Reflections on scale-ups
Reflections on Scale-Ups
Nick Sturge is the outgoing Director of Bristol’s Engine Shed High-Tech Incubator. In the blog Nick reflects on what he’s learned from all of the scale-ups he’s worked with over the last 15 years.
As I approach the end of my time at Engine Shed, I thought I’d reflect on how my journey started at The University of Bristol.
Serendipitously, as happens in this space, I had the pleasure last week of dining with a group of SETsquared alumni companies, all of whom, not surprisingly, are true scaleups – ambitious, fast growing businesses – to share reflections on each other’s experiences.
We heard from one company in particular where the founder divested the ‘warts and all’ of the journey and what he gained from the support he had through SETsquared Bristol.
Having spent the last 14 years either working for, running or supporting the brilliant SETsquared activity, it was interesting to hear some of the same old challenges. The story played out many of the things I’ve learnt over that time.
My journey with SETsquared started in 2005, when I joined SETsquared as a volunteer mentor, following the exit of my previous business in a reverse-takeover of our listed entity. I’d co-founded that business and all of us were really operating by the seat of our pants. Frankly, with very little idea about how to run a business, though enough to raise some £23m of investors’ money (the heady nineties and very early noughties!). Anyway, I stumbled across SETsquared, then just 3 years old, and volunteered as a mentor with no real knowledge of what works and doesn’t in a business that was different to mine or how to ‘mentor’. This is a trap we fall in to sometimes, we assume that someone who has been an entrepreneur, or an expert in something or other, will automatically be a good mentor. Mentoring is a skill, and requires specific behaviours, that are not necessarily related to the discipline the mentor is expert in. Sharing experience is one thing, but effective mentoring is another. Nevertheless, I had a go and found it quite rewarding – but more importantly, incredibly insightful. I was learning about lots of different entrepreneurs’ styles, sectors, successes, failures. The point is that mentoring is much better as a two-way learning process than one-way. Some call it reverse-mentoring – perhaps something we should be encouraging more of in our economy: experienced business leaders mentoring earlier-stage entrepreneurs, as much to get fresh insights into their own businesses. I later joined SETsquared as an Entrepreneur in Residence and Centre Director, 2006-2016, so I’ve had plenty of insights into how different companies are run.
The speaker at the SETsquared Alumni Dinner last week was an entrepreneur who was also an alumnus of the University of Bristol and had been invited back to mentor students. He’d found the process really useful in helping him work out where to take his own business. After joining SETsquared, he said that the first advice he received from the Entrepreneur-in-Residence was to double his prices (any SETsquared members, past and present, reading this might recognise that – it’s quite a frequent occurrence!). Technologists are often not the best salespeople – good at the conviction-selling but rarely closing the deal or appreciating the real value to the customer. Not surprisingly, our SETsquared entrepreneur lost no customers as a result and in fact achieved 20% more business from his existing customer base. Classic.
Another point of note, that we hear a lot from scaling companies, is how to manage your shareholders. Whether they are equity investors or co-founders, the different emotions and behaviours that manifest can be quite difficult for the CEO to manage. There’s no single formula or exact science. It can be destructive so takes a lot of care, but helping the CEO understand what’s really going on is helpful. One of SETsquared’s tools is to help founders understand the difference between Director, Owner (shareholder), Operator and Manager (we call it DOOM – if you don’t manage the differences properly, you’re doomed). When you start a business, you are typically all four, but you need to understand the difference – like wearing different hats at different times. SETsquared teaches entrepreneurs to understand the role of the director in directing the business as opposed to the typically greater financial and emotional investment of shareholders (even if best friends). Directors must take into account all stakeholders’ interests – not only is it the law to do so, it’s also likely to be the approach most likely to achieve a resilient and productive business.
The last nugget of wisdom from our SETsquared alumnus was also a frequent challenge for scaling companies: how much do you invest ‘ahead of the curve’ rather than pull in the business and then invest. Helping him quantify the risk in that kind of decision was really valuable. This is most acute in hiring – often the biggest cost of a business, and not something you want to get wrong. Whilst every situation is different, this comes down to belief in your vision and own capability and your ability to manage risk. In my previous business we invested ahead of the curve significantly, grew to 125 people without the revenue to match (after we’d raised £17m on the Stock Exchange) building design, production and sales capacity – then 9/11 happened. That unexpected, external shock to the global system killed business confidence within a matter of minutes.
There is an immense amount of depth and breadth of experience and insight into how to make the best decisions in business, but there is rarely, if ever, a single answer. Being a CEO can be a lonely place and echo chamber, so the other thing SETsquared evangelises about – is build a board. Get some wisdom onto your team that can be objective – and make sure it’s not a ‘PLU’ (Person Like You); there is no point having someone who’s going to agree with everything you say. CEOs need challenge and different perspectives. Yet again, diversity is key.
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