How to build a scalable business: GHV Accelerator Founder

What is scalability?

Scalability is the capacity of a company or system or a process within an organisation to manage the increase in demand. That is, a business is said to be scalable when it can be expanded enough to accommodate the growing business needs. Scalability helps a business grow as per its full potential. Scalable conditions provide a room for economic growth within a company.

_Investors invest only in businesses that are scalable. Scalability is important criteria for investors in deciding whether to invest in a particular business or not. Better the scalability, higher the economic value of the business and therefore higher the investor interest.

_Outsource non-core tasks: Transfer some specific tasks that can easily be contracted out to another larger company that is focused on that task. Think of the production of some specific components. Can some other company produce it? If yes, would it make your business more scalable? That paves the way for your organization to focus on the core of your business, as also leveraging the cost and operational efficiencies of someone else that is focused on doing what you outsource.

A scalable business model helps you capture the full potential of your concept. It allows you a better chance to be a leading brand in the market. Scalability also allows you to quickly adjust plans to capture additional, unplanned demand. Often when opportunities come up, organisations are not ready for scale and they miss on a chance to move into a different orbit of scale and growth.

For example, consider that you own a drug manufacturing company. In case of an epidemic, there will be more demand for drugs so the company should be able to meet the increased requirements.

Why scalability is critical for businesses?

_Scalable businesses are more attractive to strategic partners. Scalable businesses have a greater chance of attracting strategic investors or partners and a strategic buyer is likely to be interested if the future potential of a venture is higher.

_Scalable businesses attract better talent. People want to join organisations that have the potential for growth. Scalable business models allow businesses to grow, thus making them more attractive for professionals to consider joining.

What can you do to make your business scalable?

_Process orientation: Introduce process as your venture scales up. Make the processes simple and easy to understand so that training and on-boarding time for new employees is lesser.

_Reassess your portfolio of products and services: Evaluate the efforts, management time and investments required to produce a product or a service line against the contribution that particular product or service is making to the overall business. Is it worth it? If not, then assess if that business really needs to stay or can be hived off, or if required, discontinued.

_Automate routine processes: Delegate everything that you can in your business using the “self-service” approach. That means, delegate work to non-human systems that require no human intervention. For example, consider using the online ordering system, improved Web services, automatic updates to the customers etc.

Every start-up business model need not be scalable. But if your concept has a large base of potential customers who can be serviced profitably – you should think of creating the right processes, building the right infrastructure, making the right investments and hiring the right talent to ensure that your business is able to capitalise on the full potential that the concept has.

The author is the Chief Mentor and Accelerator Evangelist at Gurgaon-based GHV Accelerator. He is also the Founding Board Member of the Indian Angel Network Incubator.

For More Details - http://www.ghvaccelerator.com/

Source : e27.co 

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Why are most startups not able to raise Series-A funding?

Most startups, even those who get angel funding or seed-stage funding or investments from accelerators/incubators, are unable to get follow-on funding. Why is Series-A funding so elusive? When Angel Investors invest in a startup, they do so after assessing whether the startup will be able to raise follow-on capital. That’s how they have a chance of getting an exit for their investments.

Why then, are startups not able to raise follow-on capital despite the mentoring and advice they receive from their angel investors or accelerators or incubators? At GHV Accelerator, we analyzed this problem and spoke to investors and startups to understand the reasons. And based on our conversations, we had some very interesting observations. Kindly note that these are reasons of decline by VC’s, even when they believed that the opportunity was large and the concept/product was exciting.

Reasons for startups to not get Series-A funding

(This is in no order or priority, but investors mentioned that they often see at least two of these reasons in angel-funded or accelerator-supported startups that they end up declining)

• The team has failed to build the skill-sets and competencies that are required to take the venture to the next level i.e. some skill sets are missing
•  The venture has not done enough to demonstrate that there is a potential to grow i.e. whilst focusing on developing the product, the venture missed out on building traction as an evidence of the potential
• Lack of defensibility of the differentiator – often lack of IP or anything that can give the company a defensible, unfair advantage
• Lack of in-market validation of the product
• Interestingly, poor product or service was rarely a reason for decline

When we spoke to startups, we realized that most were totally unprepared to engage with VCs. Here is a checklist of what we think startups should be prepared with. Of course, there are a whole lot more things that they need to be ready with, but these are absolutely necessary for even getting follow-up meetings after the initial interaction with VCs – research their past investments, understand their perspectives and thoughts on the market, etc. This helps startups align their thoughts and conversations in line with the VC perspective.

• Understand their investment criteria – some may give more weightage to traction, some to the team, some to market sentiments, some to global opportunities while some may look for domestic focus, etc.
• Understand what they are looking for i.e. the kind of ventures they are seeking – some may be keen on product ventures while some may be open to a services business. Some may look at operationally intensive businesses, while some may not.
• What is the investment scenario – remember startups are ‘competing for capital’ with other startups, even those from completely different sectors than yours – and therefore, it is important to understand the investors view of your sector. (e.g. in the current environment, some VCs are shunning e-commerce ventures while some believe that there is still some potential in verticle spaces, and yet some others are keen to invest in ventures that support e-commerce e.g. logistics, analytics, etc.)
• Be clear on what you seek from the VCs beyond the money – clearly articulate how they may be able to add value – this helps them understand why this could be a relevant investment for them e.g. “You have investments in XYZ and ABC company. Clearly, there are synergies in what we do and two of your portfolio companies. Hence, we believe that your fund will be the ideal investor for us as it will help us leverage some synergies.”

Check the webinar –https://www.youtube.com/watch?v=sy8W75wqAzw

About the Author :

Vikram Upadhyaya, Accelerator Evangelist, GHV Accelerator

Vikram is having diversified experience from Japanese Projects Offshoring to Global Corporate Strategy and New Ventures Turnaround, specialized for the Japan-India Cross Border Business execution.

For More Details - http://www.ghvaccelerator.com/

Source : YOUR STORY 

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