Every successful startup begins with an idea; a founder identifying a problem and dreaming up a solution that feels novel and new. But, what happens after the lightbulb moment is what actually differentiates the companies that make it from the many that fail. In telling the story of a company, the founder is cast as the hero. However, operations are just as important.
So, what exactly falls within Operations at a tech startup?
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If you look at a company’s P&L sheet (profits and losses), there are three kinds of costs:
- Research & Development
- Sales & Marketing
- General & Administrative, which we’ll call Operations at a startup
The duties of Operations at a tech startup fall into four core areas:
- Legal, Compliance, and Corporate GRC (Governance, Risk, and Compliance)
- Business Ops
Obviously, the purview at an early-stage tech startup is especially wide. But let’s dive down into the specifics of those Core Four duties. [It’s important to note that often certain operations responsibilities cover multiple areas (for example, Payroll is a People and Finance overlap).]
Ironically enough, WeWork’s Adam Neumann gave some prescient advice which highlights the financial impact of a healthy operations team. On Bloomberg’s Foundering podcast, there’s a clip of him talking in 2016 about high-value companies that raise aggressively and then waste money: “They all had a spending culture. And that spending culture led to lack of processes, lack of control, and at the end of the day, lack of money.” Neumann explains that these companies are now laying off customers and going through down round after down round, as their employees’ equity craters: “The secret,” Neumann says, “is to take care of it before it becomes a problem.”
WeWork is a classic example of founder worship run amok. But the idea — which Neuman clearly failed to heed — is a valuable one. Building an efficient and well-thought-out operations system early on works as a bulwark against bad instincts and destructive decision-making. It will save you money, time, and, perhaps even, infamous ruin on the scale WeWork.
There are two parts of Finance operations at a tech startup: Operational and Management.
Operational Finance, at its most simple, can be boiled down to making sure employees and vendors get paid. At this stage, the Head of Operations will be:
- Selecting and setting up the necessary software (for accounting, payments, payroll, etc.)
- Creating a system for bill pay
- Issuing and collecting invoices
- Handling employee expense claims
- Paying salaries
- Claiming refunds and credits due to the company (VAT, R&D Credits, etc.)
This is nuts-and-bolts work, but it’s essential. It’s just as essential that structures and systems are thought out and actively designed, because changing systems midstream is much harder once a company has grown.
Management-Level Finance is more of a bird’s-eye-view operational responsibility. These responsibilities include:
- Setting forecasts
- Creating an operating budget
- Managing the startup’s burn rate
At an early-stage startup, this role also includes reporting growth numbers and financial overviews to the investors — eventually, this will include creating accurate reports for a board.
Anyone who’s ever fundraised understands the necessity of a growth narrative. It’s tempting to believe that a compelling enough product can drive that alone, but it can’t be done without efficient operations. At an early-stage tech startup, being lean and streamlined is the key to surviving long enough to build momentum. Leanness and efficiency in spending and processes are inextricably linked with a company’s financial operator. And as you grow, sticking with those processes and systems will keep the wheels from falling off the bus.
As stated above, Payroll exists in both the Finance and People arenas. It shouldn’t have to be said, but getting your employees paid in full and on time is a bedrock-level necessity at any startup. Invest in creating a system that guarantees this happens and is scalable!
But People Operations go far beyond Payroll. The Head of Operations at an early-stage tech startup will be involved in hiring and be responsible for creating an onboarding process. They will also need to create an incentive structure and a system to track and manage performance. Finally, and most importantly, they’ll need to design, build, and empower an HR policy and team to make sure the workplace is safe.
A startup may be born from an idea, but it’s the people who build and grow it. People Operations will help a company recruit talent early on, and investing in strong HR and performance-management systems will save the company from an aggrieved workforce, or even a scandal, down the road.
An initial spark of an idea can be thought of like a sketch of a concept car. A great founder can build the prototype and even raise money for a factory. But it’s the operations team that will actually staff the place up and keep the machines running. A great idea can build one beautiful car, but well-run operations is what allows the factory to hum.
At an early-stage tech startup, system building is legwork at a moment when everyone’s legs are tired. But remember: investing in creating the framework early on is much more efficient than cleaning up a mess and/or doing a full teardown down the road.
Legal, Compliance and Corporate GRC
In the Move Fast and Break Things culture of the Aughts and 2010s, operations-focused leaders were dubbed “the adults in the room.” There was a sense that they were hired to reign in the creative, unorthodox founders (see: Sheryl Sandberg at Facebook and Eric Schmidt at Google). Operators don’t get biopics — there’s nothing romantic about process-oriented, responsible management — but they’re essential tools for growing tech startups.
At an early-stage startup, there’s an instinct to view legal and compliance issues as a hassle that’ll get dealt with down the road. Corporate GRC is antithetical to moving fast and breaking things — it sounds like boring boardroom talk.
But many founders don’t realize that creating a clear and complete structure of rules, practices, and processes to direct and manage your tech startup will help your company run smoothly and also will be a valuable selling point to prospective investors. Eventually, as a tech startup grows, this Legal, Compliance and Corporate GRC responsibility will be essential. This Operator will:
- Create a framework for a company’s objectives
- Demonstrate how the objectives serve stakeholders (investors, employees, customers, the government, the community, executives, etc.)
- Explicitly construct the rules and processes that the startup will follow and implement
Implementing these rules and this framework as early as possible allows for a culture of compliance that will serve a tech startup as it grows. Fundraising becomes nearly impossible without a well-sorted legal and compliance structure. Most investors have a story of backing out of a prospective deal after looking through a startup’s books.
So, in terms of Legal and Compliance, the Operator must:
- Select the right business structure for your company
- Secure any licenses necessary for your specific type of business
- Carry out yearly audits and prepare the annual report
- Understand the law within your state and within any state you do business
- Draft clear and detailed contracts that lay out liabilities and the scope of relationships with each business partner or client
Obviously, some of these responsibilities call for a law degree. Find a reliable service (perhaps something like AbstractOps…) to make sure your tech startup doesn’t run into costly legal or compliance issues down the line.
As you’ve seen throughout this piece, the word Operations covers a wide range of tasks at a startup. The Operator is dealing with books, the employees, and the legal framework and processes of the company. But no role in a company is more wide-ranging and less defined than Business Ops.
A fantastic Medium article by Honey Patel laid out what responsibilities live under the umbrella of Business Ops based on a survey of 50 Business Op job listings on LinkedIn. She found that there were 10 distinct roles and responsibilities:
At an early-stage tech startup, the best way to define Business Ops is that it encompasses all strategic business functions that are not customer-facing. That means a Business Operator is involved with:
- Corporate Development
- Business Strategy
The product is the forward-facing piece of the company, but rarely is an MVP compelling enough to grow a business on its own. To go back to the car metaphor, if the MVP is the prototype, the job of Business Operations is to actually fund and then build not just the factory but the entire system of roads. This role eventually will encompass creating and managing a vendor network as well as finding new markets for the product.
The Operations role is essential and incredibly varied — it’s hard to find an expert in strategy, compliance, fundraising, workplace structure, and relationships with vendors and employees. This is why strategic hiring and the use of Operation tools is so essential.
AbstractOps can help startups turn their founders into expert Operators — and for all the tasks we can’t do, we can point you to the tools you need. Your tech startup won’t grow without a truly talented Operator, and the job is too big to do alone. So, let us help you level up your business.