Sustainable Growth
Background
As a founder, one of the most critical decisions you’ll face is how to scale your company. Your options include:
The venture path: chasing rapid growth with venture capital;
Sustainable growth (with funding): balancing scale and stability with external support; or
Sustainable growth (founder-funded): building value over time on your own terms.
In this post, we’ll explore sustainable growth and the trade-offs you’ll encounter. Curious about VC? Have a look at the Venture Path for more on that approach.
Sustainable Growth
Sustainable growth is a strategy that focuses on value creation by building a business capable of growing over time without overextending its resources or taking on excessive risk. Unlike the venture path, which prioritises rapid scaling and market dominance through aggressive funding rounds, sustainable growth emphasises long-term stability, capital efficiency, and maintaining control.
This approach ensures your company can reinvest profits wisely while avoiding the pressure of hypergrowth. Whether you opt for sustainable growth with funding or founder-funded, the aim is to build a Truly Great company over time, ideally with the option for A first-Class Exit or to de-risk and double down.
What should your growth rate target be?
Every business is different, ask ten investors for an opinion and you’ll get ten different answers, but my rule of thumb is: aim for 50-100% year-over-year growth in the early days (up to $10M revenue), then work toward Rule of 40 (where growth rate plus profit margin equals at least 40%) or better, after that.
When Does Sustainable Growth Fit?
Sustainable growth might be the right choice if:
Your business generates or can generate predictable revenue.
You can build your business to a high value without a massive upfront investment.
You’re in an industry where you can win over time.
You prioritise control and prefer a steady growth pace.
Your goal is a Truly Great business (profitable, resilient) rather than a high-risk, high-reward journey.
Sustainable Growth: Trade-Offs
| Benefit | Consideration |
|---|---|
| Control | You can retain decision-making power and usually more equity. |
| Lower Risk | Steady growth reduces the chance of a complete wipe-out. |
| Flexibility | Adapt your strategy over time without investor pressure. |
| Steady Growth | You can grow consistently but aren’t targeting hypergrowth with large external capital infusions. |
| Resource Management | Requires careful capital allocation and cash flow management. |
Funding Options for Sustainable Growth
Sustainable growth can be pursued with or without external capital:
Sustainable growth (founder-funded): Also known as bootstrapping, this relies on customer-funded growth, personal savings, or small loans. It maximizes autonomy but demands disciplined financial management to fuel growth.
Sustainable growth (with funding): This can involve high-net-worth individuals, family offices, growth equity, or strategic investors (Private equity can be an option, though it often involves a change of control). The focus is on securing capital that supports your growth pace without sacrificing your long-term vision. If you have sufficient scale, debt financing may also be available.
Note: Many founders begin with founder-funded growth, later tapping external capital for expansion, blending control with strategic support.
Sustainable Growth or Venture Path?
Sustainable growth builds a resilient, profitable business on your terms, that is slower and steadier than the venture path’s rocket-fueled ride.
It’s a safer bet for most, avoiding the high risks and equity trade-offs of VC funding. If you’re weighing your options, check out my post on the Venture Path to compare the two and find the best fit for your company.