Friday, July 19, 2013

Can It Scale Quickly? Is it the Wrong Question for Many Startups?

Does your business model enable you to scale quickly?   That's the question facing many start-ups these days as they seek capital from investors.   The question proves most pertinent for tech start-ups, but it seems to be thrown at founders in many different kinds of companies these days.   Is there a danger to focusing on this question?   I would argue that founders and investors must be aware of two significant downsides.    First, focusing on scale, and trying to scale too quickly, can cause start-ups to lose sight of their target market.  Who precisely do they aim to serve, and who they do not plan to serve?    A strategy can become "all things for all people" very quickly as the scale question comes to dominate conversations.   Second, founders and investors often can underestimate the challenges associated with scaling quickly.    Sometimes, it makes sense to take a bit of time to get the business model right before trying to grow rapidly.   I find it very interesting that many investors proclaim the mantra of fast iteration and experimentation, yet they also push for scale at the same time. 

2 comments:

ed simnett said...

Great observation. I remember recently reading advice that you had better be very important to a small group of passionate users, rather than slightly important to a lot of users. That goes exactly to your point here.

Michael Roberto said...

Thanks for commenting, Ed! I hope all is well.