PODIUM: scaling startups

Be careful what you wish for.

Your user growth is growing like crazy.

To the rest of the world, it looks like paradise with such success.

In reality, there's often chaos behind the scenes.

Scaling technology or infrastructure is one thing. Maybe you need to expand your cloud capacity.

Startups that began as a small team handling everything to scaling into a larger company with user growth means having to figure out how to adjust the organization itself.

Our friend Jason Calacanis interviewed David Sacks (PayPal, Yammer and now Craft Ventures) about a recent Medium post about the operating philosophy of startups.

We HIGHLY recommend checking out both the original post and the video discussion above.

Here is an excerpt from The Cadence, David's post:

Let’s face it: most startups are a shitshow. Perhaps the most pervasive problem afflicting venture-backed startups, once they achieve a basic level of product-market fit, is managing the organizational chaos that results from rapid growth. Almost by definition, this is a chronic challenge of Series A-C stage startups since the rapid expansion of the team to chase a new market opportunity is the purpose of that venture funding in the first place. During this time, the growing pains of the startup will reach such a crescendo that the founders and board will cry out as one, “we need a COO!”

As with any potential problem in a startup, it is possible to posit that a perfect hire could solve that problem, but the more direct route is simply to solve it yourself. Putting your startup on an operating cadence is the way to do that. The Cadence is an operating philosophy that I first learned as COO of PayPal (during the so-called “PayPal Mafia” founding era) and then adapted for SaaS as founder/CEO of Yammer, which Microsoft acquired in 2012 for $1.2 billion. To this day, Yammer is still the fastest unicorn exit among SaaS startups, and a lot of that success is due to the Cadence. The Cadence helped us scale to almost 500 employees and $56 million in annual sales in 4 years.

The Cadence is most needed when scaling from 50 to 500 employees. This is when a pivotal transition in the way the startup operates is required. Before then, all of the employees fit into a single room (either physically or virtually), everyone knows what everyone else is working on, and founders can easily run around telling everyone what to build and what to do.

But at around 50 employees, this approach stops scaling. So the org chart is broken into silos for sales, marketing, customer support, and other functions, and product managers are hired to guide the development process. These new levels of hierarchy create a feeling of compartmentalization and disconnect in the organization. Meanwhile, a lack of leadership for some functions creates a sense of disorganization. Disconnect plus disorganization equals chaos. Ironically, the better the startup is doing, the more chaos there is. This is one of the few startup problems that growth doesn’t solve — in fact, it’s caused by growth.

The Cadence is designed to synchronize the major functions of a SaaS startup so that the team works together in lockstep. It brings order to the chaos; it turns the shitshow into an army. It brings together disconnected areas so everyone understands what is happening and what they should work on. It replaces erratic release dates and sales targets with concrete milestones for shipping and selling. The impact of hitting those milestones, quarter after quarter, has a huge compounding effect on the performance of the business and its culture.

Ironically, the better the startup is doing, the more chaos there is. This is one of the few startup problems that growth doesn’t solve — in fact, it’s caused by growth.

So what is the Cadence? It’s based on a few simple insights:

First, the four major functions in a SaaS startup — Sales, Finance, Product, and Marketing — are all best run on a quarterly cycle.
However, it’s not the same cycle. Sales and Finance are on one calendar; Product and Marketing are on another calendar. I call these the Sales-Finance System and the Product-Marketing System.
If you snap these two calendars together, it will create a single operating cadence for the company.
The key milestones and events in these systems create opportunities for company-wide communication and collaboration — a kind of superstructure for the organization.

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Podium is a venture fund, accelerator and community across sports and entertainment, based in Silicon Valley.

Learn more at www.podium.vc

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Podcast 🎧
with Melanie Whelan, SoulCycle
and Tony Robbins
September 2019

Excerpt:

Chances are, you’ve either been to SoulCycle or have at least heard someone raving about their experience. Because it has taken the fitness world by storm. And one of the key players behind this new fitness phenomenon is CEO Melanie Whelan. Melanie has served as SoulCycle’s CEO since June of 2015. And in just this short time, she has helped take the company from 7 operating locations to 70 jam-packed studios across the nation serving over 4 million people a year. And they are still growing at an exponential rate. So what makes SoulCycle such a powerhouse? How did they create so many raving fans? And how have they managed to consistently maintain their revolutionary customer experience while scaling at such a massive rate? These are just some of the questions that are answered in this episode, as Tony and Melanie delve into SoulCycle’s innovative workout culture, their unique hiring process, and the customer experience that they’ve built so consciously that it has created raving fans in every location.

Tuesday, October 19, 2021

Launching and Scaling Startups with Airbnb Co-Founder Brian Chesky

Wednesday, July 22, 2020

Chaos Ahead | The Cadence and Operating Philosophy for Rapid Growth Startups with David Sacks

Friday, September 20, 2019

Melanie Whelan and the SoulCycle Story 🎧