The amount of startups that transition to scaleup is smaller than you may first think. Startup failure rates remain high, depending on which stats you look at, CB Insights suggest 9 out 10 startups fail and Startup Genome suggests that 74% of failures are directly linked to premature scaling.
So how do you identify the scaleup signals and make the right decisions to avoid the premature scaling trap. Let's start by asking yourself:
- Do you have the right people doing the right things?
- Is your customer base growing organically?
- Can you accurately predict your revenue?
- Is your profit increasing faster than your costs?
If the answer to these questions is “yes”, then you are probably ready to scale your business, and by reading this article you will discover scaleup challenges and how to overcome them.
What is the difference between a startup and a scaleup?
Scaling invites a whole host of newfound issues to overcome; from people management to processes and systems, from culture to team communication and effective collaboration. Being aware of these potential hurdles can smooth the way for transitioning from a startup to scaleup.
It is probably worth touching on the definitions of a startup and a scaleup.
Definition of a startup - The term startup refers to a company in the first stages of operations. Startups are founded by one or more entrepreneurs who want to develop a product or service for which they believe there is demand.
Definition of a scaleup - The term is less defined and somewhat subjective, but in general, the term scaleup is defined by team or revenue growth of more than 20% per year, for a minimum of three years.
So let's take a look at some of the common challenges transitioning from startup to scaleup...