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Strategic Planning for Startups
An internet search for “strategic planning” often turns up elaborate processes tailored for large organizations to tackle the problem of laying out their vision, goals, and strategies. Yet, even though having a strategic plan is essential for every organization’s success, how do we adapt these often expensive, consultant-driven processes to fit the world of a small, early-stage startup?
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Stock Option Grant Planning
Because the stock option pool size is a subject of fundraising negotiations, this is often the point at which the early-stage founders/CEO is first confronted with the need to develop a stock option grant plan.
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Equity Incentives for Startup Teams
Joining a startup feels risky to many, yet the upside potential of making a difference and sharing in the financial rewards of building a success can be enticing. Startup founders and leaders should consider how to incentivize their team using equity as part of an overall compensation package.
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Using Retained Recruiters
Many early-stage startup leaders leverage their personal networks and use online postings to source talent. However, sometimes it makes sense to pay recruiters for help.
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Advice to My Younger Self
After 35 years as a professional businessperson with almost 25 of those in the entrepreneurial ecosystem, here are the three things I have learned that I would say to my younger self.
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Entreprenurial Leadership
Last month, Sonali and I engaged in two great conversations about entrepreneurial leadership with an emphasis on women leaders.
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Armor vs. Authenticity
Part of leading a startup is raising money from investors, often professional investors (VCs) and high-net-worth individuals (angels). I learned over time that people who have or manage large amounts of investable capital develop “armor” to keep their distance from eager entrepreneurs. Similarly, self-taught learning to be a startup executive is often accomplished by hearing the stories of those who…
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The Power of Professionalism
Investors excited about funding high-potential startups are also eager to mitigate their risk by ensuring that the startup founders and leaders are experts in their domain with the professional expertise to build a high-growth company. That often unspoken reality puts a premium on startup leaders' reputations for professionalism.
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The Power of Sales
Founders and startup leaders, never lose sight of the power of commercial sales (a.k.a. revenue) to solve many of your problems. There are good reasons why investors are eager to jump on board a scaling commercial startup while moving cautiously on those still pre-revenue. Let’s explore why by unpacking the magic of sales.
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Hire When It Hurts
Capital efficiency is critical when relying on investor capital rather than operating income to build your company. In the early stages, hire carefully. In fact, in general, put off expanding your team prematurely by only hiring when it hurts.
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Are You Ready to Commit to Founding?
Launching a startup is a big commitment in terms of time, resources, and energy. Before you leap, are you ready for that sort of commitment?
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Facilitating Team Learning Curves
Leading a startup means forging new paths, building organizational infrastructure, and ultimately becoming skilled at facilitating team learning curves. This is one of the most challenging parts of being an entrepreneur trying to create a business.
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Business Founders Must Lead as Product Managers/Solution Architects
The title “Solution Architect” is a specific position in the IT hierarchy of a larger organization. Yet, in the context of a smaller organization, often early-stage startup, the role of a solution architect and related product manager is often at least partially filled by the founder and startup business leader. Here are some reflections on what I have learned about…
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Not Fast Enough
Are you feeling in control, regardless of what you show publicly? Maybe you shouldn’t because one of a startup's powerful advantages is its ability to move quickly. Yet, while essential, harnessing this advantage is challenging for entrepreneurs.
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Breadwinner
As an investor, I understand why angels, VCs, and even high-profile early-stage accelerators seek evidence of potential future success when evaluating newer startups. Yet would-be founders and startup fundraisers often find that one of the biggest challenges of building something new is supporting themselves and their families while doing it.
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Making Luck
Are you lucky? Does your success flow from being in the right place at the right time? Or, when we dig beneath the surface, do we find that an entrepreneur makes their own luck? Perhaps the story of an amazingly “lucky” entrepreneur will inspire you to also create your own luck!
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Pursuing Mythical Creatures
The fantasy of many intrepid first-time startup entrepreneurs is to build a unicorn. Visions of technological breakthroughs, hypergrowth, and wealth creation sing a siren song as the excitement of living the dream takes hold. Yet, let us not forget that unicorns are legendary creatures rather than something you find in every woodsy glade – and there are reasons for that!
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Resilience
Founders and startup leaders face unexpected challenges, persistent stress and uncertainty, overwhelming setbacks, and endless changes usually for years. Responding effectively and continuing to build the business demands resilience on many levels.
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Authoritative
How do we recognize leaders? Often, it is the fact that they speak authoritatively, which flows from their confidence, decision-making, and vision-casting. This matters in startups because all startup stakeholders are looking for someone who will hopefully lead an extraordinary value-creation process.
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CEO Whispering
The job of a startup CEO is multi-faceted and endlessly challenging. Yet, there is no degree or comprehensive playbook out there to provide the training for how to succeed. Enter the "CEO Whisperer."
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Critical Success Factor: Decision-Making
Startup leaders, especially CEOs, must be effective decision-makers because a huge portion of the job of leading a startup is making an avalanche of decisions in many domains and often with limited context. Decision-making is a skill that can be developed. Yet it also demands the confidence to decide even when context and information are limited. If you are not…
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Clear-Eyed Optimism
A startup CEO must balance optimistic vision with realistic risk assessment, seeking advice from peers, and knowing when to pivot or stop.
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The Illusion of Control
Owning over 51% of shares doesn't guarantee startup CEOs control due to dependence on investor funding and their significant influence.
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Know Your Numbers
Investors prioritize startups led by individuals with strong business acumen, essential for translating technical innovation into successful, scalable businesses. Demonstrated financial management skills, including understanding financial statements and core business drivers, are crucial to gaining investor trust.
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Discerning Signals in the Noise
Startup leaders must discern critical signals from noise to navigate and innovate effectively in a chaotic environment, utilizing data and customer insights.
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Making a Difference
What motivates entrepreneurs to pursue building high-potential companies? Making money? Independence? Making a difference? The answer might surprise you.
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What Gets You Up in the Morning?
Founding a startup to solve a problem is a big commitment. Before you launch, you need to carefully examine your heart and motivations to ensure you are ready for the challenge of such a marathon undertaking!
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Building a Financial Function
Few startup founders come from a finance background (except perhaps fintech startups!), so building out the foundational financial function is often outside the founders’ comfort zone. Yet, building a robust financial function becomes essential as a startup grows, especially if it raises money.
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Light
I love it when someone points out yet again the difference between light and darkness. You cannot “create” darkness directly or say, “Let there be dark,” because darkness is the absence of light. To “achieve” darkness, you must remove sources of light. Any light at all diminishes darkness. On the other hand, light pours out from itself. A light source…
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Thresholds of Spending
What seems like “a lot” of money? There is no absolute answer as it really depends on what you are used to spending routinely. This is one of those phenomena that affects entrepreneurs as they grow their companies – and it deserves some intentional management.
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Consider Your BATNA
Deep into a critical negotiation, how far do you go? What risks do you take? How should you think about your possible positions? These are essential questions that a startup leader must navigate in myriad scenarios – and BATNA is one of the most potent tools for deciding what to do.
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Cap Table Housekeeping
Good housekeeping of a corporate capitalization (cap) table is an essential demonstration of a startup leader’s competence, yet it is full of potentially painful pitfalls when moving along the learning curve.
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Fundraising is a Means
Fundraising for a startup takes enormous effort over a sustained period. Companies that raise rounds issue press releases after closing. One might mistakenly begin to think that fundraising is an end instead of a means to an end.
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Aligned on Success
Startup fundraising is a grueling process. By the time the deal closes, a startup leader often feels embattled and exhausted, wondering if taking on investment is possibly the worst thing ever. Yet there is light after closing.
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Wait to Spend Until the Money is in the Bank
When raising money or doing a big corporate deal, it pays to remember that the deal is not done until the money is in the bank.
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Section 1202 Tax Matters
Recently, I was reminded of the “downside” of a successful exit, specifically, that capital gains earned on investment in a startup are, generally speaking, subject to taxes. In other words, the IRS wants its piece of that nice big check. Wouldn’t it be nice if you could just keep it all instead?
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Milestones
While building a startup, leaders must make critical strategic decisions about what to focus on to derisk and add value. One manifestation of this planning work is determining the key milestones that must be accomplished and the resources required to take each step. Because this is so important, it is a key focus for investors who are evaluating startup investment…
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Making Bets
As a startup leader forging new paths into the future, there is always uncertainty about the consequences of significant decisions. We cannot see what will happen perfectly, so we have to gather the best information available, test assumptions when possible, and ultimately pull the trigger and make a bet.
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Funding Foundations
A house built on sand is unstable, indeed. A house built on a solid foundation can support itself even when the winds howl, the rain comes, and the floodwaters rise. In business, cash is the lifeblood, and the source of that cash reveals the nature of your foundation.
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CEO = Chief Salesperson
Because a successful entrepreneur ultimately must build a business that profitably sells a product to meet a sufficiently sized group of customers’ unmet needs, selling is one of the keys to success.
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Opportunity Costs
The founding CEO of a startup always has more to do than they can fit into their available time – even if they are working every waking hour (which I do not recommend, by the way). That means one of the most significant success factors for such CEOs is their ability to consider opportunity costs and make wise decisions about…
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Investor Levers of Control
Just as I was zeroing in on the closing of my first equity investment in a startup I had co-founded, my corporate attorney said, "Once this investment is closed, they can fire you." What? The investors won't own more than half of my Company. How can that be?
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You Cannot Learn All You Need to Know on the Internet
The internet is a phenomenal resource, but it can be hard to figure out exactly what applies to your startup because so many variables influence how to combine elements into a cohesive solution. Remember that you cannot learn everything you need to know to build a startup online.
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Considering A Whole Life
Building a startup takes an extreme level of work and commitment. Yet, there is more to life than just work. Here are some thoughts on how I have navigated this tension over twenty years.
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The Essential Fundraising Question: What is Your Plan?
When introducing your startup to potential investors, there is so much to cover. Remember that the most important question to answer is what is your plan? All else is context.
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Cultivating Your Community of Champions
As a startup founder-CEO, do not go it alone. Cultivate a community of champions who have your back and are willing to support your growth as you seek to deliver innovation and transformation.
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Legal Matters
As a startup founder/CEO, you quickly discover that you need to develop a working knowledge of legal contracts because there are so many contractual agreements that you need to review, and yet hiring an attorney every time you have a non-disclosure agreement or some other contract is often beyond the financial resources you have available.
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Your Investor is Not Your Boss
Sometimes startup leaders, especially first-time CEOs, make the mistake of thinking that their investors are their boss(es), available to help them solve their startup's problems. While experienced investors may offer some excellent value-add as they bring their distinctive point-of-view to the table, they should not be treated like a boss.
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People Management for Startup Leaders
One of the greatest challenges of founding and growing a startup company is learning to manage a team of people to accomplish amazing things on a shoestring as fast as possible.
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Specialties Matter
Gathering a startup team is always a challenge. Yet, nearly all startups demand assembling a diverse range of skills that will cover your bases. This enables forward progress to the next milestone and the subsequent funding that allows you to further expand your team. Understanding the relevant specialties and sub-specialties and how to access them will often be critical to…
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Growing into the CEO Role
Every CEO that exists was once a first-time CEO, and no one offers a training class to prepare for being a startup CEO. At some level, everyone taking on the CEO mantle must learn and grow their way into fulfilling the demands of this role.
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The Preeminence of the Customers’ Problem
Immerse yourself in your customer’s problem. The urgent and important problem IS the opportunity. Don’t build a solution looking for a problem.
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Wingmen — Those Trusted to Go With You into Battle
When you lead your startup into battle, you need an inner circle of wingmen (and hopefully, wingwomen) backing you up. They are the trusted few who have earned the right to fly by your side and make an impact.
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The Highlight Reel Effect
When we hear stories of other startups, especially successful ones, it is easy to perceive that the path they traveled was straightforward and easy, especially if we lose sight of the highlight reel effect.
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Circles of Control, Influence, and Concern
I certainly did not invent the concept of the Circles of Control, Influence, and Concern. Still, I did learn about these ideas early in my career (I believe from Stephen Covey), and it has proved a go-to framework for thinking about the work of building a startup.
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The Growth Moments
As you grow your startup, you will be confronted with moments that require fast decisions. Self-aware moments where surprise catches you off-guard, and you have to think instantaneously about what is good for the company.
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What is that Light?
There are moments when you are not sure if what you see is a light at the end of a tunnel or an oncoming train.
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Strategic Startup Scoping
Recently I was chatting with a founding team who had been asked by their investor to broaden their business scope to span several vastly different industries as customer targets. Their questions reminded me of how critical and challenging it is to determine the right strategic scope for a high-potential startup.
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Pants and People
Growing a high-potential business presents many opportunities and encounters with people that can be pretty intimidating. My mentor taught me that remembering the human dimension can help you engage authentically and effectively. That insight has helped me often.
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Big Sticks
Organizational leaders often carry a “big stick” that sometimes puts excess weight behind any minor questions or requests they might make. This dynamic can waste a lot of organizational resources, so it is essential to be mindful when you find you have a “big stick.”
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Striving for Highest Best Use
Resources are always limited in a startup. Applying the principle of the highest best use is a way of making more optimal choices to accomplish goals.
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Coping with Curve Balls
Sometimes life hands you a shock – and coping with it affects everything.
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A Startup CEO Essential: Optimism
Recently I have been chatting with others in the entrepreneurial ecosystem, and we have been reflecting that, at their core, entrepreneurs must be optimists.
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Building a Fireproof Team
Building a robust and resilient team requires constant intention every step of the way so that when the going gets tough, or a crisis erupts, the fireproof team can respond. Investing to build a strong startup team that can field a startup’s inevitable curveballs is essential.
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The Deep End of the Pool
You are often confronted with problems you haven’t solved before in a startup. Problems that no one on the team or perhaps anywhere has solved before. Being comfortable jumping into the deep end of the problem-solving pool is essential for startup success.
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I Am Not Your Friend
Shortly after we closed our financing round, my investor sat across the table from me, drinking coffee, and declared, “I am not your friend.” Uh, what?
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Keeping Eyes on Your North Star
Finding the right north star for your startup's stage of development is a powerful focusing tool to maximize your progress.
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The Dimension You Cannot Change
Building a startup is one giant multidimensional puzzle, but time is the one immutable dimension you cannot adjust. You can use time to your advantage in your startup, but you never lose sight of your personal need to manage your own precious time.
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Consulting as Startup Preparation Ground
Experience as a consultant can develop useful transferrable skills for leading a high-potential startup. Yet, by itself, it is seldom enough. Here are some reflections on both sides of the coin.
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The Stress-Management Power of Thankfulness
Every year, the Thanksgiving holiday reminds me of the stress-management power of being thankful. I suppose the challenge is continually seeking to revisit what I am grateful for all the other days of the year.
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Essential Entrepreneurial Enabler: Herding Cats
Driving forward in a startup almost always comes down to herding the relevant cats into alignment to achieve the goal at hand. Herding cats requires an essential blend of skills – and the results can be quite value-creating.
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A Sense of Urgency
Speed is a startup’s greatest advantage, therefore, startup leaders and teams must always act with a sense of urgency. This is such a comprehensive driver that I find it weaves together many of thoughts shared on this blog over the past 18 months.
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CEO = Chief Salesperson
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An Ownership Mentality
Entrepreneurs have an ownership mentality. An awareness that the buck starts and stops with them. This truth underpins many aspects of the experience of creating a business from scratch.
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The Value of Education
Startup CEOs need to bring a diverse set of skills to the table, yet what is the right balance between leveraging formal education and real-world experience to build that skill set?
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Prerequisites for Synthesis
Last week, I wrote about one of the essential skills for startup leaders: synthesis. Synthesis is collecting and quickly combining ideas and parts of ideas together into a coherent whole, to provide a critically important framework of ideas that informs startup planning, decision-making, and storytelling. As I reflected further on the core enablers for effective synthesis, three essential prerequisite elements…
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The Magic of Synthesis
When I think about what skills I rely on every day to build a startup, synthesis routinely tops the list. The need to integrate many pieces of information into a coherent whole that enables you to plan, tell a compelling story, and manage risks is a never-ending need that is entirely dependent on this skill.
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Life’s Foundation: Health
Building a high-potential company requires tremendous energy, focus, and stamina. It is essential to invest in maintaining your health to sustain your ability to keep building your startup.
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Keeping Promises
Keeping promises is an expression of integrity and builds trust. This is one of the most potent principles to apply in successful startup building as well as successful life building.
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Delivering Sound Bites
Leading a startup often means being the face of and speaking for that startup. Here are a few tips and techniques gleaned over the years on how to nail interviews by delivering useful sound bites.
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Going Virtual
COVID-19 hit like a freight train in the spring of 2020. We went 100% virtual in a day. And began learning and evolving our approaches to work to adapt to a new reality. Here are some initial reflections on our particular case study for the impact of the pandemic on our team.
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The Value of Doing Something Intrinsically Hard
Difficult challenges create barriers to entry, competitive advantage, and value. Seek them out.
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Reflections on Startup Children
Startups are like the children of their founders. What are the implications of this analogy?
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Communicating with Investors at the Right Frequency
The more frequently you communicate, the deeper into the details you need to delve. To manage the level of detail and involvement, control the communication frequency.
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The Cost of Context Switching
Leading a startup that depends on inventing new technology requires mastering the balance of context switching. Too much kills innovation. Too little means losing touch with what is essential
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Driving for Speed with Finesse
Speed is one of the great advantages of small, talented, focused startup teams – and the driver of the racing startup vehicle is the CEO. Yet like racing, it is essential to drive with finesse to maximize speed while not spinning out of control.
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The Most Important Thing
Successful startups focus on the most important thing: building a real and successful business.
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Good Leaders Define Reality
One of the critical roles of an effective leader is to define reality for the group they are leading. In doing so, they cast a vision for the future direction of the organization.
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The Magic Project Management Triangle
Balancing the dimensions of time, scope, and resources is a widely applicable framework for managing projects of all scales. Whatever your title, as a project manager, managing stakeholders' expectations and consistently performing successfully depends directly on your ability to set and deliver on your targets (scope) on-time (time) and on-budget (resources).
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Focus. Execute. Panic is Unhelpful.
The ability to control your reactions and execute under pressure is essential to successfully leading a startup.
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Leadership is Lonely
There are times along a startup CEO's journey that are profoundly lonely. It is the nature of the role.
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Connecting the Why
The most potent guiding star in sales, decision-making, and leadership is knowing, connecting, and communicating the why.
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Giving Thanks
Success as an entrepreneur depends on the contributions of many. I appreciate all the support, engagement, and encouragement over the years and ventures.
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An Essential Entrepreneurial Enabler: Learning
Learning to learn quickly and effectively is one of the master skills of becoming a successful entrepreneur.
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Using Lawyers Well
Lawyers can be a tremendous resource for a startup CEO, but it is essential to use them well. Knowing the role of a corporate lawyer can make all the difference.
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Recognizing When You Need to Change Up Your Team
Are you unconsciously suffering from a role fit problem in your team? First recognizing and then addressing the issue is critical to startup success.
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Family Enablers: The Source of an Entrepreneur’s Strength
Building a company out of nothing is enormously hard work. Hidden behind most startup CEOs are tremendously supportive families. This is one of the secrets to success.
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Focus Means Saying No
Everyone knows that maintaining focus is essential to startup success, yet distractions are both tempting and endless. A vital tool for the startup leader’s toolbox is the ability to say no.
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The Hidden Value of Board Meeting Preparation
It is time. Time to work on the board package, again. The effort feels like an interruption to the team. So the key to maximizing the value to the startup is to recognize and leverage the hidden value of the process of Board meeting preparation.
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Your Company’s Lawyer is NOT Your Lawyer
A few weeks ago, another CEO reached out and asked for a referral to an attorney. My first question was for the company or for yourself? I didn’t always realize that there was a difference.
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Permission to Innovate
Realizing the potential for process improvement requires making sure that those who are part of designing the change are empowered to find the best path.
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Prioritize Exercise While Building Your Startup
Startups are marathons, not sprints. Figuring out how to pace yourself and your team in a healthy way has real business success consequences.
