The Best Advice for a Startup Founder Post-100 Million USD Funding

Congratulations on securing 100 million USD in funding. This is a milestone that many startups dream of achieving. However, with such a substantial amount of capital, it’s crucial to navigate the journey of scaling strategically. Here are several key pieces of advice that can help guide your path:

Stick to the Plan and Ignore the Cash in Your Bank Account

Despite the abundance of funds, it’s essential to adhere to your initial business plan. The temptation to scale quickly can be overwhelming, but doing so without a solid foundation can lead to exhaustion of resources and ultimately result in running out of cash. Here are a few reasons why sticking to your plan is crucial:

Prevent Misinvestment: Rapid scaling without a tested business model can lead to misallocation of funds. This not only depletes your resources but also sets your startup up for failure. Focus on Quality: Quick expansion without due diligence can dilute the quality of your product or service, leading to a negative impact on customer satisfaction and subsequent revenue losses. Create a Sustainable Path: A well-thought-out plan allows you to scale gradually, ensuring that each step towards growth is sustainable and adds value to your business.

Beware of Packard’s Law: Hire the Right People, Not Just Anyone

Your new influx of capital will likely subject you to immense pressure to hire rapidly to support your growth ambitions. However, this is where Packard’s Law comes into play.

Packard’s Law: Maxim H. Dworkin put it succinctly as, 'The only way to scale is with people who fit the company’s culture, not just someone who can get hired quickly and do the job.' David Packard, co-founder of Hewlett-Packard, realized that a company’s growth is constrained by its ability to hire the right people, not by available opportunities.

The consequences of ignoring Packard’s Law can be severe. When growth is accelerated, and talent is compromised, the fallout can be devastating. For instance, a company I was associated with during the 1990s had a gold standard of A-level talent throughout most of the decade. However, near the end of the decade, as growth accelerated, B and C-level talent were brought in to meet demand. This predictably slowed down the company’s growth, and it has not recovered since.

Ensure Cultural Fit: Hire People Who Fit Your Company’s Culture

Awareness of Packard’s Law should serve as a guiding light. As you scale, ensure that you consistently hire individuals who fit into your company culture. The culture you build should be a key differentiator that sets your startup apart. Rushing through hiring can lead to the inclusion of unqualified or culturally misaligned employees, which can have detrimental effects on your startup’s success.

Focus on Customer Service and Product Quality

While financial metrics like profitability are important, they do not always reflect market trends. Here’s an example to illustrate this point:

Consider a company called Ferrellgas, which faced significant challenges due to a decision to focus heavily on product profitability rather than customer service. This shortsighted approach ignored the fundamental importance of delivering exceptional customer service and quality products.

Staying True to Your Brand: Customer service and product quality are inseparable elements that contribute to a strong brand. Without addressing these, excessive focus on profitability can lead to a negative customer experience, which can result in a significant loss of market share and revenue.

In conclusion, as a startup founder post-100 million USD funding, it is crucial to adhere to your original plan, hire the right people that fit your company culture, and maintain high standards of customer service and product quality. By following these guidelines, you can ensure that your startup not only survives but thrives in its new environment.