Scaleup Service Practices
A higher demand for scaling services is expected, but expert support is either mislabeled, or in scarce supply
Scale-up support services is an emerging market which we expect to become more competitive, specialised and differentiated. There is increasing demand for expert scale-up support. Yet many acceleration programmes apply ‘scaling’ terminologies but too often the process involves standardised incubation offerings, rather than the deep-dive customised support being provided by proven experts. These misleading scaling labels can easily create false expectations.
“We're scarce on people who are supporting startups at that scaling stage with the right balance of customisation, support services, and that balance between strategy versus on hands on execution.” - interviewee
“We need more focus on helping businesses build the right things at the right time in the right way, rather than just building for them and hoping they'll pick up the skills by osmosis.” - interviewee
“What we realised was that it’s not possible for a startup to actually grow linearly - from product and market fit to ‘is this a business?’ to scale. We started realising that, for the scaling piece, it was necessary to ask more pertinent questions such as, ‘what are the unit economics of the business? Will it actually be able to scale faster if you apply the right support mechanisms?’” - interviewee
Scaling support likely combines the formalisation of governance, professionalising teams, optimising systems, process and production, and securing growth capital. These factors are crucial to achieving sustainability and growth.
“They don't need someone to say, here's a recipe that you have no money to execute on. And here's a bunch of consultants that you can't afford to pay, who've never done this before in a real market. That's what's usually happening.” - interviewee
“You have individual funds, private equity, and investors - they all know this is a gap. And they don’t have the requisite skills all residing within their organisations anyway.” - interviewee
The 'right' type of scale up support is often scarce, and also expensive, due to its bespoke nature.
Scaling Social Entrepreneurship Programmes - Delivery gaps
We examined parallel lessons learnt from scaling social entrepreneurship programmes, compiled by Spring Impact.
Most (providers) lack a systematic and strategic approach to scale and have a limited understanding of the activities, skills, and resources required at each stage of the scale process.
Assessing scale-related needs is often under-resourced and not well understood resulting in poor provider selection, inappropriate scopes of work, delivery models, duration, and deliverables.
Limited understanding of the local context and knowledge of the operations on the part of providers leads to ineffective engagements.
Little provision of support along the scaling journey into implementation (pilot and scale stages).
None of the businesses interviewed had received support at these stages despite demand and this being part of the offering for many of the investors interviewed.
Many businesses do not have the capabilities and capacity to effectively absorb scale knowledge, or lack funding to pay to implement the recommendations that arise.
Scaling to new markets relies on connections to local suppliers, implementation partners, supply chains, and other peers, but businesses struggle to find providers that can sufficiently navigate and access these networks.
Too often problematic issues arise as the wrong targets are set, alongside other institutional deficiencies.
Successful Programmatic Design Features
The characteristics of programmes and policies that successfully support high-growth social businesses typically have the following attributes:
Have a holistic view aligned with regional economic development
Provide timely intervention in a flexible and temporal way
Offer multiple rounds of financing to stimulate firm growth
Simultaneously provide both financial support and non-financial support to maximise treatment effects
Focus on peer-to-peer support to ensure networking and learning opportunities, and to enhance business linkages within industry.
Several supportive scale launchpads exist
We identified and analysed a number of dedicated scaling programmes available in Africa that offer distinct scaling services, as opposed to general acceleration support, as indicated by Figure 41. Each programme blends a mix of capital, peer support, diagnostics, and expert support. It is not possible to authoritatively comment on the impact potential for each as few provide clearly articulated - and independently verified - evaluation processes, although such an exercise would be very beneficial to the ecosystem.
Figure 41: Scale up service providers Source: Systemic Innovation
Some excellent scaling support models exist in Africa including, but not limited to:
Founders Factory Africa, a leading accelerator and provider of scale up support services, supports startup teams through hands-on, bespoke and customised strategic guidance and advisory services. Their team considers the venture’s strengths and weaknesses and specific business model, and defines a set of milestones over six months through a set of monthly activities. This is rigorously governed month on month “to make sure that they are, in fact, getting closer to the kind of North Star metrics set up at the beginning of the programme.” Notwithstanding their team's undoubtable expertise, their focus thus far has been at the early scaling phases, as opposed to the later scaling growth phases.
Endeavor's Scale Up programme is a time-based programme delivered to companies “with the potential to become that top 1% within the next 24 months”. They also provide programmatic accelerator opportunities, which give the participants access to a subset of the services (including mentoring sessions). The Endeavor team offers deep global and local expertise and strong networks yet accessibility remains gated to non-participants Endeavor. Whilst some level of network protection is understandable, greater effort to construct useful drawbridges across their defensive moat is likely to offer broad benefits to many more ecosystem actors.
Looking internationally, various governments fund dedicated scale up programmes. In the Netherlands, Tech Leap offers a variety of free programmes for scale-ups. In the UK, Tech Nation provides two dedicated no-cost programmes (Upscale and Future Fifty), offering tailored guidance, peer-learning, and expert advisory support. As far as we are aware, no Government in Africa provides dedicated scale up support; instead there is a reliance on foreign aid agency support.
We believe multiple scaling intervention models will be needed in the future, which focus specifically on (demand-led) characteristics. This should involve international collaboration programmes (such as knowledge exchange soft landing programmes in specific markets); affordable options (e.g. crowdsourcing, B2B, online scalable solution); and high quality support from experienced experts alongside local knowledge and experience, which will help to build the capacity of locally-based providers.
There is limited willingness to pay to succeed
The ecosystem precedent is that ventures receive no-cost (free) support. Charging is seen as highly controversial. Yet research by the Argidius Foundation indicates that programmes which charge perform better than those which do not.
Our interviewees’ thoughts on the matter are described below:
“Founders coming into the system need to understand that to succeed, they really need quality support. And this support costs money. There is a justifiable business case for it, but this narrative has not been adequately articulated. This needs to be developed, along with case studies on the value of bringing on paid expertise. They need to know what they are getting. And if they don't have this support, they will lose out.”
“At the end of the day, you get what you pay for. If something is free, you've got to expect a certain level of service.”
“There is a recognition of the need, but there isn't the conviction, and therefore willingness to pay. Even private equity companies which have value creation arms haven’t been fully able to put together strong business cases. There's work to build more case studies of the value scaling support brings and the downside of not having these interventions. There is a need to continuously engage both the founder and funder communities because there is a gap - there's no doubt.”
Interviewees articulated further that there is a need to strengthen the business case for paying for scaling support based on value creation outcomes (for both ventures and their investors/ funders).
“On the other side, the founders must derive value from these services so they really begin to pay themselves. There's always friction. That is a gap. Companies talk about value creation. This is the space to try to play in, as a provider of defined value creation levers. We have a flexible model, but we need to shape our offer to meet the needs of this ecosystem. But it has to be focused on creating value.”
“Instead of just seeing this as a cost, they must realise they are paying for a differentiator to help transition and step change.”
“Also identifying those founders who have hunger for value creation, beyond just capital. Not every player understands it. Part of our homework is to find these sponsors and partners who can align to shared value services, and are also willing to pay for it.”
We foresee shared service models as a future trend, which should be met by VCs / investors who wish to support their portfolios under management. We also foresee the emergence of affordable scaling support solutions, leveraging online learning technology (which is pulled by leadership teams, as needed, rather than pushed) combined with ad hoc short-term mentoring and specialist support, and an online support and network ecosystem of other scale-ups, all wrapped within a technology offering.