We Need To Have A Debate About Growth

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Making Buying Decisions In A Data-Driven World Does Not Mean Digesting Old Reports

Editor’s Note: Semil Shah is a contributor to TechCrunch. You can follow him on Twitter at @semil.

In September 2012, Y Combinator’s Paul Graham penned a widely-circulated essay titled “Startups = Growth.” The message was clear — startups are about growth. Once a startup stops growing, it gets busy dying. Since so much of the Valley hangs on Graham’s words (myself included), this essay cemented what Andrew Chen proclaimed in his famous post earlier in 2012 “Growth Hacker Is The New VP Marketing,” that the stakes for gathering huge crowds of users on new hyper-growth platforms was big business. All of this culminated in an event, The Growth Hackers Conference, which was inaugurated in Fall 2012 and convened again in May 2013.

There’s no doubt Chen’s original claim that online and mobile marketers are now expected to be “full stacker,” yet at the same time, what I saw on the venture side of the table during this span has been illuminating and troubling. As traditional venture capital gets bigger, moves to  later-stage deals, and requires evidence of strong traction, the thousands of seeded startups blooming are in a desperate race for growth, to submit evidence to a jury of investors to proclaim, “Hey, look, our service is growing!” and hoping for the chance to secure funding to keep going. Investors, looking up and salivating at the skyscrapers like Twitter and Facebook, perhaps lost sight what it takes to build seismic-grade foundations under such edifices. All of this combined to create a vicious cycle where investors expect hyper-growth curves, and entrepreneurs must attain this growth at any cost — or die — thereby creating a perverse incentive to chase potentially inorganic growth in the short-term for the chance to survive.

Lost in the race were modest questions of common sense and decorum: “Have users organically found the product?” “What are users saying to their friends and acquaintances about the product?” And, “What is unique about the model that could make this scale to tens of millions of users naturally?” I’d like to underscore that I don’t assign blame  here — surprisingly, these are mostly rational moves considering all the circumstances facing these actors. We can point at entrepreneurs who chase bad metrics and wag our finger, but the unfortunate reality is that they can also be rewarded by VCs for it. Or, maybe, we are all to blame.

Like most things, the truth in this case probably resides somewhere in the middle. Early-stage startups might do better to think about growth from an engineering, product, and marketing point of view early on, and also to be realistic and willing to staff accordingly in order to carry out the variety of schlep work it takes, to do the things that do not scale, the things that large companies or the dispassionate simply would not do. Hacking growth to establish a beachhead to experiment with new tactics may buy teams more time, but may also be attempting to lock-in organic behavior.

Or, perhaps it’s not a this-or-that choice between focusing on growth and doing things that don’t scale, but rather a signal that both investors and founders need to bake  the quantitative ingredients of the growth hacker arsenal along with the softer, more qualitative elements of doing the hard things, many of which may be offline, in order to build a credible foundation and differentiate in the market. Maybe both founders and investors need to come to grips with the reality that most startups need more time to chart their path and that investors should be even more selective in choosing which teams and products deserve more swings at bat.

That’s why I found it interesting when Graham, most recently, penned another essay a few weeks ago titled “Do Things That Don’t Scale.” The web loved it, and rightly so. It’s almost as if we are finally dialing back on the culture of growth-at-all-costs. It may be time for everyone to take a breath and ask some more fundamental questions. “Do consumers have any time in the day and attention to use an infinite supply apps?” “How can we be more honest about whether a product is genuinely being used and organically shared?” “When is it time to concede a product just isn’t what the market needs?” “Will at least some investors be willing to have more conviction around earlier-stage products and back them based more on art and conviction, rather than pure metrics?”

I don’t know what the right answers are, and they’re likely to be different for each company. What I do know is that the current mix isn’t quite right, and it is not sustainable. I am most interested to learn what you think. Does a startup just equal growth, or should we be focusing on doing things that don’t scale, or is there a balance companies and investors should strike early enough so that it’s not too late? These are all important questions that affect the credibility of we all do, and as difficult as the answers may be to swallow, it is my belief that now is the time these questions need to be asked.

Photo Credit: Carl Glover / Flickr Creative Commons