Without question, the most popular slide in a startup pitch deck is the one showing hockey stick growth.
When you find product/market fit and start seeing rapid customer acquisition, the theory goes, your basic X/Y axis of time and revenue will show exponential jumps. Your monthly revenue goes from $7,000 > $70,000 > $700,000, hence the hockey stick graphic.
Source: Guy Routledge
Obviously, this is an extremely attractive slide to put in your pitch deck or financials. And while it’s clearly oriented toward venture capital investors, over the last decade hockey stick growth thinking has made its way into private equity and the broader marketplace as others learned from and emulated the growth of Facebook, Google, etc.
The slide does have value, but investors, companies, and founders still frequently mistake the hockey stick as a model for growth, rather than the consequence of it. Noah Kagan, growth marketer and early employee at Facebook and Mint.com, wrote about this a few years back and it continues to be a good reminder.
Since the problem has been covered quite a bit I won’t go into detail, but it is still clearly (and painfully) present in the course corrections of Uber and Lyft in the public markets, collapse of WeWork’s IPO, and Softbank’s recent pullback on companies like Honor, Seismic, and Creator.
I don’t personally believe that the course corrections mean all startups should suddenly become profitable, as Ezra Galston (a level headed VC at Starting Line in Chicago) lays out nicely in a recent newsletter. I’ll let other folks sort that out, too, but suffice it to say that when massive late-stage funding rounds start enabling private companies to look and act like $50B cap public companies, there’s a problem.
All of that said, the correction is happening for a reason and an important corollary is that startups need to re-engineer the way they think about growth from the hockey stick to zooming in on a “stairs” model.
A better, more operations focused way of thinking about growth
The stairs model of growth
If you’ve worked in a fast growth organization, the stairs model won’t sound new because it isn’t.
Move fast and break things is a mantra in many startups. But breaking things for the sake of breaking things is both irresponsible and ineffective. Any growth hack, whether through marketing or partnerships or simply accessing a new audience in an unexpected way, has to eventually be tested to see if it is a repeatable model over time and that is where the stairs come in.
The most important slide in your pitch deck (and within your company’s regular metrics) then, isn’t the hockey stick one, it’s the one that clearly represents both the growth opportunities you go after and the team and tools you put in place to see if it can be replicated. Simply put, a hockey stick growth slide zoomed in is actually a stair slide, or a series of stairs growth slides.
This is important because when founders (and investors) set expectations, that translates into culture and practices for the entire team. If you set an expectation of hockey stick growth as the goal, you are making it clear nothing else will be tolerated.
If you set an expectation of stairs growth, you’re more likely to end up with a hockey stick that’s durable and flexible and that doesn’t break when you get to the top of it.