Growing

It is not enough just to build. You must also build the power to disrupt.

Product is merit, and distribution is connections.

Coming out of school as an academic or an engineer, you're taught to think about quality of code, quality of user experience, quality of the product. How functional is it? How well does it work for the user? How elegant is it? Product quality in some ways is completely within your control.

Distribution answers: how do you get the product to the consumer? For example, you make a nice tasting beverage—that's a product. But it requires distribution deals to have it in a store, at the front of the store, to have it near the checkout. How do customers become aware of your product? How do you get it on shelves at Walmart? How do you get it high up on the page on Amazon?

Distribution is about connections. Anyone can get commodity distribution (by paying for Google ads or Facebook ads). The art is to find some distribution arbitrage in your time and place. Find an inexpensive customer acquisition channel and pile up users through an underpriced angle others haven't realized yet.

Startup = Growth. If you don’t consciously optimize your company for growth, you will be outgrown by a competitor who has. To maintain a constant monthly growth rate, you need to either keep hiring more salespeople of equal or greater quality (a very difficult task), or you need some way to grow virally through your existing customer base.

Virality gives you the ability to acquire more customers without expanding your sales force. It also means your economy of scale becomes much better because you don’t need to spend as much in sales for each incremental customer.

One reason startups are stressful is small sample sizes. You have a small number of employees, investors, and customers. If you're an enterprise company with ten customers and one of them cancels, 10 percent of your revenue is gone. Your revenue was increasing last quarter, and now, suddenly, it is down. Now it’s harder to raise money. Now you might not be able to make payroll. Now you are up shit creek. When you have small sample sizes, there's serious stress.

When you have 1,000 customers and one of them leaves, it doesn't matter that much, right? It's bad, but you're not losing sleep. Few realize small sample sizes are where much stress comes from.

When you’re beginning to scale your business (when users or revenue growth are consistently growing), here’s a piece of advice: include a paired metric of quality to compensate for possible cheating of the main growth metric.

If you incentivize salespeople on the basis of revenue, you also should look at customer feedback, churn rate, and per-customer profit. Ideally, you assess profit rather than revenue.

If you focus on growing users, pay close attention to churn. Pairing a second measure of quality with a metric of growth is very, very important. This is especially true when a lot of new employees are joining the company.