Category Archives: CEO

How to Lead a Strategic Board Discussion

Posted on January 23, 2022 | 2 comments

Have you ever been to a board meeting where 60 minutes were allocated on the agenda for discussion of a strategic topic?  What happened in that session?

  • You probably started late because board meetings are hard to keep on time.
  • Some exec, maybe the CEO, probably presented a “few slides” to “tee up” the discussion.
  • “A few” turned out to be 23.
  • Two or three questions were asked by the one board member closest to the topic.  The others said nothing.
  • Time ran out because you needed to get to the administrative section, approving prior-meeting minutes and such.
  • Everyone politely said, “great job,” but left the meeting frustrated.

This happens a lot.  Execs who dysfunctionally view survival as the goal of a board meeting might be happy with this outcome.  Think:  “we survived another one; now, let’s get back to work.”

For those execs, however, who actually want to both tap into the board’s expertise and build board-level consensus on a strategic topic, this is a terrible outcome.  No expertise was tapped.  No consensus was built (except perhaps that the company doesn’t run good board meetings).  So what went wrong and what should we do about it?

What Goes Wrong in Strategic Board Discussions
Startup boards are a tough audience.  They are homogenous in some ways:  everyone is typically smart, outspoken, successful, and aggressive [1].  That means leading any discussion is cat-herding.

But, when it comes to strategic discussions, the board is heterogenous in three critical dimensions [2]:

  • Operating experience
  • Technology understanding
  • Financial knowledge

Startup boards are typically VC-dominated because, as a startup goes through the A, B, C, D series of funding rounds, it typically adds one VC board member per round [3].  Thus the typical, sub-$100M [4] startup board has 1-2 founders, one VC for each funding round [5], and one or possibly two independents.

Patagonia vests [6] aside, not all VCs are alike.  When it comes to operating experience, VCs generally fall into one of three different categories [7]:

  • Deep.  Former founders, who founded, grew, and eventually sold their companies, or highly successful 10+ year executives from brand-name companies.  In high school, members of the former group were in the programming club [8].  You’ll find these people working at early-stage VC firms.
  • Moderate.  People who worked for roughly 4 to 10 years, often in product but sometimes in sales or corpdev, at a larger tech company, often with an MBA sandwiched in the middle.  Often they studied CS or engineering undergrad.  In high school, they were in the entrepreneurship club.  You’ll find these people at a wide range of VC firms.
  • Light.  People who typically majored in economics or finance (sometimes CS), worked for 2 to 4 years in management consulting or at a tech firm, attended a top business school, joined a VC firm as an associate, and then worked (usually hard and against the odds) their way up to partner.  In high school, they were in the investing club.  You’ll find these people at later-stage VC firms.

Independent board members come in different flavors as well:

  • General managers.  Active or former CEOs of startups and/or business unit GMs at big companies.  These people typically have a good overview of the business and know the functional area they grew up in, these days typically sales or product.
  • Go-to-market executives.  Active or former sales or marketing leaders, i.e., CROs or CMOs.  These people understand go-to-market, but may be light on both technical understanding and financial knowledge.
  • Finance executives.  Active or former CFOs who lead the audit committee and who work the company’s CFO to ensure the company’s financial affairs are in order.  These people are typically light on technical understanding and go-to-market (GTM) knowledge (but they know that GTM is too expensive and they don’t like it).

Now, imagine having a deep conversation about {multi-cloud, serverless, re-architecture, UI/UX, positioning, pricing, branding, ABM, PLG, company strategy, category consolidation, international expansion, channels} with a group consisting of two product-oriented company founders, three VCs (one deep, one moderate, and one light in operating experience), and two independent directors (one former CEO with a sales background and the other a former CFO).

As the saying goes, “you can’t fix what you can’t see.”  Hopefully in this part of the post we’ve shined a bright light on the problem.  You want to discuss an inherently difficult issue (otherwise it wouldn’t have made the agenda).  You’re working with one heck of heterogeneous group. And, for the cherry on top, most of the group members are type-A personalities.  No wonder these sessions are hard to lead [9].

How To Lead a Strategic Board Discussion
Since this exercise is almost a Kobayashi Maru, sometimes the smartest strategy is change the rules.  Rather than teeing up an impossible discussion, instead propose to create a working group of those members who are most interested (and presumably expert) in the chosen topic.  Team those board members with the relevant executive staff, run a series of meetings that dive deep into the topic, and then report back into the larger group. Sometimes, as the WOPR computer concluded in War Games, the only wining move is not to play.

The benefits of these working groups are many:

  • You engage the board members and really tap into their expertise.
  • The smaller group size and more informal setting lead to more interesting and interactive discussions.
  • You create an opportunity for the executive staff to increase their visibility and build relationships with board members [10].

Personally, I’ve participated in numerous such working groups on various topics (e.g., pricing, metrics, GTM planning and modeling, sales process, positioning/branding, product strategy, and reluctantly, compensation) and find them invariably superior to jumping into a hard topic with a big heterogeneous group.

That said, once in a while you do need to lead such a discussion, so in that situation what should you do?  Do these five things:

  • Make a deck.  If you start the discussion from scratch without a tee-up, it will likely be a mess.  Use a deck to frame the topic and maintain control.  However, that deck is not a presentation.  It should be built specifically to lead a discussion.  Don’t just cut and paste slides from your internal meetings.
  • Baseline the audience.  Writing for the person in the room with the least expertise and familiarity with the topic, write 3-5 slides that describe the challenge you are facing and the decision you need to make.  Try to decompose the overall question to three sub-questions about which you will lead a discussion.  This will likely clarify your own thinking on the question greatly.  If it’s a one-hour session, this part, including explanatory Q&A, should take 10 minutes.
  • Ask three questions. The final three slides should each have one question in the title and blank body.  Stay on each one for 15 minutes.
  • Balance participation.  Remember your goal is to enable a discussion, not necessarily to make the final decision.  So lead a discussion.  It’s not a discussion if you and the alpha board member are the only people talking.  (That’s called watching two people talk.)  Keep track of who’s talking and do so naturally, i.e., without “going around the room” (which also isn’t a discussion, it’s a serial Q&A).
  • Summarize what you heard and either promise to get back to them with your final decision, propose splitting off a working group, or some other concrete action so that they know the next steps going forward.

Remember if you’re clear on the goal — to have a good discussion — and you build the deck and lead the group to stay focused on that goal, you might not arrive at an easy decision in 60 minutes, but you will indeed have delivered on what you promised — a good, board-level discussion about a complex issue.

# # #

Notes

[1]  As is well known, they are also often homogenous in other, undesirable ways (e.g., race, gender) that I will acknowledge but not address as it’s not the purpose of this post.  For more on this topic, you can start here.

[2]  This is why pattern-matching across portfolio companies, executive staffing, and compensation are popular topics with boards.  They are safe topics, in the sense that everyone gets to participate in the discussion.  On the other extreme, it’s why product and major engineering decisions get so little time relative to their importance.  Go-to-market lies somewhere in the middle.

[3]  This is somewhat less true in today’s markets because (a) many VCs are more willing to invest without taking a board seat and (b) some, more indexing-oriented, later-stage VCs do not as a matter of practice want board seats because their business model is about deploying large amounts of capital across a broad range of companies.

[4]  Around $100M they may typically start reconfiguring in preparation for an upcoming IPO.

[5]  Where that number, using an Excel formula, is = code(uppercase(last-round-letter)) – 64.  You’re welcome.

[6]  A little satire from Fortune and/or my favorite scene from The Internship, which is about academic elitism in Silicon Valley in general and not VC in specific.

[7]  These buckets are definitionally stereotypes with all attached strengths and weaknesses.  While I was tempted to write “typically” and “often” before every sentence, I elected not to for word parsimony.  Place accept in the spirit given.

[8]  I add this colorful detail, which will invariably be wrong a lot, both for fun and to help paint the picture.  In each instance, I know at least one person, and usually more than one person, who fits this profile.  But no, I don’t always ask people what clubs they were in during high school.  To ensure contemporary naming (e.g., back when I was a member, it was called “computer club”), the club names come from the list at the high school that most of my children attended.

[9]  This why boards frequently talk about “safer” topics (in the sense that everyone can more easily participate) such as pattern matching across companies, executive staffing, and compensation — and a key reason why major engineering and product decisions get low airtime relative to their importance on many boards.

[10]  One of the smartest things e-staffers can do is to build relationships with their VC board members.  This isn’t always easy — everyone is pressed for time, sometimes it can make the CEO uncomfortable, and it’s not strictly necessary — but five years later when the VC is looking for a CXO for a hot portfolio company, whether you get the call or not may well be a function of that relationship or lack thereof.

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Posted in Boards, CEO, CFO, Silicon Valley, Strategy, VC

The Top Two, High-Level Questions About Sales (and Associated Metrics)

Posted on October 19, 2021 | 2 comments

“The nice thing about metrics is that there are so many to choose from.” — Adapted from Grace Hopper [1]

“Data, data everywhere.  Nor any drop to drink.” — adapted from Samuel Taylor Coleridge [2]

In a world where many executives are overwhelmed with sales and marketing metrics — from MQL generation to pipeline analysis to close-rates and everything in between — I am writing this post in the spirit of kicking it back up to the CXO-level and answering the question:  when it comes to sales, what do you really need to worry about?

I think can burn it all down to two questions:

  • Are we giving ourselves the chance to hit the number?
  • Are we hitting the number?

That’s it.  In slightly longer form:

  • Are we generating enough pipeline so that we start every quarter with a realistic chance to make the number?
  • Are we converting enough of that pipeline so that we do, in fact, hit the number?

Translating it to metrics:

  • Do we start every quarter with sufficient pipeline coverage?
  • Do we have sufficient pipeline conversion to hit the number?

Who Owns Pipeline Coverage and How to Measure It?
Pipeline coverage is a pretty simple concept:  it’s the dollar value of the pipeline with a close date in a given period divided by the new ARR target for that period.  I have written a lot of pretty in-depth material on managing the pipeline in this blog and I won’t rehash all that here.

The key points are:

  • There are typically four major pipeline generation (pipegen) sources [3] and I like setting quarterly pipegen goals for each, and doing so in terms of opportunity (oppty) count, not pipeline dollars.  Why?  Because it’s more tangible [4] and for early-stage oppties one is simply a proxy for the other — and a gameable one at that [5].
  • I loathe looking at rolling-four-quarter pipeline both because we don’t have rolling-four-quarter sales targets and because doing so often results in a pipeline that resembles a Tantalean punishment where all the deals are two quarters out.
  • Unless delegated, ownership for overall pipeline coverage boomerangs back on the CEO [6].  I think the CMO should be designated the quarterback of the pipeline and be responsible for both (a) hitting the quarterly goal for marketing-generated oppties and (b) forecasting day-one, next-quarter pipeline and taking appropriate remedial action — working across all four sources — to ensure it is adequate.
  • A reasonable pipeline coverage ratio is 3.0x, though you should likely use your historical conversion rates once you have them. [7]
  • Having sufficient aggregate pipeline can mask a feast-or-famine situation with individual sellers, so always keep an eye on the opportunity histogram as well.  Having enough total oppties won’t help you hit the sales target if all the oppties are sitting with three sellers who can’t call everyone all back.
  • Finally, don’t forget the not-so-subtle difference between day-one and week-three pipeline [8].  I like coverage goals focused on day-one pipeline coverage [9], but I prefer doing analytics (e.g., pipeline conversion rates) off week-three snapshots [10].

Who Owns Pipeline Conversion and How to Measure and Improve It?
Unlike pipeline coverage, which usually a joint production of four different teams, pipeline conversion is typically the exclusive the domain of sales [11].  In other words, who owns pipeline conversion?  Sales.

My favorite way to measure pipeline conversion is take a snapshot of the current-quarter pipeline in week 3 of each quarter and then divide the actual quarterly sales by the week 3 pipeline.  For example, if we had $10M in current-quarter new ARR pipeline at the start of week 3, and closed the quarter out with $2.7M in new ARR, then we’d have a 27% week 3 pipeline conversion rate [12].

What’s a good rate?  Generally, it’s the inverse of your desired pipeline coverage ratio.  That is, if you like a 3.0x week 3 pipeline coverage ratio, you’re saying you expect a 33% week 3 pipeline conversation rate.  If you like 4.0x, you’re saying you expect 25% [13].

Should this number be the same as your stage-2-to-close (S2TC) rate?  That is, the close rate of sales-accepted (i.e., “stage 2” in my parlance) oppties.  The answer, somewhat counter-intuitively, is no.  Why?

  • The S2TC rate is count-based, not ARR-dollar-based, and can therefore differ.
  • The S2TC rate is typically cohort-based, not milestone-based — i.e., it takes a cohort of S2 oppties generated in some past quarter and tracks them until they eventually close [14].

While I think the S2TC rate is a better, more accurate measure of what percent of your S2 oppties (eventually) close, it is simply not the same thing as a week-3 pipeline conversion rate [15].  The two are not unrelated, but nor are they the same.

There are a zillion different ways to improve pipeline conversion rates, but they generally fall into these buckets:

  • Generate higher-quality pipeline.  This is almost tautological because my definition of higher-quality pipeline is pipeline that converts at a higher rate.  That said, higher-quality generally means “more, realer” oppties as it’s well known that sellers drop the quality bar on oppties when pipeline is thin, and thus the oppties become less real.  Increasing the percent of pipeline within the ideal customer profile (ICP) is also a good way of improving pipeline quality [16] as is using intent data to find people who are actively out shopping.  High slip and derail percentages are often indicators of low-quality pipeline.
  • Make the product easier to sell.  Make a series of product changes, messaging/positioning changes, and/or create new sales tools that make it easier to sell the product, as measured by close rates or win rates.
  • Make seller hiring profile improvements so that you are hiring sellers who are more likely to be successful in selling your product.  It’s stunning to me how often this simple act is overlooked.  Who you’re hiring has a huge impact on how much they sell.
  • Makes sales process improvements, such as adopting a sales methodology, improving your onboarding and periodic sales training, and/or separating out pipeline scrubs from forecast calls from deal reviews [17].

Interestingly, I didn’t add “change your sales model” to the list as I mentally separate model selection from model execution, but that’s admittedly an arbitrary delineation.  My gut is:  if your pipeline conversion is weak, do the above things to improve execution efficiency of your model.  If your CAC is high, re-evaluate your sales model.  I’ll think some more about that and maybe do a subsequent post [18].

In conclusion, let’s zoom it back up and say:  if you’ve got a problem with your sales performance, there are really only two questions you need to focus on.  While we (perhaps inadvertently) demonstrated that you can drill deeply into them — those two simple questions remain:

  • Are we giving ourselves the chance to hit the number?
  • Are we hitting it?

The first is about pipeline generation and coverage.  The second is about pipeline conversion.

# # #

Notes

[1]  The original quip was about standards:  “the nice thing about standards is that you have so many to chose from.”

[2]  The original line from The Rime of the Ancient Mariner was about water, of course.

[3]  I remember there are four because back in the day at Salesforce they were known, oddly, as the “four horsemen” of the pipeline:  marketing, SDR/outbound, alliances, and sales.

[4]  Think:  “get 10 oppties” instead of “get $500K in pipeline.”

[5]  Think:  ” I know our ASP is $50K and our goal was $500K in pipeline, so we needed 10 deals, but we only got 9, so can you make one of them worth $100K in the pipeline so I can hit my coverage goal?”  Moreover, if you believe that oppties should be created with $0 value until a price is socialized with the customer, the only thing you can reasonably measure is oppty count, not oppty dollars.  (Unless you create an implied pipeline by valuing zero-dollar oppties at your ASP.)

[6]  Typically the four pipeline sources converge in the org chart only at the CEO.

[7]  And yes it will vary across new vs. expansion business, so 3.0x is really more of a blended rate.  Example:  a 75%/25% split between new logo and expansion ARR with coverage ratios of 3.5x and 1.5x respectively yields a perfect, blended 3.0 coverage ratio.

[8]  Because of two, typically offsetting, factors:  sales clean-up during the first few weeks of the quarter which tends to reduce pipeline and (typically marketing-led) pipeline generation during those same few weeks.

[9]  For the simple reason that we know if we hit it immediately at the end of the quarter — and for the more subtle reason that we don’t provide perverse disincentives for cleaning up the pipeline at the start of the quarter.  (Think:  “why did your people push all that stuff out the pipeline right before they snapshotted it to see if I made my coverage goal?”)

[10]  To the extent you have a massive drop-off between day 1 and week 3, it’s a problem and one likely caused by only scrubbing this-quarter pipeline during pipeline scrubs and thus turning next-quarter into an opportunity garbage dump.  Solve this problem by doing pipeline scrubs that scrub the all-quarter pipeline (i.e., oppties in the pipeline with a close date in any future quarter).  However, even when you’re doing that it seems that sales management still needs a week or two at the start of every quarter to really clean things up.  Hence my desire to do analytics based on week 3 snapshots.

[11] Even if you rely on channel partners to make some sales and have two different sales organizations as a result, channel sales is still sales — just sales using a different sales model one where, in effect, channel sales reps function more like direct sales managers.

[12]  Technically, it may not be “conversion” as some closed oppties may not be present in the week 3 pipeline (e.g., if created in week 4 or if pulled forward in week 6 from next quarter).  The shorter your sales cycle, the less well this technique works, but if you are dealing with an average sales cycle of 6-12 months, then this technique works fine.  In that case, in general, if it’s not in the pipeline in week 3 it can’t close.  Moreover, if you have a long sales cycle and nevertheless lose lots of individual oppties from your week 3 pipeline that get replaced by “newly discovered” (yet somehow reasonably mature oppties) and/or oppties that inflate greatly in size, then I think your sales management has a pipeline discipline problem, either allowing or complicit in hiding information that should be clearly shown in the pipeline.

[13]  This assumes you haven’t sold anything by week 3 which, while not atypical, does not happen in more “linear” businesses and/or where sales backlogs orders.  In these cases, you should look at to-go coverage and conversion rates.

[14]  See my writings on time-based close rates and cohort- vs. milestone-based analysis.

[15] The other big problem with the S2TC rate is that it can only be calculated on a lagging basis.  With an average sales cycle of 3 quarters, you won’t be able to accurately measure the S2TC rate of oppties generated in 1Q21 until 4Q21 or 1Q22 (or even later, if your distribution has a long tail — in which case, I’d recommend capping it at some point and talking about a “six-quarter S2TC rate” or such).

[16]  Provided of course you have a data-supported ICP where oppties at companies within the ICP actually do close at a higher rate than those outside.  In my experience, this is usually not the case, as most ICPs are more aspirational than data-driven.

[17]  Many sales managers try to run a single “weekly call” that does all three of these things and thus does each poorly.  I prefer running a forecast call that’s 100% focused on producing a forecast, a pipeline scrub that reviews every oppty in a seller’s pipeline on the key fields (e.g., close date, value, stage, forecast category), and deal reviews that are 100% focused on pulling a team together to get “many eyes” and many ideas on how to help a seller win a deal.

[18] The obvious counter-argument is that improving pipeline conversion, ceteris paribus, increases new ARR which reduces CAC.  But I’m sticking by my guns for now, somewhat arbitrarily saying there’s (a) improving efficiency on an existing sales model (which does improve the CAC), and then there’s (b) fixing a CAC that is fundamentally off because the company has the wrong sales model (e.g., a high-cost field sales team doing small deals).  One is about improving the execution of a sales model; the other is about picking the appropriate sales model.

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Posted in CEO, Demandgen, Management, Marketing, Metrics, SaaS, Sales, Startups

Video of my Presentation at SaaStr 2021: A CEO’s Guide to Marketing

Posted on October 7, 2021 | 4 comments

About two weeks ago I spoke at SaaStr Annual 2021, giving a presentation entitled A CEO’s Guide to Marketing, which discusses why marketing is sometimes seen as a dark art and then discusses 5 things that every CEO (and startup exec) should know about marketing in order to work best with the marketing team.

The slides from that session are here.  Below please find a video captured as part of the Stage A stream.  I start presenting at 8:01 and go for 30 mins.

Thanks for watching!

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Posted in CEO, Marketing, Research, SaaS, Silicon Valley, Startups

Preview of my SaaStr 2021 Session: A CEO’s Guide to Marketing

Posted on September 25, 2021 | Leave a comment

SaaStr is my favorite conference and I’ll be speaking there again this year on Monday, Sept 27th at 1:00 PM Pacific with a session titled A CEO’s Guide to Marketing.  I will be doing the speech live, I’m not sure if they’re live broadcasting or not, but they will certainly record it and make it available as they have done in years past.

I chose this session title because I find that in my work with founders and C-level startup executives that people are, well, just not entirely comfortable with marketing.  I spend an increasing amount of time explaining the basics of marketing to founders and startup execs, because most of them don’t come from marketing backgrounds and too many marketing leaders either deliberately hide behind marketing complexity or are just plain not good at explaining marketing.

Either way the result is the same, and e-teams often hearken back to the old WC Fields quote when thinking about their marketing:

“If you can’t dazzle them with brilliance, baffle them with bull.”

In this fast-paced session, I’ll:

  • Explain how product founders are often surprised to find themselves running distribution business.
  • Tell you the scariest thing a CEO can and does hear in every quarterly business review (QBR)
  • Discuss the reasons why marketing is confusing and misunderstood
  • Present the 5 things every CEO and startup exec should know about marketing
  • Provide concrete actions I think companies should consider taking
  • Include “pro tips” on managing funnels and thinking about models
  • Share my “magic secret” of marketing messaging
  • Discuss CMO hiring and pillar profiles
  • Provide 3 pages of links to resources and 5 recommended marketing books in the appendix

I look forward to seeing you there!  Here’s the session link.

For a taste of my presentation style and/or to dive into my previous content, here are links to my prior SaaStr presentations:

 

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Posted in CEO, Marketing, SaaS, SaaStr

The Three Un’s of Founders

Posted on April 4, 2021 | Leave a comment

[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.

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Posted in Career, CEO, Culture, Silicon Valley, Startups, VC