You hear it all the time, “build a product that solves your own problem.”
That’s exactly what JT Marino and Daehee Park, both software engineers, did when they quit their jobs to create mattress company Tuft & Needle, seeding it with $3000 from each each of them.
They didn’t take venture money because they wanted to build the company for the long term and borrowed the money they needed to grow.
“The reason why we turned them down all those times is because we figured it would change the way we operate as a company.”
Instead, Marino, 30, and Park, 27, took out a $500,000 loan, at a rate of 10%, from Bond Street, one of the new breed of alternative lenders, in order to keep control of the company and continue doing things their own way.
They built the business online — no showrooms and no salespeople.
No hassles returning a mattress you hate. And, perhaps most important, no gimmicks on prices, which range from $350 for a twin to $750 for a king.
They’ve considered other products, even developed a few, but with no investors to force them to expand, they are focusing on the mattress business.
Is it paying off? Absolutely, so no problem meeting their loan payments.
By its first year in business, Tuft & Needle had reached $1 million in revenues. And then it just kept growing, hitting $9 million in 2014, then $42 million in 2015. This year, Marino and Park expect revenues to reach between $125 million and $225 million, a three- to five-fold increase over last year. And, yes, it’s profitable.
However, recognizing that not everyone, especially older buyers, are comfortable buying a mattress online, they are opening their first retail store at 637 King Street in San Francisco (where else?) — first and possibly last.
“It could very well be our first and last store, or it could be the first of many,” Marino says.
That’s the priceless reward for bootstrapping.
Call your own shots, experiment as you choose and stay true to your values.
I was reminded of it by a phone call from “Kev” asking for assistance because they were having trouble hiring.
He said they had no trouble attracting excellent candidates who seemed excited about the product and work, but they couldn’t seem to close them.
I asked two questions,
How would you describe your company’s culture and its core values?
What is your hiring process?
Kev described the culture in terms of working hard, a really fun atmosphere (foosball table, bubble machine, Friday beer bust, etc.) an “awesome product” and “incredible people.”
He said whoever was available sat in on the interview along with him and everyone had a say in whether an offer was made. They didn’t have a formal process, because they were a startup, but planned to put something in place when they started to scale.
Moreover, processes created outside or in ignorance of existing culture won’t work. It’s that simple.
That’s because the culture is anchored by and tied to the founder’s values and MAP.
For example, startups/high growth companies are often hotbeds of raging egos. If the culture is tolerant of that then the level of open communications that form the basis of great culture leading to good process is impossible.
Further, process created without a solid cultural basis will quickly turn to bureaucracy — which will slow growth while accelerating turnover.
A Friday series exploring Startups and the people who make them go. Read allIf the Shoe Fits posts here
Founder: I can’t be a good leader without knowing my people. How I can contribute to their life?
Me: You are going to have a lot of people who have no interest in sharing their personal life with you or having you contribute to it other than providing a great place to work.
Founder: How? I am a leader who prefers 1 on 1
Me: It’s not about you, it’s about them and what interaction they prefer; and as the company grows you will not have time or access for 1/1, unless you plan to interfere with your managers’ organizations. What it is about is the culture you create.
Founder: You can’t lead if you can’t connect.
Me: Connection is not always 1/1; that’s why culture is so important.
Founder: You have to know your people.
Me: No, you need to know your direct reports and know that they are supporting your culture. Anyway, good leadership should be spread around your company and not just the province of certain positions.
Founder: You can’t convince me. I have had coffee with my subordinates to know them and that catapulted us. Culture is about having a tea, cappuccino with my subordinates and talking about stuff, then car-pooling.
Me: I’m not saying to stop, I’m saying it won’t work with everyone, plus, you won’t have time as the company grows. There are many people who have no interest in that kind of intimate, personal relationship with their boss, but are world-class hires. They care about the company’s culture because they know it reflects the founder’s values.
Me: Moreover, bosses who can only relate 1/1 are often seen as playing favorites, because they tend to favor those who respond to their approach.
Me: If you try to cram every hire into any one, narrow MAP it will cost you talent and engagement, because those who don’t like it will either walk or disengage.
Me: The important takeaway here is that when it comes to worker interaction one size does not fit all.
Great culture is about values, not fancy offices, free food, perks, etc., because, done well, it provides a blueprint for any worker faced with making a decision.
Great cultures don’t happen by accident or benign neglect, nor do they grow organically.
They are the result of focused thought, intentional design and, focused effort.
They are sustained through exceedingly careful hiring and the willingness to walk away from a candidate whose values aren’t compatible.
The investment industry is known more for its greed than its social sensitivity, but Bridgeway has been making waves for more than 20 years by giving 50% of its profits to charity and capping top salaries.
Montgomery’s approach has been profitable, as well as a talent magnet and retention tool.
John, you founded Bridgeway Capital Management 22 years ago and your firm grew to manage billions in assets. Many people are drawn to your firm because you are values-driven, and your website says your core values are: ‘integrity, performance, efficiency, and service’. What does it mean to live these values? (…) “We’re not trying to create golden handcuffs to keep people in place. We’re trying to create an amazing place to work where people can provide investment advisory services and give back at the same time. On my team — the investment advisory team — we’ve lost one portfolio manager or researcher in 20 years.”
If a culture built around ‘integrity, performance, efficiency, and service’ can propel and sustain a company in an industry like financial services where talk is cheap and talent is supposedly focused only on what’s in it for them, think what strong values can do for your company.
Founders who go into the game with a conscious sense of their own values, create a culture based on those values and make sure to communicate it rarely find it necessary to fire anyone.
In other words, they use their culture to filter their hiring and are tough enough to walk away from candidates with good skills who aren’t culturally compatible.
But how do you know? How can you evaluate culture compatibility in the short time you interview?
I explained how to do it way back in 1999 when the following was published by MSDN and have republished it here every few years; I think it’s time again.
Don’t Hire Turkeys! Use Your Culture as an Attraction, Screening and Retention Tool to Turkey-Proof Your Company.
All companies have a culture composed of its core values and beliefs, essentially corporate MAP (mindset, attitude, philosophy™) and that culture is why people join the company and why they leave if it changes.
Generally, people don’t like bureaucracy, politics, backstabbing, etc., but when business stress goes up, or business heats up, cultural focus is often overwhelmed by other priorities.
In startups, it’s easier to hire people who are culturally compatible, because the founders first hire all their friends, and then their friend’s friends.
After that, when new positions have to be filled the only people available are strangers.
So how do you hire strangers and not lose your culture?
Since your culture is a product of your people, hire only people with matching or synergistic attitudes. The trick is to have a turkey sieve that will automatically screen out most of the misfits and excite the candidates who do have the right values and attitudes.
Here is how you do it.
Your sieve is an accurate description of your real culture.
It must be hard copy (write it out), fully publicized (everyone needs to know, understand, believe and talk about it), and, most important of all, it must be real.
Email it to every candidate before their interview and be sure that everyone talks about the culture during the interview and sells the company’s commitment to it.
Everybody interviewing needs to listen carefully to what the candidate is saying and not saying; don’t expect a candidate to openly admit to behaviors that don’t fit the company MAP, since she may be unaware of them, may assume that your culture is more talk than walk or consider it something that won’t apply to her.
Red flags must be followed up, not ignored because of skills or charm.
Consider the various environments in which she’s worked; find out if she agreed with how things were done, and, more importantly, how she would have done them if she had been in control.
Whether or not the candidate is a manager, you want to learn about her management MAP, approaches to managing, leadership and work function methods.
Probing people to understand what their responses, conscious as well as intuitive, are to a variety of situations reveals how they will act, react, and contribute to your company’s culture and its success.
Finally, it is up to the hiring manager to shield the candidate from external decision pressures, e.g., friends already employed by the company, headhunters, etc.
Above all, it is necessary to give all candidates a face-saving way to withdraw their candidacy and say no to the opportunity. If they don’t have a graceful way of exiting the interview process they may pursue, receive, and accept an offer, even though they know deep down it is not a good decision.
A bad match will do major damage to the company, people’s morale and the candidate, so a “no” is actually a good thing.
Remember, the goal is to keep your company culture consistent, flexible and true to your core values as you grow.
From the time you start this process, you need to consciously identify what you have, decide what you want it to be, publicize it, and use it as a sieve to be sure that everyone who joins, fits.
Use your cultural sieve uniformly at all levels all the time. If someone sneaks through, which is bound to happen occasionally, admit the error quickly and give her the opportunity to change, but if she persists then she has to go.
For more help, download the CheatSheets in the right-hand frame and/or give me a call at 360.335.8054.
How would you respond if you were head of a global professional company with more than 1,400 partners, 18,500 employees and a culture built on values, trust and honor when the values were ignored, trust was broken and the organization dishonored by someone at the highest level?
The values that Marvin Bower, its longtime managing director, instilled included putting the clients’ interests above the firm’s, providing independent advice and keeping confidences. These ideas were imparted from one generation to the next, mentor to apprentice. But after Anil Kumar’s arrest [he pleaded guilty] in late 2009, Mr. Barton, who had been elected to head the firm just months earlier, decided that the honor-driven, values-based system was not enough. What the firm needed was some rules.
Powerful people do not take kindly to rules and nobody takes kindly to rules that result from someone else’s actions—especially when they impact one’s income.
Ethical people like to believe that defining values and modeling them across the organization from the top down is enough.
It’s not.
An exceptional CEO I worked with who detested politics believed it was enough that his senior staff couldn’t use politics to get ahead with him. What he refused to recognize was that even though the political games didn’t work on him they wreaked havoc on those below the game-players.
This is especially true in the current world where greed, whether for wealth and/or power, is epidemic and “enough” no longer has any meaning.
But to work, the rules must apply evenly to everybody, at all levels, including the rule maker.
Every so often I come across an old post that is to strong and relevant I feel the need to repost it as opposed to just sharing a link.
Why ‘Cracked Pots’ are Good For Your Team is such a post.
Do you have the courage to hire people with quirks? Those who are unconventional or have unconventional experience for the position? Will you hire someone who is flawed in some way?
Would you hire a ‘cracked pot’ for your team?
An elderly Chinese woman had two large pots, each hung on the ends of a pole which she carried across her neck.
One of the pots had a crack in it while the other pot was perfect and always delivered a full portion of water.
At the end of the long walks from the stream to the house, the cracked pot arrived only half full.
For a full two years this went on daily, with the woman bringing home only one and a half pots of water.
Of course, the perfect pot was proud of its accomplishments.
But the poor cracked pot was ashamed of its own imperfection, and miserable that it could only do half of what it had been made to do.
After two years of what it perceived to be bitter failure, it spoke to the woman one day by the stream.
“I am ashamed of myself, because this crack in my side causes water to leak out all the way back to your house”‘
The old woman smiled, “Did you notice that there are flowers on your side of the path, but not on the other pot’s side?”
“That’s because I have always known about your flaw, so I planted flower seeds on your side of the path, and every day while we walk back, you water them.
For two years I have been able to pick these beautiful flowers to decorate the table.
Without you being just the way you are, there would not be this beauty to grace the house.”
Managed correctly, appreciated instead of tolerated or, worse, homogenized, the idiosyncrasies of your team, the unusual backgrounds, your cracked pots, are what push productivity, juice creativity and drive innovation across the board.
And often it’s another’s management failure that gives you the opportunity to increase the strength of your team.
So cherish the pots you already have and never hesitate to hire another.
Have you heard of Dov Seidman? The man who built and runs a multimillion dollar global company around the idea that the most principled businesses are the most profitable and sustainable.
That’s hard to believe in a world where every day stories bombard us proving over and over that ‘ethical leadership’ has attained the dubious honor of being an oxymoron, whether in business, politics and even in religion.
In a world focused on ‘how much’ and ‘how many’ it’s important to remember that what we choose to measure is an accurate reflection of what we value.
Seidman offers a cogent argument that the more important question is ‘how’, as he discusses in his book, “How: Why HOW We Do Anything Means Everything” and the following video.
Three years ago, in Leadership Turn, I talked about the dangers of allowing your culture to become a cult, but it seems that’s happening more and more.
The same day I explained here the benefits of what I called an ALUC culture.
ALUC is composed of four actions:
Ask everyone for input, ideas, suggestions and opinions—not just your so-called stars.
Listen and really hear what is said, discuss it, think about it.
Use what you get as often as possible, whether in whole or in part, or as the springboard that leads to something totally different.
Credit the source(s), both up and down, publicly and privately, thank them, compliment them, congratulate them.
The following day I offered some simple advice on implementing ALUC.
Dewey & LeBoeuf is a law firm; it was born in 1909 and is dying in 2012.
Its death is the result of a culture in which money replaced values—
“Because the partnership lacks any shared cultural values or history, money becomes the core value holding the firm together,” said William Henderson, a law professor at Indiana University who studies law firms. “Money is weak glue.”
and a toxic star system.
Even as Dewey’s performance flagged, the firm doled out lavish multiyear, multimillion-dollar guarantees to its top partners and star recruits. The guarantees — there were about 100, with several over $5 million a year — created compensation obligations that the firm could not meet.
Of course, they aren’t the only law firm or other type of business to founder and sink on the rocks of unfettered growth, mergers, aggressive hiring, outsize pay packages and compensation disparity that creates an internal us vs. them mentality.
In short, 103 years down the drain.
The Dewey & LeBoeuf failure provides glaring proof of the importance of a strong shared-values culture and testimony to the mantra I evangelize—people who join for money (or perks or stock) will leave for more money (or perks or stock).
Entrepreneurs face difficulties that are hard for most people to imagine, let alone understand. You can find anonymous help and connections that do understand at 7 cups of tea.
Crises never end.
$10 really does make a difference and you’ll never miss it,
Way back in 2006 I described 
Three years ago, in Leadership Turn, I talked about the dangers of allowing your 
