Growth hacking--popular for years--is badly wounding entrepreneurship. That may sound crazy because so many see it as a critical part of business and marketing. But the popular concept of ultra-fast growth is part of a mania that has dragged the startup concept into a back alley and pummeled it until there's almost nothing left.
I'm not talking about the type of shallow and lazy tactics that, as author Paul Jarvis argued here a couple of years ago, can turn into ridiculous spamming. Instead, we're talking a world of WeWork, Uber, Lyft, SmileDirectClub, and Peloton IPOs.
At best, they're trading under their introductory price of their first days as public companies. At worst, WeWork has shown how big a disaster a business can be. After years of hype, suddenly the ugly truth of bad corporate governance practices, ridiculous losses, and no understandable path to profitability were laid bare by an S-1 filing with the SEC.
Typically, an IPO has a company selling shares--and favored insiders and early investors getting an early crack at also unloading many of their shares--to big institutions and VIP individual customers of the banks underwriting the process. Then these organizations and people expect to in turn sell to average American investors at inflated prices to also reap a profit. WeWork is unusual in that the usual plans blew up in everyone's faces except those of the little people at the bottom.
Years ago, until the insanity that would become the dot-com crisis, companies were expected to make money. To have clear paths to making profits, even if they were still losing some money. Because, unless you know how that might happen, why would you invest? To keep an unprofitable business afloat?
Even Amazon, which was a dot-com child, did better. Although many people are sure that the company had lost money forever, or at least until somewhat recent times, it started in 1994 and lost money up until it made net income of $35 million in 2003. Then things really started to take off.
Compare that to Uber, which started in 2009, lost money, and kept doing so to such a degree that if you look at the company's financials, you might wonder how it would ever see black ink on the books. There's a big difference between the two companies. Amazon lost money to grow capability that would eventually allow it to sell everything. Uber lost money to get big.
Part of this is the fault of the VC culture, which wants a few big hits to make up for their many investments that are disappointing or total flops. As an early stage Silicon Valley investor told me recently, VCs throw money at startups and push for massive growth because it makes it easier for them to raise more cash later on from their own investors. Because significant management fees mean real income for the VCs.
The VCs helped spark the growth hacking culture, again assuming that bigger is better. And it may be for some companies, but entrepreneurs have to be ready for it and not blow the opportunity. That means responsible growth.
That's not what the newly minted IPOs have shown. Instead, it's been a massive dash for growth with the hope that revenue will eventually catch up and make the whole process financially worthwhile. As we're seeing, that's not necessarily what happens.
Rather than focus on growth for its own sake, take a different approach. What do you want your business to be? How long would you like to see it last? How will you fund things and what will investors, if you have any, expect in return? How much growth can you afford while scaling up in a way that lets you keep customers, employees, business partners, and investors happy in the process? And what do you ultimately want out of all this?
Those aren't the questions you'd necessarily ask in growth hacking. But they are the ones that can help you find a path to satisfaction and success.