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Companies are usually the reflection of their founders. They have their virtues, their principles and their way of doing things. They obviously inherit their personality, bad or good. 

When you remove the founders, you lose it all. And with that, most of the times you lose the reason why that company was successful in the first place. Most companies never recover and they simply go on to become zoombies. Mediocre products, unmotivated teams and flat revenues. 

If you are new to this world, you might ask “why are founders so critical?”. There are many reasons, but the only two that matter are: because they have the gut to follow their instincts and they are the most knowleadgeable about their business, industry and market. 

When founders are in charge and have commitment, they solve problems no other executives will ever solve and they create products that you will never have without them. 

Why private equity doesn’t work for founders

Because in PE there is no appetite for risk. Zero. Nada. 

There is no appetite for new products that are working just in the founders’ mind and little interest in waiting months or years to test things out. Founders are visionaries, they are stubborn, sometimes arrogant and willing to take big bets. PE is nothing like that and the people you work with have never “lived” or “built” a company. They come from great business schools and have lots of financial knowledge.

Most importantly, your vision, your intuition and everything else isn’t of interest to them. Your company is a spreadsheet and ebit is the only thing that matters.

This is why you often hear how bad it is PE for tech companies and for their founders. Tech is about innovation, bets and creating something that doesn’t exist yet. It’s not what private equity is about, it’s actually the opposite.

Sometimes it works, but it rarely works keeping founders at the helm. Founders can make a ton of money with PE (nowadays, unfortunately, that’s often the only exit strategy), but they rarely maintain their companies or stay there for long. 

A well balanced read about PE for founders: https://www.saastr.com/rise-private-equity-saas-gift-founders/

I promised myself I would have tried to list down learnings from my 10 years building Cloud Academy, my previous company where I was CEO and co-founder. I left the company in September 2022.

I will start with some that I’ve been thinking about a lot. I will start today and hopefully I will add some more over time.

1. Everything starts small, everything
2. Trust the compounding effecft
3. You can’t work with mediocre people
4. You shouldn’t do what others do
5. Demand customer obsession from your team

1. Everything starts small, everything

Like any business, we started small. This is something I keep reminding myself years later: every company starts small. When I drive on the highway I love to look at the many companies you see and ask myself how to they got there. How did they become a 100, 1000, 10000+ people company? They started small, with one or two founders and an idea. Even the biggest business in the world started there.

It’s something I really strive to remind myself because it motivates me and it gives me hope. Building a business takes 10+ years and everyone started small. It’s possible, things will grow and change as time passes.

2. Trust the compounding effect

I wish someone explained this to me 20 years ago. The compounding effect is one of the most impressive things you can experience in life. While building a business you should remind yourself of the power of compounding. If you write 2-3 articles about your product every day, for 10 years, you will likely achieve millions of visits and those articles will rank in the first page of Google. The same happens with everything for your product: that could be a newsletter, building an audience or adding features.

Do that every day. The first month you will feel bad, like you are going nowhere. After 12 months things will be slightly better and you will see the first results but you will still doubt yourself from time to time. When you do that for 10 years, every single week, you will be amazed by how much progress you made. It happened and you almost did not notice it. We did that on several things at Cloud Academy, some more than others but every time we have been consistent with that, results have been impressive.

Entrepreneurs that are incredibly dedicated and consistent in their execution always go far. It’s just a question of time. Whenever I find myself starting something new I like to think about the compounding effect of repeating that for 2-3-5 years and the results that it will create. My day immediately gets better and I find the right motivation to keep going.

3. You can’t work with mediocre people

Like every entrepreneur I used to try to make everything work. It’s a good principle and it works with almost everything assuming you have time: you can try and try again until it works. But it doesn’t work with mediocre people. If you are working with someone that is mediocre, it will be almost impossible to change that and your business will ultimately suffer. Your best people will leave when someone mediocre is in power and sometimes even when that person is just part of the team.

Get rid of mediocre people as soon as possible. It’s better not to be able to do something that having someone mediocre executing on it.

There is not much else to say on this point mostly because there is no solution to this problem if not letting mediocre people go!

4. You shouldn’t do what others do

What I mean with this is the following: don’t do what everyone else in your space does (in terms of software, product, marketing, sales playbook, you name it) because you think they are winning. You don’t know that, you are just looking at the final results (sometimes with bias) and don’t know why they are doing that! Great companies are created when people stop following what everyone else does and start creating something new, without knowing what will happen. A similar principle applies to competitors.

In these 10 years I’ve worked with brilliant people that could see the future, constantly taking risks and innovating, but also with people that spent 30 years in their industry trying to do whatever their competitors would do, always fearful of trying something that was not sustained by market research and tons of data. In the end, the latter always lost. They got beaten by competitors and by smaller companies that did not have any fear of trying something new. Most importantly: they got defeated without seeing that coming. When they realized that, it was simply too late.

As entrepreneurs it’s difficult sometimes to trust ourselves but it’s important to have the courage of trying something new. Build software that doesn’t work like every other software in your space and simply ignore how everyone else had done that until now. It could be a business model, it could be your marketing strategy or your product. Do something unique, that others are not doing. If you succeed, it will give you a competitive advantage that is difficult to achieve otherwise.

At Cloud Academy we have built enterprise software that looked very different from our competitors. We did not even look at some of them and we created functionalities and features that were considered “useless” in our industry. It took us quite a lot of time, but those features became incredibly powerful and customers would pick us because we were different.

We couldn’t have done any of that listening to people that told us to follow the “rules” and do what the market was expecting us to do.

5. Demand customer obsession from your team

We could have done better here. It’s a learning I really try to keep in mind. The moment your engineers don’t care about your customers’ issues anymore, you are in trouble.

Everyone likes to say they are customer obsessed but it’s difficult to see that in action and even more difficult to make it happen in your organization. Your team needs to be reminded every day that customers are their #1 priority. Ideally you need to have strong rules in place to make sure everyone takes care of customers and does that quickly, always with a smile. I can’t think of a better combination to grow your business: customer obsession + sense of urgency.

Looking back I would have loved to do more on this matter. Your customer support and success team should be measure on speed and ability to really be obsessed by helping customers. But so needs to be the rest of your organization: I hate listening to engineers or PMs complaining about customers, and I hate even more seeing customers’ problems becoming just one of the many things listed in the backlog. It usually goes like this “If we do this for them, we will need to do that for all the other customers as well” or “This account is small, they did not pay enough for having priority support” or “If they wait until Monday it will make no difference“. That’s when I started shacking! All of that is wrong. The way you operate with small customers defines you as an organization. You know why? Because small customers become large customers and if they stay small…they talk to a lot of other small, medium and big customers.

Customer obsession is something you need to build in your culture from day 1. From the CEO to the last person in the company, everyone needs to talk to customers and be obsessed by them. And if you think your team is not acting with that principle in mind, stop everything and make it a big deal until everyone understands that customers are their #1 priority. When you do this everything else becomes easier, starting with sales and renewals. Most importantly, your customers know they are your #1 priority and they will think twice before leaving you.

Most companies require 10-15 years to get to something meaningful. You, as a founder, will spend that time to grow, grasp and finally master your product and your market. Your company will become very similar to you and so will your culture.

I have been extremely fascinated by the idea of building something that doesn’t have an expiration date. Call it IPO, exit. Nothing.

Going long allows you to always make the right decision for your customers and most importantly, for your people. It forces you to always prioritise what will make them successful and have the time to keep doing it over and over. And with that comes an operational and financial discipline in running your company that it’s difficult to build otherwise.

The aspect that I love the most about it? Having the time to really build something great, whatever it takes in terms of months or years.

It took me a while to understand that this would probably the best thing I would enjoy as an entrepreneur in my future venture. Going long.

This is something I would love to tell to a younger Stefano. I recently (finally) met a great mentor who reminded me how important it is to surround yourself with the right people while building your company.

While you build your company you should ignore 3 types of advisors/mentors:

• Corporate guys: they are top manager in a BigCo, never been entrepreneurs and never will be. Almost always useless for entrepreneurs as mentors/advisors unless they want to buy your product or invest in your seed round but even then it should be it, don’t give them control/board seats etc. They don’t understand what you deal with but they will pretend to and give you more issues than benefits.
• “The wannabe“: I met many in my journey. This is a tough one. They might present themselves as entrepreneurs but once you dive deep they will likely be involved in 34 different things at the same time, they are advisors, mentors, CEOs and talk like they have seen it all. They are always looking at a conference to attend and ideally speak at. They are building their brand and trying everything to see what works but they are usually clueless. The first rule for an entrepreneur is to focus on one and one only thing. They will waste your time and sometimes do also damages, mostly due to their inexperience, like saying things they shouldn’t about you to other people or give you (really) bad advices on how to manage your company.
• People that are doing it for the money: the best advisors and entrepreneurs help other people because they enjoy it and love it. It’s a great way for them to give back and something that they naturally feel the need to do. Yes, they absolutely need to be compensated (don’t commit a mistake here, always pay them, mix of cash/stocks with clear expectations) but they are genuinely involved because they like you, believe in you and have really something to say. They probably don’t need your money but paying them (stocks, with vesting, is the best thing), even something small, makes a difference in your relationship. The best people in this category do something amazing for entrepreneurs: they will be there for you when you need them but they are humble enough to step back when they don’t know/understand something and they will be transparent about it.

Why a mentor is so important is something for another post 🙂