Buzz Pressure

It’s been a while, apologies but trust me we’ve been busy.

ParkVu is now being used by a small group of users, none of whom are going to blog about it so I’ll save Google the search cycles and tell you that upfront. In the meantime, we’re busy cranking on the next wave of features and we’re still aiming for a fall launch.

Ok with the update out of the way, going back to my “Start-up Regrets, I’ve had a few…” post, I wanted to give you a heads up on a chance to get involved with the local(ish) startup community. DemoCampToronto 18 will happen Tuesday July 15th @ Supermarket. Tickets go fast for this one so sign up ASAP and keep an eye on ticket releases at http://democamp.eventbrite.com Hope to see you there.

…but not too few to mention. Over the past 7 years I’ve been directly involved with 5 startups. My track record is thanks to a combination of what some refer to as a general “lack of patience” and what I refer to as “mistakes”.

Clearly I can’t help people with patience or whatever euphemism you prefer but I’m more then happy to share what I’ve learned and what I won’t do again.

Founders and/or Early Team

I believe the founding team is the most controllable factor of success for a startup. I’m not alone - VCs talk about investing in the team. Your initial team will set the tone and vision for things to come so you better get the people right.

With ParkVu we’re poking conventional wisdom in the eye and building a company where the founders were friends before the startup. Isn’t that a risk? Of course it is, I said we were poking wisdom in the eye didn’t I? However, I think it’s actually less risk then building a team from scratch.

Starting a company is pretty much a marriage in the corporate world - and you probably wouldn’t marry someone you didn’t like. My theory is that by working with someone you already trust and respect you stand much better odds then ‘finding’ a founding team and hoping that the chemistry comes together or can somehow be facilitated. Trust me, it is extremely rare when that happens, if at all.

When you’re building a high performing team you need a level of candor that isn’t easy nor comfortable if you’re starting from scratch on day zero. Plus, you’ll spend as much, if not more time with your founding team then you will with your family so it doesn’t hurt if you don’t dread spending time together.

To be clear, don’t just fire up a company with your friends because they’re your friends. I’ve done that and won’t repeat that one either. What you need are people that both challenge you and keep you balanced which is an equally rare and elusive as good chemistry. It’s even rarer to get challenge, balance, and chemistry all together but that’s exactly what you need.

Effectively, you’re looking for a founding team that is exponentially better together then separate. Aristotle got it right when he said “the whole is more then the sum of its parts”. OK, he got other stuff right too but if his Holism theory doesn’t apply to your founding team, fix it and fix it fast.

++Beer

A few times I’ve seen teams that just don’t click. People are polite and superficially get along but there’s no spark. There are a few, fractured social outings, mostly by a rogue group who sneak away and meet clandestinely. Typically management wakes up to this being an issue and tries to engineer “fun” but everyone still dreads the holiday/Christmas party. Surely this just can’t be due to just a lack of beer? I agree, there were corporate culture issues but let me just say, there will always be beer at ParkVu.

A founding team needs some regular down time together because everyone likes each other and occasionally you’ll need to remind yourselves of that. It’s not just about pondering your collective navels but also some social non-startup time. There’s a reason Friday afternoon keg parties became rituals in the valley. And it doesn’t just have to be beer; it should be but doesn’t have to be. Your team can bond in other ways too but beer helps. A lot. At Covarity, playing Call of Duty + beer is/was the norm. Nothing breaks down barriers like trench gunning your colleagues into oblivion.

Startup teams don’t seem to ‘gel’ without this ritual, regardless if it is a formal or informal ritual. No gelling, no high performance team - and working in that kind of environment just sucks.

- - Jackasses

We’ve all worked with them but we shouldn’t have. The Jackass is the person on the team that everyone dreads will open his mouth during meetings. They sow dissent, play politics and like to think of themselves as being provocative/big picture. They’re not. They simply suck ass.

Jackasses either have some serious character flaws, were toilet trained early or for whatever reason are not finding their stride in your startup. Either way they shouldn’t be working with you. That’s not to say that you turf anyone who challenges or argues. Absolutely not - I love a good whiteboard fight. What you don’t want are people who are high maintenance “just because” and serve as a value vortex for the team.

My ‘favorite’ jackass move is when the jackass positions themselves so not only are they completely blameless, they, of course, knew that the decision in question will end in failure and they’re not about to go down for it.

Most startups experience sinusoidal waves of kicking ass and having their collective ass kicked. You don’t need more crap. Kick your jackass(es) to the curb like yesterday’s trash and find someone who makes Aristotle (sum of the parts) and the team happy.

VCs — Sure Just Not Right Now

I’ve been through a number of investment rounds both angel and VC. I’ll leave angels alone for now because frankly I haven’t seen how they behave through both good and bad. However I have seen VCs brought in too early which results in the company ramping up too early prior to markets and product being solidified. The company runs itself in circles and hires the wrong talent while it focuses on placating investors instead of building product(s) for their market.

But VCs aren’t the bad guys. Sure there are some bad ones but there are just as many, if not more, bad founders out there. Things go bad with VCs when the deals become uneconomic. Shareholder and Subscription Agreements are VC protectionary measures i.e. they’re typically anti-founder. This is because of collective past misdeeds i.e. we only have ourselves to blame. And let’s not forget that your VC has investors too. They’ve sold they’re abilities and investment potential too and they’re now looking at you as the goose to lay that golden 10x egg.

So know the rules of the game, understand the power and more importantly, understand the motivations behind the rules and the power. Interestingly, the degree you de-risk your startup is (should be) directly proportionate to the investment risk and thus power and protectionary measures. The longer you can put off taking investment while hitting your milestones, the better off you should be from the perspective of equity and ability to affect the outcome of your startup. Naturally you have to balance - if you don’t take investment will your opportunity still exists and to what magnitude will it exist?

Terry and I are building ParkVu with the idea of bootstrapping until we prove out the market and the technology. If we don’t take investment, the business should still stand on its own. We’re in full control to set strategic direction, markets, business models and make overall decisions while the business is still squishy. Early investors are a patient lot but they’re not immersed in the business to the same degree you are, it’s difficult if not impossible to have the same strategic fluidity with external parties at the squishy table.

I’d highly recommend you seriously explore ways to get as much built and tested/validated before involving professional investors. That might mean selling a kidney, working on your startup outside of your day job, etc… And if you do take investment make sure the amount you’re raising realistically fits with a 10x exit opportunity. Otherwise you’re in for a miserable, bumpy ride.

Community

You may think you’re alone in this battle but you’re not. Too often founders and founding teams schlog it out on their own when there are a lot of people out there with startup bumps and bruises. You also need to connect with your marketplace. Reach out to your community and yes even <gasp> your competitors.

Find out where people hang out, attend bar/startupcamps, check out a local tech association and connect with external people in which you can confide. These are not long term board of directors/advisers relationships, just people who you don’t have to explain what you’re going through after every sentence or why you don’t get a “real job”. Look for people who have done what you’re trying to do, who will support you when you need it but also are equally willing to deliver a reality bitch slap when it’s needed.

Sale People

I have more horror stories in this category then probably any other. I’ve seen bad and really, really bad salespeople. Sadly I’m not alone. I had a sales team allegedly selling their own competitive product to our prospects, seen some pretty dubious if not illegal expense claims and once while using a salesperson’s laptop for a demo to about 200 people managed to stumble upon the salesperson’s porn stash and blasted it across two giant screens. Yeah try to recover that demo.

The worst I think was the “parking meter” who while very expensive sat at his desk and waited for people to come feed him money. Developers spent less time at their desks then this supposed “big game hunter”. Fortunately I’ve also had the pleasure of working with some very decent (yet demanding) salespeople too.

The overall value of your product is going to be a source of friction between development and sales. Development, especially founders naturally think the product is richer and more mature then the salesperson who has to put their ego, self-esteem and social capital on the line to sell it. Typically salespeople aren’t excited about selling the product for the top dollar founders think they should. They’re much more interested in giving the product away in a quest for reference customers. No these aren’t the good sales people I’m talking about but rather the norm.

Of course, if you get out there and do the first few sales yourself (if applicable) you’ll have both the credibility to call BS on the salesperson who wants to give your product away but also an appreciation for what it takes to get a deal done. Yeah realistic sales compensation plans help too but they’re not the be-all, end-all. Again most of theses problems can go away with trust, candor and respect.

You need to have honest discussions with your salespeople. Go on calls with them, listen to their advice, make sure they have a hand in prioritizing features and work with them from initial contact through to implementation and ultimately customer retention to understand the issues. You’re in this together but often both parties forget this and salespeople end up only concerned with their next kill while the rest of the company curses them for selling something that really doesn’t exist.

Phew

There you have it, 5 startups distilled into one list of things I’ve learned. So take a hard look at your founding team, crack open a beer, fire your jackass(es), remember it ain’t 1999, talk amongst your community, hire a salesperson you trust and respect and get out there and kick ass before someone kicks yours.

Is it 1998 all over again? Some moron(s) recently tried to snow Rick Segal with their biz plan (Biz plan? really you sent a biz plan!?!?) but were st00pid enough to leave in their changes and edits much to Rick’s delight. It reads like a car crash in the making and should kick your weekend off in style!

Don’t try this at home kids…

Today was the start of our second week at ParkVu and I, for one, am having a blast. Once again Terry and I find ourselves working in the remote wilderness that exists outside of Waterloo. Today during a hardware run, we were greeted by a Mennonite buggy and horse at the foot of the driveway — note the sign.

The buggy driver was performing some masonry surgery on a near by house. This was mildly surreal, given it was 30 feet away from our little startup world of cloud computing and network performance.

Our “office” is pretty sweet. This blast of spring has coaxed us out of the basement and onto the deck. Have I mentioned I hate winter!?!?! I’m pretty sure we’ll spend most of the summer out here and I’m certain we’re not regretting our decision to launch ParkVu.

Last week, Terry Goertz and I finished up our contract work at AideRSS. Monday a new adventure begins as we launch our company, ParkVu, Inc.

We’re in early days but working on data synchronization amongst multiple devices and users. We’re also bootstrapping our venture with consulting. Yep call us old fashioned.

Website and more info coming soon-ish.

There are still seats available for ExperienceTech!2008 hosted by MaRS & IDC. I’m doing a panel moderated by Stuart MacDonald of Expedia.ca and now TripHarbor fame, Leila Boujnane of Idee and the venerable David Crow.

We did a little pre-conf/pre-panel meeting Friday evening. Stuart, Leila and David were all gathered at MaRS and I phoned in while I chased my son on his bike around our neighbourhood until my BlackBerry ran out of juice and forced me to be confined to our porch.  In any case, if our conversation is any indicator of our panel, I think you won’t want to miss it. We’re going pretty much unscripted and hope to rely on the audience to drive the conversation with Stuart playing ring master keeping Leila, David and myself in line.

Even if we suck, there’s lots of other interesting speakers at ExperienceTech. Grover Righter is sharing tips on growing and exiting with less capital. Grover is rumoured to be a kick-ass speaker and a general force to be reckoned with . Tom Kelley of IDEO is talking about innovation and there are even other panels if you dare risk missing ours.

Like I said, not too late to register.

Alex Iskold asks Are YOU Replaceable? He says what I’ve been thinking for a couple of years now. The idea that everyone is replaceable just isn’t the case anymore. Sure some people are but for small growing companies, I’d argue the Top 15-25% simply aren’t replaceable without a serious hit to the organization.

Things get really scary when it comes to visionaries and leaders. Alex says it well:

Losing leaders and visionaries is very, very costly. The knowledge, the vision, and the game plan that was in his head is unique and can not be replicated.

What’s interesting is that few if any startups consider this during their hiring strategy. Sure everyone wants to recruit the best talent, usually you’re going to toss in some options to keep the person engaged but then what? Our industry is very cyclic. Right now we’re (ok I’m) seeing some interesting stratification of talent happening. The Top 10% (aka the freakishly good) are now able to command above market rates - significantly above market rates. As the market heats up people really do seem to be willing to cherry pick and to pay for that privilege.

Recently I’ve had a couple of opportunities float by. In both cases the compensation for the year outstripped what I was currently making and the potential upside that I as a non-founder of a startup could expect over the life of a startup. Holy crap.

I can tell you that the super-sized packages make for interesting over coffee discussions but it makes trouble for the startups themselves. It also makes trouble for the person themselves because once $200k becomes the new $100k and then $250k, etc… it’s really hard to roll back to last year’s lifestyle.

I’m taking this as a wake-up call personally. Now more then ever companies really need to consider their retention policies. Clearly retention doesn’t just include raw compensation but the market does dictates rates. So take a look at your team, segment your talent and figure out a plan to keep your Top X% happy and engaged before it’s too late.

Thanks to all who commented on my CTO Handbook. Well except for the one from that that Jason guy :-p this post’s title is for you bud.

First to answer the obvious question I’ve been getting “what type are you?” Well, I started out as #1 (technical founder) in two separate startups and transitioned to #2 “Visionary” as I backfilled my team in my last personal startup. Note I define “personal startup” as one where you personally made payroll! I’ve never been chuted-in but I have CTO friends who have had the “pleasure”. My style is probably 70% Visionary and 30% Technical. That doesn’t make me any less of an ass at times but more likely an ass at different times.

Now, there must be something “CTO” in the water; Fred Wilson posted “What to say to a room full of CTOs“. I like a lot of it and I agree that in a small company (< 30 people), the most effective CTOs are ones that can manage dev and drive the technical vision. Several paragraphs jumped out at me because they resonated with me and because they brought back some painful lessons learned.

First this gem:

First and foremost, I see the CTO as a manager. Great managers are hard to find in any line of work. But managing developers is even harder. The better the developer the harder they are to manage. I assume its a bit like managing high maintenance entertainers. The best developers are artists who are often moody, are anarchists who have bursts of creativity and equally long periods of uselessness. They are strong willed people who will fight with their colleagues over anything and everything. The people who have mastered the art of managing these kinds of people are a rare breed and every great technology-based business needs one of them.

Amen brother! But you have to admit, managing developers is never a dull moment. Recently the guys I’m helping out with driving some education on Agile methods here in Waterloo managed to land Scott Ambler. Scott was an awesome presenter and I was in tears from laughter due to his presentation more then once. Note to data management people: if you’ve been booked into a meeting with Scott, I’d find a reason to bail. I’m telling you this as a friend. Non-data management people, you might want to bring some popcorn and a comfy chair to the meeting. Ok I digress again, the reason I bring up Scott is that he had a great point about managing and incenting devs. To illustrate, he used the old herding cats analogy.

Herding cats is tough, if not impossible - if you don’t understand cats. You can send terse memos to your disobedient and non-complying felines but it won’t help a bit. But toss even the tiniest piece of fish in the direction you want your herd of cats to go and you’ll be pleasantly surprised. I think that’s the main reason why the Technical Founder CTO is most effective in early stage companies. They’re pretty much still a cat and they instinctively toss fish around to get the job done. Plus they’ve got the technical chops to be the alpha cat.

Hiring a Player/Manager:

I have found that for young companies a “player/manager” often works best. If you can find someone who is or has been a world class developer who also has the ability and more importantly desire to manage a team of at least ten developers, do it. That person, by virtue of their engineering talent and prowess, will be able to manage a small group effectively. And they can contribute to the development too which at crunch time is incredibly valuable.

Another total truth. I will never, ever, ever hire a development manager who cannot or will not code. Period. At least not at an early stage for precisely the reasons Fred cites above. My best VP Dev experience ever was a guy just like this, though he had prior experience with his own team — Tom Gross kicks ass.
And now the pain…

As companies get bigger, you really need a full time manager. The best ones, like all things in startups, have done it several times before in high growth startups. As Albert said in his post, it’s not usually a great idea to hire a CTO from a super big company for a young growth company. Companies growing from 10 engineers to 50 engineers to 100 engineers over a 2-3 year period are a unique situation and you really need someone who has lived that situation a few times. Again, it’s incredibly hard to find a person like that.

Hells yes. I lived through rapid growth and totally screwed it up. My “cats” were fighting. Code was not happening and we were completely consumed by it. Eventually you figure out what works and what doesn’t . You start to see patterns in your developer types and you figure out what “fish” works and what “fish” stinks.

Hmmmn note to self: “Developer Handbook” is the new black and the next blog post.

My kids are pretty crafty. They’ve instituted a policy to celebrate half birthdays at our house. Before you think they’re really crafty, the rule is only homemade gifts so it isn’t a present grab. It’s also only a half cake so it isn’t a (total) sugar rush grab either.

Tomorrow is my half birthday and I’m turning 38.5. One thing I’ve noticed this year is that I’ve suddenly become way more comfortable with my positions on various issues. Either I’m getting self-actualized, or apathetic towards other people’s impressions of me. Or perhaps just old and cranky.

So, in that spirit, I’m going to start commenting on things about startups and the software biz that have always confounded me. Don’t worry, I can’t possibly be as cranky as Joel. He’s older then me so I’ll need some time. So without further adieu…

Over the years, I’ve been involved in a number of tech companies. Consistently there has been an expectation that the ‘techies’ must understand ‘the business’. In fact, it is often used to dismiss the technical side of the house’s opinion on things - like go-to-market, feature set or RFP responses. Now I’ll admit to being more then a little egalitarian in my mindset, (see I’m comfortable with that) and it has always bothered me that the converse isn’t true. In fact, there have been times where I’ve seen what can only be described as “learned helplessness” by sales and marketing in order to get their way. Sadly, it has been positioned as “not pissing the deal away”. Hmmm, is it pissing the deal away if you can’t possibly deliver what is promised?!?

Now I’m not suggesting that the marketing folks need to know the ins-outs of threading best practices but they should at least understand the basics of software, development, and deployment models. It’s even more critical with CEOs. The captain of a ship NEEDS to understand the working components of their vessel. All of them. People’s lives are at stake (not to mention investor money). So why, oh why, do we see CEOs without a lick of technical skills at the helm? Take a look at the most successful software companies out there (e.g. Oracle, Microsoft, etc…). Almost all of them had a techie, someone who once wrote code, as CEO. Shouldn’t we learn something from this? I know I have.

Yesterday or maybe a couple of days ago (I’m temporally challenged) Dave Winer tweeted:

programmers are supposed to be too virtuous to want to be paid. a bunch of hooey. i don’t think programmers started that rumor!

Amen brother! It was weird to read that from Dave, it was somewhat unrelated to the rest of his Twitter stream. Even weirder is that over the course of the days (hey I already said I was temporally challenged) several people brought up the issue of the virtuous startup. You know the old: do good things and the money will follow. Hmmn maybe Dave Winer has one those “world consciousness machines“; he does have an early iPhone.

Well I’m here to tell ya it ain’t the case. If you’re building a startup and you’re not sweating the revenue model and just “doing good stuff” you don’t have a business — you have a hobby and probably an expensive one at that. Trust me I’ve had a hobby.

Revenue isn’t the devil. Revenue lets you do good stuff. Revenue lets you hire “good” people, develop even more “good” products, hire more “good” people (if you need them) and most importantly continue to make your customers happy and the world a better place.

If someone tries to tell you something different, ask them why they hate you.