How to Start a Startup: 3 Essentials for Scaling

When the founders of the Y Combinator-backed startup Homejoy wanted to disrupt the cleaning industry, they took a novel approach – they became a part of the cleaning industry.

Right away they realized that they were bad cleaners, so they started buying books on the topic.

But reading books wasn’t enough for them to get the training they needed, so they got a job at a cleaning company. This became a valuable experience because, not only did they learn how a local cleaning company works, but they were able to locate the inefficiencies within the system and used Homejoy to solve those problems.

Adora Cheung is one of the founders of Homejoy, and she recounted this experience at a lecture at Stanford University as a part of YC President Sam Altman’s series on How to Start a Startup. Her talk focused on building a product, talking to users, and growing.

(For more startup advice, check out How to Start a Startup: The Book. It’s the ultimate reference guide to creating a successful tech startup.)

Building your product

Before you build your product the first thing you need to do is ask yourself: What is the smallest feature set that I should build to solve the problem that I’m trying to solve? Cheung advises answering that question by talking to users, seeing what exists, and building to solve your users’ immediate needs.

The second thing you need to do is establish your product positioning – something that took Homejoy a long time to learn.

“When we went to potential users to come on our platform they would kind of get bored after the first few sentences. What we found out was that we needed a one-liner. The one-liner was very important. It kind of describes the functional benefits of what you do,” Cheung explains. “After we changed our position to get your place cleaned for $20 an hour, then everyone got it, and we were able to get users in the door that way.”

When they changed their explanation of their product from a few paragraphs of text to “a way to get your place cleaned for $20 an hour” then people understood what they stood for, making it easier to get supporters.

Getting users to try your product

Once they they were able to simplify their message, the Homejoy team could focus on getting users to try their product. They actually had a very hard time getting people to sign up, so they had to use unconventional methods, like handing out water bottles at a street fair on a hot day.

“We started handing out free bottles of water that were cold. And people just came to us. I think we basically guilt-tripped people into booking cleanings. But the proof in the pudding was that I figured most of the people were guilt tripped into doing it, but then they went home and they didn’t cancel on us,” Cheung describes.

Now they had users and wanted to be able to get as much feedback as possible. According to Cheung, getting user feedback requires these tenets:

  • Always have a way for people to contact you. Homejoy used a phone number and voicemail.
  • Visiting users and talking to them works best.
  • But make sure you’re not interrogating the users you do talk to. Instead, get to know them and make them feel comfortable by framing it as a conversation. Cheung recommends taking people out for drinks or coffee.

Growing users

When it comes to scaling your startup, the aim is to get a good return on the money you’re investing. You want a growth model that is sustainable, but to foster sustainable growth, you need to understand the three types of growth: Sticky, viral, and paid growth.

Sticky growth

With this kind of growth, you main goal is securing returning users. Cheung says that the key to sticky growth is providing a great experience. The better the customer experience, the more people will want to use your product. You want to be so addictive that people are compelled to use your product.

Viral growth

Like its name suggests, this type of growth is what happens when people talk about you. Viral growth depends on a solid referral program, which is made up of three main parts.

  1. Awareness – Where are people learning that they can refer other people? Cheung advises offering a sign up after they use the product.
  2. Platform type play – The Homejoy team actually goes inside the user’s home. When the cleaning professional is inside, they can give the user a card that points them to a link for referrals.
  3. Program mechanics – An example of this would be getting $10 if you invite your friends. Then they use it and they get $10 as well.

Paid growth

When you have money to spend, then paid growth is a viable option. The key is that your customer’s lifetime value (CLV) needs to be more than your customer acquisition costs (CAC).

Let’s say you begin running a bunch of ads over the course of 12 months, but the conversion rates are different for each one. And there are different acquisition costs for different types of ads. Figuring out which ad is successful or not means subtracting the CAC from the CLV. If it is more than zero, then you are earning a profit.

Take-Home Message

Cheung ended her talk by discussing the art of pivoting, something she’s very familiar with. Homejoy is the product of many pivots. It was the 13th idea that they built, executed, and onboarded users for.

Determining which idea is that golden 13th idea and which ideas you need to move on from requires long term thinking.

“Once you realize that you can’t grow, and despite building out all of these great features and talking to all of these users none of them stick, or the economics of the business just don’t make sense – then once you make that realization you just need to move on,” Cheung says.

She emphasized the need for a growth plan from the very beginning. Ask yourself: What is an optimistic but realistic way to grow this business?

Next Steps

If you enjoyed this post, be sure to check out How to Start a Startup: The Book. It’s the ultimate reference guide to creating a successful tech startup.

How to Start a Startup: The Book

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