From start-up to scale-up: What does it take?
September 14, 2016 Editor 0
What do you think of when you hear the term “entrepreneur”? What about “growth entrepreneur”? Do Elon Musk and Tesla come to mind? Travis Kalanick and Garrett Camp of Uber? Jack Ma of Alibaba?
Forget for a moment the immense scale that these few, highly successful tech giants have achieved. Such cases will always be outliers. Instead, imagine the potential collective impact of companies in developing countries growing from a $50,000 to a $1 million company, or from a $1 million to a $10 million company. Imagine how this could help generate dynamism in the local economy and ultimately increase competitiveness, incomes and jobs.
The reality, however, is that most start-ups fail — about two-thirds, according to most estimates. Furthermore, out of the one-third that do survive, nearly 90 percent won’t grow at all. So when you picture 100 start-ups, you know that roughly 30 will survive: After two years, 20 or 25 will still exist, but only 5 or 10 will employ more people and generate higher revenues compared to when they started. Research from across the world is showing that this small number of growth-oriented firms accounts for nearly half of all net new job creation.
So how do you get from start-up to scale-up? What’s the “secret” behind the few companies that succeed? How do we increase the proportion of firms that survive and grow, particularly in places where job creation and growth are needed most?
We can start to answer this question by asking whether there is anything unique about the individuals who launch or run companies that grow. For one, growth-oriented entrepreneurs must have the aspiration to grow. You cannot expect that entrepreneurs will take the risk of expanding a company if they have no aspiration to do so. Expanding a company requires significant sacrifice, time and resources that many entrepreneurs cannot — or are not prepared to — invest. Indeed, “personal circumstances” is one of the most cited reasons for discontinuing a start-up project.
If having the right mindset is so critical to entrepreneurial success, are there any factors or traits that make some individuals more likely than others to succeed at starting and scaling a business? The literature is divided on this.
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Tags: start-up to scale-up
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