Cult Creation

Steve Newcomb

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Nov 1, 2016 · 42 min read

In 2010, I wrote an essay called Cult Creation (pdf).

It was a 29 page essay about lessons I had learned as founder of a small Search Engine company called Powerset. It described the hard fought, non-obvious lessons I had learned from building a team from scratch, from reporting into Peter Thiel, and from creating what ultimately became a something we all know.

Microsoft Bing.

Crazy thing is, about a million people read the damned thing. It even helped some people.

It’s now 2016, and I thought I’d write Cult Creation II (pdf).

This one, and it’s podcast, is about the lessons I’ve learned as Founder of a small company called Famous. It describes the hard fought lessons I’ve learned from building this team from scratch, from having to say goodbye to that team in one hell of a pivot, and from re-building a new team from scratch with a new direction to earn a chance at redemption.

Other than the summary you are reading right now, it’s important that you know that I wrote this entire article over a 48 hour period just before the latest TechCrunch article was released. While I was writing it, I knew TechCrunch was writing the article, but I didn’t know if it was going to be a redemption article, or the killing blow.

I don’t know if Famous will ultimately succeed or fail; I don’t know if TechCrunch is going to roast me or hail me; I don’t know how the public will receive the new Famous, but I do know one thing. I believe in the lessons that I’ve learned. And nothing has tested them like forcing myself to write about these lessons in this exact moment of Twinky shitting anxiety.

There are so many uncertainties in life, but no one can take knowledge away from you. Many people might wait until after they succeed to write — to ensure they look good. But I’m made of different stuff. When I’m in a position of vulnerability, like right now, I’ve learned that my writing changes. Instead of thinking through things with my brain, my heart takes over and I enter into a stream of consciousness.

That’s when my best, my most unguarded and my most compelling ideas come.

So here it is. A 48 hour coffee induced translation of 3 notebooks containing 5 years of notes in an essay that I’d stand by even if I die tomorrow. With all of it’s spelling mistakes, grammar mistakes, and tense mistakes intact, I offer you the very best lessons from the wildest rides of my life.

PRELUDE TO A CULT

(Learned after waking up at 4am every morning worried shitless)

If you are a founder of a startup, then burn the following info into your head. Having a good team, or even an excellent team isn’t enough — you need to build a cult. And by “cult” I don’t mean a mindless bunch of ass-hat wonks that follow you around. What I mean is a group of super high quality people who trust each other, who know who they are as individuals, who have their own values, similar ways of thinking, learning reacting, problem-solving, and working together. A cult of passion and grit bonded together under a leader they trust and respect.

That’s you.

They must no be afraid of any type of challenge; they must be willing to walk though fire when their leader asks them; and they must believe they deserve to be the ones who will change the world.

Create a cult and your startup can handle anything. Don’t, and your team will crumble at the first crossroads.

If you’re like nearly every founder I know, you worry a lot. If you are like me, when you try to sleep at night your mind spins uncontrollably between scenarios that result in a glorious success and scenarios that result in a burning death crash where you’re the world’s biggest imposter. Most founders I know ride a fine line between seeming to be in total control on the outside and going nut balls on the inside.

All I can say, is welcome to the club — you’re normal!

Whenever people ask me how I make it through the days and nights, I always say the same thing. When you wake up at 4am in the morning for the 45th time in a row try this:

Sit down and then write down the shit storms that you are worrying about and divide them into two lists. Those that are under your control and those that aren’t. Then focus on the list that you can control and an immutable truth surfaces.

The solution to every startup problem begins and ends with having a team united in passion. It is that passion that fuels the grit and determination needed to win.

If you do this one thing, it will steady you and calm your mind enough to face and conquer any challenge at work. If you don’t do this one thing right, it won’t really matter how well you do anything else. Team is the genesis of all success, and if you don’t nail it, you’re not going to get much sleep. Fuck up your team, and no matter how much you tell yourself otherwise, you’re fucked!

Creating a cult starts with the way in which you build your team — the hiring process. If you build your team in a certain way, the culture inherent in that team will give birth to the cult itself. It won’t be you, as the founder, who will own or control the credo of the cult, it will be the team itself. Your job is to control the principles, practices and processes by which the team is built. Founders who don’t pay attention to this all-important detail can inadvertently create a culture that didn’t intend, or even worse a cult that turns on you.

The best way for a founder to lead, especially in the earliest stages, is to take complete and dominant control over hiring. Nail it, and your team will their own cult of killer employees.

The following principles are the hard fought, non-obvious, super valuable principles that I live by, that I stare at at 4am in the morning. They are my rock, my immutable truths that guide me in the dark.

DO NOT NEGOTIATE — IT’S NOT FAIR, OR SMART

(Learned from Bill Keating who taught by handing me my ass)

Look at this guy. Can you honestly tell me he knows how to negotiate a good deal for himself?

Calm down. He’s my co-founder and by the way and I’d take a bullet for him.

Over the years, I have noticed some sort of weird inverse correlation between the talent an engineer has for coding and their ability to negotiate. I’ve seen people that could have hacked into NSA suddenly shit Twinkies the second I bring up the topic of their salary.

These are my people.

Many founders, on the other hand, are almost by nature programmed to negotiate everything. In some cases, I have seen founders take advantage of people who don’t negotiate well, see it as culturally not ok, or who simply hate to negotiate so much that it’s a near-phobic experience.

Do not do this.

Besides being unfair and a jerk move, it is also not smart because it’s illogical.

What inevitably happens is that the engineers, who all have different deals, get drunk one night. Then the shit hits the fan when they tell each other what they all make and what equity they got. Come Monday morning, every engineer’s password is “my_founder_is_a_jerk,” several viruses and backdoors are suddenly installed into the code base, and the founder gets the silent treatment — none the wiser of his impending doom.

Way to go genius!

If you can’t tell, this one pushes my buttons. I don’t care how good a negotiator an engineer is when I’m interviewing them. I want them to have such pristine code that it makes my other engineers cry. I want them to have a beautiful mind that can use logic and reason to solve the engineering challenges that I hand them. It is completely irrelevant how good they are at negotiating.

One of the things that is incredibly important for a founder in today’s engineering world is to create a logical and rational hiring plan with salaries and equities mapped out.

1. Outline 10 levels of competency per talent type; i.e. one for each type of engineer, one for designers, one for product people and so on.
2. Create your high and low salary bookends for each competency, which may be unique depending on your industry.
3. Then create 10 levels of salary for each competency: Junior 1–3, Mid 1–3, Senior 1–3, and a VP. Then all Junior 2 engineers would have identical salaries, as would all senior 3 engineers, etc.
4. For your ESOP pool, you will have a specific number of shares to allocate — usually around 20%at or just before Series A. With your VC develop a timeline of how long that pool should last. If you are planning to raise several rounds of financing, plan out how much ESOP should be left right before each round of financing, keeping in mind, new investors typically apply pressure for the the past investors and existing employees to take the dilution needed to shore up the ESOP pool.
5. Once you have your pool targets,then work with your board to create a general plan of how many employees, and of what type, you want right before each round.
6. Then back into how much equity each competency level gets using the following methodology. Start off by using relatively standard equity disbursals for each type of role — VCs can help, they have many, many stat sheets on this one.
7. Then, after you have your beginning equity allotments per strata, take the remaining equity to be allocated in your ESOP and dole that out to each strata based on your hiring plan. Remember to reduce the amount of equity each strata gets over time by the proportion by which you believe your total company value will grow; i.e. make it so that while your ESOP stock’s estimated stock price is going up over time, you are reducing the amount of shares you are giving out.

Therefore, if you gave employee A, who is a junior 1, 10 shares at angel funding and you estimate your stock price at .01 and you are hiring employee B who is also a junior 1 at Series A, when common stock is value at 10 cents, you would give that employee one tenth the stock. The point is, you’re giving the same or less starting cash equivalent to both people because people that joined earlier took more risk and therefore should get more reward. There are many ways to do this, but it is important that you reduce the amount of stock issued over time so that earlier employees get equivalent or better value.

It is important that you pay people in a systematic and rational way so that you can show it to your employees and new candidates.

Once you have the spreadsheet developed, follow it as best you can. Be strict on following the salary amounts and do your best on the equity. If you need some sort of sweeteners to get someone on board, then fine, but do your best not to budge on the core compensation.

Sometimes you can hold 83b elections as a benefit, or an offer of RSP instead of ISOs, but never adjust someone’s salary within a level to get them on board — the other engineers will know you did so and kill you. One of the big benefits of using this strategy to hire people is that engineering candidates on whole have a very positive reaction to hearing that there is no negotiation.

1. Engineers generally hate negotiating anyway and if there was one word I would use to describe their general reaction, it would be “relief” on the candidates part.
2. Engineers are highly logical people and if you email them your spreadsheet and explain that you negotiate with no one and that their peers in the company determine their skill sets and thus their strata, not HR, then all that’s really left is for them to check your logic in your spreadsheet. If it is sound, then I have found it removes perhaps the most awkward and stressful part of the hiring process and turns it into a logical and rational process — which engineers like.
3. Further, you will like it as well, it will help prevent you from doing stupid things that you regret and get bitten in the ass for later anyway.
4. It will also enable you to have a very different conversation when the candidate gets to you. Instead of this part of the process being confrontational, where you are the opposition, there is no opposition. You and the candidate can simply talk about what’s really important. Them interviewing you.

WHY BUY SILVER WHEN YOU CAN RENT GOLD?

(Learned from hiring Tom Preston Warner, founder of GitHub, at Powerset)

Tom Preston Warner is best known for founding GitHub. But when I met Tom, it was when he was interviewing at Powerset. When I met Tom, it was clear to me that he was a future superstar and even if I got him, it wouldn’t be forever. I wanted to find a way to get on my bus before he created his own.

In the end, I not only got him to join Powerset, but I also got Chris Wanstrath, another future founder of GitHub, to join as a consultant too — more gold for Powerset. Tom stayed for nearly a year and half and it was great.

The success or failure of most startups is determined within their first two years, so having gold, even for a short time, could make all the difference.

Renting Tom’s gold was a great deal for both of us. He was a huge part of our success and when he left, he left with a great idea, my support and invaluable knowledge about culture, team and how to raise (or in his case, not raise) capital. Although joining Powerset may have delayed his career as a founder, his decision ultimately supercharged his launch into his own startup. When he finally did raise his first round, he raised $100 million dollars at an insane valuation from one of the top VCs in the country — A16Z.

Renting gold is about getting the best people on the bus, even if it’s not forever.

Why is this so important now?

Over the last five years, a shift in the dynamics of hiring in the Silicon Valley has occurred. As a result of programs like Y Combinator and funding marketplaces like AngelList, becoming a founder and raising seed financing has become more accessible. The impact has been dramatic.

The people that would have been your first employees, are now becoming founders instead.

A-level engineers, designers and product people who used to be your first hires at seed, are now often becoming founders themselves. So more and more often, if you want A-level people in your company, you either give up on this pool of people, or create a strategy to pull those people into your company instead of founding a company.

Many older founders tell me they avoid these pools of candidates because they are too much of a flight risk — but I advise the opposite approach.

Rather than avoiding these types of candidates, I recommend you embrace the flight, seek them out and deal with the issue head on with a value proposition that helps both sides.

How do you convince Gold to be rented?

I earnestly say “Let me rent you for 6 months. Then, after you are super charged, create your company — I’ll even help you. It’s a short term deal, and it’s a much better deal for both you and me.”

Here’s why this works:

• You’ll learn an insane amount about building a startup from me;
• You’ll get to see how to raise seed, A and B from me;
• You’ll learn about culture, hiring and team building;
• You’ll get exposure to world class VCs — I’ll introduce you;
• You’ll know exactly what lawyer, accountant, PR firm and outsourcing partners to choose;
• You’ll minimize first time founder mistakes by 10X;
• You’ll expand your own network in the process increasing your pool of candidates;
• You’ll be building your brand, so every step in your success becomes easier;
• If we exit, you’ll have your own cash in your pocket to start.

Many people ask me how to rent gold if they are a first time founder — i.e. “isn’t it a bit of a chicken an egg problem?” To those people I say yes, it is. The best way to cut your teeth as a founder is to join an experienced one, suck their brain dry, and then start your own company. Those people who ask me this question are the exact people that should join me.

SHOOT FOR THE MOON

(Learned after getting the #1 ranked designer in the world to join Famous)

Before you build your management team, I recommend going on a vision quest and ask yourself — “who is the exact right person for the job?” Chances are you already know the exact person.

Then convince yourself that you can get that person.

So many founders I know compromise when they hire their leadership team. They shouldn’t.

Odds are you know exactly who you need to get, you’re just chicken to do what it takes to get them. Don’t be. Go for it and it could change your whole world.

For Famous, that person was Dash, who just happened to be the founder of Creative Dash — #1 designer company ranked on Dribbble .

How do you get started?

Every situation is different — most of it is believing you can do it. When I went to get Dash, it was just over the pivot-when we went from 34 down to only 4 original team members. It sounded impossible when I started, but I convinced myself I could do it.

My idea was simple.

Get him to fall in love with our technology, our product, our team and my vision. At Famous, we had one big thing going for us — our 3D JavaScript Engine was a truly novel invention because it gave designers the ability to design things that were never before possible on the web and mobile web. I wanted to show him that he would have the opportunity to use our engine to redefine how information was displayed on the Internet, the opportunity to upgrade the front end of the entire Internet, the opportunity to be the designer that would impact billions.

Our technology was probably the only thing we had going for us after the pivot. But it’s the exact type of thing that is very attractive to world class designer like Dash.

So, at first, I started small.

I contacted his firm and when asked if we could hire him and his design team as contractors. Once his team freed up, they got started. During their project they got to work with us, meet me, see my vision and experience the joy of working at Famous. After many months of working with Dash and team, I saw something different in how he was interacting with my team.

He was already their leader.

It was natural, not forced. As a natural leader, he simply became the leader of the team and the vision of the design — I never needed to interview him, convince him, or come up with a proposition. It came as a natural course of simply working together. Once I saw the opportunity, I asked him if he was interested in leading our company’s design efforts — permanently.

The impact of winning

Now he’s our head of creative and he brought his best designers with him. By trusting in our inherent value, I landed the biggest fish in the world. When he changed his profile to say he had joined, 600 people contacted him immediately and the design community stood up to notice. Since he’s joined, everything has changed for Famous. It made it easier to hire the next executive, it changed the game for us in hiring designers, and it gave us a confidence to do it again. It was the cornerstone of setting a culture of shooting for the moon.

If you shoot for the moon with your first hire, all the rest come easier. It creates a culture of believing you can shoot for the moon and win.

MAKE SOUP, NOT STEAK

(Learned on an all night vision quest after a date night with my wife)

One of the great mistakes many founders make is to over-optimize on talent alone. Doing this creates a one-off kind of culture and actually limits creativity.

It’s like eating nothing but steaks. That’s not what great food is about.

Building a great team is about being a chef. One that is constantly in search of a diverse set of ingredients. Ingredients that when brought together create new, inventive, and world class dishes.

If startups were a soup, being talented is just the stock, the palette, the canvas for the soup. It’s each persons x-factor, their personality and their quirks are the spices that make the soup work. A great soup is one where the chef is constantly adjusting, tasting and envisioning what to add next.

And that means that some spices are bad. When I interview people, I keep in mind what types of personalities, quirks and characteristics would be the types of spices that could shut down my team. While it’s obvious that hiring an idiot could shut down a team, it’s not as obvious that what shuts down, or makes a team is much more subtle.

When I’m building a team, I’m always tasting my soup and asking questions. I know that being qualified is always required, so I focus all my energies on what will either amplify my team, or shut it down.

1. What spice does this team need?
2. Does this team need a leader, a doer, or a follower?
3. Does this team need an extrovert, or an introvert?
4. What personality trait would shut this team down?
5. Do I need a list giver, or a list taker?
6. Do I need someone who gives energy who’s neutral?
7. Can I afford to bring in someone that’s super cerebral but sucks energy?
8. What would a woman do to this team? What would a guy do to it?
9. How will the spice of this candidate interact with the spices of my existing team members?
10. What type of spice will ruin the whole thing?

One of the things that has helped me out the most is including a personality assessment as part of hiring. It’s not an overt thing, like a written test. It’s something that’s simply embedded into the way I ask questions rather than the questions themselves. A question like “tell me what doesn’t exist in your current company that you’d love to have in your new company” is like cracking open the spice rack.

To really nail it, I recommend reading everything you can on personality assessments and find the one that resonates with you the most. None are perfect, the really important thing is to find the one you like, and use it. There’s Myer’s Briggs, DISC, and the one I like Enneagram.

Taking this approach enables me to concentrate on macro factors, rather than on just talent alone. It makes me a chef instead of a cook.

EARN YOUR JOB

(Learned by remembering the frustration I had when I was interviewing)

I strongly believe the beginning of every interview should begin with the founder earning their job first.

It shows respect. And it’s smart.

When I’m doing a phone screen, or conducing an initial interview, I start by letting the candidate know that I like to start with them interviewing me. It’s kind of fun to see their eye bulge out, but what’s really cool is watching them realize that this interview is going to be different. Better. Once I see them set in the moment, I let them know that since I’m the founder, I’d be happy to answer any question they have.

It’s magical.

See the interview through the eyes of the person you are hiring. Earn your job as a founder in every interview first and you’ll win their heart.

What happens is that nearly 100% of the people say something like “why did you found the company?”; and it’s a great question. It’s your opportunity to share your vision, your passion and your north with a candidate. It helps you set context for the entire discussion. It enables you to see how they react with your passion.

When sharing your vision, pay special attention to how a candidate reacts. The first thing you should check is to make sure there is a passion-match. If the candidate is ho humming your vision — end it and thank them for their time.

When I find a candidate that resonates with my vision, it’s obvious. And it’s exciting. Once the vision is laid out, candidates start feeling more free about asking other questions. “What’s your differentiator?” and “Who are your competitors?” and “Who are your customers?”

If you listen carefully to a candidate’s questions you can tell you far more about them than if you questioned them.

In a phone screen, I dedicate about 15–30 minutes to letting the candidate interview me. I’ve found that within this magical reverse interview, I can filter out about 90% of the people that would have normally made it all the way through an interview, only to ultimately be veto‘d for “culture” reasons.

This is huge, because it enables a founder to do one of their most important jobs. Shielding their team from distractions and protecting flow.

But it’s also magic for the candidate too. In this first 15–30 mins of reverse interview, the candidate gets to do something they rarely, if ever, get to do — interview the founder. It let’s them filter for passion too. It blows my mind how many people actually interview and join a company without ever talking to a founder, or even knowing the vision of the company.

We spend years dating the ones we love before marrying them — only to spend an average of 4–6 waking hours per day with them. Yet, we spend only a few hours in a mostly one way conversation and we commit to a team that we spend an average of 12 hours per day — that’s insane.

As a founder, it is your responsibility to win the heart of every candidate that walks through that door.

Prove to them you have really thought through the tough questions, that you truly do have a vision, that you have used logic and not hope to build your company. Prove to them that you are not above questioning. Prove to them that you have more than just a great speech and a good TechCrunch article to back your claims. Show them you have a plan, one that’s well thought out, flexible and doesn’t rely on a one-shot hero moment.

Do this right and you could win their hearts — if you can do that, it means every candidate that makes it through your interview will want to join, thus preserving the largest possible pool of guaranteed candidates. It ensures that your team doesn’t walk all the way down the line, fall in love with a candidate, only for the candidate to choose another company because they never had a passion-match.

Show a candidate you and your vision are the real deal and you’ll begin the journey to getting them to truly follow. Come in with hype and they’ll walk.

TREAT EVERYONE LIKE GOLD

(Learned at Powerset, where I considered every person part of our diaspora)

Everyone treats “yes” candidates like gold, but what sets you apart, what speaks of your heart is how you treat the “no’s”.

No matter how good or ill-fitting any candidate is, they are human and they deserve to be treated kindness, with warmth and with respect. The includes every single person that ever interviews, or for that matter touches your company in any way. Goodness, should sit at the heart of your brand.

Your brand, your essence, what you stand for isn’t what you say, it’s what other people say about you.

Once I know from other people in the company that it is going to be a “no” for someone, I switch gears from hiring to “successful exiting of the candidate.” The goal is speeding up the process of getting that person out of the building so it prevents wasting the time of the engineers while making sure that person is respected and treated just as well as anyone who a “yes.”

I always pinch myself to remind me that it is critical that even when we want to end the interview immediately (which happens) we do so in a way that is honest, respectful and mindful because we want that person to go away feeling like maybe they are bummed the interview didn’t work out, but that the company rocked.

If you learn how to say “no” to a candidate while treating them like god, you’ll earn a fan.

If you do this, believe me it will get around and it will benefit you in many ways. If you don’t do this and you act dismissively, or disrespectfully, it will get around fast and it will eventually impact your ability to hire good people.

I bet right now, off the top of your head, you could name at least one company that has a reputation for treating candidates or its people like shit. Or even better, I bet you can name one that treated you like shit.

That news travels fast and far.

If you do say “no,” tell them exactly why you are saying “no.” Don’t bullshit them and don’t simply blow them off… it will come back to bite you. One of your key evaluation metrics for your HR person is what percentage of people come away from the interviewing process loving the company. How many people send a follow up email thanking you, letting you know they thing your company is awesome, asking you to stay in touch.

FIND YOUR SECRET SWAMI

(Learned by watching Sara predict every candidate interview at Famous)

Some people code, some design, some understand brand and some sell things. Every person you bring into your company has some x-factor skill that you want to take advantage of when you are hiring.

Find your EQ Swami.

One person I urge you to look for is the person in your office that seems to know if someone is a fit after only meeting them for two seconds. Often, this person isn’t the head of engineering, or design, or marketing, or sales — it’s someone with EQ x-facto — and they could be anyone.

In Famous, we have Sara Tatman, and for reasons I couldn’t even begin to understand, she seems to know right away whether a candidate is right for us or not.

Hint: she used to be a matchmaker.

When you are thinking about your company, find this person. They exist. Somewhere. And your ability to find them, tap their x-factor and use it to your advantage could be critical in the development of your company.

It’s save our butts on many occasions. Where it typically comes into play is when everyone on the team is a “yes” and your swami says “no”. If this happens, listen. 99 times out of 100, your swami is saving you from hiring someone who could shut down your team.

CREATE THE BEST, WORST-CASE SCENARIO

(Learned from Peter Thiel while at Powerset and honed at Famous)

By the time any candidate gets to you, they are going to have lots of questions. One of them is going to be “what’s the worst-case scenario?”

Don’t mess this up.

You need to demonstrate that you have taken a realistic, rational and logical look at this case. For many engineers at Powerset, they would actually make me walk them through blow-by-blow what the worst-case would look like, and to describe the financial implications, reputation implications and technology usage implications as it related to them. On many occasions this even involved building a spreadsheet with them and walking through my logic, it sometimes even involved providing proof of things such as “each engineering head was worth $1 to $2 million.”

Many of the engineers at Powerset still probably remember my worst-case with them, because I often used it as my primary selling point when I went to hire them. I built my worst-case scenario based on simple and logical truths that had been constructed purposely from the very outset of the company.

Here it is: “the worst-case scenario of Powerset is better than the middle case, and in some cases the best case, scenario of the other startups that are trying to hire you.

Because:

1. We have a killer team, that team has intrinsic value no matter what, and the network of relationships you will build in this company will last you a lifetime
2. You will enjoy working with our team because we only hire A-level engineers like you.
3. The technology we are building is novel: we are building a search engine from scratch and the problems we face will challenge your engineering skills more than any company that is trying to hire you.
4. If you join us, you will have a very real impact on something important; we are not some also-ran company.
5. The worst-case scenario financially is that we simply run out of money (which by the way will take 2 years at least based on what we have already raised) so the worst-case is that for two years you get all of the above and then we sell for about $100 million which would mean every person in the company could put a down payment on a new house
6. From a reputation standpoint, the worst-case is that you are here for two years, getting a full salary and then you will a) have the pedigree of being part of a well-known startup and b) you will be one of the most sought after engineers on the planet because you will have had experience in either Search, Ruby or Computational Linguistics which are going to be skills nearly every company in the world will be seeking in two years or less.

If you analyze my worst-case scenario, you’ll notice that in most of it I simply restate what the candidate already knew in their mind. Really the only new piece of information in the whole statement was the estimate for how much we would go for if we sold the company and that was simply based on an estimate that any engineer could derive simply by doing a Google search on the value per engineering head in an acquisition.

In short, I made sure that while my statements were bold, and perhaps may seem cocky, they really weren’t. They were logical and rational conclusions based on simple and well-backed assertions.

I will have to say that not all engineers agreed with me, but every single person appreciated that I didn’t say something stupid like “trust me…. it’s going to be awesome…. I swear.”

No matter what your response is to this question, you need to be able to nail it. While you may be less inclined to be as bold as I was in my statement, my point is separate. Take the time to come up with an answer you believe in. I believed in mine and I think it showed through when people talked to me, and that made all of the difference in the world.

HIRE SLOW-ER-ER, THEN FIRE SLOWER-ER-ER-ER

(Learned from Peter’s HIRE SLOW, FIRE FAST mantra, then disagreeing)

In the first Cult Creation article, I had a section on Hire Slow, Fire Fast, but 6 years later I find myself disagreeing with Peter on this one.

He’s smart, but that doesn’t mean he’s never wrong.

Firing fast is rarely never good. It should be used as the exception, not the rule.

Firing fast means you didn’t do a good job hiring in the first place. It means that you missed something so egregious that you need to fire someone. That’s just negligence. Firing fast is also super bad for culture because it puts your whole team on edge, reduces trust, and increases anxiety. It makes your team thing they could be fired in a moment’s notice because they disagreed with you.

And that kills innovation, ownership and trust.

For the last several years, I’ve taken a different approach. Hire as carefully and thoughtfully as you can, and then once you hire someone let them know you’ve got their backs. Everyone does a face plant sooner or later, including me. It means the world to your team that if they are struggling, the team is there to support them, not fire them at their first mistake.

Creating a successful startup ultimately about building a team that has long standing value, not blazing a trail of fire on the way to making a profit.

This approach has paid big dividends. People I would have easily fired under the old approach ended up being part of my biggest value chain. In almost every case the person in question was a super star, they were just having a rough moment. Maybe it was a family member that was sick, maybe they were struggling with a personal problem, or maybe they just have normal cycles of productivity. Trust your team, support them, be there in their most difficult moment, and they’ll be with you for a lifetime.

The benefit of taking the slower, more thoughtful and more supportive approach is that you get the same end result except you have friends at the end the day.

THERE’S YES AND THERE’S EVERYTHING ELSE

(Learned from Peter Thiel while building the Powerset team in 2005)

This is a small section, but a really important one.

Knowing what “yes” feels like is easy. It’s exciting, you can’t wait to work with the candidate, it feels natural, easy.

But what does “no” feel like?

This is where the problem starts because people then try to define what “no” is — and that’s a mistake.

The best way to do it, is to remind your team that the rule in hiring is “there’s yes, and then there’s everything else.” And that undefinable, fuzzy, often uncomfortable thing that bundled up into everything else — that’s no.

By giving your team simple rules for what “yes” is and that “no” is simply everything else, your team will find it easier to let go of the guilt normally associated with saying no to a candidate- — ultimately saving you from hiring the wrong person.

THE MAGIC OF THE ONE MILE RULE

(Learned from Peter Thiel, who gave us the idea from Facebook — who was across the street on University Avenue in Palo Alto)

While at Powerset, we had heard Facebook was paying people more if they lived within one mile of the office. So we did it too, just to see what would happen.

All I can say is wow!

Ever since then I’ve offer people a minimum of $5,000 added to their base salary if they live within a mile of work. Often times, this makes the difference for most of your younger staff members and can be a key component to getting them to move closer to the office.

$5,000 per year is about the difference in a one bedroom apartment in the East Bay versus right in SOMA (where startups live). If you calculate the average additional time spent, the reduction and stress and other benefits — it far outweighs the $5,000 outlay.

Here’s why it works.

1. No longer had a commute, so each person captured hours back for their life
2. They were happier because they had less road rage and less drama in their lives
3. The spouses, girlfriends, boyfriends and pets were much happier
4. They stayed longer at the office because they knew they could always just run home
5. They were much more productive
6. Once some people did it, other copied and
7. We got way more value than the $5,000 per year we paid.

When we did this at Powerset, the way it made the team gel, the productivity gains and just the sense that everyone was kind of living the same life mattered. It had a much larger impact that I initially thought. You could implement this anyway you want, but I always recommend it. If you don’t have money, offer equity, he’ll offer bigger monitors. Make the benefit real, but make it attractive for everyone to live nearby.

IF THEN STATEMENTS WORK

(Learned with Barney Pell, when we hired the first eight people at Powerset)

For many founders, hiring the initial team is one big chicken and egg problem. Investors want to see a group of super talented people committed to your idea before you have any money.

And that’s difficult.

Employees, who are much more risk averse than founders, want to see that you already have money, or that your money is nearly assured before joining. It’s a common challenge.

So who wins this chicken and egg?

Well I’m a big believer that the best ideas are those where you can convince people to join even when there is no money. Following the talent is an easy way to see where the best startups are forming.

So how do you do this?

1. Write down the names of your founding employee targets — the initial people you are trying to convince to join.
2. Write down any dependencies that exist between those people. i.e. if that guy joins then I’ll join.
3. Write down the dependencies for each person that are independent of the other candidates.
4. Highlight dependencies from #3 that are common among the candidates.
5. Write down those dependencies from #4 that are necessary to solve before your next conversation with each candidate
6. Write down those dependencies from #4 that you need to solve before they would be willing to sign an offer letter
7. Write down those dependencies from #4 that you need to solve before each candidate is willing to quit their current job and join -notice I differentiated between signing an offer letter and quitting their existing job and working full time.

Once you’ve done this exercise, you should end up with a long, but understandable IF THEN statement.

You should now know the order in which you need to land your team and the order of the dependencies you need to solve. This gives you your “to do” list and what should be the top priorities of the company.

By doing this exercise, you’ll also know what dependencies will exist at the time you want them to sign an offer letter.

That’s critical.

Most first time founders think you have to have all dependencies met before you can ask a person to sign an offer letter. You don’t — put those dependencies inside the offer letter as a condition of starting employment instead of a start date. In other words, the day those dependencies are solved, they agree to give notice to their existing company and begin at yours within 2–3 weeks or so.

Once you have signed offer letters, even if you have dependencies in them, investors, partners and other candidates will see this as a sign of strength. This is often called “lookin’ like a duck and quackin’ like a duck” — it shows momentum and that’s always critical. It helps you maintain your cadence and always gives you and those that have joined something to celebrate.

Solving chicken and egg problems is part of the startup life. Using techniques like if then statement in the early days hiring process is a key tool for success.

WHAT HAPPENS AT 4:20

(Learned from changing the way all hands meetings were handled)

It’s called many things in many of the companies I have influenced. Powerset called it “4:20” or “Beer: 20” Virgance, Carrotmob and 1BOG call it “naked lunch;” Serious Business called it “beer Fridays;” and I think Crowdflower calls it “demo Fridays”. At Famous it’s our “Sprint Demo”.

At Powerset, where I started it, it went something like this.

We initially tried to have it at 4pm, but for some reason the Data Center team and the Tools team needed 20 minutes to “prepare” uhm hmmm… then once everyone was “prepared” we would generally herd them into the game room and give them some beers.

Chris Van Pelt, now founder at Crowdflower, would often start the meeting off with a magic show. Yes, a real magic show. Generally he would try to involve some small explosion or two. Then with the crowd warmed up, one of our employees would demo something awesome that they worked on that week — sometimes it was technical, sometimes it was just talking about whether or not we were looking at an east coast “Tornado” style foosball table or a west coast table.

Once the demos were done and the the applause stopped, I would sit down on what was called the hot seat. It was a sort of red stool thing.

During this time, there were only two rules:

1. Anyone could ask any question.
2. I had to answer.

And let me tell you, they would unleash on me. Some of the questions were stupid at first, like

“when was the last time you cried?” or “how much money is in your bank account?” or even “when did you lose your virginity?” to which my responses were

1. I had to admit that sometime a really good dish of huevos rancheros made me tear up.
2. I didn’t know because my wife takes care of that stuff and
3. HR VIOLATION…

But after the initial silliness was done, we would really get into it and everyone from the most senior engineer to the most junior office manager piped in. The point of 4:20 was that it was a time for us to share our successes through our demos and to maintain and sometimes strengthen the bond between me and everyone else in the company.

There are many ways to screw up Demo Day. Always make Demo Day a private affair between you and your employees. Never make Demo Day about bright and shiny things over substance. Never make it about recruiting, or showing off, or a place where introverts, people with difficulty speaking public, or simply people who’s work can’t be demo’d feel disenfranchised. Keep Demo Day sacred, personal, and about progress towards north.

In order to succeed, you need to build an incredibly tight unit. There will be times when you will need to ask each and every person on your team to make sacrifices, whether the sacrifices be time at work as opposed to time at home, or helping another engineer whose code blew up the data center and accidentally launched a Russian nuke into orbit or even asking your team to build something over from scratch because you, late last night, decided to completely change direction.

Boy do I know this one.

The degree to which your team is willing to respond to your call affects your ability to succeed perhaps more than any other factor in a startup. If these folks are going to follow you, then you must serve them well. The best way to do that is to understand that while you are their leader and you will ultimately make all of the tough choices, you are not above questioning. In fact, you should go into it with the perspective that you deserve and demand to be questioned.

At first, letting people question my decisions was scary, but it ultimately made me a better founder.

It will make you stronger because you will know that you have to prepare. It will make your team stronger too, because it will give them a real sense that the company is theirs as much as it is yours. Lastly, it will make the whole company stronger as a unit, as a cult, because you will no longer have any sense of “management,” of “them” or of “they” to blame.

NEVER LET GO

(Learned by taking an entire year to convince Chad Walters to join Powerset)

Those that know me know that I am an animal when it comes to hiring. I don’t beat around the bush, I tell them that I want them to join and that I am willing to do whatever it takes to get them (except negotiate).

One such case was Chad Walters.

Chad took me over a year to hire, but in the end it was worth it. During my courting with Chad, I talked with him, his wife, went to their house, built spreadsheets, talked through concerns, again, again and again. It was the most ridiculous effort I had ever undergone to get someone, but once we got him — it felt like it was totally worth it.

Once you identify a super A that you want to join the team, it’s critical that you never let go. Because if you get them, it creates an unlock for the rest of your company.

I have been interviewed by candidates’ wives, husbands, girlfriends and even moms in order to go over all of their concerns. I have brought in a shaman monk to bless a desk and even tried to get someone that red Swingline stapler from “Office Space” to get them to join.

I just don’t let people go away. In the entire time I was trying to hire people at Powerset I can only remember losing two guys once they got to the final round with me.

When you are building your team, be relentless, be a hiring monster and never let go of someone once you know you want them.

ONE FORMULA TO RULE THEM ALL

(Learned from Peter Thiel and a little bit of Luke Nosek)

Super A = Uber-connected leaders are super A’s. Get one of those and 10 A-level people will join. a=a. A-level people that aren’t super-connected will at least recruit one other A-level person.

super B=Super-connected B-level people, “super Bs,” are the most dangerous of all for 2 reasons. People who are B-level know it and therefore often refer C-level people to join so that they end up looking good when compared relative to their co-workers (i.e. b=c). Therefore Super-Bs will invite 10 C-levels to join, which is a total disaster.

C=0 In an effort to improve the gene pool, C-level people should simply be killed, (metaphorically speaking, of course) or at least kept as far away as possible from your company.

This one formula is simple, but all powerful. Memorize it, live by it or you will become the frog boiling in a pot of C players and never know why.

CREATE A DOMINANT MARKET SHARE

(Learned from watching Google’s move to develop a lot of their tools in Python)

In the early days Google invested big in Python — when Python was in its infancy.

Curious, I thought.

Why would they do that? At the time Python was a new(ish) language, although growing quickly in popularity. Then it hit me. They were going for a dominant market share in a specific talent pool. If you can get in on a new talent pool trend, the benefits can come back tenfold.

Here’s the strategy. Get the first luminaries in the field, then as that language grows in popularity you are labeled as the de facto place to go if you want to code in that language. Then hiring get 10 times easier.

Brilliant.

In 2005, when we founded Powerset, we realized Ruby was the new Python, so we went after some A-level people in the Ruby community. The top two we went after were first, Kevin Clark (a 20 year-old wiz-kid who we were trying to convince to quit school) and second Tom Preston Werner (now the founder of GitHub). We got both of them, and within a matter of months, we had one of the largest Ruby teams on the planet.

Anyone who wanted to code in Ruby knew about Powerset simply from the Ruby meet-ups which were dominated by either Powerset or Twitter people.

We then did the same thing in the field of computational linguistics. At one point we estimated that of the 200 or so people that really understood computational linguistics in the world, we had about 40 of them.

What’s the benefit?

Once we knew we had this level of talent market share penetration, we had almost a guaranteed worst-case scenario that most startups would dream about. We knew that our talent pool was so strong, that even in the event that we just ran out of money, one of the big three search engines would simply buy us for our team.

At that time we knew that a talented engineer in a tough to get tech was worth about $1.5 million per head. Thus, I knew with relative assurance that since we were going to hire at least 70 people with our Series A money, that our worst-case scenario was about a $100 million exit.

If anyone is paying attention, you are now saying, wait a minute Didn’t Powerset sell for $100 million to MSFT? …. Yup, we nailed our worse case scenario! (see Worst-Case Scenario Principle above)

TRY BEFORE YOU BUY

(Learned by meeting countless people like my co-founder Mark)

Take a look at this guy (again). How well do you think Mark does in many social situations?

Calm down. I’m the same way.

I do not believe in interviewing as a sole means to evaluate the hiring of someone for several reasons.

Take my co-founder Mark for instance.

It shouldn’t have to take an equally weird nerd horse whisperer like me to see his beauty. I feel great passion and connection with Mark, because on the inside, I’m just like him.

Like many people, he sometimes has great difficulty in settings like interviews — in fact it can actually shut him down. But if you work with him, see his work product, see how his mind works, a whole different person surfaces — the real Mark.

The best way, the fairest way, to interview anyone is to work with them.

And that’s why I am such a big proponent of working with someone prior to hiring them. It’s a fairer playing field. It’s better for introverts, for socially awkward people, and frankly nearly everyone.

See if you connect with any of the following logic.

1. No matter who you are interviewing or what questions you ask (even if they were developed by a PHD psychologist, or Google), I have found that you can’t tell how that person is going to gel, or not gel, with other members of your team.
2. Product managers in particular are difficult to hire. They are all but impossible to evaluate in an interview because there is no real test for competence. I have never been able to hire a “good” product person without them going through some trial period.
3. I have found that many people are awesome at interviews but suck as team mates.
4. I have found some people who are horrible at interviewing have turned out to the be the best employees (note: this is generally because many engineers are uncomfortable in social situations).
5. You can never allow everyone that needs to, or even wants to, to interview every candidate — it would simply take too much time out of the day and be too disruptive.

For every candidate, whether it’s an engineer, a designer, a product person or an executive, finding a way to work with them as the interview is critical to slowing the hiring process down, so you can make sure you’ve got the right person on the bus.

PROLOGUE

Ok, it’s been 48 hours. I am burnt, tired and not entirely sure I’m actually writing this sentence. I’ve been in flow for so long I am numb to my own surroundings and as I look up for the first time it has dawned on me that I am alone — my wife had to leave for a work trip — I had forgotten.

I wish she was here. Without her, I couldn’t have achieved anything.

For those of you who are curious, I highly recommend attempting the exercise of sitting down for 48 hours of pure writing and pouring your heart out in a moment of coffee powered vulnerability. If possible, do it right before the world will judge you in a TechCrunch article.

What will come out of you will probably be poor English; it may be a clear attack on the english language; and it may represent a lasting offense to the profession of writing. But despite these obvious shortcomings, it has the rarest chance of surfacing nuggets of gold that only come in moments of sheer exhaustion, worry, and grit.

It will be something you will remember for the rest of your life.

With that said, I will close with one of my oldest essays. I wrote it years ago, but it hold a special power over me. Just before I lay my vision on the line, before I put myself out there for all to see, before I pitch to any VC asking for life and time giving money, I always put my headphones on, play my favorite music at full blast, and read the fuck out of it.

It’s my attempt at writing something that captures why I’m an entrepreneur in the first place; And why I put myself through hell and back.

WAR CRY

I love to think of entrepreneurs as heroes of a sort. To imagine a single person that starts with a simple idea and then turns that idea into a permanent monument of human accomplishment

That is beautiful.

To imagine a single human having the guts to hold themselves responsible for affecting so many lives through employment, through their product and through the shear, raw, and direct power of money — that is my kind of benevolence. To see a person stand up and attempt greatness in the face of such overwhelming mediocrity in today’s world — that is courage. To see a person stay with their passion in the face of absolute failure, pivot and come back to life like a phoenix rising — that is grit.

I have seen the best and the worst that being an entrepreneur can offer. I’ve seen revenues grew from $20 million to over $3.6 billion. I’ve ridden the roller coaster of going public seeing our stock rise by 856% only to come crashing back down by 900%. I’ve taken on Google at their height of power and convinced 72 others to join me. I’ve made many decisions that made people love me, some that made people hate me, but more importantly I made a few difficult calls that have made all the difference in the world. Regardless of the perils, the risks and the loneliness that entrepreneurs often face, I know that my path is to create, to build and to take something that perhaps only I can see and make it work. It is ingrained in my bones and my heart. I am a capitalist and I am an entrepreneur.

To me, there is hardly anything more difficult, more worthy or more inspiring than being a founder. What defines us is that despite the risks, the fears and the fact that almost all who try fail, we, by our own volition, start companies with the intent of changing the world. And we do so not as the consumers or dependancies of the initial spark that ultimately creates value, but rather as the producers, the irreducible primaries, of it. As such, our evolutionary path, our successes and our failures, not only affects us, but also radiates out to the entire startup ecosystem with which we share co-dependencies.

Yet, despite the importance of our quest, our path is rarely made easier by our own kind. We, the founder cognoscenti, are so rapt with our own efforts that we rarely lift our head, or rather our minds to help our own brethren. We, the great producers of value, seem to flip becoming the consumer of knowledge rather than the producer of it. As a result, we unwittingly end up stifling our brethren instead of helping them in ways that seem obvious.

While founders may have no formal leader, no formal structure and our borders may be unbound by geography, doctrine or rules, we are, in fact, a community. To create a shared sense of our current state through the fearless act of sharing knowledge or taking a position is what binds us together. To do so declares our state and consummates our union. To repudiate such an attempt abdicates our responsibility to one another, contradicts our nature as producers and inures us to a solitary existence where we set ourselves adrift in what is already tempestuous waters.

In a world which irrationally values quips over explanations, summation over detail, kind of getting it versus really getting it, it is essential to recognize the need for depth when depth is necessary. So however long, flawed or perilous my essays and writings may be, and even though my wife has grave concerns for the english language when put in my hands, if just one founder is able to extract a single shred of knowledge that completes a circuit, then it was worth it.

THE END

If you’ve made it this far, you’re nuts. And thank you.

I’d like to thank my father for inspiring me. I’d like to thank all of the people who read the Cult Creation I and, as a result of experiencing the sheer glory of my writing, kindly volunteered to help with spelling, grammar and sentence structure. I’d like to thank Tyler from AngelList Radio for kindly inviting me to do a podcast on Cult Creation II. But most of all, I’d like to thank everyone who has ever had the guts to join me in my journey.

For now I’m done. I’ve got to get some sleep. I’ve got four interviews tomorrow and I want to make sure I do my best when they interview me.