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How to Manage a Real Startup: Nr44 in a series

Chapter 10: Balance

(Draft of John's new book: Your comments are welcome)

Balancing life is fundamental to the startup bicycle rider. In fact it spells the difference between winning and losing.

 

Life on Hold

“I solved that problem, I told my girl friend goodbye” said the founder. He was in Hong Kong when the Internet was nearing its peak. He had little financing and a lot of ambition. So to get more time at the startup, he tried to put his life on hold. Three years later he had neither a business nor girlfriend and suffered a hard lesson about why a startup is a marathon.

Serial entrepreneurs go on with their lives. First-timers try to put their lives on hold. The veterans continue the lifestyle that has given them satisfaction and reward, including the events and people that contributed to success. Others think they can pause in life, do the startup and after it is an established success, return to normal life. But life goes on while the startup is formed, launched and managed. The attempted pause with life turns into a new lifestyle that can change forever important stages in the life of a human: waited too long to have babies, never did the romantic trip to Paris, got a nice car but lost the nicer guy, skipped our anniversary and birthdays of parents, and so on.

When recruiting employees, think about what you want to brag about: Do you want to say how proud you are that you have put your life on hold to do a startup, or that you have a rewarding life at home as well as work, with family and friends that you delight in being with while you do the startup?

Employees are thinking about what sacrifices you will require of them. Other companies are competing for the same people. A brutal life-given-up style is not going to attract the best talent. But a complete lifestyle will. It is what humans look for in their job choices. By your example the candidates will make their decisions. They will look for the leader to set the lifestyle. If it is attractive, you have a good chance of their accepting your job offer.

One good test is to ask this question: “As I go to work each day, am I looking forward to it and to returning home in the evening?” If not, then it is time to rethink your lifestyle. Have you tried to put life on hold? Even if you have, you have time to change, to return to a quality lifestyle, one more attractive to both you and potential employees.

Startups are marathons. Life is not put on hold by successful entrepreneurs. The veterans continue with the lifestyle that has made them successful. Sprinters do not understand that and end up with a very empty basket at the end of the road.

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More tomorrow.

How to Manage a Real Startup: Nr 43 in a series

Chapter 10: Balance

(Draft of John's new book: Your comments are welcome)

Balancing life is fundamental to the startup bicycle rider. In fact it spells the difference between winning and losing.

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Marathon

Startups are marathons. If you try to run the race as a sprint, you will die. In person. That is the cold reality of a new enterprise.

First time entrepreneurs do not understand that. The kid out of school expects do all nighters and triumph. The first time founder thinks he will climb Mount Everest in tennis shoes and claim victory. The experienced corporate executive plans to work harder than ever and thus succeed. They will learn the hard way.

Yes, startups are a lot of work. And yes, they do demand enormous amounts of energy. They are very intense and stressful. It takes fire in the belly to do them. Serial entrepreneurs understand that because they have been there before. Even veterans do not avoid such burdens. But experienced startup leaders behave differently and lift the burdens in a special way. Understanding their methods will help you succeed where others fail.

·         Marathoners get sleep. Sprinters skip sleep. The long term runners know they are much sharper with enough sleep. They are more innovative and creative. They negotiate better deals. They are a lot more fun to work with. They see tomorrow with delight, not dread. I find startup veterans getting six to eight hours a night of sleep. Life science sleep doctors have found we burn brain cells as we problem solve intensely each day. Synapses fire and zap living grey cells. We grow brain cells only when we sleep. And only in the deepest sleep, the fourth level known as REM (random eyeball movement). REM sleep occurs at the end of an eight hour night. So sleep deprived sprinters are tired by Friday night and try to “get caught up” during the weekend, sleeping deeply for the first time in the week. The quality of their decisions drops daily during the work week.

·         Marathoners are realistic. Sprinter try heroics. Veterans set realistic goals but first-timers blurt out “Sure, we can do it!” without regard for what can be done in a hurry by a very tiny company. You can spot this behavior quickly by monitoring the actual delivery of short term projects: they are constantly late, yet the people do not acknowledge that. They simply say they have to work harder. And around the cage they run, again and again. They take great pride in not sleeping and in doing 100 hour work weeks, week after week. They love to be suffering heros. But soon the dragon catches up with the knight in shining armor. And the knight gets fried to a crisp by the dragon. In fact, veterans know they can call on their employees for only a single heroic 100 hour work week. After the people recover, they burn into their memory banks “Never again” and update their resumes, just in case it does.

·         Marathoners are courageous. Sprinters are driven by fear. It takes courage to leave the office at 4:00 p.m. to be on time for your son’s birthday party when the rest of your people are up to their ears in work and troubles, expecting to go home late that night. Yet that is what veterans of startups do. They take vacations in the middle of big projects and return energized and creative. I remember well how a founder and chief technology officer did that and told me when he returned “That was the best thing I have ever done!” Sprinters fear the worst will happen if they are not in the office. They do not trust themselves or their people to accomplish the great things they are working on. So they intensify their work and increase their stress as a result.

·         Marathoners adjust. Sprinters cling. When things happen that were not planned, bad or good, the experienced marathoner accepts it and adjusts. This includes events such as your key engineer suddenly leaving the company, a stealth startup pops up with a press announcement that shows they are six months ahead of you, or a big customer wants ten times as much as you can produce on a month. The sprinter clings to his plan and tries to undo the hard news in an attempt to force the company into delivering the impossible.

Burnout is the result of sprinting a marathon. No one is immune to it. Burnout catches up with the naïve leader. It is powerful. It can kill people and companies. So respecting how to run the startup race will avoid the dangers of burnout. Serial entrepreneurs lived to run another startup because they respected their human limitations. They know how to run the race as a marathon, not as a sprint.

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More tomorrow.

How to Manage a Real Startup: Nr 42 in a series

Chapter 10: Balance

(Draft of John's new book: Your comments are welcome)

Balancing life is fundamental to the startup bicycle rider. In fact it spells the difference between winning and losing.

 

Balancing your life leads to winning in startups. Learning to balance life is a special skill of the serial entrepreneur. The battle-scarred veterans wisely understand a start-up is a marathon, not a sprint. Life cannot be put on hold. That dulls innovation and makes recruiting talented employees impossible.

Aristotle’s Triangle

The ancient Greek philosopher Aristotle concluded humans are made of three elements: physical, material and spiritual. Startups are about a lot of material gain if all goes well. That is the business part of our lives, the career and related things such as wealth. The physical part is about health, sleep, food and exercise. And the spiritual part is about friends and family, morals and ethics, God and religion, the good and bad things that happen to us in life, in a nutshell, about life and death.

Serial entrepreneurs treat their physical health seriously and deliberately. They exercise regularly, like brushing their teeth every day. They eat deliberately, choosing quality food not in excess. They get sleep. Six to eight hours a day. They consider it unwise to do all nighters. They pause to smell the roses.

Veterans know that life happens in startups and thus their spiritual lives are impacted. I have had two vice presidents of engineering get heart attacks. A CEO went through the windshield of his rental care in London. One rolled his care on the freeway as he dodged a chunk of pipe. Vice presidents have had children get leukemia. Divorce and drugs happen. Doing a startup does not avoid life’s issues. In fact, it accentuates them.

CEOs and founders find trouble finds them in their startups. That’s when startup leaders experience how lonely it is at the top. It is when they appreciate family and friends who can be trusted and supportive. Those dark days are going to come to every entrepreneur. Serial entrepreneurs cultivate family and friends in anticipation of the times when they can in private share their feelings and doubts and fears and cry a bit. And when the sun starts shining once again, the same people join in celebrating how the leaders made it through to victory.

Keeping the three elements in balance requires a lot of discipline and sacrifice. That starts with recognition that balancing life is important to victory in the startup. Then it calls for an internal determination that keeps the life balancing going when the pressures and stress rise to painful levels.

Balancing life is not an option for serial entrepreneurs. They commit to it and do it. Period, end of message. That is how they got to be successively successful.

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More tomorrow.

Startup Thoughts While on an Adventure: Number 2 of a series

Today I am in Norway participating in a game conference, surrounded by a forest of green pines and white birches. The people are a diverse mix of youth and age, multi-national corporations and startups. There hot creativity has impressed me. I have been surprised. Here are some of my thoughts:

• Everything has become a game: I watched a prototype in action demonstrating how an oil company made a game out of an oil platform (safety, training, testing). Then a university professor described how education is now best delivered in game content form. The day was filled with discussions of strategy, modeling and more.
  
• There are no original ideas: Presenters showed real-virtual world progress that is only months behind Asia's best. Avatars and game faces were original and stimulating, as good as from Pixar. Business models were shown that follow American and Korean-Chinese monetization. Competition from giants equals that of agile startups. There is no safety in an idea. The issue is what you make out of your idea.
  
• Only innovators survive: StatOil is moving from delivering energy from oil and gas and inventing (via game + CAD simulators)underwater turbine systems that generate electricity from ocean currents. Agricultural and forest centric schools are moving to teach world-class courses in game technology, design and programming.
  
• Creative people are everywhere: Last week in Scotland I found game artists graduating from schools next to Highland whiskey stills. Today I encountered PhDs applying multi-disciplines to game creations in startups and giants. Ages ranged from 20s to 70s, all excited about creating cool games in some fresh form.
  
• Socialism sucks: Think about running a race with an extra 60 pounds on your back and crutches under your arms. That is what entrepreneurs have to endure in Europe. I am amazed they even try. China looks great, South Korea wonderful, and America a dream. As President Ronald Regan said, "The most terrifying words you can here are 'I am from the government and I am here to help you.'"

Time to get back to the conference with all the blondes with blue eyes (male and female) and excited people.

Keep thinking!

Startup Thoughts While on an Adventure: Number 1 of a series

Tonight I am packing, getting ready for two weeks on a fresh adventure: Camel to LA to Scotland (visit the best man at my wedding 42 years ago) and then some salmon fishing (with one of Norway's experts and recent entrepreneur, Dag Midtgard), followed with a hop way up north to a remote place in Norway to do a keynote speech (game conference) and then to wild New York (finals at Cornell University) and back home to Clint Eastwood country to celebrate with my dear wife. I'll be blogging from remote areas with thoughts triggered by special events along the road. Might even post a photo or two. So stay tuned. I can hardly wait.
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Startup Thought from Today's Episode: Founders beware: "CEO's make or break startups."

As I was gathering my traveling gear today, my head filled with recall of the morning phone chat with a world-class CFO: we compared notes about five startups that VCs were shutting down. In each case we found the CEOs (hired guns, not founders) had missed their marks badly and were responsible for the final mess that precipitated bankruptcy.

CEOs are the Ones. They are more powerful to the startup than are the people with the gold (investors). They make it or break it. Too often they break it.

So founders, it is time to start working on finding your Dream CEO. Do not rush. Take years if needed. Start working up your network far in advance of the day when you must choose.

VCs try very hard to find fresh CEOs. But too often I see them grab a person available, toss on some cash and see what can happen. That is not how world-class startups are built.

Tonight I was talking to a veteran entrepreneur in Taiwan. He is fighting to assemble a fresh startup in China during the recession. I was struck by how determined he was. And by how qualified he is. I've known him for decades. That is the kind of CEO you need to found your startup.

BOTTOM LINE: Be smart about your choice of CEO. They are not as easy to find as a Hertz rental car. They  will make or break your company. You will get only one shot in the gun. Use it wisely. Then you will have a very unfair competitive advantage.

Tip of the Week: Recession Startups Think Profit Profit Profit

Serial entrepreneurs in a recession focus on one objective: Get profitable as fast as possible.

Profits are Sales minus Expenses, measured in cash terms.

That is different than focusing on becoming the Gorilla of the new category no matter what the cost. The Gorilla attitude will require serial rounds of expensive capital from weakened angels or cautious venture capitalists. Neither source can be counted on for more than one round of capital during a recession.

So profits are going to be your source of fresh capital, your only source. Therefore you need to think that way, regardless of how far your startup has gotten.

Here is a quick set of questions for you to ask to do a checkup of how well your startup is focused on profit first:

• What is the minimum cash burn (dollars per month) required to just keep the lights on and deliver (product or services) to the first dozen paying customers? That is the level you are likely to have to drop down to if your optimistic sales forecast does not become reality. It is painful to think about, but I know more than one startup that did, took action that way, and survived the recession.
• Which customer group will get you to more sales the quickest? Often this demands courage to radically change your business model. For instance, if you counted on advertising revenue (customer group Number 1) you might find it quicker to cash sales by shifting to sale of product (customer group Number 2). Korean and Chinese social networking startups have done that recently and turned profitable and very large in a few months.
• How significant should your first product be? This my not be the best time to go for The Killer App. You may be wiser getting a basic service or product launched that has half the cool features you plannned on. That cuts expenses (need less people) and get you to market faster. You can plan on Round 2 (second version) as the recession ends. Quicker time to revenue with less expenses means quicker time to profit.
• How innovative can you be with your marketing plan? Marketing finds customers and spreads the word about what you are selling. It has loads of room for creative thinking about how to get the word to your ideal customers. In this era of blogs and buzz, you have a very wide range of opportunities available. Here is where clever marketing people are worth their weight in gold. They will be marked by their right-brained way of thinking and working. Turn them loose and they wil amaze you.

And then there is the final question:

• Who wants to buy the business (if you cannot get more investment capital)? Think about this at least 6 months before you run out of cash. Corporations act slower than venture capital firms and angels. I have experienced last minute attempts to sell startups and have seen the results: no sale, shutdown. It is not a sign of weakness to have a short list of qualified potential buyers prepared. The trick is to know they are qualified. That calls for a careful discussion of your technology, product or service and what would be compelling in the mind of the buyer. And it requires someone to scout out the potential buying organization, find the person who has to say "Yes" to the purchase, who would be the person to start with and so on. All that takes time, something precious when you are about to run out of cash next month.

BOTTOM LINE: Think quickest time to profit during a recession. You need to get sales traction without needing several rounds of expensive (or ellusive) capital. That opens the door to innovation and creativity. It demands boldness and courage because you will be faced with alternatives that can be shocking at first. This kind of profit thinking is what the serial entrepreneurs do. It is how they became serially successful. It is part of their unfair advantage. It can be part of yours also.

How to Manage a Real Startup: Nr 41 in a series

Chapter 9: Agility

(Draft of John's new book: Your comments are welcome)

Agility keeps the rider on the startup bicycle out of critical danger and ahead of the competing pack.

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Agile Organizations

The neat boxes and lines on an organization chart fall far short of describing how an agile startup is organized.

It would be better to think of how the organization of a startup looks as if it is what you see when you open up a bee hive to peer inside. At first you see a lot of what appears to be chaos. There are many bees crawling all around, up and down, over and under each other (apparently without complaining), while others are flying out of the hive and others arriving with legs covered with life giving pollen. As you study the hive your observant mind will soon find the queen bee, central to the action, as well as specialized worker bees hard at work finishing a lot of different tasks. Organized chaos? Well not really, but to the naïve bee observing mind that is how it appears upon first glance.

Startups are organized much like that bee hive. The culture sets the implied policies (how we work under generally expected conditions) and the workers operate within the established guidelines. Individuals have specific responsibilities (product manager) yet are also expected to do whatever is needed to be done at the time (hop on a plane to Japan and use Japanese language and culture skills to calm down a corporate customer angry that the three prototypes just caught on fire). A lot of agility is at work. Here are a few more examples:

·         Startup people swap jobs weekly. The vice president of business development is speaking at a conference so the chief technologist drives to Google to present the next product and continue the process of engaging the giant as a strategic partner.

·         Innovators spring surprises (e.g. a clever feature for a social networking game) that move them and their inventions into new job titles and responsibilities (from individual contributor as Member of the Technical Staff to promotion as the new Project XYZ Manager Lead).

·         Likewise, new product managers come from former engineers eager for their creation to reach the market and be sold eagerly. Their enthusiasm can win the day and get the sales order. And so on go the changes in the startup organization.

·         Cautious accountants are asked to join in presentations with the core team as they talk to aggressive venture capitalists during periods of raising the next rounds of capital. The confidence by the accountants in the financial forecasts adds credibility to the presentations done in concert with the rest of the core team of the startup.

Serial entrepreneurs use agile organizations to motivate ambitious employees. Titles are one way to reward performance. Some people seek them aggressively. Solo contributors may be looking for their first managing experience, while managers are seeking to be responsible for an entire product line. The Controller is seeking the position of Vice President of Finance. And so on.

By giving agility to the organization, the CEO gives more hope to employees and at the same time keeps the company responding to rapidly changing events that affect the company’s competitive advantage.

Over time the agility will slow down, will become more rigid. But it will still be much faster than the giant public corporations. And when done well, it will make your startup a standout compared with other new enterprises.

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More tomorrow.

How to Manage a Real Startup: Nr 40 in a series

Chapter 9: Agility

(Draft of John's new book: Your comments are welcome)

Agility keeps the rider on the startup bicycle out of critical danger and ahead of the competing pack.

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Agile Plans

Startup plans are what the founder intends to do. It is spelled out on paper. It contains vision and specific tasks and time lines. The good plans are well prepared by deep thinking entrepreneurs. Yet as soon as the first employee goes to work, that plan begins to be altered by founders with agility. They respond to a lot of bumps along the road while they are building their bicycle:

·         Key employees fail to show up to work. The employer make a counter offer so attractive the people (that accepted your job offer) could not turn it down. (Some startups are exploited in that way. They are deliberately used as a foil to get a delayed promotion or salary raise in the large, slow-moving corporation.)

·         Technical staff discovers it can make the product run twice as fast if it is allowed to consume thirty percent more power. That calls for a change in the plan: to shift focus away from the energy sensitive market segment and onto the speed-sensitive segment.

·         Large corporations yawn and say “maybe” to sales presentations. So the startup shifts from time-consuming, large installations in giant organizations and moves on to self-provisioning methods for small to medium companies that are excited and make quick decisions.

·         Giant Corp. announces at the industry conference nearly the identical software platform. The CEO immediately cancels the launch (in the middle of the conference) and takes the next plane back to Los Angeles. The identical management team goes IPO three years later with an entirely different consumer software product family. I watched this happen.

And so it goes with core teams of startups. The list of what could significantly alter the plan is very long. The people that respond are very agile. They keep on riding, progressing toward the goal of success.

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More tomorrow.

How to Manage a Real Startup: Nr 39 in a series

Chapter 9: Agility

(Draft of John's new book: Your comments are welcome)

Agility keeps the rider on the startup bicycle out of critical danger and ahead of the competing pack.

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I was talking to Eric Long, managing partner of the venture capital firm Canaan Partners,  about outstanding characteristics he sees in the winning serial entrepreneurs. “It all boils down to agility, that something special in the entrepreneur that triggers quick action, instantaneous change and creative risk taking.”

He went on to say the sports figure closest to that in his mind is the defensive linebacker in American football. The defender anticipates a play by the offense, but as soon as the ball is snapped, the defender adjusts, instantaneously altering his planned moves in response to the unfolding moves of the offensive team. That is what agility is all about.

Agility is certainly what Lance Armstrong is about. Racing with supporting teammates, he begins a race with a plan that begins to be altered as soon as the riders start out on the day’s competitive ride. As weather and competing teams combine, the situation changes and so do Armstrong’s responses. As the pack (peloton) works to stay within reach of the inevitable breakaway riders, its pace changes Armstrong’s plan. When mountains stress the breakaway group, the peleton modifies its plan once again. As the final miles arrive, Armstrong prepares to make his move but so do the other world-class competitors from other teams that move up to the head of the peleton. Finally one of the champions of a team makes a move and breaks out as the peleton catches up and passes the exhausted breakaway riders. Then Armstrong responds, once again altering his plan. As the final half dozen riders press as hard as they can for the finish line, each begins a series of tactical moves designed to fake, trick, depress and defeat the others. It appears chaotic. To the mind of Armstrong, it is agility in action. On a good day, he is confident that with his agile mind can win and he executes accordingly.

Armstrong may have planned that day on conserving energy and simply recording the time of the peleton. But his keen senses might spot an opening or weakness that leads him instead to push hard to win the day’s ride. It’s a long race, days long, and he knows he has time to respond each day so the results add up to the yellow jersey on the awards stand on the final day of the race. His agility enables him to do that. It is part of what makes him the world’s most winning professional cyclist of our time.

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More tomorrow.

Tip of the Week: Recession startups find one big problem to solve

Are you thinking of starting a new business during a recession?

If you respond with a yes, then look for the biggest problem you can find. Build your plan around how you will solve a very big problem.

Avoid "Quicker, faster, better, cheaper." That will not get you the money or top talent you need to succeed. A myriad of me-too competitors will crush you.

Instead, be bold and look for a giant to slay.

Here is one very good historical example (from Investor's Business Daily, March 30, 2009). John Deer, founder of Deere & Co, the giant agricultural equipment supplier, was a blacksmith by trade. In 1836 he set up shop to capitalize on the growing population -- and its horses.

He heard from his customers about a serious problem that Eastern farmers found in the Midwest: Because the soil was denser and richer, it stuck to their cast-iron plows. The constant stopping and starting while farmers cleaned off their plows made the work much slower and endangered their livelihoods.

Deer researched the problem and came up with a possible solution: a polished steel plow with a reshaped mold-board that would let the soil slide off of it, what is called scouring.

it worked. Deer's plow was a watershed moment that helped make the Western prairie viable for settlement. He went on to create a world-class enterprise whose culture continues to think bold and thrive today.

BOTTOM LINE: John Deere's focus on solving a big problem changed the world. That is what great startups are made of. They do not count the odds against them, instead they focus on delivering a practical solution, quickly. That is not "better." It is bold and big, with a watershed moment goal. When you think that way, you will be adding a rich fundamental to your personal unfair competitive advantage.