Startup founder who survived hyper-growth shares lessons for CEOs

Photo credit: Caleb George.

The startup journey goes through many phases and each has its unique challenges. In the first few years, it’s all about getting funded and finding a strong product/market fit. Once you nail those, your next challenge is to build a scalable sales model and deliver your product to a broad market as fast as possible and before competitors start to catch up.

This is the “hyper-growth” phase (i.e. when you grow as fast as you can and grab as much market share as possible). Typically, hyper-growth is characterized by triple-digit year-over-year sales growth for several years and an ongoing surge in the number of your employees. If things go well, your company may grow from 30-50 employees to 700-800 employees in just 4-5 years. It’s exciting, but it can also be dizzying and at times scary. Many promising startups stumble or even fail during hyper-growth and, unfortunately, conventional MBA theories do not help much during this unique period.

At my startup, AppDynamics, we were fortunate to experience this kind of hyper-growth and were one of the fastest growing enterprise software companies in Silicon Valley. As an engineer-turned-first-time-entrepreneur, leading the company as founder and CEO through this hyper-growth phase, I learned a lot along the way.

“If everything seems under control, you’re just not going fast enough.” –Mario Andretti, race car driver

Leading a company through the hyper-growth phase is sometimes like driving a race car. The business is accelerating like mad and you do not feel totally in control. You might be tempted to slow things down a bit out of fear that you’re going to careen off the track, but if you slow down too much, your competitors are likely to speed past you!

The bottom line is you have to get comfortable with the pace and the idea that not everything is going to go perfectly. These factors are not only OK but are actually the right conditions for victory. As an engineer, I had a hard time accepting that at first. But once I did accept it and, even more importantly, once I got everyone in our company to accept that as normal, we operated much more smoothly.

There will always be things to fix

Just as every race car needs the occasional pit stop, in business, there are always things that need fixing. My rule of thumb was that at any point in time, about 80 percent of things would be going right and about 20 percent would need fixing or improvement. The job is to identify the 20 percent and course-correct. But once that is done, expect a new 20 percent to emerge, and so on. If at any time you feel like you have nothing to fix and improve, it is a sign you are not moving fast enough, and that should worry you the most.

Focus on what moves the needle

Prioritize ruthlessly—not just for yourself, but for the entire company. When you are growing like crazy, there will be times when your company won’t have the bandwidth to fix everything that could be fixed. Ask yourself, “Is this going to impact our trajectory as a company, either positively or negatively?” If the answer is yes, prioritize it. If not, don’t spend your precious time on it.

I remember many years ago talking to the CEO of a startup of about 100 employees. His company was struggling with its product strategy and was teetering on the verge of irrelevancy and yet he was extremely preoccupied with whether or not to promote his director of HR to vice president. Unfortunately, just a few months later, they had to do a fire sale of the company. It was a lesson in prioritization that I never forgot.

Make sure people feel open to contribute

What if you don’t know what needs fixing? That was my biggest fear: that the 20 percent would not be obvious. That’s when you need the entire team’s collective wisdom and input. When a startup is small, it’s easier to get your crew’s perspective. Typically, you will know everyone by name, and most people will feel free to talk to you about anything. At my startup, even the most junior person could come up to me and say, “Hey man, I think xyz is not working,” and we would set about fixing it.

But when you’re in hyper-growth, that can change quickly. I remember how disconcerting it was the first time when an employee I ran into in the elevator was too scared to even talk to me. You have to address that proactively. Be open and accessible and create as many opportunities as you can for people to talk to you. As the CEO, you may be the one behind the wheel, but it takes the entire team’s contributions to keep the company on track.

Hire even-keeled leaders

You want your leadership team to be comprised of people who are emotionally even-keeled. Hyper-growth can be like a roller coaster for the organization. There will be times when you lose a deal to a competitor, a key employee resigns, or any number of unanticipated things occur. You want folks who won’t panic, who will remain rational and calm, and those who will always keep moving forward. We captured this philosophy in one of our key cultural principles: “No politics, no drama: just get things done.” This helped ensure that we always put the company first, solve problems calmly, and stay focused on our goals.

Focus on ‘guide rails’ for organizational alignment