Not all Tech Startups Have High Growth Potential

Many tech entrepreneurs, no matter how hard they try, won’t be able to make their current idea a high growth business. And, while sometimes it’s due to the entrepreneur, often it’s because of the idea. Not all tech startup ideas are bound for high growth — let’s look at a few reasons why:

  • Timing – Ideas that are good, but too early, are still a failure. The importance of timing should not be underrated.
  • Market – Some markets are small, very small. A successful business is not the same as a high growth business and often companies can be the former without the later.
  • Customer Value – Many businesses suffer from the cost of customer acquisition being prohibitively high relative to the amount of money the customer is willing to pay for the product or service. These businesses can be successful but often aren’t high growth (many small consulting firms suffer from this).
  • Capitalization – In limited circumstances the amount of capital required for success exceeds the entrepreneur’s ability to secure funds.

Notice that it isn’t due to luck, innovation, or the competition. Unfortunately, not all tech startups have high growth potential. It’s up the entrepreneur to decide if high growth is important to them and to make the appropriate call if the business idea needs to be changed.

What else? What are some reasons not all tech startup ideas are bound for high growth?

One thought on “Not all Tech Startups Have High Growth Potential

  1. David,
    Those are good points. It’s important to understand that these are not things the entrepreneur can control for. If the market is small, no amount of being a good business person will change that.

    There is one other reason companies don’t grow and that is the skill set of the CEO (and by extension others on the team). This is something the entrepreneur can improve (either through getting better or getting a new CEO) but often it’s hard to assess yourself accurately.

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