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Tao Te Chimp: Repeatable Decision Principles for Startups

Tao Te Chimp

Here are some repeatable catchphrases that I’ve learned help startups make decisions. I’d love your feedback on what to add to the list, or what didn’t make any sense.

I mentor in alternate Mondays on the 16th floor at Capital Factory, and I’m glad to set up alternate times if that doesn’t work. Feel free to share this list with others.

Every startup founder should read Running Lean and most of Jason Cohen's Blog. More recommended books are below.

Fundamental Law of Startups

A startup is a machine for turning

  • Time and Money into
  • Validated Assumptions about a
  • Recognized Problem shared within
  • Focused Market of customers that
  • Talk to Each Other

Explained:

At its core you are building a Learning Machine in order to arrive at an Earning Machine. Quantify:

  • Time and money: both matter. Understand, and consider being transparent about, your death clock.
  • Validated Assumptions. You are researchers following the scientific method: define hypotheses that can be validated by disciplined fast, cheap experiments, and set out to rigorously disprove them
  • Recognized Problem: you cannot sell an opportunity, only a solution. You are looking for the “holy crap, that will” sentence: “I can take fares in my limo whenever I have a gap between bookings? Holy crap, that will make me so much money.” Even better than money is time: “I can book a black car for less than a cab and know exactly when I’ll arrive? Holy crap that will save me so much time and hassle.”
  • Focused Market: the more you focus, the more:
    • Engineering Features become Lightweight, fast to implement, easier to identify
    • Ad spend becomes more efficient
    • Assumptions validated quickly
  • Talk to Each Other: learn to hold back and listen to how your customers explain your product’s benefits. Devote some portion of ad spend from the very beginning to analytic marketing to tune your language.

On your site, in your name, in every word and deed, learn to talk about what your customer needs, not about what your company does.

Pirate Metrics

Dave McClure published [one of the simplest and most powerful tools] for startup decision making. At every moment in your startup's existence, exactly one of those metrics is your most important challenge:

  • Acquisition: How many people hear about your company and take some action to learn more? (Do they come by?)
  • Activation: How many engage meaningfully with your product? (Do they try?)
  • Revenue: How many make a purchase decision or other tangible validation? (Do they buy?)
  • Retention: How many continue to provide revenue/validation over time? (Do they skip out?)
  • Referral: How do your customers talk to each other? (Can you get them to shout?)

Most things explaining this focus on the second part, a highly useful cutesy breakdown of the sales funnel. The revolutionary element is the first part:

At every moment in your startup's existence, exactly one of those metrics is your most important challenge.

  • Identify it and devote all resources towards it.
  • You must clearly define in advance how every feature and business activity ties to that key metric, so impactfully that it is the best use of your time and money. If you feel strongly that some feature or activity is the right thing to do but cannot justify its cost vs impact on the key metric, you are probably right about the feature but wrong about its implementation, or your key metric has shifted.
  • Every employee must understand how their work drives the key metric of the startup and that they are the person on the team uniquely equipped to execute that work.
  • Quantify the full set of metrics. This is difficult but essential.

At very early stage, mitigate risk of each metric rather than its value.

Vision Quest Traps

  • Don’t solve a problem you’d like to have.
    • Eg for a marketplace, if you are finding it easy to engage suppliers and harder to onboard customers, concentrate on the latter. You’d love to find yourself in the pickle of sending suppliers so much business they can’t meet demand. Don’t worry about distribution of your product until your sales volume is so high you know exactly when and why the cost of fulfilling orders will be one of your biggest headaches.
  • Look for people who will tell you you’re wrong
    • Go into mentoring and pitch sessions
  • Your job is to disprove assumptions by stating hypotheses and performing disciplined experiments against metrics stated in advance.
  • If you can focus, do.
    • Can you identify a recognized problem within a common market so small you can reach basically all of them, within a venue where they talk to each other? “Cosplayers in Austin who go to multiple cons a year and are active on these forums”; “Limo Drivers who regularly drive to SFO and use these gas stations or lots between rides”; “medium sized oil/gas companies in Texas currently or recently implementing a data delivery project”

Product Discovery

Do a Lean Canvas

DO A LEAN CANVAS. Do it. Do it right. Research the methodology, put it on the wall and in the newsletter, iterate and update it regularly.

  • The categories will seem maddeningly similar; that’s the whole point. It will force you to separate out the muddled assumptions in your head.

The four essential personae for closing sales

All sales require convincing the

  • Advocate: Ahhh. The advocate has a pain and you can help. Arm the internal champion to corral the other three. The advocate understands your product better than you do. Your first job is to find one sentence so compelling they will spend hours of their time trying to use, understand, and sell your crappy product.
  • Budgetholder: Balance. Quantify how customers just like them have saved money and time
  • Controller: Consensus. They approve because the budgetholder is at peace, the doomsayer shrugs, and the advocate is willing to spend their professional capital. Calm They care about risk and opportunity cost.
  • Doomsayer: Disarm. Frankly acknowledge the doomsayer's concerns (small sized company, we can do it ourselves, etc) and arm the advocate to address their concerns in language the advocate understands.

Enterprise customers care about delivery risk first, time second, money third.

Two-Sided Marketplace = Three risky startups, each captive to two risky startups.

If you are building a two-sided marketplace, you must find product-market fit on the supply side, the demand side, and the matchmaking service betweeen them. That is impossible to do as a lean startup.

You must instead build a business that serves one side without the other, and use it to fund (or fundraise) the two-sided model. At its start, Uber was essentially an app that let limo drivers to go into business for themselves. Amazon bought books wholesale and sold an infinite catalog at a deep discount.

Read deeply about the theory of establishing a two-sided marketplace. Which side are you subsidizing? Which side are you monetizing? Are you certain that both sides recognize your service as the solution to an existential problem? In the early days, Paypal deposited $10 into your account on signup.

Culture

  • Talent over experience, passion above all.
    • Hire people who are driven to constantly improve and diversify their skills
  • Work-life balance. Period.
  • Buy lunch for the office every day.
  • Optimize for employee joy. That’s the divisor in turning time and money into validated assumptions.

Leadership

  • Your goal as a leader is to become the weakest member of a highly effective team.
  • Delegation means giving Authority and Responsibility. They don’t have to do the thing, they just have to see it done. They make all final decisions, are equipped to summon resources as needed, and encouraged to seek guidance and support at their discretion. You work for your reports: your job is to provide guidance, resources, and a blame-free learning cycle that rewards initiative and care.
  • Build trust through successful delegation
    • Do not revise work you have delegated. You are multiplying the cost of the task by two and reversing the trust-delegate-trust cycle. Show what they did well, and consider carefully whether it's worth having them re-do what was not, but always ensure that they own their work.
  • There’s no such thing as Pilot Error. If you think a person is responsible for a system failure you haven’t started thinking.
  • Mistakes born of bold initiative in service of the plan are readily forgiven. Mistakes born of timidity or indecision are serious system failures.
  • (more below)

Meetings

  • Lines of code are the most expensive tax on your progress. Just behind that is time spent in meetings. Build a culture of relentlessly minimizing LOC/team size and TIM/team size.
  • Meetings are for final approval of a consensus already in place, or for the last opposing stakeholders to resolve consensus: never for brainstorming or seeking general consensus
    • Far more effective to have one advocate do N one-on-one meetings leading to a brief NxN meeting than to forge consensus with all stakeholders in the room
  • Three requirements for a meeting: an agenda, a minimal attendee list, and a hard start and end time.
  • Take time in every meeting to say “can we hear from someone who hasn’t spoken up yet?”
  • The last step before adopting a plan is for its supporters to fully and fairly state all the concerns held by the objecting stakeholders. The objectors don’t need to hear why you think it’s a good idea; they’re agreeing to follow your stupid plan, after all. They do need to hear that their concerns are heard and taken into balance.
  • There’s nothing wrong with having been wrong.

Balance

  • There are ~100 useful hours in a week, after sleep & body needs. Each hour is 1% of your week: TV, time with kids, working on something great, hugging your partner, dishes, driving. So, as Mary Oliver asked, "Tell me, what is it you plan to do with your one wild and precious life?"
  • "You can have two Big Things, but not three" — https://blog.asmartbear.com/two-big-things.html
  • Create a work culture where people come in, kick ass, and go home for their other thing. Executives should work 45-60 hours at their choice; other employees should work 40 hours outside of extraordinary circumstances. Early founders should work 50-60 hours. Social or family lives and vacations are mandatory.
  • Whenever you can diversify your team, do so.
    • Diverse teams outperform because each member has patterns of thinking that the others can't fathom. Some people still don't believe this — they're too stupid to appreciate the ways in which they are stupid (the Dunning-Kruger effect).
  • What well-meaning hiring/promotion criteria have intrinsic implicit bias? Re-examine the goals that led to those criteria, and find an inclusive definition that accounts for the power of diversity.

Fundraising

  • However long you think it will take, it will take a bit longer than that.
  • Early stage investors want to see you have built a learning machine:
    • “Lines not dots.” Start building relationships well before you need to raise
  • Raising is “interesting but not yet, interesting but not yet, ...” and ever so rarely a “yes”
    • At the end of an investor adviser meeting, lay out the two or three milestones you aim to accomplish
    • Ask whether there are milestones they might add or remove
    • Ask them to choose which of those milestones you use to determine your next meeting
  • Publish a monthly update for your advisers, investors, potential investors, and team.
  • Investors make the best advisors
  • Mid-stage: Debt: Raise It. Just Don't Spend It

Email Tips

  • For an Intro, move the intro’er to bcc so that they drop off from the subsequent replies... “Thanks for the intro, moving you to bcc but we will report back with any later news”
  • In any scheduling email, lead with an am, a pm and a large stretch of time: “I’m available at your convenience between 10am and 1pm ET this Friday, any time between 3 and 7pm ET next Monday and Wednesday, and generally free in the afternoons late next week..” Even if the truth is that you have yawning expanses of free time on all those days, it simplifies the decision making for them, saving you both an email exchange. It also lets you clump interruptions to your schedule, and implicatively communicates the pace at which you’d like to communicate.
  • If you’re meeting in person, offer two or three specific locations: “Please suggest the most convenient location for you, or if you’re downtown we can use a conference room at my offices ()”, “glad to meet at your offices or at a coffee shop near you — the Caffé Medici on Congress or the 5th/Lamar Whole Foods are two good options for me”. Again, you are saving them the time of looking up where your offices are and wondering how to balance their convenience vs. yours. If you are downtown and you’re not sure whether they are, give an option that has easy parking and remains reasonably convenient for you.
  • When you set up your domain name, make email redirects for info@, help@, support@, marketing@, security@, (your name)@ (including all conceivable misspellings), and please-reply-we-love-you@. Each should be an alias redirecting to the core team now, but you want to be able to hook them up to teams later. The "please-reply-we-love-you" alias is for when less-enlightened companiesuse "no-reply". Lastly, make a catchall ("*@") alias that auto-responds to ask people to use info@. Let no obstacle impede the learning machine.

Commitment

  • Make a company promise early on: a poison pill that publicly commits your company to prioritize ethical, customer, and team considerations over profit margin. This may make fundraising or acquisitions harder — feature, not bug.

Required Reading

Books:

These people publish infrequently, but when they do you can take it to the bank:

  • Jason Cohen -- marketing & customer development and so much more.
  • Rands (Michael Lopp) -- management
  • Kellan Elliot-McRae -- CTO school
  • Caterina Fake -- empathy
  • John Allspaw -- blame free culture

More lessons from the Gospel of Rands:

  • https://randsinrepose.com/archives/say-the-hard-thing/ “Your goal in life is to make feedback in all directions no big deal. You and your team never start in this state, they earn it. They start with small spoken observations that slowly turn into more useful feedback. They watch to see if each other are listening to the feedback and eventually acting on it.3 Once everyone has seen that feedback is both shared and acted on, they begin to feel more comfortable sharing large, more complex, and harder feedback. Why? Trust.”
  • https://randsinrepose.com/links/2013/12/30/on-delegation/ -- a brief quote, definitely read this one
  • https://randsinrepose.com/archives/one-thing/ -- Long — he talks about productivity and “The Mindset of Busy” -- "“Busy is a bug and not a feature”; “I believe in the compounding awesomeness of fixing small things”
  • https://randsinrepose.com/links/2017/01/05/regardless-of-seniority-every-good-manager-will/ - Long list of bullets, so if you’re skipping ones save this for last
  • https://knowyourteam.com/blog/podcast/episode-11-interview-with-michael-lopp-vp-engineering-at-slack/ 10:49 — “The thing I wish I’d learned and it’s something that I look for in all emerging leaders — it sounds really simple but it’s a very complex action — is delegation”. 10:51 — "The lessons are the same, and they are lessons I wish someone would’ve given me as a first-time manager. Here are three:
    • Let others change your mind. There are more of them than you. The size of their network is collectively larger than yours, so it stands to reason they have more information. Listen to that information and let others change your perspective and your decisions.
    • Augment your obvious and non-obvious weaknesses by building a diverse team. It’s choosing the path of least resistance to build a team full of humans who agree with you. Ideas don’t get better with agreement. Ideas gather their strength with healthy discord, and that means finding and hiring humans who represent the widest spread of perspective and experience.
    • Delegate more than is comfortable. The complete delegation of work to someone else on the team is a vote of confidence in their ability, which is one essential way the trust forms within a team. Letting go of doing the work is tricky, but the gig as a manager isn’t doing quality work, it’s building a healthy team that does quality work at scale. At the heart of each lesson is the same essential leadership binding agent: trust. When you are actively listening, and when their ideas visibly change your decisions, you build trust. When diversity of opinion is valued and creates healthy debate, you create trust. When you truly delegate the work that made you a better builder, they will begin to trust you as a leader. And that’s who you want to be.”
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