Growing your Startup (#PrimaryColours part 2)

Following last week’s article in what is a 3 part series on the Primary Colours of a Startup, we will now look at the building blocks of a strong growth strategy.

Blue: The Growth Strategy. To grow and scale, a startup needs to focus on the right KPIs, develop a sound financing strategy and have a global ambition from the start.

KPIs: aiming for the right targets

One of BlaBlaCar’s core 10 values is “Vanity ;( Sanity ;| Reality ;)”, which refers to the various types of indicators in any activity. It’s important to remember that some pieces of data are not actually useful in determining performance, namely “vanity” data. Other indicators are closer measures of efficiency, and are referred to as “sanity” data. Finally, there are some real indicators of performance which we should follow on a daily-basis, and we call this “reality” data. Following wrong indicators is effectively optimising something which is useless and  wasting resources. For instance, BlaBlaCar is very proud to count over 25 million members in its community, but this number would be meaningless if members weren’t using the service frequently. Therefore, the metric which we follow closely is the number of rideshares actually conducted, and the number of people effectively traveling with BlaBlaCar.

Principle 5: It’s well known, “If you can't measure it, you can't improve it.”   (Peter Drucker). 

Identify your Key Performance Indicators (KPIs) and follow them daily! Beware of vanity figures which flatter the ego but are actually not useful.

Financing : Anticipating...

We have always approached investors a year prior to needing funding. This has allowed us to negotiate with different investors at the same time. It may seem obvious, but fundraising requires a lot of anticipation since it always takes more time than expected. Ideally, investors should have time to learn about your business model and your team before you turn to them for money. No investor invests in a company that they have only just met. As you grow, you will also realise that your discussions with investors will be more balanced if you are not under pressure for immediate cash.

Principle 6: Anticipate. Raise capital before you need it!

Meet investors well in advance of needing funding so that you can build a trusted relationship before asking them later on to invest in your business.

... then choosing...

You will work closely with your investors for many years. It’s therefore important to share the same ambitions and values, and to enjoy working together. Your investor can become a sort of mentor and be the first person you turn to when you are experiencing ups and downs with your business, and who will listen and support you over the years. For each round of fundraising, we met hundred of investors. Today, we work with only a handful of them, those whom bring us the highest added value, and with whom we enjoy growing.

Principle 7: Choose your investors as you choose members of your team

Meet many different investors so that you can truly choose the ones with whom you have the best fit (and who value your company best). The closer an investor feels to your activity and the more knowledgeable they are about your sector, the more added value they will bring. You will thereby enjoy working together.

... and finally, sequencing !

Each of BlaBlaCar’s fundraising rounds was associated with a specific objective in order to prove that we could achieve our goals. After the founding team brought an initial €100k over different stages, we conducted our first round of fundraising in 2009 for €600k. It funded the structuring of our product, and allowed us to become France’s leader in terms of community size. The second round worth €1.25m was conducted in 2010 with ISAI, which subsequently allowed us to deploy a robust business model in France (a model which actually allowed revenues to cover costs). Once the business model was proven, we raised €7.5m early 2012 with large international investment funds Accel Partners, to whom we presented a plan to expand our activity to neighbouring countries. Following this first step of international expansion, we raised two further rounds to fuel our global growth: $100m with Index Ventures in 2014, and $200m with, amongst others, Insight Venture Partners, Lead Edge Capital and Vostok New Ventures in 2015. This last round allowed us to expand much further to Russia, Turkey, India, Mexico, and Brazil. Furthermore, it thoroughly reinforced our capacity to innovate and improve our service in order to consolidate our existing markets.

Principle 8: Sequence your fundraising rounds, and have one main objective per round

There is no need to promise the moon during your first fundraise. Raise capital for a precise objective, namely the next step in your business strategy. The message should be simple and credible. This will allow other investors to observe that you can meet the objectives you set for yourself, and if you do, may encourage them to join your next round because they will have built trust in your execution capability.

Global ambition : thinking big from the start

In today’s digital sector, being a national champion is not enough. This is especially true in Europe which is fragmented into multiple local markets, none of which can provide large enough growth potential. BlaBlaCar was created in 2006 yet only started gaining traction in 2009. The same year we expanded into Spain, six months before our first investment which brought a seed round of €1.2m from French VC ISAI). Next we launched in neighbouring European countries. To do so, we combined a mix of three strategies that allowed us to have immediate local relevance: 1: Acqui-hire (acquire local teams active in your space); 2: Spin-off (spin-off manpower from your headquarters to the new market); and 3: Build a local team from scratch. Today we are active in 22 countries across 3 continents. The key to building a company is also to build a brand that can be easily internationalised so you don’t have to change your brand as you grow.

Principle 9: The impact of a digital company is measured by its global footprint

Conceive your business with an international ambition, integrate that vision in your processes and recruitment from the start, and expand early on. Empower local managers with a passion for the project, and a good understanding of the local context.

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A startup with a strong DNA and a robust growth strategy is well positioned. However, there is one fundamental element remaining which is needed to build a strong business ready to face the challenges of growth. That core pillar is the Entrepreneurial Spirit, diffused across all teams. Stay tuned for next week’s article, the last of this series !