Lessons in scaling a startup

It’s the 2018 X-mas break here in Australia, and I am sitting on Surfers’ Paradise Beach at the Gold Coast, writing this piece while hearing the waves crash into excited, joyful crowds. The vibe here is right to reflect on not just the year, but the journey that we’ve had at Gibsons Technologies. The word that lingers on to my mind is “lessons”… and hence that is what this piece would be about.

About three years back, I gave up a stable job to re-enter the realm of building new companies. I was pushing well into my 40’s, so it wasn’t an easy call with family responsibilities, “life goals” etc. The only difference this time was that my co-founder Damien and me had worked together a few years back (he used to be my numero uno client), so we knew each others’ qualities and limitations to a fair degree. Perhaps that helped me take the leap of faith, and say “yes” to a new co-founder relationship.

We knew what the product was at an early stage, but not what it could become. Now, having come a little farther in the journey of building that product and the teams, the company around it, there’s some experience in the team of what being in a scale-up is like.

In a word- chaotic.

Fun, positive – but chaotic.

The first and perhaps the most important lesson I learnt was that one has to prioritise – all the time. And then we created a list of “stages” for us and the team, that could help us prioritise one focus area over the other. But first, lets look into what this list of stages needs to have in place before it can become relevant.

Before scaling…

Being a tech guy all through – I learnt this the hard way. Before we could start to put serious time and resources into making an idea big, here are the top three things that needed to be in place:

• A functional, usable minimum viable product (MVP)
• 3–5 paying customers who have used the MVP for 6–12 months
• Enough revenue+capital to float for 18 months

Many an entrepreneur might argue that “paying” is unnecessary, but having learnt this the hard way, I can tell you that you won’t be getting real feedback unless customers are paying you for your product or service- and without that feedback, please don’t bother scaling or going all-in. “Free” could be effective clickbait, but would also be a terrible customer service strategy.

The prioritised stages of scaling

We worked through the next few years working through the different stages of scaling, and very quickly realised the need for ruthless prioritisation. While none of these stages existed in isolation, and we always had to do a little bit of everything all the time, there had to be one key focus theme for a period so that everyone in the company was aware of it, and could work towards making that goal happen.

Stage 1: Scale the product

Our MVP wasn’t marketable, and in our case only attracted the earliest adopters as customers. Scaling the product for us included building marketable features, building-in customer feedback (in fact, the USPs for the product came a 100% out of listening to customers), and creating the right technology+process platform that was to be the foundation of everything else for the next 1.5–2 years.

A big part of our product scaling activity had to do with what has been the nightmare of every CTO I’ve beered with- refactoring. This had to be a brave conversation with paying customers (and now one can see why “paying” is important)- trying to convince them to keep paying while we work on shit that we should’ve done but haven’t, also slow them down while we do all that for the next few months. We didn’t win this last bit completely… but were able to negotiate an even position where the most critical issues in our engineering could be refactored.

Stage 2: Scale the team

We obviously couldn’t scale the product without scaling the team – but here is the interesting bit – our first few additional team mates arrived organically while scaling the product itself. However that led us to the realisation that we did not have proper process to onboard team members, make them conversant with our product, and a lot many basic things including timely salary transfers! No matter how many more engineers we would have added without formally “scaling the team”, we wouldn’t have gotten far. We actually entered a four month “hiring freeze” of sorts to pause and fix all this – including working on a recruitment process that leads to the best experience for everyone who talks to us- whether they made it in or not. But more about that in another piece.

Stage 3: Scale up marketing

Stage 1 and Stage 2 kind of converged into stage 3 for us, which was to now step up marketing of the product. This included getting our basic sales and marketing channels in place, while constantly trying/ testing/ failing/ repeating to see what worked and what didn’t. In our case, once again the breakthrough came when we listened to our customers. Most of them pretty much said to us that if we had used any traditional/ corporate marketing techniques for them, they would have never bought from us! What did work for them was the team, and the personal connect with the co-founders. This was particularly hard for me to digest because I preferred spending my time building the product, and thinking that it was the most important factor to it success. So more customers came with more of the founders’ time getting out of the office and demonstrating the tech where it was to be used. We have now scaled up to a model where we need not be on the road all the time, and at the same time there is a little more to our marketing outreach than just conference booths and Google Adwords.

Stage 4: Scale up customers

The only thing that was better for us than having customers… was having more customers. Once more mainstream customers started to get onto our platform, we had to quickly focus on their on boarding experience with us, right from the time since our first conversation with them, the lead times by which they would hear back from us again, the follow-through once they have signed up and paid to be on the platform, initial training, first-time-user-experience (FTUX) changes to the product, and many more such activities.

An important lesson we were forced to learn early on was the need to articulate regular value to customers even when the “deal was done” and they were fully onboard, using the product. We did this by simple tools like in-product tips and tricks, regular newsletters, and an occasional email from one of the founding members of the company on how things were going for them. While this sounds small, we saw a major shift in customer NPS as soon as these measures were put in place.

Stage 5: Scale up ops

I will admit this – we realised the need for stage 5 pretty early on, but it is hard to scale up operations in a young company. But nevertheless we had to look at scaling up our operations as soon as more teams started to be on boarded and new customers started to sign up. In our case, the operations scale-up included a process, policies, infrastructure, supplier partnerships overhaul – again, focusing on addressing the 20% of root causes that would help us resolve 80% of problems. But here is how we started- a good part of our HR, hiring, marketing, advisory processes were outsourced to partners who helped us get some of these processes off the ground in the early years. We started our ops scale-up by hiring our own staff for these key areas and building career paths for them in our company. I was personally nervous doing this, but weaning off and standing on our feet proved to be a radical game changer- not just for ops but for the company’s culture as a whole. Would this be right for everyone? Honestly I cannot say it will. But will that improve your culture? Hell yes.

The role of funding

There is no denying the fact that in all these stages of scaling, raising capital could play a major role. What I would emphasise though is that it won’t play the most critical role. I’d suggest that before you think of raising capital for scaling up, step back and think of what your cashflow needs would be in order to serve your business strategy- a simple cashflow spreadsheet that lines up payments and expenses month on month, will show you what amount of additional working capital do you need over the next 4–6 quarters. I like working backwards from cashflow, because it is a very real indicator of how much sales need to happen, what the cost per sale should ideally be, how long before you realistically get paid for a deliverable, and most importantly – how much can you actually afford to spend. Also, if you like efficiency, IMO there is no better indicator than cashflow for improving efficiency by establishing areas that you need to tighten up in your processes/ contracts/ way of working.

In my experience, it is much better to slow down over certain periods where cash is tight, than to rush for funding/ working capital only to create business risks in the process. And again just speaking from my own experience – it is better to be slow and survive than to go fast and burn out to death. Personally never having raised venture capital, I cannot speak for VCs but I do like to think that a majority of businesses need to understand the role of cashflow, much before trying to establish the role of capital funding.

Summing it up: hard to plan everything upfront

While it is much easier for me to sit on this beautiful sunny beach today and reminisce about it all, there was no way that we could have done all this planning in advance – so everyone’s own experience is their best teacher in this game I guess. It is also not easy to make the perfect scale up plan – ours was far from it and was filled up of many failed starts and, at times, underwhelming outcomes. But what’s for sure is that we did need to plan, and yet did need to step back occasionally to think about our methods and make course corrections.

The scaling journey at Gibsons Technologies has just started, and while it tires us out often – it always pushes us to do better than yesterday and have insane fun while doing it. Hope you enjoy yours too, and would care to share your own story soon.