In the early days of a startup, there’s tremendous latitude to change your mind. Your goal isn’t to launch the perfect startup—it’s to learn what startup to launch. You value learning over execution. Each release shows you can overcome the biggest risk your company faces; then you can discover the next one.
To do this, every startup needs four roles (though it may not have four founders.)
- The hacker builds things, while knowingly incurring technical debt because speed and learning are the priority at this stage.
- The hustler creates buzz—with investors, customers, the media, or partners. She knows that at this stage, contracts are flexible and customers are worth far more than the revenue they bring in.
- The designer owns every facet of customer interaction, from branding to website to app design to the subject line on emails.
- The analyst keeps the other three honest (something I argued a few years back was missing from the other three roles.)
If you’re a single startup founder, you need to devote time to all four of these roles. Discover and overcome enough risks, however, and you find the right product for the right market. This is the realm of product-market fit.
As VC wisdom goes, this is when the market pulls product out of the startup. At that point, the organization switches from searching—constant discovery and iteration—to execution. You can’t play with customers any more. They rely on you.
All great startups go through this cycle, from a founding idea, to market confirmation, to business scaling.
And growth is everything, at that point. You’re small enough that big incumbents can step on your oxygen hose, cutting off your revenues through deep discounting and market shenanigans. Yet you’re too big to change easily any more, and doing so robs your customers of confidence. You need to scale, and scale fast.
The three machines
Brad Feld says startups have three “machines” that run their business. The customer machine finds and acquires buyers. The product machine builds and delivers what customers pay for. And the company machine handles the organization itself, from recruiting to treasury to compensation to governance.
The role of a scale-stage CEO is to marshall the resources of these three machines, balancing them while emphasizing the right one under shifting market conditions. Most CEOs have an initial focus on product, sales, or finance that corresponds to one of these three machines, and knowing which you are—and how to mitigate that myopia by surrounding yourself with a team that complements you—is key to success.
But scale-stage executives face another obstacle: They’re poorly shod.
Photo by Dmitrij Paskevic on Unsplash.
The shoemaker’s children
In the old tale of the shoemaker’s children, it’s the cobbler’s kids who lack decent footwear. The same principle is true for scale-stage companies. They advocate new, better ways of doing things. But they seldom heed their own advice. They’re so focused on delivering new things to clients, they fail to disrupt themselves with technologies and processes that might otherwise give them the upper hand.
The best startups—the ones you know by name—overcome this. What separates them from the rest of the scale-stage landscape is an ability to work on, as well as in, the business. Their leaders embrace emerging technologies, recognizing them as key to sustaining innovation while delivering the predictability their clients demand. This helps such companies hit escape velocity, becoming market incumbents themselves.
Georgian Partners is one of the largest VC firms in Canada, with the bulk of its investments in the US. I like the team there a lot: They’re seasoned operators who’ve built and sold companies themselves. And they reinvest a substantial portion of their carry into an Impact Team, which deploys critical technologies like differential privacy into their portfolio of companies.
Last year, Georgian asked me to organize a day-long, invite-only, Chatham-House-rules conference for the executives of their scale-stage portfolio. We invited a handful of prominent founders and aspiring executives from the startup community in Canada and beyond. The result was amazing: Candid conversations with the people behind some of the most important technologies and leading tech firms in the world.
One of the panels and debates we hosted alongside content last year.
Scaletech, as the conference is now known, lets scale-stage executives speak candidly with their peers about the unique challenges of scale-stage growth: Balancing company, customer, and product; adopting the latest technologies without being distracted by shiny new toys; and working on, as well as in, the company.
Most of the attendees are invited directly, through a network of VC firms who believe that this kind of learning and networking will maximize the growth of their investments. Nearly all of them lead companies generating over $500K a month in revenues, with rapid growth in customers, employees, and revenues.
We know that not every founder fits that definition of “scale” cleanly, and we recognize that great companies come in many shapes and sizes. So we make a few tickets available to aspiring near-scale-stage startup founders, and include a dozen corporate participants who lead innovation in their organizations.