An Early Lesson In Scaling Startup Teams

I had a really enjoyable conversation about scaling an early stage company yesterday with someone who was introduced to me by a former colleague.  He has really done his homework and sounds like he is posed to do really well.  We got to talking about his business model and whether or not it would scale up.

In his case, the model is a consulting business that involves hiring a lot of people to work on short term projects – hours here and there or blocks of hours across a month or several.  He told me that he was planning to hire people who were remote and located in a bunch of different states.

His multi-state hiring requirement is very similar to what people in the Washington, DC area have to do on a regular basis.  We have a unique situation where there are three states that essentially overlap the District of Columbia.  As a result we have people who Metro or drive into the District for meetups, going out and for work.  On top of the tri-state region, we are a close knit region with people who commute in and out from Baltimore.  The end result is that people take advantage of regional commuter rail services a bit more than people in places like Texas (where I grew up) which is a driving state.  Rail opens things up a bit so there are quite a few more interactions with New York, Philly and New Jersey.  In Northern Virginia there is some interaction with Richmond, VA.

I asked him how he planned to hire these contractors and he said he planned to hire them on a 1099 basis.  While I’m not an HR guy, I have hired people in a bunch of different places for a ton of different companies.  It is really important that when you are hiring a bunch of people all over the map like this that you don’t assume that it will be easy.

For starters, there are federal 1099 rules in addition to state based 1099 rules.  What constitutes a safe bet in Virginia is different from DC, MD, PA, NJ and NY.  There are also different filing, tax and labor law requirements too.  There are services out there that you can outsource things to that can be helpful.  But, there is a lot of extra administration required both on a monthly and periodic basis.  While you could definitely take advantage of one or more of these services, it is a lot easier to keep things simple.

I personally learned how important this can be more than once.  I figured out that while payroll services were convenient, they require adult supervision.  When they make a mistake you end up paying for it.  When they send you a bunch of paperwork, you have to take a ton of your time pushing it into your bookkeeping system.  Plus, there are things that a service can’t change.  When you hire employees in multiple states you also have to register as an employer in those additional states. This requires that you will end up doing a ton of paperwork.

I am going to skip the subject of whether or not a 1099 is the same as a w2 employee or a corporation, but you shouldn’t. This is something you really should understand.

Enough with the thousand papercuts aspect of hiring a bunch of people in a bunch of different states.  The really important lesson is not that you should think before you commit yourself to a ton of extra administrative work.

The key lesson is that instead of hiring a bunch of people, you should concentrate on trying to hire one.  And more importantly, you should hire someone who is both experienced and accountable.  What that means is that instead of hiring junior or entry level people or interns who you think will be cheap or less expensive you should hire people who can walk on and get things done.  You probably can’t afford to hire them full time at first.  That is fine.  Instead, focus on hiring them and getting a routine that works.  This also means that you will probably have to spend more time trying to identify this more senior person and some additional time courting them.

The upside is that you will be able to focus on making money for your business so that you can afford to hire them full time.  This is crucial.  There is a side benefit: you can’t take time off if you start off by hiring a bunch of junior or entry level people who need tons of extra adult supervision.  Time off is important when you are working 80+ hour weeks.  If you hire someone more senior, experienced, accountable, etc. then you can roll up more junior or entry level people to this person.

The Best Coffee Shops To Work From In Denver

I am spending a full week in the Denver, CO which means I get to sample the city’s startup, tech, coffee and co-working options and opportunities.  So far I am loving it here in Denver and am not sure that I will want to leave when the time comes.

This is my fourth visit to Denver, and by far the most substantial one.  My initial impressions are that the city has one of the easiest public transit systems around if you happen to have a bike or a loaner car.  There is a circulator bus that you can hop on from 16th street or from Union Station or the Civic Center.  This is really awesome for getting across town.  There are also some really great options dedicated to foot and bike traffic that help you get across town and into town from the suburbs.

I am staying in the Highland neighborhood near a couple of coffee shops that turned out to be hit or miss for me for a number of reasons but they might work well for someone else.  One of my colleagues chose to work from a spot called The Laughing Late which was a short walk from where we are staying.  Despite a somewhat obnoxious notice on each table informing customers that they are required to “buy something every 2 hours” and a “customers have to pay rent” attitude (direct quote from the barista), the place has great tables and tons of them available.  It is a great place to work from, but be sure to pay your coffee dues.  I guess the rent is too high for locals, or maybe the vibe is too un-hip because several blocks away there is a another coffee shop full of Mac toting hipsters called Black Eye Coffee.  There are some food options and the neighborhood has other good and inexpensive food options nearby.  The food is so cheap here that I can’t believe it. I got a dozen tamales for a BBQ later in the afternoon and lunch for $15.

Black Eye Coffee is an open air (doors wide open) place with a distinct found objects setup that will be familiar to 1776′ers visiting from DC.  I could not find a table or a seat that wasn’t elbow to elbow or an available seat on the sidewalk outside so I decided to head downtown.  There are plenty of nearby food options that are inexpensive and this looks like a great place to work from or hang out so I will be back and may have a chance to update this post with more details later.  This is a great spot for anything, but I am guessing that it is not a great spot if you need to make a phone call from where you are sitting. That said, you could easily step out and watch your laptop from where you are outside.  If the coffee is as good as the atmosphere then this is a great option.

On the way into downtown I discovered passed the Little Man Ice Cream stand which appears to be all the rage in the afternoons (there was a long line when I passed by it yesterday).  I can’t wait to stop by on the way back later.  There is absolutely no shortage of places to grab a beer or a cocktail in this neighborhood and I’m betting that AirBnB has all kinds of options in this hip neighborhood that feels like a Dwell Magazine cover story collection.

Ink! Coffee was on the way into downtown as I was walking down the foot/bike path from the Highland neighborhood.  It is right on a really nice park along the river that runs along the edge of town. This place  has location, location, location!  Today it was jam packed, but I could find tables inside and out.  The inside is set up with the tables too close together and with extremely bad acoustics. If I had to make or take a call I would have to walk outside.  There is a big emphasis on outdoor seating here too, but no outlets to speak of.  If it was not for a cement mixer and bobcat with front-loader rolling up to it off and on across the street I would probably have stuck around for more than a few seconds.  This is a great spot if you want to throw on some headphones and work on a design or development project.

I ended up at Common Ground which is a great spot with tons of indoor and outdoor seating on 17th street (1 block from the free circulator bus).  The baristas are awesome, the coffee is good, and there is tons of room.  There are also outlets, books, a piano (yeah), etc. This is by far the best place to get your caffeine fix as well as get some work done.  There enough alcoves in the space that you can find a spot to make or take a call without hesitation.  The high ceiling and reasonable volume level of the house music creates a just right acoustical balance that allows you some privacy and makes hearing the person you are talking to easy.  I would come back here first if I had to co-work or have a coffee meeting downtown Denver.

The Tattered Cover Book Store & Coffee Shop are also a great option if you want a relaxed place to sip a latte while reading or meeting someone. The space is small for sitting down, but this is one of my favorite book stores of all time. It mixes used and new books and has a nice selection.  It feels like an old college library. There are 6 locations – I hope they add one in the DC area someday soon.

There are plenty of places around downtown and elsewhere that I have not visited yet.  I attended the Distributed Computing Denver Meetup a few miles north of here around the 3,000 block of Latimer St. and found that neighborhood to be appealing for a lot of reasons. No parking meters for one, but in general it was a hip and interesting place.  The meetup was hosted in a staffing agency’s garage (yeah, a converted auto mechanic’s garage) that had a fridge stocked with great beer and a full liquor bar.  The turnout was really low, but it was the 2nd or 3rd event for the group.  The organizer said he had 3-4 other meetups including an AngularJS meetup that I had hoped to make the day before.

So far my stay in Denver has felt like being in a less diverse and gritty version of Baltimore with a splash of the Dallas cosmopolitan and the Austin hangout vibe. I like this town and look forward to coming back.

A note to those booking travel here.  A bus from the Airport to downtown costs roughly $11.25.  You can save $1 if you buy round trip.  A cab is around $50 so I recommend the bus.  It drops off at Union Station.  What I can’t recommend to anyone is Frontier Airlines.  I bought a ticket on Kayak and ended up having an experience that was only rivaled by my last experience with United.  There was a $35 Carry On charge (un-announced at booking) for my right sized luggage item.  They are strict about it.  On top of that they did not give me a seat assignment until their 3rd zone started boarding.  Two people cut in front of me in the line at the front of the line and they did not blink.  On top of that I got a seat at the back of the plane (last seat) that did not recline (the one in front did).  The video screen in front of me had an error message (something about maintenance mode) for the entire flight. To make matters worse, you have to pay ~$2 bucks for a soft drink or and ~4-7 for a snack.  At least we had a really awesome flight attendant.  I should have spent the extra ~35 to get a flight on Delta.  Note to self: read up on the airline before flying next time.  I am not sure why, but the flights into Denver were expensive and so were rental cars. In a town where most things are really inexpensive compared to other cities this is surprising. I guess the cost of living here hasn’t caught up with what seems like a massive effort to build new, more expensive, condos, apartments, office buildings, etc. here.

If you have any suggestions, tips for what to check out while visiting here, or know of a great co-working space let me know. My plans make it a bit hard to justify a co-working tour on this trip, but it appears that there are some good co-working options here. I sense that there is a great web design and web development community here as well as a strong tech community.  I hope to explore this a bit more and maybe even make a trip out to Boulder to visit TechStars and the Boulder tech/startup community before I have to head back next week.

How and When To Apply Succussful Company Culture To Your Startup

Some of the most successful startup founders I know  are scholars of company culture.  Some take a page or several from Google, others take a page from Amazon or Facebook.

The roots of scholarship often begin in aspirations, but sometimes there are other sources.  We tend to borrow from our own career experiences as well as from the pages of popular blogs and even magazines.

Books like Good to Great by Jim Collins and Small Giants by Bo Burlingham come to mind, but company culture often finds its way into articles in magazines like Fast Company and Inc. and into popular fiction titles.  A few examples of these include The Circle by Dave Eggers, JPod by Douglas Coupland and The Firm by John Grisham.

The accomplished scholar can usually pick out themes in play at a company almost immediately despite not having earned a Ph.D. in industrial psychology or a top shelf MBA.

Knowing is half the battle, but be assured that knowledge can be a double edged weapon in the war for talent.  I was prompted to think more about this after a recent discussion with a founder on the same subject.

Take a few company’s values as case in point: Amazon, Facebook, Google.

Facebook, for example, has this quote: “The Riskiest Thing Is To Not Take Risks”.  This helps frame an entrepreneurial culture at the company.  There are other quotes that you will find on the wall and elsewhere. Things like this: “If you don’t break something you are not trying hard enough.”  Facebook’s team has helped catapult hackathons into the mainstream of company cultures.

Google’s values include this: “You can make money without doing evil.”  Despite this, the company is working in the DoD space, engaging in suspect activities on the edge of the privacy rights of its customers’ users, and is constantly being exposed for having done all sorts of things that were in conflict with the spirit of this.

Amazon’s values include a list that includes one centered around having debate when their is disagreement:  “Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.”

When you get right down to it these value statements are ideals that can be reinforced through the company’s ongoing management dialogue with employees, through quotes on the wall, etc.  As startup founders we need to spend time being a scholar when it comes to company culture.  This is often initially examined and contemplated, but soon overlooked or forgotten entirely.  That is not good enough and we must be persistent.

Moving on to a new, but related topic now.  Being a scholar is not an activity in reading and writing alone.  We are also executors of our scholarship such that once we triangulate what we believe are good ideas we must act them out in a measurable and consistent way.

As we craft and execute company culture measures it is important to consider how we will measure them, but also how we resource them.  A really good example of this applies to when we begin to compare ourselves to the companies and brands that we emulate.

The greatest example in my wheelhouse that I can speak to relates to recruiting. We often say, think and believe that we are offering candidates a company culture and an opportunity on par with or greater than Amazon, Facebook or Google.  At one point or another Jeff Bezos, Mark Zuckerberg, Larry Page and Sergey Brin were in our shoes in this way too.  Larry Page is said to have read hundreds of books about the how to build a successful startup before co-founding Google. He isn’t alone.  Today our reading lists are supplemented podcasts, social media discussion groups, blogs and an increasing number of authoritative meetup talks.

It is important to check our formula and to measure outcomes along the way though.  We can say that we are a startup like Google or Facebook when all that we have accomplished in truth is a remodeling of our office space.  We can say that we have a startup like culture, but when we get right down to it we have a military style top down style of culture that is dominated by certain personalities within our ranks.  In other words, don’t fall victim to your own propaganda and idealism which is hopeful but not a productive reality. While some candidates will not be fooled, the ones you missed may have been the best and brightest.

If you have favorite books, podcasts, articles, examples of your own that relate to this please do share them.

Re-shaping Roles in Product Companies: DevOps

I have wanted to talk about how roles have been evolving in product company teams for some time now.  One really good example of this is the appearance a role titled “devops engineer”.  If you are a developer or from the engineering side of the house this is probably not a new title to you, but it probably is if you are coming at things from the business or design side. I just read a really great article titled “What is DevOps? 3 progressively broader perspectives” by Donald Guy. He suggests a definition along these lines: “An expert in certain “configuration management” tools such as [Puppet or Chef] and Vagrant (or more recently Ansible and perhaps Docker) that allow for the automated setup and maintenance of servers (and their services).” Donald adds that in the past hardware management (e.g. servers in your office) required “physically moving and touching hardware”, but that today you can do that by an API call which means that you can treat your hardware as “code”.  In other words you can write a program or use a program that talks to your hardware through an API. This means that you could potentially be adding devops engineers if you are treating your infrastructure as code as Donald describes it.  What it means more than anything is that you need to add an additional consideration to your team technical capabilities considerations.  A good developer or programmer these days is someone who is also a devops engineer too.  As companies scale the roles will increasingly become distinct.  So if you are building a “cloud” or Saas/PaaS startup you will ultimately end up hiring software engineers (programmers), software engineers in test (test automation engineers) and devops engineers (infrastructure/systems engineers who are also coders). I should point out that I’m not just saying that you need to be thinking about how this stuff fits into your company’s plans because you can bet that if a company looks at you as a potential acquisition target they are going to want to integrate your team and efforts with theirs.  You are also going to want to be able to get the best people who are on the cutting edge – they are not going to take you as seriously if you are not on top of this stuff.

UX Research vs. MVP Development for Founders

Experience is a valuable thing, but sometimes experience is a runaway train.  When we think of ourselves as savvy technologists we often imagine ourselves capable of doing anything that we set our minds to.  This assumption can often be right, but it can often lead us into a dead end that is both costly and frustrating.  This often plays out in the early product lifecycle.

We want things to be A, B, C, Done with an IPO or a major acquisition as a book end.  But it doesn’t work that way unless we get things right enough early and often.  I say right enough because startups generally don’t have the resources required to implement big company infrastructure.  This can be to our advantage when it comes to agility, but to hurt us when we skip or gloss over important steps while trying to save time or money.

The first place that this manifests itself is with the early customer research. It is generally assumed that early customer research means asking potential customers and advisors questions.  In fact, most founders who are doing their homework ahead of time have read The Four Steps to the Epiphany by Steve Blank which provides some key insights around how to think about and approach early customer research.

Steve Blank’s book is a great resource, but it is also an incomplete resource.  In his book, Steve more or less glosses over the subject of what to ask.  You can hardly blame him. He is a professor of entrepreneurship and a widely sought after speaker and expert on early customer development.  However, he is talking to people building fuel cells as much as he is talking to people building web applications.  This means he can’t be too specific about how to proceed.

So what you need to do is take a step back and consider that here is a subject matter that you should spend some time familiarizing yourself with before you go out and start your early customer development exercises.  If you have already started it isn’t too late to get a bit wiser.

People often blend UX Research (UX = User Experience) with web design and web development.  They jump right into coming up with wireframes or mockups and then start building on things.  By the time the MVP is done, it was like one big seamless process.  But UX Research is and should be a separate part of the effort and one that precedes the groundbreaking efforts on your MVP.

If this is not something you are experienced with then have no fear. You can find a freelance designer or a designer that is willing to spend a little time coaching you and get up to speed on the subject of User Experience very easily.  If you don’t have the money to hire a designer then you might be able to get someone to help for some sweat equity or just to spend some time discussing the subject.

One book that can help you get up to speed on the subject that I would recommend is Matthew J. Hamm’s Wireframing Essentials.  It is a very quick read that you can probably check out via you public library’s ebook system and read in a couple of hours.  You will find that Matthew, an accomplished UX Designer, covers topics including stakeholder interviews, how to map out your application based on core user personas, and much more.

Armed with this new knowledge you will be better prepared to conduct your early customer interviews.  You will probably have a much better sense for how to distill information from your prospective customers and also how to prioritize the feedback that you gain from them.  Now Steve Blank’s process is refined and you are going to be much more likely to get where you would like to go.

But it doesn’t stop at just asking the right questions. I had a chat with a fellow founder and technologist yesterday.  He and his developer colleague are about to embark on an MVP build out project having had 4-5 conversations with prospective customers.  While it is awesome that that he has had 4-5 conversations, that is just not enough.  It is really important to speak to enough people that you can a) determine the patterns and what people are really willing to use and pay for and b) so that you can have a path to paying customers once you have an MVP ready for them.

As founders, we are like the kids taking the marshmallow test.  We want instant gratification, but are impatient for results.  This is where things get interesting though.  To get to the next stage we have to finish something.  But to finish something and get to the next stage in a way that isn’t going to break the bank or break our willpower because we bit off more than we could chew we have to narrow our vision and our efforts.  Imagine dropbox vs. Mac OS X or Windows 8.  Dropbox is just a file storage system that takes advantage of the cloud.  If the founders of Dropbox had set out to replace Windows or Mac OS then they might have succeeded.  But they might have spent many years just to fail or just getting to the starting line.  Instead, they built a much simpler system that they could use and sell.  Over time they have expanded their offering, but for the most part their efforts have been really focused and also very successful.  Note that they did not build a social network or concern themselves with content along the way.

So as you are imagining your MVP and talking to early customers be sure to keep in mind that you don’t have to be everything to everyone in order to be successful in your efforts.  Stick to something that is core to what you want to do and then talk to a sufficient number of people to spot the patterns.  This particular founder should have talked to 10x as many people, probably 40-50.  To get to that many you have to pace yourself and realize that it may take many weeks.

I recall my first reading of Steve’s book in much the same way. It was not until I attended a talk out in Mountain View by a founder in my product space who had been through a recent exit that things really clicked.  He talked about having done 40-50 early customer interviews and about the follow-on conversations that lead to deals being closed.  I think my approach before that was less systematic and process driven.  Talk about epiphanies.

Remember that it is better to get it right than to get it right now and you should be just fine.

Today is an awesome day for one of my teams!

Today is a awesome day for the team from HelloWallet in Washington, DC. They have just exited for $52.5 Million making them the fifth successful exit and the second largest software product acquisition in my portfolio of clients over the last couple of years.  The largest to date was that sold for $117.5 Million. I am really proud of these guys and they really rocked it!

If you have a software product idea or team and you would like some help with it or just want to chat about your plans drop me a line via today.