5 Things Startups Must Understand for Scalability

We are discussing how Intrapreneurship is the New Startup. Most start-ups fail in achieving scalability because of the founders. Successful venture capitals (VCs) are always looking for winning teams in start-ups. Smart and intelligent ones that are willing to swim ahead of the tide. Willing to change, adapt and move before the market does. Which is why the same idea or product is still funded by several VCs, where each one is funding the founding team and not the idea. So if the founding team is not able to move fast or change faster, their team is dead before they start. Founding team holds the key of success / failure. As a venture capitalist, always seeking for intelligent ones that are willing to change, adapt and move before the market does.

Business is dynamic and change is a certainty

To get a MVP out of the door, the basics are still required - talented team, reduced technical debt (sooner than later) and a great Sales team. I think another big one is adding costly, and risky, operational complexity early in the lifecycle via adding new offerings/lines of business too early, losing focus, and/or taking on too much non-core activity internally rather than “contracting” it out (with scalability and limited investment). I also think they fail to plan for the next phase. Yes they can get a product or service up and running quickly but it’s that tricky next phase that often Isla hurdle. We find they often lack the breadth of skills to cover the areas a growing business needs such as roadmap and 18 month to 2 year planning or even HR or financial accounting. It’s about getting the right skills and learning to let go of responsibility too.

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Know your Zero Cash Date and be realistic around it

As for me, the technical debt is the most severe one. This is less common, but when it happens, it’s really rough. Do not blindly believe you can raise another round. Do not believe it will be easy just because you see “worse” companies raising rounds on TechCrunch. Test the market. Ask your existing investors. Know your Zero Cash Date and be realistic around it. Sending out investor updates monthly is a wonderful way to stay engaged with investors. KPI (key performance indicators) & financial ratios should be part of goal setting, transparency, & reporting to investors in reference to subscription models and software as a service (SaaS) companies.

Glossary Terms You Should be Aware of:

• The accounting rate of return (ARR) is the amount of profit, or return, an individual can expect based on an investment made.
• Monthly recurring revenue (MRR) is income that a company can reliably anticipate every 30 days.

Transparency is key

The same could be true about a company downfall of any size. Once the company starts keeping secrets from it’s managers, customers and employees, it’s headed for the chopping block. Founders do not seem to realize that they are out of depth as the demands of the company grows. Used to micro-managing in the initial stage they just cannot give up control or even trust somebody else to do the job. This is critical to success and trust. You can only work with what you have and your supporters, suppliers and investors can only help if they know where you really are. When given the facts its amazing how creative the solutions can be and how much people will be willing to give when there is trust and integrity. Don’t pretend you’ve hit goals when you haven’t. Many of us shrink back from transparency when times are tough. That’s 100% the wrong time to not be transparent. It’s transparency — with a positive spin — that gets you through the tough times.

Related: Treating People Respectfully at Workplace

Invest in an inclusive Workforce

Hire someone above your team members that can scale as soon as they stop scaling. But not before. Don’t just check the boxes for female, ahmadi, mohajir, PTI Tiger, whatever. If it’s a bunch of Chaudhry Bros you are not going to get the 360 vision you need to scale. If there’s not diversity of thought or experience at the table. When I look for a role, I check the webpage ‘about us’ photos. If it’s all desi charray, I pass. It will not be fun for me to work there, so I’m taking my awesomeness elsewhere! The problem here is that instead of hiring an accretive resource, you hire a cost center than can’t deliver sales/leads/upsells.

Related: Easily Firing People with Dignity and Respect

Governance/Internal Controls is key

Sure, the founder should probably still hold a majority stake in the company, but not necessarily run it, or else he can run it to the ground. One thing that startups do that hurt them the most: They fail to understand that the founder might not be the best CEO for them. He might be an excellent department manager and may have the business acumen to run a small, maybe mid-size company, but when the enterprise inevitably scales up and more levels of management are introduced by necessity, the CEO suddenly may find himself out of his depth. Putting good governance practices in right at the start and maintaining them. It makes raising additional rounds or debt that much easier and faster. 

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