Reid Hoffman on the evolution of ‘blitzscaling’ amid the pandemic

When LinkedIn co-founder and Greylock partner Reid Hoffman first coined the term “blitzscaling,” he kept it simple: It’s a concept that encourages entrepreneurs to prioritize speed over efficiency during a period of uncertainty. Years later, founders are navigating a pandemic, perhaps the most uncertain period of their lives, and Hoffman has a clarification to make.

“Blitzscaling itself isn’t the goal,” Hoffman said during TechCrunch Disrupt 2021. “Blitzscaling is being inefficient; it’s spending capital inefficiently and hiring inefficiently; it’s being uncertain about your business model; and those are not good things.” Instead, he said, blitzscaling is a choice companies may have to make for a set period of time to outpace a competitor or react to a pandemic rather than a route to take from idea to IPO.

That doesn’t mean startups should avoid prioritizing breakneck speed, especially in industries like fintech and edtech, where the pandemic spotlighted a lot of potential. Instead, Hoffman thinks the pandemic’s real impact on his definition is that “the benchmark for what you may need to do in order to outpace your competitors to scale in an ecosystem may have changed.”

A lot of new money

Hoffman’s broadened view of blitzscaling blends well with his firm’s recent announcement of a $500 million seed fund. The close came weeks after Andreessen Horowitz closed its own $400 million seed fund.

Greylock claims that its new fund is “the largest pool of venture capital dedicated to backing founders at one,” and explicitly said that it is “willing to write large seed checks at lean-in valuations, which gives companies more runway to hit milestones without taking on additional dilution.” It’s fair to say that Greylock’s checks could help seed-stage startups afford to blitzscale while still prioritizing runway and other business-oriented resources.

“The capital is fungible. But what is more helpful is the experience in building the companies; the experience in building scale,” said Hoffman of Greylock’s new fund. He added that the firm takes the role of an active partnership in its investments, often helping portfolio companies with hiring or managing customers.

As capital gets commoditized to a certain extent, Hoffman emphasized that entrepreneurs should figure out the right things to be obsessed with.

Look at how big Y Combinator has grown — the sheer number of startups is huge. Given that number, you’re actually trying to work to have maximum differentiation to break out from the pack … Sometimes it could be the right partner. Sometimes it could be the right hire, the right strategy, the right go-to market idea or some combination of all the above.

Capital will follow that easily.

Mixed feelings aren’t a red flag

Hoffman also spoke about his new book that he co-authored based off his hit podcast, Masters of Scale. Riddled with anecdotes and actionable takeaways, the book’s strength is wholly related to the sheer diversity of entrepreneurs, from Spanx founder Sara Blakely, to Bumble’s Whitney Wolfe Herd. One of the major lessons in the book is that entrepreneurs shouldn’t be a simple investment for a venture team. Instead, they should be building a moonshot with enough ambition to confuse people.

He added to that with insight from his own firm:

Greylock has has over 55 years of history and [has] done analysis of its deals, and its best high-returning deals are the ones where there’s a mixed vote in a partnership. [It’s] where some people go “Oh my god, this is awesome,” and other people say, “No, we shouldn’t make this investment.” It’s … contrarian and right. If everyone goes, “You should have an e-commerce site that looks like this,” then you’ll probably make … some good money, but you’re probably not going to make the amazing … redefining new platform [such as] the Airbnb [or] the Shopify.

With Shopify, Toby couldn’t get any airtime in Silicon Valley because it was like, “No one is going to compete with Amazon; that’s not going to succeed.” That’s contrarian but right, because it was a new angle for doing it. And similarly, no one is going to rent a room in Airbnb … but no, no, no. That’s the new platform, the new experience for how do you connect in the local city.

That’s why you’re looking for some smart people who have a good reason for saying no, but you have, as an entrepreneur, as an investor, a reason why actually, no, this could be huge. And that’s what comes together for some of the most interesting investments.

The diversity of boards, cap tables, teams and mentors is inextricably related to having mixed feelings on an investment. Hoffman said he has noticed the industry shift to focus more on diversity over the last couple of years, but there’s still a long way to go.

“But I think the good news is that it’s happening,” he said. “Disruption is such a word of affection, because it’s not like destroy — it’s recreate and rebuild.”