This week I had the good fortune of attending a fantastic mentorship event for product managers organized by Josh Elman and Mina Radhakrishnan. In small groups, newer PMs had the opportunity to ask more experienced PMs questions about any topic related to product management or being a PM. One of questions in my group was, “What makes a great product manager?” I answered the question (hopefully helpfully!) by sharing what I look for when hiring a PM.
It begins with my firm belief that you need to hire PMs for attitude over aptitude. Product management done the right way is an unglamorous job executed with no formal authority. It requires PMs to accept that they need to be shit umbrellas and credit funnels. The job cannot be done without having as much EQ as IQ. And while many product management skills can be learned, I’ve found that attitude is something that can’t be taught. So hiring great PMs starts with attitude. But there are also four categories of skills that I believe are important for PMs to have in order for them to be great.
Product insight. Insight begins with empathy with the user. The best product managers are able to imagine themselves in the user’s situation and develop products that address the needs identified in those situations as simply and powerfully as possible. At the same time, they’re able to use data, ideas and feedback from many sources to inform and support the product decisions made in response to those needs.
Product execution. Potentially nothing is more important for PMs than the ability to just get shit done. No amount of insight compensates for an inability to help teams ship products. And that requires a relentless focus on doing whatever is necessary; to be the person who fills all the gaps and helps others to be successful. Great PMs are able to prioritize and do a small number of the right things incredibly well.
Over-communication. The best PMs establish trust with those around them, making themselves and their teams more effective as a result. I’ve found that the best of way of developing trust is not just by communicating, but by erring on the side of over-communicating. Great PMs need to be both willing and able to communicate clearly, concisely and often to make sure their teams have shared goals and that everyone impacted by product decisions has a shared understanding of why those decisions are being made.
Leadership. PMs need to lead without any formal authority. They inspire and motivate by articulating a compelling product vision and strategy. They establish credibility by setting clear objectives and roadmaps in partnership with their teams. And they earn trust by being honest and accountable. No PM accomplishes anything without a team that is willing to be led by him or her.
Because I believe that these “soft” skills matter much more than “hard” skills, I’ve sought out and been able to hire great PMs who come from all sorts of
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Ignore what you’re reading about the current investment climate. Yep, there is plenty of VC money out there and it’s aggressively looking for a home. But that doesn’t mean it’s so much easier to raise money than in prior years. The number of startups vying for those dollars is greater than ever. With so much noise in the market and so many companies in which VCs can invest their cash, raising money is still about the one thing it’s always been about: making a VC believe.
There are many perceived reasons for why VCs make investment decisions. But the reality is that it’s actually emotion that leads most VCs to invest. A VC only invests when she finds a quality in a startup that touches upon something personally meaningful or important to her; a quality that creates an irrational belief in the startup’s ability to succeed. I refer to this feeling as “emotional resonance”. There are only three qualities that enable a startup to create emotional resonance with an investor. If you don’t create “belief” based on one of these things, take your pitch and go home because there’s no term sheet coming your way.
People: The best way of creating emotional resonance is through your team. Despite popular opinion, VCs are people too! Just like entrepreneurs and employees, they also want to surround themselves with people they love to work with and can learn from. They want to support founders who they deeply feel deserve tremendous success or who compel them to believe in the likelihood of their success. Belief might spring from any number of team characteristics, including the team’s story, chemistry or insights. Given this, it’s no surprise that most VCs will tell you that they invest in people first. And that’s true. It’s the emotional connection to those people that leads to the investment.
Potential: The second way of building an emotional connection is via the potential of your business. The potential might be captured by the mission or the market opportunity or the product. But somehow you need to leave the VC feeling that he or she absolutely wants the problem you’ve identified to be solved or what you’re doing to exist in the world and that it will be big. This is why VCs have a hard time investing in products and companies that aren’t targeted towards them. Something that’s not relatable is impossible to connect with emotionally. It’s the promise of an early stage startup that can help a VC make the emotional decision to ignore the difficult reality that most startups fail.
Proof: If you’re an early stage company, you don’t have it. Move on.
So have only one goal in your pitch to VCs. Make them believe. Create emotional resonance with your people or your potential. If your story doesn’t do that, rework it so that you focus on establishing one of those connections. Present the opportunity in a way that reinforces the excellence of the team or the enormity of your
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In the VC business, there is a running joke about the “Oh shit” board meeting – the first one that takes place after an investment has been made. That’s when all of the bad news that was hidden during the diligence process gets uncovered and the VC is faced with the reality of the business for the first time (and the founders are faced with the reality of the partner they just “married”!) At Homebrew, when we partner with a startup in support of the founders’ vision, we expect to share in the good, the bad and the ugly. And we expect to share in it well before we invest. After all, startups aren’t all rainbows and unicorns (see what I did there? :) ). Bad hires get made, product releases fall flat and revenue doesn’t materialize. These challenges are not the exception, they are the rule, particularly at the seed stage. So we believe that the key to successful relationships between founders and their VCs is one simple rule: No Surprises. And the application of that rule starts well before a formal partnership is formed between VCs and a founding team.
Accordingly, when we evaluate potential investment opportunities at Homebrew, we try to make the diligence process beyond the first meeting feel like a series of working sessions, which in part help expose potential surprises for both sides. We find that this approach provides us with both a better understanding of how the founders think and a deeper appreciation for the nuances of the business. Most importantly, it helps both sides get a feel for what it would be like to work together. In these sessions, we tend to be pretty open and direct about what we find compelling and concerning about the startup. We ask the entrepreneurs to be equally honest about not just their business, but also about the possibility of working with us. What questions or concerns do they have? What kind of help are they seeking from investors? Are they concerned about forming a board and having board meetings? Nothing is off limits in those sessions, because the last thing we want is for either side to go into a long-term relationship based on misinformation or misaligned expectations. We build the relationship on No Surprises.
On an ongoing basis, information needs to be shared openly and in a timely manner. As major investors in your company, it’s failure if we’re hearing significant news for the first time in a monthly email update or at a board meeting. No Surprises means that everyone has the same information at the same time so that they can react as a cohesive team. And the No Surprises rule should apply to both sides. Entrepreneurs should never be surprised by their VC, whether it’s related to personnel, business metrics, follow-on decisions or anything else. Trust is fundamental in startups, but it’s possibly even more important in an effectively permanent founder/VC relationship. And living by the No
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Local offline-to-online marketplaces are just beginning to impact the lives of individuals and small businesses, enabling them to save time and money and generate new revenue streams. Where there was previously friction, opacity or scarcity, local marketplaces are providing convenience, transparency and abundance. Homebrew is focused on supporting seed stage companies like these that are building the Bottom Up Economy. Our prior experience working with and investing in companies such as OpenTable, Angie’s List and several less successful marketplaces has helped inform how we evaluate and support investments in this segment. Here are some of the other key things we look for in startups employing a local marketplace model.
Focused use case: We believe that scale is the outgrowth of doing one thing really well. Accordingly, we prefer to see local marketplaces that nail a specific, focused use case rather than take a broad platform approach from the outset. Homejoy is a great example of a company that has had relentless focus on a single use case, cleaning your home. An early competitor, Exec, offered a platform where all kinds of services, including home cleaning, could be requested but suffered as a result. One of the primary benefits of focusing on a narrow use case is that customers don’t need to think about how or why to use the marketplace. Focus makes that abundantly clear.
Premium experience for sub-premium price: Great local marketplaces enable customers to have a new experience that is magnitudes better than the old. But the best marketplaces deliver that new, better (i.e., premium) experience for a sub-premium price. Uber and Lyft are the prime examples of delivering infinitely better experiences than hailing taxis and typically at only modestly greater costs (even cheaper in an increasing number of cases). One of our Homebrew family companies, Shyp, is similar in that it delivers an incredible shipping experience at standard retail rates.
Necessities over luxuries: There are local marketplaces for all kinds of products and services, but we prefer marketplaces that are focused on necessities rather than luxuries. Necessities tend to have higher transaction frequency, greater word-of-mouth and less susceptibility to economic downturns. Everyone needs to eat, wash their clothes and get to work. But not everyone needs to fly in a private jet, rent a yacht or hire a Michelin star-winning chef. Those can be wonderful services and they can be delivered in compelling ways, but our view is that products and services that are truly need-based lead to more vibrant. liquid marketplaces.
Organic distribution: Word of mouth is the best marketing. But there are other forms of organic distribution that can be just as powerful and cost effective. For example, when Uber launched, taking a ride with a friend introduced many others to the experience. When Shyp sends a package, the recipient is exposed to the delightfulness of the service. Many of the most compelling local marketplaces have dynamics where the same person can be both customer and supplier over time. Dog owners on
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Homebrew’s first fund focuses on what we’re calling the “Bottom Up Economy.” The Bottom Up Economy thesis states that as technology becomes more affordable, flexible and accessible, many industries that have not benefitted from or been impacted by technology historically will finally do so Software is eating the world in many cases but also enabling the world in others. Accordingly, we spend a great deal of time getting to know entrepreneurs and companies building software solutions that disrupt industries or enable the existing industry players to compete more effectively. And we’ve already invested in companies serving several different areas, including legal services, mental health, logistics, communications, financial services and commercial construction. Given our focus on vertically oriented software, I wanted to share a little bit about the attributes we like to see in those startups.
Teams with a unique POV: As my partner, Hunter Walk, has written, we’re excited by teams that aredisrupting industries with love (and just enough greed :) ). Teams that have experience in the domain tend to have a strong POV about what’s broken and how to fix it. But often times the most unique insight can come from teams outside of their target industry who are approaching things with fresh eyes. So we prefer to work with teams that can demonstrate domain expertise without the stagnation of assuming status quo is just the “way things are done”. What’s critical is that the teams we invest in have an insight that many others either have not seen or don’t agree with.
Distribution focus: We tend not to invest in software companies that are 100% dependent on selling into theC-level via a direct salesforce. Instead, we prefer a bottom-up entry point via individuals or teams within the enterprise or small business. The startups that intrigue us have a well-articulated plan for how to get distribution of their software in the industry they are targeting, and most often that includes a strong likelihood for organic or viral growth. No matter how slick and easy-to-use your software is,if you build it they probably won’t come.
Long-term advantage: Nearly all software is replicable, so we look for companies that are likely to have long-term differentiation, ideally via customer or data network effects. Network effects mean that the value of the software grows as more people use it either because it allows them to interact with more people in the context of their work or it helps collect and aggregate data that informs and improves their work. The strongest network effects enable customers to benefit from product usage that occurs even outside of their companies (i.e. industry-wide).
Acute pain: VCs are notorious for categorizing things as an aspirin versus a vitamin or need-to-have versus nice-to-have. But there is a good reason for this. Unless software is helping addressing an acute pain or delivering value that can’t be ignored, it likely can’t attract the attention it needs to be used or purchased given the limited
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Of the many wonderful things about starting Homebrew, possibly the most satisfying has been working with a partner, Hunter Walk, in whom I have absolute trust. That trust stems from a longstanding relationship, a commitment to helping each other be successful and a shared vision for what we want Homebrew to be. And it makes it possible for work to rarely feel like work. Most importantly, that trust allows us to focus exclusively on the activity of the fund and being supportive of our partner companies. No time, energy or resources are wasted on questioning each others motivations, actions, decisions or feedback.
All of this has reminded me how much trust is fundamental to the success of startups (Homebrew is our own startup after all). I would argue that no characteristic impacts the productivity, motivation, camaraderie and longevity of a team more than trust. But how do you assemble a team that trusts each other when trust is usually forged through shared experiences over time? Culture, values, transparency and many other things certainly contribute to building trust. But the foundation of trust in every startup I’ve ever seen have it is a shared goal.
Whether you call it the Why, a mission statement, a shared vision, a true north or a common understanding of why the company exists, there is no replacement for everyone on the team knowing why they collectively and individually come to work each day. Startups are faced with many obstacles, unknowns and failures. People have to wear many hats and pitch in across many different areas. There’s often little, if any, time to coordinate activity, assign responsibility or formulate a plan of attack. When your team has a shared goal it becomes infinitely easier to assume, and eventually know, that your teammates are doing the right thing.
In startups, it’s the job of the founder(s) to repeatedly communicate the shared goal of the company and to make sure that anyone joining the team understands and shares that goal as well. At Homebrew, we prefer to work with mission-driven founders because they seem to do this innately. As a result, they are often successful in building teams and cultures that are based on trust. And these teams leverage that trust to become high-performing, making work feel nothing like work at all.
Nearly a year into Homebrew, we’ve learned a great deal about startups, investing and ourselves. And we’ve also reinforced many of the things we believed to be true about each of those things. Probably least surprising (and most painful!) to us and the companies we meet is how challenging it is to hire in today’s ultra-competitive talent market. While the immediate goal of startups is to get to product/market fit, the right team needs to be hired before that can happen. And when demand outstrips supply of talent, it’s easy to take shortcuts and to make hiring mistakes, especially when it feels like people are the main constraint to moving forward with your business. As a result, we spend an incredible amount of time with Homebrew family companies focused on helping with hiring, including trying to help avoid common hiring mistakes. Unfortunately, it’s an absolute certainty that hiring mistakes will be made, but you can improve your chances of success by being mindful of a few simple things.
Here are what we believe to be the most common mistakes (in no particular order and not a comprehensive list) that founders and startup teams at the seed stage make in hiring their earliest employees. Please share your thoughts on these and other hiring mistakes that founders should be sure to avoid. If you have hiring tips or tricks, we’d love to hear about those as well because hiring is an area in which everyone can always be learning and improving.
Choosing aptitude over attitude: It’s easy to believe that a highly skilled candidate who doesn’t fit the culture of your company or who can’t play well with others will still help you quickly tackle the problems you face. But history shows that undervaluing attitude and overvaluing skill actually leads to more problems, less output and lower team morale. Make sure your hiring process includes a thorough screen for culture fit and for an attitude that reflects the characteristics that you believe to be the foundation upon which you want to build your team, product and business. The right attitude alone isn’t always sufficient, but it’s always necessary. Aptitude alone is never sufficient.
Hiring specialists over “generalists”: Early in a company’s life, the reality is that nothing is certain, including which aspects of the product will be successful and which skills are needed on the team to scale beyond present day. Accordingly, startups can’t afford to have team members that are only able to do one thing well and not stretch beyond that one thing. I suggest that startups hire “T-shaped” generalists who have a superpower but also have the flexibility in thinking, curiosity and desire to take on more than only what they know incredibly well. Early team members are ideally multi-tool athletes with a particular strength who can also fill positions of need whenever and wherever they are found. Hiring people who only do one thing really well can limit your potential paths to success as
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