Founder Scalability Bottlenecks: Overcoming the Challenges of Growth
While successfully scaling their fast-growing startup is often a dream of aspiring founders around the globe, there are many pitfalls along the way from turning an idea into a scalable viable business. Currently, the broadly accepted definition of successfully scaling a business means you have built an organization that is generating revenue, but is sustainable, efficient and resilient. In this article, we will cover a few common scalability bottlenecks that founders deal with, and discuss how Evolve Venture Capital can help founders through this process.
The Attractive Hook
Consider a startup with an innovative concept, an energized team, and early traction that shows lots of promise. All of a sudden, things begin to take off and founders begin to struggle with their new demand! This is all too common for founders who experience serious bottlenecks to scalable solutions. More than just being a growth spurt, the shift from a nimble team to a scalable; efficient organization is indeed a major organizational shift that requires serious planning and expert assistance as needed.
Where Founders Struggle
- Operational Inefficiencies: Companies often run into challenges regarding scalable systems and transaction processes as they grow, leading to chaos. Examples of this include diminished customer experience, bottlenecks in operations, and employees overburdened with work. A good example of this is with Zume Pizza, who aggressively scaled too fast and ultimately failed at logistics, leading to Zume shutting down operations.
- Leadership Bottlenecks: Successfully transitioning from founder-led companies to successful leaders can present challenges for founders. For example, many founders resist giving away accountability, believing they can accomplish everything better on their own. As a result, they can create a micromanagement bottleneck which can later break down structures for making decisions and efficiently scaling their organizations. A good example is the WeWork IPO process which failed in 2019 mostly due to its poor leadership structure.
- Hiring Problems: Rapid expansion may lead to rapid hiring, which is often unplanned, resulting in overstaffing, cultural misfits, and leadership issues, which can create inefficiencies and conflict. An example of problematic hiring would be the downfall of Fab.com, in part due to the rapid hiring of the wrong people.
- Technical Debt: Startups developing minimum viable products can run the risk of incurring technical debt, where early architecture isn’t ultimately viable. Being forced to re-build the systems in critical periods isn’t a great use of valuable resources as you attempt to scale.
Analysis and Depth Understanding
While the concept of scalability is neither fun nor sexy, it is about growing your business sustainably. Founders need sustainable systems that will allow them to add demand without undermining the operational capacity of the organization they have crossed the starting line to build. It will require them to understand the demand enough to build integrated systems to deploy their assets strategically in relation to demand, utilize their resources as effectively as possible, and plan for planning in the event there is a large rise in demand.
- Identifying Bottlenecks: Wisdom for every founder is to visualize the process using process mapping to visualize normalcy, and in the case of a leader of a scalable business, it is to have enough awareness to see that normalcy has bottlenecks and lost opportunities. With a feedback loop, you can also gain valuable information from team members as to how demand can be tracked and recognized in real time as they see it develop.
- Measuring Rigorously: You need to track meaningful metrics including customer acquisition cost, lifetime value, churn rate, and whether you are checking your performance against performance benchmarks including revenue growth rate, operational efficiency metrics, and chart your consumption of these metrics to gauge how effective your systems are.
- Building Scalable Systems: Founders need to have enough awareness to design sustainable architecture from their business function rather than finding themselves designing it simply to avoid technical debt. I hope that this also includes automating repetitive responses such as making repetitive tasks applications for automation. Documented SOP (standard operating procedure), repeatable tasks made visible so that the team can check them when deciding how to act. Build out towards strategic plans and use project management systems, this is the thread that connects business in the market-driven service sector.
How Evolve Venture Capital Can Help
At Evolve Venture Capital we know that there can be some hard times when scaling a startup. Our support in the entrepreneurs journey is more relevant when we take into account that its a comprehensive approach to investment and we will assist founders at every stage of their entrepreneurship journey.We help achieve this through:
- Mentorship and Expertise: Our team consists of specific industry verticals – which allows us to provide targeted expertise and mentorship. We work intimately with our startups to develop their business model, refine operations and develop scalable models.
- Network: Our extensive network of influencers and strategic partners gives our startups the probability of getting optimal situations. We connect our startups to industry giants and facilitate meetings that allow the startups to gain further insights on synergies or potential partnerships.
- Financial Management: We facilitate the financial(s) of a startup – ensure planning & management – to provide sustainability. To be specific, our financial assistance includes connecting our startups to potential investors and helping our startups negotiate funding terms.
- Market Access: We provide market trends and consumer behaviour insights to determine avenues for market expansion. We provide strategic insight to help our startups build effective go-to-market strategies, specific to geographies or customer based segments.
Conclusion
Scaling a startup is not easy. Founders will face challenges such as building scalable systems, delegating responsibility, hiring the right talent, and managing technical debt. At Evolve Venture Capital, we want to help founders navigate through this journey. We support startups through a very data-informed, lenient, high-touch approach with data-driven guidance, expert coaching, and a powerful network of advisors that will provide startups with differentiating resources needed to scale up for sustainable success.