248. Scaling Rackspace, The Evolving Responsibilities of a Venture-Backed CEO, and Confronting Big Tech Monopolies (Lanham Napier)

Full Ratchet Lanham Napier BuildGroup

Lanham Napier of BuildGroup joins Nick to discuss Scaling Rackspace, The Evolving Responsibilities of a Venture-Backed CEO, and Confronting Big Tech Monopolies. In this episode, we cover:

  • You took on capital from Sequoia, Norwest, and others while at Rackspace.  What was the biggest challenge to taking on venture capital?
  • How were you able to move from the early product-market-fit days to true scale… what were the defining decisions/actions that helped you expand exponentially?
  • As a company leaves the product-market-fit stage and reaches scale, what is the job of the CEO or how does the job of the CEO change as the company scales?
  • You’ve talked about investing “long-term capital”… what do you mean by that?
  • How have you created a fee-light model, where management fees are eliminated?
  • How do you guide CEOs that have been conditioned to think in 12-18 months cycles, when the long-game is much more critical?
  • You’ve hired and developed a lot of folks over the years.  What advice do you have for young CEOs with regards to selection and/or development of people?
  • Leadership — great ones emerge in hard times.  What are some of the most important lessons you’ve learned about leadership?
  • We’re in an environment where the largest tech companies have monopolized a lot of the upside in the market.  Of course, recently many of the CEOs appeared in front the house judiciary committee.  Where do you stand on the position of large tech companies and how that impacts emerging startups?
  • Do you think China is a threat to the U.S.’s position as world power and tech leader?
  • What would suggest we do about it?

Guest Links:

Key Takeaways:

  1. Lanham’s biggest challenge when building Rackspace was his own personal growth. If his company was growing 70% YoY, he needed to exceed that with his individual growth.
  2. He offset this by understanding how to identify people more skilled and talented than he was. It’s difficult to rapidly grow in so many areas, so the best way to combat this is by developing a team at a high rate.
  3. When it comes to coaching, Lanham has a core belief that people are talented. With the right conditions and environment, people shine. A diagnostic or understanding of talents and strengths allows for those situations to be recreated.
  4. It’s important to be intentional about the amount of stretch or strain applied. Everyone’s relationship with stress and how it affects performance is unique. Understanding what the right amount of stress is to maximize performance is key for long term success.
  5. BuildGroup holds permanent positions on a startup’s cap table. This allows them to play a much more strategic long term game with their portfolio companies. BuildGroup believes that transformational companies are built past the typical, 5-7 year lifespan that most founders and investors opt for. BuildGroup aims to be there as a complimentary channel for founders who choose to go the distance.
  6. BuildGroup’s management fee structure decreases over time. Their thesis champions high efficiency and a deep sense of alignment with their shareholders.
  7. Lanham believes that product market fit never ends. Markets are dynamic and there are always emerging qualities and desires that the founder needs to satisfy. In order to scale successfully, one needs to continuously solve for product market fit. There is always a diminishing return and the need to innovate never ends.
  8. One of the keys to scaling is building a strong internal growth system. By anticipating what talent, skills or systems are needed to fulfill future demand, one can reverse engineer how much time and resources is needed. 
  9. Breaking things is a natural byproduct of scaling. Embracing that and building systems in advance to account for that can help with the growing pains.
  10. Growth is a complex system. There are many variables and points that have varying weights. For example, it’s important to understand that removing various friction points won’t necessarily accelerate the system. Think about growth as a holistic system.
  11.  When it comes to relationships, there is no neutral. Only forwards or backwards. Either, a relationship is actively being nurtured and improved upon, or it’s falling and declining.