What do "hockey stick" projections represent in financial modeling?

"Hockey stick" projections in financial modeling refer to scenarios where there is modest or flat growth in the early years, followed by a significant and sharp increase in growth rates later on. This pattern resembles the shape of a hockey stick, with the blade representing the initial flat growth and the handle depicting the steep rise.

This type of projection is often used in contexts where a company or project is expected to take time to ramp up to full potential, perhaps due to initial investments in capacity, market entry challenges, or the time it takes for a product to gain traction. Recognizing and understanding this projection style is crucial as it can impact valuation models, cash flow expectations, and ultimately the investment decisions made based on these forecasts.