What has happened to our “startup culture”? We are hearing about how greed and focus on short term profit brought world’s financial system into the verge of a complete collapse but heard nothing about other financial institutions misbehavior. Although large banks and their bosses blamed for the problem and punished; better to say singled out, we see same symptoms in all other sectors of investment and business related echo system like VCs. As I mentioned before, VC world is also about to change. From early 2000 until mid 2008, VC industry transformed from a real vibrant business into a fat and blind profit driven industry. VCs were just throwing money into “potential” companies/ideas and wait outside the ring to see what is going to happen. It was not 80s or 90s and they were not Kleiner or Moritz who build the company with entrepreneurs. VCs were the real force behind exploding job creation during 80s and 90s, by supporting real entrepreneurs and creating real companies. Time is passed for partners who use pre-IPO family and friends options and huge bonuses to milk their own baby. It is time for LPs to take a close look at the VCs and really vet them. Clearly something went wrong in the last ten year in the VC industry, let’s fix it for the next ten years.
In a recent Wall Street Journal article, I came across one my favorite questions. Do techies make good leaders? The old school managers, always skeptical about techie leaders, would say no. Technology guys will say; they are the only choice.
Most of the high-tech companies are relatively new. Therefore there is no such a thing as legacy management procedure in place. Also, high-tech companies are super dynamic by nature. A product today will be obsolete in ten years time. Same as its management procedure, planning and other related process. Procter & Gamble or Jonson & Jonson management procedures and therefore their leaders can and should follow same rules. In these companies, the core products will change but not dramatically. Apple or Cisco does not have a core product for more than ten years! Legacy switches and routers are replacing with cloud computing and virtual switches. iPods are replacing by iPads and God knows “i” what in five years time. All the management procedures and process which developed for one family of product should change in couple of years to be compatible with new needs and changes of new products.
Whereas old school managers are process oriented and follow a solid set or rules, techie-leaders and managers are more dynamic. They are more fascinated by product and technology behind that rather than management process. Therefore, they can understand the changes and change accordingly. For techie managers, the product is the most valuable asset not the management team. Therefore, they value the brains behind the product rather than anything else in the organization and can maintain the values and brains behind the product. A techie company needs a techie manager. If a technology company is successful with a non-techie leader, probably it is already changed to a non-technology company.
There is a big difference between a good “idea” and a good “opportunity”. Most; if not all, of successful companies have been created based on a good opportunity rather than a good idea. I have seen university professors with fantastic ideas, but because of their lack of inside industry visions, there is no platform for their ideas to translate into a real business opportunity. Real opportunities are rather simple ideas with a very clear vision toward a real product. You need to create a team to translate a good idea into a good opportunity at the end!
For me, product development is more of an external affair than an internal one. Defining a product can not happen in vacuum! I often come across companies with totally isolated verticals; R&D and Engineering groups. Although it may be OK for huge companies, for small and mid-size companies it will end up in total disaster. While the CTO and her/his group are dreaming about what is the real need out there, it is engineering and deployment groups really wrestling with customers, try to address their present and future needs. The usual line of defense; we bring R&D guys in the loop! Guys, it is not going to work. Product development is a constant struggle, it is a constant try and error procedure whether we like it or not. As I mentioned, in a small company, my product is my technology and my technology is my product. My VP of engineering is my CTO and my CTO is my VP of engineering. Split these and you will end up with a total disaster.
Last night I was talking to one of my old friends. He is a serial entrepreneur; starting couple of technology companies and had nice exists. He asked me what comes to my mind when I hear the word start-up; how old, how many employees, etc. And I didn’t have a good answer for his question!
I have seen lots of two years old companies, with millions of dolor raised as a start-up but act as a hundred years old big corporation. CEO is sitting in an office far away from engineering group and the real actions. People are fragmented into different groups. There is no transparency. And the famous “all hands meetings” once in a while!!! When you are working in a company with less than 50 employees every working day should be an all hands meeting. Start-up is a culture, a way that you mange and run a company, a state of mind to be involved in every details and actions. Size and years in operation are really secondary factors.
A good manager needs to spend more time with her/his team rather than his boss or peers. I have seen many middle managers working long hours behind closed doors to prepare weekly reports for their managers and cut themselves from day to day operations. These folks rely on high level and brief interactions with their directors. They do not spend time themselves to go through issues and picture the reality.
This can be a bigger problem in smaller companies. Because of the size and limited resources, you need to be more involved as a manager in day to day job. In start-ups you do not have the leverage of a highly structural organization. There is no clear vertical isolation between different functions and groups. Confusion is part of the game! But it is natural to solve the problem at the spot rather than pass it to other people. In a small organization you do not have that leverage.