Not all companies will be winners. In Zero to One Peter Thiel basically lays out a formula that claims in any VC’s portfolio, only one or two companies will ever truly experience explosive growth that produce 100 times return on investment.
That’s OK for the rest of us who work at companies that are growing steadily throughout the years to build a great business from 1 to 4, 4 to 8, 8 to 20, and so on. This type of growth looks explosive, but when compared to true “rocketship” companies it’s clear that these slower growing companies are just experiencing steady growth. The graph of a rocketship’s growth is exponential, typically displaying hockey stick growth. Steadily growing companies are typically acquired between years 5 and 8 and have successfully carved out a niche in a competitive space. Think about companies like Metaweb and slide.com.
How do you know if a company is a “rocketship” before the shuttle blasts off? Here are a few lessons and leading indicators from rocketship company Zenefits.
- Zenefits brought on Sam Blond as VP Sales early in his career. Sam worked his way up the ladder at Echosign after they were acquired by Adobe. He moved from Strategic Accounts to being the company’s first Sales Manager, then lateralling into the Director of Sales for the division. Today, Echosign is the fastest growing business unit within Adobe thanks to his efficiency in understanding sales and expediting the sale process to close deals. Because Sam was on the front lines of a scaling organization before joining Zenefits, he was able to prep them for success.
- They had the right investors in the company’s early rounds that tossed in around 60 million when they saw the opportunity. Unfortunately, when a company doesn’t have Tier 1 Investors, founders spend huge chunks of time fundraising every year, distracting them from spending time on the business.
- Their sales/ marketing hiring classes always consisted of 3 to 5+ people. LinkedIn can be a great indicator if you start tracking the new hire classes at these types of “rocketship” companies.
- The way Zenefits and other companies like it allocate VC dollars is another way to understand a company’s likelihood to blast off. Rocketship companies use dollars to grow at a pace of “what if” and immediately test, optimize, and kill what isn’t working. On the other hand, the small businesses that grows at a steady pace may add people here and there, trying to make sure each dollar spent and each new hire is perfect.
Another big decision Zenefits made was to have the SDR function report to marketing. This frees up the sales leaders bandwidth to optimize their time for selling instead of simultaneously selling and figuring out how to drive leads into the funnel. It would be tough to grow at a rocketship speed if you had to figure out how to optimize for both.
I’m speaking for B2C companies as this is not my expertise and their needs may be completely different. Working at a growing startup is extremely exciting and most of us will only get opportunities to work at these types of companies once, BUT if you are looking to find a rocketship company early on in the process, these observations should make it easier to spot.