Blitz Scaling Session 4 Assignment

This is my seventh blog on the notes and my interpretations on the Blitzscaling sessions. In the fall of 2015, Reid Hoffman began taking session called Technology-Enabled Blitzscaling at Stanford University.Blitzscaling is what you do when you need to grow really, really quickly. It’s the science and art of rapidly building out a company to serve a large and usually global market, with the goal of becoming the first mover at scale. And its also about why organization culture is important for Blitzscaling . Because when you’re growing an organization very fast, you have to make people accountable to each other on a horizontal or peer-to-peer basis, and not just vertically and top-down through the hierarchy.

Session 2 notes can be found here. Session 3 notes can be found here. Session 4 notes can be found here.Session 5 notes can be found here.Session 6 I haven’t covered. Session 7 notes can be found here. Session 8 notes can be found here

In session 9, Reid Hoffman and Allen Blue shared the insights on how they scaled Linkedin.Here are the session notes and my interpretations on the insights shared.

  1. The key thing about establishing an organization culture or creating a distinctive one to identify what kind of people will not fit into your culture.
  2. Most elite organisation are able to establish this very early. For example:- Google was able to identify that folks from top degree colleges with highest CGPA will fit in the collegial culture which Larry and Sergey want to create. Now what works for Google will not work for your organisation. You have to identify what kind of culture you want to create.
  3. Part of establishing a unique culture is to answer questions on
    1. How you will communicate internally and externally
    2. how you will develop your leaders
    3. how you do decision making in the company
  4. The entire Blitzscaling sessions are divided into 3 parts addressing 3 stages of start-up called as Family, then Tribe and the Village:
    1. Family: – It’s about identifying a non-obvious market opportunity where you have a unique insight or strength or approach to capture market share. And then building your initial team to build the initial offering to address that market.
    2. Tribe: – Execute and iteratively improve a plan which gets you to achieve a market share.
    3.  Village: – In this stage, you are now able to identify, plan and execute the core business that you will be able to scale up and take it globally. 
  5. The goal of the core business is to
    1. Create continued growth
    2. Generate growing revenue
    3. Build competitive advantage
    4. Grow strategic assets for later opportunities.
  6. From time to time in company lifecycle, founder’s need to communicate the same language which people can follow while they are doing their day to day jobs.
  7. When your organisation is growing from 15 to 50 to 500, as founder’s you will not be the part of each and every conversation in your company. But as founders, you have to make sure that those conversations are aligned with big picture/directions and priorities you have decided.
  8. Communicate about your (a) mission (b) vision (c) competitive advantage (d) strategic objectives (e) business model (f) operating priorities with your companies on the continues basis. But especially when you are moving from family to tribe to village
  9. All the above communications should be simple, clear & easily repeatable. If you will be able to crack this, you will be able to create an effective organisation.
  10.  At the family stage and somewhat at initial stages of tribe stage, you hire generalist. But as you grow to become a full-fledged tribe or village, you have to hire specialist.
  11. A good generalist is someone who can come and pick up skills & things without founders doing many interventions.
  12. Specialist have good analytical skills and problem-solving skills with respect to specific area of business
  13. Tips on hiring and managing talent
    1. Fire fast low performers
    2. When hiring look for the long term probability of the guy who will be able to evolve as a company goes from family to tribe to village.
    3. “Given a chance, will you hire a person again? ” – Answer this question if you have difficulty in firing your low performer or even co-founder.If answer is no, fire ASAP.But always make sure to remain humble & human while you are parting away.
  14. Following is the screenshot of Linkedin product plan. During the family stage, you have to get just one thing right. But when you are moving to tribe and village stage, you have to get many things right at the same time. To achieve this, you need an altogether a different approach for the execution and people who will execute that plan.
  15. Look at the below metrics. It shows the kind of analytics and number crunching successful companies do to move fast. CEO’s and senior folks of the company see these numbers on daily basis
  16. When you move to village stage, as a founder you have to answer few fundamental questions about:
    1. Are you the right CEO for this stage?
    2. What is the core mission, culture, and values to enable rapid distribution scaling?
    3. How to fire the right HR guy that can support the hyper growth?
    4. Who are those key executives required to support execution in critical areas?
    5. How to develop robust reporting to allow you and your senior team to learn about where execution is going and how that can support in creating future plans?
  17. Embed communicating about your core values & culture in your hiring & onboarding processes. Or you will end up being a culture less company
  18. Here are the Linkedin culture & value details. When your sales head links those values and organisation culture, that’s where it will give you the competitive advantage.
  19. As a founder, put down points why people should join your company. And make this communication visible internally & externally. At qilo, we have taken an alternative approach, where in all JD’s we put in “Why you should not join us”. Here are the points from latest JDWhy you should NOT join us
    • If you don’t put in efforts in identifying and/or pursuing your passions in life
    • If you cannot put in extended working works to achieve WOW results for the customers.
    • You don’t believe in taking ownership and accountability of assigned work.
    • If you are NOT a good self- learner.
    • You don’t know how to crack jokes 🙂
  20. Getting your technical, HR and operational process in place is essential to make the large team work together properly. And keep optimising these processes to improve efficiency.

Keep watching this blog for more notes and awesome articles. I personally feel this session has given me a very good level of understanding what I should be focusing on as one of the co-founders of qilo. Hope you have enjoyed this post too.

CS183C Session 7: Mariam Naficy, Minted

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Our special guest for this class was Mariam Naficy, who was interviewed by Reid Hoffman. You can watch the recording of the class here.

Q: Talk about during the first dot com boom.

A: I was on the Stanford campus, using a payphone to call a Varsha Rao in New York. “We should start a company — the venture capital is available.” But Varsha only agreed if we started the business she wanted — online cosmetics. In the first year, we raised $26 million and built the company out quickly because it was a land grab. Convince all the brands to give you distribution, convince the consumers that you were the place to buy cosmetics.

We hired the entire executive team in 6 months, and had 120 employees on Market Street in San Francisco. Sephora approached us about buying us the month before we launched, then the month after we launched. By early 2000, we were raising a Series D (a year after launch) and people were starting to ask about profitability. They offered $88 million, but then Idealab objected to the price. So I told them, “If you don’t like the price, you should pay more.” So we sold to Idealab for over $100 million in cash, and two weeks later, the Nasdaq crashed. We managed to hold the deal together, but I got my first grey hairs then. We then re-sold the company to Sephora at the end of 2000.

Q: What would you tell your younger self?

A: I would have tried to think longer term. Idealab ran into problems going public, and needed to get rid of it, so I called LVMH and sold the company. But there is something else I could have done, which is buy the company back myself. When the entire world is imploding around you, it is difficult to keep perspective. Perhaps I should have realized that the Internet wasn’t over.

Now I know how to make businesses profitable. I went to a bigger company for a couple of years to run a P&L. Now I realize I could have done it (we were at a $10 million run rate). I would have been a little less conservative.

Q: What other lessons?

A: I didn’t like the size of the board (10 people!) and some of the board members didn’t get along very well. There were two Series B investors fighting over one board seat. We spent about 20% of the time managing the board, which I thought was a waste. I was working in the office until 10 PM every night, and I didn’t have time to get a Pashmina scarf for a board member.

I did learn on someone else’s dime, and saw what you got with the best PR firm, the best resources. With Minted, I raised $11 million for 7 years of operation, and got to breakeven.

Now we’ve raised $90 million, and I wouldn’t have seen how to do it without doing it the first time with

Q: How did you know when to blitzscale?

A: At the beginning, I had just had my second child, so I made some lifestyle choices. Eve gave me credibility with investors, and that allowed me to have everything — a family and a company. Taking that early risk paid off. With Minted, I wanted to control the pace. I also wanted to control the strategy while it was still being formed. Not all of the angel investors were on board with crowdsourcing. I wanted to have the ability to change the model quickly without having to drag 10 board members along on the journey.

There wasn’t a lot of competition. Nobody was talking about crowdsourcing or stationary. With, four other VC-backed companies launched right after us. We were the first by a month. We were trying to grab the mindshare, and spending the money to guarantee that. With Minted, I had the luxury of no competition.

Q: What was your thinking around the Minted opportunity? You had a lot of choices.

A: I’m a lifelong shopper. When I wasn’t in school, I was in the mall. And I saw that brands would be hot and then not. I wanted to find a way to build a brand that would last forever. I thought the issue was that traditional brands are relying on a couple of buyers to pick the right merchandise every year. The thesis was that by allowing the crowd to create and curate, we could build a brand that would last forever.

We started with the stationary market, which Peter Fenton called bringing a gun to a knife fight. But it had good characteristics, including brand loyalty and repurchase.

We weren’t a stationary company at all. We had built a community of creative creators. And that’s when we decided to take the capital.

Q: What was the purpose of the capital?

A: We could no longer do the cheap thing of having a couple of us handle all the executive jobs if we wanted to build a billion-dollar company with multiple businesses.

It was all building engineering, building an executive team. I was playing 4–5 VP roles myself, as was my co-founder. We got to cashflow breakeven in 2012 because we didn’t hire any expensive executives. But we realized that this wouldn’t allow us to scale or to launch different verticals.

Q: Stationary was a classic disruption play, a market you could dominate. How did you decide it was time to go into multiple verticals?

A: We did small experiments. Everything on Minted is run as a competition. You upload a JPEG and everyone votes. If you win, you win a cash prize and make money when your design sells.

When we went into art, we started with a single art contest. We weren’t sure if we could crowdsource wall art. But it allowed us to use the same supply chain, so operationally it was an easy extension.

Within three months, we had West Elm calling us to get our art in all of their stores.

Minted is a content destination. We just happen to monetize it by selling physical versions of it. But we’re agnostic; a week from now, we are launching digital content.

We almost folded our company in the first month of our existence. There were no sales. Very different from, where people immediately came in and started buying. In week 6, we got one sale. Nobody bought any of the branded products we had spent 90% of our funding on, because it was “safe.” But we had 22 crowdsourced designs, and we sold one of them.

The problem was, we had no traffic, so we had no idea if we were doing well (though the 0.1% conversion rate was pretty bad). I thought, “Maybe I should take all the money and give it back to my investors.” The reason I kept going is that I couldn’t bear to lose my friends’ money. So that’s why I took the venture round. We took the money a couple of weeks before Lehman Brothers failed. Alex Slutsky told me, “I’ve got a bad feeling, we should raise money now.” So I cancelled my vacation, and raised the money from IDG.

Reid: “At PayPal, we raised $100 million at a $500 million pre, and the round closed the day that the Nasdaq peaked. People were deducing our bank account, wiring money, and then insisting that we had to let them in the round because we already had their money.”

Reid: “In 2008, David Sze came to me and said, ‘We think the market is unstable. You should consider doing a round as insurance.’ So we did that. One of the general scaleup strategies is to do this kind of capital planning.”

Q: Was crowdsourcing your idea?

A: I wanted to do crowdsourcing from the start. I felt terrible when I went to all the brands and told them that we weren’t going to work with them anymore…especially since our contestants were jumping into our contests because of the credibility our branded partners gave us. It was aspirational.

We don’t change our community policies, we don’t go back on them. Communication is very consistent and clear. We didn’t add anyone to our art business for 2.5 years. We just let the community grow, and as they added content, the business grew to the point where it became an 8-figure business.

Our whole product design arm is our community — people who don’t work for us directly. One week ago, we launched an outdoor art challenge to decorate the outside of our building (747 Front). It’s amazing what a community can do when you manage it with consistent policies.

Q: Did you design your community with Hayekian ideals in mind?

A: No, but we think about the community as a society. There is a hierarchy, and our creators are always trying to climb the rungs. There are no Communists in our community — they like the hierarchy.

Q: What did you learn about building a community? Both positive and negative lessons.

A: The positive lesson is to go really slowly. There’s no rush to change policies. Looking at eBay’s commissions, we decided to start high and lower over time. I read the book “Drive” by Daniel Pink, and it talks about how money can sap the true energy of a community and society. I made an early mistake by looking at Mary Kay and Avon by celebrating the person who made the most money at the end of the quarter. That’s how it works in direct sales. We had a huge negative reaction. People started quitting the community. “I could never earn that much money.” When we moved to personal growth and learning, rather than money, we moved the community to a better place. We don’t talk about money. We don’t say that you’ll quit your day job — we can’t live up to that. You’ll learn. It will be fun. You’ll make friends.

Q: How do you reconcile the desire for hierarchy with the aversion to money.

A: People want to know that they’re making progress in life. Progress can take money forms, like you’re including me in the catalog, rather than the size of your commission. Even getting on a phone call with the Minted team is considered a great reward. Nobody is satisfied doing the same thing again and again.

Q: Do you ever hire the Minted community to produce rewards for the Minted community?

A: It is not, but it should be. We do allow the community to vote on awards, like the most helpful.

All the policing happens in the community. They report all the bad behavior. Sometimes they take matters into their own hands with vigilante justice, but they typically prefer to let us deal with it.

Q: Did the community just grow on its own, or were there things you did to accelerate the growth?

A: We did go to a trade show in the very early days, and then mailed the mailing list of the trade show. Then we had too many entries in our contests, so we stopped recruiting because we felt we were turning away too many people.

Another surprise was how many artists we attracted because of our consumer marketing (since they wanted to find an audience).

Another surprise is who is a “creative”. I thought we’d have trained stationary designers. Instead, we had people come up to me and tell me that they trained themselves on Word. One of our contestants is one of three female master plumbers in New York City, and she beats out other contestants with design degrees from top art schools.

Q: So you hit the oil well?

A: Yes, we never had to do anything. The designers talked with each other. The one exception was when we went into art. We did approach artists to submit — 30–50 people. Once the West Elm deal kicked in, they artists streamed in.

Q: What have been the key lessons in people-scaling Minted?

A: If you’re just around long enough, you realize you can grow people in the company. But it takes years and years to do that. If you can look for people’s unique talents and grow them from within, some of them will become the strongest leaders in the company.

We take disciplines where we aren’t strong, like finance and HR, and hire in experts from the outside. When it comes to our secret sauce, like crowdsourcing, we grow people from the inside. It’s hard to hire someone from the GAP and tell them, ‘We want you to forget everything you’ve been doing for the past 25 years.’ Our VP Art and VP Stationary grew internally, while our VP Finance, and Chief People Officer are outside hires.

Capital affects culture. Without money, you have no “bench.” It’s very hard to let people fail and grow on their own. During those first seven years, it was hard to let people mistakes. I felt like there was too much micromanagement. Now we let people grow and make mistakes. We also hire advisors from the outside, using equity, to help our internal people grow. We have a very senior person with retail experience who is advising the two VPs for Art and Stationary.

We tried to do peer feedback. We’ve gone through coaching to help people be accountable (Patrick Lencioni’s The Five Dysfunctions of a Team). We started that at the beginning of this year (150 employees). We had finally hired all the executives, and hired a coach to help us with this. The CEO should no longer be the only one holding people accountable and delivering the bad news.

Q: How did you triage the fires?

A: In the beginning, I knew everything that was going on at the company. Now I have to be okay with not knowing everything. At the beginning, it was all about revenue growth, because we had no cash. We’d rank our initiatives, figure out what would drive revenue growth, and then go down the list.

Reid: “You either need to have a financing plan, or you have to be managing the cash. If you don’t manage your financing, you’ll never get a chance to work on product strategy, etc.”

I’m still thinking about finance, strategy, hiring.

Q: How has that changed?

A: At first, I was very involved in marketing. But within 2–3 years, I wasn’t really involved in marketing. You get product/market fit, you get the revenue engine going, and then you make your life more complicated by looking for avenues for growth.

We believe that everything in our customers’ lives can become more beautiful and better designed over time.

We manage by numbers with succinct and repetitive dashboards that we look at every Monday. At Eve, I had to sit down with a blank sheet of paper to figure out what metrics mattered. I love building dashboards. It’s one of my favorite things to do. I see analytics as a key way to leverage myself and transfer knowledge to burgeoning GMs.

Reid: “Putting metrics at the center of your management and collaboration chain is a critical blitzscaling strategy. The danger is that you choose the wrong metrics.”

The key is to create consistent questions from the beginning and to not change them over time, because that’s the only way to compare metrics over time. We been using Net Promoter Score from the beginning.

The things I have not let go of (as CEO) are analytics, reading customer feedback, brand, community, and strategy. Not operations, not customer acquisition. I used to run customer service, but no longer. It was a great learning experience, but I’m glad it’s not me anymore.

Reid: “Paul English of Kayak put his cell phone number as the customer service number. That’s the most hard-core example I’ve seen.”

Nothing can substitute for that direct experience.

We are rigorous about tracking those consistent metrics every Monday morning. We have a sales meeting every Monday. We believe in both qualitative talking with the customers, but then testing those hypotheses. We have built so much of our business on SurveyMonkey. We use it to intuit new products…you wouldn’t believe how much it impacts our business.

Once we realized that we were actually viral, it gave us a lot of confidence to scale.

Q: Are there any things you’d change about those early contests?

A: I was probably too conservative and under-funded the company. I was concerned about dilution and being forced to go public. I should have spent more engineering time on building features.

Q (Andrey Payonkov): What about the independent artist community lent itself to building a marketplace business?

A: When you have a product that has a long tail of demand, where diversity and variety make a difference in the product. There has to be enough room in the product to allow diversity to express itself. If a hit is important in any way, the curation process can feature it. But in the end, having the long tail is important. It would be hard to build a marketplace if there were very few artists.

Q (Deanna B.): How have you seen the conversation around diversity shift since coming to Silicon Valley?

A: For women entrepreneurs, start as early as possible. You have a shorter runway before life starts preventing you with tough choices around family. I think women should be more aggressive, not less.

Women should get male mentors as well. Female mentors are important, but you need both. Most people are open-minded; the bad ones get press, and the good ones don’t. Most of the people who helped me gain access to financing, etc. were male, and the generation behind me is even more open-minded.

The conversation around diversity has shifted, because generational turnover changes attitudes. Also, people want to make money. If you provide results, investors will want to make money on you.

Build your own company, with people you want to build it with.

Q: Is your core assumption that crowdsourcing trumps buyers proven?

A: If you take the 20% of products that have 80% of the sales, 80% of those are in the top 5 of our votes. We can now predict bestsellers.

Q: How did you raise the $26 million for

A: Back then, people were not focused on proving out revenue or profit. They just wanted us to go fast. Now, you need to show good consumer traction before getting funded. My co-founder was an HBS alum, and I was a GSB alum, so we just networked to as many VCs as possible. Back then, people wanted to fund MBA students; today, it’s engineers and designers. It’s a networking game — a lot of VCs will only meet with people who are referred.

Reid: “Good VCs get 10–20 cold pitches in their inbox every day, and you just don’t have time to look at any of them. They only look at deals where someone who trusts them recommends it. For commerce, there either has to be traction, or an intriguing bet.”

Q: A lot of companies have failed to do physical and digital products. Why are you tackling both?

A: We took a long time to do this…8 years. One thing we did was to acquire a wedding website company and rebrand it. We’re trying to buy one and start one. Maybe in six months, I’ll wish that I had bought a paperless invitation company.

Q: Any way you’re mitigating the risks?

A: We’re launching it as a beta to moderate expectations.

Q: How did you balance focus on artists and consumers?

A: If I could keep the designer experience simple, well-run, and ethical, the fact that I was producing revenue for them would keep them on board. The bigger our revenue got, the more attractive we would get to designers. I had to run back and forth between the two audiences. Thank goodness, I have a great team on community relations and a great team on marketing now.

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