Episode 23 | Part Two: 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 joining me for the rest of my conversation with Matt Blumberg, the founder and CEO of Bolster, a talent marketplace for on-demand executives and board members. Matt is also the author of the fantastic new book, Startup CXO: A Field Guide to Scaling Up Your Company's Critical Functions and Teams. Matt, I wanted to get into the brain of a founder. When you're a founder, you know what the company looks like in your head, but sometimes it's tricky to align your go-to-market strategy with your product teams. The Valley is littered with several visionaries that were bad managers, plain and simple. How did you find the best way to navigate that?

Yeah, it is, um, it's a problem for 2 different reasons. One is, uh, is, you know, you may be too far ahead of, of the team, and I'll come back to that in a second. The other is you might be wrong. You know, it's, it's one thing to have good instinct and, you know, you sort of know what the company you want to build is and have it fleshed out in your head, as you said. But, um, for me, I think instinct and vision must be informed by data at every turn. It's a balance, and it's a balance for founders because you, on the one hand, you have vision and you might be inventing a new category, and customers aren't going to tell you what they want because they don't even understand what you're trying to do. At the same time, you have to be willing to some extent to co-create product with customers. If you're putting something in market that customers aren't taking to, you got to learn from that. So, you know, I think one thing is, is just rooting the work that you do in data and in primary data from the market to translate what's in your head to the team. And then the second part of that, which gets to your question, is making sure that your team comes along for the ride with you, that your team is also collecting that primary data and they're doing it with you, and you're having an opportunity to interact with them regularly. I always refer to this, you know, my company as bringing people along for the ride and you can't be too far ahead of them. You have to be on the journey with them.

That is very true. I've done that myself a few times where I have to actually catch myself often, you know, running off into the future and then realizing, hold on a second, I got to make sure the team's with me.

Right.

I think that's an incredible comment. When you mentioned data, Right. So that's a pretty broad word. So there's internal data, like you're— I'm assuming you're internally, you're thinking about like leading and lagging KPIs, and externally you're looking at like market conditions. Is that what you mean? Or is there more to it than that?

There's more to it than that. I think part of what I mean by data is just information.

Oh, got it.

Not necessarily metrics, but, you know, doing customer discovery, if you're following, you know, any form of lean methodology, Lean Canvas methodology, a lot of that's qualitative. It's not metrics, but it's collecting enough qualitative data to— in enough— in a structured enough way that you have the opportunity to learn from it pretty cleanly.

In my research, I've noticed that there's this huge drop-off. You see about a 90% failure rate across the board in a 5-year period of time. And after the first year, you notice a huge drop-off. It's like 40%, 50%, depending on the market, in the first year after leaving an accelerator. And so, one of the things that I think entrepreneurs are challenged with, and being a serial entrepreneur yourself, maybe you could shed some light on what causes that and how to avoid that from happening to you as an entrepreneur.

Yeah. This is a topic I'm really passionate about. And in fact, we're building product for this at Bolster. It's a program called Bolster Prime that's designed to exactly address this. But I'll talk about the problem in general, which is accelerators are great for helping founders find product-market fit and helping them find some first money. But those 2 things, and even early customer adoption, right? Those things don't equal someone who knows how to be a CEO and how to scale a business. And most founders haven't had a lot of experience in general, and there's only so much you can accelerate experience. You know, even the best accelerators can only teach a team so much about leadership and, you know, sort of make up for years of experience. So that's tough. No one— I don't think anyone can teach you how to react when things fall apart, and things always fall apart in startups. So, you know, what can you do? You know, look, mentorship is how accelerators work. Mentorship tends to drop off at the end of an accelerator program, so finding more mentors is important. When people ask me in things like this or if I'm talking to a founder, give me one piece of advice, the piece of advice I give is don't be afraid to ask for help.

Yeah, for sure.

For sure.

I'm super excited to talk to the person who is the founder of the internet division of Moviefone. If some of us that are a little bit older remember Moviefone, this was a big deal. At the time. What do you remember about that time? Is there any exciting, fun, cool stories or any horror stories or, you know, war stories that you could talk about during that timeframe?

Yeah, a few, a few kind of funny ones. So, um, Moviefone, which was 777 Film, hired me. Company was started in the late '80s as an interactive telephone company. The company hired me in early 1995. And The first thing I remember is there was really almost no internet then. There were dial-up services that had sort of walled garden content and their own UI, but the commercial internet was really at ground zero. And to sort of put the timing in perspective, my first job when I got to Moviefone was a project which was figure out if we should build a website or not. So, right, because we had this telephone version, this, you know, touchtone telephone service that was working really well, and America Online and CompuServe and Prodigy were offering us a bunch of money to build a proprietary version of the movie phone service on their platform for their users only. And then so we had this notion of like, well, maybe we should build this thing called an HTTP website. And, uh, you know, the technology was super crude. It didn't seem like a good idea for a movie site to have this terrible technology. You could barely load graphics. You certainly couldn't load any video. But we decided to go with the experimental website, which obviously ended up working out well. We had to build a lot of stuff ourselves. I mean, I'm not an engineer at all and I taught myself how to do HTML and was in there writing code and helping us get the business launched. But there were no tools that there— like there are today around website management that we just had to kind of figure out on our own. I'll tell you another really entertaining story with this. We launched the website in 1995, and then I think in 1996 or 1997, we launched an email application called MovieMail. Which was also reasonably groundbreaking. It was one of the first sort of commercial email applications that included e-commerce. So, you know, it was sort of, hey, what movies are opening up in your zip code this weekend? And here are the showtimes. And do you want to click and buy early tickets? That kind of thing. We had a big launch event planned in LA. The company was in New York. And we had a launch event in LA planned around the release of a movie called The Net with Sandra Bullock, which was sort of this, you know, internet caper movie. And, um, I recall that movie. I remember. So we had this whole thing lined up with the studio. They were doing a big ad buy with us, and Sandra Bullock was going to buy the first ever movie ticket over the internet. And everyone was freaked out about doing this live because we were doing it like on Entertainment Tonight. And, you know, no one had any confidence in the internet actually working. So We fly out to LA for this event, and it's me and, and 2 of the founders of, of the company, the CEO and the CTO. And the CTO had a server with him. So, and you know, this is 1996 or '97, so this was a big like Dell box.

Yeah, yeah.

This was not something small, right? And literally packed it as a carry-on. And then we get to LA and he sets up a, you know, a private network in, in the, you know, the venue where we were doing this launch event so that it wouldn't actually go over the internet. And, um, uh, it was, it was so funny, like the, this image I have of this guy Rob with all— with a Dell box on his back making it work.

That is so cool. That's the kind of story I love to hear, these old, old stories of stuff that we did back in the day that, that people now can't even fathom, especially a lot of the younger Coming up entrepreneurs. I want to talk about your current business, your day job over here as CEO of Bolster. As entrepreneurs, you know, we're always trying to find problems or fix them, and sometimes they find us. And when you looked at this talent marketplace, what problem did you see specifically that's— that, you know, made you light up and say, I need to do this, I'm going to do it differently? And what did you do differently?

So I believe that startups need something different when it comes to scaling their leadership teams and scaling their boards. And when I say something different, I mean something different than lots of ways those things happen today. So if you think about the practice of scaling a startup, and let's focus either on a CXO hire, a leadership team hire, or a member of your board, There tend to be 2 ways that those things happen today. One is what I call the I know a guy search. That's CEO is sitting and talking to an advisor or a board member or a full board and, oh, I think I need a new CFO, or I think I need a coach, or I need an independent board member. That starts the process of, oh, I know a guy. That's okay. That's how most placements happen, I think, in the startup ecosystem today, but it's not particularly comprehensive and it also is not particularly diverse. It tends to reinforce the same talent networks over and over again. The second way that startups find executive talent is they bite the bullet and they write a 6-figure check to a search firm. I don't think either one of those is a great way of scaling a leadership team or scaling a board. I feel like the world has moved in a direction when it comes both to technology to match up buyers and sellers or supply and demand and data to make really surgical matches and the evolution of the gig economy where more and more people are moving jobs more quickly and moving into freelance work. All those things put together convinced us that it was really the right time to introduce a new way of thinking about scaling leadership talent and scaling boards into the startup ecosystem. And I'm trying to draw the comparison here for our market periodically that there used to be one way of doing software development, which was waterfall. And you wrote the PRD and the MRD and you threw it over the wall to engineering and 6 months later, 12 months later, a product pops out and hopefully it's still the right product.

Yeah, you miss the whole market.

That doesn't work for startups. That's why the Agile Manifesto came about and now everybody in the startup world develops using Agile method and you're doing things in 2-week sprints and checking in with the market all the time and co-creating and that's how things get done quickly. I like to compare what we're doing with scaling leadership talent and board talent to agile, and the other ways of doing it are a little more waterfall.

Ah, so you do agile talent development. It's very, very interesting. Speaking of Bolster, your company recently did a study. I found this really, really interesting of independent board members and board diversity, which revealed that most early-stage boards lack racial and gender diversity. as much as boards in more sophisticated companies. And I'm wondering, when you did this study, are there things that surprised you that you didn't know were going to surprise you? I mean, you know, there were probably things that you were going to go and you were going to say, oh, probably some racial diversity isn't there, blah, blah, blah. There's a lot of stuff out there that's like that. I'm real passionate about this personally.

Yeah.

And but I'm wondering if there are things that you found when you did that where you were sort of T-boned sitting there going, wow, that I did not know, or I thought differently.

Yeah, there was one thing that I found absolutely stunning and it's not that startup boards lack gender and racial diversity. It's that they lack independent directors. So for me, I've always had independent directors on my boards and I usually try to have as many independents as I do investors or even more independents than directors. It's never occurred to me not to have that, but in our study, Only 1/3 of the companies that responded have independent directors at all. 2/3 of them don't have any. Even the Series C and D companies, only 60% to 70% of them had independent directors. Then the majority of seed and pre-seed and Series A companies, the overwhelming majority of those companies don't have any independents.

Wow.

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. That's, I think, a good recipe for building a balanced and highly effective board.

Really is. Really is.

The thing that really surprised me was just how few startups have any independents at all. Zero. Wow.

So they just have investors?

Investors and sometimes multiple founders and I don't think multiple founders is helpful either.

No, I agree. I agree. There's— sometimes it's hard to see the forest through the trees and you need to have somebody from the outside. I want to mention one thing before we have the last question and this is that under your leadership, Returnpath won all of these awards, employer choice awards including number 2 on Forbes Magazine's Best Companies to Work For and And so on. Are some of the findings and the learnings that you did to get you to that sort of a status as a leader where the people that work for you are inspired and just love working there, are those things in this recent book or in a different book? And what were those things? I found that to be so cool. I remember Return Path. So, one of the businesses that I built was an affiliate marketing company that I sold to eBay. So I remember Return Path very, very clearly and I didn't know this about you and I do remember that the awards and everything and I was like, wow, that's really cool. I wonder what the guy is doing. Maybe you could share that with the listeners.

I think it was really simple or at least simple in my mind, which was I believe that the best businesses are the ones that care the most about their employees. For me, there's just a really clear pecking order. If you have the best people and the most engaged people and you're not just recruiting good people, but you are retaining them by treating them well and by developing them and growing them, then you will by definition, I think, do the best work for your customers. If your customers are happy, then your shareholders will be happy. For me, it's always been sort of 1, 2, 3, employees, customers, and shareholders. I think that focus on the employee and the employee experience is a large reason why we won a bunch of awards over time. I think we were very innovative in terms of our people practices, our HR practices, but it was sort of codifying all that into this culture that we called the people-first culture that, you know, we had a lot of people at the end when we sold the business after 20 years. We had a lot of people who had been there 10+ years and a huge number of people that had been there 5+ years. And, you know, I look at resumes all the time and, you know, the average length of time someone's at a job is 2 years or 2.5 years or whatever it happens to be.

Yes. It's 2 to 3 years. Yeah, you're right. Exactly. Every time. Yeah.

So we just thought it was a winning business strategy to be a people-first organization and that led us to, you know, I think lots of good decisions over the years.

When's that book come out?

Maybe after the next exit.

I was stalking your Twitter and I saw some great pictures of you and your wonderful family and I don't think that this particular question is asked enough of entrepreneurs. What's the best way to balance the corner office at the business and the corner office at home? How do you balance that work-life when you're a CEO?

Yeah, I think there are a couple of things. One is I've always drawn some pretty hard lines around when I'm working and when I'm not working. When I'm not working, I'm really not working. I'm present with what I'm doing at home. The lines have changed over time. I started Return Path, I was single in my 20s and now I'm in my 50s with 3 teens. But there have always been hard lines. When I was married and running Return Path before we had kids, I kind of worked all the time and my hard lines were vacations. My wife and I took a few weeks off every year and literally turned everything off, email, computer, phone, etc. Then when I had little kids, the lines became more nights and weekends. It's just about making that commitment.

Yeah. I think that's really why I do the same thing. The word that you said that's really important, I think, is present, right? Because you can be there and not be there.

Exactly. Yeah.

Earlier in my career, I did a lot of that where I was there, but I wasn't even on my phone or anything like that. My head was somewhere else. I think that is a key word. I really, really appreciate your time. I really, really thank you for joining the show. I think your insights are amazing and I recommend I recommend to everybody read the book. Thank you so much, Matt. I appreciate it.

Great conversation. Enjoyed it.

I did too. His name is Matt Blomberg. His new book, Startup CXO, is out now, and you can find out more about Matt's talent marketplace at bolster.com. And that wraps up this episode of The Boss Podcast. If you enjoy the show, please take a second to subscribe so you automatically get my new shows when they drop. Also, if you have a minute, I'd love it if you left a review so more folks like you can discover the show. I'll see you next time. Namaste, my friends.

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