When growth stalls
Following the news that Airtable acquihired Airplane, and Pitch is recapping and focusing on profitability, there’s been a deluge of takes on the options available to startups who were overfunded and can’t seem to grow into those heady valuations. Ed Sim over at Boldstart wrote about returning cash to investors. Jamin Ball from Altimeter riffed on Ed’s tweet and added that it’s important for founders to be honest about whether they have a path to product-market fit at all. Jason Lemkin topped it off with a sobering take on why VCs don’t want to invest in mediocre growth.
All of these pieces of advice presume that the company in question is finished. Growth has stalled. The founders don’t believe they’ll reach product-market fit. The investors don’t believe the company will be one of 2–3 category winners. Everyone is looking for a way out.
However, what if your startup isn’t growing fast enough, but you still believe it might. What should you do then?
As somebody long obsessed with growth, especially at the earliest stages, here is the single most valuable thing you can do to kickstart growth:
Narrow your ICP.
Without knowing anything about your company, your product or your target market, I can say with confidence that your ICP is probably too broad.
It’s natural for this to happen. You don’t want to inadvertently miss out on revenue, so you widen your focus. You qualify a deal that is a bit off-piste, but seems likely to close. You decide to chat with a company that’s larger than normal, but brings with it a contract value that’s three times your average. No harm done, right? You’re just being opportunistic! You’re exploring, waiting for the right time to exploit.
But there are hidden, insidious costs to a broad ICP.
Everything is just a little bit harder.
It’s harder to know what to build next because users from different segments have different needs. Early growth doesn’t come as easily as it might otherwise because users from different segments don’t talk to each other as much, reducing the impact of any potential word-of-mouth. Well-converting distribution channels are harder to identify because your users don’t all hang out in the same spaces.
And eventually, you fall into what I call the broad ICP growth “doom loop”:
- You aren’t talking to the same buyer every conversation, so your messaging doesn’t work well.
- Your messaging doesn’t work well, so your conversion rate suffers.
- Your conversion rate suffers, so your sales cycle increases.
- Your sales cycle increases, so your growth slows down even more.
- Your growth slows down, so you widen your funnel to find ripe opportunities…
…and so on.
Of course, the problem could be that there isn’t a market for your product. However, you’d be surprised how many companies have essentially reached product-market fit for a narrow segment of their customer base, but just don’t realize it.
So, let’s say you’ve decided to focus more. What do you do next?
Parm Uppal, CRO of Luminary Cloud (and Angular Ventures advisory partner) is a master of the narrow ICP and brings a data-driven approach to exactly this problem. What he’ll tell you is that you should use your ACV and sales cycle as a guide. Look at your existing customers. What group has the shortest sales cycle at your target ACV? That’s the group that is probably best suited to your product given its current functionality. Double down. And moving forward, be ruthless in your prioritization. If a deal is taking longer than average, disqualify the opportunity and move on. Keep narrowing your target market down until you can accurately predict how quickly deals will close.
This might not work. But if you can find predictability with one segment, you can start to forecast. And if you can hit your forecast, you can start to plan for the future. And if you can plan for the future, you can attempt to expand into new customer segments. And if you can expand, you might be able to raise external capital. (Or better yet…you won’t need to!). And soon enough you’ll be off to the races.