The venture capital firm Andreessen Horowitz once noted that the most dangerous moment for a software startup is not the failure to find a market, but the moment it finds one and attempts to scale before its unit economics are settled. In the third quarter of 2023, data from the research firm PitchBook indicated that late-stage startups were burning through cash at a rate 22% higher than the previous year, despite a tightening credit market. These companies were not failing because they lacked customers. They were failing because they had successfully acquired customers at a cost that the business model could not sustain. Growth had become a liability.

The prevailing narrative in the corridors of Silicon Valley and the City of London suggests that scale is the ultimate disinfectant for early-stage inefficiency. The theory holds that if you can capture enough market share, the sheer volume of transactions will eventually outpace the fixed costs of operation. This is the "blitzscaling" philosophy popularized by Reid Hoffman. It assumes that speed is the primary competitive advantage. In practice, however, scaling an inefficient model is like trying to fix a leaking boat by installing a larger engine. The faster you go, the more water you take on.