I was talking to a friend the other day who is a CEO of a 25-person, VC-backed, software start-up in the greater Boston area. He was talking about the great Product Manager he just hired, which got me thinking…
When is the right time to add a Product Manager to a start-up?
In the early days of a start-up, all of your efforts are focused on creating the product and validating your product concepts with potential customers. And of course, unless you have a very rich uncle or your own truckload of gold, there are the endless fund-raising activities.
So if you don’t have a Product Manager, who can act as the primary voice of the customer to ensure that you are creating a product that your customers will buy? We all know that everyone in a start-up will help collect and communicate customer needs, but who will synthesize all of these needs into generalized product requirements?
Let’s consider some options…
In a typical start-up you have a CEO, CFO, CTO (or VP of Engineering), a few Sales Reps, around 5 Developers, an Office Manager (who also handles Admin and HR tasks), and an IT Specialist who keeps the network and computers going. In other words, you have about 10-15 people.
It’s unlikely that the CFO, Office Manager, or IT Specialist could represent your customers — this is not their role and they will have enough of their own work to do anyway.
The Developers could potentially represent your customers — but their primary function is to create the product, so the more time they spend meeting with customers, the less time they will have to create the product. And there is no guarantee that they will be able to meet enough customers so that they can identify generalized requirements. So, this is probably not the best use of their time.
Likewise, the CTO is probably not the best choice. Someone has to ensure that Development progresses smoothly. This means sorting out architectural issues, planning the efforts of the Development team, and allocating tasks to individual developers. The CTO could also visit with customers (either in-house or at customer sites), but this could decrease the efficiency of the Development team or elongate the schedule. Some issues arise very quickly within a Development organization and they need to be resolved very rapidly — before their effect becomes wide spread. So if a problem arises and your CTO is on a plane somewhere visiting a prospective customer, who will solve the problem? And how much time will be lost waiting for a correct solution?
So, how about the Sales Reps? After all, they have been talking to prospective customers about the product’s proposed capabilities, so they should have a good idea of what these customers think. Right? I’ve worked with a number of sales representative in early stage companies and they have one thing in common — they know how to identify a potential customer and convince them to purchase their product. They have an excellent knack for telling a story so that the customer has a good picture of how the product will help them and so that the customer is completely convinced that they simply must have the product.
Sales Reps are also very much focused on the customer in front of them. They know that every sale is about the relationship that they have with that customer — and less about whether the product does (or does not) contain some small feature. Therefore, they tend to focus on the general capabilities that the product will deliver and may not even know all the individual features that the product contains, especially if the product is highly technical. As a result, Sales Reps are not so great at synthesizing requirements from a group of customers into the type of generalized requirements that Development needs.
The only person left is the CEO, who is often one of the founders. Thus, it is safe to say that the CEO really understands the value proposition of the product, what the company is trying to achieve, and undoubtedly they have a very good idea how much (or little) of the product has been completed so far. However, these characteristics are exactly why the CEO needs to spearhead the fund-raising activities for the company. After all, potential VC investors will want to meet the CEO so that they can determine if they have confidence in the CEO’s ability to delivery the goods.
And let’s not forget that the CEO is also the ultimate closer in many sales situations — the person that some customers will want to meet before signing their first contract. In other words, it sounds like the CEO has already got one, if not two, full-time jobs.
Thus, I’m forced to conclude that a product manager is critical to the success of a start-up company and should be one of the first 15 people who are hired…
But then again, I’ve spent a fair number of years in various product management roles, so perhaps I’m prejudiced…
Fulton's Ventures 
If you are saying that you must have a person with the title “product manager” as one of your first employees, I completely disagree with that.
The first fifteen employees should be made up of the core founders which should include someone who is responsible for both inbound and outbound marketing (in other words the “product marketing manager/product manager”).
From there, resources should be allocated for ensuring that the product is developed successfully. This means everyone from engineering (this is not the time to go cheap on the development – if you offshore it too early, you can lose the idea too easily without you even knowing), tech pubs to support and potentially partnerships/alliances as well as perhaps a SEO/SEM/Social Media expert if you are developing a Web 2.0 application.
The executive staff, namely the marketing person and the CTO should be tasked with handling the heavy lifting in terms of initial architecture since they are the ones who actually came up with the idea that started the company.
By giving such an enormous responsibility to someone that early is foolish since the idea will probably get diluted and in many cases destroying it before it is even developed. I would not hire a product manager until the product is at least at the second generation to see how it is received in the market and how it can be updated.
John,
Thank you for your perspective. To clarify, I have seen a number of start-ups where the founders were the CEO and CTO — or people with in-depth business, sales, fund-raising, and technical (or development) backgrounds. And while it was theoretically possible for them to also handle all of the product management tasks, it was more common for their primary tasks to take precedence, leaving Development to proceed based upon the feedback of a few key customers or their own instincts as to what the product needed.
In today’s market where your product MUST solve a real customer problem, provide sufficient functionality, be of superior quality, and must also be easy-to-use, I believe that you cannot afford to waste any of your precious Development resources implementing capabilities that are not critical to the success of the product. So, if there is no Product Manager to synthesize customer and market requirements and to help guide these early decisions, can you really afford to bet the future of the company on someone who is trying to do this job in their spare time?
-dave-
David,
If you are willing that early in the process to give the enormous responsibility of synthesizing customer and market requirements to someone else that early in the game, you really shouldn’t be in business.
Since the executive staff usually is the closest to the ground in terms of understanding the benefits and drawbacks of their offering, adding an additional layer of abstraction only makes it more difficult.
See a recent talk of mine on where strategy lives (especially at tiny start-ups that don’t yet have product managers), http://www.mironov.com/events/where_strategy/ . My theory is that a product manager should be NO LATER than employee #25, similar to Dave’s comments above.
Having been employee #15-25-ish at four start-ups and (in most cases) covering all of product management and all of marketing plus some BD until we grew enough to share the load, budget *IS* an issue but having the right mix of talent is much more of a determinant of success.
Rich,
I appreciated the comment and your presentation. Very good. If I had seen it earlier, I would have included a reference. It’s always nice to know that at least one other person shares your perspective. Thanks again,
-dave-
David, et. al,
I fully realize that the predominant attitude held by product management professionals would be to have the first 15 employees being one of theirs.
But in reality, it isn’t the marketing department or function at all that holds the purse strings. In fact, sales probably has more “political” persuasion or power in most organizations than marketing.
I can only commiserate with organizations that don’t and they take the gamble whether to hire or not.
Richard,
Your point about Sales having heavy influence is well-founded. All of my employers have been like this.
The challenge is that Sales is typically focused on short-term goals while product development takes much longer. Some companies respond by creating products that are heavily customized for each installation — which impacts their ability to upgrade customers to future product revs. Other companies add requested capabilities and then hope that the requesting companies are still interested enough to buy the product when these capabilities become available.
A better approach, in my opinion, is to leverage initial (and ongoing) customer feedback to identify generalized requirements which can allow the company to sell what they have instead of what they might have in the future. Product Management typically performs this function, but in my opinion, performing the function properly is FAR more important to the company’s success than who does it.
Thanks again for your post.
-dave-
I read this yesterday, and it reinforces the point of having a product manager as one of the first employees – if not the founder.
http://www.readwriteweb.com/start/2010/04/learning-from-failure-one-starups-story-what-went-wrong.php
Anand,
Thank you for an excellent reference. It’s very nice to see that some of my opinions are shared by others. I guess all of my “learning experiences” may have been worthwhile after all. (grin)
Your article also discussed the company having a remote development team that likely contributed to their failure. If you are interested in understanding how productive a Development team is (yours or another one), you might check out my blog entry on “How Productive is your Development Team?” at http://wp.me/pRvZI-3J. Thanks again,
-dave-
Mr. Fulton,
This is an intriguing question that is much debated in smaller companies and is related directly to budget.
As much as the product management profession would like to have it, the product manager is rarely within the first 10 employees. In my opinion the “1.0” release doesn’t need to be productized.
During this stage, it is probably more important to have a prototype that is built by tools that allows for flexibility later on.
To me, this is the challenge. Most early developers might be tempted to try using the quickest-to-market tool set (at least in software) and may find out later on that the software architecture they have chose will severely limit the reusability or repurposing of the software for a broader range of customers.
In summary, it is survival and prototyping that must be accomplished first before even thinking that a “1.0” product will completely satisfy the market and its customers.
Product Management Consultant
Twitter ID “GrandRounds4ODs”
Richard,
Thanks much for your well-reasoned thoughts. I agree with you that budget is the key issue.
However, I have seen a number of small companies where they didn’t expend the estimated $125K to hire a good product manager and instead spent countless Development dollars chasing one new prospect after another because they didn’t take the time or have the experience to recognize and pursue generalized requirements.
In addition, once you deliver your “1.0” product to customers you have the added burden of satisfying their ongoing expectations. Therefore, preparing the “1.0” release is the most fun and the most challenging because you have much more flexibility in choosing the capabilities of your product.
This is why I believe that a Product Manager needs to be one of your first 15 employees — so that you can understand your target market better and thus make the best possible decisions.
Thanks again,
-dave-