Jiva Technology

Growth Charts

Rockstar developer Joel Spolsky’s recent article got me thinking about what constitutes healthy growth for tech start ups. I’d always worked on a rule of thumb: aim for somewhere between 50% and 150% growth in revenues per year. Any less and you’re not trying hard enough, any more than 150% and the wheels will fall off sooner or later. Spolsky cites Oracle Corporation as an example. They beat Ingres to dominate the relational database market, despite initially having an inferior product, seemingly by simply setting the bar higher and growing at a faster rate. But this gravely underestimates Oracle boss Larry Ellison. What Spolsky does not mention is that whilst Ingres outspent Oracle nearly 2:1 in R&D; Oracle was outspent Ingres nearly 2:1 in sales & marketing. In other words, Ellison made the conscious bet that investment in marketing gave better returns than investment in engineering. This is a tough pill to swallow for the engineers, but the formula has repeatedly been proved correct: get your product to ‘good enough’, spend on marketing to maximise your sales and let your superior growth rate do the rest.

So where does this leave the fledgling technology company? What is a healthy growth rate? I’d argue the answer is somewhere nearer to 100% than 50% in the early days; customers will forgive a few service snafus to know they backed a winner and if Google could drive growth north of 50% even when their revenues were in the multi-billions, us small fry should be able to scale faster. I’ll settle for 101%.

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