by guest author Steven Carpenter, Accel Partners Entrepreneur-in-Residence, founder of Cake Financial, and HBS MBA '04; republished with permission from his blog
You might be interested in my previous posts detailing the 13 main ways that consumer web companies make money along with easy-to-use, downloadable models (part I, part II).
I believe there is a lack of clarity by both technical and non-technical entrepreneurs of the role of a business leader in the lean startup environment. I hope this post serves two purposes. One, as a checklist of skills non-technical entrepreneurs need to develop to become valuable startup team members and to be an attractive business partner for top-tier engineers. And, two, for Y Combinator and engineering-led startup CEO’s, I hope this can be used as a practical guide to help you evaluate a non-technical co-founder or business leader for your rapidly scaling product.
I recently spent the afternoon at Harvard Business School with Professor Tom Eisenmannand 90 students taking his new class “Launching Technical Ventures”. Most of the students are interested in either launching their own companies or working in product, business development, and marketing roles at fast-growing Internet startups. They wanted to know what were the best things they could do to be successful in the startup environment. Similarly, I have spent time with many talented technical co-founders who wanted guidance on bringing a business leader onboard. Below you will find the 6 main ways I see that MBA’s and other non-technical entrepreneurs can best add value to technical CEO’s and co-founders.
1. Product and Business Acumen in Startup Environment
2. Strong and Verifiable Business Network
3. Strong Venture Capital Connections
4. Passionate Technology User With Innovative Ideas
5. Culture Fit and Proven Staying Power
6. Understand How To Market Yourself- The Google Test
The HBS course is a different approach for the school- practical startup concepts and agile product management tactics for future business entrepreneurs- that seeks to chronicle and inculcate otherwise hard-won entrepreneurial battle scars. What is most exciting is that Tom (along with Eric Ries and Jeff Bussgang) is institutionalizing a base level of understanding and common language for non-technical leaders to have with technical founders and CEO’s. It is a simple fact: if an MBA or business entrepreneur can’t code then she, by definition, needs to work with engineers.
So is the inverse true? Are strong technical founders ultimately more successful when paired with a strong business leader?
With the advent of the lean-startup framework, minimal viable products, open web architecture, and engineering-focused accelerators like YC, it has never been a better time to be an entrepreneur with technical skills. A typically-constituted team of three, with a talented back-end and front-end engineer with a product/visual designer can certainly conceive, build, launch, and iterate on a product and acquire 1MM+ users. So, it’s not that surprising that in my interactions with top engineers over the past few years, I have noted a strong anti-MBA/anti-business leader bias.
Many younger technologists think of MBA’s as risk-adverse, impractical techno-fools that capitalize on their ideas, cause product delays with feature creep and micromanagement, expect a disproportionate share of equity for less value, and possess high salary requirements without the constitution for the lean lifestyle. But it is also a simple fact: a product with 1MM+ users does not by definition equate to a good business.
I believe the anecdotal evidence suggests that, except for rare circumstances, most consumer web companies eventually need strong technical and business collaboration to realize its potential.
Many of today’s fastest growing consumer Internet startups all have amazing technical CEO’s and founders as well as strong business leadership in place. Groupon has Andrew Mason and Rob Solomon; Zynga has Marc Pincus; LinkedIn has Reid Hoffman and Jeff Weiner; Facebook has Sheryl Sandberg; Chegg has Dan Rosensweig. If you look at smaller web companies, Square has Keith Rabois, Path has Dave Morin, AirBNB has Brian Chesky. If you go back to 1999, Google hired Omid Kordestani to turn search results into one of the all-time greatest business models.
So here are the 6 competencies you, as a non-technical MBA/business leader, need to develop to demonstrate your value to a top-tier technical CEO or co-founder.
1. Product and Business Acumen in Startup Environment
Simply point, receiving an MBA from Harvard, Stanford, or other top-tier MBA program is a great foundation but not sufficient- just as is a CS degree from a top university for engineers. Both are tremendous academic accomplishments but there is not necessarily a correlation between education and startup success. Not all graduates are cut out for entrepreneurship. I believe a lot of the resentment by engineers toward top MBA programs is justified based on the poor behavior by many of these graduates over the past decade who acted like they were provided a secret decoder ring at graduation to miraculously unlock the web riches contained in the code created by tired engineers. As entrepreneurship has become professionalized, this attitude has been scaled back to the personality types that would act like this regardless of their chosen field.
In a fast-growing startup environment you need to demonstrate that you have the skills to do any non-technical duty in the company with no limited resources- primarily product collaboration, financial modeling, business development, marketing, hiring, raising capital.You need to show that you understand how to think about products, get customers to pay for something when they never have before, what the different levers are to pull, what the proper metrics are for your business, analogs of what has worked and what hasn’t. You should expect a technical CEO to ask you in detail what you would do, to show your work with a functional model, talk about connections at key potential partnerships.
2. Strong and Verifiable Business Network
Just as the best engineers have trusted colleagues they can tap to help them solve difficult technical problems, you need to be connected to business people that can help the company succeed. This serves two main purposes: 1) engineers can verify that you are an “A” player and 2) you will need your network to do business development and market the company. It is commonly understood that “A” engineers will only work with other “A” engineers. The same is true for business types. “A” engineers also want to work with “A” business people and other “A” business types are similarly attracted to “A” players. It also follows, then, that a technical CEO will want to easily tap into his own network of MBA contacts to verify that you are indeed an “A” player.
The best way to develop this capability is to: work at fast-growing, private technology companies with a strong engineering culture; network with classmates and engineers at CS programs while getting your MBA; attend parties and meetups of the startups you are tracking.
3. Strong Venture Capital Connections
It used to be that the VC community was 100% comprised of MBA’s from top programs. And it used to hold, then, that the MBA would be mostly responsible for securing financing to keep the company going. While this tends to still hold true, the industry is evolving as more accomplished entrepreneurs and operators with varied backgrounds become partners and technical co-founders have become more confident with the business aspects of entrepreneurship.
That said, you should leverage your alumni network and make sure Associates, Principals and Partners at the top firms know who you are and develop a relationship with them. Venture capital is a relationship-based business- people risks are one of the top risks that VC’s have to mitigate against- so the longer someone knows you and can verify your work product, the more likely they are to back the company with which you are affiliated.
This takes years, so connect with alumni VC’s, introduce yourself to Board members of startups you are following, follow their blogs and Twitter feeds, and be a trusted referral of quality projects that fit with their investment thesis.
4. Passionate Technology User With Innovative Ideas
While you can’t write CSS or a MySQL query, you need to be a passionate technology user and deeply understand web-based products. All of the best engineers I know are creative and are motivated by big ideas- they want to make a positive impact on society with their code. You need to be a thought partner for them and work on a shared vision of the world where your product or service can be used by millions of people.
The best way to develop this is to develop hypotheses and a point of view where certain industries are headed. You only want to work on ideas that you think have a better than average chance of success with top engineers that can make it happen. You can only do this if you know where to focus your energy. The best way to develop this is to take classes like Tom’s; read industry publications like TechCrunch; keep a list of and track the progress of startups that you think are interesting; understand why startups have failed or succeeded; think about what areas interest you and why; and, best, begin experimenting with some ideas of your own.
5. Culture Fit and Proven Staying Power
Having a strong cultural fit and shared view of how the company is run may be the most important trait to develop and to demonstrate to top engineers. Engineers are happy to work hard together on hard problems that they believe in. But once you have agreed on certain core features and timeline, trust them and get out of their way. Remember, engineers are as good or better than you are at your job and they possess the same interest in the company’s success as you do. Product development is a collaborative and iterative process, so you need to show that you can productively work with demanding engineers in an empowering, creative environment. If you develop a reputation for constantly micromanaging and making engineers miserable with no tangible business gains, you will have a short career.
Second, I believe you need to prove that you are someone that will, except for those unavoidable circumstances, see a project thru and not jump at every new opportunity that comes your way. If you are develop a strong track record and are working with talented engineers, you will become an attractive business leader for other companies that will offer you more salary and potential equity. Top engineers will only commit to you if you are someone they trust will be with them and will not cause the company harm by your premature departure.
6. Understand How To Market Yourself: The Google Test
When I mention this to MBA’s they are initially surprised but then see the reasoning behind it. Just as MBA’s look for engineers that are considered leaders in their field with, say, contributions to open-source or side projects on their “down” time, there is a similarly easy test to see if an MBA is a good marketer- Google their name. I would suggest that if a business leader’s name doesn’t appear near the top of the search results then they either have a very common name (I’m talking to you John Smith) or it means they haven’t taken the time to learn the tools of the trade. There are so many free tools out there to get involved in the startup community- Twitter, blogs, Quora, Lean Startup communities. Top engineers need to be confident that you can represent the company well and can move it into relationships that can help it succeed.
What do you think?
