Despite their humble beginnings, some startups do make it to the coveted high-valued acquisition or IPO. But most are not this lucky. Over 3,000 startups were founded in 2018 alone, but one analysis found that nearly 70% of startups never achieve an exit. In the early days, if a startup’s product or service is innovative, that can be enough to attract initial customers and investors. But if the company doesn’t plan ahead and think seriously about the role its employees will play in building the business, the quality of the product on its own won’t be enough to achieve long-term success.
This is particularly true if your startup is growing fast. When you’re taking on lots of new hires and are laser-focused on going to market, it’s easy to forget some of the less glamorous, but equally important, aspects of making your business successful. Business leaders at rapidly growing startups need to put a strong focus on their people, process and technology to set themselves up for success.
To avoid failure and pave the way for a successful IPO or acquisition, here are a few things to remember during hypergrowth:
Don’t force a monoculture.
When startups expand into new markets, some might be tempted to impose their original office’s culture on their new offices. My advice? Don’t force it. Your home office culture might not be a natural fit in other cities or countries. One of the most exciting parts of launching in new markets is the unique backgrounds new employees bring to the table. These diverse ideas and perspectives make your company more well-rounded.
What’s most important is making sure your company’s leadership team — in any office — lives by your values. These can range from a commitment to customers to putting your teammates first. If these stay consistent, variations of your company’s culture can thrive in all locations. In addition, it’s important to develop a process for assessing how well your values resonate with new hires. Will they be a value-add to the culture? When you’re growing rapidly, the culture can shift just as rapidly if you aren’t being intentional about hiring people who embody your company values.
Don’t offer new hires the moon.
The unemployment rate for tech jobs recently fell to 1.3%, the lowest it has been in two decades. For employers in the tech space, this means competition is fierce. Tech giants can devote vast resources and stock options toward recruiting and retaining top-performing talent, posing challenges to smaller startups looking for equally talented recruits.
Some startups try to draw in top candidates by offering great salaries, perks and unique benefits. However, in the long-term these practices could hurt you. Unrealistic benefit packages are not easy to scale as your company grows. You’ll eventually need to cut benefits or decrease your initial salary offers, which will make it harder to retain and attract qualified talent. If you are growing internationally, you may be restricted from cutting or reducing benefits altogether. Plus, Gen Z is less interested in perks than previous generations. Design your total rewards packages so that they can scale and are oriented toward future workforces, not just your current one.
Your product isn’t everything.
Building out your business operations might not seem as glamorous as developing an innovative product or solving critical customer challenges, so many startups delay this part of the business development process. However, operations are crucial to your company’s success. From day one, it’s important to think about how you will manage all of your licenses, remain compliant with changing government regulations, prepare for audits and foster customer relationships.
Startups can sometimes get stuck focusing on a hopeful exit, but this is a mistake. IPOs and acquisitions are simply the start of the next chapter; make sure your company is prepared for developments and changes that come after.
When it comes to technology, there’s no such thing as too much planning.
Startups can face an overwhelming number of obstacles when considering when and how to implement the technology services their employees and customers need. Figuring out how to roll out new technologies like video conferencing and HR tools takes time. Because of this, some startups forget to think about the bigger picture. Companies should be considering the solutions they will need to succeed in the future — when they’ve hit 500, 1,000 and 1,500 employees. The workplace is changing, and you will need the tools you use for communication, HR, finance and other aspects of day-to-day business to keep up with your growing workforce.
Research our team recently compiled found that nearly half of workers now prefer to work remotely, and one analysis predicts that by 2027, the majority of the workforce will be made up of freelancers. When deciding which technology to adopt and what processes make sense, optimize for these remote employees. Solving the pain points of your distributed workforce will ensure your on-site resources are also equipped. This will pay off in the future as work becomes more distributed.
Startups will face many changes in the workplace over the next few years. If your company isn’t thinking two years ahead, it won’t be prepared to provide the growing number of new hires with the tools they need to get their work done. You’ll run the risk of losing current workers and struggling to attract new ones.
Although about 70% of startups fail to achieve an exit, yours can still make it. Being open to diverse office cultures, planning ahead with technology and operations, and being realistic about compensation are a few keys to success. It’s easy to be consumed with rapid growth and with pleasing current customers and employees in your startup’s early days, but in order to make it to the IPO or an acquisition, you need to keep long-term priorities top of mind from the beginning.
