Saturday, January 27, 2007

10x in 2

Occasionally, I’ll be sitting in a staff meeting listening to someone talk about achieving a small amount of value over a long period of time, and I’ll think to myself “this person just doesn’t get it.”

When you work for a dinosaur company, this is how you work - you add incremental value to your company in return for salary, basically - and if it’s well-managed, the whole dinosaur company sees an incremental increase in the value of its stock. If you’re lucky, you achieve a 2x return for your efforts over ten years.

Life at a hyper-ventilating, highly-strung, unstable startup is entirely different. At a startup, you are expected to work 25x harder for 5 times the return - in 20% of the time. Put simply, your target return is 10x growth in the value of the equity within a *two* year period from product launch. No product developed? Then it’s 10x in *5* (years).

I know what you’re thinking - it isn’t possible to work 25 times harder. I disagree. Most of the time it comes down to working 25x more efficiently (i.e. provisioning a new employee with a laptop in 1 day rather than 25 days), or 25x smarter (i.e. forcing a decision at the first meeting instead of 25th meeting), or aiming 25x higher (i.e. why sell to a company that has 1000 potential users when for the same effort you can sell to a company with 25,000 potential customers?).

Another way of reaching this goal is to develop stuff that is designed to be 25x *easier to get to market* (i.e. smarter development resource scheduling, reduced non-core features, focus on a single core benefit), or designed to be 25x *easier to use* (i.e. easier to ship, explain, market, and support).

Building a “ten-bagger” (a startup that grows 10x in value within two years) is not hard. Every month, someone comes along and shows you how it can be done - YouTube, Skype, PayPal, Google. The key is making sure the people at your startup *understand* the 10x in 2 years rule.

Because, as CEO, if your plan is 10x in 2 years, you cannot afford to work with colleagues that are thinking “2x in 10 years”. You either need to change that employee’s thinking, or change that employee - fast. “10x in 2″ requires *total* commitment from everyone on the staff - and that understanding needs to extend to their spouse and family as well.

Spouses usually just want to know that you have a plan - that you intend to work hard for a fixed period of time, and be rewarded when the company’s stock grows 10x in value. So explain “10x in 2″ rule. Expand your support network. Then get out there and start working harder and smarter - 25x harder and smarter. It will be worth it.

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