Wednesday Wisdom from Josh Mendelsohn, Managing Partner at Hangar
We’re halfway through the week, and it’s time for a boost of inspiration to keep us going. Our #WednesdayWisdom blog series taps into the minds of industry leaders and disruptive visionaries who are working to build the future of entrepreneurship.
We sat down with Josh Mendelsohn to discuss the biggest challenges startups face when scaling, how effective policy making can help shape the startup world and his best advice for rising entrepreneurs. Josh is Managing Partner at Hangar, a startup studio that creates companies in markets driven by federal, state, and local government.
Your career has been largely focused on helping startups scale. What would you say are the biggest challenges startups face when scaling?
Scale can be as much of an art as it is a science. It’s about improving efficiency as an organization grows, but it also means building an organization that can support and enable growth over time. I’ve seen a broad swath of businesses making the same kinds of mistakes as they try to scale up. Here are some of the trouble indicators:
- Rapid growth and early success
Having a fast-moving product or service with strong adoption or revenues does give managers the resources to address growth problems – but it also makes those problems easy to ignore, because the business appears healthy today. Of course, latent problems (unidentified or unaddressed) tend to metastasize — and in a fast-growing organization, they become increasingly difficult to remedy. Latent problems can include anything from people to operations to technical issues and everything in between. For example, poor management, toxic employees, or over-engineered tools and systems might all be present. When faced with the great fortune of a rapidly growing and successful effort, company founders must always be on the lookout for such hidden problems and solve them quickly.
- Growing distance from customers
Founders should treasure the early days, when they have the luxury of spending time thinking primarily about early customers. They can focus on keeping them happy, building a product that works for them, and running an agile organization has few if any conflicting goals. This isn’t to say one must build products and services designed strictly for these early customers; that can be a mistake. But the early days are a good time to really understand the problem you’re trying to solve for a specific market, and then build the solution. As organizations begin to scale, founders must increasingly spend time managing people, growth, and strategy. Inevitably, the distance from your customers will grow, too. Therefore, the best executives focus on two things: staying close to their customers during high growth, and — equally important — continuing to hire, nurture, and trust your team.
- The need to scale culture
It’s vital that company culture scales along with growth, reach, revenue. By culture, I don’t just mean the physical manifestations and perks usually associated with start-ups: midday foosball, beer on Friday, free meals, and so on. Here I mean the ethos you want the team to hold onto as the organization grows. Well into the years of big growth, Larry and Sergey did a phenomenal job of this at Google. Being “Googley” meant (among other qualities) encouragement for everyone to try new ideas and approaches in a transparent way with teammates; having little or no fear of failure; constant learning; cultivating talent around you. All of that began with them, and they managed to turn these values into something almost religious, constantly reinforced through managers across the company. They did this unevenly, but still far better than most do. And this aspect of culture had nothing to do with the perks our parents (and reporters!) loved obsessing over.
- Loss of flexibility
As organizations scale, managers must aim to maintain a highly adaptive, agile organization. But the fact is that from the moment you launch publicly, your flexibility to refine your business begins to diminish. (This might as well be a law of physics.) Since a loss of corporate flexibility is likely to grow, it’s more important to get the fundamentals right by considering every new employee and role very carefully. Is the problem best solved by adding personnel? Is this a hire that helps build the future or a temporary need? Is this person going to have room to grow at our company? This can sometimes be frustrating for founders who suddenly feel bogged down in process. But it’s not all bad; losing flexibility also forces discipline and focus that will force the value of priorities and will sharpen your competitive edge.
- Empire building
A mentor of mine, a very successful entrepreneur, and venture investor identified this pitfall years ago (and he would have put it higher on this list). The idea of “world domination” is a mantra often embraced in start-up culture, and it makes me angry! Aside from the distasteful political overtone, this “domination” mindset too often means teams get stretched too thin across too many product lines, feature sets or customer bases, any of which can compromise the overall company. Build one product or service well and focus on taking advantage of your strongest assets, advantages, and insights. Being opportunistic is good and important. But empire-building will contribute to all four pitfalls above: disconnect you from customers, hide problems until they are acute, suppress your flexibility, and establish a toxic culture that lacks focus.
- Humility scales better than ego
With success can come much public adulation. If you get overconfident and overly comfortable, you’ll get sloppy — and that leads to failure. Leaders lead not just through the decisions they make, but also by the way they conduct themselves as growth heats up. Do not drink this Kool-Aid! It’s ephemeral and it’s bad for you. If what motivates your inner entrepreneur when your company gains visibility, traction, scale is a vision of glory — fame, praise, recognition, press, big paydays — I’d strongly advise you to find a different vocation. Exceptions can occur, but by and large, successful entrepreneurs are disciplined and strong-willed, even in how they cultivate their public persona. Successful leaders don’t spend too much time enjoying the fruits of their labor. Instead, they are fueled by curiosity, drive, and even a kind of insecurity that’s not easily satisfied.
Your career straddles the worlds of government and entrepreneurs. How does your government experience help you in working with startups?
The similarities between startups and politics are uncanny. My very first startup experiences were in high school, and then college — for a steady stream of local, state and national political campaigns. At first, I loved campaigns, but it turns out I don’t like electoral politics very much. I did thrive in that kind of startup environment, though, and since then I’ve loved building high-growth, tech-enabled businesses. Politics and government do have this in common: dedicated, focused, self-selecting people, come together in a fast-paced and highly unpredictable environment to move towards a common goal. And when things get clicking in either setting, you have to figure out how to scale rapidly and effectively, but still, maintain focus and control. Both environments reward teamwork and communication, intelligence and insightfulness, market fit, and level-headedness. Both also reward those who build great networks of people with whom they can collaborate again and again through many highs and lows.
More specifically, by spending time in both politics and government (I’ve worked at both Treasury and Defense) — and later, at the intersection of tech and government — I’ve had incredibly formative experiences that I’d like to think have made me a pretty clear-eyed and more thoughtful leader. In those government roles, I’ve been on teams responding to natural disasters; visited minefields, strategized to knock out IEDs, and briefed about how AIDS affects political stability in Africa. As a political campaigner, I’ve knocked on thousands of doors from Maine to Florida and New Hampshire to California, meeting all kinds of folks. So now when I set out to build products, I have the luxury of understanding that comes from a wide range of experiences. It remains imperfect, but I treasure the grounding perspective. I believe that people who excel at any kind of startup are, above all, passionate and that passion translates broadly. I’ve often looked for campaign experience — for a candidate, a ballot measure, a cause, a piece of legislation, in public service interfacing with concerned citizens — as a valuable hiring signal.
How can effective policy-making help shape the startup world?
Policy-making can play a large role in many of the decisions business leaders and innovators need to make.
Policy is not an academic exercise. Through many regulations and policies, government often determines business fundamentals: how startups may get funded, who companies can hire, how they reach customers, where they can open offices. Moreover, government drives how we educate young people, which can determine the skills they have for the future. As a country, the U.S. has traditionally done better than most at adopting forward-looking policies and building an environment where the talents and strengths of many are put to great use. And I think the fact that this has consistently been the case has made this a phenomenally great nation.
But this last decade of partisanship, at all levels of government, threatens this symbiotic order. That’s why it’s more important than ever that the startup community actively invest and engage in the political process. That means showing up in Sacramento, Albany, Springfield, and all the state capitals, to advocate for good and smart policies that affect business growth, including advocating for employees (in everything from worker safety to family leave), and for cities as economic engines.
You’ve worked around the country. How do startup scenes differ in San Francisco, DC, and New York?
One of the great things about the U.S. is that from big cities to the most remote towns, Americans have such a DNA-level inclination toward entrepreneurship and risk-taking. I know there’s a political narrative that says these values are limited to the big coastal cities, but that’s flat wrong. But it is true that each geography has a culture of its own. And that’s a good thing. Regions ought to be the most entrepreneurially supportive version of themselves.
As for where I am based now, I’m incredibly bullish on New York City. After a decade in the Bay Area, my wife and I moved here three years ago. The diversity in New York simply inspires creativity and big thinking, attracting people from all walks of life, every viewpoint — but everyone with all kinds of ambition. And it is a center of gravity for so many industries: finance, media, fashion, publishing. In New York, there’s a sense of community and cooperation even among competitors. It helps that there are some New Yorkers who believe in paying it forward in a really meaningful way. Fred and Joanne Wilson, for example, have championed and funded CS4All, an effort to ensure every NYC student has access to computer science education.
Tell us about the focus of your company, Hangar.
Hangar is a startup studio that builds companies from the ground up, specifically in the broadly defined “government market.” We spend a lot of time thinking about some of society’s highest order challenges and how technology can be applied to solving them at scale. That generally means working closely with government. Whether we think about adherence to prescribed medications among Medicaid recipients, or machine learning across some of the world’s largest datasets (NOAA weather data!), the Hangar team can help guide these businesses based on our understanding of the complex nature of government and regulation. It’s an incredibly intellectual effort — our entrepreneurial team spends an enormous amount of time reading, researching, listening, meeting with experts, and designing and implementing prototypes and pilots. And of course, we work hard to recruit hyper-talented individuals to build these companies with us. It’s also immensely rewarding. Where else can you have such massive and immediate impact than when working with government agencies that by design affect millions of people every day?
What trends do you see in the startup world, and what advice would you offer the rising entrepreneurs in the Project Entrepreneur community?
I’ve mentioned that entrepreneurship isn’t for everyone — it can be hard, lonely work, and full of uncertainty. But while the lows can be low, the highs are extraordinarily rewarding, in that the impact of reaching and helping millions of people and becoming part of their everyday lives is immensely gratifying. I know the whole Hangar team shares this outlook.
One of the exciting changes we’re seeing that helps keep people motivated is that technical barriers continue to fall at a dramatic rate. That helps to create so much new opportunity. The availability of cheap and plentiful storage, processing power, connectivity, and smart software is revolutionary. These breakthroughs open innovation in a whole variety of fields and industries — so much so that those of us in tech now consider technology to simply be the empowerment layer for all else. Of course, the lines blur between a “tech startup” and a “tech-enabled start-up”. Should an entrepreneur care? I don’t think so. Just use tech to build something great.
More women have the tools, resources, encouragement, and mentorship they need to achieve parity as entrepreneurs and founders with their male counterparts. There’s still a long way to go, but it’s all a leap in the right direction. One of my mentors, Sheryl Sandberg, did more via her Lean In work to raise awareness and empower women as professional equals than many years of political advocacy. I say this because she really introduced a new conversation on this topic, and it has had great impact.
As Sheryl would note, it’s up to all of us to mentor, encourage and support each other. That’s why I’m so proud and grateful to be on Project Entrepreneur’s advisory board. And special thanks to Rent the Runway, Jenn, Jenny, and Jennifer, and Lori and the team at UBS, for their commitment and leadership.
In terms of other kinds of workplace changes, we are also seeing a significant displacement of labor as workers are replaced by more efficient (and automated) processes. But as I’ve written, this development also opens up significant opportunities for the entrepreneurs who can build products and services harnessing displaced workers. We think a lot about that, especially in the healthcare arena.
I’d also suggest that we’re experiencing great global uncertainty right now, in everything economic policy to geopolitical leadership. In eras of upheaval, entrepreneurs are wise to remember that periods of great economic uncertainty have fostered a long list of meaningful and hugely transformative businesses, such as General Electric, General Motors, IBM, Disney, Microsoft and Apple.
Ultimately, if you know yourself well enough to recognize that deep urge to build something new and special, there’s never been a better time to get started.
For an extra dose of #WednesdayWisdom, read our interview with Monique Woodard, Venture Partner at 500 Startups and Co-Founder of Black Founders.