When a company is scaling, its leaders must make critical decisions at each step of the process. While some can seem like good ideas on paper, others have proven to be bad ideas in practice.
The term “blitzscaling” makes its appearance most often about companies that are growing rapidly and looking for ways to do so even faster.
Also known as hyper-growth acceleration, this strategy focuses on investing in technology and other capital resources with the idea of accelerating growth by upwards of 2,000 percent within a defined period.
On paper, it sounds like an ideal way to accelerate the growth of your business. But in practice? Let’s dive deeper into why blitzscaling is a bad idea that puts many startups at risk instead of accelerating their growth.
Requires Large Amounts Of Money
Blitzscaling’s foundation is rooted in speed. For a company to move at the speed required to yield probable success, it needs a lot of funds.
From its initial capital to hiring and marketing, it costs a lot. It is not done step by step; everything has to move at once.
Blitzscaling is majorly a sales-led growth marketing strategy. Unlike product-led growth, It is more concerned with growing its sales and having more people know and use its services than having its product be the selling point of its marketing strategy.
This means that the cost of marketing keeps increasing every time there’s a new demographic you need to reach. As a startup company, it will work in your favor to know what is product-led growth and how it can best be utilized.
Prioritize Speed Over Efficiency
Efficiency takes a back seat in Blitzscaling as it is all about how fast you can grow and not how efficient you are in the growth process. Because blitzscaling is an uncertain process, you have to make a lot of calculated gambles, with high chances of failure and mistakes.
You end up making uncertain guesses about your product demographic, resource allocation, demand, costs, and much more while considering speed.
Maximum speed is everything in blitzscaling, and if you don’t reach the largest scale, you run the risk of burning out your startup before it can reach its potential.
Blitzscaling has proven to be extremely expensive especially due to its uncertainty and uncomfortable speed. It is increasingly hard to find investors willing to put all their faith and money into a startup with a blitzscaling portfolio.
Public markets are going down, and more investors are beginning to dismiss portfolios with extreme risk levels. Late-stage investors are reducing their investment pace. If by chance you manage to get an early-stage investor, they too are finding it difficult to find follow-on investors for their blitzscaling startup portfolios.
Additionally, startups with low gross margins find it even harder to get investors. Investors are more willing to put money into a company with a high gross margin. This is because a high growth margin allows for a steady flow of cash.
First Scaler Advantage
The key benefit of blitzscaling is its ability to monopolize an industry. This only works best for undiscovered yet necessary industries.
Take, for example, a car hire service; this is already a popular industry with several companies in it, and trying to scale up in this industry will prove futile and expensive. Blitzscaling requires companies to seize the ground before their competitors and monopolize their industry to stay on top.
The first who succeed at blitzscaling take most of the market, and this gives them a lasting advantage with little competition. This is dangerous for startups because they do not have enough room for mistakes and steady growth.