- Player: Jason Goldberg
- Company: 10x-e
- Founded: 2015
- Background: 10X-e was created by Vumela and Edge Growth. Its aim is to help talented entrepreneurs succeed by offering a high-growth support system.
- Visit: 10x-e.com
When Eric Schmidt stepped down as CEO of Google in 2011, he posted the following message on Twitter: “Day-to-day adult supervision no longer needed!”
He was referring to the fact that, after a decade as the company’s chief executive, the throne was being handed back to 37-year-old Google founder Larry Page.
The comment seemed a bit, well, snarky. It wasn’t. But it had some backstory. By the turn of the millennium, Google was attracting investors, but these investors were understandably reticent about sinking millions of dollars into a company that was located above a bicycle shop and headed by two unruly Montessori alums.
The money men were willing to invest, but not without what Silicon Valley VCs referred to as ‘adult supervision’. Founders Page and Sergey Brin grumbled about it, but eventually agreed. They started shopping around until they found the perfect candidate: Steve Jobs.
Jobs wasn’t available. But Eric Schmidt was. And the Google boys liked Schmidt. He wasn’t just a businessman — he had a solid background in engineering and tech. In fact, he had become Sun Microsystem’s first software manager in 1983.
So Schmidt’s tweet wasn’t snarky at all. In fact, it was the opposite. It was a statement filled with genuine affection for the Google founders — a tongue-in-cheek declaration that a decade of ‘adult supervision’ had officially come to a close.
As the geniality of the message implies, the partnership had worked. Schmidt and the founders had worked well together. This isn’t always the case. It can be disastrous, which is why there has been a move away from replacing the founder of a company once it scales to a certain size.
“While replacing a company founder with a CEO is certainly an option when looking to scale a business, it has traditionally had mixed results,” says 10x-e founder and Edge Growth founding director Jason Goldberg.
“Because of this a VC firm like Sequoia Capital in Silicon Valley no longer expects a founder to be replaced when a business scales. When a company loses its leader, it loses a lot of its essence.”
You Need To Cede Some Control
The poster boy for the tech-founder- turned-Fortune-500-CEO is obviously Mark Zuckerberg. Despite still looking like a boy playing dress-up in his dad’s clothes whenever he dons a suit, Zuckerberg has proved to be exceptionally adept at growing Facebook through its various phases.
How has he managed this? While he certainly has more business savvy than initially given credit for, a lot of the company’s success can be attributed to Sheryl Sandberg. Zuckerberg hired Sandberg (then Google’s president for online sales and operations) as COO in 2008, and she transformed Facebook from ‘cool website’ into ‘profitable business’. But she couldn’t have done this without Zuckerberg giving her the freedom to do so.
It’s an important example founders should follow, says Goldberg. “Growing companies need to complement existing leaders with others who have real management experience. Entrepreneurs need to make a paradigm shift when they scale. You need to accept that, even if you stay on as CEO, you are ceding a level of control. It ultimately comes down to the maturity of the founding team. Do they have the maturity to adapt to the new management context? They must realise that they don’t all bring a lot of management know-how. If they can’t make the shift, they kill the business.”
Sandberg was a great hire for one simple reason: She was a seasoned executive with more experience than Zuckerberg himself.
“A lot of growing companies hire the wrong people. If you’re looking to scale aggressively, now is not the right time to hire young people that need mentoring,” says Goldberg. “You want to hire people who can do things five times better than you can. If you’re not comfortable handing off an important task, you’ve hired the wrong person.”
Don’t Get Sucked Into The Vortex Of Day-To-Day
Growing a business is chaotic. Once you start scaling aggressively, a million things will demand your attention every single day. You will feel as if you’re drowning.
“We refer to it as ‘the vortex of day-to-day’. As the business grows, there will be more and more balls in the air, and unless you’re able to hand them off, they’re going to drop to the floor,” says Goldberg.
“You have to ask yourself: How do we, for example, have 100 sales meetings every week without the founder having to be in any of them?”
This requires that founders hire competent people, and allow them to run with things. But it also requires something else: According to Goldberg, it comes down to creating systems and processes that diminish the need for executive involvement.
At the same time, you don’t want to turn into that stereotypical organisation that depends too heavily on paper pushing and bureaucracy.
“As you scale, you hire more and more people who don’t actually care that much about the customer. It’s inevitable. At 100 people, you will have employees who never interact with the customer, and who will probably be implementing processes that irk them. A customer who used to deal with a founder will now get an email from a faceless accounts department. So you need to systematise everything from the focus point of delighting the customer. It’s very important to institutionalise customer delight.”
Strike a Careful Balance Or Risk Chaos
Here is the reality of scaling a business aggressively: Your business will lose most of the advantages it had early on. As it gets bigger, it will get slower, regardless of the systems you put in place.
“You have to consider if your company can put its prices up by 20%. If you grow quickly, your costs will go up, but you won’t yet have scale. So unless you get a lot of funding, you’ll need to up prices.”
You will, at least for a while, be slower and more expensive than much of the competition. So what’s needed is a product that is so great that customers will keep coming back, even if you’re no longer the quick and agile start-up you used to be.
“You have to strike a careful balance. Build solid systems and a good management team too soon, and you’ll burn through cash too quickly. Wait too long, and your growing company will descend into chaos,” says Goldberg. “Scaling requires you to spend ahead of revenue — but not too far ahead.”
Scaling the un-scalable
Not every business can scale. Can yours? You need to take an honest look at your company.
To paraphrase Leo Tolstoy: All successful businesses are alike. All failed businesses are unsuccessful in their own way.
Google and Facebook grew in different ways, but they were alike in one very important area: They both had businesses that were scalable.
Before jumping into the minutiae of scaling a business, it’s worth taking a moment and asking yourself how scalable your business model truly is. If your business isn’t inherently scalable, no amount of good hires or clever processes will allow it to scale.
“There are three kinds of businesses: Un-scalable, scalable and hyper-scalable,” says Goldberg. “Something like Dropbox or Facebook is hyper-scalable. Here the marginal cost of selling an additional product is virtually zero because delivery is automated.
“A scalable business is one that offers a blueprint for success that can be replicated. A franchise restaurant is a good example. Every restaurant is a profitable unit that can be operated in the same way as the previous one.
“An un-scalable business is one that doesn’t have a ‘saleable unit’ that can easily be rolled out multiple times. Many service businesses find themselves in this kind of situation. If you offer a high-level service that requires very knowledgeable (and expensive) experts, it’s hard to scale. There are many businesses like this with low barriers to entry that struggle to scale beyond 30 people because most of the skilled leaders they need would rather start and run their own businesses. Something like Uber is scalable because being an Uber driver does not require an expert skillset. However, there are exceptions. Advisory firms have managed to scale because regulation creates predictable demand, there is some regular supply of human talent and there are high barriers to entry for new players.”
Taking a company from start-up phase to corporate level is a long journey that requires a host of different skills. Very few entrepreneurs have all the talents needed to scale a business successfully.