Knowledge

The three biggest obstacles that stop Start-ups from Scaling-up

The three biggest obstacles that stop Start-ups from Scaling-up main image

In this article, Whitespace advisor Simon Devonshire OBE discusses the obstacles that start-ups face when trying to scale-up.

The repeat behaviour common to successful entrepreneurs is that they know what problem they are solving.

A real-world practical application of this insight is: the more specific people are about defining the problem they are solving, the more likely they are to succeed.

Starting a business is easy (especially so in the UK). Scaling-up a business is hard – many start-ups get STUCK.

There are a million problems that make scaling-up a business difficult.

I have given a lot of thought to the challenges most commonly faced by businesses ambitious to scale-up. My assertion is that all of these obstacles can be distilled into one of three broad categories:

  • Access to Funding
  • Access to Talent
  • Access to Customers

To help entrepreneurs crack those scale-up problems efficiently, I have unpicked them. In the order of priority that I’m usually presented them:

1. Access to Funding:

The challenge that I hear most frequently from entrepreneurs, founders and business leaders is their frustration about raising money and the lack of funding available to invest in the growth of their company.

Most people find raising money very difficult and very time-consuming – whether they are selling equity; securing debt (getting a loan); or applying for a grant. All three routes for Access to Funding are tricky. There is no easy way to win investment.

2. Access to Talent:

After a venture has secured funding, the next challenge that seems to follow immediately thereafter is a lack of hireable talent. The typical complaint sounds something like:

“I spent ages raising investment, and now that I have the money in the bank, I simply can’t find anyone with the right skills and talent available to hire”.

There are a number of potential strategies to tackle this conundrum: “World-class talent seeks world-class problems” is a practical approach to compel brilliant people to want to join your company.

3. Access to Customers:

What I mean by “Access to Customers” is, in a word: Sales. As Mrs. D always says: “Nothing is as difficult as persuading people to part with their hard-earned cash to buy your product”.

As a seasoned investor and Non-Executive Director, my frustration is: entrepreneurs often tackle these three challenges in the wrong order of priority.

Most start-ups invariably focus on funding as their first priority, and that then becomes their biggest obstacle in which they invest the largest portion of their time and attention.

However, it is worth noting that ventures that have figured-out and secured their route to market (with demonstrable sales traction) get funded fastest and funded most.

Investors like ventures that know how to sell and have prioritised establishing demonstrable sales momentum/potential above all else.

Ventures with sales momentum also tend to be effective at hiring too. Perhaps not surprisingly, people want to work for companies that are thriving.

Even ventures that are pre-revenue (ie. not yet generating sales) can land investment if they can demonstrate that they have figured out their route to market.

Which is why “Mass-Adoption” is my biggest passion in business.

The point is simply that: Access to Customers is vital to unlocking both Access to Funding and Access to Talent.

The repeat behaviour of successful entrepreneurs is that they solve the route to Access to Customers first, and then use this success to also solve the problem of Access to Funding next.

The combination of sales momentum combined with secured funding then provides a powerfully compelling hook with which to acquire the very best talent too.

And that is why knowing what problem you are solving is so important to scale-up success.

Simon Devonshire OBE – strategic advisor at Whitespace