How to Scale a Startup

When your startup gains traction and needs to scale, it’s time to stop thinking about survival and start focusing on growth. Scaling is a dangerous time for many startups, and failure to handle rapid growth is one of the main reasons why startups fail. It isn’t enough to raise capital, build great products, and print cool t-shirts. It’s crucial to also be able to build a cohesive management structure, hire and retain top talent, hold people accountable and maintain company culture.

As COO of Ready4, I’ve helped our company transition from a 20 person team with $3M in funding to a team of 40 with over $11M in funding and meaningful recurring monthly revenue. While we certainly don’t have everything figured out, I’ve learned a few lessons throughout our growth process that I hope will be helpful to others:

1. Create Management Structure and Clear Roles & Responsibilities

When I first joined Ready4, our CEO, Elad, essentially had 12 direct reports – everyone in our US office and several engineers in Israel reported directly to him. This meant his time for fundraising, strategic planning, and product work was extremely limited. To enable Elad to focus on other key areas and to successfully operate as a growing team, we created departments and department heads that all report to the COO and CTO respectively.

Don’t be afraid of creating a management structure. Hierarchy doesn’t necessarily lead to bureaucracy. Without an organizational structure, our company’s projects were delayed because the CEO didn’t have time to make decisions for everyone. In fact, the CEO shouldn’t be making all the decisions. Empowering each manager and even each employee to be able to operate autonomously with only limited strategic guidance from management is key to transitioning to a growth stage company.

Once we had a clear structure and differentiation of roles and responsibilities, our employees became more productive and projects were completed in an efficient manner. Many Founding CEOs have a hard time relinquishing control because they’re so used to doing everything themselves. A large part of our success comes from Elad’s ability to empower those around him to accomplish more collectively.

2. Hire Slow and Fire Fast

Hiring should be a deliberate process that takes into account the person’s potential in addition to their current skill set. It can be tempting to hire rapidly and hope for the best because it’s time-consuming to find highly qualified employees. However, you end up wasting even more time and money when you hire someone who is a poor performer or a bad culture fit. It’s important to strike a balance between hiring fast and taking the time to find the right person for the job. At Ready4, each of our new hires is interviewed by at least 6 different people. Even if one person thinks the candidate isn’t a good fit, we pass. In the long run, this approach saves us a great deal of time and energy.

If you do end up with someone who is not meeting expectations or working well in the company environment, you need to fire them as soon as possible. This often happens when you transition from an early stage startup to a mid stage startup. Employees who were performing well enough at one level may not be willing or able to meet the expectations you’ve set for the next phase of growth. When you know someone isn’t going to work out, and you have done your own work of clearly defining the role and directly communicating candid performance feedback, let the person go. It’s easy to blame yourself and ask, “How can I help this person more?” But ultimately some people are just mediocre performers - and that’s fine - it’s just not fine at our company.

As Steve Jobs said, “A small team of A+ players can run circles around a giant team of B and C players….A small company depends on great people much more than a big company does." Nobody likes firing people, but when it has to be done, do it as soon as you can with compassion.

3. Set KPIs, Track Performance and Hold Everyone Accountable

We established three KPIs (key performance indicators) to measure the health of our business: Downloads, Engagement, and Revenue. Everyone in the company knows these KPIs and measures their performance based on these factors. We set targets using these KPIs and hold everyone accountable to meet these goals. When your employees have a clear idea about how their success is measured and see how they can directly impact the company’s performance, they will focus on the work that needs to be done to meet those targets.

4. Maintaining Company Culture and Values in the Face of Revenue Pressure

Generating revenue introduces new challenges in the workplace. When your company starts to make money, your investors instantly want you to make more money. The pressure to perform at a high level can compromise early company values, especially if you operate a company that serves both users for free and partners for pay (similar to a Facebook ads or Google Adwords model). If a new product feature will bring in several hundred thousand dollars from a partner but will negatively impact the user learning experience what do you do?

For us, these kinds of decisions are easy to make because we’ve gone through a full team exercise developing our company mission statement and values. In this instance, our first value, Customer First, would help a product manager make the judgement call on this hypothetical product feature: “We serve two audiences – students and partners – adding value for both drives everything we do. If we are forced to decide on a feature that will only benefit one party, we always choose the student.”

Connecting all employees to shared values and a shared sense of purpose is crucial to maintaining culture as a company grows. It’s also hugely motivating for people who want to connect to something greater than themselves and their bank accounts. Our mission statement is “to create the world's most advanced mobile learning platform and to connect students with opportunity.” It’s an ambitious goal, but one that can be achieved with a lot of work and a deliberate focus on the four lessons I’ve shared here.

What lessons have you learned from your experience scaling startups? Comment or reach out and let me know!