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Scale AI CEO Alexandr Wang on the “common startup failure mode” of hiring too many people

November 20, 2024

Alexandr reflects on the mistake of rapidly hiring in 2021 and 2022 to grow into it’s $7.3 billion valuation before having to lay off 20% of its workforce in 2023.

“It feels very logical that more people equals better results and more stuff being done. But if you have a very high-performing team, it’s nearly impossible to grow it dramatically without losing all of that performance. A high-performing team is almost like this very intricate sculpture. There’s this interplay between all the people the team. If you add a bunch of people to that — even if the people are great — it just screws the whole thing up… You want to keep those high-performing teams intact as long as you possibly can.”

He also reflects on a common mistake he sees founders make:

“I think a common startup failure mode is that you have something that works but everybody in the company is really junior. So then things are scaling but all the wheels are falling off, and your investors tell you, ‘Hey, you should hire some executives.’ So you go through the exec searches, you bring in an exec, and then you give the exec a lot of rope, and your exec says, ‘Hey, we need to hire a massive team to hit our results.’ And you’re like, ‘I’m pretty inexperienced. You seem really experienced. Let’s do what you say.’ And the reality is that almost always results in ruin.”

Alexandr instead recommends letting executives get steeped in how the company works before making sweeping changes to the company. He also urges founders to have a more realistic view of what an executive can do for your business.

“There’s a founder fantasy, which is: ‘Oh, I’m going to hire a bunch of incredible execs. They’ll do all the stuff I don’t want to do. And I’m going to be able to sit back and watch the machine work.’ That’s also extremely realistic because the reason you are a good founder CEO is because you make very good decisions over an extended period of time. And to pull yourself out of the decision-making loops would be kind of crazy.”