Bytedance and the hypergrowth delusion

Published Summer 2020

Gelt VC's Turner Novak posted a chart on Twitter that illustrated how Bytedance's (ie TikTok) growth trajectory was hitting it out of the park

The problem with the chart is it doesn't account for the forecast growth of the underlying market

If you measure just market share you can see that Bytedance looks like a far superior business to Google or any other social platform launched in the past 20 years

But if you normalise the data for inflation in both dollar terms (1.4x) and the number of internet users (6x) you discover a very different story

Now you can see the growth stories look very similar

...and, if you adjust the growth to account for the lag period before Google discovered how to monetize search the comparision indicates Google still has the strongest growth trajectory in the history of the web

The lesson here?

It's the same one outlined 4 years ago in Uber, AirBnB and the Unicorn Delusion

When doing a startup valuation/momentum/growth forecast you must not only account for the growth in market share but also the growth in the market

Why? Because if the market is early and/or growing quickly your CoCA will be significantly lower than if you have to acquire customers in a slow growing or established mature market

Originally Published Summer 2020. What are we talking about today? Follow us on Twitter

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