Growth loop is a closed system where the output can be reinvested directly into the input.

In more simple terms, growth loops bring new users to the product, whatever the process.

The types of growth loops a company has and the way they are combined is core to understanding how companies grow.

See also napkin vision under prioritization.

No company grows like funnels model it. Because it would mean you're just shoveling money in but it's not being re-invested.

Some funnels do have referrals as part of them but visually they are still misleading.

Funnels enable silos. What tends to happen is that teams get split apart by funnel stages and the messages in each stage are different. Plus teams start blaming each other if there's no single north star metric.

Not everything is a loop. Just because you can visually draw it on paper as a loop, doesn't mean that you're actually re-investing the output back into the input. Pay close attention to that.

Just because you can generate content, doesn't mean it's valuable and someone wants to distribute it to others. For example, not every content that a user generates is interesting for other users.

Just because you are building a referral program, doesn't mean someone is interested in those rewards. For example, big companies are not motivated by 10€ referral bonuses but individual users might be.

Giving a one-time freebie or, even worse, a lifetime discount is usually the worst thing you can do.

What you should incentivize, is developing habits. Don't give them a free delivery - give them a free delivery after 5 orders. Don't give them a free ride - give them a 25% discount on the next 5 rides.

This applies to user activation - so both for referral programs and re-activation and loyalty programs.

While you are still a startup (searching for the Four Fits), the whole company should be concentrating on finding the fits. Otherwise, you're putting the burden of activation and monetization on a single team.

You need everyone to be thinking of how the puzzle pieces fit together before you can hire a team to optimize certain pieces.

The growth team should be separated from the rest of the product organization and have different metrics for success. While they can and should learn from the rest of the organization, they shouldn't be dependent on it (this means they shouldn't share resources).

There are three different participants in every growth loop:

They all have their reason (incentive) why they participate in the loop. Sometimes some roles might overlap (for example, the value gets distributed by the same person/company that receives value).

There are four types:

There are three types of reasons why people use products:

When a given market is new and the product novel, it gets recommended just because people want to recommend cool stuff to others. They hope that they will be perceived as cool and helpful as well.

However, there's a shift towards personal and financial capital, when a market matures. Suddenly there are many products that all do more or less the same thing. So, the incentive to recommend the product shifts to financial capital.

Viral loops are categorized by the value promise (incentive) to the distributor:

They usually have:

Content loops are categorized by the value generator:

Paid loops are categorized by the value promise friction (i.e. how hard is it to do something useful with the product):

Check out example loops on the main page.