When I first heard the term “high growth startup”, I’ll admit I was a bit confused. Startup companies are often associated with fast growth, so what qualifies a startup as “high growth”? As an aspiring entrepreneur looking to build the next big thing, I realized I needed to understand what high growth startups are, what makes them different, and how to launch one successfully.
After doing quite a bit of research and talking to many founders and investors, it became clear that high growth startups represent a specific type of new business – one focused on rapid, aggressive expansion above all else. These startups live by the motto “grow fast or die slow.” Their goal is to scale up extremely quickly and become industry leaders in their niche.
But this growth doesn’t happen by accident. High growth startups are strategic and scrappy – perfecting their business models, leveraging technology, and optimizing every aspect of the company to facilitate rapid expansion. They also have access to significant funding that allows them to take big risks and pour money into acquiring users and growing their customer base.
What Qualifies a Startup as High Growth?
So what exactly makes a startup a high growth startup? There are a few key characteristics:
Massive Year-Over-Year Revenue Growth
The #1 defining trait of high growth startups is remarkably fast revenue growth. We’re talking triple or even 10x revenue expansion year-over-year. A startup that grows from $1 million to $10 million in revenue within 12-18 months exhibits the kind of hypercharged growth VCs and founders strive for.
Of course, percentage growth is easier when you start from a small base, so scale does matter too. A company growing from $10 million to $100 million shows even more impressive high growth velocity. The billion dollar unicorns like Uber, Airbnb, and Slack took only a few years to reach over $100 million in revenue through explosive expansion.
Rapidly Scaling User Base
Behind the revenue growth is usually a user base that’s scaling up just as quickly. Look at companies like Facebook, Instagram and Snap – they onboarded hundreds of millions of users within just a few years of launch.
Viral user growth lets startups expand rapidly and achieve economies of scale. Network effects also kick in, making the product more valuable as more people join the platform. Growth hacking tactics like referral programs help high growth startups acquire users at minimal cost.
Need for Aggressive Fundraising
No matter how hot the business idea, a startup can’t scale without significant funding to fuel growth. High growth startups are constantly fundraising to finance user acquisition, expansion into new markets, hiring, technology development, and other spend.
First they attract seed funding from angels and early stage VCs. But once they exhibit traction and high growth metrics, these startups raise bigger rounds like large Series A/B/C financing from top tier VCs and investment firms. All of this capital lets them throw fuel on the fire.
Disruptive Business Model
Often high growth startups are born out of a disruptive idea that challenges the status quo. They identify an industry pain point or an untapped market ripe for disruption. Or they leverage emerging technology like AI, blockchain, drones, etc. to bring something completely new to consumers.
Look at companies like Uber, Airbnb, Spotify, and Tesla. They introduced revolutionary business models that upended traditional industries. Their offerings were radically different from incumbent players, allowing them to grow rapidly.
Mitigation of Growth Risks
Despite their risk appetite, high growth startups are savvy about mitigating potential barriers to growth. They ensure they have a sound business infrastructure that can scale smoothly.
Legal and regulatory risks are monitored closely. For consumer startups, they pay extra attention to brand safety. Data security and customer privacy protections are implemented to avoid PR crises. With the basics covered, they can then focus on sustaining hypergrowth.
Key Growth Strategies Used by High Growth Startups
High growth startups don’t ascend so rapidly by accident. They deploy smart growth strategies and execution tactics designed specifically to help them scale at breakneck speeds. Here are some of the most important ones:
Adopt a Growth Mindset
It all starts with the right mindset. High growth founders are obsessed with growth – it influences every decision they make across product, marketing, operations, finance, etc. They prioritize speed over perfection. Rapid experimentation and iteration are encouraged. Valuable user feedback is quickly incorporated to improve the product.
Leaders at these startups also realize they must delegate responsibility and hire experienced managers early on. That frees them up to focus on their vision and growth strategies. However, a collaborative, innovative culture remains.
Define and Dominate a Niche
Rather than trying to create a product with mass appeal, high growth startups zero in on a narrow target audience. They offer a solution that perfectly addresses the needs of that niche.
This targeted approach allows them to better understand customer pain points. They can fine-tune the product to delight a core user base before expanding to other segments. Dominating a beachhead market also attracts funding and talent. Word of mouth spreads like wildfire within the niche community.
Launch With an MVP
No need to wait years before launch – high growth startups get their minimum viable product out quickly to start generating traction. The MVP contains just the core features needed to attract early adopters. Momentum builds as users try the product and provide feedback for rapid iteration.
The lean startup methodology emphasizes speed over perfection. Launching an MVP early is all about validating the product idea through real user engagement. And identifying product/market fit to inform future development.
Leverage Network Effects
Network effects are a magical growth accelerator. They exist when the value of a product or service increases as more users join the platform. Look no further than Facebook, WhatsApp, eBay, etc. Metcalfe’s law states that the value of a network is proportional to the square of the number of users – so growth compounds exponentially.
High growth startups build viral loops and strong network effects into their products from day one. User invites, incentivized referrals, social sharing, two-sided marketplaces, and other tactics stimulate organic growth.
Pour Money into Acquisition
Profitability can wait – high growth startups care more about gaining market share fast. So they invest heavily in growth marketing and user acquisition channels. Paid advertising, sales teams, referral programs, and partnerships are all funded aggressively.
Their metrics focus on the cost of acquisition, lifetime value, funnel conversion, etc. Sophisticated attribution modeling determines ROI on acquisition spend. Losing money on each customer is fine if over the long term, they drive growth and create future revenue upside.
Scale the Team Strategically
Scaling up the team with the right hires at the right time is crucial. Experienced execs join early to establish processes before hypergrowth hits. Domain experts are brought in to accelerate product development.
But high growth startups avoid unnecessary hiring that won’t directly impact growth. Stock options attract top talent who will be motivated to keep growth going strong. Remote work also expands the talent pool. Automation handles low value tasks so the team stays lean.
Expand to New Markets Faster
New market expansion powers growth but it must happen at the right pace. High growth startups expand to a new domestic or international market only after establishing product-market fit and traction in their initial market.
They tailor pricing and marketing to maximize conversion rates as each new market is launched. Localization enhances the user experience. Partnerships with on-the-ground players like payment processors and sales channels streamline expansion.
Challenges Facing High Growth Startups
Despite the glitz and glamor of billion dollar valuations and massive user bases, building a high growth startup is far from easy. Along with the adrenaline rush of rapid expansion comes big challenges:
Maintaining Culture & Quality
It’s difficult for startups expanding at warp speed to maintain their culture, values and quality standards. Hiring and onboarding hundreds or thousands of employees dilutes culture. Communication suffers as the company grows. Early employees may become disengaged.
Quality can also decline across customer support, product development, and operations. Systems and processes struggle to scale. Under pressure to move fast, mistakes happen. High growth startups must take active measures to preserve their identity.
Fighting Resource Constraints
Hypergrowth taxes resources in terms of team bandwidth, real estate, infrastructure, and finances. Founders struggle to keep up with managing scale. Talent shortages choke production. Customer support gets overwhelmed. IT systems lag behind growth.
Financial management is stretched thin. More funding must be raised continuously. Liquidity events like IPOs take time. Operational discipline and financial planning are critical for high growth startups to thrive through rapid scaling.
Battling Industry Incumbents
The 800-pound gorillas aren’t sitting idly by as nimble startups eat their lunch. Industry leaders often fight back hard through lobbying, anti-competitive practices, patents, litigation, acquisitions of rivals, etc.
Government regulation is another huge risk – heavily regulated sectors like healthcare, transportation, and real estate are challenging for startups to tackle. Navigating political and regulatory landmines requires savvy leadership for high growth startups aiming to disrupt big industries.
Avoiding the scaling trap
It’s tempting for startups experiencing rapid growth to chase even faster expansion for the sake of momentum. But uncontrolled, unsustainable growth can be dangerous – creating marginal customers, excess costs, cultural cracks, and quality issues.
The most successful high growth startups understand that smarter, more targeted growth is better than growth for growth’s sake. Otherwise, they risk flaming out and losing control of the beast they created. Prioritizing sustainable growth is key.
Remarkable Examples of High Growth Startups
The best way to fully understand high growth startups is to look at concrete examples of companies that experienced massive expansion very early on:
Airbnb
The vacation rental platform grew from $200 million in 2012 to $900 million in 2013. Just four years after launch, Airbnb reached a $25 billion valuation – faster than Uber. Today they sit at over $100 billion. Their asset-light, flexible business model facilitated rapid global expansion.
Slack
The corporate messaging app grew recurring revenue 160% year-over-year in 2016. Paid user seats expanded from 75,000 to 575,000 in two years. Slack’s rapid growth was fueled by word of mouth within teams, viral onboarding, and a rabid fan base of loyal users.
Twilio
This cloud communications platform reached a $1 billion unicorn valuation within 5 years. Their API-based business model enabled frictionless usage growth as developers integrated Twilio across thousands of apps. Razor sharp focus on their core product powered expansion.
Opendoor
The real estate tech unicorn grows revenue at over 100% year over year. They expanded to over 20 US cities within 4 years. Opendoor’s seamless home buying/selling experience, enabled by software and data, disrupted a huge offline industry.
Lime
Shared electric scooters took off like wildfire in 2017/2018. Lime reached a $1.1 billion valuation in just 18 months. Lightweight assets, flexible labor, and consumer demand allowed them to expand to 100+ cities extremely rapidly.
Key Takeaways and Lessons
After reviewing what high growth startups are, how they scale, and real-world examples, a few key lessons stood out that any founder should keep in mind:
- Growth should be the #1 priority early on – that maniacal focus is the fuel for hypergrowth.
- Leverage disruptive ideas and emerging tech to attack industries ripe for change.
- Nail down product-market fit first before stepping on the gas pedal.
- Rapid experimentation and iteration is better than long release cycles. Get your MVP out ASAP.
- If growth stalls, pivot fast until you find traction channels that work.
- Network effects, viral loops and other organic growth accelerators are priceless.
- Spend aggressively to acquire users but keep LTV and metrics top of mind.
- Preserve culture and quality as you scale through strong leadership and automation.
- Raise plenty of capital to expand operations, enter new markets and extend your runway.
Success leaves clues. By learning from the growth playbooks and missteps of past startups, new founders can avoid pitfalls and hopefully build the next generation of high-flying unicorns. It’s an exciting time to tap into scalable business models, global communities, and Software 2.0 to grow faster than ever before. The only question that remains is – are you ready for liftoff?
Conclusion
Well, that was quite a whirlwind tour of the exciting world of high growth startups! While building a company that scales exponentially certainly sounds glamorous and rewarding, it requires immense determination, resilience, strategic thinking, and leadership.
But if you remember the core growth principles I covered and stay nimble yet focused, you’ll be well equipped to handle the rocket ride of rapidly evolving from startup to scaleup. Be prepared for obstacles, but also moments of magic when growth takes on a life of its own.
Strapping yourself to a rocket tends to be a wild journey, but in the words of Amazon founder Jeff Bezos – “you want to look back 10 years from now and say you’ve had a great life, not that you’ve avoided having a bad one”. Now tighten up those laces, and get ready for an exhilarating ride!
Frequently Asked Questions
What growth rate is considered high growth?
There’s no firm threshold, but most agree at least 100% year-over-year growth constitutes high growth. For new startups, triple digit growth in users, revenue, transactions etc. signals strong momentum.
What is the #1 cause of startup failure?
Lack of product-market fit is the primary reason startups fail. No amount of funding or growth tactics can save a startup if users don’t want the product. High growth depends on nailing down product-market fit first.
How do startups grow user bases so quickly?
Viral marketing, growth hacking tactics, behavioral triggers, user incentives, targeted messaging, and eliminating friction during onboarding all help startups grow their user base rapidly.
How can startups scale without additional funding?
Bootstrapping growth is tough but can be done through reinvesting revenue, partnerships, affiliate marketing, SEO, and focusing on product-led growth. But most high growth startups raise substantial outside funding.
When should a startup prioritize profitability over growth?
Once rapid growth begins to taper off and unit economics deteriorate, startups should shift focus to sustainable growth and profitability. Typically high growth is the priority in the first few years before a pivot to profits.
