With its operational costs rapidly rising, the New York City start-up is finding that fast growth can be as challenging as no growth at all.
It's often said that growing too fast is a good problem for a start-up to have. That may be true, but for many businesses, that doesn't mean it's necessarily easy to solve.
The latest example of the perils of rapid expansion is Aereo, a New York City-based company that enables users to broadcast live network television on their computers. The start-up has faced plenty of resistance from cable providers and broadcasters, but now, The Wall Street Journalreports the biggest challenge ahead of Aereo may be paying its electric bill.
Aereo's service hinges on the fact that each of its customers is assigned his own antenna, which picks up on television stations much like the way a rooftop antenna would. This helps Aereo sidestep potential copyright infringement issues. In Aereo's launch market of New York City, however, the Journal estimates there are somewhere between 90,000 to 135,000 of these antennae housed in the company's Brooklyn warehouse, and that Aereo has the capacity to support 350,000 subscribers in the city. That, according to the Journal, translates to some $2 million a year in electric bills in New York City alone.
Aereo is certainly not the first company to struggle with fast growth. As Inc.'s Kimberly Weisul wrote last year in a special report, there are at least six major speed bumps that stand in the way of most fast-growing companies:
They outgrow their staffs.
They can't hire fast enough.
They fall victim to their own outdated or low-tech systems.
They aren't able to keep up with demand.
The entrepreneur becomes a bottleneck.
They run out of money.
"Companies often actually become less liquid as they grow," Gary Kunkle, an economist at the Edward Lowe Foundation's Institute for Exceptional Growth Companies, told Weisul at the time. "They grow themselves right into bankruptcy."
Aereo founder Chet Kanojia admits that managing operating costs is a "huge struggle" for the company. In markets outside of New York City, Kanojia told the Journal, the company has taken a controlled approach to growth, typically launching with enough capacity for 10,000 to 15,000 customers. "It's better for us to get 10,000 subscribers in 50 markets than 500,000 in New York City," Kanojia said.