Lessons learned when scaling up !

As a well-known saying goes, “If you don’t try, you will never succeed“. In other words, it takes courage, daring, perseverance, creativity, contacts and strategic insight to successfully guide a startup to the next phase. And perhaps it is simply more difficult in the Netherlands than in the USA, where venture capitalists put hefty sums of money into new companies at great risk. There is a culture there where the ‘promise’ of new companies is firmly whipped up and the ‘selffulfilling prophecy’ effect does the rest.

This weekend’s NRC featured an extensive and interesting review of the demise and debacle of the Dutch sustainable techpromise; Lightyear. From the start a boy’s book, clever engineers, who after years of research and preparation see a gap in the market for a 1st solar car model, or an electric car with solar panels. How cool is that? This time, the ideas did not come from Delft, but from Eindhoven. These young pioneers, students successfully entered the Solar Challenge in 2013 and after their first place, decided to start a company in 2016 to develop a passenger car that runs on electricity generated by solar panels. The future looked bright for them, it looked like a boy’s book and yet things turned out differently.

How is it that such a successful startup with huge potential ultimately failed to make it? We have briefly listed the lessons that several startups can learn from this case study below. To be clear and as a disclaimer, there are undoubtedly more, but the ones below are telling and recognisable.
o Firstly, certainly in the startup phase, we see a group of enthusiastic-mostly relatively younger employees-working on the development and design of the product. It is a pioneering phase, where things are manageable and small-scale. When scaling up to a more mature stage, further professionalisation of management is ‘key’, and this applies to financial, operational and HR;

o Startups that rely largely on investors are constantly engaged in ‘Road-shows’ and the continuous tension regarding cash flow and liquidity. Because the environment is enthusiastic, including customers and leads, the startup continues to believe in a good outcome. It cannot go wrong, you hear those involved say, and the management is guided by a kind of unconditional optimism that things will ‘really work out’. When it does not turn out that way in practice, the shock and surprise is enormous;
o In the production process, the startup will have to be agile and flexible, i.e. you can stick to the promised product (a car that runs on electricity powered by solar panels), but when it gradually turns out that only the solar panels pay off wonderfully and the car is actually going to be far too expensive, shouldn’t you shift the focus. The learning experience shows above all, that it is important to be able to demonstrate to investors what you have achieved. What are your deliverables and ideally, what does your ROI look like;
o Continuously informing investors how the flag is flying follows seamlessly from the previous point. Even in case of setbacks or delays, keep investors informed. Young and new companies simply have to deal with cash flow issues, uncertainty and rapidly changing circumstances. Playing nice weather is a strategy that proves more than unwise in the longer term;
o Bringing in the right people, with or without grey hair but with the right skills, competences and motivation cannot be overestimated. Insufficient attention to quality in recruitment can lead to poor recruiting decisions, with startups hiring employees who may not fit a startup or the company culture, or do not have the right skills;

o Loss of company culture: As a startup grows, it can be challenging to maintain the original company culture. Bringing in the wrong people, increasing bureaucracy and inefficient processes-just when scaling up-can erode the startup’s core values and culture. Founders should continue to actively work to preserve the company’s identity.

And yet, even after all these warnings and red flags, how wonderful it is when it succeeds. “If you don’t try, you will never know”. It won’t stop the true entrepreneur from trying and let’s cherish that above all. Had Johan van Oldenbarnevelt in 1602 only listened to the potential pitfalls, the Netherlands would never have become so great. So, ‘keep trying but do it smart’!