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

by Elad Gil

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.

The problem with network effects is they unwind just as fast. And so they’re great while they last, but when they reverse, they reverse viciously.

You basically want to have autonomous teams, where each team is guaranteed to have a great product person and a great architect. And that’s the model.

This means once a year you should take a real one- to two-week vacation, and every quarter you should take a three-day weekend.

One thing I’ve observed is that you can’t make too many things at a company mandatory. You really have to be judicious about the things that you’re going to require, because there just can’t be that many.

One thing I’ve been talking a lot about with our engineering team is that usually your company’s plans and incentives and metrics structures aren’t built to stop things, or to stop and redo things. So if there is a need to pay down some technical debt or make a really hard call on stopping a project, you need a leadership voice, or even a CEO, to say, “Hey, we’re just not doing this anymore.” Because the org is always oriented toward making it work. I think decisions to stop or to retrench or to rebuild usually have to come from a leader if not a leadership team.

Do they try to do what is right for the company even if it is not in their own best interest?

Are they first principles thinkers? Can they apply their expertise in knowledge in the context of your company, team, and product? Or do they just try to implement exactly what they did in their last role?

Does this person have a pool of amazing people that will want to join a company? Can they immediately upgrade the entire talent of the organization because they’re so talented that other smart people really want to work with them?

“If this person joined my company, would you join?”

Elad: How do you think about seniority of the team versus scaling or functional debt accruing? Mariam: This is really important, and I think what it says is that perhaps the first place to really scale, and I mean scale to senior level, is engineering. You should never start with the cheap solution of building a whole team of young engineers. Whereas there are other functions where you can potentially get away with it.

“What’s working well? How do you think you could accelerate the company’s efforts? And what are the one or two priorities you think need to be addressed immediately?”

While your company should be focused on diversity of background, ethnicity, gender, class, and other attributes in employees, it should also look for cohesion in purpose, intent, and baseline culture.

Where are outcomes undesirable or insufficient because of deficiencies in the degree to which people are following the culture, and where are they deficient because of what the culture itself is? Is it the implementation or is it the spec?

Patrick: I think the macro thing to bear in mind with a lot of culture stuff is that a rapidly scaling human organization is an unnatural thing.

I think there are five top responsibilities of a CEO: being the steward of and final arbiter of the senior management; being the chief strategist; being the primary external face for the company, at least in the early days; almost certainly being the chief product officer, although that can change when you’re bigger; and then taking responsibility and accountability for culture.

Since focusing on product is what caused initial success, founders of breakout companies often think product development is their primary competency and asset. In reality, the distribution channel and customer base derived from their first product is now one of the biggest go-forward advantages and differentiators the company has.

When a founder has a multi-billion-dollar valuation two challenges arise: (1) the founder may push unsustainable growth at all costs to hit the valuation and (2) a lot of distractions arise that may not help the business (e.g., press, speaking opportunities, investments, etc.).

(in some cases having no restrictions at all on early employees, not even a ROFR—Fenwick & West is notorious for leaving this out of their standard docs).

So I think you should hire extremely slowly. Hire only after there’s a burning need for that person. I think you have to be ruthless about firing and trimming the ranks. And I know that’s not popular—I know people don’t like that model—but it’s worked well for me and for us. The founder just has to keep a very, very tight eye on waste. And there’s always waste.

There is an optimal growth rate that is unique to each company. It depends on the physics of the operations: What is the pace of hiring that’s required to service their initial customer versus expanding to the next market segment? How complex are the logistics in delivering the services? What is the capital intensity required to diversify? Those questions start to become paramount in figuring out a growth plan that makes sense. Good founders have done it. They’ve remained fiscally prudent. But a lot of companies have tried to do too much and diversify too much because lot of capital was available for cheap, but then they often had had difficulty raising money or growing into their valuations because they just couldn’t maintain focus on the unit economics.