Category Archives: Management

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April 20, 2011

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Board of Directors, Dealing with VCs, Management, Startup Life

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3 Up / 3 Down

I was talking with one of the CEOs that we work with the other day about the “weekly update”.  See https://ithacavc.wordpress.com/2011/02/28/the-weekly-update/.  This post presents a variant to it.  Don’t get me wrong, I still love to get weekly updates and still love the purposes they serve.  The critical purpose on top of my mind this morning is “unity”, as in getting the entire team unified on an ongoing basis.  The team is not just the board, but the whole management team as well.  I encourage CEOs to send their weekly updates to their management teams (sometimes editing is necessary, but not often).  The “unity” purpose falls under “amazing communication tool” that I wrote about in my earlier post.

3 Up / 3 Down is a variant of the weekly update (perhaps call it the little sibling – not quite as mature as big brother or sister).  In total it might be 6 sentences (yes, even a recovering lawyer like me can do that math).  On Sunday night, as a way to start off the week with a unifying message to the team, I am suggesting that CEOs (or other person in charge of the update though typically it is the CEO) who have been unable to write a full one page update (and the best updates are not longer than one page IMO), simply write down the 3 things that make them feel up and the 3 things that make them feel down…….and then press “send”.   Obviously the points should relate to the business.  And my guess is that this should take between 5 and 10 minutes max.  Once sent, the board of directors will know what is on the CEO’s mind, the management team will know as well and the CEO will be building unity (among other things).

Now that I have suggested this, I am going to start doing it by sending my 3 Up/3 Down to my venture fund partners.

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April 2, 2011

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Management, Startup Life

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Interview Questions

Coming up with good interview questions is an art, particularly when you are interviewing people for executive positions.  I have a list of questions that I like to augment from time to time.  Some questions are quirky, some are predictable, and some are a little weird.  Purposely weird.  My general theme is to test how the candidate will react in a startup environment and deal with/treat people (including board members) in that environment.  After all, leading a startup takes an organizational behavior skill set.  Here is a sampling (in no particular order):

  • If given the choice, do you sit in the exit row on an airplane?
  • Do you accept phone calls from “restricted” numbers?
  • Do you keep your own calendar?
  • How fast do you normally drive in a 65mph zone?
  • When is the last time you actually created a PowerPoint?
  • How many unread messages do you typically have in your inbox at 5pm?
  • What is the last book you read?
  • What blogs do you read?
  • Do you know what DealBook is?
  • What do you value more:  product launches or business development?

I realize that some of these questions are practically silly, but I honestly think that keeping your own calendar is a signal of possessing important startup survival instincts.   Likewise, driving the speed limit is a sign of caution; driving 20 miles over a sign of recklessness; and driving, say, 75mph is aggressive bliss.   I could give a similar ditty about each of these questions.

If you like, put your favorite questions in the comments and I will assemble a list and post it up.

Been a crazy week, complete with a 5.5 hour board meeting (that was actually awesome).  Often times, board meetings over 3 hours signal some unpleasant issues.  This week’s was a nice exception.

Enjoy the weekend.

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March 15, 2011

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Management, Startup Life

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Tech Founder Wins at Early Stage

At the early stages of a startup, the founding team is probably the most important variable of success.  As a company matures, the concept of “founding team” is replaced by “management team”, which may and hopefully includes the founders.  The management team continues as the critical success factor.

Focusing on the early stage, the founding team typically will have a tech oriented founder and a business oriented founder.  It may have multiple people in each category, but for purposes of this post, let’s assume one tech founder, one business founder and then some additional “first employees”.  It would be normal for these first employees to be involved in product development.

There are many blog posts (from others) written about founding team composition and the importance of picking your co-founders carefully.  I am not going to focus on those aspects.  Rather, I want to focus on one interesting aspect of the relationship between the tech founder and the business founder.

At Cornell, where I teach, it is not uncommon for a Johnson School student (business school) to meet up with a tech oriented graduate student from another Cornell department and actually start a company.  This combination can work very well, and I strongly encourage my Johnson School students to do just that.  But, with one big piece of advice:  once you raise money and before the company’s product takes off, the tech founder is in the driver’s seat. My point is not to cause anxiety.  Rather it is to make sure that both founders (yes, I want both to hear the advice) understand the reality with the hope that they will interact with each in a more informed manner.

Let’s play this out a bit.  Company XT has a tech founder and business founder.  It has a great idea and developed a great product concept (stress concept – product not yet launched).  Based on the work, Company XT has raised $250,000 in its first round of outside financing from an angel group or early stage VC.  Importantly, the “money” has a seat on the board and is actively engaged.  The other board members are the tech founder and business founder.  The company’s burn rate is only currently $15,000 a month (and expected to increase over time), so that $250,000 will last, say, 12 months.

At the end of month 4, the tech founder raises competency issues to the “money” board member about the business founder.  They discuss the issues, but after a few weeks of hashing them out, it becomes clear that the tech founder is unwilling to continue working with the business founder.  The tech founder’s reasoning may be justified or might be questionable.  What happens?

In the usual case, there is no way to complete the Company XT product without the tech founder and the only way for the investor to see a return is for the product to launch.  In essence, at this stage, product development defines the company.  Sure, the product may change prior to launch and end up directionally in a different spot, but the product “owns” the company.

There is only one choice – replace the business founder to make sure the tech founder stays engaged.  The first time this happens, the tech founder basically uses a hall pass and the business founder is shown the door.  If the issue comes up again, all bets are off, but it is not surprising to see a second hall pass used by the tech founder.  A third time, different story – you should just hope the product is launched by then.  So watch out – founder issues are the most likely cause of company death at the early stage.

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March 11, 2011

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Board of Directors, Management, Startup Life

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Outside Board Member(s)

At a startup, there are a few critical “must haves”.   Funding cushion.  A great management team. A product that customers care about and want to buy.  Those are obvious list makers.

Additionally, I would definitely include a high quality outside board member (OBM), or if you are lucky, two of them, on the must have list.  The value that an OBM can bring is huge.  And that value comes in a variety of forms.

For clarity, an OBM is a person who is not an employee, founder or representative of a significant investor in the company.  They might invest eventually to take advantage of an opportunity, but the investment amount would tend to be small (say $25,000 – $100,000).  The OBM at a VC backed startup is usually compensated with equity.  The OBM is someone from industry who has relevant operating experience, marketing knowhow, or other expertise that the company needs.

In a typical startup board configuration (post venture funding) you might have 5 board members, with 2 being founders, 2 being VC representatives and 1 being the OBM.  There is no magic to this, and you might also have 6 board members, with 2 OBMs, or 3 board members (founder, VC and OBM).  Note that an even number of board members bothers some people (as in “who will break a tie?”), but not me.  I have rarely seen a significant board decision not be unanimous and have never seen a tie.

Back to the value of the OBM:

First, the OBM brings balance to the board.  I strongly prefer that the founder/CEO source the OBM.  That sense of empowerment is good.  And, when it comes time for the OBM to make hard decisions later, the fact that the founder/CEO sourced him/her makes the overall decision making process feel more balanced all around.  This is a particularly true if the OBM agrees with the VC board members on a given issue.

Second, an engaged OBM can really get things done.   I have experience with an OMB who literally spends over 500 hours a year on company business.  He is only compensated with equity (though his package is enhanced), he seems to know everyone in the industry, and he absolutely loves what this company is doing.  We are lucky to have him involved.  And I am pretty sure he feels lucky to be involved with the company.

Third, new potential investors will look favorably on high quality OBMs.  They add legitimacy to the company by association.  They can bring valuable insights that new potential investors might want to hear.  Involve OBMs in your fund raising activities if they are willing.

Fourth, OBMs can be fabulous mentors to young CEOs and other management team members.  Sure, VC board members can be excellent mentors too, but there is always the element of enhanced control rights lurking.  OBM do not have that handicap.  With that said, I have witnessed an OBM telling the full board that the then current CEO (who picked the OBM) needed to be replaced.

There are additional benefits, but they fall into the same theme:  OBMs are incredible resources.  Find them with deliberation, engage them with fair equity packages and get them as deeply involved in your business as they are willing.

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March 4, 2011

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Management, Startup Life

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Connections, Connections, Connections……Execution

I am frequently amazed by the quality of contacts that CEOs and Bus Dev executives can generate.  Yes, it is part of the job, but sometimes the success of getting “in” with important people at key strategic companies/partners is awesome.  I think of myself as an outgoing person, but am not sure I would have such success.

Then I start thinking about business basics.  Connections are vital and a business basic, but they are barely meaningful without execution.  Management success is not measured by connections, it is measured by execution of a plan.  It is measured by the attainment of goals and business milestones.  Moving a business incrementally closer to a goal (for example, acquiring Customer Z) is exciting.  Attaining the goal and having Customer Z buy your product is thrilling.  Connections don’t execute.

As a board member, it is execution that makes me smile most.  I like to see the plan of attack and then measure success against the plan.   I care deeply about connections too.  But the connections do not get the company to revenue or the next financing.   My next goal is to figure out how to better use my LinkedIn and other social media connections to advance an execution plan!