The startup is dead. Long live the scale-up!
Towards the end of the 1990s, first in North America (and predominantly in the San Francisco Bay Area) and later in Europe, a new word entered the vocabulary of entrepreneurship and economic development: The startup. It seems that no-one ever cared to provide a definition of what a startup actually is, as it was perceived rather as a phenomenon than a specific type of business. This phenomenon actually reached a level of explosive growth from 1998–99 until 2001–02, during the period that painfully ended up as the “DotCom Bubble”. Despite the fact that quite a large number of extremely well-funded businesses (funded often with hundreds of millions of dollars, sometimes even billions) actually went bust in a spectacular way, few of them managed to survive and now constitute some of the world’s most powerful companies.
The startup phenomenon, referring to these companies with such a high potential, super fast growth rates and, more often than not, gigantic funding rounds, since then dominates the public discourse around economic development policies. Unfortunately however, the number of those who talk about startups seems to be inversely proportional to these who really understand them. All of a sudden, politicians all around the Globe, from President Obama to Chancellor Merkel and from President Macron to All recent PMs of Greece, started to talk about startups. In their mind, startups were a kind of similar to the SMEs, to which they had always been referring as the ‘backbone of our economy’. They thought that startups would be interested in subsidies and that, in this way, the startup movement would somehow be contained — if not manipulated. It is needless however to mention how ignorant must one be to think that true startups would ever be seriously interested in subsidies.
The economy, however, evolves much faster than politics. The moment when politician internationally started to talk about startups almost every time they were touching entrepreneurship and economic development policies, it started to get evident that startups do not really matter. What does matter is the number of startups which manage to scale efficiently and profitably, as it was first suggested by Professor Daniel Isenberg (doubtlessly the founding father of the scale-up movement) about a decade ago. It has been made clear that the number of new startups alone is almost irrelevant to the chances of an entrepreneurship ecosystem to flourish. On the contrary, since as early as 2010 it is known that the number of companies that manage to grow profitably in the long run (that is the number of scale-ups) creating value for their shareholders, customers, employees, suppliers and the society at large, this is the most significant indicator for the success of an entrepreneurship ecosystem.
From an economic development point of view then, startups are dead since quite a long time. Over the same period it has become evident that scale-ups are what really matters. This is exactly back in 2014 at Yes for Europe we launched the Scale-up Europe initiative and later, in my home-country of Greece, I launched the Scale-up Greece initiative, which has already show-cased four awesome scale-ups out of our small country: Epignosis, InsuranceMarket.gr, Workable and Skroutz. While the coronavirus pandemic has temporarily interrupted our gatherings, this initiative will soon resume virtually, promoting entrepreneurs and businesses who succeed into the scale-up game.
The true essence of entrepreneurship has never been that of a lonely sprint (being the startup approach); quite the contrary it resembles to a kind of a team marathon (being the scale-up approach). The startup is dead. Long live the scale-up!
Pertinent reading:
Scale up your startup: Zero to 100 with Epignosis | Scaleup Stories: a Q&A with Epignosis CEO Athanasios Papangelis
By Daniel Isenberg:
- The Best Economic Development Strategy is Scale Up
- For a Booming Economy, Bet on High Growth Firms, Not Small Business
- How to Finance Your Scale Up Venture
The startup is dead. Long live the scale-up!
