5 Things I Wished I Asked Before Switching from Employee to Founder (Video + Transcript)

Co-Founder and CEO at GoCardless, Hiroki Takeuchi and CEO and Founder at Shipamax, Jenna Brown on their switch from the employee role to the founder role and what they learned along the way. If you’re a current founder, do you agree? What lessons did you learn along the way?

Also, if you didn’t join SaaStr Europa, we’re having it again in 2019. Check out ticket prices and keep your eyes on diversity and inclusion ticket updates. Seriously, who doesn’t want a good FREE reason to fly over to Paris?

Transcript

Hiroki Takeuchi: Thank you all for coming. So I’m Hiroki, I’m one of the co-founders and CEO of a company called GoCardless. What we do is we make it really easy for businesses to accept recurring payments. We’re based in the UK, working with about 35000 businesses, collecting six billion pounds a year, growing about 100% year over year at the moment. I’m joined today by Jenna who … I’ll let Jenna introduce herself in a second but actually used to be an employee at GoCardless.

Hiroki Takeuchi: So I think one of the things that we wanted to talk about today was that transition from being an employee to starting your own business, and what are the questions that come up as you go through that journey. So, Jenna, why don’t you introduce yourself and then we can go answer the questions?

Jenna Brown: Yeah. So let me kick off. So I’m Jenna, I’m the CEO of a company called Shipamax. We help companies in the bulk shipping space, which most people don’t know exist. Ships that carry grain, coal, iron ore. Yeah, as Hiroki mentioned, we’re kind of really stage and now very curious looking at everything GoCardless is doing. Because I think since I left, it’s made quite a big transition into a lot of people. So let’s kick off. We last spoke quite some months ago when I was having some employee problems.

Hiroki Takeuchi: Yeah, sounds familiar.

Jenna Brown: We kind of made that traditional mistake of hiring let’s say someone who was quite exceptional but was taking up a lot of my time, personally monitoring them. They were probably having a net negative impact on our team. So I guess the question is how do you handle it when you’ve made that mistake?

Hiroki Takeuchi: Yeah, so I think that it’s one of the mistakes that seems to be unavoidable. We’ve definitely made that mistake many times before. I think that what I’ve found is that there’s kind of two patterns when you have people that are exceptional in many ways, becoming actually sort of a net negative impact on the team. So the first is when the team member effectively creates disfunction.

Jenna Brown: Yeah.

Hiroki Takeuchi: So I think that the example that I think we were talking about in your case and I’ve seen it a bunch of times before, is where you have an employee that kind of can’t commit to decisions that are made. So help and on being right and often is right, but can’t go along with the decisions that you make. That kind of dysfunction can really create a lot of tension and issues.

Hiroki Takeuchi: Then the second is, as the company scales, people that were great at one stage, not necessarily being the right fit for the next stage. That can also, could create issues as well. So yeah, so those are the two types I’ve seen. But I think one of the things I’ve definitely noticed is that it always seems like it’s going to be worse than it is to actually make the change. Either get someone to leave or make them really change their behavior.

Jenna Brown: Yeah, So I guess kind of picking up on that, have you got … You know, you’ve hired someone, it’s not worked out, you need to let them go, how do you kind of handle that without demotivating the rest of that team?

Hiroki Takeuchi: Yeah. Well, I think the thing I’ve always been surprised about is that when you kind of make those changes, you think it’s going to be really negative and really horrible experience, but typically the team are a little more in tune with these things than you are, right? So I’ve generally found that when that kind of thing happens, the team are kind of already aware and they’re kind of happy that it’s happening. Because it means that you can focus on the thing that matters, which is building the next stage of your business.

Jenna Brown: Yeah, it makes sense. Going back, any tips on how you can actually avoid making those hires in the first place?

Hiroki Takeuchi: I’m not sure your mic is working.

Jenna Brown: MY mic is gone. Hello? Now it’s back. So yeah, how do we avoid that happening in the first place?

Hiroki Takeuchi: Yeah, so this is something that I think for us we’ve definitely found that over time we’ve had to really think about what makes a great hire in a bit more of a structured way. So I think early on you can go with your own gut a lot more, and especially as you’re hiring everyone yourself. You may not have a super structured or formalized way of accessing people, but you kind of get a good sense of what good looks like. But I think as the team grows and you’re no longer involved in every hiring decision, you need that structure. So for us, I think that there’s five things that we look at to assess whether our hire is going to be good or not.

Hiroki Takeuchi: So the first is do they have the right experience for the stage that you’re at and the task at hand? You know, you don’t necessarily need to have that experience in every case, but if you don’t you need to be explicit about not having it. You know, making sure that you’re supporting the person around not having that experience. The second is … I know in many, I think this is the most important one, is attitude, right?

Jenna Brown: Yeah.

Hiroki Takeuchi: It’s like how do you think they’re going to actually operate and how much they care about what they’re doing. The third one is what sort of trajectory that you think this person is going to be on? So how quickly are they going to get from where they are today to where you need them to be, to be successful in the role? Often times that trajectory can be very fast. So you might want to hire someone with less experience but with a very strong trajectory. The fourth is the values. SO I think that it’s really important to have those values as a company, and when someone doesn’t fit with those values, that’s when the culture really gets impacted. Then the final one, is like how driven are they? Right?

Jenna Brown: Yeah.

Hiroki Takeuchi: Like do you think that this is someone that’s going to really push and give it their all to make things successful? Which in an early stage company is super important, right?

Jenna Brown: Yeah.

Hiroki Takeuchi: You’ve got really little resources, very few people, a get to get done. So that’s a super important one as well.

Jenna Brown: Yeah. So let’s kind of dig into that, that kind of core values piece. We actually, about maybe even last week, started thinking about what are those top things we want to work harder than anyone else as an organization, to be great at? When you started defining your values, like how did you practically define those for you?

Hiroki Takeuchi: Yeah. We’ve been through a few iterations of values I think. So the first thing I’d say is that I really wish that I’d done earlier on. So when we first started the company and I think it’s really easy to fall into this sort of trap of thinking, Okay, this isn’t the most important thing.” I think it probably isn’t in many ways but it’s also something that is much easier do to in your earlier stage and have fewer people in the company. So we did our first values probably when we were about 30 people, and I think that was around when you were at the company.

Jenna Brown: Yeah.

Hiroki Takeuchi: Right? The problem we had was that we took a really like collaborative and so firm. A really collaborative approach to it and did it by consensus. I think one of the things that I reflect on about the values that we ended up with them was that we ended up with fairly models of values that no one sort of disagreed with, but at the same time no one was really passionate about. In particular, I wasn’t super passionate about them, if I’m being honest, right?

Jenna Brown: Yeah.

Hiroki Takeuchi: So I felt like it was really hard to champion those values and shout about them from the roof tops when you didn’t really have that strong sense of ownership around them. So we definitely got that wrong the first time.

Jenna Brown: Okay. Who was it? Was that you and the other founders, was it management team, the whole company? How? What do you-

Hiroki Takeuchi: I mean, it was kind of a little bit like the whole company. I can’t remember, were you at the company when we did this?

Jenna Brown: I think I joined just after.

Hiroki Takeuchi: I think we might have done it just before. Yeah, we did it jut before you joined and like we literally got the whole company involved. We thought that’d be a really good idea because we wanted to get a true reflection of everyone in the team. I think in hindsight that was probably a mistake.

Jenna Brown: Okay. So as you kind of started to do that second time round, like what did you do differently?

Hiroki Takeuchi: Yeah. So one of the things that I’ve definitely personally struggled with a lot in building a company is that transition from being a sort of a merry band of fellow peers, they’re kind of working towards a mission together. It being really like side by side to the team being more structured, having to have more leadership in place, having to take more of a leadership role myself. I think one of the things that is really important when you go through that is you have to get comfortable with the idea that you’re going to set an example or you’re going to make it. Something that you decide rather than something that you’re deciding together.

Hiroki Takeuchi: So one of the things that we changed when we did the next set of values, which is the ones we have today was the … I kind of embraced that idea of, “Okay, well, like these need to be values that I personally really believe in.” Staring that, using that as a staring point, and obviously getting feedback from there, people, and stuff. But really being much truer to myself and then being able to sort of embed that into the company. It’s been a lot easier as a result.

Jenna Brown: What was the kind of … I think you mentioned you got a kind of consultant to help to launch some of the … Yeah.

Hiroki Takeuchi: Well, it was a coach actually.

Jenna Brown: A coach.

Hiroki Takeuchi: I was working with a coach, this guy called Ren who … He was like fantastic. He’s coached like founders of Airbnb, and like a bunch of companies in Silicon Valley. He was super strong on that idea of like the founder narrative, which I felt was cringy and like American. But I kind of figured like … He took me round to embracing that and I think that it’s definitely been something that I still I don’t think I feel fully comfortable with it, but I’m trying to embrace it a bit more. That definitely helped me to take that more of a sort of selfish approach I guess to saying those values. I think we came up with a set of values that were more authentic as a result and definitely easier for me to sell, because I really believe in them.

Jenna Brown: So I guess, just to kind of take a couple of practical pointers from that, what were the kind of one or two questions that stuck in your mind that Ren asked you, that helped you dig down to what those values would be for you?

Hiroki Takeuchi: So what I actually did was he encouraged me to basically write my sort of personally journey and-

Jenna Brown: Did that feel weird?

Hiroki Takeuchi: Yeah, it was like really dreadful. It was really awkward. I sent it to very few people but what I did was I kind of thought about what are the things that I care about through the lens of what I’ve learned through my life. He was fascinated by my Japanese side and the fact that I have Japanese heritage, so he kind of encouraged me to dig into that and things like that. Then I sent that to a few people I really trusted in the company, and got them to sort of try and turn that into a set of values that reflected both my personal point of view but also what we felt was true to the company as well. Then we kind of used that as a starting point.

Jenna Brown: Okay. That group of people, was it management or people you thought like really reflected those things the best or?

Hiroki Takeuchi: No. I purposely made it, and no one on kind of the management team.

Jenna Brown: Yeah, okay.

Hiroki Takeuchi: It was all just people that I felt like really reflected the values that I believe in, in the company. So yeah, all across the company. That was really important, was having representation from not just one area but across the company, overall.

Jenna Brown: Okay. I guess spinning back to early days and GoCardless. When I joined, certainly, it was full of young kind of smart but relatively inexperienced people. I think at the time, I personally assumed you could just exponentially figure stuff out as you go along. But we definitely had a quite a few breaking points. What were the kind of problem signs for you? Like some examples of when you realized we actually need to come and hire some experience?

Hiroki Takeuchi: Yeah. I mean, there’s plenty, we’ve made a lot of mistakes. I think there’s also two types that I’ve seen. So the first is when we’ve tried to reinvent functional experience. So how do sales work, how does marketing work? Trying to like figure that out from first principles. When we try to do that, what we typically find is that we throw a lot of energy and effort into it and get very little output in return.

Jenna Brown: Yeah.

Hiroki Takeuchi: Then I think the second type is more the kind of scaling experience. We definitely have had teams where we had the kind of relatively inexperienced leadership in place. As a result, you’d kind of cap out a certain stage, for example, for our product development, we couldn’t hire more than like 25 people. It seemed like every time we got to 30, we’d lose a few, and then we get back down to 20, and then we’d kind of bandy around, about then. That was super restrained because there’s all these things that we wanted to do as we were scaling the company. We were only really able to do one thing at once, and so I think that’s the other type of experience that we’ve started bringing now. Especially is more experience of having gone through that scaling journey. Yeah.

Jenna Brown: What was kind of missing or what have you seen since you’ve made those hire, that you’ve seen kind of really step out? What have been the core things that you look for?

Hiroki Takeuchi: Yeah, so that’s something I’ve been thinking about recently. I think the thing that I really noticed the difference between is two things. So one is their ability to team build. So we hired a guy at the beginning of last year to lead our product development team. Within a year he’d build that team from like 25 people to about 100. So we hired like more engineers in that year than we had in basically the whole history of the company. So I think that that kind of team building element is really key. Then the other is being able to take really ambiguous problems and create a huge amount of structure to deliver solutions around them. That’s the other thing that I think I’ve really noticed amongst those. There’s more experienced operators that they really deliver.

Jenna Brown: Yeah. If you would kind of go back again. When is it that you think, for each of those core hirers, would you have looked to kind of slot them in the company? Are there rules you should follow?

Hiroki Takeuchi: I’m not sure I’ve like noticed the hard and fast rules for that. I think broadly it probably falls into like two kind of categories, right? One is like when you’ve had like product market fit and you’re trying to accelerate functionally, that’s probably when you need to start getting in that kind of more functional experience. So hiring in marketers that have done that before, or sales people that have sold before. Then the other is like when you’re really trying to scale the team, right?

Jenna Brown: Yeah.

Hiroki Takeuchi: And build the team quickly. I think the important point is to get that balance between still having young, hungries of not … Somewhat naïve, in a good way, people and matching them up, people with a lot of experience. If you have too much of one or too much of the other, I think that’s where the problems come. So I think it’s about finding the balance at every stage rather than necessarily been like hard and fast rules.

Jenna Brown: Yeah. Would you want to kind of mimic that balance as well in your management team, having a bit of a mix of both or kind of experience only? What’s been the best kind of mic for you?

Hiroki Takeuchi: Yeah. I think that’s something that evolves over time and hard to say.

Jenna Brown: Yeah.

Hiroki Takeuchi: Because you’ll get to be tested much but the … I think in the leadership team you generally probably need to skew more towards experience.

Jenna Brown: Experience, yeah.

Hiroki Takeuchi: Especially as you get in … So once the team cross about maybe 100 people, then it becomes more and ore important I think. Because some of those scaling challenges become quite common across every function.

Jenna Brown: Interesting. I guess actually an interesting point, and kind of, who is I guess your kind of first time founder even though it probably doesn’t feel like it now? Who do you lean on for that kind of support on how to tell you how to do your job?

Hiroki Takeuchi: Yeah. I talk a lot to my co-founders. So they’re no longer in the business but I still talk to them a lot. So I think there’s an element of like peer kind of … Actually the other thing I’d say is, one of the good things about hiring people that have gone through that scaling journey is that they have a lot more experience than you, right? So actually I feel like I learn more from the people I’m meant to manage now than they probably learn from me. Right?

Jenna Brown: Yeah.

Hiroki Takeuchi: So I think that’s the other area that I get a lot of support from, is the exact team that I’ve hired.

Jenna Brown: Yeah. Moving a bit on to kind of transparency and it kind of ties in a bit with the kind of culture and values you were talking about. A lot of people say they would like to have fully transparent organizations, but as a startup you’re going through a kind of a big and bumpy journey. Where do you kind of draw the line on how much you’re sharing, and how does that change as you’re growing the company?

Hiroki Takeuchi: Yeah. I think it has to change quite a bit, right? Because like when you’re five people, 10 people, you all kind of sat around the table, then it’s really easy to be very transparent. Naturally, in many ways it’s hard to not be transparent, right?

Jenna Brown: Yeah.

Hiroki Takeuchi: Because you’re talking to each other every day. Everyone knows what everyone else is working on. Everyone kind of dips into everything, so it’s a lot more fluid. That’s something that we struggle with though, is that you want to try and maintain that transparency as much as possible. But then what I start noticing is that as the team grows that transparency becomes increasingly expensive. From the perspective of sort of taking people on the sort of emotional journey that you on with a lot of things, right? So take something like fundraising, you go and say to your team, “Okay, we’re kicking off fundraising.”

Hiroki Takeuchi: When you’re 20 people, it’s kind of impossible not to notice, so every one knows anyone. But then when it’s a bigger team and you’re going to have short meetings, you’re going meetings where you feel like it’s going really bad there, or that you wonder whether you’re going to be able to raise it all. Taking people through that, I’m not sure how helpful it is, right? Especially though I think that as the team grows, like the new ones gets lost very quickly when you’re trying to communicate at large scale. So you can very easily end up communicating actually the wrong thing, right? Even when you’re trying to be transparent.

Hiroki Takeuchi: So I think what we try and figure out is … I’m not sure we got this right yet, but how do you maintain the sort of aim of transparency but do it in a way that is actually helpful and productive to the team, right? So making sure that you don’t communicate stuff until you’ve actually kind of formed the decision, or you have a clear process to forming a decision. Or being clear about how … The level of clarity that you need about the decision that you’re making, you can’t just sort of iterate on that like you do when you’re eight, ten people.

Jenna Brown: Yeah. Actually, I guess let’s take an example of that. So you talked about kind of fundraising and everyone knows in the media, if you raise a seat, you’re most likely to go on and want to raise an A. Not always true, and your team is kind of going to be wondering when you’re doing those things. So comparing the two situations, early stage when you’re 10, 20 people, like when would you make that announcement, and then how would that change now you’re kind of 250 plus?

Hiroki Takeuchi: Yeah. So I think one of the things I’ve noticed is that actually like as the team grows, the team becomes less of influence than focused on fundraising. So it felt like when we were early days, almost all what anyone cared about was when the next fundraise would be, which is not … I don’t kind of get that vibe as much anymore, so that helps, right?

Jenna Brown: Yeah. So for example now, like I don’t need we really need to talk as a whole company about when we’re next going to fundraise. Because it’s I think there’s a certain level of assumption that you’re managing the business to make sure there’s enough cash to actually do the next thing. I think that probably the changing point is around like 50, 60 people. Up until that point I felt like it was much smaller and a lot easier to kind of explain the nuance behind how you’re thinking about fundraising. Actually it can be quite helpful, right? Because I think that … You know to answer your question about the series A, right?

Hiroki Takeuchi: Yeah.

Jenna Brown: It’s like, “Well, what do you need to deliver to actually justify the next raise?” Saying that as the target that the team aligns around can be really something that everyone … Motivates everyone, right?

Hiroki Takeuchi: Yeah.

Jenna Brown: So there’s ways to use it in positive light as well.

Hiroki Takeuchi: Yeah. Kind of another point on transparency and this might be related to fundraising, it might be kind of any other thing. When you’re wanting to I guess deliver kind of bad news to the team. How do you do that in a way that doesn’t … Maybe you have to pivot, maybe the fundraising didn’t go well, whatever it is. How do you kind of keep people going?

Jenna Brown: Yeah, I mean, that’s always a tough one, right? I think what I’ve found is that actually the team always really appreciates it when you’re honest. So trying to sugarcoat over the things that aren’t working well, I don’t think actually ever works, right?

Hiroki Takeuchi: Yeah.

Jenna Brown: People know when things aren’t working, right? If you haven’t closed any deals in a few months, then people will notice. So I think that actually it’s better to be really open and honest, and transparent about those sorts of things, and it’s more about being clear on what you’re going to do about it, right?

Hiroki Takeuchi: Yeah.

Jenna Brown: What you’ve learned from the experience, that it’s important, right?

Hiroki Takeuchi: So I think that especially as you grow, you can’t do it in steps. You can’t say like, “This isn’t working and I’m going to tell you what I’m going to do about it in X months, or X weeks, or X days.” Like you need to sort of deliver the message together. So I think it’s more about the form the communication takes rather than what you’re actually communicating necessarily needs to change.

Hiroki Takeuchi: But I think that generally speaking, if you have that level of honesty and transparency around the things that aren’t working well, that can help you to sort of embed your values depending on what they are. Also, I don’t think it’s really telling the team anything they don’t already anyway. So it can actually be something that makes people feel more comfortable.

Jenna Brown: Yeah, makes sense. So turning to the last one, and this is really all about focus. So I think when you get started out in a new company, it’s very exciting, you have a kind of a blank stare and you see how many things were maybe done not as you would have liked before. But there’s a kind of opportunity cost of redesigning those. So how many things can you really focus on designing, redesigning from scratch?

Hiroki Takeuchi: Yeah. That’s one of the things that’s actually really interesting. Because you think that the answer will be like the bigger you get, the more you can focus on, but I’m not sure that’s true. So we definitely made a lot of mistakes early on on this, right? So like when we were first starting, we thought like we could reinvent everything. We thought that everything that everyone else had done before us was stupid. It turned out that actually we were stupid. So we build our expense management system, we like build our own phone system. These were all things that were like really great in the sense that it was just like born out of passion, and people just wanting to do as much as they could to make the company successful.

Hiroki Takeuchi: So on the one hand, it’s kind of tricky because you don’t want to … You want to celebrate that, but I think that what we found was that over time, there’s a reason why expense management is a whole company. There’s a reason why building a phone system is a whole company. Well, I think we kind of underestimated the cost of doing those things in the first place, and so over estimated the cost of getting them in from externally. But also, I think that what we didn’t realize at all was like the maintenance cost, right?

Jenna Brown: Mm-hmm (affirmative), yeah.

Hiroki Takeuchi: That’s the issue. So I think that initially we basically have this mindset of we were literally going to reinvent everything. Overtime I think that what I’ve at least come to the conclusion of is like actually you need to be very, very choosy about the things that you’re going to reinvent from scratch. They generally should be things that are going to benefit your customers, right?

Jenna Brown: Yeah.

Hiroki Takeuchi: So how are going to reinvent the products or the operations in such a way that you can deliver something to the customer they can’t get anywhere else? There’s actually very few things that you need to do there to be successful, right?

Jenna Brown: Yeah.

Hiroki Takeuchi: If you can just one or two, maybe three things, then you can create huge amount of value for your customers. I think that that’s really the key thing early on. Is lie identifying what those one, two, three things are going to be, and then focusing all of your efforts on those.

Jenna Brown: I guess the kind of framework or digging deeper into how you actually figure out what are those kind of core things?

Hiroki Takeuchi: I think it has to start with the customer, right?

Jenna Brown: Yeah.

Hiroki Takeuchi: You have to kind of figure out, well, what is the problem that I’m solving for the customer? What’s the value that I’m providing them? Then what are the things that are going to be really key to delivering that value? Is it that you’re going to be 10X cheaper than something else or 10X faster than something else, or whatever it is, and then you kind of work backwards from there. I think that’s really where it has to start.

Jenna Brown: I guess coming back to the kind of practical side of things. It’s very nice to say, “Let’s focus on this.” But then you’re managing people, they might come up and say, hey, I spent my weekend on this, isn’t it great?” How do you kind of not demotivate them but push that energy back into?

Hiroki Takeuchi: Yeah. I mean, yeah, I’m not sure I’ve got the answer to that one, but I have to say it’s challenging. I think it’s probably more about energizing around the directions that you care about, rather than discouraging people from going I directions that you don’t care about. Right?

Jenna Brown: Yeah.

Hiroki Takeuchi: So going and saying, “Why did you waste your time on this.” It’s not that motivating.

Jenna Brown: It wouldn’t go down well.

Hiroki Takeuchi: What’s better is to kind of focus on, well, these are the three things that really are going to make a difference, and trying to get people to focus on those instead.

Jenna Brown: Oh, perfect. Well, I wish we had this chat two years ago but hopefully it sets in the right direction.

Hiroki Takeuchi: Okay, great.

Jenna Brown: We’ll wrap up there, thank you.

Hiroki Takeuchi: Thanks very much guys.

Published on September 18, 2018

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