Disclaimer: Richmond Bassey contributed his playbook for growth in a down market to TechCabal. Bassey is the CEO/co-founder of Bamboo.
Blitzscaling is what you do when you need to grow really, really quickly. It’s the science and art of rapidly building out a company to serve a large and usually global market, with the goal of becoming the first mover at scale.
Reid Hoffman, American internet entrepreneur. HBR, 2016
If 2022 shook the African tech ecosystem out of its slumber, 2023 will be a splash of cold water on the face. Everyone is talking about how 2023 will be a tough year amidst the shrivelling up of venture capital (VCs) and deepening recession.
With a difficult year looming, bearish takes are a dime a dozen. A narrative has coalesced: blitzscaling is bad. It is underpinned by two assumptions. The first is that only VC is keeping startups afloat by subsidising users. And the second is that startups have prioritised growth at any costs.
But it’s not as simple as that. While the end of the cheap money era (which certainly spilled over into African tech in 2021) is reining in the most egregious excesses we witnessed last year—like building when there is questionable demand for a product—it is shortsighted to slam on the brakes and slow everything to a crawl.
In a few words, I want to offer some thoughts on why being “default alive” must not mean reducing your business to a vegetative state. And perhaps draw attention back to the all-too present risk of becoming anorexic.
Don’t throw the baby out with the bathwater
Everyone is a genius in the crowd. If following the crowd got us into this ditch, vox populi may not be the best guide to getting us safely to the Promised Land. Yes, as the equivalent of throwing everything against the wall to see what sticks, blitzscaling is unsustainable. And if a Series A is behaving like a pre-seed, that is definitely a problem. But founders have to scale and grow their users, and African founders, especially, should not shy away from blitzscaling if their ventures have the three characteristics I want to discuss.
If you don’t have product-market fit, and you’re still trying to figure things out with VC money (classic case of a Series A acting like a pre-seed), you are certainly going to face problems.
But there are two truths to confront here: Venture-backed startups have to strive towards fast growth, and expand beyond their home market to hedge against country risk. After all, a startup that is looking to exit via an IPO in the US will need to spread its revenue across markets, not having more than 40% in one country (rule of thumb). The second truth is that nothing defines product-market fit more than fast growth. It follows then that aborting your growth momentum is the equivalent of terminating product-market fit.
In essence, how should you think about growth when the money taps have been turned off? Here are 2 thoughts to help you find your answer:
- Do you have sticky demand with a solid base of customers?
- Do you have 1,000 true fans?
The number is not literal as it is not enough for a startup, but the insight holds true. If you find that you have a solid, and growing base of customers in a large-enough market, who consistently trust you to deliver solutions that meet their needs on a recurring basis, you should choose to grow and serve more people like them.
Tough market conditions are the perfect test to determine how much product-market fit you have. You know you have sticky demand when despite tough market conditions, there is still robust demand for your product.
For us, ironically, it was 2022, when the US stock market bubble popped, that made us more confident in the stickiness of our product: Nigerians want to invest in dollarised assets, no matter how the US stock market is performing at that moment. We’ve now seen two extremes. In 2021, we had more users who were aggressive day traders. This reflected the frothiness of the US stock market where meme stocks, like AMC, took off. 2022 was an entirely different picture.
But we also began to discover an interesting trend
When the US stock market plummeted, Bamboo users kept trading, and new users found their way onto the platform. This is counterintuitive if you hold a dim view of consumer-facing fintechs. Yet, it gave us a glimpse into the motivations behind Bamboo users for using our product. We could identify a stickiness to the extent that despite a decrease in US stocks prices, users wanted to keep their money long-term in dollarised assets instead of naira-based assets.
Our second insight was that new retail investors in Nigeria weren’t deterred by low stock prices. They believed it was better to start saving in dollars now versus later.
To find a path for fast growth when the money tap is no longer running, the first question founders need to answer is, “Do I have sticky demand with a solid base of customers?”
Make your product a customer favourite
Once you’ve assessed your demand, how do you earn your users’ loyalty?
The insights we gained from the two different market realities drove us to create a new product (Fixed Returns) to allow Bamboo users to invest but minimise exposure to risks. With Fixed Returns, we are demonstrating that we understand our users’ motivations, but also that we care enough to offer some “protection”—and make ourselves more sticky!
The key questions to be mindful of here are, what are the differentiators that keep your users with you? How do you ensure they don’t go elsewhere? It is tempting to try to take the quick route and buy customer loyalty. But the problem with shortcuts is that they can cause wildfires and shock. Instead look for cost-effective ways to serve the direct and adjacent needs of your customers, but don’t stray too far.
For example, at Bamboo, we place a strong emphasis on user education. Seventy percent of Bamboo users have never invested in US stocks so they need educational content. Our content library and education partnerships enable us to meet an adjacent need—investing education. While our extreme bias for delivering quality customer service forces us to do one simple thing very well, which is delivering an app that works and is simple and intuitive.
We don’t fixate on a market downturn. Our goal is to create a product that allows us to always be a trusted financial partner in hot or cooled off markets.
How do you expand your customer acquisition strategy without sinking in new costs?
Once you have that user base, and you’re confident you can keep them, you need to increase the top of funnel but not get killed by your customer acquisition cost (CAC). How do you do this? Seek partnerships that diversify acquisition channels.
If you’ve ever heard the phrase, “Distribution is king” you are halfway to understanding why partnerships work. The answer is surprisingly simple. It is leverage.
The insights we gained from the two different market realities drove us to create a new product (Fixed Returns) to allow Bamboo users to invest but minimise exposure to risks. With Fixed Returns, we are demonstrating that we understand our users’ motivations, but also that we care enough to offer some “protection”—and make ourselves more sticky!
We don’t fixate on a market downturn. Our goal is to create a product that allows us to always be a trusted financial partner in hot or cooled off markets.
Once you’ve assessed your demand, how do you earn your users’ loyalty?
The insights we gained from the two different market realities drove us to create a new product (Fixed Returns) to allow Bamboo users to invest but minimise exposure to risks. With Fixed Returns, we are demonstrating that we understand our users’ motivations, but also that we care enough to offer some “protection”—and make ourselves more sticky!
We don’t fixate on a market downturn. Our goal is to create a product that allows us to always be a trusted financial partner in hot or cooled off markets.
Death by anorexia
Anorexia is a mental condition characterised by an intense fear of gaining weight and a distorted perception of weight. People with anorexia place a high value on controlling their weight and shape. As we head into what is certain to be a tough year, it can be tempting to excessively trim fat. For growth-stage startups meeting a clear need with strong demand and a clear and sizable market, it is the equivalent of looking at the ditch while driving, instead of the road.
This is not to say the year will be smooth sailing. It clearly won’t. Consumer-facing fintechs will especially be in a tough spot. But make no mistake about it: startups can’t afford to play it safe with their growth strategy. Founders should take enough ownership of the situation to not shy away from big educated bets.
For us, it’s a matter of how we look at brand equity: we’re aiming to be the trusted financial partners of Africans who start off investing modestly, putting down $200 in their first trade and growing in confidence and wealth. We cannot afford to recklessly slam on the brakes. Nor should you.
