High Growth Handbook

When a startup is in an advanced stage, and it is time to scale, the decisions that it makes are fundamental and can determine its future. There are usually three types of challenges. The first is to conquer the market, trying to attract as many customers as possible. The second is about creating a new product, because if we don't keep innovating, our products will soon become obsolete and we will most likely be wiped out by the competition. The third challenge is what Marc Andreessen calls "everything else” that is, building the company around the product and distribution; developing competence in finance, law, human resources, hiring, public relations and investor relations. In the initial phase of a startup, all these factors are set aside, because the focus is only on creating the product and building a sales system that works.

There comes a point, however, where everything else needs to be addressed. For example, when we have a certain number of employees (usually 50) it is the right time to start thinking about hiring someone to deal with personnel management. There also comes a time when it is important to design an efficient distribution system, because the better we are at creating channels that work, the easier it will be to sell other products to our customer base. Mergers and acquisitions are often underestimated, but they are strategic moves that must be taken into consideration at this stage, as is the question of prices, which must be given a lot of thought. There is always a tendency to think that we should hit the market with low prices; on the contrary, setting high prices can provide two advantages. The first is that we will understand whether the product we have created really does serve people (in which case a higher price will not be limiting); the second is that we will have more liquidity to invest in research and development, marketing and sales, so that we can conquer our reference market as we desire.