Startup Growth Strategy: Lessons from Uber | Mark MacLeod

March 18, 2024 - Mark MacLeod

The Secret to a Winning Startup Growth Strategy: Lessons from Uber

Startup Growth Strategy

“The minute you raise VC, you have one option – grow & try to become big. No VC is interested in dividends – they want growth.”

Mark Suster, Upfront Ventures

VCs want one thing: growth!

I talk about this a lot.

I do that because most startups don’t deliver that growth. As a result, most VC investments fail. This is why VC fund returns depend on one or two home runs.

Your #1 job as a venture-backed CEO is to deliver revenue growth.

In this article, I would like to unpack how to create a winning startup growth strategy for your company.

Strategy doesn’t create value. 

Before getting into this I want to get on my soapbox for a minute.

Many companies spend a LOT of time on strategy.

They organize exec team off-sites. They prepare fancy presentations full of 2 *2 matrices.

They come up with complex, well-thought-out strategies.

And fail…

Strategy doesn’t create value. Execution does.

We don’t get fitter by thinking about going to the gym. We get fitter by exercising.

It’s the same thing for delivering results and creating value in your company.

I will take A+ execution on a C+ strategy over C+ execution on an A+ strategy every day of the week.

Keep it simple. 

The best strategy is simple. Simple to understand. Not necessarily simple to execute.

Why? Because speed is everything to a VC-backed startup. If you grow 100% in 6 months vs. 1 year, your company will be twice as valuable (or more).

When you are in that growth, you are hiring. Constantly. Your strategy needs to be easily understood by everyone. That’s why it needs to be simple.

Simplicity is important in execution as well. Again, this is for speed.

If your startup growth strategy is complex, you risk going slower as you try to figure things out.

Simple strategies win the day.

Startup Growth Strategy in Action: Uber

Uber is a great case study since we likely all know it. Also, in less than two decades they built a company worth $160B.

Uber’s strategy was simple to understand but hard to execute. And the reason why they are worth $160B is because of their relentless focus on execution.

Uber’s growth strategy can be boiled down to a few key pillars:

1. Disrupt an old experience: Before Uber, we had to call a cab and wait. Or hope one would drive by. We had to have cash.

A driver would drive around hoping to pick up a ride.

With Uber, we press an app and a car magically appears. Quickly. When we get to our destination, we just get out.

We can set aside whether drivers earn a living wage. But, Uber delivered a completely disruptive experience to both drivers and riders.

2. Aggressive market expansion: One of the keys to the magical user experience is speed. The car needs to show up quickly.

This requires density. In a given city you need a lot of customers that want rides. And you need a lot of available drivers on the network.

Uber aggressively subsidized both sides, enticing them to use Uber over any other option.

They used capital as a strategic asset. They incurred massive early losses in order to box out their competition.

3. Dynamic pricing: Uber is a two-sided marketplace. The key is balancing supply and demand. Once they had that figured out they introduced dynamic pricing.

Busy time? Surge fares show up. Your ride is now more expensive. They were only able to do this because they had won the market. They had the supply and the demand.

4. Deliver things not just people: Over time they expanded what they do. Now Uber Eats (food delivery) is a big business.

What we see here is a strategy based on complete market domination. Easy to understand. Hard to execute.

strategies for startups

So, let’s get back to your company.

Strategy by Startup Growth Stages

Uber didn’t try to do all these things on day one. There is a sequencing to startup growth strategy.

All startups must go through these phases:

Phase 1: Product-market fit. 

I used to be a General Partner in a seed-stage VC fund. I was the first institution investor in young startups.

As soon as I invested, I would remind the founders:

“We don’t have a company yet. Until we find a market segment that LOVES our product, there is no company.”

Phase 1 is about testing and iterating till you find that first segment that pulls you in.

You don’t think about growth here. Customers are just a means to an end.

You want customers only so you can learn and test.

You are not trying to “grow.” You are just trying to find a segment of the market that is the best fit for growth.

Bringing this back to Uber. They tested and iterated in one location (San Francisco). They did this with a small number of cars and users. 

This is all that they did until customers started pulling them in. Till they knew that they had a product that the market loved.

Phase 2: Finding a growth channel. 

Once you have that initial market pull you need to find a growth channel. You need to find a proven, repeatable way to reach this segment of the market.

This is your sole focus. This means testing many channels. You need to run small, rapid experiments till you find something that works.

Uber’s growth channel strategy was quite specific to them in the sense that it was local. One city at a time.

That likely doesn’t apply to your business.

But they took the same approach: they tested their way into a proven channel and then went for it.

Phase 3: ExpansionBuild a sausage machine. 

I often joke that startups are like sausages: they taste good. You just don’t want to know how they are made.

Every startup, even the most successful ones have issues. This is an unavoidable consequence of growth. This is why the issues show up.

The point here is to build a repeatable machine. To figure out the recipe.

The ultimate pitch for a later-stage VC is this:

I have figured out the recipe. I know where to go to find customers. I know how much they are worth. Therefore, I know how much to pay for them.

I have proven channels to find these customers.

I have the leadership team in place to scale this playbook.

I can make 10 sausages today. With more capital, I can make 100. They will all taste the same.

This is when VCs back up the Brinks truck and unload capital.

Uber did this. They built a documented playbook for scaling one city at a time.

It was not set in stone. It was a living, breathing, evolving thing.

But they had a baseline. Each time they entered the city they had a playbook to help them scale fast.

Most importantly, they had the leaders in place to help them manage that scaling.

The Winning Startup Growth Strategy

Putting this together, there is no one universal strategy. But there are universal phases.

Every startup must go through these three startup growth phases in order.

The winning startup growth strategy is simple to articulate. But often hard to execute. Most importantly, it is implemented rapidly. Speed is often the most powerful element of a startup’s strategy.

How does your company rank in these dimensions?

What are you working on that isn’t a fit given the stage you are at?

How can you make your strategy simpler?

How can you move faster?

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