Category Archives: Startups

On Hiring: Promote Stars, Not Strangers

“Well, he’s never been a sales development rep (SDR) manager before, but he has been an SDR for 3 years at another company. The chance to be a manager is why he’d come here.” — Famous Last Words

I can’t tell you the number of times I’ve heard something akin to the above in hiring processes.

Of course he’d come here to get the chance to be a manager.  The question is why his current employer won’t make him one?  They’re the ones who know him.  They’re the ones who’ve worked with him for three years.  What do they know that we don’t?

As a general rule, startups are not the place to learn how to do your job.  At startups, you should hire people who already know how to do the job.  Running the startup, in a high-growth, frenetic environment, is hard enough; you don’t need to be learning how to do your job at the same time.  A key reason startups offer stock options is precisely this:  to incent people who already know how to do the job to do it again by participating in the upside.

This is not to say, reductio ad absurdum, that startups should have no entry-level jobs, never take a bet on inexperienced people, and never promote anyone into management.  That’s a recipe for losing your best people when they decide the company has no interest in their personal development or career path.  The best startup teams are a mix of veterans and up-and-comers, but since — particular for management hires — you need to have a mix, you need to be very careful to whom you give that first-time in-the-job slot.

This is why I made the Star/Stranger Promotion Quadrant.

star promotion

The two axes are simple:  is the person a known star (at this company, i.e., do we all known her and do we all think she’s a star, here) and has the person done the job before (i.e., the actual job, SDR manager in this case, not SDR).

One of the easiest things you can do is to appoint known stars.  This means the person works today at your company in a different role, but wants to do a new job that’s opened up, and has already done that exact job before.  It doesn’t happen that often, but sometimes your director of product management has been director of product marketing before and wants to get back to it.  Awesome.  I call this “appointing” known stars because while the move may involve a titular promotion, in reality it’s more of an appointment than a promotion.  It’s great to let people move around the organization and there should be no shame in ever wanting to move back to something that someone particularly likes doing (or that the company really needs).  I shade this green because it’s low risk.

One of the nicest things you can do is to promote known stars.  For example, take a top-performing SDR who has management potential (an elusive concept, I know, but a whole post unto itself) and give them the chance to run a piece of the SDR team.  I prefer to do this — especially for first-time promotions into management — on a reversible basis.  Since neither side is certain it’s going to work, I believe it’s best to make someone a “team lead” for six months and then assess how it’s going.  If it’s going great, promote them to SDR manager and give them a raise.  If it’s not going well, you haven’t burned the ships on making the person a regular SDR again, working on some skills, and trying again in the future.  I shade this purple because there is some risk involved, but it’s a good risk to take.  People in the organization want see others given the chance to succeed as well as to safely fail in taking on new challenges.

If you lack existing team members with management potential or if your current team has too many first-time (and too few experienced) managers, then your best move is to hire qualified strangers.  While the stranger might want a career step-up, the reality is that most companies hire new people to do jobs they already know how to do.  Cross-company promotions are rare and candidates offered them should be somewhat wary.  Why again are these people willing to make me a CMO for the first time?  Sometimes the reasons are good — e.g., you’ve been a divisional marketing VP at a larger company and move into a startup.  Sometimes the reasons are bad.  Think: why won’t any qualified CMO (who knows this space) take this job?  But, moving back to the employer perspective, I shade this square purple because external hiring is always risky, but you can minimize that risk by hiring people who have done the job before.

This takes us back to the start of this post.  While depending on the kindness of strangers may have worked for Blanche Dubois, as a hiring manager you should not be extending such kindness.  Hiring qualified people is risky enough.  New hires fail all the time — even when they are well qualified for job with lots of relevant prior experience.  Don’t compound the risks of cultural fit, managerial relations, attitude/urgency, and a hundred other soft factors with the risk of not knowing how to do the job in question.  What’s more, do you have time to teach one of your managers to do their job?  Especially when what’s needed is teaching in basic management?  As I often say, VCs are risk isolators more than risk takers, and hiring managers should think the same way.  That’s why you should almost never promote strangers.  (And, as a corollary why strangers should be wary of those willing to promote them.)

That’s why I’ve colored this square red.  Companies should hire outsiders to do jobs that candidates already know how to do.  Promotions are reserved for promising insiders.

Put differently, and from a career planning viewpoint:  “rise up, jump across.”

How I Got One Marketing VP Job: A Quick Lesson

I think great learning can come from studying what cost your predecessor his/her job (on the assumption they weren’t promoted out of it onto greener pastures).  While such matters are invariably complex (“oh, there were a lot of factors, boss relationship, objectives attainment, sales confidence, …”), if you poke around hard enough you can almost always find a high-level, simple explanation of what went wrong (“in the end, it all came down to this.”)

Studying those simple explanations can teach you a lot.

How I Got One Product Marketing Job

I remember my first day at the company.  It was two weeks before my official start date, but I was invited to attend the quarterly business review, so I did.  The team was great.  The company was doing well.  The vibe was positive.

Then the marketing guy stood up to deliver his quarterly update.  The crowd turned aggressive.  They hit the presenter with rapid-fire questions.  He appeared off-balance, under-attack, and at times a bit deer-in-the-headlights.  It wasn’t pretty to watch.

I remember thinking that no matter what happens here, I don’t want to be that guy.  I never want to be in that situation.  I never want to be attacked by sales, put on the defensive, and bobbing and weaving for answers.  I want to be data-driven, confident, and educational.  I want to inform sales of our plans, up-front, get their buy-in on the program, go execute it, and then clearly share past results and future objectives.  Sales considers itself the most accountable corporate function.  If I show accountability before them, they will respect me.

After the corporate lynching ended, I figured this dynamic was what caused his downfall.  But when I went asking around, it wasn’t.  The performance may well have been a symptom of the problem, but it turned out the last straw was simple.

We launched version 6 of the product and a month later all we still had was version 5 data sheets.

Boom.  Basic execution.  That’s what will get you knocked out.  While you may be so busy doing 1000 things — and most marketers are — it’s not the bad article or the average presentation or the blown objective that will get you killed.

It’s the basics:  if the company launches version 6 of the product and a month later marketing is still only providing version 5 content, there’s a problem.  It’s black and white, de facto, proof that something is wrong.  It’s like handing sales a loaded gun and daring them to fire.

The moral:  prioritize your work.  Use a Maslow pyramid or concentric circles to understand what is core, what is next layer, and what’s after that.  And never miss on core.

Lead Nurturing, Fast and Slow

I’ll borrow the title of one of my favorite books (Thinking, Fast and Slow) to make a few important points about lead nurturing in this post.

While there is a strong argument that buyers should be nurtured before, during, and after the initial sale, I’m going to speak in this post about pre-sales lead nurturing, the purpose of which is to turn prospective buyers into marketing qualified leads, or MQLs.

For a widely used term, you’d be surprised how hard it is to find a good definition of MQL on the web. HubSpot’s definition, while a tad self serving, isn’t bad:

A marketing qualified lead (MQL) is a lead judged more likely to become a customer compared to other leads based on lead intelligence, often informed by closed-loop analytics.

An MQL is someone judged to be more likely to buy than the rest.  That works for me.  Typically, MQLs are defined by a set of rules like:

  1. New
  2. A predictive lead score of A, B, or C
  3. Correct geography
  4. At a company bigger than some threshold
  5. “Raised their hand.”  Took activity that indicates interest (i.e., they are not just  a name on purchased list) or increasingly, took multiple actions that accumulated points in a behavioral tracking system that exceed some threshold.

The first point (the newness criterion) was a trap that I slipped in to see if you were paying attention.  While some marketers will argue that MQLs need to be “new” (and there are some good reasons for this) others will increasingly question — in a lead nurturing world — what “new” actually means and why “new” matters.

After all, what should matter is that we have found a person more likely to buy than the other people.  Whether they’ve been in our database 2 hours, 2 weeks, or 2 years shouldn’t matter.  Or should it?

I think it does matter because:

  • Marketing needs to watch its image in front of sales.  Declaring someone who’s come to our last 3 annual roadshows an MQL strikes me as a “Kick Me” sign, regardless of whether she’s just accumulated 50 points.  There is a difference between someone who is new and someone we’ve been recycling for several years.
  • Marketing needs to track how many are new vs. recycled (1) to avoid a seemingly in-built tendency to be new-obsessed, (2) because few companies actually want 100% of either, and (3) because new and recycled MQLs will likely show very different downstream conversion rates, which should not be averaged away.

That’s why, in my view, a “new MQL” is a contact who has become an MQL for the first time (i.e., they are not necessarily new to our database, but they are new in hitting the MQL criteria).  After that, if they don’t buy on the first round and if they later come back to life again (by accumulating enough points in the nurture system), they are a “recycled MQL.”

MQLs = new MQLs + recycled MQLs

When I first heard the term “nurture” about a decade ago, to me it was all about recycling.  Nurture was what you did to people who were interested in your stuff, but who weren’t ready to buy now.  The purpose, then, of nurture would be some combination of (1) maintaining awareness and positive opinion so that the customer would call when they were ready to buy, and (2) attempting to accelerate the customer’s buying timeframe by marketing the benefits of acting sooner rather than later.

Nurture, then, was a process that should take quarters or years — not days or weeks.  Nurture could include emails, but it wouldn’t be limited to them.  We might invite nurtured leads to local events, mail them schwag (aka, “dimensional pieces“), and even call them from time to time.

I now call this path “slow nurture” because marketers seem to increasingly define “nurture” as the process by which you take a new inquiry (or name) and turn them into an MQL.  It becomes largely about email and is a speedy process that executes in hours, days, or maybe weeks.  I now call this “fast nurture.”

Both types of nurture should involve point accumulation, use tracks, and be A/B tested.  But there is a fundamental difference between fast nurture and slow nurture, related primarily to frequency.

This is what fast nurturing all too often feels like:

That’s why I also call fast nurture speed-bagging.

If you speed-bag someone who plans to buy in 12 months, what happens?  You irritate the heck out of them.  “Hey, I just wanted to read that white paper and you’ve emailed and called 4 times in a week.  Go away.”  Then they  hit unsubscribe or junk-sender.

And that’s it.  You’re done.  You spent real money finding someone, they were the right person, they even have plans to buy — just not now — and you speed-bagged them into blocking your communications.  Epic fail.

That’s why marketers need to think about Nurture, Fast and Slow.  They need to never fast-nurture slow-nurture prospects.  And they need worry about just how much they are speed-bagging even the fast-nurture prospects.  Particularly in markets where the challenge is more finding the right buyer at right time than simply finding the right buyer, matching the pace of the nurture to the pace of the buyer is everything.

We’re Not Buddies:  Thoughts on Managers Too Preoccupied with Being Liked

I always cringe when I hear a young parent say something like, “Hey Buddy, don’t forget your toy shovel.”  I feel the same way when I hear managers call subordinates “buddy” or when I see managers who are, in general, too preoccupied with being liked.

One day I wish the toddler would reply:

You are not, in fact, my buddy, but my father.  I will have many buddies over the course of my life and you will not be one of them.  I have but one father and you are it.  If you’ve not checked lately, the roles of ‘father’ and ‘buddy’ are quite different and as my father you have a number of responsibilities that I’m counting on you to fulfill, so let’s please stop muddying up the waters with this ‘buddy’ business before it does irreparable harm to our budding parent/child relationship.

I’d love to see a buddy-dad reply to that one.

Buddy-managers make the same basic mistake as buddy-parents.  They don’t understand their role.  While it might sound nice to be buddies with all your team members, it’s just not possible.

  • Either you are going to be buddies, just one of the guys/gals, and treated as such when it comes to work matters.
  • Or you are going to be an authority figure, someone up the hierarchy and with some power distance as a result.

Hierarchies exist for a reason and love them, curse them, or both – virtually every company today is organized on some variation of a hierarchy.  Buddy-managers abdicate their responsibility to be leader in charge in favor of trying to be everybody’s friend and risk losing their leadership positions as a result.

Just as in sports, your coach is your coach and not your buddy.  Your coach may like you.  Your coach may get to know you really well.  After you’ve left the team you may one day end up buddies with your coach.  But a good coach won’t try to be your buddy and your coach at the same time.  Why?

  • It’s favoritist and ergo divisive – “Joe gets to play infield not because he’s better than I am, but because he’s the coach’s buddy.” Divisiveness can kill the team, so the coach can’t tolerate it – let alone foster it.  Managers should never have favorites or protégés for this reason.  Who’s my favorite salesperson?  The one who sold the most last quarter.  I love that guy or gal.
  • It impedes feedback. You don’t give feedback to someone you see as “a player” and “a buddy” in the same way.  If you’re like most people, you temper the latter.  If a coach does have buddies on the team, this does them a disservice – they don’t get the same level of feedback that everyone else does.  Buddies don’t react the same way to feedback either.  (Think:  “who the heck are you to say …”)
  • It complicates matters of discipline. It’s harder to make your “buddies” run 20 liners than it is to make your “players” do it.  It’s also divisive as the coach will invariably be seen as softer on his buddies when it comes to discipline.
  • It eliminates the healthy bit of fear that exists in every coach/player (and every boss/subordinate) relationship. Am I going to start today?  Will I get to play mid-field or will I be stuck on defense?  Am I going to get picked to work on the exciting new project?

Now, if you are a buddy-manager (or a manager who anoints protégés or has favorites), you have probably managed to convince yourself of the truth of a line of absolute bullshit that goes something like this.

“Yes, I have a favorite, but I’m harder on him/her than everyone else.”

You might believe it.  You might want to believe it.  Believe away.  But I can assure you of one thing:  no one else does.

Don’t have protégés.  Don’t have favorites.  Don’t be buddies with your employees.  I once went so far as to suggest that managers should view employees as AWUs (asexual worker units) which was a bit over the top.  But the spirit wasn’t entirely wrong.  We’re here to do a job and my role is leader.

If you want a friend, as they say in Washington, get a dog.

Manager is simply a different role than buddy.  Don’t try to be both at once.  And don’t try to “switch hats.”  If you’re going to work for a friend (and I have) then during the entire employment period, that person is your boss, not your friend.  Once you stop working for them, you can be friends again.

This is not to say that we shouldn’t be nice, shouldn’t get to know about our employees lives and families, what makes them tick, how to adapt your style to theirs, what motivates them, and their personal and professional goals.  Of course you should do these things.  But don’t confuse why you’re doing them – in order to be a good manager, not to try and make a new buddy.

The saddest part about buddy-managers is they typically fail as both managers and buddies.  I want my employees to like and respect me because I’m driving results that benefit the company, the stock price, and the team’s careers.  Not because I bought four rounds of beers and yacked it up with the team for three hours.  Buddy-managers often end up with dysfunctional teams that fail to drive results.  The lack of results can drive fights that then break up the buddy relationships.

Buddy-managers fail to see that the best way to be liked as a manager is to not try to be.  It’s to do a good job in leading the team and to be a reasonable person while so doing.   Managers who try too hard to be liked often end up not only disliked but not respected, and sometimes even fired.

Whose Team Is It Anyway? The 90 Day Rule.

Say you’re an experienced executive joining a new company.  When you start, you inherit a team of people.

The first thing you must realize is that over time, “the team” will silently transform into “your team.”  Warts and all, you’re going to fully own that team at some point in time.  In the beginning, you might boast about the stars you’ve inherited and gripe about the clowns.  But at some point they’re not your predecessor’s clowns any more. They’re your clowns.  You own them.

The second thing you must realize is how quickly that will occur.  Typically, I’d say it takes about 90 days before the organization — e.g., your boss, your peers — perceives “the team” as “your team.”

That’s not a long time, so you need to use it well.

A key part of any new executive’s job is not just to assess the business situation, but also to assess his or her team.  You may have inherited some great people and some weak ones.  You might have great people who are in the wrong roles.  You may have some great people who are beaten down and need to be uplifted.  You may even have some people who really need to go pursue that career in real estate that they’ve always wanted.

Whether you’ve inherited The Bad News BearsThe A Team (fool), or something in between, you don’t have a lot of time before that team becomes your team.

So, what should you do about it?

  • Invest a lot of your early time in understanding your team.  Their strengths and their weaknesses.  What their internal customers think of them.  What you think of their work.  What coworkers think.  Understand their backgrounds, interview them, and go review their LinkedIn profiles or CVs.
  • Remember that it’s not black and white.  It’s not as simple as “good person” vs. “bad person.”  Oftentimes, it’s about the role — is that person a great product manager who’s over his head in a director role?  Is that person a great customer success person, but she’s currently struggling with a direct sales job?
  • Remember that it’s about the climate.  Maybe the team is a bunch of great people who are just feeling down.  Or maybe they’re good people, on fire and already performing at 98% of their potential.  The climate can turn stars into dogs, and vice versa, so you need to figure out who’s sailing into a headwind and who’s benefiting from a tailwind.
  • Remember that it’s about direction.  If the team executed a bad strategy really well and failed, that’s quite different from executing a great strategy poorly.  To what extent was the team aimed well or aimed poorly in terms of direction?
  • Remember that it’s about personal wants and needs.  Where do your team members want to be in a few years?  Do they see a way to get there from here at your company?  Are they happy with short-term constraints or are they struggling to get out of meetings in time to hit childcare before those draconian fines kick in?

Once you’ve gathered that data, then sit down with your manager, deliver the assessment and make a proposal.  Because after about 90 days it’s not the team any more.  It’s your team.  So you better focus on having the right people sitting the right chairs on day 91.

Can the Media Please Stop Referring to Company Size by Valuation?

The following tweet is the umpteenth time I’ve seen the media size a company by valuation, not revenue, in the past few years:

mktcap

Call me old school, but I was taught to size companies by revenue, not market capitalization (aka, valuation).

Calling Palantir a $20B company suggests they are doing $20B in revenues, which is certainly not the case.  (They say they did $1B in 2015 and that’s bookings, not revenue.)  So we’re not talking a small difference here.  Depending on the hype factor surrounding a company, we might be talking 20x.

Domo is another company the media loves to size by its market cap.

domo

I’ve heard revenue estimates of $50M to $100M for Domo, so here again, we’re not talking about a small difference.  Maybe 20x.

When my friend Max Schireson stepped down from MongoDB to spend more time with his family, the media did it again (see the first line of text below the picture)

mongodb

I love Max.  I love MongoDB.  While I don’t know what their revenues were when he left (I’d guess $50M to $100M), they certainly were not a “billion-dollar database company.”  But, hey, the article got 4,000 shares.  Inflation-wise, I’m again guessing 10-20x.

So why does the media do this?  Why do they want to mislead readers by a factor of 20?

  • Because if makes the numbers bigger
  • And makes the headlines cooler
  • And increases drama

In the end, because it (metaphorically) sells more newspapers.  “Wow, some guy just quit as CEO of a billion-dollar company to actually spend more time with his family” just sounds a whole lot better than the same line with a comparatively paltry $50M instead.  Man Bites Dog beats Dog Bites Man every time.

But it’s wrong, and the media should stop doing it.  Why?

  • It’s misleading, and not just a little.  Up to 20x as the above examples demonstrate.
  • It’s not verifiable.  For private companies, you can’t really know or verify the valuation.  It’s not in any public filing.  (While private companies don’t disclose revenue either, it’s much more easily triangulated.)
  • Private company valuations are misleading because VCs buy preferred stock and employees/founders have common stock. So you take a preferred share price and multiply it by the total number of outstanding shares, both preferred and common.  (This ignores the fact that the common is definitionally worth less than the preferred and basically assumes an IPO scenario, which happens only for the fortunate few, where the preferred converts into common.)
  • In the past few years, companies are increasingly taking late-stage money that often comes with “structure” that makes it non-comparable in rights to both the regular preferred and the common.  So just compound the prior problem with a new class of essentially super-preferred stock.  The valuation gets even more misleading.
  • Finally, compound the prior problem with a hyped environment where everyone wants to be a unicorn so they might deliberately take unfavorable terms/structure in order get a higher valuation and hopefully cross into unicorn-dom.  The valuation gets even-more-misleading squared.  See the following Tweet as my favorite example of this phenom.  (OH means overheard.)

ego

When was the last time I saw the media consistently size companies by valuation instead of revenue?  1997 to 2001.  Bubble 1.0.

Maybe we’ll soon be talking about eyeballs again.  Or, if you like Stance, the company that has raised $116in VC and has “ignited a movement of art and self-expression,” in socks (yes, socks) then maybe we’ll be talking about feet.

# # #

(And while I’m not sure about the $116M, I do love the socks.)

 

Myths of the Headless Company

In the past year or so, two of our competitors have abruptly transitioned their CEOs and both have perpetuated a lot of mythology about what happens and/or will happen in such transitions.  As someone who’s run two startups as CEO for more than a combined ten years, been the “new guy” CEO twice after such transitions, sat on two startup boards as an independent director, and advised numerous startups, I thought I’d do a little myth-busting around some of the common things these companies say to employees and customers when these transitions happen.

“Everythings’s fine, there is no problem.”

If everything were fine, you would not have changed your CEO.  QED.

Houston, there is a problem.

“Uh, the actual problem is we’re doing too well, … so we need to change our the CEO for the next level of growth.”

This reminds me of the job interview response where you say your biggest weakness is perfectionism.

Look, while successful companies do periodically outgrow their executives, you can tell the difference between an organized scale-driven CEO swap out and something going wrong.  How?

Organized transitions are organized.  The CEO and the board agree that the company is scaling beyond the CEO’s abilities.  A search is started.  The new CEO is found.  The old CEO gracefully hands the reins over to the new CEO.  This can and does happen all the time in Silicon Valley because the problem is real and everyone — both the VCs and the outgoing CEO — are all big shareholders and want what’s best for the company, which is a smooth transition.

When a CEO is exited …

  • Abruptly, without notice, over a weekend, …
  • Without a replacement already identified
  • Without even a search firm hired
  • At an awkward time (e.g., a few days before the end of a quarter or a few weeks before the annual user conference)

You can be pretty sure that something went wrong.  What exactly went wrong you can never know.  But you can be sure of thing:  the conversation ended with either “I’m outta here” or “he’s (or she’s) outta here” depending on whether the person was “pushed’ or “jumped.”

“But we did need someone for the next level of growth.”

That’s quite possibly true and the board will undoubtedly use the transition as an attempt to find someone who’s done the next level of growth before.  But, don’t be confused, if the transition is abrupt and disorganized that’s not why the prior CEO was exited.  Something else is going on, and it typically falls into one of three areas:

  • Dispute with the board, including but not limited to disagreements about the executive team or company strategy.
  • Below-plan operating results.  Most CEOs are measured according to expectations set in fundraising and established in the operating plan.  At unicorns, I call this the curse of the megaround, because such rounds are often done on the back on unachievable expectations.
  • Improprieties — while hopefully rare — such as legal, accounting, or employment violations, can also result in abrupt transitions.

“Nothing’s going to change.”

This is a favorite myth perpetuated on customers.  Having been “the new guy” at both MarkLogic and Host Analytics, I can assure you that things did change and the precise reason I was hired was to change things.  I’ve seen dozens of CEO job specs and I’ve never a single one that said “we want to hire a new CEO but you are not supposed to change anything.”  Doesn’t happen.

But companies tell customers this — and maybe they convince themselves it’s true because they want to believe it — but it’s a myth.  You hire a new CEO precisely and exactly to change certain things.

When I joined MarkLogic I focused the company almost exclusively on media and government verticals.  When I joined Host, I focused us up-market (relative to Adaptive) and on core EPM (as opposed to BI).

Since most companies get in trouble due to lack of focus, one of the basic job descriptions of the new-person CEO is to identify the core areas on which to focus — and the ones to cut.  Particularly, as is the case at Anaplan where the board is on record saying that the burn rate is too high — that means cut things.  Will he or she cut the area or geography that most concerns customer X?  Nobody knows.

Nobody.  And that’s important.  The only person who knows will be the new CEO and he/she will only know after 30-90 days of assessment.  So if anyone tells you “they know” that nothing’s going to change, they are either lying or clueless.  Either way, they are flat wrong.  No one knows, by definition.

“But the founder says nothing’s going to change.”

Now that would be an interesting statement if the founder were CEO.  But, in these cases, the founder isn’t CEO and there is a reason for that — typically a lack of sufficient business experience.

So when the founder tells you “nothing is going to change” it’s simply the guy who lacks enough business experience to actually run the business telling you his/her opinion.

The reality is new CEOs are hired for a reason, they are hired to change things, that change typically involves a change in focus, and CEO changes are always risky.  Sometimes they work out great.  Sometimes the new person craters the company.  You can never know.