Startup Cultures Start with People, not Policies

Building a strong culture is a key priority for entrepreneurs. Nothing is more important when it comes to recruiting and building a team. Your team determines your success and the way your team interacts will be largely affected by the culture you build at the beginning.

But sitting down and writing a culture doc or inventing fun policies is not what truly sets the tone, it's the people who come to your office every day. I have worked in corporate cultures that are radically different (a semiconductor company in Silicon Valley, an investment bank in New York, a government contractor, and a software startup). I can tell you first hand about the unique quirks of each. What really matters is finding the culture that strongly supports your business and works for you personally (i.e. you like coming to work in the morning). Proactively creating and maintaining a culture is incredibly important and it starts and ends with people. Here are a few thoughts.

The first group sets the tone.

Even with large companies that have been around for decades, I still think that the first dozen employees largely set the tone for the entire corporate culture. Once a train is on the tracks it is very hard to stop its momentum (either good or bad), so you have to think about culture right from the beginning.

No bad apples.

When you bring on new team members, their experience and skills are clearly important (and a pre-requisite). I would argue that cultural fit is even more important. It only takes one bad apple to throw off the vibe of an entire team. You will have enough hurdles to cross when you are an entrepreneur. So do not make your life more difficult by hiring (or keeping) people who ruin the positive momentum everybody else works hard to build.

Diversity is good.

Finding people that fit your culture is key, but make sure you also look for a variety of skill sets and personalities. If everybody is an aggressive Type A business person that wants to make the decisions, that might not work so well. Find the yin and yang (or Jobs and Wozniak) for your business. Have detail-oriented people and creative people, aggressive people and patient people. Put together an ensemble. Inserting a few natural checks and balances into your team will make a huge difference down the road.

Be true to yourself.

Most businesses will end up representing their founders in certain ways (think about Apple, Google, or Blackstone). If you give your company a personality that strongly models what you really believe in, good things will happen. There is a reason why Warren Buffett works out of Omaha and sets a tone at Berkshire Hathaway that is ridiculously different than the investment banks on Wall Street. That is the culture, personality, and type of decision-making that works for him. He ignored Wall Street, set his own culture, and became one of the most successful investors of all time. If he had pretended that he was a hard-nosed Wall Street trader and worked in a typical hedge fund environment, he would have been miserable and never reached the same level of success. Be true to yourself.

Make it fun.

Running a startup is like fighting a war. Every day you go to battle. Those battles can be healthy, fun (especially in retrospect), and make you stronger. But you have to be in the trenches with people you enjoy working with. If you enjoy the journey, the entire process will be rewarding. To enjoy the journey, bring on team members who make it fun.

Take the Reins or Take the Backseat: Entrepreneurship is About Action

There are a number of aspects to building a business, but at the end of the day they all boil down to one thing: progress. Being an entrepreneur is about building something out of nothing. One day you have an idea, then you have a plan, then you have a founding team, then you have a prototype, then you have seed investors, then you have beta customers, then you have a product launch, then you have more investors, then you have a bigger team, then you scale to profitability. Not all companies need investors or follow this exact path, but this is a typical progression for a startup. Few make it from the very beginning (an idea) to the very end (a sustainable, profitable business). There are a number of reasons why companies fail along the way, but entrepreneurs who are truly tenacious and are constantly taking action are the ones who plow through each road block and make progress against all odds.

I wrote a previous post about some natural conflicts between the mindset of an entrepreneur and the mindset of an MBA program. Much of my criticism (as an entrepreneur who has an MBA) is about people who learn to analyze vs. people who learn to take action. Analyzing a situation and making reasonably intelligent comments is drastically different from taking action, managing a business, and building something. There are tons of good ideas out there (I've learned that ideas come cheap). But there aren't nearly as many people who take those ideas and put them into action.

The road to building a company is definitely a long, grueling one. But in my opinion it's a string of baby steps all lined up in the right direction. The actual next step at any point in time is never that phenomenally difficult. Call a customer. Pitch your idea to a potential partner. Outline your requirements for a prototype. Throw together a website. Iterate your business model. Start a blog. When I talk to people who have ideas they are considering pursuing, I try to help them break the business into pieces and define precise next steps. It is rare that the next steps take more than 3 hours, or a weekend at absolute most. So either take that action, put in the weekend, push your idea forward, or take the backseat. Entrepreneurship takes the word proactive to a whole new level. You can't wait for somebody else to tell you what to do, you have to wake up each morning and take the bull by the horns (though perhaps after coffee). I think you can tell near the beginning whether somebody is going to live in the clouds or actually make progress. The funny thing is that so many startup ideas die because nobody took the reins and simply took those first 3 baby steps.

I have written this specifically in regards to startup companies, but I believe it generally applies to any organization. Peter Ueberroth, former head of the US Olympic Committee, had a great comment that "Authority is 20 percent given and 80 percent taken" (previous Business Insider tip of the day). Companies have entry-level employees, managers, directors, vice presidents, etc. (or whatever equivalent applies to your organization). But at every level there are people who simply take action and seize authority and there are people who take the backseat. In my mind, a huge part of leadership is about moving the ball forward. Seize that authority, seize that opportunity, take action, and make progress. That's what makes a great entrepreneur. The resume is nice, the pitch deck is nice, the idea is cool, but taking action and making progress is what really counts. So be an entrepreneur, take action, and get out there and hustle.

Tales in Raising Venture Capital: One of my War Stories

People always want to hear the good, the bad, and the ugly when you're talking to venture capitalists and raising money for a business. I'm constantly asked for war stories. So here is one that drove me nuts, but is laughable now that the burn is gone. To set the stage properly, most VC's I've worked with are great and this story is more about a consultant than a VC. But here it goes...

When I was first raising money for Seamless Receipts, I talked to a number of venture capital firms and early-stage investors. At the end of one pitch, a VC introduced me to an "independent consultant" who could provide expert advice, put us in touch with early customers, and perform some of the VC's diligence. The consultant had been a partner at a big firm, had served on the boards of several successful companies, and looked great on paper.

I emailed the consultant to setup the meeting, including myself and my business partner. He responded by forwarding me a dinner reservation at an expensive restaurant in New York the following night. This was rather unusual. We hadn't even setup a day and time for the meeting and here was a PDF copy of a restaurant reservation. As a scrappy entrepreneur, I tend to eat at restaurants that have dollar menus. But I figured he would pay if he made the reservation. Worst case I'd pay my share and it was a worthwhile expense for his time, which was clearly valuable.

We met for dinner the next day (his schedule seemed awfully flexible). He happily ate his food, but was more interested in the New York party scene than our business. We couldn't get him to muster up any logical feedback or provide any value during the discussion. Then there was the finale, he left us with the bill for his lobster dinner. I was aghast! This was worse than a pay-to-pitch scheme. We paid for the expensive dinner that this guy set up, he wasn't even a potential investor, and he had no expertise that I could discern. What kind of "successful" business person makes a young, budget-conscious entrepreneur buy him lobster dinner?

Aftermath:

I have a lot of respect for most VC's and consultants I've met. But this was ridiculous. I wanted to launch a nasty email to the consultant and the venture partner who made the introduction, but I decided to cool off and simply move on to my next slew of meetings. I won't be meeting with him again, and I will give an honest assessment of his character when asked. But it's a small world and your reputation is more important than anything, so I'm careful with my reactions.

Lessons Learned:

You should approach the fund raising process with the same discipline, focus, and rigor you use to build a product. This means constantly prioritizing your time. There are tons of investors, "experts", and entrepreneurs you can talk to. There are plenty of people masquerading as each as well. So make a giant list of people and firms, track it, trim it down to those who can be great partners, and spend your time accordingly. Identify the bad apples as fast as possible, toss them aside, and don't look back. The sooner you develop meaningful relationships with people in the venture community, the more you can triage your schedule (and cut out people who will waste your time), I might have gotten stuck with a useless meeting and a bill for a lobster dinner, but I won't get stuck twice.

Why Entrepreneurs Should Celebrate More

Entrepreneurship is a game of ups and downs, so enjoy the moments when you accomplish something great. Jack Welch noted in his book Winning that teams do not celebrate enough. It is an important point for entrepreneurs. When you run a growing business your team gives blood, sweat and tears to meet each milestone. So celebrate when you hit them. Have fun. Build camaraderie. Create a team that knows they are in this together and are fighting for a reason. I'm always frugal with investor money and am not encouraging frivolous behavior. But the spirit of celebrating an accomplishment is more important than the venue or the budget. A few dollars go a long way when you are excited about launching a product or landing a big account. Here are a few thoughts about how to use celebrations to increase both happiness and performance.

Make your goals clear, measurable, and visible to the whole team.

Critical milestones should be visible to your team every day they come to the office, either in a software tool or on a big whiteboard (for a tech geek I still love a few old fashioned management tools). Goals should also be precise and easy to measure. When a football team walks off the field they always know if they won the game, no exceptions. Your goals should be the same way. Measure them by exact product releases, user metrics, revenue targets, or business development deals (deals must be signed contracts, not "discussions" or anything fuzzy). Having a scoreboard with real-time metrics can help you focus on your company's key performance indicators. Then celebrate when everybody executes and you reach a milestone.

Have a healthy mix of short-term and long-term goals.

It is helpful to keep spirits up by having incremental milestones that are followed by quick celebrations. But nothing is more satisfying that reaching a goal you have been working on for months. "Long-term planning" can be an evil term in startups because you need to iterate and adapt over time. However, it's still important to have a vision for the company and everybody should understand that vision. Carving out milestones over various time frames and planning celebrations when each one is accomplished is a healthy process to go through.

Suck it up and celebrate during work hours.

You put in long hours, work weekends, and sleep is a novelty. Your team does the same. Once in awhile it's alright to get out early, celebrate and simply have a good time. Throwing a celebration at night means forcing your employees to choose between your celebration and something else in their personal lives (especially those with families). It's fun to have an evening holiday party or take your team out after work. But I believe in celebrating milestones during typical work hours. This way it's truly a special event and everyone can attend without sacrifice. Productivity that day might decrease, but your results overall will be ten times greater when you have happy employees.

Do not underestimate the power of celebrating your successes. Break up the intense work once in awhile and show your team that you appreciate them. Running a business (or any organization) is about getting a team to work together in pursuit of the same goals. So set clear milestones that everyone understands, measure progress constantly, and energetically reward your team when they succeed.

7 Lessons Entrepreneurs Can Learn From Navy SEALs

I have a fascination with Navy SEALs (not because I have the physical prowess to be one, but because I respect their discipline, tenacity, and elite performance). I listened to two audiobooks recently about SEALs (Combat Swimmer, and Leadership Lessons of the Navy SEALs) and realized that entrepreneurs can learn a lot from them. SEALs travel in small packs, but are tremendously effective and can unleash fury on groups 10 times their size. Here are 7 lessons entrepreneurs can learn from Navy SEALs.

1. Take Decisive Action

Build your company so that you can move quickly, regardless of the situation. You won't have perfect information. You won't make perfect decisions. But you can't afford to delay and ponder. Being decisive and nailing the execution will make you effective in the long run.

2. Fear Nothing

Life is full of danger. You can spend your time worrying or you can build a team, plan an attack, and go to battle. SEALs volunteer for missions few people would face. But that's not because they're reckless. It's because they train constantly and know their team can handle it. Put together a solid team, a sensible plan, and work your ass off and you can beat the odds.

3. Seek Excellence, not Fame

How many athletes can you name? How many politicians? How many CEO's? Probably quite a few. How about Navy SEALs? Not so many. They devote everything to mission success, but don't go looking for headlines. Entrepreneurs should do the same. Build a great product, a great company, and a great culture. Do these things and press will come, but headlines should be a side effect and not the goal.

4. Lock and Load

"Lock and Load" literally means preparing your weapon, but also represents a state of mind. SEALs don't know when they will be called on, but are ready to perform at a moment's notice. As an entrepreneur, opportunities will come in weird situations and you won't have advanced notice. So be prepared to give your elevator pitch or launch an immediate demo. A 30 second chance encounter can change your life, but only if you're locked and loaded.

5. Leave no Man Behind

Teamwork is everything. But that doesn't end at holding meetings and dividing tasks. You should be maniacal about defending your team. Cohesive teams are forged over months and years of going to war together. Showing loyalty to your team is one of the most powerful messages in business. Missions can fail. Features can fail. Products can fail. But your loyalty should never fail. Ever.

6. Plan Your Mission, but Prepare to Pivot

SEALs plan carefully. They prepare for dozens of scenarios and pay attention to every detail. Yet unknowns will always happen. Their teams are agile, handle surprises, and make adjustments on the fly. Entrepreneurs need to prepare diligently. But it's the combination of preparation and agility that turns a good team into a great company.

7. Make Peace with Constant Chaos

You don't know where the land mines are. You don't know what announcements will be released tomorrow. Your life is full of legal issues, product issues, service issues, sales issues, financing issues, recruiting issues, travel issues, etc. There are always 1,000 things to do and only time for 100. Yet that will never change. So you need to make peace with the idea of being around constant chaos. Break down your mission into components, define them, plan them, execute on them, and train yourself to be calm under fire. The ability to sit amidst chaos yet focus on the task at hand and execute well is the key to running a high-growth venture (and is SOP for a SEAL mission).

Why Tom Brady Would be a Great Startup CEO

I just watched the Patriots put on a solid performance against the Jets. It reminded me why Tom Brady would make a great startup CEO. I'm thankful that he's playing football instead of running a business. But I think he'd excel at that as well. Here's why:

He's Calm Under Pressure: There's a reason why Mark Sanchez threw four interceptions while Tom Brady went 28 for 41 without a single pick. Sanchez was jittery in the pocket and let the blitz force bad decisions. Tom Brady stayed poised and faced the pressure without losing his rhythm. Just like football, startup life is chaotic and stressful. It's the unshakable CEO's who come out with great companies.

He's Resilient: Brady is coming back from an injury last year and a painful loss last week. But every time he gets hit, he jumps back to his feet and battles again. That's the same dogged persistence you'll find in successful entrepreneurs.

His Team Believes in Him: Every week Brady earns credibility and respect from his teammates. There is no question who the leader is. No matter the pressure, his players look him in the eye and know that he'll pull the team together. That's the quality of a great quarterback as well as a great CEO.

He Takes Responsibility: Last week Belichick took some heat for his 4th down call. But Brady wouldn't pass the blame. He said it was the right call and they simply didn't pull it off. He would never use his teammates or coaches as an escape goat. Startup CEO's who take responsibility for failures build loyalty among their troops.

He Gets the Ball to the Right Player: Brady knows his strengths, his weaknesses, and his team. He doesn't try to run for 100 yards or shoot for the highlight reel. He just gets the ball to the right person at the right time. That's the secret to the Patriots' offense. That's also the secret to running a business. The CEO is not a micromanager, but an enabler. The CEO is a quarterback who builds a team, commands the huddle, and gets the ball to the right person to finish the play.

He Executes: In Summary, Brady gets the job done. He isn't physically imposing or intimidating, even on a high school field. But he's got a laser focus, a great arm, a tremendous work ethic, and the rare ability to rally a team of athletes. His calm demeanor makes him seem approachable and humble. Yet opponents fear his execution, decisionmaking, and ferocious competitive spirit.

How I won the DFJ $250K East Coast Venture Challenge

I had the honor of participating in the DFJ $250K East Coast Venture Challenge yesterday. I presented my startup, Digiceipt, which is a new service to manage your receipts on the web. I was up against some major competition and people have been asking how I won, so here's a stab at it. I'm not an expert, just a passionate entrepreneur. But perhaps I can pass on a few lessons about how to raise seed money.

Don't build a product, solve a problem: Products are great, but investors are looking for a pain point that somebody is begging for a solution to. Don't create a product and figure out how to sell it. Find a problem and figure out how to solve it.

Sell, don't explain: I've heard this a number of times and it's very important, especially if you're a tech company. If they care about technical details, they'll ask. So be prepared to answer those questions, but that's not the crux of your presentation. You're there to sell your solution, sell your team, sell your market, and sell your ability to execute.

Talk to customers: Get out there. Talk to people. Understand the mindset of your future customers. Know what they love, what they hate, and how they behave. When you're asked questions about your customer base, you want to respond with specific feedback you've gotten.

Get coaching: Entrepreneurs are naturally optimistic, confident, and independent. So it may be unnatural to constantly ask for help, but do it! Leading up to the event I talked to over a dozen entrepreneurs, investors, and savvy business people. I got practice fielding all kinds of tough questions. Pitches are easy, but your responses to the VC's questions will make or break you.

Have something to show: There are times when you can get by with just a PowerPoint, but building a prototype does wonders. Having an idea is nice. Showing that you can execute on it is key.

Know the end game: Some people will argue this one, but I believe it helps to have a well-defined revenue model and potential exit strategies. It also helps to know exactly what you will do with their money (get a finished product, reach first revenue, hit a milestone that helps you raise more money, etc.)

Practice and do your homework: Simple, but phenomenally important. Be an expert on your competitors, your technologies, your potential partners, changes in the marketplace, etc. It makes a difference and the details matter.