High Growth Handbook: Scaling Startups From 10 to 10,000 People

by Elad Gil

Once there’s product/market fit, then the main thing becomes taking the market—which is to say, figuring out how to get the product to the entire market, how to get dominant market share; because most tech markets tend to end up with one company with most of the market share.

Number two is getting to the next product. We are in a product cycle business. Which is to say that every product in tech becomes obsolete, and they become obsolete pretty quickly.

In fact, the general model for successful tech companies, contrary to myth and legend, is that they become distribution-centric rather than product-centric. They become a distribution channel, so they can get to the world. And then they put many new products through that distribution channel.

But then the third thing you need to do is what I call “everything else,” which is building the company around the product and the distribution engine. That means becoming competent at finance, HR, legal, marketing, PR, investor relations, and recruiting.

If you don’t start layering in HR once you’ve passed 50 people on your way to 150, something is going to go badly wrong.

The problem is, the early adopters are only ever a small percentage of the overall market. And so a lot of founders, especially technical ones, will convince themselves that the rest of the market behaves like the early adopters, which is to say that the customers will find them. And that’s just not true.

I am shocked by the absence of M&A relative to what I would expect in the environment. And I would say there’s no question that the big new tech incumbents are not buying enough stuff just on the math. I think it’s just kind of obvious. In the old days, their predecessor companies were far more aggressive at building up their positions for M&A.

Talking his book?

As far as defensibility, I think you construct defensibility through some combination of product innovation and distribution building.

The problem with that is true defensibility purely at the product level is really rare in the Valley, because there are a lot of really good engineers. And there are new ones every day, whether they’re coming out of Stanford or coming in from other countries or whatever. And then there’s the issue of leap-frogging. The next team has the opportunity to learn from what you did and then build something better.

At some point, whoever has the distribution engine and gets 100% of the market, at some point that engine itself is a moat.

First of all, raising prices is a great way to flesh out whether you actually do have a moat. If you do have a moat, the customers will still buy,

companies that charge more can better fund both their distribution efforts and their ongoing R&D efforts. Charging more is a key lever to be able to grow.

Network effects can create a very strong position, for obvious reasons. But in another sense, it’s a very weak position to be in. Because if it cracks, you just unravel.

I would take more of a micro-view of it. Which is: Okay, how many great product pickers do you have, people who can actually conceptualize new products? And then how many great architects do you have, who can actually build it?

I generally think matrixed is death, so I’m always pushing companies to go to a flat structure of independent teams. I’m really on the Jeff Bezos program on that, the two-pizza team thing.2 I think hierarchies kill innovation

When in doubt, force yourself to delegate. You can even set a weekly goal for the number or percentage of meetings you stop attending or items you start delegating.

It may be painful, but to scale your organization and move ahead as CEO you will likely need to let go of certain parts of your prior roles that you enjoyed or thought were important.

If you end up working long hours on things you fundamentally couldn’t care less about, you should consider hiring one or more executives (or a COO) to do all those things on behalf of the company.