Briefing | Value Creation: Challenges for a Scale-Up CEO. We catch up with Steven Dunne, Senior Partner at Frog Capital.

For a tech growth company CEO, it is easy to be consumed by the daily challenge of exploiting a market opportunity and to focus wholly on creating an exciting operation. It is tempting to believe that fundraising at ever higher values and an eventual exit will naturally emerge. Unfortunately, this is unlikely to be the case.

Concentration on building a great business is of course paramount, but it’s essential to also find the time whenever you can to reflect on value creation. Then you will be better prepared to exploit exit opportunities more effectively.

At the growth phase, dedicated scale-up investors like Frog will encourage an early debate about value creation milestones and exit expectations, incorporating timescale as well as potential purchasers and their acquisition criteria.

Planning Value Creation

For creating and realising value, it’s never too early to start preparing. You must always be ready to take advantage of opportunities that arise.

A disciplined scale-up goes beyond the essential basics – such as building a quality operational team and executing on good customer acquisition and retention – by building a forward-looking value proposition. This requires a strategic plan of action, a growing pool of talent and a scalable organisation structure.

Managing Talent

The key to both scale-up value creation and exit readiness is being ahead of the curve in investing in people. At a high level, this means spreading the load, reducing individual reliance and providing succession planning. Hiring the right people at the right time is widely acknowledged as fundamental for success, “The Founder’s Dilemmas” provides some further insight. Written by Noam Wasserman, the book explores how equity and decision-making responsibility are distributed amongst the team and the importance of this on talent attraction and retention.

Wasserman’s key dilemma is the potential conflict between maintaining control and value creation. To attract the best hires, founders have to give up not only enough cash compensation and equity ownership, but also some level of control over operational decisions, as “skilled people usually don’t like to be told what to do”. According to his empirical analysis, founders who retain too much control and decision-making power over their scale-up can harm its value.


Many growth businesses get focused on the valuation of the next funding round and treat each uplift as a success in its own right but high valuations put large expectations on a business. If you don’t yet have visibility on sustainable, profitable trading then the journey from one funding round to the next can become the primary focus. If the growth isn’t sufficient to demonstrate a value uplift, there is a good chance the previous valuation is impaired and future fundraising becomes much harder. Worst-case scenario, a lack of funding could see the company fold with zero value.

Be in control of your own destiny: have a back-up plan to get to cash break-even with current funding, if necessary. This is the only way to ensure that value creation is sustainable and not a bubble.

Mastering Due Diligence

I know from personal experience of two exits as CFO that preparation is vital. Avoid treating due diligence as a test to pass with the equivalent of last-minute cramming – this is a high-risk strategy. You will distract key people from running the business and leave weaknesses that can be exploited in the transaction negotiation.

Purchaser due diligence is many degrees tougher than for fundraising. You will be very exposed if you haven’t developed sufficient senior team talent and resilience in the business to continue high-level performance amidst distractions.

At Frog, we encourage and support our portfolio CEOs to build resilient businesses which have control of their own destiny as they create value.

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