Rational Idealist

this story reminds me of MyBlogLog – acquired for $10M after 9 months in 2007, only 4 years later and 2 zero-s added:

19 months from launch to $1,000,000,000 acquisition: Instagram

On October 5th, 2010, Instagram launched My first instagram photo We’re really excited to launch our first version of Instagram today, free in the App Store. Instagram makes mobile photos fast, simple, & beautiful.

via: swizec.com

Instagram (Photo credit: Wikipedia)

when I saw this news on TV, and sitting trough the whole story, it felt like they were announcing a war or a new terrorist attack. it was not good news for anyone but those three founders.

these valuations have only market-sense, but no connection to the real world. Lot’s of friends have been talking about new bubble for over a year now, and I couldn’t agree with them. I believed that this time it’s different, that everyone is building real companies, with real value, and that exits happen only after they prove it or run out of resources.

not anymore apparently. instagrams valuation makes sense only in relation to facebook’s valuation, not in relation to the world or the users.

i am not saying that they are useless, like some bubble 1.0 ideas were – not at all. instagram figured out how to make pictures of urban reality, full of smog and with poor natural light, beautiful again. it gives a chance for new kids to live in a visually nice world again. like bauhaus did a century ago.

but that on it’s own is not worth 1/30th of world hunger.

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I’m reading Guttenberg the Geek, fantastic essay / biography by Jeff Jarvis, focusing on entrepreneurial aspects of famous inventor.

Several topics here are super interesting, like similarities between inventors, geeks, entrepreneurs, and what it means for the future of mankind.

Guttenberg Bible (Photo credit: Joe Shlabotnik)

However, one is not so obvious, but it might be inspiring for new generations of entrepreneurs around the web – Guttenberg spent a lot of time, energy and risk in building out the typeset and printing the first book.

The situation was much harder than anything today – he could not know if he will even survive the project, but let’s still compare this risk and emotional investment with today’s entrepreneurs – geeks between 20 and 30, who choose the uncertain but shiny path of building their business.

The project you are working on, should compensate for the conditions of extreme uncertainty. Compensate by reward and/or importance for yourself, human kind, the planet.

The product you will be judged upon should encapsulate the shiny core of the promise, of the better world. That’s why Guttenberg wouldn’t stop until he fulfilled his mission and printed the Bible – there were several smaller projects before it, to perfect the technique, but nobody really talks about them these days.

He was able to change the world because he endured on his journey until he could crown the disruptive technology, with a really memorable crown. Respect.

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Staffing is one of the most important aspects of company growth, and arguably most crucial factor in transformation of a startup into a stable company. The entrepreneur has to always know more than just who’s performing and who isn’t. The entrepreneur has to know who in the company is in the right place, who will be capable of managing teams as they grow, who has the capacity to see beyond the current state and will be pushing the company to the next level.

The evolution of a startup from staffing perspective is a repeating cycle of: (1) hiring people who see beyond the current state, (2) working hard and discovering the right way to incorporate their knowledge into your specific case, to streamline and optimize operations.

It’s really just these two focuses. And the CEO’s job is to always know where in the cycle the team is, what is the next milestone and what kind of talent will see over it.

In my company, Zemanta, I use a method to track our capacities, that shows me just that. It is implemented as a table (not spreadsheet), that maps persons (employees) into roles, according to their experiences.

I believe there is a rather fixed set of roles every company will eventually have to fill. It is probably even possible to formalize it to the point where you could predict the staff requirements based on desired yearly revenue.

Let’s take a look at an example evolution.

Startup company at inception

A typical tech startup might begin with a simple structure: business and tech co-founders. Their capacity matrix will be simple, but overwhelming:

It shows us two founders performing all business tasks with no external help. Note that capacity is not the same as performance. Performance will be based on many external factors, but dependent on time the particular employee has. In the presented case, both founders are severely over-stretched, and can perform reasonably well in just one or two roles, while the rest will be on back-burner.

Most important in this stage is that the founders have senior capacity in leadership. Everything else will be in flux, but without this they will never be able to attract and direct additional team members.

If the company has this kind of capacity matrix, it will inevitably be a technology and product company with good public recognition but poor business performance. Main challenge and milestone in this stage will be attracting early clients or investors, that will enable growing the team to really start working on the services/products.

And the competence matrix tells us that the only way to do this transition successfully will be to find some help for the founders to do things right…

Seed stage – proving the product

Where it will go from there really depends on specifics of the business. For instance, one of the first actions might be outsourcing:

Company in this stage can afford some to spend some money on making the core team more efficient, but the flexibility of working with outside help is much appreciated, since you are still proving that the work has long-term sense. Depending on the type of product you might invest in limited number of developers.

Company’s main focus is still on product and partly marketing and business development. Key milestone to reach will be implementing key metrics that will demonstrate commercial value of the service/product and inventing the specifics of the revenue model.

The competence matrix suggests that the only way to reach next stage will be acquiring knowledge/experience/people in business side – at the end of seed stage, the company is severely over-resourced on product and technology side.

Growth – stability and focus on sales

Next might be professionalizing the development part, by hiring full time staff and possibly even engineering lead, and finding seasoned sales person to kickstart the pipeline:

Now, a year in, we have a decently operational company, that is starting to generate revenue, the founders can focus on monitoring the changes in the competitive landscape and the CEO’s job for the next few months (years) will be making sure the roles are performed optimally.

Company becomes sales-oriented and is all about implementing the revenue model, where VP Sales is the key person that will have to overlook, improve, do all the hard work and earn his own staff.

The Sustainable Company

The ultimate state every company should strive for, the state where company works as a stand-alone system is something like:

At this time, every role has a senior manager, reporting to seasoned CEO. Everyone has well defined job descriptions and knows their role in the mechanism.

Most companies never get to this stage – they either stop growing at earlier stages, fail or get acquired. My thesis is that those that fail do so because they fail to find the people that could take them to the next level when timing is right.

Conclusion

We’ve followed a path of a fictional company on the path from idea to professional organization, which was really a process of converting inspiration into experiences. As the company’s focus moves from proving the idea, building the product, implementing the revenue model to stabilizing all aspects of operation, the right staffing will be the key driver of those transitions.

Quite possibly I’ve missed some other important roles. But I hope I managed to convey the main points:

• CEO’s job is figuring out the details of the path between initial state (first table) and final goal (last table)
• the areas you need top performance should have dedicated personnel, ideally seasoned
• this same method can also be used to evaluate staffing in any sub-department

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We went into alpha stage today, which basically means, we gave access to our service to some handpicked users, which we will annoy for the rest of the week demanding feedback. I love deadlines, my collegues aswell. Deadlines are the best way to raise productivity, actually they are the only way.

That said, you can imagine, it was an all-nighter again. I went to sleep at 5am, and the last man standing woke me up at 9am because I had to send official invitation letters. Three hours later he is still sitting accross the  tableworking on his computer. These guys are really incredible!

It is not usual for me to stay up so late. When I woke up today I had to immedietly start working on random office tasks, which basically means I am not going back to sleep. It’s the same every day, except that normally I go to sleap earlier, which always causes some complaints from the team, who by then just start working again after dinner. And it never helps if I explain, that I’ve woken up six hours before them.

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