Recently, after a board meeting and a series of investor discussions, I found myself pushed to be more ambitious.
This feedback prompted me to reflect on my journey at Instacart and to think about what I have seen in terms of timing a big swing.
“Leaders are paid to make a few big decisions right.” – Jeff Bezos
For startups, the challenge is twofold: staying alive and being prepared to take that big swing when the right opportunity arises.
It’s a lot like investing and the concept of waiting for the fat pitch. However, the natural clock of investor/team expectations, and your burn rate may not allow you the luxury of patience.
What Do I Mean By ‘Big Swing’?
In my experience, a big swing is a bold decision that involves significant risk.
It could mean making a large investment in organic growth or M&A, striking an uneconomical commercial partnership, betting on major hires, or launching an ambitious new product line.
It’s a move that takes you out of your comfort zone and has the potential to redefine your business—or lead to its downfall. It often requires peering into the future with very limited and imperfect data and making a bet on how things may play out.
Evaluating the Right Time for a Big Swing
- Real Options Approach: Consider whether the opportunity will be available later. For example, if competitor actions could remove the option later – think deeply about acting now and figuring it out later.
- Opportunity Costs: Assess the trade-offs between ramping up ambition and core business performance. Determine what’s more important at this moment. Challenge the often faulty trade-off that you can’t walk (manage the base business) and chew gum (be more ambitious) at the same time.
- Bezos’ One-Way Door and Two-Way Door Framework: Evaluate how difficult it would be to unwind the decision. One-way doors are almost impossible to reverse and require intense caution. However, while many things may seem like one-way door decisions, most decisions are actually two-way door moves. They just may take much longer to unwind.
Navigating Uncertainty
Many entrepreneurs I speak with struggle with when to increase the ambition of their business and take a large risk.
It’s crucial to remember: you need to stay alive to be lucky.
While things might appear to be going well, only the entrepreneur and their team truly know if the company can handle an increased pace without the wheels coming off.
Communicating with Investors
Investors often expect a consistent, upward trajectory.
When progress slows on one part of the business (e.g., core growth or margin improvement) to prepare for a more speculative big move, it is essential to communicate and bring your investors along for the ride.
I have seen operators take big risks, have them go well, but still lose their investors’ engagement during the process.
If you are trending flat for a few quarters while all your energies are on a less certain (but bigger) next horizon, they might mentally check out on your business. Just ensure you: (a) telegraph that things may slow down in the near term in service of dramatically speeding up in the medium term (b) re-engage them when you’re ready to accelerate again.
Good investors understand that sometimes, you need to slow down to smooth out processes so that you can take a big swing later.
“Slow and smooth is fast” – Mike Tully, D1 Capital
A ‘Big Swing’ At Instacart
At Instacart in 2014, we were evaluating taking a “big swing” by signing a transformative but extremely uneconomic contract with a large national natural/organic retailer.
Prior to this opportunity, we were steadily progressing by working with a few dozen small local grocery stores. We did not have a path to scaling the business quickly – which relied on getting adoption from large regional and national grocery chains.
We knew that while this deal could bankrupt the company, it also could serve as a catalyst to drive adoption of e-commerce with lots of mainstreet grocers. It was an (expensive) opportunity to topple a first domino.
We sought out lots of advice and there was a myriad of opinions – almost everyone recommended we not do the deal.
We assessed our internal capabilities – we had ~45 people total in the company at the time – and clearly did not have either the technical or operational resources to roll out with a sophisticated and hard-to-please client.
We decided to lean-in and sign the deal anyway because we knew if we didn’t do this deal, our biggest competitor at the time (Google Shopping Express) would, and we would have been relegated to being a small, niche, grocery delivery service in a few geographic markets.
Despite no evidence to support this other than our own instinct, we also believed there would be some point in the future when we could get so big and important to this retailer that we could re-negotiate our contract to fair economic terms.
We signed the deal, figured out how to launch the retailer successfully, and became so important to their business that 1.5 years later, we were able to renegotiate the contract with a dramatic price increase so that we no longer lost money every time we delivered groceries on their behalf.
The partnership with this retailer served as a forcing function, convincing other regional grocers that they needed to jump onboard Instacart to remain competitive.
Figuring out the right time to take a big swing involves patience, resilience, and most of all a gut feel about your business and industry. It also requires that you be honest about your own ambitions. Making that bold move can be the difference between leading the industry or becoming a footnote in its history.
But remember, you have to be in the game to hit the home run.