It took me six years to realize that during my first company, I saw only the first 50 days of the business. That is, I only saw half of what the business could have become, maturing to a 100 day organization.
Across a scale, startups begin at day 0. Established businesses, often those that are public (and those that aren’t reinventing themselves), are at day 100.
A founder begins with an idea or a problem that needs to be solved. Sketches and scribbles fill notebooks. At this time, the idea isn’t fully realized or tested. It’s just a thought with the potential to become a passion later on.
More research goes into the idea. Discussions with close friends begin, checking if the idea has legs. The single founder who started the idea likely finds a close a friend to go deeper into the problem and begins to evaluate the market potential.
A team forms to focus on what now becomes a base or minimum viable product. Early stages of sales begin, identifying paying customers in a target vertical.
For example, this is the stage where Diapers.com had a website but founders were running to Costco to purchase diapers in bulk while processing orders manually, with the help of their dads.
Employees join the original team. Either sales are growing very well or not growing aggressively as planned. A brand around the idea cements. The organization is fairly flat, with the founder still performing generalist tasks. Early attempts at paid marketing begin and a basic understanding of core unit economics emerges.
Ridejoy, a car-sharing service, never found found exit velocity for a venture-backed business. Sales stalled and the service shut down. Yet, Stripe, a payments API, not only saw sales grow early but began to experience sales exponentially increase across each stage below.
A critical inflection point occurs. The founder realizes, at this day, that building an idea and building a business are two different skills. “Am I [insert specific skill, i.e. sales, product, etc.] person or am I CEO and a manager?” the founder asks. The team is much larger and specific functions are created for employees but growth may slow - where too many inputs occur and therefore, the challenge shifts to managing. The core product expands in hopes of generating more sales.
The creation story of Twitter is relevant to highlight in this stage, where the original product mind behind the service, Jack Dorsey, stepped down and a more business oriented leader came in, Dick Costolo. Braintree, a payments infrastructure company, experienced a similar transition where founder, Bryan Johnson, stepped back and recruited an experienced manager, Bill Ready, to lead the business to an $800m acquisition by EBay.
Today is the most important day in the company’s life-stage, where the founder must choose a hard right or a hard left for business direction. Should the founder turn right, the company continues to sputter along with associated headaches of re-accelerating growth. However, should the founder turn left, hard realizations come to light: “I’m not cut out to serve as CEO. Should I step down and find a replacement?” The founder accepts reality - the world of black and white - and decides the organization is ready for evolutionary change.
With costs under control, the company is no longer flat as resources have been realigned. Clear hierarchy and structure guide the work day with defined processes. Operating groups and mid-level divisional managers are put in place. A new acting CEO focuses on the original product and begins to optimize sales. Growth begins, and more importantly, predictable and recurring revenue emerges.
Words like “efficiency” and “accountability” become part of the vernacular in the office(s). Management continues to zero in on key performance indicators (KPIs) and cost drivers to the business. The entire company is a significant multiple greater in headcount from the early days. Instead of revenue and growth problems, the business suffers from communication and culture hurdles. Investments in people management and retention begin.
Sales are at an all-time high. Profits are near and more importantly, strength of will set forth by the founder is now displaced by strength of financials. The company continues to build in unison, extracting value per employee as never before seen. Depending on expectations from the private market, that is, if the company took venture capital, now is a good time to consider a liquidation event (i.e. M&A or IPO).
Disruptors, like HotelTonight, a last-minute hotel OTA (online travel agency) or, Airbnb, a rental home marketplace, not only changed an entire and entrenched industry, but continue to grow faster than their peers.
Today’s company is no longer an idea but a tangible business, with products, profits and people. The public market welcomes a successful startup transformed into a burgeoning organization.