Posts from management

Bolster Your Management Team And Board

I have had the great pleasure of working with Matt Blumberg and the senior leadership team of USV’s former portfolio company Return Path (which was sold in 2019) for much of the last twenty years. Matt and many members of his leadership team got the band back together early this year and started a new company called Bolster in partnership with Silicon Valley Bank and the early-stage VC firm High Alpha. A few months later, USV joined that investor group along with our friends at Costanoa.

Matt is a great CEO and has even written a book about leading and growing a company called Startup CEO. Their new company Bolster is all about scaling and building a great management team for your startup. The Bolster team believes that scaling a high growth company means that you need to adapt, grow, and supplement your management team continuously along the way. And a big part of doing that is accessing “fractional talent” which means people that don’t work for your company full-time and permanently. All of this is outlined in the Bolster Founding Manifesto which explains why they started this company.

Fractional talent can be a fantastic independent board member, fractional talent can be a CFO mentor for your VP Finance that you want to grow into a great CFO, fractional talent can be a VP Product that can cover for your VP Product while they are on family leave, fractional talent can be a part time Chief Revenue Officer that you want to “date before you get married”, fractional talent can be a part time Head Of Insights that will allow you to understand if you need a full-time Head Of Insights. I could go on and on because there is no end in sight for the various ways a CEO can leverage fractional talent to make their company and their management team better.

Bolster came out of stealth and into a beta period today and is opening up its marketplace to companies that want to access fractional talent and to executives who want to work at high growth companies in interim, fractional, advisory, or board roles. Bolster also will allow venture capital firms and startup investors to participate in its platform as super users. If you are any of the above and want to engage with the Bolster network, you can sign up here. The full marketplace will launch soon.

We have already introduced Bolster to a bunch of USV portfolio companies and the enthusiasm for this model is really high. I love the idea of USV investing in a company that can help our portfolio companies do things better. We have done that before with Twilio, MongoDB, Carta, Sift, and a host of other companies. It’s a double whammy and it pays off in so many ways.

#entrepreneurship#management

Pay and Precedent

We are finally in an era where an equal role comes with equal pay. This is a very good thing but it comes with some hard lessons. One of them is about pay and precedent.

You cannot make a hire and a compensation commitment without thinking very deeply about the precedent you are setting.

Let’s say your company is now fifty people and you can see that you will need to be a hundred and fifty people in a couple years. You decide it’s time to build a proper senior leadership team. And you want to start with a CTO. That first “C level” hire will set a precedent for what you should be prepared to pay (in cash and in equity) for all of your C level hires. You do not have to pay every C level executive the exact same amount but they need to be in a band and I would argue that they need to be in a tight band. And there needs to be a strong rationale for the compensation for each role.

Let’s say you are bringing on your first independent director and that person is so great and you want to give them a very generous equity grant. You can do that but you should know that you ar setting a precedent for what the next independent director will get.

Let’s say you want to bring on a mentor and advisor for your VP Finance to help her “level up” to a CFO. That advisor will want and should get some equity compensation. What you do for that advisor will set a precedent for all other advisors you bring on.

Many times I hear founders say “this is good enough for now and we can fix it later.” But fixing compensation issues later can be very hard and sometimes impossible, particularly if your company significantly increases in value between the problem you want to fix and when you need to fix it.

These are some of the most painful errors you can make in a startup. It is very important to be thoughtful, diligent, and precise in your compensation decisions and approach and you have to start early in a company’s life. Getting a strong and experienced head of people onboard early on will help you avoid these issues. And trust me, you want to avoid them.

#entrepreneurship#management

Reviewing The CEO'S Performance

The CEO is an interesting case when it comes to performance reviews. They manage an entire company and they specifically manage the senior leadership team. They do not have a single reporting supervisor. They report to a Board. And that Board may, like the team they manage, have differing views on their performance.

Also, some executives are strong at managing down but weak at managing up. And the reverse is often true, where an exec is great at managing up but weak at managing down.

A failure mode I have seen in CEO reviews is when a Board thinks a CEO is doing well but they are not and that CEO gets a strong review. I’ve seen the opposite when a CEO manages up poorly but down well and they receive a weak review from the Board.

Given all of that, this is what I have learned to do.

1/ Schedule a CEO review cycle with a regular frequency and stick to it.

2/ Review compensation at the same time that performance is reviewed. If performance is reviewed more than once a year it is fine to only review compensation on the annual review cycle. Do not review compensation without doing a performance review at the same time.

3/ Have a third party (a CEO coach or some other skilled facilitator) interview all of the CEO’s direct reports and all of the Board members.

4/ I like to have the facilitator interview the direct reports first and provide that data to the Board prior to interviewing the Board members. This ensures that the CEO’s performance inside the Company informs and colors the Board members’ feedback. This is the best way I have learned to mitigate the “manage up well, manage down poorly” issue.

5/ The third-party facilitator compiles a review report and shares it with one or more Board members. If there is a Board Chair, she should be part of this part of the process.

6/ The Chair and possibly one other Board member (the Comp Chair if there is one) meet with the CEO, go over the performance review in detail, and then address compensation in light of the review.

This is a time intensive process and must be done thoroughly and with care. The stronger and more experienced the third party facilitator is, the better. You cannot skimp on this work. It might be the single most important thing a Board does on an annual basis.

Feedback is so important to ensure that a leader develops in the role and functions at a high level. In my experience, CEO feedback is often an afterthought because no single person owns the responsibility. If there is a Board Chair, she owns this. But otherwise, it can be a shared responsibility that falls through the cracks.

As Board members, we can’t let that happen. We owe it to the CEOs we work with to give them clear, regular, and accurate feedback. And this process (above) works well to do that.

#management

Working Virtually

Many of us have been working from home or some other remote location for over three months now. We have learned a fair bit about this approach to work and we have more to learn in the coming months. I don’t think we will be done with remote work until the pandemic is over.

It has taught me three conflicting things:

1/ I can be a lot more productive working remotely than many of us believed before the pandemic

2/ Those with kids at home don’t experience the same productivity boost

3/ I can’t wait to be back working together in person

On the first point, I am able to get a lot more done in a day working remotely than I am able to do in the office. I now regularly do days with ten to twelve meetings/calls/videos. I don’t think I was able to do that in the office.

I have also found it easier to find time for work that requires a lot of focus (writing/modeling/analyzing/etc).

And I’ve been much better at keeping my inbox and other communications up to date and current.

And I can do all of that while making time to go biking, do yoga, meditate, etc.

It is a revelation to me how productive I can be working remotely, particularly when our entire team is doing the same.

All of that said, my friends and colleagues with kids at home have not experienced the same productivity boost. They get some of the benefits of working from home, but they also face distractions, double duty, and more. If we cannot reopen schools in the fall, it is going to be a very challenging time for parents.

It is also the case that I miss the feeling of being together with my colleagues. Today we will spend four to five hours on Zoom in our weekly team meeting. It is way more enjoyable doing it in person around our conference table.

Reconciling these conflicting realizations will be the key to what happens when the pandemic ends. I am certain that we will all want to retain some of the convenience and productivity that comes with working remotely. But I am equally certain that we will want to work together again.

#Current Affairs#management

Board Diversity

This is a topic of great importance and one that we in the tech/startup sector have not done a good job with. We wait until a company is ready to go public and then address it. While that is better than nothing, it is not good enough.

The board diversity problem is a symptom of a much broader problem around lack of diversity in founders that get funded and lack of diversity in VC firms. Most startup boards are made up of a few founders and a few VCs. No wonder you have no diversity on the board.

Here are some suggestions for addressing this situation. I am working on this in my portfolio and USV is working on this in our broader portfolio. We are not control investors so this is a process of advocacy and persistence. This post is a part of that effort.

1/ When a startup board is created, there should be two independent seats on it. Day one. I know that will mean that founders will be unable to control their boards early on but these “independent seats” can be nominated by the founders to allay those concerns. And founders should put diverse people (gender, race, life experience, etc) into these independent seats.

2/ VCs should accept observer seats instead of board seats when they invest in companies. Boards don’t need three or four VCs on them. One is often enough. Two maximum. Instead VCs should negotiate for an observer right and the ability to nominate an independent director. And they should nominate diverse people for those seats.

3/ There should be term limits on board seats. Nobody and no investor should have the right to sit on a board forever. I could argue that in some situations, the founder might be the exception to this statement. That does not mean a valued board member should step down. That valued board member can always be asked to serve another term. What term limits do is raise the question about whether a person is the ideal board member for the company for the next few years. Often the answer is no.

4/ We need more resources like The Board List, Athena Alliance, and ELC to surface great board candidates. One of the many problems with boards that aren’t diverse is that they are not well connected to diverse candidates.

5/ We must commit to addressing this issue and make it a priority. Board development in general is not a high priority for founders. They are rightly focused on their company, their products, their customers, and enormous challenges of building a business from scratch. But boards are important. They need to be a priority and a diverse board is a better board for everyone. So we need to increase our efforts here.

Ten years ago the the tech/startup/venture industries started to make gender balance a priority in management teams, boards, and the venture capital industry. While we are not where we need to be, we have made good progress. We can do the same with diversity across the board. We can use the same approaches and the same persistent approach to the issue.

I am committed to making this a priority with the founders and companies I work with and I hope that all of you will too.

#entrepreneurship#management#VC & Technology

Leading Virtually

Most (all?) of our portfolio companies have been working remotely for over three months now. So have we at USV.

The initial experience with remote work has been mostly positive. The typical comment has been “we are doing a lot better than I expected.” Productivity is up in some places, down in some places, but overall our portfolio companies have adapted to the remote work model quickly and well.

But three months in with no end in sight is starting to wear on companies and I am sensing that the challenges are mounting. The trio of crises we are experiencing; a public health crisis, an economic crisis, and a racial injustice crisis, has everyone on edge and overwhelmed.

Leading a company in this time is very hard. My job mostly entails talking to our portfolio company leaders and I am hearing that they are yearning to be able to walk the halls, look people in the eyes, stand in front of the team, and talk to them face to face. But that is not happening any time soon.

So leadership in this moment means giving everyone a sense of belonging, letting them know they are being heard and that they are valued, and doing that via Zoom, Slack, email, and other software tools. This is uncharted territory for most leaders.

Here are a few things I am hearing that are working for some:

  • More frequent short checkins with the entire team
  • One on ones with people you don’t normally do one on ones with (skip one or two or three levels)
  • Leaning harder on the leadership team to help lead the company
  • Giving more time off to the team (shorter days, shorter weeks)
  • Celebrating more (birthdays, anniversaries, accomplishments, ship dates, etc)
  • Being yourself

I am curious to hear from all of you on what else is working in this challenging time. Please reply below with the “Discuss On Twitter” button and share with me and everyone else. And if you’d like to see everyone’s suggestions, you can click on the “View Discussions” button.

#Current Affairs#management

Leadership Has A Price

We’ve been watching the ESPN series The Last Dance along with something like 6mm other fans who are watching it right now. It is a reminder of how dominant Michael Jordan was in the 90s and what a special player he was.

I woke up thinking about the last three minutes of episode 7 which dropped last night.

Michael is asked if his intensity has come at the expense of being perceived as a
“nice guy.”

He gets pretty emotional and says “Winning has a price and leadership has a price. I pulled people along when they didn’t want to be pulled, I challenged people when they didn’t want to be challenged. I earned that right.” … “Once you joined the team, you lived at a certain standard that I played the game. I would not take anything less.” … “One thing about Michael Jordan is that he never asked anyone to do anything that he didn’t do.”

It’s a great piece of television and captures the essence of the man, how competitive he is, and how emotional he is about it all.

It also captures the burden of leadership and what is required to get everyone to commit to each other and be the best that they can be. Leadership is not being liked. Leadership is being respected and followed.

And the last three minutes of episode 7 capture that so well.

#management

Growth

One of the great joys of the work I do is I get to watch the leaders of our portfolio companies grow over time.

I’ve had a number of moments over the last few months where I got off a call or a meeting and thought to myself “wow, she’s a new person.”

Growing as a leader takes time, mistakes, failure, feedback, and a lot of work. You don’t magically show up as the CEO and you are good to go. It’s not like that at all. The authority to make the final call doesn’t mean that you are good at it and that people will line up behind your decisions.

It is a process and like all processes, it requires time and patience. But for those who are committed to personal growth, there is a path.

Two syndromes I see quite frequently are “deer in the headlights” and “I’ve got this.” They are both tell tale signs of a leader who isn’t there yet.

Deer in the headlights is pretty obvious to everyone. The leader just doesn’t seem steady and solid. You can see it in their eyes. I like to provide a leader with deer in the headlights syndrome a lot of support, advice, and constructive feedback. I have seen people go from deers in a headlight to strong decisive leaders in less than a year. It helps to have a gauntlet or two to have to run through. The greater the challenges the deer in the headlight faces, the more quickly they can emerge as a strong leader.

“I’ve got this” is more problematic. The leader acts like they know what they are doing, but they don’t. And everyone around them knows it except them. I like to provide a leader with “I’ve got this” syndrome with a lot of tough love but that is usually not enough. The answer to “I’ve got this” is usually failure of some sort, often a very significant one. The key is to be there for the failing leader in that moment and help them get through the failure and come out of it with self awareness and a desire to address the issues that have gotten in the way.

These are just two of the immature leader syndromes, but they are two very common ones I have seen.

I believe that most people have the capacity to be leaders if they want that for themselves. I also believe that leadership is a skill that you never stop learning. And I believe that it requires self awareness, courage, and deep empathy.

Sitting at a table and watching a skilled leader work is quite a sight to see. And watching someone grow into that person is one of the great joys of my work.

#entrepreneurship#life lessons#management

Event Driven Growth

I realize that most businesses are suffering greatly in this pandemic. Many have been shut completely.

But there are some that are experiencing the opposite situation. They have a growth spurt as a result of this moment. Businesses in food delivery, e-commerce, online education, telehealth, remote work, and cloud infrastructure are examples of such situations.

I’ve seen event driven growth spurts over the years. A plane lands in the Hudson and everyone heads to Twitter to see it. A competitor is shut down and everyone shows up on your door. Crypto gets hot and everyone wants in on the action. That sort of thing.

And I’ve been talking to leaders who are experiencing this and wondering how to model out what happens when and if things return to normal.

Each situation is different but a framework I like is to take your pre-event baseline, your event driven peak, and assume you will give up half of the delta when things return to normal and that will be your new baseline.

That won’t be right of course. It’s a model. You can revise as real data comes in.

But what it suggests is that not all of your new customers will stick around. But some will. And you will have a new and higher baseline. That has been true of almost every event driven growth spurt I have seen in my career.

#entrepreneurship#life lessons#management

Marketing During A Crisis

One of the most fascinating things I’ve been watching is how the 80 something USV portfolio companies are adjusting their marketing strategies during this pandemic.

It is all over the map, based on the unique situations of each and every company, with some pulling back on marketing, some accelerating it, and some keeping it more or less the same. Even the ones who are not changing marketing spend are changing their marketing mix a lot.

Digital/performance marketing, whether online or on TV (where there is a lot of targeted performance inventory now – talk to our portfolio company Simulmedia if you want to see for yourself) is really showing its stuff in this downturn as it is responsive to changing demand. Keywords/search is a great example of that. If there are fewer people searching for what you are selling, there is less spend. There are many digital/performance channels that work similarly.

Marketing costs have come down dramatically in some channels and companies are taking advantage of that to grow their customer bases and market share. But some channels have gone the other way with increased marketing costs. If you are selling something that everyone wants right now, it may cost you more to reach customers right now.

Making sense of all of this is not easy but important. You may have big opportunities that you are missing. Or you may have big problems you aren’t seeing.

Which is why I’m going to tune into this webinar by my friend David Steinberg and his friend John Sculley on Thursday at noon eastern. Full disclosure, USV is an investor in Zeta Global where David Steinberg is the CEO. I’m curious to hear about how their customers are operating in this environment and what is working and what is not.

#management