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So, You Launched a Startup. But Can You Make It a Scaleup?

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Here at the Sprosty Network, we have a rather practiced opinion on the state of startups. We’ve been working with – or at – startup companies for quite some time. And when on the retailer side of the table, we’ve worked in various roles to connect promising “up and coming” products with the mass-scale distribution of major retail – companies like Best Buy, Walmart, Staples and others.

We’ve built private label businesses that, like a startup, manage everything from product concept to retail execution. We’ve led the retail merchandising teams, tasked with finding the latest and greatest for their customers. And we’ve led forward thinking retail experiments focused on the latest technology and retail’s ability to help customers adopt the next “new thing.”

So we’ve seen a lot when it comes to startups – the promise of their potential to improve lives in some way, and the excitement the latest and greatest products can spark with consumers (not to mention the lift to retail sales).

And yet, we’ve consistently observed a common, longstanding challenge facing these growing businesses: The ability to move from a startup, to a scaleup that successfully operates at national (or global) retail scale.

I’m pleased to share that we are launching a very real solution to this problem.

The Insight

This is the era of the Startup Nation. Over the past 10 years, it’s become increasingly easy to launch a startup: Crowd funding, cloud services, startup mentors, incubators, accessible manufacturing, “Shark Tank.”  Many facets of startup complexity have gotten easier, in some respects. And there is certainly no shortage of hype (or mythical creatures – unicorns, anyone?).

But the lack of “retail readiness,” or ability to scale, contributes to the high startup failure rate. Many “stage 2” startups – which have a viable product and initial sales – aren’t prepared for the rigor required to produce, market and distribute a product through major retail locations or channels. Some even shun the notion of traditional retail, opting for online only – despite the fact that 93% of sales today still come through brick and mortar retailers (and their own growing online channels).

For retailers, the tidal wave of startups has made a buyer’s job more difficult than ever. No longer will the “next big thing” likely come from a giant multinational hardware brand, like Samsung or HP. Instead, it will come from virtually anywhere – a needle in a haystack. It’s the overwhelming task of a retail buyer to not only find that perfect product for customers, but to also find that perfect startup that can keep pace with the inventory and distribution demands of mass retail.

The Test

“First to market” is no longer a reliable predictor of startup success. Rather, it’s first to scale. In turn, retailers gain advantage when they can sort through the noise, and connect with the right scaleups that not only have breakthrough products that customers will demand, but are ready and able to keep pace with the realities of mass retail.

Given these facts, we sought to build something new.  A path to retail for startups that would make it easier for both startups and retailers to connect, benefiting both.  We talked with Staples, who volunteered, albeit cautiously, to test drive an “on the shelf campaign” connecting startups to Staples’ buyers and private label teams. We also brought in our friends at Startups.co, with their more than 600K startup members (at the time). Together, we launched the campaign, and more than 1,000 startups answered the casting call. Crowdsourced voting brought the pool down to 50 startups. A panel of judges from Staples, Startups.co and Sprosty Network selected finalists and winners. A lighting solution from EVA won the competition. More importantly, Staples established relationships with five other finalists, exceeding their expectations for the campaign. Those startups are actively scaling their Staples relationships today.

From this test, we learned that while finding the right startup is key for retailers, ensuring that the startups are ready to engage with retail – to scale – is just as important. It’s a very real skills and experience gap.

Coming soon: RX

In the coming weeks, we will launch a new home for scaleups. We call it RetailXelerator – or RX, for short. RX is an accelerator program that stands apart because it provides what other programs don’t: curation, coaching, and direct retail connections for scaleups (and not startups).

The program will bring together multiple national retailers, and coaching partners with specific expertise (from product distributors to manufacturers to product design firms), to help the scaleups get “retail ready.” And our partners at Startups.co are back to help us find the right companies for the program.

We are confident that RX will prove a sensible choice that helps a growing scaleup rise above the 75% startup failure rate and ready itself for retail demands. And retailers, like Staples in our test, will find new products to bring to their customers.

We have a lot of work to do. It takes a village to make this work. But we are excited to create something new in the startup/scaleup world.

Stay tuned…

Post By Rick Rommel (9 Posts)

Product Development, Private Label, Merchant, Emerging Business, Consumer Electronics, Rocket Scientist (really!)

Rick serves as a Distinguished Visiting Scholar at Stanford University’s mediaX, and is a respected and entrepreneurial industry leader who has built innovative businesses in the consumer electronics, retail, and aerospace industries.

Most recently, Rick created Best Buy’s Global Private Label CE, the company’s most profitable internal start-up business. Prior to that, Rick helped lead Best Buy’s New Business Consumer Solution Group to create, incubate, and accelerate new global business opportunities.

Prior to that, Rick’s career spanned management roles in a $4B retail business; a $10M start-up; and consumer product development for Best Buy and Kodak. He has served in General Management, Product Development, Sales, IT, Business Development, Marketing and Operations roles, and began his career launching satellites at Hughes.

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