Posts from management

How To Hire Executives

Brian Armstrong, founder and CEO of our portfolio company Coinbase, writes a regular blog in which he talks about a bunch of things; Coinbase, things he has learned, the crypto market, and a bunch more. If you don’t follow Brian, you might want to.

Last week he laid out the entire process he uses to hire executives and it’s a really great post.

Here is the outline of the process:

  • Speak to subject matter experts [1–2 weeks]
  • Choose the hiring committee [1–2 days]
  • Draft the mission/outcomes/competencies (MOC) document [1–2 weeks]
  • Source candidates [2 weeks]
  • Build the relationship [1 month]
  • Evaluate candidates [1 month]
  • Close them [1 month]

If you plan to hire executives or are already doing it and would like to see how another CEO does it, I would suggest you go read Brian’s post.

One thing Brian leaves out, likely not intentionally, is the role of board members and investors in this process.

I have seen board members and investors play a valuable and highly engaged role in the “hiring committee” and most certainly in the closing process. I have done this for Brian a number of times and so have Micky Malka, Chris Dixon and Barry Schuler. We are very fortunate to have a great management team and Board at Coinbase and that makes a big difference in running an executive hiring process.

I have been an investor in Coinbase and have worked with Brian for almost five years now. I have watched him grow and develop as a CEO. He takes that very seriously and it shows. Putting down things like your hiring process is a great way to pass on to others what you have learned and get feedback too.

 

Video Of The Week: Purpose, Mission, Strategy

Last month my colleague Nick Grossman gave a really great talk at The Next Web in Amsterdam. In it, he talks about the importance of purpose, mission, and strategy and how to connect them in your company. And he shares a lot of great examples from our portfolio in his talk.

Putting Harassment On The Table Vs Under The Table

A lot has been written in the last week about the way the tech sector treats sexual harassment and a lot of suggestions have been made.

I am particularly enthusiastic about what our fomer USV colleague Brittany Laughlin suggests, which is putting the entire issue on the table, talking about it regularly in the workplace, discussing specific situations as a group, and avoiding the urge to come to quick conclusions.

There is so much good sense in her blog post and I would urge you all to go read it.

Should Your Company Be Profitable?

Mark Suster just put up a long post on this topic. His message is “it depends” and he explains the rationale for investing in growth vs getting profitable.

I have come to think about this differently.

If you are bootstrapping your company without the help of outside investment (ie angels, VCs, etc), then you have to be profitable from day one. No debate or discussion there.

But if you have the ability to lose money because of the availability of outside investment, then you can and should lose money in the first three stages of your company’s development which are; 1) building the product, 2) shipping the product, 3) scaling the revenues. But once you have achieved those three objectives, I believe you should move on to #4 – getting profitable.

There is this idea that you can’t grow really fast and be profitable at the same time. There is also this idea that you have to keep adding engineering and product resources as you scale your business. And there is this idea that more salespeople equals more sales. I have found that all three of those ideas are wrong to some extent. And I have found that really strong execution in product, engineering, and sales, based on doing less, not more, and based on having a high performing team without a lot of baggage, will allow your company to grow fast and be profitable at the same time.

We have a number of portfolio companies that are now seven, eight, nine, and ten years old that for most of their lives have been unprofitable and focused on growing users, revenues, and the team. I have been working closely with a few of them in the last year or two to help them to change their mindset to get profitable. This has, in some cases, meant reducing the size of the team, in a few cases significantly.

It has been enlightening to watch what has happened with this cohort of companies. They have kept growing, sometimes at a higher growth rate than before the belt tightening. They are better places to work, more stable, more focused, and more successful. They are better companies and they are more valuable companies. They are easier to finance and they are easier to exit.

I would encourage all entrepreneurs and leaders out there to embrace the idea of getting profitable sooner than you might think you can or should. It’s good for your companies and it is good for you.

Being Transparent About Your Long Term Strategy

Elon Musk famously posted Tesla’s long term strategy in 2006 and ended the post with “don’t tell anyone.” That has led may entrepreneurs around the world to follow suit and be transparent about what they are up to and why. I think its a great practice for companies to follow. It helps the outside world understand your company and it helps with recruiting as potential employees can better decide which companies they want to work for and why.

Our portfolio Coinbase has been doing that for a while now and Founder/CEO Brian Armstrong just posted the latest version of their “secret master plan” to use Elon’s words.

You should go read the post as I think it does a nice job of explaining where they have been and where they are going. But if you want the quick summary, here are the four steps:

  1. First, we will make it easy for consumers to invest in digital currency by building a retail exchange (Coinbase). The differentiators for this product are trust (security, compliance, etc) and ease of use (access to convenient payment methods, intuitive interface, etc). This will allow more people to own digital currency, especially non-technical people.
  2. Second, we will enable professional traders and institutions to trade digital currency (GDAX). This will support the investment use case in step one, but also scale it by driving larger trading volumes. More liquidity in the markets will reduce volatility of the underlying assets, which is important to enabling the payment network. The differentiator for this product will also be trust (security, compliance, etc) to encourage larger, traditional investors to enter the market.
  3. Third, we will create a mass market consumer interface for people to start getting value from the payment network (Token). Now that a critical mass of early users have been drawn in by the investment use case, the industry is ready for its “Netscape moment”. This product will make it dramatically easier for consumers to use digital currency as a payment network, and for developers to build applications that utilize the payment network.
  4. Fourth, by lowering the barrier to create new digital currency applications, we’ll see an explosion in the number of ideas tried. We’ll invest in, partner with, or build a number of new applications in this space, including replacements for many of the services people use in finance 1.0. Some examples include merchant processing, remittance, loans, fundraising, venture capital, escrow, credit scores, and more.

If you have a secret master plan for your company, think about posting it publicly. I think it will do a lot more good than bad for you and your company.

There Is No Free Lunch

I am reminded time and time again that things that sound too good to be true almost always are. There really is no free lunch, in business or in life.

Here are a few examples of things that seem so tantalizing to entrepreneurs and the companies they create but turn out to be just as costly (or more) than the alternative:

  1. Taking on debt instead of equity in the hope that it will be paid off in the future with equity sold at much higher prices. Or convertible debt that converts in the future at a much higher price, which is basically the same thing. I have seen this go badly so many times that I now almost throw tantrums when our portfolio companies choose to do this.
  2. Raising another round to buy more time to figure out the business model vs figuring out the business model now. “Buying time” is one of the greatest free lunch fallacies of all time. I strongly believe that now is almost always a better time than later to do something.
  3. Hiring a service provider (lawyer, accountant, PR firm, etc) who will do your work for free in return for your company’s business later. This sounds great but unfortunately locks you in to using this firm later on when others may be a better choice for your company.
  4. A big enterprise company will pay you to modify your software to work “better” for them. Sounds great now, when you need the revenues/cash so badly, but little did you realize that you just outsourced your roadmap to a big company.

I could go on and on, but hopefully I’ve made my point. I encourage everyone to make the hard and painful choices when they have to be made and avoid the free lunch fallacy. It mostly leads to indigestion.

Can Do Vs Must Do

Over the past few months, I’ve been reminded about the difference between “can do” and “must do” and how companies often confuse the two.

With the abundance of capital sloshing around the tech sector, our portfolio companies often have the resources to do more than they can and should do. They greenlight a bunch of projects that are “can do” projects but not “must do” projects. And a number of not so great things happen when they do this, including but not limited to:

  • Core resources (like infrastructure, security, payments, design, product management) get stretched supporting so many efforts.
  • The team loses sight of the mission and strategy as so many projects are being tackled at the same time
  • Senior leadership gets pulled in many directions and loses alignment as a result
  • Projects slip or don’t ship at all, leading to malaise and morale issues
  • Headcount grows quickly to support all of these efforts, creating more management issues

I saw a presentation recently with a “plan” that had ten “near term focus items” on it. I told the person presenting the plan to me that I don’t think a plan should have more than three things on it. I am a big fan of the rule of three. I am not sure where I heard it but it says that you should not tackle more than three big things at one time, no matter how large your organization is.

But regardless of whether you have two, three, or four big efforts this year, you should test all of your initiatives agains the “must do” vs “can do” test. Just because you can do something doesn’t mean you should.

I’ve written about the importance of strategy and saying no. Strategy isn’t saying no. It is figuring out what is the most important thing for your company and deciding to focus on it and say no to everything else.

In order to figure out what the most important thing is, you need to understand your products, your customers, your market position, where things are going, and where you want to be in three to five years. Once you have figured all of that out, you can figure out what are the most important things you need to do in order to get there.

It is also true that the “most important thing” changes. My partner Albert told me that he thinks doing a startup is like playing a video game. Each level requires you to master one thing and once you do that, you level up and then there is a new thing to master.

I like that metaphor a lot even though it trivializes the company building process a bit. It is a very clarifying view on how you must think about things and prioritize things.

So if you are frustrated by the pace of development (and not just engineering development) at your company, I would suggest you think about how many things you are trying to do at the same time. If it is a lot, then run them by the “can do” vs “must do” test and kill all the things that are not “must dos”. That might even mean parting ways with people you don’t need, which is painful but often helpful.

Executing well on all of the “must do” things is the hallmark of a well run company. And that usually means that there aren’t many “can do” things on the roadmap at the same time.

Grit

Last week during our CEO Summit, we had the opportunity to hear my partner Albert interview Angela Duckworth, author of the book Grit.

Angela is a Professor of Psychology at University of Pennsylvania and founder and Scientific Director of The Character Lab.

Angela has the ability to make complex concepts simple and combines her expertise in human behavior with a wicked sense of humor.

She is a great public speaker and everyone enjoyed hearing her talk to our group.

Her book Grit is about the power of perseverance.

It explains why some people have grit and how you can recognize it in people.

She also explains why grit is more important than talent in many cases.

If you hire and manage people, if you run start and run companies, if you invest in people and their projects, then Grit is a book you should read.

Path Forward

Path Forward is an organization that helps employers (large and small) run “returnship” programs in which people who have left the work force to care for a family or a parent have a structured and supported way to return to work.

In this podcast, the Gotham Gal talks about Path Forward with Tami Forman who is the Executive Director of Path Forward.