It’s pretty evident that a startup in 2023 faces unique challenges that just haven’t existed in other years. Every entrepreneur knows that they will encounter difficult circumstances, clients, and people. It takes determination to scale a startup. We've seen this after auditing over 100 startups throughout the years.
In this article, we’ll explore the most common issues faced by startups in 2023. Finding out what works and doesn't is crucial to getting your company moving in the right direction. It’s not just the technical aspect that needs to be reviewed. People and employee relationships are just as important.
A Harvard Business School study found that “the time spent by managers and employees in collaborative activities has ballooned by 50% or more” in the last 20 years. As people work together more, creating a healthy company culture is essential to productive teams.
And we know just what it takes. We’ve helped dozens of companies raise millions of euros as part of due diligence rounds. Companies we regularly see are looking to bring in investors to help them scale or need to get a new round of investment because they are running out of runway. Here’s what we’ve discovered through these audits.
We also wrote a handy book about our findings and how we believe team leaders should create space when working alongside knowledge workers.
Team and leadership
A happy team is a productive one, but making a happy team takes work. A startup usually has a handful of people working for them, coming together to turn an idea into a product. When the company begins to grow, the next few hires are key as they will have a huge impact on the direction and culture.
Major tech companies have spent millions of dollars researching psychological safety in teams. They concluded that this is the number one trait of a high-functioning team. Building and maintaining an environment of mutual trust and respect takes significant effort but pays off in terms of employee happiness, productivity, and retention.
In a psychologically safe team, there is a shared vulnerability. This is built by encouraging risk taking and framing mistakes as an opportunity to learn. What are you doing today to help create this environment? Do your colleagues trust you to make the right decisions? Do you trust them? Building and monitoring this foundation is essential to collaborative work.
Well-structured feedback helps teams and individuals to see their capabilities and limitations. It contributes to building confidence in the right behaviors and helps correct the team when things have gone off course. Knowledge workers thrive on feedback.
In general, our findings indicate that feedback is undervalued in startups and scale-ups. Feedback usually only flows top-down because people feel uncomfortable giving feedback to their manager. How often do you have formal feedback moments? Are you giving both positive and negative feedback?
Roles and responsibilities
In an early phase startup, people wear multiple hats. Responsibilities are muddy and often shared with the entire team. As the team grows, it becomes essential to define everyone’s role and responsibilities more clearly, especially when founders are frequently spread too thin and find it hard to delegate.
Some crucial roles might be unfulfilled today. Who’s your Data Protection Officer? Do you need a CTO in your startup? Who takes care of engineering management? By creating clearly defined — and documented — roles, the team will know who to turn to when they have questions. This will also help you shape your hiring plan.
Companies don’t build high-quality products by accident. They actively design processes to make this happen consistently. An early-stage startup can get by just fine with informal workflows and ad hoc communication. After all, not every company should follow the Spotify model.
It’s crucial to strike the right balance between a formal process that is too strict and one that is too underdeveloped. The right process can make your company soar. The wrong one will hold your business back.
A fast-moving startup frequently takes off with a “move fast and break things” attitude. As more customers start using your software, the need for quality assurance becomes obvious. There are bugs in your software product. Do you want to find them or do you want your customers reporting them? Having too little or inadequate quality assurance can lead to an unreliable product.
Only when quality is a driving value can it become possible to keep growing sustainably. Finding a balance is important since aiming for perfection from the start usually means shipping solutions later than expected. During this time, your customers might be looking at your competitors. Introducing quality assurance late in the process can be time-consuming and will grind your delivery pipeline to a halt.
In both the startup and scale-up phases, improving your product continuously based on customer feedback is vital. The earlier you can get that feedback, the better your product will become. Having a process in place that allows your team to confidently deploy to production multiple times per day is paramount in today’s fast-paced world.
A rigorous, manual process to deploy changes to production hurts your team’s performance and will come back to haunt you when you have urgent changes. Start with simple checks and tests and improve your deployment process over time. Remember to focus on keeping it automated.
As your startup scales, your customers and prospects will ask questions about your product. They will give you feedback and indicate shortcomings and bugs based on their needs. Making your customer support team an integral part of your product development process is essential to serve your growing customer base.
We often see engineers spending valuable time dealing with customer support issues. Additionally, feedback about the product that comes through this channel is frequently ignored by the product managers or doesn’t reach them at all. In early-phase startups, we often see one of the founders fulfilling this role. It’s essential to delegate this role early enough to focus your efforts on other parts of the company’s growth.
Great teams write excellent documentation. They know that it allows the team to scale up quickly and communicate internal policies and procedures effortlessly. Often, your public documentation is the first interface that a customer has with your company.
In an economy where knowledge workers create value, too many companies neglect their documentation. The team members of early stage startups often share knowledge directly with one another. As the organization grows, that communication network gets more intricate and so knowledge sharing becomes exponentially more difficult. This makes scaling up harder. Capturing this knowledge in documentation mitigates this problem.
Onboarding and HR documentation
Scaling a company means hiring more talent. Efficient onboarding is a scale-up superpower. New hires should easily find descriptions of their role, the day-to-day processes, and how they collaborate with the rest of the organization.
The first employee can discuss their role directly with the founders. That’s not a luxury employee #38 can enjoy. The more questions they can answer autonomously using internal documentation, the less they need to rely on their colleagues. If new hires struggle to find their way in your organization, the entire team suffers.
When people engage with your product, they’ll get curious. Public documentation is a direct line of communication with your customer. User manuals, videos, blogs or tutorials are your way to help your customers develop a relationship with your product. This is why companies invest in these types of communication.
Too many startups rely solely on their website copy or an outdated FAQ section for this. When customers can’t find what they are looking for, they are unlikely to reach out to your service desk with their questions. In most cases, they will not bother and move on. Scaling up requires improving your customer-facing documentation.
Great software is at the core of your SaaS, and software doesn’t become great accidentally. It’s not enough to hire the right developers and get out of their way. You’ll need smart engineering structures and an environment designed to get the best out of your teams.
Monitoring and logging
Having clear insights into technical systems is vital. When things go wrong, well-configured alerts and logs allow you to recover faster. Developers should be able to discover potential issues long before they become real problems.
In a lot of companies, the support team is first to know when the system is acting up. That means it’s not the development team, but your customers, who monitor the product. What happens if your system breaks down at 1am? If your engineers launch a new product feature, can they discover errors that don’t show up in the interface?
Early-stage startups tend to pivot and shift gears frequently. For developers, that means changing the code all the time. Well-designed automated tests give developers a sense of confidence. They can quickly change one part of the product without breaking others.
Manual testing quickly becomes a bottleneck. It just takes too much time and effort to test everything after each change. Quality levels drop and release cycles get longer. While there is a place for some manual testing, you’ll need a great test automation strategy. Without it, you’ll find it hard to change as your product grows.
Security is not optional. As products grow, so does the risk of a breach. Each new dependency might introduce a vulnerability. Every new customer increases the amount of sensitive data. When building software products, outages and data leaks can have devastating effects on your business.
Security rarely seems the focus for start-ups. There is a real temptation to build feature after feature without taking the time to secure what was built. Often, credentials are exposed in plaintext. SQL injection vulnerabilities are still very common. Outdated and unsupported dependencies are ignored until they become a problem. At that point, it might be too late.
Growing your team means onboarding new developers. This process takes time and effort from not only your new employee but also from the existing employees who are helping them find their way in the code. Having quick and simple technical onboarding allows companies to scale up without the stress.
How long does it take for a new developer to set up their local development environment? How quickly do they actively contribute to the product? Measuring and optimizing for this is crucial to keep delivering at the same pace as your team deals with the overhead of growth. We often find small teams have complicated setup instructions and developers take months to become effective.
There’s a world of difference between a mediocre product and a great one. Building products that your customers love is as much of an art form as a business skill. Great companies have a vision of what their SaaS should do and involve their customers at every turn.
Products are driven by a vision and while that vision usually comes from the leadership, it must be carried by the entire team. When employees do their job but fail to see how it ties into the overall picture, the entire product suffers.
Many startups grow without forming that clear product vision. They’ll build features and reactively start initiatives without verifying their efforts against the bigger picture. If your teams don’t know what to focus on, they create a bloated product. Successful companies work hard to keep their products lean and focused. They define a vision that guides their decision-making and pushes their product to the next level.
Your customers love your product because it solves a problem for them. Your teams work hard to design the best-in-class solution. It’s easy to forget that most of the experts are not in your team: nobody knows that problem like your customers.
Startups often fall into the trap of not actively listening to their customers. They’ll churn out features hoping to delight their users without ever asking. Of course, you don’t want to build every single thing your customers ask for. Your instincts do have value, but so does user feedback. Great companies do their research. Gathering quantitative and qualitative data in a structured way is what makes all the difference.
Check your roadmap
Ideas are plentiful; budgets are scarce. Since you can’t build everything you want, prioritization becomes a vital skill for SaaS teams. Roadmaps are great tools to help keep that focus. Unfortunately, most companies have too much work on their plate.
What should be a tool for focus is instead treated as a to-do list. Teams work on a never-ending flow of features and are reduced to mindless order-takers. The team tries to keep busy instead of building a great product. Roadmaps are at the heart of product development and companies that know how to prioritize in a data-driven way are at a real advantage.
Get ready for success
Going from startup to scale-up is an exciting experience and navigating that change is hard. All startups experience growing pains. The successful ones learn how to deal with them.
At madewithlove, we support companies that have reached that point of growth. We offer due diligence audits that help you understand where you are and what is holding you back.
We’ll delve deep into your engineering procedures from conception to delivery. Through a series of interviews, we’ll uncover weak spots and opportunities in product planning, code quality, team composition, and release procedures.
An audit gives you more than just a report with recommendations. You’ll get the best tools and insights to take your startup to the next stage.