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Silicon Valley Tech

Doing things that don’t scale

There’s a huge misconception among founders of early-stage startups that everything you do must be scalable. This idea holds many founders and their startups back. In fact, many founders attribute their massive success (at scale) to the actions they took in the first stages of the startup.

The brothers behind Stripe would talk to anyone that would listen to them, and not only invite them to try the beta but also do the setup on the spot. Their strategy of aggressively going after te first customers in beta phase is still a tactic that is being taught at Y Combinator (according to this essay from Paul Graham).

In fact, doing things that don’t scale is considered to be such a fundamentally important step founders must take that Reid Hoffman opens with it in his -now legendary- podcast Masters of Scale. In this podcast, he starts with the story of Brian Chesky. When Brian cofounded Airbnb, they would do literally everything themselves. They would meet with the house owner, write the advertisement and even take the pictures of the place.

He describes how doing everything themselves enabled them to gain a deep understanding of their users. Additionally, they would get familiar with all the barriers, frictions and touchpoint users faced on both sides of the platform. A good argument that wasn’t directly touched upon in the podcast but that makes the case even more compelling for bootstrapping founders, is that by controlling the entire value chain you maximize the share of the total value added and you avoid unnecessary costs.

That the Airbnb founders didn’t have a budget to hire professional photographers to finetune the ads on their platform, is easy to derive from the fact that they had to resort to selling cornflakes during the presidential election in 2008 in order to survive (see picture below). Fun fact: when they applied at Y Combinator, this survivor instinct is what got them in on the program.

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Doing the things that don’t scale in order to gain in-depth knowledge on your customers, the process flows, the market, etc. and at the same time to avoid unnecessary costs and being frugal with your limited funds is the way to go to make substantial progress in the first phase of your startup. However, something that most great startups that truly made it big have in common is that they have a great way to create incentives for other parties to deal with the parts that don’t scale.

Shopify, Ebay, Bird, Lime, Airbnb, Uber, etc. all have in common that they empower individuals to become an entrepreneur themselves (and earn a lot in the process). Freefloat kickstart scooter companies such as Bird pay locals to collect, charge and distribute the scooters every day. Ride hailing apps such as Uber and Lime enable people to make an extra income by transporting users. Airbnb enables home owners to rent out their homes or even for long-term renters to sublet it using their platforms for more money than they pay in monthly rent (for better or for worse).

Even more international successes such as McDonalds and Marriott might seem very traditional at first, but when doing some research you’ll quickly find out that it’s often local entrepreneurs who are the driving force behind the impressive growth. Often these multinationals are established branding powerhouses that have created a uniform customer experience across the globe. They empower ambitious individuals to become entrepreneurs while taking care of a big part of the hassle that comes with it.

If there is one trend that I believe in and that will always work regardless of what happens, it’s the trend of empowerment. Create the right incentives for the right people and there are no limits to what you can achieve.

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