WTF is Growth?
An attempt to demystify and simplify what "Growth" is.
“Life is growth. You grow, or you die.” - Phil Knight, Nike founder.
4 years after working in Growth for tech startups in LatAm, I’ll try to define what Growth is.
The dictionary definition of growth is “the process of increasing in size”. In this article, I will try to define growth as a discipline, specifically in a business context within tech startups. My definition will not be a universal truth and might seem like an oversimplification, but I will give it my best shot …
Growth is the process of acquiring, retaining, and/or monetizing users via product, marketing, and/or sales. TLDR (Too Long, Don’t Read):
Growth History
WTF (What The Fuck) is Growth?
What's the role of a Head of Growth?
How are Growth teams structured?
Growth Learnings
Growth History
Here’s the story of the first Growth Team in 3 Reforge (best Growth school) snippets:
When Sheryl Sandberg started as COO, she had a conversation with Chamath Palihapitiya, the first Head of Growth at Facebook. When she asked Chamath what he wanted to focus on he said, “I'm going to focus on changing the product, doing some SEO, some SEM, applying some algorithms, et cetera.”
Sandberg asked Chamath what he called that, and he responded, “I don't know. I call that growth. We're going to try and grow, and I'm going to be the head of growing stuff." Thus, the first official growth team was born.
Before and after Growth:
Growth in practice:
WTF (What The Fuck) is Growth?
Growth is the process of acquiring, retaining, and/or monetizing users via product, marketing, and/or sales. Growth can be simplified into a 3*3 matrix:
Best practice would be to define each row and column, but I would enter a rabbit-hole (ChatGPT couldn’t help or I couldn’t ask correctly), as one could perfectly write a “WTF is Product/Marketing/Sales” series. Examples are not exhaustive or the best way to explain something as first-principle thinking > analogies, but it gets the job done 80/20:
Acquisition: increasing # of new users.
Retention: maintaining # of existing users.
Reforge then breaks down retention into activation, engagement, and resurrection.
Growth ≈ Retention. Retention separates the category leaders. Retention masterclass by Frubana’s Head of Growth (link), Carlos Upegui:
Monetization: extracting more profit from existing (retained) users.
Product-led: All changes to user experience and/or interface.
Product-led acquisition e.g. Spotify’s share button within the product.
Product-led retention e.g. Calm’s daily check-in feature that helps create a habit
Product-led monetization e.g. Uber’s dynamic pricing.
Marketing-led: Online and offline efforts to build awareness.
Marketing-led acquisition e.g. Paid media with ads in Facebook, Instagram, LinkedIn; SEO/SEM to generate marketing qualified leads (MQL’s)
Marketing-led retention e.g. Life-cycle messaging via email, push notification.
Marketing-led monetization e.g. Amazon Prime ads.
Sales-led: All human to human interactions intended to persuade a potential or existing customer, usually involving a Sales Representative (Rep)
Sales-led acquisition e.g. Sales rep doing outbound to generate leads.
Sales-led retention e.g. Sales rep (Key Account Manager) helping the client with all their needs to keep them satisfied and prevent churn.
Sales-led monetization e.g. Sales rep up-selling and/or cross-selling.
Note: Sales is way more common in B2B companies.
Any and all feedback welcome!
Elena Verna, growth guru, invented the 3*3 matrix with this B2B (business to business) example:
What's the role of a Head of Growth?
The end-goal of a growth team is to increase the north-star metric.
What is and what should be the north-star metric is another big topic. Ex Growth Leader at GitLab and Acorns, Hila Qu, says the north-star metric should be at the intersection of 3 items:
Business objectives. Revenue (top-line) is usually the business objective.
Users are getting value from the product. If users are not getting value, revenue will not last. Revenue (top-line) is an output metric; input metrics can lead to revenue such as Weekly Active Repinners for Pinterest at the beginning. Quality of earnings > quantity of earnings.
Strategic focus of the company at this time.
So, the Head of Growth’s role is doing whatever she/he can with the 9 combinations of the 3*3 matrix to grow the north-star metric. Usually accompanied by a lot of Data/Analytics. Andy Young from Kaszek says there’s 2 types of Heads of Growth and I agree:
Someone who is world class at data & experiment tracking, who has pure visibility on every single metric, and who understands ripple effects 3 levels deeper.
Someone who is world class in at least 1 area of the 3*3 matrix. E.g. For Nubank, an expert at Social and Member Gets Member.
Apart from the north-star metric, all heads of growth should track the payback period (calculated as the time it takes a company to payback its Customer Acquisition Cost ‘CAC’). This is the bread and butter of sustainable growth. An example from Nubank’s IPO Prospectus (F-1), a payback period of 12 months:
How are Growth teams structured?
Growth can be viewed as applied mathematics with execution. That’s why the best growth performers are highly analytical AND capable of getting shit done (executing). The inventor of counting cards in blackjack and then quant trader, Edward Thorpe, says “simple math allowed me to separate hype from reality”, and that would be my growth principle #1. It’s important to separate the signal from the noise, all hypothesis’ should have a quantitative (math/data) AND a qualitative (talking to users) fundamental.
Growth teams are usually organized around the 3*3 matrix. For example, this is Elena Verna’s optimal growth org:
Growth Learnings
Growth is not for all.
I haven’t seen many Growth teams at more traditional companies (≠ tech startups), but they do have stand-alone Product, Marketing, and Sales teams (Growth compartments). Should they have a Growth team?
Product Market Fit (PMF), then Growth.
Learned this one the hard way as a VC-backed founder and Head of Growth from Day 0 (post-mortem link).
For Elena Verna, “Product Market Fit (PMF), then data, then growth. Growth is *the maximum distribution of a product via the scientific method*. This applies to brand new companies or new products within an existing company.
Growth before PMF = focusing on the distribution of a product that is not yet ready, often leading to incorrect internal priorities and PMF failure.
Growth before data = few intuitive random wins, but will not be a scientific, data-driven discovery of the growth model. The result is a lack of ability to generate forecastable business outcomes.”
Growth is a culture, not a silo.
Ex Growth Leader at Neta, Joaquin Ruales, emphasized “Growth is not an area, it is the company strategy”.
I once heard Simón Borrero, Rappi CEO & Co-founder, say: “todas las áreas de Rappi trabajan para growth” (all Rappi areas work for growth).
Growth is what differentiates a startup from newly founded companies.
“Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups follows from growth.” - Paul Graham
Growth is a high pressure and intense job.
*Not saying growth is the only high pressure and intense job.
Growth usually works on short-term metrics (vs. long-term initiatives) and performing hacks/experiments to impact metrics is expected in short time horizons (days, weeks).
Stay tuned for more growth content. Any and all feedback welcome.
Annex
Followed my passion and joined a health tech startup as their Head of Growth. They say 2 characteristics of great founders are (i) 2nd time founders; (ii) deep industry expertise w/ unique insights. All-in to build in health tech :)