Recently, I’ve been thinking about an accurate definition of startup. It’s not as simple as you would think. In November, I
wrote about this topic in a piece
that drew on the feedback of my CTO colleagues. They provided four key factors that, in their opinions, would classify companies as startups if they:
- Search for a product and a business model
- Use venture capital financing
- Focus on rapid, scalable growth
- Formally adopt or exhibit aspects of startup culture
As I pointed out in that piece, even these four categories leave room for debate. For instance, the CTOs I spoke with raised many interesting, unanswerable issues, like:
- Does a company immediately stop being a startup once it has a business model?
- There’s a difference between a new business and a startup — if you’re entering an industry and doing the same thing as everyone else, are you a startup?
- If a company is a decade old and still taking venture funding, can it be considered a startup?
As in many areas of technology, the answers may depend on your individual perspective and experience. As part of my quest to speak with tech experts about the definitive features of a startup, I spoke with Looker’s CEO Frank Bien. I had the opportunity to interview Bien about data and analytics for the Early Adopter Research Podcast a few months ago, but in this discussion, we narrowed in exclusively on startups. His views offered new insights and nuance about whether Looker should still be considered a startup and how Bien is trying to preserve the best parts of Looker’s startup culture as the business grows and expands.
Looking to Looker
I wanted to speak to Bien about Looker because the company just received $103 million as part of its Series E financing and has a well-defined business model. Thus, it is worth asking if Looker, a company that is aggressively showing progress but no longer searching for a business model, is still a startup just because it is getting another round of venture capital funding.
To Bien, startups can go through various phases — the definition of a startup is not always black and white. A company is a startup in its first phase of development when it is focusing on getting the product-market fit right. A company at this stage is still small, nimble, and adaptive. “I think that a startup is a company that can pivot on a dime. If the business model is not working, the leaders can retune it easily. It’s earlier stage, it has some customers but is not investing fully to scale out,” he said.
He pointed out that with the advent of SaaS, the definition of startups changed because an investment in a business might not pay off for years, as it was dependent on subscribers staying with the company as it established itself. “You had to build the maturity and the product-market fit early and focus on metrics to do that, things like net retention and magic number [a SaaS metric that looks at the efficiency of selling, as well as how long the business is keeping customers compared with revenue growth] and all kinds of metrics that look at the health of your company. And that allowed you to be a little bit more mature,” he added.
SaaS-based companies like Looker can thus be in a phase of startup growth and maturation for longer than companies in the past. In many ways, Looker can still be considered a startup even though it has advanced into a phase of growth-orientation.
As a company goes through these phases, the type of VC company it is getting an investment from, and the reason those VCs are making an investment, also changes. Bien said that in early stage A, B, and C VC rounds, investors are putting their money into the vision of the company. In later rounds, investors are funding growth. “There is a distinct shift that happens as a company moves toward a growth orientation and suddenly when you’re out talking to investors, it’s not so much about product vision because people agree on that. It’s much more on metrics and financials,” he said. For SaaS companies, this is the time when the business focuses much more on expanding its annuity and customer base, rather than the product.
“When you pass over $100 million in revenue, the momentum is just astounding in a SaaS company as opposed to the old perpetual world where you’re starting over every year,” Bien stated. “At Looker, we’ve built on this big base that keeps paying off over five and seven years and it’s the gift that keeps giving because it makes us better. Our customers could stop subscribing at any time, so it absolutely requires that we focus on the success of the customer because the customer could quit. They have to be getting value out of your product. It’s a really healthy model. This alignment of customer and vendor motivations is one of the most healthy changes in tech in my lifetime.”
For Bien, as a company moves from the product to growth phase of startup, the only way to ensure success is to maintain and systematically propagate the values of the company. He emphasized that hiring the right people, people who buy into the company’s values, is as important to Looker’s success as the technical skills those employees bring. “For us, it has to be employee first. If you have motivated employees who are passionate about what they do, you will have happy customers,” he said. “You can’t have happy customers in a software company with a workforce that isn’t highly motivated.”
Bien said that traditionally, many enterprise software companies have been unhappy places to work. “They writhed with ego and politics way too early in their growth phases. They were modeled off the old legacy tech companies. Somewhere in the 2000s, the consumer world melded with the software space and it created companies like Salesforce, Workday, and ServiceNow. These SaaS companies were a little bit different and were building different models. Personally, I think it all goes back to the subscription model. You have to have happy customers and you can only have happy customers with happy employees. And you can’t have super aggressive sales teams that move on to the next customer too quickly.”
Equating customer and employee happiness is thus the main value Looker has built its growth around. Bien told me that it’s not enough for a company to document its values — it has to live by them, which something that Looker pays attention to continually. As he said, the way people are hired and the culture they come into is really what a company needs to figure out how to scale.
What are these values? Bien said the company is built on the idea of “Love Looker Love.” “We saw early in the company that our customers loved us, and we loved them. It was like the Southwest Airlines of enterprise software. We do not win until our customer wins,” he said.
He also said that Looker operates with an ethos of everyone checking their egos. “Looker tries to be a humble place. Maybe even just saying that isn’t so humble,” he added. “It’s the idea that as a creative enterprise, whoever has a louder voice should not necessarily be the winner. We have to promote innovation and creativity, and ego is at odds with that.” Looker focuses on this in the hiring process by having a “no jerks” policy similar to Netflix and screening candidates based on their humility.
Another core value that Looker emphasizes is being a learning organization. The company has a literal kitchen table in its offices where new employees can sit and speak to company veterans about any questions they may have. The ability to knowledge share in this way is key to the company’s success as it has scaled.
For Bien, what defines a startup is less important than inculcating the values of the startup in the business as it grows. “How you scale a company — that’s really who you are. Great companies exhibit a personality. And I think that’s the part that scales, it’s who the people are, and who they share the vision with and bring on, is what makes a company great,” he said.