Early traction and a passionate user base is usually a very good thing. It can also kill you if you look at it the wrong way.
Here’s what happens a lot. You launch something, get some good early traction and a still relatively small but passionate user base. Folks love your product. They are confirming your view of the world.
All of a sudden, product decisions are not only made in terms of “how do we grow” / “address a big market” but also “let’s not break this” / “let’s not piss off our users”, etc.
However you may have just hit an early adopter base that exhibits entirely different behaviours than the much bigger mass market you actually want to address. That user base may not be very valuable at all. You may have to really piss them off to address a much larger user base. Facebook pissed off a lot of early adopters. Twitter pissed off a lot of early adopters. I could go on.
Pissing off early adopters can be a very good and necessary thing.
By protecting them too much, you are just protecting a supposed value you don’t actually have.
A company has product issues. A new senior VP of product is hired. A company is struggling with its sales team’s efficiency. A new senior VP of sales is hired. Happens every day in our world and in many cases makes a lot of sense.
What does not make sense is to treat these new senior hires as if the (product / sales / etc) messiah personally has arrived at your company. This is easy to do. You are hurting. Nearly every change will appear as “ah good finally things are improving”. Appear.
To treat new senior hires this way is bad mainly for two reasons:
- Even the best person is going to take many weeks, months to have an impact at a company. By putting them on a pedestal too quickly (I have seen boards do this a lot), by all of a sudden contributing any / all changes to this person – you are really demotivating the current team. It is highly likely that any changes / progress you see (esp on product) briefly after this new person has arrived is due to stuff the existing team had been working on.
- It is also unfair to the new senior person just hired. They will need to acclimatise, learn, make mistakes, etc before they can really make an impact. They need time too. If you put so much pressure on from the 1st minute they are surely going to disappoint.
So when you hire a new senior person, remember to give the existing team some credit and the new girl / guy some slack.
I saw this on twitter a while ago and I loved it:
Not only does this apply to products, but also to features within products. Every day, every week our companies are building new features and releasing them in to a small beta group to see if they latch on. Quite often the feature implementation will just be pretty rough / bad and folks won’t engage with that feature. It is then tempting to conclude that the feature is not desired when the answer is that even for a quick beta release it needs to be a minimal viable feature.
I have been a culprit in this department but want to make a big effort in being more thoughtful in the future. Bad things can happen when a board is so forceful on encouraging the founding team to make new senior hires that it becomes a blind mission. You need a new CXO. We need a new CXO. A new CXO will be hired asap at nearly any cost. I have seen teams do it more or less just to please the board, although they didn’t really believe it was the right hire – or the right timing, etc. If board and team are not aligned you really owe it to the company to understand why. We may just disagree and that may be fine. We may also just not be paying enough attention to each other and about to make a costly mistake that will also undermine trust between board and the team.
That is the highest price to pay.
Don’t get me wrong: adapting the team, making senior hires, tough decisions around folks leaving the company, etc are probably the most essential elements of building a company and a natural (and often healthy) source of friction between board and team.
But let’s step back and look at 2 cases that usually trigger the board to suggest a new hire (of course at most companies the team is ahead of the board and already has suggested this):
- There is a specific / clear need identified by the board “hmm at this stage we really need a CMO who can do X, we’ve seen this movie and you are going to need someone like that”, or “we are really hurting on product and despite several attempts are still struggling, so we owe to the company to be thinking about a new head of product”, etc
- There is a general / non-specific feeling that “the team is too junior”, we “need some more experienced C-levels to take the company to the next level”, etc
1. is always easier in my experience. However it still requires a deep understanding of why we have developed that need and if a new CXO looks like an easy silver bullet or maybe the tough answer is that you don’t new a new CXO, but 5 more experienced product people to work with the existing CXO and he has not had the budget for it to date. It is so easy to call out for a new CXO and so hard to really dig yourself in to the details of why, how, whom, etc. But you have to.
2. can be a real nightmare because often the board will say something like “ok we need an experienced COO”. If the team pushes back often the boards reaction will be “OK then a senior CFO”, “eh, OK VP Biz Dev” (I am simplifying to make a point – but it can get to this). This must be avoided at all costs because it is random and harmful and you have no idea what you are doing. If the board feels we are lacking edge / experience across the team you absolutely have to break it down in to very specific hiring needs that are logical and explainable and that ideally can be agreed upon. Avoid randomness at all costs if you want to maintain any credibility and not harm the company.
So when it comes to senior hires I have learned that every now and then the board is going to have be forceful and we may disagree with the team. However I am only willing to do that after I have done a lot of listening, a lot of analysing, a lot of thinking. A lot more then I used to do.
The first wave of Berlin startups was predominantly German MBAs, mainly first time entrepreneurs, building German companies often based on US role models for the German market (with some internationalisation later), backed initially by German investors. This wave has created billions of exits but is now more or less over.
The second wave was more original companies addressing global markets, more product and design driven, a large share of international (still mainly first time) founders and the occasional top tier international syndicate at later stages. This wave has produced several companies worth hundreds of millions but they are still comparatively young and my guess is will need another 12-24 months before we see large exits.
We are now firmly entering the third wave of Berlin startups.
The third wave is more geeky, more engineering driven, more enterprise, more open source, with a large share of serial entrepreneurs, more mature and already at early stages many good international investors backing them up. The third wave started over the last 12-24 months (with some companies having bootstrapped for longer and now raising their heads) but has already produced some really interesting activities across a few micro-clusters not everyone has on their radar screen yet:
- Developer tools / code ecosystem (e.g. RhodeCode , TravisCI)
- Bitcoin, block-chain innovators and similar (e.g. Bitbond, Ascribe)
- E-Health: (e.g. Clue, Klara , MediGo)
- Vertical enterprise SaaS (e.g. SmallImprovements)
- Security (e.g. Zenmate)
- Market infrastructure: (e.g. GoEuro)
- FinTech (e.g. SavingGlobal, No26)
- More next-gen adtech companies that I could possibly name
- IoT (e.g. Lock8, Relayr)
I did this off-the-cuff so I am sure I have forgotten to name a lot of micro clusters and startups, but you get the picture: the third wave is not going to be a one trick pony.
I am excited about the third wave because we have only seen the tip of the iceberg.
One of the things we learned as a team is that if we see a problem, a misunderstanding, etc – it needs to be addressed and fixed immediately. The same can be said in many other areas – that technical debt that is piling up, that employee you know you will need to ask to leave the company but are hesitating too, that redesign you are pushing out, etc.
Everything gets worse with time, exponentially. So the energy and expense required to fix the problem also grows exponentially.
Now I know not everything can be fixed immediately; but if it can – it should be.
Especially if you are passionate about your companies as an investor it is very easy to do this. Say the company is going through a rough patch. You want to help. You start kicking in to action: weekly calls to ‘help’, scrambling to make emergency hires, a firework of intros to people that can ‘help’, etc.
It is the right attitude and it works a lot of times. Sometimes however it is just making things worse and a huge distraction to the team. In those cases where the team has a good plan, the right capabilities and mindset you often just need to show you trust the team, give them confidence and get out of the way.
Otherwise you are meaning well but doing harm.