70% of all startups fail due to premature scaling. What is the difference between Blitzscaling, FastScaling and Premature Scaling?
In 2011, a Startup Genome Report, which was co-authored by researchers from UC Berkeley and Stanford, surveyed 3,200 startups in order to better understand what makes high growth technology startups succeed and fail. The results were astonishing:
70% of all startups failed because of premature scaling.
Startups that scaled properly grew about 20 times faster than startups that scaled prematurely.
Premature scaling comes in many shapes and forms. Essentially, you burn unnecessary amounts of cash before you have validated the fundamental elements of your business model.
A specific form of premature scaling is blitzscaling. If you blitzscale you make decisions before you know exactly how things will play out. You accept the risk of making mistakes and operating inefficiently, in exchange for moving faster.
Until you reach the strategic inflection point where you need to prioritize speed over efficiency, you can avoid any form of premature scaling. You can FastScale.
First, you establish the FastScaling foundation that validates the viability of your business model. You generate product/market fit and product/channel fit. You ensure that your technology is stable, secure, and scalable. You make sure that your target market is large enough and that you can become the market leader.
Then, if your growth readiness is reflected in strong unit economics, you FastScale. You focus relentlessly on customer success. You generate predictable revenue and scale cash efficiently. You demonstrate strong leadership skills and create a successful high growth organization.
If you FastScale, you carefully balance speed and efficiency. Ultimately, it may take you a bit longer. But the probability that you succeed building a massively valuable business is significantly higher.
If you are interested in the FastScaling methodology, you may want to have a look at my book FastScaling.