Startups, Don’t Delay Growth

At Rockstart we see hundreds of entrepreneurs every year. We select 30 of the best early stage startups per year (in 3 accelerator programs: health, energy and web&mobile) and work with them to reach exponential growth.

Starting a startup is exciting, but actually realizing growth month over month is hard. However, growth is what it’s all about. If you want to create impact on a grand scale, you have to grow. You have to reach many people. At Rockstart we invest in globally scalable initiatives that create positive impact. We invest in early stage startups.

Hero metric

To define growth, you have to quantify it. Figuring out your metrics looks easy, but usually takes a bit more time that you think. Especially with digital products, measuring is easy. So lack of data is no problem, but focusing on the right metrics is harder.

Metrics are like thermometers, they give you the temperature in a specific area. You can use thermometers in all parts of your organization. The most important metric that defines growth is the hero metric. If it goes up, your company is doing well. It is your primary growth indicator.

The hero metric may vary per company. It depends on the type of company and should be defined and communicated to the team by the founder(s). For example, for a market place it is matches (when supply and demand are matched), for SaaS-companies it is MRR, but it can also be active users (pre-revenue). It may depend on the phase of the company.

The hero metric by definition is a lagging indicator. It is a result of the actions you take and therefore lags behind. This in contrast to leading metrics, the measures you take to achieve the goal. An example of this is number of employees or marketing spend.

Pre-launch hero metrics

Because we see so many early stage companies, we have many discussions with founders about what metrics to use before a product is launched. What is your pre-launch hero metric?

Of course, we advise founders to validate their ideas as quickly as possible by doing smart and disciplined experiments and build prototypes and minimal first versions. But building a product or service takes time. How do you measure growth before going live? How do you know you are on the right track?

Most of the teams I’ve spoken to don’t focus on growth before launch. They focus on getting to launch as quickly as possible. They set a minimal scope for the first version of the product, based on talks with customers. They then set a launch date, which is usually too optimistic. Progress is usually measured by number of screens finished or number of features completed in this phase.

If teams do keep metrics pre-launch, it is usually a failed attempt to measure internal metrics. Examples can be number of customers spoken to, experiments run etc. But this misses the point. They are leading indicators, not lagging indicators.

Growth is externally focused. It should measure how well you solve a problem in the market; how well you are able to add value to society.

So try to find a metric that is outward facing. It says something about how you are able to get people interested (or buy your product) before you launch. Or even the number of people identified with a certain problem, maybe your very first hero metric.

Try to make launching your product something small, rather than something big. Your launch is a beginning, so by definition small. It can be as small as a landing page. But not a landing page as a placeholder. It is the first iteration of your product.

Don’t delay to grow

The hero metric focuses everyone in the team to look at external growth from the start of the company. And because it is really hard to grow month to month with no product, it keeps the pressure on not delaying to launch. As Reid Hoffman said if you’re not embarrassed by the first version of your product, you’ve launched too late.

Focusing on growth from the get-go has more benefits, it aligns your team and it lets you to pivot way quicker.

As a startup, you have limited time to find the right product market fit and a sustainable business model. The limited time refers to the limited runway you usually have, it is the obligation to yourself and the team to be as effective as possible and go from default dead to default alive.

If you do not focus on growth from the start of your company, as a founder, you miss out on a valuable tool to get focus. Moreover, you run the risk of missing out on the compounded effect of growth.

So, when starting a startup, define your hero metric and focus on it relentlessly.

But what about tinkering?

I’ve heard arguments that directly focusing on growth can have its downsides. It puts the pressure on the team to jump on the first idea and try to grow from there. It can be that the team is chasing a local optimum instead of a global optimum with no room to pivot because the pressure is on. But I don’t think that tinkering/experimenting/pivoting and focusing on growth are mutually exclusive. They should reinforce each other.

As a startup you have the hard role to search for the right value proposition/business model and grow at the same time.

So, search and grow, search and grow, etc.

Rutger van Waveren is the program director for the Rockstart Web and Mobile Accelerator. He has been involved in the startup world since 2009 as a startup founder as well as working in business and product development with a variety of startups.

Also on Rockstart Accelerator