7. Class Structure: Organizational Scale
Org Scale
(employees)
User Scale
(B2C users)
Customer
Scale (B2B)
Business
Scale (rev)
OS1: Family 1s 10,000s 0 <$10M
OS2: Tribe 10s 100,000s 1s 10M+
O3: Village 100s 1,000,000s 10s 100M+
OS4: City 1,000s 10,000,000s 100s $1B+
OS5: Nation 10,000s 100,000,00+ 1,000+ $5B+
8. OS1: The Household
1. Identify a non-obvious market opportunity where you have a
unique advantage and/or approach.
2. Building a product with strong product/market fit
9. OS2: The Tribe
Execute & iteratively improve a plan which gets
you to significant market share.
10. OS2: The Tribe
Get to scale:
1. Create your plan; execute it; learn from it; rethink it; build
market share.
2. Adjust your product-market fit as you learn.
3. Address any competition by moving faster to market share.
11. OS2: Becoming a Tribe
1. A bigger team to scale, including new functions:
- a bigger team to learn and build
- marketing/PR
- customer service, sales (for enterprise)
- business development
2. Agile development and technology
3. Business operations (expenses, office space etc.) to let the
team focus on what matters
4. The right financing and capital allocation to allow it
15. In 2004, Microsoft & IE had ~95%
share of personal computing
marketshare
16. That looks like this
5%
Microsoft
95%
And Microsoft had 100%
distribution advantage
17. By the end of 2004, Mozilla had built Firefox 1.0
Breakthrough product
- fast
- popup blocking
- tabbed browsing
- integrated search
- customizable
27. Move ahead 8 months to June 2005 when I got there
Launch worked - 10M downloads first 30 days
Growth was strong; financials strong
Clear product-market fit
15 people in the organization
28. Mozilla at this point was a non-profit,
open source, 6 year overnight
success.
31. Critical Decisions in 2005
1. Hiring & compensation - winning & losing
2. Grow as distributed organization
3. Always treat community as insiders
4. Ignore enterprise,
& everything else other than normal humans
5. Always hold mission as top goal
32. Timeline & Headcount Growth
2005
Firefox 1.5
Started MoCo
2006 Firefox 2.0
2007
No Firefox major releases
Started Mozilla China, Labs
2008
Firefox 3.0, spun out Thunderbird
Started Fennec, grew labs
2009
Firefox 3.5; Thunderbird 3.0; Fennec on Maemo
Services, video, developer tools, more
Total Headcount at Year-end
2005
2006
2007
2008
2009
2010
2011
0 80 160 240 320 400
406
341
258
196
132
85
40
+113%
+32%
+48%
+55%
+32%
+19%
proposed
2010
Firefox 3.6, 3.7; Fennec on WinMo, Android?
Weave, Jetpack, reinvigorated+integrated Firebug
2011
Firefox 4 Desktop & Mobile
More services, identity?
33. Move ahead another year to July 2006
Market share > 10% (~25M DAU, ~75M MAU)
Product-market fit extremely clear (not viral!)
Organization now ~30 people
With PMF, you start to see new issues
36. Organizational Overview
• Scaling still an issue for everyone
• EA, “chief of staff,” project manager??
• Must get serious about VP operations & GC
• Actively looking for 2 engineering managers, add’l
product managers
• Low key looking for VP marketing
37. Firefox High Order Bits
• Where will Firefox be at the end of 2006?
• What’s a reasonable goal for 2006? 2007?
• 01/06 we said 20% market share
• What can and should we do to affect marketshare
numbers? What are we doing to increase it today?
38. Firefox Context (1)
• About 13% worldwide marketshare
• varies significantly by country and group
• 25MM active users on a given day
• Growth in the US appears to have slowed?
• Continuing to work on data and analysis
39. Firefox Context (2)
• Initial Disruption Period of Fx 1.0 diminishing
• IE 7 and Safari on Windows
• iTunes has been disruptive; might an iTunes-
focused Safari be the next disruptive event?
• What do we do to maintain momentum / motivate
our community?
40. Reaching New People
• Affinity groups/ vertical marketing
• Joga extension as the model
• What’s next and when? Fantasy sports? social networking?
• “Long tail” distribution by many groups
• offer customization (snippets, sidebar, etc)
• program in conceptual phase, not yet concrete
• Other?
41. Google’s Context
• Has realized that the browser is critical to them
• can’t allow MS to have a choke-hold on their
customers
• Current browser strategy: support leading
alternative browser (Firefox)
• High level question: is this the correct browser
strategy?
42. Google Issues (1)
• Browser is critical but “destiny not in their own
hands”
• Fx growth at a marketshare number that is too low
for safety
• Not clear that they or we have a plan to address
• increasing Fx market share or
• arrival of IE7
43. Google Issues (2)
• Webkit/Safari on Windows is coming
• Replay of the Unix wars?
• believe anything > IE & 1 other browser target for
web developers will fail, hurting Google
• Apple pushing Webkit (faster, smaller, accessible)
44. Google Issues (3)
• 80%IE, 20% Fx not enough, but hopeful
• 80% IE, 10% Fx. 10% Safari is a win for MS
• 80% IE, 20% Safari is bad for Google
• If Google believes the latter will happen, then it must
create its own browser
• Hopes that some “convergence” between webkit and
Fx is possible (rationale voices understand the
difficulties)
45. Critical Decisions Summer 2006
1. Accelerate product releases (Fx2, Fx3), and
stay the course with Gecko vs Webkit
2. Aggressively invest in more localizations,
global reach
3. Keep building community, keep treating
them like insiders, embrace all
47. 2 years ago...
~15 employees, no MoCo, 2 people in MozJP, 2 in MozEU
~15 million users
$15 million in the bank
working on Firefox & Thunderbird 1.0.6 (& 1.0.7!)
61. OS2: Scaling
Execute & iteratively improve a plan which gets
you to significant market share.
62. OS2: Scaling Consumer Products
• Growth through Value
• Virality
• Word of Mouth
• Repeat Use (vs. churn)
63. OS2: Finding Growth through Value
• You’ve found product-market fit (organic or inbound usage)… with
which segments?
• Not — nice — want — need
• Options once you have found where the product-market fit is:
• Improve product market fit for “nice” groups
• Take full advantage of want/need groups
• Optimize growth at “nice” level
64. OS2: Scaling Consumer Products
• Growth through Value
• Virality
• Word of Mouth
• Repeat Use (vs. churn)
• Growth through Awareness
• SEO and SEM
• Partnerships
• Facebook, LinkedIn
• Incentives
65. OS2: Scaling Enterprise Products
• The decision-maker growth hypothesis
• Beta customers
• Beta customers to validate value hypothesis, identify needs
• Will confirm or refute your sales decision-maker hypothesis
• Successful beta customers become “lighthouse” customers
• Build awareness at low cost
• Trade Marketing: Gartner and Forrester
• Pitch reporters and bloggers.
• Consumer-style bottoms-up approaches
67. Resourcing Execution
Your operational decisions should fit into two categories:
1. Direct, leveraged investment in the scaling goal
2. Keeping the scaling team focused by removing distractions
68. Resourcing Scaling: Development and Technology
• Agility (speed and flexibility) is the key target
• Optimize for speed of pivoting
• Development process is as important as the tech
• Expect to accumulate technical debt
• Almost certainly need to grow the technology team
69. Resourcing Scaling: Learning
• Data and Dashboards
• PR/MarComm
• For Enterprise:
• Customer Service
• Sales (not sales manager)
• Business Development
70. Resourcing Scaling: Recruiting
• You will have to reach beyond immediate network
• All of your recruiting will be outbound
• Hire a recruiting lead who can do this
• Full-time, attracting cofounder-equivalents
• Set up a simple, modestly rigorous hiring process
• Reference checking
• Five interviews per candidate
• Establish a talent brand, cheaply
• Engineering should contribute to open source
• MarComm should land speaking engagements
71. Resourcing: Protecting the scaling team
• Essential: generalists who can allow the founders and scaling team to
concentrate on scaling
• Minimum team for essential but distracting needs:
• Customer Service and Business Development (for consumer
companies)
• Security
• Your workspace
• Travel and expense policy, accounting, legal, finance
• Office manager, utilities, vendor relationships, food
• IT and productivity technology
73. Next 2 weeks (OS2)
10/8: Jen Pahlka, Code for America
10/13: Mariam Naficy, Minted
10/15: Shishir Mehrotra, new project; former YouTube
74. Jennifer Pahlka
Founder & ED, Code for America
Former US Deputy CTO
Ran Web 2.0, GDC
Thinks about movements, communities &
how to get real & leveraged outcomes
Assignment: reading & forum discussion
76. OS2: Navigating Competition
• Competitive threats come mainly from other startups (or parts of
companies which are operating as startups) who are approaching the
same market as you.
• You should rarely respond to competitive threats.
• On the contrary, your goal is to force your competitors to respond to
you.
• Stealth mode can be helpful to give you as much runway as possible
before competition finds your space “interesting”
• Main threat is that your competitors will learn faster and better than
you do, and scale more quickly.
• You win by iterating and learning more quickly, to improve product-
market fit and to scale market share faster.
78. Resources: Financing strategy
• You will almost always need to raise money here, because you are
hiring non-founders who require salaries, and it’s highly unlikely your
business has grown to the point where it is throwing off sufficient
revenue.
• You should strive for a quality venture round as soon as you can, even
if you don’t have product-market fit yet. That’s ideal, but the sooner
you have the money the faster you can scale.
79. Resources: Capital Allocation
• Minimize outgoing expenses
• Carefully manage large expenditures
• It’s “costly” to grant equity to employees, but that bill doesn’t come
due for a long time. This is a key way to attract quality talent, so you
don’t want to be parsimonious here. You’re playing for a big exit, after
all.
• Often the largest commitment is an office lease. Don’t sign a long-
term lease, as you don’t know what you’ll need if you’re blitzscaling.
• You can’t save your way to success. Optimize your spending to
maximize your learning.
80. The Power of Networks
• “As much as I’d like to say the value of YC was the advice of the
partners, it’s really the network of alumni.” (Sam)
• “All the enterprise software companies [in YC] get all their
customers from the YC alumni. I have no idea how you do it if you
don’t have that!” (Sam)
• “The best companies are using their employee base to unlock the
latent talent in another organization. They’re just picking great
talent from other companies one at a time. They’re
snipers.” (Ann)
81. Founders are Quick and Decisive
• “Founders can be presented with a problem that you’ve never
seen before and solve it very quickly.” (Sam)
• “You need to be screaming across these stages. Today we’re in
technical insight mode, in a month we should be productizing,
and monetizing right after that.” (Michael)
• “When a founder is frozen or needs more data, that’s the sign of
distress.” (Ann)
82. Be Contrarian—and Right
• “Great ideas that look bad lead to outsized returns.” (Sam)
• “[Contrarianism is] where you find value as an investor. It’s the
wild enthusiasm of conventional wisdom that chases prices higher
in an investment round.” (Michael)
• “Every great startup has one fundamental assumption that has a
less than 50% chance of being correct, but if true, will give you a
100X advantage in the market.” (Ann)
83. Build in Diversity from the Start
• “Diversity is a clear win.” (Sam)
• “Diversity in terms of perspective is very important. I don’t think
you can go from a homogenous organization to a diverse
organization later on. It’s very difficult.” (Ann)
• “To the extent that you can round out one another’s edges, we
like to see that kind of yin and yang. In our own firm, me and
Mike, you just look at us, and we’re clearly very different. He’s a
lover, not a fighter…I’m more of a fighter.” (Ann)
84. Don’t Believe (or Pay for) the Hype
• “[A big self-inflicted problem are] Founders that fall in love with
their public image — who want to be on those 30 under 30 lists.
Founders who go to networking events. ‘You were out of the
office more than you were there.’ When you say it like that, the
problem is obvious.” (Sam)
• “What I wish was on the [things to ignore] list is f---king PR. The
idea of founders as brands is a lie. It’s a lie spread by the people
who sell ads for pageviews. Many times, PR can tip the outcome
in the wrong direction.” (Michael)
85. Real Founders Make Money
• “Many things are being backed by VC right now that are not
businesses — they are public goods, science experiments, or
hobbies.” (Michael)
• “An opinionated person who wants to start a company ought to
know how they intend to go to market. If that doesn’t exist, it
reflects a laziness of mind and is a big red flag.” (Michael)
• “There are lots of unicorns today that are still searching for that
scalable business model.” (Ann)
86. Individual Flavor
• “Joining a successful company has a higher expected value that starting a
startup.” (Sam)
• “Every big, good idea is going to be subjected to a devil’s advocate, who
should be the smartest person you can find, whose job is to try to destroy the
idea.” (Michael)
• “Treat yourself to shareholders. Convertible debt is a terrible poison in our
industry. Ownership mechanisms ensure the best long-term custodianship of
those investments.” (Michael)
• “One of the most important pieces of a marketplace is not demand, it’s supply.
If your supply is loyal, the demand will come.” (Ann)