A 30-Year Perspective on Startup Culture
Part Two: Scaling up and Sustaining Long-Term Growth
In my companion article on startup culture (published separately on this blog), I discussed what I referred to as phase one of startup culture, specifically the importance of assembling a talented team, creating a diverse culture and attracting adequate funding – all of which are essential elements for the creation of the firm.
Here, I take a look at what I call phase two: the need to develop the organizational infrastructure that will support and enable the company to grow over the long term.
First and foremost, growing the startup and creating a sustainable business requires developing products that solve customer problems in innovative ways. Notice: that’s plural “products.” No matter how innovative that first spark might be, long-term growth will depend on keeping the product development pipeline robust and full.
Clearly the best products come from companies that understand their customers and their problems. All five tech startups where I worked shared this approach to product development, with the marketing team creating the product requirements document with the help of direct customer input throughout the development process.
Product development methodologies have changed over the years. According to Ash Maurya of Leanstack, they have evolved from staged to iterative, to continuous, all in response to the changes in how customers consume products.
Aspect Communications, my first startup, developed a high-volume in-bound call distribution system for large enterprise call centers. The product development team was recruited from the top telecommunications firms in California and Texas. The CEO brought together a team of highly experienced engineers, talented sales and marketing professionals, and a strong customer support organization.
Aspect quickly became a major player in the telecommunications industry. Today, the company’s products are used by major banks, telecom providers, airlines, healthcare providers, and general merchandisers worldwide.
Another example: 3-D printing was the first technology transfer from the University of Texas at Austin. I was the marketing manager for DTM Corporation, the company founded to commercialize the technology.
It took approximately four years to produce the first commercial machine that targeted industrial applications such as the automotive and aerospace industries, as well as a wide range of consumer goods.
One of the advantages of the technology was the ability to process metal materials versus the plastic materials used by competitors. This capability was a strong competitive advantage for DTM.
DTM had an IPO in 1997, and was later acquired by 3D Systems, another 3-D printing company in 2000. The metals technology pioneered by DTM is now a major source of 3D System’s revenue.
The road to success for startups can be convoluted – and sometimes the firms may fail but the key contributors will go on to success elsewhere. Chicory Systems was founded by an IBM microprocessor architect to design semiconductor intellectual property for the telecommunications industry. The CEO assembled a team of highly qualified microprocessor design engineers and algorithm development experts. This team developed an advanced technology for accelerating mobile Internet applications by migrating complex systems software into high-performance silicon.
These platform-level designs enabled the next generation of mobile Internet products. In 2001, Parthus Technologies purchased Chicory Systems. Despite its innovative technology and impressive brain trust, Chicory was a victim of the downturn in the telecommunications industry in 2003 and was shut down by Parthus. Nightmare, right? Well, not so fast.
The former technology team from Chicory Systems was recruited to build the XML server for Conformative Systems, which was developing a specialized server for XML, or extensible markup language, that was designed to store and transport data. The server addressed the problem of XML processing performance through the application of parallel processing. And, in a final twist, Conformative was acquired by Intel Corporation in 2006, thus generating significant wealth for Conformative’s original investors and for many of its key employees, including the former Chicory team.
As I mentioned earlier, bad hiring decisions can really cause nightmares. 7 Billion People was a web analytics company founded in 2007 with a promising technology that used psychology, linguistics, and behavioral science to build software that personalized consumers’ e-commerce experiences. Google and others expressed early, tantalizing interest in acquiring the company – assuming the technology could be shown to work as advertised.
The 7BP product was based on the capture of information about a visitor to a website. This information was instantly processed to develop a unique view of each visitor’s preferences and preferred communication style. These “Portraits” allowed content developers, e-commerce marketers and others to personalize and optimize the customer experience on their respective websites.
Early versions of the product showed promising results. However, a robust, repeatable product required the use of a type of artificial intelligence now known as “Deep Learning.” Unfortunately, the founders decided to forego hiring a VP of engineering with expertise in deep learning technology and decided to manage the design team themselves. As a result, the platform never reached its full promise and, despite interest from potential acquirers, 7 Billion People did not survive the financial crisis of 2008-2009.
Good PR is necessary for the success of every startup. It can help shape positive public images and establish social media and traditional media networks. Key PR goals for startups are to grow their audience and increase brand awareness.
Every startup I worked with benefited from engaging with PR firms. They helped us develop PR strategies, refine messaging, and built relationships with key journalists and influencers in our target markets. They emphasized the importance of clear, consistent messaging across marketing, PR, advertising and social media.
From my experience, well-executed PR programs can put your firm on the radar screen for a variety of external audiences. Favorable publicity – about your products and people – will get you noticed. And with that notice can come significant positive impacts across a range of business functions, such as:
- Business development
- Venture capital investment
- Acquiring new customers
Two of the startups I worked at were acquired by larger companies. Through our PR efforts Chicory Systems and Conformative Systems both were positioned as key players in their markets well in advance of product availability on par with established market leaders.
This was acknowledged by senior partners at Austin Ventures who noted that none of their other portfolio companies had comparable media coverage or brand awareness.
When considering working with a PR firm, startups should look for a combination of expertise (specifically in working with startup firms), objectivity, and well-established contacts.
As a startup grows, it’s the boring details that can cause endless problems if not done right. You need to setup accounting systems, distribution networks, manufacturing processes, administrative policies, legal cross-checks on trademark and patent issues, Salesforce or similar customer relationship management (CRM) platforms, and many other processes.
This is the big company administrative stuff that entrepreneurs view as boring and can also be anathema to investors. However, the administrative stuff has to be done right – or the firm risks exploding like a bottle rocket after the initial rush of success.