If you are fortunate enough to be in the space where you’re scaling, you’ve made it through the first, very difficult phase of entrepreneurship: the “Valley of Death”. But still… there’s pain.
At LevelUp’s first quarterly community session for 2022, which coincidentally was on the 2nd anniversary of the first Covid lockdown, we invited three of our alumni to talk to the pain of scale.
Deon Nobrega, co-founder and CEO, Paymenow
Paymenow started with the four founders, and now employs 20 people.
- Most entrepreneurs are product experts. But entrepreneurs are not necessarily very good at knowing how to run a business, once they’ve found traction with that product.
- Paymenow knew from Day 1 that we wanted to take our product to corporates: we knew we had to tick all the compliance and regulatory boxes, and all the digital boxes. So we set a solid foundation. But as we progressed, we saw that a lot of other business know-how wasn’t there. We had to learn a lot about managing a business.
- We brought in a single, solid investor who held us true to certain metrics. These were:
- To prove our product was compliant, which needed to be verified independently
- The MVP, from a tech perspective, needed to pass certain criteria, which also needed to be verified independently; and
- To get a MVP out with a set minimum number of users.
This helped us focus on what we needed to focus on; and it made us pitch-ready.
- Be clear about the intention of your business. How do you want to grow? What are your values? While achieving profitability (or break-even) as early is possible is top of mind, it can be counter-growth.
- Aim for the whales, but start small.
- Stick to your knitting. Don’t overpromise, especially if it involves dependencies on other people – know that you can deliver, and manage expectations.
Mishaan Ratan, cofounder and CMO, Rentoza
Rentoza started as a rental business; evolved to a rent-to-hire business; and at the beginning of lockdown, moved to a subscription model. From the four founders plus a support person, Rentoza grew to 45 staff members in 18-20 months.
- It has been a dogfight from Day One. Nothing works out as you assume it will. Growth maybe means the platform needs to change. It also means you need more capacity, which means you need to employ more people, which means more income is required. Which means you need bigger premises. At no one point in our journey have we been able to breathe out and say: it’s running smoothly. That’s the thing about scale – as you do one thing, ten other things happen.
- We made the decision to be 100% transparent with our staff, even about our own income, and to do away with hierarchy.
- You get to the point where you have to step away – even though you’ll probably have to dip back in until you have the right people to run things. It’s the only way to grow your business, and to grow yourself. All of us have to unlearn what we’ve learned, and to learn again from scratch.
- To keep your competitive edge, build a moat: change and evolve and grow faster than anyone can, that’s your best way of preventing copycat businesses.
- Get comfortable with risk. Entrepreneurs make decisions, and have to live with those decisions.
- Be willing to change everything – platforms, pricing models, strategies – as the business grows.
You’ll only find “your secret sauce” in customer acquisition through trying all the platforms, exploring partnerships and seeing what works.
Nick Argyros, Founder and CEO, GotBot
GotBot is a Saas business in the B2B2C space – a platform that allows automation across multiple messaging services. RCS is one of GotBot’s most longstanding clients, but it also has other substantial corporate clients.
- Scaling before you perfect your product-market fit is a mistake – you end up scaling the wrong things, or the wrong way.
- Some of the major pain we have taken on in scaling is technical debt – it’s a killer, and leaves you no space for innovation as you spend your time propping things up. It’s dangerous when you’re putting your customers’ needs before the platform needs – a cyclical space where you’re building on rickety foundations. It’s taken us five years and three versions to finally get to the point where we can breathe, and get rid of technical debt.
- When you reach the space where you need money to scale, think very carefully about what kind of money you need. Investors can help you scale, but they can also hold you back.
- Corporate sales cycles can be very long (Nick cited an example of a corporate deal which took four years to seal). You need to find a way to bring down the sales cycle – while you’re waiting, you’re funding salaries and everything else.
- You need to know how to talk to corporates. They are busy doing their jobs: your job is to take away pain. You’ll do that either by making them money or saving them money (or both). You need to understand their pains, and their gains. Use language they relate to, like “proof of value” rather than “proof of concept”.
- You need to understand your cost-per-acquisition, and the lifetime value of that client. Are they a one-time buyer or a repeat customer?
- Know when to step away. As your business grows, do you re-qualify for your position? One of the most important things is to know when you’re no longer the best person for the job.
- Don’t drink your own Kool Aid. Ask people what they think about the product, and hear them.
- Back the jockey, not the horse. You can change the product. Get the right people on the bus.
- Marketing is key. (1) Look through your own networks to find people who can give you an “in”; (2) Conferences can provide great leads – we signed some big deals just through being there; (3) trawling something like HelloPeter is helpful to understand a business’ pain points and the pitch that will most likely work for that business; (4) programmes like LevelUp which are funded or sponsored by corporates may give you an “in”; and (5) thought leadership: post articles in the right places so that you’re top of mind.
Any last words? “Luck is the intersection of hard work and opportunity,” says Mishaan. And: “What you need more than anything else is grit. You just need to tough it out.” says Nick.
- Blitzscaling: The lightning-fast path to building massively valuable companies, by Reid Hoffman
- From corner café to JSE giant: The Famous Brands story, by Carie Maas.