To win the future, we have to optimize for it.
Thoughts on Sequoia's "Black Swan" note from this week
On Thursday, March 5, the legendary Sequoia Capital sent out an extremely valuable message to their portfolio. If you’re in tech, I recommend reading it in full.
As a Growth Marketer, point #4 particularly hit home:
“4. Marketing. With softening sales, you might find that your customer lifetime values have declined, in turn suggesting the need to rein in customer acquisition spending to maintain consistent returns on marketing spending. With greater economic and fundraising uncertainty, you might even want to consider raising the bar on ROI for marketing spend.”
It is very important to call out that Sequoia is recommending optimizing toward the long term ROI of your customer cohorts, not CPAs or short term ROI.
Sequoia is the best in the biz because they play the long game. My best guess is that 90% of active growth teams in tech do not. Most teams are optimizing for success metrics that happen less than or equal to 30 days from now.
Growth teams that optimize toward first purchaser CPAs or ROI within very short time horizons (like within 30 days of first customer acquisition) will continue to remain blind to the big picture that Sequoia is asking us to monitor.
Fast forward to 6 months from today. Your CPAs and/or 30-day ROAS could still remain stable. That said, you will still be caught holding the bag if your long term cohort values drop precipitously after the short-term success window.
If we want to put dents in the world, we have to optimize toward the future.
Sequoia’s note this week is a good reminder that the future is what happens well beyond 30 days from now. It’s time for all marketers to optimize accordingly.