Something painful happens when your startup hits a headcount of about 150.
By this point, you’ve figured out exactly what pain point your product solves and how it adds value. You’ve proven you have a viable revenue model and the potential to scale. You’ve attracted solid investors, talented employees, and early adopters who believe in your vision. Now’s the time to hit the accelerator and push your baby up the exponential growth curve. This often coincides with a Series C investment.
But just as you have enough funds to really scale, suddenly everything that worked before in terms of how you and your team get stuff done… stops working. What’s going on?
The Series C Clusterf*!k
Series C is often an inflection point: you have a stable product and processes, and you just need to grow really fast to hit your projections. But to do that, you need to scale your people organization, and if you haven’t been planning for it, a load of challenges all hit you at the same time: upskilling and scaling your talent acquisition team, strengthening your employer brand, hiring and integrating new senior execs, rejigging some of the founders’ roles, training a load of people to be first-time managers, upgrading your HR systems… all these things take time, and they’re all interdependent.
Meanwhile, your people increasingly complain that it’s hard to get stuff done, especially across functions. As the company grows, the old method of “I’ll just get Rasheena to do it — she knows how to get sh*t done” stops working. Why? Because every change involves more people, and increasingly these people don’t know each other, trust each other, or understand how the company works.
Why does this happen so consistently? And more importantly, how can you avoid it?
The 4 ingredients of a successful startup
To answer the first question, we have to rewind for a minute. What does it take for a startup to be successful? The answer is four things:
- A compelling product. Without a great product and a strong product-market fit, there’s nothing to build a business on.
- A viable revenue model. You have to have solid unit economics and a sizable addressable market. Otherwise, it’s just a hobby.
- Sufficient capital. Cash fuels growth. The amount of money being raised by startups has increased dramatically in recent years, so without ample cash it’s tough to remain competitive.
- A high-performance organization. As you grow from a handful to hundreds and beyond, you have to find a way to build an organization that gets stuff done, scales, and still has a great culture that attracts and retains top talent.
The reality is that most founders only focus on the first three for the first few years. And this makes sense. If you fail on any of the first three, you won’t get big enough for number 4 to matter, and there’s always time to work on the organization later, right? The result is that it’s easy to ignore this until it’s way too late — and the more successful your company is, the sooner that pain point is going to hit you. Then you’re in the Series C clusterf*!k, and building the high-performance organization you need is a seriously uphill battle.
Here’s what you should do instead.
Don’t wait until it’s too late
The best time to build a high-performance organization is before you need it. Here are four things you can do as you grow from Seed to Series B that will help you avoid a breakdown later on.
1) Create an organizational roadmap
Every startup has a product roadmap that looks one or two years out, as well as a two or even five-year strategic plan, but hardly any think ahead about the people, capabilities, and org they’ll need to execute those plans. When org needs are left until the last minute, the inevitable result is that the organization lags behind the needs of the business. The faster the business is scaling, the bigger the gap becomes. As your growth accelerates, your people organization drags you backwards instead of pulling you forward.
By way of analogy: an executive at a unicorn SaaS startup recently lamented to me that at all the SaaS companies he’d worked for, the tech platform always seemed to be exactly what the business needed two years ago. “For once,” he said, “I’d like it to have a platform that is what we’ll need next year.”
If you want your org to drive progress instead of slowing it down, design it for your future needs now. Think about what your org will need to look like in a year or two and then work backwards — you’ll almost certainly find that you need to begin hiring key people and making other changes much sooner than you thought.
2) Create a playbook for building high-performance teams
In the early days, there’s really only one team that matters: the CEO and her direct reports. As you grow, though, the number of mission-critical teams multiplies. Inevitably, some perform better than others, but when there are only a few, you can coach the poorer performers on a case-by-case basis. But soon you’ll have ten, then 15, then 20 critical teams. The sooner you figure out and codify how your company can reliably build high-performance teams, the better off you’ll be. Take the time to investigate the highest-performing teams and study their ways of working. Check out the struggling teams and find out what’s tripping them up. Maybe even hire a high-performance team coach and have them help you develop your team playbook.
3) Nurture a culture of collaboration
When your company is six people sharing a pizza, cross-functional collaboration is as natural as breathing, so no one puts any conscious effort into enabling it. Even when you have fifty people, the functional leaders all fit around one table, know each other well, and have a thorough grasp of what’s happening on the ground, so they can make cross-functional change happen. But as you reach 150 people, this process gets a lot messier. Now you have team leaders and individual contributors working `with folks they barely know. Each department has developed an identity of its own, and it’s inevitable that newcomers develop their primary allegiance with their team or department rather than the company. As your organization grows , the number of cross-functional collaborations that need to take place explodes exponentially, and most folks find it difficult to solve these challenges on their own. At a certain point, cross-functional collaboration stops happening naturally — but as CEO, you’ll be the last to know about it.
So, you need to create a culture of collaboration early. It takes more than cheerleading to make this happen. It takes time, focus, tools, training, and measurement. And it’s not a ‘one and done’ job — it’s a forever job, and ultimately it’s at the core of a successful culture.
4) Train your newly minted managers
A rapidly growing scale-up is a machine for manufacturing new managers, so you better make sure yours aren’t defective. As you grow from your initial team to 150 people, a huge number of individual contributors will end up becoming managers. It’s inevitable. You hire five new UX specialists, and someone has to manage them, so your most experienced UX engineer is the logical choice. However, chances are he doesn’t know much about managing people.
At this stage, your team leads and mid-level managers don’t have to be amazing — that would be asking a lot. They just have to be good enough to embody the company culture at a basic level and not drive people out of the organization. But this won’t happen with wishful thinking. It takes training, coaching, and measurement, and the earlier you implement a solid program for new managers, the more prepared your org will be to tackle the challenges of scaling up.
The fourth ingredient of a successful startup — a high-performance organization — might seem like the least important or sexy of them all. It doesn’t make headlines, investors rarely ask about it, and it comes into focus last, so most founders anchor their focus on the first three. But when it’s time to really rev that growth engine, ingredient number four is the one that will either propel or derail your efforts. Ignore it too long and you set yourself up for serious growing pains.
To surge past that 150-mark without losing steam, start building your high-performance organization before you need it.