Growth Diagnosis: Part III
The final part of our series evaluating startup growth
Having worked with so many startups in the last 10 years in the Bay Area (85 companies in the past 3 years alone), this final episode of our series wraps up a lot of the challenges we encounter as well as the opportunities startups have to improve their chance of success.
How do we look at startup growth and potential?
What is our thought process when looking to help a startup with the challenge of growth or traction?
These are some of the key questions we addressed in the first two parts of our three part series, Growth Diagnosis.
Quick summary of the 12 factors we have covered so far:
- PMF (Product Market Fit)
- Growth Model
- Founder Factor
- ABT: Always Be Testing
- Customer Focus
- Week over week growth
- LTV : CAC Ratio
Alas, the final factors (9–12) we look at to determine a startup’s growth prospects and potential solutions.
Given there are not too many great sequels, here is a surprisingly sparse list of the best Threequels of all time. Which is your favorite?
#9 Self awareness / Stage recognition
Know every startup has a stage and you are in one of them
For us, being able to quickly recognize startup stage is key to prescribing the appropriate marketing or growth solutions. Likewise, founders and executives need to be clear about their stage to ensure that they are focusing on the right things. Reforge’s Brian Balfour build a great framework on the topic; how your company stage determines what metrics, optimization, team, and strategies to focus on in Traction v. Growth.
Once you know your stage and your objectives, it makes focus much easier. Startups that understand their stage are going to be more effective when we prescribe relevant solutions. They will also have clearer estimates and more realistic goals.
Having worked with so many startups at the seed, series A, B and C stages we often come across founders or teams that despite their high level of intelligence, advice, and domain expertise, they mistake traction stage for growth or vice versa.
Having honest conversations with your team, customer and outside experts can help you assess your stage to ensure you are applying the right approach for your business.
No knowing your true stage can significantly impact your runway and prospects of survival.
#10 Ability to Ship Product & Iterate
We have been very fortunate to work with some great product and engineering teams both in house and as consultants. Of course without being able to ship product efficiently a startup will fail.
After speaking with Chamath Palihapitiya at a conference explaining our focus helping startups with growth, he emphasized the importance of web development and engineers to enable startup growth.
A note on technical debt and importance of agile and effective engineering and product teams.
While we are not engineers, we have worked with some great ones and often recommend them. I would consider us product centric and product focused marketers. To be a growth marketer, full stack marketer, or full funnel marketer you have to be product centric.
Usability, UI, UX, and Design Thinking are all important to have a foundational understanding to be successful at growth and sustainably building a company. We cannot rely on paid acquisition, buy our way to growth, or other top of funnel only tactics.
While earlier stage teams can be limited by a lack of resources or talent, we often see larger more mature companies limited by technical debt. We have seen first hand how this can severely limit growth.
What is technical debt? Put simply it’s a company code base or technical infrastructure that is not built to grow sustainably. It cannot grow in its current form, and requires a significant amount of work and expertise to clean up or improve its foundation to grow.
Often it refers to short cut builds that add up and over time that compounded require a very large investment to unwind and allow for growth, scale, or clean up.
Andrea Goulet wrote one of our favorite posts from First Round Review Forget Technical Debt Here’s How to Build Technical Wealth:stating that “Legacy code isn’t a technical problem. It’s a communication problem.”
So many elements of what Andrea and her team does can be applied as best practice for operations, growth, and even marketing in our view. She kicks off her article with the house analogy, “we realized that what we were doing transcended clearing out old code, we were actually remodeling software the way you would remodel a house to make it last longer, run better, do more.”
We have used house analogy many times with clients when we discuss growth. It can be readily applied when talking about setting up processes to test and especially applicable to SEO. We love working with great teams to build effective foundations to build on. This often involves working closely with founder, CTO, engineers to ensure that they are aware of best practices in analytics, tracking, and on site SEO such as site speed.
The house building foundation can be readily applied to ensuring a company has build an effective growth model, quantitative growth model, and has a process for distribution, not just building a great product. Without this “growth foundation” even the best product can fail.
If process and communication are not clear and effective, and a strong foundation is not set up for both the technical team and growth prospects decline quickly.
While we have worked with some great engineers and product teams over the years we really like the way thoughtbot approaches web development.
Their playbook has been an inspiration for us and a lot of others.
Don’t try to do 20 things average, do 3 things really well.
I had the pleasure to meet Morgan Brown, fellow UCSB Gaucho and impressed with the way he thinks about startups, digital marketing, and growth. Some great insights in his article 5 phases of a startup lifecycle. Lauren Bass penned this one, unearthing some great points. Lauren was a great member of the Round Barn Labs team and she is currently with NerdWallet running marketing for their mortgage product. Both in this article and in her work she emphasizes the importance of focus for businesses. We often guide our clients toward focus via ruthless prioritization to ensure they get maximum impact.
While it is not always easy to gage a startup’s focus in a one hour in person meeting, we do look for signs to measure focus. Brian Balfour’s post on Why Focus Wins really sums up why it is so key to growth.
#12 Team Culture
Life, Business, and Growth is a team sport.
By team culture I do not mean happy hours and free lunches. What I mean is: team character, integrity, communication, transparency, values, and how that team evolves over time.
Ben Horowitz’s The Hard Thing About Hard Things emphasizes this big time:
“My old boss Jim Barksdale was fond of saying, “We take care of the people, the products, and the profits — in that order.” It’s a simple saying, but it’s deep. “Taking care of the people” is the most difficult of the three by far and if you don’t do it, the other two won’t matter. Taking care of the people means that your company is a good place to work. Most workplaces are far from good. As organizations grow large, important work can go unnoticed, the hardest workers can get passed over by the best politicians, and bureaucratic process can choke out the creativity and remove all the joy.”
We have had the pleasure of working on one of Ben’s investments on growth and we are huge fans of his book and a16z.
“Like technical debt, management debt is incurred when you make an expedient, short-term management decision with an expensive, long term consequence. Like technical debt the trade off sometimes makes sense but often does not. More important, if you incur to management that without accounting for it, then you will eventually go management bankrupt.”
So now what?
You should have a much better understanding of how my team and I at Round Barn Labs think and approach growth, marketing, and the challenge of building and growing a startup.
You should now understand our 12 key factors that determine a startup’s growth prospects.
Let us know if we missed any critical pieces, would love to discuss.
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