The Pmarca Blog Archives⁠↗

You will be amazed howmany windowshoppers you’ll deal with. A lot of people think they want to be part of a startup, but when the time comes to leave their cushy job at HP or Apple, they Yinch — and stay. Going through the recruiting process and being seduced by a startup is heady stuWfor your typical engineer or midlevel manager at a big company—you get to participate vicariously in the thrill ofa startup without actually having to join or do any ofthe hard work. As a founder ofa startup trying to hire your team, you’ll run into this again and again.

Meeting with more VCs aaer a bunch have said no is probably a waste of time. Instead, retool your plan — which is what this post is about.

Your challenge as an entrepreneur trying to raise venture capital is to keep peeling layers of risk oWofyour particular onion until the VCs say “yes” — until the risk in your startup is reduced to the point where investing in your startup doesn’t look terrifying and merely looks risky.

Never, ever say that you have no competitors. That signals naivete. Great markets draw competitors, and so if you really have no competition, you must not be in a great market. Even if you really believe you have no competitors, create a competitive landscape slide with adjacent companies in related market segments and be ready to talk crisply about how you are like and unlike those adjacent companies.

And never, ever say your market projections indicate you’re going to be hugely successful if you get only 2% of your (extremely large) market. That also signals naivete. If you’re going aaer 2% of a large market, that means the presumably larger companies that are going to take the other 98% are going to kill you.

the Xrst order ofbusiness is to (paraphrasing for a family audience) “have your stuG together” — create and develop your plan, your presentation, and your supporting materials so that when you do meet with a VC, you impress her right out ofthe gate as bringing her a fundable startup founded by someone who knows what he — that’s you — is doing.

Failing a working product and ideally customers or users, be sure to have as Ieshed out a presentation as you possibly can — including mockups, screenshots, market analyses, customer research such as interviews with real prospects, and the like.

Don’t bother with a long detailed written business plan. Most VCs will either fund a startup based on a Yeshed out Powerpoint presentation of about 20 slides, or they won’t fund it at all. Corollary: any VC who requires a long detailed written business plan is probably not the right VC to be working with.

In a great market — a market with lots of real potential customers — the market pulls product out of the startup. The market needs to be fulXlled and the market will be fulXlled, by the Xrst viable product that comes along. The product doesn’t need to be great; it just has to basically work. And, the market doesn’t care how good the team is, as long as the team can produce that viable product.

The #1 company-killer is lack of market.

The only thing that matters is getting to product/market fit. Product/market fit means being in a good market with a product that can satisfy that market.

You can always feel when product/market Ft isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”, the sales cycle takes too long, and lots of deals never close.

First, don’t do startups that require deals with big companies to make them successful. The risk of never getting those deals is way too high, no matter how hard you are willing to work at it. And even if you get the deals, they probably won’t work out the way you hoped.

Before Product/Market Fit, a startup should ideally raise at least enough money to get to Product/Market Fit. ALer Product/Market Fit, a startup should ideally raise at least enough money to fully exploit the opportunity in front of it, and then to get to proXtability while still fully exploiting that opportunity.

Not raising enough money risks the survival of your company, for the following reasons: First, youmay have—and probably will have—unanticipated setbacks within your business. Maybe a new product release slips, or you have unexpected quality issues, or one ofyour major customers goes bankrupt, or a challenging new competitor emerges, or you get sued by a big company for patent infringement, or you lose a key engineer. Second, the funding window may not be open when you need more money. Sometimes investors are highly enthusiastic about funding new businesses, and sometimes they’re just not.

Entrepreneurs who try to play it too aggressive and hold back on raising money when they can because they think they can raise it later occasionally do very well, but are gambling their whole company on that strategy in addition to all the normal startup risks. Suppose you raise a lot of money and you do really well. You’ll be really happy and make a lot ofmoney, even ifyou don’t make quite as much money as if you had rolled the dice and raised less money up front.

So how much money should I raise? In general, as much as you can. Without giving away control of your company, and without being insane. Entrepreneurs who try to play it too aggressive and hold back on raising money when they can because they think they can raise it later occasionally do very well, but are gambling their whole company on that strategy in addition to all the normal startup risks. Suppose you raise a lot of money and you do really well. You’ll be really happy and make a lot ofmoney, even ifyou don’t make quite as much money as if you had rolled the dice and raised less money up front. Suppose you don’t raise a lot of money when you can and it backXres. You lose your company, and you’ll be really, really sad.

The big downside consequence to too much money, though, is cultural corrosion. You don’t have to be in this industry very long before you run into the startup that has raised a ton of money and has become infected with a culture of complacency, laziness, and arrogance.

Raising money is never an accomplishment in and of itself— it just raises the stakes for all the hard work you would have had to do anyway: actually building your business.

Tell everyone inside the company, over and over and over, until they can’t stand it anymore, and then tell them some more, that raising money does not count as an accomplishment and that you haven’t actually done anything yet other than raise the stakes and increase the pressure. Illustrate that point by staying as scrappy as possible on material items — oZce space, furniture, etc. The two areas to splurge, in my opinion, are big-screen monitors and ergonomic oZce chairs. Other than that, it should be Ikea all the way.

The easiest way to lose control of your spending when you raise too much money is to hire too many people. The second easiest way is to pay people too much. Worry more about the first one than the second one; more people multiply spending a lot faster than a few raises.

In particular, pay close attention to deadlines. The easiest thing to go wrong when you raise a lot of money is that suddenly things don’t seem so urgent anymore. Oh, they are. Competitors still lurk behind every bush and every tree, metaphorically speaking. Keeping moving fast if you want to survive.

A startup’s initial business plan doesn’t matter that much, because it is very hard to determine up front exactly what combination of product and market will result in success.

The general theory of executives, like managers, is, per Andy Grove: the output of an executive is the output of her organization. Therefore, the primary task of an executive is to maximize the output of her organization.

First, if you’re not sure whether you need an executive for a function, don’t hire one. Startups, particularly well-funded startups, often hire executives too early. Particularly before a startup has achieved product/market fit, it is often better to have a highly motivated manager or director running a function than an executive.

Hire an executive only when it’s clear that you need one: when an organization needs to get built; when hiring needs to accelerate; when you need more processes and structure and rigor to how you do things. Second, hire the best person for the next nine months, not the next three years.

Third, whenever possible, promote from within. Great companies develop their own executives.

beware people who have “done it before”.

If a VC’s ideal investment is a company that will succceed without him, then your ideal executive hire is someone who will succeed without you.

November 20, 2022

by all means, use an executive recruiter, but for sourcing, not evaluation. There are some executive recruiters who are actually really good at evaluation. Others are not. It’s beside the point. It’s your job to evaluate and make the decision, not the recruiter’s.

Watch out for candidates who want egregious amounts of cash, high bonuses, restricted stock, vacation days, perks, or — worst of all — guaranteed severance. A candiate who is focused on those things, as opposed to the option package, is not ready to do a startup.

You don’t want your key executives focused on selling the company — unless of course you want them focused on selling the company. Make your acceleration decisions accordingly.

when hiring the executive to run your former specialty, be careful you don’t hire someone weak on purpose. This sounds silly, but you wouldn’t believe how oaen it happens. The CEO who used to be a product manager who has a weak product management executive. The CEO who used to be in sales who has a weak sales executive. The CEO who used to be in marketing who has a weak marketing executive. I call this the “Michael Eisner Memorial Weak Executive Problem” —aaer the CEO ofDisney who had previously been a brilliant TV network executive. When he bought ABC at Disney, it promptly fell to fourth place. His response? “If I had an extra two days a week, I could turn around ABC myself.” Well, guess what, he didn’t have an extra two days a week.

A CEO — or a startup founder — oaen has a hard time letting go ofthe function that brought him to the party. The result: you hire someone weak into the executive role for that function so that you can continue to be “the man” — consciously or subconsciously. Don’t let it happen to you — make sure the person you hire into that role is way better than you used to be.

It’s not that uncommon to see startup founders, especially firsttimers, who hire executives and are then reluctant to manage them. You can see the thought process: I just hired this really great, really experienced VP of Engineering who has way more experience running development teams than I ever did — I should just let him go do his thing! That’s a bad idea. While respecting someone’s experience and skills, you should nevertheless manage every executive as if she were a normal employee. This means weekly 1:1’s, performance reviews, written objectives, career development plans, the whole nine yards. Skimp on this and it is very easy for both your relationship with her and her effectiveness in the company to skew sideways.

ifyou want to give an executive full latitude, but you’re reluctant to do so because you’re not sure she can make it happen, then it’s probably time to Fre her.

ruthlessly violate the chain ofcommand in order to gather data. I don’t mean going around telling people under an executive what to do without her knowing about it. I mean, ask questions, continually, at all levels of the organization. How are things going? What do you think of the new hires? How oaen are you meeting with your manager? And so on.

You never want the bulk of your information about a function coming from the executive running that function. That’s the best way to be completely and utterly surprised when everything blows up. Here’s the kicker: a great executive never minds when the CEO talks to people in her organization. In fact, she loves it, because it means the CEO just hears more great things about her. If you have an executive who doesn’t want you to talk to people in her organization, you have a bad executive.

…life is short, startups move fast, and you have stuff to get done. You aren’t going to have the privilege of working with that many great, talented, high-potential people in your career. When you find one, promote her as fast as you can. Great for her, great for the company, and great for you. This assumes you are properly training and managing her along the way.

I’m a Xrm believer that most people who do great things are doing them for the Frst time. Returning to my theory of hiring, I’d rather have someone all Xred up to do something for the Xrst time than someone who’s done it before and isn’t that excited to do it again. You rarely go wrong giving someone who is high potential the shot.

you always Xre a bad executive too late. If you’re really good, you’ll Xre her about three months too late. But you’ll always do it too late. If you did it fast enough that it wasn’t too late, you wouldn’t have enough data, and you’d risk being viewed as arbitrary and capricious by the rest of the organization.

the minute you have a bad feeling in your gut, start gathering data. Back to the point on ruthlessly violating the chain of command — get to it. Talk to everyone. Know what’s going on. Unless you’re paranoid — and, shockingly, I have met paranoid founders and CEOs, and not counting Andy Grove — you need to gather the data because you’re going to need to fire the executive — if you’re good, in about three months.

Is it painful for you to interact with the executive? Do you try to avoid or cancel your 1:1’s? Does talking to her give you a headache? Do you often not understand what point she’s trying to make or why she’s focused on such an odd issue? If the answer to any of these questions is yes, you have a problem.

Part 8: Hiring, managing, promoting, and firing executives • Demotion as an alternative to firing (or, alternately, “I know, we’ll hire her a boss!”). Hate it. Great people don’t deal well with getting demoted. There is an occasional exception. Unless you are positive you have such an exception, skip it, and move directly to the conclusion.

Micromanaging new executives is generally a good idea for a limited period of time.

Almost nobody is brilliant at everything. When hiring and when Hring executives, you must therefore focus on strength rather than lack of weakness. Everybody has severe weaknesses even if you can’t see them yet. When managing, it’s oaen useful to micromanage and to provide remedial training around these weaknesses. Doing so may make the diWerence between an executive succeeding or failing.

Driven people don’t tend to stay long at places where they can’t succeed, and just because they haven’t succeeded in the wrong companies doesn’t mean they won’t succeed at your company

Curiosity is a proxy for, do you love what you do? Anyone who loves what they do is inherently intensely curious about their field, their profession, their craft. They read about it, study it, talk to other people about it… immerse themselves in it, continuously. And work like hell to stay current in it. Not because they have to. But because they love to. Anyone who isn’t curious doesn’t love what they do. And you should be hiring people who love what they do.

Ethics are hard to test for. But watch for any whiW of less than stellar ethics in any candidate’s background or references. And avoid, avoid, avoid.

First, have a written hiring process. Whatever your hiring process is — write it down, and make sure everyone has a copy of it, on paper. It’s continually shocking how many startups have a random hiring process, and as a result hire apparently randomly. Second, do basic skills tests. It’s amazing how many people come in and interview for jobs where their resume says they’re qualiXed, but ask them basic questions about how to do things in their domain, and they Yail.

First, realize that while you’re going to hate firing someone, you’re going to feel way better after the fact than you can currently imagine. Second, realize that the great people on your team will be happy that you’ve done it — they knew the person wasn’t working out, and they want to work with other great people, and so they’ll be happy that you’ve done the right thing and kept the average high.

The Hrst rule of career planning: Do not plan your career. The world is an incredibly complex place and everything is changing all the time. You can’t plan your career because you have no idea what’s going to happen in the future. You have no idea what industries you’ll enter, what companies you’ll work for, what roles you’ll have, where you’ll live, or what you will ultimately contribute to the world. You’ll change, industries will change, the world will change, and you can’t possibly predict any of it. Trying to plan your career is an exercise in futility that will only serve to frustrate you, and to blind you to the really signiXcant opportunities that life will throw your way.

The second rule of career planning: Instead of planning your career, focus on developing skills and pursuing opportunities.

I believe you should look at your career as a portfolio of jobs/ roles/opportunities. Each job that you take, each role that you choose to Xll, each opportunity you pursue, will have a certain potential return — the beneXts you can get from taking it, whether those beneXts come in the form of income, skill development, experience, geographic location, or something else. Each job will also have a certain risk proXle — the things that could go wrong, from getting Xred for not being able to handle the job’s demands, to having to move somewhere you don’t want to, to the company going bankrupt, to the opportunity cost of not pursuing some other attractive opportunity.

The issue is that without taking risk, you can’t exploit any opportunities. You can live a quiet and reasonably happy life, but you are unlikely to create something new, and you are unlikely to make your mark on the world.

By not keeping a schedule, I mean: refuse to commit to meetings, appointments, or activities at any set time in any future day. As a result, you can always work on whatever is most important or most interesting, at any time.

When someone emails or calls to say, “Let’s meet on Tuesday at 3″, the appropriate response is: “I’m not keeping a schedule for 2007, so I can’t commit to that, but give me a call on Tuesday at 2:45 and if I’m available, I’ll meet with you.” Or, if it’s important, say, “You know what, let’s meet right now.”

Generally in the course of a day, there is something you have to do that you are not doing because you are procrastinating. While you’re procrastinating, just do lots of other stuff instead.

The best way to to make sure that you are never asked to do something again is to royally screw it up the first time you are asked to do it. Or, better yet, just say you know you will royally screw it up — maintain a strong voice and a clear gaze, and you’ll probably get off the hook. Of course, this assumes that there are other things that are more important at which you are competent.

Do email exactly twice a day — say, once first thing in the morning, and once at the end of the workday. Allocated half an hour or whatever it takes, but otherwise, keep your email client shut and your email notifications turned off.

The problem with email is that getting an email triggers that same endorphin hit I mentioned above — the one that a mouse gets when he bonks on the button in the cage and gets a food pellet. Responding to an email triggers that same hit. The pleasure chemical hits your neocortex and you go “ahhh” inside and feel like you’ve done something. So you sit and work with your mail client open and you interrupt your work every time an email comes in and you answer it and you send another email and you feel great in the moment. But what you’re really doing is fracturing your time, interrupting your Yow, and killing your ability to focus on anything long enough to get real high-quality work done.

First, always finish each of your two daily email sessions with a completely empty inbox. I don’t know about you, but when I know I have emails in my inbox that haven’t been dealt with, I find it hard to concentrate on other things.

Only agree to new commitments when both your head and your heart say yes