Startup States: Jungle, Dirt Road, Highway

Before I get into this week’s big idea, I want to take a hot second to talk about the difference between hard work and overwork.

When I onboard a new client, I explain that by choosing to build a venture-backed startup with ambitions of becoming a business behemoth, they’ve chosen a path no less challenging than becoming an Olympic athlete. And Olympic athletes don't insist on 7-8 hours a night of sleep because they want “work-life balance,” they do it because they know sleep is critical to performance.

Yet for founders, sleeping enough gets framed as a hard work vs. laziness debate instead of the performance requirement that it is. Why? Feedback loops. Neglect your sleep, exercise, and diet as an athlete, and your times start to slip quickly. Do the same as a startup founder, and what happens? You get a bit more irritable and anxious. Both things you blame on the clock is running out on getting product-market fit before someone else does.

Athletes look at sleep, diet, and exercise as part of their work, and founders look at those things as separate, almost like luxuries or indulgences for the weak who can’t handle the grit of chewing gravel with the guys on the All-In podcast.

There’s the famous metaphor that building a startup is like running off a cliff and building a plane on the way down. And if the plane isn’t flying or at least gliding, then who has time for sleep, diet, and exercise? To some extent, these things are indulgences at the earliest stages.

The only thing wrong with applying this kind of thinking here is that sometimes it can take years to get the plane gliding.

Over the years, four things will happen if you neglect your health:

Stress will manifest physically in the form of eczema, digestive issues, headaches, and more.
Your tolerance for stress and pain builds, causing you to ignore minor aches and pains.
The lack of sleep and deteriorating health will cause you to make mountains out of molehills with issues at work, losing your temper or inflaming anxiety, causing you to break trust with the team and, more generally, make bad decisions.
The gradual buildup of stress, aches, pain, and so on leads to a sudden collapse where you cannot get out of bed or in the hospital.

Think I’m exaggerating? I woke up in May unable to stand up straight for two weeks after ignoring acute lower back pain. Or you could ask the CEO I worked with, who spent days in the hospital for an untreated knee injury this year. Or you could speak with another CEO I work with who never had a migraine until this year and finds herself getting them at least monthly now.

Sometimes you and the team need to push and sacrifice things like a good night’s sleep or an exercise routine, especially in the early days, but these things need exceptions, not the norm. They need to be exceptions because when you ignore your health, it’s like you’re operating on a sprained brain. And good luck winning the gold on a sprained brain.

Jungle, Dirt Road, Highway

Mastering the VC Game (Jeff Bussgang, 2010) pp. 145-148.

For this week’s big idea, I’m going to expand on a concept similar to building the plane after you jump off the cliff, except we’re bringing it down to Earth.

Theory

Jeff Bussgang, author of Mastering the VC Game, General Partner at Flybridge, and Professor at HBS, says startups go through three phases on their journey to maturity: jungle, dirt road, and highway.

Why it Matters: Each phase requires different behavior and making sure you and your team understand that when hiring and setting the tone can be the difference between bikeshedding and getting shit done.

What are the three phases?

The Jungle: The truth is, you don’t know where you’re going. You do not have product-market fit. You think there might be an opportunity to help a group of people by solving a problem, but you’re going to have to get out into the jungle, run some experiments, and see if going that way gets you out of the jungle. You may have to turn around.
Dirt Roads: People are buying what you’re selling. You have product-market fit now, but it’s early. Will you tap the market too early? Can you hire a sales team before a competitor out-executes you? Can you learn how to develop and hire great managers? Can you maintain focus on customer needs and continue to ship features that solve problems that lead to increased revenue? This stage is all about expanding your beachhead into ever-increasing revenue growth.
Highways: Think about any company waiting for the IPO window to open here. Stripe is a company everyone will know. They have 8,000 employees. But Highway companies may have as few as 500 employees. Where the company used to focus on revenue growth, the CEO is now interested in profitability and cash flow.

Practice

One of the biggest mistakes I see CEOs make—myself included—is accidentally operating as if they’re a dirt road company while still deep in the jungle.

Working Hours: When you’re deep in the jungle, the team will need to work outside of 9-5—and not everybody will be up for that. They should work at a dirt road or highway startup if they’re not. In the jungle, it’s life or death, and your number one enemy is the multiple. The multiple is the idea that two separate people usually invent a world-changing innovation without even knowing each other within a few months or years of one another. If you and your team don’t get after it, someone else probably will. And if you don’t want to work extra hours in the first year of the company you started, then that might signal you’re not working on the right thing.
Leadership, Ownership, and Reliability: The jungle demands leadership. Leadership, as a word, has its roots in “one who goes first” or “to lead a horse by its reins.” A CEO needs to do both. You get out there. You go first. You roll up your sleeves. You set the working tone, the vision, and the motivation. AND you need to guide your people toward what needs to get done. Does someone need to own getting water every day? Who is going to own pitching tents? Who will make sure the machetes are sharp? A leader ensures everyone knows what they own so the rest of the team can rely on them.
Doing Whatever it Takes: On highways—and dirt roads to a lesser extent—people have clear titles, responsibilities, roles, goals, objectives, metrics, reporting, and all kinds of really helpful stuff. In the jungle, only one thing matters: getting out of the goddamn jungle. If people get hung up on what their title is in the jungle, then the jungle will probably eat them. In the jungle, there’s no such thing as “that’s not my job.”
Ambiguity: One thing to look out for is when people not used to the jungle get in the jungle, they offload their anxiety is by beginning to build dirt roads. It’s like being in the jungle, having four people hacking their way through, looking for resources, and having one person behind them clearing up all the weeds, finding rocks, and building a nice neat dirt road behind them. It’s like, “Thanks, but that’s not helping my dude.” If it were a movie and you were in the audience, you would think, “That character is going to die in the jungle.”

This metaphor has several applications, but those few should get you started. One CEO I work with has been straddling Jungle and Dirt Road for a while now, and the company-wide theme for 2023 is “Exit the Jungle.”

I want to leave you with a quote—one that shows the importance of knowing which stage you’re in and communicating that to your team, starting with the interviews to weekly all-hands—from Patrick Collison, CEO of Stripe: “people’s disposition with regard to the company is actually a function of what they feel like they signed up for.”

Reads & Resources

Articles

The 3 Financial Plans You Need for The Year

It’s the end of the year, and hopefully, you’re planning for next year. I frequently cite this post with CEOs when they’re in planning mode. Jason recommends three plans for three corresponding confidence intervals (C): C-90, C-60, and C-10. I see a lot of early CEOs setting only a C-10 plan (confidence = 10%), aka their “stretch plan,” to employees and investors. While this post is meant for SaaS founders, it’s helpful for anyone forecasting and setting expectations for the year.

From Twitter

Analyzing Your Profitability by Customer or Product

Another common mistake I see founders make is spending too much time with customers who don’t pay enough. For example, a customer pays you $5,000 / year for your self-serve SaaS. Your margin is 80%, so your profit is $4,000. This customer takes up about 5 hours a month of your customer success manager’s time because they’re needy. You pay your CSM $120K / year, which comes out to about $60 / hour, which annualizes up to about $3.6K, meaning you’re barely breaking even on this customer. Michael’s thread is a good reminder for every CEO to think about profitability more granularly.

Audio

Hugh Jackman on Tim Ferriss

I couldn’t stop thinking about how endearing this episode was. Hugh and Tim have professional crushes on each other. It’s not uncommon for me to hear vapid claims about Tim Ferriss being some kind of input that outputs tech bros, and Hugh couldn’t be further from that stereotype. You can’t argue with how successful Jackman is, and I appreciated just how grounded Hugh came off as. My favorite part? The question Hugh and his wife always ask when making a big career decision is: “Is this good or bad for our family?”

Books

The Tools

A few weeks ago, I watched Jonah Hill’s documentary about his therapist, Phil Stutz, Stutz. I loved it. Go watch it. Afterward, I discovered that Phil wrote a book a decade ago, so I bought that to learn more. I’ve been loving the book, and I think anyone struggling to express themselves, find their confidence, deal with irritation and anger, or learn more about themselves will enjoy the book.

Dice Roll

Faith Meyer’s Job Responsibilities Rubric

One question I get from CEOs and founders is how to implement performance management. They usually ask, “How do I do performance reviews?” And then we have to back up. I’m a bit proponent of sharing feedback with your direct reports more often than once a year. Faith’s rubric and templates in this google doc are a practical and thorough way to start setting expectations, giving feedback and tracking performance.

That’s all for this week. I’m looking forward to what’s next!
Andy.