Startup general interest

What to do when growth stops

By October 13, 2015 No Comments

Jeff Jordan, partner at Andreessen Horowitz published an article recently on Recode advising CEOs on how to respond when growth slows.

His first point is to take it seriously. Very seriously. At most times and in most cycles investors value growth above all else because rapid growth delivers rapid increases in valuation, and without rapid growth a startup isn’t going to break out and become a star. That’s true of the growth stage startups that Jeff wrote about, and doubly true for the pre Series A companies that we back. When a company is tiny the only way it is going to get to an exit of any significance is if there are a few years of 3x+ growth.

Then he goes on to how to deal with it. He describes two types of CEO response ,’zen it out’ and ‘panic mode’, advocating the latter. For me, a CEO should stay with the management style that suits them best and make sure they are doing everything they can to get back to growth. Trying to hide the problem from staff is definitely a bad idea. Much better to enlist their help.

Going to the next level of detail, the most important thing to do is understand why growth has stopped. Something must have changed. There is no other explanation. Too often I see founders noting that something has stopped working and providing a simple first level explanation – e.g. Google Adwords is no longer working for us because CPCs have gone up. This doesn’t get to why the CPCs have gone up which might yield a solution – e.g. the problem might be regional or only with some keywords. The five whys interrogation technique can be powerful here.

Getting this right can be a time consuming and difficult process, but without it getting back to rapid growth will be tough. And without rapid growth the best case is that a startup will be ‘ok’.

Another way of thinking about this is that the best companies make growth a habit, and like every good habit it sometimes takes hard work to stick with it.