Warning Lights While Scaling Up a Startup
Some bright, committed and talented youngsters join forces driven by a strong idea. The idea could be radical or even a replication of an idea that has taken root in some other geography or industry. They believe it has the potential of creating immense value with minor tweaks.?
With personal investments, the idea sees the light of the day, and then the roller coaster ride starts. In some cases, the group gets the talent and funding to move to the next level. The idea takes a concrete shape and an organization is born.?
The story sounds familiar and quite inspiring till now.?
Once an organization starts and confidence is generated amongst various stakeholders, the next phase brings new challenges. Now, the founders have to deal with various variables and set the rhythm for the company to run, grow, and evolve.?
Suddenly, hiring new talent, launching enhanced products or features, entering new geographies or tie-ups, communicating the growth story, generating new streams of funds, giving confidence to funders/ customers/ clients/ vendors become a critical aspect of the founder’s job.
Here, the company might enter a tricky terrain.
At times, short-term goals substitute the need to build an organization that has the potential to grow and sustain in a respectable manner and create consistent value for stakeholders.?
A select group running the business might be inclined to garner a lion’s share of immediate benefits. The rest is left to chance and, occasionally, chicanery.?
Many reasons could be attributed to the latter. However, we have arrived at a few indicators after talking to several founders, entrepreneurs, founding teams, different categories of funders, industry leaders, coaches, and consultants.?
A broad categorization can be done at two levels a) How a founder thinks and feels and b) How a founder behaves.
Confusing Limelight with Purpose
It’s one thing to not follow the usual corporate path and another to be inspired by an idea that energizes you to the core. Valuing autonomy and being perceived as a successful gamechanger is fine, but this has to be coupled with other qualities.?
Essentially, these qualities help in attaining the desired goal against all odds and equip businesses to be prepared for the long haul. An honest answer to ‘Why I want to do this?’ is important.
Loosely Anchored Vision
As a founder, if the vision of what you want to create is not deeply seated in your heart and mind – I would add even in your families – and are not supported by agile business, appropriate financial, and execution models, then the roadblocks are inevitable.?
The firmness of vision and an overall direction help you respond proactively to unfavorable tides. ‘What am I willing to do for our vision? What’s the limit of my sacrifice?' These are key questions that must be answered.
The Balance Between Attachment and Detachment?
This is tricky as the separating line is extremely thin. If you’re too attached, emotions can get the better of you. Invariably, you might not act clinically when the situation demands. If you’re too detached, you lose pride and engagement for the enterprise. The organization then becomes a money-minting machine that must be milked.?
‘What does it mean to me (and my family) to be a founder of XXX organization?' This becomes an important question to explore.
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Linear Scaling Up Narrative Leading to Riding a Tiger?
To make an impact, we must scale up. To scale up, we need resources. To have resources, we need money. How much money? Quite a lot. The reality is exaggerated a bit, but I call it ambition. A dream that can be achieved if we have the resources. If we don’t present it differently to investors, they won’t fund the project.?
This type of mental narrative is quite prevalent while scaling up. The exaggeration becomes bigger in the subsequent rounds of funding till one fine day it acquires the status of fraud, misrepresentation, and a blatant lie.?
Once this vicious cycle starts, it becomes equivalent to riding a tiger. You know you’ll be eaten once you get down. The key question here is, ‘How quickly do I want to scale up? Why and what are the trade-offs?’
Indicators that Act as Warning Lights While Scaling Up a Startup?
Influencers and Their Rub-Offs?
It’s essential to understand the impact of the company you keep. Someone might not be interested in the way the organization is growing organically, especially if doubling or quadrupling money in a short time is the only objective. Someone may eulogize the idea: ‘fake it till you make it’. Founders tend to meet such people quite frequently.?
While it’s good to hear out successful influencers, it’s important to assess their impact on your values and daily behavior. A good question is, ‘Who is my role model(s) and why?’
Different Boats
Founders require deep focus and commitment. If their energies are devoted to other pursuits – hedging their risks, making extra money to keep the organization afloat, and supporting another business -- then it weakens the resolve required to create a successful venture in the long run. A question worth pondering is, ‘As a founder, where are my energies channelized?’
Grandiosity and Hubris that Lead to Obvious Blunders
Nothing succeeds like success. The confidence fuelled by success and the success journey with the people who matter is intoxicating.
The high of success can make us ignore the obvious signs or even data. It could cloud our judgment, leading to crucial decisions made in a jiffy to address the short-term needs of certain stakeholders.?
The underlying assumption is ‘nothing can go wrong since we are on a winning streak, and even if it does, we have the ability to manage it’. Founders can ask themselves, ‘What are the mechanisms and real motives behind some of the big decisions made in the recent past?’
The Organization as an Extension of My Locker
Knowingly or inadvertently if founders treat the organization as their own locker from where they can withdraw money for personal use and cover such dealings as creative financial management, then this surely is a recipe for disaster.?
This gets aggravated following signs of imminent failure. In such situations, what do the founders discuss among themselves and with their finance and legal advisories?
Are these mere acts to maximize personal gains in a hushed manner? Is the organization now looked at as a carcass for every animal to feast upon? The question is: What’s the level of rigor and transparency about the company’s financials and why?
Organization Building – Just a Catchy Story
Here, the intention of the founders is not about building a sustainable organization but making quick bucks by selling a nice and powerful story and then using legal and financial disciplines to come out unscathed.?
This requires NO questions to ponder! However, it leaves a lot of unanswered questions.?