Start-up to scaling-up heights

Really starting up

There is lot of discussion and encouraging talk around ‘startups’, and innovation, incubation, creativity, new ventures, entrepreneurship, all these are seen as related almost being synonyms. Technically the start-up is one that was ‘not existing’ and ‘came into existence now’. Whether the product / service offered is new, whether business model followed is new or replication or related to another, whether the funding is internal or external, whether the focus is domestic or diversified, all these are ‘add-ons’ to the discussion.

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Life cycle-based classification

We study and teach in management about industry life cycle, product life cycle. Nascent, to growth, to maturity, to decline (unless interventions happen for re-launch the product!) are known in case of product. Similar is for the industry, and new technologies can prove to be the game changer and reduce the industry into irrelevance.

Similarly for organizations, these are born, struggle and survive, find their feet, try to grow, and mature in the business, further scale up and diversify in some cases, and finally show the signs of the ‘old age’, need a rejuvenation, else permanent decline and final decimation.

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What is your age, size, portfolio, customer base?

Different industries have different ‘gestation periods’ to setup firms/companies in that industry. We need to setup a ‘vada pav’ stall, probably couple of weeks is sufficient. A saloon may take month or two. A restaurant may need 6 months of planning. A cement plant 2-3 years, and a steel plant 7-10 years. Hence, there is no ‘correct’ answer to gestation period. It depends on the ‘industry you are participating in’.

So, defining or identifying ‘someone’ as start-up we need to know the industry and age of the organization. Typically, 2-5 years for different medium to long commitment industries participating firms can get away as ‘start-up’. How many employees and customers (as per the participating industry standard) can also help us identify. What is the product/service portfolio too helps. In Calculus we do have ‘differentiation’ (dy/dt), meaning rate of change with respect to time as the measure. Drawing from here, if continuously something is changing in the organization, it may still be called ‘start-up’. Employee churn shall never allow the organizations to stabilize. So, after 4-5 years too, a few organizations may appear like vulnerable start-ups.

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Money flows and priming

‘Seed’ to ‘A’ to ‘B’ funding may happen but whether the organization has achieved self-priming or not is the question we need to ask. Whether there are positive cash flows achieved or not has to be confidently answered. What is the management philosophy followed for capex recovery. An organization with a couple of hundred crores of investment can't generate positive cash flows, if capex recovery is very aggressive. It will look like a struggling body. Industry standards do exist for depreciation etc. but private entrepreneurs may choose to follow their own will on certain counts. So, repeatedly the organization looking like somebody on Oxygen on bed due to ‘soft investment’ doesn’t happen due to poor planning by the ownership, may appear ‘still start-up’ but actually is not.

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Structure & Systems backbone

Do you have an organizational structure, whether it is designed scientifically, is it implemented are to be answered. Fluidity in the marketplace is justified due to multiple influences. Perpetual fluidity inside the organization may not be condonable given the time variable that passes fast. At one point, the structure, systems, culture, values should be set in place, and followed in letter and spirit. Else, internal fluidity shall be very uncomfortable to bear, and scale-up attempts get affected adversely. Even the IPO, if planned, may not be appreciated by the market if 3-4 CXOs have quit in the recent year! Others in the line to invest may also not gain confidence in doing so.

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On a closing note

There could be many factors to be considered for calling anything as still start-up, and above are only indicative. The agility, stretch, beyond bounds culture of the start-ups is enviable but sometimes we need to scale-up and for scaling up we need systems and processes. This for initial employees may appear ‘bureaucracy’ but we need to have order else chaos shall dominate. Simple example being if an organization has 20-30 employees still whereabouts of others can be known, dependencies planned. If there are 200-300 employees, then difficult, and if it is in few thousands, it shall be impossible. So, we need proper systems and processes, and ‘start-up’ phase should become our childhood memory. Sweeter memories shall be awaiting is the positive view we should take.

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