High Growth Handbook

by Elad Gil

  2. All the paperwork for the separation agreement with the executive. Your lawyers can prepare this for you. You should also decide on the severance you’ll be offering and other details up front.

  It is sometimes helpful to write out a script for the discussion. Whatever you say, it’s important that you:

  Be firm. This is a done deal.

  Be professional.

  Be clear on your reasoning.

  If you have been managing your employee well, this should not be a big surprise to him. That is, you should already have had a series of conversations around fit, responsibilities, alignment, etc.

  3. Transition plan. Who will manage all of this person’s reports? Make sure to clearly communicate whether this change to a new manager is a short-term one, an interim solution, or a permanent change.

  4. Communication plan. You should have a clear view of what will be communicated when, and to whom on the team. If the person (or your company) are especially high profile you will also want to have reactive press ready to go. Alternatively, you and the person being fired may negotiate on, or agree on, a common story to be shared with the press or in a tweet. Don’t be petty. Allow the executive to leave with dignity and reputation intact.

  For example, a communication plan when letting go of Bob, VP of marketing, might look like the below. This is an idealized plan and you should not expect things to necessarily go so smoothly.

  Tuesday, 9am: Meet with Bob and inform him that he’s being let go. Discuss how to position this with others in the company and agree on approach.

  Tuesday, 10am: Let your direct reports know that Bob has been let go. Explain concisely some background on the decision and provide clear guidelines on how your team should communicate it to their reports, exception handling, etc. Explain the transition plan—e.g., that Sarah, who runs sales, will also run marketing, and that this change is permanent. You should obviously have already discussed this with Sarah in advance.

  Tuesday, 11am: Along with Sarah, meet with the marketing team to let them know about the change.

  Tuesday, 11:30am: Email the company to let them know about the change. Explain the transition plan and the objectives for the team (if well-defined and consistent).

  If there are any concerns of impact to specific people on the marketing team, you or Sarah can meet with them to discuss, depending on the context and relationship.

  Friday weekly all-hands: Be ready to answer questions, with a well-prepped FAQ.

  How to hire great business development people

  Great business development (BD) people are hard to find. You may meet a smart, charismatic, articulate BD person who can’t get anything done. Or a highly networked deal person who leaks value when he misses all the details of a deal and structures terrible terms. It can be hard to differentiate between what deals people actually accomplish versus what they take credit for in terms of a product’s success.

  So what should you look for in a BD person?

  Great business development people

  The best BD people are:

  Smart people with lots of raw horsepower. Smart, creative, and think well on their feet.

  Articulate/good communicators. Need to communicate well with both internal teams (engineers, PMs, lawyers, execs) as well as the customer or partner (which may include their legal, engineering, and deal people).

  Creative/fearless in deal terms. Push the envelope on what is possible and are willing to make a crazy ask of the partner or client. You never know what someone will give away until you ask.

  Able to get shit done. Have a history of closing multiple complex deals with creative or aggressive terms. One person who worked for me at Twitter closed three or four partnerships while he was a part-time intern working remotely during his school year.

  Structured/can run a deal process. Structure is underrated in deal people. You want someone great at shepherding all internal and external stakeholders through the various phases of a deal (ideation, pitching, negotiating, structuring, closing, implementing).39 You want these people mining a list of prospects, aggressively framing a negotiation, and setting up internal prep meetings before calling external parties. Unstructured deal people create churn internally due to a lack of consensus on external gives or lack of planning for a negotiation.

  Detail-oriented. Reid Hoffman once told me he expected his deal people to read every word of every contract, including all the legal language. This allows them to catch all sorts of gotchas that are otherwise buried in unexpected ways and to think through the implications of what the contract says.

  Part lawyer. Able to pick up and grok key legal nuances, even without an overt legal background.

  Good culture fit/put the company first. You want your businesspeople, like all your employees, to put the company first. There are all sorts of ways businesspeople may benefit themselves rather than the company (more on this below).

  Able to work well with others across the organization.

  Pragmatic and keep big picture in mind. Figure out what is important, optimize for it (80:20 rule), and get the deal done. Don’t optimize for little things that don’t matter, except as a negotiation tactic. Similarly, some deals should not get done. Great deal people will take a step back and decide whether to walk away, and they won’t try to force a deal to happen if it shouldn’t. Some of the best “deals” are the ones that don’t happen.

  Able to understand partner and market needs. Understand what partners really want (versus what they claim they want), as well as trends in the marketplace that may impact both their company’s and as well as the partner’s leverage and needs.

  Tenacious. Deals can take a long time and a lot of back and forth. Bad deal people give up toward the very end to “just close the deal” and may leak enormous amounts of value that they didn’t need to give up.

  Relentless. Sometimes you need to keep knocking at a door over and over until someone finally answers.

  Moral compass. Like all employees, you want people who will do the right thing even if it is uncomfortable or against their self-interest to do so.

  Bad Business Development People

  Bad business development people may exhibit the following:

  Great at selling, bad on follow-through. Some BD people are charming, fun to talk to, and really smart. Unfortunately, they have terrible follow-through and can’t seem to get anything closed. They may be full of empty excuses for why they had to give on a major term that is important to your company. The only way to screen these people out is reference checks, as they are great at selling, poor on substance. Raw charisma is drastically overrated by technical founders. Don’t be fooled just because someone is friendly and charming.

  Disorganized/unstructured. Fly by the seat of their pants, don’t send follow-ups, or communicate poorly internally. Needless meetings or internal churn often result.

  Leak value. Often overthink what is “fair” for the other side. Make too many assumptions about what is important to the other side and just give a lot of terms away. Or, they just want to close the deal at all costs versus thinking through what is actually good for the company they work for.

  Don’t think like an owner. Bad deal people don’t think like business owners. They treat the company’s money or resources as not a big deal to use and will give away extra value in a negotiation because “it doesn’t matter,” “it’s within 20%,” or the like.

  Don’t think the details matter. See above.

  Outsource too much. Bad deal people become too dependent on other company functions—for example, not understanding a legal term that comes up over and over because “that’s Legal’s problem.” Sometimes terms important to the business are buried or hidden as legalese or “technical specs.” A great deal person will ferret these out.

  Optimize for themselves and their network versus the company. As gatekeepers to external parties, some business development people may use this point of leverage to benefit themselves. They may build relationshi
ps at the expense of the company by being too easy on a deal so that the partner likes them. Or they may constantly network at external boondoggles and on panels to build their own reputations, rather than working.40

  Display a cowboy mentality. Some deal people go off and strike a deal, or mention terms to an external party that you can’t back away from, without any internal discussion or approval. They may act defensive when questioned about this and feel they are “getting it done.”

  Are emotional. Deals have a lot of ups and downs—you need an even keel.

  Spin things internally. Deal people need to be able to “turn it off” when it comes to selling something internally to their boss, peers, or executive team. You need to hire people who won’t BS or spin internally, even if it is sometimes their job to do it externally.

  How to screen for a great business development person

  History of deals. What deals have they themselves negotiated? How complex were the terms? What is an ask they received that no one else at the company believed they would get? What is a clever deal hack they pulled off? What impact did the deal actually have on the company?

  References. Deal people often have lots of friends, as their job is outwardly focused and they can be charismatic. They may give you a long list of meaningless references (e.g., friends at their current company, who actually don’t know much about their work but think they are a “great person”). Get references from people who worked with them directly on deals. Back channel more information on them. Ask about the specific deals they worked on, how relentless and creative they were, and the tangible impact their deals had on the company. Did the terms end up working out or backfiring? Were there edge cases they did not think about that came back to bite? Did they champion a radical position that paid off big?

  Follow-through. How is their follow-through during the interview process? How structured are they? What approach do they take in negotiating compensation?

  Culture. What are they optimizing for? Title? Equity? Future growth? Something else? How do they fit in your culture? Businesspeople will be different from technical or product people in a number of ways, but they should still hold to your core cultural values.

  A great deal person is not usually a great partner manager

  Don’t expect the people who are great at thinking of and executing deals to be great partner managers (post-deal management). You will eventually need to find both types of people for your team.41

  * * *

  38 See related post by Ben Horowitz. Link on eladgil.com. [https://a16z.com/2011/08/24/preparing-to-fire-an-executive/]

  39 Thanks for Marc Leibowitz for spelling out the various deal-making stages, as well as other ideas.

  40 Some external speaking or networking events may be useful to your company. But the businessperson should choose the small handful of events that really matter, and have specific goals for them, rather than just claiming “all exposure is good exposure.”

  41 Thanks to Marc Leibowitz, Clara Shih, and Kim Malone Scott for feedback, ideas, and comments on versions of this chapter. Read the original post at eladgil.com. [http://blog.eladgil.com/2013/02/hiring-great-business-people-is-hard.html]

  SCALING IS MORE THAN A NUMBERS GAME

  An interview with

  Mariam Naficy

  Mariam Naficy is the founder and CEO of Minted. She founded Minted to create a retailer that could stay fresh forever, using crowdsourcing and analytics to bring the best design to market faster than anyone. She has pioneered consumer internet models since 1998, when she cofounded the first online cosmetics retailer, Eve.com, which was sold for over $100 million. Mariam sits on the board of Yelp and Every Mother Counts. She is a Stanford Business School and Williams alumna.

  Mariam Naficy knows a thing or two about scaling. Since the e-commerce site was launched in 2008, it has grown beyond custom stationery to sell limited edition art, housewares, wedding goods, and more—all created and curated by an ever-expanding global design community.

  Naficy’s latest venture has grown while maintaining a notably lean team, so I was eager to learn how she approached scaling, and what lessons she would share with entrepreneurs facing high-growth for the first time.

  In the conversation that follows, she shares her insights into everything from how to hire GMs for new business units to if and when to tackle the technical debt that often accompanies rapid growth.

  Elad Gil:

  Minted has grown to include several verticals, and 200 employees, in the nine years since you founded the company. What would you advise other entrepreneurs to keep an eye on as they try to expand their companies?

  Mariam Naficy:

  A lot of people talk about scale as it relates to the size of the company—that is, numbers of people. But I actually think there’s another dimension which really significantly affects scaling, and that’s the differentiation or complexity of the business.

  Reid Hoffman, for example, tends to focus on, “What happens when this company is like a village, versus a city”—you know, his whole analogy for the size of a company. I’ve seen companies that have a very basic model that they’re not changing a lot have an easier time scaling at first. The kinds of things that I’ve seen really complicate scaling are when a company, for example, enters a new vertical. Michael Porter’s work on this, his seminal article called, “What Is Strategy?” is a really, really good thing to take a look at.42 It talks a lot about how there are different activity maps that underlie different businesses.

  At Minted, for example, we went through this whole process for our strategy this year where we really asked ourselves the tough question, “How many businesses are we actually in?” Because the activity maps that underlie the strategic advantage in some of our businesses are actually quite different.

  What I’ve found is that the ability to scale is complicated if you are both growing fast and developing the business through different verticals. In my space, in e-commerce, there are those who have focused on one thing, and there are those who’ve spread, and spread very fast, in some cases. There are e-companies like Amazon, which started in one thing, like books, then added on music and other things at a fairly fast clip, successfully.

  The way that I think about scaling is: What are the core activities? For example, if I’m acquiring one customer base, then hopefully I’ve got an acquisition team that is able to scale and do one thing repetitively over and over again. The functional team becomes more and more experienced, which really helps with scaling. And if you’re doing that, and it’s not differential across all these businesses, then you’ve got a better scaling model, right?

  Elad: So you’re basically talking about repeatable versus non-repeatable scaling, in terms of certain competencies you develop for certain activities. The canonical example is a company that builds one software product. You’re Google, and all you do is focus on distributing search and growing and growing and growing your search market share. But then suddenly you build Gmail, and you’re like, “Do I have the same skill sets? Do I have the right people in place? Do I know how to get acquisition for Gmail instead of search?”

  Mariam: And not only that, “Do I have the right innovation infrastructure?”

  Elad: What have you found to be the toughest part of that then? Is it finding the right people, is it developing new skills as a company, is it finding the right customer base? How did you guys think about it?

  Mariam: When you do these expansions or extensions—completely new entrepreneurship within a company—you’re trying to find some overlap where some kind of core competency can be grown or monetized more. So, for example, Minted’s design community is the key asset we’re trying to parlay into new verticals. And hopefully, hopefully, our customer base too. Hopefully we’re saying it’s the same customer who’s going to continue buying other things from us.

  Sometimes you go down this path and you realize, that’s great, but there are actually some operational things that are very, very different tha
t are important to the success of the new business. Or some customer acquisition aspect or experiential aspect that creates a need for very different strategies and very different kinds of thinking.

  Most importantly, as the entrepreneur or CEO in charge, you need to understand what the strategy should be. Meaning that—even if it is the same customer and the same designer, let’s say, that’s making the goods—acquiring the customer in art, for example, may be very different than acquiring the customer in stationery. Even transferring an existing customer to a new vertical might require quite a bit of entrepreneurship.

  It’s not as simple as saying, “I’m going to just hire somebody to just run this thing.” It’s about having to split your time executing your way successfully into these different businesses. So hiring people to run these verticals or to do these things becomes quite difficult, because you have to find people who are very good entrepreneurs. You need to find people who are inventive, because they’re still inventing their way into early-stage businesses.

  But the thing is, if you’re really successful, over time—unless you’ve got an engine that really will not stop growing—a lot of very large, mature companies have a portfolio approach to investment, where they say, you know, “I’m going to take 15% and put it into completely exploratory things. I’ll take 20% and put it into something that’s past the exploratory gate, and now I’m going to try to commercialize it. And then another—the rest of it, let’s say 60%, 65% of it is incremental improvement in the core.”

  Elad: So when do you think is the right time to expand out of a company’s original product or business line? Google is a great example, where it took them, three, four, five years before they started doing Gmail. And even then it was very controversial internally. So how do you know that it’s the right time, or that you have the bandwidth to be able to add a new line of business or a new vertical or to internationalize?