Why Exponential Growth is non-intuitive

I was recently reading Swiss Businessman & Author, Rolf Dobelli’s The Art of Thinking Clearly, a brilliant book and especially relevant if you’re an entrepreneur juggling multiple ‘thoughts’ simultaneously.

One of the chapters in the book is on the topic of Exponential Growth. Rolf asks us a question: If I gave you $1000 a day for the next 30 days or 1 cent on day 1, 2 cents on day 2, 4 cents on day 3, 8 cents on day 4 and so on for 30 days which one would you pick?

When he raised this question at an event and gave people 3 seconds to answer, most people picked the first option. Of course, the first option results in a total of $30,000; The second adds up to over $10 million.

The point Rolf was trying to make was this: linear growth is intuitive. People understand it right away. Traditional businesses often grow linearly. The growth may be rapid, but it is still linear.

On the other hand, exponential growth – like how 1 cent doubles every day to become 5.36 million on Day 30 and adds up to over 10 million – is non-intuitive.

And, that’s why we believe a lot of people (outside of the startup ecosystem) don’t understand the world of VC-backed startups. Their growth trajectories are non-intuitive, non-linear and imaginative.

At Smart CEO, we’re certainly not partial to any growth approaches. We have featured a healthy mix of CEOs of different genres – including family business CEOs, founders of startups, leaders of MNCs and owners of mid-size businesses.

I write this now because we’re gearing up for the 4th edition of Startup50 Conference & Awards, our flagship event to recognize 50 of India’s most exciting VC-backed startups.

At Startup50, we aim to recognize companies from sectors including Consumer Internet, Enterprise Tech, Healthcare, Fintech & Financial Services, Retail, Consumer Brand, Social Impact and AgriTech, where the primary growth model is exponential. For example, OYO, a Startup50 2015 winner, made it to the list for setting up its network of budget hotels in 86 cities within 3 years of operations. The founder, then a 21-year-old Ritesh Agarwal, moved quickly – shifting business models and raising VC funding to scale at breakneck pace. Yes, the company was burning cash, yet certain investors bet on Ritesh’s ambition to build massive, unprecedented scale. Softbank backed the company with over US $100 million in 2015, right after Startup50 that year. The company has, of course, raised several more rounds of capital. When it announced an entry into China earlier this year, Ritesh announced a massive launch into 26 cities across China with over 11,000 rooms ready to be booked. Talk about thinking exponential.

This approach is true for most Startup50 companies. Companies such as Hector Beverages, Happiest Minds, Mitra Biotech, Sigtuple and Uniphore have all pursued exponential, growth-oriented business models versus less-risker, linear models.

While our Jury Members evaluate the nominee companies on several factors including founder backgrounds, financial health, cash flow discipline and long-term potential, often exponential growth and the ability to deliver rapid transformations play an important role.

The winners of Startup50 2018 will be announced on December 8th, 2018 at Taj West End, in Bangalore. Register now at www.startup50.in if you’d like to join us for this wonderful celebration of Indian entrepreneurship.

Hope you enjoy reading this edition.

Prem Sivakumaran is co-founder & CEO of Growth Mechanics, a leadership and entrepreneurship-focused business content company in India. Growth Mechanics publishes The Smart CEO, a publication focused on enabling peer-to-peer knowledge exchange among C-level executives and board members. The platform reaches over 1.2 lakh CXOs across its website, app, print publication & CEO Round Tables, and has featured on the cover India’s leading business leaders/founders from Infosys, Mindtree, Tata Sons, ICICI Bank, Biocon, Yes Bank and several others. In addition of Smart CEO, Growth Mechanics also organises the Startup50 Conference & Awards, an annual event to recognize India’s top 50 startups every year. Startup50 Alumni include Freshdesk, Oyo Rooms, Urban Ladder, Capital Float, Paperboat Beverages, among others. Growth Mechanics’ primary business model revolves around linking CXOs and Brands around engaging content and has worked with India’s leading companies including Mahindra Group, Godrej & Boyce, BASF, Airtel, Tata Docomo, Fiat, IDA Ireland, Yes Bank, Prestige Estates, Frederique Constant, Indian Terrain