It’s always an exciting moment for early-stage investors when a startup transitions to a scaleup. The company starts to experience rapid growth and development at this stage, as its established market presence helps to fuel increased awareness, acquisition, and sales, and its initial business plan starts to come to fruition.
Scaleups typically bring more revenue, greater market share, and increased operational capacity. That’s all good news for investors – including those who invested early on, at the startup phase, and those who have been tracking the company’s growth in the buildup to a possible investment decision.
However, the success of scaleups is not guaranteed and rapid growth may prove short-lived. In other words, even when performing well, scaleups are not completely safe investments. For that reason, investors have to find ways to track scaleup progress, making the most of the technological tools available to them. This guide looks at how this is done.
The Importance of Tracking Scaleup Progress for Investors
Before we look at how to track scaleup progress, it’s important to first address why this is done. Quite simply, it’s because the scaleup stage of a business’s lifecycle is a hugely important one. Many startups fail, with only around 10% lasting long enough to reach the scaleup phase. And even once they reach that point, it can often prove to be a make-or-break moment for the company’s longevity.
Even when experiencing rapid growth, scaleups can quickly crumble due to common mistakes, such as:
- Scaling up too rapidly
- Not being able to adapt to sudden growth
- Expanding the team too early on
- Failing to set and stick to long-term goals
- Over-customizing products or services to suit new customer needs
- Lack of focus on marketing
- Lacking agility
Because of this, investors need to be able to monitor scaleup progress and performance and assess how well a scaleup is negotiating the challenges that fast growth may bring. This will help them make more informed decisions regarding their own investments. These might include broadening investment in a company that is performing above expectations or minimizing risk in a company with red flags attached.
Technological Tools to Assess Scaleup Progress and Performance
To make the most informed decisions around their scaleup investments, investors require the most accurate and up-to-date – or even real-time, where possible – data. To obtain this, they need to rely on the most efficient and useful technological tools. Such tools include:
AI and Machine Learning
It’s the age of artificial intelligence, with a range of AI tools dominating the technological landscape of today. Certain AI tools can assist you in tracking scaleup performance metrics to understand how well a company is performing. Leading solutions also offer predictive analytics, enabling you to look ahead and ascertain how likely a scaleup is to continue growing and prospering in the months to come.
Big Data Analysis
Today’s businesses collate more data than ever before, leading to gigantic databases that can feel overwhelming and nearly impossible to analyze or learn from. However, with the right big data tools in your arsenal, you can dig into even the largest sets of data, spot trends, identify patterns, and derive actionable insights.
Business Intelligence Tools
Business intelligence (BI) tools are apps designed to collect, process, and analyze business-related information, helping users make smarter decisions. They can generate data visualizations, like charts and graphs, create reports that sum up key performance metrics and conduct various analytical processes far faster than even entire teams of data scientists would be able to.
Financial Tracking
Often, financial metrics are of particular importance for investors who are trying to learn more about a scaleup’s performance and investment viability. You need to know how many sales are being made, estimated profits, revenue from various channels and sources, and so forth. Financial tracking tools make this easy, collating income and expenditure data to paint a clear picture of a company’s situation.
Customer Relationship Management (CRM) Solutions
Investors are also likely to be interested in how well a scaleup is connecting with its customers, and how it’s faring in terms of customer acquisition and retention. The most successful companies don’t just gain new customers at rapid rates but hold onto those customers, turning them into loyal, repeat buyers. CRM tools often help demonstrate the connection between a company and its consumers.
Key Metrics to Focus On
We’ve seen some of the tools you should use, but you may wonder which particular metrics are of the most value to measure. Well, almost all business metrics are valuable to an extent, as they help to fill in the gaps and show a comprehensive view of the business’ performance. However, from an investor’s perspective, some are more interesting than others, including:
- Financial Performance Indicators: Such as revenue growth, burn rate, and profitability
- Operational Efficiency: Productivity, operational costs, and logistics optimization
- Customer-Centric Metrics: Acquisition, retention, churn, and customer lifetime value
- Market Metrics: Level of market share and penetration
Step-by-Step Guide to Tracking Scaleup Progress
With the important elements of a scaleup tracking plan already outlined, let’s now look at exactly how you can leverage technology and track scaleup progress for smarter investments.
Step 1. Define Your Goals
Before putting any type of plan into action, you need to understand why you’re doing it – what are you aiming for? So, the first step is to define your goals. Many investors abide by the SMART framework when doing this, which focuses on setting goals that are Specific, Measurable, Achievable, Relevant, and Time-bound.
With goals in mind, it will become much easier to choose the most appropriate tools to use and identify the most relevant metrics to focus on.
Step 2. Choose the Appropriate Tools
Next, it’s time to select the tools you’ll use to collate data and learn more about the scaleup(s) you’re investing or considering investing in. As touched on above, there are many such tools to choose from, including BI solutions, big data analytics, AI platforms, and CRMs.
The key here is to align your tools with your established objectives. If you want to learn how well a company is penetrating the market and connecting with its audience, for example, use a CRM. If you want to focus purely on the financial side of the company, focus instead on financial trackers and big data analysis solutions.
Step 3. Establish and Implement a Tracking Plan
With goals in mind and tools selected, you can now implement your tracking plan, using the data available to you to learn as much about the scaleup as possible. Use all relevant tools and features to obtain and analyze data, following a consistent, regular schedule to get a real-time picture of the company on a day-to-day basis.
Step 4. Adapt and Iterate Your Plan Over Time
Your initial analytical plan may not be perfect the first time. As analysis proceeds, you may find that certain data points are missing, or that the conclusions you draw don’t fully align with your initial objectives.
This is why progress tracking is a dynamic process, not a fixed one. It’s likely that you will need to adapt or iterate your plan as time goes by, possibly embracing alternative or additional tools, if those you initially chose do not yield the full range of results you desire. Regularly review your options and experiment with other solutions that might complement your strategy.
Step 5. Act on the Data You Gather
The whole purpose of tracking scaleup progress is to give you the information you need to take action and make decisions. So, once you have thoroughly assessed a scaleup’s performance and feel you have a clear and complete view of its status, you can start to make the next big decisions about your investment.
You may find, for example, that a scaleup is on course for consistent, rapid, and continuous growth for several more months. That should make it a prime candidate for further investment – if you’re already backing it – or an initial investment if it’s a company that you have been watching for some time.
Alternatively, you may find that, despite rapid growth, a scaleup has some red flags attached – like high levels of customer churn or a lack of clarity in the business plan about how the company will scale. In such a situation, you may want to defer any future investment until you have a clearer view of the company’s progress.
Make the Most of Modern Technology to Inform Your Investment Calls
Data is absolutely crucial to investors. The more you have of it, and the more accurate it is, the better. As this guide has shown, numerous technological tools exist to not only provide you with valuable data but also to analyze it on your behalf, drawing out the insights you need. Use these tools, and follow the steps above, to inform your scaleup investment decisions.
