Y Combinator Startup Podcast - #10 - Office Hours with Ali Rowghani

Episode Date: June 14, 2017

Ali Rowghani is CEO of Y Combinator Continuity, where he invests in and advises growth-stage startups. Ali directly contributed to the growth of two great companies -- at Twitter, as CFO then COO, and at Pixar as CFO and SVP of Strategic Planning.Read the transcript on our blog.

Hey, this is Craig Cannon, and you're listening to Y Combinators podcast. Today's episode is our second edition of Office Hours, and this time we're joined by Ali Rogani, who's the CEO of YC continuity. Before YC, Ollie was C-O at Twitter and CFO at Pixar. Because Ali invest in growth stage companies, today's office hours feature questions from growth stage founders. All right, here we go. How's it going? Terrific. Thanks for having me. No problem. So the first couple of questions are just mine. I wanted to ask you about your background. So the first one is, how did you get a job at Pixar?

It's actually an interesting story. The short version is when I was in school, I started researching. First of all, I love the Pixar movies. I love the product. And I loved it because I felt it was unique in that it was entertaining both for kids and for adults. And so there was an appeal that crossed generations with the Pixar films. And I didn't really see that anywhere else in children's entertainment at that quality. So after sort of falling in love with the films, I started doing some research on the company and I discovered like, wow, I really believe this company's story.

I believe what they're trying to do. I think this is going to be a big business that they can kind of defend and continue to innovate on. And after I'd done that research, I wrote a blind letter, believe it or not, to the woman who was the CFO of Pixar at the time. I went on their website. She was the only person who had kind of a business background. And I wrote her a blind letter to ask for an internship. Okay. And then I followed up with her a week or so later. And unfortunately, she was going on maternity leave. Her assistant told me. But she said that she'd read my letter and she asked me to come in to interview. And I sort of went in and talked and talked myself into an internship there. And then that became what was the beginning. Was that your first job? It wasn't my first job. I was at business school at time and I'd worked for a few years beforehand.

Okay. But I would say it was my first, it was certainly my first post-business school job, and it was my first, like, kind of career job, meaning the first place I'd work that I could imagine spending a long, long time. Yeah. And how long did you end up spending there? I spent almost 10 years there, believe it or not. Okay. So just for my context, like what movie to what movie is that roughly? Yeah.

Good question. I think about it the same way. So I joined as they were finishing Monsters Inc., which they released in 2001. Okay. And I left in early 2010 when they had finished Toy Story 3. Okay. So in order, I was there when they made Monsters Inc., Finding Nemo, The Incredibles, Cars, Rattatoui, Wally, Up, and Toy Story 3. Wow.

I was going to say glory days, but I feel like everything is glory days at Pixar. It's one home run after the next. Well, it was certainly a great period of time. It was a wonderful, wonderful environment to work and wonderful company to be associated with. And part of me feels like I always work there. Yeah, you're definitely a, you're proud Pixar employee. Yeah. And so then how did you go about transitioning to Twitter?

Well, I got a call from a headhunter. I had a friend who worked at Twitter and she had submitted my name to the headhunter. And he called me out of the blue. And he asked me if I'd be interested and I said no. And he was persistent and he sent me the job description and so on. And it's a funny story. I spoke to my brother, who is an investor. And I said, hey, I have the opportunity to interview for a position at Twitter to be their CFO.

And I think I'm going to turn it down. Would that be a bad idea? And he said, listen, Ollie, you're not going to get the job. Just go talk to them. So with that vote of brotherly confidence in my abilities, I went confidently into the interview room. But in all honesty, it was kind of the perfect thing to say because he was right. That's an interesting company. I had nothing to lose.

And why was I taking it so seriously the decision to interview there? And I went in and I really liked the people I met and sort of one thing led to another. And unexpectedly, they did make an offer and I ended up accepting. So there's also nothing more motivating than being the underdog. Yeah, but I wasn't, actually it wasn't that. It wasn't like, I'm going to prove him wrong. Yeah. It was what he said took all the pressure off.

It was like, oh, yeah, why, why not? It wasn't like, oh, I'm going to get him. I'm going to prove him wrong. Not at all. It was like, it was just like, hey, just go satisfy your curiosity. And, you know, don't worry about it. And so it was actually a very helpful thing to hear. So given that, do you give advice to the companies you advise around retaining executives?

I mean, you were there for 10, years. That's a long period of time. But, you know, what do you tell founders who have to deal with headhunters calling their best people? Yeah, I think, I think the question of like retaining great people, particularly retaining executives, comes down to three, three or four things. The first is maybe, maybe obvious or maybe not, is try to hire the right ones. You know, you should expect some turnover on your team and on your executive team. You know, my, is even companies that hire well, you know, one out of five or one out of six employees they hire or even executives they hire end up not working out over the long term because

the company evolves and changes and some people are fit at one point and they're not a fit later. And hiring isn't perfect. As hard as you work on it, you're not always going to be able to, you know, bring in people who are the right long term fit. So the best first step is to focus a lot on hiring the right executive. you're spending a lot of time with people before you hire them, particularly the executive level, making sure not only do they have the competence and experience that you need,

but they're bonded with you in terms of the values, that you guys share a common set of values and common set of goals, and that you're not going to have sort of like daylight between you and your executives in terms of what's important. So hiring well is probably the first most important thing you can do. And then it's important to manage executives differently then you manage ICs. And this is something that founders sometimes struggle with

because in a small company, when they're managing ICs or they're managing relatively junior managers, they tend to have to be involved in the details and they have to tend to be very task-oriented, you know, do this, then do this, then do this, then do this. That's often a good way to manage junior people or to manage ICs.

When it comes to managing executives, you really have to change your model. And you have to basically help sort of collaboratively define a vision for what you want them to achieve. You want to measure them on outputs, not inputs. And it takes an adjustment to learn how to do that, to think three, six, nine months forward and describe, this is what I have in mind. This is what I want you to work on. This is how I'll measure you in terms of how I think you'll be successful. and create that context in which they can work and do things that are that you would never be able to direct them to do because they have experience and capability that you don't have.

And so the takeaway is you know, you shouldn't micromanage them and you should shouldn't manage them based on inputs or process, but rather outputs and accomplishing a vision that you guys put together jointly. And the last thing I'd say, this makes a big difference. and I don't think it's intuitive for a founder is focus as you bring in executives to to really build excellent rapport and a sense of teamwork at the top of the company. I think executives find it really motivating and fun to feel like they're working collaboratively with excellent peers who are in other parts of the company to build something great. That sense of team, especially at the top of an organization, is just really psychically satisfying and fun. And it creates, not only does it help depoliticize a company when you have people really feeling like they're a team,

but it's also sort of a subtle way to keep people really engaged and involved and keep them happy in their jobs. So I would encourage you, the goal isn't to build, you know, a bunch of, strong siloed executives was rather to build a really high-functioning executive team. And that's really the goal of a founder. That's a great answer. It also segues perfectly into the first question from office hours. So they wrote in one disadvantage of being young is that you're usually inexperienced in managing people and conducting business. So how would you recommend young people improve their skills in people management and business? You know, there are obviously a lot of resources out there on books on management, you know, block posts that have been written. You know, YC has a great

blog. You have some great blog posts. I'll say it. Thank you. Thank you. But, you know, YC and the YC community, you know, has, you know, tries to basically, you know, bring a lot of experiences and observations that we have to help. So there's lots of materials. And I think being a great student, um, of materials, um, you know, read the Andy Grove books on management, so on and so forth. You know, there's a lot out there and, you know, there's a lot out there that's good and there's a lot out there that's so-so but like try to find the good stuff and read it and be a student of it and see what you can get out of it um i think there's no if if you're going to become a good manager um it's really you learn more from practicing than you learn from reading um now having said that some

you can draw some principles and some do's and don'ts um from the things that you um practice um and and so i would urge anyone who wants to be a good manager to uh to kind of get started set that as a that as a goal for themselves and try to measure themselves as much as possible. And you measure yourself as a manager by getting feedback and try to set up a system where you're getting, you know, comprehensive 360 degree feedback from the people that you're working with and the people who work for you, the people work around you and so on and so forth. And so to be more specific, like what kind of feedback are you looking for to show progress? I think what you're looking for is more than anything, you're trying to sort of

heighten your self-awareness about whether you're doing the kinds of things that are helping the people who work for you be more successful in achieving the things that you set out for them to do. So, you know, leaders, especially CEOs, you know, there are a few things they have to do. Most other things they can delegate and should delegate over time. And one of the things they have to do, which pertains to the prior question, is that, is they have to be able to build a senior leadership team, both hire them in and make sure that they work well together over time.

That's not delegatable. A second thing they have to do is to create sort of strategic alignment, to create a sense of purpose at the company. What are we trying to achieve? Like, what bigger end does it serve? And how are we going to go about doing it? What's our product strategy and go-to-market strategy, achieve that end?

And how do we measure whether we're successful? You know, in things I've written, and I call this defining the mission to metrics of an organization. Can't really delegate that. You can get feedback, et cetera, but you can't delegate it. And then finally, as a CEO, you need to be really cognizant of nurturing the right culture at your company. And that's a group activity.

It's not something you go off and write and come back and say, hey, this is our culture. Everyone follow it. It's more organic, but you have to be part of it. You have to embody it. You have to make sure that you are acting in ways that are consistent with it. And so you have to nurture the right culture at the country. company. These three things can't be delegated. So when you talk about what do you want to get feedback on, if those are the things that, you know, you have to do, particularly the point around strategic

alignment and how we're measuring success and are we doing the right things. Do we have the right strategy? Is it clear to everyone, et cetera? I think that's probably of the three, the one that you should try to get the most feedback on. There's also stylistic issues. You know, to make sure that your style isn't rubbing people the wrong way or that you're not too uncommunicative or oftentimes, you know, oftentimes young CEOs are surprised how many times they have to repeat themselves or how many, how many ways they have to find to reinforce a given message for it really to sink in into a company, particularly as a company grows. And so are you being an effective communicator, you know, is also another important thing.

Last point I'll make on this, there are also lots of really good executive coaches out there. Again, like everything, there's some great ones and some so-so ones. But if you can find one, if you feel that would be helpful, I know a lot of founders who have really productive relationships with an executive coach. Most of all, they help gather feedback and heighten as CEOs or leaders self-awareness. And sometimes we'll help brainstorm through how do I handle this hard situation? How do I communicate through it? So lots of resources and more than anything, like be the owner of your own improvement. Be the owner of your own education here.

I think that orientation is helpful. That's a great answer. Next question. How do you find good early employees in fields that you are not familiar with? You know, say, for instance, sales, marketing, HR. I assume this question comes from somewhat technical. Yeah. So almost every founder goes through this.

You're going to have to hire people, particularly if you're a first time founder or even a second time founder that didn't get very far the first time. this is a kind of a universal problem. And there are, I think, two broad answers to it. The simple one is there are lots of sort of search firms that can help you, source candidates and kind of get up to speed, help you with the process. And if it makes sense for you at the given time, I think that's a good thing to do. But more importantly, the sort of the way to hack this problem is to use your networks, use your investors. use anyone do you know to try to get introductions to people who are considered best in their field in whatever discipline it is that you need to hire for.

And so whether if you're trying to hire a head of HR, and let's say you've never done that, and you don't even know exactly what an HR person does, which by the way, there's no shame in that. It's very common. I get that question a lot. Or you don't know what a CFO, you've never met one and you don't know exactly what they do. You don't even know when the right time to hire one is. if you can get introduced to a few heads of HR who are operating in bigger companies and have experience and are really respected, even if they're not candidates or would never dream of leaving their current position,

try to meet them so that you can, first of all, learn a little bit more about what they do, what their teams look like, what their experiences have been in the past, so that you get your own sense of what greatness is in a particular person. position that you've never hired for before. And ask questions, familiarize yourself with what the job is, what they think the key skills are to look for, et cetera.

You can get a long way. You can get a lot smarter by just meeting a handful of people who are top of their craft in each of these positions. And I would strongly urge people to do that. I think that's a great point. People love to give advice. So if you come in, not as someone trying to poach them,

but just like tell me, teach me, that would be, yeah, powerful. Next question. So we have tested our product in Europe and now we're thinking about expanding our business to U.S. markets. What are the most common mistakes that foreign companies do when they expand to the U.S.? So this, it depends a little bit what the product is and whether, for instance, there's kind of differences in regulatory environment, U.S., Europe, that pertain to the product, et cetera. assuming there's none of those edge cases are involved. I think generally the biggest mistake when you take your product from one market to the next is assuming that the customer is very similar and that the customer has the same pain point.

This is often a little bit less of an issue if you're a BDB product than a BDC product. But I think that the best first step is to make sure that you're familiar with the customer in the U.S. in this case. and what are the issues that U.S. customers face and how are they the same versus different than the customer that you already serve? And then the second thing is in almost all cases, again, it depends a little bit what type of company you are. But if you're like formally thinking about introducing a product

in a new market, particularly in the market as big as the U.S., it almost always requires feet on the ground here, even if the product and engineering team stays away, that you need sales and marketing, et cetera, to be here on the ground, to be able to open the right doors, interact with a customer, and be able to help you sell. So I would say the mistaken path would be assume everything's the same, be blind to regulatory and other issues across markets, and try to do it without any presence in this country.

Okay, so following on with that, someone asked a sort of related question. If you tried to enter a market, say the U.S. market and it didn't work out, how would you go about shutting down that office? I don't think there are, I'm not aware of any tricks here. I would say that you should labor laws differ country to country. You know, they're very strict in places like France, for instance, you know, about how you can lay off employees. I would say in all cases you should try to be very open and transparent and compassionate with the people that you're letting go. But, and I would be sensitive to the legal environment in which you're operating. But generally, if you've decided that, you know, you want to shut something down, I would get started and try to get it done sort of quickly.

But in a way that's, again, sensitive to legal constraints and also to the people that you have. Great. Next question. What are the most common mistakes you have seen growth founders make? Probably the most common mistake or category of mistakes is due to the fact that sometimes founders do. don't realize that their job description changes when they go from a smaller company, you know, 10, 20 people who are just, you know, everyone's jamming and trying to like build out the product to a company that's 50, 100, 200 people. The job description of a founder, CEO, changes dramatically as a company changes. And said simply, in the first phase, it's really just about building a product. And, you know, the company is only going to succeed if the product, you know, find, you know,

product market fit. And so in most cases, the CEOs are involved in building the product, designing the product, selling the product, demoing the product to customers, et cetera, all of the above. And unless you're doing all of that, like, you're probably not doing the right thing. You're not supposed to be specializing or worrying too much about, like, you know, leadership and, you know, building a team, et cetera. Like phase one is all about, you know, building a product that people love and getting an early enthusiast a group of adopters. And it's all hands on deck.

And the CEO is just sort of one among many, the first among many when it comes to like building, selling, designing, supporting the product that you have. But as the company grows and you get to this growth stage, so call it 50, 100 employees. At that stage, the company needs real leadership. So the CEO's job shifts away from doing to leading. And so you have to transition from, you know,

doing less. You shouldn't probably be answering support tickets anymore or being the only person who demos the product to customers or being the primary salesperson or being the person writing a bunch of code. And that transition is hard psychically for someone who maybe is really great at writing code and now really shouldn't be doing it anymore. It's also sometimes jarring to the company where like, wow, you used to be the biggest code committer and now you're not writing any more code.

What do you do? but but the sort of at the growth stage the unique job of a CEO is to build the company if in stage one it's to build a product and stage two it's build company and so as I mentioned like you know building a management team and making sure those people work together establishing the strategy and alignment around that and worrying about culture and nurturing that that's the those are the characteristics of the job description for phase two and it's hard to make that transition. So where I see people go wrong or when you have bumpy times, often it's because a CEO doesn't understand that their job needs to change. They grasp things they shouldn't do

and they become a bottleneck to decision making and action, you know, for the company. Probably the second biggest mistake I see has to do with mistakes in hiring and either it being rushed or forced or decisions that are made that end up not working out and setting the company back. And those mistakes are often made because hiring decisions are rushed. And the CEO is too involved in the doing to be able to step back and spend enough time recruiting and getting to know executives. That I think is the highest correlate to executive hires that don't work out. So I would say those are the two biggest patterns that I see.

Okay. And so related to that, last question is about a board. So what do you think an ideal? board looks like. So this really depends on the stage of the company. You know, if you're a Series A company, the ideal board is probably you plus some co-founders plus your Series A investor. I don't think you want it to be very big.

I don't think you want it to be very noisy. Boards generally at that phase of life don't matter a lot. I think that, you know, they matter in the sense that they can keep you accountable. They keep a little bit of a, create a cadence where you can think about the business and present your progress. Board members can be helpful outside of a board room, but the board itself shouldn't be a big deal when you're an early company. As you progress, and especially as you start thinking about maybe being a public company or approaching an IPO, the notion of an ideal board changes. It needs to shift from being more investor sort of driven to having independence. The reason for that is when you ultimately do go public,

there are going to be thousands and thousands of shareholders who don't get to sit on your board. And the board essentially becomes the sort of fiduciary representative of all of those board members who don't have access to management or access to the data of the company. And so they need to be independent people who don't have prior investments in the company. And they also need to represent a diversity of skill sets, a diversity of backgrounds, a diversity of ethnicities to be representative of the kinds of issues that are important to the company and also representative of the sort of population at large. So you need to start thinking about that probably one to two years before you go public,

bringing on independents who have a perspective that can help the company, but also over the long term, you know, have the type of backgrounds that would be, make them effective fiduciary representatives of shareholders, who aren't on your board. Okay. Great. That's it. Thanks, Ellie.

My pleasure. Thank you. All right. Thanks for listening. So if you have a question for a future office hours episode, you can send them to macro at Ycombinator.com. And as always, please remember to leave us a rating and review wherever you find your podcast.

See you next week.