The Long March – Transitioning from a Start-up to a Growth Stage Company with Big Ambition; The Growth Stage Recipe – Ingredients Required to Build a Big Winner

The Long March – Transitioning from a Start-up to a Growth Stage Company with Big Ambition

Glenn Solomon (@glennsolomon) is a Partner with GGV Capital. Some of his recent investments include Pandora, Successfactors, Isilon, Square, Zendesk, Quinstreet and Nimble Storage. This post is part of a series for growth stage entrepreneurs who are thinking big; the full series can be found at

Congratulations Ms. Entrepreneur. After years of toiling and challenging insurmountable odds, you’ve finally moved through the gates of start-up hell. You’ve established product/ market fit, you’re 10x better that your competition and you’ve begun to scale customers and revenues. You’ve also assembled a talented and passionate team who is bought into your culture. Take a breath. Take a bow. Now, come to the frightening realization… if you want to build a big company, you’ve got much more work ahead. The moves you make at the growth stage are increasingly important. Different challenges emerge and the bets become bigger, the stakes higher.



Below are four keys you’ll need on the journey as you transition from start up to growth stage mastery. This isn’t an exhaustive list but these four are a good place to start.

Hidden Gems

Hugely successful companies have a few guys or women who are 10x better than everyone else. These people are often not executives, but rather individual contributors with special gifts. Typically they’re not easy to spot in interviews, and they come in many shapes and sizes – different execs have told me about their “secret weapon” being a sales person, a product designer, a developer.

These hidden gems are so important because they can drive highly disproportionate value. For example, a top notch growth stage CEO confided in me that one guy, a sales engineer, drove half of the $200M exit price he achieved on his first company’s sale. When this CEO joined his second company, he brought this secret weapon with him. The CEO took this second company public and ultimately sold it for over $1.5B. He credits the same hidden gem for creating approximately 25% of the value. One sales engineer. Nearly $500M of value created across two companies. Yes, hidden gems can really move the needle.

As you move from start up to growth stage, you need to identify your hidden gems and find ways to leverage their talent as much as possible. One way to do this is via emulation. For example, if you have a sales person who sells 3-5x more than anyone else, study closely what he or she is doing. As Chip and Dan Heath encourage in “Switch,” are there any “bright spots,” or uniquely successful behaviors, you can isolate and train your other sales people to emulate?

Another way to get the most out of your hidden gems is to keep them focused on what they do best. The temptation with great performers is to promote them. If promotions take these gems away from their core competency (eg, a great sales engineer losing touch with customers as she is moved up to manage all the other sales engineers), you’re detracting from value creation. Find a way to balance career development with keeping your all-stars playing the positions they were born to play.

Find Your Flywheel

As you move from start up to growth stage, your absolute growth targets get larger. For most companies, it gets increasingly hard to scale at rapid rates as the law of larger numbers takes over. As discussed in a prior post, one key to building a really successful company is to get better as you get bigger. Just as a flywheel collects energy over time and then delivers it at rapid and increasing rates, you need to cultivate and nurture sources of potential rapid growth that you can unleash when needed to help propel expansion. How can you do this?

One source of aggressive growth for some successful companies is partners. As Google was ascending to prominence in the mobile market with Android, a symbiotic relationship developed with Samsung that has helped both companies flourish. In the early days of enterprise software, Accenture ignited explosive growth for several application companies such as Peoplesoft. Although you need to be careful – no company is in business to help your business flourish – mutually beneficial partnerships can help propel growth for periods of time.

Sometimes partnerships that drive growth are developed in the field. Other times, especially when you’re trying to get the attention of a much larger company, you may need relationships to help. Cultivating the right set of independent board members, advisors and investors is key. They can help. And, if you’re able to get a flywheel going, growth will get a lot easier.

Stay Focused

When you begin to see your core business ramp, it’s tempting to assume you’ve nailed it and start looking for expansion opportunities. Mistaking early success in your core business for an ability to succeed elsewhere can be fatal however. In a world of limited resources, you risk failing to capitalize on the opportunity you’ve created in your core business by letting your focus wander. When payroll outsourcing firm ADP first went public in the 1960s with four main business units, the big question on Wall Street was what would become the “fifth leg of the stool” to fuel future growth. Fast forward 50 years – ADP has a $30Bn market cap with only two business lines, actually shedding two of its original businesses and focusing on core payroll to grow.

Of course you need to continually re-evaluate the marketplace as it shifts and consider options for future growth. In fact, the best growth stage CEOs with whom I’ve worked have all been adept at placing several “small bets” in areas adjacent to their core business, such as international markets, alternate forms of distribution and product extensions. But, these bets are best designed to avoid distraction from the core business, made with limited resources and killed quickly if they’re not working.

Professionalize Your Processes

As a growth stage company, your success is going to be measured on things like revenue growth, operating margin expansion, market share gains and the size of your total available market opportunity. Gone are the days when getting a product out on time, hitting cash burn targets, or hiring a key executive was considered a major victory.

With this shift in expectations, you need to invest in professionalizing the process of running your company. Perhaps most important here, you need to develop of set of metrics that really helps you assess the long term health of the business. Devise these metrics to give you early indicators, or warning signs, of what’s coming up ahead for the business. You may discover that additional capital, for instance, can be invested for high return and growth. Conversely, you may recognize the formula isn’t quite solved yet and that you need to keep iterating before pushing for rapid expansion.

Although your start up culture might not have supported process professionalization, find a way to fuse your culture with the benefits of additional structure. Developing a robust budgeting process may not sound appealing, for example, but if it helps your company serve customers better and in a more timely manner, you’ll get buy in. Similarly, closing the books promptly after a reporting period will add stress on an organization, but if it helps attract new investors, you can link the arduous task to a win for the company.

Nobody said going long to build a highly successful company was easy! But, those in the growth stage who find and manage their hidden gems, nurture flywheels, stay focused and professionalize process will set themselves up for success.

February 11, 2013

The Growth Stage Recipe – Ingredients Required to Build a Big Winner

As contributed to Fortune Term Sheet

For the few shining examples of enduringly successful high growth tech companies, there are far more that don’t make it.  Some of the most talented entrepreneurs fail to get their companies up and running, tripped up by technology or product issues.  Others grow their companies but plateau well below their aspirations.  Others still start successfully and may even get public, but are unable to achieve consistent growth and ultimately fail to create sustaining value.

Although rare, long-term successful companies create enormous value.  While many thousands of companies receive venture funding annually, rarely do more than 100 of these achieve an IPO in any one year.  And, an IPO is not an end game if you want to go long.  In fact, you can count the number of tech companies with over $1Bn in market value today on a few pairs of hands, and the list gets much shorter over $10Bn.  There are common traits among the winners, however, and aspiring entrepreneurs should always try to learn from existing models of success.

Four Keys To Going Long

There are many buttons to push when you’re running a company but in the spirit of Occam’s razor, identifying the simplest path can really help with focus.  The following list is far from exhaustive, but if you can nail these four, you’ll set your company up to be a long term winner.

Get Better as You Get Bigger

Most companies that achieve early success find that it gets harder, not easier, to continue prospering as they get larger.  Sometimes the initial, founder-led sales are difficult to replicate as less passionate salespeople are hired.  Other times, early demand turns out not to be indicative of a broader market need.  Whatever the culprit, growing gets harder and maintaining consistent pace feels a bit like running uphill in sand.

Some rare companies get better as they scale.  Sales teams get more efficient as more customers are added and the product matures.  Key metrics such as conversion rates, deal sizes, repeat purchases and support costs improve with growth.  The results are improving profit margins and higher return on capital over time.

Look at recently-public Workday.  The company has been steadily improving profitability with scale.  Sales & Marketing costs, R&D and G&A have all been declining as a percentage of revenue as the business has scaled.  Similarly, despite recent challenges, Apple’s return on equity has improved by 10% over the past five years.

Getting better with scale isn’t easy but if you want to build a long term winner, it’s essential to invest in your business.  This may slow growth for long periods – for example, you may need to slow hiring of sales people until you can build a mature enough product that will support efficient growth – but the long term result will be worth it.

Target an Enormous Market

There’s no shame in building a dominant player in a small market, but if you want to build a long term winner, your market has to be huge.  There are two ways to get there – disrupt an existing large market or build into a new one.

When Marc Benioff started and focused on CRM, this was already a huge market with a leader, Siebel Systems, generating $1.3 billion in the year before its acquisition by Oracle.  Launching as the first true SaaS application, Benioff disrupted the CRM market.  Today, at over a $3 billion run rate, Salesforce is much larger than Siebel at its peak, but Benioff didn’t have to create an enormous market – it was there and he was able to wrestle leadership from the incumbent via disruption.

Google, on the other hand, had built great search technology but hadn’t quite figured out how to monetize it in its early days.  Sure, Google didn’t invent search marketing, but the company re-invented this market, and single-handedly grew search marketing 20x in size over a 10 year period.

If your company is targeting an enormous market, your mission is to figure out how to win meaningful market share.  If your market isn’t huge, figure out how to grow it by introducing new products or attacking adjacent spaces.

Differentiate to Protect Against Competition

The more successful a company, the more likely it will engender serious competition. Unfortunately for undifferentiated high fliers, increased competition often causes trouble. Groupon grew very fast, but its competitive moat wasn’t deep and too many others have been able to offer similar savings to consumers.  The company has struggled to create value as a result.

Contrast Groupon’s experience with LinkedIn.  LinkedIn benefits from a meaningful core differentiator – its unique data set.  This data is enriched continually as business professionals keep their profiles and networks fresh.  Given the power of the network, there isn’t a viable alternative.  LinkedIn has been able to effectively monetize this data set, and without the threat of competition, appears positioned to grow profitably for the foreseeable future.

Build a Great Management Team

The best management teams excel at building the three attributes mentioned above – they structure businesses to get better as they scale, they expand the markets they go after and they create significant competitive barriers. In business, the only constant is change however.  The best teams recognize this and continually refresh the talent pool, grooming new leaders who are out in front of inevitable market shifts and who enable agility in the face of dynamic markets. The top teams also surround themselves with the best people, often times with boards that both challenge them and help them win.

There you have it.  While these four keys aren’t rocket science, they’re not simple to achieve.  The good news is that focusing on them early can help improve your chances of success!

January 28, 2013 

Why I’m Writing a Series for Growth Stage Entrepreneurs

Entrepreneurs starting companies need and deserve a lot of support.  Creating something from nothing is clearly not for the faint of heart.  There are roadblocks in nearly every direction, but founders find ways to surmount even the most daunting obstacles.  While the job of starting and building a start-up is incredibly challenging, the good news is that there is a lot of useful information and tools now available to entrepreneurs to help them on the early-stage journey.

While succeeding as an early stage company is a monumentally difficult task, those who get to the start-up finish line realize that new and similarly vexing challenges await in the growth stage.  Early stage leaders need to ace their formative product development, product/market fit, initial team build out and early customer acquisition. The prize for those who succeed are new, growth-stage hurdles such as scaling out sales and marketing, perfecting and hardening a business model, erecting a financial model and team that fits the business, international expansion, and orchestrating a winning IPO and life as a public company.  As leaders forge deeper into the growth stage, the bets get bigger and the stakes get higher, amplifying the need for sound guidance and tools to help make good decisions.

This is a series geared for founders and company leaders who are in the growth stage or preparing to enter the growth stage with a desire to go long and build a really big company.  In my 16 years as a growth-stage focused VC, I’ve found there can be lots of confusing noise out there.  Leaning heavily on my own experiences, I’ll try to lay out some simple frameworks and game plans to help filter out the noise and allow for focus on more meaningful signals.

I’ve been blessed to have worked with a great group of company leaders over the past 16 years from whom I’ve gleaned all of what I’ll share in this series, but I don’t view the work as complete.  I hope to foster a participatory dialog and I want to hear your comments and feedback.  The richer the interaction, the more useful this content will be for the next set of growth stage entrepreneurs who want to go long.

January 21, 2013 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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