The Secret Formula to Growing Your Startup: 1-10-100

All startup founders dream of the following scenario: You press the big red “launch” button. Your app (or whatever) goes live. The user counter is spinning like crazy, and your user graph shoots straight up like a rocket. You’re getting so many users that you have to rush to allocate more server power and load-balance like your life depends on it.

Unfortunately, this is what happens to most software startups: You open your app to the public. Realizing that you can’t count on luck to help users find it, you post on Hacker News, Reddit, and Product Hunt. But even that seems insufficient, so you post on Twitter and splash down $1K on Google ads. You track your user graph with anticipation, but all you see is a tiny blip. You panic, “Crap, I just spent the last few months working on my awesome idea, and my friends and family invested more money than they could afford in this venture. I was certain this was going to be a hit, and now I’m going to have to tell them their money is gone. There is no way I’m going to be the next Facebook/Snap/Uber now.”

It’s true, your brilliant idea probably isn’t going to blow up like Snapchat or Instagram, but you’re not alone. Many, if not most, hugely successful tech companies started out with slow growth that steadily snowballed into an avalanche of customers, but it does take time. In fact, I would argue that the slow and steady path is the more successful path in the long run. So relax, and keep reading. I’m going to share with you the 1-10-100 rule that will help you both find product-market fit and get you on a path to rapid, sustainable growth.

First, get 1 super good customer

You might have gotten a few dozen or even a hundred users in your initial promotion push, but how many of them are really engaged with your product? Maybe none. Remember that finding that magical product-market fit moment is about both building a great product and finding the right customer that will really value and enjoy it. Startups often blast broad channels like Twitter and paid advertising that are unlikely to reach precisely the target customer. It’s like using an ax to perform surgery.

Your job is to find that one customer that will be crazy about your product. That one fanatical customer will do more for your growth than a thousand unengaged customers. However, finding your star customer requires precision and hard work. You might have to do a lot of leg work and even—wait for it—call people. But I can almost guarantee that it will be worth it.

Before you start scouring the lands for your star customer, take some time to really think about who she is, so you don’t waste time looking for the wrong person. For whom did you make your product? Be as specific as you can about what exactly is the need that you are solving, why she has that need, and how she currently solves her challenges? Most importantly, where does your ideal customer spend her time in the physical and virtual worlds?

For example, imagine that you have created an app to help pet owners find pet sitters and walkers. Start by focusing down on the type of pet owner that you think needs your app the most. Is a dog owner or a fish owner more likely to need your app? Well, fish owners can probably buy automatic feeders, and fish are generally less needy than dogs. What about dogs versus cats, dogs versus birds, dogs versus rabbit, etc.? After comparing the needs of different pet owners, you realize that dog owners probably have the most pressing needs for pet sitters.

What do dog owners currently do to find dog sitters? They probably search on Yelp or Google. They might also post a dog sitting gig on Craigslist or another local classified marketplace. Perhaps a great many of them also get recommendations from their vets or the pet store? Where does your ideal customer hang out? Does she live in the city or the suburbs. Is she more likely to be on Twitter or Instagram? Does she frequent the dog park or just walks her dog around the neighborhood? Does she visit dog-themes sites or read dog-themes magazines?

After some serious thinking, you might find that your ideal customer is a busy professional that lives in the city and frequents the dog park. Plus, she does her research when picking a dog sitter or boarder, so her vet’s advice is critical. From that, you might conclude that the best way to find her is to hang out at a city dog park and tell dog owners about your app. Better yet, perhaps you can form a partnership with a vet clinic, and educate the doctors about how your app works and the quality screening you do to ensure that dogs are safe and well cared for.

Remember, at this point, you don’t need a thousand customers, you just need one fanatical customer that will love your app. There are two reasons why you need your star customer. First, they will be the spark for your word-of-mouth advertising. You can bet that if she has a great experience, she will tell all the other dog owners in the dog park, who also trust her opinion over paid advertising. Second, you must now engage her to be your guide. If she loves your app, she will probably be willing to give you feedback and talk to you about how to make your product better. This is key because it takes a long time and many improvements to work out all the kinks in your product after the initial launch. By iterating on your product with the feedback of your ideal customer, you will be sure to make the right enhancements.

Next, get 10 core customers

You want to build a core group of ten star customers for similar reasons why you initially worked to get one star customer. Not only will this core group help you attract other similar customers that are likely to value your app most highly, but you also need to engage them to regularly garner feedback from them.

Even if you already have dozens of customers, you probably aren’t ready to scale if they are not super engaged like your first star customer. Instead, keep looking for nine more customers that will use your app incessantly. Perhaps they are single professionals that travel a lot for work and need a dependable dog sitter on nearly a weekly basis. Odds are that you can find them similarly to how you found the first one.

Once you have garnered your core group of superstar customers, engage them. Because they love your product, they are more likely to give their time to speaking with you and providing feedback. Ideally, you should carry on a periodic dialog with them in person or over video chat to not only get their feedback and ideas but to ask follow-up questions and dig deeper. If they ask for a new feature, ask them why it is important to them and how they would like to see it implemented.

The goal throughout this phase is to execute an iterative cycle of gathering feedback, making product enhancements, and getting more input from your core group of customers. In this way, your team will be able to work out all the usability issues and product kinks until you arrive at a product that works and feels great. Now you will have both the ideal customers and the perfect product. Voila, product-market fit! When you get to this point, other ideal customers will start to organically find you rather than you working hard to attract them.

Finally, reach 100 ideal customers

Once you have perfected your product and found your core group of ten ideal customers, the only thing left to do to ensure that your startup takes off like a rocket is to identify the ideal distribution (customer acquisition) model. In order to hone in on the most effective marketing strategy, your job is to experiment with various tactics, measure them, and find those that bring in your target customers most efficiently. When you are able to do that, all that’s left to do is step on the gas pedal. (In reality, there is still a long journey ahead of you, but you’ll be over some key hurdles.) Not only that, investors will be much more likely to invest when they see that you have both product-market fit and have your distribution strategy figured out.

There are a few key points to watch out for, however. Efficiency does not directly translate to raw customer growth numbers. Once again, the key is finding the best way to attract your ideal customer rather than low-quality ones that will have a lukewarm affinity for your product. Efficiency is also a product of how much it costs to acquire customers as well as the rate of attraction. If your acquisition costs are higher than the revenue you derive from an average customer, you have not figured out an efficient distribution strategy. Also, you might have to decide if a model where the cost of acquisition (CAC) is mush less than the average customer revenue (LTV) is superior to another strategy that is slightly more costly but pulls in bigger numbers of customers. Regardless which you choose, both models will lead to rapid growth.

There you have it. The secret formula for finding outstanding growth even when starting from zero. It goes without saying that different kinds of products will require different targets. For example, a business intelligence platform that costs $200K might require the steps to be smaller: 1-5-20. On the other hand, a free social media app might require bigger steps: 10-100-1000. You’ll have to figure out a formula that is appropriate for your startup, but the underlying tactics still hold true.

Hope that this helps your startup journey. Remember to leave comments if you have any questions and to share with your friends if you enjoyed this article.

Special thanks and acknowledgment to Craig Daniel who shared a version of this methodology with me a long time ago while working with him on Postwire.

Sergio Paluch - Managing Partner at Beta Boom -- a pre-seed VC fund

About the Author: Sergio is a Managing Partner at Beta Boom—a pre-seed and seed fund investing in tenacious underdog founders solving impactful problems.

His mission is to level the playing field for underestimated founders and empower them to build huge, impactful businesses.

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If you’re seeking pre-seed or seed investment and think Beta Boom is a fit, reach out.

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