The Blitzscaling Checklist
When Blitzscaling works… and when it falls short
Blitzscaling is an aggressive growth tactic coined by Reid Hoffman (founder of LinkedIn and successful venture capitalist). Many of the world’s best companies have used this growth tactic such as Facebook, Uber, Pinterest, and Airbnb. Many companies try to leverage this strategy given the prominent examples of success (including the aforementioned) — raising tens if not hundreds of millions of dollars in venture capital to enable blitzscaling — however, there are specific criteria founders should consider when thinking about whether blitzscaling is right for them.
Namely, Blitzscaling only works if your business has all of the following characteristics (“The Blitzscaling Checklist”):
(1) Pursuing an enormous TAM
(2) Operating in a winner-take-all market
(3) Truly defensible business model at scale
If all three boxes aren’t checked, then you should consider a different growth strategy and avoid blitzscaling. To explain why, let’s dig in further.
Pursuing an enormous TAM
If you are not pursuing an enormous TAM, then you should not blitzscale. Blitzscaling requires significant capital, which ultimately means a company must raise large rounds of funding from venture capitalists to pursue this strategy. The more capital VCs put into a business, the larger their expectations become with respect to your company’s potential exit value. As a result, companies pursuing blitzscaling ultimately need to exit (via IPO or M&A) for billions of dollars, otherwise the returns thresholds for the VCs will not be hit. And in order to generate these types of returns, you need to be in a market with enormous TAMs. However, while enormous TAMs are a prerequisite to blitzscaling, they are not sufficient alone.
Operating in a winner-take-all market
If your company is not operating in a winner-take-all market, in addition to pursuing an enormous TAM, then you should not blitzscale. By definition, if your business is in a winner-take-all market, then you must do what you can not to lose. And once everyone in the market recognizes this, the process of gaining market share as quickly as possible (a “land grab”) becomes critical, hence the need for blitzscaling. However, if you are in a market where this dynamic does not exist — i.e. there is no good reason why multiple solutions will not exist to the specific problem you’re solving — then you should not blitzscale. Types of businesses that tend to have winner-take-all dynamics include marketplaces and networks, which have something in common: truly defensible business models, which is our third prerequisite for blitzscaling.
Truly defensible business model
If you are pursuing an enormous TAM and operating in a winner-take-all market, but you do not have a truly defensible business model at scale, then you should not be blitzscaling. In the cases of networks and marketplaces, blitzscaling helps establish their defensibility in the form of network effects. Namely, the more people on the platform, the more valuable the platform becomes, resulting in more people joining the platform (and so on). However, if you are in a market where defensibility is questionable — minimal network effects, low switching costs, low barriers to entry, etc. — blitzscaling is not a good growth strategy.
When blitzscaling, you are often supercharging customer acquisition by spending lots of money on market; usually, because of how high the acquisition costs are, you are burning capital in the short term in order to realize outsized future gains in the long-term that result from customers sticking with you. But if you don’t have a defensible business model, then competitors will begin entering the market and stealing your customers away via price-undercutting, incremental feature offerings, better customer service, or a variety of other methods. As a result, your company will have spent tons of money to acquire customers that ultimately never turn profitable.
Though blitzscaling under the right conditions can reap huge financial rewards, founders should be confident that their companies tick each and every box on The Blizscaling Checklist before implementing the strategy.
