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Magical growth loops – Issue 52

👋 Hello, I’m
Lenny
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, and welcome to a 🔒 subscriber-only edition 🔒 of my weekly newsletter. Each week I tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out at the office.
Send me your questions
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and in return I’ll humbly offer actionable real-talk advice 🤜🤛
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Q: Can you share examples of companies that found innovative growth loops, like marketplaces convincing their supply to drive their demand, or platforms where demand drove more demand?

This question sent me down a rabbit-hole of research into what I’ll call magical growth loops: growth loops where most of your new users come directly from existing users. This includes the “virality” loop (where your users invite other users) but that’s just one of many types of magical loops.
Below, I’ve compiled what I believe is the most comprehensive set of examples of these magical growth loops:
Supply driving demand
Demand driving supply
Demand driving demand (e.g. virality)
Supply driving supply

What makes these loops “magical”?

Normally, to grow your business, YOU need to go find every new users or customer. For example, if you’re building Google, you need to go tell people about Google and convince them to use Google. Each additional Google user doesn’t directly drive more Google users.
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However, if you’re building a product like DoorDash, Faire, Substack, Dropbox, Eventbrite, and many of the companies you’ll find below, a very cool thing can happen: your users grow your business for you. THEY recruit your new users. Magical!
Here’s an example from
Cameo
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, a marketplace where fans purchase short videos from celebrities to surprise and delight their friends.
Without a magical growth loop, Cameo would have to go recruit both celebrities AND fans:
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Instead, Cameo found that if they recruit celebrities, the celebrities themselves bring the fans to the marketplace:
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Amazing! With this loop, Cameo can focus most of its efforts into recruiting celebrities, knowing that much of the other side of the marketplace will come along for free.
This is one of 30+ examples you’ll find below which I hope will inspire you and your team to think about whether there’s a latent magical growth loop in your product. Let’s dive in.
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Type 1: Supply driving demand

This loop can work for marketplace businesses (i.e. which connect supply with demand) and for platform businesses (i.e. which enable supply to serve demand). The key is that your supply has a clear motivation to bring you demand.
The list below is sorted roughly in order of how impactful these loops were to their respective business.
(1) Marketplaces:

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DoorDash
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DoorDash recruits restaurant
The restaurant tells their customers about DoorDash so that they can order delivery from them
Customers signup for DoorDash
(Also applies to Uber Eats, Caviar, GrubHub, Postmates)
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Faire
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Faire recruits vendor, and asks them to upload list of preexisting retailers to avoid paying fees
Vendor encourages retailers to place orders through Faire, for convenience
Retailers signs up for Faire and find other great vendors
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Etsy
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Etsy recruits seller, who puts their items up on Etsy
Seller explores Etsy to see what else is being sold
Seller buys from other sellers
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Cameo
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Cameo recruits celebrity
Celebrity shares their Cameo profile with their fans
Fans sign up for Cameo and discover other celebrities

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Instacart
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Instacart recruits grocery store
Grocery store promotes Instacart to customers for online ordering
Customers sign up for Instacart and discover other grocery stores
(2) Platforms:

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Substack
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Substack recruits writer
Writer shares their newsletter with their followers
Followers sign up for writer’s newsletter
(Also applies to Twitch, Patreon, OnlyFans)
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Kickstarter
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Kickstarter recruits creator
Creator shares project with their friends
Friend signs up for Kickstarter to support the project
(3) Somewhere in between:

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Eventbrite
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Eventbrite recruits event host
Host creates an event and sends out invites to potential attendee
Attendees receives invite and discover Eventbrite
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Ritual
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Ritual recruits restaurant
Restaurant promotes Ritual to customers, gives them a deal for signing-up at the restaurant
Customer signs up for Ritual and discovers other restaurants

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Product Hunt
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Product Hunt recruits founder
Founder launches on Product Hunt and shares their page with their users
Users visit and sign up for Product Hunt

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OpenTable
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OpenTable recruits restaurant
Restaurant embeds reservation module on their website
Customer books through OpenTable and becomes users

Type 2: Demand driving supply

This loop only works for marketplaces. And again, the key is that your demand has clear motivation to invite supply, and again this is sorted roughly in order of how impactful these loops are to the business. There are two ways this loop works, actively and passively.
(1) Actively: Demand invites supply:

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Faire
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Faire recruits retailer, who buys an item through Faire and has a good experience
Retailer encourages their other vendors to list on Faire
Vendors join and begin selling through Faire
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AngelList syndicates
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AngelList recruits syndicate lead who posts a deal
Syndicate lead shares deal with friends
Friends back syndicate and join AngelList
(2) Passively: Demand uses the product and signs up to be supply:

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Uber
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/
Lyft
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Uber recruits rider
Rider takes a ride, meets driver, and gets excited about driving
Rider becomes a driver

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Airbnb
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Airbnb recruits guest
Guest takes a trip, meets a host, and gets excited about hosting
Guest becomes a host

Type 3: Demand driving demand

This loop is often called “virality”, but as you’ll see below this there are many forms of this loop.
(1) Actively: Demand invites more demand for free (aka virality):

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Figma
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Figma recruits employee at a company
Employee sends invites to co-workers, to share designs
Co-workers sign up
(Also applies to Slack, Asana, and other bottom-up SaaS products)
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Snapchat
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Snapchat gets user to join
User invites their friends, to send pics
Friends join
(Also applies to Facebook and other social networks)
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Dropbox
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Dropbox recruits user
User creates and shares a folder with friend
Friend signs up for Dropbox to see shared folder
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Whatsapp
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Whatsapp gets users to join
User invites their friends, to send them messages
Friends join
(also applies to Telegram, Signal, and other messaging apps)
(2) Actively: Demand invites more demand for an incentive (aka referral program):

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Dropbox
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Dropbox recruits user
User discovers referral program and sends friend an invite
Friend signs up for Dropbox, both get a bonus
(Also applies to Airbnb, Uber, Lyft, and any referral program)
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(3) Passively: New demand discovers the product as a by-product of using it:

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Zoom
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Zoom recruits user
User sents a meeting invite to co-worker with Zoom link
Co-worker signs up for Zoom

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PayPal
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Paypal recruits user
User sends money to friend
Friend signs up to accept money

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Intercom
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Intercom recruits company
Company integrates Intercom on their website
Visitors to website see Intercom in action and sign up

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Superhuman
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Superhuman receruits user
User sends email to friends with Superhuman signature
Friend sees signature and signs up for Superhuman

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Google Docs
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Google recruits user
User creates document and shares it with co-woker
Co-worker signs up to view it
(Also applies to Notion, Coda, Miro, and other document collaboration tools)

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Instagram
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Instagram recruits user
User posts picture on other social networks
Friends notice Instagram and join

Type 4: Supply driving supply

This final loop can work in marketplaces and platforms and can also happen in two ways, actively and passively.
(1) Actively: Supply invites potential new supply because of an incentive (aka referral program):

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Airbnb
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(also Uber, Lyft)

Airbnb recruits a host
Host earns of referral program and invites friends to join
Friends join
(2) Passively: Users converts to supply as a by-product of seeing the product in action:

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Typeform
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(also Survey Money, Mailchimp)

Creator sends out a survey
Receiver takes survey and sees the logo/link
Receiver creates their own survey

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Eventbrite
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Eventbrite recruits host
Host sends out invites to potential attendees
Some attendees learn about Eventbrite and becomes hosts themselves

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Substack
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Substack receruits writer
Writer shares their newsletter with potential readers
Some of these potential readers learn about Substack and get inspired to have their own newsletter

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Facebook Marketplace
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Facebook recruits a seller
Seller post an item in the marketplace
Friends see item, learn about Facebook Marketplace, and also post items

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Product Hunt
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Founder launches on Product Hunt
Founder shares Product Hunt with their audience and users
Some of those users are founders that launch on Product Hunt in the future
As you can see, these “magical” loops are fairly prevalent and can work in many different ways. My hope is that this comprehensive collection gives you and your team fodder for brainstorming ways to find opportunities to create your own magical loop.
If you know of any other examples of these loops in action, please let me know!
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