1/ Many of the biggest implosions in recent history - especially ecommerce - have been due to startups getting addicted to paid marketing while fooling themselves on Customer Acqusition Costs. As spend scales, it always gets more expensive and harder to track - never less.
2/ A familiar story: New product launches. Nice spike, but it dies down. The product is low freq - gotta spend to grow. Marketing spend increases, it's profitable! More is spent, more money is raised via VCs. OMG this is working! Party!
3/ Suddenly top line hits a ceiling. Payback period goes from 9 months to 12, then more. Unit economic profitable, but not with staff + HQ. Without top line growth, more investment dollars can't be raised. Budgets get slashed, then layoffs.
1/ The Startup Brand Fallacy. Brand marketing is mostly useless for consumer startups. Startups build a great brand by being successful, finding product market fit and scaling traction, etc. But it’s not a real lever. Let’s not mix up correlation with causation!
2/ If this seems contrarian to you, it’s because there’s a vast ecosystem of consultants, agencies, and other middlemen who are highly incentivized to have you spend $ and effort on non-ROI/non-performant activities. Early startups should opt out of all of this
3/ It’s easy to confuse correlation and causation: If you’re starting a consumer startup, you see successful late stage cos with fawning media coverage, amazing conference speaking slots, celebrities on the cap table, etc., and think that’s what caused their success: Great brand.