A growing trend among Israeli start-ups is to focus on the scale-up. Rather than seeking exits, more founders are developing their companies into larger businesses. To understand how Israeli founders can scale up their start-ups, I turned to serial entrepreneur Chaim Ellenbogen.
Chaim Ellenbogen is the founder of Checkomatic, a New York-based company providing customized computer, business, and laser checks. This is the first in a series that explains the keys to his success and advice for Israeli founders.
Most start-ups close within the first few years, and the successful ones usually seek an exit. You have been in business for over twenty-three years. Why did you decide to stay with your business?
People seek exits for different reasons. Some entrepreneurs want to make a fortune as quickly as possible. Others feel the pressure that if they do not sell to a large corporation, someone else with a similar idea will beat them to it. Some realize that they have the skills, personality, and drive uniquely suited for start-ups. But, they don’t have the skills for the scale-up. And some realize that they have the dream, ability, and personality fit for the scale-up. I am this final type of entrepreneur. I do it because I love it.
Many founders associate the scale-up phase with a lack of innovation. What do you think?
Innovation and scale-up go hand in hand; it is a different kind of innovation. Start-up innovation is often associated with developing a new program or technology. Scaling-up is about taking what you built to more significant markets and building the team of people who can take it there. You still need to innovate, but it is a different kind of innovation. How can I enter this market? How will we sell to a new type of client? What sectors or industries can use the service that we have overlooked, and how can we adapt to meet their needs. This is the kind of innovation that founders considering scale-up must ask themselves.
At Checkomatic, you sell printed checks. To many Israelis, this sounds like an antiquated product. How do you stay relevant in today’s digital business environment?
Excellent question and it highlights something that many Israeli founders overlook. First, American business culture uses a lot of printed checks. Government agencies and non-profit organizations are also large consumers. Credit cards, online banking, digital payment services compete with checks, but they have not made them obsolete.
Second, printed checks are part of a company’s brand. Paying an employee, service provider, or independent contractor with a standard check says something about your company. Paying with a perfectly printed check on high-quality paper with your logo and branded colors says something else.
Third, technology and transformation have been a source of new business for us. When accounting software created the possibility for computer checks, I realized that this would be big.
How did you realize that computer checks were going to become big business? How did you adapt?
I had been following computers and software for a long time. I realized that software was changing everything and that one day it would change the check printing industry. When I read that software companies were developing programs for accountants, I contacted several computer programmers. I said, “When this software comes out, I want to be ready. What will it take?”
Then I wrote a letter to my clients explaining what was happening in the software industry, different software options, how it will impact their business, and that I will have checks that work with all the major programs. When new software came out, we were ready. This is only one example of how we transformed with technology.
What advice can you share with Israeli founders about your experience?
I didn’t invent the computer or create a software program. I kept my finger on the pulse of business and connected the dots. Even if you are not an engineer or computer specialist, you can still build a business by connecting the dots.
In the next part of the series, we will discuss how Chaim scaled his start-up with a new division.