Scaling up: What does it take to grow your innovative tech business?
“Just because we are successful in the Netherlands doesn’t mean we would be successful in other countries. In each place, we need to start a company from scratch and understand what people want.”
Michiel Muller is co-founder and CEO of online supermarket Picnic, and he knows well what it takes to scale an innovative company in an already existing market. Founded only six years ago, Picnic has a workforce of 10,000, is able to deliver groceries to 50 percent of the population in the Netherlands, and recently raised a 600-million-euro round of funding from a number of investors, including the Bill & Melinda Gates Foundation.
The next stop on their entrepreneurial journey: Further growth.
Michiel was part of a talk show at this year’s Upstream Festival, and discussed the topic of growth together with several other entrepreneurs, investors, and innovation experts.
Expanding across borders – with a local team
Scaling across borders comes with a number of challenges for just about any (tech) CEO. For Jeroen van Glabbeek, co-founder and CEO of CM.com, a company focused on conversational commerce, growth has always been about building relationships of trust and “having to let go a little”.
“We are a bit of an older company,” he says. “We have been around for over 20 years, and we recently opened offices in Brazil, Russia and Kazakhstan. When you expand, you essentially build new companies. We have learned that our first employee in a new country is always the most important one.”
Local employees are the ones that know the market best, which is why letting them lead the way – while often a difficult decision to make, ends up being a key benefit for companies looking to expand.
Michiel shares a similar insight: “For people locally, it’s also great to be able to start a company from scratch. That way they get the startup experience as well.” It is important to start small, he adds, to be able to preserve the entrepreneurial spirit of the larger organization.
Another reason to start small and hire local talent is to validate the product-market fit more easily and quickly. Every market is different and so innovative companies may often need to adjust their approach or offering. For Deborah Nas, Professor Strategic Design for Technology-Based Innovation at the TU Delft, the right product design is the key to the success of any startup or scale-up.
“I feel that the product needs more attention,” she says. “If you can get to product-market fit because you design your product right, it would save you money and time, and increase your success rate.” In other words, it is not just about being able to listen to the customers and pivot, but also doing so as early in the process as possible in order to enter the market with the solution that it really needs.
The importance on defining your own growth strategy
Scaling an innovative tech business has also a lot do with having the necessary resources. Because it is not always easy to secure funding in an early stage, a lot of startups end up bootstrapping. “That makes them very efficient and smart,” Deborah says. “As soon as they get the product-market fit, though, they need to change their mindset to growth. And the CEO is crucial in doing that.”
In terms of attracting outside funding, CM.com and Picnic have chosen two largely different paths. For Jeroen and his company, growing gradually has been the more fitting approach.
“For 20 years, we built the company without any external investment,” he says. “When we felt ready – and that was only a few years ago, we went on the stock market in Amsterdam and raised our first 100 million. Indeed, when you have more money, you grow faster. Last quarter, we grew 127% in revenue.”
Would he have done it sooner? “Maybe,” he says. “But we are two co-founders and we liked to have our own company. It felt good.”
For Michiel and the team of Picnic, the journey has followed quite a different route. “For us, it was always ‘go big or go home’. To be successful, we need fulfilment centers, assortment, technology, a huge team.” Once they decided to go for it, there was no going back. There was only going big.
Their recently secured investment of 600 million euros, therefore, seems to be a fitting next step in the company’s development.
“The plans that we have for the next couple of years require quite some budget,” Michiel says. “We invest everything in our own infrastructure, so we have our own fulfillment centers, vehicles, city hubs, and more. Expanding our network, especially across Germany and France, takes a lot of investment and for that we are very happy that we got the funding.”
Whether a team opts for scaling gradually or for opening to investors early on, it is clear that there is no one-size-fits-all solution to growth. The approach depends largely on the type of business, its competition in the market and, perhaps most importantly, on what feels right in the moment. Entrepreneurship is a journey and it’s up to each founder and team to determine its direction.