What is Gazelle in entrepreneurship? comprehensively define Gazelle Company.
MIT researcher and inventor of business demography, David Birch, first used the term gazelle in the 1980s. He used it to refer to young, rapidly growing companies.
A gazelle company or simply gazelle is a young, very fast-growing company. This type of company maintains consistent and rapid expansion of both employment and turnover (sales). Additionally, the company maintains a high rate of expansion for at least four consecutive years. Although 20% growth annually is the common definition, there is no single definition for a gazelle company’s growth rate.
Typical gazelle companies are publicly traded firms. In other words, we can buy and sell their shares in a stock market.
They have experienced sustained growth annually for the past four years. They also registered sales of $1 Gazelle companies, which are uncommon in most economies. They usually represent from five percent to ten percent of all new entrants.
However, investors, economists, and even politicians are aware of them because some are likely to become significant employers. Some of them will also become important future creators of wealth. However, according to FT Lexicon/com, most gazelle companies fail to sustain strong growth for more than five years.
Gazelle Company – examples
Many gazelle companies over the past three decades have been either hi-tech or Internet businesses. For example, Apple, Dell, Yahoo, Cisco, Microsoft, Amazon, and Google were gazelle companies during their initial years. Facebook was a gazelle company, and so was Twitter. The two social networking sites have grown their user bases amazingly fast. However, it took them longer to leverage their user-base growth into spectacular sales and profit growth.
Gazelle Impact or Importance:
- A gazelle venture is investable. High-net-worth individuals (when acting alone, they are called “angels”) purchase equity in these ventures with the unenforceable expectation that they will receive multiple times this investment in return at some time in the indeterminate future. The investor expects the future value of the venture to increase multifold.
- A gazelle venture is a high growth. For a venture to be worth five or 10 times its value requires lots of growth, both the top line and bottom line.
- A gazelle venture is scalable. To grow fast requires that the business can scale — significantly grow revenue (top line) without equally increasing cost (bottom line). The venture must be able to move beyond its founders. This is accomplished through the process and a replicable business model.
- A gazelle venture often has defendable intellectual property. Many scalable business models depend on some “secret sauce” to provide a barrier to entry from competitors.