Early-Stage Startup Strategy: Focus on Growth, Not Monetization

When building a B2C startup, the road to success often starts with audience growth rather than immediate monetization. Spencer Rascoff, co-founder of Zillow, shares insights into why early-stage companies should prioritize building audience engagement and liquidity before turning their attention to profits.

Spencer Rascoff, co-founder, Zillow

Photo: GeekWire Photos / Kevin Lisota

Don’t Chase Dollars—Chase Users

In the early days, Rascoff emphasizes the importance of focusing on audience growth rather than monetization. Venture capital provides the necessary runway to experiment and build a loyal user base without the immediate pressure of generating revenue. "If you get enough traffic, monetization will follow," Rascoff explains.

For example, Zillow initially focused on creating a consumer media site for real estate, believing that significant traffic would naturally lead to monetization opportunities in an industry already flush with money.

Marketplace Models: Build Liquidity First

For startups operating as marketplaces, liquidity is key. This means ensuring there’s enough activity on both the supply and demand sides to keep the platform vibrant and functional. Early on, Zillow concentrated on creating value for users—homebuyers, sellers, and real estate professionals—without worrying too much about revenue streams. This allowed the platform to grow organically and achieve the critical mass required for a thriving marketplace.

A similar approach was taken by companies like Airbnb and Uber. Both platforms initially focused on user acquisition, ensuring a seamless experience for customers and providers before introducing monetization strategies.

Monetization Can Wait

Rascoff’s philosophy aligns with the idea that once a strong foundation of engaged users is established, revenue opportunities will naturally present themselves. For Zillow, this strategy worked perfectly. By creating a trusted platform with significant traffic, the company eventually unlocked lucrative revenue streams through advertising, lead generation, and premium services.

Key Lessons for Startups

1. Audience First: Prioritize user growth and engagement over early revenue generation.

2. Leverage Venture Capital: Use funding strategically to focus on building a product or service that users love.

3. Patience Pays Off: Trust that monetization opportunities will emerge once you’ve built a strong foundation.

4. Build Liquidity: Especially for marketplace models, ensure there’s sufficient activity on both sides of the equation.

From Idea to Revenue

The journey of companies like Zillow serves as a blueprint for startups navigating their early days. By focusing on growth and user experience, founders can position their businesses for long-term success, ensuring monetization becomes a natural next step rather than an urgent necessity.

For startups, the message is clear: Build something people love first—profits will follow.

Watch Spencer Rascoff:

Source: Fireside Chat with Zillow CEO, Spencer Rascoff - Startups Uncensored #55