Skip to content

The Arc of Company Life

Great piece by Mark Leslie on First Round Review:

Successful enterprises have a cycle of life. Startups build a product or service, enter the market and attract customers. Once they’re over these initial hurdles, they enter a growth phase, rapidly increasing their revenue and market share with big gains year-over-year. They continue to work on their product, fine-tuning it as revenue starts to flatten and margins stabilize at lower but still attractive levels.

As these companies mature, growth slows even more, eventually flattening out — yet operational expenses continue to climb as they strive to compete with new players in the market. Finally, unable to keep up, burdened with bloated budgets, companies spiral into negative growth, marked by layoffs, high burn rates and eventual bankruptcy or liquidation.

This paints a pretty bleak picture — especially if one considers the inevitability of this pattern — but it’s important to note that this cycle plays out over drastically different time lines for different companies. Many successful companies have prolonged their relevance for decades, and some for over a century. Technology companies are just like “real companies” except that the cycle is shorter so everything happens faster.

I love his explanation of the so-called Opportunity-Driven leaders:

You can identify this type of leader by their ability to not just see the future but seize it, their comfort with unconventional strategies, and their acceptance of bold risk. They don’t measure their success by rankings, quarterly earnings or liquidity events. They have a more grandiose vision to change the world, build a global brand, upend an existing industry.