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.
The rapid growth pace means that the company has more than doubled its revenues over a four-year period. As gazelle companies are characterized by fast sales growth, 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. Many gazelles are publicly-traded companies, meaning investors can buy and sell their shares.
How a Gazelle Company Works
Author and economist David Birch developed the idea of gazelle companies in some of his early studies on employment and introduced the 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 gazelles comprised only 4% of all U.S. companies, but accounted for 70% of all new jobs.
- A gazelle company is a young fast-growing enterprise with base revenues of at least $100,000 and four years of sustained revenue growth.
- Gazelle companies are often found in the technology industry, but also in retail, apparel, or food and beverage.
- Gazelles in extremely competitive markets eventually see their sales pace decline below 20% and into the single digits.
- Gazelle companies are also known for jobs creation and are credited for being among the best sources of new employment for the economy.
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). The pace of job creation eventually slows, however, as most gazelle companies struggle to maintain the rapid rate of growth beyond five years.
In a more recent business landscape, a gazelle refers to any fast-growing company and has lost some of 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 United States. Many are in the technology sector, but numerous others are in food and beverage, retail, apparel, and other growth industries.
Examples of Gazelle Companies
Some gazelles keep bounding along, some get tired and slow down, and some get eaten by big cats. Gazelle companies like Apple (AAPL), Facebook (FB), and Amazon (AMZN) 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 larger cats could jump on them and eat them, literally, through an acquisition, or they could enter their markets and claim market share for themselves, using their existing infrastructure to shake up the landscape. Social media giant Instagram makes a good example, having been acquired by Facebook. Mobile-messaging provider Whatsapp and the virtual reality company Oculus shared the same fate.