Strategy Session: When not to blitzscale, how to persuade your board to let you slow down, and: Are you in a Glengarry Glen Ross market? w/questions from Endeavor and co-host Youngme Moon of HBS

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You gotta have incredible talent at every position. There are fires burning when you're going out. Can you believe it? Such an idiot. and then you go back to, this is totally gonna be amazing. There are so many easy ways. So I have no idea what to do. Sorry, we made a mistake. But you have to time it right. We haven't made just how you do it. This

Is masters of scale. I'm Reed Hoffman, co founder of LinkedIn, partner at Graylock, and your host. Earlier this season, we tested a new format where entrepreneurs asked their most burning questions. Your response. as an audience was overwhelmingly positive.

What we heard back was that you found their questions as revealing as my answers. And so that's why we decided to do it again. And this time, it's a global strategy session. We partnered with Endeavour, an organization I love, which invests in entrepreneurs worldwide. For 20 years, Endeavor has helped to create ecosystems outside of Silicon Valley that support startups and scale ups. If you haven't heard our episode with Endeavor founder Linda Rotenberg, it's worth a listen. It's called And the Next Silicon Valley is

And you can find it at Listen. Master the scale. dot com slash Endeavor.

For this episode. Linda and her team connected us with their fastest growing high performing entrepreneurs worldwide. A group. They're not. They're outliers.

These aren't startups. But what you'd call scale ups. Several of them have hit unicorn status. I was really intrigued by the questions I got from these global scale entrepreneurs. So I invited a guest co-host to join me and to bring some context to what we're hearing.

My co host for today is Young May Moon, a professor at Harvard Business School and host of their excellent Weekly podcast. HBS. After hours. Thank you, Reed, and I'm particularly excited to be part of this strategy session. I'm just fascinated by the questions we'll be exploring.

Young May spends all her time studying companies around the world and how they're adapting to the challenges of today's business environment. She wrote Harvard's case studies on companies like Starbucks. IKEA, an Uber, an author of the best selling book. Called Different.

Young May's analysis of the questions has a whole different level to the show. Young May. So honored to have you join us. Thanks for having me on. You know, the business landscape is evolving so rapidly, it's forced us all to re examine conventional wisdom about what it takes to be successful today.

compared to say five, ten years ago. So this is a great opportunity for fresh insight. So let's get started. Reed, your first question comes from Guadalajara, Mexico. It's a question that's really tailor made for you. It's a practical question about the kind of hyper fast company growth that you call Split scaling.

The entrepreneur is Adalberto Flores. and he runs a direct lending company called Queski, That has distributed more than three hundred and thirty million dollars in loans. He's facing competition from companies that are growing quickly, but with poor unit economics. He wants your take on how he should best respond to this type of competition, so his question gets to the heart of what it means to blitz scale. Here's Adal's question.

Hi weed. This is Alal Flores from Queski. We are a point of sell financing company and a direct lending company in Mexico. We're the largest online consumer lending company in Spanish speaking Latin America. We've lent more than three hundred and thirty million dollars in loans, and we have more than two hundred and fifty people working in the company, and we just raised our C rounds. So I read your book on bit scaling and I have the following question. In this economy, we are starting to see a bunch of companies.

That are acquiring customers with very poor Unit economics. And they're doing this because they promise to investors. But eventually they're gonna offer a different array of products. that uh are gonna be making their lifetime values higher

And this is how they're gonna be able to kind of like justify this type of unit economics. На This makes me rethink about our own growth strategy because on one side we want to make sure that we are growing responsibly. with healthy uniconomics But at the other side of the spectrum, we're starting to see companies that are growing very aggressively and are achieving

some level of scale and might achieve some level of unit economics and network effects. That might be difficult to compete in the future. So I wanted to ask you You know, how do you think about this type of situations, about these companies? Do you think we need to rethink about our own strategy on growth?

Or do you think there's something we should be careful about? Thank you very much. Adults. Congrats with all the success with Quest Key. And this is a classic blitz scaling question.

And as always, there's both art and science to the answer. What your competitors are doing is precisely The kind of bliff scaling move. That's described in blitz scaling, which is We actually in fact

You know, don't have a Clear certain Path to Great unit economics, profitable customers. But we have as a theory.

about how if we can do market expansions very quickly We can Convert that. into a v highly valuable business. So

We can start just as LinkedIn started. with no revenue model, just spreading a network. And that we can then build a recruiting business. On top of that. And that's the theory.

That was then. counter to the companies of the time like Monster and other kinds of you know, Career Builder and other kinds of recruiting companies and We kinda play that out. And so Your judgment is

Where are any of these companies potentially doing that? Enough intelligently. That you would neither need to respond or that you should be doing that as well. Because It's precisely this technique of saying, A

Fast deployment of capital here. To acquire these kinds of customers when we actually in fact have No good solid evidence. that we can tune it to profitability, but sometimes the tune it is a new product line, sometimes the tune it is the premium growth product that is the zero margin leader into our other products.

And that this is the multi-step play. that blitz scaling is the first part of the strategy on. So my advice would be first look at the ones that you see blitz scaling.

See if you believe their theory and doesn't have to believe their theory a hundred percent. If you believe their theory fifty percent, That may be a reason to say, okay, we have to do something in this area too. If you believe their theory five percent, then you might take the risk and say, or ten percent. You might say, Well, I don't think so, but I'm gonna monitor it. And if you think zero, then you know, pay attention, but but not at all.

Those are the kind of defensive Like part of modern consumer internet strategy is If you have a customer acquisition vehicle that's essentially a a low cost investment or a zero margin product, but it is an up leader to your other very valuable products.

that can be your best marketing strategy. That can be your best ecosystem development strategy. And so if you see that when you're looking at these competitors in these companies and say, Oh, well, we should do that or a version of that, that's also a good question to be asking. part of what's happening in this more and more connected the world, this hyper connected world where You know, things are more local. We have more of what we call Glengarry Glen Ross markets, where for each particular kind of product line The rewards tend to be parallel to this movie Glengarry Glen Ross.

Which is First prize Cadillacs, second prize thake knives, third prize you're fired. And so In that hyper connected world. More often, more of these products, especially software products, especially products delivered through uh mobile, through online, through the cloud.

tend to have a Glengarry, Glen Ross. characteristic and so you really want to be paying attention to What's the way that we actually have the maximum global footprint Of scale. In doing this.

Best of luck. Any answer that evokes Glengarry Glen Ross is a great answer in my book. Reed, our next entrepreneur has a different question about blitz scaling, one that gets to the human side of business. Her name is Hyundai Gillinger. And her company, which is based in Turkey, is called Insider.

If the number one rule of blitz scaling is to embrace chaos and Hyde wants to know. How can she support her managers who feel exhausted by the chaos? Here's Hyde. As you mentioned in your

Podcast and also in the book of Plitzskeil. You deem the number one rule of bliss scaling to be embracing the chaos. Discotic practices affect high and mid level managers in a way that They feel exhausted. So it becomes hard for them to manage their psychologies.

So How can we communicate them in a way that they will see that chaos of today will bring more stability in the long term? I love the way you phrase that, Hyundai. How can we communicate? That the chaos of today

will bring more stability in the long term. And obviously this is a question that was very central to why I did a bunch of the work around blitz scaling, teaching the class at Stanford, writing the book. And indeed, doing this podcast, Masters of Scale. All companies.

That I've worked with. Whether it's LinkedIn Airbnb Zinga. Always have

a difficult time adjusting the chaos of blitz scaling. It is not new. They all do, and they all have to solve it. Part of the reason to do this work, the book, the podcast, and everything else is is to create a shared set of media that the company can discourse around. So like people say, look, we're the executive team, we're a product team, we're a development team and were concerned, well, actually get the book, read the book, use the book as a way of talking to each other. No, listen to some of the podcasts, use that as a way of talking to each other.

And the questions that you're asking as you're doing it, okay. Which areas should we allow the chaos and which should we tamp down on it. And when do we fix that chaos? And we're making sure that people are on board. With the culture of our company, how are the culture of our companies evolving?'Cause frequently, as you can hear on multiple episodes of Master of the Scale, culture's not static. It's always evolving. And how are you evolving it in that direction?

You're exactly right that one of the things that happens with blitz scaling is organizational confusion, organizational fatigue, uh, organizational disagreements. that come about because we don't have time. To get to the broad consensus. And

We need to move forward with some speed and frequently need to Duplicate work by accident. Correct work. refactor, pivot, change. and ultimately really rebuild.

For getting back to stability. And efficiency and all blitz scaling efforts ultimately return to what you might think is business normalcy, which is how do we tune towards efficiency in our operations, efficiency and how we serve customers, efficiency and how we get customers, efficiency and and how we operate. And this is a speed to scale within a market within an industry. And so The embrace chaos does not embrace all chaos. The embrace chaos is

Embrace the necessary chaos that allows us to just move to scale and move with speed. And to recognize emotionally that we're gonna have that and emotionally we're gonna refactor that. But because winning

Is getting to that scale. Within these markets, within these industries. relative to competition. So that when we get to that scale, that's what the winning state is. And then we have to of course move back to efficiency of operations, you know, it's more of a marathon than a sprint. And

I'll conclude this answer with Part of the way that you use the framework to decide Like we should move from blitz scaling is roughly speaking, when on the blitz scaling techniques that we have used

Another startup or another competitor can't catch us with them. We've established it in such a way that those techniques We have a stable business against. There's always a risk against a blitz scaler from a different product line, a different company, either large one or small one, that you'll have to respond to, and then you'll have to make decisions then about whether or not you shift your footing. But that's kind of the the raw test. Of

Should we now move from a blitz scaling configuration mindset. to a efficiency mindset. Okay, this next question comes from Annabel Perez.

Co founder and CEO of Nova Payments. a financial tech company that's created a platform of banking accessories. Annabelle is a native of Venezuela. and her company's based in Miami. Their revenue is more than doubling every year, and they're about to evolve from bootstrapping

to raising venture capital for the first time. This is a really significant inflection point. As entrepreneurs who've been through this can attest, this kind of transition is not just about the funding specifics, it's about the fundamental change in mindset required. She'd love your advice, Reed, so let's take a listen. Hello Reed. My name is Annabelle Perez, I am CEO and co founder of Novo Pain. Since our inception

We have been self funded and have grown Organically. We are in a unique position to capitalize on our technical assets. Local knowledge? I'm present across nine countries.

We are realizing A hundred percent plus year over year growth. with our monthly recurring revenue model. to fuel our aggressive scale up strategy We are midway.

Throw our first capital racing round. Which will bi use to adquire more talent. Generate demand. And optimize our R D efforts. Real. My question is

What advice do you have for a rapidly scaling company like ours That's been But strapping. And now raising cavalry for the first time.

to prepare for exponential growth. Thank you. Annabelle Congrats with all the success and Nova payments, and especially congrats On

having achieved such success Through bootstrapping, which is really Uh challenging. So first I would recommend you listen to our Ben Chestnut episode with MailChimp.

because that was actually our specific master of scale episode. Targeting the questions and the challenges and the the ways of thinking around bootstrapping. Now

you're gonna really need to prepare for is a form of culture change. Because thus far when you're doing bootstrapping and running on cash. You're making sure that you never get over your skis, even though you have great growth, you're being v extremely disciplined on it. Because you have an envelope that could just cause catastrophic failure.

And so your whole company culture will be built up around that. Now what you're gonna have to consider is we're raising capital and we can actually spend into the red. And spending into the red will be a different

Cultural calculus. Now if you're just raising capital and say we have an insurance policy, fine. That's also a good idea to do. I've done that with some of my portfolio companies. We did that with LinkedIn and the series D. But If you're really just kinda saying we're going for it, we're hitting the accelerator.

What you're now going for is a sequence of capital raises, because usually what'll happen is it won't be just one capital raise. It'll be two or three. And that part of what you're doing is you're spending into that capital to change your inflection and growth rate. But then your next fundraising Will become a much higher valuation with a much higher amount of capital because you've proven out of this capital that that's the path you're on and that the dilution from these fundraises

is worth it for the overall increase in value, the overall increase in Providing your banking accessories platform. a much broader platform, a much broader network for doing this. And that's why you would do that particular pattern. But the principal challenge will be is that that's a different game than the bootstrapping game. That's a game where you've got a North Star on what your business is gonna be.

But you're also thinking about what's the next financing round. And what's the story of the next financing round? What are the things that I need to show that I am on path to that? North Star. And that there will be a variety of capital sources and uh market availability of that capital in order to do. And so part of when you're

in this kind of scaling and blitz scaling arena as you're making that North Star judgment because if for example the capital markets suddenly get a lot more restricted. You might say, well actually in fact, even though we've raised a bunch of capital, we're gonna be much closer to bootstrapping, much closer to it's an insurance policy versus growing. You're gonna be on the slider where if you go all the way out to blitz scaling and you're like, We know that we need to raise another round. And we're already planning for that round in the round that we're raising. Because that dynamic is a super fast Growth.

with some uncertainty that we're spending into that growth. 'Cause scaling is you know, prioritizing speed over efficiency in an environment of uncertainty. Therefore you're spending inefficiently. Capital, financial capital, human capital, we're spending into that because that's the much that's the rational strategy. That's the much greater win. And so That Kind of.

Executive Decision changing, culture change is the thing you're gonna need to pay the most attention to in terms of throttling up and down and Whether or not you go all the way to 10 or you throttle up to six, and then you're w you're measuring whether or not you go back down to four or five, or you go up to eight, you know, that's the kind of decisioning and work with your executive that you'll need to do. Okay, this next question is also about bootstrapping, and by the way, this is one clue that these entrepreneurs are largely based outside the US. In the States, and especially in Silicon Valley,

We often assume that starting a business means raising money. But outside the US, you're much more likely to find entrepreneurs going it alone. Perhaps because they don't have connections to raise capital, perhaps because they're in an ecosystem where funding is generally less available. So read the next question comes from Sergio Fogel. Who has booststrapped a payments company in Uruguay called D Local.

He's been very successful. The company's bringing in nearly a hundred million dollars in annual revenue. But now he's asking himself why Are there hidden benefits to taking on investors? Hello. My name is Sergio Vogel and I am one of the founders of DLocal.

At the local, we help large internet companies accept payments in twenty different emerging markets. Where most consumers do not have credit cards. We serve the likes of Netflix. Amazon. Facebook and do better.

We were founded in Uruguay. And we've grown very fast and profitably over the last few years. Having started in a region where venture money is hard to get We have always been very careful to contain costs. Even if it means growing a bit more slowly.

This has allowed us to maintain the same culture of frugality and energy that define us. However. Now that we are a large company and approach the unicorn status, We found it hard to receive press coverage. Which is important to reach more customers.

It seems that if you received one hundred billion dollars in capital, you have an interesting story for the press. If, however, You earn one hundred billion dollars in profits. Nobody really cares. As we expand our relationships into the executive level

It would be very helpful if they would be aware from us. from multiple sources, including business media. We have the feeling that having institutional money would make it easier to sign partnerships and get more business customers. My question is Do you think that having institutional capital is important in this situation beyond the money?

Or is it overrated? Thank you. Sergio. Congrats with all the success in D local and it's amazing. How you built.

Such a strong business. With the Out. Yet. Institutional capital.

And also by the way, I just Recently I was in December. I was in Uruguay For business on Uh Bitcoin gathering. For

you know, kinda figuring out things with FinTech. So I'm aware of how central Uruguay is within the kind of financial systems market, both in South America and generally. And so I do think it's valuable to have institutional capital, but I think press is the wrong reason. I think press you can solve. Press you just may have to go hire the right people. And I think you're right.

That's Pressed people don't tend to go look, you've got a hundred billion in profits. You know, there's a story of no one's ever heard from you and this is great. Because there's a bunch of businesses that are very profitable and going, you know, the big tech companies, et cetera.

Whereas when you do a hundred billion in capital, usually that's the promise. that you're gonna have um hundreds of billions in profits as you're going. That's the prospect in terms of where you're going and what you're doing. And that's why that's that's a new news hook. But there's lots of ways to create the news newshook. Now The reasons to think about taking in institutional capital In addition to you know, sometimes the capital is useful, is that it builds the network around your company. That institution

may be able to help you with recruiting, maybe help you with go to market. may be able to help you with going public. May be able to help you with strategic relationships. market entry into other

Geographies. If you look at within a Silicon Valley context, even though there are some companies that kind of initially bootstrap very successfully, all the ones that become huge and almost all the ones that become public ultimately end up taking some form of institutional capital. because of that network connectivity. Now it isn't Just the money. The money is usually the vehicle for the economics

to bring the individual to firm and the firm together to actually help you Take the business to the next level. later stage financial co founder.

that you look for in an investor. It isn't like necessarily, oh, I know how to operate, but it's how I partner with operators. And I may know how to operate is a good way of partnering with operators. That's one of the ways that we do it at Graylock is to have, you know, people who actually built these companies partnering on, you know, hiring and go to market and product development and strategic relationships and partnerships and new markets and all of that. But sometimes it's also just, you know, the right kind of partner to help you with those things. And sometimes you have specific needs like government regulatory, regional expertise, and other kinds of things. So the right institutional investor might be very valuable. But for different reasons.

than just press. If it's just the press thing, I would solve it differently. But there are maybe other reasons why I would consider institutional financiers, but that's not just the capital. That's the I want this person, this institution. working with me as I scale the business. Good luck.

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Creative planning where wealth works together. Learn more at creative planning dot com slash masters of scale. Humans will never be more intelligent than AI. Those were great at AI and those that went out of business because they weren't. How do we build a future? That is human centered.

I'm Rana El Calyubi. And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in.

Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show because every Friday we release a second Rapid Response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely. From Ford CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. Okay, this next question comes from Nirmal Rajaram, who's CEO of one of the fastest growing restaurant chains in Indonesia. In less than five years they've gone from one store

to two hundred stores. and to fifty million dollars in annual sales. They now have six thousand employees and locations in forty five cities across the country. Here's how Nirmal describes their two restaurant chains. Our brands are Up normal, which is a coffee shop.

Which is also serving an instant nodal. It's basically a hangout joint. And Bakso Bujangan, which is a QSR focusing on meatballs. As tasty as the meatballs might be, the As Normal describes it, the His company's real differentiator is technology.

We are one of the first ones to launch Order table and paid table app. We engage with Wi Fi based technology for CRM integration. We even have data driven supply chain management.

And we also use data driven for logistics and supply chain routing. We served eighteen million customers in the year of twenty eighteen. And an estimated twenty five million customers. The current year. Reed, Normal has a few questions for you, and as you'll hear

They have to do with some fundamental tensions associated with identity. What kind of business is he in? and some fundamental challenges associated with pace. Let's take a listen. With cloth?

And more money? comes more challenges per se. People Culture. Competency.

Infrastructure. and efficiencies. The shareholder still wants us to keep the X factor and keep us on the growth. Yeah.

And still expect us to stay profitable. We are a brick and mortar business, unlike any tech based company. This in itself has multitude of barriers. I'll see you. Currently I would like to bring stability.

And switch gears to channel our entire team strength towards Innovation of products and services. In order to do this, we need to slow down our growth rate. and be able to strengthen the pillars of foundation.

My question is Do you think I'm right in my thought process? If yes. And if you were the CEO of this company What would be your strategy to align with the shareholders

And get the consensus. If you think I'm wrong. What would be your best course of action to maintain the same growth rate expected? and at the same time continue to address the present challenges. Thanks, Sweet.

Normal. Congratulations with all the success with CRP Group and your on your various brands. This is a really great question. Because Most often everyone thinks that what you're looking for is that

unified growth rate story that's continually g accelerating and growing. year by year, and that's the only thing you focus on. Whereas one of the counterintuitive rules that I put in the book Blitz Scaling was ignore your customer. It isn't obviously to say

That ignoring your customer is a good thing. Actually in fact if you ignore your customer forever you know, you essentially go out of business, you die. But really what it was is to ignore your current customer in favor of your scale customer. And it's this artful trade off because

Sometimes you say, Well look, we have a good growth rate with these current customers. But in a year or two That will flatten out. And actually, in fact, getting it simpler and refactoring it now, accepting a smaller growth rate right now. In order to have a much longer runway to a much larger

total addressable market to a much larger margin structure and a better platform for doing other businesses. That's one of the hardest calls to make. Because Most normally within a business, you'll have a bunch of people saying, look, this is predictable, we know it, we should continue to invest in exactly the business as it is.

We shouldn't try to refactor our business. Usually The consensus within a business to refactor the business always comes too late because it comes when eighty. to 90% of the people agree, oh look, we've hit the wall. Right. And usually you want to do that refactoring, you know, Much, much earlier than that.

usually the wise thing to do when you're great leadership is to figure out earlier. And so you identifying A number of different things within this combination of the food and beverage chains, you know, Upnormal, uh Boxo, and others together with the technology business.

And Those two usually have different talent bases, different product cadences. You have the advantage because you have customers who are directly feeding their work process into you with food and beverage folks. and are committed to deploy the technology. That gives you a huge advantage.

But on the other hand Technology most naturally wants to distribute to all food and beverage chains. And the most natural thing is no, no, this is our differential edge for our food and beverage chain. And so you're encountering the product development and the cost within that. when you really want to be making much more of a platform. So from what you were Describing

I generally do think That's It's a very good question to ask. How do we Simplify the platform for more scale.

Whether it's a platform in the technology, which is most often a concrete way of looking at this, sometimes is a platform in your supply chain operations or a platform in terms of how do your Business operations most generally work. And should you actually m in fact make a major project of it and accept Something of a growth rate hit.

For it. And I think the usual answer is if you have a good coherent theory on that and it works, then you should accept that lower growth rate. You need to get your investors on board, you need to articulate why you're doing this for a much bigger growth rate in the future, a much bigger TAM, a much bigger operating margin, a much more effective organization, and what challenges you're navigating around and you have to have enough confidence that there will be people who disagree with you and your employees and your investor base. that they have enough confidence in you that they're kinda willing to go along with you, even though they may have a different point of view, and that you especially with employees, you can bring them on board. And so Yeah, part of this

is to always be thinking about The fact that platforms age. tech platforms age the fastest because they're constantly being rejuvenated. It's like the move to cloud, move to mobile, move to artificial intelligence, move to data science. But that's also true for other kinds of technology platforms like logistics, you know, supply chain, you know, even brand. Right, as a platform.

And so thinking about how do you have a rejuvenation, a refreshening, a re simplification that enables faster trajectory in the future and a higher TAM is always a good question to be asking. I like how you push Normal's thinking there, Reed, away from the more narrow framing of Am I a food and beverage company or a technology company to the broader question of, Am I building technology or a technology platform?

And now our final question read comes from an entrepreneur in Madrid who has a kind of company that could only exist today. But the kind of question that CEOs have been asking for a long time. How do you know that When it's time to expand into new markets. Here's the question.

Hey Reed. My name is Alejandro Artacho, co founder and CEO of a Spotterham uh here in Europe. We are an online booking platform for long term rentals where people rent accommodation without seeing the house in person. In the last year we went from fully centralized model with everyone in Madrid to now decentralized with nine teams across eight different countries.

So my question is related to international expansion. Should we go deeper in existing markets or expand into new markets? When do we know it's the right time? Yeah, to keep expanding. А не специфі

How should we think about international expansion As we look at both culture and growth versus margins. Thank you. Alejandro, it's great to talk to you again. It was a great pleasure to actually ha uh be seated next to you at that Endeavor dinner in New York. And these are of course clasic.

Great. Scaling questions. So Usually in these kind of scale questions, it's a question of How do you build up your core engines?

So th those are uh market territory that throw off economics that help you invest in other businesses, help you raise money. Higher prices. And are working really well.

versus the need to get in other markets. For competitive reasons. for building those markets to sufficient scale because in these network businesses part of first mover advantage is actually first learning advantage because what you really want is first scale advantage and first learning, as you know, gets the first scale frequently. So those are the the framework questions that you're thinking about trading off of.

So the analysis you do is is usually on these you say, Okay, well Let's take The top X markets. Three, five, two Ten.

Depending on how you're looking at it. And then say, Okay, let's do the quick and dirty, not detailed, the quick and dirty analysis of Market opportunity now. possible competition. Availability of scale, availability of capital.

availability of capital we think over the next two to three years. Part of that availability is the market analysis itself, which your investors help you with, but also part of it is you know, what metrics will be hitting, what will be the story of the business, how does the business look like in terms of when we say, look, as we get to a a critical mass business in this network business, What does the business begin to look like? What will it tune to? And this is why it's really valuable, and we can tune these other businesses. You know, Uber is a classic example of that because part of with Uber is like, okay, this is what a mature city looks like in one of these good tourist cities or one of these good density cities, and look, there's X more of them, so we should be investing in them.

Now Generally speaking usually if you have a good way to tune the margins most investors are willing to take risks on Is the margin characteristic twenty percent or forty percent or eighty percent.

with a hope that they're getting to the higher thing. They want the story the theory about how you get to the higher one. But they don't need to see those margins now, except say maybe in a a mature market, if you're going for real big growth capital. And so they tend to be much more of, okay, if you show that you have margins and you can have margins and you have a theory of tuning them. Most

kind of blitz capital investors, most scale capital investors. We'll be we get that that could be tuned more later and we know that there's a playbook for that and if you have a good theory of it, we can get there. So that tends to be more growth. as a general strategy.

And as part of culture You want the culture of How do we establish the broadest possible platform? Because In network models like yours The network

effect tends to be a very Glengarry, Glenn Ross market. You know, first prize Cadillacs, second prize steak knives, third price you're fired. And so the growth of we establish a network, we established a network as platform. is really key to how you play this out. Uh I remember from our discussion at dinner that you're business looking really good, so I have

full confidence that you will make these decisions the right way. Good luck. And with that we've reached the end of our global strategy session. It's been fascinating. And by the way, if you found this deep dive into strategy useful, you might enjoy the podcast I host called HBS After Hours.

Each week we look at strategies and trends playing out across the world's most interesting companies. You can find us on Apple Podcasts or wherever you listen to Masters of Scale. And with that, I'll hand it back to Reed for the funnel word. Reed, thanks for having me on. It's been wonderful. Thank you, young May. For your co hosting.

And for your own great work. supporting entrepreneurs and intrapreneurs at Harvard Business School. And particularly through your podcast. HBS after hours. I love your show, and I think our listeners will too.

Thanks also. Calinda Rotenberg. Carmen Philas Tavares. and Gabrielle Wilkerson Melnick from the Endeavour team for their partnership. and to all the founders from Endeavour who submitted their questions.

If you want to learn more about Endeavour or any of these extraordinary fast growing companies, head to endeavor.org. And If you're a startup incubator or accelerator and you'd like to work with us on a future strategy session for your entrepreneurs, email us at Hello at masters of scale dot com.

I'm Reed Hoffman. Thank you for listening. Masters of Scale is a white blood original. The show is recorded on site in California and produced at the studio inside SY Partners. in New York.

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