What Is a Gazelle Company?
According to the original technical definition, a gazelle company is a high-growth company that has been increasing its revenues by at least 20% annually for four years or more, starting from a revenue base of at least $100,000.
This growth pace means that the company has effectively more than doubled its revenues over a four-year period. As gazelle companies are characterized by their rapid sales growth pace, rather than their absolute size, they can range in size from small companies to very large enterprises, though a majority of them are on the smaller end of the scale.
How a Gazelle Company Works
Author and economist David Birch first coined the term "gazelle" in some of his early studies on employment in the country and introduced his concept to a wider audience in his 1987 book, "Job Creation in America: How Our Smallest Companies Put the Most People to Work." Birch contended that small companies were the biggest creators of new jobs in the economy, estimating that these gazelles comprised only 4% of all U.S. companies, but accounted for 70% of all new jobs.
Gazelles in extremely competitive markets eventually see their sales pace decline below 20% and into the single digits.
Birch noted that the job-creation pace of gazelle companies far outstripped that of the Fortune 500 "elephants" (large enterprises) and Main Street "mice" (mom-and-pop type businesses).
In a more recent business landscape, a gazelle means any fast growing company; it has long since lost its strict Birchian definition. What is still generally true, based on recent studies and empirical observations, is that gazelles are good job creators for open, entrepreneurial economies such as that of the U.S. Many are in the technology sector, but numerous others are in food and beverage, retail, and apparel—to mention only a few.
Examples of Gazelle Companies
Some gazelles keep bounding along, some get tired and slow down, some get eaten by big cats. Gazelle companies like Alphabet (aka Google), Facebook and Amazon seem like they won't get caught by competitors. Perhaps this is because they have become too large to be acquired, or they became so big they have eliminated true business competitors. The natural maturation process of their businesses also makes it difficult for them to remain gazelles as they grow larger in size.
Other gazelles, with their rapid and flashy strides in the open field, may attract the attention of big predatory cats. These big cats could jump on them and eat them, literally, through an acquisition, or they could enter their markets and claim new market growth for themselves, using their existing infrastructure to shake up the landscape. Instagram makes a good example, having been acquired by Facebook. The same fate was shared by Whatsapp.