The Big Reveal

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Big news! After a lot of hard work, sweat, and tears, Ryan and I are ready to show off Retrium to the world.

Here’s The Plan

I’m a presenter at the upcoming Big Apple Scrum Day conference (on June 1st) and my talk is titled “Distributed Scrum — Why It’s So Difficult and What We Can Do About It”. The Big Reveal is going to happen during the last 10 minutes of my talk when I invite the audience to participate in a live Retrium-powered retrospective.

The subject of the retrospective? My talk.

Yes, I’ll be opening myself up to real-time criticism, and yet I can’t wait.

Minimum Days Off and Establishing a Culture of Trust

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Traditional Leave Policies Can Be Disrespectful

Sometime late last year, before I had decided to quit my job and co-found Retrium, I started thinking about my then-employer’s leave policy. It was a pretty standard leave policy for the corporate world: we accrued roughly 2 “personal days” every month which we could use as we wish. The more I thought about it, the more I found this policy, along with all “maximum days off” leave policies, to be moderately disrespectful to the employee. That’s because an employment contract to me is, or rather should be, an agreement that relies on mutual trust — on the employer’s side, trust in the employee to get the job done; on the employee’s side, trust in the employer to be able to pay.

By limiting the number of days off an employee can take, the employer is implicitly telling the employee: “I don’t trust you to take off a reasonable number of days each year, therefore I’ll arbitrarily set a contractual limit.” It’s as if you, in the eyes of your employer, were a young child eating too many candy bars. “But Mommy, can’t I have just one more!?!?”

But are Unlimited Vacation Days the Answer?

I’m not alone in feeling this way. Over the past decade, there’s been a trend emanating from Silicon Valley towards a policy of granting unlimited leave to employees. Take as much as you want! We trust you! Upon first glance, this seems to be an optimal solution: the employer is demonstrating its trust in the employee to do the right thing. It makes the employment contract a contract based on trust and respect, at it should be.

But there’s a catch. Without a guaranteed number of vacation days each year, employees no longer have control over their ability to take leave in the first place. Employees who work under traditional leave policies accrue days off; in other words, taking a day off is an employee’s right. With unlimited leave, a bad boss can actively prevent an employee from taking a day off because days off are not the employee’s, per say.

As a result, unlimited leave gives the employer even more control than it had with a traditional maximum days off policy. “You already took a few days off last month, Jon. Don’t you think that’s enough?” Or, even worse, “Sorry, Bethany, if you take more vacation this year you might not get that promotion we were talking about.” Think that’s unrealistic? Possibly, but the “fairness” of unlimited leave policies is entirely dependent on good corporate culture. And it also relies, scarily, on the whims of your particular boss.

Is There a Better Solution?

So, are we eternally caught between the traditional annual leave world, in which employers demonstrate a lack of trust in their employees, and the new, hip unlimited vacation day world, in which employees place an incredible amount of trust in their employer to treat them decently? I don’t think so.

Here’s my suggestion: why not give employees a minimum number of days off each year that employees have the right to use, while at the same time establishing no maximum? (Note: after doing some research, I also realized that I’m not the first to think of this. Credit where credit is due.)

What excites me most about a minimum leave policy is that it combines the best features of traditional and unlimited leave policies into one. By establishing a minimum number of vacation days that an employee must take each year, it solves the problem with unlimited leave policies: employees now have the right to take vacation every year and don’t need to trust that their employer will allow them to take time off. At the same time, by not establishing a maximum number of days an employee is allowed to take, it fixes the problem with traditional leave policies by placing trust at the core of the relationship between the employer and employee.

In essence, the employer that offers a minimum day off policy is saying to its employees:

I trust you to take an appropriate number of vacation days each year and therefore I am not setting a maximum. How many days you take is up to you. Just get the job done. At the same time, I want you to know that you have the right to take time off and therefore I am establishing a minimum number of days which are yours to take as you wish.

Because I eat my own dog food, a minimum day off policy is one of Retrium’s core values from day one. What do you think?

LLC vs Corporation: A Lean Perspective

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One of the first decisions I had to make as co-founder of Retrium was how to legally form my business (I chose an LLC). You can find many articles online comparing and contrasting LLCs with Corporations, and as a founder, it’s well worth your time to understand the implications of each option. In a nutshell, an LLC has two key features that make it very attractive. First, as a pass-through tax entity, it avoids double taxation. Second, it provides personal liability protection for the owners of the business. (Note: the advantages and disadvantages of LLCs vs. other business types is a very complex subject — so please do your own research.)

Despite these advantages, it’s rare to find startups that have formed as an LLC. In fact, if you search on Google for “Startup LLC or Corporation“, the vast majority of the articles you will find argue that tech startups should be structured as a corporation. In most cases, I disagree. And it’s because I’m a lean startup aficionado.

Why Most Startups Should Form as an LLC

Like most startups, I’m going to assume that yours has limited cash and therefore a short runway. The number one risk factor for a startup in this situation is your ability (or, rather, inability) to find your first customer. If you can’t find that elusive first customer, you’re done. Out of Business. Kaput.

As a result, you should have a laser focus on finding someone to pay you for whatever it is that you are building. That means saying ‘no’ to any expenses that don’t directly support this goal. Which also means saying ‘no’ to forming as a corporation. Corporations are like bad boyfriends or girlfriends. They are expensive. Expensive at the beginning (formation costs are high) and expensive to keep (annual filings are complex and costly). LLCs are the opposite. Formation costs are minimal and they have very few ongoing legal requirements.

Delay Expensive Decisions Until You Have More Information

By choosing to form as a corporation early on, you’re basically saying: “The best use of these few thousand dollars is to form a complex legal entity.” Not to build your product, not to advertise, not to do market research. To form a legal entity. Are you sure that’s the case?

Here’s an alternative. Form as a low cost LLC. You can always switch to a corporation if you need to (for example, if you are closing in on a funding round and the investor requires it). Yes, there are associated switching costs, but I recommend it anyway. Here’s why it’s a good, lean strategy:

  1. It keeps your costs low while your runway is short
  2. It tells investors you know how to spend money wisely
  3. And most importantly, it extends your runway by delaying your decision to spend significant money on business formation until it is required

The Key Takeaway: Be Lean

The key takeaway here is to apply lean startup to as many decisions you are making as a founder as possible. Lean says we should follow the “build-measure-learn” feedback loop. In other words, we should build a small bit of product, test it in the marketplace, learn what works and what doesn’t, then start all over again. Applied to the choice of LLC vs Corporation, here’s what build-measure-learn looks like:

  • Build – form as a low cost, inexpensive LLC (that’s your small bit of “product”)
  • Measure – see if it’s working for you (can you find funding as an LLC? is it preventing you from giving equity to employees?)
  • Learn – if the LLC is preventing you from achieving something critical to your business, switch to a corporation; if not, don’t

Then, rinse and repeat.

In fact, the principle of build-measure-learn can be applied to almost every decision you have to make as a startup founder. Keep that in mind as you continue on your entrepreneurial journey.

 

Values on Day One

The idea behind Retrium, that distributed scrum teams should be able to run effective sprint retrospectives, was born many months ago on a park bench in Washington, DC. Early on, my co-founder and I agreed on the need to establish a set of core company values that underpin who we are as a company, as well as how we interact with each other and our customers.

We are excited to share our first list of values with you. While we are confident in the values we have identified as core to our company’s ethos, we are also sure that our culture will change as we grow and mature as a company. Without further delay…

Retrium Values

Respect and Trust

  1. Everyone gets a minimum number of days off each year (this one requires further explanation and I will follow up with a blog post soon)
  2. Work from anywhere, at anytime
  3. Respect the flow of others; use non-intrusive communication whenever possible

Measuring Success

  1. Quality of your work over number of hours you put in
  2. Failure is an opportunity to learn

Company Structure

  1. Holarchy over hierarchy (title doesn’t matter; good ideas do)
  2. Everyone, from the CEO down, is responsible for customer support

How We Act

  1. Be the first to identify and flag problems; be the last to brag about successes
  2. Be part of the community, by volunteering in the physical world and open-sourcing what we can in the virtual world
  3. Be curious about our market, our product, our business, our customers, and ourselves. Continuously improve in all these areas

Remote teams, retrospectives, and the death of post-mortems (Video interview)

Last week I was fortunate enough to be interviewed by Lisette Sutherland, virtual team guru and author of the upcoming book Collaboration Superpowers. The interview started with a discussion about what works — and what doesn’t — for remote teams, and then delved into using retrospectives to catalyze continuous team-based improvement. Hope you enjoy, and if so you might want to check out the other interviews on Lisette’s podcast.

How Lean Startup Gave Me The Confidence To Quit My Job and Launch My Startup

I’ve been a “wannabe-preneur” my entire life. I always told my friends and family that “one day I’ll start my own business” but deep down, I didn’t truly believe what I was saying. I had a comfortable corporate job, a good salary, and a relatively easy life. Like most other wannabe-preneurs, I had plenty of business ideas that I became excited about from time to time. But I never became fully committed to any of them, and certainly never quit my job to work on them full-time.

In short, I suffered from three diseases that prevented me from becoming a fully committed entrepreneur:

  1. Analysis paralysis (Is there a market for my product? How big is it? How much can I charge for it?)
  2. Fear of failure (What if I fail? How will I support myself and my family?)
  3. Golden handcuffs (Do I really want to give up my comfy corporate lifestyle?)

That is, I suffered from these diseases until I found the cure. When I first found it, I didn’t realize it was a cure. Instead, it simply seemed like a useful framework for validating business ideas. While that is indeed true, it also cured me of my three diseases and gave me the confidence to become a full time entrepreneur. More importantly, it can cure the diseases that prevent you from starting your business, too.

The framework I refer to is called Lean Startup. And this is how I used it to overcome my fears and start the company of my dreams, Retrium.

But First, Some Background (You can skip this if you know about Lean Startup already)

Lean Startup is a methodology first proposed by Eric Ries in 2011 that emphasizes short development cycles, frequent customer feedback, and “validated learning.” A complete description of the Lean Startup methodology is well beyond the scope of this article, but if you’re considering starting your own business, I strongly encourage you to read about it (start with The Lean Startup, by Eric Ries himself, followed by Running Lean, by Ash Maurya).

For the purposes of this post, here’s what you need to know. Lean Startup encourages you to “get out of the building” by talking to, and learning from, potential customers early and often. So early, in fact, that you don’t even need a product to start talking. All you need is an idea and the courage to talk to others about it.

How Wannabe-preneurs are Different From Entrepreneurs

Both wannabe-preneurs and entrepreneurs typically start with the same drive: a love of building things. What separates wannabe-preneurs from entrepreneurs is that wannabe-preneurs tend to be focused on product alone, while entrepreneurs understand that building a product is only a part of building a business. Building a business also requires marketing, sales, customer development, business models, pricing strategies, HR, and more. Wannabe-preneurs start and end with product. When it doesn’t catch on, they give up.

The trouble with building a product without simultaneously talking to potential customers is that you’re just guessing. You’re guessing that others will find your product useful. You’re guessing that people would pay for it. Most wannabe-preneurs never gain the confidence they need to quit their job and start a business because they are just guessing.

Enter Lean Startup

Lean Startup fixes this problem for you. It encourages you to “get out of the building” by talking to potential customers in order to learn from them. It forces you to validate your business hypotheses early and often. It forces you to iterate on small bits of product by testing them in the marketplace. And best of all, you can do all of that before you build a product and before you quit your job. With Lean Startup, you no longer need to guess that your business idea has a real chance at success. You’ll know it has a real chance at success because potential customers will have already told you that they would pay for your product. And all this, before you even quit your day job.

Here’s My Story

For me, it all started with a simple hypothesis: that it’s difficult for distributed scrum teams to run effective sprint retrospectives (if that sounds like a bunch of mumbo-jumbo, don’t worry, you’re probably not in my target market!). Here’s how I used Lean Startup to test this hypothesis and cure myself of my three diseases.

First, I started talking to people I knew who were in the broader software development space. I did this on weekday evenings, after dinner and after I put my kids to bed. I quickly learned that most people I talked to did not suffer from the pain points I was trying to solve. Good thing I hadn’t quit my job yet! Instead, I simply narrowed my early adopter target market to Scrum Masters of distributed teams. Since I didn’t know too many of these people, I turned to Twitter, found a group who were in this target market, connected with them, and asked to chat. Most were happy to oblige (thank you!) primarily, in turns out, because they did suffer from the pain points I was trying to solve. Great news! I had found my initial target market.

Within two weeks, I had talked to over 25 potential customers. Over 95% had the paint point I was trying to solve. Most were actively looking for a solution, but couldn’t find one. Best of all, the majority of people I talked to were willing to pay for the solution I was proposing.

Notice that I still haven’t talked about actually building a product. That’s because I didn’t have one, nor did I need one yet, as long as I kept working on validating my problem hypothesis. And the more people I talked to, the more I became convinced that I had an idea that could really work. And not just as a cool product, but as a business. In effect, my potential customers had convinced me that the primary risk of going full-time on my startup was no longer whether people would pay for my product, but whether I could build such a product in the first place.

Did you hear that? Product! The thing that wannabe-preneurs are good at. The thing I know I’m good at and my co-founder is good at. I now had the guts to quit my job and start Retrium, the company of my dreams.

Lean Startup As The Cure

Let me end by going back to the beginning. I had three diseases as a wannabe-preneur: analysis paralysis, fear of failure, and golden handcuffs. Lean Startup cured them all. It allowed me to gain confidence that there was a market for my idea (overcoming analysis paralysis), it helped me validate my problem statement (overcoming fear of failure), and it let me believe that my startup could realistically lead to financial success (overcoming golden handcuffs).

Lean Startup can do that for you, too. All you have to do is start talking.

The Top 5 Ways Your Startup Fails*

As a source of inspiration, I’ve been reading a lot of startup success stories recently. They are fun, easy to find online, and extremely motivating. Perhaps most of all, they make you want to quit your day job and go “all in” on your idea. But reading about everyone’s “oh so easy” successes got me thinking: we know that 90% of startups fail, so why is it that its so much easier to find stories about startup successes than failures? More importantly, can we learn from other people’s startup failures in order to increase our odds of success?

I don’t know the answer to the first question, but the answer to the second is a resounding YES. It is critically important to learn from others’ mistakes. As I consider my startup future, I’ve compiled what I believe to be the top five reasons that startups fail*:

1. The mythical product-market fit stays mythical

If you haven’t heard of product-market fit, you need to read about it. Right now. The term was coined in 2007 in a blog post by Marc Andreeson, the cofounder of Netscape. It has since become the mantra of all startups, everywhere. According to Marc, “product/market fit means being in a good market with a product that can satisfy that market.” It sounds simple enough, yet it is also the hardest thing to achieve for a young startup. We all have great ideas that we think people would be interested in enough to pay for. Yet chances are we’re not right — at least not on our first product iteration. So we pivot. Perhaps we pivot again. Some of us keep pivoting and never find the product-market fit, and so our company, like many others, goes to the startup graveyard. Startups are born and die every day — only the best live on to find product-market fit. For the rest of us, it remains a mythical holy grail.

2. They run out of runway

A fundamental truth of business is whoever controls the money controls the company. Here’s why: suppose you have an amazing product that people love and are even willing to pay for (lucky you!). Then suppose you run out of runway because your company isn’t profitable enough to be self-sustaining. You need a cash infusion quick. So you go to the bank to ask for a loan, or you approach your VC firm or angel for another funding round. In this scenario, who controls the future of your business? You? Of course not — even if you own 100% of the shares in your company. If your lender or investor refuses to give you money and you’ve reached the end of your runway, your company dies. Simple as that. Whoever controls the money controls the company. So, don’t reach the end of your runway. Easy, right?

3. Deafening echo chambers

We all love to hear that we’re loved. Especially when the love relates to our startup idea — we are spending the majority of our waking hours thinking about it, after all. Its just dandy to hear that everyone thinks we’re brilliant! The problem, of course, is that we’re probably not as brilliant as we think, our idea probably isn’t as good as we imagine, and the people we talk to are probably predisposed to give us positive feedback. Its not enough to get out of the building. We need to get out of our echo chamber. Strategies like “the mom test” help, but far too many entrepreneurs fail because they refuse to heed the advice of those outside their echo chamber.

4. Having no business model

Ok, let’s get this out of the way. You need a business model. Too many first-time entrepreneurs think this is hogwash. I know I used to. On the surface, the popular mantras “stop planning and start doing” and “fail fast” both tell us to put our heads down and GO. But if you don’t have a vision with a plan to back it up, how will you know what feature to build next? Which customers to focus on? What marketing strategy to employ? Remember, having a business model doesn’t necessary mean writing down 500 pages of detail that no one will read. Your business model can be very lightweight. But either way, you need one. Otherwise, you’re just shooting darts at the dartboard hoping something will stick.

5. Too big, too fast

Growth! We all want growth — revenue growth, valuation growth, customer acquisition growth. The trouble is its also very possible to grow too soon, too fast, or even in the wrong direction. This relates back to the first reason startups fail — their inability to find product-market fit. Too many startups grow before determining whether the market they are in is large enough to be self-sustaining. And when they realize they’ve grown in the wrong way, they have to scale back and pivot … which might work, but think of all the cash they’ve already burned through! Imagine if they had realized it earlier, before all their jetpack-fueled growth! They could have saved time, money, and a whole lot of headache. And perhaps given them a better chance at succeeding. So remember: growth can kill.

So there it is. Nothing earth-shattering for a seasoned entrepreneur, but useful to keep in mind nonetheless.

* – Note that this list is entirely anecdotal. It is, however, based on a lot of reading and on commonalities I found time and again. Use it at your own risk 🙂
UPDATE
Ryan Hoover, of Product Hunt fame, has compiled a list of startup postmortems which help expand on the themes I’ve identified above. You can find it here.