The Scale-up Minefield
A start-up and a scale-up are completely different entrepreneurial beasts.
Each requires a different employee skillset, focus and management.
To truly understand how a business moves from start-up to scale-up, we first need to understand the difference between the two.
Entrepreneurs and academics tend to define each by the biggest challenge they face.
A Start-up's biggest challenge is its search for a repeatable scalable business model.
A Scale-up’s biggest challenge is moving past the search phase and rather in the execution and expansion phase of the business model.
With over 4,200 tech start-ups, India has become the third-largest tech start-up centre globally. However, the number of start-ups that survive and scale is incredibly low. It would seem that scalability remains the missing piece to the start-up and scale-up ecosystem in India.
For those of you wondering - why even is the success of new business scaling important to a country?
Scaling businesses are responsible for hiring frenzys, create innovation and give the economy in question a competitive advantage. Basically, they strengthen an economy and are essential to India’s growth
Who doesn't want that?
Start-up failures notwithstanding, the Indian government has announced new initiatives and legal breaks to increase the survival rates of start-ups and thus the number of scale-ups. These new programs, funds and tax exemptions should create an environment for start-ups to navigate the scale-up minefield successfully.
- Tax exemptions granted to start-ups for three years and no capital gains tax.
- Less Government interference, no inspection on: labour, environmental clearances and other compliances for three years.
- Easier patent filing procedures and a reduction in fees for filing.
- The Start-up India network want to realise a target of 12,000 start-ups by 2020 and have created research parks or lobbied top companies to fund incubators as part of their corporate social responsibility programs.
- In late 2016, the Ministry of Science and Technology announced it will be investing just over 50 Million INR over the next few years, which is a 450% increase in allocation.
Although the Indian government may now be trying to resolve the way they support start-ups and scale-ups, there are several other factors which influence successful scaling. It is the duty of the business considering scaling to take the following factors into account:
Think about how much time your business is wasting by carrying out repeated operations manually? If you believe that you are wasting no time, this usually means you have not reached the stage where you are inundated with customers where you are playing catch up.
HINT: you’re not ready to scale.
If you are wasting time, start researching different technologies that could help you automate all your operational processes. You could integrate artificial intelligence, client tracking, canned emails, the list goes on. The best way to work out exactly what can be automated is to figure out, as your business grows, what you or your team are spending time on that they do over and over and over. It could be:
- Training Processes
- Sending emails
- Communicating with clients
You need to invest in your digital capabilities if you want to scale headache free. It gives you far more scope to plan, supervise and track your sales or services with accuracy.
Before you even think about taking your start-up to the next level you need to research and test what works and what doesn't.
Do you know what your core markets preferences and pain points are? Is your audience responding well to campaigns, products or services in the best possible way? If not, how and what amendments should you make?
Research your market, audience and even competitors on a regular basis to inform the way changes are made and the way your business grows. It is not a one size fits all policy. For some you could find that by running website tests and monitoring your marketing channels you get the best results, whilst for others you could find that conducting market research yields the best results.
3) Building a Brand / Company Culture:
There is no point in thinking about scaling if you have not established a brand. It is management's responsibility to go into the outside world and not just establish a visual identity but its purpose. Users don't just want to see a logo and a tagline, they want to understand your vision and what you uniquely stand for. The best way to achieve this is by going out there and having an integrated marketing strategy (social media, guerilla and/or traditional advertising).
Another way of building a brand is by creating a reputable company culture. It’s no surprise that failure or success of a business relies on its employees. This stands true especially in a time when a major chunk of any start-up or scale-ups workforce is dominated by millennials. This generation is digital-native, always-connected, and people care about more than just the paycheck. They care about the company culture.
Just look at Facebook and Google, who are often cited as the best organisations to work at, simply because of their friendly and flexible workplace culture. This is especially important for India who has the youngest population in the world.
4) Finding the Right Investors:
A clash between company interests and investor interests will always create problems resulting in your business going up in flames. The founding partners and group need to be clear on why they want this investment to start with. Try to think of who matches you as an investor. Think about your network. Surround yourself with as much quality and diversity as you can.
For a minority of you, your business may be at the stage when you’re thinking about scaling abroad. There are several things I would consider:
1) Different Tax regimes
2) Different Privacy Laws and obligations
3) Different ways of doing business
India is taking bold new steps to rival silicon valley in the amount of start-ups that scale successfully. Here’s hoping it all pays off.