This article is available also in spanish here

From startup to scaleup: moving towards a new business approach

My list

Author | Diana PardoOver the last decade, markets and investors have focused on startups, newly established tech companies. Financed with venture capital, they pursue very specific products and services to meet a requirement that has not yet been covered. However, in reality, their explosive growth entails significant risks. Few startups survive beyond a few months or years, leaving behind a trail of debt and unemployment after the initial bonanza.

What is the cause of the premature death of startups?

There are normally two reasons:
  1. The focus is placed solely on the product development phase. As soon as this is over, they are not prepared to step up to the next level and, therefore, they disappear.
  2. Many startups emerge without having a sustainable business model in place therefore, they are sold to larger companies with the hope of being developed at a later stage. Very often, the search for the “exit” stage is more important than sustainability.
It therefore seems logic that, in order to ensure that a startup survives, it will need to be turned into a scaleup, taking into account a series of aspects that facilitate its growth and development from the start. We are referring to companies with a clear business expansion approach and realistic plans for the future.

Scaleups, a business model for smart cities

oficina scaleupUnlike the explosive cycles of startups, which very often end up as harmful all-or-nothing projects, a business mentality based on survival, innovation and continuous adaptation fits in perfectly with the type of business needed in modern cities.According to the Organisation for Economic Cooperation and Development (OECD), for a company to be considered a scaleup, it needs to have an average annualised growth in employees or turnover that is greater than 20% over a 3-year period, and have at least ten employees from the start of its activity. The focus therefore passes from the product, to growth, development and attracting talent.The process for creating a scaleup is based on continuous learning within an ever-changing environment. The growth of scaleups is much slower than with a startup, but, precisely because of this, they can adapt more easily to the dynamic activities of modern cities. Startups, on the other hand, tend to develop products and services at great speed, which may become obsolete after the initial substantial investment.

EConduce, electric scooters revolutionising Mexico City

There are already some practical examples of scaleup models, which prove they can succeed. Econduce is a firm created by two engineering entrepreneurs, with the aim of reducing Mexico City’s traffic problems with a sustainable method of transport.They created a business model based on shared electric scooters, which users can use via an app. In three years they have managed to triple the number of scooters and generated 54 jobs, thanks to the firm’s high capacity to adapt and its trial and error system that further optimises the service. According to Econduce, its electric scooters have already saved more than 300 tonnes of CO2, which is equivalent to 100 hectares of forest.The Econduce model is very different to that of startups, which pursue the same general idea. Some alternative mobility companies favour great valuations and global expansion strategies that expose them to regulatory or consumption changes. Econduce, on the other hand, focuses its activity on a single market and experiences gradual growth, experimenting with every step, adapting to the circumstances and extending its fleet together with its database of users.

Companies designed to grow with cities

Restaurante en Ciudad de MéxicoScaleups are, in a way, a return to the classic idea of medium-sized companies, but with the disruptive innovation and capacity values of startups. They are firms that grow with cities, while many urban startups wait for the authorities and society to adapt to their business models. And, since their impact on local economies is much more gradual and moderate, the risk of prompting unwanted situations such as gentrification is reduced.It is clear that modern cities are demanding creative companies, with a more positive social and environmental impact. By their actual philosophy, based on organic growth, adaption and optimisation of resources, scaleups fit in perfectly with the concept of new urban landscapes.Images | LYCS Architecture, Annie Spratt, Econduce, Regina Victorica

Related content

Recommended profiles for you

Remember to activate your profile to network!
Activate profile
ER
Edgard Roumi Roumi
Auditech
Consultant and business development.
Nicole Aye
Nicole Aye
Strategic Marketing and Exhibitions
TT
TJ TJ
LINKITUP
Ceo
OG
Oksana Grekhova
AIIIR
Head of the Project office
ss
sebastian sterzer
National University of Lujan
Head of the International Relations Area for the Observatory of International Trade
FD
FRANCESCO DE MARCO
DE MARCO SRL
impiegato
ZZ
Zoelia Zapata
Esan
Assistant
Nikka Cyden Manalo
Nikka Cyden Manalo
Manulife Philippines
Insurance Adviser/Certified Financial Wellness Coach
TP
Taltavull Paloma
University of Alicante
Full Professor
Ramon Ruiz-Navarro
Ramon Ruiz-Navarro
UOC
Researcher: Supply Chain, Sharing Economy, Consumer Behavior, Environmental Sustainability
HS
Hideyuki Sasaki
Oriental Consultants Global
Principal Consultant
AA
Andoni Alava
Fira Barcelona
Director International Business Development & Partnerships
Eduardo  Frapolli Daffari
Eduardo Frapolli Daffari
Andalucia Emprende
Técnico Cade Marbella en Andalucia Emprende. JUNTA DE ANDALUCIA
Salvador Tasqué
Salvador Tasqué
FIRA BARCELONA
Exhibition Business Director
gg
giacomo gualandi
beko
business development
JM
Jose Martinez Artiles
Smart City Infrastructure Fund
Investment Manager
LP
Lenka Paszová
University of Ostrava
.
BB
Barbara Bachiocco
UdG
Master student
Sebas  Marin
Sebas Marin
UdeA
Joven investigador
AP
Anilkunar Pasinibilli
Saarvi media
Ceo

SmartCity
Thank you for registering to Tomorrow.City. You can now start exploring from your computer, or with your phone or tablet downloading our app!
Only accessible for registered users
This content is available only for registered users
TO: $$toName$$
SUBJECT: Message from $$fromName$$