Scaleup company

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A scaleup company or just scaleup is defined by the OECD as a company having an average annualized return of at least 20% in the past 3 years with at least 10 employees in the beginning of the period.[1]

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

The importance of scaleups and the rise of their terminology according to the World Economic Forum is that, although not all startups make it big, the ones that do greatly impact society by means of new technology, services and increased employment.[3] [4]

To aid this rise, instead of large startup incubators, policy makers are more and more focusing on scaleups since they are the ones that add value.

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 Moore'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" [5] 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[6] in a particular startup's most significant metric – generally, this metric is revenue, number of employers,[7] number of active users, number of active customers, or effective reach, relative to funds raised.[8]

A key difference between a startup and a scaleup is the main challenges faced.[9] 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.[10]

A 2018 study showed that only 0.4 percent of all startups scale, reaching more than 10 million revenues within 5 years.[11] The remainder stabilizes or grows at a much lower rate.

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.

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[bare URL PDF]
  4. ^ Santos, E., Lisboa, I., Moreira, J., & Ribeiro, N. (2020, October). Regional Competitiveness and the Productivity Performance of Gazelles in Cultural Tourism. In International Conference on Tourism, Technology and Systems (pp. 114-124). Springer, Singapore.https://link.springer.com/chapter/10.1007/978-981-33-4260-6_11
  5. ^ "Growth Chasm illustration". startupeuropepartnership.eu.
  6. ^ "SEP reports critical mass as key factor". twitter.com.
  7. ^ "Eurostat-OECD Manual on Business Demography Statistics - OECD". www.oecd.org. Retrieved 2017-06-20.
  8. ^ "Mind The Bridge Foundation take on Scaleup metrics". mindthebridge.org.
  9. ^ "Marco Marinucci (2014), Scaleup Metrics". mindthebridge.org.
  10. ^ Dartmouth defines scaleup process
  11. ^ "The Art of Scaling, ScaleUpNation (2018)" (PDF).
  12. ^ "Scaleup Companies Create Most of Southeast Asia's New Jobs". ecosysteminsights.org.