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

by Elad Gil

“If you don’t keep innovating—your product will go stale. And somebody will come out with a better product and displace you.” —Marc Andreessen

One of the things that’s most frustrating for a startup is that it will sometimes have a better product but get beaten by a company that has a better distribution channel.

Cisco is one of the great case studies in the Valley. It’s a very successful, very big, very established company, and a very large percentage of that has been M&A. And then obviously Google. Probably an under-told part of the Google story is how M&A built Google. People, I think, don’t even necessarily remember the number of things that Google bought that turned into what you think of today as Google-originated products.

One interesting question I have is: Would you rather have another two years’ lead on product, or a two years’ lead on having a state-of-the-art growth effort? I think the answer for a lot of consumer products is actually that you’d rather have the growth effort.

What I’ve always found is this: give me a great product picker and a great architect, and I’ll give you a great product. But if I don’t have a great product manager, a great product originator—it used to be called a product picker—and I don’t have a great architect, I’m not going to get a great product.

The CEO: Sets the overall direction and strategy of the company and communicates this direction regularly to employees, customers, investors, etc. Hires, trains, and allocates company employees against this overall direction while maintaining company culture. Raises and/or allocates capital against this overall direction. Acts as chief psychologist of the company. Founders are often surprised by the extent to which people and organizational issues start to dominate their time.

If your involvement is not uniquely crucial to the success of a task, or an item is not core to your personal life, you should figure out how to off-load it.

Urs Holzle, who was an early SVP at Google, literally wrote, “A Guide To Urs” about the interaction approaches that work best for him. So if you needed to interact with him or you wanted things from him, you knew what to do.

“I think that founders should write a guide to working with them.” —Claire Hughes Johnson

Getting your organization used to the fact that it’s an iterative process and that you’re a learning organism and actually celebrating that is much better than resisting.

Claire: I think adopting some planning framework early will serve a company well. I was giving a talk recently at a startup, and they asked what operating processes I thought should be in place when. I told them that I’m not going to tell you which operating processes you should put in place. But I will tell you that you need them, and you need them sooner than you realize.

That’s my view: you need planning structures earlier than you think, and they should proceed all the way from the top down.

“You need to codify a set of principles and behaviors and then cohere to them, culturally.” —Claire Hughes Johnson

Once you have assets, then the game is different. What’s the balance between managing the asset and not decreasing value versus deploying the asset, potentially at catastrophic risk, to get something better? That balance begins to shift.

People with that much commitment are also willing to take more risks. Because all startups, they go through “valley of the shadow” moments, where everyone’s saying, “Oh, that’s really screwed up, that’s in a bad space, that’s really dumb.” Does this person say, “Well, hey, it wasn’t my idea?” That’s a professional manager. A founder goes, “No, I know I can make this work. I’m going to make it work. I’m going to take the extra risk, the extra difficulty, the sweat, the criticism. I’m going to play it through.” So those are the traits that you need.

“The reason you’re hiring a new CEO is there are new skill sets that are critically important. But if someone doesn’t have the founder’s mindset, they’ll be fundamentally, at best, in asset management.” —Reid Hoffman

“Every experienced board member will tell you that they favor private company boards of five or six people or less.” —Naval Ravikant

Every company I have ever worked for, or with, has realized that one of the biggest determinants of candidate conversion is how quickly you interview them and how quickly you can make an offer.

Getting too rich. Due to secondary stock sales and tender offers it is possible to partially cash out. Some employees may suddenly be liquid to the tune of tens of millions of dollars and get distracted by travel, buying houses and cars, or other issues.

But really the only universal job description of CEO is making sure the company wins. And so deciding what the company is going to do and making sure the company gets that done—that’s the most critical part of the job.

“One of the things you should always ask is, ‘If this person joined my company, would you join?’” —Keith Rabois

“The people who are thriving—at any level, junior to senior—tend to have people approaching their desk all the time.” —Keith Rabois

Many technical or product-focused founders want to (and should) remain focused on the product and overall market strategy. In parallel, the COO would build out and manage areas that the founders lack interest or experience in, or simply don’t have the bandwidth to oversee.

“You want someone who will come in to complement, operationalize, and execute your vision as a founder.” —Elad Gil

If you as the CEO are uniquely strong in a couple of areas, and you want to supplement or complement those areas—if you need to fill the gaps—consider a COO.

Add the COO role when the rate of change is reaching some kind of escape velocity.

“There’s another dimension which really significantly affects scaling, and that’s the differentiation or complexity of the business.” —Mariam Naficy

Elad: That’s a great framework for senior versus junior hires. It’s okay to hire junior people for areas where it’s clearly visible to the CEO if it’s working. And any area where it’s hard to understand things quickly and easily, then you should always have senior hires. I think you should call that the Naficy framework.

Most of the time there is no “right” answer and org structure is really an exercise in pragmatism. That is, what is the right structure given the talent available to your company, the set of initiatives you need to pursue, and your company’s 12- to 18-month time horizon?

Reporting chains are ultimately about decision-making. For example, there is a natural tension between engineering and product management, so where do you want most decisions to be taken if the two groups disagree?

As the company scales and increases in complexity you will also need to change the organizational structure of the company to reflect new executives, new functions, more employees, and changing alignment against your market and product. In other words, re-orgs will occur at the company frequently.

“Eventually, your executive team will start to stabilize but the teams under them will have more frequent re-orgs as each organization ramps in size.” —Elad Gil

Re-orgs should never be open conversations with the whole company (or a functional area) about what form the new organization structure should take. This only opens you up to lobbying, internal politicking, and land grabbing. It also prolongs the angst—re-orgs should happen swiftly and with as little churn as possible.