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Startup Growth Engines Summary (Review & Book Notes)

Posted: October 10, 2022
Word count: 14,239 (52 min)

If you are a growth hacker, you’ll love this book. It teaches you what some of the most famous and innovative startups of the last 5 to 10 years did to grow themselves.

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Tomas Laurinavicius

Co-founder & Chief Editor, Best Writing

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If you are a growth hacker, you’ll love this book. It teaches you what some of the most famous and innovative startups of the last 5 to 10 years did to grow themselves.

Author: Sean EllisMorgan Brown

Originally published: 2014

Pages: 153

Genre: Business

Goodreads rating: ⭐️ 3.74/5

👉 Buy Startup Growth on Amazon

🎧 Listen for free on Scribd (plus 1+ million other books)

Yelp

Gaining Initial Traction

What Yelp did differently:

They Made it Social

While earlier review sites sat and waited for anonymous reviews to come in, Yelp focused on building a network of reviewers with profiles, friends, and accolades. This was key to Yelp’s growth, because users are more likely to trust reviews from real people than anonymous internet strangers.

“Yelp enables and encourages reviewers to establish a social image or reputation. Yelp members can evaluate each other’s reviews, chat online, become friends, and meet with each other at offline social events. Each Yelp member has a public profile page that records her activities, including reviews written, number of useful, funny, and cool review votes received, Yelp friends made, and compliment letters displayed. Yelp also recognizes some qualified prolific reviewers as “elite” members.”

They Incentivized “Good” Behavior

It turns out that people really liked receiving recognition for their reviews of local businesses. They were more likely to write in-depth, well crafted reviews when their names appeared alongside them. Yelp leveraged this inherent user behavior, offering special recognition to users who are first to review a business, and letting other users give kudos for reviews that are useful, funny, or cool. The most engaged Yelp users are awarded “Elite” status.

While only 4.8% of users on CitySearch and only 11.1% of users on Yahoo Local contributed six or more reviews, the vast majority of Yelp users (65.8%) have contributed six or more reviews. By contrast, the majority of CitySearch (71.2%) and Yahoo Local (56.4%) users left only one review, while just 9.2% of Yelp users have contributed a single review.

44% of reviews on the site were contributed by Yelp Elite.

In addition to the Yelp Elite, the company designated particularly engaged users as Community Managers. These users worked to foster online and real-world engagement in their cities via event planning, reviewing businesses, writing newsletters, and more. One of the most important traits for Yelp Community Managers was the ability to throw a party, and they did a great job throwing cool, exclusive events for Elites.

These events fostered a sense of community among Elites and a sense of loyalty to Yelp as it expanded into new cities. The company emphasized to Elites the importance of their reviews, further reinforcing this sense of loyalty.

This combination—Elites driven to contribute high quality reviews and Community Managers who helped provide incentive and community validation and support for them to do so—is one of the major factors that helped Yelp to so quickly surpass CitySearch in both quality and quantity of reviews.

They Started Local

In our analysis of Uber’s growth engine, we talked about the merits of the city-by-city approach. Yelp, too, took advantage of the start small mentality, launching in San Francisco in 2005 and making the city its sole focus for that first year.

They had thoroughly exploded in the Bay Area, next came Los Angeles, Chicago, and New York.

They Put Users First

Unlike Citysearch, which displayed professional reviews more prominently than normal user reviews, Yelp leveled the playing field by eschewing professional reviews altogether. They also put users before businesses, which helped to foster a friendly environment, encouraging users to contribute even more reviews. So long as they were within the guidelines, Yelp even made it difficult for businesses to have negative reviews taken down.

Staying true to the users kept the community engaged and participating, while differentiating Yelp from other review services. Yelp became known as the place to get real, unfiltered information about local business.

They Offered Something People Wanted

As always, we can’t ignore the fact that Yelp provides a valuable service to its users.

In addition to perks like Elite status, parties, and profile badges, the aforementioned joy of discovery fosters engagement with the community and creates instant loyalty to the product.

They Knew When to Pivot

It is perhaps as integral to their success that they also understood what users didn’t want, and the importance of pivoting to deliver what they did.

Today’s Growth Engine

While all these factors continue to work together as Yelp’s growth engine, we can’t ignore a few more.

They’re Good for (Good) Businesses

There’s no denying that Yelp has Stoppelman explains, “We’ve created a trust mechanism with Yelp. Customers can make the decision to patronize better businesses, and local businesses are able to compete with larger ones.” The data backs this up.

According to the Yelp Blog, Michael Anderson and Jeremy Magruder of UC Berkeley report that an extra half-star rating results in restaurants selling out 19% more frequently, from 30 to 49% of the time, and up to 27% more frequently when Yelp is one of the only sources of information about the business.

Thus, as Yelp has increased in popularity, so has their authority as a local guide, meaning that yet another factor we must consider is how the positive relationship between a high Yelp rating and good business has led to restaurants actively promoting Yelp in order to gain positive reviews, further driving user engagement with the site.

When people love a restaurant or establishment on Yelp, the businesses love to promote that fact. The “People Love Us on Yelp” stickers have become ubiquitous in the windows of small businesses everywhere, driving a positive cycle of marketing and awareness for the site.

SEO

Yelp has consistently made Search Engine Optimization a priority, consulting both Moz (from 2005 to 2007) and Distilled (two of the industry’s most respected search firms) on SEO. For starters, Yelp has a ton of high-quality reviews and in-depth profiles, all of which generate an endless supply of fresh, indexable content for Google.

Yelp’s business pages are structured well for SEO. Yelp augmented this core content with their own, launching local blogs, city pages, user generated lists and other content all aimed at reaching more users through search.

As with both YouTube and SlideShare, the embed feature can be a powerful traffic driver, and Yelp’s embeddable review widgets were no different. Businesses added the widgets feature to show off their Yelp ratings, and Yelp got a ton of links and great anchor text in return.

The Mobile Explosion

There’s no denying that ever-increasing smartphone use has been a boon to Yelp. In fact, in November 2012, the company reported that 45% of its web traffic was from mobile devices. Furthermore, as of June 2013, Yelp’s mobile users had reached 1.4 million.

Ad Revenue

The mobile explosion hasn’t just been good for user engagement—it has also meant increased ad revenue for Yelp. In the last quarter for which data is available, local ads on mobile devices made up 40% of Yelp’s overall local ad inventory, up from 25% just two quarters before.

GitHub’s

Early Traction

Solve a Problem

GitHub began first and foremost as the solution to a problem, and the site has taken off not only because it solves that initial problem, but it adds many of its own features on top of the original functionality of Git. These features are forking, pull requests, and merging.

“Before GitHub, if you wanted to contribute to an open source project you had to manually download the project’s source code, make your changes locally, create a list of changes called a ‘patch’ and then e-mail the patch to the project’s maintainer. The maintainer would then have to evaluate this patch, possibly sent by a total stranger, and decide whether to merge the changes.”

By contrast, GitHub’s “forking” feature allows users to copy any public repository to their own account and modify it from there. Users can then share those changes with the repository’s owner via a “pull request.” If the owner likes the changes, then he or she can merge them with the original repository.

This new process removes the massive overhead and friction of previous software collaboration, and replaces it with a seamless, manageable and scalable solution that allows anyone to share or contribute to improve or expand software projects shared publicly on GitHub.

Network Effect + Marketplace

The aforementioned features and functionality are what attracted the first users to GitHub, and create a powerful reason to join and participate for other developers.

This unique aspect of GitHub is also its most powerful growth engine. GitHub is driven by both network effects and marketplace dynamics. The company benefits from two distinct and multiplicative growth drivers: network effects to pull in more people and their code, and an ever growing code repository acts as a marketplace for people seeking out code for their projects.

The result of this dual growth engine is the creation of two massive assets:

  1. The most important and vibrant social network for computer engineers on the web
  2. A massive code repository for people seeking out code elements for their projects.

These two assets are the sustainable drivers of their growth. New users are pulled in through multiple channels—either via searches for code, invitations from existing GitHub users, or through collaboration on open source projects.

The network effect also draws in people who want to work with the developers now on the platform. Technical marketers and other professionals are now using GitHub as a way to reach developers, by open sourcing information, books, and using the platform as a way to blog. These uses weren’t part of the original use case for GitHub, but help drive adoption and an ever growing network.

Word of Mouth

In addition to the network and marketplace drivers, GitHub’s growth can be attributed in part to word of mouth. Word of mouth, as Holman explains in a talk on Word of Mouth at SuperConf2012, “means people [are] genuinely excited to share your product with their friends.” The talk begins with Holman’s assertion that adding “Tweet” and “Like” buttons isn’t word of mouth. Rather, word of mouth comes from content, thoughtfulness, solved problems, and ease of use—in short, the whole experience of a product or service.

Holman says that GitHub’s word of mouth is driven by both surprise and delight, or the principle of “speak softly and carry a big ship.” What this means is that rather than talking up all the great improvements they’re going to make, they just make them.

Another key driver of word of mouth is “superfans” who not only like your product, but “are your most public supporters, your most public detractors, and help you out publicly and privately.” The key to generating word of mouth, he says, is being surprising, delightful, and helpful.

Freemium

As with Evernote, freemium has been a significant growth factor for GitHub.

Luckily, without necessarily intending to, their launch in free public beta set GitHub on the path to the freemium model. Wanstrath explains that it was free for early GitHub users to create public and private repositories, and more and more people began using the site—just as Hyett and Wanstrath were—for business code.

“Soon,” Wanstrath explains, “we had people emailing us asking how they could pay for private repositories.”

That’s how GitHub began the shift to its current pricing model—public projects are free, and private plans start at just $7 for individuals and $25 for organizations. There’s also an enterprise tier that can run millions a year, used by companies like Lockheed Martin, Microsoft, LivingSocial, VMware, and Walmart.

Champions of Open Source

GitHub’s collaborative structure doesn’t just make working on existing open source projects easier—it makes it easier to open source new projects. Now companies and individuals can open up previously private projects to the public, where they can be improved upon by the community.

Ignore the Advice of Others and Build What You Love

Another important element of the company’s philosophy involves ignoring the advice of others.

The concept embraces an ethos of self-fulfillment first: rather than try to build something to suit others, build what you need and solve your problems, and they will naturally find an audience with similar needs and problems. This idea is key to GitHub’s philosophy.

“Just Ship It”: Minimum Viable Product

Another core component of GitHub’s company philosophy is the Lean Startup concept of MVP, or minimum viable product. As Wanstrath explains, “We’ve learned it’s much better to ship it now and fix it later, once you can see how people are using it, than it is to let it linger in development forever. Just ship it.”

Rather than making assumptions about what customers do and don’t want, GitHub enlists them to test things via private beta as soon as possible. As Wanstrath points out: “You can’t always be right and nothing’s ever going to be perfect – embracing this is a huge competitive advantage. Shipping early and often lets you see how people are actually using your site and allows you to react accordingly. Does that feature you shelved even matter? Is a feature you didn’t think of sorely needed? Has anyone even hit that bug you were worried about? It’s very easy to get too close to something and get a bit myopic.”

Stickiness

It should be little surprise that GitHub is an exceptionally sticky product. From the large number of fork and pull requests, to the bug and issue tracking, to the overall collaboration on projects, GitHub isn’t a hit-andun destination. Their users spend a large portion of their time interacting with their product.

GitHub recognizes the need to keep the community and platform vibrant and relevant, and has focused on several product releases to drive site stickiness and engagement. Their focus on new ways to explore and discover repositories is one example. And their most recent release of GitHub pages goes even further. Pages lets developers power their web pages right off their GitHub repositories. Just another reason for developers to love and stick with GitHub.

The Remaining Pieces

Because of all these factors—in particular, the solved collaboration problem and associated network effect, GitHub has become the industry standard.

As the company continues to evolve, this collaborative nature will certainly be a guiding force.

We hope this analysis serves as encouragement for startups who are trying to solve a problem but are unsure of whether it will be profitable. Not only does GitHub prove that people are willing—and even happy—to pay for services that solve their “pain-in-the-ass-problems.” By solving a problem and working hard to do so in the best way possible, GitHub managed to find product-market fit almost instantly.

Upworthy

It’s likely you’ve seen more than one story from Upworthy, the viral hit-driven new media company that packages content designed to spread like wildfire across the social web.

The company clocked an impressive 88 million uniques in November 2013, placing it just behind the Gawker Media Network in terms of size,

The company—founded by Eli Pariser of MoveOn, Peter Koechley of The Onion, and Chris Hughes of Facebook—uses attention-grabbing headlines to highlight meaningful videos, pictures, and stories, often making them go viral.

Upworthy launched on March 26th, 2012, and just seven months later, they were getting almost 9 million monthly uniques visitors. In November of 2013, just 20 months later, Upworthy saw close to 88M unique visitors worldwide, with mobile visitors eclipsing desktop viewers for the first time.

Early Traction

Knowing When to Pivot

Pariser explains, “The election was our whole argument for starting Upworthy. Despite Pariser and Koechley’s assumptions, as it turned out, people weren’t really engaging with Upworthy’s political content.”

They pivoted away from their original goal of making Upworthy a political publication and broadened the site’s coverage.

It’s the combination—an engaging story and a bit of relevance—that Upworthy uses to turn regular news into viral hits.

Delivering Content People Want

Upworthy has found a repeatable and scalable way to drive traffic. They use interesting, surprising, emotional, and compelling content, and lots of it, to bring in new users.

Upworthy’s strategy for content curation, as Adam Mordecai shares, begins with an internal system that tracks content submissions so that staff members don’t accidentally work on the same piece simultaneously.

On top of that, each editor at Upworthy searches for content to curate via their own Facebook feeds, submissions from organizations and connections, news sites, blogs, email lists, plus Twitter, Quora, Tumblr, Vimeo, YouTube, etc.

Pariser explains, “We have our team of curators spending all their time looking on the Internet for stuff. We go for visible, sharable stories and really stay away from doing more typical, text-driven articles and blogging. We lean into images and videos.”

By keeping their audience and purpose in mind, Upworthy is able to curate content that has a much higher likelihood of becoming viral.

Mordecai tries to disabuse the notion of a crack team of scientists with the secret recipe to virality on the web:

We offer no silver bullets to make just anything go viral. We just happened to combine our skills, talents, technology and strategic planning with a giant pile of luck to get where we are.”

He continues to explain that a lot of their ideas fail, simply because not everything is viral. “The key,” he explains, “is to keep testing and throwing things at the wall to see what works.”

According to Upworthy’s Slideshare, secret sauce includes:

  • Content — Finding and/or creating amazing content.
  • Framing — Optimizing said content to be really clicky on Facebook.
  • Tech/UX — Optimizing your site to be really good at sharing said content back to Facebook.
  • Data — Never stop testing your zany theories.
  • Luck — Catching a leprechaun and stealing his lucky charms.

In Upworthy’s case, each piece of content is evaluated based on its ability to trigger multi-generation sharing, as opposed to simply resonating with their existing audience.

Turning Viral Views into Lasting Fans

But both engagement and relevance assume one thing: audience.

Since their launch, Upworthy has worked to build a strong audience, focusing initially on Facebook and email and with less attention paid to outlets like Twitter, Pinterest, and Tumblr.

From email, to Facebook fans, Twitter followers, and more, Upworthy makes it easy to subscribe and stay connected to the site, even after the quick viral hit wears off.

Through extensive A/B testing, they’ve optimized their subscription flow so that when visitors land on the site for the first time, they’re asked to subscribe via email before viewing the content they’ve come to see.

Additionally, there’s a delayed slider at the bottom asking visitors to like Upworthy on Facebook, and another subscription prompt that comes up after the content has been shared. The entire process, from first visit to subscription to sharing, is streamlined to make it as easy as possible for users to become part of the Upworthy community.

Testing

Upworthy understands what it takes to go viral, and then goes out to test and find the best combination of elements to drive that virality. Their primary signals are both shares per view and clicks per share.

In “The Sweet Science of Virality,” they share their quick and easy A/B test for headlines. All that’s necessary is Facebook, Bit.ly, and the clock.

First, they pick two promising headlines for the same content and create a bit.ly url for each—one with url?r=A and one with B. Next, they find two cities with similar demographics and populations amongst their Facebook fans and share one bit.ly with each city. They set a timer and wait for the clicks to roll in. When the time is up, they add a “+” to the end of the bit.ly and compare stats.

The title with the most clicks is the winner. And they don’t just test clicks—they also compare shares per view to see which headlines results in the most reshares.

They test and retest everything—from UX elements like CTA button placement to the most effective time for showing “Like” and “Share” prompts to kinds of images that get the most clicks, and more.

Virality Over Everything

Headlines in particular get a lot of attention from Upworthy. Not only do they A/B test a couple of promising headlines for the same article, but curators actually begin by writing 25 headlines for each piece. Out of these 25, the curator chooses a handful of favorites, and then the managing editor chooses the best out of those.

Pariser explains, “A good headline can be the difference between 1,000 people and 1,000,000 people reading something.”

HubSpot

In 2004, HubSpot co-founders Brian Halligan and Dharmesh Shah met at the Massachusetts Institute of Technology. Funded in 2006 on the concept that traditional marketing is broken, HubSpot offers an inbound marketing software platform that helps businesses “market to humans.”

HubSpot has chosen to focus on growth rather than profit for now.

Gaining Early Traction by Practicing What They Preach

Inbound Marketing

The company’s inbound marketing strategy covers the spectrum, but one area in which they’ve really excelled is content marketing. From the outset, HubSpot has offered resources like expert blog posts, webinars, and tools. For example…

Website Grader

Between 2006 and 2011, HubSpot’s free Website Grader was used to grade more than 4 million websites. Anyone could enter a URL and get insight about which aspects of a site were performing well and which ones could be better.

Website Grader was easier to market than the actual HubSpot product, because it required no up-front investment yet provided instant value.

Additionally, Website Grader brought visitors one step closer to becoming customers by showing users the need for HubSpot and collecting contact information for sales, generating tons of inexpensive leads.

Twitter Grader

Twitter Grader generates diagnostic reports of Twitter users, measuring their influence based on factors like follower ratio, update frequency, and level of community engagement; and playing off of powerful motivators such as vanity and game mechanics

When Twitter Grader first launched it set off a wave of viral awareness, with people sharing their Twitter scores with their followers, perpetuating a seemingly-endless cycle of more and more people checking their Twitter cred. Again, this free tool drove leads and tons of awareness for the company.

HubSpot’s Blog—Inbound Hub

HubSpot’s addition of a Call to Action at the bottom of every blog post tripled the number of leads they were getting from the blog.

Inbound Hub generates real results, the blog is full of useful and shareable content that results in 20% of all of HubSpot’s organic leads.

Webinars

Just like with Website Grader, Twitter Grader, and Inbound Hub, HubSpot uses webinars to educate users, generate buzz, and attract thousands of new website visitors—a number of whom will eventually become customers.

Through focusing on inbound marketing as a means of establishing themselves as an authority in the field, HubSpot was and is able to generate a huge volume of relatively low cost (especially when compared to outbound marketing), high quality leads.

Not only are these organic leads from inbound marketing less expensive to acquire—which in and of itself would matter little if they weren’t the right kind of leads—they also result in more than double the conversions. When thinking about how HubSpot has grown so much and so quickly, this can’t be ignored.

Partner Program

In 2008, a sales rep, Pete Caputa, came up with an idea to build a partner program that would allow agencies to resell HubSpot services as value added resellers (VARs). Agencies, Caputa believed, would give HubSpot additional distribution to targeted prospects.

HubSpot invests in their partner success with content, sales support, and program support to help make their partners’ customers successful, which creates lasting partner relationships and continued advocacy—all driving more leads and new HubSpot customers.

Highly Selective, Top-Notch Marketing Team

Brian Whalley, a former employee explains that during his three years at HubSpot the marketing department hired less than 1% of applicants. Every 100 resumes resulted in no more than five or seven interviews, with positions often going unfilled for months until the right person for the job was found.

Whalley explains, “HubSpot in general has about a 3% hire rate from resume to first day, which makes them more selective as an organization than any ivy league school or top-tier engineering school, among other programs.”

Growth As a Core Company Value

But it isn’t just HubSpot’s highly-selective marketing department that’s growth-oriented. Much has been written about the culture and work environment at HubSpot, in particular, the HubSpot Culture Code.

Whalley explains that every department strictly adheres to the HubSpot ideal of “Math Makes Right”. Each department keeps a close watch on the metrics that matter for them. “It can be a little ruthless,” he continues, “but it makes sure that ultimately every dollar spent in the business can be tracked into its ROI. … Everyone in the organization knows these numbers, and obsesses over them.”

Today’s Growth Engine

Sales and Marketing Excellence

By practicing what they preach, HubSpot generates a large portion of their leads from Inbound Marketing efforts. In August of 2012, Volpe reported that 70-80% of their leads—with a volume of 40 to 50,000 per month—come from their Inbound Marketing efforts. He compares that to an industry average of 20% and specifically cites Marketo’s inbound leads at 6%.

Building a sales and marketing organization to drive this program and turn content into a growth lever is arguably the most important key to HubSpot’s success. Being able to guide the inbound efforts to reach the right kind of prospect, and then build a funnel with a repeatable, scalable and successful sales process has allowed HubSpot to grow quickly, service customers with a lower average value than other enterprise marketing competitors, and make the most out of their inbound traffic.

Inbound Marketing at Scale

To feed the sales organization above, HubSpot has a constant need to scale their inbound channels. To that end, HubSpot has poured more and more effort, resources and hires at that engine.

Today, HubSpot is a content and tools machine. Beyond scaling content, they’ve also continued to deliver new tools and services that drive both interest from new customers and help retain existing ones. The company has worked to expand their offerings via new products like Signals, a marketing plugin for Chrome, and Content Optimization System, which uses cookies to deliver targeted messages on websites and landing pages.

HubSpot also offers free inbound certifications at Academy.HubSpot.com and produces a weekly Internet marketing video podcast called HubSpot TV at http://hubspot.tv. And they’ve made smart hires, like adding Dan Zarella to their team, who produces data-driven content to help businesses make sense of new marketing tools.

Acquisitions and Partnerships

The company has also made some smart acquisitions. In June of 2011, HubSpot acquired the marketing software startup Performable. Two months later, they acquired social media management platform OneForty. In May of this year, they acquired the Chrome plugin Chime and the calendar synchronization tool PrepWork, in an attempt “to make its software friendlier and more human.”

Inbound Conference

In 2010, Rebecca Corliss posted on Inbound Hub that HubSpot would no longer be exhibiting at trade shows and events because it didn’t make financial sense. [5] Instead, the company shifted its focus to speaking at events, creating more content, holding their own events, and attending events to mingle and learn (rather than sit behind a table all day).

One way they’ve done this is through hosting the annual HubSpot conference in Boston, known as the INBOUND Conference as of 2012.

Now that HubSpot is the firmly-established authority on inbound marketing, INBOUND is a fitting way for the company to foster innovation and education in the field.

Exceptional Customer Retention

One of the most celebrated pieces of HubSpot’s growth engine is customer retention. Hubspot’s approach to retention is much like other aspects of their business. They focus on key metrics and align their sales and marketing processes to create successful customers.

From a sales and onboarding perspective, HubSpot uses year-long contractual commitments that come with mandatory paid training and consultation services upfront, in addition to software fees. This gives new customers the incentive to use the software and sets them up for the best chance of success, and therefore the best chance to be a lasting HubSpot customer.

To measure and monitor the success of their retention efforts HubSpot uses something called a Customer Happiness Index, or CHI as the core retention metric. Josh Lopin, VP of Customer Success at HubSpot, explains: “[CHI] is a measure of the degree to which one of our customers is practicing inbound marketing in a way that is likely to lead to long-term success. Our customers with the highest CHI scores get the biggest lift in traffic and leads every month. These customers also give us the highest Net Promoter scores and have the highest renewal rates.”

The number is calculated based on how well a customer is doing inbound marketing, and certain elements are weighted based on their correlation with success. Lopin says that the CHI is easier than conducting a survey and quicker than cohort analysis, and it gives HubSpot Consultants a framework from which to teach inbound marketing based on each customer’s strengths and weaknesses.

Consultants work with customers to get them the highest CHI scores possible, which drives traffic and leads for customers and results in higher customer satisfaction for HubSpot.

Fostering Innovation

The company seeks to foster innovation and encourage entrepreneurship in all its employees. Halligan says that HubSpot has a straightforward, three step process by which employees introduce new ideas: Alpha, Beta, and Version One. He explains: “If you have an idea for some new thing, you can start working on it nights and weekends. You don’t have to ask us for permission—just start cranking on it. There’s no red tape. If you’re a software developer, you can write software; if you’re a businessperson, you can work on a business idea. That’s Alpha.”

Next, the employee presents the project to management, and if it looks like a good investment, it becomes Beta, meaning resources “in the form of heads and access to developers” will be devoted to the project, and the team gets three months to attempt to gain traction. Anything that doesn’t work is cut as soon as possible. What does work graduates from Beta and becomes “part of the way we do business,” or Version One.

To give this a little perspective, at the time of Halligan’s interview in 2011, 30 of HubSpot’s 260 employees were working on projects in various stages. Still, he claims that the majority of projects do fail, and employees simply go back to their regular duties—until they come up with their next big idea and try again. It’s all part of the culture.

Evernote

How did they get their first million? How did Evernote crack the code to successful and scalable growth with a product that didn’t benefit from network effects and other growth factors that many recent success stories have?

Early Traction

Excellent Timing

Evernote launched right as mobile apps as we know them today were beginning to take off. In part, their early traction had a lot to do with this timing.

These AppStores were brand new distribution channels, giving companies like Evernote instant reach to millions of users who were eager to add new, valuable apps to their smartphones. While AppStores today are overly crowded and gamed by paid downloads, in 2008 there was less competition, less gaming, and subsequently more visibility that allowed apps to break out organically through these channels.

And Libin and team didn’t rely on just one AppStore launch, each new store, each new platform was a priority to the Evernote team: “What we did, is we really killed ourselves in the first couple of years to always be in all of the app store launches on day one. Whenever a new device or platform would come out, we would work days and nights for months before that to make sure Evernote was there and supporting the new device or operating system in the app store on the first day. So that it could be one of the showcase apps for all of these devices as they launch.”

This approach continues today, with Evernote being one of the launch apps in the Google Glass appstore.

Great Product

More important than timing is the fact that Evernote is a great product. After all, it was the product itself, not clever marketing or an awesome affiliate program, that kept the company afloat during the unlucky period of 2008.

But what is it that makes Evernote great? It’s impossible to include an exhaustive list of Evernote’s killer features, but there are a few that users frequently cite, including:

  • Remember Anything and Everything is at the heart of the Evernote experience. There are no size limitations, no file constraints, no complex rules to remember. Evernote can hold everything you’ve ever wanted to remember, and then make it easy to retrieve at a moment’s notice.
  • Impressive User Experience has also been one of the company’s core philosophies from the start. In fact, rather than relying on a one-size-fits-all mobile site or app, they built native apps for every single platform.
  • Optical Character Recognition, or OCR, which refers to Evernote’s ability to search text within images. From business cards to receipts and takeout menus, this feature in particular makes a lot of people’s lives simpler and more streamlined.
  • Syncing Across Multiple Platforms is another feature that users love, consistently citing the ability to access information from multiple devices as one of the main benefits to using Evernote, and as of 2010, the majority of Evernote users were already accessing the service via multiple platforms, most commonly a desktop computer in addition to a mobile device.

Word of Mouth from Satisfied Customers

Not only did they inspire a handful of passionate users to invest in the company, it’s these killer features that resulted in word of mouth from tons of satisfied Evernote customers.

Evernote’s model is really word of mouth, as Libin is quick to point out, “We don’t pay money for users.” They don’t spend money on user acquisition, and they don’t do any SEO or SEM. They don’t do incentivized downloads or any acquisition spend of any kind.

Closed Beta Generated Buzz

When Libin and team were ready to reveal Evernote to the world, they launched with a closed beta and gave away 100 invites on Techcrunch. Techcrunch covered them, and as Libin explains, that was the spark that started the Evernote growth engine: “We launched closed beta on TechCrunch, we were lucky enough that TechCrunch wrote about us right as we were starting the closed beta and we gave away 100 invites, that was the first spark. We had a couple thousand people within the first few days just because of that really early spark and it just grew from there.”

Though Libin insists that the purpose of closed beta was user testing, it nevertheless helped to generate buzz around the product. He explains, “We never thought of the closed beta as a marketing exercise. We were frankly terrified that everything would crash all the time.”

Yet the fact that people had to sign up and send out invitations to actually use the service generated buzz around Evernote. Libin claims on the Evernote Blog that their goal was to get around 10,000 beta users to test out the app. He explains: “We were blown away by the response and watched with equal parts of glee and horror as the closed beta users count passed 10,000, then 25,000, then 50,000… By the end of the four months, over 125,000 people had participated in the closed-beta.”

Freemium Model

The final and critical piece to the puzzle of Evernote’s early growth engine is the Freemium model, in which users sign up for a basic free service, then upgrade to a paid version to unlock features and storage space.

Put simply, the Freemium model got people in the door, but the features we’ve already talked about kept them around, and eventually inspired a lot of them to convert to paid. This is because Evernote increases in value the longer you use it.

The longer you use Evernote, the more invested you are in the product.

So it follows that the more of your life you have bound up in Evernote, the more vested you are and the better user you are. Evernote’s conversion rates increase with the age of the user. That’s why, when everyone is tripped up over the percentage of paid users in a freemium model, that metric is largely ignored by the company.

As of 2010 when Libin shared some of Evernote’s revenue stats, their cost per user was around 9 cents per active user per month, and they made around 25 cents per user per month. This is likely why he asserts, “We don’t care if you pay, we just want you to stay around and keep using it and get all your friends to use it.”

Today’s Growth Engine

Beauty and Simplicity as Core Features

Perhaps the most significant of these elements is the inherent simplicity of the product, which makes Evernote applicable across a practically limitless number of use cases. Evernote is like a blank canvas, and it’s totally customizable based on what you need it to do, which is kind of the point.

Evernote’s core philosophy of simplicity is how the product lends itself to so many diverse applications.

Supercharging Word of Mouth

While the valuable product, freemium business model and simplicity are key factors driving word of mouth, Evernote has introduced new programs to accelerate sharing and drive the performance of this channel.

Evernote Ambassadors

The program is comprised of users who run the gamut—from experts in healthy living, blogging, education, small business, organization, photography, mobile living, design, travel, home cooking, and more. Ambassadors are hand-picked by the company to represent distinct ways of engaging with Evernote, and their job is to share their passion with others like them, showing how Evernote can make their personal and professional lives better.

Ambassadors attend meetups, help new users get acquainted with the product, and are enthusiastic promoters. They’re often doling out stickers and premium trial coupons to help turn more of their network into Evernote users. In exchange the ambassadors are associated with a brand they love and recognized as an expert among their peers.

Evernote Rewards

The Evernote Referral Program, launched in September of this year, is yet another way the company leverages word-of-mouth referrals and rewards customers for their loyalty. New users who sign up from a referral get a free month of premium, while referrers get points they can redeem toward perks, such as up to 12 months of Evernote Premium, a 1GB boost in monthly upload limit, a VIP ticket to the Evernote Conference in San Francisco, or a visit to Evernote headquarters for lunch with the team.

Clever Promotions and Marketing

Another way that Evernote leverages the product simplicity as a growth strategy is through broad promotional efforts like last year’s Evernote Holiday Pledge, in which users signed up to receive email tips and guidance for getting more out of Evernote during the Holidays from Ambassadors and the Evernote team.

Acquisitions and Product Extensions

In addition to the original Evernote app, the company now offers several new product extensions to make Evernote more useful to users, including:

  • Skitch — a popular screen capture and annotation app, which Evernote acquired in late 2011
  • Penultimate — a handwriting app for iPad
  • Evernote Hello — a contact management service
  • Evernote Food — an app for keeping track of meals and recipes
  • Evernote Clearly — a distraction-free reading and writing app
  • Evernote Peek — a study aid that works in conjunction with a specially designed iPad cover, which functions similar to the traditional flash card system of learning

These are in addition to a handful of physical products, designed in to work in conjunction with Evernote and Evernote extensions, including:

  • Evernote Moleskine smart notebook, which comes with a subscription to Evernote premium, and is designed so that any page can be photographed and uploaded to Evernote.
  • Two high-end, super-functional backpacks and a laptop sleeve designed by Côte&Ciel
  • The Adonit Jot Script stylus for Evernote, which seamlessly integrates with Penultimate.
  • A ScanSnap Evernote Edition scanner, which scans documents directly to designated Evernote folders.
  • Livescribe Pen integration, turning notes into digital documents with OCR in Evernote
  • Plus t-shirts, socks, a wallet, and more.

The Remaining Pieces of Evernote’s Growth Engine

Evernote indicates that with an awesome product, an inspiring vision, and passionate users, you can give your product away and still turn a profit. The key is creating something that becomes more valuable as users engage with it.

Snapchat

Why and How Did It Grow?

In an age of permanence, timelines, and revenge posts, Snapchat created a way for teens to share photos freely—without the ramifications of other social services like Facebook. The easy-to-use, self-destructing transiency of the experience feels more human in its interaction than regular MMS, Facebook, Instagram, and Twitter.

This freedom, combined with engaging product hooks, and social nature of sharing “in the moment” photos and video, created a powerful new venue and motivation for teens to switch over to Snapchat.

The Need For Snapchat

Snapchat allows users to send photos and videos to one or many friends, while limiting how long the recipients can see them. The maximum time is 10 seconds, just enough for the recipients to enjoy the moment before it is lost forever. To view the content, the recipient holds down a button. They can view the image until the counter expires or they let go of the button. After that, it’s gone.

To help foster the sense of privacy and security, Snapchat includes a built-in alert which notifies the sender if any of the recipients took a screenshot of the photo. Combined with the self-destructing nature, the app actively discourages the saving of photos. This creates less inhibition for users and an overall more fun, care-free experience.

In addition to photos and videos, Snapchat lets users express their creativity by adding text and drawing on the photos. This allows the user to create all types of goofy images and fun things that add to the experience.

While privacy of Snapchat is the obvious benefit, it also has some more subtle, but equally important benefits: disappearing photos mean less digital clutter, removing the cognitive overhead of dealing with them, and saving memory on phones.

Early Traction

The founders first spread the word about Snapchat to college friends at Stanford University, but the app’s popularity didn’t really start to take-off until it made its way into the high school ranks to become a popular means of communication for teenagers.

With Snapchat’s traction in early 2012, they attracted the attention of mainstream press including New York Times. TechCrunch and other press started to cover them too.

By the time the New York Times wrote about Snapchat, it was in the top 5 photo sharing apps, and it hasn’t looked back. Snapchat has not only been one of the top downloads for photo and video app but has consistently been one of the top overall apps downloaded in the App Store.

Facebook’s Attempt as a Fast Follower

Facebook CEO, Mark Zuckerberg saw the rise of Snapchat, and understanding the importance of photos and the teen audience to the Facebook business model, decided to release its own competitor app in late 2012 called Poke.

What was meant to be a Snapchat crushing app, acted more like rocket fuel. The mentions and awareness of Snapchat soared after the release of Poke, fueling further growth and interest in the new app.

By staring down Poke, and eliminating it as competition, Snapchat had a wide-open lane for continued growth. Instead of hurting the company, Facebook’s efforts propelled the company to new heights.

Today’s Growth Engine

Word of Mouth

As discussed, users flocked to Snapchat because it allowed them to stray away from the permanence of others forms of communication and social media. Word of mouth easily spread in the age of group messaging and group selfies.

Like Square, people became aware of the product by seeing others use it as well. New users learn about Snapchat before ever having to download the app themselves—by seeing friends use it or even taking part in the experience by jumping in for group selfies.

We verified the importance of Word of Mouth by surveying over 100 Snapchat users, asking them how they discovered it. 65% claimed they discovered it through word of mouth, with the rest saying it was invites or press.

Strong User Engagement

Strong user engagement is an essential part of the engine driving Snapchat’s growth. One of the most unique aspects of the app is that unlike other messaging platforms, Snapchat commands and demands one’s attention

Snapchat messages arrive as little gifts packed with intrigue. We don’t know what’s inside, and we’re anxious to see what it is. We also know the message will disappear quickly, so we focus on it, giving the message our undivided attention.

Snapchat lets you send Snaps to multiple people at once, creating a social experience around the images and video. And being available on iOS means that Snapchat can be used by people without smartphones (or data plans) to stay in the loop with their devices (like iPads and iPod Touches).

The unexpected and self-destructing nature of the content overcomes our ever-shortening attention spans, while at the same time creating an intense social experience, both virtually among the sender and recipients and in the real world.

Expansion into New Addressable Markets

All of Snapchat’s early growth was among US-based Apple iOS users, press mentions state that 80% of users were US based. This left the Android market unserved and prime for new growth. According to Neilsen, 48.5% of smartphone users were on Android devices in 2012.

Not surprisingly Snapchat’s launch of their Android version in October 2012 unleashed a new wave of press coverage and buzz—all driving further growth.

Snapchat is also expanding internationally, picking up momentum in Europe. Interest in the UK and France now surpasses interest in the US. This international adoption will be a key source of growth for Snapchat in the immediate future.

The Remaining Pieces of Snapchat’s Growth Engine

With reports of nearly 26 million U.S. based Snapchat users it’s clear that the company is building sustainable traction. For context, the same report estimates 52 million U.S. based Instagram users.

The virality that comes with its powerful word of mouth growth engine, increasingly strong user engagement, and ability to tap into new markets will continue to be powerful drivers of growth. The company’s challenge is to balance this growth with the demands of driving revenue and growth without alienating its core user base.

Uber

How did Uber do it? As a multi-sided marketplace business model, how did they crack the chicken-and-egg problem that so many marketplace startups struggle with? Much like Belly, Uber used intense market focus to create local network effects in their launch city, San Francisco, while fueling word of mouth growth through targeting of the early adopting Bay Area techset.

The Need for Uber

Uber is completely changing the way getting private transportation is done in several key ways. First, their smartphone app is integrated with Google maps so that you can see how far away the nearest cars are, set a meeting point on the screen, and hail a car to meet you there. You can even see your driver’s information (including ratings) as you watch the car get closer to your location.

Uber drivers call or text to confirm that they’re on the way, giving you peace of mind that your order was received. Once your car arrives (usually within a few minutes), the driver greets you by name and you hop in. The cars are black cars and SUVs. Uber X, a lower cost version of the service, is made up of a fleet of well maintained sedans.

Once you arrive at your destination, the app charges your card, and you’re free to go on about your day. There’s no need to deal with cash, change, tips, or receipts. You just hop out. (Source) Uber has removed the friction from the typical taxi cab transaction, and made it highly enjoyable in the process.

Bill Gurley sees Uber’s key to growth as a simple one: Uber offers a great product. He explains, “The product is so good, there is no one spending hundreds of thousands of dollars on marketing.”

Early Traction

Though the company was founded in 2009, Uber didn’t officially launch until June 2010. In January 2011, just six months later, they had had between 3,000 and 6,000 users and had already done between 10,000 and 20,000 rides. (Source) So what got them there?

Completely Solves Problems for Riders

Uber provides a solution to a real problem that impacts millions of people.

Among the many problems Uber is tackling are: poor cab infrastructure in some cities, poor service and fulfillment–including dirty cabs, poor customer experience, late cars, drivers unwilling to accept credit cards, and more.

Uber set out to reimagine the entire experience to make it seamless and enjoyable across the board. They didn’t fix one aspect of the system (e.g. mobile payments for the existing taxi infrastructure), they tackled the whole experience from mobile hailing, seamless payments, better cars, to no tips and driver ratings.

Early Adopter Advocacy

In many cases, the importance of the early adopter tech community can be overstated. In Uber’s case it cannot. Uber knew that launching in San Francisco meant that they would be interacting regularly with the tech community who are continually looking for new tools and services that improve their quality of life. Uber took aim at those people by sponsoring tech events, providing free rides, and in general driving awareness among this audience.

The Uber experience became a vector for growth as early adopters in the know impressed their friends with the ability to call a black car from their phone with a couple taps. These new riders were immediately wow’d by the experience and became new users and advocates within the span of a single car ride.

So how did Uber reach those early adopters? One distinct channel was event sponsorship. Uber was highly active at local-area tech and venture capital events and provided free rides to attendees. Uber knew that these attendees were well connected and highly likely to share their experiences with friends, tech press, and social media audiences after trying Uber.

Word of Mouth from Satisfied Customers

Much of Uber’s success can be attributed, as mentioned above, to the fact that it is totally mind blowing compared to the frustrating and broken taxi experience. Max Crowley of Uber Chicago explains: “We’ve found that our growth is driven substantially by word of mouth. When someone sees the ease of use, the fact that they press a button on their phone and in under 5 minutes a car appears, they inevitably become a brand advocate.”

According to Kalanick, Uber relies almost exclusively on word of mouth, spending virtually nothing on marketing. He explains, “I’m talking old school word of mouth, you know at the water cooler in the office, at a restaurant when you’re paying the bill, at a party with friends – ‘Who’s Ubering home?’ 95% of all our riders have heard about Uber from other Uber riders.” In fact, for every 7 Uber rides, word of mouth generates a new Uber user.

This word of mouth is as much today’s growth engine as it was in early days. Uber doesn’t need to do traditional marketing to drive users, they simply find ways to fan the flame of that first trial to reach new people and grow their user base.

Leverage Distinct Growth Opportunities

In addition to providing an overwhelmingly superior solution, Uber has also leveraged some real life situations to spur growth, which Kalanick refers to as “accelerants.” These accelerants indicate a concentrated, temporary need for Uber’s services. These include:

  • Restaurants and Nightlife
  • Holidays and events
  • Weather
  • Sports

Each of these factors makes driving yourself problematic at best (and in some cases downright impossible), and cities in which they coexist are especially receptive to Uber’s services. Uber focused on executing in cities where those problems are near constants to drive accelerated adoption.

Benefits for Uber Drivers

Not only does Uber transform the experience for riders, but it’s also good for drivers.

Uber doesn’t employ drivers. Instead, the service acts as a liaison between people who need rides to drivers who are in the area. This arrangement can bring in more than $500 a day, which amounts to a week of work for some cab drivers.

Like any good service, it’s a win-win for all parties involved, and this is certainly another factor contributing to Uber’s growth.

Today’s Growth Engine

Now, let’s examine today’s growth engine a bit more thoroughly. Growth engine is comprised of several related, moving parts, including:

Intensely Local, City-by-City Expansion

Perhaps the reason Uber has expanded so quickly is because they acknowledge that growth is not one-size-fits-all. What worked for San Francisco may not be what’s right for Chicago or New York, which is why they take it city by city, with local efforts tailored to each new location.

Because of the politics, regulations, and interests that make up each city, Uber needs to adapt their launch plans to suit the unique topology of each new market. It’s this ability to go into a market, understand who the suppliers are, who the special interests are, and account for those dynamics that makes Uber successful right from the start in new cities.

The effort of Uber to support these city launches is massive and all encompassing, from local events, industry partnerships, business development and more. Uber makes sure that their marketing and business efforts are in full support of fueling that word of mouth engine, driving local growth.

Huge Potential to Disrupt Transportation

A major factor contributing to Uber’s growth is its potential.

This potential is the primary reason that Uber has garnered so much attention from investors. The economic, environmental, and everyday implications are huge. They are changing the way that people think about transportation, making it less about everyone purchasing his or her own car and more about purchasing rides (like water or electricity) as we need them.

Controversy and Press

Uber’s word of mouth engine is fueled not only through word of mouth; the company is fast becoming public relations experts. As Uber rolls out into new cities, they face myriad lawsuits from existing interests, challenges to their legality from state and local lawmakers, and varying degrees of support or resistance from drivers.

The company has done a masterful job of turning these dust ups into a platform to tell their pro-consumer story. Uber has taken what could be seen as a massive business hurdle—litigation—and turned it into an asset that drives growth.

As Uber launches into market after market, these controversies are played out in the court of public opinion, and the power of Uber advocates and the quality of the experience, create an outpouring of local public support for the company.

This support changes laws, helps pave the way for Uber in new cities, and the local and national press coverage helps Uber reach more potential users who hear about an innovative new company recreating a transportation experience that is nearly universally disliked by people everywhere.

Low Risk Trials

Uber knows that once you ride Uber, it’ll be your preferred mode of getting around from that moment forward. That insight and confidence makes it easy to make the first ride a free trial. The company routinely hands out $20 first ride credits that let new users take a free Uber ride to try them out.

The Remaining Pieces of Uber’s Growth Engine

Uber is a fascinating case study because it is one of those truly disruptive ideas that completely redefine an industry and change the way people consider long-entrenched beliefs and habits. In addition, their success in a highly political arena, building a multi-sided marketplace among many disparate and entrenched interests is a model for anyone looking to take a moonshot with their startup idea.

Whether you’re tackling healthcare, government, transportation, or other well established marketplace, Uber’s growth provides insights on what it takes to find the growth you’re looking for.

Belly

In just two short years, the Chicago-based startup Belly Card (commonly known as Belly) has helped thousands of small and medium sized businesses overcome customer retention problems through their novel and easy-to-use customer loyalty platform. Their solution is now used by over 5,000 merchants across 46 states, helping them reach well over a million customers.

Belly is a customer loyalty program that offers merchants the ability to provide customized rewards to their customers, while delivering powerful business intelligence back to the store owner.

The Belly solution bridges the gap between a customer’s in-store visits and allows merchants to build and maintain a lasting connection once they leave.

The Need For Belly

Small Businesses

Due to cost, time and technical constraints, the most sophisticated loyalty programs have been little more than email newsletters or buy 10 get one free cards. These approaches have failed to keep up with the loyalty and CRM programs implemented by their bigger competitors.

At the same time, small business technology has been focused more and more on customer acquisition, through the transactional, one-off sale.

Belly went against the trend of flash sales to create a more sustainable business model for their small business customer. They developed an affordable subscription-based product that helped these merchants cultivate longer, more meaningful, and more profitable relationships with existing customers—turning them into loyal shoppers who produce a sustainable and more valuable customer base.

With customer insights and an easy to use system, small business owners who couldn’t afford the hassle or time to set up a complex customer management system could deploy a loyalty system quickly, and have access to the customer behavior data that gave them some of the same tools and insights that were previously only available to their big box competitors.

Franchisors

Small businesses aren’t Belly’s only market. Larger chains that operate on a franchise model are consistently looking for ways to drive store revenues and customer retention. Large franchise model stores are using Belly to enable their store owners to build up customer loyalty, increasing revenue per customer and critical same store sales metrics.

The corporate office then gets to roll up data from across Belly installations to learn more about how local customer behavior, which can be used to inform marketing and product decisions, as well as drive local in-market advertising and promotion strategy.

Customers

Customers of small businesses that use Belly are rewarded for their loyalty. They earn perks and rewards that are relevant to them and delivered via the Belly app on their phone. Belly’s integration with iOS in particular means that rewards and offers are delivered and retrieved easily—customers no longer need to worry about leaving their punch card on the dresser at home.

These customers get rewarded for shopping locally, which makes them feel good about patronizing local sellers. In addition, they receive an improving customer experience, as Belly helps the store identify and tailor benefits to them. All on top of a fun, gamified experience of earning points and gaining rewards.

Early Traction

Belly’s early traction was driven primarily through three main elements: obsessive focus on customer development, direct sales localized to their market area, localized network effects, and continual iteration on product to drive adoption and viral sharing through a gamified experience.

Customer Development

Through their research, the Belly team found that merchants wanted a way to verify a customer was in the store and a way to establish a deeper, lasting connection with each customer. Of course it had to be affordable and easy, and it had to produce measurable returns that could justify the expense.

Easy for Merchants

Belly built its solution so that they are able to provide new merchants joining the program with everything they need to run the solution: the software, the iPads to run the software in-store, point of purchase (POP) marketing materials and physical Belly cards. They also offered a free 30-day trial and low monthly subscription price point of less than $100 to get merchants started.

By providing the hardware and app in-store, Belly turned every merchant into a new point of customer acquisition, driving growth of both sides of their market with every new sign up.

Local Sales

The Belly team gained traction initially the old fashioned way: pounding the pavement and phone lines to reach and sell SMBs in the Chicago area. They were able to sign up 500 merchants in Chicago alone through this approach, reaching local critical mass and enabling network effects to take hold among the local business customers in the city.

Once early traction was established in Chicago, the business began to benefit from localized network effects—as more customers saw Belly in more places, more customers and merchants began to talk about it and request it, driving adoption in the area and making it a fixture on Chicago countertops.

The local sales outreach, combined the low friction adoption process paved the way for establishing a local beachhead in Chicago.

South By Southwest?

After establishing a strong hold in Chicago, Belly looked to its next market, Austin. In what can be inferred as a savvy South By Southwest launch, the Belly team seeded the Austin market in February (SXSW is in March), signing up merchants ahead of the popular tech conference.

This move likely gave Belly early awareness from techsetters in town for the conference, gaining the company not only a second market, but also attention of tech press and more advocates for Belly in many different metros around the country after attendees returned home.

Belly, by pre-seeding the market with lots of new merchants offering rewards, made the app relevant to early adopters as well, driving repeat use and new word of mouth adoption in the process.

Word of Mouth and Bottom Up Growth

In addition to the smart local sales roll out and development of a repeatable market launch strategy, the Belly app creates word of mouth awareness through Facebook integration, gamified points and rewards, and simple sharing of activity to customers’ social feeds. This creates interest among users’ friends both on-site (What are you doing and how are you earning points?) and drives incremental downloads and adoption.

Because Belly hits four important psychological rewards (discovery of something new, achievement through points, status through loyalty, and monetary benefits) the app creates a powerful driver of sharing and adoption.

While it’s hard to measure the effectiveness of this approach on the outside, it at a minimum adds tail wind to all other marketing efforts, and at its best can be a powerful acquisition driver.

The gamified experience, rewards, and word of mouth growth help fuel bottom up demand for Belly at local merchants. This bottom up approach provides several benefits to Belly. First, it helps Belly determine which markets to focus on next. By seeing the total number of users with the app and inbound requests from merchants to get set up on the platform, the company can use the data to determine where to focus their resources for success.

Second, consumers asking about Belly at local merchants drive inbound leads as small business owners’ interest is piqued by their customers asking about it at checkout. Third, it supports their national and franchise sales efforts (more below) by driving demand for the platform up through the national chains from franchisees in the market.

Breaking Down Today’s Engine Growth

In December of 2011, Belly reported 275 merchants using the platform and over 17,000 users who checked in over 45,000 times. Just 15 months later, Belly now has more than 5,000 locations across 46 states, one million users who’ve checked in more than nine million times.

In those stats lies insight into how Belly’s growth strategies have evolved to ramp up their growth. At the core of today’s growth engine are:

  • Low friction, high value solution for SMBs that makes adoption easy
  • Existing customer base driving market expansion, user acquisition, and SMB adoption
  • Strategic national retail partnerships to gain big wins
  • Repeatable local market roll out strategy and process that leverage a combination of direct sales and localized network effects

Low Friction, High-Value for SMB Customers

For every tech startup that has crashed on the rocks of the SMB market, Belly has cracked the code to launch new in-store technology. Its secret? Deep understanding of its customers’ needs.

Belly offers all-in-one plans and pricing that starts at $79/month including the hardware needed to get started. In addition to easy set up, the Belly software provides an out-of-the-box email and mobile marketing platform that is driven by rewards that make sense to the unique needs of the merchant. The in-depth reporting does a great job of demonstrating ROI—the check-in nature of the product provides true end-to-end visibility. There is no guessing about its value.

Word of Mouth from Existing Customers Drive Growth Flywheel

The existing customer base is critical to Belly’s sustained growth. It acts as a strong tailwind for all marketing initiatives, including user acquisition, expansion into new markets, and SMB adoption.

Belly leverages word of mouth (as discussed earlier) through their deep Facebook integration and ease in sharing check-ins and rewards claimed, and the gamified rewards experience keeps user engagement and retention high.

Keeping customers engaged and using the platform is core to creating value for the SMB customers on the platform, and Belly has continued to make the app more engaging and easier for customers to find participating Belly merchants and claim rewards.

Strategic National Retail Partnerships

Belly knew that while going door to door, city by city was a necessary way to gain early traction it wouldn’t give them the hockey stick growth they would need to win the SMB loyalty market. So in addition to the bottom up approach it used launching cities, Belly leveraged user and SMB adoption in cities to fuel strategic partnerships with national retail chains.

By working both bottom up and top down Belly could use local activities to drive interest in strategic partnerships. Belly CEO Lahive attributes the company’s entry into this space to numerous inquiries from franchisees in markets where Belly had already gained substantial traction.

Belly leverages this local data about potential national partners and uses organizational awareness to pre-warm partnership targets to their top-down pitch. Combining this awareness with their data about their user base in the potential partner markets creates a compelling reason for these chains to partner with Belly.

Repeatable Market Roll Out Strategy

As Belly hones its formula of low friction adoption, localized word-of-mouth network effects, and strategic partnerships, it can now repeat this formula in its aggressive roll out to new markets.

Based on their playbook, internal resources and data about where to launch next, Belly can launch multiple markets quickly and effectively—driving the momentum across the country and exponentially growing the business.

Now, with a proven model, their goal is to launch as quickly as possible in as many markets to keep copycat companies out.

Square

By combining an elegant integrated payments system with a distinctive conversation-triggering piece of hardware, Square has disrupted the credit card payments establishment while making credit card processing more accessible to small businesses everywhere.

In only a few short years (they were founded in 2009), Square has skyrocketed to a rumored valuation north of $3.25 billion dollars and 600 employees

The Need for Square

As with most fast growth products, the Square story starts with addressing a widespread need with an effective solution that completely reimagines small business payments. Before Square, it was illegal for nonegistered merchants to accept credit card payments. Registering was a costly and difficult process that most small business owners couldn’t afford.

These business owners struggled with the reality that while most people carried plastic instead of cash, the costs and complexity of credit card processing made it impractical to accept credit cards.

Early Traction

There is not much public information available on the early traction of Square, but Jack Dorsey’s own personal profile (as Twitter cofounder) cannot be understated when it came to attracting early customers and investors. Dorsey created a list titled, “140 Reasons Why Square Will Fail”, which he distributed to potential investors of Square.

The list included counterpoints to each objection, which informed investors that he was prepared for any possible obstacle the new startup may face. “140 Reasons Why Square Will Fail” also served as a clever strategy to acquire new interest.

While Dorsey’s celebrity helped gain early tech press and investor notice, Square was designed to unlock credit card payments for the average small business–not the avid TechCrunch reader. To that end, Jack Dorsey’s celebrity is less important to lasting growth, compared to the obvious early benefits.

Dorsey also promoted his product through demonstrations held with potential vendors and investors of the company showing just how easy it was to use the product. By following the Apple iTunes/iPod model of developing an integrated hardware and software solution, Square was able to create a system that was easy to use, elegant in its design and completely new and remarkable from the other solutions on the market.

By reimagining what it meant to take credit card payments, Square was able to catalyze word of mouth while unlocking untapped markets for new customers.

Despite early challenges, including questions about security, Square began to build credibility and momentum through partnerships with industry leaders and glowing reviews from users and reviewers alike. With high profile partnerships from Apple—where the company stocked and sold its reader for $10 in every store—to a strategic investment from Visa, Square showed their audience and the market that they were a serious new entrant with a product that brands they already trusted believed in. This gave Square the bonafides needed to make the leap from techset darling to a must-have for small businesses hungry for a solution to a long-unmet need.

Looking back at early traction it’s clear that there were 4 factors that drove growth:

  • An elegant hardware/software solution that reimagined the payment processing space, similar to Apple’s iTunes/iPod approach to digital music.
  • A business model that made payments accessible to small businesses who were previously shut out due to price and application process.
  • Early tech excitement based on Dorsey’s public profile to drive initial awareness.
  • Strategic partnerships that drove distribution and credibility fueling growth among their target customers.

Breaking Down Today’s Growth Engine

Square’s growth engine can be summarized at a high level by the following four components:

Compelling value proposition and low friction drives trials

Square solves a real problem that relates to the number one priority of their target customers – making more money. And they make it very easy and low risk to get started. Once a user activates an account on squareup.com, the company automatically ships out a free card reader to them within 7-10 business days. Signing up is hassle free and quick with very little friction, which complements the company’s goal to gain as many new users as possible.

An account with Square requires no contract, no monthly service fee, and doesn’t require a merchant service fee. As an added bonus, the credit card reader comes with a redemption code that allows new users to redeem $10, which is deposited into their bank account after registering the device. Compare this to the traditional payment processor model which required a detailed application, a phone call audit, and an expensive equipment purchase and/or lease.

The Square phone app can be downloaded for free, turning any phone into a reader. The app is practical and easy-to-navigate. Even for non-tech savvy small business owners, Square is a breeze to use. Square customers who have a hard time using their iPhone have no problem taking a payment.

Wow customers with elegant integrated system

Square delivers on the initial promise of solving small business credit card challenges and then goes on to wow customers with an integrated solution that includes beautiful reporting; much of the system solves needs the customer didn’t even know they had (after nailing the obvious problem).

Square’s applications for small businesses make it easy to setup and configure point of sale systems on an iPad, can provide rich insights to help business owners make the most of business opportunities, and help build loyalty through two-way communication between the business app and consumers using Square.

This integrated approach to payments goes far beyond just taking payments.

Customer loyalty is another facet of the system. Square’s Wallet allows users to buy from merchants who accept Square without having to physically take anything out of their pockets to pay (the app has all of the customer’s credit card information saved). A customer can simply walk into the store, say his or her name, and the merchant can pull up his or her account profile and picture through geo-fencing technology.

This technology detects when a customer is nearby a merchant-enabled store. The app also features the ability to find location nearby that accepts Square and provides customers with information such as contact info, menus, coupons, photos, and reviews of said merchants. All innovations around payments to remove friction and delight their customers—business owners and shoppers.

Beautiful highly visible hardware sparks questions

Square spent the time and resources to make the hardware component of their solution interesting and even beautiful to the eye. Compared to other credit card terminals, it’s a work of art.

This visible unique differentiator sparks conversations with customers. People naturally ask “Wow, what is that thing attached to our iPhone?” The experience of signing with your fingers and having the receipt mailed to you is convenient and amazing in itself. It’s completely unlike any other way to pay.

The company keeps pushing forward with new technology such as the Square Register application which turns an iPad into a powerful, point-of-sale system. The app supports a traditional cash drawer and has the ability to print physical receipts with a compatible receipt printer—a smart evolution that acknowledges that cash still is an important part of small business commerce.

While efficient, it also creates a novel moment of surprise and delight as something completely unexpected from traditional purchase transactions. This delight creates goodwill, word of mouth, and customer satisfaction both for the store’s customer and Square’s.

Raving fans advocate benefits of solution

Business owners that are asked about Square are happy to rave about the product. It makes them look smart and hip to their customers and their peers. Square’s hardware design elevates the small business brand and provides delightful elements to their own customers’ experiences.

This positive word of mouth creates a flywheel of momentum for the business.

As more people get added to the ecosystem their momentum gets stronger. New partnerships with companies like Starbucks will put Square in front of millions of new users, driving that flywheel ever faster.

When compared to Intuit or PayPal, both who recently released credit card adapters for iPhones, the positive word of mouth and delightful experiences that generate it are powerful barriers for competition to overcome.

LinkedIn’s

In 2002, Reid Hoffman gathered a team of old SocialNet and PayPal colleagues to work on a new idea—a network that allowed professionals to find and connect with one another. Hoffman and team set out to build a new, lasting professional network based on identity and connections.

Just six months after the start of development, on May 5th, 2003, LinkedIn officially launched. After the first week, the site had registered close to 12.5K users.

Nevertheless, within four months, LinkedIn had hit the 50,000 user mark, and the company, behind the bonafides of its founding team and early promise, landed $4.7M in venture capital from Sequoia Capital in its first major financing round. Within a year of launch, they’d reached 500,000 users. In 2006, just three years post-launch, they achieved profitability.

Then in 2011, eight years after their initial launch, LinkedIn became a publicly traded company.

The Need for LinkedIn

When LinkedIn launched in 2003, online social networks—though great for dating and connecting with friends—were not efficient meeting places for business.

A 2004 Forbes article sums up the site’s core concept nicely, explaining that in the business world, “the most critical step towards finding a job, finding an employee or finding a business partner is getting a high quality referral.” Yet referrals aren’t always easy to come by, especially because people typically have no way of knowing who their connections know. LinkedIn draws upon the theory of six degrees of separation—or, the idea that people are six introductions away from anyone they want to meet.

Rather than letting users initiate contact with anyone and everyone (as was the case for Friendster, the most popular network at the time), LinkedIn users would be restricted to trusted connections that they knew personally or were referred to through others in their professional network.

This gated-connection system helped curb spam and unsolicited invites, making LinkedIn a safe place for sought-after executives like Marc Andreessen, Jerry Yang, and Pierre Omidyar to participate without being inundated with unsolicited requests, while still allowing the site to function as a powerful tool for users to get introductions through their professional networks.

Gaining Traction by Focusing in on the Tech Scene

One way that LinkedIn overcame these challenges and gained traction was by focusing first on the Silicon Valley tech scene.

Hoffman chose to invite successful friends and connections, “recognizing that cultivating an aspirational brand was crucial to drive mainstream adoption.” Having the power players of Silicon Valley’s dot-com successes on the network quickly increased the appeal of LinkedIn, making it a must-have for up and coming Valley workers who wanted to connect with potential investors and advisors.

As more and more members of the tech community joined LinkedIn, the network effect took hold, and the site became the place to connect and access resources.

In many respects LinkedIn solved the classic chicken and egg problem of a network effect business by localizing the network to achieve critical mass around the Silicon Valley audience.

Freemium

Rather than relying exclusively on ad revenue, LinkedIn has used ads in conjunction with other revenue streams, such as the freemium subscription model, quite successfully.

Thus, LinkedIn monetized its key asset, offering subscriptions as a way to make connecting with others easier. It’s still free to sign up for LinkedIn and use the site’s most basic features such as creating a profile and connecting with professional contacts through referrals. However, LinkedIn Premium—which offers special packages for businesses, recruiters, job seekers, and sales professionals—boasts increased functionality and advanced features that vary from package to package.

Among other things, standard LinkedIn Premium can contact people outside their networks via InMail messaging; the Sales Professionals package boasts access to full profiles for everyone in users 1st, 2nd, and 3rd degree networks; Job Seekers are given top-of-the-pile status for the resumes; and Recruiters get a specially-designed workflow and search functions.

Though complicated, this tiered subscription system ensures that the many different types of users that engage with LinkedIn have a Premium package tailored to their specific needs at a price point that makes it affordable.

The most basic LinkedIn Premium packages—“Business,” “Job Seeker Basic,” and “Sales Basic”—are less than $20 a month (Sales Basic is just $16/month), billed annually. The biggest package, “Recruiter Corporate,” runs $719.95 a month.

The Value of Active Users

At a 2012 Growth Hacker’s Conference, LinkedIn’s Elliot Shmukler gave a talk on “Lessons Learned While Growing LinkedIn from 13 to 175 Million Users.” According to Shmukler, LinkedIn learned that “it’s easier to focus on a strength than improve a weakness.”

“It is easier to get an active user to do a lot more than to get an inactive user to do anything.”

Growth First: Virality

But the value of active users isn’t just in their engagement—active users also play a critical role in both re-activating inactive users and bringing in new ones, making virality one of the biggest keys to LinkedIn’s growth.

In order to make LinkedIn the de facto professional network Hoffman knew they needed to get as many people on the site as possible.

So what exactly did they do to encourage this virality? The more apt question might be, what didn’t they do?

For starters, they tested everything. From the number of friends new users were asked to invite to the invitation messaging, the company worked to find the winning combination that converted the most invites to new users. For example, they found that four was the magic number of default email fields for the invites page—any less, and people simply skipped over them; any more, and people got overwhelmed.

The vast majority of users had a single connection—meaning they had accepted an invitation but not gone through the steps to connect with or invite anyone else. Less than 25% of new users actually went through the process of typing in email addresses to invite new users.

It’s at this point that LinkedIn began dabbling in the concept of contact importing, something that’s commonplace now but was pretty novel in 2004.

LinkedIn built an Outlook plugin that could be installed and mined a user’s Outlook contacts for them. Though the process was certainly laborious by today’s standards, it was still a vast improvement over manual entry. As many as 7% of users uploaded their address books, and the number of invitations sent increased by more than 30%.

When people signed up for LinkedIn they were asked about their current company and title, and over 90% of people answered this question. This information was used to engineer what Elman calls the Reconnect Flow.

With the Reconnect Flow, once new users signed up, they were immediately presented with a list of people at their current company already on LinkedIn and the question, “Who do you know?” Connecting was as simple as going through and checking boxes.

After a bit of success from this feature, LinkedIn went back in and added another question into the new user flow, this time asking where they used to work. Again, new users were presented with another list of potential connections from their former companies.

These efforts combined to increase LinkedIn’s virality in a big way. Pageviews increased 41%, searches increased 33%, and there were 38% more positions listed on profiles. And despite the fact that the invitation function was moved to a much later point in the new user flow, invitations still increased by 16% as well.

The process above is what Elman cites as giving LinkedIn the Double Viral Loop. New users invite more new users and also engage old users (who go on to invite new users themselves.) Two viral loops happening at once—brilliant.

The Endorsements feature, which debuted in September 2012, is yet another way that new and active users can reactivate their unengaged connections. Though people question its value to users, for LinkedIn it’s a boon.

Search Visibility

In 2006, the same year that LinkedIn introduced Recommendations and People You May Know, the company debuted one of its most talked-about growth hacks—public profiles.

Making profiles public created big traffic and acquisition gains for LinkedIn. Profiles showing up in search results put LinkedIn in front of more and more people. Plus, once people clicked into the site from search, they had to then sign up for LinkedIn before they could connect with the person they were searching for.

Not only that, but public LinkedIn profiles made having LinkedIn that much more desirable for users who were hoping to up their profile. The site’s natural weight in Google results put user profiles quickly at the top of results for name-based searches in Google.

The key to pulling this off, however, was gaining enough initial growth for public profiles to actually make an impact, which is why the company waited until they’d reached 2 million users before they began indexing user profiles.

Acquisitions

The company’s activities that year (and the one that followed) definitely embody those three concepts. In February of 2012, LinkedIn acquired the Gmail plugin Rapportive, which lets users connect with their contacts on LinkedIn right from Gmail and displays their most recent social networking updates, for $15M cash.

Just three months later, in May of 2012, LinkedIn acquired SlideShare, a platform for sharing professional content like presentations and business documents, for $119M.

Less than a year later, in March of 2013, LinkedIn acquired popular news reader Pulse for $90M, claiming their goal was to make LinkedIn: “The definitive professional publishing platform – where all professionals come to consume content and where publishers come to share their content.”

When looked at as a whole, these three acquisitions (Rapportive, Slideshare, and Pulse) are part of a larger effort on Linkedin’s part to become more than a site where people go to find jobs and hire people.

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