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Much has been written about the very early stages of start-up life - so much so that a Google search on ‘starting a startup’ gets over 50 million hits. And of course there are the unicorns of the tech industries that keep making the headlines due to their apparently effortless success.
What doesn’t get quite as much ink (or shall we say pixels?) is the phase between early start-up and groundbreaking success, or what AirTree Venture’s Partner, James Cameron, calls “the long hard slog from $2m to $10m in ARR”. Cameron took the stage at CeBIT Australia’s StartUp conference to talk about what it takes to get your business through that stage “where it constantly feels like banging your head against the wall”. In other words, Cameron wants to help Australian start-ups to scale more effectively. This blog post outlines his three key takeaways.
This step involved being tactical about where to invest capital. “If your business is based on a SaaS model, come up with a sales incentive plan to optimise for multi year and upfront payments,” explained Cameron a strategy to keep cash in the business.
Cameron also advised to review pricing regularly. “In my experience, a lot of technical co-founders completely underprice their product and often can’t believe that people will pay for it at all.” Scaling start-ups should double their price and then double it again until they have reached a point where the pricing reflects the true value of the product.
Founders should also get a handle on their customer acquisition cost (CAC) and understand the break-even point. “You should reach CAC break-even point in under 18 months,” said Cameron.
“One size doesn’t fit all when it comes to go-to market strategy,” said Cameron. “The truth is that not everyone can do it all online and the no-sales-rep model is not right for every business.”
Finding the right sales person added another layer of difficulty to this. “Hiring a VP Sales is one of the most difficult hires you’re going to make apart from founding team,”confided Cameron.
“When you’re scaling you have to deal with a hell of a lot more than in the start-up phase,” said Cameron. Lots of businesses hit the wall at scaling stage because the founders still need to do too much.”
Apart from the VP Sales, the following roles were the most important to fill early on:
Got a great product idea, but not sure how to get the project of the ground? If done right, crowdfunding can be a great way to get an idea to market. Download our ebook ‘From idea to implementation: How to crowdfund like a pro’ to learn how.
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