The importance of values in tech start-ups [Expert Insights]

Mike McDerment is the co-founder and CEO of Freshbooks, the leader in online invoicing services. He is also one of the founders of mesh, Canada's Web Conference.

Lindsay Purchase interviewed him on behalf of Workplace Tribes on September 13th.

Q: How would you characterize FreshBooks’ values?

Mike: There’s 7 of them. We’ve got a little acronym for them called HOPFEST. The words don’t matter so much as how we define them. Collectively, to date, they’re the best articulation of our values.

In terms of describing them, I think they get to the core of the kinds of people that we want to involve, and the guidelines that we want to have for one another [in] our conduct in business. It’s been really helpful for me as a leader to have them as a guidepost to help orient people around.

Q: What exactly does HOPFEST stand for?

Mike: It stands for honesty, ownership, passion, fun, empathy, strive and trust. 

Q: Why do you think values are important in a start-up company?

Mike: On the one hand it helps you identify who to bring on to the team, so everyone can know what kind of behaviours we’re looking for, like in an interview. Another thing is, it really helps shape the conversation. 

It’s like the spiritual guidebook of how to conduct oneself in a business.

And, you know, if somebody does something that sort of transgresses our values, it’s easy to have a conversation about it without making it personal, when it’s like "hey, when you did this, you sort of upset me. I tried to figure out why, but it’s because you weren’t really owning the problem, right. And that’s one of our values here, that you own it."

We tend to do it more as positive reinforcement, and every month we have a meeting, and we give out cards. Anyone in the company can give a $50 gift certificate to anyone at any time for embodying a value. This month we’re going to give one out to a guy because he was embodying passion, because he was totally digging in to some problem on his weekend, and for us passion is about constantly working on our craft. We love what we do and we’re constantly working on our craft. If we weren’t doing it here, we’d be doing it somewhere else.

Q: What else does a start-up need to succeed?

Mike: So, consistency’s actually very big. As it pertains to a start-up needing to succeed, I have a strong belief that you can do it any way. And what I mean by that is, we are more of a sort of marketing and supportive culture than, you know, a hard-core, boiler room sales culture. It’s very different, but both can work. And so, as the founder of the company, I think at some point the value is capped.

I don’t think it would be wise to seem like a boiler kind of culture at this point. We could do it, but we don’t need to. And so, I think as much as anything, it’s just important to identify what those values are, and then just try to really bring them into focus for people, and they can use them to help guide themselves. 

Q: How did FreshBooks network in Toronto and in the rest of the business world?

Mike: Early on, myself and my co-founders, we went to the very small events in Toronto. So I’m going to talk about the Toronto Technology community, which has really been just kind of warming over the past sort of seven or eight years. And so were out there early to events, and got to know some people there. That was sort of face-to-face networking events for the industry. That’s part one. 

Part two, I was one of the founders of the mesh conference, so it’s become a pretty good-sized industry event. So, networking through running a conference. 

And then I would also say we’ve built a really magnetic business and lots of people will sort of reach out to us. 

Q: What specifically do you think can be gained from connecting with other start-up businesses?

Mike: Well, I think it depends on what phase you are in your business. So, one the one hand, honestly, I’d start with just inspiration and energy. You’re up against the world as a start-up. You’re trying to take nothing and turn it into something. So to realize there’s similar people out there fighting a similar fight, I just think you kind of need that to keep going.

You [also] get a broader view of some of the things that are going on, or maybe some tricks for what’s working for other people, whether it’s customer acquisition, or managing staff, or finding talent. You can short-circuit some of the learning process, and just learn faster based on what they’ve tried and sharing that stuff as well. I think you gain an advisor group you can turn to if you need a hand.

Q: Going back to values, how flexible do you think they can be over time? 

Mike: Well I think there’s an evolution, to be honest. I’m experiencing some of that. It will fundamentally be the same, but I don’t think you should be afraid of evolving your values. I think if you scrap them completely you’d be in deep, deep trouble.

But you know, I think that as an organization matures and as you get perhaps more clarity on what your values are over time, I think crisping them up or evolving them makes a lot of sense.  You may need to, to be able to get all of the areas of emphasis correct. I’m not even sure it’s how malleable your values are, it’s just trying to better articulate the value in terms of what’s needed at the stages. 

Q: To use Facebook as an example, can companies who don’t promote themselves based on their values or who are often criticized for them sustain themselves over the long-term?

Mike: You can do it any way, so why not? I found them [values] to be enormously helpful. I really believe culture is what matters, it’s what endures, so maybe the answer is no. But I’ll also tell you it’s kind of like one tool you have for growing and fostering an organization. I think it’s fundamental. Because small organizations, like when we were five people, we didn’t write this stuff down, we just kind of knew it. Everybody was just kind of there. And it becomes handy as sort of a growth mechanism; it’s like a guidepost or something. 

Facebook already has like 5000 people, and if they’ve made it that far without any sense of what these things are, then you know, maybe it doesn’t matter. Or alternatively, maybe not having that sense of some kind of a North Star on some of this stuff is going to be what undoes them in the end. I don’t really know. I do believe they are a tool. Can an organization be successful without it? Probably, yeah. Would it be a lot easier if they had something like that to manage some things? I’d say absolutely.

Q: What does FreshBooks have planned for the future?

Mike: We’re going to take over the world.

Q: Isn’t that always the plan?

Mike: We want to build a truly global business out of Toronto. A first class internet brand based out of Toronto. That’s the goal. We want to do it here because it’s hard, and because doing it in your hometown matters, and that’s part of certainly what motivates me, almost on an altruistic, give back to the community level.

 

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