Last week, my mentor/friend asked me if I knew anyone who’s stellar at storytelling and would be willing to hold a 1-hour workshop about it with his mentorship group. I connected with my buddy who earned his chops podcasting and being a brilliant customer-oriented founder, specifically on the user journey.
And it got me thinking. Hmmmm, I wonder how long people take to prep for a workshop or talk designed to inform and educate. Which eventually led me to the question… How much time allocation might many event hosts underestimate when asking a speaker to speak at their event?
Well, outside of travel, set up, rehearsal time, and of course, the length of the talk/workshop itself.
So, over the last few days, I reached out to 68 friends, mentors, and colleagues who have been on the stage before, including:
VCs – who invest out of vehicles that range from $5M to $1B (sample-specific)
Angels – investing individuals, who have over $1M in net worth
Founders – both venture-backed and bootstrapped
Executives – Fortune 500 and startup
Journalists
Influencers – YouTubers and podcasters
Consultants/Advisors
Professors
And, those who’ve been on public stages with 1000+ in live viewership.
… and asked them 2 questions:
How long, in hours, do you take to prepare for a 1-hour talk?
For the purpose of slightly limiting the scope to this question, let’s say it’s on a topic you’re extremely passionate and well-versed in, and the audience is as, if not more, passionate than you are.
And if I said this was for a high-stakes event, that may change your career trajectory, would your answer change? If so, how long would you spend prepping?
50 responded, with numerical answers, by the time I’m writing this post, with a few results I found to be quite surprising. *pushing my nerd glasses*
And I’m in complete accordance. I want to specifically underscore 2 of Michael’s sentences.
… and…
The only ‘exception’ to this ‘rule’ would be if investors themselves were the target market for the product. At the same time, I can see how the venture industry has led her and many others to believe otherwise. So I thought I’d elaborate more through this post.
I recently read Mark Suster‘s 2018 blog post about startups on “Remind me why I love you again?”. As an extremely active VC, he specifically detailed why, unfortunately, by meeting 2, 3, and so on with a founder, he may forget the context of reconnecting and why the founder/startup is so amazing. And, simply, he calls it “love decay”.
Mark Suster’s graph on ‘Love Decay’
The longer it has been since a VC/founder’s last meeting, the harder it is to recall the context of the current meeting. Though I may not be as over-saturated with deal flow as Mark is, it is an unfortunate circumstance I come across in meeting 5-10 founders and replying to 100+ emails a week.
Over the weekend, I was brewing up some mad lemonade. ‘Cause well, that’s the summer thing to do. Since I’m limited in my expeditions outdoors, it’s just watching the sun skim over the horizon, blossoming its rose petals across the evening sky, in my backyard, sipping on homemade lemonade. If you’re curious about my recipe, I’ll include it at the bottom of this post.
Thomas Keller. An individual probably best known, among many others, for his achievements with The French Laundry. Needless to say, I was enamored by his talk. But the fireworks in my head didn’t start going off until the 12:46 mark.
Yesterday evening, I sat in our backyard, sipping homemade lemonade and sketching out my weekly creative endeavor (why). Between sips and furtive glances upwards, I hoped to catch a glimpse of NEOWISE. But alas, I forgot to pray to the weather gods in the morning.
Disappointed, I packed up to head inside. As if by a stroke of fate, my phone buzzed. You know, this story would be more dramatic if my disappointment was telepathically transmitted to my friends. Tongue in cheek, I apologize if I got your hopes up. But, it was merely the influx of messages after my timed “Do Not Disturb” mode switched off. Yet one of these blips came from a good ol’ swim team pal into our group chat. Lo and behold – an HD cross section in time of the exact comet.
I propped my cell above my head, positioned just north of the horizon. And unable to hold my smile back, I stuck around for a while longer.
So what?
You’re probably wondering: How the hell does yesterday’s smile have to do with “You will be what you eat, you are what you excrete”. As the title of the post so kindly suggests. Trust me it does. Admittedly, probably not the greatest of blog post titles, but, hey, it rhymes. Which might be the lamest excuse you’ve heard this month. But I digress.
You will be what put in your body. You are already what comes out of your body. Literally. Well, I’m sure my cousins who are molecular cell biologists will point out some (or many) of the nuances I missed. But we don’t have to count the cards.
The same is true for your personality. You build your personality based on the inputs in your life from when you’re younger. Your personality is subsequently evidenced by what you say and do.
And, I can say the same for education, biases, and so on. For the purpose of this post, I’d like to underscore one other – relationship-building. Or as most others understand it, networking. But I have a mild allergic reaction to that nomination.
Friday last week, I jumped on a phone call with a founder who reached out to me after checking out my blog. In my deep fascination on how she found and learns from her mentors, she shed some light as to why she feels safe to ask stupid questions. The TL;DR of her answer – implicit trust, blended with mutual respect and admiration. That her mentors know that when she does ask a question, it’s out of curiosity and not willing ignorance – or naivety.
But on a wider scope, our conversation got me thinking and reflecting. How can we build psychological safety around questions that may seem dumb at first glace? And sometimes, even unwittingly, may seem foolish to the person answering. The characteristics of which, include:
A question whose answer is easily Google-able;
A question that the person answering may have heard too many times (and subsequently, may feel fatigue from answering again);
And, a question whose answer may seem like common sense. But common sense, arguably, is subjective. Take, for example, selling losses and holding gains in the stock market may be common sense to practiced public market investors, but may feel counter-intuitive to the average amateur trader.
We’re Human
But, if you’re like me, every so often, I ask a ‘dumb’ question. Or I feel the urge to ask it ’cause either I think the person I’m asking would provide a perspective I can’t find elsewhere or, simply, purely by accident. The latter of which happens, though I try not to, when I’m droning through a conversation. When my mind regresses to “How are you doing?” or the like.
To fix the latter, the simple solution is to be more cognizant and aware during conversations. For the former, I play with contextualization and exaggeration. Now, I should note that this isn’t a foolproof strategy and neither is it guaranteed to not make you look like a fool. You may still seem like one. But hopefully, if you’re still dying to know (and for some reason, you haven’t done your homework), you’re more likely to get an answer.
While sipping on my morning green tea, I’m inspired by Venture Stories’ recent podcast episode where Erik was interviewing Charles Hudson of Precursor, where they codify Charles’ investment thesis, markets, business models, among many other topics. A brilliant episode, if I say so myself! And it got me thinking.
Some market context
In the past few months, I’ve been chatting with a number of founders who largely seem to gravitate towards the subscription business model. Even pre-COVID, that seemed to be the case. And this notion was and is further perpetuated where a plethora of VCs turned their attention to XaaS (X-as-a-service).
Why? Pre-COVID, the general understanding was that consumers were:
More expensive to acquire,
And, harder to retain,
…which I shared in one of my February posts. I’d even heard some investors say: “Consumer social is dead.” Although I personally didn’t go as far as to illustrate the death of a vertical, I had become relatively more bearish on consumer than I did when I started in venture. Clearly, we were wrong. The question is: how much of this current situation will still hold true post-COVID? And honestly, your guess is as good as mine. But I digress.
Given the presumption that the consumer industry was faltering, many VCs re-positioned their theses to index more on enterprise and SaaS models. Models that had relatively fixed distribution channels and recurring revenue. It became some form of ‘guarantee’ that their investments could make their returns. And as the demand for startups shifted, supply followed.
The Business Models
Though there seemingly has been an overindexing of subscription models in the consumer space, I’m still an optimist for its future. The important part is to follow consumer behavior.
What do their consumption patterns look like?
What do their purchasing patterns look like?
How do customers think about value?
Here is a set of lens in which I think about business model application:
Subscription
“One-off”
Continuous consumption patterns >3-4 times in a month (Ideally, >3-4 times per week)
Discrete consumption patterns ~1-2 times a year Extremely episodic in nature
Proactive, expectant behavior
Reactive behavior
Examples: Food Groceries Music Education
Examples: Moving homes One-off Conferences Travel Car
Note: The examples are generalized. The business models will depend on your target market. For example, travel for the average family may not happen on a recurring basis, but travel for a consultant happen weekly (pre-COVID).
The Extremes of Gross Margins
Of course, I can’t talk about business models without talking about profits. The ultimate goal of any business model is to realize returns – gross margins. Unfortunately, there’s no silver bullet on how you price your product. While you find the optimum price (range) for your product A/B testing with your customers, here’s a little perspective onto the two extremes of the spectrum.
If you have insanelyhigh margins, expect lots of competitors – either now or in the near future. Expect price-based competition, as you may most likely, fight in a race to the bottom. Much like the 1848 California Gold Rush. Competitors are going to rush in to saturate the market and squeeze the margins out of “such a great opportunity”.
If your margins are incredibly low, as Charles said on the podcast, “there better be a pot of gold at the end of the rainbow.” You need extremely high volumes (i.e. GMV, “liquidity” in a marketplace) to compensate for the minimal cut you’re taking each transaction. A fight to monopolize the market. I’m looking for market traits like:
Growing market size.
Ideally heavily fragmented market where you can capture convoluted, antiquated, and/or unconcentrated processes in the status quo.
Why unconcentrated? Don’t underestimate the power of your incumbents’ brands and product offerings. Like don’t jump in ad tech if you’re just going to fight against the Google and Facebook juggernauts, who own 80% of the ad market.
For example, payments or food delivery. Food delivery is one where you have to reach critical mass before focusing on cash flow/profitability. I get it. It’s a money-eating business… until network effects kick in. Sarah Tavel wrote a Medium article about this where she explains it more elegantly than I have.
In closing
I’ve seen many founders end up taking their models for granted or sticking to a single generic revenue structure. But the best founders I meet make this a very intentional part of their business. Sometimes, even having different revenue streams for different parts of the business. If that’s the case for you too, Connie’s piece about multimodal models may be worth a read.
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As a footnote, I wasn’t able to predict the COVID crisis, so my thoughts in this last piece are as evergreen as an oak tree is. Specifically, my lack of foresight on increasing startup valuations and the return of consumer social.
Despite that, the final 2 questions of the piece are still very much pertinent now.
For the most part, founders are pretty cognizant of this X-factor. B-schools train their MBAs to seek their “unfair advantange”. And a vast majority of pitch decks I’ve seen include that stereotypical competitor checklist/features chart. Where the pitching startup has collected all the checkmarks and their competitors have some lackluster permutation of the remaining features.
There’s nothing wrong with that slide in theory. Albeit for the most part, I gloss over that one, just due to its redundancy and the biases I usually find on it. But I’ve seen many a deck where, for the sake of filling up that checklist, founders fill the column with ‘unique’ features that don’t correlate to user experience or revenue. For example, features that only 5% of their users have ever used, with an incredibly low frequency of usage. Or on the more extreme end, their company mascot.
To track what features or product offerings are truly valuable to your business, I recommend using this matrix.
“The optimal strategy is to assume that everybody that is competing with you has found some unique insight as to why the market is addressable in their unique approach. And to assume that your competitors are all really smart – that they all know what they’re doing… Why did they pick it this way? And really picking it apart and trying to understand that product strategy is really important.”
So, I have something I need to confess. Another ‘secret’ of mine. There’s a follow-up question. After my initial ‘unique insight’ one, if I suspect the founder(s) have fallen in their own bubble. Not saying that they definitively have if I ask it, but to help me clear my own doubts.
“What are your competitors doing right?”
Or differently phrased, if you were put yourself in their shoes, what is something you now understand, that you, as a founder of [insert their own startup], did not understand?
In asking the combination of these two questions, I usually am able to get a better sense of a founder’s self-awareness, domain expertise, and open-mindedness.
I met a founder (let’s call him Stan) recently who was about to close on his first big executive hire into a team less than 10 strong. Naturally, I asked what the rest of his team thought of that person. Stan replied, “I haven’t asked them yet.”
So, I subsequently followed up, “Were they able to meet him?”
“He’s been by our office, and I’m sure he’s had the chance to chat with them already.”
When he said that, two things stuck out to me:
Stan’s use of “I’m sure…” implied neither that he was sure nor that he took care to verify.
He seemed to have skipped a fundamental step in building a team. And by transitive property, how it would define his team’s culture.
The Culinary Parallel
Synonymously, a day later, my friend asked me, “How do you come up with your ideas for flavor mad science?”
You’re probably here thinking: “What the hell does this have to do with team-building and culture?” But bear with me here. I swear there’s a parallel.
Although, like all of my ideas and insights, I can’t say any of my flavor experiments are truly original, I always start off at the drawing board with flavor maps. And, you guessed it! Not even the concept of flavor maps is original. A few years ago, an amazing chef taught me this very trick of how he concepts new recipes every season at his critically acclaimed restaurant.
So, what’s a flavor map?
The idea of a flavor map is to start with a core ingredient – the star of your dish. And then slowly add other flavors and elements onto your diagram one by one. The catch is that every new flavor you add has to pair well with every single other flavor on that diagram.
Two flavor maps where I used green tea as the (co-)core ingredient.
Personally, I just try to think of a dish that I enjoyed, or know many other people enjoy, as the basis for a drawing a line between a pair. The reason I do so is that many generations of experts before me have already done the legwork to make these flavors work. And I’m just iterating off of their discoveries.
The more scientific approach is through flavor networks – specifically food-pairing and food-bridging. In summary, food-pairings are when you combine two ingredients with the same flavor molecules, like cheese/bacon or asparagus/butter. The most bizarre one in a 2011 Harvard study is probably blue cheese/chocolate, which share 73 flavors. On the other hand, food-bridging is when you take two ingredients that don’t share any flavors, like apricots/whiskey, and bridge them with an ingredient that shares commonalities with both, like tomatoes.
Yong-yeol Ahn and his colleagues explore the nuances of flavors and recipes in their 2011 research, which you can find here. But if you want the abridged summary, there’s a great one on Frontiers. Yet, as one of the co-owners of a critically-acclaimed molecular gastronomic restaurant told me not too long ago, take the research with a grain of salt. Food science is still extremely nascent and lacks consistent data points, especially across cultures.
Looping Back
Just like a complete flavor map has all of its ingredients working in cohesion with one another, a strong team needs to hold the same level of trust and respect. I’m not advocating that you need to agree with everyone on your team. In fact, disagreement on warranted grounds is better. But to be a well-oiled machine, a team can only be agile if you reduce the unnecessary friction that may exist now or arise in the future.
Although it is important that every team member can ‘food-pair’ with every other member, what I believe is more important is to have a fair mitigation system to ‘food-bridge’ all current and future disagreements. A system to resolve disputes and to prioritize tasks at hand. To have not only trust in each other, but also in the system design.
The cherry on top
Of course, I don’t know if Stan just forgot to set up times for his team to meet with the potential hire between his various tasks of running a business. Or if he had something he wanted to hide from his team. Regardless, his decision, or I guess, lack thereof to do so, would be detrimental to the delicate string of trust that connected his team to him.
To his and every other founders’ credit, there are often matters that seem obvious to an observer, but less so, when one has skin in the game – some degree of emotional attachment. And the deeper one is in the weeds, the harder it may be to follow rational behavior. Loosely analogized to the boiling frog problem. That said, some actions are excusable. These can often be caught by either a mentor or a close friend/family member. But there are a handful that aren’t. The same can be said on a macroscopic perspective as well. Between friendships. Lovers. Coworkers. You name it.
And, luckily for Stan, this falls under the former.
#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost).Who knows? The possibilities are endless.
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Product-market fit is fluid. Just because you’ve attained it once doesn’t mean you’ll have it forever. The market is constantly changing. And that means the intersection where supply meets demand will always be changing as well. That said, regardless of how and where you move to, you’ll always have a subset of your customers who aren’t happy. Who might miss the old ways. Who might wish for something else entirely.
To put it into perspective, I’m going to quote Casey Winters (his blog), the current Chief Product Officer at Eventbrite:
“Product-market fit isn’t when your customers stop complaining, it’s when they stop leaving.”
Retention and its Touch Points
If you run a business, you’re going to have a leaky funnel. Your job is to minimize the leaks. Double down on not just adoption, but especially retention. What does that mean? Engagement and the often, overlooked category, for many early-stage teams, re-engaging those that have become inactive over a set period of time. Whether 30 days or 7 days. It depends on what solution your product is providing for the market and how frequently you normally expect them to use the product. For example, for most consumer apps, as investors, we expect a minimum of usage for 3 days out of the 7 calendar days a week. So I characterize inactivity aggressively as after a month of inactivity.
In the past few months, since the health and economic crisis began, the conversation has shifted from ‘growth at all costs’ to profitability. And similarly, from an overemphasis on adoption to a better understanding of retention.
Speaking of retention, 2 days ago, the afore-mentioned Casey Winters and Lenny Rachitsky published their homework on the the dichotomy between good and great retention, which you can find here and here, respectively. Their research provides some useful touch points about “golden” numbers from some of the smartest people in the industry. Of course, as their research suggests, everyone’s “golden” number is different. At different points in time.
So, how are you tracking how lovable your product is?
One of my favorite ways to track what keeps users coming back for more is the Depth vs. Breadth graph. Plotting how long people use certain features and how often they click into it. You can easily substitute length of time (depth) with the number of actions taken for each product feature you have. Or as you grow into having multiple product offerings, this graph works just as well.
Below are just a few examples of breadth and depth metrics:
Breadth
Depth
# of logins/week
# actions/session
Session count
Session time length
D1/D2/D7/D30 sessions
# concurrent devices logged in
Platform-specific sessions
DAU/MAU
# paid users/ # total
The above graph should also help you better optimize your features/offerings. For instance, let’s say you’re a startup in your growth stages. Going by Reid Hoffman‘s rule of thumb for budgeting, spend:
70% on your ‘popular‘ product offerings,
20% on your ‘niche‘ product offerings,
And 10% exploring your any hidden gems in your ‘broad‘ quadrant.
In closing
If you have your finger on the pulse about what your customers love about you at all times, you’ll be able to create a more robust product. As a final note, I want to add that while this piece has been dedicated to what your customers love, please always keep in mind what they hate as well. And why they hate what they hate. Who knows? You might discover a larger secret there.
