High Growth Handbook
“High Growth Handbook” by Elad Gil
My Notes
Intro
- book is split into sections based on his original blog posts and book site
- Mark’s advice for what to do after you’ve found market fit: Win the market, get to the next product, and everything else (become expert at scaling your distribution, hiring, process, etc)
- At 50-150 people you should be layering in finance and HR folks; Dunbar number (you can only really know 150 people)
- To get the rest of the market you often have to convince people who are not early adopters to try your product (or someone else will)
- Product defensibility is really tough in tech, lots of good engineers out there can build what you’re building; distribution defensibility can be stronger and growth efforts will allow you to feed back into product with more cash, talent, and buying power
- Raising your prices will really tell you whether you have a hold on your product or not
- A great product person + a great architect == great product; each of your product efforts should have these two people (could be one person); get as many of these people as you can, otherwise it might fall solely on the CEO whose time will become increasingly less
- in their opinion, hierarchies and matrices are bad, just have small independent, two pizza teams (“the Bezos rule”)
The CEO
- Must manage thyself really well —essentialism! How do you spend your time?
- Learn to say No, Delegate, Audit schedule monthly
- as company grows product syncs may become more advantageous for CEOs than daily scrums
- Give up old responsibilities, stay healthy, take vacation once a year, work on the stuff you love
- Hold “skip level” meetings (upper-level management bypasses mid-level management to talk directly to non-managerial employees) with folks on the front lines every now and again
The CEO Growing with Company
- “Working with (employee)” guides can be extremely useful
- As company scales, so too should your processes and communication; getting everyone on the same page and aligned (OKRs) and operating efficiently (scrum/product)
- For each department, who makes the final decision? What decisions can I make without the CEO/manager? Which decisions do I need to run by them? This can be good to know explicitly.
- Codify company’s long term goals, values, and how the CEO wants to be involved
- What are things only I can do within the company?
Writing “Your Handbook”
- write your own handbook of how best to work with you
- keep a running doc for 1-on-1s with each person
- work styles that could be used for your own handbook (data driven, don’t mind deadlines slipping but don’t let me know the day after; detail-oriented, FYI me but call me if you need direction; I like hearing lots of ideas and white boarding things out; I love a good debate to a better outcome; I won’t be offended if you send me the same email twice bc I didn’t respond — I get lots of emails a day and will try to read them all but may not be able to respond, FYI = no need to respond but good to know)
- People need to know who to go to for final decisions
Managing/Creating Your Exec Board
- your board are like in-laws
- sometimes it is possible to keep a VC investment while swapping the board member from the VC (if they aren’t working out)
- try to comprise your board of senior entrepreneurs and big-time operators from across markets you’re interested in that have an aligned vision for the company
- write a job spec for board members/director
- get board members who understand the different parts of the business growth journey (can be VC’s or entrepreneurs)
- companies best interest > VC’s financial interest
- your independent board member should be somebody you would hire but is out of reach, someone you’d go into business with if you could
- what you don’t know want in the board
- the micro manager
- the grey-haired “you’re a bunch of kids” type
- someone looking purely for financial, status, or network gains
- chairman of the board is usually CEO, but can be someone else — if someone else, they can independently call for board meeting without the CEO being there
- they can also be the “tech lead” for the board corralling opinions and funneling that back to the CEO
- this person can be day-to-day involved in strategy but typically not anything that works directly with departments or employees
- the make-up the board should change as your company grows
- look to get a diverse group on the board — key: “diversity of thought, experience, and opinion”
- getting rid of board member, specifically investors, is tough; things to try: buy them out, make changes during company growth stages/changes, ask VC firm to swap the partner
- venture hacks lots of advice on managing/creating your exec board
Board/CEO Transitions and Governance Issues
- board works with CEO dynamically to assemble the plane as your falling off the cliff
- you need to know where you are in growth: risking it all to make it work, you have assets and scaling, you’ve scaled relatively large and need to protect and grow
- board-to-CEO relationship as a red-yellow-green light, green is CEO is go go go and we advise, yellow is back n forth, and red means making a change
- board members should ask how can they best contribute, phrase their advice as questions to elicit conversation
- with CEO succession/change, you’re looking for a cofounder; not a set of skills; someone willing to take the same risks a founder would
- board members should augment and empower the CEO, would the CEO want to work with the board member 1-2 hours a week?
- board meetings should focus on strategy; send meeting notes out 48-72 hours in advance with key metrics and state of the company; if needed, you can have separate 1-on-1s with board members prior to the meeting to get questions out of the way that could suck up strategy time
Board Management Interviews
- group think, large committees never built anything great; keep your board as small as possible and don’t let them become the ones running the company
- vc’s usually invest in more than one company, so their time is limited and your use of them is extremely helpful, but in specific situations like knowing the external market, deep domain expertise, or help in raising capital
- consider making all board seats temporary including that the CEO could be removed at any time (nobody is safe so everyone behaves)
- don’t let board management suck up all your time; you don’t have to have fancy power points and you can space the board meetings out more to help free up time
Recruiting
- write a job description for every role; need to know what is important for the hire; important to note what you are not looking for (“not looking for a junior developer”)
- ask same or similar questions across multiple candidates
- split questions across multiple interviewees
- ask candidate to produce something
- write your feedback quickly
- have a scoring system that doesn’t allow for wishy-washy neutral answers
- run reference checks
- when you’re sure about a candidate, be quick to get out an offer
- early-on, the best way to recruit can be from internal employee networks
- in-house recruiting person can be helpful to source talent, setup interviews, and pass along to hiring manager
On-Boarding
- send a welcome email (intro new person, who they’ll be working with, their role, goals for quarter, and interesting fact)
- Welcome package (swag, user manuals for people you’ll work with)
- Assign a temporary buddy who is a go-to for FAQs (but still have an FAQ of course!)
- Ensure goals are set early and new person has opportunity to take ownership over the task they were hired to do
- Not all employees will scale with the company; if an employee isn’t willing to learn or grow it may be time to go
CEO Considerations
- CEO main role is deciding what the company will do and making sure it gets done (generally strategy is 5% and execution is 95%)
- CEOs must master saying no to things that seem important but aren’t (too much focus on press, quick response times to investors, etc) — things that are: sales compensation plans, OKR, making sure the company continually learns to provide more value
- CEOs should never get too far away from product
- It’s worth the extra effort to try and help great early employees scale with the company
Building an Exec Team
- make sure the person fits the next 12-18 month trajectory of company in terms of experience and expertise
- do they think like owners; could they lead and scale out a portion of the business?
- ask CxOs from other companies what makes a great person for their role and take elements of that for your own hiring of a CxO
- always reference check exec candidates and ask “if this person joined my company, would you come too?”
- good exec hires should be thinking 6-12 months in advance (not 5 years)
- typically you know an exec hire is doing well by the number of people heading to their desk to ask questions (both on their team and across function)
- exec meetings with the CEO are often much more beneficial to the execs working laterally with each other than the CEO (who has been getting updates from exec during weekly 1-on-1’s)
- switching an exec to report to another exec (instead of you) can be difficult when the execs are near the same level; circumventing this situation may require some additional help to up-skill one of the exec’s if you really like them and think they have potential
- the best way to retain good talent is to hire people that they can learn from and keep their growth trajectory high!
- within the first 30-60 days is usually long enough to determine if the new exec is working out
- once you are 70% sure on a new exec candidate that is good enough to pull the trigger, waiting any longer and you probably are getting more false negatives than false positives (and you can always rebound from a few execs that didn’t work out)
- CEO’s should have somewhere between 3-7 direct reports, 5 might be the ideal (one a weekday)
- CEO’s should choose their direct reports based on the nature of the company and which areas are most high risk that could use their direction — CEO’s should always consider minimizing the number of tie breaks they are having to solve on a weekly basis and see where they can hand those off to another exec
- a solid COO is a popular way to support and compliment the CEO — adding horsepower/bandwidth/scaling areas the CEO doesn’t prefer or have super sharp skills
- a COO should be strong enough to be the CEO of the company
- COO should be process-focused, someone you can learn from, have experience in the areas you are wanting to delegate to them, have the ability to manage other executives
Hiring a COO
- remember a CEOs job isn’t to solve every single problem, it’s to make sure the problems get solved
- You can’t be good at everything, a COO is a unique position that can be shaped to support a CEO in the areas they need help or have no experience
- It is very advantageous to the CEO, COO, and rest of the company to explicitly state (put in on record for review) where the responsibilities are split and which exec makes decisions about what (so that people aren’t confused and don’t know who to go to)
- When COOs start it is really important they get very familiar with the organization fast, meet with as many as folks as you can and learn what they think would help the company grow, try to get a big win in the first 60-90 days
BD Hiring
- Good BD people are extremely detail oriented, structured, tenacious, willing to walk away from a bad deal, put company first, have a sharp eye for legal issues even if no legal background, charismatic
- Bad BD people may be great sellers but terrible closers; not detail oriented, make too many give/give/give promises (impatient), rush to close deals, don’t think like an owner, they optimize for themselves and not the company, they display a “cowboy” mentality
- When screening BD, check their references and see their history of deals struck
Scaling
- keep your eye on your growth curve and when you think it may slow down; continually consider what your next innovation will be
- to grow into a different market may required completely different entrepreneurship
- your big growth decisions will effect how your brand is perceived
- it can be really helpful to have numbers/finance-oriented people teach engineers and other non-finance folks ROI and other terms that are used at the executive level to make tactical decisions
Restructuring and Scale
- There is no perfect organizational structure— when restructuring think next 6-12 months
- Reorg quickly and fully — don’t drag it out and don’t do it partially; otherwise you’ll open yourself up to lobbying and politicking across the company
- during rapid, exponential growth, it may make sense to have someone in a “wolf” role who works cross functionally as a band-aid until an executive(s) can take over operations in that area (wolf isn’t a long term solution)
- During periods of scale, many positions that may have been more broad during startup will become more focused — employees that are able to make adjustments into their more focused roles and scale with the company will succeed
- Growth and scale can be a tough time with roles/reporting structure changing — advice to stick it out: keep working hard and doing good work, continue to think like a CEO, and strive for all the work you do to help the company’s top level objectives
- When companies are experiencing rapid growth, you’ll look like a new company every 6-12 months, change will be inevitable so just expect it
- Steer your companies culture, and revisit your values regularly so that you can filter new hires who aren’t a good culture fit. What are CS values?
Company Culture
- be explicit about your culture; don’t say things like “we’re detail oriented”; say things like “at X, we expect superb quality and we may rework your designs and code multiple times before it is adequate”
- Culture IS important, but remember it can change and you should revisit it; don’t let early culture such as “our company grew because flat organization” hold the company back it is is scaling at that value no longer makes sense — maybe it does, maybe it doesn’t, you’ll have to make that call
- New exec hires will undoubtably change culture, and that is fine — that is likely why they were hired in the first place; communicate this change to folks, let them know the direction you are wanting to steer the company culture; doing more of this upfront will help avoid long, drawn out frustrations from people who may not be a good fit anymore as the company scales
- Don’t get attached to what your culture was/is; be aware that company culture will and should evolve as your company grows
- When growing internationally it can be very helpful to have people in the (cultural) HQ before sending them out to the new office; likewise, starting a new global office can be much more successful by planting an experienced employee with strong culture there (at least to start) and then building around it
Diversity
- building a diverse team and investors must be intentional b/c typically first hires from inbound or people you know which tends to be a fairly homogeneous group
- Be intentional about how you source and hire to eliminate biases, have the skills you want interview, a rubric for grading, and make sure you ask the same questions to everyone
- Split interviews into sections so that you each person asking questions can focus on one or two things that you are looking for (don’t put the burden of testing everything on one person)
- Where are you reaching out to candidates? If someone visited your website or workspace would they feel like they belonged?
- Review and feedback should be structured and data driven — when they aren’t, people assume bias takes over or that no structure was in place which erodes trust
- Do surveys on culture, ask people do they plan to be here in 1 year, etc
Marketing and PR
- Growth (data driven) versus PR/brand
- 1 internal comms person per 100 employees
- A CMO should be able to tell your company story internally and externally; they should have operational experience (not just all flash and no substance); and they need a ton of trust with CEO
- At some point your company will be large enough to warrant PR — when that happens you need to be aligned on your story, how you talk to press, who talks to press, things that can be made known public, off/on the record, etc
- Press does not equal success
- Crisis management (how did this go wrong, acknowledge the problem, take action)
- PR gives the company a voice (and humanizes it), it can help build trust among consumers, investors, customers, etc
- Never lie, be transparent, and embrace things when they fail or break
- PR needs a story. Without a story they can’t go to work
Product Management
- PMs are the CEO of a product
- PMs act as buffer between sales/customers directly lobbying engineering
- PMs make trade offs between design and engineering and business to build the right product
- PMs are not just project “managers”, they should understand the product, prioritize work, be cross functional, create roadmaps, listen to customers/sales/market for new requests, analyze data, know how the product competes in the marketplace, it’s strengths, competitive advantages, etc
- Types of PMs: business, technical, design-centric, and growth — can be a mixture of these
- PMs should have the ability to prioritize requests not just schedule them
- Hiring PMs: what products do you use? How would you design a product? How have you dealt with competing requests in the past? Example of pushing back or green lighting a feature (how did you make the decision?)? What metrics would you track for our product? (What behaviors may they encourage?) how to determine a successful launch? Get an idea for how autonomous they have been in creating, selling, and then deploying an idea
- CEOs may function as the head PM for awhile, but as you scale, this will no longer be efficient and you will need to bring in a VP or Product
- This person should be aligned with leadership on the vision for the product and set major roadmaps that then are used as a guide for development and project decisions
- They should know how your product competes in the market, build a compelling case for why people would use it, have ideas for how to win the market
- Final decisions and blessings should still come from the CEO, but the VP of product should be given responsibility and trust to own parts of the product forecasting, planning, execution, etc
- Product planning and review/retro meetings are essential, and help keep a large team aligned on the progress and success/failure of a product
Late-Stage Investing
- late stage rounds are becoming more common as IPO tend to happen later in a company’s life (even a decade after inception)
- investing types (hedge fund, VCs, etc.) differ in the amount of money they are willing to front as well as what they care about; ex: some care more about unit-economics of the company while others care about market control or your company’s defensibility, etc.; some expect a board seats; some expect long-term versus short-term; some are more willing to work with start-ups while others are not
- some investors can help introduce you to other markets, companies, and/or executives
- some investments can help solidify partnerships
- try to avoid special preferences in deals and awarding additional board membership (want to keep boards small)
- a tender is a large selling event where a company agrees that set amount/value of stock can be sold at a set price over a period of time
- High valuations for your company may limit your ability to grow in future rounds so don’t grow too fast, keep it slow and only necessary to what you need
- Secondary sales are stock sales by people who already have stock (employees or former employees)
- If an owner or founder was the sell a sizable portion of their stock, that signals that they may not be too confident in the future of the company
- For employees exercising secondary options, it can be helpful to put a value and percentage limit on what they can sell — for example 20% or 1 million (whichever is first) to encourage people to keep shares in the company
- For employees looking to sell stock you should def consult legal and accounting advice (me especially, most of this is way over my head!)
- After IPO, your potential employee pool will shift to more conservative, risk-adverse people; you will need to be intentional to ensure that innovation and risk taking still happens
IPO
- companies should go public as soon as they’re able: (1) upcoming quarters are predictable (2) 50 million in revenue (3) low variance quarter-to-quarter
- Create an “IPO team” is very helpful
- In any round of funding try to keep as much ownership and board as possible
- Selling common stock can be a way to expand whole keeping control
- Early investors will likely be much more loyal than people jumping in late rounds
- Companies can be built much cheaper and cash is more plentiful right now (last 10 years — federal reserves keep printing it!)
- As a company try to always operate as if your strapped for cash and people — it will help spur innovation and scale out of necessity
- Be extremely slow to hire, and quick to fire
- The old model of offering 0.1% of the company to employees is becoming more outdated — your first hires are really late founders and because of the opportunity of cost of them going with you (instead of taking another good gig), you should likely offer more of a stake like 1-2%
- At a billion dollar valuation (as an example) you should seriously consider using your equity as currency to buy other companies that can offer a competitive advantage; for example a 10 million acquisition is only 1% of your equity, and if it is able to provide a 10% bump in revenue then it will certainly net positive
- Types of acquisitions: team (equi-hire) product, and strategy buys
- Don’t discuss acquisition possibilities at an all-hands
Acquisitions
- If acquiring a team, you can have members of the team still go through your hiring practices to make sure they are up to snuff and a culture-add
- What expertise is our team missing that could push us forward?
Final Thoughts
- Carve out your niche and become really really good at it
- We’ve scaled lots of industries to their breaking point where the experience is actually worse for the consumer/user; think healthcare where more people have access but not 1-on-1 direct care unless it is really expensive
- Companies need to think social responsibility in what they are building
- Pay it forward!
- Don’t buy a giant chrome panda