From Idea to Startup, to Scaleup and beyond.
The different stages of business.
There’s already a lot of writing on this by people who are far more qualified than I am. My main reason for writing this is purely from a self learning point of view.
If you have any comments or views on the below then please get in touch, as I would genuinely love to hear them.
So for some time now I have had a total obsession with Startups. (promo: I run https://twitter.com/ukstartupnews where I post anything interesting I can find on UK Startups and help promote them).
I love the hustle, I love the idea of 1 person having an idea and being bold enough to run with it and grow it. I love the scrappy, ballsy, can do attitude and the knife edge that they seem to run on.
I have never worked for a Startup (that’s about to change though) I have pretty much only ever worked for mid size corporates. However, I am surrounded by people who own their own business and I love talking to them about the good, bad and ugly times that occur when running a business.
I’m not sure if it’s my age or just a coincidence but lately some of these discussions have been focussed toward the end of a business life. Do I sell, do I fold and walk away, do I pivot to a completely new model and wind down the current one, do I find someone that can manage the business as I step away? Lots of really deep and difficult questions.
These discussions have got me thinking a lot, in particular around the phases of a business; from an idea in a bedroom to a global enterprise, to an IPO or a fold.
What are the main phases each and every business goes through:
IDEA
You’re down the pub one day talking to some friends and all of a sudden you’re hit with an idea. The idea sticks with you and you can’t get it out of your head.
You get home from the pub, you sketch your idea out on paper. You get even more excited by it. You think about how much money you could make from it, how it could transform lives or even make the world a better place.
Then life takes over, your excitement fades. You might mention it to friend who casts some some shadow on your game changing idea and right there, it dies.
I can’t even begin to tell you the amount of times this has happened to me. The amount of dropbox folders, Evernotes, note books, bits of scrap paper and postit notes that I have filled with my startup ideas must be well in the hundreds. They range from 1 liners to fully fledged pitch decks (I’m tempted to post them all up somewhere).
Sadly, I have never done anything with them.
So in the words of my one of hero’s Gary Vaynerchuk
Execution is key!!!
Luckily for humanity's sake, not everyone is like me. Some people run with their ideas and actually do something with them, which leads nicely on to the next stage.
STARTUP
The riskiest stage.
Half of all startups will fail https://techround.co.uk/startups/2016/21/12/why-start-ups-fail-in-the-uk/
The odds are stacked against you and your startup. But what an exciting stage this is.
You decide to go all in, you have some traction in your idea and can see a model beginning to take place.
You literally have to go back to business 101; how do I incorporate my business, what bank should I set up with, how do I make money, do I need insurance, do I make a first hire, move into a new office, do I need to look into raising a round of seed cash. The list is endless…
There’s so much to think about in this incredibly exciting, fast paced stage of a business.
Sam Altman from Y Combinator has a full series of video lectures initially given at Stanford in Fall of 2014 all based on starting a business. You can access all of them for free. They are well worth a watch as they feature lectures from some of the worlds leading experts. http://startupclass.samaltman.com/
I would also recommend listening to This Week in Startups with jason. There’s a lot of valuable information stored in these podcasts coming direct from the mouths of those running startups. http://thisweekinstartups.com/
One key takeaway from this stage is that culture starts here. The values and behaviours exhibited at this very early point in a business can last a lifetime. Make sure you are fostering a positive culture from day one. Culture is incredibly hard to change.
So you’ve made your startup a success, what next…
SCALEUP
This critical and extremely difficult phase of any business presents a whole new set of challenges.
You have a model that works, you’re hiring, you have some processes laid out, you’re still at a very exciting stage of business, you might have raised some cash and are currently exploring further rounds of funding.
But, with explosive growth comes explosive problems. People you hired for your scrappy startup might not be the right people to continue your growth journey to the next stages. Manager doers become managers of managers and a layer of “senior” management appears from nowhere. You are 1 deal away from both bankruptcy and not being staffed up enough to support.
Communication at this point of scale is crucial. The bigger you get, the harder it is to manage.
I love the Google TGIF story, in that every Friday there is an all hands meeting at Google that the founders (Larry and Sergey) would host. The first 30 mins is focussed on Strategy and New Product updates, the latter part is a Q&A session where any question is up for grabs. This scaled with Google as they grew into a global monopoly and as far as I’m aware still goes on to this day. There’s some further reading on how Google motivate and listen to their employees: https://www.thinkwithgoogle.com/marketing-resources/passion-not-perks/
I’m reading and watching a lot of Reid Hoffman at the moment and I love all the content he’s pushing out around Blitzscaling. If you’re in this stage of business then it’s well worth checking out the below:
Blitzscaling
Executive Summary Reid Hoffman is one of Silicon Valley's grown-ups. After helping to found PayPal, he moved on to…
hbr.org
https://www.youtube.com/watch?v=s3RrVmv5WwA
If you can survive this tumultuous time is business then you might think it’s all plain sailing from here on out. But think again…
MATURITY
This is the steady phase.
You have a well defined business model, you have processes to work to, you have customers to deal with, SLAs, Legal departments, HR, all different kinds of management layers, multiple office locations and 100’s if not 1000’s of employees.
Well done, you’ve made it!
However, do not be complacent. Startups (your not so distant past) want to eat your lunch. The rate of disruption is happening at such a fast pace that large corporates can’t be complacent and sit back and watch the money role in.
I remember sitting in a talk by one of my good friends James Haycock who runs Adaptive Lab and the stat he used was that 75% of the S&P 500 will be replaced by 2027... WOW!
The deck for that presentation is here: https://www.slideshare.net/AdaptiveLab/bye-bye-banks-will-banks-be-the-next-dumb-pipes and is well worth a read.
There’s a lot that happens in this phase. You’ll find people managing the multiple areas of the business that you used to have full control over. Entire departments develop and you no longer know everyone in the business.
You have a developed culture and a mission that you hope everyone is working to.
There’s a couple of key things I always look out for in this stage, especially in companies that have gone through all of the above stages in a relatively short space of time.
The key example for me is Travis Kalanick late CEO of Uber. So Uber started in 2010 and only operated in San Fran. They rapidly grew into a global logistics business operating in more than 630 cities across the world. Just take a step back and think about that. The rapid growth that happened in the last 6 years. It’s phenomenal.
But is the person that took you from a scrappy disruptor to global logistics company the right person to continue and manage the business. In my head, the 2 are very different CEO’s. It’s not to say it can’t happen, just look at the Steve Jobs story. I hold every hope that Travis will take the reigns again at Uber, but right now he’s not the right CEO for the business.
So you’ve made it through all of this, and you now want to look for an Exit strategy…
EXIT
I’d say the key exit strategies that most people have heard of are either getting bought out by Google or IPO’ing. These are fantasies for the majority of most companies.
Not every business has the luxury of an IPO or an Acquisition. For the majority, carful planning and consideration needs to happen at the end of a business life. It’s probably the stage I know least about, but becoming more intrigued with.
A few examples of Exits i’m aware of are as follows:
The hand off: Simply put the running of the business is handed over to a new CEO and the current CEO slowly takes a back seat whilst still enjoying financial gain. Cushty… providing you can find the right person.
Acquisition: Finding another business to buy your business. Easier said than done.
IPO: The most fantasised of all Exits. However, after searching around for further information on this, it seems like an incredibly complex thing to do. Take a look at this amazing doc by EY http://www.ey.com/Publication/vwLUAssets/ey-guide-to-going-public/$FILE/ey-guide-to-going-public.pdf
Liquidation: I don’t know anybody thats gone into business with a plan to go into Liquidation as an Exit strategy. But lets face it, it happens a lot. In this scenario you basically call it quits on the business and decide to fold it. You must repay all of your creditors first before you or any of the share holders get a look in.
So there you have it, my very brief, random run through of a business life stage.