Scaling SmartA Strategy Framework for Modeling, Managing
and Monetizing the Scaling of Bootstrapped High-Performance Ventures
Davender GuptaThe Scaleup [email protected]
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
Who am I?
Involved in technology since 1979
BEng Engineering Physics and MS in Digital Imaging
Part of a fast growth startup 1997-2000
Professional business coach since 2000 in Calgary, Toronto, Quebec, Montreal
Launched FastTrac Québec pre-accelerator program
Coached and mentored 100s of startups at idea and early-stage
Currently completing Executive MBA McGill-HEC Montréal
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©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
Scaling is important…
A high-performance startuphas no value unless it gets out of development mode and engages with the market
But is hockeystickgrowth the only
strategy?
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Failure To Launch?
Ideal VC-backed Scaleup(Hockeystick)
Failed Scaleup(Valley of Death)
Time
Success Metric(Valuation,Revenues orTraffic)
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The problem with hockeystick scaling
« Unicorn Dreams »
• Distracted by Traction
Premature Scaling
• Insufficient evidence of PSF and PMF
Unworkable Business Model
• No path to profitability
Ability to execute lags demand
• Quality and customer service fails
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Strategy is a pattern of choices
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Exit Strategy
• Build to Sell
• Build to Grow
Value Chain Strategy
• Collaboration vs Competition
• Created Shared Value (Sustainability)
Innovation Strategy
• Product vs Value
• Sustaining vs Disruptive
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
• STARTUP is “an organization formed to search for a repeatable and scalable business model”
• SCALEUP is “a transitionalorganization with the objective to develop the ability to execute and the credibility to attract customers who recognize the value of the offer and who are ready to buy”.
• Exploring a viable business model
STARTUP
• Developing credibility and the ability to execute
SCALEUP
• Executing and evolving the business model
BUSINESS
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Scaling Smart is maximizing execution while managing uncertainty
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©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
Strategic Objectives
• How your choices align with vision, mission, values
Suitable
• How your choices fit success and risk criteria
Acceptable
• How your choices can be executed with available resources
Feasible
• How you co-create choices through interaction with stakeholders
Effectual
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Causal vs Effectual Logic
• Causal = Assumes the future is knowable and known
• Effectual = Assumes the future is unknowable and unknown
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goal
means
Search for the meansto achieve a stated goal
Start with the meansat hand to design the
outcome
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
Principles of Effectuation
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What can you do with what you have, what you know and who you are
Focus on how to minimize possible losses
Collaborate with partners who provide pre-commitment
Surprises are opportunities to explore new possibilities
The future cannot be predicted but can control some determining factors
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
Source: www.effectuation.org
Impact of Effectual Approach to Scaling
•Delay seeking investors to fund initial go-to-market because the need to generate ROI locks into a causal mindset
•First find customers who are willing to collaborate in pre-production prototype development through investment
•Establish rapid build-measure-learn loops
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Momentum Scaling
Ideal VC-backed Startup (Hockeystick)
Momentum Scaling (Waves)
Failed VC-backed Startup (Valley of Death)
Time
Success Metric(Valuation,Revenues orTraffic)
H1
H2
H3
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Momentum Scaling
•Establish market influence
•Establish market credibility
•Establish ability to execute
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
H1
H2
H3
The Startup Lifecycle Model
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The five components of a wave
• Preparation• Ensuring the startup is ready to scale, identifying the initial “beachhead” market;
• Beachhead• Entering the initial market, making first sales beyond “friends”, booking one or
several reference clients which give the startup legitimacy with early mainstream customers;
• Surge• Using the reference clients as leverage to increase market share quickly;
• Consolidation• Focusing on execution efficiencies to make the venture revenue positive, establish
the venture as a price or feature influencer in the market; and
• Maturity• Stabilizing the organization and the market share and preparing for the next scaleup
wave.
16©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
Key Questions
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Scaling the ability to EXECUTE •Generating Growth•Managing Growth•Directing Growth
Execution Leads Traction• Take on only the customers you can serve
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Strategic Dimensions
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Phase > Preparation Beachhead Surge Consolidation Maturity
Strategic Dimension
Market
How do I build credibility?
Who are early adopters to test
feature MVPs?
Who are reference clients who can
generate use cases and build
credibility?
Who are pragmatists which can
be referred to us by reference
clients to help gain revenues and
credibility?
Is our credibility strong enough
that we are attracting new
customers on our own?
Which adjacent serviceable
markets should we target next?
Product
How do I create 10x value?
What are focused, disposable
MVPs to test PJF?
What is a pre-production prototype to
test in real-life use case to demonstrate
10x value?
What is the “mass customized”
feature set to optimize PMF?
What is the feature set to
optimize production efficiency
What features should I retain,
discard or add to efficiently serve
adjacent markets?
Business Model
How do I create a
sustainable and scalable
business model?
Validate potential Customer
Segments and Value Proposition
Validate Value Proposition and
Channels (PJF) and building
Partnerships
Validating Customer
Relationships (Crediblity)
Optimizing Revenue Streams vs
Cost Structure
Expanding Value Proposition to
new Customer Segments
Cashflow
How do I build revenue
streams and reserves to
fund growth
Self-funding (FFF). Avoid using
equity
Raise product and marketing capital
through partnerships with Reference
Clients
Watch that CAC < LTV (always)
Minimize burn rate
Quality (profitable) clients are
more important than quantity
Improve marginal marketing cost
and operating margins
Consider whether to self-fund
next scaleup wave or go for
equity or debt
Systems
How do I measure and
manage growth
Ad-hoc, disposable “Do Things That Don’t Scale” to
understand workflow
Systems emerge from workflow
as efficiency needs dictate
Formalize those systems which
add value
Capacity expansion to prepare
for next scaling wave
Team
How do I evolve the ability
of the team to execute
Ad-hoc
Passion-driven
Focus on developing collaboration as
team starts transition from
Development to Deployment
Be aware of emergent shared
values and group story
Establish Mission-Vision-
Permission based on emergent
values and story
Formalize Mission-Vision-
Permission
Leadership
How do I develop the
ability to quickly make
decisions
Founder needs to step back
from product development to
build business
Founder is “Salesperson” #1
Start to build leadership team (3H)
Fill out leadership team (6H)
Delegate decision making but
share responsibility
Formalized leadership team,
board
If necessary, consider
transitioning to new business
management if founder is not at
the appropriate spot
Entrepreneurship
How do I continuously
learn and innovate
Establish Innovation Accounting
systems (build-measure-learn)
Structure test cases as
Positioning
How do I integrate into
existing value creation
ecosystem
Establish Value Creation and
Value Capture hypothesis
Identify and Validate Value Chain
Partners
Bring credibility for Value
Creation through execution
Take leadership role in Value
Chain
Reconsider position in Value
Chain and ecosystem, evaluate
switchback
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
•To build a sustainable, long term business with the ability to become a gazelle
•Founder Team stays in control
•Keep options open
•Choose the best customers
•Better adapted to the Canadian (outside SV) context
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Benefits of Momentum Scaling
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
•Effectuation is the mindset foundation of Lean
• Importance of testing to find PJFProduct + "Jobs-To-Be-Done" Fit
•Managing Uncertainty through Build-Measure-Learn and Innovation Accounting
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Tie-ins to Lean
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
“Move Fast and Break Things” or
Move Smart and Build Things
• Ability to execute must lead Customer Traction i.e. Only take on clients within your current capability
• Grow Revenues before valuation
• Managing uncertainty is more important than taking risk especially in initial go-to-market when you're under-resourced
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It’s your choice
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
• B2B • XaaS, Platforms, Workflow improvements, Big Data/AI, Industry 4.0
• Manageable technical risk• Sustaining innovation
• Mature founder• Some domain experience, 35+
• Doesn’t fit the VC pattern• Outside the VC footprint
• Not into “unicorn dreams”
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Who we’d like to meet
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
Be patient for growth and impatient for cash flow.
- Clayton Christensen author of “The Innovator’s Dilemma”
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©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]
Contact me!
Davender GuptaVenture Strategist and Co-FounderThe Scaleup Project
davender.comfacebook.com/coachdavenderlinkedin.com/in/[email protected]
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC [email protected]