When you see startups like SpaceX and Pinterest grow from a low valuation to a billion dollars in just a few years, it’s easy to assume that if you just keep doing what you are doing, you can get there as well. Yet as a business advisor I am convinced that making the jump from a startup to the next unicorn takes a different mindset, and actions most entrepreneurs are reluctant to face.
Many entrepreneurs never get past their first-stage focus on their innovative product, scaling the business globally, organizing a structure to handle thousands of employees, and concentrating their focus “on the business” rather than working “in the business.” In my experience, here are some of the key elements of that “second-stage” of entrepreneurship:
- Move from small investors to major venture capital. Startups usually think in terms of a million to 10 million dollar infusions, but aspiring unicorns usually need to seek financial investments of hundreds of millions or even a billion dollars. Of course, that means a mindset willing to give up much more equity, and taking on a whole new level of risk.
Then there is the pressure to go public, and open your investment to thousands, maybe millions, of small investors. That requires work and risk to comply with reporting requirements of the SEC, including the additional accounting and reporting processes.
- Bring in an experienced Board and world-class leaders. You probably won’t get too far with friends who volunteer to be on your Board and the mavericks who built your first solution. In fact, it’s highly unlikely that you as the Founder will survive. In my experience, less than half of founding entrepreneurs even aspire to stay and scale their company.
- Switch your focus from product development to sales. Explosive growth to an enterprise normally requires a scalable sales model, a well-documented process with incentives, training, and metrics for tracking and management. Of course, customer relationships, and penetration into new market segments are also critical elements.
- Increase communication, both internally and externally. You can no longer provide leadership by just “walking around” and talking to all the key people. Working with the media is required, both social as well as the press, through public relations and internal channels. Formal documentation of strategy and progress will be expected by investors.
- Drive productivity and engagement through shared values. Every rapidly growing company struggles with keeping its teams focused and committed. By defining your values and behavior with actions based on values, you define a culture that people can follow to enable everyone to make decisions for maximum productivity on the front line.
A popular approach these days is to advertise a higher purpose that embodies your values, such as protecting the environment or assisting the disadvantaged, to your team, as well as customers. They will then line up with you, per Yvon Chouinard and Patagonia.
- Isolate marketing from sales for maximum customer focus. In large enterprises, marketing is expected to build your brand, handle competitor positioning, and set pricing and terms, while sales is focused on closing deals and managing customer relationships. Both are required and become the central force driving growth, as well as survival.
- Utilize mergers and acquisitions to accelerate growth. Now is the time to start buying your competitors, rather than just crushing them, or trying to develop enough new products internally to overrun them. This involves working with outside business advisors, doing your due diligence internally, and creatively integrating outside processes.
As you might imagine, even with the proper planning, mergers and acquisitions are difficult to pull off. Overlapping staff, culture clashes, and diverging visions are reasons that nine out of ten fails. But they can be spectacular growth vehicles when they work.
Of course, not every entrepreneur wants or needs to grow their business into a billion-dollar enterprise. Many are more satisfied and happier in a smaller domain that satisfies their business interests, family needs, and career aspirations.
But if you are determined to be the next Elon Musk or Jeff Bezos, you need to seriously tackle the strategies outlined here to survive and compete. In my view, billion-dollar businesses don’t happen by default, but you can do it.