SPEAKER_00: this week in startups is brought to you by Odoo is a fully customizable and fully integrated suite of business apps that lets you build and scale your stack as you build and scale your business your first app is free forever and right now Odoo is offering $1,000 off your first implementation pack at odoo.com slash twist that's odoo.com slash twist linkedin marketing to redeem a $100 linkedin ad credit and launch your first campaign go to linkedin.com slash checklist and vanter compliance and security shouldn't be a deal breaker for startups to win new business vanter makes it easy for companies to get a sock to report fast twist listeners can get $1,000 off for a limited time at vanter.com slash twist hey everybody i want to

SPEAKER_02: tell you about angel university this is a workshop i've been hosting since i wrote my book angel uh three or four years ago and it's a virtual class it's coming up on november 15th and it's open to all investors now not just accredited investors we've opened it up to all investors of course accreditation rules in your country may be different or you may not have them at all uh but they are changing over time so we wanted to in preparation for maybe an angel investing accreditation test allow non-accredited investors in since we took the course online in march 2020 during the pandemic we've held over 10 virtual classes and we've had over 3,500 investors attend amazing and many of those accredited investors are now part of my syndicate at the syndicate.com and we share deal flow and we invest alongside each other in what's called special purpose vehicles you'll learn about that in the course but again the course is for all investors whether you're accredited or you're a retail investor it's just a learning day for you in 2020 our syndicate deployed over 21 million dollars in 38 deals and in 2021 we're on track to double that basically and uh we'll wind up deploying you know closer to a hundred million dollars there's a lot of great deals out there we really vet them well and this course is how you can learn to vet deals find deals and to network with other angel investors i teach the course with my friend mike savino one of my best friends and long time collaborators and in this workshop we basically share all the lessons that we learned deploying tens of millions of dollars in over 300 startups including ones you know like uber robberhood com trello etc and superhuman you're going to learn how to source and negotiate deals evaluate startups and manage your portfolio we also go deep into adding value as an angel investor and we do portfolio construction scenarios we talk about securing pro rata rights getting investor updates what it means to have information rights and just so much more plus we recently added a new segment featuring an interactive investor q a with some of the best angels in the business for november's class we'll be joined by my friend meb farber he's the chief investment officer of cambria investment management and meb has a great

SPEAKER_06: podcast that i've been on and he's really into angel investing previously and i think still public market investor but he really got the bug and is now loving angel investing and the returns uh that he's seen so the course is 300 but all the proceeds go to charity since march 2020 we've donated well over

SPEAKER_02: 50 000 whether you're an accredited or non-accredited investor to learn more go to angel.university okay everybody welcome to episode five of our startup checklist these are a hundred bullet points

SPEAKER_08: that you can go through with your team with your co-founders and just check each one to make sure you're thinking about every single aspect of your business and you're not forgetting something the reason we came up with this was because we read a book called the checklist manifesto had a profound impact on me and my team essentially if you create a checklist your rate of failure will go down dramatically if you try to remember all the things you have to keep in mind well you're

SPEAKER_02: going to crash the plane or you're going to kill the patient how do we know this well in the book the startup checklist they talk about how they created checklists and procedures in operating rooms and lowered the number of people dying from things like septic shock when you get bacteria in your bloodstream or they had a story in that book about how they kept uh crashing airplanes with four engines on it and they thought pilots would never be able to fly a four-engine aircraft when they created checklists and they had the pilot and the co-pilot and maybe the navigator all working through checklists saying okay flaps up check okay speed indicator checked okay oil indicator check then they had less accidents it turns

SPEAKER_06: out the pilots who winged it would sometimes forget to check the oil they'd check that they had put the landing gear up or down or the flaps and then they died well you know startups are not a matter of

SPEAKER_02: life and death thankfully but if you have a checklist and you go through it the chances of you forgetting

SPEAKER_08: something really important will go down and your chances of success are going to go way up so in the previous four episodes episode one we did qualities of a winning founder basically what do you have to

SPEAKER_02: do what do you have to have inside of you in order to win episode two we did another 10 checklist items around business model episode three we talked about your customers do you understand who your

SPEAKER_08: customer is do you know how to delight them and that's part of the startup flywheel right is customers then episode four we talked about building a great product again that's part of my startup flywheel customers product team and today episode five we're going to talk about building a great team again a flywheel is something that once you get cranking will pick up speed and it will grow hopefully violently

SPEAKER_12: and delightfully and just uncontrollably if you get your team right and you get the team to build a great

SPEAKER_02: product and you delight customers that compounds itself because the customers give you money and they give you data to build a better product and if you have a better product you get more customers and if

SPEAKER_06: you have customers you get money to build a better team or give raises to your team or give them more resources it should all be self-explanatory but many of the founders i talk to i will have a half hour conversation with them they don't talk about their team they don't talk about their product they talk about customers they talk about market size and competitors and they're not focused on these three important things you can see the entire checklist at this week in startups.com checklist this week in startups.com checklist and you can print it out and you can you know take this and copy it and rehash it build your own blog post tell me what we got right what we got wrong you could create bullet points under it with your own checklists we did all this on notion feel free to create a new copy of the page all i ask is that you link back to this weekend startups.com checklist so we hope this is a living document i'm probably going to look at this every year and edit it and change it based on what changes in startup land so let's get into building a team all right the first question i get all the time is

SPEAKER_02: do you need a co-founder if you're a first-time founder the simple answer is probably yes it's really

SPEAKER_08: lonely to start a company and it's super stressful and having a co-founder will make it less lonely and less stressful especially if you can divide and conquer maybe you're great at fundraising you're

SPEAKER_02: an extrovert you love traveling that's a full-time job and then maybe your co-founder is an introvert and they love product and they love studying the metrics and they don't care about going on the road and they freeze up when they're put in front of uh you know a group of people in a boardroom trying to take their money and they don't like to ask people for money plus speaking of money vcs expect you to have a co-founder why well if one person quits you got a backup plan this is why vcs accelerators

SPEAKER_06: always want to see two or three founders if it doesn't work out they got a backup plan remember

SPEAKER_15: they're putting in millions of dollars it would be kind of like going on safari and you're driving

SPEAKER_06: through the desert and you're you know land rover defender and you don't bring a spare tire you kind of bring two spare tires don't you when you're going out into the you know and you bring a air pump and you bring a kit to fix flats they want to see some redundancy they want to see a backup plan

SPEAKER_02: most startups don't work everybody knows that if you're betting on a solo founder you're basically doubling or tripling the risk so if you have empathy for investors and you just think if you were on that side of the table when they see a solo founder they think no bueno this is too much risk and they have other choices so they have other teams that they can invest in that will have multiple founders so therefore you are going to lose in the zero sum game of getting money from investors again it's a zero sum game they invest in one company they don't they may have the money to invest in a second or third company but they don't have the time times the gating uh factor here if you don't have a co-founder you know it's incredibly hard to find one you have to convince somebody to go on this

SPEAKER_06: journey with you you have to know and pick them as if they were a spouse and most people find it from having worked for 10 years uh with other people at another company or on another project so you're gonna have to take some risk have three people but you invest so if one person doesn't work out or if a fourth person doesn't work out their stock options go back in the pool maybe they vested one out of

SPEAKER_02: their four years and uh you know it's it's hard to find co-founders and if you can't find one you kind of fail the first test it means you can't convince people that your idea or you are good enough to go on this crazy adventure for and that's where you have to reflect and look deeply inside yourself and say

SPEAKER_08: what is it about me that people don't want to come on this journey with me it might be that you're not credible enough in which case maybe you want to go uh build your skill stack and learn more skills or

SPEAKER_18: maybe go work at a company and build your credibility okay so that's point number 41 on our overall checklist and the first point we're going to do today if you listen to twist often you've heard me

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SPEAKER_08: okay i'm gonna take the next two checklist questions i'm gonna bundle them together the first is checklist item number 42 do you know when to make your first hire checklist item number 43 do you know what positions to hire for first so you have to in the marketplace get somebody to quit their job and come work for a

SPEAKER_02: startup that is high risk this is not an easy task so let's assume you have three co-founders right you're gonna have to assess well what are the three of you do really well and are there any glaring holes in your team so let's say you have two developers and somebody who is a great sales executive who's doing the fundraising and they're the ceo uh and one person's the cto and the other person is the president what are you missing maybe you're missing a designer somebody who's great at ux maybe you're missing somebody who's great at customer support customer happiness you're gonna have to look and decide who is the best person to help there might be just another developer it might be a sales executive because you have a great product and you need more people to sell it so uh it's also going to cost

SPEAKER_08: money so you might want to get the product to the point at which you've raised money or you have your first two or three customers and you've got a little bit of money coming in because what you don't

SPEAKER_02: want is to have that person sitting there doing nothing or you don't want to hire somebody for so far below market that they quit and so it can be a difficult thing to figure out once you've raised money well then you should start thinking about hey where do we need to be in 18 months hopefully you've raised 18 months of runway where do we need to be between 12 and 18 months when we start the fundraising process again will we be at break even and we don't need to raise money or profitability will we be burning 50k a month but have 10 customers who are spending 10 000 a year with us you want to really do a little bit of a plan there and the plan will then dictate what you need so if you're trying to get to 10 000 a month and reoccurring revenue a thousand dollars a month per customer 10 customers well you need to sell those 10 customers well you need to have two sales people if your sales people sell one person every two months or you need one person if they sell one person a month you get the idea and so let's move on to checklist point number 43 do you know what positions to hire for first okay we've talked about that first hire you really want to get somebody who is filling in basically for the fourth founder position or the third founder position and who's going to move the ball forward now once you've raised money now you have to start thinking about what positions you're going to hire first sometimes you're going to need to hire a lot of people in one group if you are an ai company

SPEAKER_12: and you're doing machine learning it's going to take two or three people right so you may need to hire them before you do anything else because you're pre-product market fit and you cannot get the product

SPEAKER_06: complete without those three and you're going to need to think about well when are you going to start the sales process and the marketing process one of the most frustrating thing for sales and marketing people is to come to a company before they have product market fit before they finish the product because they're going to sit there twiddling their thumbs what do i do write marketing materials what do i do create ad creative when we haven't finished the product it's incredibly frustrating same thing would be true for a customer support rep well if there's no customers what's the rep going to do be very careful to not hire too early conversely if you've got the sales team out there selling and you don't have customer success and customer support in yet you are quickly going to be faced with churning customers

SPEAKER_14: this is where a plan comes into place if you make a plan for how many customers you're going to have

SPEAKER_06: how many you're going to add each month well you've set a target i want to add two customers a month okay our sales executives can land 10 meetings a week at scale but they ramp up to that so let's just put it at 20 we'll cut in half they're going to do five meetings one a day we think that's what we can book okay we know that every 20 results in one sale so we need two sales people over time great sales people will become more efficient maybe they'll get 30 meetings and therefore they'll start signing one or two customers a month okay great so you can kind of model that you also know that sales people turn over quickly because in a lot of cases they may not be missionaries they might be mercenaries and so you might expect a little bit of a higher turnover rate therefore you're going to say for every three sales executives we expect one to not make it past three to six months therefore our hiring plan is to hire six sales people to get to four and if we happen to get to six we'll be delighted

SPEAKER_08: that means we have to hire one every month for six months so that in month seven we have four up and

SPEAKER_02: running landing two customers if we are in fact landing two customers each and we have eight coming in a month we're going to hit this amount of revenue and we're going to need ballpark you know one customer success person for every you know 10 new customers a month great and we're going to need to have a customer support rep you get the idea you're going to really want to think through a plan and when you have a plan like that the goals you set in the plan will determine the uh resources needed in other words the human resources needed the positions needed some you can outsource most of them you cannot accounting you can legal you can hr you can like sales you can't uh so keep that in mind you if you can uh outsource certainly accounting legal are always and human resources are

SPEAKER_09: almost universally today outsourced in the first two years okay when you're starting out people tend to

SPEAKER_02: hire generalists and then specialists what do i mean by this the first five employees at a company tend to do three four five jobs each then over time you get to 50 employees and those 30 skills you tend to have one or two or three people working on each one what's an example well when you're starting out you might have an operations person they might do hr they might do the accounting they might do legal they might do fundraising uh and they might manage the office if you had an office and they might also do it company hit scale you tend to have an it manager an hr department with three people in it you'll have an accounting firm maybe an internal bookkeeper you get the idea if you're ambitious it's great to be an early employee at a company because the generalists get to do so many jobs however if you do not quickly become a specialist you will get replaced by a specialist that's why you see some people who do four years at companies and then go to another startup why they like the zero to one function going from no product to having a launch product from no customers to a customer and that's okay those generalists are awesome in the world but they tend not to be specialists they may not like to do one thing 50 hours a week which is what you need at scale okay so uh what do you need early you really need developers and product managers early what don't you need hr lawyers pr that stuff

SPEAKER_18: comes later and you can outsource that stuff keep in mind the bar raiser hiring process at amazon every person you hire should be better than 50 of those in similar roles

SPEAKER_02: basically the concept of hiring is you know if you have the resources you want to hire people who you can learn from as the founder so i always try to hire sales executives or operational people who have done more of that than me now i'm 50 years old i've done a lot of this stuff so the chances of as you get older and wiser and you got more scar tissue and you've done it multiple times the chances of having somebody you can learn from as in a hire goes down but i still find them and it's really great when

SPEAKER_18: i do so hire those bar raisers especially if you're a first-time founder and when i was a first-time

SPEAKER_02: founder i had carl martesco elliot cook a lot of people around me who knew much more than i did about running companies joanne wilson they and they basically were able to pull me up and say hey schmuck here's how this works and i'd say oh thanks i had no idea what the difference between accrual

SPEAKER_08: and cash-based accounting was and they had been through that 10 times and they're like do this do this do this and i was like okay i'll just listen to them and it was great for me

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SPEAKER_08: checklist item number 44 should you build a distributed team in today's marketplace you may have no choice

SPEAKER_06: but to build a remote team because people don't want to come to an office during covid let's assume the pandemic turns into an endemic and we get past this and covet is no more than a typical cold or that these

SPEAKER_02: vaccines work uh to the you know with the nova and other vaccines coming out so to date this podcast and when

SPEAKER_18: it was taped in 2021 in the fall of 2021 we're still dealing with the pandemic so that affects the advice here distributed teams are fantastic because you're not hiring people within 50 miles of your office

SPEAKER_06: and they're challenging because you have to know how to manage remote workers you can't as somebody who's

SPEAKER_18: not a developer manage a remote developer credibly because you can't look at the code you can't see what

SPEAKER_02: they're submitting but if you are a cto and you're a developer you can if you're a ceo can you manage a sales executive actually you can because you don't have to look at code you can just look at the

SPEAKER_06: calls and you can look at the crm system the customer relationship management it should have all the emails in there you should be able to look at the contract so there are things that founders can manage um that other people can now there is a disadvantage i think for the founders not to be in the same room to be bonding with each other and building a culture it's hard to build culture remotely so you're gonna have to invest in that but boy you're gonna save all that real estate cost and the real estate costs and these early stage companies you know if you're spending 10k on an

SPEAKER_02: office that could be two more sales people uh you know at 60k all in with some commissions on top of it or it could be your you know third developer now the third developer is like oh it's just one more

SPEAKER_08: developer no it's 50 more developing capacity so let's pause for a second it's not one developer

SPEAKER_14: if you have one developer and you add one developer you have a hundred percent more capacity

SPEAKER_15: if you have two developers you add one you have 50 more capacity uh is some flashy we work office no

SPEAKER_02: offense or you know some warehouse worth it or is 50 more or 33 more or 100 more developer capacity a better thing i think we all know the answer to that um and speed is super important so you really want to be able to move fast if you can hire somebody from anywhere and uh get them today versus wait for three months you may only have six months of runway man keep moving and you need to know how to do slack huddles weekly team calls quarterly team retreats this best practice is being built in real time i think you have to embrace remote because startups need to move fast and remote means fast and startups need to compete if you don't accept remote workers and google and facebook are accepting remote man you're at a serious disadvantage now you have to press every advantage you have as a founder remote work

SPEAKER_06: is an advantage you're going to have to level up as a founder and figure it out if you can't figure it out don't be a founder go work for the post office okay checklist no offense to post office workers

SPEAKER_16: but it's different checklist item number 45 uh do you know what to outsource to freelancers and how to

SPEAKER_06: outsource to freelancers this is critical um there are things that will take a lot of work a lot of time

SPEAKER_08: but they're not strategic if it's administrative repeatable one time outsourcing what's an example of

SPEAKER_02: that well we needed to research all the founders in australia and so i went on fiverr or i shouldn't say i went on fiverr one of my team members went to fiverr we hired two different people we said hey

David Friedberg: here's a database make us a database read the news in australia do google searches for startup founders

SPEAKER_02: use crunchbase use pitchbook use anything you can look at the find us all the accelerators look on their portfolio page find us on twitter every australian startup put them into this database try to guess the person's email confirm the email because we want to invite them to come to launch festival australia

SPEAKER_08: and man we started on third base i could have had my internal people do it but i wanted them

SPEAKER_02: picking the speakers finding a location uh and um doing the marketing now you might be able to hire a freelancer to find locations you might be able to crowdsource that sales building product

SPEAKER_06: product probably not a good idea product customers team right that's what i talk about with this flywheel

SPEAKER_02: product customers team don't outsource recruiting customers and product anything in there is kind of the secret sauce right those are the three legs of your stool you rip off customers you rip off product you rip off team the stool falls over if you have an outsourced product team building they're not full time they don't they're not dedicated to you they work on a project basis that might be fine for

SPEAKER_18: building your mvp but honestly it's a major red flag like 10 red flags if you can't build the product

SPEAKER_06: in-house because every investor knows we give you 250k you give it to your outsourced development firm and then development stops okay give a 500k give it to your outsourced development you got to have that in-house same thing with customers if you're not talking to your customers and somebody else is selling them you've abstracted that layer that's why all those rep firms that called in the early days of this week and startups and said hey can we sell your ads i said no i want to have a sales team i want to know who the advertisers are on the podcast i want to meet the advertisers myself i actually do

SPEAKER_02: onboarding calls with each advertiser which is kind of intense given how many we have now but i still try

SPEAKER_06: to do at least an onboarding call with them so they know me i can let them know i appreciate them i can

SPEAKER_02: hear from them what their goals are and it just increases renewal so even i take this hard medicine of really getting to know the customers even though it's time consuming and let's face it you know a lot of other podcasters think they're above it like i don't think you know every podcaster of note or of my stature is getting on calls with advertisers i i still do it i'm gonna try to keep doing team same thing you know no offense to headhunters please don't start emailing me but you know if you're outsourcing headhunting it means you don't have a great culture it means you don't have a company that people want to work for it means your mission is not good and you're probably going to get people who are not great hires you need to have that muscle internally work that muscle

SPEAKER_18: internally get good at it product customers team in-house and everything else outside hr tools

SPEAKER_02: gusto i mean amazing they just get everything done for you these peos etc rippling

SPEAKER_18: zenefits all these places are great at that outsourced accounting tons of places to do that for

SPEAKER_02: you and you know with outsourced uh services that people look at that as efficiency you don't need to rack your own service you don't need to build your own hr department uh until you hit you know massive scale and even then hr you want to bring in house probably 50 100 people is what i hear from most founders and building your own server farm unless there's some super compelling reason to do it you're probably not going to be able to compete with google cloud or azure or everybody else trying to lower the costs of doing that okay item number uh 46 on our checklist how much do you pay early

SPEAKER_18: employees you know how to manage your bankroll and not have to pay a fortune you are going to be

SPEAKER_08: unable if you're a seed funded company to compete against google and facebook you should not try when

SPEAKER_14: you're interviewing somebody and they say hey i have a google deal hey this is my linkedin deal here's my microsoft deal you just have to say to them we can't compete with that if you're going for

SPEAKER_08: max money you should go work there if you're going for max impact you should work here and immediately

SPEAKER_02: sort them out of your process immediately i literally had a founder say hey this person's got a competing deal with google how do we compete i said you don't you don't if that person wants max money just tell them this is not max money you're going to make half as much cash comp and you're going

SPEAKER_06: to get you know the chance of getting the lottery ticket at options of a company that's currently valued at 10 or 20 million dollars or 50 million or 100 million if you want to go work on making you know

SPEAKER_02: billions of people click on facebook ads 0.001 time go ahead if you want to change the world

SPEAKER_08: please do that here that's the difference do not try to compete against those now you want to do the

SPEAKER_02: best you can and so what you can say is listen we are seed funded we've raised a million dollars we know as a developer you can get 200 250 working at that company we can offer you 150 or 125 you're a sales person you can make 150 working at twilio for your base salary and then get 2 of sales to get you to 250k i can pay you 75k but i'll give you 10 of sales for the first year and we'll see in year two so you know 10 on 500k or a million would be 50 to 100k you get to 125 but we want you to give you stock options and you can grow from that so i think you have to be creative and then when you get funded with more money you can go back and remember those conversations and give people raises and you can be much more aggressive in your raises when you start raising more money and if people are going for max money you just have to accept in the startup world that you will not be able to compete

SPEAKER_08: period end of story and don't try to you can always also look for if this person's a vp of sales and you can't get them to leave some sas company doing 100 million in revenue who's two steps below

SPEAKER_06: that person is there a sales executive who wants to be the sales manager is there a sales manager who wants to be your vp of sales that's the way to do it is you take somebody who's the sixth seventh eighth player on the basketball team but not in the starting five and you say we believe you should be a starter on our team you'll be a starter so sometimes in the nba they'll say hey this person is going to go to this team to chase a ring or to be on a team with a winning record of this person is going to go to a team because they want to be the man and have the ball in their hands and be starting and playing 40 minutes so they're they're picking the team not based on how much they can get paid all things being equal they're picking it based on the role that's what you're looking to do is find

SPEAKER_02: people who want to be the man or that's in the case of the nba or the woman in the case of the nba who want to shoot their shot right and who want to get more minutes on the court and that's what you're selling and if people are mercenaries and they want to go for money just cut them off immediately we can't compete with google where our offer is going to be on a cash compensation basis far below google and then stop talking and see what they say and they say oh i need to make

SPEAKER_06: max cash can you match them you say there is no way we can match them period end of story

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SPEAKER_14: okay let's go to checklist item number 47. do you have a plan to give each employee the right amount of

SPEAKER_08: equity do you know how much equity to give to your early hires this is where working with your attorneys

SPEAKER_02: and your venture capitalists can come in handy putting aside co-founders for a second there is a schedule as the company grows of how to give this equity if a person is coming in as a co-founder and you're splitting it three ways and they're there at inception and they're all vesting

SPEAKER_06: you know four co-founders 25 each and then you give 10 to the employee stock option pool you give uh 20 to your investors everybody takes a 30 haircut 30 off of 25 you get the idea

SPEAKER_02: uh you're going to start getting down into the teens and then eventually each of the four co-founders

SPEAKER_06: going to own four or five percent of the company if it's two they might own ten percent each by the

SPEAKER_18: time the company gets sold to gross public uh if it's a solo co-founder they could own as much as

SPEAKER_02: 15 to 25 percent of the company very rarely happens um there are tons of websites that will break this down for you you need only do a google search uh or look on those websites but senior senior engineers uh in the early stage they could get 50 bips to one percent a vp you know somebody in a top 10 position uh like a cto vp in the early days would get low single digits one two three four again vesting over four years people who are junior engineers they might get 10 25 bips mid-level engineer 25 50 bips when they say bips that means fractions of a percentage so 50 bips is half a percentage point 25 bips is a quarter of a percentage point so not one percent 50.50 uh and then you know other folks might junior people might get a token five to ten bips it's it's very limited equity so you really want to be smart with it and then you want to look as time goes on and say hey when do we need to ask our board to give us more equity because you blow out your esop employee stock option pool that first east option lasts you through the series a maybe the series a you would top it off five percent and then that would come either before or after the financing some of the investors if they're giving you a series a term sheet says we want you to take everybody on the cap table takes the five percent hit then we put our money in so they're not buying 20 of your company and then immediately losing a point right so they want the equity refresh to happen before that so there are little issues like that that people negotiate on the margins but you want to be generous but realistic and you want to have a plan for where this is going to get you and that's where having a great board and advisors and people have done it before comes in really handy if you go to this week in startups.com basics we did a stock options episode with becky degraw from wilson cincini amazing episode an amazing takeaway from that was selecting for your 83b provision this is crucial for founders employee stock options because it gives you the option to pay taxes on the total fair market value of your stock options at the time of the granting if you don't elect this option you're going to owe taxes on your stock after every new round of fundraising it's a really challenging thing just bring up 83b with your startup lawyer so you understand it vesting schedule uh four-year commitment that means you divide the number of options into four years that you're going to get that amount per year but a one-year cliff so you get nothing until month 12. after month 12 you might vest monthly or quarterly in other words you would take 1 48th of the option grant so if you had uh let's say uh 0.98 just to make it easy 0.98 of the company 48 months means you're getting two bips a

SPEAKER_06: month so after you get that first year then you get two bips a month what that means is it's being fairer to both parties if you don't stick around a month a year you're that lame and or we're that lame as the company that you don't want to stay you shouldn't be on the captive but if you do get to month 13 we had a good enough time to get to know you you had a good enough time to get to know us that's plenty of time you get that big 25 equity grant and then after that you go monthly so that if you were to leave a month seven you're not sticking around to month 25 which is in the bad interest of

SPEAKER_09: everybody if you shouldn't be there right you don't want a dysfunctional employee who's sticking around

SPEAKER_02: for a long time i actually in my venture firm i have people investing in six month clips uh and year

SPEAKER_06: clips for the funds why do i do it that way well i want people to take a 10 year view of working in venture capital not a monthly view if you're in it for monthly you're in the wrong thing you have to think in a decade like i do i think in two decade periods anybody who's working for me on the venture side should be thinking in a decade long period of building a venture firm to last and building a

SPEAKER_02: syndicate to last at the syndicate.com and building wealth that is generational i want people on my team thinking about making millions of dollars tens of millions eventually uh and moving up the stack from researchers to associates to principals to managing directors so that they can eventually you know buy a million dollar multi-million dollar home you can only do that if you're around for 10 years because these investments take 10 years to mature and you have to invest them you get the idea so some people do five-year grants now to keep people even more invested it's interesting stuff you can build an org chart with your board this is like board level discussions that you'll get good

SPEAKER_08: at eventually number 48 on checklist do you know when to start thinking about culture day one day one think about the culture you want and the culture should be about you and the founders what makes

SPEAKER_02: you want to come to work every day you do not have to make a culture that is for everybody that's a mistake you want a culture that works for you and your co-founders and then employees second

SPEAKER_08: why if the employees love the culture and you don't you're going to quit i need you to come to work every day the founders come to work every day if you work hard and you believe in being relentless

SPEAKER_02: great if you on the other hand are believe in six weeks of vacation and people turning off their computers at five and not checking email on the weekends and life work balance and you have the opposite of that going on at your company in either situation you now have conflict and dissonance your employees want life work balance you are working every weekend and nobody's responding to your emails and slack at 9 pm you believe in taking the weekends off and stopping work at five and you got go-getters on your team who are emailing you at night to close a contract and over the weekend and then they're like well this person's not moving fast enough i have lost employees because i didn't move fast enough and i've lost employees because i moved too fast it's like goldilocks some bosses are too hot some are too cold you got to get to that just right moment the just right moment happens because of

SPEAKER_08: alignment and you got to write it down so for me i like people who do not need to be managed i like people who manage themselves at a certain point when we were doing more remote work and i was trying to

SPEAKER_02: manage more and more people i said i want a culture where everybody comes into slack every day and says a transparent culture this is the three or four bullet points i'm working on at the end of the day

SPEAKER_06: they say this is what i got accomplished today and they linked to the documents in notion or

SPEAKER_02: spreadsheets on google sheets uh or the asana board where or crm system for sales whatever it is so that everybody was super informed i had two people who refused to do it they don't work for me anymore

SPEAKER_06: great they don't want one of them said i was micromanaging not micromanaging i'm trying to have you manage yourself well i can manage myself i'm like great then spend five minutes in the morning and five minutes at the end of the day just saying what you're doing what you got done it turned out that those two people in hindsight in the debriefs with their co-workers were the least collaborative and didn't work as hard as everybody else great there was tension there i want to have things outlined of what people are getting done now the reason i'm doing that is not to micromanage it's so i don't have to do any management that sod and eod program i wrote about on my blog you can type in calacanis sod eod start a day end today if you just type that in and we'll link to it in our notes here at

SPEAKER_02: thisweekinstartups.com checklist that sod eod program was embraced by the high performers uh and people who wanted to advance their careers and it was framed as micromanaging by people who

SPEAKER_08: wanted to be professional managers and not do work and felt certain work was beneath them it's that simple

SPEAKER_02: and great it's my company so i get to choose and i chose that and if people didn't do their sod eod's on some consistent basis it just didn't work out for them here and that that's fine with me i do it at both companies actually and what everybody says is our communication and our execution is higher because of it great and there was one or two people who said i i feel like my uh sod and eod are really light and i said to them privately so you feel like you're not contributing enough and they're like yeah i'm really worried i'm like what are you worried about i'm gonna fire you're gonna fire me you don't need me i'm like what if you raised your hand and said can i help anybody with any projects i have some extra time they're like oh that's a great idea i'm like why don't you try it

SPEAKER_12: they tried it they got included in more projects they learned more and they love the job now i have

SPEAKER_06: the opposite problem i have some people who are so hardcore that their end of days end of weeks have too many things on them they do too much and i have to tell them can you take a vacation like producer jackie who's now a managing director i'm like jackie i'm getting these notes about how many days you have off accumulated do you want me to give you that as money or would you take a goddamn vacation please and i gotta take some days off so i actually had the opposite problem now that does not mean i'm advocating for 996 either it just means i'm looking for hard-working people who manage themselves if you're not a hard-working person you don't manage yourself this is not the company for you there are places where people get put into very specific silos and they get managed and they can they're not allowed to do things in other verticals how many friends do you have or maybe you have this experience i'll ask the people who are in the watching live right now how many of you had the experience where you did extra work and somebody told you please don't do that that's not your responsibility that's this person's job that's what i was getting told my whole career you know what i

SPEAKER_16: said to that well that's stupid i literally said that to a manager i was like well that's dumb i have extra time i want to do more work why wouldn't you let me do that well that's their job

SPEAKER_69: well what about the company that that job's not getting done that work is sitting there undone like a little i'm setting up computers and then there's servers to be set up and that person went home and the servers are still in the box and i took them out of the box i cleaned them i racked them

SPEAKER_06: i put the nick cards in network interface cards i set them up and the next day i got yelled at for

SPEAKER_12: doing it and i said but it's done and they're like it's not your job i'm like but it's done and now we can do the next job and get the out of here and do i'm sorry bleep that out but get the out of this job and go do the next one to make more money for the company and i worked late because i wanted to

SPEAKER_02: go watch the next game and eat dinners in the 90s i was gonna go watch the next game at ccc and you know go have some food and uh expense it on the company so i cost the company 40 bucks for my dinner and i got a lincoln town car home and i stayed here until nine o'clock eight or nine o'clock and then i watched the second half of the next game it was literally a true story and i almost got fired i was like i need to go work for myself it's just it's just some people you know so anyway back to the checklist item do you know when to start thinking about culture you want to do it early you can look at all the different ones that have been done out there you can read all the books about it what's essential is that you write down at our company this is what we value um and this is our culture and you can change that it can be a living doc but if you don't write it then when you hire people you can't show it to them and then you hire the wrong people and they say well i believe that i should not check my email on the weekends and it's like in a finance business or in a sales position if

SPEAKER_16: you did that oh my god like you know see you're gonna you're gonna lose so you have to write these

SPEAKER_02: things uh in a way uh that are shared with people i have another friend conversely who said i um have a highly profitable business i don't want anybody stressed out i want to have everybody delighted so i am purposely going to hire 50 more people than i need in customer service i'm going to tell them they can do as long as they want on the phone with customers they can call customers proactively and they can set their hours literally a friend of mine did that and they let people set their own hours as long as they put in the 40 hours a week and they shouldn't do overtime they were told not to do overtime and uh it was they had the most delighted customer support staff in the world that was overstaffed because they were wildly profitable you ever go to a hotel that's a five or six star hotel like amon hotels or the rosewood hotels i think they're called five star and i think

SPEAKER_12: amon a six star anyway those hotels you'll have four people clean your room at the same time i'm like whoa what's going on am i in trouble four people walked into the room with the amon tokyo

SPEAKER_09: at the same time and i was like this is crazy it was a 1500 night hotel i treated myself i was there

SPEAKER_02: for book tour four people you are not needed but that's the way they do it they want your room turned over in like the least amount of time possible and they go crazy cleaning everything like maniacs

SPEAKER_06: different businesses can have different philosophies of how to do things one might be going for we're going to start knocking on your door you ever have that knock at 8 a.m

SPEAKER_69: at a hotel they're like housekeeping you're like at 8 a.m really and then they come back housekeeping 9 a.m housekeeping 10 a.m i'm like oh my lord please stop doing that and they're like we have to housekeeping leaves at four o'clock therefore we have to get your housekeeping done by then

SPEAKER_02: this is a stupid example of two different styles of businesses having two different priorities one is efficiency and cost to keep the prices low and one is luxury and making the person feel cherished and not caring about efficiency two different strategies if you mix those strategies in the same culture it creates chaos so as the founder please define your chaos early and and frugality is one amazon is frugal other places might not be okay checklist item number 49 do you know when to fire an employee if you if you think there's a question if there is any question there is no question when you have a question about an employee and you don't think they should be there get rid of them it literally 90 times out of 100 your guts correct now there is a process legally of how to do this to make sure you don't get yourself in trouble work with your hr department but almost universally people hold on too much longer i used to think about creating performance improvement plans you know and trying to be this master motivator in my you know 20s and 30s and then i said you know what i'm not here to motivate you if i have to motivate you i can mentor you but not motivate you if you are not driven

SPEAKER_06: hardcore if you don't learn if you don't have a love of learning if you don't have a love of becoming better at your job i cannot put that in you that was your parents job that's your job is not my job

SPEAKER_02: i can give you goals targets support and mentoring those are things i can do and so what you need to

SPEAKER_06: do as when you're thinking about firing somebody ask yourself like which bucket is this falling into is this something intrinsic about the person they're lazy they're not thoughtful they're not type a and they're in a type a position or they're not customer facing they shouldn't be a customer facing person

SPEAKER_02: they're angry they're curt with people they're bitter they're not a good communicator they get annoyed by people they get frustrated they get misinterpreted they're an introvert whatever it is they're not customer it should not be customer facing and then you have other people who are super customer facing like you just maybe you hired the wrong person and their alignment's not there you

SPEAKER_08: can't change that it's just too too far of a bridge to cross now you could take somebody who is affable and make them delightful you could take somebody who's delightful and make them effervescent you know you can on the margins train people on how to be 10 20 better at something very rare you can get somebody to take that huge jump so ask yourself is that even going to happen and again be be professional be graceful give people severance unless they've done something wrong and you're firing them for cause and even when firing for cause you can talk to your human resources department

SPEAKER_02: about this but when you fire somebody for cause if you say hey it's not working out uh we'd like you to resign and if you resign uh sign these papers and we're going to give you two weeks severance or we're going to fire you for cause if you don't want to sign these paperwork like there are people who do that kind of a situation for like here's your exit ramp and here's the alternative i think that that's becoming a bit of a best practice in all cases don't gossip about people don't give people a hard time don't say bad things about people specifically when i talked earlier in this program about people who didn't enjoy working under the sodeod i didn't mention which company it is i created an amalgamation of that and it was years and years ago so like you wouldn't hear me say this

SPEAKER_83: person so you have to guess it's one of these 10 20 people you don't ever ever ever want to put yourself in a position where you're bad mouthing a previous employee it just makes other employees

SPEAKER_06: think that you're going to do it to them be graceful be professional if other people on your team or bad mouthing a previous employee you can say you know what we made a mistake and put it on

SPEAKER_02: yourself or they did the best they could we're happy they found a better fit you got to kind of move into that when i was younger man i would get angry when somebody would leave the company man i would be like scorched earth can't believe this person left the team i just had a very like cutthroat attitude about it i've since moved on from that and i've even had boomerang employees i've had great employees who've left and i said oh i'm really disappointed you're leaving um would you like me i literally said this to somebody recently would you like me to fight to keep you here or would you like me not to fight to keep you here and i said no i've made my decision i want to go and i'm like great if it doesn't work out i've always got a spot for you they were like i mean they were just like j cal i love you okay be classy is another way of saying that now if somebody steals from you uh or otherwise does something absolutely there's a different different checklist item you are within your right to pursue legal remedies or do what you have to do to fire them for cause and i wouldn't say bad mouth them but you also are not obligated to give them a positive reference in the future i think the best thing to do to lower your liability is to just decline giving a reference for somebody who did something bad with you that speaks volumes think about it if you somebody worked for you for two or three years and then you don't give them a reference that's glowing what do you think when

SPEAKER_18: you're in that situation it's pretty much the ultimate tell if you call somebody's previous employer

SPEAKER_02: and they're not willing to get on the phone with you and you email them or call them three times and they don't call you back it means that person is not endorsing the person that's the non-non-endorsement they would not hire the person again okay item number 50 are advisors valuable i get this all the time checklist item number 50 are advisors valuable well let's define what an advisor is are they somebody

SPEAKER_06: who will is willing to put their name on your company if you give them 50 of your company for free up front that's kind of marauding that's not adding value let's say that person is going to get

SPEAKER_02: 50 bips at your company for over two years vested monthly one 50th every or whatever that is one 48th of it every month and you have a scope of work what they're going to do they were a vp of sales they're going to help you write sales material they'll interview your final candidates for your sales positions they'll give you uh two hours a month and one quarterly on-site four-hour lunch brainstorming session okay then you can say okay the 50 basis points is currently worth uh 50 000 dollars and in when we become a hundred million dollar company it'll be worth 500 000 therefore 50 000 for their services if it fails 500 000 if it works out great i'm going to hire that person as an advisor make sure you document everything nice and tight but these generally do not work to make a huge difference in the company unless you're actually getting value as a founder if you're doing it to impress investors that's not going to impress us in 99 out of 100 cases it might open some doors

SPEAKER_08: but generally speaking i think people overvalue it if they're valuable to you as a founder and they're willing to put in you know at least an hour to a month and at least 50 hours a year total with you

SPEAKER_02: you know like a week a year maybe 30 40 50 hours a year between lunches dinners phone calls then i think it's worth it there's some trade going on here of actual value you you can see the founder institute's fast agreement f-a-s-t it's basically a founder advisor standard template that my friend todayo came up with most people use that and you just uh have to have a candid discussion hey if it's not working for you then um you should cancel it if it's not working for us we are going to cancel it so we're not giving you free equity so that's uh what i can tell you about advisors wrapping up here we're halfway through the series i am so excited about you trying this out and giving us feedback you can always email producers at this week in startups.com that goes to all the producers and to me let's make sure that goes to me too i want to see the things people are emailing producers at this week in startups.com and you can visit this checklist at this week in startups.com slash checklist it's on notion so i think you can cut and paste it or make a new page edit it for yourself we're going to put check boxes on it we'll put our notes on it we're going to make this a living document the last three segments have been about the startup flywheel customers product team really think that through you might say team product customers because it tends to go in that order team product customers get that flywheel going stay focused on that when you are talking about your team are you talking about your product and you're talking about your customers with investors with potential employees with the press you'll see how they respond when you talk about everything else if not so much okay in episode six we're going to work on the market there's a reason why we put market after team product customers it's because that's when you should start thinking about it after you have your team product customers

SPEAKER_06: you got to really think about the market your total addressable market competition and that kind of stuff so episode six is coming understanding your market thanks again to our team jackie ashley

SPEAKER_02: charlie nick fresh marine i'm not sure who else worked on this but a lot of folks worked on this

SPEAKER_06: internally to distill our knowledge and maybe we'll make it into an ebook someday and keep editing it but thanks again for tuning in