5 points of failure between $5M and $100M in ARR • businessupdates.org

by Ana Lopez

I had the privilege to lead PlanGrid to $100 million in ARR before stepping down as CEO and handing over to Autodesk Construction. I’ve had years to dissect the mistakes I made at my first startup.

Regardless of what industry you’re building in or where you are in your startup’s journey, there are a lot of things that are likely to fail.

This post provides an overview of PlanGrid’s major failure points and what I learned from them. If these reflections help even one founder make one less mistake, I would consider this effort worth it.

Organizational structure and communication fail

As the first founders, we were too creative with our organizational structure. We had a flat management hierarchy in the early years and we boasted that we ran our startup like “Star Trek” – you were in engineering or operations, and everyone reported to a founder.

This was cute until it quickly stopped working. People care about titles and career paths, and if you want to keep great people, you have to care about these things too.

In year 3 we tripled from 30 to 90 people and a year later we doubled the team to 180. Those were the most painful years, because we went from a high performing team to one that felt like it was stuck in treacle. We didn’t know how to hire giants, so we recruited several mediocre managers, who in turn recruited mediocre people.

Meanwhile, communication becomes a lot harder with more people, and I did a poor job of conveying the company’s direction. We had a first-mover advantage in a category that we created, but lost our position during these years of slow execution.

People care about titles and career paths, and if you want to keep great people, you have to care about these things too.

Take away food: Be creative about how you solve problems for your customer and not organizational structures. Hire a great HR leader as a business partner to help recruit and retain the right team and design a good communication flow. Remember that A players can recruit other A players, but B players can only recruit C players.

Internal conflict

Our trickiest inflection point was hitting Dunbar’s number – at 150 people everything went into chaos.

Hierarchy is a factor. With 10, 20 or 30 people, everyone can report to a founder. At 150, just based on basic management ratios, the frontline team member is now three to four degrees off the founders.

Not feeling like a united team becomes dangerous if you fail to meet revenue targets or product milestones. When speed and performance don’t align, it’s easy for those who feel like they’re performing to put the lag on the rest. There are natural tensions between sales and marketing teams, support and product, and product and engineering. Everything is magnified with more people, simply because communication becomes more difficult.

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