The Management Team - While Building The Business

This is the third and final post on the subject of the management team. The final phase of company development I am going to cover is "building the business." Building the business largely means building the management team. They are one and the same.

Many founders are naturally talented at building product and building the user base. But building the company comes harder to them. I once discussed this with Roelof Botha and he made a fantastic suggestion. Founders should think of the business as yet another product they are building. It is the ultimate product they are building because from the company can come any number of additional products and any number of additional initiatives. The company, if built correctly, will be more important than any single product it can create. Think about Steve Jobs and all the amazing products he created. But Apple is the most important thing he created. So building the business requires a deep commitment from the founder. At the appropriate point, they must turn their attention to it and make it their top priority.

Let's quickly review the three stages so founders will know when they must turn their attention to building the company. The first stage is building the product. That is before product/market fit has been obtained. The second stage is building the user base. That is the period where you, either through organic growth or sales and marketing, build the user base to a level where you are certain you can build a long term sustainable business. Once you've built the user base to the point you know you can build a business, you enter the building the company stage.

As I said before building a company means building a management team. You start with a senior management team. You will need leaders for every part of the business. You will need a leader for your engineering team, you will need a leader for your product team, you will need a leader for your customer support/community team. You will need leaders for finance, marketing, sales, and business development. And to help you build and manage all of these people, you will need a experienced and talent HR leader.

Many founder/CEOs don't look for a partner to help them build the company. I think that is a mistake. The HR leader can be this person. But you need to recruit someone senior and experienced enough and make them an integral part of the senior team if you really want a partner to help build the company. I have also seen founder/CEOs recruit a strong number two, a President or COO, to help them with the company building piece. That can work too if the President or COO is a strong manager and team builder.

Companies are not people. But they are comprised of people. And the people side of the business is harder and way more complicated than building a product is. You have to start with culture, values, and a committment to creating a fantastic workplace. You can't fake these things. They have to come from the top. They are not bullshit. They are everything. There will be things that happen in the course of building a business that will challenge the belief in the leadership and the future of the company. If everyone is a mercenary and there is no shared culture and values, the team will blow apart. But if there is a meaningful culture that the entire team buys into, the team will stick together, double down, and get through those challenging situations.

Building a company is the most interesting work I know of. It is what every entrepreneur should set out to do. A company is a self sustaining entity that expresses the hopes, dreams, vision, values, and culture of the founder and leaders. It is an amazing thing and I have been blessed to watch a number of incredible companies be created.

Some startups won't reach this stage. That is the way it is. But for those that do reach this stage, I challenge all of you to step up to the work of company building with a passion and commitment for it. It will not be easy. It will be among the hardest things you will do. But the rewards are so great. Atoms and bits can be assembled to create fantastic things. But it is the things you build with people that are the most fulfilling of all.

#MBA Mondays

Comments (Archived):

  1. jason wright

    “You have to start with culture, values, and a committment to creating a fantastic workplace. You can’t fake these things. They have to come from the top.”Innate values, yes.Instant culture, how?

    1. fredwilson

      initially it has to be an extension of the founder, his or her values and beliefs. but then it must propagate throughout the initial team and it needs to take on a life of its own. the founder should encourage this.

      1. jason wright

        The founder as the living flesh and blood embodiment of what his or her company will represent in values and behavior and conduct and purpose? Our DNA, our character, our persona,….. our reason for being. The evangelist.I sometimes think of Kipling’s ‘If…’ as another good mindset basis for building a business…and living a life.If you can keep your head when all about youAre losing theirs and blaming it on you;If you can trust yourself when all men doubt you,But make allowance for their doubting too:If you can wait and not be tired by waiting,Or being lied about, don’t deal in lies,Or being hated don’t give way to hating,And yet don’t look too good, nor talk too wise;If you can dream—and not make dreams your master;If you can think—and not make thoughts your aim,If you can meet with Triumph and DisasterAnd treat those two impostors just the same:If you can bear to hear the truth you’ve spokenTwisted by knaves to make a trap for fools,Or watch the things you gave your life to, broken,And stoop and build ’em up with worn-out tools;If you can make one heap of all your winningsAnd risk it on one turn of pitch-and-toss,And lose, and start again at your beginningsAnd never breathe a word about your loss:If you can force your heart and nerve and sinewTo serve your turn long after they are gone,And so hold on when there is nothing in youExcept the Will which says to them: ‘Hold on!’If you can talk with crowds and keep your virtue,Or walk with Kings—nor lose the common touch,If neither foes nor loving friends can hurt you,If all men count with you, but none too much:If you can fill the unforgiving minuteWith sixty seconds’ worth of distance run,Yours is the Earth and everything that’s in it,And—which is more—you’ll be a Man, my son!

        1. JLM

          If you only knew the number of times I have recited that poem and forced its wisdom into my head over the last 40 years.And how well its words served me when my own were not as bold or certain until those words became not just words but real life experiences.Their truth burned into my psyche on the red hot edge of triumph and disaster.You could not do better than a just a pinch of Rudyard at trying times.

          1. sigmaalgebra


      2. awaldstein

        The handshake between the founding CEO and CTO, CMO brought on at this stage had better be firm and sincere. There will be bad days and it will be tested.

      3. Anne Libby

        And if you’re not intentional about developing culture, you’ll get one anyways.   And it probably won’t be the one you want.

        1. awaldstein

          Great statement. Culture certainly does just happen.

        2. fredwilson


    2. Dan Epstein

      Tony Hsieh’s book Delivering Happiness (on Zapoos and more) does a great job explaining how critical culture is at Zappos, and how they instill and maintain the culture. It’s a great, quick read.

      1. fredwilson

        yes. probably needs to be required reading for the MBA Mondays class 😉

        1. RichardF

          I think there should be an avc community curated list.

  2. andyswan

    Don’t be the company you want to own.  Be the company you want to work FOR.

    1. Rohan


      1. fredwilson

        Yes indeed. He’s good

    2. jason wright

      I don’t understand “don’t be the company you want to own”.

      1. Aaron Klein

        When making all of the decisions necessary to build a company, many people build it around themselves and their needs as CEO or owner.Build a company you’d love to work for and it will be 100x more successful.

        1. Modify Watches

          timely advice! We’re revamping the business and it’s been a struggle to give up, well, anything… I’d never work at a place with a CEO like me 🙂

  3. leigh

    I’ll throw in a comment about marketing as well — many pple try to hire a Marketing Director with a salary of 80-100K or so.  I think it’s a waste of money.  You end up with someone who isn’t sr. enough to know but just knowledgeable enough to waste your marketing budget.  I think you’d be way better off putting half that into a budget for some brilliant strategy from someone who is sr. enough and knows their shit and have a much more Jr. person on the ground.  

    1. awaldstein

      Welcome to my world Leigh.I agree completely but there is complexity built in. Marketing is about smart execution  ( ) and this works best when there are regular touch points over time. Direction and strategy through change is the name of the game. 

      1. leigh

        totally agree — just think that marketing is no longer one person – it is the community building as you’ve said so many times and that community manager can be that executional person with the right strategy and person to talk to over time.  

        1. jason wright

          Isn’t the best marketing performed by the users? 

          1. Aaron Klein

            Rarely happens in a vacuum.

          2. William Mougayar

            Great point. I think that Viral effectiveness and Net Promoter scores are good indicators about that.- posted via

          3. leigh

            Actually – yes and no. If it happens organically then yes. But if you start to see your users as an army of word of mouth marketers – you are putting the wrong focus on creating value…- posted via

        2. awaldstein

          Well said.Community managers are the glue between a company’s promise and market perception. This is especially true in today’s marketplace where almost all companies are a work in progress. I find that I’m always positive when I see the founding CEO play this role initially. It triggers a market perception early on and set a customer facing theme throughout the entire org from the outset. 

          1. karen_e

            Agree …. I liked when Fred said about a year ago (I think in reference to Tumblr) that it’s a great thing when startups have “media in their DNA”. Codeyear/Code Academy showed us this in January when they launched in connection to a New Year’s resolution.

          2. Modify Watches

            We’re running into the wall of the CEO playing the community manager / personalized service / answer the phones role… and it’s taking a lot of time :)Any tips/tricks for offloading that responsibility, but doing so in a way that keeps the customer experience really positive?

          3. awaldstein

            How big are you?Large enough to have a community manager on board?  The best can also play a role in partner/biz dev at times.If you add the CM layer, who does that person report to? Still the CEO? Marketing? Those are the questions to walk through. That’s how I approach this decision and process with my clients.

          4. leigh

            I would agree that community manager is the right way to go – posted via

          5. William Mougayar

            I would add – an online community manager with subject matter expertise & experience is more effective than a “generic” Community Mgr. – posted via

          6. leigh

            i want to see what happens if i reply to this now with the SOPA message up on engage 🙂 – posted via

          7. William Mougayar

            It works, as did the Disqus dashboard. – posted via

    2. William Mougayar

      Classical mistake made by less experienced founder that know little about marketing. That said, a well managed person at less than 80K can do a lot of good in online marketing and community management work.The founder/visionary can remain as the Chief Marketing mouthpiece for a long time.

      1. awaldstein

        Agree that founder should be the face of the company in most cases but managing that person at that level is not a skill that all founders have. In fact, most don’t.

        1. William Mougayar

          Yes. That’s the required trick.- posted via

        2. Melinda Byerley

          +1 to that, especially when many VCs target young mostly technical founders for funding.  It stands to reason many of those won’t have deep strategic marketing skills. 

    3. fredwilson

      Yes, if the senior person is willing to roll up their sleeves and do the work too before the company has the resources to build an entire marketing team

    4. JamesHRH

      If you need a senior person to come up with brilliant strategy, you are toast.

      1. leigh

        I don’t know why you say that. That’s like saying if you need a sr. tech person to come up with a brilliant tech strategy your toast — what you think someone with little or no experience is going to? – posted via

  4. Kasi Viswanathan Agilandam

    “Atoms and bits can be assembled to create fantastic things.”Yes and giving life to the “thing” and make it live independently and proliferate is called “building the company”. It is very close to being God.  (may be i am extrapolating the emotional quotient too far here!!). Initial stage of the company is you and you only like a ‘single celled’ Amoeba. But making it a human … self reliant, growing, proliferating (may not as in making  multiple companies but … different products) … is a great thing.

  5. Rohan

    Your ‘culture is not bullshit’ note made me think of Tony Hsieh’s Zappos story in ‘Delivering Happiness’. 

  6. Bala

    This is by far the most challenging and rewarding stage of building a company. How do you ensure your values gets passed on? what will be your legacy? the long nights and days you worked on developing the product, market and customer, how do you inculcate that work and sweat into the bright new hire. I think leadership is the key, lead by example and show the way to institutionalize what the company wants to be known for. It is easier said than done but we have many fantastic examples and books to learn from. An excellent summary Fred, I am looking forward to the compiled “book” version of these posts. Good to Great by Jim Collins is an excellent book on how to transform a business into a company.

  7. William Mougayar

    It’s easy to say that a company must be managed like a product. The fact is that managing people requires soft skills that some technical founders may have trouble with. Managing people is something that is full of ambiguity whereas managing a product is a more analytical process.A founder with a management background will have less trouble building and leading a management team. A technical founder may be able to build a management team, but may have to work harder at being a true management leader beyond being the product visionary or technical whiz they were.

    1. Rahul Deodhar

      In terms of designing there is increasing scale of complexity as below (lowest to highest)1) designing physical product (one use product or one way interaction – we can argue there is no product that does not interact)2) designing interactive physical product3) designing determinate system (like computer programs)4) designing systems that interact with each other (manufacturing systems)5) designing basic sociological systems (shopping experiences or normal games)6) designing sociological systems that interact with each other ( e.g. games like SIMcity or  MMORPGs etc, traffic systems)7) Designing anticipatory sociological systems (e.g. laws in nascent field)

      1. William Mougayar

        These are product management orientated, no? I think we were discussing the people management side in the post.- posted via

        1. Rahul Deodhar

          that’s what I meant product management systems are easier than people management systems.

    2. fredwilson

      What Roelof meant by that is you can apply your design skills to organization design. The obsessive care founders apply to designing product can be applied to organizations

      1. William Mougayar

        Agreed that it can start there, but people are more ambiguous and less predictable than systems. That’s where people skills come into play, and some founders will make the jump, but others won’t be able to manage people as naturally as they manage products.If that’s an issue, it will probably become obvious to a board member who might see things that the founder hasn’t.- posted via

  8. reece

    while i agree with your three separate stages, i don’t think they happen sequentially as described in the post (not that you’re saying they do, but it can be read that way)… rather, even at the founder level, day one, no code written, i think it’s important to think about “building the company” and how you want to approach thatand while yes, a large part of this is the culture that will be built by the team over time, it mostly lies on the shoulders of the founders to curate that create and curate that culture with each and every decisioni think this is also partly why 2nd or 3rd time founders can be more successful – the founders learn how to be better managers/leaders/culture people – thus building a team, making themselves scalable etc more easily

    1. John Best

      Interesting, building a culture can be learned and refined as a founder skill.

    2. Aaron Klein

      I agree, the three stages don’t happen neatly with one endpoint that touches another.Still, it’s been incredibly helpful for me to think inside of this framework, in two ways. First, “I need to accomplish X, Y and Z to get to the next stage.” And second, doing things early that set you up well for future stages.

      1. awaldstein

        Life and business are both messy. These ideas and categories give us something to hold onto and think about as we try to channel the flux.

        1. Aaron Klein

          Well put…

    3. fredwilson

      They don’t have to be sequential. But you have to focus on the thing that is most important

      1. reece

        of course

  9. sigmaalgebra

    “Culture”: I’ve seen some organizations where ‘culture’ seemed to be important and helpful but other cases where it was ignored with apparently little damage.Role of HR: From all I’ve seen, the role of HR is to welcome candidates arriving for interviews, smile, be nice, get water, coffee, tea, or soda, keep the interview schedule up to date, hand over the benefits folder, smile and be nice, get water, coffee, tea, or soda, keep legally required records, help with travel and expenses, say where the restrooms are, smile and be nice, get water, coffee, tea, or soda, and, did I mention, smile and be nice?When I saw HR try to do more, it was a disaster: They got the idea that they really understood something important about the organization and, then, tried to play an important role, and these two were always delusional and destructive.E.g., once at a famous organization an HR person tried to evaluate my technical qualifications by looking at my Ph.D. transcript. Nonsense: At my graduate school, the main requirement for a Ph.D. was “an original contribution to knowledge worthy of publication”, and there was no coursework requirement. As is common at the best research universities, to get ready for my research, I did that largely on my own, and that didn’t show on the transcript. And for the research, I did that essentially totally on my own. I gave a seminar on my work, and at least one more Ph.D. came from that seminar. My research work was JUST FINE, but of course there was no way to know that from the transcript. They made no effort to look at any of my research, in grad school or since. Bummer.Maybe HR would be good at recruiting receptionists who were good at getting water, coffee, tea, or soda and smiling and being nice.There are some severe and even fundamental challenges for people in the HR industry evaluating highly qualified candidates for serious positions — technical, marketing, management, finance, etc. If there is a way to have HR people meet this challenge, then I’m all ears.And there can be a problem with the proposed role for HR:”And to help you build and manage all of these people, you will need a experienced and talent HR leader.”I’ve seen this role for HR; they become a second ‘management chain’ that conflicts with the usual one. A second chain can have some advantages in additional information, say, less vulnerable to middle management ‘goal subordination’, but the conflicts are not good, and the additional information should be available from other means.For:”Many founder/CEOs don’t look for a partner to help them build the company. I think that is a mistake.”Agreed.”The HR leader can be this person.”Can’t agree with that one! Did I mention that HR is to get water, coffee, tea, and soda and to smile and be nice?For:”But you need to recruit someone senior and experienced enough and make them an integral part of the senior team if you really want a partner to help build the company. I have also seen founder/CEOs recruit a strong number two, a President or COO, to help them with the company building piece. That can work too if the President or COO is a strong manager and team builder.”NOW that’s on the right track.COO, HR, NOT nearly the same or even comparable! Steve Ballmer was long a COO, but did anyone ever see him get water, coffee, tea, or soda or smile or be nice?The biggest issue is:”Founders should think of the business as yet another product they are building. It is the penultimate product they are building because from the company can come any number of additional products and any number of additional initiatives. The company, if built correctly, will be more important than any single product it can create.”I question that there is much hope for the:”from the company can come any number of additional products and any number of additional initiatives”.I’d like it; I just have to conclude that that’s asking for too much in practice.Instead, sadly, what drives “any number of additional products and any number of additional initiatives” is, may I have the envelope, please? Yes, here it is: The CEO. E.g. Steve Jobs, Bill Gates, Larry Ellison, Fred Smith, Tom Watson, Jr., Andy Grove, James Simons, and more.I didn’t include Steve Ballmer on that list, and at Microsoft Bill Gates is COB and otherwise making his wife happy by saving the world. Microsoft is awash in bright people, and with Bill as CEO they came up with”any number of additional products and any number of additional initiatives”and without him they don’t.Why? Fundamentally large organizations are still hierarchies much like in Henry Ford’s day. So, the supervisor is supposed to know more, and the subordinate is supposed just to add ‘muscle’ to the work of the supervisor. And at every level the organization tries to get the specified work done for least cost which means that people are not really hired for”additional initiatives”.So, essentially only the CEO can authorize a new project, initiative, or product and/or take the associated risk; no one else has the authority or budget or can accept the risk.There are ways to change this situation with a good case study from, say, WestVaco Paper when it was a family owned business, but such changes are very rare.

    1. William Mougayar

      I think some of what you said can be interpreted differently depending on the size of the company, especially the role of HR. It’s tough to generalize. 

      1. Carl J. Mistlebauer

        Very true William!  But the reality is that most companies do view HR as a defensive function rather than an offensive tool.  If you look at the course requirements at most universities for a degree in HR Management, you realize that that is how most HR people are trained.Most people view HR as a morale boosting department or a loss prevention department and thus it has the status of a “support” department rather than anything relating to what a company actually does.  

        1. William Mougayar

          I think we agree. HR helps for managing/supporting the culture, but they do not create it. – posted via

          1. Carl J. Mistlebauer

            BUT, in a small company or a start up, THEY can and the founder/owner/CEO should delegate (entrust?) that to them.

    2. RichardF

      I wouldn’t argue with your perception of traditional view of HR in a large company, however when a company is still growing, the leading HR person can be invaluable to a CEO/founder that has come from a technical background and has little experience of people management and employment issues.  I’ve seen that happen a couple of times at least.I’ve also seen younger less experienced members of staff who have been quickly promoted into a people management position (which tends to happen in startups more often than well established companies) benefit from a good HR person’s advice.

      1. sigmaalgebra

        Duplicate error — should be deleted.

      2. sigmaalgebra

        Yes, there is a line of thinking about management that has a lot of respect for what HR is likely uniquely good at and that wants HR to sit at the right hand of the CEO in managing the company.  In some organizations, in some parts of other organization, okay.But to me, in technical recruiting, in technology startups, and in any organization for recruiting the top people, HR should be limited to getting water, coffee, tea, and soda and smiling and being nice.Executive recruiters?  I can’t have much hope for them, either, but will restrain my condemnation!For “building the management team” in a startup, HR can help with that?  Well, HR can get water, coffee, tea, and soda and smile and be nice.  For more, to quote from ‘The Music Man’, “I’m reticent.  Yes, I’m reticent.”.I gotta think that in a startup, building the management team is the job of the CEO and, if he has one, the COO.  I could see some of the board helping.Maybe if the CEO was really green, then HR could help him in building the team, but then with team building from just the green CEO and HR the company would be in trouble.I can believe that HR can help recruit $10 a hour people at Wal-Mart and to help find the ones who should go to $15 or $20 an hour, be recommended to moving to manage the meat department at another Wal-Mart, etc.But I don’t see HR being able to do well recruiting important people in any organization.  In particular, what I have seen at times in technical organizations, and believe is appropriate, is that, under no circumstances and at penalty of being FIRED, no one in HR is ever, not even a hint, not even once, to have anything like a technical discussion with a candidate.  Period.  If someone in HR could carry on a technical conversation for more than two sentences without making themselves and the company look foolish, then they wouldn’t be in HR!E.g.,Google HR:  What is your favorite programming language?Me:  PL/I.Google HR later hinted, the only right answer was C/C++.My justification Google HR never heard:  Of course for now you are forced into using C/C++, but PL/I beats it in memory management, task management, control structures, data structures, macro pre-processor, debugging tools, scope of names, data types, string handling, exceptional condition handling, clarity of syntax, semantics, and data conversions, and more.  Often in practice it is necessary to use C/C++, but to have it as a “favorite” is a mistake.E.g., I published a paper on real time monitoring of health and wellness of server farms and networks with ideas apparently way beyond the ideas for such work in Ng’s Stanford course in machine learning and apparently nicely beyond a project for such work of Patterson and Fox at Stanford and Berkeley and funded by Google, Sun, and Microsoft.So a really nice, sweet Microsoft HR person asked me about the work, and I gave an easy to take explanation without getting into, say, how I used some ideas from ergodic theory and ideas of the two guys on the ends in the picture…(left to right, Ulam, Feynman, von Neumann) but the HR person had their mind blown.  The HR person was a bright humanities major, would have been good at recruiting receptionists, could have recruited high school sophomores who had taught themselves C, but was clueless about anything at all advanced and technical.BELIEVE me, in the best, serious technical work, only the best technical people can recruit good technical people; alternatives are rarely tried and never for long.When I was an MBA prof, I was involved in recruiting, looked at the resumes, selected the ones for more contact, made the first phone calls, gave the introduction at the candidate’s seminar, asked the department secretary to make the dinner reservations, went on the dinner, and gave my opinion on the hire.  There was never any significant role for anyone not a professor.  The one hire I made became a big star, published five papers in ‘Math of Operations Research’ in one year, was reviewing NSF grant proposals from famous researchers, etc.For HR acting like a coach to green middle management, I’ve seen that tried, but it didn’t help much — the green middle management was making some grade school playground level emotional pushing and shoving mistakes, got coaching, but continued to mess up and eventually had a big, permanent set back in their careers.I’ve seen some good people in their 20s do well as team members without any significant ‘management’ from HR or anyone else.  They were good people.  It helps to look for ‘good people’!And I’ve seen talented, capable people in their 20s fall into grade school playground mistakes.  Then someone a little higher up — right away, and not waiting for HR — needed to tell them to get back on the team.For HR being a coach, there is an ‘authority’ problem:  Is HR really the boss?  Can HR change salary, job descriptions, promote, reassign, demote, fire?  To me the first place for such ‘authority’ is the relevant ‘line’ team leader — it’s his team, not HR’s; he gets evaluated on his team, and HR doesn’t; it’s up to him to build and manage his team, not HR.E.g., my father in law was running an REMC (rural electric membership cooperative, with low interest, Federally backed loans for capital equipment).  He had an ‘HR’ policy of paying his people more than the average but, then, asking for more.  And, in winter, with a lot of ice and many lines down, there was more to ask for, in the middle of the night, on weekends, right away and for shifts longer than 8 hours, etc.  He knew other REMC managers who paid as little as possible and constantly complained about the bad attitude of their workers.  Of course, my father in law’s board, seeing the salary structure, paid my father in law a little more also.  So, the electric rates were a little higher, but the service was better and everyone was much happier.  The rural customers were often farmers who very much needed the electric power to help keep livestock alive and would pay a little more to have A+ RIGHT NOW response when ice knocked a line down.  Net, that pay scale was a CEO policy and not an HR policy. 

    3. Jonathan Whistman

      I’ve often heard of HR being called the “sales prevention department”.  Although I would say that you can have a great HR team or a poor one.  A bad HR team is one that doesn’t understand the intricacies of the organization or the values of the leadership group. And if they aren’t any good at getting water, coffee and tea.I do think early in a company there needs to be someone that excels at people hiring and development, sometimes that’s the founder & sometimes not!

    4. LE

      “at Microsoft Bill Gates is COB and otherwise making his wife happy by saving the world.”It was worth it to read your long post just to read that statement.My theory on Bill is one of three things.a) He has personal health problems that are undisclosedb) He had some super significant change of life eventc) He knows Msft has no future and wants it in the hands of someone else as it declines in prominence. Or a combination of any of the above..Driven business people or entrepreneurs (like Bill always was) simply don’t retire in their 50’s. He was in his 40’s when he stepped down but he still hung around doing things.And not for family and not for their wives. They might get distracted for a few years (like Trump) or retire and get bored and return (Like Norman Braman) but they never loose the juice that is business.  (And I know of many examples of non-famous business people including family members where this holds true. These people are in their late 80’s and still excited by business and opportunity.)

      1. sigmaalgebra

        My explanation for Bill was shorter than yours!I really meant just what I said and was succinct and did not intend to be flippant or facetious.So, I can’t agree with your analysis and for a deeper explanation have something else that, however, gives a big role for his wife.I’m taking seriously at face value what he is doing with his wife and conclude that he is fully serious about the work. He’s saving the lives of millions of people right away and changing societies and biomedical technology in ways that can save tens of millions soon and more over the horizon.I believe that he is working fully hard at this work and taking it seriously.But why? Here’s my guess: He was close to his mother. And married he is close to his wife. Although at times he’s been socially awkward, I can believe that underneath he actually craves the close relationship he has with his wife.Then have to consider his wife and how she is similar to his mother. His mother was active in charity, and it is a super good bet that his wife is highly, let’s say, ‘devoted’ to charity.Women of Christian culture are commonly devoted to the goal of ‘saving the poor people’, including the suffering, sick, etc. In part the thought is the old “There but for the grace of God go I”. So, they feel that just any day they, too, might also be in bad shape. Moreover there is the common sophomoric view that for ones own security, if get security for everyone then will get own security as a special case and that it would be too selfish to seek just ones own security without equal effort for the security of others. And there is the view that the best security comes from being so liked by others that can be cared for by others and, then, to be so liked, devote oneself to the interests of others first. One image is the son’s mother in ‘A Place in the Sun’,On these points for many Christian women, I’m NOT guessing!Then, without getting into theology, etc., such ideas can easily be much stronger for Roman Catholic women. As I recall, Bill’s wife is Roman Catholic.So, here’s my guess: In building Microsoft, Bill worked very hard and didn’t have much time for his wife, family, and home. As his net worth climbed to $50 billion or so, at home there was a question: “Why keep neglecting love, home, marriage, family, wife, and children to make still more money?”. Not a strange thought: E.g., supposedly at one point Ann Romney told Mitt “We already have enough money” or some such.So, my guess is that Bill and his wife came to an agreement: At age 50 Bill would move to just COB of Microsoft and then devote himself to using the money to help the world instead of making money. He wouldn’t wait until he was too old to do good work helping the world but would get going at 50 while he was still plenty strong. He’s a bright, capable guy and would use those powers to do well with the money. He would do this work jointly with his wife.That’s my guess: That in ‘pillow talk’ that’s what they agreed to do. And Bill is so close to his wife and has so much respect for her, as he did for his mother, that he is plenty happy with that pillow talk plan.For more, there were the bridge games. Of course, Buffett’s wife wanted to be in LA to be in the center of the social circuit or whatever, but Warren wanted to stay in Omaha and spend his usual 14 hours a day or some such reading financial reports. That’s just what Warren wanted to do. Period. And that’s what he’s done. Gee, maybe he will learn about stopping times, potential theory, and Brownian motion to make more sense out of “instruments of financial mass destruction”!But in the bridge games, my guess is that Bill’s wife talked Buffett into joining in the effort. So, Melinda moved to charity, what, $100 billion, now with some other 1% people joining in her 50% pledge, more than $100 B? All with her nice smile, great sincerity, and a few soft words? I can believe it. I do believe it.I can 100% absolutely, positively guarantee you that there are plenty of capable Christian women who would be sincere enough and “tenacious” enough to do such things, so much so you would “have no idea” (‘Jurassic Park’ for another case of a capable woman well drawn).But, to add some weight to your conjecture about the future promise of Microsoft, we can recall that there was a period when Bill went on a grand tour and visited leading academic computer science departments and got the faculty at each to give him something of a personal seminar on the future of computing. He may have returned from this concluding, as some others in computing have, that “computing had a good run for about 60 years but now is entering its twilight period”.I suspect that Bill heard that the grand future of computing is blocked by the question P versus NP, but I believe that such a claim is wrong.My view is that computing in not in its twilight but remains the key to the future of civilization and that we are no more in the twilight of computing than we are in the twilight of civilization. Just now there is a 1 TB solid state memory chip that fits on one blade of a Swiss Army knife, and we see ‘twilight’?For computing right away, I see two major themes:First, we want humans managing computers managing computers … managing computers doing the work. So the first item on the TO DO list is to structure and clean up installing hardware and software on 1000 computers and getting them all working right away and nicely managed. In some server farms, e.g., at Microsoft, there’s more progress on this item than is obvious, but there’s still work to be done.Also for the computers doing the work, they need to be able to interface with robots well enough to do the work, say, of the 400,000+ people at Foxconn in China, and we have a way to go with such interfacing.Second, the most important core work of the future of computing is poorly understood in the computer science departments; that core work is some relatively advanced, often original, pure and applied math. This point is not commonly accepted by either the good math departments or the good computer science departments, but I’m convinced.E.g., at Stanford Professor Ng is teaching a course in ‘machine learning’ which I regard as statistics done badly. One important step to progress is starting to do statistics well. The people who do statistics well are usually not much interested in computing! Still, statistics done well is one of the stronger supporting planks to the future of computing.Whatever, for the future of computing, I regard Apple as a maker of hand held gadgets and out of the main flow and Microsoft as the main player with also a role for some US DoD projects. E.g., Microsoft has ReFS, a follow-on to NTFS as a better file system for the future. GOOD. NTFS has worked out GREAT and been hugely important, and something better for the future should be very important. Such work can give Microsoft a big advantage for the future. I don’t hope for anything like ReFS from Apple, Linux, open source, or the US DoD. Good for Microsoft.In effect Bill set aside information technology for biomedical technology, but my view is that for the long term he made a mistake including for his wife’s goals.Net, I believe that Bill is trying to please his wife, but I suspect he enjoys his new successes also.

        1. LE

          “I can believe that underneath he actually craves the close relationship he has with his wife.”You’re pulling at my heart strings when using psychology to analyze and explain business behavior. But it’s well known or believed that you can only replace one addiction with another addiction.  And I simply fail to believe that Bill’s new path is a replacement for the old one.

          1. sigmaalgebra

            Now we finally get to a serious reason a company needs an HR department — so that the technical founder won’t have to think about “psychology” and “heart strings”!  So in a big meeting where HR insists that the company needs to do this or that, the CEO says “Psycho-whatever. Go for it! Hope it works. Meeting over.” and returns to why the farm LAN is dropping packets for no good reason!

      2. fredwilson

        microsoft had a life changing event. it is called the internet.

        1. LE

          Shows why it is bad to get caught up in large scale litigation (justice department) and how it can sap time, energy, and focus from a company or a person.

          1. fredwilson


      3. William Mougayar

        We can’t rule out Bill G returning to shake up MS like Steve Jobs did. – posted via

  10. Carl J. Mistlebauer

    We create positions to build a company, these positions are defined by tasks and we hire people to perform these tasks.  The trouble is we are visualizing an organizational chart with little boxes and we only see the connectedness of these boxes via lines that are drawn to show who reports to whom.But the reality is the dynamics of an organization go way beyond just who reports to whom.The reality is we are building a machine where every position is actually a gear and every new gear that is hired changes the operations of the machine as a whole.  Every new employee brings not only a skill set but so much more to a company, and every new employee changes the dynamics of the company as a whole.Everyone attempts to “get the most” or “hire the best” for a position and the reality is, if you are a start up or a growing small company, you REALLY want to hire a person who hasn’t peaked, or who isn’t “the best” but rather you want to find that person who might have been frustrated at another job, someone who wants to do MORE.Like Leigh says in her comment, find a junior person who can take the expertise of someone else and run with it.If you are a growing start up or small company, and you only hire from skill set or experience then you are going to find that the people you hire are obsolete in six months.  Managing people is like conducting an orchestra and I have found that most entrepreneurs, small company owners, and founders are disasters at it, because of their passion and focus (which makes them demanding and impatient).If you partner up with someone to build your company do understand that if they are any good there will be a tremendous amount of tension between the product founders and the organizational builder.I know, I was “fired” 5 times in the first 18 months after I was hired!  Finally, I just had to tell them that this “firing” and or “go to the house” shit just had to stop, so if you want me back, make me an owner.  That is what happens when you hire people who are as passionate about what they do as you are about what you do!

    1. sigmaalgebra

      Yes, that simplistic organization chart out of, say, Henry Ford’s day, fails to describe a lot that’s crucial for the future of a company, but you mentioned nothing else that provides a much better description. Or for the future of the company, often “a good question is more important than a good answer” (R. Bellman), e.g., what the heck to do next, and tough to get either such questions or their answers from a traditional org chart.I’m looking for something better than essentially company-wide blogs, wikis, and/or Tweet streams but believe that these can be a step forward from just the org chart and then nothing else. E.g., I’m quite prepared to believe that the next big thing for the company might come from an observant, thoughtful, articulate guy on the loading dock who after work types his ideas into a company blog at 1 AM.

      1. Carl J. Mistlebauer

        Sigma,I have a couple of coders working on our internet project, and a programmer working on our software. Since I have been in manufacturing and operations I want to really focus on THAT end, because I believe there is where the revolution in regards to this thing called “consumer centric ecommerce” really becomes a revolution; it helps that I have the experience, know the bottlenecks, and deal with the operations on a daily basis.In screen printing you schedule production, then you “lock it.” Shirts are pulled, screens are burned and shirts are printed. As this is going on you are continously getting more orders and they have to wait till the next round of production scheduling. The reality is until you change the screens on a press you can add any number of shirts to the production of that design. By letting screenprinting “end” the production run by acknowledging when they have taken the screens off a press and moved on to another design, you have easily allowed yourself to capture a higher efficiency and increases in production.Using barcode scanners and IPads allows inventory control and shipping to have access to data normally reserved only for customer service. Thus if a problem arises THEY can contact the customer rather than going back to customer service and waiting a day or so for customer service to get back to them.Being able to give the guys on the dock an IPad that will tell them what they have coming in and or going out that day with a warehouse location system; they will know what they are doing the minute they log in.They have a question or a problem, then they type it into their IPad and it is broadcast…which beats the old way of them going to their supervisor, their supervisor going to someone else, and then ending up with half the people who need to know don’t know.You have to understand that since the 1950’s operations and production has been about making labor irrelevant and interchangeable. Its been about a top down pulling of strings. Its a world of end of the day or end of the week reports (hell, its too late by the “end of” anything to do much about it.) Manufacturing and or Production has always been a chaotic environment, and I love the chaos, but the solution to chaos is not more top down micro management; I always used to laugh at how much effort was put into production planning for a future week, knowing full well, that at least 40% of it would change by the time we got into the second day of a week.I have been in operations a long time and I am tired of giving speeches about empowerment, I want to build the empowerment right into every position. and quit wasting time running up and down or around the organizational chart; call it just in time decision making.

        1. sigmaalgebra

          Gee, with your nice example, my “loading dock” was curiously right on target!So, your production is a case of decision making using all the information available when the decision is made, that is, “just in time decision making”, under “chaos”, that is uncertainty or the situation described ‘probabilistically’.A good, old, pure form example was the computer game Hammurabi where you, as king of the kingdom, got to make decisions:  You got to allocate grain, that is, store, eat, sell, or sow it; got to allocate people to grow crops or fight for land or grain.  If you fed your people well, then you’d get some immigration; poorly, emigration.  If you fed too poorly you might get a revolution and lose your head.  If you lost a battle, you could lose people, land, and grain and might lose your head.  Your efforts were subject to ‘chaos’, that is, ‘uncontrolled exogenous variables’ such as plagues of insects and bad weather.Now, what the heck to do to be a good king and at least keep your head?Well, given actual details on all these effects, including probability distributions for the random parts, there actually is a clean, provably best possible solution.  The field is called ‘stochastic optimal control’, and an early leader was Richard Bellman.  Bellman was a bright guy, as I recall, a Princeton Ph.D., an author of some dozens of technical books, and at one time all at once a professor of mathematics, electrical engineering, and medicine.More recently a leader in the field has been R. Rockafellar at U. Washington funded at times by the USAF which clearly is taking a long term view but is not really wrong.  A leader in the field at MIT is D. Bertsekas.  At Georgia Tech is G. Nemhauser.  J. Cohon, President at CMU, has had some students work in the field.The real world tends to be messy with “unknown unknowns” and with even the rules of the game and the games themselves changing.  But there is a chance that for some significant fraction of your production operations, where at least the game and its rules stay mostly constant long enough for an attack, you could identify, formulate, set up, and solve the problem via stochastic optimal control.  Then, in simple terms, say, each second right along all day long, the software would read the latest values of the ‘state variables’, do the calculations, and spit out the ‘decisions’.The discrete time, that is, once a second, version of stochastic optimal control is ‘stochastic dynamic programming’ as in, say,Stuart E. Dreyfus and Averill M. Law, ‘The Art and Theory of Dynamic Programming’, ISBN 0-12-221860-4, Academic Press, New York.which is mostly relatively easy reading.Dreyfus was a Bellman student.Without some special tricks, stochastic optimal control is a prodigious user of processor cycles and main memory space, but the computing can make terrific use of even simple models of parallelism.  So, current computing with several processors with several cores and large, cheap main memories opens some more problems to solution.  As we get 1000 core processors, we will have still more problems open.It’s a long shot that such a project would actually work for your company, but there’s a shot.Your 40% number is tempting:  If there is commonly a lot of waste due to the “chaos”, then there is a chance that a project for a solution could pay off.My guess is that good, practiced human judgment with all the relevant data right at hand, via iPads or whatever, could remain the best approach at least for now.Of course Bellman is claimed by the old field of engineering and applied math ‘operations research’.  It tried:  In broad terms, what the field was saying was correct and powerful.  In practice the field had problems with (1) getting the data ‘machine readable’ (much less of a problem now), (2) getting the software written (easier now but still not easy), (3) having the software run fast enough (easier now but still not always easy), and (4) having the real problem change too fast for the software development to keep up.With your background in both your real operations and also software and computing, you are in a rare position to evaluate if some of Bellman’s work could actually be made to work in your operations.  If so, and if the savings are large enough, then there could be some bucks, happier customers, etc. there for you.The basic idea of dynamic programming is simple and charming.  That the idea actually is ‘best possible’ in a quite general sense is nice. 

  11. John Best

    I’m not sure that it should be an immediate consideration, and it may be that the end company is hierarchically flat, but looking at which management roles are necessary for the company at each stage is akin to looking at which components make a product, or which resources make up a project.I’ve long believed Drucker that people are the most important resource. They are a resource with their own minds and ideas. Getting the best out of them gets the best performance for your company. HR should (in my opinion) be viewed as a much more crucial business function than it is. HR shouldn’t just be about hiring, firing and payroll, it should be about developing that human resource. Other departments dealing with “resources” don’t sit static, they look at supply, fit, price etc. Like you say, a company is made of people. Making a successful business is about making both product and company a good market fit. 

    1. fredwilson

      i totally agree

  12. William Mougayar

    Fred,- Just so we can better frame this stage, are we talking 50+ employees approx?

    1. fredwilson

      it starts around 25. by 50 you are there for sure

      1. sigmaalgebra


        1. William Mougayar

          Wow..That was a short reply sigmaalgebra :)- posted via

  13. trbgllc

    Well written post Fred. Building a team is as difficult as running the business. When it is working correctly it has natural momentum and does breath life on its own. For many entrepreneurs passion can turn to obsession. I must admit in my past life I was guilty of that. I thought that if I could be all things to all people, especially my clients and the VC’s backing them, that it would continue to breath. In my haste to help all, I neglected myself which in turn neglected my team. My desire to create consistency in the marketplace, while achieved for over 5 years was not sustainable. After then experiencing two #disruptive events, the loss of a father and the birth of my daughter, at 38, I find myself appreciative of how important senior management truly is. I want to thank you for all of your help and support over the years whether you knew you were directly providing it or not. Learning everyday! 

    1. fredwilson

      my pleasure. life and death are two constants. and deeply impactful

  14. Tom Labus

    Making it this far doesn’t ensure that you have the cash to hire the best in class employees.  I  believe most new companies are still strapped for cash since most are without formal funding.You have to have a strong culture and hire the best you can afford.  If you have good team they will help this new hire play above their pay grade.

    1. fredwilson

      yup. always a struggle

  15. Jc_mellinger

    I’d add that a general counsel (GC) can be a valuable addition in certain companies. We hired one very early (4th or 5th employee). The right GC can provide operational and HR insight, liaise with outside counsel, and draft/review service agreements and financing docs cost effectively with the entrepreneurs interests in mind.

    1. fredwilson

      i agree. but i see a GC more as a consigliere than a leader per se, at least early on in the company building process

      1. Rohan

        Consigliere..Ah.. Bonasera.. bonasera.. 

      2. Jc_mellinger

        Yes, I agree with that… a senior member insofar as they are privy to higher level information but with no direct reports.

      3. Jen Berrent

        It can depend on the company / industry.  I agree that this is true for most tech companies, but life sciences or other regulatory-driven industries (financial servies, clean tech) or businesses that are driven by significant negotiations (for example, entertainment), having a GC who is on the exec team and part of strategic decision-making can be extremely effective.  The GC must be able to think like a business person – and offer solutions, not just roadblocks.  

        1. fredwilson

          yup. even in tech companies this is a key role.

  16. Polly Jenkins

    Well we all know that picking the right team means winning and losing.

  17. EmilSt

    This is one of the best posts I have read on AVC. This is exactly how I understand the company. I’ve started my first company when I was 18 and when I look back big part of my life was shaped through the companies i have been through. By building your company you are actualy building big part of your life. So if the company is a vehicle for your dreams, hopes, passions… you better build it right, with the people, values and culture you admire.And I love the line “Atoms and bits can be assembled to create fantastic things”. I actually think that bits where the missing element in this imperfect world of atoms. Through great web companies they will dent the system and make this earth a better place for all.

  18. kirklove

    “The company, if built correctly, will be more important than any single product it can create.”Great line. Very true.

    1. Brandon Marker


  19. jason wright

    I spent some of this last weekend disassembling one of my bicycles. At one point it was nothing more than a collection of static metal bits on the floor, not resembling what was once a whole capable of dynamic whirring and speed and efficiency of motion. Every bit has to be right. Every bit has to fit. If they don’t the bicycle will at best function poorly, but at worst be a complete disaster.Time to reach for the dictionary. ‘Culture’ – cultivation, the state of being cultivated; refinement; the result of cultivation; a type of civilization; the attitudes and values which inform a society; a crop of experimentally-grown bacteria or the like…..’Cult’ – a system of religious belief; a sect; an unorthodox or false religion; a great, often excessive, admiration for a person or idea giving rise to such admiration…. Is a startup like a crop of experimentally-grown bacteria?

  20. Brandon Marker

    [I am still quite young] this is one of those posts where I learned and took a LOT from. The best part about it were the comments provided almost as much insight as the post.

  21. Joseph Quaglia

    Great post Fred!  Really enjoyed this, and sharing this with our team.

  22. Mike

    You have to start with culture, values, and a committment to creating a fantastic workplace.these are the main words of the whole article.I am in the middle of something similar to what you have described here and I could not agree more. I want to build a strong brand, and I would like to add that it is all about how you treat people who are around you, what skills you and your team have and the attitude towards you work and your workers, from the janitor to the boss.

    1. fredwilson

      my mom drilled into me “do unto others as you would have them do unto you” my dad drilled into me “lead by example”you are articulating both in your comment. very nice!

      1. awaldstein

        I once heard Bill Clinton talk about foreign policy. His guiding principal that he quoted from his grandmother was ‘if you wanted to have friends, you needed to be a friend.’Folksy but it stuck as true. 

        1. fredwilson

          it’s very true

  23. Trevor McKendrick

    Fred, I love how you used the word “blessed” to describe the chance you’ve had to see companies be created.It’s something that happens so relatively little that it really is a privilege and a blessing to be a part of it, in whatever capacity.Founders and employees I hope would remember this, as only the very, very best get to be part of creating more than 1 or 2 companies.

    1. fredwilson

      that is one of the many things i love about being a VC

  24. Sean Saulsbury

    Penultimate means second to last, FYI.

    1. fredwilson

      yup. i need an editor!

  25. smartone2

    I imagine a start up like a pie chart and you need certain pieces to make it whole.In other words – it depends on what the co founder (or founders) bring to the table.. which pieces of the pie and how big of the pieces they are. Then it is fill the pie chart with any missing pieces.

    1. jason wright

      I imagine a startup like Johannes Itten’s Farbkreis.The hexagon is the startup, the circle the users. The shapes are different, but each base color in the hexagon must be represented in the circle to create the successful connection between the startup and its users.

      1. panterosa,

        So excited to see abstract color diagram used as reference!! Wow. This is my language. How did you choose this image please?

        1. jason wright

          That’s great.For some time now I’ve had a hard copy of The Elements of Color which is based on Itten’s The Art of Color. He was a very interesting man. The Bauhaus connection, living and working in Berlin (a favorite city of mine), his color theory ideas, his personal philosophies (something to read off here) have always been of interest to me. The Farbkreis has always held my attention. Even though the users don’t work in the startup they are the startup in a sense, and there has to be a connection between those working at the startup and the users of its product or service, something of each in the other. The colors of the two shapes and their arrangement seem to hint at that idea.     

          1. panterosa,

            Ok. I am geeking out a bit here. Among other things, I am a color consultant/specialist. I mix, match and teach (kids). I have color wheels all over my place.I absolutely adore how you chose to express this idea. I usually choose such references and many look at me like I am stark raving abstract mad. I love my form of “madness”. Color is so expressive of so many metaphors, color humor is extremely dry.I am so curious as to what your field is. And how you have had Itten’s work around.- posted via

          2. jason wright

            I was introduced to Itten back in my theater days by a set designer gal. The wheel is a great metaphor, but also a real thing, a technical thing, but abstract without being thought of (I hope) as ‘out there’ or ‘new age’ or ‘fringe’ thinking. It’s relevant. Itten was in Berlin and Vienna. I’ve spent time in both. I like them.The hexagon, thinking of fred’s description of management team building, has an interesting arrangement inside the circle. The core triangle is divided as yellow, blue, and red sections. They touch at the center, point out, but have limited engagement with the circle. I think these could be seen as three of the ‘inner’ roles in the startup structure of a  management team, CEO, CFO, CTO, HR, et.c. The outer three sections of the hex each touch two of the core sections, but are directly engaged with the circle. These roles would include customer support/ community team, marketing, sales, et.c.The hex must be encircled for success. It represents all external inputs, including users of course, but also every other element required for success.Not a great explanation. Sometimes words have no place in expressing an idea coming from another part of the brain.

  26. Dave W Baldwin

    A different way of looking at the debate regarding definition for HR is simply Ego/Vanity.A real leader knows they can only do so much with available time.  To achieve the bigger goal, the founder needs to be realistic and leave aside the playground style many follow.  Just because your vision and current version of product is great will not matter once you are out on the playing field and the competition is going to try to eliminate via copy and/or slightly less ‘good’ but backed with bigger money.Someone “who has it”, already has a basic game plan and list of expectations to fill in those different areas.  Be realistic since as you move into different levels of traction/scalability, the level of talent required varies.  Do not be scared of possibility those you bring in are of higher level than yourself!  The leader will need those he/she can trust, are enthused by overall mission, understand what is required and are not scared to bring up a better way to do it. This leads to two way street.  If the founder is blind to the obvious due to requiring too much credit and praise, then those brought in to the team will underperform and/or kill the company.

  27. Miljenko Hatlak

    Great post ! Thx

  28. Dave W Baldwin

    This would have been duplicate, so we’ll stay with a smile and a Bud ;D

  29. Jonathan Whistman

    @fredwilson:disqus I was hoping for an update on what you decided to do for your blog on Wednesday.  Have you decided?  I see the news that Wikipedia is going dark.  I asked my employees, and we’ve decided we will also go dark for the day and we are trying to decide if we will re-route our users somewhere.

      1. Jonathan Whistman



    Competition & Its relation to Innovation:…

  31. mv

    What should technically or product oriented founders do, if they want to improve their management/people skills (Without taking full MBA) ? Any recommend course / group in the Bay Area? Thanks!

    1. fredwilson

      i am a big fan of working with a management coach



        1. FAKE GRIMLOCK


  32. Nick White

    VERY inspiring stuff. Thanks Fred.

  33. Modify Watches

    I’m sorry if mentioned elsewhere… but can you build the company while building the product and customer base? At the extreme, can you up-end this order?

    1. fredwilson

      yes you can do all of this in parallelbut i like the serial framework because i think its important to know what your number one focus is at any time

      1. Modify Watches

        Thanks for this. It’s tough to focus but I *guess* I’ll defer to your expertise on the order 🙂

  34. Ela Madej

    “Building a company is the most interesting work I know of.” That’s why we all want to do it so badly.

  35. Cory

    “You can’t fake these things. They have to come from the top. They are not bullshit. They are everything…If everyone is a mercenary and there is no shared culture and values, the team will blow apart.”So true! Pardon the pop culture reference, but this reminds me a lot of a certain speech from The Wire (which is hands-down the best show in history BTW). I absolutely love this little speech and have shared/referenced it with my team on multiple occasions, so I might as well share it with you AVC folks!Here’s the clip:… Here’s the quote:Daniels: [To Carver] Couple weeks from now, you’re gonna be in some district somewhere with 11 or 12 uniforms looking to you for everything. And some of them are gonna be good police. Some of them are gonna be young and stupid. A few are gonna be pieces of shit. But all of them will take their cue from you. You show loyalty, they learn loyalty. You show them it’s about the work, it’ll be about the work. You show them some other kinda game, then that’s the game they’ll play. I came on in the Eastern, and there was a piece-of-shit lieutenant hoping to be a captain, piece-of-shit sergeants hoping to be lieutenants. Pretty soon we had piece-of-shit patrolmen trying to figure the job for themselves. And some of what happens then is hard as hell to live down. Comes a day you’re gonna have to decide whether it’s about you or about the work.

  36. Donna Brewington White

    “Building the business largely means building the management team. They are one and the same.”I’ve never heard it said quite this way but this says it so well. This phase seems like a whole new entrepreneurial endeavor within the process.  There is something very exciting about watching a team come together, watching a company take shape.  Very inspiring post, Fred.  Of course, this would be my favorite phase. ;)P.S. Since I didn’t get to read this post before the SOPA blackout, I felt it more acutely. Was literally watching for the site to come back up. I’ve got it bad.

  37. Richard Du

    I focus THREE Ps:1. People2. Product3. PresentationYes, great people are the key for any organization in the past, today, and tomorrow.Richard Du 

  38. Matt Straz

    This has been an incredibly useful series of articles, Fred.  Thank you!

    1. fredwilson

      just wait for the guest posts

  39. Allon Yosha

    Fred, reading this article (… on Israel in the Economist made me think of your post here. It seems Israel really knows how to execute Phase 2: Building the Product as opposed to Phase 3: Building the Company. What do you think?

    1. fredwilson

      i will read it and get back

  40. Carl J. Mistlebauer

    “Don’t spend a lot of time reading blogs. Or TC. Or whatever. Or rather–know when to stop. In one of my ventures I read way more than talking to customers, obsessed with figuring it out or finding the magic bullet, some pearl of wisdom that someone blogged about that answered everything I needed…”Love this one Charlie!The “magic bullet” and or “wisdom” comes from doing or trial and error…..

  41. Arvid

    Your penultimate point is well-put. While you always need to leverage your network to recruit talent, doing so without structure and process is a recipe for chaos. If the roles are defined properly, the best talent will often start doing the job during the interview process. 

  42. LE

    “I read way more than talking to customers, obsessed with figuring it out or finding the magic bullet, some pearl of wisdom that someone blogged about that answered everything I needed. Wrong. Talk to prospects, customers, lost customers, lost prospects.”Couldn’t agree with this more. And I’m reminded of this every time I answer a question about something that is even more concrete than “managing” and how hard it is to cover every situation and possibility in the answer that I give.  Because each situation is different and I don’t even know all the facts.   Some things lend themselves to reading and learning easier than others because the answer is more concrete (like math) vs. “this is the best practice for securing web input” or “here’s how to make sure a lawyer is the right fit for your company”. Business magazines are big on those “how we did it” articles trying to reduce down things that make it into print because they sound nice as the pearls of wisdom that you are talking about.  And of course they are always written after the fact with success or failure not taking luck or other circumstances into account. Or being so circumspect as to be worthless.Talking to your customers is what counts. Or of course the customers of your competitors. Even before you sell a product or have a company. One company I was evaluating sold a product that was targeted to college bookstores. So I set up a meeting with the purchasing agent at a bookstore before buying the company. I wanted to know what he thought of the product but I also wanted to know how hard it would be for me to get the product into the bookstore if I hadn’t had this meeting first for a different reason. In other words “how often are you approached by vendors and how tough is it to convince you” so I could gauge how difficult the sales effort would be in other bookstores. By the way if you are reading this and you don’t often have similar or different unique ideas on how to do something  that you haven’t read somewhere you may not be cut out to be an entrepreneur.  

  43. LE

    “I read way more than talking to customers, obsessed with figuring it out or finding the magic bullet, some pearl of wisdom that someone blogged about that answered everything I needed. Wrong. Talk to prospects, customers, lost customers, lost prospects.”Couldn’t agree with this more. And I’m reminded of this every time I answer a question about something that is even more concrete than “managing” and how hard it is to cover every situation and possibility in the answer that I give.  Because each situation is different and I don’t even know all the facts.   Some things lend themselves to reading and learning easier than others because the answer is more concrete (like math) vs. “this is the best practice for securing web input” or “here’s how to make sure a lawyer is the right fit for your company”. Business magazines are big on those “how we did it” articles trying to reduce down things that make it into print because they sound nice as the pearls of wisdom that you are talking about.  And of course they are always written after the fact with success or failure not taking luck or other circumstances into account. Or being so circumspect as to be worthless.Talking to your customers is what counts. Or of course the customers of your competitors. Even before you sell a product or have a company. One company I was evaluating sold a product that was targeted to college bookstores. So I set up a meeting with the purchasing agent at a bookstore before buying the company. I wanted to know what he thought of the product but I also wanted to know how hard it would be for me to get the product into the bookstore if I hadn’t had this meeting first for a different reason. In other words “how often are you approached by vendors and how tough is it to convince you” so I could gauge how difficult the sales effort would be in other bookstores. By the way if you are reading this and you don’t often have similar or different unique ideas on how to do something  that you haven’t read somewhere you may not be cut out to be an entrepreneur.  

  44. fredwilson

    i need a copy editor. but we knew that already

  45. Donna Brewington White

    Really like the points made about hiring,  A lot of thought needs to go in up front — before recruiting.  I shudder when I hear, “I’ll know it when I see it.”  Much better to first define the target and then go after it. Really, really agree with avoiding “I know a guy.”  Rolodex recruiting may cause you to settle rather than going after the right person.  Even as a recruiter, I try to avoid this.  (As a general rule, if you hire a recruiter, don’t go based on his/her “rolodex” so much as the ability to HUNT and to assess the fit — both qualifications and cultural.)High EQ results in much better hiring, so make sure someone with high EQ is involved in the process.Anyway, just a long winded way to say “what he said.”

  46. Carl J. Mistlebauer

    I talked to a group of entrepreneur majors at the local university a couple of months ago, and they really envision starting and running their own companies is like driving a convertible with the top down on a beautiful day along California’s coastal highway.You can just hear it in how they pick the words they do and see it in how their eyes light up when they talk.I tell them that they need to understand that entrepreneurship is like driving a car down a long lonely country back road at night during a raging blizzard and you just found out that your windshield wipers are really in bad shape….You better keep your senses keen and your eye on the road or you will end up in a ditch being forced to walk the rest of the way….

  47. JLM

    The recapture of lost business is one of the biggest secrets of successful businesses.It is a secret and an arcane art form magical because your lost customer was once upon a time yours to lose — and you found the way to do it — and because it requires more than a bit of humility to engage and rebuild the relationship.This is a metric that a good business should follow carefully as it provides both intelligence upon why the business was lost in the first place but also because it can have a recapture rate as high as 30%.People want to have their business earned and this is a way to do it with a group of customers who have already tried the product.

  48. Carl J. Mistlebauer

    Whew!  The college bookstore market!  That is one of the toughest markets to break into I have ever seen! I even let a salesman talk me into joining NACS and setting up a booth.  Well, I am glad I attended that show because within the first two hours I realized that this market had to be approached from a totally different angle.

  49. JLM

    Haha, I hope you didn’t tell them that, Carl, or you would have scared the crap out of them.  They will all become auditors.I have often thought that the most important qualification for being an entrepreneur — not a successful entrepreneur, just an entrepreneur — is the ability to withstand days, months and years of travail and to enjoy the struggle.It is the struggle and the sense that there are no footsteps in the snow to follow that makes one an independent and critical thinker and most importantly, a doer.The entrepreneur is the guy who undertakes the trip without the benefit of a map, compass or GPS and still knows where he is going though at times he is hopelessly lost.  Don’t be afraid of being lost as long as you know you are lost.

  50. LE

    “I talked to a group of entrepreneur majors at the local university a couple of months ago”How many of them were looking to “change the world” or “make a difference”?

  51. Carl J. Mistlebauer

    Whenever I speak I always take along a handout, included in the handout with a list of blogs I recommend, and AVC is on it. I also include things like Code Academy and the various start up incubators that I am aware of.Now, for the introduction I hope I have your permission to include this comment in full and I will even include your full name…If you and I teamed up we would probably be the demise of the entrepreneurship program! :)But when I had an internship program, I would always tell them it wasn’t a program, it was boot camp!

  52. Riley Harrison

    “The entrepreneur is the guy who undertakes the trip without the benefit of a map, compass or GPS and still knows where he is going though at times he is hopelessly lost.” As Daniel Boone once said “I’ve never been lost but I was once bewildered for 14 days”

  53. Carl J. Mistlebauer

    Short answer? None.That is one of the big problems I have about “teaching” entrepreneurship and creating a major in it or about it.How do you “teach” vision? passion? Wanting to make a difference?Without that then what good are classes in Entrepreneur Accounting, Management for Entrepreneurs? Which are names of real classes.That is why lately I am focused on the idea of creating an innovation or idea “pit” rather than a center or a program. Someplace where the kids at this college can hang out and explore, think out loud, and collaborate.

  54. Carl J. Mistlebauer

    I am probably going to get in a lot of trouble with this one, but I am going to say it anyway:I think this is one of the biggest perils of an internet based business.  You work real hard to build your customer base, then once you reach a certain plateau customer service becomes an algorithm and customers become a statistical record in a database.Three times I have gotten involved with companies that “moved on” from their loyal customers only to regret it.  Besides humility and engagement, it takes sincerity, hard work, and commitment.  Commitment in the sense that you never ever want to have to do this again.  Since I am the world’s worst sales person having to make these trips were a real nightmare for me; but when its the difference between making payroll and not, you gotta do what you gotta do.When you are successful, THAT handshake is probably the most powerful handshake you will ever give another person.

  55. LE

     I had bought a small business for my wife (now ex wife) to operate which was a coupon book of businesses catering to college students. So we were already in the bookstores in our college town.  What I wanted to know is if the other product (it was like a book bag) could be sold to other college stores all over the country.The bookstore manager had the hots for my ex wife so he let us in the store and kept the much larger competition outside giving out their coupon magazine. We got distribution right next to the cash registers as the students passed by.  One of those ways that business works that they don’t teach you in business school. 

  56. LE

    “Since I am the world’s worst sales person having to make these trips”Now, on your disqus tagline you say:”Currently seeking funding for a company that I think is an obvious home run but I cannot seem to convince anyone else!”So it seems that at the very least you need to team up with someone who can sell your idea to investors as well as wear the sales hat in your new operation.

  57. Carl J. Mistlebauer

    LE,When I walked into the convention center and realized that our little 10×20 booth was surrounded on all sides by Russell, Champion and the big names in collegiate apparel and their booths were mega booths I knew right then and there that we probably needed a “Plan B” and that was set up day…the show didn’t begin till the next day.Nothing like having to motivate your staff for what is already obviously going to be “Custer’s last stand!”Yep, entertained bookstore managers for three days as they congregated in front of my booth waiting for their appointments in the other booths!To add insult to injury, at the close of the show, the head rep for Champion came over and introduced himself, his wife was the national sales manager for a company in Florida we had just acquired! Nothing like having your competition kick you when you are down with a “…HI! You know my wife, she works for you!”

  58. Carl J. Mistlebauer

    One day I am going to write a book and it will be funnier than “A Confederacy of Dunces (.…Once I realized that I had survived the financial meltdown and moving production off shore and business actually was growing I took my plan to my old friend, a banker and I told him what I needed and he informed me that the most he could go was $250,000 because they, a bank, had no money and they were not doing any loans to businesses. So, this was my “financial professional”So I financed operations myself.Then I decide its time to hit the B2C as I had always intended and jump from old economy to new economy, since I am young and plan on living awhile.I also wanted a board of directors who had skin in the game and EXPERTISE in particular areas that I do not have (tech/social media, marketing, and MBA/finance) because I love to listen to people with experience I don’t have.So, I put it all together and off I go hitting VC firms and Angel investors….AS DUMB AND NAIVE AS HELL!Now, most of the folks I know are much older than I am and thus while I know people in finance, the world of finance has changed.I followed all the advice about decks and presentations and all of that and I made lots of presentations, met lots of really great folks and learned a lot.First off, big and tall translates to OBESITY. Its really tough to get people excited about investing in something that serves fat people; it is not sexy.Right now, everyone, particularly in my next of the woods, is looking for pure tech or big healthcare investments (call it the wannabe NYC/SV syndrome). While others would get real interested but then back out because they were already invested in CafePress and others.Then I also found out that a couple VC firms wanted to talk to me about some other apparel related investments they were looking at and thus they used the guise of being interested to get me to visit and play consultant.So, I decided a couple of months ago to move forward on my own as I was tired of trying to stick a square peg in a world of round holes. When everyone is starring in one direction looking for their next big investment and you come in from left field, well….Actually, I could have hit up friends and family, but I have no friends and my family has always hit me up to fund their follies…I would call this chapter of my book, “Jed Clampett does big city finance.”That still leaves the first issue of a board, and yes, folks with skill sets that I do not have, and as I am not that big of a fan of consultants I do have to figure out a way to make consultants my partners.As far as sales goes, yes I will need someone to handle B2C sales, but in regards to B2B, they are going to have to be comfortable taking a back seat for a while because most buyers want to deal with me as I have a 25 year reputation.Had I known what I was doing when I started you are absolutely correct and while I can present a dissertation of information on apparel, screen printing, the big and tall market, and obesity the truth of the matter is, investors don’t want that information.I need to change my disqus tagline to, “I gave you a chance and you pissed me off and now I am going to eat your lunch and show you how to make some real money!” :)Might need to have Fake Grimlock shorten that for me.