Once a startup achieves a certain scale and growth rate, they’ve hit what’s known as escape velocity. From Wikipedia, escape velocity is the “speed needed to break free from the gravitational attraction of a massive body, without further propulsion.” The idea is that the startup has so much momentum that they can’t be stopped. Only, there isn’t a specific size (e.g. $25 million in recurring revenue) where this happens. Rather, it has to do with a combination of size (revenue and customer count), growth rate (many SaaS companies achieve scale but then the growth rate plummets), and market dominance in their segment (a smaller player dominating a fast-growth market is often better than a bigger player in a slow-growth market).
Here are a few benefits of escape velocity:
- Prospects bring them into every deal, almost like an incumbent, even though it’s a greenfield market
- New product functionality becomes the market standard, and other competitors are constantly responding
- Investors place a premium on these firms and they often trade at a much higher multiple than their competitors
- Press and media often cover the top player in a market more than all the other players combined
- Growth is only limited by the growth of the overall market
Escape velocity is one of the ultimate goals for an entrepreneur. Once achieved, nothing is slowing the company down.
What else? What are some other thoughts on achieving escape velocity as a startup?