Dear Founder #1


Dear Founder,

First, congratulations on achieving the milestone of having completed a few pilots and securing a sales pipeline waiting on you to be executed.  Well, congratulations because the reward for what you’ve achieved so far is a bigger challenge that you will now face.  You are going to have to love this challenge!  You are thinking about scaling up, and you’ve got to find people with the commercialisation experience to help you.

For us, that first transition away from being a product company is like changing gears when driving, or the next phase of a multi-legged expedition.

We wanted to share two lessons about this shift from finding a reasonable degree of product-market fit (Steve Blank has quite a good and simple pictorial definition of this) to scaling.

First, it’s important to know when are the moments that a change in gear is needed.  It’s part of knowing where you are, having a sense of where you’ll need to be.  Good venture capitalists and experienced investors can often quickly give you useful clues as to where you are – we see companies in various stages of their growth all the time so, very often, we can get quite a good “pulse” in less than an hour.  Knowing this is important, as making the transition is hard: usually there will be some key hires to make, the culture will therefore morph somewhat, and the top 3 priorities of the business will change (which is often towards more market and customer driven).  Put simply, there are different problems to solve in different phases of a company’s journey as it grows, and you’re regularly having to refocus on new or different things.  You don’t want to “change gears” too early, or too late.  This self-awareness is absolutely critical, as are of course the determination, commitment, and calmness required to have the staying power to keep the car moving.

Work out what your top 3 priorities should be.  As you transition away from being a product company, your commercialization strategy (e.g. channel strategy, choice of partner) is almost without exception one of your top 3 priorities if not your number 1.  There are so many applications you can go for, so many people who are “interested”.  You’ve got to prune, you’ve got to focus.  Do something “niche” really well, then expand.  (In case I find myself having to repeat myself, I’ll make the smart move and enlist the help of Steve Jobs here: “People think focus means saying yes to the thing you’ve got to focus on.  But that’s not what it means at all.  It means saying no to the hundred other good ideas that there are.  You have to pick carefully.  I’m actually as proud of the things we haven’t done as the things I have done.  Innovation is saying no to 1,000 things”).

Second is one of the most difficult transitions we find for our entrepreneurial founders – understand how to become a “co-leader” in the company.  As you grow the company, you need to find great people to add to the team, and that requires (a) taking that initial time to help make them effective (and giving them time to ramp up the learning curve too); (b) trusting some functions of the company to others and letting them make decisions.  If you feel you can’t trust them, then you may have the wrong person.  If you feel you can’t trust anyone, then you need to rethink and adjust your own mindset.

Also, you’ll have to get the balance somewhat right.  You cannot expect the new CEO or new commercialisation guy to solve every problem.  You cannot make them responsible for delivering the sales without you working tightly with them to think through product strategy, getting the right production support, and all that.  You have to give this senior person much support!  There are some problems that can be or need to be solved now, and then there are those that do not.  Telescoping too many things together can create a disastrous situation.  There are challenges that will continue to be challenges, and there are those that can be overcome.  And when you have found the right person, there’s the issue of ensuring that your wonderful new co-leader has adequate ownership so he is sufficiently motivated to help you.  It’s no use to attract a great hire but not be able to keep them.  Interestingly, this applies to investors too – the more that is at stake for him or her, the more they are incentivized; once you find the right investors who have considerable scale-up experience, you can only get useful advice from them if you communicate and share with them your challenges. For those founders who are engineers, I add another point: management challenges are not engineering problems – the solutions often come up through iterative conversations.

In most cases, we prefer to support, help, mentor, and advise our founders to stay the CEO for as long as is possible.  But even if sometime over the next 1 to 2 years you did step back from being the CEO, you are still the visionary, the moral leader of the company, as well as, in most cases, a co-leader in practice.  You are most likely to continue to be the key cheerleader for the company (or its product vision), and your strong relationships with the early backers of the company (especially the product guys) is key to carrying the vision.  We need you to do that!

As you think through these issues, you may like to take a look at this piece which is one of the most interesting thought pieces on the topic: penned by Reid Hoffman of LinkedIn, it gives some real insights and valuable pointers to founders on the question of how to bring on the scale-up or next-phase CEO, highlighting that in some cases, there can be more than one founding moment in a young technology company’s life.

A final point: let’s go.  We know there will be the setbacks and the mistakes and the “downs”.  And let’s just have these communicated straight and in a timely fashion – the one thing that is worse than bad news is bad news that take so long for me the investor to get to the bottom of.  We know bad news is part of what it is to be a small company doing some new and innovative things or trying to build a new industry – it’s bad faith that kills the relationship.

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