What happens after market validation? Experimentation for scaling in technology-based startups

Abstract

Scaling is one of the most critical phases in the lifecycle of technology-based startups: failure to scale often translates into failure to survive. Entrepreneurial experimentation has emerged as a method to reduce the likelihood of startup failure by anticipating market information. However, previous studies only described experimentation as the means to achieve market validation during the early stages of a startup's lifecycle. In our study, we have inductively investigated experimentation in technology-based startups after they had achieved market validation, conducting a comparative multiple-case study on four technology-based startups operating as digital platforms for financial and marketing services. Our findings conclude that technology-based startups continue to experiment extensively as they scale up. We present a process model of how experimentation for scaling focuses on probing for new customer segments, experimenting on customer relationships and channels, whilst carefully pacing and prioritizing experiments, and selecting the relevant growth metrics to monitor. Our study thus extends the current understanding of entrepreneurial experimentation beyond the accomplishment of market validation to the phase of scaling. This article also provides practical guidelines for technology entrepreneurs to direct their efforts towards experimentation during the challenging scaling phase.