Startup Growth Means Not Spreading Yourself Too Thin

All startups have lofty goals for how big they can become. After finding product-market fit, they always want to explore new geographies, target new segments, and develop new products. However, founders don’t always realize that this isn’t the best path toward growth if it means your company is spreading itself too thin.

As a coach, I have a simple test I use to see if a startup is spreading itself too thin; it’s called the sandboxes test. A startup tallies how many geographies, products, and segments it serves and then multiplies those three numbers together. That calculates your total number of sandboxes.

The more sandboxes you have, the harder it is to be exceptional in each one of those sandboxes. Don’t forget that for startups to take market share away from incumbents, they have to be 10 times better than those incumbents. How can you be 10 times better than an incumbent in every sandbox if you have too many sandboxes? This is why it can be a problem for startups that create too many sandboxes too soon.

Once, I worked with a startup that had 36 sandboxes but just 10 employees. That math just didn’t calculate. How can a company of that size be adequate in 36 sandboxes, much less 10 times better than an incumbent in their industry? It’s simply impossible to do a good job when you are spreading yourself thin like that.

Founders need to keep in mind a paradox of growth that’s true for startups. Growth often comes when the market narrows rather than broadens. The goal should be to find the pain point your product solves and find the segment of people that most need it and are willing to pay for it. This is where you should focus most of your resources.

Once you win that sandbox by being 10 times better than the incumbents, then you can start to explore new geographies, new products, and new segments. But if you do that before you win at least one sandbox, there’s no way you can win any of your sandboxes. In other words, if you try to force growth or grow too quickly, you’ll only spread yourself too thin, which will ultimately prevent you from overtaking your industry’s incumbents.

If your startup dreams of being a unicorn but growth isn’t happening the way you think it should, the Unicorn Inflection Audit from the Midstage Institute can help. We will help you identify barriers and create a plan of action that puts you on the path to unicorn status.