December 6th, 2023 | By: Wil Schroter
The most ambitious companies grow their products, not their teams.
Back in 2002, I was invited by (now) Managing Partner Roelof Botha to come pitch the partnership of famed venture firm Sequoia Capital. While I was sitting in their lobby I noticed two things that I'll never forget.
First, like most venture firms, they had a giant list of "tombstones" on their wall, which are the plaques they create after a company goes IPO. The list was already impressive back then which included companies like Yahoo!, Electronic Arts (EA), and Cisco among many others. It was the "who's who" of venture investments globally at the time.
The second was that there were maybe 20-30 people in the entire office — and this was back when everyone was in the office. I have no idea how many people worked there, but what struck me was how so few people could have such an outsized impact on the world. I fell in love with the idea of a small staff doing massive things.
While we love to celebrate headcounts and growth, we often overlook the compounding problem that growth creates. As Craig Newmark of Craigslist told me, "Size creates dysfunction." At the time he told me that, I'll never forget he had 37 people working for him generating hundreds of millions in revenue.
As we add staff, we simply get bloated. We lose efficiency, speed, personal connection, and momentum. A tiny staff, which is pretty much what we all start with, can move quickly, communicate effectively, and feel more like a cohesive unit. When startups scale, the OG members of the company almost always bemoan "the good old days" when things were smaller and more tight-knit. They're often not wrong.
Typically the reason we set out to grow our staff was to accommodate the scale of our business. But what if we looked at scale differently? What if we considered it more of a liability than an asset? Would we still be so quick to staff up?
Another great piece of wisdom I gleaned came over lunch with David Heinemeier Hansson, the Co-Founder of Basecamp who is another company that has stayed notoriously small. He had scaled Basecamp to tens of millions of dollars and maintained a staff of less than 50 people. When I asked him how they could remain a 50-person company with a 500-person amount or revenue, he simply said, "We look to scale function, not staff."
The way he explained it, they look to build efficiency when things get overloaded, not just "throw more people at it." He said their goal is to hire as few additional people as possible and instead work toward figuring out what inefficiencies were being created that could be automated. I loved that.
Very little of what they needed to do to grow truly had to do with adding staff. If they looked to address every problem with "more people," then yes, absolutely. But adding more people doesn't automatically address the problem, and in many cases, it just adds more headcount to the same underlying issue.
In the past decade at Startups.com, we've used this mantra to great effect. We want to build a platform that helps millions of Founders build and scale their ideas. But we don't necessarily want to have to build a massive staff to do it.
The goal, and the dream really, is to build a massive product that helps lots of people with the fewest, most tight-knit group of folks behind it. WhatsApp took on Facebook (and sold to them for $19 billion) with only 55 people. Mojang, the developer of Minecraft built one of the most popular video games of all time with a staff of less than 40 people (and sold for $2.5b).
We live in an era where we get to have our cake and eat it too. We can start small, stay small, and go big all at the same time. What matters is how we think about growth and scale from the onset and instead point our "growth cannons" toward product and revenue, not staff and office space!
Adding Staff Isn't a Sign Of Success, Revenue Is Increasing your staff does not necessarily mean growth, but it is a deliberate liability.
How Much Should I Be Working? (podcast). Wil and Ryan take a deep dive into the benefits of thinking quality and not quantity when it comes to your weekly punch card.
We Need a Strict Definition of Personal Success Every moment we spend pursuing an undefined goal is a complete waste of time — especially personal goals.
Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.