Learning from small businesses as you scale up

Fast, a startup that enabled retailers to offer one-click login and checkout options, stopped operations early April after raising $125M in funding.

Fridge No More, a fifteen-minute grocery delivery startup also closed doors after raising $15M about a year ago.

Nice Tuan, a community buying platform, closed operations and entered a stagnation phase after having raised $1.2B in funding to date.

Periscope, the app that made mobile livestream go popular, shut down last year after six years of business and being bought by Twitter for $100M.

These are just four stories amongst thousands of startups that every year raise funds, get acquired, expand rapidly, and then succumb to succeed. Most of the times the reasons are obvious on why startups fail, as example:

1. Ran out of cash or failed to do a new funding round
2. There wasn't a big enough market to scale
3. Their competition did better and they couldn't keep up
4. Their pricing and business model was not profitable, hence flawed
5. They had the wrong team or founders to scale

There are many more reasons, but the above are the most commonly shared between entrepreneurs and post-mortem websites.

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The above part is to set the scene for one of the most important lessons as you scale up. Funding are just a means to an end, it's not the end goal.

Becoming an unicorn should not be your goal as well, it's just a consequence of solving a problem at scale for your customers and audience.

Going IPO is also a goal that shouldn't be in your horizon for a long-time. You don't need to be a public company to build a successful and lasting business, far from it.

It's a mindset shift that is very much required these days and the recent worldwide spread of layoffs just proves that we got a bit too enthusiast and proud for raising funds and scaling moreover than serving our customers.

I too got caught up in the magic of hypergrowth, scaling fast and celebrating big growth percentages and unconsciously districting ourselves from what matters most - solving the problem for our customers and do it in a compelling and seamless way.

So, what mindset needs to start shifting as you scale up? Here is a quick overview for inspiration purposes and to generate some thought-provoking ideas:

1. The only end goal that matters is to get closer to achieving your purpose, your mission. It's your compass and what empowers customers, staff and partners to believe and follow
2. As a founder or leadership team, it's natural to seek funding as you grow. It's a way to speed up scale in times where competition comes quickly, market shifts and you need to be relevant fast before losing momentum. That's all understood, but I normally see that happening at a cost of focusing on building a better product or serving customers in an even better way. Your customers are your biggest source of learning, and as you scale, it's key to remember that you're serving them and funding it's just a means to an end.
3. Raise funds when needed, but keep your customers happy. Cash flow is king. Hypergrowth comes fast, and the norm is to hire fast, where most spent is quickly seen. Hire smartly, see what the company needs as a whole moreover what each department needs - and make sure you keep investing on the product or service.
4. Lasting teams. A hard concept since attrition and turnover are high when things don't go your way. Your core team needs to last and be happy in order for you to succeed; you need to gain knowledge and train new people well, you need a philosophy and culture built beyond a founder and for that you need a team you trust and can count on. At all levels of the organization.
5. Adding features or new services is so common and many times it overcomplicates the product. It happens to so many great startups and scaleups that keep on adding features, overcomplicating the product that once was simple and easy to use. Remember that more features won't distinguish you on the long run, it's the customer relationship that matters most.
6. Product-market fit is a saga that never ends. As you expand to new countries, remember that what worked on one place might not work in the other one. New context requires new go-to-market thinking.

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A final wrap up to the story, and getting back to the headline. Why you should not only look at successful scale ups but also at lasting companies and many times companies that are just small businesses that have been in existence for a long time.

A personal example of mine, my dad's company.

A printing lab, with a simple yet efficient office in the center area of Portugal. It exists for over thirty years, and has retained a range of staff between ten to twenty people over time. Yes, thirty years, and that it's an impressive feat.

I find it more compelling and inspirational to see a business last thirty years, with a dedicated team that evolved over time, that upgraded products and changed the way to go to market in order to stay relevant over startups that raise hundreds of millions and can't remain relevant for more than ten years - disappointing customers, their people and missing an opportunity to make a positive lasting impact in their communities.

Looking at the story of my dad's company, and having studied it up close while having deeper conversations with him as I got older and more curious, I've learned a few things that I put in practice at the scaleups I've worked with.

Three biggest lessons came at different times. The first two were during the economic crisis of 2008. My dad's company majority of revenue depending on a few selected customers that defaulted and couldn't pay my dad for the work he had done. That created a major gap in revenue, bunch of loans and survival mode for many years.

My dad explained me that he survived merely because he stayed true to its course whereby others compromised on it. He always stood for high quality service and execution, even if it meant higher price. Others, in order to stay alive and retain customers, did cheaper work and many times at a loss.

My dad kept a profit margin, lost customers along the way and started diversifying its customers list. More than just diversifying the customer list, he spent more time with its customer and senior leadership, understanding their problems and thinking of creating ways on how to solve them.

The above picture is a list of awards the company won over the last years. It had won zero awards prior to the crisis. My dad taught me that in order to last as a business you need two things to work as an yin yang concept:

A simple view, but a powerful one. My dad truly believed to its core that we could offer the best printing work at a highest pace of delivery. He realized that the multinationals that competed with him couldn't keep the agile and speed of his team to execute on high-demand works and the same size companies were compromising their economic engine and profitability, which he believe it wouldn't last, so he kept the goal of outcompeting them.

The customer bit was interesting. He explained me that customers didn't fully understood the difference between printing labs and what makes one better than the other one. They trusted my dad's company ability to deliver on its promises and going the extra mile for them. That's it - and that was worth the extra price tag.

The final lesson is a simple one. My dad and his leadership team took the whole company to Barcelona a few weeks ago. Not to celebrate any revenue milestone. Not to celebrate any funding. Just as a thank you. It costed a lot for the size of his company and he explained that it means nothing to grow and last a company if you don't do right by its people.

He shared that the trip to Barcelona was a special one because the company was finally in the right path, with a lower six figure revenue and healthy profit margin and the debt under control. It took many iterations in the business model, investing in new technology in times of crisis, retraining and educating people and surviving a crisis by expanding to new frontiers, new verticals and remaining true to its mission.

The trip was just a small gesture in the grand scheme of creating a lasting company. As you scale up, these small gestures are tend to be forgotten or taken by granted.

I'm sure you know a lot of small businesses. Many are probably your customers if you target them. Learn from them, talk to them, learn their story.

You might just find the right inspiration to building not just a scale up, but a lasting business that has a large scale positive impact.