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How to Take Your Startup from Foundation to Flourish
The Startup Action Framework Explained
MELINDA ELMBORG • APRIL 2020
As you build your startup, your journey will go through 4 major stages: from Discover to Adapt to Transition to Accelerate. Each of them has its own framework, opportunities, and challenges. And it’s required to follow these stages in order. All successful startups that I’ve ever heard of have gone through these 4 stages, so don’t even think about cheating the system… That is what Blippar and WeWork tried to do:
Blippar was a gamified barcode scanning app that skipped the Adapt phase. They accelerated too fast without having any retention, which means that they didn’t have Product-Market Fit. By the time they tried to iterate, they had a team of 60 developers! They were too slow to adapt since it’s hard to be agile with a large team.
WeWork, on the other hand, skipped their Transition phase. They accelerated without having positive unit economics which led to a huge public fiasco. In other words, a customer cost them more than they generated in revenue… It is clear when you check their charts, that revenue grew, the losses grew at the same rate.
In this article, I’m going to take you through the stages that every successful startup goes through, from Discover to Adapt to Transition to Accelerate, and help you understand what you should and shouldn’t do along the way!
On the first day of your startup, you begin in the Discover stage. These days begin when you first have your idea and last until you launch your product and have gained your first user…
There are a couple of ways this stage can unfold, and choosing the right one will make all the difference. Many aspiring startup founders have an idea for a product and they want to see it out on the market where it can change the world. For them, they start with a solution and seek out a problem to fix.
The other path, which is becoming more common and really increases the chance of success, is to find a problem in the market and develop a product to solve it.
Think of it this way: does it seem smarter to create a key and then go searching for a door it can unlock, or to create a key to unlock the door in front of you? The first one you can only ever hope will work, while the latter you can be sure of! So rather than focusing on what you think are problems that the market needs to solve, focus on what is a priority for a group of individuals, and work towards solving things for them.
When you set out to build your customer base, it’s important to closely examine and get to know your market. Developing an Ideal Customer Profile (ICP) will go a long way in helping you narrow down your vision so you are not trying to reach too many different people at once. From there, it’s important to focus on the problem your customer is experiencing.
Don’t go searching for customers to fit your product. By actively engaging people to find out what they need, you’ll give them hope and be able to build a strong community! This community will be the people who form the foundation of your startup’s success and the ones who will help you determine what your product should be to fit that market.
When you know what the market needs, you’ll be able to build a product that fits that need perfectly. You’ll be on the road to Product-Market Fit faster than you can say PMF! But when you’re building that product, build simple. Develop a Minimum Viable Product so you can quickly get a product into the hands of your community.
Now they can help you test the market to make sure that what you’ve developed is what the market needs! They’ll help you figure out what works, what doesn’t, and if you’ve understood their needs correctly.
So there you have it! You’ve got your problem to solve, you got the customers who need it solved, you’ve got an MVP which solves (part of) it, and you’re ready to take your startup to the next level. It’s time to…
This stage is particularly important if you’re innovating and shifting the market in new ways as it’s all about Product-Market Fit. During this time, you have to focus on your product and make sure that it works for your users.
If you skip this step and try to scale the number of users without Product-Market Fit, it’s like pouring water into a leaky bucket! You’ll be wasting more resources than you can safely generate. Instead, take things one step at a time, find what works and what doesn’t, patch the flaws, and move on to the next step.
Of course, to optimize your product so that it does what it’s supposed to, you’ve got to understand the user’s journey with your product. The journey consists of Awareness, Acquisition, Activation, Retention, Revenue, and Referral, or AAARRR… don’t worry, no pirates here! Awareness is when users first hear about the product and Referral happens when they become loyal customers.
During the stage of Adapt, you should be building and rebuilding your product so that as many people as possible will convert throughout all the steps. Your first focus as you enter this stage should be Activation and Retention so your product maintains your user base.
It is also during this stage that you can start homing in on your data and metrics. Tracking user data, analyzing conversion and retention, surveying, and testing, are all key components for monitoring the health and success of your startup. By doing so, you’ll be able to faster adapt your product to meet the evolving needs of the market.
Remember, it’s the market, not your ideas, that should dictate the direction your product takes. Maybe that means adding features or altering the ones already in place. This is the time for iteration, testing the outcomes so you see what works and what doesn’t. And if necessary, maybe you’ll need to pivot… take things in a whole new direction! This whole process can take time, and it can take as many as 14 iterations to get Product-Market Fit.
That’s why it’s in your best interested to be fast. Imagine if every iteration takes a year, that will be a total of 14 years! Uh… no, thanks. Ain’t nobody got time for that! If you do one or two a month, you’ll have PMF in a year or less. That sounds great, doesn’t it?
The feeling when your team hits PMF!
Now that people love your product and you’ve nailed retention, it’s time to…
This is the stage where you get ready to scale your business. Ah, yes, the growth you’ve been waiting for! But don’t get ahead of yourself… take one step at a time. You’re “preparing for take-off” and getting everything in order.
Now is the time to really harness the power of data and metrics! Decisions need to be made based on data, not hunches or gut feelings. This is so important when you’re thinking of scaling your team. When you have 10 people in the team, giving directions is easy. But if you want to scale to a team of 50 people, you’ve got to start directing in a different way. That way is metrics.
Read about the metrics to measure for subscription startups here
Read about the metrics to measure for marketplace startups here
Read the complete guide to dashboards for startups here
It’s essential when tracking data to be able to follow users from the beginning of their journey to the end and really determine what works and what doesn’t. You won’t achieve this level of detail in your tracking from day one, but now is the time to invest in getting there. To truly get the most out of your data, now is when you’ll want to hire a data analyst or data scientist.
During this stage, you also need to set up your Objectives and Key Results (OKR) so that you know what success will look like for your startup. Without goals to achieve, you’ll have no idea if you’re making progress!
From there you’ll optimize the user journey to improve LTV/CAC — in other words, having positive unit economics. The important goal here is to make sure that the money we invest in getting leads is earned back when those leads convert to customers.
Once you get that LTV/CAC above 3 or 4, it’s time to…
This is finally the stage where you really hit the gas and take your startup to the next level. You should hire a CMO and/or head of sales. You will need someone with experience who can put all of their focus into marketing or sales. They’ll be able to manage the increase in market spend and help you hire more salespeople.
Your key to success in this stage is to create a predictable growth engine and determine exactly what you need to communicate in order to expand market share. There’s a lot of talks out there about “growth-hacking,” but there’s also a lot of misunderstanding. Growth-hacking is not digital marketing! It’s high tempo testing where you optimize your marketing, sales, or product to grow faster.
Read the complete guide to growth hacking for startups here
Your truly final stage will be expansion, where you begin moving to new markets, adding business units, and exploring new opportunities. These things need to be saved for when you’re truly established and can dedicate an entire team to the success of this new venture.
It’s easy to get excited and be tempted to jump ahead but by ensuring you hit each of the 4 major stages, (and in order!) you will solidify your startup with each step. This is exactly what we’ve seen done by successful startups such as Slack, Airbnb, and Spotify.
P.S. For you to get started, I have created many go-to free templates and sheets that you can refer to for your startup to grow faster. Click on the link to access all the free resources. So don’t wait and grab these templates and sheets today
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About the Author:
Melinda Elmborg was a Venture Capital Investor at the French VC firm Daphni. To help founders build, grow and raise capital to their startups, she switched careers to become a startup coach. In 2018, she started Startup Action.
Based on her learnings, she has developed The Startup Action Framework that guides startups from launch to exponential growth.
So far, over 400 founders have already joined one of her workshops and thousands of founders have taken advantage of her templates and guides to succeed with their startup.