Scaling is F—Ng Hard: Hard lessons hard earned
I’ve been lucky here, having a fairly broad experience of scaling in Silicon Valley. Had some experience @ Alibris (scaling from 15 to 150), at Yahoo! scaling from 2800 people to 15,000+; at 500 Startups; going from 30 to 150 people. Plus I’ve invested in over 400+ startups, many which have scaled to hundreds of employees. Most companies do this very badly and like many things in life, you only learn the hard way.
I noticed 2 key breakpoints in startups. 1) Dying before PMF 2) getting to PMF but not able to scale quickly enough or Spinning out of control.
I want to talk more about the 2nd breakpoint. I noticed that this typically happens after raising their Series B.
One big problem that seems consistent: “Bad Hiring” (usually hiring big name company executives). Most founders have never managed a large team nor cultivated them. Something also common is not getting rid of commandos when you need infantry. (https://hardfork.substack.com/p/the-jungle-the-dirt-road-and-the)
This is hard, these folks have been with you and helped you get to this point. But the company has evolved and they may not be effective anymore.
Tied to this and also very common for VC funded startups: “Over Hiring” and then having to fix this. You get so caught up in adding people, you end up cutting corners and hiring the wrong people. If you are honest, you know it’s not working but you want to give them more time to acclimatize. Or hope they can turn it around. Fast forward 2 quarters and you know it is not working, so you inevitably have to fire them and rebuild the team from scratch. No one talks about this but its way more common than you think.
“Messing up on Processes”: this sometimes is either underinvested in or over invested in.
Founders either tend to be allergic to bringing processes. Thus they try to keep the org flat and decentralized, which also tends to make things very messy and disorganized. And havoc when you grow the organization.
Or they over-invest and bring in processes from much later stage established companies. My view is that this was one of reasons Zynga fell behind in the early 2010s because they brought in so many execs from Electronic Arts. They became very bureaucratic and schlerotic.
Another big question and risk: “Going beyond the core customer segment. Ie. Lack of Focus.” So for example, you have grown on the back of SMB but then decide to go after Enterprise. It requires changes to product, support mechanism, and a brand new sales motion and GTM.
The big question is does it make sense right now? Have you saturated your original core market (like in my opinion, ~70-80% of the market)?
I can spend a lot more time on all the issues that come with scaling. But if companies can surmount the previous challenges, they are well positioned for tremendous hypergrowth. Like many things, it’s easier said than done. Thankfully there are an ever increasing number of people who have had great experience with scaling. And additionally, who are very open to sharing their hard earned knowledge here. I expect the art of scaling will be more common knowledge as the Unicorn startup count increases as it has in the last few years.