How to Scale After Funding: Shifting Gears from Startup to Growth

Moving from startup to expansion stage is both a triumph and a trial for any company. Rand Fishkin, co-founder and CEO of SEOmoz, outlines the path for transitioning from break-neck development to a focus on scaling your products and services.

Rand Fishkin started SEOmoz in 2004, and, aside from a small round of Series A funding in 2007, the software company survived and grew without substantial investment until 2012. SEOmoz’s 2012 round injected $18 million into the company coffers and was, as Fishkin recently described in a conversation with OpenView, “a huge accomplishment” for his company after four years on the investment roadshow.
The cash fueled new growth for the company, but it also introduced additional pressure. Suddenly, Fishkin was faced with not only “more people having a voice in the company” as the board expanded, but also a shift in the psychological, cultural, and organizational makeup of SEOmoz.
The focus moved from scrambling to bring minimum viable products to market and quickly iterating based on customer feedback to finding a way to achieve scalability and framing everything in the context of the long haul. Welcome to the expansion stage.

How to Scale After Funding: Paying Down Your Technical Debt

Until investment arrives, revenue is the lifeblood of a startup. “You’re on a very tight budget,” Fishkin explains, so “you have to make compromises and choices about what’s going to slide.” You need to ship a product that people will actually buy, so every decision is viewed through a myopic lens that makes rapid development the only priority. A lot of elements crucial to long-term success get pushed aside:

• Scalability
• Reliability
• Documentation
• Teaching more than one person how a particular system works

Those compromises create, as Fishkin puts it, “technical debt” of  “a huge magnitude.” With funding, your company has the breathing room to expand its priorities and stop focusing solely on revenue. You can begin addressing those elements that will allow your company to grow in a sustainable way and create even better products, but that takes time, and you may have to slow down before you can hit the gas.

A Brand New Engine Still Has to Be Installed

Fishkin likens the transition after funding to finally being able to afford quality auto work. Think of your company as a car. Now that you have money to make repairs you can take it to the shop and have it outfitted with a new engine so that your company can really move. The catch is installation doesn’t happen over night.
“You’ve got to wait nine months for the new engine to get installed,” Fishkin says. “They have to pull out all the old parts, and you’ve got to ramp up the team.”

Fishkin points to personnel challenges as likely the first major challenge you need to address, and in the world of software, engineering is probably at the top of your list. When he relates the story of expanding his ten-person engineering team sixfold, he points out the problems that arise when your existing engineers are tasked with interviewing candidates and on-boarding new employees. Development grinds to a standstill, which means no new products, no new features, and no bug fixes.
Expect all of your departments to spend one to two thirds of their time interviewing candidates, bringing new people on, creating documentation, and training. It’s an investment that pays off in the long run, but in the short-term it can be a grind.

Learn and Adapt As You Go

Every company’s list of top priorities and first things to address after funding is different. Keep an overall plan in mind, Fishkin says, but be ready to learn and adjust as you go. You won’t have to go hunting for issues — rest assured they’ll find you. With every plan you put into action and every new initiative you take on you’ll discover new challenges and problems to solve. Many are difficult to anticipate, so you really just have to get good at learning along the way.
For example, recruiting might start taking an inordinate amount of time, Fishkin suggests, so you might decide to streamline the process by adding a technical recruiter to your initial phone calls to ensure you’re bringing the right people in for interviews. Or, you may figure out you can find better cultural fits by focusing on LinkedIn connections from your current employees.
“Like a lot of things in the startup world, you’re driving along, you see a pothole, you’ve got to fix it,” Fishkin says. You don’t necessarily plan for specific issues, but you expect to encounter challenges, and you’re flexible enough to deal with them as they come. The funding doesn’t remove them, but it allows you to put yourself in a position where major obstacles are reduced down to speed bumps further down the line.

You’ve heard from Rand, now we want to hear from you. What are the first things a company should address after receiving funding?