Play your own playbook
By boris, October 26, 2015
Given the frequency of media stories focused on a handful of startups with billion dollar valuations and high profile rounds, it’s understandable that founders get impatient with their own company’s natural pace of growth.
This sense of urgency is intensified by the fact that growth is an elemental part of being a startup. Paul Graham summed it up: “a startup is a company designed to grow fast.” Growth is what separates a startup from a plumbing or barbershop business.
However, every company needs to grow at its own pace. Some business models simply don’t scale as quickly and need time to mature – and this isn’t necessarily a sign of failure or a bad business model.
For example, trying to grow an e-commerce site like you’re a tech company will not end well. Gross margin levels are typically not a big deal for a tech company, but can be the make-or-break area for an e-commerce company. In addition, e-commerce and tech companies deal with very different operational complexities: touching/shipping physical products vs. quickly fixing a bug for a SaaS product. And, these company types have very different acquisition strategies: an e-commerce site typically relies more on paid advertising where you can easily lose your shirt if you’re not careful as you scale.
There is a limit to how quickly an organization can scale. Be aware of the impact that high growth can have on your company’s culture, team, and execution ability. I have seen many startups get screwed up in all three dimensions because they grew too fast.
Yet having said this, there are times when fast growth is necessary. If you’re in a ‘winner takes all’ market, going slow and steady and then ending up second or third won’t help your cause.
The bottom line? Get inspired by your peers with hyper-growth and large fundraises, but don’t forget to think about what’s the right speed for your market, startup, and team.