Achieving and managing through hyper-growth is formidably difficult.
It requires executing, learning, and iterating at a fast pace, faster than competitors. It also requires transforming the organization as needed to support that growth… at the very same time.
Sure, the idea of smoking competition from the get-go can seem like a nice problem to have. But there’s a reason why two-thirds of hyper-growth startups fail.
Let’s dig into the workings of hyper-growth startups with an emphasis on managing the highs and lows, especially with distributed teams, so you can navigate the swift changes better.
Hyper-growth is when a company’s compound annual growth rate (CAGR) exceeds 40%. (It’s normal to have less than 20% CAGR.)
The term was first coined by Harvard Business Review back in 2008.
In layman’s terms, they defined it as the steep part of the growth curve that most young industries experience at some point.
Or, as they like to put it, “where the winners get sorted from the losers.”
Why it matters in today’s tech landscape
While hyper-growth matters in the tech scene for several reasons, one of the most notable is due to major funding opportunities.
Venture capitalists are eager to back the next rising star – like Amazon, Zapier, Zoom, and Uber – in order to make substantial profits before the market becomes saturated.
Challenges of hyper-growth startups
Hyper-growth startups don’t come without their challenges since they’re primarily focused on growth.
Some of the most common challenges are as follows, many of which become even messier with distributed teams:
- Systems impeding growth. IT problems may arise with the sudden influx of employees. From infrastructure to software scaling, figuring out how to better accommodate team members involves substantial amounts of time and money.
- Overworking team members. Startup employees are famous for working over 70-hour workweeks. (The dangerous allure of a 70-hour workweek has been discussed for over a decade.) While working hard shouldn’t be shunned, overworking is an unsustainable solution that will deprive your team of the work-life balance they deserve.
- Increasing costs. If marketing accelerates customer acquisition, it has a rippling impact on sales, customer success, support, finance, etc. Devoting more resources to each of the departments will inevitably shrink margins. Keep track of customer acquisition costs to see if lower-cost solutions are on the horizon for you.
Stages of hyper-growth
Depending on whom you ask, the names of the stages of hyper-growth change. Nevertheless, the general consensus is that there are three stages:
Stage 1: The Edison stage
This is the stage where you figure out if you can build a viable product that generates profit.
Ask yourself: Is this product worth pursuing? What’s the possible ROI? Is it even possible to build the product?
In general, in the first stage, teams emphasize product development (patents and invention) and project management to bring the overall vision to fruition.
Stage 2: The Model T stage
The second stage is all about scaling, named after Henry Ford bringing the automobile to the masses.
Some key questions you should ask yourself are: Who exactly is my target persona? How will I streamline processes so we’re efficient and productive? How will I spend the least on customer acquisition (X) to churn out the most ROI (3 times X)? How well are my distributed team members coordinating with one another?
Think of it this way: In The Edison Stage, you’re just finding and building your tribe. In The Model T Stage, you’re scaling that tribe and taking it to market.
Stage 3: The P&G stage
Now that you’ve garnered a global audience, it’s time to invest in your brand and hone in on your unique selling proposition, or USP.
At this stage, you want answers to the following questions to be clear: Why should consumers purchase my product over others? What makes my product different? How can I go about marketing that?
Oftentimes, this means becoming the best in your industry (for example, MailChimp with email marketing) or dominating a micro-niche (like Seventh Generation with green laundry detergent).
Keep in mind that these three stages aren’t quick wins. They may require months or years of rewiring. As the VP of Product at Facebook, Nikhyl Singhal, said, “what got you here isn’t what gets you there.”
Highs of managing a hyper-growth startup
Soaring far above competition sure comes with its high points, especially when working with distributed team members. Some of them include:
Making a great plan and sticking the landing
When it comes to hyper-growth, the companies that cross all their i’s and dot their t’s understand the importance of seeing things through properly from the get-go.
There’s a reason why only a third of hyper-growth startups succeed.
In part, that success is from having a grasp on company products, USP, team dynamics, roadmap to scale future efforts, etc.
At the end of the day, making a great plan is the difference that makes a difference between sticking the landing and falling flat on your face.
Finding the right team
Attracting the right talent is half the battle for hyper-growth startups.
It’s not only about onboarding those who share your mission, but also fit company culture (more on this below!).
Luckily, companies can finally surpass previous talent barriers by tapping into the international job market to find the perfect fits.
Managing the team to success
The other half of the battle is managing your distributed team to success. Done right and your insights will be plastered around the internet.
This not only will shed light on your pioneering management skills, but also garner attention for your product, driving even more sales.
Building a trusting culture
When you’re able to build a trusting culture, three things happen:
1. Employees know how management wants them to respond.
2. Employees believe the expected response is proper.
3. Employees know they’ll be rewarded for exhibiting company values.
The benefits for distributed team members are many, among them being improved productivity and efficiency, increased company loyalty, and stronger brand reputation.
All of this leads to a bigger bottom line.
Basking in the glory of hyper-growth
If your startup is projected to be the next unicorn, it’s only natural to adapt a slight swagger in your step as a leader.
However, don’t let the sudden fame cloud your better judgment for months to come. Remember to center growth around a future profit plan to keep all stakeholders vested in the company.
Lows of managing a hyper-growth startup
Nevertheless, what goes up, must come down, and managing a hyper-growth startup doesn’t come without its low points (and tips to overcome them):
Difficulty crafting the right plan
With a startup that’s expanding so quickly, adjusting or creating the business plan for customer, employee, and company success can be tricky.
A weak plan can damage funding efforts, cause inefficiencies, and miss goals that need to be reached.
Whereas, simply not having a plan is a recipe for disaster, like walking through a park blindfolded.
While yes, you’re advancing, there is a lot in your environment you’re not aware of. This not only can block your way forward, but prevent you from seeing other opportunities.
It’s not only about hiring the best remote talent, yet hiring talent that’s the right fit for the stage of growth your company is in.
You’ll need to consider your budget as well as future plans to scale. Hire someone that fits the bill for both criteria so you can take your startup to the next level without breaking the bank.
Veering into micro-management
The urge to micro-manage may creep up on you to ensure things are continuing to go well, especially since your team isn’t present in a brick-and-mortar office.
While it is part of your job to have expectations about the end results and empower your team to take responsibility, checking on them every few minutes doesn’t help. It will hinder company morale and lead to high turnover.
Avoid micromanagement by assigning the task and asking your employees how they plan to complete it. Remember there is always more than one approach, and new ideas can birth from fresh perspectives.
Enduring trust issues within the team
The sudden pressures of maintaining high growth can cause you to do things that lead to general mistrust from your team.
When it comes to distributed teams, this trust can be especially hard to regain as members aren’t physically present, and in-person bonding time is rare (or impossible).
Always remember that you hired your team members for a reason. Trust they can follow through with their work, and give them the space to do so.
The alternative is onboarding new staff every so often, which eats up time and resources.
Too often do hyper-growth startup leaders credit the success to their genius and not to their team’s collaboration.
Doing so (that is, focusing on personal versus collective efforts) can degrade team spirit and lead to high turnover.
To avoid falling into the “it was my doings” trap, keep your eyes on the mission, and lift up others to help them succeed.
Final words of advice
Hyper-growth is a tough enough challenge that companies should pursue it in the manner that is most comfortable for them.
For a fully-distributed organization to tackle hyper-growth, it means not only taking on additional challenges, but also opening the door to a number of accelerators of organizational performance, which we call the “superpowers of distributed companies.”
Companies that manage to both execute well against a hyper-growth opportunity and layer in the additional “superpowers” of distributed teams will achieve unprecedented things.
Oyster is a distributed HR platform designed to enable visionary HR leaders to find, hire, pay, manage, develop and take care of a thriving distributed workforce. It lets growing companies give valued international team members the experience they deserve. Without the usual headaches or the expense.
Oyster enables hiring anywhere in the world. With reliable, compliant payroll, and great local benefits and perks.