Venture Capitalist at Theory

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2 minute read / Oct 26, 2020 /

Your Startup is a Series of Cycles

I used to think of a startup as a series of funnels. There’s the customer conversion funnel, the recruiting funnel, the customer success funnel. Funnels simplify metrics. Examine the yield from each stage to gauge success. Start to finish.

I’ve been preparing my session for the NY Enterprise Tech Meetup later this week on the Essential Guide to SaaS Metrics. Thinking through that presentation and reflecting on some recent conversations, I’ve changed my belief. The superior mental model is a cycle.

The funnel stops at an end state. The cycle is a flywheel and builds momentum. That’s the key difference.

Attract a customer, engage them, sell them a contract, onboard them, ensure they achieve their objective. That’s the funnel. But add a step: solicit a testimonial, ask for a referral to a friend, cross-sell another product. The cycle starts again.

Attract a talented candidate, engage them, hire them, onboard them. That’s the end of the people funnel, but not the people cycle. Startups should manage, cultivate, and foster their employees, and this will drive the cycle again with referrals, better employee brand, and greater success with future candidates.

Modern leaders in each of the critical functions of startup teams have been telling me this for a while, describing it in different forms. But it took time to settle in. Measuring the funnel is the first step, but not enough. We have to measure the cycle and the strength of the flywheel.

That’s the lens I’ll be using from now on: cycles not funnels.

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