Leadership Challenges for Startups and Scaleups

What enables startups and/or scaleups to succeed? The Startup Genome Project has been conducting worldwide studies in an attempt to answer this question. The answers could not be more critical, since the majority of job creation in the United States and Canada is now being driven by technology startups.

Most startups face new challenges in their drive to reach their full potential. While it’s suspected that most simply run out of cash, we at Pender & Howe have a different viewpoint, one that’s based on years of observation and engagement with many startups. They would benefit enormously by finding the right talent to manage the next phases of their business model.

Startups thrive on the creation of disruptive innovations. Those innovations may arise from anywhere, even in the most unlikely of environments. The common thread is a founder or founders with an entrepreneurial spirit, driven by their passion to succeed. They dare to do things differently, and their dynamic nature attracts both venture capitalists and a certain breed of employee who is as committed to the venture as the founder is. With all oars pulling in the same, so to speak, the startup gains traction and the future appears unlimited.

What enables a startup to become a scaleup is the complex challenge of managing and directing a growing enterprise. Consider these findings from the Startup Genome Project, which define the four main types of startups and scaleups:

The Automator / Type 1 These startups are product centric with a self-service customer acquisition strategy, that focuses on quick execution and often automates a manual process. The majority of them target consumers in existing markets.

Examples: Google, Dropbox, Eventbrite, Slideshare, Mint, Pandora, Kickstarter, Zynga, Playdom, Box.net, Basecamp, Kayak

The Social Transformer / Type 2 These startups have a self-service customer acquisition strategy and often create new ways for people to interact. They are almost always confronted with the challenge of reaching critical mass. If they surpass this threshold, they can often have runaway user growth in a winner-take-all market.

Examples: eBay, OkCupid, Skype, Airbnb, Craigslist, Etsy, IMVU, Flickr, LinkedIn, Yelp, Facebook, Twitter, Foursquare, YouTube, Mechanical Turk, PayPal, Quora

The Integrator / Type 3 These companies thrive on acquiring customers by generating leads with marketing and closing them with inside sales reps. They are product-centric and rely on early monetization typically through subscriptions in smaller markets. They often take innovations from Automator startups and rebuild it for smaller enterprises.

Examples: Intuit, Square, Adobe, PBworks, Uservoice, Mixpanel, Dimdim, HubSpot, Marketo, Xignite, Zendesk, GetSatisfaction, Flowtown

The Challenger / Type 4 These startups are focused on closing high paying customers in large but fragmented markets. They are highly dependent on a small number of deals being successful and usually operate in complex and rigid markets. To be successful they need to find a repeatable and scalable sales process.

Examples: Oracle, Salesforce, MySQL, Red Hat, Jive, Atlassian, Palantir, NetSuite, WorkDay, Zuora, Cloudera, SuccessFactor, Yammer

Simply put, the skillset that enables the creation of the disruptive product or service may not provide the leadership that will determine whether the startup will thrive on a long-term basis. The Founder, along with their Board of Directors and advisors, need to determine objectively what the business model demands for future survival. Our placing of C-Suite professionals with startups and scaleups reveals the following:

Experience matters. That experience need not be in the same industry. A documented history of demonstrated success in the creation of strategy, transformation and team building is more meaningful than product knowledge, which can be acquired in relatively short order.

Financial acumen is paramount. Budgets, projections and measurement of results are critical to success.

Brand-building is the new mantra. Brand-building is both internal and external and requires a C Suite team well versed in authentic sales and marketing practices, as well as use of effective platforms for interactive communication.

The search for the right individuals is most successful when a qualified firm is engaged to assist in the process. That Executive Search firm will be networked to the max and experienced in the evaluation of the opportunity as well as the business talent and cultural fit of the candidates.