Thanks to Andy Johns (Ex-Wealthfront, Quora, FB, Twitter), Valerie Wagoner (EIR at Reforge, Ex-GoJek, Credit Karma) and Fareed Mosavat (Reforge, Slack, Instacart) for their contributions.

Momentum is everything in startups. It creates the Universal Growth Loop:

The product grows.
That growth attracts and retains talent and capital.
That talent and capital enables you to solve more problems in the business.
This leads to more product growth.

But just like with any growth loop, the loop can work for you or against you. When you lose momentum:

Sourcing potential hires is harder.
Conversion rate to closing hires decreases.
There aren't as many growth opportunities within the company for your best talent so they start to look elsewhere.
Capital to fuel more bets becomes harder to raise

The effects aren't linear, they compound. That means losing momentum doesn't make things incrementally harder, it makes them exponentially harder. Maintaining momentum requires anticipating future problems, and making sure you are planting the right seeds today.

The Momentum Canyon - From Traction to Growth

There are certain points in career and company growth where what made us successful up until that point, won't make us successful going forward. At Reforge, we call these Canyons. You are no longer solving a more intense version of a problem you've solved before, you have to solve a completely new set of problems that requires completely different muscles, skills, and tools to solve them.

In startups, roughly between Seed and Series B, a canyon exists that kills momentum. Many startups find product-market fit yet still fail to grow into large, sustainable, iconic companies. They start to face rising acquisition costs, declining retention, increased competition, and lower ROI on their efforts. Companies often stumble, early momentum is lost, and the Universal Growth Loop spins in reverse.

When companies hit the canyon, it often triggers the search for that one-off magical solution that helps them break out. This is problematic, as explained by Reforge Partner Andy Johns:

"Great companies aren’t built by silver bullets. We would have to suspend reality to believe that just one thing needs to go right for a startup to succeed and to grow into a category-defining company.
Clearly, a lot must go right during the course of a startup’s life in order for greatness to happen. So much so that it can seem random or divinely ordained whenever a company hits escape velocity.
But it’s not all about random chance. There are fundamental pieces of a growth plan that can be considered early in the lifespan of a startup or a new product line and set it on a path towards sustainable growth." - Andy Johns, Ex-Wealthfront, Quora, Twitter, Facebook

In this post, we'll cover:

Why The Canyon Exists
How the Canyon Is Getting Wider
Why Founders Need To Own Growth Strategy
How Reforge Will Help Founders Cross The Canyon

Why The Canyon From Traction to Growth Exists

To anticipate the canyon, you need to understand why it exists and the problems you'll encounter. There are three reasons this canyon exists:

You need to go from linear tactics, to building a compounding growth engine.
You start to encounter adjacent users.
The talent you need is different and highly competitive.

Let's dive into each of these individually.

From Linear Tactics → To A Compounding Growth Engine

Most startups get traction by executing what we call linear tactics in Reforge. That might include:

Posting to Product Hunt
Participating in forums or communities related to their audience
Getting a couple of press hits
Putting flyers in neighborhoods, college campuses, etc.
Scrapping to get their friends and immediate network to use

As startups need more growth, the biggest mistake is just trying to execute more linear tactics. This doesn't work for a few reasons:

Each one has a low ceiling of growth before it becomes ineffective and inefficient.
Each one tends to have a fixed cost in time to setup, plan, monitor, and report on. With a small team, limited resources, this creates overhead that is too large to mange at this stage.
Many linear tactics aren't repeatable over the long term.

In other words, you can't add lots of small things together, you need to transition to one or more big things. This leads to losing momentum and burns your team out.

"This is one of the most common mistakes among founders when I ask "How does your product grow?" The answer is typically a long list of linear tactics. It is typically because there is no hypothesis on what the growth engine is, and as a result they are compensating by trying to cobble together a lot of little things." - Brian Balfour (Founder/CEO at Reforge, Ex-VP Growth at HubSpot)"

You need to start building an engine. The motor of the engine are Growth Loops. But choosing, building, and transitioning to growth loops is a completely different muscle than what is needed for linear tactics.

From Product-Market Fit → To The 4 Fits

Another major mistake is confusing linear tactics with product market fit. As Reforge Partner Andy Johns describes:

"Startups often confuse a successful linear tactic with achieving Product Market Fit. For example, many startups that launched on Facebook Open Graph received a huge amount of top of funnel distribution (e.g. Viddy as a classic case study) and conflated that with PMF. Turned out there was no product market fit whatsoever. Linear distribution channels, especially early on in a startups life, can lead to false signals of success. Traction, does not equal product-market fit."

At this phase, startups need to understand:

Do they truly have product-market fit?
With what size market do they have PMF with?
What is the strength of that PMF? (it's not binary)

Answering and expanding these things requires founders to start thinking beyond product-market fit, and thinking about the four fits required to create a $100M+ company - Product-Market Fit, Product-Channel Fit, Channel-Model Fit, and Model-Market Fit.

From Early Adopters → To The Adjacent User

Around this time, you start running into adjacent users. The Adjacent User Theory was created by Bangaly Kaba (Head of Platform at Popshop Live, ex-EIR at Reforge, Head of Growth at Instagram). From Bangaly:

"Most product teams know their existing users pretty well. But your future audience is always evolving. The challenges that these potential users face in adopting the product increase over time. Without a team dedicated to understanding, advocating, and building for your next set of users, you end up never expanding your audience. This stalls growth, and the product never reaches the level you aspire it to."

You can think about your product as a series of circles. Each of these circles is defined by the primary user states that someone could be in. For example Power, Core, Casual, Signed Up, Visitor. Each one of these circles have users that are “in orbit” around it. These users have an equal or greater chance they drift off into space rather than crossing the threshold to the next state. There is something preventing them from getting over the hump and transitioning into the next state. These are your adjacent users and the goal is to identify who they are and understand their reasons struggling to adopt. As you solve for them, you push the edge of the circle out to capture more of that audience and grow.

The impact of the adjacent user is a decline in your acquisition, retention and monetization metrics. It takes more effort and more work just to maintain your growth metrics. Many companies don't anticipate this and as a result lose momentum with it.

From Scrappy Generalists → Specialized Strategists + Executors

To transition successfully, you typically need people that can both set the strategy, and execute some of the tactics. If the person is too tactical, it leads to never transitioning to a growth engine. If the person is all strategy, you don't execute on anything. Finding these people are unicorns:

People who can both set strategy and are close enough to the tactics aren't in that stage for their career long. It is an incredibly short window.
Out of that set of people, the good ones can easily get leadership level gigs at later stage companies for compensation you can't come close to.
Out of that group of people, the number that want to take on the risk of an earlier stage company is even smaller.

To make this problem worse, there are many different types of growth professionals. I see a lot of people out there that like to fancy themselves all around "growth experts." If you talk to the most knowledgable people in the space, they will tell you that it doesn't exist. You can't be an expert at all types of growth.

Most have deep experience in a couple of types of growth models. This means you need to match the hire's experience to the hypothesis of your growth model. But most companies don't have a hypothesis of their growth model. This leads to hiring the wrong person and creates leadership turnover.

Leadership turn over is incredibly expensive. It can take 3 to 6 months to hire someone, another couple months to fully onboard, another few months to realize it isn't working out, and another few months to hire someone new. Losing nine months to a year at this stage of a company is a momentum killer.

The Canyon Is Getting Wider

The canyon from traction to growth has always existed. But in the past 1 to 2 years has gotten much wider making it even more difficult for founders to cross. There are four reasons for this:

More Capital = More Well Funded Competition
Scalable Channels Haven't Increased At The Same Rate As Capital
The Privacy Movement
The Low Hanging Fruit of Bottoms Up SaaS Is Gone

More Capital = More Well Funded Competition

Tom Tunguz, General Partner at Redpoint, recently wrote two pieces - "The Inflationary Forces in Startupland" and "The Velocity of Money in Startupland." A few charts from these posts:

Whoa! Those are some up and to the right graphs. The key quote from Tom is:

"A few years ago, raising a large venture round anointed a winner. Balance sheets swelled to permit management teams offensive and defensive options. Today, large rounds and unicorn valuations are (and this might sound jaded) expected, normal, part of the game. As often happens in financial markets, players find an edge, exploit it, and in time the players copy it in aims of achieving the same success." - Tom Tunguz, General Partner at Redpoint Ventures

Simply put:

There are more competing companies getting funded.
Those companies are receiving more capital earlier in their life at the time of the canyon.
This accelerates the lifecycle of any growth tactic and strategy.
Which makes it harder to cross the canyon.

Scalable Channels Haven't Increased At The Same Rate As Capital

With an increase in capital, startups need a place to invest that capital in order to keep growing. The problem? The number of scalable growth channels to invest this money have not increased at the same rate as capital has increased. Outside of the monopolies of Facebook, Google, and Amazon the only other emerging player with meaningful scale might be TikTok.

In other words:

More capital
Less places to put it
Means rising costs
Which widens the canyon

It's easiest to see this dynamic in paid acquisition channels since costs are easily trackable across the industry. A recent MediaPost article published some recent data:

Social CPM's have increased 41% YoY
Search spending has increased 60% YoY
Amazon ad prices increased 20% in a single quarter

The numbers are more transparent in paid channels, but the same has been happening in organic channels. On Google, it is becoming harder and harder to rank. It requires larger content investments to break through.

Receiving organic traffic from social channels like Facebook, Twitter, and others has been more and more difficult. As those companies have needed to keep their ad numbers increasing, they make it harder to get organic distribution which pushes companies to spend more money.

The Privacy Movement

In the past couple of years, there has been a huge industry push towards privacy. There are a lot of good things for consumers coming out of this movement. I'm not here to debate the good and the bad. What I do want to point out is how this making the canyon from traction to growth even wider.

Some of the things we've seen in the past couple of years:

GDPR - The first big thing to land was GDPR, requiring users to consent to allowing cookies a key part of products tracking data across the web.
iOS 14 - The latest release of iOS significantly reduces the amount of data any individual product will receive. It's turned data from default opt out, to default opt in for every single application. The latest data from Flurry is showing only a 14% opt-in rate for US users and 24% worldwide.
Consumers Adopting Privacy Products - Users are choosing to adopt privacy products like pixel blocking at higher rates. Privacy search engine DuckDuckGo is seeing exponential growth.

This is just the beginning, more is coming especially as consumers preferences change. The loss of this data has two effects:

More difficult to target customers more efficiently and effectively.
Harder to create more personalized experiences which reduces conversion rates.

Eric Seufert of MobileDevMo recently had a good thread on Twitter about this in which he made the points that:

FB used to be an MVP growth engine for startups with efficient and effect user targeting.
As that has gone away, startups need to diversify investment across more channels to receive the same results.
This requires more infrastructure, people, and time earlier in the lifecycle of a company making getting to break out growth more difficult.

The Bottoms Up Low Hanging Fruit Is Gone

The SaaS world has benefited from a macro boom of bottoms up growth models. Much of this was driven by taking existing categories of software and massively reducing adoption friction. The challenge is that low hanging fruit is picked pretty clean. Every SaaS category is now highly competitive.

An example is the very new space of SaaS tools supporting "Product Led Sales." Even though it is new, there are already three (probably more) well-funded companies, with good founders, and good traction - Pocus, Calixa, and Endgame.io. This isn't even including the startups attacking adjacent use cases like Census and Hightouch.

Breaking out from traction to growth has become more difficult. Reducing friction is easier and less expensive than the alternative growth methods. Being low friction isn't good enough anymore. This makes it harder to cross the canyon.

Founders, YOU Own This Problem

Many founders try to "outsource" the problem of growth to someone else at this stage by either hiring someone internal or external to own it. But here is the issue - Growth strategy IS company strategy at this point in a company's life.

Your growth strategy is cross-functional, bringing together how product, marketing, and sales interlock to drive growth. Your growth strategy informs:

The metrics you use to guide your business.
The goals you set for the team.
How you organize and align your teams.
How you should think about competitors.
How much money you should raise and when.
How you should deploy that capital.

These are all founder level decisions. Outsourcing your growth strategy, is outsourcing your entire company strategy. The difference between those that cross the canyon and those that fall into it are the founders that understand the foundations of growth that will guide their business for years to come.

Growth for Founders Program

To maintain momentum, you have to anticipate future problems to make sure you are planting the right seeds today. You don't have to get it right 100% of the time, but in this competitive environment you can only afford a few misses.

Historically, Reforge has been built for product, growth and engineering leaders in larger companies. But in our startup advising, we saw the the constant demand from earlier stage founders. Last fall we ran a super small beta test with the founders of 5 companies - Career Karma, Maze, Aura Health, Clora, and Run The World.

"Growth for Founders has been instrumental in helping Career Karma scale our marketplace post our Series A. Where YC helps companies refine their MVP, meet investors and raise their Seed round the Growth for Founders is an amazing resource for founders who want to take their company to the next stage. Reforge helped us define our core growth loop, identify how to build our teams and product to reinforce our growth loop. We were lucky to be part of an amazing community of Product, Data and Design leaders who are always eager to share their experience and advice to see your company succeed." - Timur Meyster - Co-Founder at Career Karma

Based on the success, we have created the Growth for Founders program to open the lessons of crossing the canyon from traction to growth to a wider group. The program will cover four key topics to crossing the canyon:

Retention - We first deep on the core of any growth engine, retention and engagement. We'll establish how to think about retention from first principles for your product and establish the right metrics and strategies vs chasing the strategies of others.
Growth Loops - We'll then go through growth loops and how to transition to them from linear tactics.
Product-Market Fit Expansion - Every early product market fit hits a ceiling. We'll go through the different types of product and market saturation, how to expand it and tap into adjacent users.
Building Your Team - We'll use your growth model and strategy to identify who to hire, how to evaluate them, and how to organize the team around you growth strategy.

The program will help founders anticipate problems around the corner and identify the highest leverage areas. This is the first in a dedicated line of programs we'll be releasing for founders. All those programs and our product, growth, and engineering programs will be accessible as a Reforge Member. Often times you have to give up significant equity to investors, advisors, accelerators to get access to this knowledge. We believe making it more accessible is great for the ecosystem. To participate in the upcoming Fall Cohort, apply to become a Reforge member by September 9th.

Apply Here To Become A Reforge Member