Scaling in Business
Episode 969: Scaling in Business, with Sean Ammirati
View this episode on:
Scaling in business means that you’re creating sustainable growth. Learn how Sean Ammirati increased his revenue through scaling in business.
Scaling in business can help fuel your growth and improve your revenue in the process. Some companies don’t follow this recipe and wonder why they haven’t improved in every aspect. Don’t be like one of them, and start scaling up your business today!
Sean Ammirati co-founded mSpoke, which was the first acquisition of LinkedIn. His next startup was Peak Strategy, which was acquired by Morgan Stanley.
Today, he focuses on being a partner at Birchmere Ventures, where they invest in seed-stage SaaS and marketplace startups. Since its start in 1996, they’ve invested in 135 companies with 51 exits. Sean also teaches entrepreneurship at Carnegie Mellon University’s Tepper School of Business.
What you will learn from this episode about scaling in business:
- Sean’s entrepreneurial journey
- The philosophy behind “The Science of Growth: Why Some Companies Scale While Others Stall”
- Why entrepreneurship is more about being obsessive with the problems your customers have than it is about an idea
- Sean’s 3-step framework for scaling in business
- How to adapt to a changing marketplace using Sean’s 4 prerequisites
- 4 catalyzing events that can help startups drive growth
- How to vet and evaluate potential capital partners so that you are accepting smart money for your startup
- Why we need a greater number of entrepreneurs now more than ever
- How to start scaling in business to improve your revenue
Resources:
- Website:
- LinkedIn:
- Twitter:
- Learn more about why Sean has been successful in scaling in business by checking out his company’s portfolio
Additional Resources:
- Sell With Authority by Drew McLellan and Stephen Woessner: https://amzn.to/39y7x13
- Predictive ROI Free Resource Library: https://predictiveroi.com/resources/
- Stephen Woessner’s LinkedIn: www.linkedin.com/in/stephenwoessner/
- Listen to another podcast about scaling in business with our guest, Mike McDerment
Scaling in Business: Full Episode Transcript
Get ready to find your recipe for success in scaling in business from America’s top business owners here at Onward Nation with your host, Stephen Woessner.
Good morning. I am Stephen Woessner, CEO of Predictive ROI and your host for Onward Nation, where I interview today’s top business owners so we can learn their recipe for success, how they built and how they scaled their business. In fact, my team at Predictive ROI, well, we’ve been rebuilding, we’ve been scaling, we’ve been expanding our free resources section on PredictiveROI.com.
So you can download free practical and tactical guides for how to build your own authority sales machine, everything from how to create your ideal client avatar, how to create a value ladder, a sales funnel, how to make sure your content strategy aligns with the ten truths to what makes someone an authority within their niche. Just go to PredictiveROI.com/Resources.
And as always, it’s all free everything request. We will send it right to your inbox. Before we welcome today’s very special guests, I want to share some additional context around why. When I asked Sean Ammirati to join us, like this is off the charts amazing Onward Nation because Sean has done and he’s done it multiple times sort of the dream of every business owner.
I should say, every business owner. But the vast majority of business owners, we start a business, we want to scale the business and then our hopes are that at some point we’ll be able to sell the business, like be able to exit strategically from the business when it’s the right time to do that.
Well, okay. So Sean co-founded M spoke, which, by the way, was the first acquisition of LinkedIn. That’s not too shabby. Well, then his next startup was a company called Peak Strategy, which was acquired by Morgan Stanley. Okay, another successful win. Awesome. Well, today he focuses on being a partner at Beach Mirror Ventures, which invests in seed-stage SAS companies.
So software companies and market marketplace startups. Awesome. Well, great track record. They’ve invested 135 companies and they’ve had 51 exits so far. And then, in our pre-interview chat, we found out that he and I also have a very similar passion for academia in teaching and sharing, and just this love of entrepreneurship. Sean is in the classroom and teaching entrepreneurship at Carnegie Mellon University’s Tepper School of Business.
And then I’m going to share just a snippet from the manifesto from his VC company. So, part of their firm’s manifesto reads like this: Ramping up a successful company is the hardest thing you’ll ever do, but it is also the most rewarding and the most fun. So that’s why Sean and I are going to step through what he calls the science of growth.
Why some companies scale while others stall. So given his expertise in starting his own companies and then successfully exiting and now helping other business owners, just like you and me do the same, this is going to be one of those super helpful, very strategic and yet tactical conversations all rolled into one. It’s going to be awesome. So without further ado, welcome to Onward Nation, Sean.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: Sean Ammirati’s Introduction
Stephen, thank you so much for having me. I am just elated to be having this conversation with you. Oh my gosh, it’s going to be awesome. And on the chat pre-interview chat excuse me, was fantastic. And so Sean, before we dive into the what I’m sure is going to feel like a barrage or a litany of questions they’re going to be sending your way first, actually, take us behind the curtain and tell us more about you.
Your past. I mean, you’ve done some amazing things, which is awesome. And how you’re championing entrepreneurship today is phenomenal. So take us behind the curtain. Tell us more about you and your path and your journey. And then we’ll dive in. Awesome. Yeah. So you know, this will probably resonate with a lot of your audience here. So I was a graduate student at Carnegie Mellon.
I was a research fellow there working with a professor named Richard Florida, who many people in your audience may know. He would later write the foreword to the book you’re referencing, Science of Growth. And he’s written a number of bestsellers himself, including rise of the Creative Class, which for a lot of your media audience will probably be very familiar.
But I walked into Richard’s office as a research fellow and I said, Richard, I don’t know what I want to do when I grow up, but I know one thing for sure I do not want to be a professor. And, Stephen, you know, these entrepreneurs were often wrong but were never uncertain. And so, with all the confidence of a great entrepreneur, I walked out, and I was sure it would be the last time I was focused on teaching and researching those topics when I did three startups, as you mentioned, pique, spoke and read.
Right. And then, towards the tail end of that third one, got an opportunity to come back to Carnegie Mellon and teach an entrepreneurship class Monday night, one semester a year. Right. So I was typically on the road quite a bit at that point, but it would be like an excuse to stay in town on Monday.
Kind of start the travel part of the week on Tuesday and Monday night, be in a classroom with a bunch of students. And what I realize is when I was in the classroom was as much fun as it was to do startups. Helping other people do startups was even more a blast, right? Helping other entrepreneurs find success was even more fun.
And so, I started thinking like, okay, well, you know, how can I make this a job? And really, over the last eight years, I’ve basically spent all my time, all my professional time, focused on helping other entrepreneurs to succeed. And so there’s a bunch of different ways I do that. Right. Like, and you alluded to this in the intro as well, which was incredibly generous. How did you frame all that?
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: Make People Think of Themselves as Entrepreneurs
So I appreciate that. But just, you know, to sort of unpack it through this lens, there’s venture investing. That’s the closest me to an entrepreneur. Right. Be kind of almost one-on-one, helping an entrepreneur succeed. There’s my time in the classroom. So that might be one on 31 on 40. This fall, with Covid, there will be one on a lot more than 40.
just because we’re, you know, education is in a moment of transition for sure higher at especially and then I, you know, I write books, I do speaking and I’ve got an emerging business where people consume different content around different kind of courses I’ve created as well, online. So, really try to spend all of my time through each of those different activities asking the same question, which is, how can I help people think about themselves as an entrepreneurs first and foremost, then increase the probability of their success once they kind of start thinking about themselves that way and then ultimately help them realize each of their goals.
And I think it’s that first part is really important as well. And then, pause. But that everybody thinking about themselves as entrepreneurs, you know, on a podcast like this, the audience you have, I think that’s a statement that’s not hard for your audience to resonate. You’ve got people who are creating, you know, transformational wealth and building these businesses, and that’s awesome.
But there’s a lot of people who don’t see themselves as entrepreneurs. And so part of this is also I think we need to democratize that. We need more and more people to think of themselves as entrepreneurs because entrepreneurs are really the people who solve the problems in the world through products and services. And we need to make sure the problems are equally represented across different.
Yeah, it’s kind of socioeconomic and any kind of demographic that you can, you can segment a group. So you want good representation of people thinking Entrepreneurially across all of this. And so, you know, some of that also now includes things like the lab I run at Carnegie Mellon, helping large corporations think about themselves as entrepreneurs as well through the corporate startup lab.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: Helping People Find Their Success
Oh, I love that. It’s going to be so great and I think the piece that really stands out for me too, like when you mentioned, these three areas, you mentioned the venture investing, you mentioned your work in the classroom, and then you mentioned the books and the speaking in courses, too, like the sort of the common story arc, if you will, that I saw or the thread through all three of those was you.
You are asking yourself the question, the same question that you asked our audience and that you asked me, and that is how can I help people. And so you’re coming to each of those three sort of circles, if you will. That sounds like with the lens of how can I be helpful to this person in this situation?
Or how can I be helpful to the student in this lab or how can I be helpful to a student who might be taking, you know, one of my courses or completing that coursework or maybe in the audience? How can I be helpful? And so am I getting the right? Because if so, that sounds amazing. Absolutely.
And specifically helpful to through this lens of entrepreneurial thinking entrepreneurial approach. Right. Like people need help in lots of different ways and we all bring different specialties to it. But I think, you know, over 20 plus years now, I’ve had some success. I’ve made a lot of mistakes on the way to the successes. And, you know, what I’m trying to do is help other people find their successes by making, frankly, different mistakes and the mistakes I’ve made or put a different way, by warning them that, hey, this was a mistake I made.
So, you know, maybe if you did more of this and less of that, you’ll increase the chance of you succeeding. And that’s fantastic. Okay, so Onward, before we dive into because I’m going to ask Sean here in just a second to start stepping us into the science of growth. And you know why companies scale while others stall.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: The Science of Growth
But before we do that, I just want to call something out here for you Onward Nation. And that is, you know, in the intro I talk about the ten truths of authority. You know, that’s in one of our recent books, Sell with Authority. But what you just heard there was actually the embodiment of one of those truths, how Sean approaches his work in the classroom in the trenches with entrepreneurs.
It’s about being helpful in authority, a thought leader. They have something to share, they have something to teach, and they do it so generously. They’re not afraid of giving away their secret sauce or the best what they got. That’s what they’re here to do. And oh, by the way, because they’ve done that success often follows. And so this is a great proof point, if you will, that this is how Sean, that’s his lens.
He’s looking at looking through the world out, which is amazing. So super, super generous. Okay, so Sean, I’m sure we got to go high level. First macro view of science of growth. So give us just kind of an orientation of that and then we’ll start stepping through it. Sure. And maybe it would be helpful just to maybe talk a minute about how that research project that ultimately became a course that ultimately became a book, came to be so awesome.
The first set of courses I created at Carnegie Mellon we’re all around the lean startup methodologies. So I created a graduate course called Lean Entrepreneurship. For those and I imagine most people in your audience are familiar with kind of the Eric Reese Stephen Blank methodology. Right? Took a lot of those things. And added my own experiences to them, brought in some entrepreneurs and helped students kind of figure out how to go from idea to product market fit and I teach that class all over campus.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: It All Started from A Student Feedback
So I have MBA students, I have computer science students, and probably one of the most interesting segments of the student population that takes that class is the Masters in Robotics students. So these are the students who will go build the most interesting parts of self-driving cars post-graduation. Right? So, just brilliant engineers, great technologists, independent thinkers, and frankly, just a blast to have in the classroom.
The one thing about that population which I really enjoy, but different faculty, I think, react differently to them is they’re not as polished as, for example, your MBA students might be. And so if they don’t find something you’re doing interesting, they won’t hold back. You know, whereas an MBA student might be concerned about their grade, these students will just tell you how they feel.
So I was walking out of the lane entrepreneurship class with probably one of the best examples of these types of students. This is probably 5 or 6 years ago now. And he said to me, you know, Sean, that was the best class I’ve taken in all the graduate school. And I thought, wow, that’s awesome. Because again, he, unlike an MBA who might be angling to get that A-minus rounded up to an A. He’s not going to, that’s not his approach.
Right. And so I thought, wow, that’s awesome. We took two more steps and he goes, but it was also a total waste of time. And I was like, what? I was like, okay, what that spend is doing with Spencer, that’s the kind of feedback I’m used to getting from you. And so I said, you know, Spencer, why was it a waste of time?
He said, well, the whole class was about idea to product market fit. Right. How to take an idea and start a startup. You know, half your students need a work need a student visa when they graduate or a work visa when they graduate. Another 30% are are saddled with hundreds of thousands of dollars of student debt. We’re not choosing between doing a startup and going to work for Google.
We’re choosing between joining a $10 million venture backed startup or going to work for Google. And we don’t really know how to scale up or how to help scale up that $10 million startup. I started thinking about it, and this is a great principle, I think, for entrepreneurs as well. You know, all feedback from your customers is a gift, and my students are my customers, right.
And I try to think about that. That is a really good question. And I thought, okay, I know what I’ll do. I’ll find the equivalent of Lean Startup for scaling up your startup. And as I looked at resources, I just didn’t like any of them. So I did the next best thing, which is I started asking some of my best graduate students to do an independent study with me the next semester after taking entrepreneurship. They would look at pairs of companies and see why one took off and the other didn’t.
So why are you driving a Tesla instead of a Fisker? Or why do you have a Facebook account instead of a Friendster account? And what you see, and this and this became very interesting is, there’s these kind of common patterns along the progression of a startup that are predictive of if they will scale up or if they will stall out.
And that became the beginning of the embers of this research that ultimately became Science of growth, which became a class which became a book, has now been translated into Korean and Chinese and frankly, taken on a life of its own, which is awesome. But it all started with that feedback from one of my students about, you know, how great the class was, but also why it wasn’t that applicable for him.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: The Three-Step Framework
Wow. Super valuable feedback. Yeah. I mean, it’s a great lesson for entrepreneurs, right? Like we think about entrepreneurship as like, oh, I need to have this awesome idea. No, you need to be obsessive about the problems your customers have. Because when you obsess about the problems your customers have, then you can apply that entrepreneurial creativity on top of it.
They come up with these great ideas, right? So, that was how this all came to be. And, you know, we basically walk through this kind of three step progression at a high level for how companies scale up. But that’s really the genesis of Science of Growth. Okay, I love that. So when you said the three steps that’s what you’re talking about the three step framework that we talked about in the pre-interview chat.
Right. That’s right. So there’s there’s step one, which is what I call satisfying prerequisites. And there’s four prerequisites we walk through. And the point is just like you can’t do calculus before you understand the basics of math, you can’t scale your start-up before you satisfy these four prerequisites. Now once you satisfy those four prerequisites, it becomes a very different step, which is how do you quickly accelerate the rate of growth of your business.
So my guess is for your audience, this is exactly where a lot of them find themselves today. They have a profitable good business in a good market. It’s growing organically at a pretty good base. But the question is, how do you change the slope of the line of that growth rate? And what we found there is that different startups use different techniques.
But in almost every case we looked at, they used at least one of an assortment of what we called catalyzing events or this kind of different techniques to drive inflection points and unlike the prerequisites where we say, okay, you need to satisfy all four of those prerequisites with the catalyzing events. They say, think about this more like a Chinese menu. If you like you can pick whichever one of these will work best for your business, but think about them as sort of jumping off points to brainstorm the right the right ones. Then, the third step of this three-step process is okay. Once you change the slope of the line, then how do you sustain and maintain that growth?
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: The Four Prerequisites
And we have what you call five elements of sustained long term growth that we talk about how you principles you can use to apply that. Okay. I’m just quickly getting this into my notes. This is awesome. Okay. So the third step is how do you sustain and maintain that’s one term growth, right? That’s correct.
And the second step is how do you catalyze growth? And the first step is before you do either of those how do you satisfy the prerequisites to get. And there are four right? There are four prerequisites. There are four catalyzing events techniques. And then there are five elements for sustained long-term press okay. Again, each of these cases. Yeah. So, this is a pretty classic actually academic research technique.
But people don’t see this often in the business world. But what you do is you want to make sure when you’re doing this kind of research, you don’t what they call select on the dependent variable. And what that means is you only look at successful companies, and so you say, oh, all these companies did this. That must be why they’re successful.
So the easiest example of this would be, you know, all companies have been all successful. Companies have employees. Therefore, if you have employees you’ll be successful. No, because all unsuccessful companies also have employees. Right. And so you want to look for pairs of companies. The guy who’s probably best known for this style of research would be Jim Collins, with kind of series of books, but it’s actually a much more common technique than I think most business executives realize.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: People Care About the First Interaction with A Product
It’s awesome. Okay. So, can we go backwards into step one to get an understanding of what their free, what the four prerequisites are? Absolutely. So, the four prerequisites are things that you want to make sure you have in place before you focus on growth. So one there’s some questions that we ask you just around the founders vision kind of what making sure that you actually have the embers of a scalable idea and kind of the right founders perspective to that.
The second thing we talk about is the size of the market. The third thing we talk about is satisfying the problems in that market. So steps two and three would probably be the closest in a lean startup framework to product market fit. Right. Good market and satisfying the problem for them. And then the fourth of these four prerequisites is an excellent first interaction.
And this one that we’ve encountered a bit of pushback on. But I will go to my grave defending this as a prerequisite. The reality is if the interaction you’re putting in front of your customers includes a bunch of unnecessary friction, then it’s crazy to start thinking about trying to scale that up because you’re scaling up a very inefficient system and people care a ton about their first interaction with the product.
You know, if you don’t believe me, go to YouTube right now and search for the phrase unboxing. Okay. And what you’ll see is millions of videos and billions of hours watched of those videos of people recording and watching, taking products out of the box for the first time. People care a lot about the first interaction. And typically, if we were doing this in more like a keynote style with, you know, your audience live here, somebody would raise their hand and say, well, that’s yeah, that’s true for like, you know, millennials that are really into electronics and kids with toys.
And hopefully they’d be like a 40 something person like my age because then I would ask them, okay, well what’s your wife’s favorite TV show or TV station? And many of them would say, oh, HGTV. Well, that’s basically unboxing houses, right? Like, we care a lot about the first interaction with our product. And I think we tend to under appreciate how important this is.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: Customer Interaction Must Be Friction-Free
So you want to nail all four of those again think you know algebra and calculus. You want to nail those before you start spending your attention thinking about really dramatically accelerating the slope of the line. And so, you know, for people listening to this, you know, I think the nugget maybe they could take away from this is thinking especially about that last one before even think about scaling, how they optimize those customer interaction points in a way where they’re friction-free, they’re truly excellent, and people are taking away exactly what they want from their interactions with their agency or their media buying group or whatever it is.
So on point. And when you said that, it reminded me of just a few weeks ago, I was, doing a three-day intensive with a company in Australia. I was I was attending the intensive. I wasn’t leading it or anything like that. So I was an attendee in the audience, and they sent this package probably 3 or 4 days or whatever before the intensive and had all of the materials and it had the workbook in it had all these like little strategy cards and these big maps, you know, stuff that would go up on your wall when you mapped out the strategy and, and all of that kind of stuff.
Yeah. And when I got that and I’m unfolding all of these materials like I’m, you know, you and I have this academic nature at heart, right? I’m getting this. I’m like, oh, I could stick that on the wall. Look how awesome this is. And it’s like these big visuals. And I got that much more excited and thrilled about the intensity, which was important because I had to dial in at 3:00 in the morning Eastern or, excuse me, Central Time.
And in order to, you know, be in the right time zone when it was being delivered in Australia. But when I got that package, it just lit me up. And to your point, it was an excellent first interaction. When I unboxed it, I was like, wow, I was already excited, but then it was just off the charts and see it. See?
So now if they’re trying to transition you, Stephen, from customer to fanatic, right? Because maybe the catalyzing event technique they want to use is viral growth and optimizing virality of their products. Think how different that is before and after that. It’s that excellent first interaction with the product. Oh, I totally agree with you. Absolutely. And so again like we’ve had people push back on this.
But I just think it’s right up there with does your product solve a problem? Now I think about these, as you know, typically done in a linear sequence. So you do founder’s vision markets. I solve a problem and had an excellent first interaction. So you know you’re doing these kind of roughly, you know, in order although certainly not explicitly sequentially.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: Reinventing The Prerequisite
So this is probably the last of the prerequisites is what I’m driving at there. But I think it’s really an important thing to make sure you strongly check off before you turn your attention to catalyzing growth. Got it. Okay, so I totally get the linear nature of that. But so let me ask you a quick question here before we dive into step two, the catalyzing events.
So let’s say that somebody is through 2 to 3 steps. And now they’re focusing on sustaining and maintaining long-term growth. I mean maybe it’s reasonable but I’m asking you. You’re the expert in this. Is that part of the sustaining or maintaining growth? Does anybody ever go back and say, you know, the way that we kind of architected our first interaction with our customer four years ago was great, but now we can make it better.
So, they essentially reinvent that prerequisite. Does that ever happen? So 100% and what I would put in that case, I would look at it a little bit differently, which is in that third step when you’re trying to sustain growth. You need to have one of the elements, which is sort of a culture of focus, our discipline, to maintain that excellence.
Right. Okay. And that’s different than what you’re doing early on because early on. It’s a bunch of experiments to see what works and what doesn’t. When you move to step two and three, what you’re trying to do is just hit the gas, right? Just accelerate and scale up. And that’s a different set of goals than figuring out even, you know, your customers seeing the value of that kind of stuff.
But yeah, you know, you’re never going to stop, making sure the product is great. You’re never going to stop making sure that your product continues to solve the needs of your customers. I mean, this is not something that’s in science of growth. But this is newer research. I’ve spent a lot of time over the last year really studying business model transformations amongst companies.
Right. So blockbuster to Netflix to Disney Plus, right? And I think what you see when there’s that company to the next company is that they’ve missed those things that have changed in the market. Right. So absolutely, you want to keep your sensors out there, and you want to continue to adapt. That’s just a different style of adapting and what’s happening kind of early on when you’re still kind of in search mode through these first four prerequisites.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: The Double-Trigger Events
Got it. That’s awesome. Okay. So could we step into the for catalyzing events. Absolutely. And again unlike the prerequisites the goal here is not necessarily to do all four. In fact I’m sure somebody has somewhere. But I’m not aware of any startup that used all four of these. so think about these more like four options. And you’re trying to pick 1 or 2 that works for your given business.
Is there almost like brainstorming techniques, if you will? Right. Like, okay, help me understand how I can how I can drive some growth for my business. And so the four-hour virality that we talked about already in viral growth is not new. You know, Mark Zuckerberg didn’t invent viral growth much, as many social media experts might tell you otherwise.
But what is new about the digital world we live in and your audience knows this probably better than than almost anybody, right? Is we can now track it. We can measure it and into your business yourself. We can understand the ROI around it. Right. So digital has changed the equation, but it hasn’t changed. People are offering products to people.
It’s just made those processes more efficient. But there’s virality. There are what we call double-trigger events. Double-trigger events are, basically, what people will often later call us startup launch event. Probably the two best examples from our case studies of this would be Twitter and South by Southwest or Airbnb and the DNC convention. It’s worth pointing out in both cases, the startups had been around for months and months and months before either of those happened.
So later the story would be told that Twitter launched, South by Southwest. But in fact, and I happened to be at South by that year, so I kind of experienced this up close and personal. Twitter didn’t launch at South by Southwest. Twitter blew up at South by Southwest. That’s similar but different. Right. So double trigger events are again often later called the launch events.
But what they really are, they’re these unique events where the problem that your product solves and your target audience happen to be closely connected and really poignantly experiencing the pain that your product solves in a way that, like it rapidly accelerates the growth of your customer base. Now, South By is a really good example of this because people always say to me, oh, should I go launch at South by Southwest?
Well, unless you also buy Super Bowl commercials. The answer today is probably no because every marketer has now converged on South by Southwest. That’s their quote-unquote launch. Because of this misunderstanding about what happened with Twitter, They’re now, I still love going to South by, I mean, obviously this year nobody went because of Covid, but I’m hoping, you know, at some point, there’ll be a vaccine, and I’ll probably go back to South by Southwest again.
It’s fun to go hang out with my friends there for a week, but I’m not trying to launch a product there. And the reality is, unless you can afford Super Bowl-level marketing campaigns, that’s probably not great. But what you can do is you can ask yourself for my product, is there an equivalent to South by Southwest?
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: Look For Catalyzing Events
So we sold in the book. We had not yet sold the business. But we ended up selling a business called no, wait, the Yelp, in the venture firm that I’m in. And we actually had been doing this research on science of growth and was specifically looking at catalyzing events and looked at the DNC convention for Airbnb and Twitter South by and we were trying to figure out like, well, basically we’re at that same point.
We had a good product. It solved a problem for a group of users, like, how do we accelerate growth and the business we saw the Yelp was the business called no, wait and no. We basically replaced the hockey puck pagers. You would get in a casual dining restaurant with an app and text messages. So this is basically an open table for no reservation.
Restaurants were there. Catalyzing event was the Masters golf tournament in Augusta, Georgia. I don’t know if you’re a big golfer or not. Okay. So you know then so to Augusta, Georgia, is this very famous golf club? And they do a big tournament there every year called the Masters. And it turns out the busiest casual dining restaurants in America.
Every year, the week of the Masters, are all the casual dining restaurants around Augusta, Georgia, because Augusta, Georgia, for 51 weeks out of the year, is this sleepy town far away from Atlanta, Georgia? In Georgia. and you know, there is this club that people still go to. But like the other weeks of the year, like the members kind of fly in on their private jets, they play in the golf club and they leave.
But for one week a year, it’s like ground zero for all these golf fans from all over the world. And so restaurants like the TGI Fridays become super busy. In fact, the Hooters restaurant in Augusta, Georgia actually builds tents through all the parking lots around the restaurant and sets up picnic tables. And it is actually the busiest restaurant in America every year during the golf tournament.
Wow. Like the busiest you busier than a restaurant in Times Square? Whatever, right? Well, restaurant executives go to Augusta that week to check in on the restaurants. And also, I suspect I want to watch a little bit of golf. So it turns out a bunch of the execs are there. Right. So we actually partnered with the city of Augusta to have our technology in every casual dining restaurant in the entire city, all 50 of them.
Brilliant staff. People experienced it. They saw how the app work. Those executives felt it came back. And later we would do a nationwide deployment of Applebee’s. The Applebee’s executive team first experienced the no wait app inside. a restaurant in Augusta, Georgia, completely catalyzed their growth rate because what we had found was not how do we go to South by southwest, right.
That playbook’s been run at this point. But what Twitter was to South by Southwest, no way was to Augusta, Georgia. So that’s double triggers. The other two are what I call drafting off platforms. So can you find a platform of users who have a big problem that your customer base solves in their solving and kind of a wonky way today?
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: Optimizing Algorithms
So, there’s tons of examples of this, but the easy one for people to get really quickly would be PayPal and eBay. Right? People trying to send money on eBay before PayPal in the early days. PayPal steps in and solves that problem for the entire community or YouTube and Myspace. That’s kind of an interesting one because YouTube but ultimately eclipse Myspace, right?
But they use the Myspace platform early on to grow, and so that’s kind of a good example of, you know, drafting off of platforms. And I think for your audience, an example that’s not from the pairs of companies, but I think it’s particularly helpful still is. You know, what HubSpot did through the ad agency business was kind of a very interesting B2B non-echnology example of drafting off of platforms.
And then the last one is what I call optimizing algorithms and the point here. So people immediately go to like search engine optimization. That’s pretty much arbitrage away at this point, as I’m sure all of your audience knows, like it’s important to do SEO and SEM, but I don’t think it’s going to be many startups catalyzing events today.
But the key for a catalyzing event around optimizing algorithms is can you find new emerging recommendation algorithms where your competition isn’t yet and you can kind of get ahead of it. So what you could do ten years ago, SEO or five years ago in the App Store? What are those emerging algorithms where you can be first to optimize and then accelerate your growth on the back of that?
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: The Essence of Teaching Entrepreneurship
Well, this is so great. And I love it. Okay, so the four catalyzing events. Great. And I love how you knitted an example to each one of them. Actually there were a couple of them where you needed a couple of examples to each of them, which is really fantastic. So that was super helpful to not only teach them but then also ground them with practical examples.
So thank you for doing that. Thank you. Yeah. That’s why it’s funny that I think that’s really the essence of teaching entrepreneurship. And that’s what people miss. When we talk about teaching entrepreneurship. We think about teaching, you know, real statistics. They’re not the same thing. The way you teach entrepreneurship is you say, here’s the best practice. Then you say, here’s a story of an entrepreneur who used that best practice to make it real.
And then you say, and this is hard to do on a podcast. But then you say, and hopefully your audience is thinking that, okay, how do I go use these to apply it in my business? Agreed. And so not only are you doing that in a very thoughtful way, but there’s also the fact that you’ve done this like you’ve been in the field. You’ve been in the trenches, you’ve been a business owner, you’ve scaled and then exited your business.
Unlike way back when I was an undergrad student in econ 101 and, you know, professors staring or standing at the front of the room was giving her big bio, which turned into like a 30 minute, you know, lecture on experience. And it was all academic. And I’m thinking, at what point did you ever apply any of this?
Which of course had never happened. And I’m like, for Pete’s sake, you’re going to teach me economics, but you have no experience in ever applying economics. Yeah. You know, Stephen, this is a hot button for me. So, you know, people talk about teaching a lot of these business principles. And one of the things that I’ve observed is for certain times for certain parts of the business education process, and I would certainly say entrepreneurship scores high on this; things that you’ve never done look easy.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: Be Data-Informed, Not Data-Driven
And so I think a very fair question for people teaching these kinds of things is like, well, you know, how have you actually done this? Because from the outside, as a spectator, it can look quite easy to do the kinds of things that we’re talking about doing here. But I mean, you know, and your audience knows this through and through, right?
Like it’s actually quite difficult and the kind of school of hard knocks is an important part of this. And so, I always think and encourage my students to ask themselves, like for the things they’re learning, like, are these people who have actually done it and experienced it themselves? That’s fantastic. Okay. Can you know that we’re quickly running out of time, which I can’t believe.
It’s like, holy bananas. This conversation is going so quickly that it’s like the sand through the hourglass. So when we think of step three, how do you sustain and maintain long-term growth? What are those five elements? Yeah. So I’m going to go through these really quickly just in the interest of time. So okay.
One is how you look at data. And specifically what I say here is be data-informed but not data-driven. The second is how do you finance growth appropriately and appropriately is an important word there. Right. You don’t want to overfinance this. You certainly don’t want to under-finance. But you also don’t want to over-finance them.
How do you recruit and put the right team in place? We talked about this next one a little bit already, but how do you build a culture of discipline and focus? Right. Because the game is a little different at this maintaining and sustaining growth. And then the last one is how do you either maximize the existing network effects in your business or create what I call secondary network effects, which are basically building network effects and network elements into non-inherently networked businesses.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: The Struggles of Putting Financing Together
Okay, so hang on just one second here because I was just first, I wanted to get all five into my notes, which I did. Okay. So let’s go back to element number two when you said because I want to tease this out here. How do you finance growth appropriately. So, tell us a little bit more about why you keyed in on that word appropriately.
Yeah. So here’s the thing. You absolutely can over-finance and prematurely scale these businesses. You can also put financing structures in place that will end up limiting the business’s growth over time. And I think the mistake that a lot of entrepreneurs make here is they don’t understand that when you’re stepping into the ring to put financing together, a very good financing process is going to be like 35 no’s and 5 yeses.
If you talk to 40 firms and 35 of them say no, that’s a very good process. I think the LinkedIn series A was like 38 no’s into yeses. Wow. Now, once you get A and if it may have been 37 and three, but it’s sort of directionally in that, you know, in that universe there. Right. And the point is that that was an amazing business along all dimensions and credit to Sequoia.
Like once they figured it out, they moved quickly, and they made it happen, and they got the fair terms and all that. But a lot of entrepreneurs, it’s like they’re quite tempted to just like find somebody who gives me money so I can get back to focusing on my business and the wrong type of financing strategy can really limit and kind of inhibit your long-term growth.
And so you need to mentally be prepared for what that’s going to look like. And I think one unfortunate side effect of entrepreneurship becoming the kind of topic de year for so many people these days is we’ve ended up with this sort of, for lack of a better term, kind of like Hollywood version of entrepreneurship, you know, whether it’s The Social Network movie or the Shark Tank TV show.
And the problem is like financing a business is no more like watching Shark Tank than, you know, going to the doctors is like watching ER. Right. It’s just the wrong model. And so, you know, the entrepreneur gets geared up to raise money. First two people say no and they start feeling desperate.
Now, you know, you talk to 50 people and 50 people say no and they say no for good reasons. You need to ask yourself, what can I learn from that? But, you know, a decent chunk of those no’s are going to be for reasons completely beyond your control, and you basically need to ignore it and keep going on.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: The Venture Investors
The other piece of this is you need to remember that investors and I’m trying to generalize is just beyond even venture investors. But people who are investing in the businesses in general, they don’t have a business without companies to receive their capital. You as an entrepreneur like you have lots of options. Me is a venture capitalist.
Like if I can’t find startups to take my money, then I pretty much can’t do my job. Not pretty much. I just can’t do my job right. And so I think we also don’t completely understand that the dynamics here. I know we’re starting to run short on time here, but I just think that’s the philosophy by which you need to apply it.
And then, with that philosophy you can really think about, okay, what’s the right structure? What are the right terms? What’s the right amount of money? What’s the right type of partner for me in my business? I think that that is wonderful perspective because as you said, if you’re getting 50 no’s and you’re not getting helpful feedback so that you can continue to adjust and grow and pivot along the way, and you’re being super obtuse to it, and you’re not making the adjustments and taking in the good feedback.
That’s one thing. But if you’re getting a series of no’s and you’re making adjustments, course corrections and so forth. Then it does become the what? What did you say? 35 no’s and five yeses. And that’s a great process. So now you’ve got five potential partners to evaluate. So you’re accepting smart money, not just money, but you want to have smart money, right?
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: Reimagine Your Business
That’s right. That’s exactly right. This is so good. This is so great. really, really wonderful. So I know we covered a lot, Sean, but before we go, before we close out and say goodbye, any final advice you like to share? Anything you think we might have missed? And then please tell us the best way to connect with you, my friend.
Yeah, absolutely. So, I guess the thing that I would say to your audience that I think is important here is we are at a moment in time where we desperately need more people to behave like your audience. We need more people to think about themselves as entrepreneurs than ever before. This is not a political statement. Whether you’re leaning right or leaning left or far right or far left.
Everybody right now, I think the world should be better than it is. And entrepreneurs are a key part to fixing that. Right. And so we need to double and triple down on educating and creating entrepreneurs. You know, I’ve been saying to all of the companies I work with, whether it’s the large companies at the Startup Lab or my investments, you know, we cannot turn our attention to simply reopening our businesses.
We need to turn our attention to reimagining our businesses. And I believe, education and entrepreneurial education, it is, you know, one of the areas that must reimagine itself right now, not just focus on, you know, how can we survive this year and get back into a classroom like we used to be 18 months ago? So, I’ll just make it real for you for a moment on this and then hopefully each of you and your audience can think about their own versions of this.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: The Gap Year Entrepreneur
So I’ve done two things around that dimension. First, I put a TV studio-like set of equipment in my private office. I’m the only person who has a key to it, so I’m still coming to it every day. and I’ve taken what used to be, you know, 20, 20 or 30 kind of our lectures. And I’ve turned them into each hour of a lecture into 3 or 4, 5 to 12-minute bite-size actionable video.
And I’m using them in my classrooms. But I’m also giving free to anybody else teaching entrepreneurship at any other place in higher education if they want these videos for their classes, they’re theirs. Because I want to make sure whether you’re at, you know, University of Wisconsin or you’re at Baylor or you’re at Carnegie Mellon or you’re at, you know, the local community college, your entrepreneurship classes are excellent, right?
And so that content is freely available to any other entrepreneurship professor who wants it. The other thing I’ve done is I’ve become just paranoid about students who are taking these gap years. And I get it right. Like I understand why if you graduated last spring and you’re now staring down your freshman year of college being done over zoom why you might want to take a gap year.
I don’t know if you saw this or not, Stephen, but 20%. According to Forbes, 20% of the Harvard incoming freshman class is going to take a gap year-only buckets. No, I hadn’t seen that. Yeah. It’s amazing. And so think if that’s what’s happening at Harvard. I think it’s safe to assume that’s probably happening at a lot of other schools as well.
Right. And I understand that. But here’s the problem. What are these students going to do for the year? Because like, you know, when I graduated high school, I was pretty Type-A. And so I got to college as quickly as possible. And I got done in three and a half years, and I almost got done in three years.
So I was not the gap year type student, but I had friends who, like, they went to Europe and they backpacked for a year, and then they came back and honestly, they came back. The more mature young men who I think possibly had better college experiences because of that. I know the students have been watching the news, but Europe doesn’t really want us right now.
So I don’t know where these students are going to go for the year. So I’ve decided to, create a community of all of these, kind of high school graduates who are taking a year off called gap year entrepreneur, where we’re going to spend eight months together. actually helping them create businesses because I thought, like, you know, what you could do in your gap year when you can’t travel anywhere, you could build a business.
And if that business is successful, awesome. You know, now you have a business and you can think about how you want to invest in it and go for it basis. And if it doesn’t work, I guarantee you your college experience will be better. Right? So these are two things that I’m doing to do this. But my challenge to your audience is, you know, think about what you can do to try to get other people to follow in your footsteps right now, because we need more.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: Making People into Entrepreneurs
We need more entrepreneurs. And when I think about this Onward Nation that you’re building, I think of it as really a community of entrepreneurs who are looking out and figuring out how to solve problems. I don’t think the gap year entrepreneur is actually that relevant for anybody in your audience. But I will tell you if you know people who is relevant for their gap year.
If they want to send it to, you know, maybe they have a family member thing who’s done it. They can use the code Onward and they can get 20% off that community membership, or just have them email me like I’m giving scholarships away to anybody. I don’t want money to be the reason you don’t do it.
On the other hand, you know, I think most people can’t afford to put a little bit of money into getting their business going. So, but net of the net, my goal here is to make more people entrepreneurs. And I just really want to encourage your Onward Nation here to do some of the exact same things here. The lenses and the places of influence that they have. Love your generous spirit. So you gave us, one. You are all there.
Learn more about scaling in business by checking out Sean Ammirati’s website
Scaling in Business: How to Connect with Sean
What is that also the best place for them to, for our Onward Nation business owners that connect with you? Actually, the best place to see like all the different things I’m doing is probably SeanAmmirati.com.
So it’s SeanAmmirati.com the courses and stuff like that are linked off of that, but that gap year entrepreneur is a specific community that I’m spinning up around. Yes. The second of the two examples of things I’m doing right now to try to help people reimagine entrepreneurship education. Got it, Onward Nation. This was off the charts.
This was so amazing. And no matter how many notes you took, and I literally took pages of notes as Sean was giving us that download of awesome. Or how often you go back and re listen to his words of wisdom, which I sure hope that you do.
The key is that you have to take this blueprint. This amazing, super generous blueprint, take it and apply it and put it into action and Sean, we all have the same 86,400 seconds in a day and I am grateful, my friend, that you said yes to come on to the show in such this huge, generous way to teach and share and give great examples. I mean, you did it together, this tapestry of amazing, awesome information and your expertise. So that is all going to help us move our businesses onward to that next level.
Thank you so much, Sean. Thanks, Stephen, and I really appreciate it. Stay safe.
This episode is complete. So head over to OnwardNation.com for show notes and more food to fuel your ambition. Continue to find your recipe for success here at Onward Nation.
Learn more about scaling in business by checking out Sean Ammirati’s website
Fill Your Sales Pipeline Q&A
LIVE Wednesdays at 1:00 pm Eastern / 12 Noon Central
The Sell with Authority Podcast is for agency owners, business coaches, and strategic consultants who are looking to grow a thriving, profitable business that can weather the constant change that seems to be our world’s reality.