In the past two decades, there has been a tremendous amount of investment and attention directed towards fostering entrepreneurship in Canada. From the establishment of incubators, to the development of entrepreneurship courses, there has never been a better climate for Canadians to learn how to start a new business. When we explored entrepreneurship activity in Ontario using individual attitudes and behaviours as a basis, we found that as many as 15 percent of Ontarians engage in early-stage entrepreneurial activity (from thinking about starting a business, to forming a business plan, to registering a business).
But we know less about happens after an entrepreneur starts a business, hires their first employee, and gains their first client. Assuming that they’re interested in growth, how large can their business grow? How large do businesses have to be and how quickly do they need to grow to be considered a “scale-up”? There are indications that scale-ups make up a growing part of Ontario’s economy, but definitions differ, and there isn’t much known about which firms these are, where they are located, and how their growth can be nurtured and replicated by other companies. We sought to take a closer look at who these companies are, what their impacts are, and why their growth is closely tied to the success of Ontario’s economy in our report: Scale-up Activity in Ontario.
What makes a scale-up a scale-up?
You’ve likely heard of a number of different ways that scale-ups have been described and defined—some terms include high-growth firm, gazelle, and strong-growth firm. The Organization for Economic Co-operation and Development (OECD) produced a popular definition in 2007 that defined high-growth enterprises based on employee growth or turnover.
In our latest research, we chose to take a similar yet slightly different path to defining scale-ups. Our definition focused on two specific dimensions of growth:
- Employment-based scale-ups, companies that grow by hiring employees—which for data availability reasons, we’ve restricted to companies that are 10 years old or younger in this analysis—and
- Revenue-based scale-ups, companies that grow primarily by rapidly increasing revenue.
While some companies straddle these definitions, many are big revenue generators with a relatively small or slow-growing number of employees, and some may be big job creators with only minimal increases in revenue.