[HN Gopher] Part II: The failure points from $5M to $100M in ARR
___________________________________________________________________
Part II: The failure points from $5M to $100M in ARR
Author : tyoung
Score : 159 points
Date : 2023-01-12 17:23 UTC (5 hours ago)
(HTM) web link (tracy.posthaven.com)
(TXT) w3m dump (tracy.posthaven.com)
| candybar wrote:
| On the whole, this is a fairly good write-up but this is just not
| right:
|
| > Being at a startup is hard in a way that is almost
| indescribable to anyone who hasn't experienced it.
|
| Being at a startup as an employee isn't necessarily hard. You
| hear this type of "startup is so hard" because running companies
| well is hard and successful startups will often grow faster than
| their founders are able to grow their own ability to run
| companies, which makes their own job challenging. And a lot of
| startups are poorly run in ways that are entirely avoidable
| (often as a result of their CEOs not being able to grow as
| quickly as their company) which can make life hard for the
| employees as well. But this isn't a necessary part of the startup
| experience.
| metadat wrote:
| Most non-startup jobs tend to be well-defined and come with a
| pre-existing business strategy and existing resources, such as
| a project codebase and existing at least semi-working solution
| to which one can inspect and add to.
|
| Contrast this with startup companies, where it's often required
| to explore and build completely new things from the thin air of
| the ether. I'm not saying other jobs don't also have elements
| of this, as new projects and opportunities do emerge, but being
| at a startup is definitely an extreme situation and arguably a
| different game. In the meta lens, it can be viewed as the act
| of mining the veins of market realities for golden ideas.
|
| It's for the risk takers and adventurers. I've witnessed many a
| great engineer learn it's too undefined which can be
| uncomfortable, and is not a good fit for them.
|
| It's nothing personal, along the exact same lines as some folks
| who can't stand working for a large company.
|
| Different strokes and all that. This form of diversity is one
| of the beautiful things about the spectrum of humanity. In
| aggregate, it works!
| kolbe wrote:
| I got the impression that the 2022 late stage funding implosion
| was also the death of ARR as a be-all growth metric. It got
| Goodhart's Law'd to death after all the companies that went
| public at huge valuations based on ARR turned out to not be as
| "recurring" as investors would have liked.
| Ataraxic wrote:
| I wonder if you have more context or numbers. What companies
| are you thinking of. I remember companies like WeWork and
| Coinbase dropping in valuation but what more traditional Saas
| companies have run into this sort of hurdle?
|
| I'd argue that ARR is still a good measure just not the growth
| at all costs, w/e it takes to get toe 100M ARR/Unicorn status
| anymore. After all, sales is sales and if you don't have
| repeatable sales you probably don't have much of anything.
| kolbe wrote:
| There are many shenanigans that startups can play to juice
| ARR to render it meaningless. The idea isn't terrible, but
| that's why I invoked Goodhart's Law.
|
| > After all, sales is sales and if you don't have repeatable
| sales you probably don't have much of anything.
|
| That's right, but you're missing the key that it's a
| necessary, but _not sufficient_ requirement. When the pool of
| investments is 90% with ARR are honest and straightforward,
| then it 's good to use ARR as a metric. But when the pool
| changes to 50% or less who are honest (as Goodhart would
| predict), the metric loses value.
| georgeecollins wrote:
| I hate this BS about A managers hire A people, B people hire C
| etc. This is total MBA thinking (I think it comes form GE, or at
| least they espoused it) on a forum where people routinely mock
| MBAs.
|
| I have been lucky to work in a field where teams frequently work
| in parallel and success or failure is pretty clear cut. And teams
| are often stratified based on the priority of project. Many
| times-- not always -- the "B" team crushes the "A" team. Why?
| Some reasons include: the A team is performative and focused on
| the things that burnish the careers and reputation of its
| members. B teams have more of a sense of the wolf being at the
| door and that if they don't perform their task they will feel the
| consequence. Being underdogs promotes teamwork.
|
| Obviously people have profound differences in their strengths and
| weaknesses and some people are completely inappropriate. But
| calling people stars or A player covers up a lot of lazy thinking
| that includes a lot of bias. I have worked at smaller startups
| that say "we only hire A players". Obviously that is delusional
| but worse it covered up the more profound questions. Why did you
| hire the wrong person? Why did that person or team fail?
| Swizec wrote:
| An A player from Google will fail at a 10 person startup. An A
| player from a 10 person startup will choke on FAANG bureaucracy
| and fail.
|
| Fit matters. You wouldn't hire Jim Carey for a DiCaprio role.
| mooreds wrote:
| This is an underappreciated truth.
|
| The corollary is: find out where you thrive and go there.
|
| Don't beat yourself up if you get spun out of a FAANG, or a
| startup or a smallco or a bootstrap or a founding role or a
| mid-tier enterprise. Don't contort to a role or company that
| isn't a fit.
|
| If you have solid skills, you can find a place.
| albertgoeswoof wrote:
| You obviously haven't seen eternal sunshine of the spotless
| mind
| Swizec wrote:
| I have. Pretty sure I've seen every movie he was in, huge
| fan.
|
| He's a great actor, but he hasn't shown the range that
| other A-listers have. Whether that's because of skill,
| interest, or typecasting, I couldn't say.
| rockostrich wrote:
| Kind of dumb to say an actor that's clearly proven he has
| immense range when there are so many other obvious
| choices. Vin Diesel for example is an A-list star who
| clearly does not have anywhere the range that Carrey or
| DiCaprio have.
| lencastre wrote:
| Bestest movie together with Lost in Translation
| googlryas wrote:
| Can I guess you're between 37 and 42 years old.
| pryelluw wrote:
| Jim Carey as the protagonist of titanic does sound like a
| great movie. I'm sure he would have found space on that piece
| of wood and survived.
| kingforaday wrote:
| I saw this over the holiday period last month. James
| Cameron commissioned a study because he got sick of people
| yelling at him for killing Jack.
|
| https://www.insider.com/james-cameron-had-forensic-
| analysis-...
| neilv wrote:
| > _" We took two stunt people who were the same body mass
| of Kate and Leo and we put sensors all over them and
| inside them and we put them in ice water and we tested to
| see whether they could have survived through a variety of
| methods and the answer was, there was no way they both
| could have survived. Only one could survive," he said._
|
| This is peak underappreciated stuntpeople.
| rockostrich wrote:
| Speaking in absolutes is never useful even though I think
| this advice might apply when looking for a new role, but
| small companies tend to grow if you help them succeed so it
| would be difficult to say your fit is at 10 person companies
| when that means you would have to jump ship every year just
| to stay in your comfort zone.
|
| I joined my current company when it was 40 people (and around
| 10 developers). Almost 6 years later we're ~1500 and the
| engineering org is something like 200-300. I think I was most
| comfortable around 20 or so developers but that doesn't mean
| I can't make continue to have meaningful impact now that
| there's an order of magnitude more people and the org has
| completely changed.
|
| I've seen folks who were supposedly "A player"s from small
| start-ups and FAANG join the company at different stages.
| Some succeed and some fail but I never noticed any
| correlation between current size of the company they're
| currently thriving at and our size when they joined.
|
| Fit is never going to be perfect so don't give up on
| something just because it might be a little uncomfortable.
| Give up if you've tried to make it work and it's clear you
| can't find a way to have impact.
| vasco wrote:
| In general good people will be able to identify good people
| (colloquially: game recognizes game). And good people will know
| they are being interviewed by someone who is not so good, and
| they won't want to join. A hires A.
|
| Additionally, people who are not so good tend to be threatened
| by good people. So they will rather hire someone that won't
| threaten or "find them out". B hires C.
| toss1 wrote:
| Yup, this is the one thing that struck me wrong in the essay.
|
| After spending multiple paragraphs about how they found that
| they had to dig much deeper into the background of every exec,
| getting 10+ references from reports, peers, and their managers,
| and developing specific lists of red flags . . .they end the
| section with: "Takeaway: Always trust your gut on people. "
|
| Yes, for sure, if you 'gut' tells you something is off about
| someone, seriously consider and trust that also, but what was
| really effective was not gut-trusting, but gathering more hard
| data and observations to evaluate.
|
| Just seems like the author didn't really think it through.
| naijaboiler wrote:
| I have hired before. A few times. "Trust my gut" is still the
| best predictor of success for me. Every hire i have talked
| myself into didn't end up working out. Nowadays for hiring, i
| live by, "if it's not a strong yes, it's not a yes"
| candybar wrote:
| This is just garden-variety narcissism telling you that when
| you made the right decision, you were right and even when you
| made the wrong decision, you were actually right all along,
| you just let your true self be overridden. In reality, a lot
| of difficult decisions involve you being on both sides of the
| decision at different times, so it's very easy to look back
| on any wrong decision you made and decide that the real issue
| was not trusting yourself.
|
| I'm also a bit surprised that she's throwing the "big company
| executive" under the bus here, given that it's very easy to
| identify who this is. She doesn't seem to be merely saying
| that the fit was the issue, given this:
|
| > 1. They frequently use the wrong pronoun "I" followed by
| "[contribution to the company]".
|
| > 2. You dread having 1-1s with them.
|
| > 3. They blame you or their peers.
|
| > 4. They complain laterally and downwards.
| methyl wrote:
| I think it's trusting your gut when it says ,,no", not that
| you can trust only your gut when it comes to hiring. Wasn't
| clear but that's how I understand it and agree.
| gumby wrote:
| > A managers hire A people, B people hire C etc
|
| If that is the case, how do the B people get jobs in the first
| place? Who hires them?
| Nevermark wrote:
| The same reason A engineers can put out B work:
| resource/time/reward tradeoffs and the inevitable unknowns.
| nikanj wrote:
| Nepotism
| [deleted]
| [deleted]
| mbesto wrote:
| > Many times-- not always -- the "B" team crushes the "A" team.
| Being underdogs promotes teamwork.
|
| It's clear you don't understand what A and B people are then.
| If the "B team" is crushing the "A Team", then they aren't the
| "B team". Also, notice how you switched "player" with "team"?
| The quote is "A players hire A players", not "team".
|
| The point is that top tier individuals typically hire top tier
| individuals. The reason this notion isn't so clear cut is
| because its hard to identify A players before the fact. It's a
| retrospective truthism.
| endisneigh wrote:
| Seems like a no true Scotsman
| reasonabl_human wrote:
| Thanks so much for sharing these insights! Especially the
| humanizing points around life still unfolding around you
| regardless of how much success you achieve.
| lbriner wrote:
| A common theme seems to be founders who want to keep all the cool
| stuff about being a small business while they scale to the ARR of
| a corporate. It can't happen. 1000 people don't all care about
| some new feature shipped by someone over in the payments team so
| don't subject them to it.
|
| Most of us have been there in the painfull all-hands meeting
| falling asleep because the more people you have, the less they
| will care about the business. In a a team of 5, I have a lot of
| skin in the game and also a lot of influence. In a company with
| 100K employees, most of us are just a cog and some cogs don't
| even move anything!
| dilyevsky wrote:
| I could see it happening in b2c just not your regular b2b saas
| [deleted]
| xenadu02 wrote:
| As employee #36 I lived through some of these things first hand
| and definitely agree with them (I think we were over 200 people
| when I left).
|
| It was painful going through the enterprise focus transition
| along with a nonsensical reorg imposed by the aforementioned Big
| Tech VP. One day we had focused platform-specific teams working
| on satisfying customers, the next we were moved to cross-
| functional feature teams and focused on enterprise features that
| (from our perspective) no one ever asked for.
|
| I also felt the sting from mediocre engineering managers. I
| remember sitting down with Tracy and Ralph at Uptown Bar and
| giving them both barrels on what I thought of several managers.
| To their credit those managers weren't working there very long
| after that conversation.
|
| IIRC Ralph asked if I wanted to move to being a manager and I
| declined but in hindsight I think that was a mistake - we needed
| good management in engineering more than we needed my code.
|
| Another thing that hurt us was hiring a bunch of PMs. Most of
| them were condescending, ignorant, or both... but suddenly they
| were telling the engineers who had built everything what to do?
| IIRC we could have cut that department down to two people with no
| loss.
|
| The leader of this product team was a manager that just didn't
| seem to be doing his job, only pushing paperwork and giving
| scatterbrained presentations. I never did find out why he was
| kept on so long. I think I very cheekily asked Tracy one time
| which of his relatives worked at Y2K or Sequoia such that he
| couldn't be fired because it was clear everyone in engineering
| was fed up with his nonsense. I'm pretty sure at least several
| top engineers quit due to that guy specifically.
|
| Either way I don't regret my time at PlanGrid. It was a great
| team and I'm proud of what the team did and what I did.
| Ben-G wrote:
| Hah - what a vivid recollection.
|
| It's been a while - we should catch up soon :)
| fakedang wrote:
| As an outsider to the tech industry, it seems to me that the
| Product Manager/Product Owner role seems to be not only the
| most BS role, but also the most damaging role? Considering that
| I saw a post a few weeks back, I saw a similar post (I think on
| HN itself) where PMs were being fired en masse, I wonder if
| there is any real utility with the product team, or if it's
| just a holdover from Google doing its thing back in the days
| that everyone decided to copy.
| ZephyrBlu wrote:
| PMs tend to have a lot of leverage, so a bad one makes a very
| large negative impact. A good PM is worth their weight in
| gold though.
|
| I think of them as basically glue. They just help make shit
| get done. That could be helping co-ordinate between eng and
| design, doing customer research, managing expectations, etc.
| Whole range of things that different PMs do.
| pixiemaster wrote:
| I wouldn't agree with the BS label, as a good PM/PO can
| really help along.
|
| but with that kind of role, contribution quality is rarely
| assed correctly, and at the same time, the sandwhich role
| between contributors, management, and customers, combined
| with a usually communication-savvy skillset can be extremely
| dangerous. even worse in impact than a highly visible ,,bad"
| EVP/SVP.
| HatchedLake721 wrote:
| Of course there is.
|
| If not for the PM, who will speak with the customers, gather,
| analyze and understand their needs and problems?
|
| There should be a person that drives the product in the right
| direction based on customer conversations.
|
| In the early stages founder is the product owner.
|
| But as the company grows, the role of the founder/CEO
| changes. You now build the people, and people build the
| business.
|
| Engineers or CEOs building features no one asked for is IMHO
| one of the major reasons lots of tech startups fail.
|
| Awesome idea, cool product, but no one asked for that feature
| you were building for 2 months. (guilty here myself)
| skrtskrt wrote:
| You need both good PMs and an organization that is set up to
| utilize PMs well.
| vasco wrote:
| I good PM does great things if they are very busy across
| teams and don't have time to hassle people about shenanigans
| and instead talk to users and understand the product deeply.
| Many places though have too many PMs that never talk to users
| and pretend like they know what they want.
| mariambarouma wrote:
| Ha! one of the slam-your-own-dick-in-the-door moves that startups
| seem destined to repeat
|
| Seen it SO many times when startups decide they need "grownups"
| in big positions to be credible externally
| dilyevsky wrote:
| Hey it worked for google (eric) and facebook (sheryl) so it
| will work for us!
| manv1 wrote:
| A lot of the enterprise requirements he talked about add no
| actual value to the product; they're just checkboxes on an RFP
| that are required.
|
| Theoretically applying all of those requirements to your product
| might make your product more secure, scalable, or reliable. It'll
| also make your product harder to maintain, harder to test, and
| harder to improve.
|
| Many of those requirements are there because vendors put them
| there. If you're part of the RFP process (and you should be if
| you're actually selling to that sort of customer) you should be
| actively pushing back on requirements that you feel are
| pointless...making them optional instead of required, or at the
| very least providing a delivery date instead of delivering day 1.
|
| In the enterprise space there's no guarantee you'll get the
| contract; to an extent the decision more political than
| technical. You should do a brutal assessment of your actual
| chances before engaging in any work implementing their
| requirements before the contract is signed. And since the sales
| cycle will be at least 6-9 months you'll have plenty of time to
| figure things out.
|
| Lastly, if your product is highly desired the "requirements" can
| be bent or delayed. They're guidelines and can be overridden, if
| you have the right relationships.
| donnythecroc wrote:
| Interesting you assumed the female CEO writing this was male.
| a_c wrote:
| Hiring is like a code base, you have to have the right
| abstraction at the right time. Starting out, better everything be
| a concrete implementation, that is everyone is directly
| responsible for making things work.
|
| Next is what I found most people doing differently from my ideal
| - abstract and refactor base on your existing implementation, not
| because of some framework doing it, nor because the previous
| project did it this way. Do you need a data access layer, a
| library, a folder, to talk to database where the first
| implementation was just storing things as a variable? You
| probably need a database and plain SQL. Do you need site
| reliability engineer to keep your site online while your traffic
| all comes from friends? Do you need a QA for testing? Or do you
| need a product manager where, as a founder, the value proposition
| has yet to be proven? How often do you see a code base spinning
| up all the folders/empty files because "we may need it". And how
| often when you hire someone, they spin up various incarnation
| people * time like teams, sprints, squad, function, _BEFORE_
| understanding the current implementation. This is why you hire
| the wrong people. And you know it only 1 year down the road.
| Wrong abstraction. Using framework has its appeal, where a cookie
| cutter solution mostly work. But it also has its limitation,
| bloat.
|
| Once a wrong abstraction is in place, the more code/people
| depends on it, the more effort it takes to refactor
| a_c wrote:
| Btw, the most important point from OP's is the last one. Life
| is fragile, treat people well. That's more important than all
| the three letter acronyms in the world.
| ipaddr wrote:
| "And remember that A players can recruit other A players, but B
| players can only recruit C players"
|
| In point one they list this. In point 3 he mentions his biggest
| mistake was hiring someone with starpower from a public company
| who didn't work.
|
| Unless the founder is an A player in terms of recruiting everyone
| hired would be a C player or less. And in point 3 we learn he is
| not an A player.
|
| How do B players ever get hired?
| georgeecollins wrote:
| Your point just illustrates how shallow this analysis is.
| oragnediscussy wrote:
| The point is that B players have a very hard time ever
| recruiting A players and actually almost always hire people
| that are worse than themselves (i.e. c players). This is very
| true and should be something founders watch out for very
| carefully as they scale.
| sokoloff wrote:
| "Yes and..." I think a lot of times this is _intentional_.
|
| A player wants to hire A players so the A player can more
| effectively beat their rivals in the marketplace.
|
| B player wants to hire C players so the B player can more
| effectively beat their rivals in the company.
| molsongolden wrote:
| The A player thing is less about how good they are at hiring
| and more about how strong of a player they are overall.
| Founders generally need to be A players to be successful
| founders.
|
| An A player will still make hiring mistakes but they have the
| skills/ability/aura/whatever to convince other A players to
| come work with them.
|
| Many A players won't want to work for/with a B or C player
| because they won't see this as a good opportunity.
|
| Not sure if they actually meant that B players can't hire B
| players but maybe. This sort of framing is pretty high level
| though.
| mlhpdx wrote:
| Yep, just put people in bins so you can keep them organized.
| It's always worked, so why stop now, right?
|
| It's not as easy as A and B and C people (or any other
| labels).
|
| I've professionally led a team doing physical labor, and
| currently a team of teams doing intellectual labor (software
| development) and several between. They have been excellent,
| productive and profitable as well as respectful, ethical and
| honorable.
|
| The reasons behind their success are complicated but always
| start on the same foundation: respect. Genuine, difficult to
| come by, and more difficult to maintain, respect. For the
| customer. For the user. For each other. For other
| departments. For the community. For the competition.
|
| From there builds trust, and from trust comes ambition and
| the ability to focus on the purpose of the job (yes, it's a
| job in most cases, not a mission or vision).
|
| This is what I see some growth CEOs miss. They lack respect
| for people outside the "right" mold and don't hire (or keep)
| them. Then to their surprise, their teams become
| dysfunctional.
|
| Many tired anecdotes teach us about this (too many chefs,
| etc.) yet the same mistake is made with relentless
| repetition.
| skrebbel wrote:
| Meta nitpick, and I'm not certain, but I think the author
| (named Tracy) is a she. Or a they which lets you avoid the
| problem altogether.
| eadmund wrote:
| > Or a they which lets you avoid the problem altogether.
|
| At the cost of being ungrammatical, inelegant and IMHO
| profoundly disrespectful.
| williamstein wrote:
| You are correct. The author's pronoun is "she" and there is a
| bio page about her here: https://leade.rs/speaker/tracy-young
| sieabahlpark wrote:
| [flagged]
| williamstein wrote:
| The assumption is: "And remember that A players can recruit
| other A players, ...", not " "And remember that A players can
| ONLY recruit other A players, ...".
|
| (Added: My Ph.D. in mathematics is useful for something.)
| bibanez wrote:
| I cracked a laugh at the end :) I wonder what their faces
| will look like when they learn about contraposition
| tyoung wrote:
| This is helpful, thank you.
| triceratops wrote:
| Any articles about the failure points from $0 to $5M ARR?
| moneywoes wrote:
| This please, I think 99% of businesses don't even get to $5M
| jrudolph wrote:
| also on the same blog -> https://tracy.posthaven.com/part-i-
| founder-led-enterprise-sa...
| [deleted]
| jvanderbot wrote:
| It's right on the same site. It is called "part 2" after all.
|
| https://tracy.posthaven.com/part-i-founder-led-enterprise-sa...
| riku_iki wrote:
| part 1 assumes you built strong product with strong market
| fit already. Author could consider writing part 0 about
| missing most critical part.
| HorizonXP wrote:
| Love seeing you back in the game Tracy.
|
| I'm currently knee-deep in the enterprise world, and trust me,
| the point about selling into these orgs is very true. My team
| just spent the last year moving our client off a Salesforce
| Lightning-based solution onto our custom-built one. No one in the
| org could tell us why they chose to build it in Lightning, but
| everyone now says they love our solution.
|
| The lessons you learn building a startup are good and always
| usable, but you need to be ready to learn what it's like to work
| in and with an enterprise, to figure out how to adapt and sell
| your product to them. It's an arduous process, but worthwhile.
| [deleted]
| thexumaker wrote:
| So 3/4 of the main points here are in regards to hiring the right
| people... Almost makes me wonder if hr teams/operations shouldn't
| be measured on just headcount but rather getting the right people
| in
| Ataraxic wrote:
| Hiring speed, hire quality, compensation (including things like
| work/life balance, healthcare, flexibility). I think you can
| try for two.
|
| Once you get large enough your ability to really selectively
| recruit gets a lot harder when natural attrition means you need
| to replace X amount of people just to continue operating as
| before.
|
| Of course earlier on, the fewer the people the larger the
| impact each one will have so just like the article says about
| transitioning to enterprise, the focus and requirements of the
| HR team change as well.
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