The most important variable in the startup equation – the Founder

At its most basic, a startup is a giant experiment with lots of moving parts and even more guesses; and a founder’s primary job is to find the most efficient way to de-risk this entire process and engineer a higher likelihood of success. Scaling a startup is just part of this process with new variables that include deciding where, when and how to scale. Add today’s climate of expensive capital, weakening demand and higher uncertainty and you have a sizeable challenge on your hands. Thankfully, today we have tried and tested methodologies to contend with these challenges; but how do we think about de-risking founders themselves? After all, aren’t they one of, if not the most important, variable in a startup’s equation?

If our actions are a product of our minds then how founders think and make decisions about scaling can be the most crucial determinant of success. Here are 3 quick tips to keep in mind:

1. Everything is an assumption, until it’s not:

How founders think about scaling should not be very different from how they first thought about validating the basic elements of their startup’s business model. Every decision about where, when and how to scale remains a guess unless, and until, it’s been validated by experimentation. Founders who have been successful in one market will want to be aware of, and mitigate against the ‘hot-hands fallacy’ which basically means that just because you have been successful in one market, you shouldn’t assume that success will be easily replicable elsewhere. Every new market is fraught with uncertainty and in the face of such uncertainty, data, facts and a rigorous methodology for experimentation can be your greatest allies.

2. Learn how to choose:

Learning how to prioritise well is probably one of the most important skill sets founders can have in their arsenal. In the context of scaling: how do you choose which customer segments to prioritise? Which value propositions and which channels? How will you allocate your resources and deploy the new round of funding you have secured? Not knowing how to prioritise well can result in lots of wasted resources, your team being directed down the wrong road and you wasting the time you never really had.

Action bias, which is what happens when you confuse activity for progress, is what you are looking to avoid here. Prioritising well requires founders to be able to articulate their goals well and to formulate a clear picture of where they are today. Put simply, founders need to constantly ask themselves 3 questions: “Where do I want us to be? Where are we today? What is the best way for us to bridge that gap?” The first two questions are the most crucial because it requires a lot of introspection and personal honesty; but if done well, solving the third question will be far easier especially with the aid of mental models such as the tried-and-tested business model canvas.

3. Check yourself:

Founders walk a lonely road. They have many hats to wear, many stakeholders to serve and many fears and worries they can never share. In most cases, they are the only ones who ever really know the true state of affairs of their company, how well it’s doing, what clients really think of their product, what investors are saying about investability and how competitive their products really are. All rivers flow back to the founder.

So, how do they know they are making the best possible decisions and not falling prey to their own cognitive biases? This gets compounded by the fact that most founders also struggle to trust and delegate tasks to others. They have trouble letting go because they believe if they ever did, everything would burst into flames. But this is hardly sustainable or very scalable, especially for a startup looking to scale. The best way to mitigate this then, is to first be cognizant of the risks this conduct poses and to be very concerned if no one is there to check your thinking (or worse, if everyone agrees with you).

This is why it’s so important to cultivate a network of advisors, mentors and partners to help you mitigate this. In the context of scaling, learning to rely on your network and your team means you’re giving yourself permission to leverage off many more minds, hands and hearts than your own. It means you are giving yourself permission to grow as a founder, which is an important prerequisite for a startup looking to scale to that next level.

Scaling a company to the next level can bring with it rapid success and also raise a whole new set of risks along with it. The companies that stand the test of time will be led by founders who can execute a bold vision well while also being proactive in identifying and mitigating associated risks, including those that they themselves present.

This article is part of the Understanding Market Expansion Series, stay tuned for more articles and insights.

This article was written by Hardesh Singh, from the Rainmaking Team.

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Written by
Guest Author
December 13, 2022
This post was written by a guest author.

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