Growing and scaling aren’t the same thing

Had a casual chat with a bright and energetic young entrepreneur working in the blockchain space. Till yesterday, I’d been fascinated with the concept but never made the effort to actually get into the ‘weeds.’ The conversation helped me learn a chunk more about blockchain, cryptocurrency and the whole enchilada than what I would learn myself. I felt deeply grateful and appreciated how this fellas simplified the concept to make me understand.

He wanted to ‘scale’ his business but didn’t quite know better ways to find investors or market better. One of the strategies I shared was to leverage his skill of simplifying complex topics to educate his potential audience but before that he needs to be clear who he’s serving — the minimum viable audience. I also offered him to connect to some of my friends in the VC space once he’s scaled to a level that’s respectable to both him and the market.

As we got deeper into the conversation, however, I realised that he was using the words ‘growing’ and ‘scaling’ interchangeably. There’s a difference, a major one:

  • Growing the business is essentially when you have a handful of clients and would like to get more so that you move beyond survival and work towards stability. This is where most companies spend their first 3-5 years of their lives.
  • Scaling a business is taking an existing stable business to an all-new level. And that requires business maturity and most importantly, capital. Hence entrepreneurs seek funding for their businesses. This is something a business should think about only after spending at least 5 years as a stable business but are convinced they’ve got something that’s going to be a game changer.

Of course, there are exceptions to #2 above — some tech companies do need funding to get things off the ground. But I don’t think you really have to mortgage your future and be a slave (to the board, investors) for some cash.

The alternative, as Seth Godin would say, is to bootstrap and grow a business that’s funded by your customers for the value you create for them. And I believe it through and through. But it’s hard work and I think our culture has become convinced that having money just makes things easier and getting it from investors is the only way to get things done. As with all things in life, it comes with a cost.

I’m not an expert in the start-up ecosystem*. But I would on any given day focus on finding my minimum viable audience to grow my business. And only after 3-5 years of consistent performance would I ever think about scaling it to a level that’ll require a capital that I don’t have.

Grow first, scale later. Bootstrap in the interim.

P.S. *Nor do I want to be, thank you! Have you met one of these guys? Some of my closest friends are in this space and they see every damn thing from the eyes of an investor. A few years back one of them asked me, “why would these people invest in your business?” I said, “dude, I’m a writer. Stop analyzing this and tell me if you can put the word out and see if anyone needs a writer.” Get the point? The chances of getting a funding (which is what every person seems to be chasing these days) is slim to none unless you’ve got something that’s going to change the way people think and do things. If you don’t have that, it’s alright. Believe me, you can still make the riches building your small business (and let’s not forget legacy — the number of privately held businesses is much more than you think) by bootstrapping it right.

By Sunil Nair

Nurturing leaders of tomorrow.

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