From Zero to IPO: How Growth Needs to Evolve at Every Startup Stage

Brian Rothenberg’s career has spanned every stage of startup growth, from scrappy zero to triumphant IPO.

We’ll start with a snapshot of “zero”: It’s 2009, and Rothenberg and his SkillSlate co-founder Bartek Ringwelski are piled on the seat of a rickety Vespa knockoff, zooming precariously through the streets of Manhattan to their next pitch meeting. Fast forward nine years (plus one Skillslate acquisition and a stint at TaskRabbit later) to “IPO”: Rothenberg has scaled Eventbrite’s $5B+ growth engine as VP of Growth, and he’s watching the company surge to a nearly three-billion-dollar valuation as it debuts on the New York Stock Exchange.

Rothenberg is now putting that growth knowledge to work on the other side of the table: He’s an alumnus of First Round’s Angel Track, a master class for emerging angel investors, and is currently investing in and advising early-stage startups as a partner at defy.vc.

Growth is top of mind for the new founders Rothenberg works with: According to First Round’s 2018 State of Startups report, it’s the number two concern that founders say keeps them up at night. For the founders tossing and turning over customer acquisition and retention, Rothenberg’s opening up about the lessons he’s learned from supercharging growth at every stage of scaling.

The oft-overlooked key to sustaining startup growth, he says, is knowing how to evolve your strategy over time. “One of the biggest growth pitfalls I see is when smaller-scale, earlier-stage startups try to apply similar growth tactics as a late-stage startup, or even the Facebooks or Googles of the world. That’s not going to end well,” says Rothenberg. “There’s no one-size-fits-all advice: Your growth strategy should fit where you are in the moment. At each stage, you should be focused on different targets, according to your customers, your resources and the data you’ve collected.”

In this exclusive interview, Rothenberg discusses the core principles that startups at any stage should keep in mind as they develop a growth strategy. Then, he walks us through the three broad phases of the startup lifecycle, from humble beginnings to bolder bets, identifying the goals and perils particular to each phase. He shares how you can kick your strategy up to the next level — and he breaks down the growth tactics that companies have used as rocket fuel all the way to IPO.

PRINCIPLES OF STARTUP GROWTH TO KEEP IN MIND FROM THE START

“When I was talking about growth five or six years ago, it still felt like I was educating skeptics,” says Rothenberg. Today, of course, growth has become an essential part of the startup toolkit, becoming a fully-fledged discipline with new sub-specialities forming as designers, marketers, product managers and engineers all get in on the action.

Even as the discipline grows and diversifies, there’s a broad tenet that all growth teams should adhere to: “Growth is about implementing a rigorous, customer insight and data-driven process with sustained effort to remove friction,” he says. “It’s about creating an ‘a ha’ moment of value, then working on a functional or company-wide level to get customers there as quickly and as frequently as possible.”

That said, the growth function still isn’t strictly defined. “I’ve never seen a canonical definition of what a VP of Growth does,” says Rothenberg. “In more product-driven companies, growth might be almost entirely a product role. In less product-driven companies, it can represent the quantitative or technical side of marketing. And in others, it’s a blend of both. I’ve even seen some enterprise companies who have a Head of Growth who’s really more of a B2B marketing and sales hybrid.”

While there’s no hard-and-fast instruction manual for spinning up a growth function, there are a few principles that founders of startups at any stage can lean on as they start to hone their approach.

Growth strategy > shortcuts

“My friend Sean Ellis coined the term ‘growth hacking,’ but I don’t love how that phrase has come to be interpreted. What Sean meant as a scrappy and entrepreneurial term now comes across as a shortcut, or some clever one-off trick. It implies that you sprinkle some fairy dust and suddenly grow exponentially,” says Rothenberg. “Growth hacking broadly over-promises and for many startups, has under-delivered, unfortunately hurting the function’s reputation along the way.

Instead of trying to “hack” your way to instant success, commit to a long-term, customer-focused and data-driven plan of action. “The surest way to drive growth is with a steady and strategic hand,” he says.

Bloggers and charlatans peddling magic tricks have said that growth hacking is the way to the promised land, but the truth is, shortcuts will only lead you astray.

Startups should also be wary of promises of micro-optimizations. “Most startups, particularly in the early stage, aren’t yet at a scale where micro-optimization is even possible, let alone impactful,” says Rothenberg. This isn’t to say that startups shouldn’t optimize.

“As you start to scale, much of growth is about gaining compound interest: a lot of small-to-medium improvements that compound and, over time, drive substantial growth. This might look like running a series of experiments that improve conversion by incrementally smaller percentages, for example,” he says. “But focusing solely on these types of optimizations generally drive you toward a local maximum. In order to leap toward that higher hill, you need to make a strategic step-change, then optimize uphill toward the global maximum, or the total potential of a business.”

Image courtesy of Brian Rothenberg

When it comes to cultivating growth, founders should know how to combine larger-scale strategic plays with finer, continuous optimizations. “I like this quote from Trulia founder Pete Flint: ‘Knowing how to scale and knowing when to innovate are the soul of what we do.’ As you scale, you of course need to optimize. But you also need to take some bigger swings in order to drive a larger step-function change. Optimization is important, but it’s those larger innovations, particularly early on, that generate the continuous customer value that will drive long-term growth,” says Rothenberg.

Map out the journey in hypotheses, not just milestones.

To steer your startup’s course toward growth, navigate by the stars of experimentation. “Having a methodology around asking questions and applying your learnings is most impactful at the early-stage, where seeking product/market fit, and maintaining speed as a habit is most critical. But hypothesis-driven experimentation and learning is key to scaling companies at all stages,” says Rothenberg.

It’s an approach that Rothenberg and his SkillSlate co-founder (Ringwelski — the one driving the scooter) were inspired to take when they had read Eric Ries’s The Lean Startup. “It felt like an epiphany when we learned about it back when the book first came out. We felt that the lean startup approach, driven by customer insights and rapid iteration, should apply not only to product development: It could also apply to cultivating growth channels, and even to how we managed and communicated with the company,” he says.

“There’s always some impactful, yet-to-be-discovered insight ahead,” he says. “You might stumble upon it by chance, but it’s far better to have a systematic process to use qualitative customer insights, market data, product data and other sources of information to form hypotheses and insights about how you can improve.”

Putting experimentation at the center of your growth strategy can be as simple as reframing your board meeting. Here’s a tactic that Rothenberg and Ringwelski used when SkillSlate was still at the seed stage: Instead of just going over a summary of the last month’s metrics and milestones, shift your focus to the month’s learnings. (First Round partner and SkillSlate investor Phin Barnes was so impressed by the practice that he wrote a blog post about it.) “Start asking questions like, ‘What can you apply from those insights, and what additional questions did they lead to?’” says Rothenberg.

Don’t just ask “What did we do?” Chart your progress by also asking, “What did we learn?” Being driven by questions, rather than achievements, unlocks future impact and further learnings.

This tactic is one that maps over to later stages as well. “When I first joined TaskRabbit in 2011, and Eventbrite in 2013, like many other startups, we were in a cycle where we’d ship some buzzy new feature and almost hope for faster growth,” Rothenberg says. “The features were well thought-out and strategic, of course. But we didn’t always have a clear hypothesis going in, and the features didn’t always have well-defined metrics we could use to measure their impact over time.”

Moreover, no one was specifically held responsible for measuring a feature’s long-term impact. “Historically, a team would ship a new feature, we’d cheer the launch, and then that team would immediately shift to a new project,” he says. “There wasn’t enough sustained iteration to help that feature achieve adequate adoption or feature/product fit. People were moving on the next project before asking questions like ‘What did we learn?’ or ‘Did we have the impact that we expected?’ Or even ‘Should we keep this feature at all?’ As with most teams, it was onto the next.”

To remedy this mentality, Rothenberg worked to evolve the team’s ethos toward productive reflection and impact, rather than constant production. “Early on, around our seed stage through Series B, we oriented teams to be more hypothesis and learning-driven,” he says. “As we got to later stages, we structured teams to become more outcome-oriented. Instead of assigning a team what to do, we gave them a goal: say, to drive X specific outcome or Y raise metric for our customers. The team got to determine how they would achieve that.”

“Build it and they will come” isn’t a growth strategy. Before you ship a new feature, fully understand how it will impact your customers. Drive value, and then the customers will come.

In the sections that follow, Rothenberg sketches out each stage of the startup life cycle. He identifies the characteristics, goals, and risks startups face in each phase, and how they should calibrate their strategy to uplevel their growth.

PHASE I: FINDING PRODUCT/MARKET FIT AND GAINING TRACTION

What you’re doing now: Earning critical first users as you iterate toward product/market fit.

Goal: Get to the point where you’re feeling pull into the market from your initial target users.

Potential pitfall: Focusing too much on growth before you have product/market fit and sufficient data.

Founders just starting out might be tempted to go all-in on growth, but Rothenberg recommends keeping your chips close for now. At this stage, finding product/market fit should be your first priority; your approach to growth should be characterized by gathering customer insights and iterating to deliver customer value, while laying a strong foundation for data.

To illustrate how Phase I startups should frame their growth mentality, Rothenberg shares the story of a Series A startup he was advising: “When I started working with them, they were definitely operating with the right growth mentality — for a Series B or C startup,” he says. “Their scale was roughly hundreds of new customers each month, while their growth mentality was more suited to a company at a scale of tens of thousands of new customers each month. It’s a pretty common mistake: They were trying to copy-and-paste a larger company’s growth strategy to their own startup.”

The company was trying to use data to solve where and why prospective customers were dropping off in their customer journey. “That’s a great, smart goal to drive toward. But they were a bit off on the execution,” says Rothenberg. “They wanted to A/B test, like a later-stage startup might. But unlike a more mature company, this startup didn’t have a substantial volume of data to do so. If you run your test with very few users, the ROI will be lower, or even negative. With so little to go off of, it’d be a challenge even getting a directional read on whether there was a significant impact in terms of whether conversion was actually improving. More importantly, it’d be hard to tell whether those new users were actually understanding and obtaining value from the product,” says Rothenberg.

So how should an early-stage startup navigate growth, with relatively little resources and a smaller customer base? Rothenberg provides a handy checklist:

  • Use conversations to gain insights. Rothenberg returns to the cautionary tale of the Series A startup that was trying on Series C growth tactics: “Instead of wasting resources on insufficient data, these founders should have actually tried talking to these customers to gain insights into their product, and to understand who is or isn’t converting and seeing success,” he says. “If you talk to five customers, and three say that they were confused by the same part of onboarding, you should work to reduce that friction. In the early stages, you likely won’t have a statistically significant sample yet. So instead of pretending that you do, leverage what you really can do: talk to your customers early and often.”

  • Attract and retain new customers with the “a-ha” moment.“The ‘a-ha’ moment is where you demonstrate value, where customers think, ‘Oh, this company totally gets me!’ Bring your customers back to that magic moment as often as makes sense in the context of your product or service, to remind them why they value it so much. Then, work to get them to evangelize to new prospects. Once you achieve that, word of mouth becomes a powerful growth accelerant.” he says.

  • Add friction by asking early prospects to do some legwork.Sometimes, asking a prospect to furnish more work upfront can lead to a stronger “a-ha” moment. “At TaskRabbit, we found that if a user gave more information about the task they needed completed, our Taskers could give a much better estimate and better service. It might be faster for a customer to say ‘We need help building desks.’ But we’d be able to serve users so much better if they got more specific: ‘We need help building two custom, built-in desks (carpentry experience required). We are available Friday of this week.’ It slows down the onboarding process a bit, but it helps to ensure a better match, which ultimately leads to a smoother end-to-end experience for that customer. We found that it was better to have fewer new customers that were wildly happy with the service, than more new customers that were ‘meh’ about their experience.”

  • Lay the data foundation. “Now is the time to instrument data tracking through the funnel and your key growth loop or loops,” says Rothenberg. “You might not be able to use it extensively yet, but you want to have the basics of these systems in place so that as the data becomes large enough, you’ll be able to see the signal through the noise. This is critical for eventually becoming a data-driven growth team.”

Early in a startup’s life cycle, learnings are more important than “success,” and more experiments should fail than win.

Don’t jump the gun.

Finally, consider your timing carefully: It is possible to start thinking about growth too early.

“First, don’t scale without positive unit economics, or a clear path to it. If your business is losing money on each additional customer or transaction. If you try to scale without patching those holes beforehand, they will only get bigger,” says Rothenberg. This was the case with Shyp, a startup that he advised in 2016 and 2017. “It lost money on most deliveries and scaled up too quickly without a clear path to positive unit economics. So after raising $60 million, sadly it shut down,” he says.

“Second, don’t lean too heavily into growth before finding product/market fit,” says Rothenberg. “It’s a mistake that I made at TaskRabbit,” he says. “We effectively had an underlying leaky bucket issue: If a new customer’s first task wasn’t successfully completed, that customer almost never came back. We spent too much time and money trying to brute-force our growth through this foundational issue, when we should have pumped the brakes on customer acquisition and shifted focus to solving this underlying matching issue, which would have set us on a faster course to true product-market fit. TaskRabbit eventually re-launched its platform, which re-accelerated growth until the company was acquired by IKEA.”

Your startup won’t grow out of this Phase 1 stage until you are, as Rothenberg puts it, “feeling the pull from the market.” In addition to the Review’s guide to finding product/market fit, here are some of Rothenberg’s green lights to look out for, to indicate you might have found PMF:

  • High retention and engagement: People are using your service at a frequency that’s reasonable or high, compared to the average monthly retention for your category, or retention that’s high enough for your business to sustainably grow.

  • Growing organically: You’re growing without paid spend, generally through word of mouth. This is a great indicator that you’re solving people’s needs well enough that they’re now sharing with others and creating a positive viral effect.

Brian Rothenberg, partner at defy.vc and former VP of Growth at Eventbrite

PHASE II: SCALING

What you’re doing now: Building the foundation of your business model, as well as your data and analytics.

Goals: Develop a growth model and growth loops, instill a growth mindset across the company.

Potential pitfalls: Not deeply knowing why you’re growing, dividing into functional silos. 

“This second stage is about laying out a foundation for your business’s growth, then doubling down on the strongest levers,” says Rothenberg.

In this section, he dives into two tactics for Phase II companies, starting with how to build out the common loops that drive growth, whether that’s viral, paid acquisition or content.

While Phase I companies might have started out with a small but mighty founding team, Phase II companies are likely onboarding new hires at a more rapid clip. For the growing Phase II startups, Rothenberg shares how to empower your entire team with a growth mentality.

Feed virtuous cycles and growth loops

“In the first phase, you were focusing on laying the data foundation and gaining customer insights to better understand your growth to-date,” says Rothenberg. “At this phase, you should be leveraging that knowledge to further scale: Identify and lean into your most critical levers to establish a growth loop.”

One of the biggest pitfalls that looms ahead for founders is failing to understand the reason for their growth and how to make that progress sustainable. “If you don’t have a deep understanding of why you’re growing, you’re closer than you think to not growing anymore,”says Rothenberg.

Here, Rothenberg outlines the steps to gaining an understanding of your growth and developing a growth loop:

  • Play your aces. “Ask yourself: ‘What is the business’s or the team’s unique advantage?’ Instead of spreading yourself thin tasking your team with trying to pull every lever available, identify and lean into the built-in levers first,” says Rothenberg. “Of course, step zero is building in a market where there’s opportunity. Eighty percent of the battle is picking the right startup with inherent, built-in advantages.”

  • Stack up each loop’s impact. “Form hypotheses around what each loop is, and use data or customer insights to evaluate how impactful they can be. Form a cross-functional squad to test and learn, focusing on the highest-opportunity loops. Give the team at least several months to test, iterate and learn,” says Rothenberg. “They should be asking themselves, ‘If it’s successful, how big can this loop become?’”

  • Turn your sketches into reality. “Finally, sketch out the growth loops in an easy-to-understand, visual format. Simple is always better,” says Rothenberg. “Then, quantify as best as you can: Can you measure each part to figure out where you need to instrument in order to start collecting data? Tie the data into a broader business growth model, showing how changes in each loop helps to grow the overall business. Where do you have more or less leverage? Where can you lean in?”

Image courtesy of Brian Rothenberg

Rothenberg and his teammates created the diagram above to illustrate Eventbrite’s growth and key levers. It highlights Eventbrite’s most effective early growth loop: virality. “Our early built-in advantage at Eventbrite was that the event-based user experience is inherently social. We leaned on that to drive a lot of the company’s early momentum,” he says. He breaks down Eventbrite’s attendee-to-creator viral loop:

  • Eventbrite works to acquire event creators (supply).

  • Those creators put their events on the platform, then they work to promote their events and drive attendees to buy tickets. Both the event creators and Eventbrite as a platform drive attendees (demand).

  • Some portion of the attendees learn about Eventbrite by first using the platform to attend an event.

  • A portion of these attendees become event creators themselves (supply).

  • When a new event creator has a successful event, they create more events on the platform.

“Our growth team experimented to crank up this loop for almost two years,” he says. “Our efforts paid off: We dramatically improved the conversion rate from event attendee to event creator, driving substantial organic growth and lift for the business. Around 70% of Eventbrite’s awareness is driven by this viral loop or word of mouth.”

Innovate on distribution.

One question Rothenberg often seeks the answer to when evaluating startups is, “What’s your unique advantage in distribution?

At TaskRabbit, tapping into the company’s distribution advantage involved an unlikely tool: bright green T-shirts. “We already had this large workforce out in the field performing Tasks; we figured they could also be great brand ambassadors,” he says. “So, we encouraged Taskers to wear their branded T-shirts, which are an eye-catching shade of green. People would spot Taskers in the neighborhood and think, ‘I should use that!’ Consumer awareness eventually spread across neighborhoods, and then across cities.”

Startups need to innovate on product and distribution. It can’t be one or the other.

Make growth a company-wide ethos.

The “growth mentality” means that everyone across functions has a stake in the company’s growth. Not only will ensuring company-wide alignment sidestep the problem of factions as you scale, but it also boosts the effectiveness of your growth strategy overall. “Instead of creating silos, aim to encourage cross-functional coordination around achieving key outcomes and driving KPIs,” says Rothenberg.

He took steps to implement this at Eventbrite. “When I joined, the company had product/market fit in its initial segment of the market, with a great product that people loved. For a long time, that — along with some good marketing — was enough. But in order to scale to the level we wanted to hit after our series C, we needed to instill a testing and analytics DNA throughout the whole company,” he says.

A good rule of thumb to assess whether you’re evangelizing growth enough in your company: If you think you’re overcommunicating, dial it up a couple notches.

The first step that Rothenberg took was building a cross-functional growth team. “This included operators from product, engineering, analytics, design and marketing, really communicating that every function has a stake in growth,” he says.

“Our initial goal was to avoid functional silos and get cross-functional teams to row in a coordinated manner across our biggest growth levers,” he says. “We formed the team as an experiment, with a six-month initial charter for the team to experiment on improving our core viral loops. Eventually, the growth team more than tripled the key metric we were working toward, driving business impact while proving the impact of the approach.”

Rothenberg provides tips for setting up your growth squad for success:

  • Designate a decision-maker. “Disagreement is inevitable on a high-velocity team that’s moving forward and pushing boundaries. Designate a tie-breaker. This could be the CEO, the Head of Growth, or, if growth is run through a specific function like Product, the Head of Product.”

  • Commit to the long haul. “If you’re starting an experimental growth team, give them time to unlock significant insights before dismissing or disbanding it. The team should have at least 4-6 months to prove out its model.”

  • Call in an expert. “I often advise that startups retain an established growth expert as an advisor. Granting a few advisory shares is a worthwhile trade for the right person who can help to structure and coach your early growth team. Further down the line, the advisor can help you recruit a full-time head of growth; the best-case scenario is that the advisor likes what you’re doing and joins you full-time.”

Finally, one key reason behind experimental team’s success was that they worked to communicate their learnings early and often. “Every few weeks, the team would host an open meeting where we’d pull the curtain on our experimentation process,” says Rothenberg. “The most interesting part was when we’d ask people to predict the results of each experiment, before we showed them the true results. More often than not, they guessed incorrectly! These meetings not only showed people the impact of the work the growth team was doing, but it also demonstrated how much we need to test — because our instincts are so often wrong. And of course, communicating the importance of growth just once isn’t enough: You have to repeat, repeat, repeat the core principles and learnings along the way.”

Over the years, instead of an isolated growth team, Eventbrite has built multiple cross-functional teams with growth training, focused on certain key loops or areas of the customer lifecycle. “It’s one of the cultural shifts I’m proudest of helping institute at Eventbrite,” says Rothenberg.

PHASE III: MAKING LARGER LEAPS AND BIGGER BETS

What you’re doing now: Scaling, challenging yourself to stretch beyond optimization.

Goal: Take bigger risks and reap greater rewards.

Potential pitfalls: Underestimating the work it takes to make a big leap.

So you’ve found product/market fit, and you’ve used data to tap into one or more profitable growth loops. When your startup’s in Phase III, the possibilities are vast: “Here, jumping the curve and working through that ‘messy middle’ is part of what distinguishes the great from the true, breakout winners,” says Rothenberg. “This is where you can take a greater risk, with greater potential reward. This is the time to make big bets.”

Rothenberg shares some examples for strategies companies might use in Phase III — and potentially become a $10B+ category winner:

  • Expand to new metros or internationally:GrubHub and OpenTable are great examples of this. I would say whenever possible, let new markets pull you in: At Eventbrite, we already knew that the service was being used in over 100 countries. We used insights from those countries to inform strategy for Eventbrite’s first formal international expansion in 2011.”

  • Jump platforms or tap into a new platform shift: “Facebook had a rocky start shifting from desktop to mobile, but now, over 90% of its revenue is from mobile ads.”

  • Service new customer segments: “Your first customer and your nth customer can be completely different people. Airbnb started with air mattresses and spare rooms in its scrappy startup days, but they moved up over time, first in vacation rentals, and increasingly going up-market after actual hotel, eventually acquiringHotelTonight and creating luxury offerings. There are also examples of successful top-down shifts: Uber launched with a high-end black car service before expanding into the peer-to-peer rides market with UberX. It can go both ways, depending on what makes the most sense for your market, customers and competitive dynamics.”

  • Expand focus categories or product offerings: “Once you’ve built a solid core business, there are often opportunities to layer on tangential products and services that deliver value, or reinforce the value of your initial core product. For example, Zillow and Truliaadded rentals and mortgages to its services, and Square has its POS system.”

  • Acquire companies: “From Facebook snapping up Instagram to Google buying YouTube, acquiring companies can be a viable driver of growth. Be warned, though: Most mergers and acquisitions fail due to poor integration. Too many companies don’t plan well enough for this and grossly underestimate the effort and investment required to do it well.”

  • Startups within a startup: “It’s rare for a company’s core business model to have infinite growth runway. One strategy is to carve off small teams to experiment and work to build the company’s Act II and Act III, so to speak. Google runs Google X to spin up new technologies and potential businesses. Amazon is now famous for its nimble ‘two-pizza teams,’ enabling huge long-term wins like Amazon Web Services. We have a smaller-scale operation at Eventbrite, where we allow some employees to become entrepreneurs-in-residence, with leeway to pursue new business ideas to help layer in new growth curves to the company’s overall arc.”

To identify where you should place your big bet, take a magnifying glass to your growth thus far. “In most cases, the signs and stirrings of future potential are already underway,” he says.

ZERO, IPO, AND EVERYTHING IN-BETWEEN

There’s no plug-and-play textbook for growth. Instead, startups need to realistically assess the resources available to them at each stage, and what growth strategies fit them in the moment. For the earliest-stage startups, invest in growth by iterating on ways to deliver customer value. The second phase is the time to establish growth loops by doubling down on your built-in advantages, all the while evangelizing the growth mentality across functions. Finally, in the third phase, ratchet up your growth efforts and take bold, but informed, risks.

The common thread, as your startup moves across phases, goes back to one of the core principles of growth: The most effective growth is fueled by constant experimentation and adaptability.

“I was lucky enough to see this incredible transformation of the growth function at Eventbrite over more than six years,” he says. “For my own part, I’ve reported to the CMO, our Head of Product, our CEO, our CRO. Across the company, we went from growth as a function-led priority, to instituting our cross-functional growth teams. You have to find what works, and adapt when it doesn’t.

It’s a spirit of inquiry and flexibility that permeates all areas of growth. “There will always be some new discovery, some unexpected insight that humbles you because it flies in the face of what you thought you knew,” says Rothenberg. “And that’s the key to growth: whether you’re iterating on a growth loop, or working on the macro-level of company culture, you have to repeat, repeat, repeat that process of constant learning.”

Seven Questions with Amy Sun

Meet Amy

Amy Sun joined Sequoia as a partner in 2018 after working as a product manager for Facebook and Uber. A lifelong painter, she says her creative process has a lot in common with company-building: she starts with an idea, then explores new directions as she goes, seeing where the process takes her.

What is something you’ve learned that you lean on daily?

Q1

You can have results or excuses, but not both. When something doesn’t go right, it’s human nature to try to rationalize. But I try to always take ownership over what went wrong. Uber was a very results-oriented environment. I was on the Growth team, and every week, trips, riders and drivers either grew or didn’t. When they didn’t, it was tempting to blame the weather, seasonality or a bug. But I learned to own my outcomes—even when there were factors that seemed out of my control. Instead of blaming the weather, we planned for it. Instead of blaming bugs, we built better testing systems.

Now at Sequoia, the results I’m focused on are great outcomes for our companies and our limited partners. Most of our LPs are nonprofits and university endowments, including my alma mater. I was fortunate to benefit from financial aid in college, and it’s important to me to do the best possible job of supporting the next generation. Day-to-day, that means when we tell a founder, “We’re going to help you,” we deliver on that promise. With hiring, for example, investors can make a lot of intros, but ultimately all that matters is whether amazing people land at your company. So we don’t walk away after an introduction is made. We do whatever it takes, from cold emailing potential candidates ourselves to flying across the country to help close key hires in person.

You can have results or excuses, but not both.

What one piece of advice would you give someone starting a company?

Q2
There’s a quote I love by George Bernard Shaw: “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” When you’re starting a company and you believe in your vision, you have to keep going even though a lot of very smart, reasonable people are telling you to stop. You can’t allow the opinions of others to dictate the direction of your company—only you can do that. Your customers are your guiding light; not the media, “thought leaders” or even investors. As long as you’re solving a real problem for real people, you’ve got to learn to push past the noise.

With DoorDash, for example, many people said there was no money in food delivery because the margins were too low. With Zoom, people said enterprise communications were crowded and a startup would never be able to compete with the likes of Microsoft and Cisco. If either of those teams cared too much about what other people thought, they could’ve been dissuaded from realizing their visions. But they chose to stay focused on their customers.

What small change has made a big difference in your life?

Q3

I solicit feedback as if I were still a product manager. Most PMs won’t be successful if they sit in isolation trying to dream up the next hit product. They have to constantly collect product feedback and make changes in real time to address the concerns of their customers.

I try to do this in my daily life by seizing every opportunity I can to ask for feedback—in my work and elsewhere—so that I can improve in real time. It’s been extremely helpful for me as I learn and grow in a new role in a new industry. It’s also made negative feedback feel much more like a gift than like criticism. It’s so much better to have people tell you where you can improve than for you to struggle to understand on your own.

What don’t you know that you wish you knew?

Q4

I wish I were better at building physical things; I can barely assemble Ikea furniture. I have so much respect for people who can dream up a structure and create it using blocks of wood and buzz saws. I’d love to have the hard skills and physics and engineering knowledge to build something like a treehouse where people can hang out.

On a more serious note, I wish I knew how to solve big problems like climate change. The scale of that problem is so large, and aligning global incentives is so challenging, that it seems like we’re not getting anywhere—yet the situation is more urgent than ever. I don’t know the answers, but I do think it’s our responsibility to try.

What books are on your nightstand right now?

Q5

I just finished Only the Paranoid Surviveby Andy Grove, which Drew Houston highly recommended at Sequoia’s annual Base Camp event for founders. The way Intel navigated strategic inflection points and competition is legendary and more relevant than ever.

I also love the book Psychology of Intelligent Analysisby Richards Heuer. It has a lot of useful frameworks for working with imperfect information, which is something we all have to do. When Sequoia is making an investment decision, for example, we often have to act very quickly and with very limited information. It’s critical to understand which one or two key things really matter.

I just preordered Dark Ageby Pierce Brown. I love fantasy and sci-fi because it gets me thinking about where technological progress will take us and how it can impact our societies. So that will be making its way to the top of my nightstand pile soon!

When did you realize you were wrong about something?

Q6

I’m wrong all the time. At Uber, I focused too intensely on the metrics of the business and not enough on the human experience of being a driver. I’m sure I’ve been wrong about many things at Sequoia, too. I actually keep a log of every investment decision I make, so that in the future I can see where I was right or wrong and why.Maybe I focused too much on second-order issues or I was too excited about the science and didn’t pay enough attention to the business. You don’t want to dwell on your mistakes, but I do think it’s important to embrace them and to learn from them quickly. We do a similar exercise as a team—we have a slide with the mistakes Sequoia has made over the decades. When you see it in aggregate, it’s much easier to spot trends.

We have a slideof the mistakes Sequoia has made over the decades. When you see it in aggregate, it’s much easier to spot trends.

What unit of time matters the most and why?

Q7

For me, it’s not about the length of time. It’s about the intensity—how much you have at stake or how much you’re challenged or the uniqueness of the experience.Last weekend, for example, I just ran errands and worked and time flew by. I hardly remember what I did. But the weekend before that, I traveled, met new people and went on adventures—and it feels very long in my memory even though it was the same number of hours, because I vividly remember all the details.

I love moments of intensity at work, as well. I remember everything about the day we gave our term sheet to Noom, down to what I was wearing. We’d been in a long day of meetings and the room was littered with paper coffee cups. But when the founders came in to present, they were so full of energy that they woke us all up! Then they left for the airport and we had to make a decision pretty much on the spot. I remember quickly hashing out the details of the term sheet, finding some Sequoia swag to give the founders, and calling to ask them to drive back to Palo Alto for dinner. And I remember feeling so grateful that they trusted us through that process at the beginning of our partnership. I want as many of those memorable moments in my life as I can get.

The Fundraising Checklist: 13 Proof Points for Series A

By: Pete Flint

Over the last 10 years, we’ve seen a transformation of the seed and series A financing environment that has changed the game for Founders – the hurdles are now higher. To give Founders every chance at success, we’re making public our Series A checklist. While it’s focused on raising a top Series A, it’s applicable to all early-stage fundraising.

Here’s what’s happening that Founders need to understand

  • Series A rounds have gotten bigger and are being done later on in a company’s lifecycle.
  • To fill this gap and help companies in this formative early stage, seed funds like NFX have also grown bigger and more established as well.
  • Alongside the expansion of capital into each Series A financing, the expectations on companies looking to raise their Series As have heightened.
  • With a growing number of startups in many different sectors, raising a top series A has become a growing challenge.

For startups to succeed in clearing that increasingly daunting Series A hurdle, they must retain focus on their long-term vision while simultaneously hitting their near-term milestones.

It’s worth noting that in general, having product-market fit and a minimum amount of scale are usually prerequisites for raising series A funding. But here are 13 additional proof points that investors look for in startups looking to fundraise.

13 Proof Points

1. Show Traction

One of the most important things Series A investors look for is traction. How you determine whether a company has traction varies widely by context, but relatively small differences can lead to order-of-magnitude differences over even a 12-month time scale.

Below, you can see the difference between a 10%, 15%, and 20% MoM growth rate after 1 year.

Compounded Growth Rate Projection Graph

You see here the difference between a 10% growth rate and a 20% growth rate is the difference between ~3X growth and ~9X growth over the span of a year. That’s substantial.

Investors looking to see if you have traction are looking for that hockey stick curve. A more linear trajectory isn’t as appealing, they want to see you approaching an inflection point. When they invest, they want to see their investment as rocket fuel.

The point from a Founder’s perspective is that you should be figuring out how to operationalize your growth engine for 10%+ per month, which means you’ll fall into that 3-10X growth trajectory. This can apply to topline KPIs like active users or traffic, but optimally revenue.

Startups that can demonstrate that kind of trajectory in a sustainable way usually have no trouble raising money. When you check that traction box in the investor’s mind, they’ll write the check.

Naturally, the starting point for this kind of growth is very important. For example, 50% monthly growth off $10k monthly revenue is a lot less impressive than 30% monthly growth at $100k a month. So identify with your investors and peers what the minimum scale you need to be to even consider raising a Series A.

Furthermore, having 6 months+ of somewhat consistent month to month growth is important to show a trend that investors can extrapolate from.

2. Demonstrate Product-Market Fit

Showing product-market fit is both an art and a science.

The science comes from cohort analysis, retention curves, organic adoption, etc. This is where you can look to data to show that the market is starting to adopt your product. Being diligent about that data is critically important not just to show you have product-market fit, but also in cultivating and showing that you’re data-driven as an organization.

But the art of judging product-market fit comes from the ambient noise that surrounds your company. Buzz in the press. Glowing customer feedback and testimonials. Fanatical users. All these contribute towards the feeling that you’ve found product-market fit.

As my colleague James Currier likes to say, “when you get product-market fit, it’s like when someone puts two fingers in your nostrils and yanks your head forward.” That feeling of being drawn forward is qualitative evidence to back up your data that you have indeed hit product-market fit. An anecdote about that feeling can sometimes pack more of a rhetorical punch than your data can.

3. Prove Scalability & Unit Economics

At the series A stage and later, investors are looking for a clear path to growth and scale.

For scale, a minimum scale that investors are looking for is very company-specific. To find benchmarks it’s best to triangulate from peers and investor conversations.

For growth, it’s about showing that you have a credible path. During the seed stage, you experiment with maybe half a dozen channels. Typically at this stage you’re going to double down on one or two, with a well-understood strategy to achieve scale — whether that’s with product, marketing, or sales. Clearly communicating what are the growth levers and how you can profitably scale them is critical.

One of the top things investors look for is proof of latent demand, a demand pipeline that’s just waiting for you to unlock it if you can just scale out your supply or services with more funding. The more you can frame your request for funding in these terms, the more of a sure bet it looks like for the investor and the easier their decision becomes.

4. Have a Big Vision (but OK to Start Small)

As my partner Gigi Levy-Weiss wrote in How VCs Think, the economics around VCs make it so that early-stage investors are looking for really large exits.

To raise a top series A, be able to show a path to $100M and then potentially $1BN in revenue. But as we frequently tell our portfolio companies, it’s a good idea to “find the white-hot center” and then bleed into adjacent market segments from there.

Start with a well-defined, well-understood, and well-executed niche — but be able to point to a bold, inspiring, grander vision.

5. Build a Clear, Compelling Narrative

What’s your reason to exist?

Why now? Why was this impossible just a short time ago? Why does the world need your solution today?

To us, startup timing is everything. A compelling narrative starts with identifying a credible opportunity that hasn’t been tried before. It presents an unaddressed, important problem and envisions a solution. It paints the picture of a world without that problem.

The key to building a clear, compelling narrative is to frame the problem, describe how to solve it, and explain what has changed that makes right now is the opportune time for your solution.

6. Build Out Your Team

A big signal to investors that you’re ready to move to the next stage is that you’ve been able to build out your team and plug gaps in the key areas where your founding team is deficient, in the form of either employees or advisors.

You want to be able to show an ability to hire and bring on talent from centers of excellence, whether it’s individuals from top universities, top companies, or just remarkable people that can benefit the critical early DNA of the company..

The investors that you want to lead your next round should recognize that top companies only succeed if they are able to build out a diverse talent pool. The later you leave this task, the harder it gets. So by the time you’re raising a Series A, you should be able to demonstrate your ability to hire people that bring perspectives, qualities, and experiences beyond those of the founding team. No one is expecting the United Nations, but some thoughtfulness moving beyond the seed stage shows the team is building a strong foundation.

Attracting talent from places like these is a signal to investors that your company has some real magnetism, and that you’re able to convince people with a lot of optionality to choose to come and work with you. When elite talent is willing to stake themselves in your company, it’s a reliable heuristic for investors. Don’t forget to highlight and showcase your hires and their backgrounds.

7. Chart a Path to Defensibility

Top investors want to back you when you can show why you’re the category leader in a winner-take-most market. That’s what generates the greatest returns. Defensibility — especially network effects —  is the biggest factor in value creation, and investors know it.

Because of this, you have to be able to show a strong defensibility strategy to investors if you want them to be interested. You also have to show either that you’re the category leader or that you’re on a path to be.

For example, Zeus (an NFX company) might not yet own the entire housing market, but they are dominant with the more focused segment of corporate housing — and they have an opportunity to move to adjacent markets from there. And with their 2-sided marketplace network effects, they have a path to formidable defensibility.

8. Create Scarcity

When it comes to deciding how much to ask for when fundraising, it’s often better to be conservative. If you think you can raise a large round, set expectations a little bit lower and let competition drive the amount up. Nothing appeals to a VC’s FOMO like an oversubscribed round, and top VCs are always ok putting more money to work.

When you’re raising, be transparent about your fundraising timeline to help create that feeling of urgency and scarcity. It’s best not to mention the names of other VCs, but signal that you’re going to make a decision on a certain time-frame, allowing all your investors to participate and as necessary time their diligence process.

9. Build VC Relationships Early

You don’t want your first touchpoint with a VC you’re looking to raise from to come right before you’re looking to raise. Ideally start VC relationships 6+ months in advance of raising to maximize your chances of getting the ones you want. This is important for founders to find the right partner for this journey and also for investors to get to know the company.

As a benchmark, you can hope to get on average 1 term sheet for every 20+ introductions. So in building your relationships, identify why the VC is right for you and express that to them. Make sure your follow-up is quick, and be ready with detailed responses to any questions they might have, day and night.

As an additional buffer, you should aim to close your Series A when you still have 6 months or more of cash on the balance sheet.

10. Project Momentum

A proven way to get investors excited is to project a sense of forward momentum, whether that be in your business metrics, hiring, PR, marketing, etc. You want to show that your business is accelerating in as many ways as you can.

This means managing and exceeding expectations. If you have a meeting where you say you expect 15% growth next month but come back with 20%, it’s a lot more exciting than if you set an expectation of 20% growth and meet it.

A typical mistake I see from Founders is that they’ll oversell in the first meeting: “we’re going to sign huge deal X next month and have revenue Y, etc.” More often than not, things don’t go to plan.

By contrast, there is nothing more exciting from an investor’s perspective than to hear from a founder that the business just keeps getting better and better with every interaction.

Find the “minimum viable excitement in a future vision” that you can set expectations with, and then consistently beat those expectations to create a feeling of acceleration. The more you can exceed expectations and project a sense of momentum, the more excited people will be about your company — investors and employees alike.

11. Climb the Ladder of Proof

As we’ve written about earlier, VCs have a mental framework we call the “ladder of proof” that helps them judge a startup based on a group of predictors.

Whatever “rung” of proof you were able to climb to in your last funding round, climbing to a higher one than that is a good sign of progress for a VC. It’s a signal that things are moving in the right direction on the right track. If you’ve been able to turn a customer waitlist into active users, for example, that’s a good sign.

12. Make a World-Class Pitch Deck

For your seed pitch, the design and data presentation in your pitch deck aren’t always difference makers. But when you’re pitching for your series A, having world-class design and data makes a difference.

Make your decks look simple and awesome. Have lots of data available in an appendix or within the deck. You want to leave an impression of your outstanding knowledge, analysis, and insight.

13. Build Social Proof

Social proof is another important signal that most investors pay attention to. As much as you can, bring on top advisors, influencers, and angels into your circle to gain social proof, and make sure you showcase them.

It also helps to get the best possible intros, and ideally you want to find multiple intros to the same investor from people who know your company.

Lastly, it’s important to highlight endorsements from top customers, business partners, press stories, and other sources.