The high-growth phase is the stage in a startup’s lifecycle when the company transitions from early-stage experimentation and product development to aggressive revenue and headcount growth. This is the moment when customer numbers multiply, the team expands rapidly, and the company’s operations become established. During the high-growth phase, a startup transforms into a growth company. This transition brings with it both enormous opportunities and critical challenges.
For many founders, this transition phase is the most critical time. As a small-scale operation transforms into a large-scale business, old operating models no longer work. If the company is unable to build effective structures and the founders fail to grow in their roles, the result can be burnout, a crisis, or even the collapse of the company.
Angel investor and Yritystehdas business coach Vesa Lehtinen highlights three bottlenecks that every growth company should be aware of as it prepares for a phase of rapid growth.
1. Workforce management and sufficient resources for growth
When a large order comes in, resources must be ready—whether they’re machines, equipment, people, or working capital. Everything has to click into place at that stage; there’s no time to start scrambling for resources.
One potential bottleneck for growth is whether you can find enough of the right people in the right region and successfully train them to perform productive work quickly enough.
From a growth company’s perspective, there are sometimes unfortunate missteps in recruitment. From a growth perspective, it’s important to part ways with them gracefully. Developing human resources management, recruitment, and “beautiful exits” are crucial for all growth companies and require expertise and resources.
Read more about what the transition from a startup to a growth company requires of entrepreneurs, and how Lehtinen tackled the challenges of growth in his own startup.
2. Secure funding and maintain creditworthiness
Financing growth is also often one of the bottlenecks for growth companies.
“Unfortunately, in any business, revenue doesn’t come in before the expenses incurred by the product—or at least very rarely,” Lehtinen says.
Lehtinen emphasizes that a company has a king and a queen, just like on a chessboard: “Cash is king and equity is the queen!”
“It’s essential that cash flow remains healthy or that funding is secured in some other way. The queen, on the other hand, is equity. All sources of funding become expensive once equity starts to be eroded, even if there’s money in the bank.”
Lehtinen points out that during the growth phase, it’s important to maintain a balance between cash flow and equity. Simply increasing the number of employees isn’t enough. You also need to be able to anticipate future challenges and prepare for them in advance.
Lehtinen also emphasizes the importance of maintaining the company’s creditworthiness.
“These days, investors pay close attention to the team. You need to focus on team building even from the perspective of creditworthiness.”
3. Focus on customer management and quality awareness
Customer management is the third challenge for a growing company. It’s important to find your own market, and through that, your customers, and keep them satisfied.
"Streamlining the sales process, optimizing customer onboarding, and preventing customer churn are key priorities. Getting your first customer to make a second purchase is a major win."
Lehtinen sees a comprehensive understanding of quality as a critical part of customer management:
-
How do we respond to the customer’s needs?
-
What kind of need has our sales team created in the first place?
“If sales is saying one thing and production is doing another, we’re headed for a crisis. Or if sales can’t bring itself to listen and understand what the customer really needs, we’re facing another crisis. And if production is churning out shoddy, second-rate products, that’s the third problem.”
Lehtinen emphasizes that it’s important to consider how to maintain quality amid rapid growth.
“It’s good to be aware of how much funding errors and the costs of fixing them require,” Lehtinen reminds us.
This blog post is based on an episode of Yritystehdas’s “Starting a Startup” podcast, in which Yritystehdas’s Roope Pietilä and Vesa Lehtinen discuss a startup’s growth into a high-growth company. Listen to the full podcast episode.
