Draper University: Building High Growth Sustainable Startups
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TRANSITIONING STARTUPS TO SUSTAINABLE, HIGH- GROWTH COMPANIES Speed/Strength Week – Draper University – May 2 nd , 2013
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It is very difficult to build a startup, however it is even more difficult to transition it into a high-growth, sustainable startup. Startup success can be learned, however founders need to acquire the right advisors and mentors for each lifecycle stage. Innovation management breakdown is one of the key reason for growth stall. Startups need to avoid these growth stalls with the right organizational structure, management systems and expansion strategies.
Transcript of Draper University: Building High Growth Sustainable Startups
TRANSITIONING STARTUPS TO SUSTAINABLE, HIGH-GROWTH COMPANIESSpeed/Strength Week – Draper University – May 2nd, 2013
Introduction: Martin Tantow Entrepreneur: Avalas, Blissity, 3scale
(partially sold, raised $6M from Javelin Ventures and others), CloudTimes (ongoing), Amiro Group (ongoing – Scaler, Amiro Capital)
Venture Capital: Infocomm Investments Executive: Booz & Co, Oliver Wyman, T-
Mobile, Viant Advisor/Mentor: TechStars, Astia,
Startupbootcamp, Radish Systems, Ziptask
Growth-stage Mobile Industry Accelerator - helping startups gain traction, deliver on KPIs and close successful, subsequent rounds of financing
50+ advisor network with industry leaders from mobile carriers, handset manufacturers, mobile software entrepreneurs, platform providers, service providers, Internet giants and others
There is no lack of startups
Startups Getting Founded (every day)
Startups Getting Dissolved (every
day)
137000 120000
88% of Startups fail
Source: Worldwide Business Start-ups, Moya K. Mason
Why so many startups?
Markets are more mature More Internet users,
more app buyers Gaining critical mass
Market
Reaching customers is easier
Platforms like Apple App Store, Facebook, Google Play, Foursquare
Distribution
Amazon EC2, S3 Heroku Ruby on Rails MySQL instead of Oracle Availability of libraries,
APIs, web services, virtual machines
Technology
Google Apps for Business Salesforce Intuit Box Dropbox Skype, Google Hangout
Services
Eric Ries: Lean Startup:
MVP, cont. deployment, A/B testing, action. metrics, pivot
Methodology
Startup Ecosystems have their share
It’s not about quantity, it’s about quality!
However,
Building a Startup is difficult – Converting it into a high-growth, sustainable business is even more difficult
Why do Startups fail? Environment: competitors,
regulation, “Google”External
Internal
Market fit: right market at the right time
Product: product-market fit, pivot, UI/UX, design
Business Model: might be the core differentiator
Team: vision, flexibility, leadership, dedicationExecution
The right mentors are a critical success factor for a startup
1. Founders that learn are more successfulStartups that have helpful mentors, track metrics effectively, and learn from startup thought leaders, raise 7x more money and have 3.5x better user growth.
2. Startups that pivot once or twice raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely
Why do Startups succeed or fail?(Study with over 650+ startups, incl. 160 funded startups)
“Startup success can be engineered by following the process, which means it can be learned, which means it can
be taught.” (Eric Ries)
Startups require different functional expertise along the Startup Lifecycle
Conservation/Renewal
Sustain
Scale
Efficiency
Validation
Discovery
Seed
Series A
Requires industry specific advisors &
mentors with functional expertise
Gap
Source: StartupCompass, Scaler
Early business model validation
Beta tests Pivots
MPV Initial
validation Initial value
proposition
Business model refinement
Customer acquisition channels
Cust. acqu. process
High-growth Scalability Organizational
changes Management systems
Avoid the “trough of sorrow”
Source: Paul Graham’s Startup Curve – avoid the “trough of sorrow”
Avoid growth stalls (Fortune 500)
Cause Explanation
Premium position captivity
A company with long-successful premium brands ignores new, low-cost rivals or major shifts in customer preferences.
Innovation management breaks down
A company mismanages the process for creating new offerings.
Core business is abandoned prematurely
Believing its core markets are saturated, a company doesn’t fully exploit growth opportunities in its existing business.
Company lacks a strong talent bench
The firm has few executives and staff with strategy-execution capabilities.
Source: Stall Points, by Matthew S. Olson and Derek van Bever
Building sustainable, high-growth companies Organizational structure (roles & responsibilities, departments,
key hires, incentive system) Management systems (financial planning & evaluation, HR
planning & evaluation, strategic planning, product development management, sales/marketing management, partnership management)
(International) expansion (product vs. geographical expansion strategy) Buy vs. Build (organic growth, M&A, software rental, IP protection)
Strategic alliances and partners (obtaining targeted resources, JV, channel collaboration)
Channel management and enterprise sales (viral, bottom-up user adoption, lead generation, enterprise learning, support)
And especially how to ensure sustainable growth (business model, retention strategies, excellence)
Source: Scaler, Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator, by Antonio Davila, George Foster, Ning Jia
✔
✔
Organizational Structure
Leadership
1
Clear vision and priorities Cohesive leadership team1
Decision -making and -structure
2
Clear roles and accountabilities for decisions
Organizational structure that supports objectives
2
People
3
Organizational and individual talent necessary for success
Performance measures and incentives aligned to objectives
3
Work processes and
systems
4 Superior execution of
programmatic work processes
Effective and efficient support processes and systems
4
Culture5
‘High performance’ values and behaviors
Capacity to change5
Source: The Bridgespan Group: Designing an Effective Organizational Structure
Management Systems (1/3)Category of System Individual Systems Within
CategoryFinancial Planning Operating budget
Cash flow projections Sales projections
Financial Evaluation Capital investment approval procedures
Operating expenses approval procedures
Routine analysis of financial performance against target
Product profitability analysis Customer profitability analysis Customer acquisition costs
analysisHuman Resources Planning Core values
Mission statement Organizational chart Codes of conduct Written job descriptions Orientation program for new
employees Company wide newsletter
Source: Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator, by Antonio Davila, George Foster, Ning Jia
Management Systems (2/3)Category of System Individual Systems Within
CategoryHuman Resources Evaluation Written performance objectives for
managers Written performance evaluation
reports Linking compensation to
performance Individual incentive programs
Strategic Planning Definition of strategic (non-financial) milestones
Customer development plan (plan to develop market)
Headcount/human capital development plan
Product portfolio plan (plan about future products)
Investment budgetProduct Development Management Project milestones
Product concept testing process Reports comparing actual progress
to plan Project selection process Product portfolio roadmap Budget for development projects Project team composition
guidelines
Source: Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator, by Antonio Davila, George Foster, Ning Jia
Management Systems (3/3)Category of System Individual Systems Within
CategorySales/Marketing Management Sales target for salespeople
Market research projects Sales force compensation system Sales force hiring and firing
policies Reports on open sales Customer satisfaction feedback Sales process manual Sales force training program Marketing collaboration policies Customer relationship
management system (CRM)Partnership Management Partnership development plan
Policy for partnerships Partnership milestones Partnership monitoring systems
Source: Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator, by Antonio Davila, George Foster, Ning Jia
Rate of Management Systems Adoption by Early-Stage Growth Companies in Years 1 to 5
Source: Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator, by Antonio Davila, George Foster, Ning Jia
Q & A
