From startup to scaleup, the key step for entrepreneurs
You're presumably familiar with the concept of the startup, but have you heard about scaleups? These are companies that have grown over the last three financial years at an annual rate above 20% in terms of number of employees or turnover and reaching this scale is the dream of any budding entrepreneur. Here we try to untangle the steps that need to be taken to take this great leap forward.
Many of the most highly-prized startups in the world in 2020 didn't even exist scarcely a decade ago. This list includes companies like Uber, WeWork, Epic Games and others which started from nothing, grew a lot in a short time and revolutionised the global economy with ground-breaking ideas, the opening of new markets and the creation of thousands of jobs. This dizzy growth is a result of a company strategy known in business jargon as scalingup.
WHAT IS A SCALEUP COMPANY: A NEW BUSINESS MODEL
The Organisation for Economic Co-operation and Development (OECD) calls scaleups those companies that have been growing over three consecutive financial years at an annual rate above 20% in terms of turnover or number of employees. This meteoric rise, which according to the OECD must start with a minimum of 10 employees, puts these companies one step ahead of startups, multiplies their chances of consolidating themselves in the market, and makes them more resilient when faced with a crisis.
The secret to the exponential growth of a scaleup lies in its scalable business model, its non-conformist mentality and its long-term sustainability. These three characteristics are fundamental to attracting the eye of investors and getting finance, something essential for any of these companies at their inception. The scaleup format is becoming increasingly popular around the world and is proliferating especially in the US, Israel, China and the UK.
SCALEUP VS STARTUP: DIFFERENCES
Scaleups and startups have very similar beginnings. However, in time the differences become clear, since they have different needs, concerns and goals. Let's take a look at some of the main differences:
- Scaleups always have scalable business models and the intention to expand into other markets.
- Scaleups are more organised and structured companies, with more internal protocols and more mature procedures.
- Scaleups hire more specialised profiles than startups and the roles of their employees are more defined.
- Scaleups have more experience and know their strengths and weaknesses better in order to keep on growing.
- Scaleups tend to offer more-developed services and products than startups.
KEYS TO MOVING FROM A STARTUP TO A SCALEUP: FROM ENTREPRENEUR TO CEO
It's not easy for a startup to become a scaleup. In fact, it is estimated that the great majority of emerging companies don't survive into their third year. What are the keys to making the leap from entrepreneur to executive?:
Pick the right time
The hardest part of upgrading a startup is knowing when to do it. The ones that get ahead of themselves or wait too long are doomed to failure.
Have enough cash
The companies that decide to make the leap need financial solvency to keep themselves afloat while they wait for income.
Keep your customers during the process
Customer loyalty towards a start-up shows that it has positioned itself in the market and is ready to scaleup.
Carry out largescale marketing
This type of strategy is fundamental in order to stand out, win new customers and grow in an increasingly competitive environment.
Automate tasks and processes
When a startup grows its operations become more complex. However, with the aid of new technologies many things can be simplified.
Set measurable targets
Individual and group goals must be defined, and they must be specific, achievable and quantifiable so as to know whether they are being achieved or not.
Hire the right people
Teams need to be made up of motivated, qualified and capable people to face the growth stage successfully.
MISTAKES TO AVOID WHEN BECOMING A SCALEUP
Impatience and inexperience lead to many emerging companies committing grave errors on their road to the top. Moreover, it's easy to make mistakes in a context where you have to make decisions constantly, resources are scarce and problems arise on a daily basis. In this section, we look at the most common failings that impede the growth of startups:
- Lack of good planning. It's very difficult to succeed if things are not clear and well thought-out in advance. This is where strategy is vital to avoid making mistakes.
- Lack of capital and leadership. Without sufficient investment and a leader who knows how to manage change, it's unlikely that a startup will overcome the challenges it will face.
- Making mistakes with new hirings. Not hiring in time, or hiring the wrong people, is a mistake that can ruin the step from startup to scaleup.
- Not seeking outside help. Lack of experience is a burden to growth that can be solved by seeking advice from other leaders or specialised advisors.
- Not connecting marketing and sales. In a scaleup these two should maintain a close relationship to keep their targets well-aligned.