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Startups: How to drive growth post PMF ?

Updated: Jan 11, 2022

In my recent work with many startups focused on the B2B segment, one question keeps coming up – How do we grow faster? It’s a multidimensional issue and yet there are many things that founders can do to take charge of this issue. There is a belief that product led growth is it, we will build and they will come. There is a lot more to achieving the growth trajectory than just building more and more features in your product. There are certain pitfalls one must avoid and certain techniques one can adopt to drive the growth phase.

First question is how do I know I am in growth phase?

Most startups go through three phases in their early journey – Momentum, Growth and Scale up.

Momentum: This is the first phase when the startup has gained a handful of clients and they are seeing the product being utilized in a meaningful manner. There is a ton of feedback coming from the clients to help improve the product. When you have over 15-20 clients who are using the core functionality and willing to pay( or already paying) is when you have reached a product market fit (PMF). To know more about PMF, read Lenny Rachitskys notes. And then the startup tips over into the growth phase.

Growth: This is when the startup especially B2B ones go from 15-20 clients to much higher number. They start to add clients to their core functionality at a consistent phase. The product is sticking, retention is high, and clients are asking for more. They start referring other clients or are willing to be strong references.

Scaleup: This is the phase when a startup goes into a hockey stick expansion phase and is rapidly scaling up clients. User growth and demand is just organic at high velocity. The clients are pushing you to limits and the product starts to expand into adjacencies, new segments and you have multiple domains within the product portfolio. The core product functionality is now feeding into new areas of product expansion.

So, what happens in the growth phase?

Interestingly the growth phase is the one where the successful startups separate from the others and gallop ahead. This is also where many just languish, lose their way or wind up. One would argue that the growth phase makes or stalls an organization. Most founders continue to lead with their intuition. Yes, intuition is generally good approach especially if the founders are grounded in acute client pulse but many founder teams go astray for the following reasons:

1. Since the client roster has expanded and there is serious competition, founder teams start to obsess and build for parity with competition. There are times when you must be at parity but if that’s driving your overall strategy you will be an average product and not a differentiated one. Be careful about obsessing too much about your competition.

2. They start to over engineer the product on features based on anecdotal feedback. For example the 1st client or the largest client may ask for many changes or updates, most teams will go on building, after all they are paying for your product or you have an emotional attachment. You have to be careful of how intrinsic those demands to your roadmap and most importantly to your differentiation.

3. Trend catcher syndrome kicks in. A HR tech startup I was advising wanted to build an OKR module into their platform as it was the trend with enterprises and some others were doing it. There was no synergy or connect to their core functionality. This is too common these days with such an information overload. Everyone believes everything they read and want to add that to their product irrespective of its a key aligned and customer tested feature or not.

4. Monetization pressure pushes founders to look for ways to build for revenue rather than customer delight.

How do you ensure success in this phase?

There are some things the founders can do to drive a calibrated success in this phase. Some of the critical ones are:

1. First and foremost separate product from growth. Ensure that you have one of the founders wear the hat of the Growth officer. Rarely but possible your product lead, engineering lead or sales lead could be a growth officer. But very diligent in terms of who plays this role as it demands a lot out of the role.

2. The growth officer must focus on three dimensions.

a. Landing: you must use the data at granular levels to understand what is working with the existing product. You must focus on adoption as a key metric. Some founders I work with, are not very plugged into key questions like - what is the DAU for the product? what parts of the products are most used and why? What are the happy flows and thorny flows in the customer journey and why? You have to wake up each day and dig into these metrics and enable their success. BTW these are your input metrics that lead to great output metrics like NPS and revenue.

b. Building: You have to build adjacent features to the ones that product has. Especially dig into thorny flows and see if you can reengineer them. One example is in early days of Twitter, getting a handle was difficult and most people abandoned opening an account as the flow would not let you choose your handle. A simple tweak of suggesting usernames rather than letting users trying drove an exponential rise in sign ups. You have to do A/B testing on various such customer journeys to clear the path for client delight

c. Optimizing: Each customer journey with your product should be optimized for least amount of friction. You should explore and analyze the underlying emotional journey of the product experience. Identify for high friction, multi step, anxiety creating moments that need to be eliminated. You have to make the journey as seamless and shortest path to outcomes. Case in point is Robinhood's pioneering three step process to open a brokerage account helped them to become a disrupter. Just the ability to scan the driving license using the phones camera to capture all of your data was nifty and took all unnecessary steps away. Zerodha has done the same in India. This optimizing to get the client to the trading window in the most optimized timeframe.

3. Daily prioritization: This is a tricky one. Founders have to learn the art of saying no, trying a few things, sometimes failing and starting all over. There are features that may seem to be compelling or it might be a one client demand, and it could compromise rest of the clients and roadmap. Do you do it or you defer it? Daily reprioritization and rapid feedback loops with no pride/ego is the only way to ensure growth.

4. Finally pivot to leading by input metrics and not output metrics. I see many founders continue to focus on client wins, users added, to the platform sales, revenue, billing etc as the metrics in the growth phase. These are important but the key is to drive input metrics like adoption rate, DAU/WAU/MAU, feature usage, retention. Sometimes you may have to build telemetry into areas of specific experimentation to capture metrics. Input metrics will help gather deep customer insights and help you propel the product into the scale up phase.

There are other dimensions around marketing, engineering and customer engagement that are also crucial in this phase and maybe areas for another of my posts. Hopefully these pointers will at least trigger some discussions and thoughts in your journey and help you navigate through the growth phase.

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