“Only scalable businesses can achieve the high-growth characteristics required to command market multiples attractive to venture investors.
So what is a “scalable” business?…to be truly scalable, a business must satisfy two criteria…incremental costs must be decreasing – ideally approaching zero. This means that the cost of each incremental dollar in revenue must be going down…
Criteria #2 is the real key to understanding "scalability"?? – but, as with criteria #1, it is also a necessary, but insufficient, criteria. For a business to be scalable – the business must be able to grow – even if you throw mediocre resources at it (both in terms of people and money – i.e., it must be able to flourish with dumb people and dumb money)
The importance to entrepreneurs is this corollary:
If your business requires smart talented hard-driving management or sophisticated investors or customers to grow, it is, by definition, NOT SCALABLE!!!…While VCs always prefer a good management team, it is really a bonus.
If a company´s long-term requirements includes any "super-humans"?? or "super-heroes"?? (management, customers, employees, investors, whatever) -— IT IS NOT SCALABLE!
If mere mortals can´t run it – IT DOES NOT SCALE!”
Read more in this Sacred Cow Dung post.