GUEST POST from Arlen Meyers
Steve Blank describes how companies grow in three phases-search, build and grow. In the first step, the goal of a startup is to search for a repeatable and scalable business model.Building means changing into a company that can scale by growing customers/users/payers at a rate that allows the company to:achieve positive cash flow (make more money than it spends) and/or generate users at a rate that can be monetized.Grown up companies have achieved liquidity (an IPO, or has been bought or merged into a larger company event) and is growing by repeatable processes. The full suite of Key Performance Indicators (KPI’s) processes and procedures are in place.
I describe it as Fail it. Nail it. Scale it. Sale it.
Unfortunately, when founders and start up entrepreneurs grow up, they have few places to turn and are on their own. Most start up accelerators kick them out the nest after 90 days. Accelerators seem work when they follow best practices. Some don’t.
Many confuse accelerators with incubators (sometimes called generators or some other kind of whateverators). Here are some differences.
According to a recent analysis, we need scalerators now more than ever, since while the number of new businesses created since the Great Recession is increasing, the number that reach scale are not those that do hire fewer employees than in the past.
The share of private firms less than a year old has dropped from more than 12% during much of the 1980s to only about 8% since 2010. In 2014, the most recent year of data, the startup rate was the second-lowest on record, after 2010, according to Census Bureau figures released last month, so there’s little sign of a postrecession rebound.
To fill that gap, we need scalerators, designed to provide the knowledge, skills, attitudes, resources, networks and mentors entrepreneurs need to build and grow their companies. Biomedical and health scalerators can be mostly virtual, inviting participants back home from time to time for a home cooked meal gathered around the dinner table.
The core components of the Lean Startup methodology are 1) creating a minimal viable product, 2) using the customer discovery process, and 3)creating and validating the business model canvas. Here are the parts of the Lean Scaleup methodology:
The Lean Scaleup Methodology:
1. Maximally profitable product
2. Customer optimization process
3. Business model sensing and modification
4. Not so smart money to fuel growth
5. Letting people on the bus off at the next stop
6. A new way to keep score
7. Wardrobe change
8. Profitable growth KPIs/scorecards/dashboards
9. A new org chart
10. From testing to traction and avoiding the distraction of traction.
11. Building high performance teams. Sometimes they are virtual, sometimes they are global.
12. Corporate governance and founder-board-investor issues
The business model would also be different from accelerators, since the model has already been validated, requiring innovative investment schemes to provide the right incentives for growth given the more advanced stage of risk and reward potential.
Finally, given the unique requirements for human subjects trial design and execution, the participants in biomedical and health scalerators need to come from expanded domains like public health, biostatistics, epidemiology and translational reasearch in addition to the business and investment communities. Growing companies have different needs when it comes to leadership, manufacturing at scale, sales and marketing, human resources and financing.
Here are some differences between the two:
Startups:
- Have one goal: hit p/m fit
- Must take big risks
- Make you feel directly responsible
- Have higher highs and lower lows
- Are a lifestyle, not just a job
Big companies:
- Have “made it” to some extent
- Focus on growing what’s already successful
- Will be more risk-averse
- Wear the burden of higher expectations
- Take more time to try and do things for the long-term
Startups need people who:
- Operate with good intuition
- Are well-rounded, jack-of-all-trades
- Are proactive, don’t mind ambiguity
- Possess a healthy dose of optimism
Big companies want people who:
- Are team players
- Will raise the bar in a specific dimension
- Are high potential in the long-term
- Are strong connectors, good at aligning and connecting groups
Startups make you feel awesome when:
- You move like a synchronized swim team
- You continuously launch shit
- You witness direct impact of your creation
- You realize how much you’ve learned
Big companies make you feel awesome when:
- You realize you’re having an impact on millions of people
- Your company invests in ambitious missions because it has resources to
- Someone spends time to invest in your career growth
- You get to try a lot of different projects
Startups make you feel sucky when:
- No one uses what you build
- There are struggles because no one is an expert
- Nobody invests in you
- There’s personal drama / conflict
- You are constrained
Big companies make you feel sucky when:
- There are too many involved in decision making, and it feels hard to get anything done
- You feel a looser connection to what your company is shipping
- You no longer have context on everything going on
- There will be decisions that have ripple affects that affect you negatively
Accelerators need to rethink their models and practice what they teach. Many have peaked at their life cycle and risk going out of business. Maybe we need more euthanators instead.
Building a start up is like designing and manufacturing a machine that works and does what it is supposed to do. Scaleups are machines that have high performance. Grownups are machines that run faster than all the other machines. So, building scalesups takes:
- Making sure all the parts are working
- Synchronizing all the systems
- Maintaining the parts to be sure they don’t wear out
- Finding the right driver and high performance mechanics
- Putting the right OILS and lubricants in the machine
- Being sure that the machine gets the most miles/gallon as possible
- Insuring the machine against risks and accidents
- Building a better machine as time goes by
- Building value into the machine since someone might want to buy it from you some day
- Money to run the machines
Life science technology commercialization, like medicine, is a series of hand offs. In the present environment, incubators hand off to accelerators/clinical “innovation centers” who can then hand them off to scalerators . However, like clinical medicine, there are gaps that lead to dropped handoffs with resulting morbidity and mortality.
Millenials have been living in their parent’s basements for too long. We need to provide a place for scaleups to live on their own without cutting the essential parental bonds and guidance they desperately need to be successful. The good news is that some are on board already.
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