How to Start a Startup — W06
Building a Team. Building for the Enterprise
Here are a few takeaways from Stanford/Y Combinator CS183b — How to Start a Startup — Week 6 lectures.
Lecture 11 Company Culture and Building a Team, Part II Patrick & John Collison, Co-Founders, Stripe, Ben Silbermann, Founder & CEO, Pinterest.
Lecture 12 Building for the Enterprise Aaron Levie, Founder, Box.
Company Culture and Building a Team, Part II
- Culture, to a degree is a resolution to a bandwidth problem. As the organization gets larger you can’t be involved in every single decision so culture becomes the invariant that you want to maintain as you get involved in fewer and fewer decisions over time.
- No batch of ten people will have as big of an influence on the company as those first ten people. Each of those first ten are going to bring along another ten people with them. Hire wisely thinking exactly which ninety people you would like those first ten people to bring on.
- Have a great elevator pitch not just for investors but for employees as well because everyone that you run into from 6 months to a year is a recruit. Hiring takes a long time so getting people consistently excited about what you are doing will pay back later.
- If you are not an expert in the role you are hiring you can gauge excellence either by giving recruits projects to work on or by talking to specific domain experts asking them what traits to look for.
- When checking with references about potential hires use quantitative measures — is this person in the top 1% or top 5%, or top 10% of the people you worked with?
Building for the Enterprise
The Time is Right
“If there ever was a magical time to build an enterprise software company, now is that time in terms of how much has changed in what is going on with organizations.”
Changes in the enterprise space
Everything about enterprise, and by definition the software that the enterprise uses, has changed just in the past 5 years.
On-Premise Computing → Cloud
Most application categories are moving to the cloud. Today with Amazon’s AWS or Azure you have readily available infrastructure. CIOs and large enterprises are taking advantage of this and a massive shift is happening.
Expensive Computing → Cheap
From a world of expensive computing we are moving to a world of low cost, on demand computing making it easier to adopt new technologies. The barriers for introducing these technologies to enterprise are being lowered creating massive opportunities for startups.
Customized Software → Standardized
We are going from a world of customized software to really standardized platforms. Today customers are realizing that they want open platforms that they can customize at a layer on top of the product.
Large Enterprises → Every Business
Earlier you could only sell your enterprise software to the top five or ten thousand companies in the world because they were the only ones that had the financial and infrastructure muscle to deploy the technology but today even a two person company can sign up for a product like Box.
Regional → Global
You have more markets to go after now than before making enterprise software lucrative; serving not only small business anywhere in the world but also some of the largest companies on the planet. It is easier to go international now than ever. Box had its first international customers within weeks of starting the company.
IT-Led → User-Led
The adoption of mobile devices and tablets has made the IT model of the enterprise more user led as you build software in and around the user. Today the way to get into the company is through the end user.
Tipping points
There are two moments of opportunity when a technology revolution will happen in the enterprise.
- Raw Materials — When the raw materials change, the cost of computing comes down making it better to centralize and let people use technology on demand.
- Customers — The very customers that the enterprises go after need new experiences of working with that enterprises’s product. For example if you are in the shipping or transportation or the logistics business you can’t let Uber exist without understanding what are the implications of Uber to your business model.
“Anytime, the delta between what is possible, and how things work today is at its widest, that is an opportunity to build new technology to go solve a problem.”
Getting started in enterprise
Spot technology disruptions — Look for new enabling technologies that create a wide gap between how things have been done and how they can be done.
This is fundamental to entrepreneurship if you are going to build a tech company. For Box, the gap was storage was getting cheaper, internet was getting faster, browsers where getting better and yet file sharing was slow and complicated. What was impossible 10–15 years ago because it was either economically or technically infeasible is now possible. E.g. PlanGrid.
Intentionally start small — Start with something simple and small, then expand over time. If people call it a “toy” you’re definitely onto something.
Find a wedge a very natural place where you can create a product that will slip in between the gaps of other existing products. Unlike an incumbent who goes in for a full solution, find gaps in the full solution that are significant enough where the customer will want to solve the problem with a discreet technology and then move upmarket. E.g. ZenPayroll
Find asymmetries — Do things that incumbents can’t or won’t do because it’s economically or technically infeasible.
For example if you are going to build software today for the enterprise that goes after an incumbent category that has a application suite approach, you should go and build a technology that is platform agnostic.
Look at the cost structure of an incumbent company and discover where they are they not going to be able to drop their prices because that business model is fundamental to their existence and find ways of monetizing customers that are unusual or unique that no one has discovered before thus making it impractical for anyone else to do E.g. Zenefits
Find the almost-crazy outliers — Go after the customers that are working in the future, but that haven’t totally lost their minds.
Find the really crazy but reasonable outliers within the customer ecosystem and leverage them as your early adopters. If you find customers that are working in the future, you will be able to work with them to find out what is missing so that you can build for the future. E.g. Skycatch
Listen to customers — But don’t always build exactly what they want. Build what they need.
Listen to your customers list of requests and distill those lists down into the ultimate product, building the best and simplest solution to their problems. E.g. Palantir
Modularize, don’t customize — Every customer will want something a little bit different. Don’t make the product suffer for this.
Build a platform as opposed to building all of the custom technology and customer vertical experiences directly into the software itself. Think about openness and APIs as a way of delivering vertical or customer experiences and don’t build that directly into the product.
Focus on the user — Keep “consumer” DNA at the core of your enterprise product. This will always pay dividends.
Focus on the user always. By keeping the consumer DNA at the center of the product you will make adoption easier and your product has a much better chance of going viral.
Your product should sell itself — Sales should be used to navigate customers and close deals, not be a substitute for a great product.
Leverage everything about the internet, leverage everything about users to get to your customers but still use traditional sales as a way to help your customers navigate your product, the competitive landscape and ecosystem. E.g. Mixpanel
“In a world where enterprises are dealing with that kind of change, they are going to need new technology to help them evolve their business models, and how they adapt to this disruption. This is why it’s such an amazing time to even build vertical software companies for industries.”
*Photo by: hjl
