Key insights from 60 books read by entrepreneurs worldwide

This piece reads like a collection of maxims from some of the world's most successful founders and executives, organized around three lenses: finance, organization, and product/service. It lays out the mindsets to adopt and the pitfalls to watch for at each phase of a startup or new business venture.

Introduction

I was originally a researcher, and perhaps out of habit, when I first started my company I tried to tackle every problem in front of me by first reasoning from a blank slate and building my own theory in my head. In practice, things rarely went as planned. I failed over and over, tweaking my theory a little each time and gradually adapting to the problem at hand. It was an exhausting, agonizing process.

Looking back, I've often realized that the theory I eventually arrived at through all that trial and error was exactly what a successful founder had advised me early on, or exactly what was written in some book for entrepreneurs.

To put it bluntly, I've come to believe that the optimal approach is to simply try the advice you're given, even if you don't fully understand the reasoning behind it. That advice was itself reached only after the same kind of hardship and trial and error I described above, so following it lets you skip that time entirely. The reasons become clear as you go.

There is one major caveat, however: the person giving the advice has to be the right person, someone you can genuinely trust. Anyone can offer advice within the limits of what they know, but you should listen to people who have actually taken on the challenge, struggled mightily with it, and come out the other side with a major success.

Here, I've taken roughly 60 books that entrepreneurs around the world have read like textbooks (most written by founders and executives who achieved enormous success in Silicon Valley) and organized their methods and thinking (across finance, organization, and product/service) by company stage: pre-founding, seed, later stage, exit, and so on.

I hope it serves as a useful reference for anyone building an organization, launching a startup, or exploring a new business.

The Books Covered

The selection focuses on books about founding startups and building products. I chose titles that are frequently cited: those with large numbers of highly rated Amazon reviews, high citation counts on Google Scholar, and repeated recommendations from global VCs and entrepreneurs.

• The Lean Startup (Eric Ries) - The original text on Lean Startup methodology. The bible for every founder.

• Zero to One (Peter Thiel) - A product strategy for building monopolies that sidestep competition and create something "from 0 to 1."

• The Innovator's Dilemma (Clayton M. Christensen) - The classic that decoded the structure of disruptive innovation.

• Crossing the Chasm (Geoffrey A. Moore) - Strategies for bridging the "chasm" between the early market and the mainstream market.

• The Hard Thing About Hard Things (Ben Horowitz) - A raw, unflinching account of how to survive the moments when your product and your organization are on the brink of collapse.

• High Output Management (Andrew S. Grove) - The former Intel CEO's landmark work on management that maximizes an organization's output.

• Measure What Matters (John Doerr) - The definitive guide to OKRs, the goal-setting framework adopted by Google and others.

• The Design of Everyday Things (Don Norman) - The timeless classic that laid the foundations of human-centered design and UI/UX.

• Hooked: How to Build Habit-Forming Products (Nir Eyal) - A blueprint for the psychological mechanisms that turn product use into a habit.

• Inspired: How to Create Tech Products Customers Love (Marty Cagan) - The definitive bible of product management, read by every PM in Silicon Valley.

• Sprint: How to Solve Big Problems and Test New Ideas in Just Five Days (Jake Knapp) - The "design sprint" from Google Ventures: a method for validating an idea in just five days.

• The Four Steps to the Epiphany (Steve Blank) - The book that introduced the "customer development" model, the wellspring of Lean Startup.

• Radical Candor (Kim Scott) - A feedback approach built on "radical candor" for building strong product teams.

• Hacking Growth (Sean Ellis) - The original source on the mechanics and processes of "growth hacking" that propelled Dropbox and others to explosive growth.

• Traction: How Any Startup Can Achieve Explosive Customer Growth (Gabriel Weinberg) - A framework for testing customer acquisition channels, which matter just as much as product development.

• The Startup Owner's Manual (Steve Blank, Bob Dorf) - A hefty, step-by-step manual for putting the customer development process into practice.

• The Mom Test (Rob Fitzpatrick) - The art of customer interviews and problem validation so objective that even your mother couldn't flatter you.

• Build: An Unorthodox Guide to Making Things Worth Making (Tony Fadell) - The creator of the iPod and Nest on how to build products worth building, and the teams to build them.

• Lean UX (Jeff Gothelf, Josh Seiden) - A method for running fast, testable UI/UX design cycles within agile development.

• Escaping the Build Trap (Melissa Perri) - An organizational approach for escaping the trap where "shipping features" becomes the goal, and refocusing on customer value (outcomes).

• Empowered: Ordinary People, Extraordinary Products (Marty Cagan) - The sequel to Inspired. How to design autonomous, high-performing product teams.

• Running Lean (Ash Maurya) - A hands-on guide to systematically validating product-market fit using the Lean Canvas.

• User Story Mapping (Jeff Patton) - An agile technique for visualizing the customer journey and carving out the features that truly matter (the MVP).

• Continuous Discovery Habits (Teresa Torres) - A framework for making ongoing customer interviews and hypothesis testing a habit that runs in parallel with development.

• Product-Led Growth (Wes Bush) - The PLG playbook: acquiring and scaling users through the power of the product itself rather than a sales force.

• Team Topologies (Matthew Skelton, Manuel Pais) - Modern organizational design for reducing cognitive load on development teams and delivering products faster.

• Shape Up: Stop Running in Circles and Ship Work that Matters (Ryan Singer) - Basecamp's alternative to Scrum: a new approach to the development process.

• Talking to Humans (Giff Constable) - A highly practical primer on how to talk to customers effectively before you build anything.

• Good to Great (Jim Collins) - A classic read not only by startup founders but by Silicon Valley leaders building organizations for the long haul.

• Shoe Dog (Phil Knight) - The Nike founder's memoir. A portrait of the gritty reality and passion of startup life, from cash crunches to betrayals, praised by Bill Gates among others.

• Principles: Life and Work (Ray Dalio) - Principles for running an organization on radical transparency and rationality, from the founder of Bridgewater, the world's largest hedge fund.

• Rework (Jason Fried, David Heinemeier Hansson) - Basecamp's founders overturn the conventional startup wisdom that bigger is always better.

• Creativity, Inc. (Ed Catmull) - The Pixar co-founder on managing an organization of gifted creatives so that it produces innovation again and again.

• How Google Works (Eric Schmidt, Jonathan Rosenberg) - Google's organizational philosophy, from its former CEO and colleagues: how to attract "smart creatives" and balance freedom with discipline.

• Delivering Happiness (Tony Hsieh) - The former Zappos CEO's account of how an uncompromising company culture and customer service become the ultimate competitive advantage.

• No Rules Rules (Reed Hastings, Erin Meyer) - The full picture of Netflix's radical culture, from its co-founder: strip away process and raise "talent density."

• The Ride of a Lifetime (Robert Iger) - Disney's former CEO on the inside story of the Pixar and Marvel acquisitions and the practice of leading a giant corporation.

• Blitzscaling (Reid Hoffman, Chris Yeh) - The LinkedIn co-founder's strategy for dominating a market through breakneck growth, risks and all.

• Sam Walton: Made In America (Sam Walton) - The Walmart founder's memoir. A classic that Jeff Bezos studied closely in Amazon's early days as his model for customer obsession.

• Trillion Dollar Coach (Eric Schmidt, et al.) - Former Google CEO Eric Schmidt and co-authors distill the teachings of Bill Campbell, the legendary coach behind Steve Jobs and Larry Page.

• Hit Refresh (Satya Nadella) - Microsoft's CEO recounts how he revived a stagnating giant by instilling empathy and a growth mindset.

• Pour Your Heart Into It (Howard Schultz) - The memoir of the former CEO who grew Starbucks into a global company, on brand building and his passion for employees.

• Losing My Virginity (Richard Branson) - The Virgin Group founder's rule-breaking, unconventional entrepreneurial life and brand strategy.

• Let My People Go Surfing (Yvon Chouinard) - The Patagonia founder's pioneering bible of purpose-driven management that reconciles business with environmental stewardship.

• Invent and Wander (Jeff Bezos) - A collection of the Amazon founder's shareholder letters. Learn the "Day 1" philosophy and long-term thinking straight from the source.

• Behind the Cloud (Marc Benioff) - The Salesforce founder's playbook for how he made the SaaS business model and the very concept of the cloud take hold worldwide.

• Hackers & Painters (Paul Graham) - A collection of essays by the founder of Y Combinator. It lays out the intellectual bedrock of Silicon Valley: how engineers (hackers) create wealth.

• That Will Never Work (Marc Randolph) - Netflix's other co-founder recounts the scrappy, unglamorous early days of a startup that began by renting out DVDs through the mail.

• The Startup of You (Reid Hoffman, Ben Casnocha) - The LinkedIn founder shows how to treat your own career as a startup, adapting and growing it accordingly.

• What It Takes (Stephen A. Schwarzman) - The Blackstone founder on the rigorous risk management and relentless pursuit of excellence that carried him to the summit of the financial industry.

• Play Nice But Win (Michael Dell) - The Dell founder's account of the fierce fight to take the giant company he built private (delisting it) and put it back on a growth trajectory.

• Winning (Jack Welch) - A classic from GE's legendary former CEO on leadership and energizing organizations, including the 20-70-10 rule.

• Start Something That Matters (Blake Mycoskie) - The TOMS Shoes founder describes how he established the "One for One" social business model: for every pair sold, one is donated.

• The Innovation Stack (Jim McKelvey) - The co-founder of Square (now Block) explains how to build a chain of innovations no one can copy, one strong enough to repel even Amazon's entry into the market.

• Lean Analytics (Alistair Croll) - How to design metrics that support data-driven decision-making.

• Only the Paranoid Survive / Andrew Grove - A management bible from Andy Grove, the man who made Intel the world's leading semiconductor maker.

• Who Says Elephants Can't Dance? / Louis V. Gerstner - A first-hand management account of how Louis Gerstner, IBM's first CEO hired from outside the company, used forceful leadership to pull the near-collapsed giant into a V-shaped recovery.

• Positioning / Al Ries, Jack Trout - A marketing classic on the importance of burning your product into the customer's mind as a distinct "position" of its own.

Before founding a startup

The pre-founding stage of a startup, the pre-seed period that runs from the initial idea through early hypothesis testing, is the single most important phase. Before committing to full-scale product development or fundraising, this is where you determine whether the problem is truly worth solving and who your customer actually is.

Finance

Sizing up the market

• The four market types: Every startup falls into one of four categories: an existing market, a new market, a market re-segmented on low cost, or a market re-segmented around a niche. Knowing which "market type" you are about to enter, even before you found the company, is a key safeguard against failure. (Blank, 2020)

• Market type transforms your strategy: In an existing market, the goal from year one is to capture market share; in a new market, the goal is to evangelize and educate the market. Because burn rate and marketing strategy differ fundamentally by market type, misjudging it at the outset can be fatal. (Blank, 2020)

• Understand the "power law" of venture investing: VC returns do not follow a normal distribution. They follow a power law, in which a handful of winners generate more return than every other company in the portfolio combined. Founders should therefore ask themselves seriously, before founding anything, whether their company could create so much value on its own that it returns an entire fund, which means growing to a multi-billion-dollar scale. (Masters & Thiel, 2014)

• Start with a small niche, then expand into adjacent markets. Rather than going after a huge market from day one, begin by dominating a small market with a concentrated group of specific users and no (or almost no) competitors, then gradually scale into related adjacent markets. (Masters & Thiel, 2014)

Financial planning and burn rate management

• Keep the CEO's salary low. In an early-stage startup, the CEO's annual pay should be capped at $150,000. A large cash salary only creates an incentive to preserve the status quo, whereas a low salary keeps the leader focused entirely on increasing the value of the company as a whole, that is, on creating future value. (Masters & Thiel, 2014)

Organization

Preparing your career as a founder

• Learn at both a startup and a large company: If you have time to prepare, first join a startup to get a bird's-eye view of how a business actually works (org charts, marketing, sales and so on), then move to a large company to learn its processes and internal politics. Doing so dramatically reduces the "unknown unknowns" you will face when you found your own company. (Fadell, 2022)

• Don't hedge; take the risk: Rather than founding a company while keeping a foothold at a stable employer (through a leave of absence, for example), commit to cutting off every escape route and devoting yourself fully to your own company. That resolve is what builds strong confidence and a firm identity as an entrepreneur. (Benioff & Adler, 2009)

Building the first team and company culture

• The first five to ten hires decide your fate: A venture's success or failure is determined by its first ten (or even five) employees. It is not enough to keep the team small; you must assemble an "all-star team" of highly capable people. (Graham, 2004)

• Choosing co-founders and committing full-time. Picking a co-founder is like getting married, so it is best to choose someone you already share history with before starting the company. As a rule, everyone involved in a startup should be full-time; consultants and part-time hires create misaligned interests and should be avoided. (Masters & Thiel, 2014)

• A mafia-like culture and one responsibility per person. Instead of luring people with the same perks every other company offers, recruit co-conspirators with the company's unique mission and a team they genuinely want to work alongside. Aim for an organization bound together as tightly as a cult or a mafia, and to prevent internal rivalry, assign each employee one clearly defined responsibility. (Masters & Thiel, 2014)

• Decide your values and culture in advance: Once a company culture has formed, it is extremely hard to change. It is wise, therefore, to discuss "what kind of company we want to be" from the very start and to build the culture and values deliberately. (Benioff & Adler, 2009)

• Find a mentor you can trust: Founding a company is a journey into the unknown. Find a mentor who will push you to take risks and break through your limits, and actively seek their advice. (Benioff & Adler, 2009; Fadell, 2022)

Service

Coming up with the idea

• The three conditions for "what you should do": Before betting your life on an idea, check that it sits where three circles overlap: what you want to do, what you are good at, and what can make money. (Croll & Yoskovitz, 2024)

• Build in time to recharge: Instead of running nonstop, it can pay to step away from daily life now and then, for instance by taking an extended break, and use that recharging period to think carefully about the direction of your life and your ideas for the future. (Benioff & Adler, 2009)

• The three elements of the best ideas: The very best ideas to pursue share three traits: (1) they come with an answer to "why would a customer want this?"; (2) they solve a problem many people face every day, an essential "painkiller" rather than a nice-to-have "vitamin"; and (3) no matter how clearly you see the difficulties, they simply won't leave you alone. (Fadell, 2022)

• Three tests before you start: Before devoting your life to a business, verify that it meets the following three criteria. (Schwarzman, 2019)

  • Scale: Does it have the potential to become big enough to be worth dedicating your life to?

  • Uniqueness: Is there a distinctive idea, an "aha!" moment, that makes other people say they absolutely must have it?

  • Timing: Is the market on the rise, and are you sure you aren't entering too early? (The world does not reward pioneers.)

• Aim for zero-to-one creation and monopoly. Rather than making marginal improvements to someone else's product in a fiercely competitive existing market, create entirely new value, going from zero to one, and build a business model designed to monopolize its market. (Masters & Thiel, 2014)

• Proprietary technology that is ten times better: To build a monopolistic advantage, you must have proprietary technology or design that is at least ten times better than existing solutions. (Masters & Thiel, 2014)

• Get out of the building, and build a minimum viable product (MVP). Don't get trapped in desk-based analysis. Leave the office, meet customers face to face and understand their real problems. Then build a "minimum viable product (MVP)" with the least possible effort and time, and test the market's reaction early. (Reis, 2011)

• Don't fear the big competitors: There is no need to be intimidated by large companies with proper offices and sales forces. Building software from scratch is a massive undertaking for a big company, which is exactly why they are the ones who fear a nimble band of hackers, that is, a startup. (Graham, 2004)

• Run upstairs: When choosing what your business will tackle, pick a hard technical problem. It's like fleeing up the stairs when a giant bully is chasing you: it hurts you too, but the bully's bulk weighs them down and they can't keep up, which gives you a powerful competitive advantage. (Graham, 2004)

Forming hypotheses

• A business is a "stack of hypotheses": Every new business idea rests on a pile of untested assumptions, or hypotheses. You cannot confront that risk by sitting in a conference room. (Constable, 2014)

• Visualize with a "Lean Canvas": Instead of writing a thick business plan, use a one-page framework called the Lean Canvas to lay out your problem, customer segments, unique value proposition, and so on. This lets you see the whole business model at a glance and quickly pinpoint its riskiest elements—the hypotheses you need to test. (Croll & Yoskovitz, 2024)

• Put your assumptions on a canvas: Your founding vision is nothing more than a set of assumptions—hypotheses. Rather than drafting a hefty business plan, capture those hypotheses on a Business Model Canvas and get ready to leave the office to test them against real customer reactions. (Graham, 2004)

Interview your customers

• Never ask directly whether your idea is good (the Mom Test): Don't ask customers "What do you think of my idea?" or "Would you buy this?" People will lie to avoid hurting your feelings—just as your mother would. Only the market knows the truth. (Constable, 2014)

• Ask about past behavior, not future predictions: Human beings are hopelessly bad at predicting their own future actions. So ask questions that dig into specific things they have actually done: "Tell me about the last time this problem came up," or "How are you dealing with it right now?" (Constable, 2014)

• Look for workarounds (hacks): If customers are content with an existing alternative that is "good enough," persuading them to switch to a new product is an uphill battle. Conversely, if people are going so far as to hack together their own solutions out of existing tools, that is evidence of strong demand—a genuine market signal. (Croll & Yoskovitz, 2024)

• Share your idea with people you trust: Rather than keeping your idea to yourself, confide in people you trust. You may receive unexpected advice—or an introduction to the kind of talented people a startup can't do without. (Benioff & Adler, 2009)

Validate your business model quickly

• A startup is not a "miniature version of a large company": A startup isn't an organization built to execute a pre-existing plan; it is a temporary organization designed to search for a repeatable, scalable business model. (Graham, 2004)

• The five-day "sprint": Before pouring huge amounts of time and money into building a product, try the "sprint" method: in just five days, turn your idea into a prototype, test it with real customers, and get answers to your most critical questions. It is remarkably effective. (Knapp et al., 2016)

• Think in prototypes and build only the "facade": You don't need to build the back-end systems. Build only the facade—something convincing enough that customers believe it's real and react naturally—then work backwards from what you learn to figure out which technology you actually need. (Knapp et al., 2016)

• An MVP (minimum viable product) is a process: Once validation is complete, you build an MVP—but the MVP is not the product itself; it is a learning process. Include only the shortest path to the user's "aha!" moment (the instant they recognize the value), and ruthlessly cut every feature that isn't essential. (Croll & Yoskovitz, 2024)

• Ship version 1.0 fast: There are only two things you need to know about business: build something users love, and make more money than you spend. Don't chase perfection—get version 1.0 out into the world as quickly as possible, then feel your way toward the optimal product as you win users. (Graham, 2004)

Seed (Angel/Seed Stage)

This is the phase in which you search for a business model, get the business off the ground, achieve product-market fit (PMF), and lay the foundations for rapid growth.

Finance

Timing and size of fundraising

• Raise more money than you think you need Many founders, fearing equity dilution, try to raise only the bare minimum. But startup plans are notoriously prone to the "planning fallacy"—things rarely go as expected. Surplus cash acts as a buffer against the unforeseen (a market crash, unexpected expenses) and keeps more options open for the business. (Hoffman & Yeh, 2018)

• Secure 18–24 months of runway Raising money from venture capital (VC) firms takes longer than you expect—typically three to five months. If you scramble for funding only after the money runs out, you'll be forced to accept unfavorable terms. The Silicon Valley rule of thumb is therefore to hold enough cash to cover the 18–24 months you'll need before the next funding round. (Fadell, 2022; Hoffman & Yeh, 2018)

• Present an ambitious "billion-dollar" market size: Given how their funds work, VCs are hunting for home runs—returns many times their investment. Your pitch therefore needs to show the potential to reach a billion-dollar scale and the path to get there (Airbnb, too, was advised to deliberately estimate its early market size ambitiously). (Hoffman & Yeh, 2018)

• Funding is not a "magic wand" that removes uncertainty Raising capital does not make the uncertainty in your business model disappear. Landing a huge sum before you have customers or a market makes it dangerously easy to fall into the trap of squandering it—giving the product away for free or expanding the sales team prematurely. Proceed with caution. (Blank, 2020; Croll & Yoskovitz, 2024)

Approaching angel investors

• Look beyond venture capital (VC) for funding When it comes to seed-stage startups, VCs frequently fail to grasp novel business models or lowball a company's valuation. Raising VC money also means giving up a large share of ownership, and in some cases exposes founders to the risk of being ousted as CEO by investors who turn predatory. A more effective first step is to approach friends, colleagues, and angel investors who believe in the founder as a person, rather than in the business vision or product. The recommended approach is to draw up a list of likely investors along with a funding target, then work through the list one person at a time. (Benioff & Adler, 2009)

• Make use of angel investors: Angel investors are more willing to take risks than VCs and may invest at an earlier stage. Their appeal lies in applying less pressure than VCs and giving founders more time and latitude. (Fadell, 2022)

• Treat investments from friends and family exactly as you would institutional money Even when the money comes from friends and family, draw a clear line and handle it to the same standards you would apply to an institutional investor: structure and document every investment. Prepare a formal projection of when investors can expect a return, and carry out a valuation. Leave this vague, and it will come back to bite you later—when you try to raise from a large investment firm (institutional investor), the scrutiny of your cap table during legal due diligence will surface serious problems. (Benioff & Adler, 2009)

Approaching VCs

• Treat a VC as a "marriage partner": Raising money from a VC is like a long-term marriage built on trust. Be wary of any VC that demands an outsized equity stake (well beyond the 18–20% their business model typically requires) or unreasonably pressures you to decide quickly. (Fadell, 2022)

• Check the investor's references: Contact other founders your prospective VC has backed in the past and do your own background research into how the firm behaved when times were tough. (Fadell, 2022)

• Use multiple investors as checks on one another: By bringing in two investors of roughly equal influence, you ensure that if one makes unreasonable demands or plays games, the other will step in to stop it—preserving the balance of power. (Fadell, 2022)

Pitching to investors

• Show traction The strongest card you can play to unlock investor money is traction—quantitative proof of customer demand. As the market has grown more competitive, the bar investors set for traction has risen. Even if your absolute numbers are small, however, demonstrating sustainable growth—say, "10% month-over-month for six consecutive months"—or strong customer engagement with your product can be plenty compelling. And if you can reach investors who understand your industry and business well, they are more likely to believe in your potential on the strength of less traction. (Weinberg & Mares, 2015)

• Keep your passion and confidence Fundraising is mentally brutal; it is not unusual to be turned away by hundreds of investors and to endure the humiliation of being eyed with suspicion. Even so, no matter how demoralized you feel, you must walk into every investor meeting radiating energy and confidence. However brilliant your business plan, without the founder's passion and sincerity you will never get an investor to commit. It also helps to prepare a well-crafted pitch book that clearly spells out the benefits of investing (the spread, for example), and to be specific—"We're planning on $X from you"—so investors can decide quickly. (Schultz, 2012; Schwarzman, 2019)

• Deliberately confess every risk of failure Don't just show a convenient up-and-to-the-right chart. Exhaustively identify the potential risks and obstacles that could sink the business, and present them honestly alongside your plans to avoid them. The mobile payments company Square did exactly this, showing investors a slide titled "140 Reasons Why Square Will Fail"—and won their overwhelming trust. (Fadell, 2022; McKelvey, 2020)

Debt financing and other funding methods

• Understand the limits of bank loans Banks (commercial banks) favor steady growth in line with your cash balance and net worth. The startup approach of burning through losses to grow fast tends to be seen as "going too fast" (too risky), and a fundamental clash of mindsets between bankers and founders is the common result. (Knight, 2016)

• Using convertible notes Convertible notes offer a way to raise money while avoiding the risk of losing control of the company that comes with issuing equity. Under this structure, the company borrows funds from investors, who after a set period (say, five years) can choose either to convert the debt into shares or to be repaid in cash with interest. Nike in its early days (then Blue Ribbon Sports) used this very approach to get through a cash crunch. (Knight, 2016)

• Leaning on credit from suppliers and trading companies (deferred payment) When a company has maxed out its bank credit lines, drawing on credit from trading companies or partner firms—for instance, by deferring payments—can serve as a de facto source of working capital and become a critical lever for sustaining rapid growth. (Knight, 2016)

Financial planning and managing burn rate

• Your "market type" completely changes how fast you burn cash Whether you are entering an existing market or creating an entirely new one dramatically alters both your capital requirements and your path to profitability. In an existing market, a company may start generating cash within 12 to 18 months. In a new market, by contrast, you have to educate and evangelize the market first, so losses can continue for five years or more. (Blank, 2020)

• Scaling prematurely before PMF can be fatal Avoid hiring according to plan or pouring large sums into marketing before product-market fit (PMF) has been validated. With no revenue coming in, your burn rate simply climbs, and you slide into a death spiral. In the early days, stay frugal and spend only on proving out the market. (Blank, 2020)

• Don't underestimate how much capital you need—and keep launch costs to a minimum Getting a business off the ground always takes longer and costs more than planned, and miscalculating your funding needs can be fatal. Indeed, many small businesses that go under cite "insufficient capital at founding" as the cause. To guard against running out of money, it is essential to build on cloud services (such as PaaS) and internet-based infrastructure from the outset and find ways to keep startup costs low until the new venture is on a solid footing. (Benioff & Adler, 2009; Graham, 2004)

• Build a financial and billing model that improves cash flow on its own Beyond raising outside capital, it is equally important to evolve your business and financial models so that they improve your cash position. A monthly billing model, for example, takes a long time to recoup customer acquisition costs and can shake a company's financial foundations. One way around this is to offer a discount in exchange for annual or longer contracts paid up front, switching to a model in which customers pay a full year's fees in advance—stabilizing cash flow in the process. (Benioff & Adler, 2009)

• Early cash flow management and maximizing bootstrapped capital: In the early stages, you need to stretch limited capital to its absolute limit. When Michael Dell started Dell Computer with $1,000, he accepted credit card payments, built to order instead of holding parts inventory, and negotiated payment terms with vendors—keeping his cash conversion cycle short, preserving cash on hand, and achieving rapid growth. (Dell & Kaplan, 2021)

• Reward with equity (ownership) rather than cash To align employees' interests with the company's, granting ownership (equity) is more effective than paying cash bonuses. People who opt for an illiquid reward like stock tend to think long-term and commit to raising the company's future value. (Masters & Thiel, 2014)

Organization

Hiring

• Make hiring your most important job: A startup's success or failure is said to be determined by its first ten (or even five) employees. Leaders should never delegate hiring wholesale to others; they should personally devote time to it as their single most important task. And they should live by the golden rule that no position is worth filling at the expense of hiring quality. (Schmidt & Rosenberg, 2014)

• Hire "seed crystals": A cardinal principle for building a great company is to get the right people on the bus before deciding where the bus is going—choose the people first, then the goals. Your early leadership team and members need to include "seed crystals": people so exceptionally talented and well liked that their mere presence draws an avalanche of other top talent to the company. Since there is no HR department at the very beginning, founders must attract these people through their own vision and persuasiveness. (Fadell, 2022)

• Hire generalists (people useful right now) over specialists: Because conditions change so violently in the founding period, prioritize generalists who can throw themselves at a wide range of problems over specialists who can only handle one narrow domain. Rather than optimizing for the scalability to lead a large future organization, hire people who willingly embrace the chaos of your current growth stage—right now—and can help solve the problems in front of you. (Hoffman & Yeh, 2018)

• Culture fit and diversity: In interviews, check for cultural fit using criteria like the "LAX test"—could you happily spend six hours stuck together at an airport? At the same time, avoid assembling a roomful of clones; securing diversity of perspective is what leads to fresh thinking and innovation. (Schmidt & Rosenberg, 2014)

• Build a rigorous company culture and hire against your "core values": Culture and brand are two sides of the same coin. Like Zappos, you should refuse to hire anyone—however talented—who has a big ego and doesn't fit your culture (for example, a culture that prizes humility). Being willing to hire and evaluate against core values that have been articulated with input from every employee is what builds a resilient organization. (Hsieh, 2010)

• Target learning animals: In the fast-changing early stages, it is more effective to hire and develop "learning animals"—sharp, hungry people with a drive to keep teaching themselves new things—than specialists with deep experience in a specific area. (Benioff & Adler, 2009; Schmidt & Rosenberg, 2014)

• Unanimous-decision process: Adopting a unanimity rule—if even one person says no, you don't hire—or objective evaluation by a committee that has no hiring authority of its own helps prevent both a slide in hiring standards and office politics. (Benioff & Adler, 2009; Schmidt & Rosenberg, 2014)

Company culture

• Define your values up front: From the very start, clearly articulate your culture, values, and mission and embed them throughout the organization. This becomes a powerful foundation for all subsequent hiring and business strategy. (Benioff & Adler, 2009; Schultz, 2012)

• A culture that tolerates failure: The seed stage is the "search" phase for a business model. Welcome failure as a sign of learning and exploration, and instill an agile mindset of failing fast and learning from it throughout the organization. (Blank, 2020; Catmull & Wallace, 2023)

• Radical transparency and candid dialogue: Create a culture that is radically truthful and hides nothing, along with an environment where people can exchange frank opinions without fear (an obligation to dissent). This is how you achieve an idea meritocracy in which the best ideas win. (Dalio, 2018; Schmidt & Rosenberg, 2014)

• The "culture fit" trap: Demanding superficial conformity to your culture attracts people with similar backgrounds and breeds groupthink, undermining adaptability. Rather than hiring people who simply fit in, hire from the earliest days people who bring different perspectives and backgrounds and act as a tonic for the culture, so the organization doesn't become homogeneous. (Hoffman & Yeh, 2018)

• Imprinting culture through "shocking rules": By deliberately setting unusual, idiosyncratic rules that make everyone ask, "Why on earth do we have that rule?", you can sear the company's underlying values and philosophy into employees' memories. (Horowitz, 2019)

• A company is a "pro sports team," not a "family": In a startup's early days, strong family-like bonds form. But as the company grows and the work becomes more sophisticated, the skills of early members often no longer suffice. Rather than treating the company as a family and clinging to members who are no longer the right fit, think of it as a professional sports team that puts the best person in every position—and be prepared to let people go (respectfully, and with generous severance) when they lack the skills the company's growth requires. (Hastings & Meyer, 2020; Randolph, 2019)

• Leverage three kinds of relationships to attract serendipity: To make a business take off, you must strategically build three types of relationships: professional allies (strong ties), weak ties (acquaintances who bring in new information), and followers (passive career capital). By staying perpetually curious, showing up in a variety of communities, and continually delivering value to others without expecting anything in return, you can draw unexpected strokes of luck—serendipity—your way. (Hoffman & Casnocha, 2012)

Leadership

• Fast decisions and tempo: Speed is a startup's lifeblood. Don't chase perfection: make decisions that can be corrected later (reversible decisions) quickly, and if they turn out to be wrong, admit it and fix them immediately. This kind of tempo is essential. (Blank & Dorf, 2020)

• Don't fear people who are better than you: Leaders need the magnanimity to fill their executive team with people smarter than themselves—people with different abilities who aren't afraid to argue—and to delegate real authority to them. (Schultz, 2012)

• Managers should be coaches: High-performing teams rest on a foundation of psychological safety—a shared belief that it is safe to take interpersonal risks. To become an effective manager or leader, you can't just hand out instructions; you must become a skilled coach who believes in your team members' potential and helps them bring it out. (Schmidt et al., 2019)

• Building true consensus: Meetings should not be about finding the lowest-common-denominator compromise; they should actively draw out dissenting views in order to arrive at the best answer. And once it becomes clear that further debate is pointless, the leader needs to "ring the bell," set a clear deadline, and make the decision. (Schmidt & Rosenberg, 2014)

• One-on-one conversations: Hold regular one-on-one meetings and provide finely tuned guidance and feedback calibrated to each team member's level of mastery over their tasks. (Grove, 2015)

• Accuracy over kindness in evaluations: Feedback and performance reviews should be accurate rather than kind—in the long run, that is what drives the individual's growth and the organization's success. (Dalio, 2018)

• Keep top talent challenged: To keep your best people from getting bored, regularly rotate them into new positions or hand them fresh challenges—side projects or bigger responsibilities—so they can perform at their full potential. (Benioff & Adler, 2009; Schmidt & Rosenberg, 2014)

Organizational structure and communication

• No managers needed at the family stage When headcount is still in single digits—the "family stage"—everyone shares one room, information flows naturally, and there is no need for formal managers (the founders or CEO fill that role). (Hoffman & Yeh, 2018)

• Change how you communicate at the tribe stage Once the company grows to a few dozen employees—the "tribe stage"—communication becomes the bottleneck. From this point on, you must deliberately shift from relying solely on informal one-on-one conversations to "broadcast" (one-to-many) communication such as all-hands meetings, and build a system for regularly and repeatedly communicating the company's mission and key priorities. It is also only at this size that you first need formal managers to oversee the productivity of small teams. (Hoffman & Yeh, 2018)

• Separate ownership, management, and governance—and keep the board small To prevent misalignment within the company, clearly define the roles of shareholders (ownership), managers and employees (management), and the board of directors (governance). And for effective oversight without conflict, the ideal board has three members; for a private company, it should never exceed five. (Masters & Thiel, 2014)

• A culture of learning through the "Five Whys" When a problem arises, rather than hunting for someone to blame (avoid the "Five Whos"), ask "why" five times to uncover the flaw in the process, then make incremental, proportional investments to address the root cause—cultivating a culture that continuously improves the system. (Reis, 2011)

Goal management

• Track startup-specific metrics: In the early stages, your most important management metrics (KPIs) are not the profit figures or income statements of a large company, but how far your hypotheses have been validated, your customer acquisition and activation rates, and the number of months until you run out of cash (burn rate). (Blank & Dorf, 2020)

• Pick just one metric that matters (OMTM): With countless data points available to track, chasing several metrics at once blurs the organization's focus. Identify the riskiest part of your startup at its current stage—the most important question—then pick a single "One Metric That Matters" (OMTM) that answers it, and focus the entire company on it. (Croll & Yoskovitz, 2024)

• Use OKRs: Adopt OKRs (Objectives and Key Results) to set goals that are ambitious yet realistic. Making them public and sharing them with every employee aligns the whole organization in the same direction and helps prevent things like reflexively chasing competitors. (Schmidt & Rosenberg, 2014)

• Prove progress with innovation accounting (actionable KPIs) Flattering "vanity metrics" such as total customers or total revenue lead to poor decisions. Instead, use cohort analysis, A/B testing, and similar techniques to set "actionable metrics" as your KPIs—ones with clear causal links that feed directly into product-improvement decisions—and use them to prove to investors that validated learning is steadily advancing. (Reis, 2011)

• Measure stickiness (engagement) before virality (marketing): In the seed phase (the empathy and stickiness stages), don't look at vanity metrics like "total sign-ups," which grow on their own over time; look at actionable metrics that reveal user engagement, such as the active-user rate. Pouring money into marketing and advertising to grow your user base before the product has become sticky is like "pouring water into a leaky bucket," and it ends in disaster. Before rushing to acquire users (virality), the top priority is to test whether you have built a core feature that even a small number of users use regularly and correctly (stickiness). (Croll & Yoskovitz, 2024)

• Use V2MOM: Another effective approach is the V2MOM framework—Vision, Value, Method, Obstacle, and Measure—which clarifies both your goals and the process for reaching them, and brings cohesion to the organization. (Benioff & Adler, 2009)

• Gauge whether you've reached PMF One benchmark for whether you have achieved product-market fit (PMF): when 40% or more of users answer "very disappointed" to the survey question "How would you feel if you could no longer use this product?", you are ready to scale the business. Then identify the "aha moment"—the point at which users truly experience the product's core value. (Cagan, 2017; Croll & Yoskovitz, 2024; Ellis & Brown, 2017)

Service

Customers

• The facts are outside the building: A startup's initial idea is nothing more than the founders' assumptions (hypotheses). The answers aren't inside the office; the facts exist only "outside the building," where your future customers live and work. (Blank & Dorf, 2020)

• Building the product first and then looking for customers is fatal The "build it and they will come" approach—building the product first and only then looking for customers—is a fatal mistake for a startup. Customer Discovery, which validates who the customer is and whether the problem really exists in parallel with product development, is indispensable. (Blank, 2020)

• Never ask what people think of your idea Asking a customer directly, "What do you think of this idea?" is the worst possible question: it puts them on the spot and elicits polite lies like "That's a great idea" (false positives). Instead, ask about their past behavior, their current workflow, and the problems they are wrestling with. (Fitzpatrick, 2013)

• Find a problem that calls for a "painkiller" The best ideas are not "vitamins" that people can live without; they must be "painkillers" that relieve a pain that nags at customers relentlessly. (Fadell, 2022)

• Look for evangelist users and early adopters who are already trying to solve the problem themselves The target of your early marketing is not just anyone who has the problem, but evangelist users (passionate early adopters) who are already spending money or cobbling together their own solutions from spare parts to solve it. They will buy even an unfinished product, using their imagination to fill in what's missing, because they share your vision. (Blank, 2020; Blank & Dorf, 2020; Reis, 2011)

• Interview continuously Talking to customers should not be a one-time event but a weekly habit (continuous interviewing). This lets you correct course quickly whenever a hypothesis turns out to be wrong. (Torres, 2021)

• The Build–Measure–Learn loop and pivots Starting from an MVP, run the Build–Measure–Learn feedback loop to test your business hypotheses. If the data shows a hypothesis is wrong, don't dig in your heels—commit to a "pivot," a fundamental rethink of your strategy. (Reis, 2011)

• Narrow down to one singular customer: Don't chase B2B (business) and B2C (consumer) customers at the same time. It is impossible to serve two diametrically opposed customer journeys with a single product, and once you lose sight of who your "one and only customer" is, the company's fate is sealed. (Fadell, 2022)

• Don't try to please everyone: Cramming every conceivable feature into your first product to satisfy the entire mainstream market is a waste of time and money—for a startup, it's suicide. (Blank & Dorf, 2020; Patton & Economy, 2014)

• Become the customer: To deeply understand how customers behave, immerse yourself in their actual daily lives—spend a day doing exactly what they do—and make their experience your own. (Blank & Dorf, 2020)

• No "faster horses": As Henry Ford, who brought the automobile to the masses, put it: "If I had asked customers what they wanted, they would have said a faster horse." Market research and simply taking customer requests at face value yield nothing more than incremental improvements. (Osterwalder & Pigneur, 2013)

• Offer solutions customers couldn't have imagined: What matters most is not meeting customer requests, but delivering new solutions to problems that customers could never have conceived of themselves—or assumed were unsolvable. (Schmidt & Rosenberg, 2014)

• Manage and co-create with customer ideas: At the same time, having a system for managing customer feedback and folding their ideas into your product development process—like Dell's IdeaStorm or Salesforce's IdeaExchange—is a powerful weapon for earning customers' love and becoming more innovative. (Benioff & Adler, 2009)

• Value-based pricing and "value metrics": Pricing for SaaS and similar businesses should not be set by guesswork or by stacking up costs (cost-plus pricing). Instead, adopt value-based pricing, using market research to understand what customers are actually willing to pay. Likewise, rather than simply charging per user, define a "value metric" tied to the value users get from the product—such as the number of messages sent or videos watched. This lowers churn and drives sustained growth in ARPU (average revenue per user). (Bush, 2019)

• Turn end users into fans: Sell directly to the people who will actually use the product, not just to the executives who control the budget. Celebrate their success stories as "customer heroes" at events and elsewhere, and you will spark powerful word of mouth that spreads virally. (Benioff & Adler, 2009)

Product Development

• Fall in love with the problem, not the solution. More than half of your initial ideas will fail. Customers don't care about your solution; they care about getting their problem solved. So don't cling to a particular solution—stay focused on solving the underlying problem. (Cagan, 2017)

• An MVP is a learning tool, not a product. A minimum viable product is neither a finished product nor a half-baked release. It is a prototype built to test your riskiest assumption with the least possible effort—and sometimes it doesn't even require writing code. (Cagan, 2017; Patton & Economy, 2014; Seiden & Gothelf, 2022)

• The goal is to cut features, not add them: The purpose of customer development is not to collect feature requests—it is the opposite: to strip features away. Follow the iron rule that less is more, and add nothing extra until your search for a business model is complete. (Blank & Dorf, 2020)

• Gauge demand with fakes and prototypes before building for real. Before committing significant resources, test demand using techniques like the following.

  • Fake door (feature fake) test: Before building a feature, simply place a button for it in the UI. When users click it, show a "coming soon" message and measure the click-through rate to gauge demand. (Cagan, 2017; Seiden & Gothelf, 2022)

  • Wizard of Oz: Present what appears to be an automated service while humans handle the work manually behind the scenes, allowing you to test the customer experience before building the system. (Constable, 2014; Seiden & Gothelf, 2022)

• Prove technical value with a "Wizard of Oz" MVP. Rather than building a sophisticated AI search system from the outset, Aardvark used a Wizard of Oz MVP—with humans manually handling requests behind the scenes—to test whether customers actually wanted the service. The approach proved the business's value, and the company was ultimately acquired by Google for an estimated $50 million. (Reis, 2011)

• Ship version 1.0 fast: Until you have users, optimization is little more than guesswork. Start with something clear and simple that you would want to use yourself, get version 1.0 out into the world quickly, and improve it by listening to your users. (Graham, 2004)

• Validate rapidly with sprints. Instead of spending months in development, use the "sprint" method: build a "good enough" prototype in a single day and test it with five customers. In just five days you can uncover fatal flaws and confirm whether you are on the right track. (Knapp et al., 2016)

• Ship first, then fix: It is tempting to polish a product to perfection before releasing it, but you have accomplished nothing until it reaches real customers. (Schmidt & Rosenberg, 2014)

• Have a clear plan grounded in a hidden truth. Great companies are not built through haphazard improvement (mere lean iteration) alone. Discover a "hidden truth" that most of the world has yet to notice, then approach product development with a clear, long-term design that does not rely on chance—what Thiel calls intelligent design. (Masters & Thiel, 2014)

• Measure the data and keep optimizing: Especially for web and mobile businesses, focus on collecting, analyzing, and optimizing data from day one. Use your MVP to measure the "get, keep, grow" funnel—new-customer acquisition, activation (first use), referrals, and so on—and repeat the cycle of fact-based, validated learning. (Blank & Dorf, 2020; Patton & Economy, 2014)

• Build a straight line and two kinds of "bumpers": Ruthlessly eliminate every unnecessary step that stands between users and their aha moment (so-called ability debt), and build the shortest possible "straight line" to it. Then, much like the gutter guards in bowling, install "product bumpers" (progress bars, tooltips) and "communication bumpers" (welcome emails, push notifications) to keep users from straying off course and guide them to success. (Bush, 2019)

Designing the Business Model and Strategy

• Innovate the business model itself. Superior technology or design alone won't win. You need to innovate across the entire business model—how you acquire customers, how you deliver value, and how you monetize. (Hoffman & Yeh, 2018)

• Never underestimate distribution. Designing how your product reaches customers—distribution—is every bit as important as building a great product. Without it, even the best product will never scale. (Hoffman & Yeh, 2018)

• A dynamic model, not a static plan: A traditional MBA-style business plan falls apart the moment you start talking to customers. Instead, use a tool such as the Business Model Canvas to lay out the components of your business visually, as hypotheses. (Blank & Dorf, 2020)

• Expect failure and don't fear the pivot: Failure is an inherent part of a startup's search for a business model. When a hypothesis proves wrong, you must quickly "pivot"—making a substantial change to elements of the business model such as the target customer or the pricing model. (Blank & Dorf, 2020)

Sales

• Sell directly to "evangelist users" only: In the early days, target not mainstream customers but "evangelist users" (visionaries)—people who will gladly pay for an unfinished product because it solves a problem they have. Selling to them is how you validate your hypotheses. (Blank, 2020)

• From hero-dependent selling to a "sales roadmap": Build a repeatable sales roadmap that answers questions such as who the decision-makers are, where the budget comes from, and how long the sales cycle is. Do not scale up the sales organization (adding headcount) until this roadmap is complete. (Blank, 2020)

• Hire a "sales closer": At the seed stage, hire not a "head of sales" who managed an organization at a large company, but a hands-on sales professional who can roll up their sleeves and close deals on their own amid uncertainty. (Blank, 2020)

• "Seed and grow" free trials: To lower the barrier to adoption, offer an easy free trial—for example, "up to five users free for the first year"—and just get customers using the product. This "plants the seeds" for a future company-wide rollout. (Benioff & Adler, 2009)

• Focus on the sales channel that fits your price point. Your sales strategy should change with the price of your product. Deals worth millions of dollars call for "complex sales" led by the CEO personally; deals in the tens of thousands call for a right-sized personal sales effort; low-priced consumer products call for marketing and advertising, or for viral marketing in which the product itself brings in customers. Concentrate on finding the one sales channel that works. (Masters & Thiel, 2014)

• Sales matters as much as the product. The belief that "if you build it, they will come" is an engineer's delusion: even an excellent product will not become a successful business without a strong sales strategy. Sales strategy must be built into the product's design from the very start. (Masters & Thiel, 2014)

• A relationship-driven sales culture: A commission-driven, sales-at-all-costs mentality treats customers like ATMs and erodes trust. Instead, build a relationship-focused sales culture from the outset—one in which sales continues to work with the customer success team after the deal is signed to support the customer's ongoing success. (Fadell, 2022)

Marketing

• Identify your "market type" and adapt your marketing accordingly: It is critical to determine whether you are in an existing market, a new market, or a resegmented market. If you are creating a new market, for example, pouring huge sums into branding and customer acquisition campaigns early on is a waste of money—and can be fatal. In a new market, demand itself does not yet exist, so resources should first go toward evangelizing and educating the market. (Blank, 2020)

• Test the 19 channels: Set aside your preconceptions and run small-budget tests across the 19 "traction channels"—PR, viral marketing, SEO, SEM, offline events, and more—to identify the channel that works best for your company, then concentrate your resources there (the Bullseye Framework). (Weinberg & Mares, 2015)

• Invest in distribution as much as in the product: A strategy for how your product reaches customers—distribution—is just as important as building a great product. A product with a superior distribution channel will always beat one without it. (Hoffman & Yeh, 2018)

• Piggyback on existing networks and build in virality: In the early days, when you have no significant advertising budget, you need to find creative ways to grow—riding on top of another platform (as PayPal did with eBay), or building viral mechanisms into the product itself (word of mouth, incentives) so that one user brings in the next. (Hoffman & Yeh, 2018)

• Frame it as "David vs. Goliath" and lead with a vision: Rather than using PR merely to promote your product, cast yourself as the challenger taking on the industry's established giant, or articulate a bold, industry-changing vision such as "the end of software." This kind of framing captures the attention of both the media and customers far more powerfully. (Benioff & Adler, 2009)

• Data-driven growth hacking: Analyze early user behavior (leading indicators) to identify the specific actions that predict future engagement and revenue—for example, "connecting with X people within Y days of signing up"—and then deliberately optimize for those actions to engineer growth. (Croll & Yoskovitz, 2024)

• Pick one of the three "engines of growth" In the early phase, identify which engine drives your company and pour all your energy into tuning that single engine. Chasing several at once only leads to confusion. (Reis, 2011)

  • Sticky engine: Focus on keeping churn (attrition) low.

  • Viral engine: Push the number of new users each customer brings in (the viral coefficient) above 1.0. A free basic tier is essential to eliminate friction.

  • Paid engine: Maximize the gap between customer lifetime value (CLV) and customer acquisition cost (CAC)—the marginal profit—and reinvest it in advertising and sales.

Partnership strategy

• Understand your partner's business model in depth: When cultivating systems integrators or distribution channels, you must understand how they make money and show clearly how your product will help grow their revenue. Unless a partnership translates into sales for them, partners simply won't take you seriously. (Blank, 2020)

• Understand the other side's incentives: Before proposing a partnership, look beyond your own needs and get clear on why the other party should team up with you and what they stand to gain—higher sales, complementary functionality, and so on. Only then should you make your approach. (Weinberg & Mares, 2015)

• Let your partner win with the "49/51" rule: VMware's founder set a startling rule for partnerships: the company would take 49 percent of the value and the partner 51. By demonstrating a commitment to relationships in which partners were guaranteed to come out ahead—more than merely win-win—VMware rapidly built a robust ecosystem, which in turn generated enormous enterprise value. (Horowitz, 2019)

• Aim for an exchange of value (business development): Rather than plain selling, pursue "business development" that gives you access to a partner's massive customer base or distribution network—through exposing APIs, technical integrations, and the like. (Weinberg & Mares, 2015)

• Join hands even with competitors ("frenemies"): Business is not a zero-sum game in which one side must lose. If it maximizes convenience for customers, be willing to form flexible strategic alliances—even deploying your product on the platform of a fierce competitor (a "frenemy"). (Nadella, 2018)

Global strategy and scale

• Become a learning machine for local context: If you envision expanding globally in the future, don't simply impose your own way of doing things (the American way, for instance). Instead, become a "learning machine" that studies and adapts to the culture, viewing habits, and business practices of each market you enter. (Hastings & Meyer, 2020)

• Build global readiness into the product: Even if you don't plan to expand overseas right away, design your product architecture from the outset with "global readiness" built in—multilingual and multi-currency support, for example. (Benioff & Adler, 2009)

• A two-headed structure: "evangelists" and "local experts": When entering a new market, an effective approach is to dispatch an "evangelist" (an expatriate from headquarters) who deeply understands the company's culture and DNA, while in parallel hiring "local experts" (executives) well versed in local business practices and entrusting them with day-to-day operations. (Benioff & Adler, 2009)

• Building infrastructure in emerging markets creates a powerful "moat": In emerging markets and other places where existing infrastructure (payment networks, logistics, and so on) is underdeveloped, you have to go through the pain of building the platform yourself. Once built, however, it becomes an extremely strong barrier to entry—a competitive advantage—against later rivals (as with MercadoLibre in Latin America). (Hoffman & Yeh, 2018)

• Blitzscaling in winner-take-all markets: Normally, opening locations around the world simultaneously is inefficient. But in a winner-take-all market, the optimal strategy may be "blitzscaling"—as Airbnb did, disregarding efficiency to expand globally at breakneck speed and seize the market before rivals can. (Hoffman & Yeh, 2018)

• Don't lump regions together: In your eagerness to expand overseas, don't treat "Asia" or "Europe" as a single block. Culture, laws, and consumer behavior differ from country to country, so establish one foothold first and then fine-tune your strategy step by step to match local conditions. (Benioff & Adler, 2009)

Establishing CSR and ethics (corporate social responsibility)

• Integrity is a long-term investment in culture: Ethics and integrity may not help—and may even hurt—short-term quarterly results or the deal in front of you. But they are an indispensable investment in becoming the kind of company others want to do business with over the long run. (Horowitz, 2019)

• Draw red lines to prevent ethical "bugs": An excessively competitive culture of "win at any cost" or "results are all that matter" eventually produces fatal bugs—compliance violations and a collapse of public trust—as seen at Uber and Huawei. Defining, from the seed stage, the "red lines that must never be crossed" and deliberately designing a culture of doing the right thing protects the company from future crises. (Horowitz, 2019)

• Build it in from the start, as with the "1-1-1 model": CSR (corporate social responsibility) is not something to take up once the company gets big. Following Salesforce's example, it is recommended to embed a model into the business itself from day one, giving back 1% of equity, 1% of employee time, and 1% of product to society. (Benioff & Adler, 2009)

• An outsized effect on brand and hiring: Having a purpose rooted in solving social problems is far more than PR. It gives employees a deep sense of fulfillment, boosting retention and productivity, and it earns strong trust and loyalty from customers and partners—making it potentially the most powerful marketing strategy of all. (Benioff & Adler, 2009)

Early stage (Series A)

Early-stage startups (Series A and the like) have completed initial customer discovery and customer validation (achieving PMF) and are now in the phase of scaling up: cultivating end-user demand in earnest and expanding the business into the mainstream market.

Finance

Timing and size of fundraising

• Move before the money runs out, and project "comfort" If you only scramble for funding once cash is tight and bankruptcy looms, you will be forced to accept unfavorable terms. Investors by nature prefer to back those who don't actually need their money—those with room to breathe—so it is essential to negotiate from a position of strength, free of pressure. (Fadell, 2022; Hoffman & Yeh, 2018)

• Default to equity rather than debt: Many founders, fearing their ownership stake will fall below 50%, try to rely on bank loans (debt) instead of issuing shares. Yet taking on a mountain of debt that shackles future growth and transformation is far riskier than raising equity. Accept dilution as an unavoidable reality; to retain control of the business as a founder, focus on delivering results that keep shareholders happy. (Schultz, 2012)

• Raise Series A just before automating and scaling Early-phase fundraising (Series A) works best once you have validated the MVP by hand (through human effort) and proven that customers genuinely find value in it—at the point when you are ready to automate the system and scale. (Reis, 2011)

Approaching VCs

• Carefully select investors (VCs) who share your values and vision: Serious fundraising means more involvement with venture capitalists (VCs) and institutional investors, but some of them take a myopic view, chase short-term profit, and end up ruining the company. Much of the financial world evaluates only a company's financial "price," not its "value." That is why it is critically important to choose as partners investors who do more than write a check: those who embrace your philosophy and long-term vision, correctly understand the potential of the business, and will support you over the long haul. (Schultz, 2012)

• VC "red flags" to watch for(Fadell, 2022)

  • Rushing your decision: Beware of VCs who thrust a contract in front of you and demand a signature on the spot, trying to push the founder into a panic.

  • Greedy ownership demands: The stake a VC generally needs for its business model to work is 18–20%. Avoid VCs who demand an exorbitant share.

  • Cutting out existing investors: A VC who proposes terms that squeeze out the early investors who have supported you so far may well be planning to take over the company down the road.

• Don't use your top-choice VC as your "first practice partner" Your pitch deck will need many rounds of revision and improvement. If you present first to the leading VC in your region and get torn apart, other VCs may follow suit and pass on the deal. Start instead with "friendly" VCs who are likely to give you feedback, and sharpen your pitch before approaching the ones that matter most. (Fadell, 2022)

Pitching to investors

• Tell the "why" (the story), not the technology The people at venture capital firms are not technical experts. Rather than dwelling on the technology, focus on the story: why you are building this business and why customers want it. Appeal to both emotion and reason. (Fadell, 2022)

• Present early traction as your strongest weapon: The results you achieved during the seed stage become your most powerful asset when raising early-stage funding. Even at a small scale, if you can prove that your unit economics (revenue and return on investment per store, per user, and so on) are healthy, that becomes the basis for projecting rapid growth and a persuasive argument for drawing large sums (on the order of millions to tens of millions of dollars) from investors. And however good the business plan, in the end it is the founder's own passion and sincerity that tip an investor's decision. (Schultz, 2012)

Capital Strategy

• Consider a dual-class share structure to retain future control One capital strategy for raising huge sums to accelerate growth while keeping the founders in control of the company is a dual-class structure, in which multiple classes of stock (Class A, Class B, and so on) carry different voting rights. Both Nike and Google adopted this structure as they grew toward an IPO, shielding themselves from short-term market pressure and takeover attempts and securing the freedom to run the company according to a long-term vision. (Knight, 2016; Schmidt et al., 2019)

• Invest ahead of growth in infrastructure and people (and accept temporary losses): To grow a company rapidly, you need to build a robust foundation (high-performance information systems, large-scale facilities, and the like) long before it is actually needed, and to hire experts who have run companies larger than yours. This upfront investment may mean temporarily spending more than you earn and running at a loss for several years, but for a venture-backed company this is also a healthy sign of future development. Be candid with investors that you are investing ahead of growth, and secure their patient support. (Schultz, 2012)

• Conserve cash, then invest all at once when the timing is right: While you are still searching for a business model, minimize wasteful spending and preserve cash. Once you have determined that you have validated a repeatable, scalable business model (that is, achieved product-market fit), however, you need to pour in money "as if there were no tomorrow." At this stage, put the capital you have raised to work at full throttle, funneling it into demand generation and customer-acquisition marketing to rapidly scale the business. (Blank & Dorf, 2020)

Organization

Hiring

• "No position is worth filling at the expense of hiring quality": The single most dangerous thing you can do while scaling an organization is lower the hiring bar just to fill seats. Hiring is the most important job in management, and it allows no compromise whatsoever. Hire B-players and they will bring in C- and D-players, triggering a negative herd effect that drags down the quality of the entire organization. (Schmidt & Rosenberg, 2014)

• Evaluate values first, then abilities, then skills: To build long-term relationships, values and abilities (how people think and behave) matter more than skills. (Dalio, 2018)

• Peer-based hiring through committees: To prevent hiring decisions from being driven by an individual manager's subjective judgment or personal connections, it is effective to have a hiring committee made up of members with diverse perspectives make objective, data-based decisions on whether to hire. (Dalio, 2018; Schmidt & Rosenberg, 2014)

Company Culture

• Move from unwritten rules to written ones: A culture that was shared naturally among the early team fades as new hires flood in. Document the company's principles and working procedures, and build onboarding mechanisms (boot camps for new hires, team lunches, and so on) so that the culture is passed on deliberately and systematically. (Fadell, 2022)

• Build a professional sports team using the "keeper test": A company is not a family; it should be run as a professional sports team with the best person in every position. Managers should constantly apply the keeper test, asking themselves, "If this person were about to be poached by another company, would I fight hard to keep them?" For anyone the answer is no (that is, people delivering only average results), managers must be prepared to let them go with a generous severance package to free up a spot for a star player, thereby maintaining a high talent density. (Hastings & Meyer, 2020; Randolph, 2019)

• Allow subcultures across departments: As the organization grows, different departments (sales and engineering, for instance) call for different skills and personalities, and subcultures emerge naturally. While preserving the core principles shared company-wide (such as putting the customer first), it is important to accept these cultural differences so that each department can perform at its best. (Horowitz, 2019)

• An idea meritocracy grounded in radical truth: Create an environment where the best idea wins regardless of title or rank. A culture of candor, in which problems and weaknesses are brought into the open rather than hidden and debated frankly, accelerates the organization's evolution. (Catmull & Wallace, 2023; Dalio, 2018)

• Make failure part of the process: Pain + reflection = progress. Rather than avoiding mistakes, build a culture that encourages people to fail as early as possible and learn from it. (Catmull & Wallace, 2023; Dalio, 2018)

Leadership

• Scaling the founders themselves (delegation): Founders must stop acting as the company's "chief problem solver" who intervenes in every decision on the ground. Instead, they must evolve into leaders who delegate authority to capable people and focus their own energy on strategy and higher-order problems. (Hoffman & Yeh, 2018)

• Lead with context, not control: Rather than managing employees through rules and granular approval processes, share ample context (the company's strategy, goals, and other background information). This creates a loosely coupled organization in which frontline teams ("informed captains") can autonomously make excellent decisions without waiting for a manager's sign-off. (Hastings & Meyer, 2020)

• Managers should act as coaches: Treat one-on-one meetings not as mere status updates but as coaching sessions that support the growth of your reports. Determine whether each person is a "superstar," who constantly seeks new challenges, or a "rock star," who wants to apply their expertise in a stable role, and tailor your support to each growth trajectory. This is how you maximize the team's results. (Scott, 2019)

• Blend knowledge power with position power: Create forums where frontline experts (knowledge power) and managers (position power) can exchange views as equals. (Grove, 2015)

• Free discussion → clear decision → full support: First, let everyone argue their views freely. Once a decision is made, however, everyone must back it as the group's decision, even if they personally disagreed. (Dalio, 2018; Grove, 2015)

• Believability-weighted decision making: Rather than treating every opinion equally, improve the quality of decisions by weighting opinions according to each person's believability, based on their track record and capacity for logical reasoning. (Dalio, 2018)

• Training is the highest-leverage activity: Training their reports is the highest-leverage activity a manager can undertake. Instead of outsourcing it wholesale to external consultants, managers should deliver training themselves, tied directly to the company's actual work. (Grove, 2015)

• Accurate assessment over kindness: People grow not just from praise but from well-aimed criticism ("tough love"). Rather than softening an assessment out of kindness, evaluating people accurately on the basis of objective facts is ultimately the kinder thing to do. (Grove, 2015)

• Retain your star employees: Reward employees who deliver exceptional results with exceptional compensation. And rather than leaving them to languish in a single department, keep them engaged by offering new challenges (side projects, job rotations, and the like). (Schmidt & Rosenberg, 2014)

Organizational Structure and Communication

• Anticipate the breakpoints and add management layers: Once a team grows beyond 15 people, natural communication becomes difficult, and at 40 to 50 people a clear management hierarchy becomes necessary. At around 120 people, you need managers who manage managers (directors) and a formal HR function. Anticipate these breakpoints and put the structure in place months in advance, before the organization breaks down and a wave of resignations sets in. (Fadell, 2022)

• Keep small, cross-functional teams Even as the organization starts to grow, resist the pull toward siloed departments. Instead, maintain small cross-functional teams (five people or fewer, for example) that bring together engineers, designers, product managers, and others. (Reis, 2011)

• Shift from generalists to specialists: In the seed stage, generalists who could handle a wide range of problems were invaluable. As the business scales, however, you need to switch to hiring specialists with the deep expertise that scaling demands. That said, deliberately keep a small number of generalists as the organization's "stem cells" to tackle unforeseen challenges. (Hoffman & Yeh, 2018)

• Bring in outside executives to fill the leadership vacuum: As the organization grows, promoting early team members from within is no longer enough to keep management capacity up with demand. It is important to hire outside executives who have been through rapid growth (blitzscaling) before, and who can bring discipline and best practices to the organization. (Hoffman & Yeh, 2018)

• Shift from dialogue to broadcasting (one-to-many): As headcount grows, the natural sharing of information that happens when everyone sits in one room becomes impossible. You need to establish one-to-many broadcast communication that conveys information deliberately and systematically, such as regular emails from the CEO and regularly scheduled all-hands meetings. (Hoffman & Yeh, 2018)

• Decouple communication from the org chart: Nobody should have to go through a manager just to pass information along. Rather than being bound by hierarchy, maintain a flat environment where anyone can speak directly with anyone else at any time, regardless of title. (Catmull & Wallace, 2023; Schmidt & Rosenberg, 2014)

• Form a "growth team" that breaks down departmental walls: When marketing, product, engineering and data analytics operate as separate silos, growth cannot accelerate. Assembling a cross-functional "growth team" of specialists from each discipline—one that shares data and goals and runs experiments at high speed—becomes the engine of rapid growth. (Ellis & Brown, 2017)

• "Permanent beta" and ABZ planning: Neither a career nor an organization is ever "finished." What is needed is a "permanent beta" mindset: keep learning and adapting continuously. The cornerstone of risk management is "ABZ planning": execute your current "Plan A" while staying ready to pivot nimbly to "Plan B" in response to what you learn or how the market shifts, and always keep a "Plan Z"—a lifeboat—prepared for the worst case. (Hoffman & Casnocha, 2012)

• Build an adaptive organization through the "Five Whys" and "proportional investment" As a company grows, it needs to become an "adaptive organization" that preserves quality without sacrificing speed. When a problem arises, avoid the "Five Whos," which hunt for someone to blame, and instead run the "Five Whys" to uncover the root cause. Then make a "proportional investment" scaled to the size of the problem, improving processes incrementally without sliding into bureaucracy. (Reis, 2011)

Goal management

• From inspiration (gut feeling) to "data-driven": As the company scales, running it on improvisation and intuition alone hits its limits. Build clear dashboards, introduce a dedicated business intelligence (BI) team or similar function, and shift to data-based decision-making. (Hoffman & Yeh, 2018)

• Autonomous goal management with OKRs and a focus on "outcomes": Frameworks such as OKRs (Objectives and Key Results) are effective for aligning the organization and its teams. The key to unlocking a team's sense of ownership is not to dictate top-down which features (outputs) to build, but to hand the team an Objective—the problem to solve—and let the team itself propose, bottom-up, the Key Results (outcomes) by which success will be measured. (Cagan, 2017)

• Adopt OKRs (Objectives and Key Results): Make explicit both "where you want to go" (Objectives) and "the measurable pace at which you will get there" (Key Results). Set goals that are ambitious yet realistic, and guard against sandbagging—setting targets so low that everything comes up green at 100%. (Cagan, 2017; Grove, 2015; Schmidt & Rosenberg, 2014)

• Make "learning" the KPI for productivity Do not evaluate a development team's KPIs by how many features it shipped or whether it stayed on schedule. Instead, establish a culture in which teams are held accountable for "validated learning"—how much they were able to change customer behavior for the better—as the measure of productivity. (Reis, 2011)

• Stay "in sync": Publish every employee's OKRs so that it is transparent who is working on what. This eliminates misalignment between departments and synchronizes priorities across the entire organization. (Dalio, 2018; Grove, 2015)

• Objective performance criteria: To measure whether the machine (the organization) is functioning well, establish performance criteria grounded in objective data and tie them to compensation. (Dalio, 2018)

Service

Customers

• Switch from "free testing" to "paid sales validation": Once the product concept has solidified, do not settle for free alpha or beta tests. Find "evangelist users" (visionary customers)—people so eager to solve a serious problem of their own that they will tolerate a flawed product—and get them to actually pay for the product even in its unfinished state. That is how you validate both the business model and the market as a whole. (Blank, 2020)

• Crossing the chasm: Between the enthusiastic early customers (visionaries) and the mainstream customers who prize practical results (pragmatists) lies a "chasm"—a deep gap. From Series A onward, a strategy for crossing this chasm is essential. (Blank, 2020)

• Chasm-crossing strategies by market type:

  • In a new market: The sales approach that worked for evangelist users will not work as-is on the mainstream. You need a strategy of either concentrating all your sales effort on a single niche—one market, one use case, one type of company—to build a track record, or deliberately engineering a "tipping point" by using influencers to ignite herd behavior. (Blank, 2020)

  • In an existing market: There is no chasm, because customers already understand the value of the product. This is the stage for clearly articulating why customers should choose your product over the competition (differentiation) and taking market share through relentless execution. (Blank, 2020)

• Break through the wall between early adopters and mainstream customers Once the pool of early adopters who happily used the MVP begins to run dry, growth slows. The mainstream customers you target next are unforgiving of an "imperfect product," so you must invest in fundamental improvements to usability and quality (a customer-segment pivot). (Reis, 2011)

• Treat "paid" orders as the ultimate validation: The greatest litmus test of a business model is whether you can win "real orders" from evangelist users who actually buy the product at full price—not for free or at a steep discount. (Blank & Dorf, 2020)

Product development

• Apply the lessons of V1 and evolve into V2 (version 2): The first product (V1) is effectively a prototype; it is normal for it to be buggy and short on features. Using the real data and feedback gathered from putting V1 in the hands of evangelist users, fix what went wrong and evolve the product into a V2 aimed at the "early majority" (trendsetters)—customers who expect the bugs to be resolved and customer support to be in place. (Blank, 2020)

• Build a product team of "missionaries," not "mercenaries": As the organization grows, teams tend to become "mercenaries" who simply build whatever features they are told to. The most important job of a product leader is instead to build and sustain a team of **"missionaries"**—people who deeply understand customers' pain, believe in the company's vision, and pour their passion into solving problems. (Cagan, 2017)

• Rapidly test the four risks with prototypes: Even after product-market fit comes into view, most ideas still end in failure. That is why, before pouring significant time and money into development, the organization needs to embed a "product discovery habit" of continuously and rapidly testing the following four risks. (Cagan, 2017)

  • Value risk (will customers buy it?)

  • Usability risk (can users figure out how to use it?)

  • Feasibility risk (can our engineers build it?)

  • Business viability risk (does it fit within the constraints of the business—legal, sales, finance and so on?)

• Delivering the "whole product" through business development: Mainstream customers will not piece together partial products on their own. They want a complete solution—a "whole product"—that they can use immediately after purchase with no risk. The true role of the business development function is not simply to sell, but to assemble this "whole product" by partnering with other companies' technologies and services. (Blank, 2020)

• Resist indiscriminate feature creep: Even when customers ask for new features, do not give in to the engineering instinct to add them indiscriminately. Building a ten-page feature list to sell to ten customers is suicidal; what is required is the discipline to decide "which features to leave out." (Blank & Dorf, 2020)

• Speed up "ship it, then fix it": Rather than trying to make the product perfect from the start, the contest is won by how fast you can cycle through the process of shipping, observing the market's response (data), fixing, and shipping again. (Schmidt & Rosenberg, 2014)

• Regularly decide whether to pivot or persevere If repeated product optimization (A/B testing and the like) produces no improvement in your "actionable metrics," you must swallow your pride and decide to "pivot"—fundamentally rethink the strategy. Whether it is a "zoom-in" pivot that narrows the product to a single feature or a "customer segment" pivot that targets a different group of customers, you restart on the basis of the facts you have learned. (Reis, 2011)

• Smaller batch sizes and continuous deployment: Avoid the "large-batch death spiral" of spending months building a massive new version. Release new features one at a time, in increments of hours to days (small batch sizes), and introduce a "product immune system"—an automated defense mechanism that halts the system when a critical error occurs—to achieve both speed and quality. (Reis, 2011)

Designing the business model and strategy

• Optimize the balance between LTV and CAC (the one-cent machine): Think of the business as a "machine that multiplies money," and rigorously measure the ratio between the cost of acquiring a new customer (CAC) and the profit that customer generates over their lifetime (LTV/CLV). As a general rule, customer acquisition cost (CAC) should be kept below one-third of customer lifetime value (LTV). Only once these unit economics (profitability per unit) turn positive are you ready to make the company's overall bottom line positive. (Blank & Dorf, 2020; Croll & Yoskovitz, 2024; Fadell, 2022; Masters & Thiel, 2014)

• Optimizing the viral coefficient and customer acquisition cost (CAC): Before pouring large sums into advertising, build a "viral" mechanism into the product so that existing users bring in new ones. By combining "artificial virality" (incentive-driven referrals) with "inherent virality" (where using the product naturally leads to sharing), you can dramatically reduce the effective cost of acquiring each customer. (Croll & Yoskovitz, 2024)

• Validation with a high-fidelity MVP: Once testing with the prototype (low-fidelity MVP) is complete, release a "high-fidelity MVP" — limited in features but close to the real product in look and behavior — and measure and validate actual customer activation and purchasing behavior. (Blank & Dorf, 2020)

• An objective assessment of "Can we really scale?": Before committing millions of dollars in growth capital to sales and marketing (hitting the accelerator), the management team and investors rigorously evaluate whether the product truly fits the market, whether a proven way of reaching customers is in place, and whether the model is profitable. If the data isn't sufficient, they need the courage to pivot the business model or go back to an earlier step. (Blank & Dorf, 2020)

Sales

• From "heroic selling" to a "repeatable sales roadmap": A startup must move beyond one-off sales that hinge on the founder's personal charisma and connections (heroic effort). It needs to establish and prove a **"sales roadmap"** that other salespeople can execute again and again — who the decision-makers are, where the budget comes from, how long the sales cycle takes, and so on. (Blank, 2020)

• Validation by industry analysts and influencers: To test whether the new product's positioning is right, present it to industry analysts and influencers and draw out their objective assessments and feedback. (Blank & Dorf, 2020)

• Adopting product-led growth (PLG): Today's customers would rather try a product for themselves than sit through a lengthy pitch from a salesperson. That is why it's important to shift from a sales-led strategy to a "product-led growth (PLG)" model, in which users experience the value firsthand as early as possible through free trials or freemium plans. This can slash customer acquisition cost (CAC) and accelerate global expansion. (Bush, 2019)

• A bottom-up sales strategy: "Top-down" selling that targets the executives who hold purchasing authority means long sales cycles and soaring CAC. Instead, a "bottom-up" strategy — letting frontline end users try the product for free, allowing it to spread through their team, and then upgrading them to a company-wide paid plan — lets you reach a broad customer base at low cost. (Bush, 2019)

Marketing

• Investing in market education (demand creation): Once you've identified your market type, put money into demand creation (marketing) — customer education, branding, and so on — to funnel prospects into your sales channels. (Blank, 2020)

• Marketing strategy and demand creation tailored to "market type": The most fatal trap in early-stage marketing (customer creation) is pouring money blindly into advertising and branding without understanding which "market type" your company belongs to. First-year goals and demand-creation tactics differ dramatically depending on the market type. (Blank, 2020)

  • In an existing market (capturing market share): Customers and competitors already exist, so the first-year goal is to win market share. Enter the market with an "all-out assault" that leverages advertising, PR, trade shows and more to create demand, make it clear how your product outperforms the competition (differentiation), and drive that demand into your sales channels.

  • In a new market (educating and evangelizing the market): When you're creating a market that has never existed before, the first-year goal is not market share but developing and educating the market itself. Spending huge sums on advertising to the masses is a waste; instead, use approaches such as a "tipping-point strategy" (gathering a small number of visionary customers until you reach the critical mass that moves the mainstream) to evangelize the market over the long haul while keeping the budget in check.

  • In a resegmented market (owning a niche and branding): This strategy carves a new segment out of an existing market by winning over a specific customer group. Here, investing in positioning and branding is an extremely effective way to make customers recognize what is special about your segment.

• Distribution beats product quality: Silicon Valley tends to obsess over "building the best product," but even the finest product will lose to a mediocre one with superior channels if its distribution — the channels that get it into users' hands — is inferior. (Hoffman & Yeh, 2018)

• Optimizing "Get" with A/B testing: Continuously compare and test ads, landing pages, and calls to action (such as "Buy Now" buttons) through A/B testing, and keep working to bring customer acquisition cost down. (Blank & Dorf, 2020)

• "Keep" through cohort analysis: To improve retention, don't look at averages across the whole customer base; instead, analyze behavior and retention for each cohort — groups of customers who share a trait such as when they started using the product — so you can spot early signs of churn. (Blank & Dorf, 2020)

• "Grow" through viral loops: Build a "viral loop" into the product itself, so that customers bring in other customers. A referral from a friend carries high credibility and costs nothing to acquire, making it the most powerful form of marketing. (Blank & Dorf, 2020; Weinberg & Mares, 2015)

• Crafting your own unique selling proposition: Based on what customers told you they value in interviews, distill how your company differs from others and why it's valuable into a concise, powerful message. (Blank & Dorf, 2020)

• Using the Bullseye Framework: From the 19 traction channels (PR, SEM, SEO, trade shows, and so on), brainstorm without preconceptions and run small, inexpensive tests on the promising ones. Based on the results, identify the **single "bullseye" channel — the one with a low cost per acquisition (CPA) that delivers visible growth (traction) for the business — and concentrate your resources there**. (Weinberg & Mares, 2015)

• The "upward" ripple effect of PR: In PR, going straight for major media outlets from the outset is difficult. It's more effective to first get coverage on influential smaller blogs or industry-specific news sites, and then aim for an "upward" ripple effect (a media chain) in which larger outlets pick up the story. (Weinberg & Mares, 2015)

• Making customer service your "best marketing": Like Zappos, invest the bulk of your advertising budget in customer service, and scrap call-center scripts and time limits on calls. By building a "personal emotional connection (PEC)" with customers and delivering WOW experiences, your customers themselves become your most powerful marketing force (evangelists), generating strong word of mouth. (Hsieh, 2010)

• Channel focus and rapid "Triple A sprints": Rather than spreading investment across many marketing channels, concentrate resources on the one or two channels that best fit your company. Prioritize growth ideas with the "ICE score" (Impact, Confidence, Ease) and keep running "Analyze, Ask, Act" Triple A sprints at high speed to achieve compounding growth. (Ellis & Brown, 2017)

Partnership strategy

• End-user demand (pull) comes first: Don't mistake signing a distribution channel for making sales. A channel is just a "shelf"; unless the startup itself creates end-user demand (pull), the product won't move. (Blank, 2020)

• Building a pipeline and exchanging value: To form partnerships that benefit both sides, gain a deep understanding of the other company's incentives, and maintain a pipeline of 50–100 prospective partners at all times, continually reaching out to them. (Weinberg & Mares, 2015)

• "Low-touch" business development through public APIs: Start with high-touch, individually negotiated deals, then move to a "low-touch" approach — publishing APIs and a platform so that many companies can easily integrate with your system — to boost scalability. Offering a marketplace where other companies can build and sell apps for your product creates a powerful ecosystem with your company at its center. (Benioff & Adler, 2009; Weinberg & Mares, 2015)

Global strategy and scale

• Prioritize "speed" over efficiency: In winner-take-all (or winner-take-most) internet markets, a "blitzscaling" strategy — dominating the market at lightning speed rather than growing efficiently — can be indispensable. (Hoffman & Yeh, 2018)

• Simultaneous global expansion: To counter a powerful European clone (Wimdu), Airbnb didn't wait to consolidate an efficient foothold in the US; it went all in, opening offices simultaneously in dozens of locations worldwide, including London, Paris, Moscow, and São Paulo. It was hugely inefficient and chaotic, but this kind of aggressive global expansion can be the optimal move for outmaneuvering rivals. (Hoffman & Yeh, 2018)

• Localization with a two-headed structure: When entering overseas markets, an effective approach is a dual leadership structure: send "missionaries" (expatriates) from headquarters who deeply understand the company's culture and DNA, and in parallel hire "local experts" who know the region's business practices and culture to run day-to-day operations. This lets you adapt to the local market while staying aligned with headquarters. (Benioff & Adler, 2009)

• Don't be a "seagull": Companies that swoop in, stage a flashy event, and immediately fly off again—the "seagull" approach—quickly lose the trust of the local market. You need to demonstrate a sustained, long-term commitment to that market in concrete terms, such as building a local data center or opening an in-country office. (Benioff & Adler, 2009)

Establishing CSR and an Ethical Foundation (Corporate Social Responsibility)

• Test for ethical risk (the fifth risk): When a product is growing fast, teams tend to focus only on value and feasibility. But you also need to explicitly test for ethical risk by asking, "Should we build this product at all? Could it be misused, or cause harm to third parties or the environment?" (Torres, 2021)

• Responsible blitzscaling: Once a company scales up to the "city stage" or "nation stage," it can no longer ignore the systemic risks its actions pose to society as a whole. In this phase, you can't keep behaving purely as a challenger; you have a responsibility to think like a mayor or a president—engaging openly with regulators and stakeholders and voluntarily setting the right rules for the good of humanity as a whole. (Hoffman & Yeh, 2018)

• Ripple effects through the "Power of Us": Rather than only contributing your own resources, encourage partner companies, vendors, and even customers to take part in your social-impact initiatives. Bringing everyone along creates a far greater ripple effect on society than going it alone, and in turn dramatically strengthens the bonds and brand loyalty across your company and its entire ecosystem. (Benioff & Adler, 2009)

Growth Stage (Series B and Beyond)

The growth stage (Series B and beyond) begins once a company has achieved initial product-market fit (PMF) and proven that its business model works. This is the phase of explosive scale-up in pursuit of market dominance, with an eye toward an exit via an initial public offering (IPO) or M&A (sale of the company).

Finance

Timing and Size of Fundraising

• High gross margins drive valuation: In high-gross-margin businesses such as software, a larger share of revenue can be reinvested into growth. Because investors pay a premium for business models that generate cash, showing strong gross margins raises your valuation and makes it easier to raise very large sums at a lower cost of capital. (Hoffman & Yeh, 2018)

• Use the "magic number" to know when to hit the accelerator: In SaaS and similar businesses, the "magic number"—the most recent increase in revenue divided by marketing spend—indicates that your investment is being recouped efficiently whenever it exceeds 1. When this figure is healthy, you can make a convincing case to investors for pouring even more capital into sales and marketing and accelerating growth sharply. (Croll & Yoskovitz, 2024)

• Invest ahead of growth—and raise money with room to spare. You can't build a hundred-story skyscraper on the foundation of a two-story house. Likewise, to grow a company rapidly you need to invest in specialized talent, systems, and infrastructure ahead of time, beyond what the business currently requires. As a result, even while revenue is rising, you may temporarily run losses that far exceed your budget—but for a growth-stage venture, that can be a healthy sign of investment in the future. The iron rule, however, is to raise capital comfortably in advance, before you actually need it. Convincing investors when you are about to run out of cash is extremely difficult. (Schultz, 2012)

• A company's value is determined by cash flows far in the future. Most of a technology company's value comes from the cash flows it will generate at least ten to fifteen years from now. Don't let short-term hypergrowth—rising user numbers or immediate revenue—distract you from the single most important question: "Will this business still exist in ten years?" (Masters & Thiel, 2014)

Approaching VCs

• Choose VCs with a long-term outlook who can help you transition to professional management. Once a company is expanding nationally or globally, venture capital (VC) becomes a powerful funding option—but steer clear of VCs who chase short-term self-interest and meddle excessively in management. Great VCs with a long-term perspective do more than provide capital: they offer invaluable guidance on market research, brand building, and business strategy that helps an entrepreneurial private company transform into a professionally managed public one. (Walton & Huey, 2012)

• Keep the power law in mind. Even as your company begins to scale, you remain under the power-law pressure that venture capital exerts: the expectation that a single company will return the entire fund. Rather than settling for middling growth in a competitive market, keep striving to become a monopoly that creates overwhelming value. (Masters & Thiel, 2014)

Capital Policy

• The ultimate financial metric is free cash flow: As Amazon's Jeff Bezos emphasizes, the true value of a stock is determined not by future earnings but by the present value of future cash flows. Even if capital expenditures and customer acquisition costs for rapid expansion squeeze profits, you should keep investing—even at the cost of deliberately running losses—as long as doing so will generate more cash over the long term. (Bezos & Isaacson, 2020)

• Balancing growth against cash flow: In some businesses, faster growth means burning cash faster, so reining in growth would improve near-term cash flow. But because establishing market leadership leads to high long-term profitability, the optimal strategy is often blitzscaling: after rigorously calculating the cost of capital against future returns, you deliberately choose speed over efficiency and deploy capital aggressively. (Bezos & Isaacson, 2020)

• Pick a single "economic engine" (profit per X): To make the leap to a great company, you need a deep understanding of how your business sustainably generates cash flow and profit, then choose just one denominator—your "profit per X"—that has the greatest impact on financial performance, and focus the entire organization on it. Walgreens, for example, focused on profit per customer visit rather than profit per store, and Wells Fargo on profit per employee rather than profit alone. Finding the unique financial metric that gets to the heart of your business model is the key to scaling efficiently and decisively. (Collins, 2009)

• Don't let stock-market pressure make you lose sight of "value." Once a company goes public, Wall Street investors and analysts evaluate only its financial "price"—the numbers—and take little interest in its underlying "value," such as its culture and mission. The share price will rise and fall like a roller coaster, but management must stay level-headed, refusing to be swayed by the stock price or short-term market reactions and continuing to make decisions based on what is best for the company in the long run. (Schultz, 2012)

Organization

Hiring

• Prevent hiring standards from slipping: Top-tier "A-players" attract other A-players, but if you compromise and hire a "B-player," they will bring in "C" and "D" players, triggering a negative herd effect that degrades the quality of the entire organization. No matter how large the company grows, never lower your hiring bar. (Benioff & Adler, 2009; Schmidt & Rosenberg, 2014)

• Insist on 10-out-of-10 talent: Even when your options are limited, hire only "10s"—people who can identify problems and devise solutions on their own—and keep giving them difficult work. (Schwarzman, 2019)

• Hire a world-class finance team (CFO) and establish rigorous financial processes. Once you reach a scale where an IPO is on the horizon, you need to professionalize your finance function by bringing in a world-class CFO and finance leaders with large-company experience. Establish strict accounting policies and revenue-recognition standards in line with GAAP (Generally Accepted Accounting Principles), and standardize the terms of your sales contracts so you can forecast accurately. Building robust processes like these earns you the trust of Wall Street and investors as "a company that makes accurate forecasts and delivers on its plans." (Schultz, 2012)

• Use the IPO strategically to win credibility and talent. An IPO is far more than a means of raising capital. It is the most powerful branding strategy available for establishing your company in the public mind as the pioneer of its industry and earning the trust of large enterprise customers as a company with a proven seal of approval. Going public also increases liquidity, allowing employees to cash in their stock options—a powerful incentive for attracting and retaining highly talented people. (Schultz, 2012)

Company Culture

• Radical transparency: If you expect employees to make sound decisions like adults, you should share everything openly—including sensitive financial information and strategy normally known only to the executive team, and even negative news such as the possibility of layoffs. When leaders openly and loudly talk about their own failures, the organization develops trust and tolerance. (Hastings & Meyer, 2020)

• Radical candor: Build a culture that combines caring personally about one another with saying hard things directly. Holding back criticism out of consideration for someone's feelings—"ruinous empathy"—actually stunts their growth. (Scott, 2019)

• The bigger you get, the more you must "think small." The larger a company becomes, the greater the danger that bureaucracy and rigid systems take hold and the company drifts away from its customers. To prevent this, hold on to the entrepreneurial spirit of the founding days and the attentive, hands-on customer service of the front line, make "thinking small" an almost obsessive discipline, and leave room for creativity and the occasional lone-wolf personality. At the same time, resist the urge to diversify into unrelated fields or make reckless acquisitions in a rush to grow. Deeply understanding and sharpening your focus on your core business is what keeps the company from sliding into mediocrity. (Gerstner, 2009; Walton & Huey, 2012)

• Keeping the mission honest (mission reviews): To stop your articulated values and mission from becoming empty words, it also helps to run a formal mechanism—such as a mission review—through which employees can flag company decisions as "contrary to our principles" and management is obliged to respond. (Schultz, 2012)

• Preserve the founder's vision rather than handing the company to professional managers and bureaucracy As a company grows, authority tends to shift from a founder with a distinctive vision to trained "professional managers." But a faceless bureaucracy can only see what is right in front of it. Creating new value is not something professional managers can administer; innovation calls for a structure closer to a "feudal monarchy," in which an extraordinary individual like the founder lays out long-term plans. (Masters & Thiel, 2014)

Leadership

• Lead with context, not control: In an organization densely packed with talented people, managing subordinates through rules and approval processes (control) slows the pace of innovation. Rather than dictating policy, leadership should share "context"—the company's goals, assumptions and background information—as thoroughly as possible, and empower frontline teams ("informed captains") to make the best decisions themselves. (Hastings & Meyer, 2020)

• Distinguish between rock stars and superstars, and make the most of both: A team needs not only "superstars," who constantly seek new challenges and grow rapidly, but also "rock stars"—craftspeople who love the job they have and deliver consistently strong results. Instead of forcing rock stars into management roles, build systems that celebrate and reward their expertise; that is what gives a team stability. (Scott, 2019)

• Bring in professional managers and shift to a team of specialists: To cope with the complexity that comes with expansion, recruit "smart people" (professionals) with management experience at large companies onto your leadership team well before you actually need them, and have them build the management systems and infrastructure. (Schultz, 2012)

• Bring in professional managers and delegate authority: When a company crosses certain revenue thresholds—from hundreds of millions to billions of dollars, for example—it runs into complex problems that founders and early team members cannot handle on their own. At that point it is essential to bring in senior leaders from outside with deep management and international experience at large corporations, delegate authority to them, and strengthen the organizational structure. (Dell & Kaplan, 2021)

• Manage according to task-relevant maturity (TRM): Gauge each subordinate's "task-relevant maturity" for a specific piece of work. While maturity is low, give detailed instructions on what to do, when and how; as it rises, shift toward a communication-focused style; and ultimately move to a management style of "setting goals and monitoring." (Grove, 2015)

Organizational structure and communication

• Prepare for the 120-person wall (the breakpoint): Once an organization reaches 120–140 people, information gaps and communication breakdowns become pronounced, and you will need a proper HR function as well as a new layer of "managers who manage managers" (directors). Start preparing the new organizational structure and communication mechanisms several months before this breakpoint arrives. (Fadell, 2022)

• Hybrid organizations and the "dual reporting (matrix)" system: As organizations grow, they inevitably arrive at a "hybrid organization" that combines the strengths of a "functional organization," which pursues economies of scale, with those of a "mission-oriented (business-unit) organization," which pursues responsiveness to the market. To make this work, introduce a "dual reporting" system in which employees belong to two bosses or coordinating groups, and use it to coordinate across departments. (Grove, 2015)

• One-on-one meetings: Hold regular one-on-one meetings between managers and their direct reports, using them not just to check on progress but as a forum where subordinates can raise problems and both parties can learn from each other. (Grove, 2015)

• Give teams outcomes, not outputs: Instead of telling a team which features to build (outputs), give them the customer problem to solve or the business objective to hit (outcomes), and leave the how up to them—in other words, empower them. (Cagan, 2020)

• Build an "ambidextrous" organization: An effective organizational design embeds two things within the existing management structure and pursues both at once: "exploitation," the incremental improvement of products in existing markets, and "exploration," radical innovation in new fields. (Hoffman & Yeh, 2018)

• "Team Topologies" that cap cognitive load: Design teams so that the complexity of the systems they handle (their cognitive load) never exceeds their limits. Put "stream-aligned teams," which deliver value along the flow of business change, at the core, and support them with "platform teams" and others, thereby reducing unnecessary dependencies and communication costs between teams. (Skelton & Pais, 2025)

• Cultivate a management portfolio As a company grows, it comes to juggle four kinds of work simultaneously: (1) new product development (the startup phase), (2) scaling up, (3) optimization and defending against commoditization, and (4) cost reduction and legacy management. Each stage calls for different management approaches and different people, so career paths need to be structured so that the people who generate innovation are not swamped with managing existing products. (Reis, 2011)

• Create an innovation sandbox To ward off big-company disease, carve out a "special zone" where startup-style experiments can run freely without inflicting fatal damage on the parent organization's existing business. Senior executives must set up a system in which a small team, restricted to a specific customer segment or a subset of features, holds full authority from start to finish and runs split tests using only actionable metrics. (Reis, 2011)

• Avoid the large-batch death spiral As organizations grow, they tend to increase the size of each development and release cycle (the batch size) in the name of efficiency, but this invites a "large-batch death spiral." Even for mission-critical products (as in the case of Intuit), you need to keep batch sizes small—through technology investments such as virtualized systems—and maintain a setup that allows continuous deployment. (Reis, 2011)

Goal management

• Pursue results with OKRs (Objectives and Key Results): As an organization expands, teams easily turn into "mercenaries" who simply churn out features (outputs). Instead, use OKRs to give teams the authority and responsibility to solve concrete business problems (outcomes) that tie in with the company's overall goals. (Cagan, 2017, 2020)

• Decide through the GSD (Get Shit Done) cycle: To keep work moving without losing speed, run the GSD cycle: listen → clarify → debate → decide → persuade → execute → learn. Important decisions should be made by the person closest to the facts on the ground, and everyone else should firmly adopt a stance of "disagree, then (once it's decided) commit." (Scott, 2019)

• Use OKRs and V2MOM: Use frameworks such as "V2MOM (Vision, Values, Methods, Obstacles, Measures)" and "OKRs (Objectives and Key Results)" to set goals that are ambitious yet realistic. Make them visible to every employee so that goals are "synchronized" from the company level all the way down to the individual. (Benioff & Adler, 2009; Schmidt & Rosenberg, 2014)

• Scale up with OKRs: Break the company-wide Objectives and Key Results (OKRs) down into individual objectives for each product team to pursue, aligning the entire company in the same direction while preserving team autonomy. (Cagan, 2017, 2020)

• Make the black box visible with performance indicators: Treat the organization as a single "black box" (a factory) and establish objective indicators (performance criteria) that measure its inputs and outputs. Use numbers and warning lights to make the health of the machine visible, and tie evaluations and compensation to that objective data. (Dalio, 2018; Grove, 2015)

Services

Customers

• Practice dual-track agile: Product managers, designers and engineers work as one unit, running "product discovery" (exploring what to build next) and "product delivery" (shipping a high-quality product to market) continuously and in parallel within a single team. (Cagan, 2017; Seiden & Gothelf, 2022)

• Maximize outcomes, not outputs (build less) As organizations expand, they tend to get pushed around by feature requests and cram in everything at once. But in software development and similar fields, there is always more that "should be built" than the time and resources available. The goal, therefore, is not to increase the number of features (outputs) but rather to "build the bare minimum while capturing the greatest outcome (solving customers' problems) and the greatest long-term impact." Moreover, the ideas that keep you at the front of the pack come not from general sales activity or market research but directly from the hardcore users who put your product through its paces in the field (the source), combined with an approach of learning quickly from hands-on practice. (Chouinard, 2016; Patton & Economy, 2014)

Product development

• Empower engineers as a "source of innovation": If all you have engineers do is write code, you are getting only half their value. Engineers understand better than anyone which "enabling technologies have only just become possible," so involving them actively from the moment solutions are being conceived is the key to producing exceptional innovation. (Cagan, 2020)

• Combine quantitative data with qualitative insight: Use large-scale (quantitative) data to understand what is happening, while drawing on small data (qualitative) from user interviews and observation to uncover the underlying insight into why it is happening—and feed both into development. (Cagan, 2020; Knapp et al., 2016)

• Shifting to multithreading (multiple products): Move from concentrating on a single product to splitting the organization into multiple product lines (multithreading). Assign a dedicated team to each product family so that it can operate autonomously, like a small startup inside the company. (Fadell, 2022; Hoffman & Yeh, 2018)

• Splitting the monolith along "fracture planes": When a system has grown bloated into a monolith, identify its natural "fracture planes"—differences in pace of change, risk, user persona, technical boundaries, and so on—and deliberately break the software into units that teams can develop and deploy on their own. (Skelton & Pais, 2025)

• Default to open: Achieving outsized success in the Internet century requires more than shipping a standalone product; it requires building a "platform" that brings together a community of users and providers. Rather than closing the system to lock customers in, make openness the default. That lets you tap the talent and ideas of thousands of developers outside the company and accelerates innovation—a powerful weapon for disrupting incumbents entrenched behind robust defenses. (Schmidt & Rosenberg, 2014)

Designing the Business Model and Strategy

• Test the four risks quickly with prototypes: Before committing major time and money to full-scale development, use prototypes (such as live-data prototypes) to rapidly test four risks: value (will they buy it?), usability (can they use it?), feasibility (can we build it?), and business viability (does it work as a business?). (Cagan, 2020; Croll & Yoskovitz, 2024)

• Reaching V3 (a profitable business): Refine the entire business model to move from the stage where the product alone is profitable (V2) to the stage where the company's overall bottom line turns positive (V3), by optimizing customer support and sales channels and putting economies of scale to work. (Fadell, 2022)

• Optimizing LTV and CAC: To accelerate growth by reinvesting revenue into acquiring new customers, rigorously manage the balance between customer lifetime value (LTV) and customer acquisition cost (CAC). (Croll & Yoskovitz, 2024)

• Avoiding the "stuck-in-the-middle" trap: As you scale, you can end up too big to serve a niche yet too small to take on the large incumbents. At this stage you must decide clearly whether to focus on efficiency (a cost strategy) or on uniqueness (a differentiation strategy). (Croll & Yoskovitz, 2024)

• Building a platform and ecosystem: Offer APIs and an external platform for third-party developers so that a strong ecosystem forms around your product, creating a formidable barrier to entry (and to exit) against competitors. (Croll & Yoskovitz, 2024)

• Shifting from "search" to "execution" and scaling up Once customer validation has revealed a repeatable, scalable business model, the startup shifts gears from searching for a business model to executing on it. At this stage, invest boldly to expand the business, both to create end-user demand and to drive customers into your channels. On the traction front, move away from the unscalable tactics used so far and toward scalable channels—community building, virality, and the like—that can handle shifts in a large user base and produce a visible, meaningful difference. (Blank & Dorf, 2020; Weinberg & Mares, 2015)

• Managing a portfolio of business models and preparing for "10X changes" Because even successful business models now have rapidly shrinking lifespans, creating and reassessing models must be a continuous activity rather than a one-off. Practice "portfolio management," investing the profits from your existing revenue-generating business into experiments with future business models. Concretely, this means investing simultaneously across three horizons: (1) growing today's core business, (2) new ideas and products for the near future, and (3) breakthrough technologies for the distant future. It is also essential not to miss the signs of an order-of-magnitude "10X force" (a strategic inflection point) that will upend the industry, and to embrace self-disruption and change rather than clinging to the inertia of past success. (Grove, 1999; Nadella, 2018; Osterwalder & Pigneur, 2013)

• Expanding gradually into adjacent markets Once you dominate a small niche, scale gradually into the nearest adjacent markets—just as Amazon expanded from books into CDs and videos. Rather than launching straight into disruptive competition, this requires the self-discipline to steadily monopolize one related market after another. (Masters & Thiel, 2014)

• Preparing before the growth engine runs out of gas No matter how powerful a growth engine is, it will inevitably slow down—run out of gas—once it has exhausted its target customer segment. While the existing engine is still working, you must begin exploring new engines and products that will become the next source of growth. (Reis, 2011)

Sales

• Eliminating the harms of commission-based (short-term) pay: The traditional commission-based sales model risks driving salespeople to chase short-term gains and fueling self-interest. A sales culture of mercenaries who show up, make a quick killing, and move on creates friction with the product development team and divides the organization. (Fadell, 2022)

• "Graduated commissions" aligned with customer success: Instead of paying the full reward the moment a contract is signed, introduce stock options that vest over time or "graduated commissions" that incentivize winning long-term customers. Also, rather than letting salespeople walk away once the deal is done, put them on a shared compensation structure with the customer success team and support department, and involve those teams in approving contracts. This builds a culture that puts the customer's success first. (Fadell, 2022)

• Overwhelming scale through the "flywheel": As Amazon demonstrated, lowering prices improves the customer experience and drives traffic; that traffic attracts third-party sellers, which spreads fixed costs and allows prices to drop further. Keeping this "flywheel" loop spinning delivers sustained, massive growth without relying on marketing. (Hoffman & Yeh, 2018)

Marketing

• Shifting channels as you scale: In the early days, small efforts—intimate meetups, individual hands-on outreach—could produce a visible difference. But as the company grows and its growth curve flattens, the channels that worked before can no longer lift it to the next level. To acquire new customers by the hundreds of thousands, you must shift your marketing strategy to channels that work at massive scale, such as community building and viral marketing. (Weinberg & Mares, 2015)

• Fine-tuning positioning and refusing to follow: During the growth phase, fine-tuning your positioning and marketing messages matters more than fundamentally changing the product. If you fixate on rivals and follow their lead, you will produce only low-impact incremental changes and slide into a "vicious circle of mediocrity." Ignore your rivals and focus on the innovations that nobody has thought of yet but that are truly needed. It is also an iron rule to avoid attacking the market leader head-on; instead, look for unclaimed territory (a gap) and go around. (Ries et al., 2001)

• Thought leadership (PR): When dealing with the media, don't memorize the bland script prepared by your PR team. Engage journalists in an "intelligent conversation" and convey your own ideas and insights—this builds your reputation as a thought leader in the industry. (Schmidt & Rosenberg, 2014)

• Selling the company itself through the press and PR Even when a product sells virally, media exposure and a PR strategy still matter. A stronger company brand gives you an edge in recruiting top talent and winning over investors for the next round. (Masters & Thiel, 2014)

• Establishing the right sales channel based on CLV and CAC As the business expands, balance customer lifetime value (CLV) against customer acquisition cost (CAC) and establish a sales approach suited to your product's price point. (Masters & Thiel, 2014)

  • Complex sales: Deals worth millions of dollars are sold by the CEO personally over long periods (as at SpaceX and Palantir).

  • Personal sales: For deals in the tens of thousands of dollars, build an appropriately sized sales team and establish a sales process (as at Box).

  • Marketing and advertising: Low-priced products in the hundreds-of-dollars range that don't spread virally should reach the mass market through advertising such as TV commercials.

  • Avoiding the dead zone: Be careful with products priced around $1,000—they easily fall into a "dead zone" where they are too cheap to justify hiring salespeople yet too expensive for mass advertising.

Partnership Strategy

• Gaining a "force multiplier" through APIs and platforms: Turn your product into a platform and build an ecosystem in which third-party developers can create applications (Salesforce's AppExchange, for example). This drives innovation at a pace impossible with your own resources alone, multiplies the value delivered to customers (a force multiplier), and erects a strong barrier to entry against competitors. (Croll & Yoskovitz, 2024; Hoffman & Yeh, 2018)

• Moving to "low-touch" business development: Partnerships begin with high-touch, individually negotiated contracts, but once demand picks up, shift to a "low-touch" approach by publishing APIs and integration tools. This lets thousands of sites and companies connect to your system easily without tying up their IT resources, and the growth of the ecosystem accelerates explosively. (Weinberg & Mares, 2015)

• Partnering with competitors ("frenemies"): Business is not a zero-sum game. Even with a rival you compete against fiercely in a particular area (a "frenemy"), you should be willing to form a partnership if it benefits both sides and ultimately delivers added value to customers. Just as Microsoft actively rolled out its Office apps on iOS, the platform of its biggest rival Apple, this calls for the diplomatic maturity to compete and coexist at the same time. Rather than relying on traditional salespeople who chase only their own company's gains, appoint dedicated business development (alliance) staff who act like "diplomats," working to maximize value for both parties, and build partnerships with flexibility. (Nadella, 2018)

• "Collaboration" with suppliers (CPFR): Instead of treating vendors and suppliers as parties to be squeezed on price, share your sales trends and inventory data with them and plan jointly. Building this kind of genuine partnership enables dramatic cost reductions and efficiency gains through supply chain management. (Walton & Huey, 2012)

Global strategy and scale

• Shift the main arena for growth overseas and bet on "learning": Just as Netflix made global expansion its top priority alongside growth in the US market, in overseas markets with strong growth potential you should take risks aggressively for the sake of "learning" rather than profit. The key to global dominance is becoming an "international learning machine" that studies the viewing habits and preferences of users in specific countries such as India, Brazil and Japan. (Hastings & Meyer, 2020)

• Preserve your core culture while adapting to local cultures: When doing business around the world, hold on to the core culture that gives your company its strength (for example, Netflix's "freedom and responsibility" and "candid feedback"), but at the same time stay sensitive to the differences in the cultures of the countries you enter (such as cultures that avoid direct expression). Dialogue and flexibility in adapting to the local context are essential. (Hastings & Meyer, 2020)

• Contributing locally as a multinational: As a company expands globally, it must not become a presence that merely extracts profit from the countries it enters. Priorities should include supporting the growth of local partners and startups and helping solve social challenges such as education and healthcare—in short, "creating opportunity in a sustainable way over the long term" in each country. (Nadella, 2018)

• Question the textbook approach to expansion (easy joint ventures): Conventional business books insist that "partnering with a local trading house or company is essential for overseas expansion," but relying too heavily on this risks eroding your quality, brand and philosophy. When Patagonia entered Japan, it dissolved its joint venture, set up a wholly owned subsidiary and brought its California-style culture (promoting women to management, flextime and so on) over intact. Expanding without compromising your strengths and culture can be an equally powerful approach. (Chouinard, 2016)

• A global hub strategy for talent: To attract top "smart creatives," you need to make a strategic decision: either go to the global hub cities where they gather (Silicon Valley, London, Singapore and the like) and set up offices there, or build an environment attractive enough to draw them to your own locations. (Schmidt & Rosenberg, 2014)

M&A

• Buy time and neutralize threats: During scale-up, buying time through M&A is often a more rational strategy than building from scratch. It can provide a foothold for growth, as when Priceline acquired Booking.com and came to dominate the international hotel booking market. It is also an extremely effective defensive measure for absorbing dangerous rivals that could one day threaten your company, as Facebook did when it acquired Instagram and WhatsApp. (Hoffman & Yeh, 2018)

Establishing CSR and an ethical stance (corporate social responsibility)

• Considering the "fifth risk" (ethical risk): Once a company grows to the size of a "city" or a "nation," the impact of its decisions on society as a whole can no longer be ignored. Alongside value, usability, feasibility and business viability, you need to explicitly consider a "fifth risk": "Should we build this product at all—is it ethically right?" Like Airbnb, companies must weigh the impact not only on shareholders but on a diverse set of stakeholders: employees, customers, partners and the local communities in which they operate. (Cagan, 2020)

• Set out "concrete ethical standards," not vague slogans: Vague slogans such as "do the right thing" are not enough for employees to make the right call on the ground. To prevent ethical violations, you need to define concretely what must never be done and the "why" behind your values, making the organization's red lines unmistakable.

• "Transparent crisis management" that tolerates no cover-ups: As a company grows, scandals and crises are inevitable. When they occur, assume the media will portray you in the worst possible light, and rather than hiding information or shifting blame, speak the truth openly and explain how you are dealing with the situation. Leaders at this stage carry a responsibility to think not merely as the head of a company but like "a mayor or a president," acting rightly on behalf of humanity as a whole. (Hoffman & Yeh, 2018)

• Your company, your suppliers, your contractors and your customers form a single "ecosystem." Rather than seeking profit for your company alone, make the health of the whole your top priority. (Chouinard, 2016)

• When years of business dealings have strengthened your company's influence, using that leverage to push suppliers and contractors to improve their working conditions and environmental standards is an important part of the corporate social responsibility (CSR) that companies from the middle stage onward should fulfill. What is good for them ultimately turns out to be good for you as well, in the form of higher quality and lower risk. (Chouinard, 2016)

Later stage (pre-IPO rounds)

For later-stage startups (those in pre-IPO rounds), the task is to build a financial foundation that can withstand the scrutiny of the public markets—Wall Street and retail investors—and to shape an organization that can keep growing after listing without losing sight of its medium- and long-term vision.

Finance

Timing and size of fundraising

• Defensive measures: convertible bonds and follow-on investment from existing shareholders: If a listing is postponed, issuing convertible bonds or raising additional capital from existing shareholders—a kind of "war bond"—to keep plenty of cash (runway) on the balance sheet is the key to weathering the unexpected. (Knight, 2016; Randolph, 2019)

• Improving cash flow through business model design: Beyond pure fundraising, it is also important to ease financial pressure through the structure of the business itself—for example, by introducing revenue-sharing models with business partners (such as film studios) to cut inventory costs and upfront expenses, or by securing robust lines of credit from trading houses and partners. (Knight, 2016; Randolph, 2019)

• Gaining credibility and recognition: Becoming the first public company in your industry means being recognized by the world as a company with a "seal of approval." It translates directly into winning the trust of large enterprise customers, recruiting and retaining top talent, and expanding business. (Benioff & Adler, 2009)

• Be "first to market": If you plan to go public, get to market first, ahead of your competitors. The first company into the market raises the most money, leaving later entrants to fight over what remains. (Schwarzman, 2019)

• Deliberately delaying the IPO: In recent years, public-market investors have tended to dislike rapid scale-ups (blitzscaling) that produce no near-term profits, so a growing number of companies (Airbnb, for instance) have deliberately pushed back their IPOs. Continuing to raise huge sums in private markets from investors who are willing to fund growth (VCs, PE funds and so on), pulling decisively away from competitors and conquering the market before listing has become one of the most effective financing strategies of the later stage. (Hoffman & Yeh, 2018)

• With a clear vision, do not take easy acquisition offers Founders without a concrete long-term vision tend to sell their companies, whereas for founders with a firm plan the offered price is always too low, so they never sell lightly. Mark Zuckerberg turned down Yahoo's $1 billion acquisition offer on the spot precisely because he had a clear picture of his company's future. (Masters & Thiel, 2014)

Approaching investors

• Diverse financing options: In a crisis where cash is about to run out, you must use every means available to stem the outflow—not just expanding bank credit lines, but also preferred stock, corporate bonds, or even "securitizing receivables" (selling customers' IOUs at a discount to convert them into cash). (Gerstner, 2009)

• Managing expectations through transparent disclosure: Through the prospectus and other documents, clearly disclose your stance—"our business takes a long-term view, and we put our responsibility to fund investors and customers ahead of the short-term share price"—and welcome only those investors who accept it. (Schwarzman, 2019)

Pitching to investors

• Prove the "reason for the losses" quantitatively: Pouring huge sums into capital expenditure and customer acquisition to fuel rapid growth will show up as losses (or shrinking margins) on the income statement. But if you can demonstrate to investors that your unit economics are healthy—for instance, in a SaaS business, that customer lifetime value (CLV) exceeds customer acquisition cost (CAC) and that the investment pays back within a few months—you can convince the market that it is justified to keep your foot on the growth accelerator even while running losses. (Bezos & Isaacson, 2020; Croll & Yoskovitz, 2024)

• Retaining control and aligning interests: To protect the founder's long-term vision and the cohesion of "one company," build a structure—through the issuance of equity securities, restrictions on voting rights and the like—that prevents outsiders from seizing control of management. (Schwarzman, 2019)

• The concept of a "Long-Term Stock Exchange" to support long-term thinking To keep the short-term profit pressure of public markets from stifling innovation, companies should aspire to mechanisms and governance along the lines of a "Long-Term Stock Exchange," reporting not only quarterly earnings but also the results of internal entrepreneurial activity through "innovation accounting." (Reis, 2011)

Capital policy

• Issuing "Class A / Class B" shares with different voting rights: Nike, Google, Facebook and others went public with a "dual-class structure" that gives ordinary investors one vote per share while granting founders and management far stronger voting rights, such as ten votes per share. This shields management from short-term outside pressure and takeover threats, allowing them to keep making aggressive investments and "big bets from a long-term perspective" even after the IPO, at the expense of near-term profits. (Hoffman & Yeh, 2018; Knight, 2016)

• The "Blue Plan" as a hiding place for budget: A technique pioneered by Abbott Laboratories. Wall Street analysts are given a solid, achievable growth rate they will be happy with (say, 15%) as the external target, while internally the company sets a higher target (say, 25%). The "surplus" between what analysts expect and actual growth is then quietly channeled into unbudgeted new ventures and long-term investments in the future—the Blue Plan. This lets the company meet market expectations while systematically continuing to invest in what comes next. (Collins, 2009)

• A capital base with "no net debt": Raising permanent capital through an IPO allows a company to hold its value even when the market turns, and to pursue opportunities in a crisis, such as snapping up prime assets that others are forced to sell at a discount. Combining IPO proceeds with a revolving credit line from a bank, and maintaining a position of "no net debt," is a powerful hedge against risk. (Schwarzman, 2019)

• Free cash flow is the metric that matters most: Great companies care more about profit growth than revenue growth. Not top-line revenue, but growth in "free cash flow"—what remains after every expense has been deducted—is the true engine of a company's health and success. (Gerstner, 2009)

• Management ownership of company stock: When executives and senior managers hold company shares purchased with their own money, not merely stock options, the interests of management and shareholders become genuinely aligned. (Gerstner, 2009)

Organization

Hiring

• Obey Packard's Law: "No company can grow revenues consistently faster than its ability to get enough of the right people to implement that growth and still become a great company." Take to heart that the biggest bottleneck on growth is not the market or the technology but "the ability to hire and retain the right people," and never compromise on a hire. (Collins, 2009)

Company culture

• A complete shift from control to "context": Eliminate as far as possible the rules that exist to control employees—travel expense policies, vacation policies, elaborate approval processes. In their place, use forums such as the QBR (quarterly business review), which gathers leaders from across the company, to thoroughly align everyone on the company's "North Star" (its strategic context), creating an environment in which front-line employees can make excellent decisions autonomously, without a manager's sign-off. (Hastings & Meyer, 2020)

• Publicize and celebrate failure: To prevent the "big-company disease" in which people stop taking risks for fear of failing, encourage employees to disclose failures openly rather than bury them ("sunshining"). When capable leaders talk loudly about their own failures, psychological safety spreads throughout the organization and innovation flourishes. (Hastings & Meyer, 2020)

Leadership

• A coach who can unite the team beyond the egos at the top: As an IPO approaches and billions of dollars come into play, clashes over position and ego intensify among founders and senior executives (witness the crisis over Eric Schmidt's possible departure as chairman just before Google's IPO). This is precisely when a strong "executive coach" or mediator becomes indispensable—someone who can defuse conflict within the leadership team and redirect everyone's attention past their egos toward "maximizing the value of the company as a whole." (Schmidt et al., 2019)

• Breaking free of the "babysitter CEO": A founder serving as CEO needs to ask whether they have become a mere "babysitter" who simply keeps the company steady. If you can no longer summon passion for a new vision or project, draw up a plan to hand over authority to a successor (a professional CEO or COO) before you start holding the company back. (Fadell, 2022)

• Build a "succession pipeline": So that the organization keeps running in perpetual motion even after you are gone, it is essential to build into the organizational design, from the start, a succession pipeline for selecting, training and testing the next generation of leaders. (Dalio, 2018)

• Chaos and marching orders (debate and decision): Allow an environment in which people debate freely and clash over differing views—let chaos reign. But once the goal is set, the leader at the top must make a clear decision (rein in the chaos) and everyone must get behind it. This dynamic interplay is what matters. (Grove, 1999)

• Adaptation and turnover in the leadership team itself: As the environment changes, executives themselves must learn new knowledge (technology, for example) and reinvent themselves. If they cannot adapt, the cold-blooded decision to replace them with objective outside experts who carry no baggage from past successes becomes necessary. (Grove, 1999)

• Decision-making by the "informed captain": Distribute the authority to make important decisions to individuals at various levels of the organization—the informed captains. Teach employees, "Don't try to please your boss; do what is best for the company," and build a system in which, rather than the boss rejecting ideas, employees gather dissenting opinions themselves, make the call, and own the outcome. (Hastings & Meyer, 2020)

• Training is the manager's own job: Don't outsource the training of your people to external consultants; managers themselves should deliver training tied directly to the company's actual work and culture. This is among the highest-leverage activities a manager can undertake. (Grove, 2015)

• One-on-ones tailored to task-relevant maturity (TRM): Hold regular one-on-one meetings and flexibly adjust your management style to each subordinate's task-relevant maturity, from detailed instruction (low TRM) to light monitoring (high TRM). (Grove, 2015)

• Accurate assessment and "tough love": Performance reviews must be accurate, not kind. Point out even the weaknesses your people would rather not hear, candidly and on the basis of objective facts, and hold them accountable (tough love)—this is what sets them on the path to improvement. (Grove, 2015)

Organizational structure and communication

• Don't open the umbrella (information control) after going public: Netflix's Reed Hastings chose to keep sharing quarterly results fully with employees before announcing them to Wall Street, after clearly warning them of the grave consequences of a leak (including the risk of criminal liability). Unless employees at every level understand the company's financial position and context, excellent decision-making on the front lines—autonomous scaling—is impossible. A company that gives up transparency because it has gone public loses the startup's greatest weapons: speed and a sense of ownership. (Hastings & Meyer, 2020)

• More sophisticated revenue management and tax planning: To prevent revenue swings caused by diverse sales channels and frequent contract revisions, standardize the terms of sales contracts and set up a "revenue management" function capable of producing accurate forecasts. It is also important to draw up an efficiency-focused tax plan in advance, with future international expansion in mind. (Benioff & Adler, 2009)

• The "quiet period" and absolute compliance with the rules: In the run-up to an IPO, strict rules apply, such as the "quiet period," during which management may not disclose any information beyond what is in the prospectus. Breaking them can get the IPO postponed, so regulations such as SOX and all compliance requirements must be followed faithfully at all times. (Benioff & Adler, 2009)

• Splitting the organization with the 150-person wall (Dunbar's number) in mind: Anthropology suggests that the number of people who can maintain deep mutual trust is capped at roughly 150 (Dunbar's number). Each time the organization outgrows this size, communication and trust thin out, so it must be deliberately divided into concentric, semi-independent groups. (Skelton & Pais, 2025)

• From a pyramid (tightly coupled) to a "tree-like structure" (loosely coupled): A tightly coupled organization in which every decision flows up to the top slows things down dramatically. Instead, design a loosely coupled organization in which the top acts as the roots supporting the trunk (senior management), and the trunk supports the branches (front-line teams) where decisions are actually made. This lets each department innovate quickly without fear of how its actions might affect others. (Hastings & Meyer, 2020)

• Allow departmental "subcultures": Once a company grows very large, an engineering department that prizes precision and a sales department driven by competition and incentives will want entirely different cultures and rules. While preserving company-wide core values, allow each department its own subculture—differences in dress code, working hours and so on—so that each can perform at its best. (Hastings & Meyer, 2020)

• Governance and checks and balances: To reduce the key-person risk of depending on a single founder's power, establish a governance system with robust checks and balances, such as board oversight or a "co-CEO" arrangement. (Dalio, 2018)

• Blending top-down and bottom-up: Rather than having management set goals on its own, use internal social platforms (such as IdeaExchange) to gather ideas and comments from every employee, refining goals from the bottom up while running a process that keeps the whole company synchronized. (Benioff & Adler, 2009)

• Collaboration with stakeholders and empowerment: Instead of treating the stakeholders who impose many constraints (legal, finance and so on) as adversaries, build a structure in which the team deeply understands those constraints and then discovers, on its own, solutions that serve both customers and stakeholders. This allows team autonomy (empowerment) and business results to coexist. (Cagan, 2017)

Goal management

• Avoid the trap of stack ranking (relative evaluation): In the pursuit of higher talent density, don't introduce a "stack ranking" system that forces out the bottom 10%. It breeds excessive internal competition and destroys teamwork and collaboration. (Hastings & Meyer, 2020)

• Scrap formal performance reviews (and PIPs) in favor of real-time feedback: Bureaucratic processes such as annual performance reviews and performance improvement plans (PIPs) tend to be a waste of time and effort. Instead, use 360-degree reviews and one-on-one meetings to build a culture of exchanging "radical candor" feedback in real time as part of everyday work. (Randolph, 2019)

Service

Customers

• Run test-and-learn cycles safely: To keep innovating without putting what you've built at risk, you need a system for testing features against the live product using extremely low-cost, low-risk prototypes. (Cagan, 2017)

Product development

• Never stop innovating: If you do nothing but optimize and stop innovating, it is only a matter of time before you become prey for someone else. Each product must be continuously developed so that it keeps realizing its full potential. (Cagan, 2017)

• Don't quarantine innovation: A common trap for large companies is to set up a separate "innovation center" or lab and try to incubate new businesses in a protected environment. This almost never works. Innovation is not a privilege granted to a select team; it should be built into the entire organization as a responsibility shared by every product team. (Cagan, 2017)

• Gentle deployment techniques: By using gentle deployment techniques that take "customer impact assessment" into account—such as A/B tests on less than 1% of total traffic, invite-only live-data tests, or limited releases to customers under NDA—you can keep learning quickly while managing business risk. (Cagan, 2017)

• Deliver the "whole product": Mainstream customers won't piece together partial products on their own. They want a complete solution—a whole product—that they can use immediately after purchase without risk. (Blank, 2020)

• Wean the organization off the roadmap: The organization needs to break free of its attachment to the old-fashioned quarterly "product roadmap," which is little more than a list of features and projects. Whenever a roadmap item comes up, always emphasize which business outcome it contributes to, and keep persuading leadership to shift the focus from features to outcomes. (Cagan, 2017)

Business model and strategy design

• Open up the next growth market: Once you reach the "city/nation stage" with thousands to tens of thousands of employees and come to dominate a market, it becomes hard to grow faster than that market itself. To scale further at this stage, you must move into entirely new lines of business. (Hoffman & Yeh, 2018)

• Disciplined diversification based on the "three circles": Rather than blindly chasing trendy technologies, you need the discipline to stay firmly within the area where your "three circles"—what you can be the best in the world at, what drives your economic engine, and what you are passionate about—overlap. Anything that falls outside that intersection should be passed up, even if it looks like a "once-in-a-lifetime opportunity." It is each step of diversification and technological innovation within the intersection that builds a great company. (Collins, 2009)

• Establish a monopoly as the "last mover" Being first (the first mover) is not the goal in itself. The real objective is to become the "last mover"—the company that makes the last great development in a specific market and then enjoys monopoly profits for decades afterward. (Masters & Thiel, 2014)

Sales

• The true role of business development: At this stage, the "business development" function is not merely a sales force. Its primary mission is to build and deliver the "whole product" by forming strategic partnerships with other companies that supply what you cannot provide alone, such as system integration services and complementary software. (Blank, 2020)

• Embed a relationship-first sales culture: "Traditional commissions" that pay out in full the moment a deal closes encourage short-term profit-seeking and selfishness, and they destroy the organization's culture. Move to "graduated commissions" that vest over time, and, in coordination with the customer success team, embed a sales culture that supports customers' long-term success. (Fadell, 2022)

Marketing

• Leverage the "big-company advantage": Your greatest weapons are now the "overwhelming scale" you lacked as a startup and the "financial firepower" (the ability to iterate) that lets you keep trying no matter how many times you fail. By drawing on your vast existing customer base and marketing expertise, you can push new services into the market all at once. (Hoffman & Yeh, 2018)

Global strategy and scale

• Become an "international learning machine": When expanding overseas, you must become a learning machine that actively takes risks and prioritizes "what can we learn from failure" in order to learn as much as possible about the target market (viewing habits, preferred content formats, and so on). (Hastings & Meyer, 2020)

• Adapt to cultures with a "culture map": While preserving the core culture that is your strength (e.g., "freedom and responsibility" or "radical candor"), you need to be sensitive to differences with the cultures of the countries you enter—such as how candid feedback is received—and flexibly adapt your communication style to the local context. (Hastings & Meyer, 2020)

• Turn infrastructure-building in emerging markets into a "barrier to entry": Entering emerging markets that lack existing infrastructure (payment systems, logistics networks, etc.) is extremely difficult, but if you build that infrastructure yourself, it becomes a formidable barrier to entry—a competitive advantage—against rivals who arrive later. (Hoffman & Yeh, 2018)

M&A

• Accelerate growth and defend through M&A: As the market matures, use M&A (mergers and acquisitions) strategically, either to save the time it would take to build from scratch in-house or to neutralize (defend against) rivals who could threaten you in the future. That said, guard against "occupying army syndrome," in which the acquirer dominates the acquired company; humility is required to select the best people from both organizations. (Hoffman & Yeh, 2018; Welch et al., 2005)

Establishing CSR and ethics (corporate social responsibility)

• Consider your diverse stakeholders: Rather than chasing shareholder returns (short-term numbers) alone, you have a responsibility to consider whether your product might harm any of your stakeholders: employees, customers, platform participants (hosts, guests, and the like), and the communities in which you operate. (Cagan, 2020)

• Explicitly examine the fifth risk (ethical risk): Alongside the four product development risks of value, usability, feasibility, and business viability, establish a process to explicitly test a "fifth risk"—ethical risk—by asking, "Should we build this product at all? (Could it be misused, or cause harm to third parties?)" (Cagan, 2020)

• Write down concrete ethical standards: Vague slogans like "do the right thing" won't help employees on the ground make the right call in complex situations. To prevent ethical violations, you need to spell out in concrete terms what must never be done and the reasoning behind it, making the organization's red lines unmistakable. (Horowitz, 2019)

• Transparency and taking responsibility: When a crisis or failure occurs, don't dodge responsibility or make excuses. "Behave like an adult": openly tell consumers what went wrong, what you learned, and how you will prevent it from happening again. Companies at this stage have a responsibility to think like a mayor or a president and to proactively set the right rules for the good of humanity as a whole. (Fadell, 2022; Hoffman & Yeh, 2018)

• Make the foundation self-sustaining with a pre-IPO equity grant: If you have built in a model of giving back "1% of equity, 1% of employee time, and 1% of product" to society from day one (the 1-1-1 model), allocating shares to the foundation before the IPO produces the greatest leverage. At the moment of the IPO, the foundation comes into tens of millions of dollars, enabling it to run self-sustaining, lasting social programs (such as youth education support and grant programs). (Benioff & Adler, 2009)

• "Competitive camouflage" by monopolies: A company that has built a monopoly (or overwhelming dominance) in a specific market should, to avoid government scrutiny and public criticism, deliberately broaden its definition of its market and tell a story in which it is "just a small player in a fiercely competitive landscape," thereby camouflaging its monopoly (for example, the way Google presents itself not as a "search monopoly" but as "one part of the vast global advertising and technology markets"). (Masters & Thiel, 2014)

Exiting via M&A

This is the phase in which a startup sells its company or business through M&A.

Finance

Timing and scale of M&A

• Great companies are bought, not sold Rather than pitching your company when you want to let it go, the best time to sell is when a buyer is desperate to acquire it. A seller who frantically pushes to offload the company only makes buyers more wary. (Fadell, 2022)

• Selling early is a serious option: Venture-backed companies tend to become all-or-nothing gambles. Instead of endlessly chasing enormous profits (and the enormous risk of bankruptcy that comes with them), selling the company as early as possible and locking in a smaller but guaranteed payoff is one sensible way to spread your risk. That said, large companies are not hunting for bargains; they want a safe choice. You will find it easier to sell once the business is reasonably well established and presents little risk to the buyer. (Graham, 2004)

• Fatal flaws (failing the seven questions) lead to a fire sale Better Place, an electric-vehicle startup, raised an enormous amount of capital without a superior product or a clear sales strategy (timing, monopoly, distribution, and so on). It ended up building a service that was extremely hard for customers to buy, and despite raising more than $800 million, it filed for bankruptcy and sold its assets for a mere $12 million—in effect, a failed exit. (Masters & Thiel, 2014)

Approaching potential acquirers

• Be clear about what you want from the sale Before selling the company, the founders and management team need to agree on why they are doing it: to gain the massive resources (capital or infrastructure) that will accelerate the realization of their vision, to cash in financially, or because they feel they have hit the limits of what they can achieve on their own. (Fadell, 2022)

• How to negotiate when M&A (selling the company) is your exit If you are aiming for an exit by selling to a large company (M&A) rather than an IPO, understand that the acquirer is not looking for a bargain but for a safe choice. What gets an acquirer to act is not the prospect of gain but the fear of loss: "a rival might buy them first" or "if we don't buy now, the price will only go up." Also, the chief yardstick buyers use to value a company is not the technology itself but the number of users. Users are real-world proof that people want what you have built, so if you are aiming to be acquired, optimize for user count. (Graham, 2004)

• Stoke the fear of loss: Acquirers (large companies) are not looking for a bargain; they are looking for a safe choice. The strongest motivator pushing them toward a decision is not the prospect of gain but the fear of loss—"if we don't buy now, a competitor might," or "it could cost far more later." (Graham, 2004)

• Prove your value with users, not technology: When buyers assess a company's worth, they care overwhelmingly more about how many people are using the product than about how technically impressive it is. User numbers are real-world proof that you have created wealth (that there is market demand), so to maximize your sale price, pour everything into optimizing and maximizing your user count. (Graham, 2004)

• Investment banks prioritize closing the deal over relationships Most acquisitions are run by investment banks, and because bankers earn their enormous fees only when the deal closes, they push to wrap things up as quickly as possible. What matters to them is the transaction; they have no interest in the human side—whether the two cultures are compatible or how employees will be treated. (Fadell, 2022)

• Do your own thorough due diligence (the "dating period") You cannot know a company's true culture until you are inside it. It is like a romantic relationship: only after moving in together do you notice your partner's flaws, such as the dirty dishes piling up in the sink. Examine the organization's reporting structure, its hiring and firing processes, its benefits, and everything else in detail, and allow ample time for a "dating period" in which you make concrete plans for what happens after the integration. (Fadell, 2022)

• Talk to the leaders of companies the buyer has acquired before To learn how the acquirer actually digests the companies it buys—whether it lets them stay independent, quickly loses interest and neglects them, or imposes its own way of doing things—it is essential to speak directly with the leaders of its past acquisitions and find out what really happened. (Fadell, 2022)

• The biggest driver of a decision is the fear of loss: Prospective buyers will postpone a decision indefinitely if they can. What gets them moving is not the prospect of gain but **the fear of loss**. Making them worry that "if we don't buy now, a competitor will," "it will cost far more later," or "if we're not careful, they could become a formidable competitor" is a powerful hook for getting an acquisition done. (Graham, 2004)

• Maximize the price through an auction: Rather than negotiating with a single party, it is effective to run an auction among multiple prospective buyers, such as a two-round sealed-bid process. In a sealed-bid auction, bidders cannot see the other offers, so a buyer who genuinely wants the company will bid not "a little above the runner-up" but the highest amount it is willing to pay to be sure of winning—making it easier to maximize the sale price. (Schwarzman, 2019)

• Focus on the other side's problems and needs: To close a deal, do not simply push your own demands. Pay attention to what problems the buyer is facing right now and how acquiring your company would solve them, and craft a proposal that addresses both sides' challenges. (Schwarzman, 2019)

• Sell the company itself A company sells more than its product. Executives must also sell the company itself—to employees, to investors, and to future acquirers. The idea that investors and acquirers naturally flock to a great company is a myth; without deliberate, calculated selling, the "frenzy" of an M&A deal or a large funding round simply does not happen. (Masters & Thiel, 2014)

Terms and closing

• Avoid the earn-out trap Buyers sometimes propose an "earn-out," in which additional payments depend on the company's performance after the acquisition. But once the selling team accepts one, its executives cling to their old ways of doing things in order to hit their targets, fiercely resisting the compensation changes and systems integration the acquirer wants—sowing the seeds of hostility. If you want to keep the management team (or want to stay on yourself), negotiate a retention bonus—a fixed amount paid for remaining a set period—rather than an earn-out. It leaves far more freedom for integration. (Welch et al., 2005)

• Guard against the acquirer's "occupying army" (rubbernecker) syndrome Acquiring companies, with the slack that big organizations enjoy, sometimes send over employees who simply jump onto whatever project looks interesting, with no plan behind it. Open your doors to people who have no interest in the acquired company's mission and who will leave the moment things get tough, and the culture the startup worked so hard to build will be destroyed in no time. (Fadell, 2022)

• Understand that they are buying people, and act with integrity: Many large companies believe they are acquiring physical assets or intellectual property, but what they are actually acquiring is people—and in creative and technology industries, that is where the greatest value lies. That is why integrity is the key to everything in acquisition talks. Unless you build a personal relationship of trust with the buyer and come to believe that your "child" (the company and its product) will be well cared for after the acquisition, the deal will not get done. (Iger, 2020)

• "Time wounds all deals": In a negotiation, the longer you wait, the more surprises and unforeseen risks accumulate. In tough negotiations especially, the iron rule is to keep everyone at the table until an agreement is reached and get it done quickly, in one push. (Schwarzman, 2019)

• Watch out for the "re-trade" (last-minute price cut): There is a practice known as a "re-trade," in which the buyer, in the final stages of the acquisition or at the point of signing, threatens to cancel the deal unless the price is lowered. Sellers are often in a weak position by then, having already invested a great deal of time and money and turned away other buyers. But a price that has been agreed should, in principle, be honored unless something material has changed, so you need to stand firm against unreasonable demands—or take precautions in advance, such as setting a break-up fee. (Schwarzman, 2019)

Organization

Corporate culture

• An M&A (exit) strategy to protect your culture: When an exit brings you into conflict with investors or a board that shows no understanding of your long-term vision or corporate culture, one option—as Zappos did—is to agree to a stock-swap acquisition by a partner (such as Amazon) that promises to preserve your brand and independence, thereby protecting your culture. (Hsieh, 2010)

• Beware of differing interpretations (filters) of the same words When the acquirer's executives promise to "take responsibility for your team and share your goals" or "respect your autonomy," do not take it at face value. When Google acquired Nest, both sides pledged "full cooperation." To Nest's executives, who came from Apple, that meant leadership being present down to the details and supporting the people on the ground; to Google, it meant communicating only the outline of the plan and leaving (or abandoning) the details to the teams. Differences in culture and leadership style like these breed fatal misunderstandings from the moment the deal closes. (Fadell, 2022)

Organizational structure and communication

• Abandon the illusion of a "merger of equals" Companies sometimes bill a deal as a "merger of equals" to satisfy egos on both sides, but almost every merger of equals ends in failure. The organization grinds to a halt over whose way of doing things to adopt, so you must make clear who will ultimately lead and hold the reins. (Welch et al., 2005)

• Recognize that resistance is career suicide After being acquired, it is natural to feel anxious or angry when your old ways are rejected or a new boss arrives, and to want to resist the integration. But whatever the reason, resisting or grumbling about the new owners is career suicide. (Welch et al., 2005)

• Swallow your pride and "love" the acquirer Nothing irritates an acquirer more than paying a premium for a company only to be greeted by sulking, resentful employees. Tell yourself the good old days are over, focus on how to succeed in the new environment, and become a "cheerful champion of the merger"—someone who loves the combined company as much as the acquirer does and cooperates constructively. That is the single best way to survive the post-acquisition regime and win a key position in it. (Welch et al., 2005)

• "Mafia"-like bonds that outlast the exit PayPal was sold to eBay for $1.5 billion in 2002, but the team members from that era—the so-called PayPal Mafia—went on to launch one billion-dollar-plus company after another, including SpaceX, Tesla, LinkedIn, YouTube, Yelp, Yammer, and Palantir. The intense culture and bonds forged in the startup years—ties that go far beyond mere work—extend past the boundaries of the first company sold in an M&A deal and become the foundation for the next great venture. (Masters & Thiel, 2014)

Leadership

• Producing serial entrepreneurs A blockbuster startup exit is not simply a "lottery win." The existence of serial entrepreneurs like Steve Jobs, Elon Musk, and Jack Dorsey—people who refuse to rest on a single success or exit and go on to build multiple billion-dollar businesses—proves that success is a matter of skill (the ability to see a truth others miss, and the ability to execute on it), not luck. (Masters & Thiel, 2014)

Service

Product Development

• Delight users, not acquirers: When launching a venture, never design your product with the aim of pleasing potential acquirers, whether venture capitalists or large corporations. Design it relentlessly to delight users. Win the users, and everything else will follow. (Graham, 2004)

• Your greatest weapon is "user count," not "technology": It is tempting to assume that acquirers scrutinize a target's technology in detail, but in practice what they care about most is the number of users. User count is the only real proof that what you have built is something the market actually wants. A large user base worries your rivals and attracts journalists—and, as a result, draws the keen attention of acquirers. (Graham, 2004)

• Settle for being attractive to potential buyers (the sale-oriented model): For "sale-oriented" startups—those that build an app or similar product at low cost with the goal of being acquired by a large company, team included, for somewhere in the range of $5 million to $50 million—one viable approach is to accept that the market is big enough as long as the company is attractive to potential buyers, even if it will never be large enough to dominate the market as a whole. (Blank & Dorf, 2020)

Exiting via IPO

This is the phase in which a startup sells its company or business through M&A.

Finance

Approaching Investors

• Company value is determined by future monopoly cash flows: A company's valuation (market capitalization) at IPO is determined not by the size of its current profits but by the sum of all the cash flows it will generate in the future. For example, when Twitter went public in 2013 while still losing money, it commanded a market cap more than twelve times that of the profitable New York Times—because investors predicted that Twitter would be able to capture monopoly profits over the following decade. (Masters & Thiel, 2014)

• Polish the "optics" and keep the story simple on the roadshow In the investor presentations leading up to an IPO (the roadshow), appearances matter as much as the underlying substance of the business. You need to show the things Wall Street likes to see: room to cut headcount, no wasteful spending of cash, and a lean, fast-moving organization. It is also essential to make the business plan extremely simple so investors can grasp it—just as Netflix pitched itself around a single proposition, "DVD rental by mail." (Randolph, 2019)

• Declare your "long-term thinking" and management philosophy explicitly In his shareholder letter after Amazon went public, Jeff Bezos declared unambiguously that the company would make investment decisions with an eye to cementing its long-term position as a market leader rather than chasing short-term profits or Wall Street's immediate reactions. It is essential to communicate your philosophy honestly (for example, prioritizing the maximization of free cash flow over accounting profits) so that you attract investors who become "long-term owners" aligned with your approach, rather than "tenants" who trade in and out for short-term gains. (Bezos & Isaacson, 2020)

• Earn trust through full disclosure of risks Rather than showing investors only a conveniently upward-sloping plan, list every potential risk that could sink the business—regulation, technical hurdles, competitors, and so on—along with your plans for mitigating each, and share them candidly. Doing so earns you an overwhelming degree of trust: "This management team deeply understands reality." (Fadell, 2022)

• A roadshow that hits the whole world at once: In the roadshow where you pitch your shares to investors, one effective approach is to split the executive team and mount simultaneous campaigns in major cities such as New York, Boston, and across Europe and Asia, selling the offering around the world all at once. (Schwarzman, 2019)

• Present the market with a story of a future monopoly To justify a high valuation at IPO, you must convince investors and the market that your service will come to dominate its market and establish a monopoly position over the long run. If your company is viewed as one that will be dragged into fierce competition with existing substitutes, no one will expect long-term cash flows, and it will not command any value. (Masters & Thiel, 2014)

Capital Policy

• Retaining control through a dual-class share structure Going public exposes a company to pressure from the public markets to improve results every quarter, as well as to the threat of hostile takeover. A powerful tool for guarding against both and preserving management based on a long-term vision is the "dual-class structure," in which the company issues shares with different voting rights—for example, Class A shares carrying one vote each for public investors and Class B shares carrying ten votes each for founders and management. Google, Facebook, and Nike all went public with this structure, securing the ability to continue aggressive investment that sacrifices near-term profits (blitzscaling) even after listing. (Hoffman & Yeh, 2018)

• Structures that preserve control: To protect the founder's vision and the cohesion of "one firm," it pays to build structures in advance that prevent control of the company from being taken away—for example, by issuing equity securities that give outsiders no voting rights. (Schwarzman, 2019)

• Managing expectations: Through the prospectus and other disclosures, state clearly that the company is managed from a long-term perspective and that its first responsibility is to its existing fund investors and clients—and use that disclosure to ensure you welcome only investors who agree with this stance and intend to hold for the long term. (Schwarzman, 2019)

• Using the IPO—and "going private" for long-term transformation: An IPO is a powerful means of raising growth capital for R&D, hiring, and M&A. On the other hand, when a company seeks to undertake a large-scale transformation from its existing business into new areas such as cloud or SaaS, the public equity market's pressure for short-term profits and the risk of a falling share price can become a drag. In such cases, another effective strategy is to partner with private equity investors on a management buyout (MBO), take the company private, and push through the long-term transformation with the time and stability to do it properly. (Dell & Kaplan, 2021)

Organization

Corporate Culture

• "No surprises" for the board A public company's board has more members than a private company's, and its legal procedures and committees are far more intricate, which makes meaningful, in-depth discussion nearly impossible. For that reason, any topic likely to catch the board off guard should be walked through carefully with each director in advance, one on one, so the groundwork is laid before the meeting. The only surprises permitted in the boardroom are pleasant ones—progress that beats the plan, for instance. (Bezos & Isaacson, 2020)

• Defending against short-term pressure: Once a company is listed, it is exposed to pressure from public shareholders who care more about the daily share price and short-term profits than about the long-term growth of the business, creating the risk that the company's culture and strategy will be destroyed. (Schwarzman, 2019)

Organizational Structure and Communication

• Prevent "servitude to process" and stay in Day 1 As a company grows and goes public, it tries to manage everything by formula, and "following the process" becomes an end in itself. To avoid the state in which a junior leader who has failed defends themselves with "but I followed the process"—what Bezos calls Day 2—you must constantly ask: "Do we own the process, or does the process own us?" (Bezos & Isaacson, 2020)

• Maintaining speed through "Type 2 decisions" As companies grow large, they tend to apply the heavyweight decision-making process meant for "Type 1" decisions—consequential and irreversible one-way doors—to "Type 2" decisions that are reversible two-way doors, and they slow to a crawl. Unless you preserve a system in which Type 2 decisions are made quickly, by individuals with good judgment or small teams on the front line, with roughly 70% of the information in hand—that is, unless you delegate—innovation will dry up. (Bezos & Isaacson, 2020)

• The danger of careless media exposure: Executives and others involved with a company preparing to go public must strictly observe the "quiet period" rules, which prohibit disclosing any information beyond what is contained in the prospectus or promoting the IPO. (Benioff & Adler, 2009)

• Prepare in secret with a small team: Rumors that an IPO may bring a windfall can leave employees giddy and distracted, sapping their focus on day-to-day work. The IPO project should therefore be run by a small, hand-picked team working in secret at a location away from headquarters. (Schwarzman, 2019)

• A larger board and stronger governance after going public At the pre-IPO startup stage, a small board of three members (five at the very most) is considered ideal for avoiding conflict and enabling effective oversight. Once a company completes its IPO and becomes publicly listed, however, legal and regulatory requirements force it to expand the board (the average listed company has nine directors). (Masters & Thiel, 2014)

Service

Customers

• Ignore the vanity bubble and stay disciplined about customer development Companies that got swept up in bubble-era euphoria—"it's new technology, so it will sell," "it's an internet business, so the stock price will rise"—and rushed to IPO without any real substance (actual customers or a sustainable business model), such as Webvan, went on to hemorrhage losses after listing and spiral toward a very public death. Rather than being dazzled by IPO fever, keep returning to the fundamentals of customer development and proven unit economics: "Does the product genuinely solve a customer problem?" and "Are we recovering our customer acquisition costs?" That discipline is the basic precondition for surviving as a great company. (Blank, 2020; Collins, 2009)

Product

• Preserve your entrepreneurial DNA even as a large company, and manage a portfolio Becoming an established company through an IPO does not mean the startup struggle is over. You now need "portfolio thinking": managing, optimizing and cutting costs on existing legacy products while simultaneously exploring new business models in pursuit of disruptive innovation. Intuit was able to fend off attacks from industry giants such as Microsoft after its 1993 IPO precisely because it kept this entrepreneurial spirit alive. (Reis, 2011)

PR

• The risk of an IPO delay: If, during this period, you carelessly give a media interview or take some other action that is deemed a securities law violation, the Securities and Exchange Commission (SEC) can halt its review, potentially delaying the IPO by weeks or even months—a fatal setback. (Benioff & Adler, 2009)

Closing down or exiting when growth stalls

This is the phase in which performance falls short of expectations and the company considers either shutting down or pursuing an exit.

Finance

When to close

• Stop blitzscaling immediately: When market growth stalls or unit economics (profitability per customer) deteriorate, it is a warning sign that your current strategy cannot be scaled any further. Take your foot off the growth accelerator and shift into a phase focused on efficiency. (Hoffman & Yeh, 2018)

• The courage to quit, and ABZ planning: Telling entrepreneurs to "never give up" is a mistake; knowing when to quit matters just as much. Quitting is not the same as standing still—it means recognizing when it is time to try something different. To be ready for that, you should always have not only your best-case Plan A but also a Plan B for pivoting and an emergency Plan Z for surviving the worst-case scenario. (Hoffman & Yeh, 2018; Knight, 2016)

• Decide quickly rather than limping along: When you face a painful, difficult decision—during a slump or when considering a business exit—dithering and hoping the economy will turn around only makes things worse. Whether you are withdrawing or changing direction, acting too early beats acting too late, because the company still has reserves and momentum, which makes course corrections far easier. (Gerstner, 2009; Grove, 1999)

• Standing still is the most dangerous option: When a company is drifting, precious cash and organizational energy drain away while management hesitates and marks time. Your choice does not have to be the perfect one; what matters is setting a clear, forceful course. (Grove, 1999)

• Don't become a "zombie company" If, despite stagnant results, you keep drifting along with the current strategy out of loyalty to the company, you end up as a "zombie company"—one that neither dies nor grows, and simply consumes employee motivation and resources. (Reis, 2011)

When to pursue M&A

• Selling to save the project and the organization: When poor performance makes survival hopeless, one option—rather than selling out simply to recoup a sliver of cash—is to sell to a large company that will fund the business and keep it going, in order to protect the project, the organization and everything you have built (as in the case of GO Corporation in pen computing). (Schmidt et al., 2019)

• Spreading risk by taking a guaranteed payoff: Startups tend to become all-or-nothing gambles. Instead of chasing an enormous payout (and the accompanying risk of going under) to the very end, selling the company as early as possible and accepting a smaller, guaranteed return is one sensible way to spread your risk. (Graham, 2004)

• Exploit the buyer's fear of loss: Companies considering an acquisition will try to put off the decision. The strongest motivator to get them moving is not the prospect of gain but the fear of loss: "If we don't buy now, a competitor might," or "It will cost more if we wait." (Graham, 2004)

• If you have no clear vision, sell the company (exit) When founders lack a concrete vision for their company's future, the price offered by a buyer will probably look "too high" (that is, attractive), and selling the company makes rational sense. Conversely, for founders with a rock-solid plan and the will to see it through, any price is too low, and they will not sell. (Masters & Thiel, 2014)

Capital strategy

• Calculating your break-even point in "hibernation" mode: Before the money runs out, consider whether the company could survive if shrunk to its bare minimum—hibernation. Calculate whether you could cover your own costs (earn "ramen money") if you cut additional marketing spend to zero and simplified the business to nothing more than serving existing customers. This gives you a benchmark for surviving indefinitely. (Croll & Yoskovitz, 2024)

• Cutting your burn rate: When you are in danger of running out of cash, survival requires emergency measures to stop the outflow: cutting operating expenses and customer acquisition costs, and reducing salaries for employees and for management itself until the books balance. (Blank & Dorf, 2020)

• Measure runway in "pivots remaining," not "months of cash left" When results stall and cash is getting tight, do not think of your runway purely as the time left after dividing the bank balance by your monthly burn. Slashing costs indiscriminately slows down your validation loop and merely delays the business's collapse. Your true runway is the number of pivots (fundamental rethinks of strategy) you can still make, so focus on lowering the cost and time of each validation cycle to increase how many pivots you can afford. (Reis, 2011)

Terms

• Avoid the earn-out trap: If the acquirer offers an "earn-out"—additional payments tied to post-acquisition performance—accepting it will lock you into your old way of doing things and make you fiercely resist integrating systems or changing pay structures with the acquirer, sowing the seeds of hostility. If they want to retain you, or you want to stay, negotiating a fixed-amount "retention bonus" instead gives everyone far more freedom in the integration. (Welch et al., 2005)

Organization

Leadership

• The courage to admit your limits and step down as CEO: When the company has changed so much that you no longer know how to run it, or when you realize you are heading straight for disaster, you need to set your ego aside and make the decision to step back—to resign as CEO. (Fadell, 2022)

• Accept the sense of loss and make time to reflect: Leaving the company you built (or watching it fail) feels like dying; it leaves you feeling hollow and hopeless. But resist the urge to distract yourself by jumping straight into a new job. Recovering, coming to terms with the past and finding something new to be passionate about takes about a year and a half of reflection and "boring time." Having been CEO once does not mean you have to be CEO again. (Fadell, 2022)

• What you built, and the people you built it with, stay with you for life: Even if the company dies or the product fails, that does not diminish the significance of what you made, or the value of having tried and learned something. Above all, the friendships with the people who weathered the chaos alongside you and built something from nothing remain a precious asset for life, whatever becomes of the company. (Fadell, 2022)

• Ask yourself, "What would a new CEO do?": When the foundations of the business crumble and the old ways stop working, founders and executives tend to get trapped by past successes and emotional attachments. To break the deadlock, you need the cold-eyed judgment to ask, from an objective outsider's perspective, "If we were thrown out and a new CEO came in from outside, what would they do?"—and then carry out that answer yourself. (Grove, 1999)

Organizational structure and communication

• In the case of a sale, be clear about your purpose: You need to define exactly why you are selling the company—whether it is because the company is in trouble and you want to hand it to someone who recognizes the value of the business, or because you are seeking financial gain. (Fadell, 2022)

• In the case of a retreat, make sure everyone understands why: When taking painful measures such as large-scale layoffs or the sale of a business unit, the CEO must act quickly while also telling every employee, without concealment, exactly what is being done and why it is necessary. Hiding facts or releasing them in dribs and drabs only fuels employee anxiety. (Gerstner, 2009)

• Tell the truth about layoffs and give them meaning: Layoffs caused by poor performance may be unavoidable, but before the press reports them as "proof the company is failing" or employees draw their own conclusions, leaders themselves should give the layoffs meaning and communicate them honestly and convincingly. State the facts plainly, own up to your mistakes, and explain why this action is necessary to ultimately fulfill the mission. (Horowitz, 2019)

• Showing departing employees the "utmost respect": Layoffs are the company's failure, not the fault of those being let go. The people leaving should be treated courteously and with respect, given generous severance packages, and recognized for what they contributed. Treating them well is also critical for preserving the morale and emotional stability of the team that remains. (Schmidt et al., 2019)

• Publicizing failures and running an open company: If you routinely share hard realities such as the company's financial position and cash balance, then when layoffs do become necessary, employees will be saddened but will understand. Likewise, documenting failed projects and bets for the entire company and sharing the lessons learned demonstrates the courage to confront failure head-on rather than paper over it. (Hastings & Meyer, 2020; Schwarzman, 2019; Welch et al., 2005)

• Don't play the blame game (no scapegoating): When a business fails or an unexpected problem erupts, a culture that hunts for "whose fault it is" and makes an example of someone leaves employees afraid of risk and turned inward. Avoid the wasted time of blaming individuals; instead, acknowledge the cause of the problem and focus on what lessons to draw and how to prevent a recurrence. That is what turns a setback into an opportunity for future growth. (Catmull & Wallace, 2023)

• Discard vanity metrics and face the hard truth When performance stalls, don't cling to "vanity metrics" such as total customer count or cumulative page views that always seem to trend upward, and don't get drunk on "success theater." Use "actionable metrics" with clear cause-and-effect relationships, such as cohort analysis, and confront the hard reality that your growth engine is not working. (Reis, 2011)

Services

Product development

• Change the "market," not the features (market/product fit): When things are going unbelievably badly, many startups try to fix the problem by adding features, but that is a mistake. Leaving the product as it is and pivoting to a "new market" where it fits (market/product fit) is far easier than rebuilding from scratch. (Croll & Yoskovitz, 2024)

• Honest analysis of failure, then iteration: If you followed your gut and it didn't work, you need to analyze honestly and thoroughly why it failed, and gather the data. Recovery may prove impossible (the money runs out, teammates leave, and so on), but internalizing the hard lessons and starting over from the first version (V1) is the only way forward. (Fadell, 2022)

• Head off "achieving failure" as early as possible Faithfully executing your original business plan only to end up with a finished product that nobody wants is called "achieving failure." When your growth engine runs out of gas (stalls), don't stubbornly keep making minor tweaks (optimizations) to the product; instead, commit to a deliberate "pivot" that fundamentally rethinks your strategy. (Reis, 2011)

Business model and strategy design

• Shifting to a business model that can be monetized: If you have traction (user interest) on the consumer side but can't get anyone to pay, you may need to make the decision to pivot entirely to a "business with revenue attached," as Parse.ly did when it moved to enterprise analytics tools. (Croll & Yoskovitz, 2024)

• Withdrawing from fiercely competitive markets (pursuing monopoly) When the reason for stagnant performance is "intense competition," profits get burned up in fighting rivals and everyone loses (goes under)—as in the glut of online pet-supply companies in the 1990s. Clinging to a market where you can't build a unique advantage is futile; you should shift to a business that avoids competition and can dominate a small niche. (Masters & Thiel, 2014)

• Dealing with a broken balance between CAC (customer acquisition cost) and LTV (lifetime value) If you rely on a "paid engine of growth" driven by advertising and sales, growth stops and the business heads toward collapse the moment the cost of acquiring one customer (CAC) exceeds the lifetime net profit that customer generates (LTV). If you keep forcing money in while this gap (marginal profit) stays negative, the business dies. (Reis, 2011)

• A range of turnaround options through pivots Rather than throwing away everything you've learned and built, you reuse it and change direction. Depending on the situation, you can draw on methods for restarting such as the "zoom-in pivot" (narrowing to a single feature of the product), the "customer segment pivot" (targeting a different customer group), the "customer need pivot" (solving a different problem), and the "platform pivot" (moving from an application to a platform). (Reis, 2011)

• Dealing with the exhaustion of early adopters When a business that grew in its early days suddenly stalls, it's a sign that you have used up the market of novelty-seeking "early adopters" and failed to make the transition to more demanding mainstream customers. In this case, you must acknowledge that your existing growth engine has hit its limit and undertake a major shift, such as fundamentally rethinking the product and dramatically improving its usability. (Reis, 2011)

• Searching for, and focusing on, an effective distribution channel Most startups fail not because of the quality of their product but because "they never found even one effective distribution channel." Rather than trying advertising and sales at random, you must establish "one" channel suited to your product's price point—if you can't, the business ends (closes) right there. (Masters & Thiel, 2014)

• The fate of raising huge sums without a sales strategy (a fire-sale exit for pennies) Even a great product will fail without a sales strategy for getting it to customers. Electric-vehicle startup Better Place raised more than $800 million yet built a service that was extraordinarily hard for buyers to purchase; after filing for bankruptcy, it sold off its assets for a mere $12 million (in effect, a failed exit). (Masters & Thiel, 2014)

Closing thoughts

Even the ideas I've thought through hardest very often don't work out, and each time I'm reminded that the range of knowledge and experience any one person holds is far narrower than we imagine. Rather than arrogantly assuming I understand everything, I believe the most efficient approach is to first do as the great predecessors say even when I don't yet understand why (they have already made countless mistakes on my behalf), and to gradually learn the reasons as I go. I hope this summary serves as a foothold for decision-making at each phase of building a business.

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