Key takeaways

In this workshop, we review the stages of Rapid Growth Startups:

Stage 1. Prototype
Stage 2. Minimal Viable Product (MVP)
Stage 3. Product-Market Fit (PMF)
Stage 4. Go To Market Fit (GTMF)  
Stage 5. Scale-up

We talk through some of the most common mistakes as companies move through these stages, why Revenue leaders sometimes find themselves without a job 12-18 months after they have been brought onboard, the down-round (or keeping open the B-round), and more.

Hi there, my name is Jacco Van Der Kooij. I'm the Founder and co-CEO of Winning by Design. And in this series, I'm sharing with you the passion that we have at Winning by Design for sales. And in particular with sales as a science. We approach sales from a scientific perspective. And one of those key lessons that we learned is the use of models which I'm going to talk to you about today. Let's get started with these models. Now up to this point, we have spoken about several models already and those of you who've seen the previous videos of the recordings, I hope that you recall that we spoke about one of the first models that we spoke about was the Business Model. And the second model, the other model that we spoke about was the Go-To Market Model. If you haven't followed up on these various models, if you haven't seen them, go check out our YouTube channel where they are readily available for you. And when I say readily, no, you don't have to sign up for it. No email, no gates of any kinds, no pixels, all we ask you is just enjoy it. And hopefully give us a like or a thumbs up or something like that. Write a comment. I'd love for you to ask questions and so on in the context of these YouTube videos. Comments after these YouTube videos. Okay, let's get started with the third, the next model and this model is all about Growth Stages. Now, growth stages, what we're going to talk about, I'm gonna draw first the framework what we're going to think about. And this framework works as follows, in this, we have a horizontal axis, where you see time depicted, and on the vertical axis, you see the amount of recurring revenue. Now, what we see on the left lower corner, right up here-ish, what you're going to see there, is what happens before we have revenue. We call this Pre-Revenue. And in those stages we have two very specific... In that moment we have two very specific stages. We call it Prototype and MVP, Minimal Viable Product. Now, by the time we come out of that stage we need to have a working product that can be used to be sold. It needs to be a product that the client is willing to pay revenue for. Now, that is the marker that we're going to use to start. Next from that, where we're gonna look, is how do we get to $1 million in revenue? Now this $1 million in revenue indicates that clients are willing to pay money for the service that you provide. And that is a key metric for us. Now, to some clients this 1 million, can be over a million and a half but dependent on the size of the deal we're looking for, let's say of 24 to $50,000 deals. We're looking to be about like 10 to 20 customers. Now, if your revenue per seat is a lot lower, for example, $20 per month then we're going to look more at like 1,000 to 2000 recurring subscribers. That gives us an idea that you have achieved Product Market Fit. Once we are there, we're entering the Go-To Market Fit Stage. Now, as we enter Go-To Market Fit Stage, we are having a product that can be sold and we're learning it to sell it effectively and efficiently into the market. People are willing to pay for it and as we increase the investments in the Go-To Market Strategy, we see a return on it. We see that the forecasting becomes more and more reliable. This makes it sustainable. What I want you to focus on is that word sustainable, right there. What do I mean with sustainable? Well, with sustainable, I really mean that, look, if I acquire a $100,000 in revenue but it costs me $200,000, that is not sustainable, people. You're scaling failure. The more you sell, the more money you lose and that is not sustainable. Now, what are we going to do, we're going to figure out how to make it sustainable. And the key to that is right in front of you. In order to create a sustainable growth, which we call the Scale-Up Phase, where we have learned how to sell, we now start to learn how to grow the business. Now, as we are coming out of that stage, as we come out of the Scale-Up Stage, we are less focused on growth and we're going to be more focused on cost reductions, more effectively and efficiently creating the product and whatnot. This is when we enter the Growth Stage, the Grow-Up Stage, Grown Up Stage, sorry and exiting the Scale-Up Phase. What I'm focused on is what happens between these two stages. What happens in between the Go-To Market Fit Stage and the Scale-Up Stage. Now, I want you to read the boxes here. Grow at an accelerated pace by scaling what we have learned to work. That's the key. What you'll see is that if we do not, if what we did in that squirly squiggly line in the Go-To Market Fit Stage, if that doesn't scale, it's gonna get us into a heap of trouble. But as you see, the amplitude of the variation in revenue forecast and becomes more narrow and narrow and narrow and at that point in time, it is an indication we are ready to scale. That creates, what we call the Winning by Design Model for Growth Stages. At the bottom, you're going to see the stages of the company, Prototype, Minimal Viable Product, Product Market Fit, Go To Market Fit and Scale Up Mode. It's scales us from 1 million to 100 million. And the key here sits right in learning what works in a Go To Market Fit Stage and applying that to the Scale Up Phase Stage. That is the Growth Stage Model. Now, what we've learned over the years, is some real practical things that go wrong or that go awry as they say. I'm gonna share these with you. One of the first thing that goes wrong is that we are learning how to Scale Failure rather than to learn how to Scale Success. Now, as we take the model that I just described to you, I wanna depict and put my finger on it exactly where it goes wrong. Now, what we see down here is those two critical stages I indicated. I gotta scale what works. What you'll see is a small but very important change. Right where I was in a Go To Market fit, I started scaling my revenue but as I started scaling, potentially hiring people and so on and so forth, my amplitude, my miss and my hits became bigger, not smaller. This can be the result of hiring salespeople. But one of the most common ways that this is the result is we're raising a B-Round. While an A-Round is often used right after Product Market Fit to start looking at Go To Market Fit Model, we decided that this was a B-Round maybe after a year right after an A-Round which is like, Look, I've got these three months of growth here, the three dots. Look at how great we are growing. We are growing at an accelerated rate. This is our growth rate. But as the company was ramping up in order to bring on the funding, it started to pull in deals. Artificially, it started to pull those from the future. Sales people were amped up, they were brought in, "Oh, you gotta close. This is the most important month. Most important quarter ever." And they do it that month after month, quarter after quarter. And so we ended up with this. What we see as a false growth rate, it's a false flag. It's not really the Growth Rate. Right after we the closed the round, guess what happens? Yes, yes. Because we robbed the future months quarters of the revenue, we see a decline in revenue for maybe one or two cycles. And as a result, we are going to see that there's fluctuation. We were essentially too soon. Now, what we're doing with that B-Round, we are hiring additional salespeople. We're putting in additional marketing campaigns. And as a result, what are we scaling? We are scaling exactly what we were doing. And with the new funding, $20, $30 million, with all the new salespeople, our mistakes are gonna become even bigger. Our highs are gonna be higher, but our lows are gonna be lower. And that is what you see here depicted. Our back and forth becomes bigger, our amplitude becomes bigger. That is a challenge. And so, what does this mean? Well, guess what? What we originally... What our really our growth rate was, was this when we got that funding at the black star. What happened was, post-investment, you know, bringing on the VP of sales, look at that, we accelerated, what a great work, VP of sales, Sales leader, you've brought an excellent growth. But guess what? You know, like the investors expected this level of growth rate, that's what the funding was held against. And so, in this particular case there are consequences and these consequences are often felt in three different ways. Where this was the expectation rate and where we fell short, you're going to find that the first one who's probably gonna be feeling the consequences is the Sales leader. They may be in different roles but the VP of sales may be finding themselves out of a job, contributing to the 18 month sales cycle or the employment cycle or they may find themselves under another CRO that was brought in. You know, bringing in a new a new CRO. When we hit that second point in time, I can tell you that CRO is not gonna make a major difference at this point in time. You have the salespeople, If you don't change your Go To Market Strategy, if you don't tune that, you're gonna end up at the second point in time. This is a few months later. We were burning because we had so much sales people and now we need to let them go. And as a result we need to raise a Down Round. Sometimes they call it the B Extension, they kept a round secretly open and so they don't have to recognize it as a Down Round. This is a common practice. But what we see down here, there's a essentially a Down Round. And a Down Round is an order to stop gap the losses that we're making. If we're still not changing then you're gonna find it's the CEO position that is up for debate. You may find that the CEO is promoted to a Chairman position or a Chair role. So this is the three most common things that could go wrong. VP of sales, Down Round, CEO is being reviewed. These are a series of things that you're seeing happening right in this Growth Stage Model. Do you see it? Do you see how it works? I gotta get in that first squiggly line. I gotta get a narrow margin that's how I can scale. Second very common thing that we see. Now, what I'm gonna take you through, I'm gonna use the same model and what I'm gonna depict to you is what happens when we have multiple GTM strategies. Right now, what you see down here, I'm having $18 million of a particular product. Let's say I have $18 million going after a product that had Product Market Fit, let's say mid market or SMB market or something like that. It's going really well. I'm using a bunch of SDRs and AEs and we love where we're going. We're scaling really well. Now, what I'm doing is, I'm launching an Enterprise Team, right? At 18. What the mistake is, that we think that the Enterprise Team is also, is already in Scale Up mode because that's where the $18 million puts us. But what really has happened is the opposite. The Enterprise Mode is essentially needs to start all over again. It's a new business model. And as you've seen and may have seen in some of the other models, it needs to establish new Minimal Viable Product. Do we need to add certain features to it that needs a great Product Market Fit? Is the customer willing to pay for it? And then we need to learn how to sell that. How are we selling? What's the value proposition? The value proposition of Enterprise is way more geared towards services and less towards products. Are we ready for that? Do we have customer case studies and stuff like that? And so, we see that that needs to restart over again. We cannot assume that the Enterprise Model is in Scale Up Mode. It will, at best, start at Late Product Market Fit, Early Go To Market Fit stage. And the new product will relaunch maybe in mid market or a do it yourself product, a product-led growth product. Whatever the new Go To Market Strategy is, you'll find that it has to reset. There's four conditions that makes you reset. We're gonna launch a new product, a brand new price, we're gonna establish in a new region, we're gonna maybe reset it, we may even open up a new market. We go from healthcare to educational sector or from FinTech to MarTech. These are all changes that require us to take a look. Do we have Product Market Fit? Can we establish Go To Market Fit? This is all right there. That tells us that we have a few actions to take here. Now, next one up. And boy oh boy, this is so common. Okay, the next one is one of my favorites. You ready? Oh, I am. Okay, this gives you a real close up personal perspective of what goes wrong. This is the most common mistake. This is so common. Oh, stressful at times to explain it to people because it, you know, like it involves a lot of like egos and involvement. Okay, you ready? Okay. Here's what is happening, what we have is we have a Go To Market Fit Model with a client selling approximately $5 million in ARR. They get two AEs that are selling $100,000 plus solution into the enterprise markets. They have an SDR and two AEs, selling, you know what, $20,000 deals, five to six every month. That's what they're doing. And on top of that, via the web, you can sign up and buy something online because they wanted to make sure that they develop leads that way. What they see down here is that they have $5 million in ARR and that is great. Now, when we take a look at it we see that about certain part of that revenue came from SMB, certain amount came from Enterprise, and a certain amount came from the Do It Yourself, the Product Led Growth mode. What they thought with $5 million in ARR, that there were one to two quarters, this bit. See how small it is, right there? This far out we were so close. We were gonna achieve Go To Market Fit. They may be ramping up funding, they may be ramping up hiring people because they think that they are there. However, a closer look tells us different. Once we see that they closed on these different markets, the SMB, the Enterprise, and the Do It Yourself Market, what we notice is that the revenue in these three markets are very different. SMB is at three and a half million dollars and maybe it may have achieved some Go To Market Fit Stage but while we're still struggling that.xxxxxx The reason why we don't see the big amplitude is because the enterprise market filled in a few of these gaps with a few deals and so it softened the impact. We didn't see really what happened. Once we separate those three revenue streams and create three different positions, we see the SMB is an early Go To Market, the enterprise is towards the end of Product Market Fit and the Do It Yourself product, yeah, it's somewhere at the start of Product Market Fit. It's doing good but it's definitely we are not too close to Go To Market Fit. And what you'll see is, where we were anticipating that we were a one to two quarters out at the most of Go To Market Fit, we are at best four to six quarters out of Go To Market Fit just because we sub-segmented that market. And that means we would have hired too soon, we would have broadened funding to soon, and established a valuation of the company to soon causing all kinds of frustrating results for the company. And, as you can see, by using a model, by thinking about that, it becomes so easy to us to establish where we're at. Can you see it? This is the power of models. And that tells me that in summary, I want you to take a close look at this model. I want you to understand, where do we fit? Where are we? Then I want you to think, "Well, if I separated per revenue category where does my SMB fit? Where's my mid-market fit? Where's my enterprise?" And you may find that your product fit at different locations here. Obviously as a model, this needs to be calculated more accurately. Client acquisition costs, and so on and so forth, needs to be established to make sure that it is efficient and effective, hence that it is sustainable. And I have to tell you to share this with you, to open your eyes and to show you what can be done to figure out, to put a finger on this and say like, "Here's where our organization is at." Makes it so much easier for all of us. This was what we call the the Model for Growth Stages. Now with that, we have presented to you The Business Model, we have presented you to The Go To Market Model, and now we have presented to you The Growth Stages Model. There's a series of more models coming and in order for you to learn more about this models, to stay appraised as we release them, I encourage you to take out your phone, if you're not watching it on the phone yet, and to take out your phone, to pick up this QR code and to subscribe to our channel. Where you can learn about all these new models as we launch them. The two previous models can be found there or if you're in a web browser or on a phone, you can go to youtube.com/winningbydesign. Not only will you find the previous models but you will find a series and I mean a series of over 100 videos that is readily available for you. And with that, I'd love to conclude our session today hoping that we have shared our passion and that it catches on with you. Thank you very much for having me and looking forward to the next episode. Will you join me?

Learn how to Architect Your Revenue using the Recurring Revenue Operating Model

A course led by:
No items found.

Pricing & details

per person
Reserve My Seat

In this workshop, we review the stages of Rapid Growth Startups:

Stage 1. Prototype
Stage 2. Minimal Viable Product (MVP)
Stage 3. Product-Market Fit (PMF)
Stage 4. Go To Market Fit (GTMF)  
Stage 5. Scale-up

We talk through some of the most common mistakes as companies move through these stages, why Revenue leaders sometimes find themselves without a job 12-18 months after they have been brought onboard, the down-round (or keeping open the B-round), and more.

Ready to architect
your revenue?

Reserve My Seat