Achieving scale is the holy grail for any tech startup founder, but transitioning from barely scraping by to scaling up effectively can be difficult and unpredictable. So, we rounded up 3 experts from Founders Network to address key considerations founders must make when scaling their team, product, and user base. Panelists included:
- Luke Ahn, Founder & CEO of Fronto: $40M Raised, 5 Startups, 80 Employees Hired. At 18M downloads worldwide, Luke’s mobile marketing app has become the staple home screen for users in 20+ countries.
- Neha Sampat, Founder of Built.io: 200 Employees Hired, 4 Startups, 100% Customer Funded. Customers Include: Cisco, VMWare, DreamForce & Other Fortune 500 Companies.With more than 15 years of experience in enterprise software, Neha has scaled Built.io to grow from 50 to more than 200 employees across offices in three continents.
- Rony Chammas, Founder of Peerspace: $18M Raised, 50 Employees Hired, 6K Active Listings, 1M Users. Rony has scaled his locations, listing and users globally.
Q: What is the right balance between hacking things together and building for scale? When should mindset change?
Luke Ahn: “Building a great product is a continuous process. There is a reasonable distinction between finding product market fit and building your user base. I used LTV. If my LT is 0 (not bad or good, it’s neutral) it means we’re not going to lose any money. After your LTV becomes 0 or, for example 10 cents, that’s a great time to consider spending your marketing budget, which translates to scaling your product. Having a combination of LTV 0 or above, and a good retention rate makes for a solid indicator that it’s time to scale up.”
“There is a reasonable distinction between finding product market fit and building your user base.” @GetFronto tweet
Q: When should you transition from keeping it lean and doing things on your own vs contracting to move fast?
Neha Sampat: “In the early days you’re trying to see what sticks and you slowly figure out what works. But it comes down to balance. Early on things are tight. In my company, capital efficiency is everything because we’re 100% customer funded. We start out by doing what’s absolutely essential to the business in house. We hire in house and make sure those employees stick around. Those non-essentials don’t need to be in house. So it’s important to decide who you need on the full time team, and who you can contract out. For example for us, we would want a Marketing Manager in house, and that Marketing Manager would hire a PR agency and a designer, but they would be outsourcing those employees. We’ve recently hired a CFO, he’s been with us part time for 2 years and now he’s transitioning into full time. So, deciding when to spend your most precious resources is crucial, and knowing when you need to take things to the next level. The most important part of scaling is figuring out where you’re missing efficiencies and how you can make your resources go further and faster. Mainly that breaks down to automation. There are so many things that can be automated that we don’t automate. A minute of someone’s manual time saved by automation is so valuable.”
“Deciding when to spend your most precious resources is crucial to #scale” @Builtio tweet
Q: What was your number one push to scale? How did you think about the risks and benefits of scale?
Rony Chammas: “We’re a local marketplace, when we started the business we were a seed stage company and focused on SF. Getting VC funding was our push to scale. We started growing geographically to LA, NYC, and Chicago. And we we were firing darts to figure out how to scale. When you decide you’re going to raise from a VC, you’re really going down a path that’s going to force you to go as quickly as you can, and my advice is to see if you can make the most of it. If anyone is raising money from a VC, be aware that it will be a force function to scale. If I could go back in time, I would wait to take my Series A. But if you decide to raise, you’ve just gotta go. I’ve enjoyed the experience raising venture capital, it’s been a rush and a learning experience.”
“If raising money from a VC, be aware that it will be a force function to #scale.” @Peerspace tweet
Q: Luke, you’ve acquired a very strong user base, what was your scaling strategy behind that?
Luke Ahn: “At the very beginning, you don’t want to spend any money, but once you’re ready to scale up a bit, the next stage is user acquisition campaigns, so you’re going to end up spending your money on Google, Facebook ads, etc. If you’re at more than 10M users, it’s all about building followers. It goes back to a story from when I was young. It was my first time building a fire and I didn’t know how. And instead of collecting kindling and building a base for the flames to light, I just poured lighter fluid all over the wood— instead of thoughtfully determining the correct way, I just opted for a quick fix, and catch-all strategy. In the case of my business, we’ve tried out many types of user acquisition campaigns, and the best case you might want to benchmark is Airbnb. They’ve done great things in terms of referral campaigns. I also suggest founders learn about and utilize the AARRR formula; it’s very useful to manage your product in terms of growth hacking.“
Q: Neha, how did nurturing a strong customer success and support team contribute to your scale? And would you suggest founders do the same?
Neha Sampat: Customer Success is the most important core value that we hold, and it breaks down into 3 areas:
- Culture: We wouldn’t be successful unless we have a 90% retention rate with our customers. Therefore culturally, we are inherently focused on customer success.
- Efficiency: That’s the journey to scale. As you grow, you get more customers and you have to navigate the main issues most customers are facing. It’s about how to anticipate issues and solve them before the customer even runs into them, and solve for that part of the process efficiently.
- Transparency: Being honest. It can be as simple and automated as having a status page up if there’s a bug and your customers can’t get ahold of an individual. For our higher touch customers, we have Quarterly Business Reviews to understand how to continue to make them successful. That way, it’s a two way street and a partnership between you and your customer.
“Customer Success is the most important core value that we hold” @Builtio tweet
Q: Rony, you’ve mastered scaling up quickly in new locations. What is your advice for developing a model that accounts for scaling physically?
Rony: “The key question to ask is do you want to go wide or deep? Going deep for us meant sticking geographically with SF, LA, and NYC, and focusing on those markets. The question was: Do we want to become a national marketplace and try to have spaces in the top 30 markets in the country? Aka, going wide. There are tradeoffs for both, and we’ve tried both. We’ve tried going wide, my advice would be to have a fallback plan, a way to back out of it— that’s why we use contractors, and we eventually realized we weren’t ready to expand to Europe. So we decided to not make it an initiative for the company. That flexibility will allow you to switch strategies pretty quickly. So we switched and went deeper in 4 markets. And we’ve seen great results with that level of focus. Now, we’re about ready to go wide again. So again, the flexibility to switch up the strategy on a moment’s notice is really important. when scaling physically.”
“When scaling physically, the question is do you go wide or deep?” @Peerspace tweet
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