Going From Start-up to Scale-up Without Messing Up: Challenge Accepted
So, what exactly is a Scale-up? Switching to scale-up mode: when is the right time? How to go from start-up to scale-up? 8 valuable tips Objective to the moon: the evolution from scale-up to unicorn?
You've done the hard part (well, almost): brought an idea to life and launched a successful start-up.
What's next? It's up to you to decide, because after this stage:
- either the company disappears,
- or it gets bought out,
- or it becomes a scale-up.
And if you're here, it's because you intend to develop your company and take it to the next level! You're in the right place, because you don't become a scale-up by accident, but by being well-prepared, and that's what this article is all about.
We had the chance to interview Gilles Bertaux, CEO of Livestorm, on the exciting topic of scaling your company. His software specializes in unique video conferencing software. He's been there, done that, and considering the success of his scale-up, needless to say, there's a lot of good advice hidden in this article. 🤫
On your marks, get set? Scale up! 🚀
So, what exactly is a Scale-up?
A scale-up is a start-up that has succeeded in proving the solidity of its offer and its business model, completing a phase of strong growth to change scale. It has scaled up to accelerate its growth with lightning speed.
It can be recognized by different criteria:
- at least 10 employees,
- a minimum annual growth of 20%,
- exceeded 1 million ARR.
☝️ Does your company have the potential to be a scalable startup? Because not all business models are necessarily compatible. Your business must have the intrinsic ability to operate with virtually the same resources for 100 customers or 1000. It will then be able to easily multiply its turnover while maintaining good profitability. Your revenue must therefore depend as little as possible on variable costs.
Switching to scale-up mode: when is the right time?
The question of timing when it comes to scaling is a touchy one, as start-ups that fail are often those that jump the gun by launching prematurely.
74% of startups fail due to premature scaling
Let's quickly review the different stages of a start-up's life cycle, to better identify where you stand.
Phase 1: Discovery
Go to market mode activated! You launch your MVP (minimum viable product) and test it on the market to see if it meets its target by offering a solution to a problem. This is a phase where the product often evolves and is fine-tuned to get closer and closer to the famous product/market fit.
Phase 2: Validation
The match between your product and the market is starting to happen (your customers love you 😍 )! We have initial proof that it can work, and you’re starting to get things under control. However, you’re not yet fully equipped to handle a scale-up. This is where you'll have to start giving yourself the means to achieve your ambitions.
Phase 3: Efficiency
You will slowly start to accelerate things on one hand by putting some cash in the machine, and on the other hand by optimizing your activities. It is now time to think "business" (and no longer start-up) and start building its foundations before seriously accelerating growth. This requires different elements:
- anticipating the resources needed to recruit,
- raising funds,
- optimizing your processes,
- testing the scalability of your IT systems,
- choosing your KPIs, etc.
Phase 4: Scale, this is it!
This is where things really accelerate. Your foundations are solid, all you have to do is make good use of the funds raised to feed the machine and move to the next level! Keep your focus on continuous improvement though, and be sure to use the following tips to maximize your chances of success.
💡 Each phase is important and even if it is tempting to cut corners (carried away by the energy of the moment), it’s better to keep a cool head. Yes we know, it's not always easy with all those client requests and sales, but don't forget that the most common mistake is wanting to rush.
Take the time to settle down at each phase and take a step back to understand where your company is in its evolution.
The discovery phase is where you get to know everything. The 2nd phase is creating the engine with a solid foundation. The 3rd phase is to put gasoline in the engine. That's when you start to become a scale-up, when you're no longer discovering what you're doing but instead looking for traction and aggressive growth by opening new markets.
🤔 How do you know if you’ve got the green light to start your expansion phase?
Here are a few tips to understand when it's the right time to scale:
✅ your monthly revenue is in the 5 figure range,
✅ you have positive cash flow and can analyze it to anticipate future needs,
✅ your product has met THE target in its market (proof of product-market fit),
✅ you have a strong and committed team.
How to go from start-up to scale-up? 8 valuable tips
#1 - Have a vision and ambition
You don't become a scale-up by accident. It all starts with the founder's ambition to lead the company to the top.
As a leader, you’re the one who carries this starting vision and must work with your teams to learn how to get there, step by step. But you’re not required to have this vision from the start; it can be built gradually.
Becoming a scale-up like we are today wasn't a goal at all in the beginning. We started out as a startup, we did our first fundraising campaign with around 30 clients, and then we stuck with that cash for 2 years. We wanted to go as long as possible without raising funds while we stabilized. Then we saw that there was real potential for acceleration, so the question came up, and we said "OK, let's expand and give ourselves the means to go further".
#2 - Do some fundraising
As you know, it is important to have the means to achieve your ambitions. Without investments, it’s difficult to have the necessary resources to structure your start-up and ensure that it takes off towards planet scale-up!
To accomplish this, fundraising is commonplace in the industry, a real lever for growth. As proof, US startups raised around $240 billion in VC investments in 2021, in comparison to roughly $145 billion in 2018 according to Pitchbook data.
✅ make sure your business plan is solid,
✅ identify potential investors with sufficient funds that can bring their network and expertise to your company,
✅ demonstrate your profitability and growth potential with metrics.
P.S. Going through fundraising is not a must; you can also choose the bootstrapping or self-funding method!
Series A is used to build a product and marketing team that will serve as the foundation for acquisition. Then we see if we can double that million in ARR in a very short time period, usually in 12 to 24 months. Then comes the series B in a phase where we know the customer, the product, and we start to have strong legitimacy on the market. The foundations are solid and we know that if we put money in, it's like putting gasoline in a car, it will run by itself.
#3 - Structure and automate your processes
Without automation, there is no scalability! This is an essential prerequisite to ensure that your organization can handle the large scale-up that is coming.
It's a bit thankless, but you absolutely must take the time to look at the processes already in place to see what you need to:
- keep (because they work!),
- completely revise because they are not efficient,
- improve quickly to gain efficiency (quick win).
Secondly, try to identify the activities that are not yet operating with processes, and would benefit from doing so.
Setting up and fine-tuning these processes is a very good thing, but it is even more interesting to automate them. Automation is an integral part of many tools that help companies save time and energy, especially on low-value-added tasks.
Some examples of processes that can be automated:
- retrieving your invoices and accounting data,
- payroll management,
- directing customer requests to the most qualified people to answer them,
- the deployment of your IT deliverables.
💡 The more your processes are automated, the easier it will be to scale up, and the more profitability will be maximized.
#4 - Preserve your values
Your company's values and culture are its most precious assets.
They are a precondition for your scalability. They will serve as a catalyst for your hypergrowth... as long as you don't lose sight of them along the way! This isn’t always easy when you are growing, especially when you reach the critical mass of 60 people.
They are part of the founding principles of a company's culture, and if your company is where it is today, it is most likely thanks to them. Your “why”, in other words, the reason for your company's existence, is what allows you:
- to gain the commitment of employees centered on deep motivation,
- to reach your customers (and future clients) by making your company unique,
- to give your company a certain coherence that is essential to give confidence to investors.
So how do you spread these values and keep them alive when your business is growing very fast?
For Gilles Bertaux of Livestorm, there are 3 essential pillars to manage and preserve the values within a company:
- Be upfront with what you are looking for, and be demanding enough on candidate profiles without making concessions to recruit talent that fully embodies your values over the long term.
- Automate the onboarding of new recruits as much as possible so that the team can focus on supporting new hires and transmitting company values, and not on administration. The experience must be as fluid as possible. Information, processes, and knowledge should be formalized as much as possible to encourage self-service, which is particularly helpful for remote work.
- Define a manager for about 5 people, this allows the company to structure teams properly while keeping the human aspect and making company values last.
At Livestorm, we didn't have values written on the walls at the beginning. We started quite late, in a rather organic way. The first 50 hires were done with my partners, so we knew unconsciously what we were looking for in candidates. The moment when we had to start delegating, that's when we felt the need to put words to it, we just expressed it in a synthetic way, what we like in the people who are present, what we were looking for in the candidates, etc.
#5 - Surround yourself with mentors
Being surrounded by mentors is worth its weight in gold.
It's true that when you're caught up in the growth of your company, you're often very focused on your business, and sometimes a bit alone in making important decisions for your company (such is the burden of the CEO).
Remember that other people have been there before you. Taking advantage of their experience can help you avoid making the same mistakes they did and give you an experienced outside look at the situation.
Your mentors will be a source of real support to help you refine your strategy and make informed decisions. How do you choose your mentors?
I had regular calls with my mentors who helped me a lot, especially at the beginning to consolidate the vision of the company and prepare its structuring. For everything related to marketing, acquisition, and product, we also drew a lot of inspiration from role models, from companies that we idealized, and where we felt that there were very smart things to adopt. We made a mix of these good practices to apply them to the company.
#6 - Structure your teams
In a start-up, versatility and resourcefulness are often essential in the early stages of your business. But if you want to become a scale-up, it is better to start structuring your team as soon as they start to grow.
To understand what it's all about, the company Partoo shared its organizational charts with 10 employees and with 150. We can quickly understand what it means to structure your team:
Here are some guidelines to follow:
- Specialize teams by job, avoiding too much versatility (yes, we know, you were used to it).
- Precisely define the supervision of each collaborator by intermediate managers according to the number of people for more efficiency.
- Hire a GM. This is a delicate step for a company director, but it is nevertheless essential for a successful scale-up. The goal is that this person takes over your operational missions so that you can fully lead the strategic process.
- Delegate recruitment. Your teams are going to grow a lot during the next few months, with a lot of new hires ahead. It’s reasonable to hire an HR specialist to manage this part of your business, as well as personnel management, which can be very time-consuming.
During the scale-up phase, there are side effects on the teams. You can't manage a company with 100 employees like a company with 10. This already goes hand in hand with the creation of new services such as a support function, a legal team, a financial team, etc. to support these efforts. There are also many things that change, with more processes and tools, but also additional legal obligations to comply with.
#7 - Think results
You've worked hard on your product or service, making sure it addresses a problem, polishing every feature to be as innovative as possible! And it all worked, otherwise your business wouldn't be here anymore.
But to take it to the next level, you're going to have to switch your mindset from a "product" view to a "profitability" view. What do we mean by this?
Don't make any decision without thinking about results. Every action or expense must be ROI focused:
- either by reducing your acquisition costs,
- or by improving your conversion rates,
- or by being a driver of growth.
💡 For example, an evolution of your product that allows your customers to make additional purchases independently on your platform is worth developing for the growth potential it will bring.
#8 - The expert's ultimate advice: dare to show your true colors
Gilles Bertaux's last secret for maximizing your chances of becoming a scale-up? Stand out and show your true colors!
"Don't hesitate to be a little more aggressive, not necessarily with the product, but rather with your storytelling and putting your company forward like the Americans. It's actually quite healthy when you're starting out to appear bigger than you are. The idea isn’t to lie, of course, but to reassure the first clients, to put the company in a kind of self-fulfilling prophecy, and to help the teams to better anticipate what is to come. In hindsight, this is a good practice to adopt from the start-up nation. Don’t be afraid to stand out and show your true colors!"
Objective to the moon: the evolution from scale-up to unicorn?
Nicknamed because of their rarity, unicorns are unlisted scale-ups that have reached or exceeded 1 billion in valuation. At the time of writing, there are 489 of them in the United States.
It is perhaps the greatest dream you have for your company, to become a unicorn one day? You're right, and you've learned your lesson well: to succeed, you need a hefty dose of ambition.
But that's another step! In the meantime, stay focused on your goal of scaling your business, you now have all the keys to succeed. Good luck!