How To Parent Your Startup
Maturing Your Company From Infancy To Adulthood Is Key to Being a Successful Leader
As a dad and startup guy, the similarities between leading an early stage company’s evolution and what it takes to help your own child grow and mature without going off the rails is all too familiar. Being a great leader is about being a great parent to your fledgeling organization and nurturing it through the inevitable trials and tribulations along the way.
Infancy: Product/Market Fit
Perhaps the most familiar and talked about stage of a startup is product/market fit. Many young ventures typically have a product oriented founder who comes from industry and has a keen perspective on what the business needs to serve the customer. Entrepreneurs are often funded on this experience alone and successful leaders learn to navigate the other stages of the business as it matures.
In this phase, the founder and a small team of initial employees possess a combination of product, engineering and business development skills that uniquely qualify them to engage with prospect customers, identify a pain point and engineer a minimum viable product (MVP) as quickly as possible and with limited resources.
At my first start-up, Grand Junction Networks, we invented Fast Ethernet which eventually became the standard for local area networks worldwide. Our MVP was something called a “LAN repeater.” Most customers wanted something else called a “LAN switch.” But a repeater was easier and faster to build, got us market recognition with a few early customers and set us up for our next round of funding.
Our second generation product (a LAN switch) took more than 2 years to develop. It delivered dramatic performance gains and propelled us to over $40M in revenues. Without an MVP, we would not have learned what the market wanted and that would have cost us dearly. Instead, the company avoided the pitfalls of our competitors who took the longer and more difficult path to market and failed. We were eventually acquired by Cisco Systems and grew to several billion dollars in sales annually.
This is the stage many young companies confuse with commercialization. While you might have a product ready to sell, you’re not in the commercialization stage until your company’s value proposition has been proven in the market. Without market validation, the business will squander valuable resources and may not live long enough to commercialize its solution down the road.
Validation is tougher and takes longer than you think. It requires working up front with your sponsor customer(s) and defining how they plan to measure success and derive value from your offering. It’s best to think of these as formal metrics that should be spelled out in a sales agreement or contract. Without these, you risk focusing on something irrelevant and going down a costly path that will inevitably lead to unmet expectations.
When I was at Google, the key metric for our Enterprise customers was lowering the total cost of their email-based collaboration solution by 2–3x (or more) which had ballooned over the years with legacy systems from Microsoft and IBM. With Google Apps, we were able to demonstrate total costs that were a fraction of their current spend thanks to the scale of our consumer user base that took years to build.
At Bidgely, where I was recently an advisor, we were able to prove our solution helps consumers be more energy efficient, thus enabling our utility customers to promote energy savings tips and recommendations through our mobile app. It took the company several pilots and rollouts over the course of 24 months to accomplish this, but now armed with customer validation, the company is ready for the next stage.
Validation can range from a set of early adopter customers that give glowing testimonials, to independent third party analyses and reports. Either way, once you have validation and the confidence that every customer will benefit from your solution, it is time for commercialization. The fun stage!
Young Adulthood: Commercialization
Ah, what every startup wishes for and prematurely thinks they’ve achieved. Commercialization is a lot about scale. Some refer to this stage as growth, and surely growth will come but commercialization signifies more than anything that the product is ready and proven and a fair exchange of monies can be established for its value.
While you might have spent millions on technology development to this point, commercialization requires investment across the entire organization. You will need sales, marketing, product management, customer success, customer support and administrative business functions like finance, recruiting and HR to grow the company’s business.
The sure sign you are in the commercialization stage is that the business has hit an inflection point and the sales and delivery teams are hiring rapidly to serve a growing list of customers. You’re promoting a relatively well understood solution in the market that doesn’t require an unusually long sales or deployment cycle. You also have several early customers that want to get recognized for their early adoption and are excited about evangelizing for you.
At Google, I remember this stage clearly. We had our first 4 customers (Genentech, Motorola, Avago and City of LA ) and saved them millions of dollars in licensing fees and support costs. In their mind, they had discovered gold. We quickly hired as many sales people as we could, both inside and field-based. We scaled up a professional services organization, boosted our presence at industry events and launched our “Gone Google” marketing campaign to capture the market.
Our goal was simple: to commercialize our offering as quickly as possible armed with a compelling value proposition and an initial group of solid CIO references and case studies (currently with over 400K views on YouTube!). We grew from $0 to over $100M in recurring revenues in less than 18 months.
Getting to commercialization is the holy grail for every start-up. Just like my 9-year old daughter couldn’t wait to become a teenager, eying makeup and skinny jeans, the early stage start-up can’t wait to grow to become the next Workday or Salesforce. While some move through the three stages of maturity faster than others, all go through them just the same, and so will your startup.
Amazon is perhaps a poster child for how to move a new business through these stages of maturity and scale it at the appropriate time, so it’s not about startups alone. There are numerous examples in Amazon’s history from Prime to AWS to Echo. All were years in development, experimented with through the validation stage and finally matured to scale in their current incarnation.
If you’re running a startup today (internally or externally), or thinking of joining one, be clear and honest about what stage you believe the company to be in and make sure that it’s the right stage for you. Do you like the baby phase? Or does young adulthood suit you? Will you be patient through those awkward adolescent years, or do you just want them to grow up.
Being a good start-up leader means being a good parent to your company throughout the entire journey. Just like Steve Martin’s wise grandmother said in the movie Parenthood, “Enjoy the roller coaster ride.”
Bill Rossi is currently CEO of Metabiota and a start-up advisor and former executive at Cisco, Google and Enphase Energy.