Category Archives: Career Development

Diary of a Novice NED: A Look Inside the World of Independent Directors at Startups

What’s a NED, anyway?

NED stands for non-executive director (also abbreviated as NXD) and it refers to a member of company’s board of directors who is not on the executive management team.  While NED is the more common term in Europe, in Silicon Valley we typically say “independent director,” which I have always taken to mean a director independent of both the company’s executive management team and the company’s venture capital (VC) investors.

Startup boards typically have three types of directors:

  • Founders, who represent the common stock [1]
  • VCs, who represent the various classes of preferred stock [2]
  • Independents, who represent (what they believe) is the good of the company [3]

By virtue of my joining the board of European work management leader Scoro, I came to meet Martin Fincham of The Gorilla Factory (presumably a reference to Geoffrey Moore’s metaphor), a fellow NED, and the board chair of Scoro.  So I naturally was eager to read Martin’s new book, Diary of a Novice NED, and put it on the top of my reading list once it came out.

While I won’t dare to review a book written by a new colleague (and our board chair!), I will say a few things about the book:

  • It’s a quick read, enjoyable, and at times quite funny.
  • It truly is a diary:  mostly written in the first person and with lots of interesting stories.
  • It bottles a lot of wisdom:  Martin seems to be a fellow reductionist, so the book features many pithy pieces of wisdom, derived from his years of experience.
  • It has a European tilt to it:   while it’s certainly relevant to startups everywhere, some things are different in Silicon Valley [4]
  • More than anything:  it provides a rare inside look at how Martin prepared for and made the jump to “going plural” [5], making a new and satisfying living as an advisor and director.

Diary of a Novice NED is available on Amazon here.  Congrats Martin and looking forward to the foreshadowed second book!

For my thoughts on how to be a good independent director, or NED, see here.

# # #

Notes

[1]  While founders typically have common stock, they sometimes have their own series, often called Series F (founder), that has the same liquidation preference as the common stock, but additional rights such as multiple (e.g., 10x) voting rights or protective provisions.

[2] Read this paper from Wilson Sonsini for a look at the challenges faced by VCs in wearing two hats on company boards.

[3] For more on the role of an independent director, you can read this UK article, The Role of a NED, or this Utah Law Review paper, The Role of Independent Directors in Startup Firms.

[4] And it discusses tax “schemes” (I love the connotation difference between the UK and USA on this word) that are UK specific but, I believe, have rough spiritual equivalents in the USA (e.g., QSBS)

[5] Seemingly, a UK idiom for working with multiple companies as an advisor/consultant, as opposed to just working at one “real” job.

The Three Un’s of Founders

[Edited 4/16, see notes at bottom]

I’ve worked with scores of founders and companies over the years and I’ve come to make bright-line distinction between founders and managers.  Let me demonstrate it with a story.

One day long ago I was in a board meeting.  We were discussing the coming year’s budget.  The hotly contested question was:  do we spend $8M or $9M on R&D?  After much wrangling, the board agreed that we should spend $8M.  The meeting adjourned shortly thereafter.  The VCs left first and I was walking out of the room with only the founders.  The CEO said to the CTO as we were leaving, “spend the $9M anyway.”

My jaw hit the floor.  I was aghast, dumbfounded.  What the CEO said was literally incomprehensible to me.  It wasn’t possible.  That’s just not how things are done.

At that moment I realized the difference between a manager and a founder.

As a professional manager [1], we grow up climbing the corporate hierarchy.  We have savoir faire.  We know the rules.  We disagree and commit.  We horse trade.  We split the difference.  But, unless we want to do a deliberate end run to the person in charge, we abide by the decisions of the group.  We are team members in an organization, after all.

Founder aren’t.  While they may strive to be some of those things, in this case, the founders were fresh from university, with little work experience and certainly no ladder climbing.  This wasn’t some organization they were part of.  They started it, based on their research.  It was their company.  And if they thought it spending an extra $1M on R&D was the right thing to do, well, they were going to do it.  That’s a founder.

I write this post in two spirits:

  • To former-manager founders [2] as a reminder that you are now a founder and need to think like one.  It’s your company.  Your investors and advisors will have plenty of opinions but if you end up buried, you will be buried alone.  Unlike your VCs and advisors, you have but one life to give for your company [3].  Act like it — you’re not an EVP at BigCo anymore!
  • To investors [4], advisors, and startup execs as a reminder that founders are not managers, even though sometimes we might like them to act more as if they were.

Example:  a founder is raising a seed round off $1M in ARR and a VC is asking a lot of questions about CAC and LTV.

  • Manager response:  “Well, I know a CAC of 1.7 is high but we are ramping quickly and carrying a lot of unproductive sales capacity that hurts the CAC ratio.”
  • Founder response:  “This is a seed round.  I have two barely qualified SDRs and me selling this stuff.  We don’t have a sales model, so why are you calculating its efficiency?  The only thing we’ve been trying to prove — and we’ve proven it — is that people will pay for our software.”

The manager tries to be reasonable, answer the question, and preserve optionality in raising money from this target.  The founder highlights the absurdity of the question, wonders if this is a VC that they want to partner with in building their company, and isn’t shy about letting their feelings leak out.

The first example, combined with many other experiences, has led me to create the three “un’s” of founders.  Compared to managers, founders are:

  • Unreasonable.  Heck, the whole idea of starting a company is unreasonable.  Taking it to $10M in ARR is unreasonable.  Thinking you have the best product and company in the category is unreasonable.  Becoming a unicorn is unreasonable.  There’s nothing inherently reasonable about any of the things a founder needs to do.   In fact, that’s one reason why some founders are successful:  they don’t know what they can’t do.  Don’t expect someone take a series of very unreasonable risks and then be entirely reasonable in every subsequent management discussion thereafter.  It’s not how it works.  We expect every parent to think their child is the greatest and want what’s best for them; the same holds for founders and companies.
  • Uncompromising.  Managers are trained to split the difference, find middle ground, and keep options open.  In essence, to compromise.  Founders can’t compromise.  They know they will fail if they try to be all things to all people; they know the old saw that a camel is a horse designed by committee.  They know intense focus on being the best in the world at one thing is the key to their success.  If one VC on the board wants to go North and another wants to go East, a manager will tend towards Northeast, North, or East.  A founder — because in their mind it’s their company — will make up their own mind about what’s best for the company and potentially travel in another dimension, like up or down.  Getting promoted in a big company is about keeping those above you happy.  Creating a successful company is about getting the right answer, and not whether everyone is happy with it.
  • Unapologetic.  Managers are professionals who are paid to do things right.  Thus, they tend to count negatives like errors and strikeouts.  They apologize for missed quarters or bad hires.  Founders own the team.  They want to win.  While they don’t like errors and strikeouts, they neither obsess over them nor even necessarily care about minimizing them; they’re not trying to keep their resume free of red correction ink.  They’re trying to win in the market and create a leading company.  Errors are going to happen.  Fix the big ones so they don’t happen again, but let’s keep moving forward.  Yes, we missed last quarter, but how do we look on the year?  We don’t belabor the mistakes we made in getting to where we are, we focus on where we are and where we’re going.

I’m not saying all these un’s are great all the time, and I would encourage founders to recognize and appropriately mitigate them.  I am saying that manger-founders, particularly those who founded companies (or took over as CEO) after long successful careers at big tech companies, need to think more like founders and less like managers.

# # #

Notes
[1] Having never founded a company and as someone who has indeed climbed the corporate hierarchy I view myself as a manager — an entrepreneurial, and perhaps difficult, one — but a manager nevertheless.

[2] And, to some extent, first-time CEOs

[3] You are not living, as one friend calls it, the portfolio theory approach to life.

[4] Who probably don’t need the reminder, but the advisors might.

[Edited] I remove the word “successful” from the title as it was a last-minute, SEO-minded addition and a reader or two correctly called me out saying, “plenty of unsuccessful founders have these three traits as well.”  That’s true and since arguing that “the three un’s” somehow separate successful from unsuccessful founders was never the point of the post — they are, imho, what distinguishes founders (or founder mentality) from managers (or manager mentality) — I removed “successful” from the title.

Unlearning as you Scale: Recording of my Costanoa Ventures 2020 Summit Presentation

Last month I presented Unlearning As You Scale at Costanoa Ventures 2020 Costanoa CEO UnSummit.  In response to several requests for a live recording of the presentation, I sat down this weekend and recorded the following.

Key topics discussed:

  • How to properly apply the popular Silicon Valley adage, “the folks who got you here aren’t the ones to take you to the next level.”
  • How to generalize that adage to not only people, but systems, processes, and strategies.
  • If and when required, how to hire next-level executives while avoiding common pitfalls.
  • How to critically think about success with your team.

 

An audio-only version of the presentation is here:

 

My original post on the event is here.

A Missive to Marketing: Impose Simplicity

Markets are complex. Customers are complex. Products are complex, sometimes very. Heck, the world is complex. What’s a marketer to do?

Great marketing is about making things simple. We do that by imposing simplicity on a complex world. We might be attacked for so doing — people might accuse us of over-simplification. And we don’t want that either because we need to stay credible. Paraphrasing Einstein, we want to make things as simple as possible, but no simpler.

Consider product marketing. Enterprise software products are enormously complex, built by scores (or hundreds) of developers across quarters and years. They have deep functionality and subtle differences.

But a product marketer, operating in a TLDR world, can never say:

The difference between our product and their product is actually quite subtle and ultimately is about 100 little things; there’s really no one big thing that separates them.

No, no, no. The successful product marketer finds the most important subtle differences, groups them, and amplifies them. Here are our three silver bullet features. Here’s our white paper on The Five Things You Should Look For in a Schmumble.

In so doing, black-and-white is infinitely superior to gray. While sometimes unavoidable, speaking gray (i.e., “our schmumble is better than their schmumble”) is infinitely inferior to speaking black-and-white (e.g., “we have a schmumble; they don’t.”)

The successful product marketer takes a complex, gray world and transforms it into a simple, black-and-white one. If you don’t have row-level locking, you’re screwed. If you don’t have semi-additive measures, you’re screwed. If you don’t financial consolidation, you’re screwed.  If you don’t have hyperblocks, you’re screwed. 

The great marketer imposes simplicity on the product.

Consider corporate marketing, where the goal is simple. Take a complex competitive landscape and position the company as the leader. Not a leader. The leader. “A leader” is complex because it means there are multiple different companies, each of a different size, and each with its own angle on what constitutes the best product. That means customers need to understand all the competitors and their relative strengths and weaknesses. That’s a lot of work.

“The leader” is simple. Define the space in as simple terms as possible — carving it up to make yourself the leader — and then declare yourself the leader. It’s not always possible to do this — at one point, I called out Brio for effectively claiming they were the leading business intelligence vendor — on Great America Parkway in Santa Clara, California.

But if you can do it credibly, then back it up with awards, customer wins, customer counts, and financing rounds. It’s safe to buy from the leader.

The great marketer imposes simplicity on the market.

Consider customer targeting. The world is complex and gray when it comes to targeting. An ideal customer profile (ICP), typically the result of a regression used to identify the best target companies, isn’t black and white. It might output a score that varies from to 0.0 to 1.0. That’s gray. You need to make that black-and-white so sales can use it — e.g., by using it to identify named accounts for sales and account-based marketing (ABM), by using the score to create tiers that follow different processes in the high funnel, or by looking at the model to derive simple rules to say when some opportunities look better than others (e.g., we double our win rate when the customer is using Spark).

The great marketer imposes simplicity on targeting.

Consider messaging. The database reveals that the key contacts at our top 50 customers have over 80 different titles. If we stopped there, we’d end up wasting money buying overly broad lists and with an overly generic message. The great marketer interviews a broad set of customers and discovers there effectively two canonical personas in that set. Precise titles and hierarchical levels aside, there are two different animals: data analysts and data architects. And a VP of data architecture thinks a lot more like a director of data architecture than a VP of data analysis.

They look at things differently. The have different missions within the organization. They have different career backgrounds. They will respond different to sales and marketing messaging. If you want architects to come to your webinar, talk about data transformation initiatives and enterprise architecture. If you want data analytics people to come to your webinar talk about better decisions made more quickly on higher-quality data.

If you want to sell a data architect convince them your system is built for scalablity. If you want to sell a data analyst, convince them they’ll be more productive and make better analyses.

The great marketer imposes simplicity on messaging.

The hardest part of all this is believing with conviction that you have to do it. You’ll be accused of being inaccurate. Others will say you’re over-simplifying. You’ll be told, “well, it’s really not that simple” over and over again. You yourself will start to wonder.

Don’t forget that simplicity isn’t easy. Just as it takes a tough man to make a tender chicken, it takes a tough marketer to make a simple message. It’s your job.  A key skill in marketing is the ability to impose simplicity on a complex world.

Your career will depend on it.

What To Do When Someone Says You’re Not Listening

In work life from time to time you may be accused of not listening. It may not be fair. You may not like it. But you’d be shocked how many people completely flub their reaction when the boss, a coworker, or a customer says, “you’re not listening.”

Here’s my three-part formula for what to do when someone says you’re not listening.

  • Shut up
  • Active listen
  • Keep and use a mental ledger going forward

Shut Up, Immediately

If someone says you’re not listening the first thing to do is immediately begin the demonstration that you can. Acceptable responses:

  • “OK”
  • “I understand”
  • “Tell me more”

Unacceptable, yet nevertheless incredibly common, responses:

  • Keep talking, simply ignoring the comment. Recall the First Rule of Holes: when you’re in one, stop digging.
  • Get defensive. “Of course, I’m listening to you.” “Most people tell me I’m a great listener.” “I pride myself on my listening skills.” Recall Kellblog’s Second Rule of Feedback: defensiveness kills communications.
  • Make pedantic distinctions between listening and hearing. “I’m listening to you, but perhaps I’m not hearing you.” “I’m hearing you just fine — my ears work perfectly — I just don’t agree with you.”

Active Listen

The second part of your listening demonstration is to use active listening. This boils down to showing that you’re listening and confirming understanding using these techniques:

  • Focus on the speaker. Look at him/her. Make eye contact. Don’t engage in any common distractions like looking at your phone or screen.
  • Take notes, even if you have an amazing memory and don’t need them. Taking notes shows that you are engaged and listening.
  • Don’t interrupt. If the speaker says something you disagree with, write it down. I put it in triangle I’ve pre-marked at the bottom of the page. Doing this gives you a third option other than conceding the point or interrupting to dispute it. I’m amazed by how infrequently I come back to these points that, in the heated moment, seemed worthy of interrupting someone.
  • Confirm back. “OK Charlie, I want to make sure I understood what you just said. I’m hearing that you [1] tried to set up the review meeting on Monday, [2] that everyone initially indicated they could come, and [3] that … Did I get that right?”

Keep and Use a Mental Ledger

The first two steps help eliminate basic communication problems. But say it’s deeper. You’re communicating just fine, you just happen to disagree with a lot of the feedback. Examples:

  • You disagree with almost every piece of directive feedback a board member gives you — and he gives you about ten pieces of it [1] every board meeting [2] [3].
  • You are a consultant and you disagree with most of the feedback your client gives you on a draft survey that you’re running.
  • You are a manager and you disagree with most of the messaging in a presentation one of your subordinates is creating.

These are not easy situations and nobody wants to lose on every point, so you need to step back and make a mental ledger of credits (I took your input) and debits (I did not), so you can both ensure you’re somewhat balanced and to get a big picture sense of the score. This will prepare for you for a “you never listen to anything I say” attack, because you have kept some tally of accepts and rejects.

“Well, in fact, I took about 40% of your ideas and rejected about 60% and while I know that might not feel good, it’s simply not true that ‘I never listen to anything you say.’ Now, let’s go discuss the important points on the merits.” [4]

You may think I’m reducing feedback to game theory, and I suppose I am. The three key points are:

  • People do keep some mental tally and it’s almost always biased, so why not actually keep some rough score to inform the conversation.
  • You must keep the power balance in mind when playing the feedback/input game. If you’re a consultant servicing a customer, you want the customer winning. If you’re a manager challenging a senior vice president, you should be hoping to score a few points.
  • More than anything it says choose your battles, keeping the power balance in mind when you do so.

The last point leads to a corollary I love: when you are in the position of inferior power you should never argue about small matters. Why? Because the mental tally is, in my opinion, unweighted, so the smart way to get what you want and let the person with superior power win, is to let them win on issue-count while you win on importance-weighting. Put differently, if it’s a small matter it definitionally isn’t that important, so so why take a mental debit to win? Concede, instead.

Finally, when responding to input, it’s always useful to start not with the numerical tally [5] but with a summary. “Well, Sarah, I agreed with your on these points and I disagreed with you on those.” That starts the conversation in a balanced place which should keep everyone most open for feedback.

# # #

[1] Directive feedback = “You guys should do X.”

[2] The best solution here, if relationship allows, is to ask the board member not to give directive feedback. However, that’s not always possible.

[3] I have a theory that board members should never give CEOs directive feedback. Here’s the proof. Case 1: the CEO wants to do the idea, in which case it will be done anyway. Case 2: the CEO doesn’t want to do the idea and does it only because they were so directed. Thus the only result from directive feedback is to make CEOs do ideas they don’t want to do, which is a terrible practice. QED.

[4] For spouses I recommend an entirely different methodology. Say, “you’re right.” Repeat as necessary.

[5] Which you can keep in your pocket for later if challenged.