How to manage a small software startup
This article is the first of a series about how to manage a small software start-up, subsequent articles will be linked here.
These days, more and more people have the urge to become independent by either freelancing or starting a company. On the internet, you find countless motivational and inspiring videos, articles, and books about “changing the world” and “becoming your own boss” — but not so much about what it actually means to start and manage your own company on a daily basis.
In a series of short articles, I want to share my experience as a co-founder and leading the organizational and technical aspects of UniteLabs, a life science software start-up with 10 employees. My goal is to give an overview of what I believe to be the most important aspects:
- The guide rails: North star, values & principles (this article)
- Team composition & compensation
- Recruiting
- Product and project management
- Business development, sales, and marketing
- Meetings & updates
- Work management
- Knowledge management
- Financial planning & legal work
- Overall reflection
I am writing these articles as a reflection after leaving my own company and hopefully giving aspiring entrepreneurs insights into what to look out for when embarking on their adventure. When I talk about “we,” though, I still refer to UniteLabs as a company.
The articles will not go too deep but should touch upon most aspects. What I am leaving out is the whole process of fundraising (pitches, term sheet negotiation, business canvas/plans, etc.) — because, during most of my time, we were growing organically by selling projects to our clients around some core technologies we developed. The only advice I would like to give is to consider being financed through customers instead of investors if there is any possibility.
I will also not write anything about the technical aspects of our products and services, which might be a topic of different articles in the future.
Especially at the beginning, there are so many things to do simultaneously that it’s impossible to do a great job in all aspects. Make sure you have a second pair of eyes for decisions that are difficult to revert, such as contracts or hires.
I realized that most people tend towards adding more processes, meetings, and complications instead of reducing them (see this fascinating Nature article about this). This is why we tried to always agree on the simplest framework we could come up with.
In this article, I write about what I consider the most essential starting point: defining the north star and agreeing on the company’s values.
North Star
Stating the obvious, the company starts somehow — for example, with a product idea, an unsolved pain, or an already paying customer for a service the founders provide. In the beginning, the excitement of building something new can carry you forward for a while, but at some point, you will experience the valleys and draughts of your journey where you need to know the “why” of your endeavor.
Personally, I think the reason for founding a company should be that it’s really needed — if there is a company already solving the problem you are passionate about, maybe it’s better to apply there and learn what they are doing :-)
There are countless articles about the definition of a company’s vision and mission (and what they mean) — check for example this breakdown by Des Traynor. I prefer to call it the “North Star” of your company, which you strive towards. For most people, I felt the question is what are the problems you want to solve and how you intend to solve them.
Notice that the problem should indeed be your primary motivator, but the how also very much matters — you and others who join your company might have more interest in high tech work versus social work, for example. Let’s say you want to solve the pain of doing your laundry — there is a huge difference in work style between building up a laundry service or designing & distributing a laundry robot.
Find a problem worth solving, build metrics to make sure there is product-market fit (e.g. through robust surveys) and that it is indeed a problem (asking the right questions, realizing everyone is lying) — then, define the high-level aspects of how you want to solve it (e.g. human labor, software, hardware, IP, consulting). We categorized the different fits to aim for in this way:
- Customer-Problem Fit: Who is your target customer and what is a pain they care about that is worth solving
- Problem-Solution Fit: You can prove with a number of clients that your solution actually relieves the pain
- Product-Market Fit: You can prove that the product and machinery (e.g. sales, installation) is working and is sustainable (e.g. customer lifetime value exceeds the acquisition costs)
There are hundreds of tools (e.g. business model canvas) and books (e.g. lean startup) on how to refine your high-level strategy; an excellent read is the “strategist blog” by Tim Darling.
Values & Principles
Besides knowing what you want to work on, it helps to determine what values the team should agree on and what work principles should be followed. Define a minimal number of values that are guide rails in every decision (in combination with the north star). In contrast, principles are rather detailed points on the generally preferred working style in the company (e.g., “Do not interrupt others”) — as a public example, see basecamp’s communication guide.
One of the defined values, “Transparency”, is very dear to me as I found it define our work culture in profoundly positive ways. (Inspired by Ray Dalio’s “Radical Transparency”) We declared information and conversations to be freely accessible internally, even for usually sensitive topics:
- All salary information and reasoning
- Company’s financial health, book-keeping, and forecasts
- All work calendars and meeting information
Few exceptions applied, for example:
- Legally binding confidential information
- Private information, e.g., family issues or psychological challenges
- Information that key stakeholders (e.g., a person being fired) should discover before others
Transparency is an example of what I would consider an “unintuitive” value as transparency can also bring some risks but has enormous advantages, such as eliminating rumors concerning financials and feelings of fairness and inclusion amongst the team. One can write books and hold talks (as some have) about the surprising changes real transparency brings to a team’s culture. In this section, the main take-home message is to think about non-obvious guiding values that the team can agree on and reflect their decision against.
Certain values, such as transparency, might be difficult for some people to stand behind; this is a good sign that the value actually means something and serves either as a filter for new hires or as a differentiator to other companies.
On the principles side, it is beneficial to continually reflect on situations where the time either wasn’t spent effectively or people were hurt in unnecessary ways. Three principles stood out to me in my time at UniteLabs: (lack of) meetings, (over-)communication, and working with proposals:
- Early on, you should think about how to avoid unnecessary meetings. Each employee’s time should be considered holy, so we defined the principle: “Don’t invite to meetings, request your colleagues’ time” such that there is no pressure of attending meetings that would interrupt more critical work.
- People tend to assume that everybody has the context they have or that their thoughts are obvious, so you need to encourage people to “over-communicate” — meaning to better speak up once too much rather than too little — especially in written form.
- Instead of having endless discussions about suggestions, directly give a proposal or counter-proposal on a given topic. When there is concrete material to base a conversation on, it tends to be orders of magnitude more productive.
It is not sufficient to just write down a list of values & principles and expect the team members to follow them. They should be collected as a team exercise and regularly reflected on. Anyone in the company should know these guidelines and be able to name several that have helped them in their work.
Once the why and how are figured out on these core aspects, the team composition and compensation will have to be figured out, exactly what I write about in the next article.
