Startup = Growth

A startup is a company designed to grow fast.

Everything else we associate with startups follows from growth. You have to know that growth is what you’re after; if you get growth, everything else will fall into place. Use growth as a compass for every decision you take.

To grow rapidly, you need something that you can sell to a big market. That's the difference between Google and a local store. A startup must be able to:

1. Make something lots of people want
2. Reach and serve all those people

Writing software is a great way to solve 2, but you may still be constrained in 1; most businesses are constrained in one way or another.

Ideas

The constraints that limit ordinary companies also protect them. A startup has to make something it can deliver to a large market, and ideas of that type are so valuable that the obvious ones are already taken.

The moment when successful startups get started, much of the innovation is unconscious.

Rapid changes in technology uncover big soluble problems in other areas.

Rate

Starting a startup means you’re committing not just to starting a company, but to starting a fast-growing one.

The growth of a successful startup has 3 phases:

1. Initial period of slow or no growth while the startup tries to figure out what it’s doing
2. As the startup figures things out, there’s a period of rapid growth
3. Growth will slow as the company gets bigger

If there’s one number every founder should always know, it’s the company’s growth rate. That’s the measure of a startup.

What matters is not the absolute number of new customers but the ratio of new customers every month. A constant growth number is bad; a decreasing growth rate is a concern.

A good growth rate in the early stage is 5-7%, while 10% is very good.

The best thing to measure the growth rate is revenue; the next best is users.

Compass

Pick a growth rate that you can hit, then just try to hit that every week. If you hit the number, you’re successful for that week.

This turns a startup problem into an optimization problem.

Focusing on hitting the growth rate reduces the otherwise bewildering problem of starting a startup.

Having to hit a growth number every week forces founders to act. Acting vs not acting is a key factor in succeeding; strategizing can sometimes be a form of procrastination.

Optimizing growth also leads to new startup ideas. If you start with an initial plan and modify it as necessary to keep hitting, say, 10% weekly growth, you’ll end up with a quite different company than what you started with.

Every successful startup is at least partly a product of the imagination of growth.

Value

It’s hard to find something that grows consistently at several percent a week, but if you do, you may have found something surprisingly valuable.

• 10% / week = x142 yearly

A company making $1000 / month growing at 5% a week will, in 4 years, be making $25 million a month.

If a successful startup could make a founder $100 million, even if only 1% of startups succeed, the expected value would be $1 million.

Deals

The test of any investment is the ratio of return to risk.

The reason VCs like to invest in startups is not simply the return, but also because such investments are easy to oversee. Founders can’t get rich without enriching investors.

Why do founders take VC money? Growth. Growing too slowly is dangerous.

Raising money lets you choose your growth rate.

What is it about startups that makes other companies want to buy them? A rapidly growing company is valuable; if it keeps expanding, it might encroach on the acquirer’s territory.

Understand

The combination of founders, investors, and acquirers forms a natural ecosystem.

If you want to understand startups, understand growth. Growth drives everything in this world. Growth is why startups usually work on technology - because ideas for fast-growing companies are so rare, technology is the best source of rapid change.

Growth is why VCs want to invest in startups, and it's also why startups take VC money even if they don’t need it.

When starting a startup, you’re committing to search for one of the rare ideas that generates rapid growth.