3 Key Conditions of Creating a Scale-Up

Startups are progressively becoming impactful to many economies in recent years. According to the recent Startup Genome “Frankfurt Startup Ecosystem Report”, fast-growing startups, known as scale-ups, are capable of creating more jobs and two times the revenue in comparison to startups. The 2017 European Scale Up Report can also confirm this: scale-ups have provided an 23 percent increase in job availability in Europe and, overall, more potential to providing utmost economic value to stakeholders and societies across the globe. When comparing a traditional startup to a scale-up, there are several conditions which should be met to make it more likely to achieve the same extent of development.

“Startups that grow rapidly to large size–scaleup firms–are the key driver of job creation and economic impact in every country and region. These companies help thei ecosystems grow larger. creating a virtuous cycle of further scaleup creation.” -Startup Genome

ONE: Global-Orientation

In order for a startup to become a scale-up, it is important that expansion beyond regional and national borders is implemented. International expansion will make it more likely for founders to create a higher level of global connectedness. According to Handelsblatt Global’s article by consultant Martin Eisenheit, networking abroad is crucial to acceleration of the startup world, especially with regards to technology. He states that global orientation ensures that there is a mix of international developed structures, so that countries are able to work together to further their entrepreneurial ideas. The main issue in cities within Germany is the lack of global connectedness, limiting scale-up growth potential. This connection can be solidified by implementing more frequent visits to top ecosystems worldwide or by meeting other founders who visit the local ecosystems. Creating global connections means an increased likelihood to reach global markets, increased global sales, increased growth, increased performance, and, ultimately, an increased number of scale-ups.


Figure 1. The Frankfurt Scaleup Ecosystem Report shows that founders of scaleup firms have a higher level of global connection than typical startups.

TWO: Ambition

Ambition is also a key success factor for creating scale-ups because it acts as a measurement of motivation and market reach. Ambitiousness is an important characteristic that can be attributed to the majority of scale-up founders. Scale-up owners are 2.5 times more ambitious in their business endeavors in comparison to startups. However, an issue that needs to be resolved is the lack of founder ambition. In a recent article on Frankfurter Allgemeine, Julia Löhr observed that there is a lack of employment security within startups which has limited the number of entrepreneurs with the ambition required for the introduction of scale-ups. Startup Genome’s suggestion in order to increase the level of founder ambition is to strengthen the relationships with outside founders from top ecosystems in order to put forward meaningful combined efforts and strategies for the purpose of accelerating scale-up growth.


Figure 2. The Frankfurt Scaleup Ecosystem Report shows that individuals of scaleup founders have higher ambition levels than typical startup founders.

THREE: Experience
Experience especially has a considerable contribution to the creation of scale-ups. This can apply to two types: startup/scale-up experience. However, the experience and skills required for scale-up growth is lacking as well. Julia Löhr’s research states that over 440,000 skilled workers were missing from enterprises in 2017. It is important to note that within this article, it was also confirmed that the founders of most successful startups were not “hiding away” within already established enterprises, but rather were networking with businesses in early stages for advice to improve their business ideas and gain experience in the field. Scale-ups are 63 percent more likely to have founders with previous startup experience and 29 percent more likely to have previous scale-up experience (also known as “hypergrowth”).


Figure 3. The Frankfurt Startup Ecosystem Report shows that scaleups have a higher share of founders who have previous startup/scaleup experience.

By incorporating oneself into the startup community, there is increased potential for business ideas to become, not only a reality, but a fast-growing startup—scale-up—as well.

Citations

Eisenhut, M. (2018, February 20). Berlin needs to look beyond Germany for its digital future. Retrieved June 7, 2018, from https://global.handelsblatt.com/opinion/berlin-needs-look-beyond-germany-digital-future-889557

Löhr, J. (2018, April 16). Neue Gründerplattform: Wirtschaftsminister Altmaier umwirbt Gründer. Retrieved June 7, 2018, from http://www.faz.net/aktuell/wirtschaft/unternehmen/bmwi-und-kfw-starten-gruenderplattform-15544920.html

Mohaut, O. (2017, October 11). Sirris: European Scaleups Report (2017). Retrieved June 5, 2018, from https://www.scale-ups.eu/the-scale-up-landscape/2017/sirris-european-scaleups-report-q1-2017