Tag: Operations

Top 15 insights on how to operate as a startup leader

Recently came across a great conversation between Keith Rabois and AngelList, back from Aug’18. So many tactical insights for operators, founders, big co./ startup teams, or anyone who is interested in understanding how leaders should operate on-the-ground. My key takeaways below:

  1. Talent can be classified into “Barrels” (can independently execute end-to-end, from idea to product-in-market) and “Ammunition” (require supervision, execute only specific elements well). The number of Barrels in your team governs how many parallel things you can do.
  2. Every business can be ultimately distilled into an “equation”, with key revenue & cost variables that ultimately drive profit. Founders need to understand their business’s equation really well, which is what drives strategic insights that lead to better decisions.
  3. A key job of a founder or CXO is to compress “time” for the business, via a communication strategy of “simplify” and “clarify”.
  4. In the majority of cases, larger engineering teams tend to slow execution down. Paraphrasing a quote by Eric Schmidt — “one of the most powerful things is 2 engineers working together”.
  5. Put your best people on the most challenging problems, irrespective of what it does to your org. chart.
  6. The more transparency around data and information that the CEO can create, the better everyone else can make day-to-day operating decisions that align with the company goals and strategy.
  7. There is a saying in sports that a particular team has been “coached to play fast”. This is what startup leaders need to do to increase the speed of execution — coach their teams in a way that they can take fast decisions & react instantly, and in high fidelity to company goals.
  8. As a leader, it’s important to speak in “Whys?”, and not “What we are doing?”.
  9. As a leader, it’s important to change your management style as per the kind of individuals or teams you are working with at a particular point in time.
  10. The CEO is the “Chief Editor” of the company. You aren’t actually doing a lot of the functional work yourself but your key job is to a) simplify things for others, 2) create consistency across teams, and 3) create a coherent narrative & voice, internally & externally.
  11. As a founder, it’s important to understand the difference between a “bad” team and an “incomplete” team. Both require very different strategies.
  12. Best way to onboard talent (from intern to exec) -> start with as narrow a scope as possible, let them succeed at it, and then keep expanding their scope & pushing their range.
  13. Hiring is a muscle — you get stronger as you do more of it.
  14. An important question to answer while hiring: are you hiring for upside creation (is there a spark?) or downside protection (rigorous value creation role)?
  15. A simple best practice to improve hiring is to borrow your network to vet candidates and do comprehensive reference checks.

I already started implementing a bunch of these at my startup Workomo. Would love to know if you have used some of these tenets in the past, and your experience/ key learnings from it.

Understanding Fixed vs Variable Costs as a Founder

To be capital-efficient as a founder (also applicable to life, in general), when evaluating various cost line items or taking on a new cost, have a clear understanding of “Fixed” vs “Variable”. Variable Costs are driven by your intended “velocity” and therefore, can be controlled during tough times via a frugal approach (cut variable marketing spend, let go of expensive contractors etc.). Fixed Costs don’t care about your velocity and will keep eating you up (housing rent/mortgage, office space, full-time salaries etc.). They are much harder to control, given they reflect a certain baseline you have up-leveled your startup (or life) to. Paring down Fixed Costs will require more drastic down-leveling, including completely letting go of certain assets or experiences.

The issue with Bay Area startup environment today is extremely high Fixed Costs (housing, child-care, salaries etc.). These are uncorrelated to the actual state or momentum in your startup so founders have no choice but to live with them. You can’t be frugal with Fixed Costs beyond a point, as they are driven by the external environment, not the choices you make. This, in a nutshell, is the real challenge facing Silicon Valley founders.

Here are some ways to proactively manage your startup’s Fixed Costs at early stages of the Company:

  1. Explore building a non-Bay Area distributed team — to balance output with salary costs, at least until you see the business momentum required to support Bay Area salaries.
  2. Be generous with equity, (relatively) tight with cash — I know this is a hard one, especially while hiring engineers in today’s market. But as founders, we need to be disciplined about this. I would rather wait out for the right candidate who believes in aligning incentives with the real situation of the startup. For instance, if someone is asking for high cash compensation in a pre-PMF startup, this means they are not the right fit for this stage. I am all for doubling-down on higher equity, even higher than market standards, for early risk-taking hires. But every $ of cash being paid out needs to have a solid justification. Anyone who seriously wants to join a really early stage startup, needs to understand and appreciate this viewpoint.
  3. Try converting Fixed Costs into Variable Costs — some ideas could be paying sales people more on % of sales commissions and less on fixed; going for an “on-demand” co-working space with elasticity to quickly scale up/ down; keeping specific functions eg. designers, content writers etc. (these functions need to be chosen really carefully) on contract per “as-needed” basis, instead of full-time etc.
  4. Be frugal on G&A — optimize costs on office space, service providers, vendors, food etc. In particular, Bay Area startups have a tendency to splurge beyond their means on fancy office spaces, lavish off-sites, dinners at marquee restaurants, expensive swag etc. These non-core costs tend to add up and hit your budget more than you might realize.
  5. Leverage free ways of brand-building — instead of spending tons of $$ on brand marketing to drive early awareness (eg. conference sponsorships, which are essentially Fixed Costs), leverage free channels such as blogging, building a community on social media (Twitter, LinkedIn, Quora etc.), podcasts, creating a compelling website, white-papers, research articles, invited speaker slots etc. Early stages of a startup are all about cost-efficient marketing. This can only happen when founders focus on the above channels to build their startup’s brand, their personal brands as well as communities around their product. Austen Allred, Co-founder and CEO of Lambda School, is doing this very smartly.

Would love to hear what ways of Fixed Cost management have worked well for your startup.