Nothing is more important to capital providers than finding leaders who can turn ideas into large, fast-growing companies. As anyone who invested in Mark Zuckerberg or Jeff Bezos before their companies went public knows, a CEO who can deliver on this premise could be worth billions.
I am sorry to say that it's too late for you to turn back the clock and invest in Facebook or Amazon when they were just getting started. But as a startup investor, I am always searching for a similar opportunity. To get an in-depth look at what such leaders look like, you could read my book Disciplined Growth Strategies.
Or you could dig into this article about how three aspiring public company CEOs are managing growth: Frank Calderoni is CEO of connected planning platform Anaplan which topped $100 million in revenue in fiscal 2017 and seems headed to an IPO; Girish Pancha is CEO of data integration middleware supplier StreamSets which grew five-fold in 2017 and is seeking to hit $25 million in revenue in 2018; and Patrick Salyer is CEO of identify management service Gigya which grew at over 100% per year from nothing to $25 million in a few years.
1. Calderoni on Anaplan's Growth
Companies face different challenges as they grow. And some CEOs can't cope with the barriers to growth as the companies get bigger so their investors replace them with leaders who can.
Then there are leaders like Calderoni who seem to handle these challenges with ease. He views growth in three tiers -- each with their own unique challenges. As he said in an April 18 interview, "In the early stage, you are in a trial customer situation where you hope to get five or 10 early adopter customers who see your product's benefits. In the middle stage, you are going to market building on your proof points -- you are setting revenue, growth and customer acquisition objectives. In the late stage, you take your success -- say in three domestic vertical markets and expand globally. At this stage -- where we are now -- we want to sustain and repeat growth predictably so we can become a public company."
Anaplan believes it's important to keep its culture strong as it grows. According to Calderoni, "We have an open environment and communicate in many ways as we have grown to 1,000 people. We discuss topics such as 'What is our strategy', 'What are we striving for?' 'How are we doing versus our goals?' We want everyone to feel that they are part of the company."
It is challenging to sustain growth since leaders must change the organization to support the demands of greater scale and find new ways to hold people accountable for growth. As he said, "We manage growth through Vision, Strategy, Metrics and Execution. (VSME). Sales is accountable for bookings and billings by region; customer success must keep customers satisfied and be aware of their evolving needs; engineering must think about how to meet customer needs while taking advantage of emerging technologies; HR must hire and develop our talent and Finance has to focus on financial planning and reporting."
2. Pancha on StreamSets's Growth
StreamSets began selling its product in October 2015 raised $20 million in a May 2017 Series B from Accel Partners, Battery Ventures, and New Enterprise Associates -- and by September 2017 had doubled its head count in the previous year from 35 to 70, mainly in the product development 2014. As Pancha said last fall, while "headcount is growing at 50%, recurring revenue is soaring at 400%. I expect recurring revenue to rise 200% in 2018 while headcount will continue to rise at 50%."
Pancha sees growth in three revenue tiers. As he explained in a March 14 interview, "I see growth in three revenue bands -- incubation ($2 million to $8 million in revenue); traction ($24 million to $50 million); and escape velocity (over $100 million). Every year I have a spreadsheet with metrics in each -- such as annual recurring revenue per customer, number of customers and the organization."
The instrumentation changes each year. "At incubation you have the CEO, sales manager, and a few sales people. In the traction stage, we hired a sales manager responsible for quadrupling revenue but only tripling the number of customers -- boosting revenue per customers with six or seven sales people. And in 2018 we have a $24 million revenue target with a team of 12 to 14 sales people," he said.
To reach $50 million in 2019 sales StreamSets will need to make three ideas work together. As Pancha explained, "We need to be disrupting a large expanding market, to be innovating our product offering; and we need the right organization and execution. If the market is not growing, the product and organization won't matter."
3. Salyer on Gigya's Growth
Gigya has an interesting twist on the three stages of growth that Pancha and Calederoni described. As Salyer said in a March 14 interview, "From zero to $10 million it's about product market fit. The CEO's job is to get customers who can point the company in the right direction. From $10 million to $25 million it's about scaling the go-to-market -- assuming a quota of $1 million per year you need a few sales managers assuming six to seven sales reps per sales manager. The customer success organization must make the customer happy and marketing should manage the funnel of leads."
At the $25 million to $50 million stage, companies can get into trouble. As he said, "You need to figure out whether the customer is using the product as intended; whether customers think of the product as a painkiller or a vitamin; and whether the customer will recommend you to others and buy more of your products. You need a plan to retain 85% to 90% of your customers in order to keep growing."
If you find leaders who are making this kind of progress on their growth strategies, you might consider investing in them.