In today’s entrepreneurial landscape, launching a start-up has become more accessible than ever before. With more and more incubators, micro-VCs and seed funds making capital accessible, the rise of low-code and no-code tools and availability of early adopters, be it consumers or businesses, the journey from ideation to initial product development has become easier. However, the real test of an entrepreneur’s mettle lies in scaling up the business and transforming it from a promising idea into a sustainable and profitable venture. This transition from start-up to scale-up presents a unique set of challenges, especially when start-ups venture beyond solving for a few early customers to taking the product to the mass market.
The initial stages typically focus on finding a product-market fit and finding initial customer love. Start-ups often operate in a mode of rapid experimentation and adaptation. Success in these stages hinges on the agility to pivot and make quick adjustments based on market feedback. However, once the product-market fit is achieved, the focus shifts toward building a sustainable business model, establishing efficient operational systems and developing comprehensive go-to-market strategies. Additionally, scaling necessitates securing substantial funding, expanding the workforce and nurturing a customer-centric approach.
Challenges of Scaling-Up
Scaling up presents its unique set of challenges, despite the vast pool of talent and growing consumer market.
Access to finance is a significant challenge. While India has seen a boom in venture capital and angel investments, securing funding for growth stage start-ups remains a complex endeavour. In the current environment, investors are looking for proven business models, positive unit economics and a large enough market to build a large business.
Though India’s consumer base is rapidly growing, it is still not easy to build a large enough business while maintaining positive unit economics. There is a constant need to rework distribution strategies and channels. For example, while it may seem easy for a consumer brand to reach Rs 400 crore revenue through just online distribution, in India, to grow beyond Rs 100 core, the brand needs to establish offline presence.
The other big challenge start-ups, and especially first-time entrepreneurs, face is building teams. Though the first 10 or 20 people in your company can come from your network, they are usually hustlers who just make things work. Culture is almost organic; everybody is in it together and is mission driven. Scaling up requires a different mindset, you need to bring in seasoned operators; setting up systems and processes and culture takes the centre-stage as the number of people increase.
Finally, as an organisation becomes larger, entrepreneurs need to work harder to bring in focus. From planning day-to-day, you need to start thinking quarterly and yearly, allocate budgets, set OKRs, or objectives and key results, and nail the metrics the organisation needs to track and improve upon. All these skill sets are completely different from the skill sets required in the zero-to-one stage—maniacal focus on early customers, doing things that might not scale but generate customer love and nailing the product or service.
The Role of Mentorship
This is where seasoned operators and entrepreneurs can give back to the community through mentorship. Mentors can act as coaches to founders and help them navigate through these different stages of leadership. Instead of experimenting with systems, processes and thought process needed to scale, entrepreneurs can rely on these mentors to avoid common pitfalls and save valuable time and capital.
Mentors can also help open doors, make the right hiring connections and help open distribution channels by facilitating partner introductions. At the right time, mentors are the best source to get investor introductions—it means a lot more to the VC when a seasoned operator recommends a company to a VC in their space.
The mentorship landscape in India has evolved. A lot of micro-VCs and incubators today bring a host of operators and seasoned entrepreneurs to help their portfolio companies. Successful entrepreneurs are also setting up their own funds now as a way to give back to the community, such as Together Fund by Girish from Freshworks or WTF Fund by Nikhil Kamath.
Furthermore, the Indian government and various organisations are establishing mentorship programme to support start-ups, such as the Atal Innovation Mission, to address some of the scaling-up challenges by bridging the knowledge gap and fostering innovation.
Challenges in Mentorship Ecosystem
While mentorship is crucial, it faces its own set of challenges in India. Firstly, a lot of the mentors are new to this, and are still figuring out how to add value.
There is a need for a structured approach; not all mentor-mentee relationships are equally fruitful. Clear guidelines, expectations and accountability mechanisms can enhance the effectiveness of mentorship.
Not every mentor approaches mentorship with the intent of helping the founder; there are many today who do it more for their own personal brand, damaging the overall perception of angel investors/mentors.
Finally, finding the right mentor is a stroke of luck. There is a definite need for better matchmaking.
India’s Preparedness for Scaling-Up Challenges
India has made significant strides in its preparedness to address scaling-up challenges. On the government side, the burgeoning start-up ecosystem, driven by the Startup India campaign, has fostered an environment conducive to innovation and entrepreneurship. The availability of funding, both from domestic and international investors, has improved. More and more VC funds are now hiring operators and successful ex-founders who can both lead investments and guide founders in the scale-up journey.
Finally, I am also seeing some companies being built around match-making and standardising mentorship, the model is not cracked yet but, over time, these ventures will add substantial value in democratising mentorship.
The author is the founder of Mensa Brands, which calls itself a house of brands