Scaleup company

A scaleup (company) is a company who has an average annualized return of at least 20% in the past 3 years with at least 10 employees in the beginning of the period (OECD, 2007)

A scaleup can be identified as being in the "growth phase" life-cylce in the Millers and Friesen (1984) life cycle theorem, or the "Direction phase" in the Greiner growth curve.

The importance of scaleups and the rise of their terminology can be found in the study of the World Economic Forum which found that not all start-ups make it big, but the ones that do greatly impact society by means of new techonolgy, services and increased employment.

To aid this rise, instead of large start-up incubators policy makers are more and more focusing on scale-ups since they are the ones that add value.

Other definition than the official one from the OECD may apply to better fit scale-up in specific niches. Mostly scaleups are seen as high-tech start-ups, but scale-ups can be much less visible in the economy for instance small local businesses growing and expanding from 10 employees to 17 in three years are already classified as scale-ups. These businesses are important to consider when looking at scaleups since these are the companies that add value to the economy by increased job offers.

Endeavor defines scaleups as companies growing at 20% over the past three years.

Lorenzo Franchini, founder of ScaleIT (an annual event connecting VC funds and scaleups from Italy and South-Eastern Europe), identified some key metrics in order to give a more precise definition of a scaleup: 1 million euros in turnover in the past 12 months or 1 million users per month (for online B2Cs); at least 20% of turnover from foreign clients; at least +10% growth month on month and +100% year on year.

One commonly used definition of 'scaleup' is the OECD-Eurostat definition relating to 'gazelles' or High Growth Firms: "All enterprises with average annualised growth greater than 20% per annum, over a three year period should be considered as high-growth enterprises. Growth can be measured by the number of employees or by turnover."

One way of looking at the evolution of a startup into a scaleup is that scaleups evolve from startups as they cross the (so called) "growth chasm" that is, once they solve the startup challenges of market research, development, and identifying a repeatable, scalable business model. This can be identified by a significant sustained repetition of critical mass in a particular startup’s most significant metric – generally, this metric is revenue, number of employers, number of active users, number of active customers, or effective reach, relative to funds raised.

A key difference between a startup and a scaleup is the main challenges faced. While a startup's main challenge is to find a repeatable scalable business model, a scaleup's main challenge is growth of the already identified business model while maintaining operational controls.

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