When is a Startup not yet Ready to Become a Scaleup?

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DOUG: Applicant scaleups are really startups, is that not right?

ROLAND: Yes, correct, they are startups in the classic sense, companies before product-market-fit. They hope to transition to the first scaleup stage.

DOUG: What are the typical characteristics of these Applicant scaleups?

ROLAND: If I may be so blunt, most startups at this stage scream “early stage” across most of our dimensions.

DOUG: What does that mean for the type of customer they sell to?

ROLAND: The few paying customers that applicant scaleups have are technology enthusiasts/innovators. People who love the technology for its own sake and for its potential. Who love to tinker with it themselves but who do not look to make business impact with it yet.

DOUG: These are still companies before product-market-fit, right? Have they reached a different milestone?

ROLAND: Yes, proper applicant scaleups have reached problem-solution-fit. The founders are no longer shopping around a solution looking for a problem. Applicant scaleups have gone through enough build-measure-learn cycles. They have matched their technology to a real problem that customers want solved. Startups need to have reached this stage before I accept them as scaleup applicants.

DOUG: Have they raised funding already?

ROLAND: Yes, I would expect applicant scaleups to have raised a seed round from angel investors.

DOUG: How far along is their product at this early stage?

ROLAND: Applicant scaleups’ products are functional. Demonstrating that “it works” is the core of the pitch.

DOUG: If the product is already working, what is the challenge they face?

ROLAND: Applicant scaleups are trying to master how to serve customers well. That means figuring out not only how to sign up customers and how to get paid. But also providing support, response to feature requests and solve bug reports.

DOUG: I assume their team is still small at this stage.

ROLAND: Correct, most applicant scaleups have the founders and a few employees and interns . I see the total team size below ten.

DOUG: Are applicant scaleups even in business already? I mean, have they started selling their product?

ROLAND: Just barely. Applicant scaleups have very little revenue or none at all. Definitely below a million USD per year. They typically have few customers and a significant share of the ones they have are in trial mode

Roland Siebelink regularly speaks and writes about leadership in fast-growing tech startups. You can find more of his insights, including free chapters of his book “Scaling Silicon Valley Style.”