Growth hacking your startup? Be a pirate!

Your product is launched and you've got your first batch of customers. Congratulations! Now, your focus is to keep growing. But how do you do that? Many would advise that you start small with low marketing costs as you are a startup. While I agree with that general advice, I'd like to recommend using a more measurable approach - AARRR, also known as the Pirates Metrics.

The Pirate Metrics

Coined by famous investor and entrepreneur, Dave McClure of 500Startups, the AAARR system has been immortalised by so many in the ecosystem. Dave argues that for a startup to be effective at driving the company towards its vision, the founders/CEO needs to focus on only 5 key metrics and develop strategies to constantly improve on them.

Ask yourself - Is 10,000 weekly unique visitors better than 100 customers who each tell 3 friends about your website? If questions like - "How long are the weekly unique visitors staying for?" and "Are the friends turning into paying customers?" are running through your head, you're on the right track. While both unique visitors and customers are important, it's how we use the data behind these metrics that makes a difference. Don't just drive metrics, seek to understand them throughout the customer journey instead.

1. Acquisition

Driving visitors to our landing page is often the immediate answer when we think about marketing our product or service. But it's more than just driving traffic to the site, you'll need to identify where your visitors are coming from, the most effective acquisition channels and the cost-effectiveness of each channel. Acquisition channels include blogs, affiliates, search engines and social media. Most analytics tools provide these basic information for free (e.g. Google Analytics). Services like Bit.ly are very effective in measuring and experimenting the tone-of-voice and micro-copies posted on your acquisition channels.

Most startup growth-hackers break down acquisition numbers into 2 types: landed and engaged. Every acquisition that arrives at your landing page would be a landed acquisition while an engaged acquisition is usually defined as a visitor who doesn't bounce off immediately and spends at least a certain amount of time on the website. In order to grow efficiently, constantly challenge yourself to increase engaged acquisitions percentages instead of only driving new landed acquisitions.

Example - Squarespace Analytics

Example - Squarespace Analytics

2. Activation

After driving traffic to your landing page, you'll need to "activate" them. Startups need to define what this means and adapt the definition to fit their growth stage. For some, an activated visitor might be defined as a visitor who indicated an interest for early beta trials by providing their email address (e.g. mobile applications), signed up for a free trial (e.g. software-as-a-service) or viewed product details on the website (e.g. e-commerce). To improve on activation rates, you'll need to monitor data-points such as which pages visitors typically click on first when arriving at your landing page, which page they usually drop off and how much time they spend on the site. Crazy Egg's visual heat maps is a very useful tool for businesses to gather such information.

Example - Crazy Egg's Heat Map for  Chef Box Singapore

Example - Crazy Egg's Heat Map for Chef Box Singapore

You may ask - "Why not define activation as paying for the product?". The rationale behind this is simple. Visitors usually go through a phase of discovering the product (Acquisition) followed by experiencing or understanding the product (Activation), using the product repeatedly (Retention) before paying for the product (Revenue). By breaking down the user experience, we are able to create effective and actionable strategies for every step along way. During a startup's early stages, it is important to focus on activation metrics as most startups do not have a huge marketing budget to dump into acquisition. Having a high activation rate helps you stay afloat longer while you work on retention and revenue.

3. Retention

After activating visitors who have experienced your product in one way or another, you'll want them coming back for more. Retention metrics can be as simple as having a user returning to our mobile application twice in a month, or visiting our website once a week. To increase retention, craft strategies by analysing how the users are coming back and where are they coming back from. Are your weekly mailers effective at driving retention and what's the tone-of-voice that drives the most re-engagement?

Having a high retention value also increases the lifetime value of your users. This metric becomes even more important for digital advertising business models as typical consumers rarely click-through on advertisements when they see it for the first time. It takes a few sightings before consumers will actually click on the advertisement. If users don't revisit the service often enough, it will become increasingly difficult to execute such business models. There's also the value of user data. Having high retention numbers usually means you are able to gather more information about your users in a long run, opening up revenue opportunities for your business. Remember - keep wooing your users and don't be complacent just because they have used your service once.

4. Referrals

If you do very well on retention by focusing on your customers, there's a high chance that some of them will turn into your company's evangelists. Word of mouth marketing has been around for a long time and is still highly effective. Even the concept of viral campaigns stems from word of mouth mechanisms. Having a customer tweet about what you do, share their experience with your product on Facebook or tell their friends about your company are one of best affirmations any entrepreneur can ask for.

To encourage this metric, you'll need to build it into the user experience. Users like to share when they feel their friends can also benefit from that value. Make this apparent and easy for them. Dropbox's refer-a-friend program and Canva's invite-only systems are good examples. As referrals end up as acquisitions and activations, tracking this second cycle allows you to identify key influencers and increase the quality of your referrals.

5. Revenue

While all the previous AARR steps are important for early startups, it pays to understand your potential revenue models as soon as possible. You might not need to integrate revenue functionality early in your product, but by understanding how many of your activated visitors will end up paying for it helps build up investor confidence.

Experiment on your price points to find out what's the optimal revenue model for your startup while keeping an eye on your actual customer acquisition cost. The cost to acquire a paying customer needs to be lower than the total lifetime value of the customer. For subscription services, a customer's lifetime cost can usually be increased by having high retention rates - this is why it is important for startups to not skip a step in the AARRR framework. Just as the work ethic and motivation of each startup founder has a huge impact on the progress of a startup, every step in the AARRR framework plays a big part in defining a successful revenue model for your company.

Start your startup in 5 simple steps

In my very first article, I urged aspiring entrepreneurs to stop procrastinating and jump right into their startup journey as soon as possible. But how do you get it started? Although there is no one-size-fits-all method, here's mine.

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1. Open your mind

This is especially important when you don't have a particular idea you would like to work on yet. When we only focus on creating the next cool product before finding real problems that are worth solving, we tend to end up with "solutions" that don't make any meaningful impact to other people.

So open your mind - focus on understanding how people and things interact with one another. By observing real people instead of tinkering with ideas behind a desk, inspiration will come to you in various forms -- be it from the disgruntled stranger at the mall having a problem with a dead phone battery (possible solution: card-sized mobile battery packs) or a stressed-out colleague at work (possible solution: a game to beat up a virtual avatar of your boss).

Dig deeper, and gather clues from every single event that happens around you. Be truly interested in the lives of others -- this is where you might find your next great idea. Even if you do not find any ideas that you're passionate about, you would have built long-lasting and meaningful relationships.

2. Empathise with customers

After finding an idea, you should share it with everyone. Many people choose to keep ideas to themselves, in fear that they would be "stolen". Truth is, most successful businesses are not based on novel ideas, and almost every idea is a variation of some other existing solution. The top reason for startup success is great execution, and we should be focusing on the mastery of this skill instead.

By speaking to more people, you are able to see how different people react to your idea. Who was able to immediately relate with your idea or connect it with a problem he/she recently faced? These will most likely be your primary customers. Start breaking it down further to get a feel for how big an impact you can make, and always empathise!

Remember, it is not what you think the problem is; it's about understanding the user's experience of the problem. Do not let your interactions end with simple questionnaires because the insights you gain can only go as far as the length of your questions - instead, try observing how people react when they face the problem. The bigger the negative reaction, the more likely they are willing to pay the right solution.

3. Fake a solution

Your next step is to build a landing page (try Strikingly, Launchrock, Shopify and/or QuickMVP) and send out e-mailers, Google Ads or Facebook Ads to get more external validation and bring life to your idea. Imagine how your solution would look like and make quick mockups on your landing page. Many of us call this the Wizard of Oz technique -- no one needs to know that you do not have a functional solution, you just need to know who is interested to pay for it.

Remember to collect their contact details so that you can communicate your progress to them. Communication with alpha customers is crucial at this point. If you do a good job, these alpha customers will turn into your first batch of brand evangelists!

4. Try to kill it

Now that people like what you have faked, it's time for you to try to kill it. This sounds counter-intuitive but it allows us to take a step back and understand the business. By exposing all the critical assumptions of your startup, the gaps in your skills and the flaws in your business model, you are better prepared for the future. Here are some questions you should ask yourself.

  • Is the barrier of entry too low?
  • Is the cost of running the business way too high? 
  • Does the revenue model make sense for your or any investor to support the business?
  • Do you have the right expertise to grow the business? 
  • Are there legislative issues you need to deal with when running the business?
  • What are the operational requirements for you to get it up and running?
  • Is the market large enough?

5. Flip the switch

You made it this far. You are convinced that you are able to take this business to another level even after trying to kill it by exposing all the gaps in your skill sets and your understanding of the business. It's time to flip the switch and turn all those alpha customer signups into actual paying customers. Congratulations, you have founded your startup! Of course, you'll need to continue validating the assumptions around your business - we'll talk more about that another time. For now, grab a cold one and celebrate the birth of your startup.

Handling the startup marriage

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Someone (let's call him L) once told me...

Being in a startup founding team is like being in a marriage, and just like any marriage, there will be disputes, misunderstandings and times of heightened conflicts.

L couldn't have been more right. I don't always agree with him, but this is definitely one of his best advice. His words of wisdom are also very much in line with Noam Wasserman's book - The Founder's Dilemma (a quick overview of the book can be found here). Resolving issues within founding teams is more important than finding customers as unresolved conflict between founders is one of the top reasons for startup death.

Types of Marriage

There is the "arranged marriage" where founding members are put together in a particular circumstance such as winning a hackathon or startup weekend with aspiring individuals/complete strangers and the "chosen marriage" where co-founders band together believing that the other person is "the one". Regardless of the kind of marriage you're in, the struggles are very real and it's essential to start off on the right note. There are definitely strategies to bring a bad start back on track but that's for another day.

The Prenup

The prenuptial agreement a.k.a founders' agreement needs to be created earlier rather than later. Many teams might say "Let's just work on this now and leave that for later", however, starting this discussion earlier does not mean that there is mistrust amongst the team members. In fact, it signifies that each member views this as a real venture, and believes that the business is one that's worth persevering for, even without immediate funding. This also helps prevent the situation in which some members are deeply invested in the startup while others are part of the team "just to learn" or to "see how it goes". Ideally, every member of the team should start with the same level of motivation or there will be dark days ahead.

The crux lies in balancing the time spent on validating the business idea and on gradually building up the prenup. Rules for decision-making, understanding the motivations of each team member, equity split and vesting arrangements, and deciding on the CEO are some of the key points that you can include in the agreement. Once this is complete, your team will be able to count on the constant reminder that despite the fact that the journey will have its fair share of conflicts, every member has agreed to work through them together.

The Partner

When deciding if your partner is suitable as a husband/wife, you assess how life would be with the person in a long run. It's easier to imagine life with a spouse because of the way we have seen our parents, other families and even movies portray the dependence and partnership between couples. However, when it comes to the right co-founder, many are tempted to pick their best friends or family members without the slightest clue of what it really means to be co-founders.

Coming from a family where my father had most of his brothers work with him, it was heartbreaking to see how certain unpopular decisions caused strain between the founding team, common friends and other family members.

I'm not saying you should walk out there and find just about anyone to build your startup with! In fact, it's best that your co-founder is someone you have worked with. You can properly assess how working with him/her would be like as you would have had a good sense of his/her work ethics, communication style and moral ideology.

Having co-founders with different skill sets will also introduce diversity to the team and reduce problems in decision-making and overlapping responsibilities. Assigning the primary roles of each founding member early helps to reduce role confusion and potential tension. Be mindful not to set isolated responsibilities as it will lead to everyone working in their own silos.

There are great companies built by close friends such as Apple (Steve Jobs and Steve Wozniak), so it is possible that your startup might actually beat the norm. It is also important to remember that no matter how hard you try, divergence might still happen in future even between the best of co-founders (Steve Wozniak eventually left Apple).

The Lead

Your startup should evangelise being dynamic and all about the team, but you will need someone to carry that CEO title. This should definitely be decided unanimously as a team. If there are conflicts about this at an early stage, it'll be very difficult to build momentum or even hire your first batch of employees.

So, who is the most invested in the startup? Who made the greatest contribution and will continue driving the vision? That might be one way to make the call on who is the best fit for the leader. While most startups have a natural tendency to crown the idea originator the leader, that should not be the sole basis for choosing him/her as the CEO.

Finally...

It is okay if you are unable to come to an agreement on the prenup or a conflict ends the marriage. Engaging in these discussions earlier means that you care for each and every founding member. Finding out that your team is unable to work together at an early stage helps create new movements in everyone's lives new ideas will spark and new teams will form.

Just as every startup runs its own experiments, we as startup founders should also view our life as such, and take every event that happens as a valued lesson.

How to practice being an entrepreneur in a low risk low cost environment

Building a business doesn't always have to be risky. We can build up our faith and trust in our ability to run a business, the confidence of the business model and time to attune ourselves to it. Here are several ways highlighted by Pollenizer - an incubator in Sydney where I spent 3 months gaining valuable insights from my mentors.