A Reason to Stay

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In the first startup I joined, we messed up our initial business model by not providing a reason for small- and medium-sized business (SMB) owners to stay. We created a marketplace between SMBs to transact with each other. But, after the first one to three transactions, they had no need for our platform. The scary thing about marketplaces isn’t that you’re connecting suppliers to their demand network, but not providing any bonuses after onboarding – a reason to stay.

Some of the stickiest companies are marketplaces because they provide that reason to stay. More often than not, providing a lovable product so convenient, it’s much easier to use the marketplace platform than to do the transaction themselves, and an easy, passive way to be discovered by future clients/customers that would be much more difficult on their own.

Why Multiplayer Video Games Work

In his book The Messy Middle, Scott Belsky, Chief Product Officer at Adobe and founder of Behance (acq. by Adobe), a discovery platform where creatives can showcase their portfolios and engage with others’, shares that when crafting the ‘first mile’ experience, you need to optimize for three questions:

  1. Why are your customers here?
  2. What can they accomplish?
  3. What can they do next?

Arguably, I believe that founders should always have these three questions hovering above their product strategies, beyond the ‘first mile’, only embedded more implicitly. Video games do an amazing job in this regard, especially massively multiplayer online role-playing games, or MMORPGs for short.

Why play the game? Find escape and sanctuary to be someone players want to be but can’t in the confines of reality.

What can they accomplish? Achieve that endgame that players see in the trailers and in the tutorial (the onboarding for an MMORPG user). The endgame is self-defined as well. Of course, the game optimizes for the power creep meta endgame. Yet, players can always opt for a ‘destiny’, a story, they find compelling, like becoming a fashionista, a wealthy merchant, a mentor, a content creator, and with faster computing systems and more robust infrastructure, a contributor to the game itself, through user-generated content (UGC). The Steam Workshop is an excellent example of UGC.

What can they do next? Level up their character and gear. Tackle the next quest – main or side – towards something larger than themselves. There’s always a defined goal, as well as actionable steps and additional incentives laid out for the players. This creates high retention value – a reason to stay.

The same is true for many other types of genres of multiplayer games – multiplayer online battle arenas (MOBA), battle royale (BR), first-person shooters (FPS), and more. It’s just the narrative of the endgame may change a little towards leaderboard domination. E-sports, content creation, and live streaming then offers a new tier of recognition and endgame for many veteran players.

Back to Marketplaces

I’ve always argued that as a founder, you want to focus on unscalable wins before thinking of scale pre-product-market fit. Focus on the individual experiences. As Li Jin, partner at the reputable a16z, wrote in a post about the passion economy, “[great founders] view individuality as a feature, not a bug.” The best marketplaces, like Uber, Airbnb, and Medium, started off focusing on the unscalable wins for a small individual subset of their potential users. These products offered their early users a reason to stay:

  • (Additional) Incentives and tools, to make their stay worthwhile;
  • Discovery platform to help them grow their brand and customer base, actively and passively;
  • And, subsequent community and network effects.

Early adopters jump on a new product, as fast as they jump off one. They’re finicky. They’re window shoppers, but at the same time, the most willing and likely to try out your product. Luckily and unluckily, the San Francisco Bay Area has no shortage of these folks, and being a tech startup, with its initial user base here, often inflates your early metrics. In short, the goal of your product is to make these technological butterflies fall madly in love with you and your product. That’s the tough part, but it’ll also mean you’ve found product-market fit (PMF).

Where do we find ‘love’?

Instead of a minimum viable product, or MVP, Jiaona Zhang, Senior Director of Product at WeWork, in her First Round Review piece, chases the “pixie dust”, or what I like to call the secret sauce – a truly unique, money-making insight. This magic is found through diligent iteration on consumer feedback, especially in the beta stages of a product. During the beta, users have the serendipity to discover “that magical moment in the user journey where the user realizes that this product is different from anything else they’ve ever experienced”. Her framework, designed from the perspective of the consumer:

Wouldn’t it be cool if users could [a process/action that would 10X their lives]?

What We Learned

The same was true for us at Localwise. Of course, we were motivated by poor retention metrics. But, we learned what businesses truly needed by asking each of them in person, as well as flyering (and getting rejected, or worse, ignored) to college students and to shops. So, still deeply in love with the community we built, we found that need when connecting local talent to SMBs. For businesses with high churn rate with temporary employees and a need to build a brand, that was their reason to stay.

The Pain of Entrepreneurship

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I was chatting with an founder-investor last Friday about the complexities of the founder-idea and the investor-founder discovery process. Eventually, our conversation arrived at the “idea maze“, coined by Balaji Srinivasan – which describes how one’s past life experiences position her/him best to tackle a new problem. And it bled into how great investors, or people who have a track record for backing entrepreneurs who change the world, differentiate good founders from great founders. And I turned the question many of my friends, who are interested in angel and early-stage investing, have asked me to her:

How can one, without necessarily having gone through the entire entrepreneurial experience, better understand and empathize with the founder journey?

It’s a question I have tried to resolve myself, since I’ve only experienced the two extremes of building a startup – at its conception till product-market fit and right before an acquisition – and at two different ventures. I’ve heard many answers over the years:

  • Read books or listen to podcasts about startups,
  • Chat with founders,
  • Shadow them for a month or more,
  • Advise them at their early stages,
  • Join an angel group to hold office hours for them,
  • And, start your own business…

…. each from at least ten different sources. But she said something that I have never thought of before. Live with an entrepreneur.

A simple answer, yes. But a spectacularly profound one, nonetheless. I’ve had the fortune of living with an aspiring e-sports athlete, an aspiring Korean pop star, and a property manager. In all three cases, I learned, even passively, about the lifestyle of each – their wins, their stressors, even how meticulous they think about their apparel for the day, but most importantly, how hard they each worked to realize their dream. It’s not something any interview, book, podcast, blog post, and even shadowing experience can teach you.

I’ve been taught since I was a kid in elementary school to work smart, not hard, or its better cousin: work smart and hard. But in both mantras, working hard is always overshadowed by working smart. In fact, over time, I learned it wasn’t just me. Media portrays society’s hardest workers in biased, unflattering light. I remember watching a bunch of movies and TV shows as a kid where the janitor or the bus driver, playing a side character, is either a 300-pound man or an old spindly soul with hollowed eyes. Mike Rowe, host of one of my favorite childhood TV shows, Dirty Jobs, is definitely more illustrious on this stigma than I am, which he explains in his 2009 TED talk. In Silicon Valley, the occupation of being an entrepreneur isn’t too different. Yes, there’s the supposed glamour of being the next Mark Zuckerberg or Steve Jobs. But whether it’s Shikhar Ghosh‘s study that 75% of startups fail, or the 90% or 95% many others reference, the truth is the numbers work against you. Moreover, unless you’re “venture-backed”, when people see “entrepreneur” on your resume, many think “unemployed”.

Yet, I’ve realized people with the entrepreneurial spirit are some of the hardest working individuals I’ve ever met, given that there are still many who seek the title over the commitment – what I’ve come to call “wantrapreneurs.” None of my apartment-mates ever called themselves an entrepreneur or a founder, but in every sense, each of them was and is the definition of a hard worker, a hustler, and an entrepreneur. They were scrappy. They were ambitious. Or like I mentioned in my post last week, they were obsessed. They’ve navigated their own idea mazes to set themselves up for success. For example, one of my suitemates saw the value of stacking chairs every week during work study and turned it into efficient inventory management and an opportunity to get in front of the music director without an official audition. Many of the entrepreneurs around me I respect the most never had the B-school education and weren’t classically trained in the Porter’s Five Forces or the SWOT analysis. A few even dropped out of school, but they all have the capacity to work hard, then synthesize the data around them. The commitment to work hard prefaces the facility to find a shortcut. One founder, to keep his business afloat, biked up and down the hills of San Francisco delivering Uber Eats, since he couldn’t afford a car and its insurance plan. Another went to his dream client’s headquarters every day at 9AM for two months straight to secure a meeting, and subsequently, a contract. A third flew back to meet with clients that were about to bail on his startup, despite still not having recovered from four fractures in his vertebrae, leaving him paralyzed below the chest.

I’m not saying my apartment-mates or the founders aren’t smart. In fact, they’re some of the smartest folks I know, but it’s their constant willingness to get their hands dirty that has my utmost respect. Though I’ve lived with my apartment-mates, I’ve never lived with any founders, but I can only imagine the depth of understanding and empathy one would have by being in such close proximity. And in doing so, how one can appreciate the founder journey beyond the facts, and experience the emotional pain points as well.