Ideal channel mix for high-growth startup


(Amro Naddy) #1

Curious what folks view as the ideal channel mix or blend for a high-growth startup?

In my experience, I’ve seen investors have a bias against start-ups that are all SEM/paid advertising, and tend to prefer SEO, direct traffic, and strategic partnership traffic. When we were raising money for Agent Ace / OpenHouse (VC-backed real estate tech startup in LA / Santa Monica tech scene, late 2013 to early 2017 until acquired by Quicken Loans), we encountered investors (especially in LA) who were fairly weary of start-ups that were really just paid-media arbitrage machines, and saw that returns on paid ads tend to peter out at scale.

Thoughts?


(Meghan McCarthy) #2

I’m building a B2C parenting product and I second this question! Customers are far more sophisticated than they were 3-5 years ago and many of the viral growth tactics seem outdated (i.e. literally everything you use has a referral code deal, when is the last time you shared a viral video, etc.). But I’d love to hear that I’m too negative on this front.


(Dane Madsen) #3

The VC community sees customer acquisition built entirely on ad spend as a brutal conversion of investor capital to FB and GOOG revenue. They know that when that spend (really an issue when 1) you have inverted CAC/LTV, or are running a customer churn “game” where you mathematically run out of market) is not sustainable without you building a service people would be sad to not have. They want real viral - not “paid” viral - users. Slack is the highest profile version of this - may Jiro (who became parasitical in a symbiotic way with Slack).

For high growth companies, converting their margin to Facebook margin, with zero focus on the end-customer will end badly. For one client, using FB was default for the user i.e. client loyalty was to FB, not to my client. We have flipped the mission on its head to avoid just the issue you are concerned about. Critical is, if you use the FB/Insta/Snap/Goog route, you have to know in advance this is a black-hole in your P & L and as such spend all your waking hours on retention. If you show you can bring in X users via FB and retain them, then the VCs will think you genius.