November 6, 2023

The key to growth for tech brands? Leaving the startup mindset behind.

Every emerging tech company has a story.

And while each story is different, there’s a chapter that most experience: It’s the one where they get stuck. And it happens when they’ve grown enough to face “big business” problems—but try to address them with a startup mindset.

Here’s how the story starts.

You built a great product that opened up a new market, and you turned it into a thriving business. It grew, and it grew.

Others took notice and entered your space. Now you were fighting to make headway against similar products. And your obvious customers were… already customers. Where to grow now?

This is the sticking point. The moment when tech leaders need to realize: Whether your business is new or you’ve successfully scaled, once that growth curve starts flattening, you can’t think like a startup anymore. Because what you do next makes all the difference.

Obviously, you’ll keep battling functional parity. Companies born this way are almost certainly product-led cultures, and there’s opportunity to keep improving, keep innovating your offering.

But it’s how you think about brand that matters most. It’s how people feel about you—not your market fit or your impressive product roadmap—that will pull that growth curve up again.

We’ve seen this play out in Lippincott’s proprietary research.

Since 2019, we’ve sampled 100,000+ consumers from across the world on their relationship with brands.

While those relationships evolve every year, for most, only a few brands hold any meaning. The ones that do create connection—people love them—and enable progress—helping people do things they couldn’t do before. And their revenue grows 5x faster than brands that fall short on both dimensions. In short: because they’ve built brands that matter to people, they’re winning hearts and minds… and customer dollars.

It’s risky to fall short on connection or progress for too long. We’ve observed that emerging tech companies often begin in the “low connection, high progress” space, and whether they rise or fall depends on their ability to cement an emotional connection.

The startup mindset forgets about connection, and therefore, it fails to build brand. The cycle: Pressure marketing to acquire new customers, without a clear sense of your brand’s role in people’s lives beyond the purely functional. Get hooked on the drug of performance marketing, despite feeling the pain of an unsustainable customer acquisition cost. Churn through customers. Wonder why they aren’t staying—then tell marketing to pull in new ones.

The “big business” mindset values progress and connection. It centers brand-building as the secret to sustainable business growth—the engine that scaled companies need to keep winning. It understands that a transactional relationship with customers is easily replaced.

When tech companies build strong brands, they’re lifting their lead gen. With a foundation of preference and trust, prospects move down the purchase funnel more quickly and more willingly. There’s more ROI from performance marketing that draws in customers who stay—and opportunity to deepen those relationships with brand marketing. Shoutout to the tech leaders who are growing their companies with an emphasis on brand: Just as investing money in the stock market early leads to higher returns, so will investing in your company’s brand today lead to higher valuations, more revenue, and greater customer lifetime value.

And if you’re still thinking with a startup mindset, it isn’t too late.

Let’s compare two brands in the social media space—YouTube and TikTok.

From the earliest days of Lippincott’s tracking (2019 for YouTube, 2021 for TikTok), both have gotten credit from consumers for the functional progress they enable. People can do new things, because of these brands.

Or at least… those things were new, once. But in tech, companies can quickly match each other’s innovations. And while fine-tuning its product daily, YouTube has also invested in preference-building—with a clear sense of who they are and the role they play in people’s lives, they’ve built strong bonds with creators and audiences. We see these emotional bonds in our research, where YouTube outperforms TikTok (and other peers) on metrics like “makes me feel meaningfully happier” and “helps me feel a part of something bigger than myself.”

TikTok seems to be beginning its preference-building journey, with efforts to foster a loyal (not just engaged) community. But it still relies on its algorithm to hook users and keep them coming back. This is a vulnerable position for the business—especially in the face of regulatory scrutiny. Will users and creators rally to defend TikTok? There were glimmers of consumer passion after the congressional hearings in the spring, but our data suggests that it might not be enough.

It will be interesting to see what happens with TikTok and YouTube. We’re rooting for both of them. We’re rooting for everyone, really. People deserve brands that mean something to them, not just products that do something for them.

Tech leaders – are you operating with a “big business” or a startup mindset? Ask yourself:

  • Do I think of marketing as a driver of sustainable growth, not just customer acquisition?
  • Can I articulate why customers should choose us vs. a functionally identical competitor?
  • Is preference-building a priority, championed by me and my senior leadership team?