Business Lessons - Afrikan Heroes

Google’s Powerful Secret to be a Good Manager

December 31, 2019

Senior Vice President of People Operations at Google Laszlo Bock

And a good manager does not need technical skills.

Are managers really necessary?

In 2008, Google undertook a study to answer this question. Google’s Project Oxygen was birthed with a fundamental mission: To build better bosses.

The reasons why Google decided to undertake this humongous exercise were not hard to find.

The tech world is known for its rebellious attitude towards everything that represents the conventional corporation and management is often seen as a bastion of the old workplace hierarchy that just won’t die.

And the group that had the biggest problem with management was the company’s engineers. Engineers have reason to dislike bad management. This field, in particular, fosters creative individuals who have their own personal style of doing things. When someone tries to micromanage this type of worker it results in conflicts and a loss of interest.

As Senior Vice President of People Operations at Google Laszlo Bock explained.

“Engineers generally think managers are at best a necessary evil, but mainly they get in the way, create bureaucracy, and screw things up.”

The Project Oxygen team in Google’s People Innovation Lab spent a whole year data-mining performance appraisals, employee surveys, and nominations for top manager awards and other sources to evaluate the differences between the highest and lowest rated managers. The statisticians gathered more than 10,000 observations about managers — across more than 100 variables.

Once patterns were established, they then interviewed managers to gather more data, and to look for evidence that supported their notions. Finally, researchers coded more than 400 pages of interview notes and data and rolled out the results to employees. Later, these results became the source of various training programs for managers.

And the results were highly unexpected.

In Project Oxygen, they found that successful managers consistently had these eight qualities, in order of importance.

· They’re good coaches.

· They empower their team and don’t micro-manage.

· They express interest in their team members’ success and personal well-being.

· They are productive and results-oriented.

· They’re good communicators and they listen to the team.

· They help employees with career development.

· They have a clear vision and strategy for the team.

· They have key technical skills that help them advise the team.

We can draw two inferences from this study.

· the most important activity for management success is being a good coach. Successful managers know how to coach their teams into success.

· The least important is technical skills. This proves that being a great developer doesn’t necessarily make you a great manager.

As a result, Google changed its feedback surveys to mirror these qualities. Instead of simply measuring how much output a manager achieves, the surveys now focus on how much time they spend coaching their team, whether or not they communicate a clear vision, etc. They also developed new management training programs centered around these skills.

This single-minded focus of developing managers into coaches is the secret behind Google’s successful managers. This approach is what makes them take the №1 spot for the sixth year in a row in Fortune’s ‘100 Best Companies to Work for’ list.

Becoming a great coach, especially in the tech world, is essential. What engineers, developers and everyone under the sun really want is a manager who knows how to distinguish the line between coaching and micromanaging.

To learn where this line lies, think about your employee. Are they an engineer with +5 years of experience? Then what they probably need most is a manager who will help them to set goals and then stand back and allow them to execute them in their own way (as long as this gets results).

On the other hand, new engineers may need more coaching. Here the line may become thinner but the best way to provide guidance while not encroaching on your employee’s freedom is through feedback.

So in a nutshell, what is required is a balance of coaching strategies based on employee experience and temperament to achieve best results.

And here are some coaching techniques which can be used.

Be The Guide

This style is very effective for those team members who are self-motivated and willing to learn but do not have the knowledge. They have a natural zeal and passion to absorb anything like a sponge which needs to be capitalized upon by the leader.

How to be the Guide

· Prepare and help them in building Skills.

· Allow them to make “mistakes” but make them learn from that.

· Provided timely and specific feedback for improvement

· Relax your control as they develop and improve

Be the Empowerer

This style is for “star” performers. They are the go-getters, highly driven and enjoy challenges. They are the future leaders and the backbone of any team.

How to be the Empowerer

· Empower them by giving autonomy. Allow them to make their own “decisions.”

· Define the goal, not the method. Let them find out the best way.

· Do not micromanage them. They get frustrated very easily.

· Protect them from “office bullies” if they are at a lower level.

Be The Director

This style works well with “trouble makers”. They can’t do and also won’t do anything unless plodded. They do not show any desire to learn and improve and tend to escape work.

How to be the Director

· Have a candid “talk” with them and understand the reasons for their behavior.

· Provide clear instructions and set up stringent deadlines for completion.

· Monitor their progress very carefully and take regular status updates.

· Adopt the “Stick” and “Carrot” method initially. If nothing is working, let them go.

Be the Catalyst

This style works great on those team members who have the knowledge and the potential but are too lazy and laid back to do any productive work. Indiscipline and being disorganized is their second nature.

How to be the Catalyst

· Identify reasons for lack of motivation and set up the expectations upfront.

· Address the issue and motivate them. Play to their “strengths”.

· Monitor progress carefully and give them increased “accountability” in their work.

· Assign them to “collaboration” and “team building” activities to improve their organizing skills.

And Lastly, Give Feedback Regularly

Managers’ words have the power to build or destroy. Google understands this sensitivity and teaches its supervisors to be consistent (free from bias) when delivering feedback across their teams, to balance positive (motivational) and negative (developmental) feedback, to be authentic and appreciative, and to state growth opportunities in a clear, compassionate way.

Always make sure your feedback places emphasis on actions and completely avoids personality traits. For example, “I noticed you talked over Sid in the meeting yesterday” rather than “You’re overbearing in meetings.”

Always provide advice on how they can fix the situation and discuss the best solution. More than the actual feedback, the way of communicating the same plays a very important role in the response and the impact. Recent studies have shown that sandwiching negative feedback between dollops of praises is not very effective. Keep the praise and the feedback separate.

And the most important, give real praise. Employees are not dummies. They can easily see through if your praise is genuine or not. Again like the actions, the praise also needs to be specific. Mention specific areas where their work has impressed you and where they are doing a great job.

As Chris Dyer has rightly said.

“Give feedforward not feedback.”

Ravi Rajan is a global IT program manager based out of Mumbai, India.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world

How We Built a Startup that Produced 5x the Output

December 28, 2019

We deployed five different product offerings during the same period at less than half the cost of other startups of the same size.

Startups have been in my blood for the past two decades. Most startups failed for various reasons. Not a good product/market fit. Founders were inflexible for pivots. Too many pivots. Mismanagement of funds. Hired too early or built an ineffective core team. All these factors and a combination of others can lead to business closure before establishing a stable revenue stream.

Mistakes will be made along the way, but staying agile and nimble with small and frequent course corrections will allow companies to navigate back to a successful path. With a solid foundation built across the disciplines, handing the keys over to a new owner is redemption of previous failures.

Multiple factors contribute to success but will vary depending on industry and audience and their specific requirements. My focus will be catered around our last SaaS-based business platform and how we managed to get more done in the same period versus other startups.

Vision / Founder(s) / Funding

Ideas are fleeting and not worth the secrecy or paper on which NDAs are written. Ideas without execution fall short of a vision. A vision is what drives founders to risk their time, sweat, tears, and sometimes their money, into a venture.

A solution looking for a problem to solve usually fails to gain traction, whereas identifying and solving for an existing problem has a higher likelihood of pulling in investors for a seed round.

It is possible to raise too much money in any funding round, depending on dilution and projected valuation. You should only raise as much as needed to go to market within 12 to 18 months, with additional rounds following a similar pattern. There is a possibility that an innovative tech-based solution may generate an overabundance of interest with the likelihood of turning away investors.

The visionary founder usually stepped into the CEO or CTO role but wore multiple hats before hiring additional staff and resources. They should look into hiring subject matter veterans as a good foundation for the core team.

The founder(s) should quickly adapt to the tech landscape and welcome risks of emerging technologies which can launch their product to market quicker while being frugal with the funding. They’ll trust the assembled team has the experience and technical merit to transform the vision into a business.

Acceptance of criticism and feedback should balance passion as building blocks toward a stronger base of leadership. A founder should start as an individual contributor to get their hands dirty in the trenches before commanding the troops. Knowing the pain points of each department first-hand is the only way to understand how to fix them.

Our founder had executed on his vision, discovering a problem that plagued most businesses, including the current company he was leading. He decided to carve out some of his time to incubate this idea into something concrete by discussing it with colleagues and shopping around mockups to illustrate his concepts.

He had a voracious appetite for learning quickly, soaking up knowledge from everyone he engaged. With unfamiliar terminology, the next day, he was able to slip it into his sharp cadence of talking points. The context showcased his understanding as if he was the subject matter expert. He had high emotional intelligence and empathy for his colleagues. What he taught me was to identify and promote an individual’s “superpower” while coaching and strengthening their less-flexed muscles.

Working with a founder who can understand the needs of every department, but allowed them to make expert decisions, eased the friction inherent between superiors and subordinates within a traditional corporate structure. It reduced the decision churn and roadblocks, avoiding stalled initiatives.

Mission / Values

For a vision to permeate throughout the company, a mission statement should be written to convey a feeling of solidarity and purpose. Supporting the mission statement should be a set of values that define the qualities governing behaviors critical to the cause.

One of our values that drove high production rates was “Leave your pride/ego at the door.” Regardless of title, tenure, or pedigree, everyone pitched in to get the job done.

We knew building a system from the ground up with modern web technologies would outpace the titans of the human capital market stuck in development molasses.

Fake It / Market Fit

The old cliche used in and around the startup world, “fake it before you make it,” is a practice which allowed early-stage companies to experiment and hone a product. It allowed testing for market fit before a line of code was written. A demo should be built using hi-fidelity or click-thru mockups to garner feedback from friendlies or early-adopter customers. Refinement from test-marketing these early prototypes should be iterated quickly to keep them involved and interested in the process.

The founder(s) should have created a pitch deck or business plan, which includes the problem definition, the solution, value proposition, staff and revenue projections, and ROI strategy. There should be multiple variations of the pitch deck curated to three specific audiences.

The first deck would be catered for investors to convince them to give you money. The second deck would target potential customers to persuade them to buy your product. And the last version would be used to entice future employees to join your company.

Early prototypes were used to sell our vision to sister companies who had similar problems and was searching for a solution. Using the customer-based deck along with mockups returned positive feedback and verbal acknowledgments, exposing an underserved area in the HR space. The anemic area was ripe for a complete solution. Legacy systems, built on old technology, tacked on substandard features simply to tick a checkbox in their offerings.

We knew building a system from the ground up with modern web technologies would outpace the titans of the human capital market stuck in development molasses. This validated our product/market fit and gave us a boost to move forward.

POC / Prototypes

Quick proof of concept (POC) projects and click-thru prototypes set a base for production-ready and user-friendly applications. Having a prototype quickly in front of users helps identify gaps or intices additional suggestions for a tightly-coupled feedback loop.

Fail fast, fail often is also a mantra thrown around startups that should be one of the founding principles woven into the company’s value. Waiting for perfection is a formula that will slow the process; instead, an iterative approach is vital to show progress and perfecting a product.

People / Talent / Structure

A small, focused core group of experienced A-players driven by a determined set of leaders, will out-perform a younger, less experienced team, regardless of their ambition and grit.

A flat structure should be established at first with minimal or no middle managers. A bad hire at an early stage could set back the company months. Multiple bad hires could wreck the company altogether. Establish a quick way to vet and hire candidates with a corresponding willingness to fire them as quickly.

Hiring too early for an idealized corporate structure will cause waste in terms of time, money, and effort. Generalists should be considered for core team members, while specialists can be brought in as needed in later stages.

We had a few missteps in hiring because we wanted to fill positions we thought would move us forward but instead set us back. It was too early. Not only did this cost us stress, money, and time, but it may have interrupted the career paths of those individuals we dismissed.

Vetting for requisite skills and talent overshadowed the need to evaluate a key criterion: the ability to overcome the culture shock of being transplanted from a structured corporate world, with significant support teams, into a startup mentality. We readjusted our hiring strategies to align with shorter-term company goals and accounted for a candidate’s resilience to change.

Our core engineering team of six outstanding members were rockstars who built the foundation and created the initial frameworks based on a progressive trailblazing technology stack. They were prolific coders who left their ego at the office door before coding at their keyboards.

We were able to accomplish feats of astounding progress throughout the years due to our talented server engineer and data architect. During the pioneering days of Node.js, we had to build most mechanisms ourselves. These included an event bus, pub/sub queuing, UI persistence, and caching. All of these homebrewed systems helped us own a unique codebase which can quickly be debugged when an issue was reported.

We were able to hire top engineering talent throughout the years who used their experience to springboard their careers into companies like Google and Amazon. Others branched out to become tech leads or founders of new startups.

As the talent started drying up, we dipped into the code academies’ graduate pool and found great developers looking for an entry into the tech world. This allowed us to enhance the makeup of our diversity. Our engineering team had over 40% of female staff, representing the same percentage company-wide, which was doubled the average in the tech industry.

A stack using the same programming language across all layers with a homogenous transport mechanism sounded like a dream.

Tech Stack / Open Source

Choosing the correct tech stack for building out the solution will affect the production cadence. Being faster to market on innovative features will steer customers to your product, even though larger, more established incumbents exist in the same space.

Some industries will influence the tech stack choice, while others are open to using the latest-and-greatest development language and tools available. The rising popularity of a framework may drive the tech lead’s decision, or it could pivot on the comfort of knowledge towards a specific stack throughout a leader’s career. Rarely does a tech lead deviate from their comfort zone, but those who challenge the status quo may be the one factor that disrupts the space and attracts top talent.

Our choice centered around context switching and fragmentation of languages. It was a conscious effort to reduce both of those factors to increase the speed of development. Even though we would be pioneers using this tech stack, the benefits outweighed the risks. A stack using the same programming language across all layers with a homogenous transport mechanism sounded like a dream.

That dream became a reality when Node.js was introduced to the world. Married to MongoDB, it became the powerhouse which gave us the springboard to outpace our competitors. Adding Google’s Angular.js for a front-end framework was another competitive advantage. Being fully open-sourced was a natural fit towards a lean startup mentality.

The significant advantage gained by using MongoDB was the speed of development. MongoDB is a NoSQL, schemaless storage engine with a rich and robust query language based on the JSON format. Designing a data architecture using documents, without the need for complicated table joins, allowed very fast reads. The mutability of structure added to the quick iteration through design, testing, and release of new features.

With Javascript and the JSON format used across all layers of our application, we transitioned into full-stack developers who were able to cross those boundaries easily. In turn, they shed the cost of context switching and eliminated the dilution of their knowledge with fragmented language concepts.

When we first adopted these new technologies, a Google search for “Node.js” barely returned results. We did not imagine other established companies were on a parallel journey with us, using the same components of this stack. These companies started converting their older platforms to use Node.js within significant systems. Adoption of Node.js by accomplished companies like Netflix, Groupon, Orbitz, Walmart, LinkedIn, Uber, PayPay, and eBay acknowledged our decision was a fit choice. It finally accumulated enough mainstream traction to attain an acronym, coined the MEAN stack.

One former employee adopted our entire tech stack and introduced it as a way to increase their productivity at a major logistics brokerage company. They have built a sizable team around the technology switch and is one of the most innovative companies in their space due to their speed of development.

Today we have continued to promote and use variations of the MEAN stack replacing the front-end framework with React (MERN) or Vue.js (VENoM). It continues to outperform other stacks across multiple criteria: cost of development time, broad community support, increased performance (non-blocking I/O — asynchronous programming), lower memory footprint, lightweight framework, and unparalleled commercial adoption.

Hiring / Onboarding / Training

Most of our early hires were through referrals or known associates. Eventually, our needs grew enough to hire an internal recruiter to churn through hundreds of resumes a week. When a noteworthy candidate was identified, we sent out a small code challenge to further weed out the weaker candidates or imposters.

If a solution to the challenge was returned, it was graded based on several criteria which indicated their level of experience. The candidate is then invited to an in-person office interview, where they will meet other team members and participate in a mock code review of their solution. This will further ferret out candidates if they cannot clearly articulate their thinking process while answering code-review questions.

If the candidate receives a positive consensus, an offer may be extended on the same day, moving them forward to the onboarding process.

Having a defined and quick onboarding process helps with productivity. The goal is to have a new hire up and running by the end of their first day. For engineering staff, they are assigned an onboarding buddy (who happens to be the last hire through the process).

New developers then joined a training team and assigned their first project, which is usually a low-level defect or smallish project. We called this training group, the Strike Team. Their goal, within the first week, should be a submission of their first pull request (PR). Also included should be scheduled 20-minute discussions with each of the engineering leads, product group, and other department heads. Any follow-up discussions should clear remaining questions about the team roles, responsibilities, code-base, and development process.

New hires are also allowed to be recruited by squad/guild leaders for exposure into their realm. By the time they graduate from the Strike Team, they will have an idea of which squad/guild they’d like to join. These guilds included: UI, Server, Data, Mobile, Integrations, QA, and Strike.

Infrastructure / IaaS / PaaS

Going to market fast can’t wait for an infrastructure to be built. Setting up servers, routers, phones, redundancy, security, business continuity (BC), and disaster recovery (DR) requires a substantial amount of resources and time. Reducing or eliminating the use of on-premise equipment refocuses all the efforts of an engineering team towards coding solutions instead of tinkering around with hardware setup.

Moving to a cloud-based infrastructure using combinations of services like Amazon AWS (infrastructure as a service — IaaS) and Heroku (platform as a service — PaaS) eliminated the need of an internal dedicated DevOps member. Both of these services have robust APIs, which allows developing scripts for quick setup, maintenance, deployment, and scaling through an automated process.

A lean startup could not house a big enough DevOps team to match the 24/7 capabilities of entire organizations dedicated to the maintenance, backup, redundancy, disaster recovery, security, and business continuity of your infrastructure. Using an IaaS or PaaS vendor gives you an entire DevOps team at hand to leverage their expertise in what they do best.

Plan an infrastructure for a worst-case scenario where the office has no power or possibly destroyed through fire or natural disasters. The SaaS platform should continue to hum along even if your headquarters have internet issues or leveled by a Category 5 hurricane.

We leveraged AWS S3, AWS CloudFront, AWS CloudTrail, AWS Lambda, and Heroku. Our MongoDB instance was also hosted on cloud-based services. We did not use Docker or Kubernetes because Heroku handled it through building out slugs (Heroku’s version of containers) and supported pipelining between environments. We were able to scale, release, and promote features through simple UI controls.

QA / QC

Once a product hits the Beta milestone, unit-tests will not cover edge cases observed in the wild. A dedicated QA lead and team should be brought in to help ferret out defects. A good ratio of QA staff to developers is three developers to every one QA tech.

As the product grows, automated end-to-end testing should be added. A QA tech should lead the effort, recruiting developers to help write automated tests along with unit tests.

Leverage QA skill to help fix minor defects they find, by setting up QA machines as if they were developers. Train QA members to fix mistakes like typos, language files, and small CSS issues. Have them check those fixes into specific feature branches. This may have the added benefit of defining a career path for a QA tech to move from testing to development.

Let QA dictate the release cadence by allowing them to deploy and promote features. Isolate those feature branches into separate test servers before they are merged and deployed to an integration server. Since QA controlled the last gateway before the code went into production, it was logical to allow them to sign off and merge those feature.

We had multiple testing environments for QA to deploy features in isolation, which allowed them to target only the changed code. Environments for each guild type were also available for teams to deploy and test in a simulated live environment versus locally on their development machines. Exposing the feature opened it for stakeholders to access, verify, and validate it was working as designed.

Our QA leader increased coverage of tests by hiring an out-source company in India to augment our testing. She led an effort to set up a deployment server, allowing the remote QA team to deploy feature branches and test during off-business hours. This doubled the testing coverage across all of our products.

No precedence or articles existed described such a process. Internally we dubbed it zero iteration based development.

Process / Planning / Release

An established software development life cycle (SDLC) and the process around planning defines the cadence of releases to end-users. The agility to alter this cycle and flatten out roadmap speed bumps will increase the velocity of developed and released features.

Releasing features more frequently exposed issues earlier for real-world use and feedback, tightening the iteration loop, and allowing us to polish the product quickly. Development teams were able to push new releases as fast as they were coded, until paying customers started using the platform.

We organically grew into a weekly release cycle, intentionally not aligning with development sprints. QA would control the releases, in coordination with Product and Customer Success teams. QA being able to deploy, merge, and promote features allowed full control of the release cycle, including major, minor, and hot-fix releases. QA worked in a Kanban fashion, where features were cued up and dropped into the release when ready.

Development spans were usually planned into 2-week sprints, with larger projects spread across multiple phases. Deployments were scheduled weekly for Thursdays, during the day, with 100% uptime using the pre-boot feature afforded to us by Heroku. Sprint grooming, planning, and retroactive sessions were held on Friday mornings.

Eventually, when we documented our process, it did not match a traditional agile pattern but was based on time slice iterations. A feature being currently developed would represent the present time slice (T Zero). Developers would be working on the zero iteration. QA would be testing T-1 features, one iteration behind the development team. These were coded and approved pull requests (PR) waiting in a queue.

The Product team would be working on defining and writing specifications for T+1 features, one iteration ahead of development. Designers created mockups and wireframes two iterations ahead of development, working on the T+2 slice. Customer Success and Marketing would work in the T-2 slice, which was features tested and released by QA. Sales worked in two different slices: T+2 and T-2 slices. Sales had to market new upcoming features and promote already existing features.

T-2: Customer Success, Marketing, Sales
T-1: QA, UAT
T Zero: Research, Development
T+1: Product
T+2: Design, Sales

No precedence or articles existed described such a process. Internally we dubbed it zero iteration based development.

Multiple features across a few different squads were being developed in parallel. At any time, there could be five or six projects being engineered at once, one for each squad. When a larger initiative was launched, members of specific squads broke off from their group, swarmed into one large team, and pounded on their keyboards until completion. Once developed, they disbanded and returned to their respective squads.

At one point in our journey, developers were extremely prolific in their coding, which resulted in over 80 pull requests (PRs) slated for testing and deployment. We had to slow down and shifted our attention on helping QA test, merge, and deploy those features out to production. After our QA swarm, we were back down to our typical set of five to ten PRs in the queue.

Product Design / UX

Initial product design and management responsibilities landed on the founders, but eventually, the product grows big enough to demand a full-time product manager. The first product manager (PM) is a crucial hire to be added to the core team. They will evolve into a director of product and lead a team of their own.

The PM should have the ability to take on raw visionary concepts and convert them into wireframes and stories while incorporating their ideas smoothly along with a sense of design. During the early stage of a startup, PMs should seamlessly interact with almost every department in the company, switching hats effortlessly through the same stream of consciousness.

User interaction (UX) and UI design tasks also fell into the PM bucket, until the abundance of planned features starts to spill over. At this juncture, a UX lead should be hired to standardize the design across all products. A consistent look-and-feel and design language spanning the product offerings helped users transition smoothly across applications while flattening any steep learning curves.

Well defined stories and specifications drive efficiencies in development, testing, documentation, and validation by creating a blueprint of reference across all departments. When using the specs as an established reference, a feature moving from concept, through production, release, training, and support rarely gets snagged in a fast-paced assembly line.

Through a sister company, we had a successful introduction to a talented PM who we convinced to start with us, turning down an out-of-state job offer. It was a mutual risk on both sides, which resulted in an incredible hire.

Mobile App

A mobile application or mobile-friendly website helps engage users that are not tied to their desks. Targeting those organizations that are geographically dispersed with an easy interface providing the essential functions of your product is key to high engagement.

We planned to build a mobile app from inception and deployed to both iOS and Android platforms early in our roadmap. Using the same web technologies with a native wrapper allowed us to produce, update, and extend our mobile offering quickly to our users.

A major selling point to our platform was due to the tight parity between our mobile and web apps. With a dedicated internal squad working on mobile, we were way ahead of our competition, while other startups outsourced their mobile production.

Meetings / Standups

During the early stages, a majority of the day was spent in meetings, but as things fleshed out, they subsided. Weekly status meetings held steady, while operational meetings were called as needed.

Bringing Slack into our communications toolbox reduced email churn and eliminated some one-on-one meetings. Most meetings were reduced down to three major concerns: roadblocks, announcements/decisions affecting the participants/company, and show-and-tell. The exceptions were sprint planning, grooming, kickoffs, and retrospectives, which had standard concrete agendas.

Development standups were scheduled daily, 10:30 in the morning, as needed, and should last five to ten minutes. Each squad/guild can run them as they desired with specific agendas, as long as it moves the process forward. A weekly Scrum of Scrums (SOS) was held for significant announcements, shared by each squad/guild to sync on current projects or team building events.

In the end, it propelled us to the top of our space, caused us to grow at a faster pace as we produced our best work in a frenetic sprint of focused passion.

Pivots

When the initial execution of the business does not gain the expected traction, then it’s time to explore the possibility of a pivot. This change may include a reduction in staff, a refocus on a niche audience versus broad-spectrum, or, concentrating on specific types of campaigns.

One of the most successful pivots that have been publicized is how Groupon pivoted from a group activist site to a group purchasing site. Groupon started as a site called “The Point.” It promoted social activist campaigns that had required a specific number of users to sign on until it reached the tipping point for action. In 2008, one of the most famous and outrageous campaigns was to suggest building a dome over Chicago to control the weather, for a mere price of $10 billion. It had pledges of over $100,000 in a few days, but it never reached its tipping point.

The most popular campaigns that The Point promoted where group purchasing campaigns, where it would solicit bargain pricing from local retailers if it garnered enough pledges from users. The rest is history as they changed their name to Groupon, concentrated on discounts purchasing deals, and dominated the market.

Our pivot wasn’t quite as dramatic but organically grew from demand in the market place. Our vision was to cater to an underserved niche in the HR space, where SMBs were neglected. The projected revenue growth in this space gave us our hockey stick graph, but reality did not meet theory or the might of will. The amount of time and effort required to land an SMB account was about the same for Enterprise customers, but with an almost 10 to 20 times return on investment.

This switch affected all departments, but pushed us in the right direction, and forced us to optimize and scale to support a more extensive customer base. We had a staff reduction in the sales department but increased members of the engineering team. Moving from serving 5000-employee SMBs to 100,000-employee enterprises was a shift that taxed us mentally, financially, and physically. Weekend work was the norm until we launched our first enterprise account.

In the end, it propelled us to the top of our space, caused us to grow at a faster pace as we produced our best work in a frenetic sprint of focused passion.

Acquisition / Lather, Rinse and Repeat

If a startup has a foothold in their market and sticks out as a leader in the space, then suitors will be looking to acquire you. We were acquired by a private equity firm which had the resources that can move us to the next level of our growth.

There were many other factors involved with our successful acquisition, but the ones outlined were the most influential, producing the most results in a short span.

These factors interacted and comingled to produce a perfect storm of rapid growth, leading to a successful exit. We were the same size as other startups but were able to deploy five different product offerings during the same period at less than half the operating cost.

The excitement of building something out of an idea is why I continue to stay under the startup umbrella. The combination of talent, process, grit, determination, and the prospect of opportunity and learning pushed us to strive for success that others took for granted. The early days were filled with doubt and the unknown, encouraging a small group of passionate founding members to sacrifice every ounce of energy towards a shared goal.

We became a second family that celebrated the wins and bore the losses; lessons learned to be used as tinder for the next endeavor.

Charles Rapulu Udoh

Building A Sustainable Company: Why Most Companies In Africa Do Not Last Longer Than Expected

December 24, 2019

Over the past months, I have been crunching company data, carrying out extensive reviews, and scheduling series of meetings with executives and officers of companies listed on stock exchanges as well as ordinary going concerns, all in a bid to help them reinforce their board effectiveness.

While profit making remains top on most companies’ priority areas, the final straw that often breaks the camel’s back is the companies’ failure to fulfill the demands of good corporate governance practices. That is, even with the right business strategies, the complex organisational structures of most companies sometimes reach a confusing peak that demands that the company have a rigid wall of governance and culture if it is to still maintain some appreciable level of sanity, survive or continue to make profit or contain losses.

For businesses or people resident in Nigeria, 2019 came with the revelation from Moody’s, the leading credit-rating and financial analysis agency, that the main reason why a foremost commercial bank in the country — Diamond — conceded to a merger with Nigeria’s leading commercial lender — Access Bank — was because of poor corporate governance practices adopted by the former. To quote a portion of Moody’s report, Diamond Bank’s weak governance structure meant:

A highly compromised board

A board with little ability to assess the bank’s risk exposure and;

And a board that failed to rigorously interrogate management over strategy.

Moody’s report is not entirely far from my experience reviewing companies’ board effectiveness. The points made below are meant to serve as a sneak-peek into the damage wreaked by weak corporate governance practices in most companies in Nigeria,and by implication Africa.

Total Absence of Good Succession Strategies and Plans

This is the most obvious emptiness you would find in most Africa n companies. There is often total absence of good succession plans or policies for top executives and senior management of companies. A succession planning policy is a tool that helps a company to be prepared for planned or unplanned absences of a director or other top management, which, among other things, clarifies authority and decision-making, thereby maintaining accountability and ensuring stability within a company.

Furthermore, a good succession planning policy of a company should also be able to predict where the next crop of directors or CEO of the company would come from, in order to avoid a situation where the company is suddenly ambushed by the emergence of little known persons who usually find it difficult gaining grounds within the first few years of takeover from present management.

From Moody’s report on Diamond Bank merger, we were able to glean that sometimes in 2018, there was a letter from Nigeria’s market research and analysis news site Proshare. The content of the letter simply was that a former chairman of Diamond Bank, Seyi Bickerstheth gave some hints on why Diamond Bank’s CEO, Mr. Pascal Dozie, should be replaced. The letter re-echoed the same demand from one of the biggest investors in the bank — Carlyle Group’s Carlyle Sub-Saharan Africa Fund (CSSAF) DBN Holdings — who also wanted Mr. Dozie shown the exit door.

“A key shareholder CSSAF DBN Holdings demanded an immediate removal of management, principally the CEO, but the Board favoured a less drastic approach to minimise disruption and also enable the Board secure new leadership,” Bickerstheth wrote in the letter.
“After several discussions, the CEO of the Bank, who is also a representative of the second largest shareholder Kunoch Ltd agreed to resign effective January 3, 2019, but would not tender his letter to confirm his verbal notification.’’

This is a classic case of a poor succession planning policy in place. With a sound succession planning policy, it would have been easier to find a perfect replacement for the bank’s CEO who, from several reports, had already been compromised.

It is therefore necessary that every company in Africa, whether small or large should draft a detailed succession planning policy and appoint a committee (such as the governance, remuneration or nomination committee) to oversee affairs related to succession planning. Alternatively, the Committee should establish a succession plan that identifies critical executive and management positions, forecasts future vacancies in those positions and identifies potential managers who would fill vacancies. Vacancies will be filled from within or, in the event no viable candidate is available, on an “acting” basis while an external recruitment effort is conducted.

Weak Board Structures and Dynamics

This is unarguably, the strongest force that destroys a company even before it begins to make profit. From my experience, it seems most companies still revolve around powerful, god-like figures, without whom the company would struggle to exist. Truly so, if an individual is the strength of a company, in terms of finance or influence, it would be entirely difficult for the company to look stern when pointing fingers. But this is where the basic definition of a company resurfaces — a company is a person with a separate personality entirely independent of the promoters or the founders. A company with a very strong board structure or dynamics should be able to have these key essential features:

The Chairman of the Board should not double as the MD/CEO of the Board.
The Board shall consist of at least an executive, non-executive and an independent director in such a way that the number of non-executive directors shall be more than that of the executive directors. In fact, there is really no need appointing directors who are out of touch with practices in the relevant sectors the company are competing in. Apart from the fact that persons appointed to the board must be persons of proven integrity, they must also possess acute knowledge required of a person in that industry.
A good succession planning policy should be mindful of the fact that an ideal replacement period for each non-executive director is usually three years, although an executive director could stay on the board for a maximum period of three years of 4 years each, while the maximum period for an independent director should be 3 years of three years each. On their parts, MDs/CEOs’ tenure usually have an ideal maximum period of 10 years, which may be broken into periods, not exceeding five (50 years) after the expiration of his tenure as MD/CEO.
Quite obvious from my experience reviewing a number of companies is the practice of converting an existing non-executive director into an independent non-executive director. This practice is extremely unhealthy if the company is to survive. An independent director, in most cases, does not have any direct material relationship with the company; or in cases where they have some material relationship with the company, their equity interests in the company should not be more than 0.001% of the company.
Another instance of a weak board structure is the practice of filling a substantial portion of the board size with family and friends, who have little or no contribution or experience to bring to the board. A standard practice demands that not more than two members of a family shall be on the board of a company at the same time. The expression ‘family’ includes a director’s spouse, parents, children, siblings, cousins, uncles, aunts, nephews, nieces and in-laws. In the same vein, no two members of a family shall occupy the positions of Chairman and MD/CEO or Executive Director of the company and Chairman or MD/CEO of a company’s subsidiary at the same time.

Moody’s still offers us a classic example from Diamond Bank’s merger with Access Bank in this regard. According to the credit-rating agency, Diamond Bank failed because it did not have enough independent directors (the objective truth tellers) on its board and this resulted in a lack of effective board oversight.

By the end of 2017, only one of Diamond’s 13 board members met the Nigerian SEC’s definition of independent (another had retired in August),” Moody’s noted

“We believe Diamond’s board failed to provide an effective check against the bank’s management team. Board independence is important because it makes it more likely that management strategies are subject to rigorous questioning, reducing the risk of directors ‘rubber stamping’ management decisions.”

The implication of this is not far-fetched. Mr. Dozie, whose family was the second biggest shareholder in the bank, directly controlling 5% and another 9% indirectly through its investment firm, Kunoch Ltd (14% in total) was only 4% off the Bank’s biggest shareholder, Carlyle Fund, which controlled 18%. This meant, of course, a huge overbearing influence of one family over how the business of the bank was run. A striking example was the fact that a member of the founding family held the CEO role between November 2014 and March 2019 when it merged with Access Bank. During this period, profits fell by 78% in 2015 and bank deposits shrank by 22% between year-end 2014 and 2017.

Poor Board Processes And Oversight

From my experience, it appears that most companies do not seem to have a sound grasp of issues surrounding board processes and oversight. To begin with, there are certain committees a company must necessarily form. Chief among them are the risk, audit and corporate governance or remuneration committees. The absence of any of these committees must necessarily lead to a weak governance structure in the company. Consequently, for a company to have effective board processes and adequate oversight, it should be able to have these key essential features:

To make sure that there is some level of independence and checks and balances on the Committees, the Chairman of the Board/company shall not be a member of any of these committees stated above. All the committees must necessarily be headed by a non-executive director. In the same vein, the MD/CEO and other executive directors of the company shall not be members of the audit committee of the board as well as the committees on governance, remuneration or nomination.
Only those knowledgeable in risk management or audit shall be appointed to these committees. And as a matter of good practice, the board shall not replace members of the Board Audit Committees and External Auditors (not internal auditors) of the company at the same time.
The risk and audit committees must necessarily play some oversight functions on the company’s risk officer and internal auditor, and as a matter of good practice, both officers must report directly to the committees on risk management and audit respectively.
Boards of Companies shall ensure that the company’s risk management framework provides for regular and independent reviews of the risk management policies and procedures as well as periodic assessment of the adequacy and effectiveness of the risk management functions.

Moody’s particularly drew out a line here. It said Diamond bank did not attract enough corporate borrowers who are a major moneymaker for banks and that, well, it loaned out more money to the oil and gas sector than the Central Bank of Nigeria thought was prudent (52% versus 20%). So when oil prices fell in 2015 and 2016, the bank came crashing with it. This is purely a case of inadequate oversight over the bank’s risk management department by the bank’s risk committee. This is so because Moody’s noted that Diamond Bank’s weak governance structure necessitated: a highly compromised board; a board with little ability to assess the bank’s risk exposure and; and a board that failed to rigorously interrogate management over strategy.

Little Or No Adherence To Policies on Transparency and Disclosures

Although most companies tout themselves to be pro-transparency and disclosures, this is not often the case in reality. From my experience, a lot of information is still being buried or swept under the carpet by companies’ top management, in connivance, sometimes with the board. This is worsened by occasions of conflict of interests necessitated by the directors’ participation in the equity of the company. A transparent board should be able to disclose information about the each director’s interest or shareholding in the company, as well as his directorship in an another company, if any. It should also be able to disclose the exact cumulative years of service of each director, and that of the external auditor at the end of every financial year.

Again, the most common challenge being faced by most companies on transparency in Nigeria revolves around issues of financial reporting. This is the stage where usually all the books are cooked, especially when the appropriate structures for checks and balances are weak. As a matter of best practices, companies should adopt the following around their financial reporting efforts:

The board committee on audit must necessarily hold a meeting once in every three months of the financial year of the company and deliberations at such meetings must include, at least consideration of the quarterly reports of the internal auditor. The board committee on audit must as a matter of good practice, investigate all audit reports and resolve all issues arising from the reports.
At least once in a financial year, the Board Audit Committee should endeavour to hold a discussion with the head of the internal audit function and the external auditors without the presence of management, to facilitate an exchange of views and concerns that may not be appropriate for open discussion.
As a matter of standard practice, the tenure of an external auditor in a given company shall be for a maximum period of 10 years after which the audit firm shall not be reappointed in the company until after a period of another seven (7) consecutive years.
Recall that it is standard practice that the MD/CEO and all the executive directors of the company should not be members of the Audit Committee. The audit committee of the board should consist only of the Non-executive or independent non-executive director of the company.

A classic example of the effect of a poor governance structure found in a company

One notable abuse of these principles is found in Cadbury Nigeria Plc’s case. In 2006, Cadbury Nigeria filed with Nigeria’s Securities and Exchange Commission its annual report and accounts for years 2002 to 2005 which contained untrue and misleading statements. Investigations revealed that Cadbury Nigeria’s former chief executive officer (CEO), and its former finance executive director, had deliberately made overstatement of the company’s financial position over the course of a few years to the tune of between N13 to N15 billion in connivance with the Company’s heads of accounts, internal audit and sales operation and supported by the company’s board chairman.

Further studies revealed that the Audit Committee of Cadbury Nigeria consisted of 3 executive directors, against the standard practice described above. The head of internal audit and members of Audit Committee also failed in making proper recommendations to the board at meetings. They also failed to examine the auditor’s report to review and make appropriate recommendations on management matters with the external auditors. Luckily enough, the discovery of this fraud has to be the most timely intervention that saved the company from filing for bankruptcy, especially as it had actually made a loss totaling N5 billion during the period.

Failure On Strategy and Planning

Finally, one recurring problem in most companies from my experience is the absence of any formal strategic framework for the companies. In the current era of disruption and innovation, not having any comprehensive policy on strategy is foolhardy. Any company that wishes to survive and adapt must strive to remain relevant through strategies. To this effect, the following best practices must be adopted and reviewed on yearly basis by boards of companies:

The board should adopt a plan detailing the strategic priorities for the company and how it expects this to be actualized.
It must also dedicate enough time to strategy planning and must as a matter of urgency define annually the most significant issues facing the company in order to build extensive regular discussion of these issues into the Board meeting agenda.

When this is done, the company’s performance, relative to the general state of the economy, is bound to improve.

The Bottom Line

Issues around a company’s failure or success is neither here nor there, since there are different economic, social or even political factors that may influence a company’s existence over a period of time, but the principles of building a sustainable company are almost always the same. Some of these principles as discussed above are so important that a company wishing to build a long-lasting legacy cannot do without them.

On the other hand, small companies seem, however, to be having a hard time understanding that a company is a separate legal entity from the owners, an issue which they must quickly address, if the future would be any near brighter for them.

Reviewing the effectiveness of every company’s board is a good way to start towards building a sustainable company in Africa.

Charles Rapulu Udoh

Charles Udoh has worked with companies in insurance, finance, banking, leasing, investment funds as well as real estate to strengthen their board effectiveness. He could be reached at udohrapulu@gmail.com or charles@teamnominees.com

How I Failed as Founder of iStrategyLabs (ISL)

Yesterday, after more than 12 years, the company I founded no longer existed except in scattered remains of content strewn across the internet — and of course in the hearts and minds of those who engaged with iStrategyLabs (ISL) in some way. It’s been 18 months since my retirement from ISL — and I thought I’d processed all my emotions related to it, mostly by trying to kill my ego, but I wasn’t prepared for ISL to be shuttered so soon (more here) as I watched impotent from afar. Here’s some of what ISL did if you’re curious:

ISL 2019 Reel

I know that the 30+ person team that was just laid off will find great gigs in no time, as they’re some of the most talented designers, developers and strategists not only in DC but the country (a job offer thread on Twitter is here). But of course it stings to know that they’ve just been let go into a holiday break — I know how it feels. I was laid off in 2007 from an agency and I was scared, with only a few months of living expenses in the bank to keep me afloat. Three days after that layoff I started iStrategyLabs. It sucks to get laid off, but I know that so many people that worked at iStrategyLabs have already gone on to bigger and better things, and this crew will as well.

I should note that I was REALLY mad at the CEO and management of the agency that laid me off. I was mad for years. And I’m sure many of you are mad at me as well. This is not an attempt to change that. I’m writing to add just a bit more closure to this very real closure that happened this past week. And as you know, I can be selfish/self-focused so perhaps this closure is just for me. I appreciate you reading this anyway — and for considering my apology:

To all of you, I’d like to say this: I’m sorry. I didn’t expect things to work out this way post-acquisition. I didn’t expect that I wouldn’t be able keep going. I thought it would live well beyond me.

So for sake of context, and perhaps my own catharsis, here’s a little bit more of what happened: by 2016, we were on top of our game — winning awards, growing revenue by 100% year over year, and we had 7 companies that wanted to buy us. I thought that what we needed to get to the next level in this industry was to join a global network that had the ability to open doors for us everywhere. So I sold the company to JWT/WPP and it’s made a lot of people unhappy.

I didn’t know that after a 9 year streak of growing and winning — and feeling like a resounding success — that I would begin the process of failing. Not you…me. I began failing.

I tried and tried for two years to grow iStrategyLabs after the acquisition, and when we lost our two biggest clients within months of each other it was becoming clear that I was not going to be able to stem the tide that had turned against us. Clients were in-sourcing their social content, Google and Facebook’s in-house creative teams were giving away creative work for free in order to get media dollars from clients, and our juicy retainers were being challenged by upstart digital shops with lower prices — just like we’d challenged the establishment during our own ascension to a prosperous ~100 person shop. At that point I didn’t know what else I could do. We were now losing pitches because we were “too big”, or the politics of getting a part of a global account were just beyond my ability to navigate.

I failed at attempting to play a bigger game. Icarus flew too close to the sun…and the collateral damage is real.

Fast forward to today where iStrategyLabs is no more. I’m sure your trust in me — or whatever respect you had has been greatly reduced. So, for the first time in my life I really do feel like a failure. Of course it’s easy to say “no no, you did so much and it was so great for so long etc. etc.” But the goal I’d set out for myself was to build a company that would out live me, and at least prosper greatly after I no longer owned or ran it.

Why do other agencies prosper post acquisition but we didn’t? Why did I hit a wall in year 10, rather than break through it? I thought I was such a great CEO!? And now, I’m not quite sure what I could have, or should have done. If we hadn’t sold, wouldn’t the outcome have been just the same — only perhaps the doors might have stayed open a little longer?

These are questions that I’ve explored over and over — and the emotional components go very deep. Too deep for a blog post. If you find yourself in NYC sometime soon, reach out so we can chat. I’d like to hear how little you think of me so I can grow through hearing your truth. Or how much you loved ISL; that would be nice too. Here’s a collection of those comments just so we can end this post on a high note 🙂

Peter Corbett is the Retired founder of @iStrategyLabs. @Davos speaker. @GlobalShapers & @YPO #millennial. Bio: https://www.corbett.vc/about/

Charles Rapulu Udoh

Jack Ma Speaks on Essential Ingredients for Success in Life

December 23, 2019

China’s richest man and e-commerce billionaire Jack Ma has been teaching on the basic traits needed to succeed in life, and in business especially in this age of Internet of Things (IoT). According to Jack Ma who recently relinquished his position as Chairman CEO of e-commerce giant Alibaba.com, there is need for people to focus on continuous education, education he said is the “most important and critical issue” of our time. His concern: the world is changing fast, but education is not. He noted that his formula, however, is not to focus on curriculum or accountability, but on students’ capacity to love.

Jack Ma, Chairman CEO of e-commerce giant Alibaba.com

Speaking on his formula, Jack Ma said that “if you want to be successful, you should have very high emotional quotient (EQ), a way to get on with people”. He highlighted that “if you don’t want to lose quickly, you should have good intelligent quotient (IQ),” adding that “if you want to be respected, you should have love quotient (LQ)—the quotient of love,” he concluded. “The brain will be replaced by machines, but machines can never replace your heart.”

Jack Ma spoke that his formula fits well with the theme of the conference in Paris, where the OECD released the latest results of its worldwide test of 15-year-olds and discussed how to move education systems from traditional exam factories to places where kids learn content, but also self-knowledge, empathy, teamwork and agency.

The head of the OECD’S education unit Andreas Schleicher, applauded Jack Ma’s “radical” approach. Educators talk about the need for holistic reform a lot, but business leaders more often focus on education as a means to train future workers (rather than nurture well-rounded humans). Schleicher said Ma’s key message was spot on: we’ve spent a lot of effort on how we feed people—that is, the education they receive—but not enough on what we feed them.

In the future, Ma said everything had to be on the table: teachers, classrooms, and students. Classes will not be in discreet 40-minute units, teachers will not be the ones with all the knowledge, and educators will emphasize asking the right questions, not just getting the right answers. “If you focus on standardization, everything can be replaced by machines,” he said. Many educators dispute this approach, arguing that knowledge should not be undermined, and that schools should focus on discipline and high academic expectations.

Jack Ma professed himself an “amateur” educator. But he is not without experience: he failed his university exams a few times and eventually got into a teaching school. Back then, he said, people who failed at traditional achievement—top universities—became teachers. He said that teaching imparted important lessons he used as CEO—he even dubbed his job “chief education officer” at Alibaba. “I learned everything I learned from being a teacher,” he said. “Inspire students. Trust students. Believe in students. Enable them.”

Pointing out the essential ingredients for quality education. He suggested investing more in early childhood, when kids are building skills and values, and less in universities, when values are already set. “Please put more resources on the front and not in the back,” he said, suggesting kindergarten and primary schools have tremendous leverage to shape kids. He also advocated supporting teachers more robustly. “If we respect teachers we respect knowledge and we respect the future,” he said. Increase their pay and help headmasters with leadership training, since 60% of teachers leave the profession because they don’t like their headmasters.

He said education needs to change its key performance indicators, namely exams. He often asks students why they work so hard for their exams and they always say it is to get into university and go on to get a job. But at Alibaba, he said, they have to retrain university graduates to do their jobs well.

“University does not mean you are guaranteed a job,” he said, adding that he doesn’t hire from MIT and Harvard because of the names, but because the people come “ready to learn their whole lives.” In a memorable zinger, he said that a university degree was nothing more than a “receipt for the tuition paid.” He joined the zeitgeist by calling for kids to better confront failure. “It is not natural for people to help you,” he said. “You need to learn to be rejected and refused.” Indeed, he was rejected from Harvard 10 times.

Finally, he suggested education had to become more global, and more focused on teamwork. (China, he noted, was terrible at this: it succeeds in individual sports but not team ones.) The way to accomplish this is more arts and dance, painting and team sports. He’s started a school where there is no after-school tutoring but there are after-school sports.

Last century, he said, was won by muscle, while this one will be won with wisdom. Or as he put it another way, “last century we win by caring about myself, this century we win by caring about others.”

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Why Founder, Adam Neumann Cashed Out Early From WeWork ’s Failed IPO

December 22, 2019

WeWork co-founder, Adam Neumann, is under intense scrutiny from potential IPO investors for cashing out more than $700M ahead of the company’s IPO. In fact, Neumann has been reducing his position in WeWork since 2014 and I would argue that startup founders could learn a lot from his diversification efforts. Investors like Benchmark’s Bill Gurley are critical of such sales, but given the binary nature of the startup game these early sales are prudent. While Neumann provides a good example for diversification his conspicuous consumption can give founders a good idea of what not to do as well.

When Adam Neumann co-founded WeWork almost a decade ago he was advised to diversify his holdings during each funding event. Following that advice, beginning five years ago, he began selling his shares each time the company raised capital. To date Neumann has personally raised more than $700M from these diversification efforts. Typically, investors are critical of pre-IPO sales by founders, but they are more common than you might think.

Zynga Founder Mark Pincus — Sold $100M Prior to IPO
Groupon Founder Eric Lefkofsky — Sold $300M Prior to IPO
Snap Founder Evan Spiegel — Sold/Borrowed $28M Prior to IPO
Slack Founder Stewart Butterfield — Sold $4M Prior to IPO
Secret Founder David Byttow — Sold $6M Prior to IPO (Chapter 11)
Buffer Founder Joel Gascoigne — Sold $2.5M Prior to IPO

While Bill Gurley’s fund is an early investor in WeWork he made it clear that his criticism of founders who cash out prior to a company’s IPO were not directed at Neumann specifically. The truth of the matter is if a company has a successful IPO no one will remember early sales by founders. On the other hand if a company fails founders risk scorn (or worse) from the investment community. For example, when Secret blew-up shortly after co-founder David Byttow sold more than $6M of his shares, Bill Maris from Google Ventures suggested that they had been robbed and demanded that Secret’s founders return the money. For most founders the answer is simple: take the money when you can get it.

While it makes a lot of sense to diversify, founders should be VERY careful about how they spend their new found wealth. Neumann is perhaps the perfect example of what not to do. With his $700M pre-IPO warchest, the WeWork founder, has spent more than $80M on at least five homes including $10.5M Greenwich Village townhouse, $15M Westchester farm, $1.7M Hamptons house, and $21M Bay Area house (including a guitar-shaped room). He also is leasing a condo on Gramercy Park for $46K per month while his townhouse is being renovated. While these purchases are examples of the sort of conspicuous consumption founders should avoid prior to their company’s IPOs — Neumann’s greatest sin may be his real estate purchases that have created unnecessary conflicts of interest for the founder.

According to the Wall Street Journal, Neumann worked with JPMorgan Chase to borrow against his stock to facilitate loans to purchase office properties in New York and San Jose — four of which he leased to WeWork who in turn pays Neumann millions in rent. Investors pointed out that JPMorgan could have easily arranged those same loans for WeWork directly. After inquires from the media WeWork announced that they were going to buy the properties at cost from Neumann to eliminate the conflict. This is just the sort of unforced error that founders who cash out early need to avoid at all costs.

Founders should take away two things from Neumann’s example — sell early and often but avoid conspicuous consumption (i.e. no houses, planes, boats, or cars). Of course, as with most of my advice I haven’t followed it — for example when I was in my 20s, just a few days after I raised $15M for my first startup I bought a convertible Porsche — a move that created terrible optics on so many levels.

Alexander Muse is a serial entrepreneur, author of the StartupMuse, and managing partner of Sumo.

Charles Rapulu Udoh

How To Distribute Equity Fairly in Your Startup

December 18, 2019

When working with startups (both as an investor and advisor), I like to focus on incentives. The more aligned your organization is, the better the performance will be.

Commissioned salespeople are hustlers. Ever buy a used car? They do anything to get the sale, but they don’t care about the dealership. The majority of their compensation comes from sales. They don’t get a piece of the bigger pie, so why help other salesmen? It’s a bit of a dog-eat-dog world.

The other extreme (Corporate America) is just as bad.

If you’re working at a startup, you don’t just want a job. Your goal isn’t simply a paycheck and benefits — you want meaning. And upside.

Founders are crazy. They have to be to fight to bring something radical and new into the world. And they magnetize others to follow them.

But early startup employees are crazy too. They believe in the vision of building something bigger — but they also “own” the company in a sense. This is their baby. They have a stake in it and they create the culture from day one.

But it isn’t all fun and games…

A Pirate’s Life for Me?

Being a pirate is a lot like joining a startup — a rebel on the high seas setting sail into the unknown in search of treasure and adventure. And the seas aren’t usually smooth, but the rewards can be life-changing.

For ships to function, the entire crew must be aligned. Every mate has their job. Everyone relies on everyone else. There is little room for error, and the opportunities to die are endless.

The Pirate Captain

Everyone knows the captain is in charge — at least that’s the myth. In reality, leaders succeed (and survive), only when their crew permits it. Too much trouble, running out of food, stock price plummeting… mutinies occur. The collective pick the person who’s most able to help them achieve their goals. If it’s not you, you’re out.

It’s a bit like game theory.

That’s the motivation for this post: the pirate’s riddle. In essence, a captain has 100 gold coins. How does he divide them among the four members of his crew to maximize his share? Keep in mind the majority can throw him overboard if they feel cheated.

The riddle isn’t important. The consideration of others in the equation — specifically the equity equation — is.

Startup Equity

How much is too much?

That’s the number one question I get from founders. We’re hiring a VP of this or a head of that, and I don’t know how much equity to give them.

Fred Wilson has a great system here, but he also says:

“For your first key hires, three, five, maybe as much as ten, you will probably not be able to use any kind of formula.”

Alternatively, Leo Polovets of Susa Ventures presents another well-thought-out, data-supported strategy.

At 1–10 person companies, 0.5% — 2.0% is a pretty common range, though some companies fall outside of this range.
For 11–50 person companies, 0.1% — 1.0% is typical.
For 51–200 person companies, 0.01% — 0.2% is typical.

The truth is, there’s no perfect formula.

Instead, I encourage founders to consider the pirate example — see things from other people’s eyes. A smaller piece of a big pie still beats a personal pan pizza, but this can get founders in trouble as well. Being too free-wheeling with equity is dilutive and dangerous (although Sam Altman of YCombinator recommends being even more generous with equity).

Investors especially focus on this. I won’t invest if I believe the dilution required from future capital raises will demotivate the founder.

At a certain point, you can only give away so much of your company before it doesn’t feel like yours anymore. This is a trap. When founders own too little, the drive to build dies. It becomes a situation of a forced sale (or CEO replacement).

Somehow, investors want liquidity. And if the founder isn’t the one to bring the business to the promised land, the board will oust them.

No founder wants that. For a well-thought-out growth plan on equity and future employees/dilution, see this post by Andy Rachleff, CEO of Wealthfront and Partner at Benchmark.

Company Culture: More Than Just Equity

Sure, shares are great, but ownership of an idea is often better. Employees need to feel like they’re part of the mission. The best founders create this culture early on. They work the phones, handle customer service, ask employees for advice and suggestions, and create relatively flat organizations.

There are many ways to make employees feel empowered. Here are three of my favorites:

Transparency/Company Updates — Think investors updates, but for employees. In a startup, it’s easier to trust the captain when you’re kept in the loop and see where the ship is headed.
Epic Job Titles (or none at all) — Bonobos has Customer Service Ninjas. That feels and sounds significantly cooler and more important than customer service agent (and gets way more applicants). Make every role mission-critical.
Encourage Brainstorming/Debate — Ray Dalio of Bridgewater Associates (the world’s largest hedge fund with $160B AUM) has a policy of “idea meritocracy,” where everyone has a say and the best decisions win out.

Game Theory and Investors

The dynamics above are similar for investors as well. VCs and angel investors invest to make money, and they need returns to stay in the game. By working with your company, they signal that they believe in your startup.

But not all investors are created equal. As a founder, you must weigh investment offers carefully. All money isn’t good money.

Sure, all cash keeps the ship afloat, but specific capital often accelerates progress.

Sequoia or Benchmark can open doors for founders. Simply being funded by the darlings of Silicon Valley will get you meetings and give credibility to the investor community. And it helps with recruiting and sales. Plus, you’ll probably need more money, and Sequoia leads all VCs, continuing to follow on with 87% of their investments.

The network is key, too. Different investors run in different circles. And depending on your product and business, certain investors add significantly more value than others. This is especially true for industry-specific funds/investors. When a firm has industry experience, complementary portfolio companies, and connections to the enterprise buyers, they bring a lot to the table.

Accordingly, you should think long and hard about their offer, even if it’s below market rate. The right partner puts you on a path to a bigger pie.

But investors are not everything — they’re a small piece of the puzzle. And if one specific investor will make or break your company, you have bigger problems. Investors look for entrepreneurs that will succeed on their own, no matter what. We want to add fuel to these fires to help accelerate growth.

The Bidding War

When deals get hot, they can get dangerous. As a founder with a rapidly rising valuation, it’s hard to see how you can get burned. But you can.

The problem with valuations is expectations. Raise too high and the next round must exceed it. No one wants a down round. And $10M pre vs $20M pre have vastly different metrics.

Work with investors or advisors to plan out future fundraising. They should be able to help you with targets to aim for.

As a rule of thumb, Series A investors want at least $100k in MRR (monthly recurring revenue). Many founders are shocked by this (specifically by the amount of traction needed). But the fact is, if you don’t understand expectations you will come up short and fail to raise — or raise with bad terms.

Think carefully about this. The valuation isn’t the end game. It isn’t even that important — equity ownership of a rocketship is. Don’t get seduced by the big numbers…

The Problem With VCs

Most venture firms need to own at least X% of the company to make the economics work. This presents problems when you want less money. If you’re looking to raise $1M at a $10M pre and Andressen “has to have” 20% of the company to invest, you’re looking at 83.3% more dilution.

Here, competition can help. The more investors interested in your company, the more leverage you have. If Andressen really wants in and other investors are willing to match your ask, you might be able to negotiate.

The Flip Side

Raising money at good terms when you can is almost always a good idea. You never know when the capital markets will change or a key aspect of your business will fail. A war chest allows your team to continue or pivot as necessary — without relying on outside capital.

And in business, nothing is ever guaranteed.

Many investors are understandably wary of bridge rounds. They often ask, “Is it a bridge just to nowhere?”

But with money in the bank, that isn’t important. An extended runway lets startups figure things out and even make a few mistakes, and still have a shot at their goal…

It’s your choice.

Riding Off Into the Sunset…

The best startups are like special forces — a deadly unit where everybody busts their ass, does the dirty work, and keeps fighting until the bitter end.

And while developers might not take a bullet, their hardcore obsession with the mission drives disruptive innovation. 100+ hour work weeks are not uncommon — everyone is 100% committed (especially if they have equity…).

And while it’s unhealthy, it’s often what’s needed to succeed. Startups try to do the impossible — they take on the world, and they win. That takes superhuman effort.

You’re asking employees to risk everything to make your dream a reality. The best way to accomplish a dream is to help your team accomplish theirs.

Look at equity, look at incentives, look at culture — each plays a critical role.

Closing Thoughts

Pirates are pretty cool, and so are startups. But the truth is, both are glamorized. It’s a hard life filled with ups, downs, and uncertainty. The thing is, having an awesome crew can get you through tough times.

For founders: how have you handled equity in the past?

For investors: any advice from portfolio companies?

This is a hard balancing act — but getting it right sets your startup up for success. And remember, 10x employees are irreplaceable. Hire the best and you’ll always beat the rest.

Matt Ward is a startup advisor and entrepreneur

Charles Rapulu Udoh

10 Important Startup Lessons For Founders And CEOs

December 15, 2019

Managing Director and Global Head of M&A at VantagePoint Capital Partners

CEOs and founders of startup businesses face many challenges: raising startup capital, building a management team, developing competitive products, starting a marketing program, finding early customers, and more. The prospect of launching a new startup can be daunting.

We have collectively been involved in hundreds of startups — as founders, CEOs, angel investors, Board members, leadership coaches, venture capital investors, and business and legal advisors. In this article, we seek to provide advice and lessons for startup CEOs and founders based on our many years of experience.

When trying to motivate a team to perform at the highest levels, it’s critically important that a shared understanding of what constitutes success is crisply and clearly communicated to every member. Spell out in no uncertain terms, for the core management team, what success looks like in 18 months, in three years, and beyond.

CEOs and founders of startup businesses face many challenges — are you prepared?

The ten key lessons below then become strategic priorities to achieve the well-defined success that is your ultimate goal.

1. Hire the Right Team

Of course, you should hire the right people for your team — that is a truism. Smart hiring is an incredibly important factor to get right for the long-term success of the business. And CEOs should not be reluctant to terminate those employees who just are not working out.

Here are some key questions a startup company should consider before hiring an employee:

Does the employee have the requisite skill set?
Will the employee be nimble and entrepreneurial, or are they too used to being in a slow-moving corporate environment?
Will the employee fit in with the company’s culture?
Will the employee be adaptable and able to play multiple roles within the company?
Does the employee exhibit a passion for the business?
Has the company been able to obtain credible positive references?
Will the employee add to the diversity of the company’s workforce?
Is the employee smart and quick thinking?
Will the employee work well with other team members?

2. Focus on Keeping Employees Motivated and Happy

A big part of the job of a startup CEO or founder is to put programs in place to incentivize employees and keep them satisfied with their jobs.

Here are some ideas that many startup companies use to motivate employees:

An employee stock option/stock incentive plan that grants equity incentives to all or nearly all employees (subject to continued employment vesting requirements as an employee-retention mechanism). The typical vesting schedule is one-year cliff vesting for 25% of the incentive, and then monthly vesting over 36 months for the remainder.
Flexible work hours
Ability for the employee to work remotely from home from time to time
Quarterly and yearly bonus payments to high-achieving employees
Health and wellness perks
Generous PTO policy
Recognition for great work
Fun team-building activities
Regular employee feedback and encouragement
Celebration of team successes
Learning and training opportunities
Goal-setting programs and career-advancement conversations
Transparency from the management team
Company focus on work-life balance.

3. Be in Continual Fundraising Mode

Raising angel, seed, or venture capital financing for a startup is often difficult and time consuming. Savvy CEOs and founders know they must be in continual fundraising mode, or at least always be fundraising ready. Being ready entails a number of things, including:

Having a complete up-to-date investor pitch deck available to be sent to prospective investors
Being open and responsive to investor inquiries (even if you have recently closed a round of financing)
Having an ongoing PR and marketing campaign that can reach potential investors
Being introduced to new investors by Board members, company lawyers, and existing investors
Having a great 30-second elevator pitch ready to give at any time
Having an online data room housing the company’s key contracts, corporate documents, intellectual property information, and other documents that an investor will want to review for due diligence purposes

4. Expect Big Challenges and Be Prepared for Them

The biggest challenges to starting and growing a business include:

Coming up with a great product or service
Having a strong plan and vision for the business
Securing sufficient funding and maintaining reasonable cash reserves
Finding great employees
Terminating bad employees quickly in a way that doesn’t result in legal liability
Working more that you expected
Not getting discouraged by rejections from customers
Managing your time efficiently
Maintaining a reasonable work-life balance
Knowing when to pivot your strategy
Maintaining the stamina to keep going even when it’s tough
Understanding that you will have to keep at it for the long run

5. Build a Great Product But Don’t Take Forever to Launch

Your product or service has to be at least good, if not great, to start out with. It has to be differentiated in some meaningful and important way from your competitors’ offerings‎. All else follows from this principle. Don’t dawdle on getting your product out to the market, as early customer feedback is one of the best ways to help improve it. But you do want to launch a minimally viable product to begin with.

6. Focus on Becoming a Great Salesperson

Most CEOs and entrepreneurs are not natural born salespeople. But high sales numbers are often the biggest indicator of business success. Here are practical ways to become better at sales:

Be prepared to spend a large amount of your time in sales mode
Talk frequently to customers, in person or on the phone
Communicate regularly with customers via email
Try to understand the key issues for your customers: Is it features, price, ease of use?
Understand the product/market fit and why your product outperforms the competition
Have constant contact with your sales team to motivate them and to be aware of the challenges they are encountering
Understand your sales cycle and determine what you can do to shorten it
Practice and refine your sales pitch
While not everyone can be an extrovert, strive to be confident and positive
Listen to your customers and follow up with them
Ask for the sale

7. Make Sure to Continually Monitor the Company’s Key Financial Metrics

Even if a CEO or founder does not have a financial or accounting background, it is imperative that he or she constantly monitor and analyze the company’s key financial metrics. Failure to do so can have serious negative consequences for the business. Depending on the nature of the business, the following monthly key metrics will be important:

Cash burn (or monthly positive cash flow)
Gross revenues (and key components thereof)
Gross expenses (and key components thereof)
Gross margin (the difference between revenue and costs of good sold divided by revenue, expressed as a percentage)
Lifetime value of a customer
Customer acquisition cost
Customer funnel metrics
EBITDA (earnings before interest, taxes, depreciation, and amortization)
Customer churn

8. Be Open to Suggestions, Advice, and Criticism

If you have a good team, you should listen to their suggestions and advice. Be open to new innovations and changes to your products, sales approach, and marketing strategy. Here are some ways other successful entrepreneurs have done this:

Hold company-wide meetings where employees at all levels can provide suggestions, insights, and improvements.
Practice an open-door policy for employees.
Get advice from other entrepreneurs who have dealt with similar challenges.
Set up an Advisory Board with people who can help your business and regularly consult with them (and motivate them by giving them stock options in the company).
Consider working with an outside CEO coach/mentor.

9. Keep Your Board of Directors and Investors Up-to-Date

Board members can be a great resource for challenges and problems faced by a CEO or founder. Keep in mind that Board members hate to be surprised at Board meetings with bad news.

One useful strategy is for the CEO to have a 30-minute call with each Board member individually before a Board meeting, previewing what will be presented at the meeting. This will allow the CEO to inform the members in advance and obtain advice that might impact what is actually presented at the Board meeting.

The CEO should also contact each Board member promptly when material developments occur. Depending on the nature of the matter, such contact should typically be by phone versus email, especially if potential litigation is involved (to avoid litigation discovery issues). Material developments could include:

Loss of a major client
Litigation or threat thereof
Claims of sexual harassment or discrimination
Material deviations from the Board-approved budget, especially if it affects cash on hand
Proposed hiring or firing of executive officers
Inquiries from potential acquirers
Governmental or regulatory inquiries
Data breach or cybersecurity issues

It’s also good practice to keep your investors updated on a monthly basis via email. The updates don’t need to be incredibly detailed, but here are some general items you should consider including in your updates:

Summary of the progress of the company
Summary of product development
Team and recruiting update
Recent press or PR
Key metrics you are paying attention to
Financials, including monthly burn rate and current cash position
Strategic issues you are facing
Request for help by introduction to prospective investors, partners, and customers (you want to leverage their networks)

You want to maintain great relationships and connections with your investors. And you don’t want them to be surprised when you need to go back to them for additional financing.

10. Be Aware of Important Legal Issues

Ignoring key legal issues can sink a startup. CEOs and founders should ensure that the company is taking steps to comply with applicable laws. Here are a number of the key legal points to focus on:

Has the company been properly organized?
Has the company complied with applicable securities laws in issuing stock or options?
Are appropriate steps being taken to protect the company’s intellectual property (such as through trademarks, copyrights, patents, non-disclosure agreements, etc.)?
Is each employee and contractor required to sign a comprehensive Confidentiality and Invention Assignment Agreement (assuring that any intellectual property developed by the employee or contractor related to the business of the company is deemed owned by the company)?
Does the company have appropriate policies in place to prohibit sexual harassment or discrimination?
Is the deal with any co-founders clearly documented, and in the event of a departure is it clear that there won’t be a dispute about the company’s equity ownership?
Does the company have a great form of customer contract, protecting the company and mitigating liability exposure?
Does the company obtain all the required documentation from employees (e.g., at will employment letters, benefit forms, IRS Form W-4, USCIS Form I-9, etc.)?

Conclusion

For startup founders and CEOs, it’s key to articulate to the team a clear vision of what constitutes success for the company. Offering that clear, shared vision of what you are all trying to accomplish helps to galvanize and energize the entire company. Incorporating the ten key lessons set forth in this article can help a CEO or founder achieve this success.

Richard D. Harroch is a Managing Director and Global Head of M&A at VantagePoint Capital Partners, a large venture capital fund in the San Francisco area.

Mike Perlis is an accomplished CEO, investor and Board member.

Mitch Zuklie serves as Chairman and Chief Executive Officer of Orrick, an international law firm.

Charles Rapulu Udoh

Startup Growth and Venture Returns: What We Found When We Analyzed Thousands of VC Deals

December 12, 2019

Abe Othman , Head of Data Science, AngelList

If you miss the best-performing seed investment, you will eventually be outperformed by someone who blindly invests in every credible deal.

Conventional investing wisdom tells us that VCs should pass on most deals they see. But our research indicates otherwise: At the seed stage, investors would increase their expected return by broadly indexing into every credible deal.

That’s one of the results we found when we analyzed the thousands of deals syndicated by AngelList over the past seven years to test assumptions about the nature of venture capital returns. We’re presenting these findings in a first-of-its-kind report out today, Startup Growth and Venture Returns.

Theoretically Infinite Regret

According to our research, missing the best-performing seed deal can cause you a theoretically infinite amount of regret. What does that mean? Consider Mark Suster, who passed on the Uber seed round and was quoted in the Financial Times saying: “Aaaargh.”

How can you avoid missing the best seed deal? The simplest way is to put money into every credible deal. Maybe you have a crystal ball that gives you perfect foresight, in which case you can pick only the best winners. Even then, if your crystal ball is even a little cloudy eventually you will miss a winning deal—and that winning deal might have been the best-performing investment.

Simulations on 10-year investing windows for seed-stage deals suggest fewer than 10% of investors will beat the index, even if those investors have skill in picking deals. Like Vanguard has taught us in the public markets, individual investors could benefit from viewing the index as the default and then overlaying individual deals that they like.

How Startups Grow

Seed-stage returns tend to be more extreme than later rounds for two reasons: Startups tend to grow faster earlier, and seed investments have longer to compound these higher growth rates. By the time these companies go public, their growth rate has tailed off (consider Uber again, but this time at its IPO). We used AngelList data to compare the relative value of each year of a startup’s life on its compounded returns. We found that growth drops off in a startup’s second year of funding and continues to decrease from there:

Companies Staying Private Longer

Startups are staying private longer, meaning a powerful wealth-creating engine now exists entirely in the private markets. That’s why in our response to a recent SEC Concept Release we proposed steps to open broad-based early-stage venture capital indexing to the 90+% of retail investors who are unaccredited, while maintaining appropriate investor protections.

Disclosures

This post and the information contained herein is provided for informational and discussion purposes only and is not intended to be a recommendation for any investment, investment strategy, or other advice of any kind, and shall not constitute or imply any offer to purchase, sell or hold any security or to enter into or engage in any type of transaction. Any such offers will only be made pursuant to formal offering materials containing full details regarding risks, minimum investment, fees, and expenses of such transaction.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Download the Report here

Abe Othman is the Head of Data Science, AngelList

Charles Rapulu Udoh

Four Years & Two Million Dollars Later, Lessons from a Failed Startup

December 9, 2019

Bassel Idriss, Co-Founder & Chief Executive Officer — Formidable Microfactory

If you’re thinking of starting your own business because you’re after the ‘glorious’ end and not the journey getting there, don’t bother! … If you’re not tenaciously persistent; get excited by seemingly insurmountable challenges; easily swayed or care too much about what others think and say, don’t bother! … If you think failing will be the ‘end of you’, also, don’t bother!

At Generics, we set out to solve for poor fitting, uncomfortable earphones. We mak(d)e custom eartips to the shape and size of individual ears through an App, photogrammetry and 3D Printing. I failed to raise cash fast enough to scale. Here are some of the lessons I learned along the way.

Make sure you’re really solving a problem, not a nuisance.

A solution to a ‘problem’ or pain-point is a must-have. Conversely, a solution to a ‘nuisance’ is a nice-to-have. You’re looking to deliver a pain-killer, not a vitamin! Solving for a problem will dramatically improve your chances of success. The added bonus of solving for a big, difficult problem is a higher barrier-to-entry and fewer competitors. If you don’t know how big the problem you’re solving is, find out quick. Ask ‘potential’ customers and consumers, not family and friends, whether they will go out of their way and pay for your product. @Generics, we knew the problem was prevalent, however, today, judge it was more nuisance vs. pain-point for most people. Be brutally honest with yourself.

Deliver the simplest solution to the problem.

In startup jargon, this is the minimum-viable-product (MVP). Don’t fall into the trap of ‘just one more feature to make product great’. Despite all your efforts to make your first product perfect, it will not be! Don’t waste time and resources trying to achieve the impossible. Just make sure your product provides value to users. Develop the ‘perfect’ solution later, when you better understand what your users want and have more resources. @Generics, we first made fully functional earphones. They had to fit well, feel comfortable, sound great, look beautiful, exude minimalism, have a rotating bezel, a removable ‘custom initials cap’, strong cable, cost less than $45… We should have focused only on making custom great fitting eartips for select earphone models, dropped everything else, we would have saved time and money. Be pragmatic, keep it simple.

Start fast, test faster and pivot faster still.

I took too long to decide I am starting my own business. Once I did, spent too much time developing an intricate business model that later proved worthless. Took too much time figuring out how to ‘sell’ my PowerPoint to investors. Took too long to raise money. Took too long to develop the MVP. To go-to-market. Almost 3 years! To get ‘paying’ consumers feedback. Took too long to make our first pivot, a little faster but still slow for our second pivot, even though I knew 73% of startups pivot (EPFL University). At the time, each of these felt really important and merited I spend ample time to get right, in hindsight, while important, they simply took too long. I should have skipped or completed much faster applying Pareto’s law. Don’t waste time, once your mind is made up, take the plunge, go all out, focus on the big things and correct course when you know you’re heading the wrong way.

Develop and test your ‘go-to-market’ as you build product.

Developing your commercial plan after you’re done building product is too late! Testing various go-to-market models will yield priceless learnings that will impact and shape your product development. Tweaking product to reflect learnings after you’ve locked development will waste time and money. Early results will also flush out ‘red flags’. You would rather find out quick there is no demand to what you’re building so you tweak or abandon project ahead of wasting months and hundreds of thousands in development. Don’t fear getting feedback on a ‘half-cooked’ product. Call it ‘beta’ and sell it at a reduced price if you must. Customers and consumers who don’t like it will not hold a grudge against you. When developing your ‘go-to-market’ don’t just think brand equity and key benefit communication. Think of your audience, the customers and consumers who are struggling most with the problem you set out to solve. Think ‘How’ and ‘When’ you want to reach them. @Generics, our audience were daily earphone users who listen to music while working out. We wanted to reach them during their exercise regiment as they experience their pain-point. Test different channels, figure out what works best for you and optimise for cost. Leverage digital, like SEM and social media, test others. Gabriel Weinberg & Justin Mares Traction is a great resource to help set your testing framework and inspire ideas. Prove product/ market fit.

Understand the skill-set required to build your product and commercial plan, only hire for that.

Make sure you have the ‘right’ people working your project. ‘Right’ are those with relevant expertise and/ or experience, those who are persistent and will keep at it. Only hire individuals working on your core solution. Make sure to focus their efforts on solving for and delivering your core product. Prioritise and make a deliberate choice to shed anything not fundamental to your core product. This will give you the best chance at successfully delivering solution, fast, without overhead costs spiraling out of control. Tell ‘under-performers’ what they are doing wrong, give them weeks to correct, otherwise, they are not the right fit. You will hesitate to let people go every time you think of the immense effort and time you must re-invest into searching, interviewing, on-boarding new team members. Time you could spend developing product and go-to-market. It remains the right thing to do. Keeping under-performing individuals will impact you more negatively vs. investing time to find the right hires. @Generics, it took me a while to figure out the required skill-set, didn’t find the right talent in the region, ended up developing product without a fully qualified team and only managed to do so due to the team’s intelligence, sheer will and extraordinary effort. Nonetheless, it came at a price! Sapped our energy and took way too long to develop. Another mistake was to front-hire, I expected a deluge of orders that never came. Hire for big impact, make sure individuals have the skills and attitude to succeed, hire slow and keep team focused on solving for core product.

Build traction. Build traction. Build traction.

Sell your product to every relevant customer and consumer you meet. Start selling day one, it’s never too early and it’s Ok if you start small! Apart from collecting learnings, it is imperative you build ‘sales-history’ or traction. Traction is like magic! With it everything is, at least, x100 times easier. Motivating yourself, your team and collaborators. Negotiating with suppliers, engaging your community and media. It is also pivotal for investor discussions. A growing sales trend over a sustained period proves customers and consumers want what you built. It is your single, strongest data point with potential investors. Growth hacking will help you get there. Apart from being one of startup world’s biggest buzzwords, growth hacking is combining programming and marketing know-how to get more and more people paying for and using your product. They need to become aware your solution exists, they need to feel compelled to try it and keep coming back for more. Sean Ellis & Morgan Brown’s Hacking Growth is an excellent resource to get started. @Generics, we held back on sharing product until we thought it was ‘perfect’. We also spent a lot of time developing equity, brand character and voice, tweaking our ‘look and feel’, however, kept it locked behind closed doors, didn’t test various channels, too afraid to reach out to our audience ahead of completing our product ‘masterpiece’. We wasted learning and optimisation opportunities. We disproportionately invested in ‘perfecting’ product and started building traction too little too late, when we had run out of money. Without traction our quest to raise more money and investor discussions were painful. Build traction.

Check your bias.

Yes you must be data-driven and yes you should ‘marry’ this with gut feel. However, what you think is right because of everything you learned throughout your career might not be right for your current challenge. @Generics, we developed a product to sell consumers. It was always very clear, we are a direct-to-consumer proposition, that’s what I have always done throughout my career. I am a Business-to-Consumer model guy. I overlooked the amount of resources it takes to build awareness, trial and equity (unless you’re lucky and your product goes viral). Throughout my career I was supported by marketing powerhouses, there was always ‘minimal’ support; in startup world there is no ‘minimal support’ at your disposal. We should have focused first on selling to earphone manufacturers (Business-to-Business) vs. trying to sell consumers directly. Take stock, give your innate reaction another thought, (re)assess what others in your space are doing before you decide on your course of action.

Surround yourself with the right advisers, they make a world of a difference.

What is a ‘right’ adviser? Individuals that bring something tangible and fast to the table. Who are ‘advisers’? Mentors, board members, consultants etc. You are not looking for ‘head-nodders’, they will just massage your ego. You also want to avoid constant challengers, they will tire you. You want people who have expertise in a certain area you need, at a specific stage of development, action-oriented and will say it like it is. Leverage advisers to solve a clear imminent challenge, such as introducing you to your first customers, retailers, partners, investors. Give you fast access to legislators and influencers. They will remove ‘roadblocks’. Once up and running, look for more strategic, less operational advisers that can help you make the right decisions long term. Be mindful your requirements will change at various stages of development, change advisers accordingly.

When it’s time for investors, make sure you understand their mindset and needs.

Move East or West if you’re building a hardware startup. I judge it’s ‘almost’ impossible to succeed building hardware in the Middle East today. Two key reasons, you will struggle to find (i) individuals with manufacturing expertise and (ii) the right investors. ‘Regional’ investors are not interested in and lack experience with hardware development and startups. The challenges, potential pitfalls and myths of building hardware are ‘top of mind’: takes more money and longer to develop, a mistake more costly vs. software, constricted Arab borders make distribution very difficult. And they are spoiled for choice behind the region’s explosive software startups growth. The good news is these same investors are hungry for software startups, have way more experience working with them. Many have developed best-in-class models for assessing a startup’s potential and providing the required support. Do your homework, research potential investors prior to engaging them, understand their mandate, startup portfolio, affinities and selection criteria. There is money out there for ‘software’ startups, you can get it.

Brace yourself for an emotional roller coaster ride (with a physical toll).

A snippet from my ride: Happiness at locking first round of funding… excitement at bringing team together… thrill of first working prototype… despair digesting magnitude of challenge… anguish at delayed production… delight at mass production completion… some sleepless nights… joy at beating crowdfunding target… gratification with first units shipped… elation and despair reflecting on early consumer feedback… anxiety with pivot… misery of new investor rejections… pride with 3rd party product endorsements… a few more grey hairs… heartache with more investor rejections… a minor slipped disc… distress with further investor rejections, as we run out of cash, as sales slow down to a trickle and higher cholesterol levels. The physical toll might be a consequence of me starting my entrepreneurial journey at 40, I am almost sure though stress played a co-starring role. My investors, friends and more importantly family were supportive, without them, I would not have kept on. Reach out to your confidants for emotional support when you need it.

I also made a few promises to myself early on that helped keep me steadfast, here are a few:

I promised myself to stay upbeat, optimistic and believe in what I am doing in the face of setbacks. Some days were really tough, I was tested on multiple occasions. Externally… I kept my promise, internally… I doubted myself on occasion, but kept going for my team, investors and self
I promised myself to stop if I am not learning. I am a better business person today vs. 2015
I promised myself I would not compromise my family’s pre-entrepreneurship ‘standard of living’. I slipped here, I intend to make it up over the next few years
I promised myself (and partner) to cap my losses at two thirds of my savings. Knowing when to call it a day is mandatory. I delivered.

I didn’t deliver on my goal: a successful, thriving business. Despite this failure, I loved and embraced the journey. I would do many things differently, however, after a recharge, I would do it all over again!

Bassel Idriss is the Co-Founder & Chief Executive Officer — Formidable Microfactory