Scaleup company

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, and had at least 10 employees at the start of the 3 year 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.

Concept

A scaleup is still considered a startup company but one that has significantly expanded within the prescribed period and annual return average.[3] It is also identified as companies that already found their product/market fit.[4] A key difference between a startup and a scaleup is the main challenges faced.[5] 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.[6]

It is reported that one out of ten VC-funded startups successfully transitions to this stage.[7] A 2018 study showed that only 0.4 percent of all startups scale, reaching more than 10 million revenues within 5 years.[8] The remainder stabilizes or grows at a much lower rate. A scaleup, once successful, obtains the unicorn status.[7]

Evolution

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" [9] 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[10] in a particular startup's most significant metric – generally, this metric is revenue, number of employers,[11] number of active users, number of active customers, or effective reach, relative to funds raised.[12] Once scaleup company employs at least 10 people, then it is considered within its growth phase life cycle.[3]

Importance of Scaleups

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.[13][14]

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]

Endeavor published a study reporting that scaleups create most of Southeast Asia's new jobs.[15] Endeavor founder/CEO Linda Rottenberg published the scaleup petition to further elevate the movement around scaleups.

References
  1. "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. Gusdorf, Florent (2020). New Words Lycée. Lexique thématique du vocabulaire contemporain anglais-français (Conforme aux nouveaux programmes). Paris: Editions Ellipses. ISBN 978-2-340-04146-2.
  4. Association, Indian Innovators (2019-09-05). Creating Demand for Local Innovations: Compendium of Best Practices. Notion Press. ISBN 978-1-64650-786-3.
  5. "Marco Marinucci (2014), Scaleup Metrics". mindthebridge.org.
  6. Dartmouth defines scaleup process
  7. Gauthier, Romain; Malik, Samar (September 26, 2023). "SAP BrandVoice: Scaleup For Growth: Will Your ERP Help Or Hinder?". Forbes. Retrieved 2023-10-14.
  8. "The Art of Scaling, ScaleUpNation (2018)" (PDF).
  9. "Growth Chasm illustration". startupeuropepartnership.eu. 29 July 2014.
  10. "SEP reports critical mass as key factor". twitter.com.
  11. "Eurostat-OECD Manual on Business Demography Statistics - OECD". www.oecd.org. Retrieved 2017-06-20.
  12. "Mind The Bridge Foundation take on Scaleup metrics". mindthebridge.org.
  13. http://www3.weforum.org/docs/AMNC14/WEF_AMNC14_Report_TheBoldOnes.pdf
  14. Santos, Eleonora; Lisboa, Inês; Moreira, Jacinta; Ribeiro, Neuza (2021). Abreu, António; Liberato, Dália; González, Elisa Alén; Garcia Ojeda, Juan Carlos (eds.). "Regional Competitiveness and the Productivity Performance of Gazelles in Cultural Tourism". Advances in Tourism, Technology and Systems. Smart Innovation, Systems and Technologies. Singapore: Springer: 114–124. doi:10.1007/978-981-33-4260-6_11. ISBN 978-981-334-260-6.
  15. "Scaleup Companies Create Most of Southeast Asia's New Jobs". ecosysteminsights.org.
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