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Method

Further iterations

When the MVP launch goes well, we move onto scaling up the product based on market feedback. This stage typically includes supporting internal operational processes and product modifications based on early customer feedback.

Read on

1. Goal Definition and Growth Strategy

Growth strategies

You have achieved product/market fit and are ready to scale! There are multiple strategies you can use:

  • Organic growth
  • VC-fueled growth
  • Competition acquisition

Organic growth

Continue growing at a pace that is sustainable given your revenues and costs. There’s nothing wrong with this - the benefit for you is having fewer stakeholders in your company and being able to retain big control over the direction and decision-making.

Investment-fueled growth

You are most likely past your seed stage and are ready to raise a Series A to kickstart your growth. Please refer to YC’s checklist for all the documents, etc. that are usually required. Basically, you need to sufficiently demonstrate that you’ve reached product/market fit, have revenues coming in, have tested ways to acquire new customers, and have a financial model. As in previous chapters, this will be primarily a financial transaction, so the VCs need to clearly see that if they invest $1m now, you will yield them a multiple of that further down the line.

Competition acquisition

This is a strategy to consider if you’re in an oligopoly market where only a handful of companies can survive, so you can get a higher market share to render your business model profitable. The other possibility is talent acquisition for growth in a specific area that is hard to hire in.

Goal definition

Regardless of what you chose in the previous chapter, it is important to measure it and know if you are meeting your goals. As in the very first stage, OKRs can be a helpful strategic tool to keep the company in check while offering personal goals for everybody.

At this stage you should be looking at your growth rate, runway (if you have VC money), MAUs (monthly active users)/MRR (monthly recurring revenue), customer lifetime value, and multiple cost-side metrics.

On the web/app side you should always understand what your conversion funnel looks like i.e., how many people come to your site, how many go to the trial, and how many ultimately convert to paying customers.

It is important to understand how these metrics influence each other and at what levels you reach profitability in various channels.

Your goal setting should be dependent on a combination of these values and focused on becoming profitable. You should also make sure to maintain focus on your long term vision of the company so you don’t stray from your end goal.

Optimization

You need to understand what makes your users tick and what to do next to make them happier and pay more. In the majority of cases, it takes a lot of iterations to figure out what those things are and you need to rewrite major portions of your product and fast - otherwise you can expect to close your business.

You probably have a lot of technological and organizational debt - that’s okay. Identify all areas that require change and prioritize them according to your business needs and their impact. Now is the time to set a strong foundation that you can rely on in the future.

Team

What roles should you have on your team and should they be internal or external? As a rule of thumb, all the roles that impact core value/USP in your company should be internal. Think back to your exit strategy and the reasons for acquisition/exit. Is it the technology? Then you need to have the core tech team in-house. Is it users? Then you need to have everybody who takes care of acquisition and retention in-house. Is it your talent? Then just do good work.

At this stage of growth, you will likely need to start investing in overhead roles like HR, in-house accounting, and more Q.A.

It is important to hire because of fit and drive and not only because of skill. You want to avoid hiring someone who you sell on the promise of your company when the current reality is far from that. You need people who are able to work with you to inch closer to a bright future and understand the challenges to come.

2. How to Fundraise

Funding sources

Before getting external financing, every company should think of whether they are not able to at least partially fund themselves by optimizing their financial structure. The first natural source of company financing is profits retained in the company. This is of course hard to reach for a startup trying to scale, but you can reduce your capital needs by optimizing your operations and cash cycle. Many industries and products have the possibility to get paid from the customers up front, before actually providing the service or product (e.g., subscription businesses, insurance, credit card payments before product delivery, etc.). If you operate in B2B business and your clients are companies and institutions, it is in many cases possible to negotiate advance payments as well. On the other side, your suppliers are in some cases able to accept delayed payment conditions. All this is able to generate some surplus cash which then at least reduces your need for external capital.

Strategic partners are another way to finance yourself. Your large suppliers or clients can be interested in long-term cooperation and mutual vesting, especially if you provide each other with added value beyond the financial benefits (high quality product, access to specific market and clients, special know-how, etc.). These kind of partners might be willing to give you favorable payment conditions (as described in the paragraph above), special prices or discounts in exchange for long-term agreements, or equity stake. Also, it might be better to have as a shareholder somebody who is not motivated only by getting yield on his investment.

When it comes to external investors, the easier it is to get financing, the stricter the conditions will be and the higher the price. If you’re in a more advanced scaling stage, your options are now much wider. There are still Venture Capital funds and investors searching for round A/B/C startup equity investments, but their time horizon is usually a couple years and they’re searching primarily for large capital gains over this period. VCs, instead, are willing to accept a lot of risks. Compared to VCs, private equities are focused on somewhat less risky investments into usually smaller or non-traded companies. In the current era, they are also very often willing to fund startups in advanced phases (showing revenue growth, maybe still in loss, but under control). The upside of private equities is their time horizon is longer and they tend to develop their investments long-term and more actively.

Finally, compared to the above, banks and other financial institutions are increasingly searching for startup investments. These large institutional investors have in many cases dedicated VC and PE units and funds or they are even partnering with startup accelerators, innovation labs, and similar entities. It might be hard to obtain financing from them as they are more risk-averse, and due diligence and negotiations processes might be long and demanding, but their yield expectations are usually lower than those of others.

Funding can have different forms. Apart from basic equity funding, other forms of capital are also common in the scaling phase. If your startup is already out of the losses and shows decent financial conditions, you might be able to get to an ordinary loan. There are also a wide variety of investments between loan and equity which in fact very often match the needs of both the startup and the investor.

The first is a convertible loan, which is a loan that can be under some circumstances converted (also partially) into equity stake in the company. The circumstances might be, for example, fulfillment of the business plan or reaching a target valuation. The point of this is that the investor has an upside potential if the startup is doing well, but the downside risks are limited if the company isn’t reaching its goals, and the value of its equity would thus decrease. Startups, on the other hand, will get much a better interest rate on the loan or less strict conditions.

The second example of a similar investment is a loan with an embedded option. The investor in this case provides the standard loan, but has a right to acquire some pre-defined equity share of the company in the future for a pre-set price. If the startup succeeds, market value of this equity share will go above this initially pre-set price and the investor is able to get this upside. The startup will also get a better interest rate or less strict loan conditions.

How to evaluate your company

Two main kinds of business valuation are used for companies in later phases. The first derive the company value from its expected, future ability to generate profits and for its owner (models of discounted cash flows, free cash flows, dividends, etc.). It is important that these models are based on your business plan and current financial performance. So, especially if you are still in losses, these models cannot be used or the valuation might be understated, although your potential is high. It might also be difficult to align on the business plan with your investor and agree on the valuation.

The second valuation approach is based on comparing the company with the market, its peers, and past market transactions. It usually derives company value from the set of multipliers obtained from researching recent transactions (such as past financing and valuation of similar startups). Multipliers such as average market price per unit of sales or price per client are used to determine the value of your startup. This valuation can also be used for companies still in the red, and also quite often reflects the market conditions. It should be noted that this valuation usually requires some specific adjustments for the risks of the company.

How big a share should you give up?

There are two ways to answer this question.

First: as little as possible. Valuation is the price an investor is paying for your company, so you should always try to negotiate the highest possible valuation and give away for one dollar the least possible amount of equity.

Second: find a balance and an optimal financial structure. Selling equity is the most expensive way to finance a company while debt is in fact a cheaper way to finance it. On the other hand, you have to balance the risks for you and your startup, the types and expectations of your investors, and their willingness to accept risks. Due to these factors, the optimal financial structure of every company and startup is very specific.

3. How to Create an ICO

Although ICOs (Initial Coin Offerings) are still a controversial topic, they will endure as a way of funding new startups and projects. There are lot of potential risks and legal grey areas connected with running an ICO that no one has a clear idea how to minimize or control. Since this area is also constantly developing, we will focus rather on the question of how ICOs are different from traditional ways of financing and which special features they can provide to you, your investors, and also your clients compared to traditional financing and business models.

What is an ICO?

ICO is a way of raising money through an issuance of your startup’s token on blockchain (similar to cryptocurrencies). Your investors will not buy not your shares in an IPO, but will buy tokens representing part of your startup (or some kind of rights to it) in an ICO. The magic is that tokens can not only represent shares, but also represent access to your online service, credits, or many other things. We will explain why this can be beneficial to you and the advantages of it below.

ICOs are cheap, easy, and quick

The ordinary process of raising equity, distributing it to your investors, and making transactions with it is pretty expensive and slow in the traditional financial world. It takes months just to prepare funding and contracts, with every equity transaction requiring a lawyer, and it’s usually not worth it to make small transactions, e.g., for tens of thousands dollars. On the other hand, issuing tokens using smart contracts can be a matter of weeks, and it’s possible to decrease the minimum ticket of investor to e.g., hundreds of euros. Also, tokens can be easily transferred. Due to this, tokens are also easily listable on markets. The costs of running an ICO compared to organizing an IPO are frictional.

It’s not just equity or currency

A lot of people still perceive tokens as an unregulated way of raising equity or as an unregulated money. To be honest, a lot of cryptocurrencies and tokens were created only as this, but the full potential of blockchain has yet to be discovered. The main feature of tokens is that they can be used to finance the startup or project during the initial crowd sale, but clients also need them to use the application, purchase the startup’s product, or even be involved in the platform functioning (e.g., by token staking to provide trust and oracle services to the the platform or direct voting). Due to this, you can first get funded not only by investors seeking gains, but also by future clients pre-buying your services (tokens can be something between crowdsale and crowdfunding). Second, platform clients can use tokens at the same time as investors and platform operators, and be involved in the management of the company.This feature has the potential to narrow future conflicting interests between different stakeholders of the company, which we know from the current world of companies and corporations (e.g., between investors and managers and clients). Lastly, all the points above are something all P2P services were always trying to achieve, but were never fully able to because of imperfect governance. Dut to this, tokens might be the perfect tool to organize any P2P platform or service.

New ways of monetization and pricing

Many products and platforms have problems using traditional monetization models. One of the most typical ways of monetization is to charge variable fees from transactions flowing through the platform. These fees can be in some cases pretty high, as much as 20-30%. Tradeable tokens can be used to replace these fees (to which clients are sometimes sensitive) with a mandatory condition to pay in the app by token. In this scenario, for example, Uber drivers would get the full amount clients are paying but in Uber Tokens. The point is that tokens would be limited and Uber would be releasing them over time. Using tokens in the platform would drive up demand for the tokens and thus the price would be higher. The overall value of the tokens (held mainly by Uber) would go up and down directly with the client base and so the platform or service quality.

If your startup has a potentially limited amount of clients and you want to charge them a fixed fee (e.g., monthly) it can serve, or products to sell, tokens can allow you dynamic, market based pricing. Tokens would represent access to a service (account) and each user would need to buy a token to use it. With a limited supply of tokens, price of the token on the market would be linked to the demand and what the clients are actually willing to pay for it. So you would not have to experiment with changing prices and seeing impact on the client behavior. To sustain growth of the platform, smart contracts can include rules for potential future issuances of additional tokens (limits, rules, voting etc.).

There are additional schemes and for sure new ones are yet to be invented. Anyway, these two models are currently the most commonly considered. Anyway, your target should not be only to raise money through your tokens, but you should think further of the blockchain potential.

Incentives marketing

This is one of the most controversial parts of the ICO world. A lot of influencers and promoters were getting tokens during the ICOs just to promote the projects. In many cases they were accused of not being objective and not caring about the project’s quality, abusing their influence just to drive naive people to invest in the ICO to get as many tokens as possible and selling them straight after the ICO was finished. We do not advise you to do this, but it is one strategy that was historically used by many successful companies which can be updated using tokens (although risky by nature).

Many companies in the beginning, when competing for market share with traditional competition, or with other emerging companies for client pool, started not only with aggressive marketing spending, but also with directly giving away free services or money equivalents to the people who became their clients. This is not sustainable in the long term, but the aim is to attract the customer for the first time, so they will stay as clients in the future and will be reluctant to switch to the competition. To mention a few examples, PayPal was giving away a few bucks to new clients which had to be spent using their platform; Amazon offers free shipping; Uber gives away free rides. The problem is that this kind of marketing is extremely costly since the company has to spend large amounts of money. If the company gives its token, which can be converted in your platform for a service, the costs are delayed and you are not giving away the equivalent of real money, but potential future value of your tokens and thus your company, so the real costs get materialized only if your project is a success.

4. Recruitment Management and Role Definition

It’s obvious that role definitions are important to have figured out even before you start hiring, so the fact you’re reading this article shows you’re on the right track.

Role description

A general role description should include: the purpose of the position, responsibilities and competencies, and, last but not least: key performance indicators or KPIs (how you measure if the employee is doing a good job).

But since startups are ever-growing organisms, it’s not always one person doing just what’s within their role definition, and often the role you had a year ago may no longer apply or has transformed a lot since then. Thus, it’s useful to sometimes re-evaluate positions in the company and see if they serve the same purpose as before.

Role development

The most common role development within the first few years of a growing startup is that people who were there from the beginning of the company start to take on managerial roles. They maybe did a great job designing a product or setting up the architecture for development, but now they've started to manage not just the project but people as well. These are a few tips to better handle the challenges that most of new managers have to face:

  • When leading people, you should figure out what you expect them to do. And don’t forget to align your expectations with them, otherwise they will not perform as you expect, or will not have a clear vision of why they should do the tasks. Don't forget to share your expectations and focus on communication in general - try to be as transparent as possible. Take a look at our OKRs article where you can learn about how to set proper expectations.
  • You will have plenty of things to do and too little time to do them. One simple way to better manage your time is to use the Pomodoro Technique. Also, don't forget the Pareto principle.
  • The sudden shift in mindset from being a co-worker to a boss might be tricky to handle; some people struggle with it, and it tends to encompass two extremes. Being a friend but not being a enough of a boss, or acting from a position of power and forgetting the human side. It is good to keep in mind that you now hold some power, but you need to use it effectively.
  • Hiring and firing people for the first time might be uncomfortable. Hiring is an important part of building out a productive team. You should consult with your HR about best practices and techniques. If you don't have a HR person, consider using the services of professional recruitment agencies or at least consult with them.

Firing people is never easy, but the first time might be especially tough. The best advice comes from meeting with your team and asking about other colleagues. If you see certain patterns emerge, help them improve, and then reassess the situation.

The most important thing to remember: if in doubt, don't be afraid to ask for help. If you don't have a mentor or someone in your environment that can help you, look into courses and training you could take or get coaching from a professional coach.

5. Expansion to Other Markets

So, you’re happy with your product? It helps people, they love it, and want more? That’s a great feeling. If it helps people in your country, maybe it can help those in other countries. Wouldn’t that be great? Let’s do it!

Market analysis and market entry

Entering a new market is a costly endeavor. Before committing to one particular market you should conduct as many tests as possible in order to understand the viability.

Regardless of your type of product, the first thing you should do is to understand whether what you sell in one location can be sold without modifications in another location. Different markets will probably require different modifications, so you can make a list. If you have no modifications, perfect.

The next step is to understand the demand on the new market - if you have an online business you can create a localized version of your landing pages and drive traffic to them. These can be real or a so-called “fake door” website that seems to describe a complete product, but when people subscribe, you tell them something along the lines of “thank you, we’re launching in your location in three months.” That way you get the sense of real demand.

If you have a physical product or require someone to be present to make a sale, the best person to send is you - you understand the product best, and if expansion is really important, only you can make the necessary changes to the core of the company to be successful.

After you gauge interest and know the modifications required, you should have a pretty good idea which, if any, of the markets are a good start.

Localization and customer support

Localization is important for products that are not used by multinationals or meant to be used in the local languages. That is kind of obvious, we know. What is usually not so obvious are the changes both in the UI and UX of the product and the operations of the company.

The typical example for the Latin alphabet is translation into German, which can have very long words that buttons and UI are usually not equipped for, unless your design was meant to accommodate them from the start (which, if it’s the case, should also make your UI fine for any other language.) Expanding to right-to-left writing countries like those speaking Arabic or Hebrew? Get ready for your whole UI to be mirror-flipped.

And of course if you have a website localized to Mandarin, people will write Mandarin on your customer support, so operationally you need to be able to have people speaking all the languages you have your interface localized to.

6. Retention of Customers

Keeping a customer is part of your marketing strategy. This is the Care phase. Forget about classic loyalty programs that are based on collecting points. The key to keeping a customer is the relationship between the two of you.

Build a relationship

Don’t forget to send customers a notification when you add a new feature and also ask them to test it out. They will like being the first to have access. Also, create interesting content for them in monthly emails. You can also make a closed Facebook group where you can share your experiences and news. At the holidays, don’t forget to send greetings. Customer retention is about building a relationship.

If the only form of communication is an invoice in an automatic mail, the customer can stray to the competition even if you have a great product.

Ask any customer who has left to share their reasons. You may be surprised to hear what they have to say.

Measure

You can also measure how your customers use your product and their level of engagement, for example, the number of logins or actions that users make in your app. You can tell in advance that something is happening and prevent customers from leaving.

It’s also good to measure churn rate. This metric tells you how fast you are losing customers. If the churn rate is greater than the acquisition rate, your client base is shrinking and you have to deal with it.

7. Expanding Company Structure

Feels good to be in the scaling phase, doesn't it? This is where you can see your success becoming a reality and transforming into even more exciting opportunities. However, growth brings new challenges, so it's good to come prepared. What are some of the challenges you might face?

Scaling shifts your team’s focus

Processes and day-to-day activities that worked so far might not work for you anymore. Things that could be done by a few people might now require automating because you can no longer dedicate so much time to customers/requests. You may have to re-design all your processes.

Testing becomes more crucial than ever before. More customers = more bugs. Growth will be slower than you’d want, but don’t let that get in the way of giving customers what they want. In addition, you need to start preparing for situations even before they occur. It’s not sufficient to just hotfix as you go. You should invest your time and money in things that will make scaling as painless as possible.

Scaling is expensive

Your expenses don’t only increase due to hiring. Costs arise such as getting more server support or new tools that have now become necessary. Pricing and conversion optimization are extremely important to the survival of your startup. Automate where you can. Development, marketing, and customer support need a human touch, but automation systems can be used to help speed them up greatly. The are plenty of apps you can use in development, marketing etc. to reduce the workload that would otherwise have to be done manually.

Scaling amplifies everything

The larger you get, the more problems you’ll have, so be prepared. The information flow needs to be re-assessed because the more people/divisions you have, the more difficult it becomes to share and act upon the information. Hiring people based on quality is the most important thing, even if it takes longer to find them. Conversely, don’t be afraid to fire when necessary. And make sure you have a great team of managers from the start.

8. Scaling Your Product — Don't Hesitate...Iterate

Whoever said “good things come to those who wait” no doubt missed the bus a lot, and is probably reading this piece thinking “just a few more changes, and then we're ready to ship.”

The world we live in today does not allow for us to wait and make things perfect (sorry, grandfather), especially in the tech space. By the time you have “perfected” your product, the industry as a whole has already started to migrate towards something else, and the users and their short attention spans are long gone.

Fast market, fast products

With things changing so fast, it goes without saying that getting your product to market quickly, within a reasonable MLQ (minimum level of quality), depends on how quickly you get feedback on your product – giving you the ability to make changes at the same speed as the market expects them. Now, I understand that this movement is very much focused on products – mainly software related. But I see this strategy as an entire element to your business model, strategy, and overall culture. While I don’t sign on to the phrase “fail fast,” I do however believe in constant change and improvement through education. It is my belief (though it’s brashly worded) that “F*ck it… Ship it” is addressing this very point.

Roll it out

It’s called continuous delivery…not perpetual development. With continuous delivery you produce updated versions of your product in short sprints and send them out into the world. This is opposed to the methods of certain corporations that seek a kind of glacial perfection before finally releasing their “new” product. Large corporations such as banks may be hampered by bureaucracies that prevent timelier releases, but in our world of ever-increasing speed and little patience, where corporate dinosaurs are being disrupted by hot new products (think TransferWise vs. whatever your bank is), the startup-style approach is becoming more relevant than ever before. For iteration heroics, take the example of the messaging platform Slack. Here’s a company that wasn’t afraid of an identity crisis and was willing to morph into what users wanted – because it found out what users wanted (heck, its original version was for a videogame). Later in Slack’s development, the team realized that their application was functioning differently with larger groups. They went back to the drawing board and began another process of testing with user groups of various sizes before rolling the product out to a wider user base.

Who are you?

While this “movement” grows traction, you as a business owner have to ask yourself if this development method is the image you want for your products and company. Are you the one that delivers a beautiful and “perfect” product when you think it’s ready? Or are you someone that delivers a product for the market, by the market - where you give your users the ability to test-drive and shape your products and company based on their needs, which is, after all, the most empirical method for fine-tuning your product. Iterating is not ragged imperfection, spewed out haphazardly, but a path to higher perfection. Lastly, you have to ask yourself if your market is ready and understanding enough to test “imperfect” products, in the hopes that the end product, while never finished, will essentially be built by them through constant iteration. Humans are built through constant iteration, why shouldn’t products be?

9. Why Should the Founder/CEO Be Active on Social Media?

Recently, we had to convince our CEO to write a blog and share his thoughts on social media. This is not an easy thing to get a CEO to do. They are usually super busy and if they do have time for social media, they often use private profiles showing pics of their kids or dog. So, why is it so important to use social for work purposes?

What does the CEO represent?

The CEO is the face of the company. Nowadays, it is really important to show the people behind the company, so everyone can imagine “who” your company really is. The CEO should exhibit expertise, knowledge, wisdom, and experience. People want to know who they are giving their money to. And not only people—the media is interested in who they are going to talk to when preparing an interview or why, for example, they should invite him/her to a conference. How will they know this if your CEO is just a phantom figure in the back of the company?

What to write about

It is not necessary to convince your CEO to write a daily report on what they’re doing. Nobody is actually interested in that. You have to find topics your CEO is good at and connect it with the mission/vision of your company. For example: if you work for an advertising agency, he can definitely write about trends, how to build your brand, and use your company as an example. He can definitely comment on the topics from your field and air his opinions of daily topics on social media. And it is always nice if he can describe the current situation in your company. Maybe your company gets into a difficult situation—a personal statement from the CEO on social media can carry more weight than a super-formal press release since it can lend a personal touch and show your followers that your CEO actually really cares about the situation more than a press release (which is also important) can help your CEO statement published publicly. You CEO can help his company build a brand (which helps with sales), share the culture (which can help with hiring) and show the strengths of the company (which can help with PR). If your CEO doesn't talk or share his knowledge publicly, everyone might wonder if he really has anything to share or talk about. It is not always necessary to let the CEO be the only one who contributes. It is always good to show more people from your company. Remember: as we’ve done with this guide, everyone who has something interesting to say, who can help your customers, and who can help build your brand, should be welcome to share their expertise.

10. Setting Up a Company Culture - Four Basics

Establishing a company culture is a complex and long-term undertaking with many different factors. We boiled it down to the four most basic things you should do or think about when creating one.

Reflect

Who are you are as a team? What is your startup’s mission? What is the vision? (see earlier article on creating a Vision Statement). Why did you start doing what you’re doing in the first place? What is the ultimate goal?

Once you realize what your company’s vision, you need to make sure everyone in your company shares that vision and understands how their contributions fit into the whole picture—then you can start to be successful.

You may want to consider whether you have a common story. Of course your company has its own history, but forming an easy-to-understand narrative that can be simply explained, especially to new employees, really helps focus your company on its future.

Create a set of core values

The core values are almost like the rules or even laws a company operates by. A society can’t function without laws and neither can a company. When establishing your core values, make sure they are ones which can stand the test of time as your company’s philosophy.

Establishing a set of core values will help you in at least in three areas:

  • In the decision-making process
  • In educating clients and potential customers about what the company is about and clarifying the identity of the company
  • In recruiting and retention

Communicate and live it

While the founder and senior members might have an idealized picture of the company culture, it won’t automatically instill itself into the minds of employees. It needs to be actively reinforced through communication, and be present in multiple dimensions, including the very aesthetics of the office space.

While the company culture should be something that everyone more or less feels part of and comfortable with, there will be more senior members who are kinds of “brand ambassadors” for your philosophy.

Another view claims that 80% of your company is determined by the founder. Whatever the founder’s proclivities are, the company will tend to that direction, e.g. if the founder is aggressive, data-driven, design-oriented, etc.

Reassess

Once you’ve gone through each of these steps, don't think your job is done. It’s necessary to continually return to these points and reassess, especially when you’re growing and more people start to join the company. After all, the people you choose and the choices you make all contribute to the company culture. Make sure people understand not only the culture, but why your company exists in the first place. It all goes back to the first stages of conceiving of your company. If you can answer these fundamental questions, at any time, any day, then you’re still on the right track.

11. Culture with an Innovative DNA

Everything starts with picking the right people for the job. You want to hire people who can self-manage and who continuously surprise you with their results.

If you don’t have such people, chances are you picked incorrectly. This article details some management perspectives. (And how do you pick the right people for your company? First read the Startup Guide article on putting together a team)

Freedom

Now let’s assume you have the right people. Do you like to be micromanaged? No. Nobody likes to be micromanaged. Don’t micromanage people. If you really picked the right people, and they continuously surprise you with their results and manage themselves in the face of ambiguity, just set checks and give them information to decide on for themselves.

If you both make the same decision from the same data, all is good. If not, then dig deeper and try to understand the differences in thinking. Every such interaction is an opportunity to improve a process to be more self-sufficient and consistent.

What if it is not working out?

Are you constantly reaching different conclusions? Has there been a drop in motivation over time? Innovative DNA is very fragile and can be dumbed down by demotivation and choosing B players for your team. When this happens it is important to part ways with that person to keep the culture intact and bring in new blood.

How to manage expectations with new hires?

When hiring for higher level positions, you can easily fall into the trap of them knowing your brand and being sold on your company. They slide through the interview process everybody is super happy and then reality hits. Things get messy; the last company they worked for had much better processes and this is not what they signed up for. Make sure that while choosing the right people for your quickly growing company, you are equally honest about the shortcomings as the fabulous wins—you will need to find people who are high level, but are also willing to share their knowledge with everybody else.

12. How to Find and Set Up Your Workplace

So you've grown, and your business is doing well, but you don’t have an office? Perhaps you’re starting to feel the need for more space? This is the good kind of a problem you want to have. So, what should you do?

The environment in which you work has an immense influence on how you feel and perform. It is not just the psychology of colors, but the design you choose, whether you work in an open space or a closed office, etc. It shapes your everyday thinking and mood to a large extent. Picking correctly will pay off many times in your increased productivity. Here are a few tips on how to go about creating an office space that helps you achieve what matters most—the success of your startup.

Individual offices, coworking spaces, and open offices

How will a coworking space influence the culture of your company and your business? There are various options when picking a space such as shared, coworking, subleased, or direct. Consider whether you are looking for a space with other like-minded startups or if you're already in a stage where your employees would benefit more from their own environment. While in the earlier stages, try out more shared office spaces and temporary arrangements because they have greater flexibility than full leases.

As a rule of thumb, solo founders and small (less than eight) teams should choose a coworking space to have the mental benefit of being surrounded by other hard-working people from other companies, which will outweigh the potential discomfort of being around unfamiliar people. Coworking spaces also provide basic services such as meeting rooms, printers, coffee, desks, and chairs. Those are investments you don’t need to make by yourself at the beginning of your company.

Moving to an individual office space will give you more privacy, but getting good real estate is hard, and suddenly all of the services you have taken for granted have to be provided by you, which further increases your costs. That being said, coworking spaces do not scale well to larger teams in terms of per-person cost. That’s why it makes sense to move your team out of a coworking space once it is larger than say ten people (given the economics of your area and pricing of the space). At this point the concern is how open your want your office to be.

Open workspaces have become rather standard in the corporate sphere; their advantages for the employer are obvious: pack as many people as possible into the smallest area possible to reduce cost. But are open workspaces also good for employees? Not always. It highly depends on the type of the team and the work people do.

In an open workspace, it is harder to concentrate. With so many people, even if they are respectful, it is hard to keep noise level low. A good thing is that everybody is within short reach and can communicate quickly. On the other hand, this may make it common practice to approach people whenever you have a question, which could disrupt their workflow.

A possible solution for both problems (noise and communication) is to have open space and smaller offices available together. People who need to communicate a lot can use the open space and those who need to concentrate on standalone discrete tasks can use the quiet office rooms.

Consider your culture

One of the most noticeable ways to reinforce the values and vision of your company is through the physical space and design. Aesthetics, not merely functionality, is important here. Communicating company culture through physical surroundings can be done quite simply and cheaply with well-chosen decorations to give a lighthearted, fun feeling for employees. Something simple like naming conference rooms can achieve this effect as well. Existing employees will feel comfortable and new or prospective employees will be attracted to the space.

Your office should have a modern feel. A comfortable desk and chair is without a doubt a must. But there are other things that can take your workspace from boring to cool.

People are playful creatures— so equip the office with some gadgets that they can play with, because nobody can focus on coding for eight hours straight without a break. For example, a 3D printer might be highly appreciated by some creative developers, while others might prefer to spend some time playing FIFA on Playstation or Xbox. Others will want to rest for a while on a comfortable sofa or fat boy bag after working on a hard task or sitting on a chair for a long time. Also, a little in-office fridge packed with drinks like Arizona, Monster, etc. will make the office a better place. These type of furnishings and amenities will contribute to a modern, casual, Silicon-Valley style office culture.

Do the math

This is part of your planning too, not entirely different from any other concern about the initial stages of your startup, so be sure not to underestimate how much time it will take to find the right space for you, since you will be at the mercy of fluctuations in the property market. Think about your future growth and how much space you’ll need when considering terms of leases, etc. The faster you grow, the more this can become an issue. You should time things so about two-thirds to three-quarters of the way through your lease you are reaching the occupancy limit. You don’t want to find yourself trapped in a long-term, maybe five-year lease. It may benefit you to find a real estate agent who can alert you to the most flexible properties. Knowing your budget helps narrow the search. Just remember to always keep your company culture in mind.

13. Investor Relations

You have investors on your side, which is good. These are probably the most important relationships in your career. Here is some advice about how not to ruin things and keep long-term business relationships.

Why it’s important to communicate

You’ve won over the investors and you now have the money to chase your dream. Congrats! Now comes the hard part. The investor bought it because of a roadmap of growth you both believed in. While you’re involved in your startup every day, it’s important for the other party to understand what’s happening in the company and if everything is on track. The rule of thumb is: the more you communicate your progress and results, the fewer questions and disruptions will come from the investor side in you regular business.

Roles

Unless specified otherwise in contracts, you are the CEO of the company, so you make executive decisions including the money from investors. You need to abide by the rules of the engagement, but you should be in the driver’s seat. The investor sees your company as a monetary vehicle and you and the team as a way to capitalize on the investment. They should not be directly interfering with your running of the company, unless there are some unforeseen circumstances that warrant the interference.

Reporting

Agree on a standard for reporting and stick to it. Some investors will send you a template of their own that helps them look at all their portfolio companies in the same way. Include all the metrics, their past values, projections, and how you’re meeting the target.