Since a startup is a scalable, growth-focused company, what happens when growth slows? Growth slowing often happens as the law of large numbers starts to set in when the startup moves from the early stage to the growth stage. Only, if growth falls below 50% when sub $25 million ARR, the chance of building a large, enduring company drops dramatically.
Here are a few thoughts when growth slows:
- Market – Understand the dynamics in the market. Is the overall market still growing fast? Is this startup’s segment underperforming or is there something else at play? Is there a new competitor that’s making a ton of noise?
- Team – Review the team and their roles and responsibilities. The team that got the startup to A is often not the team to get to B. What changes need to be made?
- Execution – Sometimes things just aren’t going well. There’s a feeling internally, and people really know it, if things are going well or aren’t going well. How’s morale? How does everyone feel they’re executing?
- Valuation – As growth is one of the major determinants of valuation, valuation is often reduced substantially (see 3 Quick Ways to Value SaaS Startups). What does the forecast look like? How do things look projected multiple years out?
Growth slowing isn’t fun but it happens all the time. Entrepreneurs would do well to acknowledge it and figure out how to get the team focused on doing the things needed to grow faster.
What else? What are some other thoughts on growth slowing?
David Cummings on Startups 