Don’t Hate Me Cause I’m a Business Guy

I recently read a fantastic post by Jacob Quist entitled “Why Engineers Distrust Business People” that provided a unique perspective on what I never fully understood, but was always aware, to be a common tension between deeply technical folks and those of us who are far more competent in non-technical arenas such as business operations, business development, sales or marketing.  In Jacob’s post, he believes the foundation of this distrust is due to the fact that historically engineers have been directed at the highest levels of the organization by business people and it only takes a few bad experiences to perpetuate a stereotype.  This is certainly a 2-way street, there are plenty of bad engineers and technical leadership out there, but typically its the business side of the house that directs the organization.  At least historically.  Jacob is right, its all about providing mutual value which leads to mutual respect.  Now with so many new startups founded by engineers, there’s a burst of independence from these bad experiences, creating a challenge for even the most effective, accomplished business entrepreneurs to find “co-founder” opportunities unless they bring the idea or concept to the table.

As a “business guy” who’s worked closely with engineers in startups for over 10 years, I’ve consciously made efforts to complement, not contribute to (read: get in the way of), the technical aspects of the business while treating the technical/engineering function equally if not more important than anything that drives the success of the organization.  Most recently I’ve tried to take it one step further, a step that I rarely see other business folks embrace – ensuring technology leadership has an equal seat at the table at the highest levels of strategy and product development and enabling the technical staff, the engineers, to contribute to product development in the form of a “safe challenge” dialogue with the product team.  This view has evolved over time for me as I’ve been exposed to increasing levels of strategic talent in the technical individuals I’ve worked with.  Experienced engineers often have incredible design and product sensibilities because they are the closest to the end product.  While they may not create the original design or spec, they are problem solvers in implementation, constantly iterating to find the best solutions.  And they usually understand a product’s complexity better than anyone, which HAS to be considered in any strategic product discussion.

So to all of you startup engineers out there, especially those who are founders and assuming you need a business partner (and you do, subject of a future post!), what should you look for in your “business partner”?

  • Demonstrable success in starting, building and scaling a startup.  These are 3 distinct phases of a company’s early growth that require different skills and perspective, and you need someone that has success in all three.
  • Philosophically aligned on the role of technology.  Ask the tough questions about the qualities of a great CTO, the role of the engineers and how strategic decisions are made for the organization.
  • The business co-founder does not have to be the CEO.  This is a great ego-check moment.  There should at least be a dialogue and healthy debate, never a default assumption.  And discussing how roles will evolve as the company grows is equally important.
  • Find an overall athlete (COO or Head of Ops)  instead of a functional expert.  This is probably the most controversial point that many will disagree with.  Many founders want to solve their most immediate need (more sales, marketing to acquire customers) and thus seek to find deep experience in a single skill as the first or second key leader.  I would contend that in a startup, there are a dozen areas that need leadership now to properly set the company up for success and that if every other attribute on this list is met, the “right” business partner can fill any immediate functional need sufficiently in the interim.  Another important point – acquiring and building out a talented, cohesive and high performing leadership team is difficult and a skill that should be historically demonstrated by your partner.
  • Ability to immediately contribute.  Leadership recruiting, product strategy, fund raising, sales, business development, marketing – the seasoned business lead can successfully step into most of these roles initially as the other functional leaders are recruited.
  • Test for worst case scenario.  When all hell breaks loose and it looks like the business is going to crater, how will your partner deal with it?   Do you share common philosophies on hiring, spending, tough decision processes?  This is difficult to predict, but you have to talk about worst case, because in a startup, worst case is most likely case!

What other qualities should you look for in your “business” partner?

Why Most Startups Need a “Business Guy”

I read an intriguing blog post titled “What the Hell Does a “Business Guy” Do? by serial entrepreneur Rob Walling.  The basic premise of his post is that the only compelling reason a “technical founder” should bring on a “business founder” (BF) as a partner is if that BF has “successful marketing experience”.  While I agree that marketing, specifically customer acquisition, is probably the most important and difficult problem to solve in a startup’s early days, I believe there are other important aspects of both building a team and a foundation for scaling the business that technical founders (in my experience) don’t always possess.

Of course I’m biased, because I represent the BF that Rob discusses.  Having been on the ground floor of 3 startups as the lead business and operations person, there are a few consistent areas of value that I’ve seen critical to early stage success, in addition to the marketing/customer acquisition skills Rob mentioned.

I would define these areas of value in the context of what I believe a BF profile must look like.  In my opinion, a credible BF needs to have demonstrated operational success in a startup environment, from early product development through financing, rapid growth and scale, including:

  • has been through multiple early product fails and iterations
  • has a high tolerance for ambiguity, chaos and daily priority changes
  • can contribute immediately in at least one critical business functional role at the outset – Marketing or Biz Dev ideally
  • has navigated a financing from external investors
  • has built a cohesive, uber-talented team that are the best at what they do AND that share similar culture sensibilities and work ethic (this is hard to do)
  • has successfully acquired and scaled customers, partners and revenue
  • has established metrics for tracking business success and a way to reliably measure and adjust
  • has battle scars, fail stories and an ability to articulate why the same fails won’t happen again.

So, this BF is not just a strategist or marketer, but a true partner to the entrepreneur who has a unique ability to take the entrepreneur’s vision and build a real business out of it.  The importance of this experience should not be underestimated.  True visionary entrepreneurs typically have an “anything’s possible” belief system and won’t be deterred.  Balancing that perspective with someone who can implement and tolerate that kind of ambiguity and chaos is paramount.

If the technical co-founder has experience in all these areas, then yes, I agree with Rob that partnering with a non-technical founder may just represent unnecessary equity dilution, but I’d venture there are lot’s of new businesses being created right now by super-developers without these important experiences under their belts.

Some might argue that all of these skills don’t have to be wrapped up in one person and that they don’t have to all be present at the earliest stages of a company’s development.  It ultimately comes down to the skills and experiences of the original founder, but having a BF partner who has been through the “business building” process successfully can ensure the correct sequencing of process, people and technology and let the entrepreneur focus on high value creation – strategy, product and funding.

What do you think?

Foundational Events in a Company’s Life

In the life of an organization, it’s easy to reflect back at certain foundational events that either resulted in a new level of organizational development and success, or just the opposite in the case of failure.  But they are “foundational” because their occurrence contributed so significantly in either a positive or negative direction.  While there are numerous important wins or losses that are memorable and significant along the way, especially in a startup, these foundational events are set apart based on their epic significance.

At TrueCar, there have been at least 2 such events over the past 3 years.  The closing of our first Venture round of financing in 2008 and merging with our sister company Zag in 2010 to create TrueCar, Inc.  Well, we just had another one announced Monday that I believe could lead to a tipping point for TrueCar – A partnership with and equity investment from Guthy-Renker, the leading international infomercial producer.  The most notable of their product partnerships is Proactiv, the acne treatment system that has grossed over $800M.  This partnership with GR involves a large equity investment from them that will help fund a massive brand development and advertising campaign for TrueCar.  It speaks to the potential for success that the experts in this process are confident enough to invest capital and put their own skin in the game.

Why is this so significant for us and why now?

First, why now?  The past several years we (Zag & TrueCar) have been quietly and gradually building our product and brand and have been gaining share of automotive retail with little to no marketing spend.  We’ve instead grown through large partnerships with companies like USAA, AAA, Consumer Reports, American Express and others as well as a robust PR machine that has helped build a foundation for the TrueCar brand, both in the automotive industry and with consumers.  But PR and distribution partners will carry you so far, to really scale the brand you must have widespread, household awareness which can be incredibly expensive.  However, in order to spend marketing dollars to acquire customers, there has to be a positive ROI on that investment, meaning for every dollar spent on marketing, more than one dollar must be generated in profit.  That’s a tough equation to make work unless the product engine is converting customers at high rates.  This is an oversimplification, but suffice to say that we now have the engine in place that enables a positive ROI on paid customer acquisition.  So, the time is right.

Second, why is this significant?  A partnership, including investment, with a leading brand-proliferation company like Guthy-Renker enables a mass introduction of TrueCar to consumers that would be almost impossible to achieve otherwise.  It has the potential to make TrueCar a household name among consumers.  It enables us, now that the “product engine” is built, to immediately and rapidly build the TrueCar brand nationally as the new and only way to purchase your next vehicle.  If our conversions (website visitor who purchases through our program) stand up, this will not only be a large cash outflow to pay for the marketing, but also a hugely profitable partnership due to the revenue generated from paying customers who see and respond to the advertising programs.  It’s also significant because this widespread, infomercial approach has never been done before in automotive retail, and we believe auto is ready for this type of innovation.  That could lead to an important first-mover advantage.

Only time will tell whether this will be an epic foundational WIN or LOSS.  But it will certainly be foundational.

What were your “foundational” company events that defined success or failure?

What Are You Reading?

While I wouldn’t consider myself a voracious reader, I do have a habit of reading 2-3 books concurrently and they are typically of varied content.  I also have a hard time getting through an entire book unless it is very well written and engaging.  For whatever reason, I’m finding the interesting and important components in a lot of the books I’ve read lately could be communicated in 20 pages or less.  I guess I need to find better books… or get a longer attention span.

Anyway, here are the books I’m currently reading –

1. The New Dad’s Survival Guide: Man-to-Man Advice for First-Time Fathers by Scott Mactavish.  As an expecting father, I’m absorbing quite a few books in this category.  This book is laugh-out-loud funny, seriously I blurt out laughing, and easy to read, written in a quasi-military drill sergeant tone with acronyms like NFU (New Family Unit or baby), FPP (Female Parenting Partner) and BCF (Be Cool, Fool).  It’s more humor than useful, but it’s a welcome relief from some of the other father-focused books that are not only serious, but packed with more information that anyone could possibly absorb.

2. The Reason For God:  Belief in an Age of Skepticism by Timothy Keller.  It’s interesting how being a first time expecting parent can affect areas of your life that you haven’t given much thought to lately.  Spirituality and religion, for me, is a case in point.  I grew up in an active Catholic household, which I think provided a good foundation of values, but I’ve never really explored other faiths, faith in general, and challenged that belief system that I grew up in.  It has been easy to put off.  But now I feel some responsibility as a father to do some research, explore my own beliefs and develop a point of view on religion so I can at least provide a foundation for my son until he is old enough to do his own exploration of his beliefs.  This book by Timothy Keller is very good.  He makes an analytical case for God and takes it one step further, for a Christian God.  However, he does it with a balanced approach by acknowledging many common objections to God, then presenting arguments for both viewpoints.  I’m enjoying this read and intend on my next book in this category to be the opposing argument.

3. Good to Great:  Why Some Companies Make the Leap… And Others Don’t by Jim Collins.  This is an annual re-read for me.  I’ve read this book a handful of times, it’s that good.  The leadership principles in this book are so spot on as I’ve had sufficiently varied experiences to see different leadership styles perform just as Jim predicts in his book.  This book keeps me in check.

4. Inside of a Dog:  What Dogs See, Smell and Know by Alexandra Horowitz.  I’m a huge animal lover, particularly of dogs.  I know everyone thinks their dog is the greatest, smartest, most affectionate animal on the plant and I feel the same way about my dog Foster (who passed in 2008).  I really wanted to find some analytical research into the mind of man’s best friend.  Whereas most books on the subject seem to be based on opinion and experience, Alexandra, a behavioral psychologist, actually performs behavioral studies and analysis to get inside the dog.  There are nuggets of interesting facts in this book, but I’m finding it difficult to read.  At the end of the day, how can we really know what our dog is thinking?  For the most important things we long to know about what our pets are thinking, I don’t think she definitively answers them.  Probably one of those books I won’t finish.

So, what are you reading?

It’s About the Journey

Ever since our cycling trip to France last year (600 miles and 60,000 feet of elevation gain in 9 days), I’ve missed the commitment, preparation and sense of personal accomplishment that training for a strenuous physical event brings.  To prepare for France, I trained for about 6 months, riding 4-5 days per week on a pretty strict schedule of mileage & elevation gain.  As other priorities have now taken over, I’ve not spent much time on my bike, maybe one decent ride per week since we returned from the Tour de France last July.  In fact my fitness in general has taken a back seat.

Recognizing this “training” void in my life for the past 8 months, Renee for my birthday offered to drive the support vehicle so I could ride 2 stages of the upcoming Amgen Tour of California.  This is an 8-stage, pro-cycling tour event that is gaining in popularity and now competes directly with the major European tours, taking place May 15-22 along the California coast.  Amateurs have the ability to ride stages in the morning before the riders begin.

I’ll be riding Stages 6 & 7 of the Tour, the first being a relatively easy time trial through the Santa Ynez wine country outside of Santa Barbara.  The second is the defining stage of the race – Claremont to Mt. Baldy, twice!  It will be a 75 mile stage with over 10,000 feet of elevation gain during the day.  If I had to do it tomorrow, I wouldn’t make it.  That’s what makes the training journey so important and rewarding – there’s no way the objective could be achieved tomorrow, but with a detailed plan, broken into manageable and achievable components, success is all but guaranteed.

So I have roughly 6 weeks to get my cycling legs and have laid out DAILY training objectives between now and May 20.  I know precisely what I have to do tomorrow to prepare, and the next day, such that on May 20 the objective will be achieved.

Many endurance athletes would agree that the training journey, the hours, the pain, the discipline are what makes the actual race or event special.  It’s an adrenaline payoff for a lot of hard work, but many would also agree that training itself is enjoyable, even addictive.  We don’t do the training solely for the event, we do the training because it is rewarding all by itself.  The event or goal is simply what helps us stay on track, an additional motivator.

Why not apply these principles to most things in our lives – professional and personal?  I can see lot’s of opportunities in my own life to be better about setting stretch or aspirational personal goals instead of living life day to day.  Or perhaps being more diligent about my career objectives 2, 3 or 5 years from now to ensure I’m on my DAILY path to get there.

What objectives have you been putting off defining?  Maybe, just maybe the journey to reach them will be as rewarding as reaching the objective itself.

What Kind of Leader Are You?

There are so many different kinds of leadership & leadership styles.  A broad categorization might include People leadership (management) and Subject Matter leadership (expertise).  Then there are various styles of leadership – inclusive, authoritarian, hands on/off, etc.

I would like to talk about People Leadership in this post, and specifically leadership in a startup or early stage organization where innovation, speed, energy and passionate engagement need to be the life blood of the organization.  My leadership style for direct reports is very much one of inclusion, collaboration, and support to enable people to perform at a high level.  But it all starts with the team composition and quality from both a skills and personality standpoint.  This will be an oversimplification, but I see the “process of people leadership” something like this:

  1. Ensure the individuals on your team are the most skilled at what they do.  I’m specifically talking about pure intellectual horsepower and subject matter expertise.  Every individual that works in my current organization goes through skills testing, both general intellect and functional specific.  There are homework assignments that are evaluated in a panel/presentation setting by a group of the prospective candidates peers and hiring manager.  This is an area I simply won’t compromise.  True story – I interviewed over 100 individuals for a critical VP Analytics/Statistician role I was trying to fill.  The skills test was nearly impossible, taking a consultant 3 months to solve.  Most candidates fell flat, some solved 10% of the problem.  My eventual hire solved the problem and recreated the statistical model, in its entirety, over a weekend.  Find the best no matter how long it takes.  The best team wins, always.
  2. Direct reports must have the right personality and cultural sensibilities to gel with your leadership style and culture you desire to create.  This is really important and I think often overlooked.  Team dynamics and how they operate as a team, not as individuals, will define the success of achieving organizational objectives.  I look for team members that share my philosophies on desired culture and management styles.  This does NOT mean, and this is important, finding “yes” people to agree with you all the time.  Quite the contrary, I explicitly encourage feedback and dissonance to create healthy debate.  The best idea should win, not the strongest personality or the person with the most authority in the room.
  3. Show up credible as a manager, leader and problem solver. I must inspire confidence in my team as a leader.  Have I provided a clear vision for where I am leading them (strategy)?  How do I treat people?  I often participate in even the most technical conversations outside of my experience, there is likely an angle to the problem that has not been considered.  My suggestion:  Inspire your team through your engagement in their work.
  4. Recognize what each individual needs – rewards, support, level of autonomy. Knowing this and responding to it on an individual level I have found will  maximize productivity, engagement and happiness.  I have also found that every individual can be widely different on these requirements.
  5. Become a master at conflict resolution and personality management.  All of us are different and respond differently to varying personalities.  It’s human nature.  I have also found that highly intelligent subject matter experts who are the best at what they do have a high degree of confidence that their way is the right way.  Getting different personalities to work together and facilitating the flow of information & communication in a way that creates a highly effective team environment is a lot of what I do on a daily basis.
  6. Encourage risk taking and let people fail. While I often hear this in organizations, I’ve rarely experienced a real commitment to it.  People may be given a second chance, but often the reputational damage discourages further risk taking.   A culture of innovation through a tolerance for mistakes and failures starts at the top of the organization, plain and simple.
  7. Make sure each individual knows clearly how success will be measured for the organization and for themselves.  This is an important point that I see too often misguided.  By setting rigid, documented objectives for individuals and tying compensation directly to these objectives can often result in undesired behavior, particularly in a startup or early stage organization where the continuous need for flexibility and adjustment for things as core as strategy and business model are paramount.  Don’t get me wrong, I see a need for written objectives and planning, but I also am explicit about how objectives can and will shift along the way and that there is no substitute for close and ongoing communication with direct reports.  I simply don’t get overly dogmatic on this point, especially since there is always a subjective nature to the review process.  A fully objective review process will undoubtedly lead to undesired behavior if there is even the slightest shift in objectives.
  8. When times get tough, real leadership begins.  I’ve been through some tough segments in organizations that I’ve run and you really learn about people when we go into “self-preservation” mode.  More than ever, I try to lead by example during tough times.  I over-communicate.  I really try to treat people with integrity and honesty through the challenging times and I’ve found by doing so it increases people’s tolerance for uncertainty, inspires confidence and increases loyalty.
  9. Don’t be a dick.  Seriously, this is a simple tenant but one I constantly review so as to not abuse the position of authority.  How are you perceived?  I have witnessed “dick” behavior destroy the culture of an organization almost overnight, morale sinks, motivation wanes, and at 6pm every night the place is a ghost town whereas before everyone was passionately working and collaborating long after the sun went down.
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