How your Missing Piece can propel both your Startup user / customer growth and fund raising!
Okay Startup founders, have you ever experienced that special feeling when you near completion of a complex puzzle? You know, where the pieces seem to snap home, without effort, as if your hand is guided by some external force?
Or, if puzzles aren’t your thing, then after a long long drive, the car seems to propel itself, to have a life of its own, as if it knows where it wants to go and you are just the steady hand obeying its command?
Well, I guess that’s what I’m trying to describe is how you feel the moment you discover the Missing Piece for your Startup’s Growth; that serendipitous insight that can propel your startup to the next stage of growth with less effort and less stress.
So, grab a cup of tea or coffee, this is a long read — but I promise, it will be worth it:
So, to begin, what ‘Missing Piece’? Good question!
What we are looking for — and I’m going to help you describe it and then begin to find it — consists of multiple parts — but equally, it is the simple essence or singular focus (NorthStar, if you like) that you need to discover to raise funding and, at the same time, drive your user and customer growth.
What I’ve discovered is that it doesn’t much matter whether you grow your startup through investors’ money, your own money or customers’ money; your ability to identify and stay headed towards your NorthStar is the essence of building a successful startup.
Oh, and of course, the fun bit is that startup NorthStars tend to drift and move. So, the ‘what is our NorthStar’ is a question to *keep* asking to make sure you still have the right focus. (Sorry about that).
So, as we ask ‘what is our NorthStar?’ we also need to ask ‘will it always be this NorthStar?’ too.
Essentially, if it isn’t clear what you are focused on, then neither you, nor anyone else frankly, will want (or should) invest and customers will struggle to buy your products because they will remain confused or uncertain.
(I do allow exceptions to this rule, of course — where your startup is still in idea stage — where you are figuring stuff out. However, until you have passed this stage, heavy investment is unwise.)
Okay, NorthStar, what *exactly* am I talking about? Okay, let me take you through a few steps to explain this:
Growth Hackers have a formula which can help — and that can be adapted for any (including your) startup which helps us focus on what matters most:
Growth = Top of the Funnel x Magic Moments x Product
I’ll define each part below — but note how each part magnifies the total Growth. That means if you build a unique Product but fail to create Magic Moments or Top of the Funnel engagement, you will see zero results! Likewise, great marketers without a great Product will fail too.
So, let’s define these:
Top of the funnel is essentially how suspects become prospects by connecting to your business (in marketing we talk about funnels — as we seek to bring as many prospects through the funnel and to the ultimate destination of becoming a retained user or repeat customer).
How you defined the point of connection is up to you and your startup — so, if you are a shop, it might be customers coming through the door; if are selling a complex service, then probably an email list is essential (like this one); if you are a media heavy company then maybe you prioritise YouTube channel subscribers etc…
And your Product, is well, your Product — albeit here we really mean how good is your product / service at bringing back customers / users again and again without push notifications or advertising. This is called stickiness and you can read about on VC Sequoia Capital’s blog here.
Which leaves — Magic Moments! Okay, this one doesn’t have such an easy definition. And, for you and for each founder, it will be something different, something unique, a vision, or an insight into what ‘really matters’.
Magic Moments are in effect, our NorthStar.
Simple; improving top of the funnel acquisition or product development is largely a process or journey which can be mapped out and with good people and good data, optimised. Magic Moments, however, are whatever you decide they should be. They are a choice — a decision — to prioritise ‘this’ over ‘that’. The choice is made from your gut feelings — sure, based on years of experience, but it is what you believe moves the dial in the biggest and most impactful way for your users and your customers.
Again, creating Magic Moments are the one thing that you would still focus on, if you were forced to choose! Hence, they are the essence of what makes your startup unique, different and special. Whereas the marketing techniques and software developments are more (not entirely) predictable.
Now, hopefully, you can see where fund raising fits here too?
Investors are also looking for that one single knockout factor that sets you apart from incumbents or legacy businesses or, indeed, other startups. That Magic Moment or NorthStar!
So how do you find your Missing Piece? Your Magic Moment, NorthStar etc? Well, the best way is through examples of startups that discovered, lost and then began to rediscover them:
Moving Startup NorthStars
First up, Uber
A magic moment for a customer of Uber taxis is when you open the app and see that there are cars that could pick you up within 5 minutes. Wow! Especially, if you’re in an unfamiliar city or location where you don’t speak the local language or it is an odd time of day — this ‘available now’ service is amazing, incredible — like, Magic, right? It makes you want to say ‘how do they do that!?!’
So far, so good! Hence, Uber built a pricing model to ‘encourage’ drivers to be available at busy times and hence, deliver an ‘always ready’ service.
However, once Uber reached the ‘just 5 minutes away’ availability, customers don’t care if the service ‘improves’ to just 3 minutes away or 2 minutes away.
So, in other words, the ‘NorthStar’ that drove Uber to add more drivers and capacity so that people could get a faster and faster response — stopped having any impact once they reached ‘ready in 5 minutes’.
Hence, what is Uber’s NorthStar now you might ask? Good question, and why are they are now delivering food (Uber Eats) and even vaccines and other packages?
Uber have now switched from ‘ready when you are’ to ‘whatever you want, now’ — they have switched from availability to ubiquity — the ‘anything and everything, now’ model that Amazon moved to.
Hence, Uber’s NorthStar took them a long way, and then it crashed and they had to refine their Magic Moment, their unique quality.
Similarly, Facebook’s early NorthStar might be defined as ‘connections’ — so the more connections you or I added — the more valuable Facebook became. However, once you or I reached 120 or so connections, then we moved from sharing with trusted friends and family to sharing with more distant acquaintances — and once we are no longer in our trusted tribe, we are more hesitant to share personal news!
You can guess the rest, right?
I know this is a long piece — so if you got this far, thanks for bearing with me — but here’s the really AhHa! moment for me.
I work with teams to raise seed rounds and we’ve focused — and needed to — on the factor that drives the multiplying network effect and why that factor will continue to be relevant in the future (yes, many early multiplying effects fade — and VCs have now learnt to be more suspicious about a startup’s ability to maintain their multiplication effect).
Hence, whilst VCs ask about your Network Effect (or multiplier factor) and Growth Hackers speak about Magic Moments and others talk about NorthStars — it turns out — pretty much, that they are all looking for the same thing.
This insight that NorthStar, Magic Moment or Network Multiplier are essentially the same thing solves a long running question that I have had — and maybe you have had too;
Which should our startup focus on: customers/ users or investment?
And the answer is, of course, both — because they are driven by the same Missing Piece or NorthStar; that is, the ability (and hard work) to distil all the noise into the one critical signal on which all else — user acquisition, customer sales and investment attraction — depends.
Combine this insight with the ability to rigorously and unstoppably focus on that one single metric and you will drive your startup forwards and upwards.
That’s why for me, this was a ‘everything falls into place’ or ‘the puzzle pieces fit themselves’ moment. It no longer matters whether you seek to raise funds or sell more — they should both be driven by the same thing — moving the needle, shifting the dial, on the one critical factor — your Missing Piece or NorthStar.
Hence, your marketing plan is focused on NorthStar goal, your product development plan is focused on the same, your customer experiences the same; and, if you are seeking funding, then your investment pitch is about the same NorthStar and why it has a multiplier effect that will see you grow in the years ahead.
So what matters is that we find, like really, really find our NorthStar and then direct all our resources (no matter how limited or how excessive) onto that one factor.
And, if we achieve this, customers will give us their money, users will give us their time and investors will knock on our door.
Apply this question to your Startup:
What is your Startup’s NorthStar (and, will it be the same if you are x10 or x1000 larger)?
And if you don’t know or are unsure, get some help.