For many years, the stages of progress of a startup were described from an investors’ perspective through the timing and types of capital input: pre-seed, seed, series A-B-C. The Startup Genome project and the Lean Startup/Customer Validation methodology now provide for a more founder-focused definition of startup stages: idea creation, definition, validation, execution and scaling. The main benefit of this founder perspective is that it provides for an objective evaluation of the maturity of the startup: has it done its homework, what critical assumptions need to be validated in order to progress, and what are the go/no go gates to better manage risk.
A problem with how these startup evolution models are defined, is that they lose detail after the initial transition to go-to-market, lumping the most critical part of the process under the catch-all term “scaleup”.
The general assumption behind this study is that there are distinct phases to scaleup, each one with their own go/no go criteria. A more detailed Scaleup Lifecycle Model will enable founders, investors and mentors/coaches/consultants to better manage risk and improve the success rate of scaleups.
The term “scaleup” has many interpretations. This analysis assumes the OECD definition of “scaleup”, which is any venture aiming to enter a new market, launch a new offer, or otherwise embark on an initiative with the objective of generating an average annualized return of at least 20% a year over three consecutive years, starting with at least 10 employees at the beginning of the period [OECD, 2008] .
The focus of this paper will be on organic growth initiatives, and not growth through acquisition.
The research question guiding this project is:
What are the major stages of scaling a high-performance venture from market entry to market leadership, and what are the success criteria for each stage?
Answering this question should provide the foundation for three deliverables:
- Create a more detailed model of the stages of scaleup;
- Identify major challenges, risks and success factors for successfully scaling up; and
- Generate a first pass at at Scaleup Progress Index to use for managing the scaling phase.
Important subquestions to be addressed in the research and analysis of the overall research question include:
- What are the critical elements to have in place to minimize or manage risk and to maximize the probabilities of success when scaling;
- What are the preconditions for undertaking a scaling initiative;
- What are the stages or phases of scaleup with go/no-go questions at each stage;
- What are some key elements to consider (success checklist);
- What are important risk factors to consider to effectively manage risk;
- What are principal success factors which can be used to track the progress of scaling.
The intended audience for this analysis is not limited to high-tech companies or venture- capital-backed startups. It can include product or service ventures as long as they have achieved, or aim to achieve, growth which tracks with the OECD definition of “scaleup”. This also includes startups as well as existing companies who want to kick-start growth.
The independence from whether they are a new or an existing business is why these businesses are grouped under the label “high-performance ventures”.
Specific segments targeted include:
- startup founders who are preparing to enter their first market;
- existing SME owners and managers who are preparing to launch a new product into one of their current markets, or into a new market;
- consultants, coaches and mentors working with scaleups; and
- investors participating or who are considering participating in funding a venture at the scaleup stage.
The methodology used to explore this topic includes:
- Literature review to determine the various models which currently exist;
- Field Interviews with eight to ten founders and CEOS at various stages of evolution of their business. At least two will be post-scaleup, two in the process of scaling and two who are preparing for scaelup;
- Case studies from existing literature (HBR, Bain, Strategy+Business, etc) to further validate the model;
- A general survey with the goal of reaching 40-75 Founders and CEOs to further validate the new model. This survey will be designed to become an ongoing survey in the same way as the Startup Genome did starting in 2010.