Your Startup’s Strong Core

Your Startup’s Strong Core

September 21, 2018
By Uncategorized

Note: This is an excerpt from the “Growth Hacking for Founders” eBook.
Download your free copy today.

It doesn’t matter what sport you play – cycling, climbing, football – experts agree that having a strong “core” (back, hips, abs) is essential. If you do sports with a weak core, your performance will suffer, at best, and you risk serious injury.

But what does this have to do with startup marketing?

As a CEO, it doesn’t matter what kind of marketing you want to do – Facebook, SEM, SEO, PR, outbound, sales or “guerrilla” – you will struggle to scale customer acquisition on tactics alone if you don’t have the Five Core Strengths of Startup Growth.

As a VC, I see so many startups pouring money into Adwords and Facebook, using all kinds of crazy math to justify the CAC:LTV, kidding themselves that this will ever pay for itself. (Andrew Chen: “How Startups Die”) And there are such easy obvious opportunities to cut that CAC and speed acquisition if only they had a strong core.

How do I know? I spent 15 years as a Silicon Valley marketer and GM myself. Since then I’ve been an early-stage VC and run a post-seed “growth hacking” accelerator in London. I’ve helped dozens of startups scale acquisition, with consistently strong results.

We have worked with 35 companies of all sorts – B2B, B2C, software, ecommerce, marketplaces. We kept seeing the same gaps and mistakes consistently across companies and the root cause was almost never around tactical execution. Great execution flows quickly and naturally from a strong core.

But what is a “strong core” when it comes to growth?

The 5 Core Strengths of Startup Growth

Once you really have “core strengths of startup growth,” your tactics start to make a bigger impact. Organic acquisition and conversion go up, so your CPAs go down. Your activation spikes and your retention curves flatten, so your LTV goes up. That means you have more cash to play with, which means you can grow faster without having to sell as much equity.

There are 5 strengths that form your Growth Core.

Strength 1: Message

The quickest, easiest wins we’ve seen with companies have come from messaging.

Great messaging is precise and specific, and resonates with your customers at a deep emotional level. When it works, it’s reflexive, Pavlovian. We’ve seen companies increase conversion as much as 7X by changing just a few words. But they need to be exactly the right words that speak to underlying behavioral triggers.

First you need to deeply understand your product/market fit, what itch you scratch for your customers at the most mundane nuanced level. Second, you need to speak in a way that instantly resonates with their needs.

Most companies who have product/market fit don’t actually understand why.

Uncovering customers’ deep needs is a journey of surprises. For example, we all know drivers want safe cars. But what makes drivers feel safe? It turns out people feel safer when driving cars that have smaller windows. Who knew?

This stuff is not obvious. You can start by reading The Mom Test. We have developed a simple process to help you discover these insights and turn them to exactly the right words – to drive traffic, signups and conversions.

Here’s an example from our program – working with Photobook company Popsa. Really strong team, and they had a good understanding of their customers problem: People love to have photobooks, but they hate to make them: £50 and 2 hours wrestling with badly designed software. They changed their app store listing from “Print Photobooks” to “Photo Books in 5 minutes.” Do you see the difference? It increased their install rate by 4X overnight.

Strength 2: Metrics

If you have a strong, effective team, you will get what you measure. But if you pick the wrong metric, your highly effective team will march steadily in the wrong direction.

I’ve seen countless companies squander countless millions deluding themselves with, and waste top talent through misaligned incentive structures.

At PayPal, we had access to metrics on over 10 million businesses. My team built predictive models to find the ones with the highest revenue potential. As a marketer, I’ve amassed years of insider knowledge on industry benchmarks. As a VC I’ve seen hundreds of startups. I know what “good” looks like. And the key is to find your “rate-limiting step.”

Smart people have published reams of great info about SAAS and Marketplace KPIs, so I won’t repeat all of it here. But here are a few common mistakes:

  • Vanity metrics – Being focused on metrics like visits, installs, activations, that don’t necessarily represent customer attitudes or behaviours or business value. Simple rule of thumb: The magic is not in the numbers themselves, but the ratios between them.
  • Misaligned incentives – Poorly chosen numbers drive all sorts of unintended and unhelpful outcomes and behaviours.
  • Bad Data – Just that – session-based rather than user-based tracking, conflating customers with visitors, repeat visitors vs. uniques, inconsistency across platforms, common attribution errors – all lead to dangerous miscalculations and misguided focus.
  • Too much complexity – This one surprised me. Some of the most intelligent founders I’ve met have incredibly complex analytical frameworks that connect marketing and product behaviour. Massive spreadsheets, integrating heaps of key ratios and KPIs. I was astounded by how often these businesses fail. It is possible to overdo analytics. Instead, winning founders choose a few simple metrics that are easy to understand and powerful for galvanizing the team. Good metrics empower your whole team to make good decisions based on the data.

This one is fairly easy to fix. A conversation with the right outside expert can help you find this “rate-limiting step” quickly.

Strength 3: Focus

Focus on the highest impact work. Again, sounds obvious, but who actually does this well?

Most founders know that 90% of their customer acquisition will come from 10% of their work. But they struggle to figure out which 10%. Companies have a dozen competing priorities at any given time. And the result is you often do the wrong work, and do it badly.

How many months of runway do you have? Six? Twelve? Each day you try to guess and pivot around, that’s one day less to make progress towards your goals.

At any given time, you probably have 100 growth ideas you want to try. First review your numbers, and find the rate-limiting step. De-prioritise everything that is not focused on that area. (A mentoring session with a seasoned startup marketer who has experience with your type of business can help you do this). You’ll knock out 50 – 70 ideas quickly. From there, it’s on to process: Prioritize the others, identify the key assumptions behind them, and run a series of fast experiments to whittle down the list, narrow your focus, and optimize execution.

Strength 4: Team

As a marketer and a VC, I have learned time and again that this Core Strength trumps all the others. If your team has a growth mindset you’ll probably find the right metrics, invent good process, learn enough about your customers. And if you don’t have the growth mindset… none of the other things in this blog will help you for very long.

In mathematical terms, over the long-run, a strong slope beats a high y-intercept.

Sadly, most companies make the mistake of hiring for experience and skills, rather than mindset. (Lots more about hiring in my blogs 8 Traits, and Why You Should Not Hire a T-Shaped Head of Growth). But let’s talk here briefly about leadership creating mindset.

How to Lead for Mindset?

The good news: If you, as a CEO, have that growth mindset, there are simple ways to seed that thinking in your team. Start by modelling the behaviour: Speak openly about your own mistakes and what you learned from them, and things you learn from your customers each day. Then, encourage people to talk openly about their mistakes (and more importantly the lessons they’ve learned)! Create a safe space where people can talk openly about their mistakes and uncertainties without fear of retribution.

You can bake these conversations into your operating rhythms. Make that part of your daily / weekly standups or weekly status emails, or make a Slack channel #lessons.

One example: Before we ran each A/B test at PayPal, I’d ask each person involved with the experiment (especially the senior execs) to make a public prediction about what they’d expect for a result. Then, when we had the actual results, we could compare them with our predictions (eliminating hindsight bias) and unpack the assumptions that led us to our correct or false conclusions.

Strength 5: Process

Execute fast, learn fast.

Once you’ve found your 10%, how do you maintain consistent focus on the highest impact work? Despite all the random ideas, suggestions and crises that crash in every day? Engineering teams have prioritised backlogs and short “sprints.” Why should your marketing team be any different?

First, make sure everyone in the company understands the rate-limiting step, and track it with a “north star metric.” Everyone in customer acquisition should be able to explain how, by a series of steps, their work impacts that number.

From there, you run a process that looks a lot like engineering. You’ve identified a small number of ideas that you want to try, and you prioritise them by effort and impact. Turn each idea into a “minimum viable test” that you can run in a week or two. For each idea, identify the riskiest assumption, develop a hypothesis, and run an experiment. If the results are promising, double-down.

The drumbeat of the process is a weekly growth meeting with the CEO, the analytics person, and the marketing team. Review the numbers, talk about the most important things you did last week, what you learned, and decide what you’ll do this week.

When Fast isn’t Fast

I hate to say “execute fast” because everyone thinks that means “type faster, fewer meetings, no chairs in meetings” etc. While these “life hacks” might make you move around your office faster, they do not move your company faster.

Remember from The Lean Startup that progress means moving quickly through the “build-measure-learn” feedback loop – running experiments, quickly turning unknowns into knowns. Same thing with growth – every piece of work you do is based on a set of critical assumptions. You need to identify your riskiest assumptions quickly and validate (or disprove) them via “minimum viable tests.” Even if you do not have enough traffic to run A/B tests, there are lots of fast powerful techniques to get this learning.

Silver Bullet Sauce

So that’s it, the secret sauce with the silver bullets mixed in. From these five strengths, great companies grow.

Before you invest in growth by…

● Spending money on Facebook or Adwords
● Building new product features for customer acquisition
● Hiring and training a salesperson
● Doing a re-brand
● Hiring a recruiter to find you a t-shaped head of growth…

… first take an honest look at your company and think about these five Core Strengths of Startup Growth. How do you rate? Does your company live these strengths every day? If not, any additional investment into tactics will be a waste of money and precious time.

This post is an excerpt from our Playbook – Download the full book today.