Last month I gave a presentation at the Research Innovation Center in Mississauga, looking at the topics I discussed in my last post, and presenting some implementation of a CRM system, which I did for a client.
The video of this presentation is now available at http://www.youtube.com/user/RICCentre and the slides are here: http://www.riccentre.com/images/Greg_Boutin.pdf
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To any current or would-be entrepreneur, I highly recommend the following video of a presentation this month by Aaron Patzer, CEO of Mint, which was recently sold to Intuit for $170 million.
At first I thought it was a bit long, at 22 minutes, and so I figured I’d only watch the first few minutes. 23 minutes later, I am writing this blog post. Aaron goes over the start-up creation and growth process in practical details, even presenting slides from his own original pitch.
One thing, I’m not a fan of the first advice he gives, about focusing entirely on the product and hiring only engineers when you start, which has some truth to it in a number of situations but can lead to complete trainwrecks in others. Someone on the team needs to tie your development to a market need and a winning revenue model – it may not have to be a business person, and a well-atuned engineer can do that as Aaron shows, but it’s got to be someone with a certain ability to think ”market”. Leaving that detail aside, his advice is a gem.
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At Growthroute, we believe that start-up leaders should encourage candid inputs on their company and products, and be open to discussing things that don’t work. They should welcome that feedback at least as well as they receive compliments on their successes.
Highlighting deficiencies in due time (and offering solutions) gives entrepreneurs an opportunity to address them before they really hurt, while surrounding oneself with yes-sayers is a well-known recipe for failure – and yet still as common today as it was millennia ago. So you don’t want to surround yourself with either yes- or nay-sayers, you want smart folks who tell it as it is. In the age of twitter, getsatisfaction, yelp and blogs, being able to productively process their feedback - even when perceived as harsh - is more important today than ever before. Not doing it means not getting it.
It all starts within
In my experience, rowing in the right direction as a company requires a unique ability to invite, intelligently filter and incorporate constructive criticism. This ability must be built into your start-up culture and processes. It is absolutely critical not to prevent anyone -be it in your team or outside- from expressing substantiated concerns – and even less substantiated ones. And that starts with not punishing them when they do. Companies who don’t practice this miss critical market signals and drown in their own self-delusion.
It also starts at the top. The founders are usually the single biggest impediments to fostering a culture of constructive criticism. More than any other type, entrepreneurs tend to be driven by a strong love of freedom and independence, and we also like to be solely associated with the decisions that led our companies to success. While entrepreneurship pride helps us at many levels, unfortunately, it also makes it harder to open ourselves to criticism and learn from it quickly.
Have you experienced start-ups that felt a lot like the Church of Scientology? Where you were “in” or “out”. Part of the tribe, or outcast. Where performance mattered less than “fit” with founders, something so fickle it leaves everyone with a differing thought wonder whether they will be around the next day. You know, organizations where real decisions are taken behind close doors, people who don’t contribute anything are still around because the founders like them, and turnover is high.
Too many start-up founders think that to row in the same direction, team members need to be somewhat constrained in their ability to think critically. They establish a culture encouraging groupthink and “following the leader” – while punishing anyone voicing a different opinion on fundamental leadership matters . There, “team-playing abilities” actually mean “blind submission to the top”. That kind of personality cult and indoctrination may feel good for the founder but it’s not doing any service to the company. Silencing people who sighted the icebergs might help momentarily calm the passengers (including investors, often a key reason for the opacity – more than anyone, they should encourage a culture of transparency) but it doesn’t make danger disappear.
As entrepreneurs, please, let’s not require anyone to “believe”. Belief is not prescribed, it is earned. No one “believes” because you ask them to or pay them for, they believe because there is a good reason for them to. It’s our job to give them a reason. Don’t ask your people to “believe” in you and your ideas. Make them believe in your company by showing its capacity to fix mistakes, to correct trajectories and to produce great things as a result. Hire not followers, but people who showed they can accomplish great things and have a commitment not to you or even your vision, but to the success of the company.
At a company I previously was involved with, I highlighted – only after completing plenty of value-added projects as most there know well- that product development was well behind schedule (several release deadlines missed) and politely suggested that for a while, one of the founders might want to spend his time make the technology work as opposed to dealing with other matters. Most people in the team had the same concerns. Opening up my mouth was not in my direct interest, but in that of the company, and that’s why I did it. I also thought the founder would be clever enough to integrate that feedback productively instead of reacting to it instinctively.
Saying it publicly was interpreted as a lack of faith, and I was fired summarily. Keeping in line with the overall philosophy, at the time I was warned against talking publicly about my experience – the kind of things that makes you want to write a blog post about it. Much time has passed, but the company stagnates with a solution that, by all accounts, still doesn’t work and does not achieve traction. Many of my colleagues there, including my successor, have experienced the same fate and been ousted – scapegoats are obviously in demand. If that’s the culture you want to create, be ready for the results. Very sad, especially since it would be so easily fixable, and so much potential is lost by this approach.
Every company has problems. What differentiates the winners from the losers is the ability to recognize those issues and address them quickly and openly. Even a core deficiency can usually be fixed quite rapidly, once spotted. One just needs to be able to hear the signals. Foster an atmosphere of truth. Chances are everyone will row in the same direction if they feel you are going in the right direction and that they contributed to choosing it. People naturally want to believe and to contribute.
Same goes for outside critics
Repeatedly, founders make the mistake of thinking that journalists, product reviewers, bloggers, and other messengers threaten a company’s momentum. They don’t. What does is how good the company’s solution is, and how the company reacts to their feedback.
In practice, I am sometimes contacted and asked to comment on new products, especially on my blog Semantics Incorporated. I also pick new solutions on which I want to offer my impressions. In two cases since the start of this year, entrepreneurs expressed discontent when as part of my review, I highlighted a few core deficiencies (quite often even next to an ocean of praises!). One even launched personal attacks on twitter as a result (see my blog if you want to know who did ;)
I am not alone. In the recent and less recent past, unfortunately, I have witnessed quite a few entrepreneurs being keen on receiving public accolades but quick to dismiss any constructive comments – and even go out of their way to attack the commenter instead of recognizing her help, thanking her, genuinely asking for clarifications and clinically considering the comments as valuable inputs – which would be the right thing to do, and would gain them lots of public goodwill. Other entrepreneurs, like Andraz Tori when I criticized the email version of his product Zemanta (whose blog version I praise extensively and continue to use avidly – see at the end of this post) have done just that and earned my highest respect.
Being told that your baby is ugly is tough as an entrepreneur. I know that first-hand. But the good news is that, unlike the biological kind (for now), you are not stuck with this baby as is, you can improve it. And while you may have heard that your product is ugly, the commenter may have just intended to say that it would have more potential with some minor changes.
I work quite hard at trying to provide unbiased and productive analysis, and as a result my comments often highlight weaknesses and shortcomings, next to strengths and praises. I always strive to provide corresponding solutions. That’s nothing personal. I don’t make exceptions to that rule, even with friends, and I don’t want anyone, even friends, to spare me the truth either. Now, don’t take me wrong, there are some rules of engagement: not criticizing everything with little or no substance and without trying to offer solutions, not using overly aggressive language, and not doing it with a hidden agenda, for example. But when assessing whether someone has crossed those lines, remember that the common entrepreneur’s bias works towards magnifying those signals and minimizing the actual information that they channel. So, before you throw down the gauntlet, take a minute, think about what the person is trying to say, and reflect on what could be useful in the context of your company.
Let’s not be utopian, human nature is at work here. Ego gets in the way. As a rule, we tend to prefer those who support us. But ask yourself: who, really, supports us? The ones providing constant positive feedback, even if insincere? Or the ones highlighting a potential trap that may prevent you from reaching our objectives? Don’t be so quick at dismissing constructive criticism and qualifying your commenters as biased or unproductive whiners. More often than not, they are not. The main reason most of us comment on things is ultimately because we want them to work better for us. When human nature becomes highly counter-productive, override it.
Of course, I am not interested in any feedback you might have on this post ;) (well, if you really insist, you can place a comment, and I also just claimed a GetSatisfaction page for Growthroute at http://getsatisfaction.com/growthroute - it may take a few days before they approve it, apparently, so please be patient and do return to it!)
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I have just added a reading list on Growthroute’s website, to help clients, prospects and would-be entrepreneurs quickly identify some key reference frameworks that drive our actions. If you exclude the all-time classic of Peter Drucker, Innovation and Entrepreneurship, which deserves its own section, this list is divided in 6 parts, inspired by the Develop/Market/Fund/Scale framework Growthroute uses to classify the type of actions and projects we work on with entrepreneurs:
Lastly, I also listed a must-read for anyone planning to rely on business book theories to drive their companies: the Halo Effect, which argues that business book authors often confuse the causes and consequences of the business “best practices” they advocate. In our reading list, I have tried to avoid authors who do that, although even some of the books I listed fall for the halo effect at times. But one thing is certain, you won’t find Good to Great here!
Let us know what you think of those books and please do ping me if you feel like I missed any that should figure here.
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I was invited by Communitech in Waterloo to give a talk to their Product Management peer-to-peer group. It will take place next week, on June 26th at 10am. I will test a few themes I have been playing around with, on the topic of launching successful market hits. Here is the blurb, feel free to communicate this widely:
Vampires vs. Werewolves, Pirates vs. Ninjas, Techies vs. Marketers (BETA)
A beta discussion on creating market hits, with Greg Boutin, founder of Growthroute Ventures www.growthroute.com
On my left, mad-science Techies: “One really doesn’t need marketing if the product sells itself. Look at Apple etc.”. On my right: snake-oil Marketers. “It’s all about PR and advertising, not building things in the lab”. A rivalry as ancient as Vampires vs. Werewolves or Pirates vs. Ninjas. Let the fight begin (with Product Managers in the middle?)
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A great post 3 days ago by ReadWriteWeb COO Bernard Lunn on 10 Things to Be Clear About Before You Start a Company. I had the chance to meet Bernard last month at the Web 3.0 conference when we had dinner with a group of Web 3.0 business pioneers (including Alex Iskold of AdaptiveBlue and Andraz Tori of Zemanta). Bernard is one of those unassuming types with a bottomless wealth of knowledge activated on demand. You know, that type of folks everyone likes to have a conversation with, with a good glass of wine to complete the picture.
One of the many ideas that intrigued me in his post is that of checking whether you’re made to grow a lifestyle business, or to pursue a growth company. The reason it caught my attention is that lately I met a lot of tech entrepreneurs who started a business, acquired a few clients and grew revenues, and at that point started to play with the idea that they may need to raise money — and yet are far from clear on what changes this pathway will require from them and their business.
A number of those entrepreneurs, after putting everyone in marching order towards an external investment, end up not taking the plunge. While there are side benefits to preparing for an investment, the collateral damages of not taking it in the end outweigh those benefits. When the founder(s) (and their board when there is one) haven’t done their own groundwork beforehand, and aren’t ready to make the investment leap (of faith, in many cases) after pursuing it and even securing offers, it destroys value, hope and useful resources that could have been better deployed elsewhere. In fact it often ends up destroying the company itself.
That’s not to say a company founder shouldn’t be cautious about protecting her/his interest and that of the company from predators. It is critical to secure the best valuation by putting the company’s operations in order, finding the most attractive angle to document the story for the investor’s pitch, and adopting a systematic approach to raising investment that puts investors in competition with one another and keeps them on their toes. Without it, it’s normal to expect the company’s founder to hesitate.
But often, “doubts” about the potential investors and term sheets hide the darker truth that the founder sees all this as “letting the baby go” (which is often not the reality) and is not ready for it. It becomes an excuse for humming along thinking the sun will keep shining on the business and it “will continue to grow organically if we keep doing things right”. If this is true then don’t seek outside investment in the first place. Market validation has more cachet than any investor’s endorsement.
I wrote above that a founder rarely “has to” let the baby go. Any investor will tell you they’d rather keep the original founder at the helm if that founder shows the right level of flexibility and adaptivity to grow with the company. The trick is to start thinking in terms of “influence” not “control”. The main reason a founder is asked to let the baby go by external investors is that the founder stands in the way of growth by focusing too much on control, and not enough on influence.
There is a huge difference between getting a company to a few customers and taking it over what I’d call the “Growth Company Landmark”: the inflexion point at which most of what the CEO needs to do is managing other people and external investors, as opposed to securing new clients and running R&D. That point differs by type of business but, for many I came across, it was between $1M and $2M in revenue. At that stage, it is obvious to everyone that a huge transformation needs to take place and that the founding CEO needs to adapt, or curb the company’s growth.
Four evenings ago, I met a 52-year-old entrepreneur. As we kept chatting on the parking lot, he confided almost with tears in his eyes that he had once lost a fantastic outside investment opportunity, and regretted not to have been more aggressive in seeking growth and the corresponding financial resources. Now, by his one admission, he couldn’t get any of his three companies above the $2M mark. Such a waste of potential. Entrepreneurs, please, know what you want before you go for it.
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Paul Graham this month writes on the risk of VCs becoming irrelevant as the cost of start-ups “approaches” zero.
I humbly disagree. The cost is just shifting from hardware and software to talent, processes, and marketing programs.
Paul Graham is claiming from what feels like an “entrenched techie” standpoint that I noticed more than once reading his blog – which I do respect and admire – that “the web has made marketing and distribution free”.
Not so fast.
What wizard is going to run your cheap adword campaign (or maybe adword is dead too?) How are people going to find your site? What’s your sale process and have you understood your audience? How are you going to answer those service calls and emails? Are you going to run the next Google on the cloud? There are costs associated with all of that, and, even if they are compressed by technology too, the investments required to keep differentiating yourself are increasing.
What’s worse perhaps is that, with all its focus on IT, Paul seems to forget that not all start-ups are web start-ups. How about biotech, cleantech, robotics? Is marketing and distribution free for those ones as well?
There is, as always, some truth in what Paul is writing – the man is smart – but in my view, VCs are certainly here to stay and scale those start-ups that can make it into serious money machines. What do you think?
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