Investment in the UK tech sector is booming – and the term ‘hypergrowth’ is now everywhere.
A record-breaking £13.5 billion was invested into UK tech companies in the first half of 2021. With the constant stream of huge funding rounds, a growing number of startups are embarking on a rapid scaling phase, acquiring customers – and employees – at an unprecedented rate.
It all seems rosy. But how do the founders remain focused on building a sustainable business in the midst of such a maelstrom?
“Hypergrowth is exciting for those who lead tech organisations, as they become more attractive to investors and begin to generate higher profit margins. It can therefore be difficult to focus on the future, which can have catastrophic impacts on an organisation’s longevity,” says Marty Abott, CEO and founder of AKF Partners.
“It’s easy to get caught up in the excitement and think your product or solution can scale, without actually testing this.
“Growth brings a new customer base with new wants and needs, and if your product is not developed accordingly, customers can be lost. These issues are common for organisations in phases of hypergrowth, and if not tackled from the start, can result in stunting growth.”
AKF works with the likes of Etsy, Intuit – the company behind accountancy software QuickBooks – and Ask. It provides technical due diligence and scalability workshops alongside consultancy services covering digital transformation, information security and product development.
“Hypergrowth is never forever – it is a specific moment in time that will always have a beginning and an end,” continues Abott. “When growth slows, it does not mean that it has to stop, nor that organisations should forget all of the lessons they learned during the hypergrowth phase.
“Organisations must implement the three rules of hypergrowth – product, scalability, and people – in order to make their expansion futureproof.”
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Abott says scaleups should review the vision for their product to ensure existing customers remain engaged while also attracting new ones. He also suggests appointing a chief product officer.
“A good vision for product must be supported by an organisational mindset that is not afraid to innovate and take risks,” he explains. “Product should be a continuous process of experimentation and problem-solving, not just an off-the-cuff decision taken under the pressures of hypergrowth.
“As growth stabilises, leaders may need to consider hiring a CPO to ensure that the product vision and strategy is effectively disseminated across the organisation.”
On scalability, he suggests “scaling out, not up”.
“Within hypergrowth environments it is essential that companies ensure that they are able to grow sustainably without being confronted by organisational pitfalls in the face of increased production. But not all scalability was created equal – it must be carried out horizontally.
“Scaling vertically, or scaling up, is tempting in moments of hypergrowth. When your revenue streams explode it is only human to want to jump to shiny new systems which appear larger and faster. But eventually you will hit the upper limits and be unable to buy a larger system.
“The accumulated tech debt of not building systems to scale horizontally becomes evident, and your systems collapse.
“Scaling horizontally, or scaling out, is a much more reliable approach. Smaller databases are easier and cheaper to maintain and avoid the monolithic pressure of relying upon one large system. Your aim should always be to get as much value for as minimal an investment as possible, which both reduces upfront costs and makes your systems highly scalable.
“This goes beyond hardware for sizes of services and teams within your organisation too – for example, a wave of recruitment may seem great in terms of talent acquisition, but if nobody has the time to onboard that many people, then they will not become long-term assets to the organisation.
“It also includes looking for single points of failure – finding and isolating specific pain points across the organisation. The best approach is to take the time to identify and consider the value of every individual component within systems and teams, considering the potential ripple effects that could occur if each of these components were to fail.
“These principles of horizontal scalability must be applied across an organisation’s hardware and culture, so that it can move beyond the initial moment of hypergrowth to a maintained, growth-centric future.”
AKF Partners also provides people support: it can fill leadership team vacancies on an interim basis, help scaleups source and interview candidates or mentor people stepping into these roles.
Hiring the right person can take weeks or even months. “Without its people, a business is nothing,” says Abott. “It’s easy for teams to lose sight of their specific roles and responsibilities in hypergrowth environments as the organisation concentrates on growth at all costs. In the long-term this is extremely damaging, both for teams themselves and the organisation’s overall output.
“It is important that teams are regularly briefed on the business’s objectives, to understand how they are contributing to the organisation’s overall goal. Managers should then track their teams’ progress against outcomes – not outputs – which in turn allows the company to better predict progress.
“On a daily basis, teams should be encouraged to pinpoint the activities being carried out that stimulate progress towards a final goal. In doing so, teams can assess what is impeding their velocity or capacity to make headway towards stories.
“Concentrating on day-to-day activities in this way helps organisations to survive hypergrowth, ensuring that organisations do not get lost in expansion.”