Imagine an entrepreneur starting on day 1. They look at successful entrepreneurs and compare their 1000th day with their 1st day. And the big startups (valuation) as role models, believing this thinking is to be emulated.
One of these ideas is the ‘speed’ of growth. Rapid customer acquisition is considered key to startup success.
Focus on speed and growth develops blind spots:
· hasty design/product flaws
· acquiring customers at any price (or free)
· belief that things will be managed at scale
· startup value versus delivering customer value
Growth solves many problems at startups, and unit economics is not one of them.
Sales generated at an artificially low price point, selling dollar bills for 90 cents, may show that it is a thriving business. At $1.10, there may be no business.
Using external money to subsidize negative margins evokes uncertainty about product value for customers and market size potential.
Getting unit economics right and correct the culture of business at scale is challenging.
Is winning markets first (speed) versus calibrated growth (patience) the right calculus? When the journey is 10+ years.