Scaling Up Startups: Takeaways from Gemvara, Kayak, LogMeIn, Wayfair, and More at MassTLC UnConference

10/31/11Follow @gthuang

Get a bunch of prominent Boston-area founders and CEOs in a room together, and ask them provocative questions. It’s a tried and true recipe for a good discussion, and that’s exactly what we got at the end of the day on Friday at MassTLC’s 2011 unConference at Hynes Convention Center in Boston. The topic was “the secrets of scaling,” and it was a fitting end to a fun and productive day.

This was the Mass Technology Leadership Council’s fourth annual innovation conference, and the event has really solidified in its “unconference” format, in which hundreds of tech entrepreneurs, investors, execs, and other business leaders meet and create organic sessions to discuss whatever is on people’s minds. Most people are there for the networking and private meetings, but that didn’t stop a few lively sessions from breaking out.

The secrets of scaling session—focused on how startups get big—was organized by journalist Scott Kirsner and was more conference-y than unconference-y, as it was planned ahead of time and had the feel of a big panel. Here are some takeaways from that (before I get to some broader highlights later).

Each of the companies on the panel could be considered a Boston success story: Constant Contact, Gemvara, iRobot, Kayak, LogMeIn, Wayfair (fka CSN Stores), Zipcar. (See photo above by Jeff Bussgang, who noted that you can distinguish the pre-IPO companies from the public companies by who’s wearing jeans.) The idea was to tap into this collective braintrust and draw out some key lessons.

Paul English of travel site Kayak said he routinely asks people, who’s the smartest person you ever met? And then he goes out and tries to hire them. He relayed the story of recruiting Giorgos Zacharia, Kayak’s chief scientist, a process that took several years but was well worth it. “It was transformational,” English said. He also talked about Kayak’s expensive acquisition of rival SideStep back in 2007. Kayak fired all of SideStep’s engineers and created a duplicate version of its site. Lesson: hire and fire ruthlessly.

Niraj Shah from Wayfair talked about his e-retail company’s bootstrapped growth, starting in 2002. Once his team figured out how to make money from niche online stores, it faced lots of competitors and had to decide whether to raise money or stay the course. It chose the latter (until this year, when it did raise a big round). “We just launched new categories as fast as we could, built out selection in each category as fast as we could,” Shah said. “We let the growth compound on itself.” The key was “not letting early successes keep us from letting that compound,” he says. Lesson: stick to your knitting.

Michael Simon from LogMeIn, the remote access and IT management firm, started with the idea of being a lifestyle business, not a public company (it now has 450 employees, about 200 in Massachusetts). The key moment in LogMeIn’s growth was when it “started giving away stuff,” he said. This was before “freemium” was a popular model. The company’s revenues started very small but grew exponentially. “If you have an exponential growth curve, the absolute number doesn’t matter,” Simon says. “You’ll get there.” Lesson: start small and get traction.

Matt Lauzon from Gemvara, the online custom jeweler, represented the younger generation of entrepreneurs on the panel. Although it’s still fairly early for Gemvara (which started as Paragon Lake in 2006), the company seems to be on an impressive growth trajectory. “We didn’t want to be the e-commerce companies of yesterday,” Lauzon said. Instead of focusing on A/B testing and only hard stats like how many people bought from what page, Gemvara starts with customer experience and a set of core values that include being humble and amplifying passion and curiosity, he said. (Sounds a bit like Zappos.) Lesson: company culture is job one.

Some other tidbits from the ensuing discussion about missteps and difficulties, which are always more interesting anyway:

—Scott Griffith of Zipcar talked about the importance of planning for growth by distributing decision-making and delegating authority to company managers. Gail Goodman from Constant Contact asserted that “leadership and management are two different things.” What’s more, she said, managers are born, not made. “You’re not going to anoint them. If they aren’t people managers, don’t push them into it.”

—Jeff Taylor, the founder of Monster.com, had a different viewpoint. “You have to give everyone a chance to manage,” he said. “People would either fail or win on their own.” He talked about switching from a pyramid management scheme to an upside-down wedge (“make the teams manage themselves”) once Monster.com grew to more than 300 people.

—Colin Angle of iRobot talked about waiting too long to hire a chief financial officer. “I was making do where I needed expertise,” he said. As engineers, Angle said, “we think we know how to do everything. But that’s not the point.” Simon from LogMeIn added that he was slow to move people out of senior roles as the company grew and professionals with more experience needed to be brought in.

—On the tradeoff between fundraising and focusing on the business, Goodman from Constant Contact talked about raising a big VC round in 2000—“a big valuation is not always good if you can’t back it up,” she said. Constant Contact went on to raise two more “painful” rounds in the early 2000s as the company slumped. “It was a slow, ugly, continuous drain on my energy,” Goodman said. “I lived to tell the tale, but it was ugly. It was also necessary.” The company grew from a post-money valuation of just $5 million around 2002 to about $600 million now (see this recent Q&A with Goodman). “When you’re sure you’re onto something, just stick to your guns,” she said.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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