How to build a successful start-up
I started this series a while back with the 1st blog on Generate an idea (but remember that it’s worthless) followed by In-depth observe (not interview) 5-10 potential customers, including 2-3 “extreme users” and then Document your Plan A and Identify the riskiest parts of your plan and then Systematically test your plan, Get to release 1.0, Reach product/market fit, and Define your strategy and Scale and most recently, How to do the co-founder thing. I have copied the intro to the series directly below and you will then find part 11: “What is a great culture” – the subject of this post
Original intro to the series:
The goal of a founder who wants to create a big company is to find product/market fit in a large market – one that is at least £0.5B/$0.75B in size. Much smaller than that and a venture investors won’t be confident that he or she will get 10x on their investment (and note that it doesn’t matter at which stage you’re working, as if an early stage investor like us, we need to believe that we will be able to sell you onto a Series A/B investor who also has to believe he or she can get 10x and so on). It’s not right all the time, but it’s a rule of thumb.
The Lean methodology, thought up by Eric Ries and then evolved by many others, is the best way to work through the early stages to product/market fit.
We like Running Lean by Ash Maurya for a clear outline of what this entails.
What Ash excludes from his thinking is in-depth customer observations, as developed by IDEO, the design firm founded by David Kelley in Palo Alto, right next door to Stanford University, my alma mater, and a clear definition of “strategy” for the start-up.
(Overly) Simply put, we think a founder needs to take the following steps:
- Generate an idea (but remember that it’s worthless)
- In-depth observe (not interview) 5-10 potential customers, including 2-3 “extreme users”
- Document your Plan A
- Identify the riskiest parts of your plan
- Systematically test your plan
- Get to Release 1.0
- Reach product/market fit
- Define your strategy (Goals, Scope, Competitive Advantage, Logic)
- How to do the co-founder thing
- What is a great culture – the subject of this post
I will write a bare-bones explanation for each of these 11 steps with as many links and references as I can so you can read better writers’ thoughts on the subject.
Here we go: WHAT IS A GREAT CULTURE
You surely know how important a strong culture is in any company, especially a small company which is what your start-up will be for the time being.
When we hired Ash, our investment manager, we had 4 great candidates on our short-list vying for the role. All were eminently qualified to work with us in terms of intellect and relevant experience and passion. We suddenly realised, as we were getting close to having to make a decision, that it was CRUCIAL that we would enjoy hanging out with Ash out of work and in the down-times at work. This meant that he had to fit in with our culture. Pretty easy to test – drinks and dinners out before offering the job. Any of you who have had the good fortune of hanging out with Ash will know that he’s a riot and fascinating to boot. Who decides to do their undergrad in France without speaking a word of French and then heads out to Georgia to do a post-grad. Can you imagine pulling off being an Indian with a French’ish English accent in Georgia? Takes character. And it’s fun to work with characters.
Exactly the same goes for our new Partner Paul and our Marketing Exec & EA Jess. Our Christmas dinner is something I’m really looking forward to, not dreading. I’d enjoy sitting next to all of my colleagues on a long-distance flight. This is what cultural fit feels like.
So, cultural fit means hiring people who fit your culture. So far so good.
How do you design for a good culture?
A great team has 3 legs, and if any one is missing, the stool won’t stand up:
- A strong leader, respected by the rest of the team – in our case Simon, our Managing Partner. Hard not to respect his track record and his work ethic and love of his job are unparalleled. Tick.
- Individuals who are intellectually able to deliver and passionately able to deliver. True of us all, we like to think. Tick
- Cultural cohesion. Already covered. Tick
What makes for a great culture? Greg Gottesman came up with this great list to which we have added a few:
- No politics – really hard in a big organisation, but easier and even more important in a startup. How best to to ensure this – frank, honest communication and regular 360 degree feedback.
- It’s not a job, it’s a mission – you won’t be able to hire the best people in the early days without having this missionary ethos flowing through the organisation. As you grow it becomes less important and many, particularly in sales and engineering, may well fit it perfectly well even if they are really just motivated by the salary and complexity of the tech respectively.
- Intolerance for mediocrity
- Watching the pennies (careful with those Apple screens….) – all within reason. It’s really important to spend wisely, especially on tools that make your business more efficient. Just don’t over do it and remember, it’s usually hard to raise money, and when you are doing so, having more in the bank account gives you the upper hand, not the investor. So you have to make what you have last
- Equity-driven – ultimately paying someone more cash and less equtiy will be cheaper for you as a founder in the long-run because your equity will hoepfuly be extremely valuable, but I do encourage using the option pool to motivate the team. Not too liberally, but it’s there for a reason. Some companies give options (with suitable vesting terms which are critical) to every employee which is a personal choice. It’s neither a good nor bad idea. Just make sure you have enough in the tank to incentivise the star hires.
- Perfect alignment – comes from….
- Good communication, especially in bad times – ensuring everyone in the company knows exactly what the strategy is, and making sure they think about how every decision they make aligns with that strategy is critical. They will hear the bad news through the grape-vine – better for it to come out of your mouth as CEO in a way you want it communicated than via rumours….
- Strong leadership – impossible to give a few lines of explanation for this. A million books written about it. One of my favourites is the One Minute Manager.
- Mutual respect – obviously
- Customer-obsessed – I think it’s hugely useful to in-depth observe your customers regularly.
- Data measurement obsessed – “if you can’t measure it, you can’t manage it”. Do not trust your intution if data exists to give you evidence. Thinking Fast & Slow is an incredible (and dense and long) book on the subject. Highly recommended by us and by the Nobel Prize committee!
- High energy – led from the top
- Fun – obviously
- Integrity – obviously
When we are looking to invest in a startup, cultural fit with Episode 1 is extremely important – even more so than you might imagine. We spend a lot of (sometimes quite intense) time with our CEOs and if we don’t get on, enjoy mutual respect and clear communications, are aligned, can have fun together etc etc then our job won’t be much fun. You have to get on with your investors, I believe, to have an effective Board relationship. Sometimes the relationship will turn sour, but if you go in with a good relationship, at least there’s a chance!
In writing this I realised how nebulous and complex a subject Culture is and I’m not particularly happy with what I’ve written as it feels like it only scratches the surface. If you have useful thoughts to add please do as I’d like to read them. Please state your position and company for context. I hope this has been somewhat helpful at least.
And finally, althought this is post 11 or 11 in this searies, you should move next to Simon’s post on running a great Board: http://www.episode1.com/episode-1-advice-on-board-meetings/
 Greg Gottesman in Do More Faster by Cohen/Feld; Wiley. Page 96-98