Promising startups are often led by young entrepreneurs whose leadership philosophies are shaped more by ready-made Silicon Valley notions rather than real-world insights.
Just because a company is in an early stage doesn't mean the executives need to work 18-hour days and down Red Bulls like other 20-something drones. By instead applying old-school principles, they can build a platform and culture that is truly scalable.
Here are four traditional lessons a fledgling company needs to embrace:
In any business, human capital is the most important resource. The most advanced software in the world will not sell itself. The most innovative technology does not develop itself. Talent is the difference between success and failure.
When we launched Target Data in 2007, I over-hired in every key executive role. We had to get creative on compensation, but we assembled a management team that had the ability to run a much larger business, brought years of experience to the company and immediately gave us immense credibility with our clients.
Too often, early-stage management teams are overly junior with an intent to grow into a more senior team. But that strategy doesn't make sense—the earliest stages of a high-growth company is the time when having senior talent can make an enormous impact. The amount of time and productivity lost when changing out a junior team as the company takes off is incredibly dangerous.
The experience a senior team brings will also help you sidestep the pitfalls. If nothing else, pick the most crucial role and over-hire for it. For instance, a technology company could focus on hiring an amazing CTO. If a company lives and dies by sales, the founder should hire the smartest vice president of sales.
I believe a lot of early-stage companies mismanage their back office and focus on functional areas that they believe are the most important. A good place to illustrate this issue is with finance and legal.
Regardless of what stage a company is in, the financial house should be in order. Manage by GAAP principals and hire a finance team that understands how to accomplish this. When I talk to my investment banker friends, I hear stories about the millions of dollars left on the table during acquisitions due to sloppy books. The easiest way to avoid this pitfall is to make finances a priority from day one.
Legal documentation is similar. Make sure there is clear documentation on all aspects of the business. Have solid employment agreements been written? Are option grants clearly documented in board minutes? Are all IP issues clearly documented? How about state and federal filings? No one enjoys this part of the business, but large companies don't take shortcuts here, and neither should startups.
At Target Data, we spent quite a bit of money working with our legal counsel to ensure our entire business is well-documented. We try to imagine an outsider coming into our business. Would they be able to quickly understand the inner workings of the company? If a startup's answer is no, it's time to fix the issue.
Many young CEOs I speak with boast about their long work days, how they never take vacation, and the fact that they focus all their energy on their business. Although building a company takes an incredible amount of work, you will be able to build a better business by striving for balance.
New entrepreneurs should get involved in the community, take time for themselves and their families, and not be afraid to get away from the office. Frankly, if a startup exec cannot take a vacation without disconnecting, they have the wrong executive team in place. A culture of balance is much more sustainable than a hard-charging culture of 18 hours of coding and pizza. While there is a time and place for that, you will burn your team out—quickly. Learn the difference between activity and productivity.
We encourage Target Data employees to take time off and truly disconnect. I lead by example and take at least two substantial vacations per year. Turning off the noise of the day-to-day hum of the business allows a fresh perspective, and may result in inspiring ideas.
Finally, it's important for emerging technology leaders to recognize that running a successful startup doesn't require them to turn their backs on civic involvement and old-school business ideals. Although early-stage businesses have unique characteristics, innovation is never a justification for not learning from the larger business community.
Get involved civically, just like executives from larger corporations do. I regularly participate in high-profile civic organizations and serve on the board of one of the leading arts organizations in Chicago. Through my involvement, I'm connected to the community and have access to senior corporate executives who always offer advice and pearls of wisdom on key issues.
While innovative concepts and out-of-the-box thinking has driven much of the tech sector's success, they also leave tech startups vulnerable to threats and blind spots, not to mention cash left on table. Today's tech entrepreneurs need to beef up their business chops by embracing these traditional principles—tried-and-true lessons that help to avoid the mistakes that often plague startups.
Ross Shelleman is the co-founder, president and CEO of Chicago-based Target Data, a data-driven marketing solutions firm.
[Image: Flickr user uair01]