Scale, sell or IPO, when is the right time to grow your business

Any tech founder knows that in growing and nurturing a startup, no two days are ever the same. Between hiring, raising investment, considering partnerships and networking, the list of things to do never ends, and never stops changing, writes Trent McKendrick founder and CEO of Lever.

Regardless of how busy things get, the one thing startup founders need to keep focused on is growth. But how do you grow? And how do you know when the right time is for the different types of growth?

As a second time startup founder, currently well and truly consumer by growing Lever, a debt negotiation app giving people power over their debt, I’ve put together my top tips on how to know when the right time is for you to sell, scale, raise capital and consider listing your startup.

When to sell your idea to an investor?

If selling your start-up to investors is your main goal to achieve your growth plans, you need to keep your investment positioning front-of-mind. Positioning your idea isn’t easy for any founder, especially when you’re talking about tech or a product that is truly going to disrupt an industry. People and investors are naturally going to reject the idea the first time you float it with them. It’s when you’re able to articulate the vision of your idea with conviction and that investors are likely to do some research.

The best time to engage with investors is when you’ve got a prototype. Even though developing a prototype can be time-intensive and costly, it’s worth the investment. They allow you to give a working demonstration of your idea, and prove that you know the functional elements of what your users will experience when they’re using your innovation.

When to scale your company?

You’ll know you’re ready to scale when you’ve taken the business as far as you can, but the areas you lack expertise in are starting to show. That’s when you know you need to hire the people who can help you take your traction and early growth and to scale it to become a global enterprise.

For me, I’ve driven Lever as far as I possibly could as a one man band and am now in the process of hiring a Chief Technology Officer after onboarding two incredible executives to look after strategy and marketing. They all have the niche knowledge that I both learn from and am able to engage to bring significant value into the company, so I’m taking my time to hire the best in the class who can help me push Lever to new heights while I steer the ship.

Scaling doesn’t just have to be hiring though. You can also scale by licensing or simply partnering. Building on partnerships in particular is a great way to expand the breadth of eyeballs on your start-up, and gain exposure and insight from another complementary business.

When to raise money?

Once you have a functional prototype… cold call, cold call, cold call!

If you’re trying to figure out if you’re ready to raise investment, cold call your ultimate investor and tell them what you’re trying to do, why you want to talk to them and request a brief face to face. You’ll be forced to think on your feet, refine your elevator pitch on the spot, and get feedback only investors with high expectations can show you. I’m a firm believer in trusting your gut – see how the first few calls go, and if they felt right, you’ll know you’re ready to seriously get pitching for capital.

When you are pitching to investors, don’t rely on your deck to do the talking: anyone can read what you wrote, but no one can speak to it the way you can. It’s really important to let investors spend some one-on-one time with you to delve deep into the business, get to know you as a person and a leader, and experience your passion first-hand. It’s often passion that’s the winning factor in pushing a cheque across the line.

When to look to an IPO?

Building a decent annual recurring revenue is key here. While it’s really hard work, it’s one of the key things investors look at. These days, they care a lot less about a company being profitable in its first three to five years, if you’re in growth mode and able to allocate capital to increased shareholder value with a tangible purpose.

Also, reinvest every dollar towards building out a company that is able to grow globally – after all, the world is so connected nowadays that unless you have a call centre, you don’t need to be limited to one location. This will give your company ASX appeal – so if you can take your company overseas, you’ll know you’re in a good position to look to IPO!

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