How to Execute FOUNDER MODE for DTC Success

Hey everyone, 

Welcome back for another bite to chew on. 

Alright, let’s talk about it - Founder mode. 

We didn’t weigh in on the topic right away. Honestly, it mostly seemed to be a Silicon Valley/Unicorn Tech Founder thing.

But after some reflection, we think Founder Mode offers some valuable lessons for DTC and e-commerce startups - even if we’re never going to scale to $10 billion in ARR. 

Because finding product market fit in consumer goods is damn hard too.

And every 8+ figure DTC founder will tell you that going from $1M to $10M+ annually is one of the toughest phases in business. 

That’s where the big transition happens - from scrappy startup to an actual “company”. 

It forces you to change from a founder doing everything to an executive leading the charge. Sounds easy, right? 

Trust us, everyone screws up at this phase. We did. 

Let’s go through what Founder Mode means to us and how understanding this leadership perspective will help you scale and grow. 

On the Menu

• Defining Founder Mode

• The traps to avoid

• What we’ve learned 

Tool of the week

Before we get into FOUNDER MODE, we want to talk about a new AI tool we found.

To tell you the truth, we kinda got burnt out on all the AI hype for a while. Seemed to be more heat than light. 

We use ChatGPT for content and copy help here and there. And that’s…fine. Not a gamechanger. 

Then we started playing with AI-generated static ads for Facebook. That’s helped us up our image variation and volume game for sure. 

But we mostly avoided AI videos because the effort it took to create something relevant to our brand or products was way too high. 

So we figured AI statics was as far as we’d go. 

Until we found Icon - An AI platform that generates UGC variations with just a few clicks. 

This was a total 180 turnaround for us when we tried it →  

• With creators, we usually had to get them to film a bunch of edits if we wanted to test different angles and hooks. 

• With AI video, we always had to carefully craft a series of prompts and hope the output was useful. 

But with Icon → 

You get matched with a creator → they shoot a single, “base” video → you create up to 20 variations of that video with simple script edits. 

Now you can quickly A/B test your hooks, angles, narrative, etc. Just input the script in the platform (like editing a Word doc) and watch it output a fresh testimonial for you. 

Super fast. Super easy. Plus all the variants look natural and seamless. 

So, yeah…Icon has converted us. We’re starting to buy into the AI hype.

If you’re a DTC brand like us looking to unlock a completely new level of UGC volume and variety, you should definitely check out Icon. 

Defining Founder Mode

“As Airbnb grew, well-meaning people advised him that he had to run the company in a certain way for it to scale. Their advice could be optimistically summarized as "hire good people and give them room to do their jobs." He followed this advice and the results were disastrous. 

…Why was everyone telling these founders the wrong thing? That was the big mystery to me. And after mulling it over for a bit I figured out the answer: what they were being told was how to run a company you hadn't founded — how to run a company if you're merely a professional manager.” - Paul Graham

This is from Paul Graham’s seminal post on the subject that he published recently. 

Graham is the founder of Y Combinator, a well-known tech incubator in San Francisco. He’s referencing a recent talk by AirBnB CEO Brian Chesky. 

The article is kind of thin on details, so we pulled out what the above quote which is what resonated for us. 

Hiring people and getting out of their way is intuitive in business. It’s the received wisdom of growing a company to a certain scale. 

Naturally, as a leader, don’t want to become a critical choke point in the organization. This can happen in three ways:

• Lack of capacity - If everything goes through the founder, it can mean huge delays in projects since everything needs a review and a stamp of approval.

• Lack of skill - Like everyone else, founders have strengths and weaknesses. The weaknesses can start to impact a company if they result in tactical blind spots or biases.

• Lack of resources - Capital allocation becomes a vital skill as companies grow and scale. A lack of focus or prioritization/cash flow can starve aspects of the business of critical resourcing. 

Ideally, you need to build your company and your team to fill these gaps. But (big BUT here) without creating new problems.

So there’s far more nuance to it than just: HIRE → SOP → SCALE → RETIRE 

We learned this the hard way.

The traps to avoid 🪤

As an active founder, no one knows more about the vision, the history, the challenges, successes, risks, and missteps than you (or the founding team.) 

If you’ve been there from the beginning and fought through all of the major wars and battles, you have an intuitive sense of the nature and fabric of your company. 

Most importantly - no one cares more than you do.

When you’re a founder working from a personal vision, you’ve not only got skin in the game in (equity), but you are also intrinsically motivated to see it succeed (pride, ego, validation).

This is something you’ve created and sacrificed for. You want win for more than just the monetary rewards. 

You can try to hire for skills and cultural fit and capacity gaps, but these things are very, very difficult to compensate for as you grow. 

Because of all this, scaling founders can fall into one of two traps:

1. The delegation ladder

2. The principal-agent problem  

Let’s talk about the pitfalls of both.

The Delegation Ladder 🪜

As a leader, you want to spend most of your time on top-level initiatives. 

• Long-term strategy

• New sales channels

• Regional expansion 

• Capital allocation

• Key relationships

To do that, you need to hire and delegate. Get everyone else doing the day-to-day so your focus is the big picture.

But…

In practice, if you hire to delegate too much or too early, your job will become managing people rather than doing stuff that moves the needle. 

The activities that drive value for your brand will be “handed down the ladder” from team lead to junior employee to summer intern. 

That means you can become further and further removed from the stuff that is truly important. 

Even if you have hired the best talent you can find, the delegation ladder can mean becoming too far removed tactically to understand what is going on.

Once that happens, you’ll have to work through layers of management to right the ship instead of just digging in and getting the work done.

This kind of “working to manage” can result in a colossal time suck, where you’re stuck running after people to ensure the major priorities in the company are being executed with excellence. 

Instead of stroking your chin in the corner office, thinking about how to unlock the next $50 million in GMV…you’re digging through emails, having meetings with direct reports, and generally looking for fires to put out. 

The dream has become a nightmare.

The Principal-Agent Problem

In addition to the delegation ladder, you can encounter the principal-agent problem as you staff up.

The risk is as you hire “agents” for specific tasks, they may not have the context, the experience, the level of ownership, or the incentives to perform at a high level.

This exposes you to the opposite side of the delegation ladder → doing pieces of everyone else’s work for them. 

This trap is usually triggered if you hire “affordable” (read: cheaper) talent as a growing company (because founders are always sensitive to the cost of a ballooning salary.) 

This way you lower the risk of that hire costing you a bunch and not working out. 

But you increase the risk that their skill level, experience level, or ambition level isn’t where you need it to be. 

And once they’re in the company, you can become committed to “trying to make it work” - tailoring the role to the person, rather than the person adapting to the role. 

In practice, this can mean shifting tasks away from staff and back onto your plate. 

Now you have your hands in a bunch of different pies, with performance and execution being dependent on you rather than the team. 

This creates a confusing mess of responsibility and accountability. Not to mention uneven results.  

It also means a big portion of your day is taken up doing everyone else’s job, rather than your own. 

That’s how major strategic opportunities end up getting missed or delayed. 

What we’ve learned 

Here are some tough lessons we had to learn firsthand along our journey. 

At Obvi we staffed up in response to our high growth starting in 2022 and into 2023. 

It seemed like the right thing to do because we could barely keep up with the workload as the company took off. 

The problem is - our fixed costs went ⬆️ and our pace of execution went ⬇️  

When we hit profitability challenges in October of 2023, it became clear that our hiring spree had not had the impact we hoped for. 

We had to re-evaluate some of our assumptions about efficiently scaling. 

Eventually, we made the difficult decision to cut 30% of our staff. 

It was tough. 

Many of them were good people who did decent work. But it was clear that all the pieces weren’t fitting together. 

We had to really look at our business. What was working and what wasn’t? 

We cut all the channels/staff that were responsible for driving incrementality to the business but were unable to prove this out.

We then became more intentional with each hire - setting clear KPI goals that if they hit, great. But if not, we'd move on. 

SURPRISE! Our productivity and profit skyrocketed in response. Since the change, we’ve never been in a better position as a company. It was a major turning point for us. 

The key insight 🔑

If you’re an SMB or if you’re a high growth/disruptive brand, you need to be flexible, nimble, and have a bias to action. 

The realities of your business are likely to change constantly because you’re building something new on shifting sands. 

Large, enterprise-level organizations often have well-established processes and business models →  

• They have years if not decades of momentum. 

• They have massive resources to draw from. 

• Their battle-tested value chain is able to sub different people in and out of the org like cogs in a machine.

So they can “hire to delegate”. Build out layers of middle management. Their leadership can be removed from the day-to-day. 

But if you’re a high-growth or disruptive founder you’re probably still building that machine → ⚙️

• You can’t create iron-clad standard operating practices and easily pass them on to the next hire because they’ll be obsolete or incompatible within months. 

• Your strategic focus will evolve and change in unpredictable ways. 

• Your resources will be precious so they need to be carefully assessed and managed all the time. 

That’s why it’s easy to get caught between the extremes of the delegation ladder and the principal-agent problem. 

In the former, you end up too far removed from the execution and feedback happening in your company. 

In the latter, you end up micro-managing and executing day-to-day tasks because you can’t fully trust your staff to do it. 

Your business will then start to pay a complexity tax, because as you add more bodies to the team, you increase the level of communication, HR, payroll, risk of interpersonal conflict, etc. 

Focus becomes harder to maintain. Meetings proliferate.  

How to thread the needle 🪡

Here are some rules to help you achieve Founder Mode:

• Have a founding team rather than a single founder (if possible)

• Determine what activities are business critical and part of your differentiation

• Determine what is business critical, but not differentiating

• Know what skills and roles are commoditized and easy to outsource

• Know your growth levers and your finances 

**Secret Sauce** 🥫

For roles that are business-critical and part of your differentors - hire people with a builder mentality. 

These are A players who:

• Are ambitious without being ego-driven

• Have a bias to action and love to build new things

• Survive and thrive in an environment of high ambiguity and stress

• Can execute on the ground level, but also think long-term/strategically

• Don’t need to be re-directed or corrected over and over again 

• Work with a sense of urgency

• Fit your culture

A player hires can become an extension of your founding team. They will be able to own and improve key aspects of the business while fitting into what has already been built.

Think of it like adding a high-level quarterback who can execute your playbook, but also make a call based on what’s happening on the field. 

For roles that are critical but not differentiating or for skills that are highly commoditized, this is where you can look into leveraging vendors, freelancers, and outsourced VAs.

Work with them directly or place them under your A players.   

It’s often these roles where the temptation is to hire junior or “good enough” B or C players internally - ones you hope will be able to grow into A players over time. But this is where you start to clutter your team with people who need to be continually led, reaffirmed, managed, and coached. 

They probably won’t thrive in challenging or ambiguous situations and will have clear gaps in their skills or experience. 

Also - Avoid hiring lots of people who are just…managers of people. Your company should not need a thick layer of middle management. Not yet, at least.  

Sum it up

Here’s our formula for executing in Founder Mode:

Founding team + builder-oriented A players + tactical outsourcing 

This allows you to stay relatively lean, agile, and high-performing. 

If you avoid hiring a bunch of middle managers or limited impact juniors/B players,  you also avoid the slide down the delegation ladder or battling the principal-agent problem. 

You can keep the complexity tax in your company low and feel confident in your key team members being onboard, aligned, and capable of executing at a high level. 

As a founder, this lets you step back when needed and focus on executive priorities, but you’re also not too far removed from the field of play.

If you’re a young brand, high growth, or highly disruptive, you are both writing and running the playbook at the same time. You need both the structure and flexibility to get into the weeds when needed, but also pull back and see the forest for the trees. 

One last thing…

If you’re a Shopify store owner looking to squeeze more cash out of your checkout flow, you should check out this free webinar featuring me (Ron) and Alicia Gan of Aftersell.

Alicia and I will share key strategies Obvi has used to:

• Reduce cart abandonment

• Test incentives like free shipping

• Simplify and streamline our checkout UX

• And more…

Don’t miss it! Coming up on Wednesday, Sept. 8.

Grab your seat here.

All the best,

Ron and Ash