Redpoint Office Hours Recap: Building a Growth Team for Maximum Impact
What you need to know about building a growth team to scale your business
Startups and early-stage companies need to focus on growth if they’re going to be successful in the long term, and that focus should eventually materialize into a dedicated growth team. But not everyone knows when, why, and how to build a growth team that will deliver maximum impact.
In a recent Office Hours session, Medha Agarwal, a Partner on the Early team at Redpoint, sat down with Ludo Antonov to learn about his experience implementing growth teams at early-stage, hyper-growth companies like Hulu, Pinterest, and Lyft. Today, Ludo is applying his experience as the VP of Engineering at Whatnot, a Redpoint portfolio company and one of the fastest growing livestream platforms and collectibles marketplaces.
Thinking about building a growth team?
Businesses should always be thinking about growth strategies, but that doesn’t mean it’s always the right time for a dedicated growth team. When your company is still in the very early days and figuring out product market fit, the whole company should be focused on solving those issues–not just a single team.
One way Ludo recommends gauging product market fit is by tracking user retention. If you’re losing users regularly, it stands to reason that you probably don’t have strong enough product market fit to build on yet as a foundation for growth. In that case, everyone — from engineers and product developers to marketers — needs to focus on understanding your customer better and collaborating to create a more valuable experience.
Once user retention stabilizes and even starts to increase, that can be a sign you’re ready for the next step. “When your team gets to between 80 and 100 people, it starts to make sense to have a dedicated growth team,” Ludo says. “The job of a good growth team is to expand the already existing product market fit to a larger audience by fixing some of the issues that might be within the product.”
Why create a growth team?
As your company grows and matures, it’s natural for employees to specialize in certain areas (whether it’s product design, customer success, marketing etc.). This tends to result in different departments making incremental improvements to one aspect/area of the existing system.
What prevents a growth team from replicating the above pattern is that it doesn’t–or shouldn’t–work inside the limitations of the existing system. That means questioning the assumptions everyone else overlooks about user behavior, product capabilities, UI experience, and more. This approach is essential for a growth team’s success in finding new ways for the same products to meet the needs of both existing and net-new customers.
That is, ultimately, the value of a growth team. It takes both a macro look at the business and a micro look at user behavior to understand and refine all the current revenue levers–and propose new ones. Through experimentation, small product iterations lead to big improvements that can connect your product or service with more users, boost revenue, and create new opportunities.
The process of building a growth team
As you think about developing and hiring the right people for your growth team, it’s helpful to remember that a lot comes down to mindset.
“Whether it’s the first person or the 10th person or the 100th for that matter, mindset — especially on the growth side — is everything,” Ludo says.
What qualities and skills should members of your growth team have? An innate curiosity and desire to push beyond what’s in front of them, for one. They should be adept at diving into the user psychology that drives behavior. Having this mindset will be a stronger contributor to the team members’ success than how much time they’ve spent on other growth teams.
Iterative thinkers are also valuable contributors to any growth team; not only do they have the ability to formulate a clear vision of a product, but they can also conceptualize how it evolves over time. And finally, growth team members must have data proficiency and be able to deduce user behaviors from data.
Once you’ve established a growth team, a good first step is to nail down the equation that drives revenue for your product. For Ludo, this exercise has proven to crystalize the exact metrics that the growth team should focus on.
“I find just writing that equation down is critical because each one of these components is effectively what the growth team needs to be able to monitor and explain fluctuations over time,” Ludo says.
At Pinterest, for instance, the revenue equation was the number of users x pins seen x ad load. Alternatively, Lyft focused on revenue from the number of riders multiplied by the number of rides taken multiplied by the cost per ride. The growth team would then subtract the supply costs for a more accurate assessment.
How to measure the success of a growth team
While Ludo says there may not be a single definition of what a successful growth team looks like, all of them should consist of cross-functional partners who are focusing on understanding the user and the customer journey, as well as increasing engagement.
Oftentimes growth teams lean toward being product-led, and should have engineering, product, and design continuously interacting with each other. Some companies approach their growth teams primarily from a marketing perspective, while others come more from an operational perspective, according to Ludo.
One mistake Ludo often sees growth teams make is positioning them at the top of the funnel. It’s not a particularly successful approach because it cuts off the deeper understanding of users and how they engage with the product–a core component of growth teams’ work. More importantly, is that user retention should be the first thing growth teams examine.
“This is almost like the fingerprint of a product — it’s very hard to change. If your retention is really low then you probably don’t want to focus on growth, you want to focus on product market fit,” he explains. “If retention is fine and there’s a good product market fit with sufficient ways to grow and evolve, what I found best to do afterwards is really think about the revenue equation of a company.”
Top 5 takeaways
- Organizations with stable user retention numbers may be ready for a growth team
- A good place for growth teams to start is by identifying the product revenue equation, and to identify which metrics will guide their definition of success
- Growth teams are great way for companies with 80–100 employees or more to expand their product market fit
- Growth teams question assumptions about the product and user base to improve ROI
- If retention is low — growth might not be the right focus; you likely want to focus on product market fit.
Check out our full interview with Ludo!