“There’s no shortage of remarkable ideas; what’s missing is the will to execute them,” says startup guru Seth Godin. Fortunately for us, there is a group of people out there — entrepreneurs — that is willing to take a risk on those remarkable ideas and turn them into reality by founding their own startups.
That may be easier said than done, though. Startups — which, unless they are very fortunate, are unlikely to have anything to sell during their initial stages — survive on investments, and, according to industry experts, it takes nearly two years after their establishment for startups to receive Series A funding. That means the company has to survive the usual trials and tribulations on the seed money it raised, and for the large majority of startups, that is coming out of the pockets of the founders and their friends or family.
So when a startup talks about “scaling up,” it means getting to a point where they are viable enough to get outsiders to invest, or robust enough to develop a product or service to sell. It’s not just industry jargon. It’s a matter of survival, given that nine out of 10 startups fail. In a sense, the choice for startups is binary: Either scale-up and succeed, or throw in the towel.
To avoid failure — and to reach the point where they can grow, and even aim for an exit — startups need to avoid the pitfalls that could hamper, or even destroy, their project. That means developing a clear plan to avoid those problems, and ensure smooth operation while the scaling-up process takes place, whether during the crucial first couple of years or later on, when more funding and business come their way. By getting control of these areas, startups can ensure that they survive to tell their story.
The 3 Things a Startup Needs to Have to Successfully Scale Up
- Good communication.
- A strong team of carefully selected early hires.
- Senior management that shares the founders’ vision.
Good Communication
In order to ensure that everyone in the company — founders, later hires, and top executives — is working toward the same goal, founders need to communicate those goals clearly. By far the number-one reason for startup failure is misreading the market — creating a product or service for a need that is already served by someone else, or that the market is not interested in. Often, engineers and tech experts in the organization will concentrate on perfecting technology, focusing on specific functions that may not be relevant to the saleability of a product — or may even hamper that saleability. Ensuring good communication within the organization — getting and addressing input from sales and marketing, accounting and finance, etc. — will ensure that organizations develop a product or service that they will be able to sell, and help them hone their message for investors and customers, thus increasing their chances of getting additional funding and developing a customer base.
Good communication in the organization also entails developing a clear, detailed plan that includes what everyone’s responsibilities are, how they are expected to work with each other, and how their jobs fit in with the overall objectives and vision of the company. It may pay to bring in an outside consultant to train staff in how to communicate with each other, and avoid the causes of communication breakdowns.
Careful Selection of Early Hires
Running out of seed money is the second most common reason for startup failure, but “not having the right team” is a close third. Every organization is blessed with a certain amount of time and energy to carry out its mission, and it’s crucial that that energy be used for the success of the company. If that time and energy are used in negative ways, such as for personal or even professional arguments about who is in charge of what, what the direction/vision of the company should be, or any other essential (or even peripheral) issue, there is less available to ensure success. And by success, of course, we mean survival.
Thus, ensuring that hires are the right fit for a company is essential — especially early hires, who are going to be crucial for proper growth. Candidates need to be technologically qualified, of course, but they also need to share the vision of the founders — to understand what the company is trying to do, and get on board with it completely. They need to be able to take initiative, to carry out tasks that go beyond their job description when needed. Candidates who are not flexible or smart enough to figure that out don’t belong on the team.
Senior Management That Shares the Founders’ Vision
The same goes for senior hires — VPs of marketing, CTOs, CFOs, etc. As a startup scales up, there will be more to do, and founders who have been carrying out most of the administrative, sales, and even technical management tasks themselves will need to hire qualified people to help out. Here, too, those managers need to be on the same page regarding objectives, vision, and business plan as the founders and the rest of the team.
Especially if a startup is fortunate enough to acquire Series A funding, they may want to hire some big names in order to raise their profile. There’s nothing wrong with that, but again, companies need to ensure that these “star” managers are in full agreement with the agenda of the company, and that their policies and actions are in line with that agenda. While it’s true that executives are hired for their talent, capabilities, experience, and ideas, they were also hired to help the company advance its goals, and not to impose their own ideas. Individuals who have a reputation to uphold often have an agenda, and that’s fine as long as their agenda fits with that of the company. It must be clear even to executive hires that the founders are the ones guiding company policy at all levels.
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Scaling up, it turns out, is not just an objective for startups — it’s a lifeline to survival. If you’re not growing, you’re dying, and to avoid dying, startups need to use all the tools at their disposal. Proper communication, a staff that can work together toward a common goal, and the right kind of management are the building blocks of that scale-up effort. And by properly managing the scale-up process, startups can increase their chances of becoming the next big thing — among the 1 percent of startups that go on to become the household names powering the tech economy, the companies like Uber, Airbnb, Slack, Stripe, and Docker.
