Don’t Let Hyper-Growth Derail Your Startup: Five Tips For Startup CEO’s

The startup journey goes through many phases, and each has its unique challenges. In the first few years, it’s all about getting funded and finding a strong product/market fit. Once you nail those, your next challenge is to build a scalable sales model and deliver your product to a broad market as fast as possible and before competitors start to catch up.

This is the “hyper-growth” phase — i.e., grow as fast as you can and grab as much market share as possible. Typically, hyper-growth is characterized by triple-digit year-over-year sales growth for several years and an ongoing surge in the number of your employees. If things go well, your company may grow from 30-50 employees to 700-800 employees in just 4-5 years. It’s exciting — but it can also be dizzying and at times scary. Many promising startups stumble or even fail during hyper-growth. And unfortunately, conventional MBA-school management theories do not help much during this unique period.

At my startup AppDynamics, we were fortunate to experience this kind of hyper-growth and were one of the fastest growing enterprise software companies in Silicon Valley. As an engineer turned the first-time entrepreneur leading the company as Founder & CEO through that hyper-growth phase, I learned a lot along the way.

“If everything seems under control, you’re just not going fast enough.” -Mario Andretti, race car driver

Leading a company through the hyper-growth phase is sometimes like driving that race car. The business is accelerating like mad, and you do not feel totally in control. You might be tempted to slow things down a bit out of a fear that you’re going to careen off the track. But if you slow down too much your competitors are likely to speed past you! The bottom line is, you have to get comfortable with the pace and with the fact that not everything is going to go perfectly. That is not only OK — those are actually the right conditions for victory. As an engineer, I had a hard time accepting that at first. But once I did accept it — and even more importantly, once I got everyone in our company to accept that as normal — we operated much more smoothly.

#1 There Will Always Be Things To Fix

Just as every race car needs the occasional pit stop, in business, there are always things that need fixing. My rule of thumb was that at any point in time, about 80% of things would be going right and about 20% would need fixing or improvement. The job is to identify the 20% and course-correct — but once that is done, expect a new 20% to emerge, and so on. If at any time you feel like you have nothing much to fix and improve, it is a sign you are not moving fast enough, and that should worry you the most.

#2 Focus On What Moves The Needle

Prioritize ruthlessly — not just for yourself, but for the entire company. When you are growing like crazy, there will be times when your company won’t have the bandwidth to fix everything that could be fixed. Ask yourself, “Is this going to impact our trajectory as a company, either positively or negatively?” If the answer is yes, prioritize it. If not, don’t spend your precious time on it.

I remember many years ago talking to the CEO of a startup of about 100 employees. His company was struggling with its product strategy and was teetering on the verge of irrelevancy — and yet he was extremely preoccupied with whether or not to promote his director of HR to vice president. Unfortunately, just a few months later, they had to do a fire sale of the company. It was a lesson in prioritization that I never forgot.

#3 Make Sure People Feel Open To Contribute

What if you don’t know what needs fixing? That was my biggest fear, that the 20% would not be obvious.

That’s when you need the entire team’s collective wisdom and input. When a startup is small, it’s easier to get your crew’s perspective. Typically you will know everyone by name, and most people will feel free to talk to you about anything. At AppDynamics, even the most junior person could come up to me and say, “Hey man, I think xyz is not working” and we would set about fixing it.

But when you’re in hyper-growth, that can change quickly. I remember how disconcerting it was the first time an employee I ran into in the elevator was too scared even to talk to me. You have to address that proactively. Be open and accessible and create as many opportunities as you can for people to talk to you. As the CEO, you may be the one behind the wheel but it takes the entire team’s contributions to keep the company on track.

#4 Hire Even-Keeled Leaders

You want your leadership team to be comprised of people who are emotionally even-keeled. Hyper-growth can be like a roller coaster for the organisation — full of many ups and down. We used to say there is never a dull day at AppDynamics. There will be times when you lose a deal to a competitor, a key employee resigns or any number of unanticipated things. You want folks who won’t panic, who will remain rational and calm and always keep moving forward.

We captured this philosophy in one of our key cultural principles — “no politics, no drama: just get things done.” This helped ensure that we always put the company first, solved problems calmly and stayed focus on our goals.

#5 Focus on “Guide Rails” For Organisational Alignment

For a startup racing at hyper-speed, I realised that the leadership team’s first reaction is often to “over-rotate” on centralised planning and policies as a way of feeling more in control. But too many policies and too much planning can often be a bigger problem than too little. What’s important is that you strike the right balance to get things moving quickly and efficiently.

To achieve that, it’s very important that you set the “guide rails” everyone can align to. If you do that, you enable agile and nimble teams that can manage the details in a much more flexible way without asking for many layers of permissions. Guide rails for us were about aligning around high-level product goals, our user personas, operational metrics, financial targets, sales & marketing strategy, cultural principles, etc. The more concise and memorable those guide rails are, the better. This helped keep the organization moving in the right direction during a time of tremendous growth and change.

As a startup CEO, you will find that your company is not the only thing to grow during this exciting phase — it will also force you personally to learn and grow as a leader. Enjoy the journey and let me know what you are learning along the way!

[This post by Jyoti Bansal first appeared on LinkedIn, and has been reproduced by permission.]

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