Data study on success factors of scale-ups
In-depth knowledge about the customer and market is key
The popular image of the twenty-years-old college drop-out building a billion-dollar start-up is not a fair representation of reality. More often, the entrepreneur is in its forties, builds upon leadership experience and possesses in-depth understanding of the market it is seeking to address. Furthermore, over fifty percent of the start-ups in our dataset were founded by a diverse and experience-rich team instead of a solo founder. Deloitte Fast Ventures and THNK executed a quantitative data study on success factors using a dataset comprised of 400,000 start-ups from 24 countries. Presented below is a high level summary of the study results.
The success factors of fast growing start-ups
Roughly 1 in 200 start-ups becomes a scale-up. This is a fast growing start-up that realized the ten million revenue mark within 5 years. Becoming a Unicorn is even more challenging; 103 start-ups realized a market value of over 1 billion dollar. Read in our report ‘Scale-up: the experience game’ which factors increase the likelihood of success. The three most important factors are:
- Experienced leadership
Contrary to popular belief, the majority of scale-ups are led by experienced entrepreneurs, not by twenty-years-old college drop-outs.
- Designed to scale
25% of the start-ups picks a scalable concept, versus 85% by scale-ups. These scalable business models are addressing broader market demand and are suitable for international roll-out.
- Catch a wave (market timing)
The time between the founding date and market launch for a scale-up is nearly twice as long as for start-ups. The moment of launch of a scale-up typically coincides with a technological trend.
Scale-up: the experience game
Quantitative data analysis
The study was initiated by Wim Scheper, Innovation leader at Deloitte, and Menno van Dijk, co-founder and managing director of THNK (School of Creative Leadership). Where Deloitte Fast Ventures and the Corporate Venturing Advisory team focusses on partnerships between large organizations and fast growing start-ups, THNK focusses on creative leadership and innovation. Deloitte and THNK joined forces and employed quantitative analysis methods to identify factors driving the success of fast growing start-ups.
Using a dataset of 400,000 start-ups from 24 countries, Deloitte Fast Ventures and THNK analysed characteristics of scale-ups. The research team considered financial metrics, leadership attributes and different business models and looked for patterns and similarities to identify factors that increase the probability of becoming a scale-up.
“The dataset is comprised of a large number of start-ups and information about their founding teams and external factors. The financial data is retrieved from data sources Deloitte has access to. These sources are specialised data vendors for private-company information”, Wim explains. “This dataset is enriched with information from other sources including LinkedIn, CrunchBase and company websites. The data on technological trends is retrieved from Google Trend Analysis and the data on external factors is retrieved from public sources including Eurostat and Bls.gov”, adds Tim de Rooij, Senior Consultant at Deloitte Corporate Venturing Advisory.
Start-ups are becoming more prominent in the economic landscape
“We already knew that start-ups are driving job growth, innovation and value creation, and therefore are important for economic development. However, what we observe today is that disruptive technologies are increasingly introduced by start-ups and by doing so in short periods of time make significant transformative impact on industries and traditional business models of incumbents in those industries. It is therefore crucial for corporates to understand start-ups and continuously monitor market developments”, explains Wim regarding the relevance of the theme of the study.
“With this knowledge incumbent companies can adapt: should I model innovation teams more closely to start-up teams? The study presents some interesting insights for start-ups and investors as well: do we have the right capabilities in the team, should we iterate our scaling model, which technological trend wave can we potentially ride? These insights are also relevant to policy makers. They can employ public funds more target oriented and support in making connections.”
"Start-ups shake-up incumbent companies’ business models.”
About Fast Ventures and Deloitte Corporate Venturing Advisory
The Deloitte Corporate Venturing Advisory team is part of Deloitte Corporate Finance. We support large organizations in identifying new and innovative growth domains and developing and executing their corporate venturing strategy. Our services include identifying innovative growth domains, ecosystem and technology research, target search and analysis, business case modelling, venturing option design, and deal execution. The Fast Ventures venture data platform is at the core of our corporate venturing services, for more information please visit: www.fastventures.nl.
Also read our press release (in Dutch) ‘Succesvolle start-up wordt geleid door ervaren ondernemer'
More information on the Scale-up data study or Deloitte Fast Ventures?
Do you want to know more on the Scale-up data study or Deloitte Fast Ventures?? Please contact Tim de Rooij +31 (0)88 288 77 70 or Wim Scheper via +31 (0)88 288 12 49.