If you have low retention, don’t scale and keep your costs low

Edited excerpt from Growth vs. Retention by Fred Wilson:

There’s a common view in Silicon Valley that growth is the one thing you should focus on. But it’s hard to grow if you are churning your users. And if you are paying for user acquisition, as many startups do in search of growth, then retention/churn becomes even more important.

You might think you have product market fit and so you scale up your hiring, your marketing, your sales, and your capital raising and spending. But if you can’t retain a healthy percentage of your users past ninety days, you don’t have product market fit yet and all the investment you make in your business is just money down the drain. So focus first on retention, then scale.

Notes:
(1) Re. “It’s hard to grow if you are churning your users” — see Why retention is the key to growth.
(2) If you have low 90 day retention, then you don’t have product-market fit. But 90 day retention might not be sufficient on its own to demonstrate product-market fit. Consider also user engagement, your net promoter score, whether your product is liked or loved, and the ease of closing sales.
(3) Cf. Product-market fit and fundraising and Don’t scale before you have product-market fit.

One thought on “If you have low retention, don’t scale and keep your costs low

  1. “If you have low 90 day retention, then you don’t have product-market fit. But 90 day retention might not be sufficient on its own to demonstrate product-market fit.”

    How does one triangulate on what “low” means?

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