Entrepreneur’s Perspective on Non-Competes

(Note: I just found this post in the “drafts” folder and realize I never put it up! It was written months ago, although I just updated it a bit.)

Bijan Sabet kicked off the discussion about non-competes by asserting that they are a barrier to innovation and that they are unenforceable in California anyway, so why bother?

Fred continued the discussion and made some good assertions about the value of non-competes, summarizing his points as:

Non-competes are very much in the interests of our portfolio companies. But the non-competes need to be tightly defined and the term of the non-compete needs to be paid for by the portfolio company if the employee was forced out of the company. The non-competes should certainly apply to all senior management team members and all key employees (like star engineers and such). It takes a lot of work to build a company. You should not risk all that knowledge and talent being able to walk out the door and set up shop across the street.

Brad and Jason/Ask the VC are generally on board with Fred’s view.

We’ve had non-competes since the beginning at Return Path.  I am generally in agreement with Fred’s parameters, but to spell out ours:

1. Our non-competes are very narrowly defined.  I had a very bad taste in my mouth when AOL acquired my former company, MovieFone, back in 1999 and stuck a 3-year non-compete in front of me that would have prohibited me from working anywhere else in the Internet.  I think the language was something like “can’t work in any business that competes with AOL or AOL’s partners in the businesses they are in today or may enter in the future.”  It was just silly.  Our non-competes apply very narrowly to existing direct competitors of the part of Return Path in which the given employee works.

2. We do not pay for non-competes.  Because our non-competes are very narrowly defined, we don’t expect to pay for someone to sit on the sidelines.  If people leave, or even if people are fired, they have 99.99% of the companies in the world as potential employers. 

3. We are willing to excuse people from non-competes if they are laid off.  Fair is fair.  However, we still expect our confidentiality and non-solicit agreements to remain in full force.

4. Everyone signs the same non-compete.  100% of the people, 100% of the time.  Same language.  No exceptions.  Again, this comes back to how narrowly defined the non-compete is.  It shouldn’t just be limited to senior executives.  Obviously you have to respect local laws of places like California or   Europ which have different views of non-competes.  If these cause in equalities in your employee base by geography, we make an effort to “re-equalize” in other ways.

5. We enforce non-competes in all situations.  I don’t believe in selective enforcement.  That sends the wrong message to employees.  We have had a couple instances where junior people have left and brazenly gone to a competitor.  While we have never blocked someone from starting a new job, we would if there wasn’t another resolution.  Fortunately, in those cases for us, we have contacted the employee and the hiring company and been able to work out a deal — the employee went to work in a non-competitive part of the new company, we struck a commercial relationship between us and the hiring company, etc.

6. We try to play by the rules when hiring people who have non-competes.  I think consistency is important here show to employees.  If we expect people to respect our non-compete, we should respect other companies’ non-competes.  This doesn’t mean we don’t try hard to lure competitors’ people to us when the situation warrants — it just means that if a non-compete is relevant and in effect, we will either make a deal with the other company, or in special circumstances, we will pay the employee to sit on the sidelines and ride out the non-compete.  This is a tricky process, but we’ve had it work before, and we’d do it again for the right person.

Our people and intellectual capital are a huge source of competitive advantage.  They are also the product of massive investment that we make in developing our people.  A good, narrow, non-compete is important for the company and can be done in ways that are fair to employees who are the beneficiaries of the training and development as well as their employment.  I think that’s part of the social contract of a great workplace.  Non-competes don’t stifle innovation — they protect investments that lead to innovation.  I suppose the same argument could be made of patents, some of which make more sense than others, but that’s the subject of another rant sometime.

But at the end of the day, it’s up to us to retain our people by providing a great place to work and advance careers so this whole thing is a non-issue!

Selecting Your Investors

Fred Wilson has been a venture investor and director in Return Path since 2000, first with Flatiron Partners and then with Union Square Ventures.  We’ve been through a lot of wars together.  In a couple of weeks, he and I are team-teaching a class in Entrepreneurship at Princeton, and the professor gave us the assignment of writing two pairs of blog posts to tee up discussion with the class.  This is the first one…and Fred’s post on the other side of the topic is here.  Next week, we’ll address the topic of building a successful CEO-VC partnership once it’s established.

If you’re fortunate enough to have built a really strong early stage company, you will find yourself in the position of being able to pick from a number of potential venture investors.  The better your business and the more exciting the space you’re trying to tackle…the more investors you’ll find circling around you.  Here are a few tips for ending up with the best long-term partner as an investor.

1. Look for VC portfolios that have a lot of “like” companies (B2B, B2C, media, tech, etc.).  One of the strongest points of value that venture investors bring to the table is pattern matching, and you can maximize that by making sure the investor you end up with has seen a multitude of companies like yours
2. Check references carefully.  Don’t be shy – prospective VCs are checking up on you, and you have every right to do the same with them.  When Fred first invested in Return Path, he gave me a list of every CEO he had ever worked with and said “Call anyone you want on the list.  Some of these guys I worked well with, a couple I fired.  But they’ll all tell you what I’m like to work with.”  First prize is the VC who volunteers this information.  Second prize is the VC who gives it to you when you ask.  A distant third price is the VC who gives you two names and ask for time to prep them ahead of time
3. Focus on the person first, the firm second.  Having a good venture firm is important.  But at the end of the day, you’re dealing with a person first and foremost.  That’s who will be on your board giving you advice and measuring your performance.  Better to have an A person at a B firm than a B person at an A firm (of course, even better to have an A person at an A firm).  This means two things – selecting a great person to be on your Board, and also making sure you end up with a person who has enough juice within his or her firm to get things done on your behalf with the partnership
4. Always have a BATNA (Best Alternative to a Negotiated Agreement – a fancy way of saying Plan B).  This is probably the most important piece of advice I can offer.  And this is true of any negotiation, not just a term sheet.  It’s often said that good choices come from good options. Sometimes, you have to walk away from a deal where you’ve invested a lot of time, energy, and emotion.  But as an entrepreneur, you can mitigate the number of times you have to walk away by developing good alternative options to a particular deal. That way, if one option doesn’t pan out as you’d hoped, another very good option is waiting in the wings.  If you negotiate with two or three VCs, you’ll have a great backstop and won’t let the emotional investment in the deal get the best of you.  Yes, you will spend twice to three times the amount of time on the process, but it’s well worth it
5. Don’t be swayed by promises of help.  I’ve heard VCs say it all.  They’ll help you fill out your management team.  They’ll get you customers.  They’ll help with your back office.  They’re loaded up with value-add.  If venture investor has staffed his or her firm with support personnel who are available free of charge to portfolio companies (this does happen once in a while), then assume your VC will be as helpful as possible, but no more or less helpful than another investor
6. Handle the negotiation yourself, in person as much as possible.  The best way to get to know someone’s character is to negotiate a deal with him.  This gives you lots of opportunities to look for reasonableness, and to see if he or she is able to focus on the big picture.  The biggest warning sign to look for is someone who says things like “you have to agree on this term, because this is how we always do deals.”  By the way, how you handle yourself in this negotiation is equally important.  The financing is the line of demarcation between you and the VC courting each other, and the VC joining your board and effectively becoming your boss
7. “Pay up” for quality and for a clean security.  There is a world of difference between good VCs and bad VCs (both the individual partners and the firms) that will ultimately have a lot to do with how successful your company can become.  The quality of your VC isn’t more important than the quality of your product or your team, but it’s right up there.  But – and this is an important but – you should expect to “pay” for quality in the form of slightly weaker terms (whether valuation or type of security).  Similarly, I’d always sacrifice valuation for a clean security.  Everyone always thinks that price/valuation is the most important thing to maximize in a deal. However, the structure of the security can be much more important in the long run.  Whether the VCs buy 33 percent of your company or 30 percent of your company is much less important than having a capital structure that’s easy for an outsider to understand and want to join

As with all things, there are probably another dozen items that could be added to this list, but it’s a good starting point.  However, your more important role as CEO is to put your company in a position where you can select from a number of high quality investors, so start there!

This post was inspired by Startup CXO and was originally published by Techstars on The Line.

If you’re new to the Chief Customer Officer role, we’d like to share some advice we wish we had learned earlier in our careers. There are a few common misconceptions about customers and the service organization. If you don’t realize these as misperceptions, you can spend a lot of time dealing with issues that are not real, but perceived. We have identified five of these common misperceptions, although we are sure there are more.

Misperception #1: The service organization fully controls churn (customer attrition)

In a lot of organizations you’ll see the service organization be measured solely on customer churn. If you really think about it, there are many elements that come into play that impact churn, including

• How the customer is sold
• The quality of the product
• How easy it is to onboard the customer
• How easy it is to use the product
• How easy it is for the customer to understand what kind of value they’re getting out of the product

Of course, the service functions do have a critical role, but they’re not the only functions in a company that impact churn. The responsibility for churn also lies with sales, engineering, marketing, and other teams. One reason why you need a C-level senior person in charge of all service operations is because you need someone who understands the customer experience broadly and that person has to work cross-functionally to ensure customer retention.

Misperception #2: The service organization is just a cost center

In many businesses, if a function isn’t generating new revenue, it’s seen as “second class.” From our perspective revenue retained is revenue gained and the service organization has a big impact on retaining revenue. In addition, the account management portion of a service organization is often in charge of up-sale and cross-sale opportunities which can be huge areas of growth. CCOs should work within their company to alter that misperception of service as a cost center because the service organization can have a huge impact on revenues.

Misperception #3: Service teams should focus on responding to defections

I’ve recently found a situation where the customer success team is built to focus on the clients who have raised their hand and said, “I want to leave.” This reactive approach drives low job satisfaction and isn’t the “best and highest use” of a service team’s time. By the time a customer is frustrated enough, or isn’t seeing the value enough, that they want to leave — you’ve missed a window of opportunity. The right focus should be proactively helping customers reach their desired business objectives. If you can do that, most customers will stay. That’s the theory behind the rise of the customer success team and that’s what great companies are doing today.

Misperception #4: Service’s job is to “paper over” gaps in the product

There is a widespread practice of covering for product issues by throwing service at the problem. That certainly can work, but it’s not optimal. The superior approach is to focus the service team on becoming a trusted advisor for customers, helping those customers achieve their desired outcomes. To do that, the CCO will have to work cross-functionally with the product team, the marketing team, and the sales team to drive a more friction-free customer experience.

Misperception #5: Service is boring and tactical

There is a wide-spread misperception that working in the service organization is boring. It’s mundane, it’s tactical, it doesn’t appeal to people who think strategy is grander than tactics. I don’t agree with that at all. A great service organization starts with a strategy. It starts with an understanding of customer segmentation. It includes thinking about the different customer personas and how to define an appropriate and valuable customer experience. That core strategy actually takes a while to develop. Once the strategy takes hold, it is core to driving retention over time. And, while a lot of people perceive that the service organization jobs are boring, or just answering trouble tickets or reacting to client problems, that’s not the whole role. It is a strategic role as well. 

The Chief Customer Officer has a big impact on the success of a company, especially startups and scaleups, and their function touches nearly every aspect of a company. To give your company the best chance of scaling, the Chief Customer Officer should understand, pinpoint, and manage misperceptions so that they can devote their time, energy, and resources to the real problems that help customers.

The Rumors of Email’s Demise Have Been Greatly Exaggerated, Part IV

This one could also be entitled “What Are The Bloggers Smoking?”

Reports from last week’s Blog Business Summit like this one are starting to filter in (pun slightly intended).  This one gets a big yawn from me, even more so than the other times I’ve posted on this subject, here, here, and here.  I’m as much of a blogger and a believer in blogs and RSS as the next guy — maybe even more so — but honestly, people, blogs are going to replace email?

I’d like to address a few critical points here head on, although a large part of me doesn’t even want to dignify yet another empty “email is dead” quote with a response.

Basic error #1. The article seems to confuse blogs with RSS feeds.  RSS feeds are data streams coming into an RSS reader application.  Blogs are web sites.  Hello?!?

Fallacy #1. Because blogs/RSS are interesting new media, email will go away.  To paraphrase my colleague Mike Mayor, why is it that whenever something new comes along, its proponents have to bash the current paradigm to make their thing seem more important?  Let’s go through this one — TV came along, and people said radio would go away.  Cable came along, and everyone said the networks were toast.  The fax machine came along, and FedEx was said to be relegated to legal documents that needed to be signed personally.  The Internet came along, and people said everything else was insignificant (newspapers, TV, radio, snail mail).  So yes, new media do arrive on the scene and perhaps make a dent in all prior media, but I’m having a hard time thinking of that one comes in and clocks another one mano a mano.

Fallacy #2. Spam has made email more difficult, therefore email will go away.  There’s a whole industry out there fighting spam.  I know, I know, just because we want the problem to go away doesn’t mean that we can will it away — but filters are working better by the day (did everyone catch this posting about Postini this week?), false positives can be managed down by vigilant clients working with vendors like Return Path, and whitelists, whenever they start really working and charging money to clients to guarantee delivery, will still leave email as the cheapest medium for targeted commercial messaging out there.

Naive belief #1. Spam has harmed email, but blogs/RSS are immune to the same problems.  I’m sorry, do you think the bad guys, or as Fred always calls it, the Internet Axis of Evil (spam, viruses, spyware, DNS hacking, phishing, and the like) are going to leave blogs and RSS feeds alone?  Not a chance.  The bad guys are already hard at work expanding their Axis of Evil.  There’s already comment spam for blogs (or blam, as some call it).  People have and can hijack RSS feeds (no cool name yet).  There’s Instant Messenger spam (spim).  Last week, I heard about a new one that blew me away, which is that someone figured out how to hijack a Voice Over IP phone call and insert an audio ad/porn into the call (spip).

Naive belief #2. Blogs are truly interactive.  Other than a couple of very popular blogs during the height of last fall’s election, I just don’t think this is true for the mainstream.  There are certainly some people who have a little too much time on their hands who spend hours every day blogging, but most people skim most blogs as one-way communication.   While there are mechanisms for commenting, there aren’t ready mechanisms for publishing comments back to the blog audience (thank goodness), so this medium hasn’t turned out nearly as interactive as people had hoped at the onset.  RSS feeds, in case the writer/speaker was confused in this argument, are completely non-interactive.

Naive belief #3. People will read blogs with an agenda of marketing specific products and services.  The beauty of the blog is that it’s not corporate, and it doesn’t have marketing spin on it.  Blogs are much more journals and publishing tools than marketing vehicles.  Who the heck is going to read a blog on Coke?  Or Nike?  Or Microsoft?  Sure, I might read Howard Shultz’s blog if he had one (his book was good enough), but that’s very different than reading the Starbucks official blog.  Why bother?  Where’s the value there?

Ok, I’m done with today’s rant.  As I said, I love blogging as much as the next guy, but puh-lease!  And for the record, I do believe that RSS feeds and maybe even IM from marketers/publishers will supplement email and in some cases maybe even replace it, but email just isn’t going away any time soon.

Overload

Fred had a great posting last week called The Looming Attention Crisis.  He talks about how he’s at his limit of trying out new technology and consuming information/feeds.  He’s right — except I’d argue there’s nothing looming about the crisis.  Those of us who were early adopters of RSS (perhaps early adopters in general) are in full Overload mode at this point.

The negatives associated with this problem are pretty clear.  One of my very first postings, Present AND Accounted For, talked about the perils of multitasking on interpersonal relationships; that’s probably the biggest negative to the availability of all this information.  Attention, as Fred says, IS in fact a zero sum game. 

The great problem associated with all of this Web 2.0 stuff is that the web is now much more easily a read/write platform, as opposed to the primary read platform it was in the early days.  So now, everyone can have a printing press — but not everyone should.  And those who do, shouldn’t necessarily feel compelled to use those presses all day, every day.

We need some new tools and services to help reduce the Overload factor quickly.  Tips for better organizing information help (thanks, Whit), but they’re not enough.  We need better keywords and searching of the information that’s out there.  We need better tools to help understand which feeds to read and which to avoid — in other words, ways to figure out who shouldn’t have a printing press.  We need better tools to de-dupe information, or better yet to consolidate duplicate information with a clean list of sources.  We need better integration with mobile devices to scan the information during away-from-desk time.  Most of all, we need all of these tools to be integrated before average users can really adopt.

Maybe all of these tools are out there, and I just to find need more time (somehow) to find and implement them.  I’m sure some entrepreneurs far smarter than I am about Web 2.0 will come up with these things before long…and then of course we’ll hear about them 872 times until we implement their solutions.

I’m thrilled to announce that we created mini-books (about 80 pages long and only $9-10 on Amazon) out of five of the major functional areas covered in Startup CXO: A Field Guide to Scaling Up Your Company’s Critical Functions and Teams, part of our series along with Startup CEO: A Field Guide to Scaling Up Your Business and Startup Boards: A Field Guide to Building and Leading an Effective Board of Directors.

I’ve always said that while I love all three books, in some ways Startup CXO is the best because it’s a “book of books.” While I’d still encourage all CEOs and senior executives (CXOs) to read the full manuscript, my friends and co-authors and I are happy to present these five books, now available on Amazon, for functional specialists:

• Startup CFO: A Field Guide to Scaling Up Your Company’s Finance Function
• Startup CRO: A Field Guide to Scaling Up Your Company’s Sales Function
• Startup CMO: A Field Guide to Scaling up Your Company’s Marketing Function
• Startup CPO: A Field Guide to Scaling Up Your Company’s HR/People Function
• Startup CTO: A Field Guide to Scaling Up Your Company’s Technology/Product Function

Each book has several topics in common – chapters on the nature of an executive’s role, how a fractional person works in that role, how the role works with the leadership team, how to hire that role, how the role works in the beginning of a startup’s life, how the role scales over time, and CEO:CEO advice about managing the role.

In Startup CFO, the role-specific topics Jack Sinclair talks about are Laying the CFO Foundation, Fundraising, Size of Opportunity, Financial Plan, Unit Economics and KPIs, Investor Ecosystem Research, Pricing and Valuation, Due Diligence and Corporate Documentation, Using External Counsel, Operational Accounting, Treasury and Cash Management, Building an In-House Accounting Team, International Operations, Strategic Finance, High Impact Areas for the Startup CFO as Partner, Board and Shareholder Management, Equity, and M&A.

In Startup CRO, the role-specific topics Anita Absey talks about are Hiring the Right People, Profile of Successful Sales People, Compensation, Pipeline, Scaling the Sales Organization, Sales Culture, Sales Process and Methodology, Sales Operating System, Marketing Alignment, Market Assessment & Alignment, Channels, Geographic Expansion, and Packaging & Pricing.

In Startup CMO, the role-specific topics Nick Badgett and Holly Enneking talk about are Generating Demand for Sales, Supporting the Company’s Culture, Breaking Down Marketing’s Functions, Events, Content & Communication, Product Marketing, Marketing Operations, Sales Development, and Building a Marketing Machine.

In Startup CPO (HR/People), the role-specific topics Cathy Hawley talks about are Values and Culture, Diversity Equity and Inclusion, Building Your Team, Organizational Design and Operating Systems, Team Development, Leadership Development, Talent and Performance Management, Career Pathing, Role Specific Learning and Development, Employee Engagement, Rewards and Recognition, Reductions in Force, Recruiting, Onboarding, Compensation, People Operations, and Systems.

In Startup CTO (Technology and Product), the role-specific topics Shawn Nussbaum talks about are The Product Development Leaders, Product Development Culture, Technical Strategy, Proportional Engineering Investment and Managing Technical Debt, Shifting to a New Development Culture, Starting Things, Hiring Product Development Team Members, Increasing the Funnel and Building Diverse Teams, Retaining and Career Pathing People, Hiring and Growing Leaders, Organizing Collaborating with and Motivating Effective Teams, Due Diligence and Lessons Learned from a Sale Process, Selling Your Company, Preparation, and Selling Your Company/Telling the Story.

Each of these executives is a true subject matter expert, not to mention a great friend and someone who is a lot of fun to hang out with on an executive team. I’m proud of these books and hope they’re a useful addition to the startup canon.

Macroeconomics for Startups

I’m not an economist.  I don’t play one on TV.  In fact, I only took one Econ class at Princeton (taught by Ben Bernanke, no less), and I barely passed it.  In any case, while I’m not an economist, I do read The Economist, religiously at that, and I’ve been reading so much about macroeconomic policies and news the past 18 months that I feel like I finally have a decent rudimentary grip on the subject.  But still, the subject doesn’t always translate as well to the average entrepreneur as microeconomics does – most business people have good intuitive understandings of supply, demand, and pricing.  But who knows what monetary policy is and why they should care?

So here’s my quick & dirty cut at Macroeconomics for Startups.  What do some of the buzzwords you read about in the news mean to you?

· Productivity Gains – This is something frequently cited as critical to developed economies like ours in the US.  Here’s my basic example over the past 10 years.  When I left my job at MovieFone in 1999, there were approximately eight administrative assistants in a company of 200 people – one for each senior person.  Today, Return Path has less than one administrative assistant in a company of the same size.  We all have access to more tools to self-manage productivity than we used to.  Cloud computing is another great example here of how companies are doing more with less. We have tons of software applications we use at Return Path, none of which require internal system administration, from Salesforce.com for CRM to Intacct for accounting. Ten years ago, each would have required dedicated hardware and operational maintenance.

· Fiscal Policy vs. Monetary Policy –  Fiscal Policy is manipulating the economy through government taxing and spending.  Monetary Policy is manipulating the economy by controlling interest rates and money supply.  For a small company that has revenue and accounts receivable, you probably are more inclined to Monetary Policy as it has more to do with your ability to access debt capital from banks through credit lines.  But if you’re in an industry where government grants or support is critical, Fiscal Policy can mean more to you in the short run.  Of course, if you’re losing money as many startups are, business tax credits and the like aren’t so relevant.

· Inflation – As my high school econ teacher defined it, “too many dollars chasing too few goods.”  Inflation may seem like a neutral thing for a business – your costs may be going up, but your revenue should be going up as well, right?  And we can inflate our way out of debt by simply devaluing our currency, right?  The main problem with inflation is that too much of it discourages investment and savings, which has negative long term consequences.  To you, rapid inflation would mean that the money you raise today is worth a lot less in a year or two.  That said, inflation is certainly better than Deflation, which can paralyze an economy.  Think about it like this – if you’re in a deflationary environment, why would you spend money today if you think prices will be lower tomorrow?

· Strong Dollar, Weak Dollar – Sounds like one of those things that’s politically explosive…of course we all want a strong dollar, right?  Why have a mental image of Uncle Sam that’s anything other than muscular?  And yes, it’s a lot more fun to travel to Europe when a latte costs you $4, not $8.  But the reality is that a strong dollar doesn’t necessarily serve all our interests well.  For a startup, sure, you can buy an offshore development team in India for less money than a development team in Silicon Valley, and for a more established company it makes it much cheaper to try and expand to Europe and Asia.  But an artificially strong dollar means that few people outside the US can afford to buy your product or service.  This is related to…

· Trade Surplus/Deficit and Exchange Rates – The net of a given country’s exports minus imports, and how much one currency is worth in terms of the other.  There’s been much talk lately about whether and how much China is manipulating its currency and holding it down, and if so, what impact that has on the global economy.  Why should you care?  If China is articifically keeping the value of the yuan down, it just means that the Chinese people can’t afford to buy as much stuff from other countries – and that other countries have an artificial incentive to buy things from China.  If the Chinese government allowed the yuan to appreciate more, the exchange rate vs. the dollar would rise, and your product or service would find itself with a lot more likely buyers in the sea of 1.3B people that is China.

I’m sure there are other terms of note and startup applications, but these are a handful that leap to mind.

This is a topic we write about obsessively in Startup CXO: A Field Guide to Scaling Up Your Company’s Critical Functions and Teams — in fact, it’s basically the whole point of the book! I’ll write some more specific posts here in the coming weeks that take some excerpts from the book, but Bolster is putting on three free and open webinars we’re calling our “Bolster-up Series” over the coming weeks that I want to share with everyone who reads StartupCEO.com.

In this series, I’ll be doing short interviews with CEOs who we work with at Bolster on the different aspects of scaling specific functions, how they diagnosed those problems, and how they leveraged on-demand executive talent to solve those problems. The three events are:

• 7/20 2:00-2:30pm EST: Signs your Finance function isn’t scaling and what to do about it with MediaWallah founder and CEO Nancy Marzouk.
• 8/12 2:00-2:30pm EST: Signs your Revenue function isn’t scaling and what to do about it with Ozcode CEO Shimon Hason.
• 9/15 2:00-2:30pm EST: Signs your Marketing function isn’t scaling and what to do about it with Drip CEO John Tedesco.

You can sign up for the first one on Finance by clicking here.

Best CEO/Entrepreneur Quote Ever, By a Mile

I’ve seen and heard a lot of these.  But perhaps it’s fitting that on Independence Day, I realized that this gem of a quote, not specifically about entrepreneurs or CEOs but very applicable to them, comes from President Theodore Roosevelt in his “Citizenship in a Republic” speech at the Sorbonne in Paris, April 23, 1910:

It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.

Amen, Brother Teddy.  This quote is so good that it appears twice independently (once from me, once in a contributor’s sidebar) in my almost-ready-to-pre-order book, Startup CEO.  In fact, let me quietly take this opportunity to start a bit of a hashtag movement around the topic at #startupceo.  More to come on this next week!

Building the Company vs. Building the Business

I was being interviewed recently for a book someone is writing on entrepreneurship, which focused on identifying the elements of my “playbook” for entrepreneurial success at Return Path.  I’m not sure I’ve ever had a full playbook, though I’ve certainly documented pieces of it in this blog over the years.  One of the conversations we had in the interview was around the topic of building the company vs. building the business.

The classic entrepreneur builds the business — quite frankly, he or she probably just builds the product for a long time first, then the business.  In the course of the interview, I realized that I’ve spent at least as much energy over the years building the company concurrently with the product/business.  In fact, in many ways, I probably spent more time building the company in the early years than the business warranted given its size and stage.  This is probably related to my theme from a few months ago about building Return Path “Backwards.”

What do I mean by building the company as opposed to building the business?

• Building the business means obsessing over things like product features, getting traction with early clients, competition, and generating buzz
• Building the company means obsessing over things like HR policies, company values and culture, long-term strategy, and investor reporting

In the early years, I did some things that now seem crazy for a brand new, 25-person company, like designing a sabbatical policy that wouldn’t kick in until an employee’s 7th anniversary.  But I don’t regret doing them, and I don’t think they were wasted effort in the long run, even if they were a little wasted in the short run.  I think working on company-building early on paid benefits in two ways for us:

1. They helped lay the groundwork for scaling – what we’re finding now as we are trying to rapidly scale up the business, and even over the last few years since we’ve been scaling at a moderate pace, is that we are doing so on a very solid foundation
2. The company didn’t die when the product and business died – because we had built a good company, when our original ECOA business basically proved to be a loser back in 2002, it was a fairly obvious decision (on the part of both the management team and the venture syndicate) to keep the business going but pivot the business, more than once

Starting about four years ago, for the first time, I felt like we had a great business to match our great company.  Now that those two things are in sync, we are zooming forward at an amazing pace, and we’re doing it perhaps more gracefully than we would be doing it if we hadn’t focused on building the company along the way.

I’m not saying that there’s a right path or a wrong path here when you compare business building with company building, although as I wrote this post, my #2 conclusion above is a particularly poignant one, that without a strong company, we wouldn’t be here 12 years later.  Of course, you could always argue that if I’d spent more time building the business and less time building the company, we might have succeeded sooner.  In the end, a good CEO and management team must be concerned about getting both elements right if they want to build an enduring stand-alone company.

(This post was written by my colleague Bethany Crystal and originally published on the Bolster blog yesterday. While I am still trying to figure out what posts to put on this blog vs. Bolster’s blog since the blogs are pretty similar, I will occasionally run something in both places.)

At Bolster, we believe that 2021 will mark the rise of the on-demand economy for executives. More than ever before, executives are seeking out roles that distinctly aren’t full-time for a variety of reasons – they’re in between full-time roles and want to stay engaged and meet a wide range of potential employers; they’re retired or semi-retired/post-exit and want to keep working, just not full-time; they’re fully employed but are looking for advisory opportunities to help others; or they are committed to the more flexible lifestyle that being an on-demand affords. As business leaders, you might be wondering how to take advantage of this trend and incorporate on-demand talent onto your existing team. Don’t worry – we’ve got you covered.

Let’s start with a quick primer on the distinct types of on-demand talent. Here are the four most common themes we see among our member network at Bolster:

The Four Types of On-Demand Talent

1. Interim: Someone who is partially or fully dedicated to working with your company, but only temporarily (you can think of them as “filling a gap”)
2. Fractional: Someone who works part-time (or “fractionally”) with your company on an ongoing basis (they “own” the function on a long-term, part-time basis)
3. Advisor or Coach: Someone who supports your existing team by offering external advising, coaching, or mentorship as needed (this might be on a temporary or long-term basis)
4. Project-Based: Someone who is brought on to complete a specific project or a fixed span of work (this is the closest to typical consulting work)

Depending on your business needs, the capacity of your existing team, and your resourcing, you might find it useful to have one or more on-demand executives in the mix at any given time. We’ve also found this can be a great way to keep things fresh at the leadership level and make sure new ideas are circulated with some regularity.

Business Opportunities for On-Demand Talent

While every company’s on-demand talent needs will vary, we’ve already seen a few patterns emerge from the 2,000 executives in our member network. Here are a few times to think about bringing on-demand work to your business.

Choose interim work if you need…

• A temporarily placeholder at the exec level
  Whether unexpected or planned, transitions at the executive level can come with a high cost: Any week that goes by with an unfilled seat adds more work to the team, contributes to business lag, or both. While full executive searches can take six months (or more!) to get right, many CEOs find it helpful to bring on interim help as a “stopgap” in the meantime. The most obvious benefit of interim on-demand work is to prevent your business from falling behind in areas where you may not have a deep bench below the executive level. And you might also consider that bringing in a seasoned professional as you conduct your full-time search will give your team a proxy to compare against, making that placement process a bit easier. Last – while it’s not a guarantee, there’s always the chance that your interim hire is a great fit for you and wants to stick around for the long term! You then benefit from an on-the-job “interview” or audition.
• Surge capacity staffing
  Imagine a situation where your business doesn’t need an executive in a particular function. You’re small, scrappy, and you’re getting along perfectly well with the team you have in place – and you can fill in the bits of executive leadership required for that function yourself from time to time. But then something pops up where you need to be the CEO and can’t afford to ALSO be the CXO. An interim CXO could be the right solution. For example, the 3-5 months run-up to a Series A or B financing could be a good time to bring on an experienced CFO if your only relevant team members are handling AP, AR, and Payroll. Or you could be working on your company’s public launch with a less experienced marketing team and an agency – and an interim CMO could make all the difference between success and sideways.
• Parental leave coverage
  With a growing business trend of increased parental leave coverage, CEOs are starting to use interim executives to fill holes that might temporarily exist on the leadership team. Interim work is particularly useful if there isn’t an obvious “second in command” role on that team who might take on a stretch project in their absence. Implemented correctly, bringing on an interim exec can also help to squash any fears of “getting replaced” while someone is away on leave. As an added bonus, bringing in a new face (if only temporarily) can give the remaining team a chance to “try out” a new leadership style and share feedback about what worked and didn’t work during the interim period.

Choose fractional work if you need…

• A seasoned professional’s experience and skillset (but not all the time)
  Before every full-time leadership hire, there is the sticky “in between” period of need. That’s the period when some work starts piling up, but not quite enough to fill an entire work week for one person at the executive level – or the period when you know you need a more seasoned leader in a function but just can’t afford one full-time. If you don’t have an experienced executive in the role, you miss opportunities for effectively setting up scalable practices and processes. Often, a lack of senior focus in a functional area means that you miss strategic opportunities, and sometimes it also means that you expose yourself to risk that could be avoided with the right person having ownership of the function. This is the perfect time to introduce fractional work to your business. The most classic example of fractional executive talent is the CFO who oversees the bookkeeping and accounting for several companies at once. But you can find a fractional executive for just about anything. You might consider this type of on-demand executive if you don’t yet have anyone in that functional area, if you have a team of less experienced specialists or even a more junior generalist leader in that functional area, if you want a taste of what it’d be like to dedicate more resources there, or if you need just a few things done right, without having to think about them yourself.

Choose advisory or coaching work if you need…

• Mentorship for your current executives
  Sometimes it’s helpful to see what “great” looks like in order to achieve greatness yourself. If you’re looking for a way to give a current leader an added boost to their development plan, consider bringing on someone who can serve as a mentor or advisor on a temporary or long-term basis. Someone who has been in your shoes before and can give advice and guidance based on their experience. This on-demand exec role has two big benefits: The first being that it demonstrates to your executive team that you’re committed to their ongoing success and growth, which boosts morale (and hopefully performance). The second is that you’ll be able to equip your current team with the tools they each need to scale instead of having to bring on a new wave of executives for each business stage. The advisor or coach usually works a few hours per month, once they’ve set up a strong coaching relationship.
• Access to top talent without the full-time price tag
  Just as remote work unlocked the potential to find “the best of the best” without geographic constraints, on-demand work does the same at the executive level. More and more, we’re seeing CEOs incorporate advisors to their business as a way to gain exposure to best in class talent (at a fraction of the cost). This can be a great way to introduce subject matter or functional expertise into your organization without committing to a full-time salary.

Choose project work if you need…

• A fixed-scope expert engagement at the executive level
  Just as tools like Task Rabbit made it possible to find experts to accomplish tasks on a personal level (such as moving furniture or painting a bedroom), on-demand talent makes it possible to find seasoned executives to complete one-off projects at an expert level. That’s why, on Bolster, we ask each each member to indicate what roles they can take on, and also what projects they can be hired to do. As a CEO, you might consider outsourcing some of the crunchy stuff at the exec level that might take a lot of time, or in cases where you need a quick turnaround to get to an MVP. Common projects we’ve seen to date include building sales commission plan structures, designing a go-to-market launch plan for a new product, running due diligence on an acquisition, overhauling pricing and packaging, working on a strategic plan, TAM analysis, budgeting process, or creating a diversity & inclusion strategy for the company.
• An experimental project that won’t distract the current team
  One final area where you might consider on-demand work is for a project that feels more like an addendum to your current business, or an early experiment. At Bolster, we brought on an on-demand executive to help us think through and roll out a brand new product that we’re in the early days of testing right now. We’ve seen other CEOs use project-based work at the exec level for things like evaluating market expansion possibilities or speccing out the MVP of a potential new product.

This is just a short list of some of the possibilities where on-demand talent might support you in your business today. One of our favorite parts about this type of work is just that – the flexibility it offers to you and your team. Whether your business is just getting started or if you’re operating on all cylinders, don’t forget to consider on-demand work as part of your CEO toolkit for this year and beyond.

– Bethany Crystal, February 2, 2021