Who’s going to help you build a billion dollar company?
Before you read this as a ‘how-to-manual’, let’s be clear: if there was a paint-by-numbers way to reach $1B, everybody would be doing it. There isn’t a magic formula. But you can build a team with the structure and skills to dramatically improve your chances of success. And I don’t want to talk about just $1B valuations – after all, many “unicorns” can be as much about a bet on individual star founders as solid metrics such as revenue and profit. That’s not to denigrate those founders: clearly many are worth the bet! But we’re going to concern ourselves with the inherently more valuable $1B in sales.
So how do high-performing businesses get there? Many observers point out that there is an element of luck. The financier-philosopher Nassim Taleb famously said, “Mild success can be explainable by skills and labor. Wild success is attributable to variance”. In other words, you can put as much work and talent into a project as you want, but you also need the following winds of either pure luck or opportunities which open-up thanks to differentials over which you had no prior control. Otherwise, known as “right time, right place”. But founders won’t count on blind faith. High value companies consistently exhibit certain hallmarks of excellence. The companies we work with are focused on getting the execution right. Most importantly, they are uncompromising in recruiting the best possible talent available for any scenario.
The journey to $1B in sales is reasonably well trodden. Most of the pitfalls are visible in some form or other, and you can certainly maximize your chances of success at each roll of the dice. In a superb Fortune article, Tien Tzuo, ex-SalesForce and CEO of Zuora says, “Our path to success was much more of a slow climb, with lots of switchbacks along the way… Just recognize that each stage is different and what you are trying to prove is different. Embrace change. Embrace the switchback.”
At each stage, or switchback, a founding team can decide to cash out or press on, but the status quo is almost never an option. And key to each stage is the people you recruit. The skills required in a start-up are very different to the skills which will take a business through hyper-growth, IPO and then life as a public company.
Therefore, recruiting and retaining talent is a never-ending process. And sometimes it is the painful act of replacing people on the team (typically, the move from start-up bootstrappers to growth strategists); sometimes it is a case of augmenting the team (for example, the board and oversight talent required as you move towards IPO). There are plenty of ways to split out these stages, but for the people in an organization, I would call them out as follows:
- Iterate: You have an idea and it needs an audience/customer base. This process of finding product/market fit will take lots of iterations and is where you will make most stumbles.
- Accelerate: Rapid growth. You’ve found the fit, recruited a talented team, and secured initial funding from backers who share your confidence and buy into your vision.
- Replicate: You’ve demonstrated what you do in one territory; now it’s time to replicate the model internationally. (Consumer businesses may be international from day 1, but the ‘replicate’ phase is still valid e.g. opening local customer service centers).
- Dominate: Your business demonstrates not just traction but dominance – an ability to grow market share in the face of stiff competition.
- Consolidate: An independent board and governance structures are implemented, to bring the business up to the credibility and diligence required to get through an IPO.
At Renovata Partners, we have been a part of the billion-dollar journey several times. When we first worked with social gaming business King.com, for example, it was a $100m revenue business. By the time of its IPO, we had placed more than 15 senior executives and the business was up to 2000 employees and a $2bn revenue run rate.
Just as impressive is Criteo, the phenomenally successful Adtech business. Founded in 2005, Criteo has come to dominate the highly competitive retargeting segment, by demonstrating value and transparency. We started working with the company in 2008-9 when, whilst having successfully raised money in its home market of France, it was still comparatively small. We’ll examine Criteo in more depth as we look at the key stages of growth.
Iterate & Accelerate
I don’t want to focus on these early stages too much, because so much has already been written elsewhere about the founder mentality. A couple of points are worth mentioning, though. First, don’t underestimate the importance of hiring to the very best of your ability and financial reach even at this early stage. In a 10-20-person business, mistakes are amplified. Decisions are often made by the only specialist in the room, so make sure they actually are specialists. Second, hire people for whom change is not just OK, but positively inspiring. The immediate months post Series A or B are guaranteed to be periods of dramatic growth, and there is no room for empire-building or clinging to the status quo. Hire people with a specific ambition for growth.
We were tasked with helping Criteo expand into new European territories: the UK, Germany, Italy and the Netherlands; by hiring MDs for each of these markets. These MDs were pioneers. Each beachhead into an unfamiliar territory is to some degree, a start-up in its own right. We expect MDs in new territories to grow into their roles and recruit teams rapidly, but we need them to be self-starters who are happy to develop a business without the home comforts of a mature big-company infrastructure.
Breaking through the 20-25 employee mark is also significant in corporate culture terms. In the words of Marc Andreessen of A16Z, “It takes time for the culture of any company to become ‘set’ — for the team to decide what they’re all about, what they value — and how they look at challenge and adversity’. Whilst you won’t have mature departmental structures, the culture of the business will begin to clarify. Manage it by defining your mission and values – the flag around which new employees can gather – and you will create a powerful engine for both motivation and engagement with top new talent. Fail to manage it, and at best you’ll be missing out; at worst you will create competing cultures and confusion in different offices.
Criteo is unusual in that its management team was highly distributed from its earliest days. The Engineering and Finance teams were in Paris, the COO and the Head of Supply were in London, and the founder/CEO moved to SF very early in the journey. The culture has always been internationalist, ambitious, performance, transparent and flexible.
Today, the CEO and CRO can be found in NYC, whilst Paris, London and SF remain significant. This is extremely rare, but given the complexities many companies face in taking their first steps abroad (especially expanding into the US), perhaps internationalism is a discipline worth learning early. This global outlook also means that the company can recruit talent wherever it finds it. Today, Criteo’s CEO is Swiss-Colombian- American, the CTO and CFO are French, the CRO American, and other members of the senior team have been recruited from across the US and Europe.
The next stage is dominance. A dominant player in its category, a business must hire rapidly to fill matrixed roles across multiple markets – in Criteo’s case growing the team from 50 to over 350. The people for this phase are less likely to be pioneers, but are capable of operating in more process-driven, structured environments. They will work collaboratively across borders with peers in organizations which are multi-layered and federated; yet still expanding fast.
And you won’t just need these matrixed managers: you’ll also need a new cast of supporting actors. This phase breaks through what has come to be called “The Dunbar Number”; a realization that no group (from a prehistoric, hunter-gatherer village to the modern business) can remain coherent above around 150 people. It simply becomes impossible for everyone to know everyone else or remain unconditionally aligned to the same objectives. The result is a new inertia – just when senior managers want to keep their foot on the gas. The solution is investment in new strategy, communications, and HR roles: team members focused on keeping teams together and motivated during a period of growth characterized by upheaval and fragmentation.
At this stage, Criteo offers another useful cultural case study. It’s an unwritten rule that Criteo requires its senior team to retain their hands-on skills: any manager in any territory should be able to operate at the coal-face of the business if required. This has, on occasion, made recruiting senior roles hard: after all, some managers enjoy the comfort of ‘the corner office’. But in the Dominate phase of continued rapid growth, the dynamism of hands-on managers keeps the business accelerating hard.
Moving towards maturity, a company will accrue a new type of team member with the credibility to sustain the business through a life on the public markets. With Criteo, we recruited a CFO and an independent board member with specific experience of the processes and rigor required to get the business IPO-ready. Key roles like audit, remuneration/compensation committee chairs must be filled. The business should operate pre-IPO for a while as though it were a public entity, delivering quarterly filings and results.
But those are just the functional requirements. These roles bring a different kind of skillset and mindset to the management team. The consolidation phase is best served by exceptional collaborators who thrive in a team. They are unfazed by the high-growth environment, but also prize predictability, smoothness and a clear vision of the horizon.
They are good communicators as well, because the stakeholder landscape has suddenly exploded: shareholders, journalists and often a large partner ecosystem all suddenly have a right to know what’s going on. Consolidation leaders are excellent at influencing people in different offices, cultures and contexts. Criteo’s early investment in a globalized team has paid off hugely in this respect.
Consolidation also requires the constant evolution of existing roles and the maturation of a fuller strategic team, although talent is now as likely to percolate through the business as to be recruited externally. At Criteo, we have upgraded the marketing function, maintained momentum in the product organization and hired the talent to spearhead the company’s ambitions in mobile. What unifies all these roles is a focus on the future rather than the present, and an improved ability to make the right decisions based on strategic understanding. Every great hire in this phase serves to extend a large company’s “intellectual runway” – its ability to think about tomorrow’s environment and capitalize on it. This expertise is the best defense against agile upstart competitors.
(We don’t have space here to touch on the additional complexity of growth through acquisition. Suffice to say that acquihires, segment consolidation and opportunism are all valid reasons for acquisitions; they will all serve to accelerate progress through the stages of growth).
Make each leap count
Tien Tzuo’s switchbacks theory feels right. Businesses evolve in dramatic leaps, and in high-growth businesses those leaps can be particularly challenging. Certainly, a separate set of skills is required at each stage.
Sometimes, early employees (even founders) are not the right people to take the business to the next level – and we therefore, see recruitment not only as a search for talent, but also as a risk reduction exercise to ensure that the business always has the right skills under one roof to succeed, irrespective of continuity of staff.
With both King.com and Criteo, we have helped the business multiply from one cell to a much larger organism of 20 – 50x the size, going through extraordinary points of inflection along the way. It’s a steady transition from iteration (risk, guerrilla attitude) via replication (pioneering leaders) to consolidation (steady hand on the tiller, prizing vision and strategy).
Your journey won’t be identical; but this is a strong model for what each evolution looks like for businesses on a successful trajectory.