Have the Tough Chats (even if you don’t want to)

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Over the past 6 months, I’ve witnessed several founder relationships and several inter-company relationships fall apart for one reason: delaying a possibly adversarial conversation that needed to happen. Had these conversations happened in a structured and well thought out way, I’m convinced that the universe of options available would have been much broader than those that came to be when things were too late and too inflamed.

I hate interpersonal conflict as much as I suspect most of you do. The idea that talking through a problem can quickly escalate into a full-blown conflict always daunts me, and in some cases even has paralysed me in the past.

Most well-adjusted people in a startup just want to get along with their colleagues (many of which feel like family), but I’ve experienced the hard way that failing to address an issue early on can have disastrous consequences later. That’s why I learned to have tough chats to address unresolved/underlying tensions that would otherwise result in a much larger conflict down the road.

Tensions exist in any group, whether you like it or not, and particularly in high-growth environments like startups, tensions are a natural part of evolving quickly. Speed of execution & hiring vs. cost management, seniority of external hire vs. promotion from within — are part of these daily trade-offs. If balanced well, these tensions drive growth. But too many unaddressed tensions over time can lead to a company’s downfall. Founders fighting about the business trajectory and unable to resolve underlying tensions is a classic example of how companies are torn apart from within.

So tensions are, in essence, both good and bad. But why do they often end up in a ‘cataclysmic event’? They get out of hand when you repeatedly avoid having the tough chats.

I define ‘tough chats’ as well-prepared/structured conversations with a constructive end in mind, with an openness to hear the other person out and find ways of reconciling differences to move past obstacles. Tough chats are NOT impulsive; they are NOT knee-jerk chats letting someone know how you feel in ‘that instant.’ They include emotions but are not ruled by them.

The ‘toughest’ part in tough chats, I believe, is in that they require effort on your part for them to go well. They are extra tough because you can’t expect the other person to do any of the work in advance (even though you hope they do). There is no way around it. You have to put in effort and preparation for them to be constructive. They require time, energy, and empathy to understand your colleague’s perspective before you approach them and reflect on how you’d like to react to their opposition.

Additionally, you need to decouple your ego from the outcome, see the bigger picture outside of your ‘victory,’ and visualise a positive/constructive result, even if you don’t get your way. Lastly, take the time to outline the essential topics you want to cover to find a resolution to your problems. You can’t get rid of tensions, but you can move aim to move past individual ones and to find a common ground / solutions to the issues.

The more you get into the habit of having tough chats at the individual or organisational level, the more likely you are to transform conflict avoidance into constructive problem solving and personal/business growth… and… the more you will likely avoid the very thing we all fear the most: a tougher chat down the road.

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Why you need to continuously invest in yourself if you want to lead others.

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There are many great books and courses on leadership, self-development, managing small teams, but they all revolve around one key point of evolution: You.

For any progress you expect your organisation or division to make, it begins with you. You have to be willing to change. You have to be willing to evolve. You have to be willing to improve. You have to be willing to reconsider what you thought to be true in light of the changing context you live in, and you have to be willing to learn from those around you.

This isn’t easy. Stagnation is tempting, change is hard.

The reason why it isn’t easy is because, if you are reading this, you are likely a self-starter. To usually start something, a company or product, means you have to put things into motion. YOU have to take actions, YOU have to create processes, systems, products, conversations, and relationships. After many months or years of driving things, this motivation to be the main source of all creation within your organisation/division can become a habit even after that habit is no longer absolutely necessary.

Once your organisation/division starts to grow, if you’ve hired well and created a culture that allows it, your colleagues will be equally capable (if not more) in driving creativity and leadership from within your organisation. This team-driven creativity can include everything from what to do, to how to do it. Your job evolves into creating room to let this flourish. In other words, your creativity evolves into the enablement of creation.

In order to do this effectively though, you need to continue to invest in yourself, it doesn’t just happen on its own. I define ‘investing in yourself’ as a combination of learning from others but equally importantly, taking time to reflect on your actions/reactions on a daily basis. You need to invest in yourself so that you can learn how to balance between when to get involved and when not to. You need to continuously learn on how to catch trends that can become toxic within a division or organisation and know how to manage them so they resolve themselves positively. You need to invest in learning how to communicate more effectively to those within your organisation (above and below you) but also to those outside your organisation; not only to attract more talent, but also to effectively deal with ambiguous circumstances that inevitably arise in any organisation.

Additionally, building a company and hiring people to help you with scaling it requires you to take ownership and stewardship over not only the outcome of the company, but also over the people that make it possible. You can’t do that if you have your head so far up your ass you can’t be challenged by those around you or can’t be approached out of fear of not being listened to, or worse, scolded or ridiculed. We all have feelings, this doesn’t mean you should feel nothing when someone reaches out to you with feedback, but rather your tendency should not be around how you are right, but rather more towards: ‘what can I learn’ from this to help us all improve and be better off?

As I write this, I’m very conscious of where I am on my own personal journey on this topic. I’ve made many mistakes along the way, and likely will make many more. However, I remind myself that yesterday’s failures aren’t an excuse for inaction today, rather they give me a richer context from which to learn.

To share a personal example, for the longest time, we kept many of our organisation-wide decisions centred around the most senior team members, perhaps due to the fear of change or fear of what the output might be. This however, created workflow bottlenecks and stifled ideas from colleagues (rather than creating an idea-discussing context). It was basically a mode of operating that didn’t give freedom to different heads of departments to really think about how to build their respective products for their respective teams and customers. After some tough chats with colleagues where we identified the root cause of the issue, a new org structure was put in place that granted much more freedom to division heads (but with the requisite accountability) to identify key issues, assess their severity, prioritise by impact, and create new products and execute initiatives. This conversion took some getting used to, and some people letting go of some things, but in the end, the outcome has so far been much better than the previous status quo.

As you embark on your own development, if you’d like some resources to start with, here are a few I’ve found helpful in my journey so far:

The Great CEO Within— A very practical guide to all aspects of company building. A must read.

The 15 Commitments of Conscious Leadership — A great book that helps you reflect on ‘habits’ you might or might not be engaging in within your organisation or division, and how by changing them you might be able to change your culture and outcomes.

Extreme Ownership — A good reminder that you can’t have change if no one takes ownership of what’s happened.

Commit Action— Not a book, but rather an accountability program that operates on a weekly cadence after you’ve reflected on the goals you have for yourself.

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Hiring your First Product Leader

Photo by Joni Ludlow on Unsplash

Blog post written by Seedcamp Venture Partner, Andy Budd, with support from Carlos Espinal, and edited by several guest editors.

Tech founders generally start a company because they have a vision for a new product; a product that will solve some meaningful problem at scale. They’ll set that vision, assemble a team of makers, and help bring that product to life. As such, the founder is almost always the company’s first product leader.

Knowing When to Replace Yourself

In the early stages of a start-up’s life, founders tend to be heavily product focussed. They’ll spend their time exploring user needs, coming up with usage hypotheses, figuring out what features to build next, and testing them out of the market. As a product person myself, it’s a super fun stage, so it’s not surprising that founders want to be driving product decisions for as long as possible.

However being a good CEO involves more than just building a great product. It’s about building a great company around that product. So as the company grows, founders will find themselves having less and less time to devote to product decisions. Instead they find themselves doing a tonne of other things like raising money, hiring teams, setting culture, putting new processes in place, finding customers, cutting deals, and a whole host of other things.

Sometimes this shift in focus can happen quickly. Especially if the company gets early traction or after a large fundraise which necessitates an explosion in hiring. However I often see founders feeling a little reluctant stepping out of this role. While this is totally understandable — the product is their baby after all — founders can quickly become a delivery bottle-neck. When this happens, it’s often time to hire your first product leader.

The Typical First Hire

Often that first product hire is administrative in nature. The CEO still holds the vision and makes most of the decisions. They just need somebody to help deliver that vision. As such, founders are often looking for somebody who can gather requirements (what the founder wants to build), organize workstreams (who’s going to do the work, how are they going to do it, and by when), structure and communicate priorities (creating backlogs, writing user stories, running meetings and feeding back progress), and ensuring the work gets delivered in time and to the right quality (which generally involves a lot of coordination).

There’s a surprising amount of inter-team coordination and document wrangling needed to manage a modern product workflow, and it doesn’t make sense for the founder to do this work. In the “olden days” this would probably have been done by a project manager. In the modern tech world, that first hire is more likely to be a “product manager”.

Trusting your hires

When you look at the characteristics of a good product manager, they tend to be fairly systematic and process oriented. They want to talk to customers to understand what they think. They want to analyze the usage data to understand how customers are actually using the product and whether what they’ve built is working. They want to build up a picture of market trends, come up with their own hypotheses and test them out in the market. They also want to involve other stakeholders like engineering, design, sales and marketing, knowing that those teams will also want input into the road map.

For a busy founder with a strong product vision, all this new process can feel overkill. So there’s a tendency for founders to tell early product managers what they want them to build. However good product managers want to be more than just order takers. Instead they want to be involved in driving — or at the very least informing — the product vision. As such, hiring your first product leader often requires founders to give up a certain degree of control. Something which may not come naturally and may feel both uncomfortable and inefficient.

Letting go of Ownership

If you’ve hired a good product manager and the company is growing at a comfortable rate, founders are often happy to cede control of day-to-day product decisions as it means they can work on the business rather than in the business. Especially areas like partnership deals, fun-raising and customer acquisition. This doesn’t mean they give up owning the product vision, but it does usually mean that they give more control over how that vision is implemented.

Ideally this means giving the product team specific targets (through OKRS or KPI) or areas of focus (through a North Star Framework), rather than telling them what to build next. It also means having product partners who exude a sense of confidence and keep everybody up-to-date with progress, so you’re not constantly chasing folks for updates. So for this new relationship to work there needs to be a high degree of trust.

Where Early Hires go Wrong

Unfortunately the first product hire can easily become a source of tension for the founder and CEO, as they negotiate new boundaries and have a polite quarrel for control. This is especially true if the founder is still driving the vision and wants to be involved in all the details, but lacks the necessary bandwidth.

I often see big culture clashes between founders and product leaders. Founders often have a strong gut feel for what they think is the right approach, and may see research and experimentation and an unnecessary hindrance. By comparison, good product managers have been taught that in order to do a good job they need access to the customer and the ability to run experiments and learn.

As a result you often end up with founders feeling frustrated that their new product partners are bringing in too much process, slowing down or questioning the roadmap (when from the CEOs perspective they feel it’s obvious what needs to happen) and trying to wrest away some of their vision, or worse, drive the product in a different direction. At the same time the new product manager will very likely feel as though they aren’t being given the space to do a good job, or having to manage too many competing inputs, with little actual ownership.

How to avoid the deadlock

Early product hires often lack the political heft to push back on founder expectations, and can find themselves in a really challenging position. In fact I believe product management is one of the hardest jobs in tech as they generally find themselves having to satisfy a bunch of different constituents (founders, sales & marketing, customer, designers & engineer) without having the authority or power to mandate compromise. As such I often see early product managers burn out, and get replaced by more senior execs.

To avoid this drama, you sometimes see other members of the founding team step into the product leadership role instead. Sometimes this will be the CTO/technical co-founder. This is especially true if it’s a very tech heavy product. Other times the lead designer will step up and start owning both design and product.This works especially well if there’s a lot of “interface” to the product.

One of the good things about having co-founders take on the product leadership role is they’re likely to share the CEOs vision, and have built up enough trust to be given the space to execute. However designers and CTOs don’t typically have the operational or administrative experience to execute the role particularly well, so will often bring in a junior product manager to support the operational side of things (ticket writing, backlog management, comms etc) pretty quickly.

Product is a Key Hire

For all of the above reasons, finding the right product leader is super hard. You’re looking for somebody who can work closely and collaboratively with the founders, often having very robust and opinionated discussion, while doing so in a way that doesn’t threaten or undermine the founders vision or sense of control. As such you may find yourself going through several product leaders before you find the right fit, and it’s often as much about the founders own personal learning journey as it is the skills and talent of the product manager.

If you’re going through this process of hiring your first product manager, don’t hesitate to reach out to Andy and he’d love to help. Here are more resources from his website: https://www.andybudd.com/

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When is the right time to hire a CMO?

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With growth being such an important metric for a company post-fundraise, it is of no surprise that one of the very first questions that arises after raising money is how to spend it, both in terms of people but also in customer acquisition.

As most small companies have the founding team acting as the marketing, sales, and product development team, it can be quite tricky to ‘scale’ across any one of those functions. However, the wisdom of having founders’ lead these three things until finding product-market fit is one I believe in and also recommend, mostly because it allows the founding team to be nimble in adapting their marketing strategy, the sales strategy, and the product to match the needs of the customers as per conversations they are having with the customer directly (vs. via an intermediary, who is typically newly hired and desperate to showcase worth, even if not entirely aligned with the company’s PMF context).

In an effort to unpack each of these, we will do a mini-deep dive into these three parts and cover the key things to consider as part of how to best use your newly raised funds.

Starting with Marketing, I sat down with my colleague Natasha Lytton, who is an experienced CMO, Head’s up Seedcamp’s Marketing in addition to leading our Platform. I asked her the typical questions I see asked (or those that sometimes people are too embarrassed to ask) around Marketing.

What is the most misunderstood part of ‘the marketing function’ within a startup?

  1. That growth belongs exclusively within the marketing department
  2. That one person can cover the whole stack of ‘marketing’ — ie performance and brand
  3. That short-term tactics are the wholly grail and that customer acquisition costs (CAC) you achieve today will last forever

When you should be doing marketing vs. someone else?

It really depends on you; your skillset, where you feel most comfortable and what’s going to be the most impactful use of your time. If you have zero marketing experience and know this is going to be a core function in order for your business to grow, I’d be looking to bring someone on to run it asap. I think, as founders, it’s essential you take an active interest in the story of the business, which is essential when it comes to shaping your narrative. Early-stage companies are driven pretty exclusively by the founder so, while you may not necessarily be buying Facebook ads or creating content to help drive SEO, you should be inputting on the story behind the business, defining what sort of legacy you want to leave in the world and thinking about how best to bring that to life.

What should be your first hire, a junior person or a senior person?

I’ve personally always been a fan of hiring people who can grow into roles. However, I think with the market we’re currently in, that’s changing a lot. You used to hire people with relatively little experience (maybe 4–5 years) but who had loads of energy, intellectual curiosity and passion to contribute and learn and grow alongside the business, In the current market, with everyone raising so much more money and expected to grow 100x faster than before, the need for people who’ve ‘been there and done that’ tends to dominate. I’d always be asking:

Will this be a challenge that this person will be ‘excited to do?’ as that will likely determine how willing they are to stick around. I’ve found senior people are more likely to take on roles in very early companies if it’s a different sector/experience for them whereas companies always tend to want to hire people who’ve churned out from competitor businesses, Here I’d add, it’s not essential that someone has direct experience in the sector you’re in for them to be valuable.

Is this person a ‘doer’ and someone who is willing to get their hands dirty

Is this person — be it senior or more junior — someone you feel you’d be able to trust and who can help take you on a journey

As one many a founder starts wondering if the solution to their marketing problem stems from simply hiring a senior marketing person, let’s move on to the core question:

What is a CMO?

Someone who leads the entire marketing function of the organisation. This is the person who should be updating the founder on what marketing is delivering, setting the marketing strategy, working with the CFO to define budgets and reporting (as and when necessary) to key stakeholders — ie investors — on impact.

When should you hire a CMO?

Really depends on the stage of your business. If you’re hiring a CMO and it’s a marketing team of one, you’re not really hiring a CMO. I think a lot of this comes down to titles and how this sits within your organisation as a whole. People are increasingly less willing to give out C level titles pre-Series A (which I think is right). A ‘proper’ CMO should signify someone who is going to come in and own a substantial budget and run a decent sized team. I’d also be looking at bringing someone on when you have significant marketing targets you need the business to hit to help you achieve your core goals.

How should you judge a CMO?

CMOs are one of the quickest roles to churn out as everyone wants to grow, and they want to do it tomorrow. I think a lot of this comes down to setting clear expectations right at the start. With early-stage businesses, a lot will be unknown and so while goals are important, the requirements of the organisation and the individuals within them to flex as the company likely will is also important.

I would personally judge a CMO by:

  • Leadership quality
  • Founder trust and relationship
  • Ability to quickly course correct if something isn’t working
  • Ability to create a balance of short and long term strategies and tactics to drive growth while future proofing the brand in the long run

What kind of budget should you discuss with your CMO?

Traditional rule of thumb in consumer marketing is 10% of funding should be spent on marketing. This should then come down as the company scales and as next rounds get bigger.

Do you have any questions you’d like to ask about marketing hiring and creating a marketing function after having recently raised? Feel to ask those questions in the comments section below!

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To use Recruiters or To go at it alone, that is the question!

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Working with External Recruiters and Firms

One of the biggest challenges founders are facing more and more is hiring fast and hiring well. To achieve this it isn’t uncommon to both bring a talent function in house, but also, in tandem, to work with external recruitment firms.

Working with these firms isn’t always straightforward however, as many promise you the world and fall short if they aren’t well versed in your industry and key people therein. Additionally, there are a variety of ways to work with recruitment firms and each has their own unique twist to it.

To help decipher this process, I’ve teamed up with our very own Head of Talent, Alex Lewis, to address some of the typical questions that surface when engaging with firms for the first time.

Getting Started:

Planning how best to start recruiting is a bit of a minefield. You have various options from search firms to contingent agency recruiters, to embedded and hiring your own internal recruiter. Each has their own pros and cons, but hopefully these FAQs will shed some light on your chosen path.

When to engage with a recruitment partner is a common question — personally, I’m of the view that initially, founders should do their absolute best to engage with candidates themselves, from getting roles advertised to headhunting through cold outreach and leveraging existing networks. For example, as Haroun from Dala, a Seedcamp company, was looking to hire, he did some cold outreach, and found some great candidates who did respond because (after asking them), they knew he was the decision maker rather than a recruiter who doesn’t know the business as well as the founder.

Once these outreach efforts are exhausted or you are under serious time pressure to scale, then it is best to begin an engagement with an external recruiter or firm.

Picking a Recruiter:

There are a few options you have to consider:

Executive Search Firms

Executive search firms focus on leadership hiring, primarily focusing on Executive (C-Suite), VP or Director level roles. This is a high-quality method of recruiting that consequently tends to have a significant price tag attached to it. Each firm’s methodology will vary, but it is a very detailed process that would tend to include global candidate market mapping, a selection of candidates presented to you for approach, and a rigorous vetting and preliminary interview/assessment prior to them being submitted into your company’s formal process.

They tend to perform advisory roles and will have substantial amounts of research available. Having a relationship with a search firm as a founder is very useful, but they should only be used when you have exhausted your personal network and efforts to fill a role.

Recruitment Agencies

Recruitment Agencies are a dime a dozen but good ones are invaluable. The general difference between a traditional search firm and a recruitment agency are the level of role they typically work. Some recruitment agencies have executive search capabilities but leadership hiring would typically not go higher than a director.

Recruitment agencies will tend to have a selection of consultants with very specific niches. They will have a database of candidates they can contact to fill your role and will do high-level headhunting. The candidates they submit to you will typically be across a few other “clients” and as they work on commission, unless there is a long-term partnership or relationship, they’ll be inclined to favour the client paying them the greatest fee — this will vary though; some agencies are more balanced than others.

Embedded Partners

Embedded talent acquisition/embedded recruitment is a relatively new but very popular model, developed as a more flexible and smaller scale version of an RPO, with a management consultancy approach. They would come in and act as your internal talent team, helping you scale at pace until a time that you build out your own internal function, or exist in support of your existing function at a time of significant scale. Outside of hiring, they would also be able to assist with things like optimising your employer brand and wider people ops initiatives, plus wider research to make you a more effective hiring machine/more attractive employer.

When you know what type of capability you require, track record is important to understand, for example if you’re hiring niché roles ensure the partner you are working with have experience in these roles and are able to prove they have done this through providing case studies, references or showing you candidates they have placed with other businesses, as long as there aren’t confidentiality issues.

What to Expect in Terms of Costs:

This is a tricky one to answer, but with executive search firms, you can expect to pay 25–30% of base salary, or in some cases where the individual is extremely senior, part of the entire first year compensation.

With recruitment agencies anywhere from 15–25% of base salary is the industry norm but this is flexible and often dependent on the volume of hiring being done.

Embedded partners again range anywhere from £8k-£20k per month per consultant/partner, however some pricing structures differ depending on if they take a commission or discounts applied on the number of consultants deployed.

Do I need to pay a retainer or can I simply do it on success?

Search firms often will work on retainer, either as a ⅓ up front, ⅓ on delivery of a qualified shortlist and a ⅓ upon successful completion of the hire, or ⅓ upfront and ⅔ on completion, different firms will have different structures, but the above options are the most typical.

Agencies will take a retainer if it is a larger volume of hires to mitigate the risk of deploying multiple assets to fill the roles, but this also gives you assurance that the firm is deploying consultants to work these roles exclusively for you, so make sure this is in place if they elect to close on retainer.

Embedded partners don’t typically work for a retainer, they may require a security deposit on a minimum length of deployment or will have a “notice period” of x months to roll off to cover loss of earnings.

Can I pay with Equity?

Yes, some search firms, especially the larger firms, have recognised that earlier stage companies are unable to pay their fees, so offer equity exchange contracts for their services. Make sure you understand your cap table thoroughly and speak to your investors (if you have them) before going ahead with this. The percentages should be equivalent to advisory equity circa 0.125–0.5%.

How do I best manage the process once initiated?

This differs by type of firm but you can tailor it to your preference. Search firms will agree on clear deliverables in certain timelines and some even have their own platform where you can monitor progress. Agencies again vary, but you can request weekly updates on stats. With embedded partners, typically you’ll have a weekly meeting and quarterly check-ins.

What outcomes should I expect and by when (quality and speed)?

There are a lot of variables at play here e.g. complexity of role, type of arrangement — but there is an element of opportunity cost when using quality and speed as expectations of success. When you first start working with a new recruitment partner, expect there to be a bit of a bedding in period where they get to understand what you think good looks like, what you expect and get to know you as a founder and a business. After that, you can make sensible judgement, but to assess quality, request data. Number of candidates contacted, spoken to, submitted for first interview and then assess interview funnel efficiency through conversion rate like you would a sales funnel.

What if I need to fire the person they recommended

Terms for this will exist within your contract with your agreed supplier, most will have claw back clauses stating that once you have made the decision to hire the individual, the third parties responsibility has diminished, however often there are refunds available on a step decreased based on x number of weeks of employee service.

What if I need to fire the recruiter?

If there is no retainer in place, again check your contract, but just let them know they are not performing and wish to remove them from the search. Make sure you give good feedback as to why. If there is a retainer in place, you may still owe a % of total fee.

Can I have two recruiters searching for the same candidate or is it a waste of time?

The short answer is yes; however, this doesn’t count for exclusivity arrangements or a retainer, as a retainer usually implies exclusivity. On standard contingency search, it makes sense to employ multiple agencies to represent your roles, especially if there is considerable headcount. If you are concerned about candidate representation, a first come first served rule usually applies, with written confirmation required from the candidate for representation as proof, which can be requested by you if conflict arises.

Hopefully these questions help you get started with the basics of recruitment and shed some light on the whole process!

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