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a16za16z Podcast | The Basics of Growth 1 -- User Acquisition
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At a glance
WHAT IT’S REALLY ABOUT
Why Businesses Don't Grow Themselves: Acquisition, CAC, LTV and Organic Channels
- Andrew Chen and Jeff Jordan argue that growth is a systematic discipline spanning acquisition, engagement and retention, not a set of tricks, and that businesses do not grow themselves.
- Jordan says growth decays over time as the law of large numbers sets in, so entrepreneurs must keep adding new layers, as eBay did with fixed price, international expansion and payments.
- The two explain that LTV to CAC and paid CAC are more informative than blended CAC, because paid acquisition economics typically degrade as a company scales and reaches less interested users.
- They say the best businesses often acquire users for free through channels like restaurant websites for OpenTable, visible cars and scooters, or bottoms-up workplace sharing, and that paid marketing works best as one small part of a channel portfolio.
- Chen suggests fitting products into current trends such as video and Instagram-ready experiences, while noting these opportunities are temporary because competitors will copy them.
IDEAS WORTH REMEMBERING
5 ideasGrowth is not magic or a bag of hacks
Chen says growth has distinct parts, acquisition, engagement and retention, each needing systematic attention, and Jordan calls it a scientific discipline requiring micro-level understanding of the business.
Growth naturally decays, so entrepreneurs must add layers
Jordan describes growth falling from triple digits toward lower rates over time and says entrepreneurs must layer on new growth sources, as eBay did with fixed price, international and payments.
Apparent exponential curves hide lots of work
Chen notes that a seemingly viral curve is often a combination of opening new markets, launching products and reducing friction in signup or retention.
Blended CAC can mislead
Jordan calls blended CAC dangerous, and Chen says that as a company scales paid spending, blended CAC drifts toward the paid channel's CAC, so paid CAC and LTV should be measured separately.
LTV must exceed CAC with room to spare
Jordan defines LTV as incremental profit contribution after direct costs, says a CAC above LTV sinks you, and notes the ratio usually degrades with scale, so a thin margin leaves no room for error.
WORDS WORTH SAVING
5 quotesBusinesses don't grow themselves. The entrepreneur has to grow them.
— Jeff Jordan
Done right, it is a scientific discipline because it requires you to understand your business and business dynamics at this incredibly micro level.
— Jeff Jordan
If your CAC is higher than your LTV, you're sunk because it's costing you more to acquire a user than the value you get out of the user.
— Jeff Jordan
You had to manually sell some restaurants, come for the tool, stay for the network. But then once the consumers got enough of a selection and started to use it, it was game over.
— Jeff Jordan
It's so much work underneath that makes that happen.
— Andrew Chen
High quality AI-generated summary created from speaker-labeled transcript.
