10

GROW

I recently had two startups seek my advice on the same day. As types of businesses, they could not have been more different. The first is developing a marketplace to help traders of collectibles connect with one another. These people are hard-core fans of movies, anime, or comics who strive to put together complete collections of toys and other promotional merchandise related to the characters they love. The startup aspires to compete with online marketplaces such as eBay as well as physical marketplaces attached to conventions and other gatherings of fans.

The second startup sells database software to enterprise customers. They have a next-generation database technology that can supplement or replace offerings from large companies such as Oracle, IBM, and SAP. Their customers are chief information officers (CIOs), IT managers, and engineers in some of the world’s largest organizations. These are long-lead-time sales that require salespeople, sales engineering, installation support, and maintenance contracts.

You could be forgiven for thinking these two companies have absolutely nothing in common, yet both came to me with the exact same problem. Each one had early customers and promising early revenue. They had validated and invalidated many hypotheses in their business models and were executing against their product road maps successfully. Their customers had provided a healthy mix of positive feedback and suggestions for improvements. Both companies had used their early success to raise money from outside investors.

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The problem was that neither company was growing.

Both CEOs brought me identical-looking graphs showing that their early growth had flatlined. They could not understand why. They were acutely aware of the need to show progress to their employees and investors and came to me because they wanted advice on how to jump-start their growth. Should they invest in more advertising or marketing programs? Should they focus on product quality or new features? Should they try to improve conversion rates or pricing?

As it turns out, both companies share a deep similarity in the way their businesses grow—and therefore a similar confusion about what to do. Both are using the same engine of growth, the topic of this chapter.