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Startup = Growth
Growth refers to the increase in a business's customer base, revenue, and market share over time.
In one of his many insightful essays, Paul Graham asserts that a startup is simply a company designed to grow rapidly. Just being newly established does not automatically qualify a company as a startup. Moreover, a startup does not need to focus on technology, seek venture funding, or plan an exit strategy. The only essential requirement for a startup is growth. All other characteristics commonly associated with startups stem from this core necessity.
Countless startups have lost investors' money by focusing on non-essential activities, hiring the wrong people, or pursuing inefficient strategies. Therefore, the theory of constraints should always be top of mind for any startup. A chain, like 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 challenge lies in maintaining a growth mindset—this must be a daily commitment. We need to experiment, measure, discover what works, and iterate.
That's it. That's almost all there is to high-level growth. If we execute this diligently, we'll find sweet spots and leverage them. And then, we'll do it all over again.
And If You Don't Know, Now You Know
I won’t continue with Biggie’s lyrics but will reference Steve Blank’s crucial observation that "A startup is not a small version of a big company." This concept is the foundation of any growth initiative.
The best practices of large corporations don't apply to startups. Creating an idea and building a successful startup requires a fundamentally different approach.
This approach should begin with a customer development mindset.
To do this, we must stay as close to our users as possible—gather feedback, conduct customer interviews, and identify the driving forces behind our product's success. We need to determine the "Jobs To Be Done" that will improve adoption and run experiments to test our hypotheses. If the results don’t align with expectations, we need to decide what kind of iterations, pivots, or significant changes to our business model are necessary.
Our business decisions should be guided by customer feedback because we are building for them and ultimately seek their money. While gut instinct can play a role, it must always be validated by user feedback.
Growth as a Function
su(x)=rw(onb(x)/x)
- su → the number of successful users
- rw → first-week retention rate
- onb(x) → onboarded users, out of
- x → all our signups
By using this simple equation, we can measure success. When we iterate consistently and see improvement in these numbers, we’re on the path to attaining escape velocity.
Growth Strategy for Pre-Revenue Phase
In the pre-revenue phase, our growth plan should focus on increasing the North Star metric and expanding our customer base. The North Star is the key metric that grows when we deliver value to customers (e.g., DAUs, WAUs, transactions, or another critical metric specific to our business). We should aim to maximize this number and focus on its absolute increase rather than percentage growth.
Our goal should be to onboard as many users as quickly as possible.
We need to guide users toward meaningful actions that lead them to their "AHA moment." Once they’re activated, we can focus on improving retention. We must iterate until signs of product-market fit are evident.
Growth Strategy for Post-Revenue Phase
In the post-revenue phase, our growth plan should focus on increasing revenue (MRR, ARR), expanding market share, and achieving long-term profitability.
Strong growth is the key to gaining a competitive advantage.
By demonstrating strong growth, we can challenge our industry, attract top talent, and gain an edge with investors. Investors are more likely to support a rapidly growing, profitable startup with a clear plan for sustainable growth.
The Growth Mindset
When growth engines are in motion, they naturally enhance the product. As our business grows, we can gather more detailed customer feedback and use it to develop a product or service that better meets the needs of our target audience.
As cliché as it sounds, it’s crucial to stay agile and maintain a growth mindset. When building a startup, we must be willing to adjust our strategy and adapt. However, the process should remain (almost) the same:
- Collect customer insights (via interviews, emails, DMs, conversations, etc.).
- Create a backlog of ideas and score them (using ICE - Impact, Confidence, Ease; 1-10 scale).
- Prioritize and move them into the pipeline.
- Experiment based on hypotheses, rationale, and metrics.
- Execute and measure results.
- Document, analyze, learn, and refine.
- Then, repeat!
Conclusion
Achieving escape velocity requires a strong focus on growth from day one. Startups must identify and utilize their growth levers through diligent experimentation, measurement, iteration, and prioritization of customer feedback.
While it may be tempting to focus on non-essential activities, overhire, or pursue inefficient tactics, it's vital to maintain 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 pursuit of growth is an essential condition for success.