What is the right growth rate for your startup

Startups and growth are two intermingled concepts. Once you mention startups, you’re talking about growth. A startup is nothing else than a corporation designed to grow fast. Don’t confuse startups for brand new companies.

Requirements for growth

To be classified as a startup you need to be designed to grow fast, and to grow quickly, you would like two things: 1/ to deal with an outsized market and 2/ to be ready to reach and serve those customers.

Regular companies can only do one of those two things. A startup combines both.

So, how fast should I grow?

Easy, as fast as possible!! We need to define what we mean by “possible.” Below may be a list of things to think about when trying to find the right rate of growth.

Growth isn’t free!

Unless you sold your last startup to Google, the likelihood is that cash is tight, then so is your potential to finance growth. I do know what you’re thinking: let’s raise capital so you’ll afford it. Of course! First, read that. Second, venture capitalists will want to ascertain high growth before they invest. What a nightmare! Don’t lose hope, you’ll still self-finance high growth if your business has a high margin of profit and/or an asset-to-sale ratio. Keep that in mind, once you are building your business model.

Economies of scale

Currently, startups have a strong incentive to grow fast if they’re in a market with significant economies of scale. Most technology startups fall within that category: the more users you add, the more profitable you become (most costs being fixed: HR, infrastructure, etc.). The more productive you become, the more growth you’ll finance.

“Winner-takes-all” markets

In the same spirit, if you’re in an exchange with high network effects (social media etc.), where you’ll establish a typical (operating system etc.), or lock-in customers (high switching costs, etc.), you’ll get to grow a minimum of as fast as your competitors. It’s a race, and there’s just one trophy. Being the leader will make the entire ecosystem evolve around you. You only build serious barriers to entry. Isn’t LinkedIn the sole professional network within the US?

Customer’s patience

Depending on the sort of consumers you’re serving, you would possibly need to hit the brakes a touch . If your market features a lot of “early adopters minded” customers, it’s possible to travel all in: they’re okay with glitches and can assist you in fixing them. On the opposite hand, if your clients are intolerant to glitches (think security, healthcare, etc.), you would possibly want to slow down and make sure about your products before releasing them.

Leadership style

You should recognize by now that startups are messy. The faster you grow, the more problems you’ll need to solve. Some founders thrive under heavy pressure. Others are great when it’s more relaxed. Your ability to deal (rapidly) with problems also will put a bound on your ideal rate of growth.