3. Human Capital Strategy: Hire Grownups vs. Stay Young. There is a certain charm and many benefits to the founding team sticking together and scaling with the start-up. The culture remains true to the founding core, the young talented employees get growth opportunities, and there's an appeal to minimizing the disruption that outsiders bring. Yet, frequently, the talented founding team that gets you to the point of scaling is not the right team to lead the scaling process. I refer to the three stages of a start-up's life as "the jungle," "the dirt road" and "the highway." The team that is skilled at hacking its way through the jungle is often not as well-suited to accelerate rapidly once a dirt road has been discovered. Yet when more senior, experienced executives arrive, preserving the founding culture and maintaining alignment is critical. The best companies build teams for scale early on (e.g., hiring great VPs who can be both effective players and coaches as their department grows) and work hard to select for cultural fit (Google's top recruiter, Mike Junge, had a great interview on hiring best practices in peHUB, "Why It Pays To Be Nice").
4. Founder's Dilemma: Bring in a Professional CEO? One of the biggest decisions a scaling young company makes is - who should be the CEO? The founder may be one of the uniquely talented individuals who can scale from the jungle all the way through the highway but, more often than not a senior, professional CEO is hired to help take the company to the next level. This decision is truly make or break. It rests on the founder's desires as well as the board's confidence in their ability to transition from a product-centric, pre product-market fit world to a sales and marketing execution-centric, post product-market-fit world. Investors would always prefer to see the founder make that transition, but if the skillset isn't there, having an orderly transition with open communication is key. HBS Professor Noam Wasserman has written a series of cases on this topic that show some of the do's and don'ts of navigating this transition. It's never an easy one to embark on.
Each of these decisions can be gut-wrenching, bet the company moves. There's a nasty image I hear used in the board room about snatching defeat from the jaws of victory. If things are going well, you want to let them evolve naturally and achieve some measure of victory, albeit a small one. This may mean sticking with a founding leadership team, a niche product strategy and selling early.
Why should each of these decisions sound limiting? Because great entrepreneurs are competitive, ambitious types who attract ambitious management teams, advisors and investors. There's a natural allure to moving aggressively to scale once the initial product-market fit assumptions become validated. Just scale wisely. Going from $1 million to 10 million in revenue is no easier than achieving that initial $1 million. And getting to $100 million and beyond, well now you're really in the rarified air that gets the people around you excited - and sets expectations soaring higher.
Jeff Bussgang is general partner at venture capital firm Flybridge Capital Partners. You can follow him on Twitter @bussgang
