When an entrepreneur sees startups like SpaceX and Pinterest grow from a low valuation to a billion dollars in just a couple of years, it’s easy to believe if you keep your nose to the grindstone and keep doing what you are doing, you will enjoy the same level of success. But there’s a second stage of entrepreneurship.
According to Inc. Magazine, making the leap from startup to unicorn takes a different mindset, and requires actions most entrepreneurs are hesitant to take.
Inc. Magazine says that quite a few entrepreneurs never get past their first-stage focus: an innovative product. They don’t reach the point of scaling the business globally and organizing a structure to handle thousands of employees. That’s concentrating their focus “on the business” instead of working “in the business.”
Here are some of the key elements of the second stage of entrepreneurship:
1. Transition from small investors to major venture capital.
Startups frequently think in terms of one to 10 million dollar infusions. However, aspiring unicorns usually must look for financial investments of hundreds of millions or even a billion dollars. This type of mindset means being willing to give up much more equity and assuming a whole new level of risk. Plus, there is the pressure to go public with an IPO and to open your investment to thousands or perhaps millions of small investors. There is a lot of work required in order to comply with SEC reporting requirements, including the additional accounting and reporting processes.
2. Get an experienced board and world-class leaders.
Look beyond friends who volunteer to be on your board and the mavericks who built your first solution. Ask influential leaders to join your board. Approach these individuals with the right strategy to put them at ease, motivate them to listen, and convince them to consider joining your board of directors. Emphasize your shared vision and try to build a relationship, not a business deal.
3. Transition your second stage focus from product development to sales.
Phenomenal growth in an enterprise usually requires a scalable sales model, as well as a well-documented process with incentives, training, and metrics for monitoring and oversight. Customer relationships and penetration into new market segments are also crucial components.
4. Up the communication, both internally and externally.
At this point, you can’t provide leadership by just “walking around” and talking to all of your key people. You need to leverage the media (both social and the press) via public relations and internal channels. In addition, formal documentation of strategy and progress will be expected by investors.
5. Second stage requires driving productivity and engagement with shared values.
Every rapidly growing company has a tough time of keeping its teams focused and committed. Define your values and behavior by acting based on your values. That way you will define a culture that your team can follow to enable everyone to make decisions for maximum productivity on the front line. One way is to advertise a higher purpose to your team and customers that embodies your values (such as protecting the environment or assisting the disadvantaged), enabling them to line up with you.
6. Separate marketing from sales for maximum second stage customer focus.
In large enterprises, marketing is expected to build your brand, handle competitor positioning, and set pricing and terms. The sale function is focused on closing deals and managing customer relationships. Both are essential and become the central growth drivers.
7. Leverage M&A to jumpstart growth.
This is also the time to start buying your competitors, not just crushing them or trying to develop enough new products internally to outpace them. Partner with outside business consultants. You also must conduct your due diligence internally and creatively integrate outside processes. Even with the proper planning, mergers and acquisitions are difficult to execute. Overlapping personnel, culture clashes, and diverging visions are reasons why 90% will not succeed. However, they can be outstanding growth vehicles when they do work.
Second Stage Summary
It’s true that not every entrepreneur wants or needs to grow their business into a billion dollar enterprise the size of SpaceX.
Quite a few are more satisfied and content in a smaller domain that satisfies their business interests, family needs, and career goals.
But if you’re determined to be the next Elon Musk or Jeff Bezos, you have to seriously tackle the strategies discussed above to survive and compete.