Being able to scale your startup further and grow your business is one more challenge you’ll need to face eventually. In this regard, there are several strategies to consider. Let’s take a look at the possible options and try to define the most efficient one.
Vertical vs Horizontal Growth Strategy
Vertical growth is considered to be a traditional strategy for a startup. This primarily means scaling your service/product within the existing line of business. By going deeper into the current market, you get a chance to increase the demand for your product and its adoption.
Namely, there are two ways to scale vertically:
- by adding more features and capabilities to the existing product, and
- by introducing new products to complement your core value proposition.
A good example of such an approach is Snapchat. Currently one of the most talked about startups, it started out as a person-to-person photo sharing service with a twist – the disappearing message. By adding more features such as video sharing, chat, stories, and its cutting edge feature – lenses (augmented reality effects added to the photos and videos in real time). Furthermore, the company was able to grow to a point where the long-established market leaders started copying the product.
Read also: How to develop a social media app
Yet, Snapchat didn’t stop with growing the app’s functionality. The company further expanded its reach with another product (which is, however, complementary to the existing solution) – the Spectacles. The smart glasses with a built-in camera integrated with the app which allows users to record and share first-person videos on the go.
Thanks to their smart growth strategy (and, most importantly, years of hard work and a little bit of luck), the company was able to score $2.65 billion in funding and recently went public at a $29 billion valuation.
Yet, vertical growth isn’t the only way to scale your startup. There is one more proven strategy to consider.
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Horizontal growth typically means expanding the product or service to new markets, be it new geographies or business domains. By scaling horizontally, you might face additional challenges, unique to the markets you are targeting. This might be product localization issues or industry-specific business aspects. However, a vertical growth strategy is typically more lucrative and can result in better long-term ROI.
Some of the most common ways to scale your startup horizontally include the following:
- Bringing your product/service to new markets – this can be done by developing the new market or penetrating the existing one and trying to outcompete the local providers.
- Applying the existing assets in new business domains (for example, going from a product to a SaaS model). If your product turned out to be successful in one field, you can try to extract its core and adapt it to serve other industry needs.
- Bringing all of the business processes in-house – for example, you can build your own supply line or delivery service instead of depending on third-party providers.
An outstanding example of such a strategy is Uber. The startup launched its service initially in just one city and later rolled out to more locations across the US and worldwide. Furthermore, the company introduced similar on-demand solutions in a different business domain (UberEats), applying the core logic of the existing app to the food delivery industry.
As for the last type of horizontal growth strategy, the company is currently working on a concept of an autonomous car to get rid of third party drivers.
Read also: How to develop a taxi booking app like Uber
Growing smart: which strategy is the right for you?
When choosing between vertical or horizontal growth strategies, there is no definite answer. Moreover, the best solution would be to try and combine both, at the right time, using the proper approach.
Judging by our experience working with startups, the algorithm for successful and manageable growth typically includes the following stages:
- Concept verification includes launching an MVP for a limited market, at a limited scale. Thus, you will be able to prove the viability of your product at a reasonable cost and pivot without any risks if needed.
- Growing the product’s functionality to introduce the full-featured product to the existing markets. This will help you retain users and set up your primary revenue streams.
- Expanding horizontally to new locations (if the initial product was limited to only one city/country).
As soon as you have built a full-fledged product and have established your presence across the priority markets, you can scale your startup to relative domains, outside of your initial business line. The strategy for further growth will greatly depend on the type of product or service you are offering.
While it is good to be inspired by other startups such as Snapchat or Uber, it’s important to remember that there is no one-size-fits-all growth strategy. An approach that proved to be beneficial to one company might be a dead-end track for another.
Read also: How to Reduce Startup Burn Rate
So, if you are looking to grow your startup, consider hiring professionals to help you choose the right strategy and help with its implementation.
We at Eastern Peak have a proven track record of successful startups across a number of domains, from on-demand services to social media apps and eCommerce. In order to get professional help from our team, contact us now.
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