Building a Sustainable Growth Model

Building a Sustainable Growth Model

Move beyond linear funnels to build compounding loops that drive scalable, long-term product growth.

Help the user with building a sustainable growth model using insights from 16 guests and posts across Lenny's Podcast and Newsletter.

How to Help

1. Audit current mechanics - Assist the user in identifying whether their current growth is driven by SEO, paid ads, sales, or virality based on product characteristics.
2. Visualize the model - Guide the user to map out their growth as a system of interconnected, reinforcing loops rather than a one-way funnel.
3. Quantify the loops - Help the user build a mathematical representation of their growth variables in a spreadsheet to stress-test their assumptions.
4. Identify constraints - Analyze where growth is stalling by diagnosing failure points in the user journey from acquisition to retention.

Core Principles

Loops over funnels

Shishir Mehrotra: "But I highly encourage drawing a diagram like this for your business. I'll flash it up on screen for a second and I'll describe it, but this is what the diagram looks like, black loop, blue loop, and it's basically the two different ways that our product spreads. The Black Loop is someone comes in, they make a doc, they share with a group of people, some subset of the people turn around and make another doc, and the process repeats itself over and over again."

Visualize growth as recurring loops where the output of one cycle becomes the input for the next, creating organic mechanisms for scaling.

Mathematical reconciliation

Dan Hockenmaier: "And that's how I think about a growth model, so the analytical representation of how the business grows and it's typically built in a spreadsheet which has a really nice feature of being very hard to fake. You can talk about a business conceptually, but when you actually have to get it to line up and link in a model, it's very hard to not force yourself to understand how the business works."

Building your model in a spreadsheet forces you to reconcile conceptual theories with mathematical reality, ensuring all variables are linked.

Prioritize volume via low barriers

Archie Abrams: "In a given cohort of merchants, a lot of people will start. Some of those people on their first attempt that's entrepreneurship might not succeed, but the folks who do go on to be successful will make that entire cohort of merchants who started something that makes Shopify as a business extremely successful. And that's why we lower the barriers to get started and help folks grow, and those winners make the whole thing work."

In power law models, maximizing top of funnel volume by lowering entry barriers is more effective for long term revenue than early optimization.

Capture kinetic energy

Sarah Tavel: "This is where I love to think of every time a user users your product, let's say they're clicking on the mouse or they're tapping on their phone, I love to think of it as this kinetic energy that they're putting into your product. You're taking that energy, and your job with a great product, is to take that energy and, as much as possible, convert it back to the experience that they're having with your product."

Sustainable growth is achieved by converting individual user actions into collective network effects that improve the product for everyone.

Target high density networks

Nikita Bier: "We found that as a user got older from age 13 to 18, the number of people that they invite to an app just declines almost exponentially. Finally, and the most important thing is they see each other every day, and that is so critical."

Viral growth is exponentially easier in demographics with high daily physical proximity and malleable social habits, such as younger cohorts.