Eventually, firms looking for investment dollars, for a buyer, or interested in going public will be rated on objective criteria. Those objective criteria will include their current revenue base, growth rate, profitability, use of capital and many other factors to determine whether they are worthy of investment. While that may happen at some distant time in the future, it would be very useful if firms could figure out whether they are on track for such a successful financing result or exit. One big question for any firm with external shareholders should be are they on a track that will enable them to raise more capital, to sell out or to IPO? Effectively, firms should, at any time be able to determine whether they are scaling effectively..To help them do this, we created the Scale-Up Score.
What Your Score Means
To test the Scale-Up Score and develop a cut-off level that indicated success at scaling, samples were taken from data on over 1,000 companies that received a Seed, Series A and Series B round as well as data from over 200 Unicorns and over 100 companies that have had an IPO in the last seven years.
We have concluded that a firm at any stage with a Scale-Up Score of above 25 is one that is on the path to becoming a Unicorn or going public if it manages to maintain or improve its score.
If your score is lower than 25, don’t despair, this isn’t a measurement of your potential, it’s a measure of your company’s success to date. Some companies manage to to public with scores in the 20 to 25 range although this is not common. What is critical to understand is how you can improve your score. To do that we recommend that you pay attention to the research we have done to arrive at a framework for figuring how to scale faster. This framework is called Scale-Up Math and it summarizes 5 principles that focus on the economics of growth:
1. Find a larger market for your solution.
2. Improve your competitive positioning.
3. Achieve better product/market fit.
4. Increase marketing efficiency.
5. Fuel your growth with more capital.