A start-up is a little turtle on a clear path: to reach the sea.
Once it does, an ocean of opportunity lies ahead
A scale-up is an entrepreneurial venture that has achieved first revenues and now faces either the “second valley of death” or exponential growth.
To grow from a start-up team of about 15 employees towards a scale-up company of more than 100, a company needs to transform itself, from:
- Founders to CEO/MT
- Team to company
- First to recurring revenues
- Projects to processes
- First product to innovation pipeline
- Local to international
But how do companies scale?
There is no simple formula.
In researching over 500.000 ventures and working closely with 130+ teams on the ground, we discovered that scaling is an art. It can be distilled into about 20 factors that differentiate between those that scale and those that stall.
The Scale-Up Success Factors
- Scale-Up DNA
- Ambidextrous Leadership
- Business Flywheel
- Strategic Leaps
- Dynamic Structure
- Access to Finance
Before a business ever scales, it first gets started.
It all starts with a compelling vision – the articulation of a mission to resolve a large, real, urgent need, through an ambitious, future-oriented, innovative, compelling business concept
74% of scale-ups have articulated their future clearly (versus 41% of stall-ups). Having a mission that is socially orientated increases the probability of scaling by approximately 3 times.
Impact orientation is a
success factor.
The team is more important
than the dream.
Scale-ups are built on a foundation of professionalism and trust. To achieve that, scale-up leaders act as “multipliers”. They spot and unleash the genius in their employees and provide the context and resources that allow people to flourish.
“Multiplier” leaders strive towards reducing the organization’s dependency on them. The goal is to help everyone around them rise to the level they become multipliers themselves.
96% of scale-ups been founded by 3 or more founders.
Scale-ups take senior hiring more seriously. 42% of scale-up CEOs spent >10% of their time on senior hiring.
Nearly 2 thirds of scale-ups have a supervisory board, compared to 46% of stall-ups.
A step-change in productivity.
Scale-ups have to quickly accelerate sales momentum. Operations need to keep the business moving and functioning at peak levels, as well as rapidly learning how to become better and more efficient.
By constantly conducting experiments and tracking resulting performance improvement, scale-ups achieve a high “learning velocity”.
72% of scale-ups conquer a beachhead.
48% have sales that grow faster than production.
80% launch at least 2 improved versions of their product a year.
Like a skater on thin ice, you
need to keep moving or drown.
Strategy is about discovering new products to offer, and new markets and customers to serve. To stay ahead, the company needs to keep innovating.
60% or scale-ups constantly expand their product service.
64% of scale-ups generate >20% of their revenues internationally.
Going international is a success factor
Lone wolves hunt rabbits,
wolf packs hunt bison.
The scale-up needs more organization than a startup, but it still needs to remain highly adaptable. The result is a dynamic structure – like a pack of wolves that is agile yet trained, open to increase in numbers yet closely knit together. In packs, grey wolves bring down bison, moose, or musk oxen. On their own, they hunt rabbits or beavers.
Fostering a tribe
- 92% of scale-ups believe they can have global impact
- Scale-ups are 2x as likely as start-ups to be like “one, big family” instead of having clear work-life separation
Learning & experimenting
- Almost all scale-ups (96%) encourage their employees to experiment
- Scale-up employees have the freedom to deviate from the playbook
Access to finance
As they scale, ventures need significant funding – think of production facilities, or building an international sales team. It truly helps if the business model allows for positive working capital – indeed firms with negative working capital can grow themselves into bankruptcy.
50
of scale-ups have positive working capital, vs 25% of stall-ups
38
of scale-ups attract significant subsidies, vs 64% of stall-ups
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Having a common language about scale-up success factors will contribute to the scale-up ecosystem. It provides a shared way to talk about investments and priority setting. Therefore we promote every practitioner to use these materials and others on our website for their own benefit. Lawyers call this “creative commons.”