Category: Entrepreneurship

Focus on the road, not the wall

Posted on by Ryan H Vaughn

Running a venture-backed startup before profitability is like flying a plane you can’t steer toward a thick, steel wall. The only option is to throttle up faster and faster, accelerating to take off with enough distance to clear the wall (reach profitability), or somehow find a way to move the wall backward before you hit it (raise follow-on financing).

There is precedent to this wacky situation, out of which has come best practice.

Professional NASCAR drivers are trained to focus solely on the road, because history has shown that if they allow themselves to look at the wall, they’re likely to hit it.

It’s so difficult when running a startup from a balance sheet to not fixate on that wall, but Jeff Gordon might tell you your life depends on it.

When to stop “crushing it”

Posted on by Ryan H Vaughn

I’ve been “crushing it” for almost as long as I’ve been running a startup.

That’s not to say that things have always been up-and-to-the-right. We’ve had more than our share of WFIO moments along the way. But to most anyone I spoke with, we have always been crushing. I made sure of it.

I have always kept the key metrics by which we actually were crushing it at the ready at all times, because you never know who you’ll talk to and you need to be on your game when opportunity knocks.

There’s tremendous value to this. I have literally been in an elevator with an investor of limitless resources, and needed to position my company in the best possible light in less than 30 seconds to pique his interest enough to take an actual meeting with me. If I didn’t have that highly packaged version of our story at the ready, I legitimately would not have closed that round of financing. I certainly don’t mean to diminish the importance of presentation, as it’s critical to startup success.

That said, it’s worth knowing when to turn it off, too. And doing so can counterintuitively be a path to success.

If you’re always “crushing it,” you risk sugarcoating real problems that need attention, and prevent the outside perspectives that may actually help solve those problems from having a clear way to engage. In “crushing it” you present the image of success, but you may unwittingly do so at the cost of real, actual success.

Startups are hard. Over time we’ve cycled through periods of legitimately crushing it, and periods where I didn’t think we would make it. That up and down ride is the nature of the game, and the secret is that EVERY startup hits highs and lows, even though most don’t talk about the lows.

That’s for good reason. Talking about the lows will never get you funded. But on the other hand, “crushing it” communicates that you don’t need any help.

And sometimes we all do.

The (not so) new leadership: Context > Control

Posted on by Ryan H Vaughn

Many leaders still see their job as directing the activity of the people working for them, setting up detailed systems designed to remove the variability from human behavior and achieve predictable outcomes.

This approach to management stems all the way back to 1911, when Frederick Winslow Taylor released his opus, Principles of Scientific Management. His techniques were responsible for dramatically increasing the output of industrial era factories by limiting the freedom of employees to make decisions, instead creating detailed scripts to drive very specific, management-prescribed, behaviors. By creating a system that forced every employee to conform to standards in every situation, Taylor ensured maximum compliance, which at that time equaled productivity.

But that was a different time, and those employees were doing repetitive tasks in a factory. Today’s workers are asked to navigate rapidly changing markets and produce results in all kinds of situations, so compliance, at best, comes with many caveats. But many managers still use those techniques today. You see the issue.

Today, the most successful companies adopt a context > control philosophy to management. At VNN, it looks something like this:

  • Leadership’s job is to create context
    • Establish long-term vision, short term milestones needed to move toward that vision, and set any hard guidelines outside of which employees may not go (the goal is to make these as broad as possible)
    • From there, avoid making decisions wherever possible
    • Instead, ensure that everyone within the organization has the appropriate context to make their own decisions. Ensure everyone is aligned to where the organization is going, and understands their role in achieving the vision.
    • Then align some more (HT Patrick Lencioni).
  • Individual employees’ job is to use good judgement
    • Each employee is empowered to make the best decision for every situation in which they find themselves, based on the context provided by leadership

This way, the people closest to the situation, the ones best equipped with the most information about the situation–namely the employees–are the ones making most of the decisions. Meanwhile, leadership spends most of their time answering questions, providing feedback, coaching, training and generally ensuring that the decision makers (employees) have the context needed to make decisions in the moment that are aligned with overall company priorities.

Doing this admittedly requires humility on behalf of the leadership, as they need to embrace the fact that they cannot keep up with the pace of business on their own, and empower their team to help them make critical decisions (and then support them when they decide things different than you would). But I’ve found that if you empower your team, and expect them to step up, they do.

When they do, the rewards are many. In addition to better serving customers (by ensuring the person they’re talking to is empowered to help them without checking with their boss), this approach has proven to lead to a more engaged and productive employee base, and a greater level of innovation throughout the organization.

I remember the moment when I realized we had implemented this effectively at VNN: I had given feedback to an employee that I didn’t think a project he was passionate about would work, but I also let him know that, as always, my opinion was context and it was his decision, within the parameters we had constructed. He decided to go forward with it, busted his ass on the project around his core responsibilities, and it’s now one of our most successful business lines. I had to eat some humble pie on that one, but there’s no question that VNN would be less successful if I had dictated that particular decision.

What was a radical philosophy as recently as a few years ago, what I’ll call “context > control,” is quickly becoming mainstream. It’s not there yet, but organizations like The Ready, Whole Foods and Google are all leading the way, and VNN is working every day to do the same.

Many leaders still want to control every aspect of their organization. But the companies that let go of that control, democratizing decision making and embracing the full capabilities of their employees, will outpace those who centralize decision making and look to control results.

They already are.

In a future post I’ll detail exactly how we went about implementing this approach at VNN, and the structures we use today to ensure everyone has the appropriate context to UGJ (Use Good Judgement, which we stole from Netflix like any good artist).

It’s also worth noting that the above is nowhere near the leading edge of management. Recognizing the futility of pretending to control the future, some companies have gone so far as to eliminate the annual budget entirely. We still have a budget, but I must say this is very intriguing.

The mistranslation of Dukkha

Posted on by Ryan H Vaughn

The Buddha’s first Noble Truth is that “life is suffering.”

This concept is recited all over the wisdom traditions, as well as, retrofitted, in many contemporary thinkers like Sam Harris and Jordan Peterson.

When I first heard this, I thought it was unnecessarily gloomy.

Life’s not ALL suffering. I’m generally happy. Everyone says I’m an optimist. Maybe I’m not ecstatic right now, but I’m definitely pretty good. And I was great last month, when I closed that financing. I might suffer sometimes, sure, but life is much more than just that.

I learned much later that the Buddha used the sanskrit word Dukkha, which actually translates to “unsatisfactoriness.” So, in effect, the teaching is that life, by its very nature, is unsatisfactory.

Life is not enough. Ah, now we’re getting somewhere.

Life is not enough, and cannot ever be enough, because we always want more. When we’re sad, we want to be happy. When we’re happy, we want to be over the moon. And when we’re over the moon, we quickly become afraid of the inevitable come-down. Closing a financing, hitting revenue numbers or even selling your company, there is no situation in which human beings–never mind founders–can ever get enough, or experience enough, or accomplish enough. We’re not wired for that.

The “be all that you can be” mantra we’re taught in America feeds us right into this misery, amplifying our innate desire to want more, strive more, achieve more. Many of us are good at playing this game and trick ourselves into thinking we can win, amassing lots of things and experiences in the process. But no amount of getting, achieving or having will ever change life’s fundamental not-enough-ness. The game is rigged.

Instead of killing ourselves trying to get enough (things or experiences, money or status), what if we worked on really seeing what’s right in front of us? What if we got past ourselves, and really saw the people suffering around us, and in seeing that, simply endeavored to help?

For that matter, what would a company that did that look like?

A love letter to Reboot, by Jerry Colonna

Posted on by Ryan H Vaughn

I’m not the type to read business books past the third chapter. I’ve found that pretty much all business books get to their point pretty quickly, and then repeat that point, approaching it from infinite angles, for the next 200 pages. It’s exhausting.

There are exceptions, however. And one business book changed my life.

Reboot, by Jerry Colonna, was released in 2019. I picked up the book because Jerry was hailed as “the CEO whisperer”, and one of the top Executive Coaches in the country, which I figured was right up my alley. But then the entire book was the opposite of what I expected in the best possible way.

Through an examination of his life story, interspersed with multidisciplinary perspectives from some of the best thinkers, both contemporary and throughout history, Jerry hits directly at the human side of starting and running a business, which to that point in my life was still pretty well unexamined. He addresses the toll that the specific set of circumstances in which founders put themselves takes on them as human beings. He does this in a way that hit me hard–his perpetual chasing of “lemon drops” as a proxy for feeling whole, for example, which is a feeling to which my entire soul can relate (although lemon drops themselves are meh).

Jerry also cites his sources in many cases, from Jung to Plotkin to Buddha, all experts with various perspectives on the human condition (all “different fingers pointing at the same moon”). I cannot express my gratitude for this choice enough, as it enabled me to go on a months-long, on-and-offline google-deep-dive into the ancient wisdom of how to be a human being, a dive that continues to this day and is responsible for my budding faith (if you can call it that, I’ve been an athiest most of my life so I’m still not sure that’s the right word).

The core hypothesis driving all this–which to be fair he stated in the first three chapters so I could have stopped there, but I’m so glad I didn’t–was that better humans make better leaders. The book, therefore, along with his coaching company of the same name, is intended to help leaders become whole in their humanity, thereby enabling them to lead other humans to become better versions of themselves. It’s a brave approach amongst so many books offering ways to push your humanity ever deeper in the quest for ultimate achievement. I believe it’s also a necessary approach, as there’s no way I would have picked up a book about ancient wisdom and feelings unless it was smuggled in under the guise of productivity, such was my blindness. Jerry Miyagi’d me.

In the guise of a business book, Jerry penned a letter on how to live a life, written specifically for those of us who have already made the decision to prioritize our business over ourselves. It’s full of necessary information for founders which is hard to find elsewhere. Wrapped in a package of productivity, Jerry smuggled in one of the three most profound transformations of my life.

Wax on, my friend.

One of the most important lessons I’ve learned in business

Posted on by Ryan H Vaughn

I never went to business school. My business education was a startup accelerator called Momentum.

Patterned after TechStars, Momentum gave entrepreneurs a $20,000 investment and placed them in a 12-week bootcamp, which was intended as a crash course in everything needed to start a tech business and raise venture capital. As a part of that bootcamp, every Thursday night all the entrepreneurs would gather around for a “fireside chat”, where we would have the opportunity to listen to a business leader tell their story. Out of 12 of those chats, one moment sticks with me to this day.

We’ll call the business leader Bob, although that’s not his real name. Bob was the type of guy who flies a helicopter to work, and so obviously had a different perspective on life and business than I had. Bob was incredibly successful, but also went out of his way to be accessible in that conversation, which I really appreciated.

Someone asked him: “If there was one lesson you’d hope that these entrepreneurs would learn in starting their businesses, what would it be?”

Bob thought about it for a moment. He took a beat longer than normal as, we had learned that evening, was his way.

“I’ve worked with companies all over the spectrum,” he said at last. “From Fortune 100 companies to pro sports teams to two-person startups. And across all those companies, there’s only one thing that all of them have in common.

“Nobody knows what the hell they’re doing,” he said.

“The difference between successful companies and unsuccessful companies, is that with the successful companies you can’t tell.”

Do Less, Better

Posted on by Ryan H Vaughn

Inspiration sparks the best ideas, creative process crystalizes them, and perspiration makes them come to life. Three parts of the value creation chain.

We startup founders are excellent at the perspiration part. We push and push, optimizing for a constant state of busyness, checking off more boxes than we did yesterday. Eliminating more gaps in our schedules in favor of “GSD” (getting shit done).

In doing so, we feel productive. We’ve been conditioned to “do more, faster“. And that’s not wrong, but the question is at what cost?

Inspiration and creativity require one thing: Space. The very thing that our quest for productivity would have us eliminate. We’ve been sold a line that we must hustle ad infinitum, and bought it wholesale with little awareness of the implications.

Nothing happens without perspiration. It is the core characteristic of successful founders, and foundational. But successful founders get that part, and then go too far.

With the way we glorify the hustle as founders and leaders, is it really a surprise that true inspiration and creativity have become so rare? Why everyone is just the “AirBnb for pet crates” or the “Uber for luggage”?

Scaling value while also scaling variability

Posted on by Ryan H Vaughn

Scaling a business, we’re told, is about establishing processes, procedures and workflows, to ensure that the value that you created when you were small persists as you grow. The goal being to ensure that every experience your new customers have is of the same value as the experiences your early customers had. To do so, it seems, you have to eliminate variability to prevent substandard customer experiences.

But variability drives innovation. Without random variation, single celled organisms never evolve into human beings, and nobody even has the luxury of thinking about scale. Variability is the singular engine driving adaptation, growth, and increasingly, in the rapidly changing world we live in, survival.

So can we scale both value and variability? Should we?

You simply can’t replicate the chaos that permeates an early stage startup as a company grows, and you shouldn’t want to. We all have enough grey hairs from that time. But if we convince ourselves that there is a “right way”, then our teams will hew ever closer to that. Then, innovation stops, people get caught up in dogma, and the company struggles to meet evolving expectations in a dynamic market.

Even though everyone in the company is doing everything “right.”

What if we aimed instead to scale not only the value creation that we cultivated at a small size, but also the variability that helped us find that value creation in the first place?

As an example, what if instead of a “right way”, we instead scaled a “default way” for our teams (HT: Aaron Dignan), while also giving them autonomy to deviate if it made sense? If we did this, our teams could do what had been proven effective in the past, but they could also change things if they thought it was for the better. They might be wrong, or they might be right, but either way the organization would be smarter having conducted the experiment.

Might we be able, this way, to scale customer experiences better than the ones we first had success with?

The case for the startup psychologist

Posted on by Ryan H Vaughn

Cofounders are effectively married, so why do we not invest in couples therapy for startups? It works.

There is no more fundamentally important relationship inside a company than between its cofounders, and no area in which things can get more royally screwed. By extension, that applies with only a very slight reduction to the founding team and/or leadership team, the group of people with varying functional areas who through their relationships guide the direction and success of the company.

Market, strategy, culture, all of these things are important. But none of them can overcome bad relationships within the leadership of a company.

So why do we, as founders and investors, not invest in nurturing and securing those relationships? And in the rare cases where we do consciously, why do we expect success from people without any professional expertise?

We rely on board members, usually business leaders all, and the founding team itself to fix these matters. This is like handing a drill to Mike from Accounting and asking him to fix your cavity. He’s not trained in dentistry, so you don’t hand him a drill.

A board and founding team are not doctors in psychology (much less do they possess the required dispassion to do the job with objectivity), so why in the world do we so unquestioningly trust them with managing the psychological dynamics of the leadership team, the single largest lever in our organizations?

I’m piling on here, as it is definitely encouraging to see groups like Freestyle Capital investing in the mental health of their founders. This is critically important and they are pushing the envelope, far, to do even that, but it’s about more than the mental well-being of the individual. We need to go farther, and invest in the mental well-being of the leadership team (if not the organization).

If you want to help people, start a business, not a nonprofit

Posted on by Ryan H Vaughn

At some point most, but not all, successful people figure out that no amount of success or money will actually make them happy, and at that significant turning point, people start to look for meaning in different places. There are a lot of places to turn, as the human animal can make literally anything meaningful, but the best of these people turn to helping others.

If you haven’t done a ton of helping others up to that point, it can look like the non-profit world is the route to take here, as it seems like common sense that helping people is why nonprofits exist. That’s fine, and many great people work in the nonprofit world, but if you’re looking to really help people it’s the wrong direction.

Charity is a very small pond.

If you add up all the charitable giving in the world, including all the endowments, the foundations, the $18 to Bernie Sanders’ campaign, literally all of it, it all adds up to 0.005 of the world’s spending, a number which has been relatively steady the past 50 years. A half a percent.

Bracket out for a second the moral statement that level of species-wide charitable investment makes, and let’s just focus on the practical implications for someone really looking for the best way to help people. Absent running for public office (which godspeed to those souls who jump in that water but I have both no interest and a checkered past) we basically have two choices: business, responsible for 99.5% of all monetary impact in the world, and charity, responsible for 0.5%. Remember the all-importance of market size, and choose to fish where the fish are.

If you still think a nonprofit is the way to go, consider that since there is not enough money to go around, and since there are over 1.5 million registered worthy causes in the US alone, in order for you to make the impact you want to make with your nonprofit, you have to literally take funding from another nonprofit with another well meaning mission to change the world. People or organizations with money and a conscience tend to organize their giving by first setting a budget, and then choosing where to give or which cause to support from that budget. So if your neighbor wins and gets funding, that actually in reality lowers the chances of you getting the funding you need. Charity is literally a zero-sum game, so there’s a tangible human cost to any success you have in that area. Not the case in business, in which there is absolutely such a thing as a win/win/win situation (despite, admittedly, some confusion).

So far as I can tell, the only way to create lasting meaning for human beings is to help other human beings. For those of us who have learned the emptiness of self-serving success and want to create meaning by helping others, start a business, not a nonprofit.