Nov 2, 2015 ยท 4 minutes

This might be a helpful Monday read for anyone from “Uber of X” also-rans, to the many meal kit delivery companies trying to Facebook-ad-buy their way to being a Blue Apron challenger, to, well... Twitter and Yahoo.

Jeff Jordan of Andreessen Horowitz (disclosure: A Pando investor) has a post about what to do when the growth suddenly stops. His answer is very non-California: Don’t go zen. Freak the fuck out. 

From his post:

Entrepreneurs’ reactions to these moments fall into one of two extremes: There is the preternaturally calm CEO who resolves to watch the metrics closely to see if they change; he or she is concerned that a hint of panic will cause the rest of the team to panic, so they “Zen it out” as best they can. Then there is the CEO who freaks out, setting off alarm bells that reverberate throughout the entire building and continue ringing in every single employee’s ears.

Which approach do I advocate? The freak-out, of course!

Why? Because the unexpected slowing of growth in a “growth” business presents an existential risk to the company. Growth rates over a company’s history tend to move only one way over time (down); even in hypergrowth companies, growth rates tend to fall to earth … which is why I’ve referred to this effect as “gravity.”

Once gravity takes hold, it’s very hard to re-accelerate the growth of the business. Slowing growth portends a strong possibility that the company will never again experience prior levels of growth going forward. 

Why not be zen? Because growth won’t “magically resume.”

Sound familiar Friendster? MySpace? Formspring? Yahoo? Twitter? One reason Facebook hasn’t fallen into a sustained slump is Mark Zuckerberg’s constant and utter paranoia that someone might be outpacing his growth. When Facebook was surging, a still-on-top MySpace used to say in interviews “we’re just different.” Facebook has never taken that tack: Buying “different” but surging Instagram and Whatsapp and way different Oculus Rift, trying to buy Snapchat, lamely copying it instead, and then finally launching Messenger just to make sure they had the “different” bases covered.

Zuckerberg himself has noted that messaging – which used to only be a small part of his business – is the only thing people do more than social – which used to be his entire business. The result? After some $20 billion spent, Facebook dominates messaging. And that’s the paranoia of the only super unicorn of the last wave. Imagine how “freaked out” you need to be, random startup founder.

More specifically, Jordan recommends to drop everything else and figure out why growth has slowed, assume it is self-inflicted, and if necessary consult plan B.

What freak the fuck out does not mean is burn all remaining capital to acquire growth.

Coincidentally, also in my weekend inbox is also this offering from CB Insights: A new and updated list of 76 of the biggest, most expensive failures in startup history. (Yep, Webvan is still on it.)  Most have to do with running out of cash, extending beyond means, and just failing to find product market fit.

You can spend your way towards accelerating growth. (Sometimes.) You can’t spend your way towards resuscitating growth. There’s a difference. Freak the fuck out doesn’t mean spend cash violently.

While we’re on the topic of inexorable laws of slowing growth/gravity: I bring you Internet’s most enduring example, in the latest speculation around Yahoo. Apparently there’s new talk that Marissa Mayer may get ousted for – SHOCKER! – not turning around a company that so many other drastically different CEOs with wildly different skill sets have also utterly failed to turn around.

It’s a thinly sourced story from the Street, citing just one analyst saying maybe she could go run the more profitable Alibaba spin out instead since she has utterly failed – through a zillion acquihires and at least one huge acquisition in Tumblr, and Up bands for the whole staff – to turn around the core business. Serious question: Who do analysts at this point think can turn Yahoo around? (I mean, other than a CEO who will do the thousands of layoffs Wall Street has been asking for. Honestly, how have so many disparate leaders failed in something that cold math shows is sadly necessary?)

As I wrote at the time Mayer took the job, this was a career suicide mission that only someone with a massive ego – er, who loved an impossible challenge –would accept.

Sound familiar after that last Periscoped earnings call, Jack Dorsey?  


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