What is a Growth Model?

The origin of this question is the following: if you had the resources today, would you know how to deploy them in order to drive growth for your startup? Chances are you said “yes” and yet, the truth is that the overwhelming majority of founders will end up engaged in completely arbitrary activities and “best practices” at some point, myself included.  

There is, however, a simple way of thinking about this, which should save you some time and resources. 

To me, a growth model is a company’s business model. 

In simple terms, if a business model is – as Michael Lewis defines it – the way you make money, then your growth model is the way you drive growth. 

In essence, the growth model is nothing more than a simple expression of the relationship between the key inputs that need to work together in order to produce an output, which would represent growth. 

There’s a number of added benefits behind this concept: 

    • It forces you to make sure that you’re keeping track of your metrics 
    • It forces you to go beyond simply tracking your metrics and understand how they impact one another and work together 
    • It forces you to focus not on growth as an empty all encompassing concept, but on the metrics that produce meaningful outputs  
    • It forces you to prioritize on what will impact the metrics which compose your growth model 
    • It aligns your entire company to work towards one, well-defined objective 

At its core, every growth model has three main components or events: 

A. Top of funnel events
B. Activation events
C. Core value experience events 

To each of these components, we can attribute a set of questions, which may look like this: 

A. Top of funnel events
– What are my sources of traffic?
– What are my conversion rates?
– How much does it cost me to drive this traffic? 

B. Activation events
– When are my prospects understanding what is it that I am solving?
– How do prospects get to that point?
– How do prospects express their intent in using my solution to solve their problem? 

C. Core value experience events
– When do I say that the prospect has experienced the core value of my solution?
– How does the prospect experience this core value?
– How do I know that the core value of my solution is significant?

Finally, to each of these components, we can begin assigning metrics, which are specific to your product. Let’s take an example of a product, which allows you to sign legal documents online: 

A. Top of funnel events
Traffic broken down by channel and platform, CTRs, conversion rates, referrals from invites to sign a document, etc; 

B. Activation events
Created an account, added a payment method, created document to be signed, uploaded existing document, invited party to collaborate/sign 

C. Core value experience events
Number of executed documents 

Just like anything else, think about this in iterative terms, meaning that you can begin with a hypothesis of what your growth model looks like, assign the corresponding metrics and then go test it against the real world. In our example above, it may very well turn out to be that even though our number of created accounts keeps going up, it has no impact on the number of signed documents. That’s a very common issue if you’ve moved the signup very high in the funnel. So this is a great place to start asking questions and debug your model – test assumptions and run experiments.