in startups

Thoughts on Paul Graham’s “Growth”

In his recent essay, “Startup=Growth”, Paul Graham talks about startup growth and what he’s learned from the hundreds of companies that have come through YC.

One of the essay’s core ideas is to use growth as a way to benchmark progress. By turning growth into an optimization problem (he suggests 7% weekly growth as a good target to aim for), you can determine if you are succeeding or failing as a startup for a given week.

This got me thinking. If you were to take PG’s advice and focus on optimizing growth, what would that look like? Through my work on Traction Book (and interviews with over 25 entrepreneurs) I’ve noticed a few things successful founders have in common.

Spend half your time on traction-related activities

This idea that growth is the core component of a startup hints that there is more to a successful company than just building something people love. If success is determined by how much you grow, your focus should be on more than just the product you’re building.

If the success of your startup is determined by your growth rate, what does this mean when a startup fails? It follows that failure occurs when a company cannot grow fast enough to support itself on revenues, or does not have promising enough growth on which they can raise money. In short, most startups are failing because they cannot hit their growth targets, and not because they fail to build a working product.

What this means is that you should be investing just as heavily in growth-related activities as in product-related ones. We’re suggesting about half your time should be spent on traction, and half on product.

At Unbounce, founder Rick Perreault told us they spent the first six months of the company’s existence building an audience through their blog – before they even had a product. In fact, their first hire was a blogger! When they launched, they had several thousand customers signing up for their beta.

In most cases, this can mean buying ads, commenting on blogs and forums, reaching out to potential customers or partners, and making a strong effort to raise awareness of your startup.

Apply lean startup principles to getting traction

The Lean Startup movement advocates running small experiments to determine what your customers want in a product. Treating growth as an optimization problem also suggests a test-driven approach to gaining traction. Think of several traction verticals that could potentially work for you, and come up with cheap ways to test them as acquisition channels.

For example, if you think PR could be a strong traction vertical for your mobile app, spend a week pitching media outlets and see what kind of user adoption/traffic come about as a result. This systematic approach will quickly allow you to hit on key traction verticals, and increase your chances at finding the distribution channel(s) that will allow you to hit 7% weekly growth. Strong growth channels like that are difficult to find by chance.

Use Quant-based marketing

Using growth as a success benchmark also works perfectly with the Quant-based approach to marketing that we recommend. One of the difficult things about marketing is that companies often have no concrete goal they want to hit. They start buying Adwords and hoping their customer numbers keep going up.

Noah Kagan did this extremely well at Mint. He wanted 100,000 customers 6 months after launching, and worked backwards (using traffic and conversion rates) to figure out how he could acquire those customers. After six months of this approach, Mint had over one million users.

This approach makes it easier to focus on only the key marketing activities that get you closer to your goal. You can figure out what you need to do, and safely ignore the latest social media marketing tactic you read. What number of customers do you need in order to hit your next company milestone? Figure that out, and then look at traction verticals you can take advantage of to hit those numbers.

 

 

  • Anonymous

    I love this post. 

    • admin

      Thanks so much!