When to Ignore Your Growth Rate

Hey y’all — you probably pay attention to your growth rate, right?

Maybe even obsessively.

After all, if your startup isn’t growing then it’s dying.

But there’s actually a time when you shouldn’t do this.

When your growth rate doesn’t matter all that much.

Here’s what I mean…

On the Pod: Luke Sophinos

SaaS is changing. For years now, the amount of new horizontal markets for SaaS has been shrinking while customer expectations have been rising.

The result is that specialized products targeted only at specific verticals have become venture-scale opportunities.

But it wasn’t always clear this would be the case. In fact when Luke Sophinos first pitched VCs on his vertical SaaS startup he got, in his words, “laughed out of the room.”

Luke told me his story, how he ended up convincing VCs, why many of them have since come around to his way of thinking, and where SaaS is headed next.

Check it out below on YouTube, Spotify, or Apple Podcasts.

When to Ignore Your Growth Rate

A couple years ago, I invested in Figure.ai — a company that makes humanoid robots.

At the time, no one was buying humanoid robots.

The market essentially didn’t exist.

And the company’s growth rate was 0% WoW, MoM, and YoY.

Month after month, 0 robots were sold.

But the company’s founder, Brett Adcock, had realized something important:

The market was going to exist soon.

Due to advances in AI and robotics, it was now possible to build a humanoid robot that would actually be useful and that people would want and pay for.

Yes, there were a lot of steps that needed to happen and go right, and he’d need the new company to achieve their own technological breakthroughs (they build all their own motors), but the remaining problems to creating one that people would want were actually solvable with the right team.

He realized this because he talked to tons of people in the space and understood it well.

The other thing he realized was that, once robots were good enough to be wanted by people, the market was going to 1) be gigantic and 2) grow exponentially.

The breeding grounds of every one of the biggest companies are that they start in a small market that’s growing or about to grow at an extremely fast rate.

The market’s growth potential is a prerequisite for a venture-scale opportunity to exist.

Figure recently shipped commercial-use robots to a customer for the first time, roughly 2.5 years into the company’s history.

For those 2.5 years, their growth rate was still 0%.

But their last round of funding a year ago valued the company at $2.6 billion. And they still have 100x+ potential from there.

That might sound silly to some — but what was the market for iPhone apps in early 2008?

It was $0.

But people were building them, because they knew the App Store was emerging and realized the iPhone was going to be a massive platform to build on (which sounds obvious in hindsight but wasn’t necessarily at the time).

Sam Altman talks about this as the importance of “riding the ‘up’ elevator” of a new market. I would argue it’s more like a rocket launch (both in terms of speed and the potential to explode on the way).

If we want to build venture-scale businesses we need to be comfortable investing our blood, sweat, and tears into markets that either don’t exist yet or are so new that they seem tiny from the outside.

Humans are generally bad at anticipating exponential growth, since doing so requires deep knowledge of a specific area. So getting called foolish for doing this can actually be a bullish indicator.

So as we go into 2025, if you’re taking a venture-scale shot, ignore your growth rate if your market is extremely new (and, if it isn’t, consider a pivot). Instead, have an understanding of where your market is headed built on first principles and ride the rocket.

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