A question about scale-ups that uncovered a case of subconscious bias
I find it interesting that more and more people in the tech industry start talking about “scale-ups”. This is definitely encouraging, I then deciced to start a pertinent conversation on LinkedIn with the following post:
What is a scale-up?
More and more people in the industry start talking about scale-ups, overcoming (finally) the start-up obsession. Which is doubtlessly good.
One can ask themselves, however, “what exactly is a scale-up?”.
I do not feel qualified enough to give an expert answer to this question — I would direct anyone interested in a more general answer to the ultimate scale-up expert, Daniel Isenberg.
I would like, however, to try to give a simple (or, perhaps ‘quick & dirty’) rule which in my opinion defines what a ‘scale-up’ is in the #B2B #SaaS domain (at least as far as the European reality is concerned):
- ARR of €10m or more,
- “Rule of 40”(*) or better for at least three consecutive years.I was tempted to also include a dimension around the headcount (say 100 or more); after a lot of thought, however, I decided to exclude it.
At the end of the day, if a company manages to have such a great performance in “ARR per employee”, then it actually is even more interesting and successful.
#entrepreneurship #HellenicStartups #StartupEurope #ScaleUpGreece #ScaleUpEurope
Ps. “Rule of 40” refers to an indicator which equals to the sum of a company’s EBITDA plus year-on-year growth rate (and, traditionally, this sum is expected to be equal or greater than 40).
My good friend and mentor Daniel Isenberg, then, responded with the following comment:
Very interesting topic, dear friend Dimitris Tsingos — One important question is who is asking “what is a scale up?” and why are they asking it? What is the purpose of assigning a label to a company? If I were an investor, I would be looking for a Scale Up as you defined it. If I were interested in creating local prosperity I would define it more as a dynamic than a label. Is the company showing sustainable and increasing growth? Are there increasing numbers of such companies? In this second case it is the dynamic of growth that matters, not the label. A policy maker wanting more broad based prosperity will miss the mark by labeling “scale ups” and counting them. The investor wanting to make great returns will not care about whether there is a dynamic of growth that is broad based, only their ability to identify a few “scale ups” to invest in, or helping their small portfolio increase the number of “scale ups.”
I was shocked.
I have spent more than 20 years working on membership-based organizations such as YES for Europe — European Confederation of Young Entrepreneurs, Hellenic Startup Association, EBAN — European Business Angels Network and others. The common topic of these organizations, which I truly believe in, hence I devoted a good part of ly life to them, is that theyn work for the Common Good. For developing the ecosystems, in which companies and individuals can exist, grow and thrive.
And now, it is my very self, a former President or former Board Member of such national and European bodies, being blinded out of my own interest and focus.
It is not that my approach, my definition of a scale-up was wrong; quite the contrary. It was very right; but it was also partial and short-sighted.
I got in this way a serious lesson learned: When you over-focus on something, that something acquires gravity which by definition makes your views partial.
Trying always to be objective has always been a guiding principle for me. But, in this conversation on scale-ups I failed to do so, expressing a very personal view which, for a moment, I thought it was a general truth. But it was not. And this happened because of what is called ‘unconscious bias’.
Beware of the unconscious bias. Try to find it and to protect your own thoughts from it.
