Startup Tales: Growing Up is Hard to Do
Lesson #5 from the untold stories of Appirio
This post is the fourth part in a series. The original post sets the context, provides the disclaimers, and gives a preview of all of the lessons.
After Appirio closed the round of funding led by General Atlantic (GA) in 2012, we had a dinner with the expanded board to celebrate. Our new board members from GA, Brett Rochind and Gary Reiner, gave us individual gifts to celebrate our new union. My gift: a radar speed detector. Apparently, when they had done their background checks on the founders, they stumbled across my numerous speeding tickets whose status was unknown.
We enjoyed the laugh at my expense. But it was a reminder that we were entering a new phase of the company’s growth — one that would require more process and controls. It wouldn’t be enough anymore to just move fast, we had to become better in ways that our initial growth had made less critical. Gary Reiner had spent a career at GE and had spawned a generation of CIOs that knew every detail of the numbers that represented their technology investments and their business returns. He was happy to hear about something cool, innovative or disruptive we were doing. But he also demanded a clear connection to the objectives we had laid out for ourselves. He was intentional in drilling into the progress on such initiatives in each subsequent meeting. Being nimble would not be a substitute for disciplined progress.
One of the most critical parts of this discipline was clearly managing cost structures. Reducing expenses is always hard, but understanding and incorporating the impact on culture as a part of the process is critical. Everyone says culture is important. But my co-founder and CEO, Chris Barbin, focused on it more diligently and earlier than I would have thought necessary. As a result, by the time we got to this growth phase, we all recognized the tangible and intangible value of culture.
Two of the biggest and most visible expenses we had were our all company meetings and future of the cloud (FOTC) day. Appirio was a very virtual company, so gathering everyone in person was critical early in the company’s development. In FOTC day the whole company took time off to give back to various philanthropic causes. These decisions affected more than just a cost. For a services firm, every day away from the customer (i.e. not billing) directly impacts revenue. These two decisions would have huge impact financially and culturally.
Calculating the cost and lost revenue was easy. Understanding how they impacted who we were as a company was much more difficult. After quantitative and qualitative analysis, we anticipated team meetings becoming relatively less effective as we grew (i.e. they were amazing when everyone knew almost everyone, less so when you were anonymous amongst 1000+ people). In contrast, the FOTC day reinforced working with one another on things bigger and more important than any of us. It built relationships and reflected the values we wanted for the company.
Ultimately, we shifted away from all company team meetings to in person new hire orientations with virtual all company events. We kept our FOTC day.
These two decisions were a small part of our overall transition and change. Yet for most of the company how we managed them represented how we would evolve. The perception for how well those two decisions were handled impacted the perception of how we handled expense policies, hiring processes, performance management, reduction in staff as redundancies emerged etc.
In early days, startups can “out nimble” nearly every curve ball. As you grow larger (in our case particularly as we exceeded $50M in revenue) the ship was getting more difficult to turn, so we needed to plan farther in advance what direction to take. At the same time we became more measured about how quickly we could maneuver. We didn’t try to move as fast as year one Appirio — it would have caused company-wide whiplash. Yet we also set an expectation we would move an order of magnitude faster than companies of our size.
It was a difficult transition. This is normally when companies are accused of becoming less fun, the perks disappear and cliques form. We had to say no more often. We certainly made many mistakes through this phase, but one aspect we correctly focused on was understanding that it was an equal part operational change and cultural transition. Throughout we did our best to assume trust and sustain transparency. The most effective way to face these challenges is directly and openly with the entire company.
