How Successful Founders Scale Their Teams From 0 to 1,000
In Conversation with Index Ventures' Martin Mignot & Dominic Jacquesson
đ Hi, Iâm Andre and welcome to my weekly newsletter, Data-driven VC. Every Tuesday, I publish âInsightsâ to digest the most relevant startup research & reports, and every Thursday, I publish âEssaysâ that cover hands-on insights about data-driven innovation & AI in VC. Follow along to understand how startup investing becomes more data-driven, why it matters, and what it means for you.
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The ambition with our âInsights Synthesisâ format is to find the most interesting startup research, digest key takeaways, and deliver it to the right audience. When Index Ventures Partner Martin Mignot reached out and shared their new âScaling Through Chaosâ research, it was an obvious fit for this format.
Together with Dominic Jacquesson, Indexâs VP of Insight & Talent, we jumped on a call to discuss the backstory of this new project, their most interesting findings, methodological aspects, and a lot more.
The Backstory of Scaling Through Chaos
MM: âOur team has been creating content for entrepreneurs for more than six years via âIndex Pressâ, aiming to answer the most frequently asked questions by founders with data instead of just anecdotes. Following our âRewarding Talent Compensation Benchmarkâ, the âDestination USâ and the âDestination Europeâ guides, âScaling Through Chaosâ is the fourth major resource of this format.â
Target Audience
DJ: âEarly-stage entrepreneurs as well as people and finance leaders in later stages.â
AR: How can readers best benefit from your research?
DJ: âThe philosophy of Index Press is to open source our research for the benefit of the ecosystem. This is why we published the book online as well as in print, and have made our data available through the dynamic Team Plan app for everyone to slice and dice the sample to come as close to their individual situation as possible. To avoid too much noise, however, we introduced a minimum sample size of seven companies.â
Major Takeaways
MM: âWhat youâll take from this book depends on the particular challenges youâre confronting:
How do you manage hierarchy and process without squashing creativity as you grow?
Whatâs the best way to structure your tech team?
How can you make the most of your network without building a monoculture?
Thereâs no recipe or blueprint for how to innovate. But certain things are tried and tested. What this book gives you is a set of best practices and shortcuts about how to hire people, how to stretch them, how to organize themâall of which helps you achieve scale faster.
It relieves you of the mental burden of reinventing the wheel of people management, so you can play with the stuff that demands creativityâthings like product, growth and technology. It frees you up to innovate where it matters.
The core message of Scaling Through Chaos is that disorder is the price of transformative progress. Try to stamp it out, and youâll kill whatâs special about your company.
The most successful founders accept that discomfort, change and evolution are part of the journey, and that the people who help you get from zero to one arenât necessarily going to get you over the line at the end. You want to back and support your team, but you also have to value and reward performance over loyalty.
You also need to look ahead, while accepting youâll always be behind where you want to be. In high-growth, you can never hire and onboard quickly enough to match the demand youâre seeing, and it always feels like youâre filling gaps. Yet you have to get your head above the waterline to be able to look to the next beachhead, the next blocker, the next opportunity thatâs 12 months or more down the track.
What youâll see in this book is that growth is not linear, nor even a hockey-stick. Every single successful company has been through at least one near-death experience. No one goes from strength to strength, and often you need to retrench, regroup, pick yourself up and begin again.
The key traits of successful founders are not only brains and brilliance, but also commitment and resilienceâwaking up every day and giving 200% of themselves, solving impossible problems and starting to see obstacles as learning moments. The best entrepreneurs find ways of getting energy from overcoming difficulty.â
AR: The book has 300+ pages and is full of insights. What were the most surprising findings for you?
DJ: âThe amount of time that founders spent on people-related tasks is astonishing. They spend half the time on hiring and onboarding and as they grow, founders recycle this time for leadership alignment.
MM: âThe mix of time spent on people-related matters changes, but one should always keep in mind that building a great company is assembling the right people. This is the core job of the founders.â
DJ: âAnother surprise has been how few of the first 10 hires stick for long as the company grows. They transition from a generalist skillset to a specialist skillset, which is a natural process but can be quite an emotional journey. A reason why many of them leave.â
Methodology
DJ: âWe spent about 2 years collecting and processing 200k+ LinkedIn profiles from 220 outlier companies such as Datadog, Figma, Hubspot, Personio, Figma, and many more, and added 60 interviews with qualitative data points from leaders at these companies.â
AR: Did you follow an inductive (looking at the data and drawing conclusions) or a deductive (testing specific hypotheses) research approach?
DJ: âOur dataset allows us to run an almost infinite number of analysis, so we decided to start deductive by testing a range of hypotheses that we collected from decades of work experience with successful scale-ups."
MM: âThis approach is also in line with our fundamental Index Press concept of getting away from anecdotes and providing real-world data in the board room discussionsâ
AR: How do you feel about survivorship bias?
DJ: âItâs actually a good thing as we exclusively want to look at how the best companies have developed their organizations.â
MM: âThis is not for every company but only for the best in the world that have the money, willingness, and capability to become an outlier.â
AR: Did you consider moderator variables (for those unfamiliar with this term: moderation is when the relationship between two variables depends on a third variable)?
DJ: âYes, we included the development/funding stage of the company and their business model, meaning that we analyzed how org structures change based on these two dimensions and their subsets. An example is that GTM teams become relatively bigger for SaaS companies compared to other business modelsâ
AR: Does history repeat itself or do these playbooks change over time?
DJ: âWe looked at different generations of companies. More recent companies grew much faster than older generations but the team findings and underlying structures were mostly the same. We expect 95% of this playbook to apply long-term.â
AR: What are the potential shortcomings of your research?
DJ: âAbout 40% of the companies in our sample are Index portfolio companies. While all data is sourced externally, we validated if external data is matching what we know from our internal portfolio insights and found that about 90% is accurate. This is good, but thereâs some discrepancy. Moreover, the normalization of titles via LI was difficult and leaves room for subjective errors.â
Conclusion
I wrote about âThe Future of Work: How AI Enables One-Person Billion-Dollar Companiesâ last Thursday and feel that the âScaling Through Chaosâ conclusion is perfectly aligned with my line of thought:
âThe rapid advance of AI promises to fundamentally transform the nature of work across industries. AI tools are giving us superpowers which boost productivity and quality. We donât yet know whether these will lead to smaller teams able to do more with less, or to similarly sized units which can build ever-faster.
What we do know is that AI tools will become increasingly sophisticated and tailored to specific tasks. Coding copilots are being joined by assistants for Sales, Finance, CX and other professionals, together with AI-enhanced collaboration tools, to enrich learning, creativity and decision-making.
Our expectation is that CX and Operations functions in particular will see AI tooling displace headcount, in order to boost margins. In Technical and GTM teams, the best-performing and highest-growth companies will be more likely to recycle AI-driven productivity gains into accelerated velocity, rather than to trim headcount growth. However, companies where PMF and GTM-fit are not as strong will be more likely to use these gains to reduce headcount growth (and burn rates) by doing âmore with lessâ.
Distributed and remote working is the other profound theme which continues to shape the nature of organizations and startups. Talent is scarce, dispersed and not fully mobileâimmigration is increasingly constrained, and people are less willing to uproot and relocate for the sake of a job.
The tooling and âknow-howâ for effective distributed teams is also deepening. More startups will likely be remote-first from the outset, tapping into the large pool of talent that wants to work this way. Some founders will prefer to stick with in-person teams, drawing on colleagues that share this preference, but with scale, we still expect an increasing proportion of their workforce to end up being distributed rather than based in an HQ.
However, the profound impacts we expect from both AI and from distributed working relate almost entirely to the âhowâ of doing work, rather than the âwhatâ. Teams will still need to be hired, retained, motivated and aligned. Achieving this will require management, leadership and People processes in the face of the inevitable stress and unpredictability of growing at breakneck speed. For better or worse, founders still need to learn how to scale through chaos.â
With this, Iâd like to conclude todayâs interview episode and hope you enjoy the âScaling Through Chaosâ report as much as I did. Thank you Martin and Dominic!
Stay driven,
Andre
PS: Please reach out if you want us to cover your startup research too!
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This was a nice read, I have to admit.