Category Archives: Mentors

Communicating stretch goals internally versus milestones externally

I got an interesting question from Brian of Slope the other day on the process of communicating internal stretch goals (which should be much higher than the external milestones) to your board or investors.

If you have bought into the discipline of setting milestones and measuring the right metrics to support them, then you will realize quickly that you will need to push yourself and your team harder to set goals that will require you all to persist even against difficult circumstances.

The first step to come up with milestones is when you and your management team (or you and your co-founder, when you are small) meet together to understand where you want to be and when. That usually tends to happen at your kickoff meeting or your offsite or when you decide you want to plan and execute against your goals.

Lets say for example, in 12 months, we should have 15 paying enterprise customers, or 10,000 daily active users or 500 transactions on our eCommerce platform. The metric and the milestone would be something you have derived from various discussions including what your think you are capable of doing, where your competitors are, what the market adoption rate will be etc.

Then the next step is to understand the list of items that need to be done , their dependencies and synchronized in order for that to happen. For example, your product needs to have a set of features, or your need to demo your product 30 times to specific titles and roles in your target prospect, or you will need to hire these profiles in your company, or if you need to help obtain the initial set of users via word of mouth.

Now, before you and the team decide whether the goals are achievable I’d advice you work on the process bottoms up. What that means is what you think you can do as opposed to what you should be doing.

Lets say again for example that you can realistically process successfully 100 orders per day, but you believe that without you doing 250, you wont be the market leader, or you wont get the valuation you’d like, then I’d still document the bottoms up number first.

Typically the top-down number for your metric will be something the market dictates. That’s not very much in your control. In any event, I’d ignore all competitor information until you know how you can do better yourself.

Once you have decided that metric and the goal achievement number, you should run it by your 1-2 top trusted advisors before your communicate it more broadly.

The next step is to communicate that to your board (if you have one), or to your advisors (if you dont have an advisory board, I’d recommend you do that first) or to your existing investors. Most entrepreneurs ask me what the difference should be between the externally communicated goal versus the internal stretch goal you set for the team.

I dont think there’s a formula, but typically I have seen on the boards I advice a 15-20% difference, on average.

That means if your goal internally is to hit 100 orders/day, I’d commit to 85 / day to the board.

The final step in the process is to communicate to your entire team again, typically in an all hands meeting. I’d do this even if your team gets larger. That also gives your entire team a chance to ask questions and see the same information that has been committed to the board.

How to set milestones for your startup before you raise money from investors

The question “What do you want to be when you grow up” is a pain to answer for kids as it is for startup entrepreneurs. Most times you just dont know. Sometimes you ask other people in the hope that it will lead to an answer that you can co-opt. Other times it is not clear yet (unlike with kids) if you will ever grow up.

Even if you dont want to grow up, I’d still recommend you spend some time putting together milestones that matter to your company for an 18-24 month period from when you start so you know what you are shooting for.

The milestones fall into many buckets, but they should answer the question:

“If you hit the milestones you set out for your company, would you be much more valuable as a startup than you are now”?

The relative sense of “much more valuable” indicates that this is very different for each company, founder, market and type of startup. Most entrepreneurs who are focused on B2B bemoan that they are measured to revenue metrics, compared to their B2C counterparts who usually are measured on user growth (or engagement).

Regardless of what you are measured on, the key is to ensure that you document the most important metrics that will move the value of your startup.

So, to set milestones, the first step is to agree on metrics to measure, and then the date by when they will be achieved.

Here are some examples.

1. Revenue metrics. Regardless of what the new “temporary” trend might be, revenue and profit trumps all. In the early stages of your company, profit will be an illusion, so I would focus a lot on revenue growth. How quickly you grow revenue and have reduced churn, better predictability and more diversity gives an investor more confidence in your business. If you need to have one metric alone in place I’d recommend a revenue growth metric. As in most things, quality and quantity of your revenue metric matter.

2. Absolute # of customers / users metric: In some cases, when the revenue is not significant initially (for example you are in the razor blades and razors model of a business) then I’d focus on growth in # of customers. Again, like the previous metric, quality and quantity both matter. If you are an enterprise software business, getting the initial key marquee customers matters more than any customer. In B2C, this is widely followed with startups tracking # of users, MAU, DAU, or engaged users, or a proxy for # of users (# of snaps sent for example).

3. # of employees: This used to be a metric people tracked, but I am not sure this really matters as much in terms of growth. I’d focus more on the quality and profile of employees alone, instead of a growth in # of employees,. If, however you are in a consulting or services business and this metric drives revenue, by all means this becomes important to track.

There are many more metrics you could track, but the key question you have to answer is “Will this metric(s) drive my startup’s value higher. You can also track metrics that are a proxy for the metrics I listed above. This is so that you can communicate it externally and get people excited about it, instead of having to share a revenue metric.

In some cases, (like Uber for example) the # of rides as a proxy for revenue might be tracked.

Then the next part after you select the metric, (typically one is preferred) is to draw a line in the sand for those metrics –

What would those numbers be and by when would you achieve them.

This part is the “setting milestones”. It has to come with a “sell by date” or “achievement date”.

Simply setting metrics alone, without the date of achievement is typically useless.

The important next steps is to break down the milestone into smaller more achievable milestones during your progress (monthly, quarterly, etc.). This is so you can communicate with your team and have them all rally behind the milestone.

What value do #startup accelerators provide to #entrepreneurs?

Many entrepreneurs and other venture investors have a perspective of the accelerator space with little context or a construct to think about their value. I am biased and run the Microsoft Accelerator and I think most programs are extremely valuable, though I am an insider.

There are key questions I thought I’d answer that are top of mind of most entrepreneurs and investors about accelerator programs.

How do we think about accelerator programs?

The best construct to think about accelerators is the MBA program for entrepreneurs with new age changes and modifications.

Instead of tenured professors, you have (hopefully) experienced entrepreneurs who can share their story and journey towards entrepreneurship.

Instead of textbooks with theoretical knowledge you have playbooks based on actual experiences.

Instead of one teaching assistants you have mentors who have relevant experience in the area that you need help.

Is the MBA program great for everyone? No. It is only relevant for those that believe in the power of the network and want to take advantage of the connections (not only customers and investors but other fellow entrepreneurs as well).

What happens to existing MBA programs? Will they go away? No, but there will be a serious consolidation. I can see a future where MBA programs are catered to generating folks purely to be placed at a large company such as Goldman Sacs or Bain. Tier 2 colleges and MBA programs will have to fold up.

Is there value in other accelerator programs besides YCombinator? If you believe the MBA program construct, then this is a question that answers itself. Even though there are many that falsely believe there are no programs that are better, that’s like saying if you get a MBA from any other school than Harvard, then your MBA is useless. Similar to MBA programs you pay a lot (in the accelerator space you pay equity, not cash) to get that “stamp of approval” or “credibility”. Is that worth it? For most it probably is.

What value to accelerator programs provide? For most novice entrepreneurs it is advice, for amateurs it is mentorship and for the professional entrepreneurs it is guidance and connections (the network).

Do most entrepreneurs benefit from accelerators? Or just the young, first-time-as-an-entrepreneur do? Do most experienced professionals (who work before joining an MBA program) benefit from an MBA program – absolutely. In fact I would argue they benefit more from the program than young fresh graduates, because they are able to take advantage of the connections, network, mentorship and guidance immediately.

What does the future of accelerators look like? Similar to MBA programs, accelerators are beginning to specialize to compete better. There is a need for a lot of management thinkers for companies beyond the consulting and banking industries, which is why so many MBA programs are churning out graduates.

Depending on how you see entrepreneurship play out – will it be a winner-take-all market or a very competitive one with many startups and many entrepreneurs, there’s a likelihood that many accelerator programs will consolidate or get “acquired” by venture capital teams.

In a winner-take-all market, YCombinator wins. Which means, they get the 80% of the best entrepreneurs and rest are fighting for the scraps.

In a more competitive market, YC, like the others has good share, but only 30% of the best companies graduate from YC, and the rest from other programs.

I personally think it is unlikely that the accelerator market is winner-take-all. Similar to Venture capital firms, where there are tiers (Sequoia, Accel, A16Z, etc.) form the top tier, and there are over 300+ VC firms still doing well and many return good money to their LP’s. Granted the large funds deliver over-sized returns, but the rest are still doing pretty well.

Should entrepreneurs apply to multiple accelerator programs? It depends on the connections and networks you choose to leverage. If you are a health company, YC will be of value, but not by much. You want to attend YC to get the stamp-of-approval, but you will benefit a lot more from programs like Rock Health.

I don’t know of too many folks that have gone to attend multiple MBA programs, so I think that a startup going to multiple accelerators will just dilute themselves too much. Unless they attend a program that offers no dilution – like the Microsoft Accelerator program for example or many others.

Which is why TechStars is starting to offer their “equity back” (like a money back guarantee) program – You got value or your equity back.

What others questions do you have about accelerators? I’d love to think about this construct and see if it addresses more questions about the value of startup accelerator programs.

The one piece of advice I’d give myself from 15 years ago

“Skills are overrated, Connections are invaluable”.

Fresh out of school and eager to ‘conquer the world” I wish I focused a lot less on picking up “Analysis”, “Critical thinking”, “Strategy”, “Time Management”, “Project Management” skills and instead focused on “building and growing connections with people”.

I get 2-3 people emailing me to be their mentor every day. Most of these folks are young, fresh out of school and are at a large company – most times a tech company like Microsoft, Google, Facebook, etc.

Since I have very little time, I schedule 15 min when I can with them to help them learn what I did not learn, but wish I had 15 years ago.

Most young people focus on picking up “skills” or “intellectually stimulating global assignments” like a stint in China or India, etc. so they can be a well rounded individual. Then I try to push them towards entrepreneurship.

At this point, they usually (90% of them) tell me the dont think they have the skills to be an entrepreneur and point to their lack of sales, marketing, branding, positioning, coding, scaling, hiring, interviewing, motivating, etc. Any number of skills that they believe they dont have yet to be an entrepreneur.

Here’s the thing – skills are easy to develop for “most” people. If you are at a company like Microsoft or Google (or any other large company), you are reasonably skilled already. Else, they would have not hired you.

Focus your attention on building networks and connections with people instead at these places. There are folks who will be there building careers for the next 15-20 years there. They will get to important positions, just because they are there for so long. You will need their help at some point.

The other way I have found is to offer help on projects that executives have which they will never get to but are keen to execute. Offering your time and smarts towards that helps you build a relationship with top executives.

Build connections and networks not skills.

What criteria should you use to judge a hackathon?

I was on the jury panel at the Angel Hack event over the weekend with others.  Over 150 attendees were at the event, and 50+ hacks were presented on the final day (Sunday). They ranged from the sublime to the trivial. The best part was there were attendees from over 10 different cities including a few that came from over 1000 kms away. Each team was given 2 minutes to present their hack and 1 min to answer questions.

The first  thing that struck me was most of the attendees were awake to present their hacks. In previous hackathons most of the presenters have been rather tired or sleepy so they tended to gloss over their work.

This is the 5th hackathon I have judged and I dont think I have a clear idea on what the criteria should be to judge a hackathon.

This time the winner was a product that’s been in the works for a few months, and the developers made some changes / modifications to their product over the weekend. So, really it was not a “new” hack over the weekend, but something they have been working on for a while.  The runners up (not announced) was a company that’s been in the works for a while. They were well thought-out ideas, fleshed-out products and good implementations.

That obviously ticked off a few developers who had built a new hack from scratch over the weekend (and it showed that their idea was a one weekend project), and I got 3-4 angry emails on why we chose to declare the mature product as a winner.

Did we know that the winners were “mature” and not “weekend hacks”? – we did and did not. Did, because we could make out that the products were well thought out, which is hard to do in one weekend. Did not, because we were not told that we had to only look at weekend hacks.

So what does a weekend hackathon really accomplish?

I think it provides an ability for developers to learn something new, try an idea and experiment. That’s it. Globally, according to Startup Weekend, fewer than 2% of these weekend hacks actually turn into a company, but many (dont know the %) of the developers get hired because of these events, many ideas are added to an existing product and many products are enhanced post the hackathon.

There will always be folks that keep working on their idea over several hackathons so their ideas will mature quite a bit and so will their products. The good part of this hackathon was I did not see a single team that had presented the product / idea before at any of the other hackathons. There were many rehashed ideas, but largely new teams.

I think the top 3 criteria for judging hackathons should be a) how unique & interesting is the idea given the constraints of the hackathon, b) how close to “product” has the hack been over the weekend and c) how creative have the developers been in their implementation

I think the key thing that hackathon organizers should do is to form a jury of 3 hackers / developers and maybe 1-2 other folks from the startup world (VC’s or generalists like me).

Our panel on Sunday was comprised of 1 designer and 1 developer. The rest were generalists (3). So it was obvious that we were going to be biased and look for how “big” the idea was, how well thought out the implementation was etc. If the goal of the hackathon was to look to turn weekend ideas into startups, then an even mix of generalists and hackers as jury members would make sense, else they should be weighted towards developers as jury panelists.

Do you think we should even have generalists as jury members? I think that 1 might be sufficient for most parts, but if they are not developers, what’s the point of having them on the  jury?

The fallacy of providing “great mentorship” in 1 hour chunks

I have a good friend who has been a successful corporate executive for over 15 years. Off the charts smart and with a keen sense for the “inner issues” driving other people, he is able to figure out the root cause of most problems faster than most people I know.

He does though have a lack of time, like most other people. Having been in a large company for most of his career, he wished to live vicariously through other people and was keen to “mentor” young entrepreneurs. My advice to him was to focus on helping younger people in his company rather than entrepreneurs. He seemed to think about my tip, but chose to ignore it.

He setup 1 hour mentoring sessions with 3 entrepreneurs who he felt were working on problems that he was keen to understand more about and wanted to help them while he learned more about the market they were targeting.

Each session was fairly standard and given his corporate background, were scheduled a month in advance with consistency and a sense of purpose.

After 2 sessions, 2 entrepreneurs said they were busy and could not make the call or be in person.

He did feel he brought value to them in both the sessions and heard from the entrepreneurs that his advice was valuable. While he was in the process of scheduling the follow up, one entrepreneur told him rather bluntly that he did not have the time.

My friend took it rather well, and wanted to understand how he could make the time more valuable. Both entrepreneurs said the same thing.

There were pieces of advice that they could get from my friend, but they did not have the time to execute on his suggestions and felt that while well meaning, most of the suggestions were not precise enough.

Note that they did not say that the suggestions were not actionable enough. They said that the recommendations were not precise.

I get nearly 2 executives and mid-career professionals from larger companies and older entrepreneurs wanting to be a mentor at the Microsoft Accelerator each week.

Most we reject.

Some because they just want to add the mentor title to their LinkedIn profile and dont have enough time to provide.

Most others because they want to compress the “mentorship” in chunks of 1 hour sessions every month.

Its hard to do anything well in 1 hour chunks in infrequent periods of time. Even if its frequent the context is fairly limited.

Its even harder to provide any value in a 1 hour mentorship session.

Which is the prime reason I am not taking any new “meetings” to provide feedback and advice to new entrepreneurs who are not in our accelerator.

There’s very limited to little value that the session can actually provide is my experience.

I might feel good about it, so might the entrepreneur for about 15 minutes after the meeting. When the dust settles, though, after a day or two, they realize the multiple edge cases and scenarios that my advice or suggestions wont really work.

If you think you can provide value in 1 hour chunks as a “mentor” I’d love to hear how you are doing it and how you measure the value of your advice.

You think you are good at something only to find out you are not

There are a ton of people who have written about lack of quality mentorship as one of the main problems in the early stages at Indian startups. In fact, many accelerators and incubators are primarily focused on space and mentorship as the primary offerings as part of their portfolio of services.

Personally over the last 4 years in India, I have helped (I am going to avoid using the word mentor) over 50 entrepreneurs at a superficial level (day long or 2 days of my time) and 6-8 of them to a greater degree with monthly sessions on sales and go to market. Of those entrepreneurs, I financial backed only 6 of them, meaning I funded only 6 companies who needed my money and mentorship. The others I only provided my guidance.

All along, I have heard from the entrepreneurs that I was adding value and addressing their top 3 areas of concern – How to build a go to market plan, how to build a strong sales discipline at their company and helping them by opening doors to key people they wanted connections to. Turns out they were possibly being nice, to me at best.

So I generated a false sense of confidence in being good at something I was not.

I got a hard reality check a few days ago.

Over the last few months I have been helping many entrepreneurs on these exact areas, but without actually putting money in their company.

For most of them, I invested an enormous amount of time (many of them weekly) to help them understand their customers, go to market strategy and for some I helped with a complete re-positioning toward a large adjacent market. For others it was guiding them through funding options, calling a few investors who could be interested etc.

Turns out most of them (not all) only valued advice if they got funded. Else it was “gyan”.

In fact one of them mentioned that they whole point of working with me was to gain access to funding alone. Everything else was gravy.

I have written about this before based on my experience a few weeks ago.

You think you are good at something, only to find out, maybe you were wrong all along.

So, I called and asked a few entrepreneurs who they consider as high quality mentors in India. Surprisingly, only those folks that wrote checks figured on the list for many (again, not all) of them.

Rest were considered as folks who did not have “skin in the game” to help mentor, so they were detached from the outcome or the results of their advice.

There still is a need for high quality mentorship in India is my belief. I am not sure I belong in the high quality category though.