Getting what you wish for can be a mixed blessing. So it is with startup companies. They begin as an idea; progress into a founding team and initial product. And then, if they’re lucky, work hard, and don’t unravel from the stress, grow up into companies. As you might expect, these growth stages require different strategies and management styles — and navigating the changes can be one of the most difficult tasks a founder faces.
In fact, probably the biggest change and hardest management challenge for founders occurs right around the transition from the quest for early product-market-fit to early scaling. Often, this is the time of Series A funding, in which new capital goes into staffing up teams and hiring experienced leaders to oversee them. One day you’re a project, the next you’re a business.
For simplicity’s sake, let’s call this transition Series A (even though many companies experience it without a funding milestone, including most non-tech companies). Up until this point, if you’re a startup founder, you have been an emotional cheerleader, inspiring your teams and working side-by-side with your them. You have sweated details, worked all nighters, and been a part of virtually every decision. Most of your people are ICs, and it’s not uncommon for team leads to be ICs with higher than average EQs in lieu of real management experience. And, sure, it worked, not least because you couldn’t afford to carry anyone who wasn’t writing code or interacting with early customers.
At Series A, things are different, and this catches too many founders by surprise. Here are four major blind spots I’ve observed and the skills you need to succeed:
- Learn to oversee functions outside your area of expertise. Most venture-backed startups are technology-based and, not surprisingly, most founders have engineering backgrounds. There’s nothing wrong with this, but if you’re a founder, you now need to bring on new, specialized experts in sales and marketing, finance, human resources, and more. Typically, I find founders are overly deferential to such hires. That’s why it’s important to understand that you can just as easily hire a poor CFO as a bad software developer. To avoid this problem, you should listen to your board, ask plenty of questions, and not be afraid to dismiss someone if they underperform against the expectations you set for them. Most importantly, you need to calibrate the goals they set against other industry norms so you know whether or not your and their expectations are reasonable.
- Build a diversity of opinions. As companies grow, diversity becomes increasingly important. No end of studies has demonstrated that diverse teams tend to come up with more innovative ideas, devise more effective solutions, and just plain get along better. But hiring a team that doesn’t look or think like you can be a challenge. To make your company thrive, you need to get used to hiring those unlike you, who can challenge your ideas and assumptions and help you improve your product.
- Get serious about quality. The biggest change after Series A is that you go from being the lead cheerleader to the lead quality assurance manager. If you’ve been used to inspiring people to build the best product they can, you now have to think from your customer’s perspective. As you roll out additional features, you’re not just creating a product, you’re building a brand. A brand is more than a product or the name of your company. It is the total sum of every action your company takes — regardless of function. So by all means, keep inspiring your team, but also start holding them to the high standards your customers expect — in every function.
- Articulate a theory of the business. In the rush to build a product, you’re typically in full tactical mode. You’re coding, you’re creating, and you’re just trying to build something that works. Before Series A, however, a product has to become a business. You need to start understanding who your customers are, what your total addressable market is, and what reasonable financial projections for the future look like. If you can’t explain that to your potential investors, they are unlikely to sign on. So take a step back from your product, learn to assess it as a business, and be ready to answer the hard questions when they come.
Series A is above all a time when, as my kids put it, things get real. It’s a time of big changes, but good changes. And the best way to deal with any change is to be ready for it. So, check your blind spots, make sure you’ve addressed them as best you can, and then by all means, have fun.