Making the leap – transforming your team from startup to scaleup

The people who thrive in the chaotic work environment that accompanies any start-up have a unique personality. Their ability to wear multiple hats, adapt and improvise in new situations and problem solve are why a founder has brought them into their inner circle to help turn nothing into something. There is the assumption that these people - the core team – are going to go on the entire journey together.

However, once a company evolves and begins to formalise, the same people who thrived in a start-up environment may find that they are unable to excel in their roles. What’s more is that their multiple roles may be offered to more specialised workers, and they may find that their influence on all aspects of the company dwindles.

In the latest episode of Platform Diaries, I discuss how best to navigate this difficult and somewhat awkward issue with Steve Grace, the founder of The Nudge Group, a global company that connects world-class talent with start-ups and scale-ups, an Antler Angel who invests in numerous businesses, CEO of publication Balance the Grind, and director at YBF Ventures.

“The team you have at the beginning will probably not be the team you have at the end. There’ll be some, but they’ll be few and far between. You'll lose some of them at this phase – the start-up to scale-up phase – and then you’ll lose even more from scale-up to unicorn. That’s just the reality of it,” Steve says.

Steve’s harsh dose of truth may be a hard pill to swallow for those who have built a team with their friends or nearest and dearest.

“I think most founders just automatically assume the first ten, maybe 20 employees are the best ten that they want with them forever. They see these guys at the end, and that’s how they sell it to them.”

It is common in the start-up space to hear that founders must get out of the way of their own business for it to succeed. But Steve also proposes that the founding team must also reflect in the same way.

“It’s a horrible scenario,” Steve admits. “You realise that out of your six original people, four of them either have got to go, or you’ve got to find something else for them to do. They’ve given you everything to get you where you are, and you feel indebted to them, and now you’re in a situation where to take your business to the next level you either need to remove them or try and find something else for them that is useful.”

If you’re a founder reading this, starting to feel a bead of sweat form on your forehead or noticed that your heart rate has increased slightly, how can you predict when it is about to become a problem?

To answer this question, Steve offers his definition of when a scale-up becomes a start-up.

“I think for me, when you no longer have a limited runway - so this is more driven by funding than anything else. Most start-ups are trying to give away as little equity as possible, and they're trying to raise the minimum that they need to get their valuation up. I think when you get to a point where the raise is big enough - whether it’s 20 million or 100 million - that the runway no longer counts because you started to generate quite a lot of revenue, and the money is not keeping you alive, it is to just accelerate your growth, that to me is when a start-up becomes a scale-up from a funding perspective. I think from a product perspective, it’s when you make that journey from MVP to grown up, so you’ve got the product, people want it, people are beginning to buy it, and you've spent a little bit of time working with your customers to develop what that product looks like for them. You’ve gone beyond what you thought it was, and now you’re in a space where you're building it based on what your customers and the market wants.”

According to Steve, when your business hits these milestones, you may see cracks forming due to the core team’s inability to move with the growth of your business. For example, at the beginning marketing was one role, helmed by one person. Now there is likely a social person, a PR person, a communications person.

“During this stage, you begin splitting roles out. The people that you get at the beginning, the wonderful thing about them and why you succeeded, is their ability to do all of those things at the same time. To then say 'I'm going to cut your role in three, and you're just going to focus on one,' more often than not, they get bored, they get frustrated, or even worse - and this is what usually happens - they start to stick their fingers in everyone else's business.”

Steve reflects on the businesses he has run or observed going through this process and believes that a common occurrence is the people who were once responsible for all aspects of a sector of the business will attempt to retain their control. Ultimately, the people you hire end up getting peeved at the core founder who won’t let them do their job to the best of their ability. The consequence is disruptions for the overall business among staff, and time being wasted solving HR issues rather than focusing on the customer. It is at this point where not letting go of this person can inhibit your growth.

“Have conversations with those staff at the very early days, before you quite reach that scale-up. Have regular quarterly catch-ups with these key members of staff. Ask, "this is where we're heading, where do you see yourself fitting in?” Steve advises. “People are self-aware. There’s quite a lot of people in the market who consider themselves start-up specialists. Then you can plan their route out or something else – a new product, or all sorts of other options. But I think that people who have the conversation before they need to, rather than waiting for the breakdown, is best.… it’s like everything in any kind of business, communication is the key.”

Steve also thinks that this is the perfect time to give them the opportunity to present new ideas. Whether it’s a side product, or geographical expansion, people may surprise you with a great idea where they can still contribute to the growth of the business in a manner that is more suited to their skills. Steve also wanted to remind us that these people are often not at all nasty, and that usually they feel threatened.

Do you want to learn more from Steve about the best way to transform from start-up to scale-up? Tune in to next week’s episode of Platform Diaries, where Steve and I discuss the concept of shared ownership.