5 Companies That Grew Too Quickly (and What You Can Learn From Them)

Photo by Austin Distel on Unsplash

Most entrepreneurs get into the game hoping their startups grow as quickly as possible — but fast growth is often overrated. According to a joint study by the Kauffman Foundation and Inc., roughly two-thirds of the fastest-growing startups end up failing. Research from California State University also showed that companies studied that had fast revenue growth performed worse, long-term, than their slow-growing counterparts.

Why is this the case? There are many possible reasons, including unforeseen variables that factor in at a higher scale, as well as costs for increased overhead and increased operational complexity. It’s best to understand these effects through real-world examples, so here are five companies that went through an explosive growth period, only to end up faltering.

1. Wise Acre Frozen Treats

Picariello’s product had won several awards, and interest in the company had skyrocketed; unfortunately, he jumped too soon and started hiring and buying equipment before he had the revenue or startup capital to substantiate those investments.

2. 180s

Unfortunately, that growth was not sustainable, and by 2006, the company had overloaded itself with debt. Fortunately, the company was acquired by Patriarch Partners in 2006; and, since then, the company has recovered smoothly — but not all companies get that second chance.

3. Crumbs Bake Shop

The high costs of maintaining physical retail locations, the declining interest in cupcakes and the company’s push to open new locations despite falling sales ended up forcing the company to close most of its locations. Crumbs was then bought out of bankruptcy in 2014, and a handful of new stores were opened, but the momentum wasn’t sustained; all physical locations were finally closed early last year.

4. Zynga

But the investment in new equipment and new games couldn’t make up for Zynga’s lack of innovation; by 2015, the company was initiating waves of layoffs and closed down its data centers in favor of more cost-efficient data service. Today, the company still exists but isn’t the gaming powerhouse it used to be.

5. KIND Snacks

When he did, he attracted $20 million of funding from VMG Partners, which allowed him to grow the company consistently until 2014, when he bought his company back for $220 million in cash.

What you can learn

Entering a market before you understand it, spending money you don’t have and making too many assumptions about the future can all negatively impact your chances of success, so try to take things one step at a time and grow your company with deliberate patience. It will pay off.

For more content like this, be sure to check out my podcast, The Entrepreneur Cast!

CEO of EmailAnalytics (emailanalytics.com), a productivity tool that visualizes team email activity, and measures email response time. Check out the free trial!