TEAMS

ln the Introduction, I told you about how our investor and board member Ben Horowitz called me as I was driving aimlessly around San Francisco and how he gave me two critical pieces of advice about how to pull ourselves out of our death spiral. I’ll share the first piece of advice now.

When Ben called, I assumed he was going to fire me. After all, Todd and I had just told the board that we’d drastically missed our sales targets—
and I was the person responsible for sales.

But instead of showing me the door, Ben asked me to describe my job. I explained what he already knew. I was the Chief Operating Officer.

“What else are you doing?” he asked.

Our company was still pretty small. We only had about 30 employees. Todd and I were taking on a lot of extra roles. I headed up sales, and Todd was both the CEO and the head of engineering. We were effectively working two, maybe three jobs apiece.

“So here’s your problem,” Ben said. “You can’t do multiple key jobs at the same time and do them well. Very few people can. Which means that you have to hire experts—and fast.” He suggested that I shouldn’t be the head of sales, especially since I’d never run a sales organization. “That’s why your pipeline management, sales process, and forecasting are terrible,” he said. Ben went on to say the same about Todd: he couldn’t be both the CEO and the head of engineering. “You guys need to build out your executive team,” he advised. “Otherwise, you’re toast.”

Todd and I took his advice to heart. We immediately started a search for two new vice presidents and filled both positions within six months. The impact was dramatic. Okta’s sales started to pick up, and the product improved rapidly.

Many entrepreneurs try to do everything themselves for as long as possible. Partly out of necessity: you don’t have the money to hire people. But often, it’s because you think you can do it better than anyone else. So I’m telling you this from personal experience: You can’t. Doing everything on your own doesn’t work. As you grow, you need to start assembling a team of people who are better at other pieces of the puzzle than you. This is one of the most profound lessons I’ve learned. A company isn’t about one person. It’s about a team of highly talented people.

Who you hire matters a lot. Mature companies can afford to hire people who are merely “just fine.” You can’t. You’ve got too much to do in too short a time. The right people help you move fast. The wrong people—no matter how nice or talented—drag you down like a lead balloon. If you’ve never hired people before, it’s easy to make mistakes. Even if you have experience, it’s not always clear what to look for. In this chapter, I’ll share what characteristics to look for in people and how to vet them. I’ll also talk about letting people go because you will invariably end up making some bad hires.

First, though, I’ll talk about cofounders. You might be dreaming of going it alone, maybe even becoming the next Elon Musk. But research shows that teams of two to four usually do better than single leaders, so I’ll talk about why that is and how to find the right partners.

“You can’t do multiple key jobs at the same time and do them well. Very few people can. Which means that you have to hire experts—and fast.”

One Is the Loneliest Number

Thinking of going it alone? Think again.

The media likes to celebrate individual heroes, but in most cases, starting a company alone isn’t advisable. Ed Roberts, the David Sarnoff Professor of Management of Technology at MIT and a longtime mentor of mine, researched the optimal size of founding teams in high tech. “Two cofounders do better than solo founders,” he says. “Three cofounders do better than two, and four cofounders seem to do better than three.” Beyond that, however, “it’s a crowd,” he says. The chaos introduced by larger teams begins to outweigh their added benefits. “More cofounders become troublesome and harder to manage.”

It makes sense: if you’re going to try to grow a company to 10× its original size in a ridiculously short period of time, you need at least one other person to share the burden. And maybe another one or two others on top of that. It’s not just about dividing up labor, though that’s important. You’re going to be buried under a tsunami of tough decisions, most of them things you’ve never faced before. Having another person to bounce ideas off means you’re more likely to land on the right answer. Two brains (or three or four) are likely to come up with a wider set of solutions than a single person brainstorming solo.

If you’re going to try to grow a company to 10x its original size in a ridiculously short period of time, you need at least one other person to share the burden.

This jives with Ed’s research into high-tech teams. Typically, the more diverse the skills and expertise of a founding team, the better it performed. And the team performed especially well when it included someone with technical expertise and someone with a sales and/or marketing background. This latter part is important: The important business expertise wasn’t general management. It was someone who had sales or marketing experience. Those are customer-facing roles. Someone on your team needs to know how to find and talk to customers. I performed that role at Okta in the early days, when we were still talking to smaller companies. Once we started targeting enterprise-sized customers, however, we had to bring in someone with that expertise.

Cofounders are also necessary for moral support. There are going to be many times when you feel hopeless or overwhelmed. Usually only one cofounder feels this at a time. The one who’s not spiraling down can pick the other up and help keep them going. “You need a partner, so you’ll have a shoulder to cry on,” Ed says. At a minimum, your partner will be able to keep the ship moving forward until you de-panic and calm down.

It’s easy to overlook the fact that most successful startups have multiple founders. The media likes to focus on a single heroic leader. It makes for a better story. Facebook is synonymous with Mark Zuckerberg, but he actually had four cofounders (Eduardo Saverin, Chris Hughes, Dustin Moskovitz, and Andrew McCollum). Google had “Larry and Sergey” (Page and Brin). Intel had Gordon Moore and Robert Noyce. Everyone thinks of Larry Ellison when they think of Oracle, but Ed Oates and Bob Miner also launched it. Think Microsoft and you think Bill Gates, but Paul Allen was right there next to him.

Of course, successful companies have also been built by single founders. Jeff Bezos of Amazon is probably one of the most famous. Sara Blakely started Spanx with $5,000 and a prototype consisting of nothing more than a pair of hose with the feet cut off. In 2021, she sold a majority stake in her company for $1.2 billion. David Karp founded Tumblr and later sold it to Yahoo for $1.1 billion. And Aaron Patzer founded Mint.com, which he later sold to Intuit for $170 million.

So yes, a single founder can make a go of it. But doing it with others is advisable—provided, of course, that the cofounders are a fit.

Choosing a Mate

How to know if you’ve met the right cofounder.

Companies with multiple founders work great when the founders work great together. But poor collaboration among cofounders is a top reason for startup failures. So how do you know if you’ve found “the one”?

I didn’t know Todd well before we started meeting for coffee in early 2009. Our paths had crossed at Salesforce, but we didn’t work closely. We were put in touch by a mutual colleague who knew we were both thinking about branching out on our own. The fact that we were both interested in doing something in enterprise software was mere table stakes. We had also both helped build Salesforce from the ground up, and that meant we had a common understanding of how a startup should work. Since we had colleagues in common, we were able to vet each other and find out if there were any red flags. The last thing we did was go out to dinner with our wives and have our better halves interview the other person. Who better to assess whether the other would be a good fit for their spouses?

As you look for a cofounder, keep the following questions in mind. If you have doubts about any of these, think hard before joining forces:

Can you trust this person?
If you had to take off for two months and leave the company in their hands, would they make the best possible decisions for the company, and look out for you as well?

When you disagree, are you able to come to a resolution in a mature way that enables you to keep moving forward?
You can’t get stuck in disagreement—or in resentments about the decisions that do get made. Find someone you’re able to negotiate with and who can move on quickly from differences of opinion.

Do you like this person?
Is being around them a net positive? If you don’t like them now, you’re not going to like them any better when things get tough.

Does this person know how to be supportive?
Each of you will hit periodic troughs of despair. Is this someone who’ll take on some of your load while you sort yourself out? Or better yet, know how to cajole you out from under a dark cloud?

Does the person care as deeply about the business as you do? Are they as excited about the actual thing you will be building as you are? Do they think about it all the time the way you do? A cofounder who doesn’t care that much will almost certainly leave the company within a couple of years (or worse, start undermining you or advocating to take it in a different direction).

Do you have any reason to second-guess this person as a cofounder?
Do a gut check. Is your Spidey-sense telling you this isn’t a good fit? Are you trying to talk yourself into this partnership? Heed those signals. If you feel like something’s not right, it probably isn’t. Face up to it now, not two years down the road.

Why You Should Be a Snoop

While you’re doing your own gut check on these questions, do due diligence on your potential cofounder. Find at least three people (preferably six) to ask what your prospective partner is really like. Don’t get those names from your would-be cofounder. Talk to people who haven’t been teed up for you. (And don’t worry about coming across as sneaky. If your potential partner is good, he or she is doing this too.)

Find a Fairy Godmother

If you don’t know how to evaluate certain candidates, find someone who does.

In the previous chapter, you met Melanie Perkins, the university student who had the idea to build an online graphic design platform. The technical challenge was huge, and she needed to find the right engineer to bring her idea to life. But how could she assess candidates when she had no technical background of her own?

There were so many dimensions to consider: Would they know the correct coding languages, or be able to learn new ones that might be needed? Were they more than just programmers—were they architects who could design complex systems? Did they have the skills to manage a growing team? Melanie didn’t have enough tech experience to figure out who should be the right partner—and this was going to be a make-or-break decision.

Fortunately, Melanie was resourceful. After meeting Bill Tai, the Silicon Valley VC at a conference in Perth, she boldly hopped on a plane to California. Tai introduced her to Lars Rasmussen, a storied engineer from Denmark who had cofounded a mapping tool startup in 2003. That company was later bought by Google and became Google Maps. By the time Melanie met him, Rasmussen was a lead engineer at Facebook.

Rasmussen agreed to help Melanie vet potential technical talent. (He later became an investor.) “It ended up being a full year of him just rejecting every single candidate that I brought him,” Melanie says. “I’d send him people I found on LinkedIn, résumés people had sent to me. I even walked people straight into his office.” But no one was good enough. “I just wanted to get started, but he kept saying that the people I brought him weren’t up to the challenge of the huge technical project we were about to undertake.”

Eventually, Rasmussen introduced Melanie to someone he’d worked with at Google, Cameron Adams, a world-class designer who’d shaped Google Wave and was currently leading his own startup. After months of back-and-forth, Melanie eventually convinced Adams to join forces, and he came on as a cofounder and chief product officer.

Without Rasmussen acting as her consigliere, she may never have found Adams. And without Adams, she may never have built Canva into the $40 billion business it is today.

Share and Share(s) Alike

Why cofounders should receive equal shares.

You’re probably going to read a ton on the internet and elsewhere about how to divide your company’s equity (or shares of stock) among founders. People will suggest all sorts of complicated permutations and convoluted strategies to come up with something “fair.”

I’ll save you the time—except in a few rare edge cases, give everyone equal amounts of equity.

Startups fail when founders don’t get along. By giving different people different ownership stakes, you’re immediately setting up a power dynamic that says one person is more important than the other(s). Why would you do that? You did your due diligence, right? The people you chose as your cofounders are all rock stars. They’re all going to be working just as hard as you to ensure the company’s success. If so, then no one is more important than another.

If one founder insists on taking more equity, you’re simply planting a seed that will someday grow into a thicket of resentment. Strife slows you down. Why would you willingly introduce that? You won’t get nearly as far as you will if you and your partner(s) are in harmony. As the saying goes: a smaller portion of a giant pie is a heck of a lot bigger than a larger portion of a much smaller pie.

If, despite all your due diligence, a cofounder ultimately doesn’t work out and ends up leaving early, they won’t leave with all that stock—only the amount that’s vested. For example, if a cofounder leaves after a single year, they only vest 25 percent of their founder’s stock (the typical vesting period is four years), and their remaining ownership stake (75 percent in this example) goes back to the company.

There’s Plenty of Room in the Sandbox

The case for dividing responsibilities.

If you’re going to move fast, each cofounder needs his or her own sphere of responsibility. You can’t be tripping over each other in the same areas. It will slow you down. The division of labor between Todd and me worked well. He was responsible for the company vision, the product, and engineering. I took on sales and company operations—finance, HR, legal, and so on. He was the visionary and had tons of experience building products. I had experience on sales and business-development teams. As for the rest, I knew I could just figure it out—I’m a get-stuff-done guy, so I wasn’t worried about managing those areas.

Of course, there are times when founders have to make decisions about the company in general that transcend their functional areas. Most of the time, Todd and I were in sync. There were a handful of situations where my opinion diverged from Todd’s. I made my case—perhaps even “energetically”—but at the end of the day, Todd went in the direction he believed in.

Was it humbling? Sure. But the CEO is the CEO. As in any company, that’s where the buck stops. That’s who has to make the calls. The investors had invested in us based on that lineup. As legendary Intel CEO Andy Grove famously advocated, teams need to be able to “disagree and commit.” Not everyone might agree with a decision, but once the decision is made, everyone must get behind it.

If you’re going to move fast, each cofounder needs his or her own sphere of responsibility. You can’t be tripping over each other in the same areas.

Build Inclusive Hiring Strategies from Jump

Your first 10 hires set the tone for your later ones.

Silicon Valley has historically been overwhelmingly male and overwhelmingly white. Maybe your industry is the same. For a long time, the powers that be in Silicon Valley didn’t think much about it, but in recent years, our industry has been paying more attention to the ways in which its companies’ cultures have not always been welcoming places for people who didn’t look like the founders.

These days, no matter your industry, you must start thinking about these issues from the moment you start hiring. Not from a defensive stance, as in “we need to make sure we don’t get sued.” But because you won’t be able to hire the smartest and most talented people if those people don’t want to work for you.

Researchers at North Carolina State University studied the output of 3,000 publicly traded companies from 2001 to 2014. Their findings? Companies with explicit commitments to building diverse workforces—as defined by indicators like: women and people of color get promoted to business leadership positions, policies support LGBTQ+ employees (like domestic partner benefits), and people with disabilities are actively recruited—were more innovative and launched more products.

Your first 10 hires will be your most critical. If your first 10 are all men, a later fantastic female candidate might question whether she’ll be truly welcomed. If your first 10 are all white, a person of color might wonder whether your company will allow them to thrive. Plus, you’re going to be drawing on the networks of those first 10 people to find your next 100 hires. If they all come from similar backgrounds, that will limit your ability to cast a wide net.

Follow these tips to ensure you end up with a diverse “first 10”:

1 Don’t start interviewing candidates until you have a truly diverse applicant pool.

2 Reach out to a wide variety of networking groups (such as groups for women, people of color, LGBTQ+, and people with disabilities) to let them know when you have open positions.

3 Use one of the many web tools available to ensure your job descriptions don’t use language that is inadvertently exclusive.

4 Set up a system where an intermediary strips out demographic information from the résumés you receive, so you only respond to what candidates bring to the table, rather than who they are.

Look for “Great Athletes”

Surround yourself with people who have mastered hard things.

Maggie Wilderotter, the former CEO of Frontier Communications, says she always sought to hire “great athletes.” Not necessarily in the sports sense—you didn’t need to have played college ball to get hired by her (though some people did). Maggie meant that you had to be a person who naturally sought to continuously learn, practice, and get better at whatever they set their mind to. She called such people “students of the game.” “They’re always expanding their minds and their horizons,” she says. They’re often also very competitive, or at least hugely ambitious. “You have to have that fire in your belly.”

In job interviews, Maggie would probe to see if a candidate had ever pushed to do something that required enormous persistence. “Did they have a craft or a hobby or a sport or an instrument that they were committed to? Was there something that took hours and hours of practice for them to get good at?”

She would ask them to tell her a story about one of the toughest things they’d ever had to deal with at work and to walk her through how they’d handled it. “Being in a growing company is a little bit like being in the military,” she explains. “We’re going to get into firefights. I want to know who’s in the foxhole with me. I need to make sure they’ve got my back, as I will theirs.”

Many candidates won’t fit this mold. Not everybody can handle the confusion, chaos, uncertainty, and rigor of an early-stage company. It’s not useful—either for the candidate or for your company—to bring in people who can’t handle the unique demands of a startup. “Great athletes’’ can go the distance.

Hire for Core Competencies

Then outsource the rest.

A common mistake new founders make is thinking they need to hire an employee for every task on the company’s plate. Sure, you need all your core competencies in-house. But many positions can be outsourced.

Go Behind Your Candidates’ Backs

Talk to at least three people not on their list of references.

When you hire employees, you do reference checks. This you know. People give you a list of references who will inevitably say nice things about your candidate. Most recruiters stop there. They check that box and move on with the hiring process.

But when it comes to hires for key executive posts, you can’t afford to do that. Unlike at a large, well-established company, every single person in a startup has an outsized impact on its success. A middling manager can coast in a large, slow-paced organization that doesn’t have to move as fast as you do and that isn’t figuring out everything on the fly.

In a startup, your early hires—particularly your early executives—need to be rock stars with the chops to handle the work. They need to be responsible and reliable. They need to be able to roll with the inevitable failures of early-stage life. Ideally, they have worked on the most important, core initiatives at their previous companies, not on sideshows that didn’t matter. Typically, you’ll want people who got promoted and took on bigger roles and responsibilities as they grew.

How do you figure out if your candidate is that person? You can’t just ask them, of course. Anyone can come across well in a job interview. And you can’t just ask the references they provide. Those people are teed up to sing their praises.

Instead, just as you did with your cofounder(s), go behind your candidates’ backs. This is sometimes called “backdoor reference checking.” Find at least three people who have worked with the candidate recently and can talk about what they’re really like, how they work with others, how they handle setbacks, and, ultimately, whether they’d be a good fit for your world.

Sometimes, your network and the candidate’s will overlap sufficiently that you’ll actually know people who know them. If so, reach out to those people. But even if you don’t know anyone within a degree of separation, use tools like LinkedIn to find colleagues who can give you candid assessments. Don’t extend an offer to a candidate until you’ve spent at least 30 minutes really digging deep with each of those backdoor references.

Firing Best Practices

There are good ways to do it—and bad ones.

It once took me 12 months to let go of an executive who simply was no longer the right fit for the position or our company. I’m embarrassed it took me so long. Being decisive is one of my biggest strengths. But this decision? I just kept putting it off. Partly because firing someone is really hard to do. We’re human. Who wants to tell an employee that you’re about to take away their livelihood—and potentially their pride and sense of self?

It’s so easy to come up with rationalizations as to why now is not the right time to let someone go: There’s a product launch or rebrand coming up that you need the person for. Or the end of the quarter is around the corner, and it would be disruptive to the team. Or the holidays are coming up, and it’s just wrong to fire someone then. In my case, I was also afraid of having that critical position empty while we looked for a replacement.

In the end, though, it set us further back to keep the wrong person in that job than if it had sat vacant briefly while we recruited the right person. I hope you will be braver than I was. It’s the right thing to do, both for you and the employee you have to let go. Sometimes you’ll even discover that the employee already knows it’s not the right place for them, and they might actually be relieved that you’re doing something about it. While letting someone go is never easy, there are ways to do it that are better for everyone—and ways that are worse.

•   First, consider whether the person is simply in the wrong role. If they’re a good fit for your company but not for the position they have, is there a job that will be a better fit?

•   If you do decide to let an employee go, it shouldn’t be a surprise to them. You should have been having regular conversations with them about where their performance was lacking, so that they had a chance to improve.

•   Once you’ve made the decision, don’t belabor your feedback. You are no longer in performance-review mode. Going over what didn’t work is just going to make them feel worse.

•   Bite the bullet and get it done quickly. Letting these decisions linger is damaging to the company.

•   Always fire on a Monday and never on a Friday. You want them to have the whole week to start moving forward. If you let them go at the end of the week, they’ll stew on it the entire weekend.

•   Give them a proper severance and, if they have equity, vest the appropriate amount of their shares.