When many people think of startups, phrases like “immature,” “risky,” and “small-scale” tend to come to mind. Yet, despite these descriptors, many startups outgrow the title to become large scale, reputable businesses. Just because a business begins its journey as a startup, doesn’t mean it has to stay that way. Essentially, a startup is a business phase, not a final destination. However, it’s also a distinct entity from both small businesses and large-scale corporations, at least from the outset.
Companies like Airbnb and Uber, for example, began their lives as startups before moving on to become fully-fledged companies with an international following. Yet, there are thousands of other startups which never make it out of the initial startup phase. This reality begs the question of what is the precise formula which permits some companies to move past the startup label, and prevents others from crossing the threshold?
Unlike small businesses, who rely on almost immediate profits to support the business owner, startups are a risky endeavor designed to handle large growth on a rapid scale either through user acquisition (Facebook, Uber) or profitability (Amazon). Thus, for startups, there are a couple of clear dividing lines which separate the startup phase from the sustainability phase. For example, if your startup is earning upwards of $20 million annually, or consists of 80-100 full time employees, it’s no longer a startup. It’s full-fledged.
According to Tech in Asia, there are three distinct phases of growth in the evolution of a startup:
- Development – slow to non-existent growth
- Scaling – accompanied by identification of target markets and the meeting of product demand
- Saturation – Growth reduces to meet diminishing demand
On the other hand, startups also differ from large corporations, whose projections are more conservative because they have to answer to investors. Startups have more room for risk-taking, and can act more readily when opportunities arise. Although, it is important to note that many large scale corporations began their efforts as scalable startups.
Startups have the potential for growth in ways that small businesses and large corporations simply don’t have. The opportunity to take strategic risks, and have substantial success as a result, is what makes forming a startup such an exciting endeavor. Yet, it’s important to recognize that the startup phase is just the beginning, and planning towards a more sustainable and properly scaled model will ease the transition to a more established entity.
Read more at Venture Burn.
What phases of growth have you seen in your startup? What experiences have you had with handling scalability in meeting customer demands? What do you foresee as your company’s final destination?