Scale 10X with Court Lorenzini (Founder/CEO Docusign)
A conversation around building your startup, making the right bets, and achieving operational leverage as an organization.
In a startup’s journey from idea to scale, only a handful of leaders get the opportunity to lead a company through 10x and 100x growth. This startup stage is so infrequent that there are far and few opportunities for executive teams to proactively learn and grow into the role.
We created the Scale10X program at Doorstead to help our executive team be more effective leaders for scale. In our first session, I had the pleasure of sitting down with Court Lorenzini to talk about operational leverage and growing a business 10X.
Introducing Court Lorenzini
Court is the founder and CEO of multiple successful technology startups, including DocuSign and Point.com. He serves on the boards of several early-stage companies, and is an active investor and advisor to Doorstead.
I met Court over a decade ago during one of my previous startups and he has been credited with always giving me the tough advice that I need to hear. When I was leaving Uber, most people told me “good luck,” but he told me to “think about all the reasons my new business won’t work and to systematically disprove each one.”
His contrarian and straight-to-the-point coaching has been instrumental over the years. So, you can imagine my excitement when he agreed to share his lessons with my leadership team.
Court's Entrepreneurial Journey
What inspired you to become an entrepreneur?
Court’s father was a big role model for him and a fellow entrepreneur. He was an early VC and founder of a handful of companies including SILTEC and Sun Power ($SPWR). With this exposure, he was able to learn through his father’s experience and build a repertoire of experiences that could help him and other founders.
What was the aha moment to create DocuSign?
Court was approached by a former colleague, Tom Gonser, who wanted to offload the assets of a failed company called DocuTouch. Court ended up acquiring the IP-DocuSign + patents. Tom’s initial idea was to create a document management system (like Adobe, Microsoft), but they quickly realized there was a gap between electronics document creation and document storage and implementation. This gap created a huge opportunity.
How do you define success for a startup?
Court believes that milestones are key in defining success for a startup. These milestones include the first paying customer, positive signals on customer acquisition costs relative to LTV, and a path to positive unit economics. It’s also important to celebrate wins at each phase. Success gets more precise at each milestone.
What does it mean to make something that is scalable and repeatable?
Court believes that good metrics are important. It is important to follow key metrics and demonstrate that they’re improving over time (e.g. acquisition costs). He also cited ‘Crossing the Chasm’ by Geoffrey Moore, where he suggests that it’s easy to think scale is going smoothly if you’re following revenue growth. But it’s important to have discipline during this phase of scaling and to focus on the less sexy parts, such as making the enterprise professional and improving support. It is also important to have the right mindset — reframing “less fun” activities in creative, positive ways.
You often talk about proving that an idea would not work and identifying key risks. Can you elaborate on this and why it’s important?
Finding the fatal flaws is critical to success. How can you kill the idea? There are few original ideas that exist, so there are always predecessors who have failed. It’s important to investigate and even reach out to those who have tried and did not succeed to learn. The key challenge is to identify solutions to the fatal flaws, and it is better to do this early and often.
Scaling 10X
We asked Court about his experience going through different company inflection points, managing his own growth with the growth of the company, and the toughest management or leadership lesson he’s learned.
What was your experience going through different company inflection points?
Court’s experience going through different company inflection points has been that certain employment levels (10/40/100 employees) each represent a meaningful change in terms of hierarchy and process. When a team is small (less than 10 people), frequent and close communication is possible and responsibilities can be shared. As the team grows from 10-40 people, it requires more specific division of responsibilities and objectives. As the company expands from 40-100 people, day-to-day interactions start to diminish and it is essential to communicate the broader business context to everyone to ensure alignment on purpose. Finally, when the team reaches 100+ people, it is essential to communicate the "why" between leaders and team and introduce formal processes to ensure everyone is on the same page.
How did you manage your own growth with the growth of the company?
Court recommends personal coaches (external to the org) who can help think about deliverables and career paths. He also found CEO groups to be helpful. He believes that coaching is more important (personal dev) than training (skills dev) at a leader-level.
What was the hardest management or leadership lesson that you’ve learned?
Court believes that hiring and placing talent is one of the most difficult challenges, as it can lead to job allocation and hiring mistakes. He eventually created his own talent evaluation methodology, using it to create high-performing teams, which he considers one of his biggest successes.
What common mistakes or pitfalls have you seen companies make as they scale up that we should watch out for?
Court cautions against trying to diversify revenue streams too quickly. He believes it’s important to solve the challenges of scaling the initial successes first, otherwise the team will quickly become overstretched. Even a relatively small variance from the initial offering (10% difference) will lead to a multiple of differences (sales model, messaging, pricing, etc.) that increase unit economics and compromise the organization. It’s important to secure beachhead customers before doing this, where unit acquisition costs are decreasing with each new customer. He also warns against spending too much on sales and marketing too fast based on early signals.
What are unit economics and capital efficiency? When and why do they matter?
At the stage where investors are needed to fund the growth, the economic model must make sense to investors, otherwise the business doesn’t make sense and they won’t invest. Positive unit economics are critical; can the company scale at a profit, vs alternative and competitors?
Operational Leverage
What are the essential elements of a well-designed operating system?
Court believes that it’s important to identify measurable and manageable outcomes (e.g. KPIs). He recommends thinking of everything as a business process with critical outcomes, and that this can help frame, identify, prioritize, and manage the challenges.
How do you think of change management and navigating product-market-fit? How do you evaluate strategic investments and whether they have positive ROI?
Court suggests creating an internal scoring system that can evaluate value creation for both “in-work” and “parking lot” initiatives. This helps with discipline, prioritization and planning. It also helps to effectively communicate to stakeholders why certain projects might be prioritized.
Why is communicating the “what” and “why” in a simple way important?
Entrepreneurs love describing the “what” (e.g., features), but customers buy for the “why” — why does it matter to that person? What will they get that they don’t already have? How does it impact the person or organization? Simplifying the buying decisions for customers is important.
What are commons pitfalls at the scale from $10m to $100m in revenue?
Court warned of the temptation to take all of the capital and grow to lots of markets simultaneously. He believes that there is a right time for this - when unit economics are good, that’s when it’s important to lean in. He also advised against over hiring, noting that companies win on best execution - profitably, sustainably, and in a way that makes sense.
How did you balance moving fast, growing fast and maintaining the company culture?
Court believes that the most important cultural lever is to align people’s roles with what they do well. He also suggested creating a value creation scoring system to help communicate the “why” so that all employees understand their contribution and how it impacts the goals of the organization.
How have you and your portfolio of companies leveraged customer experience to fuel growth and retention? How does this change as the company moves between phases?
Court suggested that if feature development isn’t attached to the “why” of improving customer experience, then the features aren’t helpful. He also suggested having a process for customers and teammates to pitch ideas that can be assigned to the “parking lot” with rewards if the idea is implemented.
Closing
Court’s advice from his experience as an entrepreneur and investor has been instrumental in helping us navigate our own journey. Through countless conversations, he has provided us with tools and frameworks we need to make strategic decisions. We are grateful for Court’s guidance and hope that others can learn from the lessons that he has shared with our team.