Understanding The Vision in a “Visionary Founder”

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Originally published by TheNextWeb on Feb 19th, 2014

“If you have visions, you should go see a doctor” – Helmut Schmidt, one of the most admired German chancellors

Because I know how confusing and frustrating the fund-raising process can be for a founder, one of the topics I like exploring is ‘how to get into the mind of an investor’ when an investor is evaluating you for an investment. And whilst the easier topics to tackle tend to be quantitative in nature, the harder ones tend to be the ‘fuzzier’ qualitative ones…

In that spirit, I think we’ve all heard how investors want to invest in a solid team and how they want to invest in founders with a ‘strong vision’.. but what does that mean exactly? With visions, mission statements, and all that kind of fuzzy talk being part of many self-help books that are often dismissed as snake-oil, do they really have any place in the fast-moving, cold & hard world of startups? In the context of the early stage high growth startup world, what does having “vision” really mean?

Let’s start by defining what a founder’s vision* is not… *(feel free to replace a ‘founder’s vision’ with a ‘leaders’ vision’)

Vision does not equal power

A founder’s vision is not about how much money you want to make once you exit, nor is it about obtaining power or prestige. It isn’t about knowing exactly what the future will bring, nor is it about doing something no one else has ever done before. Rather, a founder’s vision is about how you communicate and put into action your values, beliefs, and ideals in producing & creating something of value for yourself, your founding team, your employees, your investors, and your customers. A founder’s vision is the foundation of a company’s culture and brand.

In the words of James Kouzes and Barry Posner, authors of The Leadership Challenge — “There’s nothing more demoralizing than a leader who can’t clearly articulate why we’re doing what we’re doing.

A founder’s vision, therefore, creates a company’s culture. This culture may not always be visible to outsiders of the company (nor is it generally communicated to potential investors specifically as such), but it is visible through the company’s culture, the brand and brand values of your company are ultimately determined. It is the brand of your company which is the outward-facing aspect to your company that customers and potential investors engage with. It is this brand that allows you to attract potential employees, customers, investors and partners. Thus, I believe that vision determines culture and culture determines brand. Think of many brands you love and respect and you will likely be able to trace their authenticity to one or several individuals (even if they are no longer there) who created the vision of the company and set the culture for all the employees to guide them through the creation of the products and services you love. Think of the ones that you liked at one point but no longer do, and you’ll likely be able to trace why to a point in time where there was a break-away or ‘sell-out’ from the original vision that started it.

How is a founder’s vision applied?

In some startups, a founder identifies a need they personally have (they are the customer), and thus, builds a company around a product or service to satisfy that need. Alternatively, there are other founders that find ideas within markets that didn’t previously exist (they intuit a need for a customer)… in some cases this happens by design and research and in some cases by accident, as was the case with the 3M Post It note.

Whichever way it may come, founders that have a strong vision that is synthesised, communicated and articulated to their team (and their customers) allows them to capture these opportunities and evolve them to become successful businesses. Effectively, a founder’s vision which is synthesized into a company’s culture and brand, facilitates the decision making process you and your team use to create your company’s products and services. It is through the clarity of a founder’s vision that  focus is brought to the planning and decision making process within a company, and as a consequence the company can function efficiently and increase its probability of success.

Authentically connecting with your clients

In a world were new products are constantly popping up and many being copied by unfair competitors, it is the strong adherence to your vision and the culture & brand it creates, that ultimately engages your customers to become loyal supporters and fervent defenders of your company. Unfortunately, if you betray your customer’s trust by deviating from your brand’s values, they will likely throw you and your products under the proverbial bus, so to speak.

In his TED talk about how great leaders inspire action, Simon Sinek, shares his golden circle of ‘why, how, and what’… and whilst I won’t go into summarising his talk here, the key point is that it all begins with the ‘why’ a leader must articulate to be effective… the “why” determines culture and the “why” determines ultimate “how” you do things and “what” you ultimately make.

A talented designer and good friend of mine, Gearoid O’Rourke  shared a thought in one of his talks that I really think captures why it is important to take the creation of a founder’s vision and company culture seriously, in his words: “Products can be copied, but culture cannot…” “Even if your products are copied, you will always be ahead of your competitors because they can’t copy your culture [and culture is what lets you innovate].”

Once determined, the culture of your company will help you make decisions about how to engage and communicate with your customers, whom to hire, what to prioritise, and whom to partner with. In effect, you vision, your culture, and your brand will become the foundation and focus of all you do.

Where to find your vision

Your ability as a founder to set this vision and culture is the attribute that investors look for. If you are unable to determine and set a vision and culture for your company, unfortunately, you are likely to have others, such as influential mentors and perhaps even your investors set it for you, and as we all know, we can’t be someone we are not, and ultimately, this will likely lead to failure.

Once you have determined your culture and then you want to communicate it externally, authenticity is the key to retaining trust. In the words of Gabbi Cahane  “if it’s just words on the wall, then it’s meaningless. Your culture is what you believe in and how you behave. Codify it, live it, recognise it and reward it. And do that every single day.” “Early stage investors are looking for the signs that you instinctively get this.”

If you are in the early early stages of starting a company and you’re really more just thinking of starting a company, I’d highly recommend you spend some time trying to understand what drives you and why, for if you want to embark on the difficult journey that is to become a founder and leader of future employees and future shareholders, it would really help you and them for you to be able to share ‘the why’ of why you do things.

And in case you are reading this and thinking to yourself, ‘but investors only care about traction’, I’ve seen several cases of where an investor is willing to take a huge leap of faith on a founder, even before any visible traction, but only when the investor feels there is a strong vision behind the company. Therefore, I leave you with this thought: Traction comes from happy and loyal customers, happy and loyal customers come from a great product or service that does what you say it does, a great product or service that does what you say it does comes from a team that has a coherent culture that allows them to know what to do, and a coherent culture comes from a strong and clear vision from the company’s leadership team.

Image credit: Shutterstock/Skylines

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On Becoming British

I’m happy to announce that I’ve just become a British Citizen.

It means a lot to me to be part of this great nation that opened its doors to me and welcomed me over five years ago. In my experience, I feel the UK has a diverse community of smart people, vibrant startup ecosystem, and British people (and as an extension the larger European community) have an amazing energy to tackle problems and getting things done whenever they need evolution (for example, read about the recent Europe-wide http://startupmanifesto.eu/ initiative to help tackle many current business & economic issues).

In my journey so far, I’ve had the opportunity to meet many people that are passionate about evolving this nation and helping it continue to grow, and I’m proud to be part of that movement.

…and for the record, yes, I now know how to make a mean cup of tea.

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What Firing an Employee may Say about You

Fired_stampA big thank you to Bretton Putter of the Forsyth group for Feedback and Editorial Input – http://www.forsythgroup.com/about/the-team/

This post is not about how to hire or how to fire someone. It is about highlighting the potential reasons why employees relationships can fall apart and lead to a dismissal down the road. Hopefully this is post provides with your the necessary information for you to consider on how you can prevent this from happening by setting up an appropriate hiring process and cultivating an environment where employees are not set up for failure within their defined roles.

As you likely already know, hiring and firing are probably two of the most difficult things to do in a company. That’s why usually, for key hires, a company’s leadership is directly involved in the selection and interview process. Ideally, if done right, you never find yourself in a position where you have to lay someone off, but what if you do? Was it entirely the employee’s fault, or could you have done something to prevent it from happening?

Let’s start with looking at your hiring process and mistakes that can lead to an employee relationship breaking down:

  • Hiring Process Mistakes – These are mistakes you could have prevented before hiring
  • No defined internal interview process – By not having a clear process which a candidate goes through to assess the communication skills of the new potential prospect and their fit within the company culture, you run the risk of the employee potentially not fitting in.
  • Not geographically disciplined – In a startup everyone should be together, if it’s not possible, then people should spend time with the home-team at least 3 months. Having remote teams early on is very hard although some companies do manage to pull it off at the cost of their sleep.
  • Not qualified enough to do the job – In a startup, you don’t really have the time to train someone. Be careful about relying too much on training you could give the candidate, they should be self-sufficient pretty quickly on. Also, sometimes we can project a bit of ourselves and our ambitions onto people, so be mindful of personal biases when evaluating someone.
  • Not being able to commit to the company’s work ethic – Some companies have the expectation that you will be there from 9-5 or some regular schedule (think of customer services roles that require people to be at their desks by a certain time). Other companies have results oriented work environments where there is no need for someone to be there at a specific time so long as they get their work done. Make sure you define what your work ethic is so that people aren’t caught off guard later.

After the Fact Mistakes Analysis – These are mistakes you might have committed unknowingly that led to a dismissal

  • Poor Role Definition –  If you or the hiring manager don’t know what the role this person will have (or main responsibility will be) within a company, you’re just setting up that new employee to linger in role purgatory, not knowing what they can control and what is someone else’s.
  • Poor Title Choice – If you give a new employee a title that is above their experience, particularly if you give them a C[x]O title, you set them up for potential failure if they can’t live up to it, because then you can’t hire above them to help them out and their ‘power’ position may create tension between other employees as their inexperience causes blunders. This may affect communication with peers as well. For more on the different philosophies on title choice, read the following: http://tech.fortune.cnn.com/2011/03/16/why-even-your-ultra-hip-startup-team-need-job-titles/
  • Poor Communications of responsibilities and expectations – Similar to clear role definition, poor communication of what is expected of them and by when, leads to that employee lacking direction and perhaps not going down a path that is necessarily the one that your organisation needs.
  • Not acting fast enough to rectify a situation – If something is going wrong, or an employee isn’t doing what they need to be doing according to their level, perhaps there is something awry in what they perceive things are they should be doing. Don’t wait because you feel awkward about it or want to see if it improves on its own. Jump in there and have a structured conversation with the employee to make sure roles and responsibilities are mutually agreed and that you both are aligned on what needs to happen next.
  • Poor Key Performance Indicator definition – defining how someone is doing well helps them to adjust their actions so that they reach the set goals. Not every employee will have a specific KPI tailored to their function, but if it is a key hire, they will likely have awareness of the company’s key KPIs and how their role aids the company in achieving them.
  • Poor management (in general) – Motivating people is not easy. Getting them to buy in to what you are doing is sometimes beyond just a pay check. You need to inspire them to do more not micromanage them if things aren’t going well. Read the book ‘Drive’ by Daniel H. Pink to get a feel for some of the latest thinking on motivational theory.
  • Other problematic employees – Sometimes organisations have bullies. You may hire someone that you think is a great fit for the job, and perhaps they would be if it weren’t to an already existing employee who ‘preys’ on others. Typically this bully can also be someone who is really good at their job so it isn’t always readily apparent from their performance. However, organisational bullies can create a reason for why new employees leave. Thus, never rule out this possibility as sometimes its hard for new employees to muster up the courage to report on a peer, particularly if they are senior to them.

So, some final things to consider

As I mentioned before, when you see a problem that’s brewing, deal with it quickly. If you need to let someone go, let them go, but don’t be blind that it’s entirely their fault, review your company’s internal circumstances to see if they contributed towards the problem.

Verse yourself well with what the legal requirements are in your company’s jurisdiction. Don’t get yourself into a big mess by not going through the appropriate process, which typically requires warning before dismissing someone. You don’t want to find yourself in a lawsuit for wrongful dismissal.

In conclusion, when you hire, consider whether your hiring process is exhaustive, but also take stake and review your company’s situation so that you can prevent things from going wrong for your new team members once they are hired.

Additional Resources:

  • http://workable.com/ – Recruitment service and application tracking
  • Are CEOs to Blame for Short CMO Tenures? – http://blogs.hbr.org/cs/2013/07/ceos_are_to_blame_for_short_cmo_tenures.html
  • Startup Hiring: Why You Should Date Before Getting Married http://www.hyperink.com/Startup-Hiring-Why-You-Should-Date-Before-Getting-Married-bD7829E3BD3a20
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The Importance of Good Legal Counsel

French Senator Charles Humbert and his lawyer ...
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Going into any new legal agreement is scary. On the one hand, you’ve seen enough movies to know that legal documents can have all sorts of loopholes and/or subtleties that feed your paranoia about walking into a trap at some point in the future, but on the other hand, you know you need to get them done in order to move on with any deal.

Legal docs are just part of business life.

The thing is, though, that it doesn’t have to be something that is so scary that you need to be extremely paranoid about. This is particularly the case when you’ve been able to bring on a good legal firm on board. Good legal counsel can basically help you understand all the tools in the legal toolbox. What the tools are for, how they are used, when they are appropriate, and what they are protecting against, etc.

Now, when I mean good legal counsel, I don’t mean your cousin’s best friend who is a lawyer and can do it on the cheap or a favor. That is probably the single worst thing you can do in terms of starting off on the right foot with your investors, you’ll waste their time and yours. If you can’t find good legal counsel where you live or nearby, then go outside of your area or move your business (and the good thing is you may not have to do it physically either). One sure sign of a startup ecosystem being mature is the availability of top tier legal firms in the area. If you need to move the legal state of your company to get access to these… do so, you won’t regret it. If you don’t know where to start, cold-call a startup you admire and ask around.

A good anecdote always helps in illustrating the point…

A few years ago, I was working with company that had reached out to a local lawyer, but not one that specialized in venture law. After having provided the company with standard industry docs, a long, almost two week period followed where I didn’t hear back from either the company or their counsel. Then, once I did receive the documentation, it was red-lined so much that it took another week just to come up with the response. As you can imagine, every single conversation we had was tough and grueling, and the entrepreneurs, grew increasingly paranoid that we were trying to get the better of them, but it was mostly due to the lawyers providing poor advice on items that we standard across the industry. This carried on for a few weeks with volleys going back and forth and various stalemates being reached at different points. In the end, we did reach an agreement, but it was after much work and much education. The situation was salvaged in the end, but it didn’t have to start off like it had. And, as you can imagine, the legal fees were over budget.

In summary, good Legal Counsel does the following:

1) Validates your company. The best Firms will be selective of whom they work with. Their time is valuable as is their reputation. Working with a top tier firm definitively says something about your company.
2) Saves you money. Yes, it sounds counter intuitive, but whilst you may pay higher in terms of fees, you’ll spend less on legal fees in the long run with the reduced issues that you’ll have during a negotiation as well as with any future issues that are the result of poor legal advice.
3) Saves you time. As mentioned in #2 above, the time an experienced lawyer takes going through documents they’ve seen time and time again is a huge savings over a lawyer who is getting acquainted with the docs on your time and money. Additionally, that time could be better spent on helping you think of what realistic scenarios you are trying to protect yourself against rather than making mountains out of molehill standard terms.
4) Helps you consider the future. As your company will go through many permutations throughout its life, a good and experienced lawyer will not only be able to help you with your current situation, but also in preparing you for situations to come, be they setting up your company in a specific way, to how you should try and negotiate with potential investors.
5) Good counsel knows the industry players. By the very nature of being a top tier legal firm, they will have worked and will know the top tier investors first hand. The firm will know what the investors tend to offer in their deals, what to expect as being standard in their terms, and what might be out of the norm.

After considering the above, however, you do have to manage your counsel. In the end, you are responsible for every item on your documents, and only you care as much about your document as well.. you do. So as much as great legal counsel can help you on not making mistakes, don’t slack off during the process. Stay engaged, you’ll learn a lot.

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Do I Need to Write a Business Plan? (or.. What Should Be in a Pitch Deck?)

powerpoint for progress report 2005
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I have updated this post recently due to a meeting I took with an early-stage founder who had yet to launch, but was diligently working on creating a 100 page business plan…  hopefully, this post should help founders avoid that kind of mistake.

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Let’s face it, most investors don’t have time to read anything more than the executive summary of anything that is sent to them.. So, should you even bother writing a business plan? What should one look like? And what may it say about you?

First let’s start defining what a modern day ‘biz plan’ could look like – I’d say that if you can take your pitch deck and add to it the necessary text so that whomever reads it can figure out what your business is about without you having to speak to it, then you’ve hit the essence of it.

A modern ‘ biz plan’ doesn’t need to be as complicated as you think (early stage plans are clearly simpler vs later stage ones where the company has scaled operations and profits). The purpose of a  “biz plan”  is to help you in crafting your business as well as provide those investors that do take an interest with further ‘meat’ to evaluate your company after meeting you, but the days of the lengthy ‘formal business plan’ have long since passed. No one has the time to read them anymore, and for those investors that demand them… well, perhaps ask them which areas they’d like more meat on and you can deal with them on a case by case basis if you need to.

So if the old style has fallen out of favor, what now? From Guy Kawasaki‘s ‘Art of the Start‘ to Business Plans for Dummies there are plenty of books out there on what constitutes a good business plan / pitch deck… but what is the point of a business plan in the first place? Shouldn’t you just ‘get on’ with doing your business and worry about that business stuff later? Perhaps… but it does help to at least identify some of the key things that are typically covered in a ‘plan’, such as what is your market and who are your competitors… A company’s business plan, no matter how short it is (10 slides), is useful for investors to evaluate an opportunity, and it also offers value to the founders preparing it, to help them articulate the core concepts of what their product is, the market it addresses, the size of the opportunity, the team, and the investment proposal.

Remember, a “biz plan” is about helping you organize your thoughts and then being able to convey them clearly to someone else, not about meeting some magical quota of pages with graphs and charts (although depending on the complexity of your proposition, this may be necessary).

Generally speaking I have found a company’s “plan” has allowed me to determine:

1) The company’s communication style and ability to articulate what they (their product or service) do, clearly and succinctly. Does the company rely too much on buzz words and/or comparisons to get the point across, or is it clear in articulating its objectives and vision? Is the plan well written (grammar)? Do I walk away from reading it being able to describe the opportunity in simple terms to others? How do they use visuals? What style are they?

2) The company’s ability to research their market size, competitors, and key industry players, distribution channels, etc. If a company has not adequately researched the size of their market, this can be a real deal-killer. One time I had a company come and speak with me about what they were doing. Whilst originally really excited about the potential of what their product could do, upon further probing during our meeting, they concluded that the market size was only  few million in sales world wide, for the whole industry. As you can imagine, realizing the size of your market size during an investor meeting is probably not the best way to make an impression. Understand your target market.

The identification of key competitors is also an important detail to include and can actually play to your favor if you can clearly articulate how you differentiate from them. In the case of some companies, where distribution channels and key partnerships are important, identifying these and discussing them is important in providing potential investors with confidence that your team understand the challenges inherent in its industry.

3) The company’s ability to analyze their cash needs and expectations for growth. Nothing is more scary than a company whose ambitions are huge, but whose idea of cash management is not in line. You don’t need a CFO, but you do need to have thought out what key costs grow with your ambitious growth and when are the crucial cash-points are for your company. Generally speaking, investors don’t have financial discussions on the very first meeting, but if you have an understanding of your cash uses, this will make you seem far more competent.

4) The completeness and experience of the company’s team. Read my post here on how an investor evaluates your team, suffice it to say that if you have a great team, highlight their accomplishments. If you know you need to hire someone to round out the team, it’s OK to put that down as a future hire.. at least it’ll make the investor know that you know there is a weak-point in the team that you plan on solving as soon as the investment comes in.

Articulating all these points allows founders to justify all the components of a business model to themselves before really investing further in an idea. During the writing of your plan, you may find that the business model changes or even the industry focus changes to avoid some risks that you identified early on.

Now, a couple of tips… the first one being, avoid putting a valuation on your deck / plan (unless you are finalising a round). Investors may ask you this figure in person, but you are likely to prevent a future dialog if you put the valuation on paper and it is either too big or too small for the investor. By omitting it, the investor focuses on what matters: what you are trying to build and then opens up the dialog for the economics of your company once the investor is ‘hooked’. The second tip is that a cap table can be a handy thing to include in your business plan (but perhaps you won’t have space to include it in a presentation). This is useful mostly for subsequent discussions, but can greatly help the investor to understand everyone’s motivations.

In conclusion, one of the best things you and your team members can do very early on, is co-draft this pitch deck / plan, no matter how simple, that you feel can represent your company without requiring your physical presence to get the value of your opportunity across. It should, at the bare minimum (even if slides or doc), include (not necessarily in this order either):

1) An overview of who you are and what you’ve done (basically, why you and your team can make this happen..)

2) A succinct explanation of what your product/service does, screenshots if possible.. run it past a non-techie friend and see if they can explain it back to you

3) A market overview section, the market size of your opportunity, key players, competitors, partnerships, target market, etc.

4) A snapshot of your financials (which in an early stage startup will be your expectations of cash usage), if preceding a physical meeting, a cap table would be useful. If your business is about growth first, then clearly show your potential investors how much money you will need to grow it to where it hits the tipping point.

Hope this helps!

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