It’s never too early to build your growth model
David Peterson

Perhaps it’s because of my background in growth, but a topic that I always enjoy discussing with early stage teams is how they think their product will grow.

I don’t mean “product-led” or “bottoms-up” or “top-down.” Those are motions. I’m looking for the overall growth model. What are the specific mechanisms by which one user turns into many, and an initial investment turns into revenue?

To some early stage teams, this question may seem a bit premature. But I’ve found that it’s useful to discuss early because it reveals the underlying assumptions founders are making about what needs to work for their business to ultimately succeed, and it provides a framework for decision-making and analysis.

Let me show you what I mean. I’ll use Airtable, where I used to lead growth, as an example.

For a customer-built product like Airtable, the growth model looks something like this:

1. User signs up.

2. User identifies a use case for Airtable and begins building.

3. User successfully activates and becomes a “builder.”

4. User launches a solution built using Airtable and invites users to collaborate with them.

There are two things I hope you notice about this model:

First, there’s nothing too complicated here. I bet you can build a similarly simple model for your product today.

Second, even a simple model like this one makes the underlying growth assumptions immediately apparent.

Namely, at Airtable, we needed to be able to:

• Acquire users and help them find relevant use cases

• Activate users and turn them into “builders” (that is, users who could build standalone, collaborative, valuable solutions) at a sufficiently high rate

• Encourage builders to invite and collaborate with new users at a sufficiently high rate

The model gave us our marching orders. We needed to build a default collaborative product with a dead simple collaborator invite flow. And if we couldn’t help users find a problem to solve and become “builders” at a sufficiently high rate, the model would break before it even got started. So we prioritized identifying collaborative use cases, tracked the “collaborator invite” rate closely, and rallied the entire organization (product, marketing, support, success, education) to move the needle on onboarding and activation.

This is why I always argue that it’s never too early to build your growth model. Even a simple model will help you identify the core risks that your business faces, as well as the metrics that matter most.

So, if you’re feeling inspired and you want to build a growth model of your own, give this classic piece on growth loops from Reforge a read. And feel free to send the model you draft my way. If you can’t tell, I love talking about this kind of thing!

David

EVENTS

Jan 25 / Lessons Learned From Investing Early in Over a Dozen SaaS Unicorns Including Salesforce, SuccessFactors, Box, Gusto, SalesLoft, ServiceMax, Veeva, Bill.com, Doximity, Yammer and Zoom Among Others
Jason Green, Founder & General Partner, Emergence Capital

Feb 15 / The Evolution of Collibra’s Product Positioning & How They Created a Category
Stan Christiaens, Co-Founder & Chief Data Citizen, Collibra

FROM THE BLOG

How to Think About Revenue Quality as an Early Stage Founder
What does “quality revenue” mean when you don’t have much revenue at all?

It’s Not All About Bottoms-up
Two recent trends indicate that we may finally be past the mistaken belief that bottoms-up is the only “fundable” business model in town.

Don’t be Fooled by the PLG Mullet
How to know if you should be building a PLG Now, PLG Later or PLG Never company.

PLG Now, PLG Later, or PLG Never
Why there is no helicopter shortcut to the summit of Mount PLG.

EUROPE & ISRAEL FUNDING NEWS

Ireland/Automation. Tines raised $55M for its no-code automation platform aimed at security teams.
France/OEM Food. Gourmey closed $48M for its lab-grown foie gras and is focused on turning cell-cultured meat products into mainstream products.
UK/SME HR. Humaans raised $15M for its Cloud-based HRMS platform for SMBs that lets organizations build a customizable HR stack that manages employee documents, data, payroll, contracts and other components of “people ops”.
Germany/Mobility. Wunder Mobility raised $11.9M for its platform that allows companies to launch, manage and scale their own vehicle-sharing service.
UK/Data Tooling. Lightdash closed $8.4M for its open-source BI platform built for dbt.

WORTH READING

ENTERPRISE/TECH NEWS

Good news on enterprise spending. Battery Ventures’ 2022 Cloud Software Spending Survey reveals that cloud infrastructure budgets are holding up, despite the downturn. “The good news for software sellers improves even more when you look five years into the future. Looking out over the next six months, fewer than 10% of respondents predicted decreasing their tech spending across four major budgetary areas–security, data, development tools and artificial intelligence/machine learning. In the next five years, respondents reported strong indications of budget increase in all areas. Specifically, 92% of respondents expect their security budget to increase, 84% expect data budget to increase, 69% expect increased spending in dev tools and 79% expect budget increases in AI / ML.”

Web3 fundamentals. A look at Web3 infrastructure fundamentals from Boldstart’s Ernest Addison. “The role of a blockchain node is extremely important, and can best be compared to the role of a server as it relates to the internet. Traditionally, computer networking has always relied on a client-server model. This is an architecture whereby a client or an individual node operator would connect to a server to send a request to gain access to a shared service. In this layout, synchronization of data is made easy given the server acts as the single source of communication. As one could imagine, this model lacks robustness, if the server undergoes failure or Denial of Service (DoS) attacks, then the entire network is now disrupted.”

Graphcore struggles. The UK-based AI/ML chipmaker appears to have lost a key customer as well as the confidence of its investors. “According to The Times, Graphcore’s deal to supply Microsoft with processors for its cloud computing platform, first announced in 2019, has since been scrapped as problems at the chip startup mount. The firm was one of many hit by the economic downturn in tech and beyond and last month it announced staff cuts. Investors are reportedly unhappy with Graphcore’s revenues, which reached just £4.5m last year against a valuation of more than $2bn. According to The Times, investors have also suggested the company is struggling to compete with American chip giant and rival Nvidia.”

HOW TO STARTUP

Darwin is back from vacation. Frank Rotman dropped a killer twitter thread characterizing the change in the market environment. “VCs were underwriting to the false signal of the next round being an up round vs. the de-risking of a startup’s business model…Step three of Darwin’s return is for Founders to internalize that how startups were built in the recent bull market has to be contextualized. Simply put, the fundamentals of how to fund, build and scale startups efficiently needs to be relearned. Disciplined Founders will procure and allocate assets efficiently. Disciplined Founders will maximize learnings and scale costs carefully. Disciplined Founders will be ambitious while de-risking their businesses in stages. Disciplined Founders will thrive in this new world.”

HOW TO VENTURE

Wary of crypto boards. The Information reports that some large VCs are steering clear of board seats in crypto companies as regulatory questions mount. “Securities and Exchange Commission Chair Gary Gensler meanwhile has been outspoken in his belief that many crypto tokens are securities and thus should be regulated by the SEC. All of these issues could increase liability for board members of startups. “To the extent there’s regulatory scrutiny, or the SEC is looking to target someone, or for that matter, plaintiffs’ lawyers are looking to target someone, they will always routinely name board members,” Perrie Weiner, chair of law firm Baker McKenzie’s North America securities litigation group, told The Information. What can make venture capitalists particularly reluctant to join boards is that directors and officers insurance can be hard to get, at least at a reasonable cost, founders and lawyers said. This insurance covers members of a board for the costs of legal settlements or regulatory penalties. Without it, board members are on the hook for those expenses.”

PORTFOLIO NEWS

Zigi’s CEO, Nir Benson, shared how Zigi cuts cycle time for developers by ~75% from days to hours.

Planable’s CMO, Miruna Dragomir, was selected as one of Forbes Romania’s 30 Under 30.

JFrog appointed Yvonne Wassenaar to its Board of Directors.