Growth Loops: the Secret behind the Fast-Growing Startups

How to define growth loops and make them a predictable part of your marketing strategy?

Let’s cover the most interesting insights from the Reforge Growth Series, blended together with my 10 years of marketing experience and practical examples from the startup world.

If you haven’t heard yet, the acquisition loop is a self-reinforcing system, where "the inputs through some process generates more of an output that can be reinvested in the input" ( Andrew Chen ). In a super simplified version, the new users create a sequence of actions (steps) which leads to acquiring more users and repeating the loop.

Acquisition loops can be compared and projected based on:

• Growth Multiplier that shows how many new users can be brought from one user who entered the loop during all numbers of the loop’s cycle. It’s calculated as 1/(1-V), where V is the signups ratio between cycles. It basically shows if our loop is meaningful, compared to other loops.
• Conversion rate (%) between the actions in the loop. When designing our loop we outline all steps in the loop with conversion between them. It allows us to calculate the exact loop outcomes.
• Internal parameters inside the loop (based on its type). For example, the casual contact viral loop is calculated based on Branching, Time, and Ripple Effect.

Unlike funnels, loops have a compound growth effect. They are more predictable in the long run and harder to copy which is critical for startup founders. I remember myself back in 2015 when I was running marketing for our dev & design tools at Flawless App. It felt like an endless race.

Our marketing tactics were copied and our messaging became an inspiration for others. But one part of our marketing strategy was very hard to copy: it was our community and the developers’ content loop which worked like magic. Together with my team, we created the biggest Medium publication for iOS developers with 150+ writers and 400 iOS articles. It covered deeply technical topics, was driven by the community, and moderated by us (kudos to Ahmed Sulaiman and Valia Havryliuk ).

So how does our content loop work?

Developers shared their articles (which we polished) → % writers shared their articles with the developer community → % bringing us more writers who wanted to write with us → % who shared their content → % the loop continues.

The more content we got, the more value we were bringing to writers and readers, who by the way were our target audience ?? This loop compounds itself.

New Old Viral Growth

While the term for loops appeared in 2018, it existed a way before. Almost 11 years ago David Skok , a popular investor and entrepreneur, wrote about the full viral cycle and how it helped YouTube grow at exponential speed. Back then he explained the notion of what we call growth loops now.

The incentivized referral programs were also recent predecessors of growth loops. So with the concept of growth loops becoming more and more spread, it’s still getting shaped and improved by the Reforge team. That’s great for the whole tech industry.

Before you outline a growth strategy for your startup, learn what’s already working. Take a look at the most common growth loops examples in the industry: viral, content, paid, and sales loops.

Viral Loops

This type of loop happens when new users who joined your product, directly or indirectly, invite their friends and colleagues.

Let’s have some examples here. Last weekend I played with an interesting metaverse avatar-creation platform, called Ready Player Me which implemented a casual content viral loop. Here is how it works:

The user signs up → % of users create an avatar with company branding on it →?% share it on social or use in games →?% community sees the high-quality engaging avatars & notices branding → % google company → % sign up → the loop repeats.?

More famous examples of viral loops will be Slack, Airtable , Figma, and almost all collaboration or task management apps where you invite your team members via the product (organic viral loops).

We also can notice viral loops with incentives when engaging with tools like Yet Another Mail Merge (YAMM) , where you can invite friends and get a free email sending quota. The YAMM team shared that 20% of installations came from this viral loop (they called it a referral program back then).

I wish I could have stats for the viral Word-of-Mouth loop which we had at Flawless App when iOS developers were recommending our tool to their teammates. Well, back then we didn't think that it was a loop ??

Content loops

Content loops work when a user or a company generates content that drives more users. Think about the beloved Product Hunt .

The user creates the product page → % launches → % user shares Product Hunt page among the community → % people from the community registering on PH to upvote → % new people launch their projects at Product Hunt → the loop repeats. It’s a user-generated content (USC) loop, shared by the user.

I launched 14 times on Product Hunt with different Flawless App products and offerings, as well WLNC lead gen projects. Every time the goal was to share the PH launch page within 100+ communities on top of sharing it with our user base. I was sharing our PH page too actively. Now imagine how cool this content loop works for Product Hunt.

One more example is Sharebird built by Alex Lopes . It’s an engaging community where users can find answers to many PMM questions. User answers get packed to be indexed by Google, driving more users and new content to Sharebird (USC is shared by the company).

Same work for Quora with its Q&A, Medium with its articles, and even Linkedin publishing tool. Recently I started seeing more and more Linkedin articles in the top Google page results, which made me publish this article on Linkedin.

Paid Loops

I see paid loops as a paid marketing tactic with constant reinvestment back into ads. Video game consoles, streaming, and distributors like Steam, Twitch , Xbox, and Nintendo Switch typically spend a lot on ads. So the paid loops work in a way that the company invests in paid ads → gets more users → users convert to customers → revenue is reinvested in ads → loops continue.

Paid channels tend to get expensive over time, which is true for paid loops as well. Think of Google ads targeting companies who hire developers. The price per click for something like “hire developer” has grown exponentially in recent years. Such companies as Upwork, Toptal, Turing, and outsourcing giants Epam and Ciklum compete to get users to click on their search ads and hire their developers. It makes PPC fly up, especially in the US market.

Your startup doesn’t have any influence on the price dynamics of the paid channels. So paid loops should not be the core of your growth strategy.

Sales loops

Sales loops work when sales representatives sell products, and the revenue from customers gets reinvested into sales reps. It looks to me like a typical sales GTM motion, which performs great for enterprise deals. Sales loops need to be fueled by SDRs providing leads or inbound marketing with MQLs.

Falling in love with loops

As with every new growth approach, acquisition loops should be based on understanding your users, your product value prop, and your Go-to-Market motion. Also, you should build the product people love. A growth strategy won’t fix poor user experience, unclear value prop, weak product differentiation, or product without Product-Market-Fit.

It’s not that easy to make the growth loop work. Every loop type has its subcategory, quantitative mode nuances, features it requires to be successful, the right triggers, and many things to consider when building it.

Here’s a great example that just crossed my mind.

Once upon a time, a competitor of the company I worked with launched a user-generated content loop with developers' profiles. Those were profiles of no-code developers working with Bubble , Webflow , Airtable, and other no-code tools.

New developers who signed up to their platform → created profiles → shared it with their community → attracted more developers to their marketplace → the loop retreats. It looked beautiful and from what I know it was very successful for developers' acquisition (kudos to the Heep team).

Did you guess what happened next? Our tactic with the same developer's profile loop was not so successful. It’s hard to duplicate loops even when you know exactly how it works. There is much more work under the hood.

You should always prioritize your resources and time, choosing what will help your startup achieve its goals. Linear marketing channels should not be thrown away. In fact, I’m still thinking about how to merge GTM strategy with linear marketing channels and growth loops to make it all work like an endless growth engine. But let’s leave it for the next post :)

Good luck with driving your startup growth!

P.S.: Can you find a growth loop mechanic on this picture? The awesome 3D model was done by Dmytro Kovalenko in Spline ??