(Editor’s note: OpenView Partners surveyed several venture capitalists to get their thoughts on a variety of issues relevant to start-up owners. This story originally ran on the company’s blog.)
We tracked down some of the brightest minds in venture capital to learn more about what makes great companies tick. We asked Phin Barnes, Brad Feld, Rob Go and Alex Taussig to share the advice to they most often give to (and the mistakes they most often see from) the CEOs and founders in their portfolios.
Here’s what they had to say:
Phin Barnes, principal, First Round Capital – Recruit and hire a team you would be honored to work for, and create a culture of “no ego” where the best ideas win.
A startup is a race against time in a world of extremely limited resources and imperfect information. I worry when founders take too long to make a decision and work to collect more information rather than trusting their instincts and being decisive about strategy, staffing, or fund-raising.
Brad Feld, managing director, Foundry Group LLC – Be honest and direct all the time, both with good news and bad news. View me as a partner, not someone you need to manage. If you ever start wondering whether I’m doing everything I can to help you win, just ask me.
The biggest mistakes I see involve freezing or thrashing. Startups are really hard. You are going to make mistakes — a lot of them. Don’t freeze. When you screw up, you have to own it, fix it, and move on.
Rob Go, Co-Founder, NextView Ventures – It’s easy to confuse forward movement with meaningful progress along the dimensions that really matter. This is especially true at the earliest stages where resources are constrained and the goals are unclear.
As for common problems, one challenge involves knowing when to scale. Many companies scale too quickly and suffer from over-staffing and over investing before a repeatable model is established. If an entrepreneur has access to lots of capital, it’s tempting to scale the operation too quickly. On the flip side, when a repeatable model is established, it’s time to invest aggressively in growth, even if it means dipping into the red. Knowing when to do this is hard, and can be tough to see as an entrepreneur that is engrossed in the day-to-day of running a company.
Alex Taussig, Highland Capital – First off, CEOs and founders are like snowflakes: no two are identical, and, as such, advice for one isn’t necessarily applicable to another. Some are starting their first company and aren’t old enough to drink alcohol, while others have exited three or four times and are building their magnum opus.
That said, one simple recommendation we find ourselves giving time and time again is to focus.
In good times, CEOs see opportunities everywhere – product extensions, acquisition targets, and unplanned hires. In bad times, CEOs may want to change course – slow the ramp, delay new product releases, and respond reactively to competitive threats. While we will occasionally advocate for dramatic changes in the business, the majority of the time our advice is to stick to the plan and focus on the true value drivers in the business.
Focus isn’t easy when you’re in the trenches, constantly responding to opportunities and threats. That’s why it’s the most frequent piece of advice we give.
As for problems, first-time founders can make the mistake of hiring for short-term needs, not long-term fit. With a small business network and no caché of multiple exits, it can be hard to attract top talent. It’s tempting to fill in holes on a team with whoever is around just to get on with things. These sub-optimal hires are a problem for two reasons: First, you never get rid of them fast enough, and second, they themselves will hire even less optimal people. It can take time to find the right early employees, but I generally believe it’s worth it.
At the other extreme, experienced founders can make the mistake of assuming their past experience is indicative of the future. Sometimes they are right, but an over-reliance on out-of-date information can guide even an experienced executive down the wrong path. That said, experienced founders are pretty good at discovering they have made the wrong choice and have the conviction to fix things quickly and decisively.