From The Archives: Turning Your Team

I’m on a short vacation in Utah for the next few days and so I’m going to pull an oldie but goodie out of the archives. I’ve been seeing a lot of “turning the team” in our portfolio as of late so I thought it would be good to give this a re-run.


A serial entrepreneur I know tells me “you will turn your team three times on the way from startup to a business of scale.” What he means is that the initial team will depart, replaced by another team, which in turn will be replaced by yet another team.

I have been closely involved with over 150 startups in my career and since roughly 1/3 of the startups we back get to real scale, that means I’ve seen the “startup to scale movie” over fifty times in my career and I can tell you this – my friend is right.

The people you need at your side when you are just getting started are generally not the people you will need at your side when you have five hundred or a thousand employees. Your technical co-founder who built much of your first product is not likely to be your VP Engineering when you have a couple hundred engineers. Your first salesperson who brings in your first customer is not likely to be your VP Sales. And your first community person is not likely to be your VP Marketing.

Likewise, the first VP Engineering who figured out how to manage the unwieldy team left by your technical co-founder is not likely your VP Engineering when you have five hundred engineers. Your first VP Sales who built your first sales team is not likely the person who can manage a couple hundred million dollar quota. Companies scale and the team needs to scale with it. That often means turning the team.

The “turning your team” thing probably makes sense to most people. But executing it is where things get tricky and hard. How are you going to push out the person who built the first product almost all by themselves? How are you going to push out the person who brought in the first customer? How are you going to tell the person who managed your first user community so deftly that their services are no longer needed by your company?

And when do you need to do this and in what order? It’s not like you tell your entire senior team to leave on the same day. So the execution of all of this is hard and getting the timing right is harder.

This is where serial entrepreneurs have a real leg up on first time entrepreneurs. They have seen the movie too and they played the starring role. So they know what the next scene is before it even starts. They know the tell tale signs of the company scaling faster than their team. And so they move more quickly to move the early leaders out and new leaders in. One of the signature faults of a first time founder is they are too loyal to their founding team and stick too long with them.

If it is any consolation, the founding team makes most of the money when a company becomes successful. That technical co-founder who built the first product will likely end up with tens of millions of dollars, if not a lot more, if a business they helped start gets to five hundred or a thousand people. The VP Engineering of a five hundred person company will not likely have an equity package that is worth anywhere near that much.

So I generally advise entrepreneurs to be open and honest about all of this. Tell your early team that they may not make it all the way to the finish line but they will be handsomely compensated with equity and if you are successful, they will be too. And when it is time for them to go, think about how much they brought to the company and consider vesting some or all of their unvested stock on the way out. Also think about compensating them to stick around during the transition. And always make sure they leave the company with their head high feeling like the hero that they are.

Here’s the thing. Turning a team is not the same as firing someone for weak performance. You are firing someone for doing their job too well. They killed it and in the process got your company off to a great start and growing to a scale that they themselves aren’t a great fit for. They may not be right for the job at hand, but they are a big part of the reason that the company is successful. That’s the narrative that you need to have in your mind when you turn your team.

All of this is very hard, particularly if you are doing it for the first time. So get some mentors, advisors, and board members who have lived through this before. And listen to them about this. You may not want to listen to them too much about product and market stuff. Maybe you understand that better than they do. But when it comes to scaling a management team, those who have had to do it before will generally be right about the issues you are facing with your team. So their advice and counsel is worth a lot and you should pay close attention to it.

Consumer Centric Healthcare

As we think about how to modify the ACA (aka Obamacare) into something different (aka Trumpcare) I would encourage everyone involved to think about one central tenet – put the person/consumer/patient at the center of the system, not the employer, not the insurer, and not the doctor.

I have written a few times about consumer centric healthcare here at AVC. I believe that patients should and will increasingly take control of their health care and that will be a good thing for costs and outcomes.

Our healthcare investment strategy at USV is largely based on this premise. My partner Andy who has done a lot of the critical thinking that has informed our investments in this sector, wrote this post on his personal blog six months ago explaining how we think about this sector.

Technology will have a lot to do with this. If the regulators will allow it. There are laws on the books in many states (NY State is among the worst) stopping patients from going around doctors and getting diagnostic tests, radiology exams, and, can you believe it, eye exams, using technology instead of humans. We must change those laws and I am involved in efforts to do just that. I would encourage others to engage on this issue. It’s important.

Andy Kessler had a good piece a few weeks ago on all of this. He points out that a lot of the data we need to train machine learning models are stuck in data silos controlled by big companies like Epic Systems. If Trump and his people want to make a better healthcare system, they should require Epic and its competitors to provide open APIs into these data silos so that people/patients can get access to their data and authorize third party systems to have it too. That one move would be huge for AI in healthcare, which we need to get costs under control.

Our problems in healthcare are largely structural. We have allowed employers and insurers to finance our healthcare system and take control of it. We need to get people back in control of healthcare. Technology can be the lever that will do that. If we allow it to happen.

Feature Friday: Foursquare List Search

If you are looking for a restaurant, a bar, a cafe, a museum, or whatever, there are plenty of ways you can do that on your phone. You can use Foursquare (a USV portfolio company), you can use Yelp, you can use Google or Apple maps, you can do a Google search, or you can stop someone on the street and ask them.

I prefer to use Foursquare because its recommendations are personalized for me based on all of my history with Foursquare over the past eight years. Many others tell me they get the best recommendations from Foursquare too, even if they haven’t been using the app for the past eight years.

But last week, Foursquare launched something that makes searching with their app even better. They now let you search their lists and get user and brand created lists by topic. These searches are geolocated so you always get lists based on where you are.

Here’s a search for sushi lists (in NYC because that’s where I am right now):

Here’s a search for pizza lists:

Here’s a search for museum lists:

If you have never seen a list in Foursquare, this is what they look like:

And if you click on the map icon when you are on a list, you get my all time favorite feature, the list map view:

I find searching for and using lists better than searching for a single venue because a list contains multiple options for that single thing you are looking for. Lists have context, lists have options, and lists are fun.

So the next time you are looking for something local, try using Foursquare and searching by lists. You go to the list tab (second one), and hit the search icon. I think you will find it to be a terrific experience.

What If The Narrative Is Wrong?

I always like to look for where conventional thinking might be wrong. I think you can find interesting investments that way.

I was exchanging emails with a colleague yesterday about Twitter’s decision to get out of the developer tools business and I asked her if it was possible that the conventional wisdom about Twitter (it is in decline and needs to be turned around) is wrong.

I shared these two Google Trends charts with her.

Facebook “interest” over the past two years:

Twitter “interest” over the past two years:

What if Twitter is not actually in decline but has seen the bottom and is growing again?

What if Facebook is in decline but nobody has realized it yet?

I am not saying either of those things is true. I am just asking the questions.

Disclosure: My wife and I are long Twitter and have never owned Facebook stock.

Protecting The Right To Speak And Write And Blog

I stayed out of the public debate and discussion of the Gawker lawsuit because while I privately came down on the side of Gawker, the specifics of the case made me uncomfortable and I don’t think it was an ideal case to determine what is free speech and what is not.

However, the same lawyer, Charles Harder, who argued the case against Gawker, is back with another libel suit, this time against Techdirt and its founder and lead writer Mike Masnick. Regular and longtime readers of this blog will know that I am friends with Mike and have supported his efforts to speak out on Techdirt about all sorts of tech policy issues over the years.

The specifics of the Techdirt case are easier for me to get excited about. Mike has consistently and rigorously debunked the claims of Dr. Shiva Ayyadurai that he (Dr Ayyadurai) “invented” e-mail. Dr. Ayyadurai is upset with Mike about this and so he hired Charles Harder to file a $15mm libel suit against Techdirt and Mike.

Regardless of whether Dr. Ayyadurai invented email or not (I highly doubt it), we have a long standing history in scientific and technical circles and in the United States of freely, openly, and publicly debating and discussing technical issues like this. Through that sort of public debate and discussion we determine what is real and what is not and we also move the understanding of science and technology forward. These public debates can get nasty and personal, and that is unfortunate, but I believe it is better that we allow for this debate than set legal precedent that wealthy people can stifle debate by suing publications out of business.

So, I am urging everyone who cares about the legacy of free, open, and public speech and debate about technical issues to support Mike and Techdirt’s efforts to defend themselves. Mike wrote a blog post about this issue last week and this is taken from that post:

I am beyond thankful to the many of you who have reached out and offered to help in all sorts of ways. It is heartening to know so many people care about Techdirt. At some point soon, we may set up a dedicated legal defense fund. But, in the meantime, any support you can provide us will help — whether it’s just alerting people to this situation and the danger of trying to stifle a free press through meritless lawsuits, or it’s supporting Techdirt directly (or, if you have a company, advertising with us). As always, you can support us directly as a Friend of Techdirt, or check out some of the other perks you can get in our Insider program. You can also support us via Patreon.

I am hoping that Mike sets up a dedicated legal defense fund and plan to contribute to it if he does. I will let AVC readers know if that happens. Until then, let’s all get behind Mike and put a stop to this nonsense.

The Department of Homeland Security International Entrepreneur Rule

From GeekWire:

The Department of Homeland Security has officially enacted a provision to make it easier for immigrant entrepreneurs to build startups in the U.S. The rule, proposed by President Barack Obama last summer, takes effect exactly one week before he leaves the Oval Office.

The initial rule outlined a “parole” period that foreign entrepreneurs could apply for, granting two years in the U.S. to grow a startup. To qualify, the founder had to prove that the startup met certain requirements and demonstrated the potential for “significant public benefit.” After the initial parole period, the founder could apply to extend his or her stay in the U.S. for an additional three years, if the startup met additional benchmarks.

Over the past five months, DHS has been collecting public feedback on the proposal to inform the final rule. That comment period led to a few key changes to the final rule, enacted today.

Instead of a two-year period followed by a three-year period, the rule now says entrepreneurs can apply for an initial parole of 2.5 years, followed by an extended period of 2.5 additional years.

The proposed rule said startups needed to have investments of at least $345,000 from qualified U.S. investors to apply for parole. DHS has reduced that minimum required investment to $250,000. The official rule also gives entrepreneurs more time to land funding — 18 months instead of one year.

The final rule also reduces the ownership stake the founder needs to have to qualify. Instead of 15 percent, entrepreneurs need to own only 10 percent of the startup to qualify for the initial parole period. To re-apply for an additional 2.5 years, founders just need 5 percent ownership.

In the proposed rule, a startup had to generate at least 10 jobs during the initial 2.5-year parole period to qualify for an extension. That number has been reduced to five jobs in the final rule.

This is really good thing. I know of a number of founders who have been unable to stay in the US even though they started a company here that is growing and hiring people in the US. Tossing people out who are starting companies that are creating new jobs in the US is nuts but that’s what we have been doing. This rule changes that, at least temporarily, and that’s a good thing.

Here’s the rule in its entirety:

International Entrepreneur Parole by GeekWire on Scribd

Talking To Others

People fail to get along because they fear each other; they fear each other because they don’t know each other; they don’t know each other because they have not communicated with each other. – Doctor Martin Luther King Jr.

I judged the Debug Politics Hackathon yesterday. The winner was Second Opinion, a Facebook Messenger bot that allows users to send the URLs of stories they have read and the bot sends back a similar story with a different take on the issue (a second opinion). The bot does a bunch of other cool things but you get the gist of it.

Two other hacks I really liked were Phoneocracy that connects people of differing opinions via phone to talk to each other and PespecTV which is “chatroulette for political discussions.” Both of these hacks had issues which got in the way of them winning, but the basic idea that the key to debugging politics to is to get people of opposing views talking to each other instead of at each other is spot on.

Like Doctor Martin Luther King Jr. said …….

The Perfect Sunday Afternoon Entertainment

If you are in NYC this holiday weekend and looking for something to do, consider attending the Debug Politics Hackathon Showcase at 4pm this afternoon in the Flatiron District:

I will be judging along with a stellar crew (Diana Rhoten, Stephanie Hannon, Nancy Lublin, Chris Wiggins, and John Heilemann).

But as strong as this group of judges is, the stars of the show will be the hackers and their projects.

God knows we need to debug politics and if that is going to happen, I am certain it will come from hackers not the folks in DC and statehouses around the country.

So if you want to see all of this in action, come by Casper’s offices at 4pm this afternoon and see it live and in person.