Scalability Secrets From One of America's Fastest-Growing Software Startups
In our increasingly interconnected world, where the rate of technology diffusion continues to rise, half of the world population had internet access at the end of 2017, reports Miniwatts Marketing Group.
Today, the internet is at the fingertips of a large portion of the globe, and that sea change in culture has created an influx of technology-focused startups. Many have the potential for quick growth, as evidenced by the perpetually compressed growth curve of new companies every year.
Consider, for instance, the example of Snap, which took less than two years to become a billion-dollar company. CB Insights provides a fascinating look at the meteoric rise of several such unicorns.
As a consequence of this growth trend, entrepreneurs entering the tech and tech-enabled startup space need to learn about scale much sooner than their predecessors typically did. On the negative side, many of these startups will also simply fail to scale -- CB Insights reported that 70 percent of funded startups die or flat-line.
What does it take to avoid your tech company's demise? Ask serial entrepreneur Gil Dudkiewicz, CEO and founder of the mobile advertising platform StartApp. The company grew from a modest $200,000 in revenue to $37.2 million in just a few years, landing the top spot on Crain’s Fast 50 list ,in 2015.
I had the opportunity to talk to Dudkiewicz about his approach to business. And, interestingly, he told me that grabbing the brass ring and scaling to the point where he could boast millions of monthly active users didn't happen because of a focus on sales or revenue; it happened, he claimed, because of his company culture.
If your startup doesn’t have a solid foundation, Dudkiewicz told me, good luck trying to grow.
DNA is the first really important factor for scaling your company.
When Dudkiewicz launched StartApp seven years ago, he said, his vision was incremental growth rather than quantum leaps. He was patient enough to allow his company to evolve over time, but he also took extensive steps to ensure a balanced team. “The thing that can’t change in a company is its DNA,” Dudkiewicz said. “We started with it, and we stuck with it.”
What went along with that balanced team, he said, was the right company culture. And, Dudkiewicz said, he set the tone for it by recruiting a 50-50 mix of men and women from diverse backgrounds and experiences. En route, he prioritized transparency and a mentality of caring by hiring people who would respect one another and exemplify company values.
Thanks to this careful planning, StartApp morphed from bronze to silver to gold without losing its integrity or structure.
Gil Dudkiewic's five recommended ingredients for scalability
1. Build your business around a growth market. If you’re starting a business, you likely have a solution in mind that you consider fascinating. If you aren’t checking, however, to ensure that that solution has a large enough total addressable market, you might become the next story included on CB Insights' list of startup failure post-mortems.
Spend time at the beginning of your entrepreneurial venture challenging yourself to explore the realistic market opportunities. Complete a market-size analysis to figure out whether the combination of your revenue model and market size makes mathematical sense. A solid litmus test is whether the company you envision could reach $100 million in annual recurring revenue within seven years.
If your plan doesn’t paint a pathway to that target, you might need to go back to the drawing board. A numbers gap doesn’t mean your idea is bad; but it does mean that you probably won’t be able to create the necessary returns to satisfy venture capitalists.
2. Stop micromanaging your people. It’s hard to admit, but you cannot grow a big business by yourself. Everyone might be able to do everything when you’re a team of four, but those close-knit days will be in the rear-view mirror once you have 100 employees.
So, find people who can help you scale your company. Trust them to do their jobs. And even let them fail (gracefully), sometimes.
Micromanagement and growth don’t go well together. Need a hand releasing your grip? Read the classic Good to Great for inspiration. As that book notes, Fannie Mae moved from losing $1 million to netting $4 million each day after CEO David Maxwell reevaluated the company’s core players and retained only those willing to bring their A-game.
3. Get out of the office for customer development. As the CEO, your job is to bridge the gap between what happens inside your walls versus the outside world -- just as Sam Walton did with his now-infamous legal pad.
Get out of your office and interact with customers and your team. Attend marketing meetings. Sit in on sales calls. If you’re going to be a growth CEO, you need to learn how to sell and keep selling for a while ($35 million a year and beyond).
Make sure you have great feedback loops with your customers to ensure your solutions adequately solve their pains. Staying involved in the sales process is an excellent way to do this.
4. Embrace change, as your company’s role model. One thing is for sure: Your business will change over time. Industries shift. Competitors rise and fall. Consumers evolve. Be ready to design an agile organization that won’t crumble the first time you have to move offices or bring on new members.
Your people will look to you as a role model during tough times. Listen to their concerns and ideas, but make it clear that you view change as an opportunity for the organization -- your staff will be more apt to follow suit. This can also help your employees look forward to change as a chance to try different workplace skills.
One Indeed study indicated that only 38 percent of people surveyed said te hey moved to a new team because they wanted more money. Instead, a surprising 64.4 percent said they changed jobs because they wanted to improve their education and experience.
5. Get ready for the ride of your life. Entrepreneurship is never dull. You’ll enjoy the ride, but you'll also need to prepare for those times when darkness falls upon even the most successful business. You’ll need to keep your spirits up -- as well as the spirits of those around you -- during those tough moments.
Remind yourself that everyone faces adversity. Evan Williams might be known these days for his role in Twitter's launch, but he previously was involved with the failed podcasting platform Odeo. That platform secured Series A funding but ultimately shut down when it clearly couldn't compete with Apple.
That's how the team at Odeo came to begin work on a side project that would become Twitter, showing that even incredible victories can rise from the ashes of epic failures -- provided you keep trying.
Scalability might not be the first thing tech startups consider, but incremental steps to improve your foundation will do your startup a world of good. As a leader in this age of exponential innovation, you have to be prepared to learn and develop yourself and build organizational leverage at a faster and faster clip.
Do this well, and you'll avoid that CB Insights' post-mortem list; instead you'll be chasing down Dudkiewicz on the other, fastest-growing companies list.