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CRUSHING IT

The “conventional wisdom” about growing your startup that isn’t so wise

REUTERS/Gregg Newton
Not every startup launch trajectory should look like a rocket’s.
  • Amy Spurling
By Amy Spurling

CEO and Co-founder, Compt

Published Last updated This article is more than 2 years old.

“StartUpify Inc.” is making a big splash on the tech scene. It’s been around for two years and is the newest VC darling. Everyone is talking about it.

The founders raised their $10 million Series A round of funding in what felt like 10 minutes, and they’re now on a hiring spree.

They have reported they’re going to double the size of the team this year and have signed a lease for a new 15,000 square-foot office. Their Twitter feeds are filled with 🚀 and 🍾 emojis.

They’re crushing it … right?

How many companies can you think of that followed the pattern above? Did they end up being unicorns or did they end up fizzling out after a few more years? For every Dropbox, Stitch Fix, and HubSpot you hear about, there are a thousand companies that have quietly faded away. Not surprisingly, you just don’t hear about them.

When it comes to growth, every company has a unique path to follow. Part of the challenge in determining how quickly you should grow is knowing which path you are on. It is a lot like driving: Driving on a country dirt road is very different from the Autobahn. Hitting a speed bump going 2 mph could stop your car outright on a dirt road because you aren’t going fast enough. Hitting that same speed bump at 120mph could flip your car and kill you. In this case, you’re going, or growing, too fast.

Based on 15 years’ experience at six companies, here are three startup trends I see that can lead companies in the wrong direction if they don’t put it in the context of their own circumstances.

The “we like to run lean” approach

Chances are that if you work in any function other than sales or engineering, you have heard this one. This is a great philosophy and one I theoretically subscribe to.

Don’t spend too much money.

Cash is king.

In practice though, what this frequently looks like is a company saying we want some of you to run lean.

Finance/people ops/systems/marketing end up rubbing sticks together to make a fire so the company can add more engineering and sales talent.

Telling your team that you want to double revenue year-over-year and that some teams are going to keep using the same systems with no additional support means that you are setting them up for failure. It’s essential to have salespeople who can close deals, but what happens when your finance team’s software doesn’t allow them to collect customer payments?

If a company is going to succeed as one team, your business model has to allow for scalability throughout your organization as you grow. If you don’t, you end up with one team that is staffed appropriately for growth, and you end up with another team that becomes a very rapid bottleneck.

Invest smart, but don’t be cheap. Otherwise, it will create more problems later on.

The “let’s hit the gas!” approach

This approach is textbook “we-closed-our-Series-A” move. The first big check is in the bank account, and the investors want you to start scaling yesterday.

If you have product-market fit and the technology is ready to go — fantastic, hit the gas now that there is fuel in the tank.

However, I have yet to meet that company. More often, there is still chicken wire and duct tape holding your tech together. It’s difficult to have enough money coming off your seed round to build out your team and your tech fully, and there is a high likelihood that you don’t entirely have product-market fit completely figured out yet.

If you blindly follow the “you raised money, so now, double the size of your team” adage and you don’t have all your tech and team ducks in a row — you will likely rip through cash very quickly by over-hiring and paying too much for a few hires. This can result in needing to do a big reset with a down round and layoffs 12–18 months out. You may still survive the turmoil and regroup, I know companies that have, but if you are slightly more thoughtful in your planning and scaling, you can avoid that entire cycle of pain and not lose a year of growth.

The “more perks = happier employees” approach

General wisdom says that to stay ahead of your competition, you must attract and retain the best talent. And with today’s talent shortage, companies are turning to creative ways to attract, retain, and engage top talent. With the increase in salary transparency, a popular trend which has emerged is offering company perks to employees to attract talent. I started noticing this trend about ten years ago with things like free food and beer in the office, but with the escalation in the past five years — everything from massage to dog walking to egg freezing — we have hit an inflection point.

As a three-time CFO and two-time COO, my aversion to the expanding perks strategy is no secret.

My stance isn’t that there’s a problem with offering perks, or the perks themselves — there are many valuable perks out there (e.g., student loan forgiveness, gym memberships, hubway rentals, etc.,) — it’s that they do not align with individual employee needs or with company culture.

When companies offer perks and their team cannot take advantage of them — whether it’s because they are in a different stage of life (post college grads have different needs than the married with children crowd), they have allergies, they are remote, or they have different needs/goals, the unintended consequence is that they end up feeling neglected or isolated.

Not everyone wants student loan forgiveness, hubway rentals, an on-site company gym, free beer, or a candy wall.

The Bureau of Labor recently shared a shocking statistic; ~31% of an American’s compensation, money beyond salary, is in the form of perks and benefits. So if your employees are not taking advantage of the perks, they’re missing out on compensation which the company allocates to them.

The company perks approach also bring up some challenges for the HR team. Few people are aware that process of managing perks is antiquated. Teams are still using email and spreadsheets to track what perks are being offered, when, and to how many people. The process is still completely manual.

To offer more perks, the company needs to hire more people to manage, operate, and maintain them. On top of it all, it’s impossible to calculate their ROI for the company and team. Collectively, these issues lead to overwhelming operational inefficiencies, accumulating administrative burden, and worse, increasingly unhappy employees.

There are many paths to becoming a successful company, but all to often companies are derailed by following the typical startup acceleration playbook. In my experience, the startups that succeed do so despite following this “conventional wisdom”, certainly not because of them.

This article originally appeared on LinkedIn.

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