by Y Combinator7/11/2018
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Thank you all for being here today. It’s a real honor to be around such an amazing group of women. I’d like to thank Sharon and Kat for inviting me to come talk to you all. It’s a real honor. As Jessica said, I’m a co-founder of a company called Gingko Bioworks. For those of you who have never heard of us, we’re based in Boston. We’re about 200 people located in the Seaport District there. And basically, we design organisms to spec. And you’re probably wondering what the hell does that mean? Basically, the best way to sort of introduce what we do is if you take a look at this picture, and you can see there’s a lot of technology on this desk. And does anybody know what the most advanced piece of technology on this desk is?
You’re right, it’s the plant, right? So this, believe it or not, is the most amazing piece of technology that any engineer can think about, right? This plant can self-replicate, self-repair, it can self-assemble, and it can do all these things at sub-nanometer precision, right? These are all engineering traits that any other engineering discipline can only dream about, but that biology does routinely every day, right? And this is why I fell in love with biological engineering and why I started Gingko, is because I wanted to be able to harness this power of biology to do great things.
The other fascinating thing about biology is that it is at its core digital, right? You can program biology. So every organism, whether it’s you, or the plant, or a bug that lives on the floor is made up of a A’s, T’s, G’s and C’s. And the sequence of those A’s, T’s, G’s, and C’s basically dictates the behavior of that organism, right? It just takes what it’s capable of. So if we can learn how to program that DNA, if we can learn the right A’s, T’s, G’s and C’s to synthesize to write, then we can program biology to do what we want. And so that’s what we do every day at Gingko is try to figure out how to program biology, how to design biology. So this was an article that came out a couple years ago now in “Wired” magazine. For all the Apple fanatics at Gingko, this was the most exciting thing ever even comparing our organism designers at Gingko to Jony Ive, right? And this is what we think about is how to design biology, how to make that process better, how to get smarter about it, how to make it more efficient.
So you might be asking, like, why am I here today? Am I gonna teach you all about biological engineering? Well, when Kat and Sharon asked me to speak, Sharon asked me to specifically talk about a little bit about scaling companies. So I happened to be at the YC or the FFC conference a couple years ago, and there, I talked a lot about how to start companies and sort of my philosophy about what it takes to really start a new company. And so today, I’ll talk a little bit about scaling companies. So one of the things that I think Jessica already alluded to is that two years ago, I was at FFC, and she issued a challenge to the group, right? She gave a talk about how to not fail as a startup. And Jessica sort of posed a challenge for all the women in the room. She said, “I wanna see a female-founded unicorn come out of this room,” right?
At the time, this obviously been a lot of why I see unicorns, but they actually all had exclusively male founders. And so as Jessica sort of stole my thunder, I’m really excited that in December, we became another YC unicorn, and, yeah. So really excited. If you had asked me 10 years ago when we started Gingko, whether I would get to the spot today, I would have said, “Hell, no.” But, you know, there you go, life takes you in unexpected places. And as a biological engineer, I’m just so excited about being able to put these resources towards the engineering of biology. What’s even cooler about Gingko becoming a unicorn is that we are a unicorn that actually has some shot of making a unicorn someday. So maybe I’ll come back in 10 years and talk to you about the unicorn we made.
So how to scale a startup? So this is something that I think about every day at Gingko. I’m the COO there and so I think a lot about how to grow and scale the company effectively, how to execute effectively. And as I thought about what I could talk to you today, I wanted to really focus on some advice that has been pretty prominent in the news recently for startups, but I think is a little misleading actually. And that’s the advice to not raise too much money, right? So there’s been a lot of headlines recently about the dangers of raising too much money as a startup founder.
And on one hand, it makes me laugh, right? I think founders should be so lucky to raise too much money for their startup, right? But if you actually dig in and look at what Sam and others are saying, what they’re really talking about is being smart about how you spend that money. So I would actually advise raise lots of money. And that’s good because as a founder, if you’re working on your life’s mission, if a little more money can make the difference between success and failure, then you know what, the extra dilution is probably worth it. So raise that money, just don’t spend it all, okay? And so that’s what I wanted to talk to you today was about the second part of how to raise a lot of money but not spend it all, because that’s actually surprisingly hard to do once you’ve raised money, and that’s what’s leading to these headlines that are awarding founders not to raise too much money.
So after you raise a lot of money, you can sort of have a holy cow moment, right? And you’re like, “Wow, these people who are apparently smart just handed me several million dollars to go build my company and work on my life’s mission.” One, are they crazy, right? And two, what am I gonna do now, right?” That’s sort of the typical reaction you have after closing around. And I think the other thing you then have is sort of an oh-no moment like how am I gonna pull this off, right? Now, I have all this money and so now, how am I gonna achieve all those goals I promised I would?
So you’ll go through that, right? And you’ll say, okay, and you’ll get over it. But sort of even more possibly dangerously, your team will go through that too, right? And so they’ll see all this money any DuckTales friends from where they are kids. You know, your team will say, “Well, hey, we’ve raised all this money. Now, we can do all this new stuff,” right? And there’s gonna be a really big but unconscious pressure to go spend that money on stuff, right? All of a sudden, all of the frugality, and scrappiness, and leanness that got you to where you are today, there’s gonna be an unconscious pressure to sort of throw that out the window, right? And that’s gonna manifest itself in a bunch of different ways, right?
So have too much stuff to do. Hire more people, right? Why not? Like, we have money, we can hire more people to go do all these things on our to-do list. Having a problem with a fellow team member, well, go to HR. We should now be have a beefed-up HR to go take care of those interpersonal conflicts, right? Have some annoying tasks that you don’t wanna do anymore? Oh, well, we should hire some administrative support and take care of it for us, right? And the problem with each of these sentiments is that, in some level, they’re all true, right? Like, you raise more money, you should go hire some people to do new things, right, that’s why you were given the money in the first place. And, yeah, like HR is important, you should invest in that, and they should be a resource for helping people solve their problems. And, yeah, you should try to operate efficiently by outsourcing tasks that are not important for you to do.
But if you take this too far, right, and if your whole team takes this too far, then that’s what leads to sort of a bloat in your company both from your headcount size and in terms of your spend. And that’s the kiss of death for a startup no matter how much money you’ve raised, right, because you get too big, you get too bloated, you spend too much. Then all of a sudden, the bar for how much more you have to raise, how much more revenue you need to bring in to pay for your team gets that much higher, right? So if you can figure out a way to raise money but keep the discipline, keep the scrappiness, keep the frugality, then that’s really the winning combination when you’re scaling a startup.
So what does it take to make that happen? Well, I would argue that you need a Scrooge McDuck in your organization, right? You need someone who keeps everybody focused on what are the key metrics for growing our business and how do we do that in the most efficient way possible, efficient in terms of headcount and efficient in terms of spending, right? And this is not an easy thing to do, particularly right after you’ve raced a bunch of money, right, because there’s gonna be all sorts of pressure to show that go try to spend your way out of problems, right? But you’ve got to have the Scrooge in your organization who’s pushing back against that, and pushing for efficiency, pushing for scrappiness.
If you’re a female founder and you’re taking on this Scrooge McDuck role, let me tell you, it’s gonna be a little bit harder for you, right? And that’s because female leaders like whether we like it or not are subject to certain stereotypes, right? Like if you’re taking on the Scrooge hole, you know, you’re definitely at personal risk to be considered the battle-ax, right, the tough person who’s saying no to everything, right, and who’s an unsympathetic, uncaring leader, right? And that’s just a certain reality. I wish that stereotype didn’t exist, but, you know, it does. And so you gotta way that sort of personal risk to your own reputation and to yourself against the risk to your organization of not having somebody who’s putting pressure on the organization to be lean, to be efficient, to retain that scrappiness, right?
And so that’s a decision you have to make. But ultimately, I think your startup success is gonna hinge on whether or not you have this pressure of being applied, right? Because the more efficient you can be, the longer your runway is, the more optionality you’re gonna have as you go forward with your startup. So your goal is really to try to scale your startup, scale your revenues, scale your customer base, whatever metric by which you measure commercial success, grow it without growing your headcount and your spend too much, right? And only you can really define like what too much is, but in general, that’s what you’re trying to do. You’re trying to decouple your growth in your commercial success from your growth in your spend and your headcount.
Okay. If you can crack this nut, this is a huge competitive advantage. No matter how much you raise, no matter what, this can be huge for your team. And the reason for that is that all sorts of problems scale with the number of people you have in your organization, right? So recruiting becomes harder, right? You have more people, it’s harder to recruit top talent people when you have to hire twice as many people as you might otherwise have to. Similarly, you know, interpersonal problems, well, they’ve scale with N squared. So if you have N people in your organization, you have N squared possibilities for conflict, right? And so a million different things get harder and harder as your organization grows.
And so if you can, again, grow your business by whatever metrics are important, revenue, customers, eyeballs, whatever number of GMOs you can produce, then you’re just at a huge advantage relative to others, and you’re building an inherently stronger longer-term business. So how do you scale without actually scaling, right? That’s a fundamental challenge. And let me tell you it’s not easy. It’s one that I’ve been working on for several years now, and I won’t pretend like I’ve totally cracked this nut. But it’s a worthy problem to work on as you’re growing your company.
The best thing I figured out so far is based on a conversation I had with Ali Rowghani a couple years ago now. Ali is a YC partner and he’s in charge of the YC Growth Program. And I went and sat down with Ali and I think this was probably just after we raised our series C or something. And, you know, I was like, “Hey, you know, what advice do you have for me, like, as we’re trying to grow our company and whatnot?” And Ali told me about this concept of mission to metrics. And he actually later wrote up a blog post on this. So I’d encourage you to go read this if you haven’t already.
But Ali is basically said that as a leader of a company, your job is to map out the mission to metrics for your organization, right? So what’s your mission? What is your organization all about, right? This is your purpose for your organization. You probably should already have this on the day you start, right? So at Gingko, our mission is to make biology easier to engineer. That was the first thing we figured out before we even had a name for the company, we figured out our mission statement, right?
Your strategy, that’s really what your commercial strategy, right, how are you gonna make money, how are you gonna get people to pay you for what you wanna do, how are you gonna be a sustainable company in order to deliver on your mission, right? And so that obviously takes a ton of thought, right? And only you can figure it out, and honestly, your commercial strategy might change several times over the course of growing your company even as you’re in growth stage. And that’s okay, that’s totally fine. We still need to have a hypothesis about what your commercial strategy is.
And then finally, based on what that strategy is, you need to define your metrics. How are you gonna quantitatively measure whether you’re succeeding or failing at your strategy, right? This is hard, right? This is not a trivial thing. This is something that like even at Gingko, we continuously work on to refine over time, right? But if you can define that mission to strategy to metrics, and even more importantly, if you can explain it to the entire team, right, make sure that everybody at your company understands this, then they can connect what they do every day to the metrics of the organization, to the commercial strategy, to the mission of the organization. It’s a hugely powerful aligning force for any startup.
And so I would argue, I would add one thing to what Ali said, right? So, yes, how do you scale without scaling? Define your mission to metrics, that’s huge. It’s gonna take a lot of work, expect it to that…it might take months or years for you to figure out, but try to figure it out. And then I would say that also make sure that your metrics include one other thing, which is that at least one of your metrics should be focused on efficiency, right? So instead of a total output, you know, is it output per person? Is it, you know, dollars of revenue per salesperson? Whatever your efficiency metric is, make sure that’s included as one of your metrics because if you force your team to optimize on efficiency and you’re forcing them to think about what goes in that denominator, right? How many people does it take, how many dollars does it take to achieve your goals?
And so I think this is a nice way to sort of encode a value system around efficiency in your organization is by defining metrics around efficiency as part of your overall mission to metrics. And then finally, as I said before you need the Scrooge who’s gonna be pushing that message across the organization day in and day out. Again, it’s not an easy job. I know, because I have it at Gingko. But I think it’s the one that’s hugely important for the long-term health and success of your organization.
And so this is what we’ve been doing at Gingko over the past few years, you know, we figured out our mission 10 years ago it’s to make biology easy to engineer. Roughly speaking, our strategy, in a nutshell, is to try to aggregate genetic engineering R&D at Gingko. And our metric is thinking about just how much genetic engineering can we do per person in Gingko. So driving that efficiency as much as possible is incredibly important to our strategy every day. So with that, again, I’d like to thank all of you for being here today. And thanks to Sharon and Kat for the invitation.
Y Combinator created a new model for funding early stage startups. Twice a year we invest a small amount of money ($150k) in a large number of startups (recently 200). The startups move to Silicon