When does a Startup turn into a Scaleup
by Alberto Onetti
Scaleups. Some have said they are the next wave of innovation. Others have credited them as the collaborative road to sustainable growth. Others see them as the only way to keep the wheel of innovation up and running (or the only way to avoid the crash and burning of some startup ecosystems). All this and more is accurate. But scaleups still lack a clear definition.
Largely because of a mandate we received from the European Commission to lead the Startup Europe Partnership (and our passion for entrepreneurship), we at Mind The Bridge Foundation, think it is time to have a common understanding about what exactly is a scaleup. The “one million dollar question” is: When does your startup become a scaleup?
We define a scaleup as a development-stage business, specific to high-technology markets, that is looking to grow in terms of market access, revenues, and number of employees, adding value by identifying and realizing win-win opportunities for collaboration with established companies. As with any capital-intensive company, the financing goal for a scaleup is to reward its investors, either by being acquired via an M&A or via an IPO.
This follows Steve Blank’s definition of a startup by its main challenge: the search for a repeatable scalable business model. Aligning with his definition of a startup, a scaleup is past the search phase and rather in the execution phase of the business model. Also, the World Economic Forum assesses the challenges affecting businesses in expansion and stresses the importance of the scale-up phase after the startup phase.
This definition then lends itself to the startup ecosystem as the foundation. Scaleups exists on top of a solid startup ecosystem. Brad Feld describes this well in saying:
“You have to have a vibrant “startup community” to get to the point where you have enough interesting companies to “scale up.” Many geographies haven’t had enough focus on “startup.” That has dramatically shifted and entrepreneurs around the world understand what “startup” is, are learning and doing it, and a phenomenal amount of activity is happening around it.”
At the same time, in order to flourish, scaleups do require a solid pool of established companies interested in providing growth opportunities. Scalers are those established companies that provide growth opportunities to scaleups that include procurement, (corporate venture capital) investment, acqui-hire, and acquisition.
So – getting back to the one million dollar question – when does your startup become a scaleup?
Your startup becomes a scaleup after it has validated its business model hypothesis, solved all the startup challenges, and thereby is ready for growth – exponential growth. We call this “crossing the growth chasm”, a modification and reapplication of Geoffrey Moore’s phrase— hopefully he’ll write another book for scaleups.
Accelerated Scaleup Methodologies
Lean startup methodologies help startups search, find, and enable repeatable scalable business models fast and at an affordable cost – advocating for failing quickly.
At Mind The Bridge Foundation, we are testing “Accelerated Scaleup Methodologies”, where the goal of these methodologies is to help established organizations find the best scaleup partners that results in exponential growth. We are advocating for hyper-targeting the right partners and getting “initial Yes/No” answers quickly.
Lean Startup methodologies are to validate a business model hypothesis as Accelerated Scaleup methodologies are to identify the right counterparts and execute growth opportunities—thereby fulfill the ultimate goal of having started up in the first place.
We will explore accelerated scaleup methodologies deeper in a future post.
* Originally published on Startup Europe Partnership website.