From Lab to First Adopters

When it comes to finding Product-market Fit (PMF), entrepreneurial vision is helpful but insufficient. Landing on the moon may be the vision but it requires precise and completely accurate calculations to actually get there.

To increase the probability of finding PMF and to accelerate the process requires the systematic and thorough application of a particular toolset in a stage specific way. Those pioneering tools are: detailed hypothesis building, market engagement and application discovery, analysis and rapid iteration, and validation.

And, of course, the crowning evidence of PMF for product companies is that first set of deals that proves your ability to generate significant revenues at a high gross margin by solving a high value challenge either in a way that no other product can or in a way that is much more effective and efficient. The right set of ‘first deals’ demonstrates market acceptance and pull, and sets in motion a pattern of accelerating revenue capture (traction).

For broader platform companies, the ‘first deal’ challenge involves working with a broader ecosystem to identify applications and build products around your platform that achieve market acceptance. While the goals are the same as with the product company (see above ), the difference here is that there are potentially several different applications that we can apply the technology to. The skill lies in choosing the right initial applications that can have a multiplier effect with regard to: revenue generation; industry acceptance; and technology scaling.

‘First deals’ are different in nature and require a different pioneering skillset than those that follow in the growth stage. To generalise, they are harder to win, demand greater intensity, consume more attention, require more face-time with the ‘customer’, take longer, need a broader more cross-functional consensus within the ‘customer’ organisation, and are substantially more valuable than those that follow.

Whereas with ‘known’ products, resistance is likely to emerge early, curiosity for ‘the new’ means issues are likely to emerge later. For the venture organisation, where the mis-allocation of resource can be an existential threat, a long but ultimately fruitless engagement is deeply problematic. Curiosity is a powerful lever for stimulating engagement but also a trap sprung by the seductive charms of early interest. The challenge is to convert curiosity into opportunity early by creating a stage gate that gives the counterparty a clear choice between disengagement or a meaningful commitment that signals interest has been transmuted into an opportunity. All too often the issue lies in the lack of leverage that a technology company can bring to bear to ensure adherence to a stage-gated process. It is of course the evidenced and transparent promise of the technology that should support a more symmetrical interaction. Once established, the best way to ensure leverage (this is most applicable to platform technologies) is to have multiple competitive companies in the same industry all in the same process which creates an urgency to progress and conclude a deal within a desired timeframe with the carrot (should one be necessary) being some form of preferential access to technology which moves the competitive advantage needle.

At least from the perspective of the technology company, ‘first deals’ are based on no direct precedent. Practice is being formed and enacted for the first time. The execution capability is embryonic. Experience may accelerate the process when wisely applied but it may also hinder progress by adhering to modes of action applicable to different contexts. Generalised knowledge can be useful but is trumped by context specific insight. The goal for product companies as they move from ‘technology visionaries’ and ‘early adopters’ (who will adopt largely on the technology’s potential) to ‘followers’ is to evolve a practiced capability built on: fast learning and systematic iteration to distil what works; a creative process mindset; and extraordinary maniacal attention to ‘customer’ detail.

At each stage, a fit-for-purpose process must be created, tooled up, and optimised. Pooling expertise early into specialist jobs (embryonic functions) is important and is a precursor to scaling. One of the huge advantages of following this type of approach to designing and developing process, whether you are pioneering a product or a platform application, is that it quickly highlights the really critical steps in the process and what is needed to engineer successful outcomes. Those critical steps are nearly always conversations. The end goal is a series of repeatable actions – the smartest and most efficient way executing deals in these formative stages of the product’s lifecycle.

What is critical about building the execution capability is that it is foundational. It sets down the templates for others to follow. A great house cannot be built upon poorly built foundations. Starting over is a difficult and expensive job. Bad habits and poorly defined sub-optimal practices become embedded. A restart will almost certainly require the recruitment of new people. Success is ultimately only measured by results. There may be many ways to tackle a challenge but it pays to select the best way.


Closing any deal is an event created by a process. The event itself involves getting the deal over the completion line. It is no more than the summation of a process that starts once a degree of mutual trust and interest have been established. Opening is a fluid mix of sparking interest (i.e. potential but still unsubstantiated fit and benefit) and relationship building. Relationships matter as they create access and provide the agency that gets things done and the medium through which information and insight is channelled and processed. Importantly, they also allow us to understand first hand what is important to an individual and an organisation. That is where empathy starts. In dealmaking, to deal is to empathise; to be able to imagine things from your counterpart’s point of view. Empathy is not simply a matter of adding another invaluable perspective, it is that soft intelligence that can lubricate the process, help smooth the bumps, and resolve the thorniest of issues. While creating ‘an opening’ is a prerequisite to selling, it is not in my book selling. It is a skill apart and a high value one at that when there is a significant degree of complexity and multiple players involved.

Determining the degree of fit, and the business case that may emanate from it, is a critical stage. The more thorough the work here the greater the probability that subsequent activities will progress smoothly. This is an evidence-based stage characterised by information sharing. The more structured this process, the better. Have a plan of what to share, with whom, and importantly, when to share. Building the business case – the ultimate measure of fit – in particular should never be presented as a fait accompli. Rather it is a very deliberate process. Agreeing a methodology (i.e. how value can be evaluated) is important because sellers are often guilty of presenting benefit cases that underestimate adoption costs while buyers may try and inflate them. The best form of persuasion (i.e. selling) are ‘facts’ messaged and presented in a manner that is compelling by virtue of being irrefutable. That is the subtle art of ascribing meaning to facts.

The basis of all sales is arbitrage: the buyer pays x for something potentially worth a multiple of x.  For the buyer that is the difference between cost and value.  This is where IP based propositions that are a multiple better than the incumbent technologies should be at a major advantage. The higher the multiple the greater and more transformative the potential value. Of course, the imperative here is transparency. Indeed ’radical transparency’, to borrow an acquired phrase, makes absolute sense. No bullshit required. Just detailed hard proof that for many of the companies RIG works with can only come through a period of collaboration. To fall short of ‘showing the value’ is to sell your technology short. Falling back on persuasion, however articulate and passionate the advocate, is a poor substitute for empirical, substantiated, indisputable, shared and accepted evidence of value. In this stage at least, the best way to sell is simply not to.

Beyond the core challenge of agreeing a methodology for establishing value, there is always an extensive list of associated ‘issues’ (not least those related to IP) that must be worked through before a closing event becomes a possibility. Failure to identify or anticipate an issue will delay ‘the close’ or lead to premature attempts to close a deal that is not yet closable. An apt metaphor might be borrowed from my boyhood:  compare this final stretch to building a model airplane of the type that predate the machines that you can order on Amazon and that are ready to fly straight out of the box. For the plane to fly the build had to be completed to spec and the little engine perfectly calibrated. Everything had to be just right, which took a fair amount of checking and tinkering, otherwise the plane failed to take off or crashed shortly after take-off. The most important tool was a comprehensive checklist.

The critical challenge of agreeing commercial terms is the penultimate activity before ‘the closing event’. This essentially involves trade-offs between cost and anticipated value. The buyside argues cost (and if procurement gets involved it will almost inevitably try to divorce cost from value as is their brief) while the sellside must stick to the language of value. To fall immediately into a pricing dialogue dominated by arguments around cost is to be seduced by the dark side. Instead frame your arguments using the language of value. How challenging this negotiation is primarily a function of how well you have executed the preceding stages. Though you will be frequently told otherwise, there is little in truth that cannot be anticipated or established before the negotiation to ratify final terms. An agreed methodology to evaluate value will at the very least enclose the discussion within parameters that make reaching agreement easier. The result we get may in part be down to our planning and negotiation skills but in much greater part it is down to leverage. Leverage is power and that power is found, created, built, adjusted, and understood as the process unfolds from first contact. In sum, the most skillful closers are those who know how to create leverage and use it to shape their counterpart’s decision-making, so that they seek in their own interest, terms that closely resemble the ones the closer set out to achieve in the first place.


The draw of a silly assumption

On paper it might make sense: hire a commercially minded executive who has ridden the tiger at a fabulously successful growth company, who has been there and done that, and low and behold the same result will transpire. Unfortunately, this will rarely happen in practice (at least not in the formative stages – see below) yet it is an assumption that in the sweaty heat of entrepreneurial aspiration is alluring.  It follows a predictable path in how we seem to process success and failure. If a project or indeed a company is hugely successful it is all down to us; if it fails it is because of someone else or some external factor. The ‘us’ part in business (most especially in the mythologising realms of entrepreneurship) tends to be reduced to the individual ‘hero’ leader and while individual agency and inspired leadership are critical, this is the most demeaning of fallacies to co-workers – as if they were simple appendages in constructing success. The art of building the successful venture company is a team sport. There can be no leader without a team and no team without a leader.

Of course, if we bet that hiring the battle-hardened veteran (the ‘grown-up’ as some VCs might put it to shepherd the innocents), will put the world to rights then the odds are high that a mismatch is on the cards. No matter how brilliant the manager, if the product sucks there is no salvation. If the new manager has led a team that grew from 20 to hundreds and built revenues from a few miserable millions to tens of millions then it will matter not one jot if that difficult-to-find first market has not been found.

In truth, growth managers who know how to build a company are valuable. They matter but they only matter once the company has located itself in the slipstream of a market that will pull it from being a start-up to a venture scale company and beyond. Before that, there is nothing to build on. All too often the ‘been there done that manager’ is hired too early. Their experience and competence has been forged in harnessing and exploiting the demand unleashed by locating a breakthrough market. Their expertise is in scaling – in driving and underpinning growth with structure and process. Their challenge is not the pioneering and discovery work that must always be undertaken and which so often limits the growth prospects of aspirant company.

Competent growth management will determine the parameters of a company’s success. They enable the scaling process. But they are not the answer to finding strong organic growth or to addressing product design challenges. That is not their role.


How to develop a business and yourself

Developing a business and developing yourself have a lot in common. Fundamentally they both involve learning.

As a business owner, one responsibility I feel towards those with whom I work is to ensure that they are learning and developing in a way that drives the business and their value to it. In a knowledge business this is an essential dimension if the organisation is to flourish and grow. Where an individual isn’t learning or shows little appetite for discovering new challenges (i.e. new learning opportunities), it is time for them to move on and find inspiration elsewhere.

The recipe for developing yourself or a business is much the same: work with great colleagues (mediocre and non-performing colleagues are a source of talent drain); find new client opportunities to learn; and get out of your comfort zone. While I can personally think of few things more enlivening or liberating than a fresh challenge, I recognise that, for many, deliberating stepping out of their comfort zone is an anathema; a process fraught with the fear of not being in control, of losing authority, of facing criticism, of being shown up or failing outright, of once again being the novice.

Like most activities that involve an element of fear, there are two ways of thinking about them. Much like going to a new school, the first day is a mix of anxiety and anticipation. Bias the latter emotion and the fear is quickly muted by excitement. And be determined to embrace some failure as a stepping stone to eventual success. I recently read an article in which Vinay Khosla, that titan of the US venture industry, said: “I like to say my willingness to fail is what gives me the ability to succeed.” Make that an article of faith.

Once a challenge has been identified, there are two instrumental elements in developing yourself and the business. First is the new knowledge or activity that you must master – this is the intellectual challenge but not the hardest one. The second, and much more challenging element, is applying this knowledge by facilitating a result through people. It is that experience alone that can eventually produce the genuine personal and business confidence upon which so much business success rides.

Don’t try harder, iterate faster

Trying harder while generally doing the same thing is not the recipe for finding product market fit or finding early traction. It is a recipe for running out of runway. It is also a very human reaction.

Take a competent sales person from an established company selling an established product with an established proposition. Put them in an early stage company with an unproven product. Give them a target market and a proposition based on best current assumptions. S/he starts to fail. No traction. Their manager should say ‘well done, move on, no market there, please fail faster next time’.

But, of course, it doesn’t happen. Failure is perceived not as the route to success but rather as its opposite. The competent sales person is pushed to succeed. Confidence dips. The disillusion is that it is now the formerly competent sales person who is now deemed incompetent or not trying hard enough. S/he works harder because that’s what worked so well in their previous job. More failure. The sales person gets fired. Wrong horse wrong course.

And yet the truth is simple enough: if a competent sales person gets little or no traction within a reasonable time frame, then there is no market. Iterate the proposition or move on.

Recruitment Matters

I am flying to Geneva to interview a potential hire. It will take a day and it could be regarded as a time extravagance. But I don’t think so. Recruitment is the most important arbiter of company culture. The more senior the hire, the more this is true. Few activities are more important yet too often, too little time is found for an activity that is a significant determinant of the level of success a firm can achieve.  I would put my money on saying that the greater the investment in hiring practices, the greater the return. Skimping, rushing, or failing to work out best practice for your organisation is a false economy. Your organisation is who you hire.

Talent spotting and assessment is part of my job. It is one I enjoy thinking about. While there are occasions when we must hire, in general my approach is always to be on the lookout for talent. That means meeting a lot of people and hiring very few. If your organisation is harder to get into than Oxbridge then you are on the right track. At RIG, my hiring judgements are a mix between ‘facts’ and ‘feeling’ (which is judgement distilled from experience). I will hire a ‘junior’ quickly with feeling predominating. The more senior the hire, the more I bias the ‘facts’. Yet first encounters are essentially impression interviews. My goal is to get a sense of whether I want to proceed or not. IQ is very rarely an issue. Everyone who interviews at RIG is bright. I frequently half-joke that, in terms of IQ, that I am the dimmest person in the firm. In my mind, this is not a self-deprecating comment.  I take seriously the notion that if you want to build an A-team, always see yourself as a B looking to hire an A. IQ, of course, is just one dimension of intelligence. It has been argued that having a high IQ and relatively lower EQ is a defining characteristic of successful technology entrepreneurs. In our business, however, EQ is a form of intelligence that is as important, if not more important, than IQ. What our clients lack, we must have in spades.

When I am not entirely sure about my first impressions or I feel that my own prejudices are in danger of colouring my judgement, I will ask one or two of my partners to speak to the candidate.  There is no set agenda; I simply want their impression. While all of our partners are very different characters who will naturally look for different things, there is always a remarkable common sense of whether or not someone will fit.  I cannot recall an occasion when this was not the case.

The second encounter I often hold with one of our younger consultants. I value their opinion. They are closer in age to graduate candidates and will ask questions and arrive at insights that would otherwise pass me by. They are thinking whether they want to have lunch with that person, or be away with them on a three day gig. And, of course, then there is the matter of practice. Interviewing – asking smart and well formulated questions – is a core skill in our game. Never miss an opportunity to practice internally.

I take note of how candidates react to being questioned by one of our younger consultants. Some senior candidates clearly don’t appreciate it. They won’t work at RIG. RIG is flat. Junior consultants are actively encouraged to challenge their seniors. It is intelligent contribution that matters. If you are the best person to lead in a given situation then you lead. Younger candidates sometimes answer the question but refer to me. In this context, eye contact is the communication that matters. If they cut the younger consultant, they will not progress.

Common interview questions are well sign-posted. Candidates have answered them before. While I may admire how an answer is articulated, pre-packaged answers tell me very little. I know that much of the information that the standard sort of questions are designed to elicit will emerge should we progress beyond this stage. So I have two approaches I like to deploy. Often I will go through a case we are working on and ask the candidate what they would do. Or I pick an old case and ask them if we chartered the right course. Some candidates, irrespective of age or whether or not they have a business related degree, feel pressurised and put on the spot thinking that there must be a right answer. Others enjoy the exercise, ask lots of questions, and see it as a problem to be solved. They quite naturally seem to develop and assess a range of options to addressing the challenge. The latter will prevail and progress.

The second approach that I deploy is to inverse the interview and to get the candidate to interview us. I do this for several reasons. First, both parties need to gather data to make an informed decision. Consistent with this, it makes sense to give the candidate an opportunity to ask questions. Second, it drives home the point that selection should be mutual. We choose a candidate; the candidate chooses the firm. This, of course, is the basis of any employment contract though the balance of power between employer and prospective employee may differ greatly. In the competition for top graduates, the balance is pretty evenly weighed. Of course, many firms do not act this way. They proceed in ways that are consistent with their culture. Our approach is no different: it speaks of how we think about things. Third, you often learn more from the questions a person asks than the answers that they give. Given that candidates, most especially newly minted graduates, are generally more conditioned to answer questions, this is a revealing technique.

As our hiring process unfolds we derive data and impressions from a variety of exercise and sources which is then discussed internally. This part of the process cannot be rushed. I must feel there is a fit and know where and with whom the candidate will slot in. I will risk losing a candidate rather than rushing to a decision. Selection is much to do with pattern recognition. When I was younger, the pattern I knew best was my own. The temptation was to hire people like myself. That temptation has long been tempered. I have no doubt that our strength lies in our diversity. It is the dimensions that I question. We all have our strengths, preferences, and weaknesses; people we can spark off and work with effectively. Selection is not simply a matter of the individual. It is the shape and performance of the team that matters. Concocting that special brew is certainly part science, but it is also a creative pursuit and an act of imagination.

Away Days

It’s early. Far too early for some. We are flying to The West Coast. Of Ireland. We are not visiting The Valley but will drop into Tom Collins’ pub in Limerick.

It is a relatively rare occurrence for us all to be together. We are crammed into an Aer Lingus jet for our flight across England, Wales, Muir Bhreatan (St George’s Channel), the East Coast of Ireland, and across the interior to the international hub that is Shannon Airport. Go further west and there is nothing but the Atlantic and America beyond that. While I can never sleep on a plane, the ability of others to be asleep before we have taken off never ceases to amuse me. Sameer is collapsed in his window seat as if he had been shot. Ffion is slouched across the aisle in her window seat, the fear of flying banished by sleep. There is a mournful look on her face as if the early morning flight was a crime against young people.

Away days serve many purposes: primarily they are an opportunity to reflect and then to look forward beyond ‘the immediate’ that preoccupies so much of our working lives. In consulting, knowledge-based businesses, there is always added spice to such affairs. ‘The cats’ are out and all efforts at ‘herding’ are lapsed. The arguments will be heated. I measure the general health of the firm by the degree of debate we can sustain while remaining committed to our collective cause. The greater the intensity of the argument, the healthier we are. It is a starkly honest measure of the strength of our culture as a firm.

Every first time CEO does it differently

There is no one way of being a start-up CEO. There is no single template or standard job description. Rather, think of the role as a jigsaw with each piece representing a particular area of competence. When correctly assembled, the pieces come together to present a complete picture.

Yet no individual, however brilliant, has the ability or the desire to cover all the pieces. Each apprentice CEO – and that is surely what most first time CEOs are – will by inclination or design select those pieces that best reflect their abilities.

To be sure, there are some ‘corner pieces’ that must carry their imprint. The oft-quoted Fred Wilson puts it well when he says that, ‘A CEO does only three things. Sets the overall vision and strategy of the company and communicates it to all stakeholders. Recruits, hires, and retains the very best talent for the company. Makes sure there is always enough cash in the bank‘.

But no two CEOs execute the job in the same way. All CEOs have their own character, their own respective passions, idiosyncrasies, and limitations. And it is awareness of these qualities, gained through self-reflection or feedback from trusted parties, that stands at the core of becoming an effective CEO and building a team of managers that can augment and compensate their leader’s strength and weakness.

But there is a constant quality that stands at the heart of effective start-up CEO competence. A start-up is by definition a company capable of hyper growth. Fast growth companies are characterised by the speed at which things change: by the need to make redundant structures, processes, systems and people that have may have only recently proven successful . The challenge is to manage change as a constant rather than a periodic exercise in realigning a company to changes in its environment. It is why leadership, which is about creating movement, is a more important quality in a start-up CEO than management, which is about nailing things down and optimising operations.

So being a start-up CEO is about negotiating successive transitions. Most founding CEOs excel at the product development stage when the company comprises a committed band of product developers. Fewer and fewer excel as the company grows. This is not purely a matter of ability. I have worked with several CEOs who I believed harboured the ability to evolve their competence to match the changing nature of their role but they simply didn’t want to.

Desire is ultimately what drives learning. And desire has a lot to do with enjoyment. When desire and enjoyment fade and the gap grows between the demands of the role and their skillset, then the job becomes more stressful and the CEO more ineffectual. In my experience, it is a situation that is implicitly understood by employees. It affects morale and engagement as employees know (always earlier than the board) when a CEO is no longer the right person to lead them.

The right thing for the CEO to do in these circumstances is to stand down and slot into a role that restores the alignment between their motivation and preferences. Too often they will persevere and run the inherent risk of the company losing momentum. Or perhaps, they realise that they have taken the company as far as they can and will look to cash in on their investment. The company is sold and the adventure is at an end.

Gender and the firm

Our firm is not unlike many of its clients: the majority of our employees are male. This has been true since our inception. It is not an issue that has been much discussed internally. Nor is it one that I have discussed with clients and their predominantly male management teams. On both counts I am surely at fault.

I have championed the notion that it is the CEO’s responsibility to make sure that within its means, the company sources the best candidates. I have not been shy in advocating that growth companies should ‘always be hiring’; always be scouting for the ‘best’ talent rather than settling for the three or four candidates caught in the net of a recruiter’s trawl. And here of course is the rub: tech has always been and remains a heavily male enterprise. Recruiters work on the basis of matching a role with previous experience. The more senior the role, the more it seems the pool is loaded on the male side.

If attracting ‘the best’ is to be a serious proposition then the addressing the imbalance between male and female must surely be addressed. Can we claim to be hiring the best when we know that girls are outperforming boys across the board from nursery through to university? Add to this the common assertion that while IQ determines one’s success up to university, EQ will be the greater determinant of success thereafter. On this front, too, it would seem we are prepared to settle for less than the best.

At a senior level, companies need to pursue recruitment strategies that are more akin to internal promotions, where candidates are assessed not on their record of doing a similar job but on performance indicators that they have the talent and aptitude to do the job. The recruiter may well argue that this approach increases risk, but this is merely an argument for the perpetuation of the status quo. On this basis, no founding, first time CEO is qualified for their role or likely to be successful. The paradox here, of course, is that most great technology companies are closely associated with their founders who remained at the helm long after the start-up phase has passed.

It is with less senior hires that there is an opportunity to remake the future, level the playing field, and secure the best of the best. For the first few years at RIG we advertised our annual summer internships on the Cambridge Careers website. For us, internships are a serious business that are used to assess potential entry-level employees. For several years the number of male applicants outweighed the female applicants. We reviewed the language we used to described ourselves and reduced the emphasis on technology. The point, of course, is that to create a balanced pool of applicants takes some thought and design. Our primary commitment is not to employing equal numbers of men or women or to ensuring that the senior levels of the firm are populated by both genders; it is to ensuring that we are always hiring the best of the best.

To be serious

Aspiring entrepreneurs and the startup community in general quite naturally thrive on success stories. They provide inspiration, role models , and the promise of heady returns. But success stories can also give rise to misguided assumptions. One of the most common is around the time it can take to build a valuable enterprise.

A few companies are created and ‘flipped’ within a few years. Most aren’t. Entering the entrepreneurial arena with a short term exit horizon is likely to result in disappointment. Entrepreneurship is about developing the competence to build value and generate extraordinary returns over time. It is focused on mastering the art and science of business building from the ground up. Better to think 8 years and beyond to a liquidity event. That is not an argument against accepting a life changing amount of money 24 months in; rather it is a recognition that in most cases value is built over time. Enter the arena with the expectation of building a business.

Survive long enough and you may unlock the scaling formula for your business. That is the holy grail for entrepreneurs. Many perish on this quest. The formula is never completely unearthed. Early promise fades. The business grows year on year but not fast enough. Investors become exasperated and their interest migrates elsewhere. Their own agendas come to the fore and the business is sold with little equity value accruing to the founders. Waiting years to find out if a business can actually scale is simply too long. Life is too short. For this reason, I favour businesses that either fail quickly or where the potential to scale and the scaling formula become evident fairly early on. Of course the point to note here is that the more complex the business the more challenging it is to scale. Not all businesses can scale but as Paul Graham writes a startup is a business designed to scale. Those entrepreneurial teams that succeed deserve respect: they have acquired the know-how to navigate the startup stage, to prove their business model, and to build an organisation that can execute at scale. How rare is that?