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What is Hockey Stick Growth?

Growth is the lifeblood of any startup. It’s what investors look for, what founders obsess over, and what can make or break a company.

One type of growth pattern that every entrepreneur dreams of is the fabled “hockey stick” growth curve. If you’ve ever looked at the charts of runaway successes like Facebook, Uber, or Airbnb, you’ve seen that iconic hockey stick shape.

But what exactly is hockey stick growth? How do you achieve it? And is it really as glamorous as it seems?

I’ve seen my fair share of companies chasing the hockey stick. Some have achieved stratospheric growth, while others have burned out spectacularly.

In this post, I’ll break down the concept of hockey stick growth, explore what it takes to make it happen, and share some hard-won insights from my experiences.

What is Hockey Stick Growth?

Hockey stick growth refers to a sudden and explosive increase in a company’s key metrics, like user growth, revenue, or market share. The curve on a graph takes on the distinctive shape of a hockey stick, with an extended period of slow or flat growth followed by a sharp upward swing.

This rapid acceleration is what every startup dreams of – going from zero to hero in a matter of months or years. It’s the growth pattern that can turn a scrappy little company into a billion-dollar unicorn seemingly overnight.

The Phases of Hockey Stick Growth

While the hockey stick curve looks deceptively simple, there are actually distinct phases that companies go through on the path to explosive growth:

  1. The Traction Phase This is the slog – the early days when a startup is scrambling to find product-market fit, build an initial user base, and figure out a repeatable customer acquisition model. Growth is slow and incremental.
  2. The Inflection Point This is the magical moment when everything clicks into place. The product resonates, the marketing engine hums, and growth starts to accelerate rapidly. This inflection point marks the curve of the hockey stick.
  3. The Escape Velocity Phase Once a startup hits escape velocity, it’s off to the races. Customer acquisition becomes a self-sustaining cycle, with new users and revenue fueling further growth. This is the vertical blast-off part of the hockey stick curve.
  4. The Saturation Point No growth can continue at a breakneck pace forever. Eventually, the law of large numbers kicks in, and the curve begins to flatten out again as the market becomes saturated. Smart companies capitalize on this to find new growth channels.

Factors Driving Hockey Stick Growth

So what factors enable this coveted hockey stick trajectory? While there’s no single recipe, some common ingredients include:

Network Effects

Companies with strong network effects, where each new user adds value for existing users, can experience powerful growth feedback loops. Think social networks, marketplaces, and collaboration tools.

Example: As more people joined Facebook, the platform became exponentially more valuable, attracting even more users in a self-reinforcing cycle.

Virality

When a product or service has inherent virality baked in, it can spread like wildfire through word-of-mouth and organic sharing. This drives efficient, exponential user acquisition.

Example: Hotmail’s genius move of appending “PS: I love you. Get your free email at Hotmail” to every outgoing email was an early viral growth hack.

Product-Led Growth

By making the product itself the primary acquisition and conversion engine, product-led growth (PLG) companies can scale rapidly with lower customer acquisition costs.

Example: Slack’s freemium model allowed their product to spread virally within organizations before monetizing power users.

Technological Shifts

Disruptive new technologies can open massive new markets and growth opportunities for companies that ride the wave early.

Example: The rise of smartphones unlocked global scale for mobile-first companies like Uber, Snapchat, and Pokemon Go.

Challenges of Pursuing Hockey Stick Growth

As thrilling as hockey stick growth sounds, it’s not all sunshine and rainbows. Chasing hypergrowth often comes with a unique set of challenges:

Scaling Pains

Periods of explosive growth can put immense strain on a company’s resources, infrastructure, and processes. Supply chains get stretched, technical debt piles up, and cultural cohesion is tested.

Burn Baby, Burn

Financing all that growth is expensive and cash-intensive. Startups often have to burn through massive amounts of investor capital to outspend competitors and “buy” growth.

Talent Crunch

Hiring and retaining top talent becomes exponentially more difficult when you’re in hyper-scaling mode. The war for engineers, product managers, and operators is real.

Regulation Risks

Companies that grow too big, too fast frequently find themselves in regulatory crosshairs as concerned governments try to rein them in (hello, antitrust lawsuits).

Famous Examples of Hockey Stick Growth

While hockey stick growth is the exception rather than the rule, a few notable companies have embodied this dream:

Facebook: From a Harvard dorm room project to a global social media behemoth with over 2.9 billion users, Facebook’s user growth curve is the textbook hockey stick example.

Netflix: After starting as a humble DVD-by-mail service, Netflix’s growth skyrocketed as it transitioned to streaming video, now boasting over 220 million global subscribers.

Uber: The ride-sharing giant went from scrappy startup to global domination in under a decade, with operations in over 700 cities and a massive $72 billion valuation at its peak.

Slack: The collaboration software’s user base grew a jaw-dropping 5,092.9% from 16,000 to 8 million users within three years of its public launch in 2014.

How to Identify Hockey Stick Potential?

As an angel investor, one of my key objectives is spotting companies with legitimate hockey stick potential early on. While there’s no foolproof formula, here are a few factors I look for:

Massive Addressable Market: To sustain exponential growth, a startup needs to be playing in a market that’s truly massive – we’re talking billions of potential customers or users.

Product Delight: The product has to be 10x better than existing solutions, delighting early users and inspiring zealous word-of-mouth advocacy.

Scalable Customer Acquisition: There needs to be clear, scalable customer acquisition channels that can be aggressively (and cost-effectively) poured fuel on to accelerate growth.

Founder-Market Fit: The founding team needs to have unique insights and unfair advantages in truly understanding and serving their target market.

Data-Driven Iteration: The ability to rapidly test, measure, and iterate based on user data signals is critical for finding and optimizing growth levers.

Of course, even ticking all those boxes is no guarantee of hockey stick success. But those are some of the vital signs I look for when investing.

TL;DR

  • Hockey stick growth refers to a sudden, explosive increase in key company metrics like user growth or revenue, forming a distinct hockey stick shape on a chart.
  • It typically involves phases of slow initial traction, an inflection point acceleration, reaching escape velocity, then eventual market saturation.
  • Drivers of hockey stick growth include network effects, virality, product-led growth models, and riding technological shifts early.
  • Challenges include scaling pains, hyper-aggressive cash burn, talent wars, and regulatory scrutiny from growing too fast.
  • Famous examples of hockey stick growth include Facebook, Netflix, Uber, and Slack.
  • Spotting hockey stick potential early involves assessing factors like market size, product quality, scalable customer acquisition, founder expertise, and data-driven agility.

Q&A

Q: How long does it typically take for a startup to achieve hockey stick growth?

A: There’s no set timeline, as every startup’s journey is different. Some companies like Slack have hit hockey stick growth in just a few years, while others like Facebook took closer to a decade to really take off. It ultimately depends on finding product-market fit, an effective growth engine, and favorable market conditions.

Q: Is hockey stick growth always sustainable long-term?

A: Not necessarily. The growth curve will inevitably hit a saturation point as the addressable market becomes tapped out. Sustaining long-term growth requires constantly finding new markets, use cases, or revenue streams to restart the hockey stick cycle.

Q: What role does fundraising play in enabling hockey stick growth?

A: Fundraising is often crucial to fueling the aggressive spending required for hypergrowth, whether on marketing, R&D, or scaling operations. Well-capitalized startups can essentially “buy” their way into hockey stick growth by outspending incumbents. However, running out of runway and having to cut growth spending prematurely is a major risk.

Q: Are there any risks or downsides to pursuing hockey stick growth too single-mindedly?

A: Absolutely. An obsessive focus on reaching escape velocity can lead startups to neglect other vital areas like company culture, technical infrastructure, or fiscal responsibility. Many unicorn startups have suffered dearly from this tunnel vision. You can grow too fast for your own good if you’re not careful.

Hockey Stick Growth Quiz

  1. What shape does a chart depicting hockey stick growth resemble? A) A flat line B) A roller coaster C) A hockey stick D) A bell curve
  2. Which of these is NOT typically a driver of hockey stick growth? A) Strong network effects B) Product-led growth model
    C) Proprietary technology D) High customer acquisition costs
  3. At what phase does hockey stick growth rapidly accelerate? A) The traction phase B) The inflection point C) The escape velocity phase D) The saturation point
  4. Which company exhibited textbook hockey stick user growth? A) IBM B) Myspace C) Nokia D) Facebook
  5. True or false: Companies pursuing hockey stick growth often need to burn substantial investor capital. A) True B) False

Answers:

  1. C) A hockey stick
  2. D) High customer acquisition costs
  3. B) The inflection point
  4. D) Facebook
  5. A) True

Scoring:

5 Correct: Unicorn Founder – You clearly have an expert grasp of what drives explosive startup growth and how to identify its potential. Invest wisely!

4 Correct: Growth Hacker – You understand the fundamentals of hockey stick growth trajectories and what it takes to spark that kindling. Keep learning and iterating.

0-3 Correct: Early Traction – You’ve got some of the basics down, but there’s still more to master when it comes to recognizing and enabling massive growth opportunities. Stay curious!

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