How To Scale A Business

Discover how Sam Altman & Reid Hoffman scale startups

Sam Altman and Reid Hoffman are big deals in the entrepreneurial world. Altman is an American entrepreneur and programmer that runs Y Combinator and a co-chairman of OpenAI. Hoffman is another American entrepreneur that’s a venture capitalist and co-founder and executive chairman of LinkedIn. So they’re both incredibly influential in the startup space and recently published this video highlighting some of the key factors when moving from startup to scaleup.

Considering this video is 41 minutes long, I added some key takeaways below so you can skip around if you’re short on time, however I highly suggest you watch the whole thing. If you have any thoughts, please add a comment below! I’m looking forward to hearing people’s reaction to this video. I think it hits on a lot of things that startups go through when they’re scaling.

Key Takeaways

Below you will find some key takeaways I had while listening to this conversation about moving from startup to scaleup.

3:20 minutes: network effect

Hoffman explains the importance of network effects. A network effect is a phenomenon whereby a product or service gains additional value as more people use it, and Altman’s role at Y Combinator relates very much to this phenomenon. When asked, Altman explains that the more communication and connectivity in Y Combinator’s community, the better they all get. He says, “the bigger we can get our community, the more we can get people feeling loyal to our community and helping each other — and that’s our network effect.”

7 minutes: hiring changes over time

Hoffman explains how hiring changes over time and I think his advice is really important. He says that there is a common misconception that’s advised to startups which is when you have 20 people in your company, hire your scale executives. This way, when you’re at thousands you have those people baked and in place. But Hoffman goes on to say that that’s rarely the right move. Usually, the right executives when you’re at 20 or 50 people aren’t the right executives when the company is at 500 or 1,000 people.

13:35 minutes: hiring variables

Altman hires on values first, aptitude second, and skills third and mentions how most recruiters reverse that order. For example, if a company is scaling and in need of a CFO, recruiters will typically find a CFO with 20 years of experience in a vaguely similar company. But that’s not always the best move. If the CFO has been doing the same thing over and over again for 20 years, they will be less adaptable and willing to learn, which for a scaling company isn’t as useful in the long run.

20:30 minutes: company culture

When hiring new employees, Altman believes that the key metric to look at is what a person’s net effect is on the output of an organization. He explains how some people are incredibly talented but their overall effect on others around them actually makes everyone else less productive. A truly productive culture isn’t one that just “drinks green tea and does yoga together” (as Altman says) but instead, creates an environment that allows talented people to be surrounded by good people that make them as productive as possible — that’s a good culture.

A truly productive culture isn’t one that just drinks green tea and does yoga together.

29:55 minutes: keep key contributors involved

Hoffman explains how he keeps key contributors involved once a company scales to 500–1000 employees. His hack in this situation is to schedule a regular lunch with key contributors. This way he always provides an opportunity to talk about the company holistically with them, so they feel like they still have some say and insight into the growth and development of the company.

Airbnb founder, Brian Chesky, does something similar. He takes 20 of his 30 nights every month to spend with key contributors that don’t report directly to him. He does this for the same reason Hoffman schedules regular lunches with his key contributors — to keep them involved and invested. I think this is a big reason why both LinkedIn and Airbnb are as successful as they are today.

Leave a comment below!

Thanks for reading this post and I hope you got as much out of this conversation between Altman and Hoffman as I did. If so, let me know your key takeaways below — I look forward to reading your comments!