28. June 2016
Michal Dallos (8 articles)

TOPSCAN – A Formula of Success for Startups and Investors (Part 1/2)

Traditional venture capital investors provide mainly funds and are seldom involved in the operations of their portfolio companies. Many startups with funding and innovative products may still fail, since their founders are normally fascinated by technology and are focused on product development, while often neglecting marketing, sales, or company management.

Therefore, the investor’s strong operational involvement offers a formula of success to the new ventures. It also lowers the risk on the investor’s side by protecting the invested capital. The TOPSCAN framework provides a blueprint for operational involvement, hence may inspire the ‘Financiers-only’ investors to become successful Portfolio Operators. It was developed by Teten & Coll.[1] and is based on a survey of more than 50 venture capital companies.

What is TOPSCAN?

The TOPSCAN framework is based on the investor’s pro-active application of seven key management techniques in the portfolio companies:

  • Team building: developing and shaping the most valuable asset – human capital
  • Operations: establishing the structure of the company’s administrative and business processes, such as accounting or legal capacities
  • Perspective: strategic positioning of the business among competitors on the target market, scoping the product
  • Skill building:  nurturing the relevant managerial skills of the startup entrepreneurs, required for the transition from the startup idea into a fast growing professional company
  • Customer development: identifying and approaching the target customer segment
  • Analysis: appropriate measuring, understanding, and reporting of the performance of the startup
  • Network: access to the investor’s networks, in particular to potential clients and future investors

Due to the unique nature of the startup investment –investment into highly uncertain projects in a fast moving business environment, combined with the factor of technology-oriented fist-time entrepreneurs – startups strongly need the TOPSCAN methods, especially in their early stage. Hence a pro-active and institutionalized use of TOPSCAN framework may add tremendous value to the portfolio companies.

Learn more in Part Two about which investor type you possibly are or need, in reference to the TOPSCAN framework.

[1]D.Teten, A.AbdelFattah, K.Bremer, and G.Busling: The Journal of Private Equity, Vol. 16(2), 2013