Scalability

Scalability is one of the key terms for describing startup businesses. In essence, it means that the company will be able to keep up with its own growth rate.

Whoever invests in a startup, be it a business angel or a venture capital corporation, usually examines three things thoroughly before making a decision: the idea, the team and scalability. If the idea is good and original, the team is professional, the investment may still fall short due to the lack of scalable. But what is it that needs to be watched so much? 

First, what happens when the business starts? Has our company or service reached critical mass? Many people use it and even more people will use it, since those who are already there are satisfied and spread the good news of the product? Can we satisfy the increased demands, and what are the conditions for this? If not, the number of dissatisfied customers will increase and attrition will begin. 

There are clear stage boundaries in growth. If a service is first launched in a small market, in the local language, then it is advisable to quickly create versions in English and later in other languages, otherwise someone will copy the idea over time and introduce it in the Anglo-Saxon market. But how much does it cost? Can we, with the existing team, operate the same from home with many more users who do not communicate in the given language? If not, how much capital does the foreign office, the employees there, and the international operation in general require? 

The stage boundaries are often not so clear, and the relationship between growth and return is often not entirely clear. When we produce something, it is usually true that there is a limit to economies of scale above which production becomes truly profitable. Manufacturing the first few thousand products under manufacturing conditions is quite different from switching to large-scale series of 10 or 100 thousand. Who and where will manufacture our product? Will he be able to produce the same quality that our people could under our supervision? Or what can they be even better than them? 

Startups' need for funds is often linked to such stage boundaries. Investors want to know exactly what is happening at the stage they are giving their money to, which is completely understandable. It is also important to be aware of when the next stage will come when the business will need capital again? Simply put: it's useless to know what will happen at the end of the process if we don't know what will happen until then. However, without this, we will not be able to fulfill one of the most important expectations of investors, the convincing demonstration of scalable.