As I see it, growth refers to the increase in a business's customer base, revenue, and market share over time.
Startup = Growth
In one of his many superb essays, Paul Graham says a startup is nothing but a company designed to grow fast. Just being newly established does not qualify a company as a startup. Plus, a startup doesn't need to focus on technology, seek venture funding, or plan an exit strategy. The only fundamental requirement for a startup is to achieve growth. All other characteristics we associate with startups stem from their growth.
We can talk about a long series of startups that lost investors' money by focusing on unessential activities, hiring the wrong or too many people, and paying for inefficient tactics. So, the theory of constraints should be running in the back for all the startups out there. A chain (or a business) is only as strong as its weakest link.
There are systems, structures, procedures, methods, and actions that are repeatable and easy to understand. The hard part is to maintain a growth mindset. Because it has to be present day in and day out. We must experiment, measure, discover what's working, and iterate.
That's it. That's (almost) all there is in terms of high-level growth. If we do it diligently, we'll find sweet spots and use them to our advantage. And then, we’ll do it again.
And If You Don't Know, Now You Know
I won't continue with Biggie's lyrics but with Steve Blank's omnipresent affirmation that "a startup is not a small version of a big company." That is the bedrock of any growth initiative.
The best practices of big companies don't apply to startups. Creating an idea and building a successful startup requires a different approach.
And that approach should start with a customer development mindset.
To do this, we have to stay as close to our users as possible. We must gather feedback, host customer interviews, discover what forces are moving our boat, “Jobs To Be Done” needed to improve adoption and run a series of experiments to determine whether our hypotheses are correct. If they need to be corrected, what types of iterations, small changes/pivots, or significant changes to our business model do we need to make?
Our business efforts should be based on information provided by the customers because we are building for them and are looking for their money. Okay, the gut instinct might play a part here, too, but it should be validated by the users. Always.
Growth as a Function
su → the number of successful users
rw → first-week retention of the
onb(x) → onboarded users, out of
x → all our signups
By running this simple equation, we can measure success. When we iterate, week after week, and the numbers are looking better and better, then, soon enough, we will attain escape velocity.
Growth Strategy for Pre-Revenue Phase
In the pre-revenue phase, our growth plan should focus on the North Star and expanding the customer base. The North Star is the metric that increments when we deliver value to customers (e.g. DAUs, WAUs, transactions, the most important thing specific to our business). This number should be maximized and expressed as an absolute increase rather than a percentage.
Bring as many users as fast as possible.
We should get them on board by leading them to meaningful actions until they hit the "AHA moment." Then, activate them and improve the retention. We must iterate until signals of product-market fit are visible.
Growth Strategy for Post-Revenue Phase
In the post-revenue phase, our growth plan should focus on increasing revenue (MRR, ARR), gaining market share, and achieving long-term profitability.
Strong growth leads to a competitive advantage.
If we can show strong growth, we can challenge our industry, hire top talent, and have an edge over investors. They are more likely to invest in a rapidly evolving, profitable startup with a clear plan for sustainable growth.
“Stay on Your Toes”
Growth motors implicitly improve the product when they are in motion. As a business grows, we can gather better customer feedback and use it to develop a product or service that meets our target audience's needs.
Down the road, as cliche as it sounds, it's essential for us to stay agile and guard the growth mindset. When building a startup, we should be willing to adjust the strategy and adapt. But the process should remain (almost) the same:
- Collect customer insights (customer interviews, emails, DMs, conversations, and so on).
- Create a backlog of ideas and then score them (use ICE - Impact, Confidence, Ease; 1-10).
- Start prioritizing and putting them into the pipeline.
- Experiment based on hypotheses, rationale, and metrics.
- Execute and measure the results.
- Document that information, analyze, learn, and refine.
- Now, there's only one thing left to do: again!
Conclusion
Attaining escape velocity requires a strong focus on growth from day one. Our startups must identify and use their levers diligently, experimenting, measuring, iterating, and prioritizing customer feedback. While it may be tempting for us to focus on unessential activities, hire too many people, or use inefficient tactics, it's crucial to keep a growth mindset, and adapt to market conditions and customer needs. By doing so, our startups can achieve sustainable growth, gain a competitive advantage, and increase revenue and market share over time.
The path of growth is a sine qua non for success.