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What Is A Technology Scaleup? We Explain.

Unicorn.

A term thrown about in the entrepreneurial scene nowadays that carries a heavy sense of recognition. To an outsider, it may just be a mythical creature. But for tech and digital entrepreneurs, it describes a poignant stage of growth that most aspire to achieve.

But now there’s another term to introduce—technology scaleups or for short “tech scaleups”. We raised our brows the first time we heard it too but it’s actually important to truly understand the significance of a tech scaleup.

They are after all the people who have a huge impact on our economy by creating jobs, generating wealth and affecting communities, based on a study conducted in 2014. Some tech scaleup founders have also nourished local ecosystems as role models and mentors.

But the question remains:

What exactly is a tech scaleup?

What defines it? By its revenue? Valuation? Profitability? If they have their own branded attire?

You could say it’s all of these things combined. To quickly understand, the real question you should ask is “Has the company started to scale?”

If you can say that the tech company has proven services or products and is growing in terms of market coverage, has good financial track records, and a sizeable number of employees, chances are that it’s a scaleup.

Gopi Ganesalingam, Vice President of MDEC’s Global Acceleration and Innovation Network (GAIN) programme, sees tech scaleups as companies with a working business model that are addressing a big market and now plan on growing further.

Showing the growth of a startup onwards.

To put it into better perspective, think of startups like children learning to take baby steps and figuring out growth. Scaleups are the late teens who have built their identity and are now bracing themselves for adulthood.

In entrepreneurial terms, this means being a sustainable corporate.

Some companies that fit this category include the likes of iflix, Green Packet, and Mindvalley.

Are there clear differences between scaleups and startups?

This infographic gives you a rough overview of the differences but here are a few key points that elaborates further on the characteristics of each:

This is the most obvious difference. Startups take time experimenting with things like product features and targeting their audience correctly. Scaleups have already perfected this and are already economically sustainable.

Basically, scaleups know if they put in RMx into the business, they’ll get RMxx in return. This gives them more confidence in segmenting their funds into what works on a bigger scale. Startups on the other hand are just focused on using their funds to figure out what works.

Early on, startups usually hire “jacks-of-all-trades”. It’s not uncommon to see employees taking on multiple roles. The goal is to achieve a lot with a little, letting businesses kickstart and grow further with a smaller team.

But for scaleups, narrowing the roles is crucial. Splitting the team into departments or hiring specialists is the start in their pursuit of growth.

Startups usually have smaller customer bases with an unproven product, so there’s not much to lose when pursuing a new and unusual idea. But that will change when the company starts scaling up in size and risks are more daunting.

Scaleups bear a larger responsibility while needing to manage the expectations of a wider pool of people (i.e investors, customers, team members). Generally, the more money made, the more careful they are experimenting with new ideas.

Startups are known to have “looser” systems. The team usually gets some form of freedom to experiment with processes until they figure out what works best for them.

But when hitting a critical size, it’s time to start documenting that process into a system so that growth becomes sustainable and success can be easily replicated. Having organised systems is also imperative to maintaining quality control and completing projects on time.

“Scaleups need to have processes in place. You can’t scale without a process. You need a proper backend running, layers of approval, authority, and more. Everything needs to be more structured.”
– Gopi

What does the Malaysian scaleup scene look like?

We mentioned a few familiar names earlier but there are so many more. Under the GAIN programme itself, there are 149 technology scaleups companies to date.

The GAIN programme has been designed to catalyse the expansion of Malaysian and Malaysia-based tech companies with potential to become global players. This is done via four tailor-made intervention areas – elevating brand visibility, facilitating market access, up-skilling capabilities, access to funds including match-making for merger or acquisition.

Many of these GAIN companies are not visible and not many people are aware of how good these companies are. Not everyone can be like Elon Musk or Steve Jobs as it requires a certain mix of charisma, eloquence in pitching and the ability for great storytelling. GAIN knows this problem and is looking to help.

Image Credit: MDEC

“Better storytelling is something we’re pushing for. We have so much to offer but we’re not able to articulate it. Again, it’s probably cultural. We don’t stand out there and amplify what we have. I think that’s something we need to work on for 2018,” said Gopi.

For such tech scaleups, GAIN also provides them with access to seasoned entrepreneurs and training partners to help mentor and nurture these companies.

“Because they have such good products and they’re really world class products but they’re hidden and not coming out. So we need to bring the ability to story tell,” said Gopi.

What comes next for tech scaleups in Malaysia?

2018 could be a good year for them.

The goal is to see scaleups grow bigger and have a wider reach with products or services that their customers can associate with. A common fear factor among scaleups would be “to go global or not?”.

GAIN is aiming to mitigate that by building a stronger ecosystem so that more companies can be guided on the right ways of going global.

2017 had also seen a lot of initiatives made to give finance access to scaleups, thanks to a change in mindset and more people beginning to invest in tech companies which wasn’t the case last time.

“The government is also pushing the notion that entrepreneurism is important for the economy and to take advantage of what we have, like our strategic location, good access to air travel, English fluency, and being culturally diverse,” said Gopi.

There’s still a lot that can be done to improve the ecosystem. We’re hoping to see accelerated growth in the tech scaleups ecosystem, more mergers and acquisitions brought in as well as more investments, whether they be local or foreign.

“We need to continue hammering this ecosystem. Scaleups need funds, mentors, markets, and visibility so we need to keep connecting the dots and increase the momentum since we know it’s working,” said Gopi.

This is the first part of our collaboration with MDEC GAIN. Our next piece in this series will delve into the mindset of the scaleup entrepreneurs. Stay tuned!

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