Smart Scaling - Presentation to Lean Startup Circle Montreal Nov 14 2017

Scaling Smart
A Strategy Framework for Modeling, Managing
and Monetizing the Scaling of
Bootstrapped High-Performance Ventures
Davender Gupta
The Scaleup Project
davender@davender.com
514-448-1894
©2017 Davender Gupta. All rights reserved. 171114 V7-LSC davender@davender.com
1

Who am I?
Involved in technology since 1979
BEng Engineering Physics and MS in Digital Imaging
Part of a fast growth startup 1997-2000
Professional business coach since 2000 in Calgary,
Toronto, Quebec, Montreal
Launched FastTrac Québec pre-accelerator program
Coached and mentored 100s of startups at idea and
early-stage
Currently completing Executive MBA McGill-HEC
Montréal
2

Scaling is
important…
A high-performance startup
has no value unless it gets
out of development mode
and engages with the market
But is hockeystick
growth the only
strategy?
3

Failure To Launch?
Ideal VC-backed Scaleup
(Hockeystick)
Failed Scaleup
(Valley of Death)
Time
Success Metric
(Valuation,
Revenues or
Traffic)
4

The problem
with
hockeystick
scaling
« Unicorn Dreams »
• Distracted by Traction
Premature Scaling
• Insufficient evidence of PSF and PMF
Unworkable Business Model
• No path to profitability
Ability to execute lags demand
• Quality and customer service fails
5

Strategy is a pattern of choices
6
Exit Strategy
• Build to Sell
• Build to Grow
Value Chain
Strategy
• Collaboration
vs Competition
• Created
Shared Value
(Sustainability)
Innovation
Strategy
• Product
vs Value
• Sustaining
vs Disruptive

• STARTUP is “an organization
formed to search for a
repeatable and scalable
business model”
• SCALEUP is “a transitional
organization with the
objective to develop the
ability to execute and the
credibility to attract
customers who recognize
the value of the offer and
who are ready to buy”.
• Exploring a
viable
business
model
STARTUP
• Developing
credibility and
the ability to
execute
SCALEUP
• Executing and
evolving the
business
model
BUSINESS
7

Scaling Smart is
maximizing
execution
while
managing
uncertainty
8

Strategic Objectives
• How your choices align with vision, mission, values
Suitable
• How your choices fit success and risk criteria
Acceptable
• How your choices can be executed with available resources
Feasible
• How you co-create choices through interaction with stakeholders
Effectual
9

Causal vs Effectual Logic
• Causal = Assumes the
future is knowable and
known
• Effectual = Assumes the
future is unknowable and
unknown
10
goal
means
Search for the means
to achieve a stated goal
Start with the means
at hand to design the
outcome

Principles of Effectuation
11
What can you do with what you have, what you know and
who you are
Focus on how to minimize possible losses
Collaborate with partners who provide pre-commitment
Surprises are opportunities to explore new possibilities
The future cannot be predicted but can control some
determining factors
Source: www.effectuation.org

Impact of Effectual Approach to Scaling
•Delay seeking investors to fund initial go-to-
market because the need to generate ROI locks
into a causal mindset
•First find customers who are willing to
collaborate in pre-production prototype
development through investment
•Establish rapid build-measure-learn loops
12

Momentum Scaling
Ideal VC-backed Startup
(Hockeystick)
Momentum Scaling (Waves)
Failed VC-backed Startup
(Valley of Death)
Time
Success Metric
(Valuation,
Revenues or
Traffic)
H1
H2
H3
13

14
Momentum Scaling
•Establish market influence
•Establish market credibility
•Establish ability to execute
H1
H2
H3

The Startup Lifecycle Model
15

The five components of a wave
• Preparation
• Ensuring the startup is ready to scale, identifying the initial “beachhead” market;
• Beachhead
• Entering the initial market, making first sales beyond “friends”, booking one or
several reference clients which give the startup legitimacy with early mainstream
customers;
• Surge
• Using the reference clients as leverage to increase market share quickly;
• Consolidation
• Focusing on execution efficiencies to make the venture revenue positive, establish
the venture as a price or feature influencer in the market; and
• Maturity
• Stabilizing the organization and the market share and preparing for the next scaleup
wave.
16

Key Questions
17

Scaling the ability to EXECUTE
•Generating Growth
•Managing Growth
•Directing Growth
Execution Leads Traction
•Take on only the customers you can serve
18
Strategic Dimensions

19

20
Phase > Preparation Beachhead Surge Consolidation Maturity
Strategic Dimension
Market
How do I build credibility?
Who are early adopters to test
feature MVPs?
Who are reference clients who can
generate use cases and build
credibility?
Who are pragmatists which can
be referred to us by reference
clients to help gain revenues and
credibility?
Is our credibility strong enough
that we are attracting new
customers on our own?
Which adjacent serviceable
markets should we target next?
Product
How do I create 10x value?
What are focused, disposable
MVPs to test PJF?
What is a pre-production prototype to
test in real-life use case to demonstrate
10x value?
What is the “mass customized”
feature set to optimize PMF?
What is the feature set to
optimize production efficiency
What features should I retain,
discard or add to efficiently serve
adjacent markets?
Business Model
How do I create a
sustainable and scalable
business model?
Validate potential Customer
Segments and Value Proposition
Validate Value Proposition and
Channels (PJF) and building
Partnerships
Validating Customer
Relationships (Crediblity)
Optimizing Revenue Streams vs
Cost Structure
Expanding Value Proposition to
new Customer Segments
Cashflow
How do I build revenue
streams and reserves to
fund growth
Self-funding (FFF). Avoid using
equity
Raise product and marketing capital
through partnerships with Reference
Clients
Watch that CAC < LTV (always)
Minimize burn rate
Quality (profitable) clients are
more important than quantity
Improve marginal marketing cost
and operating margins
Consider whether to self-fund
next scaleup wave or go for
equity or debt
Systems
How do I measure and
manage growth
Ad-hoc, disposable “Do Things That Don’t Scale” to
understand workflow
Systems emerge from workflow
as efficiency needs dictate
Formalize those systems which
add value
Capacity expansion to prepare
for next scaling wave
Team
How do I evolve the ability
of the team to execute
Ad-hoc
Passion-driven
Focus on developing collaboration as
team starts transition from
Development to Deployment
Be aware of emergent shared
values and group story
Establish Mission-Vision-
Permission based on emergent
values and story
Formalize Mission-Vision-
Permission
Leadership
How do I develop the
ability to quickly make
decisions
Founder needs to step back
from product development to
build business
Founder is “Salesperson” #1
Start to build leadership team (3H)
Fill out leadership team (6H)
Delegate decision making but
share responsibility
Formalized leadership team,
board
If necessary, consider
transitioning to new business
management if founder is not at
the appropriate spot
Entrepreneurship
How do I continuously
learn and innovate
Establish Innovation Accounting
systems (build-measure-learn)
Structure test cases as
Positioning
How do I integrate into
existing value creation
ecosystem
Establish Value Creation and
Value Capture hypothesis
Identify and Validate Value Chain
Partners
Bring credibility for Value
Creation through execution
Take leadership role in Value
Chain
Reconsider position in Value
Chain and ecosystem, evaluate
switchback

•To build a sustainable, long term business with the
ability to become a gazelle
•Founder Team stays in control
•Keep options open
•Choose the best customers
•Better adapted to the Canadian (outside SV) context
21
Benefits of Momentum Scaling

•Effectuation is the mindset foundation of Lean
•Importance of testing to find PJF
Product + "Jobs-To-Be-Done" Fit
•Managing Uncertainty through
Build-Measure-Learn and Innovation Accounting
22
Tie-ins to Lean

“Move Fast and Break Things” or
Move Smart and Build Things
• Ability to execute must lead Customer Traction
i.e. Only take on clients within your current capability
• Grow Revenues before valuation
• Managing uncertainty is more important than taking risk
especially in initial go-to-market when you're under-resourced
23
It’s your choice

• B2B
• XaaS, Platforms, Workflow improvements, Big Data/AI, Industry 4.0
• Manageable technical risk
• Sustaining innovation
• Mature founder
• Some domain experience, 35+
• Doesn’t fit the VC pattern
• Outside the VC footprint
• Not into “unicorn dreams”
24
Who we’d like to meet

Be patient for
growth and
impatient for
cash flow.
- Clayton Christensen
author of “The Innovator’s Dilemma”
25

Contact me!
Davender Gupta
Venture Strategist and Co-Founder
The Scaleup Project
davender.com
facebook.com/coachdavender
linkedin.com/in/coachdavender
davender@davender.com

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