The Transition from Small to Midsize Company

By: Dr. Shadi Farhangrazi Issue: Innovation, Growth, Job Creation Section: Business

Developing An Enterprise Strategy to Create More Jobs


As the country focuses more on economic recovery and high unemployment rates, there are ever increasing conversations about innovation and entrepreneurship. One of the major questions is how to create more jobs and to ensure that small companies and start-ups grow larger. The transition by entrepreneurs from a small company to medium size is a path filled with obstacles and challenges — such as raising enough capital to invest in their business venture, organizing the different aspects of their business depending on whether they offer services or products, hiring the right people, bringing together the right management team, or creating a marketing strategy. All are integral to the success and growth of transitional companies.


A major factor impacting the success or failure of any early-stage company is its access to capital. As entrepreneurs start their businesses, oftentimes they rely on borrowing money or raising investment from family members, friends, and those who believe in the business. However, there is a time in the life of many emerging organizations, especially technology companies, when traditional funding methods have been exhausted, and the company falls into the proverbial funding “Valley of Death,” often failing to find additional financial resources and going out of business.

It is critical that innovative, early-stage companies create an advisory board and board of directors that can assist the company in creating a wider network of interested parties — especially funders and other investors. Starting this process early is important, as it gives the company time to raise the appropriate funds for marketing and advertising or for research and development. In fact, over the last few years, the venture capital industry has been increasingly reluctant to invest in early stage companies due to the demand for tighter exit windows or faster returns on investment. However, some angel investment groups remain actively involved in funding early stage companies. Unfortunately, many of these investment groups are focused locally in the states and/or regions where they reside.

Another way of accessing funding for research and development is for companies to apply for government grants or SBIRs. These grants are usually small and cannot replace large capital infusions, especially for some science and technology companies whose research is capital intensive and expensive to perform.


Another challenge facing technology and innovation companies is finding the right people to hire. This not only applies to hiring engineers, scientists, and people with a technical background, but also people who understand how innovation companies are managed. Finding the right team is imperative in transforming a company from a small start-up to a medium sized company. The management team must be selected by people who understand the fundamentals of an innovative company — keeping in mind that the entire team does not need to come from a technical or scientific background. But in the end, all members of management must understand how to create an environment and culture that nurtures innovation, and ultimately ensures the company’s success.


Supporting private sector innovation is a hot topic in many circles, especially the government. There are many pushing for an extensive national conversation on the subject. Federal and state governments continue to consider better tax incentives for small businesses as some states have already done; however the progress is slow. There is also a need to focus on grant funding for early stage companies beyond the current SBIRs, perhaps to train employees who are entering a new profession.


Most entrepreneurs talk about the lack of availability and/or accessibility to knowledgeable mentors and advisers who can guide them through obstacles and barriers on their path to success. Mentors, in many cases, either have built successful companies in the past or have been entrepreneurs themselves. Often, senior family members, a board member, or other business advisors are needed to help an entrepreneurial company move to the next level. Mentors and advisors, in many cases, serve as a confidant for the entrepreneur; therefore, their personal and professional roles must be separated.


Finally, if a small company is looking to grow, they must have a clear, concise, measurable strategy. It can be the fundamental factor of success or failure. A strategy plan is a dynamic document which needs to be written at the early stages of the life of a company and reviewed often by the management team. Ultimately, moving companies from the small to mid-size range requires many fundamental building blocks. All are interconnected pieces that support strategy, drive capital investment, support innovation and research, and ultimately create more jobs.

Dr. Shadi Farhangrazi is a neuroscientist, Biochemist, an HIV/AIDS expert, strategist, an entrepreneur, International speaker, a professor and an expert in the area of innovation and entrepreneurship. She is the President and Managing Director of Biotrends International, Founder of Biotrends Foundation, Founder and Co-Editor of and three other life sciences and innovation companies.  Dr. Farhangrazi is also an adjunct professor at the University of Denver at Daniels College of Business, College of Engineering and Computer Science and the Women’s College. Dr. Farhangrazi was born in Tehran, Iran and grew up in Europe. Dr. Farhangrazi has spent considerable time in Africa and Asia in several countries working with schools, orphanages and several organizations focusing on women’s health, childhood diseases and women and entrepreneurship. She is currently working on a book about her experiences over the last five years.