When you start a new company, one of the last things you worry about is scale. You’re thinking about the Minimal Viable Product (MVP), product/market fit, getting that first customer, adding features, getting the second customer, when you need an accounting person, etc. These are what the first year(s) of your startup life as CEO are concerned with.
If you are fortunate and you do the legwork in that early phase, suddenly you are on to something. Now you have 100 customers, 10 team members and $1 million in revenue (what I call a Tweener). Maybe you meet with an angel investor or a mentor and they ask you that one question you haven’t been thinking about: “What does it take to get this to $10 million or $50 million or $100 million?”.
Lots of questions, not many answers
What I found building several software businesses is that there is a lot of great literature and advice for that early phase but once you get past the pre-tweener stage, the amount of information, mentoring and general information is very, very thin. At this point, founders and CEOs start to feel very lonely. Also, each decision is made in a vacuum and the very nature of the decisions makes it impossible to know if you made the right choice because you can’t do an A/B test on these decisions.
Some of the questions I have found myself asking at this phase:
All of these types of questions are what I call “scaling decisions”. They are tricky because they really sneak up on you fast and even if you have built a business at scale before, every business is different enough that there literally is no roadmap.
- Should my next hire be in sales, marketing or product?
- When should I bring on a full-time CFO?
- When should I think about going international?
- How big does the sales team need to be to achieve my goals?
- What should the split be between Sales and Marketing?
- What is a good CAC/LTV ratio for my business?
- Should I invest in a product line extension?
- How did I end up with 12 people reporting to me? Is that good or bad?
- What’s the name of that new person we just hired—why don’t I know the name of everyone in my company now?
- Wait a sec, how did we just hire person X without me knowing? Is that good or bad?
- How should we define our culture and make sure that team member number 50, 100, 200, 300, 500.
Five Scaling resources (and if you found this helpful….)
The good news is there are finally some great resources available. They don’t give you the answers—that would be impossible—but they do give you some frameworks and case study-type best practices to think about and apply to your situation:
1. (Book) The Hard Thing About Hard Things by Ben Horowitz
Ben Horowitz has built several large businesses in the Bay Area and is now a venture capitalist with Marc Andreessen at Andreessen Horowitz (called A16Z in a nod to I18N, a reference the geekier readers should ‘get’). Ben’s book is the first I’ve read that really resonated with me on these topics and is the No. 1 book I recommend to Tweener CEOs. It doesn’t (and admittedly can’t) give you a roadmap, but the experiences Horowitz shares from coaching startups can give you a framework for a lot of scaling topics, including culture, compensation, recruiting, etc. If you still aren’t sold, here’s a short video that Ben put out that gives you a taste of his style.
2. (Book) Scaling Up Excellence: Getting to More Without Settling For Less by Robert Sutton.
While Horowitz’s book is a straight-up, no-filter approach, Scaling gives a nice balance because it is a more academic approach to the topic from a couple of Stanford professors. The two together, I think, are a great combo to get you really thinking about scaling.
3. (Podcast) a16z podcast
While it doesn’t focus 100% on scaling, there is a mix of scaling topics, tech and case studies that are all generally helpful to any startup CEO. Plus, you’ll occasionally hear from Horowitz (see reco 1) and those are the best, so start there if you need to catch up. Here's the link.
4. (Online resource) Reed Hastings, CEO of Netflix—culture deck.
Netflix has a really interesting culture and I really like everything Reed has to say about the topic. While you may not agree with him, he puts forth a CEO-friendly and direct argument that is refreshing.
5. (Online resource) Google’s quest to build the perfect team
Google takes a very quantitative approach to team building and because it is Google. The company will always have 10,000x more to spend on this than anyone reading this, so we can all benefit from that investment. Here's a great story from the New York Times on team building there.
6. (Bonus book) Rework by Fried and Hansson
Fried and Hanssono founded 37signals, the makers of Basecamp (37signals renamed Basecamp), and also invented Ruby on Rails. Most of the startups in the Triangle have technical founders and this book is probably already on your bookshelf. But if it isn’t, it should be! The bulk of the book skews towards early stage kinds of topics. About mid-way (competitors forward I would say) it does tilt more towards scaling topics.
If you find these resources helpful and are interested in this topic, I want to invite you to attend the workshop we are holding in conjunction with the CED Tech Venture Conference, which is being held September 13 and 14 at the Raleigh Convention Center.
I am hosting an entrepreneur-focused workshop on Tuesday morning from 9:30-12:30, where we are going to focus 100% on scaling topics. Three guest speakers include:
After we hear from Ryan, Joe and Brendan on these topics, they are going to stay around for an ‘open mic’ workshop/Q+A session where we’ll try to answer all of your scaling questions including:
- Ryan Walsh – CRO of ChannelAdvisor. Ryan has grown our sales team from 5 to ~200 and has been at ChannelAdvisor from its first $1 to $100 million in revenue. Ryan is going to cover the topic of how you scale sales.
- Joe Colopy – co-founder and CEO of Bronto Software. Joe grew Bronto from $0 to $40 million and recently sold Bronto to NetSuite for $200 million. Joe is going to cover how you scale product.
- Brendan Morrissey – CEO and co-founder at Netsertive. Brendan is co-founder and CEO at Netsertive. Netsertive has raised >$60 million in venture capital and has over 300 team members. Brendan is going to cover how you scale marketing.
Hopefully you can tell this is a topic I’m really passionate about and feel we don’t talk enough about in the Triangle. I’m looking forward to seeing what kinds of scaling issues Triangle companies are facing and seeing if we can collectively help you bust through them so you can be the next Red Hat, SAS, ChannelAdvisor, Bronto or Netsertive.
- What should my first sales hire look like?
- How do compensate sales reps?
- How can I have world-class marketing as a startup?
- How can I differentiate my product in a crowded space?
- Should I invest in sales, marketing or product?
- How does my company change from 10->50->100->200->500 team members?
- How do I recruit and retain this many people?
- How important are the ‘intangibles’ around culture, goals, communication, etc?
- When do I go global?
- Should I bootstrap or raise capital?
- How do I raise venture capital, what’s that like?
- When do you think about M+A vs. IPO?
- What’s the role of culture as you scale?
- Should I hire that big company person or promote from within or ?