Getting ready for scale-up

Scale_up_altWe look to make Series A and Series B investments into companies, and so we find ourselves often asking the question: is this company ready to scale up?

Perhaps one of the most important things about the start-up and scale-up journey is having to “change gears” as one grows.  Scale-up for a technology company typically mean achieving a non-linear type of growth, and leaders of the company to be effective will have to grow with the needs of the company.  That’s why courage in entrepreneurs is much valued, and why adaptability is high on the list of qualities we look for.

Are you scale-up ready?

The start-up to success journey (typically ending with an IPO or a successful sale) is so non-linear it often requires big gear changes.  To put it simply: you first focus on building a product (probably after identifying a need or a market gap somewhere) and iterating until you “get it right”, then you focus on developing and growing the market for the product and services and finding the right strategies and the right team to help you get there.  You go from a company with essentially a product team to one also with a sales team.  Eventually, you would have to stitch other teams in between these two as well and keep upgrading them as well (one of the most useful books written about the entrepreneurial journey is The Second Bounce of the Ball), and when you continue to scale up your focus next changes to a different type of fire-fighting: managing the complexity of an organization where most people are no longer very entrepreneurial and don’t know each other by first names, and you expend energies to stay ahead of the curve and compete with the new upstarts. We have found our thinking about the art and science of building a company with very fast growth (“scaling”) to be quite aligned with this.

It is in this third phase that Clayton Christensen famously and eloquently wrote about: incumbents often miss the disruptive innovations despite having the best-trained managers equipped with the most technologically advanced resources and maintaining relationships with industry’s most valuable customers, and even if they are well-run companies focused on innovations.

It is this second phase that VCs like us love – it is exciting but it is also very difficult – many small young companies do not succeed in scaling up, and sometimes even after a few tries or “pivots”.  There are of course many unknowns – it goes with the territory.  But one of the most controllable parts to it is this: get yourself scale-up ready before you commit money and resources into scale-up.  If not, you could easily spend a few millions and realize at the end of it that the product-market fit is still not there.   Most importantly, you lose a lot of valuable time!


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