Founding a Startup Will Not Make You Your Own Boss
You’ll have three types of bosses and you need to know how to keep them happy if you want your startup to succeed
I founded a startup. In fact I founded three, over a period of about fifteen years. I’ve raised tens of millions of dollars. I went through the cycle from initial idea to full blown sales. I’ve made all the mistakes you can imagine. Looking back I can say that I went into this adventure with some deeply false notions.
So, here are a few thoughts to arm yourself with if you’re thinking about embarking on an entrepreneurial journey or if you’re already in the midst of one.
Meet your new bosses
Even if you’re the CEO or have a board seat at the startup you founded (or co-founded) you will have bosses. Yes, plural. Firstly, let’s discuss investors. You will have, hopefully, received a large sum of money from investors — angels, VCs, microfunds, private equity — one or all of the above. They are going to be monitoring your progress and will demand timely updates. They will sit in board meetings and will call and email you and they will ask a lot of questions.
There are different types of investors, different styles of investment management and, clearly, different types of personalities, but as a rule your investors are your bosses. You will need to do what they say (or convince them to change their minds) and you will need to report your progress to them. Oh, and they can fire you if they’re not happy with you. Remember that. I’ve seen it happen.
Second, your customers. Yes, that pesky bunch. When you launch or beta test or even just manage to get a proof of concept into the hands of some users, they’ll have comments and complaints. And you’ll need to be extremely attentive to them.
If you want these first testers or customers to keep using your product (or service) you’ll need to make them happy, make quick corrections and check in to see they like your progress. Listening to someone’s complaints and making sure everything is done to make them happy — yep, they’re your bosses too.
Third, your employees. But no, you say, you’ve made a logical error, how can your employees be your bosses. Surprise, surprise, the demand for talent always outstrips its supply. If you want the top people in your field (you do) then you’ll have to keep them happy. The barriers to moving between jobs in our online, WFH world are lower than ever and keeping the top people means keeping them engaged and content.
This does not mean you have to be less demanding or bend to all your employees’ wants and wishes. But it does mean you need to be attentive and engaging and thoughtful in how you distribute tasks and, mostly, how you communicate processes. You’ll have to spend time and energy on this and keep this in mind when planning the work.
Keeping investors happy
Investors can make and break your company; and it’s not only a matter of giving you more money. Startup investors tend to talk to each other. They form communities online (like everyone else) and spend a lot of time gossiping, ahem, discussing current and potential investments and founder interactions. If you get into a fight with your investors it won’t stay a secret.
My years of investor relations work taught me this simple strategy: Be open and honest. While it may sound simple this is easier said than done. After pitching your startup and finally getting the investors you want you’ll be in “pitching mode” whenever you talk to them. You’ll have a burning itch to “beautify” the situation — to make your team, your company and your plans seem good and worthy.
The problem is that while this is good for raising an investment, it’s a horrible idea when running a company. Over promising or over-hyping your current status will backfire so quickly and forcefully that you won’t know what hit you. You’re much better off discussing why your plan has stalled or why you’re not making any sales when you can still make course corrections.
Pro tip: Always go into the discussion after you’ve quietly informed the most important people of the problems so they don’t hear about them for the first time in a large forum (like a board meeting) and always have a plan ready that details how you’re going to solve the problems at hand.
Keeping customers happy
I remember reading an interview with one of the former CEOs at General Electric. He talked about how he divides his time and noted that he spends about 80% of it talking to customers. It was always clear to me that understanding customer needs was paramount but that figure caught my attention. Here was the head of a huge company and he spent only 20% of his time formulating strategy, managing the workforce, looking at finances and all the rest of his tasks. And I think he had it just about right.
Your customers are the reason you make whatever it is you make and listening to them is what you should be doing. If you build the right team around you you’ll be able to do this during most of your work time and they’ll make sure everything else keeps on ticking. Your customers will inform your strategy, let you know what you need to change in your product and which of your employees are doing a good job.
Listening is not easy. All people, especially leaders, have an instinct to analyze and respond quickly and in many cases explain to the other person what they think they need to know. Listening is the opposite of that. There are a lot of good books on the subject of active listening; Read some of them.
Keeping employees happy
Employees are in a way customers. They consume the work experience you provide them with each day. You need to actively listen to them just like you do with your customers. This means trying to understand their viewpoint. A lot or research has shown that a feeling of inclusion and a common goal goes further than bonuses, raises and perks. Getting your people to feel they are really part of something, getting them excited and energized — this is not an easy task, but it’s essential.
I think it was Guy Kawasaki who said in one of his famous lectures: “there are no secrets in a startup”. He went on to explain that everything should be out in the open and debated by the team. While this may go a little too far for my taste (there are always some private and personal issues) I think it’s the right direction.
As CEO I used to hold company meetings once a week where everyone said a few words about what they were doing this week and what they hope to achieve. That included me. I tried to be as open and specific as I could even in matters that were traditionally considered “management issues” like financing and budgeting.
In a startup you’re usually surrounded by smart people and they’ll probably figure out what’s going on anyway. So you might as well get the benefit of the collective brain-power of the group. Don’t try to hide problems and mistakes. Think of a startup like a journey and your employees as travel mates. The more you band together and share a common goal the better your chances of reaching your destination.
One important note is to be careful not to cross the line into pushing over the responsibility. When discussing tough situations or decisions the CEO needs to always make it clear that he/she is in charge, will make the final decision and be responsible for the results. Informing and discussing is not a way to shift responsibility.
One last thing
Statistically you have a much better chance to become rich by being a top employee or freelance professional. Become very good at something and you can set your own rate. In today’s “gig economy” the opportunities are plentiful for talented people. If you decide to found a company do it for the right reason. Being the boss is not it. Becoming rich is not it either. Do it because you care about something or think you can make a real change. Good luck.
