Tag: lenny rachitsky

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#unfiltered #35 How Do You Know When You Click?

Over the weekend, my friend and I had this fascinating conversation about how we found our other friends. I know, metaphysical, nerdy even. But nevertheless, I thoroughly enjoyed it. She posed the question: “Is it just based on how long you’ve known each other? And how often you see each other?” For most of my life, I would have said yes. Classmates that became friends were people I met and could chat with over lunch or after school. The same is true for colleagues. And strangers. Some happened exceedingly fast – within 24 hours. Others have taken over half a year before we “warmed up” to each other.

Unsurprisingly, it gave birth to the question: At what point does an acquaintance become a friend?

The PMF parallel

To be honest, I didn’t have a good answer then, nor do I have one now. Part of the reason I’m sharing this is to open up dialogue and draw inspiration from you, my readers.

Pushing up my glasses, which I’ve got to get a new pair (open to any recommendations), I couldn’t but analogize it to startups finding product-market fit.

How do founders know when they hit product-market fit? The TL;DR version: when you’re too busy to even ponder if you have product-market fit. Or simply, you’ll know it when you have it. For the longer, less nebulous answer, I recommend checking out Lenny Rachitsky’s piece on it, and some of other essays I’ve written on the topic:

Or as Casey Winters, Chief Product Officer at Eventbrite, says:

“Product-market fit isn’t when your customers stop complaining, it’s when they stop leaving.”

Some more examples include, when:

  • You’re focused on upgrading your servers rather than acquiring customers.
  • There’s so much demand, you’re writing “I’m sorry” and “Not yet” emails to your customers who are asking when can they get off the waitlist.
  • Laggards on the adoption curve start using your product and saying wow. In Airbnb’s case, that was Joe Gebbia‘s mom using the product.
  • There are handwritten love letters in your office mailbox.
  • Customers are asking how they can pay (more) for your product.
  • You’re feeling the pull of the market rather than pushing your product in front of people.

Friends

On a similar note, when the entropy of a relationship and the subsequent conversations break into an impetuous nature that eclipses the inciting reason for the relationship, you might have something going. Or in simpler words, you can’t stop the momentum of the relationship. “What about this?” “Let’s do that!” “Ahhh, not enough time!” Of course, as all relationships go, it takes two to tango. Just like product-market fit, when you don’t have it, it’s not obvious what you need to do make it click. But when you do have person-person fit, everything makes sense. And quite obvious, in retrospect.

While the above was my answer on Sunday, I’m not completely sold it’s the end all, be all. And as I continue to find new sparks and rekindle old flames, I’m sure I will learn more about myself and others. A provocative question that may require a more provocative answer.

Top photo by Tyler Nix on Unsplash

#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.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

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How to Build Fast and Not Break (As Many) Things – A Startup GTM Playbook

The tech world, particularly Silicon Valley, in the past 2 decades, has accelerated its growth ’cause of one mantra: “Move fast and break things.” Some of the most valuable products we know today were built because of that. Facebook, whose founder coined the phrase. Google. Amazon. LinkedIn. Uber. The list goes on. In sum, be “agile”. Simultaneously, I see founders, on the regular, take this mental model too far. They move fast, but they rarely give enough time to test their hypotheses.

Equally so, some companies cannot afford to “break things”. Take Dropbox, for example. Ruchi Sanghvi, founder of the South Park Commons Fund, former VP of Operations at Dropbox, and Facebook’s earliest female engineer, told VentureBeat in 2015, “Quality is really, really important to Dropbox, and as a result we needed to move slower — not slowly, but slower than Facebook.” Ruth Reader, who wrote for VentureBeat at the time, further extrapolated, “What was right for Facebook — fast-paced iteration and fixing bugs in real time — didn’t work for DropBox, an application people entrusted with personal documents like wedding photos or the first draft of a novel. What was valuable to DropBox was the details.”

On the other extreme, there are founders who spend day after day, week after week, and sometimes year after year, pursuing the “perfect” product before launching. If they were right on the money before, by the time they launch 6 months later, they might be 6 months off the money. Take the situation we’re all in today for example – the pandemic. No one could have predicted it. In fact, I had many a few predictions before the pandemic, which all proved to be unfortunately wrong.

  • The Marketplace of Startups, written on February 24, 2020 – I alluded to an opinion I held that consumer social was almost dead. The consumer app market had become so saturated that it was hard for new players to play in.
  • Myths around Startups and Business Ideas, written on October 12, 2020 – Pre-COVID, I was more bullish on Slack than Zoom as a public stock investment. History proved otherwise.

… and more to come. Mistakes are inevitable. And “the rear view mirror is always clearer than the windshield”, as Warren Buffett would describe. Seth Godin said in his recent interview on The Tim Ferriss Show: “Reassurance is futile because you never have enough of it.”

At the end of the day, as a startup founder, your raison d’être is creating value in the world where there wasn’t before. As Bill Gates puts it: “A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it.” Analogized, your startup is that platform.

So, in this post, using the lessons from other subject-matter experts (SMEs), I’ll share how startup teams can balance speed with intentionality in their go-to-market (GTM) strategy.

Continue reading “How to Build Fast and Not Break (As Many) Things – A Startup GTM Playbook”
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Fantastic Unicorns and Where to Find Them

As a venture scout and as someone who loves helping pre-seed/seed startups before they get to the A, I get asked this one question more often than I expect. “David, do you think this is a good idea?” Most of the time, admittedly, I don’t know. Why? I’m not the core user. I wouldn’t count myself as an early adopter who could become a power user, outside of pure curiosity. I’m not their customer. To quote Michael Seibel of Y Combinator,

… “customers are the gatekeepers of the startups world.” Then comes the question, if customers are the gatekeepers to the venture world, how do you know if you’re on to something if you’re any one of the below:

  • Pre-product,
  • Pre-traction,
  • And/or pre-revenue?

This blog post isn’t designed to be the crystal ball to all your problems. I have to disappoint. I’m a Muggle without the power of Divination. But instead, let me share 3 mental models that might help a budding founder find idea-market fit. Let’s call it a tracker’s kit that may increase your chances at finding a unicorn.

  1. Frustration
  2. The highly fragmented industry with low NPS
  3. Right on non-consensus
Continue reading “Fantastic Unicorns and Where to Find Them”
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How to Identify Market Opportunity and Recognize Market Inefficiencies

round gold colored pocket watch

I was raised a swimmer. From 4 years old, my parents sent me to take swimming classes for 2 primary reasons:

  1. Learn how to not drown.
  2. If we (my parents) are ever going to drown, you’re going to save us.*

*Note: I’d like to point out the irony is that both of parents know how to swim themselves. Not at a competitive stage, but enough to survive from drowning.

Oddly enough, I learned how to swim by drowning. Over the years, like many other children around me, on top of swimming, I also played ball in its various sizes and ran. And I learned that swimming and running are of the 2 purest forms of athleticism and exercise out there. There’s very little margin for error, if any. A tenth of a second is the difference between Olympic gold and not even qualifying for the semifinals. Because of that, in swimming, we’re taught to be efficient. We learned to maximize for our distance per stroke (DPS). And I believe in running, it’s distance per stride.

Efficiency. The ability to do more with less.

The market of efficiency

These days, getting from point A to B isn’t as difficult as it used to be. Cars made travelling miles easier. Planes, for hundreds to thousands of miles. Bikes and scooters, for last mile transportation – distances too close to drive, but take twice as long to walk. Outside of transportation, career development, information and skill acquisition have all seen massive developments not only in the last hundred years, but especially in the last 10 years. Online platforms, like Coursera, Masterclass, Google, and Wikipedia, helped us all shave off months, years, even generations of legwork and information acquisition. They made so many things more accessible.

Accessibility

Accessibility is platformitizing and democratizing information. What Yellow Pages did for services. Reddit for knowledge acquisition. Amazon for shopping. Google for information. And Food Network and food media did for cooks. The average person today is more knowledgeable about the culinary process and its accessories than someone two decades back. Laughable now, but 8 years ago, it’s how I learned not to burn frozen pizza. I could go on and on.

But, in the next ten years, accessibility may not be enough. Though there are many populations in this world who still have yet to access the knowledge I can readily find on my laptop, accessibility provides people with the tools, but not the means to use those tools effectively.

Ease

Ease does. Lower the barriers to entry and bundle the entire knowledge acquisition, or otherwise, what I would call onboarding, in an intuitive manner. Like what WordPress did for websites. Instagram for photos. Opendoor for home-buying/selling. TurboTax for, well, tax.

It’s a messy web of information out there. As economist Herbert A. Simon puts it:

“A wealth of information creates a poverty of attention.”

Here’s an easy way to tell which industries and processes lack ease. Find where people have created hacks to solve a problem.

  • Using multiple tools/software to solve a single problem;
  • Using a “temporary” solution to solve a repetitive problem. Like a basin to catch the rainwater that leaks through the roof;
  • A public forum, like Reddit or a Facebook group or multiple similar questions on Quora, where people share their “life hacks”.
  • A How-to YouTube video that has tens/hundreds of thousands, if not millions, of views.

And to know if you hit the nail on the head, you’ve got crazy pull. Product-market fit. PMF. When you don’t even have the luxury of time to worry if you have PMF ’cause your customer success inbox/sales inbox is filled to the brim. Or you’re getting so many new users that you’re figuring out how to upgrade your servers before your servers go blank. For more on PMF, I highly recommend checking out Lenny Rachitsky‘s recent post surveying 25 of the most successful companies on when they realized they had PMF.

In closing

Tools and platforms that make it easier for an individual to go the distance, to be more efficient, carry 2 traits: accessibility and ease. With each stroke, with each action one takes, they can go further. They can do more. With less. Technology, in the incoming years, will further do so.

And as a VC scout, I look for, what I call – distance per action. Or DPA, for short. So, if you’re working on something that will enable people to have higher and greater DPAs, I wanna talk.

Photo by David Bartus on Pexels.com

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Tracking What Customers Love

focus, lens, product-market fit is fluid, how to find product market fit

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.

depth vs breadth graph, retention, product features

Below are just a few examples of breadth and depth metrics:

BreadthDepth
# of logins/week# actions/session
Session countSession 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.

Photo by Paul Skorupskas on Unsplash

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