Growth, PMF and Web3

A lot of people nerd about growth and PMF (Product-market fit), but often dont connect the two well.

Let’s briefly unpack the two things and then I’ll come to why they are related.

PMF

It’s hard to define PMF, millions of definitions have floated around to explain this elusive G-spot of startups. I like the description Marc Andreessen gave -

You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”, the sales cycle takes too long, and lots of deals never close.

And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it—or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can.

So, graphically

Growth Hacks

Growth is broadly about the initiatives you try to get a lot of users for your product.

Broadly, these initiatives can be divided into the following types, per this article by Brian Balfour

1. ⚙️ The (Growth) Engine

   Self-sustaining growth loops that drive most of your growth (e.g. virality, performance marketing, content, and sales).

2. 💥Turbo boosts

   One-off events that accelerate growth temporarily but don’t last (e.g. PR, events, Super Bowl ads). these are typically ‘growth hacks’

3. 💧Lubricants

   Optimizations that make the growth engine run more efficiently (e.g. improved customer conversion, a stronger brand, and higher customer retention).

4. ⛽️ Fuel

   The input that your engine requires to run (e.g. capital, content, users).

I think a lot of people in the industry know this stuff, so what’s the catch here?

The problem is, while people know this stuff, they often apply it wrongly.

Firstly, you shouldn’t be doing growth hacks before PMF.

The only sustainable growth hack for a company in early stage is solving the user need(s). This is the stage where you are figuring out if the problem you have identified is even a real problem, whether you have built something that is directionally correct etc. The goal is to understand what will kill you and it is more important to come to this realisation sooner than later.

Using things like referral bonuses, media releases at this stage prevents you from learning that faster. All of these work very well when you have a proven concept that you want to scale, but are actually detrimental in the long term if used before.

Some examples of doing this wrong

• You start giving out referral bonuses before even solving for retention.”When they’ll come, we’ll figure out what to do”.

• You put a gamification hack before even building the core value proposition

• You create warped financial incentives for using your product

These turbo boosts are sexy and attract attention because of their novelty and hope (my chart will just go to the up and right if I do this) but they dont lead to anything substantial without the core retention and growth engine in place.

Let me explain the last one using web3.

Let’s take an example of building a game in web3. Usually, the game will have a token linked to it, as a currency to buy and exchange assets. However, you don’t just buy the token to trade, but also in the belief that its value will increase. Since these objectives become warped at the early stage, it’s hard to determine whether people are coming for the game or for the speculation.

So you may have fast upward sloping curves here, and think you have PMF, but it’s PMF on steroids, which may not sustain once you pull out the plug.

To be clear, this doesn’t mean you shouldn’t create financial incentives for using your product where relevant. Just that creating them from Day1 could be more misleading in understanding of your product.

So, in a nutshell, this comes down to

• Do the hard work of creating a great product without all the warped incentives

• Use those incentives once you have proof of success

This is assuming you care about creating a product that’s not just a blip, is used by people as long as possible.

P.S. There are umpteen examples even within web3 where people focus on getting the initial value prop sorted before tokenomics into play, which, in my opinion, is the right way to go about it.

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