One of the unavoidable realities of building a startup is having to fire people.
In a normal business you can often sweep bad performers under the rug and not deal with them. When you have millions or billions of dollars of revenue you can suffer a few bad performers or bad apples. You can miss a quarter’s target and not cull the inefficiencies. I’m not saying you should, but you could.
But in startups this equals death.
Death because just 3 extra non-performing employees in a company of 15 can either accelerate cash out date or can dramatically lower your productivity.
I’ve spoken about this before and my mantra, “Hire Fast, Fire Fast.”
When I first started my career I came across a term for this that has always stuck in my head and serves as a useful reminder of this mantra.
We called it “PURE.”
Previously. Undetected. Recruiting. Error.
My premise with “hire fast, fire fast” is that some companies over-analyze potential recruits and therefore chew up valuable months with functions unfilled. Most (whether they hire quickly or slowly) are very slow to deal with problems once they have them.
I have sat through scores of board meetings in the past year and in at least 25% of them the topic of a senior employee we hired that hasn’t worked out comes up. Almost always the CEO is defending why he or she has to hold on to that employee for an extra 6 months until they can fix a,b and c before letting them go.
I have never (literally not once) heard a leader later tell me, “I’m glad we waited.” Universally after the shock of letting somebody go and the reverberation in the company is felt a sense of relief and well-being ensues.
For the past 5 years or so Google, Facebook and a handful of tech industry giants have been quietly buying scores of early-stage startups for their talent. And to keep up with the Jones’s it seems that Yahoo! has now employed the same strategy.
And who cares, right?
A couple of tech giants throw millions around in either cash (for which they have hoards) or part with some publicly traded stock. And a few teams of super talented, educated and bright entrepreneurs make a few mill. in their 20′s. What could be more capitalist than that?
It has even gone so far that we now have evocative headlines in the tech press such as “Buy or Die,” which is what got me thinking about this post.
We’ve been here before – trust me. Every era has its own amnesia for M&A gone wild.
In the end, it doesn’t really matter. It’s not some big tragedy on a grand scale.
I am fond of quoting that about 70% of my investment decision of an early-stage company is the team. My rationale is simple: everything goes wrong and only great teams can respond to competitors, markets, funding environments, staff departures, PR disasters and the like.
Final startup grind from msuster
How you build out your team in the first few years can have a huge impact on the trajectory of your company.
So I naturally spend much time with the companies in which I invest helping them:
figure out roles
measure performance / quality of team
debate the right structure
and so forth.
There are no “right” answers – just opinions. And the folks at Startup Grind have been kind enough to invite me to present this morning in Mountain View on the topic.
Be careful not to have too many co-founders. it’s the most expensive dilution you’ll ever face.
I’ve thought a lot about team construction of early stage companies.
I was once asked on Quora what my idea startup team would be. I wrote the following:
“I like to invest at the seed or A round. My ideal team is simple:
Assuming 6 people
1. 5 engineers
2. 1 CEO who doubles as head of product management
3. Nothing else
But obviously I am open to other configurations. The key important things are:
- strong tech DNA
- dominance of tech personnel relative to others
- strong product focus on CEO
I never invest in:
- business people who outsource tech dev to 3rd parties (“to speed up time to market”)”
If you like that feel free to
This post originally appeared on TechCrunch. I have often said that what separates real entrepreneurs from pundits and bystanders is a bias towards getting things done versus over analyzing things. My credo has always been JFDI.
It’s the hardest thing to teach people who come out of big companies, out of conservative jobs. At the big consulting firms, investment banks and established large technology companies we’re taught to produce long reports, make sure that every document is perfect quality and that every possible bit of diligence has been done. Good enough isn’t.
And so things operate on a CYA basis.
That doesn’t work in a startup.
There’s a certain cadence that you can feel when you spend time hanging any well-run startup company. The management team has to have a bias toward making decisions. They know that a 70% accurate decision made quickly and based on sound principles is better than a 90% decision made after careful consideration.
The startup entrepreneur knows that they’re going to be wrong often.
This article originally ran on TechCrunch. I’m in Seattle this week.
People keep asking me if I’ve “seen anything interesting.” Of course I have. I’m an entrepreneur at heart so I’m always inspired when I hear stories about innovation.
I really liked BigDoor, MediaPiston, OpsCode, BuddyTV, SEOMoz and much more. Can’t list them all.
But I’m not here trolling for deals. I’m here to build long-term, stable relationships that I hope will pay off over a decade, not a week. I’m looking to turn dots into lines over time.
I’m inspired by the enthusiasm of the young, emerging startup ecosystem that is here.