Startup Whisperer

What's In Your Wallet?

An entrepreneur asked me recently, "how much money should I have in the bank before I look for more money."  He was really asking, "at my current burn rate,  when should I look for more money."  The best answer is that you shouldn't because you are cash flow positive and don't need a lot of new capital.  You have a revenue model and are looking at using different types of financial instruments to super-charge your growth.  But, given that most VC-powered startups require large amounts of capital for the promise of high returns,  I understand the tension. 

I personally, like to have at least 12-18 months of cash in the bank.  In other words, if something disastrous happened to your business, how long would you have to ride out the storm.  There is still a lot of money flowing into venture-funded companies per the chart below. In fact, it wasn't down much from the previous quarter.  Techcrunch has a good piece on this recently.    However, expect the bar to get higher as we move into worsening economic conditions.  Never be in the position of having an under-funded startup.  There are two many examples of great ideas and great management teams failing due to their lack of capital.

Startup Employee "Pit Crew"

If you follow auto racing, imagine a pit crew coming out and quickly enabling the driver to have fresh tires, gas, and quick maintenance to get back into the race.  That is how you should approach getting new employees contributing in your company.

When you are in startup mode (which is seemingly never-ending), you will want to indoctrinate processes in your company to quickly get new employees effective once they are hired.  Many larger companies have developed very sound processes around new employee orientation and management  practices around on-boarding employees.  When you are under 50 people, my guess is that you haven't spent a whole lot of time thinking about this.  Imagine each new employee as helping give you fast mover advantage for your business. 

Each position will have a different approach.  A coder is of course different than a salesperson.  But,
each new employee should be supplied some core information from the manager.  This includes an overall roles and responsibilities document and a weekly MBO (management-by-objective) document,

I have previously posted about MBOs.  You can read that post here.

I'll spend a little time on the Roles and Responsibilities document.  It can be as simple as a 1-2 page document.  It should including the following information:

• Role: Overall description of the employee's role in the company
• Responsibilities:  A list of 3-4 job responsibilities for the employee.  Example:  Responsible for all revenue display deals for WidgetBucks, this includes:  ad networks deals, direct ad deals, and agency relationships.  (Note: this is important especially when companies are growing quickly.  Typically you get into trouble as you grow when you are not clear on job responsibilities.  When you move from everyone wearing different hats to more definitive roles, you can get confusion across the company if  you are not clear about each employee's responsibilities.  )
• 6-month MBO’s:  You can do 1-month, but, I find for a new employee, in a startup, you are going to be more fluid that annual goals.  The MBOs will include a list of 3-4 strategic asks to the companies objectives (as part of the agreed upon role) that are tracked every week.  I did an earlier post on the role of MBOs.  Each roles and responsibility document should include the 6-month metrics that you want that employee to hit.  They should be specific and measurable. Example MBO Metrics:

• Individual quota 8/15 – 12/31 = $X,XXXX
• Overall Sales Target = $X,XXXX
• Ship new front-end release by end of Q3 (contributes n% increase in revenue)

You should also articulate how to integrate the employee in the DNA of the company.  This includes key employees that will be important to get to know quickly, key meetings to attend, etc.  If you are a little larger, either have a mentor and/or the manager to help the employee get up-to-speed on the infrastructure (bug tracking systems, development platforms, CRM systems, etc).

In addition, you should plan on providing supplementary information on a network share and/or email that will help the employee get up-to-speed more quickly.  Some examples:

• Sample sales agreement and IOs
• Sales pipelines
• Prior Strategic planning documents and/or Board slides
• Latest specs on pertinent code bases
• Sales forecast information
• Marketing materials

Your goal is to get any employee up-and-running effectively within a month.  You want them to have everything the need to contribute and pumped full of enthusiasm about your company. 

What Is You Fortress of Solitude?

It is stressful starting a company.   You have employees, investors, competitor circling you at all times.  You are reading 200 + RSS feeds/day, managing your personal life, and trying to hit your numbers.  The signal to noise ratio is very high.

There are times when you need perspective.  I was prompted to think about this since Bill Gates has officially retired from Microsoft last week.  He was well known for his Think Week's where he would go to a remote cabin and well, think.  Not everyone has a Fortress of Solitude like Superman.  But, every entrepreneur can carve out time to think.  I am getting married soon and I am going to leave the BlackBerry at home.

I am excited to visit Greece which I have spent a bunch of time studying (both the history and the mythology).  I am really excited to just relax and think.  One of my favorite quotes is from Voltaire,

"Judge of a man by his questions rather than by his answers."

I plan on focusing on family and asking some big questions.  Breaks are a great time to unlever the brain from the norm and travel is a great way to get yourself out of your daily comfort zone.  See everyone later this month.