The Startup Scale-up Challenge
Every tech-based startup company goes through similar business cycles. The initial challenge is identifying and building a product offering that solves a significant problem. While monetizing that product or service is the primary measure of success, landing on the perfect product/market fit is never the endgame.
The next challenge for most startups is one of scale, and this phase of a startup’s development is no less trying than the first. This step brings new challenges, most of them never before experienced by the venture's founders and the leadership team.
The fierce competition for all kinds of resources, including human capital, promotes the natural selection of those businesses best fit to thrive. Moreover, qualified human capital is much less abundant than money. Bacellar Inc. provides superior talent management skills, working with startups to help them successfully manage the scale-up phase of the business cycle.
Complexity as a New Variable of Business
A company that moves into the scale-up phase of the business cycle has already achieved a significant level of success. It has created a new offer and proved the demand for its product/service. It has clients that provide positive referrals about the business and compelling stories to relate. It has achieved a level of confidence that prompts investors to put more and new money into the company.
Even then, all of that is not enough to succeed. The achievements of the past and the new money in the bank only prepare the ground for the future. Success is not to be taken for granted.
Indicators of when to bring Bacellar Inc. on board
|Angels, friends and family money||PE/VCs and other institutional investors|
|Bootstrapped/garage-based||Trendy and “cool” leased space|
|Incubator promising venture||All the signs of a potential unicorn|
|"Let’s test this new business"||“Let's do it!"|
|Mentors and business advisors||Board of Directors and Governance Committee|
|Me, my friends and friends of my friends||Headhunters and professional executives|
|Near-home clientele base||National footprint in one year, planning for international expansion next|
|Sales target of $1-2 million/year, no money in the bank and some credit card debts||Sales target of $10-$20 million/year, with cash on hand and a line of credit from the bank|
|Total headcount of five, including the three co-founders, one unpaid intern and an undergrad developer||From 20-100 new employees planned for the next 12-18 months|
The significant change experienced by scale-ups goes beyond the new size and dimensions of the business, which are, in themselves, a challenge to overcome. Many startup founders and leaders equate the scale-up phase of the business cycle with "let’s make it a bigger success," and underestimate the complexities of a larger market scale. Managing complex new business problems is the key to success when scaling up.
The challenges of the scale-up business cycle are often taken for granted because the leadership team tends to believe that old solutions will apply to new and bigger problems. In reality, more significant problems will require new and different solutions to achieve a higher level of success on a whole new scale of business.