Three Unicorns, Three lessons
Three Unicorns, Three lessons
I wanted to take a moment to reflect and write up some notes I've had for years, on some of the patterns and lessons I learned from my experiences scaling three unicorns.
I’ve had the incredible fortune to be part of several unicorns over the past few years. Typically during a period of hypergrowth. I recently left Travelperk and felt this was a great time to retrospect. While many elements made these companies (Skyscanner, Letgo, Travelperk) fantastic, three non-obvious patterns jumped out at me.
Own your distribution.
You need a unique approach to attracting talent.
The customer at all costs.
Owning Your Distribution
One of my all-time favorite blog posts that I frequently reference is a short piece by Tomaz Tunguz on proprietary distribution channels. Every one of these companies had a flavor of this.
Skyscanner’s SEO Strategy: In the early days the team invested incredibly hard in SEO. Before Google had a chance to swat the "bug" they had amassed over 30 MAUs (monthly active users). They built the everywhere feature and generated millions of canonical URLs and destination pages /cheap-flights-to-london-from-prague. The product was designed to facilitate a massive SEO funnel. The whole business and technology moat was built around being the best in the business at acquiring traffic through this channel.
This “free distribution” meant that with £2.5M of early funding, Skyscanner was able to scale to profitability and take 6 years, getting themselves almost to unicorn status before raising additional investment.
Letgo's Unique Access to Capital: Letgo, was founded by 2nd-time founders who had flipped a previous company for over $3BN they had a track record and connections. This gave them access to lots and lots of money very quickly. This was in total contrast to Skyscanner. It lets them own a different distribution channel.
TV in the US was typically reserved for established enterprise brands. Out of reach of other startups trying to scale large P2P (peer-to-peer) networks. For a product where metclaf’s law (a network’s value is proportional to the square of the number of people in it) this was powerful. This meant that the 100th user was more valuable to the network than the first user as the 100th user would likely be able to get involved in lots of different transactions, while the first users had limited options.
In that situation, lots of capital can give you a big edge, as you can theoretically kick-start your network and quickly get to the high-value, high-volume network.
Travelperk’s Sales Machine: Born in Barcelona, an expat haven, there was a huge volume of smart, ambitious English speakers flowing through the city, who just wanted to get stuck into the tech industry. This opened up an ability to approach sales and implementation differently to someone with their cost base in London, San Francisco.
A big intake funnel and a really meritocratic culture meant they built a very high-quality and uniquely cost-competitive sales team. It gave them the ability to distribute more effectively than many of their competitors.
Talent
In all three of these cases, the companies were HQed in non-traditional tech hubs (at the time). London, SFO and NY all have much higher talent density and the "second city" approach would seem to be a disadvantage. However, each company had a unique approach to finding great talent and exploiting those markets.
Skyscanner’s graduate and internal talent pipeline: Skyscanner partnered deeply with the universities. Edinburgh has one of the best informatics schools in the world and Scottish universities like St Andrews and Glasgow have exceptional engineering pedigree. Every year Skyscanner took cohorts sometimes of 50+ grads. Then whittled them down over time. This pipeline became uniquely critical over time. Today the CTO is a product of that pipeline with 14 years at the company. Many of their best and brightest are homegrown. Exceptional talent, very loyal...
Letgo’s access to capital: remember that capital thing… They paid 30-40% over market. Done.
Travelperk’s culture: Given the often transient nature of the workforce in Barcelona, they invested heavily in building a culture that was magnetic for people who didn't have a natural family and roots in the city. They made a place where they could socialize, and connect and this appealed heavily to that demographic in a foreign city. Weekly end-of-weeks, Calcotadas, summer parties, winter parties, rooftop yoga, a rockstar office. It all helped them attract and retain talent.
The customer at all costs
All of these companies used different tactics to achieve superiority in the quality of their service and their product. Long term this was critical in holding customers that their distribution engines acquired for them.
Skyscanner’s engineering advantage: With Skyscanner, it will not surprise you that Gareth believed that a dollar spent on the quality of your product and thus your engineering was the very best investment, short, long, and medium term that you could make. That giving money to the "Google tax" was a waste of time. That principle and constraint, in part, manifested in their pursuit of the SEO channel, but it also channeled resources to their product. 80%+ of the headcount was RnD and they threw everything at just making sure that their prices and their performance were the best in the world.
Fake it till you make it: At Travelperk behind the scenes for years people were supplementing the technology until we had time to build the functionality. Offering value and connecting the dots while making a loss. Margin was an optimization, user satisfaction was something that if you didn't solve, optimization would be pointless.
There are other elements to building fantastic companies. However, I find it helpful to take some non-obvious perspectives to analyze other businesses. All too often they are dropping the ball on one of these. Doing these won’t mean you are a unicorn overnight, but it will stack the deck in your favor.