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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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Trust Can Scale

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Following is a guest post from Chris Moody. Chris is president and COO of Gnip, one of the silent killers in our portfolio. Once the main stream tech press starts noticing Gnip, they will be blown away at how big they got in such a short period of time by just executing. Chris is a huge part of this – he joined Gnip when they were 10 people and has been instrumental in working with Jud Valeski, Gnip’s founder and CEO, to build a mind blowing team, business, and market leadership position.

Following is a great email Chris sent me Friday night in advance of the Foundry Group “Scaling Your Company Conference”  which we are having this week for CEOs of companies we are investors in that are on the path from 50 to 500 people.

Startups that experience success are typically built upon a strong foundation of trust among the early founders/employees. This trust has been solidified through long days/nights in small offices working on hard problems together.  The amazing thing is that the founders don’t always realize that their company is even operating under an umbrella of trust or that trust is one of their core values.  Instead, they just know that it feels easy to make decisions and to get shit done.

When companies try to scale, one of the biggest mistakes they make is trying to replace trust with process.  This is rarely a conscious decision, it just feels necessary to add new rules in order to grow.  After all, there are a lot of new people coming into the company and it isn’t clear who of the new people can be trusted yet.

A startup obviously needs to add process in order to scale, but if you replace trust with process, you’ll rip the heart right out of your company.   When adding processes, ask yourself the following questions:

  • Does this new process help us go faster?
  • Does this new process help us be more efficient?

If the answer to these questions is “yes” you are off to a great start.

Now ask yourself “Are we adding this process because we don’t trust people to make decisions?”  If the answer to this question even has a hint of “maybe” you need to stop and really consider the cost of that process.

Replacing trust with process is like a cancer that will spread quickly and silently throughout the company.  One day you’ll wake up and think “this place doesn’t feel special any more” or ask yourself “why is it so hard for us to get stuff done.”

Trust could be one of your most valuable company assets.  As a leader, you need to fight like hell to protect it.  If you are successful protecting trust, you’ll actually grow much faster and you’ll still have a place where people love working.

I’ve seen trust work at a 700 person company.  Trust can scale.

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Haiku Deck Helps Make Marketing Not Suck

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I continually refer people to the post I Don’t Hate Marketing which is a great example of a bunch of chocolaty goodness all rolled into one little post. Now, my friends at Haiku Deck have made it slick and pretty!

Don’t let your marketing suck. Set your story free with Haiku Deck.

The Work Begins When The Milestone Ends

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Today’s guest post from Chris Moody, the COO of Gnip, follows on the heels of the amazing Big Boulder event that Gnip put on last Thursday and Friday. To get a feel for some of the speakers, take a look at the following blog posts summarizing talks from leaders of Tumblr, Disqus, Facebook, Klout, LinkedIn, StockTwits, GetGlue, Get Satisfaction, and Twitter.

The event was fantastic, but Chris sent out a powerful email to everyone at Gnip on Saturday that basically said “awesome job on Big Boulder – our work is just beginning.” For a more detailed version, and some thoughts on why The Work Begins When The Milestone Ends, I now hand off the keyboard to Chris.

We’ve just finished up Big Boulder, the first ever conference dedicated to social data.   By all accounts, the attendees and the presenters had a great experience. The Gnip team is flying high from all the exciting conversations and the positive feedback.   After countless hours of planning, hard work, and sleepless nights, it is very tempting to kick back and relax. There is a strong natural pull to get back into a normal workflow. But, we can’t relax and we won’t.  Here’s why.

As a company it is important to recognize the difference between a milestone and a meaningful business result.  Although it took us almost nine months to plan the event, Big Boulder is really just a milestone.   In this particular case, it is actually an early milestone.    The real results will likely begin months from now.   All too often startups confuse milestones for results.   This mistake can be deadly.

Milestones Are Not Results

Milestones represent progress towards a business result.  Examples of milestones that are commonly mistaken for results include:

Getting Funded.  Having someone make an early investment in your company is positive affirmation that at least one person (and perhaps many) believe in what you are trying to accomplish.  But, the results will come based upon how effectively you spend the money; build your team/product, etc.  Chris Sacca has tweeted a few times that he doesn’t understand why startups ever announce funding.  Although I haven’t heard him explain his tweets, I assume he is making the point that funding isn’t a meaningful business result so it doesn’t make sense to announce the news to the world.

Signing a partnership.  Getting a strategic partnership deal signed can take lots of hard work and months/years to accomplish.  Once a partnership deal is finally signed, a big announcement usually follows.  The team may celebrate because all the hard work has finally paid off.  But, the obvious mistake is thinking the hard work has paid off.  Getting the deal signed is a major milestone, but the results will likely be based upon the amount of effort your team puts in to the partnership after the deal is signed.  I’ve never experienced a successful partnership that just worked after the deal was signed.  Partnerships typically take a tremendous amount of ongoing work in order to get meaningful results.

Releasing a new feature.   Your team has worked many late nights getting a new killer feature in to the product.  You finally get the release out the door and a nice article runs in TechCrunch the next day.  The resulting coverage leads to your highest site traffic in a year.   But, have you really accomplished any business results yet?  Often the results will come after lots of customer education, usage analysis, or feature iterations.   If no customers use the new feature, have you really accomplished anything?

Is it okay to celebrate milestones?  Absolutely! Blow off steam for a half-day or a long celebratory night.  Take the time to recognize the team’s efforts and to thank them for their hard work.   But, also use that moment to remind everyone that the true benefits will happen based upon what you do next.

Results Increase Value

Unlike milestones, results have a direct impact on the value of the company.  Results also vary dramatically based upon different business models.   Examples of common results include: increasing monthly recurring revenue, decreasing customer turnover, lowering cost of goods sold (increasing gross margin).

Announcing a new feature is a milestone because it adds no value to the company.  On the other hand, having customers actually adopt a new feature might increase customer retention, which could be a meaningful business result.

The Work Begins When X Ends

When I worked at Aquent, there was a point in time when we were doing lots of tradeshows. We noticed a pattern of team members taking months to prepare for an event and then returning from the tradeshow declaring the event a success.   They would put a stack of business cards on their desk and spend the next several weeks digging out from the backlog of normal work stuff.  The business cards would begin to collect dust and the hot leads from the show would eventually become too cold to be useful.

In order to avoid this phenomenon, someone coined the expression “the work begins when the tradeshow ends”.  This simple statement had a big impact on the way that I think about milestones versus results.  Since that time, I’ve used the concept of this phrase hundreds of times to remind my team and myself that a particular milestone isn’t a result.    You can substitute the word “tradeshow” for whatever milestone your team has recently achieved to help maintain focus.

The most recent example?  The work begins when Big Boulder ends.

Startup Culture: Values vs. Vibe

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My friend Chris Moody, the COO of Gnip, has another guest post up today titled Startup Culture: Values vs. Vibe. He’s written about this in the past on his blog, but we both thought it was worth reposting. Enjoy – and comment freely, especially if you disagree or have constructive feedback.

I hear some form of the following question frequently from founders that are starting to have early success:

“How do we hire a bunch of new people and grow the company quickly without losing the culture we’ve worked so hard to establish?”

I’ve been fascinated by different company cultures for as long as I can remember and I love asking entrepreneurs to describe the culture of their companies.  Over time I’ve come to realize that when you break down culture descriptions you’ll often find a mix of two components:  values and vibe.  Although each component can have a significant impact on the overall feel of a company, the way you establish and manage the two should be different.

Values

I think of values as the guiding principles or a code-of-conduct upon which a company was founded and which it operates on a daily basis.  If you establish the right set of values early, these principles won’t change with time.  Values establish your company’s view of the world and determine how you treat others including employees, customers, partners, and investors.  Most importantly, values serve as the foundation on which tough company decisions are made.  Values are 100% controlled by the company and should be unaffected by competitors, market conditions, and industry trends.

The people you hire will come with their own set of values. Every person you hire should have personal values that completely align with the values of your company.  95% isn’t good enough.  In fact, if a team member violates a company value, the violation should result in removal of the individual from the company.   Here are some other things to consider around establishing and maintaining company values:

  • Document and talk about your company values with your team all the time. Consider publishing your values, and talking about them with customers, partners, etc. to add an extra level of scrutiny to your commitment.
  • I believe a set of five or less documented values is ideal because you want all your employees to have them top-of-mind when making decisions.  If you have too many values, people simply won’t remember them.
  • Determine a set of tough “trade-off” questions that you can ask during the interview process that will help you determine if a candidate’s values align.
  • Good values require tough decisions to be made in order for the values to be upheld.  If you establish values that are never challenged, these values aren’t serving any real purpose.

This last point is particularly important.  Watered down or generic values might be easy to uphold, but they also won’t establish a strong culture.  Companies with unique cultures tend to have values that are unconventional and sometimes controversial.   A famous example of a unique value is Google’s “Don’t Be Evil”  (I believe the actual company published version is “you can make money without doing evil”).  I’m guessing “don’t be evil” is discussed at Google hundreds of times of day when decisions are being made, and I bet it is surprisingly hard to stay true to this value even though the premise seems fairly simple.  The fact that Google allowed this value to become public knowledge has resulted in a huge audience of observers that are constantly scrutinizing Google’s actions to see if they are staying true to their values.

Vibe

Vibe represents the emotional side of the company. Like all emotions, vibe can be fairly volatile and is highly influenced by outside factors.  For example, think about the vibe of a company on the night that the first product is launched vs. the vibe of the same company when Apple announces they are launching a competing product or service.  When it comes to vibe, management can certainly set a tone and lead by example, but the reality is the vibe of a company will naturally change with time as the company grows and the products/employees mature.    The biggest influence on vibe is typically success.  Most companies that are doing well tend to have an overall positive vibe.

In the last few months, I’ve talked to two different startups that described one of their values as “Work hard. Play hard.”  Is this really a value? Perhaps this statement actually describes the vibe at a certain moment in the life of the company. If an employee is no longer willing or able to play hard but is still producing at a high level, is this person no longer valued by the company?   Working and playing hard together might be an important part of the company in the early days, but will it be a necessary component for all 300+ employees when the company has been around for 10 years?

As a leader, there are aspects of vibe that you will naturally want to try to control.  However, you have to ask yourself a few questions:

  • Is this aspect of the company important to our long-term success?
  • Does this aspect need to be maintained forever and is it sustainable?
  • Does this aspect apply to all areas of the company and to all employees?
  • Will establishing this aspect help us make important decisions in the future?

If you answered, “yes” to all of the above, congratulations: you’ve just identified a new potential value.  However, it can be fairly liberating to realize that the foosball table in the middle of the office is nice, but it isn’t crucial to the long-term success of the company.

I know this won’t be a popular statement, but I don’t think maintaining culture (as defined by many entrepreneurs I’ve encountered) is important.  Instead, I think it critical to focus on establishing strong values early and hiring people that have aligning values.    Maybe it is all just semantics on how you define culture, but I believe you shouldn’t sweat the vibe part.  You’ll have an overall positive feel if you are successful and that is the only type of vibe that really matters.

Getting The Compensation Conversation Right

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Chris Moody, president and COO of Gnip, is back with a guest post in his Moody on Management series. Following are Chris’ thoughts on negotiating compensation with a prospective employee. Enjoy and comment freely!

In my last post, I provided a few tips for job candidates when interviewing at a startup.  This week I wanted to cover a simple process for hiring managers to follow when communicating with candidates about salary requirements.

There is the old saying that people spend more time planning their vacation than they spend planning their retirement.  I’ve found the same concept sometimes applies to job candidates when thinking about their compensation requirements.  As the hiring manager, you need to ensure that a candidate has fully considered their compensation needs before you make an offer.  Over the years, I’ve refined a simple and effective approach to facilitating this discussion.  I’ve used this technique countless times with great results.  The process starts with an email to the candidate:

“Dear Candidate,

From a skills and values standpoint, it seems like we are both excited about the possibility of you joining our company.  If you agree, the next step in the process from my perspective is to determine if we are aligned from a compensation standpoint.  As such, it would be helpful to get the following information from you:

- Current compensation.  Please breakout your base salary from any variable compensation if applicable.

- Your view of your current compensation as it relates to your next opportunity.  It is particularly helpful if you provide this feedback by selecting from either

a) I believe I’m fairly compensated and would anticipate making the same salary at my next opportunity

b) I’d be willing to take less for the right opportunity

c) I feel I’m currently under valued and looking for an increase of $x in order to be excited about my next opportunity.

If it works for you, I’d prefer to have this communication via email.  Over time I’ve found that putting this stuff in writing helps people think about it more before responding.

Love,

Chris”

Of course there are no right or wrong answers.  The goal here is simply to get a clear understanding of how the candidate is thinking about their future compensation by using their current compensation as a frame of reference.   Best case, the candidate’s expectations align with yours and the offer moves forward with a high probability of success.  Worst case your expectations don’t align but you now have a thoughtful starting point for negotiations if you still want to move forward with an offer.

A couple of additional points:

1) Even if the candidate has expressed salary requirements during the screening process or during your discussions, I strongly recommend you have this written conversation as the final step before you make an offer.  For example, perhaps your conversations along the way changed their perspective on salary requirements for the position.

2) The key to this approach is to do this communication in writing.  I know it can seem silly or impersonal, but it makes a huge difference in terms of requiring people to give thoughtful answers instead of answering on the spot.

Before using this approach I had more than a few occasions where candidates indicated verbally that they wanted $x, we offered $x, and then they responded with “I was thinking about it more and I really need $y to feel good about joining”.  Once you hit this situation, it puts both parties in an awkward position and it can be hard to recover.  You can avoid this potential pitfall with one simple email.

Oh, by the way, Gnip is hiring!

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