Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies

by Reid Hoffman

First, try to establish a standard. One of the classic Silicon Valley plays is to move from an app to a platform so that you can attract people to build on and to your platform (thereby leveraging the network effect of compatibility). Salesforce.com’s Force.com ecosystem is a great example of this. By offering the ability to build third-party applications on top of the Salesforce platform, Salesforce benefits from a “force multiplier.” There are over 2,800 apps on the Salesforce AppExchange, and an International Data Corporation (IDC) study showed that the Salesforce ecosystem generates 2.8 times the revenues of Salesforce.com itself. That means that while Salesforce.com has revenues of “only” $8.4 billion, its platform gives it the economic impact of a $32 billion company.

It’s not that you should strive to produce a bad product. Rather, if you need to choose between getting to market quickly with an imperfect product or getting to market slowly with a “perfect” product, choose the imperfect product nearly every time. Getting to market fast allows you to start getting the feedback you need to improve it.

Having “extra” capital gives you a cushion for when outcomes do not in fact follow your plan. Moreover, it increases your optionality—if you need to invest in growth, you can do much more without having to go through the time-consuming process of raising another round. As Mariam Naficy, CEO of Minted, told me, “Act like you’ve got half the amount you have in the bank because you’ve got to factor in all the failures and all the optimizations that kill great entrepreneurs and businesses all the time. Both of us know so many people who had good ideas and were on the right track, but just ran out of money.” At both PayPal and LinkedIn, we raised large financing rounds right before a market meltdown (2000, 2008), and we sure were glad we did. In the case of PayPal, that money allowed us to keep growing during the dot-com bust; without it, we wouldn’t have made it to our IPO. In the case of LinkedIn, the situation wasn’t as dire, but I realized that the value of the optionality from additional funding far outweighed the potential negatives of equity dilution.

Brian Chesky of Airbnb defines culture in a simple and concise way: “a shared way of doing things.” Clearly defining the way an organization does things matters, because blitzscaling requires aggressive, focused action, and unclear, hazy cultures get in the way of actually implementing strategy. Netflix cofounder and CEO Reed Hastings told me, “Weak cultures are diffuse; people act differently, and don’t understand each other, and it becomes political.” Mark Zuckerberg and Sheryl Sandberg have done many wonderful things at Facebook, and one of them is building a unified culture that is devoted to aggressive experimentation and data-driven decision making, as summarized by Mark’s original motto “Move fast and break things.” Facebook’s culture helps employees understand that they shouldn’t be afraid to try things that might fail. This allows Facebook to move faster, and to move on from failed experiments quickly. Imagine if someone asked a random employee from your start-up the following questions: What is your organization trying to do? How are you trying to achieve those goals? What acceptable risks are you incurring to achieve those goals more quickly? When you have to trade off certain values, which ones take priority? What kind of behavior do you hire, promote, or fire for?

Culture is critical because it influences how people act in the absence of specific directives and rules, or when those rules reach their breaking point. In a notorious example from 2017, acting at the request of United Airlines, Chicago Department of Aviation employees forcibly dragged passenger David Dao off an overbooked flight, breaking his nose, knocking out two of his teeth, and giving him a significant concussion in the process. The next morning, United CEO Oscar Munoz sent a rather perplexing e-mail to United Airlines employees.

The David Dao incident is a classic example of how a poor articulation of company values can weaken the culture. The employees on the ground believed they needed to bump passengers from the flight so that United could get another flight crew to their plane (i.e., “flying right”) and that meeting metrics such as on-time departures and flight cancellations was more important than treating customers with “respect and dignity” (which most of us would agree does not include breaking their noses and knocking out their teeth). In contrast, Southwest Airlines is not only clear about its company values but makes them the emphasis of hiring and management. The mentality isn’t: “We’ll know it when we see it.” Instead, it is: “Does this person already live the way we do?” The company uses behavioral interview questions to determine whether candidates are a cultural fit. For example, to determine someone’s ability to be a selfless team player, they might ask her to describe a time when she went above and beyond to help a coworker succeed. The airline acknowledges that certain positions call for specific skill sets. As Southwest puts it, “We’re not going to hire a pilot who has a great attitude but can’t fly a plane!” But, when it comes down to two equally qualified candidates, the one who lives Southwest’s values receives the offer. And, even when Southwest finds a qualified candidate who doesn’t have the right values, it will keep looking until it finds someone who does—no matter how ...

Brian Chesky sends to all Airbnb employees is a powerful one. “You have to continue to repeat things” Brian told our class at Stanford. “Culture is about repeating, over and over again, the things that really matter for your company.” Airbnb reinforces these verbal messages with visual impact as well. Brian hired an artist from Pixar to create a storyboard of the entire experience of an Airbnb guest, from start to finish, emphasizing the customer-centered design thinking that is a hallmark of its culture. Even Airbnb conference rooms tell a story; each one is a replica of a room that’s available for rent on the service. Every time Airbnb team members hold a meeting in one of those rooms, they are reminded of how guests feel when they stay there. At Amazon, Jeff Bezos famously bans PowerPoint decks and insists on written memos, which are read in silence at the beginning of each meeting. This memo policy is one of the ways that Amazon encourages a culture of truth telling. Memos have to be specific and comprehensive, and those who read the memos have to respond in kind rather than simply sit through some broad bullet points on a PowerPoint deck and nod vague agreement. Bezos believes that memos encourage smarter questions and deeper thinking. Plus, because they’re self-contained (rather than requiring a person to present a deck), they are more easily distributed and consumed by a wider population within Amazon. The late Steve Jobs used architecture as a core part of his deli...

Build a “Ship of Theseus” The other main lever for cultural development is the organization’s people management practices. After all, the strongest influences on organizational culture are often who you hire, promote, and fire. When he visited our Blitzscaling class at Stanford, Eric Schmidt shared how Google’s hiring strategy shaped its culture. “The people that you hire make your culture,” Eric said. “We’d hire people who were special in some way. You don’t hire generic people—you hire people who have had stress and achievement.” Culture is a key part of the hiring process at Airbnb too. Each candidate also goes through a values interview, conducted by an Airbnb employee who isn’t that candidate’s hiring manager. This ensures that values are considered independently of how much the organization needs that candidate’s particular job skills. When the business is growing that quickly, it’s usually desperate for bodies, and it can be tempting to simply pay whatever is necessary to get employees through the door. The problem is that you end up hiring mercenaries rather than missionaries. And if you’re tripling the company’s size each year, you can shift your company from a majority-missionary culture to a majority-mercenary culture in a single year.

In Lewis Carroll’s classic book Through the Looking-Glass, the Red Queen tells Alice, “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” Sometimes blitzscaling a company might feel a bit like running as hard as you can simply to end up in the same place. But the difference between our world and the Red Queen’s is that blitzscaling is a race to build things that make the world a better place. Whether your new market will be machine learning, or a new kind of wireless computing, or something that hasn’t been invented yet, there’s a word for the by-product of blitzscaling: “progress.”

In 2008, Barack Obama won the presidency in part because his campaign was the first to leverage the distribution possibilities of the Internet, including leveraging existing grassroots networks and achieving virality via social media.

Sal Khan’s Khan Academy began when Sal started tutoring one of his young cousins over the Internet. When other cousins started signing up, he decided to post his lectures on YouTube so that anyone in the world could use them. The critical decision to leverage the YouTube platform meant that Khan Academy had both an enormous market (anyone who could access YouTube, which is to say, most of humanity) and a powerful distribution platform (anyone searching for educational content on YouTube was likely to run across Khan Academy). As the Khan Academy gained a massive user base, it began to benefit from both indirect and standard-based network effects. Educators began incorporating Khan Academy videos into their official curriculum, and creating lesson plans that they shared with other educators. Today, the Khan Academy is used by 40 million students and 2 million educators every month

These ties will likely get even closer if the cities are connected via additional transportation links like high-speed rail or Elon’s proposed Hyperloop, or with the advent of self-driving cars, all of which would make travel and commuting between these cities and Silicon Valley faster and cheaper. Thus, LA and Seattle are becoming increasingly fertile grounds for entrepreneurship, and good places to set up a company that you are planning on blitzscaling. It will be interesting to see if Amazon’s HQ2 project to set up a second headquarters (Amazon intends to spend $5 billion to construct a new corporate campus that will accommodate fifty thousand employees) ends up expanding “Greater Silicon Valley” even further (and farther). Moody’s picked Austin as the most likely city to be chosen, while the New York Times believed Denver to have a good chance. Either would be a logical expansion point, given the long-standing pattern of migration from Silicon Valley to Colorado, and the “nerd bird” flights that Southwest operates between San Jose and Austin.

According to research at Wharton, Stockholm actually produces the second highest number of billion-dollar “unicorn” start-ups after Silicon Valley itself. Around 65 percent of working-age (eighteen to sixty-four years old) Swedish adults think there are good opportunities to start a company in Sweden, compared with 47 percent of working-age Americans. For example, Stockholm’s streaming music giant, Spotify, has a record of blitzscaling that most Silicon Valley unicorns would envy. Spotify’s cofounders, Daniel Ek and Martin Lorentzon, are both serial entrepreneurs with prior blitzscaling experience—Ek was the CTO of Stardoll, while Lorentzon cofounded Tradedoubler. Spotify uses the proven freemium business model, offering a basic free service and encouraging users to subscribe for higher-quality audio and zero ads. Since its launch in 2008, Spotify has pursued a course of extremely aggressive investment, raising over $2.5 billion in funding from Silicon Valley VCs, such as Founders Fund, Accel, and Kleiner Perkins Caufield & Byers, as well as global investors with scale experience, such as Li Ka-shing’s Horizons and Yuri Milner’s Digital Sky Technologies (DST), while growing from one million paying subscribers in 2011 to sixty million paying subscribers in 2017. It’s worth noting that despite their success in Stockholm, in 2016 Ek and Lorentzon began to fear that policies like restrictive and expensive housing regulations for immigrants and heavy taxation of stock options c...

All these new ecosystems around the globe represent interesting and potentially differentiated opportunities, much like China fifteen years ago or Silicon Valley twenty-five years ago. Boston has won a leadership position in health, for example, because of its world-class hospitals and universities, while New York is the leader in fashion-related businesses like Rent the Runway and Birchbox. Countries like Estonia have made their dependence on international markets a strength; Skype (founded by Estonian programmers Priit Kasesalu and Jaan Tallinn) wasn’t likely to have started in the United States because international phone calls simply weren’t as important to the US consumer.

When I interviewed him for my Masters of Scale podcast, Andrew Ng, a professor at Stanford who cofounded Coursera and led major machine learning efforts at Google and Baidu (China’s leading search engine), told me that when he was at Baidu, he once had an HR question come up while he was at dinner. He texted his HR lead at 7 p.m.; she texted her team for input, and by 7:30, Andrew had his answer. “If she had taken longer than an hour to respond,” Andrew said, “I would have gotten worried.” That kind of rapid decision making might make many feel uncomfortable, but by consistently making quick decisions, Chinese entrepreneurs become comfortable with the discomfort and uncertainty, allowing them to move even faster. Another advantage comes from China’s massive talent pool. The sheer abundance of human capital allows companies in China to scale their organizations more quickly, including opening multiple offices in multiple cities. China also has a thing or two to teach Silicon Valley about tapping the entire talent pool. For example, China has proven an amazing environment for women entrepreneurs. Of the seventy-three women in the world who are self-made billionaires, forty-nine (over two-thirds!) live in China. Eight of the ten wealthiest self-made women in the world are Chinese. Finally, China’s relatively recent rise into its status as an industrial power means that more of its industries are still nascent and thus up for grabs. Where Silicon Valley might have cornered the...

In its battle against Amazon, Walmart spent $3.3 billion to acquire Jet.com, a high price for a thirteen-month-old start-up (the price represented a revenue multiple double that of Amazon’s already-rich valuation). The two companies have already experienced some culture clash moments, such as when Walmart asked Jet to stop holding its regular office happy hours, stocking bottles of liquor in the office kitchen, and allowing employees to drink at their desks. According to a 2017 Wall Street Journal article, Jet executives complained, and Walmart allowed Jet to revive its office happy hours. On the other hand, Walmart’s e-commerce sales got a big boost from the acquisition, and Jet has allowed Walmart to appeal to urban millennials—a key demographic that has typically shunned Walmart’s traditional stores. Blitzscaling is risky, but so is doing nothing if a competitor seems likely to succeed in scaling up.

Skeptics might argue that the kind of scale that blitzscaling produces is inherently bad, and that society should simply prevent companies from growing too big. Testifying before Congress in 1911, future Supreme Court justice Louis Brandeis argued, “I think we are in a position, after the experience of the last twenty years, to state two things: In the first place, that a corporation may well be too large to be the most efficient instrument of production and of distribution, and, in the second place, whether it has exceeded the point of greatest economic efficiency or not, it may be too large to be tolerated among the people who desire to be free.” We disagree with this position on the harmfulness of scale in today’s world. First, Brandeis was speaking during the era of “trusts,” when figures like J. P. Morgan consolidated American industry into powerful, giant companies like U.S. Steel. But we believe that today’s blitzscalers are qualitatively different than Gilded Age trusts. Those trusts held virtual monopolies over the supply of key physical resources like steel and oil. Consumers had no alternatives and were forced to do business with them. In contrast, companies like Apple and Amazon have to win their customers every day, and if they fail to do so, those consumers can simply buy Dell laptops and order books from Barnes & Noble. Second, we believe that while big can sometimes be bad, big can also be great. Scale creates dominant companies, but scale also creates enor...

On the other hand, there are technologies emerging from blitzscaling companies that could pose real, systemic problems (yet get far less media attention). Synthetic biology, driven by CRISPR-Cas9 targeted genome editing, has the potential to produce huge benefits in medicine and agribusiness, but brings with it the systemic risk of bad actors engineering a deadly global pandemic. Changes and developments in this field have occurred so quickly that it is difficult for governments to create intelligent regulatory regimes to manage these risks. Responsible

Blitzscaling also improves social mobility. Compared with a child born to parents in Detroit’s poorest 20 percent, a child born to parents in San Francisco’s poorest 20 percent has double the chance of ending up in the richest 20 percent as an adult. We believe that blitzscaling can bring that kind of economic miracle to other areas of the world, and that educated blitzscalers will be more likely to fulfill their ethical obligations to strive for positive societal impact. Consider, for example, the