Author Archives: Sean

Tell Your Own Story

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One of the most effective ways to explain book-97709_640something is to use a story. Humans are story telling creatures, we consume stories (both real and fiction) in every part of our lives for both work and entertainment.

When people try to understand your new company, they will use stories. The story might be as simple as “they are horrible” or as detailed as “let me give you an example of how they helped me…” or as soaring as “they are changing the world, let me tell you how…”. The story may include metaphors (e.g. “they are Google for Sheep Herding”) or use personal anecdotes. Stories come in all shapes and sizes.

If you are very lucky, you will be the one telling telling your story and explaining it in a way that you think captures the entirety of your vision. Unfortunately, most of the time your story will be told by someone else. Hence, it’s important to craft a positive story that others will tell on your behalf.

Storytellers

Everyone who interacts with your company will have a story to tell. That includes customers who had a great experience and investors who believe in your vision. It also includes customers that demanded their money back and investors that decided to invest in your competitors. Depending on their experience with your company, the story someone tells might be great or very, very bad.

The best way to combat this uncertainty is to realize that everyone you touch is a storyteller, so you should give them every reasons to tell a great story about you. While you can’t control what they say, you can make sure their experience with your company is as positive as possible. Specifically:

  • Treat all potential customers as well. Regardless of whether they become customers, you want them to know that your company cares about them and is focused on delivering quality. Even if they choose to work with another provider, they should walk away feeling good about having contacted your company. You should also be sure that they remember your differentiation very well, so if someone asks them they will relay that as part of their story.
  • Sell hard to everyone you interview. Anyone who interviews for a position at your company should walk out the door thinking your company is something special, regardless if you plan to hire them or not. This means you need to spend time during the interview selling yourself (See Recruiting is a Form of Sales) even if the candidate is weak. You never know who they might talk to about their interview.
  • Build relationships with all investors. Even if an investor passes on your company, you should make sure they know how passionate you are and why you believe it will succeed. You may end up raising more money in the future and these investors might realize their mistake and come back again.

Customers, candidates and investors all talk to each other and you cannot know who they will talk to about your company. Treating everyone extremely well will put you in the best position to ensure their stories as as positive as possible.

Providing a Narrative

It’s not enough to treat people well, you need to give them an easy story to remember. The story of your company encompasses your vision, your differentiation (See The Only Thing That Matters ) and your people in a narrative that ties them all together. Often, the best way to do this is to talk about how your market is changing and how your company is at the center of that change. A successful narrative describes your company as more than a company – it describes it as a movement.

Crafting that narrative is something that is a critical responsibility for you as a founder. But once you have it, what do you do with it? It’s not enough to blog/tweet/post about your company narrative, as no one will read it. You need to broadcast it far and wide so people will see it multiple times and become familiar with it. Some examples:

  • Public Speaking. When you speak in public about your market, you are telling your story. While you might not talk about your company specifically, the tone and content of what you say reflects on your company. If your knowledge and passion come through clearly, people will want to learn more about what you do.
  • Public Relations. PR has a bad name since many companies use it for the wrong reasons (customer acquisition, etc.). One great use of PR is to start telling your story to the world. Your goal is not customer acquisition, but customer familiarity, which is achieved by talking about the movement that is your company.
  • Social Media. While simply posting to social media is not enough, engaging in conversations can be very important. People will watch how you behave, who you talk to and how you do it. That will reinforce your story and encourage them to learn more.

Conveying your narrative in the way I describe here is hard, as it requires you to tell your story through actions instead of directly through advertisements. However, you will find that people would much rather hear you talk about a topic that interests them instead of talking about yourself. Use that to your advantage.

Stories Evolve

Your story will not be a book you print and store on a shelf, it will be constantly changing. Embrace that and allow your story to grow, while being sure that it stays true to your vision. If others begin telling your story in a slightly different way, that is a good sign that they believe your story and are building on it themselves.

If you are successful, you may eventually have someone tell you the story of your company without realizing it is your story. That is the most fulfilling feeling a founder can have, since it means you have succeeded in spreading the story you are building.

Image made available on Pixabay to the public domain via Creative Commons.

Unbroken Markets

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Many startup pitches start off with the 512px-Broken_glasssimple claim that something is broken. “Email is broken.” “Messaging is broken.” “Advertising is broken.” If you hear too many pitches, you might start wondering how anything at all gets done since everything around us is so broken.

It’s a common refrain which you expect from aggressive founders who are eager to change the world. When your vision of the future is powerful and truly innovative, the current state of the world can seem very broken in comparison. However, such powerful vision and dismissal of the status quo overlooks the fact that the status quo exists for a reason.

If something is broken, why are people using it everday?

Activation Energy

In chemistry, changes come through chemical reactions. Reactions don’t just happen on their own, they require some minimum amount of energy to get started. That energy is known as the activation energy of the reaction.

Innovations are similar to chemical reactions. Where chemical reactions transform materials, innovations transform markets. What, then, is the activation energy of innovation? In business, activation energy takes the form of the amount of effort you need to displace existing tools and services with new innovations. That effort is a combination of how radical the innovation is and how much you need to invest to get that innovation adopted in your market.

Depending on the characteristics of a market the activation energy required for innovation can differ greatly. For example, a highly mature and slow moving market with large, entrenched competition such as the taxi industry requires a massive innovation and investment in the form of Uber/Lyft. A young but fast moving market like online messaging requires less innovation and investment in the form of WhatsApp/Snapchat to transform the market.

Your activation energy is not only overcoming the existing market competitors, but the ingrained habits of your customers. Customers who have a regular habit of using a product, even if that product is bad, will resist changing out of sheer momentum. In these cases you need even more activation energy to transform the market.

Unbroken Markets

So, how does chemistry help you start a company? By helping us make good assumptions.

It is dangerous to assume that the activation energy for your market is low, but that is exactly what you are doing when you assert it is “broken.” Instead, assume your market is stable and healthy, so that your innovation needs to be radical to succeed. Also assume that the effort to bring that innovation to market will be significant as well, so you will plan accordingly. Any other assumption will allow you to become complacent.

Your market may, in fact, be broken. Assuming otherwise will ensure that you do not underestimate your challenges.

Image By Jef Poskanzer (originally posted to Flickr as smash) [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)%5D, via Wikimedia Commons 

The Founder Spectrum

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Understanding your own weakness is very difficult. Most people have a positive self image, and company founders tend to have an extremely positive self image. That self confidence is what allows us to persevere when everyone else is saying stop, and can carry you through the worst parts of The Struggle. However, it also prevents you from objectively evaluating your own weakness.

Many start up failures can be traced back to founder weaknesses that are either exacerbated under the heavy stress of starting a company or are never compensated for by the rest of the team. No one is perfect, and understanding your weaknesses will allow you to compensate for them before they become risks to your business.

One way to make sure you are objectively evaluating yourself is to find entrepreneurs similar to you and examine their weaknesses. While all founders are created differently, you can group founders together at a very high level. I call these groupings the Founder Spectrum and there are many.  One of my favorite, and most useful, founder spectrums is what I like to call the Scientist, the Expert and the Outsider.

The Scientist

Many of the exciting start up companies you read about in the news are started by university researchers who have been developing new technologies for many years. This is not a coincidence, since pushing the boundaries of what is possible can take a long time and require deep study. These founders have created new technology that was never possible before, and are true innovators in their field. Their companies use this technology as their core asset to build a new business and compete with existing companies. An example Scientist is Tillman Gerngross (GlycoFi, Adimab) who has repeatedly pushed the boundaries of protein synthesis.

Strengths

  • Through their technology, Scientists have a head start on the rest of the industry. It may take many years for competitors to match them.
  • Through their deep expertise, they can maintain that head start by continuing to improve the technology.
  • If they are part of a university, they can spend many years developing the technology without worrying about burn rates and capital requirements.

Weaknesses

  • If the technology fails for any reason, the company will fail. While their expertise is deep, it is not broad and everything is bet on the specific technology.
  • If the technology is too new, it may take a long time to convince customers to buy it. Something truly innovative will be strange to customers who might not have any idea how to value how much it is worth.

How to compensate

  • Test the market value and potential of the technology as much as possible before founding your company. Make sure that companies are willing to pay for the products enabled by the technology starting on day one.

The Expert

Experts are people who have worked in a given industry long enough to understand all of the nuances and details that make it run. While they might lack the deep technical expertise of the Scientist, they make up for it by understanding the business deeply. That understanding brings with it the ability to see opportunities that are not available from the outside, while maintaining a wide perspective that isn’t limited to a single technology. Examples of experts include Lew Cirne (Wily Technologies, New Relic) and Craig Walker (Dialpad, Grand Central, Uber Conference).

Strengths

  • Deep understanding of the industry allows Expers to see opportunities that no one else can see.
  • Able to adjust within their market as things change, staying flexible. In many cases they see changes coming before others.

Weaknesses

  • Can have difficulty getting out of the rut of industry thinking and see things differently than everyone else. This becomes more true the longer they spend in the industry.
  • Limited to their industry of choice, even if that industry is challenged.

How to compensate

  • Change your environment as much as possible (office, people, places) to encourage new ways of thinking. Bring in advisors from outside the industry to challenge your thinking and open up new avenues of exploration.

The Outsider

Sometimes, it takes someone from outside of an industry to see opportunities and create new innovations.  While an outsider might lack the deep expertise of the Scientist or the Expert, they are also free of any preconceived notions of what is possible. That freedom can allow them to approach problems in novel ways that change the way the business works. Examples of outsiders who have changed industries where they had no previous experience include Elon Musk (Tesla, SpaceX) and Palmer Luckey (Oculus Rift).

Strengths:

  • Fresh perspective on the industry which allows them to find new solutions to existing problems.
  • Lacks any preconceived notions of what is possible or what might have been tried before.

Weaknesses: 

  • Prone to making a large number of mistakes as they learn the nuances of the industry.
  • At the start they have a disadvantage against existing companies due to their lack of relationships, experience and reputation in the industry.

How to compensate

  • Constant customer development and market validation of ideas while developing the first product. The more customer feedback you get, the less likely you will veer off in directions that prove fruitless.

The best founding teams (See 5 Rules for Choosing a Co-Founder) are made up of many different types of people. In fact, some of the best founding teams have a Scientist, an Expert and an Outsider. Having such a diverse team compensates for the weaknesses of any given member while building up a wider array of strengths.

If you read those descriptions and found one that matches you, then you are very self-aware and ahead of the game. If not, don’t worry. Remember, this is a spectrum so there are many people that fall in between these categories.

This is one way to think about the spectrum of founders, but there are many more. The most important thing is to understand your strengths and weaknesses and how they compare to those of your competitors. If you do, you can recruit the kinds of co-founders that will make you stronger.

Why You Don’t Want to Be Acquired

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All founders dream of building everlasting public companies that will live on long after they are gone. However, after a few years of struggling and working for free the idea of being acquired for a nice payday can seem very attractive. In fact, if you read TechCrunch too much, you might believe that an easy way to get rich is to start a company and sell it for $100M in two years.

While getting acquired is a great exit for any company, planning for it is a very bad idea. Even worse, starting a company with the goal of being acquired will set you up for failure before you even begin. To understand why, let’s think about how potential acquiring companies look at acquisition targets.

Goals for Acquisitions

Large companies acquire smaller companies to gain assets they don’t have access to any cheaper way. Acquisitions, even small ones, are expensive ways to gain assets so acquirers are highly motivated by what is necessary to improve their own business.

While you might think about your company as a living, growing organism with many dimensions and nuances, acquiring companies will look at it like a butcher looks at a cow. Your company is made up of one or more assets and those are what they consider acquiring. Those assets may include:

  • People. All of the employees, including the founders, and the expertise they have developed working at your company. If everyone works together extremely well, that teamwork chemistry can also be considered an asset by acquirers looking for productive teams.
  • Product. The product(s) you have built, whether or not they have been released to customers yet or not.
  • Technology. Any unique algorithms, mathematical models or processes you have developed even if they aren’t patented.
  • Customers. Everyone using your products, whether or not they are paying you for them or not. In some cases, you may only have one customer but that customer is a very large customer who pays you a lot of money over a long term.
  • Profit. If your business is profitable, that positive cash flow is a huge asset since it produces a return for whoever owns the business. The same can be true of having a lot of liquid assets as the result of being profitable.

Not all of the assets are created equal. Below is an illustrative example of the comparative values of assets based on the acquisitions I have been involved with (both as the acquirer and the acquired companies).

Example of how corporate assets compare in terms of value to acquirer. Technology is 10 times more valuable than people or products, while customers are 100 times more valuable. Profit can be infinitely more valuable, depending on how much of it you have. Note that these are just illustrative.

Why are assets valued so differently? For the simple reason that the value of your assets are entirely dependent on how they apply to the acquirer’s business. For example, the value an acquirer assigns to your technology is not the value they would get from selling it themselves on the open market, but how much value it will add to their business. It is not enough that your technology is new and ground breaking, it needs to help the acquiring company make money.

It’s not a coincidence that the assets that have the highest value are developed later in the life of a company (customers, profit, etc.). Those assets are the hardest to build and therefor will carry the most value. That is one of the many reasons that companies become more valuable the longer they exist and why it’s so rare to see a big acquisition of a young company.

The Exception Proves the Rule

It is almost impossible to make generalizations about acquisitions because each acquisition depends so much on the companies involved. One acquirer may value your company at $5M while another values it at $20M, because the second company believes they can use your assets to increase their own profits by $40M. So, remember that the previous example is only illustrative.

But that is exactly the reason you should never focus on being acquired! You have no way to control how potential acquirers will value the assets you are creating. Successful acquisitions require the right acquirer to value your company at the right price, at a point where you would consider selling. That combination of factors is rare and definitely not something you can plan.

So what does that mean? The best strategy, in fact your only strategy, is to focus on building a successful and highly profitable business. As long as you do that, you will control your own destiny and decide if and when you get acquired on terms you decide.

Or, maybe you’ll go public! Then you can buy some companies yourself.

Fundraising Fever

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In the past few months, almost every discussion I have with founders who recently started their companies start the same way.

“We are really excited to have you help us, do you know of any investors that might want to invest?”

These are companies that were literally just started, whose product does not yet work and who have no customers. They haven’t even figured out what their business might look like, but they want to immediately jump to raising $1M using a convertible note with a $5M cap (yes, those terms are so common I’m not even making them up).

Why is everyone rushing to raise money? Most of the blame falls to the frothy funding market right now and how easy it is to raise seed funding for new ventures. If you look around and see everyone else doing it, why shouldn’t you? It would be nice to have the money to pay a small salary and remove some of the financial stress that goes along with being a founder. Besides, the market might crash at any time and you should act while the market is hot.

It’s tempting, but dangerous.

Fundraising too early can be very risky for your new company. It will distract you from building your product, recruiting customers and learning about how your business will change from your initial vision (and it will change). In fact, you might not end know what kind of financing is right for your business since it is too early to tell.

Let us look at the difference between two example companies, Company A and Company B, in their first six months of existence. Company A decides to focus on product and customers, delaying fundraising until after their Beta. Company B decides to raise money right away to remove some of the financial stress from the founders. We can give both companies the benefit of the doubt and assume they did sufficient customer development ahead of time so they are working on business concepts that have potential.

Below is how the first six months play out for both companies:

First Six Months

 

As you can see, after the first six months Company A is already in their Beta and has started fundraising, while Company B is still working on their product because they took three months out for fundraising. This is being conservative, since it’s quite likely that fundraising takes Company B more than 3 months.

But wait! Why didn’t Company B just continue their product development while fundraising? Because there just isn’t enough time in the day. Raising funding is incredibly time intensive, requiring meetings and discussions with many investors, only a few of whom will invest in your company. Assuming both companies had co-founders, there are 2 people on the team and at least 1.5 of them would be working on raising money.

Not only that, but when Company A is fundraising they can speak to investors with confidence about their product and business since they have tested it in the market with customers in their Beta. Company B was pitching investors on an idea that may or may not need to change. This means that Company A will likely be able to raise more money on more favorable terms than Company B.

Well, so what? Company B raised money, right? They have plenty of time to figure it out.

Maybe and maybe not. Again, they have yet to understand what their business might look like as they learn from the market. It is possible that the market completely rejects their business model, or perhaps their product is significantly harder to build than they thought. If they cannot get to market with the financing they raised it is very unlikely they will be able to raise more.

Just in case you don’t believe me, there are countless cases of companies that raised money too early and ended up failing because of it. Color burned through $41M in premature financing before failing. Clinkle is in the process of failing after raising $30M too early.

I know it’s hard to work for free and watch your bank account dwindle. I know that it’s hard not being able to hire a few more people to help build your business and make it move faster. I know that you worry about the market turning and financing getting harder to raise. These are things you will worry about for most of the life of your company. Paying a long term price to address them in the short term is only hurting yourself in the long term.

Raising your first capital is an important event in the history of any company. Be sure it is the right time for yours.

 

The Art of Being Unreasonable

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Starting a business from nothing requires you to Impossible_cube_illusion_angle.svgconstantly overcome unreasonable problems. You have no resources, no time and an infinite list of tasks to complete. In pursuing your goals, you are asking both yourself and your team to do unreasonable things.

However, there is a fine line between being unreasonable and being unrealistic. If you lose sight of that line, you will fail.

Learned Helplessness vs Self Confidence

One of the most depressing psychological principles that you will ever encounter is called learned helplessness. It is a mental state where the subject is trapped and subjected to adverse stimuli (pain, abuse) from which they cannot escape. Eventually, the subject learns that there is no escape from the adverse stimuli and, even when given the chance to escape, fails to even try. They have learned to be helpless.

While I am sure you will never abuse your team, subjecting them to unrealistic goals which they can never achieve can have a similar effect. Eventually, after being subjected continuously to nothing but unattainable goals, people begin to disassociate from such goals and will fail to treat them seriously. People will give up before they even start.

On the other hand, there is a clear tie between motivation and setting ambitious goals. Self efficacy is a psychological term for the confidence a person has in their ability to achieve a goal. Research has shown that optimal performance is reached when a person’s self efficacy is slightly above their actual ability, meaning that they are in a little over their heads.

So, how do you set goals that are just beyond reach but not so far as to make the goal meaningless?

Unreasonable vs. Unrealistic

As with anything in your new company, finding the balance between aggressive goals (unreasonable) and impossible goals (unrealistic) will require testing. In the early days of decision making, you will set some unrealistic goals which backfire and some unreasonable goals which will drive your team to do amazing things. The more goals you set, the easier it will be to tell the difference.

It will be hard to tell the difference if you lack faith in your team, as you will question whether your goals are unrealistic or if your team is not pushing themselves hard enough. This is yet another reason why you should never compromise on the quality of your team, especially in the early days. You should never waste time wondering if your team is working as hard as possible.

Don’t fear setting unrealistic goals, it is part of building a company, but beware setting too many of them. Instead, you should strive to be unreasonable.

Image made available via Creative Commons by Wikipedia user 4C. 

Closing the Loop

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Today, I am currently an advisor/mentor/investor in 10 early stage start up companies, 3 accelerators and 1 venture fund. I pride myself on spending a lot of time with each company and getting as involved as possible, in many cases having projects assigned to me. Regardless, I am regularly shocked by a simple fact:

Only one of these companies sends me a regular update.

I know I shouldn’t be shocked, as the early days of building a company are hectic and busy so updating advisors and investors is never a high priority. There is also a natural fear of bad news, so if things are not going extremely well it is easier to say nothing than admit things are hard.

Unfortunately, the side effect of a lack of updates is that I’m not as engaged as I could be. As a founder you live through a hundred battles everyday, but if I never see them then I can’t understand. For all the time I spend with a company, not knowing about the struggles, the victories and the defeats means that when I do help it is with only a limited perspective. Even worse, I have no idea if the advice that I provided proved useful as I rarely get told the end results of any given decision.

But it’s not the fault of these companies. Almost all entrepreneurs are really bad at closing the loop.

Closing the Loop

One of the fundamental components of Corkscrew_(Cedar_Point)_01continuous improvement is feedback. If you don’t know how you are doing today, you can’t get better tomorrow. Modern engineering processes such as Scrum or Kanban encompass feedback as a core part of the process through the use of retrospectives. This is why the engineering teams at many startups are the best run teams, since they have a clear and well understood process to follow. So what of the rest of the company?

The best way to make sure your company is focused on continuous improvement is to make sure you always close the loop. For every decision that’s made, for every goal that is set you check back on it in the future to see whether it worked. Did that strategic partnership pay off? Did you meet your goal of 10% weekly growth? Make it part of your company culture to always review decisions and goals in the future, and learn from them.

All companies make decisions and set goals, but surprisingly few will review them on a regular basis. Many start up board meetings involve a review of key metrics, but not a review of key decisions and how they worked out. If you don’t review the decisions you made and the results of those decisions, what do the key metrics matter?

It can be scary to review past decisions since many of them will not work out well. However, fear of bad news will slowly paralyze your decision making because it will evolve into fear of failure. If you develop a habit of sharing news, both good and bad, you will feel a weight lifted from your shoulders – the weight of that fear.

Communication as a Core Competency

Making sure your team closes the loop is easy if you’ve set communication as a core competency of your team. If you have done that, then you already have plenty of tools and structures for communicating, you just have to make sure you communicate retrospectively.

Some examples of how you can close the loop:

  • Regular Updates. Send regular updates to your team, investors and advisors on your progress that review the results of key decisions (Leo has a great template for these kinds of updates that is short and easy). These serve not only to update the team around you but force you to put in writing what has worked and not worked on a regular basis.
  • OKR Reviews. Many companies use OKRs, but not many have regular public OKR reviews. Such a public review of individual OKRs should not serve as a punishment or a reward, but instead a chance for everyone to learn from what worked and what did not.
  • Waterfall Financials. When projecting your company’s financials, the only guarantee is that those projections will change (a lot). Keeping track of changes in your projections will help you understand the flaws in your forecasting models and waterfall financial reporting is a great way to do that.

The best way to make sure you are closing the loop is to make it part of your corporate culture. Any decision that gets made comes with a report on how it faired later. Remember, the goal of closing the loop is not to punish failure but to learn from your mistakes.

We all make plenty of mistakes, why not turn them into assets?

Image made available via Creative Commons by Coasterman1234.

The Snowball Effect

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I spend a lot of my time advising 113026147_9ce84baa38_zand mentoring entrepreneurs, including coaching at three awesome accelerators. Since almost all the companies I work with are at the pre-Seed stage (translation: very very early), I end up hearing the same questions quite a lot. They are, in order of frequency:

  1. How do I convince my co-founder to quit their job and join full time?
  2. How do I close my first customer?
  3. How do I raise my first seed financing?

These are very fundamental questions for building your business, so it’s no surprise they come up so often. The good news is that the first step towards answering any of them is exactly the same: build up your snowball effect.

The Fear of Being First

If you turn around each of those questions, you realize that the person on the other end represents a first for your company. You are trying to convince the first employee, the first customer or the first investor to believe in you. Being first, while exciting, brings with it the most risk since you clearly have not proven your business if they are the first. Most people have a very justifiable fear of being first which makes it hard to convince them to take that first step.

However, you need to have a first because if you don’t then you will never have a second, a third and so on. So how do you overcome that fear?

The Power of Momentum

One of the best ways to overcome the fear of being first is to use an even more powerful force: the fear of missing out. The more momentum you build up for your company and the more progress you make before asking someone to be the first, the more likely that they won’t want to miss the opportunity. You want to make your company move as far as you can as fast as you can to make it an attractive bandwagon for people to jump on.

Having a brilliant idea is not enough. If you have a brilliant idea and nothing else, nothing separates you from the hordes of other dreamers whose dreams will never see reality. An idea has little value itself, you need to turn it into reality or at least as real as you can make it.

So, how do you get that momentum going in the early days? You don’t need to build a finished product (although that works well), there are many ways to build momentum without a product:

  • Invest In Yourself. You should be investing in your own company, using your own money. The more you invest, the more you will show commitment to your vision and building your business. You cannot ask others to invest or believe in you if you cannot demonstrate that you believe in yourself. It only costs a few hundred dollars to form a legal corporation – how much more than that do you believe in yourself?
  • Prove Demand. One of the most important things you can do in the early days of your company is prove that your idea has customer demand. Building a product can come later, but you can start by talking to prospective customers, industry experts and investors about a product and how much demand exists. The more you can quantify and prove there is demand, the more likely you are to convince others that your idea has value. Along the way, you’ve also lined up a list of prospective customers that make your company seem a little less risky for employees and investors.
  • Sell Your Friends. There is no rule that says your first customer(s) need to be strangers that you cold call. In fact, almost all successful companies start out by selling to friendly customers whom they knew well before they got started. YCombinator, one of the best accelerators, goes to great lengths to get their companies to become customers of each other to overcome the first customer problem. This strategy won’t scale, but it will get you started.
  • Spread Your Message. While your idea might not have value, communicating about the problem you are solving and building a voice in the community does. Set up a blog, join Twitter and start a mailing list to talk about the industry, market or problem. The more you participate in the discussion the more you can start to build your company’s brand even before you get started.

Most of all, be creative. I know non-technical founders that hired people to stand in front of conferences wearing sandwich boards to raise awareness of their company which had no product. I’ve seen founders hire armies of people on oDesk to gather hard to find data on the web to create valuable industry blogs. Even Mattermark, a great market data start up, got started from a blog post.

Accelerators are in the business of helping you build this momentum, at the cost of a small amount of equity. Many accelerators require that you have a working prototype, but if you do have a prototype they can give you a big boost of momentum and help you get past a lot of these early hurdles.

The Snowball Effect

So, what is the snowball effect? The great thing about building up your momentum is that it becomes a virtuous cycle if you can maintain it. You are more likely to raise your first investment if you can close your first employee, which in turn makes it more likely to close that first customer. Then it becomes easier to hire that second employee, close the second customer and so on. Eventually, making progress on all fronts makes it easier to make more progress on all fronts.

That is the snowball effect. Just like a snowball rolling down a hill, the more momentum you have the larger you can get and the more momentum you will get.

All you need to do is start the ball rolling.

Image made available via Creative Commons by redjar.

Speaking, Fast and Slow

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Avoid the trap of thinking everyone sees the world the same way you do.

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I belong to a great science fiction writer’s meetup here in the bay area and we have a problem. If you’ve never participated in such a group, the format is simple: each month a few members submit pieces they have written and everyone else in the group reads them. Then, the group meets to provide feedback and discussion for the author.

As with any group of people, there is a wide variety of personality types in this group. There are introverts, extraverts and everything in between. Finding a format that allows everyone to participate in the meetings each month is very hard. If you give every person a turn to talk by going around in a circle, everyone participates equally but there is no discussion and the meeting is very slow. If you have an open discussion, the extraverts dominate the discussion and the introverts are alienated, often choosing not to participate. How can you get everyone to participate effectively? That is the problem.

By the way, this is a problem you have at your company as well.

Personality and Productivity

One of the most popular personality type classification is called the Myers-Briggs Type Classification (also known as the Myers-Briggs Type Indicator or MBTI). While it is hard to quantify human personalities, the Myers-Briggs system uses four different characteristics, each of which have two values. This creates sixteen different possible personality types to which a given person could belong.

Of those sixteen types, none comprises more than 14% of the US population. That means that any group of people larger than one is likely to contain at least two different personality types. Your company of 100? You probably have most of the sixteen represented.

This is good news. Teams comprised of people with different personality types are more effective, assuming they complement each other. Homogenous teams tend towards group think and difficulty defining roles, while diverse teams can provide multiple points of view and more easily fill complementary roles. In short, you want to have a lot of different kinds of people on your team to succeed.

Even people with neurological disabilities, such as autism, which may prohibit normal social interactions can be critical members of successful teams. For example, many autistic people excel at detail oriented repetitive tasks that others might find boring, such as data entry or quality assurance testing, and there are consulting companies set up that allow you to hire autistic people for such tasks.

Designing Teams

Since having diverse personality types makes your teams more effective, you need to make sure that your company is set up to recruit and empower a diverse group of people. Some simple ways to get started:

  • Watch for Personality Bias in Recruiting. It is often much easier to get along with someone of the same personality type, which is why you are so similar to your friends. When recruiting, this can cause you to favor people who have a similar personality type even if someone else might be a better fit. Make sure your entire interview team keeps an open mind and considers all the factors, not just personal affinity for the candidate.
  • Mix Up Your Teams. Just as you will gravitate towards similar personalities when recruiting, social groups of similar personalities will form at your company. Be careful not to let these social groups become teams or else your company will divide itself into personality driven teams. On a regular basis, change the composition of your teams so everyone has a chance to work with a different group of people and watch for productivity gains. It should be clear when you have a good team that clicks together, even if they are very different.
  • Have Many Ways to Communicate. Not all people do well in group discussions and not everyone will speak up when they have a problem. Do not rely on town hall meetings and group message boards to be the voice of all your employees. Make sure your leads speak to their people one-on-one and ask how they are doing instead of waiting for them to complain to you. Make sure employees have ways to express their ideas that does not require them to overcome a fear of public speaking. Don’t just tell everyone that you have an open door policy and wait for them to come to you, you should go to them.
  • Recognize Great People, In Whatever Form They Take. It’s always easy to recognize the star salesperson that everyone loves, but what about the quiet engineer that works long hours and does amazing work while keeping to herself?  Make sure your company is set up to recognize contributions of all kinds so that everyone feels involved and appreciated. Remember that not everyone will be appreciated in the same way, either, so buying wine for someone who doesn’t drink alcohol might not go over well.

The most important thing you can do is to avoid the trap of thinking that the other people in your company see the world the same way you do. It is easy to use yourself as the prototype for your employees when you make decisions about the work environment, processes and communication but that will often lead you astray. Always ask instead of assuming.

I take all of this one step further and seek out people who have very different personality types to mine. I find that such people keep me out of my comfort zone and constantly challenge my assumptions, while often succeeding in changing my mind about important matters. I would rather work with someone where I need to put effort into our professional relationship but I feel that I am at my best, than someone where working together comes easily but I get lazy.

So, What About the Writing Group?

I honestly don’t know what the solution is for our writing group, and I fear that it will inevitably disband as most volunteer and unstructured groups do. However, as testament to the positive impact of diverse personality types, we are tackling the problem head on by trying different kinds of formats to see if we can find one that works. In the meantime, the extraverts try to be less extraverted and the introverts try to be less introverted and we all learn something along the way.

The title of this post is in honor of the great book Thinking, Fast and Slow by Daniel Kahneman, one of the founders of behavioral economics. The image was dedicated to the public domain by Mamoru Masumoto.

Going the Distance

15 Replies

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You have two hours of peak productivity every day. How do you spend them?

I just returned from 3 weeks without internet or mobile service, which you might have noticed by the lack of updates. I find it harder and harder to turn off the urgent cacophony of the internet so I sometimes take extreme measures to quiet my mind and recenter on what is important.

There was a time when I would never have considered doing that. In the early days of Flurry I worked 12 hours a day, 7 days a week (and a few all nighters). Even when family was visiting me from out of town, I worked while they toured the city. I worked as hard as I possibly could because I was gripped by the fear of failure, by the urgency of seeing our money dwindle and dealing with a myriad of problems I didn’t know how to solve.

In short, I was a typical first time entrepreneur.

Ironically, during this period of hyper-work I actually moved more slowly than I ever had before and the company almost failed because of it.

Peak Productivity

One of the things that drives us to want to work harder when under stress is the assumption that our productivity per hour is a constant. If you make that assumption, then you believe working more hours equals more productivity. Unfortunately, that assumption is false. Your productivity is a function of many things including your natural body rhythms, how often you are interrupted while working, what you are doing and how long you have been working (fatigue). Improving your productivity requires managing many of these factors before you even consider working more hours.

There is evidence that no matter what you do, you only have two hours of peak performance every day. Two hours. It proves your productivity is a scarce resource and you have even less time than you thought to get things done.

Designing For Productivity

While all of this might seem intimidating, it provides a clarity of focus that you need while building your business. Your productivity suffers from limitations, and just like every other problem you face you need to manage around it. Some common techniques for designing your day for maximum productivity:

  • Avoid interruptions through scheduling. Schedule time for email, social media and messaging instead of constantly suffering interruptions during the day. Instead of keeping a todo list, schedule time for your tasks the same way you schedule time for meetings.
  • Utilize your peak performance. Schedule complex or high priority projects for a few hours in the morning, or whenever you are at your peak. Schedule easier or routine work for times when you are tired such as after lunch or the end of the day.
  • Take breaks. Taking breaks, even if only 10 minutes, can greatly increase your productivity and problem solving skills. If possible, change your environment by getting out of the office. If possible, have meetings while walking around the neighborhood.
  • Balance your life. The more balanced your life, the more effectively you can deal with stress at work. Exercise, friends and family are well proven at helping you decompress and avoid burnout.  

There are tools to help make managing your productivity easier based on recent scientific research, such as Timeful, but none of them will be useful unless you make managing your own productivity a priority. Experiment with your time and see what works the best for you.

The Long Run

In those early days of Flurry, I was working so hard that I lost perspective on what we were doing. Working all of those hours greatly impaired my judgement and I lost the ability to think strategically about where the business was headed. Luckily, fate intervened and saved us from ourselves but it could easily have been the end of the company. I was given a chance to learn from the experience and better manage my productivity for many years to come.

Speaking of many years… It can take, on average, 7-10 years for your company to go public (although it varies wildly). That means that if you are very successful, and everything goes according to plan, you will be working on your business for a very very long time. In that long term, it is much more important not to burn out than to work a few extra hours to try and push something out. Focusing on maintaining your productivity is a great way to keep running for the entire race.

Now, stop reading this blog and get back to work.

Image made available via Creative Commons by Jon Rawlinson.