The WorkTech Venture Lifecycle
Disclaimer: WorkTech is a recent name given to the group of software applications for personnel services and HR, but also for employees, managers and teams. This article offers a conceptual framework for WorkTech startups, based on experience, observations and reading. It is not an exact science, because like any frame of mind this too is subject to different evolutions and interpretations.
According to the 2021 Gartner Hype Cycle for Human Capital Management Technology , the WorkTech market is not only highly segmented, the speed with which these (new) applications reach the level of acceptable expectations in terms of productivity is very diverse. From less than two years to more than ten years.
In summary, Gartner identified 3 trends among executives:
HR leaders are focused on managing their ongoing pandemic response – coupled with today's fierce competition for talent.
This has led to new human capital management (HCM) projects and a renewed interest in established technologies.
In particular, technology critical to today's job market, such as hiring, developing and retaining talent, as well as employee wellbeing and productivity, has come to the fore.
Of course covid19 has had an impact on expectations for the solutions that supported hybrid working, the feedback from the market they obtained and digested at such short notice has accelerated their adoption. Because of course the expectations of the users and how they can be responded to have an impact on the adoption and therefore the scalability of an innovative idea or startup. This increasing adoption rate also affects the steps a WorkTech startup should take from concept to mature enterprise.
From concept to mature company in four phases
I already spoke above about certain phases that a startup can find itself in. On the way to growth we distinguish four, but in fact the growth never ends.
"There's no finish line, so love the journey!" - David Weekly
The four stages in a WorkTech Startup Lifecycle
From concept to MVP: product-solution fit
From MVP to a startup company: product-market fit & product-channel fit
From startup to scale-up: strategy and series A & B
From scale-up to a mature enterprise: strategy and series C an beyond
1. From concept to MVP
Problem / Solution Fit
This term means that a problem has been found with a customer and that the solution that has been devised for it actually solves the customer's problem. So this can be hypothetical.
A startup entrepreneur asks two questions at this point: "What problem do I need to solve?" and "Does my proposed solution effectively solve it?"
If one has a clear answer to the first question and confidently a "Yes" to the second, then one has a Problem / Solution hypothesis, and it is time to test the concept in the market.
After one has an idea and a plan, incorporating the initial feedback from the market, it's time to build an MVP (Minimal Valuable Product). It's a very basic version of the later product, with that key feature that customers might love. An MVP realizes the minimum and highest goal that the customers might want, that's why it aims to learn what users and customers really want while using it.
A WorkTech MVP can be a prototype of the website or application, a video, a mock-up or a website describing the MVP. As long as one can continue to improve the customer experience, the start-up entrepreneur has them on board.
"The difference between winning startups and those whole lose is that the winners understand why customers buy. The losers never do” - Steve Blank
2. From MVP to Startup Company
Product / Market Fit
Realizing the Product / Market Fit is therefore also an iterative process, in which you test different propositions with the target group. The ideal Product-market Fit describes a scenario in which a company's target customers buy, use, and tell others about the solution. This in numbers large enough to support the growth and profitability of that product.
When it comes to language/market alignment, it's important to figure out how to talk to your users about what your product does so that they "feel" it. This is where you test your messaging to make sure it resonates with your target customers.
"Product/market fit means being in a good market with a product that can satisfy that market." – Marc Andreessen
Product / Channel Fit
To succeed with your startup, you not only need a market, but also a way to reach that market through various channels (e.g. Google, social media, communities, affiliates or partners). According to Brian Balfour of Hubspot, product-channel fit was just as important, if not more important, than product-market fit. And he's not the only influential person making this claim.
"Most companies get zero distribution channels to work. If you get just one channel to work you have a great business. If you try for several but don't nail one, you're finished." - Peter Thiel
3. From start-up to scale-up
The key to effective growth at this stage is to further expand the team with deep expertise in the primary channels. If e.g. SEO is a promising growth channel for the startup, then it is best to hire an SEO expert. If the startup entrepreneur still masters many channels himself, it is best to bring in a product-driven person with relevant experience, and so on. But not only should sales and marketing be strengthened, consideration should also be given to customer care and/or account management for the growing customer base and possibly to expand the services with product implementation or training (services that accelerate the adoption ).
At some point, the favored channels will begin to reach saturation points, so it is critical for strategic and sustainable growth not to let the growth engine stall. By considering each channel as a floor on top of a first foundation, you can continue to build it up systematically and thus guarantee growth. The most common mistake is therefore opening fire on all kinds of possible channels and then going under by not being able to handle the response.
By systematically expanding the activities, or the sectors that are addressed, for example, the customer base grows in a targeted manner, but also the knowledge about the customers and also the company itself. A well-thought-out business plan that is grafted to scale is indispensable here.
"Nearly every problem has been solved by someone Somewhere. The challenge of the 21th century is to find out what works and scale it up." - William J. Clinton
4. From Scale-up to Mature Enterprise
The pace of growth may slow as the company matures, but it never stops at the world's top tech companies. It's ingrained in their culture and DNA.
Luck never built a business. Propsperity and growth come only to the businesses that systematically finds and exploits its potential. - Peter F. Drucker
Scale-ups are looking for opportunities to expand abroad. They assemble localized teams to adapt the product experience to the fine differences and cultural nuances of each new region.
Scale-ups are also looking for acquisition opportunities that are directly or indirectly related to the product. Perhaps an acquisition will open up a new but very similar market of users, or perhaps another (additional) product will help increase the value offered to current users.
In this phase, scale-ups continue to invest in the growth team and look for new growth channels through constant experimentation. The focus is not only on sales, but also on potential target audience users who have not yet adopted the product; they are trying to find out why they haven't already.