Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies. Reid Hoffman

Framework for Responsible Blitzscaling

       The Response Spectrum

       Balancing Responsibility and Velocity as the Organization Grows

       Conclusion

       Acknowledgments

       Appendix A: Disclosures

       Appendix B: The Blitzscalers

       Appendix C: CS183C Essays

       List of Searchable Terms

       About the Authors

       Back Ad

       About the Publisher

FOREWORD BY BILL GATES

      I’ve known Reid Hoffman for years. Our friendship started on my visits to Silicon Valley to meet with Greylock Partners, the venture capital firm where Reid is a partner, so I could learn about the companies they were investing in. I was always impressed by his sharp mind and brilliant business sense. Reid is famous for hosting long dinners where the conversation runs late into the night, and we’ve spent many meals breaking down the technology industry, analyzing the promise of artificial intelligence, and more. When Microsoft CEO Satya Nadella started talking about acquiring LinkedIn, I knew it would be an amazing fit.

      Of all the things I’ve discussed with Reid, the most thought-provoking might be blitzscaling. It is an idea that applies to many different industries, as he and Chris explain in the last section of this book. But prioritizing speed over efficiency—even in the face of uncertainty—is especially important when your business model depends on having lots of members and getting feedback from them. If you get in early and start getting that feedback and your competitors don’t, then you’re on the path to success. In any business where scale really matters, getting in early and doing it fast can make the difference.

      This is especially true for two-sided business models, where you have two user groups that create positive network effects for each other. For example, LinkedIn wants to attract people who are looking for work as well as employers who want to hire them. Airbnb wants guests looking for a place to stay as well as hosts with space to rent. Uber wants to attract drivers as well as riders.

      And a software company with an operating system to sell wants app developers as well as end users. Microsoft definitely went through a blitzscaling phase (although we didn’t call it that at the time). We got on the learning curve early and were able to build a reputation as a serious company. We had an extreme culture of working hard and getting things done fast.

      The ideas behind blitzscaling aren’t just for startups and scale-ups. They’re important for big, established companies too. The window for action can be tiny and it can close quickly. Even a few months of hesitation can mean the difference between leading and chasing.

      Reid and Chris’s ideas are more practical than ever, because it is now possible to get big fast in a way that simply wasn’t feasible a few decades ago. There is a rich ecosystem of service providers and outsourcing companies to support rapid growth. Many companies have gone through their own big growth spurts, so there are lots of examples to learn from. User feedback comes in a constant stream of data. Product cycles have dropped from yearly to weekly or daily. And good reviews can spread in an instant online, so a strong product can quickly attract a big audience.

      In other words, the case studies you’re about to explore and the tools you’re about to gain have never been more relevant. This is an ideal moment to be reading this book. I’m glad Reid and Chris are sharing their insights.

Introduction

      2011: SAN FRANCISCO, AIRBNB HEADQUARTERS

      “They’re probably going to kill you.”

      The year was 2011, and in the offices of Airbnb, then a scrappy little forty-person start-up, its cofounder and CEO Brian Chesky had just received some very bad news.

      Brian pondered the implications of the ominous prediction he’d just heard from Andrew Mason, the cofounder and CEO of Groupon. He didn’t like it.

      Brian and his cofounders, Joe Gebbia and Nathan Blecharcyzk, had already fought their way through plenty of obstacles to build Airbnb, a website that makes it easy for people to rent out their rooms or homes for the night. In the beginning, every investor the founders approached had turned them down or, worse, ignored them. The company was on the upswing now, but the painful early days were still fresh in their minds, and they weren’t looking for another battle.

      When the Airbnb founders first met, Paul Graham, the highly regarded founder of the start-up accelerator Y Combinator (YC), told them flat out that their idea was terrible. “People are actually doing this?!” he incredulously asked. When Brian told him yes, people were, in fact, renting out their living spaces for a night, Graham’s response was “What’s wrong with them?”

      Still, Graham had accepted the Airbnb guys into the three-month-long YC program. Not because he was inspired by their Airbnb business, but because he was impressed by the hustle of the founders. He loved the (now famous) story about how Chesky and his cofounders managed to pay the bills while trying to get Airbnb off the ground. It was 2008, a US presidential election year, so they created and sold special-edition cereals called “Obama O’s” and “Cap’n McCains”—a sugary parody of (or tribute to, depending on how you look at it) that year’s candidates Barack Obama and John McCain. The creativity and persistence displayed by the Airbnb founders as “cereal entrepreneurs” got them in the door at YC; once in the program, they refined their business and were able to persuade two leading venture capital firms, Sequoia Capital and Greylock Partners (where I am a general partner), to invest.

      Now, nearly four years later, it seemed like all the hard work was finally starting to pay off. Having celebrated its millionth booking, Airbnb had plenty of working capital, and it was clear that the concept was valuable.

      But when you’re successful, you attract competition. And sometimes that competition represents a deadly threat.

      In Airbnb’s case, that threat was three brothers from Cologne, Germany: Oliver, Marc, and Alexander Samwer. They had become billionaires by analyzing successful US companies, rapidly creating copycats in Europe, and, in many cases, selling those “cloned” companies to their original American inspirations. In other cases, the Samwers actually held on to and built out their clones; Zalando, the “Zappos of Europe,” had over ten thousand employees and was worth more than $10 billion in 2017.

      Their first success was Alando, an eBay knockoff that they were able to sell to eBay for $43 million, just one hundred days after launching it. The Samwer brothers then invested in the German versions of YouTube (MyVideo), Twitter (Frazr), and Facebook (StudiVZ) before founding their own start-up studio, Rocket Internet.

      In early 2011, Brian and his team started noticing that Airbnb users were being spammed by a new company named Wimdu. Wimdu had apparently just received $90 million—the