Main challenges for scaling up a tech company

Challenging market, desperate founders who try to become profitable, lowered valuations... Scaling up is always a challenge.

There is a sentence that is often used in sports: “The hardest thing is not to get there, but to stay,” which, for a startup founder, can be translated as “The hardest thing is not to create a business, but to make it scalable.” Once you have proven that your company works and that solves a necessary problem, you face the greatest challenge, which is to prove that in many different markets. 

Especially after a long period of time where money was “cheap” and many founders could raise big amounts for high valuations, the tech start-up ecosystem is facing several challenges: Investors, in particular VCs, are having a hard time to explain to their investors why they have invested at valuations which are not defendable today. Or, founders who believed too much in their own PR and believed growth is the only way to go. Now they are facing pressure from their board of directors to become first profitable: Unfortunately this does not happen by firing your employees. We will be witnessing a lot of mergers, acquisitions and drama in 2023. 

In general, there are always some challenges for the founders: 

#1 Money doesn’t grow proportionally: Startups typically have limited resources and need to be careful with how they spend their money (I think there is no better example than the current tech situation to explain this). You must decide carefully where to spend those resources, such as personnel and technology, to scale the business. Do not believe in Blitzscaling (as long as you are not in Silicon Valley). 

#2 Complexity is everywhere: As a startup grows, it may become more difficult to manage the increased number of employees, customers, and partners. This can lead to problems with communication and coordination, which can hinder the company's ability to scale. This is quite related to the next problem…

#3 How do I call this new position?: Startups often have a flat organizational structure, with few layers of management. As the business grows, it may become necessary to introduce more formal roles and processes to ensure that the company can continue to function effectively. 

In my view, there is a common key to face these problems: it is the management of people. I believe that you must try to digitize and automate as much as possible in your business and only hire those profiles you are really sure you will need in the short and long term. Paying a salary to more people than you can afford is not sustainable. The alternative, firing your employees' when you don’t need them anymore, will harm your company culture. Also, this can help startups to scale more efficiently and effectively. 

Another solution is to focus on building a strong company culture with a quite involved team. Startups are often built around a small group of people with a common vision, but as the business grows, it is more difficult to have a close relationship with everyone. This can be challenging, but by building a strong culture (with defined and ‘living’ values), startups can better manage the increased complexity that comes with scaling.

On the other hand, startups should also maintain a long relationship with their partners and customers. These relationships can provide valuable insights and support as the startup scales. Strong relationships can also help startups to identify new opportunities for growth.

We have faced all these challenges in Tiko, and one of the first things that we did was to review our company values and involve all the employees. We also keep doing weekly meetings to coordinate the team and have fluent conversations between the coordination members and the rest of the team.