Growing up as a kid of Chinese immigrants I loved formulas. I particularly liked Algebra, solving for mystery x through a series of plug and chug actions. It was so predictable, expected, and in some ways mind numbingly soothing. The operators had rules for calculations. The type of problems that were more challenging were the word problems. Oftentimes if you were not careful or read it incorrectly, you could set up your problem wrong and get the wrong output. Life is both a set of word problems and formulas.
Similarly, in startups, you are also solving for x, which is momentum. And a key ingredient to momentum is growth.
Growth is essential, but not sufficient.
Growth is an essential characteristic of any tech startup, but it should not be confused with velocity or momentum, nor is it the only characteristic needed. Growth is the distance between two points that is greater than zero. Velocity is how quickly a founder moves between two points. Investors are constantly wondering if the founders can make a good amount of progress in a short amount of time so they ask about growth over a period of time. Investors are focused on velocity because it leads to momentum. Momentum is the velocity of growth is so high that it’s own energy along with its market enables the startup to get bigger and bigger becoming a flywheel, which is really hard to stop. [a] The startup has product market fit. [b] The startup has momentum.
Growth is not momentum, but you need growth to get velocity.
Velocity creates momentum.
In fact in physics the formula for momentum is the following:
momentum (p)=mass * velocity
Growth and velocity is necessary for momentum, but not sufficient.
In the earliest stages of a company, growth is gated by how quickly the team moves and the amount of force the founding team puts in the startup. In other words, growth does not happen on its own. There is a ton of pushing from the team, and sheer force.
In fact in physics the formula for force is the following:
force (f)=mass *acceleration
Force is a product of mass and acceleration. Of the two, mass is the constant. A startup can control acceleration, the change of velocity, as a byproduct of speed to execution. The best founders use urgency as a forcing function to accelerate. In this stage it feels like pushing a snowball up a hill; the snowball will only go as quickly as you are pushing it. Mass would be the startup itself. [c] The bigger the startup and if you are going up the hill, the harder it is to push it.
Once you hit an inflection point (top of hill) then the snowball begins to roll down the hill, no amount of pushing will make it go faster, and stopping the snowball will be extremely difficult. In fact, you will be chasing the snowball. The two differences from before. One, the startup kept pushing and trying to push this snowball to get to the top of the hill. Two, the impact of how gravity (the markets/problem) plays an extra force to your snowball (startup) on the other side of the hill. This is not only called the “Snowball Effect” but you can see the power of momentum and compounding. [d][e]
🚀 Velocity has a direction
Velocity is a vector meaning that it not only has a quantity (speed), but also a direction.
Speed does not equate to progress, but velocity does.
Progress has a direction - forward. The best founders make a ton of progress in a short amount of time. How does an early stage startup know it’s moving in the right direction?. The best way to ensure that you are moving forward is to create a framework to enable you to make multiple attempts and course-correct if need be. Timeboxing can also allow you to begin and end attempts. Every step that you take may not be forward but on the whole you should progress towards your destination. If you are wrong with your direction, you can change and begin the cycle over.
Timeboxing works particularly well in early stage startups. First, early stage startups have less people on the team and number of customers, so you can move faster. Second, you don’t have any legacy code to work with.
When we were an early stage company, our launch cadence was weekly, which was frequent for its time! Our weekly cadence included a series of meetings that would enable us to conceive the feature, design it and launch by the end of the week. At Facebook, they launch hourly and set up a system to support that. You can increase your cadence to be continuous, tools like LaunchDarkly support continuous delivery, but you need to set up a system and process to support that. The initial founding team sets the pace and cadence of your company and the earliest days are when founders can move the fastest.
In the early stage, nothing is gating your velocity except yourself.
In order to move, you pick a direction. The important action is to move. Sometimes you don’t know the right direction until you move. However, this doesn’t mean you shouldn’t be intentional of your direction. The best way for founders to determine their direction is to set a goal. The goal should be clear and measurable. It should answer the question, how will we know when we succeed?
The target is often a revenue goal or as close to revenue as possible.[f] A clear measurable goal can bring focus. The focus can bring execution. Execution can bring achievement. To enforce urgency, timebox the goal, this can help you measure your velocity (growth over time).
When you are in a growth phase and later stage, the mass of the startup is larger and you need infrastructure, process to make sure nothing gets in the way. You can think of all these implementations as ways to remove as much friction, like boulders and debris, on the mountain to ensure the snowball doesn’t break and can keep momentum. Within a later stage startup, infrastructure also means setting up great feedback loops to help you set or clarify your goals. For companies that are later stage, the timebox period tends to get longer, mainly because there are more people and more systems need to get integrated.
It’s hard to measure success if you aren’t clear on what success looks like.
In 2012, Kabam had 400 employees, we set a yearly goal that if we were to achieve it, every employee and a guest were going to go on a trip. This year it was to expand 51% of revenue outside of Facebook. Facebook had levied taxes on app developers, something they promised they would never do. This would kill our business if we stayed. The deadline was July 4. It was our internal rallying cry. Earlier in 2012 we had launched the mobile version of one of our games. At the same time we had a platform team that was trying to migrate much of our traffic and revenue onto our website. For the longest time when we were tracking against the yearly goal, we kept focus on our website revenue because the strategy was to move the revenue to the website, not necessarily mobile. Mobile didn’t even factor into it. As the deadline loomed, our mobile revenue boomed. But we lacked clarity on whether or not mobile revenue counted as moving off of Facebook when we were supposed to be moving it onto the website, building a direct relationship with the customer. Because we were not able to clarify this until closer to the deadline, this led to a lot of confusion and wasted opportunity to progress further in the same direction. We still achieved the goal and went to Tahoe, but I think our execution could have been better had more clarity as to what counted towards the goal, and perhaps less prescriptive on how we achieved it.
No matter how big or small, late stage or early stage, the most important thing you can do is pick a direction and then move. Picking a direction for later-stage and bigger companies is more costly and therefore spend more time deciding on direction. However, if you are early, velocity is your exact advantage because you can pick a direction and move and repeat that over and over until you get growth and then momentum.
Movement is the prerequisite for growth
Growth is the prerequisite for velocity
Velocity is the prerequisite for momentum
So get moving...👟
🔦 Startup Spotlight 🔦
This season, stay connected with your team even when everyone is remote. Take a break from work and the pandemic to share a virtual experience on Offsyte. Everything from ramen to cocktail mixing, where you can directly book the event for you and your teammates. When you book mention “Holly” and get a $20 discount towards your first Offsyte event. Offsyte is founded by two ex-Lyft engineers, they launched a few months ago and are already growing 37% week over week, making 60% net revenue after paying out the vendors. They definitely have growth and velocity! If you are a vendor or an early stage investor interested in learning more, send a note to the founder at firstname.lastname@example.org, and mention “Holly”.
❄️ ‘Tis the Season to Share and Care 🎄
2020 has been rough. Some, more than others. Females founders have hit a 3-year low in funding, and many are dubbing this time as a Female Recession. On top of that almost 300,000 Americans have died from COVID.
For every new subscriber, I will donate $1 to AllRaise which supports female founders and funders and DirectRelief, ensuring COVID-relief to those who need it.
So, during this season, please share it with your startup friends who will find this newsletter helpful, becaues sharing is caring. ❤️
[a] Amazon Explained the Flywheel [b] How do you know if you have product market fit? [c] I think “solution” and “product” or “what you are building” can also be substituted for “mass”[d] Compound Interest [e] The Snowball Effect [f] Revenue is a blunt goal, but for early stage and even later stage companies revenue goals are what sustains the business and enables you to pay your employees. The closer you can get to revenue the closer you can sustain your business.