Sustainable growth requires product market fit After the business eventually collapsed parts were sold for a total of US$16.5m despite more than US$40m being invested into the business.įor founders who are hoping to be a part of Australia’s economic recovery, there are lessons to heed from the Groupon and Digg experiences. It successfully grew a large number of users in a short period of time but wasn’t able to monetise the user base quickly enough to cover the acquisition cost. In 2004 it was initially free of advertisements, allowing members to vote a page up (“digg”) or down (“bury”). News aggregator Digg was another casualty of overly ambitious growth. This forced Groupon to pivot their business model to focus on a smaller number of cities in a lower number of countries. The issue was they were spending too much money on acquiring consumers and merchants, and neither were staying around for long. It raised a lot of venture funding, expanded into many cities across various countries spending vast sums of cash along the way.Īfter it listed in 2011 Groupon’s share price fell by 80% when investors realised the company’s key metrics did not align with the valuation. Unfortunately, in many cases these plans are too ambitious and they scale too prematurely.ĭaily deals site Groupon fell victim to overambitious growth plans. Most startups have ambitious plans for growth. It is a small market.Ĭonversely if they make software to teach English to Chinese speakers, this is startup territory where the market is large and the product must be scalable. He said, that i f a startup writes software to teach Tibetan to Hungarian speakers, the startup will undoubtedly be able to reach most of the people who want it, but there won’t be many of them. Paul Graham, English founder turned VC investor and academic, recently cited a great example. Indeed, not even all tech businesses are startups. The difference can be subtle in some cases. As distinct from other newly founded businesses, a startup has entirely different DNA – they are both scalable and address a large market. This is because startups are designed to grow fast. In Australia, the StartupAUS Crossroads Report have validated startups as leading job creators and as a primary driver of Australia’s new jobs growth. Studies in the US have concluded that technology-based startups have long been an important driver of economic growth and competitiveness. ![]() ![]() The defining characteristic of a startup is, of course, their growth potential and this is what stands them apart from other small businesses. Uber, Airbnb, Pinterest and Dropbox come to mind as they were all founded during the GFC. Historically much of the growth seen after an economic downturn has been achieved from technology startups, largely because of their multiplier effect on employment. Those in sectors like hospitality, travel and retail particularly, have reeled from the impact of a nation in self-isolation who are both subject to their own, as well as government restrictions on movement and spending.Īs Australia takes its first steps back to normality, the focus for government will be on how our country can supercharge economic growth necessary to fill a $360 billion hole in the federal budget.
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