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Insights April 2019

Scale-up vs. Start-up. Where do I fit best?

Here at Zeren our core focus is helping place individuals at the Sub-board level at VC/PE backed businesses or exciting fast-growing corporate brands. As a result, the titular question comes up a surprising amount if not phrased in precisely the same way.

There is a distinct difference in the challenges faced by start-ups and scale-ups and despite a grey area between the two it is worth bearing in mind these differences, so that you are best placed to decide where you might thrive as a new employee.

First the definitions – mostly because there are in fact distinct definitions, which can sometimes be a rarity when it comes to business buzzwords.

  • Start-up:
    • “A start-up is a newly emerged business venture that aims to develop a viable business model to meet a marketplace need or problem. Founders design start-ups to effectively develop and validate a scalable business model. 
  • Scale-up:
    • “A scaleup is a company who has an average annualised return of at least 20% in the past 3 years with at least 10 employees in the beginning of the period (OECD, 2007)

What has become increasingly apparent is that the importance of a business at the Scale up phase is beginning to significantly eclipse the start-up from an economic perspective. Something agreed upon by the British government and indeed the World Economic Forum both of which have pledged to help identify and support businesses in scale up phase via various means. The reason being that relatively speaking Start-ups are profligate, at times tens of thousands a month are starting up new businesses.

Whereas a successful scale up is a relatively rare beast and can, if done right, be well on their way to becoming a unicorn of the future.

It could be argued that the phrase start-up is in and of itself over used. Technically any freelancer out there is well within their rights to claim they are the founder of a start-up. They are, after all, aiming to “meet a marketplace need or problem”. This is perhaps why there are so many shades of grey in the start-up marketplace and distinguishing one from another has become an incredibly fine art which has challenged origination professionals and more recently AI and ML algorithms.

The reality is that a huge number of start-ups that no one has ever heard of fail before they get to the scale up phase and this is why the scale up phase can be so exciting. There are however several things that you need to get right to make the transition from start-up to scale-up a successful one. Below are three of the core areas to get right to be able to successfully move the dial.

 

Infrastructure:

There are many things that can hint at a business beginning its journey to scale up and a creaking infrastructure is certainly one of them. There has inevitably been a lot of business literature around this; from Jeff Bezos’ famous two pizza team analogy to the 7-17-70 method. Infrastructure around communications with the team, scalability of tech systems, real estate, problems with a growing work force and subsequent customer/client base are well known. Thus, in recruitment terms we have always noted the exponential usefulness of candidates that have seen things from different ends of the spectrum and thus can plan and future proof early stage businesses, understanding what trials and tribulations might be lying in wait further down the line.

 

Marketing / Sales:

This might seem obvious, but without a clear plan of attack, the ability for your marketing and sales engine to keep finding and converting new clients/customers can be a real sticking point when moving from start-up to scale-up. Start-ups can often find themselves operating in a bubble. Their product has hit just the right chord with those it is directly aimed at and initially there are enough of those types of customer/client for sales and marketing to track incredibly effectively and everyone gets very excitable! But what happens when these quick wins and obvious sales run dry as they surely will/do. When things plateau do you have the robust attitude needed to push on to the next level and the one after. Can you shift into a new geography or vertical and continue to achieve great results? All this certainly is a key question for investors and something that often catches start-ups out as they get caught up in the excitement of the initial wins.

 

Leadership:

Finally, it will come as no surprise that we mention leadership as it is the start-up to scale up challenge that we have most first-hand experience in. Firstly, as a company grows beyond the day to day orbit of the founder/s decision making, delegation and all the complexities and time absorbed within become an increasing problem or if dealt with correctly benefit.

Without the right people in place in the right positions start-ups can falter by not altering their leadership attitudes and approach. It is at this point where bringing in the right external senior talent can be completely pivotal to a company’s success. The hiring of the right Head or Operations, HR, Finance, Sales, Marketing, Engineering etc. can really make the difference to a business’s success in scaling. Get this right and a lot of the other problems can look after themselves, but without the right talent sitting below and working hand in glove with the founders and C-suite, start-ups have very little chance of a successful transition to scale up.

For obvious reasons this boundary between start-up and scale-up is core to Zeren and how we operate. The Sub-Board senior talent that make up this ecosystem are incredibly sort after. If in the right place at the right time they can really make the positive impact necessary to a growth journey and can have a say in the big decisions and successes that a occur when a company dips its’ toe into different geographies, verticals or ways of working. As it was once described to me the ‘robustifying’ agents that can make or in their absence break a business’s chances.

 

If you would like to learn more about how Zeren can help find the right talent for this area, please do get in touch with us to talk further.

Author: Jon White, Director