By Alex Yakubovich, Scout RFP
A life cycle analysis of startup evolution reveals a stark funnel. According to research from CB Insights, 67 percent of startups fail to exit or raise additional funding; just 48 percent of startups make it to a second round of funding; and only 15 percent raise a fourth round of funding, typically a Series C.
We are all too familiar with how difficult it can be to achieve these important stages within our company, but the company shouldn’t be the only thing evolving. From launch to exit, businesses evolve marketing, sales, and product strategy — but leadership is often overlooked when it comes to evolving the way they think, act, and speak with their team as the business morphs.
Leaders of software startups must adjust their leadership approach to continuously build and sustain a winning company culture throughout all stages of the business, while keeping on course with product development, marketing, and investor relationships. Here’s how to evolve:
Startup: Team Cheerleader
In the early stages of your startup, you may be the only team member, or one of just a few. How you manage your small but mighty team will have a huge impact on the future of your company. You have to be a cheerleader for your team and motivate your current employees to buy into the company mission and the problem you’re solving.
The first couple of years of a company are challenging. You’ll likely face more obstacles than wins, but you must keep your entire team engaged with the company vision. Ensure they understand how your product fits within the industry and competitive landscape because they will be your best long-term advocates. Additionally, stay transparent with all aspects of your company — from finances to hiring to product development. If you aren’t transparent early on, you risk alienating and losing your A-team.
Series A: Network Guru
In this stage, investors are typically looking at growing their customer base. How can you shift your leadership style accordingly? One word: networking. As a leader in this stage, not only should you be networking with current customers, investors, potential customers, and industry experts, but should be encouraging your team to do the same. Hone your focus on being approachable and transparent — both in and out of the office. Invite employees to networking events so they can better learn and understand how you’re marketing the company.
At Scout, one of our core values is obsessing over our customers. It’s been that way since before our Series A. As a leader, I’ve encouraged our employees to network with customers as often as they can to further inspire the core value. Don’t let your location stop you either — we have global clients at Scout and are always connecting virtually with them through status calls or on social media.
Series B: Delegating Maestro
Hiring will always be a key component to your success. At this stage, hiring for the right skillset and culture fit is critical as these teammates will allow you to accelerate innovation and market share. As you’re investing in your team, it’s important to shift your leadership mindset to be a delegator and allow these new founding players to help grow the business. Demonstrate trust in your new team you by handing off projects you’d normally oversee yourself and allow them the freedom to strategize and execute on their own. In turn, this flexibility gives you the availability to focus on series C.
Series C: Strategic Visionary
At this stage, your customers, employees, and investors value your product, mission, and believe in your place in the industry. The challenge at this stage is immense. To be an effective Series C leader, you must continue to trust and delegate, but not let the rapid growth of the company affect the company vision or core values. You are the champion of your company’s vision and your mindset should center around maintaining the integrity of the company, while guiding others to scale and meet growth demands. This growth phase from a company that is hands-on to one that is scalable is an emotional and physical challenge. One of the best ways to navigate this part of the journey is to remain transparent to your board and your investors — both which will play a prominent role within your company at this stage. They have great advice and can guide you through this metamorphosis.
As you dive deeper into your C round growth, networking with investors and larger enterprise companies could lead to an acquisition conversation. Your focus as a leader is to drive company growth. As long as that top line growth is happening you will head toward another round of funding and to an ultimate exit that is on plan with your strategic goals. As you lead with these goals in mind, keep your entire team up to date on the company vision. For customers, you are likely scaling globally. Continue to network with customers in your new verticals and global markets to better understand how they tackle issues and what they expect to see from your offering.
On a personal level, you must also be a coachable leader throughout your journey. Your board, investors, and customers are going to have feedback — good and bad. To remain agile in your company roadmap, you have to be open to this feedback and willing to hear where you may be challenged and adjust.
As a software startup leader, it is never an easy journey to Series D and beyond. At the end of the day, as you shift your leadership style, always remember to stay true to your company mission and the ‘why’ behind your startup, and you’re sure to find long-term success.
About The Author
Alex Yakubovich is CEO Scout RFP.