3 Reasons “Scaleup” Businesses Are Just As Important As Startups

At JumpStart, we’ve spent more than ten years focused on accelerating the growth of startup companies in Northeast Ohio. Our goal has been to increase entrepreneurs’ odds of success, so they can transform our region’s economy and make it a nationally significant center of innovation and entrepreneurship.

The results speak to the impact of the work.

Recently though, we’ve begun expanding our focus to include working with existing small businesses that have high growth potential. Typically, these companies have 4-99 employees, a founder with a commitment to growth and existing revenues of $2 million or more.

We call these types of small businesses “scaleups,” and unlike startups–which have hundreds of incubators, accelerators and other support organizations dedicated to helping them succeed–scaleups haven’t received as much specialized attention from the economic development world, at least in the U.S.

Here are three important reasons why we’ve chosen to evolve our work and add support services for scaleups.

Scaleups Are Significant Job Creators
Several studies, like this one from the UK, show that the most significant job growth comes from companies that are scaling rapidly. Closer to home, noted economic development expert Pete Carlson points out in a recent article that as a general rule, startups aren’t massive job creators right off the bat. Turns out, approximately 90 percent of net new jobs in the U.S. are being created by–you guessed it–scaleups.

The statistics paint a compelling picture. For an organization like JumpStart with a mission to drive broad economic impact in our home region, helping scaleups to grow can have as much or more impact as helping startups, and can do so much more rapidly.

Many Scaleups Grow Faster With Support
As Babson College Professor Daniel Isenberg once wrote in the Harvard Business Review, “entrepreneurial growth post start-up has numerous challenges which can be an order of magnitude more difficult than … starting a venture.”

At JumpStart, we have found that as scaleups work to grow quickly, they face a whole new set of challenges, including confirming new market opportunities, scaling marketing and sales activities to drive revenue in these new markets, securing next rounds or new types of growth capital and finding critical team leaders and team members. In many cases, we have been able to help our scaleup clients address some of the issues standing in the way of more aggressive growth–even if they don’t yet see those issues themselves.

“There were things I knew I needed help with, but what surprised me were the things I didn’t know,” explains Wayne Grant, CEO of The CADD Department, a Cleveland-based engineering and infrastructure company. “Working with JumpStart gave me the opportunity to get some guidance in those things I didn’t know … I’ve learned a lot. They have helped me (grow) in a lot of ways.”

Scaleups Are Naturally Diverse
From minority-owned engineering firms like The CADD Department, to women-led financial services providers, electronics recyclers and even biomedical research companies, scaleup businesses come from a wide variety of industries. As such, they are more likely to have a broader, more diverse range of entrepreneurs at the helm.

This natural diversity can drive major impact in diverse core-city communities. A handful of successful scaleups can transform entire core-city neighborhoods because they create a wider range of jobs in a wider range of skill levels than most high-tech startups. For an organization like ours that strives to connect with economically challenged and disconnected community members, this potential simply cannot be ignored.

The most impactful economic development efforts almost always employ a balanced approach. We know startups, and the entrepreneurs behind them, will always be a critical part of our growing economy. But diverse scaleups are poised to play a crucial role in our 21st century economy, and it only makes good sense to explore ways to help accelerate their growth.

This post orginally appeared in the Huffington Post on January 19, 2016.