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Draper University: Building High Growth Sustainable Startups

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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.

Published in: Business, Economy & Finance

Draper University: Building High Growth Sustainable Startups

  1. 1. TRANSITIONINGSTARTUPS TOSUSTAINABLE, HIGH-GROWTH COMPANIESSpeed/Strength Week – Draper University – May 2nd,2013
  2. 2. Introduction: Martin Tantow Entrepreneur: Avalas, Blissity, 3scale (partiallysold, 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 andclose successful, subsequent rounds of financing 50+ advisor network with industry leaders frommobile carriers, handset manufacturers, mobilesoftware entrepreneurs, platform providers, serviceproviders, Internet giants and others
  3. 3. There is no lack of startups137000120000Startups Getting Founded(every day)Startups Getting Dissolved(every day)88% of Startups failSource: Worldwide Business Start-ups, Moya K. Mason
  4. 4. Why so many startups? Markets are more mature More Internet users, moreapp buyers Gaining critical massMarket Reaching customers iseasier Platforms like Apple AppStore, Facebook, GooglePlay, FoursquareDistribution Amazon EC2, S3 Heroku Ruby on Rails MySQL instead of Oracle Availability oflibraries, APIs, webservices, virtual machinesTechnology Google Apps for Business Salesforce Intuit Box Dropbox Skype, Google HangoutServicesEric Ries: LeanStartup:MVP, cont.deployment, A/Btesting, action.metrics, pivotMethodology
  5. 5. Startup Ecosystems have theirshare
  6. 6. It‟s not about quantity, it‟s aboutquality!However,
  7. 7. Building a Startup is difficult – Converting it into ahigh-growth, sustainable business is even moredifficult
  8. 8. Why do Startups fail? Environment:competitors, regulation, “Google”ExternalInternal Market fit: right market at the righttime Product: product-marketfit, pivot, UI/UX, design Business Model: might be the coredifferentiator Team:vision, flexibility, leadership, dedicationExecution
  9. 9. The right mentors are a criticalsuccess factor for a startup1. Founders that learn are more successfulStartups that have helpful mentors, track metricseffectively, and learn from startup thought leaders, raise 7xmore money and have 3.5x better user growth.2. Startups that pivot once or twice raise 2.5x moremoney, have 3.6x better user growth, and are 52% lesslikely to scale prematurelyWhy do Startups succeed or fail?(Study with over 650+ startups, incl. 160 fundedstartups)“Startup success can be engineered by following the process, whichmeans it can be learned, which means it can be taught.” (Eric Ries)
  10. 10. Startups require different functionalexpertise along the StartupLifecycleConservation/RenewalSustainScaleEfficiencyValidationDiscoverySeedSeriesARequires industryspecific advisors &mentors withfunctional expertiseGapSource: StartupCompass, Scaler Early businessmodel validation Beta tests Pivots MPV Initial validation Initial valueproposition Business modelrefinement Customer acquisitionchannels Cust. acqu. process High-growth Scalability Organizational changes Management systems
  11. 11. Avoid the “trough of sorrow”Source: Paul Graham‟s Startup Curve – avoid the “trough of sorrow”
  12. 12. Avoid growth stalls (Fortune500)Cause ExplanationPremium positioncaptivityA company with long-successful premiumbrands ignores new,low-cost rivals ormajor shifts incustomer preferences.Innovationmanagement breaksdownA companymismanages theprocess for creatingnew offerings.Core business isabandonedprematurelyBelieving its coremarkets are saturated,a company doesn‟tfully exploit growthopportunities in itsexisting business.Company lacks astrong talent benchThe firm has fewexecutives and staffwith strategy-Source: StallPoints, byMatthew S.Olson and Derekvan Bever
  13. 13. Building sustainable, high-growthcompanies Organizational structure (roles & responsibilities, departments, keyhires, incentive system) Management systems (financial planning & evaluation, HR planning &evaluation, strategic planning, product developmentmanagement, 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 targetedresources, JV, channel collaboration) Channel management and enterprise sales (viral, bottom-up useradoption, lead generation, enterprise learning, support) And especially how to ensure sustainable growth (businessmodel, retention strategies, excellence)Source: Scaler, Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator, byAntonio Davila, George Foster, Ning Jia✔✔
  14. 14. Organizational StructureLeadership1 Clear vision and priorities Cohesive leadership team1Decision -making and -structure2 Clear roles and accountabilitiesfor decisions Organizational structure thatsupports objectives2People3 Organizational and individualtalent necessary for success Performance measures andincentives aligned to objectives3Workprocesses andsystems4 Superior execution ofprogrammatic work processes Effective and efficient supportprocesses and systems4Culture5 „High performance‟ values andbehaviors Capacity to change5Source: The Bridgespan Group: Designing an Effective Organizational Structure
  15. 15. Management Systems (1/3)Category of System Individual Systems Within CategoryFinancial Planning  Operating budget Cash flow projections Sales projectionsFinancial Evaluation  Capital investment approval procedures Operating expenses approvalprocedures Routine analysis of financialperformance 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 newsletterSource: Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator, by Antonio Davila, GeorgeFoster, Ning Jia
  16. 16. Management Systems (2/3)Category of System Individual Systems Within CategoryHuman Resources Evaluation  Written performance objectives formanagers Written performance evaluation reports Linking compensation to performance Individual incentive programsStrategic Planning  Definition of strategic (non-financial)milestones Customer development plan (plan todevelop market) Headcount/human capital developmentplan Product portfolio plan (plan about futureproducts) Investment budgetProduct Development Management  Project milestones Product concept testing process Reports comparing actual progress toplan Project selection process Product portfolio roadmap Budget for development projectsSource: Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator, by Antonio Davila, GeorgeFoster, Ning Jia
  17. 17. 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 managementsystem (CRM)Partnership Management  Partnership development plan Policy for partnerships Partnership milestones Partnership monitoring systemsSource: Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator, by Antonio Davila, GeorgeFoster, Ning Jia
  18. 18. Rate of Management Systems Adoption by Early-Stage Growth Companies in Years 1 to 5Source: Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator, by Antonio Davila, GeorgeFoster, Ning Jia
  19. 19. Q & A
  20. 20. Martin TantowFounder, Scalermartin@scaler.cowww.scaler.coThank you.

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