This first research in the field aimed to study different pathways of scaling with examples of 8 USA-based high technology late stage startups. Its main objectives were to develop a definition of scaling and to suggest a framework leading to success.

1. MASTER
THE STARTUP
JOURNEY:
SCALING
A NEW VENTURE
Done by:
Elena Zagreba
September 24th, 2015
Experts :
Philipp Bubenzer
Marcus Schneider

2. Introduction
Problem and preliminary literature review
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 2
Most startups fail
(Cader & Leatherman, 2011; Nobel, 2011; Roberts & Eesley, 2009)
Prior research concentrated on :
Reasons for startup failures Predictors of new venture
performance
(early stages of development of a startup)

3. Research Gap
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 3
 Scaling process :
• In the academic literature : poor understanding
• On practice : more advanced understanding :
Figure 1. The Startup Journey by Troiano (2015).

4. Research Gap
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 4
Blank and Ries:
(Marmer et al., 2011).
 Paucity in the literature :
• Lack of understanding
• High number of failures
New ventures performance on practice :
Scaling is the most difficult phase.
70% of startups scale prematurely.
74% of growing internet ventures fail during scaling.
(Marmer et al. 2011)
«Startups are temporary organizations
designed to scale
into large companies»

5. Research Question and Objectives
STARTUP JOURNEY: THE STEP OF SCALING UP OF A NEW VENTURE | Elena Zagreba 01.05.2015 5
Research Gap :
 Lack of understanding of the scaling process.
Research Question :
 How do new ventures successfully scale their businesses?
Research Objectives :
 Definition of scaling
 Ways of scaling
 Measurements of success
 Framework for successful scaling
Research Process :
 Theory development

6. Scope of the Study
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 6
Scope :
• New ventures at their late stages of development
(ready service on the market approved by first customers).
• High technology companies (online platforms and applications).
• Geographically : North America
• For-profit companies only

7. Literature review
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 7
• Measurements of performance
• Startups lifecycle by Blank (2007)
 Scaling is a transformation
of a new venture to
an established profitable
company.
Figure 2. Customer Development model by
Blank (2007).
• Understanding from social entrepreneurship (scaling up) – more
developed than in business
• Scaling in other disciplines (eg., informatics)

8. Literature review
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 8
Knowledge around scaling in business :
• Beginning of volume production and creation of an operating business
(Gaibraith, 1982)
• One of the strategies for fast growth. Serving mass market at a low cost
(Von Crogh & Cusumano, 2001)
• Economies of scale (Bhide, 2000)
• Crossing the Chasm (Moore, 1991)
Figure 3. Technology Adoption Lifecycle adapted from Moore (1991).
• The Startup Genome Report (Marmer et al., 2011)
The
Chasm
Innovators Early Early Late Laggards
Adopters Majority Majority

9. Intended outcome
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 9
Figure 4. Expected outcome of the research.
Scaling
performance
Success factor 1
Success factor 2
Success factor 3
...
Success factor n

10. Intended outcome
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 10
Theoretical contribution :
• Better understanding of the scaling process.
• Basis for future research (development and testing).
• Introduction to the business schools’ programs.
Managerial contribution :
• Better understanding of the scaling process (multidimensionality).
• Using the framework in elaboration of the scaling strategy.
• Guiding new ventures towards repeatable and scalable business models.
• Decrease the number of failures during scaling.

11. Methodology
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 11
Figure 5. Research methodology framework.
• In-depth
Interviews
• Archival
Data
• Grounded
Theory
Approach
• Case
Study
Method
Theoretical
Sampling &
Methods
Data
Collection
Data
Analysis
(coding)
Theory
Saturation
Theory
Building

12. Analysis
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 12
Defining scaling :
• Coding
• Cross-case comparison
• Hypothesis
Measurements used by startups at the scaling stage :
• Coding (categories and their properties)
• Cross-case comparison
• Hypothesis
Investigation of scaling success factors:
• Multi-level cross-case analysis
• Memo method
• Coding : 1st-order categories
• Cross-case comparison and coding by company size
• Coding : refining to the 2nd-order categories and their properties
• Hypothesis

13. Results
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 13
Scaling a New Venture Framework
Figure 6. Emerged framework of successful scaling.
Successful
scaling
Quantitatively
Revenue & Ratios
(predictable)
Qualitatively
Product (approved)
Process (repeatable)
Resources
Sales
Strategy
Product
Timing
Measurements
Costs
Customers
Market
Partners
Internal Factors
External Factors

14. Results
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 14
Developed definition of scaling :
Scaling is a multidimensional process
that transforms a new venture
to an established, sustainable, and profitable
company
by developing standard, repeatable, effective,
and efficient internal processes.

15. Conclusions and Discussions
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 15
Findings vs Existing Knowledge :
• Measurements of success
• Factors contributing to success
• Aspects of the scaling phenomenon
Limitations :
• Not applicable to manufacturing companies.
• May not represent other geographical zones.
• Weaknesses of the research design :
− availability of the data,
− interpretations by participants (potential data biases),
− voluminous data and results,
− lack of simplicity.
• Retrospective study : unknown future of the participants
(success or failure?).

16. Conclusions and Discussions
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 16
Opportunities for future research :
• Studies including the same sample
• Longitudinal studies using the developed framework vs other strategies
• Testing framework :
prospective quantitative studies measuring the correlation between
variables

17. BONUS
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 17
• Talking to Venture Capitalists :
 Scaling is a challenging, cash-burning phase.
 Investments are much greater
than at the early stages of development.
 High risk of failure, devastating consequences.
 Failure for new ventures and for their investors.
 Understanding of the scaling process and a right strategy are crucial to raise
the capital.

18. Thank you!
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 18
For your attention.
For contribution to my work.
QUESTIONS?