swombat.com

daily articles for founders

Here are 10 quality posts from the Founder's Library:

Three modern organisational structures  

I found this gem by Aaron Dignan linked via this previous article. While the general theme is around "what to do with a 10,000 person stagnant organisation" (and it offers some concrete advice towards that), the really interesting part is the overview of three modern ways to structure a business, namely:

  • Holacracy (Medium, Zappos): "authority should be distributed, everyone should be able to sense and process (solve) the tensions (ideas/problems) they perceive, roles and employees are not one-to-one, and that the organization can and should evolve toward its "requisite structure" (the ultimate structure for its current environment)"
  • Agile squads (Spotify): "Instead of an engineering department, a design department, and a marketing department that each collaborate on products with dubious ownership, they organize vertically around products (or more specifically pieces of products) and traditional disciplines are loosely held horizontally."
  • Self-organising (Valve, Github): "Unlike the examples above, they accomplish this by essentially having no structure. Employees are encouraged to work on whatever they want-to find the projects that engage them and do the best work of their lives."

GrantTree is somewhere in between Holacracy and Self-organising - but I'd never heard those terms before today, so perhaps that's the case for many people who will read this article.

Agile Squads is the only one that doesn't seem all that new - cross-functional teams are hardly ground-breaking - but perhaps the meat of the newness is somewhere else than in the cross-functional element.

Key quote:

The defining characteristics of these models are fairly straightforward. They aim to distribute authority and autonomy to individuals and teams. They let the changing nature of the work (expansion/contraction/shifting) impact the structure of roles and teams in a fluid way.

I firmly believe that if you're starting a business in today's ever-changing environment and not making any effort to make the business more adaptable to rapid change ("anti-fragile", as the article calls it), you're setting up your business for failure a few years down the line. Getting big won't protect you, either. See Blackberry as a warning.

Hand to wannabe "product guys"  

Is a potential business cofounder pitching himself as a "product guy", without any evidence that he can do it? Aaron Harris has an answer for them:

The first, and I suppose seemingly easiest claim and means to justify your place in the startup world, as someone who has no experience, is to call yourself a product person.

But that claim generally comes with a fundamental misunderstanding of what it means to do product. It is not code for a person who doesn't really know how to do anything but thinks he can boss engineers around. It doesn't refer to marketing guys who had an idea. Understanding what it means to drive a product means understanding the full scope of the vision of your company. It means understanding your engineering team, their capabilities, and their priorities. It means understanding what your next move is, and what your 6th move is from every angle.

Aaron also proposes a development plan for people who want to become product guys in reality as well as in title, which involves both practicing the craft and reading some product development classics.

Fighting online fraud  

Fraud can be a huge issue for online businesses, for a number of reasons.

First of all, fraud can affect you even if you've done nothing wrong: any customer can request a chargeback, for spurious reasons, even if you did deliver the service as described and they made use of it. The ultimate decision about whether the transaction was fraudulent will then often rest with the issuing bank - i.e. the customer's bank. Unsurprisingly, those usually side with their customers.

Another big issue is that merchant banks (those that provide you with a merchant account) are usually very strict about how many chargebacks they will allow before they start investigating your account and possibly closing it down. Typical figures are 1% - of both transaction volume and amount. So, if you have 150 monthly customers, and just 2 of them turn out to be fraudulent (or one of them causes two fraudulent transactions in that month), you could end up being investigated because that's more than 1% of your transactions. If you have less than a hundred customers, a single chargeback could cause you trouble.

You might think that your payment gateway will help you with this by detecting fraud patterns across their entire network, and therefore saving you from obvious fraud... but in practice they don't. It's your job to write algorithms to detect obvious or likely fraud and figure out how to convey that to what might either be a strange customer, or a fraudster.

So, with that in mind, this is an excellent article to bookmark, written by Eran Galp, as it goes into a lot of detail about how you can detect and deal with fraud for a variety of payment methods, like Paypal or credit cards.

Reckless risk-taking  

Philip Kaplan proposes that instead of worrying about low-probability risks, an entrepreneur should just power on ahead and sign whatever the client asks:

This lesson in total disregard for risk served me well. They say entrepreneurs are risk takers. I think of myself as too lazy and irresponsible to fully understand the risk.

It works for me.

I'm not sure what the lesson is here.

I think this falls squarely in the "very dangerous, easily misunderstood lesson" category.

If you met someone who crossed the road with his eyes closed his whole life, and said "no need to worry about crossing the road, just close your eyes and go right ahead - it's worked for me so far" you wouldn't take that advice seriously.

Now, the reality of entrepreneurship is that standing on the side of the road worrying about the cars costs more than just crossing, and if a car does hit you it won't necessarily cost you your life. So, it makes sense to just decide and go with it rather than worry about things too long.

However, that doesn't mean that you should take risks on casually and naively. The best entrepreneurs are risk-takers in the sense that they will take measured, calculated, mitigated risks for the chance of good rewards. They are not risk-seekers, they will not seek out unnecessary risks, nor will they naively accept every risk that comes their way.

In the examples he cites, Philip had an experienced entrepreneur looking over his shoulder, and also used his own gut feeling to help him make the decisions. What's not mentioned in this anecdotal article is all the deals he rejected before they even got to the contract stage, because he had a bad feeling about them.

As a smart founder, you need a bias towards making decisions, and you need to be willing to take calculated risks (ideally risks with a small, limited downside and a large, unlimited upside). But you should still think through what risks you are taking on, and do whatever you reasonably can to minimise those risks.

In other words, don't wait until you have a live GPS map of all the traffic before crossing, but do open your eyes and look both ways.

Why blog?  

Gabriel Weinberg on why and whether he should blogs:

It's not an easy decision, and one that is constantly in your face, simply because blogging takes a lot of time. A good post may take 3-5 hours when all is said and done. That time (for me) is often directly taken away from other professional activity, so the opportunity cost is quite high. In other words, I must have a good reason for doing so or else I really shouldn't be doing it.

Gabriel lists 4 key reasons:

  • Writing leads to understanding: writing things down forces you to think through them more logically.
  • Writing blogs helps you get over your fears of putting your opinion out there: in this, it's very much like public speaking.
  • You can reach the right people: building a following will help you reach an audience with other things you have to say.
  • You can stand out: having a popular blog is a great way to stand out in your field.

I agree with all these reasons and they are great reasons to blog. Personally, I have a few other reasons:

  • I just enjoy it. I love writing, expressing thoughts in the written medium. Throughout my life, I've always spent a good amount of time each day writing things. Whether it has been fiction writing, posting on message boards, commenting on HN, chatting on IRC or even blogging, writing my thoughts out is something that I can't help doing each and every day.
  • Blogging is an opportunity generator. A lot of really excellent opportunities have come my way because of blog posts I'd written. This ranges from coverage from sites like LifeHacker, Slashdot or TechCrunch, to essential business deals that made a big difference to one of my business ventures.
  • It serves a purpose. I like to share useful lessons with others. I'm a big believer that when good ideas spread, we (humans) all benefit. It makes sense to take part in the spreading of good ideas.
  • It's as essential as having business cards: although this is changing these days, with Twitter taking the place of a blog, I still feel like an entrepreneur without any kind of personal or startup blog is a bit strange and incomplete.

I'm sure there are many other reasons to blog. Fundamentally, I think the best reason is because it's just fun.

Who is swombat.com for?

Like any long-term venture, the goals of swombat.com have changed over time.

When I started, I just wanted to focus on providing a filtering mechanism for all the great startup articles out there, to separate the entreporn from the really good stuff, and to enable busy entrepreneurs to stay on top of the best, latest ideas without having to spend hours every day browsing a collection of websites and RSS feeds.

Then, over time, I saw there was a problem with this approach: most start-up advice is valuable for a very long time - not just the few days or months after it's published. Paul Graham's articles are as worthwhile today as they were 3 years ago. So I launched the Founder's Library and set up an automated twitter feed to push forward these pieces of evergreen content.

Even more importantly, I realised some time in the last month that although highlighting other people's great articles is fun and worth continuing, I have a lot of thoughts, ideas and advice that I'd like to communicate, for three reasons: first, and most important, it might help someone who needs that particular idea; secondly, it helps me to formulate those ideas more clearly to myself; thirdly, accruing those ideas in this place might form the material for a book (yes, I do want to put those ideas into a book sometime). So, there'll be more of a continuous flow of full-length articles going forward.

My understanding will, of course, continue to evolve. But the question I'm answering in this post is, where am I now? And, more importantly, what does this mean for whether you will derive value from subscribing to this site (by RSS or email)?

Focus

To be effective, swombat.com requires some level of content focus. Articles about how to fire an executive in a late-stage, well funded, expanding startup may be highly interesting - and I am sure that Ben Horowitz's advice is invaluable when it comes at the right time - but if you're fighting to get your MVP out the door and achieve early traction, it's just a distraction, no better than counting your chickens before they're hatched.

Focus should of course be driven by what I've done and achieved myself. Naturally, the most insightful comments I can make are about things I've experienced directly. A lot of my experience is at the early stages of a company's existence. At the same time, through GrantTree I am gaining a lot more experience of a wider variety of businesses, so the breadth of advice I feel confident in giving continually grows. Still, my roots are in the early stage.

Luckily, I think that's where most of the problems are. That's where it's possible to add most value. The transition between "the normal world" and the crazy world of startups is tough on pretty much everyone. I have yet to hear anyone declare "I had no problem switching from my banking job to running my own startup". Everyone seems to come out of this with a bloody nose, and for a good reason: it's really hard.

The beginner entrepreneur

This, then, is my target audience with these articles: the entrepreneur who is around the transition point from doing something else, to running their own business. You might still be in school, or you might be slaving away in a consulting company or some other corporate paymaster. You might have made the leap already (and be well on the way to smashing into the ground painfully), and might even have managed to conjure up a parachute so as to land more softly.

What's in common between all these scenarios is you want to run your own business, and you're not yet confident in your abilities to do so. You want it to be a startup (technical or not), i.e. you want it to grow and make you a successful entrepreneur.

The aim of this site is to help you build the skills that you need to achieve this independence, and, equally importantly, to build the skills to avoid the worst disasters. It's easy to fail really hard at the transition to running your own business. Most of those failure modes are avoidable. My goal is to reduce the chances that you'll fail to make the transition and break teeth in the process.

This is an important distinction. Many startup advice sites are about how to "make it big", how to build a huge success and, to paraphrase Paul Graham, to condense a 40-years career in 10 or less years of intense startup insanity. Using my success scale, those are "wealth" or "mega-wealth" successes, and they are needed to sustain the VC/investor industry, and so it's fair enough that this is the type of startup they want to encourage.

However, I believe that there is room for a great many businesses which, while not world-changing or billionaire-creating, enable smart, intelligent, driven people to gain control of their life, achieve a comfortable level of wealth, and create jobs and other benefits for society without becoming world-class successes. Most people would like a Facebook-level success if they can get it, but I think many would be satisfied with comfortable success, at least as a stepping stone.

I also happen to believe that if there are more baseline successful entrepreneurs out there, there will be more huge successes too. Currently, huge successes are largely based on luck, because most entrepreneurs faced with a facebook-like opportunity fumble and fail at the very basics of running a business. If there are many more competent entrepreneurs out there, there will also be more opportunities being exploited successfully (though they may very well not need investors' assistance to do so).

So, this is what my writing, and the articles that I link to, will be focusing on: helping people make the transition and achieve at least a moderate level of success, so that they can continue being entrepreneurs for as long as they please.


Don't reinvent management  

Interesting article by William Mougayar, looking at some obvious mistakes that people can make when scaling up a startup's team, namely by trying to reinvent the wheel of management:

What troubles me sometimes is seeing startups that re-invent tried and true management principles, or misinterpret them, or even ignore them, for a lack of interest in researching or learning the prior knowledge that already would have served to solve the issues they face.

This is a very good point. Many startups started by developers try to throw the whole of what they call "management" out the window. But the reality is that a startup is a human organisation, even at a small size, and it needs management like any other kind of human organisation. Don't accept any management tools as gospel, but be knowledgeable about what's out there, and pick and choose bits that suit your startup and context.

William makes a number of worthwhile points and links to a number of further insightful articles. Here's one that stands out for me, though:

Each startup CEO who has scaled their company ends up developing their own style or management framework.

As MD of a growing company, I am hoovering up information from every possible source - but it is abundantly clear that the GrantTree way, while taking its cues from many sources, will be fairly unique.

I'm beginning to think that this is a characteristic of interesting businesses: they're unique, different, in the specific combination of features they present, whereas most businesses are similarly uninspiring and unpleasant places to work, mostly in similar ways, all doing more or less the same things.

This is an interesting reversal of the Anna Karenina principle.

Balance in the startup life  

Through the example of his excesses during his years at IronPort, Scott Weiss comes to a wise conclusion:

In retrospect, I believe that I could convince the hardest working CEOs that having some real life balance by investing in your important relationships will make you a better CEO. When you are out of balance, it affects your stress, judgment, and ultimately becomes another destabilizer just when you need to be the most put together. I also believe this change is actually a much better example of leadership than the one I was exuding. When a leader shows the way toward getting things done and balancing their life, it sets a much better example for everyone else in the company who struggle with it too.

Reading the whole article is quite harrowing. Scott's wife deserves a medal for putting up with all this.

At the end of the day, my advice is to reject the Aztec Principle of work: that there must be sacrifice and hardship so that the sun may rise tomorrow. Instead, realise that a healthy, balanced life is a much better starting point for success than an excessive, unbalanced, unhealthy life.

Let your team speak!  

Mark Suster:

What occasionally happens is the CEO introduces his team giving a brief overview of who everybody is. I hate this. I want to hear everybody speak - to get to know the team. What purpose could there be to having the CEO talk on behalf of everybody?

You might say, "it's streamlined, we don't want the intro to take too long." That's an excuse. If you really believe that then just have your team practice their personal intro's and tell them the time budget they have to hit.

I have never done that, nor has anyone that I've worked with. From simple pitches, to sales presentations or big show presentations, everyone who stands by the projector should get a turn to speak. Otherwise, don't bring them along.

The MicroPreneur Manifesto  

Rob Walling of SoftwareByRob has just published a "MicroPreneur manifesto". In it, he presents some principles for building microbusinesses online - not the kind of business that will sell to Google for $10m or even $1b, the kind that will make a steady income for its owners, and grow slowly and organically, and enable its owners to eventually have a relaxed, pleasant lifestyle with enough time to focus on other things that they also enjoy.

It's a good overview of an online business philosophy, which is different from the typical Silicon Valley approach, but certainly works for some people (and, possibly, it works for more people than the so-called "startup lottery").

I'll list the headings here, but please do have a read to get the full text.

The headings:

  1. It's much harder than it looks.
  2. There is power in working alone.
  3. Focus on your strengths.
  4. Freelancing is dangerous.
  5. Seek leverage.
  6. Stay away from moonshot ideas.
  7. Product last. Market first.
  8. Charge for your product.
  9. Passion isn't all it's cracked up to be.
  10. The pressure of freedom.
  11. Become a black belt internet marketer.
  12. Think human automation.
  13. The more you do in public, the faster things will move.
  14. Failure is an option.
  15. Live like a pauper, treat your business like a king.
  16. Reject growth.
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