I want to take a few paragraphs to address an interesting topic, as the flames in Silicon Valley begin to fan themselves on the horizon, I look west from Utrecht, back toward my home country.

 

Of course I am speaking figuratively, and San Francisco is a world away from the one in which I have found myself, but the effects of a relentless focus on scaling that is currently causing speculators to scream ‘bubble’ in California threaten the health of your startup. It is rampant in my professional and personal social circles here in the EU, not to mention I find myself repeatedly having to explain why scaling isn’t necessarily important when all you have is an idea.

 

Josh Reeves, CEO of Gusto (formerly Zenpayroll), takes a longitudinal, sustainability-focused, approach to growth that he touches upon in this blog for Business Insider. What he says may seem like the logical counterargument to the obsession with scale; seemingly foremost on the priority lists of many founders and CEO’s. However, after taking an additional 55 minutes to watch an address (start at 27:03) he delivered to Stanford Tech. Ventures Program I took note of several very compelling points that relate to what I do professionally and in my coaching with budding entrepreneurs and students.

 

Having a mindset of cutting corners with cash, in place of committing to long-term learning, and refusal to focus on important metrics like customer acquisition and satisfaction seems to be, somehow, viewed as a perfectly acceptable business practice in 2016. Doing so often results in a failure of team members to realize from where they have come and know what EXACTLY they are building and why (let alone what makes it great). This, according to Reeves, results in a reduction in [tactical] learning that threatens growth sustainability.

 

Don’t get me wrong, scale is great, but scaling for the sake of scaling is a temptation of which to be wary.

 

 

Leadership is hard pressed to allow their teams to evolve organically and have a holistic, systemic perspective as they grow and build cool stuff. From the perspective of our team, this is the most important and often ignored principle in the startup world today: a true leader must direct his or her troops to play the long game and trust the learning process. In a purely scale-obsessed organization the scaling mindset allows for decision making to be based on vanity metrics like customer volume and turnover. If things don’t work out there is always the capital raised that can compensate for any screw-ups, right?

 

Wrong. A scale mindset, if left unchecked, will lead inevitably to a characteristically quick-fix decision making culture that seems to have permeated several organizations and can spread virally from colleague to colleague. In the case of Zenefits, the main rival of Gusto, this shift of focus from building something great to building for the sake of scale has materialized into regulatory issues. Startups, unlike corporates, have neither the political nor the financial resources to handle the fallout from an insurance scandal like the one faced by Zenefits. In other words, maybe it is a mistake for leaders to rely on a corporate model for disaster management— startups, regardless of their round, do not have the war chest of a Monsanto or of a BOA.

 

There is a time and place for scale, and it happens several steps after validation and consistent growth sustainability. Ignore the necessary steps at your own risk.

 

Start your culture on a path toward building, testing, retesting, launching, customer satisfaction, and building something great rather than pure scale. Find that common thread which ties all of your employees together before you invest 20% of your round 1 into outbound marketing. Most importantly, trust the process and be wary of cutting corners by spending money— your learning will suffer and the ghost of sustainable success will evaporate before you know it.

 

Click here to read more about how we start entrepreneurs off on the right foot at Effectuation Academy and with Entrepreneur in 100 Days.

 

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Christopher L. Sparks wants to talk to you about how to make your entrepreneurial experience more organic and likely to succeed. Follow him on Twitter. Call him at +31 616 10 85 77