The existential cost of decelerated growth

What happens to technology companies with slowing growth and a rising focus on profitability before they reach behemoth scale? How much does the market value hyper-growth?

Just because a technology startup has a hot start, that doesn’t mean it will grow quickly forever. Most will wind up somewhere in the middle — or worse. Put simply, there is a larger number of tech companies that do fine or a little bit worse after they reach scale.


The Exchange explores startups, markets and money.

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


But what every investor hopes for is the hot company that can keep growth alive even after reaching material scale, running through walls, competitors, economic headwinds and anything else that comes its way. Those companies don’t end up worth a few hundred million, or a billion, but can end up valued in the dozens of billions or more.

In reverse, tech companies — even those with strong gross margins — with slipping growth can see their multiples compress rapidly. Then, the vultures circle.

Which explains some of the news we’ve seen recently in the market. As Dropbox comes under fresh pressure from external parties, joining its erstwhile rival Box in the public-market growth penalty box, we’re seeing companies like Braze, Gong, Shippo and others rip ahead with rapid-fire funding rounds or public brags about their growth.

While the differential between the two groups is clear, it’s still worth exploring in more detail. Let’s talk about the growth dividend. Or, if you’d prefer, the existential cost of growth deceleration.

Grow or die

The news this week that Dropbox has attracted an activist shareholder should not have been a surprise. Its former rival Box is in the midst of a long-running struggle with an activist investor of its own. (More here.)

Credit belongs to : www.techcrunch.com

You May Also Like

Vietnamese financial services app MFast gets $1.5M pre-Series A led by Do Ventures

MFast, a mobile app that lets Vietnamese users in remote areas access financial services, announced today it has raised a $1.5 million pre-Series A. The round was led by Do Ventures, with participation from JAFCO Asia.  Launched in 2019 by fintech company Digipay, MFast says it has been used by 600,000 people to date. It […]

GrowSari, a B2B platform for small stores in the Philippines, adds investors like Temasek’s Pavilion Capital and Tencent

Sari-sari stores are neighborhood stores in the Philippines that usually sell daily necessities and sometimes serve as community hubs, too. Today GrowSari, a startup that is digitizing sari-sari stores with features like pricing tools, inventory management and working capital loans, announced it has raised a Series B from several notable investors that brings its total […]
error: Content is protected !!