Matt Blumberg Wants Other Startup CEOs to Know the Lessons He's Learned

By Scott S. Smith | Wednesday, 30 June 2021 | Feature, Startup, Interviews

"I wish someone had given me this book when I was a first-time CEO, since I didn't have a clue what I was doing and made every mistake at least once," Matt Blumberg told Startup Savant regarding his “Startup CEO: A Field Guide to Scaling Up Your Business” (John Wiley & Sons, 2020).

It runs 454 pages, covering everything from hiring when you can't pay much and creating a company culture to building a board and preparing to sell your baby when it grows up.

If that were not enough to scare off half-hearted wannabe entrepreneurs from diving into the deep end, he's just followed it up with “Startup CXO: A Field Guide to Scaling Up Your Company's Critical Functions and Teams” (John Wiley & Sons, 2021). It's another 620 pages, written with a group of current and former employees and collaborators (and there is more on the designated site).

"The first book left me with the nagging feeling that it wasn't enough to only help CEOs excel, because starting and scaling a business is [a] collective effort," Blumberg explained. This volume is a guidebook for CEOs of young firms and their functional leaders of everything from human resources and finance to marketing and engineering.

Blumberg had been a management consultant, venture capitalist, and general manager of an Internet startup within a larger company when, at 29, he decided to found Return Path. In the digital dark ages of 1999, it offered ways to make email marketing easier and more effective. He sold it in 2019 when the company had nearly 500 employees and had reached $100 million in revenue. Blumberg followed that with a couple of stints as a temporary CEO before co-founding Bolster, an on-demand marketplace that matches leaders with companies that have openings for interim, project, advisory, and "fractional" positions (gig roles that come with executive decision-making authority).

Out of the Starting Gate

Most first-time entrepreneurs are excited by a big idea and are sure investors and customers will be, too. Then they hit a wall of skepticism and apathy and never get their dream off the launching pad. Those who do are inevitably shocked by huge challenges they didn't foresee, even when they have lots of other business experience. The road remains bumpy for most startups for years, but the thrill of creating something new often offsets the setbacks.

"The first job a startup CEO has is to tell a story that paints a picture of what the future could be," Blumberg said. "Stories take a jumble of facts and give them meaning to inspire people to give you money, buy your product, or join your team."

The initial vetting process for ideas needs to ask what significant problems customers still have in any field, what products or services might solve them, whether an upgrade from a current solution will be enough or a brand new one is needed, and how much would they likely be willing to pay for it.

The answer a startup begins with often turns out to need adjustments, or the company needs a complete course correction after testing. The "lean" or "agile" startup model rapidly tweaks versions to come up with a Minimum Viable Product that can get a full real-world reaction from more than just early adopters. (Blumberg insists that new leaders read the classic accounts of how to do this before jumping off the cliff and expecting to fly.)

"This is the opposite of porting MBA techniques to the startup world and much more effective," said Blumberg. "Determining the sales channels is the most important part of the lean process because it's where the rubber meets the road--are you going to engage in direct sales via ecommerce or act as a technology provider and leverage another organization's sales force? If you are going direct to the consumer, will you offer something free with an incentive for a premium upgrade and depend on word-of-mouth organic growth?"

Of course, if you've bootstrapped this far, relying on a small group of partners, family, and friends, you'll probably need a cash infusion to do a serious launch. Outside investors will insist on a brutally realistic, fully- documented view of the opportunity, competition, financial projections, and why your team can deliver. Most pitches fail, so Blumberg advises more reading to be prepared for the tough questions.

Some of his takeaways on venture capital negotiations:

• Get a really good lawyer with a lot of experience.
• Trade weaker terms for yourself to get high-quality investors--they're as important as the quality of your products and services. Ask for half a dozen references to CEOs they've worked with and call them ASAP before they can be "prepped."
• Only a few terms really matter and the exact percentage the VCs want is not as important as having a capital structure that an outsider can easily understand because you will probably need more investors later.
• If you have multiple investors in a syndicate, insist on a lead counsel and lead investor for negotiations.

A Team to Master the Unglamorous Details

Like the CEO, CXOs are going to be overwhelmed by the number of details they need to master, perhaps 75% of which they have never or rarely done, Blumberg notes (former corporate department heads are usually not good fits for small companies). His advice to get started:

• Do a complete inventory of all the functional competencies you and those reporting to you need to have, whether by conferring with team members, handbooks, or outside friends who have expertise. To measure competence, build a RACI (responsible-accountable-consulted-informed) list and test it.
• Form a strategic approach. Every function has tactical and transactional elements to it, the lowest common denominators, Blumberg wrote. "HR can just be about benefits and payroll, or it can help create a people-centric, values-driven learning organization and culture that optimizes the contribution and experience of employees. Think holistically and put the needs of the business before your departmental needs."

For each role, Blumberg provides some CEO-to-CEO advice. For example, he recognizes that most startups have a busy, medium-sized marketing department before a full-fledged Chief Marketing Officer (CMO) is at the helm. A sign that it's time to hire one: you find yourself spending too much time doing the hands-on management of small parts of the process because no one else has the skills. If the department is small and has competent people that lack strategic experience, a fractional CMO might be the best option.

Startup CMOs do key things very well:

• They know how to analyze data to inform decisions.
• They understand what the business needs to achieve, how to drive the results, and the budget elements necessary to keep the funnel full.
• They are fluent in all the channels, which could be a couple of dozen, from ecommerce to TV ads.
• They spend time in the field, at events, partner meetings, on sales calls, etc.

Blumberg says he spends the most effective time with the entire go-to-market team as a group, including sales, account management, and partnerships. "I also find the most creative thinking comes out of longer-form one-on-one conversations on strategic topics."

Signs a new CMO is needed: they spend too much time on the glamorous agency work, focus on task execution and not strategy, and report on activity instead of outcomes.

Another critical role can be the Business Development Officer (BDO), even though the CEO might initially handle mergers and acquisitions and Sales may be in charge of strategic partnerships. Blumberg says it's time to hire one if you find yourself often waking up in the middle of the night thinking about buying part or all of another company or selling yours and spending too much time consulting with outsiders about it. A fractional BDO could help define partnership or M&A strategy, aid with transactions too small for a banker, or advise on how to think about a significant geographic or channel expansion.

"I spend a lot of time with our development officer, most of it while we are traveling, because he is the ambassador on the organization's current thinking, positioning, and forward-thinking strategy," wrote Blumberg. "The deal world is intense, so when one is going on I might be talking to him 20 hours a day, but when it's business as usual, I might go weeks without deep interactions."

How to not burn out while managing a startup at any stage?

"Some of the things I dismissed early in the life of Return Path, either because I thought they were extravagant expenses or I just didn't need them, have become the cornerstone of my success," Blumberg wrote. "My coach works with other members of the executive team, helps facilitate executive and board retreats, and provides perspectives based on working with others. My executive assistant, who is my alter ego, can anticipate what I need, prioritize things for me, follow up on things without direction, and frees up three to four hours a day of my time…The culture you create, the operating systems you develop and practice, will change both you and others and allow you to balance your life and grow your company simultaneously."

About the Author

Scott S. Smith

Scott S. Smith has had over 2,000 articles and interviews published in nearly 200 media, including Los Angeles Magazine, American Airlines’ American Way, and Investor’s Business Daily. His interview subjects have included Bill Gates, Richard Branson, Meg Whitman, Reed Hastings, Howard Schultz, Larry Ellison, Kathy Ireland, and Quincy Jones.