Higher output without a jump in costs

An important benefit is neatly encapsulated in the difference between simple growth and scaling-up. Growth is often conceived in linear terms: an addition of resources (i.e. capital, people, technology) leads to a proportional rise in output or revenue. Scaling-up, on the other hand, means achieving output or revenue growth without needing to input more resources, such as hiring an extra employee to cope with rising demand. In the ideal scenario, such growth should increasingly outpace costs. It is closely tied to the concept of economies of scale, where the average cost per unit falls as the number of units produced increases.

More attractive to investors

Besides reaping the benefits of economies of scale, scale-ups generally represent a more attractive investment proposition. According to a study conducted by McKinsey in 2020, “real value” lies in being able to scale new businesses. Venture capitalists are indeed the ultimate arbiters of precisely this value. Referring to an analysis of data on US venture capital investments, the report states that two-thirds of value generation takes place when a business scales up to significantly increase market penetration. This is reflected in the fact that 63% of the USD135 billion invested by US venture capital firms in 2018 was used to help thriving start-ups achieve scale-up.