The most important and often the most expensive and challenging part of building a high-growth company is attracting new customers. And it is the ability to do so consistently over time, at scale, and at an affordable cost that differentiates any company from an exponential business.
As a venture investor, I have assessed many business plans and have had discussions with many founder teams. During this process, I have discovered where most founders and startup teams fail: by lacking an accurate understanding of how to drive customer acquisition.
Too many business plans read in three overly simplistic ways:
Sorry to say that it is just not that simple. Before anything happens, you first need to understand your customer journey and define and monitor your customer acquisition metrics. I will also raise the bar by claiming that your business will never experience real exponential growth if you do not have at least some element of organic customer acquisition in your business model.
Organic customer acquisition is the process of acquiring new customers without paying any direct fees, i.e., without spending money on paid ads. There are many ways to obtain new customers organically, and we can organize them into three main parts, all of which have both an online and offline dimension:
A great example of an offline business with great organic customer acquisition is a popular local restaurant. If recommended by friends or neighbors, you are likely to try it out yourself. If the restaurant is also centrally placed, perhaps even within walking distance of your home, it quickly becomes a natural choice for both you and the local community to visit frequently.
For high-growth companies with exponential ambitions, you can create the same organic effects online by having people recommend you through social media, recommendation apps, or appearing at the top of search engine result pages from phrases related to your offer. You can also use ambassadors, partners, or a community that pushes for your brand.
Unfortunately, there are no shortcuts here, as you cannot pay people to love your product or service. You have to deliver the goods by making products your customers actually love.
In this case, MVP (minimum viable product) is not good enough, and this is something we have experienced the hard way. Snowball, a product design, development, and growth company that's part of New Normal Group, is not selling nice designs or bits of code. They sell growth, and to do that, they need to help their customers create the products their customers will love.
When working with a new product line, which is typical at most startups, it is more important in those early stages to build a base of 100 loyal customers that genuinely love your product, instead of 1000 mediocre customers that don't really understand or value your product. And this is something I have a hands-on learning experience with:
When we started our Coffee Roastery, bearing my grandfather's name, we targeted the people who were truly enthusiastic about coffee and were willing to pay extra for a high-quality coffee experience. We did not target people only focused on the price of the coffee. As we went about making our first enthusiastic (and demanding) customers happy, it was those original "100" loyal customers that started recommending us to their friends, and there began our organically growing customer acquisition.
Crystallize, a software company building the next generation of e-commerce platforms, is taking this even further. Being a product-led growth (PLG) company, a term first introduced by OpenView's Blake Bartlett in 2016, the product itself is the center of the customer acquisition and adoption process.
The Crystallize service is a tool that developers use to build awesome e-commerce experiences. At the early stages of adoption, they had a very targeted focus towards JAMstack developers, where the platform found its first love. Over time, the developers brought the tool to their employers: larger retailers, innovative e-commerce startups, and digital agencies. Today, Crystallize still boasts a 100% organic customer acquisition, delivering a 300 % yearly growth rate - a rate that is still accelerating as adoption widens beyond the initial core developers.
There is little that is more powerful than having the right product, at the right time, right in front of the customer. Yet that is what you have if you can get on top of the online search results regarding the relevant search phrases for your product or service. If you can turn this relevant visibility into a website visit that converts into customers buying your product, you have yourself an entirely organic search-driven customer acquisition funnel.
We now enter into a separate field of expertise called Search Engine Optimization (SEO). While it is not the purpose of this article to dive into the details of the SEO game here, I would like to share a few important insights.
To start with, you need to know technology (or have someone who knows technology help you). Google, the no. 1 search engine in the world, does discriminate on the technical quality of your website. If you have a slow site or if your site has other technical issues, you will never get a high ranking in Google, no matter how much money you spend on SEO-related help.
Secondly, content is king. Quality content, which delivers real value and understands and solves the issues from reader queries, always builds the basis of an organic search strategy. If done well, your content will help you connect and build trust with your customer base.
To round off the topic of SEO, I will also mention the long list of details you should be prepared to fine-tune when it comes to optimization. One of them includes linking to metadata, which will get you great rankings and help drive organic traffic when combined with the right content-filled, high-quality website.
Ecosystems, communities, ambassador programs, or partners that use, build with, or sell your product can also be powerful accelerators of your organic customer acquisition. And there is some inherent magic that happens when you open up for others to contribute to your success: while endorsing, recommending, and helping others succeed with your product, they end up becoming part of the success story.
Just look at the super active community surrounding Tesla, whereas Tesla owners feel part of a greater mission set out by Elon Musk. A little cult-like, perhaps, but extremely powerful nonetheless.
You could also look at Open Source products: the projects with the strongest communities have become leaders because of their rapid adoption rate.
My first startup was an open-source company at the turn of the century. When we launched our first product, eZ Publish, it was quickly picked up because of product love. We carefully built up a core base of fully engaged developers that led the product to reach a community of fifty thousand developers within just five years, contributing to a successful five million software downloads.
Ultimately, if I were to sum it up, I would say to think of extending ecosystems as supercharging the organic nature of your customer acquisition.
Building a high-growth business with an exponential business model means that your customer acquisition should be primarily organic. And yes, this implies that you do not need to pay to get new customers through ads or the like!
There is a lot of power that comes from going viral, getting high organic search results, and building a supportive ambassador ecosystem. Together and in unison, they will bring in many new customers, supporting the idea that a defined organic customer acquisition model is the most crucial success factor of any exponential business.
Why do most businesses grow relatively linearly? What is the secret behind the companies that seem to have perfected the formula to grow exponentially? While team experience and owning the resources needed for execution are important, the secret to exponential expansion lies in the business model's elements.
Our mission at New Normal Group is to build exponential companies that chase the new normal of their industry. At the core of this is our Prove & Scale Model, designed to guide us systematically through the different building stages, all the way from start-up through scale-up.
Let’s take a walk through the main principles of the model to get a better idea of how it works.