Lesson: Growth From User 0 with Morgan Brown

Step #4 Must Have: Find your must-have experience

I think the way that you know you have traction differs by the size of the company you are in and the stage of growth that you are at, but I think there are three ways that I think about traction. One way is, Sean Ellis has this concept of a must have score, and that is a very early stage measure of whether you have traction or you have a product that people want. That is a qualitative measure.

He asks people, "How disappointed would you be if you never used the product?" If less than 40% of people that answered that wouldn’t care, then you don’t really have traction. You do not have a product that is a must have.

Now, obviously as you get bigger, you like to have things that are more quantitative to measure. You can move to measures like Net Promoter Score. So, if you have a Net Promoter Score of greater than 50, then you have something that people generally really like. Or as you get bigger still, you start to look at your retention curve. If your retention curve stays consistent over a long enough time horizon, that is essentially product/market fit. If people are retained for a long period of time and it kind of flattens out, then that group of people are "lifelong users”. I think understanding whether you have traction really is stage dependent and those are a few measures that I use at different stages.

Trying to decide when it is time to go all in on growth is obviously a very scary proposition. Marc Andreessen says that companies fail for two reasons. One is either they try to grow when they are not ready to or they do not grow fast enough once they are ready to. It is a very critical juncture for any company. The decision of when to back up the truck is really business model dependent and the market that you are going into.

In some business models, being first is everything. If your business is network effects-based and you really need to own that market and get user lock in, backing up the truck really fast is critical to winning. There are other models where maybe it is SaaS or something like that where backing up the truck too early, your SaaS model is already going to be a major drain on your cash, so accelerating that when you do not have product/market fit is deadly.

I think depending on the business model that you have is really going to determine what that point is, but I think you need to look at things like Sean Ellis's must have score if you have a really core group of passionate users or you have a channel that is performing at a very high conversion. I think you have to look at it holistically so you can’t look at, "How's my customer acquisition rate?" or, "What is my monetization?" or, "What is my retention?" independently.

You have to look holistically at it and make a judgment call. "Do I have a sustainable growth engine here where I am acquiring customers at a rate that works with my model? I'm retaining them, making or monetizing them if that's the model. I'm gaining referral and I have kind of a loop developed." Depending really on the model is when you are going to determine whether to back the truck up. When you feel like you have product/market fit and you have a performing marketing funnel and loop in place.

Companies that have scaled really well are some of everyone's favorites. Airbnb, I think, has done a tremendous job of scaling growth. New Relic has done a tremendous job of scaling growth. Stripe has done a great job. In the consumer space, you have companies like Snapchat and Nasty Gal and a bunch of new ecommerce companies that have really done a great job. I think what they have all done that has been really unique is that they've keyed in on a few core insights about their business and used those to unlock really big growth.

We can dive into those specifically, but I think it's when companies have figured out something about their market or their business that their competitors don't know or haven't keyed in on and then really driven hard to deliver on that. The companies that scale that best, ultimately word of mouth is the big driver. There's a bunch of early stage tactics, channels, it can be nontraditional or traditional to get the ball rolling, but ultimately it's this must have experience of the product and word of mouth about that must have experience that helps the company really scale really, really large over time. So the best companies are the ones that have figured out how to go from those early stage tactics to figuring out what their must have experience is and then facilitating that word of mouth growth to really scale up really large.

Tinder, Whitney Wolfe flew from college to college, sorority house to sorority house and she really did two things. Most people think of it as, "Oh, that's cool. She's going and she's onboarding new users," but it was actually a bit more nuanced than that. The first thing is, because Tinder is location based, with any marketplace, you need supply. Supply fuels growth. Without supply, you have no buyers. If you think of a dating app as a marketplace, then you need localized supply to make the app worth anything. By going from sorority house to sorority house, she's able to build local supply very quickly.

The other thing is, by focusing on a very dense network, a very small niche, she didn't go college to college, she went sorority house to sorority house, you are focused on a network of college students who have very tight ties. It is a very dense network, the Greek system. Not only was she seeding supply locally, she was also leveraging network effects and sometimes network effects can be really hard to get going, but by focusing on such a small, tight-knit community, she was really able to amplify and localize network effects. That really helped that app explode.

Then, as they get bigger, obviously they start to get more word of mouth, a lot of press. Obviously that company had a lot of tumultuous stuff, but just going to focus on the product. Then they go international, they go to new platforms like Android. Those things are much different than this very early stage stuff. I think if you look closely at some of these really big companies, you will see these early stage things that definitely look different.

I think that what's interesting, too, is if you look at big companies and you try to reverse engineer how they did it, big companies, when they're big, like to tell a brand story. There is a lot of revisionist history and a lot of things that get changed. You have to dig a little bit deeper. If you look at a company and try to reverse engineer it from what they are saying today, you will almost never figure out exactly what the growth engine was. You really have to go back and look at early stage tactics to really figure out what are the scrappy things that they did.