Ep: 413: Join four-time Founder and CEO Auren Hoffman as he breaks down how businesses can become the right model for explosive growth, emulate their strategy, and join the path to Unicorn potential in eight simple, hand-made steps.
This episode is an excerpt of Auren’s session at SaaStr Scale. You can view the full video here.
If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:
Jason Lemkin
SaaStr
Auren Hoffman
Transcript:
Announcer:
Welcome to the Official SaaStr podcast. In today’s SaaStr insider episode, Auren Hoffman, CEO at SafeGraph, shares how to build a unicorn in eight simple steps.
Auren Hoffman:
Good morning from San Francisco. I’m Auren Hoffman, CEO at SafeGraph. I’m going to go over how to build a unicorn in eight easy napkin graphs. We’re going to have a lot of fun. I hope you can read my terrible handwriting. We’re also going to fly through this presentation. So hopefully we’ll have a lot of time for questions. Please prep your questions, extra credit for non obvious questions that make us think. Also, if we don’t get to your questions, you can ask me a question on Twitter. I’m @Auren on Twitter. If we don’t get to your questions during the session, I’ll just answer them over the next 24 hours on Twitter as well.
Auren Hoffman:
Now, some of these slides are controversial, and dare I say contrarian? So, this advice comes with a warning, which is, never take advice from somebody who’s more than 10 years older than you, and that’s probably me. So with that warning out of the way, let’s just fly. Okay, the most important advice that I can give you today is to avoid good opportunities. Avoid good opportunities like you work to avoid the coronavirus. Good opportunities must be avoided at all costs. This is true if you want to build a company, but it’s also true in life.
Auren Hoffman:
The more successful you become, the more good opportunities are just going to start coming at you. Soon you’re going to be swimming in good opportunities. Again, this is true for companies, but also true for you individually. Let’s first dive into this advice individually and show how it applies to building a business as well. Let’s say you’re 22 years old and you don’t have a lot of money, well, you’re likely going to see very few opportunities to invest, and most of those opportunities are going to be bad. But as you gain wealth, you’re going to see more opportunities to invest and many of them will be very good. But even the good opportunities will take time and effort to review.
Auren Hoffman:
So it’s in your best interest to do everything possible to wait only for the great opportunities. This is also true when running a company. The possibilities of the number of things that you can do to grow your business are endless. You can launch new products, you can be better at recruiting, you can speak at SaaStr and so much more. My advice is to have some sort of rubric that allows you to ID the good opportunities and do everything possible to avoid them. Now, you might have a question. “Okay, how do I know when an opportunity is just good and not great?” Well, my simple heuristic is that, if the opportunity has very few downsides, it’s almost certainly not a great opportunity.
Auren Hoffman:
All great opportunities have very big and very obvious downsides. Of course, just because an opportunity has obvious downsides does not mean it’s a great opportunity. I can jump off of a building that has some obvious downsides. It’s probably not a great opportunity to go do. But if you see something with no obvious downsides, it’s almost certainly not great. This is also true with people you hire. If you want to hire a 10xer, that person will almost certainly have glaring faults. Anyone that you could hire without glaring faults will be, at best, good. They will not be great. In summary, avoid good opportunities like you avoid COVID-19.
Auren Hoffman:
All right, let’s dive into delegation. Most people advise us to delegate things that you’re not good at. They advise us to surround yourself with people that have different strengths and different weaknesses. This is the conventional advice. Maybe somebody on your board has given you this advice. Most of us have heard this advice many times over the years. This is terrible advice. Don’t listen to it, ignore it, take it outside the backyard, bury it, stab it and kill it. Just do the opposite. Instead, delegate things that you’re good at. This sounds really strange, so let me explain. The things that are the easiest to delegate are the things that you’re already good at.
Auren Hoffman:
You know how to do these things really well, you might already be an expert in them. You can break these things down really well. You can also hire for these things really well. So delegating these functions will for sure have the highest success rate. If you’re a great engineer, who do you think you’re going to be better at hiring? Other great engineers or great sales people? The answer is obvious, you’re going to likely hire super engineers and very mediocre sales people. The first thing you should always delegate are the things that you’re best at. I cannot stress this enough.
Auren Hoffman:
You can even see this in companies. They rarely get great at the things that are not the traits of their founders. For instance, Marc Benioff is one of the world’s best software marketers. He was an amazing software marketer even before he started Salesforce. He’s incredible. He’s hired great marketers, and he’s delegated to them, and Salesforce continues to be great at marketing. But Marc Benioff is not a great UI/UX person. While he’s been able to acquire great UI/UX people through acquisitions over the years, Stewart Butterfield, the CEO of Slack is one of the greatest.
Auren Hoffman:
The Salesforce product still suffers from having one of the worst UI experiences. But guess what? It hasn’t mattered at all. It’s better that Benioff focused on his strengths. And you should focus on your strengths too, you cannot be all things to all people. Focus on being great at just a few things. Now let’s go to the napkin graph. On the y-axis are things that you’re good at, and things that you’re bad at. On the x-axis is things that you love to do, and things that you hate doing. When you get a chance, offline, fill these quadrants for yourself. The easiest thing to delegate as much as possible are the things you’re already good at. Build systems to make delegation easier, hire super talented people and work on up-leveling them.
Auren Hoffman:
But now you’ve got these two other buckets left, you’ve got the things that you like to do, but you’re not yet good at. In that case, work on investing in yourself, get a coach, read, learn, try a few different things. You’re going to fail a little bit, and while it’s unlikely you’re ever going to be great at those things, you can get yourself to good, and once you get yourself to good, you can better effectively delegate or hire for those things. Now, there’s these things that you’re bad at and you just don’t like doing. My advice on this quadrant is to do everything possible to get leverage through either APIs or software, or maybe don’t even do them at all.
Auren Hoffman:
Remember, you don’t have to do everything to be a super company. There can be many functions you either outsource or honestly just not do at all. The great thing is that the number of vendors that you can choose from, these API software vendors, et cetera, has been growing exponentially. Many of them are here at SaaStr. So, you have amazing choices. The number one skill to have over the next 20 years is the ability to select and manage vendors. Almost every company today has more vendors than employees. So this is so important, and I’d love to dive in more during the Q&A.
Auren Hoffman:
Now, listen, this napkin graph, let’s look at what the smart people around you are doing, and let’s do the opposite. Most smart people optimize for the midterm. They delay gratification in the short term, they’re experts at passing the marshmallow test. But while they think they’re optimizing for the long term, they’re actually usually optimizing for the midterm. This explains why so many smart people go to law school. If you’re going to law school, go because you have a true love for the law, don’t go because of optionality, don’t go because you’re getting your ticket punched.
Auren Hoffman:
Most people who go to law school don’t love the law, and they certainly don’t love the first few years out of law school, where they’re really in a grind. They go because they’re optimizing for seven years out of law school, when they hope to make partner. They’re optimizing for the midterm. Never do things just to get your ticket punched, never do things to gain optionality, optionality is bad. You need to really have a purpose-driven life. The smartest people never optimize for the midterm. In the short term, they optimize for learning, for growing in areas that are very non obvious. They might do things that are a little remote, they are certainly not being conventional. In college, they’re probably not choosing a popular major, they’re being different.
Auren Hoffman:
Smart people stay in jobs with bad bosses, they deal with bad things in the short term, but the smartest people would never have a bad boss. They would get out of that situation immediately. Smart people are always thinking 10 years out, the smartest people are always thinking 10 days out and 30 years out. So, don’t be like the smart people, be one of the smartest people. I’d love to dive in with any questions that you guys have at the end of this session.
Auren Hoffman:
Okay. It’s a lot easier to choose which companies to invest in, than to choose which companies to start. To make money as an investor, you need to be both unconventional and right. It’s not enough that you are right, because if it’s already conventional, it’s already priced in. You need to have a different view of the world than other smart people. When you start a company, you too need to be unconventional and right, but you need a third element, which is the true ability to get business done. If I want to start an energy business, it’s not enough to think the future is going to be super small nuclear fission reactors or something like that, and it’s not enough to be right about that prediction eight years later, I also need to have some unique advantage to start and run that business.
Auren Hoffman:
In this case, I personally have no such unique advantage, so it’d be really folly for me to spend the next 10 years of my life on this vision. Given that you can start a small number of businesses in your lifetime, this is a very good Venn diagram napkin chart to consider before diving in headfirst to anything. Okay, in the next two napkin graphs, we’re going to dive into fundraising. First, let’s talk about when a venture capitalist turns you down. The reason that they give you for turning you down is usually a lie. It’s like Leo Tolstoy’s first line in Anna Karenina, “All happy families are alike, but every unhappy family is unhappy in its own way.”
Auren Hoffman:
The reasons that VCs give you for wanting to invest in your business are usually true, but the reasons they give you for not investing are usually lies. The number one reason why a VC will pass on your business is that they don’t like your team. This is especially true for seed and Series A deals. And of course, they’re just not going to tell you this. One reason that most VCs will give for not investing in you is that your Total Addressable Market, your TAM, isn’t big enough, and that’s pretty much never the actual reason. VCs will happily invest in businesses with small TAMs, if they think the team is good enough to move to an adjacent TAM, once they’re no longer growing at 100% year over year.
Auren Hoffman:
So while getting advice from VCs that pass would be super helpful in theory, if it was true, in practice the advice is not worth considering, because it’s rarely true, and so you can often discount that advice. Now, let’s say you’re lucky enough to get a term sheet from your favorite venture capitalist. Okay, you’re going to have a lot of options to negotiate, many different terms, like there are certain rights and there’s valuation, there’s a lockup period, there’s board seats, there’s so many more terms to negotiate. But most of these terms are win-lose, and they’re very contentious to negotiate. You should still negotiate them, but it’s going to be a little bit of a contentious back and forth when you are negotiating them.
Auren Hoffman:
The most non obvious clause to negotiate is the amount that you’re supposed to reimburse the investors’ legal counsel, you’re actually doing your investors a favor by negotiating this, this is an actual win-win to negotiate. The time it takes you to go from term sheet to close is a function of how many dollars there are in this clause. This is also the first thing that your lawyer and your investor’s lawyer are going to look at, they’re going to look at this clause before they look at everything else. This is going to tell them how much they’re getting paid, and this is also a core signal to the lawyers of the investor’s view of the complexity of the transaction. The more complex, the bigger the fees.
Auren Hoffman:
Remember, investors do not want to pay legal fees out of pocket. Assuming your company is pretty vanilla, there’s no need to signal to the lawyers that this transaction is complex. Remember, both law firms are going to take their cues from this one simple number. If the number is large, they’re going to justify their fees by adding work and nitpicking on very small points, and that’s going to result in a significantly delayed closing. Remember from that time from term sheet to close, can be quite variable.
Auren Hoffman:
If the number is smaller, if those dollars are smaller, then nitpicks are going to be less prevalent, and the time to close are going to be much, much speedier. In addition, it’s a real win-win, because it’s going to, one, take less time for you and the VCs to close, so you both can focus on much more important things to do. And two, the company is going to be able to use its treasure for more important things than covering legal nitpicks. Now, the next thing, let’s talk about planning. In start-ups, doing trumps planning. Planning is really important at the very early stages of companies when figuring out your market and figuring out what company to start.
Auren Hoffman:
Remember that fourth graph with the Venn diagram that we talked about, that’s the real planning piece. Planning is really important at larger companies, because larger companies can really only effectively do one or two new things per year. But small companies win by doing. They win by moving super fast and reorienting themselves and moving again. Air Force pilots learn about this, they call it OODA loop, which stands for observe, orient, decide and act. It’s really about moving fast. My favorite quote from Jeff Bezos is, “Being wrong might hurt you a bit, but being slow will kill you.” It’s like Maverick from Top Gun, you really must feel the need for speed in start-ups.
Auren Hoffman:
Okay, and we’re on our last napkin graph. So, get your questions ready, we’re going to hit some of the questions pretty soon. This one came from one of my discussions with Jason Lemkin, who’s the founder of SaaStr. The better the person, the less time it takes to manage them. That’s the obvious thing, but that’s only up to a point. The true 10xers actually take more time to manage than the average performers. If you happen to have a 10xer on your team, you really are going to need to make sure that you’re giving them quite a bit of your time and your love. These people are going to require a lot more time, they’re going to probably require more time to even hire, so they’re going to require more time to interview, and they’re going to require much more time to manage, but they’re going to give you so much more in return. They take much more investment than typical high performers.
Auren Hoffman:
So, let’s do a recap, before we get to the questions. What did we learn today? Okay, we learned eight things today. So let’s recap them. The first one is, avoid good opportunities, avoid them like the plague. Second, delegate things that you’re good at, do not try to delegate things that you’re bad at. Third, do the opposite of smart people. Think for the short term and the long term, don’t optimize for the midterm. Fourth, remember our Venn diagram on how to start companies, make sure that you start a company that’s both non obvious, and that will be true, and something that you actually have some core reason that you’re going to win at.
Auren Hoffman:
Fifth, the reason that most VCs give you a no is lies, and especially the reason of Total Addressable Market or TAM. Six, decrease the time from term sheet to close by negotiate on legal fees. Seven, in startups, doing always trumps planning. The eighth thing that we should always remember is that true 10xers really need significant active management. Okay, lastly, as I mentioned at the start of the presentation, never take business advice from people who are over 10 years older than you, and that might be me. They’re not going to understand what you’re going through, and that might just include everything I just told you, especially if you’re under 35. Definitely do not do what I say.
Auren Hoffman:
Also, never listen to your parents’ business advice either. They’re just coming from a different era, businesses are moving too fast. While some truths are enduring, those are the truths that are most obvious and conventional, and your parents are just not going to be able to help you with hidden truths. Of course, there’s another piece of advice that you might want to ignore from me, especially if your parents are Bill and Melinda Gates. All right, let’s dive into some questions. Then remember to keep your questions going on Twitter if we don’t have time to get to them. I’m going to stop the screen share so you can see my lovely face over here.
Kaitlyn:
Amazing, Auren, thank you so much. Couple of things, we’ve got plenty of time for questions, so please drop them into the Q&A, so Auren can get to them hopefully on this session, but if not, look forward to continuing the conversation on Twitter. Second, you’re aging yourself.s Auren has multiple successful exits, and obviously some great insights to share. So, let’s dive into some questions, and these are probably related to the specific charts, but we’d love to just hear some of your theory. So, first one that came through, “How should I think about delegating HR?”
Auren Hoffman:
Well, HR is high strategy. Outside of company strategy, this is probably the area that CEO should be thinking about all the time. My advice is that, of all the core functions of the business, this is the last one that the CEO should truly delegate. The CEO really needs to be the keeper of the culture, and you should only be delegating that responsibility to someone you’re positive is a truly good steward of that culture going forward.
Kaitlyn:
Great. Why do you say optionality is so bad? Any time that’s a good thing?
Auren Hoffman:
There’s a quote that is one of my favorite, Warren Buffett quotes, which is, “The difference between successful people and really successful people is that really successful people say no to almost everything.” Optionality really means you cannot have a coherent strategy, because people all the way down the chain, don’t know what trade offs to make, you really need to have a very clear coherent vision about the future that’s helpful for yourself, to basically put yourself in a box, that’s helpful for every single person on your team.
Auren Hoffman:
If you’re not in a clear box, with clear boundaries about what you will do and what you will not do, it’s very hard to delegate, because it’s very hard for people all the way down the chain to make decisions on what they should be doing, because they’re not going to want to make decisions that they think are against the CEO’s wishes. So the more they can be clear about what the future is going to be, the easier it’s going to be for them to make decisions, and essentially, the more you eliminate optionality, the clearer everything is going to be about the future.
Auren Hoffman:
Now, ideally, you also want to be right, but it’s okay, even if you’re wrong, you can change your mind as long as you actually clearly articulate. You can say, “Hey, we were going in this direction before. We now think this is wrong, because of these reasons, and we’re going to go into this new direction.” But doing things in series rather than parallel gives you that ability to keep everybody in the same orbit and the same direction.
Kaitlyn:
Right. Swimming, I was going to say swimming in the same direction, and just that focus on that one thing.
Auren Hoffman:
Exactly.
Kaitlyn:
Yeah, that’s great. Here’s another one. In planning versus doing, how do you think about step functions versus 1% improvements?
Auren Hoffman:
Yeah, it’s a really good question. They’re both really important in businesses. If you can do the 72 1% improvements, you’ve just doubled the effectiveness of your company, and there’s always one side of your company, and maybe the core side of your company, that’s focused on these constant 1% improvements. Then there’s these step functions, which really help you move to the next level. You can build a really amazing company just with 1% improvements. There’s actually quite a bit of companies that do that, and a lot of the literature that you get, especially on the SaaStr site, is really about how do you continually get these 1% improvements.
Auren Hoffman:
Although there’s a lot of really good things written about how to get 1% improvements, there’s almost nothing going to be written about how you can get step functions. It’s very hard to write about that, because they’re going to be very, very specific to your business. That’s why on the SaaStr site or other types of places that you read through, you’re rarely going to read about, “How do I get a step function in my business?” Because it’s going to be very, very specific to your business.
Auren Hoffman:
My advice is, you have certain people in your company, and let’s say the vast majority of the people in your company, are probably going to be focused on these 1% improvements. The more you as a founder can delegate, and you have a few other people in your company, then the more time you’re going to have to work on these step functions. The step functions are going to have a much lower chance of success than the 1% improvements, and you can work on very few of these step functions at any given time. Maybe just one at a time is the maximum that you can do, but you really need to do think thoughtfully. This is probably an area where planning is very important to think thoughtfully about how you’re going to go about them and how you’re going to go do them.
Auren Hoffman:
But in this world of competitiveness, it’s not enough to just do the 1% improvements. It’s not enough to just be like incredibly operationally good. You need to do the step functions as well, if you’re going to build a great and enduring company.
Kaitlyn:
Right. Almost like a bigger ROI or bigger bang for your buck, right?
Auren Hoffman:
Yeah, exactly. But they’re both important, if you just do the step functions, long term, you’re not going to live either. It is a difficult dance.
Kaitlyn:
Sure. Got to find that balance. Question coming through from Jonathan, “If you don’t jump on great opportunities, then what do you go after, bad ones?”
Auren Hoffman:
Yeah, I mean, basically, well, you’re going to have, often, many different opportunities that come to you, you’re going to have bad opportunities that come. And sometimes, bad opportunities could be cloaked as good or great opportunities, et cetera. But those can often be relatively easy to avoid, is these bad opportunities. The hard thing to avoid is all these good opportunities. Imagine someone comes at to you, “It’s easy money, it’s easy investments, easy money, et cetera.” But you often still don’t want to do it.
Auren Hoffman:
If you think of a company, it’s like some easy BD deal that you can go do, it still might not be worth doing, because that might be taking your time from doing something that could be a great thing. This is the hardest thing to learn. I think as an entrepreneur, it’s the hardest thing to learn, really anybody in life, is that you have very limited time, and all these things are going to have positive ROI that come at you and it doesn’t mean you should do them. I think when you’re younger, it does make sense. When you’re 18, you just do everything that has a positive ROI, and it makes sense, it works out well. But as you get older, and as you get more successful, you really have to discriminate against the opportunities that come in to you.
Kaitlyn:
Yeah, that makes sense. Let’s move then, we got a question on the topic of delegation. So I think that’s a good segue. For founders who are not engineers, how would you recommend investing yourself to help hire high performing engineering teams?
Auren Hoffman:
Well, first of all, I would delegate everything else first. So, it depends on what you are really good at, but I would try to delegate those things first. Let’s say you’re really great at sales, do everything possible to delegate the sales side as quickly as possible. Get to a point where you’re spending very little of your time doing sales. The more you can do that, the more time you have to actually grow your own skill set. It doesn’t mean you have to be a great software developer, but you are going to have to learn about what a good engineer is, how engineers work, how engineering operates, microservices, you’re going to have to start upleveling yourself, and you’re going to need time to be able to do that. And you’re going to need time to talk to people, to make lots of mistakes, et cetera.
Auren Hoffman:
But you’re going to have to get yourself to at least a point where you’re like mediocre to good at managing engineers, because at least at the very least you are going to be managing your VP of Engineering, and you need to make sure you’re bringing in the right person. Often, if you look at where people mis-hire, it’s usually in the areas that they’re not strong in, which makes sense, right? You’re just going to be much easier at hiring for things that you’re very good at hiring. So, really, really think about what you’re going to delegate, and my advice would be to do everything possible to delegate things that you’re good at before you delegate things that you’re not very good at.
Kaitlyn:
That’s great. Let’s see, we got a lot coming through here. What are some ways to know and recognize if someone is truly 10x versus a high performer? And do you spend time with a high performer trying to move them to 10x?
Auren Hoffman:
Well, first, I think it’s very hard to know during the interview stage, a priority before they join your company, unless you’ve worked with them before, I think it’s basically impossible to know if someone’s going to be a B player or an A player or a 10xer. So, you will not know. Of all the 10xers I’ve worked with in the past, and I’ve been fortunate enough to work with people that have just been like incredible, talented people. If I didn’t work with them before … I did not know that they were going to be a 10xer before I interviewed them. Sorry, before I started working with them.
Auren Hoffman:
Now, after maybe three months of working together, you might start to have some inklings that this person is really good. The most important thing you can do with the 10xer, once you recognize … I think this is the most easiest thing to do, but also the thing that people forget to do. The most obvious thing that you can do with the 10xer is never ever, ever let them leave your company. The only way to never let a 10xer not to leave your company is to keep giving them more responsibility. You have to continue to give them more responsibility so that they continue to be engaged and they continue to grow, because the number one thing that all 10xers are optimizing for is growth. If they’re not optimizing for growth, they’re almost certainly not a 10xer.
Auren Hoffman:
So, you want to continually let them grow, and that means you have to do everything possible not to hire above them, and you have to give them frequent promotions, and sometimes you’re promoting them over people that are way more experienced than these 10xers. That might cause friction, your board might be against it, there may be other things, but remember, these 10xers will leave if you’re not giving them constant opportunities to grow. So keep giving them those opportunities to grow, so you keep them in your company. I think it’s really interesting when you see these companies where they know they have these 10xers, but they still let them leave because they’re no longer allowing them to grow at the rate that they want to grow.
Kaitlyn:
That’s really important. Question I had myself but I’m sure everyone in the audience is wondering, how do you identify a 10xer? You said you don’t know until you start working with them, but what are some key cues? Is that something you see in the first 30, 60, 90 days, or how do you suss out and identify when a new employee is actually a 10xer?
Auren Hoffman:
Yeah. I think there’s some core common traits of 10xers. I think smart employees are very good at identifying problems that exist. Then really good employees are very good at identifying solutions to those problems. But the 10xers are really good at identifying core opportunities for the company that may not even be on the radar. Often you have these problems that have … most problems in companies have 1x downside, they’re obviously ones that can have more than that, but most problems have 1x downside, and it is important to solve these problems and have solutions to those problems. That is an important trait, but there’s a lot of opportunities that have unlimited upside.
Auren Hoffman:
So, these 10xers are often identifying these opportunities, but they’re not just identifying, they’re actually moving these opportunities forward. The other thing that 10xers all do, 100% of 10xers do, is that they push everyone around them to move much faster, including their boss, including people lateral to them, everybody around them to move much faster. If somebody is not pushing everyone around them to move much faster, which is most people in your organization, they’re definitely not a 10xer. All 10xers are pushing people fast, they’re always trying to push pace. Moving pace is really important.
Auren Hoffman:
Another criteria of almost every 10xer is that they tend to be a yes and person not a no but person. They tend to be building off of other people in a positive way. Now they don’t have a complete rose colored glasses. So it’s not like they look at everything with a complete positive lens, they’re going to be a realist about many things, but they’re going to be building off of other people, they’re going to create this positive energy around them, rather than being like a real naysayer. There’s so many really smart people out there, and they are important people for your company, they’re naysayers, they’re always shooting things down. They’re kind of Debbie downers that are around there.
Auren Hoffman:
Again, those people are important for your company, and they’re core people in your life, but they don’t have the personality to be a 10xer. You do need to bring people up, you need to build on top of those ideas, you need to find what’s good in other people as well.
Kaitlyn:
That’s great. Thank you. Off that, expand on this, or address this question a little bit, what is our role in managing 10xers since they’re usually more experienced and more knowledgeable than ourselves, I assume the R is a CEO or an executive?
Auren Hoffman:
Well, first of all, the 10xer may not be more experienced and knowledgeable than yourself. So, if you can hire a 10xer, it often means that they’re not more experienced than you. Because if they are 10xer, and they’re way more experienced than you, they probably don’t want to work for you. It’s actually quite difficult. So if they’re already recognized universally in the world as a 10xer, then it’s going to be really, really hard, unless you’ve got some amazing company, to convince them to work for you. You’re going to likely be hiring people that are not recognized universally as a 10xer. They might not even know themself that they are 10xer, you won’t know that for sure when you’re interviewing them, and then you can bring them along.
Auren Hoffman:
One of the things, there’s three ways to get anyone to grow in your company. This is true for 10xers, but it’s true for everyone across the board, and you should always be thinking about these three things. The first one, which is simple, which is, always make sure that they’re working with people around them that are smart, that are pushing them, that are challenging them, that are interesting other people to work with. That just means you need really talented people in your company. Okay, everyone’s probably already working on that already.
Auren Hoffman:
The second thing is to make sure you have a culture of feedback, because everybody wants to grow, people want to grow really fast, you can’t grow if the only people that you’re getting feedback from are your manager, and that’s it. You need to have been getting feedback from 360, and that’s both the critical feedback and specific positive feedback. So, really try to build in these different layers of feedback. But the third thing, which is really important, is that, you really need to make sure that everyone in your company is spending as much time as possible working on things that are really hard for them to do.
Auren Hoffman:
Too many companies, most people are working 5% of their time on things that are really hard for them to do, and 90% of their time on things that are relatively normal for them to do. You should be completely flipping that as much as possible. Ideally, 75% of the time that people are working on things, are things that are hard for them to do, and then when they’re working on things that are not hard for them to do, their goal should be to figure out ways to not work on those things, and not working on something, figuring out that, is always hard to do.
Auren Hoffman:
That could be by delegating to somebody else, that could be by using APIs or software, it could be by hiring contractors, it could be by even just deciding, “Okay, as a company, we don’t even need to do this.” Whatever it is, but you should be doing everything possible to not do particular things that aren’t hard for you to do. Because the only way you’re truly going to grow is by spending as much time as possible in the areas where it’s difficult for you to do.
Kaitlyn:
Great. This is a follow up to all these series of questions that we’re talking about 10xers, right? You mentioned, hire them, keep promoting them, push them forward, even if they’re promoted to somebody with more experience, and even if the board doesn’t agree. Any advice for overcoming the VC no if they don’t like your team, or I guess just the VC sentiment? How do you address that with your board?
Auren Hoffman:
I think it’s hard. Because the VCs are not going to appreciate this person is a 10xer because they’re not going to be working with this person every day, they’re just going to see this resume. You may have this person who’s 25 year old and she’s amazing, and she’s just doing all these incredible things in your company, but the VCs will just look at a resume and say, “Oh, she’s only three years out of school, we need to overlay her with … let’s say she’s in product with the new VP of product or something like that, we can’t promote her to VP product.” They’re just going to have a lot of biases against somebody that’s more junior, especially if you’re a growing company.
Auren Hoffman:
May be bringing those VCs along, highlighting this person in the board, giving this person an opportunity to shine, et cetera. I’ve had plenty of situations, though, in the past where people on my board didn’t appreciate folks, and I just had to not listen to my board. There are good times to listen to your board members–we should always listen. So you should always hear what they have to say, but it doesn’t mean you have to act. I think the most important thing to do with your board is to listen and to consider all their advice, because they’re going to have often some really sage advice, and so it’s worth listening and considering. But it is not your job to take the advice, your job is to listen and consider, and then make up your own mind based on your own judgment.
Auren Hoffman:
If you take all the advice of your board, then you should not be the CEO. You should only be considering, because you might be getting conflicting advice from different board members. So just consider the advice, and then make up your own mind about what you think is best. Then talk to them about why you made that decision. They often may not agree with you, but they will respect the fact that you came to your own decision and stuck with it.
Kaitlyn:
Yeah, of course. All right, let’s see. Let’s go into micromanaging. How do you balance between micromanaging, assigning specific tasks versus delegating, setting clear expectations without going into too much detail about how? What if we’re not actually sure about the how? I guess that’s a two part question. So, balancing between micromanaging versus delegating.
Auren Hoffman:
Well, the more you have to micromanage usually means … you’ll find yourself often micromanaging some people and barely managing other people in your organization. The more you find yourself micromanaging someone, often the more that is not the right person for the job. It’s almost always a good indication that this is somebody who’s not doing well in the role that they’re in, if you feel like you have to micromanage that person. Now, if you’re micromanaging everybody, okay, that might be your own personality trait that you may have to work on, but if you’re micromanaging a select number of people, that often means, for whatever reason, you don’t have confidence in those people.
Auren Hoffman:
Now, it doesn’t mean they’re not the right people for the job, but it does mean you’re going to have to work with them on upleveling those people, so you don’t have to micromanage those people in the future. If you continue to have to micromanage for those people in the future, they might not be in the right position. Maybe in a different area of the company, they might be more successful. Then you have to figure out a way to make sure they’re successful. Nobody likes to be micromanaged. That’s not the situation. Most people don’t like micromanaging others. There’s just a lot of work involved in micromanaging people. So you have a situation where both the manager doesn’t like it, and the person being managed doesn’t like. It’s just not a good long term situation. So you need to figure out a way long term to get out of that situation.
Kaitlyn:
Yeah, absolutely. A follow up to that, I guess, the second point, which is what if we’re not actually sure about the how? So, the question is, when you delegate something, and I think we often do this, you set a clear expectation about what you want, but you don’t go into much detail about how they’re going to do it, or maybe you don’t even know how they’re going to do it. Right? So, any thoughts on how to best delegate when you don’t actually know the answer? I think that’s the best case scenario. Right? They come up with a better solution than you.
Auren Hoffman:
Yeah, absolutely. I think it’s good not to delegate the how, if you’re delegating the how, that limits this person’s creativity. It probably limits their growth. Even if you have a really good understanding of the how, maybe best to not delegate that so the person gets there on their own, and they may surprise you with a new how or new way of doing types of things. I would do my best to try to never delegate the how. Maybe in certain situations, it could be good. I think people don’t like to be delegated, delegating the how is kind of micromanaging. So people don’t like to be delegated the how to, they want to figure it out themselves, they want to get the broad goal. These are the core big goals.
Auren Hoffman:
There may even be like the next step goals that you’re going to work with them on. You can coach them, you can say, “Hey, let’s figure this out together, et cetera. Here’s my big goal, let’s coach on some of these other things.” But how you get there, that’s their job. That’s why you’ve hired this incredible person. You want that person to go figure out the how.
Kaitlyn:
Great. The best hire. How do you manage a founder’s passion with employee and business marketplace realities? I think this goes back to your silo and your focus and swimming in the right direction. But how do you manage or advice on managing a founder’s passion with employee and business marketplace realities?
Auren Hoffman:
Well, some of this comes down to the 1% improvements versus the step functions. Really great founders have to be focused on both, and this is very, very difficult to do. Because the step functions come with often a lot of process, they come with building things that are repeatable, they’re really about building engines. Again, so much of like SaaStr, if you listen to podcasts, are really about how to continually build on these 1% improvements. So you continually up-level your company. Remember, 72 1% improvements, you’ve just doubled your company. So if you can be doing that at a regular basis, this can be really, really great.
Auren Hoffman:
Again, 1% improvements can be in your product, you want to keep making your product better, 1% improvements in your marketing, 1% improvements in your sales operation, 1% improvements on engineering, 1% improvements about how you hire people. There’s all these different things, and they add up really fast. They’re really important. But at the same time, you do need time to be thinking about very big swings, and you need to be thinking about how to do things in a much, much different way.
Auren Hoffman:
For a lot of the people in the organization, every time you think of something that’s a big step function, they might freak out a bit. Any step function sounds impossible, sounds really hard to do, especially once you get the company going, you’re at four or 5 million ARR or something like that, and now you’re coming up with the step function, you’re going to have a lot of internal dissent about actually taking on that step function, because that step function is going to have a high chance of failure.
Auren Hoffman:
So you do need to push it through, there’s going to be people in your organization, are going to be a little upset at it, because you’re taking time from something that they know is going to work, the 1% improvement is going to very high likelihood of success, to this other thing that is much more, pie in the sky, a little bit out there, a little bit crazy, et cetera. It’s your job as a founder to balance those things, and you’re never going to get that balance perfect. So there’s no one in history who’s got it perfect. You’re always going to be making error going too far on the step function side or too far on the 1% improvement side, and then you have to over time rebalance it. It’s a very hard dance, and that’s why as a founder, you get paid the big bucks.
Kaitlyn:
That’s great. We’ve got some great comments coming through. We’ve got about five minutes left for questions. So again, if we don’t get to all of your questions, tweet @Auren, he will get back to you within 24 hours. He’s great with that.
Auren Hoffman:
Absolutely.
Kaitlyn:
A couple of comments coming through, “Wow, love hearing that OODA loop thrown into this talk, managered that principle for many years. Great stuff.” Someone did ask if you can get the recording later, they missed the first part. Yes, we are live and all the recordings will be available on the SaaStr YouTube, so make sure that you subscribe and check them out. Let’s get to a few last minute questions. So, as a follow up to your smart people graph, what are your definitions for short term, midterm, and long term?
Auren Hoffman:
Well, it’s a good question. Maybe midterm is seven years out or something. I just think most smart people optimize for the midterm. They might think they’re optimizing for the long term, but they’re actually optimizing for the midterm. Smart people have been trained all their life to delay gratification. This is the famous marshmallow test where people are delaying gratification, and they think by delaying gratification, this is always a good strategy. It can be good to a point. Obviously, you don’t always want to eat chocolate cake all of the time. This is probably not going to be something that’s good for you, and you want to build certain habits that are really important.
Auren Hoffman:
But sometimes they can tend to under optimize the short term. Really the short term should be about, “Okay, not suffering bad bosses.” Too many smart people, I think, are willing to suffer bad situations. That’s just generally not a good idea. Not just doing things to get your ticket punched, do things because you really enjoy them and love doing them. Make sure you’re learning and growing all the time. These are all things that you can optimize for in the short term, that I think a lot of smart people discount because they’re used to delaying gratification on things.
Auren Hoffman:
Then they’re doing things that are often quite conventional. Quite conventional sometimes can be a good optimization for the long term, but often are not good, they’re often very good optimizations for the midterm. It’s not like being a corporate lawyer has a super high job satisfaction. I’m not against corporate lawyers. I have many friends that are corporate lawyers, but many of them would have been much happier in different situations, but they got on this path and the path kept going, and that’s what they ended up with. Before you actually put yourself on a path where you’re doing things to get your ticket punched, really think it through like, “Is this something that I really, really want to do?” And really imagine yourself doing something.
Auren Hoffman:
Then the last thing is that, a lot of times people do things…they think things are risky, when they’re actually safe, and they think things are safe when they’re actually risky. So you really do a true risk analysis, taking a job in some boring company that you’re not going to learn that much, it sounds “safe” but it’s often the riskiest thing that you can do.
Kaitlyn:
That’s great. Can I throw two more questions at you? You’ve got one minute, but–
Auren Hoffman:
Oh, my gosh, let’s do it. Lightning round.
Kaitlyn:
All right. Rapid fire. This is a great one for you. You mentioned one should choose a college major that’s not popular. I’ve never heard of that. Why do you say so?
Auren Hoffman:
Well, the popular majors are often popular because they’re super conventional. Most colleges, it’s like computer science and economics and political science or something like that, and everyone’s taking them, it doesn’t differentiate you. You’re not going to get massive time with the professors, et cetera. Because this is going to be hundreds and hundreds of people in your major. So, choose something that’s unconventional with a few people doing it. Choose something that you really have a passion for, and you’re probably going to learn a lot more and you’re going to be much more differentiated in the future.
Kaitlyn:
Great. Then last question, maybe this could be one of your next charts. You’ve obviously had a lot of experiences and successes, what are some challenges that are currently still trump you at the level you now play at?
Auren Hoffman:
Oh my gosh, so many challenges. One of the terrible things that happens is, as you get more experienced, at least to me, it doesn’t happen to everybody, is that I continually make mistakes, and I make the same mistakes I made five years ago, and that’s the same mistake I made 10 years ago. It’s so frustrating when you make the same mistake and you don’t learn from the mistakes. In fact, most of the advice I’m giving you right now, I don’t actually … I’m a complete hypocrite, I don’t actually do it myself, or I don’t do it very well myself.
Auren Hoffman:
It’s very, very hard to continually to be good, and every time you make mistakes, you’re going to be very, very … at least for me, you’re going to be very hard on yourself as you realize you’re making all these mistakes.
Kaitlyn:
Auren, thank you so so much.
Auren Hoffman:
Thank you.
Kaitlyn:
Such great insights and so much fun. Again, make sure you follow @Auren on Twitter. If your question didn’t get answered, please tweet them there, continue the conversation, and until next time, it was so great to have you. Thanks so much.
Auren Hoffman:
Thank you.
Announcer:
If you don’t have a SOC 2 report, you aren’t going to be able to sell to major customers. Secureframe helps startups get and maintain SOC 2 compliance in as little as two weeks. Join companies like Stream, Hasura, Benepass and unlock more sales with Secureframe. SaaStr listeners get 10% off at secureframe.com/SaaStr.