Scaling Your Startup (eBook)

Peter S. Cohan is Lecturer of Strategy at Babson College. He teaches strategy and entrepreneurship to undergraduate and MBA students at Babson College. He is the founding principal of Peter S. Cohan & Associates, a management consulting and venture capital firm. He has completed over 150 growth strategy consulting projects for global technology companies and invested in seven startups—three of which were sold for over $2 billion. Peter has written 13 books and writes columns on entrepreneurship for Forbes, Inc, and The Worcester Telegram & Gazette. Prior to starting his firm, he worked as a case team leader for Harvard Business School professor Michael Porter’s consulting firm and taught at MIT, Stanford, and the University of Hong Kong. Peter earned an MBA from Wharton, did graduate work in computer science at MIT, and holds a BS degree in Electrical Engineering from Swarthmore College.

Contents 5
About the Author 6
Acknowledgments 7
Introduction 8
Part I: Exploring the Scaling Model 13
Chapter 1: Introduction 14
Stage 1: Winning the First Customers 19
Stage 2: Building a Scalable Business Model 19
Stage 3: Sprinting to Liquidity 20
Stage 4: Running the Marathon 21
Case Study: ThoughtSpot Grows to Over 250 People 22
What Is Different About the Startup Scaling Model? 25
Chapter 2: Creating Growth Trajectories 31
Growth Trajectories 33
Takeaways for Stakeholders 37
Growth Trajectories Success and Failure Case Studies 37
Stage I: Winning the First Customers 38
Successful Case Study: Platform.sh Wins Its First Customers After Careful Development and Extends Its Lead 38
Introduction 38
Case Scenario 39
Case Analysis 39
Less Successful Case Study: harmon.ie Takes Its Time Winning Customers 40
Introduction 40
Case Scenario 40
Case Analysis 41
Principles 42
Stage 2: Building a Scalable Business Model 42
Successful Case Study: Threat Stack Grows Rapidly and Plans to Follow the Same Six-Vector Growth Trajectory as Industrial Defender 43
Introduction 43
Case Scenario 43
Case Analysis 44
Less Successful Case Study: Actifio Struggles to Shift into a New Customer Segment 44
Introduction 44
Case Scenario 45
Case Analysis 47
Principles 48
Stage 3: Sprinting to Liquidity 49
Success Case Study: Looker Sprints to a 2019 IPO 50
Introduction 50
Case Scenario 50
Case Analysis 51
Less Successful Case Study: Snowflake Computing Grows Fast, But Is Losing Money 51
Introduction 51
Case Scenario 52
Case Analysis 53
Principles 53
Stage 4: Running the Marathon 54
Success Case Study: Amazon’s Value Surges from $0 to $825 Billion in 24 Years 54
Introduction 54
Case Scenario 55
Case Analysis 56
Less Successful Case Study: Blue Apron Stock Plunges As It Burns Its Cash Pile 56
Introduction 56
Case Scenario 57
Case Analysis 59
Principles 60
Growth Trajectories Success and Failure Principles 60
Are You Doing Enough to Create Sustainable Growth Trajectories? 62
Conclusion 62
Chapter 3: Raising Capital 63
Takeaways for Stakeholders 68
Capital-Raising Success and Failure Case Studies 69
Stage I: Winning the First Customers 69
Success Case Study: As JASK Wins Customers, It Raises Capital from Kleiner Perkins 70
Introduction 70
Case Scenario 70
Case Analysis 72
Less Successful Case Study: With $37 Million in Capital, OmniSci Gradually Gets Its Product Up to Speed 72
Introduction 72
Case Scenario 73
Case Analysis 74
Principles 74
Stage 2: Building a Scalable Business Model 75
Success Case Study: Varsity Tutors Raises $107 Million to Target $1 Trillion Market Opportunity 76
Introduction 76
Case Scenario 77
Case Analysis 78
Less Successful Case Study: Tipalti Raises $40 Million As It Ambles to Liquidity 79
Introduction 79
Case Scenario 79
Case Analysis 81
Principles 81
Stage 3: Sprinting to Liquidity 82
Success Case Study: Anaplan Sprints to a 2018 IPO 83
Introduction 83
Case Scenario 83
Case Analysis 84
Less Successful Case Study: SentinelOne Is Not IPO-Ready As It Grows to $100 Million 85
Introduction 85
Case Scenario 86
Case Analysis 87
Principles 88
Stage 4: Running the Marathon 88
Success Case Study: Talend Goes Public and Its Stock Soars 90
Introduction 90
Case Scenario 91
Case Analysis 92
Less Successful Case Study: Domo Raises $690 Million and Loses 78% of Its Value in Its June 2018 IPO 93
Introduction 93
Case Scenario 93
Case Analysis 95
Principles 95
Capital Raising Success and Failure Principles 95
Are You Doing Enough to Raise Capital at Each Scaling Stage? 97
Conclusion 97
Chapter 4: Sustaining Culture 98
Takeaways for Stakeholders 103
Culture Success and Failure Case Studies 103
Creating Culture Success and Failure Case Studies 104
Stage I: Winning the First Customers 104
Success Case Study: Twine Hires People to Do the Best Work of Their Life 105
Introduction 105
Case Scenario 105
Case Analysis 106
Less Successful Case Study: After Winning First Customers, First Republic Acquires Gradifi 107
Introduction 107
Case Scenario 107
Case Analysis 108
Principles 109
Stage 2: Building a Scalable Business Model 109
Success Case Study: ezCater’s Culture Helps Propel It to $700 Million Valuation 109
Introduction 109
Case Scenario 110
Case Analysis 112
Less Successful Case Study: Threat Stack Grows but Leaves Unhappy Employees in Its Wake 112
Introduction 112
Case Scenario 112
Case Analysis 113
Principles 114
Stage 3: Sprinting to Liquidity 114
Success Case Study: $200 Million Capital Raise and Culture of Customer Loyalty Propels CrowdStrike to IPO 115
Introduction 115
Case Scenario 116
Case Analysis 117
Less Successful Case Study: Copper Suffers Some Growing Pains As It Wins 60% of Its Bids Against Salesforce 117
Introduction 117
Case Scenario 118
Case Analysis 119
Principles 120
Stage 4: Running the Marathon 120
Success Case Study: Amazon’s Culture Helps It Keep Its Lead in the $180 Billion Cloud 122
Introduction 122
Case Scenario 123
Case Analysis 125
Less Successful Case Study: Nutanix Grows Fast After IPO but the Path to Profitability Remains Elusive 125
Introduction 125
Case Scenario 126
Case Analysis 127
Principles 128
Creating Culture Success and Failure Principles 128
Are You Doing Enough to Create Culture? 130
Conclusion 130
Chapter 5: Redefining Job Functions 131
Takeaways for Stakeholders 137
Redefining Job Functions Success and Failure Case Studies 139
Stage I: Winning the First Customers 139
Success Case Study: Ethos Wins Customers and Boosts Staff to 20 Three Months After Launch 139
Introduction 139
Case Scenario 140
Case Analysis 141
Less Successful Case Study: After 12 Years and $484 Million, Fuze Lacks A Scalable Business Model 141
Introduction 141
Case Scenario 142
Case Analysis 143
Principles 144
Stage 2: Building a Scalable Business Model 144
Success Case Study: Growing at 300% a Year, Hired Raises $132 Million with a Quick Path to Profitability 145
Introduction 145
Case Scenario 145
Case Analysis 146
Less Successful Case Study: Growing at 300% with $56 Million in Capital, Pendo Trades Off Profitability for Growth 147
Introduction 147
Case Scenario 148
Case Analysis 148
Principles 149
Stage 3: Sprinting to Liquidity 149
Success Case Study: Growing at 60% a Year, Redis Sprints Towards a 2021 IPO 150
Introduction 150
Case Scenario 150
Case Analysis 151
Less Successful Case Study: After 21 Years Will Click Software Be Acquired Again? 151
Introduction 151
Case Scenario 153
Case Analysis 153
Principles 153
Stage 4: Running the Marathon 154
Success Case Study: Netflix Disrupts Itself with Help from Chief Content Officer Ted Sarandos 155
Introduction 155
Case Scenario 155
Case Analysis 156
Less Successful Case Study: Okta Grows Rapidly, Goes Public, Yet Remains Far From Profitable 156
Introduction 156
Case Scenario 157
Case Analysis 158
Principles 158
Redefining Job Functions Success and Failure Principles 159
Are You Doing Enough to Redefine Job Functions? 160
Conclusion 160
Chapter 6: Hiring, Promoting, and Letting People Go 161
Takeaways For Stakeholders 164
Hiring, Promoting, and Letting People Go Success and Failure Case Studies 165
Stage I: Winning the First Customer 165
Success Case Study: With $173 Million in Capital, Cloudian’s Experienced Team Builds a Scalable Business Model 166
Introduction 166
Case Scenario 166
Case Analysis 167
Less Successful Case Study: Sapho Enjoys 320% Growth in a Small Market but Can It Get Large Enough to Go Public? 167
Introduction 167
Case Scenario 168
Case Analysis 169
Principles 169
Stage 2: Building a Scalable Business Model 170
Success Case Study: Confluent’s Scalable Business Model Is Built on World Class Talent 170
Introduction 170
Case Scenario 171
Case Analysis 172
Less Successful Case Study: BigID Targets a Large Opportunity but Can It Build a Scalable Business Model? 172
Introduction 172
Case Scenario 172
Case Analysis 173
Principles 173
Stage 3: Sprinting to Liquidity 174
Success Case Study: With Leadership from Two Nutanix Executives and $296 Million in Capital, ThoughtSpot Sprints to IPO 175
Introduction 175
Case Scenario 175
Case Analysis 176
Less Successful Case Study: After Five Years, Exabeam Raises $115 Million to Accelerate Its March to 10% Market Share 177
Introduction 177
Case Scenario 177
Case Analysis 178
Principles 178
Stage 4: Running the Marathon 179
Success Case Study: SendGrid’s CEO Takes the Company Public in 2017 and Sells Out to Twilio in 2018 179
Introduction 179
Case Scenario 180
Case Analysis 181
Less Successful Case Study: Anaplan Files for IPO with Inexperienced Executive Team 181
Introduction 181
Case Scenario 182
Case Analysis 183
Principles 183
Hiring, Promoting, and Firing Success And Failure Principles 183
Are You Doing Enough to Hire, Promote, and Let People Go Effectively? 185
Conclusion 186
Chapter 7: Holding People Accountable 187
Takeaways for Stakeholders 190
Holding People Accountable Success and Failure Case Studies 191
Stage 1: Winning the First Customer 191
Success Case Study: With $27 Million in Capital, Arcadia Data Holds Its 65 People Accountable for 500% Growth 191
Introduction 191
Case Scenario 192
Case Analysis 192
Less Successful Case Study: After Eight Years, PowerInbox Struggles to Scale 193
Introduction 193
Case Scenario 193
Case Analysis 194
Principles 194
Stage 2: Building a Scalable Business Model 195
Success Case Study: Qubole Aims at IPO with $75 Million in Capital After Doubling Two Years in a Row 195
Introduction 195
Case Scenario 195
Case Analysis 196
Less Successful Case Study: StreamSets Grows Rapidly in Competitive Market While Trying to Make Its Business Model Scalable 196
Introduction 196
Case Scenario 197
Case Analysis 198
Principles 198
Stage 3: Sprinting to Liquidity 198
Success Case Study: With $207.5 Million in Capital, WalkMe Sprints to a 2019 IPO 198
Introduction 198
Case Scenario 199
Case Analysis 200
Less Successful Case Study: With $90 Million in Capital, Panzura Forges a Scalable Business Model and Targets a 2020 IPO 200
Introduction 200
Case Scenario 200
Case Analysis 201
Principles 201
Stage 4: Running the Marathon 202
Success Case Study: Kronos Goes Public, Goes Private, and Keeps Growing 202
Introduction 202
Case Scenario 202
Case Analysis 203
Less Successful Case Study: Snap Burns Through Cash, Its Stock Falls, As Its Efforts to Hold People Accountable Fall Short 204
Introduction 204
Case Scenario 205
Case Analysis 206
Principles 206
Holding People Accountable Success and Failure Principles 206
Are You Doing Enough to Hold People Accountable? 208
Conclusion 208
Chapter 8: Coordinating Processes 209
Takeaways for Stakeholders 212
Coordinating Processes Success and Failure Case Studies 213
Stage 1: Winning the First Customers 213
Success Case Study: Arcadia Data Plans for Growth As It Adds Blue Chip Customers 214
Introduction 214
Case Scenario 215
Case Analysis 216
Less Successful Case Study: Molekule Builds a Better Air Purifier but Struggles to Meet Demand 217
Introduction 217
Case Scenario 218
Case Analysis 218
Principles 218
Stage 2: Building a Scalable Business Model 219
Success Case Study: Algolia Outdoes Google in Business Search As It Grows Along a Path to Profitability 219
Introduction 219
Case Scenario 220
Case Analysis 221
Less Successful Case Study: After Eight Years, Kinetica Hires a New CEO to Jump-Start Its Growth 221
Introduction 221
Case Scenario 222
Case Analysis 223
Principles 223
Stage 3: Sprinting to Liquidity 224
Success Case Study: JFrog Sprints to Liquidity with a Scalable Business Model 224
Introduction 224
Case Scenario 225
Case Analysis 225
Less Successful Case Study: After 10 Years, Virtual Instruments Is Growing at 20% While Hoping to Be Acquired 226
Introduction 226
Case Scenario 226
Case Analysis 228
Principles 228
Stage 4: Running the Marathon 228
Success Case Study: Okta Goes Public and Keeps Revenue Growing Faster Than 50% 229
Introduction 229
Case Scenario 230
Case Analysis 231
Less Successful Case Study: ForeScout Technologies Pays the Price for Lowering Its Growth Expectations 231
Introduction 231
Case Scenario 232
Case Analysis 233
Principles 234
Coordinating Processes Success and Failure Principles 234
Are You Doing Enough to Coordinate Processes? 236
Conclusion 236
Part II: Implications for Leaders 237
Chapter 9: What’s Next? 238
The Seven Principles of Scaling 238
Stay Intellectually Humble 238
Target Blue Oceans 239
Keep Betting on New Growth Trajectories 239
Create and Scale a Growth Culture 240
Hire Functional Experts to Scale Your Processes 240
Win New Customers Efficiently 241
Retain Your Current Customers and Sell Them More 241
Can You Scale Your Startup? Calculating Your Scaling Quotient (SQ) 242
Conclusion 248
AppendixA: Notes 249
Chapter 1: Introduction 249
Chapter 2: Creating Growth Trajectories 250
Chapter 3: Raising Capital 253
Chapter 4: Sustaining Culture 258
Chapter 5: Redefining Job Functions 261
Chapter 6: Hiring, Promoting, and Letting People Go 265
Chapter 7: Holding People Accountable 268
Chapter 8: Coordinating Processes 270
Chapter 9: What’s Next 272
Index 273