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.

What font should I use?  

Design is an essential part of most successful startups. Having some, even relatively basic, design skills is useful in many areas of business.

Dixit Smashing Magazine:

Over the last six months or so we've been trying very hard to improve the overall quality of the articles published on Smashing Magazine. One of the improvements we introduced is the so-called 'Smashing Magazine Experts Panel' where our articles are reviewed by experts (who are invited and paid for their reviews) before these articles get published online. There are also other things we do to ensure the good quality of the articles. We want to be a professional, reliable online publication for designers and web-developers.

It shows in this article. Excellent overview of key principles for picking fonts. Here's a summary, but do read the article.

  • Use appropriate fonts. Don't go for individuality above all else.
  • Know the font families: Geometric, Humanist, Old style, Transitional, Modern, Slab Serif.
  • Use decisive contrast, fonts that look significantly different. Either keep it exactly the same, or change it a lot.
  • Don't over-use particularly stylised fonts.
  • Break any of these rules sooner than design something truly barbarous
A great cold email to an angel  

David Cohen of TechStars presents an example of what he calls a "perfect" cold introduction email, and some advice on what makes it work:

  1. He knows my background, and frames the question that he has with that relevant context.
  2. He understands who I am (references to TechStars).
  3. He gets that I'm seeing a million groupon clones and makes me chuckle a little.
  4. He's clearly generally intelligent/articulate. His writing has an easy style.
  5. He speaks my language. He references "Pinpoint" (the previous company name, before it was bought by ZOLL and started being called that). He mentions "summer program" even though he's in Australia where this will actually be winter time. He references SimpleGeo, another of my investments. He's making the question easy for me to answer.

Read on for the full example.

More on thinking small  

Following on my earlier article about thinking big and small in the right context, I got into a small exchange on twitter with Joel Gascoigne, who had retweeted Gabriel Weinberg's article.

Joel pointed me to two blog posts on this topic which seem worth adding to the discussion: Steady yourself, those world-changing thoughts are not productive and Start something small.

Quoting a few passages from the first:

It may be healthy to be ambitious, but often these thoughts occupy more time than they should and stop us doing the real work we need to do to get anywhere near to those thoughts becoming reality.

It is easy to look at the success stories of the world and think they started at the top. Let’s try and question that and think how all successful ventures or entrepreneurs started with something small.

And the second:

What I’m starting to notice more and more, is that great things almost always start small. Most of us know that Branson started the Virgin brand with a student magazine, but Virgin is just one of many examples which shows that the reality is counterintuitive: actually, the best things we know and love started as tiny things.

I’ve found that if I look into my own life, I find similarly that some of the most important achievements I’ve made started as little projects. My startup Buffer itself is a great example: it started as a two page website and in addition the short blog post describing this process has now turned into a talk I’ve given more than 30 times.

This is more evidence that thinking small is an essential first step before you start thinking big, which opposes the usual Silicon Valley advice of thinking big and choosing ambitious startup ideas.

Why is this idea so prevalent if it leads to lesser chances of success? One theory would be that most of the "think big" advice comes from investors (directly, or indirectly via entrepreneurs they've funded). Typical investors definitely wants all their investments to think big - that's how they make their returns.

That doesn't mean it's good advice for you.

Instead: Think small, make it work, and then think big.

Swinging for the fences  

Dan Shipper on swinging for the fences:

For a long time I accepted the “leave school and raise money” argument because I assumed that “swing for the fences” and “scale as quickly” as possible were inviolable tenets of company building. But it turns out they’re not inviolable. They’re not even tenets. They’re just a common way of thinking about how to do a startup.

Common (and successful) in the valley. Almost everywhere else, it's deadly. Paraphrasing Paul Graham, "Somehow, it's as if most places were sprayed with [swinging-for-the-fences] startupicide."

Dan continues by analysing why he's not interested in homeruns:

And so my goal is this: to be able to do those things sustainably, for the rest of my life.


Now let’s get back to homeruns. Homeruns by definition aren’t sustainable. They’re not predictable. Sometimes you hit one, but most of the time you don’t. That part of things is mostly out of your control.


What I’m spending my time doing now is this: learning how to build a real business. And by real, I mean a business that has money coming in the door from day one. Businesses that make money can be started in any investment climate. They don’t go out of style.

If more startup founders subscribed to that philosophy, I think everyone would win - more businesses, more jobs, more value creation, more opportunities fulfilled, and so on. Of course, that's not the Valley philosophy, but then that philosophy is not the only game in town, and shouldn't be.

Investor tricks to mess with valuations  

Here are a couple of articles (1, 2) detailing some techniques used by investors to tweak a valuation in their favour. The site is a little dubious - basically a collection of articles designed to sell you an eBook about private equity, but the articles are interesting on their own merit.

The tricks being exposed seem devious and misleading, and they are hopefully more representative of private equity than of technology venture capitalists. Personally, I'm not much into the VC money game, but if I was to consider taking on investors and I noticed something like that going on, that'd be the end of the discussion with that particular investor. This is probably a good reason to build a business that doesn't strictly need outside investment: so you can tell any investor who tries to pull a fast one to fuck off.

In any case, if you do intend to raise money from professional investors, make sure you get a good lawyer who can spot these things and warn you that you're about to get shafted.

Here, then, are the devious tricks:

  1. Vendor financing, aka giving you the money in tranches; for example, $7m now, $7m in 5 years means that the actual value of the deal is only $9.8m based on a 20% discount rate);
  2. Contingent earn-outs, aka the same, but even worse, because the second tranche is uncertain;
  3. *Company-paid earn-outs, aka the same, but the wording says that "the company" will pay the extra money, which means the current shareholders (i.e. you) will need to pony up some of the cash yourself;
  4. Equity clawbacks and ratchets, aka if you don't meet your own targets (because of any reason), we'll take more of your shares;
  5. Mis-valued employee stock options, aka "Let's shift the options pool into the pre-money valuation (effectively decreasing the value of your shares), and make it even larger by actually calculating it based on post-money valuation";
  6. Preferred stock with outrageous terms, aka you'll need to grow your business to several times its post-money valuation before you even see a penny of return;
  7. Huge management fees, aka let me get some of my money back from you for stuff I should be doing anyway, even though I'm supposedly investing in you.

I'd be very surprised if any high-profile, reputable VC (or any VC wanting to preserve their reputation) stooped to those types of obviously misleading tricks. Do that once, have an article written about it, and you're burned in the startup community.

Don't let me know how I can help  

Robert Williams from letsworkshop.com:

The single phrase (and every variation of it) that time and time again repels clients away from us and hurts our credibility in more ways than one:

“Let me know how I can help.”

When I said this I honestly thought I was being helpful.

Read on for Robert's explanation of what to do instead.

It's amazing how many little quirks of language can have a pretty significant influence on conversation. Two "power tricks" that I like are the use of the words "reasonable" and "fair".

When ending an email about a suggestion that you're not sure will be accepted, it helps to end the email with "Does this sound reasonable?" - because this question somewhat demands a yes. Even the recipient disagrees, they will typically start the answer with "Yes, that sounds reasonable, but I disagree because of XYZ". Saying "no, that doesn't sound reasonable" would force them to escalate the conversation in an unpleasant direction.

This is not a trick to be abused, but it can act as a tiny little nudge in the right circumstances, to help someone who would otherwise hesitate forever to actually make a move. "If it sounds reasonable," their internal monologue hopefully goes, "then let's do it."

"Fair" (and her evil twin brother "unfair") is an even more powerful word. Despite the fact that everyone knows "the world is unfair", people have a strong desire to be perceived as fair (whether or not they are). So, for example, when I feel like a sales situation is drifting out of control, and I'm tempted to simply end the sale completely, instead I give it a firm chance to get back on track by bringing "fair" into the mix. "I believe we're not being treated fairly in this discussion, and I'm not willing to do business on terms that I perceive to be unfair. I'm happy to start the conversation again if we can agree on terms that will be fair on both of us."

I wonder if there's a collection of these conversational power tools (and their brethren, the conversational limp handshakes like "Let me know if I can help") somewhere.

You don't need a million dollars

When people talk about starting startups, one of the implicit statements is the idea of making it big - of building high-growth, outrageously profitable businesses that will make everyone involved in them rich. And in fact, high growth is even part of my definition of "startup".

VCs, angels, and in fact all investors, have a vested interest in seeing lots of people trying to build big businesses. It is well known that startup investment follows a "hit" business model, where most of the returns of a fund are made by a handful of big hits, which make up for a lot of failure. So pretty much all the literature produced by investors pushes founders to think big, aim for the moon, and give it their best shot.

However, my experience of talking to a lot of would-be entrepreneurs is that most of them simply want to run their own business, to escape the clutches of the corporate world, gain the freedom and security of being their own boss, and so on. The advice to swing for the fences is completely inappropriate in those cases.

Even if you do want to eventually "make a million dollars", which is a euphemism for making enough money that you can maintain a comfortable lifestyle for at least a decade without needing to work for it, aiming straight for the million dollars is often not the right approach. The reality is, it's much easier to make a million dollars when you're an experienced entrepreneurs who knows how to build a profitable business, than it is to do so from a standing start, straight out of the corporate world or university.

A better approach

My advice to people who want to be entrepreneurs but have not yet acquired the skills to build and run a successful business is to aim first for financial independence, rather than try to make it big.

If you can create a business that pays a sufficient percentage of your current salary, but is entirely yours (no investors) and enables you to have full control over your time, you're much further along the way to success (however you define it) than if you're still bound in effective peonage to some employer who owns most of your time.

Entrepreneurship is a career

The tech startup world of Silicon Valley, with is stories of insane working hours, mind-blowing successes, and its dismissal of serial entrepreneurs as crazy people, has perpetuated the myth of the startup as a singular event. You "decide to do a startup", you go and do it, and then you exit and retire, having compressed your working life into a short period and dealt with the money issue once and for all. But that's not how it is in practice - at least not outside the Valley.

I look around at friends and acquaintances who are entrepreneurs, people that I know personally, and all of them, successful or not, are serial entrepreneurs, and happy to be so. What will they do if/when they "finish" their current business? Why, start working on the next idea, of course! I look at myself, and, having run my own business for the last half-decade, I wouldn't have it any other way. Running your own business is hard, but it's infinitely better than letting your soul slowly grind away in a job you find uninspiring. Being your own boss has a lot of perks in terms of lifestyle and personal freedom.

Despite its reputation, entrepreneurship also a much more secure occupation than having a job. Being a competent, skilled entrepreneur means having the ability to seek out business opportunities and make money out of them. No matter the business climate - boom, bust, depression, recession, or even war - there are always business opportunities and so there will always "be work" for entrepreneurs.

Entrepreneurship is the safest career there exists today.

When you see entrepreneurship as a career rather than a single-shot lottery ticket, you don't need to aim for a million dollars. It's enough to start by achieving the "survival" level of success, then make sure that each subsequent step takes you further up the ladder along whatever dimensions of success you care about.

The truth about a failing startup  

There's a pastebin text that went to the top of HN recently that is worthy of comment. I'll reproduce it below in case it gets removed from pastebin (not exactly the most reliable storage location):

Somehow, I managed to create an app that some people seemed to like. With some odd stroke of luck, an investor in the U.S saw the app, and saw something in me. He gave me a shot. Invested in me and my company.

Fast forward a couple of years, and that company still exists, but it’s on it’s last legs. It’s dying. I’ve failed. I haven’t been able to innovate, I guess I lost my touch. The money will run out within a couple of months, and the debts won’t be able to be paid. It will all collapse.

I think the investors lost faith a few months ago. They don’t contact me. They don’t even follow me on Twitter anymore and if they do contact and I reply, they don’t respond with answers to my questions.

It’s pretty shitty to be living in a state of impending doom. You know in a month or two, your entire life will crumble apart. You’ve tried everything but nothing works. Doom is coming. And you have to live with it. It’s a constant state of ever worsening depression.

When family asks how things are going, like all entrepreneurs, I respond with “Great!”. I don’t know how to tell them that I have failed.

The investors money is just about gone. My own money is non-existent.

I see articles on Hacker News about depression and entrepreneurs. Most of them are so far from reality. They don’t capture the sense of impending doom, the sense of failure. The don’t capture the loneliness, where you have nobody you can turn to.

If I can leave with one piece of advice to young founders. Please think really hard about taking other peoples money. If I had failed using my own money, I could live with it. But having a team of investors believe in you, only to let them down is an incredibly difficult thing to deal with. Try and finance your product yourself for as long as you can. At least until you can realise if your idea is decent (which takes a long time to figure out).

I commented on the HN post. I feel it's worth repeating that comment here and adding to it.

The idea that the (unhappy) end of a startup is depressing and filled with doom is pernicious, because it's partially true. Yes, it is a pretty difficult time, or at least it is until you finally admit to yourself that this venture has failed, and start the process on moving on.

Once you've done that, something surprising (at least the first time) happens:

You will feel an immense sense of freedom and lightness.

It's pretty obvious why: a weight is being lifted from your shoulder. Where your path was a narrow funnel leading to one specific destination, you will now have the infinity of all possible and reachable paths ahead of you. Before, you couldn't think of anything other than worrying about the startup - now you can do anything you want.

The end of a start feels very dramatic before it happens, but once it's done, you will feel a whole lot better. This is truly liberating.

One side-effect of this is that experienced founders tend to be much more willing to draw a line and call it a day. "Ok, this one isn't working. Let's figure out the next one."

Moving on cleanly and swiftly when it's time to move on (rather than 6 or 12 or 18 months later, after much, much more pain) is one of the skills that you learn from failing at your startup, that you do not learn from succeeding.

Tips for customer development interviews  

Some great tips for how to conduct customer development interviews, by the localmind folks:

  • Be prepared for people being early
  • Confirm the day before
  • Limit interview to about 30 minutes, but leave room for another 30
  • The interview is also a sales opportunity
  • You'll need stamina - don't let yourself appear tired at the end of the day
  • Write conclusions immediately after each interview
  • You might meet some great people in the process

And the most important, the bonus tip:

  • Have donuts