Maturity Map-Expansion Stage: 30-50 employees

The most common questions I hear from startup founders and team members is, “What are the best practices? What lessons have others learned? What’s coming next?”

The purpose of the Maturity Framework Series is to help startup founders and employees anticipate what is coming next. This post will specifically look at the Expansion stage, when a company grows from 30 employees to 50.

Company Stages by Number of Employees

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Links to full posts detailing the Early Stage and Momentum Stage.

Expansion Stage: 30 – 50 employees

You’ve probably been at this for a few years. Only a year ago your company was only in the Early Stage with 10 members of the team. How quickly things change. Your product doesn’t look anything like the MVP. Your customer base has grown 10x from that time. You’ve got all engines firing but there is still so much to get done.

Your team is growing in all directions. Work is getting done that the CEO might not know about. That’s a new thing. Metrics are increasing but it’s harder to pinpoint exactly which person or team shipped that new update, found that bug, or closed the newest clients. You have a team that thrives when they collaborate. You’re on your way to building the organizational side of your business.

The organization needs a leader, now is the time to hire a full time HR or People person. Their role is to setup the people-side of the business for success: hiring, compensation, interviewing, reviews, feedback and resolving any issues. The CEO should still be focused on hiring, but now there is someone to lead the charge.

You likely have a laundry list of other hires you want to make in the next 6 months, having someone fully dedicated to bringing on new talent and making sure to retain the existing talent is crucial. Don’t wait until you have 50 people to manage to hire HR, do it when you are 30 FTE and about to hire 20 more people so they can help onboard, interview, source and grow those people. Hiring an HR manager or promoting someone internally from operations should be your 30th hire. If you’re not sure what to look for, you can bring on a HR consultant to help you hire a full time HR person. 

At this point, you’ve lost some talent but you are now attracting more applicants. They aren’t all necessary the skill set you need but it’s nice to have talent arriving at your door for a change. There is a brief time period where you believe that it will be easy to fill that next open position. The company is known, you have customers and you have inbound candidates. The unsettling news, the types of hires you want to make now are in a different realm than the one’s you’ve made to date. Things need to change.

Your hiring plan likely includes a VP of Engineering, QA Manager, Head of Marketing, Product leader, HR, DevOps, Engineers, Sales and Mobile. These jobs commonly come up for the first time at a company moving from 30 to 50 FTE. This is new territory for most of your team, what does an excellent QA Manager do, where is the bar set?

Equity and compensation change once again. You quickly realize that if you give 50 people 1% that’s half of the business. You want to attract the best talent but where is the balance to comp and equity compensation? What structures make sense now or will in the future?

Time to step up your hiring game. In order to grow your team, hiring needs to become more of a machine. You can’t ask all of the questions anymore. Instead, you have to make sure the right questions are being asked throughout the rounds of interviews. The right people need to vet new candidates. The bar for new hires should be roughly set, not just a matter of ‘gut’. A process will help save everyone time, it may sound daunting to set up but that’s why you hire someone to run this side of the business. The better your company is at hiring, the easier it will be to expand with customer demand.

Larger teams mean more leadership required. If you have a team larger than 9 people, it should be split into two smaller teams. That means instead of one team leader, you need two. Perhaps you need two team leaders, Engineering Leaders for example, and one functional leader, CTO. There are more layers of management in order for teams to move faster, not slower. The only way to achieve that is by ensuring leaders know what they’re doing.

Hire experienced people leaders. It’s scary to consider hiring someone from outside of your company culture to come in and lead your team. Recruit from companies that have great management training programs like Twitter or GE. Try to instill the culture of management training into your organization.

Adding new hires into management will surface concerns. There will be push back from existing employees that think they would be the best fit for the job or are seeking a title and pay increase given their loyalty to the company. These battles may happen in the open or only exist in whispers among the disgruntled. Be as transparent as possible in your rationale and criteria for people leaders. Don’t cave to the pressure of loud voices at the cost of putting quality management in place. If an existing employee wants to be considered for the role, evaluate them accordingly.

Embrace new people leaders. You’ll promote people from in to fill leadership roles but they may have no idea what they’re doing. Expect that. Build training, seek coaches, find leadership curriculums and use them. Just because a person is talented as an individual contributor (IC), it doesn’t mean they will be great at leading other people in that skill. Plan for it. Coach them through it. If they realize they would rather return to an IC role, consider the growth path for them there.

Most companies revaluate how teams are structured at this stage, not just by adding more leadership, but by dividing up teams. Some structure teams around features, so the team includes one designer, one engineer and one product manager. Others structure teams to revolve around KPIs, so cross-functional teams focused on onboarding vs. retention. Another option is to keep teams split by function, engineering vs. sales vs. design. The setup depends on the company and the people you already have on the team. Team structures will change again when you hit 75+ employees so don’t get too comfortable.

Adding new people to the organization will accelerate the output of the company but not always in the short term. Getting up to speed on how you will construct management teams in order to remove roadblocks will be the biggest priority. It is very easy to add more people and decrease output. Don’t crush your dreams of, ‘if we only had two more mobile engineers we could get this done faster’, by not being prepared to setup the organization correctly.

You will no longer know everyone personally. You won’t have the time or interactions to truly know each person in the company. You can no longer fit your whole team in one meeting at the same time. You should build systems in that can help make sure you’re getting exposure to different parts of the business. One-on-ones with team leaders is a must for CEOs. One-on-ones within teams are a must. Townhalls with everyone present should happen between 15-30 employees, keep those up on a frequent cadence. Provide a tool like Slack, HipChat or Yammer to keep communication lines open.

A clear vision of the future and matching KPIs are required. The company burn has increased with positive metrics, you’re likely in the window to fundraise your Series B or C. Unlike most Seed and Series A fundraises, you have real metrics, historical numbers to compare to and more costs. No longer are things projected purely on speculation, you now have enough of a path to make future forecasts. Putting together the next round of funding will eat into the leadership team’s time and may require additional ad-hoc work from data, design and business teams. The more you can align your weekly metrics with those you’ll use in your pitch process, the easier it will be to streamline.

Opportunity is ahead making sure on the right path. Growth can mask a lot of management issues. They will likely happen over the coming 6 months, just try to ensure it doesn’t happen in the long term. Over communicate with your team about the reason you’re all here and working so hard. It’s easy to get distracted by job titles, competitors or the quality of the free beverages. Drive home the reason you’re here and working together. Keep the beat of the drum loud and consistent. Your team should be able to recite your mission in their sleep. Don’t shy away from building something together. There are new challenges here but that’s what comes with growth. Make sure to take some time to reflect on how you got here because it’s just the beginning all over again. Appreciate the past behind and prepare for the path ahead.

Current state of the organization:

  • Every employee has weekly 1-on-1s with their leader
  • Everyone attends weekly Town Halls
  • CEO should be focused on vision and hiring up
  • More management and restructuring of teams within sales and product
  • You’re raising your Series B or C
  • You have a few years of metrics and you’re starting to run A/B tests
  • More management brings up questions around career progression
  • You have process in some places, like product sprints, but none in hiring or career progression

Things you’re doing for the first time:

  • Hiring HR or People Ops
  • Setting up a new hire referral bonus program
  • You’re big enough now that a data breach will matter, make sure you have a plan.
  • Increasing communication: Town Halls, 1-on-1s, and more tech tools
  • Raising your Series B or C, using more metric-driven forecasts
  • Training new people leaders
  • Hiring more management level talent
  • Deciding how to recognize great ICs without management promotion
  • Structuring your teams around KPIs to align with the company vision
  • Setting up an interview process that gets the hires you need
  • Negotiating down rates for per-use services like MixPanel & AWS

What you’ve already solved:

Software you use:

  • Payroll - JustWorks, Paychex, ADP or Zenpayroll
  • Benefits - JustWorks, or Zenefits
  • Accounting - Quickbooks, Intaact, or Netsuite
  • Google Apps for email and documents
  • Dropbox
  • Google & Flurry Analytics plus MixPanel or Localytics for data
  • AWS, Digital Ocean or your own servers
  • Mac books
  • Zendesk or Desk for customer support
  • Sprout Social or Hootsuite for Social Media
  • Trello, Asana or Jira for Product Management
  • Github for permissions & software sharing
  • Highrise, Bases or Sugar CRM for sales pipelines
  • Careers 2.0 and Indeed to hire outside of your network
  • Stripe, Amazon, Dwolla, or PayPal for payments
  • Skype or Google Hangouts for remote meetings
  • Hiring Platform, like Lever.co, Greenhouse.io or BambooHR.com

Who you need to know:

  • Recruiting firm for hard hires: engineers & VP+ level tech, product talent
  • Real estate broker for your new or next office
  • Architect or interior designer for office setup
  • Lawyers to review equity documents and to negotiate contracts
  • Journalists you’ve built relationships with to write-up new features
  • Skilled friends who may refer top talent to your company
  • Mobile platform gatekeepers to promote you in their stores
  • Full time accountant to manage books
  • 409a consulting firm to evaluate equity

Additional decisions that may start in this stage:

  • Having multiple offices or remote employees
  • Offering your product in more than one language
  • Securing visas for international candidates
  • Hiring outside or in-house council, for more regulated industries
  • Negotiating a lease on a new office
  • Hiring a white hat security firm to run an audit

If you have something to add to this list, please share in the comments or send me a line on Twitter.

Next up, the Growth Stage, growing from 50 to 75 employees. To subscribe to weekly updates via email, sign up here.

If you’re interested in giving back to the startup community this week, please check out some of the great panels from USV companies that are up for consideration for SXSW 2015. Review and vote here

Footnotes:

*Please note, this outline is based off of trends I’ve seen in venture-backed startups. It very easily could apply to bootstrapped or non-venture funded companies, but not necessarily. In this outline I assume the company has taken funding, whether Seed or Series A

**We’ve invested in a number of companies mentioned in this note. For a full list, visit our Portfolio Page or find opportunities with them through the USV jobs page.

Maturity Map-Momentum Stage: 15-30 employees

As part of the Maturity Framework Series, today we’ll look at the Momentum stage, for companies with teams of 15-30 employees. Here’s what companies at this size are thinking about*.  

Company Maturity Map by number of employees

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You can learn more about the Early Stage here.

Momentum Stage: 15 - 30 employees

Your product feels more real than ever before. You have customers using your product, suggesting features, and needing help canceling. So goes the rhythm of a company with momentum. You have money in the bank but are working to find that balance on how fast or slow to spend. You’ve heard not to be ‘penny-wise and pound foolish’ but what does that really mean? VCs invested growth capital, not stay the same capital. It’s time to grow the team beyond the 15 loyal team members who got you this far.

You’ve either found product market fit or are continuing to grow but not exactly how you expected. The previous months of product and customer development help determine who should be hired next. You may be adding more to your engineering team, sales team or community team. Wherever there feels like the biggest opportunity for growth is where you’re staffing up. However, these next hires aren’t exactly the same as the ones you made to get to 10 FTE.

You may finally convince that former colleague from Twitter, Google, Facebook, Samsung, Apple or (insert large tech brand here) to join your team. The hires bringing more experience in a particular area. They have war stories, set processes and advice that sounds very similar to, “When I was at Twitter, this is how we approached building our sales process from scratch.” They have higher salary expectations and will bring more authority than your founder may be used to. The advice “hire people smarter than you” works, but it’s a shift away from the way things have always been done.

Bringing on more specialized talent doesn’t necessarily mean their role on the team will be 100% what their title entails. The VP of Engineering may be managing your team of 7 engineers but they may also be required to ship code 50% of the time. The Head of Sales may be working alongside 2 other sales people but feels more like an individual contributor than a full time manager. Making these hires is an investment in the future team as you’ll need more leaders before you know it. Amazon’s two-pizza rule is popular for a reason, having more than 8 people on one team is too many. If you get to 9 engineers, divide into two smaller engineering teams.

The move up to 30 employees may take a long time as some people will move on as new hires are hired up. The more specialized hires will work alongside your existing team but may scare a few early team members away. The early employees may feel like things are ‘changing’ or becoming ‘too big’. Don’t fight those people who leave. Anticipate it, acknowledge it to your team: Where we are is not where we started, where we’re going will bring more change too. Those who are excited about the future are welcome. Those who are looking to move on, we wish them well.

Teams that grow to 30 will expand the types of roles that are required. At fifteen employees you will likely need to hire an office manager if you haven’t yet. Having someone fully dedicated to making sure the office has everything it needs to be productive becomes a priority. In the early days, even the CEO would run out to refill handsoap, TP or pick up lunch. Now there are deadlines and products to be built, making sure there is a productive environment for the team to succeed is not an after thought. The office manager at this size often have a secondary role in the company too.  They may also serve as a temporary executive assistant, QA manager, community manager or HR coordinator. As the team grows to fill those roles, the office manager role will expand to serve the larger company too.

Having the CEO interview every potential candidate may get unwielding. It’s good for the CEO to agree on new hires, as it should be her top priority, but it’ll become challenging to schedule time with potential candidates, 1-on-1s with existing employees and leave head space for leading the company. It’s best to get to work on a strong interviewing process, even if just a few steps in a google doc, to make sure top candidates get through and mediocre candidates don’t take more time than they’re worth.

You’re still at the point where it’s easy to remember everyone’s name on the team. You may need to change your old policy, everyone in the company going out to lunch with a new employee, to ordering lunch in for everyone as restaurants don’t seat 20+.

Each new hire brings something new to the table, you’re expanding the expertise of your team to become the company you’re all working so hard for. More people with diverse backgrounds brings more conflict. That difference in opinions and experiences is what helps drive the business forward, but it’s something to make sure is propelling the team forward, not sideways.

Over communicating is essential as this stage, it’ll feel like work, it’ll feel like too much but it’s necessary to help keep the team on the same page. Gone are the days where you could all give updates in a daily stand-up. You need to protect peoples time but make sure they understand the message. You should have a weekly Townhall meeting to keep the company up to date on where the company is, what everyone is working on, and the vision of the company (repeat it every week). This drumbeat is essential, especially as the company grows. Make sure to share news, good and bad. If you only show numbers that are positive or always increasing, you’ll build a culture afraid to fail or terrified if you miss goals. Find the balance of transparency at this stage.

When you continue your focus on the team communicating, make sure multiple voices are being heard. Be mindful that a culture that only recognizes the ‘old guard’, or early employees, is demotivating for new employees. Equally, the leadership of your company may need to make themselves more available to new employees. It’s easy for an early employee to walk up to the CEO and ask a question, something they did in the early days, but more intimidating for someone who just started. There are invisible barriers that new employees try not to violate, as a leader, make sure you are creating equal access to your time.

Be the place you want to work. You are building this thing together. There will be great successes and big mistakes. Cherish these, celebrate these because this is the culture you are going to bring with you for the next year. If you think there are people in the company at odds with the growth, don’t be afraid to let them go, they will bring down other team members too. It’s important that there is alliance in where you are all heading together. Having a team of thirty will feel like a big group, but it’s a stepping stone to where you will soon be. Don’t let looking backward to how things were keep you from moving the company forward. You’ve got a lot of ground to cover. Your team is all here for the right reasons, help remove any barriers preventing them from doing their best work.

Current state of the organization:

  • Everyone attends a weekly Town Hall to learn what’s going on.
  • Founder should be focused on vision and hiring up.
  • More specialization in new hires, little or no management hierarchy.
  • You’re building expanding sales, engineering or support teams based on company demands.
  • You have consistent customers and start to see your first churn.
  • More perspectives in the company mean more disagreements.
  • You may see company culture become more dominated by sales or engineering depending on your business.

Things you’re doing for the first time:

  • Figuring out role requirements for the new roles
  • Hiring an Office Manager
  • Moving away from the CEO interviewing every potential candidate
  • Increasing communication: Town Halls and more tech tools
  • Keeping an eye that ‘first hires’ and ‘new hires’ are working together
  • Involving your investors in quarterly strategy discussions
  • Creating meaningful data dashboards to update weekly
  • Hiring more experts instead of just generalists
  • Increasing the size of your support or community to scale with customer growth
  • Deciding on titles for new and existing hires
  • Right sizing equity and compensation for more experts
  • Nailing down your KPIs to align with the company vision
  • Conducting a refresh of your company Mission, Vision & Values
  • Managing team morale when things don’t go as planned
  • Setting team expectations that some employees may leave
  • Trying to manage low performers or firing any bad hires

What you’ve already solved:

  • Investors and immediate runway
  • Filled 80% if not more of the board seats
  • Working location: new office or sublet
  • Technology stack - dominant language
  • Mobile platform roll-out schedule
  • Milestones you’re going to accomplish in the next 3 & 12 months
  • *For the full list, see the Early Stage Maturity Map*

Software you use:

  • Payroll - JustWorks, Paychex, ADP or Zenpayroll
  • Benefits - JustWorks, or Zenefits
  • Accounting - Quickbooks, Intaact, or Netsuite
  • Google Apps for email and documents
  • Dropbox
  • Google Analytics plus MixPanel or Localytics for data
  • Flurry Analytics plus Localytics for mobile
  • AWS, Digital Ocean or your own servers
  • Mac books (possibly through business financing)
  • Zendesk or Desk for customer support
  • Sprout Social or Hootsuite for Social Media
  • Sticky notes on a wall, Trello, Asana or Jira for Product Management
  • Permissions & software sharing: Github
  • Highrise, Bases, Sugar CRM or PipeDrive for sales pipelines
  • Careers 2.0 and Indeed to hire outside of your network
  • If accepting payments, Stripe, Amazon, Dwolla, or PayPal
  • Skype or Google Hangouts for remote meetings

Who you need to know:

  • Real estate broker for your new or next office
  • Architect or interior designer for office setup
  • Lawyers to review equity documents and to negotiate contracts
  • Local meetup attendees to recruit new talent
  • Influencers on blogs, at hackathons or at events who will promote you
  • Journalists, via Twitter or friend-of-a-friend, to write-up new features
  • Skilled friends who may be willing to leave for a ‘startup job’
  • Mobile platform gatekeepers who will provide feedback on your app
  • Part-time accountant to manage the company books
  • Recruiting agencies that can help with hard to find hires

Additional decisions that may start in this stage:

  • Having multiple offices or remote employees
  • Offering your product in more than one language
  • Securing visas for international candidates
  • Hiring outside or in-house council, for more regulated industries
  • Negotiating a lease on a new office
  • Hiring a part-time HR manager or full-time recruiter

If you have something to add to this list, please share in the comments or send me a line on Twitter.

Next up, the Expanstion Stage, going from 30 to 50 employees. To subscribe to updates via email, sign up here.

Footnotes:

*Please note, this outline is based off of trends I’ve seen in venture-backed startups. It very easily could apply to bootstrapped or non-venture funded companies, but not necessarily. In this outline I assume the company has taken funding, whether Seed, Series A or B.

**We’ve invested in a number of companies mentioned in this note. For a full list, visit our Portfolio Page or find opportunities with them through the USV jobs page.

Maturity Map-Early Stage: <15 employees

As part of the Maturity Framework Series, I wanted to map out a few basic things a startup that is growing from 2 to 15 employees should be thinking about as they grow. We’ll start with taking a look at what should already be ‘figured out’ by the time you reach 15 employees. 

Based on the past 2 years of Series A investments, companies at this level usually have team sized between 5 and 15 people. In this outline I assume the company has taken funding, whether Seed or Series A*. 

Company Maturity Map by number of employees

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Early Stage: 15 employees or less

You’ve been at this for a year or two and you’ve finally made some traction. Your first mobile app is in market, you have a few thousand customers visiting your website or you just closed your first two deals with big businesses. You’re seeing initial traction and you’re moving as fast as you can to keep the firing burning.

Very few people who work in your company are ‘domain experts’. Some came with little experience and a lot enthusiasm to build something new. Others were overworked at a previous job with little personal meaning, so took a pay cut for the chance to build something that excites them. The skill sets people walk in the door with aren’t necessarily what they are working on. Former lawyers are now operations managers, musicians are managing the community, salesmen are making hires, and that former VP of Engineering is now a full-stack hacker. Everyone is doing a little bit of everything, no one is only doing one thing.

The team fits around one table and if you need to talk to someone you just turn around and tap them on the shoulder. You don’t need to over-engineer systems to share information because everyone can overhear every meeting in the small office. Even the CEOs phone calls with investors are heard through thin walls and headphones.

You may have some of the best engineers but there’s a lot of ground to cover. You find out about bugs in your code from your friends who are using the ‘beta’ or getting a tweet from someone trying to login. The site was down for 30 minutes and you just realized there was an error in that last push. Everyone jumps in to help out. Someone is reviewing the log files. Another engineer is pushing code. One of the co-founders is testing the website on 3 different browsers to ensure the bug was fully fixed. The CEO is reaching out via Twitter to thank the customers and assure them the site will be back up soon. 

This group of friends and new faces are building something that is bigger than they imagined at this size, but still feels like a spec compared to the other ‘startups’ out there. It’s exciting and chaotic but you wouldn’t want it any other way. 

Current state of the organization: 

  • Everyone in the company knows everything going on. 
  • Founder or founders are usually doing a lot of different things.
  • No specialization, anyone can, and does, do anything.
  • You’re building out an idea, not necessarily a company yet.
  • You’ve pushed a real product to real customers (not just friends).

Things you’re doing for the first time: 

  • Figuring out role requirements for the next set of hires
  • Learning the nuances of interviewing
  • Deciding if you’re open to ‘remote teams’
  • Defining your ‘vacation policy’
  • Adding “Terms of Service” to your product
  • Putting together a board deck
  • Setting up one-on-one meetings between Execs & team
  • Having regular meetings with the whole team
  • Right sizing equity and compensation
  • Deciding on Security of employee equipment (2-factor auth)
  • Figuring out what type of coffee machine to have at the office

What you’ve already solved: 

  • Investors and immediate runway
  • Founders: who they are and what they do
  • Domain name, company name, vision
  • Filled 60% if not more of the board seats
  • Company structure: likely a C-Corp or B-CORP
  • Working location: office or coworking space
  • Business banking - a professional account, not a personal one
  • Technology stack - dominant language
  • Milestones you’re going to accomplish in the next 3 months

Software you use: 

  • Payroll - JustWorks, Paychex, ADP or Zenpayroll
  • Benefits - JustWorks, or Zenefits
  • Accounting - Quickbooks, Intaact, or Netsuite
  • Google Apps for email and documents
  • Dropbox if not Google Drive
  • Google Analytics for web (free tier)
  • Flurry Analytics for mobile (free tier)
  • AWS or at the verge of outgrowing Heroku
  • Mac books (possibly through business financing)
  • Zendesk or Desk for customer support
  • Social media is manageable so no tools
  • Sticky notes on a wall, Trello or Asana for Product Management
  • Permissions & software sharing: Github
  • Careers 2.0 and Indeed to hire outside of your network
  • If accepting payments, Amazon, Dwolla, or PayPal

Who you need to know: 

  • Local co-working spaces to house your growing team
  • Real estate connections for your next office
  • Lawyers to get your documents in order
  • Local meetup organizers who will let you demo at the next event
  • Journalists, via Twitter or friend-of-a-friend, to write-up new features
  • Skilled friends who may be looking for a ‘startup job’

Additional decisions that may start in this stage: 

  • Having multiple offices or remote employees
  • Hiring outside or in-house council, for more regulated industries
  • Negotiating a lease on a new office

If you have something to add to this list, please share in the comments or send me a line on Twitter

Next up, the Momentum Stage, going from 15 to 30 employees. To subscribe to updates via email, sign up here.

Footnotes:
*Please note, this outline is based off of trends I’ve seen in venture-backed startups. It very easily could apply to bootstrapped or non-venture funded companies, but not necessarily.

**We’ve invested in a number of companies mentioned in this note. For a full list, visit our Portfolio Page or find opportunities with them through the USV jobs page.

Mapping the Startup Maturity Framework

See the wall. Scale the wall. See the next wall.

After working with 52 companies at various stages of growth, building a small team in Chicago, and talking with startups of all sizes, I’ve seen a clear pattern of organizational maturity emerge.

I wanted to share some of my findings and continue to map out the patterns of organizational maturity in order to better serve entrepreneurs facing those challenges. 

For example, Drew Houston, Dropbox CEO, describes it as scaling walls: 

“If you’ve never started a company, or worked at a smaller company, you’ll run into a vertical learning curve, Houston says. There’s no way to know everything you need to from the start, so you need to a) gain as much knowledge as you can as fast as you can, and b) plan ahead to learn what you’ll need months down the line. You have to be prepared for a never-ending conveyor belt of challenges.

‘You have to adopt a mindset that says, ‘Okay, in three months, I’ll need to know all this stuff, and then in six months there’s going to be a whole other set of things to know — again in a year, in five years.’ The tools will change, the knowledge will change, the worries will change.’” Article Link

The good news for entrepreneurs and their teams is that by studying multiple companies at once, it’s possible to better set expectations of what’s coming next, what others have done at their transition, and how to anticipate or avoid the biggest mistakes.

Patterns in Hyper-growth Organizations

We’re going to look at the framework for growth. The goal is to innovate on that growth. In terms of methods, the companies I’ve explored are high-growth, technology-driven and venture-backed organizations. They experience growth and hyper-growth (doubling in size in under 9 months) frequently due to network effects, taking on investment capital, and tapping into a global customer base.

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Every company hits organizational break-points. I’ve seen these happening at the following organizational sizes:

Revenue, amount of capital raised, type of company, size of audience, product maturity and other factors vary among all of these companies, but the challenges they face at the different organizational sizes are the same.

I plan to dive a little deeper into each Growth Stage in a series of blog posts over the coming week. I’ll cover what new challenges arrive, what pieces of the organization a company should already have figured out, and what decisions should be held off on at that point.

I hope to share some of the things I wish I knew when I was an entrepreneur. And hey, it may help alleviate that feeling that you’re the only one scaling those walls.

Solving Challenges at Scale: 

At USV, my goal is to test which methods work best for sharing these best practices and delivering information right when a team might need it. Most of the work is still in progress, so let me know if you’ve been doing any research in this area. 

I’ve leveraged a lot of knowledge around networks, as the framework for how we deliver this knowledge:

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Source: Why Being The Most Connected Is a Vanity Metric

Instead of building a centralized method to deliver knowledge, the USV Network uses knowledge across the network to share best practices. The next challenge is how to leverage that network to provide advice and guidance before it’s even requested. 

For example, if a company has 15 employees and plans to hire to 30 in the next 6 months, helping provide knowledge that they’ll likely need to hire an office manager or they might need to consider more advanced payroll and insurance tools for employees. The team member feels comfortable asking their peers for advice on existing problems, but doesn’t have an easy way to anticipate the challenges ahead. 

Connecting peers at all levels helps surface some of these topics but I think we can take it further. The holy grail would be a resource that anticipated what the company needed in advance and helped educated them along the way so they would have the information they needed when they were ready to make the decision. 

It’s not ready yet but it’s in the works. If you have thoughts on things that have worked for you, please let me know in the comments or on Twitter

Finding a big pie

In startups, we often hear “X for Y” in terms of business model, “Airbnb for backyards” or “Duolingo for Music”, but it’s also common for market locations. Examples include, “The Knot in the Middle East" or "Amazon for Australia". Great businesses in the US haven’t spread everywhere, and sometimes for good reason. The market may not be big enough to make sense. 

Australia, for example, has 23 million people. It’s a large country but population-wise, it’s dwarfed by neighbors like Japan with 125 million people. And even though there are large populations there, it may not make sense that the market demand there are the same as market demand there. 

Understanding the size of the pie first is important, especially when thinking about raising venture capital. It’s very easy to think: I want this product so everyone will too. It’s worth doing some quick analysis of what that pie looks like to avoid the “someone like me” problem.

Potential Customers matter

I’m a New Yorker, 8.3M other people belong to that group too, but that’s only .1% of the 7.14B on this planet.  

Well, being a New Yorker means I’m also an Urban Dweller, which makes me part of the 50% of the population (as of 2010) that lives in a city. And that number is increasing. So maybe catering to city dwellers, not just New Yorkers is a big pie. 

That pie is big by population, but not necessarily by potential customers for your product.

Around 1.29 billion people (18.4% of the world population) live in extreme poverty, subsisting on less than US$1.25 per day; approximately 870 million people (12.25%) are undernourished. 83% of the world’s over-15s are considered literate. In June 2012, there were around 2.4 billion global Internet users, constituting 34.2% of the world population.(Source: Wikipdedia)

There are big problems for big populations of people. Those are pies worth thinking about. If your mission is to serve 10% of all internet users, that’s roughly 244 million people. That’s a big pie to shoot for, but it may be spread across different countries with different languages. 

What other requirements about your product need to be true? Do customers need to speak English? Be a tech early adopter? Have a smart phone? Travel? College educated? Parent? Tech savvy? Know your market. 

Spending matters

If you want to serve every mother living in New York City that makes over $100,000, that’s a smaller pie but maybe a bigger opportunity to sell a higher priced product. 

Margins matter

You could build a big business selling 100M widgets with a $1 profit on each. Or you could sell 1M widgets with a $100 profit margin on each. What the market will allow matters, think about the margins and how they will change over time. It’s easy to sell a $5 coffee when you’re the only game in town, but what happens when competition moves in and you need to cut prices to maintain sales? Goodbye margin or hello decrease in customers. You could do either, but you’ll want to think about that before you start. 

Even large, well funded companies sometimes choose to give up their own margins to drive more business. Sometimes they do this because they have the volume to maintain a profit, or sometimes they do it to squeeze their competition, driving competitors to cut prices too.

Pie ownership matters

Is this a winner take all market? Could many companies build big businesses in this space?

Walmart, Target, and local convenience stores co-exist. Walmart and Target have built massive businesses, they each own enough of a very large pie. It’s a massive market, so it doesn’t matter that they aren’t the only owners of the pie. Not winner take all, two winners take most. 

Android and Apple are winner take most in operating systems. It’s a slightly different story in handsets, it’s Apple, Samsung, Nexus and a number of manufacturers competing for share, especially in the US. 

For a good read on the US Brewery industry only having room for 3, not 4 big players, read 'How to Blow $9 Billion: The Fallen Stroh Family'

Big businesses can be built without venture capital

The majority of businesses are not venture backed. There are a number, especially those recently making their way to the public markets, but that doesn’t mean every business needs to shoot for venture funding. 

If there is a big pie that could benefit from a large amount of growth capital, that’s worth discussing. If it’s a business that can grow on it’s own revenues, that’s a great way to get there too.

If you look at the big picture, you can own 100% of your business, take 1% share of your market and build a $100M business. You could also own 10% of your business, take 10% share of your market and build the same $100M business. The goal would be to take 10% of a market that pushes your business to $1B+.

Go with the market

Markets move quickly, but if you understand the ceiling, it’s easier to be realistic about how to get to 1% of the pie and grow it from there. 

Scale your perspective to lead

A superior leader is a person who can bring ordinary people together to achieve extraordinary results. Remember this if you are lucky enough to manage a team. 

8 Wharton MBA lessons that stood the test of time

Part of scaling as a leader is knowing where you belong.

First you belong at the top, you have the vision and the skills to get things started. You hold the information and spread it down within a small team. The team is flat and they all look to you for what’s next. 

Then, the grass roots begin. You have to evolve so that you’re highlighting other people. Sharing their strengths. You are still the keeper of the vision but you lead by showing the work of others not your own. Expertise bubbles up, not just a trickle from the top.

Next, you have area expertise, whether it’s marketing, technology, design or data, but are slowly building a team of better experts around you. They may be better than you at the skill that you’re leading them in. That’s what you want. The real way you lead is from way behind. The message is shared through the experts, let them share with the company what’s going on, what’s worked, and what is up next. You lead the vision but it’s told through the people building towards it. Leadership is spreading up and down. 

Then you become a leader of people who are leading teams. You’re leading leaders. You are less into the mechanics and more on the showroom floor. Leading with the vision and passing off the vision to the leaders in your company to lead their teams. Everyone has ownership and is expected to lead, title or not.

In order to grow a company, you have to change along the way. There aren’t hard and fast rule to when things change, but it can work out better to move onto the next step earlier rather than later. You have to work to be better at letting others lead.

It won’t be like it used to be, but that’s not where you wanted to stay, now is it? 

Universal skills to land a startup job

Working with the USV portfolio means I get to meet a lot of outstanding candidates looking to join one of our portfolio companies. Here are a few characteristics I’ve found to distinguish the great candidates: 

Curious
You need to be curious to create things that never existed. You don’t necessarily have to be curious about something related to the job you’re taking on, but you have to have curiosity for something.

What do you love? If you can’t think of anything, it will be hard to build a product out of love. You have to understand it to get better at building it.

Show Hustle
Now, this is not just, “I got one ‘no’ so I’m going to give up.” That’s persistence, but hustle is more that that. Do your research, put your heart into it, cater to that company that has an open position, then don’t stop at one “no”. Understand what they need and work to become the person the company needs.
This is not, let me send my cookie cutter resume to every startup (even when they’re not hiring). Do the work to understand what you’re applying to and why it would be a good fit. There are other candidates doing this, some with outstanding backgrounds too. Don’t get lazy where it’s important. Do the work. 
Be Smart
Being smart is beyond just intelligence, it’s working to raise your knowledge, not just what you’ve been given. Logic works. Learning works. Do your research. What don’t you know? What aren’t you good at? Everyone has strengths and weaknesses, understand your own. Then be smart enough to push to the edge of your potential. See what exists there. 
Level Up
Become a mechanic. Understand the what, how, who. You don’t need to know everything but you should be excited enough about your industry that you want to know as much as possible. If you want to work as a Product Manager, learn SQL. If you want to work on Design, learn Javascript. If you want to understand social media, start with a side project just focused on promotion. Be hungry for more. If you’re not hungry in the beginning, it’s a long road.
This is why people preach about passion. If you don’t have an interest about something, a let me wake up first thing in the morning and read the news on this topic - then look in a different industry. Every day, ever dinner party, every taxi driver (in SF or Chicago) will want to know what you do. If you aren’t excited about talking about it, keep on moving.
Care
Love to solve problems? Think scaling is challenging? Be excited about that, the thing you do on the day to day. Love talking to people, maybe sales, or customer support. The industry doesn’t matter as much as the mission of the company does. Find what moves you. Serve that purpose in what you do and the mission the company solves. 
- Kickstarter, VHX, Soundcloud, Shapeways, Wattapd and Splice empower creators. 
- Meetup believes people should build offline communities just like they do online.
- CircleUp, LendingClub, Funding Circle, Coinbase and Dwolla are revolutionizing the way money and banking exist. 
- Firebase, Twilio, MongoDB, CloudFlare and Sift Science are creating the best tools to empower developers. 
If you’re looking for your next move, we’ve got quite a few jobs worldwide looking for good people. Check out all of the USV portfolio company jobs here.
If you have any additions or questions, happy to discuss in the comments.