The relationship between acquisition cost and growth is at the heart of any startup operation. There are largely two paths to growth, and the one your startup follows will determine how fast you can grow through limitations imposed by marginal cost. When you follow the path that favors business models with scalable advantage tending towards “1”, your business will generate value faster.
When marginal cost goes low, a company can experience a virtuoso moment, anchored on network effects, where more users bring more partners, and more partners more users. But that happens to startups with certain characteristics which make it possible for them to INVERT the positioning of growth trajectory and acquisition cost typical in most traditional firms. At scalable advantage of 1, the acquisition cost curve can even begin to flatten, and yet the growth will continue to experience positive slope. Google did not waste money in advertisement for years, and yet it was adding many users.
In this video, I explain the two most important plots that define how fast you can grow that business or startup, especially at the early phase, before maturity. It is about ascertaining the speed of growth through The Trajectory Advantage of a business.
You can revisit the Scalable Advantage video below.
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