🌞 Earlywork #71: WTF are Scaleups?
Airtasker’s former COO Yaniv Bernstein explains what the heck happens when startups grow up
Ello ello Earlyworkers!
Scaling up is Earlywork #71, a weekly cheeky newsletter sharing insights into future-focused careers for the next generation of founders & operators.
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If you’re thinking of joining a startup for the first time, I’m sure the question of ‘risk’ has crossed your mind.
A role in big corporate might offer a more stable business model, more structured mentorship & training, and get you access to a larger selection of cheeses at the office.
But what’s not typically considered in the ‘startup vs. corporate’ career decision is the weird, murky in-between, commonly termed as ‘scaleups’.
This week’s newsletter features a guest piece from Yaniv Bernstein diving deep on:
The differences between startups and scaleups
How employees can navigate the transition to a scaleup
What to look for in scaleup jobs
Yaniv is the co-founder and COO of Circular, a Y-Combinator startup in Australia and Singapore.
He’s seen the full spectrum, having spent 10+ years in engineering at Google, doing a stint as VP Engineering at Flare HR, and serving as both COO and VP Engineering at Airtasker.
On the side, he also runs The Startup Podcast, a series of lucid rants on driving disruption.
Here’s his hot take on scaleups:
A scaleup is not just “a big startup”, it’s a fundamentally different beast.
If a startup is an adorable baby, a scaleup is an awkward teenager. Not as cute, maybe, but filled with wonder, possibility and newfound strength and sophistication.
Another way that a scaleup is like a teenager is that it is fundamentally defined by the fact that it is going through a period of profound change and transition.
The most important thing the organisation needs to do is respond effectively to that change.
What changes? 🚀
There are two changes that really characterise the transition from a startup to a scaleup.
The first of these is really an accumulation of entropy that starts to slow things down. You often hear people talk about technical debt, organisational debt, or product debt.
What all of those things mean is that you've been in business long enough, your product has evolved enough, and you have enough customers or users that things have started getting a bit gnarly and a bit funky.
The nice clean design, the nice clean architecture, the clean database, the nice clean pricing; all of these things are no longer so nice or so clean and that's really noticeably starting to slow you down. When you’re used to moving fast and suddenly you find you can’t anymore, that can be quite frustrating.
#2: Coordination & Alignment
The other thing that changes is the fundamental limiting factor of the organisation’s ability to succeed.
At a startup, that limit is basically the number of hours in the day, the amount of raw work you can get done.
At a scaleup, the limit changes to being about how well you are able to keep all the people in the company aligned and coordinated.
So in other words, when there are five people, there's so much to do.
You don't have much of that entropy so you can really just keep your heads down and do your work.
You don't need to have a lot of meetings, everybody knows what everybody else is doing.
You can hold the whole business in your head. And so it's relatively straightforward, just to know what you need to do and get it done.
But then you reach a stage where you're 30, 50, 80 people, and suddenly everyone just having their head down and doing work isn't producing the same great results.
And that's because getting 80 people all pointed in the same direction and doing work that is mutually reinforcing is not going to happen by itself. In fact, it’s incredibly hard.
Getting people, many of whom are new, aligned to a clear strategy is not easy.
Respecting your company's legacy without being bound by it: that’s not easy.
Not stepping on each other’s toes: that also isn’t easy.
I hear from founders who say, “I've doubled the size of my team in the last 12 months. And not only are we not twice as productive, we're actually less productive than we were a year ago.”
With twice as many people! That sounds insane, but it's actually a very common story. And what that means is that the organisation is facing the challenges of being a scaleup, but has not put the pieces in place to keep the team aligned and coordinated. So productivity plummets.
Productivity is not about units of work like lines of code or features delivered.
Productivity is about the pace of delivery of actual meaningful value that is experienced by the customer and the end-user, and ultimately leads to growth in the business in ways that matter.
The implications of these two changes for the leadership of the company are quite profound. During this transition, what happens to the CEO and other senior leaders is that although their job title has stayed the same, their role has radically altered.
At the startup stage, senior leaders are focused on execution and getting things done, hustling, and being directly involved in everything that's happening.
By contrast, the CEO at a scaleup is an organisational leader, an executive. Their job is to set the strategy, communicate it clearly, allocate resources, inspire the team, make sure that people are aligned, and make sure that people are motivated.
It’s a completely different job.
So one of the most common dysfunctions we see in a company early in its scaleup journey is that its leadership is still operating as though they’re leading a startup, and it’s just not what’s needed anymore.
My company is becoming a scaleup. What does this mean for me? 🙋
Employees at emerging scaleups face two key challenges:
#1: Changing Nature of Roles
Even the example of a software engineer who is still a software engineer, the things that they did that used to work well, stop working so well.
And that's partly because of that entropy increase. The codebase used to be simple and easy to understand, where you could just make and push changes quickly without any challenge.
Suddenly, everything takes forever. How can you make yourself productive in such an environment?
#2: Cross-Team Alignment Issues
The second challenge is related to the initial point, which is that your leadership has often not reoriented in their role, and as a result, there is a lack of alignment with other teams.
And so you find that you're working at cross-purposes, there is a lot of conflict, and a lack of momentum and direction.
If you’re at this stage, the first thing to consider is: do I want to stick around?
Some people prefer the startup environment. If that’s you, then there’s no shame in moving on once things have reached a different stage that no longer matches your skills or inclinations.
If you are keen on staying on the journey, the most important thing is to welcome change.
Resistance marks you as a member of the old guard, as somebody who is not willing to evolve with the company. You become an obstacle. So watch, process, learn and figure out how you should change as the organisation does.
The second thing that is important is to become adept at managing up.
That does not mean “brown-nosing”, but rather making it very clear to your leadership what context and guidance you need in order to be able to do your job effectively.
When everything is changing, people need to articulate their needs or they will be neglected. Seek actively to understand the business and its goals, and be proactive in articulating how best you can contribute to them.
I’m thinking of joining a scaleup. What should I look out for?🕵️
You’re joining a teenage company, and you want to make sure that it’s on the cusp of a jaw-dropping glow-up rather than sliding into glue-sniffing irrelevance.
How do you tell the difference?
The biggest thing to look for is organisational self-awareness and humility.
A scaleup is going to be facing a lot of challenges, and the only way to overcome them is with a willingness to face them head-on and be willing to change.
Ultimately the whole organisation needs to do this, but the tone is set at the top.
See if you can get a sense of whether the CEO and other senior leaders understand that their company is going to have to change, and what they’re doing for themselves and the company to change them.
Another thing to look out for: is the company growing super fast? That’s exciting, but be aware that the faster the growth, the greater the likely growing pains.
Any company that is growing headcount by more than 80% or so per annum will have a significant amount of internal chaos.
Can you thrive in such an environment? Then great, you’re on a rocketship. But on a rocketship, the G forces are high.
Have a look on Glassdoor. Are there a bunch of negative reviews saying “this place isn’t what it used to be”? If so, that’s not necessarily a bad thing!
Negative reviews might suggest that meaningful change has arrived, and some folks who were more comfortable with the startup culture are not happy about it and moving on.
However, from reviews alone, it can be hard to tell the difference between a startup that is going through painful but necessary change, and one that is simply getting worse.
That is why you need to parse these reviews carefully: are people giving examples of genuine dysfunction, or are they simply railing against the change?
If there is no sign that anything has changed, that probably means the company is neglecting the coming storm.
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