3 December 2006
Without Focus and Scale a Startup Will Die
I think there are two key traits I’ve learned over the past two years that a startup needs: Focus and Scale. They are two intertwined characteristics. Your focus is strengthened by your scale, and vice versa. I’ve touched upon this aspect before, but have never done an in-depth post on the issue.
Focus
Your focus should be drilled into your head. It should probably be envisioned in your mission statement. Focus is the goal of your company and its products. Your initial focus should be very narrow, targeted, and niche. For example: We provide learning tools to educational institutions that focus on preschoolers. Notice that Focus is made up of two things: what and who. In this case, the what is: learning tools. The who is: educational institutions. The what is usually shaped and molded to fit the who. These two aspects are what change with scale.
Scale
Scale, is the explosive growth of your company towards new verticals and markets. Scale expands the who, while keeping the inherent goals of the what. In my mind, there are three levels of scale a company/ startup should go through in order to be succesful.
Initial Scale
This is going to be your first trial run. In the first few months, it will be where you start to grow and acquire your first customers. It is going to be very very small, but don’t be scared. In our example company, it might be preschools only in Florida. Eventually you will expand your initial scale to different regions: the southeast, the east coast, start over in the west coast, then make it nation wide. This in itself is one hell of a feat. If you can saturate your first market with your initial scale, awesome. You’re already a great company. Take your time with your initial scale, as this will teach you the most important lessons.
Expanded Inter-Vertical Scale
So you’ve saturated the first part of your vertical. In our example companies case, it was the preschool market. Some companies will just stay at this level, and be happy. If you want a homerun, you try to keep growing. Your next step is expanded inter-vertical scale. This is the first point you hit, that slightly changes your who. Our example company is still providing educational tools (the what), but they begin to provide their product to new markets within their vertical (the education market). It might be the college level, the high school level, disabled learning level,etc. This is where it might also make sense to raise a round of capital. It really depends if your revenues can sustain rapid growth or not on their own. At this point, you want the fertilizer to grow. You may hit some speedbumps as well. Expect that some inter-verticals will go well. ie- college market, but not the high school market. Once you’ve spent some time on inter-vertical scale, take a look at the results. More importantly, look at what you’ve learned. If so, it’s time to move ahead.
Mass Consumption and New Markets/Verticals Scale
This is the holy grail. This is where your company is dominating, and ready to reach its maximum potential. If you pull this off, or even begin to take the journey, you may be ready for an IPO. You are going to change the who for sure, and also modify the what slightly. In our example company, they may begin providing learning tools to educate and train. This could start to include the workforce, police academies, the government, and more. The same philosophies and strengths they applied to the educational market could be applied to new markets and verticals. This is very hard to do, and takes planning from day 1 as a startup. This is where your revenue charts are really making that “J curve”.
A quick example- Facebook.com
Initial Scale- The college market. Began with the ivy league, and eventually expanded to all colleges. Included 2 and 4 year schools.
Expanded Inter-Vertical Scale- High School and graduate/workforce market. Simply an expansion in the who to include more people
Mass Consumption and New Markets/ Verticals Scale- Opening up to regions and everybody. This is Facebook’s big test, to see if they are “that” hot. This fully scales their who and their what.
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