20VC Faire's Max Rhodes on Three Steps To Hire the Best Candidates, Why Every Company Should Have a Strategy Doc and How To Do It & The Art of Referencing; How to Get the Most Out of Every Reference

In this episode of "20 VC," Harry Stebbings interviews Max Rhodes, co-founder and CEO of Fair, an online marketplace connecting retailers with independent brands globally. Max, who previously worked at Square, shares the journey of raising over $1.1 billion from notable investors like Sequoia and Founders Fund, and the evolution of Fair from his experiences with trade shows and technology. He delves into the importance of a mission-driven organization, the power of a written culture for clarity, and the rigorous hiring processes including deep behavioral interviews and structured work exercises. Max also discusses the challenges of scaling and decision-making as the company grows, Fair's strategic focus on Europe, and his vision for Fair as a global presence by 2030. The episode is interspersed with sponsor messages from CoreSignal, Squarespace, and AngelList, highlighting tools and services for VCs and founders.

• Max Rhodes is the co-founder and CEO of Fair, an online marketplace for independent brands.
• Fair has raised over $1.1 billion from notable investors such as Sequoia, Founders Fund, DST, Forerunner, and Lightspeed.
• Prior to Fair, Max worked at Square for five years in various roles, including director of consumer product at Caviar.
• The episode mentions the involvement of Ravi Gupta at Sequoia and Anu Hari Haran at YC, as well as others who contributed questions and suggestions.

"This company is such a special company, recommended by two of my favorite people, the amazing Ravi Gupta at Sequoia and Anu Hari Haran at YC."

This quote introduces Fair as a notable company and acknowledges the recommendations from Ravi Gupta and Anu Hari Haran, suggesting their endorsement is significant.

• The episode is sponsored by Core Signal, a data vendor for VCs, and Squarespace, an all-in-one platform for online presence and business management.
• AngelList is mentioned as a key partner for managing investments and offers a product called AngelList Stack for founders to incorporate and manage their startups.

"Our first sponsor for this episode is Core Signal... And speaking of incredible tools like Core Signal there... And last, but by no means least, the incredible team at Angel List."

This quote highlights the sponsors and tools that are beneficial for startups and investors, emphasizing the importance of such resources in the entrepreneurial ecosystem.

• Max's "aha" moment for Fair came from his experience with trade shows and the inefficiency of the retail and brand market.
• He was inspired by the outdated methods of buying and selling products at trade shows and the potential for technology to improve this process.
• Max's time at Square, working on technology products for SMBs, informed his understanding of the potential for Fair.

"It really started back in, I guess it was like 2010 when I went to my first trade show... It felt like we were in 1995."

Max reflects on his initial exposure to the inefficiencies of trade shows, which sparked the idea for Fair. The quote underscores the contrast between the existing practices and the possibilities offered by modern technology.

• Max credits his time at Square for learning about building great products and the importance of a mission-driven organization.
• He emphasizes the influence of Jack Dorsey's focus on product quality and the alignment of the company around its mission.
• These lessons from Square were fundamental in the creation and success of Fair.

"I don't think that fair would exist if not for my time at square. I think I learned everything that has ultimately led to the success of fair at square."

Max attributes the existence and success of Fair to the experiences and lessons learned during his tenure at Square, highlighting the formative impact of his previous role.

• Max and his team prioritize product development and have built the organization to support this focus.
• Hiring the right people for key roles is crucial for maintaining product velocity.
• The dedication to product excellence is a core aspect of Fair's culture and success.

"I think a lot of what enables us to build great products is kind of simple. We care deeply about it, build the organization around it."

Max explains that the secret to building great products lies in the simplicity of caring deeply about the product and structuring the organization to support this priority. The quote reveals the foundational philosophy behind Fair's product development approach.

• Harry Stebbings discusses the importance of focusing on hiring and maintaining high standards for product managers, designers, engineers, and data scientists.
• He attributes his ability to build a great product organization to learning from three influential product leaders at Square, including Jack Dorsey and Brian Grassadonia.
• The engineering organization at his company, led by co-founders Marcelo and Danielle, is praised for its focus on quality, speed, and impact.

"I probably spend over half my time on it myself. And so I think some of it is just simply focus."

This quote emphasizes the dedication Harry Stebbings has towards building a strong product organization by personally investing a significant amount of his time.

"I was really fortunate to work for incredible product leaders at Square, spent time with Jack. I learned a ton from him."

Harry Stebbings highlights the value of mentorship and the impact of working with experienced leaders like Jack Dorsey, which helped shape his approach to product leadership.

• Max Rhodes describes the company's preference for written prose and documents over slides for important communications.
• A written culture helps in making big decisions, working through strategy, and creating product requirement documents.
• He credits Gokul, a former colleague, with emphasizing the importance of writing clear strategy documents at Caviar, which has influenced his approach at his current company.

"We generally use written prose and documents versus slides. Anytime we've got a big decision to make, anytime we're working through strategy, all of our prds, product requirement documents, we always use writing to express our ideas and to communicate."

Max Rhodes explains that the company's written culture is a key part of their decision-making and strategy development process.

"It forces you to really think through your ideas and to connect your ideas together. You can't hide sloppy thinking in writing, and so it forces rigor, and I also think it creates clarity."

This quote underlines the benefits of a written culture, where writing enforces logical thinking and clarity, eliminating the possibility of vague or incomplete ideas.

• Max Rhodes recommends books like "Good Strategy, Bad Strategy" and "Working Backwards" for understanding how to craft effective strategy documents.
• A good strategy document includes a diagnosis of the situation, identification of key challenges, and strategic pillars that address these challenges.
• The document should clearly articulate business and customer problems and lay out solutions that create business value.

"I think it's getting really clear on what are the problems that you're trying to solve."

Max Rhodes emphasizes the importance of clarity in identifying problems that a strategy document aims to address.

"Every product pod writes its own strategy doc. That kind of ladders up to the broader strategy doc."

This quote explains the hierarchical structure of strategy documents within the company, where each product team creates a document that aligns with the overall company strategy.

• The process of writing a strategy document is time-consuming and requires collaboration with strategic thinkers and leaders within the company.
• Feedback from various stakeholders, including the board and leadership team, is incorporated into the document.
• The strategy document evolves through rigorous debate and revisions, eventually shaping the company's operational model for the year.

"It's a pretty involved process. It's gotten longer as we've gotten bigger, which I think is appropriate."

Max Rhodes acknowledges that the process of creating a strategy document has become more extensive as the company grows, reflecting the need for more detailed planning.

"We coalesce that all together. We build an operating model around it, and then we lock it and share it out at the end of the year."

This quote describes the final steps in the strategy development process, culminating in a comprehensive operating model that guides the company's actions.

• Max Rhodes discusses the importance of maintaining flexibility to adapt to unforeseen events, such as COVID-19 or changes in market focus.
• The company's values, including "embrace the adventure," support a culture of resilience and a bias towards action.
• The analogy of a startup being a speedboat and a larger company being an aircraft carrier illustrates the need for more deliberate planning as a company grows.

"Having the ability to change directions quickly is a superpower for even a large organization."

Max Rhodes believes that the ability to pivot and adapt swiftly is crucial for success, even for larger organizations.

"We recently placed a much, much bigger focus on Europe, and we did that after we did all of our planning."

This quote provides an example of how the company adapted its strategy to prioritize new opportunities, demonstrating flexibility in their strategic planning.

• Max Rhodes enjoys change and sees it as exciting, but he also recognizes the need to balance his inclination for change with more deliberate decision-making.
• He uses structured approaches to manage changes in strategy, such as writing documents to outline different scenarios and possible responses.

"I like change. I don't find it challenging. I would argue that it's more of a weakness than a strength that I've learned to manage."

Max Rhodes expresses his personal affinity for change and acknowledges that he has learned to manage this tendency for the benefit of the company.

"At the beginning of COVID we wrote a doc that basically laid out three scenarios for how we saw things playing out."

This quote shows how the company proactively addressed the challenges posed by COVID-19 by creating a document to guide their response to various potential scenarios.

• Max Rhodes discusses the importance of strategizing for multiple scenarios to ensure success.
• Adapting strategy in the face of unexpected events like Covid is challenging and exhausting for an organization.
• Change management is difficult but also exciting and engaging for some leaders.

"We built a strategy that ensured in all three of those scenarios we would be successful."

This quote highlights the proactive approach taken in strategic planning, considering multiple outcomes to ensure organizational success.

"It's really hard for the organization."

This quote reflects the difficulty organizations face when having to adapt to sudden changes, such as those brought about by the Covid pandemic.

• Max Rhodes and his wife, both former management consultants, sometimes apply management principles to their marital issues.
• There is a humorous aspect to applying these principles in a personal context, but it can become absurd.

"My wife is also a former management consultant."

Max Rhodes shares a personal detail that he and his wife have a common professional background, which influences their personal life.

"It can quickly venture into the absurd when you're trying to do that."

Max Rhodes acknowledges the limitations and potential absurdity of applying management principles to personal life, indicating a need for balance.

• Max Rhodes acknowledges making many bad decisions.
• A particular hiring mistake taught him the importance of thorough vetting and not relying on brand names or logos.

"I've made a lot of bad decisions."

This quote shows Max Rhodes' openness to admitting past mistakes, which is a crucial part of learning and improving decision-making.

• Building a disciplined hiring process is key to avoiding mistakes.
• Max Rhodes highlights the danger of falling in love with candidates and confirmation bias.
• The importance of a structured process, including deep behavioral interviews and work exercises, is emphasized.

"Build a really disciplined process and to be very deliberate about the way that you approach the process."

This quote underscores the importance of a systematic approach to hiring to prevent biases and ensure the right candidate is chosen.

• Max Rhodes recommends the 'who' method from a book for structuring hiring.
• He stresses the need for a clear understanding of the job role, desired outcomes, and core competencies.
• The strategy includes a combination of top-of-funnel calibration, deep behavioral interviews, and structured work exercises.

"We use a combination of deep behavioral interviews and structured work exercises."

This quote describes specific techniques used in the hiring process to evaluate candidates thoroughly.

• Max Rhodes provides a detailed process for conducting reference checks, including specific questions to ask.
• He emphasizes the importance of digging deep to reveal potential weaknesses and deal breakers.

"Keep digging until you find something bad. And then are the bad things that you find deal breakers for the things that you really need in the role?"

This quote suggests a rigorous approach to reference checks to ensure a candidate's weaknesses are not critical for the job role.

• Max Rhodes shares his technique for referencing, which involves a structured set of questions and building rapport with the reference giver.
• He advises on how to probe for weaknesses and rate performance, providing insight into the candidate's past work behavior.

"I think the first is being prepared, having a specific set of questions that you ask every time."

This quote emphasizes the importance of preparation and consistency in conducting effective reference checks.

• Max Rhodes discusses how to handle conflicting references by digging deeper into the context of each reference.
• He shares a personal experience where he had to evaluate differing opinions and decide based on the specific needs of the job role.

"You have to dig in to understand the why. What actually happened?"

This quote illustrates the necessity of understanding the reasons behind conflicting references to make an informed hiring decision.

• Exploring an individual's background, including childhood and parental relationships, can reveal their character and motivations.
• The depth of background exploration varies with the context and purpose of the interview.
• Time constraints and respect for the interviewee's time can limit the extent of personal history covered.

"I really like to go deep on childhood and their relationship with their parents and their relationship to money, growing up, and ambition. And I find so much of a person's true material and character is in that."

This quote emphasizes the belief that understanding a person's early life experiences is crucial to grasping their fundamental character traits and motivations.

• The value of discussing professional experiences often outweighs extensive personal history in interviews.
• Interviewers balance the need for depth with the practical considerations of time.
• Interviewing techniques may vary based on the interviewee's stage in their career.

"I think you probably would get a better interview if you had it before hours and you went and you started from like age three onward. But I think the value of that time is a little less than the value of more recent professional experiences is."

This quote suggests that while comprehensive life stories could enrich an interview, focusing on recent professional experiences is often more valuable given time constraints.

• Rigorous financial discipline becomes crucial as a business scales and handles larger sums of money.
• Predictability in business operations allows for better financial modeling and decision-making.
• The transition from a startup to a larger company necessitates a shift from speed to stewardship of capital.

"We've definitely gotten a lot more rigorous in the way that we've approached it financially because the dollars at play are just so much larger."

The speaker highlights the increased financial rigor required as the business scales and the financial stakes grow.

• Favorite books can offer insights into personal development and management style.
• "High Output Management" and "Radical Candor" are identified as influential books for the speaker.
• Fictional works like "Anna Karenina" and "Rifles for Watie" are also mentioned as favorites.

"Favorite business book is still probably high output management. I was a bad manager when I started fair, and I think that that had a huge impact on me."

This quote reflects on the importance of learning and personal growth in management, citing "High Output Management" as a significant influence on the speaker's development as a manager.

• Mentors play a key role in providing guidance and independent perspectives.
• Keith Raboy is identified as a mentor who offers unvarnished opinions and independent thought.
• Learning from mentors is an ongoing process that contributes to personal and professional growth.

"One person I haven't talked about, Keith Raboy, who you may have seen on Twitter. He has quite a presence on twitter. I worked for him at square, one of the most brilliant business thinkers out there."

The speaker acknowledges Keith Raboy as a mentor whose independent thinking and business acumen have been influential.

• Recognizing personal weaknesses is essential for effective leadership.
• The speaker identifies a propensity for change and underestimating its organizational cost as a weakness.
• Managing change and its impact on others is an area of focus for improvement.

"I create too much change. I underestimate the cost of change, particularly the organizational cost."

This quote reveals the speaker's self-awareness of a tendency to initiate frequent changes, acknowledging the need to manage change more effectively within the organization.

• Personal branding can be a weakness if not leveraged effectively.
• Strategic and insightful leadership may go unnoticed if not communicated publicly.
• Balancing humility with self-promotion is a nuanced aspect of personal branding.

"Personal brand is your weakness because you are one of the most strategic and thoughtful and insightful founders that they work with."

The speaker is advised that despite being a strategic and insightful founder, a weakness lies in not showcasing these qualities enough to the public.

• The speaker envisions a lasting, global presence for their company.
• By 2030, the company aims to support retailers in various channels and expand its services.
• The ambition is to build a consumer brand and directly connect retailers and brands with consumers.

"In 2030, I think we will be everywhere. I think we'll be a major global presence."

This quote outlines the speaker's vision for the company's expansion and pervasive global presence by 2030.

• The spontaneity of the interview led to discussions beyond the planned schedule.
• The host expresses gratitude for the opportunity to engage in such conversations.
• The interview reflects the dynamic and unpredictable nature of discussions with industry leaders.

"It really is shows like this for me where I'm so grateful to do what I do. It reminds me why I love what I do, because I'm going to send you the schedule after this. Actually, none of what we chatted about was on the schedule, which is fantastic."

This quote captures the host's appreciation for the interview's organic and unplanned nature, which diverged from the original schedule, providing a more authentic and enjoyable experience.