Startup Lessons I Needed to Learn First Hand (But Maybe You Don’t)

When I stepped down as CEO in 2018, I wrote a post mortem and shared it privately with founder friends who directly asked when I blogged here. The company got acquired in 2019 and now I’m sharing the post mortem publicly because readers told me they saw novel concepts in my document they hadn’t heard elsewhere (as I write this I wonder if it’s because I was wrong. LMK!).

I used to abhor failure, but publicly releasing this post mortem no longer holds charge for me. Through Apptimize, I’ve learned and changed such that my subsequent companies will be very different. One of my biggest learnings is that I’d played a finite game and missed the infinite game. I didn’t know those concepts at the time and saw “product innovation” as a separate category of work. After shifting my reference frame, I now know innovation as a sign of infinite game behavior. Anyway, I hope the below is useful to founders whose sales motions aren’t getting easier years into their venture backed company and want to consider frameworks for evaluating their position. 

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Startup Post Mortem, written Q3 2018

At times, the company we founded in 2013 seemed to be doing well by various objective metrics— we had a prestigious customers list ranging from CNN to Comcast, we raised 3 funding rounds summing to over $20MM in venture capital investment, and our revenue grew exponentially for the first few years (obviously easier to 3x when x is small). As the cofounder and CEO, I always bet on our ability to figure it out and be a financial success. I put in the first $50K and bought our domain for an additional $10K, which isn’t much money in the scheme of startup funding, but this was before we had users, before we’d gotten into Y Combinator, before it was anyone other than me and my cofounder. I used to be a trader, so I wasn’t goofing around— I fully expected to eventually make tons of money off our startup. I wrote a draft S-1 for how we would IPO, I didn’t pay myself for the first year, I was the lowest paid person in the company for years, and I guarded our equity like it was the blood of my children. I always wanted more equity because I valued it so highly. When founder friends told me to pay myself more, I asked for more equity instead. When we raised an oversubscribed Series B, founder friends told me to ask if I could sell some of my shares or take money off the table, but again I asked for more equity instead. Suggestions to get cash seemed ridiculous to me because I didn’t think I deserved cash yet; we weren’t a success and I, more than anyone, knew all our warts. When we were getting acquired, founder friends suggested I block the acquisition unless I made money off it, but that also sounded ridiculous to me because I felt I deserved money least of all. I’m sure my VC’s would’ve agreed.

Our company didn’t exit at anywhere near as well as I’d pitched, and I felt sad to fail after so many years of everyone working so hard. For years, we worked weekends and holidays, regularly in the office till 10pm. My VP of marketing was back at work weeks after birthing each of her babies, working through her pregnancies, and we forced anyone who entered my house or office to do user tests. Had it all been a waste? Should we have spent that time partying instead? Being successful is important to me and I felt ashamed my company wasn’t a financial success despite how hard everyone worked on it and how much money we raised. Sure, I could twist the story to make it sound like a success in terms of learning and building, and we made a product people used, and we got acquired, but the fact is that the company didn’t make money the way I’d imagined and pitched. I felt scared my investors would view me as a failure and dislike me or view me as incompetent. We should’ve done better— we had some of the smartest people you’d ever meet working on this problem that I convinced them was important enough to warrant their time and resources. How had I been so wrong about the financial outcome? 

Two Key Qualifying Questions:

One of my investors put it well: everyone in a company is either a) making the product or b) selling the product. I learned there were 2 key questions that separated successful vs unsuccessful hires in our company:

  1. How hard is it to make this product?
  2. How hard is it to sell this product?

Our product was both hard to make and hard to sell. What do I mean by this and how does this impact the hiring profile?

Product vs Sales Driven Company:

On the spectrum of how hard it is to build a product, web forms are on the easier side. Easy products are anything that a person could do with a series of google docs and sheets, anything that you’re 100% sure is possible to make. On the harder side, there are products like a rocket or a flying car, where it’s <100% guaranteed the engineering will get there in the time required. If the product is easy to build, then engineering is easier and it’s more on the sales and marketing teams to drive the company forward and show why your company is better even though others can make this commoditizable product (through network effect/ better land grab execution, brand/ trust, integrations/ partnerships, “thought leadership,” customer service/ support, etc). 

In contrast, the harder a product is to build, the better engineers you need and the more everything depends on the product team shipping something 10x better. 

Our product was nowhere as hard to build as a rocket, but it was harder than a webapp, and we made design choices that increased the difficulty of building and maintaining our product in exchange for gaining competitive advantage, which was high at one point but eroded. This means our company had to be product driven. But after the first few years, we failed to be product driven because 1) I struggled to hire product leadership that was technical enough and 2) I was short term focused on revenue goals. Single-threaded on sales, I didn’t focus on the product roadmap because all I cared about were short term goals to lead us to the next funding round because I was mainly driven by my fear of the startup failing versus any love for shipping a better product. 

Transactional vs. Consultative Sales:

Everyone in B2B SaaS knows from SaaStr etc you’re supposed to distinguish between sales people who sold to technical vs non-technical teams, and differentiate sales candidates based on the price point they were comfortable selling at, but I learned an additional point of differentiation: how consultative must the sale be? On the spectrum of how hard it is to sell a product, widgets like video conferencing software are on the easier end, easy to explain and demo. On the harder end, there’s consulting services to suggest TBD process improvements. Even harder is stuff that’s a new category where you have to educate the buyer on the need. The hardest sales require founders to drive sales; the salesperson needs to be at least as smart as the buyer so they can credibly educate the buyer on how the product will urgently impact their revenue. Buyers of video conferencing software don’t expect to get promoted because they chose Zoom over Webex or talk about the impact of their choice at a conference, but buyers of analytics software do want to hear how they’re going to become Chief Product Officer vs VP, that they’re going to show their CEO a powerpoint with graphs clearly illustrating the revenue their analytics choices have created for their team, and how they’re going to speak at the conference on their data driven decision making processes.

If the product fulfills a clear, established need, you can hire a wider variety of salespeople. But when the product’s harder to sell, you need a “consultative” salesperson, a specific profile correlated but distinct from price point. When the product differences/ usage/ impact are hard to explain, or there’s no category yet, or it’s not a drastic, budgeted need, you need sales people who are like consultants, subject matter experts who are smarter than the buyers. 

If the sales person is interested in presenting a custom, strategic overview of how our product impacts the buyer’s product strategy, they eventually want to become customer success managers. Other than our first business hire, who was more like a cofounder to me and eventually founded his own company, I couldn’t get anyone to do both sales and customer success at the same time. I think our deals weren’t big enough and our customer success process was in the awkward gap between easy and hard— not hard enough to warrant consulting services, but not easy enough to remain a yearly check-in to upgrade the account. 

Pros and cons of product vs. sales driven startups

Fear/ Ego:

Shifting gears from the tactical company building stuff to the touchy feely, the following section is philosophical.

It had started out really fun. In the 2nd year of the company, one executive told me that she got all her social fulfillment from our work. We were always together, working from my house on weekends, engineers sleeping over when they got tired, cooking together, talking about each other’s love languages, a group of friends going on an adventure together. 

But now I see that I didn’t start the company with a pure heart. I started the company because I thought it’d be successful and I wanted to prove I could contribute something to the world, not because I specifically cared about our product or market, which I learned matters for me as time passes. 

I thought I could get passionate about anything, and that was true at first, but it drained me to force myself to be an expert on our product for years because it wasn’t something I would’ve done if it weren’t for the company, the team, and my ego. For years, I always knew the most about our market and would send links to the rest of the team for news that had come out, anything they needed to know. I’d talk with all the CEO’s in our industry and obsess over competitive intelligence. But I didn’t enjoy it for the sake of it— I did it because I felt responsible for everybody and didn’t think anyone else could be held responsible for anything. 

Over time, I learned that my energy was the limiting reactant to much of the company’s forward progress, so I had to focus on what would energize me and manage my own energy. I learned that I do best when something is new because I’m intrinsically interested in learning new things. But after a project gets going, I can only continue gaining energy from the project if it’s something I’m intrinsically interested in, if it’s something I’d work on even if no one knew about it or if I never got any reward for it. 

It took me years to admit I wanted to stop being CEO because I was scared the company would die if I stopped. I wanted to quit, but I view myself as a strong, successful person who doesn’t give up and always figures it out. When I started thinking it wasn’t fun anymore, I thought about how I should be grateful for my amazing life, and a lot of the time it was still fun… I made excuses and suppressed my “weak” or “useless” feelings. When I wanted to give up, I’d listen to Ben Horowitz’s writing on “the struggle” and think about how it was supposed to be hard; I was supposed to not have fun— otherwise everyone would be a billionaire. It took me time to peel back my ego so I could admit my true feelings. 

Those are the only regrets I have, times when I didn’t listen to myself. All the strategic and tactical mistakes, I don’t regret those because I did the best I could. But when I knew that it wasn’t what I wanted but went along with it— I regret that because I wasn’t true to myself and I knew better. 

I was scared to tell anyone I wanted to leave because I was scared of what would happen. I think it’s a rare company where people are vulnerable about their thoughts around leaving, especially if they’re founders or executives, because it’s scary to lose control. We hide our emotions because we want to control peoples’ potential reactions to us. I had lots of justifiable reasons for not admitting even to myself that I wanted to leave. I was scared everyone would leave if they heard I wanted to leave, I didn’t want to burden them with something they couldn’t affect anyway, it’d distract them needlessly from their work. I learned that if I don’t figure out how to be vulnerable with my team, I can’t build the culture I want.  

For years, I tried to shield my team from investors and my desire to leave because I thought they couldn’t handle it and I wanted to control them. I thought if I focused them on their goals, everything would be fine. This was not fun for me because it was lonely, but I didn’t know another way to operate. I made sure to be reasonable and had a slew of advisors and executive coaches validating my choices, but my conventionally justifiable managerial moves weren’t authentic to me. 

At various points during the CEO hiring process, I told my board members I didn’t care about staying CEO, but I don’t think they believed me and assumed I was ego attached to the title or role. This was false. I told them, “Ideally, I would do no work, and people would still give me money,” but I didn’t believe this was possible. Rather than the role or title, the thing I was actually ego attached to was the company being successful, which I was sure was tied to me being CEO even though I didn’t want to be anymore— that’s a different kind of hubris/ ego attachment. 

It wasn’t until I hired an amazing executive team that was smarter than me (V1 of my exec team was also smarter than me but I didn’t trust our inexperience so I messed up that team) that I felt ready to stop trying to manage their emotions and admitted the truth to myself and to them. It was futile to try to control them because I needed their help. I was tired after 6 years of running the company and was no longer too proud to admit my needs. I realized my ego was keeping me from my true desires because all my ego cared about was my image, looking like a success, when inside I wanted to be more playful. For years, my ego kept me doing something I thought I “should” do, when I didn’t want it anymore.

Market Size, Product Market Fit, Raising Venture Capital:

This section is relevant if you are raising venture capital. Unlike VC-backed startups, bootstrapped companies are not as reliant on growth. A profitable small business might have zero competitive advantage and never think about building moats or expanding outside of a tiny niche and still be making bank for its owners. In contrast, VC-backed startups need to grow at all costs to be worth it.

VC’s always ask about market size and competition, and I had a reasonable answer for this. Our market size was small but growing. We would expand out of this market through new products on our roadmap. The thing we didn’t realize is that we needed to be a product driven company, and we weren’t anymore. After the Series A, I focused on hitting quarterly sales goals and we all believed we could do that without product innovation or market expansion, because product only impacts things longer term. Driven mainly by fear of failure, I was not thinking longer term than the next funding round and board meetings were lasered in on short term quarterly targets. 

However, in a small/ developing market, you can’t hit the next sales goal by pouring money into marketing. Our market wasn’t so small that we couldn’t hit our next sales goal with our existing products, but it was small enough that increasing costs on sales and marketing didn’t get us anywhere. The “gas on the flame” model is what everyone assumed we should follow, and it’s what you basically have to follow if you want to grow exponentially in the way the VC model demands. If the market is large enough, then pushing additional marketing dollars into it gets you more leads for longer, but if the market is small, additional money stops working too fast. In that situation, strategies that work for big markets don’t work for a small but growing market because it’s not just a matter of more marketing dollars, automation, or SDR’s. We tried these things, and frustrated a bunch of SDR’s and marketers who thought it’d be easy but then realize they couldn’t hit the goals they’d set for themselves. When people are scared to miss goals, they want to blame the other legs of the org, leadership, etc. 

We always pitched that we’d expand out of our market, and this is plausible and what we attempted to do, but we didn’t do it successfully. Although our core product was still the best, it was no longer 10x better. We had to come up with another product but we were already a company with an established product that was hard to maintain, and the magic that came with the first versions of the product wasn’t in our DNA anymore. Only a few people on the team even still remembered the days when we’d release mind blowing features that were obviously patentable, made our customers say, “Wait, how did you do that?” and force our competitors to freak out and start rewriting everything.

I don’t think the VC’s ever thought we had a product issue because:

  1. At our stage and revenue, VC’s were used to the product being fairly well baked with a pretty obvious roadmap. 
  2. SaaS VC’s are finance focused because SaaS has so many metrics to fixate on and it’s easier to fiddle with the arithmetic of the funnel conversion rates and CAC and so forth than to look at the product. 
  3. My MIT background implies I should be the product visionary so they trusted I was dealing with it. Sadly, this was not happening.
  4. Everyone they talked to, including product VP’s who came to interview customers and assess our issues, would talk about how our product was the best. “Best” is a squishy concept and not good enough to solve our issues. 
  5. The VC’s who passed because of market size were sort of right, and we were with the VC’s who didn’t believe it was too small and could keep going with the existing product.

TLDR: we weren’t focused on product innovation because, after raising a Series B, you’re supposed to be in scale mode, not majorly reconfiguring product market fit to try to grow at the rate required. But we couldn’t scale sales for a small market in a Series B way. We should’ve been in product development mode, but my Series B focus was all on quarterly sales goals, so we poured money into sales with little effect while chugging along half heartedly on product. 

I wanted to make my VP of Product CEO because he is amazing at product and strategy and leadership, but neither of us thought anyone else would support this because the board thought my inexperience was the problem, not product, so someone with zero CEO experience would’ve been the opposite of what they prescribed. If I’d had more energy and courage, I would’ve fought to make him CEO anyway and told him I would’ve had his back and helped him run everything, but I was tired, unsure of myself, and didn’t want to get blamed if we failed, which was very possible even with the best CEO ever, so I went the conventional choice that no one would blame me for and that everyone else wanted: an experienced, sales oriented CEO (I also have post mortem notes on what it was like as a board member with an outside-hire CEO, but that’ll be relevant to fewer founders so I’ll only share that if enough people care). We’ll never be able to run the experiment of what would’ve happened if I’d made my VP of Product the CEO, but in the future I can trust myself and stick to my gut vs going with popular opinion.

There were other VC-backed companies we were competing with, and that fueled the high cost, land grab mentality. We could’ve operated profitably, grown more slowly, returned money to investors, and become a small business until we were ready to scale at a VC rate, but all of us were on board for something higher growth and weren’t interested in this path. 

In my mind, I wanted to get us to the next funding round so I could leave and thought there was no way we could hire a CEO who wouldn’t kill the company until I fixed xyz first. I didn’t see that my mentality made it so there were always more things to fix before I could leave. I always found fundraising from VC’s way easier than making it from customers, plus that’s what competitors were doing, plus so many random SaaS companies with easy products that were basically webapps that I could make in 5 minutes using google forms were raising tons of money (our product was way harder to make and so much more advanced!) so I didn’t think twice about the potential strategic obligations of raising more venture. 

Lastly, Hiring:

As a leader, if you suck at hiring, you suck at everything. For example, if you’re bad at hiring, you’re scared to fire underperformers because you’re scared you won’t be able to backfill them in time, so now you’re making excuses about how you’ll fire underperformers after you already have someone else in place, which is increasingly awkward the more senior the role is because now you’re secretly interviewing for replacements. Being great at hiring means sourcing, which means getting really clear on the criteria. It took us a few iterations to get the criteria right because we learned there was a lot we had taken for granted when we put together the initial scorecards. 

I read many books on hiring and had overqualified hiring committees of top executives interviewing each candidate, but we still made mistakes. The biggest learning I had was that experience is much less important than the candidate having a growth mindset and the drive to learn. The deal with experienced candidates is that they will do whatever has made them successful in the past. This works if you precisely diagnose your problems and know exactly what you need to hit the goal, which is hard to do if it’s your first startup. 

I had never even worked in a business with customers before, so I knew I had blind spots in my ability to assess candidates. But I best knew all the things that actually needed to happen to hit goals and function well at my company because I had experienced it happen. Nevertheless, I didn’t trust myself and overly relied on the hiring committee. 

Hearing experienced candidates tell me with such confidence that they would fix all my problems was so comforting. I deeply wanted to believe them. What did I know anyway? We’ve closed a few million in revenue, but this person has closed a hundred million. I’ve done X at my company for a few years, but they’ve run that function for decades at various, more successful companies. The safe thing seems to be to hire this person so I don’t have to worry about it again. However, I learned these claims were uninformed because there was no way they could understand our issues well enough through an interview process to know how to solve them. Because our product was both not easy to make and not easy to sell, and our market was small, we weren’t just missing the obvious things to do and just hadn’t written the correct playbook or set up the right interviewing process. It worked better to hire people who didn’t know how they would solve our problems but had demonstrated scrappy problem solving abilities in the past. 

After hiring someone who wasn’t going to work, I usually knew within a week because they would still have no clue how anything worked (in contrast, execs like my CEO-level VP of Product was teaching me things about our company and space and writing documentation within a week). But I’d fear I was wrong or inadvertently creating a self fulfilling prophecy by not supporting them enough. Thus I’d let them hire people and stay out of their way, but ultimately the original team would leave and the new team wouldn’t be hitting goals, and we’d be left worse off than before. It’s better to make the tough call right away and admit you mishired, even at the cost of all the time invested and the team initially being excited and having to pay the recruiters, but it took me time to gain the confidence to do this, to trust myself and thus earn my team’s trust. 

Hiring experienced candidates worked if I knew exactly what I wanted, which I came to trust more over the years. Then all you need is to get confidence the candidate can do it for you because they’ve done it before themselves. References corroborated whether they were instrumental versus “around” at a hot company growing irrespective of their involvement. But you have to make sure the problem isn’t going to change from that diagnosis, and that the candidate is self aware about their strengths and weaknesses. The candidate has to get comfortable that their experience aligns with the diagnosed issue and that if the diagnosis changes, they may no longer suit the job. If you aren’t able to precisely diagnose the thing you want them to solve for and what it takes to do it, or if you think the problem will evolve, then hire someone who is more open and willing to grow, even if it means less experience, or experience that’s not as applicable, eg. a different price point, space, or buyer. 

I struggled the most to find good product leadership. Many good product people with remotely technical backgrounds become founders themselves, so it’s a tough role to hire for unless you invest in someone less experienced with a growth mindset who’s willing to join you for a few years so they can learn faster and have a bigger impact. I think this is the deal you often have to make in engineering and product hiring. 

I can see how my hiring mistakes often came from my ego driven fears of failure. I’d forgotten that one of the reasons I’d started a company was because I wanted to choose who I wanted to work with. Now I know I’d rather fail with a team and product I love and learn together with, than to “succeed” with a team and product that isn’t right for me.

Aftermath: 

We started the company in 2013 and, for me, it was fun for 3 years, then un-fun for 3 years, then I spent 2019 distancing myself from it. I wasn’t involved in the acquisition conversations, nor did I go with the team and product upon acquisition. 

I wish I were better able to show my appreciation for everyone. I felt guilty my company was an expensive learning experience for me. I don’t think any other experience would’ve been challenging enough to force me to change because I’d always gotten what I’d wanted before— my standard operating procedure of being smarter and harder working than anyone has always been enough when it came to the types of things I was pursuing. But this challenge was what I needed to force myself to confront my blind spots. I had never worked so hard at something and had it fail like this. I definitely gained tactical skills with regard to everything from executive hiring to enterprise sales, but ultimately I learned about my own psychology. 

Isn’t it always about people? I still feel haunted by the people I fired who feel unjustly treated, and my investors who saw me fail. Simultaneously, I feel awed by everyone who worked for the company because I saw how much people gave, and how everyone stepped up when I felt useless. Ultimately big takeaways devolves into platitudes, but the parts I loved the most were the relationships. Our customers became my friends and allies and, as far as I know, our product is still alive at the acquiring company. When I started the company, I didn’t know what it meant to have full partners in the business who I utterly trusted. Now I know what it’s like to not have to be alone, what it’s like to be with people smarter than me. My team inspired me and raised the bar. In future companies I start or join, I know what I need out of the team and how to be a better teammate and leader. 

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Reading through the above document I wrote 2 years ago, I appreciate how I’ve gotten to know myself better. Sounds cliche, but self awareness is the ultimate power. Regardless of $ or resources, without self awareness, I’m at the mercy of my thoughts, emotions, sensations, stories, friends, etc, reactionary and subject to un-designed manipulation from random stimuli. As I keep learning about myself and my blindspots/ assumptions, I gain more power to know and act from my true self, vs reacting to what I think will impress others or what sounds like a good idea right now because of this thing I just read or because of my mood.

Now I’m willing to allow my life to be 100% exquisite. I used to fear getting soft if I indulged certain facets of myself. Like, if I got a cat, or had kids, or meditated too much, I might lose my drive and leave a lesser dent in the universe. But now I see that I don’t have to worry about that. Now I trust and know myself better. The competitive part of me will always be this hyperproductive, demanding, ruthless achiever who constantly strategizes about how to crush every potential threat— I don’t need to worry about not being driven enough; I trust and know it’ll always be there when I want it. The thing to be aware of is whether I’m doing it reflexively versus consciously. That’s all Conscious Leadership, which I constantly talk about. Anyway, for all you founders out there, let me know if I can help. I invested in 2 companies in the last YC batch, Backlot and Known Medicine, because, for me, startups and angel investing are about supporting founders and learning and having fun. I love founders, so let me know if you want to connect.