Peter Bauer – Founding Principles vs. Scaling Principles

This is a summary of Peter Bauer’s Business of Software 2012 presentation.

Founding and scaling principles

According to Peter, the four principles to a successful company are:

1. Build something with friends
2. Deal constructively with fears about success
3. Never allow an investor to change the chemistry or assert their agenda above that of the company
4. Clear intent and logistics

Build something with friends

Mimecast started in 2003 before cloud computing was cloud computing. It’s been almost 10 years. Mimecast started over a bottle of Absinth, as a group of friends drinking together said they should start a company and work with each other.

It was not a picnic, however. They were deadly serious about success and about each other. They were fully engaged in building together, and it was obvious who the contributors were.

Working with friends is one of the key reasons Mimecast was created. When hiring they ask, “Can this person act and work with us like a friend?” But this extends beyond the company to customers, suppliers, etc.

Favor endurance over brilliance.

Deal constructively with fears about success

One of the biggest challenges of an entrepreneur is the guilt of prioritizing work and the fear of missing out on your family. An entrepreneur is compelled to choose between family failure or business failure. You start to think great success isn’t the thing for you and you start buckling. Peter would think “Do I want to go up there?”, when thinking about success. However, his co-founder would say success brings many options.

The first five years of a startup are risky from a business perspective. Because they were backed into a corner they found more efficient ways of being successful. The early stage is not the time of sustainable effort, it’s the time of gravity defying heroics. A real CEO thinks, “The harder you make it sound, the more I want to do it.”

A strong sentiment after the dotcom bust was that founders could not scale, and VCs kept thinking they needed to pick the management team.

Don’t let the team expire.

Never allow an investor that would change the chemistry

Writing that check doesn’t make you right.

Angels provided a better way for Mimecast. Then by the time they brought in VCs, they had proven themselves and could assert the company’s interest over the investors’ interest.

Clear intent and logistics

When considering intent on scoring think about boys playing soccer.  The young kids have no intent – they run around because it’s fun. The older kids, on the other hand, are intent on scoring. Just participating is not intent.

You should be far more frightened by the guy that has intent…intent on taking you out. Intent creates a power multiplier. A lot of startups are bumbling along, waiting to be taken out by someone with intent.

Targets help define and declare intent. Mimecast’s sales department had a focus on intent, and the whole business followed sales. The non-revenue generating departments would apologize to the sales department for anything they did that took away from the sales resources. This started to impede Mimecast’s growth, so they began putting product marketing and system goals as a priority. Then they had to ensure those projects had intent of their own, so they forced the non-numeric intent departments to write down their goals.

The AIM (Actionable Intent Matrix) factors determine the supply chain of success.

[Justin Goeres has a more detailed summary of Peter’s presentation on his blog.]