To decide who to bet on is always a gamble: the hare or the tortoise?
Although the tortoise won the race, I think the hare’s cocky attitude was more to blame for its loss than a lack of expertise. The moral of this story may be a great life lesson, but can we truly consider this when building a startup? All startups face a tough choice: whether to grow slowly and steadily or make a big splash with fast growth and increased capital.
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The Tortoise: Slow & Steady Growth
The main benefit of slow and steady growth is that it allows startups to focus on profitability from the beginning. This means that the company can reinvest its profits back into the business, rather than using them to fuel growth. Additionally, slow and steady growth gives startups time to perfect their product or service before scaling up.
The main downside of slow and steady growth is that it can take a long time to achieve the desired level of scale. Additionally, in highly competitive industries, slower-moving startups may find themselves at a disadvantage over their faster-moving counterparts.
Startups who choose this route may also find it difficult to attract top talent, as employees are often drawn to fast-growing companies.
The Hare: Accelerated Growth
The allure of big bang growth is obvious – it allows startups to achieve a high level of visibility and market share quickly. This can be a major advantage when it comes to attracting customers, partners, and investors. Moreover, fast growth can help startups build momentum and create a “flywheel effect” that can be difficult for competitors to match.
However, big bang growth is not without its risks. The most obvious one is the increased chance of failure – after all, many startups that go for broke end up going bust. Additionally, fast growth can lead to cash flow problems and issues with scaling the business quickly enough to keep up with demand. Finally, this approach often requires significant investment capital, which may be difficult to raise.
Wondering Which Strategy is "Better"?
An ancient but still relevant article by Joel Spolsky describes Amazon and Ben and Jerry as two examples of opposing growth strategies. While Ben and Jerry began small and eventually became the market leader in ice cream, Amazon went all out without worrying about profitability and became a super-giant. An organic, steady approach is ideal if you have little access to capital, weak customer lock-in, are okay with eventual growth, and corporate culture is important. But if you have a strong customer lock-in, outrageous amount of capital, and minimal competition, a big splash like Amazon’s growth strategy, is the way to go.
The truth is, neither strategy is wrong, it comes down to what’s right for your startup. There are benefits and risks to both approaches. The right path for your startup will depend on your specific industry, product, and goals. A startup’s most dangerous mistake is choosing a growth path and then not sticking to it. Choosing path A and expecting result B can have deadly consequences.
Whichever path you choose, be sure to keep your eye on the prize: a successful business that creates value for its customers, employees, and shareholders.