What Is a Gazelle Company?
Let me explain what a gazelle company is based on its original technical definition: it's a high-growth company that boosts its revenues by at least 20% every year for four years or more, starting from a base of at least $100,000.
This kind of rapid growth means the company more than doubles its revenues in four years. You should know that gazelle companies focus on fast sales growth, not their overall size, so they can be anything from small outfits to huge enterprises, though most are smaller. Many of these are publicly traded, so if you're an investor, you can buy and sell their shares.
Key Takeaways
- A gazelle company is a young, fast-growing enterprise with base revenues of at least $100,000 and four years of sustained revenue growth.
- You'll often find gazelle companies in the technology industry, but they also show up in retail, apparel, or food and beverage.
- In highly competitive markets, gazelles eventually see their sales growth drop below 20% and into single digits.
- Gazelle companies create jobs and are among the top sources of new employment in the economy.
How a Gazelle Company Works
The concept comes from author and economist David Birch, who developed it in his early studies on employment and brought it to more people in his 1987 book, Job Creation in America: How Our Smallest Companies Put the Most People to Work. Birch argued that small companies create the most new jobs, estimating that gazelles make up just 4% of U.S. companies but account for 70% of all new jobs.
He pointed out that gazelle companies create jobs much faster than Fortune 500 'elephants' or Main Street 'mice' like mom-and-pop shops. But that pace slows down, as most gazelles can't keep up the rapid growth past five years.
In today's business world, the term gazelle applies to any fast-growing company, moving away from Birch's strict definition. What still holds true, from recent studies and observations, is that gazelles drive job creation in open, entrepreneurial economies like the U.S. Many are in tech, but plenty are in food and beverage, retail, apparel, and other growing industries.
Examples of Gazelle Companies
Some gazelles keep growing strong, others tire out and slow, and some get taken down by bigger players. Companies like Apple (AAPL), Meta (formerly Facebook, META), and Amazon (AMZN) look like they'll stay ahead of competitors. Maybe it's because they've grown too big to be bought out, or they've wiped out real rivals. As they mature, though, it's hard for them to stay gazelles due to their size.
Other gazelles, with their quick moves, draw attention from big predators. These larger companies might acquire them outright or enter their markets to grab share, using their resources to disrupt things. Take Instagram, acquired by Meta, or WhatsApp and Oculus, which met the same end.
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