A VC in Vacationland

12: The Elements of Great Managing (Photo credit: Wikipedia)

Warning: this post contains mercenary behavior!

One thing I learned a long time ago as a consultant was that you always picked up the bill at a bar or restaurant, whether you were out with a colleague, client or prospect. Why? It's always useful to have people feel indebted to you and picking up the tab is a easy way to accomplish this.

Picking up the tab with a customer or prospect always makes sense. You are either doing business with someone, or want to cultivate a relationship, so paying the bill is a strategic investment.

The same holds true when you are out with employees, partners or business friends. One never knows when you will need a favor from any of them, so why not be the good guy and grab the check?

It's worked for me for years. Remember, always pick up the bill…

I love the following Nest story, courtesy of Dan Primack of Fortune and Term Sheet.

How would you pitch your company to the VC's? What's your killer line? Better have one…

Nest Labs is Silicon Valley's most recent success story, agreeing earlier this week to be acquired by Google for $3.2 billion. But it wasn't always such an obvious winner.

Back in 2010, Nest's founding team went to pitch itself to venture capital firm Kleiner Perkins Caufield & Byers. The two investors with whom they met, Randy Komisar and Trae Vassallo, were obviously impressed by the co-founders' intelligence and Apple pedigree. And the pair also was intrigued by the idea for a "smart" thermostat, particularly because it tied into an Internet-of-things investment thesis that they already were beginning to develop.

The only problem was that… well, it was a thermostat. These were the guys who were credited with developing the iPod. Was this really ambitious enough? And could Komisar and Vassallo sell it to their skeptical partners?

The key was a single line at the end of Nest's presentation: After the thermostat, we're going to reimagine every unloved product in people's lives.

"When I saw that, I looked around my office at all of the beige plastic devices that had populated my life and were trying to hide from view because they were so ugly and cheap," Komisar recalls. "At that point I had to be in, and Trae agreed."

Komisar and Vassallo then won over their partners, joining Shasta Ventures on Nest's first round of funding. According to a Kleiner Perkins investor, the firm will recognize around a 20x return on that investment, via the sale to Google.

 

Français : La Chauvinière-Riant, Charles de Gaulle, Chartres (Photo credit: Wikipedia)

'The graveyards are full of indispensable men (and women)'

                –attributed to General Charles de Gaulle (and others)

Coming from a French General who sent many people to their death in war, the quote is at best ironic and at its worst, gravely cynical (sorry for the pun). 

I have witnessed the syndrome many times in my life in every company I have worked in and in many of the start ups I have had the privilege of mentoring and investing in. It generally starts fairly benignly, with the founder unable to delegate authority to his professionals. This can often be cured with some strong lectures, usually starting with the words: 'Why did we hire these people if they aren't given the resources to be successful?' lectures. If not, stricter messages are initiated in an effort to get Superman or Superwoman to help their team and the company be successful. If that fails, replacing/promoting the founder is often the only solution left.

The board, mentors, peers and investors all share the responsibility for making sure founders do not believe they are indispensable. Too often, founders either bully or threaten their board members into letting the worst happen. It may be insecurity on the part of the founder, or true belief that no one besides them is capable of running the company.

Here are a few thoughts on communicating with indispensable founders:

1. Be specific–often, lectures on poor behavior are couched in generalities, not specific situations. This is common when a co-founder or employee has approached the board and complained about the founder's behavior. Rarely does an employee, for example, want their founder to know that he or she has a complaint. If the founder is not confronted with specific situations, ones that potentially did/could harm the company, then the founder can often dismiss complaints as isolated events that do not need addressing. Its best to try showing the founder a pattern of behavior that is detrimental to morale or success.
2. Be honest–too often, messages can be overly coated with honey by providing excuses for the founder to slip back into his or her bad behavior. Don't say: 'I know you are under a lot of stress and that resulting in….whatever', say 'Your stress is creating havoc within the company, let's look at how we can reduce the stress and havoc'.
3. Be supportive–no one wants to be a jerk all their lives(well, some never learn but most don't). Changing behavior takes time and patience. You might try bringing in a CEO coach to work with the founder on their key problem areas. The board, peers and investors also need to take an active role in making change happen.

If you would like additional information, see this excellent 2008 HBR article by Noam Wassermann on the Founder's Dilemma and how to deal with it. 

Here's his conclusion – it is so apt.

 

"Choosing between money and power allows entrepreneurs to come to grips with what success means to them. Founders who want to manage empires will not believe they are successes if they lose control, even if they end up rich. Conversely, founders who understand that their goal is to amass wealth will not view themselves as failures when they step down from the top job. Once they realize why they are turning entrepreneur, founders must, as the old Chinese proverb says, "decide on three things at the start: the rules of the game, the stakes, and the quitting time." "

Cover of Only the Paranoid Survive

Andy Grove had it right: 'Only the paranoid survive'. Building a successful start up means lying awake many nights thinking about what could go wrong, and how to prevent it. What can go wrong will go wrong in a young company. One bad hire who becomes an energy vampire for the rest of the employees, releasing a product too early that fails in the field, a poor decision on features and functionality can all create failures that can be hard to recover from.

So celebrate those successes–customer acquisition, a new release, hiring a key employee–with lots of gusto, them get back to worrying…