I recall an episode of Shark Tank where the entrepreneur had a company that was doing quite well and had a bunch of loyal fans and a trendy product – but were definitely an unknown underground kind of company. I don’t remember the exact revenue numbers this guy shared – but I think they were around $2M a year at that time and were looking to grow much bigger. I remember this guy telling the sharks that their main competitive advantage was the trendiness of their product and the rabid loyal fans they were creating. He had a number of famous people loving his products – which helped create a really strong word of mouth buzz with non-famous people that his products were unique and different and up and coming.
Mark Cuban gave him some really good advice – but advice that’s sad (to me) at the same time. He told this guy that if he wanted to stay trendy and keep that word of mouth growth – he had to stay small. If we wanted to go from a $2M company to a $20M company – he would have to sell/market to the masses and ultimately lose his trendy under the radar edge. So basically – sell out for the money. Trade in the whole reason that he started the business that created really perfect fans – for more money and I guess – more, less perfect, fans? I guess companies like GoPro and Apple are exceptions to that theory – but I do wonder how much fun it is to work at those companies.
It’s just interesting to me because it’s kind of true. A company starts off with a great story. They create something that people love and those people feel some emotional connection to that company and love to be part of their story. The customers talk about the company (on their own) and they are proud to own/use what that company makes. The company starts having success and the founders and employees are having a blast! They are having a blast because they have found a sweet spot where they all love what they do and enjoy working every day and the customers love what they make and are excited to be customers – so the money is coming in. Everyone is happy. They have created a really special company…
Well, at some point, investors somehow get involved and offer to help them scale to a whole new level of growth – where they can expand and hire and market to a much larger group of people. And I guess to many – that sounds even better! Wow – we can possibly grow from a $2M business to a $20M business – which must mean we will have 10x the fun and people will love what we do 10x more and we will be 10x as trendy – all while eliminating the threats and risks that come with staying small.
I doubt it. I think Mark Cuban was probably right. Because I think you’d quickly outrun that manageable sweet spot and end up trading a really special company (that people talk about) for a company that makes 10x more money. But instead of having 10x the fun – you’d probably end up with a company that is 10x less enjoyable to run that ultimately sends customers searching for a company that they love again.
So that’s the challenge – how can you keep growing and not lose your fans? I don’t know. But I think growing too fast might ruin it.