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You Won’t Believe How These Growth Strategies Are Propelling 3 Startups to IPO

Scaling a company depends on disciplined growth strategy, culture, and evolving organization and processes.

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BY Peter Cohan - 06 Apr 2018

PHOTO CREDIT: Getty Images

What's the difference between you and the world's wealthiest CEOs? They have succeeded in turning their ideas into large, fast-growing public companies. Assuming that you are smart and willing to work hard but aren't at the top of the world's richest, you may have a great idea, but you don't know how to turn that into a business that keeps growing at over 100% a year.

On March 30, I interviewed three CEOs who are doing just that. And learning about their growth strategies might help you close the gap between where you are and where you want to be.

Consider Brian Ahearn, CEO of Boston-based Threat Stack, a cloud security service provider. Ahern earned an electrical engineering degree from University of Vermont and with help from an unnamed angel investor who "bet on people heading in the right direction" started a company in 2002 -- Industrial Defender, a cybersecurity firm that protects industrial control systems for the electrical grid, oil and gas, and chemical companies -- which Lockheed Martin acquired in 2014.

Ahern has overseen exceptionally rapid growth at Threat Stack. He took over as CEO of Threat Stack in May 2015 and it has since grown from 11 employees to about 100 in September 2017 -- and he expects to add 86 more in 2018. Between 2016 and 2017, its annual recurring revenue was up 187% and in the last 12 months, that growth rate has accelerated to 342%. Threat Stack recently raised a $45 million Series C round of funding.

Ahearn breaks down the challenge of scaling into three stages based on funding levels -- Early (during which a company raises, seed, Series A and B funding), Growth (Series C and D), and Later (Series E to IPO). As Threat Stack has scaled, Ahearn has used three growth strategies to keep up.

1. Disciplined Growth Strategy

To turn an idea into a big company, you need to find new sources of growth. In the Early stage, you are trying to find a fit between your product and what customers are willing to buy. In the Growth stage, you sell that winning product to more customers within your initial target segment and then expand that globally. And in the Later stage you might expand to more groups of customers globally while adding to your product line.

Threat Stack's growth trajectory has evolved along six vectors -- creating a growth trajectory as I described in my book, Disciplined Growth Strategies. As Ahearn explained, "Initially, we built a great product that we sold to middle market customers; next we expanded from the middle market to Fortune 500 customers. Thirdly, we sold to cloud service providers such as AWS and from there began to partner with channels. Fifth, we expanded geographically from North America to Europe. And now we are moving from the corporate to the government sector."

2. Sustained Growth Culture

The right culture can propel a company's growth because it attracts and motivates talented people who are passionate about creating new products and delivering great service that turns customers into advocates for the company.

Threat Stack has such a culture. "We have four operating principles: no egos, no assholes (because teamwork matters); achievement vs. entitlement (everyone must earn their place in the company); raving vs. raging customers (make customers happy); and conviction for the mission (work hard)."

Nozomi Networks, a San Francisco-based provider of industrial cybersecurity, has a different approach to culture. As CEO Edgard Capdevielle, a veteran of Data Domain -- which EMC bought in 2009 for $2.4 billion -- and EMC, explained, "When I joined the company in 2016, we had seven people and seven customers in Italy. Now we are growing from 46 to 67 people and we have a culture that fits our geographically distributed organization. We believe in extreme transparency -- sharing all financial results we can legally disclose and high integrity with everybody -- employees, customers, partners, and investors. These values build trust with our stakeholders which gives us a competitive advantage."

3. Upgraded Organization And Processes

As a company grows, the jobs that need to be done get more specialized and key processes such as selling, marketing, and product development must become more efficient.

Craig Powell is CEO of Motus, a Boston-based vehicle management and reimbursement app, which was acquired in January 2018, along with its rival Runzheimer, by Thoma Bravo, a private equity firm.

Powell -- who is CEO of the combined companies -- has figured out how to upgrade the organization and process of a scaling company. As he said, "As the company gets beyond the stage of proving its business model, the CEO becomes a dogsled leader -- whose job is to empower the right leaders, to give them the right orientation, and tools. You are trying to standardize your product and selling process as you grow."

Things change when you reach $25 million. "When you are trying to grow from $25 million to $75 million, it's about how you can scale as fast as possible. You are trying to reduce the sales cycle from 12 months to 90 days with a junior person getting paid $45,000. You also have to deliver consistently excellent customer service," said Powell.

Apply these growth strategies and you may find yourself on the billionaires list some day.

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