Lessons from Coinbase’s Wild Ascent: Four Rules for Scaling

Lessons from Coinbase’s Wild Ascent: Four Rules for Scaling

Engineering leader Varun Srinivasan had a front-row seat as Coinbase scaled to meet an explosion in demand for cryptocurrencies. Here, he shares the four org design rules they relied on to gear up for hypergrowth.

SPOTTING AND RESPONDING TO THE ONSET OF HYPERGROWTH

Sometimes hypergrowth is a ship on the horizon. As sales forecasts climb and revenue ticks upwards, all signs point to a scale that startups can see coming in the distance. This may give founders at least a little time to prepare for the move from the blade up to the handle of that hockey-stick curve. But other times it’s a bolt from the blue, a surge in customer demand that leaves teams, infrastructure and leaders unprepared — and quickly underwater.

Srinivasan’s experience very much mirrored the latter path. “The most surprising thing about hypergrowth was just how rapidly it overtook us at Coinbase. SaaS businesses can have a pulse on when things start picking up and forecast growth pretty well. But when you're operating a consumer business, sometimes things just explode. In Coinbase’s case, it had a lot to do with broader market conditions. But it could come from unlocking a viral loop,” he says. “That’s what makes preparing for it so hard. Hypergrowth wasn’t something we could have banked on, but it requires thinking ahead and planning for a longer time horizon, which you can’t afford to do as a really early-stage team. Before coming to Coinbase, I founded my own company and I know firsthand that everything is a struggle during the zero to 10 employees phase. You're worried about product/market fit, not running out of money, motivating the team and ordering lunch — you really only have the bandwidth to look two or three months ahead.”

Even for the startups that have moved out of that earliest stage and found more solid footing, hypergrowth requires a complete shift in perspective. “Now our engineering team has grown to over 100 people, but for my first two years at Coinbase, we were very lean and efficient in our operations. When I joined we were an engineering team of 20. We were always talking about our burn rate and tried to keep spend top of mind, so we hired conservatively, only adding a couple engineers a month at our peak,” says Srinivasan. “The surge of interest in cryptocurrencies in 2017 made it clear that this approach wasn’t going to keep working. We had to change our mindset entirely or growth would turn into this undertow that would pull us down. What makes or breaks companies is their ability to react in that phase. You need to move beyond the short-term optimizations that accompany a frantic search for growth and mature into thinking and operating very differently. Our problem wasn’t simply sourcing more engineers. It was completely revamping our hiring process, because there’s no way it would scale to hiring 100 more people.”

It doesn’t matter how you get there, it’s how you keep up with hypergrowth that defines you.

To help startups making a similar leap from keeping the lights on to powering hypergrowth, Srinivasan has drawn from his experiences at Coinbase to develop four rules for outfitting companies for hypergrowth.

RULE #1: SHAPE YOUR ORG CHART TO MOLD YOUR PRODUCT

To cope with hypergrowth, often the next logical step is to start scaling up teams to build the capacity to handle that pressure. But adding more individuals without rethinking how groups interact can lead to growing pains that radiate throughout the org chart. As teams balloon in size, organizational complexity and subdivisions are introduced to help wrangle and streamline an increasing set of moving parts. But increasing communication overhead and conflicting priorities often slow decisions and prevent startups from retaining speed as a habit.

At Coinbase, Srinivasan saw these side effects firsthand. “When we were launching our new cloud deployment pipeline on our platform, we were around 80 people and engineering was a 50-person group newly divided into six sub-teams. About a month into the project, I walked into a huge meeting and it was absolutely crazy,” he says. “The room was packed to the brim, but it was hard to understand the specific problems that we had gathered there to solve or what each group’s responsibility was. One team thought they were shipping everything on all platforms in a month, while another group thought that they were shipping just one component on a single platform in two months. Our new structure had left us a bit disconnected.”

For Srinivasan, this instance was the living embodiment of the warning that you ship your org chart. “Variations of this concept have been floating around for awhile, popularized more recently by Steven Sinofsky but dating all the way back to Conway’s Law in the 1960s. It’s the notion that products are ultimately shaped like the structures of the teams making them. In other words, when you create an org chart, you’re shaping your product because it’s the sum of all the teams’ missions and the resources you put against each of them. It all needs to add up to what you want the company to achieve,” says Srinivasan. “Make sure your org chart always reflects your priorities, even if it means you have to reorg or wade into the unknown waters of virtual teams for the first time as you grow.”

To ensure org charts add up to the outcomes founders are trying to achieve, Srinivasan outlines the most common issues that startups should take care to avoid:

To maintain decision-making velocity and solve for these org chart math problems during hypergrowth, Coinbase relied on these two strategies:

Comb through every team, every quarter.

The root of this issue often comes down to leaders not looking at their organizations closely enough to spot these mistakes and ensure their org charts reflect what they want to ship. Nowadays, Coinbase makes sure this doesn’t happen through quarterly exercises in which a single leader evaluates each team’s mission, deliverables and metrics with a careful lens.

Use virtual or matrixed teams to make a change.

Whether it’s a rigorous meeting cadence, pushing desks together or actually taking your pen to the org chart, Srinivasan notes that it’s important to create the virtual teams or structures that enable rapid communication and alignment when launching big company-changing projects.

RULE #2: PUSH STRATEGY SETTING DOWN THE CHAIN OF COMMAND

In the early days, many founders prescriptively tell their engineering teams exactly what to do and when, either out of a conviction that they know the right answer or out of a fear the group won’t work as effectively without strict guidance. But in Srinivasan’s experience, that isn’t something leaders should pack in the move to hypergrowth.

“Teams going through hypergrowth need to learn the difference between strategic goals and tactical goals. As you push for growth, goals should become less tactical and more strategic,” he says.

RULE #3: THINK IN 3D TO VISUALIZE WHAT’S MISSING

“If you design your organization by just looking at org charts, you're going to get it wrong,” says Srinivasan. To anchor this assertion, he points to an unexpected example from the world of cartography.

Humans take 3D structures like globes and organizations and squish them into a 2D format because it's easier. But you lose a lot of nuance in translation.

RULE #4: PUT PEOPLE OVER STRUCTURES, COMBINING TEAMS IF YOU HAVE TO

While tinkering with organizational schematics to match the hypergrowth phase, startups should spend more time considering the individuals slotting into those structures.

“During hypergrowth, you need to create new teams and new leadership positions and you’ll naturally have some gaps that are hard to fill,” Srinivasan says.

BRINGING IT ALL TOGETHER

Hypergrowth can be tough to spot in advance, but once founders find themselves in the thick of it, it’s important that they shift the organization’s mindset and design to brace their team for the wild ride. Given that startups ship their org charts, consider putting a single leader in charge of reviewing goals across the company on a quarterly basis to look for overlapping or conflicting missions. Use virtual or matrixed teams for key projects in order to ensure alignment and focus amidst the chaos of a growth spurt. Make strategies more abstract as you expand in order to give teams enough room to fill in the tactics underneath and move quickly. Use a work map as a supplementary tool to capture the nuances your 2D org chart is missing.