There is no culture trait more important than your compensation philosophy. Team development, org structures, and off-sites are secondary to how you pay people.

Why?

Because your system of pay communicates how you think about the long term success of your company. Something rushed, complicated, and managed by someone else leads to a culture that follows suit.

How your compensation philosophy works is separate from how much you can pay people. In a perfect, cash rich world, you’d pay everyone above market rate. That’s not a reality for 99% of startups.

Instead what employees value most is having a clear understanding about why your philosophy exists, how it works, and how they can level up. It doesn’t need to be complicated. It just needs to be clear and consistent with a commitment to make it better over time.

I prefer to think about compensation philosophy like a product. You create versions and each one gets better over time as you learn what’s missing in your previous version. It also requires you to stay committed to improving it over time as you find flaws. Teams can tell when a product is improving. The same should be said for your compensation philosophy.

Moment is six years old and we’ve gone through three versions. The first was equal compensation for everyone on the team. The second was built around skills. And the current version is built around ownership.

It has taken me a decade to create a compensation philosophy. It has taken me some time, but i’ve come to realize that I can’t outsource it. I can get help to run it, but ultimately it’s up to me to create it and improve it as the company scales.

Two Compensation Methods

There are two ways to compensate people.

1. The Negotiated Method – Used in NFL, it’s you against the employee to determine their salary. Each person is treated differently and although you create some general guidelines, you bend to the request of your better players.

2. The Formula Method – Championed by Buffer, this method relies on a set formula where employees can self calculate where they stand and how to make more. This system doesn’t bend to the individual, but instead creates a set of rules that everyone can use.

The Negotiated Method

The negotiated method is how most of the world operates. It’s considered standard and therefore your investors, board, and team are used to it.

This methodology is based on trying to align compensation to each person. It’s a lot of work. You end up spending a lot of time trying to align financial incentives to performance with bonuses, commissions, and justification for why one person is worth more than another.

Your most vocal employees, including bosses, will dictate your compensation philosophy. This doesn’t always mean that your most talented employees are the most vocal. It means you have to consider both the vocal and the non-vocal.

An unintended consequence to the negotiated method is that it generally benefits men. There are several studies, demonstrating that men prefer jobs where there is room to negotiate. While women rarely negotiate. Bosses are supposed to offset this personality difference, but compensation is a very hard skill to teach. Even if you train your managers, compensation is not applied evenly across the company.

Reasons to consider this method…

• You are hiring very quickly. You have raised a lot of money and need to move quickly in deploying the capital. You don’t have to create anything different from the standard.

• Equity value is climbing. You have a currency that continues to go up in value with frequent capital raises. An increasing company valuation gives people confidence to stick around as they calculate the value of their stock options.

• First time ceo. Of everything you need to learn, developing a new compensation philosophy is much lower on the list to learning how to be a great ceo.

• Function Dependent. Your business success is driven by a few function types and therefore you need to win in having the best of that function. Engineering and sales talent comes to mind and the rate for the best talent is very expensive.

Specifics you need in place with this method….

• Explanation. The Netflix 2009 culture doc make it clear why and how they compensate the team. It makes it clear why some employees make more than others. This is for a highly funded, venture scaling business.

• As and Bs. This a simple structure but you need a way to rank your talent so the managers know who to pay and who not to pay. You need some uniformity other than the most demanding bosses getting the most compensation for their teams.

• Market rates. You need to refresh your compensation rates annually with the latest market rates, ready to negotiate with new hires and existing hires who are thinking of leaving. Within this you need red lines the team can not cross in paying people.

• Compensation training. You have to train managers on how to manage compensation. In the early years you will do this but that will cap out therefore you need to teach them how you want them to manage compensation. Someone on your team with a lot of experience here, is important.

• Robust talent pipeline. You are going to go through more people, therefore you need a robust pipeline of talent. It’s not a bad thing but hard charging, pay me more employees are going to move on if your growth or comp slows.

The Formula Method

The formula method is different. The most public version is Buffer and their open salary.

This method takes a lot more consideration up front. You have to decide what the core value is you financially reward people for. Then build a financial model that considers your different functions, how fast people want to move up, and where you need to be against market rates.

The biggest benefit is that once in place, it takes very little management. The team can easily add new people and existing employees have a clear path to earning more money based on how they develop. You turn the whole discussion around from..what are you going to give me…to how can I level up?

You still have to teach managers how to properly review employees against the skills they are working on. But they don’t have to be come expert negotiators. The stress of trying to align financial incentive to each person goes away.

Being different isn’t for everyone. Savvy employees can make more in the negotiated method by continuing to move jobs and asking for raises. Therefore you’ll miss out on the traditional style of talent.

Reasons to consider this method…

• Easier hiring process. It removes the awkward negotiating at the end of the hiring process because the model is provided up front, a project tells you what level they are at, and then people take it or leave it. It puts all of the energy into testing their level and removes the fear on both sides of the table.

• Skills vs Compensation. It changes the discussion from how much do people make, to what level are they at? It separates the financial insecurity and puts the focus on people getting better at set skills. Those skills result in a better company and more compensation.

• Transparency. Compensation is the scariest topic. Unmasking what people make is one of the most vulnerable things a culture can learn. You don’t have to publish salaries but people can do their own math on what everyone makes based on the level they are at.

• Less Overhead. This method runs itself. People know what level they are at, what skills they have to improve at, and have a clearer path to increasing their own salary. It puts development into the hands of the employees and not into an hr department.

What you need in place…

• A Model. You need a base comp for each function and multipliers for skills, location, and leadership.

• Salary Calculator. The result of your model is a salary calculator that current and potential employees can use to calculate how much they can make as they move up.

• Evaluations With Levels. A consistent way you evaluate everyone in the company. If these evaluations are function specific it takes a lot more work. Whatever you choose has to align to your levels so it’s clear what skills they are improving and therefore what level they are moving up to.

• New Hiring Process. You need to change your hiring process to see people work. Because the model is based on what level people are at, you need as many avenues as possible to make an accurate assessment before they join.

The Staples

Regardless of which method you select every pay system ALSO has extras that you need in place.

• Equity. This can be a whole post in itself, but you need to consider equity with both methods and have a clear policy about why it is / isn’t given and how people can get more of it.

• Documentation. This isn’t a handbook. It’s something anyone can read before they join the company to understand your compensation philosophy. It should be clear about why and how it works.

• Evaluations. You need a consistent way that you review and evaluate people. This can evolve over time as you move from generalists to functional expert. Regardless you need a score card employees can use to know where they stand.

• Review process. Separate from how you evaluate people you need a process with timing for when. Employees count on this in setting their personal goals so you have to be clear about when and how this happens.

• Time off. How are you going to handle people working more than and less than a full week? Often people put something in place concerned about when people miss days. If you are going to do that, you also have to think about the days they put in more than a full day or a full week. This even includes time off the clock they are just thinking about work.

• Parenting. Daily work is different from taking time off to be a new parent. This only makes sense once you have kids but you’ll need a policy for new parents. You can separate time for the primary care taker versus secondary. You can also adjust this over time as you have more resources.

• Equipment. What job specific equipment are you going to apply. The simple answer is nothing, instead provide some money for them to buy their own equipment. A more complex answer is a list of stuff that you will need to manage and keep track of.

Moment Compensation

Rather than interject Moment through out the post, I summarized what we do in our 2.0 compensation.

• Philosophy – the formula method. We use this for both salary and equity.

• Documentation – we have a 14 page doc about our compensation philosophy. It covers why, what, and a lot of how.

• Evaluations – everyone has a scouting report. Similar to a sports player scouting report, ours has 10 skills and 15 micro levels. As people take on more ownership and improve at their skills they get compensated more. We review scouting reports every four moths.

• Time Off – we have unlimited vacation. We don’t keep track of the times people work or don’t work.

• Parents – time off to be a parent is separate because we need to back fill resources that are gone for longer periods of time. We provide 60 days for the primary care taker and 30 days for the supporting care taker. After that we have part time options as parents ramp back up.

• Equipment – to do the functions of your job, we don’t provide any equipment. We provide an annual $500 credit for people to improve their own equipment. If they need specific equipment to do their function at Moment then we purchase it, such as a unique piece of software, a machine, etc.

Thanks for reading. If you have any questions email or dm me [@marcbarros]https://twitter.com/marcbarros

There are two theories with raising capital for startups.

On one side you get….money is evil don’t raise it. The Basecamp founders are in that ‘camp’. They aren’t wrong in warning people about the potential issues. Their ROI math says that selling a fully owned business for a smaller value can provide a better return than selling a venture business that you own a small percentage of.

On the other side you get…raise more money than you need. Reid Hoffman champions this camp. Break out scale, especially when accomplished in under 10 years, takes a lot of capital.

Both of these sides are right. They are just two different ways to build a company. Both come with positives (and negatives) and the tradeoffs is a whole post in itself.

When it comes to raising capital the questions you get asked a lot from fellow founders is…should I raise money?

I used to think they were asking about which business path to take. Eventually I realized they didn’t actually want help with the business path. What they really wanted to know is what happens to them and their company, if they raise capital.

Here is how I think about it.

You’re Adding Gasoline

Before asking if you should raise capital, understand what it is.

Capital is gasoline.

You can raise it in single gallon containers to get an idea off the ground. Or in 737 sized allotments to fuel a startup airplane. The amount is irrelevant. Your ability to accurately use it, is what matters.

I say accurately because gasoline is an accelerant. To the positive it can enable you to learn faster, creating greater momentum in order to raise capital or become profitable. To the negative it can uncover bad strategy faster, creating negative momentum that is very hard to recover from.

The question, should I raise capital, is really a question of…do you know how to use the gasoline?

You’re Adding Expectations

Capital comes with expectations. Yeah, duh.

It’s not that simple. The level of expectation compounds over time.

In the early days the expectations are low. People who invest are generally banking on you, often assuming your initial idea won’t be the big idea in the end. It’s easy to fall into the trap assuming that low expectations from early investors are what you can expect in later rounds. It’s not.

Each coinciding round of capital brings new, higher expectations. Higher valuations assume you know what you’re doing in spending more capital to build an even larger company. Later stage investors are more risk averse and will therefore pay greater attention to how well your business is performing. Their expectations will be tied to how well you can operate and scale a company.

If additional expectations stresses you out, then capital will not help. You can’t fire your investors, but they can fire you.

If additional expectations are what you thrive on then investor capital can be good. It will force you to raise your game.

Expectations aren’t bad. Your employees have them too. Just know that expectations are part of raising capital. Wanting the money, but not the expectations doesn’t work. Therefore you need to either love the exceptions or the process of managing them.

You Need A Team

Being successful with investor capital is easier if you have a team. A team that you trust. One that you’ve been to battle with whom you know can turn capital into more capital.

Taking this back a step, when you raise capital from new investors you’re adding new relationships. These relationships increase risk because they add new dynamics to your company. If you then add a new leadership team on top of these new investor relationships you have multiplied your risk in being able to turn capital into more capital.

Therefore before I raise capital I either want a team that I trust or a methodical process by which I can successfully build a leadership team. Both can reduce my risk and increases my chances of success.

Even with a process to build a leadership team, most hires only work out 40% of the time. A 60% miss rate combined with new investor expectations can be a fast way to crash the plane. Or get you fired.

What makes new team building hard with capital is that you have move at a faster rate. In the early years you need a team that can turn an idea into a business. In the later years you need a team that can get an ROI on the capital, making it worth 2-10x the price you raised it at. The more you raise the faster you have to go in building the team. The faster you go the more stress it puts on your culture.

Your direct experience in building a leadership team matters a lot in your decision to raise capital.

You Can’t Run Out Of Money

The amount of capital you raise should be a plug value to what you need to prove to yourself. You should have a clear 1,2,3 that is tied to the current stage of the company.

For example you might take an angel round to prove you can make a product, acquire customers, and successfully reach a next customer. In order to accomplish that you need blah dollars and a set of investors who are excited about customer discovery.

Regardless of your 1,2,3, you need to map to your next safe spot. That can be a traction point that lets you raise more capital or to a profitability line so you don’t need more capital. These safe spots vary wildly by company and can totally change depending on the capital climate.

Here’s the shitty part, your existing investors aren’t really going to help you in making sure you make it. They will try to assist but it’s on you to make it to that next point and then raise the next round of capital you need. They don’t have the time or appetite to constantly keep you afloat.

Going back to the original question, should I raise capital, it depends on how confident you are in using the capital to reach your next safe spot.

You Have To Grow

Your growth rate is all that matters. It doesn’t have to be blistering but it has to be consistent.

Just look at public companies and which ones have the highest valuation. They are all tied to the company’s growth rate. The ones with higher multiples have higher growth expectations. This is true in the private markets.

With growth comes pressure. Pressure can raise everyone’s game, see professional sports. But it has its downsides if you don’t know how to manage it.

Playing with more pressure it’s a bad thing, it’s just a choice. If you make that choice then you have to really internalize that choice. There is no going back until you are out of the company or out of cash.

You Have To F*$%ing Love It

The biggest knock to raising money comes from people who don’t like it. They don’t like everything that comes with the capital and that’s ok.

But it’s also ok to realize that you love trying to build companies that scale faster with more capital. It’s ok to be obsessed about it and to spend your waking hours trying to make your company successful. You shouldn’t feel bad for enjoying this path.

The Reid Hoffman Blitzscaling playbook can work to build massive, category winning companies. See Netflix, Uber, Zoom, Spotify, LinkedIn, and Fitbit. They all raised large amount of capital to win a category.

It’s also true that for every success story comes hundreds of failures where large amounts of capital didn’t work. That doesn’t mean you shouldn’t do it.

Don’t Become An Asshole

My closing remark is don’t raise money and become an asshole. Raising capital is about adding more gasoline, it doesn’t mean you’ve been successful. A startup car with a HUGE gas tank doesn’t mean you’re better off.

It does take confidence to raise capital. But it also takes humility in becoming successful with it (or at least I think it should).

DM me @marcbarros if you have any questions.

I’ve been a founder and ceo for the last 16 years. Almost all of it self taught.

Over that time I’ve come to believe that founders can become great ceos. The only way to get there is by doing it. Yes you can get a coach but that only takes you so far. At the end of the day you need time on the field making decisions, fucking up, and learning from your mistakes.

What makes this transition hard is it takes time. You acquire the hard skills by running enough companies with enough varying scenarios that you can build recognition patterns. The soft skills develop by leading people and making a lot of personal mistakes, many of them causing additional emotional stress. All of this often takes more time than your current startup wants to give you.

You see a similar development happen with sports coaches. First time head coaches often fail, get fired, and connect the dots in their next head coaching role. Even Bill Belichick, the most successful NFL coach of all time, went from being a hugely successful assistant to a failed head coach tp a record setting head coach. He just needed more time and more chances to learn how to be great.

Back to startups.

The intensity to start a company is so great that people don’t do it for decades. They do it long enough to succeed or fail and then they stop founding because it’s too hard. The end result is a network of fellow founders who can share broad learnings, but who haven’t has the time to create their own methodology on developing from a founder to a ceo.

So I collected feedback from several who have made this transition and combined it with my own 16 years of making this transition. If I were to develop a founder into a CEO here is how I’d think about it.

Development Triangle

I think of developing from a founder to a CEO like this….

• Self – the personal foundation you need, no different than if you are trying to become a professional athlete.
• People – the people skills, without them no one will follow you.
• Functional – the functional skills, these are specific to your market and business model.

The assumption is that you already have the personal foundation in place before you take the role. Developing all three parts of the triangle at the same time is really difficult.

Time

The overall thread to developing as a ceo is this transition takes time and energy. It’s not for everyone.

An alternative path is focusing on how to be a great founder. Understanding customer needs, building products that gain traction, and willing people to believe are very hard skills to master. You then have to get great at finding and hiring the right ceo to take it from a product to a company. Garrett Camp is a modern day version of being a successful founder, starting StumbleUpon, Uber, and Expa. I haven’t met Garrett but from the outside it appears he’s obsessed about founding new ideas and teams.

I provide this context so people understand there is no shame in just being an awesome founder. To found, start, and hand off companies can be personally rewarding and financially lucrative (i.e. Garrett is a billionaire).

If you do want to be a great ceo you have to recognize this is a life’s work. You will need your founding ideas to be successful enough that you can learn to be a ceo or you’ll need to join fledging product ideas that need a ceo. You’ll also have to be wiling to try it again if you fail the first time.

The Self

Being a ceo is a long game. It takes time to develop a company and even longer to develop your ceo philosophy. Therefore I believe in foundational building blocks that you will need to stay committed over the long term.

1. Discipline
Cus D’amato was Mike Tyson’s coach. His philosophy was that will is more important than skill. You aren’t born with skill therefore you have to practice and train to become the best.

This only happens with discipline. And no one can generate this for you. You have to find it and harness it until discipline becomes a personal habit.

Mine started as a kid with soccer. I wasn’t always the fastest therefore I had to be the hardest worker. I’d train before school, after school, and then go to team practice. Fortunately this created a set of habits that I now heavily rely upon.

It’s important to note that with discipline it doesn’t mean that you can’t be creative. I find the opposite to be true in that the more disciplined you have the better your creative sessions become. You create with purpose that keeps you from getting burned out.

2. Physical Exercise
This is hard to do consistently. It becomes easy with stress and travel to ignore how exercise is tied to your very survival. But it is.

Consistent physical exercise is very much tied to your discipline so find a way to make it foundational to your life.

3. Emotional Outlet
You are going to need a place, or person, or a set of people that become your emotional outlet. You should recognize this before you even start.

If you are founding a company and have a significant other, they are also founding the company with you. You should talk about the why behind founding the company and what success looks like for the two of you. And you’ll have to keep this conversation going as you level up in the ceo game. Each new level gets harder than the previous one and without the emotional support you will break.

A therapist is also a good way to go. The role is stressful, especially when it’s not going well. Money and expectations are a heavy burden to bear.

Another route is a psychology coach. Ideally you can find a coach who actually develops ceo (ie has been a founder to ceo). Unfortunately the startup industry is full of “coaches,” ie people who listen really well but haven’t been a ceo.

The People Skills

Leading people is emotionally difficult. It’s even harder if you don’t have a methodology for how you organize and run your teams. The analogy would be like coaching a sports team but not having any method for how you prefer to practice, prepare for games, play the games, and analyze the results.

Giving people the structure they need is critical to reducing the emotional stress involved. It’s better to start with something and modify it over time than to start with nothing.

1. Compensation Philosophy
How you pay people matters. Are you going with the traditional negotiated model (hiring manager versus the employee) or are you going with a formula model?

I have moved to a formula model, emulated from Buffer’s salaries.

I have found that a formula model removes a lot of the emotion around hiring, especially ‘renegotiating’ when people leave. It treats everyone the same so the team can focus on the work and not try to figure out why someone is making more than them.

Your compensation philosophy speaks to how you think about the people on the team.

2. Team Structure
You should have a way you like to organize and run teams. This includes the when (daily, weekly, monthly, etc) and the how (functional vs non-functional).

In sports this is similar to having a consistent schedule and a formation by which you play the game. Both of these threads can change over time as the team becomes more sophisticated.

By having a preferred structure you give people clarity on when to work and who owns what. This helps people focus on the work and not be distracted by hierarchies.

3. Feedback
You have to develop how people give feedback within the company. This is both at a peer and structural level.

The biggest challenge in developing feedback is that people are terrible at it within a business environment. This is because no one has taught them how to give and receive feedback. Plus they haven’t learned what kind of feedback they need through out a project. The feedback you need at the problem definition stage is very different from the shipping stage.

Beyond the day to day level of feedback you also have to establish the formal process for feedback, both when and how. This gives people the stability they need in knowing how they are doing at their job.

4. Taking Teams Apart
Unfortunately learning how to put teams together also means that you need to learn to take them apart. This can be at an individual level (moving or changing people) or at a team level (layoffs).

The best resource I have read is Ben Horowitz and The Hard Thing About Hard Things.

Anything Ben puts down on this subject is worth picking up.

The Functional Skills

Many of the functional ceo skills you need are business model and market specific. Most of them are developed by fucking up before learning the right approach.

The nice things is these functional skills get easier over time.

1. Editing
Editing is the most important skill you have to develop.

As a founder you write, but as a ceo you edit. This means being able to listen, cut to the core, and then pull out the key insights. It doesn’t matter if it’s a product, customer, or team issue you have to learn how to cut to the core problem and communicate it.

I use a few tools to learn how to edit…

• Customer Journey – it’s a mental map of before, during, and after. It helps you quickly map out process to understand the core problems. It’ helps you to identify what you don’t understand.

• Visual Hierarchy – a core element to design thinking, it stresses that arrangement of information implies importance. Getting good at this helps you structure the most important information up front with the problem, the why, and the what.

• Skimming – if you can skim and still understand it then the information is well organized. You can’t skim everything but it’s a skill set that helps you to focus on what is most important. If something is too complicated to skim then something is wrong.

• Malcolm Gladwell – he is incredibly succinct. Reading and listening to his podcasts you can learn from someone that is able to distill complex topics in simple ways. If not Malcolm find other communicators who you believe are great editors.

2. Communicating
What you say matters. Learning this is painful as you transition from the early days (everyone personally knows you) to the later days (very few people know you). People will start reading everything you do and making assumptions.

The energy you bring. What you say. When you say it. Even who you say it to and in what order. It becomes overwhelming to worry about.

Communicating is harder when you are wearing multiple hats. Especially as you build out a leadership team, there are times when you will hold dual roles and people will struggle to understand if you are speaking as the ceo or as the functional leader. It’s your job to clarify.

What people want is…

• Consistency. They don’t like all your new ideas or changes to plans they already executed.
• Clarity. They need you to be succinct and to the point so they can make decisions from what you say.
• Confidence. Being calm throughout the peaks and valleys gives people the confidence that they are making the right decisions.
• Transparency. Don’t underestimate the decisions people will make if they have the same information you do. I’ve always found that if you are totally transparent and provide clarity around the why, people will follow you. When you start hiding stuff people will bounce.

3. How You Win
You have to figure out what quadrant you can own in the market. This skill takes practice in looking at how the market traditionally competes without you and how you can win on a new paradigm. I call this finding your quadrant.

You learn to do this at a product level (i.e. how you differentiate) and at a business level (i.e. how do we win the market). From this clarity you then learn how to communicate and adjust resources to execute against your opportunity.

4. Decision Making
You have to learn how to make ceo decisions. Keith has a decision framework I agree with. It’s based on your level of confidence and the impact of getting the decision wrong.

As your company scales you move from lots of small decisions to a few, very large decisions. These become the decisions that keep you up at night.

The learning skill here is to figure out which decisions you need to make and which ones you don’t. The less you can make and and still deliver, the better.

5. Have Capital It’s your job to make sure the team has the money it needs to execute their plan. This can come from debt, equity, or by being profitable. It’s on you to pick the right strategy and then find the right partners.

Finding the right partners gives you rocket fuel. While finding the wrong partners is death by a thousand cuts.

The skill set to master is story and investor speak. Learning how to simplify your business and then find people who are excited about the title wave you are trying to ride.

Conclusion

This is a work in progress as I develop my own philosophies on making this transition. A lot of what I have learned has come through struggle. It’s a struggle I love and try to get better at every day.

If you need anything please dm me @marcbarros.

It’s been a long time since my Contour ceo days. Being 21 when I started and 31 when it was over, a lot of it has become a blur.

It started with two undergraduates in a shitty rental house north of Seattle. One person was hand making helmet camera lenses and the other was selling and marketing them. There was no ceo, just two kids with no idea what they were doing.

That continued for another 10 years, just with more people and nicer offices. We were still making cameras and trying to sell them. But somewhere along the way our titles changed.

I became the ceo.

Even today today that sentence makes me pause. It’s so matter of fact and yet my journey was anything but that. Instead it was a meandering of highs and unforgettable lows. Most of which was spent fighting for our survival as number two in a market that investors didn’t want to fund.

At the time I knew I was in the ceo position. In retrospect I didn’t know I was the ceo. I had never internally committed to the role and what it takes to be the best at it.

Now I know what it takes to make that decision.

It’s More Than A Job

Being the ceo is more than a job. Because to do it well you have to let it consume you. You have to emotionally internalize that people are counting on you to lead from the front, with consistency and decisiveness. Everything that goes well is because of your team and everything that doesn’t is because of you. Unfortunately those expectations aren’t just 9-5.

I often refer to being a great leader as being a great coach. The best coaches in the world are obsessed about their system of play, the players on the field, and how to keep a group of people moving forward. They are constantly iterating and finding small ways to make everyone better. You can’t do that from just 9-5.

Letting a cause consume you is’t a bad thing. You just have to realize what’s expected and the level of commitment that it takes. While you are the ceo, the role will always be there. Even on Sundays.

Money Is Stressful

It takes a lot of energy to get past the survival point. Either by raising enough capital or becoming profitable the stages of constantly running out of cash will consume you. Even if money hasn’t stressed you out before there is something to having customers, partners, and investors on the line that dramatically increases the concern.

Some ceo’s love raising money. The chase to have enough capital is what drives them. For others raising money is terrifying. Whether asking your friends or strangers, the thought of raising capital is too much to bear.

Learning to raise money is not a natural skill, it takes practice and just because you’re good at it doesn’t mean your company won’t always be on the brink of running out of cash. It can take multiple years until you have a sustainable company. That’s years of being stressed about money.

As the ceo it’s your job to make sure the company has the capital or the profits it needs to survive. You have to relish in this stress.

Learn To Contain Fear

Every book written by a ceo recounts their fears along the way. Hard Thing About Hard Things is one of the best. Ben is honest enough to share what it means to be a war time ceo and the decisions he had to make along the way.

Whenever you add growth, investors, and employees you carry a burden…what you created might not work out. Your combination of offering and delivery will fail and you’ll have to explain to everyone why you lost their money and their job.

This fear is real. It gets easier after you bankrupt a company as you learn failure isn’t the end of the line for founders. If you are honest, hard working, and self reflective about why you failed, someone else will give you another chance.

Everyone finds their own way to manage this fear. You will have to do the same. Thankfully the internet is full of ceo self help tutorials for how to manage this fear. From a personal coach to counseling to a private network of fellow ceos.

Have Zero Expectations

The way I deal with potential failure is by not having any expectations. I expect none of it to work out and therefore I’m obsessed in making sure we have enough swings at the plate.

Zero expectations doesn’t mean you expect it to fail. It just means being methodical in your approach in trying, measuring, adjusting, and trying again. The assumption is that your company is one giant experiment. Therefore you’re on a quest to figure out what does and doesn’t work.

This approach also helps to keep the peaks lower and the valleys shallower. Because as soon as you set expectations the only option is to disappointment them.

Want The Ball

Everything else aside the easiest way to think about the role is that you have to want the ball at the end of the game. When it’s all on the line you have to be someone that says I want the shot.

Every company has a handful of these do or die moments. As Ben calls them, sometimes you have to roll a hard six.

Conclusion

It’s ok to be a terrible ceo when you start. I was for a decade.

Being a ceo is an unnatural skill. It takes a lot of practice to be great, which means you need enough time on the field to develop at it.

Lots of great assistant coaches are terrible head coaches. It’s not the same thing. It’s a whole new set of skills you have to learn. This is why most head coaches are a twenty year journey. They start with small, unknown programs and move their way up over the years until they reach the top of the sporting world.

The same goes for being a great ceo. There is no practice for it. Even being a great startup executive doesn’t mean you know how to be a ceo.

I do believe you can learn to be a great ceo. As long as you think of it as a 20 year journey…the role gets easier over time.

If you have any questions dm me @marcbarros.

There are two ways to organize a team. One is by function, with sales, marketing, product, etc. The second is cross-functional, with each team having a mixture of functional roles.

The first company I built was organized functionally. I had never run a company before and the senior people around the table had never experienced anything other than the traditional structure.

A functional organization worked when we were small (sub 15 people) as it made the list of tasks easier to group. After fifteen it started to break down because in order for each team to deliver their goals they relied on other teams to deliver first. When a team missed their goals it created a downward spiral that looks something like this…

• One team misses, now the other teams miss their numbers and blame the original team. The non-miss teams assume they would have crushed their number if the original team hadn’t f’d up. The group starts to crack.

• Next quarter a different team misses, again repeating the cycle of other teams missing their numbers. Doubt starts to set in about your ability to lead.

• Next quarter people start sand bagging their goals and preaching about underpromise over deliver. They start assuming the other groups will miss so they build that into their plan. The team is now less aggressive. And you don’t know how to fix it.

• Soon a board member asks a functional lead how it’s going. If they are senior they understand the politics at play. They give the…well we’d be doing better if we could just do blah on time. Concern begins to set in with board member.

• Any sales people on the team start to leave or bitch louder about how your revenue growth is everyone else’s fault. They built their forecasts assuming the other teams delivered amazing new products on time with the best marketing. They increase your anxiety.

• The pressure builds as you can’t get each team to deliver their parts on time and you can’t figure out why the teams are blaming each other. You don’t have a deep bench of new executives you can call on. The clock continues to tick.

• You start spending more time with the functional leaders who can’t deliver. This takes away from time spent on winning the market. People see this. You know this. the pressure continues to build.

This cycle repeats itself as you end up firing, changing, and replacing the functional leads. If you don’t sort it out you too get replaced.

I no longer structure companies functionally. That might change with a larger organization but for now I’ve moved on to the Keith Rabois theory of barrels and ammunition.

The reason is because you can focus the entire organization around the largest problems you need to solve. Those problems always affect the whole company and are not function specific. You get a culture that wins and loses together vs functions that win and lose independently.

What Are Your Biggest Problems?

Start by listing out thee largest problems you need to solve.

When you start the company the list is very. Such as, ship a product and find customers. And over time your list will become more complicated as you need to reach new people, service customers, deliver new products, scale an organization, etc.

To figure out your biggest problems, start by making lists. Once you have a bunch of lists try to group them into 2-5 major problems. These major problems are the ones you organize your company around. They are often connected to how you win the market.

Who Owns What Problems?

Once you have your largest problems you find one owner for each. These owners will be obsessed the larger problem, identify several sub problems to be solved, and then build a team that can solve all of them. Keith calls these team leads barrels.

When looking for barrels I have found two types; creative or functional.

If the problem requires break through creativity you want someone who can make sure the group makes the right creative decisions. This works best when shipping new products or initiatives. The downside is that this person will soon need a functionally minded person on their team to make sure their creative direction can be delivered.

If the problem requires consistency then you want a functional leader, someone who is a strong system thinker that runs the trains on time. They have the opposite problem in that any creativity needed can suffer without the right creatives on their team.

It’s ok to start a team with a creative to solve a new problem then change that person for someone functionally minded who can scale the solution. You will need both creative team leads and functional ones.

Being able to move teams around is one of the biggest benefits to a cross-functional organization. The end result is more opportunities for new people to step up and lead.

Where Are The Hand-Off Points?

Once you have your problems identified and an owner for each, you can then check the hand off points between teams and within teams. We use a simple customer journey to figure out these points.

We do one set to figure out the hand off points between the teams and a second set within the teams so they know who owns what.

For example, to launch a new product across the teams…

Define the campaign -> creative direction -> messaging -> create assets -> launch -> convert customer -> ship orders -> service customer.

You would figure out what team owns what part of this journey so the hand-offs are clear.

We then do the same structure within teams to make sure people know who owns what. Taking the same product example a product team would have done the following just to make that new product…

Define the problem -> define solutions -> concepts -> prototypes – > test -> refine -> manufacture -> beta test -> refine -> ship -> measure -> fix.

This is a basic flow but it lets the team know who owns what phase of the journey. They then have their own problems to solve that ladder up to the larger problem at hand.

Checking these overlaps only takes a few minutes. It also provides you clarity on how to get from the large problems down to delivering on the subset of problems. It also makes it much easier for anyone who joins the company to know what problems the team is going after and what they own in that journey.

How To Scale The Teams?

We use a team sizes of 2-7 people. After 7 people we split the group into multiple teams. Why seven? Because after seven a team lead can no longer hold weekly 1:1’s with everyone on their team.

Looking at Moment we started with one team of 4. Over time we’ve organized and re-organized into what is now 3 main teams and 8 secondary teams. Some of those secondary teams will start as one person who launches a new discipline we then build around.

This has enabled us to teach new people how to run teams, while giving us the flexibility to rally around new problems.

Where This Falls Down

Every team structure has weak points. Ultimately the right structure will be based on your own preferences and how you like to run teams. The biggest warning I can provide is to forget about what functions you need and instead focus on what problems you need the company to solve.

But here are the biggest weak points with cross functional teams…

• Team Leads. It takes more time to develop barrels. They aren’t being developed in traditional companies so each one you put in place has to learn.

• Senior Functions. Functions are used to working for the best functional person in the company. So designers are used to working for the best designer, engineers the most technical engineer, etc. Therefore you can lose senior technical people who only want to work for a more senior functional leader.

• Reviews. You have to create a review and leveling up system based on the skills you need people develop within cross functional teams. When organized functionally your review and reward system can be built around how much they are improving at their function. When cross functional you need them to improve at how they deliver work across a mixed team.

• More Conviction. Old timers will tell you this is wrong and you should just do what everyone else does. Therefore you need more depth to why you are doing this and more conviction about how it can work.

If you have questions or need help dm me @marcbarros. Thanks for reading.

How does your team function?

Most team leads don’t how to answer this question. Most of the time they will give you job specific answers about vision, process, timelines, etc. Yes you need those for providing direction, but they are secondary to having a methodology for how a team functions.

If you run teams for long enough you’ll learn that what direction you ultimately send people (i.e. vision, process, etc) is secondary to how they function in getting there. The "how" ends up being more important than the "where" because the where can change, especially in a startup.

You see this exemplified in sports. The best lead teams can execute new formations and tactics on a per game basis, while poorly coached teams can’t. Why is that?

Because a change in strategy is the where, not the how. The how is about the consistent nature by which the team goes about their work on a daily, weekly, and annual basis. The best coaches are maniacally consistent about the how. They know that if the how becomes automatic, they have the freedom to change the where without disrupting the team.

I’ve been running teams for 15 years. Most of it, poorly done. I was too focused on changing the where without ensuring my teams were consistent in their how.

What makes this self discovery hard is there is no right answer. It takes a lot of practice in getting it wrong to figure out how to get it right. And in the end it takes self confidence to decide…this is how I like my teams to run.

Personally I focus on three elements…

1. The When

I start with the cadence of when the team works. Note this isn’t about 8-5, but about the rhythm of the team for when individuals work, teams connect, and the whole organization sets new goals.

In sports this is clearer with practice, games, and an offseason. In business it’s harder because everyone has their own personal schedule which can conflict with a team work schedule.

That aside I focus all of our energy around the following cadence.

• The Daily – Maximizing people’s peak hours and grouping calls / meetings to the middle of the day. This enables morning people and night owls to maximize their best hours.

• Weekly – Regrouping within teams so everyone is on the same page with what needs to get done by when.

• Trimester – I found quarters were too fast so we run our company cadence around trimesters. this means we bring everyone together every four months to review our results and set new goals.

• Bi-Trimester – Because four months is a long time we take a pause half way through a trimester to reflect, meet with the Board, and continue forward.

2. The How

This section is more business specific. It evolves based on the size and maturity of the team you’re running. The list below is for running a sub 50 person company.

In creating this list you want to make sure it aligns to the processes used against your stages of when. It gives the team confidence to know what we do at each stage.

• Daily – standup to keep everyone on the same page with chat and calls to move through issues during the day.
• Weekly – team sessions keep everyone on the same page and 1:1 sessions give individuals the feedback they need.
• Monthly – reviewing our financial results and updating our forecast, this lets us check in on the trajectory of the business.
• Bi-Trimester: we pause to review our progress half way through, while looking ahead to the trimester in front of us.
• Trimester: we review our results, discuss process improvements, and set new goals.
• Projects: how we define and ship work together. From small to large we use the same process to define, discuss, and run cross company initiatives.

3. The Where

I try to create consistent spaces the team can rely on to do their work. Back to sports, they have practice fields, training facilities, and a stadium for games. Within a company you need to create these artificial places so the teams know where to go to do what.

• Dashboard: a singular data dashboard per company and per team that enables them to understand how we’re doing against the goals we set and problems we’re trying to solve.

• Schedule: a simple, high level calendar with a list of dates that affect the whole company. Even at 40 this is still a simple google doc with a list of dates.

• Project Management: a tool the team can use to organize and plan their work both as individuals and as collective groups.

• Slack: our communication tool for chat and calls.

• Briefs: how we think and edit our most important work. Written down plans provide clarity and scalability for others to pick up the ball and help.

• Journeys: how we map out the steps in everything, from products to projects we use this tool to make sure we don’t miss anything.

• Docs: having one place we store and define everything. Yes folders can get cumbersome but how you label and organize them matters.

• 1×1: the weekly session between team lead and player to provide feedback and work on individual skills.

• Company Meetings: done every two weeks, this is our chance to review, brainstorm, and discuss cross company issues.

• Off-sites: where we do our big brainstorms and fix team process. This provides us the place to tackle the uncomfortable team subjects.

Conclusion

Figuring out the strategy (where) is much harder than developing a highly functional team (how). Even if you are unsure about the future direction of where the team needs to go, you can be very consistent about the methodology to get there.

A word of caution is if you are super creative developing a consistent how can be much harder for you. You assume that spontaneity is they key to your success. That might be true for a group of one, but that doesn’t scale to a group of two and beyond. Therefore if developing this methodology isn’t your thing then you should put someone on your team who can develop and execute it consistently.

If you have any questions dm me @marcbarros.

We don’t hire marketers. We do marketing, just not with marketers.

Why don’t you hire marketers?

Because at the end of the day they can’t make anything. In order to do their job they have to hire someone. So instead of hiring someone to hire someone else, we just hire the creators, analysts, and developers who can do the work that the marketer was going to hire anyways.

But I don’t know anything about marketing, don’t I need marketing people to advise on marketing?

No. The reality is that everything you do is marketing. Whether you are servicing a customer, making a product, or running an ad…it’s all marketing.

Yes there are different tactics that can bring in more new customers, but at the end of the day every dollar you spend is going towards ideas that bring in new customers. That’s marketing.

At Moment we’ve grown from zero to over 1M followers and hundreds of thousands of customers. We didn’t advertise our way there and we didn’t hire any marketers.

Here is how I think about marketing without marketers.

Start With One Person

Marketing begins the minute you start your company. It looks like a product, but in reality it’s about to become marketing as soon as you tell anyone about it.

Therefore from the beginning I like to take one person, often a founder, and give them the sole purpose of figuring out our marketing plan. I call that plan Delivery. It’s actually deeper than a marketing plan because you have to figure out the paradigm you’re going to compete on.

We started Moment with four people. Three of them worked on the product and I worked on Delivery. We used friends as contractors to fill in the minimum functions we needed to launch our first product on Kickstarter. From there I started testing a variety of tactics to figure out what worked. And what didn’t work.

This process took about 24 months. Over that time we hired, arranged teams, re-arranged teams, and repeated this cycle until we figured out that our Delivery would be Content to Commerce. Now we have a complete Content team and a separate Commerce team. Each are focused on how they compete against other content and commerce offerings in the market.

Find People Who Live Your Market

Figuring out your delivery isn’t about hiring function specific people. Early on you don’t know what’s going to work so hiring specialists can get you into trouble if you later realize that their specialty isn’t working for your business.

Instead you want to build a team of people who can do multiple skills well. Such as designers who can shoot photos. Or writers who can create community. Or engineers who can handle SEO. You want combos that give you the most amount of flexibility in these early years.

But of everything you do in building this initial team it is critical that they live your market. You can’t teach an early employee who the customer is. Therefore you need people who are the customer and/or have spent a lot of time serving your customer. When hiring, this experience isn’t on the "nice to have" list. It is #1 on the list.

At Moment this was easier because we could tell if someone was into photography or not. All we had to do was look at their Instagram.

You need to find your own version of "look at their Instagram."

Build One Team Per Delivery

Another way to think about Delivery is uncovering the 1-3 strategies that work to differentiate and grow your business. And as you figure out each strategy you then build a team around it.

Early on we thought community was working, so we built a team around it. Only to find six months later that strategy really wasn’t working to profitably reach new customers. This mistake forced us to go back and re-look at our own Delivery, to then realize that within community it was the content that was working.

Therefore we re-arranged the team from Community to Content. We even swapped team leaders upon this realization. Thankfully the community team we hired were all creatives, therefore the switch to content was easier. If we had hired a community marketing team and then needed to become a content marketing team, we would have been in trouble.

It’s important to realize that you will arrange and re-arrange the team based on what you learn. You need to build your culture around this realization so you don’t lose anyone as you pivot your way through finding your Delivery.

Be Amazing At Campaigns

New is what drives startups. Whether it’s a new offering, service, or form of delivery, something new is the engine that drives everything else. Therefore your team has to get exceptional at launching the new. I refer to each new introduction as a Campaign.

You want to see your team improving with each campaign they ship. This doesn’t mean each campaign has to get larger, just better. Your team should get faster at the process, the details should get tighter, and their analysis of the results more insightful. Marketer or not, this process will take time.

Important to remember, your process to create and launch a campaign should become the same over time. The contents will change but the internal process shouldn’t. The process we use is A Brief and it took us several years to be great at it.

Develop Team Leads

Once you get delivery teams working your biggest challenge will be team leaders, especially if your teams are cross functional. Traditionally marketing is considered one organization and functional leaders work with in that, such as community, advertising, or events. These functional leaders get great at running a team that executes a single tactic.

But in order to win at Delivery you end up building teams around strategies versus tactics. This means you need team leaders who can lead functions they previously only collaborated with.

For example, lets say one of your Delivery strategies is to win on service. This means you are trying to be the best in the world at service and therefore your examples will be anyone else who wins on this paradigm. Think Les Schwab Tires employees running out to your car. Or Nordstrom taking back products they don’t sell or having people on the floor to help you pick the right shoe. This is winning on service and it’s much bigger than the marketing tactic of service.

You would need a team leader who can win at service across every company touch point. That could be service through social, or stores, or email, etc. You will even market why your service is so amazing. The end result will be a cross functional team of creatives, developers, operations, etc to deliver the best service on the planet.

How to develop your team leads is an entire post in itself, just know that in order to win at Delivery you need to find and develop these cross functional leaders.

If you have questions dm me @marcbarros.

This is a three part series on how to win your startup market. Part 1 is delivery (tactics to win), Part 2 is finding your quadrant (how to differentiate), this is Part 3.

In the first company I built I didn’t understand markets. I assumed like everyone else, it was a business class exercise to add up the most amount of people and argue why you could capture x% of them. That was the wrong way to think about it.

A better way to think about a market is…what is the tidal wave you are going to ride?

What makes this hard is that your tidal wave may not even exist yet. Which means you are looking for converging trends that may create a new tidal wave.

When we started Contour there was no tidal wave for action cameras. That changed when YouTube started.

YouTube became a tidal wave for self recognition. People wanted more video views, which means they bought better tools to make better videos to get more views to receive more recognition to further satisfy their ego. The end result was a business model that was much stickier than people realized. Customers were not one time buyers, but instead life time buyers willing to purchase accessories and additional cameras to get a better shot.

GoPro was smart enough to recognize this was a tidal wave and winning it is all that mattered. They won, we lost.

Why this matters is because in order to build a big business you need market momentum. That momentum translates into easier growth, which drives everything else.

Here is how I think about finding a your market tidal wave.

Why Market Wins

Before the how, it’s important to understand why market is the most important ingredient in startup success. Marc Andreesen outlines this better than anyone. You should read his post, "The only thing that matters."

The key argument is halfway down the post when he quotes former VC Andy Rachleff…

• When a great team meets a lousy market, market wins.
• When a lousy team meets a great market, market wins.
• When a great team meets a great market, something special happens.

The end summary is that a great market is more important than a great team or a great product.

Why A Narrative

Everyone looks at a market differently. Personally I prefer the Chris Dixon method in saying market size is about narratives, not numbers.

This makes it easier to say if X is true then we believe Y is inevitably true. If Y is true then we believe Z will also happen. Following your logic is much easier than saying the market A is X million people and market B is Y million and together they will make a new market called C that is Z billions of people large.

By talking people through a line vs a series of dots you also shift the discussion away from arguing about the size of each dot and your probability of capturing it. Instead the discussion becomes about the line and what has to happen for the line to become a huge wave.

Ultimately the key to the right narrative is finding investors who already have their own narrative that matches yours. It’s very hard to convince someone about a new narrative for a market they aren’t already thinking about. Most investors have already formed their own narratives and therefore their investment in you is just a self validation of what they already believed.

This is a complicated way to say that a narrative is how investors talk so it’s easier to sell them in a way they are already thinking.

How To Make A Narrative

Start with the person who will be buying your solution and look at the trends happening around them. Whether a B2B or B2C business you want to understand the broader customer, purchasing, psychological and use trends that are happening.

A few ways to do this…

1. Purchasing behaviors.
One path is to look at how purchasing is changing. In the case of Box, Aaron recognized first a technology shift would happen from mainframe to pc, pc to cloud, and cloud to mobile. These shifts only occur every 10 to 15 years therefore IT departments were about to buy a whole new suite of tools. This was going to be the tidal wave that Box needed to ride

2. Psychological needs.
Human needs have never really changed. But what can change is the interest in one of these needs. Take the Wellness Wave, it’s been a tidal wave that Fitbit, Nike, Apple, and Peloton have taken advantage of. Each has a variant wave they are riding but the general narrative is that people are looking to be healthier, to use data to help them make better decisions, and therefore are looking for companies that help them lead healthier lives. A word of caution is that by the time the press are writing about your wave, you already missed it.

3. Use behaviors.
How people accomplish basic behaviors, change over time. Take work for example. It has changed radically in the last 100 years from heavy labor all the way to remote computer work. You can look at how everything has evolved from where to when to how people work. Each new behavior trend is replace by the next so looking at how the world is shifting form 9-5 to remote is a massive tidal wave that some companies are already riding. Slack is currently the most famous, riding the trend in work communication from stagnant email to a constant stream of discussion.

4. Same behavior in alternative markets.
This post is a bit technical but Reid Hoffman talks through the Linked In Series B pitch. Here he uses search analogies in other markets to demonstrate why there is a tidal wave towards a 2.0 version of people search. It’s a market wave built around networks vs individual nodes. Notice how he eventually gets to a [quadrant they can win], but first paints a picture around the people search trend.

I’m sure there are more ways to look for tidal waves, these are the four I prefer to use.

Writing Your Narrative

You can write your narrative with words or learn communicate through power point slides.

Personally I prefer a written narrative, which means that I don’t have a pitch deck. This isn’t for everyone but it helps me to think through the market and the tidal wave we’re trying to ride.

If you plan to communicate your narrative through a slide deck look at Mary Meeker and her Internet Trends Report. It’s a series of different narratives but she knows how to explain trends in a format that investors understand.

If you have questions email me or dm @marcbarros.

This is a three part series on how to win your startup market. Part 1 is delivery (tactics to win), Part 2 is this post, and Part 3 is finding your tidal wave

There are two startup theories about winning a market. One theory is you need a product that is 10x better than anything else. The other theory is to identify a hole in the market where you can be the segment leader from the beginning.

Making a 10x better product is really hard. It requires a technical or production advantage to create something that is significantly better. Peter talks about this in Zero to One.

The latter requires you to understand how the market competes today to then identify a new segment you can begin leading immediately. This doesn’t mean you can have a crappy product or service. But it does mean that you can identify a new space, enter it quickly, and then improve over time. Rule #1 in 22 Immutable Laws of Marketing calls this The Law of Leadership.

I’m not a technical founder, therefore I live by figuring out open spots in markets. Those open spots enable me to start, find customers, learn from them, and make the offering better over time. I call this method…the fastest path to cash.

Learning to identify a quadrant is an exercise I use before entering a market and then constantly revisit to make sure the world hasn’t changed on us. I will do this at both a product and market level to ensure our fist offering can win, which lets us then figure out how we can stay #1 over the long term.

This is bigger than identifying a problem to solve. This quadrant exercise is about saying…if I solve that problem how am I going to compete at a business level?

This is my process.

1. How Do People Compete Today?

Look at your market and ask yourself, how do the existing companies compete today?

Remember, this isn’t a product feature question. It’s a business question to ask what strategies are the existing companies using to win?

It goes something like this…

• List all the companies in the market who serve your customer’s needs either directly or indirectly.

• Look at each company you list and note what their core differentiators are. What are they trying to win on? Is it product, price, distribution, service, etc.

You want to look below the tactics of the existing players to understand the DNA of the company. This list will be their core super powers.

2. What Is Your DNA?

Now you do the same exercise for yourself and the founding team.

What is your personal DNA? What is the DNA of the founding team? What is our superpower and therefore what can we be the best in the world at?

Be honest with yourself. You are amazing at one, maybe two things and that’s it.

For example I’m not a technical founder, therefore building a company that wins on technical prowess would be difficult for me without finding a technical savant. Even then it’s not in my DNA and therefore my instincts for how to build this culture would be an uphill climb for me.

By the end of this exercise you should have one, maybe two super powers you will build your company around.

3. Start Drawing Quadrants

Now go back to your list of companies that exist in the market and start drawing two by two quadrants to look at how the market competes today. On each axis should be a single paradigm.

Let’s look at shoes and Allbirds. I don’t personally know the company so this is me looking in from the outside. But if I were originally making a shoe company I’d be looking at how the market competes today….

• distribution vs none
• niche customers vs broad
• expensive vs cheap
• general vs activity based
• community vs none
• service vs none
• single brand vs multiple brands
• celebrities vs non

I would keep redrawing these quadrants until I understood how each of the companies were competing. Through this exercise, you will start to notice that the winners of each market have a large, clear quadrant they are winning on.

Nike – distribution and athletes. They have more distribution than anyone else in the world and more athletes using their gear. This ties back to the founding DNA of the company with Phill Knight and Bill Bowerman. Allbirds can never win here.

Adidas – distribution and expression. Adidas has struggled to differentiate from Nike. Yes they have the stripes but until recently didn’t have a clear quadrant to win. They have nearly the same distribution scale but have pivoted to focus on creatives, ie a new tribe of people. So instead of shoes being about performance they are about expression. This requires them to have distribution and community at their core to understand the fashion, street, and lifestyle markets.

I would continue this process until I understood the top competitors I listed. I might even do this for the initial product I plan to enter the market with, to make sure it was differentiated from existing solutions.

4. Create Your Quadrant

Once you draw a few of these quadrants you want to go back to your DNA and ask…ok how can we rotate these quadrants to compete on a paradigm that I can win?

Competing straight up on product features is going to be very difficult. You may start with a differentiated product but you’re going to have to figure out how you win at a business level.

Going back to the Allbirds reference, they started by competing on comfort and material. It gave them a clear product space to own with wool shoes that were more comfortable than anything else. It let them compete on comfort versus performance.

Post a successful initial product it appears that Allbirds is now trying to win the market on comfort and direct distribution.

On the comfort side they are going deeper with materials, fit, and activities. It’s enabling them to expand their offering to men, women, and kids as well as their styles with runners, loungers, and skippers.

On the direct distribution they are going one geographic market at a time, building the know-how around selling, marketing, and supporting customers. They get faster with each new market, building a DNA that the legacy shoe brands can’t compete against.

By having legacy, the existing companies can’t easily change their DNA. In the case of Nike, once you build your entire culture around distribution you can’t just change it. Therefore Allbirds can compete on a new paradigm until someone else comes after comfort and direct distribution. But by then Allbirds will be too advanced in both areas to easily knock them off.

It takes time to figure out your quadrant. The more you do this exercise the easier it gets. You can do it both at a product level and a market level.

Word Of Caution

If you enter a market with another startup and compete for the same quadrant it’s going to be a winner take all scenario unless your market is gigantic AND you can raise enough capital to compete.

Uber and Lyft is a great example. This market was so significant they were able to raise massive amounts of capital in order to compete. They are still well behind Uber but were able to succeed into a public company.

This is very rare. In the case of GoPro vs Contour the market was not big enough and therefore no one wanted to fund number two. Once they raised $80M we had to either raise more money or find a new paradigm to compete on. We weren’t smart enough to do this. We just kept doing the same thing, self justifying that every market was big enough for Coke and Pepsi. This was wrong.

You can read more here about what happens when you are losing.

The reason I say winning a quadrant against a fellow startup is harder is because they are going to be just as aggressive and scrappy as you are. They are not going to be too big or too complacent to let you gain market share. You can compete head to head, just know what you are up against.

Email me or dm me @marcbarros if you have questions.

This is a three part series on how to win your startup market. Part 1 is this post, Part 2 is finding your quadrant, and Part 3 is finding your tidal wave

Delivery, it’s where startups fail.

What’s delivery? It’s your methodology for winning your market.

What does winning your market mean? To be the largest, most successful, and therefore the most enduring company in your space.

Why do you care? It’s called the Law Of Increasing Returns. Chapter 1 of Eating the Big Fish explains this best, but number one has every advantage in the market. This means everything is easier from acquiring customers to raising capital to attracting employees to being profitable.

Back to delivery….In my first company I spent a decade of my life not realizing that winning a market was by far the hardest aspect of building a company. I was naive to assume that the best product wins, it doesn’t. Instead the company who figures out delivery has the best shot to both win their market and give themselves time to make the best products.

GoPro beat the shit out of us with content to retail. They copied the RedBull model but instead of selling a can of sugar water they sold you a camera. They built their company DNA around content marketing and retail distribution. The result was brand value that allowed them to sell an inferior product at the same price. Ultimately better product margins gave them more money to put back into Delivery, which further increased their market share.

A second example is Box. They started in the same market as Dropbox, both trying make data storage easy. Early on they realized they had very little chance of winning in the online, consumer storage game. Therefore they pivoted to enterprise where they quickly realized their Delivery was about enterprise sales and marketing. They had to shift their DNA from consumer internet to the enterprise and therefore had to spend a lot of capital to establish customer relationships quickly. They knew that if they could win customers they could then make their offering better over time. They too became a public company.

Every market is different. Below is the process I use to discover Delivery.

Keep in mind this is not a list of steps but instead a circle you keep spinning to find your answers. This process takes 2-3 years to figure out.

1- Who Is The Customer And Why Do They Buy?

The who is different from the why.

The who, is the person who will eventually purchase and use the offering you make. Ignore how you get to them, just understand who they are.

When you start you don’t have customers so you have to do this through interviews within an existing market. You have to find out how people solve their problem today. If they are buying/products or services you want to know what and why they bought it. If they didn’t buy anything you want to know that too. Why people don’t buy is as powerful as why they do buy because in their "no" you can uncover a lot of potential.

Please note these are not customer persona’s. Those are just made up people and a waste of time. Instead just talk a lot to potential customers, to the point that you can see the trends of what people are saying.

The why, is deeper than the features or the price. It’s about understanding their motivations and what triggered them to act on them. You want to find out…

• Why did you buy?
• Why did you buy now versus later?
• How long was it from thinking about buying to actually buying?

When you get surface level answers, like price, ask follow-up questions to understand their deeper why. Such as, what problems are you trying to solve, why is it a problem, what are you trying to get out of the solution?

What you’ll start to discover are consistent themes. At Moment we learned that people purchased because they were going to take a trip. It represented the reason they wanted better photos or videos..and therefore the products and services we offered.

2 – Who Has Reached This Customer Before?

Take your customer and look at who has reached them before.

Start outside of your direct market to avoid repeating tactics they have already seen. Instead look at random, different markets and what tactics have worked to reach this same type of customer.

For example, early on we thought people had to see and touch Moment gear before buying. If true, this tactic is similar to sampling. So we looked at sampling industries…

• Beverage
• Food
• Cars
• etc.

We would then look at the tactics the winning companies used to see which ideas were relevant to us that we could test. The ideas we liked we copied and applied to our market.

• Local street team with gear who would visit local events.
• Small trips where people try our gear.
• Photo walks.
• Etc.

All of these were small bets we could take and test to figure out our Delivery.

At scale a great example is RedBull. Somewhere along the way they realized they could take the the tactics of an alcohol company (sampling, parties, vip) and marry them with the tactics of an entertainment company (entertainers, content, and big events). They were able to take tactics used in ancillary industries, bring them to beverage, and create something no one had ever seen before.

3 – What Tactics Work?

Try everything…quickly.

You need to create a culture built around experimentation. Everything your team is working on is in support of figuring out your Delivery. You don’t care if it’s about products or sales or sampling, etc. Every dollar the team is spending is a bet and you need the team learning which bets work to acquire a new customer.

What you care most about is that the team has a decision framework to make bets, learn from them, and decide what’s next. They need a bet size, in dollars, they can use. They need to be able to measure the results, even if in a basic way. And they need to take notes so you can find the threads.

The basic process…

• Create a culture that experiments.
• Provide a bet size, in dollars.
• Have simple ways to measure ROI.
• Take notes to find the trends.
• Be part of as many bets as you can.

In order to roll this up into one Delivery methodology you need to be in the middle of the action. You can’t run all the experiments yourselves but you need to be looking at the data, reading the notes, and talking to people. In between the tactics are the bigger trends and it’s really important that you find them.

4 – What Is Your Delivery?

Now comes the hard part.

You have to roll-up the tactics into one strategy. You will build your entire cultural DNA around this strategy, therefore it’s important to figure this out as fast as you can. If not you risk hiring people that aren’t going to fit.

In creating a delivery strategy you want to keep it as simple as 1,2,3. It probably starts as just one strategy and over time you add the second and the third. Keep in mind you will get some of this wrong so don’t be afraid go backwards in reducing your list to then re-add.

The easiest way to summarize your Delivery is to answer the finish the statement…we win our market through_____. To start it will be, we win our market through ______. Then it’s we win our market through ______ and ______. Then it’s probably…we win our market through ____, ______, and ______.

If you list a bunch of tactics you’re doing it wrong. Your answer should be simple enough if fits in a single sentence.

At Moment we win through Content to E-commerce. Therefore we have built our whole team DNA around both content and e-commerce. From the people we hire to the way they area organized to the tactics we use, we are building around this Delivery.

We still have a ways to go in adding our third element but now five years in we’re starting to uncover what our third element is to winning our market.

If you have questions email me or send a dm to @marcbarros.