Growing a startup business can offer compelling rewards, but the journey will involve leadership challenges which shouldn’t be underestimated
There’s something of an allure in being a founding leader or chief executive of an entrepreneurial, startup business. Be your own boss and make your own rules. Build that nest egg. Create the next unicorn. Avoid the entrapments of corporate hierarchies. Choose your lifestyle. Change the world.
And more of us are doing it than ever before. Accountancy network UHY Hacker Young found a 51 per cent increase in the number of new UK business registrations in 2014 compared with 2010, placing the UK second only to China in growth of new startups.
It’s easy to understand why. Technological innovations have opened up new ventures, product categories and markets. Funding options are more plentiful and varied. Government policy and schemes such as StartUp Britain have helped increase support for entrepreneurs, alongside a wide array of networks to help new businesses access advice and expertise. And fast-growth success stories abound.
Yet in reality, building and scaling a new business is tough. Overnight success and sky-high valuations are the exception, not the norm, and the challenges for founders and chief executives are many and varied.
For some, the biggest challenge for a high-growth business can be the leader itself. Anthony Fletcher, chief executive of healthy snacks company Graze, reflects: “I wish I’d taken more notice of the different style of CEO you have to be in a startup business versus a scale-up business. As we grew I knew the organisation had to evolve, but I underestimated the extent and the speed with which I had to change my style to make this work.
“I used to be someone who wanted to be in the decision-making process. I trusted my intelligence and instincts to add value. Now I realise you’ve got to be much more curious about what people are saying and what’s going on, and why organisationally that is happening. You’ve got to be much better at getting everyone aligned, ensuring the processes are right, that the purpose and strategy are well defined, and these are completely different skills.”
Eamon Fitzgerald, UK managing director of online wine retailer Naked Wines, concurs. “You can fall into the trap of believing your job is to solve everyone’s problems and to make everyone’s decisions for them. But you learn over time that the most effective job you can do, as head of a fast-growing business, is to help people make decisions and solve problems for themselves. Over time, you should effectively become redundant from the day-to-day running of the business, because you’ve focused on bringing great people on board, and that enables you to focus on ensuring the strategy and long-term goals for the business are in check,” he says.
Russ Shaw, founder of Tech London Advocates, asserts that talent is both a top challenge and priority. “Those CEOs who get it right, know how to manage talent, to identify the right talent are the ones who are going to succeed over the longer term. Those who don’t are going to have a really hard time,” he says.
“If the CEO is smart, they’re going to look to get some diversity around the table. Diversity of skills, experience, background, ethnicity, gender and so on. If you’ve completed some fundraising through angel investors or venture capital, turn to those guys for help. They’ll be well placed to help you to identify where your key gaps are, be it in finance, people management or operations, and then they can help you to find the right expertise to complement your skillset and leadership style.”
I wish I’d taken more notice of the different style of CEO you have to be in a startup business versus a scale-up business
Meanwhile James Layfield, founder of co-working hub Central Working, argues that leaders must pay more attention to the basics of accountability. “Defining the roles and goals of the management team is one of the biggest challenges facing a growth business,” he says.
“It’s essential to have real clarity and accountability for each management role, but this quite fundamental stuff is often overlooked because of the passion of the people involved and because they don’t think about systematising their management or understand why they need to. Instead, the focus is simply on trying to explode out of the starting blocks and grow the business as quickly as possible, without these fundamentals in place. But when management lacks clarity, the trickle-down impact on the people below them can be enormous.”
For MADE.com, the six-year-old designer and retailer of furniture and homewares, the challenges of scaling the business were particularly acute when the pace of success overtook expectations. “When you’re scaling a business, you have to ask if your operation and organisation is ready for growth. Between October 2011 and January 2012, we increased our monthly revenues fourfold. That’s great from a sales perspective, but we were growing too fast and the operations couldn’t keep pace. Our delivery companies couldn’t keep up and our customer support team became strained,” says Julien Callede, co-founder and chief operating officer. “Unmanaged growth is a bigger risk to a business, than slow growth. It can cause you to hit a wall and die.”
Style. Focus. Talent. Accountability. Pace. Tackling these themes head-on will ensure future chief executives are best positioned for success and that they’re managing the growth of their business, rather than it managing them.
ADVICE FOR LEADERS FEELING GROWING PAINS
Julien Callede, co-founder and chief operating officer of MADE.com:
“Anticipation is key. Are your systems, partners and teams truly ready for growth? Test the business in your mind. What happens if your growth expectations are surpassed, if your business doubles? Will your systems, partners and organisation be able to cope? Will you be able to sustain that level of growth? Look at your key people and partners, and ask ‘If they weren’t here tomorrow, would we survive?’ Do you have a plan B?
”George Burgess, founder and chief executive of Gojimo:
“You’ve got to be really clear, whether fundraising or recruiting talent, about expectations and how long it takes to build successful startups. It’s easy to read stories about Facebook, Airbnb and Uber and envision overnight success, but in reality all of those companies had years in their infancies of testing, iterating and struggling. We tend to forget that and it’s not mentioned a lot. Beyond all the hype, it’s important to recognise that startups are a long-term commitment.”
Aftab Malhotra, co-founder of GrowthEnabler:
“We talk about ambidextrous leadership. Think of it as a pendulum. On one side is flexibility, which is what startups are all about – making friends with uncertainty, agility, creativity, scrum. The other side is all about efficiency – standardisation, certainty, productivity, process. CEOs of the future need to recognise that as you grow and scale, the pendulum keeps moving and you need to be able to adapt to both. Embracing this bipolar nature of ambidextrous leadership is key.”