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Does it? Revenue is != profit though. This is where it bothers me. Startups start out by taking a share of the enterprise companies lunch by doing things that

Does it? Revenue is != profit though. This is where it bothers me. Startups start out by taking a share of the enterprise companies lunch by doing things that enterprise companies can't because of the structures they built. At some point when startups get successful they flip a switch a switch and try to become more enterprisy. They might get a "real" CEO, one of the big performance metrics becomes by how many hundred people you can grow the company per year and at some point if they make this transition successfully the company will start to stagnate. Back in the days when I went to some Erlang user group I was complaining about how I could solve a problem and rather than solving the problem the guy wanted to grow the engineering team to 20 people(from 5) some government contractor said that I don't get how the system works. You think that solving the problem is the key performance metric, but the actual metric is how many people the manager manages. One of the comments I saw below is true though. They grow the numbers and then they don't have proper management to fill the gaps. But what's proper management to begin with? If they "invest" in their people they will promote their earliest employees to director of xyz. Congrats, now some random crappy junior javascript developer is now your Director of Engineering and it will be legitimized by the $10000 Leadership 1 weekend course he got at Stanford. He will do 1 on 1s with you and try to talk about your future. But here's the problem though. Where do you get good management? Anecdotal evidence, I once sat at a dinner table and next to me was some old school business guy with his friend, a senior management guy at another company who recently got fired, saying that the worst thing you can do is hire middle management that is weaker than you. He will always try to keep the lower tier below himself. I'm supposedly in a leadership position in my company, yet the thing that no one ever wants to hear in upper and mid management is fixing issues. Ironically I recently did a PMP certification to see what the fuss is all about(granted, it's not really a management certificate). Nothing I saw in that formal guidebook aligns with what I've seen in real life. So if you can't get good management from other "enterprise" companies, and you can't get good management from your early employees and you can't get it from training, then why strive for that model to begin with? It seems like the only rational explanation for all of that is to pump up to numbers so you can aim for a nice exit on the ipo.

mathattack 9y ago
Revenue definitely doesn't equal profit. Headcount is easier to measure than revenue, which is easier to measure than profit. :-) A rule of thumb I've heard for SaaS startups is after they reach $50MM in ARR, Revenue + Margins should equal 40%. So if you're growing 20%, you should have profits of 20%. If you're growing 50%, it's ok to lose 10%. Just a rough rule of thumb.
majormajor 9y ago
> This is where it bothers me. Startups start out by taking a share of the enterprise companies lunch by doing things that enterprise companies can't because of the structures they built. It's a tradeoff. I don't think it's realistic to, outside of consulting or similar model stuff, build a company that can continue to run at peak efficiency even as the world changes. Internal small exploratory teams and a willingness to cannibalize yourself can help a lot here, but may hit a wall at some point (e.g.: what can Apple build next for future massive growth?). It's something like: Startup starts small enough to exploit how the world has changed since the big companies built their processes, and start undercutting those companies. Then they have to grow their delivery capacity to build out the rest of the features to capture the rest of the market, but this means more devs, more management, more sales, etc. That makes those of us in the "but it's less efficient" camp uncomfortable, but it's also explicitly what we're being paid for: figure out a way to grow this opportunity to be something really big. At some point it's unlikely that it can be your baby anymore. Then the world changes enough, and somebody else does the same thing to that startup. Satellite/cable TV is an example: from very innovative at the time, to the dinosaurs lumbering around today. The biggest thing I've seen correlated to good management is caring (if not about the people under them, at least sufficiently about the product so that they will do what's necessary to empower the people under them to get things done right). Hard to identify in a day of interviewing, though.
klodolph 9y ago
> You think that solving the problem is the key performance metric, but the actual metric is how many people the manager manages. Both metrics are wrong. "Solving the problem" might as well be translated as "how well the engineer engineers", and it's just as bad a metric as you might expect. You want to measure impact on the company bottom line, in the long and short term. It's just not easy to measure this metric, so we come up with a bunch of proxy metrics which we optimize for, each of which can easily lead to its special type of dysfunction.

mathattack 9y ago

Revenue definitely doesn't equal profit. Headcount is easier to measure than revenue, which is easier to measure than profit. :-) A rule of thumb I've heard for SaaS startups is after they reach $50MM in ARR, Revenue + Margins should equal 40%. So if you're growing 20%, you should have profits of 20%. If you're growing 50%, it's ok to lose 10%. Just a rough rule of thumb.

majormajor 9y ago

> This is where it bothers me. Startups start out by taking a share of the enterprise companies lunch by doing things that enterprise companies can't because of the structures they built. It's a tradeoff. I don't think it's realistic to, outside of consulting or similar model stuff, build a company that can continue to run at peak efficiency even as the world changes. Internal small exploratory teams and a willingness to cannibalize yourself can help a lot here, but may hit a wall at some point (e.g.: what can Apple build next for future massive growth?). It's something like: Startup starts small enough to exploit how the world has changed since the big companies built their processes, and start undercutting those companies. Then they have to grow their delivery capacity to build out the rest of the features to capture the rest of the market, but this means more devs, more management, more sales, etc. That makes those of us in the "but it's less efficient" camp uncomfortable, but it's also explicitly what we're being paid for: figure out a way to grow this opportunity to be something really big. At some point it's unlikely that it can be your baby anymore. Then the world changes enough, and somebody else does the same thing to that startup. Satellite/cable TV is an example: from very innovative at the time, to the dinosaurs lumbering around today. The biggest thing I've seen correlated to good management is caring (if not about the people under them, at least sufficiently about the product so that they will do what's necessary to empower the people under them to get things done right). Hard to identify in a day of interviewing, though.

klodolph 9y ago

> You think that solving the problem is the key performance metric, but the actual metric is how many people the manager manages. Both metrics are wrong. "Solving the problem" might as well be translated as "how well the engineer engineers", and it's just as bad a metric as you might expect. You want to measure impact on the company bottom line, in the long and short term. It's just not easy to measure this metric, so we come up with a bunch of proxy metrics which we optimize for, each of which can easily lead to its special type of dysfunction.