by Elad Gil
“Give me a great product picker and a great architect, and I’ll give you a great product.”
—Marc Andreessen
Elad: That’s an awesome insight. I feel like there’s two really key notes that you brought up that typically aren’t talked about. One is distribution moats. I think people emphasize network effects and data effects way too much, and I’ve never seen a real data effect, at least recently. And then second is charging more equals faster growth. Those are really key things that people really don’t talk about or think about.
Marc: I think network effects are great, but in a sense they’re a little overrated. The problem with network effects is they unwind just as fast. And so they’re great while they last, but when they reverse, they reverse viciously. Go ask the MySpace guys how their network effect is going. Network effects can create a very strong position, for obvious reasons. But in another sense, it’s a very weak position to be in. Because if it cracks, you just unravel. I always worry when a company thinks the answer is just network effects. How durable are they?
To your point on data network effects, I would just say that we don’t see it very often. We see a lot of claims, and very little evidence. The reality is, there’s a lot of data in the world, and a lot of ways to get data. We have not seen very many data moats that actually make sense, even in science. Deep learning is the latest area where people think there’s data network effects. The problem is there’s innovation in deep learning to actually do deep learning on small data sets now. So even the science strains underneath that in a way that’s undermining it. So that’s risky.
Elad: I’d love to talk a little bit about getting the next product in the product cycle. How do you start iterating and how do you come up with your v2 or your new product area? And how do you think about percent investment in core adjacent versus completely new areas? Google had a 70-20-10 framework. Do you think frameworks like that work?
Marc: I don’t really like the numeric version of the answer because it’s kind of what big, dumb companies do. They say, well, we invest R&D as a percentage. But anybody who’s actually worked in R&D knows it’s not really a question of money. It’s not really a question of percentage of spend. It’s who’s doing it.
What I’ve always found is this: give me a great product picker and a great architect, and I’ll give you a great product. But if I don’t have a great product manager, a great product originator—it used to be called a product picker—and I don’t have a great architect, I’m not going to get a great product.
Elad: Google’s framework, by the way, was percentage of people. So it was 70% of human resources versus financial. But fair enough.
Marc: But it’s kind of the same thing. I mean, it’s a fine concept, but it begs the question: Who are the people?
I would take more of a micro-view of it. Which is: Okay, how many great product pickers do you have, people who can actually conceptualize new products? And then how many great architects do you have, who can actually build it? Sometimes, by the way, those are the same person. Sometimes it’s a solo act. And sometimes that’s the founder.
As you scale, you need more of those people. But I always think it’s a matter of, okay, how many of those people do you have or can you go get? Or, back to acquisition, how many of those can you acquire? And then basically that’s the number of products you can be working on. You organize R&D around that, in my view. You want to have a relatively flat R&D structure. You basically want to have autonomous teams, where each team is guaranteed to have a great product person and a great architect. And that’s the model.
This is why I always ask people, okay, let’s just do an inventory of how many of those people you think you have. And even at really, really big companies, it’s not a large number. Even at giant companies there might be ten or twenty of each, maybe. And then you build the rest of the engineering organization around those people, including all the rest of the stuff that you do for recruiting and onboarding and all that other stuff. But at the core of it, who do you actually have who can conceptualize new products, and who do you actually have who can build it?
If it’s the founder, fair enough. But you need to construct the organization so that the founder has the time to continue to do that. So that gets to all the questions around when you need an outside CEO or when you need a COO. And then, even the founders who can do that themselves eventually run out of time. And the challenges get bigger. So how do they attract and retain people who can pick up some of that work for them?
Elad: If it does get distributed, do you have any perspective on whether it should be a general management, verticalized structure versus a matrixed one?
Marc: I generally think matrixed is death, so I’m always pushing companies to go to a flat structure of independent teams. I’m really on the Jeff Bezos program on that, the two-pizza team thing.2 I think hierarchies kill innovation for the most part. And I think that matrixes are just lethal in most cases. There are exceptions, but in most cases, you need original thinking and speed of execution, and it’s really hard to get that in anything other than a small-team format, in my view.
This interview has been edited and condensed for clarity.
* * *
2 Jeff Bezos favors product innovation teams with five to seven people—no more than can be fed with two pizzas. See eladgil.com. [https://www.fastcompany.com/50661/inside-mind-jeff-bezos]
CHAPTER 1
The role of the CEO
The role of the CEO: Managing yourself
In most business books, the role of the CEO boils down to a small number of key responsibilities. The CEO:
Sets the overall direction and strategy of the company and communicates this direction regularly to employees, customers, investors, etc.
Hires, trains, and allocates company employees against this overall direction while maintaining company culture.
Raises and/or allocates capital against this overall direction.
Acts as chief psychologist of the company. Founders are often surprised by the extent to which people and organizational issues start to dominate their time.
Many books emphasize the first two points—corporate strategy and culture setting. However, you will find that in practice you have little time in a high-growth, rapidly scaling company to think deeply about those points until you hire a strong executive team and manage your own time properly.
Instead of covering strategy-setting and big picture stuff, I want to instead cover three key tactical duties of a CEO that often go under-discussed: how to manage yourself, your reports, and your board of directors.
First and foremost: managing yourself. Because if you fail at that, you’re headed for burnout—and both you and your company will suffer.
Personal time management
As your company scales, the CEO role will need to scale with it. The demands on your time will grow nonlinearly, and more and more people will ask for your time, including members of your team, your customers (especially if you run an enterprise company), and various external stakeholders such as investors, the press, other entrepreneurs, etc. As CEO, you will need to find a way to get leverage on your time—and learn to say no a lot.
Key components of personal time management include:
Delegation.
Auditing your calendar regularly.
Saying no more often.
Realizing your old way of operating will no longer work.
Finding time for the things you care about in life.
Delegate
There are a few good ways for first-time managers to learn to delegate:
1. Hire an experienced manager to run a team and watch how she does it. You will notice she probably tends to hold regular 1:1s (to stay in sync with her team) while also trying to give the most rope to the team members who run most independently. The very best executives tend to be a combination of a router (i.e., they send items on to other people for execution and end meetings with few to no action items for themselves
), a strategist, and a problem solver (i.e., someone who can identify when the team is off track and dive in to help).
2. Trial and error. Try delegating and try again until it works. This will be part of any approach you take. You need to build some pattern recognition for when someone is starting to flail (they seem overworked and rumpled, they’re late to every meeting, etc.) or when people have more slack in their time. You will learn to iterate on the size of responsibilities, teams, or projects you give someone and build confidence in their skills as they continue to add to their stack.
3. Get a formal or informal mentor. Ask a board member, angel, fellow entrepreneur, or executive you trust to mentor you on management and delegation. Alternatively, assemble a set of CEOs whose companies are at the same stage as yours, and meet them regularly for dinner so you can compare notes—you can learn a lot from your peers.
4. Get an executive coach. Most of these are bad (since any random person can dub himself an executive coach without any basis for it). But some are quite good and can help you think through how to increase your effectiveness, including proper delegation.3
However you choose to learn this skill, you’ll also need to watch out for key signs that you are not delegating the way the CEO of a high-growth company needs to:
You tend to leave meetings with many action items for yourself.
Someone now “owns” an area you used to run, but after 4-8 weeks you find you are still doing most of the work or weighing in on every decision, however small.
You feel the need to jump in on every email thread or attend every meeting across the company.
You can also over-delegate and abdicate all responsibility for, or involvement in, areas that are crucial to the success of the company. I have seen at least one CEO go into hard-core avoidance mode or get distracted by the external spotlight. This approach can cause many problems for the company, but it is less common, so I do not address it in depth here.
The biggest reasons CEOs don’t delegate:
They don’t know how.
They don’t have lieutenants they can trust or who have the right skill sets to operate at scale. See the section in this book on hiring executives to address this issue.
They are stuck in a work mode that made sense for a smaller company but doesn’t for their fast-growing organizations.
The latter can be addressed in part by auditing your calendar and asking yourself, “Do I really need to do this? Or can someone on my team do it instead?” When in doubt, force yourself to delegate. You can even set a weekly goal for the number or percentage of meetings you stop attending or items you start delegating.
Audit your calendar weekly, then monthly
I encourage you to go through your calendar once a week and add up where all your time is going. (Once you become proficient at this kind of auditing, bumping that down to once a month or once a quarter should be sufficient.) If your involvement is not uniquely crucial to the success of a task, or an item is not core to your personal life, you should figure out how to off-load it. In most cases, that will boil down to simply learning how to say no, which we’ll talk about next.
Often when I help high-growth CEOs audit their calendars, we find a few common types of meetings they should skip 90% of the time:
First-round interviews. You don’t need to be part of every first-round interview for every candidate. You can still talk to people in later rounds or as a final sell. Executive hiring is different and as CEO you may need to actively reach out to candidates. More on executive hiring in a later chapter.
Sales or partnership meetings. Who can go on your behalf? I am not advocating you skip all such meetings, but some you can probably skip. Note: Silicon Valley product- or engineering-centric founders can often have the opposite problem of not talking to their customers enough. If you are a technical founder selling to enterprises, you will need to make the time to meet with customers regularly.
Every internal engineering, product, and sales meeting. When do you really need to be there? Who can you delegate to? You can also move from a lot of point meetings (attending every engineering or product sub-team meeting) to a simple process that brings everyone to you for important decisions (“Weekly product synch with the CEO”).
Random external meetings. See “Learn to say no” below.
If you identify areas that consistently consume your time, but should no longer require the CEO, you can either delegate to someone on your team or hire someone to take them on. Hiring is often easier said than done if you are swamped, but you must force yourself to carve out the time.
If done right, after 4–8 weeks of self-auditing you will start to open up time to focus on strategy and the other key components of your company. You need to be focused on the most important things—not on everything. You also need the ability to take a step back and look at the big picture. If you spend all your time on the tactical brass tacks, you will steer the company in the wrong direction (or people will self-direct in the wrong direction).
Learn to say No
One of the most important things you will do as CEO is learn to say no to those things that are not the best use of your time. Just as at some point you stopped taking out the trash and ordering food for your startup, there are other items you should stop doing or push back on.4 For example:
Items for your calendar audit. As mentioned above, you can skip things like first round interviews and many of the internal meetings you used to attend. Note that I am not advocating that you abdicate all involvement or responsibility. However, debating the nuances of database schema may or may not be the right thing for you to be involved with (unless your company sells a database product).
6am customer or partner meetings. If your East Coast contacts will meet with you at 9am ET, they will also meet with you at noon ET. Don’t take every meeting at any time—that will just exhaust you and not really help progress. While doing whatever it takes for your customers continues to be crucial, you need to create limits so you don’t burn yourself out. I have seen a number of CEOs continue to act like they are in scrappy startup mode years after product/market fit—often resulting in burn out.
Every press opportunity. Do you really need to talk to Dog Life Monthly Webzine for their “SaaS entrepreneurship” issue?
Every event. Choose the one or two highest-impact events to attend or speak at in a given quarter. You do not need to be everywhere. Be selective about the events you attend to free up time for other items.
Excessive networking. Networking is a crucial part of being an entrepreneur, but take a look at your calendar: If large blocks of time are taken up each week with meeting other entrepreneurs or investors, you are probably not being focused enough with your time. Put networking into consolidated blocks so the switching cost is low, and focus your outreach on things that are actually meaningful to your company or to you personally.
Unnecessary fundraising. Fundraising is a necessary side effect of having a company that needs capital to scale, but it’s also hugely distracting. Some people seem to fundraise for no reason other than they think they should. Or because “a VC approached us, so we figured we may as well talk.” Only fundraise when you are ready to do so and it supports a set of objectives for your company.
A big part of the transition from “hungry, no product/market fit CEO” to “high-growth CEO” is realizing that the amount of downtime you have will continue to collapse. You will need to say no to things that you would have readily accepted before.5
Realize your old patterns of work can no longer apply
When you go from a small startup to a larger one, one of the unexpected transitions is that the sorts of tasks that you can uniquely do to make your company successful change. While you may be an excellent programmer, if your team now has 50 or 500 engineers, it is unlikely that writing code is the best thing you can contribute as CEO. Similarly, your old patterns of personal and professional time management will break down as more people either need, or simply
want, your time and attention. It may be painful, but to scale your organization and move ahead as CEO you will likely need to let go of certain parts of your prior roles that you enjoyed or thought were important.
“A common trigger of founder burnout is finding yourself working on things that you hate.”
—Elad Gil
Take vacations and time off
One of the mistakes I made in my first two-and-a-half years as CEO of Color Genomics was that my vacations often were not real vacations. On my first anniversary trip with my wife, I spent half a day on the phone with a potential major partner. (Incidentally, the partnership did not work out.) On subsequent trips and vacations, I was constantly online, on the phone, and effectively trying to work full time while supposedly out of the office. This was also true for weekends—I was working every day of every one. This path can only lead to burnout, and I now try to truly unplug when away.
A CEO’s energy levels dictate those of the team. You should find time to take vacations and truly be offline—otherwise you will lose energy, burn out, and potentially give up. This means once a year you should take a real one- to two-week vacation, and every quarter you should take a three-day weekend. If you are working every day, I strongly suggest that you start enforcing a personal no-work day at least once a week. Burning out will not help you or your company deal with all the stresses of scaling.
