In today’s world, every entrepreneur aims at expanding his or her start-up at an exponential pace. Before we can figure out what are the factors that influence acceleration from early stage to growth stage we need to understand the different stages of growth. Post this we would look at the different factors and factors prevalent in the emerging markets.
We would be focusing mainly on three stages, that is, Existence, Survival and Success – Development and Growth:
- Stage 1: Existence
In this stage the main problems of the business are obtaining customers and delivering the product or service contracted for. The organization is a simple one—the owner does everything and directly supervises subordinates, who should be of at least average competence. Systems and formal planning are minimal to nonexistent. The company’s strategy is simply to remain alive.
- Stage 2: Survival
In reaching this stage, the business has demonstrated that it is a workable business entity. It has enough customers and satisfies them sufficiently with its products or services to keep them. The key problem thus shifts from mere existence to the relationship between revenues and expenses. The organization is still simple. The company may have a limited number of employees supervised by a sales manager or a general foreman. Neither of them makes major decisions independently, but instead carries out the rather well-defined orders of the owner.
- Stage 3: Success
The success stage can be further sub-classified into development and growth stage:
In the Success-Disengagement substage, the company has attained true economic health, has sufficient size and product-market penetration to ensure economic success, and earns average or above-average profits. The company can stay at this stage indefinitely, provided environmental change does not destroy its market niche or ineffective management reduce its competitive abilities
In the Success-Growth substage, the owner consolidates the company and marshals resources for growth. The owner takes the cash and the established borrowing power of the company and risks it all in financing growth. Systems should also be installed with attention to forthcoming needs. Operational planning is, as in substage III-D, in the form of budgets, but strategic planning is extensive and deeply involves the owner. The owner is thus far more active in all phases of the company’s affairs than in the disengagement aspect of this phase
Now let’s understand the various factors that impact the movement along these stages. These factors can be divided into two main categories:
- Organization Related Factors
> Financial Resources: This includes resources including cash and borrowing power, which are crucial enough for any business to grow
> Personnel Resources: The quality of personnel that an organization has, has a great impact on its performance. In today’s world one needs to have people who are innovative, creative and have the ability to get the things done
> System Resources: Resources are needed for better performance and growth. System resources includes resources related to both information & planning and control systems
> Business Resources: These include business relations with customers and suppliers, market share, reputation and distribution process and technology. These factors are key components in deciding how seamlessly a business can operate in the given environment and fast can it grow
- Management Related Factors
> Vision: For accomplishing any great task, we need to have leaders who can imagine big. Start-up ventures having owners who have long term vision for their venture prove to be far more successful than other ventures lacing such leaders
> Operational Abilities: In the initial stages, a start-up runs mainly on the individual efforts of its founder. So it is of utmost importance that the founders are capable of handling the operational, financial and marketing aspects of the business
> Managerial Ability: As the business expands, management comes into picture. Having a good management can be a key to success as it would ensure proper delegation of tasks and would help each and every employee deliver their best
> Strategic Abilities: The founder(s) of the start-up needs to look beyond the present situation and speculate about the future movements. He or she needs to sync their individual goals with that of the organization so that both can survive as a single entity
The mix in which these factors are required keeps on varying as we move from one to another. However, all these factors are do required for accelerating a start-up from early stage to growth stage. Now, having looked at the various factors we would focus on the factors that are relatable to ventures operating in emerging markets:
According to a report by Deloitte, Emerging market entrepreneurs have more-than-adequate educational experience and technical competence, according to data and interviews. However, investors often point to a lack of entrepreneurial experience among founding teams. In addition, emerging market entrepreneurs place more value on “business skills development” when considering accelerator programs, despite their higher levels of reported experience. This indicates that for a successful venture in emerging markets one needs to have relevant experience or support that can help him or her win the trust of the investors and the industry. This would help in assortment of financial resources and would help run the business operations smoothly
Emerging market ventures do not have much of initial investment support and tend to wait longer iterating their growth strategies. They raise very less equity in the initial three or four years as they intend to retain control and set a definite path for the growth of the business. This sometimes works well for the ventures but most of the time it is observed that without relevant support the ventures tend to come down. For having a successful venture, one should be open to reach out to industry for funds and managerial pool of talent.
According to the Deloitte report, Investment funds flow less freely in emerging markets. This makes it difficult for ventures to secure investment that is commensurate with their needs, and more challenging for accelerator program managers to facilitate equity investment during their programs. Having access to resources is the most important aspect for accelerating development from early stage to growth stage. It is of outmost importance to know what type of an ecosystem is the venture operating in. This would help us know the future growth potential of the business and accordingly one can take decisions. Also, there is a need to have more of open ecosystems in emerging markets which can help the ventures thrive.
- Accelerator Programs
The accelerator programs available in emerging markets or developed markets are similar in quality and service. Due to real time connectivity, it is possible for ventures in emerging markets to have access to different programs from across the world. What lacks is the connect between the entrepreneurs and the accelerator programs. Owners do not find it comfortable enough to reach out to such accelerators for guidance and mentorship. This restricts them from enjoying the benefit of a resource that is important enough during the ideation or existence stage.
Having analyzed the various factors, which impact the acceleration from early stage to growth stage one can conclude that:
There is a need to develop the resources in emerging markets and there is need for the entrepreneurs’ of emerging markets to come forward and utilize the most of the given resources so that they can gain an edge over their competitors, both within and outside the country
Thank You Courtesy / Source: https://www.startupindia.gov.in/content/sih/en/bloglist/blogs/early_stage_to_a_growth_stage.html