The Tech Startup Machine — How to build a high-growth tech startup
7 Lessons to Accelerate Your Tech Startup’s Growth
Key Takeaway — “Focus whole-heartedly on your customers and product-market fit, constantly aim for your next inflection point, and build a legendary team!”
Ambitious tech founders around the world tend to ask the same question when seeding their new venture — “How do we scale as fast as possible?”. Every potential unicorn startup begins with an innovative idea or technology and a burning desire to build something new! It’s an exciting time filled with passionate conversations, rough prototypes, and many late nights. However, turning your blossoming idea into a high-growth startup is no easy task.
The difference, as I’ve learned for myself, between an interesting idea and a scalable venture is its execution. You may have heard the old adage – ideas are great but the execution is best – and it’s true. The beauty is, you don’t need to learn the hard way anymore — other founders have faced similar challenges and overcome them.
This article will provide you with seasoned advice from serial founders, practical questions and recommended reading to help you side-step the hurdles and accelerate towards the finish line!
Get to the Point — What are the lessons?
- Focus on the things that matter most
- Understand what drives your customers and your stakeholders
- Your product must be both viable and valuable to survive
- Market Economics and Access to Capital will ultimately drive your initial Business Model
- Understanding your Market Characteristics is Essential to your Sales Strategy
- Plan your Fundraising and Growth Strategy from Day 0
- Build a Legendary Team and Create an Inclusive Culture
Lesson #1 — Focus on the things that matter most
One of my most influential mentors once said; “Success is a combination of opportunity and hard work — the key is choosing which opportunities to pursue”. He encouraged me to focus on opportunities that would help me to achieve my goals and defer the rest. The startup world is fast-paced and, if you don’t stay focused, you may miss out on your rocket ship moment.
“Success is a combination of hard work and opportunity — the challenge is choosing which opportunities to pursue” — Advisor X
When you are running a startup and spinning countless plates, you only have a finite amount of time and attention — distributing your efforts only leads to poor quality results or longer lead times. To maximise your success, concentrate your efforts on the most important things that your business needs.
Practical Q&A
- What is most important? Start with your intentions or your vision for your business and build a clear picture of your underlying objectives (see The Strategy Pyramid). Once you know where you are going — you can begin to plan how to get there.
- Which opportunities should you prioritise? Well, the answer is surprisingly simple — the most important and most viable opportunities that bring you closer to your next step function in growth (often called inflection points). Hence, you should focus all of your efforts on them!
- How do you maintain this focus in practice? Constantly prioritise your tasks by importance and urgency to ensure you are working towards your short-term goals whilst considering the long-term strategy. If you deploy “pig-headed discipline and determination”, as Chet Holmes says, you cannot be stopped!
Recommended Reading: The Art of Learning (Josh Waitzkin) / The Ultimate Sales Machine (Chet Holmes)
Lesson #2 — Understand what Drives your Customers and your Stakeholders
Whether you are dealing with customers, investors or team members — we are all people. As such, we all have intentions — our wants or needs. For example; customers want value for their money, investors want to maximise return on their capital (with minimal risk) and your employees generally want job security and a safe working environment (amongst other things). If you can understand what drives your stakeholder’s choices, which are inevitably influenced by their fears or desires, you can provide a better product and experience.
“Success in dealing with people depends on a sympathetic grasp of the other person’s viewpoint” — Dale Carnegie
Ultimately, your product or service is felt most by your end-users. If you listen closely to their feedback (words and interactions) — their feelings will become clearer. Knowing what a customer thinks about your product will help you to build something truly valuable in the long term. For instance, if your core message is confusing or incorrectly targeted, it will get no attention at all (without expensive marketing) and likely result in high churn. The goal is to ensure that your product is “Obviously Awesome” in the eyes of your customers (an amazing book)!
How do you achieve this in practice?
Start by defining your user profiles and customer groups by identifying their unique SPIN (situation, problem, impact and need). This allows you to dig into their individual pains, gains and value drivers. Next, go out and speak directly to these groups to curate a real-world user profile, customised for each audience.
Recommended Reading: How to win friends and influence people (Dale Carnegie) / Obviously Awesome (April Dunford)
Lesson #3 — Your Product must be both Viable and Valuable to survive
One of the biggest challenges for tech startups today is building a viable and, most importantly, valuable product that customers will actually pay for — all before running out of cash. Many founders find the dreaded ‘Minimal Viable Product’ (MVP) difficult to execute in practice because it means different things depending on your technical background or industry. As such, some new concepts have been floating around the tech ecosystem such as; Minimum Valuable Product (MVP 2.0) or Minimal Awesome Product (MAP). Both MVP and MAP concepts emphasise inherent value or a certain level of quality — which most people are now accustomed to in the digital age.
As consumers, we are spoilt for choice and naturally gravitate towards smooth user experiences and have little or no patience for poor-quality products (especially ‘buggy’ Apps or Websites). Once your product is out in the world, it’s very costly to fix a fatal design flaw. So, ensure you constantly alpha (and beta) test your new features throughout the development stages. Don’t be afraid to tell people about your idea — it’s the best way to get feedback and avoid unnecessary pitfalls.
“If you are not embarrassed by the first version of your product, you’ve launched too late” — Reid Hoffman, Co-founder of LinkedIn
How do you achieve this in practice?
Use a disciplined approach to testing each of your product assumptions — keeping your customer at the centre of your decisions (see Lesson #2). Be mindful of scope creep and perfectionism — consider the inherent ‘value’ of each feature instead. Build concentric user groups to gather qualitative and quantitative feedback. Depending on your market characteristics (see Lesson #5), you can test your concept by launching a silo website, posting on public message boards or speaking to customers at networking events or even on street corners — whatever it takes (e.g. guerrilla marketing tactics).
Recommended Reading: The Lean Startup Changes Everything (HBR) / Disciplined Entrepreneurship (Bill Aulet)
Lesson #4 — Market Economics and Access to Capital will ultimately drive your initial Business Model
No matter your industry or product, every startup will eventually need to be self-sufficient and, until then, you will require external capital to survive (see Lesson #6). New technologies and hardware-oriented products are particularly time-consuming to commercialise — meaning they are cash hungry. Many seasoned entrepreneurs learn to “Beware of the Valley of Death” and consider their death valley curve closely — i.e. the span of time taken to get to revenue.
Revenue is vanity, profit is sanity, but cash is always king.
How do you achieve this in practice?
To ensure you stay above water, constantly monitor your burn rate and update your financial models as your predictions change — keeping a close eye on profitability metrics and cash flow (i.e. runway). Ensure your assumptions are reviewed regularly with respect to sales volumes, market-entry constraints and resourcing costs — building in a healthy buffer for uncertainty. Focus on your ‘unit economics’ as you scale — reducing the cost of acquiring new customers whilst retaining existing ones. This can be achieved through industry partnerships, establishing new distributor relationships or deploying sticky, indirect marketing campaigns. There are tons of useful articles available — so, get stuck in!
Recommended Reading: That will never work (Marc Randolph) / ShoeDog (Phil Knight)
Lesson #5 — Understanding your Market Characteristics is Essential to your Sales Strategy
The key to understanding your market is information — the motion of goods, services and people within it — including the various sales channels, pricing models and logistics systems behind them. Before you can effectively sell your product you need to know; your customer’s preferred purchasing channel (the where), their buying patterns or behaviours (the when/how) and decision-making psychology (the why). For example, B2B business development is normally conducted during industry networking events or via direct introduction — so, investing time in relationship building is critical. However, B2C is a different world — listing your products on a marketplace (e.g. Amazon), leveraging digital channels or partnering with other consumer brands would be much more impactful.
“Price is what you pay, value is what you get” — Warren Buffet
Every customer interaction is a chance to present your solution clearly, build trust and develop a relationship that is mutually beneficial. For example, providing free-to-use or educational elements, such as blogs or training sessions, can help new customers to overcome their initial reluctance to trust an unknown brand. Overall, offering a free trial is a better conversion tactic than cold, hard persuasion. Everyone is looking for a bargain— so offer them one — and you will gain unbeatable engagement!
Practical Questions to Consider:
- What drives demand in your market? Is it your end-consumer's habits, desires or problems? Do they depend on a particular resource and does it have any price elasticity?
- What is the competitive power dynamic and how do they retain market share? Is it a race to the bottom (constantly reducing costs) or a content-centric, quality-driven marketplace (i.e. Netflix vs. Disney)?
- What are the traditional sales channels or routes to market? How do your end-consumers purchase their existing goods and services (e.g. online marketplaces, physical retails etc)? Does your industry use distributors or do most transactions occur at the point of origin?
- What types of marketing efforts are deployed by competitors? Do you know which channel has the most traffic or is the most effective per audience/customer group (see Lesson #2)? How do your consumers find new products — i.e. via word of mouth, search engines or marketplaces (e.g. Etsy or Amazon)?
- Where does your product or service fit in the market? How does it compare to existing solutions in terms of price, quality, effectiveness or another distinguishing factor?
Recommended Reading: 7 Powers (Hamilton Helmer) / The Ultimate Sales Machine (Chet Holmes)
Lesson #6 — Plan your Fundraising and Growth Strategy from Day 0
At some point, all startups need an injection of cash to accelerate their growth— whether it’s grants, loans or equity investment. You will inevitably need multiple rounds of funding at different stages of growth and quantity of capital (i.e. £100k or £10M) which require different types of investors (i.e. Angels, VCs or Private Equity) — so, think about your capital requirements at each stage and the metrics you will need to achieve. If you don’t plan sufficiently far ahead — you may run out of cash too soon and, subsequently, pay an extortionate cost for your capital (i.e. loss of control) or watch your rocket ship come crashing down.
Every founder has to make strategic choices about resource allocation and time commitments. Some decisions seem easy at first and can benefit you in the short term. However, every quick-win has long-term consequences if you don’t think them through carefully (colloquially called founder’s dilemmas— another great book). Alas, the world of fundraising is complex and will likely require its own blog (coming soon). To get you started, here are some nuggets of wisdom from the investor’s side of the table.
Practical Q&A (just get to the point):
- How much should you raise? Short answer — as much as you need to get to the next inflection point, with a suitable contingency. This ensures you can retain control of the decision-making process and you don’t raise too much at a lower valuation. There are various methods for valuing a startup and it’s a well-documented topic (happy reading).
- How much can you raise at each stage? This is normally dictated by your industry, stage of development, revenue figures and your team’s track record (ability to raise capital). Various terms get thrown around like Pre-Seed, Seed and Series (A, B or C) — their quantum and requirements have changed over the years but the general trend is upwards. Generally, more commercial progress means less risk for investors and larger rounds.
- How do you maximise your chances of raising funding? By considering your target audience and their qualifying criteria (i.e. Angel syndicate, HNW, VC). Present each party with the metrics that they want to see and clearly articulate your commercial traction — don’t be vague. You generally need a big opportunity, a professional team and, preferably, a warm introduction to an influential investor or partner to have the best chance at success.
Recommended Reading: The Founder’s Dilemma (Noam Wasserman) / The Warren Buffett Way (Robert G. Hagstrom)
Lesson #7 — Build a Legendary Team and Create an Inclusive Culture
All companies are built by people who make decisions about every aspect of the business on a daily basis. By creating a common vision and a clear purpose, you ensure everyone is moving in the same direction. Recruiting a star team will be your biggest challenge — it’s time-consuming and expensive — especially once you’ve exhausted your network of ex-colleagues and friends. If you hire the wrong person, you will find out very quickly.
Startups are all about creativity and flexibility — you are solving problems that did not exist before, so you need the best minds on the case. Build a legendary founding team to get the momentum started and never stop hiring Rockstars in their field (AKA — Tech Ninjas). Once you have the right team — there is no mountain you cannot climb!
“You’re hiring a team, not a set of positions” — Marc Randolph, Co-founder of Netflix
Focus on creating an inclusive, welcoming and mission-driven culture that inspires each person to deliver their best work. Culture isn’t what you say, it’s what you do — so lead from the front. Practice ‘Radical Candor’ and foster instant, empathetic feedback when it is needed most. You inevitably spend most of your time with your colleagues — so, be open and honest about your feelings to your colleagues to build trust and comradery. If you have hired the right people, they will already have the skills and the good judgement to make informed decisions — you just need to get out of their way!
Lastly, remember that you are not alone — tonnes of founders and entrepreneurs have stood in your shoes. So, surround yourself with mentors and advisors who have done it before. You can learn a lot from the mistakes of others without the personal cost — failure is the best teacher after all!
Recommended Reading: Radical Candor (Kim Scott) / That will never work (Marc Randolph)
Closing Advice — Take it one step at a time
When it comes to startup building— you need to embrace uncertainty and take every opportunity as it comes. I've found that expecting the worst and hoping for the best, in all circumstances, ensures you are never disappointed or unprepared when a change occurs. At the end of the day, we can only control the choices we make and our attitude towards them.
As long as you make the best decision at the time with the information you have available — you will have nothing to regret. If you need to pivot your startup for whatever reason, don’t look back, just ensure you survey the paths ahead before you commit wholeheartedly to one. Aim for cheap and valuable lessons in business— failing fast is good, as long as you can learn faster.
“A journey of a thousand miles, begins with one step” — Lao Tzu
Like all good things, startup ideas take time to nurture and require a little bit of luck (the right timing) to become a unicorn success story. So, don’t beat yourself up too much if things don’t go as planned — it’s all a learning curve. If you take it one step at a time, I guarantee that before you know it, you will be miles ahead of where you started. Enjoy the journey and the challenges along the way — Good luck!
Recommended Reading: Meditations (Marcus Aurelius) / Ikigai (Héctor García)
About the Authors
#ScaleUpLessons is written by serial entrepreneurs, engineers and technologists to share knowledge about scaling startups across a range of industries.
The content was presented at the World Festival (2021) Startup Summit — by Selby Cary and Bhairav Patel, Co-founder of ATOM Ventures. This blog was written and curated by:
Selby Cary —is a serial entrepreneur, inventor and engineer with a passion for data-driven and automated systems. Previously, Selby co-founded ZIVA Robotics, an award-winning deep tech startup based in Edinburgh, before joining TestCard.com to accelerate affordable at-home digital healthcare. In his free time, Selby hosts the Edinburgh Tech Meetup and Entrepreneurs Social Club, bringing the tech startup community together one meetup at a time.
