Jason Goldberg: The .3% of start-ups who made it did this one thing right
By Jason Goldberg | Founder of 10X-e; Founding director of Edge Growth; Head of Vumela Fund
The start of no man’s land
Two years ago, Bruce felt exhilarated: like a cheetah at full tilt on the wide African savanna. At 30, he was heading up a successful business. From the first client pitch, they’d steadily conquered each new peak (albeit with blood and sweat). He’d secured an angel investment followed by two follow on rounds from strong local VCs. Before long they had a killer product and customers were flocking to the proverbial door. Users were growing exponentially, they were monetising, and not far from a zero cash burn rate. He and his business were the flavour of the day in several popular tech blogs. He was basking in that space between the great accomplishments that lay behind and the great heights that lay ahead. He’d made it this far, surely nothing could stop him now!
Having sprinted flat out for four years, he was ready to settle into a slightly more manageable pace. But instead, things were accelerating. To Bruce, it felt like his business was getting away from him despite its amazing success. It was becoming a never-ending sprint to a finish line that kept getting further away. Every day was a sprint. Every day he got further behind. He was barely keeping things together and the effort to stay on top was becoming exhausting!
Elite start-ups can also fail
Even more worrying was the fact that he had seen this exact pattern before. A good friend, Andrew, had started down the same path a few years before Bruce. Epic start. A product customers loved. Solid growth. Great PR coverage. Etc… But for Andrew, things did not turn out so well. Growth just got away from them. Things got a bit crazy, then a lot crazy, then spun out of control.
The business ran out of money. He then had to raise emergency funding, scale back, and rebuild. To top it all, his personal life fell apart due to the hours and stress. He burnt out, got divorced, and had to move house and figure out co-parenting with almost no time. Now the business is just kind of ticking along from a much smaller base. And Andrew is not even a majority shareholder any more after having to raise capital to turn the business around.
It feels like Bruce is reliving the early parts of Andrew’s movie, which is very worrying! How will he scale without going over the edge?
Confronting no man’s land
All too often, successful start-ups find themselves in no man’s land: too big to be small (no structure, no management, no process, etc.) and too small to be big (afford the overheads of a management team, time to implement good systems, etc.). A space where nothing seems to work, and everything seems to be hard.
In the last two years, something about Bruce’s business had changed. Going from one to 10 employees was easy; from 10 to 20 was tricky but ok; from 20 to 40 was hairy and now at 45 staff, things just feel out of control. Bruce could sense that the rules had changed (and maybe the game), but he didn’t quite know what or how to adjust. He knew that running his business the way he had always done wasn’t working, but he didn’t know how else to do it. He knew he had to break free from the cycle of continuously sprinting from fire to fire. He had to find out why they were burning in the first place. It felt like he needed new tools and skills to get his company to the promised land.
Bruce confronted the truth: ‘you can’t scale this mess; it will kill you. You have to get things working again’.
Ground zero: Shift the focus and adjust the team
Fortunately, the basics were solid. He knew the problem they solved and who they solved it for. He knew they were good at it – the best.
So why were they still spending most of their time hustling and adapting products for every new customer? Because that’s what this team does: hustle and experiment. That’s what they know how to do! They’re not wired to systematise and scale something that’s proven, and to build a business around that!
No more! Gone were the days of thousands of experiments. Execution was the new reality. 20% experimentation and 80% execution was the name of the game. He needed to shift from a collection of products, people and projects, to building a company that scaled what they are already great at (and only that).
He’d always known he could not do it alone, he’d prided himself on building an A-Team. And he had that. Had. He had some awesome people. But he also knew some of his senior team weren’t up to the job that lay ahead. Some were already holding the business back. It wasn’t a matter of loyalty or talent. Some of his former A-players just couldn’t take ownership of building their function for the future or building a scalable team. They were great doers and hackers, but not company builders! He would need to assemble a kickass team to take this company to the next level.
The first order of business was to compose a scalable management team. An A-team of leaders that could scale the businesses and dominate their core market.
The anatomy of a cracking scale-up leadership team
He knew that it was easy to underestimate the specialist functional and executive management skills needed to scale up. He’d always gone for versatile ‘swiss army knife’ types.
But he also knew from mentors and friends that the people part of scaling was tough to crack. He needed a team of people that could each juggle 20 (or 100) balls, put out several fires at a time, live with a few that just aren’t big enough to bother with, make judgment calls about how much ‘system’ is enough for now, and build that system themselves, with almost no money! He needed leaders ready to build and lead large teams and manage operations at scale – which most corporate managers are trained to do – and also roll up the sleeves and build a function from scratch, brick by brick, starting from nothing – which most corporate managers are useless at.
All his mentors had told him that getting these people in every key role was both the single most crucial and most difficult element of scaling up. Unlike big businesses or steady-state organisations, scale-ups can’t afford to carry anyone. Not one soul. You can’t even afford folks who get ‘good’ performance ratings in ‘normal’ businesses where good enough is good enough. You need people who punch above their weight and deliver awesomeness. You need ninjas.
The hiring challenge had changed from recruiting talented young generalists to seasoned specialists who can hustle and build from scratch, in the right roles, at the right time.
But they’re out there. He knew some people like that; and friends and investors knew others. This was doable.
Bruce no longer felt like he was drowning. Stormy seas? Sure. But with land ahead. And soon he would have the team to do the rowing.
Clarity on where he was (no man’s land) and what he needed to do (starting with building the scalable A-team) was liberating. He was still in the middle of it, and a lot of work lay ahead; but a huge weight had been lifted from his shoulders.
Bruce’s story is common in the scale-up landscape. Most elite start-ups follow this path into no man’s land. But not all make it out. Your choice? To keep grinding deeper into no man’s land – until there’s no turning back – or to work your way to the exit, by taking decisive action to escape its clutches. This choice is the difference between a slow, painful doom and a great legacy, between the fruit of failure and the sweet rewards of success. The realisation that ‘what got me here won’t get me there’ is the turning point that separates those who make it from those who don’t.