Manufacturing Momentum - Letter from Hector
Hector
Beneath all of the guff and without the founders, early-stage startups are inert.
In chemistry, an inert gas is chemically inactive. There are six inert—a.k.a. noble—gasses: They don’t react with hardly anything. They sit there, lifeless and unmoving like I was in recovery from covid (unresponsive even to hilarious episodes of Rick & Morty).
There is nothing noble about inertia in early-stage businesses. Nobody else will send the email that the founder needs to send. Nobody else is going to solve the problem of having no systems or sales. If the founding team doesn’t turn up, nothing happens. (It’s odd to think about, but honestly, nothing changes.) Customers don’t get closed; the product doesn’t get developed: The company begins to evaporate as soon as the founders stop. The world forgets about the vision, and eventually, GoDaddy shuts down the domain. This is the number one reason people are nervous when dealing with startups: They can disappear. Poof! Gone. This is the steady state of a startup, but it’s not its forever state.
After a lot of puff, the status quo changes. Further down the road in a startups life, if the founding team were to stop working, they will undermine their roles as directors and be replaced by the board. Their team will take up the slack, and the project will roll forward under new leadership. The startup becomes a system with a purpose and stabilising feedback loops (think HR, Christmas parties and weekly roundups). A startups founders are often not there when the business has grown up. The skills needed at a late stage are different.
This week Coinbase grew up. It IPO’d at close to a $100bn valuation. It’s hard to believe it, but Coinbase was once lifeless and inert. Its founder, Brian Armstrong, posted on Hacker News in 2012 looking for a co-founder. This was the status of his business then:
“I’m throwing a hail mary here - because desperate times call for desperate measures. I have an awesome prototype built that brings an emerging tech to the masses and I think has a good shot at changing the world. YC has expressed interest (got to the interview as solo applicant in the last batch but decided to defer without a co-founder). This idea won’t be fresh forever (there are others starting to look into it) so I want to move on this asap with the right team.”
The criticism of Armstrong’s business on the subsequent thread is brutal.
“Did you invest in Bitcoin when it was $21, and want to bring that price back up?”
says one commenter (bitterly). BTC has now passed $60k. The prototype is a little janky in the screenshots, but through hard work and manufacturing momentum, Armstrong and his team have created a big company.
Reading Armstrong’s post is inspirational for any founder: It’s a window into the hard days of building momentum. The founder’s job is to get the project from the temperamental inert stage to a purpose-driven ‘system’ stage as fast as possible. If she can do that, she unlocks the freedom to focus on life beyond day-to-day survival. The role instantly becomes more strategic and less about the weeds. Manufacturing momentum is about building an organisation that progresses towards a shared vision organically.
Manufacturing momentum at an early stage is uncomfortable. Inventing and extolling a vision of a different world is—by definition—about changing things up. The world likes the world as it’s always been. You can get a sense of that from the comments in Armstrong’s thread: ‘I don’t think you’ve properly thought this through. Many people have, and there’s a reason we still have the system we have today’. The world outside of the startup pushes back, but so too does the world inside the startup. There is a lot of pushing back: A lot of inertia.
Creating momentum is cumbersome because it is. But, it must be embraced, like sweating in Bikram (you can’t fight it). As the pull from customers gets more substantial and the systems get tuned, the clunky nature of world-building becomes less intense. For early-stage businesses in ‘hard’ markets with long sales cycles and distractions, the daily challenge of battling inertia is essential because it can go on for so long.
We are at an early stage, and I think a lot about it. From where I stand, there are two phases of manufacturing momentum: Strategy and execution.
Strategy
These are all things that a founder can do before the workday starts.
Committing to a business plan
Having a simple business plan that the team commits to is critical. If everyone understands the bigger picture and is encouraged to think about the system, the team will solve problems organically.
Defining responsibilities and tracking them
Ensuring people feel ownership over elements of the project is essential for buy-in. At PayPal, “Peter [Thiel] required that everyone be tasked with exactly one priority. He would refuse to discuss virtually anything else with you except what was currently assigned as your #1 initiative”, said Keith Rabois of his time at the company.
Saying no
Momentum gets wrecked by having too many priorities. Saying no to the next shiny thing is often the most important thing to. Having too many directions to run in gets confusing for everyone involved. Two can be too many.
Execution
These are actionable things that are done ‘live’, at work.
Raising money
We’re bootstrapped, so I have mixed feelings about raising money. However, aside from the cash itself, one tremendous upside is the motion it manufactures. Raising acts as a forcing function to clarify a business plan, get widespread buy-in, and then committing to dates (as laid out in the plan). Suddenly, other people’s money is at stake: It bears urgency like nothing else.
Hiring a team
Hiring is not possible or sensible at the very start because there are too many known unknowns (will customers buy, for example!). Answers can be discovered by the founding team early on. Once the significant unknowns are bottomed out, then it’s time to hire. Hiring creates momentum because it means (a) more hands to push forward initiatives and (b) costs rise, so revenue becomes critical.
Routine
Routine is one of the most critical things any founder can get on board with. It’s the precursor to getting the engine running. If a founder and founding team build internal momentum, then the cadence of their product updates, customer interactions, and decision-making can increase. Brian Chesky of Airbnb said that Y-Combinator was responsible for forcing routine. Accelerators can be valuable for this.
Final thoughts
No one wants to be uncomfortable. Sometimes life feels like mile 14 in a marathon: There is still a very long way to go until the finish, and everyone knows it’s going to be horrible. I’m English, so I am happy to say that we aren’t very good at manufacturing motion. The English are lucky: We wait for things to turn up, or we see what happens. We are laissez-faire about outcomes because it’s never that bad. I used to work for an ex-trader American who went ballistic all the time. His “HECTOR?! OH MY GAAD, GET GOLDMAN’S ON THE PHONE” still rings in my ears like tinnitus. Was this good management? No. Was it fun to work for him? Again, no. But did it manufacture momentum? Yes, it was uncomfortable, but it worked.
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