In the early stages of a startup, you’re still deciding what the company will be. This means securing funding, building a minimum viable product, and carving out a niche in your industry. These businesses inherently carry more risk because they’re unproven in the market and still need time to mature.

Growth-stage companies, on the other hand, have proven their product in the market and have secured financing. They’re in the process of growing and trying to scale, but are encountering some obstacles to that growth. The focus here isn’t on pure innovation, but expanding on what’s already working for the business.

5 ways early-stage startups and growth-stage companies differ

Not sure what category your business falls under? Consider these 5 differences between early-stage and growth-stage startups.

1. Complexity of work

Running a business is always going to be hard work. However, the complexity of running your business will differ if you’re early-stage versus growth-stage.

Early-stage startups have less complex tasks. But that doesn’t mean it’s easy; this phase of starting a company requires you to become a Jack of all trades, often working long hours to bootstrap the business. This stage is all about learning how to DIY essential processes and being scrappy with your resources.

Growth-stage companies aren’t going through such an exhausting time, although they have more complex issues to solve. Payroll, investor ROI, and market demands mean growth-stage founders are under pressure to have a consistently successful business. Your work will still iterate and transform as a growth-stage brand, but now it’s about trying to meet market demands and stakeholder needs, too.

2. Culture

Startup culture is famous: it’s known for casual dress, beer Fridays, and interesting perks like free pet daycare. It’s easy to maintain a fun and productive culture as an early-stage startup, and that’s largely due to size. You aren’t managing employees when you have a company with 2 to 10 employees, for example. You’re more likely to hire people with similar backgrounds at this stage, which means the culture will stay consistent.

That changes as your brand enters the growth stage. When you get an HR department and allow them to hire new employees, you’re relinquishing some control over the culture. As the company expands, this can feel like a game of telephone: the message will change with the more people you add to it.

This is why growth-stage companies fight to maintain their culture as they grow. One bad hire can wreck your carefully-crafted culture. That’s why it’s important to prioritize healthy culture as you grow, modeling the culture you want to see with your actions and decisions.

3. Product-market fit

Does your product have a place in the market? Is it already tested and growing in your niche?

Early-stage startups are still trying to find their place in the market. It’s early days for their minimum viable product, which means the startup experiments with their customer base as they try to hone in on their sales approach and messaging. That means features, pricing, and positioning might change overnight.

Growth-stage companies have already validated their product in the market and can prove it’s sustainable. At this point, growth-stage founders are trying to keep the brand from plateauing. This means founders are trying to grow their existing numbers, either by expanding their team or breaking into an underserved market . . . it’s about scaling.

4. Risk

Every founder has to deal with some level of risk. But you’ll see that there are big differences in the amount of risk between an early-stage startup and a growth-stage company.

Early-stage startups are able to take more risks. They’re running lean teams of 1-2 people and maybe an investor who’s along for the ride. With fewer people depending on the startup for results, the brand is able to take bigger risks—with the potential of a bigger payoff. If a startup does fail, it isn’t a disaster because the brand hasn’t grown enough to experience a true disaster.

It’s a different story for growth-stage companies. The bottom line matters much more once you have employees and high-profile investors as company stakeholders. Growth-stage companies have a lower tolerance for risk for this reason; they have more to lose.

5. Hierarchy

Early-stage startups are all about the hustle: founders wear all of the hats in the company, fulfilling orders while they try to figure out QuickBooks. The goal is to do as much as possible yourself so you don’t have to outsource tasks, saving capital.

Growth-stage companies are finally at a place where they can afford to hire team members with specialized skills. That means they’re starting to build a skeleton staff, creating departments and hierarchy within the small company.

This is good, because it means founders can focus on their vision and let employees take over more specialized tasks. But it’s a challenge to outline how the hierarchy works, and for inexperienced founders, the added moving parts can get messy.

The bottom line

Whether you’re in the early stages of a startup or you’re starting to see growth in your company, it isn’t easy to know where to turn. Avoid the delays, nasty fines, and lost income that come with bootstrapping everything yourself. Instead, rely on a trusted advisor like Hollines Group. Now’s not the time to plateau—it’s time to scale upwards. Get in touch with us now to brainstorm your brand’s next big move.

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You could speak with dozens of investors before one agrees to partner with you. But are they really the right fit for your business?

As a startup founder, you have to learn how to sift through investors to find the right match. Go beyond capital investments and find someone who has a stake in your development.

How to find better investors

Early stage companies don’t always need more money. If anything, you need the right investor at your side to make the best use of your existing resources and guide you around common pitfalls.

Here’s how startups can connect with better investors.

1.   Define your ideal investor

It’s easier to find your ideal investor if you know what qualities to look for. Make a list of criteria for your investor. What background, experience, or personality do you want? This will help you determine which investors you shouldn’t pursue so you can focus your time on the best potential investors for your company.

After developing a list of criteria, the real work starts. Research and identify a list of investors who fit these criteria. Go after reputable and well-known investors in your industry. To start building your list, speak with other startups, consult local news, or use sites like AngelList.

2.   Do your research

Once you compile an Excel sheet of potential investors, do your research. Determine their specialty, education, similar investments they’ve made in the past, their track record and success, and contact information.

Once you’ve done your research, it’s time to pitch. To best manage your pitches, consider using a customer relationship management (CRM) platform.

Store all information about investor outreach in one place so you monitor and track outreach efforts. This streamlines the search for investors and keeps your co-founders in the loop about who’s been contacted already.

3.   Network

Some of the best investors are right under your nose. Go local and ask your network to find the best investor for your business.

Attend university mixers, casual parties, professional get-togethers, and conferences. These are your chance to build a relationship with fellow attendees.

Remember, networking is about fostering a relationship. You can let people know about your company and that you’re pursuing funding, but don’t go in and ask for financing at first blush.

Be patient. It might take months to build the right relationships, but it will have a big payoff for your business.

4.   Join an accelerator

Accelerators offer programs that train you as a founder to get your business off on the right foot. It’s a great option if you’re looking for mentorship, community, and support as you grow your business.

Depending on the accelerator, they may set you up with meetings where you can connect with investors. Accelerators give you a big network not just of investors but also of potential mentors and fellow founders. I would with several Accelerators in the area and I can attest to the benefits of engaging that community.

5.   Ask for referrals

Investors are sometimes wary of working with people they don’t know. You can build trust quickly with an investor by requesting a referral from your network. Warm referrals vouch for you and help you build a relationship with the investor.

Even if an investor isn’t the right fit for you, they may know someone who is. Don’t be afraid to ask for referrals and connections; they’ll take you far.

6.   Trust your gut

Investments are a financial decision but you’re also giving a portion of your company to the investor. They’re going to have a seat at the board room and this isn’t a step you should take lightly.

It’s important for early stage companies to establish a positive working relationship with investors. You’ll be working with this investor intensively to get your project off the ground. You need to share common values, interests, and vision to pull the project off without a hitch.

Even if all the numbers line up, it doesn’t mean the investor is right for you. If they make you uneasy for any reason, don’t follow through with the deal. The right investor is out there for you, and choosing the wrong one could be disastrous for your business.

The bottom line

The right investor helps you avoid the mistakes that come with creating a new business. It’s never too early to start looking for funding for your startup. The right investor will not only boost your business with their capital investment but also the guidance and resources to help you grow. Put your head together with an investor and partner who’s been there before.

You don’t have to go alone to find the right investor. Partner with The Hollines Group to seek out the best investor to grow your business for many years to come.

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However, I know from working inside companies for decades and trying to build my own company that saying ‘No’ is essential to success.

The companies I worked at that had a clear and thought out strategy would say ‘No’ to many engagements to stay focused on executing the core strategy. On the other hand, companies I’ve worked at that did not succeed or failed to reach their potential always said ‘Yes’ and chased every opportunity that knocked on the front door.

That inability or reluctance to say ‘No’ is one of the reasons startups and early stage companies fail . . . I refer to it as the ‘I can’t say no’ pitfall.

On this point, I remember Berkshire Hathaway CEO Warrant Buffet once said, “The difference between successful people and really successful people is that really successful people say no to almost everything.”

From my perspective, here is what saying “No” represents and why it is so critical to success:

1. ‘No’ means you clearly defined what is in the “Yes’ bucket otherwise you are not comfortable responding ‘No.’
2. ‘No’ means you believe in your go-to-market strategy and business model and this should be applauded.
3. ‘No’ represents discipline and that is a key attribute of success.
4. ‘No’ means neither you or your employees will waste valuable time chasing deals that do not make business sense and instead laser focus on executing the core strategy and scaling the business.
5. ‘No” requires confidence and all the great leaders at successful companies have at least one thing in common . . . they are confident – if not conceited – in what they are building and how they are building it.

In reminding myself of the context in which Buffett made his statement, I came across the following article in which successful leaders and advisors were asked if they agree with Buffett.

What about you? Do you agree with Buffett? Can you recall a situation where you walked away from a deal? Do you remember continually changing ‘Who’ and ‘What’ your business stood for in an attempt to win any deal?

Tell me about your experiences and always feel free to drop me an email at: harry@hollinesgroup.com. Also, download our free eBook at www.hollines.com on how to avoid common growth roadblocks .

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However, as a startup or early stage tech company, you still share some commonalities with other businesses in your arena.

In fact, as you develop your startup strategy and  prepare to scale your business, there’s no harm in looking to the tech giants for inspiration. One of the best ways to scale efficiently is to learn from those who came before you.

America’s hottest technology companies

Even in today’s rapidly changing market, there’s still much we can learn from the greatest technology companies of our time.

Amazon

eCommerce titan Amazon is one of the most diverse, innovative tech companies on the market today. They rose to fame thanks to their two-day Prime shipping, but have also excelled through innovation.

Thanks to mergers with companies like Whole Foods and their research into drone delivery, Amazon is quickly becoming the go-to company for all things convenience.

Facebook

Although Facebook experienced the Cambridge Analytica scandal in 2018, they’re still one of the best tech companies of our time.

Bootstrapped in its early days by the resourceful Mark Zuckerberg, Facebook has been one of the most successful social networks on the web. Utilized by both businesses and consumers, Facebook earned nearly $56 billion in 2018 alone.

Alphabet

Google’s parent company, Alphabet, includes the search engine as well as other subsidiaries, like Google Fiber, Waymo, and Loon.

Famous because of its fanatical obsession with user experience, Alphabet aims to improve the world without “being evil.” The company is known for innovation and creativity, which is likely why Alphabet earned $136 billion in 2018.

A blueprint for your success

What do these tech giants all have in common? When we break down their history, it comes to five essential components.

1.   Talent

Amazon, Facebook, and Alphabet hire only the best. While these multi-billion dollar companies have the budget to bring in high-dollar talent, early stage companies can’t afford that luxury.

How do you attract and retain talent as a small, early stage and scaling business?

It’s about having a mission. Salary is important, but your tech company also needs to have a clarified mission with short and long term goals.

To achieve your mission, remember that you can’t do everything alone. There’s a time for bootstrapping, but if you want to scale your business, you must hire a reliable team.

Acknowledge your weaknesses as a founder. Emulate these famous technology companies by hiring people who complement your weaknesses.

2.   Product-market fit (PMF)

You can have a great corporate structure and product. But if no one is buying your product, your company can’t be successful.

That’s why product-market fit is so important. Companies like Amazon took the time to gather consumer data and understand their audience. Facebook and Alphabet do extensive testing to understand their audience before rolling out a product.

You need to do the same. Understand who you’re selling to before you even develop a product. Address audience pain points to make selling and scaling easier for your business. Lastly, validate why a consumer purchases your product or service.

3.   Industry knowledge

Some people, like Mark Zuckerberg, created a product without necessarily being inside the tech industry.

When it comes to industry knowledge, you can do one of two things: hire people with the experience to help you or take the riskier DIY approach.

When it comes to growing your early stage technology company, knowledge is power. But don’t worry . . . if you don’t have the experience yet, you can always bring someone on your team who has the knowledge.

Use their wisdom to your advantage. Know what your competitors are doing, understand user buying habits, and how your business can stand out.

4.   Funding

Funding is both the lifeblood and a persistent problem for early stage tech companies.

These giant technology companies are very successful in raising capital. Why? Because they didn’t just look for a simple cash cow.

Instead, they sought out investors who could be a business partner. They used investments as an opportunity to grow a brand and build connections. You need to do the same.

5.   Adaptability

Technology is a changing market. You can’t scrape by, hoping that what you’ve done in the past will continue to work. That’s why most people use Google instead of Yahoo! . . . one company adapted, while the other remained in the past.

Your business needs to adapt to the market and consumer behavior. Think strategically. Know where you need to pivot your business to scale efficiently.

The bottom line

Early stage technology companies have so much promise. You want to grow your business in a way that’s sustainable and successful.

You can learn through secondhand knowledge by emulating popular companies. However, this approach is rife with trial and error. When you’re growing a business and have employees on the payroll, you can’t afford errors.

Partner with someone who’s invested in your success. Choose an experienced advisor to grow your early stage startup. Partner with Hollines Group.

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