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Managing Hypergrowth

Ross Mayfield
Expert Author
Published: 2005-03-10

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I'm speaking today at a World Financial Symposium event on Growth and Exit Strategies for Software and IT Companies.

Earlier today Veritas founder Mark Leslie spoke on the Sales Learning Curve. Here are my notes from one of the sessions, three CEOs who have experienced managing hypergrowth companies. Some good management insight from people who have been there and are doing that.

Brian Bacon, President & Founder - Oxford Leadership Academy - (moderator)

Three things you have to do when founding:
* Do something you love to do.
* Something you can do better than someone else.
* The Economics

Paul Sutton, CEO - Kabira Technologies (1550% growth)

On hiring and cycling: Looking to add new players to the team at all times. Early in your career you hire on gut reaction ,then you learn practices, but he has come back to gut reaction. When things are going well, its an indication to start thinking about what to change. When things go well, its because of decisions 9-12 months ago. Comes back to his gut about who can take them to the next step.

Sales learning bump, is about when to push the pedal to the floor. When you get the signals that you have a product, acceptance, then picking the hotspots where the product was applicable. Now they challenge is to take a generalized product and figuring out how to take it to the next level. I actually personally give away the upside and internalize the failure. You think about if you should exit, but you should also try to learn how to scale yourself and your company.

Layoffs are about communication. We all have investors. Its another test for a CEO, a hurdle to get to value down the line.

Tony Naughtin, CEO - Network Clarity, Inc. (former CEO - Internap Network Services)

Passion. Balance. Focus. Risk managed growth. You can be insanely passionate or passionately insane. Have to be very open to learning and adapting. You want to be insanely passionate. Importance of the team, no successful entrepreneur does it by themselves. Don't stray too far from home unless it will add value in a predictable fashion.

Can your team do things they have never done before. Get the work done even through it doesn't seem like its work. Be uncompromising about who you bring onto the team, but recognize by looking over the horizon at what the change points will be in my business model. Beyon $10, $50 and $110 inflection points (symptoms of if managers will capabile of managing 300 people in an engineering group or systems in place to take care of you 8 months out). Need to let people go, but have qualified people as backfill, don't make a move without an immediate replacement.

Knowing when to stop leading. When you grow something beyond your ability to manage it. In 2001 they were one of eleven public companies in the space looking at sales vs. churn and how the market changes were really effecting their business. 96% of the customers we had then we have now because we moved quickly to get the bad news out there. Every one of the other companies followed suit in 6 weeks. Then they raised more capital to get to profitability (making up for revenue). $100M Pipe financing. Decided to take himself out, after taking the company all the way up and all they way down (firing 300 people), the same person can't take it up again.

On sales growth... Better not be about me, or I have 1/1000 chance of being successful. If you have built your team you are not the smartest person in the company. CEO forces and refreshes the vision. Built their sales opportunistically. Something that was differentiated. Hired 3 director and 1 VP out of MCI when WorldCom acquired them. Then built underneath them. They allow engineers at an early stage to have a big influence on how the sales organization down to a lowly AE to make sure people could talk solutions. Lots of training. Last thing you want them talking about is price.

After layoffs, trust between employees. When private company, stay true to culture after the layoff. When public, do the same thing but its harder to do because morale has more to do with the stock price.

Having to expense options will hurt us not just monetarily, but as a country.

Pure plays are companies that do one thing, but also typically don't do the marketing research before doing it. Going to the next level, we made the same mistake. Didn't have people from the software industry who knew how to ask the right questions to form value added application bundles.

Joe Lynam, CEO- PaymentOne (9300% growth)

Focus on the early stage clients. What it takes to drive their metrics, they monitor client metrics above their own. Think big from the outset, plan to be big, think about large markets where you address pain points with differentiation. Go big or go home. When you start small and have an intimate relationship with customers, there is room for profit, which then provides a model to explore and scale.

Stages of growth. Early is Wild West, not all people thrive in all stages. Set expectation that this business will grow and take on entrenching processes. A CFO who is really a VP of Finance and the need for a true CFO, can be handled if expectations are set for the team up front.

Have to have, if not me, who? That keeps me in my seat for now.

On the sales learning curve...They help merchants get their charges into the telecom bill. In the early stage it was a CEO/CTO selling the deals. At $31M we still dont have the renessance sales rep, partially because of the size of our deals. Recurring model, so they have a big infrastructure sale, then sell services on top

Managing the downturn...layoffs can be a mystery or you can let people know what's coming. Most important element was communicating a transparent view of the business to the entire company in a day after meeting. Transparency and honesty is the best approach to manage something that is never fun and always difficult. After it happens, every day its like 100 days behind you.

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About the Author:
Ross Mayfield is CEO and co-founder of Socialtext, an emerging provider of Enterprise Social Software that dramatically increases group productivity and develops a group memory.

He also writes Ross Mayfield's Weblog which focuses on markets, technology and musings.

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