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Businesses big or small continuously struggle with the challenge of scaling up and financing and managing that growth. Dolf Wittkamper, Head of EIT Digital Accelerator gave us some great insights on how deep tech scaleups can surmount different kinds of obstacles in order to make a real breakthrough in Europe.
Silicon Canals (SC): What hurdles do deep tech scaleups have to overcome to breakthrough in Europe?
Dolf Wittkamper (DW): The most common hurdle for founders is that they struggle to delegate and stay too involved in day-to-day operations. Their focus should be on keeping a strategic direction and performing in a specific task like CEO or CFO and they should really learn to delegate other tasks and responsibilities, which requires a different skill set and team structure.
Another important hurdle to overcome, for both management and founders, is not getting enough input from others. It is crucial to keep looking for content and context outside your own company and not be afraid to ask for help or advice.
SC: How can founders overcome this?
DW: You can overcome this by talking to peers, getting a mentor or setting up a Board of Advisors. Another option is joining an accelerator, like ours. At the EIT Digital Accelerator, we are working on creating a community feeling in which founders can share their challenges because they can’t always do that within their own team or organisation.
SC: What other obstacles do these companies encounter?
DW: Another big issue is raising capital. Founders should be focussed on that from the very beginning and work on it continuously. Otherwise, the challenge becomes apparent by the time they should be working on their next step, which, by then, will be much more difficult. To avoid this, they should start building their network from the beginning and stay in touch with investors continuously.
SC: Should you involve others in getting investors?
DW: If raising funds is beyond their scope of expertise – and it usually is for founders – they should consider outside help for this. Getting outside help to raise funds comes at a cost, usually 2-5% of the money raised. However, they should take in consideration that without the help, they might not get as much funding, at a lower valuation or it would take more time and effort. Giving up a percentage in getting investors, therefore, is not a risk, it is solving a problem. And thus worth the investment.
SC: Once you have the money, what is the next obstacle?
DW: Scaling up in a different country is a really difficult thing to do. In general, the hurdle of growing outside of your own region, your network, your own early adopters is always a challenge, as you have to step out of your comfort zone. Getting those first customers in a new country might involve adopting a new sales strategy.
Scaleups have to be aware that results will be different and should adjust their expectations. The conversion rate from leads to deals will not be as high as in the home market, since they are basically back to being a startup. They should be very careful in selecting the country or market segment they want to scale to and even consider getting outside help.
Things like language barriers, cultural constraints and different ways of working, all determine how business is done in a particular country. The EIT Digital Accelerator supports scaleups to crack that code. The EIT Digital Accelerator, is currently active in 10 countries, in Europe and the USA, and we have the resources available to assist companies with the aforementioned hurdles.
SC: How do you overcome the international constraints?
DW: The best way to accomplish success is to combine your expertise with a team of local representatives. It’s advisable to hire people in your own company who speak the language and know the business locally. At the same time, hiring a country manager always works. Also, you need separate sales teams for each country you’re in.
SC: Hiring the right people is a very important aspect. What is your advice on this?
DW: Reid Hoffman wrote something interesting in his book Blitzscaling: if you are growing at a crazy fast rate, you can take risks. You can focus on hiring the best people for crucial positions and just getting the right amount of people for not so crucial positions. But when you are at 30 or 50 employees, recruitment requires permanent dedication and attention, because you need the best people. I believe that companies who are consciously building a certain ‘culture’ will be more successful.
SC: To summarise: the founders, raising capital, timing, hiring the right people, choosing the convenient country and preparing for the scaleup in a well-thought way are the key to success? Do you have one final tip to share?
DW: Don’t forget that even though a lot of knowledge can be found inside your own company, there are always even more people outside of your organisation, who are more knowledgeable about particular aspects.