The Scalable Startup Test: Bumps vs. Engines

“A startup is a company designed to grow fast… The only essential thing is growth. Everything else we associate with startups follows from growth.” - Paul Graham

 

Paul Graham differentiates between startups and new businesses on one particular parameter, the potential for scale and hyper-growth. A startup’s potential to achieve hyper-growth and rapid scale is largely dependent on the types of growth strategies it implements.

 

Scaling a startup is a lot like starting a car. There are two ways of starting a car and making it run. You can drive another car and ‘bump’ into the first car to make the first car move. The car does move with that ‘bump’, but that movement isn’t sustainable. To make a car run sustainably, you need to fit it with an engine.

 

Startups grow in similar ways. Most growth strategies fall into one of two buckets: Bumps or Engines.

 

Bumps

‘Bump’ strategies – PR, advertising, events – give a startup some traction and exposure. However, these strategies require commensurate investment of time, effort or money. Advertising works as long as you pump in money. PR and events aren’t repeatable or scalable; you need to invest time and effort every time you run them.

 

Engines

In contrast, startups that build growth ‘engines’ scale rapidly and achieve exponential growth. These startups do not rely exclusively on external marketing channels; they build an engine for growth within the product. They are designed to grow as a consequence of product usage.

 

Growth by Design

Startups with growth ‘engines’ experience growth that scales with adoption. As more users use the product, the product’s growth rate increases. More pictures created and shared from Instagram expose Instagram to even more users. As users create and send out surveys from SurveyMonkey, survey recipients get exposed to the product and come on board to create their own surveys. KickStarter’s project creators spread the word about KickStarter every time they promote their project. All these products are designed to get greater exposure through usage. That is a common design pattern that we see repeated across scalable startups. As more users use the product, the product gets exposed to new users, leading to greater growth.

 

Growth-first Products

Startups that are designed for scale do not see growth as something divorced from the product. They implement growth within the product, much like an engine sits within a car and powers the car forward. They leverage users to expose their product to more users. Many startups erroneously believe that getting users to send out invites equals creation of such a growth engine. On the contrary, startups designed for scalable growth rarely rely on invites. They rely on users to share elements of the product with their network. YouTube users share videos, KickStarter users share projects and AirBnB users share listings.

 

Intelligent Piggybacking

These startups also, invariably, piggyback on an external network to achieve rapid growth. Instagram used Facebook to achieve rapid traction initially. AirBnB allowed users to cross-post listings to Craigslist, which accelerated its initial growth. Paypal piggybacked on eBay’s growth initially and YouTube first got traction when MySpace users started using it to display videos on MySpace. In all these examples, users on the external network get exposed to the product and transition to becoming active users of the product.

 

The Scalable Startup Test

A scalable startup can never achieve hyper-growth purely on the strength of strong marketing budgets and external ‘bump’ strategies. It needs a growth ‘engine’ that powers growth from within. It needs to design growth that accelerates with usage. Finally, it needs to create the hooks and motivations that will enable and incentivize users to expose the product to others every time they use the product.

 

If you’re creating a marketing plan for your startup, think of what you’ve got and slot those down into bumps and engines. Bumps are important to get initial traction, which then acts as fuel for the engine. But if bumps are the only thing you’ve got, you probably aren’t building a startup that can scale.

 

The Curse of the Well-Funded Startup

Most startups lament the fact that they haven’t got the money to  spend on marketing. Ironically, some of the fastest growing startups of all time, e.g. AirBnB, Instagram, didn’t have the money to spend on marketing. Marketing dollars make one complacent about growth. In fact, the lack of marketing dollars forces one to figure out how to build engines for growth that will not require commensurate investment. More often than not, well-funded startups fail because of an over-reliance on those very funds. Access to cash numbs the need to create organic growth.

 

Tweetable Takeaways

Startups are like cars. Marketing creates Bumps, Real Growth needs an Engine. Tweet

Bumps may get you initial traction but scalable growth needs an engine. Tweet

The curse of the well-funded startup: Marketing Budgets. Tweet

 

About the Author:

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  • http://about.me/arunshroff arunshroff

    Great insights. Particularly liked the analogy of the Bump and the Engine – as it conveys the essential notion that a Bump requires external force (money and time), while the Engine is both self-starting and self-running.

    But while I agree that having a growth engine is critical to scaling a startup and to hyper growth – there are a few other key elements that are needed. The product and end-user-experience also needs to be far superior to anything else out there. New users exposed to your product’s hook ought to take the bait and actually sign up. Conversion has to occur in the few moments that users are exposed to the viral sharing hook you carefully built in to your product. Instagram became successful at converting those who saw pictures from friends, both because those pictures looked so beautiful, and the user experience was so great. It was similar for Airbnb and all the others. You could build the best possible engine, but it could fail to propel your startup and sputter if you ignore this aspect of the design. While this seems to be obvious – it is not at all easy to get right as there are so many variables. You have to tweak all of them by experimenting and iterating to maximize the conversion.

    But again conversion is just the start. Sustainable hypegrowth comes if and only if your product genuinely offers real value to its users and resonates with an unmet need. Without that conversion will not lead to further engagement, usage, and sharing, Users who see real value in your product will be compelled to share it further with others – not otherwise.

    If I were to extend your engine analogy I would call all of these attributes that lead to higher conversion, and sustainable growth as the fuel that keeps the engine turbo-charged and humming. Else it may just sputter and die….

    Incidentally, another great resource on building these engines for growth is the book Viral Loop by Adam Penenberg [
    Viral Loop: From Facebook to Twitter, How Today's Smartest Businesses Grow Themselves: Adam L. Penenberg: 9781401323493: Amazon.com : Books ]

    [ Note : This was originally posted as a comment on the corresponding Quora post by the author : http://sangeet-paul-choudary-platform-disruption.quora.com/The-Scalable-Startup-Test-Bumps-vs-Engines/comment/458923 ]

  • http://platformed.info/ Sangeet Paul Choudary

    Thanks Cliff

  • CliffElam

    This was a very useful analogy – I’ve shared with a ton of people.

    Thanks

    -XC

  • http://platformed.info/ Sangeet Paul Choudary

    Always be experimenting. :)

  • http://Netstars.com/adam Adam

    Tweetable takeaways are a great idea for an engine.

  • http://platformed.info/ Sangeet Paul Choudary

    Steve, Thanks a lot for the kind words. It’s a pleasure!

  • Steve Rumo

    Sangeet, you exceeded my expectations with this post. You use very real and recognizable analogies, I especially like the analogy of Bump vs Engines!
    Thank you