The “health” of a startup growth can be a strong predictor of how big and valuable you can become. The most valuable startups of our generation have maintained a high user / revenue growth rate for an extended period. As such, founders, employees, and investors are trying to figure out whether their startup can achieve sustainable growth to create a large, long-lasting business.
Simply looking at gross income growth tells you relatively little. Two startups that are currently increasing users or revenue by 300% each year may have different long-term prospects. It’s almost like looking at two people of the same age, height, and weight, and projecting the same quality of life and longevity for both of you – there are many more factors that can help you make better predictions. Startups are similar, and it’s important to delve into the health of a startup’s early growth and work to build the right foundation from an early stage.
Paid marketing can be a useful tool in your toolbox to speed up an already buzzing flyer. Don’t let it be the only one.
Before becoming a VC in To challengeI founded two companies and was VP of Growth for Eventbrite for more than six years, from inception to IPO. Working through all stages from foundation to public company and advising many other startups along the way, I have landed on five critical factors for healthy and sustained growth that can be the difference between failing a startup, reaching an exit. modest or build a worthwhile and lasting multi-billion dollar company.
Healthy engagement and retention are key
In essence, any successful product or service offers more value to the user / customer than it costs to use (money or time). To see if your product offers real value, ask if it is achieving strong user engagement and customer retention. My friend and growth guru Casey Winters gets it right: “Product-to-market fit is retention that enables sustained growth.”
Consumer startups can assess this through a cohort-based retention analysis of how often customers use the service and for how long they are retained. SaaS companies need to talk to customers often to gauge their happiness while also looking at logo retention, as well as gross and net revenue retention; Ideally, the company should show the first signs of being a negative net churn business, in which the revenue of existing customers actually grows over time, even after accounting for lost customers.
Many people incorrectly think “startup growth = customer acquisition”. In reality, retention is the most fundamental aspect underlying sustainable growth.
The obsession with the customer creates a “pull” of the market
The obsession with the customer, plus the organic attraction of the market, are indicators of the early adjustment of the product to the market and signs of future growth potential.
Here are a couple of ways to measure this:
See if a healthy percentage of the business is growing with no expense paid, usually through word of mouth or some other form of virality. If your business is experiencing organic growth of more than 50% at a rapid rate (200% to 300% + year over year), you are solving people’s needs well enough that they now share them with others and create a positive viral effect.