Seek and destroy is the idea that proactively finding and accomplishing the highest value activities in the company is the primary objective of any employee from the CEO to the most junior person on the team.

First, we need to look at what is highest value

Look at the goals that you have as a company, that the CEO has, or that your boss has, or that your team has, or even better those which are intuitively the highest value.

Is the company running out of money and needs to raise capital or generate more money through revenue? Well, that’s going to trump everything else.

Does the company have tons of money in the bank and has great revenue, but everybody is drowning because you’re not hiring the caliber people you need fast enough? Well, then recruiting is probably the biggest thing to focus on.

Just like this, you can use your common sense and intuition to understand what is most valuable for the business at any moment in time. Of course you have a formal definition of value through the goals that the company sets and how they trickle down hierarchically from the CEO to the teams to your boss and to you. The best people pay attention to this, but ultimately they have their own intuitive understanding of what the company really needs to be doing based on assessing the situation like I described above.

Let’s talk about the value of a employee

For any high-value team member the trajectory up is mostly about; 1) the vision you have to see what’s most valuable, 2) how proactive are you going to be about attacking those things once you identify them, and 3) how much direction can you provide against those things for yourself and for groups. Great leaders can identify activities that occupy not only their own time but the time of an entire team, a group of teams, or – at the level of a CEO – an entire company.

The value of an employee mostly comes down to those three things; your ability to see value, your ability to proactively generate value, and your ability to generate valuable work for ever larger groups.

Doing just enough versus doing more than enough

A lot of people are waiting around to be told what to do, or for the team to decide what to do, or they are their boxing themselves in to a certain number of hours every day. They agree with the team on what they going to do for the day or the week, and then they just do that. A lot of people Self-limiting and it’s mostly related to self-limiting beliefs or laziness. At the end of the day this is going to limit your growth and your career.

Meanwhile, some people are always doing more than enough. They’re so dialed in to what’s valuable and what’s gonna make you win that they’re constantly finding more activities than they need to be every given day. They’re doing things outside their set of responsibilities, they’re doing things proactively, and they are surprisingly productive and working on surprisingly valuable ideas.

There’s an old military saying about being on time; “if you’re early, you’re on time, if you’re on time, you’re late, and if you’re late, you’re wrong. This is how it is for doing enough stuff in your role at an exceptionally well run company; “if you’re doing more than enough, you’re doing enough, if you’re doing enough, you’re doing too little, and if you’re doing less than enough, you’re fired.”

Let’s look at an example. In pipeline oriented functions like fundraising, business development & sales, and recruiting, the team is running through a series of stages, and this can occupy all the effort. There are many other activities that can feed or accelerate the pipeline, like publishing content, hosting events, or planning trips to visit clusters of people in person. You could be having investor dinners or visiting a cluster of investors in a specific city. For business development or recruiting you could host fireside chats that position the company as a leader within your market. Teams might talk about these ideas in meetings but don’t necessarily follow through because running the pipeline absorbs their time. The company needs to hire specific people to do this additional work. An outstanding team supporting fundraising, business development and sales, or recruiting is going to proactively do these kinds of things after it’s been discussed. They’re going to do their normal job of running the pipeline forward and they’re going to collaborate with others in the company to publish content, run events, and plan trips.

A lot of times what you think of as doing enough is actually less than enough. It’s not unusual for outstanding leadership to fire people that are doing the minimum to get by. The reality is doing the basics isn’t really acceptable. If you want outstanding results as a company, then you need outstanding results from individuals that are going above and beyond. No strong leader wants to micromanage team members that are not proactive, just doing what’s assigned to them, or doing what they think is the least they’ve got to do in order to look OK to the team and their boss.

Up or out and bias for action

There’s a model that successful companies use where they have a career ladder that you basically have to advance up or they end up firing you. This ladder progression upwards is similar to what I described earlier; seeing value, proactively attacking value, and being able to generate more and more work that has a ton of value – eventually generating work not just for yourself, but for teams.

At the most junior level, when you just come in from school or from a small amount of experience, you’re going to need a little bit of micromanagement. The team is going to spoon feed them little chunks fo work and they just need to deliver at a solid pace. A lot of people don’t even get enough work done in a short enough time, so they are worth keeping around. This is especially true in the age of AI. A lot of times now it’s faster for a strong leader that knows how to use the AI tools to do something themselves versus asking somebody else to do it if that person is going to require too much coaching and micromanagement and the volume of what they get done per unit of time is too low.

Strong leadership is going to see those people who are first of all going get huge amounts of work done per unit time, so they’re highly productive. Then second of all they’re doing the right work. They see the value and they’re doing the work that generates the most value. Third, they are looking for the ones that are most proactive when you talk about an idea on a call, or you talk about a problem on a call, these folks are going go after it – they’re not just gonna sit around and do the work that’s already on their plate or wait for this stuff to get prioritized in their project management system or whatever. They’re gonna do the work already in their queue, and then they’re also going to proactively attack these other ideas and problems. So organizing content, events, trips or whatever; they’re not going to leave these as ‘brainstorms.’ They’re going to start doing it. They are going to have a bias for action. They’re going to show up with an event or a trip all totally planned out and just get sign off from leadership; yeah we’re down to do this, that’s within budget. I understand it’s going to take some extra time for you in the coming weeks and that’s all good. You just make sure you’re not gonna burn a ton of the company’s time and money or try to use budget that is outside the scope of what can be reasonably authorized. Again, you understand the business context and what makes sense, so you’re going to get sign off for these ideas easily. You’re basically figuring everything out and all you need is some approval and then you just get it done.

Another example would be engineering if there's a huge cleanup or chunk of code that’s always full of bugs in production because it doesn’t really have any tests around it or whatever. You’re doing the type of work that you see as high value. You see it blocking the team, slowing the team down, reducing the quality of the software for the customer. Let’s be honest, it’s not sexy work that engineers are necessarily super excited to attack. You’re just going to proactively dive in and fix these things and you're going to do it on top of your regular work. You’re gonna show up one day at a meeting and be like hey guys I delivered the thing I was working on, and also on top of that I have a PR out for people to take a look at that refactors this part of the code that we keep complaining about, or I also wrote a bunch of tests around this this one real time system that keeps blowing up in production and driving us crazy. Whatever it is, you’ve done your normal thing, and you’ve done this other thing on top of it.

So this is the type of stuff that great people are doing who are going to drive success, get promoted, make a bunch of money, and all that good stuff. To be honest – to be really brutally honest – this is the stuff that you have to do in order to even stick around at a great company. Great companies won’t even keep you around if you’re not doing these kinds of things. You’re actually going to get fired if you’re not doing these kinds of things.

This is the elite performer model, and elite teams are stacked with people like this. You’ve got to learn to behave this way like the rest of the team. Your colleagues are going to do it. You’re just straight up going to get fired and go work at a mediocre organization where the other people are also lazy, can’t see value, and aren’t proactive. Complacent organizations don’t look for people to be as proactive, don’t look for people to contribute as much value, and don’t want anyone to do anything extra. They just want the minimum. These organizations are full of micromanagers that can’t get out of the weeds themselves. Even leadership isn’t able to be proactive, see more value, and generate more work, so they’re watching the team do trivial work like a hawk because they themselves don’t see value and aren’t motivated.

Be the laser guided missile

See the value, proactively figure out how to deliver the value, and go generate a bunch of work for yourself and – as you grow – for others.

I like to use the seek and destroy analogy, which obviously comes from military applications. Laser guided high precision munitions are very difficult to lead off target. It’s locked in on the target, proceeding as fast as it can, and blowing it up. Very simple. It doesn’t get distracted by a whole bunch of other stuff going on because that’s not its job. Its job is to seek and destroy. It is in pursuit of the target as aggressively as possible, to the maximum of its specification, and blowing it up.

Be the laser guided missile. Seek and destroy.

Big changes come in small steps. The key to success in achieving big things is breaking them down into small pieces and making steady progress over time.

In life and software

Many of us try to set goals for our lives like losing weight, getting fit, making money, getting promoted, making friends, or finding love.

When these goals are huge, like losing 50 lbs, becoming a CEO, making a million dollars, getting married, or building a new group of friends, it's hard to track how we're doing. These goals take multiple years, so we benefit a lot from breaking the goals down into smaller changes, and tracking progress against these smaller steps that we can measure weekly. This way we can tweak our behaviors more often as we evolve toward the goal.

My background is in software engineering. One of our most important concepts is decomposition. Master engineers always decompose big changes into a series of small changes. Small chunks are independently verifiable, understandable, and easy to work with.  When things go wrong it's easy to pinpoint where they are and debug them.

When changes come in big monolithic chunks, progress grinds to a halt and it's impossible to tell on any given day how much progress you're really making. The work is slow, difficult to debug, hard to verify, and difficult to understand.

We can’t simply start out walking in exactly the right direction on the path towards some big distant goal and make a series of steps in a straight line. There are always going to be detours and steps backwards along the path.

Decomposing big goals into small goals with explicit hypotheses

When breaking big goals down into smaller ones, it’s powerful to explicitly state hypotheses. There are hypotheses inside each step towards the bigger goal whether you make the hypotheses explicit or not.

Maybe I want to close 5 new customers this month, and I plan to send 500 emails with the expectation that I can close 1 customer from every 100 emails I send. The 500 emails are a hypothesis. Maybe I think i can get 10 meetings from every 100 emails, but I only get 2. Then I’m going to reconsider if I should be doing something differently to close those 5 customers – maybe a different campaign in parallel with a completely different leadgen strategy like going to events or asking my network for referrals.

Small goals with explicit hypotheses enable experimentation, and experimentation enables winning.

Easy to debug

Achieving big goals involves many hypotheses along the way. Many times we just proceeded towards our bigger goals with implicit hypotheses. This cheats us out of an awesome debugging opportunity. If we just proceed towards the larger goal without checking in, it often ends in disappointment. Even if we do succeed, we don’t know why, so it may not be repeatable. We get frustrated about our lack of progress towards the bigger goal after some period of time, and we're not really sure how to debug the situation. What has worked and what hasn’t? What should we do now? Maybe we change our diet around a bunch of different times and we've lost 5 lb in 6 months but the progress has slowed to a halt and we're not really sure why, so we get frustrated and give up.

Small goals with explicit hypotheses enable persistence, and persistence enables winning.

When you look at small steps individually, you can investigate short term results and understand what’s driving them. Let’s say you change your diet for a month but you don't lose any weight. What’s your calorie burn – have you burned less than you expected? Do you need more or some different types of workouts? Are you sure the diet has resulted in the calorie intake you expected? Did you cut calories too much then binge snack to avoid crashing? Did you not cut calories enough? Rather than sticking to the diet that didn’t give you any results in the first month, try something different in the second month based on what you’re learned.

Easy to achieve and measure

Big goals are hard to measure. Let's say for example you want to become a millionaire.  You can measure your bank balance if you're expecting that to go up every week, but what if you’re working on something longer term like a new startup or getting a new job? It takes many years for most people to make their first million, so what do you track along the way?

If you’re planning to make your first million from compensation, you might want to focus on the kinds of jobs and your pace of promotion in order to get to the earning power you need in your target time frame. This way you can come up with short term goals around education, career progression, or short term impact at work that tell you that you are on track or not.  If you’re planning to make your first million from your own business, then you can start from determining a realistic time for you to generate that liquidity for yourself from selling some or all of the business itself, or from distributing its cash flows. In either case, you can set up different financial milestones along the path that will tell you if you are building value as fast as you want, or if your expectations are unrealistic.

Celebrate small wins

Small goals and small steps means small wins, and this is very important.  I’ve learned over the years to celebrate small wins. Celebrate every day if you can – even multiple times a day! Celebration and winning builds momentum and positive energy around your progress, and that solidifies into a habit of thriving and celebrating rather than stressing out trying to survive.

Going back to the software example, great software engineering teams release software multiple times a day into production. The teams feel a sense of accomplishment with every little bit that gets pushed to production, and they never need to feel stressed out about major releases that could be broken in millions of tiny little ways. Only a little bit changes with each push to production, so changes are smaller, faster, less stressful, and can be celebrated more frequently.

source

We started a poll among founders last week to see how many of them are planning layoffs and downsizing their fundraising plans for 2022, and the results show a concerning level of disregard for risk in my view. It seems that the full impact of the change in market conditions hasn’t set in yet with founders. I theorize that this might be related to the shocks followed by unsuspected booms – such as during Covid – lulling people into a sense of complacency.

Here are the poll results

• 92% of founders did not do layoffs during Covid

• 88% of founders have not done layoffs thus far in 2022

• 80% of founders are not planning any layoffs in 2022

• 92% of founders have not received pressure from their investors to do layoffs in 2022

• 60% of founders have a cash out date in the next 12 months

• 50% of founders do not plan any fundraising in 2022

• 50% of founders say that the events of 2022 have not changed their 12-32 month plans at all

This week, as markets have continued to tank, we’ve started to see public sentiment shift dramatically on tech Twitter, and when the layoff numbers for June become clear, I think that we’ll see more founders sober up during the summer, plan layoffs, and curtail fundraising plans.

With this in mind, let’s dive into how to plan a reset to gain additional runway, and how to run the corresponding layoff processes with as much dignity and grace as possible.

Reset planning – getting to 24 months runway

Y Combinator tells founders who raise money to act as if it's the last they'll ever get. – Paul Graham, The Fatal Pinch

The conventional wisdom is that startups should always endeavor to have 24 months of runway, and never less than 12. If you are negotiating a fundraise or an acquisition with less than 6 months of runway, you will have no leverage and the risk of failure is enormous. So we try to stay as far away from that risk as possible.

One of the things that makes the fatal pinch so dangerous is that it's self-reinforcing. Founders overestimate their chances of raising more money, and so are slack about reaching profitability, which further decreases their chances of raising money…What do you do if you're already in the fatal pinch? The first step is to re-evaluate the probability of raising more money. I will now, by an amazing feat of clairvoyance, do this for you: the probability is zero. – Paul Graham, The Fatal Pinch

Beware of this counterproductive set of anti-patterns

Investors will continue to fund my company if I run out of money.

If I fail at fundraising I can just sell the company.

My conversations with potential acquirers or investors are very far along and likely to happen.

Acquirers won’t buy us if I cut costs.

My employee morale will plummet if I cut costs.

New investors won’t fund us if I cut costs.

–Dalton Caldwell, Advice for companies with less than one year of runway

Sometimes you get into a bad spot with your runway, and you need to hit reset. When that happens, it's time to step back and re-plan. Keep it simple. Running a business can be enormously complex. Resist the temptation to revisit everything from first principles and consider every contingency. The only way to increase runway is to increase revenue, cut burn, or raise money. Hopefully as a startup you’re already trying to grow your revenue as fast as possible so growing your way out of this is unlikely a realistic solution. If there is a chance you can raise funds to avoid getting into crisis mode then you should do so now. So when you’re resetting you’re probably mostly looking at how to cut burn and what milestones you need to get to in order to raise additional capital.

That said, you can’t just cut costs and stagnate. You need to understand the milestones you need to achieve in order to become profitable or raise additional capital. So this is going to require that you're getting additional commercial traction and building whatever you need to build in order to support that traction.

Here’s a sequential process to help cut burn

• Create a basic financial plan assuming *realistic* revenue growth and try to target 24 months (or as close to it as you can get) of runway. Maximizing your runway implies how much burn you need to cut to get there, which is normally going to be 20%+.

• Decide whether you are happy with the team’s performance or whether performance issues are part of what got you into the current circumstances. It’s normal that issues have stacked up over time and, when you come to the point of requiring a reset, you have some performance debt among other things.

• If you have performance issues to deal with, conduct the evaluation to determine who to lay off for performance reasons. Then I would conduct the operating expense reduction, and only then finally look at what target burn reduction is left over that requires further layoffs purely based on reducing burn. Even if you make all the cuts at once, it’s important for management to separate these matters in their minds in order to plan more efficiently and avoid conflating multiple issues that have stacked up over time leading up to this reset.

• Once you have outlined the folks you need to let go for performance reasons, look at everything else you can possibly cut besides headcount. This should include any outsourced services and often these should be the first thing on the chopping block. Cut any nice to have or incremental operating expenses or things that people might claim make them more efficient but aren’t necessary right now. It's very important to distinguish activities you should be investing in with investor capital versus your own profits. There are only a small handful of core existential bets that startups are meant to make with investor capital to prove out their core business, and only then should startups proceed to broaden the horizon. It’s important to dig as deep as you can into operating expenses because every penny that you can’t find in operating expenses is going to have to come from layoffs.

• Be honest with where you are commercially. Poll next-stage investors to gauge their expectations around traction, and work backwards to determine what your growth expectations should be. Then plan your commercial team resourcing and product roadmap around these targets.

• After you measure how much you’ve leaned out then you need to decide how much burn to take out of the organization through layoffs. Next let’s look at all the details of planning the layoff.

Veteran founder and investor Pete Flint has a number of great suggestions in his post 39 Moves to Survive and Thrive in a Downturn. Focus especially on the sections on cutting burn, incentivizing top performers with additional grants, and gaining ground.

Planning the layoff

The first rule of planning layoffs is to cut deep.  You never want to end up doing multiple rounds of cuts – you’re just going to annihilate the team’s morale and everyone will be looking for jobs instead of trying to save the ship. Use the burn and runway exercise to make your exact decision, but a general rule of thumb is that 15-20% is going to be the low side, 30%+ is going to be the high side, and if you’ve let things get to the extreme where 50%+ is required, you’re almost creating a totally new company. 

When I moved out to Silicon Valley I joined a high flying startup backed by Sequoia and Matrix. The company grew from 120 to 150 people, and then shrank to ~12 people over 5 rounds of layoffs as the internet bubble imploded. I got laid off in the 3rd round. It would have been better for the company to do one big cut up front and preserve cash than to wait through multiple layoffs and keep burning large sums of money. Repeated layoffs devastated morale at the company. – Elad Gil, Startup Offense and Defense in the Recession

Here’s a sequential process to help decide on layoffs

• As soon as you become aware you need to revise your financial plan and do a strategic reset, you need to make layoffs part of this plan. You should absolutely not communicate this revised plan to the team and *then* do layoffs. You need to roll out layoffs as part of the plan, and communicate the new plan only to the team that’s staying.

• Founders and core leadership (execs and people ops / HR) should be involved in the layoff planning process. These leaders should involve managers and key people as required in the process of deciding upon and carrying out the cuts. For example if there are cuts on an engineering team, you probably want key managers and tech leads involved – with the caveat that you need to limit the pool of those involved to those who can manage sensitive HR information.

• Reiterating from above, first run a process to decide any people or teams that need to go for performance reasons. Performance debt is a real issue and it's common that it builds up and gets addressed during resets. Don’t shy away from addressing this separately from pure cost-cutting, because many of the folks you have to let go for cost cutting are folks that you’d rather keep but just can’t justify the burn for right now.

• Next, I recommend going top down

  • Are there any execs that can go?

    • Execs typically have the highest cash burn

    • Startups commonly overhire execs as part of speculative scaling. Clear signs of this are when you have an exec with a single digit headcount on their team. You might even have execs with ICs reporting directly rather than managers. In that case, you really need a manager not an exec, or you need a simpler org with a larger number of people rolling up to execs and founders.

  • Do we need every org? Whole orgs are often easy cuts.

• How much to cut each org you are keeping? Is there clear reasoning for where you can downsize most?

  • This can be tricky. You need to balance the need to grow commercial traction and build product against the need to cut burn, and of course leaders are all going to fight to retain as much of their teams as they can in order to deliver on what they need to. This is where the CEOs role is really critical – you must continue challenging everyone to cut as deeply as they can, and sometimes you need to give people a ‘sandbox to play in’ with some parameters.

• What do we do with management layers? How do we engage management who we need to cut but who we also need to help run the layoff process?

  • I talk about this more in the comms section below, but I always recommend being fully transparent with managers and engaging them fully in the process even if they are also going to be transitioning out. You do this by ensuring everyone is being treated fairly with their exit package – good managers will stick around to take care of their team and transition out gracefully like professionals as long as they are being treated professionally with the exit package in return.

• Are we sure we’re retaining the capacity to grow traction and build the product to the extent we need to get to the next milestones?

  • This is a double-check on how much we’re cutting from each org and why. You want to be especially sure you’re not cutting too much in areas like engineering and sales which are the engines of building and selling your product.

  • It’s OK to let some areas fall behind and get into a funky state – remember it's life or death. The company can live without certain ops processes running as smoothly as they should, but it can’t live without more commercial traction.

• Do we have second order decisions to make like extended offers, recruiting, or interns?

  • If you’re entering a hiring freeze for some period of months, you’re probably not doing yourself any favors keeping the recruiting team on.

  • You should probably also not be onboarding new team members, including already extended offers.

  • Other high-touch and not long term full time help like interns or consultants should be cut. You need only people that are going to be fully dedicated to seeing the company through this difficult time and have an intense vested interest in success. 

• What do we do about tactics like severance, benefits, notification date and when people stop working, and company property especially when operating remote?

  • Lots of great answers to these from David Ulevitch from a16z. I mostly agree with all this so I’ll just refer to his post.

Comms

Comms is probably an even more gut wrenching part of the process than deciding on cuts. The team appreciates directness and as much economics and benefits as you can give them. The Airbnb Covid layoff was executed well in this regard

Severance: Employees in the US will receive 14 weeks of base pay, plus one additional week for every year at Airbnb. Tenure will be rounded to the nearest year. For example, if someone has been at Airbnb for 3 years and 7 months, they will get an additional 4 weeks of salary, or 18 weeks of total pay. Outside the US, all employees will receive at least 14 weeks of pay, plus tenure increases consistent with their country-specific practices. 

Equity: We are dropping the one-year cliff on equity for everyone we’ve hired in the past year so that everyone departing, regardless of how long they have been here, is a shareholder. Additionally, everyone leaving is eligible for the May 25 vesting date. 

Healthcare: In the midst of a global health crisis of unknown duration, we want to limit the burden of healthcare costs. In the US, we will cover 12 months of health insurance through COBRA. In all other countries, we will cover health insurance costs through the end of 2020. This is because we’re either legally unable to continue coverage, or our current plans will not allow for an extension. We will also provide four months of mental health support through KonTerra. 

Spare the team the rest of the details, your personal sob story about how hard this is for you, or waffling around among various reasons for the cuts. Read up on Better.com’s recent layoffs as an example of comms struggles.

Once you communicate layoffs to the team, their first questions are going to be “are there going to be more layoffs? What’s going to happen to me? What happened to my colleagues who are gone now?” This is why how you treat outgoing employees is key, including offering the most generous severance and benefits packages you can muster. Not only is it the right and most empathetic thing to do as management, but it’s also critical to creating emotional safety among the team that’s staying, because they can see people are being treated fairly and transparently, even on the way out.

Here’s a sequential process for comms

• As a precursor to everything else, typically when you're conducting layoffs it's going to be at multiple levels including managers and folks on their team. Some people will have the managers fire the people on their teams and then fire the managers afterwards.  I think that's just despicable and normally correlates with trying to cheapskate managers on their exit packages. Just muster some courage and bring managers into the process, offer them a good package, and give them the dignity of carrying out what needs to be done with their teams and with themselves. Managers always appreciate being treated with that respect and given that agency.

• First, managers should do 1:1s with those affected. Some people think that an HR person should be present, but this depends on stage, culture and policy – it’s not strictly necessary.

• Next, do an all hands immediately afterward with those who are staying. This minimizes time for gossip with the wrong message circulating around among the team.

• Do not invite the folks that are leaving to all hands. Although this may seem counterintuitive, if you have built a truly exceptional company culture, it can be appropriate to have a going away party for people as a chance for everyone to connect, share contact info, and for everyone to express their warm feelings and well wishes to the departing team. It’s also appropriate to help folks with job searches, put up a public list of their roles and contact to help them get inbound for their job search, and offer to provide references or anything else that’ll help them – even having others on the team help reach out through their networks and even do mock interviews to help the outgoing folks find and prepare for new opportunities.

• If rumors start spreading or you are noticing a rapid decline in morale, have a meeting with all managers for open roundtable discussion and send them off to do 1:1s, then do the same and have an all hands and allow everything to be aired openly. It’s important everyone is heard and that real concerns are addressed with real actions.

The CEO should address the company in a similar way to a new CEO taking over, but starting by owning their own failures that are leading to the layoffs. The CEO should start by stressing that they are ultimately accountable for letting the company get into this position whether through overhiring, not anticipating market conditions, or what have you. The reason is less relevant than the willingness to take ownership and not point the finger. Whatever the case may be, here we are, I own it as CEO, and here’s why this is necessary to position us to make it out alive and to the next stage of building the business. Here’s what’s going to change now and why these are the right changes. Now I want to open the floor to any questions about both our decisions in this process and our plans for the future.

Referring again to David Ulevitch’s post from a16z, I think there are some solid comms advice at the bottom that are also well worth the read.

Startups win by growing fast. As Paul Graham’s startup = growth essay explains, “A startup is a company designed to grow fast.”

VC-backed startups are designed to “eat capital and shit growth.” Growth expectations create a new definition of winning at each round of venture capital that your startup raises. Most businesses can’t scale rapidly based on large amounts of additional capital, which is why most businesses aren’t suitable for venture capital.

many people still don't understand startup = 'eats capital, shits growth.' when you play with VC money, you play with fire. if a normal business grows revenues 50% per year, its great. startup seed-growth expectations are 10x that; 500% per year. can't hit it, funding dries up. -- @bradfordcross

Modeling startup growth

Once you embrace that startups imply growth expectations, you can work backwards from growth expectations to outline a winning path. There are many simple rubrics out there for this, and one of my favorites came from Garry Tan’s reply to my tweet above; the T2D3 model.

Get to $2M ARR and then just triple, triple, double, double,double (T2D3) revenue every year -- @garrytan

The T2D3 model will generate a $1.44B company in 6 years assuming a 10X revenue multiplier as a standard valuation rubric.

This is just one model that works generally for SaaS and consumer startups, but you can poll the market of investors for your particular space to design a model that makes sense for your startup.

Polling the market for growth expectations

I tell founders to start working on their next fundraising as far in advance as possible via financial planning. Go out and poll the target VCs for your next raise, and ask them about their growth expectations based on the stage you’re at and the amount of capital you want.

Depending on your market and type of company (SaaS, consumer, deep tech, etc), you’ll find different expectations about growth milestones at each phase.

This also serves as a great screening mechanism for investors. The best investors know exactly what they're looking for, will think independently, and make decisions from first principles. Others will operate purely on social proof and how hot a deal is. The latter group of investors won't be able to tell you anything about growth expectations and won’t provide you any value after they invest. Polling the market to get a sense of expectations for your next raise is also a way of prefiltering those VC's that you want to work with based on the value that they can probably add after they invest.

I would poll a full set of target investors and use it as an opportunity to get to know them and show your savvy. This could mean reaching out to up to 100 investors. You probably won't get good data back from more than 10. Make sure to overweigh the data that comes from the people that seem most competent. You’ll be able to tell who’s done their research. They’ll have metrics, data, and expectations that are all backed by their existing portfolio. 

Backing into your goals from growth expectations

Once you have a basic table of growth expectations like the T2D3 model, then you can create a goal tree that maps short term goals to their longer term goals counterparts with explicitly stated hypotheses about how the short term is going to influence the longer term; e.g. how are product updates, content marketing, or outbound email campaigns going to lead to more new customers.

Note that what matters here is always what matters to the market and *not* what the team feels internally. If tons of customers are churning and telling you they need specific functionality, that’s a strong market signal the functionality will help your growth. If everyone in your industry is crushing it with SEO and content marketing, that’s a strong market signal that trying more content marketing is a good idea. If a bunch of diesgners, engineers, or PMs have personal opinions about what will make the product better, or what customers want, and these opinions aren’t grounded in customer or market data, then these hypotheses should be subjected to heavy scrutiny. It’s very common that failure comes from setting the wrong fast moving goals because the team doesn’t have the right internal market instincts or focus. Founders need to be relentless about everything being based on market and customer inputs. This needs to be installed into the DNA of the team. It’s the only way to get people to stop arguing based on personal opinion and start focusing on how they can discover and support ideas that are grounded in the market.

Once you get everyone aligned on a strong set of hypotheses for fast moving goals that everyone believes will lead to achieving the slower moving growth expectations, you’re ready to execute and achieve your goals.

Cadence of accountability and check ins

Once you’ve locked in growth expectations and set your goals, it’s time to drive accountability with a cadence of regular check ins.

There are many ways to do this and you should find what works best for you and your team. For some teams this might mean daily standups with quarterly team syncs and for others it can mean weekly planning. What’s important is that there is some regular interval for accountability. My recommendation is meet as frequently as you can without going into overkill.

Sometimes people will say that certain goals don't move fast enough to be worth talking about every week. This is a problem. You want to be really careful about setting your fast-moving goals. Make sure that they are things that can move every week. Without this, you’ll struggle to keep yourself and your team accountable and steadily progressing towards your longer-term growth expectations. 

As I mentioned in the post linked above on goals, I'm a fan of weekly meetings that check in on fast-moving goals. The team needs to set all these fast moving goals themselves based on the longer term growth expectations, and the weekly meetings are the place to be accountable for the results -- both whether we’re hitting these fast moving goals, and whether the fast moving goals, when hit, are influencing the longer term growth metrics the way we hypothesize. This applies natural and realistic pressure on the team.

Celebrating small wins

If you're hitting your short-term goals and making steady progress towards achieving your longer term growth expectation, you’re in great shape. This is an awesome place to be and it’s important to do little things to acknowledge and celebrate these small wins along the way. Even though you want winning to be status quo, you don’t want it to *feel* status quo. For bigger milestones you might want to do team outings or swag, but even if it’s just a pause to reflect, high five, scream with excitement, to compliment everyone on what they did to achieve the goal -- it all goes a long way.

Making the tough calls; changes to hypotheses and teams

When things aren't going well you’re either failing to achieve your short-term goals or your short-term goals are failing to move the needle on your longer term growth expectations. 

When you’re not meeting your short term goals you need to change the team, or how the team is being managed. If you need to change the team, it’s usually because you have some folks that you need to transition out, and this is never easy. The classic error here is to take too long to have clear accountability for the expected impact of each team member. It is especially important to identify a bad team member in the first four weeks during onboarding. It’s a lot harder to let someone go when they’ve been around for a bit. If you have the right team with the right managers, when you’re not hitting your short-term goals it’s a sign that you need to fix the process, set up systems, and remove blockers that are holding everyone back.

When you’re hitting your short-term goals but missing your longer-term growth expectations, your hypotheses are wrong. An example of this would be when you're wrong on product ideas or go to market ideas. You thought that customers would love a product feature, a new marketing campaign would work, or that a new sales process would increase revenue, but instead the customers didn't care, the marketing campaign flopped, and the sales process failed. You should expect this to happen. This is why it's so important to separate out fast-moving short-term goals versus slow-moving long-term growth objectives. It's never the case that your first ideas are just going to work, you're always going to have to iterate an experiment to find your way to the short-term actions that are going to generate the longer-term results.

What company growth implies about personal growth

The best startups are the best run companies in the world. When they keep growing, they become companies like Amazon, which is just unfathomably well run for its scale.

Ask yourself -- do you think you can become one of the best in the world at what you do? The answer should be yes. If you struggle with it too much, then startups might not be a good fit. You must be able to suspend disbelief and become a ‘true believer’ in this vision for yourself and for the startup.

You must be able to take an empirical scientific attitude. Question yourself every day and not be overconfident. Bias toward thinking you don’t know what you are doing rather than that you do, so that you can constantly learn and improve. Learning and improving really fast is one of the things that sets startup people and startups themselves apart from other people and other companies. Growing really fast as a company implies growing really fast personally, and that means messing up a lot, seeing it immediately, reflecting, seeking knowledge, and doing it really well very quickly.

If we want to be scientific thinkers and empirical about how we make decisions, then we need to also understand that means very high personal and company level growth expectations, which in turn means we must believe in ourselves to become the best in the world at something -- both in our own personal skill sets, and in terms of our startups’ market positions.

What company growth implies about systems, delegation, and self-replicating leadership

Systems design

Systems design is #1 for scaling. If we look at engineering for example, there are interviews, code reviews, design reviews, architecture/system design, release process, quality eval process for models, the build process, etc. There is also clarity of roles and responsibilities, not having EM and TL roles clear, siloing of ML team rather than integration into engineering.

One of the reasons that I hate scrum so bad is that the Sutherland guy ripped everyone off to validate his scrum master certification class by posturing that this is the whole story to managing tech organizations. Scrum should be viewed as agile planning. Basic agile planning is good, but is literally 0.5% -- that’s point five percent, not 5% -- of the vast set of systems that must be in place for tech organizations to operate well. At one of my previous companies, we spent eons messing around with the agile planning, and hardly any time fixing the vast number of other missing or broken ‘systems of working’ in engineering and product.

I also notice that the team often talked about how there has been so much change and the change is at fault for the lack of growth--this is usually on teams where there has been about 1/10th the change that there should be. Let’s stop changing basic planning shit that should take 0.5% of our time, and let's start changing very important things very fast. There’s almost never too much change too fast -- it’s usually just that there is too much churn in the wrong areas.

If we look at sales, when we set and follow a solid system, we onboard new customers fastest. When we start to wing it, we slow down and risk failure.

Delegation

Delegation is key. You can’t scale if you can’t delegate, but you have to delegate the right stuff, and be aware of what is ‘special’ and what is not.

Some people think I don’t delegate because they see me in the weeds fixing stuff. I mostly delegate, but I’ve made the mistake of over-delegating too fast without calibration, and then needing to zoom in to fix things. For example, a common pattern among founders is delegating sales too fast and then needing to come back and reset things, setting up the foundation yourself and then gradually backing out.

Remember at startups we don’t have any time for make believe and overconfidence -- we must generate the outsized growth results that everyone expects. One of the hardest parts of startups is you have to balance suspending self-doubt with a razor sharp self-awareness. We need to be explicit about people trying to take things on, failing at it, and it's OK. What is not OK is when we take something on, we are failing at it, and we avoid looking in the mirror in order to protect our ego. Delegation always has to come with short term results -- there isn’t time and space in startups for ‘just go away and trust me’ forms of delegation.

Self-replicating leadership

A startup’s culture and momentum dies if the team is unable to grow with it and the startup needs to keep shedding the old team and replacing it with a new one for the next phase. A solid percentage of folks need to ‘grow with the business’ -- that means if the startup is growing 3X per year in revenue and headcount, you need to grow 3X per year to keep up. This means that you must rapidly master what you are doing today, and be able to teach someone else to do it tomorrow.

Self-replicating leadership is not just about ‘emerging stars’ who can grow as fast as the company for several years, it is about the feedback loop of learning -> doing -> systematizing -> teaching; people constantly pass through some skill or role, making the systems/process better each time. Rotating people through code leaves it better than component-level code ownership. The rotation of engineers through on call duty makes the production culture of the team improve dramatically. The whole team rotating through code reviews ensures that we break down context silos and have strong system level context across the team. When we constantly learn, do, document systems, and teach others, we are setting the team up to be able to scale as fast as possible.

Building leadership teams

Know where you are truly exceptional

Each leader should focus on which of the three pillars will be their strongest. It's always great to work on your weaknesses, but the most important part of fitting in on an exceptional leadership team is understanding, embracing, and leveraging your superpower. 

Assume you can master at best two of the three

Be candid among the team about who is best at what, and where people should be focused. Be self-aware about where you’re weakest, and strive to ‘do no harm’ there. It's really awesome when the leadership team has folks with somewhat overlapping superpowers. For example a CEO with strong vision and execution capabilities that overlaps with a really strong people manager that also has solid execution capabilities. This way they can overlap on execution and the people management focused leader can offset that area where the CEO is weaker.

Identify and build around the visionary

Without direction, execution and management firepower doesn’t matter. The most important role to identify is the team's Visionary. Everyone needs to understand this and how it sets Direction.  Defining and keeping the vision does not mean that you control every single decision, but it does mean that the entire leadership team needs to be taking input from the Visionary as equally important to other critical matters like the team and the execution roadmap. More on this in separation of powers section below

Identify the Visionary’s secondary pillar

Ideally, the CEO is a visionary leader -- this is the easiest setup for success, the so-called “Product CEO.” Many of the best CEOs combine vision and execution, and have other leads whose strengths are with people. Visionaries can be non-CEO and focused on Execution and People paired with a Visionary peer; a founder or executive chairman could be the visionary product leader, or or driving the scientific vision at a biotech or deep tech.

Define overlapping and non-overlapping pillars for other key leaders

Some overlap is required for communication. E.g two execution focused leaders may get the rest of the team onboard for how something needs to be managed despite pushback from the team. The visionary leader who is weaker with people management might be able to overlap on execution with a strong people manager who is great at getting the team excited about the vision through emotional engagement.

Assess whether anyone doesn’t fit on the team

Beware of excessive redundancy leading to too many cooks in the kitchen. Too much vision leads to infighting about direction. Too much execution focus will lead to a lack of empathy for the team and burnout. Too much people management will lead to a ‘feel good’ culture that optimizes for short term team happiness over long term success. Beware of leaders that overestimate their core competency; you need actual superpower-level performance at each core pillar, not ‘pretty good.’ Beware of leaders that aren’t self-aware and feel they are strong in areas where they are weaker – this leads to overstepping boundaries and causing strife.

Establish separation of powers and checks and balances

The three pillars should be thought of in terms similar to the separation of powers in the US Government: Vision is the executive branch, Execution is the legislative branch, and People is the judicial branch. The Vision sets the direction, the Execution sets the roadmap, and the People interpret the roadmap alongside the impact on the team.

Background on the three pillars

I first heard about this framework from some executive teams back in 2012, and I’ve applied it ever since. My guess is that it originally came from coaching that execs were getting from Julie Straw, and is outlined in her book published in 2013.

Visionary Leaders

Vision is “what the world will look like” and mission is “why it’s meaningful.”  

For example, Microsoft’s founding vision was, “a computer on every desk and in every home,” and Tesla’s mission is, “to accelerate the world's transition to sustainable energy.” 

Visionary leaders are

• Able to absorb and synthesize a remarkable amount of information in record time

• Nerd out deeply and learn rapidly in new topics

• Able to see connections between different domains, people, etc

• Often called creative geniuses for how they connect the dots to bring new ideas to life

• Able to reliably have a sense of how trends are unfolding

• Often seen leading from the front like Alexander the great

• Known for a keen eye for talent and motivating people with vision and mission

• Usually de-energized by meetings like 1:1s and project management that go into operating details other than brainstorming and strategy.

Actual vision is probably the rarest leadership skill, and it comes with a cost -- people with real vision are drawn deep into concentrated thought, are often agitated when interrupted, and may have a difficult time translating the vision to execution. Because of this, there are very few people who can both see a real vision of the future and be good enough in planning execution and working with people that they can bring that vision to life. Many with vision aren’t organizational leaders that make the vision a reality, but instead are more thought leaders, writers, and other various forms of influencers.

Visionary leaders need to be able to synthesize vision and mission to define paths of execution and motivate teams along those paths. They need to help teams visualize the future that the team is creating together and internalize the impact it will have if this future is brought into existence. Teams need to visualize what the world will look like and internalize why it’s a meaningful journey to get there.

Potential antipatterns

The asshole visionary death march

• Many people look at stories from leaders like Bill Gates, Steve Jobs, or Jeff Bezos, and they draw the wrong lessons. They think that great vision and execution has to come with being mean, and that’s bullshit. If you ask any of these leaders on their death beds what they’d have done differently, they will definitely say that they wished they’d have seen how to get the same results without being a dick about it

Vision without team and execution is hallucination

• Vision spiral; keeps saying more and more visionary stuff but never does anything

• Can’t build teams; doesn't even have the right people around to do anything

People Managers

Great people managers create happy, healthy, inspired high-performing teams. They thrive grinding it out on the day-to-day people management issues and derive great joy from untangling drama, conflict, misalignment and bringing clarity to the team.

People managers are

• Deeply focused on personal growth of the team.

• Jointly optimizing for winning and personal growth; always considering what has biggest impact on overall success, and what each person wants to work on to have fun and grow

• Energized with sessions of back-to-back 1:1s stacked on one day, or a series of meetings to untangle conflict or misalignment.

• Master facilitators in meetings and 1:1s

• Highly emotionally attuned

• Masters of driving alignment and ensuring everyone feels heard yet is, in the end, aligned on a single chosen path

Emotional attunement with an entire team is a challenge, especially as teams scale up and there are many layers of management. Expert people managers are able to avoid burning out the team by pushing death marches too hard, and also prevent allowing the team to drag things out and move slowly when they could be going a lot faster. They know how to harness the team's energy and rally people to do their best work. The old “one plus one equals three” adage. It's really about managers that are able to get more out of their teams than the sum of the parts.  they can sense attrition from a mile away and help to retain top people or help to gracefully transition folks out who may be struggling.

Driving alignment up and down in organization is super challenging. To make matters worse, sometimes the Visionary leader who has the best sense of the vision mission and direction is not as good at people management and ensuring that everybody up and down the organization fully understands the vision and the mission and the plan to carry it out.  On top of that the alignment against the direction that the company is headed in overall has to itself align with the direction for individual teams and for individual contributors. At the level of the individual contributor, the manager needs to care about the professional hierarchy of needs for each individual and how to align their personal work and growth plans with what matters to make the company win overall.

Potential antipatterns

The hijacking people manager

• Over-emphasizes the role of people management and bottom-up polling of the team

• Doesn’t understanding ‘managing to the level’ and takes feedback from junior team members and can’t interpret the raw input within the context of what level people are at and broader issues on the team

• Tries to ‘get the other leaders out of the day-to-day’ then sabotages

• Can’t execute for shit -- feel good manager

• Doesn’t even understand what the vision is

The top-down micromanager

• Doesn't understand how people management fits with execution -- sees humans as cogs in a machine who are just there to take the next ticket and complete the next task

• Team is always on a death march

• Over-engineers the shit out of anything process related

• Slows progress, everyone gets frustrated and stuck in process bullshit, doesn't understand how to set a good work pace that is equal parts manageable and efficient

Managing your way out of bad execution

• The team just isn’t good enough, or isn’t executing well enough, but management tries to deal with it as a people management challenge rather than making tough decisions about changes on the team, the product, and driving clear goals and accountability.

Execution Machines

Great executors are laser focused on outcomes and mechanically precise in their pursuit of goals. They’re notorious for meticulous milestoning, roadmapping, and project management, sometimes to the point that it becomes an annoyance that everyone knowingly appreciates but also dreads. They are the taskmaster and constant voice of accountability to measurable results.

Execution machines are

• Making decisions and have the confidence to trust their instincts and take a direction even when it goes against the grain of what the majority of the team wants to do.

• Sees up and down the stack from vision to task; master in translating vision into strategy into execution.

• Knows the right regular meeting cadence for everything and how to structure them.

• Working with goal trees and leading indicators to be sure that short term goals translate to longer term goals and we don’t need bigger changes to the daily and weekly work.

• Vigilant about people who bluster or blame as a way to avoid setting and measuring against goals because they “already know what they’re doing.”

No matter how strong the vision and the team are at the end of the day, managing execution is still really difficult, time consuming, and requires a lot of hard skills. A lot of teams try to scale headcount in order to increase velocity or output, and it often doesn't work. You easily end up with sublinear scalability, where you get only a fraction of each new team member’s potential productivity. This is why it's often more important to have outstanding execution managers that are fixing systems in place for doing the work instead of just adding more people to the problem. Great people managers will be great at sussing out why the team is unhappy, but unless they're also outstanding execution managers they may not take all the right actions to get things on track.

Execution managers are focused on goals and tracking an organizing work to be able to meet the goals. They are constantly working on how to make hypotheses explicit. That means let's say we want to grow our customer base by 3 fold in the next 6 months, and we think that running email campaigns for the sales team to generate more leads it's going to be key to that outcome. The great execution manager sees the email campaigns as a hypothesis, and ruthlessly tracks them week-over-week to see how the conversion numbers look and whether this is really a path to increasing the customer base 3 fold or we need to start testing other ideas.

Potential antipatterns

Hammer looking for a nail: Executing your way into a vision

• Leadership team doesn’t have sufficient direction from the vision and tries to just experiment their way into a direction. This is the lean startup fallacy.

• You especially see this from people that worked at companies with a strong P/M fit and culture of experiments like FB/GOOG. They don’t understand what got them to P/M fit, and only learned about controlled experiments that make small steps away from the local optimum. But they aren’t aware of how the process of vision initially combined with experimentation to find globally optimum regions for P/M fit.

Executing with a blindfold; failing to make hypotheses explicit and pivot as needed

• Most of what we do start from some kind of a goal

• Goals are hierarchical and there's a lot of assumptions in the hypotheses baked in as you move down from the highest level goals in the company down to the individual work

• Great execution managers of Boyd blindly executing against previously set goals without tracking how those goals are moving the needle on the overall goals

• For example there may be a company goal to increase engagement with a product by 20% in the next 3 months. At the start of the quarter the team may have come up with a bunch of new feature ideas that we're rolling out as we implement them.

• But if the ideas are in working and getting their engagement impact that we think,  the great execution manager takes a step back and says hey team we maybe need to pause this roadmap and brainstorm some new ideas because our current threat of thinking doesn't appear to be working it doesn't look like we're going to hit our goal by the end of the quarter. 

Introduction

No VC pattern matching is more well honed than the assessment of founding teams. Last year I surveyed a list of top VCs on what they think are the three most important aspects of successful founding teams. 

The top three that came back were:

• Unfair advantage from domain expertise and founder market fit

• Vision, clarity and thoughtfulness

• Grit, persistence, resilience and tenacity

I compiled all the responses into a founding team builder. The tool is meant for founders, but it’s equally useful to VCs and employees considering investing in or joining a startup.

Founding Team Builder

Each founder has to meet all the criteria on the founder checklist, and the founding team in aggregate has to meet all the criteria on the founding team checklist.

Founder checklist

• Grit?

• Ethical and likable?

• Startup person – resourceful, prioritization focused, and customer obsessed?

• Can learn and grow with the startup?

• Outsized intellectual horsepower and productive energy?

Founding team checklist

• CEO with clear vision and strong market thoughtfulness

• Ability to recruit top talent and executives

• Product, design, technical ability to build the product

• Founder market fit

• Sales savvy

Notes on applying the Team Builder

Working through the checklists

First think carefully about the design of the founding team overall. You want to ensure the team includes a CEO with a clear vision, founder-market fit, sales savvy, and the ability to build the product. Sometimes one person could tick all these boxes, and other times you may need as many as 3-4 founders in order to cover all the bases.

Next, as you are screening each potential founder, ensure they meet all the criteria on the list. Spend lots of time with people you are serious about. Do multiple backchannel references. Don’t only explore a work context: go out together, have fun and get to know each other to make sure you are aligned on values more broadly. You can’t anticipate everything that could go wrong, but look for issues that could escalate and cause founder breakup in the near term. Be especially careful that you think they can really grow with the startup and be as successful in 5 years with thousands of employees as they are today with just the founding team.

What differentiates a founder from an early employee

If a person meets all the criteria for a founder, then consider them as a founder. Otherwise consider them as an early employee.  Early employees share most of the same characteristics as founders, but founders need to be able to grow with the startup.  It's fine to have a star engineer who doesn't want to grow into a manager as the company scales,  but it's not fine if your technical founder can't really grow into something like a CTO – it tends to breed resentment among early employees and founders.

Recruiting founders

If you are starting as a solo founder and want to build a team of co-founders, this should be relatively easy for you. It should be about as hard as an executive search and take a max of 6 months – hopefully much less –since you should be focused mostly on building the founding team before building the product or company overall. If it’s too difficult, that’s a sign that you probably aren’t ready to be a founder. 

Who should be CEO

The CEO should be the natural leader with a strong vision and market orientation. If you are unclear who the CEO is or think you can figure it out later, then you probably don’t have someone who should be CEO. If you have someone who wants to be CEO but doesn’t have the market vision and ability to fundraise, you need to talk about it and see whether this is really the fight founding team or not.

Equity split

When it comes to the equity split among founders, much has been written.  You can readily find equity calculators and blog posts around. Many people, including within the YCombinator community, have been a bit religious about recommending founders have equal equity.  I don't believe in assigning value to past work like who has the idea, who has connections to investors – it should be based on the ongoing roles and contributions. A lot of the recommendations for equal equity are based on not knowing what the contribution among founders will be a priori. What really matters is what’s going to happen in day to day operations: who drives the vision as the CEO, who does the selling, who owns product, who owns engineering. If you have a serial founder CEO who already has some success, is putting in personal money, leading sales and driving management, it probably makes more sense for them to have more equity than a first-time technical founder for example.  Whereas if you have two peers coming out of university together and one is CEO and the other is CTO then equal equity makes more sense.

Detailed VC survey results

I asked top VCs to name the three most important aspects of founding teams that they look for when making investment decisions. I then synthesized the survey results into categories, ranked them in priority order based on how frequently each category was named, and summarized what I think is most important about each category.

The top three were:

• Unfair Advantage from domain expertise and founder market fit

• Vision, clarity and thoughtfulness

• Grit, persistence, resilience, tenacity

Next were:

• Being ethical and likable

• Ability to recruit top talent and executives

• Technical ability to build out the product 

• The team composition and history

• Learning machines with the ability to grow with the start up

• Sales savvy

• Resourcefulness

• Prioritization in focus

• Mission driven

• Raw horsepower intellectually and the energy for hard work 

• Obsession with customer value and outcomes

• Ability to fundraise

Unfair advantage due to domain experience and founder/market fit

Founder/market fit can be along many dimensions. It could be domain expertise, or the type of disruption and go-to-market strategy, or the product and technical problems.

Both the founder and the VC need to assess which dimensions seem most important to gain an unfair advantage, whether go-to-market, the tech, some deep scientific or industry expertise, or ultra strong product and design skills. Founders want to think long and hard about this when designing their founding teams.

Founder/market fit doesn’t only refer to deep experience in the business domain. In fact,  sometimes it’s coming from outside the domain that gives them the advantage to think differently and innovatively. The type of founder/market fit may not be obvious. For example, a founder may understand exactly how to build a team with the right domain expertise even though they may not have the domain expertise themselves. Someone who is great at building sales teams going after small businesses, but hasn’t ever worked in insurance before, may be better as the commercial cofounder of an insurtech selling to small insurance agencies than someone with years of experience working with insurance agencies. This is because many times the go-to-market domain is even more important than the business domain and the commercial leader can work with experts from the domain on their team and other teams.

A common problem is founders want to start a business but don’t have the industry domain expertise. The question is – is that expertise one of the top 2-3 most important dimensions to gain an unfair advantage? For example, for many industries the biggest issues are delivering better products and tech with a streamlined SaaS go-to-market. In those cases I’d rather have a CEO, CTO pair with the GTM, product, and engineering chops to deliver something 1000X better, and I’d entrust them to bring the right domain experts onto the leadership team. On the other hand, there might be a deeply scientific biology company that only makes sense with the scientific founder as the technical leader and domain expert.

VC Keywords

• Domain Expertise

• Understand space

• Unique insight into a market 

• Customer (Buyer) Domain Expert

• Founder-Market fit.

• Unfair advantage

• Industry expertise

Vision, Clarity, Thoughtfulness

Someone needs to be the ‘keeper of the vision’ and able to synthesize massive volumes of information from the market, customers, and team to define a crystal clear vision and roadmap to get there.

Normally, it’s best this is one person and not a decision by committee.  They need to be masters of building an open creative environment that takes any and all ideas from the team into the creative process. This person needs to be able to see the world through multiple perspectives: users, customers, investors, employees, partners, competitors, and any relevant stakeholders in their markets or adjacent to their company.

It’s very important to recognize the ongoing value of vision and thoughtfulness. This isn’t a one time up front process of defining the vision. This same thoughtfulness is required to navigate the business to product-market fit on an ongoing basis.

What if the market changes – for instance when Netflix needed to pivot from mailing CDs to a streaming service. Consider Steve Jobs’ return to Apple and subsequent pivot in Apple’s focus and the series of product launches that ensued from iPod to iPhone and iPad. Consider Satya Nadella’s strategic acquisitions and product focus at Microsoft since taking over. If you have a thoughtful visionary at the helm leading through these times in a business’s history, you might make it out the other side even better off. If you don’t have someone who can process the vast data and shepherd towards a clear and thoughtful vision for the future, you may not make it out the other side at all.

VC keywords

• Product visionary 

• Visionary CEO

• Clearly communicate their vision

• Drive a compelling vision

• Can sell the vision to customers, investors, employees 

• Can clearly articulate what success looks like

• Ability to articulate how to achieve success at scale

• Clarity of thought

• Thoughtfulness. Less about having the right answer but I want to hear that they've thought through the problem.

Grit, Persistence, resilience, tenacity, confidence and energy to win

Startups are as difficult and painful an activity as you can undertake. The emotional rollercoaster is notoriously intense. One day, it can feel like you're the next Google. The next, it feels like you're about to fail and one of your best team members quits. You have to hear “no” almost all the time. Whether it's raising money, selling your first products or attracting top talent, you have to push through a hundred no’s for every yes. Also, when you get “hot”  you might hear 100 yes’s for every no but they're not actually real yes’s, they might easily evaporate overnight. Then also you need to keep your head on straight because if you let it go to your head you will easily implode. So there's a kind of steady unwavering confidence and energy that comes with this type of persistence and resilience –  you can feel your feelings and go through the highs and lows without letting them overwhelm you and shut you down or send you into the heights of mania.

There is a counterexample which I call the ”keepin’ the dream alive”  mode.  This is where persistence becomes toxic in the face of a startup that just isn't working.  It's tough to say anything useful about this one, especially for first-time entrepreneurs. Sometimes if you dig six more feet you strike gold and sometimes you've reached the depth of your own grave, the trick is to know which is which before you’re lying in a coffin.

VC keywords

• Grit

• Persistent

• Resilience

• Relentlessness to win

• Tenacity. Will they stick with this through ups and downs, run through any 

• Confidence

• Energy

Being ethical and likable

Likability is an interesting one that's less straightforward than it might seem. Sometimes people who can come off as abrasive or argumentative are actually very likable in the long run. This is because being honestly direct and vulnerable is actually extremely valuable in environments of high uncertainty. Excessive polish, posturing, and oversensitivity can actually make people less likable in a startup environment. Sometimes these can be signs the person is a charming manipulator and plays politics rather than focusing on getting things done. Likability ends up having a lot to do with transparency, honesty, some basic sense of empathy, and how you treat others. I've seen a ton of fake nice people treating their colleagues poorly when push comes to shove and engaged in constant political shenanigans rather than being transparent and addressing conflicts. So be careful because in the startup game likeability is probably more about realness with a dose of empathy then it is about overt polishing politeness and coming off as ”nice.” For example if a project is failing and the team is unwilling to see that and embrace change, gently validating them and saying nice things won’t stop them from running head-on into a brick wall.

Integrity and ethics are crucial. It can sometimes be hard to assess this up front but you can look for small signs and you can conduct reference checks. Over the years I've decided to adopt a zero-tolerance policy for integrity slip-ups and charming manipulators. If you see even a small sign that the person puts optics and politics ahead of execution, walk away.

VC keywords

• Integrity

• Intellectual honesty

• Trust

• Do I like them?

• Ethics

• Transparent and responsive

Ability to recruit top talent and execs

Recruiting top talent happens in three main phases at startups.  In the first few years, founders recruit both the founding team and then all the early employees. I like to see the team putting in 20% of their time into recruiting at a fast growing startup. Later, after the founders have fully embedded the focus on elite talent throughout the organization, the recruiting team will be working mostly with other leaders that the founders have brought on board. These leaders need to have the same relentless focus on attracting and retaining top talent that the founders do.

VC keywords

• Ability to recruit

• Able to recruit/ hire/ attract amazing individuals to join them phenomenally

• Ability to recruit amazing talent from day 1

• Ability to recruit

• Can they attract great people

• Someone I'd like to work for

• willingness and ability to hire A+ people

• Hire great executives

Technical ability to build out the vision

The old saying goes that vision without execution is hallucination.  Whatever the product is, your team needs the technical skills to build it, whether it's design, engineering, hardware, machine learning, biological sciences, or physics. Depending on the focus of the company and its product someone with these technical building skills should probably be a founder. They don't have to be actually building the thing themselves for years, but it's important that they are hands -on building themselves in the first few years to overcome the chicken-and-egg problem.  If you have a core skill that you must be strong at to be successful, and nobody is even remotely confident in that area on the founding team, it can be quite challenging to assemble the right early team before you have enough traction to attract people just based on the business and career growth opportunity. Talent attracts talent within core skill areas.

VC keywords

• Technical

• technical expertise

• Technical

• Competent technical lead suitable for the mission ahead

• Ability to build

Team composition and history

You have the right mix of skills on the team so that you can attack the problem with high velocity from day one. They have to cover the cases of founder market fit, visionary CEO, selling capability and building capability. You don't want to have a founding team with three sales people on it, three product people, or two engineers.

Most VCs like to see some history of the team working together knowing each other being friends longer-term. My opinion is this is kind of a mixed bag. Sometimes overly deep personal connections can cause drama and huge falling out during the course of the start up. Teams that are more professionally connected than personally connected can sometimes perform in a more stable and rational way without these kinds of flameouts. It depends a lot on the situation you see founders that are even family or even spouses and it can work.

VC keywords

• Team background (e.g., previously working together)

• history together

• complementary superpowers longstanding, tested relationship

• Complementary skills that address the problem they are trying to solve

• Right composition

• Team dynamics

Learning machines and ability to grow with the startup

Great Founders learn and scale very quickly.  It's amazing to watch a person start a company with just a few people and then a few years later they're running a team with thousands of people. A lot of times folks will talk about the stage fit for employees. Some folks work well in big corporations but would be ineffective at a startup or vice versa. The most amazing founders are remarkable at every stage. They just keep learning and growing with the business. These types of founders receive coaching extremely well and then proactively follow up on the coaching to learn more and impress everybody around them consistently. They realize that by taking the advice they get from folks that have very valuable time and running with it and doing much more on their own that these really high-level advisers will take the time to come back and teach them more. They are rabid readers spending thousands of dollars a year on books and educating themselves. They rapidly build support networks in areas that they don't know about yet, for example the founder CEO with a technical background will build a huge network of world-class sales people or vice versa, a CEO with a sales background will build a big network of product and engineering folks.

VC keywords

• Evidence of learning

• Learning mindset

• High Slope

• Self Awareness

Sales savvy

Startups are about growth. They need to be masters of sales and marketing. Great products don't sell themselves and it's naive to think otherwise. The reality is that product, marketing and sales are so deeply intertwined that they aren’t even really distinct disciplines at the earliest stages. The earlier the stage of the startup, the less well-formed the product, the more the way that you're communicating the product in sales and marketing activities is deeply connected with the way that you are building the product. Sales, marketing, and product are all about learning how to meet the needs of your customers – master salespeople, marketers, and product managers are all masters of listening to their customers and the market. You also need to be able to run a sales process and close deals efficiently relative to the size of the deals; this means you need one kind of approach for large seven figure enterprise deals and something completely different for a ten dollars a month SaaS product. 

VC keywords

• savvy on selling the product( their solution)

• Sales Leader with traction

Resourcefulness

Startups need to do the impossible. They do things that bigger, more successful companies with tons of cash aren’t able to do. They do this by being more resourceful. The best founders come up with all kinds of creative hacks pretty much on a daily basis. You'll see them come up with a new way to find an early user growth channel that nobody else would have thought of – it won’t scale but could get you the first batch of users you need over the next 3 months. You'll see them being able to figure out a way to hire a way more senior person for a particular role than the startup really deserves at that point in time. You'll see them stretch out a tiny amount of money for a remarkably long period of time. You'll see them figure out how to import desperately needed expertise into the business through advisers or some other method when there isn't the time, money or opportunity to bring someone in full time. You'll see them react to an existential crisis that appears that it will certainly kill the business but the next week everything is back to being fine again.

VC keywords

• Resourcefulness

• Resourceful

Prioritize and focus

The best founders and executives are relentless about focus. Creative types will come up with tons of new ideas every day and that's fantastic. At the same time, you have to have the discipline to stick most of these ideas on to a list and keep yourself focused on the things that are really going to make the startup win. You can't change direction every single day.  At the same time you also need to have the intuition about when you are seeing information from customers and from the market that you need to pivot. You need to understand what the highest priority work is for derisking the business, and be a meticulous project manager to keep the team focused on winning and not getting sidetracked on nice-to-haves that can be dealt with later.

VC keywords

• Driven and can prioritize

• Excels at narrative and prioritizes well to match

Mission driven

Mission driven. Great founders can make much more on a risk-adjusted basis working at Google. A powerful mission and will to win keeps them at it when moving forward seems pointless or impossible. Whether it's raising capital from investors, hiring a team, bringing in customers, or motivating other business partners, it's always way easier when you have a positive mission that everyone can identify with. Great founders are primarily focused on this mission through meeting the needs of their customers. There are many better and faster and more energy efficient ways to generate wealth that have higher likelihood of actually working. Founders are primarily focused on achieving mission, and secondarily on other aspects of the outcome.

VC keywords

• Mission driven

• Passion

Raw horsepower

Pulling off such a long shot is part luck and we can’t control luck. One thing we can control is selecting for raw horsepower. Great founding teams are smart, fast, and skilled.  There's just no way around the reality that startups are pulling off miracles. The velocity of execution and the quality of what your building has to be extraordinary compared to the number of people around and how long they have to do the work. This means that the people have to be orders of magnitude better, smarter, faster, creative, and more persistent than other teams.  This apolitical truth says that not everybody should be a startup founder, as there’s a certain amount of raw aptitude required. That said, not everyone has to have a genius level IQ. There are many different kinds of start up aptitude and horsepower. I will say that I think folks need to have a very high baseline energy level just because of the volume and velocity of work it takes special people to avoid burning out.

VC keywords

• Intellectual horsepower

• Smart and hardworking

Customer Obsession

The best founders are obsessed with creating value for users. They are constantly talking to users, running surveys a

nd eliciting feedback, trying to figure out both simple novel ways to make users happy. Jeff Bezos talks about this all the time. One of my favorite Bezos’ mantras is that you can be obsessed about your competitors or obsessed about your customers and you need to choose one. You can see customer obsession in how founders talk about their business and how they spend their time. They'll casually reference something they learned on a customer interview call recently or something they see from looking at the metrics. They also understand their market very well; its size, how it's growing, what is and is not successful in meeting customer needs in their market. You don’t see them knocking on competitors and overly focusing on defensibility and claims of superior technology.

VC keywords

• Customer obsession

• Outcome orientation

Ability to fundraise

It's Interesting because people often say that CEOs job is to not let the company run out of money, yet this was the least listed among top three attributes of founding teams. I think that VC's understand what's actually required for the start up to be able to raise capital, and they are focused on the attributes that will allow that, rather than just naming the ability to raise capital itself as one of the most important attributes.  This makes a lot of sense because the things which allow a startup to raise capital are also the things which allow it to operate and be successful in many other ways,  such as selling a compelling vision, having a customer obsession, showing grit, and having an unfair advantage in their Market.

VC keywords

• Fundraise

Introduction

A well written memo is the core of sharpening your startup pitch.  You should write the memo first, and build the deck only once you have a final draft.

Many funds write investment memos internally for investment committee meetings, so when an entrepreneur writes one they are effectively seeding what will be shared directly with the investment committee.

It's important to keep early-stage startup pitch decks very short, and this 6 section memo can be turned into a 6 slide pitch deck mapped to each section.  It's okay to have more detailed supporting materials that you feel are relevant, but those should be moved into an appendix.

The good news is the startup community has mostly converged on a set of categories that can serve as your one-pager template.

The one-pager investment memo

Clone this doc to get started. This memo is composed of six sections, which you need to fill out constrained to a total of one page. My view is that constraining to one page is critical, as it forces clarity and prioritization of what’s truly most important. Sections listed below.

Pitch: One sentence value prop.

Market: Street smart TAM -- problem you solve, for whom, and for how much.

Timing: Why is it the right time and what catalysts make it so?

Distribution: Market entry, growth traction, KPIs, differentiated acquisition model.

Team: Why are you the right founding team for this? Linkedins / links / bios.

Basics:  Website, deck, stage, team size, capital raised, location.

Why you should build your pitch deck around your memo, not your memo around your pitch deck

The future of fundraising is more distributed, streamlined, objective, and systemic. Examples of what's coming include YC and other accelerators, NFX FAST, AngelList syndicates, and DAOs.

If you look at the memos that appear on YC, AngelList,  and NFX fast for example, they are virtually the same.  I think in the future there will be many places to submit a standard one-pager investment memo for systematic decisioning. There will be an industry-standard template like the one I’m proposing here, similar to how YC drove adoption of the Safe Note. This doesn't mean investment decisions will be fully automated but rather that the process to progress to an in person pitch will be very streamlined at the early stages. 

This isn't a very big change from today.  Most top firms have partners write up an investment memo for the investment committee; both for decision-making and governance.

As an entrepreneur I find this process of creating a one-pager to be incredibly powerful as a focusing tool.  When you start with the pitch deck, there’s a tendency to generate all kinds of materials that go deep into the weeds and distract from the core of the business. This just makes it way less likely that you will maintain investor attention during pitch meetings.

More detailed materials should be developed only after the final draft one pager, and should be built out as slides in appendix to the core six-slide deck based around categories in the one-pager. Founders can jump in and out of the appendix as needed throughout the pitch and during diligence. If the same questions keep coming up from investors at a level of detail that doesn't make sense in the core pitch, just create slides in the appendix that address those questions.

Background on investment memos

The oldest and most well known template is probably the YC application. The YC application has been around for nearly 20 years, so many blogs have dissected the template and made it available as a google doc. This is worth looking at whether you apply to YC or not. Here’s the original Dropbox application as an example.

YC has also published a memo template and Parker Conrad has shared how Rippling raised a 45M Series A using only a memo, without any deck. The YC memo is part of its Series A guide which also includes a deck outline as part of the set of investment materials. 

NFX has put a great deal of work into their FAST program. You can fill out a template of 12 questions and submit for pre-seed or seed investment within 9 days.

AngelList investors submit memos to their syndicates for investment consideration. You can review the AngelList memo template but keep in mind that investors don’t follow this religiously on AngelList, folks tend to clone it and do their own thing. Here’s a summary of other info syndicate investors see with a deal alongside the memo, which gives you a sense of what they care about when making investment decisions.

Bessemer has put up a list of well-written memos that show you the level of work VCs will often put in and surface to the partnership ahead of investment committee meetings. Fred Wilson also puts up USV investment memos – love the memos for twitter and coinbase.

Visible wrote a solid post summarizing memos and linking out to many good resources. They mention that Andy Johns at Unusual Ventures even recommends executives create strategy memos for the CEO that look a lot like investment memos that the CEO would create for investors. I haven’t tried this yet myself but love the idea.

Lastly, it’s also worth reading a little about how Signalfire operates to try and make more systematic investment decisions, as I suspect that the industry will head towards more programmatic assessment of standardized investment memos over time.

Send me memos for review

bradford@twolions.co

Summary of our current place in the market cycle

We’re at the tail end of an awesome tech cycle with massive real value creation. This was the real dot-com boom. The information revolution created this weird self-Heisenberg effect where information about the market travels so fast that markets get way ahead of economics then collapse and take years to earn out their valuations. This kind of pre-mania, which I think dot-com was, is distinct from total nonsense speculative markets where there isn’t actually any underlying value creation. Make no mistake, there has been staggeringly massive value creation by tech since dot-com and the market has recognized that since.

Like dot-com, we’re seeing valuations that assume growth at scale that’s probably unlikely. It’s hard to keep growing as fast once you are already big, and the growth rates baked into today's valuations are probably unrealistic. Many of these valuations will be valid at some point, but it will take great companies many years to grow into these valuations under a more middle-of-the-road stage in the market cycle.

As a simple example, let’s look at Amazon. It took 9 years from 1999 to 2008 for Amazon to recover to its 1999 highs. Then it collapsed again in the 2008 liquidity crisis and was back to highs in late 2009. 

It took 9 years from 1999 to 2008 for Amazon to recover to its 1999 highs.

In the current situation we have a bit of a weird perfect storm of accumulated loose credit and monetary policy for multiple decades with a layer of massive financial infusions from COVID right at the tail end of a two decade mega tech cycle. Loose money and credit means assets of all kinds are pretty inflated relative to US dollars (which they’re all measured in). As the IPO window is wide open and we see many tech companies getting liquidity, we’re starting to see the kind of dangerous late stage speculative behavior that leads people to do themselves real financial damage. I hope this book list can influence some people to stop day trading, index the markets, and get back to work.

Market speculation is a serious game and you will win at the tail end of a bull phase by just betting long. Then you’ll get your ass handed to you when the market turns and starts to behave more normally, i.e. tricking most actors into losing their money. A great example is the recent coordinated mania in GameStop, which received a lot of press as a triumph of the little guy after a hedge fund Melvin Capital was short squeezed into a 53% drawdown on their fund. In reality though, these small players kept riding the stock back down during the panic that followed, and it was typical capital markets folks who profited by liquidating shares to the tune of $700M and $1B a pop at inflated prices during the speculative frenzy.

This was all too predictable. History repeats itself time and time again. What’s too good to be true is actually not true. So if you don't know much about the history of financial markets, then what follows is a delightful and hilarious treasure trove of knowledge. Besides some of these being among the funnest and funniest books you’ll ever read, these books are the cheapest tuition you can possibly pay to avoid naive speculation and the associated investment losses.

The top ten books on the history of bubbles, manias, panics, and crashes

Each of these is a well known financial markets classic. Many are over 100 years old, yet when you read them they will sound as if they are describing what you see around you today.

I’ve ranked them so you can read in order based on your time budget. The first seven books are general and cover several examples of mania-panic cycles. The last three books are the specific stories of tulipomania and the 1907 and 1929 crashes.

There are loads more in this genre from topics in credit and monetary theory about credit bubbles and monetary cycles, to volumes on specific blow ups such as the classic Long Term Capital Management story. You can find plenty of these from the Amazons related books recommendations starting from those I’ve linked below. For now, I want to keep the list to under ten books focused on the kind of mania I see today where people are day trading on the side and looking at ridiculous bar charts.

The Crowd: A Study of the Popular Mind -- notable for being published by a social psychologist in 1895, this one lays the foundation for how a lot of financial market historians and theorists have come to think about how herd mentality drives financial mania and panic.

Extraordinary Popular Delusions and The Madness of Crowds -- a classic on every long term investor’s shelf, this one covers a wide range of history and especially the classical European examples.

Manias, Panics, and Crashes: A History of Financial Crises -- a hilariously entertaining tour de force from an economics professor and financial historian.

Irrational Exuberance -- a modern classic and NYT best seller, this one focuses on modern stock market mania-panic cycles in the US and is highly relevant to what we see today.

Devil Take the Hindmost: A History of Financial Speculation -- a well researched, entertaining, and broad coverage of financial manias. Published in 2000 so includes more recent bubbles like Japan and dot-com.

Boom and Bust: A Global History of Financial Bubbles -- lots of great examples from around the world in the past few hundred years. Tries to synthesize some themes to help the reader understand economic and psychological factors.

Famous Financial Fiascos -- a hilarious cult classic covering an eclectic mix of history from the inverter of the Ponzi scheme to the Kuwait Stock Exchange mania and 1982 crash.

Tulipomania: The Story of the World's Most Coveted Flower & the Extraordinary Passions It Aroused -- an absolutely crazy tulip frenzy that takes place centered in Holland in the 1600’s ends in the disastrous crash of 1637. Considered to be one of the first and most entertaining modern speculative bubbles.

The Great Crash 1929 -- one of the best books on what’s probably the most famous all time stock market crash at the end of the roaring 20’s that ushered in the Great Depression.

The Panic of 1907: Lessons Learned from the Market's Perfect Storm -- the crash that led to the establishment of the Federal Reserve and a lot of both good and questionable modern financial infrastructure. Bank failures lead to establishing the FDIC.

I’ve hired three CEOs, dozens of executives and managers, and hundreds of employees into early stage Seed and Series A stage startups. I’ve been exposed to hundreds of early stage teams through my network and the startups I’ve built in Consumer, SaaS, Enterprise, Deep Tech, Biotech, Fintech, Agtech, and other markets. So I’ve seen a lot of data on which backgrounds and traits work in startups versus which don’t.

The easiest way to find folks that are most likely to be a fit for startups is to find people that have already been working in early stage startups. That said, you often find great people that haven't worked at startups before. They may come from bigger companies, later stage startups, academia, or fresh out of school. Regardless of the source, the question is always the same:

Who is going to be successful in an early stage startup environment?

Startups have unique characteristics which require people to have unique traits. The earlier the stage of the startup, the more pronounced those unique characteristics are, and the more important it is to hire for startup traits. Let’s dig into the most important traits and how to interview for each.

The 7 Most Important Startup Culture Traits

Growth Mindset -- the most distinguishing startup trait is the maniacal focus on customer growth and personal growth.

Ownership Mentality -- proactively seeks highest value responsibility and takes accountability for it.

Resolves Uncertainty -- leans into the unknown with an active curiosity to clarify, create, and experiment their way to novel solutions.

Humility and Empathy -- self-reflects, sees the bigger picture, understands and cares about the needs of others. 

Grit and Intensity -- bias for action with the determination and persistence to achieve a goal. 

Velocity and Productivity -- shocks others with speed, quality and volume of their work.

Clear and Precise  -- can articulate a clear direction that is magically both detailed and simple.

Now that we’ve outlined the traits, next we’ll just describe each trait in a bit more detail and provide interview questions for each.

Growth mindset -- the most distinguishing startup trait is the maniacal focus on customer growth and personal growth.

Either your startup grows fast, it’s failing, or it’s not a startup. The defining characteristic of a ‘startup’ versus any other business is that startups are meant to have scalable fast growth. They can take in venture capital and use it to grow faster. Since startups are focused on growing so fast, there’s a lot of pressure. It’s hard to grow fast enough, and it’s quite stressful when you aren’t. It’s also stressful when you are growing fast, because it’s difficult to keep pace with all the change and things breaking from the scale. If the startup grows so fast and you don’t grow as fast as an individual, then you wont keep up. The startup will ‘run out ahead’ of you, and keep hiring you new bosses. Some people talk about great startup CEOs and team members as learning machines -- they just keep surprising you by getting better so quickly in so many different ways.

There’s another side to all this growth. First, it is very stressful and it burns people out a lot. Of course everyone would say they want personal growth, but it’s tiring to have a constant pressure to grow important metrics and for you to grow to keep up with the growing scope of work. It can also feel very unsatisfying to constantly get something to be good enough to work, and then move on to the next thing. If you want to go very deep and master something -- for example I worked with a guy at Google who was absolutely amazing and he chose to go very deep into compilers. He could have grown into a critical technical leader at startups too, but he chose to grow in a different way with a deep specialization. He can roughly understand that by making C++ code run faster, he’s making everything at Google faster, and therefore impacting the user experience. He doesn’t need to obsess about products, markets, or rapidly learn new skills in areas like sales or marketing. Si you might think of him as growing vertically deeper in a specialized skill, rather than growing horizontally broader across skills, as is often required in startups.

Interview questions

• What's the fastest you ever grew something?

• What's the most aggressive goal you’ve ever set? Did you hit it?

• Describe your process for learning something new?

• Name an experience where you were dealing with something that grew so quickly that it spiralled out of control and how did you deal with things breaking?

• What’s the most pressure you’ve ever been under and how did you deal with the stress?

• When have you been under pressure to grow, but haven’t been able to? How did you deal with it, what did you try?

• Where have you worked hardest on to grow in the past few years, and what’s your #1 goal for the next few years?

• How would joining our team get you closer to becoming the person you want to be?

Ownership mentality -- proactively seeks highest value responsibility and takes accountability for it.

Startups have very little resources and management. You have to be self-directing with a high level of autonomy. You have to create the output yourself, not just look around for other things in place already or places to delegate the work. All the work is mostly ‘core work’ that is on the main production line and critical to company results. There aren’t any places to hide and work on secondary less important projects with less pressure and visibility. You must be able to manage the stress of owning high pressure core results. Everyone is expected to see what’s most valuable, and to use their nose for value to seek out and find ways to have higher impact. There’s always more work to own than people to own it, so we’re looking for those who will grab open work and take accountability for it, not people that will avoid important work that they see and could take on, but instead avoid and claim that it wasn’t their job.

Interview questions

• When’s the last time you proactively just took ownership of something because nobody owned it?

• If the team is dropping a few responsibilities, how do you decide which to pick up?

• How do you decide what has the highest impact on any given day?

• What’s the biggest thing you’ve ever owned?

• What’s the longest you’ve ever owned something?

• How do you decide what you should own?

• How do you identify things you should drop?

• What if you own something and you don’t think its as important as something else that you think you should be doing?

• What do you do if someone else owns something, they are doing a poor job, and you think you can do it better and should own it?

• What are your favorite mechanisms for holding yourself accountable?

• When was the last time that you could see you weren’t hitting your goals, and you pivoted to do something differently and then started hitting your goals? How did you know you weren’t hitting your goals? What did you do to pivot?

Resolves Uncertainty -- leans into the unknown with an active curiosity to clarify, create, and experiment their way to novel solutions.

Enjoys resolving the unknown and is comfortable with ambiguity.  OK with 90% of their work being thrown away as part of the navigation process. Most people aren’t accustomed to throwing away a lot of work because they are used to doing incremental work on top of established work, so it’s not so often that you expect to work super hard for a few months, figure out that the thing you’ve been working on is a dead end, then throw the work away. Must like to experiment. Is excellent at taking various bits of information and synthesizing them into a coherent direction. Goes into seek-and-destroy mode; finds areas of uncertainty that can yield biggest wins, and takes initiative to find solutions.

Interview questions

• What’s the most stressed out you’ve ever been over something uncertain at work?

• What’s the most ambiguous instruction you’ve ever gotten and what did you do about it?

• Give a recent example when the team was stuck on an unknown and you resolved it.

• What is the hardest problem you ever solved?

• What problems have you paused or given up on?

• Tell me about a side project you’ve worked on?

• What project was most heartbreaking to abandon because it solved a problem perfectly but it was the wrong problem?

• Did you ever try to start a business or help someone else starting one?

• When’s the last time you came up with a novel solution to a problem?

• What’s the coolest experiment you’ve run in the past few years?

• What’s the gnarliest bunch of information you’ve had to aggregate and synthesize in the past few years? What was your final output?

Humility and empathy -- self-reflects, sees the bigger picture, understands and cares about the needs of others. 

Doesn’t take themselves and their opinions so seriously that it impedes their ability to learn and work with others. Looks first at what they can be doing differently before looking at what others can do differently. Doesn’t participate in a culture of blame. Keeps a service mindset -- focusing on how they can make life better for customers, teammates and others around the business. Is deeply connected with the customer needs.

Interview questions

• When was the last time you felt strongly about the value you were providing to the customers of your company and why?

• Where can you most improve in the next few years of your life?

• What do you most wish you could go back in time and change about the past few years of your life?

• When is the last time you’ve messed something up really badly at work and what did you do about it?

• When did you last help a teammate with something?

• What’s the worst conflict you’ve had personally or professionally in the past few years? What do you think was the cause? Could you have done differently to help?

• Give a couple of specific examples of how you work with your current team

• When do you prefer to work together vs work independently?

• What are you most proud of in the past few years at work? What could be better about it and what would they do differently now?

Grit and Intensity -- bias for action with the determination and persistence to achieve a goal. 

Action oriented and actively resolves blockers. Bravely makes a first try right away, doesn’t get caught up in analysis paralysis. Executes quickly, proactively, intelligently, and systematically. Maintains balance so they don’t burn out, and has the endurance to keep pushing hard until they achieve a challenging goal. Being persistent enough to make it in a startup environment requires both a ton of energy and a way to replenish your energy. Most startups fail, and even the ones that succeed fail a ton along the way. That’s why the startup community has special jargon for failure like ‘fail fast’ and ‘pivot.’ So we need people who aren’t surprised to fail, who get up quickly, and who try again and again until they get it right. Resiliency is a critical capability, because otherwise we simply aren’t going to make it through all the failure.

Interview questions

• Walk me through the worst blockers you pushed through at your last company?

• Give an example of a case where you hit a roadblock and failed. What did you learn from it?

• How do you recharge your batteries after a tough grind?

• What kind of systems or tools do you use to strike a balance and make sure you don’t burn out?

• How do you manage stress?

• Give an example of a case where you pushed through a roadblock to success? 

• What was the most difficult problem you had to solve in the past couple years? How did you go about it?

• How would you motivate somebody in your team to overcome a problem? What would you do?

• What do you do when you’re stuck? Give examples from the past.

• What do you do if you have an interpersonal issue with your colleague?

• What do you do if others are stuck?

• Can you think of something you worked on that you had to give up?

• When was the last time you were surprised how quickly you got a big project done?

• Tell me about your track record of projects over the past few years -- which ones did you think you executed on best and why?

Velocity and Productivity -- shocks others with speed, quality and volume of their work.

In startups, growth is our #1 goal, and as long as you’re headed in a reasonably correct direction, then speed wins. The work has to be both fast and good, and we’re looking for what are sometimes called things like ‘10xers’ or ‘rock stars’ -- which are just monikers for being the most productive people in the world in their roles. There’s really no way around it -- startups are under high pressure to grow fast, but don’t have enough time, money, and people. Startups pull off miracles only because they manage to hire extraordinary people that really can do many times the work of their peers and solve problems others can’t solve.

Interview questions

• What’s your “mutant superpower” -- what are you remarkably good at that serves as your greatest strength? Why do you have this power -- did you start early, train hard, have a natural gift? What do you think can be done to increase your mutant power?

• If there were any reasons why you got higher quality work done faster than other people, what would those be?

• What would you say our output is like relative to peers? If it’s significantly different in some ways, what are those ways and why?

• Can you think of any examples where you’ve gotten a lot done and the team wouldn’t have been able to deliver without your contribution?

• Geek out for a minute -- what’s the neatest thing you’ve been studying lately?

Clear and precise -- can articulate a clear direction that is magically both detailed and simple.

Explains things in clear and simple terms. Understands the vision for what they’re working on and can get anyone to understand it regardless of their role. Is analytical, systematic, articulate, and broadly aware of social and business context, so that they always distill information and and explain things in a context-aware manner. Is a great synthesizer -- can take in complex information and explain things in simple terms with sufficient detail to get everyone to understand what’s important relative to their role. Drills down into precise details -- doesn’t wander and remain at a high level.

Interview questions

• What does the project do that you work on right now? What are the customers and what are the goals?

• How would you describe your company’s vision?

• What’s the most complex thing you’ve worked on in the past couple years? What is the simplest description you can give of your hardest problem that has enough detail for me to really understand what you’re talking about?

• Tell me about the last time you laid out a highly detailed plan and what it was for?

• Tell me about the most complicated coordination situation at work in the past few years and how you pulled it off?

• What’s something you've done recently at work that the largest number of people had to interact with?

• What’s something you’ve done recently at work that made sense in context but would seem totally crazy from the outside?

• Explain the most important decision you’ve had to make in recent years and how you went about it analytically?

• If I asked you to come up with your own onboarding plan for the first three months after joining us, what’s the simplest description you can give right now that contains adequate detail?

How to run the process

There are three key aspects to running the startup traits screening process; booking a dedicated time slot, training interviewers, and backchannel references. 

1. Book a dedicated 30 - 60 minute screening session just for startup traits

I recommend a 30 - 60 mins ‘culture fit’ screening. Build your own set of interview questions for each trait by cherry picking those from above and adding your own -- try to give each section a mostly equal amount of time, but it’s ok to spend more time in areas of biggest concern based on the candidate’s background.

Many times ‘culture fit’ is treated as secondary and bolted on to the end of another screening step, so there’s less time for it. The questions and responses are normally fuzzier, less strictly interpreted, and ultimately just based on likeability. It's critical not to let cognitive biases rooted in likability blur the vision of the interviewer to the extent that they prefer candidates that are more like them in superficial ways rather than candidates who demonstrate stronger startup traits. This risks building monocultures of the same profiles who are all very similar and like each other, but who lack the diverse skills required to make magic at startups. The degree of importance and uniqueness of startup traits means that they should really be treated more as must-have skills that you screen for explicitly.

2. Train interviewers to conduct longitudinal interviews

Longitudinal Assessment > Self-Assessment.

Interviewers should be trained specifically how to assess candidates based on what they did, not what they report about themselves. A lot of the ability to assess these traits comes from the interviewer’s active interpretation of how the candidate describes things they did in the past, rather than to simply administer a skills exam. Internal calibration is also very important here - the team should be aligned on what each trait means and how it translates into behavior. It’s not uncommon to have very different notions of a trait like persistence, only to later realize that you have someone in the company who isn’t really persistent at all and they’ve already hired a bunch of other people who aren’t very persistent either.

Asking candidates to self-assess is foolish in many cases, as they’ll just report things they think you want to hear. The key is to get into the details of their real experiences over time, and calibrate against your needs and expectations.  They’ll report they knock down walls, but when you ask what the biggest wall was, it barely registers as a day to day blip on the radar at your startup. They recall a ‘dealth march’ where they had to deliver a new feature for a customer in 6 months, but it's totally normal for your team to have to react to a customer request like this every two weeks. They say they are easy to work with, but in all the stories of their conflicts, they never seem to see their role in anything. A great example of this is the scales sometimes used in hiring for grit. Many people have realized that a self-assessment scale will have limited utility, and what really matters are examples of actions from the past.

3. Conduct backchannel reference checks

Backchannel references > candidate references.

Do backchannel references, don't just take the word of the candidate. The more senior the hire, the more important it is to find your own references and find references from people you trust. People are really biased, so it's not unusual to see a big delta between what a candidate says and what their peers say, even if they aren’t being intentionally misleading. Use the interviews to suss out areas of potential strength and concern, and then reach out to backchannel references to test your hypotheses and make a final decision.

When hiring is competitive, I sometimes see people fail to follow through with the reference checks, and it often comes back around to bite them. I’ve also done checks, received critical feedback that told me I should not have proceeded, but then brought people in anyway, or started with a ‘trial phase.’ People sometimes say things like ‘well he wasn’t super sharp and didn’t bring in the numbers back when we were on the same team, but it has been like five years now so maybe they are better and you could give them a try at your company?’ Just to be clear, this reference check maps to ‘no.’ If you really need help right now and you’re desperate to hire, it can be tempting to map this check to a ‘maybe,’ or try things like a ‘trial phase.’ Conduct your backchannel checks, and hold the bar to people who have a record of strong recommendations. Don’t give people a try that have spotty records -- if people say they didn’t do great when they worked together, then it's a no.

In Summary

Startups are uniquely focused on fast growth, and require people with specific traits that are well suited to the environment of constant uncertainty, change, failure, challenge, and relentless pursuit of serving customers and winning. These startup traits are so important and unique that they should really be treated as must-have skills and interviewed for explicitly.

I’m planning specific follow ups on topics like ‘who can make the transition from a big company to early stage startup,’ so if you have any specific questions about your startup or specific candidate scenarios, hit me up on twitter, linkedin, or email.

You made it! Your startup has some early traction and now you’ve hired the first wave of leaders to help grow the company.

Trouble is that things aren't going as planned.

Some parts of the company have team members that aren't up to the bar you initially meant to set. These same parts of the company aren't really performing, and progress seems to be slowing almost to a halt. You’re starting to hear more about what can't be done than what can.

You're starting to question your own judgment with respect to the leaders that you've hired, and now you're not sure what to do, but you’re pretty sure someone has to go. You may have even spent a lot of time generating buzz with the board and the team about how awesome these leaders are.  You probably celebrated with high-fives when you closed the offer and got them on board. Yet here we are.

Let's backtrack and see what went wrong and talk about what to do now that we're in this position.

The silent startup killer: over-delegation combined with bad hiring management

When startups get early traction then struggle and start going sideways, most of the time I think it's because of bad initial leadership hires leading to poor execution. This combines with the CEOs inability to recognize the leadership hiring mistakes quickly enough, transition them out, and get those functions back into shape.

That's why I think bad leadership hires and failure to respond to them is the biggest silent killer of startups that have already got some early traction. 

The reason that the issue gets out of hand so quickly is that when you're hiring new leaders, these are senior people that you want to give autonomy and ownership over a lot of critical decisions. There’s nothing more critical than who they hire onto their teams. CEOs often don't know how to both give the leaders space while also ensuring accountability for results and maintaining the high bar they want to set for talent.

The trouble is that if you over-delegate to the new leaders without any mechanism for review and accountability, and those leaders turn out to be weak hiring managers, these folks are going to build entire teams of mediocrity and you are the one who has to clean it up.

It's a tricky problem and I've messed it up as many times as anyone -- probably in ten companies at this point. I've had to be the one to clean it up, and I'm going to tell you how to avoid the problem, and how to deal with it when you inevitably make mistakes.

Rule #1: forgive yourself and act quickly

This is bound to happen.  I've looked at a bunch of different studies and  f no more than 50% of leadership hires that CEOs make in the early years actually pan out and perform long-term at the company. So you are going to make some mistakes. It's inevitable and it’s normal.

So many times you see famous CEOs or VCs being quoted that their biggest operating mistakes are not firing people quickly enough. Notice that the biggest mistake is not that they hired the wrong person, it's that they didn't trust their instincts and their data when they knew they needed to get rid of the person.

Listen, this sucks. You don’t want to be here, it’s your mistake, you own it, and it’s slowing everything down. It feels awful fighting people, especially in this situation. But here’s the thing. The faster you forgive yourself, the faster you're going to have clear judgment to make the right call. The more you allow psychological defenses to bias you towards letting the situation drag out, the higher the likelihood that you're going to fail the entire company because of this mistake rather than correcting it and moving on.

So forgive yourself. This is a normal mistake. It’s a cost of doing business. A rite of passage. You're going to recover much faster by acknowledging it, acting, and moving on with life.

Rule #2: trust but verify with the direction-review-approve loop

One of the reasons it's so difficult to see if a leader isn't working out and act quickly enough is that we don't have good enough alignment on direction, review cycle for results, and accountability to the results.

So first,sit down with a leader and align on direction.  For example, if  you have a new sales leader it's okay to sit down and align on general sales processes, tools, the profiles that they want to hire for, and as a founding CEO who's probably led a bunch of the initial deals yourself, you should have a strong say in these topics.

If your initial sales leader is being defensive, wants to own everything, and can’t even accept input from you as a CEO, then you've already hired the wrong person and the time to move them out is right now. I know this may seem crazy but I'm serious.  This kind of defensiveness and inability to collaborate closely is one of the biggest signs that the person won't work out in a startup environment.  At really big companies, people are accustomed to having budgets and quite a lot of autonomy within some group.  In the early stage startup environment, the group is still pretty small, and the lines are blurred between functions. The founders are meant to be heavily involved in a lot of the execution work which is very different from the CEO of a large established corporation. 

When I'm sitting down to align on direction with my leaders, I like to be explicit about what things I want to approve versus not. So for example I like to explicitly approve sales and marketing hires for quite a while actually -- until it's clear that the model is repeatedly working. Whenever I’ve let go of this, it’s always been a road to failure. A big part of the founders job, especially a founder CEO, is the navigation to product-market fit. When we talk about product-market fit, we talk about repeatability.  So if I've got a sales leader in place and we don't think that the sales motion and marketing materials are fully repeatable, we can't get success out of most of the reps that we're hiring, and sales is still heavily dependent on a small number of folks, then we're not yet at a point where I want to take my eye off the ball. We’re not running playbooks, we’re defining playbooks. A sales leader who thinks they're coming in with a defined playbook that's just going to work without significant iteration and specialization to the product and company, is someone who's just not going to get it done. You want people with a big toolkit and an open mind. They can look at the problem and build solutions based on the tools they have, rather than just simple pattern matching and rolling out of what they think worked elsewhere.

So my direction-review-approve loop here starts by sitting down with my sales leader to talk about the overall direction for sales and we're aligning on many ideas around process and the profile of reps. Then when the sales leader comes back with their concrete plans I'm reviewing them, and the sales leader knows which things I explicitly want to approve versus where I'm just going to give them feedback about their plan and they can do as they choose. Maybe I've decided that I don't care so much about CRM tools or how they experiment with different decks to pitch the product in different ways, but maybe I want to explicitly approve the sales rep profiles, interview flow, and first 10 reps. Or maybe I have a very strong sense of what we think is working when we're presenting to clients, so I actually do want to have a strong approval on slides in the deck. It’s situational based on what the CEO feels they need to be able to approve because they feel the strongest confidence in the startup’s collective knowledge there. If I know we spent a ton of time with a ton of customers testing and iterating until we got to a message and slide sequence that’s really working, then I don’t want to start over without significant data saying we should. On the other hand, if I know we haven’t invested as much as we should into the sales materials then I’m going to encourage a lot more experimentation, and requiring my approval is just going to slow down the volume and pace of experiments.

By establishing clarity of alignment on direction, how we're going to review work, and what I actually want to approve or not, we can figure out up front whether the leader and I are going to work together effectively.  I can also determine my opinion of whether or not the leader is going to work out an early-stage startup environment or they're going to be touchy about everything in their domain and unable to align with other leaders and take feedback.  By placing my approval on areas that can cause the ship to go off course in the worst ways, like making key hires or fiddling with things that are working instead of addressing things that aren’t working, I can mitigate risk in the event that I find out I've made the wrong decision and I need to move this leader out.

Rule #3: Hiring management is half the job

Great startup leaders view recruiting as their number two responsibility behind winning. Weak startup leaders expect some kind of a machine you just generate good hires.  They toss a job posting up online and expect to hire from the inbound.  

I've actually never hired a single person inbound from a job listing myself, and I've never posted a job listing myself.  I've had some people on my team try it, and have made some hires, and  I think the results have been pretty mediocre compared with when myself or one of my key leaders really digs in and spends a significant amount of time with recruiters conducting an organic search by creating a market map and leveraging our networks.

I tell people they should spend 50% of their interview time with leaders on their hiring management approach, and the other 50% on management and domain skills.

One of the worst problems that happens in early startups is when you get a bad manager in who wants to build organizations instead of getting traction. Ironically, the ones who want to org-build almost always end up being the worst hiring managers too, so you get hit with a double whammy. Performance goes down, headcount and burn goes up, and then you have to conduct a Sherlock Holmes forensic examination just to uncover and unroll the shitshow that this person has created.

So when you're interviewing managers ask them a bunch of recruiting questions. Ask them about their interview process for various roles. Ask how they’d source for different roles. Ask how they like to work with recruiting and what they expect to do versus what they expect recruiters to do. Ask them about how they win in competitive hires and what their offer process looks like. Ask them what they expect their team to do in the recruiting and interviewing process vs. what they expect recruiters to do.

Great leaders expect their teams to invest a pretty significant amount of time in talent.  During fast growth periods, I've often told product, engineering, sales, or marketing teams that I'm expecting them to invest up to 20% of their time in hiring.

There are common and clear patterns among weak leaders in that they really don't understand what quality talent is and how competitive you need to be in order to get a lot of talented people together and build an awesome team.  They don't expect the team to work very hard on recruiting.  They expect that the recruiters are going to do everything for them and show up at the front door with hires.  They have mediocre or non-existent interview processes.  They expect to hire from job listings and they don't know anything about sourcing.  Their only playbook is to hire randoms from past jobs and they have no playbook for going outbound to find new talent. They think more in terms of putting bodies into slots then in terms of the overall capabilities of their teams.  Rather than trying to find the best people that they possibly can, they think in terms of needing three mid-level engineers or four junior marketing people or whatever.  They think in terms of headcount not capability. 

Rule #4 : Your first leaders are more like founders than corporate executives

I just wrote a guide to building founding teams, and I’d recommend that as a close reference for building your early stage leadership teams as well.

When you get some early traction and start wanting to build up a team, it's very common to make the mistake of hiring somebody who looks more like a corporate executive than a startup leader.  There are many reasons why this is a natural thing that happens. You think you're about to scale a lot so you think you need somebody who can manage at scale. You want somebody who understands the industry really well, comes from a big-name company, and seems impressive. Usually the founders aren't really big organization people, so it seems like you're balancing out the team by having more mature executives paired off with more visionary risk-taking founders.

Unfortunately this thinking is all wrong. The reality is that the startup is still way closer to its point of founding than it is to its point of being a stable running large corporation. So when you are hiring leaders from large corporates and drop them into startups you really end up with fish out of water.

Although it might seem counterintuitive, the first leaders that you want look a lot more like founders than they do like corporate executives.  Maybe we should be asking ourselves -- “if this startup works, and I make a bunch of money, would I back this person as a founder of their own startup as the next step in their career?”  If the answer is yes, that's probably a great early leadership hire for your startup. If the answer is no,  it's almost certainly not a high-caliber enough person who is well-suited to being one of the first leaders of a fast-growing early-stage startup. Rather than maintain or increase your trajectory, this is a person who can't keep up with your trajectory and will hold you back and potentially even kill the company.  I can't emphasize this enough; it really is binary at the early stages. It's totally normal to go from a point of pretty good traction straight into death after a very painful period of 12-24 months. Founders make mistakes about how they build their leadership team, and then they don't have the skills, awareness or courage to make the changes they need to quickly enough, and before you know it, the cash is out, the music stops, and the party's over.

You can also get people who are very corporate, even though they don't necessarily come from that background. They could have spent a lot of time and startups before. Maybe they worked at a corporate in the past but have been in midsize businesses for some time. Nevertheless, their actual work habits and leadership approach looks a lot more like someone coming from a large corporate. They expect too much from the things around them -- expecting to have support systems in place that they should be expected to help build later on when the time is right. They tend to want to over-hire, they're too touchy in interacting with other leaders. Rather than engaging deeply in discussing and debating different choices about what to do and how to hire,  they demand full autonomy. They snarl to give them space and they scoff at accountability -- they already know what they’re doing! They expect to be treated as if they already know how to do everything and the results should be taken for granted. These org-builders will settle for weaker hires because they just want to put bodies into slots. They will spend inordinate amounts of time on operating infrastructure and things that the company doesn't need yet. 

Corporate-minded leaders will completely fail to get themselves and their resources focus adequately on generating traction, which is really the only thing that matters at the early stage.  If we're not figuring out how to show enough incremental traction to make it to the next stage of the business, we're going to die. So when you see people focusing on things that aren't needed in order to get to the next phase because they think they're going to be needed in the future,  that's telling you immediately that this isn't a leader who is going to work in a startup.

I’m reminded of two of my most recent executive hiring failures. They both hired very high-priced operating executives out of big-name firms in their domain as one of their first moves. These folks in turn hired other back office support. Before long, in both cases, we ended up with a back office infrastructure suited to a company that was about ready to scale massively, but one of the companies only had one customer (which I brought in), and the other company didn't even have a live product yet. This kind of premature operational build is a telltale sign you're headed in the wrong direction with a corporate-minded leader.  It's important to dismantle this kind of stuff very quickly because it normally adds quite a lot to the burn and establishes the wrong mindset at the company. You want everyone paranoid about getting enough traction, not taking results for granted and building out speculative infrastructure. 

Ironically, the more corporate and the more org-builder the profile of the leader, the worse they seem to be at operational planning. I’ve always gotten the absolute worst planning documents, roadmaps, KPIs, and directional work from the corporate folks. So don’t be surprised by the counterintuitive truth when you discover crazy specialtive org builds correlated with awful planning.

Detailed instructions for cleaning up when you get it wrong

When you see that you can't work with the leader, or they can't achieve goals you need them to, then it's time to transition them out.

First, audit their organization. Get a hold of any road maps, KPIs, planning documents, and a list of their team members. Get whatever context on the people you can -- capabilities, their last review cycle, feedback from other teams, etc.

Second, plan how reporting is going to work after the manager is out.

Third, review all of the planning materials roadmaps KPIs etc. Form your view of what needs to be done by whoever is taking over this team. If you suspect there are weak players in the team and the new leader is going to need to conduct layoffs, be direct with them about why, and leave it to them to assess and act.

Fourth, define the transition plan for the leader.  If you think they're toxic and harmful or will be once they know they're out, then you should define an immediate transition where they turn things over this week, or even right away.  If you think it's amicable and there's value in a more gradual transition, you could have this take place over a couple weeks, even up to six weeks or more in rare cases.

If this is a person you've sold extensively to the board or other leaders, and you're afraid that you can't just fire this person without buy in from others or potential backlash, then you're going to want to check in with whoever you feel has a voice before you go and have a 1:1 with the leader that you're letting go. This can be especially important if it's an executive-level leader and the board has been part of the interview process. 

Next go and have a 1:1 with the leader.  Tell them clearly why you think it doesn't make sense to continue together. Make it clear that it's a final decision and not a negotiation. Make it clear that if there’s a transition, it's not a trial.  Tell them you wanted to give them the respect of telling them first and so you'd like to speak with some of the other leaders and outline a plan before discussing specifics of what you might need from them in the transition.

Lastly, talk with whoever is taking over their reports next.  Tell them the view you formed from the planning materials, share those materials with them and have them go read up and form their own opinion and have a second 1:1 with them to get their proposal for how they want to take over the execution and management reports. This should include a timeline for their first round of 1:1s.

At this point you can have your second 1:1 with the leader that you're transitioning out. Present them with the plan for who's taking over their reports and what if anything they're going to need from the departing leader.

These 1:1s with the departing leader, the one taking over their team, and the team members, should ideally all be done on the same day so that you avoid wasting time on rumors and drama.

Make sure you have at least a weekly 1:1 with the leader who is taking over this part of the team until performance is where you want it and the team is stabilized.  If this is meant to only be a temporary solution, then make sure you have a clear plan with this leader how you will work together to identify when it's time to bring somebody new in and how to run that search. 

In closing

It’s normal to hire the wrong leaders, especially ones that aren’t well suited to early stage startups, hiring closer to a corporate executive profile than a startup founder profile.

These early leadership hires that tend to go into org-building mode can cause a lot of damage very quickly by remaining unchecked while making a lot of the wrong hires. As an anecdote to this, we’ve talked a lot about hiring management, including 50% time allocation ot=n hiring management skills in the leadership interview process, and also how the founders can and should engage in the hiring process.

We’ve talked about how to try to avoid this mistake, how to maintain awareness with the direction-review-approve loop, and how to clean up the problem once you recognize that you have inevitably made this mistake.

Hopefully it’s been helpful, and if you have a current crisis in your hands or just more detailed followup questions about any of this, then hit me up on twitter, linkedin, or email.

Building the founding team is by far the most important part of building a startup. The founding team sets the vision, builds the rest of the team, builds the prototypes, and brings in the initial customers. Once you have one or two people that want to work on a startup, there can be a tendency to ‘just get going’ without putting enough emphasis on ensuring that you have the right team in place, which leads to a lot of failure scenarios.

I’ve lived through nearly 10 startups as a founder, and seen hundreds more through my experiences as an investor or friend of the founders. The past five years, I’ve been incubating startups, which lead me to reflect systematically on building founding teams and early stage leadership teams. I talked to as many founders and VCs as I could, including all the incubators and accelerators. I read all the best blogs I could find on building founding teams and have done my best to distill those as well. I hope this is the most useful and comprehensive guide to building founding teams, complete with symptoms to identify antipatterns, advice to avoid common mistakes, and recommendations for how to do things right.

I’ve broken the article up into three sections that each represents a major theme in building founding teams; Balanced Capabilities, Startup Credibility, and Founding Timeline. Each theme starts with a set of identifiable antipatterns with symptoms, a story, and advice. Then each theme ends with suggested patterns for how to do things right.

The Balanced Capabilities theme talks about how to identify the skills required to build your specific startup. The Startup Credibility theme gets into what having proper ‘startup DNA’ really means, and what VCs, founders, and early employees should be watching out for as signs that a startup isn’t credible. Lastly, the Founding Timeline theme lays out the tactics for how to get started, and how to avoid both getting stuck or being too hasty.

What follows is meant to be the most comprehensive available guide to building a founding team with specific examples of what to do and what not to do. It’s intended to be useful to both first time founders and experienced entrepreneurs.

Balanced Capabilities

Antipattern: the ‘anyone could be CEO’ team

Symptoms

Many times you see a team with very little startup experience, and they don’t yet know who is going to be the CEO. They think it could be any of them. Being a CEO is a very difficult job that requires some real skills, and when people don’t know who it is yet, or think it could be anyone, it's normally a sign that they neither have a CEO onboard, nor do they have any idea how to get one in place. They are probably going to fight each other and go down in flames.

“A very, very common source of co-founder friction we see at Y Combinator is where two people really want to be the CEO. Right. And this can sort of...we can see this in Y Combinator interviews, where you end up with two people who kind of talk over each other, they interrupt each other, they can look at each other with a little bit of content when the other person's answering.” -- Harj at YC 

This almost never happens, but if you had such an exceptional team that multiple people could play the CEO role, then the founders will naturally understand how to divide up roles and responsibilities.  They’ll understand if it makes sense for them to work together or if there’s not enough space for that much leadership firepower in one startup. If it’s uncomfortable to talk about this stuff, then something’s wrong, and you probably have too many cooks in the kitchen, and they probably aren’t even CEO caliber cooks -- “ it's actually, I think, a bit of a red flag if it is uncomfortable conversation.” -- harj from YC

When the startup doesn't have someone who can play the CEO role effectively, you start to see clear signs in lack of focus and staying stuck in a slow-growing local optimum for many years. The vision and product aren’t clear enough, and they aren’t growing fast enough, but they also aren’t self-reflecting and changing, they just keep speeding towards a brick wall.

Story

I remember being asked to advise a team that had three technical co-founders, who all thought that two of them could be CEO. The result was that they weren’t able to make progress or get funding without a new CEO, and it was ultimately a VC who ended up selecting the CEO they wanted to see in place before agreeing to fund the company. The startup is still around but not going anywhere. I guess the moral of the story is that if you don’t know who the CEO is, or you think anyone could be the CEO, then you either aren’t going to get funded or whoever funds you is going to pick your CEO. Might as well own up to this up front and pick your own CEO instead of playing make believe.

Advise

Early on when it’s just the founders, there’s enough work to go around it can seem unimportant who has the CEO title, but this is mostly an illusion. As soon as you are talking to customers, investors, and trying to hire a team, everyone wants to see clarity about who the CEO is and ensure they have the skills to be the CEO. Product vision and commercial skills are more important than the tech.

“The founding CEO is the first among equals in the founding team. Ironically they are almost never the most intelligent or technically astute person on the team.  They deal with the daily crisis of product development and acquiring early customers.  And as the reality of product development and customer input collide, the facts change so rapidly that the original well-thought-out product plan becomes irrelevant. While the rest of the team is focused on their specific jobs, the founding CEO is trying to solve a complicated equation where almost all the variables are unknown – unknown customers, unknown features that will make those customers buy, unknown pricing, unknown demand creation activities that will get them into your sales channel, etc. They’re biased for action and they don’t wait around for someone else to tell them what to do. Great founding CEO’s live for these moments.” -- steve blank

If you want to be a CEO, you should be reading bios of the great historical CEOs, and talking to as many CEOs as you can. It’s a hard job and one that you can only learn on the job. Ask yourself if you really understand markets and products that well, or if you’d be better off to pair up with someone who is even stronger than you. If you have multiple people thinking they are peer level skills and can be CEO, they is most likely that either none of you can, or that you have too many cooks in the kitchen and someone needs to go build a different kitchen.

Antipattern: The ‘just need someone on the business side’ team

Symptoms

It’s common to have a technical team that views themselves as exceptional and thinks they have some solution that should manifest as a startup. Trouble is, the solution is often looking for a problem rather than the other way around. They say they ‘just need someone on the business side,’ but what they really need is a CEO. When they say ‘the business side’ they really mean figure out the product, raise money, hire the team, and do all the sales and marketing. What’s worse, is they want you to figure out a product that’s constrained to whatever solution they already have in mind that hasn’t been tested out with any customers yet.

Story

I remember two different startups that I met around the same time, both founded by really smart machine learning teams, and both unclear about who should be the CEO. One of the teams ended up with a technical founder taking on the CEO role and bringing in the standard ‘old BD guy on the business side,’ and the other ended up working with an investor who helped the team bring in a CEO. In both cases, the startups were focused too much on their tech and too little on finding big problems that were aligned with how talented the teams were technically. The results have been that both startups seem to be still alive after many years, but aren’t really growing. When you start with the tech and downplay the importance of the CEO, you get weak vision, mediocre product, and slow growth. Sometimes you get faster failure, but I’ve often seen these kinds of startups tend to drag out a really long time before people realize it's not going anywhere.

Advise

There are a lot of cases where cool tech enables new products and businesses to be built, but there are many more cases where the tech ends up being a hammer looking for a nail. This is why, when you have a strong technical core, you need to be sure that i) the tech is actually required by the product, and ii) the CEO understands the tech but is product and business oriented.

The easiest way to avoid this problem entirely is to start from the problem and work backwards to the solution; work outside-in, not inside-out. Test with customers every step of the way. This will humble you early, and it’ll help the founders see what kind of founding team they need.

Lastly, founders should study what a startup CEO really needs to do, even if they don’t want to be a CEO. Leading a team to product/market fit is one of the most challenging things in all of business, and it’s taken way too lightly by many teams that don’t understand enough about markets, product, marketing and sales.

Antipattern: The ‘just need someone to build it’ team aka the ‘idea man’

Symptoms

Just as often as you see a tech team with a hammer looking for a nail, you see someone who fancies themselves as having lots of great ideas but can’t build any of them. They don’t have any background in product or engineering, and it’s not even clear they can sell, market, hire, or manage. Whether they have a technical background or not, they are more of a mad scientist inventor type that jumps from idea to idea and never manfists anything. Not an evil genius mad scientist type that poses any danger though, but more like a self-proclaimed genius whose inventions never work, like Wile E Coyote trying to catch the Road Runner.

Story

Everyone in the startup community has endless examples of the ‘idea man’ wandering around looking for people to build unclear stuff that they are certain will put them in the history books alongside Steve Jobs and Bill Gates. These are sad and forgettable people -- so forgettable that I don’t even remember something interesting enough for a specific story. Their ideas are so bad and this antipattern is so commonplace that nothing even comes to mind.

Advise

If you’re excited about a new product or business, and you don’t have a background in product or tech to start building anything yourself, then you need to clarify what you bring to the table. You need to be the visionary and learn enough about product and tech to form a team with the right cofounders and build product. You also probably need to understand the market, and how to run sales and marketing to get traction in that market.

The person who is driving the central ideas should really be a ‘product person’ and ideally the visionary CEO. There are much less common cases where someone else can be the keeper of the initial vision. It could be a technical visionary if the tech is the product. In rare cases, it can even be someone who is fractional time rather than full time, such as an important professor or doctor who is generating core IP in biotech, or a very experienced fractional co-founder injecting vision, building the founding team, and working with the founding team on early product, like Keith Rabos did by incubating Open Door.

Antipattern: The Mediocre CEO with 100% ownership

Symptoms

You often see the one-person-show CEO who owns the entire company, and has the attitude that people just give them money, and they will magically make the company worth a lot, after which point they will move on to executive hiring with way smaller amounts of equity, because they ‘don’t want to give too much up in the early stage.’ 

Story

I once tried to help a guy who had been funded as a solo founder CEO who was way out of his depth, and ultimately isn’t CEO caliber. He had no cofounders, no team members, and was making abysmally slow progress. Meanwhile, he was sitting on top of an actually quite good opportunity. His attitude was that he would be able to hit some trivial initial milestone, and then suddenly investor cash would pour in, and between the perceived traction and cash infusion, he’d be able to ‘hire a professional CEO without giving up that much equity.’

Advise

Good CEOs are mindful of building founding teams, executive teams, and having large employee pools to attract top talent. They are busy trying to get talented people in *before* they get to the next stage, not after, so that they can experience that bump in valuation right out of the gates.

While it’s possible to be a solo founder, it’s rare and you need to be incredibly skilled in a number of areas -- in particular you need to be able to build and sell. You need strong product and/or engineering skills, marketing and sales skills, you need to be able to product manage, and you and you neeed to be able to recruit and raise money -- all by yourself. You also need to have a tremendous amount of energy and persistence. 

“A single founder is like one hand clapping. The sweet spot is somewhere between two and four. Unless you’re 100% certain you’re that outlier who can go it alone (and willing to risk the chance you're not), the co-founder search is worth it.” -- Steve Blank

If you want to be a founding CEO, then you need to be able to attract a strong team of co-founders, and you need to be thinking long term and seeing the monumental effort ahead and the support you need, rather than thinking short term and being greedy about equity.

Pattern: Balance founder capabilities, ideally among two or more founders

Most successful startups have two or more founders, 2.4 on average according to some studies. Other studies show that solo founders can take 3.6 times longer to scale. Some outlier solo founders can set vision, raise money, bring in customers, direct product/tech, and build the team, but these are rare.

“Two is the right number. Think Jobs and Wozniak, Allen and Gates, Ellison and Lane, Hewlett and Packard, Larry and Sergei, Yang and Filo, Omidyar and Skoll, Julia and Kevin Hartz from Eventbrite, Jennifer Hyman and Jennifer Fleiss from Rent the Runway. In three founder companies, the politics can be tough. Four is an extremely unstable configuration and five is right out.” -- venture hacks

Three reasons why VCs are so strongly in favor of having more than one co founder; “1) Productivity: you get more work done with more people, and better work done if they have complementary skills, 2) Moral support: you have someone you can lean on during inevitable tough times. You can pick each other up when down, and keep each other grounded if getting high on your own supply, 3) Pattern matching: many of the most successful startups like Apple, Facebook, Google, Microsoft, all had co-founders when they started -- it’s not always true, but its true enough that investors and many other groups important to your startup will be using this as a pattern to match against.” -- Harj at YC

Be curious to learn enough about the other functions outside your background so you can be informed about who makes awesome co-founders or leaders for your startup. Steve Blank talks about identifying the capabilities you need to support your key activities, and the gap between what you’re going to need and what you bring to the table reveals the expertise you need to find in your co-founder. Ideally someone who you can also see delivering what you need today and also scaling with the startup as it grows. 

“Learn enough of the other side to have an informed opinion. Business founders who don’t code use bad proxies for picking technical co-founders (“10 years with Java!”). Technical founders who don’t sell also use bad proxies (“Harvard MBA!”). One builds, one sells -- The best builders can prototype and perhaps even build the entire product, end-to-end. The best sellers can sell to customers, partners, investors, and employees.” -- venture hacks

“One of the biggest mistakes in assembling a founding team is not thinking through the need for skills but instead settling for who’s around.  When you’re considering bringing on a co-founder, look closely at your Activities. Who do you need to accomplish them, and are they missing from your existing team? Your first thought when vetting a co-founder should be: Does this person have skills and knowledge that are essential to the success of my business from day one? Do I need them to get this thing off the ground? Your next question is: Can this person keep giving?” -- Steve Blank

“So if you're really great at sales, talking to users, getting customers, ideally, you'd have a co-founder who's really great at building product, and writing code, and building software, because the two of you can divide and conquer and get a lot done. I don't think it's one you should overly fixate, more important than anything is just working with someone that you like working with and you trust. And so if sort of the person best fits that description doesn't necessarily have the perfect set of complementary skills, tools, I think that's fine. then you can start hiring people as you need, and make enough progress in the company to get investment, you can hire people to kind of fill in the skills gaps, and that's okay.” Harj at YC

I’m going to write a separate article just on founder equity split, but it’s worth stating here that you want equity to flow to impact, and balance of equity flowing to balance of core skills. Not everything needs to be covered by a founder, but you need a bigger pool reserved the less you have things covered by founders.

“I would really encourage you to do is not optimize for the short term, right. So just because you made a little bit of progress and the idea by yourself, and you have a great co-founder, and you're sort of thinking, "Hey, maybe I should take 70% interest, just leave them 30%," because you've made progress in the last 6 months, I would encourage you not to do that. Startups are a really long-term game.” -- Harj at YC.

Now, this view may be somewhat controversial, but I’ve been a founding CEO and CTO, and CEO is a vastly harder job. It’s OK to have a strong CEO figure with more equity if they are truly impressive and likely to stick around to drive the company well into the future, especially if you are counting o them to do product, marketing, sales, fundraising, and recruiting -- that’s a lot. The CEO role is the hardest, most time-consuming, and highest pressure job as the company grows, so letting the CEO have a bit more to keep them in the game longer term is totally fair imho.

Startup DNA

Antipattern: The high pedigree team aka big names from big institutions

Symptoms

A common pattern involves trying to impress everyone with a slide deck of important faces. It could be niche-famous people within a particular industry, a set of folks from a management consulting shop, friends from the graduating class of a top university, or a set of folks who were at a big name tech company.

They’ve got the pedigree, but do they have the startup DNA? Oftentimes, the more impressive everyone looks, the more the team has been optimized for optics than execution.

Watch out for folks that have already been successful and haven’t faced that much risk or adversity, or folks that have no history of tinkering with projects and trying to start things. Check out how much people have read startup blogs, bios of great entrepreneurs, and generally seem to be geeky about building startups. Are they only making carefully controlled bets, or taking serious risk to try bold things?

You can see this come out the most with failure -- proper startup people face failure immediately, and want to learn from many small failures because they are paranoid of bigger existential company-killing failures. High pedigree people that haven’t failed at anything in their lives don’t even respect the risk of startup failure, as they feel entitled to some kind of an outcome, and will ignore clear signs that things aren’t working.

Story

I’ll share a few examples that are pretty common.  One involves a set of really talented folks coming out of Stanford, another was a team coming out of Google, the third example is a couple CEOs that came from top management consulting shops, and the last example comes from some big-name experienced industry guys.

The Stanford team came out guns blazing with a big press release after getting funded without a clear product.  Direction was pretty murky from the early days as they continued  to focus on buzz over product. Ultimately ended up getting a pretty good acqui-hire deal with a big tech company.  Pretty good outcome for the founders, but not so much for the investors, and definitely not an example of building a successful startup.  This has become a very common model for AI teams,  when over the years the acquisition market has been really strong and folks have been able to get acqui-hired, so teams are leaving big tech companies to start startups and get re-aqui-hired by the big tech companies with some extra stock.

I've also seen a team that came out of Google that were incredibly talented technically and even had strong PMs, but really weren't well suited to the early product-market fit stage. They could optimize the hell out of a working product, but couldn’t really see how to build a differentiated product in their market -- they sort of just copied clear patterns for their kind of app, and tried to optimize it before they had anything differentiated enough that anyone wanted to switch to it. They ended up getting acqui-hired by a big tech company to optimize one of their products. 

I've known guys over the past 5 years or so that left top three management consulting firms to become startup CEOs and in both cases the startups didn't work out and they both went back to their management consulting roles.

In three of my startups I've tried to hire big-name executives from the top industry players.  In both cases the executives failed very badly within the first 6 months and shipwrecked the companies because they engaged in the wrong activities -- spending time and money on building out teams and operational infrastructure that really weren’t needed at that stage, meanwhile massively under investing in the core product, marketing, and sales.

Advise

Entrepreneurship is a skill.  It’s a mistake to think that the functional skills engaged in building larger companies are the same as those engaged in building early-stage startups.  It's Important to take the time to identify what skills you're searching for in your early stage startup, and not to identify the skills that seem to be needed in that industry in general, or even for later stage startups in your industry.  Startups are very stressful; they need to make remarkable progress very quickly.  That's stress and pace just doesn't work for some people. Harj from YC talks about selecting for those who can handle the stress “the single most important thing to know about someone before you start a company with them is how do they handle stress. Sort of second most important is how well are they going to help you handle stress.”

“Select for the Startup Mindset (i.e. Love of Chaos).  You also need to consider whether your prospective co-founder is, simply put, a match for startup life. You want someone who exhibits intense focus in chaotic situations, keen decision-making skills when faced with little data, relentlessness, agility, and curiosity.” Blank pictures a sort of spectrum of professional types, starting with founding CEO on one side and the employee who will perform best at a multi-billion-dollar corporation on the other. He encourages founders to haul out the whiteboard and start understanding those distinctions for themselves: What general skills or sensibilities does a founder or co-founder of a startup need? What’s the difference between that and being a later employee at that startup? And how are they all different from someone working at a large company? When I became an entrepreneur, the behemoth was IBM,” Blank says. “The conventional wisdom was that you didn’t want to hire someone out of IBM. You waited until some other startup hired and fired them, and then you snatched them up.” Of course, that’s not to say that a co-founder fresh out of a larger, more established company isn’t the right fit, it’s just another big factor worth considering.” -- Steve Blank on startup mindset.

Make sure you focus on outcomes over optics -- take bets on people who you think can execute and handle the pressure to grow fast enough, not the people who look most impressive in a slide deck.

Antipattern: The potemkin village

Symptoms

A more nefarious version of the high pedigree team is the Potemkin village.  Here everything has been optimized for optics, presenting an external façade without any real intent to build something.

When you scratch below the surface you see that there isn't really even a real startup.  The product is out-sourced, they don’t have engineering in house, and they have a bunch of people doing corporate strategy and finance stuff when they don’t even have a decent product yet.

When you talk to executives everything seems to be stuck at a high-level and you can't get low-level operating plans out of anyone like marketing campaigns or product roadmaps.

Story

One of my startups was considering acquisition interest from a much later stage start-up which had raised a ton of money.  As I dug in, I couldn't understand where the traction was coming from that had validated all this capital they’d raised. It seemed like they had some fishy deals that were essentially very large-scale consulting engagements with very long terms on them which allowed them to announce big things to press and investors.  There was no technical co-founder and there was really only one engineering lead internally who ran everything, using 100% outsource consultants to build everything.  Meanwhile the founder CEO was telling me crazy stuff about how famous people like Johnny IVe were going to come work for their company. Also, the process for talking to us became increasingly opaque, and the executives being brought on board seemed very corporate and not results-oriented. There were tons of weird corporate strategy and finance people involved in these discussions, and we’d never seen a product, product demo, or spoken to a product person. Ultimately we disengaged, and the one or two people who did seem competent during the discussions ended up leaving the company within 6 months.

Advise

When you're out looking for co-founders or startups to join up with, be on the lookout for the Potemkin Village.  Focus on people who optimize for outcomes over optics. You can tell this by doing your due diligence. You want people who go straight to the product and traction -- let’s see a demo, let’s talk about customer needs, let’s talk about how we’re marketing and selling. When people want to talk about vague strategy matters and engage in name dropping, that’s when it’s time to pull the ripcord and bail out.

Antipattern: Failing to know the game you’re playing -- the Flippers vs the Founders

Symptoms

It’s totally okay to start companies with the intent of selling them quickly.  It’s also totally okay to start companies with the intent of not scaling them to be very large.  Neither one of these two approaches is a classical “venture backable” startup though.  A startup is meant to have a big vision that you manifest over decades and can rapidly scale based on invested capital being spent on growth activities. So if you want to start a company and sell it quickly, or build a company that can grow slowly without the pressure to be very big very fast, then bootstrap it or raise money from alternative sources, don’t go out and raise venture capital.

You often see founding teams that aren't really committed to a long-term vision or don't really understand what it means for their idea to be scalable enough to make sense for venture capital.

These teams will be evolving very slowly, investing in small incremental changes that are low-risk and don't really have the opportunity to create the kind of growth a proper startup needs.  You also see these teams over focus on optics, getting engaged with the tech press, and taking inbound corporate development calls from potential acquirers instead of focusing on product.  These companies engineer themselves for early acquisition or slow growth.

“Aligned motives required. If one founder wants to build a cool product, another one wants to make money, and yet another wants to be famous, it won’t work. Pay close attention — true motivations are revealed, not declared.” -- venture hacks The second thing I think you really want to look for is understanding the goals and values someone has for starting a company or wanting to do a startup. why they want to do a startup, what are they hoping for? And the kinds of things that can come out are avoiding conflicting goals, right. -- Harj at YC

Story

I recently made the mistake of hiring a bunch of executives that had experience at larger stage startup-ish tech companies. These midsized organizations didn't have the growth goals that startups do, and these leaders created tremendous frustration for everyone on the team that had startup DNA, including myself.  I remember 1:1’s with two of my favorite people from those teams saying; “I'm not even sure she knows what game we're playing” and “your biggest weakness is that your leadership is great but your approach is allergic for B-players.” I was hiring the wrong kinds of leaders that were not suited to building startups -- they didn’t even understand the game we were playing, how fast we needed to grow, and that *we* were the team that had to create the growth.

Advise

When you're finding co-founders and early executives for a startup, make sure that you're carefully examining people's goals and experience.  A lot of people think they want to do startups but they don't actually understand what the growth pressure really means.  A lot of people think they have done startups, but they’ve really been working on small to midsized businesses. Venture capital-backed startups have the specific characteristic that they can take in high-risk high-return seeking capital and generate rapid growth.  Many times people will say that they want to do this or they think they have done it in the past, but you need to dig below the surface and see if they really understand what they're saying.  What experience do they have that they think is like a startup?  How fast do they think a startup needs to grow its revenue every year? What’s been their most recent traction goals and how fast did they grow traction? When’s the last time they haven’t been growing fast enough and had to make some major changes?

The bottom line is that startups need to grow as fast each month as what most people think is a startup grows each year.  So maybe one early stage company is growing 50% each year, but a successful startup is growing maybe 20-50% each month -- or 10x to 100x a year rather than 50% a year. People that think about growth on this scale act differently, have different work habits, and think about different ideas -- once that can10x change not ones that can make 50% change.

Antipattern: The ‘good enough for now’ or ‘pretty good’ team

Symptoms

When you are bitten by the startup bug you often just want to get going.  You're excited about the idea you see, the timing, and why it has to happen now and you don't care if everything is in place perfectly because you want to have a bias for action.  All these things are good.

The problem is that, as we move forward, we’ll also need to understand that it's a team effort to build a startup and it's the right founding team that makes it more likely we’ll succeed than anything else.  So if we just proceed with what's convenient based on who's around us we're really unlikely to have the best foundation for building a startup. We’ll need to iterate a ton on the product, and how we market and sell it, and its arrogant of us to think we can just dive in and figure these things out with a mediocre supporting cast rather than a strong founding team.

We'll see mediocre execution -- a product that isn’t great, maybe it crashes and has a lot of bugs, marketing isn’t clever enough to rise above the noise and doesn’t help anyone understand the product, sales efforts don’t close deals fast enough to show meaningful growth.

Story

At the late stage of this current tech cycle, people have become far more aggressive about building startups even if they might not have adequate skills or experience.  This is especially problematic when there isn't a clear CEO. That's really the biggest problem.  I've seen a couple teams recently with some very smart folks I've worked with or observed pretty closely where the founders aren’t making much progress. If the founders just kept searching to find a great CEO to work with, then they’d be working on much more important and scalable ideas and be making much faster progress towards traction and product manifestation. The excitement of building stuff and seeing so much money around in startup ecosystem is luring people into starting things with whoever around them seems smart. They aren’t reflecting to see who is really going to be the CEO and what kind of progress they actually need to make in the first couple of years. 

Advise

Startups are by definition trying to do something nearly impossible, and let's remember that most startups fail.  If we expect extraordinary outcomes then we should assume we need extraordinary people. 

“Don’t settle; has to be smartest and fastest people you know that have the persistence, humility and integrity to stick through the journey. If it doesn’t feel right, keep looking. If you’re compromising, keep looking. A company’s DNA is set by the founders, and its culture is an extension of the founders’ personalities.”  -- venture hacks

Pattern: Build exceptional teams well suited to the problem, and focus on startup credibility not pedigree

In startups good enough just isn't good enough, we need to be the best at what we do if we think we’re going to build a billion dollar business that transforms an important problem. The company needs to be the best at what it does, and we all need to be the best at our individual jobs in orer to maek that happen. It’s not about the best school, the best big-name company, the best network etc.  What makes people credible for startups is really the job skills and ability to deal with the ambiguity of finding product/market fit, and the stress of the growth expectations that startups are under.

Paul Graham has a few suggestions as to what makes for credible founders; 

“1) Determination. This has turned out to be the most important quality in startup founders. We thought when we started Y Combinator that the most important quality would be intelligence. As long as you're over a certain threshold of intelligence, what matters most is determination. 2) Flexibility. You do not however want the sort of determination implied by phrases like "don't give up on your dreams." The world of startups is so unpredictable that you need to be able to modify your dreams on the fly. 3) Imagination. Intelligence does matter a lot of course. It seems like the type that matters most is imagination. It's not so important to be able to solve predefined problems quickly as to be able to come up with surprising new ideas.” -- Paul Graham

Determination, flexibility and imagination are traits that make up a large part of what’s often called ‘startup DNA’ -- note that none of these have anything to do with perceived pedigree or intelligence. As Paul says in the post, most people in the startup world are really smart, so being smart enough is OK, and beyond that its more about these other startup DNA traits than it is being the absolute smartest. Also notice that nobody names how connected or knowledgeable someone is within a particular industry -- great founders will navigate through ambiguity in fields they don’t even know, remaining humble and finding hte right teammates and advisors to help.

I’d add a couple final traits which are execution firepower and bias for action. Startups need to move very fast, and you need people who think and work very fast. Some people are very smart and get stuck in analysis paralysis, or they jump around all over the place with a new initiative practically every day. Startups need people that can stay focused and persistent -- they need to be able tp stay organized and project manage themselves. Startups also need peopel that just work very fast -- I’d rather have the fastest engineer as a technical co-founder rather than the one who is smartest and going to create tons of frameworks. I’d rather have someone who is going to market and sell fast as the CEO rather than someone who has the best connections in the target industry -- over time the speed will overcome the connections.

Founding Timeline

Antipattern: The ‘we just met each other outside but everything is fine’ team

Symptoms

Some founders haven’t worked together before, and haven’t even tried to test out working together for a while before starting a company. The blowup risk here is enormous. The same risk applies when a solo founder tries to make progress, get seed funding, then bring in leadership using executive search or recruiting through their network. The seed stage of a startup is just much too stressful and crazy for normal hiring to work out well when it comes to hiring leaders.  Your strong initial leaders need to be the founders and have founder level equity.

These startups often fall apart in the early years when the invariable slow down and growth or failure to ship something on time happens and the co-founders chance come together and get through it instead one of them on more quits or gets fired 

Story

I've personally jumped into a startup as a co-founder without getting to know people or working on it as a project for a while first, and I’ve also screwed up pretty badly by trying to get startups going without cofounders then hiring in executives.

When I jumped into a startup that was already running a bit before its seed funding, I didn't know what the other co-founders interests were, and our motivations didn't end up being aligned.  I really wanted to go for something very big, and the other co-founders ultimately wanted to go for a quick acquisition.  so when our first product stopped growing after an early push my co-founders wanted to sell the company and I ended up being surprised and starting to work on something new so that I didn't need to go with the acquisition.

In the case where I’ve had a few things I tried to run through seed funding and then hire executives into rather than having founders at the inception of the seed stage, I always failed to find the right kind of executives, because basically you’re searching for a founder at what’s pretty much still a founding stage of the business, but you are trying to pretend its later stage and so you land with later stage executives that might be fine once you have product/market fit and start scaling, but wind up performing pretty poorly when you’re still hunting for product market fit and defining all the product, marketing and sales playbooks.

Advise

Pretty much everyone tries to advice to work with someone that you  already know. “Go for someone you have history with” -- Venture Hacks. Paul Graham says “Empirically it seems to be hard to start a startup with just one founder. Most of the big successes have two or three. And the relationship between the founders has to be strong. They must genuinely like one another, and work well together. Startups do to the relationship between the founders what a dog does to a sock: if it can be pulled apart, it will be.”

It's okay if you don't have the perfect co-founder already in your network,  you can go out and find them and run a trial. Working together. Steve Blank has thoughts about founder trial periods To get to the bottom of these core traits, he advises that any prospective co-founders “date first.” Start with a hack weekend, or some other period of intense activity that requires plenty of decision-making. Follow that up with, at a minimum, a provisional 30-day working period.“Agree on whatever terms make sense — you both get to keep the code, for example — but give yourselves some time before you fully commit. You’re about to get married and have kids, and the consequences of divorce here can sink the entire venture,” Blank says.

“you really don't want to start a company with someone that you don't know particularly well. you don't really have insight into how they're going to respond to pressure and stress.So the best people to start companies with are always people that you've got some sort of personal experiences, where you kind of know the character and how they're going to respond to those tough situations. So once you found a potential co-founder, how do you test out and know for sure that you both want to start a company together before making the final commitment?one way to de-risk it is to allocate a chunk of time where you agreed to kind of work together. And set yourself a deadline by which time you want to have ideally, like a MVP, or a prototype of something built, or you at least want to have gone out and try it out, pitching some customers and convincing them to pay you if you did build a particular product. These are all things you'd usually do when you're signing up with a new company or testing out new idea anyhow. And do that together, and agree that at the end of the time that you've set aside, that you both have an honest conversation, decide.” -- Harj at YC

Antipattern: The ‘we’ll bring someone in after the next milestone’ team

Symptoms

Some founders are too arrogant or too humble, and both sides lead to the same unfortunate fail pattern -- not getting the help the company needs to succeed in the founding phase. The overly humble founder doesn’t think they are worthy of getting more people into the company until they hit some milestones that make it very attractive -- trouble is that they need exactly the people they are thinking of in order to get to those milestones, so its a catch 22. The arrogant founder thinks they can weasel out of having more founders by holding on to as much of the equity as they can and ‘hiring in leaders’ after they hit critical traction milestones. There’s an arrogant greed here in thinking they can get even higher caliber leaders for less equity.

A variant of this one is the heads down team.  Everyone is no BS, get stuff done, and feels really hardcore always working on building product, tech and talking to customers. This is all great but they're missing the most important part which is making sure the founding team actually has the skills that it needs to be able to execute. For example maybe you have two technical co-founders and neither is very good at the external-facing activities like business development, recruiting, or raising money. Their convrosations with customers aren’t really getting them into a clear product direction, so they aren’t building something people want. They would be better off to focus on finding a co-founder who could maybe play a CEO or head of commercial who can sell to customers, recruits, and investors.

Story

On the overly humble side, there was a time I was incubating a few VC-backed startups and made the grave mistake of thinking they weren’t going to be compelling enough to get founding leadership until we got some early product and traction to show. Once I started to think systematically about CEOs, and I got the first founder into one of the startups and they took over as CEO, it was very clear that I’d made a huge mistake by not focusing mostly on building founding teams from inception. By not getting the right founding DNA in place that could take the startups from zero to one, I couldn’t raise more funding, because we didn’t have the right teams, and the leaders I was able to get in palace later on weren’t good enough to make the kind of product and commercial progress that I’d expect from founders or early execs leaders.

On the overly arrogant side, I've recently seen a founder who is making very little progress with his startup. Checking in 6 months later, I find the founder in the same place. Rather than see the obvious missing skills and need for help, the founder remains in a fantasy world thinking that they're going to hit some Milestone that suddenly makes investors want to come in. At this mystical point in the future when the cash flows in, they think they can do executive search to find new leadership for the company,  even including a CEO search.  In reality this company won't get off the ground unless the CEO reflects and understands the immediate need for a well-rounded founding team in order to execute and raise money.

Notice that in both stories the motivation for deferring the build out of a proper founding team is different, but the results were the same. I was thinking I wasn’t worthy to get people in yet so didn’t look, the other CEO thinks he doesn’t need it yet, but in both cases the startups got stuck without enough traction and team in place to raise further capital. 

Advise

Founders need to be aware  of what they need in order to get to the milestone of raising their first money from investors and getting initial traction from customers. Usually you need a mix of skills and resources around the table -- probably either some funding from your own cash or the ability to work for free for some time to get the company off the ground. You have to be honest with yourself about what investors, customers, potential partners are going to want to see from your company before they will engage. If you can't get to that point by yourself then you need to make it a top priority to build a founding team before you try to achieve those milestones.  Don't trick yourself into thinking that you can achieve those milestones and then go out and raise money and hire people. You won’t hit the milestones, and investors will pattern match you out because the team looks weak. 

For the love of the start-up gods don't let over-optimizing on equity or over-expecting progress be the thing that makes you delay this decision. Founding equity needs to be allocated among an awesome team that can get to product-market fit and lead the business. The right founders for your startup actually *want* to be the ones that get you to those key traction milestones you have in mind, not the people that you bring in right after you hit them. Founders want the risk, they want the big chunk of equity, and they want the blank slate that they can be a part of filling in. This kind of proactive ownership mindset is critical to embed into your startup DNA, and you want a core team to do it, not just one person.

Antipattern: The chicken and egg aka the ‘can’t start until we have the team’

Symptoms

Sometimes you see a friend always talking about starting a startup but it never gets off the ground.  Usually they don't feel like they can start until they have the team in place or investors in place or whatever. Another common refrain is the people think they don't have time to get the start-up started or that they can't do it unless they quit their full-time job and focus on it entirely to raise money and get it off the ground.

Story 

I've had many really smart friends that would make great founders but haven't taken the jump yet. There's a few groups of friends that I've worked with before that have tried to work on similar startups that I’ve done -- applied machine learning stuff.  They always seem to be distracted by other projects that they're working, either within a services business, or within another company. They don't have the right idea or team in mind to really risk the time money and energy on a startup. Maybe at most they make a half-heared and under-resourced effort that they nurse for a while and eventually die -- normally this never even gets off the ground beyond maybe incorporation or a V1 at most. As the years go by they never really take the plunge and take the risk. The value of those short-term project distractions keeps on increasing and startup bets look riskier.  The longer time goes by, the more it seems they're stuck and maybe won't ever start a startup. 

Advise

Perfect is the enemy of the good. At some point you just need to get going. Check out the rolling close model outlined below which explains how you can still be thoughtful about building out the founding team before you go to raise money from VCs. You can still take your time to make sure you're working with the right people while you're talking to customers and building prototypes.

Pattern: The rolling close -- building the founding team if you don’t have everyone from day one

Based on my experience, you should only present yourself to investors once you have a complete founding team in place. Even if you have a  clear vision and you've made some progress towards early traction and a prototype, you’re going to have a tough time without co-founders, even at the seed stage. Even if you are experienced and have a clear plan to build out a leadership team plus a realistic idea about the amount of equity you need to grant, you’re just still going to be up against decades of VC pattern matching that’s looking for the right kind of balanced founding team.

It's fine to start having customer discussions and start working on a demo well you're hunting for co-founders. In fact making concrete progress is always a great selling point to a potential co-founder who would like to see some customers lined up or see a demo -- it shows the train is leaving the station.It's okay to talk to prospective investors you might know already if you're looking for founders some of them might help you point you to some people that they've heard about, but just be careful about presenting yourself to them as a fully formed startup until you actually have the founding team in place.

The founding CEO or the product/technical visionary is usually the prime mover -- the one driving the initial push to build the founding team. Imagine rolling a snowball up a hill, it gets bigger and harder as you go up. Once you crest the top it starts rolling down and gets bigger and faster as it goes down, and it's easier for you. There are two phases like this in startups, building founding teams and then getting to product market fit. So don’t be afraid to treat building the founding team as a phase -- it shouldn’t block you from getting started talking to customers and building stuff.

Lastly, an important detail that I missed until building probably my 7th founding team, is that the ability to sell an idea to different constituencies probably matters about the same. You want to be able to sell the idea 360 degrees to co-founders, customers, investors, any partners you need to deliver your product or service, and so on. You kinda want to derisk the entire business as much as you can before taking outside capital, because once you do, it creates quite a bit of inertia towards a particular direction.

Pattern: the project that mutates into a startup

A great way to find co-founders organically is just to work on a bunch of projects with people for fun in areas that you're interested in and might want to build startups.  It's totally normal for one of these fun projects to turn in to a proper startup, Google and Facebook are examples of this.  It's equally normal for the people that you work on those projects with to become co-founders in the startup.

Rather than sort of trying to pick a startup idea, and go and find co-founders to work on with it, I would suggest that I just look for people to do projects with. the other thing that's great about projects is you can work on different projects with different people and you can start developing a taste for who do you like? Well, what kinds of personalities? Like what kinds of skills are you actually good at as opposed to what you might think you're good at? And so what kind of complementary skills might you look for in a co-founder.  Projects that you work on in your spare time often tend to be some of the greatest sources for actually finding great startup ideas and building huge companies. This advice also applies if you're not in college or school, maybe if you're working at a company, like look at your coworkers, keep a list of people that you think are particularly smart, particularly capable, who impresses you, and start getting to know them better. And ask them if they're up for working on things in the evenings or weekends. The kind of person who is interested in working on evening and weekend projects is the kind of person that's likely to make a great co-founder. -- Harj at YC

You can get started finding such projects by just socializing with people that might be interested in the same kinds of things that you are. 

“I actually remember years ago at Y Combinator startup school, we had Phil Libin, the founder of Evernote. And he kind of gave a somewhat extreme version of his advice; he would only make friends with people that he thought could someday be a co-founder. I think this is kind of the thing where if you make this of a conscious effort well before you start a company, it'll probably the best bet for finding a great co-founder. make a list of the people that you know, you're closest to that you think would be great co-founders, and start from top to bottom, and ask every single person there to go grab a coffee and talk to them, and ask them if they'll start a company with you and be your co-founder. If they say no, that's totally fine. Say you understand. But like, who would they start a company with and make it very specific. Ask them, "If you were starting a company, who would be sort of your top three or four co-founders that you want to try and convince to work with you?" And ask them for an introduction to each of those people. So your list keeps growing now. Right, it kind of sounds a little bit just like how to have a social life. just find people who are interested in the kinds of things you're interested in.” --Harj at YC. 

Bias for Action

This guide is intended to serve as a tool to help you build founding teams. Go put the patterns into practice and watch out for the antipatterns. Find founders who have built startups before and go ask them to be your advisors. If you want further advice from me, then hit me up on twitter, linkedin, or email.

It’s important to know why we’re setting goals, so that we have a sense of commitment and motivation to achieve them. Then we need to make goals clear and measurable, and work backwards to define leading indicators and milestones. Lastly, we need to define a cadence of accountability so that we can evaluate how we’re doing and make behavior modifications along the way.

We’ll go through both personal and work examples, and end by reviewing goal trees for setting goals in larger organizations.

Take a snapshot

I’m a fan of goals anchored in visceral emotion and vivid imagery. It helps to create a bit of drive. Envision the future outcome you want and imagine yourself in a visual picture of that outcome. Maybe you want to be in great shape -- explore to see if there’s some visualization, like being in super great shape on the beach and feeling confident. Maybe you want your startup to grow its revenue by 10X -- maybe there’s some annual party and the end of 2021 and you’re all toasting to the success. Maybe you’re working on a new drug or healthcare project, and there’s a way to visualise the impact on saved lives or quality of lives. Visualize yourself in the goal state, getting whatever it is that you want to get out of achieving your goal. Getting in shape or tripling your revenue aren’t ends in themselves, they are means to ends -- visualise the endgame. 

The snapshot answers why you are setting these goals. It’s not something you measure, it’s the reason why this is worth measuring.

Set measurable top down goals

Let’s say you’re setting goals for an entire calendar year. Start with the outcomes you want, and then think about how to make them measurable.

Define your goal at a high level, but keep drilling down until it's clear and measurable.

The process for personal and work goals is the same, and I write mostly about startups so let’s switch it up a bit since we’re just now kicking off 2021. Let’s start with a classic personal fitness goal. Suppose you want to ‘get in shape’ by EOY 2021. This is a great starting point for a goal, but it’s not a goal. A goal needs to be “X to Y by WHEN” -- the goal must be expressed as a number, and you then must start with an explicit statement of today’s value of that number, the target number, and the time period you are setting the goal for.

Getting in shape isn’t measurable, and can be refined in many ways. You need to refine more clearly what this means for you. I had a couple injuries in 2020 that set me back on my fitness goals, so I got in significantly worse shape the second half of the year.  I know that I want to recompose my body so that I lose weight overall but I cut body fat dramatically and add muscle.  I Bought an inexpensive scale that approximates body composition, and I’m starting the year at 200.6 pounds and 21.9% body fat. I set a target to get to 190 and 10% body fat by EOY 2021. 

Here’s what the first quarter of 2021 looks like in my milestones spreadsheet.

Establish leading indicators and milestones

Now, this milestone tracking is measurable but it's a lagging indicator of lifestyle changes that drive changes in body composition -- which is a function of exercise, and calories coming in vs calories being burned.

Setting leading indicators is much harder than setting quantifiable top down goals! This is where the magic happens that separates people that achieve their goals from people who always set the same goals and never get there.

Let’s take this fitness goal as an example so you can see the degree of rigorous thinking required to set good leading measures.

First, I’ve worked with nutritionists and trainers over the years, so I know what my issues are. When it comes to nutrition, my big issue is that I skip breakfast, go straight into work, take a late lunch, and then get low on blood sugar later in the day. Then I crash hard and eat a massive late dinner and loads of junk. When I follow the discipline of breakfast every day, I don’t have the blood sugar volatility which has a huge positive impact on my mood stability and my nutrition. So for this year, I’m not counting macros or setting other dietary restrictions, I’m just setting the goal to have breakfast. Furthermore, I’m not expecting myself to nail this perfectly 7 days a week from week 1. My goal is to start at 3 days a week in Jan, and get to 7 days a week by EOY 2021. This is robust, practical, and easy to track. I’ve arrived at it through careful analysis. I don’t need to carefully count my macros at every meal, especially given my running.

I also have a goal to be able to summit the nearby mountain from my house, which is about 26 miles and 6K feet elevation change. I’m an active runner but starting from a pretty low baseline again, so I’ve build milestones leading to this outcome by increasing my running volume by 10% every 2 weeks, starting from 10 miles a week and getting to 40 miles a week by August 1, which means my long runs will be 20 miles and my heart and lungs will be conditioned for the summit effort in the fall.

Given my goal to gain muscle, I also need to workout in my garage gym at least 4 days a week, and ensure my protein intake is sufficient. I love working out, and I’ve used weight protein for years, so I don’t feel the need to set goals on these fronts. 

Note the practicality -- I’ve taken my overall fitness goal and broken it down into goals for breakfast and running, but I haven’t set goals for things I don’t need to, so I have less tracking to do, and my system will be more robust. Be honest with yourself though!

If you set goals with way too much detail that are way too tedious to track, then you will stop tracking them and give up on your system, and surely fail to reach your goals.

Let’s look at a couple work examples. Let’s say I’m running a seed stage startup and I want to grow revenue enough to do a big Series A fundraising in the second half of 2021. Well, first I need to go to the VCs I want to raise money from and ask them how much traction they’d expect to see in order to fund me. Suppose I do this and some give me numbers that are 4X the traction I have today, and others give me numbers that are 20X the traction I have today. Several are in the range of 10X, and that’s a number I feel like I can do based on the growth rate of the past year. We’ve been growing at 30-40% month over month, and I think we can get it up to 50% from January onwards, and if we do that 6 months in a row we’ll have growth 10X by mid year. 

So I’m setting my goal to 10X growth by mid year, and my leading indicator is my monthly growth rate, but I’m going to measure my weekly growth rate and my daily signups. I break down my monthly growth rate into a weekly rate, and I build a table all the way down to the granularity of daily signups. This way I can track daily signups every day, and I can act on that very fast moving leading indicator along the way. So I break the 10X goal over 6 months down into roughly 50% growth per month, and then I further break it down into growing about 1.41% every day in January because I only have 28 days. Break things down in whatever way you feel comfortable, maybe you don’t want daily compounding in january and you just want a target of 17,860 sign ups every day in january, or just make it 18,000 to be round. Even though maybe you’ll be a bit lower at the start and larger at the end, if you have short enough time periods this won't matter much. Make it easy for yourself and avoid false levels of precision that don’t help you track, or being too rough that it doesn’t let you steer.

Define a cadence of accountability

A common fail pattern is setting milestones in the first week of January, and then checking on them the last week in December. I think we all know how that’s going to turn out.

I have to commit to the discipline of tracking my leading indicators on their respective timescales and defining check-in points along the way. This is why it’s so important to make tracking my leading indicators robust and easy. If I fall off tracking and checking in, then I lose the feedback loop of accountability, and I’m very likely to fall off track from my goals.

Falling off your tracking means falling off your goals.

You should be doing a monthly check-in at a minimum for work or personal goals. Better yet, there are some things you’re even recording and checking in on daily and weekly. The faster the feedback and more frequent the check-ins, the greater the accountability and the higher the odds of achieving your goals when the end of the year rolls around.

Personally, I really like to do Sunday night checks. It's an important way to reflect on the past week and prep for the upcoming week.  When I stick to this cycle, I perform much better in life and work, and when I abandon it, I invariably lose my way and fall off my goals. So I recommend a daily or weekly check-in if you really want to take your goals seriously. Let’s take my breakfast example -- if I check-in every day, I’ll know how many times I’ve had breakfast this week so far, and if I’m on thursday night and haven't had breakfast but I have a goal of 3X per week, then I still have Friday, Saturday and Sunday and I can still hit my goal. Even if I was so busy that I skipped my check-ins tuesday and Wednesday, I still got it in on Monday and Thursday, and I still have time to act to modify my behavior and hit my goal for the week. If I checked in on this goal monthly, and had only had breakfast 3 times in the entire month, then that’s a much worse outcome and will be much harder to modify my behavior for the following month. If I’m supposed to eat breakfast 4 days a week next month and I did 3 times in the entire previous month, then I’m going to have a really hard time with this radical behavior modification next month.

Steady progress is key. If you keep a cadence of accountability and make many small behavior modifications along the way, you can move mountains, but if you check-in infrequently and then need to make massive behavior modifications, you can barely even bring yourself to move your butt out of your chair.

Although daily or weekly check-ins are important for tactical execution and behavior modification, it’s equally important to make strategic modifications every month or every quarter. Let’s suppose we’re back in the startup example aiming for 10X growth in the first two quarters of 2021. We’ve been missing our daily signup target, and we hit January 31 and our growth rate is stabilizing at 30%. We’re trying different marketing strategies, but we’re not able to drive the jump from 30% to 50% month over month growth that we thought we could, and our efforts to boost daily signups haven’t worked consistently.

Although we did a good job breaking down the overall growth goal into daily signups, we had a baked in assumption that our hypotheses about driving more daily signups were right. We tested a bunch of those hypotheses but they were wrong. This is telling us that our hypotheses about how to act on leading indicators were off. Indeed, we’ve learned that tracking daily signup probably isn’t a good leading indicator for us, we need some more fine grained things to measure that let us get down and debug why our marketing ideas aren’t connecting. We do some attribution analysis to see which channels new signups are coming from, and which campaigns are performing vs underperforming. We notice that only two of the three channels we’re using are showing mild improvements in signups, and the third is actually falling off. We decide as a team to give up on the underperforming channel and try to get a new channel that’s actually growing. So we split up the team’s focus -- half will work on testing hypotheses in the two channels where we seem to be able to grow signups a bit, and the other half will work on quick prototypes of small product and messaging tweaks for two new channels that we think could work. Although the daily signups target is still there in the background, it becomes more of a lagging indicator now, and we set new leading indicators for each of these two teams -- we want to get ⅔ of the target daily signups form the two channels that are working, and ⅓ of the target signups from one of the new channels we are testing, and then these two teams set their own goals for how to drive their signups -- for example the number of test campaigns they run every week, or the number of product prototypes they ship into new channels in February. The teams have autonomy to do what they think is going to move their signup number, and we’ll come back to reflect strategically at the end of February.

Build goal trees for teams

For organizational goals as described above, it's important for leadership to facilitate how high-level goals break down into smaller goals for teams and ultimately individuals. At each team’s level, the leadership at the level up is defining some top down measurable goals, and providing the team the autonomy to define how they intend to hit those goals and what their leading indicators are. Then the team’s leadership will review, debate, and sign off when they feel comfortable with the bets the team plans to make. Like the example above with one of three marketing channels drying up and forcing a reshuffle of leading indicators and a plan to enter new channels, we don’t always know what is going to move the needle on the longer term goals.

Leading indicators are bets. Expressing our best guess at leading indicators and checking in on them is a form of betting with our time and resources, and then checking in to see how the bets are paying off.

The most important way in which leadership creates autonomy and agency for its teams is in letting them take ownership of the bets they make. Leaders should for sure provide input, and they should review and sign off since they will be accountable for the bets at a higher level, but it’s important that they step back and create space for the team to define and place their bets.

Top down goal trees create more space for ownership, not less.

A goal tree is just a simple hierarchical tree structure showing goals at different levels in an organization. Let’s come back to the startup trying to grow 10X in the first 6 months of 2021. The reason for this goal in the first place is to run a successful fundraising in the second half of 2021, and the reason to run the fundraise is that it’ll run out of cash in Q1 2022. This is important context for the CEO -- if we fail to hit our growth targets along the way we could do other things like downsize to reduce burn and extend the runway to hit our targets. The startup CEO’s primary jobs are not running out of money, setting the vision, and recruiting top talent. So the CEO goal is to not run out of money, which leads to a goal of raising money, which leads to a growth goal, which leads down into the team goals.

In the example above, you see how the CEO goals refine from not running out of cash down into growth goals required to raise a Series A. Then you can follow how the functional teams decompose this overall growth goal into their goals. I’ve left a big chunk of the bottom of the tree in each function undefined, because I want to talk about how the tree creates space for them to make their goals more detailed. For instance, product and engineering have clear goals around shipping weekly product and marketing experiments. Marketing has clear numerical targets that they need to hit based on these experiments. Product may want to adopt those because the product tweaks required to get a new channel working are on both product and marketing. Note that ops can play a role here -- they can find ways to reallocate resources to put more firepower behind the company’s need to grow. I can’t tell you how many times I’ve seen ops totally divorced from the overall growth goals of a startup -- adding to burn and building out “future proof” infastructte that’s never used while the startup is understaffed in marketing, sales, product and engineering. Empowering ops to move the needle on product market fit and growth can be just the thing that unifies the company and stops misdirected bloat across all its functions.

In closing

Make no mistake about it, achieving your goals will be hard work. Setting goals is a lot more common than achieving them, and hopefully now you can see why. You need to clarify goals, visualize why we’re going after them, and work backwards to define leading indicators. Then you need to set and track milestones, and hold yourself accountable to results. Making faster progress often requires large behavior and organizational changes. We’ll also be wrong about some of our bets as to which leading indicators are going to move the lagging measurement of our goals, requiring us to shift tactics. It’s a lot of work and focus, but if we master it, we can achieve just about anything we put our minds to both personally and in our companies.

The #1 mistake A-Player leaders make is failing to identify and transition out B-Players quickly enough.

A-Player leaders get a lot of fundamentals right, but invariably make mistakes and hire some B-Player leaders who have an amplified effect and tend to hang around months or even years longer than they should. When B-Players are left in place, it kills organizational performance in that functional area and spills out to tangent functions. The more senior the B-Player, the larger the magnitude of the fallout.

This post is focused on advice for executive level leaders who need to quickly identify and transition out B-Player leaders on their teams, but the advice easily translates to leaders up and down the stack and ought to be useful to anyone who wants to correctly interpret organizational results.

Building and Managing A-Player Teams

“A small team of A+ players can run circles around a giant team of B and C players.” — Steve Jobs

As Steve Jobs points out in this clip, the primary focus of a great CEO is recruiting and vision. If you build a great team and get them aligned around a clear vision, then the team will be largely self-managing. 

“The greatest people are self-managing. They don’t need to be managed. Once they know what to do, they’ll go figure out how to do it, and they don’t need to be managed at all. What they need is a common vision, and that’s what leadership is -- having a vision, being able to articulate that so the people around you can understand it, and getting a consensus on a common vision.” — Steve Jobs

He talks frequently about self-managing and self-policing teams of A-Players;

“I've built a lot of my success off finding these truly gifted people and not settling for B and C players, but really going for the A players, and I found something. I found that when you get enough A players together, when you go to through the incredible work to find you know five of these eight players, they really like working with each other because they've never had a chance to do that before, and they don't want to work with B and C players. So it becomes self policing and they only want to hire more A players.” — Steve Jobs

While there is some self-policing aspect among the core A-Player team, the fog of war sets in and distracts everyone from doing it 100% of the time and with 100% accuracy. B-Player leaders spend most of their time churning up chaos, drama and diversion to distract from their performance. So the crux problem for A-Player leaders is less so the setting of vision and recruiting, and more so the identification and transitioning of B-Players -- because setting vision and recruiting top talent aren’t actively working against you, whereas B-Player leaders are by definition actively working against your goals, while also actively working against you identifying them and transitioning them out. Since you can and will make hiring mistakes, the process for identifying B-Players and transitioning them out is just as important as identifying A-Players and recruiting them in. Reiterating for emphasis;

The process for identifying B-Players and transitioning them out is just as important as identifying A-Players and recruiting them in.

If we want to hire only A players, we need to define what it even means to be an A-Player. Once we define what an A-Player is, we need to figure out how to find them, recruit them, interview them, and how to transition B-Players out when we’ve made a mistake.

Defining A-Players and B-Players through Winning, Growth, and Accountability

Everyone will have job-specific criteria that separates the exceptional candidates from those that don’t make the cut.

In addition to job-specific skills, I use a general framework to distinguish A-Players from B-Players based on three important attributes; 1) degree of focus on winning, 2) degree of focus on personal growth, 3) attitude towards accountability.

A-Player: Wants goals for the organization because their #1 priority is winning. Wants goals for themselves because their #2 priority is personal growth and challenging themselves. Because the A-Player wants to win and grow, they want to hold themselves accountable, analyze shortcomings, and focus on getting better. Focus on outcomes above optics. Laser focused on important goals rather than distracted by shiny objects. Heads down on work rather than engaged in internal politics. Not afraid to take some risk in the name of better outcomes.

An A-Player focuses on outcomes over optics and a B-Player focuses on optics over outcomes.

B-Player: Doesn’t want precise goals for themselves or their organization because it eliminates their ability to move goalposts dynamically to create fictitious positive momentum. Doesn’t want a regular cadence of accountability because this makes it even harder to move goal posts, and risks continuous exposure of their shortcomings. Focused on optics above outcomes; increasing their perceived status, alliances, and power within the organization while minimizing risk, outcome focused work, and change to the status quo.

Finding, recruiting and interviewing A-Players

The #2 mistake A-Player leaders make is not treating recruiting and retaining A-Players as their #1 priority. Again referring to the above Steve Jobs clip where he states that recruiting is his most important role;

“So I consider the most important job of someone like myself is recruiting. We agonized over hiring. We had interviews. I'd go back and look at some of the interviews again. They would start at 9:00 or 10:00 in the morning and go through dinner. A new interviewee would talk to everybody in the building at least once and maybe a couple times, and then come back for another round of interviews, and then we’d all get together and talk about it. We wanted people that were insanely great at what they did, but were not necessarily those seasoned professionals. We went through that stage in Apple where we went out and thought oh, we’re gonna be a big company, let’s hire professional management. We went out and hired a bunch of professional management -- it didn’t work at all. Most of them were bozos. They knew how to manage, but they didn’t know how to do anything! And so, if you’re a great person, why do you want to work for somebody you can’t learn anything from? And you know what’s interesting, you know who the best managers are? They’re the great individual contributors, who never ever want to be a manager, but decide they have to be a manager because no one else is going to be able to do as good a job as them.”

He’s talking about one the the most challenging aspects of recruiting, which is that you are looking for the high trajectory people that will grow into the role you are hiring for.  If you optimize for pedigree and optics, you aren’t going to get the folks that are best at execution. If you try to find someone who already knows how to do the job you are hiring for perfectly, then why would they possibly want to take this job if they care about personal growth? Who do you know that is outstanding at what they do and doesn’t care about personal growth? This chain of reasoning shows why you always want to hire high-growth trajectory people to grow into roles, rather than to find people that you think are already pedigreed.

It’s important to identify the skills needed for the job, then extrapolate out profile, and work backwards to places they can be to source them. I won’t get into detail here, but I’ll probably do a whole series on recruiting.

Selling your opportunity is about making yourself a great fit for people -- have an awesome team and opportunity. Build a place they can win and grow better than anywhere else, and then you don’t have to be slick about selling it, you just have to show them the opportunity.

Speed wins -- have an awesome recruiting and interview process with a minimum number of steps. Use clear tests against skills as a way to impress candidates that you know what you are looking for and competent enough to test for the right stuff. Note that compressing the timeline means cutting out logistical bottlenecks, not watering down the interview. I once had an initial screening call with an outstanding design candidate. We really needed a designer and this guy had another offer from one of the top agencies in the world. I flew him out to San Francisco for an all day interview the next day, which he rocked. We made him a spot offer on site, which he accepted. He attended our office warming party that night, since we’d just moved into a new office to accommodate our growth. We never cut the interview down, in fact we spent more time with him. Speed wins.

The Allergic Reaction; Identifying when you’ve made a mistake and hired a B-Player

When a B-Player senses they are at risk of being exposed, they tend to have extreme allergic reactions aimed at diverting attention from their performance. This is what makes detecting and transitioning them out so challenging. 

Ultimately, B-Players can't deal with accountability -- this is what triggers them, but it’s also their kryptonite. The way to cut through their noise is with clear goals, milestones, and accountability. B-players are always finding a way to belittle goal setting, roadmapping, and a steady cadence of accountability -- they want everything to be fuzzy with movable goal posts, which allows them to attempt to define wins dynamically in a way that maximizes their status. So the hardest job of the A-Player leader is to just remain calm, rational, not get drawn into the chaos and drama, and just keep returning to the goals.

A common move is to avoid accountability for outcomes by stirring up resentment and flight risk among the team, and surfacing it as a hostage play -- the only way to retain the team is to let the B-Player leader address their grievances. The steady A-Player leader responds with “Well that’s unfortunate that Kim, Michael, and Jessica are all on the edge of leaving, and that’s something we should address. Let’s come back to it after we’ve finished looking at why we’re missing our goals so badly and what we can be doing about that. Why do you think we’re behind on our marketing goals so badly? What could we be doing better?”

The B-Player allergic reaction is serious and requires immediate attention because they are not going to sit inactively waiting for the other shoe to drop, they are going to actively create damaging diversions.

How to transition B-Players out of the team

The #1 mistake A-Player leaders make is in failing to identify and transition out B-Players quickly enough.

Check for symptoms and when you find them, understand the second and third order effects, then act immediately. B-Players spend more time on optics than outcomes -- so they tend to make a big investment in politics and alliances. When a senior B-player leader feels exposed, they will immediately begin to leverage their social engineering skills and internal network to foment discontent and distract from productive work.The important thing when it comes to transitioning these leaders out is understanding the political context and alliances they’ve created so that you can quickly defuse drama.

Don’t get drawn into reacting to various specific dramas the B-Player leader tries to churn up, just have some 1:1s with relevant folks, get an understanding of what’s going on, and act quickly to remove the leader and replace them with whoever is the best manager to get everyone focused on productive work toward clear goals, and how they should each be growing professionally as individuals. Don’t spend time on the drama, spend it on the work. This lets your actions do the talking.

Reinforce this in 1:1s that you take over from the B-Player leader. Validate the feelings and concerns that the team raises based on discontent fomented by the removed B-Player leader. Thank them for sharing, then bring it back to the work. “Yeah it’s a bummer that Kim, Michael, and Jessica were all talking about leaving. I’m talking to them and listening actively for sure. I think part of it is always just when we lose focus on the goals and how we want to grow. So back to that, how are you feeling about your team’s goals and what’s the kind of stuff you’re looking to accomplish yourself this year personally and professionally? Let me get to know what’s on your mind a little better since you’re reporting to me for now.”

You want to make some space to air grievances, but not really probe in and spend time there, which is because there’s just too much noise in this feedback until after the dust settles when the B-Player leader is gone. In a month or so, the dust starts to settle a bit and anytime between one to three months after the leader is gone, you can start doing rounds of 1:1s more actively probing in for issues and getting critical feedback that’s more focused on operational reality than synthetic drama.

I’ve assembled a list of interesting links about firing senior managers -- especially geared toward CEOs faced with firing their direct reports, but I think the same applies up and down the chain -- and I’ve summarized what I think are the key points below.

Key Points

• Executives need to grow their skills and solve problems through a support network and mentorship in their field. So if they can’t do it on their own, it’s not the CEOs job to help develop them. CEOs and cross-functional leaders can not master every craft, so they need leaders that can execute in their function. There’s a bit more space for coaching as you move down the leadership chain into specialized skills where senior managers can help grow their reports.

• Confirmation bias makes us want to hold on to leaders we’ve hired. We feel like firing a leader we’ve hired is an admission of failure. We are willing to go to great lengths to try to fix the situation, reconfigure it, and wiggle our way out of admitting failure. In a way hiring the wrong leader is a failure, but in a way it’s just normal -- depending on the study and probably the stage of the business, 20-50% of executive hires fail. So as CEOs, we should be a lot more open about making executive hiring mistakes and learning from them.

• It’s often the case that you might have a round A-Player leader and a square A-Player leader role. The CEO needed someone with really strong product marketing skills, and thought their new marketing exec’s skills would translate, but it turns out that the products and markets they are used to are too different, and the leader just isn’t effective and they know it. The leader is performing as a B-Player, and actually they are miserable doing it and will be relieved to talk about it with the CEO and find something new. The CEO can help them, sometimes even with a role pivot inside the company if the company is big enough, but often in another company. If the CEO and exec are aligned on why they missed a fit, then they have a clearer idea of where the exec does fit and the CEO can help.

• CEOs are sometimes happier focusing on achieving goals than on untangling drama. This is why a lot of vision and execution focused CEOs want to work with other execs who are strong people managers. If one of these people managers turns out to be a B-Player though, then impact is reversed -- they’ve spent time building alliances and setting up socially engineered drama rather than spending their time getting alignment and defusing drama. The CEO knows this and has approach avoidance about stepping in to untangle the mess, which will only distract focus from execution, but they know it has to be done. They let it stew and the situation only gets worse and distracts even more over time.

• Have conversations with relevant stakeholders such as the board and figure out the separation package before discussing with the executive you are firing. You want this conversation to be short and to the point, not leaving the door open to trial periods and separation package negotiation -- you’ve already spoken to the board and gotten everything approved. I agree with Ben Horowitz that all these discussions should be done as 1:1s, because you’re building gradual alignment on a very sensitive topic and want to hear everyone out. I also agree you generally want to inform the departing exec first, the CEOs reports and the departing execs reports next, and then the rest of the company. That said, there are complex edge cases here, such as operating conditions that require someone to take on the departing executive’s reports immediately, but the decision requires discussions with other executives and the board, and they must know that the departing leader is out before you can have the discussions. This chicken and egg problem is normal and you usually want to wait until after you transition out the departing exec, but in practice sometimes there are edge cases, so if your situation feels uncomfortably complex, find yourself a really senior advisor who has seen decades of battle to help you out.

Relevant Links

• https://hbr.org/2019/04/5-reasons-executives-wait-too-long-to-fire-their-direct-reports

• https://hbr.org/2010/08/how-to-hire-senior-executives.html

• https://corpgov.law.harvard.edu/2015/03/18/when-executives-fail-managing-performance-on-the-ceos-team/

• https://a16z.com/2011/08/24/preparing-to-fire-an-executive/

• https://a16z.com/2017/05/24/on-firing-why-when-how/

• https://a16z.com/2015/03/16/the-sad-truth-about-developing-executives-2/

• http://growth.eladgil.com/book/chapter-4-building-the-executive-team/firing-executives/

Symptoms of B-Players

I’m adding a special section on this because, in practice, this is really the most difficult part of the matter. The trickiest part of B-Player leaders is that they spend more time making it difficult to identify them than they do on trying to win, so I’m sharing some patterns to be on the alert for.

Optics over outcomes; unwillingness to take goals seriously

B-Player leaders downplay focus on measurable goals because they focus on status over performance, or as I like to call it, optics over outcomes. B-Players just want their teams to feel good and serve as chess pieces in their social engineering endeavors, and this is impossible if we’re looking at the scoreboard and focusing on the work we need to do to hit our goals.

You’ll normally see a certain peculiar disdain for goals from B-Player leaders right at the outset. You’ll run a goal setting exercise as a leadership team, and they’ll be skeptical, claiming high uncertainty makes it difficult and so on. While the rest of the leadership team comes up with even more aggressive and rigorously defined goals that you’d have thought of, the B-Player leader just has one slide with some high level numbers like sign up 10 new accounts. When pressed, they don’t have much thinking behind this number, or how it ties to the company’s overall objectives. They aren’t mindful of the business context -- if it’s a startup, what stage is it at, how much does it need to grow to raise the next round of funding or get to profitability. They don’t think about leading indicators that we obviously need to monitor to see if we’re on track to sign up as many accounts as we need. They are cynical about goal setting, feeling that they are somehow above it, and so they just don’t take it seriously enough to invest the amount of rigorous thought it requires to set direction for the chunk of the company that they are supposed to own.

The Roadmap to Nowhere

The hardest part about good strategy is the place where strategy meets tactics -- it's why so many companies that have totally reasonable high level strategies fail to execute them.

A good strategy and a good team doesn’t imply good execution. The place where strategy translates to tactics requires real mastery in order to ensure good strategy is carried by good execution.

B-Players create horrible roadmaps. It’s an even worse manifestation of all the same issues as the goal setting. A roadmap is only useful if you know where you’re going and intend to get there, neither of which are interesting to B-Players. Moreover, defining milestones and a cadence of accountability to check in on them makes it way harder to move the goalposts to suit whatever social engineering the B-Player needs to achieve at any given moment.

"This document was clearly written by the B team. Can someone get me the A team document?” -- Jeff Bezos

A roadmap with a sequence of milestones is only one step away from a cadence of accountability to check in on the milestones, and this is anathema to the B-player leader.  Without bothering to know what our goals should be, working backwards from there to define milestones, and building out a detailed roadmap around these milestones, we can conveniently avoid knowing if we’re executing well along the way. This creates a fertile environment to move the goalposts around dynamically to make sure everyone feels like they’re doing things right.

Like goal setting exercises, you will see telltale signs of B-Player roadmapping.

• A single slide straight out of the underpants gnomes school of roadmapping with a handful of dates leading to something nebulous. 

• A constantly changing roadmap, and the need to extend time to be able to complete the roadmap. They just can’t facilitate among their team and get a sane draft roadmap, the format of the artifact keeps changing, and there’s analysis paralysis on some topics among their team.

• A sloppy roadmap -- its complex with links all over the place to different internal systems, and nobody is comfortable following it.

• A massively over-engineered roadmap -- the roadmap has everything you could possibly imagine in it, and obviously can’t be completed during our lifetimes. It’s structure is a very complex spreadsheet with loads of color coding and columns for various attributes of the work.

The blow-up and blow-out; avoiding accountability and creating distractions by blaming leadership and surrounding teams

Blow-ups and blow-outs are the two most pathological responses from B-Player leaders because they are most damaging to the team and hence have the largest impact. Blow-ups work by blaming problems on more senior leaders, and blow-outs work by blaming peers, their own teams, or other neighboring teams. These responses tend to be carried out by narcissist B-Player leaders, and they are both forms of gaslighting, so if you haven’t studied narcissism and gaslighting, add them to your reading list. The essence of gaslighting is a crazy person doing crazy things while manipulating you into questioning whether you might be the crazy one.

B-Players are concerned with being exposed and held accountable for their results. They don’t like leaders who want them to set aggressive goals and hold themselves accountable. Their response to exercises that try to set goals, define roadmaps, or establish a cadence of accountability is to create maximum chaos by stirring up drama and blaming others.

Blow-up: blaming their leaders. The B-Player’s manager is the one driving accountability and therefore must be discredited to preserve the image of the B-Player. This type of melt down can do real damage. The B-Player will try to discredit their manager in the mind of their manager themselves, and in as many of their allies as they can. It’s not the B-Player leader’s failure to focus on goals and make progress, no, it’s their manager’s insistence on measurable progress and annoying failure to make everyone on their team happy. It’s critical that the leader who is overseeing the B-Player has strong self-confidence and an understanding of narcissism and gaslighting, otherwise they will be asking themselves “Am I crazy? Am I somehow the problem like he is saying? It does seem like they are pointing out some people who are frustrated.”

Blow-out: blaming everyone else around. B-players tend to manage up really well. They’ll often posture as BFFs with their manager, assuring them that they are in the right, and proceed to blame performance issues on everyone else. It’s their team, they need to make some layoffs. It’s a neighboring leader and their team -- those folks are causing distractions. It’s a set of people demanding change because something is broken but it doesn’t really need to be fixed. Whatever it is, it will conveniently be people that are shining the light of critical feedback and accountability in some way.

“Thousand Fingers Pointing” -- the deity of blockers and excuses

Imagine a deity with 1000 arms pointing all over the place. That’s the B-Player leader creating a thousandfold diversions to avoid accountability.

This playbook rolls out when it's too difficult politically or operationally to stir up drama and chaos by blaming others and inciting conflict, so the blow-up and blow-out playbooks won’t work. The next target is to point to as many other factors as possible, preferably conditions outside the company outside our control.

For example the issues become driven by market circumstances, sales cycles in the space, a shift in consumer trends, unforeseeable regulatory blockers, the timing of the holiday break, the team is burned out, the customer is mean, we’re under-resourced, we don’t have budget, we need some time to ramp up, etc. The true master B-Player leader also converts their allies into thousand-armed deities of blockers and excuses, and gets them pointing all over the place to add to the cloud of dust.

“I already know what I’m doing”

When you hire in “professional management” or “really senior people in the space” you will tend to find people that think they know what they are doing to such an extent that they actually can’t focus on the goals that matter, so it feels like they can’t get anything done.

They seem busy, but they are just busy congratulating themselves for knowing what they are doing while driving as fast as possible into a brick wall. They’ll burn all the time and money on ancillary stuff that’s not needed to achieve the goals at hand. 

The biggest tell here is that these leaders are rolling out their established playbooks from the past without regard to present conditions. They set up all sorts of infrastructure that they don’t need yet, and that isn’t dictated by any of the near term goals. They can be seen demanding budget to buy tools that they aren’t really even leveraging to any material extent, or going through the motions with some mechanical process that’s yielding meaningless results while claiming that “we just need to get this in place and then we’ll ramp it up.”

These leaders are pattern-matchers; always going on gut feel and reasoning based on analogy, never starting from goals or working backwards reasoning on how to get there from first principles.

Another tell is that these leaders are hardcore luddites; in response to suggestions or new ideas, they just scoff. They don’t need to try or learn anything new, they already know the playbook, and they just need you to give them the time, resources, and space to roll it out. There’s no growth mindset. This is why strong, curious fast-growing mid level folks will quickly be better than more senior folks with a complacent mindset, and you are better off to bet on growth trajectory than seniority.

The only people they want to fire are the good ones

B-Players don't assess who is stronger or weaker in their positions based on skill and impact, but on their strength of alliance and utility for social engineering.

The B-Player leaders performance meter is literally inverted to protect themselves; those who want a culture of aggressive goals and critical feedback are seen as problems, and those who like dynamic goal posts and constant socializing are favored. They want to keep the weak players and fire the strong ones.

They want to build up alliances to increase their staying power and ability to cause drama, so they keep all the weaker players around that will come into their fold, especially ones who are very social, and they get these folks to act as their little social engineering chess pieces. They love to get their weaker inner circle socially intermingling with the stronger players. When you start to see this behavior, it’s a sure sign of a B-Player manager getting the hooks in, and the longer you want to transition them out, the worse the fallout is going to be, and the higher the risk of losing A-players in the course of the transition.

B-Players can’t handle feedback and critique. Team members who point out issues within the B-Player leader’s organization are automatically seen as a threat, and they are the ones treated as weak performers, because they risk exposing the B-Players performance. This is why the B-Players will get aggressive about other high performing players that are sharp and vocal with their critical feedback and focus on goals.

Benign vs Pathological B-Players and the impact of narcissism 

The attributes of B-Player leaders often look a lot like attributes of narcissists -- being incapable of self-reflection and uninterested in personal growth, requiring loyalty without critique, building their sense of self through churning up chaos and drama in their social sphere, maintaining the center of attention through social engineering.

The benign B-Player is just lazy -- they set the stage but only in order to do the minimum they can to get by. They just don’t get much done, and their damage isn’t so bad; it’s more what’s undone than what’s done. They are focused on optics to the extent that they don’t need to be seen as making things worse, but not to the extent that they need to be seen as making things better. Rather than being the center of attention, they are happiest hiding out in the shadows of the status quo.

Pathological B-Players are pathological narcissists -- they set the stage and want to absorb as much energy from everyone as possible by playing the star of the show. They are very proactive in churning up drama. They don’t just react negatively to accountability, they proactively stir up chaos and drama as an end in itself. Pathological B-Players are incredibly toxic and I recommend that once you recognize one, you should have the 1:1s you need to have and act to transition them out within a week.

In summary

Regardless of how good you are at recruiting and interviewing, somewhere between 20-50% of your leadership hires will fail. The process for identifying B-Players and transitioning them out is just as important as identifying A-Players and recruiting them in. Spend time defining a clear check-in process every month after a new leader starts and every quarter thereafter so that you act early when you find B-Players. Don’t let yourself kick the can down the road.

Use a general framework to distinguish A-Players from B-Players based on three important attributes; 1) degree of focus on winning, 2) degree of focus on personal growth, 3) attitude towards accountability. If you’re worried you’ve made a hiring mistake and have a B-Player leader onboard, review the symptoms listed above and follow the guidelines for transitioning them out of the team as soon as possible if they are benign and immediately if they are pathological. Always remember; the #1 mistake A-Player leaders make is failing to identify and transition out B-Players quickly enough.

Paradoxically, trying to win leads also to making people happy, because people are happy when they win. Trying to make people happy in ways other than helping them win ends up making them unhappy, because they are less focused on winning, which is the thing that makes them happy.

In Cam Newson’s awesome “So good they can’t ignore you”, he expresses the general idea that people that are successful are passionate about what they do because they are successful at it, rather than being successful at what they do because they are passionate about it. In the same way, I posit that when you get teams focused on winning, they find passion in what they do, but if you try and get teams focused on what they are passionate about, then you wind up lurching all over the place and getting a lot of pet projects and shiny objects rather than focused harmonious team making magic together.

A lot of folks aren’t sure what makes them happy, and self-reporting is hard. So when you’re polling bottom up to try and find a path to happiness, you’re not necessarily even fishing in the right pond.

Professional hierarchy of needs

My friend Cameron Marlow first introduced me to the idea that there’s a professional hierarchy of needs that looks something like Maslow’s hierarchy of needs. I’m naming the professional hierarchy of needs after him below, since he gave me the idea, and since Marlow sounds a lot like Maslow.

Maslow’s Hierarchy of needs

Marlow’s Professional Hierarchy of Needs 

Most decent managers at least somewhat realize that, if you want to have a good team, then you need to pay good comp, provide a basic sense that the company, product, and team will continue to exist, and hire high capability individuals. However, many managers focus too little on winning and self-actualization, and too much on ancillary topics that generate a short term buzz.

Each level has some important parts to get right;

1. Comp: Comp must be calibrated to be competitive to the market -- you can’t say you hire the best people when you’re not paying the best. Comp also needs to be calibrated to stage and role; earlier stage folks should expect more equity and less cash, and variable como vs equity tradeoffs are important for sales.

2. Stability and Resources: People need to have an honest sense of stability in their company, product and team. If there is too much existential risk, too much pivoting around and changing direction, or too much churn on the team, it's just hard to focus and get things done. They also have to have the proper resources available to meet their goals or it’s demoralizing. Everyone likes to be pushed to do things they may not have thought they could do, but nobody likes to know they’re setup to fail in an impossible game. For example we can work extra hard but we can’t always figure out a way to do ten times the volume of work for a team out size. We can be extra creative but we can’t always generate tons of new customers without much budget for marketing and sales.

3. Awesome Team: People need to have an emotional sense of community among their team, and this comes when the personal and professional aspects of the team are all healthy. We’re all capable, and any performance issues are being dealt with, so there’s no tension where we see some weaker members of the team that we might like as people but that we know are holding us back. We’re all excited to learn from each other because everyone is amazing and bringing something slightly different to the table. We don’t have toxic narcissists and assholes around causing chaos and making people feel bad. People work hard but don’t burn themselves out too badly -- we have lives outside work.

4. Winning: We all understand the company’s goals, the team’s goals, and our individual goals, and how we win at all levels. It’s important to never have a culture of esteem being defined in ways other than winning -- if people are trained to derive internal status and recognition from things other than winning, then you’re just providing incentive to do things that aren’t focused on your goals. There are almost always optically pleasing things to do that are easier with shorter term payout than the often unglamorous things required in doing the primary work required to win.

5. Personal Growth: Hiring hungry people with an ownership mindset means that everyone wants to grow and take on more responsibility. I take comp, stability, and team as givens -- any good companies and managers need to do this well. This means that the most important way that great companies and managers differentiate are #1 winning, and #2 personal growth. So personal growth is the next highest priority for managers behind winning, and should therefore be the second most discussed topic in 1:1s. Managers are constantly helping their team find the work that jointly optimizes for winning and growing into new challenges.

As we’ll talk about in a bit, most of the magic of great management lies in the interplay between winning and personal growth.

The illusion of feel good management

There are a lot of mediocre managers who simply focus on the short term things that make teams feel a sense of enjoyment, thinking it will make teams happy. Often these activities fall under the banner of ‘culture,’ but they also show up in weak voting-based operating models -- let’s effectively just let the team vote the roadmap so everyone’s doing the work they personally feel like doing. Over-investing in designing the office, or perks, or taking surveys from the team, or having the team vote on backlogs -- all these things are aimed at trying to make the team happy in the immediate term, but they ring hollow in the longer term as the team seeks real self-actualization through winning and growing.

Feel good management may create a short term sense of enjoyment, but it pretty quickly wears off in the team isn’t winning and growing. First, the best and smartest people on the team can see that we aren’t really defining or hitting important goals, or they can see no space for themselves to grow into larger ownership and push themselves to be better. Then these folks leave. Gradually, others follow.

Feel good management without winning and personal growth opportunities for the team always results in attrition followed by failure. So if you aren’t winning and growing already, focus instead on that long before you focus on various culture and bottom-up initiatives. Start by building a culture that’s focused on winning and on pushing to get better in important ways for winning faster and more with even better skills. These two things are primary, and once established, there are certainly other important considerations that optimize for the team’s well being. That said, avoid managers who invest in culture and bottom-up feel good initiatives before establishing a culture of winning and growing.

Esteem; winning and goal trees 

Teams grow their esteem by hitting their team and company goals. Individuals grow their esteem by hitting their personal and team goals.

Goal trees are just a hierarchical mapping of company to team to individual goals. Trees let individuals clearly see their impact on the company overall, and strengthen the sense of esteem through strengthening their feeling of ownership in team and company level wins. They also empower individuals to think more creatively about how to impact the company goals -- the CEO may facilitate among the board and leadership team to define company goals top down, but a good management culture then empowers team leads to facilitate among teams to define team and individual goals in whatever way they see fit.

A great company culture puts strong weight on ‘nose for value’ from its managers and team members. Let’s say you have a junior marketing person who doesn’t really know what work to do in order to have impact, and that person is frustrated because they don’t have enough direction and they can’t sense their impact. If a manager takes over this report and starts by trying to make them feel good by allowing them to define their own work bottom up, they’re failing. For a while, this team member will appear to feel good and produce a flurry of work. However, none of the work will have impact, and gradually, the team sees it, the team member sees it, and eventually others around the manager will see it. Even when the person isn’t delivering any useful impact, this person will probably eventually leave, because they’ll see themselves as great and see the organization as the problem -- and they’re right! The problem is that feel good managers don’t understand the company’s goals, their team’s goals, and how to help the individual set their goals so that they’ll have real impact. Additionally, with no realistic impactful goals that would have shown the junior marketing person that they have a long way to go in growing their skills, the team member probably hit some of their ill informed self-defined goals, were consistently praised and validated by their manager, and probably lost out on the opportunity to calibrate on what level they’re really performing at. Another company that seems more successful reaches out validating their sense of accomplishment, and they move on to another job -- when meanwhile it was the case that the team member either needed to increase their impact dramatically or be managed out. This is the sequence that plays out commonly in companies without a focus on managers and team members having a strong nose for value.

Managing up to winning

If you’re a manager that sees that you don’t have a goal tree from the company to your team, or a team member that sees you don’t have goals for your team, then this becomes the #1 thing to raise with your manager in your next 1:1. I’ve never seen an organization that execute well without understanding its goals, so job #1 for everyone is to understand your goals.

It’s common that middle managers or line managers want to set goals for their teams, and their team wants goals, but the goals from above are unclear. Either the CEO or someone in upper management has failed to define clear goals, so nobody else can either. In this case, the way to show maximum ownership and initiative is to just define everything that’s missing and necessary to define your own goals. If the company goals aren’t clear, then state what you think they should be. If the goals for your region, group, or whatever entities are above you are unclear, then define those. Then define your team's goals.

As an example, let’s say you are in a larger organization whose product is lagging behind some of the competition in the market, and not selling as well. You’ve been a strong sales manager, but now the bigger issue in the company is that we’re not just losing new opportunities to the competition, we’re also losing some of our biggest existing customers to the competition. So senior management has asked you to take over relationship management and focus on customer retention while the product is brought up to date. The trouble is that senior management hasn’t defined clear goals for existing relationships, and you think that your team shouldn’t just be looking to retain them on the product that’s being updated, but also to try and cross sell into other relevant products your team knows about.

You can just define what you think is a reasonably aggressive set of goals, such as not losing any of the top 50% of your accounts, and growing revenue by 5% through cross sales, and then sit down with your team to discuss and get alignment. You don’t want to give your team no direction and have them defining goals purely bottom up, but you also don’t want to come with already fully defined goals for the team without creating space for their input -- this is the art of giving enough direction while creating room for team input, which creates stronger sense of buy in and ownership from the team, while still giving the manager space to push the team for the best performance they can deliver. Once you have the team’s goals ironed out, then you can show up to your next 1:1 with your manager and share your team’s goals and leading indicators to track retention and expansion, and you can share that you’d like to see such goals defined at a higher level as well, and suggest what those could be baked on your team’s view.

Self-actualization; Professional personal growth

Great managers are always jointly optimizing for winning as a team and personal growth among their team members. This means they always think about what the team’s goals are, what their team member’s goals are, and always coming up with clever ways to help the team get to the right work that maximizes their impact on the team goals and their progress on their personal growth goals.

A common example of this is to recognize and grow new managers and leaders. First, managers and leaders aren’t the same. Managers own team execution results and people management reports, leads tend to me more oriented in functional skill areas. Current managers need to be able to spot team members taking on more ownership proactively and naturally growing their authority within the team. Then they need to be able to help that person identify where they find the most joy and the highest impact on the team -- is it more the type of work a manager would do or a skill-focused leader would do. Do they want to take on a regional manager role on a sales team, or an engineering manager role, or would they rather be the #1 grossing rep in the company owning specific deals, or be a tech lead for the core services that the company most depends on? Both sides of the coin are just as important to the success of the business, it's just a question of whether one enjoys and is better at the execution or managing the execution.

I’m a fan of building a culture of the most rapid possible personal growth. That means the team is always hunting for more ownership and greater impact. As a manager that facilitates rapid personal growth for the team is therefore needing to enlarge the ownership and impact pie at all times, otherwise they can’t create enough space for the team to grow into. This is where it’s important to be creative -- find ways to nudge the team to think about topics where they are strongest and how to find great amounts of important work to do there that directly impacts the team’s goals. An example would be someone in marketing identifying the need for, getting buy in for, and then defining a new tracking system alongside a few of their campaigns. This marketing person took the initiative to see something that would make the team better at meeting their goals, and fixed it for everyone while doing their own work. Another example would be an engineer that delivers a new feature while massively cutting down some gnarly legacy code. When the team complains about things in 1:1s, these are classic opportunities for the manager to encourage them to fix the things they're complaining about.

Winning and growth in regular 1:1s

Normally people’s ideas for their own growth are expressed in how their personal goals map to the team goals, and maybe a couple other extra goals that grow their skills or well being, but not necessarily aimed at short term team goals.

I usually run 1:1s by first asking what’s on top of my team member’s mind, and if I have something top of mind, I’ll let them know that I want to cover that right after whatever is most pressing for them, and before we get into anything longer term. For example I’ll share any big strategic news such as fundraising, major sales or new customers, big new product changes, or team changes.

Transparency creates trust in an organization. Many companies think that the team needs to be protected from certain top secret strategic news, and that it will defocus them from their work. I believe the opposite -- people are smart, they know what’s going on at a high level, and can sense if something is going really wrong or there are major changes coming. Misleading them or withholding information just makes them cynical with management -- if management doesn’t think team members should know about critical strategic matters, that’s communicating that they don’t think team members would do anything useful with that information, and that it could even be net harmful. If your company has hired high initiative people with a strong ownership mentality, then you are just disempowering them by restricting their access to critical information that might lead them to make different day to day decisions about how they have the most impact on the company’s success. If management trusts everyone wants to help the company win, then they need to feed all possible information to the team to help them make the best decisions. A great example of this is M&A discussions. It’s often the case that management is worried about sharing this with the team, because maybe some people will quit, or be scared about the uncertainty, or maybe engineering won’t be shipping new features as fast. If management explains to a great engineering team why M&A might make sense at some point, and that the company is always open to hear about strategic opportunities that align in certain ways, then engineering might surprise management with leaning in rather than checking out. There will be technical due diligence during any M&A process anyhow, and an an informed and great engineering team will actually get ahead of this -- they might hustle to ensure they can claim and present certain things about the system that they know represents the core value to would-be acquirers, giving management more firepower to push for higher valuation, better vesting terms for the engineers that come over in the deal, etc.

I like to create an open dialogue where mutual vulnerability is OK, so I’ll be honest if I’m doing really poorly or have exciting new news, and I’ll ask if I know they have anything major going on in their lives. Sometimes they will have major complaints or updates, and this is often a great opportunity for me to identify and steer them to growth and winning opportunities. Let’s say for example an engineer complains about something really messed up on the backend, and they are whining that everybody knows about it but nobody does anything about it. Then of course I’m going to encourage them to own it, and help them outline their plan right there and then during the 1:1, down to the detail of how they are going to kick off this discussion with other teammates to coordinate the big changes. Only at the end of the 1:1, if there’s time left, would I fallback to checking in on their more formal goals that map up to team goals. In this way, most of good management is this back-and-forth interplay between the immediate term things on the team and managers mind’s, the active work and issues coming up, and then ensuring that we’re doing the most important work each week.

A lot of the magic of good management happens in these 1:1s and more people-meets-execution interactions, and less in rolling out process and sitting in project management meetings. The reality on the ground is always some mix of project management combined with reacting to day to day issues that bubble up, all modulated by the motivation and focus of each team member. One key aspect is balancing the project plan against things that bubble up and may or may not require us to react, and this can often involve tricky on the fly prioritization decisions and tactical adjustments. Another key aspect is balancing the work to be done with the motivation to do it; the fastest velocity comes not from death march project management, but from individual team members finding the most challenging work for themselves to do, in the nearest direction of how they want to grow their skills, and in the nearest direction that will have the greatest impact on the team’s goals.

Sometimes people want to develop skills outside work, which would be education connected to work, picking up a new hobby, getting in shape, dealing with some life drama they want to put behind them etc. It’s important the manager is attuned to this and encouraging space for this too. If someone is getting burned out because they have no time with family, then help them learn to setup effective calendar blocks and shut off work for family time from dinner till they put the kids in bed.

Good managers are also making sure their team’s are healthy and happy -- are people needing some time off, or maybe a clearer picture of work to do. Do they feel heard, and do they have the resources available to them to take the initiative to solve the problems they see? Is their mental health in a good space, or is there any support and encouragement that their manager can give.

Winning is not just about people focused on the highest impact work, but also maintaining a healthy team that can output with sustainable force. Personal growth is not just about doing the work that pushes your boundaries, but also growing personally and professionally more broadly. Great managers see people holistically, not as worker bees pulling the next task off the assembly line.

The new version of up or out

Many high performing organizations like McKinsey, Facebook, and the US military are known for their up or out policies. Team members have particular time frames to be promoted to the next level, or they are expected to transition out. This is especially common at the lower levels in the ladder, where there are often concrete 12-24 month expectations to move between levels.

I don’t believe in stack ranking, or referring to the top X% or bottom Y%. If you do a great job on hiring, and you are proactively managing to a simple leveling system, then you’ll naturally manage up top performers and manage out underperformers. You don’t really need to go into the further detail of stratifying everyone into quartiles of performance or anything -- I generally think its a waste of time. If you have a basic leveling and comp system, then it's simple; 1) someone is performing above their level, and they need a promotion and raise, 2) someone is performing within their level but getting better and should get a raise within the level’s comp bands, 3) someone is performing at their level but staying about the same, and their manager needs to talk about how to get them growing, 4) someone is underperforming at their level and the manager needs to think about a PIP or transition plan. If this is done well, then there’s no need to engage in more complex stratification during review cycles.

The #1 responsibility of managers is to win, and the #2 responsibility is to grow their team. Managers have to proactively advance people through levels, otherwise the best people start looking elsewhere and feel they need to switch companies in order to get promotions as quickly as their skills merit.  Great managers aren’t just asking their teams how they want to grow as individuals, they are proactively identifying high impact people and emerging leaders, and coaching them towards the work that makes their impact even greater and their growth even faster. They are also masters of building and composing their teams -- this means being great hiring managers. They spend a great deal of time with recruiting, and are always thinking about the right composition for their team. They know if they have too many senior people on the team and not enough room for their growth, and they know if they have too many junior people on the team and not enough leadership to give them direction.

The ultimate test of managing for personal growth is what happens when a team member outgrows their team. If a company and team isn’t growing its business, product and system complexity, and team fast enough to challenge all the fast growing leaders it has nurtured, a great manager is not afraid to graduate teammates into alumni status. There are also only so many C-level jobs and founders, so if someone needs to lead at that level and there’s not space in the team, then proactively helping them find that elsewhere is way better than losing key leaders by surprise. A great management culture creates super fast growth in skills and encourages initiative and puts pressure on the business to grow fast enough to keep up with its people’s desire for more ownership. For example maybe the engineering org is incredibly well managed and always pushing teammates to take on more responsibilities, but the product/market fit isn’t as good and the sales and marketing functions aren’t as strong, so that engineers are growing faster than the sales, marketing, or product team members. This reduces the workload and opportunity to scale engineering to take on new challenges. It might make sense for some engineers to seek opportunities elsewhere. A great manager isn’t afraid to help some folks find jobs elsewhere, and in fact they will help make introductions, serve as a reference, and coach them through the process. This controls inevitable transitions, builds trust, creates very positive vibes, allows the manager to help guide the balance of senior-mid-junior, and allows everyone to build stronger networks. Besides, a great manager is a master recruiter, and always has a strong pipeline of existing and newly sourced contacts to bring fresh energy into the team.

Until startups are profitable while growing, they are burning down cash against a

finite runway that’s usually less than two years away. As a result, it's important to have a realistic plan at all times for what it will take to i) raise additional capital, ii) become profitable, or iii) fall back to m&a or wind down.

Keepin’ the dream alive

Founders and early employees are usually excited about some big vision and have personal reasons for wanting it to come to fruition. This creates a strong confirmation bias, and often makes us wholly unable to look in the mirror and reflect on where the startup is actually at relative to its goals and relative to how we’re seen by the outside world. Many times this will result in not setting clear and measurable goals at all, not planning milestones against our goals, or abandoning any form of regular cadence of evaluation. When startups get into this state, I call it “keepin’ the dream alive,” in honor of the fantasy world we live in when we ignore the realistic issues of market, product, team and certainty of impending cash out.

Defining the target state: what it takes to get to profitability or complete successful fundraising

For a startup to be a going concern, it needs to be profitable or financeable. It’s unwise to rely upon inside investors to bridge you through difficult times. Instead, start by polling target investors on what kind of traction they’d like to see for your kind of business. The smartest investors should be able to give you a rough sense such as “I’d usually like to see at least ten mid sized SaaS logos for a Series A, but YMMV based on the specifics.”

Let’s say you are a seed stage SaaS startup that asks around and finds that the consensus for a Series A is about ten logos, you have twelve months of cash left at current burn, only five logos paying real money, and you aren’t growing fast enough to have ten within the next six months. In general, you want to start raising money when you have six to twelve months of cash left. If you’re not going to get to the point that outside investors will likely invest, you need to be talking among leadership and then the board (or lead investors) whether you can change to grow fast enough, whether it's worth trying to pitch some new outside investors anyway, whether the inside investors would want to invest to extend runway if it seems like a growth inflection is near, or last whether it makes sense to engage potential acquirers or wind down the company.

If you want to become profitable, you just need to see how much it costs to sell and build as much as you need to and maintain operating costs, and ensure that you’re able to make at least this amount, ideally with some 20% buffer or more so that you’re not truly living month to month or quarter to quarter -- which can be incredibly stressful on a startup and lead to attrition issues that make it impossible to break out of the catch 22 death spiral of ‘need cash to attract and retain talent, but need talent to generate cash.’

So whether you’re shooting for raising a round or becoming profitable, you need clear target metrics; either consensus VC metrics for a fundraise at your next stage, or clear operating metrics and revenue targets that will allow you to be profitable enough that you aren’t living month to month or quarter to quarter and shedding top talent due to the uncertainty.

The scientific startup operating mindset and how to avoid keepin’ the dream alive

Once you have a target state in mind, work backwards from there to define a series of milestones. You need to break the bigger goal down into steps that will let you evaluate and pivot -- so they need to be quarterly at the longest, and should probably be monthly. If you have a growth rate to increase, or a burn rate to decrease, you need to make it operationally realistic -- how fast can the rate of change really change, and does it happen in discrete chunks or continuously?

I like the concept of lead vs lag measures. Let’s say you have a typical growth target based on what VCs are looking for in your next round, like growing your # of logos paying you more than $X a month, or increasing your number of retained signups from inbound marketing efforts. This target metric is slower moving, and should probably be reviewed as a leadership team monthly and with the board or lead investors during monthly update emails/chats, and formal meetings quarterly.

The more important operating measures to the CEO and leadership are the fast moving lead measures that the team believes will drive outcomes in this lag measure. For example it might be that we know we can close about 10% of fully qualified leads who use the free demo version of the product according to some qualification criteria, then if we need 10 new logos, we know we will need to get 100 fully qualified leads to use the free demo. If we know about 5% of the good leads we hit the site with will convert into qualifieds, then we need to drive about 2000 good leads (100/.05) to the site. So if there’s a number to track and discuss as a leadership team each week, it’s probably how many leads we’re driving -- unless we start to see that our estimates of funnel conversion are off, or we think that we can drive more signups by increasing conversion at key points in the funnel, which is often the case. Most likely we have some combination of driving new leads as well as optimizing our sales and onboarding process to increase conversion and retention at each step.

If our lead measure isn’t moving our lag measure the way we think, then in this example something is wrong about our conversion estimates. If we move the lead measure how we want but we don’t move the lag measure how we want, then it always means that something is wrong in our understanding of how inputs drive outcomes, and we need to talk among leadership and do some testing and measuring so that we understand better how to do the right work to drive the results we want. It’s not simply about working harder when the work is getting the right immediate results but not the right outcomes -- for example you might have loads of signups or sales calls but you’re not closing any paying customers on a timeline that works for the goals.

You can always create lead measures that are your best guess at what will precede the lag measures you want. For example if you are working on huge enterprise clients and have a smaller number of target clients, you can still guess at what kind of early stage time commitment activities you’d need to see with a client -- such as calls or workshops -- that would indicate progress. Even if you’re working on something binary like a technological breakthrough or drug development, you still have phase-based milestones for your overall project and leading indicators on your progress within each phase.

“Good board meetings are those where the numbers are good”

-- grizzled old CEOs

Inside a company, we see all kinds of things, and many of them look good, especially considering our confirmation bias. To the outside world, and especially to investors, the company is reduced to an elevator pitch of its core product and its metrics. We need to review these metrics periodically and soberly, and if we’re focused on growth, then we need to use any insights from reviewing lead indicators as opportunities to pivot and run experiments that aim to grow our metrics faster.

Always remember that uncertainty is super high and what you are trying to do is nearly impossible; these are defining aspects of startups. Therefore, don’t be afraid to acknowledge that there are some massive issues -- there pretty much always are! This is why it’s so important to remind the team “let’s not get caught keepin’ the dream alive, let’s be rigorous and ask if we’re making the progress we need to be and what we could be doing better.”

When the numbers don’t look how you’d like, there are often significant market, product, or team issues, not just small tweaks. Either the i) market’s not there in terms of size or timing, ii) the product isn’t what the market actually wants and needs, or iii) the team isn’t able to execute on product and go to market -- they can’t build and sell what people want.

Have hard conversations as a leadership team and with your board. Don’t be afraid to ask the existential questions.  When we review fast moving lead measures with leadership and see that the numbers aren’t changing the way we need, then we have to ask which things aren’t working and be prepared to make major change.

This might mean totally changing the market you’re focused on -- which may mean pivoting the product and team with some small cuts and additions to both, or it may mean sunsetting the product and having a massive layoff, then rebuilding the team and product from scratch.

This might mean changing the product by doing a lot of rapid customer interaction like interviewing, shadowing, metrics forensics, and synthesizing out some key ideas for reworking the product until to align to the wants and needs of our customers.

Lastly, the team being unable to execute is among the most common reasons that you’re not moving the numbers the way you need to be. The CEO needs to be willing to start with looking in the mirror -- are they the problem and would someone else be a better CEO? If they’re confident enough that they're as good as anybody for now, then what’s the next place where the results don’t seem good and the team doesn’t seem strong -- is it sales, product, maybe engineering? This debugging process is pretty simple if you’re executing well with decent metrics and reporting. Is engineering shipping slowly and having lots of production bugs? Tech debt and weak technical leadership is probably an issue. Is everyone grumpy, opinionated about direction, and not aligned on what you’re shipping? Product is probably weak. Are we shipping regularly but not closing customers, and we can’t get enough feedback because we’re not getting enough customers to try the product? Market and sales are probably too weak to drive leads and deliver customers.

Of course there’s nuance here too -- especially between product and sales, but these can often be easily resolved. If we’re hitting some basic leadgen and sales pipeline KPIs, and getting the product in front of customers, but we’re not closing customers, then marketing and sales are probably working and the product is off. If we’re shipping regularly and evolving the product in a way that satisfies us internally, but still getting nowhere with customers, then the market opportunity probably isn’t there, so we may need a big pivot rather than tweaks to the team.

“It aint’ gonna smell any better in six months.”

-- grizzled old CEOs

The CEO needs to first ask themselves if they need to make a leadership change. Start with hypotheses about what’s happening, and go ask the relevant leaders what they think. Do they agree with the hypothesis and what do they think is wrong? Their response is probably a good signal to the CEO as to whether they seem on top of it and the CEO should trust and let them try to address, or if the leader is wandering the wilderness and pointing the finger. In the latter case, the CEO may want to get an outside advisor to take a second look and help swap the leader out with someone who might be more capable. Remember, there isn’t much time for these team changes, and it’s so common you’ll need to do it at least once or twice in each stage. If you wait 6 months too late, you might kill the company. As the CEO, if you’ve got the wrong leaders in place, then you own it and you need to act rather than avoid conflict.

The harsh reality of the stage gates

Startups are beasts of momentum -- highly sensitive to initial conditions and success begets success. Some, like Peter Thiel, don’t think startups are even fixable once they get funky early on. There are some counterexamples like Slack’s pivot from Tiny Spek, but these are super duper unlikely and random -- not something to count on or plan for as a serious option.

VCs largely want to see really great founding teams of world class people with strong founder-market fit and sane cap tables from inception. It doesn’t always have to be an equal equity split among co-founders, but the distribution should be more even than not and every needs >10%. Solo founders are less ideal, just because you can’t show the same breadth and depth of skill for attacking the product and market. Still, it’s OK to be a solo founder but one must come to the table humbly and with an expectation that they are going to be quickly building a leadership team and reserving maybe up to 50% of the company for them. What VCs don’t want to see is that there’s no well rounded founding leadership team and no clear plan to allocate the equity that’s needed to attract early stage leaders. Such a company is most likely doomed to fail, and even if it gets lucky is doomed for massive dilution as the leadership team needs to be built. When you need the people to get the traction rather than having the traction to attract the people, then you need to attract them with upside they can’t get anywhere else, and that’s only possible with founder level equity. If you’re going to treat this as executive search, then you’re going to have adverse selection bias -- nobody would take the same equity from you with a way lower salary then they can get from a later stage company with a way higher salary, unless they aren’t good enough to get those jobs.

So even coming out of the founding phase into the pre-seed and seed stage, a startup is already under high expectations and being evaluated against historical founding team and cap table success patterns.

As you hit the pre-seed, seed, and Series A stages, you first have to wade through the ebb and flow of VC cycles. These stages are pretty nonsense and keep changing as the startup market goes through boom-bust sequences. There are really just two discrete steps that matter here -- either you’re selling the dream or you’re selling the traction. If you’re selling the dream, then you're pre-seed, seed, or whatever it becomes fashionable to call it before you have any traction. This includes if you have a tiny bit of traction that sorta shows directionally that you might be right, but not much else. Pre-seed and Seed investors are looking more for awesome founders with a great vision and something that would make for a strong one page investment brief with beefy sections for market, timing, product, distribution, or whatever their key criteria area.

If you’re raising a Series A, this is the point where you’re really doing it on traction. You might have some rapid initial growth that peters out, and that’s the risk VCs take when writing Series A checks -- but you should be growing rapidly and look like you have some hope of continuing to do so, otherwise the Series A VCs aren’t doing their jobs.

Series A investors are looking more for some key metrics they track based on the kinds of businesses they focus on. These investors should be a broad set of deal flow and tracking the top performing startups in their areas of focus such that they are well calibrated to the kind of traction they’re looking for in order to determine that an opportunity is extraordinary and they should invest immediately. If the VCs aren’t doing this they just aren’t very good and aren’t a valid use of founder time for polling to get market consensus on desired traction for their startup. There are a lot of social proof VCs out there who just wait around backchanneling to see what others are going to do. Founders are best to avoid wasting time with second rate investors who can’t give a read of their respective markets -- after all, if they can’t even do that, then what can they do?

As you get into Series B onwards, the VCs look more and more like growth investors and ultimately public market investors, and these stages are progressively dominated by quants. The spreadsheet jockeys descend and your company becomes an exercise in discounting future cash flows more so than evaluating the founders and their vision. The good news is that these folks can increasingly provide assessments of what kinds of metrics they are looking for in companies like yours at their respective stages.

Time between stages matters -- take too long and it reduces odds you can make it to the next. This is simply because the best startups grow really fast so investors are always seeing that some of their portfolio and new deal flow are growing way faster than others. Those growing the fastest obviously attract VC capital and attention. So if you are taking longer to grow into the same traction when compared to a peer startup, then you’ve already shown that you’re growth rate is lower and that even with the additional time it took to grow, you weren’t able to somehow improve your growth rate -- so it tells them two bad things about your growth. Startups that operate really well also just continue to do so, and therefore if we assume we’re always raising and planning 24 months ahead, then we’re going to be always hitting our goals and raising again. If anything changes, it’ll be that we’re raising earlier on higher valuation than planned as we exceed our goals. So those that are taking longer than 24 months between stages and stretching things out to try and show more traction raise red flags for VCs that you are growing slowly, unable to improve your growth rate, and also probably executing less well.

If you get too far off cadence between stages, it might be very hard to raise, and even inside investors may not want to continue funding your company. If you are worried that you might get into this state sometime in the next 12 months, then you may want to consider cutting burn and going for profitability, which can be a way of hitting the reset button. You can stabilize and explore whether its possible to rapidly increase growth and get back on track, or if you should just keep growing on profits or sell because growth-hungry VC funding no longer makes sense.

M&A and wind down as fallback strategies

Like raising capital or attaining profitability, you need to start M&A discussions 6-12 months before cash out. Failing to realize this is a common oversight, and you see a lot of startups attempting chaotic fire sales while playing payroll chicken with impending cash out. There’s no shame in discussing M&A alongside fundraising and monthly burn and profitability. More startups will be acquired than go public and be long term independent, so it’s a likely outcome anyhow and not one to be embarrassed or awkward about. Oftentimes, prospective buyers are tangential in the industry -- even customers or partners -- so some care is needed in running M&A interactions alongside other commercial interactions. Doing so is common though, and provides great signal for the M&A and fundraising as long as one plays both sides correctly and prospects know that you have strategic traction with other acquirers and investors. There are a multitude of tricky configurations, and its too hard to go into here -- seek advisors with deep experience to help if you find yourself at a crux point. If you wait until the 11th hour, you will be out of cash, less attractive to an acquirer, shedding top talent, and any VC or acquirer will have tremendous leverage they will use to hammer you on terms.

Last and saddest for all involved is when it seems fundraising and M&A are both failing, cash out is approaching, and it seems the company may need to wind down. If the team is holding strong, then founders should be exploring all possible options to keep the team together working on something meaningful for them. Founders are responsible to shareholders, and if its clear there’s not going to be an investor outcome, then we must fallback to optimizing purely for the team. If we can’t find a strategic option to keep the team together, then plan a bit ahead to ensure we can meet payroll and help with some career coaching to provide a springboard for job searches. Again, seek a seasoned startup professional with experience winding down startups.

Set milestones pensively and stay accountable to realities

Firstly and most importantly, you need to start with a realistic assessment of what it’s going to take to raise additional capital or get profitable, and then work backwards from that leaving 6-12 months to get your numbers to the target state for the final raise or profitability push.

Next you need to treat these slow moving milestones as market reality inputs into your planning. Then use your experience, metrics, and discussions with other startups in your market to work backwards and define fast moving leading indicators that you can measure and discuss monthly with leadership and drive decisions about pivots.

If you don’t create a culture of #realtalk, then all this will be moot. It’s incredibly common to see smart teams keepin’ the dream alive because they just won’t look in the mirror and ask the hard questions about what the data is telling them about themselves -- is the market even there, is the product really what people want and need and what tells us that, and can the team really deliver on this opportunity or do we have wrong or missing team members?

It’s important to be rational about parallel tracking strategic options between profitability, fundraising, and M&A -- we’d all like to build a long term independent business worth billions of dollars, but that’s not always possible. If we can’t grow fast enough to raise cash or find a way to be profitable, we’ll have a hard time finding enough time for M&A fire sales after a failed fundraising or product death march leaves us near cash out with a burned out team.

Dig deep and have the courage to make the hard decisions

Don’t get caught keepin’ the dream alive, feeling depressed as you shut your company down, looking backwards wondering what could have been if you’d only taken more aggressive action when it was clear things weren’t working. Be optimistic about your vision, but scientific about your execution. Approach milestoning pensively, not with rosy optimism. Work backwards from market realities needed to make it to the next stage of the business, and track fast moving indicators that tell you if you’re likely to get there. Set a steady cadence of reflection and accountability, and if you aren’t moving the leading indicators the way you need to be, then dig deep and have the courage to make the hard decisions about pivoting markets, products, or teams.

Good luck and Godspeed!