You would think if your business was fast-growing, if that were to be deemed a problem, it would be a nice one to have.
I see a lot of founders really struggle with growing a business from 50 to 500 people. For some, they are almost caught off guard by the scale of growth, especially when paired with a lack of necessary funds.
It is important to remember that this is a great problem to have, but it does require having a solid plan in place to address these challenges and ensure that the day you hit that super growth path, you can embrace it and not be overwhelmed.
Right now, I am working with a company which is looking like it will be in this position soon, so I started thinking about today's landscape and some of the things board members, shareholders and employees need to think about.
End in sight
It might not be the end for the company just yet, but it could be when that good old ‘exit’ you stuck on your seed round deck eventually becomes important.
This is all about where the founder and board see the company in 3, 5 and 10 years time. The exit isn't just about the company being acquired (although that is the most likely outcome) but also where the board sits. I meet a lot of founders, who work hard for 10 years on their company and because of outside factors – or just the journey has proved somewhat different or their circumstances have changed – who will not necessarily still want to be with a company for another 10 years.
The main reason for questioning and planning the journey forward, most likely for the 10th time is that you can save a lot of money wasted on taking the wrong routes or not supported by the board , but also be clear on expectations around growth and appetites in your business with all those involved.
Organic or sacrifice?
A key question to consider is: do you grow organically but risk missing that window of opportunity where some companies succeed or indeed where that fantastic offer of acquisition comes in? Or do you get more cash in for more aggressive growth at the risk of sacrificing interest in the company and potential board dynamics?
Remember, a venture capitalist probably wants exactly the same outcome as you as a founder and the board, but may be tied to much tougher timelines internally. Your business plan and timelines should reflect this but like all plans, you should have areas flexible to change.
Your F1 team
I remember saying to a team principal who had just won the constructors championship in Formula E (not to be taken lightly) about the startup company he also had. My remark was: ‘put your team together, just like you would with your race car team to win a championship’.
By this I mean, you need a tight team to go through this journey. It may change slightly in places, but to go from today to the end point with the same team is not only satisfactory, it's always good not to show too much churn in people. Surround yourself with the best advisors, accountants, and lawyers. Ultimately you want people who show a massive interest in your company but also understand your values and where the company is heading and who are experienced enough to have seen it before.
Most startups get the structure and foundation wrong at an early stage, usually because it's not top on the agenda, low priority or just acting on bad advice. Even the paid advice can be dire. In order to get to the end point here you need to make sure the structure is right operationally, correct for raising funds and not a structure for a quick exit, that will put people off.
Plan, plan and plan again. A chap called Gerry said this to me once whilst sat in Monte Carlo. I may have slightly ignored this incredibly useful advice at the time but it didn't take me long to get it with other companies.
Your company, teams, its culture needs to be slick and agile. In 2020, the back office, the governance for the most part can be automated. I have met a lot of founders and boards in fact, that have the greatest opportunity to move towards exit but are effectively stuck in the day to day governance and BS.
No plan ever goes to plan. As a board you will probably be mature enough to track hard against those agreed business plans and also track the risks. However, I see a lot of companies go aggressive and lose track of what their cash flow is doing.
Stay calm, prepare, reflect, clean up, determine what your value as a company is for buyers, where is the strategic fit and be very ready to have the negatives on your company used in negotiations.