When is a company ready for traditional growth efforts?

A company is ready for traditional growth efforts when it has achieved a degree of product-market fit. Critically, it needs to see cohorts of users demonstrating long-term retention. Launching heavy acquisition, especially paid marketing with significant burn implications, before this can be problematic.

What should a growth professional's core skill set be?

The ideal growth professional is a smart, analytical generalist. They should possess low pride of ownership, be eager to test and iterate quickly, and have a deep analytical capability. Crucially, they need to be able to hold the business's entire equation in their head and intuitively understand where the key leverage points are.

How do product and growth interact?

Product and growth are deeply intertwined. While a great product drives natural adoption, a growth team's role is to ensure that adoption doesn't slow down by optimizing channels, onboarding, and conversion. Best products are often built to optimize for a specific acquisition channel.

What is the main difference between consumer and B2B growth strategies?

Consumer growth strategies have historically led, with B2B increasingly adopting similar tactics. B2B benefits from higher LTVs, allowing for more creative marketing and sales approaches. The key difference lies in the target audience: B2B often requires identifying specific customer lists and employing traditional sales for enterprise, while SMB can scale more bottom-up, similar to consumer models.

How should a company approach A/B testing and experimentation?

Companies should first ensure their site is properly instrumented for data collection. While building custom tools is an option, third-party solutions are often sufficient. Focus on testing hypotheses, trying disparate experiments to find high-impact changes, and fostering a culture where experimentation is the standard for decision-making.

What are the key metrics for a marketplace company?

For marketplaces, a North Star metric needs to combine both sides. Thumbtack used 'transactions' or 'requests' as their primary metric. Upstream proxies, like the number of quotes a consumer receives from a professional, can also indicate platform health and future success.

How can employees drive a growth program within a company?

Employees can start by identifying low-budget, high-impact opportunities, like testing new acquisition channels. Publicizing company goals and tracking metrics transparently can anchor efforts. Contributing ideas for optimization in areas where employees have deep understanding, especially in high-intent funnels, is also effective.

What is the role of paid marketing in modern growth strategies?

Paid marketing has shifted from a secondary channel to a primary one due to platform changes. It's highly competitive and requires data-driven creativity and constant innovation. While effective for seeding new markets or balancing marketplaces, relying solely on paid channels can be unsustainable due to rising costs and degrading performance over time.

How should companies organize their growth and marketing functions?

It's often better to build an in-house team sooner rather than later. Given the scarcity of experienced growth marketers who are also team builders, disaggregating roles is key. Growth marketing often aligns closely with product, while product marketing may live within product or design. Retention is typically healthier within the product team.

What are the main drivers of viral growth?

Viral growth is increasingly driven by niche variations and incentivized referrals, as broad platform-driven virality has become harder. Referrals remain effective if measured for incrementality and payback. Growth within closed networks, like corporate environments or through social proof with coworkers, is also a key driver.

How can growth tactics be used for positive societal impact?

The same growth tactics that create addictive products can be 'weaponized' for good. Meditation, exercise, and healthy eating apps use these methods to encourage positive behaviors. The key is to fight back with these channels and develop clear ethical principles, avoiding dark patterns and understanding 'why' specific behaviors are changing.

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Advice on Organizing and Running Growth Teams from Dan Hockenmaier and Gustaf Alströmer

Y Combinator

Science & Technology5 min read62 min video

Jun 26, 2019|12,140 views|203|5

YC Y Combinator Dan Hockenmaier Gustaf Alströmer Podcast Interview Growth Growth Advice Basis One Airbnb Growth Consulting Craig Cannon

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TL;DR

Growth experts Dan Hockenmaier and Gustaf Alströmer discuss effective growth strategies, team building, and data-driven decision-making for startups, emphasizing product-market fit and sustainable acquisition.

Key Insights

Most gains in growth come from one or a handful of channels, not a wide variety of tactics.

Product-market fit and sustainable retention are crucial before heavy investment in acquisition, especially paid marketing.

Building a comprehensive spreadsheet model of the business funnel (acquisition, conversion, retention, monetization, referrals) is key for identifying leverage points.

A smart, analytical generalist with low pride of ownership and a deep understanding of the business equation is valuable for growth roles.

Growth and product development are intrinsically linked; products should be built to optimize primary acquisition channels.

Experimentation velocity is important, but testing truly disparate ideas and focusing on hypotheses is more impactful than rapid minor adjustments.

For B2B, focus on building a sales funnel starting from the end goal and working backward, leveraging higher LTV for more creative marketing.

THE UNPOPULAR ADVICE FOR GROWTH

Dan Hockenmaier often finds himself advising founders to stop doing things they want to do, emphasizing that growth follows a power law where most gains come from a few key channels or tactics. He stresses that companies must have foundational product-market fit and observe sustainable retention before pursuing heavy acquisition, particularly costly paid marketing, which can be detrimental if done prematurely.

STRUCTURING GROWTH EFFORTS AND IDENTIFYING TALENT

A fundamental exercise for understanding a business's growth levers is building a traditional spreadsheet model that maps out acquisition channels, conversion rates, activation, retention cohorts, monetization, and referral loops. The ideal person to drive this is a smart, analytical generalist who is deeply analytical, possesses low pride of ownership, and can hold the entire business equation in their head, understanding how changes impact overall output.

THE SYMBIOTIC RELATIONSHIP BETWEEN PRODUCT AND GROWTH

Growth and product development are not separate entities but are deeply intertwined. The most successful products are built with an understanding of their primary acquisition channel. For instance, if paid marketing is key, the product needs to monetize quickly and deeply. Conversely, a unique product can sometimes allow a company to compete on different vectors, as seen with Zoom's viral adoption, but it doesn't negate the need for dedicated growth efforts.

EFFECTIVE EXPERIMENTATION AND DATA INTEGRITY

Companies need robust instrumentation and queryable data before embarking on A/B testing. While speed of testing is important, focusing on testing truly disparate ideas and validating core hypotheses yields more significant learning than rapid, minor tweaks. It's crucial to understand the underlying hypotheses driving experiments rather than just running a high volume of tests without strategic focus.

KEY METRICS AND FUNNEL OPTIMIZATION

The initial focus for growth should be on retention, directly linked to product value. Beyond that, tracking user acquisition sources through basic analytics and surveys is vital. Understanding the end-to-end funnel, from initial awareness to achieving product value, is key. Early proxies for retention, like activation metrics and first-session engagement, are crucial for iterative improvement and experimentation.

NAVIGATING B2B VS. CONSUMER GROWTH STRATEGIES

While consumer growth tactics have increasingly been adopted by B2B, the fundamental approach differs. B2B often involves building a sales funnel from the end goal backward, leveraging higher LTV for creative marketing. For SMBs, an automated sign-up process is common, while enterprise sales require traditional methods. The key is to understand the distinct decision-making processes and customer journeys in each segment.

THE EVOLUTION AND PERILS OF PAID MARKETING

The growth landscape has shifted towards paid channels, offering targeted acquisition but increasing competition. Paid marketing is often best used as an accelerant, not the sole growth strategy, as it can degrade over time and become expensive. Its effective use lies in seeding new markets or balancing marketplaces, while sustainable growth often relies on organic and SEO efforts.

ORGANIZATIONAL STRUCTURE AND GROWTH TEAM INTEGRATION

Growth is increasingly a philosophy for running a business, not just a team. Building an in-house team is generally preferred over relying solely on external consultants, especially for core functions like paid marketing. Growth efforts can be integrated into product teams or stand alone, depending on the company's DNA and need for evangelization, but clear accountability around key metrics is essential.

EMBEDDING GROWTH CULTURE AND EMPLOYEE INITIATIVE

Fostering a growth culture requires transparency, with regular sharing of metrics and experiment results. Employees can drive growth by identifying high-intent flows and proposing data-backed improvements. Companies should prioritize testing ideas that have the potential for high impact, often found in user-critical paths like onboarding or conversion funnels, rather than solely focusing on the highest-volume touchpoints.

THE ROLE OF BRAND AND MEASURABLE GROWTH

While brand is crucial, its impact is often best built through a great product and positive customer experiences, rather than isolated brand marketing campaigns. Measurable growth activities that ladder up to a core metric are paramount. Metrics like NPS, customer sentiment, and willingness to recommend are valuable signals, whereas raw awareness benchmarks are less actionable for startups.

GROWTH INTO NEW REGIONS AND CULTURAL NUANCES

Expanding into new regions requires understanding both product limitations (e.g., internet speed, device availability) and cultural impacts. While perceived cultural differences are common, the underlying technology stack often remains similar across markets, with exceptions like China or Russia. The top-of-funnel strategies may need adaptation, with certain regions presenting ad arbitrage opportunities due to lower competition.

UNDERSTANDING VIRAL GROWTH AND REFERRAL MECHANISMS

Viral growth, once driven by open networks, is now more common in closed networks and incentivized referrals. While channels for organic viral growth have become saturated, referrals, when carefully managed for payback and incrementality, can still be effective. It's crucial to view referrals not as 'free' growth but as a form of paid marketing with controllable levers.

PRICING STRATEGY AND MONETIZATION

Pricing strategies should align with the overall growth approach, whether it's about removing friction in a virally growing product or ensuring sufficient margins for paid acquisition. Monetization changes require observation over long periods, using A/B tests and retaining a small portion of the user base on the old price to validate long-term behavioral impacts and ensure sustainable growth.

BALANCING GROWTH WITH ETHICAL CONSIDERATIONS

The growth industry faces challenges related to addictive products and filter bubbles. A more optimistic view suggests that as companies mature, they shift to measuring longer-term metrics that align with both business and consumer interests. Furthermore, the same growth tactics used for engagement can be 'weaponized' for positive outcomes, applied to health, meditation, and other beneficial applications.

Mentioned in This Episode

●Software & Apps

●Companies

●Organizations

●Concepts

●People Referenced

Growth Team Strategy Cheat Sheet

Practical takeaways from this episode

Do This

Focus on sustainable retention before heavy acquisition.

Build a comprehensive spreadsheet model of your business (acquisition, conversion, activation, retention, monetization, referrals).

Hire smart, analytical generalists with low pride of ownership and a drive to test and learn.

Prioritize product-market fit before scaling acquisition channels.

Ensure your site is instrumented correctly for robust experimentation.

Focus on user accounts for A/B testing rather than visitors for more reliable results.

Track core product value metrics reflected in retention graphs.

Ask users how they heard about your product to supplement source tracking.

Optimize early user experiences (like sign-up/login) as they are key to retention.

When in doubt, consider the 'Type 2' decisions for experimentation (those you can roll back).

Run pricing experiments long enough to observe behavioral changes. Ensure pricing aligns with growth and monetization strategy.

Use paid marketing as an accelerant, not the sole growth strategy.

Balance acquisition channels by considering intent vs. scale.

When entering new markets, understand the maturation curve of paid vs. organic growth.

Organize teams around clear metrics and accountability; consider keeping retention within the product team.

Broaden the scope for idea generation for A/B tests, but have a synthesis process.

Prioritize high-intent flows for initial optimization efforts.

As an employee, find quick wins with small budgets (e.g., paid marketing experiments) to gain buy-in.

Publicize company goals and metrics regularly to align efforts.

For international growth, assess both product limitations (tech stack) and cultural impacts.

In emerging markets, leverage low-cost advertising arbitrage on platforms like Facebook and Instagram.

Incentivized referrals can work but must be measured for incrementality and payback.

Build an in-house growth team as quickly as possible.

When working with consultants, focus on acute, high-leverage problems to unblock the team.

Establish clear principles for your growth team regarding ethical practices and understanding 'why' things work.

Consider subscription models where users are the customers, not advertisers, to align incentives.

Avoid This

Jump into heavy acquisition before ensuring sustainable retention.

Implement paid marketing too early without understanding retention.

Build custom A/B testing infrastructure unless the long-term maintenance cost is justified.

Focus solely on speed of testing over testing truly disparate, high-impact ideas.

Rely only on source tracking; supplement with user surveys for acquisition insights.

Neglect basic but critical flows like sign-up and login for optimization.

Assume everyone understands the importance of experimentation; foster a data-driven culture.

Focus exclusively on high-funnel optimization due to scale; balance with high-intent flows.

Rely on a 'growth hacking' mentality without considering product-market fit.

Optimize for short-term metrics like click-through rate without considering long-term impact.

Treat paid marketing as a 'set and forget' strategy; it requires constant innovation.

Over-invest in brand awareness metrics if they aren't actionable.

Assume organic growth will automatically optimize a great product; growth teams are essential.

Hire a VP of Marketing too early if their core functions can be handled by existing product or growth teams.

Allow multiple teams to work on the same metric without clear accountability, leading to fragmented user experience.

Believe that referrals are 'free growth'; they require careful consideration of payback and incrementality.

Common Questions

The most unpopular advice is often telling founders to stop doing things they want to do. Nine times out of ten, growth gains come from a few key channels or tactics, and most early teams have many good ideas with diminishing returns. The advice is to focus on the highest-impact activities and avoid chasing less effective ones.

Topics

Technology & Innovation Business & Entrepreneurship Product Management AB Testing Startup Growth Growth Strategy Product-Led Growth User Acquisition Retention Optimization

Mentioned in this video

Companies

Basis One

A growth strategy consulting firm.

Facebook

Discussed for its growth evolution, including the shift to mobile and expansion into data-constrained markets, and its early growth team's impact.

Thumbtack

A platform connecting consumers with local professionals, where one of the speakers previously worked as director of growth marketing.

Airbnb

A company where one of the speakers was a product lead for growth, discussed extensively regarding its product experience, growth strategies, and international expansion.

Square

A company mentioned as an example where product innovation enabled a unique distribution strategy, particularly for SMBs.

Instagram

Mentioned as a platform where a significant portion of paid marketing occurs and where growth can be achieved through advertising arbitrage in emerging markets.

Highlighted as a mobile-first product that contributed to Facebook's step-function growth, particularly in data-constrained markets.

Y Combinator

A startup accelerator where one of the speakers is a partner.

Blue Apron

A D2C company mentioned as an example of rapid growth via paid marketing, followed by challenges with rising acquisition costs and declining retention.

Concepts

paid marketing

Acquisition strategy involving paid channels, discussed as a potential pitfall if implemented before sustainable retention.

product market fit

The degree to which a product satisfies strong market demand, crucial for determining readiness for traditional growth efforts.

Software & Apps

Healthy eating apps

Cited as an example of products using growth tactics to encourage pro-social behaviors and personal improvement. (Classified as 'software' for product category).

Google Analytics

A web analytics service that tracks and reports website traffic, mentioned as a basic starting point for source tracking.

Exercise apps

Cited as an example of products using growth tactics to encourage pro-social behaviors and personal improvement. (Classified as 'software' for product category).

Messenger

Mentioned as a lighter version of Facebook's app, crucial for expansion into markets with limited data and hardware capabilities.

Zoom

A company whose product is highlighted as an example of a product-led distribution strategy that achieved viral growth.

SurveyMonkey

An example company where an early growth team focused on optimizing a single critical page, leading to expanded influence.

Slack

Used as an example of a product that grew bottom-up within organizations, eventually becoming widely adopted.

Boxer

A messaging service the speaker worked on for growth, indicating early career experience with viral growth strategies.

Meditation apps

Cited as an example of products using growth tactics to encourage pro-social behaviors and personal improvement. (Classified as 'software' for product category).

AWS

Mentioned humorously in the context of cost-effectiveness, implying that 'cheap' infrastructure doesn't equate to free growth overall.

People

Dan Hockenmaier

Co-host and expert on growth strategy consulting, founder advisor, and former director of growth marketing at Thumbtack.

Gustaf Alströmer

Co-host, partner at Y Combinator, and former product lead for growth at Airbnb.

Organizations

Sequoia Capital

A venture capital firm mentioned in the context of whether to pitch to large clients or VCs early on.