Sell before you Buy

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Many of us operate at work like we shop at a grocery store.  At a grocery store, we might smell the oranges, check which brand of cereal we want to try and contemplate what is on sale.  We’ll walk around, consider the options, and ultimately put the winners into our carts and walk out the door.

We know how to buy.

A lot of how we work comes from the same instinctual behavior.  We’re interviewing candidates before we sell them – considering them like the bucket of oranges. We are thinking about which software vendor to work with – a lot like those boxes of cereal. We are evaluating technical options – considering which one is the right balance of return vs. cost. We are qualifying sales opportunities – thinking carefully about – and sometimes over-thinking – the question of which one deserves our time and attention.

Fundamentally, we operate like buyers or consumers first. But here’s the issue if you are an entrepreneur or working at a startup:

No one in the world cares about you. You have no currency. You have no money. You’re lucky to have anyone spend any time on your business when there are so many successful companies to spend time with.

So, reverse how you operate. Sell first, buy later.

The “buy first” mentality comes from a large company orientation. Oracle can be in “buy first” mode since everyone knows them.  If you’re at a startup, and you try to “buy first,” you’ll be choosing from poor alternatives.

Let’s talk about specifics.  Suppose you’re recruiting, and you prioritize choosing among incoming resumes or interviewing the selection of candidates that are high quality from that group. Fundamentally, you’re choosing from poor candidates. None of the best candidates care enough about your startup to apply. Instead, focus your time on selling to the best people – spend 80% of your time recruiting them to interview and 20% of your time selecting.

Suppose you’re thinking about which of five potential features makes the most sense to build. You can spend a lot of your time evaluating which one is most doable (that’s “buying”) and then push it out to your teams to sell. The alternative would be to spend most of your time “selling” (or validating in product-management-speak) and then only evaluate feasibility on what you know would move the needle.

Suppose you’re meeting a potential vendor – a PR firm, a software provider or a law firm.  Our natural tendency would be to start by assessing them. However, the best vendors in the world fundamentally shouldn’t work with you, because you have a high probability of amounting to nothing.  Start the opposite way. Seek out the best vendors in the world and sell them on your vision and the future potential of your startup. Then evaluate.

Finally, let’s get to sales.  You’d think that the one group of people who would certainly be focused on selling are salespeople. But even in sales, how much time do we spend thinking about compensation plans, territory alignment, qualification, adherence to Salesforce, preparation for those meetings, internal alignment, qualifying deals vs. the pure act of selling – persuading someone to buy something they fundamentally don’t have to?  Of course, all of those are important activities but do they matter if we don’t have demand for our products?  Shouldn’t we be spending 80% of our time on the latter?

As startup leaders, we are not grocery store customers. We are grocery store clerks at the corner store competing against Wal-Mart, Safeway, Whole Foods and Trader Joe’s.  And the landlord is happy to throw us out.

Sell authentically. Sell often. And, sell before you buy.

Image from Farmer’s Market by Pabak Sarkar licensed under CC by 2.0

Building a Culture of Profitable Growth

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Silicon Valley is embracing the new reality of constrained VC markets, lower exit multiples for technology businesses, and a much more balanced perspective on risk versus return. As the cost of capital has gone up, both sides of the entrepreneurial ecosystem (investors and founders/CEOs) have taken predictable positions. Investors are a lot more bearish on funding, in large measure because the assumptions that underlie their Internal Rate of Return models are uncertain and they are busy funding portfolio companies. Founders and CEOs are engaged in belt-tightening – as we’ve seen from fellow SaaS companies Optimizely, high-flier Zenefits and a range of others. Internet businesses have arguably fared worse. A lot has been written about the rapidly narrowing mismatch between public and private company valuations.

The point of a business is to make money, and too few Silicon Valley businesses, including us at BloomReach, do.  As one CEO told me, effecting a culture change from unprofitable growth to profitable growth is “the hardest thing I’ve ever done.”

At BloomReach, we have set the course to achieve the triple play — the kind of recurring revenue scale that provides an ability to tap public markets, best-in-class growth rates, and profitability. We believe that’s what creates long-term sustainable value.  We just raised $56 million in capital, so some might ask – why are you worried about driving to profitability now? Now is exactly when we should be worried about it, so we control our own destiny and don’t have to make tough choices to achieve the triple play. Fortunately, we have the benefit of a natural history of capital efficiency and strong unit economics to help get us there, but I fully expect it to be really hard – maybe the hardest thing I’ve ever done.

Building towards profitable growth requires a metamorphosis in the culture of one’s business in so many ways.

  • Hiring: We intend to use the favorable hiring environment to hire extraordinary people, but we’re fully committed to raising the bar from an already high standard. The natural instincts of a growth-only business are to hire as fast as possible and against a “headcount plan.” That’s not what gets one to profitable growth. Every hiring manager must ask the question — “Is this incremental hire going to move the needle on growth or profitability? Is it going to meaningfully upgrade my team?”
  • Shorter-horizons on investment: There are a ton of good investments to be made, and in a non-capital constrained world, the question is — “Is this investment going to get us a return?” In a capital constrained world, the question is —  “Is this investment the lowest risk, shortest horizon, highest return choice?” Are your marketing programs the ones that have a history of results? Are your product investments sufficiently oriented to where the revenue is rather than where it might be? What’s the risk of achieving those returns?
  • Investments in productivity and cost-control: You only get to profitability if you spend less than you make. And focusing only on the top line is like fighting with one hand tied behind your back. The natural ethos of Silicon Valley is to build and sell great products. That’s important in any market environment. But what about productivity tools for your customer success team? Or initiatives that help bring down your Amazon Web Services spend? Do you celebrate those victories with the same passion as a new feature or product?
  • Leveraging teams in every geography: At BloomReach, we have teams in India, the U.S. and the UK. There is a cost to effectively leveraging teams globally, but doing so can make a huge difference in effectiveness and the cost structure. We built a significant product (BloomReach Commerce Search) in India. Of course, teams will always have good reasons for why proximity to HQ or the market matters. But the reality is, if you don’t leverage geographic diversity – you compound the profitability challenge.
  • Alignment within your executive team and your overall leadership: You’re not going to get to profitable growth if you’re doing it alone. As we started the journey towards profitable growth, our CFO pulled us all together to map out a range of scenarios (around growth vs. profitability) and we committed together to the mission of profitable growth. An aligned leadership team goes a long way towards good decision-making.
  • Just say no: At times, the decisions to not spend are really painful — a hire you’d really like to make, a trip you’d like your team to take, an initiative you’d really like to start. You’ve done all the context-setting possible but there will come a point on your journey where you’ll just have to say, “No.” It will be highly unpopular, but it’s necessary.
  • Answering the question,“Is the company in trouble?”: Not growing headcount super-fast can somehow feel the same as reducing your employee base. The psychology of the change from growth-only to profitable growth, requires over-communication of the message that growing costs at a slower rate than revenue growth is exactly the way for a successful company to win.  This is particularly true when certain teams are working on growth-oriented initiatives and others are working on profitability-oriented initiatives (important for each set to stay focused on their objectives).
  • Over-index compensation and culture initiatives on the great people you have: If you have a  dollar to spend, spend it on the key people you have that help make you great, and the environment around them that helps them succeed and thrive. At BloomReach we invest a ton in culture and citizenship. I’d rather hire a little slower and over-index on the proven winners than over-hire but sacrifice culture.
  • Getting rid of the growth-only mindset or marginal-contribution people: There are some people in your business who are only well suited for a growth-only mindset. You’re not going to change them. It’s time for them to move on. There are others who are OK performers, but not great – move on from them.
  • Don’t over-correct: In a drive towards profitability – your team can interpret your goals as only about profitability. That’s a mistake. Growth still matters a ton, it’s just got to be accomplished in a smarter manner.

The journey to bring the triple play to BloomReach is going to be a tough road, and it is one that is paved with good, balanced decisions. When the temptation to spend the extra money with an uncertain result comes up, remember that the ultimate choice you have to make is – do you want to subject your company to the whims of fickle financial and venture markets or do you want to control your own destiny? I want us to control our own destiny.

Image from Balance Scale by Sepehr Ehsani licensed under CC by 2.0

How Do Leaders Find their Inner Donald Trump

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Let’s start here:  I think it’s an abomination that Donald Trump is a legitimate political candidate for president.  There is very little that he has said or done that I agree with.  But if you step back, you can’t deny that he has exceeded expectations, drawn tremendous passion for his candidacy and been highly effective in countering predictions of self-destruction.  So what can we learn from his approach to the Republican nomination?

  • Be authentic:  Perhaps the number 1 reason Trump voters are attracted to him is that he feels unfiltered.  No reasonable Republican political adviser would advise him to attack George W. Bush in the state of South Carolina (where Bush is enormously popular) or boast about his billions of dollars.  In a political environment with so much spin, people value authenticity.  And Donald Trump just comes across as being willing to “tell it like it is”, with no sacred cows that he is not willing to take on.  Authenticity may be among the most important aspects of leadership.  The team may not always agree with you, but they respect authentic leadership and transparency.  At BloomReach, we’ve always believed in truth as a core value; it’s at the core of authenticity.
  • People love a winner and a battle:  We will destroy the other candidates.  We are going to win the nomination.  We are going to win on trade again.  We are going to win with our military.  We are going to win against Russia or China.  We are going to win against corporate interests.  The Trump candidacy is built on winning.  And winning works.  It works in the market and it works in leadership.  It’s important to convey confidence that the team is winning and that victory is inevitable.  While I’m sure Trump, like all leaders, has moments of self-doubt, he doesn’t convey them.  If the leader doesn’t think they will win, why should anyone else?  There are bogeymen everywhere in the Trump candidacy – Fox News, the Pope, his political opponents, Mexicans, Russians, ISIS.  Enemies can be tremendously galvanizing.  It’s a proven tactic in business – Oracle vs. SAP vs. Salesforce, Google vs. Microsoft vs. Apple, Facebook vs. MySpace.  Battles draw attention, focus the mind and force us all to take sides.
  • There is no such thing as bad PR: Press coverage of the Donald Trump candidacy has been unprecedented.  His statements are so bombastic that the press (and his adversaries) have no choice but to report on it and comment on it.  What does that do?  It brings him free media coverage.  It makes him the best interview on television. It also, as they say in politics, sucks all of the oxygen out of the room. We can learn a lot from that approach.  In a world with a lot of noise, breaking through is hard and many businesses can benefit from a more aggressive PR strategy simply to draw attention to themselves and away from their adversaries.
  • Outcomes, not details: Much of what bothers people about Trump’s answers to questions is that he consistently ignores questions of “how?”  He sticks to outcomes.  We will build a wall on the border and Mexico will pay for it.  How will we convince Mexico to pay for it?  Not relevant.  We will defeat ISIS.  How?  No answer.  We will create the largest number of jobs in the economic history of the country.  How?  No details.  But here’s what we miss:  Voters are ultimately electing leaders, not policies.  And most teams don’t see more detail as greater leadership.  The details are there to provide confidence in a strategy, and ultimately to validate the leader’s plan.  But just as so many political leaders are so focused on policy proposals, many business leaders are focused on strategy details.  We need to remember that too many prosaic details don’t necessarily inspire confidence in great outcomes.
  • Believable irrationality can work:  One of the underlying assumptions of the Trump candidacy is that he will be a better negotiator than anyone else – with Putin, on trade, with China and with anyone else.  Here’s the believable part of that.  Negotiating with an irrational leader is pretty hard.  How do you negotiate with the leader of North Korea when he may actually use a nuclear weapon?  Does anyone doubt that Donald Trump might actually be insane enough to threaten our relationship with Mexico or bomb the Middle East?  If he’s willing to say the many irrational things he does, maybe he is actually crazy enough to do those things.  And that probably puts him in a good negotiating position.  Business leaders can learn from that.  There are times where a little bit of irrational intransigence can benefit your company’s negotiating position.  Perhaps you’re negotiating a tough contract with an employee or a customer and you’re down to a final negotiating point, even a small one.  Try just completely walking away from the deal when your counterparty believes you’re close.  Your deal might just improve materially.

There is no doubt that the Trump candidacy has challenged the core values and assumptions of so many of us.  I’m embarrassed for our country that he is a legitimate candidate.  But even I can learn from an insane man.
Image from Donald Trump by Gage Skidmore licensed under CC by 2.0

Creating Generational Leadership

It’s the struggle of every start-up leader, across roles, – how to create multilayer, generational leadership to scale through the much longer journey of a start-up than many employees are able to stay around for.  Some of the most successful technology companies (witness Twitter most recently) have their founders return to the helm during perilous times.

Should startups care about generational leadership? Absolutely. Generational leadership is not about CEO succession – it is about ensuring that a business can thrive even when great people leave.

The paradox is this: Technology startups are built on the mythical “A-player,” someone who contributes at 10x the normal human being. Suppose you have the good fortune of recruiting such an individual. What happens when they leave? Won’t the business performance in that individual’s domain equally suffer by 90 percent?

Now, that doesn’t work. So what do you do?

  1. Try to create a business that doesn’t need 10x performers, then try to hire them anyway: Is the sales process unbelievably complex? Are the technical requirements extremely nuanced? Both would require 10x performers. A more scalable approach creates the kind of process or the kind of software that can be built by mere mortals.
  2. Make it the responsibility of every leader to have a succession plan in place: As a founder or CEO, you can’t step into every possible job – and in an employment environment as robust as Silicon Valley, people are going to leave. But great leaders think of themselves as owners first (because they are with the stock they earn) and worry about what happens to the value of their shares on the day they move on.  This applies to every level of the organization.  Of course, this assumes you’ve created an ownership culture.
  3. Actively promote the next “vintage” of leaders: There will come a moment when the people that helped you build the early stage business either move on voluntarily or involuntarily. The key is to create the next vintage – the ones who are not motivated by pure creation at the early stage but rather by the stage of business you are at.
  4. Hire versatile leaders: Versatile leaders are ones who can, in the worst case, do the jobs of the people who report to them.  They might not do it as well as the person they are replacing.  In fact, if they are empowering leaders, they will enable their team rather than micromanage it. But when they face an inevitable departure – they can step in.
  5. Put people in jobs that are tests: The clearest way to test if you have generational leadership is to challenge individuals to take on responsibilities that are beyond their current job function. Do they step up? The best promotions are absolutely obvious.
  6. Always be recruiting for key roles: Its the transition from key people that is most scary, but if you’re always recruiting, it gives you confidence that the business won’t skip a beat.

It’s important to work really hard to retain the best people. But there comes a time when it’s the right time to let great people go. You might have “saved” them multiple times, persuaded them to stay on with you, but their heart is elsewhere. Perhaps they have turned negative. Perhaps their demands have become unreasonable. To create generational leadership, you have to have the courage to test it. When the moment comes, trust in your grand plan.  Trust the next generation.

Image from 3 Generations of MacBride Men by Scott MacBride licensed under CC by 2.0

Scaling a No-Titles Organization

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Three of the core values of BloomReach are “We”, “Own” and “No Drama.” “We” is about being on shared journey – no individual stars at the expense of the team. “Own” is about acting and behaving like an owner of the company. “No Drama” is about being a team of problem solvers – non-political and collaborative. These cultural values are tightly coupled with the core objective of many early-stage start-ups: creating an environment of little to no hierarchy and maximum creativity. Given that titles are typically a source of hierarchy, the question of how to handle the scaling of the organization while minimally introducing titles is the subject of this post.

Stage 1 – the early days

One of the earliest decisions my co-founder and I made was to establish a principle of “no titles” (full disclosure Ashutosh was always CTO and I was always CEO). The idea was born out of a desire to create an environment where those three values could really take root. In a world of large numbers of VPs, directors, senior directors and managers, the incentive system seems out of whack with the priorities of an early stage start-up. We wanted everybody to be part of “We” – not just the leaders of the company. If titles were eliminated as an issue, everyone could feel like an equal part of the journey. Everyone could feel like they were an owner. And if no one could gun for a new title, the drama quotient would be significantly reduced. Everyone in engineering was “member of technical staff.” People could be paid differently and given different levels of responsibilities – but the lack of hierarchical titles would drive a culture of equanimity. We even went so far as to word every offer letter by function rather than title. People were simply “in sales” or “in marketing.” The standard question we would get is, “How do you recruit great people to a no-titles culture?” By sticking to our guns. If we could come out and say “we have no titles at BloomReach” – it’s pretty hard for a candidate to make an argument that they deserve an exception. And those that walked away on that basis, we were happy to lose.

Stage 2 – “Head of”

As time went by, we got into the “head of” stage of the company-title evolution. We hired a “head of sales” and a “head of product”. The “head of” title was meant to signify leadership, not one’s superior position on the organizational chart. A “head of east coast sales” could report to a “head of sales”. By keeping both titles “head of,” we were continuing to send the message that we were still very much a “We” culture. We could recruit leaders if we needed to, and ensure that the efforts those people were leading could be reflected in the way they described themselves externally. The objective of adding a “head of” title was twofold – provide clarity to the external world on the role of our people and provide clarity internally on who owned a given function. We complimented the “head of” with leads. We had tech leads, marketing leads and product/account management leads. Leads were not titles – they were roles. Someone could be a tech lead for project A and a team member for project B. Stage 2 enabled us to grow up a little bit, just really slowly. And it allowed us to preserve a no-hierarchy culture in day-to-day operational life.

Stage 3 – Directors and Principal Engineers

As BloomReach’s engineering team grew we started to need real people-managers outside of the executive team. We also needed individual role models for the rest of the organization. Directors and principal engineers were born. We have always been very conservative about the criteria for these titles. The people who took them on were already clear leaders – managing complex projects and large teams or providing technical leadership across the company. The addition of directors and principal engineers provided aspirational role models, but still preserved the ethos of a “no titles” world. Since less than 5% of the team had these titles and the bar was so impossibly high – the same behavior of the early days was maintained, albeit with individuals now clearly responsible for the success of others.

Stage 4 – Peer-based promotions

Just recently we took our conservative approach to titling to a new level. As a result of clear feedback from our team that they were hungry for more readily accessible career paths, we introduced the “staff engineer” and “manager” titles in engineering. Though they may make us look a lot more traditional, it was our promotion process that preserved the essence of BloomReach values. The recently rolled out promotion process enabled a team of senior engineers and engineering directors to evaluate the contributions, cultural fit and impact of candidates. They reviewed everything – code, projects, leadership and interaction style. They set the criteria for being promoted to “manager” and “staff engineer.” They debated the merits of each individual and ultimately reached consensus. Importantly, neither my co-founder (our CTO) nor our head of development was present in those meetings. It sent a clear signal: promotions at BloomReach would not be achieved by currying favor with leadership. You succeed by earning the respect of your esteemed colleagues.

Why bother with all of this innovation around titles and promotions? If we were going to end up in the same place as many other companies, why not take the shortcut there? Culture is set in the early days and reinforced over time. Setting a no-titles culture created the collaborative nature of the BloomReacher. Even as titling is introduced, the value system has become so ingrained that it cannot be broken. The conservative approach to titles also ensures that we had the minimum amount of hierarchy needed for a given stage.

The spirit of the “no-titles” organization remains intact today and it is at the heart of everything we do that makes BloomReach healthy– debate, contribution, impact and limited politics. People said it would break over time as the company scaled. We are at 210 people and counting — and I’m still waiting.

Image from Ceramic Hierarchy by Travis licensed under CC by 2.0

Leaders should be Problems Solvers and Problem Creators

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The trajectory of most careers starts with problem solving.  Good engineers, faced with a well-defined problem, can usually do an effective job thinking through how to best solve the problem.  The best engineers find the 10x solution – 10x more scalable, 10x more maintainable in one-tenth the time. Good marketing people, armed with an adequate budget and clear goals, problem-solve around messaging or marketing program choices.  Good finance people take the characteristics of the business and think about the best deployment of capital to achieve the desired outcomes. Good salespeople are problem-solving around how to navigate obstacles to persuade decision-makers.  We all start our careers honing skills around being effective problem solvers.  I spent the early part of my career problem-solving as an engineer, problem solving as a financial analyst and problem solving as an early entrepreneur.  And some of the best individual contributors at BloomReach, and at every organization I’ve seen, are incredible problem solvers.  The CEO job involves a ton of problem solving.  And usually, by the time the problem reaches you, it’s a big hairball.  It’s a decision where the path is unclear and where the data is murky (a bet on a new market or new product). It’s a complex, people-oriented problem (a manager or team not performing or two leaders not getting along).  Or it is a problem that has inherent short-term vs. long-term trade-offs (losing a customer that might be very valuable vs retaining that customer at the cost of longer-term priorities).

 

Great problem solvers who continue to advance in their careers, are constantly broadening the scope of the problems they can take on.  At any startup, leadership opportunities often outpace the people that the startup has to take on tough, large-scope problems. As I look at the people who have advanced quickly at BloomReach we’ve seen them grow from task-oriented problem solvers to outcome-oriented problem solvers.  On the customer-success side, they move from “I can complete the analysis” to “I will own the customer’s success end-to-end.”  On our engineering team, they move from “I can build this component” to “I can lead this project.”  Being an outcome-oriented problem solver provides enormous benefit to one’s manager. There is nothing an oversubscribed manager appreciates more (or should) than someone on the team who says “I got this.”  And has the credibility to have earned that trust.

 

Being a great outcome-oriented problem solver is a necessary, but not sufficient, condition for true leadership.  Leadership means both being a problem solver and a problem creator.  The inherent nature of a well-executing team is that they are focused on solving a problem.  But what if the problem definition needs changing?  What if you have a team chasing a revenue goal when they should be chasing a customer satisfaction goal?  What if you are executing really effectively against a narrowing addressable market?  What if your organizational alignment inherently is misaligned with the goals of the company?  Those are all times to step in and create problems for the teams involved.

Problem creation has been important at BloomReach.  At times, we’ve created problems to  drive a change of direction – sometimes by hiring a new exec, sometimes by personally selling a customer who might be outside of the qualification criteria, sometimes by reorganizing a team, sometimes by radically changing the product goals and sometimes by materially changing budget allocations.  Many of these steps create more problems (at least in the near-term) than they solve.  Often, they materially disrupt the execution cadence of the organization.  They invite significant dissent among key team members.  But they are key to driving a team or an organization to raise the bar, think differently and adapt to a dynamic world.  I’ve seen cases of leaders going down the problem creation road too far.  They create so many problems that they set their teams up for failure.  They are unsympathetic when a team member asks for help.  They become unapproachable.

 

Many of the best leaders are great problem creators, inspiring teams to achieve what they never thought possible and adapt in ways that can appear radical at first, but become second nature over time.  And they are also great problem solvers, taking ownership for the toughest problems around and helping teams navigate them. The problem-creation gene is a wholly different gene than the problem-solving gene.  Problem solvers want to get through the task list.  Problem creators want to create a new one.  The best leaders get both genes to co-exist in harmony, artfully drawing on each at just the right time.

Image from Troublemakers by THEJOKER licensed under CC by 2.0

Operating in the Tech Bubble

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“Every incremental day that goes past I have this feeling a little bit more.  I think that Silicon Valley as a whole or that the venture-capital community or startup community is taking on an excessive amount of risk right now.  Unprecedented since ’99.  In some ways less silly than ’99 and in other ways more silly than ’99.”

–       Bill Gurley to the Wall Street Journal, September 15, 2014

I may be in the minority but I remember 1999.  In 1999, I was part of a bubble that made the dot-com bubble look small.  Sure, those were the days of Pets.com imploding and Amazon’s stock going from $107 to $7 per share.

But I was a part of the telecom bubble, borne out of excessive spending by telcos on spectrum, fiber optic cable in the ground spanning the world, and a massive data center build out.  About $2 trillion was lost in telecom market capitalization by 2001, by both well-established companies (MCI, AT&T) and startups (Exodus, Level3, Global Crossing).  It was a period when companies were valued as a “multiple of gross PP&E” – or basically, the more money you spend on assets in the ground – the higher your valuation.  At least with eyeballs you are dealing with customer acquisition, with PP&E, you’re talking about outdated optical equipment.  During that time, I helped start FirstMark Communications – a startup for which we raised $1 billion, including $600 million from private equity firms (KKR, Goldman, Morgan Stanley and Welsh Carson) and $400 million of debt.  The story did not end well.

Which brings me to 2014, and the recent spate of articles cautioning startups that the current tech valuation levels might not last and warning startup founders to be careful about raising hundreds of millions of dollars on companies with extraordinarily high burn rates.  That is good advice, but hard to accept for entrepreneurs who have never really operated in the dark days; and much easier said by investors than done by entrepreneurs when every force around them pulls in the opposite direction.

Let’s put aside the question of whether or not there is a tech bubble and ask the question – how should a CEO or founder operate in the midst of one?

Gurley says the answer is being “pragmatically aggressive.”  I think the real answer is that there should be very little difference in how you operate your business in a bubble world or a non-bubble world.  Sure, the cost of or access to capital might be different in the two scenarios but the truth is that for most software, Internet or other low-capital-asset businesses, the cost of capital is far less correlated to success than the use of that capital.  Let’s take two cases: You are operating in “normal times” and you need to spend $100 to acquire a customer, versus you are operating in “bubble times” and it costs $200 to acquire a customer.  Given that most business cycles, up or down, last three to five years and the lifetime value of your customers likely does not change in the two cases, you should be willing to spend roughly the same amount in both cases.  The fact that you can raise $50 million at a $500 million valuation versus raising $50 million at a $250 million valuation should not impact your fundamental decision-making.  If the “normal” case only allows you to raise $25M, then you really have to ask yourself whether the incremental $25 million really changes your calculation.  In a world of natural capital abundance for good businesses, I would argue it mostly should not (i.e. if you can only raise half the money today, but if you deploy it to good use, more capital will likely be available downstream for you anyway).  There may be a difference in ultimate founder / early investor ownership but not likely in ultimate outcomes.

The playbook for operating in a tech-bubble involves mostly blocking the noise out:

  •      Stop worrying about how high Uber’s valuation is:  First of all, their valuation does not impact your valuation.  The only thing worse than spending large amounts of money unnecessarily or raising money at outrageous valuations that you don’t deserve is doing so because someone else did.  I get the competitive fire that most founders/ceo’s have about being best-in-class but worry about the hand you’re dealt, not the one you wish you’d been dealt.
  •      Play for long term:  Remember, you are playing for your product vision and potentially towards an exit that takes several years.  Responding to current market forces in ways that diminish the value of the long-term to get a short-term pop almost never works.
  •      Over-communicate to your team: Everyone reads TechCrunch.  I had one engineer ask me at what price I would be a “buyer and/or seller” of BloomReach stock.  Others will be influenced by the events around them and it is important that you continue to explain to your team the various forces that ultimately impact your value and their equity value.
  •      Resist the temptation to massively over-pay or over-hire: The natural conclusion of any self-respecting entrepreneur in a capital-abundant environment is to raise too much capital and then over-pay or over-hire in a super-competitive job market.  Don’t do it. It will create fairness issues with your team downstream; and if you over-hire when the risk profile of your company doesn’t permit it, you will ultimately be faced with painful layoffs.  Explaining the cuts to your team will damage morale much more than the gains incurred by over-hiring or over-paying.
  •      Only raise money at a price that you have a line of sight towards being priced at in “normal” markets: Just because investors are prepared to value your company at billions of dollars doesn’t mean you take their money at those prices.  At some point those investors will want a return; and just the psychological burden of knowing that you need to actually earn out an unattainable price can destroy a founder or a CEO. If you at some point need to do a down round, the financial and cultural costs are massive. Mitigate that risk.
  •      Burn as much money as you would in “normal” environments: Remember the good days will end and you will ultimately be held accountable for what you did with your capital.  Usually, in any high-growth environment, there are only so many things you can execute on in parallel and generate a good return.  Stick to those.

I’m not suggesting that you should not be opportunistic in good times.  Certainly plan your fund-raise to take advantage of the opportunity, negotiate the best possible deals with investors, consider exiting, and (at the margin), be slightly more aggressive.

But mostly, as you are faced with the innumerable pressures to take advantage of the tech bubble, step back and take a walk around your (overpriced) office space.  Then come back to your desk and make the unnatural move:

Don’t change anything.


Image from popped by carterse licensed under CC by 2.0

Can you be an introverted CEO?

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The world’s stereotypical definition of a successful CEO is perhaps half Jack Welsh (polished, organized) and half Richard Branson (brash, outspoken, charismatic).  CEOs are supposed to be outdoor cats – comfortable representing their peers in the wild, spending large numbers of hours selling the company and the stock.  Essentially, it’s a people job, right?  So how do you operate as a CEO if you are an introvert?

I’m squarely an introvert by any definition.  But I’m not uncomfortable around people and I work hard to be an effective communicator.  Remember, the definition of an introvert is not someone who is shy or nervous around people. It is a person who is energized by being alone and whose energy can be drained by being around others.  How can one be a leader of people and be an introvert at the same time?

Here are a few things that I’ve learned along the way that help me:

  • Work on your public speaking:  Fortunately my parents had me do a bunch of debate and extemporaneous speaking contests when I was young. It helps enormously as CEO – to have the confidence to get up in front of a large crowd and discuss any subject without enormous preparation.  Like any learned skill, public speaking can be learned with practice and it matters as a CEO.  Its worth joining Toastmasters or forcing yourself into uncomfortable public-speaking situations to gain practice.
  • Surround yourself with enough extroverts at work: The demands on your time to participate in events, speak to people or sell will always outpace the amount of time in a day. And because you often don’t derive energy from those activities – you need people who do. I have the benefit of an executive team with enough extroverts to represent the company effectively. This provides a level of balance to my life that helps enormously.
  • Reserve enough “think time:” I’ve found, especially for an introvert that derives energy from thinking, that if you overschedule yourself – it not only means that you may not be using your time wisely, but that you are not giving yourself enough time to recharge and gain energy. I’ve tried hard to give myself enough unscheduled time to problem-solve, think, read or write.  (My philosophy on time management)
  • Learn the “cold start:” Among the hardest things for an introvert to tackle is the cold start. It’s actually a lot easier to present in front of a room of 5,000 people than to walk up to 10 people and start shooting the breeze. The cold start (i.e. what do you say first) can be among the most challenging things for an introvert. To try to improve in this area – I pushed myself in 2008 to do some cold-calling on behalf of the Obama presidential campaign. It forced me to get on the phone and start a conversation with someone I did not know in Nevada (and ultimately try to get him or her to stay on the phone with me and vote for Obama).  My cold starts (and my selling skills) improved enormously.
  • Spend a lot of one-to-one time and be approachable: Because you are unlikely to be the person who hangs out a ton with folks after work, it’s important that you reach people in other ways. One-to-one time, with the right set of folks, is a valuable way to do that and far easier for an introvert.  Often, I don’t do it in scheduled ways – but will rather have multiple, short, frequent conversations with folks on the team. It keeps me in touch with them and them in touch with me, and it’s super easy as an introvert to pull off.  Doing everything possible to approachable matters too – joining social events, sitting in an open floor plan or being responsive to email from anyone anytime.

The good news is, as an introvert you’ll bring a lot of good things to the table as CEO that compensate for the skills you may not have.  You’ll often be a pretty good listener.  You’ll often be able to use your think time to create impactful results for your company and your team. You’ll reach other introverts more effectively because you’ll understand that not everyone naturally speaks up. You’ll make sure you’re balanced as a CEO, spending an appropriate amount of time as an inside cat to make sure your house is in order before you start prowling outside.

Can you be a successful introverted CEO?  Absolutely, just ask Larry Page or Bill Gates, both noted introverts.  In fact, four in 10 CEOs are introverts. And that’s not an accident.


Image from Jacksonville zoo meetup by fdbryant3 licensed under CC by 2.0

Be One with Your Customer

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Most companies fundamentally pay lip-service to customer-centricity. The economics make it so. If I spend a $1 on sales and marketing, I might get $5 in ongoing revenue pretty quickly. So it always makes sense to spend money on sales and marketing in the short term. If it spend a $1 on product and engineering, I might get $100 back in long-term revenue for my business. The return on $1 dollar spent on “customer-centricity?” Not clear. And therefore most companies shortchange their customer-facing organizations with people who cost less and add less value. I’ve never believed in that.

At BloomReach, we have some of the brightest people in the world solving problems for our customers. They don’t just take people out to lunch or dinner and say, “I’ll get back to you” when they get a hard question. They understand the product. They understand our business. They understand our customers businesses. They are analytical and organized. Some are technical. Some are business people. And we spent the same amount of money in 2013 on making customers successful as on marketing. There is no better marketing investment than a $1 spent on making a customer successful.

But how do you make a customer successful? If you want to be customer-centric, the key is to be one with your customer, at least for a day. I see tons of technology companies who say they have found a deep “customer pain point.” Or they say they have found a solution that will deliver an improved return on some part of their customers activities. But when you break it down, customers don’t have “pain.” They are not walking around looking for “ROI.” Searching for ROI might be part of what they do, but its not who they are. They are real people. We have great customers at BloomReach and they are some of the smartest, highest integrity business people I have ever worked with. One of our customers is spending time trying to drive search traffic to his website. Another one is figuring out how to convince his boss to redirect spending to a new project. Another is trying to replace the technical people who are leaving his IT organization. Another one is transforming the retail industry. Another one is tired of all the politics around her. Technology is supposed to make their lives better, not add irrelevant meetings to already busy calendars. If you want to build a great customer-centric company, don’t just put window-dressing on poor fundamentals. Step back and ask yourself some basic questions:

1. Are you solving a problem that is big enough to matter to your customer? Too many products fail here. They deliver value, but they don’t deliver enough value to really move the needle in their customers’ lives. For example, a lot of products promise “ 20% improvement in revenue,” but in some micro-part of a customer’s business. Is that worth anyone’s time if it only touches 2% of the Customer’s business? You’re not competing with other products. You’re competing for my time. And I only give my time to things that matter. Think of it like a consumer mobile app – is it cool enough for me to replace another app on my home screen?

2. Is the value of your product transparent to all involved? Too many software projects from old-school software vendors have great business cases that never pan out. Or at least, no one knows if they pan out. You cannot fundamentally live the life of your customer if you cannot clearly measure the ways in which you’re improving his or her life. At BloomReach we do a lot to measure value – we run control tests, we do analyses to correlate operational metrics with results and we develop ROI studies. We only build products that we believe we would buy if we were the customer. Measurement can be brutally hard and it does not make sense to count every nickel and dime, but if your organization does not care about value delivered, your organization is setting your customer up for the board meeting where they get called out. Value does not always mean revenue generated. It could mean just making someone’s life easier. It could mean improving the user experience of your customer’s business. There are a lot of qualitative ways of creating value. But the value should be palpable.

3. Are you prepared to have an honest conversation with your customer? You will at some point disappoint a customer. There will be a bug in your software. Your release date will slip. Someone will handle a customer care situation badly. Your customer will ask for something totally unreasonable. What are you going to do about it? Are you going to stand up and have the tough conversation where you tell your customer you think they are wrong? Or tell them you have totally screwed something up? If you’re not, you can never be one with your customer. Because you would never misguide yourself (at least knowingly).

I told myself before I started BloomReach that I was only going to start a business-to-business focused company if I could assure myself that the CEO of my customer’s company would care about my product. The world is too noisy for technology that doesn’t matter. I think that’s the starting point for being one with your customer. From there, every aspect of your organization should ask the question, “What would I do if I were the customer?” If I’m selling, is it easy to buy from me? If I’m marketing, do the messages pierce through the noise bombarding my multi-tasking customer? If I’m providing analysis, does my customer care about my analysis? Is it trustworthy? If I’m serving a customer, do my actions get my customer ahead in their organization? If I’m building a product, how hard is it to use the product to fulfill its value proposition? If I’m acting on a support request, how long am I making my customer wait?

The journey to being one with one’s customers is a long one, one that we are very much in the middle of. When you think about customers, remember the famous Jerry Maguire quote from the eponymous movie:

“You…complete me.”

Image from We stick together…smile together…be together by Thai Jasmine licensed under CC by 2.0

Democratizing your Culture

“Democracy is the worst form of government.  Except for all of those other forms that have been tried from time to time.”

– Winston Churchill

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Culture is the center of the start-up.  It is the pulse.  It is the soul.  It is the binding that gets teams through hard times.  It is the intoxicant that enables teams to share the highs with each other – making them even higher.

At BloomReach we have our own core values, written in February 2009, before my cofounder Ashu or I had raised any money, figured out our product, determined what market we were going after or hired our first person.  That’s how important it was to us.

The most interesting question around culture is not, “What is your culture?”  It is, “How do you make your culture real?”  Thousands of enterprises have come before your start-up or growing business.  Most of them have terrific culture and values documents.  But they are not real.  They are not authentic to the team or to the business; and they don’t manifest in ways that are practical to the work lives of employees.  The pseudo-cultures think that the key to great culture is a lot of parties, free food or cool schwag.  It’s not.

The key to making your culture real is to democratize it.  The aspirational goal of your culture should be to make it genuinely co-owned by every member of your team.  That can be counter-intuitive because so much about companies is top down – the titles, the strategic direction, the planning, the compensation and the decision-making.  But culture needs to be built bottom-up.  It can’t be the responsibility of the HR team or even the CEO.

It has to be an organism that grows and shrinks with the ebb and flow of your business and the personalities of your team.  It has to be truly democratic.  So how do you democratize your culture?  A democratic culture draws from the pillars of a democratic society.  It starts with citizenship.

Here are 10 ways we do it:

  1. The BloomReach Citizenship Document:  We maintain a document of dozens of initiatives – broken up between “Fun” and “Company Building” in a Google doc spreadsheet.  Each initiative has an owner and a team.  Initiatives can be “improve remote office communication,” “organize fitness activities,” “organize peer awards” (more on that later) or “create volunteer events.”  No one approves these initiatives.  The only ask of a new BloomReacher is that he or she do something that goes beyond their job description to contribute back to the company.  Many of their contributions are memorialized in the BloomReach citizenship document.  It serves as a repository of our “democratic traditions.”
  2. Hackathons and Business Challenges:  We’ve had a tradition at BloomReach of either running hackathons (24-hour efforts to build and ship something cool) or running the BloomReach Challenge (where the entire company is divided into cross-functional teams to dream up business and product ideas). Hackathons and business challenges encourage people who never get to work together and often don’t know each other to get creative and get to know one another.  It also reinforces that just as the rewards belong to all of us, the challenges belong to all of us.  Eighty out of 170 people participated in our last hackathon and several new product features came out of it, promoting the energy and creativity that are “must-haves” in any start-up.
  3. The Open Floor Plan: Democratizing your culture starts with open communication among teams.  Just as in any democracy, there must be freedom of expression. The open floor plan creates energy, expression and sends a clear statement that the environment values everyone equally.  Yes, it can lead to some loss of individual productivity, but the cultural gain across the organization outweighs all of that.
  4. One Set of Rules:  Are you flying first class and expecting others to travel coach? Is an exec allowed to spend exorbitant amounts of money on a team dinner that a team itself would not be allowed to spend on its own?  All of these send clear signals – that the culture does not value the contributions of every member of the team equally.
  5. Peer Awards: Peer awards are fantastic.  They reinforce that the highest honor anyone can receive is an unsolicited award from a teammate.  For us, peer awards are a big deal.  Anyone can give them as a thank you to a colleague, along with a $150 gift certificate.  It comes with an Oscar-like thank you speech and creates the essential quality of a democratic culture –the willingness to go to great lengths to help a teammate in need.
  6. Bonuses on Company Performance:  A key to democratizing your culture is the idea that “we rise and fall as one company.”   And there is no credibility to that claim if the compensation of individuals is meaningfully at odds with how the company performs.  Of course, one should find mechanisms to recognize extraordinary performance but a democratic culture means democratic compensation features.  Because base compensation and equity are often variant on time of joining and role, a target bonus percent purely based on overall Company performance helps equalize the compensation mix.
  7. Independent Ownership of Decisions: A pillar of the democratic culture is the idea that each individual is an adult, capable of making good decisions as an owner of the business.  At BloomReach, we borrow from the Netflix model of limiting “policies” – no vacation policies, no expense policies and no over-legislation of behavior.
  8. Self-Scoring of OKRs (Outcomes and Key Results): Nothing is more typically top-down than individual performance.  On the other hand, self-scoring of team OKRs enables teams to (in a non compensation-impacting way) score themselves in public and share those scores openly.  It holds each team accountable to each other.
  9. 360 Feedback: We try to keep our performance-feedback process simple.  However, one of the key changes we’ve made is to incorporate 360 feedback (particularly, feedback from peers).  Top down feedback reinforces that the only thing that matters is pleasing your boss.  In truth, high-impact initiatives involve teams collaborating with each other fruitfully.
  10. Hanging out together:  You can’t force friendships.  But you can put people in a position to get to know each other genuinely.  We do that with a lot of company-sponsored initiatives like soccer teams, volunteer events and running relays.  I’m proud of the number of BloomReachers that hang out with each other.  Social relationships build camaraderie.  And camaraderie creates loyalties that go beyond loyalty to the company. (Ok, there are some parties involved.)

I believe that a democratic culture solves the single most difficult conundrum of growth: scaling while maintaining extraordinary commitment.  We have a long way to go to continue to evolve what being a BloomReacher means.  I am sure, however, that the answer to every impending decision lies somewhere in the historical tradition of the only system that has ever really worked: democracy.

Photo courtesy of “DEMOCRACY” by SUXSIEQ under CC BY 2.0

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