It means he needs to be bigger, either in terms of sales, profit, capacity etc of a combination of the above.
The idea is that a startup with 100 customers will get a better deal than one with 2 customers.
Of course "scale up" is not limited to startups, it can apply to making anything bigger.
One common use of the term is when one develops a prototype process, such as a new cake recipe in one's kitchen. The home oven might be able to make 10 cakes a day. Scaling up would mean figuring out how to make a commercially viable quantity such as 200 cakes a day. Here scaling up would entail modifying processes and materials to be efficient in a production environment. Using 50 lb sacks of flour rather than 5 lb packages for example and getting appropriate sized storage bins etc.
As to your comment, is it always required before trying to get some deals? No, not always. Let's take the example of a bakery. You have a good cake recipe and a home kitchen and approach an investor to get funding for a commercial kitchen (scaling up). He might say:
1) "How do I know if this will make money, you have never sold any cakes?" In this case you might want to bake some cakes and take them to the market to prove to him that people are willing to pay for the cakes. What he is telling you is that he will offer a better deal to someone that is actually selling cakes and making money than to someone who just has a great recipe.
on the other hand he might say:
2) "Wow, this is the best cake I have ever tasted, my brother owns a large baking company, I would like to buy the recipe from you." To a large company like General Mills or Sara Lee a great recipe could be worth lots of money. If he is making you a great offer you like, you could simply sell the recipe, there is no point in scaling up as it would not make the recipe any more valuable.
He may also mean bigger in terms of his team. A larger startup team, or even just two founders rather than one, means more people are willing to take the risk for the startup.