Duet Partners
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Weekly Briefing Note for Founders

17th December 2020

This week on the startup to scaleup journey:
  • Founders must create a 'performance culture'
  • Team Building In The 3 Stages Of A Startup’s Lifecycle
  • Pitch numbers rather than words
  • Recharging for 2021

1. Insights of the week

Founders must create a 'performance culture'

Most founders would subscribe to the notion of a so-called 'performance culture', even claim to have one, but not all appreciate what that truly means, what that takes, and what you have to give up. The past year has been a brutal testing zone. For some it will be a year to forget and for others the unique circumstances have provided an environment to forge ahead. But it would be wrong to attribute the success of this latter cohort entirely to the market. What we have witnessed, several times at first hand, is the 'making' of new leaders, rising stars that have driven their businesses forward with amazing pace and intensity. The single-minded pursuit of goals, driving their people to become the best version of themselves and truly living the 'performance culture'.

To be clear, this is not about effort. If that were the case every founder would be a hero. It's about purpose. Frank Slootman, CEO of Snowflake - the cloud-storage firm that went public in September at $33B - wrote an uncompromising article back in May 2018 entitled 'Amp It Up!' . This is a shot in the arm for any founder and epitomises the 'performance culture' mindset: "It is breathtaking how slow, substandard and unfocused many companies out there get through the day. And think nothing of it. The lack of energy is palpable. There is performance upside everywhere. As a leader ... you look for and exploit every single opportunity to step up the pace, expect a higher quality outcome, and narrow the plane of attack. Then, you relentlessly follow up and prosecute at every turn. Yes, it is confrontational. That is pretty much what CEOs do all the time: confront people, issues and situations."

Some say that the performance culture isn't a fit in the very early 'collegiate' days of the startup. It's dangerous because you will drive people out of their comfort zones. But culture impacts every hiring decision right from the beginning and you are not hiring for comfort. You want drivers not passengers. Great startup managers embrace the performance culture and make it reverberate throughout the whole team. Most new hires find this an incredibly liberating experience and will rise to new levels. But performance-centric thinking like this doesn't trend well with prevailing attitudes and the 'entitlement mindset' that pervades many established companies. It takes conviction and courage to execute. For Slootman, the proof is now well and truly in the pudding.

Team Building In The 3 Stages Of A Startup’s Lifecycle

Hiring outstanding people is an essential capability of any founder. The process always takes longer than expected, so experienced founders plan the organisation chart at least 18 months ahead and work back. Working to this lead-time gives a better chance of hiring success when senior roles can sometimes take 9 months or more to fill. But this takes courage as well as planning, as predicting future roles when so much is fluid seems risky. Experienced founders mitigate this risk by building a hiring pipeline and very deliberately aligning 'candidate' profiles with the stage of the business. There are at least three distinct stages in a startup’s lifecycle:
Stage 1: Founding team searching for product-market fit
There’s a set of people you know you can work well with in an ambiguous environment. You have shared trust even if you don’t know the path or destination. You’re checking some functional boxes across the early team, but most of all you have a unique insight and ambition to make it work. High velocity of experimentation is critical. Don’t worry too much about defining management and organizational structure at this stage. Simply figure out how you can move as quickly as possible, iterate, and build to get to product-market fit. Whatever you do, don't be tempted to hire ahead of this stage. Premature scaling is the biggest startup killer.
Stage 2: Once you find product-market fit, rapidly scale
In this stage, you are experiencing rapid adoption of your product. As you grow from ~15 to 50+ employees, you need to put more structure and process in place to develop early contributors into functional leaders, and to augment them with other leaders. For example, if you have a committed customer service individual, they may not be a great VP of Customer Success, even if they’re the closest existing team member to the role. Evaluate every new position carefully. This scale-up process typically starts with the most pressing challenges, normally around the go-to-market. You’ll need to navigate these challenges as you start to build out your management team. A critical early hire will be the HR leader who should report directly to the CEO.
Stage 3: Scaling the org and startups within startups
The 75-500 person stage is the most challenging organizationally. You’ve achieved some level of scale, you're likely developing an international footprint, and you’re still growing quickly. At this stage, it is necessary to put more structure in your organization, and that can often be uncomfortable. Organizations without appropriate structure and leadership start to break down as they approach the 100 number ahead of Dunbar’s number of 150. So, it’s critical to get some experienced leaders in place before then. Selectively promote top management talent alongside to demonstrate a culture of opportunity. For more insights on this topic, listen to the Hopin growth story below.

Pitch numbers rather than words
One simple test for judging the likely effectiveness of an investor pitch is whether numbers are a central feature. There are 3 reasons: (i) Investors like to quantify things as it helps their pattern recognition. (ii) Numbers are revealing, so if you shy away from them it can appear that you might be trying to hide something. (iii) Using (lots of) words where numbers would be more insightful just creates irritation. Legendary VC Bill Gurley says, "It’s nearly impossible to convey complex numerical arguments with only words. Charts, graphs, and tables are orders of magnitude more efficient at this task. The best entrepreneurs I have worked with are all intensely focused on the numbers."

As a result, investor decks with very few numbers just don't have impact. They will neither convey the scale nor precision required and you will struggle to demonstrate mastery of insight. Intuition is critical at the beginning, but if you can't measure it, it's hard to improve it. This could be your market analysis (TAM, growth rate), your customer cohort analysis, your pricing model, your pipeline, your team size, your timeline, your raise size, your valuation target and many other KPIs. When you turn each slide, numbers provide a focus for the eye and allow you to make everything appear more tangible. A revealing trend analysis, wherever possible, will invariably heighten interest. Your story should almost 'wrap' around the numbers.

Along with enticing graphics and images, numbers are also the key to reducing wordy pitches. They allow you to both signpost and validate your story. If you're struggling with this ask yourself if you have the numbers you need. It may not be the pitch you're having problems with it might be that you simply don't have the data. Worse, the data at hand may be actually undermining the story you really want to tell. Work this out well in advance. You can be sure that in their investment analysis a big part of what you tell investors will get boiled down to figures, especially as you start to grow. Spoon feed the data to determine where you want to convey precision and where you want to convey scale. Above all, use this to weave a memorable story.

Recharging for 2021

One of the best pieces of advice any board can give their CEO is to take some time out over Christmas. This year, unique circumstances make this harder than ever, but it's needed more than ever. In the era of remote working, delineating between work time and home time has become significantly harder. Even the commute itself, that regular moment to have some rare thinking time and bookend the day, has been lost. Everyone must find their way to recapture this, to reflect, to consider the future.

We devote so little time to the future, too often caught up in the immediate. But long-term thinking has the biggest payoff at the greatest moments of volatility. This is one of those times, so we must seize it. The Greeks saw leisure as a time for learning. In fact, the etymology of “school” comes from the Greek word for leisure, skole. In that spirit, these coming weeks are an opportunity to learn something new, to be inspired. With this in mind, we have been helping founders update reading lists. Our top recommendations are included below.

Leisure is not always a time to retreat from the world, but to indulge in it. This might seem like a big ask in present circumstances. But the value of this free time depends not on the activity you pursue, rather on how much satisfaction it gives you. Some will find this in reading, and a growing number in writing. Researching new subjects then spilling the mind onto the page can be cathartic. Meaningful leisure can look like work, but won't be if you change things up. And a change is as good as.... 

2. Other pieces that are really worth reading/listening to this week: 

20VC: Hopin, The Breakout Startup of 2020
Johnny Boufarhat is the Founder & CEO @ Hopin, one of the fastest-growing companies on the planet, providing an online events platform where you can create engaging virtual events that connect people around the globe. In the last 13 months, Johnny has raised over $174M and has grown the team from 10 people to over 210 people in 37 countries. This is his incredible story of how to thrive in a remote business environment.

Jeff Bezos's Most Important Investing Lesson
While there is little doubting his business acumen, attention is rarely devoted to his thinking as an investor. The recently released Invent & Wander: The Collected Writings of Jeff Bezos represents the most comprehensive collection of Bezos's thinking on a wide variety of subjects, and the title itself sums up a core philosophy of Amazon-innovating and experimenting. And there's one theme the Amazon chief keeps coming back to about his approach as an investor and acquirer of businesses and that's the concept of missionary vs. mercenary.

The complete list of Global Unicorns
CB Insights has published a definitive list of unicorns. At the end of 2013 there were 43 unicorns globally. Today there are more than 500 startups with $1B+ valuations. This is a useful list to examine (it is also sortable) to see the key sectors and countries that have provided the fertile environments for growth.

Europe’s biggest home-grown tech upstarts are still choosing the US for their IPOs
An article in Quartz highlights the leakage of some of Europe's most valuable companies to the US public markets. "The average market capitalization for a European tech company listed domestically is $1.6 billion, and the median is $49 million. Those that go to New York have a mean market capitalization of $5.7 billion and median of $970 million, which is around 20 times larger than the median for tech companies on European exchanges. Since 2000, about a quarter of Europe’s tech unicorns have listed in the US."

Hide Your Work
For those seeking to improve their writing skills, another thought-provoking piece from the wonderful David Perell. "Writing begins with a creation phase and ends with a deletion one. Removal is the essence of a final draft. Your scrap folder of deleted words, let alone all the thoughts you had before you ever laid your fingers on the keyboard, will always be longer than what you published. Only by silencing the part of your ego that wants to advertise your work ethic can you create a streamlined experience for your reader." 

Our Christmas reading list
5 recommended reads to inspire your thinking over the next few weeks:
21 Lessons for the 21st Century - Yuval Noah Harari
Thinking fast and slow - Daniel Kahneman
The Click Moment - Frans Johansson
Range - How generalists triumph in a specialised world - David Epstein
To Have or To Be? - Erich Fromm

Happy reading!

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