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How To Control the Risks Associated With Hyper-Growth for Responsible Scaling

Are you a startup founder who didn’t scale fast enough to outrun your competitors? I’ve been there, but you can turn it around quickly–don’t lose hope. Did you later try to scale like crazy and lose money? Many startup leaders have. 

We entered the era of startup hyper-growth over seven years ago thanks to a combination of dramatically expanded global markets, access to unprecedented later-stage private growth capital, and the ability to scale organizations with remote talent.

Therefore, many startups often seek to scale rapidly to outrun their competition to expand service offerings or products faster. Realistically, as startup founders, the message we have been fed is “it’s not first to invent but first to scale.” Naturally, that puts pressure on startups to develop faster than ever before. 

Hyper-growth startups, however, are often confronted head-on with challenges and failures when trying to scale their operations. So, how do you know when you’ve got the right innovations to grow from 25 employees to hundreds in nine months, like Paypal did? 

As the CEO of a robotic sidewalk delivery startup, the most important lesson I’ve learned is to be socially responsible with stakeholders and communicate with the communities you’ll be impacting. With this in mind, a new version of scaling is emerging on the horizon: responsible scaling. It’s a balance between money, good processes, resources, culture and networking. And here’s how to navigate it all.

 

Leave important and unimportant things for later 

Reid Hoffman, an American internet entrepreneur, venture capitalist and co-founder of LinkedIn, once said: “The classic mistake is: We’re going to reinvent everything.” If startups have that mindset, they will look like they are doing everything, but they’ll never really get anything done. There are always things that can wait. 

For example, you don’t need to have documented procedures and complicated processes for every part of your business—from recruitment to revenue reports. As more people join, they’ll bring creative solutions that don’t necessarily fit your defined checklist, so it’s best not to have one, or you’ll find yourself disappointed. Remember, your company will change radically as you go through different levels of scaling, especially if you double in staff size over three to six months. 

To start the scaling process, you also don’t need to know precisely your customer acquisition costs, the long-term value for customers, or even the business model. If you look to Uber, Facebook and LinkedIn, they all needed to scale first to get the answers to those questions.

Deployment speeds are entirely unpredictable and all depend on the particular industry and time of scale. But while you can leave things for later, you must keep an eye on the competitor’s clock. If you hit product-market fit, you will be competing against others. Therefore, don’t get stuck on an idea you had at the beginning of conception that your potential customers now won’t need or find value in. Be ready to evolve, leave ideas behind and postpone “important” stages for later, or you’ll risk losing the market opportunity of what you discovered. Nobody wants to go through that. 

 

Focus on culture and chaos early on

Due to the decentralization of opportunities globally and remote work becoming more popular, many valuable startups have jumped on the bandwagon and have staff based in different locations, especially post-pandemic. 

Therefore, before putting pen to paper for a business plan (or finger to keyboard, I should say), startup founders need to think about what kind of culture they want to create:

  • What values do you want to install? 
  • What working hours/company benefits can you offer to attract fresh talent? 
  • What does your organization reflect, wherever your team is in the world? 
  • Most importantly, in which location can you give people the option to convene? 

As you hire rapidly and your culture expands from several to hundreds of people of different ages and backgrounds, think about what they have in common. According to Deidre Paknad, co-founder of the hyper-growth SaaS WorkBoard, distributed teams must be aligned on a mission. For Kiwibot, it has always been our pursuit of technology for good. 

Finally, trust in the delegation process from the very beginning, otherwise, you and your colleagues will never embrace it. Welcome chaos at first by giving tasks to people who may not be ready yet and employing inefficient managers—the whole process is a learning curve, and you have to let some fires burn to achieve success. 

Next time your startup has a moment of failure, there is no need to ask for reassurance from your network. Simply ask: What could I have done better? If you set that precedent, your team will start problem-solving in the same way. 

 

Make something from absolutely nothing 

Back in 2015 in Bogotá, Colombia, I was fiercely discussing the future of sidewalk delivery with a few friends. We already had a delivery service startup running in Colombian universities, and we thought about experimenting with drones, but it was too expensive to scale. We liked this product, but we hadn’t fallen in love—often a pushback for founders

One day in 2017, after traveling to the U.S., we decided to add another income stream by building semi-autonomous robots. Scaling robotic production was just the extra spice on top of a stable, reliable infrastructure. The robots on their own would never have been enough; we needed a support network. 

The challenge was to find a way to create a minimum viable product robot to prove the concept. The first robot used a small box from Target, a car chassis and a mobile phone for streaming. When we deployed this robot across universities, people’s reactions to it motivated us to work on developing better technology. 

The lesson was that even if it is a complete embarrassment, you need to find the courage to innovate and test new things in the market. You first need to prove the concept, and scaling the technology can be sorted afterward. In fact, almost 60 percent of startups change their whole business plan to prevent business failure. 

To make a move from a single to multithreaded business with multiple revenue streams, startups should discuss current customers’ journeys and satisfaction and decide whether repackaging services would appeal to your existing and different demographics. The reality is: Your startup won’t grow without the support of an existing customer base. 

When creating something from nothing, you must also find a middle ground between your business mission or passion and the innovative technology you are creating. For instance, when new technology appears—take the examples of Open Banking or BNPL payments—there’s often no regulation. Therefore, your operations may attract governmental bodies and public policy organizations wanting to regulate processes, monetize and have policy frameworks in place. That’s when your mission comes in. With Kiwibot, our high focus on safety and accessibility means public bodies are now on board with the scaling of last-mile delivery robots. 

 

Revenue isn’t everything, but measuring is

A focus on revenue can be detrimental, and as the saying goes, money can’t buy you happiness. You may get interesting, positive results at the beginning following that route, but if you try to monetize every single dollar, you will underdeliver on results.

It is important to have continuous funding and a positive income but, if you scale fast, you need to be efficient with resources. To deploy programs successfully at Kiwibot, we created a centralized step-by-step playbook about opening campus robotic delivery services. This means that anyone with little training will know what standards to follow, how to speak to customers and business partners, what challenges they’ll face, and where to go if there is a problem. This kind of initiative shows real and physical company structure and potential for investors. 

Measure key performance indicators too. For our operations at Kiwibot, we are constantly measuring all movements that robots take on campuses or with our local businesses; how long it takes for them to deliver, how accurately the platform tells us there’s a new order, and how satisfied the customers are.

You have to measure everything, from the very beginning to the present. And this can be done in various formats: Creating your own CRMs and platforms, integrating company hardware with external software, or using software that already exists such as Airtable or Google Forms.

Overall, startups are constantly up against the clock, knowing that any minute they could be defeated by the competition, especially if those startups have more people, expertise or money. But businesses with a great idea could be one up on their competitors if they follow responsible scaling instead of dangerous hyper-growth. They don’t need to do everything at once; they can make mistakes with staffing, completely change a business model, and do a U-turn from a focus on revenue to a focus on measurement.

  • Originally published May 10, 2022