accelerator : The Challenges, Risks & Opportunities in Scaling Your Startup
The L-SPARK team spoke to Wesley Clover’s Vice President of Corporate Development and Technology Strategies, Ben Morris, to ask him a few questions on what it means to scale a startup and the risks and rewards that go along with it.
Why might a startup want to scale their operations?
BEN: Great question! Within the context of the L-SPARK and Wesley Clover portfolios, I’ve seen a pile of examples where scaling early can both hurt or help businesses. There is certainly a delicate balance required to get this right – scaling comes in many forms including the ability for a product to scale (ie. technical) or an organization to scale its people (ie. think rapid growth locally or geographic expansion). Let me try to use a couple of examples:
English Ninjas is a learning platform that connects people seeking to learn or practice their English with folks from all over the world. Ali Eyüboğlu, a serial entrepreneur, and the founder of English Ninjas, decided at the beginning that he would build English Ninjas to scale early. The backbone for English Ninjas was built to scale big from day one by taking advantage of elastic compute and storage capabilities on Amazon. He also partnered with a global technology leader to maximize the voice and video experience for English Ninjas users.
CareerJSM is perhaps the opposite of our first example. They sell software to companies that help job seekers find jobs. For CareerJSM the priority is to build software which is easy to integrate into 3rd party systems. Since much of what they do is to help job seekers navigate the difficult task of finding employment that matches their skill. As a result, it is paramount that company effort is placed on building a smooth and frictionless user experience.
What are the challenges or risks associated with scaling?
BEN: Cost and not just money. Think back to your college and university days when you studied opportunity cost. Scaling is tough and it comes with much opportunity cost. For every minute a company focuses on scaling it means there is a minute taken away from critical commercial functions like selling! On the other hand, depending on the desired outcome, if a company doesn’t invest to scale then it will have to live with those decisions for many years. This can come in the form of a crappy product, lack of tools, painful processes or a lack of trained human resources.
How can a startup prepare its people and processes to scale their operations?
BEN: My advice is to follow the lead of others. I’ve always liked HSBCs tagline “World’s Local Bank – Think Global, Act Local”. I’ve also had the pleasure of working with Sir Terry Matthews, founder of 100+ successful companies and the only Canadian to start 3 x billion dollar companies, one of Terry’s favourite lines is “I’d rather own 1% of IBM than 100% of a corner store”. Whether a founder is starting a business or trying to grow its important to remember a couple of these simple quotes.
How can a startup scale and still maintain a startup’s core culture?
BEN: Company culture is tough! Culture comes with a cost and it doesn’t come easily to most founders. What is the company culture? Is it the company décor, free lunches, company activities, free beer after 5 pm, free dinner for anyone staying after 6 pm, free uber rides for people who stay past 9 pm? I’ve seen it all and it can be all over the map – I can tell you one thing – company culture often doesn’t have a bearing on what you see on Glassdoor and other employer review sites.
The most successful companies we have in our portfolio have figured out a way to mix hard work and company fun. Company culture is most successful when the senior leadership team values their employees and goes out of their way to make the lives of hard-working staff a little easier. Staff recognize culture, they put a value on it and they reward the company by saying great things about the brand, sticking around to work hard and see their efforts grow and pay off.
In what ways can a VC help a startup scale?
BEN: A start-up has very little oxygen – others call it cash – but to illustrate the point oxygen works better since you need it to live. It costs oxygen to live and every action uses a bit of that valuable resource. A start-up should lean on its VCs as much as possible to do non-core jobs.
Some of the best CEOs I know ask their board to work on projects between meetings. Often this involves getting VCs to reach out to their own networks for help and feedback or early sales leads. The interests of VCs are aligned with the companies they invest in, as a result, CEO shouldn’t shy away from asking for help because chances are they want to contribute!
What is the one thing startups should keep in mind when scaling up?
BEN: Stay humble and listen to your customers. As a founder, CEO or any person working for a company the trick is to use your senses proportionally – you have 2 ears and 1 mouth. Listening is hard but it will help you build your company!