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The Startup Players Handbook: A Roadmap to Building SaaS and Software Companies
Charles Edge
Minneapolis, MN, USA
Amy Larson Pearson
St. Paul, MN, USA
ISBN-13 (pbk): 978-1-4842-9317-1
https://doi.org/10.1007/978-1-4842-9315-7
Chip Pearson St. Paul, MN, USA
ISBN-13 (electronic): 978-1-4842-9315-7
Copyright © 2023 by Charles Edge, Chip Pearson, Amy Larson Pearson
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Printed on acid-free paper
The Mission
The gamemaster of life has prepared a new campaign, one that is as arduous a journey as any previously attempted. The party is woefully underpowered to make it through the gauntlet of encounters, each as much a riddle as it is melee—and each with real consequences.
During and after each encounter, we prepare for the next, without knowing what it will be. We conserve resources, and with each level we achieve, we realize there are more to go. At some point, we decide how the campaign will end—at least for us personally.
The adventure begins when we get this idea to evolve something. Evolution is innovation. The idea could take five minutes or a lifetime to form in our minds. But once formed, we simply cannot let it go. So we form an organization in support of the idea, create a product, and take it to market.
The product we create gets a little success. We use our network of friends and colleagues, and word spreads through word of mouth and our own self-promotion, maybe even experimenting with a few cheap ads here and there. We get a few customers. We think creating a company means freedom. But the idea is now a job, and we have less freedom than before.
We realize we can’t do the job alone. We’ve bootstrapped thus far but need help. This is a turning point: do we go it alone, sell our fledgling company, risk our own financial freedom to hire cheaply, or take on outside angel funding and dilute equity and so sacrifice even more of our freedom?
© Charles Edge, Chip Pearson, Amy Larson Pearson 2023 C. Edge et al., The Startup Players Handbook, https://doi.org/10.1007/978-1-4842-9315-7_1
As we grow, we realize scale is hard. When more people use our product, they reveal defects that were maybe always there or escaped due to how scale impacts quality. Our product gets more complex and less fun to work on as we add more features. The influx of customers inevitably brings an increase of customer feedback, some of which is not very personable or understanding. Bigger customers mean lower per-unit pricing due to volume, which drives down our ability to fix defects only bigger customers have or pulls precious development cycles from smaller customers. Our job can be a grind sometimes.
There are things that take us away from the deep industry knowledge that let us come up with the product in the first place. We bring on a sales team, build a marketing discipline, nurture content, train people to support our product, and so much more that customers see. And behind the scenes, we need to scale operations: accounting, legal, finance, sales, and technology. Scale isn’t cheap; we have another decision to make.
The company has a lot of people who depend on the founders. One wrong move and a lot of families get hurt. Payroll is always a thing. Insurance, human resources, and taxes weren’t what we set out to do with our lives. We keep a few months of cash around and grow smartly; the larger we get, the more cash we need to de-risk growth. But it’s hard to grow fast enough to meet demand, keep demand increasing, and deal with cash flow. Do we give up even more control with a Series B like the angel investors are telling us to do, so we can scale better? That means diluting equity again, and more people seems to mean more problems. Or do we slow the growth? Or do we take one of the offers from those private equity firms that keep calling?
We introduce more products. We buy a couple of smaller companies— acqui-hires, really. Investors want us to keep the growth up, but to do so, we’ll need to take on more funding. We know less and less about the people we serve, so we bring on product managers. We know less about the product itself, so we bring on engineers to make it better. Both are more diluted than we ever were, and it takes many people to do what we used to by ourselves. And they all scoff at our previous work. Chapter 1 the Mission
Chapter 1 the Mission
The board of directors wants to put together a plan to take the company public. They didn’t say the founder is the wrong person to lead the company any longer, but they did recommend we take a second look at a few people who would be great at it. And looking at the list of people, they aren’t wrong! They’ve actually taken companies public before! But what does a founder do next? Maybe we should take the offer to buy us out from one of those adjacent companies. Or maybe we should… be on to the next adventure! Start a new campaign. Or help others with their campaigns! Or take a little time off and reconnect with loved ones who have, let’s face it, forgotten what we look like!
This is the real world and not a game. However, the playbook for a startup is predictable enough that it can be laid out before us. And the game can go any way we want. We can step outside the defined parameters of a module, but we should understand where we’re being led and know the risks of each potential path. The greatest campaign ever is the startup; choose your adventure wisely.
The Campaign
A campaign in most tabletop gaming platforms is a collection of games that follow a common storyline, usually with the same characters. Think of the lifecycle of a company founded to support a given innovation as a campaign.
The campaign that inspired many a game like Dungeons and Dragons is J. R. R. Tolkien’s The Lord of the Rings series. In the trilogy, we follow a few characters, each inspiring different classes of characters in Dungeons and Dragons—and in so many modern computer games. None are as archetypal as Strider, the ranger. We begin the campaign with the ranger, exploring the wild lands, much as a founder (or founding team) explores different industries. Over time, though, Strider faces a choice: to set aside the wandering ways and take the rightful place as ruler of the
Chapter 1 the Mission
lands (or, to extend the analogy, to turn into a paladin and put charisma over perception to become the chief executive) or to move on to the next adventure.
But Strider (a.k.a. Aragorn) doesn’t do it all alone. Nor can any founder who sets out to change the world by bringing an innovation to the masses. A brave adventuring party is formed. Just as our companies grow, the party then consists of many a utility player, each with their own set of skills they bring to the table. As they explore the path to save the world, they encounter others with specialized skillsets. These are the basis of character classes in most modern role-playing games. Let’s look at the analogous relationships with those we’ll need in our startups:
• Ranger: The ranger has traits from a few different classes. They have limited spell casting abilities, fighting abilities, and some roguish characteristics. As mentioned, most founders wear many hats and spend a lot of time perceiving our industries and so begin the campaign as a ranger. As we grow, rangers become product teams or corporate development. The organizations that replace the individual continue to explore the wilds, looking for new opportunities to build new products and help more people.
• Fighter: Fighters are grinders. The most common types of grinders in a startup campaign are those who build the product (in a software company, these are software developers who likely do not think of themselves as fighters, but alas, they aren’t writing the rule book) and those who sell the product (sales teams). The fighters often become the “tanks” of a party and rush into melee to fix products or sell products to customers. They are often the core of a party—yet need support from many others for successful outcomes.
Chapter 1 the Mission
• Cleric: The cleric is the healer. They keep the party healthy, bless their efforts, and protect them. Think of this as human resources and dedicated management positions that emerge in organizations. As we explore later, management and leadership are quite different— thus the paladin.
• Paladin: The paladin is often the leader of the party. These knightly characters have big armor, give inspiring speeches, and sometimes heal others. They are there to lead and inspire the party. The paladin is more devoted to the big picture than most in the party, which leads to something like a mission and values statement—which we’ll cover in later sections.
• Druid: The druid speaks with animals and communes with nature. They are mystical and support those communities as much as they draw power from them. We all live in a community. Those who support the product, especially early in the life of an organization, are building a community, and even more, they become the primary window with which the community around us perceives the organization. They craft the full customer experience and so can be seen as our support teams.
• Mage: Nontechnical people often think of software developers as wizards. But in truth, anyone who reaches a high level of performance in their specialty is a wizard. The real magic in a company comes with operational excellence—which means the mages are the operations team. These are the people charged with efficiency, logistics (getting everyone where they’re supposed to be when they’re supposed to be there), and tranquility (keeping the organization humming along).
Chapter 1 the Mission
• Monk: We might initially outsource accounting, but as we bring it internally, we need people we can trust and people who will always do what is right. In Dungeons and Dragons, the monk is the moral compass for many parties. But they’re tricky. They’re also a martial expert and will kick the crap out of anyone that doesn’t pay their bills or turn their expense report in on time.
• Bard: We need people who can sing our praises and in doing so bring people to our way of thinking and into our circle. Marketers and evangelists are even more important in freemium types of SaaS offerings where an early sales team isn’t in the plan.
• Rogue: Rogues nimbly find and remove the traps in dungeons. They can be played as thieves, but there isn’t much room for those in a company. Looking forward to creating an End User License Agreement (EULA) that protects the party and developing contracts to find those traps is really where legal and then corporate compliance teams shine.
• Illusionist: As the party grows, we take on new specialties. Public relations (PR) is a discipline that often comes as an addition in larger adventuring parties and helps present the organization to the outside world in several ways. The most common is through interfacing with the media to project the adventuring party in a way that aligns with the mission and values. But the illusionist can also help protect the company when things go awry by casting a distraction or repositioning the way foes perceive the party.
The combinations of these classes are so much more valuable than each alone. So it is with organizations. A campaign with just bards would be no fun and likely wouldn’t get far.
Each character gains experience as we go through encounters and games. With experience come new abilities. Most games use a leveling game mechanic to track these in a quantifiable fashion. As organizations grow, we institute leveling mechanics as well. It begins with an acknowledgment that someone did more, maybe going from engineer to architect. Sometimes, as the organization matures, we level within titles, such as software developer I and software developer II. As we mature to each stage as individuals, the party is capable of more and more feats of heroism.
This doesn’t tell the whole story. The founder, like that lone ranger in the beginning of The Lord of the Rings, is out there doing what they do— they explore and learn the lore of the lands. As each class, or discipline, goes from being a part of a founder’s job to the job of a whole department, the discipline has a level of its own. The individuals grow, but so too grows the maturity of the disciplines and number of individuals involved in each. In fact, there are plenty of coaches or consulting firms dedicated to helping level up each department, or discipline.
We can go a step further than most games do with leveling. Since the birth of venture capital with Georges Doriot following World War II, assembly lines of companies have emerged. We begin with an idea, bootstrap a product or prototype, get financial assistance to go to market from banks or angel investors, and move into a Series A of funding, then Series B, and then Series C through F. The campaign ends (and maybe a new one begins) as we get to an initial public offering (IPO), acquisition, or bankruptcy almost as though the organization itself began at level 1 when we incorporated and ended at level 10 at the IPO.
As we get into each discipline, we will go through and identify common levels, or stages, that disciplines go through. We aren’t prescriptive around company size or revenue amounts per level because every organization can grow differently. Think of this as leveling up with milestones. Chapter 1 the Mission
Chapter 1 the Mission
For example, we once needed more than one person to do accounts receivable, calling customers to get payment for renewals, etc. These days that can be put on autopilot with a payment processing service like Stripe for some businesses but not for all. We also used to have to look up tax information so we could pay each state what they were due. That can now be done by automated tax compliance software like Avalara. We also used to… Get the picture?
Each business and the systems they use scale differently. Further, consumer-focused organizations lean heavier on marketing, and those who sell into enterprises typically lean more into direct sales (although both are required at most organizations once they reach a certain size). Some use distributors or have other routes to market. Therefore, we try to leave leveling as more a general mechanic, like milestone-based leveling up in Dungeons and Dragons.
We also equip our characters. Each typically has a weapon and armor or a robe and a wand, just as the company supplies computers and desks. As we level up, we also find new objects we can wield in different ways, much as we pay for software to automate various aspects of our jobs to make us more productive. Where appropriate, we’ll mention some vendors who make magical items we can equip for various aspects of our company so we don’t get overly dependent on having people perform tasks better suited for microservices (or even very small shell scripts).
Our paths are not certain. The gamemaster of life may have plans, but we can go our own way. We are operating in an open world game, not a railroad. However, before veering off the path set out for us, we should understand the traditions and norms and what others do and why. This allows us to be intentional about our activities and keep our eyes out for keen adventurers we’d like to conquer a dungeon or three with. Otherwise, we end up hiring or architecting reactively, and when that happens, who knows where the games will lead us!
What Kind of a Startup?
Our campaign is going to be a startup. Most startups are created in support of an innovation. The innovation helps people. Sometimes these are tools to support engineers or engineering teams. Other times, we’re looking to help a company get more telemetry into the devices in the field or learn about where products are in a supply chain. Still other times, we’re helping people connect to one another or buy or sell or find or even find peace. In the software industry, these innovations usually fall into one of a few buckets, and this is important, as we’ll call back to this list throughout the book:
• Productivity: The first few decades of the computing industry were all about improving productivity of first mathematicians, then scientists, and then other knowledge workers. Along came robotics, and new industries were created as computing became ubiquitous, and productivity gains took on all sorts of new shapes. It’s important to consider the innovation a new company might support in this lens, because many a tool is focused on productivity. The best example of this might be how accounting was done before the 1970s: armies of human computers updated paper spreadsheets, using physical calculators to calculate each row as the column dictated. Then Dan Bricklin and Bob Frankston wrote VisiCalc, which was the first spreadsheet. Suddenly, a single person could get done what it previously took multiple people to accomplish.
• Telemetry: Once we moved a lot of processes and records into computers, we gained more and more insight into what data about each process or the metadata about people and processes meant. This is huge, because it Chapter 1
Chapter 1 the Mission
comes with connotations for so much more than just productivity tools. Once computing became ubiquitous, we saw more than how many widgets were delivered to Pretendco and on what date and for what price. Suddenly, we see the temperature in our homes, whether there’s a leak in the basement, how many people are at our favorite mall, the price for a hotel if we get stuck at the airport, or how active we were in a day and so how many calories we need to consume. And these days, we can go a step further (pun intended) and have that information analyzed by various machine learning algorithms to tell us the answer to almost any question we can think to ask (many of the answers are still just the number 42, but we get better and better every year).
• Quality of life: There are a lot of things we do on computers that have absolutely nothing to do with productivity. In fact, games are quite the opposite in most cases (for those still trying to convince themselves otherwise, embrace the game and stop kidding yourself). Quality of life goes beyond seeing the temperature in the home. We want to tell a smart speaker to make it more comfortable. Or we want instant access to every photo we’ve taken or every song ever recorded in the history of humankind.
Most innovations a campaign centers around will fit into one of these categories. The mission of our organization is then to foster an innovation around one or more of these. The mission is to bring the technology to the people and so improve productivity or improve the telemetry to a given piece of data not previously available or improve the quality of someone’s life. Hopefully we’re able to do all three, because that’s a mission for which we can easily recruit others to join us. But enough of one of these is valuable in its own right.
Chapter 1 the Mission
Then the mission statement becomes simple. Okay, so not quite simple…
