Why you should grow your startup as slowly as possible

Grow slowly? Does this make sense for a startup? When Francisco Webber (founder/CEO of cortical.io) and I spoke in episode #013 (available on iTunes, Android and YouTube) of the Startup Milestones Podcast, he explained how he raised several million Euros from Business Angels, the advantage Angels have (read about Angels vs. VCs here), and that VCs have the tendency to push you for maximum growth very fast. Here are Francisco’s key thoughts about speed of growth – very insightful!

“A business concept needs time to grow and mature”

I’ve heard very experienced founders and investors support this point by saying that one of the main reasons startups fail, is pre-mature scaling. What does this mean? Think of the good old “pivot”. A change in direction of the company required to turn away from a path that is leading nowhere, in the search for a path that can lead to success. Now think about getting outside pressure to “grow fast”, which most of the time means: take whatever is working best today, and do more of it.

As you can imagine, this can quickly lead into a dead end; or in the best case, a local optimum that is far below the real potential of the company. If you “do more” of something that is barely working, and for that reason don’t give yourself the freedom and opportunity to do a few more pivots to maybe find the real scalable business model … well, you are in trouble.

“Hiring people is easy. But hiring the right people for the right tasks is hard”

I’ve seen it many times: a startup closes a round of funding. The money is in the bank. So you need to get the money to work: lets scale up and hire people! And Francisco is right: hiring people just for the sake of increasing the head count is easy. But there are two things that are really, really tough; that take time; but time that is well invested:

Find great people

This is really, really hard. And it’s a huge and complex topic that we talk about often on the podcast. Here are a few thoughts: find people who are aligned with your vision (read Francisco’s insights about ‘alignment’ here); find people who are top of the crop; think about hiring senior people first (listen to Simon Staib, who talks about this in episode #011). But it doesn’t stop there – there is another, very important point:

Define the right jobs

This step comes even before finding great people. First off, you need to know what it actually is, that will best contribute to your company’s success. What is the job that needs to be done right now, for which you then want to find the best possible person? This, too, is a huge topic – here just two thoughts I want to share based on problems I see many startups have after their first round of “fast hiring”:

1. Don’t hire someone “to figure it out”: Many early hires are to fill a gap in the competence pool of the current team. For instance, a tech-heavy team hires a marketing person. A big mistake is to give the new hire too little guidance and direction. I actually know of one particular case, where a “Head of Marketing” was hired. She asked the founder/CEO what her immediate goals are. He said: “Build me a world class marketing”. This is a recipe for disaster. How is the new hire supposed to know which direction to run? As a founder, and especially as the founder/CEO, you need to be educated enough on any topic in the company, to give rough direction and context.
2. Do it yourself before delegating: one of the best ways to bring on people is by first doing the job yourself (or someone on your current team). When it is sufficiently clear what needs to be done, and when you have found ways to do that job sufficiently efficiently, and you got a benchmark for how long it takes to produce a certain amount of output, then it is time to hire a person. You will know the what, the how, the how much – this enables you to find people who can do this job, you can track their efficiency by benchmarking it against your own speed, and you can encourage them to improve the processes and tasks with their special domain expertise above and beyond what you were able to do. New hires know exactly what they are getting in to, so the employee churn is reduced, too.

 “With every step of growth you create legacy, so the next step will be much harder due to increase of complexity”

This is a very valid point, too. One that you can only realize in hind sight, when you have built a few companies or have already grown a few steps – things, Francisco has done in the past 20 years.

This “legacy issue” applies to all kinds of areas:

• not just technology (using a quick solution that works for product that is used by 1000 users, but that does not scale properly once you have a million users)
• but also processes: setting up processes and getting a team to perform them flawlessly and then having to change them is a form of legacy. But more often, processes are not set up properly because no one “has the time” to define and implement them. But when your organization grows, you might end up with implicit processes that are inefficient and great legacy
• and of course it also applies to personnel: recruiting people is a lot of work. That is why letting go of people that don’t fit is one of the toughest (and most avoided) tasks of many founders. Recruiting fast can cause much more burden and slow down the company much more than taking the time to do it right in the first place. (Like an old business partner of mine liked to say: “It is like peeing in your pants – at first, it warms you…”)

Try to resist the outside pressure for speed. Become clear about the overall impact of a decision in terms of the legacy effects. If you invest 10 more hours today, that will save you 1 hour per month going forward, I’d say that’s an investment worth taking. These small decisions stack up, making all the difference between an organization that ends up constantly trouble-shooting, and one that is lean and able to focus on the real impactful decisions at hand.

So think twice about your “need for speed”. Take Francisco’s tip of “grow as slowly as possible at the beginning” with a grain of salt and find the right trade-off for your company and your goals.