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Startup Growth Pains: what are they and how to navigate through them (with the great Kintxo Cortés!)

Sebastián Fernández-Medrano
May 6, 2021

Over the last months I have had the immense pleasure to learn from and work with Kintxo Cortés, current General Manager at Shopify Spain and luckily, one of Samaipata’s operating partners in The Hive (our network of advisors working with our portfolio on a weekly basis).

A couple of weeks ago, we had a great discussion at Samaipata led by Kintxo about startup growth pains, something he is very familiar with given his experience in fast-growing tech companies like Airbnb (he joined the company back in 2012 when they were <400 people globally and <50 in EMEA, and left it in mid-2018 when they had scaled to 5.9k globally and 1.3k in EMEA people) and Shopify (the team has grown 2x in 1.5 years since he arrived). We both thought it would be awesome to share our favourite learnings in this short post.

What we mean by growth pains

Fast-growing young startups can be like little Frankensteins with some parts of its body moving faster than the rest, generating imbalances in the company. It is hard to grow organically and consistently without some things going under pressure. We call these things “Growth Pains”, and you will feel them when you are scaling a company at a very fast pace. The purpose of this post is to highlight those parts of your company that can be more severely affected by fast growth. You better keep an eye on some of these, as we believe they can mean the end of your business if unchecked!

We have identified three things that can break when a company scales fast, all of them highly sensitive:

  1. Company culture & talent management
  2. Communication
  3. Performance

Let’s go one by one!

1) Company culture & talent management

Many early-stage companies are born with a strong DNA (the company culture) and this becomes critical to talent acquisition and retention over time. Here are some of the most common challenges when scaling teams fastly and putting the company core values under pressure, and some quick tips for them:

1.1) Hiring the right people especially at C-Level

This sounds logical right? Well, the truth is it’s not easy to find the right person. Bringing somebody who’s not suitable for the role and who doesn’t match the company values can cost you a lot of time, money and severely harm the company culture. Here are some quick tips:

  • As founders, be (at least minimally) involved in the hiring process of every position until you reach a minimum scale (e.g. 30 minutes interview of top 2–3 final candidates per role).
  • Have core value interviewers: these are culture carriers embodying the company culture, trained to take care of a part of the hiring process.
  • Ask your investors for help! Part of their value proposition should be helping you with hirings.
    1.2) Friction between early employees vs. new experienced hires:

Early in the lifetime of companies when they lack resources, have no reputation/sexiness and no traction whatsoever, startups typically hire risk-taking/friendly employees who will join regardless of the company potentially dying in a few months. These profiles tend to be generalists, but at some point the needs of the company change and you need more senior and specialized talent.

This brings a lot of friction because there are employees who made a big bet on you, accepted a low salary, made a big commitment, and worked long hours in the early days. They basically made a bet when there was a high level of uncertainty, and when new talent arrives (many times to be put on top of them as experienced managers) they start to lose power and influence in the company and it can be very frustrating for them to see reporting layers added on top. It is hard to swallow especially for early employees unable to grow faster within the company as they are not suitable for more senior positions.

This can ultimately lead to early employees leaving, which is a big pain since these individuals embody the company culture and understand the business from A to Z, which is detrimental for new profiles onboarding. A couple of quick tips here:

  • In case you are an early employee facing this situation: remember this is your team, and that you are here to serve a broader purpose (the company vision). Your early commitment will always be praised, but keep expectations low as nobody is getting married to you.
  • In case you are a founder dealing with the matter: be clear with everybody from day one, set expectations and reward early employees but make sure they understand the company will need top (and more senior) performers as the time passes by.

1.3) Frequent changes in management:

Teams within startups change often. The same employee can experience pivotal changes all the time given the tenure in some tech companies is pretty short. The best advice here is to build a culture where everybody understands that “change is the only constant”.

1.4) Lack of core company values:

Many early stage companies wait too long to define their vision, mission and values. While doing so may sound cheesy and less of a priority, we believe it’s key. Early stage companies lack the resources to be on top of all the things moving below their feet (you simply can’t be on top of every employee). Setting guardrails to fuel independent decision making from employees is crucial. Otherwise you fall into a black hole where managers are pushed to micromanage their teams. Quick tips here:

  • Set some principles to make sure people know what you expect from them (Netflix Culture Memo is a cool startpoint).
  • Foster autonomy via team alignment and company values. You have brilliant individuals around you, let them fly as long as they comply with the company culture.

1.5) Keeping the company culture over time:

The more people who join the team at the same time, the higher the dilution of the company culture. Your first 20–30 hirings were very committed and were happy to work long hours but when you start hiring additional people you will face employees not performing at the same pace, having higher expectations on company perks and big differences in culture understanding (stronger ego, LinkedIn logo hunters, frictions with career progression, etc.). This can have an impact on the performance of some early hard performers and it’s key to keep an eye on this over time.

1.6) Fatigue and burnouts:

The ultimate driver of churn. As you scale, it’s very important to be alert as it can be an invisible illness. It’s very common to demand the very best from employees to a point that can be unbearable, and if you don’t have the proper processes and playbooks these issues can be deadly for a company.

2) Communication

Communication can be another broken toy in fast-growing companies. As the team scales, badly managed communication channels can be a core source of misalignment. Here are some of the common challenges and some tips too:

Losing track of the company leadership’s mission and priorities causes cracks throughout the entire organization, especially at a very early stage (when focus really makes a difference!). Some quick tips to foster alignment:

  • Organizing weekly or biweekly all-hands meetings.
  • If you are the CEO, sending a brief weekly email talking about the company, the vision, things that are concerning/exciting, etc., can be a great exercise of alignment and transparency. It’s typically sent early on Monday morning so that it’s the first thing you read at the start of the week.
  • Interlevel meetings where C-Level / middle management are asked to meet with more junior employees can also fuel connection and engagement.
  • Another great idea are ‘sidekicks’, which are randomly scheduled time slots to connect with different people within the company every week. There are some bots available to match people via Slack for instance.

2.2) Friction and overlaps:

Believe it or not you may face situations where different teams are working on the same things for several months. It’s very common in the early days if you haven’t set the proper communication channels. Lack of communication can generate overlaps between different departments/geographies, and this of course impacts resource allocation.

2.3) Fear to communicate up:

When the company reaches a certain scale, some employees can feel shy/intimidated to share what they think/feel with the management/leadership. The root cause may be simply an increase in the team size (bigger audience = harder to share stuff) but it can also be due to the arrival of new managers with a more aggressive/narrow-minded managerial style. This can be the origin of a lot of bad things, hence we highly suggest you tackling it from day one. Some quick tips:

  • The clearest silver bullet is encouraging people to be open and braver. This communication link can’t be broken, and people need to be brave to raise their hands and voices always.
  • Build a culture around upward feedback between employees and managers and the leadership (if needed, it can be anonymous sometimes).
    2.4) Connection with former managers:

As the team evolves and experiences manager changes, you may see employees often reaching out to former managers with whom they built great relationships in the past. While staying in touch is not an issue at all (and employees see it as a great benefit), these interactions can become a big pool of hours from key managers that should be spent in their current responsibilities and not coaching (or eventually managing) former employees. In addition to the cost of the time allocated, it can generate misalignment and bad politics between managers. This is hard to avoid, but the best advice here is to make it clear to managers that they should spend their time managing their current teams and not stepping into somebody else’s responsibility. Otherwise, they should find a time over the weekend to grab a drink with whoever they want but avoid doing it during work time.

2.5) Lack of high quality feedback:

Last but not least, having proper performance review processes can have an immense impact in performance improvement and engagement. Some quick tips:

  • Foster a culture of 1-on-1s between managers and employees.
  • Build some basic career materials for employees where you can track performance and they can have visibility on career progression.
  • Do at least a couple of performance review sessions per direct report every year, and make sure feedback is bidirectional.

3) Performance

3.1) Lack of insights and dashboards:

The faster you scale the greater the importance of keeping track of how are things going (speed typically comes with greater lack of visibility). It’s key to keep an eye on what is happening at a company, department and employee level. The sooner you build some analytics the better! In case you’re operating a marketplace, check out our cheat sheet with key metrics to track.

3.2) Lack of processes:

Fast-growing companies can suffer from not building playbooks from day one. Developing a culture of “playbooking the world” (writing a playbook of every new process and always leaving a footprint of best practices learned) is key to scale efficiently.

3.3) Investor metrics becoming more important than pure business metrics:

If your company board has become a fundraising meeting, there’s a big problem to fix. It probably means investors have started deciding which metrics are the important ones to focus on instead of trusting the North stars defined by the founding team. This is typically derived from a fear of transparency and building a board dynamic driven by the need to ensure follow-on financing from existing investors (especially common in fast-paced fundraising storylines). The best suggestion we have for you founders is to trust your gut, make your own decisions and spend time aligning investors on what’s important for the business. Otherwise you won’t be running your company anymore, but you will continue to be blamed for failure. Check out this article for more tips to turn your startup board into a secret weapon.

3.4) Lack of time to review and question existing processes:

Having processes in place is as important as keeping them alive by having a culture of constant improvement. Make sure you provide room to question the status quo. Some companies do process reviews every 3–6 months questioning everything that has been done before, ensuring constant innovation.

**

At Samaipata, we are always looking for ways to improve. Do not hesitate to send us your thoughts. We strive to partner with early-stage founders and to support them in taking their business to the next level. Check out more ways in which we can help here or for all our other content here

And as always, if you’re a European digital business founder looking for Seed funding, please send us your deck here or subscribe to our Quarterly updates here.

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