Do More Faster

by Brad Feld

  Now, guess how I met Brad Feld? It was on one of his random days. And on that random day, guess what we talked about? Techstars! I had never met Brad, but I had been a fan and reader of his blog. I had no expectation that Brad would actually take an interest in Techstars. I certainly had no expectation that he’d help me cofound it and be an amazing partner. During our short meeting, Brad expressed his interest in investing. Unheard of! This was as random as it gets. And it led directly to Techstars being what it is today.

  Today, I too have the random day tradition. I’ve met some really interesting people, made new friends, and even found some investments this way.

  On one of my random days, I met a local entrepreneur named Sean Porter. Sean was building a company called Gigbot and would just come by occasionally and ask for some advice. Gigbot would later be acquired by TicketFly, and Sean graciously granted me advisor options just before the acquisition. Through this randomness, I’m now a small shareholder in TicketFly. Another example of someone I met randomly is Rob La Gesse, who served as the chief disruption officer at Rackspace. They’ve been amazing supporters of Techstars and have sponsored The Founders, which is a video series that we produced.

  Being open to randomness is more than just taking meetings with people. It’s the idea of trying something you really have no reason to try. You can go to a meetup on a topic that you know nothing about or take up a new hobby. There are all sorts of ways to increase your level of “randomness.” But once you recognize the fact that someone you meet or something you do might ultimately be able to help you in some completely unexpected way, you’ll embrace random situations and maybe even plan for them, like Brad. If you’re not open to randomness, you may miss a huge opportunity to advance your company, find a customer, a business partner, or maybe even a lifelong friend. How random is that?

  Brad Feld and David Cohen randomly fielding questions.

  Chapter 21

  Entrepreneurship Is a Group Sport

  Mark O’ Sullivan

  Mark was the founder and CEO of Vanilla, which makes forum software that is used to power discussions on more than 300,000 sites across the Web. Vanilla raised $500,000 after completing Techstars in 2009. While Vanilla continues to thrive as a business, Mark departed and is currently a senior engineering manager at Adobe.

  Before Techstars, all of the work I did on Vanilla was done alone. Sure, members of the Vanilla community helped me with features and bugs, but all new initiatives were mine and all final decisions were made by me. If I decided not to do anything, nothing got done. When I first spoke with David Cohen, he immediately stressed the importance of having at least one cofounder. Having been working alone for so long, I really didn’t understand why he felt it was so important. I was absolutely positive that I’d be fine on my own, and, in retrospect, I couldn’t have been more wrong.

  When I set out to find a cofounder, my list of candidates was very short. I needed someone I could trust implicitly, had the skills and dedication to do the work, and who I would work well with. These requirements brought the list down to two people. One person was working at Microsoft in Seattle and had just bought a house. He simply couldn’t afford to quit working and try to start up a new company. The other person was single, had money saved in the bank, and was coming to the end of a consulting contract. All I needed to do was convince him.

  I met Todd Burry more than 10 years ago in Toronto at the first tech company I worked for. He immediately disliked me because I looked remarkably similar to his high school nemesis. Despite this fact, we became friends and worked closely over the years. After leaving that company and eventually returning to Toronto as a contract programmer, I reconnected with Todd, and we began sharing contracts and working together again. I knew we worked well together, and I had absolute confidence in his skills as a developer and his mind for business. To put it bluntly, Todd is just way smarter than I am.

  They say that the first cut is the deepest and cutting my ownership of Vanilla in half should have been a tough pill to swallow, but it really wasn’t. Todd eventually agreed to come on board after a number of lengthy phone calls, a code review of Vanilla 2, and introductions to David Cohen at Techstars.

  When Techstars began, Todd and I would return to our shared accommodations each night and reflect on the day. We thought it was exhausting in the beginning of the summer and I’m so glad we had no idea of how much more difficult it would get. Ignorance is, most certainly, bliss. I cannot count the number of times I would reflect on a day and think to myself, “There’s no way I could have gotten through that day alone.” By the end of the summer, there was no longer any personal time available—Todd and I worked 14-hour-plus days, every single day of the week.

  In the 2009 Techstars Boulder program, there was one company that had a lone founder. It was painfully obvious to me, watching the lone founder struggle to make progress, what could have happened had I not brought Todd on board with Vanilla. At the opposite end of the spectrum, I watched a company with four cofounders continually knock it out of the park and wished I had added a third person to the Vanilla founding team.

  It wasn’t that I truly couldn’t have done it by myself (I think I could have); instead, it was that I would have missed so much. Todd and I were able to split up tasks. If there was development work to be done, one of us could stay behind and do it while the other attended meetings or talks. If we were both in on meetings, I knew that Todd was grasping things that were slipping past me, and vice versa. To be able to reflect and share our thoughts on each day was the true value that I discovered in having a cofounder, and that is something that lives on well beyond our time at Techstars.

  Creating a company is really hard and there is way more work than you can even begin to grasp. Having someone to share your burden, walk side by side with you into battle, and sing you show tunes when you’re feeling blue is invaluable.

  Although there are examples of companies created by single founders, many of the most successful tech companies have been created by at least two cofounders. Google (Brin and Page), Yahoo! (Yang and Filo), Apple (Jobs and Wozniak), Intel (Moore and Noyce), HP (Hewlett and Packard)—the list goes on and on. Brad’s first company—Feld Technologies—was started by two people (Brad and Dave Jilk), as was David’s first company, Pinpoint Technologies—founded by David Cohen and David Brown. Even though Techstars is often associated with just David Cohen, there were four cofounders—David, Brad, David Brown, and Jared Polis. Entrepreneurship is a group sport—don’t go it alone.

  Techstars employees take a break during “StaffCon,” the annual gathering of the global Techstars employees.

  Chapter 22

  Avoid Cofounder Conflict

  Dharmesh Shah

  Dharmesh is the cofounder and CTO of HubSpot, a provider of inbound marketing software and now a public company with a market cap of over $5 billion. He is also the curator of the popular OnStartups blog and community and has been a Techstars mentor since 2009.

  A common reason for startup fatalities, particularly in the early days, is some sort of conflict between cofounders. One of the main reasons for cofounder conflict is that many aspects of the relationships were either ill-defined or misunderstood. To minimize the chance of this, it’s critical that you and your cofounders come to agreement on some key issues. I’ve framed the most important of these as a set of questions that cofounders should be asking each other as they enter into the business relationship. Many of these questions are hard, but they get only harder with time. The sooner you address them, the better off your startup will be.

  How should we split the equity? While there can be different aspects to this, the basic question is really simple: Who gets what percentage of the company? There are different schools of thought on how to arrive at an equitable answer. A perennial favorite is to decide that each founder should own an equal share. Or, you could try to come up with some formula that uses a bunch of different factors such as experience, market value, contributio
n to date, and expected contributions in the future. However you split up the equity, the important thing is to make that decision up front and not put off the discussion, as it will come up in the future.

  How will decisions get made? This is often tied to the number of shares, but not necessarily. You can have voting and nonvoting shares. You can set up a board. You’ll need to decide what kinds of decisions the board makes, and which ones it won’t. Common areas to address are decisions around capitalization, executive hiring and firing, share issuance (dilution), and acquisitions.

  What happens if one of the founders leaves the company? Although it may seem like a bad idea to be talking about this when you’re starting the company—believe me, it’s not. In the evolution of any startup, there will be good times and bad times and there will likely be times when one or more cofounders are simply not happy and not committed. You should decide how to treat this situation early when it is easiest to solve. In the early founding period of a company, everyone is at least semirational and optimistic about their future involvement in the company. The last thing the company needs is a cofounder who is no longer engaged but is hanging around out of guilt or ambiguity. Or worse, one that claims equity that you don’t believe is due. In the worst-case scenario these conflicts can quickly escalate, involve lawyers, and take both time and money to resolve. No one wins in this situation.

  Can any of us be fired? By whom? For what reasons? Yes, that’s right—even cofounders can be terminated. Too many people mix the notion of being a shareholder in a startup and having an operating role. These two things should be thought of as separate and distinct. The company should have a mechanism for gracefully terminating the operating role of a cofounder if that’s the right thing to do. This is never fun, but it should be discussed up front.

  What are our personal goals for the startup? Although this can change over time, it’s helpful to at least get a sense of what each of the cofounders wants to get from the company. If you have one cofounder who wants to build a sustainable business that is spinning off cash and run it forever and another who wants to shoot for high growth with some type of massive exit through a sale to a much larger company, it’s better to get that out in the open early and talk it through.

  Will this be the primary activity for each of us? Cofounder conflict can stem from misunderstandings around how committed everyone is. Will one of the cofounders be keeping a day job until the company gets off the ground? Will one be working on another sideline business? Under what circumstances will someone decide that they just can’t commit to the business full time anymore, such as a situation where the founders have to go without a salary for six months?

  What part of our plan are we each unwilling to change? Not all startups need to change their plans during their evolution—just the ones that want to survive and succeed! However, there may be elements of the plan that you don’t want to change. This might relate to the product being built or the market being addressed. For example, if one of the founders is fanatically obsessed with wanting to create a consumer software company that lots of people know about, then friction may be created if the model needs to shift to more of an enterprise product.

  What contractual terms will each of us sign with the company? One of the best examples of this is a noncompete agreement. Will each of the cofounders be signing some sort of contract with the company beyond the shareholder agreement? If so, what are the terms of this agreement? At a minimum, all founders should be willing to assign whatever they develop to the company.

  Will any of us be investing cash in the company? If so, how is this to be treated? It is very likely that one or more cofounders will be putting in some cash in the early stages of the company. It is critical to decide up front how this cash will be treated. Is it debt? Is it convertible debt? Does it buy a different class of shares? What happens if the company raises follow-on funding?

  What will we pay ourselves? Who gets to change this in the future? This can be a touchy issue. Risk tolerance varies by individual and it is a good idea to factor this into determining the compensation plan for the founders. The issue can be clouded sometimes when one of the founders is investing significant cash into the enterprise.

  What are the financing plans for the company? Will the company be self-funded and bootstrapped? Raise angel funding? Raise venture capital funding? What happens if this doesn’t occur? There are tradeoffs to all of these options and the founders ought to have a clear perspective on what the tradeoffs are and how they impact the company and their own personal goals.

  All of the questions I have posed are critical, and all will come up eventually in the course of the startup’s evolution. While I’m sure there are other issues that could generate cofounder conflict, you’ll decrease your chances of misunderstandings and implosion of the team if you visit each of the issues identified here early in the life of your startup.

  During the first few days of every Techstars program, we tell the ten bright-eyed new teams that at least one of them will not be together at the end of the program. Unfortunately, we have not been wrong yet.

  One of the biggest reasons for team issues is not addressing the issues Dharmesh describes. It’s easy to talk about ideas, visions, and the product. It’s hard to talk about equity splits, how much money you need to make it through each month, and personal pressures. It’s even harder to talk about the doubts you are having about your cofounders or the path the business is going down.

  If you assume that you will have many ups and downs along the way, spending time addressing these issues early on sets the tone for the rest of the business. When something material arises, the cofounders should be willing and able to discuss the issues openly with a goal of quickly reaching consensus on how to resolve them.

  Chapter 23

  Hire People Better than You

  Will Herman

  Will is an angel investor and entrepreneur. He is one of the founding investors in Techstars Boston and has been a mentor since 2009.

  If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But if each of us hires people who are bigger than we are, we shall become a company of giants.

  —David Ogilvy

  You’ve worked your asses off, had some success, and decided it’s time to start expanding your team. Surprisingly, this turns out to be one of the most difficult tasks that startups take on. Some do it too fast, hiring the first cool person they meet without thinking of the big picture. Others, painfully, wait forever until they find someone who not only meets every preconceived criterion, but can also turn water into wine. Both are common mistakes but are not nearly as problematic as the biggest hiring mistake entrepreneurs can make—hiring those less capable than themselves, as David Ogilvy reminds us.

  There’s an old adage that A-players hire A-players while B-players hire C-players. This refers to the idea that while great performers prefer to be among high-performing people who are similar to, or better than, they are, mediocre (and poor) performers often want to avoid having their weaknesses exposed and their efforts and abilities challenged. As a result, weaker performers often hire people who don’t threaten them.

  Although this is frequently the case, it misses the point. You don’t have to be an A-player to hire an A-player; you simply have to want to succeed, have a grasp of the big picture, and have the self-confidence to hire someone better than you are. This is true when A-players are doing the hiring as well. Even they should be looking for people better than themselves, or A-plus players—if you can find them!

  There are lots of reasons why you should want to hire people better than you. For one thing, you can learn from those who are better, who know more, or have done it before. Learning is a total blast—why wouldn’t you want to have a blast? If you are the competitive type, people who have skills you lack will challenge you to develop, expand, and enhance your own set of skills. Gotta keep up!

  On the performance front, great teams of people move
much faster than teams of weak people, as great people feed off of each other. You want your company to do more faster, right? Time is always against you in a startup, and great teams will help manage the critical time factor. Knowledge grows exponentially. The more your team knows, the more they can learn from each other, and the more they will ultimately know. Finally, better people are easier to manage and are more self-directed. Would you rather spend your time leading your company or with your head down in the trenches?

  Say you’re an athlete whose individual performance is key—such as a runner, cyclist, tennis player, or golfer. Do you want to train with someone worse than you? Do you get any better when you do? Of course not; you only get better when you’re challenged and taught by others who are better than you are.

  Hiring people more capable than you are can be scary. Will they show you up? Will they make you feel bad about how you’re doing? Will others think they’re more qualified than you are to do your job? The simple answer is no.

  Hiring people better than you reflects positively on you. It’s a fundamental trait of people in the best companies, whether it’s a startup or an international conglomerate. The better you are at it, the better you will be perceived as a leader and manager. Also, remember that you are the entrepreneur. Every day you demonstrate to others your strong leadership ability, insane work habits, and fanatical drive. Those qualities can’t be readily supplanted and taken from you. Think of it this way: you are the hero when the organization is successful because you made it successful by building the best team.

  Everyone has insecurities that they want to keep buried, and many entrepreneurs question whether people who are better than they are will expose their weaknesses. You should break through this type of thinking. Hiring great people not only makes you and the perception of you better, it makes your entire team better and drastically improves your chances for success.