Investors & board members can be growth preventers.

Most smaller tech companies require external financing and external directors at some point. This is needed to steer the company towards a successful future. The combination of smart and ambitious founders and CEOs on one side, and external owners and directors on the other side, can work very well.  But what about the times when this combo just doesn’t work?

 

Key external stakeholders may decide to take a too conservative stance, in principle preventing the companies from growing successfully. Often, applying the same structure and thinking that worked so well in traditional industries or just 5 years ago, just doesn’t work in tech today. Especially where steep growth rates and time-to-market are important.

 

Flexibility, ability to change and growth hacking is critical for most smaller companies. There are many ways to grow, and a company may need to test several approaches before landing on the one that really works. Many times, companies need to pivot their strategy and approach. They cannot afford to limit their flexibility. It is not easy for people with limited operational insight to understand the need for this dynamic way of running the business.

Some examples of where things go wrong:

• The Board and investors expect all staff to be regular employees, in order to have ‘full control’ of their resources. A good alternative can be to use consultants/interim staff for several roles in early stage. This provides much more flexibility and ability to change when needed.
• Board members and investors want to manage and structure new companies in the same way they are used to from their past. This approach may not work, as change happens quicker today. Change will happen even quicker tomorrow.
• The Board and investors believe natural growth should be based on first winning the home market. The next step should be to set up an office or subsidiary in your next-door market. A smart alternative is to gather market insight and select the markets where you are likely to deliver most value. Find out where prospective customers today experience the most pain for lacking your product or service – and if they are willing to pay.

In summary:

• Conventional wisdom needs to be qualified – ‘worked before, so no reason to change’.
• Sales competence and international experience is often lacking – seek advice when needed.
• Growth and related KPIs need to be established, understood and monitored.
• Alternatives to traditional approaches need to be considered.

Reach out to abcb if you want to discuss a fresh view and approach!