Episode 23 | Part One: Critical Teams

Gregory Shepard, an entrepreneur who's built and sold 12 businesses, a recipient of 4 private equity awards, TEDx speaker, and Forbes author. This is The Boss Podcast with Gregory Shepard.

Thanks for taking the time from your busy schedule to join me in another episode of The Boss Podcast. My guest today is Matt Blumberg. Matt is the founder and CEO of Bolster, a talent marketplace for on-demand executives and board members, and the author of the new book Startup CXO: A Field Guide to Scaling Up Your Company's Critical Functions and Teams. Matt is like a spiritual brother of mine. He's dedicated his entire career to creating startups, scaling them, and sharing best practices of what works and what doesn't work. Matt, thanks so much for coming on the podcast.

Absolutely. It's great to be here.

Matt, we have so much to talk about and so little time. So let's just dive in and talk about your book. This book is fantastic. In fact, I just sent it off to all of our portfolio companies and said, this is a must-read. You have to read that. What led you to write that book? Like, what series of events got you down to the point where you're like, this is the book I'm going to write, this is the topic I'm going to write about?

So my first book led to the second book. So I'll tell the story of both. So Startup CEO, which is the book I wrote in 2013, and then it did a second edition in 2020. It was designed to be an instruction manual for the first-time CEO. And I wrote it because I really wished I had had one and just, you know, felt like there's so many people that are starting companies younger and younger with less and less experience that, you know, just kind of jotting down for them, here's how to do a whole bunch of things, was something I had been wanting to do for a long time. So I had this blog, startupceo.com, with hundreds and hundreds of blog posts of, you know, my experience as a founder. And that plus some new material turned into Startup CEO, the book, which is 65 chapters of how to do X, Y, and Z. How to hire someone, how to do a pitch deck, how to run a board meeting, how to work with an EA, that kind of thing. And that book spawned a lot of questions from CEOs along the way. So there's one chapter of that book called The CEO as Functional Supervisor, which is one of the important parts of the job of being a CEO is you got to You gotta manage the head of sales, and you gotta manage the CTO, and you gotta manage the CFO, and the head of HR. And most CEOs have never done any of those jobs, right? At most, you've done one or two of them. So I had all these questions from CEOs who were reading Startup CEO saying, man, what I really need is an instruction manual for how to manage each of the people on my team.

Mm-hmm.

So that was kind of the genesis of Startup CXO. And what I decided to do was pull together people that I'd worked with in my career who were 20-plus-year C-level executives in each of the different functions— HR, finance, marketing, sales, etc.— and have each of them write, you know, 20 chapters about what it's like to run that function at a startup, what it's like to scale that function, what are the critical competencies, what do you do, what do you do when, what do you not do. How do you relate to the other functions on the executive team? And basically, we put all of that together in one book. So Startup CXO is a book of books. It's got sections for each major functional area written by a functional expert, and then it has some connective tissue that I wrote in at the beginning, at the end, and in each section about, you know, sort of how I think about that function as a CEO.

That is really interesting. You know, I talk a lot about the horse and the jockey, right? The horse being the business product And then the jockey being the entrepreneur. And a lot of the times, we're focusing on the product, right? We're trying to— as an investor, I'm looking at the product. I'm looking at the product. Is the product good? Because a lot of times, you can't judge the entrepreneur, right? It's really— especially if they're a new startup entrepreneur and they've never ridden the horse before, right? They're bound to make some mistakes. But what you're saying is give them some initial training that says, hey, this is how you do this. This is how you do this. Watch out for this. Avoid these minefields and so on and so forth. So do you find that when people read the book and then they come back to you, that they come back and go, I've tried this with these functional area leaders and this really worked and that really worked? And does that lead you to a third book?

There is a third book in the works actually. It's going to come out early next year and it's called Startup Boards. So we have Startup CEO, Startup CXO, Startup Boards. And Startup Boards is actually a second edition of a book that was first written by a longtime investor and board member of mine, Brad Feld, from Foundry Group out in Colorado, with another venture capitalist, Mahendra Ramsinghani. And I've written a tremendous amount about boards from the CEO's perspective, and I've been an independent director on a bunch of boards. And here at my current company, Bolster, one of the things we help CEOs do is build their boards. So we're doing a Startup Boards second edition that will come out early next year that hopefully will sort of complete the set for The CEO.

Oh, that's amazing. I think that's really— I can't wait to give this out to all of our portfolio companies. It's very exciting. I mentioned in the opening that you've had this incredible career. What elements of your career prepared you specifically for Startup XO and all the books, I guess? I think now we should talk about it more broader than just that one book because you're a serial writer.

I guess, yeah. I am also a sitting CEO, so that's where most of, uh, that's where most of my time goes.

That's why they're so good, right? Because you have real practical boots-on-the-ground experience.

Yeah, I, um, like to think of myself as a student of the craft. Everything I do, no matter what it is, but, but, you know, being in business and entrepreneur and founder and CEO, I want to be as good as I can at it. And a big piece of that is making sure I'm constantly learning, and I'm learning from Outside sources, as well as learning from you know my own experience and the experience of my team, and doing retrospectives all the time. And I think with with all of that and the passage of time and experiences at different companies, sort of you know those those come together to give me not just the passion to do my job and do really well at it, but kind of document it along the way. And there's a great a great as it relates to the books, there's a great quote from Toni Morrison, the Nobel laureate. writer, she said something to the effect of, if there's a book that you want to read and it doesn't exist, you're obligated to write it. You must write it. That was— I really felt the case with both of the books so far.

I've done a dozen— I've done 12 exits as an entrepreneur and they're all different. Every single one has nuances here and there. I'm wondering, with your experience of exiting a startup, What has your experience been like in exiting these things? Is it the same as me where every one of them is a little different and there's nuances here and there, or do you feel like there's some things that are consistent from entity to entity?

Well, first of all, I haven't done a dozen of them. Good for you. There's certainly a lot of things that are different from situation to situation, but I can give you a couple of thoughts of things that I think are consistent from time to time or Or things that, that I've tried to do from time to time. So, and these are, I think, all sort of about the, the mental side of being a founder or a CEO. One is you want to prepare yourself mentally and emotionally for an exit way before you exit. The founders that I know that have had the hardest time leaving a business have been the ones who didn't do that. You know, I think you can simultaneously say, hey, I'm going to be in this business forever, and, you know, I'm the founder and it's going to be great, and also have in the back of your mind, well, what if I'm not? You know, what, what's going to happen someday? So I think that sort of mental preparation of what's it going to be like to have someone else run this thing, um, was very helpful for me, uh, in, in our exit. I think related to that, I am a big believer in marking transitions. And I think one of the ways that I certainly help myself and try to help others in our organization mark change, manage change, is to mark transitions really effectively. So, you know, the opportunity when you're exiting a business to say thank you to the people that have helped you along the way, to say goodbye. if you're leaving the company. To help all of them with the transition from one owner to another or one CEO to another, I think is something that is pretty important as well. And then finally, it's around exiting, really wanting to leave the organization, whether it's the products or the customers or the people, in the best possible shape. So that, you know, when you hand that baton off to the company that bought your company and you're handing things over to them, that you're really proud of what they're taking.

I agree 100%. I think it's really— that transition is really important to do it, you know, with grace and respect and honor, I think is a beautiful thing. I was at a— the other day, day before yesterday, I was at Camp Pendleton at the Marine Corps and I was doing a war game exercise with A whole bunch of colonels and that sort of thing. And one of the things I saw on the way is a change of command. And the way that they handled the change of command was just— it was beautiful. I just stopped and watched it and it was absolutely beautiful. And it— when you said that, it made me think about that, right? About this respectful honor in terms of transitioning, you know, yourself and your role to the next person who's taking over that. I think it's Really cool that you mentioned that.

It's an honor to be compared to Marines.

Yeah, it was really cool. I mean, they had— it was joint forces, so it was people from all different branches of the military. It was a really fun exercise, actually. I want to ask you a question, go back to the book a little bit. I had this thought when you were talking and I came back and forth and I decided I should ask this question because I think the listeners would really appreciate it. Tell me about the role of Of a CXO, and what does that entail? Like, unpack CXO a little bit.

Yeah, so first of all, CXO, if people aren't familiar with it, is just Chief Something Officer. So, you know, any, any C-suite leader in a company. So I think there are, you know, maybe 4 important things you have to do to be an effective Chief Something Officer— head of sales, head of marketing, head of HR, head of finance. One is you have to really understand all the details that go into making your function work. So, you know, fortunately, by the time most people get to be a CXO, they've come up through the ranks of their function. They may not know all of it, right? Think about it. If you come up through marketing, maybe you were a brand person, maybe you were a demand gen person, maybe you were a digital person. So you may not have done everything, but you really have to understand all the details that go into making your department function. The second thing, which is sort of a layer up from that, is you have to have a strategic framework for your department or a reason for being, right? As they say in French, a raison d'être. I'll give you an example of this. My longtime CFO and multiple-time co-founder, Jack Sinclair, who wrote the CFO section of the book, talks about finance as a partner.

Mm-hmm.

His strategic framework for the finance and accounting department is to partner with the business, to partner with fellow executives and decision makers to provide them with actionable information. Whether you like that particular thing or not, that's an example of strategic framework for a functional department.

I think it's really beautiful because a lot of times they're at odds with each other. Finance is the unappreciated bad guy and poking holes in all the sales. I think it's really important in that comment about partner with them and really work with them and try to establish a relationship where you're weaving through the tapestry of the business functional areas together, I think is really, really cool. And I know in your book, I read that part of it. It's just really— I think your book's really good, by the way. I've been building companies for 25 years and I thought it was really good. And I can't say that about all these types of books.

Thank you.

Yeah. Really well done. As you know, a lot of times scaling a business is harder than starting a business. For the listeners, I wanted to know if you could give us some advice on the major issues and what comes up when you actually switch from that growth mode to that scaling mode and they're usually really close together and crash into each other.

Yeah. I mean, I'll give you a couple of things that I've learned over the years. One thing in terms of myself that I've always found is Is obsessing about seeing around corners, not just about knocking out the tasks that are in front of me. People will always be driven by the urgent, right? The things that someone's throwing at you that you've got to react to. But the ability to have a longer horizon and operate in multiple horizons at the same time is so important. So yeah, you've got to clean out your inbox every day, but you also need to make sure you're making the quarter and that you're set up to make next quarter and that you're going to make the year and that you're thinking about next year and the year after. And that gets trickier with organizations that are scaling rapidly, but, you know, but it's even more important. The second thing for me is thinking about the organization as a talent machine. So not just thinking about like, hey, how do I hire the best people for the job at the moment, but how do I get the organization to produce the best people At level 1 for level 2 and at level 2 for level 3 so that over time you're not constantly having to hire in senior people all throughout the organization, but your organization is growing talent. The third thing for me that I think is really hard for founders is what I call learning to love the teardown. It's really easy to tear down someone else's work and build it back up as your own, And it's really hard to tear down your own work and build it back differently. And if you're the, you know, the architect, the founder, the CEO, you know, the people and the processes and the systems you put in place for a $2 million business are really different than the ones you need when you're a $10 million business. And you have to be the one to tear it down and build it back up.

That is incredibly wise. That is very true. You have to restructure as you go through the different gates along the lifecycle of a startup. I agree 100%. Give us a little more on that. So, if you're essentially this talent machine, right? So, you're hiring a certain type of person and then you're fostering their development until either they get moved down, move out, or you move somebody in or they move up, right? So, are you hiring somebody that you think can be there in the future or are you hiring somebody that you need right now? Like, what of those 2 is the primary focus?

You know, yes is the answer. And it depends a little bit on the job, right? Different teams and different departments kind of function differently. So here are 2 examples that are extremes, right? Sales, you know, most— if you talk about an enterprise sales organization, you're talking about an organization that can have many, many different levels in it. And each level, as you move up, carries more quota and works on more complicated accounts. And it's incredibly painful when quota walks out the door, right? When you have a senior sales rep with a big book of business walks out the door. But it's a lot less painful if someone who's handling smaller accounts, commercial accounts, mid-market accounts can bump up to that role and pick the book of business up. So a selling organization where you can start with SDRs or BDRs and move them into a junior rep and move them into a commercial rep and move them into an enterprise rep You know, is the example of you hire someone for what you need today with an eye toward what you need tomorrow. But at the same time, you need today's job done and you need it done well. And we always, you know, we always told people, you don't have to be here to get promoted. And what I mean by that is there are, you know, there's some people in life that are just great doing their job. And they don't necessarily want the next challenge and the next challenge and the next challenge, and that's okay too. So it's kind of balancing that out to make sure that you have enough stability in your organization, but you also have people who are promotable to the next level at all times.

So let me ask you this. So one of the things I tell people when I'm talking to them is that I see all the time, you know, I did this study on why entrepreneurs fail. It was like this 5-year thing and, you know, 1,200 interviews and hundreds of thousands, like 5 people. It was a big, big project. And when I did that and I was learning why they failed, One of the reasons is that they hire senior-level executives when they're still in pre-seed or seed or even series seed. And those people are used to hiring people to do the job and not actually rolling up their sleeves and doing the job. And a lot of times they don't even know how to do the job. They know how to hire the right people to do the jobs.

Right.

How would you— how— what kind of, I guess, advice would you give to an entrepreneur when they're in the situation where it's like, okay, well, I need somebody that can roll up their sleeves and work in a startup. But I also need, uh, you know, an FAL, you know, a functional area leader, but I can't afford them right now. And maybe the person that I'm hiring to do the job now can't do that, but then they might be upset when I hire over them. How do you handle that sort of a scenario?

Yeah, it's, it's, it's really tricky. There are, you know, there are a couple different thoughts that I have on that. One is I, I think hiring for stage experience is just as important for— as hiring for functional experience or domain experience. Finding people that are comfortable at whatever series you're at and understand what that is and they've done it before is really important. Not to be promotional, but one of the things that we do at Bolster, which is my new company, is we place interim executives and functional mentors and other things too, like board members and full-time executives. But interim and fractional executives are incredibly helpful and useful for early-stage companies who can't afford full-time C-level help in every seat, but who do need to augment a more junior team with some experience. So I think the gig economy has moved upmarket, and I think the notion that you can have that expertise without having them W-2 full-time is, is here to stay.

I agree. Well, hang on, Matt. We have to take a quick break, but coming up in the second part of my talk with Matt Blumberg, the founder of talent marketplace Bolster and the author of the new book Startup CXO, Matt discusses the importance of adding independent directors to your board.

My mantra for startup boards is what I call the rule of ones, which is add independent directors from day one. Only have one member of the management team on the board, and for every One investor have one independent. And that's, I think, a good recipe for building a balanced and highly effective board.

Learn more about the BOSS Business Operating Support System at bossstartupsience.com, or you can reach Gregory Shepard at gregoryshepard.com. This has been a production of Forbes Books.