What Now? Founder Re-org

In the spirit of being at Andreessen Horowitz, I wanted to write a blog that was both unconventional yet educational and useful to the entrepreneurs that we serve.  In thinking through my options, I very much wanted to combine my CEO experience and operational background with my teaching experience at the MIT and Stanford business schools.  As a result, here’s what I’ve developed:

Over the course of the next 12 months, I will present a series of short “cases” for a fictitious Silicon Valley-based software company called SpiderNet.  Each case will highlight a single management issue with a key “what now?” decision that needs to be made.  You are the CEO of SpiderNet and you will be asked to make the decision. About a week after the initial posting, I will respond with how I would solve the problem.

The genesis of the idea came about when I realized that there is little formal education on how to grow a technology company once it is funded.  The bulk of business school entrepreneurial training is focused on the macro elements of creating a business plan such as market size, product fit, and the financial plan.  Little time is spent on how to grow and manage a technology concern.  Simply put, once you get funded, what now?

A few years ago, I asked 50 VCs and entrepreneurs to list the most common mistakes made while managing a software company.  The results were amazing, not for the profound nature of the results, but for the consistency of the answers.  Everyone answered with pretty much the same list.

I have taken those answers, plus my own experiences and failures, as input to the SpiderNet concept. The result is a collection of key management decisions such as hiring and firing, product delivery, strategic decisions, and sales issues that are common in most growing technology organizations.  While some of these (or all of these) may seem completely obvious (and easy to solve) on paper, all of the scenarios that I present are 100% real and many of them I have personally experienced when I was a CEO.  And in case you attribute this to me being a “bozo” CEO, I see many of the same issues appear again and again in other companies.  In general, there is no absolute right answer, but there are certain patterns and outcomes that each decision yields.  Let’s get started.

Founder Re-org

SpiderNet has recently been funded $10M in an A round by two venture firms in the Valley.  As part of the funding, you agreed to think about bringing on a VP of Engineering, though you are uncertain when this might occur.  Currently, the company co-founder manages the engineering organization.  You’ve made no explicit commitment to the timing, only that the company would assess when a new VP engineering might be needed.  You sense that the time is coming.

The engineering group has 10 people at this time and the co-founder has very little engineering management experience.  He’s done a phenomenal job of hiring super-smart folks and the group is generally working quite well.  However, the company needs to double the size of the engineering team over the next several months and you are not at all sure how well the co-founder will scale.

While the engineering team is doing well, you’ve noticed some issues in product quality and some slipped dates, but nothing terribly out of the “ordinary”.  Some of the engineers have come to you to suggest that they want more process and leadership in the engineering organization.  Right now there is little process or organizational structure, which is what you’d expect in a start-up.

The bottom line is you have this “gut feel” that when you double the size of the engineering organization over the next several months in preparation for your product release, things will not run very smoothly.  You are pretty convinced that you are going to need to change things around, but are very unsure when and how to go about making the changes.

What now? Some things you consider…

Do you put a new VP above the co-founder?  Do you put a new VP under the co-founder?  Do you have two in the box leadership?  Do you create a new job for the co-founder?

And when you make the changes, what reaction will the co-founder have?  Will he still be motivated or will he pack up and leave? How do I approach him on the topic?  How will this impact my culture?

Up next: my answer.