Open this lesson in your favourite AI. It'll walk you through the why, explain the demo, and quiz you on the try-it list.
Funnels are linear and leak at every stage — once a user exits, the model offers no mechanism to bring them back or compound your existing base. Growth loops describe how outputs feed back into inputs, which is the actual structure of products that scale without proportionally increasing spend. Understanding the difference changes where you invest your time.
Model a content loop and compare it to an equivalent funnel to see compounding.
Use these three in order. Each builds on the one before.
In one paragraph, explain growth loops versus funnels like I'm new to it.
Walk me through how a growth loop actually works step by step — how the output of one cycle becomes the input for the next.
Given a marketplace with buyers and sellers, how would you design a loop that compounds both sides simultaneously, and what metric would you watch to confirm the loop is closing?
// Funnel: each cohort is independent
function funnelRevenue(adSpend: number, cvr: number, arpu: number, months: number) {
return Array.from({ length: months }, () => adSpend * cvr * arpu).reduce((a, b) => a + b, 0);
}
// Loop: each cycle's output seeds the next cycle's input
function loopRevenue(seed: number, loopRate: number, arpu: number, months: number) {
let users = seed;
let total = 0;
for (let i = 0; i < months; i++) {
total += users * arpu;
users = users * (1 + loopRate); // existing users generate new users
}
return total;
}
console.log("Funnel 12mo:", funnelRevenue(1000, 0.02, 50, 12).toLocaleString()); // $12,000
console.log("Loop 12mo:", loopRevenue(20, 0.15, 50, 12).toLocaleString()); // $17,409