From Zero to IPO: How Growth Needs to Evolve at Every Startup Stage

There's no one-size-fits-all growth advice. Brian Rothenberg, former VP of Growth at Eventbrite, breaks down the three broad phases of the startup lifecycle. For each phase, he identifies key targets that startups should aim for to kick their growth strategy to the next level.

Principles of Startup Growth to Keep in Mind from the Start

“When I was talking about growth five or six years ago, it still felt like I was educating skeptics,” says Rothenberg. Today, of course, growth has become an essential part of the startup toolkit, becoming a fully-fledged discipline with new sub-specialities forming as designers, marketers, product managers, and engineers all get in on the action.

Even as the discipline grows and diversifies, there’s a broad tenet that all growth teams should adhere to: “Growth is about implementing a rigorous, customer insight and data-driven process with sustained effort to remove friction,” he says. “It’s about creating an ‘a ha’ moment of value, then working on a functional or company-wide level to get customers there as quickly and as frequently as possible.”

That said, the growth function still isn’t strictly defined. “I’ve never seen a canonical definition of what a VP of Growth does,” says Rothenberg. “In more product-driven companies, growth might be almost entirely a product role. In less product-driven companies, it can represent the quantitative or technical side of marketing. And in others, it’s a blend of both.”

While there’s no hard-and-fast instruction manual for spinning up a growth function, there are a few principles that founders of startups at any stage can lean on as they start to hone their approach.

Growth Strategy > Shortcuts

“My friend Sean Ellis coined the term ‘growth hacking,’ but I don’t love how that phrase has come to be interpreted. What Sean meant as a scrappy and entrepreneurial term now comes across as a shortcut, or some clever one-off trick. It implies that you sprinkle some fairy dust and suddenly grow exponentially,” says Rothenberg. “Growth hacking broadly over-promises and for many startups, has under-delivered, unfortunately hurting the function’s reputation along the way.”

Instead of trying to “hack” your way to instant success, commit to a long-term, customer-focused and data-driven plan of action.

Bloggers and charlatans peddling magic tricks have said that growth hacking is the way to the promised land, but the truth is, shortcuts will only lead you astray.

Startups should also be wary of promises of micro-optimizations. “Most startups, particularly in the early stage, aren’t yet at a scale where micro-optimization is even possible, let alone impactful,” says Rothenberg. This isn’t to say that startups shouldn't optimize.

“As you start to scale, much of growth is about gaining compound interest: a lot of small-to-medium improvements that compound and, over time, drive substantial growth. This might look like running a series of experiments that improve conversion by incrementally smaller percentages, for example,” he says. “But focusing solely on these types of optimizations generally drive you toward a local maximum. In order to leap toward that higher hill, you need to make a strategic step-change, then optimize uphill toward the global maximum, or the total potential of a business.”

When it comes to cultivating growth, founders should know how to combine larger-scale strategic plays with finer, continuous optimizations. “I like this quote from Trulia founder Pete Flint: ‘Knowing how to scale and knowing when to innovate are the soul of what we do.’ Optimization is important, but it’s those larger innovations, particularly early on, that generate the continuous customer value that will drive long-term growth,” says Rothenberg.

Map Out the Journey in Hypotheses, Not Just Milestones.

To steer your startup’s course toward growth, navigate by the stars of experimentation. “Having a methodology around asking questions and applying your learnings is most impactful at the early-stage, where seeking product/market fit and maintaining speed as a habit is most critical. But hypothesis-driven experimentation and learning is key to scaling companies at all stages,” says Rothenberg.

It’s an approach that Rothenberg and his SkillSlate co-founder (Ringwelski — the one driving the scooter) were inspired to take when they had read Eric Ries’s The Lean Startup. “It felt like an epiphany when we learned about it back when the book first came out. We felt that the lean startup approach, driven by customer insights and rapid iteration, should apply not only to product development: It could also apply to cultivating growth channels, and even to how we managed and communicated with the company,” he says.

“There’s always some impactful, yet-to-be-discovered insight ahead,” he says. “You might stumble upon it by chance, but it’s far better to have a systematic process to use qualitative customer insights, market data, product data and other sources of information to form hypotheses and insights about how you can improve.”

Putting experimentation at the center of your growth strategy can be as simple as reframing your board meeting. “Instead of just going over a summary of the last month’s metrics and milestones, shift your focus to the month’s learnings,” he suggests.

Don’t just ask “What did we do?” Chart your progress by also asking, “What did we learn?” Being driven by questions, rather than achievements, unlocks future impact and further learnings.

In the sections that follow, Rothenberg sketches out each stage of the startup life cycle. He identifies the characteristics, goals, and risks startups face in each phase, and how they should calibrate their strategy to uplevel their growth.

PHASE I: FINDING PRODUCT/MARKET FIT AND GAINING TRACTION

What you’re doing now: Earning critical first users as you iterate toward product/market fit.

Goal: Get to the point where you’re feeling pull into the market from your initial target users.

Potential pitfall: Focusing too much on growth before you have product/market fit and sufficient data.

Founders just starting out might be tempted to go all-in on growth, but Rothenberg recommends keeping your chips close for now. At this stage, finding product/market fit should be your first priority; your approach to growth should be characterized by gathering customer insights and iterating to deliver customer value, while laying a strong foundation for data.

To illustrate how Phase I startups should frame their growth mentality, Rothenberg shares the story of a Series A startup he was advising: “When I started working with them, they were definitely operating with the right growth mentality — for a Series B or C startup,” he says. “Their scale was roughly hundreds of new customers each month, while their growth mentality was more suited to a company at a scale of tens of thousands of new customers each month. It’s a pretty common mistake: They were trying to copy-and-paste a larger company’s growth strategy to their own startup.”

The company was trying to use data to solve where and why prospective customers were dropping off in their customer journey. “That’s a great, smart goal to drive toward. But they were a bit off on the execution,” says Rothenberg. “They wanted to A/B test, like a later-stage startup might. But unlike a more mature company, this startup didn’t have a substantial volume of data to do so. If you run your test with very few users, the ROI will be lower, or even negative. With so little to go off of, it’d be a challenge even getting a directional read on whether there was a significant impact in terms of whether conversion was actually improving. More importantly, it’d be hard to tell whether those new users were actually understanding and obtaining value from the product,” says Rothenberg.

Handy Checklist for Phase I Startups

• Use conversations to gain insights. Instead of wasting resources on insufficient data, these founders should have tried talking to these customers to gain insights into their product and to understand who is or isn’t converting and seeing success. “If you talk to five customers, and three say that they were confused by the same part of onboarding, you should work to reduce that friction,” he says. In the early stages, you likely won’t have a statistically significant sample yet. So instead of pretending that you do, leverage what you really can do: talk to your customers early and often.
• Attract and retain new customers with the “a-ha” moment. The “a-ha” moment is where you demonstrate value, where customers think, ‘Oh, this company totally gets me!’ Bring your customers back to that magic moment as often as makes sense to remind them why they value it so much. Then, work to get them to evangelize to new prospects.
• Add friction by asking early prospects to do some legwork. Sometimes, asking a prospect to furnish more work upfront can lead to a stronger “a-ha” moment.
• Lay the data foundation. Instrument data tracking through the funnel and your key growth loop or loops, even if you can’t use it extensively yet.

Your startup won’t grow out of this Phase 1 stage until you are, as Rothenberg puts it, “feeling the pull from the market.” In addition to the guide to finding product/market fit, here are some of Rothenberg’s green lights to look out for to indicate you might have found PMF:

• High retention and engagement: People are using your service at a frequency that’s reasonable or high, compared to the average monthly retention for your category.
• Growing organically: You’re growing without paid spend, generally through word of mouth.

PHASE II: SCALING

What you’re doing now: Building the foundation of your business model, as well as your data and analytics.

Goals: Develop a growth model and growth loops, instill a growth mindset across the company.

Potential pitfalls: Not deeply knowing why you’re growing, dividing into functional silos.

“This second stage is about laying out a foundation for your business’s growth, then doubling down on the strongest levers,” says Rothenberg.

Feed Virtuous Cycles and Growth Loops

“In the first phase, you were focusing on laying the data foundation and gaining customer insights to better understand your growth to-date,” says Rothenberg. “At this phase, you should be leveraging that knowledge to further scale: Identify and lean into your most critical levers to establish a growth loop.”

One of the biggest pitfalls that looms ahead for founders is failing to understand the reason for their growth and how to make that progress sustainable.

Rothenberg provides steps to gain an understanding of your growth and developing a growth loop:

• Play your aces. Identify and lean into the built-in levers first.
• Stack up each loop’s impact. Form hypotheses around what each loop is and evaluate how impactful they can be.
• Turn your sketches into reality. Sketch out the growth loops in a simple visual format and quantify as best as you can.

PHASE III: MAKING LARGER LEAPS AND BIGGER BETS

What you’re doing now: Scaling, challenging yourself to stretch beyond optimization.

Goal: Take bigger risks and reap greater rewards.

Potential pitfalls: Underestimating the work it takes to make a big leap.

Strategies companies might use in Phase III include:

• Expand to new metros or internationally.
• Jump platforms or tap into a new platform shift.
• Service new customer segments.
• Expand focus categories or product offerings.
• Acquire companies.
• Startups within a startup.

To identify where you should place your big bet, take a magnifying glass to your growth thus far. “In most cases, the signs and stirrings of future potential are already underway,” says Rothenberg.

Zero, IPO, and Everything In-Between

There’s no plug-and-play textbook for growth. Instead, startups need to realistically assess the resources available to them at each stage, and what growth strategies fit them in the moment. The common thread, as your startup moves across phases, goes back to one of the core principles of growth: The most effective growth is fueled by constant experimentation and adaptability.