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Staff vs. Line

Moving up through any organization is a tricky and non-obvious route.  Sure, some people have raw skill and natural talent; others have and adroitly exploit personal connections; still others leverage bravado or luck.  It wasn’t until I spent time at larger public companies working for professional managers that I was able to really understand how, generally, people move up through an organization to larger and broader roles/responsibilities.

 

Effective and disciplined business leaders typically follow a “Line – Staff – Line – Staff – Line” stair-stepping process:

1. Start off in a Line position.  A position where you focus on a specific discipline (Sales, Marketing, Engineering, Finance, etc.).  Focus on learning and expanding your depth of knowledge about that particular Line.  Stretch your knowledge and skill and find Line managers that are really good at what they do – learn from them – specifically what do they do that drives real and tangible results time after time.  In my mind it takes ~2 years on average to learn a solid level of Line discipline and skill.

2. Move into a Staff role next.  These jobs are by definition cross-functional.  This is tricky because it needs to be done explicitly as a stepping stone process with the goal to go back into a Line position when the opportunity presents itself.  Getting stuck in a Staff position is far too easy if you don’t constantly and incessantly try to make a noticeable impact on the business.  Staff positions enable you to see and work across multiple Lines, usually this is under a very senior executive or general manager.  The Staff role gives you visibility into how the different Line positions must work together to successfully execute against the business goals of the organization.  It helps you appreciate the importance of forecasting and delivering on results.

3. Find a Line position to move back to.  Your new found cross-functional knowledge enables you to take a higher position in the organization with more responsibility.  While you’re back focusing on a Line discipline, you now have the broader appreciation and understanding of other pieces of the business and how they work together.  If you can, switch Lines from your first one; i.e., move into Marketing if your first Line was Sales.  This later point is harder to do and may end up being a lateral move from your last position.  Again, this is tricky, so most folks will tend to stay in a particular Line as they move up.

Think of the “Line – Staff – Line” progression as a way to truly learn each discipline of a business.  Finding really good Line managers at each step is the key point. Learn from them, stretch yourself to try new things, figure out what works, what doesn’t, and why.

Thee ultimate “Staff” position is the CEO.  To be a great one, you have to have a solid understanding of each major functional Line discipline of the organization – and – you have to know how they work together and why.  In my mind there really is only one best way to get that in-depth solid understanding and that is to have done meaningful work in every Line.  Sure, there are those that short-circuit the process for whatever reason, but for the rest of us the Line – Staff – Line is the way to go.

A Tragedy of the Commons

I’ve been living and working in Colorado since 1994 when I first came to Boulder to get a Masters in Engineering.  At the time, I wanted to study this Information Super-highway thing and learn all about advanced data communications and the world wide web.  In grad school I started my first “real” company and raised a bit of venture capital. 

In Boulder its always been an incredibly collegial environment.  VCs, Entrepreneurs, retired business executives, and the like, all tend to take meetings, help each other, and share information in a  generally transparent and helpful way.  My experience in Boston and Silicon Valley is that these areas are more cut-throat and culturally competitive.  Here in Colorado the sense is that we all can work together to drive the collective ball forward.

No doubt the market here rose with the dot-com bubble and many new venture funds and companies got funding than should have.  In 2001, before the markets broke, it reached its zenith.

Over the past 2.5 years I’ve been completely heads-down helping build Lijit Networks from 10 people, no revenue, and a small market presence to 34 people, scaling revenue, and an utterly massive network that seems to grow now by leaps and bounds.  I’ve rarely had the time to really look around and see how the overall entrepreneurial environment has been evolving and changing.  Recently I had the chance to see and talk with a lot of folks about this evolution.  What I see is somewhat unsettling, but probably the best for the long-term health of the Colorado start-up marketplace.

VC firms are going out of business; some know it, some don’t.  Mostly the good entrepreneurs are busy with interesting projects.  There isn’t a lot of investment capital available unless the idea is big  - and - the people involved are really good.  This applies to both companies and VC firms.  And this is exactly what is supposed to happen.

The market here is small.  That’s a fact.  The market here is highly educated.  Also a fact.  The reason everyone pitched in to help each other and was culturally collegial in nature is that there was always a common sense that in order to compete we had to work together explicitly.  A culture was established and available to most anyone that was smart, serious, and contributed to the whole.

We are going through a natural cleansing cycle now.  We grew too fast, raised too much capital that chased too few good ideas and people.  We acted too much in our own self-interest.  The best part is that all of this is a natural process and one that is elegantly simple to resolve, the weakest die.  Self correction in an efficient market is built in.

I love the fact that the guys at the Foundry Group (one of Lijit’s lead investors) invest so much personal time and energy in programs like TechStars nurturing fledgling businesses and fostering green people.  I’m seeing more and more the collaboration between really smart local entrepreneurs carving out time to help each other even if their respective companies have overlaps in market goals.  Those of us that have an extremely long view of their careers are hard-wired to raise the collective market.  The cycle of where we are now produces better companies, stronger investment professionals and we, at least for a few years, can avoid the Tragedy of the Commons.

According to Wikipedia:

The tragedy of the commons refers to a dilemma described in an influential article by that name written by Garrett Hardin and first published in the journal Science in 1968.^[1] The article describes a situation in which multiple individuals, acting independently, and solely and rationally consulting their own self-interest, will ultimately deplete a shared limited resource even when it is clear that it is not in anyone's long-term interest for this to happen.^[2]

Smart is as smart does

There are two market-facing types of smart.  What I call “Conference” smart and what I call “Customer” smart.

Anyone that’s been in a business leadership position knows or should know the different types of “smart” that people around them bring to the table.  Street smart.  Book smart.  Engineering smart.  Keep your mouth shut smart.  I don’t know what I don’t know smart.  And so on.

I’ve been to more than a few industry conferences – and I’ve been on hundreds of customer calls.  In turn, I get the opportunity to talk to lots and lots of people, asking questions, gauging each of their perspectives, problems, lenses on where they see their business and what opportunities that are important to them. 

Conference smart shows up when people go to lots of conferences.  Speak on panels, and generally hob-nob with other conference elite.  They learn the buzz-words, trendy jargon, what people say is the future and can recite the Industry luminaries (and celebrities) by first name – even better by nickname.  The close cousin to Conference smart is Book smart.  They just don’t like to travel to or don’t have the budget freedom to hit the conference circuit.

Customer smart is more gritty.  Not nearly as glamorous as the Conference smart, and definitely without the cocktail parties and trips to Vegas.  Customer smart typically comes with good sales people, but can also come from product leaders, marketeers and other externally-driven people that are interested in who’s buying what, why, and how.

Customer smart trumps Conference smart.  Both however are necessary if you want to be successful - and its important to combine the two when it comes to strategy and longer-range planning.  As my old boss used to say: “when in doubt, make a sales call”.

Smart people can ratfuck you if you’re not careful

Good intentions. Sage advice. Clever insights.  All good and worthy goals of a conversation with a smart person, a successful person, an influential person.  The problem lies in the clarity of what you want out of it and your perspective on the situation or issue.  Smart people want (desperately) to add value, show their intellect, solve a problem, and have you come away better for having spent time with them. Its human nature to want to be liked and smartness is a likeable asset.

1. Career advice

Who hasn’t asked someone for career advice?  We’ve all done it, and given the field I’ve chosen to work in, likely I’ll be seeking it again at some point.  The filter I learned early on was that most people give the advice to do what they did to get them where they are.  Caveat: I typically don’t seek advice from people that haven’t been successful in one way shape or form.

The advice goes like this: If you want to be a fill in the blank.  The advice you get is that the best way to get there is through sales, or marketing, or engineering, or being a ‘generalist’, or goofing off in Europe, or going to grad school, or whatever the background of the person giving the advice is/was that got them to their success.  Its not an intentional ratfuck, but its all too common and is nearly useless to the individual getting the advice.  Unless you too believe that dropping out of Harvard and starting a social networking site is the path to greatness.

In my mind great career advice starts with an understanding of what the advice getter’s background is, where they’ve had real success and real failure, and what their ultimate goal and desires are.

2. Board of Directors

I’ve been on both sides of this one a bunch.  You get a group of (by definition) smart people around a table to “direct” and advise, and keep on the straight and narrow a bunch of (hopefully) smart executives.  The board folks some to meetings and spend quality time with their peers (other investors, former executives, industry experts) once a month and, being human, they want to be seen as smart value-adding participants.

The potential to ratfuck you starts here with the well intentioned, but picks up speed with the their individual level of under-informededness, and achieves escape velocity if their ego is sensitive.  Unless one is plugged in to the market, major business happenings, and other near day-to-day operations then the value you’re adding could be the wrong value to the directees.  The trick on both sides is to gauge the level of direction needed and appropriate as weighed against the width of understanding the situation – of both the director as well as the directees.  Not an easy thing to do!

Some of the best board members I’ve ever had the pleasure to work with don’t talk a lot, but when they do its usually a question that seems to split atoms with its simplicity and directness to the essences of a particular issue.

3. Advisor or Mentor

This is the toughest to spot and the one most likely to really ratfuck you if you’re not careful.  Why? Because more often than not a close advisor or mentor develops a personal or emotional relationship with the advisee.  The ratfucking is unintentional, but no less wrong.  It comes from giving advice that has too much defense for the advisee and too little perspective of the bigger picture.  I’ve experienced this one and the only thing I can reflect on in retrospect is that the advice was too much exactly what I wanted to hear.  Bad decisions result, started in motion by the best intentions.

Punchline:

Great advice is really had to come by.  Most smart people aren’t sage advice givers.  If you find one that likes you, takes the time to really understand you, and tells you things that you don’t like or want to hear – but in retrospect were the right things you needed to hear – hold onto that advisor like gold.

Its all ball bearings - and it starts with a conversation

Its amazing to me what power a simple conversation has.  Conversations can build an incredibly powerful company culture, Conversations can lead to life-changing decisions.  Conversations can turn into fist fights.  Conversations can make your sales number for the year.

Its pretty simple when you think about it.  It all starts with a conversation.  The first time I really heard this was from John Dragoon (CMO at Novell).  John is one of those great presenters that can stand up on a stage in front of 1000 people and give a kickass presentation with nothing but slides with pictures and no words.  You come away remembering exactly what he said, what the point was, and what you can take away.  It feels like a conversation, I think, because he makes a connection with the audience that is authentic.

I read a lot, and recently a lot of that reading has been to understand the industry perspectives and trends as they relate to digital advertising, social content, and media.  As I write this, I'm attending the OMMA Global conference in NYC.  Much of the talk here is about the scarcity of attention and the need to engage in the conversation.  Conversations and authenticity matter in marketing and sales and in running a company.  Even if a conversation is brief, as long as its authentic and honest, that works for me.

What its not:

Its not a conversation if no one participates.  Check your tweet views, blog comments, or bit.ly stats if you want third party confirmation.  Now for those of you with tons of the above: filter out your groupies and then look again.

Wasted conversations are like the plague.  Improve actors and sales people know this better than anyone.  Ditto for conversations that have a contrarian participant being that way just to be contrarian.  Wasted time and energy sucks.

What it should be:

An opportunity.  Every interaction is a chance to have a real conversation.  Sometimes they're short (messaging service).

The VC audience

Understanding your audience as anyone who’s in sales, marketing, or speaks frequently will attest is probably the single largest factor when preparing for and then having success.  Its really no different when it comes to understanding and raising money from venture capitalists.  In fact, its probably one of the most important (and overlooked) things you can screw up. I’ve been thinking about this lately as I talk with fellow entrepreneurs who are looking for investment capital and want advice or opinions on who they should talk to and what their best line of attack should be.

In my experience, no matter how a VC gets onto the career path to partner, they tend to always gravitate into 1 of 3 types of lead investment criteria.  I think this understanding is generally not well understood by companies seeking to raise capital.  Understanding the primary drivers of your audience results in less time wasted and less frustration for both.

1. The Market or Theme-driven investor

At Lijit, our primary lead investor, Foundry Group, falls squarely into this category.  These investors seek out a major market theme and then learn everything there is to know about it.  They are connectors, filters, and learners.  They meet with everyone that covers, invests in, or tries to build a company in their particular focal area.  If they’re right about the market and they do their job right of meeting everyone and looking at everything, then they have an obvious advantage over other investors pursuing the same market – and – they give their portfolio companies a huge boost with connections, partnerships, business development assistance, economic modeling, etc.

2. The People-driven investor

We also have one of these as a lead at Lijit, Boulder Ventures.  This type of investor bets primarily on entrepreneurs that have track records of demonstrable success.  Over time, they form a “stable” of these entrepreneurs.  Tracking, following, keeping in contact with people they want to back.  They make good and focused use of their EIRs to start something and then they invest in that something.  Oftentimes these investors will pass on a deal that has what could be phenomenal market potential, simply because they don’t like or don’t have any experience with the management team.  Conversely, they will take on more market risk with a known and trusted management team with the driving belief being that the team will figure it out and create success.

3. The financial-driven investor

More often than not this group comes from investment banking or other professional investment backgrounds.  They look for deals where they can apply some sort of financial leverage as the leading criteria for weighing whether or not to do a deal. The portfolios of these investors have a more private-equity look and feel.  Portfolio companies that are capital intensive businesses, service driven businesses, roll-ups, and the like might also be there.  Down-rounds are opportunities to consolidate positions, and creative use of leverage is common in their deals.

Obviously the successful venture investors apply all 3 of the above when making an investment decision, but understanding the primary criteria of your audience will make both sides lives easier and more productive.

Admit One.

Step right up.  Get your one-way ticket to ride the ride.

At the close of every quarter we do a review with the entire management team.  Typically these meetings are a chance for everyone to share their successes, how they or their team performed against their goals and get collaborative feedback on what did and didn’t work.  Its also an opportunity to set goals and discuss tactics for the upcoming quarter.  In general I think everyone gets a lot out of it and its a great level-set for where we are as a business.

At this last review we started off with a presentation called: “Ticket to Ride”.

My thesis was simple:

1. You each have a ticket.

2. The ride is going to be up – down – and definitely twisty. 

3. It will be really fun and possibly really scary at times.

4. It may make you light-headed, queasy, disoriented, and possibly you might even puke all over yourself.

5. You will not exit the ride the same as you entered the ride.

Punchline: you have the choice whether or not to take the ride. 

But.. if you go through the turnstile, understand that there will be too much to do, in too little time, with not enough resources.  We’re going to do things that we’ve not done before and in ways that we don’t yet know how exactly we’re going to do them.  Some of you might not make it out alive.  Those that do, will, at a minimum, never be the same again…

Everyone on our team grabbed their ticket.

Would you?

Venture Capital + Federal Government = Sucks

I wrote a quick blog post awhile back after Thomas Friedman’s op-ed in the Wall St. Journal.  Mr. Friedman essentially said that if government really wanted to spur innovation and progress, that we (the royal “we”) should be emulating the venture capital model of a small group of knowledgeable investors making strategic equity investments in promising new start-ups that are executing on innovative and disruptive ideas.  I still like the line of thinking.  I’m not passing judgment on the how or who, I just like the idea.

Today in the PEHub daily newsletter, Dan Primack takes a swing at a Federally backed VC fund-of-funds.  Take a minute to read the article (and the flow chart).

This is where I get sideways with the VC + Government idea.  My experience with the prior wave of SBA-backed VC funds is nearly universally bad.  To me, this was a way for fledgling VCs that couldn’t raise institutional capital, to lever up their individual investors commitments and get them a “big boy” fund.  This is bad on several levels and in nearly all cases I’m familiar with produced a flop for the individuals, the government, and the companies.

Mainly, I think the bar that VCs have to hurdle in order to raise an institutional fund is there for a reason.  It separates the wheat from the chaff in a way that no other model currently does.  It forces the team to have certain performance characteristics, have a sound strategy, and it gets them the kind of commitment that doesn’t balk when markets fluctuate as the always do.  Its a basic check and balance to ensure that only the best survive and that the rewards accrue to the consistent top performers.  Isn’t that what operating and executing in the high-velocity world of venture capital and disruptive innovation is all about?

The creation of a Federal fund-of-funds will obviously push a whole bunch of capital flows into alternative investments.  This will result in a spike of investment and startup activity some of which will be good – and of course some of which will be bad. The rule of unintended consequences suggests that most of this will flow to mediocre VCs and mediocre startups while at the same time hamstringing the companies and investment firms that truly have innovative and disruptive ideas.  A classic example of where the ideals and reality part ways.

Founders make the best salespeople

People that have known me for any length of time have heard me say this more than once.  I still believe it to be the case, although recently I’ve evolved my thinking to include the ‘owners’ of a business.

The simple reason  for my original contention is that a founder of a company has been there since the beginning.  They’ve seen all the gyrations, been intimately involved in building the product or service, sold the first few customers, answered the investors questions, taken on heaps of constructive and critical feedback, and described what they do (or intend to do) at countless social events.  Pile on top of all that: they wouldn’t be founders if they didn’t have a passion that ran far deeper and more animalistic than anyone else around the table.

Like I said, recently, I’ve evolved my thinking a bit on this.  I now include people who truly “own” the business.  By this I mean those people that posses the ownership gene.

This set of people develops a sense of the company’s history regardless of how long they’ve been there, they fearlessly try and try again to describe what it is the company does at each and every family/social/cocktail/sporting event, they roll up their sleeves and get involved in challenges beyond their job scope and description, they think about new ways to expand, increase, grow and generally go faster everyday.  Every business needs a team of people like this if they hope to succeed.  People that have an insatiable need to talk to end users, prospects, skeptics, and basically anyone who will take the time to listen and give constructive feedback.  They use every opportunity to talk passionately about what they’re doing, where they fit amongst the competition, and why their product or service is more awesome than the other guy’s.

Once these people truly understand, are deeply passionate about, and can describe the company’s place and position in a holistic business sense, they then become the best salespeople in the company.

Reducing ‘value’ to an algorithm

Interesting article in the MIT Technology Review about measuring the value of a company (startup) by measuring buzz metrics (Twitter activity, Techcrunch mentions, Blog posts, etc.).  Similar to the YouNoodle or KillerStartup goal of predicting a companies value and ability to raise capital based on the historical biographies of the management/founders.

All of this is complete and utter bullshit.

In the article Feld has a quote that hits the mark: "factors like this dramatically oversimplify the drivers of success (and failure) in entrepreneurial ventures.".

Also in the article is a paragraph quoting Josh Lerner: he has published research showing that an entrepreneur's second startup has slightly better odds of succeeding than her first, and that having one successful startup makes a second startup more likely to succeed. "That suggests there are definitely patterns out there that work," Lerner says. "I'm sure if you were really to punch the data, you'd find there were many other patterns."    This statement on the surface seems to suggest that indeed there are data patters that point to a positive result for YouNoodle.  That unfortunately is at best a weak linkage, and at most purposefully misleading.

The issue I have is that the article and the stance by both the popularity and valuation algorithms is that they completely miss the point of how value is created in ANY company, startups, or otherwise.  I’m actually amazed that MIT paid any real attention to it.  I’d assume that The Onion would be a better source to cover the news on this one.  Not my line, but one I like is Peter Drucker’s: “the purpose of any company is to create a customer”.

Value isn’t created by buzz or by the ability of a founder or manager to raise capital, its created by customers parting with their money/resources because what you have to offer is more valuable than their money/resources.

Back to the article’s usage of Lerner’s research: if you extrapolate that a 2nd time team is statistically more successful than a 1st time team.. then why does the 3rd time team bump directly into the Experience Trap I wrote about a few days ago and decline in their ability to succeed and create value?