It’s been more 2 years since I stepped foot in Silicon Valley as a VC investor and I’ve had the opportunity to work with many passionate entrepreneurs and their incredible companies. But because we invest in early growth (Series A through C) companies I haven’t been part of the initial a-ha moment or the early founding journey. Also, as expected, in two years I haven’t yet been a part of any grandiose exits. That means that my two years have been filled with working with teams that have created real businesses with real customers and real growth. But with growth comes very real challenges as the issues that CEO’s face as a pre-revenue company are drastically different from the issues that arise with rapid growth, high maintenance customers, and of course hundreds of employees.
In this insightful article, Scott Belsky calls the growth stage of a startup the “Messy Middle.” It’s not the ‘romanticism of the start’ nor the ‘pithy headlines’ of a unicorn exit or bankruptcy.
A few things I’ve learned about the challenges of the Messy Middle:
Founders fall into the trap of minor pivots as they realize that Optimizing & Refining the core product/service is much harder than trying something new. It’s a trap I’ve seen multiple times. Successful product leads to a successful fundraise -> Inevitably growth slows down (because unfortunately, 10X growth in perpetuity is pretty damn hard) -> To maintain the mythical everlasting growth trajectory, CEOs dream up a new product and while focusing on launching that, the core business starts to lose some of its razor sharp efficiency. Also, guess what? The CEO got where he is because of his core competency in the original product…but quickly realizes that he’s got a lot to learn with this new service.
The rockstar team at 15 people, are not the same rockstars when leading 150 people. Having worked with the management of many large companies as a consultant, as well as in the trenches at the behemoth that is Samsung, I‘ve worked with both tremendous leaders and veterans who were extremely smart but had no business leading a team. It’s such a different skill set managing or developing a fantastic product vs. inspiring, motivating, and managing a large team to do much more. A high growth start-up will experience a roller-coaster journey that begins with individuals on a very small team, each exerting superhuman efforts to get a product up and running and then on-boarding the first customers, to eventually managing a corporation with hundreds of employees and diverse array of customers. As a small start-up, the product manager can turn around and easily discuss and align bug fixes and product iterations with the engineers and sales guy. But when the company gets to a much larger scale, the product manager must work with her team to work with the head of engineering’s team to align with the sales team in balancing and prioritizing the development needs of multiple products with the diverse needs of different customers. Vastly different skill sets are required in ‘building’ vs. ‘managing’ and the reality is that many people are not exceptional at both. As a result, an often necessary step in the Messy Middle is a change/shuffle/augmentation within the leadership. This is never an easy process and sometimes quite ‘messy’ as the CEO has to go through the difficult process of replacing a friend & comrade who put in the same blood, sweat, and tears in the early days and remains a core strand of the company’s DNA. But for the sake of the company, the other >100 employees, the investors, and the customers, it’s sometimes a very necessary step.
Professionalism is real, and it’s required. I’m a fan of casual work culture. T-shirts, sneakers, flexible hours, free snacks, etc. etc. certainly contribute to a happier working environment. But a common misconception seems to be that work casual work culture is a trade-off for professionalism. Perhaps this is somewhat acceptable for an early stage start-up with a smaller number investors, a smaller number customers, and no real revenue to speak of. But in the growth stage, the importance of professionalism dramatically increases. The voices of customers must be religiously adhered to. The needs of employees must be attended to. And the relationships with investors must be transparently managed. An entrepreneur creating a product in his garage may not have anticipated these challenges, but this is an important learning process in the Messy Middle.
Grit. The Messy Middle is inevitable. Entrepreneurs face challenges beyond my wildest imagination and I have immense respect for these leaders overcoming the challenges one at a time. Great companies aren’t created overnight, and the greatest companies continue to evolve and develop in perpetuity. For the entrepreneurs wading through the Messy Middle, a key characteristic to get them to the next stage is grit. To be clear, I haven’t been around long enough to see that jump. But what I know for sure is that creativity, intelligence, and leadership got them to the Messy Middle. With grit and leadership, getting to the next stage is just a matter of time.