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Posted On June 20th, 2018 by Crowded Ocean

Jargon Watch: The June 2018 Edition

Inclusion rider: would the business world, and even startups, ever embrace the idea of tying a guarantee of gender and ethnic diversity among their team to their funding? With only 2 percent of all funding for venture capital going to companies with all-female founding teams, it’s clear that gender diversity of startup teams have a long way to go. 

Weaponized AI: the idea that AI technology could be applied to sinister surveillance efforts by federal government organizations as well as your local police is a growing concern of the employees of corporations inventing the technology.

Ambien-tweet: this new phrase, coined by disgraced performer Roseanne Barr, is the pathetic, but meme-worthy excuse for bad behavior. In other words, “my sleep medication made me do it.” It’s destined to stay as part of the popular culture for the rest of the year. Wait for our president to use it.

 

Posted On June 11th, 2018 by Crowded Ocean

Native or Learned — Make Social Media Work for Your Startup

Here’s an excerpt from Chapter 14 of The Ultimate Startup Guide:

It’s rare that startup founders are fluent in social media. The relentless demands of company building are usually the enemy of any time devoted to social channels, whether that’s Twitter or Facebook, GlassDoor or Github or you-name-it. When we meet with a startup led by technical founders, it’s common for us to discover that the majority of the team have profiles or pages on channels like LinkedIn but they are far from active there. In fact, if they even have a Twitter handle, it’s probably dormant. Consequently, we never assume that social media is considered by the team as a channel to engage with customers. Nor is it integrated into a company’s marketing plan or even part of an inbound marketing strategy.

There are two types of Social Media practitioners:  native and learned. Native practitioners are usually under 35, have grown up with Social, and, when they experience, read or see something, their natural inclination is to somehow share, comment or post it on one or more social sites. Learned practitioners have to be reminded to post or share:  it doesn’t occur to them or come naturally.

On the ‘Learned’ front, it’s like going to the gym. Some people have exercise built into their DNA—working out is a natural and daily occurrence. The rest of us need a personal trainer—or an annoying app that won’t relent until we burn X hundred calories. Your startup is going to ultimately need a Social Media Director, and part of her/his job will be as a personal trainer, training and then supervising company adherence to these policies. This is not unlike meeting a founding team that will insist that they want their company to be covered in The New York Times or Wired. But when you ask them by which reporter or columnist and why, you’ll discover that they are not, in fact, regular readers of the media they covet.

So, in order to set your social media strategy, you need to start by finding out where your stakeholders (prospects, influencers, partners, developers) congregate online. If you’re building an early-stage startup, it’s almost a given that you’re going to be competing for top talent and therefore LinkedIn must be a top priority. Again, the best way to be successful on any social channel you use is to be there, and to be there regularly. That way, you’ll understand first-hand what the common practices are; how content and news feeds on that channel work and therefore how to “join the conversation” on that channel to achieve your goals. Once you work out your top social media priorities (more on that later), you’ll need a “digital native” to lead your social media program. And that native can help your team learn to be fluent and successful on social media.

Focus, Focus, Focus

Given that social media is important for hiring, brand reputation, customer acquisition and building sales pipeline, what’s a resource-strapped startup to do? As in many things in life, it’s a question of focus. Our advice is to start by appointing an owner. Just as a startup needs a Chief Content Officer to really “own” (but not necessarily produce) all content, your startup needs someone to own your social presence. Rest assured, we’re not advising anyone acquire “Chief Social Officer” as a title (which drifts dangerously close to asshole territory alongside titles like “Sales Rockstar” and “Visionary”). But you get the idea: appoint someone on your team who already has a natural affinity for communicating and connecting via social channels. That’s the person to tap early on to be a rallying point, teacher and role model across your team in the early days of your startup. Remember that it’s temporary. With growth (and revenue) can come additional staff, a PR agency resource or a dedicated contractor to staff your social media as you grow.

Determine Your Goals and Your Audience for Social Media

After appointing an owner, step two is to determine your goals and your audience. And then, step three, prioritize the social channels that will support your goals. The top three channels for many startups tend to be: Twitter (for connecting with prospects, partners and influencers), Youtube (for sharing rich media content) and LinkedIn (for recruiting new talent and for connecting with customers.) For some companies, Facebook could be a fourth channel, but this part of the chapter is about focus, using the lifeboat game, Facebook goes overboard.

Your social media owner will also help you and your team stay on top of new channels emerging that are becoming influential to the stakeholders in your particular industry (e.g., SnapChat, IMGUR, Reddit) as well as the latest enhancements to those channels (Vine on Twitter; GIFs on Twitter; live video and sponsored ads on Facebook, etc.) Your social media owner will be facile with social media best practices, knowledgeable about your content/sales strategies and capable of working across your organization in order to teach colleagues new habits and the value of social media.

Since there are so many moving parts in the social media landscape, it’s important to identify experts in the field – Hubspot and Marketo, to name two – that can offer guidelines, tools and best practices for the frequency, cadence, and content appropriate for each channel, and how to ensure that they are woven into your marketing plan. Again, new channels (SnapChat, Periscope, etc.) and new advertising and content offers are emerging regularly as each new channel continues to tweak their offerings to vie for new audiences and corporate advertising dollars. Those are even more reasons to rely upon your social media owner to help monitor new opportunities for sales leverage. You’ll want to be sure that your Content Officer and social media owner are working closely together so that content can be shared but also measured.  And there are tools galore, some free and some paid, for creating dashboards and for automating posts that will help develop, schedule and measure your startup’s social media results.

Deliverables of your Social Media Manager

Now that you’ve got your go-to social media manager appointed to centralize and evangelize the content and social media program for your priority stakeholders, what, exactly should your social media manager be responsible for delivering?

When your startup team is small and multi-tasking against urgent product deadlines, you should count on your social media manager to provide a weekly list of “posts” tailored for each priority channel that follows best practices around frequency, topic, links and hashtags that your team can use to post, adapt or “re-share” (retweet, etc.) That way, no one on your startup team is really starting from scratch. As every writer knows, staring at a blank page can be paralyzing, but with a social media manager, you’ve got a go-to person to rally support internally and provide expert assistance. Your social media manager can serve as part-content creator, part-teacher/coach to help motivate your team to contribute. If, as the saying goes, it takes 21 days to form a new habit, it’s going to take much longer to make social sharing a habit for a technical team that’s striving to hit urgent product and customer deadlines. That’s where an effective social media manager can smoothly motivate and support the troops.

In addition, your social media manager should be delivering a focus on your competitors, since they’re probably trying to chase many of your same constituents (partners, potential employees, media, analysts, future customers.) So make sure your social media manager is tracking and reporting on what your competitors are saying and on which channel so you can flag developments early.

Metrics are a big part of what your social media manager should report on to your team to both let them know what’s being said and shared about your brand as well as to demonstrate growth in important metrics like number of followers, shares, posts, etc. Your social media manager should be able to answer simple questions like, “what was the most shared blog post last month?” An easy-to-consume internal report will keep social media an important priority for your startup team.

Build Your Own Brand

Finally, maybe you find yourself actually interested in joining the Twittersphere (tutored by your social media owner, perhaps?) After teaching the team about best practices in terms of content and tools, your social media manager will be greatly helped if the co-founders and CEO dive into social media personally. While it’s true that only 42 of the Fortune 500 company CEOs had Twitter accounts (MIT Sloan Review), consider the prolific Elon Musk, co-founder and CEO of Tesla Motors, CEO of SpaceX, co-founder of PayPal, chairman of SolarCity and more. Many consider Elon the heir apparent to Steve Jobs in terms of his impactful products, obsessiveness with product details and master of media attention. Musk is also active and accessible on Twitter. He has made that channel his focus. He has announced new product, press conferences, new hire opportunities, not to mention interacting directly with his customers and fans of his products. Like other Twitter masters (Richard Branson of Virgin Airlines, Donald Trump, VC titan Marc Andreessen), Musk uses Twitter in his own voice to share his point-of-view and to reinforce his personal and his company brand.

 

Posted On May 15th, 2018 by Crowded Ocean

Early sales development: reverse your thinking

An excerpt from our book, The Ultimate Startup Guide

Earlier in The Ultimate Startup Guide, we talked about needing to reverse your hierarchy, to move from bottom-up selling (focusing on your core technology ingredients: ie. ‘texahydrochlorophine’) to top-down selling (‘get lucky’). Or, as one of our sales reps explained: ‘I’m not selling vacuum cleaners, and I’m sure as hell not selling the vacuum’s unique suction capabilities. I’m selling ‘clean.’. Reversing this thinking (and the value hierarchy behind it) is one of the toughest things a startup sales team can do. After all, it was probably your unique technology that attracted both your early/key employees and early investors. But your mainstream customers (unlike your Early Adopters) could care less about texahydrochlorophine. They just want know to how you’re going to improve their lives/jobs (get lucky). So let’s look at this reverse hierarchy at work in your actual selling tools.

Your initial sales deck (Hint: you’re not that interesting)

We’re in a new world, both in dating and sales. Your prospective customer has done their research on your—they don’t want a pitch, they want a conversation. So give it to them.

The first thing is to get rid of (or move down) the dreaded ‘About Us’ slide. You wouldn’t lead off a date with: “Let me tell you a little about myself. I’m the kind of guy/gal who…” So why do it in a sales call? Don’t start with the basics of your company (location, # of employees, patents, etc.) If you dazzle me, I’ll ask you about yourself later. But let’s start with what matters to them—and it’s not you.

Below is the formula that we use with our clients to morph the deadly traditional sales pitch into a starting point for a Sales 2.0 conversation.

The first slide in this sequence is your own ‘market analysis.’ It’s your own distillation of what analysts, investors and early customers have expressed about the industry that your audience is in, how it’s changing, and the impact those changes are having (at an industry/global level). The goal of this slide is twofold: 1) to give you credibility at a macro level; and 2) to start the transformation from pitch to conversation. You wrap up your presentation of these facts with: “Is this what you’re seeing out there?” Which flatters them (You’re treating them like mini market analysts) and also kicks off the conversation.

It sucks to be you

Now move the conversation down a level, to the ‘It sucks to be you’ slide. The ‘you’ in this slide isn’t the individual per se (you shouldn’t presume to know that much about them) but their job definition or role in the company. This slide is basically saying: “People in your job have told us that management’s expectations are out of whack, especially given the tools that are at your disposal. And that as a result…” The goal of this slide is to give your customer the opportunity to expand on what you’re reporting: “You’re right, but you don’t know the half of it. Just last week my manager asked me to…” At this point the conversation just moved from presentation to conversation.

It’s not your fault 

Which brings us to the “It’s not your fault—it really isn’t” slide. This is where you (and your new friend) can analyze (and trash) available solutions, which conveniently include your competition. And where you sympathize with how demanding (and uninformed) management is, expecting great results with such a limited toolset.

Okay, now you’re done with the negativity. You move the conversation into the positive realm by posing a business-centric scenario. “Wouldn’t it be great if _________” (Fill in the blank with your definition of ‘get lucky’ statement or bold claim: “Wouldn’t it be great if you could see how every one of your apps is performing for every one of your users?”) This slide should be provocative, just this side of braggadocio. The goal of it is for your prospect to say: “Yeah, that would be great. But it’s not possible.”

With that challenge now before you, your prospect has just given you permission—albeit subliminally—to move the conversation back into presentation mode. Your job is now to show how your product/solution/technology can achieve the goal (Yeah, that would be great…) that the two of you have agreed upon. Now you’re off and running.

Posted On May 3rd, 2018 by Crowded Ocean

5 Steps to Take Your Startup to the Next Level

  1. Write your launch press release as early as possible to unify sales and marketing messaging

As much as startups like their white boards, when it comes to their core positioning, product capabilities and supporting messaging, they don’t take anything seriously until they see it in print (or in PPT or HTML). As important as a launch is to a startup—and as important as press coverage is to the launch—you’d think they’d recognize the fundamental importance of the press release and act accordingly. And yet most startups don’t write the release until about 3 weeks prior to launch. Only then are fundamental inconsistencies and misunderstandings revealed, causing everyone to scramble, from website authors to the PR firm. Instead, draft your news release as early as possible to crystallize messaging. Start by writing your ideal headline for the launch, then write the release that will best generate that headline. Then take the components of that release and insert them into all your key marketing and sales materials.

  1. Ditch the “elevator pitch”; use a 20-second “bold claim” instead

The “elevator pitch” is a time-honored marketing exercise and tool for distilling your company’s value proposition. But we’re living in an ADHD world where your prospective customer is addicted to nonstop interruptions in multiple streams delivered on multiple screens. So forget the elevator ride: you don’t have that long. Imagine you’re on an escalator instead, with 30 seconds to make your pitch. Lead with your ‘bold claim’. It starts with: “what if I told you that…” (An example: ‘What if I told you that you could wash your car while driving it home from work?’) An effective bold claim poses a question that generates this customer response: “I don’t believe you can do that, but I’ll take your card.” It’s a statement that sits at the core of your sales pitch, PPT decks and website–one provocative enough to grab your customer’s attention and initiate the sales process.

  1. Build a company “war room” around your “buyer persona”

 

Defining the buyer persona is a best practice supported by business books, courses, institutes and online tools. And it makes more sense than ever now because customers have more power and more options. But for so many companies creating a customer persona is just a paper exercise. The key is to develop a 3-D understanding of your persona’s personality and affinities, knowledge that you can then apply to your website, sales pitches, and white papers—and to make it a company exercise. The more advanced startups not only create these 3-D images of their customer, they name them and put an image (or imagined photo) of them on their walls, reminding everyone of what (and whom) they’re working for. This is particularly true of the Sales “war room,” where the customer persona should have equal wall space with all of your competition’s material, a constant reminder to stay focused on your customers—their needs, their options and their reasons to choose you.

  1. Bring your “chief content officer” to the leadership table

Think about it: in an enterprise product sale, the average sales process requires seven ‘touches’ (or interactions) with your prospect. So, to support their transition from prospect to buyer, you’ll need at least seven pieces of original content. And yet, for many startups, content is a last-minute addition to their launch and sales efforts.

Content needs to move to the top of a startup’s Maslow hierarchy. And it has to be everybody’s job. The problem is that every team at early-stage companies is so busy iterating on their product—both in features and possible business applications—that crafting sales content for lead nurturing and demand gen often takes a back seat. We recommend designating a “chief content officer” and giving him/her a seat at the big table for sales pipeline reviews, product planning meetings, maybe even board meetings. Make generating topics and content ideas a corporate-wide function, then recognize and reward those who generate this content—blogs, mini-white papers, etc.

  1. Set diversity goals (just like growth/revenue targets) and report on them just as frequently

Diversity is not only good for a company’s culture, it’s good for business, paying off in better decisions and improved profitability. But how to achieve it? A few innovative startups like Slack have adopted the Rooney Rule that requires that “persons of color” and women be candidates for strategic hires within an organization. Meanwhile, VC firm and startup builder Kapor Capital has taken the Rooney Rule a step further by requiring their own firm be diverse. Now, Kapor Capital partners are requiring the startups they invest in to create a culture of inclusion from the beginning. They ask their startup founders to sign a diversity pledge, then deliver a diversity report every quarter to investors.

Tech titans like Apple, Google and Salesforce have diversity initiatives that they report on publicly. Startups can build diversity in from the ground up by giving it the same status in their business plan as goals for customer acquisition, revenue and profit. And, by reporting on those goals every quarter to your board, investors and your team you’ll be able to reinforce diversity as a value and a business goal that will help set your startup apart.

Posted On April 17th, 2018 by Crowded Ocean

On VCs and Consiglieres–from The Ultimate Startup Guide

An excerpt from The Ultimate Startup Guide:

There is no more important—or more convoluted—relationship in the startup world than that between the CEO and your VC(s). Even within one Board (assuming that there are more than one VC on the Board) you can see a huge swing in how the CEO and the VCs view the relationship.

On one hand we hear this: “This guy has got it in for me. I can’t do anything right. It’s like he’s wishing for me to fail so that he can replace me.” And to that person we say, don’t be naïve: this guy’s got almost as much invested in your company—and your success—as you do

On the other hand, we hear this: “My VC is like a brother (or best friend) to me. I rely on him/her for everything.” And to that person we say, don’t be naïve: your brother (or best friend) can’t fire you.

Picking the right VC partner 

This may seem like an odd topic, since the ‘right VC’ might, by definition, be the only one who’s interested in giving you a term sheet. In which case, that VC partner, warts and all, looks pretty good. But let’s assume that your pitches have gone well, your product has garnered a certain amount of buzz, you have an ambitious but achievable revenue growth plan, and you have options. Here’s what you should consider:

  • Domain expertise. This is #1 on everyone’s list—CEO and VC alike. A great guy/gal who doesn’t know your market is just that: a great guy/gal. Solid business experience and advice isn’t enough: keep looking.
  • Personality fit. This is everyone’s #2. You’d be surprised how both VCs and CEOs speak of the relationship in either familial (brothers) or marriage terms. Less surprising, we find many of our CEOs in bad marriages just because the dowry (terms) looked so inviting. And the marriage is still there once the dowry has been spent.
  • If you find someone who fits the above two criteria, ink the deal, even if you’re leaving a little bit of valuation on the table. Again, this is advice from both sides—CEOs and VCs.
  • Do careful reference checks—not just on the VCs home runs, but on the singles and strike-outs. Make sure the track record they present to you is complete.
  • Does the VC have in-house services that could benefit you? This is a recent trend in the VC industry, creating and staffing in-house services in areas that a young startup might need. Menlo Ventures recently announced the formation of FUEL, an in-house resource center, with expertise and resources in Sales, Marketing, Biz Dev and Talent (recruiting). Other firms offer in-house real estate, “rent-a-CFO” and “rent-an-attorney” services to fast-track some of the essential infrastructure of company building. (See Chapter 8 on core vs virtual and commodity).
  • Does your VC have a reputation for introducing his/her clients to initial sales opportunities? If so, that’s a huge plus.
  • Some CEOs give serious weight to whether their VC ever ran a company. Some won’t even talk to a VC who hasn’t been a CEO in the past. That’s a bit drastic, but you get the point: if it matters to you, know that going in and schedule accordingly.
  • Check on how many boards your VC is currently on. In their more honest moments, most VCs will admit that anything over 7—certainly over 10—means you won’t be getting the mindshare and time that a first-timer needs. It certainly indicates that timely response to your issues will be problematic.
  • Finally—and this is a bit delicate—what is their track record for sticking with vs. replacing first-time CEOs? It’s worth having that conversation before signing up, even if it’s a bit awkward.

 Building the Relationship

If your relationship with your VC turns out to be a one-way street, you’re screwed. You may still get the benefits of their business acumen, but not the mentorship, honesty and intimacy that are the hallmarks of a great relationship.

Our pal Jim Goetz says that the first year of his relationship with a new CEO is all about ‘intimacy.’ It’s a word not heard that much in the macho world of venture capital, but most of the VCs we work with will cite how hard they work on the relationship with the CEO. One sets a practice of not having any meetings before 10 am, so their CEOs can call them with any immediate issue or crisis. Others will schedule a weekly offsite meeting—either for a beer or coffee—to build a relationship away from the ‘deal’ and the office.

Building this relationship can take time. As Venu Shamapant, a General Partner at LiveOak Venture Partners, a leading Austin-based VC, points out, negotiations place a VC and a CEO on opposite sides of the table. Once the term sheet is signed and approved, the table is gone—something that a VC is very used to and can make the emotional adjustment to easily. A first-time CEO may harbor some resentments over the tone and content of the negotiations. If so, both parties have to work hard to put that behind them and move forward together.

We have talked earlier in this book about making sure that your meetings are productive and not just a chance for bullying, posturing VCs to hold court and take their pound of flesh. The best way to do this—and this applies to the time between Board meetings as well—is to ask (or assign) certain key items to your VC: an introduction to a key client, help in identifying potential senior team members, etc. You’re in this together. It’s a shared enterprise. Your VC partner is expecting to be asked to deliver support.

Going forward

Remember this: your VC’s ultimate job is to add value to your endeavor. So make sure you get their advice and involvement in key areas:

Building your team: Every VC investor, angel investor or board observer professes—to a person—that they invest in teams, not products. So get them to help you build out the team. You and your co-founder probably know your industry well enough to attract the product guys, but beyond that your network is most likely limited. A head of Sales: your VC should lead that search. Same for your CMO (Chief Marketing Officer), or virtual resources that can accelerate growth but not monthly burn rate. Hopefully their firm has recruiting capabilities—if not, they certainly know the best recruiters. And they should be active in both interviewing and closing your candidates.

Helping with early sales: Nothing builds early value like early deals, so get your VC involved early and often. This should be happening before you hire your VP of Sales; hopefully your VC’s professional network will lead to a couple of early successes that will make hiring that Head of Sales easier.

Helping you grow the company: This is an active, ongoing area of VC responsibility. This is your first rodeo, but hopefully they’ve encountered—either as VCs or as entrepreneurs—every roadblock. What parts of the company to invest in and in which order, when to start staffing up your sales operation, what components of your operation can/should you outsource and what should remain in-house—these are all issues that your VC can and should be able to help you with. Scaling a business requires flexibility on your part but also the introduction of systems and management principles. As you move from garage and early stage collegiality to more structure—facility-wise, organizationally and in your relationship with your employees. These are the kinds of areas where you should be meeting regularly with your VC, have an agenda, and develop yourself and your company in a structured manner.

Acting as Coach and Mentor

This is a delicate area. While your VC can definitely act as a mentor, we strongly advise that you have one or more mentors independent of your company and your VC. Why? Because you can be far more forthcoming with an independent party than with someone who ultimately has your professional fate in their hands. (And, obviously, if you’re looking for guidance on how to better work with your VC, your VC probably isn’t the right mentor.)

But that doesn’t mean that your VC can’t be a coach, especially in your professional evolution. Ask your board members to be frank with you on a number of professional items: how do you run a meeting; how do you interact with peers, customers, and employees; how can you expand from a technology-centric or product-centric CEO to a business-centric leader.

Remember this: you’re a walking billboard for your VC. If you and your company are successful, it reflects well on the VC and leads upcoming CEOs to bring their new startup to that VC. So don’t be afraid to ask your VC to critique your performance and work with you to develop a personal and professional growth plan. After all, it’s their job.

Making the Hard Decisions

Both VCs and CEO’s (if they’re being honest) will talk about the value of the VC when it comes to the area of ‘tough love.’ This is not contradictory to all of the above discussion about relationship, mentorship, and general counsel, but always remember that your VC has a fiduciary responsibility to his firm and a reputation to protect. So, depending on your VC, your leash as a CEO may be luxuriously lengthy (rare and generally not good business) or precariously short (not the norm, but there are some VC firms who have a reputation for replacing their CEOs within the first 18 months post-funding).

Helping you close your next round

As you’ll read in The Ultimate Startup Guide, a startup CEO wears a multitude of hats. But the hat that’s always on—or at least within easy reach—is that of raising money. Our CEO’s tell us that, even as they’re going through the process of signing their term sheets for their Series B funding, for example, they’re already thinking ahead to Series C.

The person who knows more about funding—and the people who have those funds—than you do is your VC. And the good news is that they’re not selfish—at least not in this area. Because most VCs will tell you that, if they were the lead investor in your previous round, while they may participate in the next round, they don’t want to be the lead again. So they’re incented to help you find additional funding. Work with them to establish your list, to refine your pitch, consider your offers and help you make the final decision.

For more, read The Ultimate Startup Guide.

Posted On April 10th, 2018 by Crowded Ocean

Make your startup feel like a “cause” with a manifesto

Every startup should feel like a cause as much as a business. That’s why we recommend writing a manifesto for your team––then publish it and live by it. A manifesto describes your founding principles or the fundamental tenets of the solution or service you are pioneering and your commitment to it. As an example of a manifesto, here’s our own manifesto for building the ultimate startup.

1. Hire for the core; outsource the rest.

Companies that distinguish their core (technology, product roadmap, sales and go-to-market strategy) from ancillary functions that can be outsourced or staffed by on-demand resources are leaner financially and more flexible and responsive in the face of a changing market dynamics and competition. For example, the CMO owns building, orchestrating and executing the Marketing or Go-to-Market plan, but should outsource the specific components, from PR to SEO to content development to event marketing.

2. Pick your board carefully. Experience and true partnership trump (sorry!) valuation and terms.

A team of experienced investors and advisors can help cultivate and mentor a strong CEO and team to greatness. Get the best deal possible (terms, liquidity, valuation and preference) but not at the expense of partnering with the right VC.

3. Leadership comes with a sell-by date.

A smart CEO should know going in that the company and market may outgrow his/her capacity to lead it. History shows that by the time a startup has raised its third round of financing, 52% of founding CEO’s have been replaced, most of them fired by their own board. Leaders with longevity are self-aware enough to ask for help to close their own gaps. True leaders know they are building a kingdom, not a king. And if they want to remain the king, they listen and learn from their Board and mentors.

4. Team trumps technology.

VCs to a person will tell you they invest in teams first, technology second. Smart, well-functioning teams build smart, well-functioning products. But if something goes wrong, smart teams recognize errors earlier, respond quicker and make better decisions. Smart teams can solve product-market fit misfires. Hiring is critical: so is firing. If you do make a mistake, recognize and fix it as early as possible. And be guided by the industry data that shows diverse teams (gender, ethnicity, psychological) make better decisions and build more profitable businesses. Make diversity part of your culture from the beginning.

5. How you make decisions determines your long-term success.

Company culture may initially focus on Bagel Wednesdays, free neck massages and a foosball game on site, but it ultimately has to do with how decisions are made—and who makes them. Great CEOs let their employees know what’s going on in company meetings, solicit their input, then ultimately make and implement the decision. The company knows that it’s been heard and also has the positive feeling that it’s being led by a confident leader.

6. Content marketing drives customer acquisition.

The normal enterprise sale requires a minimum of 7 customer touches. That means Sales needs at least 7 pieces of supporting content. Market awareness, inbound traffic, sales preference: they all start with Content. Develop a steady stream of unique, compelling content that captures the imagination of your target buyer by breaking through the market noise. Whether it’s written or rich media (audio, image, video), your content has to be accessible, shareable and increasingly—it also has to be personalized and brief enough to be consumed in a single sitting.

7. Positioning and customer development go hand in hand. 

Your customers—not your Product group—are the ultimate arbiters of what product you should build (and what market you’re in). So as you interact with your early customers, identifying your target buyers and use cases for your new product, use that information to develop your positioning and messaging. Then, it’s Marketing’s job to apply a variety of programs, tools and best practices to launch the company and product, then test and refine to maximize market definition and customer acceptance.

8. Launch is a milestone, not the finish line.

Some startups launch to “legitimize” their business in the eyes of customers or potential investors; others to attract the right talent in a competitive job market. Whatever the reason, you get one shot at your launch. Be sure to have the systems, demand generation and sales programs in place to build on the attention your launch generates. Your launch is just a milestone in the long life of your company, not the finish line.

9. You can create a new market niche, not a new category.

As a startup, you don’t have enough time or money to create a brand new market category for your product. Focus on defining a new market segment and growing from there. Identify the market influencers who can help define or endorse your segment and build market understanding. Don’t try to go it alone.

For more on manifestos and building your startup, check out The Ultimate Startup Guide.

Posted On April 3rd, 2018 by Crowded Ocean

Jargon in Silicon Valley: April 2018 Edition

Herd thinking: Some say that the best example of “herd thinking,” or “group think,” is Silicon Valley. Celebrated investor and entrepreneur Peter Thiel has moved from the SF Bay Area to Los Angeles to escape it.

Synthetic identity fraud: One of the fastest growing forms of identity theft involves scammers using phone names and “unused social security numbers to secure debt, a crime that exposes a vulnerability in the US’s credit-checking system,” according to this article in the Wall Street Journal.

Hearables: Wearable, in-ear devices like water-resistant earphones are the latest category of fitness gadgets. Some are claiming to be AI-enabled by incorporating personal assistants, GPS data and more.

 

 

Posted On March 27th, 2018 by Crowded Ocean

Why Marketing-as-a-Service is a Fit for Startups

An excerpt from The Ultimate Startup Guide:

We launch startups.

Those are the first three words on our website and the essence of what we do. We may position ourselves as a marketing firm, but when you join a company as early as we often do (sometimes before they even have a name), you better bring a lot of general business sense to the table as well.

One of our clients once referred to us as his “VPs of Common Sense.” His logic was simple:  you’ve got an experience base that I’ll never have, launching over 40 startups and working with such industry luminaries as Larry Ellison (Oracle), Scott McNealy (Sun), Tom Siebel (Siebel Systems) and Marc Benioff (Salesforce). Our job, according to him, started with a negative: make sure he didn’t screw things up. Then the job turned positive:  use our experience to position the company appropriately; develop the messaging and content to support that positioning; launch the company into the open market; and equip the sales team with the tools and programs to give them the best chance to succeed.

Crowded Ocean, in its own way, is just another startup. We started with the basics that most founders do:  a whiteboard and an open mind. We didn’t have an installed base that we needed to preserve or antiquated technology that we needed to amortize. We just had the goal of building the ultimate marketing agency for startups.

Once we focused on our core strategy and market, we articulated our core operating principles, which we not only wanted to offer to our clients but wanted them to integrate into their own business operations. They are:

‘On-Demand’ Marketing

This concept can go by multiple names:  ‘just-in-time’; ‘kanban’ (Japanese for ‘just-in-time’); ‘virtual’, and the more trendy adjective: ‘fluid’.  Regardless of what you call it, it comes down to this:  pay for only what you need, when you need it. It applies to Marketing (a major focus of this book), but increasingly, to multiple areas of your own startup operation.

When Tom started at Oracle, he was one of three members of its nascent Corporate Marketing department, writing all the company’s product literature, annual reports and ads. During his six-year tenure there, as the company skyrocketed, he wound up as Sr. Director of Corporate Marketing, with a staff of 70 (running ORACLE Magazine, Oracle Open World, seminars, direct marketing, advertising, etc.) In today’s world, with a growing distinction between ‘core’, ‘virtualized’ and ‘commodity’ functions, so many great contractors out there, and so many collaboration technologies allowing contributions from many perspectives and geographies, that department of 70 would probably be between 15 and 25, most of them managers sourcing and collaborating with outside resources.

Why the move to on-demand (or ‘virtual’) resources? A number of factors, really:

  • Economic. This one’s obvious. No hefty salary, no 30% overhead, smaller real estate costs. The lower burn rate alone makes this option very attractive to startups.
  • Agility.  Much of today’s work is task-oriented or project-oriented. It’s much faster to assemble a collection of professional talent for a short period and specific task than hope that your collection of in-house talent has the same ‘best of breed’ skills and original ideas to perform the task at hand.
  • Fresh thinking. In-house talent often grows comfortable and intellectually complacent. Outside talent has to stay on top of its game, learning and integrating the most recent ideas and techniques into their skill set.

In the course of our engagements with startups, we generally outsource the development and delivery of the following programs:

  • Corporate identity
  • Content writing (white papers, data sheets, case studies, video)
  • Public Relations
  • Website design and development
  • Event Marketing (trade shows, webinars, partner programs)
  • Demand generation, automation and measurement
  • Sales and Marketing systems
  • Video production
  • Social Media

What does that translate into, headcount-wise? At most, for your Marketing department (in an enterprise startup), in addition to your CMO (or a virtual VP of Marketing like Crowded Ocean) your startup should have at most one full-time employee:  a strong Marketing manager who can hire and manage all of the above contract services. As you move into Phase 2 (Early Sales) you should plan to add a second employee, someone strong in demand gen, web analytics and sales/marketing automation systems. That’s it. The rest should be virtual or on-demand.

The above logic applies not only to Marketing but to almost every other discipline within your startup. There are some obvious areas:  no startup needs a full-time CFO or legal counsel, but in the eight years that Crowded Ocean has been operating, we’ve seen even the ultimate in-house, full-time positions—coding and Sales—moving to on-demand.

Inbound and Outbound Marketing

The marketing brains and co-founders of Hubspot evangelized the concept of “inbound marketing” about a decade ago. Inbound marketing says that in the age of the internet, you want to invest in targeted content to attract or pull customers to your website and social channels to build your audience with compelling content and offers. In other words, you want to “get found” online and earn your audience through authority, content and offers.

Previously, a brand would reach out to try find customers through traditional outbound or push-based investments like paid media (advertising), PR and direct mail. Startups today invest marketing dollars in targeted content offered on specific sites, social channels and forums online to be discovered in search and “earned media.” The term ‘inbound marketing’ is now so ubiquitous that it has its own Wikipedia entry and has spawned its own industry of books, presentations and seminars. Inbound marketing is the marketing engine that lowers the cost of customer acquisition, but it is an engine that must be fueled with an investment in outbound marketing to prime the pump, so to speak, a process that can take months.

Success in inbound marketing also implies an emphasis on measurement that was heretofore unavailable in the pre-internet, outbound-marketing era. By using marketing automation system software like Hubspot, Marketo, and Pardot, coupled with a disciplined inbound marketing approach, startups can measure where their customers are coming from, what content is most effective at attracting customers and therefore how to tune and maximize every marketing dollar spent to attract and convert customers.

Sales-Based Marketing

Since our founding, Crowded Ocean has been associated with ‘Sales-based Marketing’. The concept is simple but controversial:  The role of Marketing comes down to three words:  Make sales easier.  If it doesn’t generate new sales, shorten the sales cycle, or make repeat sales easier, don’t do it.

We’ve written about it, we do workshops about it—for us, it’s just common sense. But for many marketing professionals, it’s controversial because it sounds as if we are making Marketing and marketers subservient to Sales. We’re not: Marketing is a true equal of Sales in any startup in which we work.

But the term is off-putting to many. Especially marketers. There are any number of CMOs or VPs of Marketing who reject this concept. They believe that: a) They know—better than the Sales team—what the market does or doesn’t need; and b) Raising the role of Sales, in their mind, diminishes the importance of Marketing, which is a killer in this world of big egos, and big budgets.

Let’s be clear:  there are certain companies (Coke, Nike and Quiksilver come immediately to mind) that are truly Marketing-centric. The differences between my sugar water and yours, between my shoes and yours, between my surf shorts and yours, rarely come down to functionality and technology:  they come down to Marketing. And in those cases ‘Sales-Based Marketing’ doesn’t make sense. But for most companies today, ‘Sales-Based Marketing’ should be the norm.

This is especially true in the area of startups, which exist because of real-life problems that a company or consumer is having or because of a unique application that users will flock to. Which means Marketing can’t work in a self-imposed vacuum:  it has to go down the hall to the product team and translate what they’ve created to a skeptical market. And it needs to go out in the field with the Sales guys and see and hear how target users react to the product. Then it needs to incorporate all of this into their positioning and messaging.

The next step in sales-based marketing is testing the message. Let’s say that, in the course of establishing the initial positioning of the company and product, we establish three different options to explain how the product works:  a bicycle, a car and a boat. After much discussion, with Sales and Product weighing in heavily, we decide on ‘car’ and devise presentations and sales materials in support of this position.

Now it’s time to test our new positioning (before we do any of the heavy investments of time and money in critical marketing deliverables like PR, a website and demand generation programs). We meet with a number of potential customers and get their feedback. And we listen hard.

It’s the same thing with early positioning of your product. You have to have confidence in your decision (‘Car’), but you have to be flexible and humble:  the market knows better than you what it needs and wants. So the first time a customer says:  “You’re not a car—you’re more like a bicycle,” consider the feedback but stay the course. If Sales, based on this one meeting, wants to rip up the PowerPoint presentation and start over, tell them they’re over-reacting. The second time, if the Sales team gets the same reaction, listen harder:  but it’s still too early to change course. But if the Sales team reports that they hear it for a third time, scrap the Car and get to work on the Bicycle strategy.

Now that you’ve been out selling the product for a bit, it’s time to define your sales cycle. Not some generic cycle—your sales cycle.

The key is to still hold Sales accountable for revenue generation but to also involve your entire startup team by showing them where there holes (or stalls) in the cycle, so that the appropriate department (Marketing, Product, Support) can take the appropriate action. If the issue is lack of market awareness you might heavy up on PR, analyst relations, thought leadership, search engine marketing, and social media. If it’s a problem of early trials not turning into volume sales, we work out incentive programs for the pioneers within a company. If the product is a complex sale, we might pilot a try-before-you-buy program, where some customer success people work as coaches for key clients.

Your company-specific sales cycle graphic will change as you grow—and it’s Sales’ job to keep it up to date and the company informed. And your marketing strategy and spend will adjust accordingly. You can put PR on a maintenance budget and heavy up on lead generation. Build out case studies and ROI tools—anything that validates your early claims and assures customers they’re not taking a major risk. And then (you’ll be sick of reading this phrase throughout the book) ‘measure everything.’ Learn what’s working, where new business is coming from, and how to make your sales cycle as short and efficient as possible.

Whole-Brain Marketing

Business, as seen through the left-brain/right-brain lens, (left brain = logic and analysis, right brain = creativity and imagination), is a determinedly left-brain discipline. Sales:  make your numbers and you’re golden; miss them and you’re gone. Product:  make the product according to ‘spec’ and on time and you get a bonus. Miss it often enough and you’re working the drive-through lane at Carl’s Jr.

For most of its history Marketing has inhabited the sparsely-populated right-brain sector of business, describing itself as ‘more art than science.’ When asked to justify our spends in such areas as PR, advertising and direct marketing, we point to recent coverage and hoped that no one would ask if any of that coverage led to a sale. Same thing with advertising.

Historically, Marketing has always been the least appreciated part of most businesses. (Those who can, do; Those who can’t, teach; Those who can’t do either, go into Marketing.) While no one in management is bold or stupid enough to suggest that the company do no marketing at all—after all, how else was the market going to notice you initially and learn more about you over time—there is always the lurking suspicion that Marketing is run by lemmings, that they only do what other companies are doing and are only doing it because the other companies are doing it.

All of that changed in the past two decades because of two developments:  the internet and Sales/Marketing Automation systems. Now, Marketing is “Metrics R Us.” With the right tools in place, data-driven digital marketing experts can report stats from site traffic (weekly, daily, hourly) to time on site to downloads, signups, shares, follows, etc—all of which is valuable market feedback about what content is resonating with your target buyers, what channels are producing traffic, etc.

Since virtually every click is now captured and traceable, the data is there to move marketing from the right-brain parking lot into the left-brain side of the business, along with sales, accounting and product development.

Now, with the rapid adoption of Inbound Marketing, which focuses on your company being found, the technology that made sense of all those clicks and connections are marketing automation systems, an outgrowth of customer-relationship-management or eBusiness software. Originally, companies like Siebel Systems and Salesforce led the way on the Sales front, with Marketo, Pardot and Hubspot (and more) complementing them on the Marketing side. Marketers could now tell not only when you first visited their site, but where you had come from, how long you stayed, what else you clicked on while visiting, etc.

To be successful these days, you need to employ both halves of your marketing brain. While the internet and marketing automation systems have created a new level of visibility and accountability, you still need the original thinking and creativity to create those programs you want to measure. So our counsel to our clients is to adopt a pattern similar to military marching:  left-right-left. Start with the analytics for your market to determine who’s looking for what you have to offer, then use this data to guide your creative thinking (for campaigns, PR positioning, sales promos, etc.). Then use your left-brain tools to track the efficiencies of these programs.

Then do it all over again.

Posted On March 20th, 2018 by Crowded Ocean

Sales-based Marketing for Startups Explained

An excerpt from The Ultimate Startup Guide:

Sales. There is nothing more critical to your early success. And, if you’re like most founders, nothing more foreign to your DNA. You’re most likely a product or technology genius (or else how could you have attracted the team and initial funding that you did) or even a bit of a Marketing savant (rare in a founder), but, up until now you’ve probably viewed Sales with a combination of distrust, distaste and mystery. You don’t know what exactly salespeople do, you know they’re necessary (barely, since you probably come from the school that great products sell themselves) and you know that they complain a lot. And now they report to you. Or, for now, they are you.

But here’s the deal: in the course of your company’s arc—and let’s hope that you’re one of those that arcs all the way to a successful IPO or acquisition—there is no facet of your company that is going to change more, and demand more of you in your own professional development than Sales. Over the course of this arc you’re going to most likely evolve from your company’s best/only sales person to a manager of a small, tight early sales department to the CEO monitoring the performance of a sales department that could include direct sales, channel programs, freemium versions, free trials, an inside sales team, sales engineers and a customer service department. So let’s get started.

Sales-Based Marketing Explained

The concept of ‘Sales-Based Marketing’, is built on the premise that the role of Marketing comes down to three words:  Make sales easier.  That if anything you’re doing doesn’t generate new sales, shorten the sales cycle, or make repeat sales easier, don’t do it. Now, let’s see it in action as we focus on the early sales process.

Here’s a scary concept: at this stage in your company’s arc you’re probably the company’s best (and most likely only) sales rep. But, if you’re like most founders, you probably started the company as The Product Guy. So you need to now change two things: 1) how you see yourself; and 2) how the rest of the company sees you. You’re no longer representing the Product group (they’re probably the largest and longest-tenured group in the company)—you’re representing Sales—and, more importantly, the Customer. To be sure, you can still go down the hall and talk to the Product Team, but your focus needs to shift from your old role (‘Let’s see how we can improve this thing’) to your new one (‘I know we built the product around Concept A, but I’m hearing more and more from early customers that they want B with a dash of A. So we need to give it to them.’)

In your new role you need to educate the company about not only your new role but what you’re learning on the job. You need to tell them when your idealized product bumps up against market realities and what that market wants. Culturally, let someone else deliver the Product section of the company meeting. And encourage the entire company to learn more about this new process by either going on a sales call with you or listening in on an inside sales call or two. This kind of action—rather than lip service—is the only way to get Sales-Based Marketing to truly take hold in your company.

What you have to sell: The decision on what you’re going to sell may be the most important one you make in the early stage of your company. This may seem like a stupid question—or at least one with an obvious answer: ‘the product we’ve been working on all this time.’ Duh.

But wait. It’s extremely rare that what a company is developing is exactly what the market wants—or thinks it wants. So what do you do with the ‘delta’, the difference between the two? There are two options: let’s explore each.

The MVP (Minimal Viable Product): There’s a lot of confusion (and negativity) around the concept of MVP, so let’s start with the definition provided by one of its inventors, Eric Ries: “the version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.” Those last two words are what some people seize on, leading them to portray the MVP process as a lazy one: ‘throw shit at the wall and see what sticks.’ But that’s hardly the case: MVP is a true structured approach, one that requires a lot of discipline and diligence to be effective. Once you’ve created and released a ‘minimal’ product, you have to then be in constant contact with the market and then constantly iterating the product in line with that feedback. Done right, MVP can be very effective.

The Sales-Ready Product (SRP): This term is just the opposite of the MVP—it’s too easy to grasp, to positive: who the hell doesn’t want a ‘sales-ready product’. But, just as with the MVP, the SRP requires diligence and discipline. The concept behind the SRP is that, instead of releasing the product and gauging and reacting to initial feedback, put in the extra time and homework to have a more ‘finished’ and approachable product that a larger market—not just the early adopters who are the targets of the MVP—embraces and buys the product. Done right, a Sales Ready Product converts a prospect ‘in the moment’, shortening the sales cycle, ramping early revenue and giving your company an early market lead.

When and who to hire first

Leading up to the launch—and in the first few months after it—most companies don’t need a VP of Sales (or Chief Revenue Officer or whatever trendy title is en vogue these days). Unless that person is a killer sales rep and can do a bit of Sales Engineering on the side, it’s too soon to make that senior a hire. Until your product is market-tested and you’ve created a pipeline of early leads, it’s best to be handling your early sales efforts with your existing team. Led by yourself.

Product Marketing: This person isn’t in the Sales headcount but should be. Whether you adopt the MVP (Minimal Viable Product) or SRP (Sales-Ready Product), constantly checking in with your market and making appropriate suggestions to your Product group is essential. For that reason we recommend that Product Marketing be one of your earliest hires. This person also plays a critical role in interpreting your product’s workings and benefits to the Corporate Marketing group that has to help package and promote the product.

Sales Engineer (SE): Along the with Product Marketing guy, your other critical hire at this stage is an SE (Sales Engineer) or a director-level sales person with a heavy amount of SE DNA. The importance of this person can’t be understated (NOTE: Don Templeton, cited above in the SRP section, was the ultimate SE. Outside the company he interacted with the early customers as an extension of sales, demoing and installing the product, recording all the customers’ early feedback, and acting as the bridge between the customer and the company. Back at the ranch he had the technical chops to sit down with the engineering and product teams and articulate what the customer was saying and if, in his mind, it had merit. If the latter case was true, then Product would get to work on making the appropriate changes and additions.

Pipeline: A company’s earliest sales efforts are often like flowers in an early spring: they arise, beautiful and early, seemingly without effort. But, be careful: they aren’t indicators of the true season ahead. Why? Because early sales are often the results of your and your investors’ ‘Friends and Family’ network. These people are willing to test your product as a favor, or because you steered them right at your last company, or because you’re giving it to them for free. Whatever the reason, they’re not emblematic of your true market.

One of the biggest cultural (and economic) challenges facing you will be when you transition from ‘Friends and Family’ to what one of our reps calls ‘Missionary Selling’. Missionary Selling is akin to you being home on your couch and there’s a knock on your front door. You stumble to the door and there are two fresh-faced religious missionaries full of smiles and literature that can ‘change your life.’ Think how many doors are slammed in their face for every piece of religious literature that is taken—much less the number of prospects who then follow up on the literature by going to a meeting.

That’s what it’s like to go from your friendly contact records or LinkedIn connections to cold-calling. So here is our advice on two fronts related to this transition and your Sales and Marketing investments:

Cold call early and often: Don’t wait until you go to market to find out what that market really is thinking, wanting and needing. As painful and awkward (and unproductive) as cold calls can be, pick up the phone and try to reach the people that your sales force (once they’re hired) will be trying to reach. If you base your go-to-market strategy just on what you’re hearing from Friends and Families, you’re going to be both optimistic and deluded. Then frustrated. And, if you’re not careful, broke.

Build your pipeline early: Based on your cold-calling, market research and advice from investors and peers, you probably have a good idea of whom you should be trying to reach. So start now in investing in building the lists, sales technologies and resources (human and otherwise) to make sure that, once you flip that switch to ‘Missionary Selling’ your sales people (who should be paid for turning leads into sales) have a strong list of leads to work against.

Seth: Which brings us to our second recommendation on who and when to hire: let’s call this person ‘Seth’. Just as we encourage our clients to create ‘personas’ of the people they’re selling to, here’s our persona of ‘Seth’:

  • 24-30 years old
  • Eager to “grok” the technology/product and your competitors
  • Fluent in social media, collaboration software, chat and social selling
  • Lives on multiple screens
  • Loves data, especially those related to your website: daily traffic, who visited, from where, how long did they stay, what did they do while there, etc.
  • Knows how to find core materials for early prospect lists, both organic and purchased

Seth is your digital native that you want managing your Salesforce dashboard of lead pipeline, your marketing automation dashboard and who is comfortable conversing with prospects and partners via multiple channels—email, Twitter, Snapchat, Google Hangout, LinkedIn, you name it. He can bridge sales and marketing while remaining focused on goals and opportunities across your different sales targets.

If you were at an industry conference or tradeshow, Seth would be the kind of utility player on your team that could help staff your booth. Furthermore, if you wanted to ask someone on your team to keep an eye on your top three competitors to keep your entire team informed on their latest announcements, maneuvers on social media and new content and product claims, Seth would be your go-to guy.

Posted On March 14th, 2018 by Crowded Ocean

Best Practices for Building Your Startup Team

An excerpt from The Ultimate Startup Guide:

The Value of the Org Chart:

Every year, come draft time, professional sports teams are faced with a dilemma: should they hire by need (say, a basketball team needs a power forward) or should they draft the best available athlete (that same basketball team, when it comes their turn in the draft, sees that the best athlete out there—by a long shot—is a point guard; but they already have a pretty good point guard.)

The same dilemma faces startups as they start to expand. Your product is coming along well and you need a QA person to head up the testing. But Seth, one of your coders, says that Sara (we’re going for diversity here as well), who ran social media and lead generation at his old company, is looking to join a startup. She’s the best available athlete in this current draft—by a long shot. So you defer the QA hire and bring in Sara. You think, what a great get—one that will definitely pay off down the line.

The problem with this strategy is twofold: 1) You don’t have anyone to test the product. You try to offset that by having all the coders take time away from their coding to bang on the product and look for flaws. But coders aren’t testers—they suck at it and they resent the time away from their real jobs. So the product goes out the door (a little late, since the coders needed to both code and test) and the market, rather than your crackerjack QA guy, discovers the flaws.

The second problem is that Sara is bored stiff. She’s a Social Media director, but for her first four months at your company, since you haven’t launched the product and are operating in stealth, she’s been the good soldier and helped out where she can. But she’s a fish out of water and is getting frustrated. Meanwhile, her old boss has moved on to a hot new startup, one that needs Social Media immediately. You know how this movie ends: now you don’t have a QA manager or a Social Media director.

The lesson? Create an org chart based on company priorities and hire to it.

Get Your Investors Involved

Keep this in mind: outside of yourself and early team, the people most invested in your company’s success are the people who put their own money into it. Which means you should be tapping them in two key areas as you start your company up: 1) finding new talent that is outside your friends/family network; and 2) interviewing the candidates identified in the previous section. Your investors—especially experienced VCs—have the skills and detachment to ask the hard questions, to identify the players who might upset your company’s balance. And they’re far more experienced at interviewing than you are, so use them, then leaven their recommendations with your own experiences and judgment.

Investors should also play an active role in identifying talent in the first place. They have networks that you don’t, especially employees from previous companies that they’ve invested in. Good CEOs manage their Board as much as the Board manages them: give them quotas of resumes to find—they’re in this with you.

 

Outsource and Go Virtual Whenever Possible

Here’s a fresh way of thinking about startup hiring: full-time employees should be the exception, not the rule. The loaded costs, managerial responsibility and employee issues that come with a full-time employee argue that you should only make only the most business-critical (and full-time) functions full-time. (In fact, if your employees are European, parting company with them can be a protracted and costly venture.) So before you roll your eyes at this advice, ask yourself: what function will this new hire play, how essential is it to your operation, and could it be done cheaper and as well with a different approach.

Let’s start with the obvious: no startup that we know of needs a full-time CFO, HR director or legal operation. There are any number of options (including tech veterans who have either cashed out or are looking for less than full-time jobs), where an established player can serve as a part-time, on-demand resource spread across 3 or 4 companies. You get all that experience for a fraction of a full-time employee.

The single largest psychological barrier to this hiring philosophy is in the area of core technology. Until recently, even if a company bought into the idea of the ‘virtual’ or ‘on-demand’ corporation, the technology had to be in-house and under the same roof. Then a number of factors (price of Bay Area real estate; Google, Facebook and Apple hiring all the best developers; and a new focus on a balanced work/social life) led to companies agreeing to let smart coders work remotely. They were still full-time employees, but the door was now open to new thinking. The next domino to fall came in the area of Outsourcing. As countries like India, China and Ukraine started building tech centers and staffing them with talented techies who could code for pennies on the dollars, a number of firms—driven by their inability to find and attract talented techies—took the plunge. And found that, between tele-conferencing and occasional on-site visits, they could get great results for a fraction of what it would cost to do it locally. The crown jewels—the CTO and his/her top lieutenants—are still based at Corporate, but every other function is now subject to the ‘Is this really a full-time, local position?’ scrutiny.