Scaleup company

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A scaleup (company) is a company who has an average annualized return of at least 20% in the past 3 years with at least 10 employees in the beginning of the period (OECD, 2007)[1]

A scaleup can be identified as being in the "growth phase" life-cycle in the Millers and Friesen (1984)[2] life cycle theorem, or the "Direction phase" in the Greiner growth curve.

The importance of scaleups and the rise of their terminology can be found in the study of the World Economic Forum which found that not all start-ups make it big, but the ones that do greatly impact society by means of new technology, services and increased employment[3].

To aid this rise, instead of large start-up incubators policy makers are more and more focusing on scale-ups since they are the ones that add value.

Definition[edit]

Other definition than the official one from the OECD may apply to better fit scale-up in specific niches. Mostly scaleups are seen as high-tech start-ups, but scale-ups can be much less visible in the economy for instance small local businesses growing and expanding from 10 employees to 17 in three years are already classified as scale-ups. These businesses are important to consider when looking at scaleups since these are the companies that add value to the economy by increased job offers.

Endeavor defines scaleups as companies growing at 20% over the past three years.[4]

Lorenzo Franchini, founder of ScaleIT (an annual event connecting VC funds and scaleups from Italy and South-Eastern Europe), identified some key metrics in order to give a more precise definition of a scaleup: 1 million euros in turnover in the past 12 months or 1 million users per month (for online B2Cs); at least 20% of turnover from foreign clients; at least +10% growth month on month and +100% year on year.[5]

One commonly used definition of 'scaleup' is the OECD-Eurostat definition relating to 'gazelles' or High Growth Firms: "All enterprises with average annualised growth greater than 20% per annum, over a three year period should be considered as high-growth enterprises. Growth can be measured by the number of employees or by turnover."[1]

Evolution of a scaleup[edit]

Adapted from Geoffrey Morre's Crossing Growth Chasm

One way of looking at the evolution of a startup into a scaleup is that scaleups evolve from startups as they cross the (so called) "growth chasm" [6] that is, once they solve the startup challenges of market research, development, and identifying a repeatable, scalable business model. This can be identified by a significant sustained repetition of critical mass[7] in a particular startup’s most significant metric – generally, this metric is revenue, number of employers[8], number of active users, number of active customers, or effective reach, relative to funds raised.[9]

A key difference between a startup and a scaleup is the main challenges faced.[10] While a startup's main challenge is to find a repeatable scalable business model, a scaleup's main challenge is growth of the already identified business model while maintaining operational controls.[11]

Economic importance of Scaleups[edit]

Endeavor published a study reporting that scaleups create most of Southeast Asia’s new jobs.[12] Endeavor founder/CEO Linda Rottenberg published the scaleup petition to further elevate the movement around scaleups. Endeavor's research arm continues to focus on providing more insight into scaleups.


Mentions of Scaleup as a concept[edit]

SEP is a pan-European startup ecosystem established by the European Commission in January 2014 under the EU Startup Europe initiative during the World Economic Forum – Mind The Bridge Foundation (MTB) leads SEP.[13] Its founding partners include BBVA, Telefonica, Orange, Cambridge, IE Business School, European Investment Bank Group, and the European Investment Fund, with support from UK innovation foundation Nesta (charity).[14] SEP is testing accelerated scaleup methodologies, a term it coined while defining[15]

Marco Marinucci: founder & CEO – Mind The Bridge Foundation that leads Startup Europe Partnership (SEP). Marco Marinucci AngeList[16]

Sherry Coutu: Scaleup Advocate, Angel investor, Commander of the Order of the British Empire for entrepreneurship. "We really need to shift the focus from startups to scaleups". Commander Sherry Coutu Video on scaleups.

In March 2014 Sherry was commissioned by BIS [department for Business, Innovation and Skills] through the Information Economy Council to produce 'The Scale Up Report on UK Economic Growth', an independent report that presents results from other nations that have changed their economic policy towards scale-ups and recommends actions the UK needs to take to ensure is the leading economy in the world for generations to come.

Alberto Onetti: Chairman – Mind The Bridge Foundation (MTB) that leads Startup Europe Partnership (SEP); SEP Coordinator at MTB. Professor of Entrepreneurship at Insubria University and serial entrepreneur. He is a scaleup advocate. Alberto Onetti Linkedin Alberto Onetti crunchbase[17]

Brad Feld: A noted American entrepreneur, author, blogger, and venture capitalist. In 2013 he wrote a piece about shifting his focus from startups to scaleups.[18]

The World Economic Forum (WEF) published a report highlighting scaleups as the collaborative road to sustainable growth.[19] SEP was launched at the 2014 WEF event in Davos, Switzerland.[20]

David Butler, vice president of innovation at The Coca-Cola Company, gave a speech in August 2013 about the next wave of innovation; Scaleups. He described why and how Coca-Cola is joining the entrepreneurial revolution.[21] "The weird thing is that big, established companies know how to scale, but don’t know how to start. At Coke, we think the big idea, or the next wave of innovation; will be all about building scaleups."[22]

Daniel Isenberg, professor of Management Practice at Babson Global who publishes articles in the Harvard Business Review, leads the Scale Up Milwaukee startup ecosystem. He reports that "Startup CEO (written by Matt Blumberg, CEO of Return Path), Startup Boards (written by Brad Feld and Mahendra Ramsinghani), and Startup Metrics (written by Brad Feld and Seth Levine) each are a lot more about ‘scaling up’ than ‘starting up’."[23]

Joe Haslam, Associate Professor at IE Business School and executive director of Owners & Entrepreneurs Management Program gave a class titled "Scaleup is the New Startup" in March 2014.[24]

Joe explains how understanding operations is the key to scaling in this video [25]

Verne Harnish is founder of ScaleUpU with Brad Feld and Sheri Coutu as advisors; author of Scaling Up (Rockefeller Habits 2.0); and founder of the Entrepreneurs' Organization.[26][27][28]

Matching Services[edit]

Several businesses offer matching services between established companies and scaleups, such as: RocketX: RocketSpace’s Corporate Innovation Program[29]

  • Startup Europe Partnership Matching Events[30]
  • Runway – Focus on growth; Intros to Fortune 500 companies[31]
  • Bootstrap Labs[32]
  • ScaleIT [33]
  • Scale-Ups.eu

History[edit]

The origin or first use of the term scaleup in the context of a growing company is unknown[citation needed] The first known use of the term scale-up (context unknown) was in 1945 [34]

On Sept 4, 2014, Daniel Isenberg and Linda Rottenberg submitted a petition titled The Global Scale Up Declaration[35] to Change.org to further highlight the scaleup movement, scaleups and the virtues of focusing on growth.[36]

References[edit]

  1. ^ a b "OECD Eurostat-OECD Manual on Business Demography Statistics". Eurostat-OECD. 
  2. ^ Miller, Danny; Friesen, Peter H. (1984-10-01). "A Longitudinal Study of the Corporate Life Cycle". Management Science. 30 (10): 1161–1183. doi:10.1287/mnsc.30.10.1161. ISSN 0025-1909. 
  3. ^ http://www3.weforum.org/docs/AMNC14/WEF_AMNC14_Report_TheBoldOnes.pdf
  4. ^ "Endeavor scaleup metrics". ecosysteminsights.org. 
  5. ^ "ScaleIT" (PDF). 
  6. ^ "Growth Chasm illustration". startupeuropepartnership.eu. 
  7. ^ "SEP reports critical mass as key factor". twitter.com. 
  8. ^ "Eurostat-OECD Manual on Business Demography Statistics - OECD". www.oecd.org. Retrieved 2017-06-20. 
  9. ^ "Mind The Bridge Foundation take on Scaleup metrics". mindthebridge.org. 
  10. ^ "Marco Marinucci (2014), Scaleup Metrics". mindthebridge.org. 
  11. ^ Dartmouth defines scale-up process
  12. ^ "Scaleup Companies Create Most of Southeast Asia's New Jobs". ecosysteminsights.org. 
  13. ^ SEP launch press release
  14. ^ "Startup Europe Partnership". startupeuropepartnership.eu. 
  15. ^ "Definition of a scaleup". startupeuropepartnership.eu. 
  16. ^ "@mmarinucci tweet on scaleups". twitter.com. 
  17. ^ "@aonetti tweet on scaleups". twitter.com. 
  18. ^ "Brad Feld Shifting Focus". Feld Thoughts. 
  19. ^ World Economic Forum 2014 report
  20. ^ SEP launch press release
  21. ^ "David Butler, Coca-Cola – Scaleups, the next wave of innovation". The Coca-Cola Company. 
  22. ^ "Coca-cola joining the entrepreneurial revolution". The Coca-Cola Company. 
  23. ^ "Daniel Isenberg on Scaling up". Harvard Business Review. 
  24. ^ Joseph Haslam. "Joe Haslem, Scaleup is the New Startup". slideshare.net. 
  25. ^ Joseph Haslam. "Joe Haslam, Scaling Up". youtube.com. 
  26. ^ Verne Harnish. "Verne Harnish, Gazelles". gazelles.com. 
  27. ^ Verne Harnish. "Scaling Up". scalingup.com. 
  28. ^ Verne Harnish. "ScaleUp-U". scaleupinstitute.org. 
  29. ^ RocketSpace. "RocketX". rocket-space.com. 
  30. ^ "SEP Matching Events". startupeuropepartnership.eu. 
  31. ^ "Runway". Runway. 
  32. ^ "Scale-Ups.eu". scale-ups.eu. 
  33. ^ "ScaleIT 2016 - Top Italian Scaleups Showcase for International Investors". ScaleIT 2016 (in Italian). Retrieved 2017-03-13. 
  34. ^ https://www.merriam-webster.com/dictionary/scaleup
  35. ^ "The Global Scale Up Declaration". Change.org. 
  36. ^ "Petition · The Global Scale Up Declaration · Change.org". Change.org.