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MASTER
THE STARTUP JOURNEY: SCALING A NEW VENTURE
Done by:Elena ZagrebaSeptember 24th, 2015
Experts : Philipp BubenzerMarcus Schneider
Introduction Problem and preliminary literature review
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 2
Most startups fail (Cader & Leatherman, 2011; Nobel, 2011; Roberts & Eesley, 2009)
Prior research concentrated
on :
Reasons for startup failures Predictors of new venture
performance
(early stages of development of a startup)
Research Gap
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 3
Scaling process :• In the academic literature : poor understanding
• On practice : more advanced understanding :
Figure 1. The Startup Journey by Troiano (2015).
Research Gap
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 4
Blank and Ries:
(Marmer et al., 2011).
Paucity in the literature :• Lack of understanding• High number of failures
New ventures performance on practice :Scaling is the most difficult phase.70% of startups scale prematurely.
74% of growing internet ventures fail during scaling.(Marmer et al. 2011)
«Startups are temporary organizationsdesigned to scale
into large companies»
Research Question and Objectives
STARTUP JOURNEY: THE STEP OF SCALING UP OF A NEW VENTURE | Elena Zagreba 01.05.2015 5
Research Gap : Lack of understanding of the scaling process.
Research Question : How do new ventures successfully scale their businesses?
Research Objectives : Definition of scaling Ways of scaling Measurements of success Framework for successful scaling
Research Process : Theory development
Scope of the Study
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 6
Scope :
• New ventures at their late stages of development (ready service on the market approved by first customers).• High technology companies (online platforms and applications).• Geographically : North America• For-profit companies only
Literature review
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 7
• Measurements of performance• Startups lifecycle by Blank (2007)
Scaling is a transformation of a new venture to an established profitable company.
Figure 2. Customer Development model by Blank (2007).
• Understanding from social entrepreneurship (scaling up) – more developed than in business
• Scaling in other disciplines (eg., informatics)
Literature review
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 8
Knowledge around scaling in business :• Beginning of volume production and creation of an operating business
(Gaibraith, 1982)
• One of the strategies for fast growth. Serving mass market at a low cost (Von Crogh & Cusumano, 2001)
• Economies of scale (Bhide, 2000)
• Crossing the Chasm (Moore, 1991)
Figure 3. Technology Adoption Lifecycle adapted from Moore (1991).
• The Startup Genome Report (Marmer et al., 2011)
TheChasm
Innovators Early Early Late Laggards Adopters Majority Majority
Intended outcome
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 9
Figure 4. Expected outcome of the research.
Scaling performance
Success factor 1
Success factor 2
Success factor 3
...
Success factor n
Intended outcome
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 10
Theoretical contribution :
• Better understanding of the scaling process.• Basis for future research (development and testing).• Introduction to the business schools’ programs.
Managerial contribution :
• Better understanding of the scaling process (multidimensionality).• Using the framework in elaboration of the scaling strategy.• Guiding new ventures towards repeatable and scalable business models.• Decrease the number of failures during scaling.
Methodology
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 11
Figure 5. Research methodology framework.
• In-depth Interviews
• Archival Data
• Grounded Theory Approach
• Case Study Method
Theoretical Sampling & Methods
Data Collection
Data Analysis (coding)
Theory Saturation
Theory Building
Analysis
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 12
Defining scaling :• Coding • Cross-case comparison• HypothesisMeasurements used by startups at the scaling stage :• Coding (categories and their properties)• Cross-case comparison• HypothesisInvestigation of scaling success factors:• Multi-level cross-case analysis• Memo method• Coding : 1st-order categories• Cross-case comparison and coding by company size• Coding : refining to the 2nd-order categories and their properties• Hypothesis
Results
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 13
Scaling a New Venture Framework
Figure 6. Emerged framework of successful scaling.
Successful
scaling
QuantitativelyRevenue & Ratios
(predictable)
QualitativelyProduct (approved)
Process (repeatable)
ResourcesSales
StrategyProductTiming
MeasurementsCosts
CustomersMarket
Partners
Internal Factors
External Factors
Results
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 14
Developed definition of scaling :
Scaling is a multidimensional process
that transforms a new venture
to an established, sustainable, and profitable
company
by developing standard, repeatable, effective,
and efficient internal processes.
Conclusions and Discussions
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 15
Findings vs Existing Knowledge :• Measurements of success• Factors contributing to success• Aspects of the scaling phenomenon
Limitations :• Not applicable to manufacturing companies.• May not represent other geographical zones.• Weaknesses of the research design : − availability of the data,− interpretations by participants (potential data biases),− voluminous data and results,− lack of simplicity.• Retrospective study : unknown future of the participants
(success or failure?).
Conclusions and Discussions
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 16
Opportunities for future research :
• Studies including the same sample
• Longitudinal studies using the developed framework vs other strategies
• Testing framework :
prospective quantitative studies measuring the correlation between
variables
BONUS
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 17
• Talking to Venture Capitalists :
Scaling is a challenging, cash-burning phase.
Investments are much greater
than at the early stages of development.
High risk of failure, devastating consequences.
Failure for new ventures and for their investors.
Understanding of the scaling process and a right strategy are crucial to raise
the capital.
Thank you!
THE STARTUP JOURNEY: SCALING A NEW VENTURE | Elena Zagreba 24.09.2015 18
For your attention.For contribution to my work.
QUESTIONS?