📨

Dear Founder

🔖How would I describe this book in 1 sentence?

🗺️What was the role of this book in my journey?

💡Key Insights

  1. It’s easy to become an entrepreneur, but it’s way harder to become a successful entrepreneur!
  2. There are few decisions that you will make in your company’s life— including picking the right co-founder, deciding on the right board members, and choosing a strategy—that have the potential to make more of an impact than any other choices. Take your time and make sure you potentially are making the right decisions. If all goes well, these decisions will be with you for decades.
  3. When you start out, you’re probably only looking to hire a few people— not an army. With a small team, it’s critical to get only the very best players
  4. From day one it is important to pay attention to culture. What is it that you want your company to stand for? What is its purpose? What are its values? How are people treated? What do you think about flexible work hours? Working remotely? How do you address performance issues? The list is endless.
  5. The best way to build a strong culture is to start at the beginning, by paying attention to your values and thinking about what types of practices will celebrate and extend them. A strong culture is a genuine culture
  6. In eighteen months, you want your new investors to look smart —just not too smart. That’s the real secret to the best deal—and biggest return—for everyone.
  7. I have a visceral reaction to people who don’t want to take any risk— especially when everyone involved is taking risks. As an investor, I’m always looking for entrepreneurs who are willing to take the same bet on themselves that I’m taking on them. That means getting a big equity stake but forgoing a big salary
  8. It’s common for big companies to spend many months on the budget process. They often set top-down targets and ask for bottom-up requests. The problem is, these two camps generally don’t reconcile, creating tension and leading to budget wars. Until things get settled, people often feel like winners and losers
  9. While spending too much isn’t the problem, spending on the wrong things at the wrong time often is
  10. Sales compensation is one of the most important things to figure out. It’s also pretty simple to mess up, which can lead to dire consequences
  11. You must be aware that spending money for growth at all costs is no longer in vogue. The definition of business is for it to make a profit and cash flows as you drive growth. You want to build something solid, solvent, and sustainable.
  12. One of the most important roles of a founder is to set and manage expectations of all constituents—employees, investors, partners, customers, and press. You paint the picture of what is possible someday, but also what should be expected at each step along the way. At any point in time, your startup’s value will be determined by a unique combination of macro market conditions, quality of team and product, scarcity, business traction, and comparable company transactions. Know and use that information to generate your own “stretch-but-rational” valuation expectations for the next financing as well as the exit. In parallel, you’re setting expectations for the performance you must deliver to justify that valuation.
  13. Effective delegation means that you know that the task/project will get done with the results that you expect
  14. Successful decision-making isn’t just about speed or outcome—it’s really about empowering others to make the best decisions for the team
  15. Too often, I see goals that are achievable, but the bar is so low that the company doesn’t achieve the destiny it’s aiming for. (That scenario is definitely uninspiring for everyone involved.) Conversely, if the bar is too high and the team thinks the goals are unachievable, it won’t really be committed to achieving the goals. (That scenario makes it impossible to get anything done.)
  16. As a leader, it’s your responsibility and obligation to help people improve and achieve their potential

🦅Key Principles

WHEN YOU WANT TO START A COMPANY

  1. Before starting a new business, ask yourself a set of important questions
    1. What are your motives? Are you in this for money or impact? You must know what you’re really chasing; otherwise, you’ll never find it.
    2. Do you have an idea that you are deeply passionate about? This question is perhaps the most important one. If you pursue your idea, you will likely be waking up every morning of the next two to ten years touting its value not just to your employees, but also to your customers, to your friends, to your family
    3. Do you have a co-founder who will join you?
    4. Do you have the right team to take this on? Often, the best teams have spent much of their time working together before, through good times and bad, with each member bringing something distinctive to the table
    5. Are you comfortable with risk? If you need certainty, being an entrepreneur probably won’t make you very happy. At its core, starting a company is a high-risk/high-reward endeavor.
    6. Can you afford to live on a small income for years in advance? You certainly won’t get paid handsomely in the beginning
    7. Do you mind working way harder than ever before, and under conditions of much higher stress? You will wear more hats and have more responsibility than you’ve ever had. You will also be responsible for the well-being of your team, and the satisfaction of your customers.
    8. Do you really want to go for years without great benefits, long vacations, work-life balance, etc.? There is no balance when starting a startup!
    9. Do you need outside validation? If you need a pat on the back, you may not make a good entrepreneur. You need faith in yourself; you cannot rely on others to keep you going. Find strength in your passion for the idea and your interest in changing the world
    10. How do you deal with rejection and how much grit do you have to pick yourself up and make something out of nothing? Know that conviction is required. You’ll get nothing but pushback all day long, from everyone you encounter—investors, people who use the product or service, people who are testing it out. You cannot get depressed at hearing “no” or that your idea is “stupid.” Instead, you need to be inspired by it.
  2. After you sorted out the important questions, go for it
  3. Determine the amount of time and resources that you are willing to commit to this project
  4. Make sure your family and friends are supportive of the risk you will take
  5. Try it while still being employed
  6. Once committed, don’t look back and wonder; put all of your energy into making this successful

WHEN YOU ARE SELECTING A CO-FOUNDER

  1. Look for someone with skills and abilities that you don’t have and that will complement—and extend—your own.
  2. Consider someone you know.
  3. Determine what they add to the equation.
  4. Get to know them deeply, and spend lots of time together.
  5. Find references upfront (and back channel).
  6. Is this the one person that you would seek out to solve the deepest problem?
  7. Make sure you are aligned.
  8. Determine roles and equity structure.
  9. Do not rush — take your time. Make sure you make the right decision

WHEN A CO–FOUNDER ISN’T PULLING THEIR WEIGHT

  1. If you notice the lack of commitment in your partner — aim to resolve this immediately
  2. Find the source of the problem. And quickly figure out if it’s recoverable or not
    • Is the lack of effort new? Was your co-founder once a tiger, and now is a mouse? Was your cofounder once a “step on the brakes” person that always had to be told to slow down, but now things are not happening at the same pace and you need to tell them to “step on the gas”? If so, what has changed? Is this something related to work, or not?
    • Are there personal issues involved?
    • Is there resentment over ownership?
    • Is there an issue because someone gets too much credit?
    • Is this an issue over strategic direction?
  3. Approach the situation in exploration mode. Never open with criticism
  4. Call the co-founder out on any bad behavior.
  5. Bring in coaching or help from an outside adviser.
  6. Think of everyone involved.
  7. Get the board’s input.
  8. Figure out a fair way to move on.
  9. Sometimes, a solution to this tension may involve recasting the role of your co-founder.
  10. Determine, “what’s life like on the other side?”

WHEN YOU NEED TO RECRUIT

  1. Always be recruiting—even when you don’t have openings.
  2. Own the process. Recruiting is not just someone else’s job. You need to invest your own focus and time.
  3. Treat people well throughout the process and make sure they have an experience they enjoy
  4. Do the reference checks yourself, and personally say no to people. Don’t hide behind the people or the process.
  5. Don’t look for people who are just like you. Look for people with the skills you need and the types of people who bring diverse perspectives and will contribute to your culture.
  6. Don’t be swayed by big names.
  7. Pay extra attention to those with a “chip on their shoulder.”
  8. Rule out people motivated mostly by money.
  9. Make your company attractive to potential hires by being the best place to work. Be the place people are clamoring to join.
  10. Have huge aspirations.
  11. Be humble. Never stop trying to get better
  12. Be fun to hang with. Care about your people. That’s never about money; it’s about being a part of something meaningful.
  13. Foster a culture of inclusion. Make sure you are building a place where each member of your diverse and talented team can feel like they belong.

WHEN YOU NEED TO HIRE A ROCK STAR

  1. Value an individual with a track record of success
  2. Look for someone who has a chip on their shoulder and something to prove.
  3. Scout for someone who doesn’t take no for an answer.
  4. Prize a person with a following. If this individual goes somewhere, will they inspire others to join?
  5. Pick people who will help you and your culture grow.

WHEN YOU NEED TO SET YOUR CULTURE

  1. Have a point of view on what culture you want to have.
  2. Live and model what you have stated the culture to be.
  3. Don’t pick up somebody else’s culture and adopt it as your own. Authenticity matters.
  4. Decide on what's important by answering a set of questions:
    • How frugal are you?
    • How do you show you care for and nurture your employees?
    • What does your office space look like?
    • Do you have a learning environment? What are the opportunities to receive mentorship and personal growth?
    • Do people have to come into the office, or can they work from home?
    • What working hours are expected?
    • How long are people supposed to stay in the office?
    • How are deadlines managed?
    • What about pets; are they allowed in the office?
    • How do you welcome new people?
    • How do you manage departures?
    • How do you deal with problems? Do you tell people about them early or do you wait?
  5. Consider how your culture might evolve as the company changes and grows.
  6. Do a culture check every 6 months with founders.

WHEN YOU NEED TO HIRE DIVERSE CANDIDATES

  1. Understand why diversity matters.
  2. Acknowledge that you will have to work hard to make your company more diverse, but that it’s worth it.
  3. Quantify your problem
  4. Act now, while you are still relatively small.
  5. Make inclusion and diversity part of your corporate culture.
  6. Think about the company you want to build—not just the one or two spots that are now open.
  7. Prioritize the skills you are looking for before you interview
  8. Disregard unnecessary criteria that can promote bias.
  9. Remove subconscious biases from the hiring process.
  10. Look for talent in unlikely or overlooked places.
  11. Employ a diverse set of interviewers.
  12. Reconsider how you define diversity.
  13. Learn how to value the journey.
  14. Use data and facts, not personal preferences, to evaluate candidates the same way.

WHEN YOU NEED TO CREATE A WORKPLACE OF INCLUSION

  1. Examine your culture. Diversity isn’t something you can just hire your way out of.
  2. Support a culture that celebrates inclusion. Get rid of a "bro" culture
  3. Mitigate issues like unconscious bias through all phases of the employee life cycle: evaluation process, promotions, and succession planning.
  4. Encourage and measure inclusive leadership behaviors.
  5. Understand that workplace enhancements promoting diversity and inclusion are also things that would help “traditional” workers, as well as millennials.
  6. Listen. Listen earnestly to the suggestions from employees.
  7. Grow the circle wider.

WHEN YOU ONBOARD AN EXECUTIVE

  1. Answer the following set of questions when onboarding new executive. Ask the executive to take notes and send the meeting notes document to you for editing
    • What does success look like?
    • What is expected of the new executive?
    • What authority level does the new executive have? (What authority do they have to hire? What input should they get before they fire anyone?)
    • What are the expected behaviors? What is the appropriate style for the culture?
    • What do the first ninety days look like?
    • What problems will they want to tackle right away? What should be put on hold?
    • What is the cadence for check-ins? How often will you be meeting?
  2. Have weekly 1:1 check ins with new executive
  3. Expect changes.
  4. Remind every new executive of the importance of listening to the team.
  5. If people come to you to complain about the changes, you need to listen, but also route them back to have a transparent discussion with the new executive
  6. Do everything in your power to make the new hire feel welcome

WHEN NOBODY WANTS TO GIVE YOU MONEY

  1. Determine if you are speaking with the right people
  2. Categorize investors in different buckets. Try to group three to five investors in each bucket, and reach out to each group individually rather than blasting everyone at once
  3. Fundraising is all about building and maintaining momentum.
  4. Determine if you are set to success by asking yourself a set of questions:
    • Are you setting yourself up for success?
    • Do you have any leverage going into these meetings? Often, the most important source of leverage for a founder going into fundraising is having plenty of runway (you do not need to raise, but feel the time is right).
    • Does your “ask” for investors make sense?
    • Are you raising an appropriate amount for the stage of your business?
    • Do you have the right team and the right approach to tackle your market?
  5. Internalize and act on the feedback from investors
  6. Determine what's the current momentum.
  7. Think about Plan Bs.
  8. Reach out to companies to potentially acquire your business
  9. Be patient and respectful to all potential investors
  10. Avoid artificial deadlines or time pressures
  11. Do not be coy, or give runaround answers, to questions about the state of the business or fundraising to date
  12. Talk to a few potential lead candidates for the next round and ask what they like to see in companies like yours. Focus on achieving those figures

WHEN EVERYONE WANTS TO INVEST

  1. Remember that you have the power to drive the process, timeline, and expectations.
  2. Breathe, and remember that it is just the very beginning of the journey.
  3. Keep counsel with friends and advisers.
  4. Do not accept all the checks in the beginning. It is difficult to undo a commitment.
  5. Examine your biases and think what's better for the company
  6. Don’t get ahead of your skis when it comes to valuation. Choose a number, which feels fair, which you believe you and your team can live up to, and which you believe creates a foundation for a win-win outcome.
  7. In the battle for allocation, remember that you can cast the deciding vote. Recognize that you have more power than you might think
  8. Be upfront, decisive, and understanding throughout the process with all potential investors
  9. Understand most common tactics of investors' they may use to win a deal or to exert influence, such as: exploding term sheets, guilt, and fancy outings/exclusive gatherings

WHEN YOU ARE SETTING TERMS FOR YOUR SEED ROUND

  1. Read up on round structure.
  2. Do the math and create a model. Check your assumptions.
  3. Think about your next round.
  4. Think about your milestones
  5. Think about how much money do you need
  6. Consider your dilution.
  7. Leave room for upside
  8. Check the market pricing of similar companies
  9. Work together to set terms.
  10. Choose your partners carefully.
  11. Prioritize what matters most to you.
  12. Fundraising is not a competition.

WHEN YOU NEED TO SET A VALUATION

  1. Aim to raise money when things are going well
    • When do you raise money? Timing matters. Raising money with more progress is better as long as you have enough cash. It’s always better to raise in a position of strength, not weakness. People see when you are desperate. Raising money is like accessing credit—really easy to get when you don’t need it and really difficult when you do. Also, remember, there are a lot of things beyond your control.
  2. Raise enough funds for 18-24 months of runway
    • How much do you raise? Well, how much money do you need? In some ways, startups need less money today than they used to, but you need to raise enough so that you are not constantly raising money. We recommend modeling eighteen to twenty-four months of runway (the longer the runway, the better, as things will usually take longer than you expect).
  3. Research different sources on how much your company is really worth
    • What valuation is the market willing to give you? You have to determine what the company—your idea and team—is really worth. Solicit a couple of friendly sources for their feedback on what the market is currently paying to invest in a company like yours. This answer can vary with time, based on your revenue, your sector, or recent news about you or competitors
  4. Give away between 15% and 25% of the company in each round
    • With all of this in mind, companies can start thinking about dilution. Typically, we see companies give away somewhere between 15% and 25% of their company for most rounds of funding, with smaller percentages as companies get later stage and have more options. Try to give away enough to be worth great investors’ time and attention, but not so much that you lose control of the business long term
  5. Valuation is not the only thing that matters. Look at the terms sheets and decide what's better for your business
    • Lastly, valuation is not the only term that matters. One time I saw a term sheet from an investor that demanded three different board seats—for a seed round. I coached the founder to back away as fast as humanly possible. Term sheets can include provisions about number of board seats, observer seats, rules for handling debt, how a CEO can be dismissed, and more. Ask your friends for horror stories, and always ask a lawyer to read your docs before signing (and read them yourself, too). Conversely, you may want to take a lower valuation, provided that it results in the best possible board member for your business.
  6. Ask a lawyer to read all your docs before signing

WHEN YOU’VE JUST RAISED YOUR FIRST ROUND OF FUNDING

  1. Start raising another round 4-6 months before the cash runs out
  2. Write updates to your investors
  3. Ask investors about what metrics and figures it's worth tracking
  4. Seek intros from your investors
  5. Build an informal (advisory) board
  6. Get help in management questions
  7. Seek honest counsel on your next round
  8. Ask investors about the failures
  9. Avoid headaches. Investors can be tremendously helpful, but they can also be tremendous distractions
  10. Consider investors' input, but make up your own mind
  11. Treat investors like advocates

WHEN YOU NEED TO THINK ABOUT COMPENSATION

  1. Pay founders salary enough to cover their basic needs, but not as large as at an established company
  2. In the beginning, you need to hire people that will work for less than market salary rate
  3. Be careful with making exceptions
  4. Find out what will "move" people to commit to you
  5. Motivate employees with mission first

WHEN YOU NEED TO SET A BUDGET

  1. Review budgets every quarter
  2. Spend money like it is your own. Instill financial discipline early
  3. Get alignment between the executive team and the board on the overarching goals.
  4. Allocate reserve funds at the CEO level
  5. Create a challenge for the whole team
  6. There is no entitlement. Just because you received a big allocation last year doesn’t mean that is the starting point this year
  7. Always look to get better and spend smarter. Those extra dollars saved can be allocated to do more strategic things

WHEN YOU NEED TO SPEND YOUR MONEY WISELY

  1. Don't spend too much too early
  2. Spend enough money on current priorities
  3. Don't hire a sales team too early
  4. Outsource administrative matters in the beginning
  5. Don't overspend on office space
  6. Don't pay full salaries
  7. Utilize all available resources from your board
  8. Spend your time wisely
  9. If you are not getting the traction you had expected, you have to figure out how to change the burn rate to extend your life

WHEN YOU NEED TO FIGURE OUT COMPENSATION FOR YOUR SALES TEAM

  1. Set the right quotas and comp structure
  2. Add incentives
  3. Make sure all deals come in cash upfront
  4. Have the right number of sales reps
  5. Don’t overpay people in cash.
  6. Invest in your product.

WHEN YOU NEED TO UNDERSTAND WATERFALLS, LAYER CAKES, AND CAP TABLES (OR HOW TO PROTECT THE TRUE VALUE OF YOUR EQUITY)

  1. Don’t apologize or feel guilty for considering your own financial outcome
  2. Use online tool to manage your cap table
  3. Before each financing, reevaluate your exit scenarios. Take them into account when you consider what amount and terms you’re seeking
  4. Try to avoid—or at least delay—allowing complex financial terms into your cap table.

WHEN YOU WONDER IF PHILANTHROPY HAS A PLACE IN A STARTUP

  1. Start philanthropical activities gently
  2. Give employees the freedom to spend up to two to five days a year on the nonprofit of their choice.
  3. Use philanthropy to unite the company

WHEN YOU NEED TO DELEGATE

  1. When delegating the task, make sure it will get done with the results that you expect
  2. Assess the capability and willingness of the team to do the task.
  3. Ensure they know that if they encounter problems, you are there to guide them.
  4. Delegation is not abdication. Overall, you are still accountable for the results.
  5. Establish checkpoints to monitor progress so you don’t get any nasty surprises at the end.
  6. When the team delivers, celebrate their success

WHEN YOU NEED TO KNOW WHO OWNS WHAT

  1. Develop a RACI model to address "who does what" question
    • The first step in this model is to clarify what the decision is and when it has to be made. Write it down
    • Then, you employ RACI, an acronym that delineates the necessary stakeholders in a decision. This outlines the person who is:
      • Responsible. Who is the owner? Who sets the strategy? Who will decide? Ideally, this should be one person, but it can be two. Remember, decision-making needs to be pushed down to the lowest competent level. If that’s not done, it means you are not delegating enough. Worse, it means that you may be running a monarchy.
      • Approves. Who will ratify or veto? This person is the one who delegates the work to the “R.”
      • Consulted. Who will be affected? These people do not have the right to make the decision, but you have the obligation to get their input before the decision is made, and you want to know what they have to say.
      • Informed. Who has to be informed about the decision? Always err on the side of informing too many people rather than too few.
  2. For each decision, write what the decision is and when it has to be made
  3. Push the decision-making to the lowest competent level

WHEN YOU’RE AFRAID YOU MIGHT BE A “TWEENER”

  1. Reflect on your current business situation
    • Ask yourself the following questions:
      • Do you get cold reach outs from the press, from investors, and from potential employees?
      • Do your customers send notes about how much your product matters to them?
      • Do people talk about you on social media?
      • Are you honestly fulfilling a need better than anyone else?
      • If you say “NO” to the above, sadly you’re in tweener territory.

        Now, what are your answers to the following questions?

      • Do you still have to explain why your product matters?
      • Do you find that huge success is always one release away?
      • If you answer “YES” to the above, you’re in the danger zone

        Still not sure whether or not you are a tweener? These are things we often hear in updates that set off the tweener radar: • “We’re working on our churn problem.” • “We’re now working on [X new project].” • “We published twenty thought pieces this quarter.” • “Our head of product/head of sales/head of marketing is leaving.” • “Our model [predicated on unfounded and aggressive assumptions] shows us earning 100x revenue in two years.” • “We weren’t able to do [something we promised], because [competitor did something, team was slow, our big customer had a leadership change, and our sponsor left].” • “We’re working on technical debt.” • “We lost a big customer this month as their needs changed.” • “We grew 5% month-over-month.” • “Things are continuing with [three customers who are personal friends].” • [No update]

  2. Ask your investors if they think you look like a breakout
  3. If you decide that your business is not a breakout, take the following actions:
    • You need to put strong plans in place to get back on track to become a breakout.
    • You need to take a deep look at the current state of things and future projections with the board and management team to assess how viable the strategy is and how bright the future looks
      • If some aspect of your business is working, consider betting the farm there. Often startups try to do too much and offer a “complete” solution, and that can slow their release schedule, make adopting their technology more onerous, and worst of all, dilute the quality of everything they offer.
    • You may need to take significant actions (e.g., painful layoffs, redo of product, pivot, etc.) to ensure you have the cash needed to achieve the turnaround.
  4. If you are not convinced that you have a great chance of becoming a breakout, you should think seriously about M&A or returning cash to investors.

WHEN YOU NEED TO SET GOALS

  1. Always start with this question: “What am I aiming for?”. And, then ask: “If we achieve it, will it matter?”
  2. It is better to aim very high and not quite achieve perfection than to nail every goal and deliver mediocrity
  3. Assess where the team is
  4. Outline goals I’d be proud to achieve
  5. Understand that very bold goals might intimidate the team.
  6. Reassess the goals. What would be acceptable to me and also make sense for the team?
  7. Introduce these reassessed goals and a plan to the team

WHEN YOU NEED TO GIVE (AND GET) FEEDBACK

  1. Praise in public; criticize in private
  2. Build trust
  3. Give feedback constructively. Feedback should provide validation and inspiration
  4. Be thoughtful. Have everyone else’s best interests at heart
  5. Deliver feedback with love and good intentions.
  6. Don’t hold feedback conversations when you’re angry
  7. Understand where the person is. Feedback is best given when people are receptive.
  8. Don’t shy away from delivering feedback just because it’s hard.
  9. Be a heat seeker for asking for feedback. Always ask, “Is this working? Is there anything else I should be doing?”
  10. Be approachable and safe.
  11. Start with an open mind. Try to understand where their advice is coming from
  12. Listen to what is being said. This doesn’t mean you have to accept it, or do it, but you do need to listen.
  13. Commit to creating a learning environment and enlisting your team’s support to help you grow.

✍️Notes

Part 1: Getting Started

1. The Early Days

WHEN YOU WANT TO START A COMPANY

  • It’s easy to become an entrepreneur, but it’s way harder to become a successful entrepreneur!
  • It’s very hard to turn an idea into reality, and even harder to turn that new reality into something of great significance
  • Oftentimes, the world is not ready for a new idea and the majority of companies don’t get traction

Principles

  • Before starting a new business, ask yourself a set of important questions
    • What are your motives? Are you in this for money or impact? You must know what you’re really chasing; otherwise, you’ll never find it.
    • Do you have an idea that you are deeply passionate about? This question is perhaps the most important one. If you pursue your idea, you will likely be waking up every morning of the next two to ten years touting its value not just to your employees, but also to your customers, to your friends, to your family
    • Do you have a co-founder who will join you?
    • Do you have the right team to take this on? Often, the best teams have spent much of their time working together before, through good times and bad, with each member bringing something distinctive to the table
    • Are you comfortable with risk? If you need certainty, being an entrepreneur probably won’t make you very happy. At its core, starting a company is a high-risk/high-reward endeavor.
    • Can you afford to live on a small income for years in advance? You certainly won’t get paid handsomely in the beginning
    • Do you mind working way harder than ever before, and under conditions of much higher stress? You will wear more hats and have more responsibility than you’ve ever had. You will also be responsible for the well-being of your team, and the satisfaction of your customers.
    • Do you really want to go for years without great benefits, long vacations, work-life balance, etc.? There is no balance when starting a startup!
    • Do you need outside validation? If you need a pat on the back, you may not make a good entrepreneur. You need faith in yourself; you cannot rely on others to keep you going. Find strength in your passion for the idea and your interest in changing the world
    • How do you deal with rejection and how much grit do you have to pick yourself up and make something out of nothing? Know that conviction is required. You’ll get nothing but pushback all day long, from everyone you encounter—investors, people who use the product or service, people who are testing it out. You cannot get depressed at hearing “no” or that your idea is “stupid.” Instead, you need to be inspired by it.
  • After you sorted out the important questions, go for it
  • Determine the amount of time and resources that you are willing to commit to this project
    • Keep your eyes wide open. For example, “I’m going to self-fund up to $100,000 and spend six months testing out my idea,” or “I’m going to commit to this idea/company for the next five years without thinking about anything else.”
  • Make sure your family and friends are supportive of the risk you will take
    • There will be many sacrifices all around, and everyone needs to be on board and understand the road ahead. Otherwise, you may end up with more pain in your personal life than you desire
  • Try it while still being employed
    • Can you dip your toe in the water? Can you start trying to do this while you are still employed?
  • Once committed, don’t look back and wonder; put all of your energy into making this successful
    • Pledge total focus and commitment. Building a company is a long-term proposition. Knowing that you’re making a commitment for a decade will give you the perspective you need to make it through the tough moments

WHEN YOU ARE SELECTING A CO-FOUNDER

  • The magic formula to finding a co-founder is more complex than it seems. When it works, the equation looks like this: 1 + 1 = 3.

Why you need a co-founder:

  • Having a partner increases your commitment level. Making a commitment to someone increases your chance of following through with your goals. It forces you to answer to someone. Having someone hold you accountable is especially important in the beginning, before you’ve taken any money from investors (other than perhaps your friends and family, who tend not to pay too much attention to the speed of progress).
  • A co-founder can help keep you sane. The days are filled with roadblocks and disappointments and often end with self-doubt. It can be easier to stop doing this work than to continue through with it. A partner who shares the same passion and who is driven by the same goals, vision, and values will offer the appropriate encouragement and pressure to stay at it.
  • A co-founder enables you to do more. A great product person needs a great engineer.

Principles

  • Look for someone with skills and abilities that you don’t have and that will complement—and extend—your own.
  • Consider someone you know.
    • The best of all worlds is finding a co-founder whom you already know, someone you have worked with before, and someone you trust and know inside and out
  • Determine what they add to the equation.
    • You’ll want to select someone with complementary skills (e.g., sales/marketing vs. engineering).
  • Get to know them deeply, and spend lots of time together.
    • Founding a company is a big deal. You might want to work your way into it and see if it is working. You have to review how the collaboration is working along the way.
    • Do you crave more time together, or wish it had ended earlier?
    • Does this person bring you energy, or take it away?
  • Find references upfront (and back channel).
    • The more of a 360- degree view you can achieve, the better your perspective will be. Look at the references they give you, but also speak to people they did not give you as a reference, but who may have worked with them or know them in a more personal capacity. (Also, if they’ve given you a reference and it’s not strong, that’s a big red flag.)
    • Ask others about how they handle pressure and good and bad situations.
    • You’ll also want to learn what motivates them
  • Is this the one person that you would seek out to solve the deepest problem?
    • If you are choosing them out of convenience, maybe you need to spend more time looking for a great partner. Look for someone who has the deepest experience in the universe in your topic area.
  • Make sure you are aligned.
    • People want different things in life. Just as you need to discuss what you want before entering a marriage (e.g., Do you both want kids?), you must discuss what you want for the company—and reconcile any differences. Some people want a change-the-world business, while others want a lifestyle business. Neither is bad, but they are different. Figure out your values and motivators upfront and discuss the following: How do you think about work-life balance? Compensation structure? How big do you want to grow this endeavor? What’s the ideal exit strategy?
  • Determine roles and equity structure.
    • Are you looking for an equal partner (e.g., 50/50 split)? Or, are you looking for a more junior co-founder? Think ahead about what you want your working relationship to be like. Are you okay being challenged? Are you willing to have this be totally equal in terms of equity even if only one person is the CEO? There are pros and cons and ramifications to each of these decisions and they are long-standing.
  • Do not rush — take your time. Make sure you make the right decision
  • 📌

    There are few decisions that you will make in your company’s life— including picking the right co-founder, deciding on the right board members, and choosing a strategy—that have the potential to make more of an impact than any other choices. Take your time and make sure you potentially are making the right decisions. If all goes well, these decisions will be with you for decades.

WHEN A CO–FOUNDER ISN’T PULLING THEIR WEIGHT

📌

It’s upsetting when you’re working your tail off and someone else isn’t as engaged or committed. This situation has to get resolved—immediately. First, as always, you need to investigate what’s happening to understand what’s behind the change in commitment. Suddenly not pulling one’s weight is a symptom of something else.

Principles

  • If you notice the lack of commitment in your partner — aim to resolve this immediately
  • Find the source of the problem. And quickly figure out if it’s recoverable or not
    • Is the lack of effort new? Was your co-founder once a tiger, and now is a mouse? Was your cofounder once a “step on the brakes” person that always had to be told to slow down, but now things are not happening at the same pace and you need to tell them to “step on the gas”? If so, what has changed? Is this something related to work, or not?
    • Are there personal issues involved?
    • Is there resentment over ownership?
    • Is there an issue because someone gets too much credit?
    • Is this an issue over strategic direction?
  • Approach the situation in exploration mode. Never open with criticism
    • That will not lead to a great resolution. Do this investigation with an air of wonder.
  • Call the co-founder out on any bad behavior.
    • It is unacceptable to not pull your weight or to engage in dysfunctional behavior.
  • Bring in coaching or help from an outside adviser.
    • You need to do everything within your power to try to save this relationship.
  • Think of everyone involved.
    • A little time off for someone carrying a stressful situation to work may do them some good, but you have to be mindful of the other people at the company and how they might view this special treatment. Everyone knows the difference between strong and poor performers, and they are counting on the leaders to set an example and fix the issue.
  • Get the board’s input.
    • The board has seen this movie many times and they will have suggestions. They may offer creative solutions they’ve seen work in the past, such as formally changing the equity structure to reflect the reduced engagement.
  • Figure out a fair way to move on.
    • If you decide that the partnership is not going to work, move with dignity and grace on that decision. Do not assign blame. Don’t disparage each other.
  • Sometimes, a solution to this tension may involve recasting the role of your co-founder.
    • In my experience, it’s extremely rare for both co-founders to scale equally along with their business over the long-term, as your job changes so dramatically with each new level of company growth. Your co-founder’s current management role might become something they do not enjoy or are not very good it
  • Determine, “what’s life like on the other side?”
    • What skills did your co-founder bring? What needs to be replaced? It’s likely someone else has stepped up already. My best moments have been seeing what people can do when you give them an opportunity. Think about who can take on new responsibilities and help through the challenge of losing a critical player in the company

WHEN YOU NEED TO RECRUIT

📌

When you start out, you’re probably only looking to hire a few people— not an army. With a small team, it’s critical to get only the very best players

Principles

  • Always be recruiting—even when you don’t have openings.
  • Own the process. Recruiting is not just someone else’s job. You need to invest your own focus and time.
    • You always have to be on the lookout for talent you resonate with— you can’t just wait for what HR or someone on your team might bring you.
  • Treat people well throughout the process and make sure they have an experience they enjoy
  • Do the reference checks yourself, and personally say no to people. Don’t hide behind the people or the process.
    • Maybe outsourcing these pieces of the process is more efficient and it gets you out of giving bad news, but it’s not thoughtful. Gain credibility by treating prospective hires like human beings.
  • Don’t look for people who are just like you. Look for people with the skills you need and the types of people who bring diverse perspectives and will contribute to your culture.
  • Don’t be swayed by big names.
    • Just because somebody works for a great company, it doesn’t mean that they are great or will be right for your startup
  • Pay extra attention to those with a “chip on their shoulder.”
    • The best hires often have something to prove, and are motivated by a profound desire to excel in their jobs.
  • Rule out people motivated mostly by money.
    • If your candidate is focused on a high salary, you should be questioning whether or not they are the right fit
  • Make your company attractive to potential hires by being the best place to work. Be the place people are clamoring to join.
    • Being the best place to work is not about massages and gourmet food; it’s about what was accomplished, what was learned, and how well people are treated
  • Have huge aspirations.
    • Be inspirational with what you are trying to accomplish
  • Be humble. Never stop trying to get better
  • Be fun to hang with. Care about your people.
    • You want to think that yours was the best and most fulfilling job that they ever had. That’s never about money; it’s about being a part of something meaningful.
  • Foster a culture of inclusion.
    • Make sure you are building a place where each member of your diverse and talented team can feel like they belong.

WHEN YOU NEED TO HIRE A ROCK STAR

Principles

  • Value an individual with a track record of success
  • Look for someone who has a chip on their shoulder and something to prove.
    • It’s not perfection you need to prize, or even the balanced resume. You want to hire a person who has something powerful driving them to succeed—someone scrappy who has grit.
    • I want to know what they spent their time on. I’m looking for a track record of excellence and bandwidth, along with a willingness to take on tough challenges and risk
  • Scout for someone who doesn’t take no for an answer.
    • Some people see barriers; others see opportunities. The best employees have likely been told they “can’t” a lot of times. And yet, they did not let that deter them
  • Prize a person with a following. If this individual goes somewhere, will they inspire others to join?
    • Never underestimate the power of someone’s ability to recruit; it suggests that this person has built up years of goodwill and trust with others. And, better yet, this often leads to a new infusion of great talent eager to follow this leader wherever they head next.
  • Pick people who will help you and your culture grow.
    • Don’t eliminate people because they don’t seem like a “culture fit” (see the “When you need to hire diverse candidates” letter)—embrace the differences, and stay rigorously focused on the cultural attributes that actually define your company

WHEN YOU NEED TO SET YOUR CULTURE

📌

From day one it is important to pay attention to culture. What is it that you want your company to stand for? What is its purpose? What are its values? How are people treated? What do you think about flexible work hours? Working remotely? How do you address performance issues? The list is endless.

Essential Principles

  1. Have a point of view on what culture you want to have.
  2. Live and model what you have stated the culture to be.

Principles

  • Don’t pick up somebody else’s culture and adopt it as your own. Authenticity matters.
  • You have to develop a point of view on what you want this company to be—otherwise it will not work. Sure, it’s said imitation is the highest form of flattery, but when it comes to startup culture, following the fad of the day is a recipe for failure

    📌

    The best way to build a strong culture is to start at the beginning, by paying attention to your values and thinking about what types of practices will celebrate and extend them. A strong culture is a genuine culture

  • Decide on what's important by answering a set of questions:
    • How frugal are you?
    • How do you show you care for and nurture your employees?
    • What does your office space look like?
    • Do you have a learning environment? What are the opportunities to receive mentorship and personal growth?
    • Do people have to come into the office, or can they work from home?
    • What working hours are expected?
    • How long are people supposed to stay in the office?
    • How are deadlines managed?
    • What about pets; are they allowed in the office?
    • How do you welcome new people?
    • How do you manage departures?
    • How do you deal with problems? Do you tell people about them early or do you wait?
  • Consider how your culture might evolve as the company changes and grows.
    • What works for three founders doesn’t work for fifty people or five thousand
    • One thing to keep in mind is that a culture gets calcified very quickly. At the same time, the world is constantly changing and evolving and cultures must be fluid enough to keep up
    • 📌

      If your culture is not attractive to the next generation of employees and you don’t change it, you will lose people.

  • Do a culture check every 6 months with founders.
    • Answer the question: Do we still believe in this? What used to work won’t always work, so be ready to change. You have to ask yourself which elements of your culture you will take with you as you grow, and which you will leave behind

WHEN YOU NEED TO HIRE DIVERSE CANDIDATES

Principles

  • Understand why diversity matters.
    • A report from McKinsey & Company indicates that the top racially diverse tech companies are 35% more likely to have financial returns higher than the tech sector’s national median. Companies that are more gender diverse are 15% more likely to outperform others
  • Acknowledge that you will have to work hard to make your company more diverse, but that it’s worth it.
  • Quantify your problem
    • The first step in improving diversity at your company is to measure the breadth of it. How diverse is your hiring funnel? For your current employees, how are they made up across genders, races, religions, region of origin? How does it vary by department, or job role? Across each of these facets, how have you allocated promotions? How has tenure varied? How does pay?
  • Act now, while you are still relatively small.
    • Experts say diversity must be inculcated into a company early—after fifty people it may be too late
    • “People from different backgrounds solve problems in more interesting ways,” Masha said. “They come up with solutions that people who are like-minded can’t see. The first five hires make a difference.”
  • Make inclusion and diversity part of your corporate culture.
    • People will hire based on “fit”—and that often means people like us
  • Think about the company you want to build—not just the one or two spots that are now open.
    • What matters in the long run?
  • Prioritize the skills you are looking for before you interview
  • Disregard unnecessary criteria that can promote bias.
    • Get rid of anything that may be filtering out quality people—examples might include rigorous expectations of number of years of experience, coming from a set of high-profile universities, or taking a certain curriculum that may not have been available
  • Remove subconscious biases from the hiring process.
    • Write a job spec and test it out to make sure it doesn’t only appeal to one group of people, such as men. If we want a talented workforce, we need to look at the whole population not just half! Think about the words you use. “Dominant” and “competitive” are seen as positive traits for men, but as negative attributes for women. Similarly, “competitive,” “best of the best,” and “fast-paced” appeal more to men and self-select women out. “Ninja” is another one as Japanese ninjas were historically men. 3 Words like “extreme culture” or “exclusive” alienate many people and discourage them from applying. Other words such as “loyalty,” “passion,” and “collaboration” have been shown to appeal more to women, experts say. It’s not that you can’t ever use any of these words, but it matters how you use them—make sure that your spec is well-balanced and appeals to all genders equally
  • Look for talent in unlikely or overlooked places.
  • Employ a diverse set of interviewers.
    • Women are much more likely to join a company when they can interact with women who are already there and can testify to a company’s commitment to diversity. In fact, one of the biggest deciding factors on whether or not a female candidate accepts a job is if there was a woman on the interview panel.
  • Reconsider how you define diversity.
    • Have your eyes open to the many ways we can think about what diversity means. Gender and racial and ethnic diversity may be visible, but ensuring other kinds of diversity such as educational background, geography, economics, family status, disability, sexual preference, gender expression/identity, political inclination, religious affiliation, age, and neurodiversity (people who may connect the dots differently) is also important.
  • Learn how to value the journey.
    • We often value recognizable indicators of past success, such as elite schools, or work experience in leading companies. We are less skilled at recognizing unique talent, or those whose journey is possibly longer and less traditional; in many cases, those candidates can demonstrate exemplary grit, resiliency, and creative problem-solving
  • Use data and facts, not personal preferences, to evaluate candidates the same way.
    • One study found that white candidates receive 50% more callbacks than black candidates with the exact same resume. Create a standard evaluation system and metrics and use them the same way. Some companies remove names and photos before reviewing them so that they are not aware of race or gender.

WHEN YOU NEED TO CREATE A WORKPLACE OF INCLUSION

Principles

  • Examine your culture. Diversity isn’t something you can just hire your way out of.
    • To truly make the workplace more inclusive, evaluate your methods of mentorship and promotion
  • Support a culture that celebrates inclusion. Get rid of a "bro" culture
    • Unfortunately, some early stage companies promote a strong “bro” culture, which may make many others feel left out. Embracing diversity means that you may need to change the way you work to accommodate a broad range of people. Employ policies that are equitable for both men and women
  • Mitigate issues like unconscious bias through all phases of the employee life cycle: evaluation process, promotions, and succession planning.
    • Particular areas to evaluate for inclusiveness are the evaluation process, promotions, and succession planning.
  • Encourage and measure inclusive leadership behaviors.
    • Be sure that any concerns are taken seriously (i.e., address all red flags)
  • Understand that workplace enhancements promoting diversity and inclusion are also things that would help “traditional” workers, as well as millennials.
    • This may include promoting worklife balance, demonstrating the meaning in the work, and rewarding loyalty—all of which are important to many types of workers. Find a way to welcome and celebrate everyone and ensure that no one feels isolated. Provide gender-neutral bathrooms and an environment that ensures that employees feel comfortable
  • Listen. Listen earnestly to the suggestions from employees.
    • Give employees the latitude to speak and write about their findings.
    • Solicit feedback from your diverse candidates and ask them to score how you are doing and share what they think you can do better
  • Grow the circle wider.
    • Consider building an internship program with allfemale or historically black universities. Adopt a school in an at-risk neighborhood, and send them supplies, bring students into the office, and commit to the school’s improvement. Let your employees tell the story of your company’s journey, in the hopes that you inspire others to follow you

WHEN YOU ONBOARD AN EXECUTIVE

If you’re a first-time CEO and you’re several years younger than this new professional on your team, you may think, I hired this person and they are the expert—they’ll know what to do. Please, PLEASE, resist this temptation. I’ve known many CEOs who’ve practiced this management approach and I have yet to see it yield great results.

Your job as a manager is to be inspiring, fair, and honest—and to hold people accountable to do their best work. If you do that, you will not go wrong. Don’t become intimidated by years of experience, a good reputation, or simple bravado. You’re the leader, and while they may be the domain expert, you need to ensure that they (and your company) are successful.

Principles

  • Answer the following set of questions when onboarding new executive. Ask the executive to take notes and send the meeting notes document to you for editing
    • What does success look like?
    • What is expected of the new executive?
    • What authority level does the new executive have? (What authority do they have to hire? What input should they get before they fire anyone?)
    • What are the expected behaviors? What is the appropriate style for the culture?
    • What do the first ninety days look like?
    • What problems will they want to tackle right away? What should be put on hold?
    • What is the cadence for check-ins? How often will you be meeting?
  • Have weekly 1:1 check ins with new executive
  • Expect changes.
    • You hired this person for a reason. You therefore know that something needs to be done differently, so expect that there will be some changes. You just need to be aligned about what they are.
  • Remind every new executive of the importance of listening to the team.
    • I recommend soliciting input about what is going well and where improvement is needed.
  • If people come to you to complain about the changes, you need to listen, but also route them back to have a transparent discussion with the new executive
  • Do everything in your power to make the new hire feel welcome

2. Financing Your Company

WHEN NOBODY WANTS TO GIVE YOU MONEY

Our industry is quite extreme in that sometimes everyone wants to give you money, and other times, no one wants to invest in your company. If you’re in the latter category, it’s crucial to focus on the business to make the investment as attractive as possible. How you respond to these setbacks, and how you prioritize your time and effort, will have a big impact on your happiness and on your fundraising success

The fundraising process can make you a better CEO. Fundraising is a lot like sales, only this time you’re not selling a product but rather shares in your company. Though the process may be grueling, it can offer an important window of self-reflection and a chance to tighten your story and focus on the important drivers of your business. Also, this experience can serve to encourage you and your team to make the next round of financing as compelling as possible

Principles

  • Determine if you are speaking with the right people
    • First and foremost, are you speaking with the right people?
    • I cannot stress enough how important it is to be targeted and measured as you build your investor list. Have you had a chance to speak with investors and advisers who know the market well, who can give you advice, and who might be able to open doors for you? If you find yourself meeting with seemingly random investors at the early stage, there is a high likelihood that you might be barking up the wrong tree.
  • Categorize investors in different buckets. Try to group three to five investors in each bucket, and reach out to each group individually rather than blasting everyone at once
  • Fundraising is all about building and maintaining momentum.
    • Once the lead falls into place, rounds normally come together very quickly. How does one find a lead? In your initial investor bucket, speak with a handful of leads and also individual angel investors who can commit before a lead is in place
  • Determine if you are set to success by asking yourself a set of questions:
    • Are you setting yourself up for success?
    • Do you have any leverage going into these meetings? Often, the most important source of leverage for a founder going into fundraising is having plenty of runway (you do not need to raise, but feel the time is right).
    • Does your “ask” for investors make sense?
    • Are you raising an appropriate amount for the stage of your business?
    • Do you have the right team and the right approach to tackle your market?
  • Internalize and act on the feedback from investors
    • Are you internalizing and acting on the feedback from investors after a meeting?
    • If you start to detect a pattern in how investors respond (e.g., they think the idea is too early, they have questions about market, they have questions about competitors, etc.), it’s important that you address these concerns and take this feedback to heart
  • Determine what's the current momentum.
    • Are you being honest with yourself about momentum?
    • Momentum is palpable, and you know when you have it. Follow-up meetings do not necessarily mean momentum. Does the investor seem to be leaning in? Is he or she proactively reaching out to you with next steps, or do you find yourself constantly chasing people down?
  • Think about Plan Bs.
    • Can you raise a smaller amount of money to make material progress?
  • Reach out to companies to potentially acquire your business
    • You should also have an idea of companies that could acquire your business and start reaching out to those contacts, if only to help build momentum as you engage with investors
  • Be patient and respectful to all potential investors
    • It is easy to become bitter with the fundraising process. Don’t focus on other companies that seem to have an easy go of fundraising. Try not to disparage people who don’t “get” what you’re building. Investors are well-tuned to pick up these emotions, and often view them as a sign of weakness and lack of fortitude.
  • Avoid artificial deadlines or time pressures
    • Investors know when something is moving, and when it is not. A rush for a follow-up meeting, needing clarity as the round is coming together, etc., often present investors with an excuse to pass. (You’ll hear: “We cannot meet your deadline at this time.”)
  • Do not be coy, or give runaround answers, to questions about the state of the business or fundraising to date
    • Investors should do their homework, and they will eventually find the truth so it’s much better to control this process and this dialogue, rather than try to hand-wave these questions away (again, this can give investors a reason to send a quick “pass” note). It’s much, much better for an investor to give you money knowing the thorny challenges you’re facing, rather than to give you money on somewhat false pretenses.
  • Talk to a few potential lead candidates for the next round and ask what they like to see in companies like yours. Focus on achieving those figures
    • Be ruthlessly focused on getting to those figures (ideally six-plus months before you’re out of cash), and the fundraising experience may be very different the next time around.

WHEN EVERYONE WANTS TO INVEST

Take a moment to celebrate the rarefied air you are breathing right now. Many CEOs dream of being in this position, and you should feel great about capturing the attention and interest of so many investors

Principles

  • Remember that you have the power to drive the process, timeline, and expectations.
    • Investors can sometimes create an environment of pressure and deadlines, monopolizing your time and your imagination. Take stock of the situation, and ensure that you’re talking to the right folks
  • Breathe, and remember that it is just the very beginning of the journey.
    • You will be working with your investors for a long time, and getting the right people involved will have a lasting impact on your business
  • Keep counsel with friends and advisers.
    • Walk through and explain all of the varied points of different term sheets and different partner experiences with someone you trust. Just the act of putting your thoughts together, and of making a rational argument around why you should go with one offer or another (even a simple pros/cons list), can be of value.
  • Do not accept all the checks in the beginning. It is difficult to undo a commitment.
    • Try to resist the urge to continue raising smaller checks while you piece together the lead. Early commitments from friends and angels can add up quickly. Every $50K to $100K check counts, and the larger this pledged pool becomes, the harder it is to set expectations with your potential leads, and potentially to reset expectations with your committed angels if there is not enough space. Rather than confirming all the investment amounts at the beginning, you can communicate your appreciation and desire to work with someone without promising allocation or a specific dollar amount
  • Examine your biases and think what's better for the company
    • Sometimes we encounter founders who are concerned about board dynamics, or who are worried about any potential challenge to company control. Others are very worried about dilution, to the point where they press their advantage too early
    • Try to think through what set of choices will have the biggest long-term impact on your company. Sometimes finding a strong board member who believes in your team and vision, but who can also challenge you, is critical. Sometimes, a little more dilution early on can result in better outcomes for all. When you decide to move forward with a term sheet, it’s important that you fully understand the reasons (and potential biases) behind your thinking, and to make a good choice for the long term
  • Don’t get ahead of your skis when it comes to valuation. Choose a number, which feels fair, which you believe you and your team can live up to, and which you believe creates a foundation for a win-win outcome.
    • If your company’s growth falters or does not meet expectations, you’ll run the risk of having to answer to an angry and disappointed group of investors. If the macroclimate changes, or if your company, for whatever reason, momentarily loses its luster, you could face the prospect of a down round, which can have lasting effects on company and investor morale. This is not to say that you should purposefully sandbag your valuation for fear of not living up to expectations. Rather, it’s to suggest that you choose a number, which feels fair, which you believe you and your team can live up to, and which you believe creates a foundation for a win-win outcome.
  • In the battle for allocation, remember that you can cast the deciding vote. Recognize that you have more power than you might think
    • There is always flexibility on all sides of a negotiation. Many investors have gone through this process hundreds of times, whereas founders go through it a handful of times at most. If you are in a competitive situation, recognize that you have more power than you might think. If it is important for you to preserve space for pro rata or for strategic new investors, make this clear in the negotiation and set aside some allocation.
  • Be upfront, decisive, and understanding throughout the process with all potential investors
    • Remember that this is a long game, and that many of the people you encounter in this process are folks that you will cross paths with again. Treat them in such a way that the next time you meet, they are as eager to work with you as they are right now. You may not always be in this enviable fundraising position, and it’s important to establish good relationships with the investor community and not to burn any bridges (in particular, false expectations around timing or valuations can cause future friction).
  • Understand most common tactics of investors' they may use to win a deal or to exert influence, such as: exploding term sheets, guilt, and fancy outings/exclusive gatherings
    • Exploding term sheets. Investors will rush to provide you with a term sheet before others do, and they will sometimes include a clause that makes the term sheet expire if you do not accept it within a few days. A good way to counteract this maneuver is to say that you want to do more diligence on the firm (this can give you time), and that you are looking for a great partner and thus do not understand why there is a need to emphasize a short time horizon. If they are trying to make a case that they will be tremendous partners, then this is not a great way to start the relationship.
    • Guilt. Investors may try to make you feel bad if you do not choose to work with them. As a founder, it’s important to separate your own personal feelings from what is best for the business. Simply be polite and let them know that while you are so appreciative of their interest to work with your team, you still need to evaluate your options carefully to choose what is best for the future of your company.
    • Fancy outings and exclusive gatherings. You may be invited to unique events and experiences. Understand that there is an investor agenda at play, and use the time with the investor to see how they behave socially and with other founders and peers.

WHEN YOU ARE SETTING TERMS FOR YOUR SEED ROUND

If someone wants to invest in your business, then you are already off to a great start. Now you just need to agree on the details, structure your round, and start a positive relationship with your investor group. Here are a few things to keep in mind as you go through this process.

Do your research.

Principles

  • Read up on round structure.
    • Many early stage rounds are done with convertible notes or simple agreements for future equity (SAFEs). Since SAFEs are agreements for future equity, the terms end up being dependent on terms set at the time of the SAFE and at the time of the future equity fundraise. It is therefore important to understand how these contracts work, and to understand common terms like cap, discount, pro rata, liquidation preference, and MFN (most favored nation).
  • Do the math and create a model. Check your assumptions.
    • Convertible note math is tricky, and the results are not intuitive. Build a simple spreadsheet to understand how conversion will work, and include all rounds through your Series A. Calculate your dilution, and look at how the share price changes from round to round.
  • Think about your next round.
    • What is your next round? Your next stage might be a Series A, another early stage round, or profitability. Many companies raise more than one early stage round, so experiment with this— especially if you are raising a smaller seed round. Also ask around to estimate the size and price of your Series A (as a rule of thumb, the size will be 20–30% of the post-money valuation). Get a few data points, and don’t expect an outlier.
  • Think about your milestones
    • What are your milestones? Talk to some founders and investors, and try to get a sense for what it will take to get to that next stage. It might be a certain amount of revenue, product usage, team size, or something else. Your milestones should be both realistic and sufficient: You don’t want to run out of money before hitting them, nor do you want to get there only to find out that you set your targets too low to raise the next round.
  • Think about how much money do you need
    • How much money do you need? How much time, which team members, and what kinds of resources will you need to hit your milestones—and how much money will that take? Be conservative and leave some breathing room. Things usually go slower than expected, and raising the next round will take time, too. We usually advise our companies to aim for at least eighteen months of runway in a seed round. If this is not possible, focus on your milestones and add some extra buffer.
  • Consider your dilution.
    • Many seed rounds bear 20–25% dilution, meaning the seed investors will own that much of your company before the next round. Sometimes this can be as low as 15% or as high as 30%, and in unusual cases outside this range, too. There are no hard rules here, but this can provide one data point on where to start.
  • Leave room for upside
    • Your first investors are taking a risk and supporting you early, at a stage where most companies will fail. Treat them well, and set them up for success with a price increase in the next round. If you are already close to your milestones, then a small step up might make sense. If you are just getting started and hoping for $2M revenue in eighteen months, then a bigger valuation jump is in order. Check your model and discuss what is fair.
  • Check the market pricing of similar companies
    • Market pricing trumps all. Ultimately, the terms are set between you and your investors, and anything goes as long as you agree with them. If you have a lot of interest you can be choosy, and if not, you may need to take whatever you can get. Either way, try to stay within a reasonable range. You don’t want to give up too much of your company, and you also don’t want your investors to get a raw deal by paying the same price as the next round (or to have a price decrease, which can cause other issues).
  • Work together to set terms.
    • If you don’t already have significant commitments to invest in your company, keep an open mind. If you try to set terms upfront on your own (or with someone who is writing a tiny check), you may create mismatched expectations. Work with your early champions to set terms that make sense for everyone, and set the tone for collaboration.
  • Choose your partners carefully.
    • Good investors will be great partners for you in the future, and they will help you grow your company and raise future financing. Ask around about their reputation and their ability to help
  • Prioritize what matters most to you.
    • Some founders want mostly financial support, and others are focused on getting help and a good network from their investors. Some want to minimize dilution, and others want extra runway. Rank your priorities, and then don’t sweat the small details. If you are pressing your advantage on one axis (e.g., price), be mindful of any trade-offs you may be creating
  • Fundraising is not a competition.
    • If you have a friend raising money at high terms, or if you are reading articles about hot companies, it can be tempting to constantly compare yourself to them. Focus on your business. A year from now the comparison will not matter, and having the right amount of capital and support will be crucial!

WHEN YOU NEED TO SET A VALUATION

Companies need to set a valuation to determine what the company is worth and what percentage of shares go to new investors versus stay with the company

Of course you want the maximum valuation for your company, but it’s important to take a long-term perspective. It might seem like you won if the deal is overpriced and you gave up less of your company, but in reality that comes with the price of an investor with a board seat who is steaming about overpaying for an overvalued deal

Principles

  • Aim to raise money when things are going well
    • When do you raise money? Timing matters. Raising money with more progress is better as long as you have enough cash. It’s always better to raise in a position of strength, not weakness. People see when you are desperate. Raising money is like accessing credit—really easy to get when you don’t need it and really difficult when you do. Also, remember, there are a lot of things beyond your control.
  • Raise enough funds for 18-24 months of runway
    • How much do you raise? Well, how much money do you need? In some ways, startups need less money today than they used to, but you need to raise enough so that you are not constantly raising money. We recommend modeling eighteen to twenty-four months of runway (the longer the runway, the better, as things will usually take longer than you expect).
  • Research different sources on how much your company is really worth
    • What valuation is the market willing to give you? You have to determine what the company—your idea and team—is really worth. Solicit a couple of friendly sources for their feedback on what the market is currently paying to invest in a company like yours. This answer can vary with time, based on your revenue, your sector, or recent news about you or competitors
  • Give away between 15% and 25% of the company in each round
    • With all of this in mind, companies can start thinking about dilution. Typically, we see companies give away somewhere between 15% and 25% of their company for most rounds of funding, with smaller percentages as companies get later stage and have more options. Try to give away enough to be worth great investors’ time and attention, but not so much that you lose control of the business long term
  • Valuation is not the only thing that matters. Look at the terms sheets and decide what's better for your business
    • Lastly, valuation is not the only term that matters. One time I saw a term sheet from an investor that demanded three different board seats—for a seed round. I coached the founder to back away as fast as humanly possible. Term sheets can include provisions about number of board seats, observer seats, rules for handling debt, how a CEO can be dismissed, and more. Ask your friends for horror stories, and always ask a lawyer to read your docs before signing (and read them yourself, too). Conversely, you may want to take a lower valuation, provided that it results in the best possible board member for your business.
  • Ask a lawyer to read all your docs before signing
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“In eighteen months, you want your new investors to look smart —just not too smart.” That’s the real secret to the best deal—and biggest return—for everyone.

WHEN YOU’VE JUST RAISED YOUR FIRST ROUND OF FUNDING

You basically have 12 to 18 months (50 to 75 weeks) to build a compelling business. During that time, you’ll want to get the most out of your shiny new investors

Principles

  • Start raising another round 4-6 months before the cash runs out
    • Assuming you’ve raised enough to give you 18 to 24 months’ runway, you have approximately 75 to 100 weeks from now until you need to already have more cash in the bank. To put yourself in the best position for your next round, you’ll want to be done with your raise with 2 to 3 months of cash left in the bank, which means starting the raise another 2 to 3 months before that
  • Write updates to your investors
    • Short and frequent communication is better than long and sporadic missives. Make updates easy to produce. With so many things happening constantly within your business, writing updates can serve as a chance to reflect on your top-line goals—and a way to stay honest about your business’s direction
  • Ask investors about what metrics and figures it's worth tracking
    • As you get into the rhythm of sharing updates, you can ask investors what metrics or figures they think are worth tracking as you progress to your next round
  • Seek intros
    • One of the primary ways any early investor works is through facilitating introductions. These come in many flavors: customer discovery, potential hires, potential customers, professional services, other investors, etc. As you’re in the driver’s seat, it’s important to chase introductions that are actually needle-moving for you. Assume with most introductions that you only get one chance to impress someone—it’s not a bad idea to ask investors if they believe the timing is right to approach a given contact.
  • Build an informal (advisory) board
    • We’ve seen founders put together an informal board, either as a quasi board of directors, or as an advisory board of potential customers. An informal board gets you all the advantages of a traditional board, but without the potential risks and formal governance of a real board (i.e., they can’t ever fire you). Choose people you like and who can add value, and ask them to meet regularly every month or quarter. Ask that they hold you accountable. This structure can give you valuable experience going into your next round, and it can potentially surface and kill off issues that— without their pattern recognition—could lead you astray
    • An advisory board is a bit different; it’s a way to turn people you’d like to be customers into advisers. Done well, it’s an elegant Jedi trick—you transform someone who might be put off as a customer into someone who will actively counsel you on how to make them want to give you money. You can meet these people ad hoc, or get them together regularly for broader feedback. Remember: even incredibly accomplished people like to feel recognized for their time and insights. Give credit freely, and they’ll be excited to help. Some might even be hires down the road
    • A note of caution: Before you have some evidence of product/market fit, these boards can prove to be far more of a distraction than they are valuable. We’ve seen “advisory boards” comprised of people with little experience relevant to the company. That’s a mistake; view these advisory slots as a scarce resource, only given to people with immense expertise
  • Get help in management questions
    • We see many first-time founders. In this role, you can expect a huge range of new, stressful, or time-consuming tasks that are completely unrelated to what’s most important (building a long-term, defensible business). While investors should never be able to know more than you about the special sauce of your business, they may know much more about distractions that can derail you. They can help on a wide range of interpersonal issues that constantly spring up.
  • Seek honest counsel on your next round
    • Now that your seed money is in the bank, start thinking about what incredible story you can tell by the time you need to raise your next round of financing
  • Ask investors about the failures
    • Every investor who’s been around long enough has seen businesses flame out. Ask about these situations—they are informative lessons, and often make for good stories
  • Avoid headaches
    • Investors can be tremendously helpful, but they can also be tremendous distractions. After meetings, honestly assess what you got out of your time with them—in terms of resources provided, energy given or taken, etc. Maynard often wonders how much he would pay for advice a particular board member provides in meetings. Sometimes, the people most eager to take your time have the least to offer
  • Consider investors' input, but make up your own mind
    • Again, no one runs your company but you. In general, investors’ incentives are tied closely to yours. When they offer advice, you can typically assume good intentions and often there’s hard-earned wisdom behind it, but ultimately, it’s your role to consider their insights, weigh them against evidence and your own perspective, and make up your own mind. Investors bet on you to process information and to make the decisions you think are best
  • Treat investors like advocates
    • Lastly, remember that early investors have relationships with other investors that will span years, if not decades. If they’re seeing your story progress, they can—if you want—be warming up your future leads well before you need to think about raising more capital. Their reputations are also on the line, so the more they’ve seen, the more earnestly they can get other investors excited

WHEN YOU NEED TO THINK ABOUT COMPENSATION

I have a visceral reaction to people who don’t want to take any risk— especially when everyone involved is taking risks. As an investor, I’m always looking for entrepreneurs who are willing to take the same bet on themselves that I’m taking on them. That means getting a big equity stake but forgoing a big salary

Principles

  • Pay founders salary enough to cover their basic needs, but not as large as at an established company
    • How much should founders pay themselves? It should be enough to take care of your basic needs so you can focus 100% on the company, but not as large a salary as you would make at an established company—that would drain too much cash. Worse, it reduces your leverage when you explain to new hires why their offers may be below market rate. Startups by nature are never flush with cash, and they must preserve the cash they have to invest in the company. Equity should be your primary fiscal motivation
    • Once the company is further along, CEOs can consider asking for a higher salary. For example, we often see salary bumps after the company has raised a Series B.
  • In the beginning, you need to hire people that will work for less than market salary rate
    • What about the rest of the team? I like to see everyone—employees included—taking a risk, but you want to pay them enough so they will be committed fully to the company, and not have to take another job or live off of savings. As the company grows you will likely come closer to paying market rates, but in the beginning this may not be possible. Offering everyone equity is a great way to get everyone aligned with what is good for employees and good for the enterprise. Consider employing a sliding scale, where employees can choose whether cash now, or equity, is more important. I tend to gravitate toward employees willing to take risks, but this may rule out talented people who have families, mortgages, etc.
  • Be careful with making exceptions
    • While it might sometimes be necessary to make exceptions, understand every compensation decision you make (or break) will set a precedent
  • Find out what will "move" people to commit to you
    • It’s necessary to know what will “move” them to fully commit to you. A killer engineer will have several offers with both a great salary and great equity. Know what other startups are offering to remain competitive. (Do not compare yourself to bigger companies—you will be offering a lower cash package but giving them higher upside.)
  • Motivate employees with mission first
    • Mission matters. There are thousands of companies talented people could conceivably work for. You’ll have far more leverage in negotiation if what you’re working on, and how you communicate that mission, appeals viscerally to someone’s sense of purpose. And, assuming you properly grow and invest in that person, their retention is likely to be far longer than more money-motivated peers

WHEN YOU NEED TO SET A BUDGET

In the very early days, you can probably manage expenses pretty easily. However, I still advocate having a simple plan for expenses—know what you are allocating toward head count, marketing, software, computers, lease, furniture, etc. Even in the early days, you can track how you are doing against what you thought you were going to spend, and most importantly, if there is a delta, you can find out why

Once you are growing—and certainly when you are between a Series A and Series B round of funding—you will likely need a more formal budget process. This is a blend of art and science.

The art of implementing a budget process is to ensure:

  1. You are fully (or near fully) funding the most important things.
  2. It is clear where the money is being spent.
  3. There are mechanisms in place to spend wisely

It’s common for big companies to spend many months on the budget process. They often set top-down targets and ask for bottom-up requests. The problem is, these two camps generally don’t reconcile, creating tension and leading to budget wars. Until things get settled, people often feel like winners and losers

Principles

  • Review budgets every quarter
    • While setting an annual plan is good, understand that your business is probably too early in its life cycle to have this cast in concrete. Revenue projections are always wrong in some fashion. Therefore, plan to true up the budget and the actual spend every quarter.
  • Spend money like it is your own. Instill financial discipline early
  • Get alignment between the executive team and the board on the overarching goals.
    • This means: revenue, gross margin, profit/loss, head count, etc
  • Allocate reserve funds at the CEO level
    • I’ve always found it wise to reserve some allocation at the CEO level. This enables you to have resources for unforeseen issues as opposed to clawing things back from somebody. (It’s better to never give something than to give and then take away.) At WIN, I have 10% of the budget allocated as “discretionary,” so if we make a mistake and don’t have enough funding for something, I can decide to still do it and relieve some of the pressure
  • Create a challenge for the whole team
    • If you are close to what you want to spend (over by only 5–10%), put that in as a challenge that the whole team is committed to solve. Most companies wind up hiring more slowly than planned and also underestimate the attrition, which will likely cover your challenge issues. Remember this truth: People spend lots of time arguing for specific, exact head-count numbers even though they are generally not going to hit them
  • There is no entitlement. Just because you received a big allocation last year doesn’t mean that is the starting point this year
  • Always look to get better and spend smarter. Those extra dollars saved can be allocated to do more strategic things

WHEN YOU NEED TO SPEND YOUR MONEY WISELY

While spending too much isn’t the problem, spending on the wrong things at the wrong time often is

Principles

  • Don't spend too much too early
    • Spending too much too early. If you don’t have a product yet, don’t spend much on anything other than developing the product.
  • Spend enough money on current priorities
    • Not spending enough. When the flywheel is really going, it might be necessary to spend money on increasing sales and marketing to grow even faster. In other instances, it becomes essential to spend more building the architecture and systems to stay ahead of the growth
  • Don't hire a sales team too early
    • Hiring a sales team too early. If you are building an enterprise product, having a big sales organization before you have a product is a mistake
  • Outsource administrative matters in the beginning
    • Beefing up on administrative matters in the beginning. Building finance or HR teams too early is not prudent. Initially, those can—and probably should—be outsourced
  • Don't overspend on office space
    • Falling for office space. While most entrepreneurs are inherently frugal, many have a blind spot for nice office facilities. The justifications for a hip, well-located space can be tempting—this space will attract employees, and it will impress clients and press. Yet, often the cost simply isn’t worth it, and worse, getting a space that says, “We made it!,” when really, you haven’t, can draw the wrong talent and infuse your culture with a sense of false accomplishment.
  • Don't pay full salaries
    • Paying full salaries. Offering high salaries at an early stage is a recipe for burning cash. At a startup, everyone should be taking risk, and compensation should be a combination of salary and equity. If the business is successful, the equity will be far more valuable than cash
  • Utilize all available resources from your board
    • Underutilizing all of the available resources. If you need help, ask for it from your advisers and board. Don’t think of your board members as just folks who tell you what to do; put them to work. The best entrepreneurs know how to leverage their network and are not shy about asking for advice and introductions.
  • Spend your time wisely
    • Wasting time. Capital is not only money; time is just as valuable, and managing it well is just as crucial. You have to do as much as you can every day, week, month, and year. Utilizing time effectively is one of the most important skills in an entrepreneur’s arsenal
  • If you are not getting the traction you had expected, you have to figure out how to change the burn rate to extend your life
    • If you are not getting the traction you had expected for whatever reason (e.g., maybe the product isn’t ready, the market is not quite there, or sales aren’t being executed), you have to figure out how to change the burn rate to extend your life
    • While you can feel horrible about having to do this, this is the cold reality of managing your company. Just like in the rest of your financial life, if you are not able to pay your bills, you’ll have to find a way to spend less or earn more
    • If you have more office space than you need: Explore how you can either get out of the lease or sublease the space.
    • If you can’t afford to hire people: Slow down! Put a freeze on hiring. If the product is not ready, you don’t need salespeople—or a lot of the other hires you’ll need later, but probably can do without at the moment.
    • If you’ve already hired too many people: As painful as it is, if you’ve added a bunch of people too quickly, you’ll have to let the nonessential hires go and keep the folks around who can get you to the promised land. You have to be very cautious about this. Laying someone off is one the nastiest things an employer ever has to do. It’s far worse than having to fire someone for cause. If nothing else, this will prove to you the importance of managing your money right from the beginning
    • If you are spending too much on payroll: Obviously you will have to tweak your own compensation. Sometimes people are willing to take voluntary pay cuts. However, you must be aware that once you start to either reduce or defer salaries, it’s a signal that the business is in trouble and people will start to look for other jobs

WHEN YOU NEED TO FIGURE OUT COMPENSATION FOR YOUR SALES TEAM

📌

Sales compensation is one of the most important things to figure out. It’s also pretty simple to mess up, which can lead to dire consequences

Principles

  • Set the right quotas and comp structure
  • Add incentives
    • We have simple plans that also pay well in accelerators. The plan begins paying at 6%, then moves to 12%, then moves to 18%. That’s a highly motivating plan. This way, superstars get paid well. One individual is already at 35% of quota by the end of January—I think motivated by our plan
  • Make sure all deals come in cash upfront
    • Cash must come in before compensation is paid. Commissions must be based on cash collected—not just securing a contract.
    • Pay for the cash coming in, not for bookings
    • You can only pay when cash comes in so you have something to offset commissions.
  • Have the right number of sales reps
    • You need sales reps, but you need not go overboard with hiring a lot of reps early
  • Don’t overpay people in cash.
    • The big incentive should be there in equity. That’s the brass ring.
  • Invest in your product.
    • You want cash from VCs to go into the product —and investing in evolving and improving it. That’s what’s most important in the early days of a startup
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You must be aware that spending money for growth at all costs is no longer in vogue. The definition of business is for it to make a profit and cash flows as you drive growth. You want to build something solid, solvent, and sustainable.

WHEN YOU NEED TO UNDERSTAND WATERFALLS, LAYER CAKES, AND CAP TABLES (OR HOW TO PROTECT THE TRUE VALUE OF YOUR EQUITY)

One of the most important roles of a founder is to set and manage expectations of all constituents—employees, investors, partners, customers, and press. You paint the picture of what is possible someday, but also what should be expected at each step along the way. At any point in time, your startup’s value will be determined by a unique combination of macro market conditions, quality of team and product, scarcity, business traction, and comparable company transactions. Know and use that information to generate your own “stretch-but-rational” valuation expectations for the next financing as well as the exit. In parallel, you’re setting expectations for the performance you must deliver to justify that valuation.

Imagine that your cap table is a layer cake. At the bottom of the cake, is common stock (typically founders and employees), and above that sits a new layer every time you raise financing—Series A preferred stock, above that Series B etc., and finally any debt is at the top. Each layer may also have its own set of terms (e.g., size, dividends, preferences, ratchets, etc.). When an exit happens, the proceeds are distributed one layer at a time—according to each layer’s particular terms—from the top down. The effect is that each layer of the cake becomes “denser” as you move from the bottom (sponge cake) to the top (brownie). As long as your company meets or beats the expectations you built into your cap table, all layers should participate in the outcome as you’d expect. But if not, that cake starts to get squeezed from the top as your valuation is compressed. The larger the gap between expectations and reality, the more forceful this compression will be. When pressure is applied, the lowest/softest layers get squeezed more than the dense layers at the top. In a worst-case scenario, the brownie may be fine but the sponge cake (you) is flattened. This metaphor explains why your theoretical fully diluted ownership percentage of the total exit value may be far different than your actual payout

Principles

  • Don’t apologize or feel guilty for considering your own financial outcome
    • Both founders and investors are rightfully focused on the dream and building a long-term successful company, but your investors have a portfolio and you don’t. If they can model their return profile and internal rate of return (IRR), so can you
  • Use online tool to manage your cap table
    • If you’re not doing so already, consider using an online tool to manage your cap table. Services like Carta, Solium, Capyx, and others can streamline your cap table management and most also offer exit scenario modeling with liquidation waterfalls. Familiarize yourself with how such an analysis work
  • Before each financing, reevaluate your exit scenarios. Take them into account when you consider what amount and terms you’re seeking
  • Try to avoid—or at least delay—allowing complex financial terms into your cap table. Like entropy, cap table complexity only increases. Try to avoid—or at least delay—allowing complex financial terms into your cap table. Recognize that a “good deal” should consider all terms, not just valuation
📌

We encourage founders to fully understand what you are signing up for when you raise money, and how cap table complexity compounds over time. You can be visionary and focused on the long term while still setting rational expectations along the way. None of this will matter if everything goes perfectly to plan. Yet since that rarely happens, plan for a range of scenarios and ensure you always protect the personal value of what you’re building

WHEN YOU WONDER IF PHILANTHROPY HAS A PLACE IN A STARTUP

We’ve all been very blessed in our lives with talent and access to opportunity. Even when you’re starting out, scrappy and small, caring about others less fortunate than you says a lot about the kind of company you are trying to build

Salesforce was also inspired by the eBay Foundation and looked to the eBay model when it started its own initiative in 1999. Marc Benioff built on this idea and extended it. From day one, he implemented a 1-1-1 model, dedicating 1% of equity, 1% of employee time, and 1% of product to nonprofits and educational institutions. Through www.salesforce.org, Salesforce technology has powered more than 32,000 nonprofit and education institutions; Salesforce and its philanthropic entities have provided more than $168 million in grants; and Salesforce employees have logged more than 2.3 million volunteer hours to improve communities around the world

Principles

  • Start philanthropical activities gently
    • Participate in a charity drive around the holidays to collect food, toys, etc. Celebrate how much you have raised or given.
  • Give employees the freedom to spend up to two to five days a year on the nonprofit of their choice.
    • Let your people “own” it and develop it. Being able to make their own decisions about where to invest their time makes it meaningful to them and they’ll support it.
  • Use philanthropy to unite the company
    • Consider doing teambuilding exercises around helping a favorite charity

If you’re ready to go all-in and create a comprehensive plan from the start, the Pledge 1% website will be a great resource.

I strongly believe that from the beginning of a company, it can have a soul. Caring about others less fortunate than us is soul food.

Part 2: Getting to Relevance

3. Management Basics

WHEN YOU NEED TO DELEGATE

When you start growing and are between ten and a hundred people, you will have to delegate more—and do it systematically and effectively. Effectively is the operative word here

Too often, I’ve heard someone who has been given a task say, “I delegated that to X,” and think that they’re done. Not the case!

📌

Effective delegation means that you know that the task/project will get done with the results that you expect

The more confidence you have in a team or person, the less structure you need to make delegation work. However, if you haven’t taught your team to fish, then it is often a recipe for disaster.

There is nothing more satisfying than seeing teams accomplish more than they (or you) thought possible, with minimum input or guidance from you. It frees up tremendous cycles for you to innovate or to lead in other areas. After all, effective delegation is a crucial building block for scale

Principles

  • When delegating the task, make sure it will get done with the results that you expect
  • Assess the capability and willingness of the team to do the task.
    • Often, people will volunteer for a cool assignment, but can/will they really do it?
  • Ensure they know that if they encounter problems, you are there to guide them.
  • Delegation is not abdication. Overall, you are still accountable for the results.
  • Establish checkpoints to monitor progress so you don’t get any nasty surprises at the end.
  • When the team delivers, celebrate their success

WHEN YOU NEED TO KNOW WHO OWNS WHAT

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Successful decision-making isn’t just about speed or outcome—it’s really about empowering others to make the best decisions for the team

The best decisions do not come from a majority vote or from a single authoritative voice. They are the result of something more balanced. The RACI model allows decisions to be made collaboratively, with the input of several voices and all the necessary data—but ultimately the answer is determined by a single decision maker who was tasked with this responsibility. This approach reduces unnecessary debate and enables timely decisions that are aligned with the company’s priorities.

Principles:

  • Develop a RACI model to address "who does what" question
    • The first step in this model is to clarify what the decision is and when it has to be made. Write it down
    • Then, you employ RACI, an acronym that delineates the necessary stakeholders in a decision. This outlines the person who is:
      • Responsible. Who is the owner? Who sets the strategy? Who will decide? Ideally, this should be one person, but it can be two. Remember, decision-making needs to be pushed down to the lowest competent level. If that’s not done, it means you are not delegating enough. Worse, it means that you may be running a monarchy.
      • Approves. Who will ratify or veto? This person is the one who delegates the work to the “R.”
      • Consulted. Who will be affected? These people do not have the right to make the decision, but you have the obligation to get their input before the decision is made, and you want to know what they have to say.
      • Informed. Who has to be informed about the decision? Always err on the side of informing too many people rather than too few.
  • For each decision, write what the decision is and when it has to be made
  • Push the decision-making to the lowest competent level
    • If that’s not done, it means you are not delegating enough. Worse, it means that you may be running a monarchy.

WHEN YOU’RE AFRAID YOU MIGHT BE A “TWEENER”

In today’s world, product-market fit happens faster than ever. When we invest, companies are often one to two years from actual product-market fit. And that’s totally fine and normal

If you’re reading this letter, you’re probably struggling with your business strategy or execution.

At the risk of stating the obvious, here are two points to consider:

1. If things are really going well, and you’re working on an investable business that’s succeeding, it’s very easy to decide to double down.

2. If your business is really doing poorly, and you don’t see any signs of improvement you also have an easy decision: shut down, treat people well, and return as much cash as possible to shareholders.

Now for the nuance, and the more common situation I see: the tweener scenario. You’re neither a breakout nor a complete failure. It’s pretty easy to tell whether or not you’re a breakout. It’s not a matter of simply achieving any given metric, but rather that momentum is building and it’s impossible to ignore. If you have a consumer-facing company, you can easily see if you’ve struck a nerve. If you have an enterprise company, people want to join your team, employees are thrilled, partners are talking about your technology, customers are huge fans, sales are outpacing the bandwidth of your team, investors are begging to give you money, infrastructure is melting. You know when you have it, and if you don’t feel this (or feel it slightly), it means that you are not breaking out.

📌

Real failure is throwing even more time and capital at a business that isn’t working, and ruining your chances to raise again down the line. Take the learnings, take the loss, take a vacation, and move on.

Principles

  • Reflect on your current business situation
    • Ask yourself the following questions:
      • Do you get cold reach outs from the press, from investors, and from potential employees?
      • Do your customers send notes about how much your product matters to them?
      • Do people talk about you on social media?
      • Are you honestly fulfilling a need better than anyone else?
      • If you say “NO” to the above, sadly you’re in tweener territory.

        Now, what are your answers to the following questions?

      • Do you still have to explain why your product matters?
      • Do you find that huge success is always one release away?
      • If you answer “YES” to the above, you’re in the danger zone

        Still not sure whether or not you are a tweener? These are things we often hear in updates that set off the tweener radar: • “We’re working on our churn problem.” • “We’re now working on [X new project].” • “We published twenty thought pieces this quarter.” • “Our head of product/head of sales/head of marketing is leaving.” • “Our model [predicated on unfounded and aggressive assumptions] shows us earning 100x revenue in two years.” • “We weren’t able to do [something we promised], because [competitor did something, team was slow, our big customer had a leadership change, and our sponsor left].” • “We’re working on technical debt.” • “We lost a big customer this month as their needs changed.” • “We grew 5% month-over-month.” • “Things are continuing with [three customers who are personal friends].” • [No update]

  • Ask your investors if they think you look like a breakout
    • In today’s world, product-market fit happens faster than ever. When we invest, companies are often one to two years from actual product-market fit. And that’s totally fine and normal. Yet if you are past that point, it might be worth asking your trusted investors if you look like a breakout. It could be an uncomfortable question, but they manage a portfolio of businesses, and they probably already have an opinion on the subject. And every quarter that passes where your business looks the same as it did three months before, is a quarter where breakout potential seems markedly lower. Maybe you think being a tweener is okay. Maybe you think you can wait it out. You can’t. The CEO of a tweener company needs to act with an incredible sense of urgency.
  • If you decide that your business is not a breakout, take the following actions:
    • You need to put strong plans in place to get back on track to become a breakout.
    • You need to take a deep look at the current state of things and future projections with the board and management team to assess how viable the strategy is and how bright the future looks
      • If some aspect of your business is working, consider betting the farm there. Often startups try to do too much and offer a “complete” solution, and that can slow their release schedule, make adopting their technology more onerous, and worst of all, dilute the quality of everything they offer.
    • You may need to take significant actions (e.g., painful layoffs, redo of product, pivot, etc.) to ensure you have the cash needed to achieve the turnaround.
  • If you are not convinced that you have a great chance of becoming a breakout, you should think seriously about M&A or returning cash to investors.
    • I’ve watched companies burn through every penny without a plan or hope, and I’ve watched companies make a tough decision to return some money to shareholders and move on to something they more strongly believe in.

WHEN YOU NEED TO SET GOALS

Goals are something that humans intrinsically need. From the very earliest days of starting your company, or launching any initiative, you set goals. Answers to basic questions like the ones below lead to clear and helpful goals for your business:

  • How many people are we hiring?
  • How much funding do we need?
  • How long will our cash last?

Setting goals is natural and easy to do. Setting goals that are achievable, realistic, and inspirational is where the magic comes in.

Too often, I see goals that are achievable, but the bar is so low that the company doesn’t achieve the destiny it’s aiming for. (That scenario is definitely uninspiring for everyone involved.) Conversely, if the bar is too high and the team thinks the goals are unachievable, it won’t really be committed to achieving the goals. (That scenario makes it impossible to get anything done.)

Principles

  • Always start with this question: “What am I aiming for?”. And, then ask: “If we achieve it, will it matter?”
    • Or, to paraphrase Steve Jobs, “Will it make a dent in the universe?”
  • It is better to aim very high and not quite achieve perfection than to nail every goal and deliver mediocrity
  • Assess where the team is
    • Is it a high-performance team? How high performance? How does it operate?
  • Outline goals I’d be proud to achieve
    • What would I think is amazing?
  • Understand that very bold goals might intimidate the team.
    • Take a step back. Understand that very bold goals might intimidate the team. Teams that are not yet high performance will think they can’t achieve aggressive goals. When goals are way out of range, you don’t get the buy-in or commitment you need to make anything happen.
  • Reassess the goals. What would be acceptable to me and also make sense for the team?
    • What would be acceptable to me and also make sense for the team? Look for the magic spot here—a goal that gives a little bit of angst (it’s aggressive and inspiring), but is also realistic (it’s achievable). Rather than set commits on next quarter, set them nine months out. People freak out in ninety days, but they are willing to set more aggressive goals for nine months out. With enough time, people think they can do anything.
  • Introduce these reassessed goals and a plan to the team
    • If you have done this right, the team will still find the goal aggressive, but also achievable. When I was at eBay around 2000–2001, we were at about half a billion in revenue, and Meg Whitman said she wanted us to reach $3 billion by 2005. It felt like when JFK said he’d put a man on the moon. Initially we didn’t see a way to get there, but we figured out a plan and everyone came on board.
    • What’s amazing is what happens after the team goes through somecycles where they successfully achieve these goals. Before long, the team starts learning to hit aggressive goals consistently. And then I’ve seen something even more incredible happen: They set and beat aggressive goals that exceed my expectations. I love nothing more than when I have to dial them back!

WHEN YOU NEED TO GIVE (AND GET) FEEDBACK

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As a leader, it’s your responsibility and obligation to help people improve and achieve their potential.

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Soliciting feedback is a great way for a top exec to learn and grow

Principles

  • Praise in public; criticize in private
    • Always follow this rule. And remember, people are watching how you react. It’s not just what you say, but how you say it and how you hold yourself
  • Build trust
    • Do the necessary work in advance. People receive feedback better when they trust the person delivering it. Ideally, the recipient should understand that you’re sharing thoughts in the interest of serving their needs. The more trust you can build, the easier it is to have more difficult discussions, because you come from a place of working together rather than a place of judgment. Additionally, if you know your employee’s career aspirations, surfacing bad behavior can help them improve and achieve their own goals. The more trust you’ve built, the more candid you can be.
  • Give feedback constructively. Feedback should provide validation and inspiration
  • Be thoughtful. Have everyone else’s best interests at heart
  • Deliver feedback with love and good intentions.
  • Don’t hold feedback conversations when you’re angry
  • Understand where the person is. Feedback is best given when people are receptive.
    • How do you know? Ask them. Say, “Do you have some time for a one-on-one? I had some suggestions I was hoping to share with you. If you are not prepared for that now, we can discuss when you are ready.”
    • Setting up the conversation in this manner is a way to clue them in to what is happening and to make them aware that you are here to help them.
    • Recently, someone I work with wanted to vent, and I made it clear that I was not open to hearing it. Yet sometimes you have to let people get emotions out of the way and then get to a pragmatic discussion on what happened so you can help them gain perspective. You can do this with a simple, “This is what I am seeing. What do you see?”
  • Don’t shy away from delivering feedback just because it’s hard.
    • We can’t take the new nicer workplace to an extreme and let it remove our ability to offer constructive feedback. Tough love can go a long way on the path to improvement.
  • Be a heat seeker for asking for feedback. Always ask, “Is this working? Is there anything else I should be doing?”
  • Be approachable and safe.
    • It’s hard for someone to tell you something critical, and it is important for you to be understanding that they may find it challenging. Try “baiting the hook”—you know some of your own weaknesses. Ask a colleague or direct report if they’ve noticed you do something you shouldn’t, and if they have advice for you. Often, they will ask for advice in turn.
  • Start with an open mind. Try to understand where their advice is coming from
    • Try to understand where their advice is coming from. Even if you disagree, sharing feedback is hard and you should view their consideration as a gift.
  • Listen to what is being said. This doesn’t mean you have to accept it, or do it, but you do need to listen.
  • Commit to creating a learning environment and enlisting your team’s support to help you grow.
    • You should not be afraid of truth. Commit to creating a learning environment and enlisting your team’s support to help you grow—because every day you can be getting better. I promise that understanding that you’re never done improving will help your career in spectacular ways.

WHEN YOU NEED TO HAVE AN OPEN DOOR

Founders and CEOs should be approachable. They should be open to engaging in dialogue, both inside and outside the company, and to soliciting feedback from employees, investors, and customers.

Principles

  • When you are starting out, give frequent updates to all employees
    • Such updates are ideally done in person, but can also be done in writing. The idea is to keep teams informed of your perspective and initiatives. This practice should also continue as you grow
  • Ensure that the culture doesn’t “paper over” large issues
    • When you’re small, you may not have an HR department to deal with tough issues, such as sexual harassment, discrimination, or bullying. This often means that these issues come to the CEO. Therefore, it’s up to you that they get managed and handled correctly, either by you or by appropriate members of your staff
  • You do not need to own and resolve each issue personally, but you do need to ensure that each issue gets resolved
    • Generally, it is best to have the person who has the issue work with their line management directly to resolve the problem (and not expect you to resolve the problem) and then report the resolution back to you.

WHEN YOU NEED TO BE THERE FOR SOMEONE

There’s a well-known saying that insists achieving success is mostly about showing up. Obviously, if you want to succeed you need to show up, but I’ve found that success really results from what you do once you’re there. Showing you are committed, engaged, focused—and delivering great results—is what makes a difference

As an employer, you may be on the sidelines. Yet it’s also your role, if possible, to get your people help. You may be a boss, but you are also human, and being there for someone is the most important thing you can do

The first rule is to show up—even when it’s difficult and you don’t know what to say—and the next and more important step is to show that you really want to be there. That sounds obvious, but sadly it often doesn’t happen. With everyone so busy, people frequently stay away in tough times. What people really need is for you to step up and lean in.

In order to be productive, your employees must be healthy and happy. If you see something is different with someone, check in and see how you can help. Yes, this may not be work-related, but it’s life-related and it benefits everyone to try to help make everything work holistically.

Principles

  • Show up when the person has difficult personal times
    • The first rule is to show up—even when it’s difficult and you don’t know what to say—and the next and more important step is to show that you really want to be there. That sounds obvious, but sadly it often doesn’t happen. With everyone so busy, people frequently stay away in tough times. What people really need is for you to step up and lean in.
  • When someone loses a loved one, or has a child who is very ill, it’s important to demonstrate real care. Show compassion and relay your own experiences, because people can spot insincerity from a mile away. Here’s what you should be doing:
    • First, ask if it is an okay time for the person to talk, in a quiet, nonstressed moment.
    • Tell them you are sorry for their loss, or for what they are going through.
    • Ask them if you can be of service or help in any way. When an event has been particularly devastating, I recommend just jumping in and helping. Volunteer to babysit their kids, ask if there’s a foundation you can give to, offer to take work items off their plate.
    • Just listen. In the cases of battling an illness or losing someone, learn more about this person who is so special to them.
    • Help nourish them. Send food so they have less to think about and organize. Or send flowers to show you care.
    • Ask them if you can check in again. Tell them that if they don’t feel like talking, they don’t need to answer the phone.
    • Reassure them that you care and that everything at work is handled, and that there is nothing they should worry about. You should expect their productivity to fall, but I’ve found that tragic events can also bring out the best in fellow teammates.
  • Remember, as a manager, your behavior will also be what you hope your colleagues model.
    • And in this case, the things that feel right to do for the person, are also the right things to do for your company
  • If you see that something isn’t right, check in and ask. Do this early and often
    • It must be noted that there are times when you do not know what someone on your team is going through, but you know that something is wrong. That person also needs your help. There’s a fine line between being helpful and supportive and overstepping.
  • You can’t meddle, but you can show compassion and care.
    • When you’re worried about caring too much or stepping over a line, it’s always better to be human and caring than to be perfectly correct.
  • Try and get them the help they need
    • whether that means taking time off or helping them find and access the appropriate professional resources, which hopefully are covered in your company’s benefit plan.
  • Be aware that serious events can put a team through a collective depression. Determine what resources you can bring to bear to help the rest of the team
  • Make people feel safe to share what they are going through.
    • Be committed. Make people feel safe to share what they are going through and get professional advice along the way so you can be assured you are taking the right steps to help
  • Remember, when a team member is going through catastrophic events it affects the whole team. You need to pay attention to them as well.
    • Consider bringing in professional resources for the whole team to help guide them through.

WHEN YOU NEED TO LEAD WITH INSPIRATION, NOT FEAR

Communication is so important. But it’s not just what you say and how often you say it. It’s also—perhaps even more so—about how you listen. Adhering to this practice is especially important when you’re the CEO. It has massive implications for the culture you want for your company. Do you want to run your company based on fear and power, or based on inspiration? Stephen Covey famously advised, “Seek first to understand, then to be understood.” A more folksy adage is that God gave us two ears and one mouth for a reason.

Listening is so important because not doing so comes off as defensive, and worse, it’s a gating factor to success

When a CEO frequently reacts to information or perspectives defensively, it sets off alarm bells for shareholders and board directors. Ifthis is how the CEO reacts to people to whom they are accountable, how are they interacting with their employees? Do the employees feel safe in surfacing their concerns and ideas?

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Active listening is a skill all CEOs have to master in order to succeed with their board, their employees, their customers, and their community

Principles:

  • Be open to others’ thoughts. Realize that everyone is entitled to their opinions and perceptions, even if you disagree with them.
  • Try to understand first, then to be understood.
    • Make sure you follow the Covey advice of seeking first to understand. Keep asking questions until you have drained all the points the person hoped to make. If someone looks uncomfortable or attempts to change the subject, there is likely more on their mind. Make it safe for them to share their thoughts.
  • Ask clarifying questions.
  • Don’t say judgmental things like, “You’re wrong.” Say, instead, “That’s an interesting perspective, I need to think about it.”
  • Don’t act defensively or disregard what you’ve been told.
    • You can share your perspective, but at the end you should repeat what you’ve heard and have alignment around next steps to correct the situation.
  • Lead with inspiration, not fear.
    • If every discussion is a battle, people have to decide how much energy they want to expend and where, and you won’t get engagement unless there’s something really wrong. Replace a command-and- control culture with one that is inspiration-based and gives everyone a chance to buy in and make meaningful contributions. The very best companies are led by inspiration—not by fear or power. Problems will happen at all companies, but people do their best work when their company’s culture is based on getting the best from everyone, being open, celebrating problems and fixing them fast, and making everyone feel safe to help the company achieve its destiny.

WHEN YOU NEED TO BE OVERT

Are you surprised when your team sometimes does things or behaves in ways that are diametrically opposed to what you believe or hope that they will do? When you see such a situation occur, do you think that they should have known better since you’ve overtly communicated the expected behavior in such circumstances—maybe even several times?

Yet other times, people aren’t making their own choice; they simply aren’t aware that their behavior isn’t in step with your expectations

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As the founder, one of your roles is to ensure the core messages of what you’re doing, and what matters, are understood and echoed by everyone in your organization

When there’s a disconnect—regardless of the root cause—it’s up to you to correct it. Own your part to ensure that communication will be done effectively and repeatedly. Take steps to make the expectations overt and hold people accountable

Principles

  • Make the expectations overt and hold people accountable
  • If there is a problem, decide whether the expectations of behavior have been communicated clearly and recently.
    • There is always a lot going on, and the most important things need periodic reinforcement.
  • If communication hasn’t been done, now is a good time to start doing so. Approach this calmly and professionally
  • If communication has been done, figure out what’s causing the split between your desires and the actual behavior.
    • Expectations may be unrealistic at times, but the behavior also may have deviated from expectations either because the expectation wasn’t ingrained or because it was consciously disregarded
  • Understand that you can’t make EVERYTHING matter. Be realistic
    • Also, be realistic. Understand that you can’t make EVERYTHING matter. If you try to be overt on everything, you’ll pummel the team to death. Instead, decide what trumps what. Let everything else go, and be overt about what matters most.

WHEN YOU NEED TO FIND SYNCHRONICITY

Synchronicity is about seeing around corners—and it’s necessary when doing something as tricky as building a business. Too often we expect to find the answers we need from sources we know, but there are answers to questions everywhere. It’s necessary to have a learner’s mind and to be open to input and insight from everywhere.

Synchronicity happens more often than we know. Look for it everywhere and you will see what it can do.

Principles

  • Identify what’s troubling you. You must be super-aware of the problem you are trying to solve.
  • Be open to gaining insight from everywhere.
  • Be willing to walk out of your comfort zone. Sometimes this means doing something uncomfortable.
  • Ask probing questions to those around you.
  • Delve into how you can solve someone else’s issues.
  • When synchronicity happens, seize it.

WHEN YOU WONDER IF NETWORKING OR MARKETING EVENTS ARE WORTH YOUR TIME

If you’re extroverted, the thought of attending an event may energize you. If you’re introverted, as I am, the thought may stress you out and cause you to want to avoid it. I am a believer in the power of the right events to accelerate your business and give you some fresh perspective. When approached correctly, events can allow me to do three weeks’ work in just a few hours. They also provide a great opportunity for synchronicity

So, introverted or extroverted, attending conferences should make it to your priority list. Like everything else, though, you need to manage them wisely and ensure you get the return expected for the time spent. And, by the way, have some fun along the way and bring the learnings back home to the team!

Principles

IF YOU ARE ATTENDING AN EVENT

  • Don’t do it all. Decide which events make sense, and guard your time religiously.
    • There is only so much time we all have. . Similarly, do not go to every session at each event. At Dreamforce, Salesforce’s annual user conference, I always go to the keynotes and leave the rest of my schedule open for serendipity
  • Plan some meetings in advance.
    • People have busy schedules, especially with the compressed time of an event. Get an attendee list and put meetings on the calendar before you go so you won’t miss the opportunity to see each other
  • Make sure you keep what matters at the top of your mind: new insights and new connections. Have fun, but measure results.
    • Events are not just about partying, though that does seem to define some of them. Make sure you keep what matters at the top of your mind: new insights and new connections. I make sure that attending an event will enable me to make at least twice the impact I would have had in the office, and I define what that looks like so I know how to focus my time at the event. Define what a successful event looks like for you in advance, and then chase your goals while there. Also remember to leave some time that isn’t scheduled (see the “When you need to find synchronicity” letter). Frequently, I’ve come up with some new insights or ideas while listening quietly to someone else speak.
  • Be measured.
    • In the tech industry in particular, there can be a temptation to go down the path of becoming a “celebrity founder,” where every week you might be talking at a different event

IF YOU ARE HOSTING AN EVENT

  • Don’t make the invite list too big. Think carefully about who attends. You need to make sure you have the right mix of people.
    • Don’t make the invite list too big—it should not be a cast of thousands, but an intimate event of the right caliber of people. Marc Benioff masterfully creates the right mix of attendees, which includes customers, prospects, team members, board members, journalists, philanthropists, and a few other interesting people. Sometimes this includes a musician or magician. It keeps things interesting!
  • Build in informal time for interaction. Leave room for surprises.
    • Events that are hosted somewhere other than the office or conference center are a great way to get people more invested and present. The most meaningful encounters happen when people are at an event for a dedicated period of time, not just popping in for one topic that interests them. That’s because relationships are not built during formal programming, but rather when people have an opportunity to create the conversation in a comfortable atmosphere. (At the Upfront Summit, a big technology event in Los Angeles, most of my best “meetings” took place around the food trucks that served lunch.) Make sure there are spots for mingling so attendees are not all running back to their hotel room to hide (or do email)
  • Make sure people want to come back.
    • That means ensuring that every attendee leaves with more than they expected. Build a roster of impactful content and give them opportunities to have fun (I find contests help with this) to help make them feel like the event was worth their time—including the cost of travel and time away from the family

WHEN YOU NEED TO BUILD YOUR ALUMNI NETWORK

The fact is, we don’t own our people; they choose to work for us and we choose to hire them. It is our obligation to do everything we can to make them better while they are with us. It is the employee’s obligation to do everything they can to make the company successful.

When someone decides to leave—whether the employer decides the employee no longer is needed or the employee decides they no longer want to work there—we should be thankful and appreciative on both sides. We should agree to stay in touch.

An alumni network can be an amazing source of referrals for candidates and new business. Even more importantly, though, it’s a source of validation for the people who have been a part of your company’s journey.

Principles

  • Send every team member off well. Thank them for their service and solicit their willingness to stay in touch
  • Create an alumni page on Facebook or LinkedIn. Keep an in-house contact list
  • Periodically create content to update alumni on the latest goings-on at the company. Include things they may be able to help you with, such as suggesting candidates for a job opening.
  • Be willing to show up at alumni events. You might want to even consider hosting them.
  • Make everyone feel that they are still in the family even though they’ve left the house

WHEN YOU NEED TO BUILD A GREAT BOARD

Most likely, if you build a successful business, you won’t be able to get away without building a formal board for long. And when it comes time to creating a board, you will find that it is one of the most pivotal decisions you will make in your entire career

Principles

  • If at all possible, stay informal—do not have a formal board for as long as possible
    • Why? Ask most board members what their number one job is, and they will most likely say it’s hiring or firing the CEO. Board members will cover all kinds of other things—providing strategic insight, opening doors, advice and counsel, and all of the regulatory obligations that come with being a public company—but they will always say their number one job is to ensure they have a great CEO in place.
    • Most likely, if you build a successful business, you won’t be able to get away without building a formal board for long. And when it comes time to creating a board, you will find that it is one of the most pivotal decisions you will make in your entire career
    • One of our biggest breakout companies has a “board of one,” and the founder jokes about holding an annual board meeting in the Caymans, where he talks to himself.
  • Choose small boards over big boards, especially in the early days of your startup
    • Less is more! Keep your board as small as possible. Build hands-on boards with members who are willing to help and provide advice, rather than board members who are trying to play “smartest person in the room.” It’s important to ensure that the board is engaged and treated with appropriate dignity and respect.
  • Assess the talent on your board the same way as the talent on your team
    • Just as you are always assessing the talent that is on your team, you should be assessing the talent that is on your board.
    • What help do you need now, and what will you need when you are much bigger? There are some seats (like investor seats) that are guaranteed, but most times board seats can be swapped, and changes should be made so that the best person possible is in every seat.
  • Select board members who fill your gaps.
    • I always selected members based on some of my weak areas. I didn’t have extensive sales and marketing experience, so I added someone who had been a CMO of a big public software company and a sales exec at Hewlett-Packard. Some seats are directly attached to functional expertise, such as the head of the audit committee. I always tried to select someone who could excel at that role, but who was also interested in helping more strategically. If possible, put someone in an “adviser” role first so you can see how you interact.
  • Understand why someone wants to be on your board.
    • What are the motives for joining the board? Sometimes the best way to become CEO is through a board seat. Sometimes board members still want to run companies. Others want some ego gratification. None of these are good reasons. Most people who are eligible for boards are very accomplished, but you need to know whether they want to provide advice and counsel—or whether they want to do operations. Are they willing to be one voice of five? Or would they rather have everyone do what they say? Board members wield a lot of power and it’s very difficult to get someone off. Choose the right individuals who want to be of service
  • Pursue people who don’t want to be on a board
    • This suggestion sounds strange, but it is perhaps my best tip. Busy people with big jobs are great selections because they won’t spend all their time obsessing over your company (but make sure they will be willing to be available when you need them). Someone with a lot of free time might want to spend it with you—you don’t want that. I’ve found that often the people who talk the most and demand the most are of the least value
  • Instead of dreading board meetings and seeing the members as “overhead,” put these great resources to work for you
    • The importance of having a close collaboration with the board is one of the most valuable things I learned as a CEO. I always took my biggest issues to the Board, sought their input, and then made my decision. Make meetings a source of affirmation and insight. Put the board to work on lead generation, problem-solving, and pattern recognition. Advice from seasoned veterans can also help you grow and operate as a manager and leader.
  • Make allies, not enemies.
    • Appreciate the board in the best of times, so they are there for you in the worst of times. Board meetings and board assignments can either be very tedious and boring (when things are really going well), or very intense and crazy (when things are stalling or in flux). When everything is going well and the CEO and company meet or exceed goals, it is often easy to be a little arrogant with your board and see them as overhead. Don’t do that. Having great chemistry and trust is very important, because when the tide changes (success is not usually linear), you want the board to feel informed and eager to help you

WHEN YOUR FIRST KEY HIRE LEAVES

TAKE A DEEP BREATH. If you become as successful as I hope you will, this departure will be the first of many people who will leave over time. It always hurts when a key contributor leaves

Principles

  • Find out why they are leaving.
    • Are they running away from something or running toward something? Do they have their heads on straight regarding the situation?
  • Find out if they are salvageable
    • If there is something wrong, can you fix it?
    • If you can fix it, is the person mature enough to recommit and be wholly engaged?
  • Use additional compensation as a last resort
    • I always use additional compensation as a last resort, as it’s usually not compensation that makes someone want to leave.
  • If you think they are salvageable, still do a gut check and make sure you’re not getting gamed.
    • Sometimes people use the threat of leaving as a way to angle for more money. Unfortunately, people sometimes do disingenuous things
    • You want to give people the benefit of the doubt, but you do have to be careful as you do not want to build an entitlement culture where people think that if they threaten to quit, they become eligible for a promotion
    • If you are not careful, soon everyone will be at your door with a counteroffer and a request for a raise and promotion
  • If they are leaving definitely, negotiate a mutually beneficial transitional plan
    • If they definitely will be leaving, can you negotiate a transition plan that’s beneficial for both of you?
    • Can you get their agreement to help out in a pinch even if they are in a new job?
  • Treat them with respect and dignity on the way out.
    • Celebrate their contributions and let them know they are welcome back if things don’t work out where they are going
  • You need to celebrate the people who stay and do good work as much as—or more than—the folks that leave.
    • I’ve heard people say they only got recognized when they left (the squeaky wheel gets all the grease syndrome), which leads to very bad cultural dynamics.
  • Make sure the team knows that the departing person will be missed, but talk about the actions you can take and they can take to ensure the company will still achieve its dreams.
  • Recognize that this is a great opportunity for someone else to step up and get a promotion.
  • Look back and assess whether losing this person was a surprise.
    • Did you see it coming? Make it a point to proactively know where all your key talent stands—and work hard to keep them motivated and in the game.

WHEN YOU HAVE TO FIRE AN EMPLOYEE FOR THE FIRST TIME

Organizations, even small startups, have great performers as well as people who aren’t so great.

Big companies are notorious for having mediocre people. Startups can’t afford this.

As a founder, you have to view each employee as someone you are giving something very precious to—like a ticket to the Super Bowl on the fifty-yard line.

You’re hopefully going to change the trajectory of this person’s life, and in doing so, you need to hold them accountable to achieving the company’s potential.

Remember, performance is not a static thing. Someone may be a great performer early and then check out later. Or their role or priorities may shift over time. The best cultures require outperformance at all times, and if something starts to go south, take steps to correct it quickly

The fact is, most people wait too long to fire someone. That’s a problem because most great performers become very frustrated having to deal with the results of working with second-rate performer

How do you know when it’s time to let someone go? By the time you start worrying about it, it’s probably too late

Principles

  • As a founder, you have to view each employee as someone you are giving something very precious to
    • You’re hopefully going to change the trajectory of this person’s life, and in doing so, you need to hold them accountable to achieving the company’s potential.
  • Performance is not a static thing
    • Remember, performance is not a static thing. Someone may be a great performer early and then check out later. Or their role or priorities may shift over time. The best cultures require outperformance at all times, and if something starts to go south, take steps to correct it quickly
  • Determine the driving issue of your concern
    • Are they not making the commitment? Are they not working hard enough?
  • Assess if they are recoverable
    • Go all-in and try to help. Expect them to make it, but simultaneously work on your recovery plans in case it will not work
  • If it’s not fixable, act in a way that will minimize damage. Treat everyone nicely, ask them to deliver, but don’t invest in preserving them in this role any longer
    • If it’s not fixable. Go into “dead man walking” mode. Treat everyone nicely, continue to ask them to deliver and put more checkpoints in place, but don’t invest in preserving them in this role any longer. It is only a matter of time before they will be leaving the organization. Act in a way that will minimize damage.
  • Do not put this off.
    • The situation has to be addressed immediately.
  • Project how it will be on the other side of this difficult process.
    • I’ve always found that thinking about firing someone was far worse than the actual act of doing so
  • Look back and think if you have done your job to set the person up for success.
    • If so, keep moving.
    • If not, do you think that you can effectively set them up for success? And are you and the team willing to try?
      • If so, put the person on an improvement plan with clear expectations and checkpoints.
      • If not, again, keep moving, but next time do a better job of setting your people up for success.
  • Treat the person well on the way out.
    • Be firm on why they are being let go, but explain what you are doing to help them. Let them resign if they desire, and still give them whatever severance you were prepared to give them after firing them. Let them propose (subject to your review and approval) the messaging around their departure. Some people may prefer it to look like they voluntarily resigned. Let them opt out
  • Understand that how you treat employees who are being fired or placed under performance review is important, and will be remembered by all members of the company.
    • Not only are your employees aware of what’s happening, they are all projecting themselves in a similar situation.
    • Remember, how you fire people carries repercussions for everyone else. Use the Golden Rule and treat everyone the way you’d like to be treated— even, and especially, on the way out
  • Think about what you will say as a reference—and talk about it.
    • Having this kind of dialogue is a good way to ensure a smooth transition.
  • After it’s done, be open with your team.
    • Be willing to answer questions without disparaging the individual.
  • Find someone great to fill the role being vacated.
    • As difficult as it is to let someone go, understand that this is a great opportunity for someone else. Give one of your stars a chance to take it on
    • Throughout my career, I’ve been more pleasantly surprised with “battlefield promotions” than by hiring rock stars from outside. I’ve always had more success by promoting from within rather than hiring from the outside. Give someone on the team the chance to step up and to learn and grow.
  • Commit to doing even better on the next hire.
    • If the person didn’t work out, it’s not just their fault. It’s your fault, too. You hired someone who wasn’t right. What are the signals and learnings for you to make sure you’re hiring right the next time?

WHEN YOU NEED TO GAIN CREDIBILITY

You already know a great deal about credibility. You’ve already developed enough credibility with investors to get funded and with your employees to develop a staff.

But that’s just the start. You are either gaining or losing credibility—and building or eroding trust—every day.

My comments had been heard, but I had not been specific enough about what to do. If you are in this situation, you have to ask what you can do to fix the situation and reestablish trust:

1. What are the concrete actions you can take to lead the company to a better place? 2. What do you need to help achieve them? 3. When will these actions be done?

For entrepreneurs, there’s no shortage of working hard, but you need to assess your efforts to examine whether or not you are working on what matters, what inspires everyone around you, and what builds their trust in you.

Principles

  • Determine if your strategy and plan inspires confidence or fear.
    • Does it tell a breakout story and show you are being as proactive as possible, or does it tell a defensive story (e.g., huddle down, preserve cash, and hope for product/market fit)? If you don’t inspire confidence, don’t expect trust to build.
  • Determine if you deliver on promises made
    • Do you deliver on promises made (what I call “do what you say and say what you do”)? Staying true to your word is essential. If you are not carrying through on your commitments, do you know why, and are you taking the appropriate steps to course correct?
  • Determine the effectiveness of your response
    • Is your response effective? I have often seen people taking the wrong actions and doing things with a “false urgency.” (See, for example, what happened in the scenario with the head of sales above.) In his book A Sense of Urgency, John Kotter postulates that most individuals and companies live in a “complacency zone.” However, when they are faced with challenges, Kotter writes that they often create “hair on fire” task forces, which exhibit false urgency rather than true urgency—the kind that inspires people and really moves the needle.
    • Leaders must only work on what makes a real impact
  • Don’t confuse action for traction.
    • Realize that just because you’re busy, it doesn’t mean you’re making forward progress. You have to focus on the right things. It’s necessary to organize and prioritize in order to achieve the right outcomes. How do you do that?
  • Iterate and test your way into knowing what success really looks like.
    • Once that is clear, double down, move fast, and execute

WHEN YOU NEED TO UNDERSTAND THE IMPACT YOUR JUDGMENT IS HAVING ON YOUR DECISIONS

As a CEO, you have to make judgments all day long. I would argue that the same is true in our personal lives. We also are constantly making snap judgments: that person is a bad driver, a lousy planner, a crummy cook

Understanding the role that our judgment plays is a really complicated issue. Sometimes we think we are making decisions with the appropriate facts, but we all have powerful, always-running unconscious cognitive biases that affect our decisions. And our brains can behave completely differently in different contexts. Our biases may lead us to hire someone that acts like us or seems familiar and they may cause us to stay away from something we don’t know or don’t understand.

None of this means that we should shy away from making decisions. We simply must understand that our judgments will always be fast and imperfect and therefore we must do everything in our power to build some process and transparency for our decision-making

Principles

  • Don’t ever fret about whether you have to make decisions
    • Fret about whether you are doing them without quick judgments and with an open mind—that will dictate the best thing to do.
  • Conduct decisions with an air of wonder.
    • Ask yourself: Do I have all the facts I’d like to have? Am I missing anything? (You always are.) Are there subconscious biases creeping in? Ask: Have I thought of everything else? and go back and reconsider
  • Ask others for their opinions on what they would do if they were you
    • Make sure you are not insular on who to ask—don’t gloss over people you are pretty sure will disagree with you. Think about how anyone else in your circumstances would respond and what they would decide. Don’t be afraid of asking for help if you don’t know the answer. Go to your board, employees, or peers. Gathering input from others is often helpful and doesn’t mean you will not ultimately make the decision. And the real mastery comes when everyone else thinks they made the decision, but in reality you did.
  • Determine if this decision is one that you have to make. You should always be working to empower your people to make crucial decisions
    • If someone else can do it, that’s good; it’s an opportunity for them to hone their judgment. You should always be working to empower your people to make crucial decisions
  • Decide. If the situation requires an answer now, make it.
    • Decide. Understand the time constraints of the decision and proactively decide whether to make a decision or not. Does the situation require an answer now? If so, make it. Too many people delay making decisions. That is, in essence, making a decision
  • Hone your judgment so that you keep getting better
    • If you make a decision that isn’t right, learn from it. Be willing to admit when you’ve made a mistake. Acknowledge your error and fix it fast. Consider adding a postmortem process for key decisions: Were they good or bad? What information should you have gotten? Judgment tends to gets easier with experience and practice, though keeping an open, inquisitive mind often becomes harder

WHEN NO ONE IS EXCITED TO BE HERE

You can feel energy in rooms. It’s palpable. It radiates. When teams are energized, everything seems way more possible to achieve

📌

It’s up to you as the leader to set the tone for what energy is expected. You have to set that example and exude that kind of energy.

When things are tough, it’s time for leadership to be more present and demonstrate how to get through this bump to better days ahead. Step up into this role and don’t let the team bring you down—you need to lead them to greatness!

Principles

  • First calibrate where you are in terms of energy level
    • What’s the highest energy level your team has ever had? Have you had a “10” day? What’s an average day like? What’s today?
  • Celebrate the wins that exist.
    • Do fun things with your team. Take a break to treat your team to a movie, or do some charity work together. It can be simple: At LiveOps we had random Nerf arrow attacks and paper airplane contests;
  • Honor special occasions.
    • Welcome everyone and celebrate every new hire. Acknowledge special occasions such as anniversary dates. IBM used to give a gold watch to celebrate twenty-five years with the company, but most people don’t stay so long with the same company anymore. You don’t have to wait twenty-five years! You can celebrate every year, and other milestone anniversaries, in small ways by recognizing people’s achievements in all-hands meetings or by writing them thank-you notes.
  • Treat setbacks as learning experiences.
    • If there are problems, address them candidly and openly. Let people ask questions and then enlist their support to fix things
  • Personally model the enthusiasm—even when it’s hard.
    • At eBay, some days were hard and even without saying a word, people could tell that I was troubled by something. They got worried and asked what was wrong. I would say, “Wow, just because I wasn’t smiling you think I’m angry, or someone is in trouble.” However, I had to accept that my actions were leading them to worry. I had to maintain more of a sense of calm, even in an urgent situation. I learned that from Meg Whitman’s leadership. She made me laugh every day, and these interactions helped me get through the clutter. As a leader, you need to model courage, candor, and resolve
  • Spend time engaging with people.
    • Say hello to them in the morning and good-bye at night. Be approachable. Ask about their families and show them you care about things other than getting their work done. When they miss work because their baby is sick, ask about how the child is doing when they come back. Also, enable your teams to enjoy and get to know each other. One great and very simple way to do this is through team lunches and dinners
  • Extend inclusion beyond your employees. It’s important to include the families.
    • People work hard and their families miss them when they’re away—you need to enlist loved one’s support, as well. Include them in special events

WHEN YOU NEED TO DEAL WITH POOR PERFORMERS

It happens all the time: someone looks great on paper, stands out in an interview, and then joins the company—and then things don’t go according to plan. Their skills aren’t really a match, their experience isn’t translating, and they are not achieving what they were tasked to do. These are issues that every entrepreneur battles. In fact, some studies show that hires don’t work out 50% of the time

Principles

  • Investigate always
    • As a leader, it is your responsibility to do everything you can to understand the reason behind poor performance. Determine why the employee is struggling. Are they not able to give their full attention? Do they no longer like their job? Have a conversation with the person and get input from the executive team and the board to determine the appropriate next steps
  • Set expectations of excellence and make sure there is clarity on all sides.
    • Expectations must be set high, and must be both aggressive and achievable. With aggressive goals, hitting 80% of them is amazing, but hitting 100% of goals means you likely didn’t set the bar high enough
  • Be crisp and clear with the individual on what they must do to get better. Communication is key
  • Establish a culture that allows people to ask for help early and often.
    • Problems are good. If made aware of them early, you can solve them.
  • Fix it fast.
    • If problems do not get better, sometimes other actions are necessary. Remember, by the time you are aware of poor performance, your superstars are already aware of someone not pulling their weight. They are counting on you to address it
  • Part amicably and celebrate contributions.
    • Everyone is watching how the situation is being handled. It’s okay to let people go if it’s not working, but always treat them with dignity and respect, even on the way out
  • Invest in your best performers instead of focusing on poor performers
    • Okay, now let’s get down to what really matters. In our efforts to get the most out of employees we too often make a common mistake: We spend too much time worrying about poor performers and not enough time focusing on the best and the brightest. The real secret to making the biggest impact rests in investing in your best performers and ensuring they become even better.
    • Unfortunately, that rarely happens. Instead, the best players are viewed as so good that they are often left on their own. We have to think about it differently. If someone is tremendously good, you should ask, What can I do to make them even better? If someone is an A student, you must explore what you can do to make them an A+ student. The recipe for greatness is generally not found by taking a C student and making him or her a B student
  • Go find your best people, inspire them, and ask more of them
    • As the adage goes, “If you want something done, ask a busy person.”
    • “Find a busy person and try to break them.”
    • What you will receive in return will astound you, and it is what will ensure your company’s success today and tomorrow.

WHEN YOU NEED TO OWN BAD NEWS

Principles

  • Let the person or team to deliver good news
    • You have good news and you’re eager to share it. Don’t
    • Let the person or team that accomplished this feat deliver the news. Then, you can add your thoughts—and kudos—on top. Everyone should have a chance to shine.
    • (One disclaimer: If this information is going to the board, review it first, and use your judgement to decide who should send it. For example, if it is likely to generate follow-up questions you may want it to come from you.)
  • Don’t ask other people to deliver the bad news, and if they want to, don’t let them
    • What about bad news? Do you have the folks you believe are responsible for something going wrong deliver a negative update? Here, the answer is a firm “no way.” Don’t ask them to deliver the news, and if they want to, don’t let them
  • Deliver bad news personally
    • As a CEO, it’s your responsibility to take ownership of delivering bad news. Don’t ever distance yourself from it. You must also put context around it, explaining what it means
  • When delivering bad news, give context on the plan of fixing it
    • Most board members react to bad news with action; it’s up to you to give them enough information about how you’re going to improve your issues, so they leave you alone to focus on fixing things
  • Find a way to highlight progress
    • No matter who’s telling bad news, there needs to be good news sprinkled in with it. Your job isn’t over just because you told the truth. You can’t just ask people to absorb bad news constantly—that’s not a recipe for greatness, let alone longevity! You should find a way to highlight progress, deliver some positive news, and leave people feeling optimistic
  • Follow 12 steps when you have to deal with bad news
    • Bad news doesn’t get better with age; so don’t wait
    • Stay calm and focused
    • Determine how bad it is
    • Figure out who needs to know
    • If it’s seriously bad, consult with your lawyers and advisers and listen to them.
    • Decide what to disclose. (Don’t overreact, and don’t underreact!)
    • Make sure the information comes from you.
    • Tell the truth, admit the situation, and own up to the seriousness of it.
    • Share what you are doing to resolve the issue and move ahead.
    • Set expectations for what progress will look like.
    • Don’t expect anyone to be happy with very bad news.
    • Ask for help, and ask those receiving the bad news what else you can be doing.

WHEN YOU NEED TO SET THE TONE FOR APPROPRIATE BEHAVIOR

It’s important to set the right tone for your company from its very earliest days. Most important: Treat everyone with dignity and respect, always

Leaders play the most significant role in ending these problems. They must examine how they can prevent abuse from happening and take a critical look at their own behaviors.

📌

Leaders are held to higher standards. The higher you go, the more obligated you are to set an example. Do the right thing.

Principles

  • Treat everyone with dignity and respect, always
  • Picture whatever you are doing showing up on the front page of The New York Times. How would you feel about that?
    • You usually know the right way to behave, but if you find yourself in an uncertain situation, picture whatever you are doing showing up on the front page of The New York Times. How would you feel about that? Better yet, how would you feel about your mother reading it?
  • Be maniacally clear about what behavior is expected in your workplace. Have guidelines on what is and isn’t acceptable and guidelines on how you hold people accountable.
  • Do not promote a monoculture, such as a “bro culture"
    • —this is antiquated and dangerous. Have a workplace that supports and celebrates diversity and makes everyone feel comfortable.
  • Remember that you are a leader outside of the office too.
    • Celebrating teams and wins is a good thing. Having validations and rewards for people is important. Yet leaders must remember their leadership roles, even when outside of the office. They can never lose control or go over the top. I know of a company that has a holiday party tradition where the CEO matches the employees “shot for shot.” That’s stupid on his part. Regardless of how smart or wellbehaved you normally are, alcohol (and other substances) alters your judgment and impacts your inhibitions
  • Don't get drunk with your colleagues
  • Don't apply pressure in an unwelcome way on anybody
  • Do not ever become romantically involved with a subordinate
    • Remember: the greater responsibility and authority you have at the company, the less freedom you have in this regard
  • Never do anything unethical or illegal
  • Do not put yourself in any inappropriate or compromising situation. Understand that perception is reality.
    • We live in a world of extreme transparency and winnowed privacy. There are cameras everywhere. Anything can be videoed. Bad behavior is likely to be captured and published. Do not put yourself in any inappropriate or compromising situation. If you are in a position of power, it does not matter if you didn’t “do” anything. Even the appearance of doing something will be harmful
  • Remember to stay human.
    • It’s easy to see when something is over the line and wrong, but there are more gray and nuanced issues
    • Is it ever okay to hug someone at work? I think so—as long as itis welcome.
    • What about saying, “you guys”? I used to say that all the time and I would say it meaning to encompass everyone. Now, that feels wrong and I’m working on migrating to a different term, like “team” or “people” or “y’all.” (I am from Florida).
    • Asking someone out for a drink alone? (Probably not okay if they work for you.)

5. Personal Challenges of Leadership

WHEN YOU ARE OVERWHELMED

Unfortunately, this is a normal feeling for most of us. The important thing is to realize that this is a momentary state. By shifting into action, you can get rid of this uncomfortable feeling

Sometimes, in stressful times, even the smallest issues can seem insurmountable—but when you take a step out of the moment and implement the action necessary to solve it, you find that these issues are never impossible and are not worth a fraction of the grief they caused.

The most important thing to do when you do become overwhelmed is to stay calm, and recognize that the best thing to do to conquer this sensation is to shift into taking action and executing on a well-thought-out plan.

Principles

  • Realize that it's a momentary state. Shift into action
    • Sometimes, in stressful times, even the smallest issues can seem insurmountable—but when you take a step out of the moment and implement the action necessary to solve it, you find that these issues are never impossible and are not worth a fraction of the grief they caused.
    • By shifting into action, you can get rid of this uncomfortable feeling
  • Start taking action and focus your energy on resolution. Follow the 5-step plan:
    • Slow down.
    • Ask questions
    • Get your bearings.
    • Develop a plan that you believe in.
    • Start taking proactive actions.
  • Proactively manage your calendar and to-dos
    • I proactively manage my calendar and my to-dos. Anticipate as much as possible. Ask yourself: What’s likely to interrupt the most important things? Develop ways to absorb the bomb-ins.
  • Don't expect perfection in all to-dos, but expect to accomplish the most important things
    • I don’t expect perfection on all of my to-dos, but I do expect to accomplish the most important things. I’ve always found that the worry about how long something will take to get done is far worse than the actual time it usually takes to do it. So, as Nike says, “Just do it.”
  • Reflect every week to make sure you're grounded on what matters most
    • I build in time every week for reflection and ensure that I’m grounded on what matters most. All of us are busy, but we must not confuse action with traction
  • Try very hard to not be a bottleneck
  • Don't appear overwhelmed. Stay calm
    • We’re all faced with feeling overwhelmed at times, but it’s not becoming for a CEO to appear overwhelmed. Remember, you’re a leader and people will take their cues on how to handle a situation from you. You will generally have information ahead of most others in the company. If you find you’re overwhelmed, take the time to process this privately so that public communication to employees and others can be done professionally and proactively

WHEN YOU HAVE TO FACE THAT YOUR STARTUP IS FAILING

Part of entrepreneurship is failing. Don’t feel horrible about it. Don’t lose your drive to change the world and make a difference.

📌

Remember, true innovation rests on trying, failing, and trying again

What really matters is how we deal with it. I’ve seen failure addressed in two very different ways:

1. Rationalization

As an investor, I often hear a lot of reasons from founders for their issues: “The market wasn’t ready,” “The product wasn’t ready,” “We were burning though cash too quickly.” Well, who chose the market? Who developed the product? Who spent the cash? When it comes to dealing with failure, recovering from failure, and learning from failure, it’s important to take responsibility for any missteps. That’s the only way to ensure that they won’t be repeated.

2. Responsibility

When things go wrong, I am always looking to see whether or not the founders own the outcome and the mistakes that led to the outcome, and I appreciate and give credit to people who are self-aware and learn from their errors. At the same time, it’s important to be a bit wary, as some people may take responsibility as lip service, rather than feel it viscerally.

Principles

  • Decide if it's right or not. Get out of the gray zone
    • Being in the murky area where you keep spending money and are “hoping” for a turnaround is a bad place to be. You need to know: Is this right or not? If the idea isn’t good enough or big enough, determine if there is a pivot to be made. What do you need to do to restructure? What do you have to do differently? We recently had one of our portfolio companies pivot and replace the CEO—changes that saved the company. However, changing the CEO is not a panacea. In rare cases, the founder comes back to save the day like Steve Jobs did at Apple or Michael Dell did at Dell.
  • Know when to let go. Determine how to sell the technology and the talent and return some capital to investors
    • If the idea is never going to make it, determine how to sell the technology and the talent and return some capital to investors.
  • Treat people the way you want to be treated.
    • As you would with any job, leave on good terms. By treating everyone with respect, you give people another opportunity to remember you in a positive light. You want people to feel as if you treated them as well as possible even though the company did not reach its full potential. It is very likely that you will want do another startup, and how you handle your failures now will set a precedent for how likely you will be to obtain funding for your future endeavors. If you flame out, it will be much harder for anyone to support you next time
  • Communicate early.
    • Surprises are bad things, especially when all the money is gone. People should know the company is in trouble before it folds. Investors might be able to help get the company on the right path. Give them the opportunity
  • Take care of your customers. Keep it running for ninety days or more after you notify them. Educate them on places to migrate and give them a date for the end of life of the service
    • Don’t crash and burn and leave them with nothing. If you have customers on your service, educate them on places to migrate and give them a date for the end of life of the service. (Try to keep it running for ninety days or more after you notify them.)
  • Be generous with your employees.
    • Make sure they have other jobs. I believe some severance is in order. There are some tough calls here about who gets what, and at what expense to investors, and there are no hard and fast rules. The decisions you make will be very situational and depend on team performance among other things. The operative word in this calculus is fairness.
  • Turn your focus to, “Now what?”
    • Determine if you have the stomach to start a company again. Do you have the passion and enthusiasm to go after it again, or do you want to pursue a safer route, with more predictable economics? Take the opportunity to step back and reflect: What really went wrong? What have you learned about yourself that you didn’t know before? Are you ready to do it all again?

WHEN YOU NEED INSPIRATION

Everyone sources inspiration differently. Sometimes it’s the result of a eureka moment, but more often it’s the result of hard work, serendipity, and having an open mind—seeing opportunities where others saw constraints

Inspiration often starts with frustration. It begins with what seems like intractable problems—and then an unwillingness to accept that there are not any answers

Principles

  • Acknowledge that you have a sticky issue, commit to solving it, and go about your journey with an air of wonder
  • Start with “how can I” instead of “I can’t.”

WHEN YOU’RE DEALT BODY BLOWS

What’s important is not that you have these blows, or how big they are, but instead it’s how you deal with them and what you learn from them

📌

When something bad happens, you have two choices: you can curl up in the covers and stay in bed, or you can pick yourself up and achieve what you set out to do

Resilience is not just about intestinal fortitude and grit. Resilience also encapsulates potential. Every time you get close to your potential, it expands. Everyone—and especially leaders and top executives—needs to possess that kind of resilience. Without it, you stay in your safe zone. That’s not where excellence happens. It’s where average and mediocre happens.

Principles

  • Pick yourself (and your teeth) up, recover, and move on to the next adventure
  • Embrace how it feels and acknowledge the pain
    • When you are hit with something painful, it hurts. First, embrace how it feels. Acknowledge the pain. Understand that this experience, while difficult in the moment, will ultimately make you stronger
  • Go through the healing. Do what you have to do to fix the problem
    • Do what you have to do to fix the problem— whether it’s seeing the dentist for some knocked-out teeth, speaking with someone about your loss, or taking the time you need to recover from an injury
  • Don’t become callous
    • Some people can deal with anything and lose their humanity after experiencing losses. They become hard, or they become selfish. Take the learnings from the body blows with sensitivity and care. Gain wisdom and understanding, not an edge. Let this setback help you empathize with more people.
  • Understand that this hit cannot keep you from going back.
    • How quickly you can recover is important. You must get back into the ring—you cannot be afraid to be put at risk again. Bad things happen, but if you let them derail you, they win.
  • Rebuild your muscles and increase your flexibility to handle things differently next time
  • Get fired up.
    • Unfortunately you’ve just been delivered a significant body blow. I’m sorry about that, but now you must get back up—there’s too much good work that needs to be done to let yourself wallow in self-pity
  • Never stop teaching yourself how to handle more and get good at picking yourself up. This is what leadership and growth is all about.

WHEN YOU NEED TO PUT THE COMPANY’S NEEDS AHEAD OF YOUR OWN

Being the CEO of a company sounds like a great job—until you actually have to perform the work and you quickly find that this work must come before your own personal desires. You’ll find that the chief leadership role requires you to put the entity’s mission ahead of your own goals. Sometimes, it’s a huge wake-up call.

The most inspiring CEOs are committed to changing the world, and they are able to do so by putting the destiny of the company ahead of their own ego or needs

Principles

  • Your leadership style is personal, so don’t let anyone else decide how you want to deploy the CEO role at your company. CEOs approach their role in different ways. Yet in order to determine if they still deserve the role, every great CEO needs to examine their performance and periodically ask themselves
  • Examine your performance and ask yourself these questions:
    • Am I driving/leading the company forward, or am I holding it back?
    • What unique contributions am I making to the success and future of the company? Would I rehire myself as CEO? Why?
    • Am I getting managed into compliance by the team? Or am I challenging the team to get to previously unimagined capabilities?
    • When I do challenge the team and then later look back with hindsight, was pushing them the right thing to do, or did it cause unnecessary churn and a failure to reach the desired result? Why?
  • If you no longer have the burning desire to take on the challenges and responsibilities that come with the top job, think about stepping aside.
    • Sometimes, when you’re tired or overwhelmed, you need to harden your resolve and dig deeper. I have a lot of belief in founders and their willingness and commitment to do the unthinkable. However, if you no longer have the burning desire to take on the challenges and responsibilities that come with the top job, you may need to put the company’s success ahead of your own. And, that may mean stepping aside.
    • Being a leader is hard work and it requires tons of personal sacrifice. You have to manage your employees, your customers, and your board and investors. The founder of the private equity firm TPG once compared being a CEO to playing three-dimensional chess. It’s insanely difficult

WHEN YOU’RE CONFUSING HUBRIS WITH BOLDNESS

You’ve founded a company—essentially, you’ve created something from nothing. That’s alchemy. As a founder, you have an outsized desire for greatness for your company. That’s bold. You might also think you have ideas or talents no one else has ever had. That’s hubris.

And that’s (mostly) okay. The fact is you have to possess that kind of belief to do something that’s new, different, and world class. However, you also need to back up what you say. Your “say-to-do” ratio needs to be high. After all, your vision doesn’t matter if it doesn’t become a reality. In other words, you need to deliver

There’s a fine line between confidence and cockiness

Everybody that comes in thinks they have a winning strategy, but when someone truly has conviction, it shows. How?

  • It’s when someone can crisply articulate the vision, the value proposition, the market, and the potential.
  • They have clarity on what their next steps are and what will be done with the money.
  • Rather than downplay competitors as dumb or naïve, they explain what the strengths of each are, and why those strengths will make it difficult for them to outcompete this new startup

Being secure enough to identify the parade of horrible things that can go wrong. I’m impressed with someone who says, “We don’t have it all figured out yet” or “It’s early but here’s what we’ve seen so far.” No business plan or model is ever bulletproof, and I appreciate the entrepreneurs who highlight the unknowns

With experience, you learn that being the best you can be doesn’t mean doing everything right, it means constantly striving to be better. You also learn that the behavior and aggressive stance that was essential to your success early in your career can derail your success in the next part of your career. So, temper the hubris and tame the arrogance, but never stop being brave and bold

Principles

  • Be confident, not cocky
    • Everybody that comes in thinks they have a winning strategy, but when someone truly has conviction, it shows. How?

    • It’s when someone can crisply articulate the vision, the value proposition, the market, and the potential.
    • They have clarity on what their next steps are and what will be done with the money.
    • Rather than downplay competitors as dumb or naïve, they explain what the strengths of each are, and why those strengths will make it difficult for them to outcompete this new startup
  • Highlight the unknowns
    • Being secure enough to identify the parade of horrible things that can go wrong. I’m impressed with someone who says, “We don’t have it all figured out yet” or “It’s early but here’s what we’ve seen so far.” No business plan or model is ever bulletproof, and I appreciate the entrepreneurs who highlight the unknowns
    • Note: You should still know some things for certain. For example, if you’re raising money, you should have already talked with potential users or customers; you should understand competitors, etc.
  • Be good at listening. Don't think you have it all figured out
    • Overall, the biggest difference between boldness and hubris, though, has to do with listening. Bold entrepreneurs are thoughtful and good listeners. They may not necessarily implement our advice (and that’s okay), but we want to see that they value and consider outside input
    • Unfortunately, it’s common for entrepreneurs—once they’ve achieved some success—to fall victim to thinking they have it all figured out. I’ve noticed a funny paradox that happens as you rise in your career. When you start out, you sometimes have to be loud to simply break through the noise; later, once you’ve “made it,” everyone listens and agrees, even when maybe they shouldn’t
  • Show vulnerability to build trust
    • In the past, I remember thinking that revealing any vulnerability would be a sign of weakness. I was so worried when I got hearing aids in my forties, and I thought that my career would be over. How wrong was I about that! It’s counterintuitive, but I found that the more vulnerabilities I shared, the more grace I received. As an executive, you feel pressure to be perfect, but the more human you are, the more you are genuine and authentic, and the more people relate to you and support you. (My hearing aids turned out to be a gift—when people rambled on too long in meetings, I’d simply make a joke of turning down the hearing aids, and everyone quickly got the message.)
  • Own the mistakes.
    • Every pro-football player fumbles. What matters is that you jump on the ball. When you make a mistake, admit it as quickly as possible. Apologize and explain it, fix it, and move on
  • Don't surround yourself with only "yes people". Your critics are your greatest mentors
    • you realize you don’t just want “yes people” around you. “Yes people,” the people who support you and never question you, will not help you get any better. Instead of only having people who are drinking your own Kool-Aid, you need to have people around you who are honest and critical. They may annoy you, but they will help you stay true to what you’re good at, and help you get better at what you haven’t yet mastered
  • Stay humble and don’t read your own press clippings
    • As you succeed—which we hope you do—you will have to work harder to be your own biggest critic. Of course you have to believe in yourself, and be proud of what you’ve accomplished—but only feel that for two seconds. There is strong evidence that decision-making can be directly influenced by leaders’ public perception

WHEN YOU’RE ACCUSED OF WORKING TOO MUCH

It is not that work-life balance is not important—it is—it’s just that if you’re a founder, you’ve already decided that work will take most of your focus for the next several years

Building a transformative company requires heroics from many people, and particularly from the founders. In starting a company, the unfortunate reality is that there’s no such thing as balance. Taking an idea to greatness requires extreme—Herculean—efforts

If you want to do something game changing, if you want to grow a thousand times bigger, if you want to transform an industry or change the world, there are likely to be difficult trade-offs

Principles

  • Be ready to make sacrifices in work-life balance to achieve game-changing results
  • Building a transformative company requires heroics from many people, and particularly from the founders. In starting a company, the unfortunate reality is that there’s no such thing as balance. Taking an idea to greatness requires extreme—Herculean—efforts

    If you want to do something game changing, if you want to grow a thousand times bigger, if you want to transform an industry or change the world, there are likely to be difficult trade-offs

  • Don't leave the family behind
    • While building a startup requires many demands and sacrifices, founders must also be mindful of their family situation and take what’s best for their loved ones into careful and constant consideration. Family must not be left behind for the needs of a company. A business succeeding at the expense of family is a failure. If you achieve wild success, but have lost your spouse and your children, what’s the point?
    • And, a business can never succeed without the support and understanding of a founder’s loved ones. At the start of founding a company, founders should ensure that their partners are fully aware and bought into the challenge. Before starting your business, consider talking to other people—founders and their spouses—about what the real sacrifices are. At the same time, founders need to know when to be there for family regardless of work.
    • As always, communication on this issue with your loved ones is key. That doesn’t mean that your partner will always understand or that there won’t be tension. There will not always be harmony, but you should always communicate what you are doing and why it’s important
  • Figure out the "rubber ball" and "crystal ball" moments. The rubber ball moments, if you drop them, they’ll bounce and come back. With the crystal ball moments, if you let them drop, they shatter and they never come back
    • Brad Smith, the CEO of Intuit who spoke at a WIN Summit, articulated this constant dilemma very well. He describes two categories of moments in life: “rubber ball moments” and “crystal ball moments.” He said of the rubber ball moments, if you drop them, they’ll bounce and come back. With the crystal ball moments, if you let them drop, they shatter and they never come back. “Our key in life is to make sure we know which is which,” Brad said.
    • He offered examples in his own life with his two daughters. One is a dancer who had fifteen dance recitals last year. She wanted him at every one, but he couldn’t deliver on that. “I knew if I let one dance recital drop it would bounce and next week I’d be at another one. She would be hurt, but it wouldn’t be forever,” he said. Brad defined a crystal ball moment as high school graduation. That happens one time. If dropped, it shatters forever. “I never ever prioritize work over a crystal moment, but I have to make tradeoffs at times when it’s rubber. I’m very very clear about which those moments are,” Brad explained.
  • Weave your work and personal life into a custom tapestry
    • Technology, and the constant connectivity it offers, has made many of the daily choices both easier and harder. In a world that’s connected 24/7, in which we check email after dinner (and sometimes during dinner), and we can work from home when the kids are off from school, there’s no longer such a thing as on-hours and off-hours. Our work and personal lives often collide, and they will only continue to do so. The best way to make it all work is not to silo off these distinct parts, but to weave them together into a custom tapestry. If you do that, and if you are truly doing what you love, it trumps the desire for balance and achieves something better, something magical

WHEN YOU SELF-IMPOSE LIMITS

“I can’t take a risk because I have a mortgage to pay.” “I can’t accept my dream job because I’d have to move.” “I can’t work after-hours because my spouse would be mad at me.”

I hear these statements—these self-imposed limits—every day. As humans, we often have too pessimistic a view on what is possible, and we let the world convince us we can’t do something, instead of thinking, How can I?

When you create limits that don’t really exist, you are justifying where you are. And where you are is never as great as where you could be. By setting limits you’re effectively deciding not to reach for more. Therefore, you must push through the limits that you’re imposing on yourself.

If there is a recipe for success, I believe that it is this: Get out of defense mode and go into wonder mode. Every time you hear yourself say, “I can’t,” dive in and ask, “Why? What are the reasons I can’t?” Upon introspection, you might realize that many of the things you feel are holding you back, exist nowhere but in your head.

Principles

  • Take a pause. Find out where the limits stem from and why you’re reinforcing them
  • Recognize that you are holding yourself back.
    • Yes, the world tries to hold us back at times, but the most constraining limits you have are the ones you put on yourself. It’s easy to blame society, the government, the economy, your health, or your family—and all of these can be challenging or completely debilitating—but generally we put more limits on ourselves than any outside force ever can. Instead of blaming others for setbacks, accept accountability and understand that you are the one who is responsible for chasing—and catching—your dreams
  • Make choices carefully. Every choice comes with trade-offs; it’s up to you to decide if they’re worth it.
  • Play out all of the options and know where they lead.
    • When I was in my late twenties I was starting to get some traction in my career, but I was still exploring different paths and trying to see where they would take me. I loved watching people lead and knew I wanted to be a manager. I was enamored with the art of HR and coaching

WHEN THE WORLD TRIES TO MANAGE YOU

We are constantly being judged and categorized, but often this is based on “surfacey” things that may or may not matter. What really matters is what is the impact you are trying to make in the world and how committed are you to making it.

Principles

  • Consider the source. If you don’t know or trust the source, you might want to disregard their input quickly.
    • We are pummeled every day with junk mail, spam advertisements, and also, unsolicited advice. If you don’t know or trust the source, you might want to disregard their input quickly.
  • If you trust the source, listen and ponder. Be open to new input
    • If you do trust the source, you should listen and decide if they can sway your opinion of yourself and move you to do something differently. No one is perfect, and we need to be open to new input.
  • Decide whether you want to modify behavior as a result of the input.
    • There are many times when I have definitely decided not to give in to what someone else wanted. But that’s not always the right answer. Sometimes change is warranted.
  • Don’t let others make you feel guilty about pursuing your goals
    • If you decide not to accept the request, fully appreciate the comfort and satisfaction you feel in being yourself. Don’t let others make you feel guilty about pursuing your goals.

WHEN YOUR BOARD IS DRIVING YOU CRAZY

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As with any relationship, the founder’s relationship with the board changes over time

Board dysfunction is usually preceded by company or CEO dysfunction; it generally happens when the business or the CEO isn’t doing well. It’s not okay to dismiss this situation, thinking the board is being a pain and hoping they will go away. They will not go away, and it is their fiduciary duty to intervene and restore growth

Your relationship with your board is a long-term partnership, and in many ways is not too dissimilar from a marriage. To make it successful requires transparency, trust, more communication than imagined, and the willingness to compromise

Principles

  • Immediately identify the root cause of why the board is upset
    • Is this new behavior, or has it been going on for a while?
    • Is it that board meetings used to go well, but now you dread them? It’s time to ask yourself: What’s changed? Maybe it has to do with your last product shipment. Or perhaps you can’t find a head of sales. Or it could be that customer reception is not what was expected. The result of any of these issues is that the board’s trust in you has now shifted. The board should know what’s happening AND they should know what you are doing to fix it. Being defensive will not help. Problems do not have to be bad things—as long as you address them quickly. Put yourself in their shoes. What do you see?
    • Are there execution issues? You said you’d hire a person and you didn’t; you said you’d land customers that you didn’t; you said the product would be released by a certain time, but it wasn’t. If you have any of these execution issues, the board is banking on you to fix them.
    • Are there aspirational issues? You said you’d become a market leader in nine months and you didn’t. Aspirational issues are less fatal and can be resolved with the board over time.
  • Assess your credibility
    • Would my investors vote me onto the team if they were deciding today? Why or why not?
    • If we were looking for funding would they re-up? Why or why not?
    • Have I underperformed and made myself vulnerable to criticism and angst? Have I created a soft underbelly?
    • What am I doing to show the board members that I’ve identified problems and am working to resolve them?
  • Is it the whole board or one person? If it's just one member, investigate why, address problem proactively, consider speaking to another trusted board member
    • Also consider whether it’s the whole board or just one member who is out of phase with everything else. If it’s just one person:
    • Do you know why they may be cranky? Sometimes, it’s due to the other things going on that are not related to your company. How’s their company or fund doing? What else is going on?
    • Address the problem proactively. You may not have control over these issues, but you still have to deal with them. Call the board member to discuss the behavior privately. Share with them what you are experiencing and ask them what’s going on to try to understand where they are coming from.
    • You may also consider speaking with another trusted board member about this issue and asking them to reach out on your behalf.
  • Manage your board differently than you manage your customers and employees
    • Your board has unique powers. Think about it. A customer can fire you, but you can get other customers. An employee can leave you, but you can find other employees. Board members? You are accountable to them, and they have the ability to fire you if things do not go well. Too often, CEOs don’t understand the board dynamics they walk into and therefore they have no idea to how to manage a board
  • Be realistic about what a board is and what it isn’t, and how it functions
  • Be aware that you’re gaining or losing credibility with a board every day.
    • Just because you once had tons of trust and credibility, that doesn’t mean that you can’t lose it all very quickly. I once saw a public company CEO lose the support of his whole board in less than a week
  • Be able to predict where the board is on any given issue and why
  • Be transparent with the board.
    • Some founders may be concerned that honesty makes them look weak. Not so. Tell the truth. Doing so will enable the board to trust you to accomplish your company’s goals. Of course, I’m not suggesting that every time you have a bad night’s sleep over a problem it requires board notification. You’ll have to assess what is worth telling them. I’ll give you some clues though: If there is a massive outage or something that will cause a loss in revenue, the board needs to know immediately. It’s a little bit like managing any relationship
  • Put the board to work.
    • Your board is made up of the people who are closest to your company. They know your aspirations and your problems and they are aligned around wanting you to succeed. Instead of doing all the work and just asking them to judge you, ask them to help you. Bring them into the loop so they can help problem-solve. Almost every board member wants to help.
    • Tell them about the issue and the options you’re considering. Ask what they would do if they were in your shoes.
    • Ask them for their advice on your strategy and ask them to help open doors
  • Engage in dialogue, not debate. Turn “Here’s what I’ve decided, and I need you to support it,” → “I’ve been thinking about this…” and then, “What do you think about that idea?”
    • Don’t make it “us against them.” Don’t force them to a decision; encourage them to come along willingly. Make them feel as if they are part of the solution. This may mean taking two bites of the apple, not one. Instead of saying, “Here’s what I’ve decided, and I need you to support it,” try a twostep approach that offers them room to weigh in and provide their opinion. “I’ve been thinking about this…” and then, “What do you think about that idea?” This approach will bring them along on your journey
  • Compromise on less important things. Know when to hold ’em and know when to fold ’em.
    • Not every decision should be given the same weight. You have to know when something is worth giving the sleeves off your vest. If this problem is a 10 on the Richter scale, you know best what you have to do. However, if it’s a 2, let the board win. Trust gets burned on the small things that don’t matter. Don’t allow that to happen. Compromise on the small nits so you can retain trust and gain consensus on the big things
  • Before every board meeting, check in with all the board members on the agenda topics and ask if there’s anything else someone wants to cover
    • Quickly determine whether or not the board is with you on the next steps.
    • Before every board meeting, check in with all the board members on the agenda topics and ask if there’s anything else someone wants to cover. It’s important to understand all of the key issues in advance. We all know that sometimes someone comes in with a bee in their bonnet and they ruin the meeting! Avoid that. To do so, give them the chance to tell you where they’re coming from and why.
    • Identify where everybody is. Are they as excited today as when they invested in you? You should know.
    • Is their trust in you growing or shrinking, and why? You need to know.
    • Do you have alignment around the cause of the problem and what is being done to solve it?

WHEN YOU NEED TO PICK YOUR BATTLES

Difficult as it may be in practice, fighting every battle is not a smart strategy. The old adage that you can win every battle and still lose the war is true. Throughout my career, I’ve learned that you can’t fight and argue about everything you disagree with, as this will leave you exhausted and, worse, it will eat away at the trust others place in you.

Remember, you are building or losing credibility every day. You must really know which decisions are worth imposing your will on—and which ones aren’t

This doesn’t mean that you shouldn’t ever fight for what you want. It does mean you need to determine what things are worth fighting for

Choosing the wrong battle will burn cycles and pull you away from achieving your true goals

Principles

  • Focus on the areas where you have a sphere of influence. Start on a local level
    • If you want to effect change, it’s better to focus on the areas where you have a sphere of influence. So, if you’re concerned about inequaity in this country, instead of going after things at a national level, make the changes in your company—where you have the influence and power to make a difference
    • 1. Is it in my scope? Is this my responsibility? Is this something I have to do? Is it an opportunity to let someone else lead and learn?
  • Train your team to make great decisions and understand their consequences
    • Another necessary thing to note is the importance of training your team to make great decisions and understand their consequences. This kind of education will lead to fewer contentious battles
    • 2. How important is this decision? Is it a company decision where there are great stakes? Or, is this an experiment? If it doesn’t work out, will it be uncomfortable, or will it be a catastrophe?

WHEN YOU WANT TO BLAME SOMEONE

You can’t be so quick to blame them or act on that feeling of blame. Maybe this sounds like a small thing, but this is a real issue that can derail executives and leaders

I’ve seen a number of executives throw other people under the bus. This action almost always ends up looking bad for the executive who does it—not the team member who made the mistake.

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The executive should be a good enough manager to know the importance of reflecting on the problem, owning up to their piece of the accountability, and focusing on the learning

When you point a finger, three point back at you

Principles

  • Don't point fingers. Never openly blame anyone
    • You can’t be so quick to blame them or act on that feeling of blame. Maybe this sounds like a small thing, but this is a real issue that can derail executives and leaders
    • I’ve seen a number of executives throw other people under the bus. This action almost always ends up looking bad for the executive who does it—not the team member who made the mistake.
    • 📌

      The executive should be a good enough manager to know the importance of reflecting on the problem, owning up to their piece of the accountability, and focusing on the learning

  • Instead of blaming someone, look at everything as if it’s the first time you saw it. Ask yourself:
    • What happened here?
    • What did we miss?
    • How could I have helped to see this earlier and help fix it faster?
    • How likely is this to happen again?
  • Build a culture of openness and learning for your teams. Have employees be tougher on themselves than anyone else
    • Such behavior typically happens when you create a transparent AND supportive culture where mistakes are generally used as learning experiences and everyone is encouraged to be brutally honest about how they are doing.
    • When something doesn’t go well, dive deep into why and focus on the learnings—instead of the blaming
    • For example, during a postmortem from a system outage, are you looking for gaps in process and execution to shore them up in order to avoid a recurrence, or are you quick to fire someone who made a mistake?
    • No one does their best work when they feel that they are on the edge. No one will take chances or strive to be better when they live in fear. So, instead of seeking revenge by throwing someone under the bus, transform that urge into preventing the situation the next time around and inspire everyone to do better

WHEN YOU ARE ASKED TO KEEP SOMETHING IN CONFIDENCE

When someone asks you to keep something in confidence, you want to say yes—but this is never a black-and-white issue. More often than not, it’s a million shades of gray

Principles

  • Honor the confidentiality. Understand that the only way to be given trust is to deserve it
    • While you will often be “in the know” on interesting things, you should, in general, totally honor the request for confidentiality
  • Respect their privacy but do what you legally and morally bound to do
    • Be clear that it’s not as simple as a pinky swear. I always make clear to people who are going to tell me something that I generally have a fiduciary obligation, which may require me to take an action. For example, if someone tells me about a bribe, sexual harassment, or some other illegal activity, I am obligated to take action. I will do my best to respect their wishes for privacy, but I will have to do what I’m legally and morally bound to do.
  • Be upfront about how you will handle confidences and then live up to them
    • It takes a long time to build trust, but it can be broken in an instant. Keep both your integrity and your fiduciary obligations front and center. Doing so will serve you well

WHEN YOU NEED TO BURN THE CLOCK

In many sports that depend on a clock—think football and basketball— when a team gets ahead and it’s close to the end of the game, they often do everything they can to stall and keep the ball away from the other party.

This practice is called burning the clock. The reverse situation exists when the clock is running down and you’re behind. Here is when your hurry-up offense comes in!

When you commit to burning the clock, you are consciously agreeing to spend time on something (e.g., third preferred bidder or second-choice candidate) that is not likely to bear fruit—but this work is required to achieve your ultimate best outcome. I have found that rather than being annoyed about spending time this way, I feel far better about it when I remind myself that this effort is contributing to my ultimate goal.

Principles

  • Always have multiple parties bidding into the deal
    • When you’re doing a deal or any kind of negotiation. The best chances for a great outcome usually require having multiple parties bidding or negotiating. There is often one bidder that becomes the favorite, but it’s incumbent on the buyer to keep multiple bidders happy and engaged
  • Always have a pipeline of warm candidates in case something doesn't work out
    • When you’re hiring. You may have a preferred candidate, but you must keep the pipeline of other candidates warm in case something doesn’t work out
  • Treat quitting employees professionally and politely
    • When someone has quit. Often this person becomes a “persona non grata” in the company. I would rather have that individual fully engaged and working hard all the way through the rest of their tenure. If that means I need to keep being professional and polite— and put aside the fact that I may be disappointed—that’s a small price to pay

6. External Roadblocks

WHEN A COMPETITOR ENTERS YOUR SPACE

When you started your company, you were familiar with the existing competition, and you had an idea of how you might beat them. Yet sometimes, out of nowhere, an established company in a different industry decides to start competing in yours. It can come as a particularly nasty surprise and the news causes chatter both inside and outside your company, and it’s not clear how—or even whether—you should respond

You might be tempted to give up on your company in hopelessness, but be careful not to overreact. An announcement isn’t the same as an existential threat, and when a big company rushes to market in a space it doesn’t know well, the product is rarely compelling right away

Principles

  • Accept that fundraising will get harder for a while.
    • When every investor asks you if you’re worried about a new competitor, you can be sure that all of them are worried about the new competitor.
    • More to the point, every investor is worried that every other investor is worried. That matters a lot. When investor sentiment turns on an industry, even promising companies struggle to raise money because investors don’t want to fund a company that won’t be able to find future investors. In this way, investor worries can become self-fulfilling
  • Don’t pretend nothing has changed; recognize you need to change your approach
    • There’s no way around it: This is bad news for you
  • If you don’t need to raise money, consider waiting
    • Everyone assumes the worst when news first hits, but when the world sees the shortfalls in your competitor’s effort, you may find investor sentiment turn in your favor again.
  • If you need to raise money, decrease your valuation expectations
    • If you do need to raise money, consider looking for less and lowering your valuation expectations
  • The enemy of your enemy may be your friend. Talk with the companies in your industry that may be threatened by the new entrant
    • Consider also talking to established companies in your industry, which might themselves feel threatened by the new entrant.
    • They might be willing to invest in you as a hedge
    • The funny thing about Google entering the travel industry was that it scared everyone else in the industry into working together in ways they never would have considered before
    • Look for the companies in your industry that have the most to lose from the new entrant. Start regular conversations with them. You never know what might happen
  • Set the right tone with your investors and employees. Don’t wait for investors and employees to ask what it all means. Talk to them proactively. Tell them, truthfully, that you view it as a sign that the market you’re in is a big opportunity. Acknowledge that it may mean new challenges, but demonstrate the optimism that you can overcome them
    • When big companies enter a new space, they sometimes fail, but they usually don’t fail right away. For better or worse, you should expect to see this company continuing to make headlines in your industry for a while
    • That’s why it’s important to set a tone of respect and curiosity right from the start. Not dismissal and derision, but also not obsession and despair.
    • Don’t wait for investors and employees to ask what it all means. Talk to them proactively. Tell them, truthfully, that you view it as a sign that the market you’re in is a big opportunity. Acknowledge that it may mean new challenges, but demonstrate the optimism that you can overcome them, just as you’ve overcome past challenges. Make sure everyone feels that you’re in touch with what’s going on, and also feels reassured that you’re not overly perturbed
  • Learn more from your competitor's approach
    • Over time, you may be able to learn things from your competitor’s approach. Use their products, and talk to customers about what they like about them. Encourage your employees to do the same. Keep in mind there’s so much you don’t know yet about your competitor’s strategy. For the sake of your credibility, don’t pretend you have it all figured out
  • Be ready for more. When one big company moves, other big companies often follow
    • Brace yourself for more surprises like this one.
    • In anticipation, consider reaching out to other companies before they enter your space. You may find them interested in partnering or investing.
    • But also keep in mind that tech industries don’t remain ultracompetitive forever. Sooner or later, companies will die, or else merge to build up scale
  • Make friends with your new competitor.
    • They’re entering your industry because they’re interested in your industry. Maybe their first product will be a failure, but they’ll still be interested in the industry as a whole, and you’ll be growing by leaps and bounds. Maybe their first product will be a success but you serve a slightly different market segment and they’ll realize they want the expertise you have

WHEN YOU NEED TO BE MANIACALLY FOCUSED ON YOUR BUSINESS

So, you’re worried about competition?

If you are just starting out, don’t be! If you worry too much about what you are up against, you will never start something new. We’d still buy tickets through travel agents instead of online, we’d still use taxis instead of Uber or Lyft, and there would be no Facebook—only a failed Myspace. Competition—whether you’re competing against another company or the status quo—is what evolves old ideas, inspires new ones, and makes the world work better

Just because you have a big name doesn’t mean you will get a big win

Principles

  • Know what is going on around you, but not let it disable you
    • That experience showed the value in knowing what is going on around you, but not letting it disable you. Be acutely aware of markets and customers, and listen to what they are telling you. And more importantly, you need to be able to predict where they are heading.
  • Don't be stressed or worried about your competition
  • So, you’re worried about competition?

    If you are just starting out, don’t be! If you worry too much about what you are up against, you will never start something new. We’d still buy tickets through travel agents instead of online, we’d still use taxis instead of Uber or Lyft, and there would be no Facebook—only a failed Myspace. Competition—whether you’re competing against another company or the status quo—is what evolves old ideas, inspires new ones, and makes the world work better

    Just because you have a big name doesn’t mean you will get a big win

  • You are your most important competition. If you don’t build a product or service of relevance, it really doesn’t matter what your competition does
    • As Michael Jordan said, “You have competition every day because you set such high standards for yourself that you have to go out every day and live up to that.”

WHEN YOU RECEIVE PUBLIC CRITICISM

There’s no such thing as bad press

While I strive to keep my head low and receive only positive recognition, I’ve come to realize that getting input—good or bad—is a blessing. It gives you invaluable information on how you are doing, and more importantly, how you can do better. Even bad press, while it can be uncomfortable, can also be an incredible opportunity for improvement.

So what do you do when you’re on the receiving end of critical reviews or negative comments? First of all, congrats—this is validation that people care about what you’re doing. It’s confirmation that you have some traction. People who aren’t engaged won’t talk about you or your product or service

📌

No company will escape criticism, but how they deal with it is what makes all the difference

Want to create evangelists? Consistently deliver an amazing product that people love. And if you do something wrong, make it right. Negative sentiment is not a reason to retreat under the covers, but rather an amazing opportunity to show customers what you really are offering: a commitment to do everything you can to delight them

Principles

  • Accept the input as a blessing
    • Getting input—good or bad—is a blessing. It gives you invaluable information on how you are doing, and more importantly, how you can do better. It gives you validation and confirmation of traction
  • Assess the impact. Is this a story that will just blow over or is this one that must be addressed?
    • You must immediately aim to make the situation right
  • If customers are discussing the issue in print, on the web, on social media, on external sites, or on your site, that's the sign that you must react quickly
    • You must understand that they believe that their opinions are important, and you should listen
    • When you get this heat, you have to lean into the fire and respond immediately. That’s the best way to put it out
    • Be open and transparent about the issue; do not try to bury it, and do not think it will go away. Problems, like a stinky cheese, get more potent with age
  • Don’t get defensive. It doesn’t look good and doesn’t help correct matters
  • Acknowledge the issue at hand, appropriately apologize for any missteps, and let people know what you are doing to correct it
  • Ensure your critics feel as though you’ve heard their point of view. Only after they’ve felt heard, should you make your point of view known
    • You may not agree, and that’s okay.
  • If you are receiving critics from customers, salve their concerns, make them feel included.
    • No company will escape criticism, but how they deal with it is what makes all the difference
    • When your biggest critics are customers, remember: Most of the time, they don’t actually want to be spending their time criticizing you. An angry user is a user who loved your business, and feels betrayed somehow. Salve their concerns, and you’ll reaffirm their loyalty. Make them feel included when you do have problems and challenges, and they not only will cut you slack, they might even help you solve the problem.

WHEN YOU NEED TO MANAGE THE LAWSUIT FILED AGAINST YOUR COMPANY

Lawsuits are chess games, not checkers. They move slowly, and you must anticipate the next ten moves, and countermoves of your opponent. I tell founders that litigation is the sport of kings; sure, Apple and Samsung can afford multiyear patent battles (Apple’s law firm bill was over $60 million as publicly reported), but startups cannot afford to pay even a million dollars for any lawsuit defense. So, a lawsuit for a young venture (that you are defending, not bringing) is something to dispose of without losing, as rapidly as possible. Kind of like dog doo-doo on your shoe—get rid of it

Principles

  • Assess what are the business goals of the enemy plaintiff company (and its lawyers) in bringing this lawsuit?
  • Be clear in your mind about what your business goals are in resolving the lawsuit.
    • Be dispassionate and seek to “get rid” of it, and not make it a “showdown at the O.K. Corral.”
    • Young ventures with only a few millions in cash in the bank simply can’t afford multiyear lawsuits
  • Assess what is the best way to reach a resolution (whether a settlement or go to trial)?
  • Immediately defuse this public lawsuit in the eyes of your employees, investors, and customers (if needed to reach that far)
    • Be proactive in managing the PR of the lawsuit; don’t let it become a PR problem, nor an employee or a customer-relations problem, in addition to being a legal threat. Your goal should be to get it off their collective radar screen as rapidly as possible. A lawsuit is public knowledge, by its nature, so get proactive on how to respond, but keep in mind, the goal should be to take it out of the public mind as time progresses—don’t get into a PR pissing match.
  • Rapidly retain counsel you trust and tell them everything under attorney/client privilege
    • Your lawyer must know all the facts and the secrets and the issues behind it, and most of all constantly remind your lawyer of your business goals in resolving the suit
  • Quickly construct with your law firm the next ninety days of actions
    • Assess the hope of marshaling a counterclaim against the plaintiff where, carefully and deliberately you may be able to determine a claim by your venture against the enemy, to put them back on their heels and begin to rethink “Was it a good idea to sue these guys?” You don’t want to be just on the defensive, but you should not bring meritless counterclaims, which will merely undermine your credibility and fuel the flames of a fire you wish to extinguish
  • Push your law firm to consider aggressive, judo-like strategies and tactics that force a resolution.
    • Seek a win-win possible settlement where your opponent and you can both look like you “won.” And consider SOON getting aggressive about “discovery” where you seek to depose under penalty of perjury the senior executives of your opponent (after you have developed enough facts through interrogatories and other early discovery tactics). When the senior execs of your enemy find themselves under the microscope of your lawyers in a deposition room, their appetite for litigation often suddenly is lost. Many law firms save this move for a year or two into the litigation, but I like to notice the depositions of the top execs of my opponent ASAP
  • Stay on top of this as the CEO. Do not just delegate it to your CFO
    • Lawsuits are dangerous, unpredictable, and can become boomerangs for all involved. Make sure you personally have a solid relationship with your law firm and the lead partner, where you drive them to focus on your business goals for the litigation and your cost-containment goals
  • Cost control is critical. Mandate that the law firm you retain cannot staff this case with more than three lawyers: the lead partner, a junior partner, and one associate (and a paralegal)
    • I have prevailed with that staff against enemy firms with truly ten times those numbers—we were so more on top of the case than those many minions! And, know each of your lean staff’s billing rates. Review their monthly bills and question them (it makes a difference or they will bill as much as they can). Also, make sure you provide in the revised operating plan of your company for your best estimate of the ongoing expense, so your board is aware and you plan for it without destroying your cash plan.
  • Do not be alarmed: a lawsuit is not lethal; it’s just a thorn in a paw that needs to be removed
  • View this threat as just another business problem to be managed by the CEO.
    • It is primarily a business problem, secondarily a “legal” problem.
    • Don’t let any of your constituents worry about it; rather, get it out of their minds
  • Understand that the world of courts and judges and lawyers is a twilight zone; it is not a “business” zone, and thus, the normal, rational rules of business do not apply
    • Don’t believe the portrayal of the law as depicted on TV programs— that’s utter fantasy. Instead, as a CEO responsible for preserving cash and building shareholder value, you cannot employ mere logic or business judgment to direct your actions
  • Be aware of the two problems: the opponent lawyers that drag time and your own lawyers that drag time
    • The “enemy” lawyers who will do all they can to twist the facts and the law and the merits, while dragging your cycles and billing your opponent to the max to win against you, despite truth being against them.
    • Your own lawyers who by the nature of their business model, don’t want a quick fix, and instead often wish to extract as much money from your venture representing you in this case as they can accomplish while they hold your hand and say, “We are doing all we can!” (that is what “litigators” do) all the while getting you to think they are your savior, perhaps leading you to longer-term ruin convincing you they will prevail, rather than just settling.
  • Retain a lawyer in a firm that you trust will place your business goals above their revenue/billing goals, and that both the lawyer and the firm value a long-term relationship with your venture far past the resolution of this case
    • As important: Both must know the court you are in, must know the opponent law firm, and must know the judge well (we prefer if they play golf together)
  • As a young startup, you almost never go to trial because it just costs too darn much
    • (a lawsuit going to trial can cost as much as $2–4 million a year for a young venture)
    • I often tell founders: Going to trial is dangerous no matter the merits and no matter the facts you think are in your favor. I’d rather be in a Las Vegas casino betting my venture’s money and future on the craps table where I understand the odds, than in a courtroom in front of a judge and jury, and a clever enemy lawyer, even if I am sure I’m right and “should” win. Do not believe that courts are the engine of truth—they are subject to human frailty and uncertainty and its consequent flaws and tears of “how could that have happened?”
    • and the risks are often too great, and your case could backfire!
  • Treat lawsuit as a plan to launch a new product
    • Do not give management of the case to your law firm; rather, manage their response to the lawsuit just as if it is a plan to build and launch a new product: with a plan, and a schedule, and a budget, and milestone reviews, while always being guided by the unemotional business mandate
  • Litigation is WAR. High-level strategies for lawsuit litigation:
    • Go for the jugular of your opponent. Seek to kill them or neutralize them, rapidly
    • If no compromise is possible, then do all you can to destroy the enemy while NOT distracting your company from achieving its business model
    • If your enemy is determined to destroy you no matter what, then delay and counterattack are the best tactics

WHEN YOUR IDEA JUST ISN’T WORKING

At this point, the most important thing is to figure out what you are going to do about it

Sometimes there are no more steps you can take and the most responsible solution is to call it quits because you’re burning time and cash (your investors’ and your own), and there’s little hope left that you can make something magical happen. In this case, you will want to return as much cash as possible and find your next thing. What’s your next move? It’s time to take a hard look at everything. The answers to the following questions should give you some clarity and be able to guide you to the right next move.

Principles

  • Analyze how you spend your time
    • You never get the time you are spending back.
    • Are you spending your precious time on something that will produce world impact or deliver multigenerational wealth? If not, you may want to tweak things so that you are.
  • Analyze your spendings
    • Are you spending every dollar wisely and with impact? Being thoughtful about how you spend is another incredible resource and you need to know that you are handling it well
  • Analyze your team
    • How is your team holding up? Are they fired up, and ready to go out swinging? Silicon Valley is filled with temptation for talented employees, so it’s crucial to know how committed your people are.
  • Think about the correctional steps
    • Before you completely change course, there could be other correctional steps to take such as tweaking a product, increasing marketing activities, or ramping up sales spend
  • Think about the pivot
    • Some great entrepreneurs have executed a “big pivot,” changing everything about the product.
    • Despite the success stories, pivots are not always the obvious next step or a guaranteed route to success. I would only suggest pivoting if you have a great team and a great idea to chase. Remember, you are now deciding to use investor money and the team’s time on something that was not the original premise for the company
  • Dig deep, and decide whether you need to make some tweaks (modifications), execute a pivot, or shut things down. Ask yourself a set of assessment questions:
    • How long do you have to live? How much cash do you have to continue pursuing your dream? Can you raise more money based on the traction you have?
    • Is there traction at all? Are you building something that people like? How certain are you that this will be a winnable market? Are you early? Late? Is your timing off?
    • Can you do something that has much more relevance? Have you developed any new insights that demonstrate that you should be chasing something else, ideally something you and your team have seen is a clear need? If you can: Is your team the right one to execute on this idea?
    • How do you want to treat those who have invested in you when you are unsure of where you want to go? Are you able to provide a return to shareholders rather than just burn through the cash?
    • Most importantly: What are you prepared to take on? A pivot means starting all over again—fundraising, recruiting, hyping what you’ve built. If that prospect doesn’t fire you up, it may be time to look elsewhere.

PART III GETTING TO SCALE

7. Operational Excellence

WHEN YOU NEED TO IMPROVE EXECUTION

People are either gaining credibility or losing credibility every day. The absolute best way to increase your credibility is to deliver what you say you are going to do.

Principles

  • Clearly set cultural norms and standards about what you’re trying to achieve.
    • I always made it clear we were after excellent performance and that we wanted to set aggressive goals. I didn’t expect us to meet every goal, so I would give 100% credit for 80% of key goals made. It is also crucial to clearly articulate the definition of success for any given goal, and achieve alignment on these definitions with your team.
  • Calibrate teams on what "great" looks like.
    • “Great” should not be defined as what you think it looks like, but what the world thinks is great. Maybe it’s graded as an “A,” but you have to ask, is it an A in elementary school or an A in grad school? Too often, we celebrate greatness as getting better instead of being great on the world stage. If you are not vectored toward how the world sees greatness, it will just be okay—but not friggin’ phenomenal. (You want friggin’ phenomenal!)
  • Make sure everyone knows that identifying problems is a good thing, and that issues get resolved quickly. I always set a standard that any big issue had to get owned and on a path to resolution quickly, ideally within twenty-four hours. I set high standards for myself on responding and troubleshooting, as I never want to be a blocker on critical path items.
  • Articulate clear ownership for every major task.
    • Ensure that the biggest tasks are appropriately resourced. You always have to know whose back to pat and whose butt to kick.
  • Implement forcing functions (e.g., 1:1s, project reviews, and weekly status updates) to ensure that things stay on track.
    • These are agreements on what you are going to do by when. Also schedule “deep dives” to ensure that work is on track and meets or exceeds the quality your company expects.
  • Keep teams as nimble and small as possible.
    • Even in big companies, keep the actual teams doing the work small. Build mechanisms to ensure that if any problems arise, they get escalated quickly. Pay attention to the whole team and stop by to see how they are doing. In addition to making sure they know the importance of what they are doing, make sure they know how much you believe they will do it.
  • Have teams and leaders grade projects and outcomes in a transparent fashion.
    • One of the best ways to set a culture of excellence is to have your own teams become tougher graders on themselves than you are. If every significant effort is realistically graded against the original goals with full transparency, good things happen. When things don’t go well, explore why with an air of wonder and a commitment to improve.

WHEN YOU NEED TO FOCUS ON WHAT’S IMPORTANT

Every day your inbox is flooded with new emails, your team approaches you for approvals, and your customers are requesting all sorts of new features. There’s so much incoming, it’s hard to get to all of it. It’s hard to focus on what matters most.

Use Stephen Covey's framework (Time Management Matrix) to manage your focus.

Covey’s framework delineates the things that matter today, things that may matter in the future, things that don’t have a lasting impact, or things that don’t matter at all. This matrix clearly revealed that the efforts that merited the most focus were those that were important—but not urgent (Quadrant 2).

Remember, Quadrant 2 takes deep introspection. It requires investing in what’s most important. This includes your health. If you do not take care of yourself, you will not have a productive life. I firmly believe that if you are able to do the Quadrant 2 activities that you need to do for your company and for your family, everything else will be beautiful. But neglect Quadrant 2, and you put your company, your family, and yourself at risk

I think we all find that it’s easiest to focus on what happens in the moment—especially when there is a crisis or deadline. Too often we mistakenly concern ourselves with stopping the bleeding, and we don’t determine where the bleeding is coming from so we can stop it from happening again

CEOs must learn how to turn chaos into order, so their companies can look like well-oiled machines.

📌

One of the key skills for any leader to master is understanding what matters and what doesn’t. We all have only so much time in the world, so it’s best to spend it on things that are impactful.

If you spend time on what must be accomplished every week, and review that daily, you will find that you stay more focused on the big goals instead of making everyone happy on things that don’t matter.

image

Principles

  • Use Time Management Matrix — the system of 4 quadrants to manage your focus
  • Steal time from the “urgent and not important” Quadrant 3. Don’t take telephone calls from someone you don’t know.
  • Don’t plan or attend unnecessary meetings, which could fall into Quadrant 4. Build culture to make everyone else feel ownership of time that’s wasted.
  • Don’t focus at all on Quadrant 4. Delegate—or remove— inconsequential tasks.
  • Carve out Quadrant 2 time every week—make it a priority on your calendar and honor it.
    • If you don’t, no one else will; they will drag you back into 1, 3, or 4.
  • Take time to reflect every week on how you spent your time and whether you spent enough time in Quadrant 2.
    • I promise you that the more you are able to spend there, the less time will be needed in Quadrant 1. (Always be minimizing 3 and 4.)
    • 📌

      If you spend time on what must be accomplished every week, and review that daily, you will find that you stay more focused on the big goals instead of making everyone happy on things that don’t matter.

WHEN YOU ARE FACED WITH A BET-THE-COMPANY DECISION

When you are faced with a true “bet-the-company” decision, it is my hope that you are looking at an opportunity to dramatically increase your growth and impact on the world

This can be a dramatic shift in strategy; for example, think about Apple going after the phone market or Amazon launching AWS. It can also be a transformational acquisition such as PayPal for eBay or Whole Foods for Amazon. Just recently, Gilead Sciences announced an $11.9B acquisition of Kite Pharma in order to enter into cell therapy for cancer

Another way to assess whether or not a “bet-the-company” decision is worthy of pursuing requires examining where the idea came from and who will be accountable for driving the implementation and results

Principles

  • When you have to make a major decision about your company, ask your self a set of questions
    • If it goes well and achieves everything you hope (understanding that it generally won’t), what do you have?
    • If it fails miserably, what have you lost and what impact does it have on the core business?
    • Who is driving the strategy and how much passion do they have around it?
    • What degree of confidence do you have that you can pull this off?
    • Do you have dedicated resources to make this happen?

WHEN YOU NEED TO GO FROM GOOD TO GREAT

I’ve been most inspired by teams that are always seeking to become the best in the world at what they do. I find that the teams that achieve this end up being the most fun to be around, AND they deliver the most value

Across our portfolio companies, we sometimes observe founders who confuse good with great, and for people who may not have seen greatness up close, it can be really hard to tell the difference. Many milestones are objectively good—large infusions of capital from venerable VCs, landing a marquis customer, hitting a hundred employees. And when you’re a startup, these milestones will always look like progress from where you were a year ago. However, are you still doing great when you take a wider view of the ecosystem?

📌

Too many people aim too low. They feel satisfied with themselves when they are getting better, but they are not striving to be best in the world. I often see teams get excited when things get better. They should feel pleased with this progress, but they haven’t reached high enough. The result? They settle for good, not great. Good is not good enough. Go for greatness.

Principles

  • Understand what great looks like. Think about telling an audience of a hundred people what you want to do. If they are not amazed, you’re not aiming high enough.
    • We all need to be looking at who is bold and audacious. Who is the best in the world, and what are they doing? Unfortunately, I have observed that most people manage to the mean, or compare themselves to what they did last month, rather than what the best in the world do
  • Be suspicious of "it can't be done" and challenge it. Work every day to take all the excuses away on why something can’t be done.
    • People are naturally resistant to change. Internally and externally, I often find people say that something “can’t be done.” Generally, I find this answer results from a lack of effort, or a lack of imagination. If you can get your team to prove themselves wrong, they’ll have done the impossible
  • Take a look on what others are doing and analyze industry standards. Build the benchmarks.
    • At eBay, when I took over customer support, the team walked me through what they were doing and how well it was going. “That’s great, I think it’s an ‘A,’ but don’t know if it’s an A in elementary school or in graduate school,” I said.
    • To figure that out, we looked outside to see what others were doing and built benchmarks. We found that each customer support representative was processing three to four emails an hour. The industry standard was fifteen. Once we knew how far behind we were, we set a new target, built a plan, and executed.
  • Be on a constant quest to improve.
    • Do you always strive to deliver more? Ask the following questions:
      • Who do I admire who is facing analogous challenges, and why? What do they do?
      • What is achievable and by when? What is the highest we could aim for and hit? Always aim high, but know that if you have unreasonable expectations, you can burn out your team. Demanding too much can erode their trust not only in you, but more damningly, in themselves, too.
  • Be very clear on the opportunity and what you are intending to achieve—and don’t let anything get in the way
  • Give your team the tools they need for success.
    • (not only budget dollars and resources, but helpful forcing functions, check-ins, access to executives, escalation rights, and practices that set them up for success).
  • Align the team so that they can make decisions quickly.
    • At Bay Networks, when we were working on a really fast Enterprise Resource Planning (ERP) implementation, people weren’t making decisions quickly. To address the lag we were seeing, we introduced a twenty-four-hour rule where any problem had to get solved within twenty-four hours or it would escalate to me and the steering committee for rapid resolution
  • Do not hold your company back. Don't bottleneck your growth
    • We had one founder in the portfolio who was at the crossroads of good and great. After years of middling results, he finally pivoted and tapped into massive customer demand. Eventually, he grew pent-up demand for sellers who wanted to use his service, but he was holding them at bay because he couldn’t accommodate their supply. The business was continuing to grow like gangbusters, but it could have been growing even faster
  • Inspire others to greatness.
    • As a manager, this requires that we walk a fine line. I’m a perfectionist, so if I told people the full extent of what I really thought, I would probably leave them in a puddle most days. Instead, I’ve learned to inspire people and to help them extend their vision to become better and bolder. It’s your job to instill confidence in your people and have them aspire to greatness on their own. That magic happens when you inculcate this philosophy into your teams.
    • Too many people aim too low. They feel satisfied with themselves when they are getting better, but they are not striving to be best in the world. I often see teams get excited when things get better. They should feel pleased with this progress, but they haven’t reached high enough. The result? They settle for good, not great. Good is not good enough. Go for greatness.

WHEN YOU NEED TO KNOW THAT ANYTHING IS POSSIBLE

While there’s no formula, there are individual steps on the path to success that must be followed. It all starts with aiming high. What’s high enough? It has to be amazing. If what you are thinking is not amazing, you need to step back and recalibrate and think bigger.

I wish we knew then that the options were boundless. I wish I knew that we could create opportunities for ourselves, that jobs could be exciting and fulfilling—and that we each have a role in building an extraordinary life.

Insights

  • One opportunity could beget another, and hard work—especially volunteering for the hard jobs no one else wanted—could yield stratospheric success.
  • A lot of it is about jumping in the water. A pedigree, while a good stepping-stone, is not the only way to get where you need to go. The only way to get where you need to go is to actually go for it: Show up, knock on the door, and then run through it.
  • When you try and succeed, you’ll see winning is fun—and addictive. You will want to do it over and over.
  • But you can’t ever become cocky. You have to learn how to win gracefully. Stay humble and live up to the hype about you.
  • Remember, even if you are a breakout, it doesn’t mean you will stay a breakout. You will always have to prove yourself, again and again. With successes, you will gain the perspective that what you once saw as a mountain was just a hill, and you will realize that you still have a ways to go to reach your peak. Always focus on the next range of mountains in front of you.

Principles

  • What you once saw as a mountain was just a hill. Always focus on the next range of mountains in front of you.
    • Remember, even if you are a breakout, it doesn’t mean you will stay a breakout. You will always have to prove yourself, again and again. With successes, you will gain the perspective that what you once saw as a mountain was just a hill, and you will realize that you still have a ways to go to reach your peak. Always focus on the next range of mountains in front of you.
  • Jump in the water. Show up and knock on the door
    • A lot of it is about jumping in the water. A pedigree, while a good stepping-stone, is not the only way to get where you need to go. The only way to get where you need to go is to actually go for it: Show up, knock on the door, and then run through it.
  • Don't become cocky. Stay humble and live up to the hype about you

WHEN YOU NEED TO SCALE

Companies are not static; they’re either growing or shrinking. Moving in either direction is hard work (though it’s a lot more fun to be growing)

The more you grow, the more friction you introduce. Challenges get harder as you become more successful

You have to be relentless at getting better and better. You have to always figure out how to make everything easier.

When it comes to scaling, there is always something to do. The company must fill positions quickly, onboard new hires successfully, get customers clamoring to the business, ensure everyone is fired up, and have the world understand how it is different

Principles

  • Be more discerning. Understand which priorities are most important.
    • One of the ways to navigate these scaling hurdles is to learn how to become more discerning. You need to understand which priorities are most important. As you grow, there will always be more items clamoring for your attention, and it’s up to you to decide which of these are most important.
  • Operational excellence usually brings more benefits than innovation
    • For a company to be successful, it must be growing and scaling. I always find it fascinating how people find “innovation” to be exciting (despite how routinely it fails to pay off), but react to words like “operational excellence” or “rigor” (which almost always correlate with better outcomes) with yawns. If you can figure out operational excellence, it will be massively great for your career and company. It’s far easier than you think—if you focus on it.
  • Develop an external methodology that helps you look at the company, see where you are, and determine where you need to be
    • There are many tools and methodologies to help you see what “great” looks like and help you get there. We used to tout Kanban, Key Performance Indicators (KPIs), and Objective and Key Results (OKRs). In programming, Agile Methodology has largely replaced the once-popular waterfall development approach. I personally use Capability Maturity Model (CMM), and Salesforce employs Marc Benioff’s V2MOM methodology, both of which I’ve included below. Yet what I really want to impart is not one particular process, but the importance of implementing a process to drive predictability to your company’s operations. You need to have some kind of external methodology that helps you look at the company, see where you are, and determine where you need to be.
    • Capability Maturity Model (CMM)
      • Level 1. This is the disaster scenario. You didn’t do what you said you would do and people are running around with their hair on fire (metaphorically). On any given day you can slip into Level 1—a meeting runs late, you miss your window to get to your next meeting, and you don’t gain pertinent information. When things start to spiral out of control, take measures to correct the situation immediately.
      • Level 2. You didn’t yet achieve what you set out to do, but you have a clear plan in place. The plan is credible, you know who owns which tasks and goals, but you’re not effectively implementing the plan yet.
      • Level 3. You don’t have a lot of crises at this point. Your organization’s “say-to-do” ratio is close to one. You are predictable and reliable, but you are not achieving all the potential that you have. Your growth is healthy and your business is accommodating it well, but you need to build on this stability to gain momentum—and get ahead of the curve.
      • Level 4. You are operating efficiently. You are able to do more with less, and the feeling of winning is palpable. For example, when we got ahead of the scaling challenges at eBay, there was a palpable difference. Our community members were happier, most of us got more sleep and we all loved it so much we vowed to stay there. (I do find it interesting that the people who climbed from Level 1 or 2 to Level 4 never forget the climb and resolve never to go back. Team members who join at 4 don’t always understand the pain involved in the transformation and this leads to teams getting complacent.)
      • Level 5. Your team can operate without you, and it’s taking less time to get things done. You are now a resource for others. At this point, you are now able to chase new and additional opportunities. You have discovered the holy grail, where you are working on what matters most.
  • Achieving success means continuously leveling up your company, and each division, over time
    • Remember, achieving success will mean having to continuously level up your company, and each division, over time. That’s why it’s so important to not just tread water and stay alive for today (Level 3), but to get ahead of the curve to prepare for tomorrow (Level 4). Also important to note: None of this framework is static. You can be doing a Level 5 activity (a great project that will be important tomorrow), while living in a Level 3 world (where you are stable, but not yet secure for the future). And, you can have a Level 1 issue (losing a key employee) limit you and take time and cycles from where you want to be.
  • Talk about what success look like.
  • Decide what’s important and develop metrics on the key things that matter.
  • Implement forcing functions.
  • Have timely communication, where issues are addressed in minutes or hours, not days or weeks.
  • Escalate problems.
  • Understand that it’s not about what information you discover, but what you do with it. (Always ask, “What do we know now and what do we change?”)
  • V2MOM is a great framework for achieving alignment in your vision
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WHEN YOU WANT TO RUN AN EFFECTIVE BOARD MEETING

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Running an effective board meeting is simple: run an effective company

The problem is that too often this is not the case. With most companies, growth is not always up and to the right, and therefore you want and need board members helping you all along the way. That means the pressure is on: You’ll need to run your meetings exceptionally well.

It’s important to point out that board members generally get to know you and experience your leadership skills mostly through board meetings, so they may (rightly or wrongly) extrapolate how you perform in other areas of your company based on how you perform in the boardroom.

A successful meeting starts with alignment between the board members and you. In the beginning, ideally these meetings can be like deep 1:1s with a little time carved out for legal formalities (e.g., approving, stock, and other formalities that need to be discussed). These meetings will go much more smoothly if you have understanding and agreement in advance—on frequency and length of meetings, agenda, and management participation

Principles

  • Set up the meetings well in advance.
  • Make sure board members know whether it is okay to attend remotely or not.
    • (I just experienced a board meeting that the CEO changed to video at the last minute, and one of the board members had cut a European trip to make it back in person—oops! You don’t ever want to do that.)
  • Send out a proposed agenda a week or two in advance and solicit input for any topics the board wants to cover.
  • Make sure all materials get out in advance (at least two days before the meeting). Board members are usually busy, but want to do a good job. When you don’t give them time to do their jobs well, they get cranky.
  • Leave time for an executive session with the full board, and with just outside board members.
  • Save time at the end of the board meeting for board members to give you feedback.

WHEN YOU SHOULD PUT YOUR BOARD TO WORK

Principles

  • Solicit their advice on all kinds of matters, such as requesting examples of board decks, getting board agenda advice, inquiring about their style of preferred communication, asking what reporting they need for their firm, and more.
  • If you are starting to ramp up go-to-market, solicit their help in opening doors to key prospects.
  • When you are looking for key hires, invite them to suggest candidates.
    • A word of advice here: If they give you recommendations, be sure to follow up on them. It can be irritating to a board member who responds to a request for help, only to have that ignored instead of acted on.
  • Ask for their input on many key decisions, without abdicating the decision.
    • Remember, board members (generally speaking) like to be part of the dialogue on big decisions as opposed to being told to vote on something that you’ve already made up your mind on.
  • Whenever practical, recognize your board members for their contributions as well.
    • Whenever practical, be sure to recognize your board members for their contributions as well.
    • At WIN, we often advise our founders to send out periodic updates on their progress and recommend they call out investors who were helpful. This “gamifies” the process. (I know I always want the WIN team to be on the list of helpful investors!)

WHEN YOU WANT TO AVOID NASTY SURPRISES

I wrote this letter to share the benefits of being proactive rather than reactive.

Productivity is all about getting way more done than the average person— and we all know nasty surprises often derail you from great productivity.

Forcing functions (including 1:1s and status reviews) help surface problems early and provide you with an opportunity to immediately address any issues that arise, making them useful tools to help increase productivity.

Yet it’s not enough to assign tasks and integrate forcing functions. There are soft skills that matter here, too. I make a habit of spending time focused on getting to know most of the key people on every project. This includes checking in with them frequently and observing body language to get a deeper sense of what else may be happening. It also includes observing the chemistry of the team

Principles

  • Be respectful of each other’s time. Communicate early what you need and by when. Obtain a commitment to have people get back to you when needed.
    • If you’re always in crisis mode and changing meetings and times, you are causing massive churn for others on your team. This, in turn, can lead to massive churn for their teams.
  • Teach your team that identifying problems should be encouraged and that early warnings are also appreciated.
    • It’s much harder to solve problems when you are out of time to do so. Of course, you need to also teach your team how to come up with solutions on its own as well.
  • Check in frequently on the things you care the most about. Have formal check-ins and frequent 1:1s, as well as informal and impromptu check-ins.
  • Pay attention to all the signals that exist. Look out for changes in cadence around communication and listen to what other people are saying
    • I’ve often had to probe deeply with somebody whose behavior, attitude, or patterns have changed, and in doing so I’ve discovered early signs of a problem. Look out for changes in cadence around communication and listen to what other people are saying. As they say, where there’s smoke, there’s fire.
  • Always do the postmortem. Debrief on how to do better next time
    • When you end up with a problem that could have been solved earlier, take the time to debrief the team on how to do better next time. Set expectations on what’s expected when similar situations arise.

WHEN YOU HAVE A CRISIS

Whether it happened unexpectedly or it happened because you haven’t managed something well, the imperative is to deal with it now before it becomes something bigger.

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My advice: overreact instead of underreact.

Principles

  • Assess the order of magnitude
    • What’s the magnitude? First of all, let’s determine: Do you REALLY have a crisis? Listen first. What’s the crisp description of the problem? Now, how bad is it? You need a way to categorize it.
    • Ask yourself: Is this a tremor that will pass, or is this a killer earthquake you can’t recover from?
  • Problems don't get better with age. There’s no time to waste
    • If you put a frog in boiling water, it will quickly jump out. But if you put it in and heat the water slowly, it will stay there—and cook. Do not stay in hot water for long.
    • I often say that problems don’t get better with age. Too often, people choose to hide problems or let them sit, rather than addressing them when they’re smaller.
  • Deploy your resources
    • It’s time to get all hands on deck. The first thing to do is to sound the alarm to get immediate attention—and action
  • Get the right people in place
    • Talent is everything. When you are in crisis mode, you quickly get to see people at their best and at their worst.
    • Make sure you have the best surgeons, firefighters, and problem solvers on board—and if you don’t, get them there quickly
  • Have a backup plan. And a backup for the backup.
    • Let’s be honest: When a problem hits, you don’t always know what’s wrong, and you certainly don’t always know how to fix it.
    • Keep asking yourself, And if that doesn’t work, then what?
  • Swallow your pride. Allow everyone to participate in solving the crisis
    • It’s not about hierarchy. The best answers can come from anywhere. Allow everyone to have a voice and contribute insights and questions throughout the process. What’s most important is to solve the problems quickly and prevent their recurrence. Always ask yourself: Are we getting better every day? If not, make some changes
  • Do everything possible to minimize impact for customers
    • I reference eBay a lot, probably because it was crisis central. When I started, we used drives from a big vendor and when they crashed, our entire site crashed. The vendor told me that we were trying to recover “too fast” and if we just let them recycle for twenty minutes, everything would be fine. Who has twenty minutes on the internet?
    • We agreed that the current situation was unsustainable, and the vendor went to work on a firmware solution. However, we needed a proactive interim strategy. For twenty-four hours a day, we kept people watching for the warning that would flash before a crash. Once it went, they would take the disk out of service before a crash happened. It was a high-intensity solution that required a lot of resources, but until it was automated with a bug-free software fix, we had to do everything within our power to reduce how customers were affected.
  • Communicate with everyone (i.e., the board, your team, customers).
    • Have your board and your management on high alert and make sure they’re present until permanent solutions are in place. Do not hide from anyone.
    • At eBay, I wrote personal updates on issues to the management team and every week gave status reports on what went well and what didn’t. Make it one of your action items. Also, get every executive’s mobile number and the personal cell phone numbers of every vendor so you can mobilize resources as quickly as possible.
    • Remember, you’re not just solving for the problem with your team in a silo; customers are involved. Someone has to notify them and calm them down. Silence is not a good thing at this stage.
    • Here’s how to take action during a crisis:
      • Tell the truth.
      • Tell them the next steps.
      • Tell them when you will update them again.
    • You’ll need to have a process in place to communicate. Who’s managing communications to employees, to customers, to the press? (Hint: It shouldn’t be the surgeon in the operating room.)
    • The world will always want you to do more. The best thing you can do to address this demand is to create a culture of transparency and accountability
  • Never waste a crisis. It’s an opportunity to make things better.
    • Postmortems are essential. Once the problem is solved, figuring out what went wrong (Was it an execution issue, a vendor or product issue, a software bug, an external event, etc.?), and how to ensure it won’t return, is essential. Remember, great companies have to be world class at dealing with crises, but they aspire to be even better at avoiding crises in the first place. (You’ll need to master BOTH. If you’re in a crisis it’s too late to worry about prevention, so you better be great at getting out of trouble!)
  • From now on, plan for crises in advance
    • Ideally, you want to be deploying a playbook rather than developing a playbook. Most often, founders don’t do this in advance and then have to develop processes while in battle—that’s much harder

WHEN YOU’VE JUST MISSED YOUR QUARTER

Principles

  • Assess when did you realize that you might miss the quarter
    • When did you start to think you might miss the quarter? When were you certain?
    • Did you communicate this concern? Did you message anything in advance, or did you wait, hoping for a miracle?
  • Communicate to the board
    • Boards don’t do well with surprises. And, like with all problems, bad news doesn’t get better with age.
    • If this comes as a surprise to the board, how big of a surprise is it? Where would it fall on the Richter scale?
    • Remember, when things don’t go well, people are looking for you to step up and lead in a bigger way.
    • How you handle sharing bad news is a great way to instill more confidence in your leadership.
  • Determine what business issue caused the problem. Own the problem, don't be defensive.
    • What was the business issue that caused the problem? (Answer these questions clearly and definitively to understand why. Own it. Do not be defensive.)
      • Was your planning flawed? Were your goals unrealistic?
      • Was your execution flawed? If you underexecuted, at what phase did this happen (e.g., sales, technology development, marketing, etc.)?
      • Was the product flawed?
      • Did the market for the product or service tank?
  • Assess how bad is the situation
    • How bad is the situation? Is it a cold, is it the flu, or is it something more serious that could be terminal?
    • If it’s a cold: Find a way to recover quickly and still make the year. The quarter is gone, but don’t give it up yet. Work harder to get back on track. Overdeliver for the next quarter and try to make up for the miss.
    • If it’s the flu: You probably won’t make the year and your next round may be at a lower valuation than hoped, but you may still be on a good long-term trajectory if you put the right recovery plans in place and execute on them.
    • If it’s a serious illness: There will be lots of angst and discord in the boardroom. If you don’t have a lot of cash in the bank and you need to raise money, it will likely result in a down round with onerous terms. It’s not pleasant. This often leads to leadership changes. You can escape from near-death experiences
    • If it’s terminal: Work on minimizing your cash burn, get acquired or acqui-hired if you can, and return cash to investors
  • Learn the lesson
    • How can you get better? The board and the people at the company want to know how this affected you.
      • Did this defeat you? Or, did it harden your resolve?
      • Do you know what to do next?
      • Are you doing this with urgency—better, faster, and stronger than ever?
  • Keep setting aggressive goals. Don’t let this change the trajectory of hope for the company
    • If the miss doesn’t have dire near-term implications for your company, then it’s important to not let this change your belief in your company. Don’t let this change the trajectory of hope for the company.
    • Set aggressive goals. It’s important. Be transparent about where you fell short and be positive about the momentum that you do have. Don’t become so conservative that you miss the opportunity you’re striving for. Mediocrity is the worst place you can be.

WHEN YOU NEED TO SOLVE CROSS-FUNCTIONAL FRICTION

First, it’s important to realize that this friction you are experiencing is a natural state. Unfortunately, we don’t automatically embrace and welcome people who are different from us. For example, engineers don’t always intrinsically think salespeople are as important as they are. Also, everyone has their own work to do and when a new function or capability arises in the company, it generally brings new demands. Some people find these new demands threatening.

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Unfortunately, it’s seldom the case that teams reach out to say, “I know you are working on something huge, how can I help you?”

Principles

  • Get peer alignment on goals.
    • I’m a fan of ensuring that everyone at the executive level gets input on one another’s goals and on grading these goals later on. This also includes knowing what trumps what, and which goals matter most
  • Engage in broader communication.
    • Whatever you’ve been doing regarding communication is very likely not enough. Communication must be constant and it must reach everyone
  • Implement decision-making guidelines.
    • What are the expectations for problem resolution? Who gets to make which decisions? I’m a fan of the RACI model (who is Responsible, who needs to Approve, who needs to be Consulted, and who needs to be Informed
  • Find ways to surface issues.
    • I ask everyone at WIN to submit things they need help on every week. In my 1:1s, I ask how things are going and why.
  • Celebrate the wins and give validation across the whole company.
    • When you see cross-functional behavior that is great, call it out and celebrate it. Our customer support team at eBay gave out “silver star awards” to those people who went above and beyond to help them out. There were lots of people at eBay who had the printed award up in their cube

WHEN YOU NEED TO ASSERT THE CHARACTER OF YOUR COMPANY

There will be thousands and thousands of decisions and judgments made in the coming months and years at your company. Some decisions matter more than others. The types of decisions I am talking about here are ones that shape the bedrock of your company

Principles

  • Define the character of the company. Answer the character-defining questions
    • When we see bad or illegal behavior, do we turn the other way, or do we address it head-on?
    • What do we do when our service goes down (or does not meet expectations) in order to maintain our customers’ trust?
    • When our Glassdoor numbers are abysmal from current and former employees, do we just say they weren’t a fit, or do we examine our behaviors?
    • When our numbers for the quarter are not looking good, how do we talk about this to our board and to our team?

WHEN THERE’S A CONFLICT OF INTEREST ON YOUR BOARD

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Sometimes conflicts of interest with board members are black and white issues. But most of the time, it’s at least a thousand shades of gray.

Creating a balanced board requires a balancing act. While the best directors will have the necessary relevant expertise and zero conflicts, finding this magical board member is a little like finding a leprechaun. So, be open-minded, understand that some conflicts are more perceived than real, and then vet them thoroughly and continuously, and make changes as necessary

Principles

  • Disclose your conflict of interest to board
    • Sometimes you have to solve for something that was never anticipated to be an issue. An example: a number of years ago, I invested an immaterial amount in a small company creating software in a category that had been of no interest to Salesforce. Later, Salesforce became interested in acquiring the company. The solution: I stayed on the Salesforce board, but fully disclosed my small investment interest and recused myself from any discussion and decision-making about the acquisition
  • Recuse yourself from any decision-making on the conflicting issue
  • Not all conflicts are unsolvable
    • Don’t assume all perceived or potential conflicts present actual or unsolvable conflicts. You should not always write something off just because it could raise a perceived issue. Take time to investigate it thoroughly, and then make an informed decision. Process and disclosure can make a difference. When I was the CEO and chairman of LiveOps, LiveOps and Salesforce wanted to do business. But I was a board member at Salesforce. The contract amounts were ultimately not significant, but the situation could have presented potential issues. In this case, I disclosed my situation fully, the audit committee thoroughly vetted the transactions, and I recused myself from any decision-making on those transactions. Salesforce also disclosed those transactions to its shareholders.
  • Understand that perception is reality
    • For example, two of the boards I sit on use Everwise, a company I co-founded. There were rules that helped us navigate this situation, which put limits on the amount of business Everwise can do with these companies. When shareholders or other board members perceive there to be a potential conflict—regardless of whether you agree—you must quickly address and vet it
  • Reassess frequently. Businesses today change so rapidly, that what may not have been a conflict yesterday, can easily become one tomorrow.
    • Be cognizant that companies and markets are fluid, and monitor continuously. Consider how there was very little overlap in 2000 between Apple and Google, and Google CEO Eric Schmidt served on both boards. However, some years later, things had changed substantially, and it became clear that they were both chasing a mobile strategy. Eric did the right thing and stepped off the Apple board

WHEN YOUR BOARD SAYS THEY ARE REPLACING YOU AS CEO

Principles

  • If you find yourself being replaced as CEO, ask yourself a set of questions:
    • Is this a surprise?
    • Do you want to fight the decision? If yes, where does that lead? Assess whether this is recoverable or negotiable.
    • What does this mean for you and for your team? Do you message this as your decision and lead through it, or do you fight it and create a lot of emotion around your role? Are you still being asked to be involved in a big way?
    • Will shareholders (and remember that you’re also a key shareholder) end up better in the long run?
  • Try to ease the transition.
    • When I left LiveOps, I was willing to commit to staying as chairman for two years to help. I committed to the new CEO that I would help in a transition and I asked him how long he would like for me to stay. He said, “You can leave my first day.” I didn’t take this personally, as he had been warned by his former colleagues about having someone like me on the board and was concerned that I may overpower everyone else. Trying to retain control isn’t my style, but he didn’t know that. It’s important that you offer what’s right—despite how others might respond.
  • Take some time. Figure things out.
    • There’s no way this will make sense to you immediately. Determine the insights and learnings you can take with you for the future.
  • Be proud that you had the courage to start something from scratch.
    • We are proud of the traction you’ve built.
  • If you can’t find an engaging role that you love and can get passionate about in the current company, don’t grow bitter.
    • Figure out round two. You’re in control of the move you make next. Figure out what you’re uniquely qualified to do and want to do. This situation was not in your hands, but the next one is.
  • Comeback can be real
    • Finally, and I don’t want to give any false hope, but we all know Silicon Valley “comeback” stories that involved greats like Steve Jobs returning to Apple, Larry Page returning to Google, and Jack Dorsey returning to Twitter. Nothing is impossible.

PART IV LEAVING A LEGACY

9. Building a Company to Last

WHEN YOU HAVE A BIG PAYDAY

It’s important to understand what’s what.

Too often people who come into money lose it quickly

Principles

  • You will pay a significant portion of your payday in taxes.
  • Try to achieve your return as a capital gain
    • Hopefully you were able to achieve most of your return as a capital gain. If not, if it’s straight income, as much as 50% (based on your state) can be taxed.
  • Markets change and your net worth, too.
    • Probably, the most painful things I’ve experienced have been when market forces exert themselves—and not in a good way
    • When the “bubble” burst in the early 2000s, so did some of my net worth. The same thing happened again in 2008–2009. It’s hard to think you have made your targeted or desired net worth, only to see it erode quite quickly
  • Find the right approach to manage your wealth
    • You need to find the right approach to navigate and manage newfound wealth. Many people work with financial advisers, but it’s important to understand that these professionals aren’t always working for you, though they say they are. I remember being excited when I was seeing my net worth grow due to my company doing well and some angel investment bets that had paid off. I had my money with a reputable big bank and soon I started noticing that there were lots of trades happening. I was paying hefty fees to my advisers for this kind of money management, yet the investments weren’t doing very well. I switched advisers to a group that gets paid based on my net worth. When it grows, their fees grow and vice versa. Our interests are better aligned
  • Gaining significant wealth can introduce unexpected dynamics with family and friends
    • Suddenly gaining significant wealth can also introduce unexpected dynamics with family and friends. Ultimately my wife and I made decisions together, including making college help available to every blood relative and their offspring. We also focused on providing experiences—family reunions or special events, such as attending Super Bowl games. Our thinking is that we want them to have fun and enjoy these great times together, but we also want them to keep working hard to ignite their own success and reach their own destiny

WHEN YOU NEED TO PLAN SUCCESSION

It’s never too early to think about succession.

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From the earliest days of getting started, you need to make sure you have the talent you need to achieve the destiny of your company

You must continue to challenge and groom your talent, and at the same time you need to explore and secure additional options in case it doesn’t work out with your current team member

You always want to recruit people better than you. And you always have to give people a chance. The fact is, a lot of people are willing to step up. They just need the opportunity and the mentorship. Give it to them

Principles

  • Continuously assess the existing talent you have. Ask yourself a set of questions:
    • In each position, how good is the talent you’ve got? If everything goes according to plan, will they be able to scale with you? Will they be able to grow so they can stay with you two years from now? How can you know that? Investigate what you do know. How are they doing today in delivering on one product? They are managing three people now; how is that going? Then, extrapolate out. What happens when they need to also manage customers? Based on how they manage three people, will they be able to manage thirty? Where do they break?
  • Have people on your bench
    • Who’s on your bench? Even if someone is able to scale with you (and especially if they are flourishing, as this means that they will be promoted and then need to be replaced), you need to make sure that you have talent underneath them who can step in and do their job.
  • Understand who is best in class outside your company. Have your dream candidate
    • Who’s best in class outside your company? You need to know who the best CMO is, who the best engineers are, who the best HR professionals are so you can develop relationships with them and try to tap them down the road.
    • Always ask yourself: Is there somebody in the world who would be a dream candidate even if I can’t have them in that exact role?
  • Plan a replacement for yourself
    • So, what about you? This is a difficult question. No one wants to think about getting replaced —it’s a lot more fun to think you are indispensible—but you must plan for succession. The board should know who will take your place should anything happen that would change your leadership at the company. Public companies have that discussion at least once a year. It’s not always easy, but it’s always necessary.
  • Recruit people that are better than you
    • You always want to recruit people better than you. And you always have to give people a chance. The fact is, a lot of people are willing to step up. They just need the opportunity and the mentorship. Give it to them

WHEN YOU ARE THINKING ABOUT BUILDING A COMPANY TO LAST

If you are still truly a startup, you shouldn’t be focused on legacy right now. Your focus must be on making your company relevant and then scaling.

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Getting to scale is hard. Getting to legacy is almost impossible. The people who got your company off the ground, the people who scale it, and the people who help achieve legacy are rarely the same. Not only does it require a different skill set, the same people often will no longer be around

Since 2000, more than half of the companies on the Fortune 500 list have disappeared as a result of mergers, acquisitions, or bankruptcies. Consider that in 1975 the life expectancy of one of those Fortune 500 companies was seventy-five years. Today, it’s just fifteen according to John Hagel III at Deloitte’s Center for the Edge

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Success is not about the individual; it’s about the company

As a founder, you can’t worry about being legendary when you are starting out. However, you should always be aware of your own impact on your company

Principles

  • When you are a founder, your fingerprints never leave.
    • As a founder, you can’t worry about being legendary when you are starting out. However, you should always be aware of your own impact on your company
  • Codify the secret sauce that makes your company special
    • Have you codified the secret sauce that makes you special?
  • Firmly inculcate your values and teach your people how to modify them when needed
    • Are your values inculcated firmly? Have you taught people how to modify them when needed?
  • Have successors at the ready who can carry on the mission and improve it
    • Do you have, at the ready, successors who can carry on the mission (and hopefully improve it)? The company should be able to continue on its merry way—and without any hiccups—without you.
  • Embrace servant leadership. Put the cause ahead of your agenda and beliefs.
  • Get out of the way, but be willing to insert yourself when the legendary status is at risk. (Think Steve Jobs’s reinsertion into Apple.)