Startup founders are in an all-out sprint for the line. First, we need to launch our product, then get product-market fit before the cash runs out, then raise some more. There is no time for many of the niceties of bigger businesses when cash is bleeding and product-market fit is way over the horizon.
But some niceties are necessities. I have made this mistake myself, several times, and I’m convinced that there are some things that you should not do without. Top of the list are product teams that have full ownership.
To build the right product, treat the people right
Without product managers, designers and engineers who truly empathize with the customer’s struggle, who feel 100% in control of their outcomes, and who not only buy-into the founder’s vision but have a real emotional stake in it, founders increase their chances of being one of the majority of startups that fails due to a lack of market demand (building the wrong thing), lacking the right skills in the team or running out of money (aka taking too long to build the right thing).
Within startups I have personal experience of, I see these symptoms stemming from a lack of ownership in product teams:
- Slowing velocity
- Problems integrating new team-members
- Lack of empathy for the customer
- Lack of agility/lack of willingness in the product teams to pivot or adapt
- Discontent, burnout and unhappiness in product teams.
Any and all of these factors will readily create a death spiral of slow product development, failure to obtain product/market fit and stress and anxiety within team members.
Before I talk about how, starting from seed funding, founders should empower product teams, let’s talk about the elephant in the room.
If most businesses fail because of a lack of market need, why don’t investors insist on better practices in product management?
Some do, after all, the concept of product-market fit was pioneered by VCs (as recently as 2007).
Investors make a bet that an early-stage founder has an insight that will get their product to product-market fit. Based on this bet, they invest the minimal amount of funding possible to allow the founder to get to product/market fit. Investors have a portfolio of other companies and the probability of your startup failing is built into their business model.
Many investors do help their portfolio companies do product management right, but there are still many out there who take a more hands-off approach.
I expect that as the concept of product-market fit is better tested, elaborated upon and understood, more investors will insist on its application within their portfolio, just as they insist on many other best practices today.
Startup failures stem from a lack of ownership in product management teams.
As a few friends working together to solve a problem, product velocity (the speed and direction at which the product is developed) was not a problem.
As soon as you make your first hires, velocity will decrease. This phenomenon was documented in 1975, yet still haunts tech companies 45 years later.
As a founder growing your team past the number of people who can reasonably be expected to intuitively understand and build upon the problem space (could be 5 people, could be 10 people) you need to make a decision:
- Maintain velocity by telling your team what to do
- Hire one other person who you tell what to do who tells the team what to do
- Give your product team enough ownership so that they can figure out what to do for themselves.
Many founders choose 1 or 2 because it is cheaper and seems faster than choosing the harder path of giving ownership to the product teams. I have made this mistake myself and I am convinced it’s a route cause of many startups’ failure.
Give ownership to your product teams
The solution is to give ownership to your product teams - the product managers, designers and engineers who build the product. These are five things I look for to tell me if product teams really have ownership.
Business metrics are separate from product metrics
There’s a clear separation between business metrics (e.g. LTV:CAC, revenue, bookings) and product metrics (e.g. time spent in the app, revenue per customer). The business metrics are owned by the CEO. The product metrics are owned by the product manager and her team and are generally behavioural.
Product managers report to the CEO
The most senior product manager needs to report to the CEO, not to the CTO. There are some exceptions, but I could (and will) write a long piece about why your PMs need to report to the CEO.
A culture of test and learn
Celebrate learning that moves you closer to your goal (launch, PMF, scaling, etc). Downplay flukes, visions and intuition - luck is not a strategy and intuition is not scalable. As the CEO, find yourself answering ideas from your team with “how would you test that”.
If you believe you have an insight, a hunch, make that clear to your team
Let’s be realistic - as a founder of a pre-product-market fit startup, you are going to have hunches that are going to be valuable. But you need to consider if you can train your team to have these hunches? Did it take you 10 years slogging away at the coalface to develop these hunches? If so, will it take your team 10 years? What are you going to do in the meantime?
How about you approach it by saying “this is a hunch, how can we make this testable?”, rather than “this is what we are going to build, I am completely sure of it”.
Strategy is the guardrails
Strategy means a lot of things to a lot of people. The best catch-all I’ve heard is Seth Levine’s strategy is what you don’t do. As a founder, your job is to communicate a vision and strategy clearly enough that your team can operate freely inside it. You create the sign-posts, the rules and the conventions. You even let your team propose the sign-posts, rules and conventions. But it’s their party - you’re the host making sure everyone’s drinks are topped up whilst you steer a course past the icebergs.
What’s the right amount of ownership for startup product managers to have?
The right amount of ownership is full-ownership - there really is no other kind. If you’re a startup CEO with product management experience, you’re leading product. If you are the CEO but don’t have the experience, hire someone who does. If you can’t afford that, choose your most competent product manager and give them space and trust they need to succeed.
I work with a handful of startups at a time to help them create the kind of product management organisation I describe above. If you’re a startup CEO, founder, product manager or investor and you’d like to chat, click here.
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