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How to Conquer the Biggest Problems in Startup Scaling – ReadWrite



How to Conquer the Biggest Problems in Startup Scaling - ReadWrite

As a startup entrepreneur, one of your biggest priorities is scaling — in other words, growing. Modern startups, especially SaaS companies, have business models contingent upon their ability to reach a wide audience. With 10,000 users, you might be able to make a slim profit, but with 1,000,000 users, you could be a multibillion-dollar enterprise.

Unfortunately, a good business model, a novel idea, and a strong leader aren’t enough to guarantee a successful opportunity to scale. There are many things that can go wrong during the scaling process, and you’ll need to find a way to resolve them if you want to succeed.

The good news is that there’s a solution to nearly every problem. You just need to plan proactively.

Why is Scaling so Important?

Scaling is a vital strategic element for millions of modern businesses. For some, it’s just a matter of volume; operating with a bigger footprint and more customers leads to more revenue and more profit. But for many, profit only begins to become relevant at higher scales.

Let’s say your overhead costs are $500,000 per year, regardless of how many users you have. Each new user subscribes to your service for $150 per year, with additional costs to your company of $50 per year per user. With 5,000 annual subscribers, you’ll break even. With 4,500, you’ll be losing money. With 5,500, you’ll be making a profit of $50,000 per year. And with 50,000 subscribers, you’ll make a profit of $4.5 million per year.

This is a simple model, but it demonstrates the central idea: for many businesses, scaling is a matter of life and death. If you don’t grow to reach a certain threshold, the business model simply doesn’t work.

How Scaling Can Go Wrong

To scale effectively, you first need to understand the many ways that scaling can go wrong.

These are some of the most common:

  • Timing. When do you begin to grow your company? Do you start right out of the gates, before your product is fully developed? If so, you won’t have a stable ground to retain your current customers. You may also have trouble establishing your brand reputation, rendering your scaling efforts inefficient. Do you wait until you have a stable, reliable pool of customers before you begin to scale? If so, your competitors may beat you to the punch, making it harder for you to enter the broader market. Or worse, you may lose money and run out of capital, making it hard to invest in marketing and other scaling strategies.
  • Scaling too aggressively. Every startup wants to scale quickly, but there’s such a thing as scaling too quickly. If you hire a bunch of new people to support your growth before you have an influx of new customers and new revenue to support their salaries, you’ll quickly run out of money – and your new employees won’t know what to do. Additionally, you may burn through your capital and other resources prematurely, making it difficult to stabilize and regain your momentum.
  • Scaling too leisurely. Conversely, it’s problematic to scale at a pace that’s too leisurely. If you refuse to invest more than the bare minimum, you won’t reach new customers quickly enough to support your upward trajectory. And if you refuse to hire new people, you may quickly overwhelm your existing staff.
  • A shift in priorities. Your customers should always be your biggest priority, in one form or another. But the priorities that support those customers will change quickly as you scale – and not always in a beneficial way. For example, as you grow, you may focus on improving the features available in your product without spending equal time on customer service. These prioritizations aren’t always a bad thing – in fact, some are actually beneficial. But if you make the wrong choice during a volatile period of growth, it could spell the end of your business.
  • Magnifying existing issues. A growing business tends to magnify and exacerbate problems that already exist. It’s easy to understand this with a simple example. Let’s say you have 1,000 paying customers and 100 of them have regular complaints of intermittent outages. If you scale up to 10,000 customers, you’ll likely face 1,000 regular complaints – a much bigger issue for customer service to contend with. In some ways, this is valuable; it’s your opportunity to figure out what’s wrong with your business early on and correct those flaws. But if you miss this opportunity, it will haunt you.
  • Running out of money. It costs money to scale. Even if some of those costs are recovered by the influx of new customers, it’s possible that your startup will run out of money before this phase of growth is over. Cost efficiency is usually the culprit here; startup entrepreneurs invest too much in strategies with no proven return on investment (ROI), or spend money recklessly on tactics that simply don’t work.
  • Splitting into departments. Oftentimes, when a small business begins to grow, it splits into different departments and local chapters. This is a great way to divide labor and improve efficiency in the long-term. But in the short-term, it can result in growing pains. Individual departments can result in the creation of silos, making cross-communication difficult. And developing the business with multiple teams in multiple locations can result in the fracturing of your brand values – which can eventually impact your customers.
  • Losing adaptability. There are some fundamentals that will likely remain consistent no matter how your business grows or how much time passes. But if you want to maximize your business’s longevity, you need to remain adaptable – that means adapting to new changes in your demographics, new competitors, and other new market dynamics. Growing a business means hiring new people, spreading the team out, and dealing with bureaucratic internal complexities. In other words, you almost necessarily lose adaptability – even if you try to maintain it. This often leaves room for smaller, nimbler competitors to encroach on your territory.

Scaling More Effectively

So, what can you do to scale more effectively?

  • Master the basics. You need to know what the “core” of your business is. What is the hook that’s going to attract new customers and keep your current customers happy? Focus on this and master it. Then, and only then, will you be able to scale effectively. Everything else is secondary to these fundamental characteristics of your business; the best marketing strategy in the world won’t make up for a bad product.
  • Install scalable systems early. Early in your development, install scalable systems – processes, tools, and practices that will work effectively regardless of how small or large your company is. What makes a scalable system? For one, automated systems are incredible; algorithms and backend machines don’t care how many customers they’re processing. Manual effort isn’t nearly as effective. It’s also important to design your workflows with scalability in mind.
  • Prioritize sustainable income. You won’t run into problems with scaling too quickly or running out of money if you have a sustainable stream of revenue. One of your highest priorities should be building this revenue stream. With enough paying customers, most of your scaling problems will practically disappear.
  • Make gradual, iterative changes. There are some situations that call for a dramatic transformation – like if you’re completely pivoting the business. But otherwise, you should spend your efforts making gradual, iterative changes. Do your research before making a decision. Build on what you’ve already created. Try not to waste time by redoing things over and over.

Scaling a startup is a complicated, messy business – even if you have a strong business plan and a great leadership team in place. Even with all the fundamentals in alignment, there’s no guarantee of your success.

Take your time, do your research, and proactively prepare for these scaling challenges to put yourself in a better position.

Image Credit: anna shvets; pexels

Timothy Carter

Chief Revenue Officer

Timothy Carter is the Chief Revenue Officer of the Seattle digital marketing agency, & He has spent more than 20 years in the world of SEO and digital marketing leading, building and scaling sales operations, helping companies increase revenue efficiency and drive growth from websites and sales teams. When he’s not working, Tim enjoys playing a few rounds of disc golf, running, and spending time with his wife and family on the beach…preferably in Hawaii with a cup of Kona coffee.


Fintech Kennek raises $12.5M seed round to digitize lending



Google eyed for $2 billion Anthropic deal after major Amazon play

London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.

According to an Oct. 10 report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.

The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:

“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”

The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:

“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”

The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.

The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.

Featured Image Credit: Photo from; Thank you!

Radek Zielinski

Radek Zielinski is an experienced technology and financial journalist with a passion for cybersecurity and futurology.

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Fortune 500’s race for generative AI breakthroughs



Deanna Ritchie

As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.

Goldman Sachs’ Cautious Approach to Implementing Generative AI

In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.

According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.

One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.

To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.

Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.

Featured Image Credit: Photo by Google DeepMind; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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UK seizes web3 opportunity simplifying crypto regulations



Deanna Ritchie

As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.

Streamlining Cryptocurrency Regulations for Innovation

To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.

The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.

Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.

The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.

Featured Image Credit: Photo by Jonathan Borba; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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