No entrepreneur can remain insensitive to the phrase “Chase the antelope, not the mouse!” (Well, some do! Read “Fuck the VCs” by the founder of Camera+ if you feel like you are one of them). If you’re still here, you’re interested in the antelope. This article follows the discussion that Christian Kranicke, founder of Leading Edge Advisors, and Carlos Silva, manager of the Founders Institute, had with participants of the 2017 SeedStars Summit. Here are the main takeaways:
What does scaling up even mean?
Scaling up is having “more”, but more of what? This is the first question participants answered. Some mentioned scaling up was replicating their Business Model (BM) in larger markets, others said that scaling up meant having more paid customers from all around the world while another participant mentioned that it meant pivoting his startup. The point is, scaling up has a different meaning for each start-up.
However, there is one common thread that applies anyone seeking to replicate their services in new markets (the branch of scaling up we will be delving into): when? The business should already have a strong foundation in its core market before considering expansion, meaning it showed organic growth. Once you know the BM works, you need to know it is replicable, and you need to look at the endemic problems you solve daily to determine whether the target market will offer the same issues.
This is when things start to get messy because the answer to the article’s headline depends on where you want to expand your start-up. First, we will see how to open the way for growth in developed countries before trying to see how it is different from doing the same in developing countries.
How to scale in developed countries?
The key to the European and American market is getting into a start-up accelerator. Even though there are accelerators in most countries today, not all are helpful. The household names (500 Start-Ups, Y-Combinator, …) offer credibility, support and a huge network. The hardest part, of course, is getting in by showing that your model is replicable and that it has real traction in these markets.
Once you are in, you are sure to build a brand and attract investors, allowing you to scale up without using a penny of your own money. Make sure to “keep the cap table as clean as you can” because you are exchanging freedom for investment. This is why you need to choose your investors wisely according to what they have to offer: always choose Venture Companies (VCs) with knowledge of the business and of the markets you want to expand in.
Keep things on your own terms. Investors will ask for a quick scale up, which often leads to self-destructive targets. Understand your competitive element, be aware of your ability to deliver and determine whether you can face off with your local competitors.
How to scale in developing countries?
There is no single way to succeed in emerging countries, winning the market over depends on how original you are. The support of local partners is always key as they have more knowledge of the environment than you do. You should try to partner with the right stakeholders; however unfair this advantage may seem.
Unlike developed countries, BMs in emerging markets are based on institutional voids, which makes even neighbouring markets completely different. This may lead to a complete transformation of your BM, a risky endeavour but not impossible. An important question to ask is “Who has been there and done that?” the answers may give you the legitimacy that will get you a seat at the table of investors.
Wherever you want to scale, the hardest part of your journey will be to build a solid BM. Once you know that your idea works, try to find the local knowledge that will boost your start-up and allow you to replicate your services in the new markets you are targeting. But most of all, keep in mind that getting investors on board really boils down to one single question only you can answer: “It doesn’t matter how good a product, are you credible?”
This article was originally published on Innovation Time, a student media association based in Lausanne, their mission is to provide young entrepreneurs with advice and insights from experts.
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