As a startup founder, I have grown two separate products (HelloSign and HelloFax) from $0 to $1 million in revenue. In doing so, I found a lot of growth truisms to be false, many of which I debunked in part one of this series. Below are further lessons I hope other entrepreneurs who are growing their business take to heart:
- Use engagement as a leading indicator for revenue. Is your engagement flat but revenue growth steady? That probably won’t last. There’s only so much you can do before paid upgrades decrease.
- Focus on a limited number of metrics. As much as I love metrics, focus your attention on just a few. I’d pick one revenue growth metric, one churn metric and one engagement metric to start. Then, grow your metrics dashboard over time. When you do, implement this one. We started out with a metrics setup that was really complex and all we got was an important lesson.
- When fundraising, use revenue growth slides rather than free user growth slides in your deck. This may be controversial, but I completely pulled our free user growth slide from our deck and stuck it in the addendum. Investors were way more receptive to our pitch. Free user growth is just a proxy for future revenue. If you have revenue, just show that instead.
- Hone in on deal-breaker features, not feature requests. There’s something powerful about someone saying they won’t sign up unless you have X feature or canceling because you don’t do Y. Anyone can have a feature request. Few people will vote with their feet. Building those deal-breaker features will produce more revenue.
- Always know your runway. I still meet with founders getting blindsided when they realize they’re almost out of money. Knowing your runway allows you to make smart decisions about revenue and fundraising, early. Knowing when you’ll run out of money is healthy, since it guides your daily decisions on revenue.
- Use your free users for marketing. I remember an experienced CEO explaining to me that free users are just one part of the funnel. She thinks of supporting those free users as part of the marketing budget. They spread the word now. They become engaged and upgrade later.
- Know that growth is neither magic nor a black box. It’s something companies either do or don’t; they do it well or don’t. There are tried and true tactics out there, and I see a lot of almost desperate attempts to innovate when it comes to growth. Sure, keep looking for the hacks and viral loops. Maybe you’ll come up with your own equivalent of the Dropbox referral page. But while you’re doing that, there are a ton of tried and true sources of growth. You just have to build those channels: BD, PPC, SEO, channel partners, PR, content, API evangelism, viral and more.
- Use paid advertising to improve your entire funnel. There’s nothing like paying money for advertising to make your entire funnel more disciplined. We changed our onboarding, emails and pricing, all to make our campaigns profitable. The paid ads were only a minuscule part of our growth. But the rest of the product hugely benefited from those optimizations.
- Do post-mortems on every release. It’s humbling when you make a big investment on a feature, only to have no one use it or pay for it. Do this once and it completely changes how you think of every feature you build.
- Generate some revenue to take the pressure off. Startups can be stressful. A lot of people have written about founder depression — it’s a real thing. Sam Altman talks about how founders have a lot of weight on their shoulders. Having revenue can significantly ease that weight.
- Don’t expect customers to price shop as much as you think. Our price, in relation to our competitors, doesn’t come up often. Sometimes we’re more expensive, yet we might still win the deal. So don’t become too obsessed with your competitor’s prices. Just optimize for your users.
- Rethink the value you add if you’re only winning on price. Unless you’re Amazon, a price war can be brutal. Instead of being cheaper, think about how to differentiate.
- Know that people behave differently when money is involved. As a company, we pay a huge amount of money for software and don’t flinch, but in my personal life, I’m still on a free Spotify account. Many founders don’t have real work experience before starting a company, myself included. Without being in a work environment, it’s hard for a founder to imagine how much companies pay for software, which leads to underpricing their product.
Today is a good day to grow revenue. There is no reason to wait. I find it odd that I meet with founders and have to convince them that growing revenue is important. Then, runway decreases, they can’t raise, the game is over and everyone acts surprised. In fact, if you get this figured out, you may get to the mythical “infinite runway.” Then, if you want, you can turn on the spigot and operate at a loss in exchange for revenue growth. That’s the moment when increasing your burn rate for growth makes sense.