Usually, startups have to move through lots of suggestions and require big attention while their initial stage of establishment is going on. However, after establishing a business, the next thing to be done in scaling up a business and taking it to the next level. Scaling the startup refers to acquiring a broader customer base and higher revenue by following the customer acquisition methods constantly.
Businesses face both kinds of customers-loyal ones consistently using products and services and others who leave at a point. Thus, to reimburse the lost revenue out of customers who left, businesses constantly need to expand their customer base for more revenue. Startups who do not focus on scaling up processes usually fail on their journey of business.
If you are thinking about scaling up your startup, then it can be a decisive move. This is because if you scale up impetuously, then it will result in organizational issues that will be hard to handle and may lead to a complete business breakdown. On the other hand, if you scale up very sluggishly, you will miss out on crucial opportunities that come with larger resources and revenue.
This webinar discussion with Alok Goyal, Partner at Stellaris Venture Partners, a technology-based venture capital firm in Vancouver, is best to read for the entrepreneurs who are willing to scale up their startups. Alok Goyal is a Computer Science graduate from IIT Delhi 1992 batch. Post completing graduation, he moved to the University of Texas in the U.S. for research. In 1994, he realized that he was more inclined towards business and, hence, returned to India.
He worked for McKinsey India for 6 years and another firm in the U.S. In the midst of all this, he also completed his MBA from INSEAD business school in France. Later, in 2013 he made his foray into the world of Venture Financing. He was a partner in Helion Ventures and started investments in enterprise software like Whatfix, Pipemonk, Axtria, and Linguanext. After 3 years, he, along with 2 of his collaborators, established Stellaris Venture Partners. Stellaris is an early-stage, technology-focused VC firm, and they provide seed funding, mostly Series A funds, to Indian technology firms.
An early-stage founder can expect numerous challenges while they think of transitioning or scaling their startups. There are ambiguities related to scaling a startup and not enough fluency in the founders’ minds on this subject. No matter whether you are scaling up your business or startup, there are huge requirements of financial investments for exponential growth. You need to engage with more investors for your funding needs. This discussion presents you with an opportunity to understand the mechanisms of developing a scale-up business plan for your startup.
Current Scenario of Startups during COVID pandemic
According to Alok, startups are currently facing moments of uncertainty. Due to COVID 19 pandemic, it has become quite difficult for both the startups and capital firms to operate in such a tough situation. There is a slowdown in the industry due to this uncertain environment. While speaking on the pandemic opportunities, Alok says that demand for technology is going to rise, whether it is a big company or startups. All the sectors associated with work from home methodology are getting benefits like the education industry, telemedicine, IT/ITeS, and security. He also considers that at the generic level, the world is facing a contraction in GDP, which is not good. This will change the consumer sentiments on the negative side, which will hurt in the near future.
Scalability in Startups
Alok shares his views on scalability and tells that scalability is when you get the next thousand dollars or the next million dollars at a lesser cost than the previous one. It can be understood in terms of growth, i.e., as you grow, what you do becomes easier than what you did in the past.
Recommendation while scaling a startup
Alok points out the some do’s and don’ts which a startup founder can look into while scaling up:
Figure out a product-market fit prior to scaling up the startup.
Figure out the ways to take your product to the market, i.e., find a go-to-market fit.
Go all out once you find the above 2 fits, i.e., product-market fit and go-to-market fit.
Organizations need to look out for specialist and transit from generalist to specialist people as they grow. Apart from this, CEOs should be able to bucket the people in the organizations into builders or creators who have entrepreneur-like thinking, the other one are the growers who can make things grow just like a seed into a plant, and the last one are the optimizers, who are process-oriented and can optimize things.
The other thing that founders need to consider is to have an eye for competent people in the organization. They should identify people who can transit according to the demands and provide them the right opportunity. Whereas for the other set of people, the organization needs to adjust them to newer roles or let go of.
Apart from this, he also says that companies should hire people for tomorrow and not today. It is beneficial if the startups focus on building the workforce for tomorrow and workout things accordingly. Founders should also find mentors who can guide, empathize, and strengthen them in their startup journey.
Q & A What are your views on travel content startups and their scalability?
As per Alok, the travel sector startups face headwinds at the moment as people have not traveled across the globe. Companies need to figure out the requirements of the people and create offerings to fulfill those needs. There are models that are coming up like daily, weekly, or monthly rentals in terms of vehicles for the people.
As the SAAS model has grown up, how do you see IoT hardware startups choosing the PAAS model for scaling up?
Alok shares his views on this and tells that he has evaluated at least 100-200 such startups in the past 7 years. According to him, there lies a massive opportunity in the IoT space, but hardware-oriented startups still face challenges compared to other startups. Iteration of hardware is a difficult process altogether. Moreover, India doesn’t have a very good hardware ecosystem. So, as compared to software, the hardware startups are harder to take on.
What are your views on Edtech post-COVID?
Alok is very confident in Edtech startups in the current COVID scenario. According to him, the actual education pedagogy has not changed from the past 30-40 years. There are a lot of opportunities when it comes to experiential learning enabled by technology. Hybrid models combining learning and social aspects can make a lot of difference when it comes to education.
What is your advice for founders who have received a term sheet pre covid, and the VC has taken a pause since COVID started?
Alok sees this as unethical on the part of VC when such a situation arises even though the term sheets are not binding documents. But the commitments hold some value, and that should be taken care of. It is incumbent upon all parties to abide by the term sheet. It is important as once a term sheet is signed, some startups stop looking for funds, and when the investor backs out after a month or so, it puts the startup founders in a spot of bother and may throw the startup in an existential crisis. In such a situation, the founders must be ready for acceptable re-negotiation terms if that happens or go for measures such as cost-cutting, saving money, or raising bridge funds from existing investors.
How is Stellaris Venture Partners different from other VC firms?
As far as the evaluation of a startup is concerned, Alok says that the VC profession is more of an apprentice, and this art is continuously evolving. He believes that the right market scenario and the entrepreneur and his team are equally important. The problem to be solved should be deep enough to make an impact in the market, and the insights that the entrepreneur is bringing to the table are the essential things to look at. Identifying a spike in the team is also a paramount requirement for the VCs, be it the technical skills or team motivation.
Speaking on what Stellaris is doing differently, Alok has pointed out a few things:
Trying to access the best entrepreneurs.
Trying to enter the company as early as can be to maximize the returns.
Rather than the strategy, it is the execution that matters for Stellaris.
This company is created by people who were operators themselves and has built businesses in the past.
There is enough practical experience within the founders, and the company believes that they can become better partners to the entrepreneurs post-investment.
Stellaris believes in making investments only when they are confident of the venture, and there are no half bets while making investments.
What are the sectors that you focus on?
Alok shares his favorite sectors that he focuses on:
What are the items that startups can focus on in the near future?
Alok recommends items which he finds a startup should focus on:
Entrepreneurs should ask themselves why they have started this business.
Believe or be optimistic about the problem that they are solving.
Figure out the ways to keep the company capital healthy for 12-24 months, at least.
Be ready to alter the course if needed, but keep the overall goals intact.