About startup growth and how to deal with increasing complexity
Does that sound familiar: your founding team is still sharing the same room. Maybe you have an employee or two. Communication lines are short. A 180-degree turn on the office chair is all it takes to get a quick conversation. Everyone knows what the others are working on right now. There’s only a whiteboard on the wall with colorful post-it notes lined up. No more than a handful of people are busy developing your innovative technology. And in general, the organizational complexity keeps within limits. Everything is still easy to keep track of. But for how much longer still?
Growth needs capital
Your startup is slowly gathering pace. With skill and luck you have already been able to win your first customers and achieve first sales. More customers are coming and revenues continue to rise. But you are still miles away from being cash flow positive. Nobody is talking about profitability yet. The money from the seed round will run out in the foreseeable future. You are aware that you will need a larger sum of venture capital for further growth this time. You are actively fundraising. There is a lot of feedback and many rejections. You are wondering if your approach to investors is really convincing. And then what really happens is what everyone has worked so hard on: you convince a huge Venture Capital firm of your innovative business model and successfully complete a Series A financing round. In addition your seed investors continue to believe in you and invest again. The ink under the term sheet is not even dry yet, and a higher seven-digit amount is already flowing into your account. You know how you will use the money to grow your startup and what milestones you want to achieve in the next 18 months. But now a lot of new things are yet to happen.
Growth brings more complexity
You will successively invest the collected capital in the further development of your business. You are hiring new staff. You need more of everything: more computers, more smartphones, more office equipment, more coffee and and and. All of a sudden your office is much too small and you need a bigger one quickly. More people, more rooms and many more tasks to be coordinated – communication becomes more challenging. Also a single whiteboard is not sufficient anymore. You need other tools. But which ones? The financial plan is constantly running after reality and is actually outdated by the minute because everything is in motion: turnover, costs, deposits, withdrawals, their amounts and times. How long is the runway? In this phase, the founding team alone is no longer able to cope successfully with the complexity, the abundance and variety of tasks. At least not without the work on the actual business model and the development of a beneficial corporate culture falling by the wayside. Your startup is on a growth path and therefore partly in a chaotic state. Although this is normal, your goal should be to quickly transform the chaos into structures and achieve operational excellence. A startup must “grow up” in order to scale up successfully. To do this, the founding team needs the support of an technically excellent and ideally experienced management team.
Success factor management team
The management team can be a critical success factor for your startup. The management team builds an organization that makes sense and strives for operational excellence. To achieve this, structures are developed, and coordinated processes are defined and introduced. Planning, goal definition and the determination of strategies are also carried out by the management team, which also orchestrates the implementation. Professional management is required in all areas. From product development, sales and marketing to quality assurance. This also does not stop at the internal service functions. The human resources department, in particular, must do an excellent job in the startup phase. Recruiting, onboarding, personnel development, administration, etc. must run like a clockwork.
The finance department also has to meet higher demands as a result of investors and growth. Correct and punctual monthly statements, investor reporting, regular updates of financial planning, ad-hoc analyses and the like. And who actually takes care of office management and IT?
A start-up can quickly become a complex entity that would end up in chaos without active management.
Conclusion
Your management team can decide about the success or failure of your startup. The managers work for you and with you to achieve the best possible economic result using the resources available to your startup. With sustainable business models, the management team will of course place equal importance on achieving your environmental and social goals.
