Don't Fail As You Scale
Key questions and their honest answers that founders must seek before pursuing heady growth
Startups often confuse their post-launch phase with a steady-state where they can rest easy post their herculean efforts in launching their venture. Nothing could be farther from ground reality as a majority of startups languish in a ‘valley of death’ in their early months/years, sadly to never recover and eventually to become a mortality statistic. Many startups face existential issues right after their launch while they scramble to acquire and retain mainstream customers. Additional challenges of building the right team and managing finances accrue as their identity evolves from that of a startup to that of an operating organization.
Founders are often in haste to raise funds and to scale-up. When a startup attempts to grow without ensuring a strong foundation of product, team, finance and marketing, premature scaling can be disastrous. Each of these elements must be independently solid, as must the collective, for the startup to survive today, and thrive tomorrow. Based on our work with hundreds of early and growth-stage startups, we suggest that new ventures answer the following questions in their quest for growth:
How are your customers reacting to the product/service so far?
The nascent venture’s founders must engage first-hand with customers and partners to understand their experience with the venture’s offerings. Keep in mind that customers never interact with a product/service in isolation – their experience is shaped by the quality of outreach/marketing, experience with the partners, engagement with the sales team, and the handholding provided by your technology platform and apps. Conversations with the key stakeholders often lead to product improvements, business model pivots, further market segmentation, or team changes – hence, an open mind is essential. Nathan Furr, author of Nail it then Scale it said it best, “At the heart of it, to be a successful entrepreneur you have to learn to change and adapt.” Specifically, feedback on the product/service provides deep insights into how well our product/ service is addressing real-world customer needs (and problems), and the extent to which its features are over, or under, whelming customers.
How to gauge the financial health of the startup?
A common mistake made by first-time founders is to assume all is well as long as revenues come in at a good rate. It is ‘not’ the time to allow expenses to go off-radar. During the early months of the launch, when profits, if any, are scarce, startups need to keep a keen eye on their cash burn—pay special attention to your customer acquisition costs and product development investments as you begin to service more customers. An upfront effort in setting up a financial/cash-flow dashboard can save many unpleasant surprises downstream. If you don’t have a financial wizard as a co-founder, make it a point to understand the basics—simply ignoring it or outsourcing it is too risky.
Have you defined clear roles and responsibilities within the team?
Ad-hoc juggling of tasks may have been the need of the hour during the startup launch phase, but at the pre-scale stage, the venture needs discipline and coordination. The founding team must attract talented team members and align them with the organization’s operations, values, and purpose. It falls upon the founding team to define roles, responsibilities, and deliverables for each team member, along with his/her position in the larger organizational structure. This upfront clarity on goals is needed before people delve deep into execution. An organization structure with delegated responsibilities allows people to evolve into accountable, responsible leaders and managers. Without this clear focus on human effectiveness and coordination, the venture may expand itself beyond its capabilities too soon.
Do you have defined key systems and processes for the venture?
Founders must identify key customer-facing and internal activities that can be enhanced through standardized processes, and which must be continuously improved through qualitative and quantitative feedback. Founders must strive to create a common “nerve center” for the organization to coordinate activities, share experiences, and to monitor the quality of service to the customers. Practitioners and specialists identify business processes that ensure high-quality business operations (for example, customer acquisition, product quality, cash flow management) and organizational activities (for example, recruitment, training, and administration).
Is the heady lure of growth, funding, and associated adrenalin rush, making you jump into scaling-up too soon? With responsibility and objectivity, startups need to evaluate their product/service, financial, and organizational readiness to scale. Building a startup brick-by-brick is exactly like constructing a building that will last for decades, if not centuries. A strong, sturdy foundation assures resilience and reliable strength.
Ajay Batra is a startup founder, mentor, and an active contributor to the Indian startup ecosystem. Currently, he is Executive Vice President at Venture Fastrack – an initiative of the Wadwani Foundation. He is the Founding Director of Centre for Innovation and Entrepreneurship at Bennett University. He also headed Bennett Hatchery – the startup incubator.
He serves on several national committees of FICCI and CII, and is a sought-after jury member for national and international startup competitions like HULT Challenge, CII Startpreneur Awards, Babson Challenge, ET Power of Ideas, Innovation Launchpad, etc. He was the only Indian to be selected for IDEO ’s global program on Design Thinking for Social Impact, and has recently been recognized as Top 10 entrepreneurship contributors in the world by Arist, USA
His next book, “The Startup LaunchBook” (Wiley) is slated for a late 2020 release.