
Later Stage Advice for Startups - craigcannon
http://themacro.com/articles/2016/07/later-stage-advice-for-startups/
======
hacknat
I think really good advice to late stage companies, before any of this stuff,
is, "Have you actually found product/market fit?" If so, what is the product,
what is the market?

I have spent a lot of time with startups (as an employee), and I have never
seen this question answered properly, at least up close.

Very often product/market fit becomes "We've solved all these peoples'
problems and they pay us money." The problem? The problems and the people are
all different. I've witnessed so many companies turn themselves into
specialized consulting companies thinking they've built the product that's
going to take them to the finish line, when all they've really done is
networked their way into solving a bunch of separate business problems for
their network. A product should be so good that your users are almost
embarrassed to file support tickets.

IMO, sama is wrong to suggest founders take their eye off the product ball at
all (even just a little) until they are 1000% sure they've built a machine
that will scale, and now all they have to do is scale it.

~~~
dasil003
In theory I agree, but when are you ever 1000% sure of _anything_ in business?
Also, the thing which scales to 100k users does not necessarily scale to 1m
let alone 10m.

Given that the article is titled "Later Stage Advice" and it says things such
as switch from not caring at all about marketing to caring about it a little
bit _once the product is working_ I think Sam's advice is properly qualified.

But your point is well taken; I've seen it to, but I'm not sure what the
solution is. In general I think the advice of staying focused and minimizing
burn attempts to address this, but in practice these choices are rarely easy.
Sometimes you need to try a bunch of different things, but then you can be
saddled with maintenance costs or blowback from customers if you yank the rug
out. Also, if something appears to be working and you start to hire to support
growing the business in that direction you can get screwed if you hit some
ceiling of market appeal.

The cases where a company is so compelling and viral that there is a clear
path to scaling are the exception. For every Instagram there are probably 1000
companies that are still considered successful by their founders but at a
smaller scale or slower pace. Startups are hard.

~~~
wtvanhest
> Given that the article is titled "Later Stage Advice" and it says things
> such as switch from not caring at all about marketing to caring about it a
> little bit once the product is working I think Sam's advice is properly
> qualified.

There are probably less than 20 YC companies that have reached the point where
this advice is valid. Zenefits, Airbnb, Dropbox, Stripe etc.

The others never needed this advice. The nightmare scenario for employees is
getting stuck at a company without true product/market fit that just sort of
has it, then watching the founders justify following this advice because they
have raised enough money to get to 30 employees without ever having true
product/market fit.

> The cases where a company is so compelling and viral that there is a clear
> path to scaling are the exception.

IMO, this advice should only apply to the exceptional companies.

> For every Instagram there are probably 1000 companies that are still
> considered successful by their founders but at a smaller scale or slower
> pace. Startups are hard.

Those companies should stay small with no formal management structure and most
should not follow the advice in the post, even if they have scaled.

I think the OP's point is that product/market fit is overlooked so often by
founders and teams. No matter what, it should always be the true focus of the
business. The number of companies that need the advice in this post is so
small that YC should just write it as a personal email to founders.

~~~
nostrademons
> The number of companies that need the advice in this post is so small that
> YC should just write it as a personal email to founders.

I think that a large portion of The Macro's purpose is content-marketing for
YCombinator. It's a taste of the advice that you will get, personalized, if
you take funding from them. The point isn't necessarily to help later-stage
companies (although this is a beneficial by-product), it's to convince later-
stage companies or early companies that hope to get to the later stage to
apply to YC so that they can get the personal emails to founders with more
tailored advice.

~~~
wtvanhest
My comment is more about backing up this point from the OP:

> IMO, sama is wrong to suggest founders take their eye off the product ball
> at all (even just a little) until they are 1000% sure they've built a
> machine that will scale, and now all they have to do is scale it.

Founders are adults and part of being a founder is knowing what advice to
take. That said, I think someone at YC may agree that this advice is generally
bad for a lot of early founders to follow. The reason I was backing up the OP
is that he/she was stating that you should be 1000% sure you have
product/market fit before following any of the advice in the post. Simply
having the right number of employees or making some revenue are not enough.

My point is kind of nuanced. In general, I think YC puts out the best
information for founders of all early stage companies/startups.

------
RKoutnik
sama, if you're reading this, I'd love to hear more about

> Senior People: In the early days, hiring senior people is usually a mistake.

I know a lot of folks (including myself) are of the opposite opinion - it's a
mistake to hire non-seniors to build the first round. Senior folks can often
see pitfalls ahead of time and dodge them, saving valuable time while the
company is pre-product/market fit. I can think of plenty of definitions of
"Senior" that I _wouldn't_ hire (overspecialized, 'senior' in years only)
though. Our disagreement may only be one of definitions [0].

I have seen startups die due to lack of talent early on (I worked at a startup
that died due to technical debt, but that's another story). What scenarios
have you seen that were caused by senior folks that causes you to see hiring
them as a mistake?

[0] More on my opinions on what 'senior' should mean:
[https://rkoutnik.com/2016/04/21/implementers-solvers-and-
fin...](https://rkoutnik.com/2016/04/21/implementers-solvers-and-finders.html)

~~~
emmett
There are multiple ways to be a "senior" employee.

The first is to be a very experienced individual contributor. Amazing
programmer with deep experience, world class designer, sales person who can
get to the right person in any org. These people are gold. Hire the best and
most experienced you can.

The second way to be senior is to be great at hiring and building
organization. These people are very valuable later, and will save you a lot of
heart ache. Hiring them early is a mistake in general, because their instinct
for solving problems is to hire great people and develop great process rather
than to simply solve the problem themselves. For an early stage startup there
are too many unknowns and this amounts to premature optimization. Later on
this is the a critical skill set.

Inexperienced managers are nearly universally terrible. Inexperienced
individual contributors can often make up for it with raw talent, and you gain
experience fast at a startup. Therefore early on experience is not at a
premium, you should hire primarily for talent above everything else. Later on
experience becomes increasingly valuable.

Short version: Hire the best makers you can early even if they're junior, hire
the best managers you can later which means more senior folks.

~~~
mbesto
This is a strategy that has been proven to work, but history would state that
it's not the only way. There are plenty of examples where senior people have
started nice large growing software companies. In fact I'd dare to say that
many more senior people have created more economic value from their startups
then those who haven't...you just never read about them in TechCrunch. The
valley specifically is littered with former Oracle/HP/Apple/etc execs (aka
"senior people") that go on to create very big companies (Dave Duffield, Marc
Benioff, etc).

~~~
emmett
(1) I totally agree that there are people who violate this rule and do great.
Hiring really senior early can totally work, especially if you get the product
right the first time. In fact, it can be a huge accelerant.

(2) There's a difference between the founder of a startup and early employees.
The founder has to be a manager from day 1. I wish I had been more experienced
starting Twitch. I generally think more experience for founders is a positive,
especially when it comes to management.

~~~
mbesto
> Hiring really senior early can totally work, especially if you get the
> product right the first time.

Spot on. I do find in practice that "senior people" get the product right the
first time, but are less risky to try to steer the company in directions that
may appear "disruptive".

------
a_small_island
>"Announce Offers: Up to a few hundred employees, try announcing every
potential job offer on an internal mailing list. If you do it, very often
someone in the company will know something good or bad about the prospective
employee."

Does this actually happen?

~~~
chollida1
It probably depends on how incestuous your chosen industry is.

I'm going to guess that Sam went to a "top 10 school" and has only worked in
Silicon valley. In this case I'm guessing that this advice seems self evident
to him as you tend to run into the same people over and over again.

The financial industry behaves very similarly where all other things being
equal, its considered almost a negative if you can't find someone who actually
knows a potential hire. This makes it easy to move around but tougher to break
in.

I'm not sure if this is good advice or bad advice but it is something that
does happen so its best to follow the old advice and make friends/network. It
doesn't have to be slimy, it can be as simple as emailing someone on hacker
news who made a comment you learned something from to thank them for making
it.

------
hitr
When I read this,I was verifying each point against the last startup I worked
with and they don't follow many of the points discussed when I was there.But
they have a very good seed funding.The thing going against them may be is
growth.They are from 4 (including me) to 25+ (excluding me)employees in less
than 6 months with no senior person in the team.One main Founder was trying to
do micro management and delegating tasks poorly with poor communications.They
have fired many people than I can imagine.And I am still hopeful that they
succeed as my friend is still with them. I still think they may succeed as
they are growing. I was ok with everything except the firing part!.This is an
operational heavy business and not technical.

~~~
the_watcher
> But they have a very good seed funding

This implies that they aren't at the stage that this article is aimed at.

~~~
hitr
Yes probably. Article is largely aimed at 12-24 Months but at the same time
20-40 member team. But if you team is big, you need lot of things in control
no matter how old you are as detailed in the article. Otherwise they are
inviting chaos

------
semerda
Some great points in there! "Communication" should be right up the top in
bold. Bad communication has ties to many disasters like founder breakups, team
disconnect, ownership & performance issues, company direction et al.

However one that stands out as unnecessary: "Senior People: In the early days,
hiring senior people is usually a mistake."

The best people I hired in the past were senior. Ton more experienced and
older than I. Of course they didn't come from corporate backgrounds but from
fast paced tech cultures/environments. With all the equality talk in the
valley around gender and ethnicity I'm surprised age discrimination is still
so loosely thrown around. The key here should be "hire experienced people fit
for the stage of growth". Burning time teaching / hand holding inexperienced
people is a drag on the company's speed to execute and culture.

Any views on holacracy?

~~~
fuhrysteve
The traditional argument against hiring senior people in a young company is
usually a mistake because cash is precious and senior people are usually too
expensive to fully utilize since at a startup everyone ends up having to do
bitch work anyways, so it might as well be cheaper hands doing it.

Senior people aren't always old.. this has nothing to do with age
discrimination

~~~
semerda
"Senior people" is an age reference. "Senior role" is a reference to the
actual position. Maybe semantics.

If I have to pay say 2x junior rate for 1 senior role that can move/execute
faster than 2+ juniors, then I will. Apart from having someone that hits the
ground running I'm also sending a strong business message to the market and
investors that I can bring in top hires to execute faster than the shop down
the road that's still learning business fundamentals.

------
dworin
>> Good HR means three things: a clear management structure, a way for people
to talk about workplace issues and concerns, and pathways for people to evolve
in their careers.

I've seen a number of startups who think the only part of HR where they need
to invest resources is recruiting, right up to the point where the wheels
start coming off. Once you're feeling the pain points - disgruntled employees,
people leaving, communication problems, etc... - it takes a lot more time to
get things working again.

It's hard because these issues aren't the things recruiters are good at
solving, so they need more specialized knowledge, but at 20-50 people don't
have the capacity to bring on the right expertise.

------
wfoweoi
Any advice on setting the top three goals for your startup? Do founders
actually create "SMART" goals or are they more general like "growth"?

------
AndrewKemendo
I guess I don't understand why there is "later stage startup advice" on the
internet.

Ostensibly if you are later stage you have a bevy of advisers, investors,
mentors, peers etc... that would be in a much better position to give you
advice about your specific - end even general - issues. Who is this advice
really for?

~~~
CPLX
There's also lots of people on the internet giving advice to the President.
Maybe giving unsolicited advice is a thing people do on the internet.

~~~
AndrewKemendo
I think that nails my point.

------
kriro
Wouldn't it be simpler so identify which size worked well for you without
thinking about management much (probably up to 20ish) and then splitting the
company into teams of max. that size? Sure for some types of businesses that
won't work but it'll work for a lot of them.

As an aside: my gut feeling is that many startups tend to over hire as it's
sort of a status symbol to have more employees. I mean look at how many people
were needed to build and scale WhatsApp. Is your startup really doing
something that is technically more complicated or harder to scale?

------
untilHellbanned
The 12-24 month timeframe seems off. The % of startups who after 12-24 months
should have 25 employees and do all the other things that sama mentioned has
got to be very small to the point of making this blog post seem out of touch
with reality.

Tell me a startup that went anywhere within one year? Now count the startups
that went nowhere. That ratio has to 1/1000 or greater. I actually question
how many YC startups this really applies to. 10 or less? How many really have
market fit?

------
the_watcher
I'm at a startup that has product-market fit, and are currently at the early
end of what it seems like the target company is. Interesting to see how much
of it has already been implemented or is in the process of being implemented
(onboarding is a somewhat iterative process right now, but it's steadily
improved), as well as what we haven't yet gotten to.

------
sytse
Very good advice, I love every since part of it and added it to our leadership
documentation
[https://about.gitlab.com/handbook/leadership/](https://about.gitlab.com/handbook/leadership/)

------
chris_7
> Do Offsites: Take your best people outside the normal workspace for a
> weekend where everyone has time to just talk and think through the bigger
> picture.

That sounds horrid. My weekends are _mine_ , they're not to be used to improve
the company's performance. If you're doing this, do it during the work week.

~~~
harryh
That's great. You should never take a senior position at a startup. Or, for
that matter, probably a senior position at most any company. Which is fine.
Different strokes for different folks. But some people prioritize career
advancement over free time on the weekends.

~~~
bacongobbler
Typically offsites (for me, as a senior level engineer) happen during the work
week, not during a weekend. I feel that people are more productive and
creative at offsites during regular work hours because they're not thinking
about what they could be doing instead (like going on a camping trip with
friends, for example).

I agree that my weekends are mine, and there needs to be a work/life balance
no matter what position you are in.

~~~
chris_7
Yes, all of my offsites have happened during the work week, as they should.
The idea that senior engineers should ever be expected to work 12 days
straight (5+2+5) is absurd. Yes, it's still a work day if it's an "offsite".

------
sandGorgon
about compensation bands - how does one correlate this with experience ?
Because in an early stage startup, this may fluctuate drastically based on
what the startup really needs.

For example for a fintech startup, a 5 year devops guy may be making market
salary... but a 2 year, talented data science guy may be offered market++
salary. So how do you really structure bands ? And does bands really solve the
problem of not pissing people off in this case ?

