Reaching critical mass is the goal of every business whether stated or not. Critical mass is the point at which a growing and mature company becomes self sustaining and no longer needs the infusion of investment capital to grow and prosper. Many businesses never reach this point. They remain profitable, but do not earn enough to grow the business to a desired level.

The term critical mass, is also commonly used by private equity companies in connection with their platform companies that are rolling up a group of smaller companies in a specific industry. When a platform company is large enough to reach a certain size, it has reached critical mass, allowing it to command better pricing and terms with its vendors due to the combined, increased volume of business.

 

Network Effect

The network effect is a phenomenon where a service or product gains exponential value and usefulness as more and more people or companies use it. Critical mass is the point at which a network becomes self-sustaining, generating sufficient value to attract new users on its own. Companies with strong network effects generally enjoy high sustainable growth. Two early examples include the telephone and the internet. Other examples include barter networks, executive suite businesses, community newspapers, delivery or service routes, and some websites.

 

 

Inorganic Business Growth

Organic Business Growth

Reasons for Mergers and Acquisitions

Mergers and Acquisitions

Synergy

Private Equity Funds