The Scaling Challenge

There is a meme making the rounds and I have no idea how old it is or its origins but I’ve heard it twice in the last week. It’s easier to start a company than it is to scale one. You can’t say it’s a revolutionary thought, but for the last 20 years the emphasis has been decidedly on founding, so this is something of a departure.

Startups don’t grow to the moon on average. For instance, if we didn’t have Salesforce, would we even remember the dot-com boom at the start of the century? There have been so many startups; some failed and many were bought, and their names disappeared. So we have a lot of experience and data about what to do — and equally important, what to avoid — in starting a company.

No User Guide

A case in point: Venture capitalists commonly look for a business model and a minimally viable product (MVP) in the early rounds, and they want to see a repeatable revenue model later as they attempt to bring a company to the market. Not having either, or even not having one, is death. That’s a far cry from the era when business proposals were written on cocktail napkins.

There are no precise formulas for how to scale a company, once the MVP is not so minimal and the revenue model is fairly predictable. We may have lots of memory about this phase but it’s nothing like early days.

At the same time, once a business has reached the relatively calm waters of early adulthood, you can bet the marketplace has changed enough to cause some rethinking. The impulse to do everything at once is just as prevalent for early adult companies as it is for those more junior, but it is also more perilous. Failing as a startup happens all the time, but failing after initial success can be very painful since so much is riding on continued success.

It was refreshing, therefore, to see how NetSuite was coping with success when I attended the analyst events at SuiteWorld ’18 in Las Vegas. In its still young life, NetSuite has been a startup, an IPO candidate, and an acquisition target.

Staying the Course

Now part of Oracle, NetSuite has a lot of growing left to do, but it is still able to take the measure of where it’s been. Executive Vice President Jim McGeever and founder and EVP of Development Evan Goldberg were able to provide a convincing and down-to-earth morning presentation of NetSuite’s approach to the market.

“We’re not going to boil the ocean,” Goldberg said several times, emphasizing the company’s commitment to stay on track. The goal is to deliver functionality for NetSuite customers while avoiding the pitfalls of more full-blown development projects that might scratch a research itch but not necessarily deliver utility to customers.

Part of the credit for this approach likely should go to Oracle. Since buying NetSuite, it has provided cash to expand operations — for example going from 60 to 600 sales people in EME — while exercising a light touch on operations. It also has contributed sound management.

Perhaps one reason for NetSuite’s success was the continued involvement of Larry Ellison as a board member and part owner during the company’s formative years. With Ellison’s influence, it’s hard to see how NetSuite could have failed to become a good acquisition candidate.

Focus on Micro-Verticals

As for scaling a middle-sized company, NetSuite demonstrated its focus on its customers in its announcements and interviews with customer CEOs. One good example of its focus has been its SuiteSuccess program, designed to take the pain and risk out of the onboarding process, especially for smaller customers.

Another good example is NetSuite’s focus on micro-verticals, markets where it intends to deliver 80 percent of the necessary back office functionality out of the box, in order to speed up onboarding and adoption.

There are 33 micro-verticals for 14 industries, and there’s a need for scores more, according to McGeever. There’s no doubt about that, but it might have been equally useful to say more about the tools and technologies that provide the last 20 percent. There’s no doubt the technology is available, so the messaging should track it a bit closer.

That said, NetSuite appears to be benefiting from the acquisition by accessing Oracle’s resources — including its cash and brain power — to scale at a time when it can be put to work to good effect.

My last point, which is something the financial analysts may not have calculated: The new Oracle data centers going up around the world will be perfect homes for products like NetSuite, which is growing significantly outside of North America (more than 80 percent recently). The company has plans to prove this when the German data center becomes operational.

It looks as though it won’t be too difficult to populate those facilities, and this will give Oracle’s continuing cloud rollout added momentum.