Scaling Through to IPO and Beyond

On the 1st and 2nd of December 2020, the Xcel team held its first virtual "Digital Xcellence Forum". The two afternoons focused on Internationalisation and Investment/Fundraising respectively. As part of the internationalisation topic on Day 1 we held a panel on "Scaling Through to IPO and Beyond" together with thought leaders in the space including Karl Josef Seilern from Sezzle, Sophie Freres, co-founder of LiSA and Johanna Campion long time investor and mentor.

Here's what we learned:

When it comes to scaling, what are the high level strategies and how are they applied?

There are two very different poles when it comes to strategy in scaling;

• The first is the very controlled product market fit approach which is where the product is validated in the new market as best as possible and at the lowest burn rate possible. The goal here is to hit product market fit before scaling. This is more likely to be done in startups that are at a first-mover advantage or who have hard-to-copy tech.
• The other is the very aggressive “blitzscaling approach.” In this approach, the startup makes the decision to sacrifice efficiency for speed; scaling as quickly as possible into as many markets as possible. High growth, high risk. The goal here, is to out-maneouver your competition.

As a CEO it is important to understand the range between the two strategies and balance these two poles.

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At what point should you enter the market versus continuing to work on the product?

Ideal is to first enter the market with your core product and to understand when you have hit the product market fit. It is very hard to jump into a market and innovate from the outset. It is therefore better to stick to what you know and when you crack the market, only then to improve the last 15-20% of the product.

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"You need to focus to be meaningful. The discipline to do that is very important." - Sophie Freres

Once you have a proven product, when is it time to scale beyond the "home market"?

Once the concept is proven and you have scaled in your home market successfully, it is time to look to other markets, if they have similar conditions to your own the recommendation is to internationalise directly rather than expand on your product vertically (with new features etc.). It will be easier to enter a new market with a proven model than it will be to over innovate your product in the current market. The key is to expand rather sooner than later as, most businesses are dominated by size.

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“More often than not startups tend to expand a bit too late.” – Karl Josef Seilern

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How do you work with the  customer acquisition cycle?

If your solution is new or young, it is likely that you are completely tied to customer cycles. In that instance, rather than doing a typical demo, start with interviews on why the potential customer is interested in your product; whether it be to increase sales, increase engagement, community building etc. Identifying this will help to cater the demo accordingly. In addition, ask questions around what resources and infrastructure the customer already has in place to implement your solution. All of this information will ultimately help to provide a demo that is highly valuable to the customer.

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What frameworks do you apply to better understand the customer acquisition funnels?

• Every time you enter a new market, it is important to understand the customer acquisition funnel. I would recommend to apply Mclure’s AARRR framework (Acquisition, Activation, Retention, Revenue Referral). It is useful because it allows you to identify early on where the funnel is “broken”, or where there is a problem, like customer dropouts. In addition, it lets you hone in on your KPIs, and set the right focus from the beginning.
• It is often the case, that founders are too distanced from their customers. When entering a new market, it is extremely important to increase these touch points. In each market, customer needs and desires are different, these nuances might make or break efforts to scale. A framework like AARRR will force you to go into the product, funnel and monetization questions early on.

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How do you recommend to set up the constellation of the team for successful expansion?

It is advisable to set up a dedicated product team that is not centralized and dependent on the prioritization with in the HQ. It is important to have a separate team that works under its own tech stack.

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Why is who you hire so important when it comes to scaling?

Key hires will have a huge impact on whether scaling into a new market will be a success or not. If you hire talented people they will hire and grow talent in return. A tip here is to not rely solely on recruitment agencies; good people are usually not on the market, it’s rather about identifying them and poaching them.

That said, as soon as you have a good understanding of how a given market works and know who the specialized recruiters are, it might be helpful to use such an agency. Keep in mind, recruitment also changes according to the stage your product is in, each phase requires different deep skills.

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How do you manage and motivate the team through scaling and how do you set the right culture?

• As a CEO, it is important to have a clear vision of where you are heading and, a clear idea of who you are and what your values are – and then finding people who share those values. It is not just about writing it down but that you live those values; it is an endless battle but one of the most important battles.

• Mission-driven companies are likely to be most successful, as they are extremely focused. In order to really build a culture, it is important to not only define the right values for the company but to also make them actionable. Take the values and quantify them by putting a process behind them.
• For example, if a value is about transparency applying a process like OKRs (objective, key results) goal setting methodology might foster that in addition to ownership and communication.
• Remember that less is more, it is important to think carefully about which processes should be implemented and in what way they represent company values.

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How has COVID impacted your sales and customer acquisition process, and how do you think it will look in the future?

Due to COVID, customer acquisition, onboarding, and deployment have all been done digitally. As a result of not needing to travel, sales have become much easier and more efficient.

“Moving forward, a flexible model will be applied, at the moment we are planning to set up teams that have access to co-working. This way of working will definitely increase the recruitment pool.” -Karl Josef Seilern