optimized speed venture capital waste

Optimized for Speed = 30% Waste

May 23rd, 2008   |   by Frank Addante

Yesterday, our 1,000th customer went live here at the Rubicon Project. I have been blown away by how fast this team moves and how quickly we have ramped. So, I took a step back and asked myself, how did we go from zero to 1,000 customers in 6 months? The answer is that we have specifically focused on optimizing this company for speed. Speed is our mindset. It’s easier said than done. It doesn’t just “happen.” You have to purposely manage a company differently to be optimized for speed – and it requires a special set of expectations, alignment, trust and discipline.

Different companies operate in various gears at different stages of their development. It’s really important to define and set the “gear” for the company and make sure everyone is aware of what it means. As an example, a company optimized for cash-flow may not take as many risks or yield as much waste. A company optimized for speed is going to be very risky, make lots of mistakes and there will be a certain amount of waste. If people are not aligned, it could create a lot of confusion. Right now, speed is our strategy. Meaning, our #1 objective is to move the company forward by putting points on the board as fast as possible (e.g. market-share, customer growth, product development, etc.)

The primary reason that we have raised $21M in capital is so that we can afford to operate in this gear. This is because when optimized for speed, you should expect that 30% of all of your efforts will be wasted:

– 30% your decisions will be wrong;
– 30% of your money will be wasted;
– 30% of your time will be wasted;

This 30% waste is generated by making fast decisions. Fast decisions on hiring, advertising, product development, operating infrastructure and strategy. But, when right, optimizing for speed will put you leaps ahead.

Thomas Edison failed more than 1,000 times when trying to create the light bulb. When asked about it, Edison allegedly said, “I have not failed 1,000 times. I have successfully discovered 1,000 ways to NOT make a light bulb.”

Edison was able to afford himself the time to make 1,000 mistakes. He wasted a lot of time. But, his waste yielded great success. So, in order to truly optimize for speed, you have to reconcile with the fact that you will produce waste.

This may sound irresponsible. But, if the objective is speed, you are inevitably going to create waste. If you are in your car and you slam on the gas pedal after every stop light versus slowly easing into it, you are going to waste fuel, but you will likely get to your destination faster. (note: by no means am I encouraging this driving method – it is unsafe and environmentally irresponsible :) )

One of the biggest benefits of raising capital is that it enables a company to move fast. And to move fast, you will make mistakes. Capital enables mistakes without sacrificing the viability of the company. Along side that, you need to encourage mistakes and (managed) waste. It is an extremely difficult discipline to accept.

This is one of the hardest lessons I have learned. When you bootstrap a company, every penny counts. You have to spend wisely and cannot afford waste. Going from bootstrap mode to optimized for speed, requires a different kind of discipline, ultimate trust in your instincts and a whole different mindset. Many entrepreneurs can’t make that transition, it took me 5 companies to figure it out.



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