Choosing Focus: How to Drive Hypergrowth

Insights from three Earlybird Digital West portfolio companies

The start-up environment is becoming increasingly fast-paced. According to Atomico’s State of European Tech Report ’21, it took six years from funding in 2000 for the first European unicorn to reach unicorn status. Whereas for two particular companies founded in 2018, it took only one year to reach this milestone. Similarly, companies now often raise more than five times the amount of money within their first five years of existence than they used to a decade ago.

So it’s worth asking: how can companies use innovation to help achieve hyper growth? We turned to our portfolio companies who successfully managed this challenge to find commonalities and help others navigate towards exponential growth. Though all of our successful portfolio companies were innovative in some way, most of them placed their early focus on one or two particular dimensions combined with the right market timing, rather than reinventing the wheel across many areas.

While for N26, the lever was a killer feature and best-in class UX to reach sufficient scale for monetization, for OneFootball it was influencer-reach on a path to efficient customer acquisition. For Isar Aerospace, it involved fast iteration processes and continuous access to capital to build up the infrastructure and get the product ready for launch — even though investors knew it was still a long way towards the market entry of now Europe’s choice for engineering the future of space flight.

It starts to appear that successful companies perform on a sufficient level on all relevant dimensions yet set a clear focus on which dimension they want to supercharge and differentiate from their competition. While this dimension can vary, the laser-clear focus — in combination with the right timing– appears to make all the difference.

N26: Killer features and best-in-class UX

Our portfolio company N26, for instance, performed similarly to other (neo)banks on various dimensions but focused on a killer feature and best-in-class UX to drive their early growth. These two dimensions were chosen because the company understood early focus should be on user growth; monetization would only be possible at a later point when they had reached significant scale. For N26, this key feature was a peer-to-peer payments service called MoneyBeam, where N26 users could instantly transfer money from one N26 bank account to another. This feature caused a very positive word-of-mouth response and as a result, significantly increased the efficiency of marketing. Further, it created a sense of community between users and created network effects in a sector where you traditionally have none. (I.e. in an old-school bank, it does not make a real difference whether they have a thousand or a million customers). While for N26 this killer feature was MoneyBeam, for other companies it could be anything that increases marketing efficiency or creates network effects.

The second innovative dimension of N26 was their best-in-class UX. Be it the home section designed to provide a clear overview of relevant insights and actions, (such as seeing how much you spent on groceries, as opposed to a chronological list of all your expenses), or the option to create spaces sub-accounts and shared spaces for specific purposes, N26 always had the customer in mind when designing their UX. This resulted in very high engagement of users compared to traditional banks — further accelerating the growth of the neobank, which recently surpassed Commerzbank in market capitalization and became the second largest German bank.

(Read more on N26 from our Partner Christian Nagel here).

One Football: Customer Acquisition

For our portfolio company OneFootball, we saw a similar pattern of user growth up front, but with a twist. While many of the things they did were similar to traditional sports news outlets (such as targeting the same customer group or using the same form factor i.e. text, images, videos etc.) they innovated on how they acquired customers. Similar to N26, the company knew that given their early stage, it was key to innovate on a dimension that helps them achieve significant reach. Especially in consumer-facing business models, it became increasingly hard to target new customers efficiently, given the strong reliance on Google and Facebook (now Meta).

About a decade ago, influencer marketing was a channel that introduced a novel form of customer acquisition. However, everyone who has ever worked with influencers will quickly realize that it is a nitty-gritty and admin-heavy business (especially since influencers who perform well and get engagement for your campaigns are often so-called micro influencers, with a smaller but more engaged audience). Once the team of OneFootball realized this, they automated their influencer set-up to a large extent and built a tool that takes over repetitive and administrative tasks. This enabled them to manage 800–900 influencers per month with ca. 8k monthly content pieces and helped them reduce their customer acquisition costs (CACs) by 95%.

It accelerated their growth so significantly that they are now the largest sports community in the world with 100 mn monthly active users (MAUs). This example should encourage other startups trying to innovate on the customer-acquisition dimension to think about current alternative channels or different approaches that could drive down CACs and reduce dependence on traditional channels. For instance, a currently trending alternative approach is to leverage existing customers as a marketing and acquisition channel by mobilizing them as creators.

Isar Aerospace: Saas Lessons & the Funding flywheel

Isar Aerospace’s team story intersects with both funding and growth. The founders and core engineer team met long before founding the company, back at the Technical University Munich — in a group dedicated to building rockets together. The subsequent trust and reliability they developed were key in the startup’s early days — especially when convincing first investors of the team, business case, and technology. Once the company secured the capital needed from its first funding round, team cohesion still played an important role in growth; it enabled them to hire the best engineers and increase manpower quickly, further driving their product towards launch.

Isar Aerospace leveraged the right timing by focusing on raising substantial amounts of funding every time they hit major milestones,I such as key technological tests or a substantial increase in customer interest. This initiated a flywheel between the access to capital and aggressive growth.

But deep tech is more capital intensive than a SaaS business. So Isar Aerospace transferred a skill that is easily used in nearly every SaaS company to hardware deep tech to further convince investors: fast iteration processes. By implementing fast iteration processes for its hardware, they gained speed and achieved better results. Having the right advisors by their side, they managed to win more investment, raising even more funding. This access to capital became a fly wheel for growth. It significantly differentiated them from competitors, allowing them to double their launch LOIs between December 2020 and July 2021 and to secure their first down payments even before their initial test flight, planned for H2 2022.

(Read more on Isar Aerospace from our principal Paul Klemm here).

To recap, we encourage founders to think about which selected dimensions to focus on and how they can combine those with the right timing. With these parameters, companies should aim to be highly innovative and unique in leveraging those dimensions as key drivers of their growth. For all other dimensions, companies should try to avoid significant innovation risks.

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