How many startups launched last year? How many of them succeeded?
Some data suggests that up to 95 percent of startups fail, but it’s difficult to exactly pinpoint why it happens. Some of them fail simply because they didn’t create something people want, while great many vanish due to the wrong execution of their growth and marketing.
Growth is key, yet growing a startup is really hard and most founders struggle with it.
What makes it even harder is the overwhelming amount of tactics and the “one size fits all” hacks that dictate how we should be running our own growth and marketing efforts.
Usually these tips are meant to be an inspiration, but a lot of founders take them too seriously and apply them directly — regardless of the context of their product or customers.
I think this happens because many founders love “short-cuts” and fantasize about hockey-stick curves. Stories we’ve heard about Dropbox, Airbnb or other unicorns have led us to believe that growth is about chasing this one silver bullet that will magically change the course of our history.
However, we forget that what these startups actually did was to ask a single question: “What marketing channel(s) will help us find our dream customers?” This led them to establish a growth process that involved lots of experimentation, measurement and learning to get their growth machine up and running.
It might seem easy and appealing to talk about building a growth machine, but how can you start this process from scratch? These are the five lessons I have learned:
1) Don’t take hacks out of their context
One thing is clear, there is no silver bullet. No unicorn you’ve ever heard of made it overnight.
Dropbox was doing Google AdWords before introducing the “Refer a friend for more space”.
Hotmail was considering billboards and doing Radio ads (yes, believe me!) before introducing their wildly glorified viral loop “P.S. I love you, get your free email at Hotmail.”
They didn’t sit around and spend their time trying to come up with the one ‘hack’ that would save their buisness. What worked for others won’t work for you simply because your audience, your model, your customer decision process are different. Your business is different, plain and simple. To make the most of what you read, always try to understand the context of the hack that’s being discussed: What was the audience? What was the business model? What’s the customer decision process?
By answering these questions, you start making assumptions of why this might work for you as well. Comparing your business to the context of the hack is important in prioritizing what you work on.
For the hacks to work, your competition might be a good starting point to identify the patterns of success.
2) Don’t experiment with many acquisition channels at once
Focus always wins.
Almost all successful startups or companies get the majority of their scale from a single channel.
However, with so many channels to consider, most founders are tempted to try a bit of everything instead of going all in on one thing
Yet, doing so is equivalent to shooting yourself in the head, because it will require more time to learn from your experiments, therefore taking longer to decide whether to kill a channel or double down on it. As a result, you end up with no focus.
3) If you can’t measure it, you can’t manage it
No startup can find a sustainable business model without occasionally pausing to get directions, and these directions are derived from examining the right metrics.
As Head of Growth at my company, a big part of my job is to regularly check upon my metrics. In fact, we have a big screen in the center of our office hall that shows our growth metrics and their progress on a daily basis.
This sounds a bit stressful, doesn’t it? I might have been sceptical at first, but it turned out to be extremely helpful. Measuring my performance makes me accountable. I’m forced to confront inconvenient truths and always look for ways to improve the results.
It’s very important to define your growth metrics and measure them constantly. Customer acquisition without a clear set of objectives is just a random activity.
You’ll always track and review multiple numbers, but pick a minimal set of key performance indicators (KPIs), which you’ll track and report everyday. Capture everything, but focus on what’s important.
In the book Lean Analytics, the authors introduce the concept of OMTM — the One Metric that Matters. The OMTM is the one number you’re completely focused on above everything else for your current stage. It could be N° of customers per week, churn, N° of new active users, N° of paid subscribers, cost of acquisition — basically anything that has a direct impact on your company performance.
4) Do things that don’t scale
When your startups is taking its first step, by all means get your friends and family to use the product — and don’t stop there. Email your local community groups, get those blog mentions and engage with potential users over Twitter, Reddit, Hacker News or other niche forums.
Most founders know about this tactic, but they usually refrain from unscalable strategies. The reason is that the numbers seem so small at first and they start thinking “is it really worth it?.” This can’t be how the big, famous startups got started, they think. The mistake they make is dismiss the power of compound growth.
When you have a small user base, little things can drive a high percent growth. As Paul Graham, Y Combinator founder explains: “If you have 100 users and keep growing at 10 percent a week you’ll be surprised how big the numbers get. After a year you’ll have 14,000 users, and after two years you’ll have two million.”
The other benefit of using methods that don’t scale is the ability to get in close contact with your users. And everybody knows how crucial it is to engage with potential customers directly, especially if you are still working on a product/market fit. Getting in direct contact with the user can be an essential step way to learn if you have the right product.
5) Focus on a small niche
Who do we actually want to work with?
Most of us start with a product idea, never thinking about who we want as ideal customers.
Many investors give startup entrepreneurs this terrible piece of advice: “Your ideas are too small. You need to think bigger and go after a larger market.“ When you’ve found the unusual idea to base your startup on, don’t go too broad too quickly.
This may sound counter-intuitive because most founders fear that if they start small, they will lose potential customers on the way. Startups are more likely to accelerate growth by narrowing their target demographic, better understanding customer needs, building more focused products, and tailoring their marketing message to their specific audience.
Later on, after getting initial traction with a small audience, startups can grow their market and expand product offerings to go after bigger market segments.