Growth gets a lot of attention in the startup world. A lot of attention. If you Google “startup growth“, you’ll find a plethora of articles, blog posts and tools all suggesting that growth is the most important measure of your startup.
Paul Graham, the founder of Y Combinator, asserts that “The only essential thing is growth“.
In some sense, this attention is well-deserved. But it is often misunderstood and taken out of context.
Growth is, of course, important. Growth is a telling measure of your product/service’s popularity; and, as such, strong growth metrics are invaluable when you’re trying to raise money from investors.
But growth can, and often does, flatter to deceive. And this is something both entrepreneurs and investors should be wary of.
Entrepreneurs need to be careful because “…many founders hurt their companies by focusing on growth too soon“. This is what Sam Altman, the founder of Loopt and President of Y Combinator, wrote in a recent article on the topic of growth.
His reasoning is simple: if you focus too much on early growth and not on actually building a product people love, then at some stage you will encounter the leaky bucket problem where the customers you worked hard to onboard, leave in droves ne’er to return!
But, if you focus on building a great product then you will have better customer retention and, as a result, growth should become increasingly easy as word-of-mouth spreads.
Consider the example of AirBnB who worked and iterated for years before they got the product just right; and then it spread like wildfire because people loved it.
Equally, investors need to be careful because there are often more telling metrics indicating the potential for success of a particular company. An app, for example, may have achieved 100,000 downloads in its first week, but if 95,000 of those users had stopped using the app by the second week, then the impressive early growth suddenly appears deceptive.
So there we have it. Growth should always be important, but it is also important that entrepreneurs and investors espouse a more nuanced attitude to it than believing it to be the ultimate measure of potential and success.