On when to turn on growth

Today I had a chance to sit down with Alon Wertheimer, a brilliant mind in early-stage growth. Alon was the first marketing hire at two startups: Aaptiv and Truebill. He shared with us many of the lessons he learned in scaling Aaptiv, including some of the mistakes he made, and how they informed his second run as head of Marketing at Truebill.

This is a must-watch for any early growth marketer, analyst, and LTV/CAC junkie.

Hard Lessons Learned

Alon shared two critical lessons from his time at Aaptiv. First, that they relied too much on a single growth channel, and second that “when we scaled… we didn’t have the premium engagement that we needed.”

Initially, their “CACS were so freaking low” that engagement was of little concern. It cost them around $10-12 to get a customer to start a $9/month. And for a company whose biggest priority was growth, scaling this channel with those economics felt like the obvious thing to do. This mistake though; burning through cash and early customers when the product wasn’t quite ready yet.

“We didn’t realize how easy it is to make changes when you’re small, and how hard it is when you’re larger. I wish we took that time to focus on the product to make it stronger. We could have delayed [scaling] until we actually found what works.”

Truebill’s Success: First, Get Sticky

Alon said Truebill’s founders immediately understood that “we only have one chance to reach our customers”.

The LTV:CAC ratio is important, but goaling that metric alone can incentivize “bad growth” if your product doesn’t keep users engaged, especially as CAC starts to climb. CAC will inevitably increase as your user base grows. “if you don’t have a business that’s truly sticky and engaging, you won’t be able to grow LTV over time…eventually your CACs are going catch up.”

“We knew not to scale… we didn’t have that long-term stickiness yet”.

Before scaling, Alon wanted engagement, and he developed an eloquent yardstick for it. He wanted to see people “getting value on some kind of cadence”.

Hold…Hold… Charge!!!  

Throughout the talk, Alon warned against pouring gas into an engine before it’s fine-tuned. This is really about agility and optics.

For a huge market like the US, you’re not likely to run out of fish to spear. The biggest factor is the timing of growth, and the story it tells both your target market and potential stakeholders.  

“Nobody wants to see you slow down. No VC is gonna get excited about a company that’s growing at a slower pace.”

As your CAC increases, growth will get slower and more expensive. You want to already deliver a disruptive, high-value product by the time that happens, and to be running the most efficient funnel possible.

Alon evoked the famous scene from Braveheart. It takes patience and discipline to wait until the right moment to go big, to apply the bulk of your marketing resources when the product and marketing channels are optimized.

Diversify, Experiment

Alon kept coming back to the need to diversify and experiment with your sales channels.

“Advertise enough to have enough people in the funnel so that you can do testing to improve conversion, to understand how sticky the product is.”

He advised against putting all your eggs in one basket when it comes to marketing channels, even if one is outperforming the others. All channels are likely to mature, so having several maturing at different rates minimizes the chance of a big drop in growth.

Additionally, he said to constantly tweak your existing channels and search for new ones. While your traffic is still small, find the most efficient funnels that bring you the highest LTV clients. Focus on your ROAS (Return on Ad Spend), and the relationship of each channel’s ROAS to the LTV and engagement it brings in.

“The early days are great for understanding what channels you want when you’re gonna go strong, and for developing a stickier product to boost your LTV and even have some organic traffic coming too.”

Smart Growth: Slow Down, Find Your Fit

Alon’s battle-hardened wisdom is of huge value for any early stage company. Even after you have the funds to scale quickly, resist the urge to grow before the product is ready. Make sure you get the most out of ad spend by maximizing LTV with a perfect product fit, as well as a sales funnel that brings you the highest-value clients.