Tortoise vs. the Hare
Most startup-lore is focused on lightning fast growth or striking out, but what about slow-growth businesses? The proverbial tortoise to the blitzscaling hares?
Much of the writing on startups focuses on two elements:
- finding product-market fit
- scaling the company once #1 is accomplished
For product-market fit, we have a lot of source material to work with from the last decade: Steve Blank’s leadership on Customer Development, and Eric Ries’ on the Lean Startup — along with the contributions of dozens if not hundreds of founders, entrepreneurs and investors, to build out the canon for the startup. This material culminated in and resulted from teaching classes at Stanford and Berkeley.
For scaling a company, a body of work not quite so large has found a home on the Internet, and now we have a class to cover the subject — Stanford’s CS183c — Blitzscaling — taught by my friend John Lilly, along with Reid Hoffman and Chris Yeh. I expect that teaching that class and observing the principles applied will lead to a lot of new material over the next few years. Already we see books like Play Bigger entering the fray.
Both of these bodies of work and frameworks for thinking about startups fit really well for funded startups who plan to shoot the moon (launch the rocket to escape velocity and go as far and fast as possible).
Understanding the stages of growth
I think the first thing to realize is that you need different methods for different stages. Stanford’s CS183c — Blitzscaling— lays out a useful framework for thinking about this, including the relevant B2B customer scale:
- OS1 : Family (1’s)
- OS2 : Tribe (10’s)
- OS3 : Village (100’s)
- OS4 : City (1000’s)
- OS5 : Nation (10,000’s)
As with every model, it is only that — a model. Something to compare against. My view is that if you don’t fit the model, you should understand why, and determine whether that’s a good thing, a bad thing, or just an expected difference in circumstances. After all, we’re talking orders of magnitude not exact measurements — and you’re not obligated to live up to someone else’s expectations.
The Blitzscaling model doesn’t address businesses that are on a “slow” burn — e.g. *only* 50% annual growth, or businesses that have to fund themselves. For growing businesses that aren’t “blitzscaling”, that trajectory from OS1 (Family) to OS3 (Village) takes a decade, not a two or three years. So how do you get it done?
It took BP3 9 years to grow from a 2-person consulting firm into a 100-person software and services company. Maybe there’s something to learn from our experience. Perhaps we can start with the phases of growth and compare with the Blitzscaling versions…
OS1: The Family Stage
As you might expect, this phase doesn’t subjectively feel that different between a bootstrapped tortoise and a blitzscale-intent startup. Neither is blitzscaling at this point. But there are differences:
The blitscale startup likely doesn’t want too many customers before it determines whether it has product-market fit. In other words, it only wants the right kind of customers. If a major pivot happens, and a product direction needs to be abandoned, likely the customers will be, too. By contrast, the bootstrap startup wants to acquire customers that can pay enough to fund growth, or to keep the lights on while development ensues.
Both types of startups will be worried about common issues :
- Is the product (or service) good enough?
- Can we convince people to join the company?
- How do we make payroll?
Both startup-types will really benefit from reading and following the advice in Paul Graham’s Do things that don’t scale. If you don’t get to a certain size, doing things in a way that scales would be wasteful, as any student of Lean or Six Sigma could tell you.
In the Tortoise model, it can take years to get past the Family stage. In BP3’s case, it took nearly 3 years. Companies intent on Blitscaling are going to blow past this stage in weeks or months. What’s important to understand is that both answers are okay. There’s no one-true-path-to-glory in startup land. As a founder you have to have a sense of whether you have an investable thesis or company — or not. If not, but you still have the passion to build it, then you have to do it the hard way — one customer at a time, one team member at a time.
OS2: Tribe
The pressure to operationalize a blitzscaling company must be immense. But the tortoise has time to make each move. Tortoises don’t have to hire god’s gift to sales, they can hire someone with potential who can grow in the role. Tortoises can hire people who will grow with the company — and they will. Tortoises can take the long view — investing in college recruiting at an early phase, without the pressure to win in year 1. Tortoises can take more time on operations.
Why? Because a Blitzscaling startup is expecting to blow through employee #100 within 1–2 years after hitting employee 10. If you’re going to have that kind of growth, operationalizing everything you do is critical — otherwise you have chaos. You may have chaos anyway. A Tortoise could take a decade to make the same growth happen. At BP3, it took 6 years. And no one would mistake it for Blitzscaling, believe me.
In the Blitzscaling mode, there is a real emphasis on the transition from generalists to specialists, as you get closer and closer to OS3. You don’t hire someone who can do sales or marketing, you hire the best sales VP you can find, or the best Marketing VP you can find. You’re going for specialization — and ideally someone who knows how to scale the operation from a couple people in their team to a lot. And fast. They’re specialized because they’ve done this before. They’ll come in with a game plan and a script, and they’ll want to run it — so find out what they’re script is before they start.
A Tortoise startup, by comparison, can pick its battles. Perhaps a specialist is warranted in one area, and a smart generalist in another. In these startups one of the traps is paying too much for a specialist, because the company may not grow fast enough to warrant the expense, and the specialists talents may go (somewhat) to waste without the rapid growth environment. Your specialist VP of Marketing may have no idea how to operate without a scaled team — they don’t do the social media marketing campaigns themselves, they hire consultants and teams to do this stuff for them. Uh oh.
What those of us in slow-growth Tortoise models love is that we get to invest in our people. We expect those investments to really pay off over the next 5 years. Your current 100 employees are absolutely the foundation for the next 200.
OS3 : Village
Once Blitzscale companies hit this stage, recruiting is a machine, and a functionally organized company in this stage is going to explode in hiring if they have the funding and customer metrics to do it. We watched it happen at Google and Facebook and LinkedIn — and Uber. And we’ll see it happen with the next Blitzscaling company that comes along.
The Tortoise reaches 100 employees and the expectations are for hiring to be pretty consistent on a percentage basis. Up to this point, the CEO probably interviews everyone who joins the company. After this point, he or she can still do that, but it requires real organization of the recruiting process to make it work.
More recently, BP3 has entered this rarified air of 100+. But this is where the value of understanding another model comes in. In the Blitzscaling examples discussed in CS183c, it became apparent that a huge issue was managing culture and communication through this growth — but also just as the company got larger and no longer fit in one room, floor, or building.
And that’s a challenge that BP3 is going to experience more and more as well. We’re north of 100 people — but only about half of our employees are in Austin. So we have had this challenge to communicate over time and distance since the beginning… but it gets more challenging.
One example. Broadcasting news to the company is straightforward — I can compile an email with my thoughts and get it out to everyone. But one of the things I like to do is call people out for praise to the whole company. It turns out, at a 100-person company, there’s a lot of good stuff to call out, and one person (even the CEO) can’t possibly (a) be aware of it all, nor (b) get it correctly captured — for example, you hate to thank 3 people on a 4 person team and leave the last person off by accident. Or thank 2 out of 3 project teams that had a go-live that week.
Beyond that, the CS183 Blitzscaling instructors went out of their way to point out that most companies that get to even 300–500 employees still “fail” (noting that failure might mean a very profitable merger or acquisition, I’m not sure on this nuance from the class’ instructors). It’s kind of amazing to think about it that way, but the story for most companies ends, at nearly every stage of organizational growth.
And so while getting to the village is a major accomplishment, we have nothing but work to do in front of us if we want to get to the next level. And that’s a good thing. Our team at BP3 wouldn’t have it any other way.
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