Operations Best Practices with Adam Spector of AbstractOps

All right, all right, hello everyone, uh, welcome to this, uh, alumni master session for, uh, the Founder Institute. My name is Mike Superbici and I lead the alumni success group here at FI, and our role is to help you scale, and we try to do that in any way that we can. Sometimes we do that through various post-programs, other times we do it through one-on-one advice. Other times we do it through alumni master sessions like this, and what an alumni master session is, is that we bring in an expert on a very specific topic that's very relevant to the, you know, the time right now, and we bring them in and just basically like dive into their knowledge. And as usual, if this is— if first of all, if this is your first alumni master session, we want these to be highly interactive, so I can see A lot of you folks here in the chat room are already starting to say hello. Hey guys, I recognize some of the names here. It's great to see everybody. And we try to make these super interactive, right? And so if you have any sort of questions, you know, for the, you know, for the guests, just feel free to put them in the chat and I will definitely try to relay them. So that being said, I want to go ahead and introduce Adam, who's a top-rated mentor here at the Founder Institute. And we decided to say, hey, You know what, let's go ahead and bring you on to talk about this concept of operations, which is highly, highly relevant right now. So Adam, I'm going to go ahead and give this over to you. Thank you so much for taking the time to share all this knowledge with our community.

Mike, it's my pleasure, and hopefully to the community, I hope it's valuable and a good use of your time since, as you'll hear in this presentation, being focused and using your time wisely is a critical element of startup success, and also being good at operations. Uh, so, so super briefly, um, about me. So I'm a 3-time founder. Um, I've also invested in, um, close to 40 different companies as an angel. Um, and I was most recently doing product actually at Twitter. So a variety of different roles that I played in the past and a lot of different experiences. But one of the key ones that I've experienced in every single one of my startups, and actually my current company Abstract Ops is really focused on, is how to automate and make operations far easier, because they take so much time, energy, and effort for startups to get operations right. And so it's tough. So hopefully this will help give everyone an overview of how to do it the right way and how to really think about it. So here's kind of the key starting point, right? I view operations as almost like a pit stop crew, right? So if you're a race car, if you're into race cars— I'm actually not a huge race car person, but I think I know what a pit crew is, right? They're the people who help make sure your car's running at full speed. You can never win a race unless you have your team making sure your car is running at full speed. So the wheels are in good shape, you're gassed up, you're ready to go. So you might be— your company might be the race car, you might be the driver, but you need your operations essentially around you to make sure that you are driving as fast as you possibly can and really can get to the lead. So that's sort of how to think about operations to start with. A big thing about operations and a challenge is that literally, when you actually can look at public company comps about this, um, 10% of the dollar costs that companies spend are dedicated to operations. Um, this tends to be a catch-all word, right? So operations is including a sort of G&A, general administrative, and a lot of other work that folks do. But it's just dedicated to throwing people at the sort of challenge of operations. So it's a really big expense line item that doesn't actually go to increasing the value of your business. On top of it, we find— and really, I found myself as a founder— that almost 20% of your daily, like, cognitive load is dedicated to operations. It's just like distraction after distraction after distraction that's not product. And it's not customers comes to you and is dead, like you have to dedicate towards figuring out and thinking about operations work. So it's really expensive. Operations is really expensive for you as a, as an operator and really business owner. But here's the thing, right? The really successful companies focus, and what do they focus on? Well, they focus on product and they focus on customer. And those are the two key things that are most important to them. It's really, really being absolutely focused on those two pieces, product and customer. And here's why, right? If you can focus, it creates speed. And in business, speed actually compounds. And frankly, businesses that compound win the most. So if you think about that, right, the more customers you get, the better products you build. And the sooner you can do that, the sooner you get those out to customers, the sooner those customers you got yesterday can lead to new revenue today, can tell other companies or other customers about you. And that just grows and builds on itself. But every second you spend being distracted and not focusing on customers and product is another second that you get towards missing out and losing out on your business and growing it and building that compounding ability to where you want to get to as a real business. So here's the thing, right? There are examples of focus everywhere, right? Everyone knows, hopefully almost all these companies, right? Um, Google, what did, what did they focus on the most? What is their core product that we all know them for? Well, it's ads, right? They do lots of other things, but ads is their big one. Facebook, it's social. Salesforce, truly it's a, it's a CRM, but it's also really a platform at this point. And you can tie so many things together to it. And Okta, for those who don't know, they've been laser-focused on being a single sign-on tool, essentially across all your different operations sort of databases. So, but what do these companies all have, right? Well, they're successful, they have one core product, that's what we know them for. But they were super duper focused. They didn't get distracted by lots of operational things. They didn't get distracted by going off in different directions with their product. They focused exclusively on that, and this frankly core product they really started with is what they're known for still even today, for many of these companies that have been around a long time. But here's the problem, right? In today's world, operations cost too much, and they've always been the case, even with these companies that were able to really focus well. Frankly, like, operations feel secondary, tertiary, right? They're time-consuming, they're distracting, they're really difficult to outsource. So what happens is you end up as a founder being like the guys on the screen, and you just say, forget about it, like, I'm just gonna do it later, I'm gonna do it later, it's a distraction, but I'm gonna do it later, and just forget about it, who cares, it doesn't matter. And the big thing is like, these are also just part of why people just say forget about it, is they're super high cognitive load. What we want to get to is a world where you have like zen, like true zen and calmness, so you can get into this focused mindset, which will allow you to get into flow and start actually really building your product the way that you want. So that's the challenge, right? But because you want to move on and get to that focus level and you don't want to invest in operations, it could end up costing you a huge amount. Later. So actually, one simple example here of how we try to keep ourselves focused, um, in fact, is actually my company, Abstract Ops. We do almost all of our phone calls on Thursdays. We try to schedule everything on Thursdays, and that's also a day for operations work and dealing with all the operations piece. The rest of the week, um, is focused on product and customers. So even this is a little bit of a distraction since it's Friday morning, but I'm obviously making an exception for the FI team. But we try to stay really focused, just do all sort of distracting type phone calls with investors and other businesses on Thursdays, and everything else is focused on product and customers the rest of the week. So of course, like, what are operations, right? I haven't actually defined that yet in this call. So what are operations? Well, operations in a sense is everything that's not product and not customers. A lot of other pieces fall into operations. So human resources, financial, insurance, vendors, like contractor data management, um, legal, regulatory, and what I call sort of run the business, RTB. There's all these different elements. I think there's about, what, 8 elements or so, um, that I would include in operations here. I mean, of course there's a ton of sub-bullets as well as part of that. So a lot of these things, like, these are tough to do, right? No one on this call probably today are experts at all 8 of these elements. Frankly, as a founder, it's really difficult to be an expert at all 8 of these because once again, like, they're random one-off. Like, you might be building a company that focuses on one of these areas, but overall these are not things that you're doing on a regular basis. Um, arguably Except like, except for in a case like mine with my company, you're actually not building a company to focus on these areas either, right? You started your business because you care deeply about building the great next SaaS platform, or doing something in machine learning, or, um, helping creating the next great consumer product. Um, you had a vision and an idea that you cared deeply about, and you wanted to go build your business to make that German reality and then get customers to use that product, right? That was why, at least all the companies I've started, that's why I did it. It's because I cared deeply about the idea and vision that I had, and getting customers was validation that that vision was real and it was something really valuable and worthwhile. Um, I didn't start those businesses to deal with these 8 different things in operations, but I had to deal with these issues So I continue to run the business. So these are essentially, once again, like the key levers of operations overall. But why are operations super duper distracting? Um, well, here's the problem that I've had in my time as a founder, and probably all of you have had too, an experience. Well, when you need to go figure out one of those 8 different elements, you start doing research. Of course, that's what we do, right? We go, we go online. Start doing research. And of course, research leads to like a deep rabbit hole in many cases. Like, well, I want to get the best credit card, or I want to get the best bank account, or I want to find the best lawyer. Well, who— what is the best? Well, you might talk to your friends, you might talk to your investors, you may even talk to your expensive lawyers. If you have lawyers, go talk to them and see what they can recommend, because you need to get this advice. And so you're doing this deep research on it. It's one issue why operations tend to be super duper distracting. Um, they also happen to be really one-off tasks, right? This is once again not stuff you're doing on a daily basis. It's stuff you're doing on a, um, every once in a while situation, right? Hopefully you start hiring lots of new employees is one example, but even then it's maybe once a week you're, you're adding a new employee if you're really moving fast. So it's not something you're doing on a regular basis. On top of it, of course, there's also context switching, right? So if you're going from deep on customers, deep on product, and then suddenly it's like one of your employees is having, um, some issue with getting their paycheck, that's a huge distraction. You need to go figure that out for them. And then you got to try to go back into your core work. That takes a ton of time. Um, there's actually a bunch of studies out there that show the, the time it takes from when you get distracted to go back into the zone, get back into the zone, and focus again on the core work that you were doing. It's like 30 to 45 minutes of time when you get distracted from what you're doing to get back into it, because you get back in the zone, you get yourself set, and go from there. And it's frankly very time-consuming, which is why once again operations are really so costly. And then finally, like, to complete any task or initiative, in many cases it takes a ton of different tools to actually do it. So operations isn't just like, I'm going into Figma to design something amazing, which is like what a designer might do. They make a really deep on their design tool. Operations is, I need to go talk to 6 or 8 different SaaS tools, tie them all together, and use me as a human API to tie all these pieces together to make a decision, right? If I have to figure out why my employee didn't get their paycheck, well, I'll go look at payroll. Then I might go look, did they have the right address? What did we have on file? There's a ton of different steps you'll do, and I'll show you one right now. So here's an example, right, of just the steps to onboard an employee. And by the way, these are some of the tools we might recommend you use in some cases. But like, think about this, just to onboard employee, these are 10 steps, and it's actually, I'm skipping a bunch, frankly, in this, 'cause it got pretty long. But think about it, right? If you wanna break these down, if you wanna send a new employee an offer letter, and confidentiality agreement. Well, not only do you need to fill out that offer letter and fill it out the right way, you then need to send the confidentiality agreement to them, probably via email. Um, you then need to make sure it gets executed, which by the way is something that so many companies miss. Um, but you need to make sure it gets executed, right? Did this person actually sign their offer letter? And even more important, did they actually sign their confidentiality agreement? You then need to add them to payroll. Gusto is a fantastic tool there. Make sure you add their equity in their vesting schedule to your tool for that. Carted's great, Puli's another great tool. But also, frankly, like, we've seen companies who do it on a spreadsheet. In some ways, it doesn't matter, but you need to track all of this. Health insurance, you can do that through Gusto, but you can also do it through a few different tools that are out there. So you need to make sure they get added to your health insurance. 401(k), do you offer a 401(k)? I think you should, that's a whole different discussion, but like, um, 401(k), gotta add them to that. Uh, then you might want to issue them a credit card, right? And maybe you don't give them a physical credit card, but you might want to give them a virtual one just to go spend money on buying their own software that they might need. Um, so you can create these great virtual cards with Brax as an example. You need to purchase them a laptop, you need to add them to all of your different software systems— Slack, Notion, 1Password. Obviously Google. And then you might want to update your projections, right? You just hired a new employee. Well, that reduces— that increases your burn and reduces your overall time that you have until you need to go raise money again. And that changes everything. So like, there's a lot of different steps. Doing all these can take a ton of time, especially if you want to do them right, right? So it's distracting, it's stressful, it's sort of moving the business forward. Like, you need to do this, you need to hire great people. but it's not directly related to product and, uh, customers. So here's like my best practice. If there's one thing that I would say is what we call DOTS, like don't overthink shit. Um, just don't overdo it. Um, the simple thing is there are so many great tools that are out there today that can help you be successful, um, in running your operations. It's still a lot of steps. I mean, as my last slide hopefully made clear, Even with amazing tools, you have a ton of steps you need to do, but you don't need to overthink it. Don't worry if you're not getting the perfect, absolute best credit card for your business, or the absolute best bank account. Just get something in place. All the tools are fairly good, right? The competitive landscape has made these tools pretty successful and worthwhile, but don't overthink it. Um, I have a bunch more recommendations in this, but also I'd recommend checking out SignalFire. They have a whole back office Adulting Guide. I know that link is sort of hard to read, but just do a Google search for that. They have a ton of great recommendations and explanations about sort of the back office operations that you might want to do. But once again, key thing: dots. That's what you should focus on. So here are a bunch more best practices I'll go through a little bit. Um, banking. Mercury is a great bank. It's built for startups. It's easy to use and manage. They usually have a high interest— it's a high interest-bearing account. It's very low right now, given the way the world has changed in 2 months. But it's a great bank to use for startups. They just know how to deal with the stuff we're dealing with. It's super cheap or basically free, I think, for wires and ACH, which is great. You can pay people, it makes it just really easy. Brex is a great credit card to have. Not only are you getting benefits, which is super important, Not super important, but it's important. It's also, as I mentioned, easy to issue new credit cards for either different team members or specific tasks. So essentially, keep a lid on your overall expenses and give people the freedom and autonomy to do what they need to do to run their business. On benefits, I'll just mention really quickly, I know so many companies that are just using their debit card from their bank essentially their charge card for things. And while that's very safe in many ways, you're also missing out on huge amounts of benefits. So I know a number of startups that once they started using a credit card and started charging really everything to their credit card, they literally had benefits. One of the companies I know was doing all their advertising on their credit card, and they started advertising a lot. I mean, you're talking like a ton of Google AdWords and Facebook ads, to the point where they were taking their team on trips around the world, obviously pre- pre-COVID, but taking their teams on trips around the world just off credit card points. So it's super critical— not super critical, but really valuable not to miss out on that, because you can get a lot of benefits. And frankly, your company is probably spending a lot of money. No reason not to get benefits for it. Um, accounting— QuickBooks is great. Um, it's obviously one of the older school tools, but QuickBooks is great. Just get your basic stuff set up. Um, Pilot is a good tool. For helping with bookkeeping, there's a lot of sort of outsourced ways to do it for even less than Pilot as well. I really recommend that people spend a little bit of money, use a tool called OnPlan. They're great if you want to build out a financial model and figure out what your projections might look like in different scenarios. Frankly, a lot of companies, especially when you hit a Series A, end up hiring an outsourced CFO to build them a financial model that costs $10,000 to $20,000. You'll spend for a CFO to build it out for you. I always thought that was ridiculous because the CFO, in many cases, just like your lawyer, is taking literally just an off-the-shelf model that they built before, tweaking a few formulas for you, for your business and who you are, and then giving it to you and charging you $20,000 for the privilege. So I think that's ridiculous, um, but your, your Series A investors will probably require you to have this in place. And frankly, I'd recommend it far before that if you can do it. Human resources, we talked a little bit about this previously, but Gusto is great for startups. They just make things really easy. As you get bigger, there are a lot of different payroll providers we would recommend otherwise, depending on your size, but Gusto is a great one early on. 401(k), Human Interest is great. Full disclosure, I'm actually an investor in them. But they're a great 401k tool for startups and small business. There is a cost, but frankly, it's fairly low. And I think I really believe in people saving up for retirement, and it's a great thing to offer as a benefit to your employees. I wouldn't say you should match, by the way, to be very clear. I don't think it— in early stage, for an early stage company, they should be matching employees' 401ks, but you should give employees the option of using a 401k. as a way to keep themselves ready for retirement, right? It might be a long time in the future, but they'll thank you for pushing them in that direction. And I certainly believe that happy and secure employees, uh, equals really productive employees. You feel safe in your job and you feel good about the way things are run in the operations. It will lead to more productive employees who aren't stressed and worried about, are the operations going the way that I expect or hope? Everything else. So there's a ton of other things, and frankly, some of these could still be a great startup idea, by the way. But high-quality legal counsel— well, people probably remember Atrium. It just failed about 2 and a half months ago. They tried to tackle the legal side. Legal is really tough. I actually used to work in legal tech. It's pretty tough to be successful there. But the key point here is high-quality legal counsel does not mean expensive legal counsel. So as an example, at AbstractOps, my company, our main corporate lawyer is fantastic and he's $250 an hour and he's great. He's probably gonna raise his rate soon, but he's great. And he came from a big firm, he just didn't wanna work at a big firm. And we know who we're getting versus if you go with a big firm, in many cases, you might once in a while talk to the main partner, senior partner, who probably charges $1,000 an hour, but then they're gonna give you to an associate who's one year out of law school, who doesn't really know what they're doing, who you're gonna hope will give you the best advice. I don't know, I'd be worried about that. As a former lawyer myself, I've seen that. Key thing, keep track of all your docs. If nothing else, please, please, please keep track of your documents. At the basic level, that means just giving them a good title, right? Say, offer letter to the person's name, say SAFE with the investor's name. Just make sure you have a good title so you know exactly which doc, and say it's executed, right? This is the executed version. It's not— and so forces you to double-check that this actually got executed. No matter what, just title things correctly because you're gonna need to have this as organized as possible when you go through your next round of fundraising. I mean, you need to have a data room. I know so many companies that take weeks, I mean, literally weeks of the founders' and their core team's time to build up their data room just because they didn't take the few seconds to tag things the right way. They didn't label things correctly, and they're scrambling to find documents and email. Like they're looking through, searching through Gmail, looking through their doc stores. They don't even know what things are titled, so they're trying to look by date. It can be crazy. Don't do that to yourself. Title things the right way. Put a date on everything. Obviously even better, store it in Google Drive, Box, whatever you use, it doesn't matter. But create folders. These are my folders for my investors, these are my employees, this is my employee folder, things like that. Regulatory. It's challenging and tough to deal with because people are starting their companies obviously in lots of different states, and there's different rules and regulations everywhere. Just make sure you register where you are and make sure to open your mail and read your mail, and then pay your taxes when they're due and follow through on all the requirements that come in. Vouch is great by the way for insurance. I recommend for early stage companies get liability, cyber and errors and omissions, you know what it's called? For themselves and cyber not everyone needs but most startups nowadays are having some level of personal data so it's always good to protect yourself in case you get hacked. It costs let's say depends on the company, but $2-3,000 a year for most of those. If you combine them all. So it might be a little bit more if you combine it, maybe $4,000 a year. But it's insurance, and the definition of insurance is pretty straightforward, right? You want it— you hopefully hope something never happens, but if something does, you want to be insured because it could otherwise destroy your entire business, which would be a terrible outcome. So it's worth getting insurance. It's now really easy to do. Boucher does a great job. Um, so here's the problem, like, what if you get it wrong? And you get your operations piece incorrect? Well, you will. We all do. We all have. But speaking of, sort of hinted at this issue, right? You're raising your A, you have a great potential investor, and they were going through your docs and they found that a former employee, so someone you fired, didn't sign their confidentiality agreement. That's a real big problem because now you have to go begging to the former employee to retroactively sign their confidentiality agreement You fired them, they probably dislike you, and you need to beg them basically to sign this so that the new investors don't feel like there is some liability hanging out there that they can't kind of validate and put a metric on. So try to get this stuff done right up front so you don't make errors overall. You might still, but the more you can avoid and the more time you can spend focusing on it without getting distracted, right? This is the trade-off. The better you are. So what about COVID Well, like, this is obviously changing the world, and it's a question for every presentation nowadays. I hope everyone listening on this call is obviously healthy and safe, as is their families. Assuming you are, use this actually as an opportunity. Use what's going on in the world to become smarter, to focus better, to reduce your overall burn. If you can, and there's ways you can do that. Go virtual, right? Find the best people wherever they live. Extend your team with tools and services, which are so many great— there's so many great tools and services that you can outsource that will reduce your overall need to spend a lot of money to take care of, let's say, even a lot of these things that we're talking about, but also can extend your team and really get you the best people who know what they're doing for a relatively low cost. Right, that is a real opportunity, um, in the world that we're living in today. You don't need to find the best local people who might be expensive, especially if you're in the Bay Area, but you might be able to find the best people wherever they live. So here's the thing, right? Don't be a human API, right? Don't be the connectivity tissue across all your operations, right? You just— humans us today as founders tend to be that human API. Everything is coming through us and we have to try to connect it in our heads, right? Those dozen-plus tools and you're trying to connect all those tools. So don't be that human API. Don't be that center of everything, right? Founders have a tendency to want to have that control and be that central location and understand, I want to know what's happening in all parts of my business. Here's the thing, you don't need to do that. you should actually be able to find experts, right? An outsourced COO, outsourced CFO, outsourced CMO, CTO, CRO. Um, your outsourced lawyers, they're like the first outsourced group ever, right? No one ever thinks, I'm gonna do legal myself. You outsource it immediately. Why not do that for almost every other part of your operations that once again is not, um, your core competency, right? So really not product, and not customers. Why not do that for all those? And some of those, once again, even for you, it might still be worthwhile to outsource for a CRO or CTO. Frankly, tools exist for many of these, or many— or there are many services you can get out there to get going with lots of this. Here's the thing, right? Founders' time is so valuable, as of course cash that you have in the bank. You do need to be the final decision maker. Thinking about the last slide, you do need to be the final decision maker, but you don't need to be the center of every single thing. That becomes overwhelming and reduces your ability to be successful. Because as a founder, you are the most precious, precious resource in an organization. There's only so— there's so many things only you can do, right? Product. Once again, this is why you started your company, is because you have a product idea that you believe the world should see. So focus on that, make that happen. Um, then outsource everything else. Small example, we outsource our logo design. We got it for $250. We outsource the website design. We help overall create the look and feel. We did it for under $1,000. Um, we do general research for lots of our, our own customers for us. Um, we outsource a lot of that research. Now we manage it to some extent, but we do it for $8 an hour. Um, Calendly is a great tool to use for scheduling. Um, HubSpot's a great CRM if you want just a free basic CRM, and it's free. You don't have to go spend a ton of money on Salesforce, which is heavy and expensive to set up. Now once again, this all might not be right as you get bigger and grow as a business, but it's great early on. So if I leave you kind of with one key thing, it's this: compound yourself. Um, the key beauty of compounding— and I talked about this a little bit at the beginning, so I want to kind of end where I started, right— is that every new customer you assign today adds massive value overall. Every new product feature that you launch today adds compounding value over time. A crazy stat is that I believe it's something like if you add, uh, if you save $100, $200, uh, a month— actually, sorry, if you save $5 a day— I was looking at this yesterday— save $5 a day, um, over, uh, the next 30 years, every day, $5 a day, and compound that at 7%, you end up with something like close to $800,000 saved for retirement. When you hit retirement, if you start at 20 years old and compound it, so it's massively powerful. The power of compounding is like this magical thing, and it happens in finance all the time, which is what people talk about. But frankly, it's the same thing for business. But the only way you can compound yourself is if you're able to focus and get rid of distractions, get rid of the stuff you're not good at, Don't be that human API. Focus, focus, focus, and that's how you can build a truly successful business. And there are these tools to use for operations. So thank you so much, I really appreciate it. Hopefully this was interesting and valuable, and feel free to drop me a line.

Amazing. I was like nodding my head like the whole time you're doing this because we, we just, because we, you know, we're managing this, this, uh, we help a lot of companies, right? 4,500 at this point. Most of these issues are just so common, and many of you I see here in the chat are already experiencing some of these issues. So, got a lot of questions. If you have additional questions, please feel free to add them in the chat. We'll try to get to as many of them as possible. So, you know, one of the things that Scott mentioned earlier, and Scott, I know you had this question before. He kind of showed the— can you talk about some examples of operations where, you know, that you've seen or ignored first that popped up later? You know, like kind of issues that you ignored and kind of maybe popped up later?

Yeah, I mean, so one, literally, I mean, the example I was talking about where you have an employee you've fired who didn't sign their confidentiality agreement and your Series A is coming up and you have investors who are doing a detailed dive into all of your documents and all of your past employees and who owns different equity amounts. That literally happened to me. And it's really easy to miss, by the way, because guess what? You send off your offer letter, you send off the confidentiality agreement. The confidentiality agreement only needs to be signed in most cases by the person who's signing it. So you don't even need to countersign. So you're moving fast, right? I'm moving fast, trying to get things done, moving my business forward and raising money. And like, who knows what you're doing, right? You're just trying to move your business forward. You don't always check and verify that people have actually executed an agreement. Makes sense. Um, you're trying to move quickly and they come on board. Everyone's super excited, everyone's happy, you're pumped. And oh my gosh, a year later and you're trying to raise your Series A, you guys, wait, this didn't get signed. It's a huge issue. Another one, a great example, literally with one of our clients right now, they're doing all their cap table in a spreadsheet. And like, that's not terrible. It's more than plenty of companies do. The problem is like, there's a bunch of oddities that are occurring in it. It doesn't quite net out the right way. And so we're trying to help them figure out how to like get it in there the correct way. And does it actually tie to the documents that have been signed? Are there actually all the right docs that are signed? Like there are people on their cap table who get equity, who we don't have docs for that we can find. So clearly, like at some point, somebody was promised some equity. Did they actually sign the doc? Did that happen? Another great example of stuff that people made mistakes on is board consents. So to issue equity and issue stock to yourself as founders, and then to your employees and have an employee pool, you need to have the board consent. Now the board at startups is really the two, probably the two founders, or just the founder. It might be the board, but you have to have a legal board consent that says we're going to issue this equity, we're going to make this stuff happen. And if you don't do that and you miss it and wait 2 or 3 years, you can still do it retroactively and have your vesting happen. But guess what? The value of your company 2 or 3 years later is way different. Which means the tax implications for you is far higher. Instead of— so instead of issuing equity to yourself when it's at $0.001, which means like 10 million shares is worth $10, which means you can purchase it for essentially nothing, right? You own 50% of the company, it's $5 to purchase your 5 million shares. There's no— there's really— there's some— well, first off, there's no tax anyways because the price hasn't gone up. But now a few years later, if you wanna purchase your equity, you have to purchase it at fair market value. And a few years later, your company's up and running, fair market value much different, you need to get a 409A. There's lots of costs that go into it. And those are things you don't wanna miss if you can help yourself. So there's some examples.

Lots of questions about outsourcing, right? Looks like Marcelo asked one, Kanya asked one as well. So first one, you know, when is it worth it to start outsourcing operations and, And when should operations be internal?

Yeah, totally. So, so full disclaimer, I'm, I'm biased. I didn't really talk about my company Abstract Ops, but our whole goal is to help startups outsource operations. It's really what we focus on, um, so I am biased about that. But I really do believe, as a 3-time founder, I mean, once again, seeing 40+ companies I've invested in go through this, the sooner you can outsource your operations— like, you could start doing it from day 1. So I'll Um, an example, by the way, of that, uh, if you want to register your company, well, a few years ago to do that was really tough. You had to get lawyers, you had to do all these things. It was really hard to do. Now you can outsource it to Clerky or to Stripe Atlas, and they just get you going really quickly. So literally from day one, you can start outsourcing. Arguably, you should. You shouldn't be doing these registrations yourself if you can help it. Use tools like Clerky, use Stripe Atlas. Early on. Um, use a company— once again, like, sorry to be biased— like, use something like AbstractOps. We can help you, like, take care of all these things and make sure you don't make these mistakes, um, and just get it off your plate. Uh, I don't think there's a lot of value— and once again, founders may have a different disagreement— but I really don't think there's a lot of value in you as a founder understanding or becoming an expert on any of the tools that I mentioned that encompass operations. There's no reason why you need to be the expert at HR, the expert at finance, the expert at legal. Um, it just doesn't make sense, right? Once again, like, no one would say to you, you need to be the legal expert. They say get a lawyer. And it's the same thing for every other part of operations. Now you can hire fantastic people to give you advice on HR, fantastic people to give you advice on finance. Um, and frankly, you don't need a lot of that help on a regular basis in early stage startup. You just need a little bit. And that's really what I would recommend. So the sooner you can outsource it and just get it off your mental plate so you can go back to focusing, the better.

And just to double-click on that question, talk a little bit about the access, right? So there's a question here in the chat room about what kind of access should this person or this organization that you may be, you know, outsourcing some of this information to, what kind of access should they get and to what level? Should you be granting the accesses and permissions?

Yeah, also a really good question. And so what I would say is you should treat your outsourced team— and I actually say this to every outsourced team that I work with— that they are like my own internal team. I view them as partners and part of my team, and so I want to treat them the exact same way. So really, the way you should view an outsourced team is, as I said on one of those slides, trust but verify. And that actually was a reference to something Ronald Reagan actually said during the Cold War in the missile treaty. In fact, it's like, hey, we're going to trust the USSR in this treaty, but we're going to verify it. We're going to double-check. I mean, it's the same thing, frankly, you would do if you hire— let's say you hire a chief financial officer internally. You don't know who they are, right? Maybe they came from a recommendation, you spent some time interviewing them, but you don't really know them. They come on board, they've signed a few docs, And now suddenly you've given them access to your bank account, your credit cards, all these things. Um, so you should trust them, but also verify it. And as an example, one of the great things with some of the newer bank accounts like, like Brex or, um, or Mercury is you can make sure to set limits on how much a third party can spend. So one of the things that we recommend everybody do just from security perspectives for get even outsourcing is set up a limit that nothing over, let's say, $1,000 can be sent out unless 2 people approve. So let's say you have a CFO or an outsourced operations team, they can pay bills on your behalf as long as they're under $1,000. Anything over that requires you as the CEO to also check off and say yes, I agree to that. Um, that's important once again, not just for outsourcers, but also important if let's say you get hacked, um, you or your co-founder then suddenly a hacker somewhere goes into your bank account and tries to wire out every single dollar that you've raised or made. You might not even know about it. Like, this happens. You might not even know about it till days later, and then the money's gone. So I think everyone should just set up a requirement that there's two people who approve any wires, let's say, over a certain amount. So high level, basically trust but verify. You need to give your team access. You need to let them trust. You need to trust them to do their job and do it well, but track it, verify, get updates from them on a regular basis. You should be communicating with your outsourced team the same way you would communicate with your internal team. There shouldn't be a huge difference.

There's a question, a follow-up question to your like to-do recommendation as a way to avoid distractions of operations. Scott says, you mentioned this is the hardest thing to delegate, and this is my experience too, is what he says. Until you get to a certain size, you know. Do you have any sort of tips or best practices or any other sort of recommendations? And for context, uh, context, he's a, you know, 3-year-old, uh, company, bootstrap, B2B.

Yep, totally. So, so, um, great context. And I will say, look, the thing that ends up happening is what people do, and this is where we think they're not a mistake, it's really what's the, the standard today, is you end up hiring people The problem is to hire a really, really good operations person is really expensive. So you end up hiring someone relatively junior instead. Then you have to train them on everything, how to use all of your tools. Um, and you're still having to really look over their shoulder because once again, like the problem with operations is once again, it's sort of like this pit crew, um, in a race car. If the pit crew isn't working well and getting things done, everything else can break, right? If your employees suddenly stop getting paid on time, because someone forgot to press a button, or you didn't renew— like, and this happens all the time too— you forgot to renew your— put auto-renew on your domain name, and suddenly your website just goes down because you forgot to actually pay for your domain name, and your website just disappears because someone forgot. These things all happen. And so if you hire someone junior, they might be making those mistakes. Someone senior is really expensive, so What you want to try to do is find someone who can do, once again, do maybe part-time. Like get people who are really good, give you a system, communicate with you on a regular basis, and can take these different pieces and like give them a really clear responsibility. Your responsibility are these things. So if you're a later-stage founder and you've been doing this all yourself, you probably have some idea of what you really need to get done. I mean, what the job sort of entails for operations. Write that down in a list. I like, I'm a huge believer in lists. Create a clear list of all the different things you need to do, write it down, then find experts in those areas who can just do this for you. Like, this is your job. We're going to pay you X amount every month to make sure this is going well. And I'm going to keep checking on you. And the more you keep doing it right, the more I trust you and the less cognitive load I have worrying about that problem.

There are several questions in the chat room with respect to product. You know, one from, from Annie, as well as one from, I think, Robert. "Can you talk a little bit about time tracking tools to assess productivity of software developers or any sort of other tools? What do you think about Notion and can that replace Jira and Confluence? What are your thoughts?" Yeah, no, great question.

So, at Twitter, we used Jira and did all that stuff there. At my company, AbstractOps, we actually use Notion for all of our tracking right now. Whether it could completely replace Jira, TBD, actually I'm not completely convinced yet of that myself, but arguably the most important thing, going back to my slide about DOTS, right? Don't Overthink Shit, is find a tool that's good, and there's so many good tools out there for this. Don't overthink it, just find one, spend 30 minutes doing research, choose one. Jira's great, I think they now have a free plan as well. But find one that you like and just start using it. The key thing is to stick to something and use it over and over again and make it a regular part of your daily habit. So for us internally on the product side, what we're doing, we have a clear weekly standup. We go through the key elements we're all working on every single day. We talk about on Mondays, we actually talk about our overall plan for the week. Then every day we do a standup and we go through the key items we're trying to get done that day. We have it all on a list, by the way, in Jira— or not Jira, in Notion, sorry. And we have everything set up there. We also have a full product roadmap, and that's based on a 2-week sprint cycle. And so that full product roadmap on our 2-week sprint cycle, we have epics that we're focused on, there's tasks within those epics, we know how that's tracking as well, and we review that on a weekly basis just to make sure we're on track. So the key thing there— and there's, by the way, some great templates in Notion for products. Obviously the Notion team 2 billion plus dollar company, has done all of their products and engineering tracking within Notion. So it clearly can work well. Um, but key point there, don't overthink it. Find a tool, stick to it, use it. Everyone— people might have complaints. They might say, well, this isn't exactly right, this isn't exactly right. It's going to be close enough to good. Just start using it on a regular basis.

How did you personally outsource general research? Uh, can you, can you talk a little bit about that a little bit more? You kind of mentioned that in one of your bullets.

Yeah, totally. So for us, right, part of what we need to do as a business is understand what the best tools are that are out there. And there's so many tools and there's so many questions that come up in operations, right? I've done a lot of operations myself, but I don't have every answer. I mean, I don't know the perfect state of the art for every single thing, but my role for my business is to understand that, to have the right answers for my clients. So that means like, we know what the questions are in many cases, but I don't always know what the answers are. And I could go research it, right? I have decent Google search skills, but I don't think that's the best use of my time. So what we actually do is, so I found someone who's fantastic on a service called Upwork, which you guys may have heard of, but it's a great service for finding outsourced workers all over the world. And the woman we found, she's fantastic. I believe she's in the Philippines. I've never actually talked to her on the phone, but I email her stuff, email her ideas, tell her what the format we want, here are the different tools that I use. So I've done the research myself. To be very clear, I don't think you should ever outsource things, um, well, in most cases I should say, uh, without having a decent idea of like what the key questions are you need to ask or how it might work, um, especially if you're going overseas where you really need to be specific. So there's different types of outsourcing, I should say. Like if you're hiring a CFO or or obviously a lawyer, that's work you maybe don't understand, but you're paying for someone who's pretty expensive, who can think autonomously about the topics. When you go for fairly low-cost overseas help that maybe doesn't have as much experience, it does take more time to manage that resource. So you need to be pretty specific. Hey, like, this is what I did. Here's my example for research. So I literally did a lot of the research ourselves and my team, and I did actually, did the research, sent our woman an example, and gave her an idea of what we were looking for. And she can now run from there. And I totally trust her. I give her feedback when she sends stuff over. And literally, it's great. That expands the scope of my team so quickly because I can send her something on Monday night, which is her morning, and when I wake up the next day, it's complete and it's ready to go. And literally now my company, we're a small business, we now basically can run 24/7, which is amazing.

Can you talk a little bit more about compounding value and how it's actually, how it's applied to operations?

Yeah, totally. So, you know, it's funny, this is something that I didn't really realize until I started like recognizing how much time I've wasted in my previous startups doing operations. And frankly, what makes companies the most successful. So the founders, if you look at the founders, who are the most successful, right? Elon Musk, I'll just use as another example of someone who everyone sort of publicly knows is incredibly, incredibly focused. Um, he just goes straight at a problem and just deals with it and focuses on it non-stop. And that insane focus is arguably one of the key reasons why SpaceX and Tesla have been so, so successful. Because he's been able to focus with such level of depth. It sounds like somebody's gonna start doing some gardening or cutting the grass outside, but hopefully you guys can't hear that. But, um, but so really, like, the idea of compounding— hopefully everyone gets the overall idea, which is like, literally, compounding is magical. You can literally— if you take $10,000 today, compound it for the next 30 years, you'll end up with a really nice nest egg to retire. It's just magical. It just gets better. 'Cause every, every year from $10,000 today, it compounds for the next year. It's now $10,700. Now next year compounds on top of the $10,700 and grows and grows and grows. 'Cause the amount of money you're compounding on top of gets bigger. It's the same thing with customers and with product, right? If I can launch a new product, part of my product today, instead of a month from now, Those are more customers I can get feedback from sooner. It's fast. I can iterate faster. I might be able to sell more customers on the product overall right away. So that's a huge win and highly recommended. Same thing with customers, right? If I get a new customer today, that new customer today might A, give me feedback, but B, they're paying me money, right? That's money that I can use to reinvest in my business. And then C, they're helping actually to make recommendations. If they're loving my product, they're making recommendations to new customers, and every new customer I get is a customer that my competitor doesn't get, is a way I can continue to build a business and I can hire more people and grow. And so it just like builds on top of itself.

Uh, Lauren asks, you know, you said you take about a day a week on ops. Do you have ops routines done weekly, monthly, yearly? How do you do, uh, revenue ops routines?

Yeah, so, so we do. So we try really hard to have— I'm a huge believer, um, and this isn't easy to do. This is something that we're focused on ourselves as a company, um, because we're focused on actually making operations a lot easier for everybody, is literally building something. A book, by the way, everyone should read, I highly recommend, something called The Checklist Manifesto. Um, it's all about having checklists to do certain tasks. So in the end, for operations or financial operations, there are a bunch of steps you need to do to take care of paying a vendor paying an employee, updating your metrics for your, where you want to go and your projections. There's a bunch of steps you need to do. Now, once again, the reason you want these steps, and it's the same thing, a great checklist example is when you go to fly in an airplane, right? You know, the pilots are going through a checklist, right? Boom, boom, boom, boom. That's how they fly the plane is by a checklist. And they do that all the time. But the reason you have a checklist is so that you don't miss things. When there's issues that you don't deal with on a regular basis. So in a bad plane situation, um, if you're— there's something dangerous going on, that's a situation pilots don't deal with frequently. And guess what? They have a checklist for how to deal with it. The reason is because they don't deal with it frequently, they're not going to remember all the key steps, and they shouldn't have to because their focus is on flying the plane safely from point A to point B. And that's what they should be focused on on a regular basis. Same thing with the startup. You're focused on growing your business and growing your product and making it better. The rest doesn't really matter until something comes up, until you need to update your financials. Well, if you rethink it every time, that's really frustrating. So just build a checklist, and that will help you take care of exactly how to deal with the situation.

I have a— there's a question here that's highly individualized from Luciano, but I think it's actually very applicable to many companies right now. So he says, look, we're We're a pre-revenue company, and pre-COVID, we outsourced our accounting, bookkeeping to Pilot. But now we're trying to reduce costs, so we stopped all spend to preserve money, right? So what do we do? Do you think we should still keep our Pilot subscription in this case? So, I don't know, take that however you want. Maybe talk about it individually, but if you could talk about it generally, because I'm sure a lot of companies are kind of dealing with this issue right now as well.

Yeah, totally. So look, Luciano, it's a great question, and obviously it's a tough time. I'd say in the end, the most important thing for a startup is having cash in the bank. So you need to see, like, if you run out of cash, your business stops existence in most cases at least, right? Unless you can just keep affording to run it yourself for no money and not have a salary or anything else, which means you're essentially still funding it out of your own personal bank account. But I would say focus on cash first. You need your cash so you can build your product and get customers. You can go back, and it's expensive to go back and retroactively fix your books, but you can do that. I'd rather stay alive to fight another day than run out of money because I have books that are in really good order. So in the end, keep your cash, like preserve your cash so you can fight. Everything else can be fixed. It's not ideal. It'll be more expensive, but I'd rather that than die.

Okay, couple questions here with respect to outsourced teams. So Rebecca asked, you know, what percentage of your time is it reasonable to allocate to managing your outsourced team? And Naz has a question: at what stage of growth revenue-wise is it recommended to hire people to manage those outsourced teams?

Yeah, um, so I think percentage of time to allocate— so we look at it as If you're spending 20% of your time just dealing with operations, you should spend 50% to 75% less managing those people. Now, there might be a slight upfront cost if you're— you need to get things set up, find the right team. But once you do that, they should be doing their job and doing it well. If they're not, that means we either didn't explain things well to them or they're not really good at their job, but it should dramatically reduce. The amount of time and mental energy, sort of cognitive load, that you have to spend on that, on that area and topic. So you should be dramatically reducing your cognitive load by outsourcing this work. And if you're not, then you're not doing it the right way. As for size and what size you kind of should think about for when you should hire someone, truthfully, I think teams, if they're doing outsourcing the right way, they probably don't need to hire people to really manage their operations until they're 20, 30, 40 employees. Um, you should not be having to spend— in our view, companies do this today, but if, as an example, we do our job right, um, companies should not be spending 10% of their overall employee, like, expense on operations. So like, if you have a 20-person team and you're similar to all the publicly traded companies that are out there in the world today, That means 2 people are going to be dedicated to operations, right? That's expensive when you're still like— you're still small at 20 people and you're trying to grow your business. It's really expensive to have 2 people dedicated to that. So I would say outsource for as long as possible, set up repeatable systems that are low cost and that work, and have a checklist, or hire teams that might be really good at it, and then don't worry about it. Um, so you shouldn't have to hire people to deal with operations in a big way to get to be fairly large, and even then you hire a chief operating officer who can hopefully just manage the outsourcers. And really their focus as COO is more on strategy and growth and op— and overall operations, not on like dealing with the one-off tasks. Like the problem that most people have is these one-off tasks you don't deal with regularly, like hiring an employee and onboarding and offboarding an employee, are time-consuming. There's no reason you should be paying expensive COO or CFO to deal with that stuff. Like that is easy stuff you can outsource. You should be hiring these really smart, expensive people to deal with big questions that really move the business forward.

There's also kind of like a quick follow-up here in the chat from Esteban that's very relevant to what you just talked about. So basically you're saying, look, hiring and outsourcing is a cost to your business, and especially if you're not making money. So did you use your funding, or do you use your funding, or did you do everything yourself before cash flow?

So yeah, I mean, totally. So excuse me, the way to think about it is, um, and this is the trap founders fall into on a regular basis, which is I want to be sort of pennywise and pound foolish. And that's the dangerous trap. And I've done this many times myself. I like to be frugal. But so what ends up happening in many cases when you're trying to be frugal is You end up saying, well, I'm going to save an extra $1,000 a month because I'm going to do— I'm going to be this human API and I'm going to deal with all the operations pieces. Well, if that costs you 10 or 20 hours a month to deal with all these things, just to figure it out, make sure it's working right, making sure you're not making mistakes, that is a huge drain and sort of like an anchor holding your entire business back. If you can spend $1,000 or even $2,000, which seems like a lot, right? Like as an early-stage founder, like that's a lot of money to spend every month, right? That's a lot of money to spend, $12,000 plus a year. But if you can do that, and it means that you can get, you can talk to your customers more often, that's a huge win. And I think that's a huge way to go. So kind of my key point really is like, don't be pennywise and pound foolish. The things you should be spending your time on are product and customer. Outsource the rest, even if it costs you some money. Like, once again, if you're going broke and have no money, then that's like, preserve that cash. But if you have some money in the bank and you have enough for, let's say, the next 12, 18, 24 months, saving that extra $1,000 is not going to change your business. Getting that next customer or getting that new product feature out actually might save the business. Like, that's the real key thing. An extra $12 grand If that will do it for your business, that's a different issue, but like, it probably won't. What will do it is getting that customer, getting that product feature out.

Awesome. Final question, we're running out of time here, so I'm gonna give you this final question. You know, can fundraising be outsourced?

It's a great question, and actually the truth is like, yes, it actually can. Not all of it, but a large portion. So actually Atrium, that just went out of business, a large part of their business was helping companies do fundraising. And companies were paying Atrium $20,000, $30,000, $40,000, $50,000. I know companies that paid $200,000 to them to help with, like, outsourcing a lot of fundraising. And why do you do that? Same reason you do it for all the stuff we've just been talking about. You do it because you're not an expert at fundraising, you're not an expert at building your pitch deck, you're not an expert at getting in touch with the investors. So yes, absolutely. Like, you're still the founder, so you still need to go in front of the VCs and pitch them, but you should absolutely be outsourcing help to get your deck done right, outsource to people who can help you practice the right way to pitch the right way and talk about your business the right way. You can outsource making sure you're getting the right introductions. All this costs money, and there's different ways to do it for a relatively actually decent price and not the amount that Atrium was charging. But yes, like, yes, everything should be outsourced except for the core thing, which is you getting in front of your potential VCs and explaining the business to them. Everything around it can and should be outsourced.

Amazing. This has been a great talk. Thank you so much for taking the time out of your busy schedule to do this, Adam. I mean, we got through a lot of questions. This has been great. Um, thank you so much again for everybody that's been asking. We're recording this. We'll send this out to you in an email. Don't worry, we got this. Um, and Adam, thank you so much for taking the time to do this. This is awesome. Have a good rest of your day.

It's my pleasure. I hope it was helpful to everybody. Um, I really, really care deeply about people building super successful startups, which to me once again means focus. Feel free to drop me an email. My email's on the slide, adam@opsrercops. Happy to help out and see what we can do to help you be really successful. So thank you to FI team and Mike. Appreciate it.

All right, everybody, bye-bye until next time.