Growth – How To Manage It

If you raise venture or angel money there is one expectation…grow. It is the one metric every investor values, whether private or public. Everything else is just noise.

How fast do you have to grow?

It depends. It’s not actually easy to control your growth rate as it’s highly dependent on your timing, team, and luck. In consumer 6x annual growth is really strong, 2x is good, and below that you get a "meh."

Personally I’ve found that a 2x annual revenue growth rate is fast enough but not too fast that you can’t develop the team. This is a far cry from blitz scaling, but over time 2x compounds into real revenue numbers.

If you have to grow, it’s a stressful reality. Grow and everything is easier. Raising money, hiring people, working harder, and everything in between.

Don’t grow and you’re on the path to running out of money. Or worse and you’re stuck running a company that is slowly dying.

Slower growth isn’t just that life got harder. It’s much more binary than that. It changes your entire trajectory to survive.

Going back to the public markets, growth drives the stock up. Missed numbers or slower future growth brings it crashing down. Recent startup examples like Blue Apron, Snap, GoPro, Fitbit, and Stitchfix stand out. These companies won the startup game, but are getting trashed because they aren’t growing fast enough.

The same phenomena happens in the private markets, you just don’t directly see it until you can’t raise money. It’s unclear until you’re writing your startup’s post mortem about how you were so close…just missing this one thing. That one thing was growth. You didn’t have enough of it.

A cold reality is that people won’t directly tell you how f’d you are. Investors will still take your meetings. Press will still write about you. New employees will still apply. The perception is that if you just try a little bit harder it will click. That’s not true.

If your growth slows you have to dramatically change your trajectory to get back on track. These are not small decisions. These are massive decisions that may require restarting your own company to create the growth required.

In making that pivot, what is underestimated is the personal toll this expectation takes on a CEO. Yes it’s their job, but it’s incredibly stressful.

And to a founder it’s even more peril. To everyone else your startup is just one of many opportunities. To your investors you are one bet within a portfolio. To your employees you are one job in their career. To your customers you are a solution they will find a way to move on from. But to a founder, this is one of the few companies you get to start in your career.

The energy it takes to start a new company is too great to start over multiple times. It’s one thing to run a company you scaled, i.e. Bezos, Musk, and Hastings. It’s another thing entirely to start over from scratch and build a new one.

Therefore if you raise money and can’t grow fast enough, good luck.

This is a cynical way to look at building of venture funded startups but it’s true. The outcomes are binary. Just ask every founder that didn’t make it. Or every founder that got stuck running a "not growing fast enough" venture backed startup. It’s just something you can’t fathom until it doesn’t work out.

How To Handle Growth

Everyone handles this expectation differently. Here is how I think about it…

  • Set expectations up front about what rate you want to grow at. It’s ok to start slow and build into the growth as you understand your business. It’s not ok to start fast and then slow down. If anything you want to hedge towards growth accelerating over time.

  • Determine how much growth you can personally handle as the CEO. If your team is new, it takes time to go faster. If this is one of your first companies it also takes time to learn how to grow. Growth is a learned skill and you need time to develop how to do it.

  • Build this growth curve into the culture of the company. Your whole startup philosophy should be built around how fast you need to grow in order to win the market. The answer to that question is different for every founder.

  • Teach your team how to grow. Constantly run brainstorm sessions about how you can 2-4x the business and the team. This gets people thinking about this earlier so as you make decisions they aren’t surprised. People don’t teach growth in a business environment. Therefore you have to work on teaching it.

  • Find your outlets for the stress. If you show it, your team will sense it. The more they sense it the worse they perform. Learning how to handle your emotions is critical to achieving the growth you’re searching for.

What Happens If Growth Slows

If growth is slowing here is how to think about it…

  • Pivot to a market segment where you can be number one. Investors fund and companies buy market leaders.

  • Dig deeper to figure out what is and is not working. Here is where a Customer Journey can help you. Be ruthless to cut what isn’t working and shift to things that are working.

  • Watch your burn. Cash is survival so if you want any chance to change your growth rate make the business profitable so you have more time. Generally those cuts come in the form of people, which is really painful.

  • Sell the business before it’s a fire sale. Selling the business doesn’t mean you’ve given up it just means someone else is the owner of the upside and downside. This path can allow you to still serve your customers without the same stress of survival.

Conclusion.

If you crack growth everything else gets easier. If you don’t crack it, you’re in a tough spot.

Alternatively don’t raise capital and just worry about one half of the equation…enough cash in the bank. This stress comes with investor backed startups, but isn’t compounded by the requirement to grow.