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The HyperGrowth Equation
21.11.2022
Hypergrowth is the Holy Grail of the tech startups’ land. Every founder out there wants to have that hockey-stick growth curve. Very few actually get to see it. And there are very good reasons why. Real hypergrowth is the true unicorn that even some of the acclaimed tech unicorns don’t get to discover.
So what’s the fuss about hypergrowth?
As all the hyper, mega, uber-extraordinary hyped words that we tend to use in the tech world, hypergrowth is nothing more than exponential growth: you’re adding more customers today than you did yesterday. It’s highly sought-after by both entrepreneurs and investors because it’s a sign that the company has managed to solve a real problem for its target customers and it’s now shooting for the moon (aka going mainstream, for people less familiar with the startup slang).
However, getting to real hypergrowth is not easy. I emphasised the world “real” because you can temporarily fake hypergrowth by throwing money out the window. There are startups out there that reach the fake hypergrowth by recklessly spending investor money to acquire customers. Those customers’ lifetime value will never get even remotely close to their customer acquisition costs. And that’s simply dead-wrong. The most straightforward way to differentiate between genuine and fake hypergrowth is to make sure the hockey-stick growth curve stays consistent when you look at MAU (monthly active users) growth, or, even better, revenue growth.
Prerequisites to reaching hypergrowth
First, you need to have a really good product that solves a pressing need for a specific target audience. So ask yourself: is your product a pain killer or a vitamin? If it’s the latter, the hard truth is that it will never achieve consistent hypergrowth. People will use it infrequently and you will struggle with conversion and retention.
Your product has the capacity to generate network effects. While one might argue that products without network effects can reach hypergrowth, I cannot name one single example. Network effects mean that the more people are using your product, the more valuable the product gets for every single individual user. This not only fuels hypergrowth, but gives your company a competitive moat, creating a high barrier to entry for your competitors.
Not all companies that meet the prerequisites for hypergrowth actually end up achieving it. What makes the difference is consistent execution. And, while there’s no playbook to achieve hypergrowth, getting there is more scientific than one might be tempted to think.
Product-Driven vs. Marketing-Driven Growth
This continuous debate in the marketing world should not really exist, at least not in the tech industry. First, the relationship between the two is not either, or. It’s AND. Product-driven growth AND marketing-driven growth. Secondly, this is not a “chicken-or-the-egg” type of dilemma. Product-driven growth always comes first and builds a solid foundation for future growth.
Read the full article on Irina's blog https://irinascarlat.com/hypergrowth-equation/
So what’s the fuss about hypergrowth?
As all the hyper, mega, uber-extraordinary hyped words that we tend to use in the tech world, hypergrowth is nothing more than exponential growth: you’re adding more customers today than you did yesterday. It’s highly sought-after by both entrepreneurs and investors because it’s a sign that the company has managed to solve a real problem for its target customers and it’s now shooting for the moon (aka going mainstream, for people less familiar with the startup slang).
However, getting to real hypergrowth is not easy. I emphasised the world “real” because you can temporarily fake hypergrowth by throwing money out the window. There are startups out there that reach the fake hypergrowth by recklessly spending investor money to acquire customers. Those customers’ lifetime value will never get even remotely close to their customer acquisition costs. And that’s simply dead-wrong. The most straightforward way to differentiate between genuine and fake hypergrowth is to make sure the hockey-stick growth curve stays consistent when you look at MAU (monthly active users) growth, or, even better, revenue growth.
Prerequisites to reaching hypergrowth
First, you need to have a really good product that solves a pressing need for a specific target audience. So ask yourself: is your product a pain killer or a vitamin? If it’s the latter, the hard truth is that it will never achieve consistent hypergrowth. People will use it infrequently and you will struggle with conversion and retention.
Your product has the capacity to generate network effects. While one might argue that products without network effects can reach hypergrowth, I cannot name one single example. Network effects mean that the more people are using your product, the more valuable the product gets for every single individual user. This not only fuels hypergrowth, but gives your company a competitive moat, creating a high barrier to entry for your competitors.
Not all companies that meet the prerequisites for hypergrowth actually end up achieving it. What makes the difference is consistent execution. And, while there’s no playbook to achieve hypergrowth, getting there is more scientific than one might be tempted to think.
Product-Driven vs. Marketing-Driven Growth
This continuous debate in the marketing world should not really exist, at least not in the tech industry. First, the relationship between the two is not either, or. It’s AND. Product-driven growth AND marketing-driven growth. Secondly, this is not a “chicken-or-the-egg” type of dilemma. Product-driven growth always comes first and builds a solid foundation for future growth.
Read the full article on Irina's blog https://irinascarlat.com/hypergrowth-equation/
