June 14, 2017

Starting a Company, Scaling the Business, and Preparing for the Next Chapter

Writing the forward for a book entitled The Entrepreneur's Roadmap: From Concept to IPO, Steve Case, Chairman and CEO of Revolution LLC, writes: "Entrepreneurship is vital to job creation, innovation, and economic growth. Across time and continents, entrepreneurs have contributed enormously to society by creating new products, improving existing concepts, and exploring new markets. Entrepreneurial activity drives the competition, productivity, and investment that fuel economies."

Published by the New York Stock Exchange (NYSE), the book is segmented into five parts:
  1. The Seed Stage: Starting a Company;
  2. The Growth Stage: Scaling the Business;
  3. Late Stage: Preparing for the next chapter;
  4. The Exit: Strategies and Options; and
  5. Corporate Governance and Other Considerations.
Each part includes contributions written by an array of academics, corporate executives, attorneys and corporate advisors, and entrepreneurs. For example, the first chapter is written by David Cohen, founder and co-CEO of Techstars, where Mr. Cohen presents ten things to consider before starting a startup. His advice is based on the approximately 1,000 startups he has been involved with so far in his career.

In chapter 18, Debra Nunes, Senior Client Partner at Korn Ferry Hay Group, addresses the importance of creating a great team for your company. "Who's on your team? For CEOs, it's one of the most important questions to consider. The strength of the team determines how well the organization can respond decisively and swiftly to opportunities as well as to challenges. It's the team's responsibility to help the CEO formulate and execute a coherent strategy to achieve the company's objectives."

Three representatives from KPMG, Brian Hughes, National Partner in Charge of Private Markets Group & National Venture Capital Co-leader; Mark Barnes, Partner in Charge of International Corridors; and Phil Isom, Global Head of M&A, authored chapter 26, which focuses on going global in high growth markets. Entrepreneurs can look for opportunities to grow in "one of the many developing countries located in Africa, Asia, South and Central America, and parts of Europe with rapidly growing economies and potential high growth markets (HGMs). This article focuses on business opportunities in these HGM countries, the challenges you may encounter, and some examples of companies that have faced and overcome these challenges." The article also takes a look at the following developing HGM countries a KPMG survey identified as having particular promise: China, India, Indonesia, Nigeria, Saudi Arabia, South Africa, and Vietnam.

Chapter 33, which is the first chapter in Part IV, provides useful information on how a company should prepare for an initial public offering (IPO). Lise Buyer and Leslie Pfrang, partners at Class V Group, provide four reasons on why a privately-held company may want to go public:
  • To create a liquid market in the stock;
  • To enhance the profile of the company;
  • To provide liquidity to early investors; and
  • To discover the "real" valuation of the company as determined by third-party trading in the stock. Among other uses, this information is critical should a company want to use its stock as an acquisition currency.
In the book's final part, Adam Elsesser, Penumbra, Inc.'s Chairman, Chief Executive Officer, and President, writes a passage entitled "A Company Based on Impactful Products and a Unique Culture." Mr. Elesser explains how Penumbra's culture rests on four pillars:
  1. Risk. "When building a company with the mission of making innovative products, it is critical to know this fundamental truth—if you're going to do something that's never been done before, you're going to fail along the way. As companies grow, they traditionally become more risk-averse. That change in risk profile pushes companies away from innovation";
  2. Jargon. "Sometimes people in business settings speak in jargon. Unfortunately, no one responds emotionally to jargon. I don't respond to it, so how would I expect anyone else to respond to those types of terms?"
  3. No tiptoeing. "It is common for people, particularly those at a senior level, to communicate about company issues in a scripted manner. This is a big mistake—employees can immediately tell and then lose faith in the mission. Tiptoeing around issues does not build a strong, trusting culture"; and
  4. Great ideas. "Another pillar of Penumbra's culture is that great ideas can come from anywhere in the company. We have created a culture of openness that allows for great ideas to come to light. Everyone at the company has adopted an open-door policy in order to encourage people to share their amazing ideas. Instead of getting in the way for great ideas to surface, the hierarchy or chain of command encourages these ideas."
The NYSE book contains a vault of valuable information for business owners and corporate executives. Is there a chapter that you find of particular interest?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

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