Fundraising is of course important for growth but money really isn’t everything for scale-up success. Not convinced? Have you ever heard of Fling?
Fling was a London-based social media app which allowed users to send photos and videos around the world. The platform once boasted 4 million users through the Apple App Store, secured £17 million in funding and occupied plush top floor offices in Hammersmith. It seemed to have all the trappings of a UK tech success.
But Fling burned through its funding in three years, never brought in any actual revenue and was removed from the Apple App Store in 2015 for inappropriate content and user safety concerns. There were also reports that the company lacked real leadership or vision and staff were mistreated and unhappy.
The next year, Fling filed for administration.
While the sector remains healthy now, there are hurdles ahead that could make long-term success even harder to achieve. With the UK media clamouring for the next tech unicorn and uncertainty around the wider impact of Brexit, scaling businesses can be guilty of obsessing about securing investment and valuations that are as high as possible. It’s more important than ever that scaling tech businesses focus on factors beyond the funds – and that of course means taking the right advice throughout the business life-cycle.
So what should tech businesses consider on the road to growth glory?
It sounds obvious, but a core part of scaling successfully is working to a plan. Businesses should define their ‘moving forward’ strategy over 24 months or so, outlining their focuses and where they will spend any funds. Keeping a view on the overall purpose is key for outlining priorities.
All too often, however, young companies can lose track of what they have set out to do and be pulled in an entirely unplanned direction. Returning to the example of Fling: the company had originally started as a social network for students called Unii, attracting 100,000 users in six months. But apparently inspired on a flight to Hong Kong, the founder pulled his team from the Unii concept and Fling was born.
Two years might seem a long period to plan, especially in a sector that’s moving so quickly, and remaining agile and adaptive is certainly important. But a plan will help businesses to spend the time and money that they have well and will keep young companies on the right trajectory.
The right people strategy is essential. In a highly competitive talent market, businesses require a laser sharp understanding of the skillsets they need. Should resources be poured into product development? Is making a name quickly through PR and marketing important, or will having feet on the ground in certain locations make all the difference?
Once you get the right people it’s just as important to engage and keep them. This may involve a combination of providing flexible working or bonus schemes but mostly important through encouraging, respecting and inspiring your employees. Looking back at Fling, Business Insider reported that staff morale was low and the whole marketing team resigned all at once. This may sound harsh, but – you might be the founder, who has the best technical skills but might lack those important people and leadership qualities to take your business to the next level. Should you put others in place to take care of the operations side and also the on-going business strategy?
A diverse employee base, with a range of experiences and ideas is also proven to benefit performance, so inclusion should be prioritised from the start.
The tech sector moves quickly and it’s easy to be distracted and miss a chance. Having a strong understanding of the window of opportunity will inform the business strategy, product roadmap, fundraising approach and timescales. Your business service or product might seem crazy now but there may be a market for it in five years’ time.
The most successful scaling businesses will have a plan of how they can add to their original product or service line and when to implement these changes in order to carry their business into the future.
Funding that fits
Having said that money’s not everything, of course it’s a critical resource for enabling businesses to achieve growth and long-term sustainability. But arguably more important are the terms attached to that funding, whether a founder has to stay with the business until it reaches a certain valuation and how easy it will be to secure further funding, for example. Finding investors whose objectives align with the business is invaluable and securing the right terms and timeline for the business purpose and strategy will be central to lasting success.
So what does the story of Fling and many others really teach us? Securing investment is brilliant, and it’s incredibly positive that so much is available in London. But fundraising is just one part of a wider growth story. Businesses need to pursue a holistic strategy, defined by a clear sense of purpose and the right people to achieve stable growth and scale in the long term. Then we can look forward to more growth stories to be proud of, rather than ‘could have beens.’
Article taken from issue 7 of Beyond the Numbers