How to scale a startup
Ten startup growth lessons from care.com co-founder (and MIT lecturer) Donna Levin.
By Kara Baskin |
October 3, 2016
Care.com co-founder Donna Levin teaches scaling entrepreneurial ventures at MIT Sloan
Care.com co-founder Donna Levin played a key part in that company’s growth, and the passion was personal. Levin’s work plans were curtailed when her son was 11 weeks old and had a seizure following a difficult pregnancy. Tests were inconclusive. Her daycare situation evaporated; she and her husband took turns staying home with the baby for three years until his health stabilized. Her husband worked nights, she worked days, and somehow they muddled through.
“Everyone has a caregiving story. At some point we will all either be a caregiver or need a caregiver,” she says.
’16, later built the infrastructure, operating systems, policies, and procedures as Care.com scaled. Today, it’s is the world’s largest online destination for finding and managing family care, with more than 20 million members in 18 countries.
Not every company is so lucky: half of startups fail by their fourth year, and 70 percent fail by their 10th year.
“Scaling prematurely burns cash, and it’s hard to course correct when you have hundreds of employees,” Levin says.
It’s crucial to take it slow and do it right. Levin, who teaches Scaling Entrepreneurial Ventures at MIT Sloan and is an entreprepreneur in residence at the Martin Trust Center for MIT Entrepreneurship, explains how.
1. Grasp what “scaling” really means. Scaling your startup is all about growth. The definition Levin prefers is “accelerating growth with confidence,” meaning that the resources that you put in should yield great results that are predictable and measurable.
2. Understand that scaling is never one-size-fits all. “There is no one straight path to scale. It’s deeply personal to each company’s experience,” Levin says.
3. Know your audience. “You have to make sure that you’re solving a problem that people care about and that they like your solution enough that they’re willing to pay for it,” she says. Be able to answer: Who is the customer? What can you do for the customer? How does your customer acquire your product? How can you make money off your product or service?
4. Know your staff. “If you’re ready to accelerate growth with confidence, be ready and willing to disrupt your organization and yourself,” Levin says. “Avoid the temptation to hire fast. Hire for skill and fit.” At the same time, recognize that some employees who started out with you might not be a fit any longer. “When it comes to scaling successfully and keeping people enthusiastic and committed to their work, it’s important to do enough internal communication to remind the team why they should be not only invested in their jobs, but committed to the mission, too. That’s how a dedicated and impassioned mindset gets passed on as you grow,” she says.
5. Know thyself. Levin urges students to understand their own challenges before scaling. Ask yourself: What will stepping on the gas mean for you personally? Are you a “nail it” leader who’s passionate about creating something new, or are you a “scale it” leader, who’s more about precise optimization?
6. Onboard smartly. Think through the onboarding of new people and what it means to your company culture. “Now’s the time to go beyond your personal network and think about what you truly stand for as a company,” she says. In this vein, also consider structural challenges pertaining to organizational design. Will you need to hire more managers? Add a board of directors? Be transparent when dealing with this type of internal change, she urges. “The rationale for a redesign is not always clear to your entire company. Handle them well. You might have been thinking about a reorganization for months, and the actual implementation can happen very quickly. Make time to thoughtfully explain the strategy to your team. Remember, companies are made up of people.”
7. Confront your operational challenges. Think about how scaling up will affect supply chains, efficiencies, and vendors. “It’s OK to stretch your internal processes. It’s not OK to break them,” she warns. Make sure your team knows how to actually get things done. What’s the approval process? What is each person empowered to do?
8. Address financing. Stepping on the accelerator requires capital: How much money will you need to raise? What are your financing options? Equity? Debt financing? Advanced sales? Strategic partners?
9. Determine how to expand. Do you plan to expand vertically, with a deeper dive into your niche, or beachhead, market? Or do you plan to expand horizontally, into new areas or new countries?
10. Accept that less is sometimes more. “Scaling is not always about doing more—it’s often about doing less and focusing on what works,” Levin says.