The scale-up conundrum: Evolving startups from founder-led growth to industrialised scalability

April 16, 2025Successfully scaling a company is hard. McKinsey research¹ suggests that 78% of companies that have successfully built a product and found product market fit (PMF) fail to scale. These businesses end up either failing altogether – or, more often, failing to maintain growth – and end up either being bought while still sub-scale, or limping along whilst struggling to maintain their early growth trajectory. 

Odds of start-ups with successfully built product to achieve scale-up1

Why does this happen? Our research suggests that growing and scaling companies face a natural ceiling to early-stage growth, where the approach that has driven their success to that point is no longer able to fuel a continued upwards trajectory. Put simply, what got them here will not get them there. 

This matters whether you are an investor in an early to mid-stage company, or a founder successfully navigating the first years of growth. Why? Because the attributes of a company which will successfully grow their first c.$10m ARR and then stagnate are largely indistinguishable from one which will go on to adapt, evolve and continue to accelerate. Both have overcome the manifold challenges of the “build and launch” phase. They have taken an idea and formed a product with real Product-Market Fit (PMF), moving from prototyping to production, finding and selling to initial customers, and retaining those customers. All this can take you into double digits millions ARR in most markets, and well beyond in some. However, to scale further, a company needs to make the huge, hard transition from the charismatic to the industrial – from founding-team led product and sales processes to a scalable, industrialised approach across the business. And although, in an uncertain macro-environment, it can be tempting to retrench on what has made you successful in the past, in times of market and geopolitical uncertainty this transition is even more important, because it will put in place the foundation needed to adapt, diversify, and grow even in turbulence. 

In the “Build and Launch” phase, the attributes of a company that will go on to scale and IPO successfully …

...can be indistinguishable from those that will falter during the growth stage

McKinsey has identified three stages of growth for a company as it evolves from idea all the way through to IPO: Build and Launch, Grow, and Scale. This article focuses on the middle stage – Build and Launch – and the difficult transition from founder-led to industrial growth.

To succeed in this transition, a business often needs to be rewired throughout – although the approach will differ across three functional areas, which we have called the engine room, the accelerators and the cockpit. The engine room contains the core drivers of initial and ongoing business success, for example product, manufacturing, go-to-market. The accelerators are those considerations which will enable growth from a strong base, such as market expansion, partnerships, and M&A. The cockpit includes the command-and-control considerations, such as people, leadership and data.

The Engine Room, Accelerators and Cockpit all need to be industrialised to maintain scale-up growth

The engine room: Core product and go-to-market capabilities

A company can have a highly successful product and go-to-market (GTM) engine and show every sign of being able to continue to evolve the product and expand to new customers. They have successfully grown quarter-on-quarter for some time, and have honed the product to achieve repeat customers – all the right KPIs.

Often, however, this early success has often only required minimal product evolutions, scoped by a small number founders driving both product and sales. The growing customer base may only be one part of a larger market, and repeated challenges in selling outside of this one segment may have been quietly ignored as being “tomorrow’s problem”. This is charismatic success – a handful of evangelists building and selling a product to a tight network of homogenous customers. Success beyond this stage will require a different approach. It will require a scalable ‘engine room’, with the following components: 

• Product: A product as well as research and development (R&D) team with the ability and proven processes to grow the product repeatedly and rapidly. This will likely require the capability to evolve and run multiple products in parallel, plus a defined and tested approach to attract an increasingly less homogenous customer base.
• Manufacture: Often the manufacturing approach and partnership model which is fit for purpose for 7-figure revenue numbers will not economically scale to 8+ figures globally, both in terms of software development and hardware manufacture. Evolving from manufacturing a handful of prototypes into production is tricky, but moving from workshop-based production into large-scale factory manufacturing is equally challenging. In many geographies this requires offshoring production, with the supply chain complexity and quality challenges this entails. Identifying the supply chain that can multiply your output by ten takes time and must be tackled early to prevent delays and defects.
• Go-to-market: A scalable engine room should have the ability to hire and train new salespeople; to identify, close and retain new types of customers; and to track, understand and improve the pipeline. Warning signs for potential stagnation here might include a high and early attrition rate, or a concentration of sales across very few salespeople.
• Customer success: The separation and professionalisation of a customer success team within a company is often the last to be built out. Even when a customer success team exists on paper, often it can initially be operating in silo from product and go-to-market teams. Scalable success is driven by these three teams operating together, to ensure that customers buy and renew because they’re happy with both the product and the wider interactions with the business. As both product and customer base become larger and more varied this requires a truly industrial process.

Creating a scalable and coherent approach combining these elements is the linchpin of continued growth. Although a siloed, workshop approach can enable the flexibility and responsiveness for the first stage of company creation, an integrated factory is needed to go beyond and avoid stagnation.

Accelerators: The accelerants that take a company beyond charismatic early growth

Every early-stage company will have some element of the components of an engine room, but in many cases, they have not had to consider many or any accelerators yet. Unlike with engine-room innovations, early-stage companies will often need to implement new concepts from scratch and embed them into the business, not just industrialise existing processes. This will include:

• Market and geography expansion: As described above, the early-stage customer set is often homogenous in geography, business focus and need. Expanding into new markets is hard, and although the first new market is often the hardest, each will come with new, unforeseen challenges. This is an area therefore where a business needs flexibility and agility of approach, as much as a tested playbook.
• Product expansion: Expanding the product beyond the initial framing to enable access to new markets and broaden the customer base will require new feature sets within the core product, or even new parallel products. Delivering this successfully will require not just the right people and team set-up, but also the tech and processes to enable.
• Pipeline management: Early-stage growth can often be ad hoc and word-of-mouth, particularly in B2B sales, where the market is intimate. Growth beyond this requires a demand generation machine, with the right roles and structures (and communication between them), the right orchestration of different levers, and continuous analysis to adapt and refocus.
• Strategic M&A: We often hear early-stage business leaders discount M&A, seeing it as a lever for much larger companies. However, 3 out of 4 of the founders we spoke to had gone through acquisitions, many when they were at the $20m ARR stage. M&A at an early stage can consolidate a market or solve a challenge (for example by adding a capability or opening up a new market or segment). Importantly, however, M&A is a muscle which needs to be developed through practice. If it isn’t built early, it will not be there when it’s needed. It can take time, and iterations, to develop a tested and successful playbook.
• Partnership: The final accelerator to help an early-stage company to avoid stagnation is to identify and enable other partners to support growth as well as amplify reach, reputation and impact. Mobilising a wider ecosystem to create a sales flywheel will look very different depending on the circumstances, but can materially boost growth. Options might include partnering with larger companies, creating communities, or identifying new go-to-market channels.

Cockpit: What drives the company

The ‘cockpit’ is made up of the central command and control elements of a scale-up. This is where a company discovers if it has both the robustness and the flexibility to scale without losing control of itself or its identity. We have identified three factors which comprise the ‘cockpit’ of a successful start-up.

• Talent, hiring and culture: Hiring processes and policies need to be right, both to attract the right people at the pace required, and to enable their success. Many founders we spoke to suggested that even with the most careful hiring processes, success was still 50/50 when hiring for senior roles. It can be tricky to find the right hires who will be your senior executives of tomorrow, but in the meantime be the ‘player-coach’ who can roll their sleeves up and deliver change today. Through this, ensuring the culture isn’t just wallpaper, and is maintained and evolves appropriately is critical.
• Tech and data: The world is full of companies which have scaled beyond their technology’s ability to function. Early-stage growth can be driven by instinctive decision making, or back-of-envelope analysis given small numbers of customers. Over time, failure to build out a robust and scalable tech and data architecture with associated processes reduce efficiency/scalability and effectiveness. Decisions and day-to-day management will absorb more and more senior time and the fidelity of decision making will be reduced.
• Top team: The final, and arguably most important factor is to ensure your top team is as effective as possible. This is partly led by the board and investors. They will need to ensure that interactions are valuable and their guidance is helpful and actionable, and not a ‘necessary evil’ or a source of churn. The other decision is if or when the founder team should be substituted for executives experienced in scaling. This can feel like a challenging decision, although it isn’t unusual. After all, the skills required to be the charismatic leader of a start-up and the senior executive of an IPO ready organisation are very different. Procrastinating can undo or prevent good work on every other factor. 

Understanding whether a scale-up is ready to accelerate is complex. Quite often the company can be hitting all its targets and apparently making all the right moves until it is too late, and stagnation has already set in. The natural ARR ceiling varies significantly, so it can only ever be a very rough rule of thumb. It can be several quarters, or even years, before it is obvious that a company has failed to transition from charismatic founder-led growth to industrialised process-driven excellence. The consequence, however, can be significant from a growth trajectory, putting back the date of a successful IPO by many years, if not indefinitely. Getting this right is potentially worth hundreds of millions of enterprise value – it is the highest value intervention management and investors can make.  

_{¹Based on analysis of 3164 companies with Series A funding in 2011-13 that went on to complete at least a series D by 2024}