While a significant amount of research activity has sought to measure high-growth firms, it generally has not distinguished among startups based on their initial growth potential or “entrepreneurial quality.”
MIT researchers developed a way to estimate the growth potential of startups at founding. To do this, they identify startup characteristics that signal the growth ambition of founders, including how a firm is named, where it registers, and whether it files for patents or trademarks, and maps these characteristics to significant growth outcomes.
The results provide new information about startups that have the potential and likelihood to grow, as well as whether entrepreneurial ecosystems support the growth of these firms or not. While more startups with high-growth potential are being founded today than in the past, fewer are successfully scaling. The researchers find that entrepreneurs are starting firms that could be high-growth, but struggle because the environment is less accommodating.
Spend enough time talking about entrepreneurship and you’re likely to hear people refer to “gazelles,” “cheetahs,” or other fleet-footed animals (even the mythical unicorn!). These terms may leave you scratching your head, wondering if you wandered into a safari—not an accelerator.
Like many labels, the utility of these terms is limited; but these words are used because we need a way to describe and talk about an important phenomenon in entrepreneurship—the fact that some businesses grow and others do not. And even among the firms that grow, a few blossom substantially bigger and faster than the rest.
Though few in number, these high-growth businesses have a big impact on the economy. Research has found that high-growth firms:
Not all entrepreneurs have ambitions to grow their businesses and dominate market segments, nor should we expect them to. However, given the outsized economic contributions of high-growth firms, it is important to both understand how these firms are defined and ways to encourage more business growth.
The Kauffman Index of Growth Entrepreneurship uses a combination of employment and revenue thresholds to identify growing firms in the United States.
Entrepreneurs flourish in a connected, dense, and diverse ecosystem where they can move quickly to take advantage of opportunities. Remember, you can’t scale what you don’t start, so pursue entrepreneurial growth in a holistic manner, while focusing on policies that particularly benefit growth entrepreneurs.
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