What Makes a Strong Startup CEO

By Gigi Levy-Weiss

In all the companies I founded and invested in, one thing was always clear about leading a startup — it’s hard. Really hard.

Most Founders won’t come to their startups with years of leadership experience. Yet I’ve seen firsthand that there is a direct link between a Founder’s leadership skills and the outcome of their startup.

The first step in developing your leadership skills is to understand that as a startup CEO, you have two different tasks that may seem like one but are actually different – being a manager and being a leader. And you must excel at both to succeed.

The CEO as Manager

For years now, as I’ve served as a CEO in multiple companies, I kept asking myself what the simplest way to understand the CEO’s role is. I’ve come to the conclusion that, at the end of the day, the CEO role as manager can be represented by a cycle with five stages:

The CEO Role as a Manager
  1. Defining a strategy: setting the vector (direction) for your company.
  2. Recruiting the right team that is best positioned to execute the strategy.
  3. Setting goals that steer your team in the right direction and then letting them “run”.
  4. Assisting where needed when your team runs into challenges; or, where the goals show they are off course, setting them back on track.
  5. Monitoring progress and periodically reassessing the two building blocks – your strategy and your team – to make sure they still make sense. And having the perseverance to adjust accordingly & begin the cycle again.

This framework is the essence of a CEO’s responsibilities in managing their company. In a large company this cycle should be performed at least monthly given today’s fast-changing world; in a startup? Probably weekly. That’s the pace you want to aim for as a CEO.

The CEO as a Leader

Being a CEO is more than just management. While that core of management is important, and takes a lot of your time and effort, it’s also important not to get so busy and caught up in that cycle that you lose sight of other big-picture responsibilities.

I see the big-picture leadership responsibilities  — driving people, vision, and culture — as ‘orbiting’ the core CEO role as manager.

The CEO Role as a Leader

The reality is that if you only focus on the management part of being a CEO, you’re very unlikely to build an amazing company. It’s the leadership part that is going to get your company to be the winner because there are many good managers, but very few great leaders. And it should be said that leading a startup is 10X tougher than leading a standard company given uncertainty and the need to change your direction often.

Leadership is harder to master than management. It takes soft skills and big-picture thinking. But it’s also harder because the best leaders lead by example. It all starts with you. You’re the CEO, you’re the inspiration. You’re the one people look at. You have to become the type of person that you’d want leading yourself — the type of person who you would willingly follow.

And while you can recruit managers who are better than you are at their job, it’s very unlikely that your team will ever strive to be better than you on the core leadership area of people, vision, and culture. Why would they even try? And so your example becomes not the basis but the actual ceiling of what you can expect from your team. That’s why leading by example is so critical.

People – Top leaders actually care

Hiring is one of your most important jobs in leading a startup, especially early on when the DNA of your company culture is at stake. Choosing who to add to your team at this stage has long-term compounding effects for your company. The mantra of the startup world is speed, but hiring is the one area where it pays to take it slower because the cost of mistakes in hiring is much greater than running a failed experiment.

But once people join your team, you have to lead them – which means more than just giving orders.

Though it’s counter-intuitive to many Founders, one of the biggest differences you can observe about top leaders is that they care deeply— about the company, about the product, and most of all about the people on their team. Top leaders understand that if they care and their team feels it, they’re going to love their work and company. Moreover, it opens the possibility for them to care as well, which will make them better leaders in their own right. So by caring, Founders will quickly see those compounding effects.

The thing is that caring is incredibly hard to fake. Demonstrating you care comes in the little things, and if you authentically care, your team will know it subconsciously. Here are two simple, high-leverage things you can do right away to lead people better:

  1. Spend time with people. It’s easy to get caught up in endless tasks and feel like there’s no time for anything. Carve time out for 1 on 1s. It shows you care, it increases commitment, and it increases your team’s performance. It doesn’t have to be daily or sometimes even weekly, but it is important to make the time.
  2. Listen to your team. As a leader, it’s often best to let your team speak first and listen to what they have to say, because once you’ve stated your own view, it’s difficult for people to challenge you. Getting the best out of people means not standing in their way, but enabling them to do what you hired them for.

Vision – Leaders have a clear and powerful vision

My colleague Pete has previously written about the need to have a clear and compelling vision for investors when you’re fundraising, but it’s just as important — if not a lot more important — to have it internally for your team.

Because what you’re asking people to do is very difficult as the leader of a startup, You’re asking them to work usually at not very high pay. You’re asking them to work very hard — often at all hours of the day and night. And you’re asking them to be 100% committed to something that may not work out.

All of this is contrary to human nature, and it’s something you have to overcome as a leader in motivating your team. A clear vision — a great “why” — gives you the best chance to do that.

But that vision has to be something your team connects to in their individual roles. It’s not just important for the vision to be compelling, but if you’re a junior person at a company working all those hours for little pay, you also have to know how what you do ties in to that big vision, how each role plays a part in reaching the company’s goals.

And that’s something you have to articulate as a leader, often and clearly. Typically you have to repeat it many more times that you intuitively think you need to. Not only do you want to tell and retell the story and vision of your company, but you want to paint a picture to your team how they fit into that bigger vision as individuals.

Your goal as a leader is to get them ‘addicted’ to your compelling “why”. All the time you spend on that is going to pay big dividends in your team’s commitment, in their understanding, and in their feeling that they’re part of something bigger than their job. I often call employees and ask them about their company’s strategy only to find out to the surprise of the CEO that they have little idea what it is and how they are helping the company get there. Never allow yourself to get to that position!

Culture – Leaders create and implement a distinct culture

Big companies always say they want startup culture, and often adopt the trappings of startup culture like hoodies and more vacation days and coconut water. Unsurprisingly, this rarely works.

It’s a lot more fundamental than that. We’ve written about this before in the NFX Company Culture Manual, which gets more into the tactics. From a leadership perspective, it’s important to understand that everything you do as a leader helps set the tone for your culture. It really does flow from the top down, for better or for worse.

As a leader, there are several things you can focus on to promote a culture of speed and excellence:

  • Encourage collaboration. A collaborative team is fast. A team of individuals working alone is slow. That’s just the reality of it.
  • Push communication & transparency. This is more than just saying you’re transparent. It takes real effort. Without it, your teams will not reciprocate so you will not benefit from them being transparent with you.
  • Fight complacency. It’s human nature to start getting complacent the minute you start succeeding and growing. Celebrate success but stay paranoid, knowing that complacent startups usually fail.
  • Promote self-awareness. Lack of self-awareness is the parent of poor decision-making. You’ve got to create an environment where challenging you (up to a point) is a great thing.
  • Be optimistic. Be optimistic about your team, about yourself, about your chances to win. Without this it’s hard to get yourself and others to stay motivated.

There’s a lot more to talk about here, and the playbook for how to engrain each of these things in your culture as a leader is something we’ll be sharing in the future as an update to the NFX Company Culture Manual. But as a leader, know that diligent attention to your culture is key.

Leadership is tough, keep learning every day

Every morning in my most recent stint as CEO, I asked myself:

Am I taking my team where they ought to go?

Am I caught up in the rabbit hole of management, or am I actively leading?

Am I leading by example?

And the days I said yes, those were the good days. Being a leader is tough. Being a startup leader is even tougher. That’s why not everyone’s a great Founder or a great leader. It requires a lot of work and attention. You have to keep learning every day to have a chance. But when you nail it, the upside is massive.

Mary Carabeo

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Emily Gresham

From Zero to IPO: How Growth Needs to Evolve at Every Startup Stage

Brian Rothenberg’s career has spanned every stage of startup growth, from scrappy zero to triumphant IPO.

We’ll start with a snapshot of “zero”: It’s 2009, and Rothenberg and his SkillSlate co-founder Bartek Ringwelski are piled on the seat of a rickety Vespa knockoff, zooming precariously through the streets of Manhattan to their next pitch meeting. Fast forward nine years (plus one Skillslate acquisition and a stint at TaskRabbit later) to “IPO”: Rothenberg has scaled Eventbrite’s $5B+ growth engine as VP of Growth, and he’s watching the company surge to a nearly three-billion-dollar valuation as it debuts on the New York Stock Exchange.

Rothenberg is now putting that growth knowledge to work on the other side of the table: He’s an alumnus of First Round’s Angel Track, a master class for emerging angel investors, and is currently investing in and advising early-stage startups as a partner at defy.vc.

Growth is top of mind for the new founders Rothenberg works with: According to First Round’s 2018 State of Startups report, it’s the number two concern that founders say keeps them up at night. For the founders tossing and turning over customer acquisition and retention, Rothenberg’s opening up about the lessons he’s learned from supercharging growth at every stage of scaling.

The oft-overlooked key to sustaining startup growth, he says, is knowing how to evolve your strategy over time. “One of the biggest growth pitfalls I see is when smaller-scale, earlier-stage startups try to apply similar growth tactics as a late-stage startup, or even the Facebooks or Googles of the world. That’s not going to end well,” says Rothenberg. “There’s no one-size-fits-all advice: Your growth strategy should fit where you are in the moment. At each stage, you should be focused on different targets, according to your customers, your resources and the data you’ve collected.”

In this exclusive interview, Rothenberg discusses the core principles that startups at any stage should keep in mind as they develop a growth strategy. Then, he walks us through the three broad phases of the startup lifecycle, from humble beginnings to bolder bets, identifying the goals and perils particular to each phase. He shares how you can kick your strategy up to the next level — and he breaks down the growth tactics that companies have used as rocket fuel all the way to IPO.

PRINCIPLES OF STARTUP GROWTH TO KEEP IN MIND FROM THE START

“When I was talking about growth five or six years ago, it still felt like I was educating skeptics,” says Rothenberg. Today, of course, growth has become an essential part of the startup toolkit, becoming a fully-fledged discipline with new sub-specialities forming as designers, marketers, product managers and engineers all get in on the action.

Even as the discipline grows and diversifies, there’s a broad tenet that all growth teams should adhere to: “Growth is about implementing a rigorous, customer insight and data-driven process with sustained effort to remove friction,” he says. “It’s about creating an ‘a ha’ moment of value, then working on a functional or company-wide level to get customers there as quickly and as frequently as possible.”

That said, the growth function still isn’t strictly defined. “I’ve never seen a canonical definition of what a VP of Growth does,” says Rothenberg. “In more product-driven companies, growth might be almost entirely a product role. In less product-driven companies, it can represent the quantitative or technical side of marketing. And in others, it’s a blend of both. I’ve even seen some enterprise companies who have a Head of Growth who’s really more of a B2B marketing and sales hybrid.”

While there’s no hard-and-fast instruction manual for spinning up a growth function, there are a few principles that founders of startups at any stage can lean on as they start to hone their approach.

Growth strategy > shortcuts

“My friend Sean Ellis coined the term ‘growth hacking,’ but I don’t love how that phrase has come to be interpreted. What Sean meant as a scrappy and entrepreneurial term now comes across as a shortcut, or some clever one-off trick. It implies that you sprinkle some fairy dust and suddenly grow exponentially,” says Rothenberg. “Growth hacking broadly over-promises and for many startups, has under-delivered, unfortunately hurting the function’s reputation along the way.

Instead of trying to “hack” your way to instant success, commit to a long-term, customer-focused and data-driven plan of action. “The surest way to drive growth is with a steady and strategic hand,” he says.

Bloggers and charlatans peddling magic tricks have said that growth hacking is the way to the promised land, but the truth is, shortcuts will only lead you astray.

Startups should also be wary of promises of micro-optimizations. “Most startups, particularly in the early stage, aren’t yet at a scale where micro-optimization is even possible, let alone impactful,” says Rothenberg. This isn’t to say that startups shouldn’t optimize.

“As you start to scale, much of growth is about gaining compound interest: a lot of small-to-medium improvements that compound and, over time, drive substantial growth. This might look like running a series of experiments that improve conversion by incrementally smaller percentages, for example,” he says. “But focusing solely on these types of optimizations generally drive you toward a local maximum. In order to leap toward that higher hill, you need to make a strategic step-change, then optimize uphill toward the global maximum, or the total potential of a business.”

Image courtesy of Brian Rothenberg

When it comes to cultivating growth, founders should know how to combine larger-scale strategic plays with finer, continuous optimizations. “I like this quote from Trulia founder Pete Flint: ‘Knowing how to scale and knowing when to innovate are the soul of what we do.’ As you scale, you of course need to optimize. But you also need to take some bigger swings in order to drive a larger step-function change. Optimization is important, but it’s those larger innovations, particularly early on, that generate the continuous customer value that will drive long-term growth,” says Rothenberg.

Map out the journey in hypotheses, not just milestones.

To steer your startup’s course toward growth, navigate by the stars of experimentation. “Having a methodology around asking questions and applying your learnings is most impactful at the early-stage, where seeking product/market fit, and maintaining speed as a habit is most critical. But hypothesis-driven experimentation and learning is key to scaling companies at all stages,” says Rothenberg.

It’s an approach that Rothenberg and his SkillSlate co-founder (Ringwelski — the one driving the scooter) were inspired to take when they had read Eric Ries’s The Lean Startup. “It felt like an epiphany when we learned about it back when the book first came out. We felt that the lean startup approach, driven by customer insights and rapid iteration, should apply not only to product development: It could also apply to cultivating growth channels, and even to how we managed and communicated with the company,” he says.

“There’s always some impactful, yet-to-be-discovered insight ahead,” he says. “You might stumble upon it by chance, but it’s far better to have a systematic process to use qualitative customer insights, market data, product data and other sources of information to form hypotheses and insights about how you can improve.”

Putting experimentation at the center of your growth strategy can be as simple as reframing your board meeting. Here’s a tactic that Rothenberg and Ringwelski used when SkillSlate was still at the seed stage: Instead of just going over a summary of the last month’s metrics and milestones, shift your focus to the month’s learnings. (First Round partner and SkillSlate investor Phin Barnes was so impressed by the practice that he wrote a blog post about it.) “Start asking questions like, ‘What can you apply from those insights, and what additional questions did they lead to?’” says Rothenberg.

Don’t just ask “What did we do?” Chart your progress by also asking, “What did we learn?” Being driven by questions, rather than achievements, unlocks future impact and further learnings.

This tactic is one that maps over to later stages as well. “When I first joined TaskRabbit in 2011, and Eventbrite in 2013, like many other startups, we were in a cycle where we’d ship some buzzy new feature and almost hope for faster growth,” Rothenberg says. “The features were well thought-out and strategic, of course. But we didn’t always have a clear hypothesis going in, and the features didn’t always have well-defined metrics we could use to measure their impact over time.”

Moreover, no one was specifically held responsible for measuring a feature’s long-term impact. “Historically, a team would ship a new feature, we’d cheer the launch, and then that team would immediately shift to a new project,” he says. “There wasn’t enough sustained iteration to help that feature achieve adequate adoption or feature/product fit. People were moving on the next project before asking questions like ‘What did we learn?’ or ‘Did we have the impact that we expected?’ Or even ‘Should we keep this feature at all?’ As with most teams, it was onto the next.”

To remedy this mentality, Rothenberg worked to evolve the team’s ethos toward productive reflection and impact, rather than constant production. “Early on, around our seed stage through Series B, we oriented teams to be more hypothesis and learning-driven,” he says. “As we got to later stages, we structured teams to become more outcome-oriented. Instead of assigning a team what to do, we gave them a goal: say, to drive X specific outcome or Y raise metric for our customers. The team got to determine how they would achieve that.”

“Build it and they will come” isn’t a growth strategy. Before you ship a new feature, fully understand how it will impact your customers. Drive value, and then the customers will come.

In the sections that follow, Rothenberg sketches out each stage of the startup life cycle. He identifies the characteristics, goals, and risks startups face in each phase, and how they should calibrate their strategy to uplevel their growth.

PHASE I: FINDING PRODUCT/MARKET FIT AND GAINING TRACTION

What you’re doing now: Earning critical first users as you iterate toward product/market fit.

Goal: Get to the point where you’re feeling pull into the market from your initial target users.

Potential pitfall: Focusing too much on growth before you have product/market fit and sufficient data.

Founders just starting out might be tempted to go all-in on growth, but Rothenberg recommends keeping your chips close for now. At this stage, finding product/market fit should be your first priority; your approach to growth should be characterized by gathering customer insights and iterating to deliver customer value, while laying a strong foundation for data.

To illustrate how Phase I startups should frame their growth mentality, Rothenberg shares the story of a Series A startup he was advising: “When I started working with them, they were definitely operating with the right growth mentality — for a Series B or C startup,” he says. “Their scale was roughly hundreds of new customers each month, while their growth mentality was more suited to a company at a scale of tens of thousands of new customers each month. It’s a pretty common mistake: They were trying to copy-and-paste a larger company’s growth strategy to their own startup.”

The company was trying to use data to solve where and why prospective customers were dropping off in their customer journey. “That’s a great, smart goal to drive toward. But they were a bit off on the execution,” says Rothenberg. “They wanted to A/B test, like a later-stage startup might. But unlike a more mature company, this startup didn’t have a substantial volume of data to do so. If you run your test with very few users, the ROI will be lower, or even negative. With so little to go off of, it’d be a challenge even getting a directional read on whether there was a significant impact in terms of whether conversion was actually improving. More importantly, it’d be hard to tell whether those new users were actually understanding and obtaining value from the product,” says Rothenberg.

So how should an early-stage startup navigate growth, with relatively little resources and a smaller customer base? Rothenberg provides a handy checklist:

  • Use conversations to gain insights. Rothenberg returns to the cautionary tale of the Series A startup that was trying on Series C growth tactics: “Instead of wasting resources on insufficient data, these founders should have actually tried talking to these customers to gain insights into their product, and to understand who is or isn’t converting and seeing success,” he says. “If you talk to five customers, and three say that they were confused by the same part of onboarding, you should work to reduce that friction. In the early stages, you likely won’t have a statistically significant sample yet. So instead of pretending that you do, leverage what you really can do: talk to your customers early and often.”

  • Attract and retain new customers with the “a-ha” moment.“The ‘a-ha’ moment is where you demonstrate value, where customers think, ‘Oh, this company totally gets me!’ Bring your customers back to that magic moment as often as makes sense in the context of your product or service, to remind them why they value it so much. Then, work to get them to evangelize to new prospects. Once you achieve that, word of mouth becomes a powerful growth accelerant.” he says.

  • Add friction by asking early prospects to do some legwork.Sometimes, asking a prospect to furnish more work upfront can lead to a stronger “a-ha” moment. “At TaskRabbit, we found that if a user gave more information about the task they needed completed, our Taskers could give a much better estimate and better service. It might be faster for a customer to say ‘We need help building desks.’ But we’d be able to serve users so much better if they got more specific: ‘We need help building two custom, built-in desks (carpentry experience required). We are available Friday of this week.’ It slows down the onboarding process a bit, but it helps to ensure a better match, which ultimately leads to a smoother end-to-end experience for that customer. We found that it was better to have fewer new customers that were wildly happy with the service, than more new customers that were ‘meh’ about their experience.”

  • Lay the data foundation. “Now is the time to instrument data tracking through the funnel and your key growth loop or loops,” says Rothenberg. “You might not be able to use it extensively yet, but you want to have the basics of these systems in place so that as the data becomes large enough, you’ll be able to see the signal through the noise. This is critical for eventually becoming a data-driven growth team.”

Early in a startup’s life cycle, learnings are more important than “success,” and more experiments should fail than win.

Don’t jump the gun.

Finally, consider your timing carefully: It is possible to start thinking about growth too early.

“First, don’t scale without positive unit economics, or a clear path to it. If your business is losing money on each additional customer or transaction. If you try to scale without patching those holes beforehand, they will only get bigger,” says Rothenberg. This was the case with Shyp, a startup that he advised in 2016 and 2017. “It lost money on most deliveries and scaled up too quickly without a clear path to positive unit economics. So after raising $60 million, sadly it shut down,” he says.

“Second, don’t lean too heavily into growth before finding product/market fit,” says Rothenberg. “It’s a mistake that I made at TaskRabbit,” he says. “We effectively had an underlying leaky bucket issue: If a new customer’s first task wasn’t successfully completed, that customer almost never came back. We spent too much time and money trying to brute-force our growth through this foundational issue, when we should have pumped the brakes on customer acquisition and shifted focus to solving this underlying matching issue, which would have set us on a faster course to true product-market fit. TaskRabbit eventually re-launched its platform, which re-accelerated growth until the company was acquired by IKEA.”

Your startup won’t grow out of this Phase 1 stage until you are, as Rothenberg puts it, “feeling the pull from the market.” In addition to the Review’s guide to finding product/market fit, here are some of Rothenberg’s green lights to look out for, to indicate you might have found PMF:

  • High retention and engagement: People are using your service at a frequency that’s reasonable or high, compared to the average monthly retention for your category, or retention that’s high enough for your business to sustainably grow.

  • Growing organically: You’re growing without paid spend, generally through word of mouth. This is a great indicator that you’re solving people’s needs well enough that they’re now sharing with others and creating a positive viral effect.

Brian Rothenberg, partner at defy.vc and former VP of Growth at Eventbrite

PHASE II: SCALING

What you’re doing now: Building the foundation of your business model, as well as your data and analytics.

Goals: Develop a growth model and growth loops, instill a growth mindset across the company.

Potential pitfalls: Not deeply knowing why you’re growing, dividing into functional silos. 

“This second stage is about laying out a foundation for your business’s growth, then doubling down on the strongest levers,” says Rothenberg.

In this section, he dives into two tactics for Phase II companies, starting with how to build out the common loops that drive growth, whether that’s viral, paid acquisition or content.

While Phase I companies might have started out with a small but mighty founding team, Phase II companies are likely onboarding new hires at a more rapid clip. For the growing Phase II startups, Rothenberg shares how to empower your entire team with a growth mentality.

Feed virtuous cycles and growth loops

“In the first phase, you were focusing on laying the data foundation and gaining customer insights to better understand your growth to-date,” says Rothenberg. “At this phase, you should be leveraging that knowledge to further scale: Identify and lean into your most critical levers to establish a growth loop.”

One of the biggest pitfalls that looms ahead for founders is failing to understand the reason for their growth and how to make that progress sustainable. “If you don’t have a deep understanding of why you’re growing, you’re closer than you think to not growing anymore,”says Rothenberg.

Here, Rothenberg outlines the steps to gaining an understanding of your growth and developing a growth loop:

  • Play your aces. “Ask yourself: ‘What is the business’s or the team’s unique advantage?’ Instead of spreading yourself thin tasking your team with trying to pull every lever available, identify and lean into the built-in levers first,” says Rothenberg. “Of course, step zero is building in a market where there’s opportunity. Eighty percent of the battle is picking the right startup with inherent, built-in advantages.”

  • Stack up each loop’s impact. “Form hypotheses around what each loop is, and use data or customer insights to evaluate how impactful they can be. Form a cross-functional squad to test and learn, focusing on the highest-opportunity loops. Give the team at least several months to test, iterate and learn,” says Rothenberg. “They should be asking themselves, ‘If it’s successful, how big can this loop become?’”

  • Turn your sketches into reality. “Finally, sketch out the growth loops in an easy-to-understand, visual format. Simple is always better,” says Rothenberg. “Then, quantify as best as you can: Can you measure each part to figure out where you need to instrument in order to start collecting data? Tie the data into a broader business growth model, showing how changes in each loop helps to grow the overall business. Where do you have more or less leverage? Where can you lean in?”

Image courtesy of Brian Rothenberg

Rothenberg and his teammates created the diagram above to illustrate Eventbrite’s growth and key levers. It highlights Eventbrite’s most effective early growth loop: virality. “Our early built-in advantage at Eventbrite was that the event-based user experience is inherently social. We leaned on that to drive a lot of the company’s early momentum,” he says. He breaks down Eventbrite’s attendee-to-creator viral loop:

  • Eventbrite works to acquire event creators (supply).

  • Those creators put their events on the platform, then they work to promote their events and drive attendees to buy tickets. Both the event creators and Eventbrite as a platform drive attendees (demand).

  • Some portion of the attendees learn about Eventbrite by first using the platform to attend an event.

  • A portion of these attendees become event creators themselves (supply).

  • When a new event creator has a successful event, they create more events on the platform.

“Our growth team experimented to crank up this loop for almost two years,” he says. “Our efforts paid off: We dramatically improved the conversion rate from event attendee to event creator, driving substantial organic growth and lift for the business. Around 70% of Eventbrite’s awareness is driven by this viral loop or word of mouth.”

Innovate on distribution.

One question Rothenberg often seeks the answer to when evaluating startups is, “What’s your unique advantage in distribution?

At TaskRabbit, tapping into the company’s distribution advantage involved an unlikely tool: bright green T-shirts. “We already had this large workforce out in the field performing Tasks; we figured they could also be great brand ambassadors,” he says. “So, we encouraged Taskers to wear their branded T-shirts, which are an eye-catching shade of green. People would spot Taskers in the neighborhood and think, ‘I should use that!’ Consumer awareness eventually spread across neighborhoods, and then across cities.”

Startups need to innovate on product and distribution. It can’t be one or the other.

Make growth a company-wide ethos.

The “growth mentality” means that everyone across functions has a stake in the company’s growth. Not only will ensuring company-wide alignment sidestep the problem of factions as you scale, but it also boosts the effectiveness of your growth strategy overall. “Instead of creating silos, aim to encourage cross-functional coordination around achieving key outcomes and driving KPIs,” says Rothenberg.

He took steps to implement this at Eventbrite. “When I joined, the company had product/market fit in its initial segment of the market, with a great product that people loved. For a long time, that — along with some good marketing — was enough. But in order to scale to the level we wanted to hit after our series C, we needed to instill a testing and analytics DNA throughout the whole company,” he says.

A good rule of thumb to assess whether you’re evangelizing growth enough in your company: If you think you’re overcommunicating, dial it up a couple notches.

The first step that Rothenberg took was building a cross-functional growth team. “This included operators from product, engineering, analytics, design and marketing, really communicating that every function has a stake in growth,” he says.

“Our initial goal was to avoid functional silos and get cross-functional teams to row in a coordinated manner across our biggest growth levers,” he says. “We formed the team as an experiment, with a six-month initial charter for the team to experiment on improving our core viral loops. Eventually, the growth team more than tripled the key metric we were working toward, driving business impact while proving the impact of the approach.”

Rothenberg provides tips for setting up your growth squad for success:

  • Designate a decision-maker. “Disagreement is inevitable on a high-velocity team that’s moving forward and pushing boundaries. Designate a tie-breaker. This could be the CEO, the Head of Growth, or, if growth is run through a specific function like Product, the Head of Product.”

  • Commit to the long haul. “If you’re starting an experimental growth team, give them time to unlock significant insights before dismissing or disbanding it. The team should have at least 4-6 months to prove out its model.”

  • Call in an expert. “I often advise that startups retain an established growth expert as an advisor. Granting a few advisory shares is a worthwhile trade for the right person who can help to structure and coach your early growth team. Further down the line, the advisor can help you recruit a full-time head of growth; the best-case scenario is that the advisor likes what you’re doing and joins you full-time.”

Finally, one key reason behind experimental team’s success was that they worked to communicate their learnings early and often. “Every few weeks, the team would host an open meeting where we’d pull the curtain on our experimentation process,” says Rothenberg. “The most interesting part was when we’d ask people to predict the results of each experiment, before we showed them the true results. More often than not, they guessed incorrectly! These meetings not only showed people the impact of the work the growth team was doing, but it also demonstrated how much we need to test — because our instincts are so often wrong. And of course, communicating the importance of growth just once isn’t enough: You have to repeat, repeat, repeat the core principles and learnings along the way.”

Over the years, instead of an isolated growth team, Eventbrite has built multiple cross-functional teams with growth training, focused on certain key loops or areas of the customer lifecycle. “It’s one of the cultural shifts I’m proudest of helping institute at Eventbrite,” says Rothenberg.

PHASE III: MAKING LARGER LEAPS AND BIGGER BETS

What you’re doing now: Scaling, challenging yourself to stretch beyond optimization.

Goal: Take bigger risks and reap greater rewards.

Potential pitfalls: Underestimating the work it takes to make a big leap.

So you’ve found product/market fit, and you’ve used data to tap into one or more profitable growth loops. When your startup’s in Phase III, the possibilities are vast: “Here, jumping the curve and working through that ‘messy middle’ is part of what distinguishes the great from the true, breakout winners,” says Rothenberg. “This is where you can take a greater risk, with greater potential reward. This is the time to make big bets.”

Rothenberg shares some examples for strategies companies might use in Phase III — and potentially become a $10B+ category winner:

  • Expand to new metros or internationally:GrubHub and OpenTable are great examples of this. I would say whenever possible, let new markets pull you in: At Eventbrite, we already knew that the service was being used in over 100 countries. We used insights from those countries to inform strategy for Eventbrite’s first formal international expansion in 2011.”

  • Jump platforms or tap into a new platform shift: “Facebook had a rocky start shifting from desktop to mobile, but now, over 90% of its revenue is from mobile ads.”

  • Service new customer segments: “Your first customer and your nth customer can be completely different people. Airbnb started with air mattresses and spare rooms in its scrappy startup days, but they moved up over time, first in vacation rentals, and increasingly going up-market after actual hotel, eventually acquiringHotelTonight and creating luxury offerings. There are also examples of successful top-down shifts: Uber launched with a high-end black car service before expanding into the peer-to-peer rides market with UberX. It can go both ways, depending on what makes the most sense for your market, customers and competitive dynamics.”

  • Expand focus categories or product offerings: “Once you’ve built a solid core business, there are often opportunities to layer on tangential products and services that deliver value, or reinforce the value of your initial core product. For example, Zillow and Truliaadded rentals and mortgages to its services, and Square has its POS system.”

  • Acquire companies: “From Facebook snapping up Instagram to Google buying YouTube, acquiring companies can be a viable driver of growth. Be warned, though: Most mergers and acquisitions fail due to poor integration. Too many companies don’t plan well enough for this and grossly underestimate the effort and investment required to do it well.”

  • Startups within a startup: “It’s rare for a company’s core business model to have infinite growth runway. One strategy is to carve off small teams to experiment and work to build the company’s Act II and Act III, so to speak. Google runs Google X to spin up new technologies and potential businesses. Amazon is now famous for its nimble ‘two-pizza teams,’ enabling huge long-term wins like Amazon Web Services. We have a smaller-scale operation at Eventbrite, where we allow some employees to become entrepreneurs-in-residence, with leeway to pursue new business ideas to help layer in new growth curves to the company’s overall arc.”

To identify where you should place your big bet, take a magnifying glass to your growth thus far. “In most cases, the signs and stirrings of future potential are already underway,” he says.

ZERO, IPO, AND EVERYTHING IN-BETWEEN

There’s no plug-and-play textbook for growth. Instead, startups need to realistically assess the resources available to them at each stage, and what growth strategies fit them in the moment. For the earliest-stage startups, invest in growth by iterating on ways to deliver customer value. The second phase is the time to establish growth loops by doubling down on your built-in advantages, all the while evangelizing the growth mentality across functions. Finally, in the third phase, ratchet up your growth efforts and take bold, but informed, risks.

The common thread, as your startup moves across phases, goes back to one of the core principles of growth: The most effective growth is fueled by constant experimentation and adaptability.

“I was lucky enough to see this incredible transformation of the growth function at Eventbrite over more than six years,” he says. “For my own part, I’ve reported to the CMO, our Head of Product, our CEO, our CRO. Across the company, we went from growth as a function-led priority, to instituting our cross-functional growth teams. You have to find what works, and adapt when it doesn’t.

It’s a spirit of inquiry and flexibility that permeates all areas of growth. “There will always be some new discovery, some unexpected insight that humbles you because it flies in the face of what you thought you knew,” says Rothenberg. “And that’s the key to growth: whether you’re iterating on a growth loop, or working on the macro-level of company culture, you have to repeat, repeat, repeat that process of constant learning.”