The number one reason that startups fail is from premature scaling. A study from the Startup Genome Report found that 74% of startups fail because of premature scaling, while those who scale properly typically see growth that’s 20 times faster.

To better understand scaling risks and rewards, I worked with Alligatortek to analyze a list of major companies that scaled quickly, with good results and bad.  Here’s what we found:

• Companies who scale quickly have many similarities, including the ability to raise capital to support growth prior to turning a profit.
• Slack, a popular cloud-based team collaboration and communication tool scaled quickly from 2014-2017.  The popularity of the app globally spurred a need to grow quickly. In that time period they went from 8 to 385 employees and raised over $160 million in funding.  Their valuation also went from $1.2 billion to $3.8 billion in just under 3 years.
• Chobani also got scaling right.  Chobani knew they could scale quickly for two reasons.  One their product was extremely popular in a limited area, so they could safely assume it would be popular if they took it nationwide.  Lack of competition was the other factor that contributed to their success. In just 7 years they went from a revenue of $2 million to over $1 billion.
• Many companies have got scaling wrong including Groupon, Blockbuster and Kodak.

Take a look at the rest of our analysis and let me know if you can use any of this for a story.  There are a few interesting storylines from our analysis that show why many startups fail while other’s succeed that I’d be happy to discuss with you further.

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