Wed, Feb 24, 2016
Few strategies are as detrimental to your startup, once it hits initial traction, than premature scaling. Driven by an excitement over their initial success, pressure from investors and fear of competitors coming into the market, entrepreneurs feel compelled to scale their businesses as fast as possible.
As much as this is a good general strategy if your company is building something which is well understood in the market (a me-too product), it can be fatal if what you’re building is truly new.
One study of over three thousand startups indicates that roughly three out of every four fail because of premature scaling — making investments that the market isn’t yet ready to support.
When you create something new, it is of paramount importance to understand that you need to educate the market about your product, its use, value and importance. And it just takes time.
We see this quite a bit with the startups we build here at Singularity University — startups which deploy exponentially accelerating technologies to tackle large-scale problems. As amazing as their solutions might be — if they are not careful about scaling alongside their market, they typically just fizzle out as they scaled prematurely.
Take Apple as a positive example: At the time Steve Jobs introduced the iPhone, Apple had the iPad essentially ready. But Steve knew that he first needs to educate the market about this new technology, the new way of interacting with your technology (tap and swipe, pinch-to-zoom, etc instead of point and click) and that it would be premature to release both products at the same time.
I said this before (in a slightly different context):
Building a successful company takes time. Perseverance and patience — combined with a healthy sense of urgency — are key character traits of the best entrepreneurs in the world.