I’d like to share some thoughts on this topic.
Much has been written about startups, of course. In Australia, the fledgling startup scene is finally showing some life: earlier stage capital is more available; young people consider entrepreneurship as a real career choice; and even the government is coming to the party to help, at lease “sort of”.
And it is well known that startups are more likely to die than be successful, but the rewards can be plentiful, as well.
But what about the startups that succeed, what’s next?
The overwhelming majority just turns into a going concern, growing slowly or not at all, allowing its owners and employees to make a living, and perhaps enjoy their craft. This is a great outcome and generates a significant portion of employment.
But what about the ones that have more potential and have owner(s) who want more than to just earn a living? Those are the rare animals that can become a “scaleup”.
However, whilst much value can be generated by a scaleup, the challenges faced are much less well covered and potentially much harder to navigate.
For starters, there are so many of them: virtually all aspects of a company will change when transitioning from a stable startup to a faster growing scaleup.
And whilst it would be easy to just mimic whatever the big boys are doing, that won’t do either.
Rather, a scaleup must pick the best of both worlds, learn from entrepreneurs and corporations, and then slowly shift its unique recipe as it grows up, over many years.
Generic examples might include:
- Processes need to be designed with scalability in mind – “MVPs” alone won’t do anymore. Yes experimentation and learning needs to continue, but it's no longer enough.
- Products needs to compete with a much bigger section of the market – just appealing to the keenest early adopters will limit growth. A structured Sales & Marketing approach is required to attract customers who are not necessarily looking to switch.
- Technology platforms need to be designed for the future – running the current volume on a smell of an oily rag is a recipe for disaster unless capacity and resilience is addressed before scaling up.
- The team is what matters – not a “lone genius”. A despotic, opinionated personality on the team can be toxic, whereas a diverse, empowered and collaborative team always wins.
- Investment will increase ahead of revenue growth – so profitability will look worse for a period. This may make people uncomfortable who may have fought for years prior to finally reach profitability, so it's key to be clear about what's going to happen before the numbers roll in.
- Collectivity matters much more – the entire team needs to believe in the new future, or faith will waver when difficulties arrive, which they will. Compensation needs to be structured such that everyone "wins and looses together".
- Shared values are essential – or the team will buckle under the pressure
- Multi-year planning is essential – making daily decisions on the fly is a recipe for disharmony and confusion
So what to do?
I feel that making an explicit decision to turn a successful startup into a scaleup is essential. All stakeholders must be clear about the massive changes this decision implies.
It’s better to spend the time to be aligned upfront and kick off later, rather than find out that key people aren’t on board with the renewed ambition of the organisation.