Scale Venture Partners

What My Three Years At Netflix Taught Me About Scaling A Startup by Sam Colt

By Ariel Tseitlin, Partner, Scale Venture Partners

This article originally appeared in Fast Company.

I joined Netflix at the beginning of 2011, just as the company was making the transition from operating in the data center to the public cloud. My job was to help build out Netflix's cloud platform and manage streaming operations. It was an incredible three-year experience seeing the company scale its people, culture, and technology.

In my life since then as an investor, I still apply what I learned in my time at Netflix to companies big and small. These lessons I picked up there might not save your life, but they might save your business.

1. BUILD A HIGH PERFORMANCE CULTURE

What separates winning companies from their competitors often has nothing to do with the products or services they offer but with the cultures they build around employees. Netflix's, of course, is renowned. One thing Netflix knows well is that a company's ability to execute depends hugely on culture, which comes either top-down from the founding team or through formalized process and training.

As I consider companies to invest in, one thing I look for is a culture that encourages results and healthy competition. That's a no-brainer. But less appreciated is that culture takes different forms even while emphasizing the same goals, like transparency and high performance. If I see a company that’s heavily compartmentalized or relies on a command-and-control structure, that’s a red flag.

There’s no question that companies known for strong work cultures are outperforming their peers. What’s more, when these companies unveil a new policy, others take notice. Mark Zuckerberg’s recent paternity leave, for instance, has raised the issue of work-life balance for tech and non-tech companies alike. Netflix unveiled its own unlimited paid parental leave policy last year. Issues like these have become powerful recruiting and retention tools for tech companies, which is why some of the most prominent ones are following suit.

2. PLAN FOR SUCCESS

Building something without planning for how it will work when it gets popular is one of the easiest ways to not only kill off a great product, but sometimes the company itself. During my time at Netflix, we were driven to build for scale by necessity—you knew that if something was successful it would be used by millions of people.

Imagining our products at scale influenced the way we thought about building the company as a whole. The choices you make at the beginning of development matter when you go from 50,000 to 50 million users, so planning for mass adoption from the start helps companies grow rapidly and at the same time keeps them ahead of the curve, instead of rebuilding features to handle new users.

What's more, there’s little incremental cost to building for scale. It’s easier to spend 20% more while you’re developing the core product than spending 100%–200% more once your decisions are set in stone. For developers, an ounce of prevention really is worth a pound of cure (and then some).

How your startup handles growth will ultimately determine how large it becomes. Automation and self-service tools and processes enable startups to scale efficiently instead of becoming victims of their own success.

3. MAKE MANY MISTAKES, JUST KEEP MOVING

Tech companies get upended by newer startups every day. The companies with staying power have learned how to disrupt themselves instead of letting another company push them into obsolescence. Ultimately, the best way to avoid getting disrupted is to maintain a high rate of innovation and move quickly. Mistakes are a natural consequence of speed. If you aren't screwing up, you won't find out how much faster you could be going.

Netflix made waves in 2011 when it announced plans to spin off its DVD business into a new company called Qwikster. This decision—coupled with a new pricing model—didn’t sit well with customers. Netflix CEO Reed Hastings eventually apologized for moving the company too quickly and abandoned plans for Qwikster.

The knee-jerk reaction after such a mistake would be to slow down in order to prevent future errors. But there’s no way to do that without stifling innovation, and what impressed me about Netflix was that even in the aftermath of those decisions, the rate of innovation never slowed down.

Don’t avoid mistakes at the expense of innovating as quickly as you need to. One of your competitors will come out with a better product if you don’t move fast enough—and by then, it could already be too late.

4. LOOK BEYOND THE CAP TABLE

Netflix taught me more about building a startup than I ever learned at business school. Founding a startup is a challenge like no other, but there are things you can do to make it easier and increase your odds of success. Financials aside, what sets Netflix apart from other companies that have emerged out of the latest tech boom is its dedication to employee culture and shared values, its ability to design products for mass adoption, and the energy it spends anticipating what could disrupt its business model.

These lessons aren’t specific to cloud computing—they apply to startups as a whole. As an investor, I perk up when founders mention these differentiators. They just might signal the next meteoric tech startup.

Ariel Tseitlin is a partner at Scale Venture Partners focused on investments in the cloud and security industries. He currently sits on the board of directors at Agari and CloudHealth Technologies. Previously, Ariel was director of Cloud Solutions at Netflix.

You’re doing DevOps wrong by Sam Colt

By Andy Vitus, Partner, Scale Venture Partners

This article originally appeared in TechCrunch.

Gone are the days of the quarterly product release cycle. To meet the evolving expectations of today’s end user, software must continuously adapt. As a result, hyper-automation of the software development process has become the thing on which companies, regardless of industry, compete. From fledgling startups to enterprise heavyweights, business leaders are realizing that they need to figure out how to embrace ideas like DevOps to keep up.

As an engineer and investor in the infrastructure space, I see where the breakdown happens with DevOps in theory and in practice. Progressive companies get the value of agile development, but the approach is often misguided, primarily because of the fact that DevOps comes into play too late in the game: Too often, startups only go back to layer in automation and test scripts once they’ve run into problems scaling. Enterprise giants face a similar challenge as they grapple with weaving DevOps into legacy infrastructure and processes.

It doesn’t have to be like this. There’s an old saying that an ounce of prevention is worth a gallon of cure.

Baking in DevOps from the start is the key to running a lean and agile team that can scale quickly and adapt easily. Whether you’re just starting out or you’re part of an established organization that wants to make the shift, here are three guiding principles for doing DevOps right.

Account for automation and testing from day one

Building in automation and testing from the beginning is your linchpin for success. Here’s why. Taking the idea of the minimum viable product to an almost stupid degree, companies of all sizes are getting crushed by mountains of technical debt. It’s common to see companies write code for a product or service and find themselves trapped a couple of years later because they didn’t think about what would happen at scale. So they frantically hire engineers whose sole purpose is to fix what’s broken and rewrite the code base to build in automation, instead of focusing on creating new product features. Meanwhile, customers wonder why they aren’t seeing new features, and often move on to more innovative competitors.

Similarly, test-driven development is a concept that’s touted as best practice, but, in reality, very few companies actually follow this practice. People don’t test from the start for the same reason they don’t floss their teeth: It’s unpleasant. But then one day you find yourself getting a root canal. There is a common perception that building testing into the development process slows things down, because the amount of code for testing can sometimes be two or three times what is needed to build a product. I find this thinking nearsighted.

There’s an easy way to avoid this issue — build in automation and test-driven development from the very earliest phase of a company (or product). Spending the extra time up front, rather than waiting for things to break, will save you time (and a huge headache) down the line.

Get to know the new DevOps stack

The entire software development and operations process used to be (and for many companies still is) manual. Thanks to a newly defined DevOps stack, comprised of tools purpose-built to simplify and automate each step of the development and operations process, taking advantage of DevOps can actually be quite simple.

Companies like GitHub provide a repository for writing and controlling the initial source code. CircleCI and Travis CI make continuous integration easy by automating testing. Companies like JFrog provide an end-to-end solution for storing and managing binary code, allowing developers to have full control over the software release flow — from development to distribution. And then there are companies like Chef that automate the next phase of taking that data into production. Sitting above all of this are containers like Docker and Kubernetes, which accelerate delivery and enable continuous deployment.

Companies that take advantage of these tools find themselves able to make changes to software as quickly as developers can write the code, without any down time.

Decentralize IT and empower developers

In addition to the tools and moving to a mentality of building for scale, you need a leader with a strong vision and commitment to making the organizational changes required. Nike, Facebook and Netflix are great examples of DevOps success stories — largely credited to their leadership. Having an executive-level advocate — likely a CIO or VP of Engineering — who believes in a meritocracy across development, operations and testing and prioritizing agile development processes, is a key factor for success.

The CIO must be willing to challenge the status quo and change the mindset of how developers and operations teams work together. While enterprises have traditionally relied on a massive, hierarchical IT organization to oversee operations and testing, DevOps requires decentralizing IT and empowering developers to create agile, scalable and innovative teams.

Startups have an opportunity to adopt this approach from inception, but for legacy companies, the DevOps shift is happening more organically — one project or application at a time, rather than across an entire organization at once.

Embracing DevOps is essential for companies to stay nimble and competitive. But the fact of the matter is that failing to have the discipline to do it the right way is holding them back. Taking the time up-front to bake in best practices, leveraging the latest tools for innovation and a willingness to dive in and reorganize your IT organization with DevOps in mind are the keys to deriving the most value from agile development.