--- title: "Lenny's Newsletter — 2022 年合集" date: "2022-01-01" source: "Lenny's Newsletter" url: "https://www.lennysnewsletter.com/" ---
# Lenny's Newsletter - 2022 (44 issues) This file contains 44 articles/episodes. --- ## [1/44] Prioritizing at startups > ## Q: I find most of the prioritization frameworks are for larger companies with an established set of features. Apart from user feedback, research, and my gut, I’d love to understand if there is a framework you’ve seen work at early-stage companies trying to hit product-market fit. For context, I’m a first-time founder building in the B2B space. You’re absolutely right. Most of the prioritizing advice out there is not actually useful for early-stage pre-PMF companies. Including [my earlier post on prioritization](https://www.lennysnewsletter.com/p/prioritizing). That’s troubling, because bad prioritization is an excellent way to kill your startup. A startup is like a newly lit fire: exciting but fragile. Make a few wrong moves, and it ceases to be. ![Image from Prioritizing at startups](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e3b0fcca-1f87-4018-b391-1e047e7dd75c_480x254.gif) Prioritizing at a large company is different. You’ve got momentum and fuel, and prioritizing is more about accelerating something that’s already working vs. creating something new. As a result, you have a lot more room for error. ![Image from Prioritizing at startups](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/dcb6593b-3db0-4e6e-b86c-a1932fa733d7_480x270.gif) While I was at Airbnb, I’m pretty sure the majority of our experiments had zero (or negative) impact. But we continued to grow because we had strong PMF, a word-of-mouth flywheel, and a growing market, and we found enough big wins to make up for many mistakes. You have none of these advantages at an early-stage startup. Let’s take a closer look at prioritizing at a pre-PMF startup—specifically a B2B startup. Below, I’ll share: 1. Common prioritizing pitfalls 2. A guide to prioritizing 3. How to come up with ideas 4. Further study *To inform my thinking, I asked some of my favorite early-stage founders (building rocket-ship businesses) how they prioritized early-on. You’ll find their insights below. A big thank-you to [Benjamin Encz](https://www.linkedin.com/in/benjaminencz/) (CEO of [Ashby](https://ashbyhq.com/)), [Christina Cacioppo](https://www.linkedin.com/in/ccacioppo/) (CEO of [Vanta](https://www.vanta.com/)), [Julianna Lamb](https://www.linkedin.com/in/juliannaelamb) (CTO of [Stytch](https://stytch.com/)), [May Habib](https://www.linkedin.com/in/may-habib/) (CEO of [Writer](https://writer.com/)), [Rujul Zaparde](https://www.linkedin.com/in/rujulz/) (CEO of [Zip](https://ziphq.com/)), and [Tommy Dang](https://www.linkedin.com/in/dangtommy/) (CEO of [Mage](https://mage.ai/)).* Let’s do this. ### **Most common prioritizing pitfalls at early-stage startups:** 1. **Solving nice-to-have problems:** Too many founders spend their time building “[vitamins](https://www.forbes.com/sites/georgedeeb/2014/07/24/is-your-startup-building-a-vitamin-or-a-painkiller/?sh=16c5eb223826)”—products that solve small problems and make life just a bit easier. In B2B, you’re unlikely to build a big business if you aren’t solving significant pain. Salesforce, Datadog, Stripe, Workday, Gusto—they all solved big problems for people. These products aren’t just nice-to-have. You basically can’t do your job well without them. How do you know if you’re solving a big enough pain point? Keep reading. 2. **Trying to be data-driven:** As an early-stage startup, especially in B2B, you simply don’t have enough data. [Use this calculator](https://www.optimizely.com/sample-size-calculator/?conversion=3&effect=20&significance=95) to see for yourself how many data points you need. For example, if you want to increase conversion by 10% and it’s currently at 20%, you’ll need over 5,000 users to experience that change. 3. **Too much theory, not enough building:** I’ve seen a lot of founders (particularly ex-PMs) with incredibly detailed strategy docs and really nice decks who don’t ship often enough, and thus end up building something no one really needed. If you’re holding back because you aren’t sure which direction to go, just ship something. 4. **Doing everything your users ask:** Don’t rely on what your users tell you to build. They will (unknowingly) deceive you. Instead, focus on their *pain points*. Then think deeply about the best way to make that pain go away. Sometimes the solution will be exactly what a user suggested. Oftentimes you’ll discover a solution that’s simpler, smarter, and useful to many other users. > #### “We have a philosophy when it comes to building product that we shouldn’t just build either what competitors are doing or take at face value what customers are asking for. Rather, we dig deeper to understand the problem they’re trying to solve and what the optimal solution could be. Maybe someone thinks that x is a solution to problem y—but if you just build x without understanding problem y, you often shortchange yourself. There’s actually a more elegant or better solution to problem y that you’ll only find if you understand the root issue first. Sometimes we even find that the product already supports what someone is trying to do. This helps us build more universally applicable products vs. one-off solutions.” > > #### —Julianna Lamb, CTO of [Stytch](https://stytch.com/) ### How to prioritize at a pre-PMF startup Broadly, your single goal as an early-stage pre-PMF startup should be to **make 10 customers** ***very*** **happy**. Everything you prioritize should be in service of this goal. **Why 10?** If you can make 10 customers very happy, you can probably make 100 customers very happy. From there, you can continue to add value, reduce friction, build your growth engine, etc. On the flip side, if you cannot make 10 customers very happy, it’s unlikely you have a business. **Why** ***very*** **happy?** Because there are endless products fighting for your customers’ attention. The bar for people continuing to come back to (and pay for) your product is much higher than you think. When you’ve solved a real problem, people will beg you to take their money. ![Image from Prioritizing at startups](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/05f35ad0-ed7b-4381-be50-5c4cef14dc8c_356x200.gif) **What does very happy look like? “**Very happy”is just another way to describe product-market fit. Here’s what PMF [looks like](https://www.lennysnewsletter.com/p/how-to-know-if-youve-got-productmarket) and [feels like](https://www.lennysnewsletter.com/p/what-it-feels-like-when-youve-found). Once you have data, look at your [cohort retention numbers](https://www.lennysnewsletter.com/p/what-is-good-retention-issue-29). #### **How do you make 10 customers very happy?** **SUSS it out:** Segment, Understand, Solve, and Stay focused. 1. **Segment:** Narrowly and concretely define who you’re building for. [Here’s a template](https://docs.google.com/presentation/d/1YoaOOX6a2SR7exE4roSg1AxYOxFykCEUS6roYyUtydU/edit#slide=id.ga11148e336_7_28), and [here’s a guide](https://www.field-guide.unusual.vc/field-guide-enterprise/sales-intro-to-icp). As an example, here’s [Vanta](https://www.vanta.com/)’s actual first segment: ![Image from Prioritizing at startups](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/0d827181-082a-470b-adf7-23b8b07b8d03_1134x416.png) 2. **Understand:** Talk to many (ideally 100+) people from this segment. Identify a major pain point that you can solve. [Here’s some guidance on interviewing](https://www.lennysnewsletter.com/p/interviewing-users-for-product-market). If you go after something that isn’t a major pain point for people, your product will struggle. > #### “We had a folder where we put all of our power-user video calls. When we were coming up with how to articulate the core value proposition (which became ‘AI writing assistant for teams’), I would re-listen to them over and over, hand-write out the exact clutch quotes, and try to connect the dots between different types of users who were really happy with our product. It helped me really internalize why people found the early product so useful, and we, very critically, could relay that back to engineering and to the market to acquire more users.” > > #### —May Habib, CEO of [Writer](https://writer.com/) 3. **Solve:** Put all of your energy into building a product that significantly reduces this very specific pain point. Come up with ideas, test them out, and continue to iterate until your customer can’t live without your product. The bigger the pain, and the better you solve it, the bigger your business. 4. **Stay focused:** Resist solving adjacent problems, or problems for other segments. Continue to come back to your primary segment and the primary problem you’re solving for them. Unless, of course, you discover that the segment or problem isn’t big enough and intentionally pivot to a different segment or problem. > #### “We’d revisit our customer pitch and investor pitch (in a simple Google Doc) on a weekly basis and modify it as our understanding of the problem/solution evolved. We then wrote out what we believed to be the core problems Zip solves, logged every single request that any prospect or customer had, and then mapped each one to the list of problems to decide whether we should build or skip.” > > #### —Rujul Zaparde, CEO of [Zip](https://ziphq.com/) #### **What should I actually prioritize when working to solve these pain points?** You’ll never find a magical prioritization framework that tells you exactly what to build. Instead, embrace the messy. **Prioritize work that will bring you closer to** ***10*** **very happy users,** across these three buckets: 1. **Increase the value of your product (~80% of your time):** Put most of your resources into reducing your users’ pain, saving them time, and helping them do better work. Look for: - **Blockers:** What’s keeping your users from quickly accomplishing the task they want to accomplish? - **Retentive features:** What features would keep the largest number of people using your product longer? Retention is the ultimate sign of happiness. When people churn, use the opportunity to identify what’s missing. What one feature would directly lead to the *most* customers sticking around? - **Acquisition features**: Similarly, what one feature would directly lead to the most *new* customers? Specifically, what’s getting in the way of the most potential customers (1) being able to use your product and (2) wanting to use your product? - **Differentiators:** Double down on what makes your product different from alternatives. You often win not by being better but by being different. > #### “We generally prioritize any serious ‘blockers’ with existing features over new feature development. Beyond that, we take a portfolio approach of allocating a certain percentage of the team to building new features (i.e. making the product stickier), over optimizing existing features.” > > #### —Benjamin Encz, CEO of [Ashby](https://ashbyhq.com/) 2. **Improve onboarding (~10% of your time):** Though most of your time should be spent increasing the value of your product, there’s also value in making it easier for new users to experience that value. If a great product exists and no one is able to use it, does it even exist? 🤷‍♂️ 3. **Create delight (~10% of your time):** Your users are human—part rational, part emotional. Delighting your users with humor, design, personality, surprises, or even simply quick turnaround on issues. These can go a long way. > #### “When it was just us two founders, I spent much of my time fixing bugs that early users wrote in about. Those got fixed as quickly as I could fix them (though I also introduced some 😬). As soon as the team was four engineers, we had a rotating ‘support on call’ role, where three engineers were working through the roadmap and one was just fixing bugs/issues that came in from support tickets. That was really helpful in the early days, as it (1) ensured we were prioritizing small user delight-ish things and (2) showed early users that we were responsive and cared, which I think/hope encouraged them to send more feedback.” > > #### —Christina Cacioppo, CEO of [Vanta](https://www.vanta.com/) ### **Where do I get ideas for what to build?** You’re at a huge advantage if you’re building a product that you yourself need or wish you had. If that’s the case, then your best initial ideas will come from you and your founding team. Pay attention to these ideas. > #### “We’d prioritize the features we wish we had when using existing ML tools. That was our base roadmap—build features that could’ve made our jobs easier back then. Until we got our product in the hands of real paying customers, we kept building things we needed as users of our own product.” > > #### —Tommy Dang, CEO of [Mage](https://mage.ai/) Outside of that, the best ideas will come from conversations with your early users (and potential users). When talking to them, look for: 1. Significant pain points 2. Ideas that get them visibly excited, especially if that happens with multiple people 3. Features that would get them to switch from a competitor 4. Table stakes—features that would keep them from being able to use your product even if they wanted to 5. Potential solutions you could test quickly without a lot of code 6. Products that they’d pay you for right now if those existed 7. Early adopters to try out your early product—people who love trying new products [Check out this post](https://www.lennysnewsletter.com/p/where-great-product-roadmap-ideas) for more ideas. To close: remember, you are building something that has never existed before. It’s hard. There is no magical framework that will tell you what to build. And even if you prioritize perfectly, there’s no guarantee you’ll build something people will want, or a business that will last. But prioritizing smartly, and laser-focusing on making 10 (and later, many more) customers *very* happy, will give you a fighting chance at building a roaring business. Good luck! ![Image from Prioritizing at startups](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5e9299cb-37ed-46fc-ac89-fbcbdc4eb769_370x200.gif) ## 📚 Further study 1. [How to prioritize features](https://www.ycombinator.com/library/8p-how-to-prioritize-features) by Emmett Shear, co-founder of Twitch 2. [How to balance focus on one customer at a time versus new features for many](https://www.ycombinator.com/library/4N-how-to-balance-focus-on-one-customer-at-a-time-versus-new-features-for-many) by Kevin Hale, partner at YC 3. [Users you don’t want](https://www.ycombinator.com/library/67-user-you-don-t-want) by Michael Seibel *Have a fulfilling and productive week 🙏* ## **🔥 Featured job openings** 1. **Casual:** [Product Designer](https://lennys-jobs.pallet.xyz/jobs/c03a7db8-67f0-4b79-a82b-e4bf8ef624d1)(Remote-EU) 2. **Mynd:** [Product Manager, Buying Services](https://lennys-jobs.pallet.xyz/jobs/5acd93b4-3e73-45f6-894f-a701509a81ea) (Remote-US) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* ## **🧠 Inspiration for the week ahead** 1. **Watch:** [Elon Musk on SpaceX, Mars, Tesla Autopilot, Self-Driving, Robotics, and AI](https://www.youtube.com/watch?v=DxREm3s1scA) by Lex Fridman 2. **Listen:** [Top Growth Lessons from Andy Johns](https://www.thetwentyminutevc.com/andy-johns/) by Harry Stebbings 3. **Start:** Doing the thing. #### **How would you rate this week's newsletter? 🤔** [Legend](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=5) • [Great](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=4) • [Good](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=3) • [OK](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=2) • [Meh](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=1) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [2/44] Differentiating your product > ## Q: **I know differentiation is important, but why is that, and what are ways we can differentiate our product?** [Michael Porter](https://en.wikipedia.org/wiki/Michael_Porter), one of the most cited authors in business and economics and generally seen as the godfather of business strategy, spent decades studying what it takes to build a durable business. He found that there are only two paths to winning a market: 1. **Operational effectiveness:** Performing activities *better* than rivals 2. **Differentiating:** Performing activities *differently*, or performing *different* activities, than rivals You have to do it better or you have to do it differently. Even more interestingly, Porter found that even if you go the first route and beat your early rivals through operational effectiveness, you’ll probably still need to differentiate down the road: > #### “Constant improvement in operational effectiveness is necessary to achieve superior profitability. However, it is not usually sufficient. Few companies have competed successfully on the basis of operational effectiveness over an extended period, and staying ahead of rivals gets harder every day. […] Competing to be unique is ultimately more sustainable than competing to be the best.” > > #### —Michael Porter, *[On Competition](https://www.amazon.com/Competition-Updated-Expanded-Michael-Porter/dp/142212696X)* Why? Because your competition will learn from your success, copy you, and eat away at your margins. It becomes a race to the bottom. If you can instead run a different race, the competitive field becomes less crowded. This is why [Etsy came back to its roots](https://www.nytimes.com/2017/11/25/business/etsy-josh-silverman.html) after trying (and failing) to beat Amazon, how Airbnb (unique) and Booking.com (cheapest) can both co-exist, and why Apple [continues to stay high-end](https://www.businessinsider.com/why-apple-wants-you-to-believe-it-is-a-luxury-goods-company-2015-3) in spite of the huge low-end technology market. > #### “If you stay in the shadow of your larger competitors and never establish your differentness, you will always be weak.” > > #### —Jack Trout, *[Differentiate or Die](https://www.amazon.com/Differentiate-Die-Survival-Killer-Competition-ebook/dp/B000U5I6QU/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr=)* Differentiating becomes even more important if you’re entering a crowded market or coming after an established player. You need to give people a reason to choose you, and to even pay attention in the first place. Think about Robinhood coming after Fidelity and Schwab by offering a cheaper alternative (i.e. not trying to beat them at their own game), Whole Foods entering the grocery business by differentiating through quality (rare at the time) , and Signal going after the messaging space by obsessing over trust (before it was cool). As [Jack Trout](https://en.wikipedia.org/wiki/Jack_Trout) said, “differentiate or die.” Seeing how important differentiation is, I was surprised to find very little advice on *how* one can differentiate. There are great [books](https://www.amazon.com/Positioning-Battle-Your-Al-Ries/dp/0071373586) and [posts](https://www.lennysnewsletter.com/p/positioning) about positioning (i.e. how to communicate your product) and [counter-positioning](https://marginalfutility.substack.com/p/13-counter-positioning-as-a-business) (i.e. how to make it hard for your competitors to copy you), but not on how to actually *design and build* your product to be differentiated. What could you actually do differently? I spent this week looking at hundreds of companies and found that **there are seven common ways to differentiate**: 1. Be the cheapest 2. Be the highest quality 3. Be the most convenient 4. Be the safest 5. Sell a proprietary product 6. Sell something that makes people feel great buying 7. Focus on a niche underserved market If you’re having a hard time getting attention for your product, especially in a crowded market, consider picking one of these differentiators and going all-in. ![Image from Differentiating your product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/48d11ccf-9699-44ce-b565-e0b7acdbdfba_4636x4600.png) ### 1. Be the cheapest The most obvious way to differentiate your product within a crowded market is to offer the lowest price. People love low prices. This is how ARCO differentiates within the gas market, Geico within the insurance market, and Wish within the very crowded e-commerce market. ![Buy wish clothing website> OFF-67%](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/80f89370-b86d-447a-96f8-94225d2f7cca_3766x2688.jpeg) You can go beyond being the cheapest option to differentiating by (1) being the completely free alternative, like Robinhood and Chime, or even (2) *making* customers money, like BlockFi and Compound. Long-term, this is a tough way to differentiate because it’s essentially winning through operational effectiveness—which we saw above, rarely lasts. ![Robinhood Free Stock - How To Get $1,000 In Free Shares](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2a7df282-7487-4cc3-ac3e-0f22a689bacc_1280x720.png) ### 2. Be the highest quality At the other end of the spectrum, you can also differentiate (and thus stand out) by selling the highest-quality product. This is Apple, Gucci, Whole Foods, Tesla, MasterClass, and Peloton’s differentiation strategy. You can choose from many alternatives, but when you want a great experience, you know where to go. ![Everything You Need to Know before Watching 'House of Gucci'](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d5e5c867-5e9f-449e-871c-898dd5da5d87_834x464.png) > #### “We never had an objective to sell a low-cost phone. Our primary objective is to sell a great phone and provide a great experience.” > > #### —Tim Cook, CEO of Apple ### 3. Be the most convenient Instead of being the cheapest, or offering the highest-quality product, you can also differentiate by offering the most convenient option. Products like Coinbase, TurboTax, Eaze, and Gopuff win by offering customers by far the most convenient option. Gopuff in particular is an interesting case study because it entered the crowded grocery space by pushing the convenience lever as far as it can realistically go. You thought getting your groceries in an hour was good? Try 10 minutes. ![Image from Differentiating your product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/06676685-a865-408e-be20-057c464a7667_1600x784.png) > #### “We’re all about convenience. How can we deliver the goPuff customer the variety of products they want, when they want, where they want it—and for an affordable price? Furthermore, how do we create an experience so unique and so unforgettable that when the customer thinks ‘I need’ or ‘I want,’ he or she immediately turns to goPuff?” > > #### —Rafael Ilishayev and Yakir Gola, co-founders of Gopuff ### 4. Be the safest A growing opportunity to differentiate is to become the safest, most trusted option. This is how Volvo has always positioned itself within the car market, DuckDuckGo within the search engine market, and, more recently, how Apple has come to position itself within the broad technology market. A sense of safety can come in many forms, from physical safety, to a sense of trust, to privacy. ![New Apple privacy ad highlights App Tracking Transparency | AppleInsider](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9e8baa1c-59be-4958-a2ac-35c3b59ad6c5_1280x720.jpeg) > #### “Instant answers and spam filtering were really the initial focus there and still are in terms of product differentiation. But very quickly after that—I would have done it from the beginning had I actually thought about it, but I hadn’t—was privacy.” > > #### —Gabriel Weinberg, CEO and founder of DuckDuckGo ### 5. Sell something proprietary A fifth way way to differentiate from your rivals is to offer something no one else has. Netflix has exclusive content, Airbnb has exclusive homes, and Cameo offers access to a supply of celebrities no one else has. If you can sell something no one else has, you’re innately differentiated. ![Olivier Gillaizeau - ONLY ON AIRBNB](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/c1e3fc04-b743-4419-b450-be9b02bdefd8_2084x1390.jpeg) ### 6. Sell something that makes people feel great buying A rarely used but powerful differentiator is to be the product that people feel best about buying. Customers often choose Patagonia because of the company’s mission to help the environment, Toms because it donated a pair of shoes for every pair purchased, and Nike because it makes them feel like an athlete. This differentiator is tough to win with on its own, but combines well with other differentiators, like high quality (Patagonia) and low cost (Toms and Imperfect Foods). ![Image from Differentiating your product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b89e31eb-4d1d-4a3e-8d23-4c0c79c85334_2518x1322.png) > #### “Giving is not only the great authenticator, but the great differentiator from other brands. This is in our DNA, and it’s what sets us apart from the competition.” > > #### —Magnus Wedhammar, CEO of Toms ### 7. Focus on a niche underserved market Finally, an underappreciated differentiator, which is especially powerful in the early stages, is to laser-focus on a small, underserved market. By definition, if a market is underserved, there’s very little competition. Wish focused on [value-conscious shoppers](https://twitter.com/lennysan/status/1355564051724607491) in Florida and Middle America, while most e-commerce sites focused on affluent global shoppers. DoorDash started with [Tier 2 and Tier 3 markets](https://www.wsj.com/articles/doordash-loves-the-burbs-as-much-as-you-do-11605618001), while other food delivery products focused on big cities. Chime [targeted people making $35K-$70K](https://www.pymnts.com/news/banking/2019/digital-bank-chime-suffers-outage-affecting-5m-customers/#:~:text=Chime%20has%20described%20its%20target,their%20chances%20on%20a%20startup.), while most banks went after high earners. If you start with this differentiator, you can stick with it (like Wish and Chime have done), or you can use it as a foothold to expand to the broader market (like DoorDash has done). Here’s a fascinating look ([courtesy of a16z](https://a16z.com/2021/11/19/the-rise-of-many-in-consumer-fintech/)) at how the fintech space is playing out, with different startups going after different niches: ![Image from Differentiating your product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/46efed43-9476-480c-93c6-9590a6877816_1024x752.jpeg) > #### “As consumer fintech continues to grow, we expect to see the rise of many winners, and while products may find an initial wedge innovating on one primitive (savings, spending, lending, investing), what will differentiate these products in the long run will be the features that are purpose-built for a specific community or audience.” > > #### —Anish Acharya, Sumeet Singh, and Alex Immerman of a16z ### Bonus: Combine differentiators and 🚀 You may have noticed when browsing the chart above, many companies have found their way to offering multiple differentiators. One differentiator is great, but more are better. A few examples: - **Patagonia:** Highest quality + makes you feel good - **Apple:** Highest quality + safest - **Airbnb and Uber:** Cheapest (at least initially) + proprietary supply - **Etsy:** Proprietary supply + focused on a niche market - **Figma:** Highest quality + most convenient To close, remember, you don’t absolutely need to have a differentiator, especially if you’re going after a new market or if you believe you can win by out-executing your competition. But you are going to have a much easier time if you do. > #### “Operational effectiveness means you’re running the same race faster. But strategy is choosing to run a different race because it’s the one you’ve set yourself up to win.” > > #### —Michael Porter Good luck! ## 📚 Further study 1. *[On Competition](https://www.amazon.com/Competition-Updated-Expanded-Michael-Porter/dp/142212696X)* by Michael Porter 2. *[Differentiate or Die](https://www.amazon.com/Differentiate-Die-Survival-Killer-Competition-ebook/dp/B000U5I6QU/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr=)* by Jack Trout 3. [A quick-start guide to positioning](https://www.lennysnewsletter.com/p/positioning) by April Dunford *Have a fulfilling and productive week 🙏* ## **🔥 Featured job openings** 1. **Otta:** [Product Manager](https://www.lennysjobs.com/jobs/896bc872-ef34-44a5-85bd-74784e9bea89) (London) 2. **Sonar:** [Product Manager, Integrations](https://lennys-jobs.pallet.xyz/jobs/d830dd44-5885-452a-a0fc-681a667d20c5) (ATL, Remote-US) 3. **LiveAuctioneers:** [Senior Product Manager, Platform](https://lennys-jobs.pallet.xyz/jobs/4550e1ee-d35a-4975-9bb1-ec28725672cc) (NYC, Lehi UT) 4. **Writer:** [Product Designer](https://lennys-jobs.pallet.xyz/jobs/2da796a4-bd41-4797-b052-3224fc5adbf2) (SF, Remote-Global) 5. **Shortwave:** [Growth Product Manager](https://lennys-jobs.pallet.xyz/jobs/f67128c7-7420-4e94-8548-5c9bfdfbe66e) (Remote-US) 6. **Casual:** [Product Designer](https://lennys-jobs.pallet.xyz/jobs/c03a7db8-67f0-4b79-a82b-e4bf8ef624d1)(Remote-EU) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* ## **🧠 Inspiration for the week ahead** 1. **Watch:** [Most people don’t know how bikes work](https://kottke.org/21/11/most-people-dont-know-how-bikes-work) [Watch on YouTube](https://www.youtube.com/watch?v=9cNmUNHSBac) 2. **Listen:** [Prophets of Doom](https://www.dancarlin.com/product/hardcore-history-48-prophets-of-doom/) by Dan Carlin 3. **Read:** [My first impressions of web3](https://moxie.org/2022/01/07/web3-first-impressions.html) by Moxie Marlinspike #### **How would you rate this week's newsletter? 🤔** [Legend](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=5) • [Great](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=4) • [Good](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=3) • [OK](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=2) • [Meh](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=1) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [3/44] The inside story of Facebook Marketplace *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to the ✨ **monthly free edition**✨ of my weekly newsletter. Each week I tackle reader questions about building product, driving growth, working with humans, and anything else that’s stressing you out about work. If you’re not a subscriber, here’s what you missed this month:* 1. *[Prioritizing at B2B startups](https://www.lennysnewsletter.com/p/prioritizing-startup)* 2. *[Seven ways to differentiate your product](https://www.lennysnewsletter.com/p/how-to-differentiate)* 3. *[The best of 2021](https://www.lennysnewsletter.com/p/the-best-of-2021)* **I recently learned that [Facebook Marketplace](https://www.facebook.com/marketplace) is the world’s second-largest marketplace, in terms of monthly active users, behind only Amazon.** It’s ahead of Alibaba, Walmart, eBay, Taobao, and has quietly left the once-unconquerable Craigslist in the dust. For years, I’ve been curious to learn what it took to make Facebook Marketplace work, when so many local marketplaces (including Facebook’s previous attempts) have failed. There is no better human alive to tell this story than [Deb Liu](https://www.linkedin.com/in/deborahliu/), and below, for the first time, Deb shares the story behind Facebook Marketplace. Deb led the team that pitched, built, launched, and scaled Facebook Marketplace from just an idea to what it is today. During her 11 years at Facebook/Meta, she also led teams that built Facebook Login, Facebook Pay, Facebook Commerce Manager, and dozens of other foundational Facebook products. Deb left Facebook about a year ago and is now the CEO of [Ancestry](https://www.ancestry.com/). She also sits on the board of Intuit and is the author of the soon-to-be-released book *[Take Back Your Power: 10 New Rules for Women at Work](https://www.amazon.com/Take-Back-Your-Power-Rules/dp/031036485X/ref=tmm_hrd_swatch_0?_encoding=UTF8&qid=&sr=)* (I’ve already pre-ordered it and [so should you](https://www.amazon.com/Take-Back-Your-Power-Rules/dp/031036485X/ref=tmm_hrd_swatch_0?_encoding=UTF8&qid=&sr=)). To learn more from Deb, definitely [subscribe to her newsletter](https://debliu.substack.com/), and follow her on [LinkedIn](https://www.linkedin.com/in/deborahliu/). Enjoy! ![Image from The inside story of Facebook Marketplace](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a64a9018-b4d0-4834-88ca-b3ac179cd9fb_4096x1368.png) I pitched the idea for Facebook Marketplace in 2009, when Sheryl Sandberg interviewed me for a Product Marketing role at Facebook (aka Meta). We didn’t start working on Marketplace until 2015, however. Five years after launch, the Marketplace Tab on Facebook now has over a billion monthly active users, more than Snapchat and Twitter combined. The story behind it is well-known within the company but has rarely been publicly documented in detail . . . until now. ![Image from The inside story of Facebook Marketplace](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9696e2a1-023d-4cad-96c2-3477bf939639_1390x883.png) ## **The early days** I knew I wanted to build commerce into Facebook from the moment I walked into my first interview. It seemed inevitable that social commerce would be an important part of the company and its products. Social networking was not simply about sharing with friends; in many places, especially in emerging markets, commerce was a core part of the “[jobs to be done](https://hbr.org/2016/09/know-your-customers-jobs-to-be-done)” on Facebook. In fact, in many early research studies, more than half of people studied in many countries cited Facebook as a place they had bought or sold things. This was less common in Western markets, which made it a blind spot for many of those at the company. Unfortunately, I was terrible at selling the idea, and for five years, nothing happened. We tried hackathons, enlisting interns, and testing new products ([Wishlist](https://techcrunch.com/2012/10/08/facebook-collections/), I’m looking at you), but we never quite built up the momentum to get it going. This was in part because of previous failed commerce attempts, like [Beacon](https://en.wikipedia.org/wiki/Facebook_Beacon) and [Oodle](https://about.fb.com/news/2008/12/facebook-chooses-oodle-to-power-its-marketplace-application/), but also because the idea of selling something on Facebook seemed strange to many of the employees. ![Image from The inside story of Facebook Marketplace](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/cee99795-0bac-4b30-9936-e4fb54e6c6e5_620x614.png) But I saw something they didn’t. In 2012, I was the only PM who was a mom. I used to joke that because I had three kids, and there were six women PMs, on average we each had half a kid—but I had to go home and take care of all of them. I was a member of multiple mom groups, where people bought and sold all sorts of things. Kids generate a lot of used goods, many of which are insanely expensive to buy new. I also had friends in Asia who talked about how meaningful buying and selling in groups was to them, and how Facebook was *the* place to connect for commerce. This put me in a unique position and allowed me to see what others in the company couldn’t. Although the efforts didn’t take for several years, I continued to toy with the idea and brainstorm ways of making it possible. ## **The testing** One day, a [rotational product manager](https://www.fbrpms.com/), Bowen Pan, joined Facebook and said he wanted to work on enabling commerce within Facebook groups. He had previously worked on [TradeMe](https://www.trademe.co.nz/) in New Zealand and saw what Facebook could do. [Vijaye Raji](https://www.linkedin.com/in/vijaye), our engineering lead, immediately pulled a couple of engineers from our team, and we started testing a product we called Groups Commerce. At the time, commerce in groups was informal and completely organic. One of the biggest issues early on was that there was no way to know what groups were meant for selling things (vs. being purely social). We decided to set up a way to allow group admins to opt into becoming classified commerce groups. This allowed us to track organic behaviors on the platform. We found that many more people were part of Facebook Groups communities that had been set up specifically for buying, selling, and trading than we expected. Some were local mini-marketplaces (ex: [Denton Buy and Sale](https://www.facebook.com/groups/209684575903306)), some were interest groups (ex: [marble collectors trading](https://www.facebook.com/groups/2841117486164784)), and some were both (ex: [classic car sale groups](https://www.facebook.com/groups/classiccarsforsaletrade)). Some of our earliest experiments were simply structuring the groups so that items for sale showed up as listings rather than just discussion posts. We also started to rank the group content to help people discover products for sale. Prior to this, no group content was ranked—it was purely chronological. ![Image from The inside story of Facebook Marketplace](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/57b6d300-970c-4f7c-8b7d-06bbae2e6071_1600x1354.png) We eventually ran into a problem. Being stuck within the Groups system was constraining, and most users had trouble discovering groups, joining them, and finding items. This meant that we faced the twin marketplace issues of limited seller liquidity and difficult buyer discovery. Buyers told us in research studies that they couldn’t find the items they wanted, and sellers felt that their reach was limited. We knew we had to think bigger. ## **The pivot** Almost every two-sided marketplace struggles with bringing on enough supply and/or bringing on enough demand. Surprisingly, Facebook didn’t. We already had both buyers and sellers, but we weren’t succeeding in making the connection between the two. As long as we stayed within Groups, we could not address this issue. We had two options: 1. Add a tab within the app 2. Launch a separate app We debated for some time and finally decided that having a tab in the largest app in the world was preferable to having a separate app. The ability to work within the Facebook ecosystem, where millions of people were already trading in communities, made this decision a no-brainer. Though we expected to launch a separate app once Marketplace became successful, you will likely notice that it never happened in the years since, because the experience was better integrated into Facebook itself. Launching one of the first new tabs in the app was no small feat. The good news was that Mark [Zuckerberg] wanted to make space for more “jobs to be done” in the app by adding new tabs. He offered the opportunity to our team and the Video team first. As other teams began requesting tabs, including Groups, Pages, and News, the team that managed the navigation within the app had to create rules about how tabs could be used and how the channels could be leveraged. This led to the development of the system of dynamic tabs you see today. We evaluated a number of options for building the V1, balancing speed and functionality, and decided to use React Native, one of the first major products to do so. This enabled us to build nearly twice as fast, at the cost of flexibility. Under Vijaye’s leadership, the coding and launching of our V1 product to several U.S. cities took about two months. Once we had the tab within the Facebook app to drive buyer engagement, we settled on the key metric of *weekly buyer retention*. Our early bet was that supply would drive demand—that having sufficient inventory would get buyers excited about coming to this new tab to browse. To do that, we had to get sellers on board. Sellers had no incentive to create new listings on an unknown marketplace with no clear buyer engagement. That led us to make it a “one-checkbox experience,” which allowed sellers to take items that were already being listed in groups and cross-post them into the Marketplace Tab as a way to seed the early supply. Some items were more suited to Groups, such as marbles, which were mostly bought and sold by enthusiasts within their own communities. However, many sellers wanted to drive maximum discovery to move items, especially larger ones, like furniture, cars, and electronics. As we tested cross-posting, we were able to assess the quality and diversity of the inventory that would show up in the new Marketplace Tab well before launch. Typically, we turned on cross-posting within Groups for two months before we rolled out Marketplace in that area. Surprisingly, buyer engagement among weekly active users was relatively high at the start, and it remained so during the testing period. This meant that we were able to keep buyers coming back on a regular basis. Once we had sufficient buyer engagement, we decided to roll out from a few cities to a few states. Before long, we were ready to launch in five countries, which we selected carefully to ensure that we got a sense of the product’s performance in different areas of the world. We were no longer going to be in beta, but were ready to go live on a broad scale. ## **The launch** The launch of Marketplace happened on October 4, 2016. This was the *New York Times* headline heralding the rollout of a product we had been working on for a year and a half, a product I had dreamt of for seven years: ![Image from The inside story of Facebook Marketplace](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2476ce01-916d-45ad-8bf1-29c53864bb99_1519x1600.png) Needless to say, it wasn’t pretty. A small bug in the fraud queues resulted in a massive flood of violating items. We were able to get it cleaned up quickly by reinstating the rules, but it was an inauspicious start, to say the least. But this was the first in many lessons about what could—and did—go wrong on the path to success. ## **How we made Marketplace work** ### **1. Focusing on trust** Buying and selling face-to-face meant that trust was a huge factor, especially when it came to bulky items that required people to meet up in person. We sold our minivan on Marketplace, and we knew we had to meet with buyers. My husband reviewed the profiles of everyone who messaged him and arranged a meetup with the first two people who reached out. He felt more comfortable seeing their real identities and the duration they had been on the Facebook platform, something that wasn’t possible on other, anonymous platforms. He invited them to meet him near our home to test-drive the vehicle. Within 48 hours, he sold the minivan to a small-business owner, who paid him in cash, and they went to transfer the title together. ### **2. Engaging Facebook active users** People use Facebook widely and frequently, often multiple times a day. Adding a local and shipped commerce solution only extended the value of the app and the things that could be done with it. The fact that you can have the app open already and see when something new comes up for sale is part of the serendipitous discovery aspect of Marketplace. ### **3. Integrating with Messenger** Being integrated with Facebook Messenger makes communication fast and easy. It allows you to pin your location and have someone come to you, or easily send a deposit to someone. This has greatly streamlined the buying and selling process. ### **4. Leveraging the Groups community** I am a member of a [Buy Nothing group](https://buynothingproject.org/), and I also regularly buy and sell on Marketplace. I bought an entire bedroom set from someone moving down the street, who turned out to be a friend of a friend. I bought my kids two digital cameras from a student I had met at Stanford just the year before. This idea of people-powered commerce, buying from your neighbors, and reducing waste was part of the ethos of the product from the start. ## **Lessons learned** ### **1. Follow the data** From the start, we noticed that some of the most popular items on Marketplace were cars and rentals, which surprised us. We did not realize that there was such demand for these big-ticket items online. We started working on structuring posts so that people could easily list places for rent and cars for sale. This enabled us to double down on these new verticals, which helped us become key players in those markets. Notably, the “job to be done” in these categories was unique to Facebook. Many rentals were for roommate situations or home-sharing, so trust was incredibly important. Knowing someone had mutual friends or had been active on Facebook for over a decade provided confidence to those who were looking for someone to live with. The same goes for car selling: Trust is important, since you are meeting and getting into a car with a stranger. Buying a car is one of the biggest transactions someone does in a year, so taking the anonymity out of the process created a winning category. Immediately upon launch, we also noticed that search numbers were incredibly low. Our Research team showed buyers two test phones: one with Marketplace and one with a different local classifieds service. They then asked them to “find an iPhone to buy.” On Facebook, ‌users immediately started to scroll, whereas on other apps, they searched. This led us to realize that people on Facebook had learned never to use the search bar except when searching for people. We addressed this by putting a large search button next to the search bar, which our designers grudgingly allowed. This changed the trajectory of the search participation rate, and even when we removed the button, searches remained at the new, higher level. Following the data, we were able to iterate and evolve the product to be what users were looking for. ![Image from The inside story of Facebook Marketplace](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/067f9a00-be28-4d7b-84e2-eb950f94dc75_871x778.png) ### **2. Device matters** While the product started primarily for mobile, we realized that to be competitive, we needed to add a desktop version. This was important for larger purchases and would make listing easier for high-volume sellers. The desktop version was launched about a year and a half after the initial mobile launch in October 2016. We noticed that participation on desktop was significantly higher in high-consideration categories, such as furniture, rentals, and motor vehicles, where people liked to comparison-shop in different tabs. In addition to the desktop version, some countries primarily relied on [Facebook Lite](https://about.fb.com/news/2015/06/announcing-facebook-lite/), so we also had to adapt our product to ensure that it worked for those users. As we launched on new platforms like desktop, Facebook Lite, and mobile web, we saw an increase in engagement and transactions. ### **3. Navigating scaling** Once we had expanded beyond five countries, we began to notice new issues that hadn’t appeared when we were in testing in just a few states. For example, it was very difficult to distinguish between authentic and inauthentic goods. We ended up having to work with brands and build models to detect violating items. We also needed a more fine-tuned violation reporting flow and a more robust takedown and appeal process. As with any enforcement model, we faced false positives. We needed to scale the tooling to be able to perform a manual review of the sellers and ensure that they were following the rules. We saw different problems arise in different countries, which complicated things. In one country, the issue of selling diplomas (i.e. printed certifications) appeared. This is less of an issue in other countries, so we had to decide what to do with the policy. We had to find a way to keep that particular country safe, such as detecting violations and allowing reporting of these local issues, without adding substantial hurdles in other countries where this was not a problem. The hardest part of offline transactions was knowing when a transaction actually took place. Transaction verification was crucial; it gave us a better understanding of which items sold and which items did not, which helped us improve rankings. To address both violations and transaction measurement, we settled on encouraging buyers and sellers to report transactions by incentivizing ratings and reviews. We noted when buyers and sellers messaged back and forth to get a sense of the ways they interacted. Later, we added online payments and shipping labels with tracking information so that we could see when transactions were completed and items were delivered. Being responsive to challenges while maintaining a core product roadmap required a team that adjusted quickly. We had to stay on top of new issues as they arose but also keep the team innovating and building features that customers expected. This is the constant push-pull of building a product that balances the needs of buyers and sellers while preventing bad actors and negotiating the external environment. Without a team that is able to flex to the right priorities at the right time, this product would never have been successful. — Our team often joked that Marketplace was a five-year overnight success. While it seems straightforward on the other side, there were times during that period when we struggled with achieving true product-market fit. In the end, however, we succeeded, and Marketplace is no longer the simple and scrappy product we started in 2015. It is incredibly exciting to see how far it has come, and I look forward to seeing how it continues to evolve. *Thanks, Deb! Want to read more?* - *[Subscribe to her Substack](https://debliu.substack.com/)* - *[Follow her on LinkedIn](https://www.linkedin.com/in/deborahliu/)* - *[Pre-order her book](https://amzn.to/3FmjU0v)* ## **🔥 Featured job openings** 1. **Otta:** [Product Manager](https://lennys-jobs.pallet.xyz/jobs/896bc872-ef34-44a5-85bd-74784e9bea89) (London) 2. **Sonar:** [Product Manager, Integrations](https://lennys-jobs.pallet.xyz/jobs/d830dd44-5885-452a-a0fc-681a667d20c5) (ATL, Remote-US) 3. **LiveAuctioneers:** [Senior Product Manager, Platform](https://lennys-jobs.pallet.xyz/jobs/4550e1ee-d35a-4975-9bb1-ec28725672cc) (NYC, UT) 4. **Writer:** [Product Designer](https://lennys-jobs.pallet.xyz/jobs/2da796a4-bd41-4797-b052-3224fc5adbf2) (SF, Remote-Global) 5. **Shortwave:** [Growth Product Manager](https://lennys-jobs.pallet.xyz/jobs/f67128c7-7420-4e94-8548-5c9bfdfbe66e) (Remote-US) 6. **Casual:** [Product Designer](https://lennys-jobs.pallet.xyz/jobs/c03a7db8-67f0-4b79-a82b-e4bf8ef624d1) (Remote-EU) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* #### **How would you rate this week's newsletter? 🤔** [Legend](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=5) • [Great](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=4) • [Good](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=3) • [OK](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=2) • [Meh](https://a.sprig.com/672d7967625042535f477e7369643a3434363132?r=1) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [4/44] Lessons from 140+ angel investments > ## Q: I want to get into angel investing. How does one get started, and what’s surprised you most about it so far? Over the past five years, I’ve angel invested in over [140 companies](https://www.lennyrachitsky.com/investing). Twelve have grown into unicorns, 10 more are on track to get there this year, and I suspect many more will get there eventually. ![Image from Lessons from 140+ angel investments](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/704355a9-40d6-41a6-a471-7ba6eb0febbb_1984x1366.png) I’ve invested my own cash, [scout checks](https://superscout.co/programs), with the [Airbnb alumni syndicate](https://airangels.co/), and the [Airbnb alumni fund](https://www.wsj.com/articles/airbnb-alums-raise-early-stage-venture-capital-fund-11627903800). AngelList recently shared that I was in the [top 20 investors on their platform](https://www.angellist.com/blog/solo-capitalists-vs-vc-firms). All of that is not to say I’ve got it all figured out but rather that I’ve been very active, things seem to be going in the right direction, and, most importantly, I have a bunch of first-party data to learn from. To answer your question, I’ve spent the past week reviewing all of my past investments, and below I’ve laid out my seven biggest surprises about angel investing so far. I’ve also included advice about getting started, a bit about how I evaluate startups, and, as a bonus, I’ve roped in a ton of my favorite angel investors to share their insights throughout. #### Disclaimers: 1. I only do this part-time, and I only vaguely know what I’m doing. Buyer beware. 2. These learnings may turn out to be wrong when all is said and done. I’m still very early in my investing career. 3. I’ve been investing through a bull market. Many people look really smart right now. 4. I’ve missed many great deals and made many bad investments. 5. This is not investment advice. I’m just sharing my experience. *Thank you to these amazing investors for contributing their insights to this post: Aaron Schwartz, Alexis Zhu, Andrew Chen, Ann Miura-Ko, Austin Rief, Brian Nichols, Brett Berson, Charley Ma, Christopher Fong, Cristina Cordova, Dan Becker, Daniel Rumennik, David Breger, Harry Stebbings, Jack Altman, Jamie Quint, Jeff Chang, Jeff Kozloff, Jonah Greenberger, Jules Walter, Julia Lipton, Julian Shapiro, Leo Polovets, Louis Beryl, Packy McCormick, Sharrifah Lorenz, Sriram Krishnan, Todd Goldberg, and Varsha Rao 🙏* Let’s get into it. ## My biggest surprises about angel investing so far If you think about it, angel investing is an amazing deal. You give a bit of cash to someone who will work the hardest they’ve ever worked in their life, for years, and if they can make it work, you make a lot of money. Seems almost unfair. But it’s not all rainbows and butterflies. Most startups fail, most angel investors lose money, and it’s a very expensive hobby. Looking at my 140+ investments, here are my biggest surprises so far. #### 1. I’m usually wrong about which investments will do best When I invest in a startup, I make sure to record how confident I am in that investment—OK, Good, or Great. Looking back, only a *third* of my best investments—the companies that are on track to drive the biggest returns—I rated as Great at the time of investing. Meaning, if I invested only in companies I had Great confidence in, I’d have missed out on two-thirds of my biggest successes. I obviously thought they were a good enough bet to invest in, but I didn’t have 100% conviction in most of the companies I’ve invested in. And it turns out that’s the right move as an angel investor. > #### “VCs like to pretend that they’re really smart, but ultimately it’s just math. A single 100x or 1,000x deal will return your fund. But it’s nearly impossible to know which deal that will be. The important thing is to invest in enough deals that could 100x+.” > > #### —[Julia Lipton](https://twitter.com/JuliaLipton), investor > #### “Conventional investing wisdom tells us that VCs should pass on most deals they see. But our research indicates otherwise: At the seed stage, investors would increase their expected return by broadly indexing into every credible deal.” > > #### —[Abe Othman](https://www.angellist.com/blog/venture-returns), Head of Data Science, AngelList Venture Angel investing is much more about [not missing the big winners](https://www.angellist.com/blog/what-angellist-data-says-about-power-law-returns-in-venture-capital) than it is about avoiding losers. And as [AngelList found](https://www.angellist.com/blog/venture-returns), early-stage investors do best if they invest in every credible deal vs. trying (and usually failing) to pick the few winners. This is also why the general advice is to invest the same check size into every deal—two of my largest markups are also my smallest checks :( **Takeaway:** If you see something special about the startup, and there’s a path to a 100x exit, consider investing even if you don’t have full conviction. #### 2. Most deal flow comes from other investors—not founders, friends, or colleagues Seven of my first 10 deals were in my friends’ companies. The other three came from other investors sharing a deal with me. As I’ve gotten more active, that ratio has reversed. Now the majority of investments I make come from other investors (mostly angels and solo capitalists). ![Image from Lessons from 140+ angel investments](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/db0ab761-f578-44a0-aa17-ad4fd02039de_2114x1304.png) **Takeaway:** Increase your deal flow by building relationships with other active investors. The two best ways to build relationships are to: 1. Build a skill that is useful to startup founders, so that other investors benefit by introducing you to them (e.g. “We can connect you to Lenny, who can help you with growth strategy”). 2. Share great deals with them, and help them get into great deals. > #### “You can’t be a great investor if you don’t see any deals. Being a friendly collaborator with other investors is one of the best ways to see more investment opportunities. You essentially multiply the surface area of what you see. And if you share the companies you are most excited about with others, they will do the same, and you can build a good natural filter for deals.”” > > #### —[Daniel Rumennik](https://linkedin.com/in/rumennik/), GP at AirAngels > #### “The best way to get deal access isn’t to be great with founders—it’s to have other investors think you’re great with founders. Build a high NPS with investors, since they have meaningfully more reach than an operator. But of course, fight hard to be great with founders too or else this will all crash down.” > > #### —[Aaron Schwartz](https://linkedin.com/in/aaroncharlesschwartz), investor, 3x founder Special shoutout to [Sriram](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01), [Dan](https://www.linkedin.com/in/rumennik/), [Jamie](https://twitter.com/jamiequint), [Todd](https://toddgoldberg.com/), [Siqi](https://twitter.com/blader), and [Julian](https://twitter.com/Julian) for sharing the most deals I’ve invested in 🤜🤛 #### 3. Great deals are currency among investors To build on the above learning, the best way to build relationships with other investors, and thus deal flow, is to share great deals with them. The more great deals you share, the more deals they’ll share with you—simple as that. This isn’t always the case due to status differentials (e.g. I share many deals with Sequoia and a16z and barely ever do they share deals with me, lol), but in general this holds true, especially with angels and solo capitalists (where most of your deals will likely come from). > #### “It’s advantageous (and fun) to be collaborative as an angel investor. Sharing deals with other investors keeps you top of mind for when they’re investing in something. I personally try to only send deals when I’m investing (or very close to it) so my ‘signal’ is strong. In general, I want other investors to be excited when one of my deals is in their inbox. Over the long run, I think being known as a collaborative angel with good taste is most ideal.” > > #### —[Todd Goldberg](https://twitter.com/toddg777), entrepreneur and investor > #### “By default, investors mostly share the deals they’re asked to share by founders. Or they share the deals that need help being filled. That has adverse selection (but there are always exceptions, of course, like when founders want ‘strategic angels’!). In contrast, when you get truly close with other investors, some will start proactively pitching you to founders to get you into even the hardest-to-get-into deals. This is why the depth of relationships matters so much more than the breadth in venture.” > > #### —[Julian Shapiro](https://twitter.com/Julian), writer and investor **Takeaway:** Seek out three to five awesome angel-investor friends and share everything you see with them. Two tips: 1. Once you decide to invest in a startup, ask the founder if he or she is looking for more great angels. If yes, suggest your co-investors. 2. Send a weekly email to your angel friends sharing the deals you’re looking at. Share just the URLs and a short blurb, unless you have permission to share the deck. Once you decide to invest, tell them asap in case they also want to try to join the round. *Note: If a founder asks you to keep their round confidential, you need to respect that. But in most cases, if you ask, founders are happy to meet more awesome angels.* #### 4. Angel investing is more about access than picking There are three parts to angel investing: capital, access, and picking. Based on my experience, access is by far the most important part. If you have access, you can raise capital, and generally the most popular deals (i.e. the ones already discovered) also end up doing well. So picking becomes secondary. > #### “As an angel investor, it’s more important to be swimming in a pool of good potential investments than to be an exceptionally good picker. Obviously if you’re able to be both, it’s better :) but if you had to choose between being in a position to see great deals and then picking randomly, or coming across average deals and picking expertly, choose the former.” > > #### —[Jack Altman](https://twitter.com/jaltma), investor and CEO of Lattice > #### “Judgment is important but overrated.” > > #### —[Naval](https://venturehacks.com/11-lessons), investor and co-founder of AngelList Looking at my own data, over two-thirds of my biggest winners were “hot” deals at the time, and similarly, over two-thirds of the hot deals I’ve invested in have gone on to do very well. Not all investments in hot deals will do well, but broadly, getting access to hot deals is key. For that reason, much of angel investing these days is marketing yourself as an investor and getting founders to take your money. > #### “There are so many incredible founders building great companies today that one of the hardest things to do is to stand above the noise. Even exceptional products need help telling their story and reaching customers and potential hires. Being able to bring that to the table is a leveraged way to help: instead of recommending one hire, you can tell their story to an audience of hundreds of potential hires.” > > #### —[Packy McCormick](https://twitter.com/packyM), writer and investor > #### “With the perfect levels of information that exist today on different firms and investors, the question LPs must ask of investors they evaluate is: Is this investor an aspirational source of capital that the very best founders consistently choose?” > > #### —[Harry Stebbings](https://twitter.com/HarryStebbings), podcaster and investor > #### “I hate when people think investing is all about picking winners. This presupposes that as an angel you can get into any deal you want to. Definitely not true! Ask yourself—what is your right to invest in a deal? Working at a16z taught me that we are not just picking companies and entrepreneurs to work with—the best ones are choosing to accept our money. So what is your reverse pitch to entrepreneurs?” > > #### —[Louis Beryl](https://www.linkedin.com/in/louisberyl/), investor and 3x founder One way to track your “access” is: whenever you see a big fundraising round or great exit, to ask yourself—did I have a chance to invest in that company? All that being said, your picking skills are still important to build over time. A third of my best investments weren’t in hot rounds, and not all hot deals do well. Even top VCs often make terrible decisions. It’s wise to place a portion of your bets on under-the-radar deals that you’re excited about. Especially if you have unique insight into the opportunity that other investors may be missing. **Takeaway:** Work on building your ability to get into hot deals, and don’t stress out about not being able to pick, especially early on. #### 5. It’s mostly about becoming someone founders want on their cap table To build on the above point, the best way to get access, and thus accelerate your angel investing career, is to become a person founders want to have on their cap table. There are four paths to this: **1. Useful knowledge:** Become very smart about something founders will need help with, e.g. hiring, fundraising, growth strategy, product, marketing, scaling internationally, etc. > #### “Money is cheap now, so you have to have something other than money to get access. The best thing to have is unique expertise that founders want access to. In my case, it’s my experiences and lessons learned from working on growth early on at companies like Twitch, Reddit, Mercury, and Notion that founders tend to find worthwhile. It can be in any important area, though: sales, operations, people, engineering, marketing, etc.” > > #### —[Jamie Quint](https://twitter.com/jamiequint), investor > #### “You will differentiate yourself as an investor if you understand which of your skills are most valuable to founders and inform them of your experiences in those areas. What’s helped me the most are referrals from founders and investors (including Lenny) to companies that are seeking angels with skills I’ve developed at places like Slack and YouTube (e.g. product-led growth, scaling product teams).” > > #### —[Jules Walter](https://www.linkedin.com/in/juleswalter/), investor and PM at YouTube **2. Audience:** Build an audience that founders can someday rely on to amplify the startup’s story (e.g. [Packy](https://twitter.com/packyM), [Harry](https://twitter.com/HarryStebbings?), [Erik](https://twitter.com/eriktorenberg), [Sahil](https://twitter.com/SahilBloom)). > #### “Building an audience today is more crucial than ever. Why? In compressed fundraising timelines, content allows you to build a ‘pre-sales’ relationship with founders where they know you and how you think, well before meeting you in a raise. This positions you ahead of others who have not created such content.” > > #### —[Harry Stebbings](https://twitter.com/HarryStebbings) **3. Signal:** Build status as an investor such that your being on the cap table becomes a strong signal (e.g. [Elad](https://twitter.com/eladgil), [Cyan](https://www.linkedin.com/in/cyanb/), [Naval](https://twitter.com/naval)). > #### **“I track how well I’m doing as an investor by how often I co-invest with Elad Gil.”** > > #### **—Me** **4. Reputation:** Build an amazing reputation with founders, such that they tell all of their founder friends about you. > #### “Founder NPS scores matter a lot. You may not see the value of being a service-oriented investor in the short run, but over the long run it compounds and the results show up in the most unexpected ways. And founders don’t forget. You as an investor may have to talk to several founders a day and have to context-shift regularly. Every conversation for you may or may not be memorable. But for the founder, you’re only one of a handful of investor conversations, so every interaction will be memorable.” > > #### —[Sriram Krishnan](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01), investor But the bar isn’t super-high: > #### “The bar is surprisingly low for actually being value-add. If you help a founder find and hire an engineer, as an example, you’re already in the top 0.01% of investors for them in terms of value-add.” > > #### —[Charley Ma](https://twitter.com/charleyma), investor and GM at Alloy > #### “It’s surprising to me that often founders do not get practical, sometimes basic, execution and ops advice from their VC partners, but that’s where angels can really help.” > > #### —[Varsha Rao](https://www.linkedin.com/in/varsharao/), investor, former Head of Ops at Airbnb, and CEO of Nurx > #### “Be helpful to as many people as you can at every stage of their journey. You don’t know where your biggest investment returns will come from. Mine came from helping a founder sell his prior startup to someone in my network. Even though I never invested in that startup, being helpful will open up new investment opportunities.” > > #### —[Christopher Fong](https://www.linkedin.com/in/cfong), investor and founder of Xoogler #### 6. Follow high-signal leads. But not only. After seeing how professional VCs operate, particularly how much time they spend on due diligence, reference calls, market research, etc. (i.e. hours and hours), I’ve come to realize that as an angel investor, I’ll never be as good at picking deals as they are. I just won’t. As lame as it sounds, I’ve found the best strategy as an angel investor is to try to get into deals led by top investors for the majority of your bets. It sounds obvious, but many angel investors try to find just the diamonds in the rough. I think that’s a losing strategy, especially if you do this only part-time and don’t have the time to get deep on each deal. > #### **“For companies that get to the finish line, it’s not unusual for me to spend 2-3 weeks getting to know the founder and their business. Now, this is partially due to my strategy—only invest in 2-5 companies per year and spend a lot of time with them. I will look into a number of pieces around the business, including their investor updates (to assess how their thinking evolves) and the feature updates (to assess speed of building), and will spend a lot of time on core beliefs around their business (what they believe that they are not willing to let go). I also spend time talking to customers if they have them and references for the founders.”** > > #### —[Ann Miura-Ko](https://twitter.com/annimaniac), GP at Floodgate > #### “The amount of time I spend on diligence varies a lot depending on how familiar we are with a sector. If it’s a sector we know well, we can offer to invest after a few meetings over the course of a few days. If a sector is new to us, we’ll usually do four meetings over two weeks, a few calls with domain experts in our network, and customer reference calls. I’ve done as many as a dozen customer reference calls to really understand a business. And of course, multiple Susa investors join later meetings, so our investment decisions combine multiple people’s points of view.” > > #### —[Leo Polovets](https://twitter.com/lpolovets), GP at Susa Ventures Looking at my own data, over 80% of the investments I’ve made with high-signal investors (i.e. a top-tier investor leading it) are on track to become big successes. Unless you think you’re a uniquely talented picker and have the time to do it, you’re probably better off trying to get into high-signal deals vs. discovering hidden gems. > #### “Social proof can get a bad rap, deservedly so because it can be a herd mentality where one monkey imitates the other. […] In the stock market, you can’t follow Warren Buffett into a hot deal, because he’ll only tell you a month after he did the investment. The instant he invests, the price of the deal goes up. And when he announces it, the price goes up even more. > > #### However, in private markets the price of the deal stays relatively fixed until the entire round is done. So it’s advantageous to be a late, credible mover.” > > #### —[Naval](https://spearhead.co/social-proof) All that being said, my single biggest winner was a low-signal investment. The next 10 best were not, however. So do both. **Takeaway:** As an angel, most of your investments should probably go into rounds led by [top-tier funds](https://www.forbes.com/midas/). But place maybe 30% of your bets on low-signal startups that you’re very excited about or have unique insight into (e.g. the tech, the founders, the market). One caveat is that a16z and Tiger are both Tier 1 investors but also very prolific investors—them leading a round means a lot less these days than a fund that invests less frequently, like Sequoia, Benchmark, Accel, First Round, etc. #### 7. Power laws are real 70% of my paper gains are currently from a single company (which includes three separate investments in subsequent rounds), and 80% are from just four companies. If I had missed these four investments, my performance would have been incredibly average. But I didn’t, and that’s the key—you need to hit a few 100x to 1,000x returns in order for this whole endeavor to be worth your time. Which again comes back to the broad strategy of betting on many companies vs. trying to pick the few winners. > #### “It’s not about all your deals being winners, but instead a few mega-winners that drive all the returns. So do you believe that these founders have the talent, the resources, the vision, and mostly the will to try and build not a $1 billion company but a $100 billion company?” > > #### —[Louis Beryl](https://www.linkedin.com/in/louisberyl/), investor and 3x founder > #### “A few companies will generate most of your returns; the power law has been super-real for me. One company represents 85% of my gains, and the top 10 represent 95% of my gains (though most of my investments are early from the past 1-2 years).” > > #### —[Daniel Rumennik](https://linkedin.com/in/rumennik/), GP at AirAngels **Takeaway:** Optimize for not missing the 1,000x returns vs. avoiding losing bets. Which, coming back to the very first lesson, essentially means placing many bets. I’d guess you need to invest in at least 30 companies before you have a shot at getting into one rocket ship. This also means having the budget to invest in 30 companies. Plan ahead. ## How to get started in angel investing The five most common ways to get started angel investing: #### 1. **Invest in your friends and former colleagues** Make it known that you want to back them if they ever start something, and pay attention to any hint of their starting something. That’s exactly how I started and how most angels start. > #### “Telling your smartest friends you believe in them so much you would write a check almost regardless of what they do goes a long way and also makes them remember you when they’re fundraising. Being a founder is scary and riddled with self-doubt, so getting this early stamp of validation can be incredibly memorable for them and generate goodwill.” > > #### —[Jonah Greenberger](https://www.linkedin.com/in/jonahgreenberger/), investor and CEO of Bright #### 2. **Pair up** Pair up with a few people who are actively investing and share everything you see with them. As you saw above, this is where most of my deals now come from. #### 3. Join syndicates Sign up for a bunch of [AngelList syndicates](https://www.angellist.com/syndicates). There’s no money up-front, you can invest small amounts, and you get to see how investors evaluate each deal and start to see what good deals look like. > #### “The quickest way to get access to deals is to join AngelList syndicates. Nowadays, you'll see top syndicate leads invest at the same terms as tier one funds, and share their allocation with operator angels. Bonus points for syndicate members who add-value to the founders they invest in.” > > #### —[Brian Nichols](https://www.linkedin.com/in/briannichols11/), investor #### 4. **Join angel training programs** My three favorites are [First Round Angel Track](https://angeltrack.firstround.com/), [Hustle Fund Angel Squad](https://www.hustlefund.vc/angelsquad), and [On Deck Angels](https://www.beondeck.com/angels). Also, check out platforms like [Stonks](https://stonks.com/). #### 5. **Cold outreach** Cold email/DM founders of products you love and ask about investing, especially early-stage. This works more often than you’d think. > #### “When you know of strong founders starting a company, don’t wait for them to raise money, apply to an accelerator program, etc. Get into the company as quickly as you can via a standard SAFE. They’ll appreciate your conviction in them, and you won’t have to worry about trying to get allocation when there may not be enough room later on.” > > #### —[Cristina Cordova](https://twitter.com/cjc), angel investor and advisor > #### “When sourcing deals, cold outreach works. Founders are excited to hear from angels who are excited about what they are building and will usually take your call. Be proactive!” > > #### —[Alexis Zhu](https://www.linkedin.com/in/alexiszhu/), investor and head of payments partnerships at Stripe ## What I look for when evaluating a startup There’s nothing revolutionary in what I look for, and I’m still learning to do this better every day, but here’s what I focus on when looking at a startup (in priority order): 1. **Pain:** How significant is the pain that this product is solving? Is it a small pain or a “can’t live without this product” pain? If there are budget cuts or a new hot app comes out, will people stick with this? 2. **Big and growing market:** Are there enough people with this pain? Could it get to a $1B/year revenue business someday? 3. **Evidence of PMF:** Is there enough reason to believe this team can solve this big pain? Is there strong organic growth, killer testimonials, or high retention? 4. **A+ founders:** Is the team executing frighteningly fast, with high intensity, and do they have unique insights into the problem? If another team emerges doing the same thing, will I feel good about who I’m backing? 5. **Unfair advantage:** What will give this team an edge over (future) competitors, or the status quo? Do they have a unique insight, a clever distribution strategy, proprietary data, or incredible tech? 6. **Business model:** Is it software-based, ideally with recurring revenue and high margins and selling to companies that move quickly and embrace new technology? 7. **Rocket-ship-ness:** Broadly, I try to get into every rocket ship (on track to for $1B/year+) business , no matter the price. ### Bonus: Advice about angel investing As a bonus, I asked my friends in the [First Round Angel Track](https://angeltrack.firstround.com/) program and other angel friends for their biggest surprises and learnings about angel investing so far. Here’s what they shared: #### 1. Just get started > #### “It’s so much easier to start angel investing than I had realized. I thought about it for years before doing anything about it, and I was amazed by how accessible it is. I feel silly in hindsight. There is so much content out there. If you want to become an angel, start today.” > > #### —[Sharrifah Lorenz](https://www.linkedin.com/in/sharrifah-lorenz/), investor and head of partnerships at Loom > #### “Don’t be afraid to start with little/no money. I started angel investing too late because I assumed I didn’t know enough, or didn’t think anyone would take small investors. My first few checks were $3K and $5K, and that’s only after I got the courage to even ask. Those investments gave me experience and courage to meet and invest in more founders. It compounds on itself over time. (AngelList makes this super-easy today.)” > > #### —[Daniel Rumennik](https://linkedin.com/in/rumennik/), GP at AirAngels > #### “Keep your early checks very small. Your first checks should be viewed as learning experiences. Write a detailed memo on why you invested and what you loved about the team. These will be invaluable as you start to understand what makes a great company and founder. Only then should you start to deploy larger sums of money.” > > #### —[Austin Rief](https://twitter.com/austin_rief), investor and CEO of Morning Brew > #### “Deal throughput is key. The more deals you see, the more you’ll be able to tune and home in on the opportunities that make sense for your investing criteria. At first you may feel the pressure to invest in a lot of what comes through (i.e. FOMO), something you’ll want to resist to balance out your portfolio, but as you see more, you’ll begin to understand the attributes that are attractive to you and become more selective. And the more you see, the more comfortable you will become when you do say yes or no.” > > #### —[Andrew Chen](https://www.linkedin.com/in/andrewfchen), investor and SVP at GlobalE #### 2. Start with your network > #### “By far the best source of investment opportunities for me have been people I’ve had the chance to work with. This isn’t just former coworkers starting companies themselves but also connecting me with their former coworkers starting companies. They have been the best-performing and most fun investments!” > > #### —[David Breger](https://www.linkedin.com/in/davidbreger), investor and Director of Product at Google > #### “A significant portion of my deal flow comes from existing founders in my portfolio who are referring other founders in their network to me. Many founders reach out to friends asking, ‘Who are the angel investors you took money from and have been the most helpful?’ If you’re one of the top two or three value-add angel investors for your portfolio companies, you’ll get some incredible deal flow as a result.” > > #### —[Cristina Cordova](https://www.linkedin.com/in/cristinajcordova/) #### **3. It’s a long game** > #### “It takes at least 8 to 10 years for companies to realize their potential. Startups that are perceived to be early winners might flame out. Startups that you’ve written down to zero might end up doing well. It’s extremely hard to judge who is going to succeed or fail in the first one to five years.” > > #### —[Sriram Krishnan](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01) > #### “When starting on the angel investing journey, many times (and in my case), your losing bets materialize much faster than your winning portfolio companies. Thus, it’s hard to keep conviction and continue investing as self-doubt rises and you question your investment decision-making criteria/abilities. Do a retrospective on the ones that flamed out and tweak your criteria if necessary, but keep investing. Portfolio theory will prevail.” > > #### —[Jeff Kozloff](https://www.linkedin.com/in/jeff-kozloff-4004662/), investor and CEO of TrialScope #### **4. What to look for when picking** > #### “Co-founder chemistry, prior working relationship, and trust are more important than anything else (market, TAM, product-market fit, etc.) in the early stages.” > > #### —[Sriram Krishnan](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01) > #### “When evaluating opportunities, angel investors should focus on the next 18 months—not the next 18 years. This may seem counterintuitive, as investing is a game of casting into the future, envisioning what might be and trying to spot breakout companies that can go the distance. But no great company has ever made it to the summit without successfully passing through basecamp first. When you start assessing the opportunity to get to a more near-term milestone, versus just thinking through the fuzzier question of ‘Can this be a $10B company?’ then you have more to work with. It transforms the decision from speculating about moat and TAM, to focusing on the strength of the founding team, how many customers already love the product, and early signs of market pull.” > > #### —[Brett Berson](https://firstround.com/person/brett-berson/), Partner at First Round Capital ![Image from Lessons from 140+ angel investments](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/867ca546-1744-4493-b061-e3d59eb362f9_1821x1046.png) > #### “Most of the big winners in B2C are not ‘hot’ at the seed stage; there is low predictability.” > > #### —[Jeff Chang](https://www.linkedin.com/in/jeff-chang-82467459/), investor and advisor #### **5. On angel investing as a whole** > #### “I’ve found the angel investing community to be refreshingly welcoming and collaborative. Adding value for early companies or other investors via perspective, expertise, and/or deal flow always seems to come back to you in spades.” > > #### —[Dan Becker](https://www.linkedin.com/in/becker513/), designer and investor > #### “I genuinely find founders and other angels to be nice to one another. When you’re a small check, founders and other angels generally want to find ways to work you—we all want to work with great people!” > > #### —[David Breger](https://www.linkedin.com/in/davidbreger) ### In closing To summarize, here’s an overview of what I’ve learned. **Biggest surprises about angel investing so far:** 1. I’m usually wrong about which investments will do best. 2. Most deal flow comes from other investors—not founders, friends, or colleagues. 3. Great deals are currency among investors. 4. Angel investing is more about access than picking. 5. It’s mostly about becoming someone founders want on their cap table. 6. Follow high-signal leads. But not only. 7. Power laws are real. **How to get started:** 1. Invest in your friends and former colleagues. 2. Pair up. 3. Join syndicates. 4. Join angel training programs. 5. Cold outreach. **What I look for when evaluating a startup:** 1. Pain 2. Big and growing market 3. Evidence of PMF 4. A+ founders 5. Unfair advantage 6. Business model 7. Rocket-ship-ness I’ll close with one final quote from Naval: > #### “You’re living inside the gold mine—people are digging up gold next to you. The returns in this industry are higher than anything else. You understand it so well, and you have specific knowledge. If you’re in the tech industry, you should be doubling down. I don’t know a better industry or better place on the planet to be investing, for today.” > > #### —[Naval](https://nav.al/angel-1) Good luck! ## 📚 Further study 1. [How to Angel Invest, Part 1](https://nav.al/angel-1) by Naval 2. [How to Angel Invest, Part 2](https://nav.al/angel-2) by Naval 3. [How to be an angel investor](https://www.paulgraham.com/angelinvesting.html) by Paul Graham 4. [Angel: How to Invest in Technology Startups](https://www.amazon.com/Angel-Invest-Technology-Startups-Timeless-Investor/dp/0062560700) by Jason Calacanis 5. [Reading Social Proof Is an Art Form](https://spearhead.co/art) by Naval 6. [Investing in Public: Non-Obvious Lessons from 100+ Angel Investments](https://sacerdoti.medium.com/investing-in-public-non-obvious-lessons-from-100-angel-investments-a5951985593e) by Tod Sacerdoti 7. [The 11 Lessons Dharmesh Shah Learned From 80+ Angel Investments](https://thehustle.co/11-lessons-dharmesh-shah-learned-from-80-angel-investments/) *Huge thanks to everyone who shared their insights, and have a fulfilling and productive week 🙏🙏🙏* ## **🔥 Featured job openings** 1. **Clubhouse:** [Growth Product Manager](https://www.lennysjobs.com/jobs/ed55d82e-f9b6-47b7-837d-b8f29b9e2b41) (SF, Remote-US) 2. **Earthly Technologies:** [Senior Product Manager](https://lennys-jobs.pallet.xyz/jobs/958ba7ed-1571-4249-a103-2e58dfcc40bd) (Remote-US, Remote-CANADA) 3. **Otta:** [Product Manager](https://lennys-jobs.pallet.xyz/jobs/896bc872-ef34-44a5-85bd-74784e9bea89) (London) 4. **Sonar:** [Product Manager, Integrations](https://lennys-jobs.pallet.xyz/jobs/d830dd44-5885-452a-a0fc-681a667d20c5) (ATL, Remote-US) 5. **LiveAuctioneers:** [Senior Product Manager, Platform](https://lennys-jobs.pallet.xyz/jobs/4550e1ee-d35a-4975-9bb1-ec28725672cc) (NYC, Lehi UT) 6. **Writer:** [Product Designer](https://lennys-jobs.pallet.xyz/jobs/2da796a4-bd41-4797-b052-3224fc5adbf2) (SF, Remote-Global) 7. **Shortwave:** [Growth Product Manager](https://lennys-jobs.pallet.xyz/jobs/f67128c7-7420-4e94-8548-5c9bfdfbe66e) (Remote-US) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [5/44] How to get promoted > ## Q: I’ve been stuck at the same level for a few years now. What advice do you have for getting promoted? Getting a promotion is like eating a huge burrito: it’s a lot of work, it’s unclear what’s on the inside, it feels great for a bit, but then you wonder why you did this to yourself. Knowing all that, we keep wanting it. Over the course of my 16-year career, I’ve been promoted roughly nine times. First as an engineer, from an intern all the way to head of engineering, and later as a product manager, from a junior PM to a manager of PMs. I was stuck at the same level for many years at times, and at other times I was promoted year after year. Reflecting back on my experience and the experience of my colleagues, the most important ingredient has always been simply doing great work, over and over. But the process does often need a nudge, particularly if you’ve been stuck in the same role for a while. I’ve found seven strategies for significantly increasing your chances of getting a promotion, no matter your role: 1. **Deliver more impact** 2. **Take on more scope** 3. **Demonstrate that you’ve addressed a gap** 4. **Find an influential champion** 5. **Pay attention to who gets promoted** 6. **Ask for it** 7. **Quit and go work somewhere else** Before we get into it, it’s important to note that even if you do all of these things, you may still not get promoted, for very practical reasons: 1. There’s a minimum amount of time you need to be in your current role before you can get promoted 2. There aren’t any available roles at the new level 3. The company isn’t doing well and doesn’t have the budget to promote people 4. You just aren’t ready for the next level I also strongly encourage you not to over-fixate on promotions and levels. Be patient. Like preparing for a marathon, it takes time to get your mind and body ready for the next level. One of the most common ways to crash and burn at a company is to be put in a role you aren’t ready for. With that in mind, let’s get into it. ### 1. Deliver more impact Companies desperately want to give more responsibility to people who deliver results. **If you aren’t getting promoted, it usually means you aren’t seen as someone who can consistently deliver significant impact**. You can always make excuses, like people not seeing the impact you’re making, or not having the resources to deliver the impact, but that’s part of the job—fight for resources, take on work that’s most meaningful to the business, and highlight your wins. There are many ways you can deliver more impact: 1. Contribute to hitting more ambitious goals that directly map to business growth 2. Lead and successfully launch an important project 3. Work on higher-visibility, more important, projects 4. Save the company a lot of money 5. Help the company run significantly more efficiently 6. Move to a team that’s working on more critical work When you look at the people around you who got promoted, how much impact did they drive to help the business grow, or work more efficiently? If you consistently find a way to drive significant impact for the business, you’ll be prime promotion material. ### 2. Take on more scope As [Tara Jaye Frank](https://tarajayefrank.com/) so accurately puts it, “People don’t get promoted for doing their jobs really well. They get promoted by demonstrating their potential to do more.” At many companies, you get promoted only after you’ve demonstrated you can handle the next level. **And** **there’s no better way to demonstrate that you can take on more responsibility than by taking on more responsibility.** Like they say: do the job you want. In my case, a year into becoming a senior PM, I proactively began mentoring a couple of junior PMs, and that became a big factor in my being promoted to a manager a year later. Similarly, I got promoted from a mid-level PM (L5) to a Senior PM (L6) after leading a mission-critical project (Instant Book) for a couple of years, which spanned multiple departments, reported up to the executive staff, and became a major part of the company strategy—going far beyond the scope of a traditional mid-level (L5) PM. I showed people that I could handle more, and they gave me more. This happened again when I got promoted from an M1 to an M2, only after I took on managing five sub-teams and showed that I could handle it. What’s something you can take on that increases your scope or responsibility? Some suggestions: 1. Take on work that your manager is currently doing 2. Take on a project for someone while they’re out 3. Lead ambitious projects 4. Get ahead on next year’s strategy 5. Take the reins of an important visioning exercise 6. Architect or wireframe the next big product But note that if you’re doing the job of someone at the next level for over a year, without being recognized for it, it’s time to have a hard conversation with your boss. ### 3. **Demonstrate that you’ve addressed a gap** No matter your role or level, there’s a skill or behavior that is keeping you from the next level. Whether it’s your ability to execute reliably, communicate well, or lay out an inspiring five-year vision, it’s always something. **To get promoted, you’ll need to demonstrate that you’ve addressed that gap, in the eyes of both your manager and other influential leaders involved in the promotion process.** Here’s my advice: 1. In your very next 1:1, push your manager to articulate which 2-3 skills/behaviors/attributes are most keeping you from the next level. 2. Put together 3-10 concrete actions you (and your manager) can take over the next six months to improve at these skills/behaviors/attributes. 3. Align on this list with your manager and put them into an [action plan spreadsheet](https://docs.google.com/spreadsheets/d/12Z8euSULYHGSKgJMR47QuK2cEyHm0B-6hAmanqtVqQ0/edit#gid=0), like so: ![Image from How to get promoted](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3591173f-c598-44ce-aac2-6807c6ef4e35_950x306.png) 4. Schedule a monthly “career coaching” session where you and your manager review each of these action items and review how they’re going—giving them each a status color. 5. Keep doing this every month, between performance review cycles, and continue to focus on concrete actions you can take to address your gaps. Broadly, what you need to do is to get crystal clear about your gaps, keep both of you accountable to making progress on addressing these gaps, and stay aligned on how it’s going. [Read more](https://review.firstround.com/the-power-of-performance-reviews-use-this-system-to-become-a-better-manager#:~:text=Create%20a%20two%2Dsided%20action%20plan) about how this can fit into your regular performance review process. ### 4. Find an influential champion Promotions generally happen through a calibration process, where managers across the company come together to discuss the performance of every report. **The most underappreciated, and often the most powerful, ingredient in getting promoted is to have someone with influence fight for you in the calibration process.** The fastest ramp up in my career happened when I moved to a new manager who was incredibly influential within the org. He not only helped me level up as a PM, which led to some of the best work of my career, but he also fought for me cycle after cycle, leading to one promotion after another. But don’t let this become an excuse for why you aren’t being promoted. The best way to get a champion is to do a great job (e.g. deliver impact, address gaps, and the other items on this list). If you’re doing a great job, people will want to champion you. Give them ammo to fight for you: 1. Hit goals 2. Keep your manager updated on how you’ve addressed gaps 3. Start a “wins” folder or document to keep track of your wins and impact 4. Lay out your case for why you believe you should be promoted 5. Treat your manager as a partner, not a gatekeeper Do a great job, help them articulate how great a job you’re doing, and good things will happen. ### 5. Pay attention to who gets promoted There’s a reason no two [company career ladders](https://www.lennysnewsletter.com/p/jobs-of-product-manager#:~:text=Public%20examples%20of%20career%20ladders) are alike. Explicitly or implicitly, every company prioritizes different skills and behaviors. If you pay attention to who gets promoted, you can start to see what actually matters at your company. For example, [here’s how different PM skills are emphasized](https://www.lennysnewsletter.com/p/product-management-survey) across a few dozen companies: ![Image from How to get promoted](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ec74669b-0f27-44de-a2ef-f2cc0c611833_1100x1474.png) My advice is to have a conversation with your manager about what you should be paying attention to beyond the career ladder. What should you be reading between the lines? I’d also encourage you to chat with colleagues who recently got promoted and ask them what they did. Even your manager may not be aware of what other leaders are looking for. ### **6. Ask for it** When was the last time you told your manager you’d love to get promoted? It may seem obvious to you, but they may not know how important this is to you. Bring it up at your next 1:1 and see what happens. Better yet, create the action plan we discussed in item 3 above. This doesn’t need to be a constant conversation. Just make sure your manager knows it’s on your mind. ### **7. Quit and go work somewhere else** Finally, sometimes the best path to a promotion is to jump ship. I don’t like this path because it’s often defeatist and can put you in a position you aren’t truly ready for. But it’s sometimes necessary. In many cases, it’s a matter of finding a better manager, or getting out of a rut at your current company. If you’re stuck at the same level for over two years, and nothing I’ve shared above seems to be helping, it’s probably time to explore a new gig. Zooming out and looking back at my career, of all the strategies I’ve shared above, the most important factor in getting promoted has always been simply doing good work. Consistently. If you do only that and nothing else, most of the time things will generally take care of themselves. But if not, these strategies will help get you over the hump. And just like with a huge, delicious burrito—be patient, but be determined. ## 📚 Further study 1. [What most contributed to you getting your last promotion?](https://twitter.com/lennysan/status/1486861610895360000) 2. [Do You Want to Get Promoted?](https://hbr.org/2021/05/do-you-want-to-get-promoted) by HBR 3. [Becoming a senior PM](https://www.lennysnewsletter.com/p/senior-product-manager) by Jackie Bavaro 4. [Ask Women in Product: How do I get promoted to Senior PM?](https://womeninproduct.medium.com/ask-wip-how-do-i-get-promoted-to-senior-pm-794be2d2e00f) 5. [How to Get Promoted — The Complete Guide to Moving Up](https://www.linkedin.com/business/learning/blog/productivity-tips/how-to-get-promoted) *Have a fulfilling and productive week 🙏* ## **🔥 Featured job openings** 1. **Superjoi:** [UI/UX Designer](https://www.lennysjobs.com/jobs/9710eb14-bc72-46a5-b75b-2949c5c1bfa7) (LA, Remote-Global) 2. **Superjoi:** [Full Stack Engineer](https://lennys-jobs.pallet.xyz/jobs/4111e336-604a-43c7-90b4-8cf03952800b) (LA, Remote-Global) 3. **HireArt:** [Senior Full-Stack Engineer](https://lennys-jobs.pallet.xyz/jobs/fd0b1a53-7741-4a2b-8739-a976d2482afe) (Remote-US) 4. **Universe:** [Product Lead - Commerce Tools](https://lennys-jobs.pallet.xyz/jobs/38cfa180-37e3-4882-99ae-3a6d35a04d32) (Remote-Global) 5. **Universe:** [Product Lead - Creation Tools](https://lennys-jobs.pallet.xyz/jobs/5b414879-8180-4651-bc80-39610ee206f2) (Remote-Global) 6. **Clubhouse:** [Growth Product Manager](https://lennys-jobs.pallet.xyz/jobs/ed55d82e-f9b6-47b7-837d-b8f29b9e2b41) (SF, Remote-US) 7. **Earthly Technologies:** [Senior Product Manager](https://lennys-jobs.pallet.xyz/jobs/958ba7ed-1571-4249-a103-2e58dfcc40bd) (Remote-US, Remote-Canada) 8. **Otta:** [Product Manager](https://lennys-jobs.pallet.xyz/jobs/896bc872-ef34-44a5-85bd-74784e9bea89) (London) 9. **Sonar:** [Product Manager, Integrations](https://lennys-jobs.pallet.xyz/jobs/d830dd44-5885-452a-a0fc-681a667d20c5) (ATL, Remote-US) 10. **LiveAuctioneers:** [Senior Product Manager, Platform](https://lennys-jobs.pallet.xyz/jobs/4550e1ee-d35a-4975-9bb1-ec28725672cc) (NYC, Lehi UT) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* ## **🧠 Inspiration for the week ahead** 1. **Watch:** [Are you an ideal team player?](https://youtu.be/PRh80RyT74I) [Watch on YouTube](https://www.youtube.com/watch?v=PRh80RyT74I) 2. **Listen:** [Lex Fridman and Dan Carlin](https://podcasts.apple.com/us/podcast/lex-fridman-podcast/id1434243584?i=1000497016023) 3. **Read:** [Does Not Compute](https://www.collaborativefund.com/blog/does-not-compute/) by Morgan Housel **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [6/44] What is good monthly churn > ## Q: What is a good monthly churn for a SaaS business? Look, I made a meme. ![Image from What is good monthly churn](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b93a2670-8b88-43e4-b760-635e30ea058d_5120x3412.png) *You could even argue that churn is both a leading cause of business **death** and the biggest **tax** on your growth 🤣* As Ben points out, churn is unavoidable. So what to do? Beyond constantly working to [reduce churn](https://www.lennysnewsletter.com/p/how-to-increase-your-products-retention), it’s essential that you understand what healthy monthly churn looks like for your type of business—so that you know if you’re on track for 🚀 or ☠️ Though you should generally spend your time focusing on [cohort retention](https://www.lennysnewsletter.com/p/how-to-increase-your-retention-issue#:~:text=First%2C%20how%20does%20one%20measure%20retention%3F) and [net revenue retention](https://www.lennysnewsletter.com/p/what-is-good-retention-issue-29#:~:text=2.%20What%20is%20good%20Net%20Revenue%20Retention%3F) instead of monthly churn—because monthly churn blends new and existing users and hides what’s really going on long-term—it’s still a powerful metric, because it’s quick (you don’t have to wait for cohort curves to flatten), it’s easy (every dashboard has this), and, most interestingly, it tells you how many new users you need to bring in each month in order to continue to grow. Losing 2% of users each month? Grow by over 2% and you’re 📈 Depressingly, your monthly churn stat also tells you how quickly you’ll churn through your users if you do nothing. For example, with an 8% monthly churn, you’ll lose almost two-thirds of your users each year 😵‍💫 Even with a 4% monthly churn, you’re rebuilding a third of your users base year after year. This is why SaaS businesses with revenue expansion (i.e. [negative churn](https://tomtunguz.com/negative-churn/)) are so sought-after. But again, churn is normal and unavoidable. Step one is understanding what healthy (vs. deathly) churn looks like for your business. ### What is GOOD and GREAT monthly churn To come up with a benchmark, I came at it from two directions: 1. I reached out to all the smartest growth people I know and asked them what they consider GOOD and GREAT monthly churn when advising and investing in companies. 2. I asked [Patrick Campbell](https://twitter.com/patticus?lang=en), the founder and CEO of [ProfitWell](https://www.profitwell.com), to dig into his treasure trove of data (13,000 anonymized SaaS companies), to see what monthly churn real companies are seeing. After hearing from the experts, and looking at Patrick’s data on the top percentile of SaaS companies, clear answers emerged: - **For B2C SaaS:** Between 3% and 5% monthly churn is GOOD, and less than 2% is GREAT - **For B2B SMB + Mid-Market:** Between 2.5% and 5% is GOOD, and less than 1.5% is GREAT - **For B2B Enterprise:** Between 1% and 2% is GOOD, and less than 0.5% is GREAT ![Image from What is good monthly churn](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a15abbdc-c994-4688-bb26-3d75ee3d0366_2728x2320.png) #### **Definitions** - **B2C SaaS:** Subscription products sold to consumers; e.g. Duolingo, Spotify, Grammarly - **B2B SMB + Mid-Market:** Subscription products sold primarily to companies with fewer than 1,000 employees, generally charging less than $1K per month for the average customer; e.g. Gusto, Intercom, Airtable, Asana - **B2B Enterprise:** Roughly defined as subscription products sold primarily to companies with more than 1,000 employees, generally charging more than $5K per month for the average customer; e.g. Salesforce, Snowflake, Workday, ADP #### **Disclaimers and advice** This metric is looking at the steady state of churn. New user churn in the first month is always the steepest, normally ranges from 5% to 50%, and happens for a number of reasons. > #### “You can often attribute month 1-3 churn to be failure of activation/onboarding. This can vary a *lot* across companies, and even within the same company by channel and funnel. > > #### For businesses with paid user acquisition, the other factor is acquiring the wrong kind of customer. I’ve told more than one company: Hey, if you just cut your paid marketing by half, I bet your churn will go down!” > > #### —ChenLi Wang, ex-growth at Dropbox As you grow, long-term, expect monthly churn to go down. > #### “Monthly churn on subscriber base decreases with age of the business as long-haul subs pull that number down.” > > #### —Elena Verna, growth at Netlify, ex- at Miro, SurveyMonkey In a B2B SaaS business, net revenue retention is a more important metric than monthly churn. > #### “In SMB/Mid-Market SaaS especially, revenue retention is much more important than customer retention. > > #### For example, in the Shopify ecosystem, SaaS players will inevitably see ‘unavoidable churn’ due to shorter lifespan of smaller merchants. This is inherent to the Shopify model. I’ve seen the expansion for many commerce SaaS products look great as merchants grow/graduate to Shopify Plus. Net revenue retention can look very healthy even with low logo retention in these businesses.” > > #### —Mike Duboe, ex-growth at Stitch Fix, Tilt For B2C SaaS, you’ll want to focus primarily on cohort-based retention. > #### “I would only look at monthly churn to see how much you need to maintain new user acquisition to keep up growth. Other than that, you should look at it by cohort basis.” > > #### —Yuriy Timen, ex-growth at Grammarly, Airtable, Canva Make sure to break churn down into its component parts. > #### “Churn should always be modeled between (1) intentional and involuntary churn and (2) soft and hard churn: > > #### 1. Intentional churn is when a user willingly decides to stop using the product. Where I see companies losing meaningful percentage points is in overlooking involuntary churn—good data instrumentation can flag these events, like credit card declined, forgot password, connection errors. > > #### 2. If users stop using the product but are still paying for it (whether annually or monthly recurring), that’s soft churn and should be a concern where value extraction is greater than value generation.” > > #### —**Crystal Widjaja, CPO at Kumu, ex-growth at Gojek** And finally, a healthy churn rate is highly dependent on your price point. > #### “The higher the price point, the lower you should expect the target churn.” > > #### —Adam Grenier, VP Marketing at MasterClass, ex-Uber This last point is really important, so let’s explore it further. ## What is GOOD and GREAT monthly churn, by price point Why would churn be highly correlated with price? Two reasons: 1. **Customer type:** The cheaper your product, the smaller the businesses you’re likely selling to—and the smaller the businesses, the more likely they are to go out of business, change their minds, or switch to a competitor. 2. **Unit economics:** If it’s costing you thousands of dollars to close a deal, you won’t survive if too many of those customers churn. And so companies with a high price point don’t last long if churn is too high. To understand healthy monthly churn by price point (i.e. how much you charge each customer on average per month), [Patrick](https://twitter.com/patticus?lang=en) sliced and diced the data, and with input from the experts, this is what we found: ![Image from What is good monthly churn](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/7bf3352f-bd4e-4347-ad33-2d843f82558c_5584x3360.png) **Takeaways:** 1. This is very much in line with the first benchmark—just more granular and likely even more useful. 2. Acceptable churn at the highest B2B price points is very low—below 0.35% at $5K+ 😵‍💫 3. There’s a lot more variance in B2B churn vs. B2C churn. If you’re building a B2C subscription product, you basically want to see less than 2% churn per month, no matter your price point. > #### “Basically in consumer it’s nearly impossible to have under a 1% monthly revenue churn rate. I mean, people will have it, but the difference between best 10% and best 25% isn’t that much. Whereas in B2B there’s a bigger difference between top 25% and top 10%.” > > #### —Patrick Campbell, CEO of ProfitWell ## **When it’s OK for your churn to be higher** If you’re finding your own monthly churn to be much higher than these benchmarks, don’t despair. There are cases when it isn’t necessarily bad: 1. **You’re just starting out:** Use these benchmarks as a guide to prioritize between retention vs. acquisition, and don’t miss this post on [ways to increase your retention](https://www.lennysnewsletter.com/p/how-to-increase-your-products-retention). But just know, startups rarely increase retention significantly. 2. **You have low CAC and marginal costs:** Growth is a balancing act between CAC, retention, and unit economics. If you can acquire new users cheaply (e.g. through SEO, WOM, or virality), you can afford to lose more users. [This thread by Dan Hockenmaier](https://twitter.com/danhockenmaier/status/1270376412642373633) explains why low retention for businesses like Shopify and Twitter is OK. 3. **You’re not building a venture-scale business:** These benchmarks are coming from people who helped build iconic, massively scalable businesses. This level of retention is *not* required for product-market fit, or to build a sustainable business. Though the upside will be limited, a flat retention curve that drives a scalable acquisition strategy is enough to keep your business alive. ## Bonus: What is GOOD and GREAT cohort retention To save you from having to jump between multiple posts, below I’ve included what healthy **[cohort-based retention](https://www.lennysnewsletter.com/p/what-is-good-retention-issue-29)** looks like, at 6 months at the user level and at 12 months at the net revenue level. As a reminder, cohort-based retention looks at the percentage of users/customers who are still active x months after signing up, and is the best predictor of product-market fit. Here’s what you want to see, based on your particular type of business: #### **GOOD and GREAT user retention** - **Consumer Social:** ~25% is GOOD, ~45% is GREAT - **Consumer Transactional**: ~30% is GOOD, ~50% is GREAT - **Consumer SaaS:** ~40% is GOOD, ~70% is GREAT - **SMB/Mid-Market SaaS:** ~60% is GOOD, ~80% is GREAT - **Enterprise SaaS:** ~70% is GOOD, ~90% is GREAT #### **GOOD and GREAT net revenue retention** - **Consumer SaaS:** ~55% is GOOD, ~80% is GREAT - **Bottom-Up SaaS:** ~100% is GOOD, ~120% is GREAT - **Land and Expand VSB SaaS:** ~80% is GOOD, ~100% is GREAT - **Land and Expand SMB/Mid-Market SaaS:** ~90% is GOOD, ~110% is GREAT - **Enterprise SaaS:** ~110% is GOOD, ~130% is GREAT > #### “Monthly churn benchmarks all add up to the most important retention metric of all: the point at which your cohort retention asymptotes. > > #### Chart the percentage of users remaining in a given cohort over time—at what level does that line flatten out, or in the very best businesses, start to turn back upward again?” > > #### —**Dan Hockenmaier, Head of Strategy at Faire, ex-growth at Thumbtack** For more on this, don’t miss [the full post on cohort-based-retention](https://www.lennysnewsletter.com/p/what-is-good-retention-issue-29). And if you have any questions or feedback, or would like to see any other benchmarks, just leave a comment or reply to this email 👌 [Leave a comment](https://www.lennysnewsletter.com/p/monthly-churn-benchmarks/comments) *Thank you to [Adam Grenier](https://twitter.com/akgrenier), [Brian Rothenberg](https://twitter.com/bmrothenberg), [ChenLi Wang](https://twitter.com/chenliw), [Crystal Widjaja](https://www.linkedin.com/in/crystalwidjaja/details/experience/)**,****[Dan Hockenmaier](https://twitter.com/danhockenmaier), [Darius Contractor](https://twitter.com/dariusmc), [Elena Verna](https://www.linkedin.com/in/elenaverna/), [Jamie Quint](https://www.linkedin.com/in/jamiequint/), [Mike Duboe](https://twitter.com/mduboe), [Naomi Ionita](https://twitter.com/npilosof?lang=en), [Sriram Krishnan](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01), [Yuriy Timen](https://www.linkedin.com/in/yuriytimen/), and in particular [Patrick Campbell](https://twitter.com/patticus?lang=en), CEO of ProfitWell, for contributing their wisdom to this post.* *If you aren’t familiar with ProfitWell, it has a free subscription and SaaS financial metrics product that’s used by over 25K companies, from MasterClass and Whoop to Notion and Typeform (and my newsletter!). You can even use ProfitWell for [benchmarks custom-tailored to your own data, here](https://www.profitwell.com/benchmarks).* *Thank you all 🙏* ## 📚 Further study 1. [What is good retention](https://www.lennysnewsletter.com/p/what-is-good-retention-issue-29) 2. [How to increase your retention](https://www.lennysnewsletter.com/p/how-to-increase-your-retention-issue) 3. [What is good payback period](https://www.lennysnewsletter.com/p/payback-period) 4. [The Innovator’s Dilemma for SaaS Startups](https://tomtunguz.com/saas-innovators-dilemma/) by Tomasz Tunguz 5. [Individuals or Teams: Who’s the Better Customer for SaaS Products?](https://sacks.substack.com/p/individuals-or-teams-whos-the-better) by David Sacks *Have a fulfilling and productive week 🙏* ## **🔥 Featured job openings** 1. **Siteline:** [First Product Manager](https://lennys-jobs.pallet.xyz/jobs/3cc1fa57-e3e3-4b93-9d0d-fac7c592545b) (SF, Remote-US) 2. **Koodos**: [Product Engineer](https://lennys-jobs.pallet.xyz/jobs/1412066a-3922-47c6-99f7-28401ed895f5) (NYC, Remote-US) 3. **Mynd:** [Senior Product Manager, Communications](https://lennys-jobs.pallet.xyz/jobs/77af7c80-baa3-4208-b322-2ea674604fdb) (Remote-US) 4. **Empower:** [Product Manager](https://lennys-jobs.pallet.xyz/jobs/5d73dc1a-9b0d-45d9-a661-735f07650d26) (Remote-Global) 5. **Superjoi:** [UI/UX Designer](https://www.lennysjobs.com/jobs/9710eb14-bc72-46a5-b75b-2949c5c1bfa7) (LA, Remote-Global) 6. **Superjoi:** [Full Stack Engineer](https://lennys-jobs.pallet.xyz/jobs/4111e336-604a-43c7-90b4-8cf03952800b) (LA, Remote-Global) 7. **HireArt:** [Senior Full-Stack Engineer](https://lennys-jobs.pallet.xyz/jobs/fd0b1a53-7741-4a2b-8739-a976d2482afe) (Remote-US) 8. **Universe:** [Product Lead - Commerce Tools](https://lennys-jobs.pallet.xyz/jobs/38cfa180-37e3-4882-99ae-3a6d35a04d32) (Remote) 9. **Universe:** [Product Lead - Creation Tools](https://lennys-jobs.pallet.xyz/jobs/5b414879-8180-4651-bc80-39610ee206f2) (Remote) 10. **Clubhouse:** [Growth Product Manager](https://lennys-jobs.pallet.xyz/jobs/ed55d82e-f9b6-47b7-837d-b8f29b9e2b41) (SF, Remote-US) 11. **Earthly Technologies:** [Senior Product Manager](https://lennys-jobs.pallet.xyz/jobs/958ba7ed-1571-4249-a103-2e58dfcc40bd) (Remote-US, Remote-Canada) 12. **Otta:** [Product Manager](https://lennys-jobs.pallet.xyz/jobs/896bc872-ef34-44a5-85bd-74784e9bea89) (London) 13. **Sonar:** [Product Manager, Integrations](https://lennys-jobs.pallet.xyz/jobs/d830dd44-5885-452a-a0fc-681a667d20c5) (ATL, Remote-US) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* ## **🧠 Inspiration for the week ahead** 1. **Watch:** [Duett chain of numnumcat](https://www.tiktok.com/@mimo_mio/video/7029807544944069894?_d=secCgYIASAHKAESPgo833ZZlLy4Ub5tHcH5c6ss0rgQWVMAC%2Fg6kov%2FLjEPTkguVAMBkUyzKHONmqWK5bzlw%2BOHMMJORh3VHFY7GgA%3D&checksum=7ef5f380257e35bb15c71586ee7238941818ad1cf788fd97d6c6071c98283c4b&language=en&preview_pb=0&sec_user_id=MS4wLjABAAAA2iretHzEfQauJoWoVDho3eU1VQmRKZG6iNUOenqpUcVl8gJSHUMxwg39P0Ku3b1c&share_app_id=1233&share_item_id=7029807544944069894&share_link_id=4C119251-14F5-4FA1-8A53-A0493C34522F×tamp=1644083180&tt_from=twitter&u_code=d4gh1jfaca4l4e&user_id=6656083751413628934&_r=1) on TikTok 2. **Listen:** [Optimizing Workspace for Productivity, Focus, & Creativity](https://podcasts.apple.com/us/podcast/optimizing-workspace-for-productivity-focus-creativity/id1545953110?i=1000549503046) by Huberman Lab 3. **Read:** [Scaling with Process vs. People](https://svpg.com/scaling-with-process-vs-people/) by Marty Cagan **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [7/44] A product manager’s guide to web3 *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to a ✨ **monthly free edition**✨ of my weekly newsletter. Each week I tackle reader questions about building product, driving growth, working with humans, and anything else that’s stressing you out about work. If you’re not a subscriber, here’s what you missed this month:* 1. [Lessons from 140+ angel investments](https://www.lennysnewsletter.com/p/angel-investing) 2. [How to get promoted](https://www.lennysnewsletter.com/p/how-to-get-promoted) 3. [What is good monthly churn](https://www.lennysnewsletter.com/p/monthly-churn-benchmarks) > ## Q: I’ve been a PM for a few years and I’m thinking about getting into web3. How is PM’ing different at a web3 startup, and what’s the best path into web3? With so many smart friends jumping into web3, this question has also been on my mind. The PM role is already so strange and varied—how does the web3 way of working change the role further? Is it fun to be a PM in web3? Are PMs even necessary? To understand this myself, I reached out to my good friend [Jason Shah](https://twitter.com/0xShah), who I was lucky to work with at Airbnb for many years and who now leads product at [Alchemy](https://www.alchemy.com/). Alchemy is essentially AWS for web3, and has quickly become a fundamental infra layer in the web3 startup stack. And just last week, the company [announced a raise of $200M at a $10B valuation](https://techcrunch.com/2022/02/08/alchemy-which-aims-to-be-the-de-facto-platform-for-developers-to-build-on-web3-raises-another-200m-and-is-now-valued-at-10-2b/). Through Jason’s experience scaling Alchemy, working with hundreds of web3 startups in the process, and having just recently (and methodically) made the transition into web3, I knew Jason would be an incredible source of insight on the PM role in web3. He did not disappoint 🔥 Below, he shares the most in-depth guide to product management in web3 you’ll find anywhere. I learned so much about the wild and wonderful world of web3 from Jason, and I hope you enjoy it as much as I did. #### **In true web3 fashion, Jason minted the core artwork from this post, “[WAGMI: Web2 PM Meet Web3 PM](https://opensea.io/assets/0x495f947276749ce646f68ac8c248420045cb7b5e/59793507817619197726422726491707995633373880928833237379690573428648344289281),” and will be auctioning it off to raise funds for [Girls Who Code](https://girlswhocode.com/) and [PadawanDAO](https://twitter.com/PadawanDAO) in a two-day OpenSea auction.** [Check out the auction](https://opensea.io/assets/0x495f947276749ce646f68ac8c248420045cb7b5e/59793507817619197726422726491707995633373880928833237379690573428648344289281) Thanks, Jason! *P.S. You can now hear this post in audio form:* ![Image from A product manager’s guide to web3](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/024a1841-c38d-447c-8f10-f0b5f7e7ede2_1456x240.png)![Image from A product manager’s guide to web3](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/0b8b39b9-518d-447f-84b8-16e168980449_4096x1368.png) If you hadn’t noticed, web3 is exploding. Everyone is talking about NFTs and DeFi, and investment and job postings in web3 both grew by [more than 400% in 2021](https://www.nytimes.com/2021/12/01/business/dealbook/crypto-venture-capital.html). What does that mean for you, anon web2 product manager? There are countless opportunities to make a big impact and grow your career by transitioning into web3. But it can be an opaque process and a risky decision. So let’s prepare you for web3. ![Image from A product manager’s guide to web3](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/518222ac-b5b0-4105-ab38-551acd759fc9_1000x500.png) In this article, we will explain three core concepts: 1. The unique attributes of a web3 PM 2. The advantages and disadvantages of PM’ing in web3 3. How to make the transition into web3 Let’s get into it. ## **How is PM’ing different at a web3 startup?** Web3 product managers are still cross-functional leaders driving outcomes, but web3 product management is different in three primary ways: 1. It’s more **versatile** 2. It’s more **art than science** 3. It’s more **public** It’s more **versatile** because to find product-market fit, PMs also own incentives, partnerships, and community. This requires a more flexible skill set and the ability to learn quickly. It’s **more art than science** because there is very little user data and A/B testing given web3 values and the small user bases. This requires more intuition and the ability to make decisions in a very high-ambiguity environment. It’s **more public** in that discussions about decisions tend to happen in Discord, Crypto Twitter, and public Snapshot proposals. This creates more inclusiveness but also requires a PM to be effective at community engagement rather than purely analytical and influential behind closed doors. ### **Product managers aren’t yet very common in web3** Most projects have become successful without PMs. Creating a DeFi protocol? You need a protocol specialist. Building an engaged community for an NFT project? Hire an anon community manager with 50K Crypto Twitter followers and a penchant for meme mastery. Need to write smart contracts? Solidity or Rust developers can help. **The most important things a web3 team needs usually don’t have that much to do with product managers**. The [Ethereum Foundation that has 97 employees](https://www.linkedin.com/company/ethereum-foundation/people/) and stewards a $500B Layer 1 protocol with virtually zero PMs. A leading NFT project like [World of Women](https://worldofwomen.art/about-us.html) has artists, a head of philanthropy, and legal counsel, but no PMs. When creating a DeFi protocol or running an NFT drop, teams mainly just need a developer, a community manager, and a protocol designer (DeFi) or an artist (NFTs). **PMs have had 20 years to demonstrate value and carve out a role in Big Tech, becoming the leaders of a company’s vision or a feature’s execution. Not here.** When I explored roles with 20+ web3 teams in 2021, nearly half of them didn’t understand what PMs were for. ### **Product managers aren’t as necessary for the web3 0-1 phase** In web2, the founder or early product manager can be crucial in deciding what and how to build, which helps get to the holy grail of product-market fit. In web3 the product experience, such as features and perceptible user experience, doesn’t actually matter as much to the success of the project relative to the token incentives (Staking and AMMs), trading pairs (DEX), artwork (NFTs), network design (L1s/L2s), transaction speed (L1s/L2s), security (L1s/L2s), or other attributes. These are areas where PMs are secondary, if relevant at all. In the case of the Ethereum Name Service, the website and front-end interface to register a domain is fairly simple for a developer to do compared with building complex blockchain infrastructure or structuring DAO governance. Web3 0-1 is more about technical infrastructure, cryptoeconomics, and/or online community to find product-market fit. At this time, PMs in web3 are usually better for 1-10, not web3 0-1 when you are going from an idea to initial product-market fit. ### **Product managers need different core skills in web3** Many PMs develop skills like “communication” and “influence” at larger organizations, or even startups where they need to work closely with founders and rally overworked teams. This makes sense because persuasion and coordination have been core to the web2 PM job. Those skills don’t matter as much here. Web3 PM is more focused on execution and community—like signing a big new protocol partner or getting tons of anon users via Twitter. In web2 I was afraid to tweet much, for professional consequences. Now I’d be untrustworthy if I didn’t tweet a lot. **Making a viral meme is more important than writing a good email.** That is because getting positive attention in the frenetic world of web3 is more valuable than “alignment.” There are almost no PM career ladders or performance reviews, so teams are purely focused on making a project successful, not politics. ### When web3 startups generally hire a PM All that being said, there are several situations that create a need for a PM at a web3 startup: 1. **Engineers have become inefficient:** The engineering team has grown too large to prioritize and self-coordinate projects; a PM adds efficiency (e.g. multiple Layer 1 protocols and EVM solutions). 2. **The product experience is complex or critical to traction:** The product suite is large and the UX is complex/consumer-facing, as in gaming (e.g. the Sky Mavis play-to-earn game Axie Infinity). Some products compete initially by cloning products (e.g. Sushiswap forked Uniswap) and adding tokens, so that requires less product management support and is more focused on technical and cryptoeconomic changes than gaming or wallets. 3. **There’s a mix of externally facing activities that a single specialist couldn’t do, but a versatile PM can:** There is marketing, growth, business development, and community work the devs don’t want to do and don’t need a dedicated hire for, such that a versatile PM can help. Over time, there are needs for specialist PMs as well (e.g. an L1 like Flow or a marketplace experience like NBA Top Shot), but less at early-stage web3 startups. ## **What** ***is*** **a web3 PM?** One oversimplified, universal definition of a web3 PM is: > #### **Web3 PMs are responsible for the success of communities rather than increasing acquisition, engagement, or revenue.** Hearts over charts. ![Image from A product manager’s guide to web3](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/7f9926e6-20fd-45af-a6df-abfc26453c8d_1000x500.png) We have seen the past 10 years of web2 demonstrate scenarios where the interests of the community (e.g. internet-addicted teenagers, underpaid ride-share drivers, local restaurants stuck with high platform fees) are deprioritized in favor of company-first north-star metrics. **In web3, if the community—such as the NFT creators, liquidity providers, or software developers—is not successful, you are NGMI. Community first.** But how do you make a community successful? To do this, web3 PMs have to think about protocol design, tokenomics, user safety, security, growth marketing, community engagement, and much more that encompasses the interconnected people, technology, and economics of web3 products. Let’s unpack this further. ### **Ten truths of web3 product management** #### **1. You have to prioritize execution over vision/strategy** Web2 PM careers reward setting long-term vision and crafting a nuanced strategy to achieve OKRs. Execution is expected but not what is most recognized as one progresses from a junior PM to a more senior product leader. Not in web3. I have not seen a single PM vision document; vision lives in whitepapers by technical architects who know cryptography and sharding. Web3 instead requires PMs to be more focused on execution: quickly hammering out a spec over Telegram with devs, QA’ing carefully and setting up a smart contract audit given the risk of vulnerabilities, building hype on Twitter, launching—and repeating. Web3 moves too quickly for pontification; new protocols launch daily and DeFi concepts like bonding curves and OHM forks are being tested in real time, so visions and strategies quickly become outdated. This may change over time as the space matures and product vision becomes more of a competitive advantage. But instead, today the best web3 PMs spend 95/5 on execution/vision, not 70/30. **Web3 PM emphasizes building, marketing, and iterating rather than planning, managing, and measuring.** Given the pace in web3, this prioritization of execution with the right principles has led to greater success. #### **2. You have to do user research, business development, and marketing directly, yourself** As web2 matured, the PM role was unbundled: user researchers, UX and UI designers, data scientists, QA testers, product marketing managers, social media managers, and more. Because web3 is so new, the 2020s talent market is tight, and web3 teams lack much of the traditional organizational design of web2 companies, PMs have to do everything again: listen to the community on Discord and Crypto Twitter (user researcher), run some on-chain analysis through a tool like Dune Analytics (data scientist), sketch out the token swapping UX and the AMM’s proposed liquidity incentives (designer and tech lead), form partnerships with stablecoin protocols (BD manager), write the launch blog post (product marketing manager), and make the memes and virality happen on Twitter (social media manager). **Web3 requires one person to do all of this right now, because the tasks above are uniquely technical and interdependent such that they can’t be easily unbundled.** #### **3. You have to focus on perfecting the details rather than expanding features** Front-end interactions are extremely limited, and winning is based on a marginally more secure or higher-yielding product. Web3 products don’t need to maximize engagement by adding more features. The web3 model doesn’t depend on advertising or a freemium SaaS model that converts free users to paid plans. Those models **inherently incentivize web2 PMs to focus on getting people to extensively use a product, rather than simply benefiting from a product**. It’s the quality of the artwork for a collection like Bored Ape Yacht Club, or the ease of setup for a DAO, or the availability of liquidity on a DEX to minimize price impact that determines the success of a web3 project. Consider native staking through a Layer 1 blockchain like Cosmos. What matters to a user are details like the annual percentage yield (APY, or the return on investment) and if there’s a cooldown period where the tokens remain staked and cannot be accessed—not so much the UI. The UI is a commodity in part because of open-source and composability where teams fork each other’s products. **The UX tends to be either a commodity, like a simple token swap two-field design that Uniswap pioneered, or out of your control if gas fees are high and transactions are slow. So the few details you control really matter.** The actual flow of clicking to stake doesn’t matter as much, and, in fact, the ecosystem is optimizing for you to not visit the app very frequently because staked collateral is more stable for the network. But the APY and speed do matter. Engagement less so. #### **4. You have to understand your users without their email addresses, tracking tools, or running A/B tests** Moreover, airdrop farming and liquidity incentives can make it difficult to tell if you truly have product-market fit.In web3, users can take their data with them at any time and use multiple wallets that can’t easily be linked despite blockchain transparency, and the ethos around decentralization limits one’s ability to use something like Google Analytics, Mixpanel, or Amplitude, let alone cookies or a customer data provider to match email address to demographic information. Without this data, it can be incredibly difficult to know how people are using your product and whether you have achieved product-market fit. Instead you must rely on qualitative information like user feedback, network-wide information like TVL and floor prices/distribution of NFT holders, and concrete but pseudonymous information like wallets that have deposited funds or swapped tokens. Additionally, many products bootstrap communities by offering native tokens either through liquidity provider incentives for putting capital into a DeFi protocol or giving away free tokens to early believers, like when LooksRare ($LOOKS) gave tokens to high-volume OpenSea users to attract them to its decentralized platform. This lack of data and incentivized engagement, including airdrop farming, make measuring utility very unclear. #### **5. You have to design your product around the trade-offs of a given L1/L2 blockchain like Ethereum or Solana** Rather than a product fully controlled by your company or mediated by a closed platform like iOS, your product isn’t in a silo. Instead of a product your team fully controls the user interface for, like a travel booking website built on top of AWS or a social networking app distributed in the iPhone App Store that uses iOS design primitives, **web3 products are largely subject to the behavior of the Layer 1/Layer 2 protocol they’re built on top of, like the fast transactions on Solana or high gas fees on Ethereum Layer 1.** For example, if you are building a marketplace for NFTs that cost less than $1 geared toward consumers in emerging markets with less disposable income, you may choose a lower-cost blockchain, like Solana or Avalanche, or a mobile-friendly protocol like Celo. Using Ethereum Layer 1 may routinely result in gas fees above $100 and not be accessible to your user base, unless you use a Layer 2 solution like Polygon, Arbitrum, or Optimism. Your choice of which chains you support will impact user adoption, development time, and scalability. **Web3 PMs need to understand different blockchains so they can select which chains to support and design accordingly, whereas in web2, PMs today rarely need to be involved with technical infrastructure decisions because it may not directly impact the end-user experience being created.** #### **6. You have to be extremely careful about what you deploy in smart contracts, and that slows development time** In web3, you can’t just do a quick patch if it’s buggy. In blockchain, code is immutable. Immutability means the code can’t easily be changed unless there is a proxy contract, which can also undermine trust in a project because users can’t trust that it won’t change. This is different from web2 code, where a bug can just be fixed or a database edited. If there is a security vulnerability, it can lead to massive financial loss that cannot be reversed, since there is no central party or customer support line to call to resolve an issue. This can slow development time and require you to plan around audits. #### **7. You cannot rely on proprietary code, trade secrets, and data moats as your competitive advantage** Everything is open source and composable in web3, preventing incumbency/market domination: whether it’s Sushi forking Uniswap and dropping tokens to all of its users to jump-start usage in a vampire attack or all the protocols forking OHM, code in web3 is generally open source. Moreover, your user interface is visible to anyone and usually not that complicated, unlike vast and complex web2 social networks or SaaS product suites. This means anyone can fork your product and compete on tech/product in an instant. Combine this with how users can take their data with them, and you see how the user base isn’t locked in. By contrast, if all of Facebook’s code were public and user data was portable, it’s not hard to imagine a competitor emerging. This means that web3 PMs must continue to compete with better products, stronger communities, and continuous new value to end users, and can’t rest on having an intellectual-property moat or high switching costs to succeed. #### **8. You cannot make all product decisions unilaterally and may not control your roadmap** User ownership over the protocol or dapp means that the community is a participant in decision-making. Communities need to be engaged early and often as opposed to being an afterthought or just part of a launch marketing campaign. Users generally hold tokens and have the ability to vote on the future of products, like the Ethereum Name Service (ENS) or the proposal to merge Rari Capital and Fei Protocol. While not every decision, like the canonical-but-overly-satirized web2 decision to test the color of blue on a signup button, would need to be approved by a DAO, there isn’t full autonomy either. For example, Uniswap is one of the most popular DeFi protocols and needed a vote from the community to deploy its protocol to Polygon. The proposal was [submitted by Polygon in November 2021](https://gov.uniswap.org/t/governance-proposal-up010-deploy-uniswap-v3-to-polygon-pos-chain/15459), and this affected the Uniswap product’s roadmap thereafter. Another example is the ENS core team realizing that bots were snapping up three-letter domain names because the threshold for the bit was too low at $2K and needed to be $100K to prevent squatting. The [proposal was submitted in January 2022](https://snapshot.org/#/ens.eth/proposal/0xf854140e16ab96eaed7bbd783f31b441ff5122efc8c002632396df9b7d20342d), approved, and will be implemented through a change to an ENS oracle. **Communities structured as DAOs govern most protocols; product leadership must happen through them.** #### **9. You must prioritize user security, because with every transaction there are funds at stake** Even if the application is for decentralized music listening or a social network, given how web3 wallets work, there is no real separation between funds and user engagement. Web3 can be a scary place; imagine that clicking a button in a Chrome extension can transfer a $100K JPEG to another wallet without your even realizing it. **Security is paramount in the space because all transactions stem from the same place: the web3 wallet.** Here is an example: Some PMs at NFT marketplaces prefer to prompt users for “approve all” permissions in some Metamask transactions to avoid needing to repeatedly give this permission. Repeatedly doing so would be cumbersome and expensive. But then a risk is that the user could have the entire collection transferred out of their wallet if the marketplace turns out to be malicious or gets hacked. The user just intended to give one-time access to sell an NFT. But if they don’t give that broader access, the user might have to pay repeated fees and have a cumbersome UX every time they want to execute a sale. This is an example where security may be prioritized over UX by requiring repeated approvals despite the expense, given how high the risks are. This would likely never be a consideration for a web2 marketplace like eBay or Etsy because listing an item for sale doesn’t put all of your other assets at risk due to the asset ownership model, and there is always a centralized party and team such as customer support to reverse transactions and mediate. **Moreover, in web3, users realistically cannot audit every smart contract, so the burden of ensuring that an app is secure and trustworthy on behalf of your users is higher in web3 given what is at stake in each interaction.** This is part of why Crypto Twitter provides social proof when users can’t complete their own diligence to trust products. #### **10. Regulatory concerns have mostly shifted from web2 to web3** Crypto is on the mind of every congressperson in the U.S. and on the radar of most federal governments, from China to India to Brazil to Nigeria. Many congressional hearings about Facebook’s power have turned into sound-bite-generating floggings—but not much has happened, no matter how many times Zuck shows up on C-SPAN. On the other hand, regulators can’t stop talking about crypto, from Senator Elizabeth Warren to SEC chairperson Gary Gensler. The 2021 infrastructure bill was passed with a provision with onerous tax and tracking requirements that directly affect the entire crypto ecosystem and caused an extreme stir among the web3 community and policy advocacy organizations. The IRS, SEC, Commodity Futures Trading Commission, and other U.S. agencies have different rules about crypto, not to mention the international landscape that has chased after companies including Binance and PoolTogether. **As a PM, you have to consider these matters far more directly than in most web2 organizations, where legal is more secondary at this point. You liaise with counsel to understand a fragmented and undefined legal environment, unlike today in web2, where most legal matters have been settled and product counsels are there to enable but not guide business direction.** ## **What are the best and worst parts about being a web3 PM?** Web3 has a lot of promise as a career path for those who are low-ego, curious, and interested in building. But it’s not all cryptokitties and ATHs: #### Best parts: - **Build the future:** Web3 remains uncertain. You get to design the next generation of the internet. - **Impact:** Because web3 PM is so nascent, what you do and how you do it uniquely matters. - **Use all parts of your brain:** Product, partnerships, meme-posting, growth hacking, community—do it all. - **Learn every day:** There is so much going on at the intersection of computer science, economics, and sociology. - **Fun:** Web3 is much less formal—people post memes, Crypto Twitter always has some new drama. It’s weird. #### Worst parts: - **Start again:** Think you know PM? Web3 is so different, you must unlearn what you worked so hard to develop. - **24/7:** Web3 is nonstop. Builders are in every country, and what was new is now old. This can be exhausting. - **You’re not as important:** Engineers, community leaders, artists—these people are all more important than you. - **Immutability and low data:** Experimentation and data are a PM’s best friend at times; not so much in web3. - **Financialization of everything:** Token prices, airdrops, and floor prices—everything has a dollar figure (or ETH). ## **What’s the best path into a web3 gig?** Web3 can be strange and scary. Paid in magical internet tokens? The founder is an anonymous giraffe? What? But web3 is at a special moment. It is both risky and inevitable. This makes the upside very high for passionate PMs because the space is not yet flooded with people who might be interested for less authentic reasons. Here’s how I’d advise approaching it: ![Image from A product manager’s guide to web3](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/bdf5df9c-145b-47d4-8d0c-4b4a08c412cc_1010x500.png) ### **1. Learn: Read, use, build** **Start here:** Peruse the [Bitcoin whitepaper](https://bitcoin.org/bitcoin.pdf). Watch [“The Potential of Crypto” from Chris Dixon](https://a16z.com/crypto-startup-school/). Follow [influential accounts on Crypto Twitter](https://twitter.com/0xShah/following) and go down the rabbit hole. **Once you’re ready for more**: Read the [Bitcoin](https://bitcoin.org/bitcoin.pdf) and [Ethereum](https://ethereum.org/en/whitepaper/) whitepapers. Watch [a16z Crypto School](https://a16z.com/crypto-startup-school/). Listen to [Bankless](https://podcast.banklesshq.com/?src=0xshah), [The Defiant](https://thedefiant.io/podcast/?src=0xshah), and [Unchained](https://unchainedpodcast.com/?src=0xshah). Read [The Sovereign Individual](https://www.amazon.com/Sovereign-Individual-Mastering-Transition-Information/dp/0684832720) for philosophical context, [The Infinite Machine](https://www.camirusso.com/book) (Ethereum), and [Crypto Assets](https://www.amazon.com/Cryptoassets-Innovative-Investors-Bitcoin-Beyond/dp/1260026671?src=0xshah). Read *Snow Crash*, *Ready Player One*, *Dune*, and other sci-fi for the culture. Check out recent videos like the [EthCC4 conference](https://www.youtube.com/channel/UC_kOxlaYNOTtNwtwySZ0B8w/videos) (here’s a [talk from Vitalik](https://www.youtube.com/watch?v=oLsb7clrXMQ)) and these interviews by Tim Ferriss with [Naval and Vitalik](https://www.youtube.com/watch?v=42uhsP4vvCE) (March 2021) and [Nick Szabo](https://www.youtube.com/watch?v=3FA3UjA0igY) (August 2017) and Chris Dixon ([Chris Dixon/Naval: Wonders of Web3—October 2021](https://t.co/ApwtOwb4TC)), as well as [Balaji](https://t.co/UOup9j4Z5O) (November 2021) and [Hosseeb’s talk in 2022 with the Layer 1 founders](https://twitter.com/hosseeb/status/1481340501815017472) from Solana, Avalanche, and NEAR, or [Brian Armstrong’s interview with Bankless](https://t.co/mtOrVgkMrf) (November 2021). Read everything Linda Xie has written [here](https://alias.co/linda/essays), and look at [Preethi Kasireddy’s guide to Web3](https://www.preethikasireddy.com/intro-to-cryptocurrency) or [Web3 University](https://web3.university/). Follow insightful people on Crypto Twitter ([here](https://twitter.com/i/lists/1466578038351486976) [are](https://twitter.com/i/lists/1466196761479839748) [some](https://twitter.com/i/lists/1438462993017282563) [lists](https://www.blog.cointracking.info/best-85-crypto-twitter-accounts-to-follow)) and start posting your own views to learn in public. **Use it:** Buy some (e.g. [Coinbase](https://coinbase.com/), [FTX](https://ftx.com/), [Binance](https://binance.com)), send it to a web3 wallet (e.g. [Metamask](https://metamask.io/download) for Ethereum or BSC or [Phantom](https://phantom.app/) for Solana), stake it (e.g. [Staked.us](https://staked.us/)), swap it (e.g. [Uniswap](https://uniswap.org/)), yield-farm to participate in DeFi (e.g. [Compound](https://app.compound.finance/)); find an NFT collection or 1/1 that you love (e.g. [World of Women](https://opensea.io/collection/world-of-women-nft), [Crypto Coven](https://opensea.io/collection/cryptocoven?search%5BsortAscending%5D=true&search%5BsortBy%5D=PRICE&search%5Btoggles%5D%5B0%5D=BUY_NOW), or [Zed Run](https://opensea.io/collection/zed-run-official)), get one or two through [OpenSea](https://opensea.io/)/[Rarible](https://rarible.com/)/[Foundation](https://foundation.app/)/[LooksRare](https://looksrare.org/), join the Discord for that NFT community, and get engaged with it; try using cross-chain bridges (e.g. [Synapse](https://synapseprotocol.com/) or [Wormhole](https://wormholebridge.com/#/)) to move some ETH to different chains or an L2 like Polygon or any other two-way transfer. You have to really live it to build it. **Build it:** Try a [Buildspace project](https://buildspace.so/). Search and read contracts on [Etherscan](https://etherscan.io/). Mint an NFT. Join a DAO and start contributing to something like [Developer DAO](https://www.developerdao.com/) or [Friends with Benefits](https://www.fwb.help/). Create something, whether you are technical or not—code, documentation, an event, anything! ### **2. Search: Find teams you love** **Search:** Review top web3 VC portfolios ([a16z crypto](https://a16z.com/portfolio/#crypto?src=0xshah), [Pantera](https://panteracapital.com/portfolio/?src=0xshah), [Paradigm](https://www.paradigm.xyz/portfolio/?src=0xshah), [Dragonfly Capital](https://www.dcp.capital/?src=0xshah), [Electric Capital](https://www.electriccapital.com/?src=0xshah), [Fabric Ventures](https://www.fabric.vc/?src=0xshah), [Variant Fund](https://variant.fund/)) and filter for well-respected teams while looking for missions you care about and a stage that you are well-suited to and where you’re able to have an impact. Create a spreadsheet of the top teams in the space and make notes on what you like, don’t like, and need to understand. **Research:** Read those project websites, research what they have shipped, and understand how you can help by reviewing community forums (e.g. [Lido/staking](https://research.lido.fi/)) and Twitter (e.g. [Frax/fractional stablecoins](https://twitter.com/fraxfinance)). **Explore:** Join the project Discords to get a sense for the project momentum and community culture. ### **3. Ape In: Reach out, evaluate, and join a web3 team** - **Define your role:** Figure out what value you can add based on the project’s status and your experience. - **Reach out:** DM the founder or a core contributor with a concise pitch (e.g. three sentences via Twitter DM). - **Connect and decide:** Interview with 5+ teams, evaluate your options, make a decision, and have fun! Many teams may not even know they need a product manager. Focus on the value you can offer by working backward from their problems, their goals, and their community ethos, and find alignment in your own interests and experience. ## **In conclusion: web3 needs you—join us!** Web3 is an exciting new frontier, and product management in web3 will require a lot of unlearning, thinking from first principles, and hard work. But who would want it any other way? See you down the rabbit hole, anon. WAGMI. *Thanks so much to lennysan.eth for the opportunity to share this perspective with you. And thanks to contributors for perspectives and feedback on the web3 ecosystem, including Christina Beltramini (Aave), Mike Garland and Rob Boyle (Alchemy), Matt Henderson (Aurora), Rachel Mayer (Circle), Georgiana Mirea (Dapper Labs), Mike Sall (Goldfinch), Veronica Saron (Mirror), Aadil Mamujee (OpenSea), Pooja Shah (Protocol Labs), Nassar Hayat (Radicle), and Ian Lee and Will Papper (SyndicateDAO).* *None of this is financial advice. Please do your own research. You can follow Jason on [Twitter](https://twitter.com/0xShah) and [LinkedIn](https://www.linkedin.com/in/jasonyogeshshah/).* ## **🔥 Featured job openings** 1. **Alchemy:** [Product Manager](https://www.lennysjobs.com/jobs/3ee9aa95-2101-41b4-b664-c143bc9f2e01) (SF, NYC, Remote) 2. **Elevate Labs:** [Senior Product Manager, Balance](https://lennys-jobs.pallet.com/jobs/54802bbd-3ad4-4abf-bd0f-308e86d52586) (Remote) 3. **Oath Care:** [UX Designer](https://lennys-jobs.pallet.com/jobs/0e35e470-6b81-4dae-a706-33139219fa68) (Remote-US) 4. **Oath Care:** [Community Marketing Manager](https://lennys-jobs.pallet.com/jobs/300b896f-80ca-4893-a39f-1d2dfff8da00) (Remote-US) 5. **Hex:** [Growth Product Manager](https://lennys-jobs.pallet.com/jobs/957d5c52-aac0-483e-b336-5b63961a99e6) (SF, Remote-US) 6. **Monarch:** [Data Lead - Growth](https://lennys-jobs.pallet.com/jobs/269cafbf-a15c-41d3-b8cb-566b49fbe84e) (Remote-Global, Remote-US) 7. **Monarch:** [Performance Marketing Manager](https://lennys-jobs.pallet.com/jobs/e80e525c-d891-422a-8bfe-5a82aa4caad4) (Remote-Global, Remote-US) 8. **Convosight:** [Sr Product Owner](https://lennys-jobs.pallet.com/jobs/22dd029a-3678-491f-b7ca-820585118380) (Remote-Global, Remote-US, Remote-India) 9. **Siteline:** [First Product Manager](https://lennys-jobs.pallet.xyz/jobs/3cc1fa57-e3e3-4b93-9d0d-fac7c592545b) (SF, Remote-US) 10. **Koodos**: [Product Engineer](https://lennys-jobs.pallet.xyz/jobs/1412066a-3922-47c6-99f7-28401ed895f5) (NYC, Remote-US) 11. **Mynd:** [Senior Product Manager, Communications](https://lennys-jobs.pallet.xyz/jobs/77af7c80-baa3-4208-b322-2ea674604fdb) (Remote-US) 12. **Empower:** [Product Manager](https://lennys-jobs.pallet.xyz/jobs/5d73dc1a-9b0d-45d9-a661-735f07650d26) (Remote-Global) 13. **Superjoi:** [UI/UX Designer](https://www.lennysjobs.com/jobs/9710eb14-bc72-46a5-b75b-2949c5c1bfa7) (LA, Remote-Global) 14. **Superjoi:** [Full Stack Engineer](https://lennys-jobs.pallet.xyz/jobs/4111e336-604a-43c7-90b4-8cf03952800b) (LA, Remote-Global) 15. **HireArt:** [Senior Full-Stack Engineer](https://lennys-jobs.pallet.xyz/jobs/fd0b1a53-7741-4a2b-8739-a976d2482afe) (Remote-US) 16. **Universe:** [Product Lead - Commerce Tools](https://lennys-jobs.pallet.xyz/jobs/38cfa180-37e3-4882-99ae-3a6d35a04d32) (Remote) 17. **Universe:** [Product Lead - Creation Tools](https://lennys-jobs.pallet.xyz/jobs/5b414879-8180-4651-bc80-39610ee206f2) (Remote) 18. **Clubhouse:** [Growth Product Manager](https://lennys-jobs.pallet.xyz/jobs/ed55d82e-f9b6-47b7-837d-b8f29b9e2b41) (SF, Remote-US) 19. **Earthly Technologies:** [Senior Product Manager](https://lennys-jobs.pallet.xyz/jobs/958ba7ed-1571-4249-a103-2e58dfcc40bd) (Remote-US, Remote-Canada) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [8/44] Reforge applications open (and taking a sick day) Hey there, I caught a cold (how old-fashioned!), and as much as I tried to get today’s edition out anyway, I couldn’t get it to a place where I felt it was ready. So I’m going to take a sick day (my first) and instead focus on resting and making next week’s post that much better. In the meantime, I’ve still got a few things to share, including an extended *Inspirations for the week ahead*. And if you’re pining for more, don’t forget that as a paid subscriber you have access to a thriving Slack community of thousands of PMs, founders, growth leaders, and all manner of product builders. It’s a very special place, and a great way to get answers to your burning questions. I’ll see you next week 🧡 ## 🚨 [Reforge Spring 2022 applications](https://program.reforge.com/apply) now open Twitter, books, blogs, and newsletters are invaluable, but they won’t provide the immediate step-function change in your career that a live cohort-based course can. And there is no better ongoing program for accelerating your product, growth, engineering, or marketing career than Reforge. Trust me, I’ve looked. Especially while my PM course is on hiatus, this is going to be your best bet. **This spring, Reforge is offering** ***six*** **different courses on product management (all awesome):** 1. **[Product Management Foundations](https://www.reforge.com/product-management-foundations)**: Build a foundational understanding of the product manager role, and learn the tools and strategies needed to succeed as a product manager. 2. **[Mastering Product Management](https://www.reforge.com/mastering-product-management)**: Level up your product management abilities by mastering critical product management tools. Learn to identify and execute on high-leverage work that generates disproportionate product returns. 3. **[Product Strategy](https://www.reforge.com/product-strategy)**: Build, communicate, and execute a cohesive product strategy across feature, growth, scaling, and innovation product work. 4. **[Product Leadership](https://www.reforge.com/product-leadership)**: The methods of building high-performance product teams, managing up/down/across, and creating cross-functional influence. 5. **(New!)** **[Data for Product Managers](https://www.reforge.com/data-for-product-managers)**: Unlock your full potential as a product manager by learning to drive impact for the metrics that matter most for your product. 6. **[User Insights for Product Decisions](https://www.reforge.com/user-insights-product-decisions)**: Learn to make key product decisions based on a deeper understanding of customers. There are also courses on growth, marketing, and engineering: - **Growth:** [Growth Series](https://www.reforge.com/growth-series), [Advanced Growth Strategy](https://www.reforge.com/advanced-growth-strategy-series), [Retention & Engagement](https://www.reforge.com/retention-engagement-series), [Monetization & Pricing](https://www.reforge.com/monetization-pricing), [Experimentation & Testing](https://www.reforge.com/experimentation-testing) - **Marketing:** [Marketing Strategy](https://www.reforge.com/marketing-strategy) (updated), [Growth Marketing](https://www.reforge.com/growth-marketing) (new) - **Engineering:** [Scaling Product Delivery](https://www.reforge.com/scaling-product-delivery), [Technical Strategy](https://www.reforge.com/technical-strategy), [Engineering Management](https://www.reforge.com/engineering-management) (new) For one flat yearly fee, you get to participate in any three courses each year, plus year-round access to their content, ongoing workshops, and deep-dive sessions led by Reforge partners. **Apply by March 11 (2.5 weeks!), and cohort onboarding starts March 21. First come, first served.** [Apply now](https://program.reforge.com/apply) ## **🧠 Inspiration for the week ahead** 1. **Laugh:** [What are we searching for?](https://searchingthe.world/) by Michelle Rial and Raph Lee in collaboration with Google Trends ![Image from Reforge applications open (and taking a sick day)](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/10f8a557-9c33-4676-9f98-72b8f91923dc_1080x576.png) 2. **Watch:** [Derek DelGaudio’s](https://www.hulu.com/movie/derek-delgaudios-in-of-itself-19b9d405-40b2-483e-8e1f-e25fe10c7299) *[In & Of Itself](https://www.hulu.com/movie/derek-delgaudios-in-of-itself-19b9d405-40b2-483e-8e1f-e25fe10c7299)* on Hulu 3. **Watch:** [Be so good they can’t ignore you](https://youtu.be/teAvv6jnuXY) by Steve Martin [Watch on YouTube](https://www.youtube.com/watch?v=teAvv6jnuXY) 4. **Listen:** [Boyd Varty and Tim Ferriss—The Lion Tracker](https://podcasts.apple.com/us/podcast/the-tim-ferriss-show/id863897795?i=1000551273147)[’](https://podcasts.apple.com/us/podcast/we-do-talk-about-bruno/id934552872?i=1000549643361)[s Guide to Life](https://podcasts.apple.com/us/podcast/the-tim-ferriss-show/id863897795?i=1000551273147) 5. **Listen:** [Why “We Don’t Talk About Bruno” hit number one on the charts](https://podcasts.apple.com/us/podcast/we-do-talk-about-bruno/id934552872?i=1000549643361) by Switched on Pop 6. **Read:** *[Nobody Wants to Read Your Sh\*t: Why That Is and What You Can Do About It](https://www.amazon.com/Nobody-Wants-Read-Your-Sh-ebook/dp/B01GZ1TJBI)* by Steven Pressfield 7. **Read:** [Is less than 7 hours of sleep actually harmful?](https://guzey.com/theses-on-sleep/) by Alexey Guzey ## **🔥 Featured job openings** 1. **CommerceHub:** [Director of Product Management, Delivery](https://lennys-jobs.pallet.com/jobs/5e4c79e3-9c75-4cd3-aa6f-0b9fc40636bf) (Remote-US) 2. **CommerceHub:** [Sr. Product Manager](https://lennys-jobs.pallet.com/jobs/125eafba-2e93-41ee-98aa-abaae84c1b35) (Remote-US) 3. **Elevate Labs:** [Senior Product Manager, Balance](https://lennys-jobs.pallet.com/jobs/54802bbd-3ad4-4abf-bd0f-308e86d52586) (Remote) 4. **Oath Care:** [UX Designer](https://lennys-jobs.pallet.com/jobs/0e35e470-6b81-4dae-a706-33139219fa68) (Remote-US) 5. **Oath Care:** [Community Marketing Manager](https://lennys-jobs.pallet.com/jobs/300b896f-80ca-4893-a39f-1d2dfff8da00) (Remote-US) 6. **Hex:** [Growth Product Manager](https://lennys-jobs.pallet.com/jobs/957d5c52-aac0-483e-b336-5b63961a99e6) (SF, Remote-US) 7. **Monarch:** [Data Lead - Growth](https://lennys-jobs.pallet.com/jobs/269cafbf-a15c-41d3-b8cb-566b49fbe84e) (Remote-Global, Remote-US) 8. **Monarch:** [Performance Marketing Manager](https://lennys-jobs.pallet.com/jobs/e80e525c-d891-422a-8bfe-5a82aa4caad4) (Remote-Global, Remote-US) 9. **Convosight:** [Sr. Product Owner](https://lennys-jobs.pallet.com/jobs/22dd029a-3678-491f-b7ca-820585118380) (Remote-Global, Remote-US, Remote-India) 10. **Siteline:** [First Product Manager](https://lennys-jobs.pallet.xyz/jobs/3cc1fa57-e3e3-4b93-9d0d-fac7c592545b) (SF, Remote-US) 11. **Koodos**: [Product Engineer](https://lennys-jobs.pallet.xyz/jobs/1412066a-3922-47c6-99f7-28401ed895f5) (NYC, Remote-US) 12. **Mynd:** [Senior Product Manager, Communications](https://lennys-jobs.pallet.xyz/jobs/77af7c80-baa3-4208-b322-2ea674604fdb) (Remote-US) 13. **Empower:** [Product Manager](https://lennys-jobs.pallet.xyz/jobs/5d73dc1a-9b0d-45d9-a661-735f07650d26) (Remote-Global) 14. **Superjoi:** [UI/UX Designer](https://www.lennysjobs.com/jobs/9710eb14-bc72-46a5-b75b-2949c5c1bfa7) (LA, Remote-Global) 15. **Superjoi:** [Full Stack Engineer](https://lennys-jobs.pallet.xyz/jobs/4111e336-604a-43c7-90b4-8cf03952800b) (LA, Remote-Global) 16. **HireArt:** [Senior Full-Stack Engineer](https://lennys-jobs.pallet.xyz/jobs/fd0b1a53-7741-4a2b-8739-a976d2482afe) (Remote-US) 17. **Universe:** [Product Lead - Commerce Tools](https://lennys-jobs.pallet.xyz/jobs/38cfa180-37e3-4882-99ae-3a6d35a04d32) (Remote) 18. **Universe:** [Product Lead - Creation Tools](https://lennys-jobs.pallet.xyz/jobs/5b414879-8180-4651-bc80-39610ee206f2) (Remote) 19. **Earthly Technologies:** [Senior Product Manager](https://lennys-jobs.pallet.xyz/jobs/958ba7ed-1571-4249-a103-2e58dfcc40bd) (Remote-US, Remote-Canada) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* See you next week! --- ## [9/44] What is good waitlist conversion ### A quick word on Ukraine As some of you may know, I was born in Odessa, Ukraine. Right at the southern edge, bordering the Black Sea. ![Image from What is good waitlist conversion](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/846a7e1c-b075-4287-8bd8-3a14bf77071d_1200x977.jpeg) I don’t remember much—I left when I was 6 when our family emigrated out—but it breaks my heart to watch the pointless death and destruction unfold. And worse yet, to be on the razor’s edge of something far worse. As Albert Einstein once said, “I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.” Let’s hope that cooler heads prevail, that the bloodshed ends quickly, and that we as a species come out stonger and wiser. I’m optimistic we will. A few pictures from my visit to Odessa a few years back: ![Image from What is good waitlist conversion](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/6f6a93c9-cd46-4535-8ab6-796c3b5ee7d7_1024x768.jpeg)![Image from What is good waitlist conversion](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/62dbd305-5091-4ba3-b701-6a26644f7d7b_1024x768.jpeg)![Image from What is good waitlist conversion](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/87b11d6b-44fe-4f56-844a-5e9421cd137b_1024x768.jpeg) — If you’re looking to help, a few suggestions: **1. Host:** If you live in Poland, Germany, Hungary, or Romania—host a refugee. **2. Hire:** Thousands of talented creative and technical professionals are left without jobs or income. [Hire for Ukraine](https://hireforukraine.org/) is an initiative aiming to make it easier for them to find new quality jobs or projects. - If you're an employer or recruiter, please [browse submitted profiles](https://hireforukraine.org/) in your field of interest. - If you’re a Ukrainian professional who’s been affected, [create a profile on the website](https://hireforukraine.org/account/signup). The team will be sending it out to companies and recruiters regularly. - If you just want to help, please share this resource with affected Ukrainians who are seeking work. The project was launched yesterday and is just getting the word out. Follow them on [Twitter](https://twitter.com/hireforukraine), or [subscribe to receive the New Talent Digest](https://hireforukraine.org/recruiters). **3. Donate:** Send crypto to the official Ukrainian government wallet **4. Follow the news:** I’ve found most value in tracking [this Twitter list](https://twitter.com/i/lists/1492242776825552896) and [newsletter](https://noahpinion.substack.com/) by Noah Smith (who also happens to sit right below me in [the Substack rankings](https://substack.com/discover/category/business/paid) 😮) **5. A few other simple and straightforward actions you can take:** Now back to our regularly scheduled program. > ## Q: What is a good waitlist conversion? Any advice for making the most of our waitlist? To get you a concrete answer, I asked a bunch of founders (over [Twitter](https://twitter.com/lennysan/status/1495092635991609345), email, and IRL) who have direct experience with long waitlists, and broadly here’s what I’ve learned: 1. For converting to a free sign-up, conversion rates range widely, from **25% to 85%**, averaging around **50%** if you get people off the waitlist in under a month and **below** **20%** if you wait over three months. 2. For converting to a paid account, conversion rates range from **5% to 25%**, averaging around **20%** if you get people off the waitlist in under a month and falling **below 10%** if you wait over three months. 3. For converting waitlisted users to purchase a physical product, I only have a few data points in this bucket, but conversion rates are all **below** **5%** once you roll your product out widely. Here’s a summary: ![Image from What is good waitlist conversion](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ea770875-7574-4e22-a9a7-ca5ad8b25b2a_3768x2512.png) *If you’ve got any more data to share, especially if your conversion rates are wildly different, please leave a comment 👇👇👇* [Leave a comment](https://www.lennysnewsletter.com/p/what-is-good-waitlist-conversion/comments) ### Factors that most influence conversion rates You can increase your conversion rates by optimizing a few variables: #### **1. Tenure on waitlist** This is by far the biggest factor in conversion rate. People quickly lose interest and forget what they signed up for. > #### “With Linear, we probably saw 30%-50% in the first few months, and then 10% 12 months later.” > > #### —[Karri Saarinen](https://www.linkedin.com/in/karrisaarinen/), CEO and co-founder of [Linear](https://linear.app/) #### **2. Audience targeting** If your waitlist is all Hacker News users, you’re not going to have a good time. If instead your waitlist is diehard fans who’ve been holding their breath waiting for your product, you’ll do a lot better. e.g. [Opal Camera](https://opalcamera.com/): > #### “We’ve got a waitlist of 40K, and in the first batch of invites, almost 90% have converted. They’ve been very excited to get their Opal camera since we started working on it.” > > #### —[Veeraj Chugh](https://www.linkedin.com/in/veerajchugh/), co-founder of [Opal](https://opalcamera.com/) #### **3. Cost of your product** Like in any conversion funnel, the cheaper your product, the higher your conversion. Free products (e.g. Robinhood) will convert better than paid software products (e.g. Superhuman), which will convert better than paid physical products. ### Ways to optimize your waitlist Six tactics that most helped founders and teams increase their waitlist conversion: #### **1. Act quickly** Conversion drops exponentially the longer you wait. Start with the people who are the best fit, and keep expanding out. #### **2. Keep your list warm** Send interesting content and valuable updates to your waitlist to keep them excited about what’s coming. > #### “Something that mattered a lot for conversion rates was keeping our waitlist warm by sending regular product update emails (changelogs) and other meaningful content.” > > #### —[Matthias Wagner](https://www.linkedin.com/in/matthias-wagner-5220b047/), CEO at [Flux](https://www.flux.ai/) #### **3. Run emails through a bounce filter** People will enter fake email addresses, and even real addresses will become invalid over time. Cutting down on bounces will help keep you out of the spam folder, and thus increase conversion rate. > #### “The day we release a good chunk of the list (5K or so), bounces lead to hundreds of emails getting to spam, and people not signing up. > > #### Next time, I would run a waitlist through a service like [ZeroBounce](https://www.zerobounce.net/) to validate them. This will filter out the ones that don’t exist. Plus, a lot of sign-ups are fake accounts/bots.” > > #### —[Henrique Cruz](https://twitter.com/HenrM_Cruz), Head of Growth at [Rows](https://rows.com/) #### **4. Re-educate your users** If you’re taking people off a waitlist after a few months, it’s safe to assume they’ve forgotten what it is you do. Remind them. > #### “The older the cohorts, the more of a full-funnel approach you have to take. Start top-of-funnel—awareness, education, reeducating them on what the product is. People who sign up more recently have such high purchase intent, you can skip the middle-of-funnel and get straight to sign-up.” > > #### —[Ben Grynol](https://www.linkedin.com/in/bengrynol/?originalSubdomain=ca), Head of Growth at [Levels](https://www.levelshealth.com/) > #### “Something that helped was an extremely aggressive onboarding movie on clickthrough.” > > #### —[Nan Yu](https://www.linkedin.com/in/thenanyu/), ex-CTO at [Everlane](https://www.everlane.com/) #### **5. Re-engage users more than once** Don’t send just one email. Send at least three, each time reminding people of the value they’re missing. #### **6.** Improve targeting Conversion is innately tied to intent, so if you can increase the quality of the people on the waitlist, conversion will go up. One founder shared that conversion rates coming from one podcast were an order of magnitude larger than from any other podcast. Although conversion rate itself is not the goal (vs. absolute sign-ups), consider putting more time into audiences that are more likely to eventually convert. Have any tips for optimizing conversion off a waitlist? Do share! [Leave a comment](https://www.lennysnewsletter.com/p/what-is-good-waitlist-conversion/comments) Good luck! ## 📚 Further study 1. [My original twitter thread](https://twitter.com/lennysan/status/1495092635991609345) 2. [Turning your waitlist into actual users](https://taskablehq.com/blog/launch-plan) by taskable 3. [Anyone have benchmarks for waitlist to signup conversion?](https://www.indiehackers.com/post/anyone-have-benchmarks-for-waitlist-to-signup-conversion-813460d68a) on Indie Hackers 4. [4 viral sharing tactics for your product launch strategy](https://neilpatel.com/blog/tactics-product-shares/) by Neil Patel *Have a fulfilling and productive week 🙏* ## **🔥 Featured job openings** 1. **Airhouse:** [Senior Product Manager](https://www.lennysjobs.com/jobs/1739a7ee-41ab-43fb-8ac9-788738baad22) (SF, Oakland) 2. **CommerceHub:** [Director of Product Management, Delivery](https://lennys-jobs.pallet.com/jobs/5e4c79e3-9c75-4cd3-aa6f-0b9fc40636bf) (Remote-US) 3. **CommerceHub:** [Sr. Product Manager](https://lennys-jobs.pallet.com/jobs/125eafba-2e93-41ee-98aa-abaae84c1b35) (Remote-US) 4. **Elevate Labs:** [Senior Product Manager, Balance](https://lennys-jobs.pallet.com/jobs/54802bbd-3ad4-4abf-bd0f-308e86d52586) (Remote) 5. **Oath Care:** [UX Designer](https://lennys-jobs.pallet.com/jobs/0e35e470-6b81-4dae-a706-33139219fa68) (Remote-US) 6. **Oath Care:** [Community Marketing Manager](https://lennys-jobs.pallet.com/jobs/300b896f-80ca-4893-a39f-1d2dfff8da00) (Remote-US) 7. **Hex:** [Growth Product Manager](https://lennys-jobs.pallet.com/jobs/957d5c52-aac0-483e-b336-5b63961a99e6) (SF, Remote-US) 8. **Monarch:** [Data Lead - Growth](https://lennys-jobs.pallet.com/jobs/269cafbf-a15c-41d3-b8cb-566b49fbe84e) (Remote-Global, Remote-US) 9. **Monarch:** [Performance Marketing Manager](https://lennys-jobs.pallet.com/jobs/e80e525c-d891-422a-8bfe-5a82aa4caad4) (Remote-Global, Remote-US) 10. **Convosight:** [Sr Product Owner](https://lennys-jobs.pallet.com/jobs/22dd029a-3678-491f-b7ca-820585118380) (Remote-Global, Remote-US, Remote-India) 11. **Siteline:** [First Product Manager](https://lennys-jobs.pallet.xyz/jobs/3cc1fa57-e3e3-4b93-9d0d-fac7c592545b) (SF, Remote-US) 12. **Koodos**: [Product Engineer](https://lennys-jobs.pallet.xyz/jobs/1412066a-3922-47c6-99f7-28401ed895f5) (NYC, Remote-US) 13. **Mynd:** [Senior Product Manager, Communications](https://lennys-jobs.pallet.xyz/jobs/77af7c80-baa3-4208-b322-2ea674604fdb) (Remote-US) 14. **Empower:** [Product Manager](https://lennys-jobs.pallet.xyz/jobs/5d73dc1a-9b0d-45d9-a661-735f07650d26) (Remote-Global) 15. **Superjoi:** [UI/UX Designer](https://www.lennysjobs.com/jobs/9710eb14-bc72-46a5-b75b-2949c5c1bfa7) (LA, Remote-Global) 16. **Superjoi:** [Full Stack Engineer](https://lennys-jobs.pallet.xyz/jobs/4111e336-604a-43c7-90b4-8cf03952800b) (LA, Remote-Global) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* ## **🧠 Inspiration for the week ahead** 1. **Watch:** [Ukraine cold open,](https://www.youtube.com/watch?v=IjE4_h0t7qI) *[SNL](https://www.youtube.com/watch?v=IjE4_h0t7qI)* [Watch on YouTube](https://www.youtube.com/watch?v=IjE4_h0t7qI) 2. **Protest:** Crowd gathers in St. Petersburg, Russia 3. **Cry:** Texts from a Russian soldier shortly before he died **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [10/44] Freemium vs. trial > ## Q: When does it make sense to make my product free? And how do I decide between offering a free trial or having a freemium product? Microsoft Teams came from behind and disrupted Slack’s dominance in workplace chat (145m DAU vs. 12m, respectively) by making its product essentially free (i.e. part of the Office 365 bundle). Robinhood launched the world’s first free stock-trading product and quickly built a waitlist of over a million people, completely disrupting the stock-trading space. And Fortnite generated over $5b just last year by giving its game away for free. Also, if you hadn’t noticed, freemium and PLG are all the rage these days. Free is the ultimate value prop. I’ve come across only three SaaS products that don’t have a free (or very cheap) offering. Why? Because free, used effectively, helps you (1) get people’s attention, and (2) gives people an incredibly low-friction (e.g. no sales call, no credit card) chance to take your product for a spin. The question isn’t really *whether* you should give away some or all of your product—you most certainly should. The question is *what* you should give away for free and *how* to most effectively use your free offering to drive top-line growth. ### Two ways to use free to your advantage Making a product free isn’t a revenue, pricing, or monetization strategy—it’s an acquisition strategy. It’s always a means to lower CAC, increased virality, and a way to get people’s attention in a crowded market. All in an effort to monetize in some other way. There are two primary strategies for using free to drive growth: ![Image from Freemium vs. trial](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd5781de-adaf-41a1-9e90-1dac4cfceb2b_5932x2128.png) **1. Business model disruption: Giving away the core product while making money in some other way** Chime disrupted the entrenched banking industry by offering fee-free banking—while making money through [transaction interchange fees](https://finty.com/us/business-models/chime/#:~:text=Chime%20makes%20money%20by%20charging,and%20interest%20earned%20on%20cash.). Robinhood broke out by launching free stock trading—while making money through [payment for order flow](https://www.investopedia.com/articles/active-trading/020515/how-robinhood-makes-money.asp). Square gave away free PoS systems—as a wedge into taking a cut of SMB transaction flows (and later, lending, banking, payroll, and much more). Making their products free gave these companies a way to break through the noise. > #### “If it’s digital, sooner or later it’s going to be free.” > > #### —Chris Anderson, *[Free: The Future of a Radical Price](https://www.amazon.com/Free-Future-Radical-Chris-Anderson/dp/1401322905)* Find a way to make free a product that is currently not free, and you’ll get a lot of people’s attention. **2. Lead gen: Give prospects a taste of your product (freemium or trial) in hopes that they take a full bite** The more typical way to use free to drive growth is to give potential customers a way to try your product (or parts of your product) for free. This is done with a free trial or a free tier of your product. The bet is that the lower friction of trying out your product leads to more paying customers. As you’ll see below, nearly every SaaS product goes this route. > #### “I have never come across the business where I don’t believe there’s not a role for free at some point in their strategy.” > > #### —[Elena Verna](https://www.linkedin.com/pulse/freemium-free-trial-surprises-elena-verna-reforge-when-baxter/) Find a way to make (part of) your product free, and you’ll most certainly accelerate growth. For the purpose of this post, I’m going to stick to typical free strategies for SaaS companies, but there are other ways to use “free” to drive growth: 1. Free samples (e.g. Red Bull) 2. Free shipping (e.g. Amazon Prime) 3. Free prize inside (e.g. cereal boxes) 4. Getting a bonus for signing up (e.g. Uber) ### When to go trial vs. freemium I looked at the pricing models of about 50 SaaS products, and the takeaways are fascinating. ![Image from Freemium vs. trial](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8e319f3b-19d5-495d-8806-1f7567c24da7_4468x2116.png) 1. **You don’t have to choose—you can do both.** Nearly 90% of freemium products (e.g. Slack, Canva, Airtable) also offer a 7- to 30-day trial of their paid product, and about 50% of all the SaaS companies I looked at do both. If you have a freemium product, you almost certainly should experiment with offering a free trial of your pro plan. 2. **Go with freemium, and without a trial, if your premium product can be fully understood without experiencing it.** I’ve come across only three freemium products—Figma, Miro, and Amplitude—that don’t also offer a trial. I suspect this is because their pro versions can easily be understood without being experienced (e.g. enabling increased collaboration, better administration, or support for more data). If you can get your customers to upgrade without trialing the product, you may as well! 3. **Go with a trial (instead of freemium) if your product significantly benefits from hand-holding and has a high price point**. Everyone wishes their product could be self-serve, but wishing doesn’t make it so. If your product requires complex integration (e.g. Okta, ServiceNow) or many stakeholders (e.g. Snowflake, HubSpot), or simply converts a lot better with human intervention (e.g. Front, Looker, Zendesk), go with trials instead of a self-serve free tier. Particularly if your price point can support the cost of hand-holding (e.g. adding a customer success team). 4. **Very few products** ***don’t*** **offer a free product of any kind**. Of the ~50 companies I looked at, only a handful didn’t have a free offering: Workday, ADP, Superhuman, Stripe, and MongoDB. In the case of Workday and ADP, I’m guessing this is because the onboarding process is too complex to simply try out for a short period. In the case of Superhuman, I suspect it’s because its manual onboarding process, involving humans, makes free trials ROI-negative. And in the case of Stripe and MongoDB, they have usage-based pricing and thus are very easy and cheap to try out already. **TL;DR:** Go trial if your self-service product doesn’t convert well and you have a high price point. Otherwise, go freemium combined with a trial of your pro plan. ### What to make free in your freemium product This is a deep and nuanced topic, and I’m far from a pricing expert, so I’ll share a few suggestions and then point you to my favorite in-depth reads on the subject. **What to keep free:** 1. Features that enable your product to spread throughout an organization/community (e.g. invites, sharing, some level of collaboration) 2. Features that are necessary to keep a user hooked (e.g. your killer “aha” features) 3. Features that are necessary to keep a user retained (e.g. meaningful usage limits) **What to charge for:** 1. Features that professionals or teams (i.e. people who use this for their business and will spend money to be more productive) will need (e.g. billing and admin, customer support, higher usage limits) 2. Features that make the lives of power users much less annoying (e.g. automations, reports, history, etc.) 3. Increased usage limits beyond some initial threshold For further inspiration, [here are pricing tiers of 50+ SaaS products](https://airtable.com/shrCT6ToQg0xnCvZA/tblkxppVHddRti4l4), collected by a16z: ![Image from Freemium vs. trial](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/793152a0-eaa8-4de5-9171-77827926dddc_2684x1430.png) Finally, a bit of advice from [Patrick Campbell](https://twitter.com/Patticus), CEO of ProfitWell, from his previous guest post on [SaaS pricing strategy](https://www.lennysnewsletter.com/p/saas-pricing-strategy): > #### “Don’t do freemium until you truly understand how to convert leads to customers, because you’ll end up increasing noise or false positives when you’re trying to figure out your segment beachheads. The best folks who deploy free typically don’t implement freemium until 2-3 years into their business. The exceptions to this notion are if you have a very specific need or network effect (e.g. marketplaces, social networks, etc.) or if you have a top-50 growth person on your team. > > #### To be clear, I’m not saying *don’t* do freemium. I’m saying it’s a scalpel, not a sledgehammer, that requires thought. A lot of people end up reading our articles on freemium and going, ‘Cool, let’s do freemium and we’ll be a unicorn.’ I’m being pragmatic in that you need to realize freemium is fantastic, but doing freemium properly takes a lot of effort and nuance.” ### Recommended reading on pricing strategy 1. [Bottom Up Pricing & Packaging: Let the User Journey Be Your Guide](https://a16z.com/2021/03/11/bottom-up-pricing-packaging-let-the-user-journey-be-your-guide/) by Jennifer Li and Martin Casado at a16z 2. [Per Seat or Per Use Pricing: A Framework for Evaluating the Right Strategy for Your Startup](https://tomtunguz.com/seat-vs-usage-based-pricing/) by Tomasz Tunguz 3. [Pricing your SaaS product](https://www.lennysnewsletter.com/p/saas-pricing-strategy) by Patrick Campbell 4. *[Monetizing Innovation: How Smart Companies Design the Product Around the Price](https://www.amazon.com/dp/B01F4DYY1I/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1)* by Madhavan Ramanujam and Georg Tacke To go even deeper, definitely check out Reforge’s [Monetization and Pricing](https://www.reforge.com/monetization-pricing) course. ### 📚 Further study 1. [The Hidden Freemium Advantage](https://www.reforge.com/blog/the-hidden-fremium-advantage) by Elena Verna 2. [Freemium, Free Trial and Free Surprises](https://www.linkedin.com/pulse/freemium-free-trial-surprises-elena-verna-reforge-when-baxter/) by Elena Verna 3. [The Flavors of Free](https://goodbetterbest.substack.com/p/the-flavors-of-free) by Rob Litterst 4. *[Free: The Future of a Radical Price](https://www.amazon.com/Free-Future-Radical-Chris-Anderson-ebook-dp-B002DYJR4G/dp/B002DYJR4G/ref=mt_other?_encoding=UTF8&me=&qid=)* by Chris Anderson 5. [The Freemium Manifesto](https://www.profitwell.com/freemium-acquisition-book) by ProfitWell 6. [The Ultimate Guide to Freemium](https://blog.hubspot.com/service/freemium) by HubSpot *Have a fulfilling and productive week 🙏* ## **🔥 Featured job openings** 1. **Silo Finance:** [Technical Product Manager](https://lennys-jobs.pallet.com/jobs/dceac63a-d817-47e7-a4a5-5f653f298bdd) (Remote-Global, Remote-EU) 2. **Donut:** [First Product Manager](https://lennys-jobs.pallet.com/jobs/6259d930-475f-4ed4-82a3-fea29273b40a) (Remote-US, Remote-EU) 3. **Mindbloom:** [Product Designer](https://lennys-jobs.pallet.com/jobs/0db1f9c0-266c-4d77-9852-df27b58f8779) (Remote-US, Remote-Canada) 4. **Finch Care Inc.:** [Product Designer](https://lennys-jobs.pallet.com/jobs/18311f14-d482-48a1-808e-3716a7f1aabe) (Remote) 5. **Mos:** [Product Manager](https://lennys-jobs.pallet.com/jobs/86e76563-7237-4a39-8465-3682823f7506) (Remote-US) 6. **Airhouse:** [Senior Product Manager](https://lennys-jobs.pallet.com/jobs/1739a7ee-41ab-43fb-8ac9-788738baad22)(SF, Oakland) 7. **CommerceHub:** [Director of Product Management, Delivery](https://lennys-jobs.pallet.com/jobs/5e4c79e3-9c75-4cd3-aa6f-0b9fc40636bf) (Remote-US) 8. **CommerceHub:** [Sr. Product Manager](https://lennys-jobs.pallet.com/jobs/125eafba-2e93-41ee-98aa-abaae84c1b35) (Remote-US) 9. **Elevate Labs:** [Senior Product Manager, Balance](https://lennys-jobs.pallet.com/jobs/54802bbd-3ad4-4abf-bd0f-308e86d52586) (Remote) 10. **Oath Care:** [UX Designer](https://lennys-jobs.pallet.com/jobs/0e35e470-6b81-4dae-a706-33139219fa68) (Remote-US) 11. **Oath Care:** [Community Marketing Manager](https://lennys-jobs.pallet.com/jobs/300b896f-80ca-4893-a39f-1d2dfff8da00) (Remote-US) 12. **Hex:** [Growth Product Manager](https://lennys-jobs.pallet.com/jobs/957d5c52-aac0-483e-b336-5b63961a99e6) (SF, Remote-US) 13. **Monarch:** [Data Lead - Growth](https://lennys-jobs.pallet.com/jobs/269cafbf-a15c-41d3-b8cb-566b49fbe84e) (Remote-Global, Remote-US) 14. **Monarch:** [Performance Marketing Manager](https://lennys-jobs.pallet.com/jobs/e80e525c-d891-422a-8bfe-5a82aa4caad4) (Remote-Global, Remote-US) 15. **Convosight:** [Sr Product Owner](https://lennys-jobs.pallet.com/jobs/22dd029a-3678-491f-b7ca-820585118380) (Remote-Global, Remote-US, Remote-India) 16. **Siteline:** [First Product Manager](https://lennys-jobs.pallet.xyz/jobs/3cc1fa57-e3e3-4b93-9d0d-fac7c592545b) (SF, Remote-US) 17. **Koodos**: [Product Engineer](https://lennys-jobs.pallet.xyz/jobs/1412066a-3922-47c6-99f7-28401ed895f5) (NYC, Remote-US) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* ## **🧠 Inspiration for the week ahead** 1. **Watch:** *[jeen-yuhs: A Kanye Trilogy](https://www.netflix.com/title/81426972)* on Netflix [Watch on YouTube](https://www.youtube.com/watch?v=i-e_YPO-RYc) 2. **Listen:** [Chuck Klosterman on Writing the Past and Relishing the Present](https://podcasts.apple.com/us/podcast/chuck-klosterman-on-writing-the-past-and/id983795625?i=1000552000320) by Tyler Cowen 3. **Read:** [Opening up about mental health](https://andyjohns.substack.com/p/opening-up-about-mental-health) by Andy Johns **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [11/44] How to develop product sense *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to a ✨ **monthly free edition**✨ of my weekly newsletter. Each week I tackle reader questions about building product, driving growth, working with humans, and anything else that’s stressing you out about work.* *If you’re not a subscriber, here’s what you missed this month:* 1. [Freemium vs. trial](https://www.lennysnewsletter.com/p/freemium-trials-free?s=w) 2. [What is good waitlist conversion](https://www.lennysnewsletter.com/p/what-is-good-waitlist-conversion?s=w) 3. [What is good monthly churn](https://www.lennysnewsletter.com/p/monthly-churn-benchmarks?s=w) > ## Q: How do I develop product sense? Your question implies that it *can* be developed, and to that point, I 1,000% agree. Contrary to what a lot of PMs believe, product sense is not something you need to be born with. It’s a learned skill, just like any other PM skill. Sure, some people are naturally better at it, but that’s OK. You don’t need to be in the 99th percentile of this skill to be an incredibly successful PM. That being said, you are building a product as your job, and are often the final word on product decisions, so you absolutely do need to develop your product sense muscle, especially as you move up in seniority. To help you build your product sense, I’ve asked [Jules Walter](https://www.linkedin.com/in/juleswalter/), a longtime PM at Slack and YouTube who’s also a prominent leader in the broader PM community, to share his hard-earned wisdom with us. Below, Jules unravels the mystery that is product sense. He shares a ton of actionable and practical advice to develop your product sense, explains what product sense is, how to know if you’re getting better, and dives deep into four concrete ways to build this skill with a bunch of examples from his own experience. Enjoy! *You can follow Jules on [Twitter](https://twitter.com/julesdwalt) and [LinkedIn](https://www.linkedin.com/in/juleswalter).* ![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9a440cde-98a4-4954-a5b4-365ba9df0786_1600x534.png) Product sense is not only one of the most important PM skills (see chart below from [Lenny’s survey of ~1,000 PMs](https://www.lennysnewsletter.com/p/product-management-survey?s=w#:~:text=Being%20a%20Product%20Manager))—it’s also the most vague. And it’s often the hardest to learn. ![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/816acf1f-88a1-49ed-a1fc-f0d71fe8dde8_1850x1132.png) There isn’t much written on the subject, and as a PM trying to improve your product sense, you may not know if you’re any good at it, or how to get better. I want to help. ![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a689526b-d2e8-4569-951e-ad25ac521ff9_1188x860.png) ## What exactly is product sense? 🤔 **Product sense is the skill of consistently being able to craft products (or make changes to existing products) that have the intended impact on their users.** Product sense relies on (1) **empathy** to discover meaningful user needs and (2) **creativity** to come up with solutions that effectively address those needs. ![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/21522827-3cb5-45d5-b9fe-63fefa4b8ed7_1684x1218.png) You likely have good product sense if you’ve championed successful features or products that were not obvious to others. Here are some examples of products born out of strong product sense: - The original iPhone was built on the insight that people value aesthetics, and not just functionality, in their products. It was designed around the idea that consumers needed a smartphone that felt personal. - The original Gmail responded to unmet user needs at the time. It addressed common user problems, including low storage quotas, poor search experience, and related messages separated from each other (instead of being combined in a thread). - Superhuman saw a need for a modern email client to allow busy professionals to get through emails quickly. It used thoughtful design to support fast email workflows and limit distractions. Each of these products originated with strong product sense and offered creative solutions to previously unmet user needs. ## Building product sense I was the first PM on Slack’s growth team, where I spent more than four years building product experiences used by millions of people. I’m now a product leader at YouTube, where I’m building a yet-to-be-released zero-to-one product. In my roles, I’ve relied on product sense to bring unique insights to the table and drive user value and business impact. In this article, I will be discussing four practices for building product sense. **Building empathy:** 1. Observe people interacting with products 2. Deconstruct everyday products **Improving creativity:** 3. Learn from great product thinkers 4. Be curious about changes in technology and your domain Let’s get to it. ### 1. Observe people interacting with products 🕵🏾 One approach to developing empathy—and thus, product sense—is to repeatedly observe people using products, whether yours or other companies’. This practice will help you get better at identifying subtle user needs that others miss (e.g. social, emotional, or functional needs). You can start small. Initially, I recommend doing this two to four times a month for your product. Don’t just read reports from researchers on your team; instead attend user research sessions to get firsthand exposure to user experiences and reactions. What’s important is to pay attention to micro details and ask yourself why people react to your product the way they do. Observe their facial expressions as they try various aspects of your product, and try to spot moments when they’re hesitant, confused, excited, etc. In those moments, ask open-ended questions to better understand not just how they feel but, more importantly, *why*. Here are some sample questions you can ask: 1. What do you think the purpose of this product is? Who do you think it’s for? *This will give you a sense of how effective your product’s landing page is. It also gives you ideas for words to describe your product that resonate with people.* 2. Now that you’re in the product, what actions do you want to take? *This will help you understand which features are easy to discover and how clear your product’s navigation and calls to action are.* 3. What are you thinking right now? How does that make you feel? *I tend to ask this at every new step the user lands on, because people tend not to notice their self-talk and feelings otherwise.* When I joined Slack in 2016, our data indicated high churn rates for new users on mobile. We wanted to understand why, so we set up user research sessions and asked questions such as the ones above. Through those questions and through observing users, we learned that: - Many people didn’t really understand what Slack did, even after visiting our homepage, which was too abstract at the time. - People would land in the Slack app and not know what to do because of competing calls to action. - People didn’t want to give permission to their mobile address book, because it had their friends’ contact info and not their colleagues’. These new insights led us to come up with experiment ideas that enabled us to improve Slack’s product experience for new users and significantly increase the product’s retention rate. Below is one such experiment, which removed friction in the invite step and addressed users’ concerns around giving permission to their address books. ![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5d6907a8-a0b9-4183-ad0e-7337ceb7b87e_1486x1078.png) After observing hundreds of people use products I’ve worked on (whether in research sessions or coffee shops etc.) and asking them questions about their usage, I’ve developed better instincts about how people will react to various product experiences. Here are five quick lessons about product usage that have stuck with me: 1. **People are time-crunched and distracted when they use your product.** They might not read labels or text and might not be willing to spend even a few seconds to figure out what to do next. Pick the right defaults and use visual design and cues to make primary actions obvious (e.g. prominence, lack of distractions). 2. **People will drop out of a product flow as soon as they feel confused or nervous** that they might be doing something wrong. Make sure labels are unambiguous and contrast options appropriately. 3. **Don’t give people too much information at once**, because once they feel overwhelmed, they tend to leave. For example, we ran pricing page experiments at Slack and saw increases in purchases when we moved some of the information on the various purchase options behind a dropdown list. 4. **Context impacts decisions.** Use tools like comparisons, contrasting, and social proof to make it easier for users to make a decision. 5. **Make sure the goal of your product and possible actions are clear to users.** At Slack, we often heard from users that they didn’t know what Slack was really about and what they could do with the app. We experimented with various onboarding experiences to address that issue, and one early experiment on mobile increased user retention just by telling new users what Slack is and linking to a video showing people how a work team might use it on desktop and mobile. The more frequently and closely you watch people using products, the more observant you’ll become and the more empathy you’ll develop. ### 2. Deconstruct everyday products 👨🏾‍🔧️ Another approach to developing empathy is to observe *yourself* using everyday products. I spend one or two hours a month trying out new products and deconstructing them. The goal is to strengthen my intuition about why some products work well and others don’t—this also helps me identify common UX best practices and paradigms. While deconstructing products, I recommend asking the types of questions Julie Zhuo shares in the article [How to Do a Product Critique](https://medium.com/the-year-of-the-looking-glass/how-to-do-a-product-critique-98b657050638#.v5o81mocz), such as: 1. What’s the experience of getting started or signing up? 2. How does this app explain itself in the first minute? 3. How easy to use was the app? 4. How did you feel while exploring the app? 5. Did the app deliver on your expectations? If you want to go deeper in your understanding of a product, I recommend also looking at other products in the same category and comparing and contrasting them. For example, to better understand a product like [Cash App](https://cash.app/), compare it with [Venmo](https://venmo.com/). You’ll see that these two seemingly similar money apps are fundamentally different. Below are a few dimensions you can look at to compare two products and better understand how they approach product decisions. ![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e3b78633-a349-4d48-9a0c-7d6453bf9952_2106x1188.png)![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2cd1cd61-ce75-46df-97ec-e659236d988e_1958x988.png)![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2d48045f-c48e-4112-b748-352dfd5f10d8_1998x1192.png) By comparing a product with others in the space, some of the product design choices become more salient and it’s easier to get hints of the product’s strategy. For example, in the Cash App vs. Venmo comparison, it seems Venmo’s strategy is to lean into its social graph (use Venmo because your friends are already on it and you can easily make sure you’re sending the money to the right person), whereas Cash App is focused on ease of use and breadth of capabilities for people who want to go beyond just peer-to-peer transfers (run your personal finances or small business from your phone). When I use new products, I also observe my own self-talk and feelings, including moments of frustration, such as: - I’m trying to log in to my medical app to set up an appointment, but I’m unable to because I can’t remember my password. The password reset flow never sent me an email, even after multiple attempts, and I just stopped using the service. - I’m trying to rent a car, but as soon as I input the start time, the interface shows an error message telling me that the end time can’t be before the start time. I was going to update the end time anyway, and now I feel stupid and frustrated while using this product, which is not a feeling you want your users to have. I also note moments when I experience delight, such as: - Carta’s stock-vesting email could have been just text letting me know that I’ve vested into more shares, but it also includes an animation with confetti that takes my feeling of celebration to another level. - Google Photos collages combine multiple photos of the people who matter to me the most in delightful ways. ![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fa8fa82d-fd54-419b-9384-8c119caf1741_558x1152.png) One bonus practice I recommend for improving your empathy and observation skills is meditation. I’ve been meditating for years, and it’s helped me become more perceptive—not just of other people’s feelings but also of my own. If you are new to meditation, I recommend starting with an [app](https://www.fitmind.co/fitmind-meditation-app) or joining a [meditation community](https://sundaysangha.net/) to help you form a daily habit. ​​The more frequently and closely you observe people (and yourself), the more insight you will gain into their motivations and needs, and the more your empathy will grow. ![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/21fdfbfa-972d-446f-89c7-decc5d3e1d68_960x540.png) ### 3. Learn from great product thinkers 📓 One of the biggest levers for developing creativity (and again, product sense) is to spend time with people who already have it. My creativity improved significantly after I joined Slack, partly because I observed how people like CEO Stewart Butterfield approached building products. If you’ve never worked at a company with strong product thinkers, I recommend joining such a company at some point in your career to strengthen your product fundamentals—the earlier, the better. If you’re not sure which companies to consider, start by thinking of companies whose products you use and love. Once you’re at a company with great product thinkers, I recommend attending as many product reviews as you can. Take copious notes during the reviews, and look for patterns in the questions and feedback you hear—i.e. what type of comments keep coming up. Over time, you’ll understand the mental checklists your product leaders use to ensure that new product ideas will be successful, and you’ll identify the principles they use to make product decisions and trade-offs. One of the things I learned from my exposure to Stewart Butterfield is that *every* detail about the user experience matters. “The details are not the details,” he would say, quoting designer Charles Eames. “They make the design.” Stewart’s obsession with the details is one of the main reasons why Slack exists and is used by millions of people. For example, if a user tries to use @channel to message a large number of teammates across multiple time zones in Slack, they’ll see a cartoon rooster (below) asking them to think twice about notifying these people. It’s a detail that wasn’t built to move metrics but rather to prevent anxiety for people who would otherwise receive work notifications at odd hours. The rooster icon was chosen to keep the tone playful so that the message sender doesn’t feel ashamed or guilty when they read the warning. ![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8b6ffd43-4710-4916-85f6-6353f57bc0a6_456x1056.png) This type of product detail can mean a lot to users. When I would review customer tickets at Slack, many of them were positive feedback from people thanking us for the thoughtfulness that the team put into the product. Sometimes people couldn’t even say exactly *why* they loved Slack—partly because what drew them wasn’t one big feature, but rather the attention to details across the product. I’ve learned that if you remove from your product lots of small annoyances that people deal with on a daily basis, the value you get from doing that adds up to something meaningful. Another lesson I learned from Stewart is to spend time understanding user problems and framing them in a way that sets strong constraints for the team. Many PMs jump into solution-finding before they truly understand the problem. This leads to ineffective solutions, or indecisiveness as their teams struggle to eliminate potential solutions. If you understand why a problem exists and frame it clearly, you will identify enough constraints that only a few solutions will be left, streamlining the decision-making process. For example, in the article [Are You Solving the Right Problems?](https://hbr.org/2017/01/are-you-solving-the-right-problems), Thomas Wedell-Wedellsborg gives an example of how two different framings of a problem lead to completely different solutions: ![Image from How to develop product sense](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5cbfbb97-19d1-4157-95dc-7591f9130767_1064x464.png) This ability to reframe problems and set opinionated constraints is a key skill I’ve seen product thinkers use to drive creative solutions. If, on the other hand, you don’t work at a company with strong product thinkers, look for external mentors and read articles or interviews from people such as [Julie Zhuo](https://www.youtube.com/watch?v=b78zq-kimVs), [Stewart Butterfield](https://medium.com/@stewart/we-dont-sell-saddles-here-4c59524d650d), [David Lieb](https://www.ycombinator.com/library/5f-on-starting-and-scaling-one-of-the-biggest-ios-apps), and [Rahul Vohra](https://www.youtube.com/watch?v=zaxAdRlyZQ8). If you’re able to connect with great product thinkers, here are some sample questions you can ask to better understand their processes and insights: - What prompted you to build your product? *This will give you a sense of the type of user insights you should be looking for and the process to get them.* - What were the key decision points along the way? - What alternative approaches did you consider? *For ambiguous problems, you have to explore multiple approaches before you land on one that works. Understanding the solutions that were discarded, and why, will help you get a sense of how they test hypotheses and make trade-offs.* - What were surprising insights or results? *Knowing when their initial hypotheses were wrong and understanding why can help you uncover great insights.* - What principles or frameworks helped you navigate the ambiguity? *Great product thinkers internalize product principles they use to evaluate solutions. If you can uncover those principles, you can use them to guide your decisions as well.* Gaining access to strong product thinkers may be difficult, but try to read as many blog posts or watch as many videos as you can where product leaders who you look up to share their thought processes. ### 4. Be curious about changes in technology and your domain📱 Another practice for developing creativity is to spend time learning about emerging trends in technology, society, and regulations. Changes in the industry create opportunities for launching new products that can address user needs in new ways. As a PM, you want to understand what’s possible in your domain in order to come up with creative solutions. For example: - Cash App decided to support Bitcoin transactions, and as a result, 76% (nearly $4.6 billion) of its 2020 revenues came from Bitcoin. For more examples of products that benefited from new trends, see Lenny’s article [Why now](https://www.lennysnewsletter.com/p/why-now?). - Uber became possible because of the proliferation of smartphones with GPS capabilities and the availability of Google Maps APIs. - Clubhouse took off quickly because of the pandemic, which accelerated the need for virtual public discourse. There are two levels at which you can look at emerging trends: the macro and the micro. At the macro level, you should keep track of important platform shifts (e.g. web3, AR/VR, AI), social shifts (e.g. the shift to remote work), and changes in regulations (e.g. new privacy protection laws). It’s important to keep an open mind about new technologies, because at first they receive a lot of skepticism and have obvious flaws. I still remember when people were skeptical of e-commerce and assumed it would never be safe to use credit cards online. When you see a new trend, instead of dismissing it as a fad, ask yourself, “If this trend reaches its full potential, what opportunities will it create that I can pursue?” There are many places to keep up with macro technology trends. For example, you can: - Watch annual developer conferences from major tech companies to understand what areas they see as promising (e.g. [Google](https://io.google/2021/?lng=en), [Apple](https://developer.apple.com/wwdc21/), [Meta](https://developers.facebook.com/f8/), [Amazon](https://reinvent.awsevents.com/)). - Read commentary from industry analysts (e.g. [Ben Thompson](https://stratechery.com/)). - Follow tech founders and investors on Twitter (e.g. [Naval Ravikant](https://twitter.com/naval?), [Elad Gil](https://twitter.com/eladgil?), [Balaji Srinivasan](https://twitter.com/balajis)) and pay attention to trends they’re bullish on. - Invest in or advise startups operating in spaces that interest you. If that’s not possible, pay attention to what companies top VCs are investing in, and follow those companies. While the macro trends are helpful in seeing where the industry is going, many of the non-obvious opportunities lie in deeply understanding micro changes that may unlock new possibilities. For example, Figma’s high-quality browser-based application for designers became possible only once WebGL became performant enough. In order to understand the nuances of micro changes, I recommend meeting with engineers and domain experts and going deep with them on topics of interest, such as new APIs or platform capabilities. As Paul Graham said in [How to Get Startup Ideas](https://paulgraham.com/startupideas.html), “Live in the future, then build what’s missing.” Living in the future is also an effective approach to developing your product sense. ## How to tell if you’re getting better at product sense 📈 Developing product sense takes time and practice. As you get better at it, you’ll: - Notice subtle things about products and people that you would have missed before (e.g. micro frustrations and delights) - Anticipate non-obvious user problems when you look at product experiences or before you present at product reviews - Develop higher-quality hypotheses about product experiences to build, even in the face of ambiguity - Contribute more unique insights to your team, given your improved understanding of users and the landscape - Be right more often than not about what impact a change to a flow has on metrics - And, potentially, receive comments from your design partner on how impressed they are with a detail you noticed I hope you decide to invest in developing your product sense, and that the practices in this article, on strengthening empathy and creativity, are as useful to you as they’ve been to me. ### Helpful resources 🙏🏾 1. [The First Secret of Great Design](https://www.youtube.com/watch?v=9uOMectkCCs): 16-minute TED talk with Tony Fadell about how keeping a beginner’s mind led to the creation of Nest 2. *[Inspired](https://www.amazon.com/Inspired-Create-Products-Customers-Love/dp/0981690408/ref=sr_1_2?)*: Book by Marty Cagan about creating products people love 3. [Intro to the Design of Everyday Things](https://www.udacity.com/course/intro-to-the-design-of-everyday-things--design101): Two-week course with Don Norman on applying design principles *Thanks to Lenny for the opportunity to contribute to this newsletter. And thanks to others who’ve shared thoughts or feedback for this article, including Courtney Lessard, Bangaly Kaba, Camille Edwards, David Lieb, Erin Teague, Lawrence Ripsher, Todd Sherman, and Shreyas Doshi.* *For more, follow Jules on [Twitter](https://twitter.com/julesdwalt) and [LinkedIn](https://www.linkedin.com/in/juleswalter).* ## **🔥 Featured job openings** 1. **Perfect Venue:** [Founding Team Full Stack Engineer](https://www.lennysjobs.com/jobs/461940f7-6f12-42af-a0d7-8fca71b2c693) (Remote-US) 2. **Snackpass:** [Senior Product Manager](https://www.lennysjobs.com/jobs/3e5c5552-cb71-4b23-9773-95f21ab14dfc) (NYC, LA, SF) 3. **Silo Finance:** [Technical Product Manager](https://lennys-jobs.pallet.com/jobs/dceac63a-d817-47e7-a4a5-5f653f298bdd) (Remote-Global, Remote-EU) 4. **Donut:** [First Product Manager](https://lennys-jobs.pallet.com/jobs/6259d930-475f-4ed4-82a3-fea29273b40a) (Remote-US, Remote-EU) 5. **Mindbloom:** [Product Designer](https://lennys-jobs.pallet.com/jobs/0db1f9c0-266c-4d77-9852-df27b58f8779) (Remote-US, Remote-Canada) 6. **Finch Care Inc.:** [Product Designer](https://lennys-jobs.pallet.com/jobs/18311f14-d482-48a1-808e-3716a7f1aabe) (Remote) 7. **Mos:** [Product Manager](https://lennys-jobs.pallet.com/jobs/86e76563-7237-4a39-8465-3682823f7506) (Remote-US) 8. **Airhouse:** [Senior Product Manager](https://lennys-jobs.pallet.com/jobs/1739a7ee-41ab-43fb-8ac9-788738baad22)(SF, Oakland) 9. **CommerceHub:** [Director of Product Management, Delivery](https://lennys-jobs.pallet.com/jobs/5e4c79e3-9c75-4cd3-aa6f-0b9fc40636bf) (Remote-US) 10. **CommerceHub:** [Sr. Product Manager](https://lennys-jobs.pallet.com/jobs/125eafba-2e93-41ee-98aa-abaae84c1b35) (Remote-US) 11. **Elevate Labs:** [Senior Product Manager, Balance](https://lennys-jobs.pallet.com/jobs/54802bbd-3ad4-4abf-bd0f-308e86d52586) (Remote) 12. **Oath Care:** [UX Designer](https://lennys-jobs.pallet.com/jobs/0e35e470-6b81-4dae-a706-33139219fa68) (Remote-US) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [12/44] How to interview product managers > ## Q: How should I structure my PM interview process? I can understand why so many people are befuddled by interviewing product managers—the role is so endlessly undefined, how can non-PMs possibly know what to interview for? As [Gergely Orosz](https://twitter.com/GergelyOrosz/) (ex-Uber, Microsoft, Skype engineer) confessed in [a tweet](https://twitter.com/GergelyOrosz/status/1443275923843862536), “we EMs have no clue how to do these. At first, you wing it; by the third time, everyone has their own, completely different setup.” In my [chat with Harry Stebbings last week](https://www.thetwentyminutevc.com/lenny-rachitsky/), I shared a bit of advice on this, but it was quite brief. So let’s get much deeper. Below, I’ll share suggestions for: 1. Structuring your PM interview process 2. What specific skills to test for 3. My favorite interview questions 4. How to structure an interview project (plus a bunch of real-life examples) 5. Tips to get them to take your offer *Disclaimer: People have strong opinions about how to interview, but very few people have enough data (or have looked at their data) to know if their interview assumptions are actually predictive of performance. Interview best practices are generally anecdotal, so definitely do your own research.* With that, let’s get into it. ### How to structure your PM interview process High-level, I’d set up your interview process like so: 1. **Recruiter phone screen [30 minutes, optional]:** Make sure the candidate meets the minimum requirements for the role and is likely to be a fit for the organization. Focus on their expectations for the role, basic skill questions, personality fit (e.g. [not an asshole](https://www.amazon.com/Asshole-Rule-Civilized-Workplace-Surviving-ebook/dp/B000OT8GV2/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr=)), and their interview timelines. About 50% of candidates should make it through this step. 2. **Hiring manager phone screen [30 minutes]:** Make sure there is a strong chance that the candidate is a fit for the role. Focus on getting to know the person as a human, the role, and a couple skills or attributes that you believe to be most important to this role (more on this below). About 40% to 50% of candidates should make it through this step. 3. **A full-day interview [4-5 hours]:** The day is made up of two parts: 1. **A project** (done at home before arriving, in the office, or live), sharing what they came up with, with a group of potential colleagues 2. **Three to six 1:1 interviews** with potential colleagues, each testing for a key PM skill 4. **Post-interview panel discussion [30-60 minutes]:** Each interviewer blind votes Strong No, No, Yes, or Strong Yes. Share your vote, discuss, and then the hiring manager makes a decision. 5. **Reference checks:** Ping their references (and backchannel) to make sure you aren’t missing anything. 6. **Make an offer:** Put together a compelling offer, share it with them,and try like hell to get them to accept. To benchmark a typical hiring funnel, I asked [Benji Encz](https://www.linkedin.com/in/benjaminencz/), CEO of the recruiting platform [Ashby](https://ashbyhq.com/), to share stats he had on conversion rates at each step, and wow, did he deliver. Here are hot-off-the-presses stats his team pulled for me, based on over 75,000 recent applications across high-growth tech companies. Takeaway: You need to talk to an average of 23 PM candidates to hire one great one. ![Image from How to interview product managers](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/0c4ede2f-8f42-4730-aa3a-db1d66227f69_2024x1012.png) > #### “Many early-stage teams underestimate how many candidates they need to speak to to make one hire. In our data we also saw that only 13% of inbound applicants even make it to the first screen. You will either need a lot of inbound, or more likely, you will have to fill the funnel with sourced candidates and referrals.” > > #### —[Benji Encz](https://www.linkedin.com/in/benjaminencz/), CEO of [Ashby](https://ashbyhq.com/) I would be remiss if I didn’t plug my new [Talent Collective](https://www.lennysjobs.com/talent/) here, which is quickly becoming the single best place to find and hire product managers—and help you find your next dream gig. [Learn more here](https://twitter.com/lennysan/status/1503437573263282178). ### What skills to interview for There are [10 core skills of product management](https://www.lennysnewsletter.com/p/jobs-of-product-manager?s=w), but assuming you’re interviewing an IC PM (i.e. not a manager), you can whittle it down to these six: 1. Communication 2. Collaboration 3. Execution 4. Strategy 5. Impact 6. Product sense ![Image from How to interview product managers](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/72e7fff6-10dc-429e-bd57-2a2a9d8d9711_2048x1654.png) Interestingly, product sense isn’t ever on PM career ladders, but [it is something that companies interview for](https://www.lennysnewsletter.com/p/what-is-product-management?s=w#:~:text=The%20most%20important%20PM%20skills%20when%20interviewing), so I’ve included it in the list above. ![Image from How to interview product managers](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a2286546-990f-48f3-88d1-140a51e48271_925x566.png) ### What interview questions to ask I wrote a whole post sharing [my favorite PM interview questions](https://www.lennysnewsletter.com/p/my-favorite-pm-interview-questions?s=w), so definitely go read that, but here’s a sampling: - **Collaboration:** Tell me about a time you disagreed with an engineer on your team and how you resolved it. - **Execution:** Pick a project you’re proud of that took 3-9 months. Walk me through it from beginning to end. I’ll ask questions along the way. [Give this ~7-10 minutes] - **Strategy:** Pick a product you worked on in the past year—talk me through your strategy for it. - **Customer insights:** Tell me about a time you did user research on a product/feature and that research had a big impact on the product. - **Impact:** What’s the most important or impactful product you shipped? What made it so important or impactful? Would it have been as impactful without you, and why? - **Product sense:** How would you improve feature x in our product? [This full post](https://www.lennysnewsletter.com/p/my-favorite-pm-interview-questions?s=w) includes what to look for in the answers, red flags, and a ton more great interview questions to inspire you. Seriously, go check it out. And don’t forget to keep your questions consistent, with predefined good and bad answers, to [avoid bias](https://hbr.org/2016/04/how-to-take-the-bias-out-of-interviews). > #### “Companies should rely on a structured interview that standardizes the process among candidates, eliminating much subjectivity. These interviews pose the same set of questions in the same order to all candidates, allowing clearer comparisons between them.” > > #### —Iris Bohnet, *Harvard Business Review* ### The project I’ve found the project portion of the PM interview process to be the most informative component of the interview. It’s the only time you’ll get to see the candidate tackle a chunky new problem, be able to watch them in action, and have a discussion about it. Though some people don’t include it, I couldn’t imagine a PM interview without it. > #### “Years later I can see that the performance on the project was closely related to their success at Slack over the course of years.” > > #### —[Merci Grace](https://twitter.com/merci), former Head of Growth at Slack The goal of the project is to get a taste of how a candidate approaches a new problem. Most importantly, you aren’t looking at how close they got to the right answer. Instead, you are looking at how they break down the problem, how they structure their solution, and how they communicate it to you. Often the discussion afterward is even more valuable than the prompt itself. You have two options for delivering the project: 1. **Before the interview:** Give them a project before the full-day interview, to work on at home in some timeboxed amount of time. They then share what they came up with when they come in (or Zoom in) for the full-day interview. 2. **The day of the interview:** Give them a project at the beginning of the interview day, with a timeboxed amount of time for them to work on it (e.g. 90 minutes). Once they are done, they share what they’ve come up with. I did [an informal survey on Twitter](https://twitter.com/lennysan/status/1499452039541112833), and the majority (maybe two-thirds) of hiring managers prefer Option 1—to give the candidate the project ahead of time. I personally prefer Option 2, giving the project the day of the interview. Instead of telling you exactly what to do, I’ll instead share the pros and cons of each, a few people’s perspectives, and let you decide for yourself. **Option 1: Project at home, before the interview** - **Pros:** More time to think, closer to real life, and gives you more interview time during the day - **Cons:** Unfair for people with less time outside of work, some people don’t like being asked to “work” on their own time, and more confounding variables > #### “At Slack, we gave projects to be done on their own time. I’ve heard the reasons people have not to do this, but it works. It worked for the IC product writing and UX research roles I hired and managed as well. I hired a diverse team that included parents, people with student loan debt, women, men, people of color, veterans.” —[Merci Grace](https://twitter.com/merci), former Head of Growth at Slack > #### “On their own time allows them to do research if they don’t have too much background on industry or space. Plus, preparation shows care and commitment.” —[Kosta Kolev](https://twitter.com/Kosta_kolev), founder > #### “For candidates who are more interested in the domain and the problem you are solving (the ‘missionaries’), the assignment can actually generate additional excitement about the opportunity. These candidates will likely find working on the problem so intrinsically motivating that it gives them energy rather than draining it.” —[Jens-Fabian Goetzmann](https://www.jefago.com/product-leadership/homework-for-product-manager-candidates/), Head of Product at RevenueCat **Option 2: Project during the interview day** - **Pros:** Equalizes interview conditions and doesn’t suck up candidates’ personal time - **Cons:** Candidate has less time to think and is under more pressure, and it gives you less time for other interviews > #### “We found take-homes have high friction vs. signal, and the best candidates have multiple offers.” —[David Cheng](https://twitter.com/DavidPCheng/status), Senior GPM at Chime > #### “During the day of the interview, to truly equalize amount of time spent (2 hours) by each candidate.” —[Ketki Duvvuru](https://twitter.com/k3tk1/), Product Lead at Superhuman > #### “I have done it in their own time in the past but have since moved to doing it during the interview. Many reasons why, and still today kinda on the fence/grapple with it, but mainly I choose to do it as I believe it’s more equitable.” —[Ant Murphy](https://twitter.com/ant_murphy), Product Coach If you’re unsure which way to go, try both and see which feels like a better signal of the candidates’ potential. Also, as a last resort, if you can’t decide, you can also give them the choice and accommodate both. #### What should the project be? You have three options: 1. A real problem you’ve faced 2. A hypothetical problem, related to your product 3. A hypothetical problem, unrelated to your product In the same [informal Twitter survey](https://twitter.com/lennysan/status/1499452039541112833), the majority of hiring managers go with Option 1 or 2—a hypothetical problem, related to, or based on, their actual product. > #### “Closely resemble what their day-to-day work would look like.” —[Marissa Goldberg](https://twitter.com/mar15sa), founder of Remote Work Prep > #### “I typically use a case that is in the domain but doesn’t require specific product knowledge, to prevent bias.” —[David Cheng](https://twitter.com/DavidPCheng/status), Senior GPM at Chime > #### “I want the person to learn about what we do and get excited about it. Interviews are two-way.” —[Fareed Mosavat](https://twitter.com/far33d), CDO at Reforge, ex-Slack, Instacart > #### “Our prompt is venture-specific, but we explain the venture pieces. We don’t expect people to have that domain knowledge, and we generally overlook ‘mistakes’ that are simply related to that. It’s a good litmus test, though, to see whether applicants do their own research on the space.” —[Jessica Toy](https://twitter.com/jtoyPro), Director of Product at AngelList Venture I personally went with Option 1, because I found that I was able to get the best signal, but I didn’t have the chance to experiment in-depth here. Be careful about asking candidates to do actual work for you (e.g. solving a problem you’re currently facing) without paying them for the work. But do feel free to pay them for their time, especially if the project is being done on their own time. ### Examples of real project prompts To make this even more concrete, I’ve collected a handful of real-life prompts from fellow PMs. As I come across more, I’ll add them to this post. Use this as inspiration for coming up with your own custom project. #### **[David Cheng](https://twitter.com/DavidPCheng), Senior GPM at Chime** This is a take-home assignment (when he used to do take-homes), about a hypothetical product, used to hire a manager for the identity product (owning KYC, authentication, and profiles): > *The take-home should be timeboxed to 3-4 hours. You will be presenting this as part of your on-site interview, so please choose a presentation format. You will have 45 minutes to present.* > > ***Net(Income)Flix*** > > *Imagine you’re the product lead for identity at a video streaming service called Net(Income)Flix. The CEO wants to maximize financial returns and has anecdotally heard that many of our customers share their accounts with their friends and family, leading to potential lost revenue.* > > *You have been tasked to come up with a plan to identify access to these rogue accounts and shut them down. Specifically, this plan must address:* > > - *How do you measure the scale of the problem/opportunity?* > - *What other product teams may be impacted by this? How could you address their concerns?* > - *What are some features/solutions that may address this issue (just a bullet point description, nothing in-depth)?* > - *How do you prioritize and sequence your plan?* > - *How do you think about user experience?* *Things I looked for:* - *Answered the questions I posed (surprisingly, some candidates didn’t do that!)* - *I tried to make sure the candidate knew to spend at least 1/4 of the time on user experience, because oftentimes that would get overlooked, particularly given the domain* - *Understood the domain around identity (e.g. 2FA, identity signals like device, location, etc.)* - *Had success metrics that tied back to the problem/opportunity* - *Created user personas and tied them to features/user experiences. They also tied features back to the success metrics they chose* - *[Bonus] Talked about getting user feedback through quant and qual* - *[Bonus] Pushed back and said some fraud is okay to optimize for user experience* - *[Bonus] Pushed back and said there was market opportunity for “stolen” accounts (e.g. different user profiles, different pricing schemes, referrals)* #### [Merci Grace](https://twitter.com/merci), former Head of Growth at Slack This is a take-home assignment about a real Slack product opportunity, used to hire all levels of PM: > ***Background*** > > *The first part of your interview will be an assignment for members of the product, engineering, and design teams. Our goal is to see how you approach product problems in depth, with real-life situations. Please prepare a presentation that covers the topic below.* > > *We ask that you try to complete this within 72 hours of receipt. If your schedule does not permit and you need more time, just let us know.* > > *When you’re done, please send us a copy of your presentation. We’re excited to see what you come up with!* > > ***Problem statement*** > > *Every day, human beings create new Slack teams. These people are often not officially tasked with finding new enterprise software in their day-to-day role, but they have a problem that they think Slack can solve.* > > *The most successful Slack team creators are able to get several people to create accounts on their team a​nd​ have a meaningful conversation within the product in the first day or so. Inviting people to a new product is fairly straightforward—we can set that aside. What is much more difficult is getting 3 or more people to have a meaningful conversation in a new messaging service.* > > *Go through the process of creating a new Slack team. Assume that you are someone with a reasonable level of intent in creating this team: you have a problem that you think Slack can solve. Identify issues or missed opportunities with the current new-user experience that you think hold people back from having meaningful conversations in Slack. Generate ideas for experiments to run that you think would positively impact this metric. Prepare materials for a plan that ranks your ideas in priority order. Flesh out at least 3 of those ideas into experiments you think the Growth team should run.* > > ***What we want to see from you:*** > > 1. *What questions do you have?* > 2. *What assumptions are you making?* > 3. *What data would help make your case?* > 4. *How would you measure success?* > 5. *How would you execute quickly on this?* *Things I looked for:* - *Their ability to structure and communicate ideas clearly and succinctly in the overall presentation. Can this person write in a compelling way? Can they present well?* - *Are they curious? I got a lot from the questions they asked either while working on the project or within the presentation itself. Are they comfortable making a gut call when there’s little or conflicting data? When in doubt, do they prioritize creating a quality customer experience?* - *Their creativity within the constraints of the product. Did they come up with a solution that’s feasible, testable, and not too over-reaching? (We’d often see more junior product managers over-rely on a hand-wavy solution, like reaching toward Slackbot for a deus ex machina conversation with the user.)* *No joke, literally no former Facebook PM I interviewed would make a decision about something without data. They actually refused. I stopped interviewing people from FB. Your success is hugely dependent on your fit at the company, which is why it can feel so arbitrary.* #### [Kevin Yien](https://twitter.com/kevinyien), former product lead at Square, currently Head of Product & Design at Mutiny This is a take-home assignment about a fictional, but realistic, product used to assess mid-senior PMs. They were given 2-3 days to work on it, and were expected to spend 2-3 hours (though everyone always spent more). > *You are the product manager for Square Training, a new product that we will build to help merchants train their staff on Square products (starting with the point of sale).* > > *Please prepare a short presentation to describe what you would build, in what order, and why.* > > *Designs are not required but may help in articulating the solution you have in mind. Be prepared to speak for 30 minutes, with 15 minutes of discussion on top.* *Things I looked for:* - *Problem context grounded in actual customer conversations (i.e. they went out and talked to real customers)* - *Solution was tangible and defined enough to have actual conversation around, able to reframe questions around a framework rather than get bogged down in an actual response (which would be unrealistic to expect)* - *Thought through the before/during/after of a solution, not just the during* - *Considered design, technical, and GTM constraints (not just one)* - *Able to improve upon the idea in the meeting, rather than try to bring back to original solution* *I experimented with both slide and doc formats, with the live discussion being both oral presentation and a silent read of the doc (which always tripped people up unless they came from a heavy doc culture).* #### **Me, while at Airbnb** This is a day-of-interview assignment about a real product opportunity the team faced, used to hire IC PMs and managers, for the host side of the product. I’m sharing this from memory (didn’t have it written down). > *You have 90 minutes to work on this project. Once you’re done, you’ll share what you’ve come up with with a small group of potential colleagues (e.g. an engineer, a designer, a researcher, etc.). Don’t worry about having the perfect answer; just do your best.* > > ***Problem:** When Airbnb guests attempt to book a place, 50% of the time they are ignored or rejected by hosts. This leads to a bad user experience and a lack of trust in the platform, and the business misses out on revenue. How would you increase this conversion rate from 50% to 90%?* > > **Context** > > - *Nearly all host rejections are for logistical reasons—their calendar is not up to date, they can’t support pets, they don’t allow parties, etc.* > - *Hosts sometimes don’t know they recieved a guest request* > - *Hosts have 24 hours to respond to a guest request before it expires* *Things I looked for:* - *How did they break down the opportunity to increase conversion—what levers did they come up with?* - *Which lever/opportunity did they see as the biggest opportunity, and why?* - *Did they think big (i.e. working backward from the ideal) or incrementally (i.e. optimizing at the edges)?* - *How they prioritized—what did they optimize for?* - *How they laid out their proposal and communicated it—did it make sense?* - *How they balanced the needs of both sides of the marketplace* #### **[Ronnie Regev](https://twitter.com/RonnieRegev),** former product leader at **Procore, AppFolio** This is a take-home assignment to be done on their own time, with guidelines to try to keep it to a few hours. It took 6-9 months of iteration just to get the exercise dialed in. > *Pick a modern collaboration tool (e.g. Miro, Asana, Mural, Slack, etc.) and design a new feature* or *improvements to the acquisition, activation, or engagement steps.* > > *Constraints:* > > - *3 months of dev time with a team of 4 eng who know the code base* > - *Present the problem, the customer value, the solution, the success criteria, a roadmap, trade-offs, release strategy, and mid fidelity mock-up* > - *A one-pager supporting the presentation* > - *No bonus points for a super-slick presentation; focus on content over form* > - *You have 30 minutes max to cover all content, and 30 minutes of discussion* > > *This approach allowed me to assess one’s product sense and execution, and how they articulate ideas visually (mocks), verbally (presentation), and in prose (one-pager). It also worked well for designers, with different constraints.* **More projects inspiration:** ### How to convince them to take your offer Finally, after you’ve found the person you want to hire, the final step is convincing them to take your offer. I wrote [about winning at hiring](https://www.lennysnewsletter.com/p/early-stage-hiring?s=w), which has a bunch of great advice from founders who are world-class at this, so here’s some tactical advice from that post: 1. [Julianna Lamb](https://www.linkedin.com/in/juliannaelamb/) (CTO of [Stytch](https://stytch.com/)): “**We see the actual offer stage as a big place you can stand out.** We do a Zoom to surprise the candidate with everyone from their interview panel to share why they’re excited about the candidate potentially joining.” 2. [Siqi Chen](https://www.linkedin.com/in/siqic/) (CEO of [Runway](https://runway.com/)): “**We treat closing a candidate almost exactly the same as closing an investor.** In fact, we’ve found the best candidates will do even more diligence than the average investor. Arguably, candidates are investing something even more valuable than capital: their time. Our pitch and demo for our Series A is pretty much exactly the pitch and demo we do for candidates.” 3. [Sam Corcos](https://www.linkedin.com/in/samcorcos/) (CEO of [Levels](https://www.levelshealth.com/)): “**Be prepared to commit ~100 hours for each hire you make.** Interview a lot of people. Ask your network for introductions. Reach out to people on LinkedIn. Get creative on how you source candidates. Write excellent [job descriptions](https://levels.link/eng). There are no shortcuts.” ## 📚 Further study 1. [My favorite PM interview questions](https://www.lennysnewsletter.com/p/my-favorite-pm-interview-questions?s=w) 2. [Constructing an effective phone screen](https://kevinyien.com/blog/phone-screen.html) 3. [Winning at early-stage hiring](https://www.lennysnewsletter.com/p/early-stage-hiring?s=w) 4. [Product management career ladders](https://www.lennysnewsletter.com/p/jobs-of-product-manager?s=w) 5. [What is product management](https://www.lennysnewsletter.com/p/what-is-product-management?s=w) 6. [A Twitter thread with dozens of PM interview process examples](https://twitter.com/lennysan/status/1443264202831896578) 7. [Product Interviewing by Hadar Dor](https://www.hadardor.com/product-interviewing) 8. [Take-home assignments for product management candidates](https://www.jefago.com/product-leadership/homework-for-product-manager-candidates/) 9. [Bias in Interviews: Eliminate It Fast with These 6 Easy Strategies](https://codesubmit.io/blog/eliminate-bias-in-interviews/) 10. [10 Ways to Reduce Interviewer Bias](https://www.linkedin.com/business/talent/blog/talent-strategy/ways-to-reduce-interviewer-bias) *Have a fulfilling and productive week 🙏* ## **🔥 Featured job openings** 1. **Fractal Software:** [CEO/Founder](https://www.lennysjobs.com/jobs/bbb7f335-4841-48fc-aff8-702a83f26f35) (SF, NYC) 2. **Perfect Venue:** [Founding Team Full Stack Engineer](https://www.lennysjobs.com/jobs/461940f7-6f12-42af-a0d7-8fca71b2c693) (Remote-US) 3. **Snackpass:** [Senior Product Manager](https://lennys-jobs.pallet.com/jobs/3e5c5552-cb71-4b23-9773-95f21ab14dfc) (NYC, LA, SF) 4. **Silo Finance:** [Technical Product Manager](https://lennys-jobs.pallet.com/jobs/dceac63a-d817-47e7-a4a5-5f653f298bdd) (Remote-Global, Remote-EU, Remote-US) 5. **Donut:** [First Product Manager](https://lennys-jobs.pallet.com/jobs/6259d930-475f-4ed4-82a3-fea29273b40a) (Remote-US, Remote-EU) 6. **Mindbloom:** [Product Designer](https://lennys-jobs.pallet.com/jobs/0db1f9c0-266c-4d77-9852-df27b58f8779) (Remote-US, Remote-Canada) 7. **Finch Care Inc.:** [Product Designer](https://lennys-jobs.pallet.com/jobs/18311f14-d482-48a1-808e-3716a7f1aabe) (Remote) 8. **Mos:** [Product Manager](https://lennys-jobs.pallet.com/jobs/86e76563-7237-4a39-8465-3682823f7506) (Remote-US) 9. **Airhouse:** [Senior Product Manager](https://lennys-jobs.pallet.com/jobs/1739a7ee-41ab-43fb-8ac9-788738baad22)(SF, Oakland) 10. **CommerceHub:** [Director of Product Management, Delivery](https://lennys-jobs.pallet.com/jobs/5e4c79e3-9c75-4cd3-aa6f-0b9fc40636bf) (Remote-US) 11. **CommerceHub:** [Sr. Product Manager](https://lennys-jobs.pallet.com/jobs/125eafba-2e93-41ee-98aa-abaae84c1b35) (Remote-US) 12. **Elevate Labs:** [Senior Product Manager, Balance](https://lennys-jobs.pallet.com/jobs/54802bbd-3ad4-4abf-bd0f-308e86d52586) (Remote) 13. **Oath Care:**[UX Designer](https://lennys-jobs.pallet.com/jobs/0e35e470-6b81-4dae-a706-33139219fa68) (Remote-US) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* ## **🧠 Inspiration for the week ahead** 1. **Listen:** [20 Product: Lenny Rachitsky and Harry Stebbings](https://www.thetwentyminutevc.com/lenny-rachitsky/?v=2) 1. **Read:** [Can’t cook, won’t cook? Here are the tips that saved me from a life of terrible meals](https://www.theguardian.com/food/2022/mar/02/cant-cook-wont-cook-here-are-the-tips-that-saved-me-from-a-life-of-terrible-meals) by Elle Hunt 2. **Watch:** *[The Rescue](https://www.disneyplus.com/movies/the-rescue/6u1VV7RFRiRz)*. From the Oscar-winning team behind *Free Solo*, it chronicles the daring rescue of 12 boys and their soccer coach from deep inside a flooded cave in Thailand. [Watch on YouTube](https://www.youtube.com/watch?v=raVceiFQSjw) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [13/44] The most important marketplace metrics to track > ## Q: I’m building a marketplace and am wondering, what KPIs should I focus on and track? As you probably know, marketplaces hold a special place in my heart. I spent many years optimizing both sides of the Airbnb marketplace, and later spent hundreds of hours researching [a series on kickstarting and scaling a marketplace](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-marketplace?s=w). Based on this work, along with conversations with a dozen marketplace founders, and the insights many of you shared in [this Twitter thread](https://twitter.com/lennysan/status/1499129349923958785), **below are my recommendations for the four most important metrics to track and optimize in any burgeoning marketplace**: 1. **Fill rate:** Percentage of intentful sessions that end up converting 2. **Bookings growth:** Number of completed transactions per week/month 3. **Supply growth:** New active supply per week/month 4. **GMV growth:** Dollars going through your system per week/month Note, these are in addition to the metrics every founder should be watching, no matter the business model, such as retention, user growth, payback period, etc. For completeness, I cover these and a host of other valuable marketplace metrics, at the bottom of the post. *A big thank-you to [Alex Taussig](https://lsvp.com/team/alex-taussig/) (Lightspeed), [Ania Smith](https://www.linkedin.com/in/aniasmith/) (TaskRabbit), [Angela Tran](https://versionone.vc/about-us/) (Version One), [Dan Hockenmaier](https://www.linkedin.com/in/dan-hock/) (Faire), [Emma Guo](https://www.linkedin.com/in/emmahongguo/) (Offsyte), [Grant LaFontaine](https://www.linkedin.com/in/grantlafontaine/) (Whatnot), [Kevin Tan](https://www.linkedin.com/in/kevinhuangtan/) (Snackpass), [Matt Bendett](https://www.linkedin.com/in/bendett/) (Peerspace), [Mike Duboe](https://greylock.com/team/mike-duboe/) (Greylock), and [Mike Ghaffary](https://www.canvas.vc/team-member/mike-ghaffary) (Canvas) for contributing to this post.* *Also, I have dedicated posts on metrics for [consumer businesses](https://www.lennysnewsletter.com/p/the-most-important-consumer-metrics?s=w) and [PLG SaaS businesses](https://www.lennysnewsletter.com/p/the-most-important-bottom-up-saas-69d?s=w).* Let’s get into it. ![Image from The most important marketplace metrics to track](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/218a00e3-049a-4882-93e9-732f27a83ed5_4096x2048.png) #### 1. Fill rate: Percentage of intentful sessions that end up converting This metric is the ultimate measure of marketplace health, because it’s the essence of what a marketplace is—a place people can consistently come to find what they want. It also bakes in important input metrics like supply quality, availability, and booking conversion, since in order for you to convert a purchaser, you need to have (1) the right supply, (2) that’s available and interested at the right time, and (3) a funnel that converts people. As an example, this would track the percentage of Airbnb guests who searched with dates and ended up booking a home, the percentage of DoorDash customers who searched for a cuisine and ended up ordering food, and the percentage of Uber ride requests that led to a ride. [Sarah Tavel](https://sarahtavel.medium.com/the-hierarchy-of-marketplaces-introduction-and-level-1-983995aa218e) calls this “happy GMV”: [a16z](https://future.a16z.com/marketplace-metrics/) calls this “match rate”: > #### “It’s important to measure your successful ‘match rate’—the rate at which buyers can find sellers, and vice versa. How to define this metric depends on the unique business.” Many people call this metric “liquidity”—an ambiguous term I’ll cover at the end of this post. To [Alex Taussig](https://lsvp.com/team/alex-taussig/), one of the smartest people I know on marketplaces, this metric is primarily how he evaluates every new marketplace startup: > #### "The prime directive of a marketplace is to generate liquidity where none existed before. The founding insight for most great marketplace businesses is principally a ‘liquidity hack.’ Uber hacked liquidity by paying drivers to circle key neighborhoods even with no passengers. Airbnb hacked liquidity by paying for professional pictures of homes to give guests a better sense of quality. Faire hacked liquidity by guaranteeing items would sell and offering net 60 terms to retailers. thredUP hacked liquidity by processing merchandise on the seller’s behalf. The list goes on. > > #### So when I evaluate early-stage marketplace business, my analysis focuses on the liquidity hack and how effective it is for both new and repeating users. When it comes to metrics, I often examine the probability that an initiated transaction will be successful and watch it change in cohort time. Every company has a slightly different way of accounting for this liquidity metric, so the best analysis usually references your own benchmarks and watches how liquidity improves as new initiatives take effect. When I see that founders have unlocked novel liquidity and can consistently drive the metrics ahead of the initial benchmark, I get quite excited.” To operationalize this metric, you’ll need to identify what point along the user journey signals that the user is “intentful.” At Airbnb, this was a guest searching with specific dates. At Lyft/Uber, I suspect it’s somebody entering a destination, or even just opening up the app. At Etsy, it’s likely searching for a specific keyword. Benchmarking what is good here is difficult, because it can range from under 5% for an e-commerce marketplace to over 80% when you narrow in on bottom-of-the-funnel conversion. The most important thing here isn’t hitting a specific number, but a laser focus on optimizing it. > #### “At TaskRabbit, we’re currently most focused on fill rate (or invoice rate, as we call it) as our north-star marketplace performance metric. This gives us a good view of the efficiency across our funnel ecosystem from the signal of the intent to successful completion. We also break it down across multiple decision points in the funnel to help us see opportunities for improvement and understand what is working well.” > > #### —[Ania Smith](https://www.linkedin.com/in/aniasmith/), CEO of TaskRabbit #### 2. Bookings: Number of completed transactions per week or month If fill rate is the ultimate measure of marketplace health, *bookings* is the best way to track marketplace growth. Unlike GMV (which is also incredibly important, as you’ll see below), bookings removes confounding variables like average order values, pricing changes, and outlier purchases. It directly tells you whether your marketplace usage is growing or shrinking. > #### “You can tell a lot about the marketplace health by digging deep into bookings growth; for example, bookings growth by first-time users (user acquisition), repeat bookings growth (user retention), bookings growth within an organization (network effect).” > > #### —[Emma Guo](https://www.linkedin.com/in/emmahongguo/), CEO of [Offsyte](https://www.offsyte.co/) At Airbnb, this was was our [north-star metric](https://future.a16z.com/north-star-metrics/), as it continues to be for the majority of marketplaces in one form or another: - **Uber and Lyft:** Rides - **Airbnb:** Nights booked - **Cameo:** Orders - **Hipcamp:** Nights outside - **eBay**: Items sold - **Peerspace:** Bookings - **Offsyte:** Events booked #### 3. Supply growth: **New active supply per week or month** [My research](https://www.lennysnewsletter.com/p/how-to-know-if-youre-supply-or-demand?s=w) showed that 80% of marketplaces start out supply-constrained, and about half stay that way. Thus, supply growth is likely to be a major priority for your marketplace. My advice is to track not just raw new supply but “activated supply”—supply that has reached some milestone that tells you it’s valuable. For example, a Lyft driver with at least one completed ride, a Patreon creator with over $x in earnings, or an Airbnb home with at least one booking. This additional constraint protects you from creating the wrong incentives (e.g. teams driving tons of useless supply). Another way to track supply growth is to look at it from the perspective of the user. If you’re Uber, you want to track average car wait times when someone opens up the app. If you’re Thumbtack, you want to track the average number of search results when a user looks for a pro. Some marketplaces make this approach their north-star metric for their supply teams. [Matt Bendett](https://www.linkedin.com/in/bendett/), the co-founder of [Peerspace](https://peerspace.com/), found an additional aspect of this metric that makes a great input metric for supply quality: > #### “In addition to activated supply, you also want to look at ‘time to activation’ to ensure you can gain and keep supply engaged early on. Proving the value of your platform to your suppliers when their interest is highest will create a virtuous cycle that benefits overall marketplace health.” #### 4. GMV growth: Dollars going through your system per week or month Lastly, marketplaces (almost always) make money by taking a cut of transactions. Thus, tracking GMV (gross merchandise value) is going to be the best way to track overall business and revenue growth: > #### “GMV is the total sales dollar volume of merchandise transacting through the marketplace in a specific period. It’s the real top line, what the consumer side of the marketplace is spending. It is a useful measure of the size of the marketplace and can be useful as a ‘current run rate’ measure based on annualizing the most recent month or quarter.” > > #### —[a16z (Jeff Jordan, Li Jin, D’Arcy Coolican, Andrew Chen)](https://future.a16z.com/marketplace-metrics/) GMV growth is the second-most-common north-star metric (behind bookings), prioritized by companies such as Snackpass, Whatnot, Shopify, and, in part, Cameo. A common way to calculate GMV, if your tooling doesn’t automatically calculate it for you, is by multiplying the number of transactions in your marketplace with your average order value (AOV). #### Additional metrics that everyone should be tracking: Whether you’re building a marketplace, a SaaS platform, a DTC business, or most any type of online business, you should also be tracking these five foundational metrics: 1. **Cohort-based retention:** Percentage of users who come back x months later 2. **Net revenue retention:** How much you grow revenue per customer over time 3. **New user growth:** Number of new users per day/week/month 4. **CAC/LTV, payback period, or contribution margin:** Cost to acquire a new user vs. money you make from each new user 5. **Unit economics (optional):** How much profit you make per order #### Other marketplace-specific metrics to consider tracking: For completeness, though the four marketplace KPIs above are the *most* essential for every marketplace, I’d also track and work to optimize 3-5 metrics from the list below that most support your current growth strategy: 1. **Average order value:** Average dollars spent per transaction 2. **Share of wallet:** The percentage of spend in this category that goes to you 3. **Supply success:** The average and/or median number of transactions per seller 4. **Demand conversion:** Visit → Search → “Add to cart” → Book 5. **Supply conversion:** Visit → Learn more → Begin signing up → Go live → Activated 6. **Time to fill:** How long it takes to fill a customer request (e.g. Uber request) 7. **Supply retention:** The percentage of supply that sticks around x months later 8. **Frequency of transactions**: How often customers use your product per week/month 9. **Results per search:** Number of viable options customers see when searching 10. **Take rate:** How much you able to take from each transaction, on average ### What is “liquidity”? As a final note, the word liquidity gets thrown around a lot in marketplace talk. And it is clearly an important attribute of marketplace health, e.g.: > #### “Figuring out how to generate liquidity is the single most important thing for a marketplace. If you don’t have this, you’re not going to build a marketplace people will use. Clearly defining what this means is incredibly helpful in figuring out how to make it happen.” > > #### —[Grant LaFontaine](https://www.linkedin.com/in/grantlafontaine/), CEO of [Whatnot](https://whatnot.com/) But as Grant points out, defining what liquidity actually means is essential. I find people have such different definitions: ![Image from The most important marketplace metrics to track](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3b0d0615-9d64-4273-a70e-5af69e954ca4_1192x710.png)![Image from The most important marketplace metrics to track](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/da46121f-2875-49c9-b78e-d144614fe279_1188x662.png)![Image from The most important marketplace metrics to track](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/03f2b851-3a9a-4afe-b653-3b5460969a5b_1188x490.png)![Image from The most important marketplace metrics to track](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/95520e5c-c987-40a6-bac0-881f92a3b18e_1188x1188.png)![Image from The most important marketplace metrics to track](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/c3e5e281-d0f0-4ca9-be63-7fedb122d8c0_1176x454.png) Funny, right? Since there’s so much confusion around this term, I prefer to avoid using it altogether when we’re describing operational metrics, and instead get specific about what I mean (e.g. fill rate, supply quantity, supply success, etc.). If you do use it, explain what you actually mean. Don’t assume anyone knows what you’re talking about when you say “liquidity.” > #### “Everyone throws around the term ‘liquidity’ with different definitions. For me, it comes down to ‘How reliable is the marketplace for a potential buyer?’ i.e. How often can they find what they are looking for? > > #### The specific metric you use to define this is dependent on the type of marketplace, but would often be something like search-to-fill rate.” > > #### —[Dan Hockenmaier](https://www.linkedin.com/in/dan-hock/), Head of Strategy and Analytics at Faire If you have any additional thoughts on this topic, I’d love to hear it 👇 [Leave a comment](https://www.lennysnewsletter.com/p/the-most-important-marketplace-metrics/comments) ## 📚 Further study 1. [13 Metrics for Marketplace Companies](https://future.a16z.com/marketplace-metrics/) by a16z 2. [Marketplace KPI Spreadsheet](https://docs.google.com/spreadsheets/d/1K5E1Nzjq4KEvGVv6EysGswTuQm5u21Sa2ugSZewrZqE/edit#gid=1569059121) by Version One Ventures 3. [The Marketplace Checklist: 16 Questions](https://www.canvas.vc/blog/the-marketplace-checklist-16-questions) by Mike Ghaffary 4. [Choosing Your North Star Metric](https://future.a16z.com/north-star-metrics/) by me 5. [How to Kickstart and Scale a Marketplace Business](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-marketplace?s=w) by me *Have a fulfilling and productive week 🙏* ## **🔥 Featured job openings** 1. **Clipboard Health:** [Engineering Manager](https://www.lennysjobs.com/jobs/299a6ac5-8435-4596-8262-b29c15c7613f) (Remote-Global) 2. **Brilliant.org:** [Senior Product Manager](https://www.lennysjobs.com/jobs/a9f29cee-d7b7-42ce-b1dc-05d6d29ecec7), Growth (SF, Remote-US) 3. **Fractal Software:** [CEO/Founder](https://www.lennysjobs.com/jobs/bbb7f335-4841-48fc-aff8-702a83f26f35) (NYC, SF) 4. **Perfect Venue:** [Founding Team Full Stack Engineer](https://www.lennysjobs.com/jobs/461940f7-6f12-42af-a0d7-8fca71b2c693) (Remote-US) 5. **Snackpass:** [Senior Product Manager](https://lennys-jobs.pallet.com/jobs/3e5c5552-cb71-4b23-9773-95f21ab14dfc) (NYC, LA, SF) 6. **Silo Finance:** [Technical Product Manager](https://lennys-jobs.pallet.com/jobs/dceac63a-d817-47e7-a4a5-5f653f298bdd) (Remote) 7. **Donut:** [First Product Manager](https://lennys-jobs.pallet.com/jobs/6259d930-475f-4ed4-82a3-fea29273b40a) (Remote-US, Remote-EU) 8. **Mindbloom:** [Product Designer](https://lennys-jobs.pallet.com/jobs/0db1f9c0-266c-4d77-9852-df27b58f8779) (Remote-US, Remote-Canada) 9. **Finch Care Inc.:** [Product Designer](https://lennys-jobs.pallet.com/jobs/18311f14-d482-48a1-808e-3716a7f1aabe) (Remote) 10. **Mos:** [Product Manager](https://lennys-jobs.pallet.com/jobs/86e76563-7237-4a39-8465-3682823f7506) (Remote-US) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* ## **🧠 Inspiration for the week ahead** 1. **Read:** [The State of Pay for Women in 2022](https://elpha.com/resources/state-of-pay-for-women-2022) by Elpha 2. **Exercise:** [The Power of the Squat](https://www.nytimes.com/2022/03/23/well/how-to-do-squats.html) by *New York Times* 3. **Think:** Tom Peters’s life lessons **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [14/44] How to know when to stop *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to a ✨ **monthly free edition**✨ of my weekly newsletter. Each week I tackle reader questions about building product, driving growth, working with humans, and anything else that’s stressing you out about work.* *If you’re not a subscriber, here’s what you missed this month:* 1. *[How to interview product managers](https://www.lennysnewsletter.com/p/how-to-interview-product-managers?s=w)* 2. *[The most important marketplace metrics to track](https://www.lennysnewsletter.com/p/the-most-important-marketplace-metrics?s=w)* 3. *[Open thread: What is your product development process like?](https://www.lennysnewsletter.com/p/open-thread-what-does-your-product/comments)* When [Andy Johns](https://twitter.com/ibringtraffic) (growth legend via Facebook, Twitter, Wealthfront, and Quora) [began opening up](https://twitter.com/ibringtraffic/status/1499898173875048448) about his mental health journey, it caught my attention. All you ever hear about on social media are people’s wins. Everyone’s killing it! Rarely do you see someone of Andy’s stature share what’s really going on. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/06c9c1e8-70d3-4b5c-a42a-f6ad15d7a95d_1190x536.png) I knew more people needed to hear Andy’s story, so I immediately DM’d him to see if he’d be up for writing a guest post. I’m so happy he agreed. Below, you’ll find what I genuinely believe to be one of the most important posts this newsletter has ever seen. The stories, the transparency, and the incredibly actionable advice (including templates and worksheets!) is like nothing you’ll find elsewhere. I encourage you to read it, and re-read it. Thank you for sharing this with us, Andy 🙏 And for more, make sure to subscribe to [Andy’s Newsletter](https://andyjohns.substack.com/) and [follow him on Twitter](https://twitter.com/ibringtraffic/). ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8083ecc6-3980-4c29-8e1e-6b06e9b27880_4096x1368.png) > #### “Who exactly are these people that you want to be admired by? Aren’t they the same people you are in the habit of calling crazy? And is this your life ambition, then—to win the approval of lunatics?” > > #### —Epictetus In 2018, the universe sent me a sign saying, “Slow the fuck down!” I had recently been promoted to president at Wealthfront after 15 hard years of climbing the startup ladder. Yet after only a few months in my new position, I was in the emergency room with heart issues. After several tests, the doctors told me that my heart was like a lopsided tire. It worked, but it wobbled. Some parts of my heart were enlarged, and others had a thick, rigid texture that I imagine is like the low-quality meat you find in a bad bowl of pho. The cardiologist gave me the “You know how many 40-year-old CEOs I know who have heart attacks?” talk. Except I was only 35 at the time. I knew that I was constantly stressed out and exhausted from work. But I was unaware of just how fragile my health had become. He lectured me on what I needed to do moving forward. I needed more rest, more exercise, a better diet, and less stress. It’s advice that I already knew but that I ignored while in the “fog of war” of high-growth startups. Yet it was clear that I had had enough. So I stepped down and left the company to focus on my well-being. ## Systemic imbalance In retrospect, the signs were there that I was pushing too hard. I suspect the same is true for many of us in high-profile positions, high-profile startups, or high-stress industries. To help prove that, I decided to run a few surveys on LinkedIn. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e43f8328-96eb-4796-a144-fcf2263b3305_1042x622.png)![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fcdf13fd-7012-4dad-afca-a86df0b1ee82_1040x620.png) Nearly 50% of responders had thought about changing their careers at least three times due to it “not being worth it.” And another 50% had cried because of work at least twice. It seems commonplace within our work culture to push ourselves to a breaking point, whether it’s physical or psychological. Often it’s both, as our body and mind are intertwined. Nonetheless, as someone who was conditioned to always aim for the top, like many high achievers in the world of tech, I was having a hard time reconciling the limitations of my health with my professional ambitions. It was clear that I needed to make a trade-off to avoid a fate that others had faced, like the sad loss of the wonderful [Dave Goldberg](https://en.wikipedia.org/wiki/Dave_Goldberg) at the age of 47. It also required that I step back and make a holistic assessment of what matters to me. Not just with work but with the broader tapestry that makes up a complete life, including human connection and nurturing experiences. So I created a framework to do so. It has three parts: 1. **Define your personal range of tolerance** 2. **Pick your career progression** 3. **Pick your life progression** I should have followed these steps earlier in my life. But because of my relentless, single-minded pursuit of success, I had to do so somewhat retroactively. I hope this framework will help you avoid my mistakes and establish a balanced life that allows you to thrive in many dimensions of life, not just the professional. ## Part 1: Define your range of tolerance Stemming from my heart attack scare—a clear sign that I was overloaded—I began creating a plan to keep myself out of extended periods of unsustainable stress. That’s when I rediscovered the [concept of a range of tolerance](https://www.khanacademy.org/science/biology/ecology/biogeography/a/tolerance-ranges-of-species) and started to apply it to myself. After a few years of iterating on it and pursuing it earnestly, it’s led to a quality of life that I wouldn’t trade for any salary. Here’s more on how it works. ### Where does life flourish? Life is found everywhere on the planet, but it is not evenly distributed. That’s because life has an optimal zone to survive and reproduce. For example, Atlantic salmon spend most of their adult life at sea, but they make an annual trek into freshwater to breed. Most other saltwater fish die quickly when placed in freshwater, but it’s a variable that the salmon are uniquely accustomed to. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/6209f268-7fb3-4107-a72d-d87815d567ec_1600x743.png) Staying within a range of acceptable tolerance in your life should be the goal, so that you flourish in all dimensions, not just the professional. Taking on too much pushes us into zones of intolerance, where very little life can be sustained. ### How do I know if I’m outside my range of tolerance? When pushed outside our tolerance range, we will experience a wide range of indicators. One category of indicators is hormonal dysregulation, which reveals itself in the form of negative emotional states. We can feel irritable, anxious, sad, angry, withdrawn, or shut down. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3c84abfb-59f3-4fbf-b727-085f3f376a09_1420x1064.png) The second category of indicators of unmanageable stress is [physiological](https://www.apa.org/topics/stress/body). Our natural bodily functions are interrupted, including the musculoskeletal, respiratory, cardiovascular, endocrinal, gastrointestinal, nervous, and reproductive systems. Lastly, we may adopt destructive behavioral patterns to soothe our emotional discomfort. We may develop [addictions or compulsive activities](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2732004/) as a coping mechanism due to excess stress. I know a lot of people who need a bottle or two of wine several nights a week in order to “unwind.” That’s not healthy behavior. ### Take an inventory of possible stress responses In the first few months of receiving therapy, I quickly wised up to all the ways in which my mind, body, and habits were telling me that I was on a bad path. My therapist sat me down and ran me through an inventory of my bodily sensations, taking note of my jaw and neck tension, tightness in my chest, shallow breathing, and huge bags under my eyes. Next, she dissected my habits and behaviors. She expertly pointed out all the ways in which my work routine had sidelined healthy habits and replaced them with unhealthy coping mechanisms, such as smoking pot at night in order to sleep. As the months and years went on, I became much more attuned to myself, which gave me the tools to assess how I was doing at any point in time. That turned out to be the first in a series of steps that I took to defend my health and know when to take a break. Based on what I learned through therapy, and in conjunction with comprehensive research on the subject of [chronic stress](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5579396/), I created [a simple questionnaire](https://docs.google.com/spreadsheets/d/1d7uxama7vhNwWLVrpgGvxNObU0cCuRE9bXxgbwNCkn0/edit?usp=sharing) that you can copy and use yourself: ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/f8910d04-6a0a-4f41-bebb-a4777074e3a5_966x1016.png) Note that assessments like this can be subjective, so there isn’t a clear line in the sand that perfectly describes the state of your mental health. But they can be reliable indicators that someone may need to seek help. There are also publicly available tests that are clinically used and approved and can be taken for free. The [Beck Depression Inventory](https://www.ismanet.org/doctoryourspirit/pdfs/Beck-Depression-Inventory-BDI.pdf) is widely used, as is the [Patient Health Questionnaire](https://patient.info/doctor/patient-health-questionnaire-phq-9). With many of these tests, if you score near the midpoint of the total possible score, you’re entering a clinical level of depression that professionals would deem worthy of treatment. If you want to know more about the mind-body connection, Gabor Maté has an incredible lecture that discusses the relationship between trauma and our health. I suggest carving out an hour to give it a listen. He is one of the best in the world at discussing the human condition: [Watch on YouTube](https://www.youtube.com/watch?v=ajo3xkhTbfo) Here’s what my stress response inventory looked like in 2017 when I was on the verge of peak burnout: ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a7b9ad0d-952f-4f9b-ab6c-9d893d09927b_966x1016.png) I had checked 17 of 29 boxes, and I was still burning the candle at both ends. Eventually, I ended up in the hospital, which I could have avoided if I’d truly listened to what my body, mind, and behaviors were telling me. ### Each person has a unique range of tolerance We must remember that when we approach our lives *as if we have a limitless range of tolerance, or that our tolerance must be the same as our peers*, we’re pursuing our life and our work in an inevitably unsustainable way. We’re all unique. Our biology, our circumstances, experiences, and the environment we are in will influence our range of tolerance. #### Biological and environmental factors My heart attack scare forced me to confront my biological limitations. It also helped me understand the direct connection between psychological trauma and physical illness. The doctors gave me a half-assed guess that “maybe it was genetic,” but every part of my ass knew that it was the by-product of excess stress on my nervous system, beginning with [the PTSD](https://andyjohns.substack.com/p/opening-up-about-mental-health) induced by my early childhood experiences. Being not a complete idiot, and in deference to the substantial amount of research showing [the connection between PTSD and cardiovascular disease](https://pubmed.ncbi.nlm.nih.gov/21792377/), I listened to my doctors and stepped away from work. That was the beginning of admitting that my nervous system wasn’t cut out for the constant stress of a leadership role within the chaos of growing a startup. Even as I write this, from the comfort of a couch in a local coffee shop on a beautiful Sunday morning, my heart pounds, and my chest feels entombed with pressure. It’s not because of my present circumstances. It’s because of the shadow cast on the most primitive components of my brain by certain experiences I had as a kid that left me with an overactive nervous system. That’s the way it is for me. #### Conditioning and negative beliefs The beliefs we hold can be very harmful and limit our ability to cope with challenging situations. A few examples of negative beliefs that I’ve commonly heard throughout tech: - *“I guess my coworkers manage stress better than I do.”* - *“I have to accept feeling like this since it’s part of the job.”* - *“I hate this feeling and just want it to disappear, but I don’t think it ever will.”* Holding these beliefs can lead to further negative behaviors, such as [withdrawal, avoidance, or even self-harm](https://psycnet.apa.org/record/2011-04021-003). For example, there was a time when I called in sick at Twitter to avoid giving a five-minute presentation at the upcoming all-hands meeting. I was already sick with panic attacks, so the last thing I wanted to do was talk in front of a few hundred people. I decided to withdraw and bailed on my obligation to speak to the company. I told my boss that I had the flu. In my mind, I was conditioned to think that I needed to be perfect; otherwise, I wasn’t worthy of acceptance and love. Already in the grips of panic attacks, it was easy for me to believe that my presentation would be a failure, so I bailed on it before I gave myself a chance to prove otherwise. ### Create your tolerance list Now that you have taken an inventory of your current stress level, it’s time to come up with a plan to keep yourself within an acceptable range of tolerance as often as possible. It begins with creating a few lists: 1. **List of intolerables:** A list of things to completely avoid. These are the variables that immediately place you outside a tolerable range and should be avoided. Think of experiences you’ve had that have produced a large emotional response that sent you into a downward spiral. Or things that you intuitively know are bad for your overall well-being. This may also include negative coping mechanisms such as substance abuse or behavioral patterns that directly impact your health, such as binging on junk food. 2. **List of boundaries:** A list of self-imposed boundaries that are favorable toward health and well-being. These act as defensive measures to avoid the slippery slope into intolerable situations. For example, a boundary that promotes healthy behavior could be maintaining at least one active gym membership. 3. **Plan to flourish:** A list of items that put you in your optimal zone of performance. You should be prepared to make sacrifices in order to commit to these. Think of experiences or behaviors that make you feel healthiest and at your best. These are the items that, when you commit to them, make you more resilient against things that test your tolerance. Here’s a [table for creating your list](https://docs.google.com/spreadsheets/d/166FaMHwGrXKa39K_MS_kmeY5addiKXO1VFKFIshOTS0/edit#gid=304341923). It is broken down into each major category of life to ensure that it is thorough and inclusive of a full life experience, not just our professional lives: ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b11c6850-f236-45f2-9ac2-3b03bf2d23a6_1600x581.png) As an example, [here’s the current list that I use](https://docs.google.com/spreadsheets/d/166FaMHwGrXKa39K_MS_kmeY5addiKXO1VFKFIshOTS0/edit?usp=sharing) to organize my life. I tend to update it every 6-12 months, but this is the list that I’m using at this stage in my healing and this stage in my life and career. ### Create your tolerance target Once you have the list complete, [transpose it into the tolerance target](https://docs.google.com/presentation/d/1UdWE9T-b4jOWYrxwAEMSge83vutQG9LvscF7iO8pnic/edit?usp=sharing), which is a visual representation of the list you created: ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/eddd3121-1cb4-45b7-a83a-801bcc19cd3f_1034x892.png) Items in the center red circle, you want to avoid at all costs. Items in the middle yellow circle are those that may be a slippery slope toward intolerable experiences and should be navigated mindfully. The outer green circle is where you want to dedicate your time, since that’s what encourages resiliency and allows you to flourish in all of life’s dimensions. This is what my current tolerance target looks like. I’ve hand-picked the items that resonate with me as “most true” when it comes to my own range of tolerance. I’d encourage you to do the same by trimming your list down to the items of greatest importance to you. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/611886f9-c577-4b0a-89cd-70d15719db3f_1012x916.png) For example, I once had a boss publicly mock me in front of my peers for not knowing how to write a very complex SQL query. It wasn’t playful banter. It was public ridicule. I asked him to speak with me privately. I pressed him on how unacceptable it was for him to publicly mock me. He shrugged and said, “Well, that’s just the way I am. I don’t know what to tell you.” Two weeks later, I put in my notice that I was leaving to join another startup. That clown was naive enough to act shocked and angry that I was leaving. After repeated negative interactions with him that made me feel stupid, I decided it wasn’t worth the bullshit, so I left. Sometimes that’s the right thing to do. As a result, I put “Work for asshole” in the negative red center of my diagram. It’s not what brings out the best in me, nor does it lead to an enjoyable work environment, so I refuse to do it anymore. Your red circle is for experiences that you find are deal-breakers when it comes to your overall well-being. I left quite a bit of money on the table by leaving the company when I did, but I found much more peace and self-confidence on the other side. ## Part 2: Pick your career progression wisely Now that you have an understanding of your range of tolerance, and a list of things you can do to stay within your range, consider how your broader life choices will fit into your tolerance target. It begins with a concept I’ll refer to as the “career S-curve.” It’s a measure of how much “stuff” we take on during different stages of our careers. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e8824344-b0ff-4f9b-94fe-e6c50fb938f8_1538x856.png) On the y-axis is “labor” from low to high. The x-axis is years (into life or career). Generally speaking, we can break our career down into three stages along the career S-curve. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/96506bbb-37a6-4180-afbc-9ab23222874a_1520x886.png) The first stage is setting a foundation in terms of getting your career started. The second phase is the acceleration phase, when we tend to push to climb the ladder. The last phase is the peak phase, when we slow things down and ride the coattails of our prior work. We can also generalize the types of responsibilities at each stage. As time goes on, we evolve from developing skills and doing individual-contributor work to something entirely different. During the acceleration phase, people tend to start managing other people and managing projects of increasing scale and complexity. At the peak phase, it presumes that you’ve climbed high enough to where there isn’t much climbing left to do. At this level, you’re managing entire organizations instead of small groups of people. And although you may still be managing some large projects at this level, a huge portion of what you’re doing is managing problems that keep getting bigger and more frequent the higher you climb. The amount of labor and hours tend to increase as well. There are two types of hours that increase.Let’s call them *office hours* and *mind hours*. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/4dfe99af-30c5-4671-bd03-b941db031452_1568x888.png) **Office hours** are the standard measure of the number of hours you’ll work where there’s a “butt in a seat,” i.e. actual work being done. We tend to work more office hours as our career progresses toward the peak. **Mind hours** are the number of hours that your mind and nervous system are preoccupied with work because of the stresses of it. What most people in the acceleration phase of their career underestimate is the number of mind hours that are spent working, especially if your goal is to get to an executive level, which is in the deceleration phase (there’s only so high you can go). You may work 50-60 hours a week, but you might have to tack on an additional 10-30 hours of mind work on top of that. The thing about mind hours is that they are the most emotionally taxing. You’re worrying about who to hire and fire, projects going off the rails, a CEO who’s on a rampage, and so on. Nights and weekends, which earlier in your career during the foundation stage were used to recover from office hours, are now spent on mind hours, eliminating most of the room for proper rest and recovery at an intellectual and emotional level. As an overachiever, you’re probably thinking, “Well, of course I’m going to be an executive. That’s what successful people like me do.” Sure, you *can* do it. But the better question to ask is whether you *should*. ## Part 3: Pick your life progression wisely Determining if you *should* keep climbing the ladder is partly answered by understanding what the trade-offs and consequences are. After all, the career choices you make have an impact on other facets of your life. Let’s turn to the S-curve of life, which is a similar model but applied to non-work-related aspects of living. It is also broken into three basic buckets. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d0a49eda-0776-4ddc-b89f-8ae7a2c55603_1470x886.png) In childhood, life is full of mystery and exploration, and everything is exciting because it’s new. On a relative stress scale, young life tends to be easier than adulthood. Not always, but often. The acceleration phase is when you’re pushing well into adulthood and midlife experiences. That’s often characterized by major expenses such as cars and homes and is when the precariousness of life becomes more evident when people have accidents, get sick, encounter major hardships, and have to respond to various fire drills (losing a job, kids getting sick, etc.). All of which are taxing on your mind and body. Lastly comes the peak stage of life. We and others begin to decline physically and we prepare to pass on our legacy to, if we’re lucky, our family and friends. ### When worlds collide It’s roughly between our late 20s through our 50s when these two S-curves collide. We take on more not only at work but also outside of work. We walk ourselves year by year into overload, especially as overachievers within a culture that encourages achievement as a defining element of a life well-lived. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b22f7d1e-0384-4246-9d09-a909a2259634_1288x876.png) Our ability to take on a lot is thoroughly tested. As high achievers, we’re conditioned to not question if we should take on more. We just put our heads down and run face-first into exhaustion without pausing long enough to ask ourselves, “What am I doing? And why am I still doing it?” ## Benefits of periods of intolerability All of that said, I’m not arguing that we should avoid any period of intolerability. There may be times when you decide it’s necessary to expose yourself to harsher conditions. But that’s the key—*you should consciously decide* when and why a wander into the intolerable makes sense. In biology, there is a concept called hormesis. What it refers to is that all organisms have adaptive mechanisms that kick in when the organism is put under a *reasonable* amount of stress, and those mechanisms are adaptations that [may improve the organism’s tolerance or performance](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5601424/). A common example would be exercise when it comes to increasing muscle mass, bone density, and cardiovascular capacity. In a professional context, there are times when it makes sense to seek situations that can produce a “hormetic career response.” There are promotions or new roles that you may seek that require a step up in effort and responsibilities, and you may determine that it’s worth the extra stress and work to pursue it. ### Intolerability example Let me provide a personal example. Early in my career, I made a decision that I was going to establish financial freedom as quickly as I could. I understood that it meant increasing my earnings from work (via promotions) while keeping my lifestyle costs as low as I could. I would then aggressively invest my savings to build a modest nest egg. Here’s a plot of my actual earnings vs. cost of living per year since the beginning of my career: ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/149cb899-2a8b-40c9-bf01-c64f240373a1_686x762.png) The first and second green rows are when I took 6+ months off during those years to recharge. I left Quora during year 8 of my career because I was having lots of panic attacks and bouts of depression and struggling with my OCD. And I stepped back from Wealthfront at year 14 of my career due to the heart issues I wrote about above, which were driven by long periods of excess stress. As a result, my earnings were lower those years. The last green row, in year 17, is when I declared that I had enough money saved such that I could live a simple life off my savings and not have to work as hard anymore to build my nest egg. I also kept my annual cost of living low relative to my earnings, especially by the time I was about 10 years into my tech work. I made the decision to not own a home in the Bay Area, keeping me from having to pay for a $1M+ jumbo loan, which would have required more years of work that would regularly push me outside a tolerable range of stress. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/f0a71bc6-3d16-410c-8c72-8895443fcf68_1426x836.png) You’ll also notice that there were three different acceleration phases in my career. Those are the periods when I made a push into new jobs, higher levels, and higher pay. Those periods also coincided with higher stress, leading to major burnout and the need to step back for rest and recovery. My nervous system was totally shot by the end of each period. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9f2c5ce7-4d4a-483c-a211-7645bdfee1e4_1356x802.png) Going back to the S-curve metaphor I shared earlier, it would be more accurate to say that a career is a series of S-curves stacked on top of each other. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5d45e3d0-9e24-46bd-940d-d07a80b468f8_1516x874.png) As you can see from my personal example, I had three major S-curves. However, I decided to call it quits shortly into my third major S-curve, since the benefits no longer outweighed the costs. In the early stages of my career, I experienced many benefits from the acceleration pushes. I paid off school loans, gained new skills, expanded my network, and increased my earnings. And I moved closer to my ultimate goal of financial independence one year at a time. But by the third push, I could no longer justify the juice being worth the squeeze. So I made another major lifestyle change in 2020, when I moved to a small blue-collar community with a significantly lower cost of living relative to Silicon Valley. With what would have been a down payment on a home in the Bay Area, I was able to purchase my home outright. The same type of home costs four times as much in the Bay Area. That meant I had no mortgage to worry about, which is a major expense that keeps most people locked into doing work that may drive them outside their acceptable range of tolerance. Now, as long as I make at least $35,000 a year post-tax, I won’t have to dip into my savings or investments at all. Note that I also assumed that the equity I held in the startups I worked for would be worth $0. That was a conservative assumption that drove me to keep my cost of living low relative to my earnings. Anything that comes in from stock options will be icing on the cake. So before you make your next major career or life decision, pause and ask yourself a few questions: - How much money do I *truly* need to live the life I envision for myself? - What would I have to sacrifice if I reduced my salary by half, and would it be worth it? - What would I need from my job in order for it to be worth the extra labor and stress? ### Saying no to the unnecessary In 2020 I began having significant mental health issues again. It was brought about by a combination of excess stress and overwork, and isolation brought on by Covid made the situation worse. Had I decided to continue working at the level I was, I was guaranteed to earn a lot each year—somewhere just short of $1M. If I continued for eight more years, until my 25th year of work, my gross earnings from salary alone would have ballooned. In the below example, I would have earned about $10M in cumulative salary during my entire career, with 70% of my career earnings being in the last eight years. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/162da2cc-4db7-43b2-840d-c10e40f4d1c8_1514x910.png) However, since I decided to take a major step back to focus on my health and not continue with the same stressful lifestyle, I am no longer earning nearly that much per year. Yet it was worth it. Within 30 days of making several major lifestyle changes to focus on my health, my level of blood cortisol, a dominant stress hormone, dropped by 30%. And I finally had months of dedicated time to work through the childhood trauma that had been taxing my nervous system for decades. That’s the beauty of knowing when to say “enough is enough.” Given my modest lifestyle goals and my desire to focus on my health, I was able to call it quits with the stress of running high-growth startups and give my nervous system the rest that it desperately needed. And I was able to make a complete investment in the other aspects of my life that had been neglected for years. ## How to develop more tolerance Although there are benefits to windows of intolerance, we should still aim to remain within the range of tolerance as often as possible. To do so, you can widen that window in a couple of ways: 1. Lower your baseline agitation 2. Reduce recovery time from peak stress ### Lower your baseline This means lowering your default state of agitation. I’m more anxious than the average person (I have PTSD and OCD diagnoses), so my range of tolerance is narrower than I’d prefer. To widen it, I try to engage with my green-circle items as much as possible. Hot sauna and hot yoga are mainstay techniques for me. The reason for that is I find them effective at [lowering my baseline heart rate](https://pressemitteilungen.pr.uni-halle.de/index.php?modus=pmanzeige&pm_id=3102) without the wear and tear of a traditional workout. Most of the time I’m walking around with what I refer to as “PTSD heart” (it’s rapidly beating from fight-or-flight mode even though everything is OK). With a hot sauna or yoga session, I experience a meaningful decline in my resting heart rate once I’m in the recovery period. It tends to last for a few hours at a time and sometimes for the rest of the day. A 20-year study involving 30,000 people in Japan demonstrated a [28% decline in cardiovascular disease](https://www.health.harvard.edu/heart-health/hot-baths-and-saunas-beneficial-for-your-heart) for those who took a sauna every day versus those who didn’t. For me, it’s a green-circle behavior that I stick to religiously for the impact it has on regulating my nervous system. I could say more about it, but biochemist Rhonda Patrick does a better job, so listen to her instead: [Watch on YouTube](https://www.youtube.com/watch?v=XaLd5w6zF7A) ### Reduce recovery time Professional fighters know how important it is to recover quickly in between periods of high exertion. A five-minute round pushes most fighters into an intolerable physiological range, so they have to become skilled at recovery in order to approach the next round fresh and ready to fight again. [Watch on YouTube](https://www.youtube.com/watch?v=tk3KVu23FPY) Although I’m using athletes as an example, the concept of recovery from excess stress applies to anyone experiencing a high range of physical and/or psychological stress. Without a serious commitment to recovery, we can’t expect to improve our ability to bounce back from periods of intolerability. The good news is that by [drafting your tolerance list](https://docs.google.com/spreadsheets/d/166FaMHwGrXKa39K_MS_kmeY5addiKXO1VFKFIshOTS0/edit?usp=sharing) and turning it into a [tolerance target](https://docs.google.com/presentation/d/1UdWE9T-b4jOWYrxwAEMSge83vutQG9LvscF7iO8pnic/edit?usp=sharing), you can create a lifestyle that not only manages the frequency with which you’re brought into intolerable periods but also gives you the tools to quickly recover from high-stress periods, which in turn improves your range of tolerance moving forward. ## Knowing when to stop There will be times when it makes sense to push very hard on career growth, so long as it aligns with the vision you have for your future and respects the boundaries of your personal range of tolerance. The purpose of life isn’t to sacrifice our well-being. The purpose of life is to flourish. But it requires sacrifices to be made. Maybe you should turn down that promotion. Or not buy that house that will bind you to 5-10 years of additional work to pay for it. It may also require separating ourselves from people whose lifestyle preferences are misaligned with our own. It can be done as long as you understand your own limitations and make conscious life decisions that align with what enables you to flourish. And when the time comes to call it quits, you will feel secure in saying, “No thanks. I’ve had enough.” *Thank you, Andy 🙏 For more, subscribe to [Andy’s Newsletter](https://andyjohns.substack.com/) and [follow him on Twitter](https://twitter.com/ibringtraffic). And if there’s anyone in your life who would benefit from this post, you can easily share it using this button 👇* *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of hand-curated product and growth people open to new opportunities. ![Image from How to know when to stop](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/08085e94-3a8c-418e-a973-e9a484f0f100_1486x886.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 [Featured job openings](https://www.lennysjobs.com/)** 1. **WorkWhile:** [Head of Product](https://lennys-jobs.pallet.com/jobs/8be3c844-7997-4d22-9edd-28ae8e541860) (Remote-US) 2. **Clipboard Health:** [Engineering Manager](https://www.lennysjobs.com/jobs/299a6ac5-8435-4596-8262-b29c15c7613f) (Remote-Global) 3. **Brilliant.org:** [Senior Product Manager](https://www.lennysjobs.com/jobs/a9f29cee-d7b7-42ce-b1dc-05d6d29ecec7), Growth (SF, Remote-US) 4. **Fractal Software:** [CEO/Founder](https://www.lennysjobs.com/jobs/bbb7f335-4841-48fc-aff8-702a83f26f35) (NYC, SF) 5. **Perfect Venue:** [Founding Team Full Stack Engineer](https://www.lennysjobs.com/jobs/461940f7-6f12-42af-a0d7-8fca71b2c693) (Remote-US) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [15/44] Preparing for a PM interview > ## Q: I’m interviewing for a PM role. What should I do to prepare? I’ve interviewed hundreds of PMs over the years. As an interviewer, you want to believe that no matter how long the candidate has spent preparing, you can see through it all to their true PM nature. But that’s just not true. Preparing gives you a big leg up, even if you spend just a few hours. A little prep helps you nail common questions, build frameworks for confronting unexpected questions, and gets your mind into the interviewing game (which is very different from doing the job itself). Broadly, there are three parts to the preparation process: 1. Research 2. Practice 3. Study Below I’ll share a bunch of advice, and point you to my favorite resources, to help you through your preparation process. If there’s anything else you’ve found helpful in your own interview prep process, I’d love to hear it 👇 [Leave a comment](https://www.lennysnewsletter.com/p/preparing-for-a-pm-interview/comments) *Disclaimer: This guide will help you prepare for an interview, but it won’t help you do the actual job. Be careful about becoming so good at interviewing that you get into a role you aren’t ready for and end up having a bad time.* ![Image from Preparing for a PM interview](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/82c20790-61d8-4c5a-8037-5e5314ed1ec9_4096x2048.png) ### 1. Research Start by doing your homework on the product, the company, and its interview process. 1. **Use the product**. Form an opinion about what could be improved, what you’d prioritize if you were in charge, and where the product might go in the future. 2. **Research the company.** What’s its mission and vision? What has it launched recently? Who does it compete with? Where do you think it’s going next? Try to find someone at the company to get insight from. 3. **Review common interview questions**. Skim questions on [Glassdoor](https://www.glassdoor.com/Interview/index.htm), [Exponent](https://www.tryexponent.com/questions?page=1&role=pm), and [PMExercises](https://www.productmanagementexercises.com/interview-questions). Identify the typical question structure, and the skill sets the company seems to care most about, e.g.: 1. Product design/sense 2. Execution 3. Strategy 4. Leadership/behavioral 5. Analytical skills 6. Technical skills ### 2. Practice Nothing will better help you prepare for an interview than actually doing interviews. Instead of reading about interviewing, start practicing with real people. I put this section above “Study” because too many people spend their time studying and not doing. 1. **Find PMs who can do mock interviews with you**. If you can’t find enough willing friends, check out peer groups from [Exponent](https://www.tryexponent.com/practice?src=nav), [PMExercises](https://www.productmanagementexercises.com/practice), [IGotAnOffer](https://igotanoffer.com/pages/technical-mock-interviews), and [Lewis C. Lin’s Interview Community](https://launchpass.com/pminterview). 1. **Watch mock interviews** by[Exponent](https://www.youtube.com/c/ExponentTV), [Product Alliance](https://www.youtube.com/c/ProductAlliance/videos?view=0&sort=p&flow=grid), [RocketBlocks](https://www.youtube.com/c/rocketblocks), and [Diego Granados](https://www.youtube.com/c/PMDiegoGranados). These are particularly useful if you’re interviewing at a larger company with a consistent interview process. While you’re watching these mock interviews, pause the video as soon as you hear the question and try to answer it yourself in front of a friend. Then watch the answer and see what you could have done better. 2. **Get an interview coach** through [IGotAnOffer](https://app.igotanoffer.com/coaching/tech/), [Exponent](https://www.tryexponent.com/coaching?src=nav), [RocketBlocks](https://www.rocketblocks.me/#pricing), [Product Alliance](https://www.productalliance.com/coaching), or [PMExercises](https://www.productmanagementexercises.com/coaching). A few select videos to get you started: [Watch on YouTube](https://www.youtube.com/watch?v=m-qyEDwB1tw)[Watch on YouTube](https://www.youtube.com/watch?v=-Pg_7Tiohns)[Watch on YouTube](https://www.youtube.com/watch?v=se6Soyi2k0U) Above all else, start practicing with real people ASAP. ### 3. Study Finally, while you’re practicing, study up on frameworks, best practices, and core PM skills. 1. **Learn a few useful frameworks** 1. [CIRCLES](https://www.productplan.com/glossary/circles-method/), for product design questions 2. [STAR](https://www.thebalancecareers.com/what-is-the-star-interview-response-technique-2061629) and [DIGS](https://www.lewis-lin.com/blog/2019/9/16/what-is-the-digs-method), for behavioral questions 3. [AARM](https://www.lewis-lin.com/blog/2017/11/3/what-is-the-aarm-method), for picking a metric for a product 4. [RICE](https://www.intercom.com/blog/rice-simple-prioritization-for-product-managers), for prioritizing 5. [Broad then deep](https://www.tryexponent.com/courses/general-interview/broad-then-deep), for any question 2. **Read the two most popular books on PM interviewing** 1. *[Cracking the PM Interview](https://www.crackingthepminterview.com/)* 2. *[Decode and Conquer](https://www.amazon.com/Decode-Conquer-Answers-Management-Interviews/dp/0615930417/ref=tmm_pap_swatch_0?_encoding=UTF8&qid=&sr=)* 3. **Read up on the core PM skills** 1. [Ruthless prioritization](https://blackboxofpm.com/ruthless-prioritization-e4256e3520a9) by Brandon Chu 2. [Prioritizing](https://www.lennysnewsletter.com/p/prioritizing?s=w) by me 3. [WTF is strategy?](https://hackernoon.com/wtf-is-a-strategy-bcaa3fda9a31) by Vince Law 4. [Getting better at product strategy](https://www.lennysnewsletter.com/p/getting-better-at-product-strategy) by me 5. [How to become a strategic leader](https://sloanreview.mit.edu/article/how-to-become-a-strategic-leader/) by Julie Zhuo 6. [How am I going to move my product forward today?](https://www.sachinrekhi.com/how-am-i-going-to-move-my-product-forward-today) by Sachin Rekhi 7. [What is product management](https://www.lennysnewsletter.com/p/what-is-product-management) by me 8. [How to develop product sense](https://www.lennysnewsletter.com/p/product-sense?s=w) by Jules Walter 9. [Building products](https://medium.com/the-year-of-the-looking-glass/building-products-91aa93bea4bb) by Julie Zhuo 4. **Prepare stories and answers to common interview questions** 1. Walk me through your resume. 2. Why are you excited about this role? 3. What’s your biggest weakness? 4. What’s your favorite product and why? 5. What’s a project you led that drove significant impact? 6. Tell me about a time you had a disagreement with an engineer. How did you get past it? 7. Tell me about a time you had a conflict with someone. How did you resolve it and what did you learn? 8. Tell me about a time you made a mistake. 9. Tell me about a time you went against what the data told you, and relied on instinct or some other insight. *Good luck 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of hand-curated product and growth people open to new opportunities. ![Image from Preparing for a PM interview](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/08085e94-3a8c-418e-a973-e9a484f0f100_1486x886.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 Featured job openings** 1. **Ellis:** [Software Engineer](https://www.lennysjobs.com/jobs/dbba97cd-8552-4e1f-96d2-f6092bdff5a5) (Remote) 2. **WorkWhile:** [Head of Product](https://lennys-jobs.pallet.com/jobs/8be3c844-7997-4d22-9edd-28ae8e541860) (Remote-US) 3. **Clipboard Health:** [Engineering Manager](https://www.lennysjobs.com/jobs/299a6ac5-8435-4596-8262-b29c15c7613f) (Remote-Global) 4. **Brilliant.org:** [Senior Product Manager, Growth](https://www.lennysjobs.com/jobs/a9f29cee-d7b7-42ce-b1dc-05d6d29ecec7) (SF, Remote-US) ## **🧠 Inspiration for the week ahead** 1. **Watch:** Flying Through Giga Berlin [Watch on YouTube](https://www.youtube.com/watch?v=7-4yOx1CnXE) **2. Listen:** [Rick Rubin: Legendary Music Producer](https://podcasts.apple.com/us/podcast/275-rick-rubin-legendary-music-producer/id1434243584?i=1000556892280) on Lex Fridman Podcast **3. Read:** [The Marketplace 100: 2022](https://future.a16z.com/marketplace-100/) by a16z ![Image from Preparing for a PM interview](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/f3114aac-a859-4d20-bc84-c9837f0b153a_1200x1179.jpeg) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [16/44] What is a good growth rate > ## Q: What growth rates do investors expect at each stage of the business? To get you a clear answer, I reached out to two dozen of the smartest investors I know and asked them what they consider GOOD and GREAT growth rate by stage of business. Below is what I learned. *Huge thank-you to the following amazing people for sharing their insights: [Alexander Taussig](https://lsvp.com/team/alex-taussig/) and [Arsham Memarzadeh](https://lsvp.com/team/arsham-memarzadeh/) (Lightspeed), [Andrew Chen](https://a16z.com/author/andrew-chen/) and [Olivia Moore](https://www.linkedin.com/in/oliviamoore94/) (a16z), [Arra Malekzadeh](https://www.craftventures.com/team/arra-malekzadeh) (Craft), [Caitlin Bolnick Rellas](https://www.crv.com/team/caitlin-bolnick-rellas) (CRV), [Daniel Levine](https://www.accel.com/people/daniel-levine) (Accel), [Elad Gil](https://twitter.com/eladgil), [Ellen Chisa](https://ellenchisa.com/) (Boldstart), [Grace Ge](https://www.menlovc.com/grace-ge) (Menlo), [Grant Ebenger](https://www.linkedin.com/in/grant-ebenger-8558b224/) (Tiger), [John Luttig](https://foundersfund.com/team/john-luttig/) (Founders Fund), [Jonathan Golden](https://www.nea.com/team/jonathan-golden) (NEA), [Kanyi Maqubela](https://kindredventures.com/about) (Kindred), [Kimberly Tan](https://www.linkedin.com/in/kimberlywtan/) (a16z), [Leo Polovets](https://twitter.com/lpolovets) (Susa), [Mike Duboe](https://greylock.com/team/mike-duboe/) (Greylock), [Mike Vernal](https://www.sequoiacap.com/people/mike-vernal/) (Sequoia), [Niko Bonatsos](https://twitter.com/bonatsos) (GC), [Nina Achadjian](https://www.indexventures.com/team/nina-achadjian/) (Index), [Patrick Chase](https://www.redpoint.com/our-people/patrick-chase/) (Redpoint), [Rebecca Kaden](https://www.usv.com/people/rebecca-kaden/) (USV), [Sandhya Hegde](https://www.linkedin.com/in/sandhyahegde/) (Unusual Ventures), and [Todd Jackson](https://firstround.com/person/todd-jackson/#mystory) (First Round) 🙏* ![Image from What is a good growth rate](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8911046e-9cad-455e-a1d0-dde3dbeb5139_4636x7788.png) ## Takeaways #### **1. In the early stages, investors don’t care about month-over-month growth** Why? Because percentages with a small base don’t mean much. This sentiment was true across every investor I talked to, e.g.: > *“I look at MoM only really as a proxy for how fast it ramps to $1m ARR.* > > *We don’t anchor on the specific percentages for MoM growth because the percentage represents a pretty small dollar difference with small denominators. For example, 10% vs. 20% growth at $100K ARR isn’t substantial. Every percentage means different things in an absolute sense when the denominator is small.* > > *Another way of thinking about it through a MoM lens is that we’d want to see accelerating MoM growth (it going from 10% to 12% to 15%, for instance) to see that the company is picking up momentum.”* > > *—Kimberly Tan, a16z* That being said, if you’re looking for a month-over-month benchmark below $1m ARR, answers typically fell in the 15%-25% range. #### 2. Instead, **for early-stage B2B businesses, investors focus on how quickly they ramp to $1m ARR after going live** As John Luttig (Founders Fund) put it: > *“In the early stages it’s mostly about time from launch to your current ARR.* > > *If you grew to $500k ARR in 3mo post-launch, that’s more impressive than $1m in 24mo post-launch. Generally, 0 to $1m ARR in 12mo or shorter is great. There are obvious exceptions to this—not every company’s success can be measured in ARR since launch (Figma, OSS, etc.).”* Broadly, the expectation is that getting to $1m ARR within a year of launch is GOOD, and getting there in three quarters (9 months) is GREAT. ![Image from What is a good growth rate](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/683db424-e114-4c61-a69b-e012241da0bd_4572x1060.png) As Sandhya Hegde (Unusual Ventures) said, “You start the growth clock the month you go GA.” Grace Ge (Menlo) shared a similar point: > *“Velocity is everything post-launch. As the company matures, it’s less about convincing investors to dream the dream and more about proving the dream is real, executable, and monetizable.”* For this reason, you want to be strategic about when you launch: > *“The great irony is that once you start having numbers, investors start to really care what those numbers are.”* > > *—Caitlin Bolnick Rellas, CRV* > *“If you’ve launched and have very little traction, it’s worse than being pre-launch, because it shows the market/value prop is already demonstrably weak. This is why no data is better than bad/small data.”* > > *—John Luttig, Founders Fund* However, a couple of investors specifically said that they don’t care about how long it takes you to get going, as long as when you do get going, it really gets going: > *“We’re less concerned about ramp to $1mm of ARR, or growth rates every year after launch. Some of our biggest winners took several years to really get going and find strong PMF. But once they do, we want them to take off. In other words, if a business grew revenues from $500k > $5mm this year, I wouldn’t care whether it was launched 1 or 5 years ago.”* And if you get out of the gate slowly, you can sometimes still catch up: > *“Investors tend to prize early velocity. This makes sense: it increases the likelihood that you will compound to very high revenues. But speed of 0 to $1M of ARR has, in my experience, been less predictive than speed from $500K to $5M ARR. The latter is indicative of having ‘minimum viable durability’ of your revenue, which will compound over a longer period. Oftentimes, during the 0 to $1M phase, a company is still working to optimize retention, experimenting with efficiency, and initially segmenting their customers.”* > > *—Kanyi Maqubela, Kindred* #### 3. If you don’t have strong immediate ARR growth, you can show success in other ways Without fast ARR growth, you’ll need to show strong signals that people really want your product—through high retention and efficiency: > *“Revenue growth is really an output for what else is happening in the business—basically how much customers love the product and how efficient it is to get more of them. Cohorted revenue retention and/or purchase behavior (ideally U-shaped cohorts where net revenue retention goes up over a year) and marketing spend/revenue (efficiency) are the most important factors to the health and velocity of a business.”* > > *—Rebecca Kaden, USV* > *“The key thing is that there’s some leading indicator of ARR that is intrinsically compounding at a high rate. It’s often early users with taste representative of future users loving something. For example, if the business is going to be sales-led, are our salespeople incredibly productive (or do I think they will be)? Are sales cycles oddly short, do customers rave about us and tell their friends (typically leading to oddly low CAC), etc.?”* And Ellen Chisa (Boldstart) reminds us that in the early days, it’s often a trap to focus too much on growth: > *“It’s a huge mistake to focus on the growth number before getting retention. You can often hit the ‘great’ number at an early stage by brute force because the numbers are so small. Unfortunately, that won’t translate to continued growth, and then you’ll end up in a worse place than if you’d spent longer to hit the fundamentals.”* And the quality of your ARR often matters just as much as your growth rate: > *“Beyond simply growth, it’s equally important to look at components of ARR (new, retained, expansion, resurrection, contraction, churn) and customer concentration, and be mindful of the sustainability of growth (e.g. how’s sales efficiency and CAC payback? How does new ARR compare to sales and marketing spend?).”* > > *—Arra Malekzadeh, Craft* #### 4. Along those same lines, for early-stage *consumer* businesses, it’s all about intensity of engagement, virality, and retention—not revenue For B2C businesses, early-stage consumer investors look for how intensely people use the product, and share the product, versus revenue growth. For example, Mike Vernal (Sequoia) shared: > *“For consumer, I focus on **engagement** and **retention** first and foremost. >50% DAU/MAU or >50% D30 retention is excellent. If you have both of those, only then do I worry about whether you can grow it.”* Another investor had a similar sentiment: > *“If it’s a consumer productivity app with less of a clear product-led **virality**, do people use it a ton and rave? An example would be an email app. MAUs don’t matter at all. A much more valuable metric would be something like people who **use the app 10 times per day**, every day. If it’s a consumer messaging app, then it should be **growing exponentially** by default.”* As did Niko Bonatsos (GC): > *“For non-transactional consumer companies (i.e. consumer media), I would love to see an **awesome [K-factor](https://en.wikipedia.org/wiki/K-factor_(marketing))** that would lead to a distribution advantage over time. For transactional consumer companies (i.e. marketplaces or e-commerce), I’m super-eager to see if they have **‘organic’ growth** of 20% MoM or more, and understand if it’s sustainable. This again would lead to a distribution advantage over time.”* Along those lines, Olivia Moore and Andrew Chen at a16z generously pulled data on what growth rates they’ve been seeing recently across three categories of consumer businesses approaching Series A: ![Image from What is a good growth rate](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/56165a4d-9e49-4e77-af59-d7bca327b78e_4636x2188.png) Prior to Series A, Olivia and Andrew similarly focus on engagement, retention, and virality (i.e. organic growth): > *“For all three consumer categories, we look at the **acquisition breakdown between paid and organic channels**, as well as how acquisition costs are trending over time. This is particularly important for social—given how fast a social app needs to grow, **ideally all or almost all of their acquisition is organic**.* > > *For these three categories, we also index heavily on **engagement and retention**. For social, this is looking at how many users are still on the app at d1, d7, d30, and beyond—as well as time on app, frequency of posting, etc. For subscriptions, we often look at **‘inflection’ points** such as m12, when annual subscribers have to decide whether or not to convert to a second year. **Usage retention** in the months prior can give good hints towards this. And for marketplaces, we look at both user and **GMV retention** on the supply and demand sides.*” > > *—Olivia Moore and Andrew Chen, a16z* In case these benchmarks scare you, Todd Jackson (First Round) also reflected on how there’s no one way to succeed in consumer: > *“From what we’ve seen, there are a few different paths to success in consumer. It’s less about timing and more about when (and if) you hit real inflection:* > > 1. ***GREAT → GREAT:** Grew quickly out of the gate and maintained that growth rate: Instagram, Twitter, Dropbox, etc. Within months of launch crossed 1M users, then got to 10M within the next year or two, then got to 100M within the next year or two (I’m not sure those numbers are exactly right for those companies, but directionally correct).* > 2. ***GOOD → GREAT:** Uber, Gmail, RecRoom: started out good, but hit key unlocks along the way, so their growth curves look more like step functions. Uber’s was UberX, RecRoom’s was the introduction of the Oculus platform, Gmail was enough machines/leaving invite-only. E.g. it took Gmail roughly 3 years to get to 20M users, then about 4 more years to get to 200M, then crossed 1B and 2B (I think) mostly because of bundling with Android.* > 3. ***AVERAGE → GOOD → GREAT:** Roblox, Pinterest, Notion, etc. Several years to get to first 1M users, then got to 10M quickly and continued to climb on an exponential curve.* > 4. ***GREAT → GOOD → ?:** Grew very quickly out of the gate, but then decelerated: Yik Yak, maybe Clubhouse ... we’ll have to see.”* Lastly, if you’re building an open-source-based business, Elad Gil pointed out that they behave a lot like consumer businesses: > *“Some open source models are in some ways similar to consumer—the early focus is on user adoption, with later conversion of users to paying via, e.g., a SaaS service layered on top.”* #### 5. Once you’re off and running, expectations around growth rate from B2B and B2C businesses are fairly standard ![Image from What is a good growth rate](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/c7349f43-e637-44b5-bb49-40aa78a1c78f_4636x3388.png) > *“Classic top-level growth for Tier 1 ventures investors is 3x, 3x, 2x, 2x, 2x after 1M in revenue, so 1M to 3M to 9M to 18M to 36M, etc. Anything above that is obviously great, but many other factors come into play.”* > > *—Jonathan Golden, NEA* > *“Best-in-class SaaS companies triple, triple then double, double, double ARR.”* > > *—Nina Achadjian, Index* > *“At the early stage, I think, at this point 3x is good but sort of table stakes to raise a great round. 4-5x at the early stage (like 1 to 4m or 1 to 5m ARR) is where growth really starts to stand out and what I would consider ‘great.’ ”* > > *—Kimberly Tan, a16z* > *“Before $1m ARR, I love to see 5x+ annual growth. After $1m, 3x is good, and more is great.”* > > *—Leo Polovets, Susa* But this is just a heuristic, and becomes less useful as you grow: > *“The ‘triple triple double double double’ rule of thumb is useful as a starting point but loses relevance at the late stage. At $50m+ ARR scale, growth should be benchmarked against other companies in your category (public and private) and put in the context of your capital efficiency. Growth rates are helpful in demonstrating how high the ceiling for your core market can be, but it is a multi-part equation (GTM efficiency, consistency of your growth track record, ‘act two’ proof points, etc.).”* > > *—John Luttig, Founders Fund* And you certainly don’t need to be in the GREAT column year after year to build a massive business. Though consumer social businesses do have a slightly elevated bar because, as Mike Duboe (Greylock) pointed out, they’ve delayed monetization. Although markets these days… > *“You and I both see companies raise at the Series A with only a few hundred K in ARR (from 0 in revenue at the seed).”* #### 6. By funding round, expected growth rates are also fairly consistent across investors ![Image from What is a good growth rate](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b5ed934c-1a10-422c-aaff-6c50b56e685a_4636x3456.png) *(For reference, investors roughly equate Series A to $1-5m in revenue, Series B to $5-10m, and Series C to $10m+.)* These benchmarks apply to B2B, B2C, and even GMV businesses (e.g. marketplaces), with an important caveat: > *“What is key for GMV businesses is that both GMV and take rate are growing at healthy rates. Strong GMV growth signifies healthy product-market fit (commonly a leading indicator), and a strong take rate signifies a willingness for the customer to pay for the platform.”* > > *—Jonathan Golden, NEA* #### Remember: All these benchmarks are just rules of thumb Every investor mentioned that growth rates are just one piece of the puzzle when they evaluate a business. Early on, investors also put a lot of weight on founder/market fit, retention, and ACV, and, in later stages, on unit economics, CAC, margin structure, pipelines, quota attainment, and again, retention. If you do hit these benchmarks, at any stage of the process, you’ll have investors beating down your door. But, as Caitlin Bolnick Rellas (CRV) so eloquently put it, “If it’s a hot category or space, oftentimes all these fundamentals go right out the window.” Good luck! ### 📚 Further study 1. [T2D3](https://techcrunch.com/2015/02/01/the-saas-travel-adventure/) by Neeraj Agrawal 2. [The official SMB software benchmarking guide](https://lsvp.com/smbguide/) by Lightspeed Ventures *Have a fulfilling and productive week 🙏* ## 📣 Apply for Lenny’s Talent Collective 📣 If you’re looking for a new gig, [join my Talent Collective](https://www.lennysjobs.com/talent/welcome) to see personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. If you’re hiring, [apply](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. [Learn more or apply now](https://www.lennysjobs.com/talent/). ![Image from What is a good growth rate](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/08085e94-3a8c-418e-a973-e9a484f0f100_1486x886.png) [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 Featured job openings** 1. **Balance Homes:** [Founding Product Manager](https://www.lennysjobs.com/jobs/b9e8f81a-ae8c-427b-8072-71097b7c3197) (Remote) 2. **Ellis:** [Software Engineer](https://www.lennysjobs.com/jobs/dbba97cd-8552-4e1f-96d2-f6092bdff5a5) (Remote) 3. **WorkWhile:** [Head of Product](https://lennys-jobs.pallet.com/jobs/8be3c844-7997-4d22-9edd-28ae8e541860) (Remote-US) 4. **Clipboard Health:** [Engineering Manager](https://www.lennysjobs.com/jobs/299a6ac5-8435-4596-8262-b29c15c7613f) (Remote-Global) ## **🧠 Inspiration for the week ahead** 1. **Read:** [How People Think](https://www.collaborativefund.com/blog/think/) by Morgan Housel 2. **Watch:** [Feynman’s Ode to the Wonder of Life](https://kottke.org/) via Kottke **3. Listen:** *[CODA](https://www.youtube.com/watch?v=VJjvTcnPtJk)* [(2021) Audition at Berklee](https://www.youtube.com/watch?v=VJjvTcnPtJk) [Watch on YouTube](https://www.youtube.com/watch?v=VJjvTcnPtJk) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [17/44] How to validate your startup idea *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to a ✨ **monthly free edition**✨ of my weekly newsletter. Each week I tackle reader questions about building product, driving growth, working with humans, and anything else that’s stressing you out about work.* *If you’re not a subscriber, here’s what you missed this month:* 1. *[What is a good growth rate](https://www.lennysnewsletter.com/p/what-is-a-good-growth-rate?s=w)* 2. *[Preparing for a PM interview](https://www.lennysnewsletter.com/p/preparing-for-a-pm-interview?s=w)* 3. *[Open thread: How is your product org organized?](https://www.lennysnewsletter.com/p/open-thread-how-is-your-product-org/comments?s=w)* > ## Q: I have an idea for a startup. How can I validate that it’s a good idea, and how will I know when an idea is promising enough to commit to? Committing to a startup idea is possibly the most consequential decision you’ll ever make. It’ll impact everything they do for the next 1 to 50 years, and either lead you to fame and fortune or a brick wall to endlessly bang your head against. No pressure. To help you navigate this critical time, [Todd Jackson](https://twitter.com/tjack) (partner at First Round Capital) spent 2+ months researching, interviewing, and synthesizing lessons from some of today’s most exciting companies to understand what gave them the confidence to commit to their idea. Below you’ll learn how these companies come up with their idea, validated it, and gained traction—along with a host of lessons learned along the way. In his nearly 20-year career, Todd has helped build some of the biggest products in tech that hundreds of millions of people use every day, from Gmail’s UX and Facebook’s Newsfeed, to Twitter’s timeline and Dropbox’s bottom-up revenue engine. He founded his own company, Cover, in 2013 and met First Round Capital when they led his seed round. Now at First Round he helps early founders launch and grow their businesses. You can find him on [Twitter](https://twitter.com/tjack) and [LinkedIn](https://www.linkedin.com/in/toddj0/). ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/025b88bd-b067-40c1-8c5d-5572fd6300ab_4096x1368.png) As a seed-stage investor at [First Round Capital](https://firstround.com/), I get to meet a lot of founders who are exploring and validating their ideas. It’s an exciting time for them and, as a former founder myself, I relate to the thrill and anxiety of just getting started. You believe you’re onto something and feel ready to bring your idea to life, but there’s also a lot of wondering, *Am I crazy to pursue this?* While there’s no single right way to get started or build a business—and timing, luck, and grit often play an outsize role—over the years, I’ve observed a few commonalities in how strong businesses got their start. From my own startup ideas (more on that [here](https://review.firstround.com/after-15-years-as-a-product-leader-ceo-and-now-vc-heres-the-advice-i-always-share-with-future-founders)) and from talking to many successful founders, I’ve seen a few clear patterns around how people come up with their ideas, validate them, and build the conviction they need to go all in. There may not be a single playbook on how to build the next unicorn, but you can learn a lot from reverse-engineering how the best entrepreneurs went about building their companies. **To give you some recent examples of the path from initial idea to success, I interviewed the founders of eight companies and spent many hours over the past two months digging into their incredible stories:** 1. [Christina Cacioppo](https://www.linkedin.com/in/ccacioppo/), CEO and co-founder of **[Vanta](https://www.vanta.com/)** 2. [Ryan Petersen](https://www.linkedin.com/in/rpetersen/), CEO and founder of **[Flexport](https://www.flexport.com/)** 3. [Mahima Chawla](https://www.linkedin.com/in/mahimachawla1/), CEO and co-founder of **[Cocoon](https://www.meetcocoon.com/)** 4. [Josh Wais](https://www.linkedin.com/in/joshwais/) and [Lauren McDevitt](https://www.linkedin.com/in/laurenmcdevitt/), co-founders of **[Good Dog](https://www.gooddog.com/)** 5. [Kevin Tan](https://www.linkedin.com/in/kevinhuangtan/), CEO and founder of **[Snackpass](https://www.snackpass.co/)** 6. [Nick Fajt](https://www.linkedin.com/in/nicholasfajt/), CEO and co-founder of **[Rec Room](https://recroom.com/)** 7. [Edith Harbaugh](https://www.linkedin.com/in/edithharbaugh/), CEO and co-founder of **[LaunchDarkly](https://launchdarkly.com/)** 8. [Kurtis Lin](https://www.linkedin.com/in/kurtislin/), CEO and co-founder of **[Pinwheel](https://www.pinwheelapi.com/)** ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/41df206b-2e64-48fc-a51e-b766782c61ab_1600x634.png) Here’s what I learned. ## How do I pick an idea and validate it? Based on my research, there are three common ways to come up with an idea: 1. **Market first**: Start with a market or space that interests you, then look for a specific problem. 2. **Experience ripe for improvement:** Look for areas where you believe there should be a better consumer experience than what currently exists, and iterate from there. 3. **Problem first**: Start with a problem you’ve experienced firsthand and figure out if enough other people have the same problem. These methods tend to correlate with specific categories of companies: ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/81460e01-9ddf-4da8-839e-4277a11c00a0_7144x4164.png) Let’s look at examples of how the founders I talked to used each method to come up with an idea, validate it, and gain confidence that they were on the right track. ### Start with a market/space first and look for a problem. If you already have a particular market in mind, talk to people in that space to more deeply understand their experience and challenges. There’s no set number of conversations to have, but I’ll offer suggestions near the end of this article. You want to look for a burning pain that’s so bad, customers will literally try anything to solve it. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/04f66c7c-4053-4bbf-a93a-f882e180fda7_954x330.png) [Christina Cacioppo](https://www.linkedin.com/in/ccacioppo/) is the CEO and co-founder of [Vanta](https://www.vanta.com/), an automated security monitoring platform that helps companies get SOC 2, HIPAA, or ISO 27001 certified quickly. Launched in 2017, Vanta has over 2,800 customers today and has raised $55M. **Finding an idea** Christina started out on a couch with her co-founders, tossing around ideas for several months. **Her advice? “Don’t do this.”** She elaborates that when you’re at the idea stage, it’s easy to poke holes in everything if you ideate in a bubble: all the ideas are flawed, you’re limited by what you already know (which might be a lot, but it’s still a small subset of what the market knows), and it’s hard to get real feedback from anyone when you’re just talking through hypotheticals. Instead, she recommends getting out into the market, having conversations, and testing early models. After testing a few prototypes that didn’t work out, Christina decided to investigate the security space out of naive interest. > #### “Securing the internet seemed important, particularly around the recent 2016 election and Equifax breach, and yet the tech industry seemed *really bad* at it. Why? And why are there so many cybersecurity companies and yet no startup uses any of them?” —Christina Cacioppo She started by interviewing founder friends and security leaders and asked them about the best and worst part of their days. She heard many answers, and tried and discarded several different ideas. But when she heard about security being a blocker to companies moving upmarket and *unlocking revenue*, that’s when she started to feel real interest from the people she spoke to. Digging in deeper, Christina and her co-founders discovered that SOC 2—often the first way a company needs to prove its security competency—was a major pain point and, while security consultants offered expensive help, many people wanted an easier solution. **Validating the idea** They started by developing a [gap assessment](https://www.vanta.com/industry-topics/how-to-identify-and-close-gaps-in-soc-2-compliance) similar to what a SOC 2 consultant would create, with the goal of confirming they understood the requirements of the SOC 2 process and that it could be broken down into simple steps. After hearing a strong desire for a “SOC 2 easy button” solution, they built a zero-code MVP (a spreadsheet) to test with potential customers and determine whether SOC 2 preparation was actually productizable. Both founders were skilled at product development but had learned the hard way not to write code until they’d validated that people wanted the product. Christina shared this MVP with friends, former coworkers, and people in their networks at companies ranging from two-person startups to multi-thousand-person enterprises to gauge their reactions. She knew they were onto something when she got a call from a friend out of the blue saying, “I heard you’re doing SOC 2. We should get a drink, and also can you do that for my company?” **As more people proactively reached out to ask about what she was building, she got a real sense of market pull, which led to growing confidence.** Christina didn’t try to segment her customers by total addressable market (TAM) but instead went where the pull felt the strongest. From her customer discovery conversations, she not only validated product-market fit but also found that selling to smaller startups would initially be easiest because those founders were most eager to get their SOC 2 report in hand. As the co-founders continued building, they found that small startups were seeking SOC 2 earlier and earlier—for example, fintech companies like Modern Treasury got their first SOC 2 report when the teams were just the founders. > **💡 Moment: When people whom Christina hadn’t even spoken to started reaching out directly to ask about using Vanta.** **Finding traction** They joined Y Combinator, kept building the product, and completed their first full audit with a customer in November 2018. By the end of the year, with seed funding, a nascent team, and 30 customers, they suddenly realized, “Wow, this is working better than it should.” While raising their seed round, Christina was routinely asked, “How many startups, especially small ones, *really* need SOC 2?” At the time, they believed there were maybe 600 companies in the world that would need SOC 2. The co-founders knew that was too small of a TAM for a compelling venture-scale business, but they bet that as the technology evolved, software security would change and the need for SOC 2 would continue to grow. That prediction ended up coming true faster than they expected. Today, Vanta has thousands more customers than they even thought were in the company’s initial market. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/153eca6b-95a4-413e-8f75-6220c6b154b6_1024x768.jpeg) **What advice would you give a founder just starting out?** > #### **“**Do all the product development best practices [market research, user interviews, validating mockups before building, starting with a lightweight MVP to test the core problem]. > > #### Nobody wants to do them because they seem tedious, they’re less fulfilling than building, and when you’re excited, you just want to get started. But these steps make such a difference. It’s so easy to change a spreadsheet or mockup; it’s much harder to change code.” **Quick tips:** 1. Build prototypes and test your early ideas on real customers; listen to their responses, and anything short of “I want this!” is really a “No thanks.” 2. Don’t build a full product until you’re feeling real pull from the market. 3. Figure out who you can sell to most easily, and start there. Market analysis can come later. 4. Develop a product that unlocks revenue for your customers. #### ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/7a54ed27-12af-4482-9304-ddc7a7f2d3f3_880x202.png) [Mahima Chawla](https://www.linkedin.com/in/mahimachawla1/) is the CEO and co-founder of [Cocoon](https://www.meetcocoon.com/), an employee-leave platform designed to empower companies to better support their team members through life’s most pivotal moments. Founded in 2020, Cocoon has raised $26M and seen rapid customer growth since its initial launch. **Finding an idea** Mahima and her co-founders, [Amber Feng](https://www.linkedin.com/in/amberfeng/) and [Lauren Dai](https://www.linkedin.com/in/laurendai/), started by exploring pivotal life moments, particularly around the significant transition to becoming first-time parents. They interviewed dozens of parents to surface the challenges faced during that major life change. Initially their interview script was open-ended around financial planning, but conversations consistently steered to the problematic topic of leave. They heard about big pains over and over. > #### “In other areas, we were searching for the problem, whereas with leave it was obvious.” —Mahima Chawla **Validating the idea** This prompted the team to start a deep exploration into the world of leave. They heard about the challenges of state and federal regulations. They heard crazy stories, including one where a coworker brought her laptop to the hospital for her C-section and was applying for California state EDD benefits while being wheeled into the OR so she would be paid during leave. **After exhausting their own networks (which tended to be tech employees), they put an ad on Craigslist to talk to a broader audience that included hourly workers.** The nightmare leave stories continued: not getting paid in full, not knowing they had the option to take federal- or state-entitled leave, drowning in paperwork, spending 10 hours on hold trying to track down state and private insurance benefits, and more. Once it was abundantly clear that leave was a pain point for employees, they did similar research on the employer side. Talking to dozens of companies confirmed that leave is an absolute nightmare, both for administration and employee experience. With conviction in the opportunity, Mahima, Lauren, and Amber limited their initial scope to addressing parental leave in California. **They began by designing a UI flow in Figma, which they shared with the employees and employers they’d previously interviewed.** The general reaction was that it was almost too good to be true: “I’ve never seen something like this before” and “I’ll believe it when I see it live!” They signed their first two customers—Carta and Benchling—off the Figma prototypes, which strengthened their confidence that they were on the right track. > **💡 Moment: Strong positive feedback from both employees and employers on product mockups of Cocoon—including selling their first customers based on Figma prototypes!** **Finding traction** The Cocoon team raised a seed round in December 2020 and started building the product. While they’d validated that all types of employers in the U.S. and Canada, regardless of size and industry, needed a leave solution, they started by focusing on parental leave for companies in California, Utah, and Pennsylvania with 100 to 200 employees (the stage of growth when the challenges with leave administration start to surface). They expanded quickly to all 50 states and added medical leave. They used outreach to their networks early on to find companies interested in using Cocoon but soon had an influx of inbound leads from word of mouth and their website. That rush of interest gave them confidence that they were on the road to success (a pattern we’ve seen in both the Vanta and Cocoon examples!). ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/47b8fcc6-a10c-4359-8e8f-de4b1633b52e_1390x781.jpeg) **What advice would you give a founder just starting out?** > #### “Go in with a very open mind. Don’t try to make something a problem, because if you do you’re going to find the evidence to support it. Really just truly listen to what the person you’re interviewing is actually saying and notice if there is a trend.” **Quick tips:** 1. If it feels like you’re pulling teeth to find the pain point, you haven’t found a problem worth solving. 2. If you’re building a marketplace or platform for multiple audiences, be sure to validate the pain points for each persona you’re targeting. 3. Use an MVP or mockups to get early customer feedback before you build. 4. Inbound demand is a strong signal you have product-market fit. ### Start with an intuition about a better consumer experience and work your way to a winning idea Other founders, particularly those building consumer or marketplace companies, start with an intuition that there *should just be* a better consumer experience and set out to build it. This approach still takes a lot of conversations with consumers to pinpoint exactly where they’re experiencing pain, in and around the hunch that got you started. Start with your intuition, but don’t let it be the *only* information that informs your approach—unless you’re happy being your only customer. #### ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/55030f77-fc09-43ad-9585-0c7fc49439f8_656x176.png) [Josh Wais](https://www.linkedin.com/in/joshwais/), CEO, and [Lauren McDevitt](https://www.linkedin.com/in/laurenmcdevitt/), Chief Experience Officer, co-founded [Good Dog](https://www.gooddog.com/) to make it simple to get a dog responsibly. Started in 2018, Good Dog has now raised its Series B. **Finding an idea** Back in 2010, Josh and Lauren started an online shopping platform called Wantworthy that didn’t work out, because it required consumers to adopt a new behavior. They wanted to try again, approaching the fresh start with a clear view of what it takes to create a successful company. They explored a number of ideas but were struggling to find a good one that leveraged their strengths and had a mission they felt passionate about. > #### “For somebody entrepreneurial, you want to start a company, but you have to wait for the right thing to hit you personally and logically.” —Josh Wais They found that idea in the concept for Good Dog. Both Josh and Lauren had experienced firsthand the challenges of finding a dog. As they talked to more people, they heard that others had faced these problems too—long waitlists, finding the right breed, finding a reputable breeder or shelter/rescue, avoiding potential scams, etc.—and saw the effects this had on both people and dogs. They saw an opportunity to create a marketplace bringing together reputable sources for getting a dog with consumers who wanted a trustworthy, confidence-inspiring, convenient experience. This mission felt more compelling than anything they’d worked on before, and they were excited about the prospects of creating a better system. **Validating the idea** Lauren’s background in product helped them employ design thinking to shape their validation process. She used “sacrificial concepts”—**low-fidelity concepts that could be printed out and put in front of consumers** to test different adaptations of potential solutions. **They asked friends and colleagues** if they knew of anyone who had recently gotten a dog or was looking for one. Since people tend to talk about their dog search process, they were able to find a lot of subjects to interview. They also compensated participants for their time to reduce bias by making it less about the person doing them a favor. They then did a series of **20+ dog owner interviews**, asking people to walk them through the whole process with questions like *How did you decide you wanted to get a dog? What was the most painful part of the process? Which part was most exciting?* After a month of interviews, they’d learned that people struggled or even gave up trying to get a dog because it was such a time-consuming and challenging process. Pain and hassle were consistent themes across almost every conversation. Finding so many pain points around trust and convenience in an area so personally important to people gave them certainty that they were onto something big on the demand side. To confirm their hypothesis, they experimented with finding dogs manually for hopeful owners and discovered there were a lot of people who were desperate for assistance. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/493993fe-ac4f-4c87-8e2b-5bae077d2df8_1200x1600.jpeg) They then worked on validating the supply side of the marketplace because it was critical to have trusted, quality breeders on the platform for the community to work. This part turned out to be more challenging—they worked on it nights and weekends for six months, **cold-calling** ***hundreds*** **of breeders** and trying to get them to answer questions. Josh and Lauren didn’t know exactly what the value proposition would be for breeders, but they had so much conviction on the consumer side that they were determined to crack it. “We need to figure out the specifics, but we believe in the vision of where we’re going,” they said. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/475a485e-5fb4-4693-be74-f0c150ea2d07_1600x1200.jpeg) **Finding traction** It took a full year to crack the supply side of the marketplace. Josh initially cold-called breeders using a script that felt painful and awkward to him. Then he had a revelation: if he explained the mission and that he was focused on recognizing responsible breeders and then dove right into the screening questions (i.e. starting with the hardest part), the breeders he called were much more inclined to engage. That approach tapped into the breeder’s pride and passion for their dogs, as well as the effort they put into their work and the welfare of their dogs. Good Dog went live with 300 breeders on the platform in March 2019 and started using Facebook ads, initially to build brand awareness with breeders and then shifting into informational content. Three months later, they had 600 breeders and a strong enough reputation to focus on adding a sign-up flow to the site. By the end of 2021, they had over 20K breeders live on Good Dog. Josh says, “The goal we set out, to become the go-to platform for responsible breeders, is now within our sights. Of the estimated several hundred thousand breeders in the U.S., over 50K have signed up to be on Good Dog and are either live or we’re screening and helping to onboard or bring up to our standards.” They’ve successfully built a community dedicated to advocating for responsible breeders and helped hundreds of thousands of people in their dog search. > **💡 Moment: On the consumer side, it was hearing about the deep pains people encountered, including giving up on their dog search altogether. On the breeder side, it was discovering that tapping into breeders’ pride in their work and passion for ethical treatment of dogs motivated them to engage with a new startup like Good Dog.** ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/45f92e37-b77b-46ef-88d9-5c3876ed765f_1600x1194.png) **What advice would you give a founder just starting out?** > #### “Put in the work to try to gather as much information as you can to understand the underlying motivations/needs of users and the dynamics of the market you’d be entering up-front. You don’t want to be blindsided by something that’s fundamental later. Better to know early on to understand if it’s worth moving forward, and if so, you’ll be prepared to work through it. > > #### And don’t ignore your gut and how you personally feel about the idea and mission. You’ll face more than just the one challenge of finding PMF at the beginning. There are a lot of steps you’ll need to work through to bring your company to life. Having belief in your idea and feeling it in your core is really important. Believing it should exist and having information to support that is really critical. Everything after that is problem solving.” —Josh Wais **Quick tips:** 1. Don’t rush into just starting a company—wait for the right thing to hit you personally, emotionally, and logically. 2. Be clear-eyed about what it means to start a venture-backed company. 3. Be self-aware about what you know and don’t know. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/860fa856-2d9c-4cf3-8d6b-1d22ed375648_766x164.png) [Kevin Tan](https://www.linkedin.com/in/kevinhuangtan/) is the CEO and founder of [Snackpass](https://www.snackpass.co/), a social commerce platform that focuses on mobile order pickup at local restaurants. Founded in 2016, Snackpass has raised $96.5M to date. **Finding an idea** When Kevin was in school at Yale, there was a big culture around going out for food after class or late at night, particularly at a really popular place called Gourmet Heaven (“G-Heav”). It was ridiculous pandemonium every Saturday night when people would struggle to even place their orders. Uber Eats had just recently launched, but students were still going to pick up their food and it was a crappy process, a bad customer experience, and a likely cause of lost revenue. Kevin envisioned a future where people could order ahead and skip the lines entirely. **Validating the idea** With this insight in mind and the desire to create something his roommates would love, Kevin tapped into relationships with a few local restaurant owners he’d built websites for in the past (including G-Heav) and went door-to-door to talk to the owners. He convinced them to join his new website to reach more customers, grow their brands, and offer discounts to verified students. He then built the website over Thanksgiving break, used an API to send orders to the restaurants by fax machine, and launched with five restaurants. In December around finals week, Kevin printed flyers and distributed them across campus to tell students about the website that would give them discounts and let them skip the line at participating restaurants. > #### **“It was amazing. It was the first time people signed up for a product I’d made. It was a trickle at first but kept growing and growing.” —Kevin Tan** ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/002f8f42-001b-41a6-96ca-bb1c136da53f_1600x1332.jpeg) **Finding traction** Kevin saw signs of traction from the beginning, and within six months everybody on the Yale campus was using it (he estimates 90% of students!). The team created a mobile app for a better customer experience, added more restaurants, fixed a lot of bugs, and added the social layer that makes Snackpass stand out today. That social layer made it much easier for Snackpass to naturally spread, since the team didn’t have enough money (after being rejected from both YC and school funding) to offer cash incentives like referral bonuses for inviting friends to the app. They implemented a social points system, inspired by the Starbucks app, to reward users for orders and let them send points to friends on every purchase. Restaurants loved the idea because it drove word of mouth at no cost to them. Kevin and his team worked on the app over summer break, and when students came back in the fall, the response was overwhelming. Restaurants would call the Snackpass team to say they needed to shut down because they couldn’t keep up with incoming orders. Instead, the team went to the restaurants and pitched in, washing blenders and helping with deli orders to keep customers happy. At their second school, Brown University, the team had to overcome a lot of the same hurdles they’d experienced at Yale. Scaling the supply side was the primary bottleneck, so they built features to help restaurants onboard faster. The expansion to Brown was the first test of whether Snackpass was just a Yale phenomenon or had potential to be much bigger. By the end of the semester, Snackpass had taken off at Brown too. Kevin attributes their success to focusing on three core value propositions—saving time, saving money, and connecting with friends—and making all product and resource decisions with those in mind. > **💡 Moment: Seeing Snackpass take off at Yale through social mechanics and supply-side hustle, then repeating that same success at Brown University.** ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/72ef26f0-781d-44cc-aa4f-1db8d7b78991_600x1067.gif) **What advice would you give a founder just starting out?** *On finding an idea* > #### “It’s natural to think about things in trends, but there’s a great framework—the jobs-to-be-done framework—that says people hire products to get something done. That’s a more sane way to look at it than trying to map a trend.” *On the art of advice:* > #### “Nobody ever gets penalized for giving bad advice. If you try to use heuristics as a cookie cutter, you’re going to run into some things that don’t work. All cases are different.” **Quick tips:** 1. It’s OK to do things manually to get in front of customers and see if your idea works. 2. Thoughtful social integrations (like gifting reward points) can unlock substantial growth. 3. Find traction in one market before expanding into others. 4. Remain laser-focused on your core value propositions and vet new ideas against whether they deliver on those values. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3c6921f3-739d-477a-8136-da8618ea22ba_496x496.png) [Nick Fajt](https://www.linkedin.com/in/nicholasfajt/) is the CEO and co-founder of [Rec Room](https://recroom.com/), an online universe that enables users to play and create games with friends. Founded in 2016, Rec Room has raised $294M. **Finding an idea** Back in 2016, Nick and the five other Rec Room co-founders were part of a group at Microsoft working on what would eventually become the HoloLens (a head-mounted display for AR tech). While building games and social apps for it, they realized the app model was fundamentally wrong. They were using the model of tiles that wrapped around your head, but the tiles didn’t work together. You could play with a pet in a pet app, chat with your friends in a social app, and visit Machu Picchu in a travel app—but you couldn’t go to Machu Picchu with your friends and let your pets run around. The team had the idea to figure out a different, richer app model where people could build rooms and objects and interact more across experiences. Nick wanted to make it possible for an object authored by one developer to work in space made by another, and he envisioned a social substrate that would stitch all these experiences together. He and the five others formed Rec Room to explore building a platform, developer tools, or their own engine but figured they’d be “wildly unsuccessful because there are six of us, no money, and a couple hoodies between us.” Instead they decided to start by building a game and slowly ladder up from an app that began as a toy but became a platform used by a host of creators from individuals to businesses. **Validating the idea** They built the first game within 90 days and launched it quietly on SteamVR, figuring nobody would notice. **To get early testers, they set up in the lobby of their WeWork and asked people walking by to check out the app. They also posted on Reddit**, asking people to try their new build and gave demos to investors from within the game. Nick describes the first app they built as “looking like Wii sports in VR with three really shitty, terrible rooms in it.” Yet people liked it. > #### **“We were very surprised. It struck a chord somehow and had a weird, buggy charm to it.” —Nick Fajt** The Steam VR store at that time didn’t have any free content—existing apps had very expensive, limited content because the overall audience was so small—so the Rec Room team launched their app for free and immediately started picking up traffic. Says Nick, “I think what was pulling people back over and over was the social aspect. You’d land in a room and there were other people from all over the world wandering around. There was no menu—it would force you to be with other people and you could see and hear them. The human came through in a way that’s hard to describe.” People in the app could play games (paddleball, dodgeball, and disc golf), but the experience was very basic. Despite that, people were inventing other ways of interacting, such as putting on plays, hosting murder mysteries, or playing games like hide-and-seek that weren’t built in. This gave the team confidence that something was resonating—users were doing all sorts of things the team never imagined. Nick saw sparks of real love in the way people talked about the experience inside the app and in reviews. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e2f4728d-cf41-4c11-89dd-bfa334b354ea_455x256.gif) > **💡 Moment: Early users showed signs of true passion, despite bugs and limited functionality. People found ways to invent their own activities that the team never predicted, showing they were immersed in the product.** **Finding traction** After that first launch, the team got on Oculus and started adding other games like paintball to create a more playful version of the typical gory first-person shooter games topping the VR store charts. They also added quests—cooperative adventures that people would go on together. People *loved* paintball and quests (and still do today), but the team started realizing there was diminishing ROI because the user response gradually waned with each new version but Rec Room’s costs continued to grow. The team then explored user-generated content (UGC) by looking into what players were inventing on their own by taking over rooms meant for specific games and exploiting system bugs to do their own activities, some of which were particularly unexpected and impressive. Growth continued steadily, but the team foresaw a plateau as the number of VR headsets available in the market topped out and the cost of creating new content grew. They leaned into UGC and launched on other screens (phones, game consoles, etc.) so people could play Rec Room outside of VR. Both caused intense audience backlash: VR players didn’t want non-VR players in the app, and everyone wanted Rec Room–generated content rather than potentially lower-quality UGC. In retrospect, while Nick recognizes that they should have evolved more slowly, he believes the changes were critical: “My view was that we’re not making enough money to operate this business, so we do this or we die.” It took a long time for the UGC and cross-platform shift to take hold, but once again, Nick saw sparks of love growing in the community as people got more creative with UGC. Launching on PlayStation VR, Xbox, and mobile eventually helped them jump from 30K to 150K users each month. Four years later, Rec Room now has 3 million monthly active VR users, which is just a fraction of its total monthly active usership. **What advice would you give a founder just starting out?** *On the highs and lows of being a founder:* > #### “The absolute value of emotion you feel on any given day is way higher early in the founder journey. You can go from feeling on top of the world in the morning to feeling at the end of the day like the company is going to die next week. You’re going to be constantly surprised by the way people are using what you’ve built in ways that are inspiring, but you will also encounter problems that you as a 5- to 6-person company are horribly equipped to solve.” *On how relationships can support you as a founder:* > #### “Optimize your relationships for the long term. That goes for your employees, your investors, your customers. You’re facing an existential wall, and it helps to have somebody who can just help you get through the next day or the next week. There’s all of these short-term decisions that feel like if you don’t take this sub-optimal path, you’re going to die, but it’s all about avoiding those traps.” ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/857a75c4-798e-4244-bc7d-c6a32c4b90f7_512x293.png) **Quick tips:** 1. You can build toward a big idea by starting with a small step that’s more accessible and affordable to launch. 2. Stand out from the status quo (e.g. whimsical paintball vs. gory shooters). 3. Watch how customers use your product to find inspiration for new features. 4. Listen to audience feedback, but balance it against doing what you believe is right for your company to survive and grow. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a9759fe8-ba70-411e-aa71-8e619579e897_456x144.png) Cover was my own company, an Android app that launched in 2013 and reached 2 million users before being acquired by Twitter in 2014. My co-founders and I didn’t stick with it long enough to see continued traction like other founders I spoke to, but I wanted to include it to show a close-up of what it means to get scrappy and learn from your target audience. **Finding an idea** In 2012, the iPhone was dominant, and our idea was to target an underserved market by focusing exclusively on Android. People with Android phones were used to feeling like second-class citizens—cool apps like Instagram and Vine were iOS-only, and the whole Android UX in the early era (Froyo/Gingerbread/Honeycomb versions) was pretty unpolished. It was also an unfamiliar market to VCs—I didn’t meet a single VC in 2012 who used Android as their primary device. Our thinking was that because of the developer capabilities available on Android, you could do cool things that were impossible to do on iOS, like modify the home and lock screens of the phone and access all the sensors. We envisioned creating a set of really cool experiences using those surface areas and had a ton of ideas around better app organization, surfacing better notifications and social updates, and generally just making the homescreen UI look cooler than the stock version. But we weren’t sure exactly which ideas would resonate most with users, so we turned to research. **Validating the idea** To better understand Android users, we posted an ad on Craigslist saying “Seeking Android users: $20 Starbucks card for 20min research interview (computer gigs).” When people responded to the ad, we sent them an email: ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8edc5675-9dfa-47b6-8a5c-2062b45c35b2_1600x612.png) Then we camped out at several local Starbucks and interviewed each person who responded. We asked them why they chose their Android phone, what they liked and disliked about it, how they used it, and more. We then showed them various Play Store listings—some of which were real apps and others that I made in Photoshop (**but we acted like they were real**)**—**and asked for their feedback. Each interview was summarized into a simple dossier like this: ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/376fede9-3699-43e0-8c3a-e706cc9e10d6_1240x938.png) It was awkward and time-consuming but absolutely worth it. We talked to 30+ users total, all of whom were complete strangers from outside our personal networks. As a result, we were able to design an experience that resonated with a broad swath of Android users—and critically, to appeal to both their functional *and* emotional needs. The secret insight? A lot of Android users at that time were insecure about their phones and wanted to feel cool and edgy for choosing Android. We’d never have learned that without taking the time to ask questions for hours at Starbucks. **Finding traction** Within a few months, we had raised money from First Round and were building the first version of Cover. We arrived at a v1 design that offered utility in automatically organizing your apps but also looked sleek and changed the theme of your lockscreen based on your location. In both our product design and marketing materials, we emphasized that everything Cover did was *only* possible on Android—this was in direct response to learning from users that they wanted to feel cool and unique for choosing Android, not like second-class citizens to iPhone. One of the best pieces of advice I got for driving a successful launch was from Gentry Underwood, the founder of Mailbox. Mailbox had grown incredibly quickly out of the gate because of its cool and innovative UX and excellent marketing. He told me that if you have a product that feels really interesting and different, strikes an emotional chord with users, and shows well in product demos, then the *best* way to launch that product is with a great demo video and an invite-only waitlist. It gets people really charged up: they naturally want to talk about the product, share the video, and eagerly anticipate their invitation. We followed that approach, made a [slick video](https://www.youtube.com/watch?v=chUtv1kWIg8), and sent it to all the big Android blogs (Android Central, Phandroid, Android Police, etc.) the night before launch. When we woke up the next day, it was on all their homepages. The response from the Android community was immediate—Cover appeared on dozens of sites, hundreds of tweets, and even a handful of teardown videos in the first week—because it was a polished app that was *only* possible on Android, addressing that emotional need we had uncovered in research. We got more than 100K waitlist signups in the first week, giving us a ton of momentum. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a2a7114f-6160-4eca-be22-2567b4cbdfb3_1600x895.png) The mechanics of the waitlist turned out to be quite useful because it provided a community of users we could iteratively test on via different cohorts. On the waitlist sign-up page, we gathered information like what kind of Android phone they had, which version of the OS they were running, and what country they were from. We let in ~1k users each week with a new beta release and were able to target certain types of users based on what we were trying to test (e.g. we could release to 1,000 Samsung Galaxy users running on S3 hardware with a specific version of the Android OS). This was huge in terms of helping us iterate and systematically refine the experience for different flavors of Android one by one. We spent about three months in invite-only beta, inviting wave after wave of users and steadily improving the product. We discovered our retention characteristics were generally binary—either users loved the app and kept it as their lockscreen (which they used hundreds of times per day) or they uninstalled it because it was doing something unacceptable like draining their battery. Determined to improve retention, we fixed compatibility issues, solved battery life problems, got location tracking working in different countries, and focused on making the app really solid. > **💡 Moment: Tapping into a fervent community of Android enthusiasts and seeing them share the product, tweet about it, make their own teardown videos, and generally love and spread the app gave us a lot of confidence.** We reached 2 million users before being acquired by Twitter about eight months after launch. I could go into a much longer story about why we decided to sell so quickly, but the primary reason was that we felt strongly aligned with Twitter’s mission and its desire to innovate more quickly on Android, but also because in the back of our minds we were worried about staying compatible with all the new versions of Android and continuing to innovate on what we suspected might become OS-level functionality at some point. **What advice would you give a founder just starting out?** > #### “The biggest advice is simple—look for an audience that is large (or will become large) but is currently underserved, and then really take the time to dig in and understand their needs. Ask them questions, then another round of questions, and then another (sort of like [the five whys](https://en.wikipedia.org/wiki/Five_whys)). Don’t stop until you really understand the root causes behind their problems (again for us, it was the emotional factors around their relationship with Android). And then you can start testing solutions.” **Quick tips:** 1. Seek out both functional *and* emotional needs from your users to make sure you build something that’s must-have, not nice-to-have (more on that [here](https://review.firstround.com/after-15-years-as-a-product-leader-ceo-and-now-vc-heres-the-advice-i-always-share-with-future-founders#if-youre-an-aspiring-founder-or-even-just-someone-with-a-running-list-of-company-ideas-in-your-notes-app-assess-startup-ideas-against-the-following-criteria#if-youre-an-aspiring-founder-or-even-just-someone-with-a-running-list-of-company-ideas-in-your-notes-app-assess-startup-ideas-against-the-following-criteria)). 2. You need to *really dig* for the deep needs—users often can’t verbalize them directly. 3. Word of mouth can be your biggest driver. To encourage it, think about which communities might love your product and how a normal person in that community would describe it to a friend *in their own words*. Then use those same words yourself in the product, on your website, and in your marketing. ### Start with a problem you’re experiencing and figure out if other people or companies are experiencing it too You can also find a good idea by solving a problem you’re experiencing yourself. There’s a good chance that if you’re feeling the pain, others are as well. But don’t just assume this—you need to do the homework to make sure it’s a real and common problem. And it needs to be more than just a nuisance. No one pays for solutions to problems that aren’t impacting their lives or their revenue in meaningful ways. I’ve seen solutions to lived problems most often in developer tools, infrastructure, and other B2B companies. Founders who experienced a problem at one company sometimes leave to start their own business solving that problem for other companies. If you’re starting a developer or API-focused business where you’ve lived the problem before, it’s critical to have a deep belief in the usefulness of your tool but equally critical to make sure there’s enough market pull for what you’re building from other developers. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/057b35ec-da32-4da5-bc27-98b4b090fa2a_954x146.png) [Edith Harbaugh](https://www.linkedin.com/in/edithharbaugh/) is the CEO and co-founder of [LaunchDarkly](https://launchdarkly.com/), a feature management platform that allows software development teams to deliver to their customers. Started in 2014, LaunchDarkly was valued at $3 billion as of August 2021. The company currently has 3,000 customers, including 22 of the Fortune 100. **Finding an idea** Edith had been an engineer at several startups and kept seeing the same problem over and over again with releases: developers would push a new release out to everybody and it would go horribly wrong. The company she was working for at the time had a basic system that didn’t get much attention or love. She knew that large companies had systems like this internally—Dropbox had Gandalf and Facebook had Gatekeeper—and that most companies wanted a system like those but didn’t want to have to build it from scratch. She had the idea to build a system where you could stage releases and push them to different people (the “dark launch”). After launch, you could also have different functionality for different users. She felt a deep conviction around how feature flagging could unlock an entirely new way to develop software. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/21fc1d90-76c1-4b43-97b3-d07bd21c8b9d_960x950.png) **Validating the idea** Edith partnered with [John Kodumal](https://www.linkedin.com/in/jkodumal/), a college friend who had been at Atlassian (which also had an internal solution to the problem). He started building a solution while Edith began talking to people to convince them to use it. Their first users were their old engineering buddies, including their first customer WidgetBox. Many of those users later admitted that the reason they tried the product initially was just as a favor to Edith! **The first organic customers came in via SEO. In 2015, Edith started blogging around feature flagging and feature management as a way to create inbound leads.** She had done marketing and product in the past and knew there wasn’t a lot of good content around feature management, so new content could rank well quickly. As an additional boost for SEO, she made a point to interview leaders at prominent companies like Facebook and Netflix to create content with titles like “Secrets of How Facebook Ships.” **Finding traction** LaunchDarkly was an incredibly hard sell at first. Edith had thought it would be a self-serve business and that the value of feature flagging, staged rollouts, and the cloud were common knowledge. Instead, sales were much more hands-on than anticipated and required convincing people that this was how they should build software. She and **John had to go to potential customers’ offices and sit with them to provide education**. Because LaunchDarkly was a new product and small team, she knew it represented a risky sale. > #### “If people had any alternative besides us, they’d probably do it. We had to convince people to trust us.” —Edith Harbaugh In the first eight months of selling, they got only one paying customer each month. “Those days were pretty depressing,” said Edith. “We tried to look for the bright spot that we had at least one customer a month, and got really excited when somebody signed up on the website, sight unseen without a phone call.” She found encouragement in a support call they did with InVision, an early customer: the call was on Zoom (much less common seven years ago than it is today), and suddenly more than a dozen employee faces popped up on screen. That showed her that people were invested in LaunchDarkly and using it enough to care about asking questions. They raised a seed round in 2015 but struggled to put together a Series A because VCs doubted that the market was big enough and that developers would pay for it. Instead, Edith got more customers and was on a path to become profitable. “Revenue is its own series A,” as she put it. In 2016, they signed their first six-figure contract, which felt amazing because VCs had previously told them it was a $5 per month developer tool. That six-figure customer paid by check, and Edith took a picture and sent a copy of the stub to those skeptical VCs. The growing sales had a snowball effect as current customers became references for new customers, and the business took off. While Edith was convinced her idea was sound from the beginning, she acknowledges it took a lot longer to get going than expected. “I remembered [Jason Lemkin](https://www.linkedin.com/in/jasonmlemkin/) saying SaaS businesses would take two years,” she said. “But the customers that started using LaunchDarkly stuck with it—we had very low churn. I knew that it changed the way software was built for the better.” When LaunchDarkly was a huge success years later, her former boss remarked, “Edith, you built the system you always wanted.” > **💡 Moment: Strong internal conviction from seeing this problem at previous companies carried Edith a long way, before eventually getting external validation from the inbound responses to the LaunchDarkly blog, the InVision call showing high employee interest, and landing their first six-figure deal.** ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/185617a2-a0cd-4a31-9d3e-453679b892a4_1554x1068.png) **What advice would you give a founder just starting out?** > #### “Build something you’re excited and passionate about but with a market that is more than just you. If you’re not excited about the work, it shows.” **Quick tips:** 1. You can educate the market on the value of your product, but be prepared for a longer road. 2. Your earliest users should feel the pain you’re solving very, very deeply. 3. If you can’t raise funding, you can also grow revenue as a way to fund your business. 4. Understand why your potential customers might say no, and work to help them overcome those objections. 5. Deep conviction in the value of your solution can help you weather the harder times. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d9dd2218-8d9d-40e1-bbc7-f03c869111a4_660x124.png) [Kurtis Lin](https://www.pinwheelapi.com/) is the CEO and co-founder of [Pinwheel](https://www.pinwheelapi.com/), the market-leading payroll data connectivity platform building the income layer to power a fairer financial system. Pinwheel has raised $77M to date, built a team of 100+, scaled its platform to 4.6M monthly transactions, and signed flagship customers like Square, Varo, Current, and many more. **Finding an idea** Kurt and his co-founders, [Curtis Lee](https://www.linkedin.com/in/curtisylee/) and [Anish Basu](https://www.linkedin.com/in/anishb/), went through multiple early pivots in their founder journey and, along the way, built a framework for developing ideas, researching them, rating them on 32 different attributes, and stack-ranking them. The framework covered everything from TAM to potential regulations and natural acquirers—all elements he considered critical to building a winning business. Kurt had 20 ideas on the list before choosing the number-one idea, which eventually became Pinwheel. They started with health savings accounts (HSA), because Kurt and Curtis had both had poor experiences using them and recognized that many Americans living paycheck to paycheck lacked the cash flow to pre-fund their HSA. They considered building a way to invert the process and let consumers make health purchases on their Plaid-connected cards and then credit tax savings onto paychecks. They tested an algorithm to scan customer card transactions, flag them as medical expenses, and credit the tax savings back via employer payroll systems but ran into challenges around the volume of integrations needed because every potential customer immediately asked, “Do you support [Gusto, ADP, Workday, etc.] payroll system?” ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/42130701-c7a8-4a9e-97f7-cdda32524b90_1200x1600.jpeg) Instead of building their product, they were spending all of their engineering hours building integrations into payroll systems, which led Kurt to wonder, *If these integrations are this big of a problem for us, maybe they are also a big problem for other people.* They built a lead list by identifying an ideal customer profile (ICP) and checking market maps and competitive analyses to find others who would ostensibly have the same needs, and then started talking to people. The moment Kurt and Curtis mentioned how difficult it was to access income and employment data, the tone of the conversation would change and people’s eyes would start lighting up. By the 12th or 13th conversation, it was clear the problem they were experiencing was quite common. **Validating the idea** At that point, they considered the TAM around who needs income/employment data to power their products and realized there was a real opportunity to focus on the infrastructure layer to help others build the products they wanted to build. Initially, they assumed their target customers would be digital lenders and banks. In doing user research, they heard that current solutions were too expensive, didn’t offer enough coverage, and had inaccurate or stale data. Pinwheel saw those as solvable problems if they could build API integrations and add a layer on top. Through additional research, they developed three hypotheses: 1. They could provide better, cheaper, real-time data for lenders. 2. They could meaningfully increase direct deposits for banks. 3. They could extrapolate a combination of those two ideas and collect repayment out of direct deposits in a form of paycheck lending. While each idea seemed compelling, they felt like they needed to pick one as a wedge. They’d pitch all three ideas to prospective customers—Kurt got the whole pitch down to seven minutes and even tried switching the order in which he presented to see if the response changed, but people always leaned forward on the direct-deposit part. He would *get interrupted* by prospective customers: “Wait, you can do *what*?” Direct-deposit switching was the holy grail for many of their prospective customers, because it meant having a much deeper relationship with their users. That became the wedge. The next step was validating the implementation. They were initially worried that most people didn’t log in to payroll systems regularly and wouldn’t be able to remember their passwords (this was certainly true for themselves and their friends). But broader surveys showed that many people (especially hourly workers) log into their payroll systems much more often, with 70% to 80% logging in every day. This was another huge insight that confirmed the need for what they were building. > **💡 Moment: When Kurt mentioned the idea that eventually became Pinwheel to prospective customers, they’d give a noticeably strong reaction: perking up, nodding along, or even interrupting him—“Wait, you can do** ***what*****?”** **Finding traction** Pinwheel came out of stealth in June 2020 after fundraising, with no PR strategy other than asking a friend at TechCrunch to write an article. They’d hoped for 20 inbound leads from that one article and instead got 133 in the first 72 hours—not just other startups but major companies like Chase, Wells Fargo, Citibank, Bank of America, PayPal, Square, SoFi, Credit Karma, and more. The combination of prospective customer feedback around the direct deposit idea, validation from the survey results, and the strong inbound reaction led them to believe “There’s really something here.” ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/52e1d3fb-c5cf-4d61-8c4e-a49650d6ab5f_1024x768.jpeg) **What advice would you give a founder just starting out?** *On selling to businesses:* > #### “If you’re not decreasing cost or increasing revenue, nobody is going to buy your product.” *On trying to reach PMF* > #### “What people never talk about is just how f\*cking hard it is to actually get to product-market fit. In fact, most people never get there. Instead, all you hear about is all the breakout businesses where people magically found PMF. As Marc Andreessen said about finding PMF, ‘When you know, you know.’ Until you find it, you don’t have it. If you have to ask the question, you don’t have it. Put that as the bar you have to clear. It’s ruthless, but if you don’t look at it that way, you just won’t make it.” **Quick tips:** 1. Create a structured way to assess your ideas and research to help you evaluate. 2. Talk to as many customers as possible until you discover some earned secret or insight. 3. Pick a single product wedge as a starting point. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/40f263d2-27a5-4114-97c6-faccc43e421e_562x134.png) [Ryan Petersen](https://www.linkedin.com/in/rpetersen/) is the CEO of [Flexport](https://www.flexport.com/), a full-service global freight forwarder and logistics platform using modern software to fix the user experience in global trade. Founded in 2013, Flexport has raised $2.2B to date. **Finding an idea** An entrepreneur at heart, Ryan had his first inkling around the idea that eventually became Flexport nearly 20 years ago. **He was running a business with his older brother importing products from China and really feeling the pains of managing customs, regulations, shipping, and other logistical challenges.** He wasn’t alone: he saw that clearing customs was really challenging for people who aren’t experts, like entrepreneurs, Amazon merchants, and small businesses. In 2008, he started to lay out some initial thoughts for a business to address this pain in an Excel sheet. He envisioned building something like TurboTax for customs that would make it understandable and easy, with an expert available to walk people through it and get them cleared. > #### “I wanted to be able to help a small business clear customs.” **Validating the idea** Before starting to build what he knew would be a complex platform, Ryan used Photoshop to create screenshots that looked like a real app. He put them up on a website to see if people would sign up for this fake product and used SEO and Google ads with a small budget to drive traffic to the page. **Over 300 companies signed up for Ryan’s fake company, which gave him real validation that there were at least hundreds of companies who would want this if it existed.** He conducted phone interviews with people who had signed up, as well as friends who ran importing businesses, asking questions like *Who do you use for customs support today? What are you paying for these services? What are your pain points? What’s annoying to you? If you could have a magic wand to make a problem go away, what would it be?* Throughout the interviews, Ryan would double-click on answers to dig deeper. He learned that people desperately wanted *clarity* and *transparency* into the customs process, their obligations throughout the process, when their cargo would be released from customs, what they would have to pay, and how to avoid customs inspections and holds. The sign-ups on the website, the findings from exploratory interviews, and learning that large enterprise companies didn’t have their supply chains dialed in beyond emailing Microsoft Excel and PDF attachments around gave him enough conviction to start building Flexport. > **💡Moment: When Saudi Aramco signed up for the mock product on the website. “I thought I was going to get Amazon merchants and small companies, but then the biggest oil producer in the world signed up for my fake website. I realized this could be much bigger: I thought it was just going to be for small businesses, but if the biggest companies in the world are saying this is a pain point, there’s something here.”** **Finding traction** From 2010 to 2013, Ryan and his team worked on building v1, which included getting licensed by the U.S. Department of Homeland Security Customs and Border Protection, building the software, and meeting all of the compliance rules. While he had contractor engineers, his first employee had previously spent 25 years as a customs broker and was an expert on the process and rules. The product launched at the beginning of 2014 with a laser focus on solving the customs problem—companies had to actually buy freight from another provider. The sign-ups came in quickly—Ryan estimates several per hour. But many were individual, one-off customers, like the man who ordered a bouncy house from China for his kid’s birthday party or the U.C. Berkeley professor who bought a tuk-tuk in Cambodia and wanted to bring it home. There was a steady flow of demand from these types of customers, but Ryan felt it wouldn’t be enough to build a venture-scale business. When the team went to sell to companies with potential for repeat transactions and real supply chains to manage, those companies weren’t willing to sign up because they didn’t want to separate customs from freight. Ryan and the team quickly discovered that their hypothesis around focusing solely on customs was incomplete—companies wanted to buy customs and freight bundled together. They had always planned to add freight services but had assumed they could add that several years into the roadmap after perfecting the customs product. Instead it became apparent they needed to accelerate that to interest larger customers. That pivot to add freight made the business much harder to build but also more defensible and valuable. The team opted to focus on a broader product surface area, offering an end-to-end solution that was more appealing to customers. It stretched the team and challenged traditional product narratives around perfecting narrow areas of focus, but Ryan believes it ultimately made them better and made it much harder for new entrants to build competing businesses. Their first big freight customer was one of the world’s largest watchmakers: the company liked the promise of the Flexport platform but only wanted to sign up if it could get a specific price on freight. That price was half of what Flexport was paying for freight at that time, so the team had to hustle to set up enough business to lower their freight price to meet the watch company’s demand. It worked, and Flexport signed their biggest deal yet to ship 200 containers for the company. > #### “It was **very, very obvious** at Flexport that we had product-market fit as soon as we moved into freight. We had trouble keeping up with the demand and had to learn as fast as we could how to do it, how to build systems for it, and how to be more efficient at it.” —Ryan Peterson In 2014, Flexport joined Y Combinator, partnered with First Round, and earned $2M in revenue. They learned how to do enterprise sales to the biggest companies in the world while still maintaining a focus on serving SMBs and Amazon merchants. “There were no silver bullets here—instead there have been a lot of lead bullets and steady improvements to the way we work,” Ryan says. Once Flexport offered the full package of customs and freight, its revenue shot up quickly, growing by 4-5x per year (from $2M to $10M to $50M in just the first few years). Now, eight years later, the company is on track to do $5B in revenue this year and is the fourth-largest U.S. freight forwarder by volume operating on the world’s largest trade lane, the trans-Pacific eastbound. **What advice would you give a founder just starting out?** *On deciding to be a founder:* > #### “If you’re doing it to learn, then you kind of can’t lose. If you’re doing it just to make money, on a risk-adjusted returns basis and accounting for the possibility of failure, founding a company is not the best way to make money, and you’ll ironically probably make less money.” *On getting started:* > #### “A lot of people think that if they can’t raise venture capital, they shouldn’t do a startup. But I think you should pick something you *can* do, get started, and try to get traction before raising. I had student debt when I started one of my early businesses and I took side gigs to make money to pay that off while having the flexibility to work on my business.” *On confidence*: > #### “Don’t be too sure of yourself. You have to be adaptable and open to the idea that you could be wrong and that there could be other ideas that are better than the one you have.” *On finding product-market fit:* > #### “If you have to ask the question of whether you have PMF, then you don’t. It’s really obvious if you have it. If you can’t keep up with the customers and their demands, you have it. If you’re taking orders from internal management instead of external customers, you don’t have it. That’s fine, but don’t hire too many people, and keep your burn rate low.” *On finding focus*: > #### “Spend your time figuring out which customers you’re going to listen to and prioritize, because you can’t help all of them.” **Quick tips:** - Find low-lift ways like landing pages with mock product screenshots to validate your idea with real customers before starting to build. - Assess your early customers to understand their needs, and use that information to make product decisions that align to your business goals. - Consider taking on income-generating side projects in the earliest days of building your company so you have time to build but money to live. ## What traps should I look out for? No matter which method you use to validate a company idea, you’ll find no shortage of challenges. Here are six common traps: **Trap #1: Asking the wrong questions.** It seems really easy to just start talking to people, but if you don’t approach customer conversations correctly, there’s a good chance you’ll come away with useless or misleading information. Humans don’t see themselves clearly and are often bad at predicting their future behavior, so instead ask people about their past and current actions and problems. This will lead you to facts versus guesses and opinions. For example, instead of “Would you want to solve XYZ problem?” ask “How have you tried to solve XYZ problem in the past?” If the person tells you they’ve never looked for a solution to that problem, chances are good you won’t be selling them one. For more on this, check out the great book *[The Mom Test](https://momtestbook.com/)*. **Trap #2: Settling for a “meh” or “nice to have” reaction from early customer discovery.** As an early-stage investor, this is the trap I see founders fall into most often. Remember that people are generally trying to be nice, so if you ask them if your new product would help them, they’ll probably say, “Sure, yeah, I’d check it out.” Successful founders didn’t settle for lukewarm reactions. They kept searching for a big problem and a solution that was literally being pulled out of their hands, even in the earliest, roughest version. Cocoon started by exploring ideas around financial planning and heard lukewarm reactions—but when they hit on parental leave, people pounced on the topic. You’re looking for that kind of energy. **Trap #3: Not having enough conversations.** It’s critical to talk to people in your market to hear about their experiences, needs, and frustrations firsthand. You should start having conversations from the moment you’re thinking of starting your business and not stop until you sell the company or close the doors permanently. Customers (potential, current, or past) are the best source of information on your company and product. There’s no one right answer for how many people you should talk to before starting to build your product because it really depends on what you’re building and who you’re targeting. In general, you want to keep starting new conversations until clear patterns and themes begin to emerge. For Good Dog, around 20 dog owners felt sufficient, since customers across different demographics mostly still find dogs the same way. But for B2B products, I prefer to see a higher number (like 50 or more), since different businesses have very different buying patterns. The founders of Cocoon talked to well over 50 people just during the early research phase! After you start building, keep conversations going to continually validate what you’re doing—feedback is your best tool. **Trap #4: Selling a vitamin, not a painkiller.** Painkillers are “need to haves”—if you have a headache, you’ll go out of your way to get an aspirin. Vitamins are “nice to have”—you’ll take them if you remember or have them handy, but they’re not a necessity. You want to build something people need *right now* and are willing to give you their time or money to get. Some classic “painkiller” products include UberX, Google search, and Mailchimp, while you might recall notable “vitamins” like Google Glass, Crystal Pepsi, and CNN+. **Trap #5: Myopia in focus (e.g. only focusing on the product).** Having a great idea that people want is essential, but so is having a great way to get that idea out to the market. You need to be thinking about both along the way or your business won’t take off. You don’t need a go-to-market or growth strategy on day 1, but you need to have a few smart hypotheses for how you’ll find and win customers. **Trap #6: Pivoting too early.** It takes a long time and a lot of work to test an idea and give it time to develop. Don’t rush to throw in the towel and find a new idea too soon. There’s no right answer on timing, but expect to spend at least a month or two digging deeply enough into an idea to explore it fully and up to a year or more to bring it to life in the market. **Trap #7: Pivoting too late.** It’s also critical to not spend too long on an idea that isn’t going anywhere. Find an idea, figure out how to validate it, assess the results you’re seeing, and be ready to change course if you’re not feeling a strong pull. How do you know if it’s too early or too late? Unfortunately, there’s no magic formula. It’s too early if you truly believe you’ve found a real pain point and just can’t seem to nail the product execution or GTM. It’s too late if you’re out of money or sanity, or if no one seems to want what you’re building after multiple tries from various angles. Everything in between is a gray area. ## What do I do once I’ve gotten some validation that this idea can win? Celebrate ;) That seems trite, but I often hear founders say they wished they’d taken more time to enjoy the interim victories, however small, instead of always grinding on to the next step. This becomes especially important once you have a team that needs to feel like their hard work is producing progress worth acknowledging. Edith from LaunchDarkly shared how she leads her team: “Each day, we talk about what we did yesterday. Then we discuss what we’re going to do today. It keeps a one- or two-year project from feeling daunting. I also find that it creates a great deal of pride and accountability.” Beyond taking time to appreciate the small and large wins, there are steps the most successful founders take once they’re feeling real market pull for their solution and seeing traction: - Document your metrics and share them with your investors and advisors so they know you’re making progress and are prepared to help you with next steps. - Keep updating your roadmap and goals so your team knows where to focus their efforts and how to plan for and create continued growth. - Carefully expand your team while making a conscious effort to build the company culture you want, all while keeping an eye on your burn rate and cash reserves. I’d love to give you tidy answers on when to raise various rounds of funding, but it’s not an exact science and there’s no one set of metrics to achieve for each raise. For general guidance, you should check out [Lenny’s recent article on good growth rates](https://www.lennysnewsletter.com/p/what-is-a-good-growth-rate?s=w) based on conversations with 25 investors. As an investor now, I’m looking for a smart, motivated founding team taking on an interesting market with a solution they believe can win. How they demonstrate that from the idea phase up through raising later rounds depends on the company and how success is defined in that business. ## Final thoughts Founding a company sounds glamorous and exciting, and if all goes well, it can be—eventually. But the road there is filled with a lot of steps that can feel awkward, tedious, or downright discouraging. I’m not going to lie and say I loved meeting strangers on Craigslist to ask them about their Android points. Every founder I talked to shared stories of doing hard things on the way to validating their ideas. Here’s a quick review of the steps they took: ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/36b5a61c-6d44-4ceb-a2f0-3616f8b1d5dd_5888x6676.png) All of these tactics helped the founders better understand their audience and gave them the confidence they needed to keep building. I loved hearing these stories because it confirmed that all of these successful companies were started by people who were willing to put in the gritty work to develop and test their ideas over and over. I’ve noticed that after conducting all these interviews, when I hear new pitches myself recently, I’ve become *especially* mindful of learning the ways that founders discovered and validated a burning need for what they’re building. **The early journey as a founder really comes down to a few steps, regardless of what kind of business you’re creating:** 1. **Find an audience with a problem they want solved.** 2. **Have the empathy and creativity to come up with a solution that resonates.** 3. **Put in the work to validate the solution with your target customers.** 4. **Make sure there’s a large enough audience who wants to buy what you’re selling.** 5. **Find clever ways to reach that audience. Be willing to do things that don’t scale in the early days, but look for non-linear ways to scale as you go.** There’s still a lot of timing and luck involved, but following those steps will create the conditions for success. First Round meets with dozens of early-stage founders each week, and we look for founders who will take the time to move through these steps. It’s not always a linear path, and every business is different, but the best founders take the time to search out a big problem worth solving and pair it with an earned insight on the right solution. If you’re that kind of founder, I’d absolutely love to meet you and hear what you’re building. *You can email Todd at todd.jackson@firstround.com, and follow him on [Twitter](https://twitter.com/tjack) and [LinkedIn](https://www.linkedin.com/in/toddj0/).* *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to validate your startup idea](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 [Featured job openings](https://www.lennysjobs.com/)** 1. **Roofstock:** [Senior Product Manager](https://www.lennysjobs.com/jobs/89098663-b9f7-414b-b374-b76111d93917) (Remote) 2. **Clipboard Health:** [Growth Strategy and Marketing Manager](https://www.lennysjobs.com/jobs/82ed8c6a-418a-44e3-9b37-fff54792ba6f) (Remote) 3. **Around:** [Product Manager](https://www.lennysjobs.com/jobs/942a7802-9e65-40ed-bced-cb939e6cfa32) (Remote) 4. **Karate Combat:** [Founding Product Manager](https://www.lennysjobs.com/jobs/bb059354-70d4-41de-a0b0-77b51067a817) (Remote) 5. **Balance Homes:** [Founding Product Manager](https://www.lennysjobs.com/jobs/b9e8f81a-ae8c-427b-8072-71097b7c3197) (Remote) 6. **Ellis:** [Software Engineer](https://www.lennysjobs.com/jobs/dbba97cd-8552-4e1f-96d2-f6092bdff5a5) (Remote) 7. **WorkWhile:** [Head of Product](https://www.lennysjobs.com/jobs/8be3c844-7997-4d22-9edd-28ae8e541860) (Remote) 8. **Clipboard Health:** [Engineering Manager](https://www.lennysjobs.com/jobs/299a6ac5-8435-4596-8262-b29c15c7613f) (Remote) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [18/44] How to win in consumer subscription > ## Q: I’m building an app targeted at consumers, and plan to charge a monthly fee. I’d love your advice around what it takes to build a durable business as a B2C subscription app. Think about it: When was the last time you (1) installed, (2) paid for, and (3) continued to pay for, a new app? I bet you it’s been a while. For me, it was upgrading to [Twitter Blue](https://help.twitter.com/en/using-twitter/twitter-blue), and I’m probably going to cancel it. I certainly pay for apps (e.g. [AllTrails](https://www.alltrails.com/), [Centered](https://www.centered.app/), [Copilot](https://copilot.money/), [Future](https://www.future.co/), and a few streaming services), but I’ve tried and discarded 10x more over the years. Consumers (e.g. you and me) are busy, distractible, always looking for something new. A couple of years ago, [GP Bullhound](https://docsend.com/view/fn3udv2wxzqrirw4) created this map of B2C subscription apps. How many are still thriving? A very small percentage. ![Image from How to win in consumer subscription](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/452ad144-54ec-4979-9fe0-535c1f0cb4d1_2470x1350.png) It’s brutal out there. But it’s not hopeless. There are a number of consumer apps that have stood the test of time, including some of my favorites: [Grammarly](https://www.grammarly.com/), [Duolingo](https://www.duolingo.com/), [Noom](https://www.noom.com/), [Calm](https://calm.com/), [Flo](https://flo.health/), [Future](https://www.future.co/), and [Spotify](https://www.spotify.com/). To answer your question, I went deep into these seven companies (along with a few up-and-comers like [Copilot](https://copilot.money/), [Centered](https://centered.app/), [Mighty Health](https://mightyhealth.com/), and [Greg](https://greg.app/)) to understand what it takes to win in the B2C subscription space. Here’s what stood out: 1. **An obsession with efficiency** 2. **Alignment between product strategy and acquisition strategy** 3. **A singular focus to build a magical, sticky product through rapid iteration and endless optimization** Below I’ll share stories and insights from each of these companies, but remember, a lot goes into building a successful company. Following all of this advice won’t guarantee you make it. In the end you still need to build something people want, continue to want, and make money doing it. But these tips will certainly help your odds. *Thank you, [Alex Ross](https://www.linkedin.com/in/alexross8/) ([Greg](https://greg.app/)), [Andres Ugarte](https://www.linkedin.com/in/andresugarte/) ([Copilot](https://copilot.money/)), [Artem Petakov](https://twitter.com/artemon) ([Noom](https://noom.com/)), [Cem Kansu](https://www.linkedin.com/in/cemkansu/) ([Duolingo](https://www.duolingo.com/)), [James Li](https://www.linkedin.com/in/lijames/) ([Mighty Health](https://mightyhealth.com/)), [Nick Lisher](https://www.linkedin.com/in/lish/) ([Flo](https://flo.health/)), [Nikhil Jhunjhnuwala](https://www.linkedin.com/in/nikhiljhunjhnuwala/) ([Noom](https://noom.com/)), [Rasmus Andersson](https://www.linkedin.com/in/rasmusandersson/) ([Spotify](https://www.spotify.com/)), [Rishi Mandal](https://www.linkedin.com/in/rmandal/) ([Future](https://www.future.co/)), [Ulf Schwekendiek](https://www.linkedin.com/in/sulfme/) ([Centered](https://www.centered.app/)), and [Yuriy Timen](https://www.linkedin.com/in/yuriytimen/) ([Grammarly](https://www.grammarly.com/)), for sharing their insights and advice with me for this post 🙏* ![Image from How to win in consumer subscription](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/63b45077-5325-4e87-a600-2d1d50e2bfb6_4096x2048.png) ### Pattern #1: Obsession with efficiency The most common thread across every company was an obsession with efficiency—staying small, keeping costs down, and getting profitable. They all stayed lean until they found strong product-market fit and, in many cases, far beyond that. In the case of Calm, an early employee shared that “for years, they had a hard time getting funding, so they were left with no alternative but to make the business profitable. They were obsessed with profitability, margins, and LTV/CAC. They kept the team size under 10, worked long hours in a one-bedroom apartment in San Francisco, and sharply questioned every outgoing dollar.” At Grammarly, [Yuriy Timen](https://www.linkedin.com/in/yuriytimen/) (ex-Head of Growth) shared a similar story: > #### “Grammarly was bootstrapped, so it could go really deep on R&D without the external pressure to launch too quickly. We remained self-funded for a while, which just built a culture and operating identity of being lean, efficient, and focusing on sustainable growth. If I had to guess, Grammarly was probably 2-4x leaner than other companies of comparable scale, which also allowed us to maintain profitability. This applied to hiring as well—Grammarly always paced its hiring goals based on its ability to maintain cultural cohesion and operational excellence.” Same with Noom, as [Artem Petakov](https://www.linkedin.com/in/artem-petakov-745a62b/) (co-founder) shared: > #### “We were all living and working in one apartment for two years.” [Nikhil Jhunjhnuwala](https://www.linkedin.com/in/nikhiljhunjhnuwala/) (VP of Growth at Noom) went deeper: > #### “We were very lean in the first few years. From 2016 to 2018, I don’t think the growth team had more than 10 people (across all of creative, marketing, growth product, etc.). For context, in late 2016 we started gaining traction, ending the year at $3-4M in revenue. > > #### Staying small forced us to develop hacking skills. I [a PM] was a top contributor to the growth repo. One growth marketer was responsible for all our spend, and always ruthlessly prioritizing. The experience helped define growth culture at Noom. > > #### I also think it helped that we targeted one-month payback, which allowed us to immediately reinvest money into our performance marketing engine, making us less reliant on raising money to grow. We started hiring significantly in 2019 after raising a round with Sequoia, once we were well past $60M in revenue/year.” And at [Future](https://www.future.co/), as [Rishi Mandal](https://www.linkedin.com/in/rmandal/) (CEO) shared: > #### “Efficiency, and the discipline to keep our team and footprint small, has allowed us to do something that I think category-creating consumer businesses have to be able to do, which is to be misunderstood for a number of years. > > #### When we started Future, we felt that the broader world (consumers, investors, our friends, the press) may not fully grasp why connected coaching is a game changer until we showed it to them at scale. With this in mind, we aimed to keep our team size and cost structure small so that we could fund years of patient development and growth. To compensate for this smaller size, we’ve hired a team of talented and experienced people, where each team member is trusted with a lot of scope and decision-making power.” It’s probably not a coincidence that the founders of all five of the biggest B2C subscription companies are immigrants: Noom and Grammarly’s founders were from Ukraine, Duolingo’s founder is from Guatemala, Calm’s from the U.K., and Spotify’s from Sweden. **Takeaway:** Stay as lean as possible, and focus on revenue over growth—at least until you’ve found PMF. ### Pattern #2: Alignment between product strategy and acquisition strategy The second most consistent pattern across these companies was an inseparable alignment between the product roadmap and the growth engine. Surviving in B2C is all about finding an efficient (aka cheap) growth channel. All of these five teams found a way to grow very efficiently—either through word of mouth or highly optimized paid ads. Grammarly’s growth strategy was to be everywhere: > #### “Grammarly’s product strategy was to sit across all your apps and writing environments (i.e. mobile keyboard, browser extension), so that immediately informed our rapid funnel and creative experimentation.” —[Yuriy Timen](https://www.linkedin.com/in/yuriytimen/) Duolingo, which was also driven almost exclusively by word of mouth, optimized for free user growth: > #### “By offering all of its learning content for free, Duolingo built a massive user base through word of mouth and no paid marketing. This also helped us build a growth revenue loop: Building a free and fun product → more users → more subscribers → more resources to improve our product → more users. > > #### Most B2C subscription products limit the free user experience heavily in order to grow subscribers. In my experience, this slows down organic growth, because only payers can use your product and tell their friends. > > #### Duolingo created a great free user experience, where no user had to pay to learn a language. It offered all of its learning content for free and only monetized additional features (like no ads, unlimited health etc.). Since the product was free to use, this business model created an organic growth engine.“ > > #### —[Cem Kansu](https://www.linkedin.com/in/cemkansu/), VP of Product at Duolingo As did Spotify, which found a lot of success with the freemium model: > #### “The bar for freemium models at the time was Skype, which converted about 7% of their users to pay at least something—maybe a dollar. We hit that in a few months, but it just continued from there. Past 10%, 15%, 20%—and we realized that we had stumbled on what might just be the most effective freemium model the world had ever seen.” > > #### —Gustav Söderström, chief R&D officer, via [Spotify: A Product Story](https://open.spotify.com/episode/7oB1UYZtOiKqY1Gj3niptG) Noom, which grew primarily through paid ads, focused on making it very easy for their teams to iterate and learn: > #### “We invested heavily in our testing infrastructure. For example, we built a sandbox environment designed to allow us to rapidly experiment (e.g. a modularized website, Optimizely, Mixpanel, etc.). > > #### To do this, we had stakeholder buy-in from the start, and super-high autonomy. The early growth team was fully resourced and autonomous: one PM, one eng, and one designer. We started experimenting with paid marketing (ads → funnel) and had full ownership of our tech stack. We didn’t have to bother anyone to get stuff done.” > > #### —Nikhil Jhunjhnuwala But be forewarned, the paid growth channel is very different these days, as [James Li](https://www.linkedin.com/in/lijames/) (founder of [Mighty Health](https://www.mightyhealth.com/), an exercise and nutrition app for adults 50+) pointed out: > #### “The paid acquisition landscape is more challenging than ever. With a saturated B2C app market, CPMs were already trending higher, but last year’s iOS 14 changes were the proverbial nail in the coffin. We’ve observed founder friends at companies of all sizes and budgets struggling with paid social. Some of the largest app companies (such as the ones you’re exploring) rode the wave of cheaper social ads in previous years but are struggling now; luckily, most were able to achieve escape velocity and build a big revenue base before it was too late. You can still get healthy ROAs on Facebook at lower budgets to kickstart things in the early days, but you’d better start finding some hit channels in referral/PLG or content/SEO (as you outlined in [the racecar framework](https://www.reforge.com/blog/racecar-growth-framework)) to get to the next level.” Though it’s not all bad news: > #### “One noteworthy tailwind that’s helping to offset some of the increase in CAC for earlier-stage subscription apps is that the cuts App Store and Play Store take are coming down, which boosts gross margins. Most big apps that are operating at scale and have web-based subscription options were seeing a blended gross margin of around 85% before 2022. Google Play now charges 15% for most apps, and the Apple App Store is 15% for your first $1M in revenue, so new apps can also now plan for gross margins of 85% and over time it should be possible to push that up to 90%+. There’s more pressure for that cut to come down even further, and Google Play [is testing a ‘user-choice’ third-party billing option with Spotify](https://newsroom.spotify.com/2022-03-23/spotify-and-google-announce-user-choice-billing/).” > > #### —[Alex Ross](https://www.linkedin.com/in/alexross8/), CEO of [Greg](https://greg.app/) **Takeaway:** Determine how you’ll grow (e.g. paid ads, word of mouth, or SEO) and then make sure your product roadmap is actively supporting this growth engine. ### Pattern #3: **A magical, sticky product through rapid iteration and endless optimization** More than simply “building something people want,” the bar for a sticky consumer subscription app is high. People get bored and quickly look for the next shiny thing. Every one of these apps did something unique to keep people coming back. For Noom, it was getting deep into human psychology: > #### “We used a lot of tactics to maximize and capitalize on motivation (behavioral economics, psychology, etc.). Our product isn’t ‘fun’—getting healthy is hard. Acquisition is part of the product—changing people’s minds.” —Nikhil Jhunjhnuwala Artem (co-founder of Noom) shared the same point on Twitter: For Duolingo, its special sauce was making the experience incredibly fun: > #### “Learning a language is hard, especially since it’s self-motivated learning. So we knew we had to create a fun experience in order to create a sticky product with good retention. We gamified language learning through many product features: mechanics like streaks and [leaderboards](https://twitter.com/cemkansu/status/1366165611496296451), or having our mascot Duo be your coach, or using design elements like progress bars. > > #### This helped us continuously increase our retention over the years, making Duolingo more fun and sticky. Every screen in our products is obsessed over many times by many people. You can see this throughout the product, where every screen takes Duolingo design principles seriously: every screen will have minimal text, be gamified, simple and intuitive etc. Even though this slows down how fast you can ship features, it’s key to creating a delightful product experience.” —Cem Kansu For Spotify, it was about creating magic: > #### “Every product needs a magic trick. It needs to do something that nobody thought was possible. It needs to pull off an illusion. For Spotify, that illusion was the illusion of having downloaded all of Napster to your hard drive, instantly accessible, for free. And it was totally captivating. It’s hard to overstate just how much the product itself, and this magic trick, mattered in convincing users, future employees, and the record industry to take a chance on Spotify. > > #### If you’re going to try to tear people out of an existing habit that already works for them, you need to be 10 times better—especially if that existing habit happens to be free, while you’re planning to charge $120 per year for it!” > > #### —Gustav Söderström via [Spotify: A Product Story](https://open.spotify.com/episode/7oB1UYZtOiKqY1Gj3niptG) > #### “We knew that Spotify had to be at least as good of a user experience as piracy. That meant very low playback latency (for example, 200ms was our limit for response to scrubbing in a song). It also meant that Spotify had to be a desktop app and that it would need to be familiar in the ways it worked (and so we made it mechanically similar to iTunes, Winamp et al.)” > > #### —Rasmus Andersson, ex-Head of Design at Spotify For Grammarly, it was to intensely focus on a very specific use case: > #### “One of the most important elements of Grammarly’s early success was nailing a narrow, strong PMF early. Specifically, this was ‘high-consequence writing,’ e.g. term papers, cover letters, business memos, public blog posts. We targeted them aggressively with custom creative, landing pages, and onboarding experiences.” > > #### —Yuriy Timen For [Future](https://www.future.co/), it was figuring out how to crack churn in a historically high-churn market: > #### “Besides retention simply being good for business, the history of consumer fitness has been a cycle of enthusiastic adoption followed by high churn (i.e. fitness fads). So if you want to invent something revolutionary in the space, the key thing to solve for is stickiness. > > #### We did this through rapid iteration. What we did early on was set an *insanely* high bar for our 3-month retention (relative to that characteristic curve above). Then we onboarded cohorts of members every 3 months. To make sure we weren’t tricking ourselves, each member was billed and reminded monthly (many subscription businesses don’t bother doing this; and this is still the case today—we even still remind members ~1 week *before* their first recurring charge). > > #### Our initial cohorts performed great, but their retention didn’t meet the insanely high bar we set. So we tweaked our offering and then did something pretty unusual. We actually fired perfectly happy paying members. We did this to keep our costs and complexity low (i.e. so that we didn’t have to expand our coaching team early on, and so we weren’t catering to different needs and customer journeys). Then we would onboard a new cohort, see better 3-month retention, tweak or improve, bring in a new cohort, and so on. We did this until we saw that, consistently, our 3-month retention was anomalously high. By that time, our members were so fiercely in love with their coach that we did start expanding our operations and keeping members on our service perpetually. Through that process we built high conviction that our delivery of connected coaching was unusually sticky, and we saw it reflected in long-term retention as those cohorts matured.” > > #### —**Rishi Mandal** For [Greg](https://greg.app/) (a plant care app), it’s about getting users to that “aha” moment as quickly as possible: > #### “A helpful mental model we use when designing the first-time user experience is to look at how long it takes a person to reach the ‘aha’ moment in our app. That’s the moment when the problem we solve and the role our app plays in a person’s life becomes crystal clear. It’s the best moment for magic. On Tinder, it’s when you get your first match. On Greg, it’s when you scan your first plant and learn all about it. Right now we’re redesigning this experience using augmented reality to really boost the ‘wow’ factor.” > > #### —**Alex Ross** Most important of all, across growth and product, is to figure out what’s *different* about your product or distribution very early on, as [Andres Ugarte](https://www.linkedin.com/in/andresugarte/) (CEO of [Copilot](https://copilot.money/)) pointed out: > #### **“**This is particularly important when you’re entering a crowded category but applies to any SaaS business. You either have a clever new way of finding users or you make your product hard to ignore. In our case, we started Copilot because we were frustrated with the quality of the apps in the space. So we focused on delighting users with a best-in-class app that would blow the competition out of the water. That’s our main driver for growth, retention, and engagement. Everything else is secondary.” And to build a loop that keeps them coming back: > #### “To have a successful subscription consumer app, you need to become a part of your users’ daily habits. A good way to measure this is DAU/WAU and DAU/MAU. Very early on, we iterated quickly on the feature set to find hooks that would bring people back organically. One that has worked really well for us is our ‘inbox zero’ experience for reviewing recent purchases. Users love it, and it creates a habit that brings them back into the app multiple times a week.” > > #### —[Andres Ugarte](https://www.linkedin.com/in/andresugarte/), CEO of Copilot To accomplish this, you need to create a culture of learning and rapid iteration. For example, Nikhil Jhunjhnuwala (VP of Growth at Noom) shared how the company operated in the early days: > #### “We optimized for *fast* learning, encouraged rapid experimentation, with nothing off-limits. For example: > > #### (1) We ran a lot of tests, up to six per week per PM at our highest velocity. More learnings led to improved performance faster. 90% of our ideas failed—we had to know quickly. > > #### (2) We made sure to always have an experiment running. Night/ weekend launches were common. Never waste your bottleneck resource. > > #### (2) We aimed for a large minimum detectable effect (MDE) and didn’t sweat the small stuff, e.g. only +20-30% improvements. > > #### I think companies underestimate the power of experimentation volume. There’s an assumption that quality (high effort) will increase win rate or size. Possibly, but you lose out on learnings that can be used to help you eventually figure it out. There’s an appropriate level of speed and quality depending on what you’re validating and risk; no one size fits all.” [Flo](https://flo.health/) had a similar philosophy, as [Nick Lisher](https://www.linkedin.com/in/lish/) (CMO) shared with me: > #### “Flo Health’s subscription product has incredibly low churn, which was only possible through relentless high-tempo testing of every aspect of the funnel. From user acquisition to onboarding to paywall, it has been essential not only in communicating these benefits but also in learning which benefits our customers want from a health app.” [James Li](https://www.linkedin.com/in/lijames/) ([Mighty Health](https://mightyhealth.com/)) also shared how important constant optimization has been for his company: > #### “We’ve found that it’s essential to focus on conversion rate optimization (CRO)—constantly iterating on and improving every step of your initial funnel, from the app store page to your paywall (and beyond). It’s a super-unsexy, disciplined process, running weekly sprints with multiple A/B tests and being conscientious about monitoring the metrics, but it leads to success over time. You have to be OK with most of your tests failing, but the 1 in 5 or 1 in 10 experiments that *do* win accrue to big gains over time. For example, we’ve recently had a string of failed experiments, but adding a ‘sizzle reel’ video of our most popular features to our onboarding flow last week increased conversion from account creation to start trial by over 50%.” Similarly, Ulf Schwekendiek (CEO of [Centered](https://www.centered.app/)) recently saw massive improvement from a small update to the website: > #### “We 2x’d our web conversions by stripping everything out above the fold (header links, platform-specific download link, et al.) and forcing new subscriptions into a single CTA.” But as [Cem Kansu](https://www.linkedin.com/in/cemkansu/) (VP of Product at Duolingo) reminds us, it’s important to think long-term: > #### “’Take the long view’ is an operating principle at Duolingo that we’ve stuck to for years. We believe it’s key to building a durable business. It means: if something works in the short term but hurts Duolingo in the long term, it’s not right. We make decisions that keep us moving toward our big goals. > > #### For example: If you offer subscription pricing that’s confusing to users, you might make more revenue in the short term from user confusion, but you’ll pay the price in the long term by losing your users’ trust. Instead, always do the right thing for your users and build things you will be proud of in 10 years.” **Takeaway:** Work backward from a magical app experience, and then continue to refine, iterate, and optimize until you get there. ## Bonus advice As a bonus, I asked every founder for any additional tactical advice. Here’s what they shared. #### 1. Encourage longer plans > “One of our biggest wins came from going from monthly to four-month plans, and offering add-ons right after signups when motivation is the highest for our customers. Interestingly, money is a strong lever for us. Even paying $1 up front will increase engagement and retention vs. $0.” > > —[Nikhil Jhunjhnuwala](https://www.linkedin.com/in/nikhiljhunjhnuwala/), Noom I heard similar stories from Calm and others. #### 2. Play with pricing > “An often-forgotten part of product-market fit is pricing. If you’re seeing conversion rates lower than benchmark, it can be easy to assume that consumers don’t want your product, while it could sometimes be an issue with pricing. > > Consumers are typically accustomed to paying $10-20/month at most for digital apps (ironically, usually anchored to the price of Netflix), so a higher price can be jarring. > > We’ve observed a trend of consumer apps pushing annual discounted pricing more and more aggressively (sometimes not even offering monthly prices anymore, like Calm) to improve revenue retention metrics and reinvest revenues into growth. We’ve also seen others do a lot of creative experimentation with their price points (e.g. Noom’s ‘name your own price’ option for the first month, giving users a sense of control). > > You have much more freedom to price-test by driving users to a web-based funnel than within the iOS subscription framework (where every pricing change needs to be approved and displayed).” > > —[James Li](https://www.linkedin.com/in/lijames/), Mighty Health #### 3. Add multi-player features > “By taking the SaaS product from single-player to multi-player, we increased our K factor organically.” > > —[Ulf Schwekendiek](https://www.linkedin.com/in/sulfme/), Centered #### 4. Unpack churn > “It’s critical to have a good understanding of what makes users churn; otherwise you’re going to have a leaky bucket that will become a problem once you start growing faster. But not all churn is created equal. You don’t have to make everyone happy; some users simply aren’t a good fit for what you’re offering. Focus instead of what you need to do in order to make your product stickier for your best users. Measure by cohorts to track your progress over time.” > > —[Andres Ugarte](https://www.linkedin.com/in/andresugarte/), Copilot #### 5. Explore B2B2C > “An interesting distribution strategy I’ve seen emerge is B2B2C. I think Calm and Headspace leveraged this by distributing their app through employee wellness groups. [Klima](https://klima.com/blog/the-next-big-update/) is testing that now. [Beam](https://beamimpact.com/) (not subscription-based) is scaling through an e-commerce integration with retailers, which has a lower barrier to entry than the native mobile app they started with.” > > —[Alex Ross](https://www.linkedin.com/in/alexross8/), Greg I hope this gives you enough to go on. Good luck! ### 📚 Further study 1. [2020 Consumer Subscription Software Insights](https://docsend.com/view/fn3udv2wxzqrirw4?__hssc=45195259.1.1599757901297&__hstc=45195259.0547c74be4e12ea2c32fa878c57a99ed.1599757901297.1599757901297.1599757901297.1&__hsfp=3942711842&hsCtaTracking=07aefb9e-c575-410d-8d5d-88afc155de51%7C11a5bf2d-8ba8-4f2c-9250-d5a0ab74ea26) by GP Bullhound 2. [What is a good payback period](https://www.lennysnewsletter.com/p/payback-period?s=w) 3. [What is good retention](https://www.lennysnewsletter.com/p/what-is-good-retention-issue-29?s=w) 4. [From Onboarding to Healthy Habits, Noom’s Growth Is Powered by Psychology](https://breakoutgrowth.net/2021/02/02/podcast-from-onboarding-to-healthy-habits-nooms-growth-is-powered-by-psychology/) 5. [Spotify: A Product Story](https://open.spotify.com/show/3L9tzrt0CthF6hNkxYIeSB) podcast 6. [Consumer Subscription KPI Benchmarks: Retention, Engagement, and Conversion Rates](https://medium.com/parsa-vc/consumer-subscription-kpi-benchmarks-retention-engagement-and-conversion-rates-9ac13b57c3d3) by Parsa Saljoughian 7. [The Racecar Growth Framework](https://www.reforge.com/blog/racecar-growth-framework) *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to win in consumer subscription](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 Featured job openings** 1. **Wethos:** [Director of Fintech Product Operations](https://www.lennysjobs.com/jobs/a9a10752-0952-4ca7-9116-924dd0a4d0ca) (Remote) 2. **Roofstock:** [Senior Product Manager](https://www.lennysjobs.com/jobs/89098663-b9f7-414b-b374-b76111d93917) (Remote) 3. **Clipboard Health:** [Growth Strategy and Marketing Manager](https://www.lennysjobs.com/jobs/82ed8c6a-418a-44e3-9b37-fff54792ba6f) (Remote) 4. **Around:** [Product Manager](https://www.lennysjobs.com/jobs/942a7802-9e65-40ed-bced-cb939e6cfa32) (Remote) 5. **Karate Combat:** [Founding Product Manager](https://www.lennysjobs.com/jobs/bb059354-70d4-41de-a0b0-77b51067a817) (Remote) 6. **Balance Homes:** [Founding Product Manager](https://www.lennysjobs.com/jobs/b9e8f81a-ae8c-427b-8072-71097b7c3197) (Remote) 7. **Ellis:** [Software Engineer](https://www.lennysjobs.com/jobs/dbba97cd-8552-4e1f-96d2-f6092bdff5a5) (Remote) 8. **Clipboard Health:** [Engineering Manager](https://www.lennysjobs.com/jobs/299a6ac5-8435-4596-8262-b29c15c7613f) (Remote) ## **🧠 Inspiration for the week ahead** **1. Listen:** [Jeff Jordan—Building & Investing in Marketplaces, with Patrick O’Shaughnessy](https://podcasts.apple.com/us/podcast/jeff-jordan-building-investing-in-marketplaces/id1154105909?i=1000560238242) 2. **Watch:** [Geometry](https://www.instagram.com/p/CcdXnTVFnLB/) via Tim Ferriss [geometriasagrada](https://instagram.com/geometriasagrada) [![Image from How to win in consumer subscription](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/__ss-rehost__IG-CcdXnTVFnLB.jpg)](https://instagram.com/p/CcdXnTVFnLB) A post shared by Geometria Sagrada ([@geometriasagrada](https://instagram.com/geometriasagrada)) **3. Look:** Most detailed image of a human cell to date **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [19/44] Product management career ladders > ## Q: I’m working on our product management career ladder, and I’m looking for examples of how other companies do it. Career ladders (a.k.a. leveling frameworks, career tracks, competencies, etc.) have long been secretive and mysterious. I’m not totally sure why. I don’t see how sharing these publicly gives anyone a competitive advantage, and every new company ends up scratching their heads and coming up with something new. Why do we do this to ourselves? It’s especially painful for product management—a role that is already so inconsistently defined and evaluated. Let’s change this. I’ve collected dozens of career ladders from all of the big companies, and though I’m not at liberty to share them fully, below, I’m going to share the high-level frameworks of how 20+ large companies structure their PM role: - Titles at each level - Attributes/competencies/skills they evaluate for - Where the IC and manager tracks split - A handful of public career ladders - A bunch of templates to get you started [Check it out](https://docs.google.com/spreadsheets/d/1F1Y3YtjsvAJUZMqS-rK0LGQGg7eHYubq9KqedPwLCDE/edit) ![Image from Product management career ladders](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/647c0676-ca07-4b58-b4a2-6804b26ec1e0_2422x1194.png) **If you’d like to contribute to this effort by adding your company, or fix a mistake (I’m sure I got something wrong), please [DM me](https://twitter.com/lennysan) or [leave a comment](https://www.lennysnewsletter.com/p/product-management-career-ladders/comments).** ### Takeaways from reviewing these career ladders 1. Two-thirds of companies have both an IC track and a manager track. 2. When there’s a manager track, you can switch at L6 (i.e. Sr. Product Manager) 3. The most common title sequences: 1. **IC:** Associate Product Manager (L3) → Product Manager (L4-L5) → Sr. Product Manager (L6) → Principal Product Manager (L7) 2. **Manager:** Group Product Manager (L7) → Director of Product Management (L8) → Sr. Director of Product Management (L9) → VP (L10) 3. **Single track:** Associate Product Manager (L3) → Product Manager (L4) → Sr. Product Manager (L5) → Group Product Manager (L6) → Director of Product Management (L7) → Sr. Director of Product Management (L8) → VP (L9) 4. Most common attributes/competencies/skills (in order): 1. Leadership 2. Impact 3. Scope 4. Execution 5. Communication 6. Vision 7. Strategy 8. Collaboration 9. Planning 10. Technical skills 5. Four companies (Stripe, Airbnb, Lyft, and Facebook) try to avoid title inflation and stick to “Product Manager” for the majority of IC levels. Stripe officially sticks to the “Product Manager” title at every level. 6. Two-thirds of companies have an APM role 7. Two-thirds have a “Principal PM” role 8. Over 80% have a “Senior PM” role 9. Only 25% have a Lead PM, or Product Lead, role **If you see any other trends in this data, or would like to contribute to the effort by making your company’s PM ladder public, please [DM me](https://twitter.com/lennysan) or leave a comment.** [Leave a comment](https://www.lennysnewsletter.com/p/product-management-career-ladders/comments) ### 📚 Further study 1. [Career ladder templates](https://docs.google.com/spreadsheets/d/1fEY8JnLhvjci1F-twKOFK7gh8Z0SwXCdMxOxXrXZEhw/edit#gid=1925149295) 2. [Levels.fyi](https://www.levels.fyi/) 3. [Progression.fyi](https://progression.fyi/?discipline=Product+Management) 4. [Skills PMs need to build](https://www.lennysnewsletter.com/p/jobs-of-product-manager?s=w) *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 **If you’re hiring:** [Join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of hand-curated world-class product and growth people who are open to new opportunities. ![Image from Product management career ladders](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) **If you’re looking for a new gig:** Join to get personalized opportunities from hand-selected companies. I only accept companies I’m confident you’ll be excited to hear from. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 Featured job openings** 1. **Firstbase:** [Business Lead, Fintech](https://www.lennysjobs.com/jobs/06fe3597-dd58-4979-93d7-03ee8a0dbe24) (Remote) 2. **Weights & Biases:** [Growth Project Manager](https://www.lennysjobs.com/jobs/c0dab35d-dbb5-47a5-92cc-df0cde2ca009) (Remote) 3. **Wethos:** [Director of Fintech Product Operations](https://www.lennysjobs.com/jobs/a9a10752-0952-4ca7-9116-924dd0a4d0ca) (Remote) 4. **Roofstock:** [Senior Product Marketing Manager](https://www.lennysjobs.com/jobs/89098663-b9f7-414b-b374-b76111d93917) (Remote) 5. **Clipboard Health:** [Engineering Manager](https://www.lennysjobs.com/jobs/299a6ac5-8435-4596-8262-b29c15c7613f) (Remote) 6. **Balance Homes:** [Founding Product Manager](https://www.lennysjobs.com/jobs/b9e8f81a-ae8c-427b-8072-71097b7c3197) (Remote) 7. **Web3 Sports:** [Founding Product Manager](https://www.lennysjobs.com/jobs/bb059354-70d4-41de-a0b0-77b51067a817) (Remote) 8. **Around:** [Product Manager](https://www.lennysjobs.com/jobs/942a7802-9e65-40ed-bced-cb939e6cfa32) (Remote) 9. **Clipboard Health:** [Growth Strategy and Marketing Manager](https://www.lennysjobs.com/jobs/82ed8c6a-418a-44e3-9b37-fff54792ba6f) (Remote) ## **🧠 Inspiration for the week ahead** 1. **Read:** *[Talent: How to Identify Energizers, Creatives, and Winners Around the World](https://www.amazon.com/Talent-Identify-Energizers-Creatives-Winners-ebook/dp/B08R2KNYVX/ref=sr_1_2?crid=4MXLSF8KWBMZ&keywords=talent&qid=1653361090&sprefix=talent%2Caps%2C300&sr=8-2)* by Tyler Cowen and Daniel Gross 2. **Learn:** [GoodUI—Improve Your UI with Winning & Losing A/B Tests](https://goodui.org/patterns/) 3. **Watch:** [Elon Musk on Twitter’s bot problem, SpaceX’s grand plan, Tesla stories, Giga Texas & more](https://www.youtube.com/watch?v=CnxzrX9tNoc) [Watch on YouTube](https://www.youtube.com/watch?v=CnxzrX9tNoc) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [20/44] I’ve launched a podcast! ## I’m so damn excited to introduce… ![Image from I’ve launched a podcast!](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3b37edcc-a067-422e-8567-603209266a64_4000x4000.png) If you like the newsletter, you’ll love this podcast. FWIW, I tried to call it something more creative, but [y’all convinced me](https://twitter.com/lennysan/status/1518359053595934722) to go with the obvious choice 😛 Each week, I’ll be interviewing world-class product leaders and growth experts to uncover concrete, actionable, and tactical advice to help you build, launch, and grow your own product. Here’s a peek at who I’ve got lined up over the first couple of months: ![Image from I’ve launched a podcast!](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/747d4163-5c07-42d8-8213-f5ec3bb21ab9_4048x2646.png) This won’t be about theory or pontification—like the newsletter, it’ll always be focused on real, practical stuff. And unlike the newsletter, I’ll be able to get really deep with the world’s most experienced builders, operators, and teachers to help you learn from their experiences and insights to inform your own thinking. Over time, the lineup will be a mixture of people you already know and love along with people who are under-the-radar but amazing. **Catch every episode by subscribing today using your favorite podcasting app:** ![Image from I’ve launched a podcast!](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/79535206-d335-4099-a007-af5f1fd2613a_1888x499.png)![Image from I’ve launched a podcast!](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2d5314a1-43f1-40dd-bf69-55cb693282d5_1015x260.png) Also find it on [Pocket Casts](https://pca.st/fbemlhd4), [Google Podcasts](https://podcasts.google.com/feed/aHR0cHM6Ly9hcGkuc3Vic3RhY2suY29tL2ZlZWQvcG9kY2FzdC8xMDg0NS5yc3M), [Amazon](https://music.amazon.com/podcasts/83671d19-a1c5-4351-9cde-eba687a34675/lennys-podcast-product-growth-career), and [the raw RSS feed](https://api.substack.com/feed/podcast/10845.rss). ### **Best of all, you can listen to the first two episodes right now!** ![Image from I’ve launched a podcast!](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3c769975-69a4-4718-ad40-d7629e3313b0_4096x4096.png) Julie is a former VP of Design at Facebook and author of *The* *Making of a Manager*, and in our chat we talk about career growth, imposter syndrome, writing, building product sense, using intuition vs. data, hiring designers, moving into management, and more. [Listen to Julie Zhuo](https://podcasts.apple.com/us/podcast/episode-2-julie-zhuo/id1627920305?i=1000565522448) ![Image from I’ve launched a podcast!](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/64ca803d-df58-475d-a1ac-132c6d38781c_4096x4096.png) Shreyas PM’d at Twitter, Google, Yahoo, and Stripe, both as an IC and a manager, and since leaving has amassed a huge Twitter following thanks to the mind-expanding insights he frequently shares on the art of product management. In our chat, we go deep into five of the most insightful topics that he’s shared on Twitter. [Listen to Shreyas Doshi](https://podcasts.apple.com/us/podcast/episode-3-shreyas-doshi/id1627920305?i=1000565522145) **Catch every episode by subscribing today:** ![Image from I’ve launched a podcast!](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/79535206-d335-4099-a007-af5f1fd2613a_1888x499.png)![Image from I’ve launched a podcast!](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2d5314a1-43f1-40dd-bf69-55cb693282d5_1015x260.png) Also: [Pocket Casts](https://pca.st/fbemlhd4), [Google Podcasts](https://podcasts.google.com/feed/aHR0cHM6Ly9hcGkuc3Vic3RhY2suY29tL2ZlZWQvcG9kY2FzdC8xMDg0NS5yc3M), [Amazon](https://music.amazon.com/podcasts/83671d19-a1c5-4351-9cde-eba687a34675/lennys-podcast-product-growth-career), and [the raw RSS feed](https://api.substack.com/feed/podcast/10845.rss). If you’d like to suggest a guest, explore sponsoring the podcast, or share feedback, email [podcast@lennyrachitsky.com](mailto:podcast@lennyrachitsky.com). Finally, I’m super-new to this podcasting thing, so please bear with me as I learn how to do this 😬 And I’d absolutely love to hear your feedback, suggestions, and questions once you listen 👇 [Leave a comment](https://www.lennysnewsletter.com/p/ive-launched-a-podcast/comments) That’s it! Now go listen to the podcast! *Thank you to [Melissa Perri](https://produxlabs.com/product-thinking), [James Beshara](https://belowthelinepod.com/), and [Hanne Winarsky](https://twitter.com/omnivorousread) for a bunch of podcasting guidance, [Jess Nguyen](https://www.linkedin.com/in/njessnguyen/) for help craft our show notes, and a very special thank-you to [Harry Stebbings](https://twitter.com/HarryStebbings?) for most encouraging me to take the leap and offering priceless advice along the way 🙏😍* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from I’ve launched a podcast!](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 [Featured job openings](https://www.lennysjobs.com/)** 1. **Scratchpad:** [Senior Product Manager](https://www.lennysjobs.com/jobs/c4039341-f2c6-4ac9-bc69-7b52c457f621) (Remote) 2. **Net32:** [Senior Product Designer](https://www.lennysjobs.com/jobs/b4a61fe4-0676-469c-8131-af743ca536bc) (Remote) 3. **Joby Aviation:** [Air Taxi Product Manager-Operations](https://www.lennysjobs.com/jobs/6e99a528-2443-435f-bd43-a86d437f6ff2) (Santa Cruz, CA) 4. **Firstbase.io:** [Business Lead, Fintech](https://www.lennysjobs.com/jobs/06fe3597-dd58-4979-93d7-03ee8a0dbe24) (Remote) 5. **Weights & Biases:** [Growth Project Manager](https://www.lennysjobs.com/jobs/c0dab35d-dbb5-47a5-92cc-df0cde2ca009) (Remote EU) 6. **Wethos:** [Director of Fintech Product Operations](https://www.lennysjobs.com/jobs/a9a10752-0952-4ca7-9116-924dd0a4d0ca) (Remote) 7. **Roofstock:** [Senior Product Marketing Manager](https://www.lennysjobs.com/jobs/89098663-b9f7-414b-b374-b76111d93917) (Remote) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [21/44] How to build trust in a marketplace > ## Q: I’m building a marketplace startup. How do I build trust for my new marketplace? Convincing people to get into the car of, send money to, or meet, a complete stranger is a hard problem, rooted in our evolution. > #### “Throughout human history, we have distrusted people outside our clan, our tribe. We believe strangers will do us harm. Why? In deep time, hominids outside the family group were likely to be a raiding party.” —[Gordon H. Orians](https://www.amazon.com/gp/product/B00J0U6J4C/ref=dbs_a_def_rwt_bibl_vppi_i0) A lack of trust is why many marketplaces have struggled (e.g. Couchsurfing) and why those that cracked the trust problem (e.g. Airbnb) have gone on to do exceptionally well. To give you a comprehensive answer, I got in touch with the founders and early growth leaders at a dozen of today’s most successful marketplaces, including [Lyft](https://www.lyft.com/), [Thumbtack](https://thumbtack.com/), [Rover](https://www.rover.com/), [Shef](https://shef.com/), [Peerspace](https://www.peerspace.com/), [Snackpass](https://www.snackpass.co/), [Good Dog](https://gooddog.com/), and [Udemy](https://udemy.com/), and asked them what they found to be the *most* effective way to build trust in their marketplace early on. I was surprised by the variety of answers. I was expecting to hear “reviews” and maybe a couple of other tactics. Instead I found six effective ways to build trust in a new marketplace: 1. **Reviews** 2. **Verifying your supply** 3. **Leaning on social proof** 4. **Creating a perception of quality** 5. **Providing a safety net** 6. **Delivering magic** Let’s explore each in a bit more depth. *Thank you to [Alvin Salehi](https://www.linkedin.com/in/alvinsalehi/) (Shef), [Archie Abrams](https://www.linkedin.com/in/archie-abrams-b6aa8b6/) (Udemy), [Evan Goldin](https://www.linkedin.com/in/evangoldin/) (Lyft), [Lauren McDevitt](https://www.linkedin.com/in/laurenmcdevitt/) (Good Dog)**,** [Matt Bendett](https://www.linkedin.com/in/bendett/) (Peerspace), [Kevin Tan](https://www.linkedin.com/in/kevinhuangtan/) (Snackpass), [Philip Kimmey](https://www.linkedin.com/in/philipkimmey/) (Rover), and [Sander Daniels](https://www.linkedin.com/in/sander-daniels/) (Thumbtack) for sharing their insights with me for this post 🙏* ### 1. Reviews Reviews, as expected, were the most frequently cited strategy for building trust. They’re essentially table stakes these days. Here’s Joe Gebbia (co-founder of Airbnb) talking about the power of reviews for Airbnb’s early success (~90 seconds long): [Watch on YouTube](https://www.youtube.com/watch?v=16cM-RFid9U) [Alvin Salehi](https://www.linkedin.com/in/alvinsalehi/) (co-founder of [Shef](https://shef.com/)) shared a similar lesson: > #### “For the longest time, we only had star ratings on our platform. But we found that ratings alone weren’t enough to help customers make efficient decisions. As a result, we also began publishing full text reviews *and* photos of the dishes that were being reviewed to help customers avoid the paradox of choice and make well-informed decisions more quickly, which has had a positive impact on acquisition and retention.” ![Image from How to build trust in a marketplace](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/1b1fbf06-009f-49f1-b569-a09555fabf58_3456x1948.png) [Matt Bendett](https://www.linkedin.com/in/bendett/) (co-founder of [Peerspace](https://peerspace.com/)) had the same experience building Peerspace, but with a twist: > #### “Initially, we started simple and built a mutual review system that was thorough, easy to complete, and required both sides to leave a review in order to transact again. That meant reviews didn’t expire and hosts needed to review their guests to accept their next inquiry. Perhaps not the friendliest UX, but this force-enabled early trust and social proof that propelled the marketplace forward.” Same for [Thumbtack](https://thumbtack.com/), as [Sander Daniels](https://www.linkedin.com/in/sander-daniels/) (co-founder) shared with me: > #### “We built reviews into the product from day one.” [Lauren McDevitt](https://www.linkedin.com/in/laurenmcdevitt/), co-founder of [Good Dog](https://gooddog.com/), found that traditional reviews alone weren’t enough, so they made them more personal: > #### “When we talked to our users, we found a lot of distrust in review systems. So instead, we focused on telling the meaningful stories of our users through a feature called ‘Verified Owner Stories’, where new dog owners are able to share detailed information and photos about their interactions with their breeder on our platform. The little details shared like, ‘they sent a blanket and photo book home with my puppy’ show the warmth and care our community puts into their work, leading to a more authentic feeling of trust and quality.” ![Good Breeder Dashboard](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a077e66f-1610-4615-a48e-88c1fc384464_2880x1878.png) And at [Udemy](https://www.udemy.com), [Archie Abrams](https://www.linkedin.com/in/archie-abrams-b6aa8b6/) (early growth leader) found that the volume of reviews created an unexpected tension: > #### “There’s an interesting tension in something like number of ratings and the number of students. Look at the screenshot below. By putting the number of ratings in the review, you signal to the student you can trust this (good), but you also make the increments (i.e. courses with a lot of ratings) much more entrenched, hurting trust with instructors (particularly new ones). This was a constant balancing act.” ![Image from How to build trust in a marketplace](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/02af7a06-7c2a-487f-aed2-aeb176744fd9_1437x864.png) If you have a trust issue and you don’t have a review system—the path is clear. ### 2. Verify your supply The second most frequently cited strategy for building trust was to take steps to verify that your supply meets a certain level of quality, or safety. And that makes sense. People will trust your marketplace if you’ve taken steps to make it trustworthy. For [GOAT](https://www.goat.com/) (and [StockX](https://stockx.com/)), verifying supply was the core of their entire strategy. Here’s Eddy Lu’s early thinking (via *[Input](https://www.inputmag.com/style/goat-ceo-eddy-lu-interview-sneaker-apparel-resale-covid-19-coronavirus)* [magazine](https://www.inputmag.com/style/goat-ceo-eddy-lu-interview-sneaker-apparel-resale-covid-19-coronavirus)): > #### “Why don’t we build a marketplace based on trust and safety so that no consumer has to ever have the experience that you just had of spending hundreds of dollars on a pair of shoes and get something that’s not authentic.” And here’s how they do it: > #### “If you want to sell sneakers or any apparel on GOAT, for instance, you first have to be approved by a team that looks into your personal Twitter or Instagram account to ensure you’re an actual person and that you have a history of selling goods online. Then, before someone posts an item for sale, they have to send pictures to GOAT, which uses a combination of image recognition and machine learning to spot details that will ensure its authenticity. The final step in the process comes when the sneakers or clothes arrive in one of GOAT’s authentication centers across the world, when they’re inspected one last time by a human before they get shipped to the buyer if there are no issues with the product.” —[Edgar Alvarez Barajas,](https://www.inputmag.com/style/goat-ceo-eddy-lu-interview-sneaker-apparel-resale-covid-19-coronavirus) *[Input](https://www.inputmag.com/style/goat-ceo-eddy-lu-interview-sneaker-apparel-resale-covid-19-coronavirus)* [magazine](https://www.inputmag.com/style/goat-ceo-eddy-lu-interview-sneaker-apparel-resale-covid-19-coronavirus) Good Dog similarly built their reputation on the quality of their supply, and thus required specialized training to do their verification of dog breeders: > #### “Vetting a source for a dog requires expertise that most people looking for a dog don’t have. What signals should you look for when assessing a dog breeder, shelter, or rescue to ensure you’re getting a dog from a source with responsible practices? We found that prior to Good Dog, people were attempting to make judgment calls based on their own intuition, which left them feeling unsure and uncomfortable. Our team is prepared and trained to make those judgment calls, which means potential owners feel safer on the platform and the breeders, shelters and rescues feel proud to support our community and mission.” > > #### —[Lauren McDevitt](https://www.linkedin.com/in/laurenmcdevitt/), co-founder For [Thumbtack](https://thumbtack.com/), verifying its supply (aka their “pros”) through background checks was instrumental in its early success, as co-founder [Sander Daniels](https://www.linkedin.com/in/sander-daniels/) shared: > #### “To create trust early on, we built a number of trust and safety mechanisms into the product, including background checks for pros. We awarded and displayed badges on pro profiles for going through stages of our trust and safety process that verified their identity and work quality. This significantly helped build trust in the marketplace.” As it was for [Rover](https://www.rover.com): > #### “Two things we’ve done for a long time that most helped create a sense of trust in the marketplace: > > #### 1. Background checks > > #### 2. Manual profile review for all sitters applying to the platform > > #### There’s lots of other stuff we do, but those two we’ve been doing for most of Rover’s history, and are likely the most impactful.” > > #### —[Philip Kimmey](https://www.linkedin.com/in/philipkimmey/), co-founder You can read about how Rover does this [here](https://support.rover.com/hc/en-us/articles/206693486-How-does-the-sitter-profile-review-process-work-). Is there something you can do to “verify” the quality of your supply? ### 3. Lean on social proof A surprising number of founders referenced social proof as the most important ingredient in their early trust-building efforts. For example, [Snackpass](https://snackpass.com/): > #### “We primarily built trust by piggybacking on social proof and authority. We partnered with names that people were already familiar with—university sports teams, student clubs, frats and sororities, flagship restaurants.” > > #### —[Kevin Tan](https://www.linkedin.com/in/kevinhuangtan/), CEO And Udemy: > #### **“For instructors, the** key tactic was making a few instructors a ton of money (i.e. $1mm+) and then leveraging that as social proof for other instructors. This did have some trust-draining effects for instructors who didn’t achieve that success (selling the dream vs. reality), but the social-proof effects built trust that Udemy could, theoretically, deliver a massive outcome for you ... therefore, a lot of instructors signed up.” > > #### —[Archie Abrams](https://www.linkedin.com/in/archie-abrams-b6aa8b6/), early growth leader In a sense, reviews are a form of social proof, as [Matt Bendett](https://www.linkedin.com/in/bendett/) (Peerspace) rightfully pointed out: > #### “Reviews create social proof—and they propelled our marketplace forward.” How can you leverage social proof to build trust among your target audience? ### 4. Create a perception of quality A somewhat higher-level strategy—to invest in creating a perception of quality—proved essential to a handful of the marketplaces I researched. For Airbnb, free high-quality professional photos of homes, along with host profile photos, contributed to an immediate feeling of trust for new visitors, as Joe Gebbia [shared with Guy Raz](https://www.npr.org/transcripts/478563991): > #### “Our design mantra at that time was fun and friendly. So anytime we could show a face in our service, we would—in search results, on profiles, on the actual homepage. I think the tone of voice that we used also engendered trust—and even some, like, maybe subtle things like the color palette. > > #### One of the important ways to build trust when two people are meeting for the first time is to encourage them to have the right amount of disclosure. And when a guest first sends a message to a host inquiring about their home, we can look at it and see what’s too short and what’s too long. > > #### So if somebody writes and says, ‘Hey, yo,’ the acceptance rate typically goes down. And if they write something that’s too long—it’s like a novella—their acceptance rates also go down. And so there’s a zone that’s just right, which is the ‘Hey, coming for vacation with my family, and man, I love the artwork in your place,’ et cetera, et cetera.” While working on this post, I came across [a study](https://www.sciencedirect.com/science/article/abs/pii/S0261517716300127) that looked into the impact of just profile photos on conversion. As expected, here was their takeaway: > #### “We suggest that the presence of [host profile] photos can have a significant impact on guests’ decision making. Specifically, we contend that guests infer the host’s trustworthiness from these photos, and that their choice is affected by this inference.” [Alvin Salehi](https://www.linkedin.com/in/alvinsalehi/) (co-founder of [Shef](https://shef.com/)) shared the same lesson from his experience building Shef: > #### “High-quality photos are incredibly important for building trust with customers, especially in the food industry. From day one, we over-indexed on processes that enabled ‘shefs’ to upload beautiful photos of their amazing dishes, and it’s been instrumental for new user conversion.” ![Image from How to build trust in a marketplace](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/86681d67-0ad2-495b-aadc-4f4034492da2_3456x1870.png) Beyond photos, there are other ways to create quality. Udemy found that price (i.e. a high price) also created a perception of quality, and thus helped build trust: > #### **“For students, price** was an important trust signal. We **purposely** had instructors set their prices very high ($199). High prices signal value—‘If it’s this much, I can trust it!’ Then we discounted it down to $10. Because we split revenue with instructors on the sales price ($10), it was fine for our margins. Students trusted the high price to indicate quality.” > > #### —[Archie Abrams](https://www.linkedin.com/in/archie-abrams-b6aa8b6/) And Good Dog found that transparency and education made a big impact: > #### “We’ve found science-backed, easy to understand educational content to be incredibly powerful for building trust. As an example, I recently had a friend tell me that Good Dog helped him **not** get a dog. He said that thanks to us he learned that this likely isn’t the best moment for him to add a dog to his family and so he decided to wait, but talked about how much more eager he is to use the platform thanks to that experience.” > > #### —[Lauren McDevitt](https://www.linkedin.com/in/laurenmcdevitt/), co-founder ![Image from How to build trust in a marketplace](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fc7cedb4-77d3-410e-9a69-379e7a43daaf_2778x3153.png) What’s one change you can make to your site to improve the perception of the quality of your marketplace? ### 5. Protection if something goes wrong A somewhat obvious, but still underappreciated, lever for building trust is to create a safety net—to help your users feel protected if/when something goes wrong. Airbnb famously introduced a [$1 million Host Guarantee](https://allthingsd.com/20120522/airbnb-will-now-cover-up-to-1m-worth-of-property-damage/) after a guest had a [horrible experience](https://allthingsd.com/20110729/airbnbs-rental-nightmare-ends-in-arrest-and-one-still-very-unlucky-renter/), and today most marketplaces have some sort of protection, including [Rover](https://www.rover.com/rover-guarantee/), [Swimply](https://swimply.zendesk.com/hc/en-us/articles/1500000533142-Swimply-Protection-Guarantee#:~:text=a%20Swimply%20reservation.-,The%20program%20provides%20protection%20in%20the%20unfortunate%20event%20that%20a,registered%20hosts%20are%20legally%20liable.), [Outdoorsy](https://www.outdoorsy.com/help/physical-damage-coverage-for-outdoorsy-owners-us-rentals), and [Peerspace](https://www.peerspace.com/blog/peerspace-host-insurance/#:~:text=When%20a%20host%20opens%20their,our%20hosts%20to%20feel%20secure.): > #### “Early on, we found many hosts wanted peace of mind when it came to transacting with strangers online. After a lot of searching, we partnered with a forward-thinking insurance company to build a custom policy that protected suppliers from liabilities for events that would not be traditionally covered.” > > #### —[Matt Bendett](https://www.linkedin.com/in/bendett/), co-founder What’s your users’ biggest fear, and how can you assuage it with a policy or guarantee? ### 6. Deliver magic Finally, and arguably the most powerful lever in building trust long-term, is to actually deliver on your promise as a marketplace, and deliver an experience that blows your users’ minds. > #### “For [Thumbtack] pros, the magic moment is when they get hired and paid for their first job. ‘Wow, Thumbtack is really growing my business!’ > > #### For consumers, the magic moment was when they used Thumbtack to hire someone better than they could’ve found through word of mouth. ‘Wow, maybe Thumbtack is a better place to find a pro than my personal network!’ > > #### Getting to both of those moments was accelerated by having liquidity in the marketplace. The more consumers in the marketplace, the faster a pro could get hired and paid. The more pros in the marketplace, the higher the likelihood of finding the right pro for them. > > #### That’s why in the early days we focused above all on building liquidity in the marketplace. The more the supply and demand in the marketplace, the more trusted we were.” > > #### —[Sander Daniels](https://www.linkedin.com/in/sander-daniels/), co-founder Same for Lyft: > #### “The high-level story of Lyft, I think, is taking a ride experience that was *super*-unpredictable and making it super-predictable. > > #### If you rewind to 2010, taking a cab somewhere would generally involve **not knowing** (1) who was going to pick you up, (2) what route they would take, (3) their ETA or current location as the pickup time approached, (4) any information about the driver, like what other riders thought of them, (5) what vehicle they were driving or how many seats it had, (6) how to get in touch with them, or (7) what the ride would cost! > > #### Now all of those things have been solved for and are known. In the early days, though, just providing most of them—live location, ETA, driver rating, vehicle, a contact method—was a huge step up for everyone and gave riders a huge sense of trust.” > > #### —[Evan Goldin](https://www.linkedin.com/in/evangoldin/), first PM If you have a trust issue, it may be because you simply aren’t delivering on your core promise. ### Bonus strategy: Highlight differentiation Although this insight from Lyft didn’t fit into any of the buckets above, I wanted to share it anyway. Evan Goldin (first PM at Lyft) made the point that focusing on what made Lyft *different*,as compared with a regular taxi experience, went a long way in creating trust in its ridesharing experience: > #### “We were trying to communicate that this was a *different* type of ride than getting a taxi. It was supposed to feel like ‘a friend with a car’ picking you up, and we designed the ride experience accordingly, for example: > > #### 1. It’s almost completely gone away by now, but in the early days, riders were strongly encouraged to sit in the front seat (especially if it was a solo trip). This helped break the ice, make the ride feel different, and make it feel like your friend was picking you up. It also helped improve ride navigation, which was important in the early days when we didn’t have in-app nav. > > #### 2. Payments were optional. Obviously most people paid 100% or more of the suggested amount, but it was truly optional to pay, and that helped make it feel like a different kind of ride.” > > #### —[Evan Goldin](https://www.linkedin.com/in/evangoldin/) In your messaging and positioning, could you emphasize why your experience is *different*, vs. simply better? I hope this gives you enough to go on to build trust in your own marketplace. I’d love to hear if there’s anything else you’ve found to be effective in building trust—share it here so everyone else can learn from your experience 👇 [Leave a comment](https://www.lennysnewsletter.com/p/how-to-build-trust-in-a-marketplace/comments) ### 📚 Further study 1. [How Airbnb designs for trust, by Joe Gebbia](https://www.youtube.com/watch?v=16cM-RFid9U) [Watch on YouTube](https://www.youtube.com/watch?v=16cM-RFid9U) 2. [Why marketplaces fail](https://www.lennysnewsletter.com/p/why-marketplaces-fail?s=w) 3. [Four Paths to Marketplace Success](https://a16z.com/2020/02/20/marketplace-engagement/) by D’Arcy Coolican *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to build trust in a marketplace](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 Featured job openings** 1. **Ashby:** [First Lead UX Designer](https://www.lennysjobs.com/jobs/3f84ab83-6078-4607-b55b-d107a3674e1f) (LA, SF, West Vancouver, Austin, Texas, Tribeca) 2. **Wethos:** [Director, Growth Product Marketing](https://www.lennysjobs.com/jobs/a8779353-bfa9-4f10-9ab7-d96ec87ae733) (Remote) 3. **Scratchpad:** [Senior Product Manager](https://www.lennysjobs.com/jobs/c4039341-f2c6-4ac9-bc69-7b52c457f621) (Remote) 4. **Net32:** [Senior Product Designer](https://www.lennysjobs.com/jobs/b4a61fe4-0676-469c-8131-af743ca536bc) (Remote, Cary NC) 5. **Joby Aviation:** [Air Taxi Product Manager-Operations](https://www.lennysjobs.com/jobs/6e99a528-2443-435f-bd43-a86d437f6ff2) (Santa Cruz) 6. **Firstbase.io:** [Business Lead, Fintech](https://www.lennysjobs.com/jobs/06fe3597-dd58-4979-93d7-03ee8a0dbe24) (Remote, NYC, Sao Paulo) 7. **Weights & Biases:** [Growth Project Manager](https://www.lennysjobs.com/jobs/c0dab35d-dbb5-47a5-92cc-df0cde2ca009) (Remote EU) ## **🧠 Inspiration for the week ahead** 1. **Read:** [Marketplace retention benchmarks](https://future.com/gmv-retention-marketplace-metric/) by Olivia Moore of a16z 2. **Watch:** [Trending TikTok videos](https://ads.tiktok.com/business/creativecenter/inspiration/popular/pc/en?from=001114) via [Benedict Evans](https://www.ben-evans.com/) 3. **Listen:** [Julie Zhuo on my podcast](https://podcasts.apple.com/us/podcast/julie-zhuo-on-accelerating-your-career-impostor-syndrome/id1627920305?i=1000565522448) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [22/44] What COVID taught me about product management Just kidding 😜 I caught COVID over the weekend and I’m taking the week off. ![Image from What COVID taught me about product management](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/bdd6c0bc-0150-4dfe-83c8-d80babc3d3e5_1536x2048.jpeg) So far it’s been fairly mild, but I’m forcing myself to take it easy. **In the meantime:** 1. Stay tuned for possibly the best thing I’ve ever written shipping in two weeks. 2. Don’t miss my latest [podcast interview with Gibson Biddle](https://link.chtbl.com/LennysPodcastGibsonBiddle). We cover: ✔️ 5 real-life Netflix strategy case studies ✔️ The DHM product strategy framework ✔️ Roadmap prioritization using GEM ✔️ Why build a personal board of directors ✔️ What it takes to become a CPO someday ![Image from What COVID taught me about product management](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/aff438be-b9cc-4223-a699-174755068d3f_4096x4096.png) [Listen to Gibson Biddle](https://link.chtbl.com/LennysPodcastGibsonBiddle) See you next week! P.S. If you’re looking to uplevel your career, applications for Reforge are now open. I’m a huge fan of their courses, which are all top-notch, and they have something for everyone: [Product Management Foundations](https://www.reforge.com/product-management-foundations), [Product Strategy](https://www.reforge.com/product-strategy), [Product Leadership](https://www.reforge.com/product-leadership), [Data for Product Managers](https://www.reforge.com/data-for-product-managers), [Experimentation + Testing](https://www.reforge.com/experimentation-testing), [Advanced Growth Strategy](https://www.reforge.com/advanced-growth-strategy-series), [Marketing Strategy](https://www.reforge.com/marketing-strategy), [Engineering Management](https://www.reforge.com/engineering-management), [Growth Marketing](https://www.reforge.com/growth-marketing), and [much more](https://www.reforge.com/all-programs). Applications close in about a week. **[Apply here](https://program.reforge.com/apply).** ## 📣 [Join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/) 📣 If you’re hiring, join [Lenny’s Talent Collective](https://www.lennysjobs.com/talent/) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from What COVID taught me about product management](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/c55d42ab-3382-463f-80fb-cd6f1aab52fd_1456x844.webp) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Lenny’s Talent Collective](https://www.lennysjobs.com/talent/) #### 🔥 [Featured job openings](https://www.lennysjobs.com/jobs) 1. **Render:** [Product Manager](https://www.lennysjobs.com/jobs/e948aaae-136d-4de6-954b-58985e9643e0) (Remote US) 2. **Mine’d:** [Head of Product](https://www.lennysjobs.com/jobs/2dbd9fc9-b2df-4567-82bd-7941760549b1) (NYC, Remote US) 3. **OpenStore:** [Product Marketing Manager](https://www.lennysjobs.com/jobs/8a65b820-6d69-4a43-a46f-0d96b67b0b37) (Miami, FL) 4. **Ashby:** [First Lead UX Designer](https://www.lennysjobs.com/list/lennys-jobs/jobs/3f84ab83-6078-4607-b55b-d107a3674e1f) (LA, SF, Vancouver, Austin, Texas, Tribeca) 5. **Wethos:** [Director, Growth Product Marketing](https://www.lennysjobs.com/list/lennys-jobs/jobs/a8779353-bfa9-4f10-9ab7-d96ec87ae733) (Remote) 6. **Scratchpad:** [Senior Product Manager](https://www.lennysjobs.com/list/lennys-jobs/jobs/c4039341-f2c6-4ac9-bc69-7b52c457f621) (Remote) 7. **Net32:** [Senior Product Designer](https://www.lennysjobs.com/list/lennys-jobs/jobs/b4a61fe4-0676-469c-8131-af743ca536bc) (Remote, Cary NC) 8. **Joby Aviation:** [Air Taxi Product Manager-Operations](https://www.lennysjobs.com/list/lennys-jobs/jobs/6e99a528-2443-435f-bd43-a86d437f6ff2) (Santa Cruz) 9. **Firstbase.io:** [Business Lead, Fintech](https://www.lennysjobs.com/list/lennys-jobs/jobs/06fe3597-dd58-4979-93d7-03ee8a0dbe24) (Remote, NYC, Sao Paulo) 10. **Weights & Biases:** [Growth Project Manager](https://www.lennysjobs.com/list/lennys-jobs/jobs/c0dab35d-dbb5-47a5-92cc-df0cde2ca009) (Remote EU) Sincerely, Lenny 👋 --- ## [23/44] How to kickstart and scale a consumer business *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to this month’s ✨ **free edition**✨ of my newsletter. Each week I humbly tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out about work. Subscribe today to get each and every issue.* ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/722783c1-e10d-46fe-b570-36428239de53_4096x2048.png) As a startup founder, you need to do the impossible. You build something that has never been built before, with a team that’s never worked together before, while learning dozens of new skills, making countless no-going-back decisions, all before you run out of money (and energy). It’s like being lost in the wilderness, in the dark, with only a vague sense of where you’re heading. Imagine if you had a map. From TikTok to Reddit to Uber to Airbnb, I’ve had the opportunity to study the growth stories of hundreds of companies. I’ve explored how these companies [acquired their first users](https://www.lennysnewsletter.com/p/how-the-biggest-consumer-apps-got), [found product-market fit](https://www.lennysnewsletter.com/p/how-to-know-if-youve-got-productmarket), [built growth engines](https://www.reforge.com/blog/racecar-growth-framework), and nailed [retention](https://www.lennysnewsletter.com/p/how-to-increase-your-products-retention), [conversion](https://www.lennysnewsletter.com/p/this-week-21-strategy-and-tactics), [virality](https://www.lennysnewsletter.com/p/increasing-virality), [positioning](https://www.lennysnewsletter.com/p/positioning), [pricing](https://www.lennysnewsletter.com/p/saas-pricing-strategy), and [most every other ingredient](https://www.lennysnewsletter.com/p/the-best-of-lennys-newsletter?s=w) that goes into building a durable business. But I’ve never tied all of these pieces together. **Starting today and for the next five weeks, I’m going to share a six-part playbook that I’ve been developing that guides you through the six fundamental steps of kickstarting and scaling your consumer business.** Later this year, I’ll share a similar playbook for B2B businesses. This work is the result of hundreds of hours of research, interviews, and synthesis. It’ll include brand-new frameworks, stories, and insights that I’ve never before shared. It may be the best work I’ve ever done. If nothing else, it’s definitely been the most time-intensive. Here’s what’s in store: - **Step 1: INSIGHT: Come up with your idea** ← This post - **[Step 2: AUDIENCE: Identify your super-specific who](https://www.lennysnewsletter.com/p/consumer-business-super-specific-who)** - **[Step 3: HOOK: Craft your pitch](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer)** - **[Step 4: REACH: Find your early adopters by doing things that don’t scale](https://www.lennysnewsletter.com/p/consumer-business-find-first-users)** - **[Step 5: RETAIN: Iterate until enough people stick around](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer-9c8)** - **[Step 6: SCALE: Build your growth engine](https://www.lennysnewsletter.com/p/growth-engines)** Following these steps (or any steps!) won’t guarantee success—but it’ll certainly increase your odds. Let’s dive right into Step 1. ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/c9513c6a-e831-4776-b9c6-4b5d4c00f217_4096x2048.png) Whether it’s disappearing photos, cars on demand, DVDs by mail, or a marketplace for NFTs, it all starts with an idea. And as much as you’re told that ideas don’t matter—don’t buy it. > #### “I myself used to believe ideas didn’t matter that much, but I’m very sure that’s wrong now.” > > #### —[Sam Altman](https://en.wikipedia.org/wiki/Sam_Altman) To kick off this series, I dug into how 50 of today’s most successful consumer businesses originally came up with their startup idea. Below I’ll share: 1. The five most common strategies for coming up with a startup idea 2. Should you sit around and think, or wait for an idea to strike? 3. What signs point to it being a good idea? 4. What to do once you have an idea This post also includes the largest collection of startup founding stories you’ll find anywhere. Before we get into strategies, a few takeaways (and surprises) from my research: ## High-level takeaways 1. **These consumer founders were very young.** Half were under 30 years old when they started the company, and 80% were under 35. 2. **Less than a third of consumer startup ideas emerged out of founders trying to solve their own problem.** I was expecting this to account for the majority of startup ideas. 3. **Less than a third of founders were actively ideating** a startup idea when they came up with their big idea. In other words, most startup ideas emerged organically. 4. **Only 18% of winning consumer startup ideas came from pivots**—I was also expecting this to be much higher. 5. **Less than a third of founders had a unique or specific skill** that enabled them to build their product. 6. **Just over half of the biggest consumer business ideas felt very trivial** **at the time**, e.g. Twitter, Snap, Pinterest, Coinbase, Tinder, Calm, Airbnb. 7. **Over 75%** were founded by 2+ founders. 8. **68%** had an engineering co-founder. 9. **42%** had previously started a company. 10. **11%** of founding teams had a co-founder with an MBA. 11. **Only one company**, DoorDash, came up with its idea by actively talking to potential customers/users. You can see the analysis I did in this [Google Sheet](https://docs.google.com/spreadsheets/d/1ixkFXc8S2lZCTdqJjxQKK514a-4RTd8gOoWecGlk41Q/edit#gid=0). ## How to come up with a startup idea Based on my research of over 50 of the most successful consumer companies, there are only five common strategies for coming up with a great startup idea—**all rooted in paying attention**: 1. **Pay attention to your own problems**, and solve them (~30%) 2. **Pay attention to your curiosity**, and tinker (~20%) 3. **Pay attention to what’s already working**, and double down (~18%) 4. **Pay attention to paradigm shifts**, and work backward (~15%) 5. **Brainstorm with friends**,and pay attention to the four points above **(**~15%**)** Here are these strategies mapped to today’s biggest consumer businesses: ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d7918183-ed08-4fd1-b6c6-3c24596710ce_7144x4524.png) Below, I explore each strategy in depth and share the founding stories from each of these companies. Let’s get into it. ### Strategy 1: Pay attention to your own problems, and solve them The largest chunk (~30%) of successful consumer companies emerged from the founders simply solving their own problems—and then realizing that their solution was valuable to others. For example: - **Dropbox:** Drew Houston kept losing his thumb drive, so he built cloud-based file syncing. - **Etsy:** Rob Kalin was looking for a way to sell his furniture and couldn’t find anything good. - **Cameo:** Steven Galanis and Martin Blencowe needed to find business for their NFL client, so they experimented with pay-for-access to celebrities. - **Airbnb:** Joe Gebbia and Brian Chesky needed to find a way to pay rent, decided to rent their air bed to travelers, and found that people enjoyed the experience. - **Apple:** Steve Wozniak couldn’t find a computer he was happy with, so he built his own. - **Substack:** Chris Best and Hamish McKenzie were worried about the direction content and journalism were heading in, so they decided to build a solution themselves. - **Uber:** Garrett Camp was frustrated by his inability to get around San Francisco reliably and began experimenting with better solutions. - **Hipcamp:** Alyssa Ravasio struggled to find great campsites, so she built a website to make that much easier. - **Snapchat:** Reggie Brown wanted to send private photos without worry, so he recruited Evan Spiegel help him built an app that sent disappearing photos. - **GOAT:** Daishin Sugano got ripped off with fake Air Jordans, which got him thinking about a better solution. - **WhatsApp:** Jan Koum wanted a simple way to know what his friends were up to. - **Warby Parker:** The founders kept losing their expensive glasses and realized there had to be a way to make them cheaper and easier to order online. - **Calm:** Michael Acton Smith found that meditation helped him deal with his pain. As Paul Graham says, “Pay particular attention to things that chafe you.” Below are stories from these founders sharing how they overcame a problem they were facing, and how that helped them realize there was an opportunity to start a business. #### Dropbox ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/71a13212-ed99-43ff-8428-8b6651d2d269_2400x1300.jpeg) > “**I got really sick of having to carry my thumb drive everywhere, and if it wasn’t a bus ride I was getting on, I was about to put in the washing machine—it’s always one step away from disaster.** And then I was on a ride from Boston to New York, forgot my thumb drive, and I couldn’t get any work done and started writing the first lines of code for what became Dropbox, even though I had no idea where that was gonna go at the time.” > > —[Drew Houston](https://www.linkedin.com/in/drewhouston/), CEO and co-founder, via [foundr](https://foundr.com/articles/podcast/drew-houston-dropbox) #### Etsy ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/06d57f77-05d7-423d-8f87-49f5c4ffc4e3_3024x1654.png) > “**I started my own company with woodworking and I was making these couture computer cases, and I looked for the best way to sell those.** I looked in the offline world, where there’s consignment and there’s wholesaling, and neither of those were really my cup of tea. I also looked at the online world and neither of those really worked out. > > And then the magical moment happened when I started working with Jean Railla, who was the creator of Get Crafty.... She asked me to help her rebuild Get Crafty. That was my introduction to designing websites.... **I was looking to sell my own furniture, and so that idea percolated** and I talked with Jean about adding a marketplace to Get Crafty. She said, and I probably agreed with her, that it would probably be better to start the marketplace separate instead of doing it inside of Get Crafty, because Get Crafty was really a community of people talking, so one thing led to another and the idea of creating the marketplace as a marketplace took birth. > > And when I initially started Etsy, my thinking was I’ll build the marketplace where I’d like to sell what I’m making, and then I’ll get right back to making these things.” > > —[Rob Kalin](https://www.linkedin.com/in/robertkalin/), co-founder, via [From Scratch](https://www.npr.org/2015/06/15/414682318/rob-kalin-founder-of-etsy) #### **Cameo** > “The way the company started was Steven and Martin [co-founders] were chatting at a funeral, and Martin was talking about how we recently became an NFL agent managing Cassius Marsh and **the challenges with trying to find him brand deals**, etc. > > They decided to start a company where for X dollars you can do Y activity with Z athlete. For example, go golfing with Michael Jordan, invite Serena Williams to your daughter’s birthday, etc. **The specific problem that Cameo was solving was Martin’s problem to get cash paid.** At first.” > > —[Devon Townsend](https://www.linkedin.com/in/devspinn/), CTO and co-founder #### Airbnb ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e0c55dca-8beb-487d-8d6f-7757e4f670a3_1400x780.jpeg) > “**I get to San Francisco and Joe tells me the rent is $1,150. And I don’t have enough money to pay rent.** It turns out that weekend, though, an international design conference was coming to San Francisco. And all the hotels in San Francisco were sold out. And so that’s when we had this idea. **We said, ‘Well, what if we just turned our house into a bed and breakfast for the design conference?’** > > Unfortunately, I didn’t have any beds, but Joe had three air beds. So we pulled the air beds out of the closet. We inflated the air beds and we called it airbedandbreakfast.com. > > When we came up with this idea, I remember telling my mom, like, ‘I’m now an entrepreneur.’ And she said, ‘No, actually you’re unemployed.’ ” > > —[Brian Chesky](https://en.wikipedia.org/wiki/Brian_Chesky), CEO and co-founder, via [The Jordan Harbinger Show](https://www.jordanharbinger.com/brian-chesky-lessons-airbnb-learned-to-survive-the-pandemic/) #### Apple ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8bf6e59d-7a28-47cc-9c96-aeb0da95d3f7_630x372.jpeg) > “**I didn’t want to pay to use somebody else’s computer, so I decided to design my own**. I wanted to have it all in one place, and I already had a terminal, so I was partway there.” > > —[Steve Wozniak](https://en.wikipedia.org/wiki/Steve_Wozniak), co-founder, via [Byte magazine](https://archive.org/details/byte-magazine-1984-12/page/n463/mode/2up?view=theater) #### **Substack** > “The way it all started was through conversation between Chris and I. Chris was writing a draft of a blog post that he never ended up publishing. In the draft, he laid out all the problems with the attention economy, how it incentivized bad online content and behaviors that led to bad outcomes in society. He asked me for feedback on that draft, and I said all the things he was saying were true but that people in the media already knew those were the problems and what they were lacking were any meaningful solutions (not for want of trying). > > **I suggested that he add a couple of paragraphs proposing a better way forward, but instead of doing that he started trying to convince me that we should make a thing based on direct payments between readers and writers because that would better align incentives between all parties.** > > We were both readers of Stratechery and had heard Ben Thompson saying the model was working great for him and he didn’t know why more people weren’t trying it. We wondered what might happen if it were far easier for any writer to try to do what Ben was doing, since the effort required to set up and maintain all the infrastructure to run something like Stratechery was nontrivial. And that’s when we started brainstorming.” > > —[Hamish McKenzie](https://www.linkedin.com/in/hamishmckenzie/), co-founder #### Uber > **“The city’s sad taxi situation seriously cramped [Garrett Camp’s] new lifestyle. Since he couldn’t reliably hail a cab on the street, he began putting the yellow cab dispatch numbers in his phone’s speed dial.** **Even that was frustrating**. ‘I would call and they wouldn’t show up, and while I was waiting on the street, two or three other cabs would go by,’ he says. ‘Then I’d call them back and they wouldn’t even remember that I called before.’ > > Habitually restless and frustrated by inefficiencies, he came up with his first attempt at a solution: he would call all the yellow taxi companies when he needed a cab. Then he would take the first one that arrived. > > Not surprisingly, the cab fleets didn’t like that tactic. Though impossible to confirm, Camp believes his mobile phone was blacklisted by the San Francisco taxi companies. ‘They wouldn’t take my calls,’ he says. ‘I was banned from the cab system.’ > > Camp started to experiment with the city’s ‘gypsy cab fleet’—the unmarked black sedans that would approach prospective passengers on the street and flash their headlights to solicit a fare. Most San Franciscans, particularly women, would stay away from these unmarked cars, fearing for their safety or worried by the ambiguity of a cab without a running meter. > > But Camp found that a majority of the cars were clean and that many of the drivers were friendly. The biggest problem for these drivers was filling in the dead time between rides, when they tended to wait outside hotels. So Camp started collecting the phone numbers of town-car drivers. ‘At one point, I had 10 to 15 numbers in my phone of the best black-car drivers in San Francisco,’ he says. > > Then he started gaming the system further: texting a favourite driver hours before he needed him and telling him to meet him at a restaurant or bar at an appointed time. On another night, he rented a town car and driver for himself and a group of friends for an entire evening. It was an indulgence that cost $1,000, and zooming around the city at the end of the night dropping everyone off was a pain. > > **And that is when the futuristic image from** ***Casino Royale*** **popped into Camp’s head. Suddenly, he was obsessed with a new notion. He frequently talked with McCloskey [his girlfriend] about the idea of an on-demand car service and vehicles that passengers could track via a map on their phones. At one point that year, Camp scrawled the word ‘Über’ into a Moleskine notebook that he kept to jot down new ideas and logos for companies and brands.** > > Camp was certain that he wanted such a service. He also knew that the iPhone and its new app store, which Apple introduced over the summer of 2008, were going to finally make the futuristic vision in *Casino Royale* practical. Not only could you chart the location of an object on a map, but since the earliest models of the phone had an accelerometer, you could also tell if the car was moving or not. That meant that an iPhone could function like a taximeter and be used to charge passengers by the minute or the mile. > > The idea behind Uber was crystallising in Camp’s mind.” > > —*[The Guardian](https://www.theguardian.com/technology/2017/jan/29/uber-app-changed-how-world-hails-a-taxi-brad-stone)* #### **Hipcamp** ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/bf379387-2883-4b26-bcac-cffb360e7232_1240x620.jpeg) > “I was planning my first camping trip. I had been camping a ton before, but always with someone else doing the work, making the reservation. **I couldn’t believe how difficult the process was**. Everything was on so many different websites. So much was booked out. The information was super-fragmented. > > Finally I found a campground. We got down there and it was great. I walked out to the ocean and everyone was surfing. It turned out this place was a great surfing spot. I had read everything about the campground online, everything on their website, and nowhere had mentioned surfing. And I love to surf! **I just sat there looking at this beautiful wave breaking and realized I had tried so hard and still missed what was the best part of this campground experience.** I was driving back the next day when the idea came to me that getting outside was very broken, and that the internet could fix it. > > I learned how to program later that year. That June, I launched a very, very beta version of the website.” > > —[Alyssa Ravasio](https://www.linkedin.com/in/alyssa-ravasio-23114717), CEO and founder #### Snapchat ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/f6d211f7-92cd-418c-84f9-c4ff6a327cc5_1047x829.jpeg) > “Reggie Brown [co-founder] carefully ran his fingers over the blunt, admiring its tightly rolled perfection. It was almost a shame to smoke such a work of art. […] The subject of the conversation moved on to the girls. A dreamy expression appeared on Reggie’s face. **‘I wish I could send disappearing photos,’** he mused, almost absentmindedly. […] > > **Reggie focused on the usefulness of this new idea.** A way to send disappearing pictures. He wouldn’t have to worry about sending a hookup a picture of his junk! And girls would be way more likely to send him racy photos if they disappeared. > > Suddenly, he jumped up, and rushed down the hall to see if Evan [Spiegel] was around. Bursting into Evan’s room, Reggie exclaimed, ‘Dude, I have an awesome idea!’ Even before Reggie finished explaining his idea, Evan lit up. He was immediately energized—almost intoxicated. It was just like all those nights of partying together, except they were drinking in Reggie’s idea. **‘That’s a million-dollar idea!’** Evan finally exclaimed.” > > —Billy Gallagher, *[How to Turn Down a Billion Dollars](https://www.amazon.com/dp/B073Z7XL5D/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1)* #### GOAT > “When the [Air Jordan 5 Grapes] arrived [from eBay], I was so excited; I immediately opened the box and smelled them. There’s a very distinct Air Jordan 5 smell, and it just wasn’t there. When I put the shoes on, they didn’t feel right. After buying a lot of the same sneaker style, you know what to expect when they’re in hand/on your feet. The details of the shoes and the Jumpman logo looked off, the pods in the back looked deflated, and the laces were even a different texture. > > **The purchase was my first pair of fake shoes, and it was a total letdown. And I wasn’t able to get my money back, because eBay has a poor policy for reconciliation that puts the burden on the buyer and seller to work out any issues. The experience really affected me, and for the first time I wasn’t excited to shop for kicks.** > > My co-founder Eddy and I talked about the experience and he started grilling me with questions: > > - ‘Does this happen to a lot of people?’ > - ‘Who did the best job outside of eBay?’ > - ‘Is there anyone leveraging technology to solve this problem?’ > - ‘How do people search for sneakers?’ > > It became apparent that the industry I loved was fragmented and unsafe. Many people buying sneakers were running into the same problems. There are entire subreddits, social accounts, and blogs built around how to spot fakes. People even post product SKUs in spreadsheets on forums like NikeTalk so others can find the shoes they are looking for. Essentially, everyone was piecemealing information together to find and purchase authentic sneakers. > > We knew we could use technology to solve many of the existing problems, and with the knowledge we already had in the space, we would have an additional edge. We also decided it was important for us to find an industry that serves a passionate and youthful generation. GOAT fit the bill, and we knew we were onto something. We just needed to start building.” > > —[Daishin Sugano](https://www.crunchbase.com/person/daishin-sugano), co-founder, via [Matrix Partners](https://viewpoints.matrixpartners.com/goat-from-pivot-to-a-pair-of-sneakers-59c290e2fc44) #### **WhatsApp** > “ ‘Jan was showing me his address book,’ recalls Fishman. ‘**His thinking was it would be really cool to have statuses next to individual names of the people.**’ The statuses would show if you were on a call, your battery was low, or you were at the gym. […] > > Koum spent days creating the backend code to synch his app with any phone number in the world, poring over a Wikipedia entry that listed international dialing prefixes—he would spend many infuriating months updating it for the hundreds of regional nuances.” > > —[Alex Fishman](https://twitter.com/fishmanalex) via *[Forbes](https://www.forbes.com/sites/parmyolson/2014/02/19/exclusive-inside-story-how-jan-koum-built-whatsapp-into-facebooks-new-19-billion-baby/)* #### Warby Parker > “[Right before starting business school], I had accidentally left my glasses on an airplane and they’d cost me $700. And I just couldn’t justify as a full-time student paying that much for a new pair of glasses. The new iPhone 3G had come out that we didn’t mind at the Apple Store paying $200 for, and it did all these magical things. And meanwhile, the technology behind a pair of glasses is 800 years old, and it just didn’t make sense. […] > > **I was complaining to anyone that would listen about why glasses were so expensive. And then Andy kept losing his glasses, and he was buying everything online but couldn’t figure out why he couldn’t buy new glasses online and why no one was effectively selling glasses online. So we kind of started this conversation where we were kind of frustrated by different pieces of the eyewear industry.** > > We knew that Neil [co-founder] had spent a number of years working for an eyewear nonprofit and probably knew a lot more about this than we did. And so we were all in the computer lab one day and started asking Neil a bunch of questions, and, no pun intended, but I think all our eyes were open that there was this massive opportunity. We thought, oh, why not sell glasses? And the light bulbs went off in all of our minds.” > > —[Dave Gilboa](https://www.linkedin.com/in/davegilboa/) and [Neil Blumenthal](https://www.linkedin.com/in/nblumenthal/), co-founders, via [How I Built This](https://www.npr.org/2018/03/26/586048422/warby-parker-dave-gilboa-neil-blumenthal) #### Calm > “I just couldn’t face going into the office every day…. I used to take painkillers every morning because I woke up with such a headache and my body ached, I felt like I was hit by a truck every morning. So these painkillers would kind of help me get started in the day. It was a very tricky time, so not addressing the fundamental issues with my business, or trying to but not doing a very good job—**for me this is what led to Calm, because I could see it so clearly having been through it. One of the best businesses to ever set up is one where you’re scratching your own itch, and I didn’t know what meditation was or mindfulness, but my very dear friend Alex Chu had been meditating with CD-ROMs he bought when he was a teenager (a very unusual teenager), and he would often say to me, ‘Look, dude, you need to try meditation,’ and I’d be like ‘You need to try effing off. That’s the last thing I need. Give me something practical.’** > > But slowly but surely, the penny started to drop and I kind of got it, and the key breakthrough for me was when I did something I’d never done before. I took myself off on a solo holiday. I went away to the Austrian Alps, to this resort where I played tennis in the morning, I scribbled in my notebook, I read books, and I started to try to meditate because I’d heard about it, and it was just incredible. The fog started to clear; I’ve had my face pushed up against the cliff and I couldn’t see a way out of this problem that I was facing with my business, and just taking a step back and getting perspective was hugely valuable. And I read a bunch of books and research papers and I realized that you know, this is science: mindfulness is a way of rewiring the human brain. What if we could make this simple and relatable and accessible to everyone? This could be one of the biggest opportunities and businesses in the world. > > I came back, I remember chatting to Alex about it, and he was like ‘Right, dude, you finally get it. Let’s go.’ […] > > He found a person that owned calm.com […] and I said, ‘Oh my god, what a great domain, what a business we could build there, helping the world become more calm.’ I said, ‘How much is the domain?’ And he said, ‘It’s about a million pounds,” and I said … ‘Right.’ > > About a year later, we’re playing video games and he said the guy that has calm.com wants to to sell it and he’s willing to to do a deal. We were able to buy it for much, much less… So we bought calm.com, and that was kind of the starting acorn that was planted for that business.” > > —[Michael Acton Smith](https://www.linkedin.com/in/michaelactonsmith/?originalSubdomain=uk), co-founder, via [The Diary of a CEO](https://www.youtube.com/watch?v=DAVw-yQRUjE&t=2630s) **Advice for finding startup ideas by solving your own problem:** 1. **Build your self-awareness:** Pay attention to challenges you have day to day. 2. **Be motivated:** Pay attention to problems that drive you to action. 3. **Don’t take your ideas for granted:** If you’re finding it valuable, it’s likely other people will too. ### Strategy 2: Pay attention to your curiosity, and tinker Twenty percent of the biggest consumer businesses emerged out of the founders simply following their curiosity and intuition and then spending time tinkering with the idea. In most cases, soon after they had the idea, they quickly built a prototype to see if there was a *there* there. For example: - **Coinbase:** Brian Armstrong got excited about the applications of crypto and decided to build a Bitcoin wallet. - **Google:** Larry Page and Sergey Brin got interested in the web for its mathematical characteristics and built a crawler to rank pages. - **OpenSea:** Devin Finzer got excited about what the new ERC721 standard made possible and shipped a beta of OpenSea in a couple of months. - **Musical.ly (aka TikTok):** Alex Zhu noticed teens combining video and music and quickly built a prototype. - **Twitter:** Jack Dorsey got excited about building a way to send simple status updates to friends and built a prototype in two weeks. - **Tinder:** The early team built a prototype at a hackathon and couldn’t stop working on it. - **Duolingo:** Luis Von Ahn started exploring language learning academically and got excited to see if he could build it into a business. - **Rent the Runway:** Jenn Hyman’s sister told her she wanted to wear a dress once, mostly for the photographs, but still had to buy a new dress. - **The RealReal:** Julie Wainwright’s friend bought upscale consignment while they were out shopping, and she recognized that it could be done much more effectively online. > #### “A good way to trick yourself into noticing ideas is to work on projects that seem like they’d be cool. If you do that, you’ll naturally tend to build things that are missing. It wouldn’t seem as interesting to build something that already existed.” > > #### —Paul Graham As Steve Jobs said, the reason people have to have a lot of passion for what they’re doing is because “if you don’t, any rational person would give up. If you don’t love it, you’re going to fail. So you’ve got to love it, you’ve got to have passion.” Here are the stories from founders who found their way to a massive business through following their curiosity: #### Coinbase ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9b827e1f-2823-40a3-8d44-3347a65d376d_1200x645.jpeg) > “I happened to see [the Bitcoin white paper] on Hacker News. I was just sort of reading things on the internet…. I don’t claim to have understood it the first time I read it, but I did have a degree in computer science and economics, and something about it grabbed my attention. **I distinctly remember reading it and thinking, wow, this might be the most important thing I’ve read in like five years.** […] > > And then at Airbnb, we were trying to operate in 190 countries around the world. There were delays; it was impossible to know how money was going to get moved in all these countries. And so **I just had this sense that financial services are really holding back innovation in the world, and it’s holding back human progress** because people don’t have the freedom to participate in this global economy, because of all the barriers to innovation. > > **Imagine if you could unlock the level of innovation or the kind of trust in security that a society like the U.S. has**, but put that into 190 countries, just because they have good internet access, a cell phone, and now they have crypto. And what if I could help do that? That just got me incredibly excited.” > > —[Brian Armstrong](https://www.linkedin.com/in/barmstrong/), CEO and founder, via [How I Built This](https://www.npr.org/2021/11/12/1055432035/coinbase-brian-armstrong) #### Google ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8e24ca7f-ffcd-43de-8d1f-f22a48b6e94a_500x375.jpeg) > “[Larry] Page didn’t start out looking for a better way to search the web. Despite the fact that Stanford alumni were getting rich founding internet companies, **Page found the Web interesting primarily for its mathematical characteristics**. Each computer was a node, and each link on a web page was a connection between nodes—a classic graph structure. […] > > It proved a productive course of study. Page noticed that while it was trivial to follow links from one page to another, it was nontrivial to discover links back. In other words, when you looked at a web page, you had no idea what pages were linking back to it. **This bothered Page.** **He thought it would be very useful to know who was linking to whom.** […]Unaware of exactly what he was getting into, Page began building out his crawler.” > > —[John Battelle,](https://www.wired.com/2005/08/battelle/) *[Wired](https://www.wired.com/2005/08/battelle/)* #### OpenSea > “Initially, the idea for OpenSea stemmed from our interest in CryptoKitties. While marketplaces for digital goods have existed for quite some time, they tend to be self-contained ecosystems: individual marketplaces for specific games, marketplaces for domain names, marketplaces for tickets, etc. **Scaling something like eBay for digital assets would be difficult because there was little standardization around digital ownership. With the introduction of [ERC721](https://erc721.org/), it felt like such an idea was possible for the first time.** > > We validated the idea by joining the various communities for the new ERC721 project […] and shipped the first version of OpenSea within a couple of months, in order to get a product out there in the wild and start testing with early adopters.” > > —[Devin Finzer](https://www.linkedin.com/in/dfinzer/), CEO and co-founder, via [DeFi Prime](https://defiprime.com/opensea) #### Musical.ly (aka TikTok) > “I was on Caltrain one day, from San Francisco to Mountain View, and it was crowded by teens. Observing their behavior, 50 percent were listening to music and the other 50 percent were taking photos and videos with their speaker on top to add music. **Teens are so passionate about social media, photos, videos, and music, that it made me think, ‘Can we combine these three very powerful elements into one app and build a social network for music videos?’** ” > > —[Alex Zhu](https://www.linkedin.com/in/keepsilence?originalSubdomain=cn), CEO and co-founder, via *[Forbes](https://www.forbes.com/sites/mnewlands/2016/06/10/the-origin-and-future-of-americas-hottest-new-app-musical-ly/?sh=13e56f3d5b07)* #### Twitter > “Jack Dorsey grew up in St. Louis, and at the age of 14 he became obsessed with dispatch routing. That was something he wanted to write software for, so he got to work on that. He was in St. Louis and there were no bike messengers there, but **he was obsessed with this, so he wrote open source software for dispatching, which to this day is used by many different taxicab companies. He had this routing history, and he had this idea from when he first started seeing the status messages in instant messaging and wondered, ‘What if we could build a status service out of that?’** > > So later, he came to us with this idea: ‘What if you could share your status with all your friends really easily, so they know what you’re doing? But you don’t want to have to write a whole blog entry or LiveJournal entry.’ At the time, we had been thinking about what interesting things we could do with SMS, because we were interested in it. And so we made the connection between status and SMS [in March 2006]. > > So we went off and built a prototype in two weeks and showed it to everyone in Odeo. They really dug it. We knew when Jack told us the idea it was a cool idea, but we built it and showed it to the team and everyone started using it. I think the first weekend we were using it, I was ripping up all the carpet in my house, having a terrible weekend, and my phone buzzed and I look down and saw that Jack was sipping wine in Napa. The idea that I was doing what I was doing, and I could look down and see what he was doing just struck me. ‘I can’t believe I know that,’ and it made me giggle that I knew that.” > > —[Biz Stone](https://en.wikipedia.org/wiki/Biz_Stone), co-founder, via [MediaShift](https://mediashift.org/2007/05/twitter-founders-thrive-on-micro-blogging-constraints137/) #### Tinder ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b6b82cc3-d714-47e2-9d9a-fe509052aeeb_780x586.png) > “About two weeks after Sean [co-founder] started work, he participated in a hackathon. Sean had been talking about potentially building out a dating product for a while, so the two [Sean and Joe Muñoz] were paired together based on the compatibility of their two passion projects. Over the course of the hackathon in February, they built the first prototype of Tinder.” > > —[Jordan Crook, TechCrunch](https://techcrunch.com/2014/07/09/whitney-wolfe-vs-tinder/) #### Duolingo > “The whole thing started as an academic project at Carnegie Mellon between me and my PhD student Severin Hacker. I had just sold my second company to Google, and we both wanted to work on something related to education. Education is very general, so we decided to concentrate on one kind that is in huge demand everywhere (except the U.S.): language education.” > > —[Luis Von Ahn](https://en.wikipedia.org/wiki/Luis_von_Ahn), co-founder, via [Quora](https://www.quora.com/What-made-Luis-Von-Ahn-start-Duolingo/answer/Luis-Von-Ahn) #### Headspace > “I was midway through a sports science degree when I left England and traveled to Asia to find some form of meaning, and I was eventually ordained as a Tibetan Buddhist monk after years of training. Ritually meditating four times a day, I became aware that many people outside this tradition didn’t know what meditation was, or had negative preconceptions about it.... > > I returned to England—in a suit and tie, rather than robes—and found a doctor who was interested in mindfulness. I worked in his London clinic, where I was introduced to an advertising executive, Rich Pierson. We clicked from the start and began doing a skill swap—me teaching meditation and him giving lessons in marketing. > > **Rich had amazing vision and saw the potential of what I was doing. He tried to persuade me to do an app—a very new thing at the time—which I thought was such a bad plan, so we launched Headspace as an events series in 2010. After receiving feedback that people had been inspired at our events but didn’t know what to do when they got home, Rich asked me to record some of the sessions. Almost three years later, those recordings became the main material of the app.**” > > —[Andy Puddicombe](https://en.wikipedia.org/wiki/Andy_Puddicombe), co-founder, via [Soho House](https://www.sohohouse.com/en-us/house-notes/issue-4/headspace-how-i-launched) #### Rent the Runway > “In the second year of business school, I went home for Thanksgiving, and I was in Becky’s apartment. And Becky had just gone to a store and bought a dress that was higher-cost than her rent. And as her responsible older sister, I remarked how she should probably wear one of the dresses in her closet again, as opposed to being in credit card debt. And her response to me was, you know: Everything in my closet is dead to me. I’ve been photographed, and the photographs are up on Facebook, and I need something new. > > And, you know, Becky was a 25-year-old, like, normal girl who lived in New York. She wasn’t a celebrity, but she was talking about being photographed and not being able to wear something. > > **And it was like a light-bulb moment for me, because I realized I was having a conversation with my sister about the experience of wearing an amazing dress, of walking into a party, feeling self-confident and feeling beautiful. And that’s what she cared about. She didn’t care about the actual ownership of the items in her closet. The other thing she cared about was the photograph that would exist after the party that she could post on Facebook and kind of share with everyone.**” > > —[Jenn Hyman](https://en.wikipedia.org/wiki/Jennifer_Hyman), CEO and co-founder, via [How I Built This](https://www.npr.org/2017/09/21/541686055/rent-the-runway-jenn-hyman) #### The RealReal > “The idea for The RealReal was born after I was out shopping with a girlfriend. My friend purchased items from a consignment rack in the back of an upscale boutique. **I never knew her to shop consignment or buy from online resale websites. When I asked my friend why she said she trusted the shop owner—the shop was beautifully curated, and she was getting amazing deals on Chanel, Louis Vuitton, Gucci. It changed my perception of consignment.** > > The light bulb went off, and I did extensive research of the luxury and resale markets and even tested resale methods myself. […] > > In December of 2011 I had my aha moment, and by early March, I picked out a name, registered the business, and raised capital. In June 2011 I opened the doors.” > > —[Julie Wainwright](https://en.wikipedia.org/wiki/Julie_Wainwright), CEO and co-founder, via *[Marin Magazine](https://marinmagazine.com/style/fashion/ceo-julie-wainwright-on-the-realreal-her-luxury-consignment-business/)* **Advice for finding startup ideas by following your curiosity:** 1. **Give yourself time to tinker:** If you’re excited, make space in your life to explore the idea. 2. **Build:** Don’t just think. Build a prototype. 3. **Keep it simple:** Test the idea as cheaply as you can, as quickly as you can. Your first idea is unlikely to be exactly right. ### Strategy 3: Pay attention to what’s already working, and double down (aka pivot) The third most common path to a successful consumer business, a path just over 15% of the companies I looked at followed, is to first launch something, pay close attention to which elements (unexpectedly) work best, and then double down (aka pivot) to that one element. For example: - **Instagram:** Kevin Systrom noticed people weren’t using Burbn to check into places, but they were often sharing filtered photos they downloaded from other apps. - **YouTube:** The founders noticed their video-based dating site was more useful as a generalized platform for all types of videos. - **Lyft:** Logan Green and John Zimmer noticed their long-distance ridesharing service Zimride was struggling, but there was pent-up demand for shorter trips. - **Pinterest:** Ben Silbermann noticed that his e-commerce app Tote wasn’t taking off but that people loved saving collections of their favorite items. - **Glossier:** Emily Weiss noticed a budding need for personalized beauty products in her existing beauty community Into the Gloss. - **PayPal:** In one year, the founding team pivoted from encryption on mobile phones to cash on mobile phones to cash on PalmPilots to cash over email, based on their learnings about what was possible and useful. - **Discord:** Jason Citron found that his game business wasn’t working but that people loved its voice and text chat feature. - **Twitch:** Every other product the team tried faded, while this one side project continued to grow. The best part about this strategy is that it should motivate you to launch whatever it is you’re currently most excited about—because even if the idea doesn’t work, it may lead you to the bigger idea. > #### “The stars will never align, and the traffic lights of life will never all be green at the same time. The universe doesn’t conspire against you, but it doesn’t go out of its way to line up the pins either. Conditions are never perfect. ‘Someday’ is a disease that will take your dreams to the grave with you. Pro and con lists are just as bad. If it’s important to you and you want to do it ‘eventually,’ just do it and correct course along the way.” > > #### —Tim Ferriss > #### “If there were two paths where we had to choose one thing or the other, and one wasn’t obviously better than the other, then rather than spend a lot of time trying to figure out which one was slightly better, we would just pick one and do it. And sometimes we’d be wrong ... but oftentimes it’s better to just pick a path and do it rather than just vacillate endlessly on the choice.” > > #### —Elon Musk, speaking about PayPal Here are stories from companies that found their way to a massive business through pivoting, or simply doubling down on an idea that was already working: #### Instagram ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8d1b3b01-c018-4dcc-b343-dd2bff0cddd3_1920x1080.jpeg) > “Most people don’t realize that we were doing a completely different startup before we did Instagram. We were doing something called Burbn. I remember we had maybe 100 users using the service. It was a check‑in app, a lot like Foursquare meets Gowalla meets everything else. […] > > **We knew it wasn’t working when we would give it to people and they’d just keep bouncing off. The one thing that people would continue to do on the service was post square images from either Hipstamatic or CameraBag or whatever filter app existed out in the world, and people loved these posts.** > > They got the most likes. They got the most comments. I would ignore every other post on Burbn except for the photos. > > One day, Mike, my co-founder, and I sat down, and we were like, ‘All right, we have to change something, because no one knows what we’re doing.’ We were like, ‘You know what? **Let’s do what everyone’s doing on our service anyway. Let’s cut everything except for photos.** Let’s build the filters in, and let’s allow for likes and comments and see what happens.’ I swear, the first day we launched it, we got 25,000 users.” > > —[Kevin Systrom](https://en.wikipedia.org/wiki/Kevin_Systrom), CEO and co-founder, via [Startups.com](https://www.startups.com/library/founder-stories/kevin-systrom) #### YouTube > “When YouTube first launched in May 2005, it was still intended to be a dating service, rather than a generalized platform for all types of videos. So in the early, early days, it was trying to see if there was a need for a video platform for dating (rather than just photos/messages). > > I remember trying to recruit users to come to YouTube for that reason. We quickly realized that a dating platform wasn’t in demand of videos as the media type so we opened up the app to go after all types of content creators.” > > —[Steve Chen](https://twitter.com/stevechen), co-founder #### Lyft > “We were running Zimride, a long-distance ridesharing platform, and looking at the business, we realized that people took long trips pretty rarely. They also needed much more reliability than ‘I am heading to L.A. sometime this weekend,’ and coordinating pickup was a big challenge. > > John Zimmer [co-founder] mocked up something called ‘On My Way’ during one of our hack days, which was a service that would notify your passengers as you were approaching them to pick them up for your Zimride. We also started thinking about creating an ‘instant ridesharing’ product with firm commitments, even dabbling with calling it ‘Zimride Instant’—but we weren’t sure it would be legal. > > **The Uber black-car experience was starting to take off, and then we saw Sidecar announce that they were going to launch that exact product we were thinking about. That was the kick in the rear we needed to hit the metaphorical gas.** The founders grabbed a couple engineers and a designer, and three weeks—and a lot of hard work—later, that small team within Zimride launched Lyft.” > > —[Evan Goldin](https://www.linkedin.com/in/evangoldin/) and [Adam Fishman](https://www.linkedin.com/in/adamjfishman/), early Lyft employees #### Pinterest ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/425dd23d-ed39-40c2-ab81-6ebbcca5f202_2000x1385.jpeg) > “But while Tote users weren’t making purchases via the app, they were amassing growing collections of ‘favorite’ items to share with their friends. To Silbermann, who had collected insects as a kid, this was yet another example of people’s tendency to share their collections with one another. And while there was already a plethora of sites that allowed people to display virtual collections, they were all limited to a single item. > > So a year after launching Tote, Silbermann pivoted to offer people a visually appealing way to display all their collections—whether they were books, adorable dog images, or women’s clothes—on the same site. […] Six months after its launch, Pinterest, then still an invitation-only site, had 80,000 collections.” > > —*[Fast Company](https://www.fastcompany.com/3001984/pinterest-pivot)* #### PayPal > “Of course, neither team had set out to build the world’s foremost email payments system. For X.com, like Confinity, the feature emerged as an afterthought. > > In the fall of 1999, Musk and another X.com engineer discussed the concept of emailing money from one user to another, and they determined that an email address could function as a unique identifier, not unlike the digits of a checking account number. Nick Carroll, the engineer, recalled that the program took only a few days to build, ‘if even that.’ > > Musk concurred: ‘It’s trivial to do money transfer. It’s literally, you have a SQL database with one number, decrement that, and move it to another row in the database. It’s super dumb. My kid made one. He’s twelve.’ > > Carroll and Musk alike found the feature’s success surprising. ‘It was totally an add-on,’ Carroll admitted. Amy Rowe Klement recalled that the X.com team thought of the person-to-person payment product as simply its ‘user acquisition engine ... it wasn't the core business. That was the online financial superstore.’ > > Indeed, Musk was frustrated that X.com’s other products didn’t generate the same excitement. ‘We would show people the hard part—the agglomeration of financial > services—and nobody was interested. Then we’d show people the email payments—which was the easy part, and everybody was interested,’ Musk explained in a > 2012 commencement speech at Caltech. ‘So I think it’s important to take feedback from your environment. You want to be as closed-loop as possible.’ > > Despite frustration, the team responded to the product's strong market feedback and shifted focus to the incipient email product.” > > —[Jimmy Soni,](https://www.amazon.com/Founders-Paypal-Entrepreneurs-Shaped-Silicon/dp/1501197266/ref=asc_df_1501197266/?tag=hyprod-20&linkCode=df0&hvadid=509360428472&hvpos=&hvnetw=g&hvrand=5254135810215129175&hvpone=&hvptwo=&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9032091&hvtargid=pla-953521925941&psc=1) *[The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley](https://www.amazon.com/Founders-Paypal-Entrepreneurs-Shaped-Silicon/dp/1501197266/ref=asc_df_1501197266/?tag=hyprod-20&linkCode=df0&hvadid=509360428472&hvpos=&hvnetw=g&hvrand=5254135810215129175&hvpone=&hvptwo=&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9032091&hvtargid=pla-953521925941&psc=1)* #### Glossier > “I started ‘Into the Gloss’ [a community she formed] because I wanted to create a space where people could celebrate beauty and share their routines. The women I was interviewing and the community that formed around the site had so much to say about their own experiences, and **it struck me that brands were failing to leverage the power of their own customers**. There had always been a ‘brand knows best’ approach—here’s an issue and a product to fix it. It really was an aha moment when I decided that, with our community, we could create a modern beauty experience that empowered people to be their own experts.” > > —[Emily Weiss](https://en.wikipedia.org/wiki/Emily_Weiss), CEO and founder, via *[Irish Tatler](https://irishtatler.com/beauty/your-complete-guide-to-being-a-glossier-girl-with-founder-ceo-emily-weiss)* #### Discord ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/74fa39bd-0f8d-4111-b712-8f02fcb3de5a_655x434.webp) > “His first company started as a video game studio and even launched a game on the iPhone App Store’s first day in 2008. That petered out and eventually pivoted into a social network for gamers called OpenFeint, which Citron described as ‘essentially like Xbox Live for iPhones.’ He sold that to the Japanese gaming giant Gree, then started another company, Hammer & Chisel, in 2012 ‘with the idea of building a new kind of gaming company, more around tablets and core multiplayer games.’ It built a game called Fates Forever, an online multiplayer game that feels a lot like League of Legends. **It also built voice and text chat into the game, so players could talk to each other while they played.** > > And then that extremely Silicon Valley thing happened: Citron and his team **realized that the best thing about their game was the chat feature**. This was circa 2014, when everyone was still using TeamSpeak or Skype and everyone still hated TeamSpeak or Skype. Citron and the Hammer & Chisel team knew they could do better and decided they wanted to try. > > It was a painful transition. Hammer & Chisel shut down its game development team, laid off a third of the company, shifted a lot of people to new roles, and spent about six months reorienting the company and its culture. It wasn’t obvious its new idea was going to work, either. ‘When we decided to go all in on Discord, we had maybe 10 users,’ Citron said. There was one group playing League of Legends, one WoW guild, and not much else. ‘We would show it to our friends, and they’d be like, ‘This is cool!’ and then they’d never use it.’ > > After talking to users and seeing the data, the team realized its problem: Discord was better than Skype, certainly, but it still wasn’t very good. Calls would fail; quality would waver. Why would people drop a tool they hated for another tool they’d learn to hate? The Discord team ended up completely rebuilding its voice technology three times in the first few months of the app’s life. Around the same time, it also launched a feature that let users moderate, ban, and give roles and permissions to others in their server. **That was when people who tested Discord started to immediately notice it was better. And tell their friends about it.**” > > —[David Pierce,](https://www.protocol.com/discord) *[Protocol](https://www.protocol.com/discord)* #### Twitch > “It was as classmates at Yale University that the two [Emmett Shear and Justin Kan] first worked together, launching a web calendar startup called Kiko in 2005. It didn’t last. One month after launch, Kiko—designed to combine the power of Microsoft Outlook with the modern web sensibilities of Google’s then-new email product Gmail—was buried by a different solution: Google Calendar. After 14 months, Kiko did find an exit, however … it was sold on eBay, for $258,000. > > That money kept them going, and they learned from a series of further fizzle-outs, like a Facebook-for-families social network and a company that would sell glow-in-the-dark gene-spliced roses. Then the duo landed on one idea that Y Combinator founder Paul Graham was willing to invest $50,000 to see: a reality show devoted to broadcasting Kan’s life on the web, 24/7. > > Justin.tv began broadcasting in early 2007 and quickly scored some major headlines; Kan even wound up on NBC’s *Today* show and ABC’s *Nightline*. Shear said that part of what made the *Truman Show*-esque experiment work was that this time, the product was something its creators wanted for themselves. > > The site opened up to other broadcasters in October 2007. Three years later, Justin.tv had raised $7.2 million in venture capital and was claiming some 31 million unique users per month. > > **It was at this time, in late 2010, that the company began working on two ‘skunkworks’ projects. One project, a Justin.tv mobile initiative led by Michael Seibel, would spin off into an Instagram-for-video startup called Socialcam, which sold to Autodesk for $60 million in 2012. The other, a task force led by Shear to grow the audience for video game content on the site, would also become its own product: a new site called TwitchTV.** > > TwitchTV (later shortened to Twitch) has outpaced its predecessor. Meanwhile, Justin.tv’s star has faded.” > > —[Eric Johnson,](https://www.vox.com/2014/7/5/11628568/how-twitchs-founders-turned-an-aimless-reality-show-into-a-video) *[Vox](https://www.vox.com/2014/7/5/11628568/how-twitchs-founders-turned-an-aimless-reality-show-into-a-video)* **Advice for finding startup ideas by doubling down:** 1. **Kill your darlings:** You may love your idea, but if not enough other people do, it won’t work. 2. **Don’t take what’s working for granted:** If any part of your product is proving to be valuable to people, that’s a rare find. Embrace it. 3. **Try stuff:** The more ideas you put out there, the more likely you are to find something that sticks. ### Strategy 4: Pay attention to paradigm shifts, and work backward Another common strategy to coming up with an idea is to simply notice a shift in where the world is going, and work backward. As Mike Maples Jr. put it, “Start from the future and work backwards,” and as Paul Graham said, “Live in the future, then build what’s missing.” > #### “From mobile to social to crypto, there’s so many examples where people failed to imagine what a couple years of compounding developments would look like, in terms of technology speed improving, costs dropping, or adoption increasing. We should be monitoring what’s compounding at a fast rate or, alternatively, where adoption is growing reasonably rapidly. **The proof is in the growth rate or the extrapolated technology curve rather than the number sitting in front of you in that moment.**” > > #### —[Elad Gil](https://review.firstround.com/future-founders-heres-how-to-spot-and-build-in-nonobvious-markets), founder and investor Examples of founders doing just that: - **Spotify:** Daniel Ek realized that the future of music was paid. - **Amazon:** Jeff Bezos noticed that the web was growing 2,300**%** a year and found a product that would most benefit from being sold online: books. - **23andme:** Anne Wojcicki realized that genetic information was suddenly cheap and available. - **Instacart:** Max Mullen and Apoorva Mehta noticed the rise of on-demand ridesharing and delivery services. - **Stitch Fix:** Katrina Lake noticed that retail was going to move online. Here are their stories: #### Spotify > “**I realized that you can never legislate away from piracy. The only way to solve the problem was to create a service that was better than piracy** and at the same time compensates the music industry. That gave us Spotify.” > > —[Daniel Ek](https://en.wikipedia.org/wiki/Daniel_Ek), CEO and founder, via *[Fast Company](https://www.fastcompany.com/90205527/the-definitive-timeline-of-spotifys-critic-defying-journey-to-rule-music)* #### Amazon [Watch on YouTube](https://www.youtube.com/watch?v=rWRbTnE1PEM) > “I was in New York City working for a quantitative hedge fund when **I came across the startling statistic that web usage was growing at 2,300% a year. So I decided I would try and find a business plan that made sense in the context of that growth,** and I picked books as the first best product. > > I made a list of like 20 different products that you might be able to sell, and books were great as the first product because books are incredibly unusual in one respect—that is that there are more items in the book category than there are items in any other category by far. Music is number two. There are about 200,000 active music CDs at any given time, but in the book space, they are more than 3 million different books worldwide, active, and printed at any given time.” > > —[Jeff Bezos](https://en.wikipedia.org/wiki/Jeff_Bezos), founder and CEO, via [YouTube](https://youtu.be/rWRbTnE1PEM) #### 23andme > “I happened to be—when I was investing on Wall Street—**I happened to realize genetic information, it was suddenly cheap to get access to a broad amount of information on your genome**. And I was really lucky noticing that, one, suddenly, individuals could get access to your genome. And then there was this whole convergence of Web 2.0. There was going to be social networks. And you’re going to find each other. And it was hot. It was so interesting. > > And I suddenly realized that one of the things that’s a big issue in health care is there’s a lack of data. So routinely, my sister, who does nutrition research, said: you look at those studies, and it’s like 200 patients here, 200 there. And my dad, who is a particle physicist, would be like: anyone who knows about statistics knows you can’t find anything in this. You need lots of data. And clearly, the Google world had taught me the value of lots of data and what you can do with it. > > So I got lucky with this idea of, why do I need Stanford? Why do I need Pfizer to go and do all this research? I can just allow all these people to learn about their genome. It’s so cool. Learn about your genetics. And then we’re going to bring everyone together in this whole new research model. It’s going to be like crowdsourcing. We’re going to have the world’s data. I don’t need Stanford and Pfizer and all these other people. I don’t want you to be a human subject. I want it to be a live participant, excited in research. So we had this idea of really marrying this idea of cool technology with this concept of Web 2.0. And we launched the company.” > > —[Anne Wojcicki](https://en.wikipedia.org/wiki/Anne_Wojcicki), CEO and co-founder, via [Talks at Google](https://www.youtube.com/watch?v=pDoALM0q1LA&t=473s) #### Instacart > “I had several life experiences over the 10 years leading up to starting the company that eventually gave me the insight that this would become a huge consumer need. **They included early adopting Web 1.0 delivery services, a business plan I wrote in college for a food marketplace, and then seeing the early days of ridesharing in 2011 after moving to San Francisco.** > > Once I had that insight in April 2012, I was on a warpath to start this company, and I started telling my smartest friends about the idea and getting their feedback. By luck, one of them was Brandon, who introduced me to Apoorva in June 2012, and he had a similar consumer insight from working at Amazon. Then Apoorva and I brought Brandon on as our third co-founder in July 2012, and the rest is history.” > > —[Max Mullen](https://www.linkedin.com/in/maxmullen), co-founder #### Stitch Fix > “I moved on from Parthenon to become an associate at Leader Ventures, a VC firm, just as the iPhone appeared, in 2007. I was thinking about retail. I studied the economics of Blockbuster during the rise of Netflix. On one side was a company that dominated physical store sales; on the other was a company that dominated sales without stores. It was the perfect case study. And I could see exactly when the scale tipped. Whenever Netflix hit about 30% market share, the local Blockbuster closed. The remaining 70% of customers then faced a decision: try Netflix or travel farther to get movies. More of them tried Netflix, putting more pressure on Blockbuster. Another store would close, and more customers would face that try-or-travel decision, in a downward spiral. > > **I recognized that other retailers might suffer Blockbuster’s fate if they didn’t rethink their strategy. For example, how would someone buy jeans 10 years down the road? I knew it wouldn’t be the traditional model: go to six stores, pull pairs of jeans off the racks, try them all on. And I didn’t think it would resemble today’s e-commerce model either: You have 15 tabs open on your browser while you check product measurements and look for what other shoppers are saying. Then you buy multiple pairs and return the ones that don’t fit.** > > The part of me that loves data knew it could be used to create a better experience with apparel.” > > —[Katrina Lake](https://www.linkedin.com/in/kmlake/), founder, via [Harvard Business Review](https://hbr.org/2018/05/stitch-fixs-ceo-on-selling-personal-style-to-the-mass-market) **Advice for finding startup ideas by looking into the future:** 1. **Spend time thinking:** What is likely to be very different in 5, 10, 20 years? 2. **What hasn’t software eaten?** Find a big market with a bad customer experience. 3. **What would be amazing if it were possible?** Start with the ideal experience, and figure out what it would take to make it possible. ### Strategy 5: Brainstorm with friends, and **pay attention to the four points above** A final strategy is to simply sit around with your friends and think up ideas. Eight out of the 50 companies I looked at found their idea through active brainstorming. Michael Seibel has some great advice on this path (30-second clip): [Watch on YouTube](https://www.youtube.com/watch?v=vDXkpJw16os) Here are a number of examples of this working: #### **Thumbtack** > “The conventional wisdom when starting a company is to work on a problem that you’ve faced personally. > > At Thumbtack, we didn’t do that. **Instead, for a year we brainstormed on weekly phone calls ideas of things we could start that, if successful, would create opportunity for people. We were focused on impact at scale. We knew we weren’t representative of the general population. We focused on issues that most people faced even if we didn’t personally.** > > We threw so many ideas at the wall over the course of a year. The first one that stuck was an aggregator for all of one’s online financial accounts. We drafted our business plan ... then a couple weeks later, Mint.com launched and won TechCrunch 50. So we then moved to the second (and better!) idea that stuck—for Thumbtack. I don’t recall the specific moment the idea for Thumbtack came up. **These ideas all came from observing the problems people faced in the world and thinking about how we could use technology to make things a bit better.**” > > —[Sander Daniels](https://www.linkedin.com/in/sander-daniels/), co-founder #### Netflix > “Silicon Valley loves a good origin story. The idea that changed everything, the middle-of-the-night lightbulb moment, the what if we could do this differently? conversation. Origin stories often hinge on epiphanies. The stories told to skeptical investors, wary board members, inquisitive reporters, and—eventually—the public usually highlight a specific moment: the moment it all became clear. […] > > There’s a popular story about Netflix that says the idea came to Reed after he’d rung up a $40 late fee on *Apollo 13* at Blockbuster. He thought, What if there were no late fees? And BOOM! The idea for Netflix was born. That story is beautiful. It’s useful. It is, as we say in marketing, emotionally true. But as you’ll see in this book, it’s not the whole story. Yes, there was an overdue copy of *Apollo 13* involved, but the idea for Netflix had nothing to do with late fees—in fact, at the beginning, we even charged them. More importantly, the idea for Netflix didn’t appear in a moment of divine inspiration—it didn’t come to us in a flash, perfect and useful and obviously right. > > **The truth is that for every good idea, there are a thousand bad ones. And sometimes it can be hard to tell the difference.** > > **Customized sporting goods. Personalized surfboards. Dog food individually formulated for your dog. These were all ideas I pitched to Reed. Ideas I spent hours working on. Ideas I thought were better than the idea that eventually— after months of research, hundreds of hours of discussion, and marathon meetings in a family restaurant—became Netflix.** > > **I had no idea what would work and what wouldn’t. In 1997, all I knew was that I wanted to start my own company, and that I wanted it to involve selling things on the internet. That was it.”** > > —[Marc Randolph](https://en.wikipedia.org/wiki/Marc_Randolph), CEO and co-founder, author of *[That Will Never Work](https://www.amazon.com/That-Will-Never-Work-Netflix/dp/0316530204)* #### Yelp > **“So I got to Max [Levchin]’s little office, little dumpy office, brick lined room, and it was just a bunch of different folks working on little internet ideas. What’s going to be the next big thing on the internet—which I actually was intrigued by. And I thought, well, this is a fun exercise. I’ve always wanted to start a company—this is a good trial run for me to see if I could come up with a compelling idea that I could pitch Max on that he would actually get excited about. […]** > > There was some interest within the incubator around the local space. It was, you know, we were observing. Craigslist was killing the newspaper business by carving out classifieds, and so that put a spotlight on the Yellow Pages, like, hey, here’s another old media business that hasn’t really been transformed by the internet. > > And so that got us thinking about what would be, you know, better than the Yellow Pages. And as I thought about and talked about it with my co-founder, Russ Simmons, who was another early PayPal person, you know, reviews, capturing word of mouth, bringing it online, marrying it with social networking—which was another technology that was just emerging; you had Friendster and MySpace. It seemed intriguing, but we didn’t think you could create a social network just around reviewing. > > It took us a couple of months, maybe a month and a half or so, to really zero in on an idea. Eventually I said to [Russ], you know, what if you asked me a question, like who’s a good doctor in San Francisco—I love to be the expert, I love to reply, to give you this helpful information. So out of this sort of back-and-forth conversation about questions, the idea emerged: maybe we can build a site around asking friends for recommendations.” > > —[Jeremy Stoppelman](https://en.wikipedia.org/wiki/Jeremy_Stoppelman), CEO and co-founder, via [How I Built This](https://www.npr.org/2019/06/21/734865142/yelp-jeremy-stoppelman) #### Reddit > “Somewhere in the middle of Connecticut, on an exceptionally long train ride back to Virginia, my cell phone rang. It was Paul Graham. He wanted us back, but only if we changed our idea to something else. So much for proving them wrong. We got off at the very next stop, but not before I got Paul to buy us a pair of tickets to fly back to Charlottesville that night so we could **return to Boston for an hour to join him in ‘brainstorming a better idea than mobile food ordering.**’ […] > > We got back to the Y Combinator office and met with Paul Graham alone, without his partners. He told us to forget mobile for a moment and consider building something for the browser. […] > > He asked us about frustrations we had using the internet, which had just recently seen the launch of a college-only site called TheFacebook.com. Steve was an avid reader of Slashdot, a news website with editorial oversight and a robust community of commenters as well as a moderation system. I had too many tabs open every day—they showed me a range of news websites, but I had no way to filter signal from noise. > > At the time, a website called del.icio.us (pronounced ‘delicious’; ignore the dots) let people bookmark websites online, so if you hopped between computers, your reference material followed you. An interesting by-product of this was del.icio.us/popular, which aggregated the most popular bookmarked URLs at any given time. There was something here that del.icio.us wasn’t quite getting, but we saw the potential for something bigger, which would sort not the most popular links for bookmarking but the most popular links for sharing. > > We hadn’t figured out functionality, but we knew the old model for news aggregation, when it was printed on a dead tree, wasn’t suited for the internet age. In fact, the vision was best crystallized by Paul Graham in that very meeting: ‘That’s it! You should build the front page of the web.’ ” > > —[Alexis Ohanian](https://en.wikipedia.org/wiki/Alexis_Ohanian), CEO and co-founder, via [Reddit](https://www.reddit.com/user/kn0thing/comments/6fg6zw/how_reddit_went_from_mobilefoodordering_service/) #### Nextdoor ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d1619d95-c20a-4680-84ce-c811aeef2df2_512x387.jpeg) > “**We had no hierarchy at all. And we had this standing 10 a.m. meeting to come up with billion-dollar ideas. It was fun. We were kind of poking fun at it.** > > **And you would have ideas and they would come up and people would talk about them and then you’d find out, ‘Okay, who wants to go work on that?’** > > We had a lot of ideas that were focused on building and taking advantage of online community because that’s what we understood and what we knew. One of those ideas was what became Nextdoor, where one of our co-founders came in and said, ‘Hey, I’m trying to get a pothole fixed in my neighborhood and I realized there’s no way to communicate with the folks who live around me.’ > > I remember the moment he said it. ‘Oh, that’s super interesting.’ And then we started to ... like, well, you have Facebook for friends and family, people you know. LinkedIn for your professional contacts. But people who live around you, how do you have a way to communicate with them?” > > —[Sarah Leary](https://www.linkedin.com/in/sarahleary/), CEO and co-founder, via [Mike Maples, Jr.](https://greatness.floodgate.com/episodes/nextdoor-co-founder-sarah-leary-the-moment-you-know-youve-created-something-valuable-55JiUgue/transcript) #### DoorDash ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/08e7a7c4-90c6-457a-9949-6ab5b7795a9a_2800x2080.jpeg) > “**During our second year in b-school, we wanted to build something. We went door to door and asked business owners to tell us about their work. The most useful question, for me, was ‘Tell me everything you’ve done since getting here today.’** > > **Delivery first came up at a macaron shop. We were wrapping up an interview when we overheard the manager turn down a delivery order. If there was a light-bulb moment, this was it—why couldn’t businesses send things across town, on demand? There should be an on-demand FedEx!** > > We tested just the consumer part first. We made a static HTML page at https://paloaltodelivery.com with a Google Voice number and a few PDF menus from local restaurants, offering delivery for $6. We launched a small AdWords campaign to see if anyone was searching for it. > > Hours later, Tony [Xu] and I were driving home when we got the first order. I grabbed a notebook and wrote down what the guy wanted from a local Thai restaurant. We placed a takeout order, drove to the restaurant, bought the food, took it to the customer, and charged him with Square. > > We quickly had trouble keeping up. I remember running out of class to answer the phone more than a few times. We probably took ‘Do things that don’t scale’ too far.” > > —[Evan Moore](https://www.linkedin.com/in/evanmoore/), co-founder, via [Twitter](https://twitter.com/evancharles/status/1336835867768279040?s=20&t=eo6AZsa-nhu8nI_v3yqvVg) #### Bumble ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2d3185bc-0ff4-4cc4-9c86-f8bafc00ee9c_1020x608.webp) > “I received an email from [Andrey Andreev](https://en.wikipedia.org/wiki/Andrey_Andreev)—we’d met back in 2013, and he’d always said he wanted to speak to me when I had my next step after [Tinder](https://en.wikipedia.org/wiki/Tinder_(app)). We got speaking—he was really convincing—and said, ‘Hey! You should come be the CMO for my dating app.’ At the time I was *allergic* to dating apps and didn’t *ever* want to be in the space again. I told him, ‘Thank you so much; it’s really kind of you to have that belief in me. I’d love to work with you, but I want to start my own company and be CEO. I’m thinking of starting a social network, where the currency is compliments, just for girls and women…’ > > I’d had a really tumultuous summer where I was being abused on the internet by strangers, and I really wanted to clean up the internet for young girls. I shared this vision with Andrey and he said, ‘That’s a great vision; I believe in it. I see these issues all the time on the internet, and there’s definitely something here. Why don’t we turn the concept into a dating app?’ I thought he was mad. I thought he’d lost his mind, but you know what? He was absolutely right—there was a huge opportunity to improve the dating space for women. > > **We sat down, brainstormed what a dating app for women would look like—how it would work, how our past experiences could be drawn on—and it came down to one thing. Women were** ***never*** **in the driver’s seat with dating.** It always came down to the man to take the lead, to ask the girl. There was this playbook where the guy has the power, the girl is weak and fragile waiting to be saved by Prince Charming—and this is disempowering for both sides. > > We decided to flip the script and empower people through connections, reducing rejections on the man’s side and empowering women to make the first move and be confident. That was the beginning of Bumble. And here we are, five years later, with almost 60 million users globally.” > > —[Whitney Wolfe Herd](https://en.wikipedia.org/wiki/Whitney_Wolfe_Herd), CEO and co-founder, via [ThoughtEconomics](https://thoughteconomics.com/whitney-wolfe-herd/) #### Eventbrite > “**[Kevin Hartz] was already transitioning out of Xoom and he was starting to look at what he wanted to do next, what he wanted to build next. So he was primed to be in ideation phase.** > > There were several ideas that he had actually prototyped and, to some extent, had built early versions of. One of the things was about this very simple transactional platform to sell tickets to any kind of event. […] And that became, that was the first idea that we had to work on together and, you know, just so happened to stick.” > > —[Julia Hartz](https://www.linkedin.com/in/juliahartz/), CEO and co-founder, via [How I Built This](https://www.npr.org/2020/02/14/806106473/eventbrite-julia-hartz) ## Should you sit around and think, or wait for an idea to strike? Of the more than 50 companies I looked at, fewer than 10 founders had sat around and actively brainstormed startup ideas. I’m sure many other founders were thinking about startup ideas passively, but most didn’t actively try to think of one. The majority of ideas emerged organically, out of the founders’ attempt to solve their own problem, following their innate curiosity, trying something and then doubling down on the part that was working, or having a sudden insight into a much better user experience. This isn’t to say that you shouldn’t spend time ideating—it just means that isn’t where most of the biggest consumer startup ideas have come from. ## What makes a good idea? Although there’s no way to truly know if your idea will work (otherwise, some VC would be batting a thousand) and many really good ideas fail, based on my research, the more of the following elements your idea has, the more likely it is to succeed: #### **1. You can’t stop thinking about the idea** Startups only really fail when the founder gives up. The more passionate you are about your idea, the less likely you are to do that. > **Max Mullen, Instacart:** “I was on a **warpath** to start this company.” > **Neil Blumenthal, Warby Parker:** “**You know one of those moments when you can’t sleep because you are just thinking?** […] The four of us each had that feeling in our stomachs where we thought that we were really onto something and we really couldn’t sleep, and it was that next day that we all met back up at school and were committed to doing whatever it took to make it happen.” > **Brian Armstrong, Coinbase:** “**It was kind of an obsession**. I don’t know what you’d call it. I kind of couldn’t help myself. I remember I was actually almost trying to talk myself out of it at a certain point because I was like: if you’d go down this rabbit hole, you know, you’re not going to be able to get out of it because this is not some kind of throwaway project you can do.” > #### “We hear again and again from founders that they wish they had waited to start a startup until they came up with an idea they really loved.” —Sam Altman #### **2. You immediately start building a prototype, and have the skills to do it** Most of the companies I researched emerged out of a scrappy experiment that came together hours/days/weeks after the founders had the idea. That isn’t always the case, but it seems to be common for successful consumer companies. This is likely why over 80% of the startups had an engineering co-founder. > **Twitter:** “We went off and built a prototype in two weeks.” > **Tinder:** “Over the course of the hackathon, they built the first prototype.” > **Lyft:** “The founders grabbed a couple engineers and a designer, and three weeks—and a lot of hard work—later, that small team launched Lyft.” > **Patreon:** “The very day [I] had the meeting to talk about the idea, I went home to work on the code. I started working probably more passionately than ever on any other project. For me it felt like a race, and I had this fear that if we didn’t move fast on this, someone else would do it and I’d regret that.” #### **3. You have unique insight into the opportunity** Although only about half of the startups I looked at were started by founders with specialized *skills/experience*, the majority of founders had a unique insight into the opportunity, based on some prior experience they had. For example, Alex Zhu worked on video and music apps before TikTok, Larry and Sergei wrote research papers and saw how citations were a sign of content value, and Brian Armstrong had a dual bachelor’s degree in economics and computer science. The unique insight is also why some of the best ideas initially sound crazy (e.g. Airbnb, Uber), trivial (e.g. Cameo, DoorDash), or impossible (e.g. Uber, Spotify, DoorDash)—you see the world differently from those around you. For that reason, also notice that among the stories I shared, rarely is user research a big factor in the early ideating. Most ideas emerged out of the founders’ experience, vision, and gut instincts. #### **4. The idea is easy to understand** Every product we’ve looked at can be explained in a sentence or two. We’ll spend more time on this in Part 3 of this series. Broadly, if you can combine the right founder—who can’t stop thinking about that idea, has a unique insight into the opportunity and the right skills, with market timing—you create the opportunity for massive consumer businesses. ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ca0914b9-2a23-4a99-89b2-fcac0f3f6a71_1684x1218.png) This is also why you shouldn’t be super-worried about someone stealing your idea—the chances that anyone else has this rare combination at the right time are incredibly low. ## What to do once you have an idea As Walt Disney said, “The way to get started is to quit talking and begin doing.” Here’s my advice on what to do as soon as you have an idea you’re excited about. #### 1. Prototype it cheaply and quickly to validate the idea > **Stitch Fix:** “Lake used Survey­Monkey to track customers’ preferences and then toted armloads of garments to their homes, accepting checks to cover the $20 styling fee.” > **Netflix:** “We turned the car around mid-commute and drove back down to the town we lived and tried to buy a DVD. And of course there weren’t any—it was in test market—so we bought a used music CD and mailed that to Reed’s house in Santa Cruz for the price of a postage stamp. And the next morning, we learned is it a good idea or a bad idea.” > **DoorDash:** “We tested just the consumer part first. We made a static HTML page at https://paloaltodelivery.com with a Google Voice number and a few PDF menus from local restaurants, offering delivery for $6. We launched a small AdWords campaign to see if anyone was searching for it. Hours later, Tony and I were driving home when we got the first order.” > **Rec Room:** “They built the first game within 90 days and launched it quietly on SteamVR.” > **Hipcamp:** “I learned how to program later that year. That June, I launched a very, very beta version of the website.” Don’t miss [Todd Jackson’s in-depth post on validating your idea](https://www.lennysnewsletter.com/p/validating-your-startup-idea?s=w). #### 2. Talk to potential customers to refine your idea > **Rent The Runway:** “‘You know, we should really call Diane von Furstenberg,’ Jenny said. ‘Do you know Diane von Furstenberg?’ And I said, ‘Obviously I don’t know Diane von Furstenberg. But we could probably figure out her email address.’ Jenny and I wrote an email that afternoon to many different versions of Diane von Furstenberg’s email address. And we basically said, ‘Hey, we’re two women at Harvard Business School. We’d love to come in and talk to you about it.’ And this is where luck plays into the situation, because she or someone from her office opened that email. She responded, ‘I’ll see you tomorrow at 5 p.m.’ And we drove down to New York that next day, put on our DVF dresses, and walked into her office and introduced ourselves.” > **Rec Room:** “To get early testers, they set up in the lobby of their WeWork and asked people walking by to check out the app.” > **Discord:** “Citron and Stan immediately jumped into the server, hopped into voice chat, and started talking to anyone who showed up.” #### 3. Figure out who you are building for … and this is exactly what we’re going to be focusing on in our very next post! ### **Next week: 🕵️ Identifying your super-specific who** Subscribe to make sure you don’t miss it! Two final words of wisdom: > #### “Don’t worry about failure. You only have to be right once.” > > #### **—[Drew Houston](https://en.wikipedia.org/wiki/Drew_Houston)** > #### “The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.” > > #### —[Nolan Bushnell](https://en.wikipedia.org/wiki/Nolan_Bushnell) *A big thank-you to [Alyssa Ravasio](https://www.linkedin.com/in/alyssa-ravasio-23114717/) (Hipcamp), [Chris Best](https://www.linkedin.com/in/cjgbest/) and [Hamish McKenzie](https://www.linkedin.com/in/hamishmckenzie/) (Substack), [Devon Townsend](https://www.linkedin.com/in/devspinn/) (Cameo), [Evan Goldin](https://www.linkedin.com/in/evangoldin/) and [Adam Fishman](https://www.linkedin.com/in/adamjfishman/) (Lyft), [Julia Hartz](https://www.linkedin.com/in/juliahartz/) (Eventbrite), [Max Mullen](https://www.linkedin.com/in/maxmullen/) (Instacart), [Sander Daniels](https://www.linkedin.com/in/sander-daniels/) (Thumbtack), and [Steve Chen](https://twitter.com/stevechen) (YouTube) for generously sharing their stories for part one of this series.* ## 📚 Further study 1. [How to get startup ideas](https://paulgraham.com/startupideas.html) by Paul Graham 2. [How to get and test startup ideas](https://www.youtube.com/watch?v=vDXkpJw16os&t=86s) by Michael Seibel 3. [How to validate your startup idea](https://www.lennysnewsletter.com/p/validating-your-startup-idea?s=w) by Todd Jackson 4. [How to start a startup](https://startupclass.samaltman.com/) by Sam Altman and Dustin Moskovitz 5. [How to build a breakthrough](https://medium.com/@m2jr/how-to-build-a-breakthrough-3071b6415b06) by Mike Maples, Jr. 6. [12 frameworks for finding startup ideas](https://review.firstround.com/12-frameworks-for-finding-startup-ideas-advice-for-future-founders) by First Round Capital 7. [Finding the right idea](https://pioneer.app/codex/idea) by Pioneer 8. [The hidden backstory of 5 startup pivots that grew to $43B](https://www.jasonshen.com/115/) by Jason Shen *Have a fulfilling and productive week 🙏* ### 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to kickstart and scale a consumer business](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) ### **🔥 [Featured job openings](https://www.lennysjobs.com/jobs)** 1. **Fountain:** [Senior Product Manager](https://www.lennysjobs.com/jobs/d1cac1a4-674a-4342-82b9-43373ea1c283) (Remote) 2. **Render:** [Product Manager](https://www.lennysjobs.com/jobs/e948aaae-136d-4de6-954b-58985e9643e0) (Remote) 3. **Mine’d:** [Head of Product](https://www.lennysjobs.com/jobs/2dbd9fc9-b2df-4567-82bd-7941760549b1) (N.Y., Remote) 4. **OpenStore:** [Product Marketing Manager](https://www.lennysjobs.com/jobs/8a65b820-6d69-4a43-a46f-0d96b67b0b37) (Miami) 5. **Ashby:** [First Lead UX Designer](https://www.lennysjobs.com/jobs/3f84ab83-6078-4607-b55b-d107a3674e1f) (L.A., S.F., Vancouver, Austin, Tribeca) 6. **Wethos:** [Director, Growth Product Marketing](https://www.lennysjobs.com/jobs/a8779353-bfa9-4f10-9ab7-d96ec87ae733) (Remote) 7. **Scratchpad:** [Senior Product Manager](https://www.lennysjobs.com/jobs/c4039341-f2c6-4ac9-bc69-7b52c457f621) (Remote) 8. **Joby Aviation:** [Air Taxi Product Manager-Operations](https://www.lennysjobs.com/jobs/6e99a528-2443-435f-bd43-a86d437f6ff2) (San Carlos, CA) **Finding this newsletter valuable? Consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [24/44] How to kickstart and scale a consumer business—Step 2: Identify your super-specific who ![Image from How to kickstart and scale a consumer business—Step 2: Identify your](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/53899ed0-931b-4572-9e69-9c2fdbfe51e5_4096x2048.png) Welcome to part two of our six-part series on kickstarting and scaling a consumer business. If you’re just joining us, here are links to previous posts, and a sense of what’s ahead: - **[Step 1: INSIGHT: Come up with your idea](https://www.lennysnewsletter.com/p/kickstarting-and-scaling-a-consumer)** - **Step 2: AUDIENCE: Identify your super-specific who** ←This post - **[Step 3: HOOK: Craft your pitch](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer)** - **[Step 4: REACH: Find your early adopters by doing things that don’t scale](https://www.lennysnewsletter.com/p/consumer-business-find-first-users)** - **[Step 5: RETAIN: Iterate until enough people stick around](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer-9c8)** - **[Step 6: SCALE: Build your growth engine](https://www.lennysnewsletter.com/p/growth-engines)** **The main question we’ll be answering in today’s post:** Why (and how) do you target a very narrow set of early adopters? Let’s get right into it. ![Image from How to kickstart and scale a consumer business—Step 2: Identify your](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/618b5342-04d5-402f-8106-81bc9c8ca596_4096x2048.png) In January 2010, when Ben Silbermann launched Pinterest, his initial growth strategy was to target his techie friends. He first emailed friends to let them know about his new site that lets you organize and share the things you love. “What’s the point?” they all asked. He then emailed all of his co-founders’ friends on the East Coast. No one cared. He emailed everybody he knew from his last job at Google, and all of his wife’s friends at Facebook. > #### **“No one really got it, to be totally honest with you. But they were also very polite about it. ‘This looks interesting. Very interesting,’ they’d say.”** He then started spending time at Apple stores, where he switched the default home pages on every laptop to Pinterest.com and stood in the back saying, “Wow! This Pinterest thing is really blowing up.” Didn’t work. Ben started to realize that maybe tech people had no interest in what he was building. But there was an unexpected demographic that seemed to get it, as Ben shared at a [talk at Startup School](https://www.ycombinator.com/blog/ben-silbermann-at-startup-school/): > #### **“There was a small group of people who were really enjoying it. Those folks would not be who you’d think of stereotypically as early adopters. They were folks I grew up with. People that were using it for regular life stuff: What is my house going to look like? What kind of food do I want to eat?”** On a whim, Ben decided to attend a conference in Salt Lake City called Alt Summit, a large female-focused design and blogging conference. He walked the halls pitching Pinterest and began to see a bit of interest. Eventually he met a woman named Victoria Smith who had a blog called SFGirlByBay. She quickly saw the potential of Pinterest, and they decided to collaborate on a promotion: Victoria created a Pinterest board with all the things that mean “home” to her and then tagged other bloggers to do the same. Each blog had a small but rabid fan base, and their audiences loved it. They *got* Pinterest. Soon they started to use it for all kinds of other things, and just a year later, Pinterest was at over a million users. Throughout this journey, the product itself didn’t meaningfully change—the audience did. Ben initially assumed that a new tech website would resonate with tech employees. Instead, 30-something female bloggers turned out to be the ideal early adopters. **When deciding who to go after when just starting out, it’s important to be super-specific. You need to find your “super-specific who”.** As [Andy Johns](https://twitter.com/ibringtraffic/status/1258817334342381575?s=20) (former growth leader at Facebook, Twitter, Wealthfront, and Quora) put it: > #### “When it comes to the question of the target customer, the most common mistake is the definition is too broad. It must be almost comically narrow, to the point where you may be misunderstood for such a narrow focus. > > #### At Wealthfront, our initial target customer was an engineer at a pre-IPO tech company, typically between 25 and 35 years old, less than $1M net worth, and had a personal preference to delegate money management to a trusted third party.” [Michael Seibel](https://www.michaelseibel.com/) shared the same lesson from his time at Justin.TV (60-second clip): [Watch on YouTube](https://www.youtube.com/watch?v=C27RVio2rOs) As did [Andy Rachleff](https://mixergy.com/interviews/wealthfront-with-andy-rachleff/) (co-founder of Benchmark): > #### “If you want to build a big business, you don’t go after the big market first, because those people only buy based on references, and you don’t have the references. You need to create a beachhead, a niche you can dominate. Through references, you grow from that niche of early adopters.” As did [Paul Graham](https://www.paulgraham.com/): > #### “Usually your initial group of users is small, for the simple reason that if there were something that large numbers of people urgently needed and that could be built with the amount of effort a startup usually puts into a version one, it would probably already exist.” [April Dunford](https://www.lennysnewsletter.com/p/positioning) (author of *Obviously Awesome*) calls this your “customers who care”: > #### “There is likely a wide range of buyers that care about that value, but certain customers care a lot more than others. What are the characteristics of a customer that makes them care a lot about your differentiated value? That gives us an idea of who our best-fit customers are. Your best-fit target customers are customers that really care a lot about your unique value.” And [Julie Supan](https://review.firstround.com/what-i-learned-from-developing-branding-for-airbnb-dropbox-and-thumbtack) (GTM advisor to YouTube, Airbnb, Dropbox, Discord, and Thumbtack) calls this your “high-expectation customer”: > #### “The high-expectation customer, or HXC, is the most discerning person within your target demographic. It’s someone who will acknowledge—and enjoy—your product or service for its greatest benefit. > > #### They look things up. They research things. And they have ideas for new types of products or services that can help them save money, gain time, get healthier, or make their team more productive. If your product exceeds their expectations, it can meet everyone else’s.” Nearly every successful consumer company nailed their super-specific who (though not always right away). Here are a bunch of examples: ![Image from How to kickstart and scale a consumer business—Step 2: Identify your](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/804f31f0-eb40-4f4a-aac6-36b109d4b06d_2374x5634.png) ### How they found their super-specific who Yelp started very broad and quickly found one specific group that was most drawn to its product: > #### “Early on, we found that females ages 25 to 35 were the most active Yelp users. It’s not because we chose to focus on them—more like that’s who Yelp most strongly resonated with in the early months. We were neutral in our initial outreach (just friends and friends of friends), and then the first super-active users who had happened to be in that demographic—a disproportionate amount of 25-to-35 females. It was more just an observation of who it resonated with than an a priori idea we came in with.” > > #### —[Russel Simmons](https://www.linkedin.com/in/russel-simmons-9562/), co-founder and ex-CTO of Yelp Cameo started off by focusing on B-list athletes because the idea itself was inspired by one—and it turned out to be a great target: > #### “The way the company started was [Steven](https://www.linkedin.com/in/stevengalanis) and [Martin](https://www.linkedin.com/in/martin-blencowe-b1768114a) were chatting at a funeral, and Martin was talking about how he recently became an NFL agent, managing [Cassius Marsh](https://en.wikipedia.org/wiki/Cassius_Marsh), and was trying to find him brand deals. They decided to start a company where for X dollars you can do Y activity with Z athlete—for example, go golfing with Michael Jordan, invite Serena Williams to your daughter’s birthday, etc. > > #### This evolved into what Cameo is today, starting with Cassius and some former Duke athletes we knew. We quickly went into additional verticals, but now that we’ve had time to tune the platform and develop the brand, athletes are again one of our strongest verticals.” > > #### —[Devon Townsend](https://www.linkedin.com/in/devspinn), co-founder and CTO of Cameo Netflix went after online DVD fanatics because that’s who they suspected would benefit most from unlimited DVD rentals: > #### “[We’d] realized, early on, that the only way to find DVD owners was in the fringe communities of the internet: user groups, bulletin boards, web forums, and all of the other digital watering holes where enthusiasts met up.” > > #### —[Marc Randolph](https://en.wikipedia.org/wiki/Marc_Randolph), co-founder of Netflix, from *[That Will Never Work](https://www.amazon.com/That-Will-Never-Work-Netflix/dp/0316530204/ref=nodl_)* Instagram went after designers interested in photography with a large Twitter following, because those are the people they wanted to set the tone for the platform: > #### “The founders picked their first users carefully, courting people who would be good photographers—**especially designers who had high Twitter follower counts**. Those first users would help set the right artistic tone, creating good content for everyone else to look at, in what was essentially the first-ever Instagram influencer campaign, years before that would become a concept.” > > #### —[Kevin Systrom](https://en.wikipedia.org/wiki/Kevin_Systrom), co-founder and CEO Wealthfront went after young engineers at pre-IPO tech companies: > #### “We started with young people in tech and we started with engineers in tech, and then they told the product managers and the biz dev people and the salespeople and then they told their friends who they went to college with and might be lawyers or doctors. They told their friends about it locally and then they told their friends about it nationally and they just kept growing through word of mouth. > > #### We also learned that employees of enterprise software companies were not good targets because they were older than people who worked at consumer internet companies.” > > #### —[Andy Rachleff](https://mixergy.com/interviews/wealthfront-with-andy-rachleff/), co-founder Discord’s super-specific who was comically narrow: > #### “Discord’s initial wedge was quite narrow: a tool for Final Fantasy XIV gamers—an MMORPG with only 4 million registered players.” —[Olivia Moore](https://readlaunched.substack.com/p/-how-discord-dominated-gaming) Substack went after successful online writers it suspected wanted to spend more time writing and less time dealing with email tools: > #### “It all started with Bill Bishop, author of [Sinocism](https://sinocism.com/), who I knew from my days as a reporter in Hong Kong (and later, a visiting reporter in China). He had been publishing Sinocism as a free newsletter for five years, and I was a reader. In 2017 he started telling his readers he was going to put up a paywall. This was around the time that Chris [Best] and I were talking about starting Substack. I asked Bill if he’d be interested in being Substack’s first publisher, and he said ‘Sure!’ So we built the first version of the product to suit his needs and iterated from there.” > > #### —[Hamish McKenzie](https://www.linkedin.com/in/hamishmckenzie/), co-founder and COO Finally, TikTok had a genius framework for who to go after and how to win them over: > #### “In the early stage, building a community from scratch is like discovering a new land. You can give it a name: America. You want people from the existing platforms (i.e. Europe) to migrate to your country. Instagram is Europe. Facebook is Europe. > > #### The economy in Europe is very developed, and in your country there is no economy. How can you attract people to come in? In Europe, the social class is already stabilized. For the average citizen, for citizens of Germany or France, they have almost zero opportunity to go up in the social class. But now you have a new land. America! A.k.a. TikTok. > > #### Initially the majority of the wealth should be distributed to a small number, to make sure new people get rich. These people became a role model for people living in Europe. ‘This is just a normal guy, he went to America, and he became super-rich. I can do the same!’ > > #### And then lots of people came to your country, and you grow the population, you grow the economy.” > > #### —[Alex Zhu](https://news.greylock.com/productsf-2016-b753fa9159b8), co-founder of Musical.ly and ex-president of TikTok Spend time promoting your product to the wrong people and you’ll waste your time or, worse, go nowhere and give up. But if you can identify the right early users for your product in time, you’ll find that everything gets easier. > #### “If you can find a market that really wants your product—if the dogs are eating the dog food—then you can screw up almost everything in the company and you will succeed.” > > #### —[Andy Rachleff](https://en.wikipedia.org/wiki/Andy_Rachleff) ### **How to identify your super-specific who** To help you identify your own super-specific who, start by taking your best guess at the following five questions: 1. **Who are three real people you know who will be** ***exceptionally*** **excited about what you’re building? What do they have in common?** 2. **Of your existing users, who are** ***happiest*** **and** ***most committed*****? What do they have in common?** 3. **Who do you know whose life will become** ***instantly*** **better once they use your product?** 4. **Who do you know whose life will become** ***instantly*** **less painful?** 5. **Who’s asking to** ***pay*** **for this product**? > #### “Some prospects will say, ‘Yeah, your stuff is cool,’ but others will jump out of their chair and yell, ‘That’s *amazing* — I need that right now!’ You are going for the second group.” > > #### —[April Dunford](https://www.aprildunford.com/post/startup-market-segmentation-how-to-select-a-target-market), author of *Obviously Awesome* A few examples of *good* and *bad* super-specific whos: ![Image from How to kickstart and scale a consumer business—Step 2: Identify your](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5562967f-e7de-498b-918a-04d353f88d7f_3572x2262.png) > #### “Who are the most desperate customers?” —[Michael Seibel](https://www.michaelseibel.com), head of Y Combinator Let’s get even more concrete. Take out a piece of paper (or [make a copy of this template](https://docs.google.com/document/d/19k7oXAYb9qkra6FTUMPljW75YZfUfWEr0eTITZvDe6s/edit)) and write your best guesses of these six attributes of your super-specific who, based on the exercise above: 1. **Age range** 2. **Job title** 3. **Interests** 4. **Where they live** 5. **Where they spend most of their time, online and offline** 6. **What is most important to them in this product** Aim for *three* very specific characteristics of your ideal early adopter. For example: - **[Wealthfront](https://wealthfront.com/):** (1) 25-to-35-year-old, (2) engineers, (3) at a pre-IPO tech company - **[Yelp](https://yelp.com/):** (1) 25-to-35-year-old, (2) women, (3) in cities - **[Cameo](https://www.cameo.com/):** (1) B-list, (2) football players, (3) in Chicago - **[Instagram](https://www.instagram.com/):** (1) Designers, (2) interested in photography, (3) with a large Twitter following - **[PayPal](https://paypal.com/):** (1) Small to medium businesses, (2) on eBay, (3) who are power sellers - **[Strava](https://www.strava.com/)**: (1) Pro and serious amateur, (2) cyclists, (3) who want to visualize their activities - **[Atlys](https://www.atlys.com/)**: (1) Non-U.S. citizens, (2) living in the U.S., (3) going to Europe for a vacation Start simple. You can get more specific as you uncover which types of people get most obsessed with your product. [Again, here’s the simple template](https://docs.google.com/document/d/19k7oXAYb9qkra6FTUMPljW75YZfUfWEr0eTITZvDe6s/edit?mode=html) (which includes pieces from future posts) to help you consolidate your thoughts: ![Image from How to kickstart and scale a consumer business—Step 2: Identify your](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ca02f656-317d-44c4-801a-d30ba5c911b7_1318x1372.png) If you’d like to go deeper, here are some of my favorite guides for coming up with your super-specific who: 1. [Find your HXC](https://review.firstround.com/what-i-learned-from-developing-branding-for-airbnb-dropbox-and-thumbtack#:~:text=global%20mobility%20services.%E2%80%9D-,Find%20Your%20HXC,-It%E2%80%99s%20no%20exaggeration) by Julie Supan 2. [Ideal Customer Profile (ICP): How to Create a Comprehensive Customer Profile](https://www.mykpono.com/ideal-customer-profile-icp-how-to-create-a-comprehensive-customer-profile/) by Myk Pono 3. [Ideal Customer Profile (ICP) template](https://docs.google.com/spreadsheets/d/1QZ8sNT7aP3TWHDsrK8k1vN_HDohxQUQaPok1BfVh0Uo/edit#gid=0) by Patrick Campbell 4. [GTM nirvana](https://docs.google.com/presentation/d/1M_j0F-IuqgaGfHPfvOh1ssBudpA_Wyp6VoHA46uOr80/edit#slide=id.ga6fcfd8bcf_2_93) by Caroline Clark ### What if you get it wrong? It’s not the end of the world. But it’ll waste time, and may make you feel like no one wants your product. We already saw what happened when Ben went after the wrong initial target market for Pinterest (tech people vs. female bloggers). The product seemed like a failure until it didn’t. But once he figured it out, it worked. Udemy spent months going after the wrong audience, until they finally cracked it: > #### “It was really hard to get our first active instructors; I spent hours every day on Skype calls with all sorts of people—book authors, entrepreneurs, professional poker players, even someone who called themselves a ‘witch’ and who believed she was trained in black magic! While some of these folks created courses, it was basically useless—and just a really extended version of customer development. > > #### After we manually created some successful courses and we had proven the value of teaching a course in the first place, we then went to some experts in programming, technology, and entrepreneurship and convinced them to teach courses. It was enough to convince two more instructors to join—Zed Shaw and Bess Ho. They were more successful than our previous instructors, so that helped us convince 5 to 10 more to join that summer.” > > #### —[Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/), co-founder of Udemy Typeform saw early success going somewhat broad, but their lack of focus led to growth stagnating a few years in: > #### “In the beginning, our focus was deliberately very broad as ‘democratizing data collection for everyone.’ The benefit is that it cast a wide net and gave us a huge TAM [total addressable market], but our positioning mostly attracted SMBs [small and medium-size businesses]. > > #### The market perception is that we offered some value to everyone but that we didn’t go deep enough in any single use case to offer a ton of value to anyone. > > #### We enjoyed hypergrowth during the first 3-4 years of our journey, but at some point growth slowed and we realized that what had gotten us that far wasn’t going to get us to the next level. > > #### It was at this point that we dug deeper into our data and decided to focus our GTM strategy on specific personas with specific JTBD [jobs to be done]. We realized that our most valuable persona in terms of usage and LTV was a marketer using Typeform to grow their business.” > > #### —[Cristina Apple Georgoulakis](https://www.linkedin.com/in/claki/), ex-Global Head of Customer Engagement at Typeform The faster you can nail your super-specific who, the better everything will go. Remember: 1. Try to make it almost comically narrow 2. Aim for three very specific characteristics 3. Start simple. You can get more specific as you learn more. And then once you have a sense of the *who*, the next step is to figure out *what* to pitch them. And that’s exactly what we’ll be covering in the very next post. Stay tuned! ### 📚 Further study 1. [My simple B2C GTM template](https://docs.google.com/document/d/19k7oXAYb9qkra6FTUMPljW75YZfUfWEr0eTITZvDe6s/edit?mode=html) 2. *[Crossing the Chasm](https://www.amazon.com/Crossing-Chasm-Marketing-High-Tech-Mainstream/dp/0060517123)* by Geoffrey A. Moore 3. [Positioning](https://www.lennysnewsletter.com/p/positioning) by April Dunford 4. [The High-Expectation Customer](https://review.firstround.com/what-i-learned-from-developing-branding-for-airbnb-dropbox-and-thumbtack) by Julie Supan 5. [Ben Silbermann at Startup School](https://blog.ycombinator.com/ben-silbermann-at-startup-school/) by YC 6. [The Sharp Startup: When PayPal Found Product-Market Fit](https://medium.com/craft-ventures/the-sharp-startup-when-paypal-found-product-market-fit-5ba47ad35d0b) by David Sacks 7. [The “thin edge of the wedge” strategy](https://cdixon.org/2010/12/26/the-thin-edge-of-the-wedge-strategy) by Chris Dixon *A big thank-you to [Cristina Apple Georgoulakis](https://www.linkedin.com/in/claki/) (Typeform), [Devon Townsend](https://www.linkedin.com/in/devspinn) (Cameo), [Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/) (Udemy), [Hamish McKenzie](https://www.linkedin.com/in/hamishmckenzie/) (Substack), [Michael Horvath](https://www.linkedin.com/in/mtkhorvath/) (Strava), and [Russel Simmons](https://www.linkedin.com/in/russel-simmons-9562/) (Yelp) for contributing to this post 🙏* ### Next week: HOOK—Crafting your pitch 🥁 Subscribe to make sure you don’t miss it. ### 📣 Join Lenny’s Talent Collective [Join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to kickstart and scale a consumer business—Step 2: Identify your](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join the collective to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply to join](https://www.lennysjobs.com/talent) ### **🔥 [Featured job openings](https://www.lennysjobs.com/jobs)** 1. **Fountain:** [Senior Product Manager](https://www.lennysjobs.com/jobs/d1cac1a4-674a-4342-82b9-43373ea1c283) (Remote-US) 2. **Render:** [Product Manager](https://www.lennysjobs.com/jobs/e948aaae-136d-4de6-954b-58985e9643e0) (Remote) 3. **Mine’d:** [Head of Product](https://www.lennysjobs.com/jobs/2dbd9fc9-b2df-4567-82bd-7941760549b1) (N.Y., Remote) 4. **OpenStore:** [Product Marketing Manager](https://www.lennysjobs.com/jobs/8a65b820-6d69-4a43-a46f-0d96b67b0b37) (Miami) 5. **Ashby:** [First Lead UX Designer](https://www.lennysjobs.com/jobs/3f84ab83-6078-4607-b55b-d107a3674e1f) (L.A., S.F., Vancouver, Austin, Tribeca) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [25/44] How to kickstart and scale a consumer business—Step 3: Craft your pitch ![Image from How to kickstart and scale a consumer business—Step 3: Craft your pitch](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/733df44f-e335-4413-a00a-eef436c938a5_4096x2048.png) Welcome to part three of our six-part series “Kickstarting and scaling your consumer business.” If you’re just joining us, here are links to previous posts, and a sense of what’s ahead: - **[Step 1: INSIGHT: Come up with your idea](https://www.lennysnewsletter.com/p/kickstarting-and-scaling-a-consumer)** - **[Step 2: AUDIENCE: Identify your super-specific who](https://www.lennysnewsletter.com/p/consumer-business-super-specific-who)** - **Step 3: HOOK: Craft your pitch** ← This post - **[Step 4: REACH: Find your early adopters by doing things that don’t scale](https://www.lennysnewsletter.com/p/consumer-business-find-first-users)** - **[Step 5: RETAIN: Iterate until enough people stick around](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer-9c8)** - **[Step 6: SCALE: Build your growth engine](https://www.lennysnewsletter.com/p/growth-engines)** **The main question we’ll be answering in today’s post:** How do you get your super-specific who’s attention? Again, a disclaimer: following these steps will not guarantee success. But it will increase your odds. ![Image from How to kickstart and scale a consumer business—Step 3: Craft your pitch](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/4cabdf61-9abf-4dac-b647-71f5761c0ca2_4096x2048.png) People are busy. They’re bombarded with ads and life responsibilities, and have absolutely no reason to pay attention to your product. As venture capitalist Marc Andreessen put it, “Their time is already allocated.” To have any hope of grabbing someone’s attention, your pitch can’t be just good. It needs to be remarkable. Something worth remarking about. Watch this 30-second clip: [Watch on YouTube](https://www.youtube.com/watch?v=xBIVlM435Zg) > #### “Competition is so fierce that you have to create something remarkable in order to succeed. Something remarkable is worth talking about. Worth noticing. Exceptional. New. Interesting. The opposite of remarkable is very good.” > > #### —Seth Godin, author of *[Purple Cow](https://www.amazon.com/Purple-Cow-New-Transform-Remarkable/dp/1591843170)* When Tony Xe launched DoorDash in 2013, he spent weeks going door to door trying to convince restaurants to sign up. It was a slog. He pitched them on the value of food delivery and mobile technology and on the promise of new customers. Growth was slow and restaurant owners were unimpressed. One day, he finally found a value prop that worked: > #### “What I realized was that we were selling *revenue*. Unless you hated money, you should sign up with us, because you didn’t pay us anything until you got a sale. It took me a while to realize this. I hadn’t sold anything before, so I had to learn it.” The product stayed the same, but the new pitch changed DoorDash’s trajectory. Similarly, when Scott Belsky first tried to convince designers to put their portfolio on [Behance](https://www.behance.net/), he had a really hard time. > #### “Inviting top designers to showcase their portfolio on a website they could barely pronounce and had never heard of was a fruitless endeavor. Nobody cared or had the time.” Eventually he adjusted what he was pitching designers, and his luck immediately turned around: > #### “We contacted the 100 designers and artists we admired most and instead asked if we could interview them for a blog on productivity in the creative world. Nearly all of them said yes. After asking a series of questions over email, we offered to construct a portfolio on their behalf on Behance, alongside the blog post. Nobody declined. > > #### This initiative yielded a v1 of Behance that was jam-packed with projects, each from 100 top creatives, built the way *we* wanted. This manual labor was the most important thing we ever did. It solved our chicken-or-egg problem.” Netflix iterated on its product offering for 18 months and eventually found a hook that worked, as Marc Randolph (former CEO and co-founder) shared: > #### “Hundreds of failed experiments later, and after many a sleepless night of worrying, we finally tested the unlikely combination of ‘no due dates, no late fees’ and ‘subscription’ that ultimately was the thing that ended up working. And boy, did it work. Within days of testing it, we knew we had a winner.” The question you need to be asking yourself: **What is your remarkable hook?** Here are some examples of great hooks that helped launch massive consumer businesses: ![Image from How to kickstart and scale a consumer business—Step 3: Craft your pitch](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/c9c489a5-3e04-4983-940a-eee9e9b346f1_2374x5634.png) Nail your hook and you’ll notice an immediate shift in interest, growth, and engagement. Miss the mark and you’ll continue to struggle. ## How to craft your hook There are many approaches to coming up with your hook. I’ll share four. My advice is to try them all. Feel out which path leads you to something that excites *you*, grabs your *potential users’* attention, and tells your story in as few words as possible. As you start to see what’s working and what isn’t, keep tweaking. Almost no one got this right the first time. Before you start, make sure you’ve come up with your [super-specific who](https://www.lennysnewsletter.com/p/consumer-business-super-specific-who). Also don’t overthink the difference between a hook, a pitch, a value prop, a tagline, and positioning. They’re all important, but in the end, you need to figure out a way to describe what you’ve got, in a compelling way, and get someone to care. Here’s four ways to do this: - Strategy #1: What’s unique about your product? - Strategy #2: How do your users describe your product? - Strategy #3: What job is your product doing for people? - Strategy #4: What about your product is likely to grab people’s attention? You can use this [simple B2C GTM template](https://docs.google.com/document/d/19k7oXAYb9qkra6FTUMPljW75YZfUfWEr0eTITZvDe6s/edit?mode=html) that I introduced in the previous post to capture your ideas. #### **Strategy #1: What’s** ***unique*** **about your product?** Start by making a list of products that your users currently use to solve the same problem your product does. For example, Uber solves the same problem as taxis, DoorDash solves the same problem as old-school delivery services, and Robinhood solves the same problem as regular brokerages. Now compare this alternative with your product. **What’s** ***unique*** **to your solution?** Not only better, but what’s different? For DoorDash, it’s variety, convenience, and a slick mobile app. For Uber, it was lower cost, convenience, and reliability. Use these unique attributes to craft a pitch. For Netflix, it was **no late fees**: ![Image from How to kickstart and scale a consumer business—Step 3: Craft your pitch](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/de177d42-2d0b-4848-b0e8-cb0c8b766d7f_1348x1198.png) For Robinhood, it’s **$0 commission**: ![How Robinhood Got Nearly 1 Million Users Before the Company Even Existed | by George Vasiliadis | Inside Viral Loops | Medium](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8f4b1dc9-67ce-4d4a-a217-3d9180d9418b_900x492.png) For Amazon, it was access to **millions of books at a low cost**: ![amazon 1995](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/c34cc66c-82dc-4aca-904a-13235588d595_1200x780.jpeg) For WhatsApp, it was a fast, clean experience: ![Image from How to kickstart and scale a consumer business—Step 3: Craft your pitch](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d384f240-92c8-4f85-a1bb-8c44c0a187b5_480x542.jpeg) [Arielle Jackson](https://www.linkedin.com/in/ariellerjackson) shares a bunch of great examples of finding a “foil” in [this excellent First Round Review piece](https://review.firstround.com/great-startups-deserve-great-brands-build-a-strong-foundation-by-avoiding-these-mistakes#mistake-3-not-carefully-considering-your-category#mistake-5-emphasizing-emotional-instead-of-functional-benefits-in-your-early-messaging#mistake-4-focusing-on-the-wrong-foil#mistake-5-emphasizing-emotional-instead-of-functional-benefits-in-your-early-messaging#mistake-4-focusing-on-the-wrong-foil): ![Image from How to kickstart and scale a consumer business—Step 3: Craft your pitch](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/4d68d698-2e6b-4fa7-b215-7c6dd472dfc5_1626x1066.png) Here are a bunch more examples courtesy of [Julian Shapiro](https://www.demandcurve.com/playbooks/above-the-fold#2b792zvigbgm724x4udiri), comparing a bad alternative and good alternative, to isolate the differentiating element: ![Image from How to kickstart and scale a consumer business—Step 3: Craft your pitch](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/7caebf51-6475-491e-9bf3-ae990bff94d5_1702x1368.png) **What’s your** ***differentiated*** **value?** #### **Strategy #2: How do your users describe your product?** Pick your 10 most obsessed users and ask them how they describe your product. What words do they use? What functionality do they focus on? Mold those words into a pitch. For example, when Drew Houston saw his early users describing Dropbox as a USB drive replacement, he ran with it: “Throw away your USB drive.” ![Dropbox — Marketing with no money | by Sarit Ariel | The Aha Moments | Medium](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9c9197be-6499-4884-a19d-6e1bef741402_970x748.png) For Behance, the word Scott found most used was “exposure,” and for DoorDash they were “Revenue for your restaurant, risk-free.” **What words and features do your** ***most obsessed*** **users mention most?** #### Strategy #3: What *job* is your product doing for people? If you’re not familiar with the [Jobs-to-Be-Done framework](https://uxdesign.cc/8-things-to-use-in-jobs-to-be-done-framework-for-product-development-4ae7c6f3c30b), the basic premise is that your users are “hiring” your product to do a job for them. We “hire” Google to find things on the internet, we hire Verizon to be able to call people, and we hire Domino’s to satiate our hunger. So here’s the question: **What are users hiring your product for?** Apple nailed this when it launched the iPod, recognizing that people didn’t care about a better music player—they cared about listening to their favorite songs on the go. ![1000 Songs in Your Pocket | The Apple Renaissance through iPod](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/727e4dc4-3225-4f24-8bc3-675b94c6d303_497x234.png) Uber got right down to the job you need done—getting a car on demand: ![What Uber's First Website Looked Like](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b07fd5d1-c6e0-4f61-aac2-63e0e69120ad_991x496.jpeg) Simply match the needs and wants of your users with how you pitch your product: I need X + we have Y = magic. ![Image from How to kickstart and scale a consumer business—Step 3: Craft your pitch](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/50507913-f205-4e04-9e67-922e7accb07e_1684x1218.png) [Here’s a guide](https://uxdesign.cc/8-things-to-use-in-jobs-to-be-done-framework-for-product-development-4ae7c6f3c30b) to help you think through the jobs to be done for your product. **What job are users hiring your product to do?** #### Strategy #4: What about your product is likely to grab people’s attention? A final strategy is simply to think of a way to capture people’s attention. Look for something bold and very specific. Zillow got attention early on by launching its Zestimate tool, with the pitch “How much is my home worth?” Who could resist wanting to know? ![Zillow launches retooled Zestimate that uses AI to analyze photographs and 'see' value in homes - GeekWire](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/550e6623-d3dc-46cd-996b-8dc9c63563a2_1225x654.png) Duolingo [pitched](https://www.youtube.com/watch?v=-Ht4qiDRZE8) “Learn a new language [for free!] while simultaneously translating the web.” Bold! ![Image from How to kickstart and scale a consumer business—Step 3: Craft your pitch](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8fca1e46-9f72-4726-825f-108f62b470fe_1602x902.png) [Everydae](https://www.everydae.com/) pitched acing the SAT with just 10 minutes of studying a day. How could a student not pay attention to that? ![My landing page formula](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e21622dc-68c1-4ae0-afcf-248093bf2d78_1039x603.png) And Domino’s is famous for its 30-minutes-or-free pitch: ![30 minutes or it's free' delivery guarantee from Domino's Pizza: nostalgia](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/83c3d8c1-22e6-4cd6-a7ca-91f17e6ca859_653x393.jpeg) **What the boldest way you can pitch your product?** #### For more advice, check out these in-depth guides: 1. [A quick-start guide to positioning](https://www.lennysnewsletter.com/p/positioning) by April Dunford 2. [Positioning Your Startup Is Vital—Here’s How to Nail It](https://review.firstround.com/Positioning-Your-Startup-is-Vital-Heres-How-to-Do-It-Right) by Arielle Jackson 3. [How to Write a Value Proposition in 5 Simple Steps](https://jacobmcmillen.com/how-to-write-a-value-proposition/) by Jacob McMillen 4. [Above the fold](https://www.demandcurve.com/playbooks/above-the-fold#2b792zvigbgm724x4udiri) by Julian Shapiro 5. [My step-by-step guide to landing pages that convert](https://marketingexamples.com/conversion/landing-page-guide) by Marketing Examples 6. [For the love of God, please tell me what your company does](https://hackernoon.com/for-the-love-of-god-please-tell-me-what-your-company-does-c2f0b835ab92) by Kasper Kubica 7. [Emphasizing Emotional Instead Of Functional Benefits In Your Early Messaging](https://review.firstround.com/great-startups-deserve-great-brands-build-a-strong-foundation-by-avoiding-these-mistakes#mistake-3-not-carefully-considering-your-category#mistake-5-emphasizing-emotional-instead-of-functional-benefits-in-your-early-messaging) by Arielle Jackson 8. [Shopify’s Slogan Maker](https://www.shopify.com/tools/slogan-maker) ## My pitch isn’t working. What do I do? If you’ve been pitching your product and no one seems to care, one of three things could be happening: 1. Your pitch is bad. 2. You’re pitching the wrong people. 3. Your product is not something people want. Let’s go through each scenario: ### 1. Your pitch is bad This happens all the time, and only looking back is it obvious what will work. As you saw above, it took Netflix 18 months to find the right combination of pieces that worked. And then it immediately took off. For DoorDash, it was a handful of conversations with restaurants. If you’re finding that your pitch isn’t resonating, try something else! Go back to the top of this post and try a different strategy to come up with a new hook. ### 2. You’re pitching the wrong people As we saw in [last week’s post](https://www.lennysnewsletter.com/p/consumer-business-super-specific-who), Ben at Pinterest spent a lot of time pitching the wrong people. People who didn’t care or need the product. But once he found the right audience, it took off. It’s very possible that your product is awesome and valuable to people but that you haven’t figured out who these people are yet. [Go back to the previous post](https://www.lennysnewsletter.com/p/consumer-business-super-specific-who) and revisit your assumptions. ### 3. Your product is not something people want This will be the toughest pill to swallow. If you feel like this may be what’s happening, part five of this series will explore the topic in depth, but in the meantime, here is some advice from the smart folks at Y Combinator: [Watch on YouTube](https://www.youtube.com/watch?v=IhNnkPsdohY)[Watch on YouTube](https://www.youtube.com/watch?v=C27RVio2rOs)[Watch on YouTube](https://www.youtube.com/watch?v=1hHMwLxN6EM) Finally: With your startup idea, a sense of who wants this most, and a first crack at a hook, the next step is to bring all of these together and to go and pitch people. But how do you find them? That just happens to be the topic of next week’s post, and one that I’m particularly excited to share. ### Next week: REACH—Find your early adopters where they are 🥁 Subscribe to get the next issue in your inbox *Have a fulfilling and productive week 🙏* ### 📣 Join Lenny’s Talent Collective [Join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to kickstart and scale a consumer business—Step 3: Craft your pitch](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join the collective to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply to join](https://www.lennysjobs.com/talent) ### **🔥 [Featured job openings](https://www.lennysjobs.com/jobs)** 1. **Fountain:** [Senior Product Manager](https://www.lennysjobs.com/jobs/d1cac1a4-674a-4342-82b9-43373ea1c283) (Remote-US) 2. **Render:** [Product Manager](https://www.lennysjobs.com/jobs/e948aaae-136d-4de6-954b-58985e9643e0) (Remote) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [26/44] How to kickstart and scale a consumer business—Step 4: Find your early adopters by doing things that don’t scale *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to this month’s ✨ **free edition**✨ of my newsletter. Each week I humbly tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out about work. Subscribe to get each and every issue.* ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/cddbe16e-5f6e-423e-a317-6dde005d543c_4096x2048.png) Welcome to part four (maybe my favorite!) of our six-part series on kickstarting and scaling a consumer business. At this point, you have [your startup idea](https://www.lennysnewsletter.com/p/kickstarting-and-scaling-a-consumer), a good sense of [your super-specific who](https://www.lennysnewsletter.com/p/consumer-business-super-specific-who), and a [hook](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer). In this post, we bring it all together to go find your first 1,000 users. If you’re just joining us, here’s where we are at, and what’s ahead: - **[Step 1: INSIGHT: Come up with your idea](https://www.lennysnewsletter.com/p/kickstarting-and-scaling-a-consumer)** - **[Step 2: AUDIENCE: Identify your super-specific who](https://www.lennysnewsletter.com/p/consumer-business-super-specific-who)** - **[Step 3: HOOK: Craft your pitch](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer)** - **Step 4: REACH: Find your early adopters by doing things that don’t scale**← This post - **[Step 5: RETAIN: Iterate until enough people stick around](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer-9c8)** - **[Step 6: SCALE: Build your growth engine](https://www.lennysnewsletter.com/p/growth-engines)** **The big question we’ll be answering in today’s post: How do you find and acquire your first 1,000 users?** This post is an updated and fully revised take on [my previous post on this subject](https://www.lennysnewsletter.com/p/how-the-biggest-consumer-apps-got?s=w) (my single most popular post of all time). Again, an important disclaimer: following these steps does not guarantee success—but I’m confident it will increase your odds. Let’s get into it. ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9e45e594-1125-49bf-b1ab-29105de8865d_4096x2048.png) Should I try to get press? Run Facebook ads? Find email addresses and cold-email people? Where should I start, and what’s worth my time? Let’s get right to it. After reviewing the early growth strategies of more than 100 consumer companies, it turns out that there are really only seven reliable ways to find your first 1,000 users: 1. **Reach out to friends and colleagues** 2. **Reach out to targeted strangers** 3. **Go where your target audience hangs out (online or offline)** 4. **Enlist influencers (paid or organically)** 5. **Get press** 6. **Create viral content** 7. **Get physical placement (e.g. flyers, stickers, signs)** You can think of this list as a menu of options for kickstarting your product’s growth: ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5872682a-69f3-4c50-aaf7-7fc2da53c166_2048x2048.png) On occasion, a startup finds success with something “off menu,” and at the end of this post I’m including examples of that for completeness and inspiration. However, the core seven strategies account for 99% of all B2C startups’ early growth. Like with a menu, your job is to peruse this list, pick two or three items that seem appetizing, and try them. If something works, chow down. If not, try something else. Note, almost every startup finds the vast majority of their early growth from just one or two channels. Some see all of their early growth come from just a single channel (e.g. Udemy and PR, Etsy and online and offline communities, Twitter and influencers). So my advice is to focus. Don’t order everything on the menu. ### How do you decide which tactic to pursue? To make your decision even easier, here’s what I’ve found to be the three common archetypes of early startup growth: **Typical path to first 1,000 users for consumer startups:** 1. Reach out to friends and colleagues (e.g. email them, post on social media, call them) 2. Go where your target audience hangs out, online or offline (e.g. forums, Product Hunt, college campuses, Craigslist, etc.) 3. Enlist influencers **If you’re a marketplace or platform (e.g. DoorDash, Cameo, Substack):** 1. Reach out to targeted strangers (e.g. DM celebs, email owners) 2. Get physical placement (e.g. stickers, flyers) 3. Enable your supply to drive your demand **If you have a remarkable story to tell (e.g. Airbnb, Spotify, Superhuman):** 1. Get press 2. Try to create viral content ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5cd369d1-9491-4bb3-bdeb-b342670bc6aa_2730x2048.png) Below I’ll share dozens of stories from founders pursuing each of these tactics, but broadly, here’s a summary of which tactics were most impactful for all of the largest consumer tech companies: ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/39ffb188-49f1-440e-b2b8-b4e0f51c638a_3572x2878.png) *Thank you to [Alexa Mateen Abdi](https://www.linkedin.com/in/alexa-mateen-843a6587/) and [Jonathan Badeen](https://twitter.com/badeen) (Tinder) [Alyssa Ravasio](https://www.linkedin.com/in/alyssa-ravasio-23114717/) (Hipcamp), [Andrew Chen](https://www.linkedin.com/in/andrewchen/) (Uber), [Casey Winters](https://www.linkedin.com/in/caseywinters/) (Grubhub), [Cem Kansu](https://www.linkedin.com/in/cemkansu/) (Duolingo), [Devon Townsend](https://www.linkedin.com/in/devspinn/) (Cameo), [Emily Castor Warren](https://www.linkedin.com/in/emilycwarren/) (Lyft), [Evan Moore](https://twitter.com/evancharles) (DoorDash), [Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/) (Udemy), [Georg Bauser](https://www.linkedin.com/in/georgdanielbauser/) (Airbnb), [Gilad Horev](https://www.linkedin.com/in/gilad-horev-65902827/) (Eventbrite), [Gokul Rajaram](https://www.linkedin.com/in/gokulrajaram1/) (Caviar), [Hamish McKenzie](https://www.linkedin.com/in/hamishmckenzie/) (Substack), [Joey Grassia](https://www.linkedin.com/in/joeygrassia/) (Shef), [Max Mullen](https://www.linkedin.com/in/maxmullen/) (Instacart), [Michael Horvath](https://www.linkedin.com/in/mtkhorvath/) (Strava), [Nickey Skarstad](https://www.linkedin.com/in/nickeyskarstad/) and [Dan McKinley](https://www.linkedin.com/in/mcfunley/) (Etsy), [Nikhil Jhunjhnuwala](https://www.linkedin.com/in/nikhiljhunjhnuwala/) (Noom), [Rahul Vohra](https://www.linkedin.com/in/rahulvohra/) (Superhuman), [Russel Simmons](https://www.linkedin.com/in/russel-simmons-9562/) (Yelp), [Ryan Hoover](https://www.linkedin.com/in/ryanrhoover/) (Product Hunt), [Sander Daniels](https://www.linkedin.com/in/sander-daniels/) (Thumbtack), [Scott Belsky](https://www.linkedin.com/in/scottbelsky/) (Behance), [Sriram Krishnan](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01) (Spotify), [Stefan Heinrich Henriquez](https://www.linkedin.com/in/stefanheinrichhenriquez/) (TikTok), and [Steve Chen](https://www.linkedin.com/in/stevechen2/) (YouTube) for sharing your stories with me for this post 🙏* # How to find your first 1,000 users ### Strategy 1: Reach out to friends and colleagues The easiest and fastest way to find your early users, and a large driver of early growth for about 20% of startups, is to reach out to your friends and former colleagues. There’s little downside to giving this a shot, but just don’t get discouraged if it doesn’t bear fruit, as your friends may not be anything like your super-specific who. - **Ideal for:** Products that most people will find useful (e.g. Reddit, Facebook, Lyft) - **Key:** Your friends are close to your super-specific-who definition - **Takeaway question:** Have you asked your friends to try out your product yet? Stories that show this tactic in action: #### Yelp > “**Inviting people from our network (mostly former coworkers from PayPal) drove our initial users.** We asked all our network to invite their friends, and being startup people who wanted to help us, they obliged, so two degrees out, we probably got to 1K or so users. The takeaway is not to underestimate the power of one’s personal referral network and to think deeply about the incentive and mechanics.” > > —[Russel Simmons](https://www.linkedin.com/in/russel-simmons-9562/), co-founder ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b84bbfc9-039f-4afa-a480-2e8b43e08c3d_670x611.png) #### Lyft > “Before we launched the Lyft waitlist, we first sent **personal email invites to our friends**.” > > —[Emily Castor Warren](https://www.linkedin.com/in/emilycwarren/), early employee ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/85603956-c43e-4cdf-8184-b08fff8333ab_1456x1026.webp) #### Facebook > “**[Mark]** **Zuckerberg’s friends made up most of the 10 first Facebook sign-ups, after which the social network expanded to friends of friends across campus**. Eventually it swept all Ivy League colleges, the nation, and then the world.” > > ー*[Business Insider](https://www.businessinsider.com/the-first-20-people-to-sign-up-for-facebook-2011-5)* ![Thefacebook profile page](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fdf4e944-93a9-48e1-8153-9a9675c3329b_550x554.png) #### Strava > “We started with friends and asked them to invite a few friends. We got to about 100 with direct friends, and then it spread to about 1,000 by the end of the first 12 months by word of mouth.” > > —[Michael Horvath](https://www.linkedin.com/in/mtkhorvath/), CEO and co-founder #### LinkedIn > “**Reid [Hoffman] and the rest of the founding team all sent invites to our professional contacts on launch day. We asked all those folks to try the v1 product and invite their professional contacts. In total that was maybe a couple thousand individuals.** > > During the first seven days, most of the 12,000-odd people who signed up were either 1st degree (e.g. directly knew someone on the founding team) or 2nd degree (‘friend of a friend’ of someone on the founding team) connections. So virtually all of the people who signed up in the first week were part of the startup ecosystem (so, predisposed to try out new products) and had a direct or indirect connection to the LinkedIn team (therefore more willing to check out a colleague/friend’s new project).” > > ー[Lee Hower](https://www.linkedin.com/in/leehower/), founding team, via [Quora](https://www.quora.com/LinkedIn-product-1/How-did-LinkedIn-product-get-its-initial-traction) ![483902506_5ffbfe60a8](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3eceb8d1-e11d-483b-b561-015c99631b4c_500x405.jpeg) #### Substack > “**It all started with Bill Bishop, author of [Sinocism](https://sinocism.com/), who I knew from my days as a reporter in Hong Kong (and later, a visiting reporter in China)**. He had been publishing Sinocism as a free newsletter for five years, and I was a reader. In 2017 he started telling his readers he was going to put up a paywall. This was around the time that Chris [Best] and I were talking about starting Substack. I asked Bill if he’d be interested in being Substack’s first publisher, and he said ‘Sure!’ So we built the first version of the product to suit his needs and iterated from there. Through suggestions from friends, and friends of friends, I also recruited Kelly Dwyer, formerly of Yahoo Sports and now author of [The Second Arrangement](https://tsa.substack.com/), and Daniel Lavery, one of the founders of The Toast and now author of [The Shatner Chatner](https://shatnerchatner.com/). They were the first three publishers on Substack. And from there, I kept asking smart friends, many of whom worked in media, for writer recommendations, and then in each call or meeting with a writer, I’d ask that writer for more recommendations.” > > —[Hamish McKenzie](https://www.linkedin.com/in/hamishmckenzie/), co-founder #### Quora > “**Quora launched in January 2010 with a user base largely composed of [Adam] D’Angelo’s and [Charlie] Cheever’s college and high-school friends**, meaning there was a lot of early Quora information on the best places to eat in Pittsburgh, Pennsylvania, where Cheever was raised. But they also built a feature into the site whereby users could invite people, and soon their friends from Facebook were summoning people from other startups, and other entrepreneurs.” > > —*[Wired](https://www.wired.co.uk/article/q-and-a-quora)* But be careful—your friends may not be the best source of inspiration, as **WhatsApp** co-founder Jan Koum found: > “**He demoed WhatsApp to some friends, but none of them liked it.** Moreover, issues like battery draining, crashing of the app, etc. made Koum so disappointed that he lost all hope and started to look for a new job.” > > —[Aashish Pahwa](https://www.linkedin.com/in/aashishpahwa/), via [Feedough](https://www.feedough.com/history-of-whatsapp/) And it doesn’t always work out, as **Patreon** co-founders Jack Conte and Sam Yam experienced: > “Jack obviously had a huge plan to launch to his whole audience. And on top of that, he had this whole network of artists and creators, and we were going to be launching on day one with just millions of fans and artists talking about how you could support them on Patreon. > > So we made a list of like 40 or so creators we knew, people who have local, small followings, folks who I thought, like, ‘Hey, you’re in the same boat that I’m in right now; do this, I think this could be valuable to you.’ **We made an Excel spreadsheet with those folks, and I found their contact info and reached out to all 40 of them. And all 40 of them said no.**” > > —[Sam Yam](https://www.linkedin.com/in/samyam/), co-founder, via [How I Built This](https://www.npr.org/2021/01/08/954876726/patreon-jack-conte-and-sam-yam) ### Strategy 2: **Reach out to targeted strangers** The second most common way to acquire your first 1,000 users, important for the early growth of 30% of consumer startups, is to go recruit them directly, either through email, DMs, phone calls, or door to door. Interestingly, this tactic was almost exclusively used by marketplace startups to bootstrap the supply side and rarely used by non-marketplaces. I imagine this is because one unit of supply is worth a lot to a new marketplace, and so the ROI on this manual cold outreach is high enough. - **Ideal for:** Marketplaces and platforms - **Key:** Each new user you recruit is highly valuable (e.g. a Cameo celebrity) - **Takeaway question:** Would it be worth having someone on your team ping 100+ people directly? Here are some stories that illustrate this tactic in action: #### Cameo (supply side): DMs > “**The founders hired $10/month interns to DM talent on Instagram and Twitter**. The bet was that they could bring on celebrities and influencers who would message to their audience that they could be booked on Cameo, driving user growth. The interns ended up punching above their weight.” > > —[Stefan Heinrich Henriquez](https://www.linkedin.com/in/stefanheinrichhenriquez/), early employee #### YouTube (supply side): Email > “For the entirety of the summer of 2005, it was a lot of experimentation—**going after bloggers, video bloggers, photographers, pets communities, etc**. It was a lot of trial and error in guessing what type of content creators were looking and [were] in need of a service like YouTube.” > > —[Steve Chen](https://www.linkedin.com/in/stevechen2/), co-founder ![Youtube homepage 2005](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/1f88d71f-ab36-4da6-acf0-100e7449dbf0_550x903.png) #### Airbnb (supply side): Phone, email > “**Direct sales was critical to get the first listings on the platform**, especially in immature markets without critical mass. It enabled us to pick and choose different supply types and build the right mix of homes. The local teams were accountable for their market and could themselves decide which supply to acquire, e.g. in which neighborhood, what size of the listing, and price points.” > > —[Georg Bauser](https://www.linkedin.com/in/georgdanielbauser/), early employee ![airbnb site showing map of san francisco with pop up listings](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/f6664df0-da08-4acc-a2e1-d2ec1d6da3be_800x535.png) #### DoorDash (supply side): Door to door, phone > “In the beginning it was me going door to door to convince restaurants to join. Thinking about how to convince them to join. I don’t think there was anything else that could be substituted for that.” > > —[Tony Xu](https://www.linkedin.com/in/xutony/), co-founder ![How DoorDash Experimented to Find Product Market Fit | by David J Bland | Precoil | Medium](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/995a8945-31f4-46ab-91de-9a8ad07b5a4c_1200x632.png) #### Thumbtack (supply side): Email > “We used email marketing to get our first 1,000 users. We found email addresses of local service professionals and messaged them letting them know we existed. If they registered with Thumbtack, we would start sending them job leads. The number-one thing any local service professional wants is new customers. We found new customers for them, notified them via email, and they signed up.” > > —[Sander Daniels](https://www.linkedin.com/in/sander-daniels/), co-founder #### **Caviar** (supply side): Door to door, phone > “For us, for supply growth, it was direct sales/field sales—no question!” > > —[Gokul Rajaram](https://www.linkedin.com/in/gokulrajaram1/), early employee #### Uber (supply side): Phone > “Uber Black was initially ops- and phone-driven. They would call limo companies to pitch them. A lot of limo companies were sole proprietorships, and the pitch was ‘While you are waiting for trips, we’ll guarantee you a minimum level of income if you keep this app on.’ ” > > —[Andrew Chen](https://www.linkedin.com/in/andrewchen/), early growth leader ![How Did Uber Start? The Story Behind Founder Travis Kalanick](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/c6dad1a0-a7b0-4ffe-9ae5-380281686d18_600x401.png) #### Musical.ly/TikTok (supply side): DMs, email > “Some people say that influencers bring their own demand. I wouldn’t blankly state that but rather say that you can offer something unique that money can’t buy: you will meet a lot of open ears, and influencers might stick around. Influencers, just like any other stakeholders, need to buy into your mission, and you have to be genuine about your interest in building a joint community. Otherwise you are just another brand/client. Once you create a community with them, they will start telling their fans. > > So basically: Reach out to specific celebrities/influencers directly -> Celebrities/influencers engage their fans and bring their demand -> Celebrities get $ > They share this with their celebrity/influencer friends > use likeness to promote to more lookalike fans.” > > —[Stefan Heinrich Henriquez](https://www.linkedin.com/in/stefanheinrichhenriquez/), early employee ![How did the founders of Musical.ly made $1b in 2016.. | by Mirza M.S. Baig | Medium](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a7e3c24c-8151-4994-8025-bb6545298743_900x541.jpeg) #### Substack (supply side): Email > “I searched for top newsletter writers through old media stories about the most interesting TinyLetters, etc. (which is how I found [Griefbacon](https://griefbacon.substack.com/), one of the original Substacks). The more quality writers we brought on, the more the good word spread about Substack and the quality writers who were using it. And of course, many of those writers’ readers were quality writers themselves. Virtuous cycle.” > > —[Hamish McKenzie](https://www.linkedin.com/in/hamishmckenzie/), co-founder #### Udemy (supply side): Door to door, phone > “After we manually created some successful courses, we had proven the value of teaching a course in the first place. We then went to some experts in programming, technology, and entrepreneurship and convinced them to teach courses. These are the same people we talked to six months prior, but this time we had proof that you could be successful on Udemy. It was enough to convince two more instructors to join—Zed Shaw and Bess Ho. They were more successful than our previous instructors, so we convinced 5 to 10 more to join that summer.” > > —[Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/), co-founder #### Nextdoor (supply side): Door to door, phone ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2df11107-8f0a-493f-9741-310426bf4978_810x540.jpeg) > “Back then, the founding team knew that it would only work if they could find a neighborhood to embrace the idea of a social network for neighborhoods, as well as test it along the way. Choosing the right neighborhood was essential. > > That neighborhood is known as Lorelei. Nestled close to the Bay on streets shaded by trees, the neighborhood was close-knit and small yet vibrant, with the longest-standing homeowner’s association in the state of California. The community already had some ways to communicate with each other, which was a promising sign. **We reached out to board members of the homeowners association, and they were more than willing to hear us out.** After an initial conversation, they invited us to present the concept to more residents at their next board meeting.” > > —[Sarah Leary](https://www.linkedin.com/in/sarahleary/), co-founder, via [Nextdoor](https://blog.nextdoor.com/2017/05/22/celebrating-lorelei-americas-first-nextdoor-neighborhood/) #### Behance (supply side): Email > “**We got our first 100 users by contacting the 100 designers and artists we admired most and asked if we could interview them for a blog on productivity in the creative world.** Nearly all of them said yes. After asking a series of questions over email, we offered to construct a portfolio on their behalf on Behance, alongside the blog post. Nobody declined. This initiative yielded a v1 of Behance that was jam-packed with an average of about five ‘projects’ each from 100 top creatives, built the way *we* wanted (which set the standard for new members). This manual labor was the most important thing we ever did. It solved our chicken-or-egg problem.” > > —[Scott Belsky](https://www.linkedin.com/in/scottbelsky/), founder #### Shef (supply side): Intros from friends > “We began by serving immigrant communities in the Bay Area—allowing them to easily share extremely authentic dishes that couldn’t be found at local restaurants. What we didn’t realize at the time was the enormous value in targeting these tight-knit communities, who share many cultural traditions, including food. > > We found our first shefs by asking where our friends were purchasing their authentic dishes, then onboarded those shefs. They had their favorite neighborhood cooks who they were already ordering from (usually using WhatsApp or WeChat), and many of these folks were also on FB Groups (of that specific immigrant community). We asked for intros, and joined these groups.” > > —[Joey Grassia](https://www.linkedin.com/in/joeygrassia/), co-founder ### Strategy 3: **Go where your target audience hangs out, online or offline** The single most popular (over 50%!), effective, and highest-ROI strategy for finding your first 1,000 users is to find an existing gathering spot for your super-specific who (this is why it’s important to be very clear and focused about who these people are) and get in front of them there to pitch them. This can include niche online forums, events, transit hubs, Hacker News, Product Hunt, college campuses, malls, or even an REI. - **Ideal for:** Most products, if a community or meeting point exists - **Key:** Provide real value to people (vs. just spamming your pitch) - **Takeaway question:** What are 1-2 places where your super-specific who already gather? Stories of this tactic in action: #### Netflix: DVD forums (online) > “**We realized early on the only way to find DVD owners was in the fringe communities of the internet: user groups, bulletin boards, web forums, and all of the other digital watering holes where enthusiasts met up**.... Posing as a home theater enthusiast or cinephile, [Corey Bridges] would join the conversation in communities geared toward DVD fanatics and movie buffs, befriend the major players, and slowly, over time, alert the most respected commenters, moderators, and website owners about this great new site called Netflix. We were months from launch, but he was planting seeds that would pay off ... big time.” > —[Marc Randolph](https://www.linkedin.com/in/marcrandolph/), via *[That Will Never Work](https://www.amazon.com/That-Will-Never-Work-Netflix/dp/0316530204)* ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5ee60bb7-aeec-44b4-90b3-0e5fc2bb8310_599x385.jpeg) #### Morning Brew: Business classes (offline) > “**The model we used in our mind was this hub-and-spoke model. Who are the hubs that have access to all of these spokes—the spokes being the people we want reading our newsletter? What we decided was this was professors of business classes or it was presidents of business clubs.** So Austin and I just pounded the pavement to get into every big business class in Michigan, [every] lecture with 75 to 500 people. We got into all the clubs, and we would basically give our spiel at the beginning.... We got a couple thousand people from Michigan.” > > —[Alex Lieberman](https://www.linkedin.com/in/alex-lieberman/) and [Austin Rief](https://www.linkedin.com/in/austin-rief/), founders, via [How I Built This](https://podcasts.apple.com/us/podcast/how-i-built-this-with-guy-raz/id1150510297?i=1000511527443) #### Discord: Final Fantasy subreddit (online) > “The tipping point arrived via Reddit. **The team was connected with a member of the Final Fantasy****subreddit and asked them if they’d mention Discord.** According to [co-founder Jason] Citron, they posted something along the lines of, ‘Has anyone ever heard of this new voice over IP app called Discord?’ > > A few Redditors trickled in, checked out the product, and spoke with the development team via the platform. One reported back, ‘I just talked to the devs, they’re in there. It’s really cool. Check it out.’ > > That one comment was a miniature inflection point. More users flowed in, and Discord had figured out a grassroots distribution model. ” > > —[Packy McCormick](https://www.linkedin.com/in/packym/), via [Not Boring](https://www.notboring.co/p/discord-imagine-a-place) #### Etsy: Craft fairs (offline) > “**We did something that works and is often overlooked. We got off the internet and there was a team out there across the U.S. and Canada attending art/craft shows nearly every weekend.** Supporting potential sellers (we would buy them lunch, drop off ‘craft show kits,’ pass out handmade promos)—these were artists/crafters that were influential in the handmade world. We knew if they set up shop on Etsy, and were successful, others would follow. > > The community team went to a different show every single weekend all across the U.S. and Canada. Most sellers I knew did not have any other kind of online presence or activity on other sites.” > > ー[Danielle Maveal](https://www.linkedin.com/in/daniellexo/), via [Quora](https://www.quora.com/How-did-Etsy-get-its-first-batch-of-independent-sellers-when-it-started) ![RENEGADE CRAFT FAIR](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/0378569b-6527-4423-bb59-b343e1edcb9e_565x370.jpeg) #### Etsy: Craftster.org (online) > “We ventured to build a marketplace for this apparently underserved niche, and while doing so we became familiar with **Craftster.org (which at the time was another message board consisting of around 100,000 people). We reached out to Craftster’s founder [Leah Kramer] and suddenly we had an audience with an even larger group of interested sellers.** > > By the time we launched the site (roughly two months after conception), we had thousands of sellers excited to register and try it out. The ball started rolling almost immediately (especially since we offered fee-free listing for the first few months while we built a billing system).” > > ー[Chris Maguire](https://www.linkedin.com/in/revolvingdork/), co-founder, via [Quora](https://www.quora.com/How-did-Etsy-build-its-brand-name-among-independent-sellers-early-on) #### Behance: StumbleUpon, Reddit, Pinterest (online) > “**For our first 1,000 users, there were a few hacks I found especially helpful in this phase. One was using sites like StumbleUpon, Reddit, NotCot, and others (and eventually Pinterest) that featured great work around the web with a link-back.** > > I remember sending tons of ‘I noticed your work on MySpace/DeviantArt/etc. and thought you’d enjoy showcasing your work on Behance’ type of emails. The more personal these emails were, the better they converted. And I figured, for every *great* member we had, many of his or her admirers would follow. We have evidence to prove that the majority of new members joined because of someone they admire. My simple daily practice was to bring in 10 amazing new members every day. Whether it took a phone call or me building their portfolio for them, we were willing to do whatever it took because we were so convinced by the network effect.” > > —[Scott Belsky](https://www.linkedin.com/in/scottbelsky/), founder #### Lyft: Startup offices (offline) > “**We asked everyone on our team to give us their list of contacts at startups, and we contacted them to ask their permission to come by with a free Bi-Rite ice cream sundae drop-off for their employees.** They basically all said yes, because Bi-Rite is delicious. :) So we arranged a drop-off operation and had teams of staff with insulated bags taking ice cream sundae kits to all of the companies and giving them Lyft credits.” > > —[Emily Castor Warren](https://www.linkedin.com/in/emilycwarren/), early employee ![How the biggest consumer apps got their first 1,000 users](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2954af84-3e95-4ca8-a3c7-c806e6cfdb56_612x612.jpeg) #### Uber: Transit hubs and startup offices (offline) > “**There was a very significant use of street teams early on at Uber. They went to places like the Caltrain station and handed out referral codes.** There are stories about how Travis [Kalanick] went to Twitter HQ personally and handed out referral codes.” > > —[Andrew Chen](https://www.linkedin.com/in/andrewchen/), early growth leader #### Dropbox: Hacker News, Digg, Reddit (online) > “**We started with the early adopters intentionally—who are the people who are actively looking for something like this? They tend to be people who hang out on HN or Reddit.** Getting your files on multiple computers was a niche problem. But this audience was a technical audience; most of them were carrying around a thumb drive. A lot of that community struggled with that problem.” > > —[Drew Houston](https://en.wikipedia.org/wiki/Drew_Houston), co-founder, via [How I Built This](https://www.npr.org/2020/11/06/932199300/dropbox-drew-houston) > “**The HN post did great—it stayed at the top of HN for two days** (this was in April 2007, when HN was much, much smaller) and led to Paul Graham sending me a cold email (saying to get a co-founder if I wanted to get into Y Combinator, ha). But for me, the Digg post was the first big sign that Dropbox would resonate outside of the very early adopter community. > > The HN post was in April 2007 and the Digg/Reddit posts were in March 2008; we launched publicly/out of closed beta in September 2008. We hit a million sign-ups in May 2009, and it felt like we were celebrating new big numbers (2m, 5m, 10m) every several months after that for a few years. > > ー[Drew Houston](https://en.wikipedia.org/wiki/Drew_Houston), co-founder #### Robinhood: Hacker News (online) ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/bc570c7f-76fd-46db-a96e-abaf2abac78b_900x506.webp) > “The last thing from our minds when we launched Robinhood, the initial website, was that it would blow up overnight, so we were kind of cavalier in the way we approached it. > > [The website] had a description in very simple language saying, ‘Commission-free trading, stop paying up to $10 per trade.’ And then there was a button that let you sign up, and then when you signed up, you put in your email, and you would join this wait list where we would actually show you: There’s this many people ahead of you, this many people behind you. […] > > **I remember distinctly it was a Friday night. We had been working on the wait list in preparation for our press launch, which would have been, I think, the following Wednesday or Thursday. Everyone goes home, and I wake up Saturday morning, and I open up Google Analytics, and I see something like 600 concurrents on our site, which nobody knew about at that point.** I was just like, ‘What’s going on? This is not normal. Something must be wrong.’ Right? > > And I’m looking at the analytics—I see a lot of traffic, or the majority of it, coming from Hacker News. And I open up Hacker News, and I see No. 1: ‘Chinese Land Spaceship on the Moon,’ No. 2: ‘Google acquires Boston Dynamics, the Robotics Company,’ and No. 3 was: ‘Robinhood: Free Stock Trading.’ So, first of all, I was like, ‘Oh man, like, No. 3 on Hacker News? This is sort of like every engineer’s dream in the Valley, right?’ ” > > —*[Business Insider](https://www.businessinsider.com/robinhood-app-vlad-tenev-founder-free-stock-trading-valuation-2017-7)* #### Facebook: Harvard mailing list (online) > “**The site went viral within Harvard after a message was sent to a mailing list of 300 Harvard students.** New users were encouraged to invite friends, which helped build critical mass within that segment. More users within a segment improved the experience for everyone else within that segment.” > > ー[Sean Ellis](https://www.linkedin.com/in/seanellis/), growth leader, via [Quora](https://www.quora.com/What-tactics-did-Facebook-use-to-drive-its-user-acquisition-growth) ![Thefacebook.com creator Mark E. Zuckerberg ’06 edits computer code for his popular website on his laptop in Kirkland House. The website, launched just last week, has already attracted about 4,000 members.](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/f35e4830-0bec-4b7b-a3d3-180035934bdb_500x341.jpeg) #### WhatsApp: Russian emigrants (offline) > “**To get the first users [Jan Koum] reached the Russian emigrant community in San Jose** through his friend Alex Fishman. That community became WhatsApp early adopters.” > > —[John Popel](https://www.linkedin.com/in/johnpopel/), via [Reddit](https://www.reddit.com/r/startups/comments/8b0u5m/how_whatsapp_got_their_first_users/) #### Snap: Malls and high schools (offline) > “**Evan [Spiegel]’s mom tells her niece, who’s in high school in Orange County—so this is Evan’s cousin, who’s a high schooler in Orange County—about this app that Evan is working on, and her niece downloads it and thinks it’s really cool and starts using it with her friends in high school.... It sweeps through the school**, then it turns sweeping through other high schools in Orange County, then it moves up the state, and then it moves into other high schools in Northern California and in Silicon Valley, and the growth takes off. So by December 2011, Snapchat is up to just over 2,000 users. The next month, January, 20,000 users. Couple of months later, in April, 100,000 users.” > > —[David Rosenthal](https://www.linkedin.com/in/davidjamesrosenthal/), via [Acquired](https://www.acquired.fm/episodes/episode-12-snapchat) ![Snapchat's History: Evolution Of Snapchat And Timeline (2021)](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/02b6f512-2603-43b0-a39e-e1b4e3e5ba90_1000x655.png) #### Tinder: College campuses (offline) > “**It all started at a launch party we threw (at my parents house, where I grew up, actually) with about 300 students from USC. In order to get in, you had to download Tinder. I actually stood at the door and told people they were not allowed in if they did not download the app. I think those were the first few hundred faces we had on the app.** > > The following Monday, I went to all the sororities and fraternities at USC. I started with the sororities at the Monday night chapter meetings. I stood in line to make an announcement. My pitch was: ‘Do any of you have any crushes on anyone at school, and are you too afraid to go up to them and strike up a conversation? Do you have someone in a class you kind of want to get to know but don’t know if they feel the same way? Are you nervous that someone you like, doesn’t like you back? Do you feel like you’re seeing the same people every day and want to see new faces around here? Well, now is your chance! You can anonymously swipe on someone and if they feel the same, then it’s a match! All the cool people are on it. All your crushes are waiting for you. You don’t want to miss out, trust me!!’ > > Next we went to the fraternities, I would run, not walk, from house to house saying the same exact thing: ‘Who wants to find out who likes you on campus? Who wants to see a ton of new faces? Where are the sorority girls on campus? They are on Tinder. It’s not creepy, this is the new thing.’ > > I actually remember standing on a piano at some point and hearing a round of applause after a speech I made at a frat. People were so excited. I remember calling Justin, the CMO at the time, and he was counting the downloads for me. It was working. I replicated this at SMU the next week (because I went there for a year before USC, and still had all my friends there). After SMU was UCLA and UCSB. A week or two later was my University tour in Boston. There are so many colleges in that small little area. Downloads were skyrocketing. > > All the while, I was creating the ‘Tinder University Program’. We made it a program so that this exact recipe would take place at every school we picked, even if I could not be there myself. I would interview people, then choose a few influential students on every campus, send them a box of T-shirts, stickers, keychains, cups, you name it. Basically, a bunch of Tinder swag. And it was their job for that semester to be a tinder Brand Ambassador and to make Tinder popular on campus. I would measure their success with the percentage of people that would download the app within a certain area. It was a numbers game. The Tinder ambassadors would send me photos of events at every cool bar or club where they ‘had to download tinder to get in’. It was amazing. Once I felt an area was saturated enough, I would add another university. I had about 15 universities at a time. It was a domino effect. The more people on the app, the more people wanted to be on it. Total chain reaction. Next up was finding ambassadors outside of the US in different countries.” > > —[Alexa Mateen Abdi](https://www.linkedin.com/in/alexa-mateen-843a6587/), founding team and the head of US expansion ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/58054f92-a552-4649-99f8-0fe3c1cca753_1170x1157.jpeg) #### Bumble: College campuses (offline) > “I kind of had a little bit of a playbook [from Tinder’s launch]. I had maybe done it once before. **I went right back to SMU, this time decked out in yellow. And I went back into all those sororities and I spoke from the heart.** Listen, I have lived through the pain points of male-dominated relationships. I have felt it. I know what it feels like. And guess what? Every other woman in that sorority house, chances are she’s felt it too. I’m speaking from the heart, and I’m speaking to them about how they can be empowered and they make the first move and they go after what they want. > > And me and my early team members—the girls are at my office right now; they’re still with us—we went in there, and we took pizza boxes with stickers on it and offered a piece of pizza to the fraternity boys that would get on [the app]. We wrapped cookies in Bumble stickers. We took all sorts of goodies and we kind of growth-hacked our way to success.” > > —[Whitney Wolfe Herd](https://www.linkedin.com/in/whitney-wolfe-herd-1791a299/), co-founder, via [How I Built This](https://www.npr.org/2019/04/12/712909267/bumble-whitney-wolfe) ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5a3d7169-ee8e-4e6e-9e52-57ff391ec685_2400x1877.jpeg) #### Wealthfront: Seminars at startup offices (offline) > “Facebook was about six or 12 months away from IPO. A number of employees had sold secondary stock. We thought, well, who are the best-connected people in Silicon Valley? It’s the people who work at the social networks. So we did three or four seminars at Facebook and LinkedIn where we educated people on investment best practices. Not Wealthfront, because we wanted to get the engineer as the earliest adopter because we thought they would provide the references to the less well-educated people on investing. What we know about engineers is they hate being sold. They’re like cats; they’re not like dogs. Salespeople are like dogs: they want to be petted and loved. Engineers do not want to be sold to. > > So we did this beta test, I’ll never forget, with Adam D’Angelo of Quora and a few people at Quora, and the beta test we did of the seminar to eight people was 80% education and 20% selling. At the end of the seminar, Adam said, ‘Andy, you have to decide which one it’s going to be, because it can’t be both.’ He was absolutely right. That was the surprise. So we went all education, and immediately Facebook and LinkedIn people signed up and then used their networks to start telling their friends.” > > —[Andy Rachleff](https://en.wikipedia.org/wiki/Andy_Rachleff), co-founder, via [Starting Greatness](https://medium.com/starting-greatness/andy-rachleff-and-startup-lessons-of-greatness-you-need-a-breakthrough-insight-ae846196ba7) #### Pinterest: Apple stores (offline) > “We did all kinds of pretty desperate things, honestly. **I used to walk by the Apple Store on the way home. I’d go in and change all the computers to say Pinterest**, then just kind of stand in the back and be like, ‘Wow, this Pinterest thing, it’s really blowing up.’ ” > > —[Ben Silbermann](https://en.wikipedia.org/wiki/Ben_Silbermann), co-founder, via [YC Startup School](https://www.ycombinator.com/blog/ben-silbermann-at-startup-school/) #### Hipcamp: REI (offline) > “**I think our first 100 or so users came from sitting at a fold-up table in front of REI and handing out stickers.** We’d have them test the website and make sure they added their email to the newsletter field. Then they told friends!” > > —[Alyssa Ravasio](https://www.linkedin.com/in/alyssa-ravasio-23114717/), co-founder #### Rent the Runway: College campuses (offline) > “**We held trial trunk shows on college campuses**, met with everyone we could talk to in order to gather feedback and suggestions, and adapted along the way.” > > —[Jennifer Fleiss](https://www.linkedin.com/in/jennifer-fleiss-18577314/), co-founder, via *[Forbes](https://www.forbes.com/sites/lisaquast/2013/04/01/rent-the-runway-brings-the-catwalk-to-your-closet/?sh=669a54191f4a)* ### Strategy 4: **Enlist influencers, paid or organically** A powerful yet underutilized way to get your early users is to enlist influencers to talk about your product, either by paying them or just by getting them excited about it. Influencers, if you think about it, are people who influence others (duh!), so your job is to figure out who your super-specific who are influenced by, and enlist them in your growth plan. This could be bloggers, newsletter writers, tweeters, Instagrammers, or actual celebs. - **Ideal for:** Founders who know influencers - **Key:** Getting the influencer genuinely excited about what you’re building - **Takeaway question:** What’s at the center of the Venn diagram of (1) who your super-specific who is influenced by and (2) which of them you can get excited about what you’re building? Some examples of this tactic in action: #### Instagram > “I think the biggest thing overall was that as we were prototyping and testing [Instagram], **we gave it to a few folks who had a very large Twitter following. Not necessarily a large following overall, but a very large following within a specific community**—specifically, the designer community, the online web design community. We felt that photography and the visual element of what we were doing really resonated with those people. And we gave it to those specific people who had a large following.” > > —[Kevin Systrom](https://en.wikipedia.org/wiki/Kevin_Systrom), co-founder, via [Stanford Technology Ventures Program](https://stvp.stanford.edu/blog/tag/instagram) ![What Facebook, YouTube, Instagram, and Other Apps Looked Like at Launch](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/1b54f080-9335-40f0-9d17-fc9392e726bc_909x606.jpeg) #### Tinder > “In the early days, although everyone focuses on our on-campus guerrilla marketing, the fact is that we used Instagram, in the early days before Instagram really had an advertising product. **We were reaching out to prominent Instagrammers who had a large following and encouraging them to post for us. Because all of the posts were authentic, the signal to noise was very high.**” > > ー[Dinesh Moorjani](https://www.crunchbase.com/person/dinesh-moorjani), co-founder, via [HBS](https://startupguide.hbs.edu/sales-marketing-pr/b2c/tinders-co-founder-shares-b2c-marketing-strategies/) #### **Product Hunt** > **“Once we identified an influencer, Nathan [Bashaw] or myself sent a personal email**, inviting them to contribute and linking to the PandoDaily or *Fast Company* articles, to tell our story. A manual process indeed, but an effective way to recruit good contributors and open lines of communication for future feedback.” > > —[Ryan Hoover](https://www.linkedin.com/in/ryanrhoover/), founder, via *[Fast Company](https://www.fastcompany.com/3024472/how-we-got-our-first-2000-users-doing-things-that-dont-scale)* ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/80b2cfb6-32d2-4202-8689-4918ad7fce63_596x318.png) #### Spotify > “**[[Mark Zuckerberg] wrote about Spotify](https://www.google.com/search?q=mark+zuckerberg+spotify+facebook+post&rlz=1C5CHFA_enUS915US915&tbm=isch&sa=X&ved=2ahUKEwiK_-qwypftAhWPvJ4KHbr1AqkQ_AUoAnoECA8QBA&biw=1440&bih=789), Sean Parker reached out to us, we [seeded it with influencers](https://web.archive.org/web/20190530203143/https://rsms.me/we-have-let-spotify-out-of-its-cage) (journalists, musicians, tech CEOs/founders, etc.) who all raved about us.** So this built up pent-up demand. The issue with Lars Ulrich also helped us build fomo.” > > —[Sriram Krishnan](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01), early growth leader #### Cameo > “**Ronnie Radke was a particular inflection point.** The team went on famousbirthdays.com, and [CEO] Steven [Galanis] looked up the most famous person on his birthday. It was Ronnie Radke. Steven got Ronnie Radke to respond and buy in. Ronnie said, ‘I’m going to break Cameo.’ This is something they would hear a lot, but Radke actually did it. He came on Cameo for $25 and started getting booked like crazy. It was so fast that after a couple of hours, he was booked a couple of hundred times. The team realized that at the rate he was going, he was going to get booked 2,000 times, and there’s no way a human can fulfill all those Camoes. We thought the startup would fail if we disappoint all these fans with unfulfilled Camoes. > > At what point does Cameo break? Ronnie ended up getting booked 500 times. Three days went by and he hadn’t fulfilled any Cameos. Finally, it’s 7 p.m., they’re watching the feed (a Telegram bot of fulfilled orders). A Cameo video gets fulfilled by Ronnie. It’s the worst Cameo ever. It’s seven seconds, bad lighting, and he mispronounces the customer’s name. And then he keeps doing it, with new videos coming in every 30 seconds. The team still thinks the fans are all going to be really upset. The reviews start coming in an hour or two later, and they’re ... positive. They say things like, ‘Oh my god, I’ve been a fan of you my whole life, this is amazing.’ They realized the magic of Cameo is about the relationship between the fan and the talent and how special it is to hear your name. And Cameo kept on going.” > > ー[Devon Townsend](https://www.linkedin.com/in/devspinn/), co-founder #### Pinterest > “On a whim, [co-founder] Ben [Silbermann] goes to a conference in Salt Lake City that January called the Alt Summit, which is a big women-focused design and blogging conference. I think a friend had suggested that he go there. But I don’t think he had really that much intention of: oh, this could be the promised land of our user base. > > He goes there, he’s talking to everybody about Pinterest, gets a bunch of people signed up; they start using it. **At the conference he meets a woman named Victoria Smith, who’s a blogger who lives in San Francisco. She has a blog called SF Girl by Bay.... They kind of hit it off, and they were on the flight back and they decide, ‘Hey, let’s do a collaboration together.’** Pinterest is going to work with SF Girl by Bay and ‘we’re going to do this thing called pin it forward,’ where Victoria will create a pin board with all the things that ‘mean home’ to her, things that inspire her of home, and then they’re going to tag another blogger and ask the next blogger to do the same thing for them and then just pass it around to all of the bloggers that are in this network and had been at the Alt Summit, and they do it. > > The bloggers really get into it, and they of course all have their small but rabid fan bases of their blogs. Their audiences love it, they start using Pinterest, and lo and behold, things start to turn around. The company starts to work.” > > ー[David Rosenthal](https://www.linkedin.com/in/davidjamesrosenthal/), via [Acquired](https://www.acquired.fm/episodes/the-pinterest-ipo) #### Twitter > “This is the day-by-day chart for the initial launch. The first public mention of the service I can find is on [co-founder] Evan Williams’s blog late on July 13th, but you can see that even on the 12th there was a mini-boom in registrations. **Then [Om Malik’s post on the 15th](https://gigaom.com/2006/07/15/valleys-all-twttr/) really pushed it over the top, with more than 250 people signing up the next day**. What I find fascinating is that there were less than 600 people on the service at that point, so it was a very prescient plug. […] > > A recurring theme is **the power of that initial publicity in driving the early users**, and the feeling that it was a way to connect with an interesting group of people. Evan’s high profile and Om’s endorsement must have been a big help in building that sort of buzz.” > > —[Pete Warden](https://petewarden.com/), via [Dharmesh Shah](https://blog.hubspot.com/blog/tabid/6307/bid/6505/The-March-Of-Twitter-Analysis-of-How-And-Where-Twitter-Spread.aspx) ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/f9b1a721-1ea3-489a-a009-bba1b07d19aa_1022x713.jpeg)![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/39e2bb1e-9617-4c56-b30a-c73023fc04f6_613x320.png) #### Reddit > “**[Paul Graham] forced their hand to launch when he referenced Reddit in his famous [‘What I Did This Summer](https://www.paulgraham.com/sfp.html)’ essay, where he unleashed YC into the world.** Just like that, Reddit was launched (without the founders’ knowledge or blessing), and traffic was spiking.... With that unplanned launch, just a day in, Reddit got over their first-1,000-user mark.” > > —[Ali Abouelatta](https://twitter.com/abouelatta_ali), via [First 1000](https://read.first1000.co/p/-reddit?s=r) ![These men are Steve Huffman and Alexis Ohanian, the creators of Reddit. Without them this sub would not exist. Let's all give thanks for making something that allowed this ban to take](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fa8c8f60-b350-4a24-881a-01846f1da95e_401x297.png) #### Quora > “**Quora launched in January 2010 with a user base largely composed of [Adam] D’Angelo’s and [Charlie] Cheever’s college and high-school friends**, meaning there was a lot of early Quora information on the best places to eat in Pittsburgh, Pennsylvania, where Cheever was raised. But they also built a feature into the site whereby users could invite people, and soon their friends from Facebook were summoning people from other startups, and other entrepreneurs.” > > —*[Wired](https://www.lennysnewsletter.com/p/how-the-biggest-consumer-apps-got?s=w#:~:text=Quora%20launched%20in,%E2%80%94%20Wired)* ### Strategy 5: Get press A surprising number of startups saw their initial growth come from press. Though often advised against, getting press right out of the gate is a very legitimate early growth strategy, responsible for the early growth of over 20% of the most successful consumer startups. - **Ideal for:** Products (or founders) with a great story and a drumbeat of news (e.g. multiple city launches) - **Key:** Having the skill and connections to get a reporter interested - **Takeaway question:** To a regular person who doesn’t care about your company, what’s the most interesting or surprising thing about your company? Some examples of startups using press to get their early users: #### Instacart > “Anytime we’d launch a feature or [add a new retailer](https://thenextweb.com/news/instacart-adds-costco-to-its-same-day-grocery-delivery-service-and-you-dont-need-a-membership) to our marketplace, we’d make a big announcement, and we got a lot of coverage just for doing that. > > **PR is an untapped growth channel for early-stage consumer startups.** Founders underestimate the novelty their products and companies represent to the average consumer, and in turn they don’t leverage earned media enough.” > > —[Max Mullen](https://www.linkedin.com/in/maxmullen/), co-founder #### Airbnb > **“The event that marked the turning point in the business was the 2008 Democratic National Convention (DNC) in Denver, Colorado**. The pair [Brian Chesky and Joe Gebbia] saw an opportunity to capitalize on the quadruple-overattended event that caused a massive shortage in rental housing. Finding hosts to offer up rooms in their houses was actually the easy part. Getting people to rent those rooms proved more difficult. > > The first counterintuitive strategy was to pitch only the bloggers with the smallest audience possible.... As ridiculous as it sounds, the coverage by these bottom-feeder press was the social proof that more-prominent publications needed to piggyback on the story. Eventually, national news networks, including NBC and CBS, were interviewing the founders of the unknown startup that was housing the biggest political convention in history. > > **The DNC bump was great for business, but it only lasted a week**. The founders were desperate for a way to extend the impact of the event. While sitting around their kitchen table one day, still extremely broke, they came up with the idea that would bring Airbnb to profitability: cereal. > > Both designers who graduated from the prestigious Rhode Island School of Design, the pair created fictitious cereals called ‘Obama O’s, the Cereal of Change’ and ‘Cap’n McCain’s, a Maverick in Every Box.’ They designed the box artwork themselves and convinced a student at U.C. Berkeley to print 500 units of each box on the cheap. The boxes were delivered as flat rectangles that had to be cut and assembled by hand. > > ‘I was thinking at the time, that Mark Zuckerberg was never hot-gluing anything at Facebook—so maybe this is not a good idea,’ recalls Chesky. > > The founders sent boxes to hundreds of the most well-known tech bloggers, hoping that they would proudly display them on their desks and that they, or their colleagues, would eventually write their story. Shortly thereafter, they started selling the political cereal at $40 per box. The Obama O’s sold like hotcakes, so much so that they had to give out Cap’n McCain’s for free with each purchase.” > > —[PandoDaily](https://pandodaily.com/2017/01/13/brian-cheskys-unbelievable-journey) ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/17125da7-2c55-475e-9918-1d9621b96cd7_640x526.jpeg) #### **Udemy** > “**Our first 10,000 registered came directly from our initial press launch**. [You can read about the whole process here](https://blog.udemy.com/udemy-launch/).” > > —[Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/), co-founder ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/093ce3fa-a2bb-4287-83f4-426297df6cee_1902x1112.png) #### Spotify > “For each country launch of Spotify, **we relied on PR to acquire the initial users**.” > > —[Sriram Krishnan](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01), early growth lead #### Kayak > “**We were very successful with PR at the beginning**, because Steve [Hafner] was one of the founders of Orbitz, and then we had Terry [Jones] from Travelocity, and Greg Slyngstad from Expedia. People in the industry were like, what’s going on? How’d you get these three competitors to join together on one board to form a company? That helped us get some attention.” > > —[Paul English](https://paulenglish.com/), co-founder, via [TechCrunch](https://techcrunch.com/2012/03/30/founder-stories-kayaks-paul-english-discusses-big-wins-important-strategic-alliances-tctv/) #### Product Hunt > “I wrote guest posts on tech publications ([like this article for](https://www.fastcompany.com/3024472/how-we-got-our-first-2000-users-doing-things-that-dont-scale) *[Fast Company](https://www.fastcompany.com/3024472/how-we-got-our-first-2000-users-doing-things-that-dont-scale)*) to drive awareness. **In the early days, press was effective in driving adoption. The same people that read tech publications like TechCrunch are the same people that might want to visit Product Hunt.** Additionally, we forwarded compelling products that launched on Product Hunt to reporters that I knew. I made sure to send products that were relevant to their interests or beat, resulting in several articles mentioning and linking back to Product Hunt. Bonus points: We were helping makers and early-stage startups get more visibility.” > > —[Ryan Hoover](https://twitter.com/rrhoover), founder #### Superhuman > “**PR was key for growth in the early days.** We had pieces in *[Wired](https://www.wired.com/story/email-is-broken-can-anyone-fix-it/)*, [TechCrunch](https://techcrunch.com/2017/08/18/rapportive-founders-new-startup-superhuman-is-what-gmail-would-be-if-built-today/), [Cheddar](https://cheddar.com/media/email-client-that-claims-it-can-cut-your-time-spent-emailing-in-half), etc.” > > —[Rahul Vohra](https://www.linkedin.com/in/rahulvohra/), co-founder ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/617f350b-1f1a-4cb0-b487-34b149f95c57_1716x636.png) #### Instagram > “They also contacted the press directly rather than using a PR firm, and Kevin [Systrom] notes that this went down very well. A good product, pitched by the passionate creators themselves, and as it happens they secured a load of good coverage for launch. ‘We were shameless about contacting people who we thought would love the product,’ says Kevin. ‘But it paid off. People actually said to us, there’s no point contacting publications such as the *New York Times* and that we’d be wasting our time. But not only did [the](https://bits.blogs.nytimes.com/2010/10/19/a-photo-sharing-app-with-bigger-aspirations/) *[New York Times](https://bits.blogs.nytimes.com/2010/10/19/a-photo-sharing-app-with-bigger-aspirations/)* speak to us, they also sent someone to meet with us.’ On the day of launch in October 2010, all the press coverage happened at roughly the same time and their servers were hit hard.” > > —[TNW](https://thenextweb.com/video/2011/09/18/kevin-systrom-on-instagrams-meteoric-rise-and-when-is-it-coming-to-android-interview/) ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8eeb15dd-5b9c-4c5a-92c0-eac5c392c62d_1260x1228.png) ### Strategy 6: Create viral content Though rarely effective (only about 10% of startups), a potentially very high-ROI early growth strategy is to create content that goes viral. Only five of the more than 100 companies I looked at initially grew this way. But when it works, it’s game-changing. - **Ideal for:** Founders with an existing audience - **Key:** Being able to write/film/build something remarkable - **Takeaway question:** What story would get thousands of people to share your content? Some stories of viral content in action: #### Duolingo > “Before Duolingo launched as a website, we had a splash page where people could sign up to be invited to the private beta. The splash page had a very clear message: unlike other language-learning software that costs hundreds of dollars, Duolingo would be 100% free and therefore accessible to everybody. > > **At around that time, Luis [von Ahn], our CEO, gave [this TED talk](https://www.ted.com/talks/luis_von_ahn_massive_scale_online_collaboration?language=en) about the idea for Duolingo in 2011, which went viral.** This got more than 300,000 people to sign up for the private beta. After our public launch in 2012, our main marketing approach was word of mouth and PR. No money was spent on advertising.” > > —[Cem Kansu](https://www.linkedin.com/in/cemkansu/), VP of Product [Watch on YouTube](https://www.youtube.com/watch?v=-Ht4qiDRZE8) #### Patreon > “The plan was: I’ll put up a YouTube video on my YouTube channel, send my fans over to Patreon. And that’s kind of how we’ll start. > > [At the end of the ‘Pedals’ video](https://youtu.be/mZ02alEkbLw?t=237), I put a vlog where I told people about [Patreon], and I said, ‘Hey, I’m building this new thing, and I don’t think it’s just going to help me. I think it could help a lot of people. Check it out and let me know what you think. And if you’re, if you’re up for it, join me on this, on this journey here.’ ” > > —[Jack Conte](https://www.linkedin.com/in/jack-conte-a15a3686/), co-founder, via [How I Built This](https://www.npr.org/2021/01/08/954876726/patreon-jack-conte-and-sam-yam) ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/c78b04aa-ca0e-4a51-af8e-307c9cec7655_2320x1174.png) #### Superhuman > “I like to write high-quality longform pieces that will stand the test of time (i.e. will be relevant 5+ years from now). **These pieces helped drive much of our early growth**: > > 1. [RIP Mailbox, or: Founders, how to stop worrying and love being acquired](https://medium.com/swlh/rip-mailbox-or-founders-how-to-stop-worrying-and-love-being-acquired-261da4f6d566) > 2. [How Superhuman Built an Engine to Find Product Market Fit](https://firstround.com/review/how-superhuman-built-an-engine-to-find-product-market-fit) > 3. [Game Design, Not Gamification, for Great Products](https://a16z.com/2020/01/13/game-design-not-gamification/) > > —[Rahul Vohra](https://www.linkedin.com/in/rahulvohra/), co-founder #### Calm > “[Alex Tew] created a website that was basically just some waves lapping on the beach, and it was called donothingfortwominutes.com. And you literally had to just stare at these waves for two minutes and not move your mouse or tap on the keyboard, and not many people could do it. It was surprisingly challenging, but if you got to the end of it, it would ask for your email address. **And we collected about 100K email addresse**s**—it went super-viral**. People started sharing it and writing about it, so it was … 100,000 email addresses in two weeks.” > > —[Sam Parr](https://www.linkedin.com/in/parrsam/), via [Trends](https://trends.co/articles/the-making-of-a-meditation-empire/) [Watch on YouTube](https://www.youtube.com/watch?v=gS3QLiD7HQ0) #### Substack > “It helped a lot that we published our founding essay, [‘A better future for news](https://blog.substack.com/p/a-better-future-for-news),’ before we had even started building the first version of the product. NiemanLab picked up on that essay and [published a story](https://www.niemanlab.org/2017/10/stratechery-as-a-service-substack-aims-to-streamline-the-creation-of-independent-subscription-news-sites/) about our aspirations, which led to some inbound interest from other publishers, including [Petition](https://petition.substack.com/). And then we convinced a *Wall Street Journal* reporter to [write about Bill [Bishop] and Kelly [Dwyer]’s success](https://www.wsj.com/articles/niche-online-publishers-bank-on-subscriptions-over-advertising-1509530403) and the new model Substack represented, and that brought us interest from more writers, including Judd Legum of [Popular Information](https://popular.info/).” > > —[Hamish McKenzie](https://www.linkedin.com/in/hamishmckenzie/), co-founder ### Strategy 7: Get physical placement And finally, a strategy used primarily by food delivery and dating startups (and only about 10% of the startups I looked at) is putting flyers, stickers, and signs where your super-specific who spends time—essentially, getting in front of your super-specific who’s eyes as they go about their day. - **Ideal for:** Products that require customers to be local (e.g. food delivery, dating) - **Key:** Hustle - **Takeaway question:** If you *could* put flyers, stickers, or signs somewhere, where would you? Some stories of this tactic in action: #### DoorDash > “What we learned about our customers is that they didn’t care about DoorDash; they cared about the restaurant. **So what we did was was print out tens of thousands of flyers that said ‘Dubar delivers, get hummus delivered!’ We stuffed them in our delivery bags.** The bill of the flyers exceeded our cash balance. Later, we printed a bunch of flyers charging $6 for delivery and put them all over Stanford University.” > > —[Tony Xu](https://www.linkedin.com/in/xutony/), co-founder ![Image](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/25331d20-f225-460e-bab0-1ee89ead897f_600x800.jpeg) #### Instacart > “**One offline hack that worked was that we produced reusable grocery bags with our logo on them and delivered the groceries in them.** Hard to say the magnitude, but the bags may have given customers a physical reminder of us and reminded them to share with friends or re-order week after week.” > > —[Max Mullen](https://www.linkedin.com/in/maxmullen/), co-founder ![instacart bag_courtesy instagram - San Antonio Report](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/18d861ee-4d52-4554-8619-1193b4b9662e_600x600.jpeg) #### **Grubhub** > “**We did in-store signage, but we copied it from Yelp, which was the first with their ‘People love us on Yelp!’ stickers.** We did Open/Closed signs, sandwich boards, printed menus, business cards with promos on it, delivery bags. You name it—we tried it.” > > —[Casey Winters](https://www.linkedin.com/in/caseywinters/), early growth lead ![28 Grubhub Stock Photos, Pictures & Royalty-Free Images - iStock](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e3821958-3b6a-4890-9edf-2f76a8704d4e_612x408.jpeg) #### Tinder > “I had to get really crafty. When I landed at Southern Methodist University, I took a picture of [a female friend] and then I took a picture of one of my guy friends on campus, and I dropped them into the match like the Tinder screens. And **I wrote a big thing on top of it saying, ‘Find out who likes you on campus.’ I saved the file and I took it to the FedEx across the street from SMU, and we printed, I think, a thousand copies. And I offered a bunch of people around campus $20 bills to help me put them everywhere.** I mean, on people’s windshields, under dorm [room doors]. Everywhere, everywhere, everywhere.” > > —[Whitney Wolfe Herd](https://www.linkedin.com/in/whitney-wolfe-herd-1791a299/), co-founder, via [How I Built This](https://podcasts.apple.com/us/podcast/bumble-whitney-wolfe/id1150510297?i=1000436036734) To summarize, these are the seven most common early growth strategies: 1. **Reach out to friends and colleagues** 2. **Reach out to targeted strangers** 3. **Go where your target audience hangs out (online or offline)** 4. **Enlist influencers (paid or organically)** 5. **Get press** 6. **Create viral content** 7. **Get physical placement (e.g. flyers, stickers, signs)** Before we move on, one interesting way to think about this list of strategies is as a series of concentric circles, with the founder at the center. The further out from the center the founder gets, the harder (and less likely to succeed) these strategies generally are. So in your decision of where to start, start with the easy stuff and migrate outward if nothing is working. ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/202d269b-12fb-44a2-8b6f-b7778022d071_2048x1496.png) And again for reference, your menu of options for finding your first 1,000 users: ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/53c9f02b-ae2a-4786-afd3-d9b039f42573_2048x2048.png) ### Bonus: Off-menu early growth strategies Although the seven options above are by far the most common, there are other tactics I’ve come across that have helped startups kickstart growth. Though they’re rarely used, or only useful in very specific instances, I want to make this post as complete as possible. Below I’ve outlined four, and I’ll add any new strategies and stories as I learn of them. Here’s the list so far: 1. **Build an audience first:** Product Hunt, Stack Overflow, Patreon 2. **Enable your supply to drive your demand:** DoorDash, Etsy, Cameo, Behance, Product Hunt, Substack 3. **Be first to figure out an emerging platform:** Noom, TikTok, WhatsApp 4. **Host a launch party:** Hinge Hopefully this bonus list feeds your creative juices. #### 1. Build an audience first: Product Hunt, Stack Overflow, Patreon **Product Hunt** > “Product Hunt, a daily leaderboard of new products, began as an email list using Linkydink, a tool for creating collaborative daily email digests. […] > > Over Thanksgiving break, we designed and built Product Hunt. Meanwhile, we reached out to contributors in the MVP and other respected product people, sharing early mocks and gathering feedback. We weren’t just doing customer development; we were getting them excited and making them feel like part of the product (and they were, helping guide our design decisions). > > Five days later, we had a very minimal but fully functional product. We emailed our supporters a link to Product Hunt, informing them not to share it publicly. The supporters were thrilled to join and play with a working version of something they had thought about and, indirectly, helped build. That day, we acquired our first 30 users. […] > > By the end of the week, we had 100 users and felt ready to share Product Hunt with the world.” > > —[Ryan Hoover](https://www.linkedin.com/in/ryanrhoover/), co-founder **Patreon** > “Jack [Conte] obviously had a huge plan to launch to his whole audience. And on top of that, he had this whole network of artists and creators, and we were going to be launching on day one with just millions of fans and artists talking about how you could support them on Patreon.” > > —[Sam Yam](https://www.linkedin.com/in/samyam/), co-founder, via [How I Built This](https://www.npr.org/2021/01/08/954876726/patreon-jack-conte-and-sam-yam) **Stack Overflow** > “The founders of Stack Overflow (Joel Spolsky and Jeff Atwood) both had large communities of existing followers from their previous online endeavors (Joel on Software and Coding Horror, respectively). They invited members of those communities to participate in a private beta, in which they seeded the site with content so it didn’t launch with no content whatsoever.” > > —[Jon](https://meta.stackexchange.com/users/25111/jon), via [Stack Exchange](https://meta.stackexchange.com/questions/76126/how-did-stack-overflow-get-started) #### 2. Enable your supply to drive your demand: Many platforms and marketplaces, including **DoorDash, Etsy, Cameo, Behance, Product Hunt, Substack** **DoorDash** > “Restaurants did a lot of the marketing for us. They would actually print placards and stickers and put them up in the restaurant, without our help and often without us knowing. Stickers on the windows worked extremely well. Restaurant owners are enterprising entrepreneurs and are super-creative at driving demand.” > > —[Micah Moreau](https://www.linkedin.com/in/micahmoreau/), early growth leader **Etsy** > “**Sellers were doing their own grassroots marketing**, and that became a big growth driver. Etsy pushed sellers to promote their shops to their communities in order to drive growth of their shops, which in turn drove growth of the marketplace overall.” > > —[Nickey Skarstad](https://www.linkedin.com/in/nickeyskarstad/) and [Dan McKinley](https://www.linkedin.com/in/mcfunley/) **Cameo** > “Ronnie Radke was a particular inflection point. The team went on famousbirthdays.com, and Steven [Galanis] looked up the most famous person on his birthday. It was Ronnie Radke. Steven got Ronnie Radke to respond and buy in. Ronnie said, ‘I’m going to break Cameo.’ This is something they would hear a lot, but Radke actually did it. He came on Cameo for $25 and started getting booked like crazy.” > > ー[Devon Townsend](https://www.linkedin.com/in/devspinn/), co-founder #### 3. Be first to figure out an emerging platform: Noom, TikTok, WhatsApp **Noom** > “Noom’s first product (way before my time) was the fourth app in the Android store when it launched, and as a result got a lot of organic downloads. Artem [Petakov] had a connection at Google at the time, which helped getting placed. The broader lesson is getting into a new channel early to get your first users.” > > —[Nikhil Jhunjhnuwala](https://www.linkedin.com/in/nikhiljhunjhnuwala/), early growth leader and now VP of Growth **TikTok** > “There was a secret in the App Store. You could make the application name really, really long. And the search engine on the App Store gives more weight to the application name rather than the keywords defined. So we put a really long application name, ‘make awesome music videos with all kinds of effects for Instagram, Facebook, Messenger.’ And then traffic came from the search engine. That’s how we initially got started.” > > —[Alex Zhu](https://www.linkedin.com/in/keepsilence/?originalSubdomain=cn), founder, via [Greylock](https://news.greylock.com/productsf-2016-b753fa9159b8) **WhatsApp** > “Help came from Apple when it launched push notifications in June 2009, letting developers ping users when they weren’t using an app. Jan [Koum] updated WhatsApp so that each time you changed your status—‘Can’t talk, I’m at the gym’—it would ping everyone in your network. [Alex] Fishman’s Russian friends started using it to ping each other with jokey custom statuses like ‘I woke up late’ or ‘I’m on my way.’ > > ‘At some point it sort of became instant messaging,’ says Fishman. ‘We started using it as “Hey how are you?” And then someone would reply.’ Jan watched the changing statuses on a Mac Mini at his town house in Santa Clara and realized he’d inadvertently created a messaging service. ‘Being able to reach somebody halfway across the world instantly, on a device that is always with you, was powerful,’ says Koum.” > > —*[Forbes](https://www.forbes.com/sites/parmyolson/2014/02/19/exclusive-inside-story-how-jan-koum-built-whatsapp-into-facebooks-new-19-billion-baby/?sh=4c661d082fa1)* #### **4. Host a launch party:** Hinge ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a0fa0d33-9fd0-4134-9e75-9df6a12e0e7d_300x199.jpeg) > “We took our last $25,000 and we threw a 2,500-person launch party in D.C. We set the date and we just worked backwards from that. […] > > We were just like, we’ve gotta get everyone on at once. No one’s gonna stick around if there’s not a lot of people on this thing. We’re just gonna, like, get 2,500 people in here. They’re gonna be like the coolest, trendiest people in D.C. And they’re all gonna see each other downloading the app. And so they’re gonna think it’s cool and they’re gonna keep using it. > > [We had an] open bar—Tito’s vodka just like shipped us a bunch of alcohol for free. We had a DJ, we had an art exhibition, we had photo booths and a dance party, and everyone had to download the app to get in the door.” > > —[Justin McLeod](https://www.linkedin.com/in/justin-mcleod-b43156134/), co-founder, via [How I Built This](https://www.npr.org/2021/03/19/979188827/hinge-justin-mcleod) ## 📚 Further study 1. [60 ideas to boost your growth](https://www.lennysnewsletter.com/p/turbo-boosts) 2. [Generating buzz](https://www.lennysnewsletter.com/p/creating-buzz-at-launch) 3. [How the biggest consumer apps got their first 1,000 users](https://www.lennysnewsletter.com/p/how-the-biggest-consumer-apps-got) Now, with your initial growth efforts in action, and some early users, the next step is to figure out whether you have product-market fit. And what to do if you don’t. Which is the topic of next week’s post. ### Next week: RETAIN—Iterate until enough people stick around See you next week! Until then, have a fulfilling and productive week 🙏 ### 📣 Join Lenny’s Talent Collective [Join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to kickstart and scale a consumer business—Step 4: Find your early adopters](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join the collective to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply to join](https://www.lennysjobs.com/talent) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [27/44] How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until enough people stick around ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/72ed7b91-9bc1-44b5-827b-3ba9d959eb6a_4096x2048.png) Welcome to part five (omg almost the end!) of our six-part series on kickstarting and scaling a consumer business. If you’re just joining us, here’s where we’re at: - **[Step 1: INSIGHT: Come up with your idea](https://www.lennysnewsletter.com/p/kickstarting-and-scaling-a-consumer)** - **[Step 2: AUDIENCE: Identify your super-specific who](https://www.lennysnewsletter.com/p/consumer-business-super-specific-who)** - **[Step 3: HOOK: Craft your pitch](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer)** - **[Step 4: REACH: Find your early adopters by doing things that don’t scale](https://www.lennysnewsletter.com/p/consumer-business-find-first-users)** - **Step 5: RETAIN: Iterate until enough people stick around** ← This post - **[Step 6: SCALE: Build your growth engine](https://www.lennysnewsletter.com/p/growth-engines)** By this point, you have a startup idea, a product, some early users, and you’re on a quest to find that elusive product-market fit. For this post, I researched the PMF journeys of dozens of today’s most successful consumer products and will help you understand: 1. **How do you know when you’ve found product-market fit?** 2. **How long does it normally take to find product-market fit?** 3. **How do you iterate toward product-market fit?** 4. **What actually is product-market fit?** Per usual, this post includes new concepts I’ve never before shared, a bunch of brand-new stories that I’ve gathered directly from founders, and few new frameworks. Again, a disclaimer: following these steps (or any steps) will not guarantee you success. But I am confident that it will significantly increase your odds. *Big thank-you to [Alyssa Ravasio](https://www.linkedin.com/in/alyssa-ravasio-23114717/) (Hipcamp), [Amir Nathoo](https://www.linkedin.com/in/amirnathoo/) (Outschool), [Cem Kansu](https://www.linkedin.com/in/cemkansu/) (Duolingo), [Chris Best](https://www.linkedin.com/in/cjgbest/) (Substack), [Drew Houston](https://www.linkedin.com/in/drewhouston/) (Dropbox), [Evan Goldin](https://www.linkedin.com/in/evangoldin/) (Lyft), [Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/) (Udemy), [Jonathan Badeen](https://www.linkedin.com/in/badeen/) (Tinder), [Kevin Systrom](https://en.wikipedia.org/wiki/Kevin_Systrom) (Instagram), [Kevin Tan](https://www.kevintan.me/) (Snackpass), [Marc Randolph](https://www.linkedin.com/in/marcrandolph/) (Netflix), [Max Mullen](https://www.linkedin.com/in/maxmullen/) (Instacart), Mike Evans (Grubhub), [Rahul Vohra](https://www.linkedin.com/in/rahulvohra/) (Superhuman), [Ryan Graves](https://www.linkedin.com/in/ryanashtongraves/) (Uber), [Ryan Hoover](https://www.ryanhoover.me/) (Product Hunt), [Samuel Yam](https://www.linkedin.com/in/samyam/) (Patreon), [Sander Daniels](https://www.linkedin.com/in/sander-daniels/) (Thumbtack), [Sarah Leary](https://www.linkedin.com/in/sarahleary/) (Nextdoor), [Steve Chen](https://twitter.com/stevechen) (YouTube), and [Tommy Leep](https://www.linkedin.com/in/tommyleep/) for contributing to this post, to [Natalie](https://www.natalieharney.com/) for illustrations, and to [Alex Ross](https://www.linkedin.com/in/alexross8/) ([Greg app](https://greg.app/)) and [Hayley Barna](https://firstround.com/person/hayley-barna/#mystory) ([First Round Capital](https://firstround.com/)) for inspiring the PMF archetypes 🙏* Let’s get into it. ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9f3dd93c-edb3-4c01-a676-052d62d985b8_4096x2048.png) Building something people want, and making money doing it at scale, is extraordinarily hard. [Ninety percent of all startups fail](https://explodingtopics.com/blog/startup-failure-stats), [75% of venture-backed startups don’t return cash to their investors](https://www.wsj.com/articles/SB10000872396390443720204578004980476429190#:~:text=About%20three%2Dquarters%20of%20venture%2Dbacked%20firms%20in%20the%20U.S.%20don%27t%20return%20investors%27%20capital%2C%20according%20to%20recent%20research%20by%20Shikhar%20Ghosh%2C%20a%20senior%20lecturer%20at%20Harvard%20Business%20School.), and the vast majority of startups [run out of money](https://www.cbinsights.com/research/startup-failure-reasons-top/) before finding product-market fit. > #### “If failure is defined as failing to see the projected return on investment—say, a specific revenue growth rate or date to break even on cash flow—then more than 95% of start-ups fail.” > > #### —*[Wall Street Journal](https://www.wsj.com/articles/SB10000872396390443720204578004980476429190)* I’m opening with these dire stats because (1) I want to discourage people who are scared by this from starting a company and, (2) if you can’t *not* start a company, to help you stay laser-focused on finding product-market fit. As venture capitalist [Marc Andreessen put it](https://pmarchive.com/guide_to_startups_part4.html): > #### “Do whatever is required to get to product-market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don’t want to, telling customers yes when you don’t want to, raising that fourth round of highly dilutive venture capital—whatever is required. > > #### When you get right down to it, you can ignore almost everything else.” ## How do I know if I have product-market fit? Below are four tell-tale signs that your product has product-market fit. However, it’s helpful to think of PMF not as a binary “you have it” and “you don’t have it” one-way-door kind of point, and instead as a spectrum of confidence that changes over time. On one end of the spectrum, you are 100% confident you have PMF. On the other, you definitely do not. The more signs of PMF you see, and the more intense each sign, the more confidence you should have that you’ve found, and still have, product-market fit. Here are the four clearest signs, in decreasing levels of confidence, that you have product-market fit: ### Sign #1 of PMF: Cohort retention curves flatten There’s no better way to tell that people want your product than by people’s revealed preferences: using, and continuing to use, your product. In other words, retention. ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/82a4aa1c-5205-431c-abc1-6fd3b859a878_800x604.png) There are a few ways to look at retention, but the most informative is to look at what’s called cohort-based retention: the percentage of users who continue to use your product x months/weeks/days later. You measure cohort retention by bucketing all the users who joined during a certain month/week/day (that’s your cohort) and looking at how many in this group are still active x months/weeks/days later. For example, if 100 users joined in January, and only 25 are still active in July, your six-month cohort retention is 25%. You can track this data either as a table: ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3050de6e-5634-47e2-accc-9ccfe0c63cb8_1456x1018.png) Or as a curve, which is often more interesting: ![Retention Curve Market Fit Comparison](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3c299156-0ac9-4cea-a886-5a9632925e1d_1317x801.jpeg) If this curve flattens above 0%, that means there is some part of the market that wants your product. Good work. However, to build a durable business, you’ll need this curve to flatten a lot higher. **Based on [my research](https://www.lennysnewsletter.com/p/what-is-good-retention-issue-29?s=w), here’s what is considered good and great user retention at six months:** - **Consumer social (e.g. Snap): ~25% is good, ~45% is great** - **Consumer transactional (e.g. Airbnb): ~30% is good, ~50% is great** - **Consumer subscription (e.g. Duolingo): ~40% is good, ~70% is great** [Read more about this here](https://www.lennysnewsletter.com/p/what-is-good-retention-issue-29?s=w). And to measure cohort-based retention, you can use popular analytics tools like [Amplitude](https://help.amplitude.com/hc/en-us/articles/230543327-Retention-Analysis), [Mixpanel](https://help.mixpanel.com/hc/en-us/articles/115004546883-Retention-Report-Basics), [Google Analytics](https://support.google.com/analytics/answer/6074676?hl=en), [Mode](https://mode.com/help/articles/cohort-analysis-for-customer-retention-and-churn-rate/), or you can find some plug-and-play templates [here](https://docs.google.com/spreadsheets/d/1BWhbks4NhDOAoy3GEosD_PBff5eM5OfUYDcdQggw8ao/edit#gid=0), [here](https://andrewchen.co/the-easiest-spreadsheet-for-churn-mrr-and-cohort-analysis-guest-post/), or [here](https://blog.usejournal.com/how-to-perform-cohort-analysis-calculate-customer-ltv-in-excel-80bfed785ec4). Note, it’s OK if your retention is lower than these benchmarks if: 1. You have low CAC and marginal costs 2. You’re not building a venture-scale business 3. You’re just starting out [Read more here](https://www.lennysnewsletter.com/i/465580/disclaimer-why-it-may-be-ok-for-your-retention-to-be-low). Broadly, as [Casey Winters](https://twitter.com/onecaseman/status/1230533020727304192) wisely put it: > #### “You have product-market fit when your retention creates enough money (or content/virality) to drive sustainable acquisition.” We’ll talk more about sustainable acquisition below. If you’re finding your retention metrics well below this, or don’t have enough data yet to know, keep reading. ### Sign #2 of PMF: Explosive growth through word of mouth Many of the smartest consumer minds out there consider exponential organic growth *the* sign you’ve hit PMF: > #### “For consumer apps, you have PMF when you start to experience **exponential organic growth,** driven by word of mouth. > > #### People can buy growth and they do it all the time, and I’m always amazed that people fall for it and that they kid themselves into thinking they have product-market fit because they bought it. The only way to know is if that you have product-market fit is if you get word of mouth. The best test of word of mouth is exponential organic growth because the only way you can get exponential organic growth is through word of mouth.” > > #### —[Andy Rachleff](https://podcasts.apple.com/us/podcast/andy-rachleff-on-how-to-know-if-youve-got-product-market-fit/id1488560647?i=1000458416917), founder of Benchmark and Wealthfront > #### “You can always feel product-market fit when it’s happening. **The customers are buying the product just as fast as you can make it—or usage is growing just as fast as you can add more servers**. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house.” > > #### —[Marc Andreessen](https://pmarchive.com/guide_to_startups_part4.html), investor > #### “The only way you know if you’ve built what customers want is because **they are using it in an explosive and destructive way**. If you are not getting explosive usage, you are not building what customers want, or there aren’t that many customers, which means you don’t have a big business.” > > #### — [Michael Seibel](https://www.youtube.com/watch?v=FBOLk9s9Ci4&feature=youtu.be), head of Y Combinator > #### “I think the right initial metric is ‘**Do any users love our product so much they spontaneously tell other people** to use it?’ “ > > #### — [Sam Altman](https://blog.samaltman.com/before-growth), ex-head of Y Combinator > #### “**Are people grabbing the product out of your hands** saying: I want it, or I’m using it, or I’m buying it, or I’m downloading it, or I’m giving you my email address?” > > #### —[Steve Blank](https://www.youtube.com/watch?v=6PR-8_6AzP8), creator of the lean startup movement > #### “Pushing a boulder: don’t have product-market fit. Chasing a boulder: have product-market fit. Both are very demanding but feel totally different. If you’re still pushing the boulder, you don’t have it yet.” > > #### —[Emmett Shear](https://twitter.com/eshear/status/1155180521485242368), CEO of Twitch, partner at Y Combinator > #### “Organic growth is the key indicator of product/market fit. People love to seem smart and cool. They want to recommend something great to their friends. They don’t need a share button to do it. If they love your product, they will tell people about it. Ideally more than 50% of your new accounts come from direct or organic traffic.” > > #### —[Merci Grace](https://mercigrace.co/about), ex-Head of Growth at Slack To make this even more real, here’s what the founders of some of today’s biggest consumer companies shared when I asked them what product-market fit felt like: #### **Dropbox** > “**For me there was a visceral sense of your thing taking on a life of its own and lurching forward, like getting pressed into the back of your seat by a fast car or a plane taking off.** The most standout moment for me was our demo video hitting the top of Digg (and then Reddit).” > > —[Drew Houston](https://www.linkedin.com/in/drewhouston/), CEO and co-founder #### **Tinder** > **“The rise of Tinder was really fast, and there were very, very few changes to the product before it had already taken off.** The swipe had been added within weeks of launching in August or September 2012. I think we were working on the 2.0 of the app already before we rose, but it wasn’t finished or released until we were already spreading like wildfire.” > > ー[Jonathan Badeen](https://www.linkedin.com/in/badeen/), co-founder and CSO #### **Uber** > “Uber never really had a product-market fit problem—**zero marketing budget and we were growing like a weed. Word of mouth was uncontrollable**, and especially as regulatory heat started, it’s all anyone could talk about (is how it felt). Marketing was free because media loved the story.” > > —[Ryan Graves](https://www.linkedin.com/in/ryanashtongraves/), first CEO, founding team #### Instagram > “We spent about two months building Instagram post burbn, launched it quickly and it was an immediate success. **Loads of people signing up immediately and we never looked back.**” > > —[Kevin Systrom](https://en.wikipedia.org/wiki/Kevin_Systrom), CEO and co-founder #### **Robinhood** > “Up until that point, we never really had an idea of what success, at least in the consumer space, was like. **That was sort of the first moment where we built something that actually worked. We ended up getting 10,000 sign-ups that first day**, **over 50,000 the first week,** and almost 1 million in the first year.” > > ー[Vlad Tenev](https://www.linkedin.com/in/vlad-tenev-7037591b/), CEO and co-founder, via [Business Insider](https://www.businessinsider.com/robinhood-app-vlad-tenev-founder-free-stock-trading-valuation-2017-7) #### Snackpass > “I knew we had PMF when users and orders kept growing without real effort to spread the word. **In other words, word of mouth started taking off.**” > > —[Kevin Tan](https://www.kevintan.me/), CEO Though explosive organic growth is almost always a very good thing, and usually a sign that you’re on to something big, I’ve also found that (1) many successful consumer startups never saw explosive organic growth, and that (2) sometimes this growth comes as quickly as it disappears (e.g. Clubhouse, Yik Yak, Poparazzi, Path, Vine). More on this below. ### Sign #3 of PMF: Sean Ellis survey Initially developed by [Sean Ellis](https://www.seanellis.me/), and more recently popularized by [Rahul Vohra](https://review.firstround.com/how-superhuman-built-an-engine-to-find-product-market-fit), this survey asks your users how disappointed they’d be if your product no longer existed. Here’s an example of that survey as a live poll for this very newsletter that you can vote on🤞 > #### “After benchmarking nearly a hundred startups with his [customer development survey](https://pmfsurvey.com/), Ellis found that the magic number was 40%. Companies that struggled to find growth almost always had less than 40% of users respond ‘very disappointed,’ whereas companies with strong traction almost always exceeded that threshold.” Many question the validity of this survey approach (and surveys in general), but my feeling is that if you don’t yet have enough retention data, and you’re not seeing explosive organic growth, this is a really useful proxy in the meantime. For more advice on interviewing your users around PMF, [don’t miss this great post by Matt Gallivan](https://www.lennysnewsletter.com/p/interviewing-users-for-product-market) (Sr. Director of Product Research at Slack), and for much more, read [how Rahul Vohra operationalized this PMF survey](https://review.firstround.com/how-superhuman-built-an-engine-to-find-product-market-fit) to iterate Superhuman toward product-market fit. ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/83aece46-f751-4109-9ddb-e25413b2d3ce_2056x1157.png) ### Sign #4 of PMF: Visceral excitement Finally, if you’re just at the idea or early prototype stage, without any data, users, or growth, the best signal that you’re heading toward product-market fit is **a strong, visceral reaction**: > #### “**The real metric for both consumer apps and enterprise is—do someone’s pupils dilate when they use your stuff?** Whether you’re handing them a demo or if you drew something on the whiteboard, do they say, ‘You’re not leaving’ or ‘Where have you been all of my life?’ ” > > #### —[Steve Blank](https://podcasts.apple.com/us/podcast/steve-blank-great-entrepreneurship-is-artistry/id1488560647?i=1000459113604) > #### “At the end of your free trial, you should pull the trial. **If the customer doesn’t scream, you don’t have PMF**. Because if they aren’t going to buy it at the end of the 30 days, they aren’t desperate. And if they aren’t desperate, you don’t have PMF.” > > #### — [Andy Rachleff](https://greatness.floodgate.com/episodes/andy-rachleff-on-how-to-know-if-youve-got-product-market-fit-XxGvX8DH/transcript) Kind of like this: ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b74de1f3-ad18-45d6-baf3-44c7ee03fb6b_500x381.gif)![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d05df695-59b8-43b2-a74a-402c4db03f2c_380x177.gif)![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/61fe9886-ade5-49f4-aa38-47c74e008f45_356x200.gif) Why does it need to be this strong? Because if it isn’t immediately blowing people’s minds, they will quickly forget and move on to the next shiny app. You need them to not want to let go. [Elad Gil](https://www.linkedin.com/in/eladgil/) [suggests](https://www.youtube.com/watch?v=9v0v5TLZKzA) a related signal: > #### “**If your product is broken and people are still using it, that’s a clear sign you have PMF**. When Twitter was constantly going down in the fail-whale days and no one moved off Twitter, that was a sign of raw market adoption.” [Sarah Leary](https://www.linkedin.com/in/sarahleary/), co-founder of Nextdoor, shared a story along these lines about when she felt Nextdoor found PMF: > “I distinctly remember one day when I thought we had reached product-market fit. We only had about 10 neighborhoods using Nextdoor at the time. One of our engineers needed to upgrade the database, which required taking the service offline for about an hour. As a lean team, he decided to start the migration (and make Nextdoor unavailable) around lunchtime in the middle of the week. We thought no one would notice the downtime since we had less than a few hundred users at the time. > > **About 10 minutes after taking the servers offline, I started getting emails and phone calls from concerned users. What happened to Nextdoor? One user called me in a panic because she needed to contact a neighbor immediately and the directory on Nextdoor was unavailable**. Another user was worried that the service was suddenly gone and he was trying to organize a neighborhood meeting that night to save a local park. We rushed back from our lunch break to get the servers back online as soon as possible. It was an embarrassing mistake to take the service down mid-day without any advance notice. But the good news was we had clearly built something that mattered in the lives of users—they noticed within minutes when the service was unavailable. > > **If your users are urgently calling and demanding access to your product, you have clearly built something of real value. That’s product-market fit.”** ## How long does it take for companies to find PMF (in B2C)? Here’s a summary of how long it took today’s biggest B2C companies to find product-market fit after launching: ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b5a35a80-d754-4264-a944-4273a785f9e8_3654x3286.png) **A few takeaways (and you’ll find their stories below):** 1. Over 80% found PMF within 2 years 2. Less than 20% felt clear PMF immediately 3. If it wasn’t immediate, most took 6-18 months 4. Most eventually got there by iterating on their product or finding effective distribution 5. When they got there, the moment they hit PMF was very clear **I also found five archetypes of the PMF journeys:** 1. **Lightning in a bottle:** Immediately clear, up and to the right 2. **Delayed lightning:** Eventually instantly clear, but after 6-18 months of iterating on the product, distribution, or business model 3. **Foothold:** Very clear with just a narrow segment, unclear if it’ll work broadly, but with growing confidence as you expand (usually takes 3-18 months) 4. **Milestone:** Glimmers early on, and with steady and consistent growth you hit a meaningful milestone that finally tells you it’s working (usually takes 6-24 months) 5. **Grind:** 2-10 years of iterating, and eventually you get there ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3040e25c-c3a5-4a44-98da-edc425affc11_2400x1582.png) Plus, a sixth, sad, archetype (let’s call it **15 minutes of fame**) that initially looks like PMF, but then fizzles out. ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5309b9d5-d2c3-4cd7-b2c5-41c7562b5b58_2400x1582.png) *Shoutout to [Alex Ross](https://twitter.com/AreteRoss/status/1556367453554413569) ([Greg app](https://greg.app/)) and [Hayley Barna](https://firstround.com/person/hayley-barna/#mystory) ([First Round Capital](https://firstround.com/)) for inspiring these archetype names.* Below are stories from founders sharing what it took for them to find PMF, across each archetype. Which bucket do you suspect you’re in? #### 1. Lightning in a bottle: Immediately clear, up and to the right **Instagram:** > “We spent about two months building Instagram post-Burbn [earlier app], **launched it quickly, and it was an immediate success. Loads of people signing up immediately, and we never looked back.** Of course there were chapters where things slowed, but the core product had PMF from the very start. We got very lucky in that respect. At the same time, this is an unfair answer because we only discovered IG through the making of Burbn, which took over a year.” > > —[Kevin Systrom](https://en.wikipedia.org/wiki/Kevin_Systrom), CEO and co-founder **Tinder:** > **“The rise of Tinder was really fast, and there were very, very few changes to the product before it had already taken off.** The swipe had been added within weeks of launching in August or September 2012. I think we were working on the 2.0 of the app already before we rose, but it wasn’t finished or released until we were already spreading like wildfire.” > > ー[Jonathan Badeen](https://www.linkedin.com/in/badeen/), co-founder and CSO **Patreon:** > “**We felt we had PMF right after we launched with [co-founder] Jack [Conte]’s music video on YouTube and patrons and creators started writing in. I’d never seen that level of passion and immediate resonance,** and our launch was particularly fraught with stress, since weeks before, all the creators who were asked to launch rejected us. I actually emailed investors right after this, with a now cringey-esque note: ‘If you recall anything about me, I’m not one to exaggerate or overstate things, but based on the results and response thus far, I really think this company is going to be the one.’ ” > > —[Samuel Yam](https://www.linkedin.com/in/samyam/), co-founder and CTO **Robinhood:** > “I remember distinctly it was a Friday night. We had been working on the wait list in preparation for our press launch, which would have been, I think, the following Wednesday or Thursday. Everyone goes home, and I wake up Saturday morning, and I open up Google Analytics, and I see something like **600 concurrents on our site**, which nobody knew about at that point. I was just like, ‘What’s going on? This is not normal. Something must be wrong. Right?’ > > **I’m just screenshotting the page; I’m calling my parents saying, ‘Oh, this is crazy. It might actually be working.’** And up until that point, we never really had an idea of what success, at least in the consumer space, was like. That was sort of the first moment where we built something that actually worked. > > We ended up getting 10,000 sign-ups that first day, over 50,000 the first week, and almost 1 million in the first year.” > > ー[Vlad Tenev](https://www.linkedin.com/in/vlad-tenev-7037591b/), CEO and co-founder, via [Business Insider](https://www.businessinsider.com/robinhood-app-vlad-tenev-founder-free-stock-trading-valuation-2017-7) **Dropbox:** > “**For me there was a visceral sense of your thing taking on a life of its own and lurching forward, like getting pressed into the back of your seat by a fast car or a plane taking off.** The most standout moment for me was our demo video hitting the top of Digg (and then Reddit).” > > —[Drew Houston](https://www.linkedin.com/in/drewhouston/), CEO and co-founder #### 2. Delayed lightning: Eventually instantly clear, but after 6-18 months of iterating on the product, distribution, or business model **Netflix (after 18 months of iterating on the product and business model):** > “It took us at Netflix 18 months to finally find the repeatable scalable business model that worked. > > Hundreds of failed experiments later, and many a sleepless night of worrying, we finally tested the unlikely combination of No Due Dates, No Late Fees, and Subscription that ultimately was the thing that ended up working. And boy, did it work. **Within days of testing it, we knew we had a winner.** > > **Where before we were struggling to get traffic, all of a sudden we couldn’t keep up. Our previously prodigious amounts of inventory were suddenly not enough. Engagement soared, churn went dramatically down. Everything started working!** > > If there was a moment when Netflix stopped being a startup and became a real company, it was then.” > > ー[Marc Randolph](https://www.linkedin.com/in/marcrandolph/), first CEO and co-founder **Uber (after 1 year of iterating on the product and distribution):** > “One year in, we had obvious virality, and thus we felt we had PMF. When you’re putting almost no effort into growth but it’s clear the product itself is becoming ‘word of mouth’ viral, you know you have something really special. Then all efforts shift to keeping that magic going as long as possible.” > > —[Ryan Graves](https://www.linkedin.com/in/ryanashtongraves/), first CEO, founding team **YouTube (after ~6 months and finding an effective distribution channel):** > “We launched in May 2005, and we had the daily metrics that were tracking the number of videos uploaded, videos viewed, and user registrations. The daily video views were doubling every 1-2 weeks. But in the summer of 2005, even at that growth rate, the absolute numbers were still in the thousands. > > Six months after launch, we reached a million video views. That target number was always a metric that we had established as the most important. The numbers continued to expand after that, but it was around that time frame when we were all convinced that the YouTube idea had proven itself. > > **We did a lot of experimentation during the summer of 2005. Video bloggers. Auction videos. Embeds of videos on message boards. It ended up being MySpace embeds that drove the true virality of the service and the spread of the brand.”** > > —[Steve Chen](https://twitter.com/stevechen), co-founder **Snapchat (after ~6 months and finding an effective distribution channel):** > “The first version debuted in the iOS App Store on July 13, 2011...to yawns. ‘The Instagram fairy tale’—the app had 25,000 downloads on the first day—‘that was not us unfortunately,’ Murphy laments. The team had worked around a potentially fatal flaw—the fact that recipients can take a screenshot, rendering a disappearing image permanent—by building in a notification if your picture has been captured, a potent social deterrent. Still, by the end of the summer Picaboo had only 127 users. Pathetic. Brown toyed with positioning the app as a sexting tool. (‘Picaboo lets you and your boyfriend send photos for peeks and not keeps!’ reads a draft of a press release he wrote.) Murphy’s parents implored him to get a real job. […] > > But that fall Snapchat began to exhibit a pulse. As user numbers approached 1,000, an odd pattern emerged: App usage peaked between 9 a.m. and 3 p.m.—school hours. Spiegel’s mother had told her niece about the app, and the niece’s Orange County high school had quickly embraced Snapchat on their school-distributed iPads, since Facebook was banned. It gave them all the ability to pass visual notes during class—except, even better, the evidence vanished. Usage doubled over the holidays as those students received new, faster iPhones, and users surged that December to 2,241. By January it was at 20,000; by April, 100,000.” > > —[J.J. Colao, Forbes](https://www.forbes.com/sites/jjcolao/2014/01/06/the-inside-story-of-snapchat-the-worlds-hottest-app-or-a-3-billion-disappearing-act/?sh=da02e4267d27) **Discord (after 3 months and finding an effective distribution channel):** > “When they released the product in 2015, it failed to make a dent. A few dozen people might mosey into the company’s servers on a given day, but it didn’t seem to be gathering real momentum. That might have been in part due to the fact that alternatives existed—TeamSpeak and Skype were both used by gaming communities—but seemingly had more to do with getting the word out and winning early customer trust. > > The tipping point arrived via Reddit. The team was connected with a member of the *Final Fantasy* subreddit and asked them if they’d mention Discord. According to [founder Jason] Citron, they posted something along the lines of ‘Has anyone ever heard of this new voice-over-IP app called Discord?’ > > **That one comment was a miniature inflection point. More users flowed in, and Discord had figured out a grassroots distribution model.** > > In the years that followed, Discord succeeded in growing rapidly, accumulating hundreds of millions of users and close to $1 billion in funding.” > > —[Packy McCormick](https://www.notboring.co/p/discord-imagine-a-place) #### 3. Foothold: Very clear with just a narrow segment, unclear if it’ll work broadly, but with growing confidence as you expand **Instacart (~1 year):** > “**For Instacart, product-market fit happened across a series of moments. We found product-market fit very early on with people who wanted groceries delivered as soon as possible and didn’t care which store they came from. This made us feel like we had achieved product-market fit, but it was only with a small sub-segment of customers.** > > The average customer wanted to shop from their favorite grocery store. So we formed partnerships with top retailers. As a result, customers started to seek us out and word of mouth grew. We then signed more partnerships, reached a larger scale with customers, and in turn attracted more partners. > > Ultimately we created a marketplace where most customers can shop from their favorite stores, and as a result, customers have a great experience using Instacart and want to share it with their family and friends. > > Initial signs of product-market fit feel a bit like a calm breeze, while true product-market fit feels like a powerful wind at your back, accelerating you forward and compounding over time.” > > ー[Max Mullen](https://www.linkedin.com/in/maxmullen/), co-founder **Lyft (~1 month):** > “**When we launched in San Francisco, PMF was obvious on day 1. Even with the demand limited to employees and 3-5 drivers on the platform, it was clear we had a hit. What wasn’t obvious was whether this was an S.F.-only product.** > > When we launched in L.A., we had dozens of drivers in the field on launch day. We launched at like 11 in the morning, and despite a ton (for a small startup) of marketing, we didn’t have a single ride request for hours. Finally, around 4 p.m., one came in … and then canceled. > > We were pretty unsure of whether this would really work outside of S.F. It took weeks to months of hard marketplace design work, better marketing, referrals, etc. for it to really start taking off in L.A. Once we figured out what made it work there, we replicated it in other cities in much better fashion and raised a ton of cash, which we then deployed to essentially speed everything up.” > > —[Evan Goldin](https://www.linkedin.com/in/evangoldin/), started Lyft’s product team **Cameo (3 years):** > “**It was immediately clear that this product resonated incredibly powerfully with consumers. The first-ever Cameo made the recipient cry.** > > **But it took a long time to feel confident that we had created a long-lasting brand and business.** Each round of funding was a step-function change in our confidence that Cameo would last. Lightspeed’s Series A in November 2018 (1.5 years in) was the point that, OK, this thing is going to be a rocket; but it wasn’t until 2020 (three years in) that I felt like Cameo would be here to stay. This is partially due to healthy paranoia and partially due to not having been on a rocketship startup before. Until then, it was hard to know what metrics to trust and how sustainable the growth was.” > > —[Devon Townsend](https://www.linkedin.com/in/devspinn/), co-founder and CTO **Superhuman (4 years):** > “**We found pockets of PMF with specific segments of founders, managers, executives, and business development professionals**. Once we recognized this, we were able to focus the entire company on serving that narrow segment better than anybody else. It’s a commonly held view that tailoring the product too narrowly to a smaller target market means that growth will hit a ceiling—but I don’t think that’s the case. > > The biggest specific moment of realizing we had PMF, though, actually occurred just when I had arrived at a conference. Before I’d left, I’d asked our Head of Growth to update all our analytics. **What we saw was that every single metric was amazing**—growth, DAU/MAU, PMF score, NPS, virality, CAC payback, CAC:LTV, activation rates, long-term retention rates, and so on. That was when I realized that I could put together a Series B deck that would raise an awesome round. And so I did! Just a month later, Superhuman was on the front page of the *New York Times*, in *The Economist*, and in the *Guardian*.” > > —[Rahul Vohra](https://www.linkedin.com/in/rahulvohra/), CEO and co-founder ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/f26f716c-714c-4a25-9b43-6c5ffc063e5c_640x360.png) **Product Hunt (~3 months):** > “**Product Hunt is unusual in that there were clear signs of PMF very early on, with a specific audience.** I started with very modest confidence, but it grew quickly as the newsletter (and eventually the site) became more popular. As cliché as it is, I was building it for myself, so my challenge was less about understanding consumer needs and more an exercise in finding if there were enough people like me.” > > —[Ryan Hoover](https://www.linkedin.com/in/ryanrhoover/), founder #### 4. Milestone: **Glimmers early on**, and with steady and consistent growth you hit a meaningful milestone that finally tells you it’s working **Substack (~1.5 years):** > “Early on, I had product-market-fit anxiety. Do we have it? How will we know? There isn’t really a moment I can point to where that changed. We’ve just been growing fairly consistently, and gradually the how-do-we-keep-up anxiety got bigger and bigger **until there wasn’t time left in the day to worry about whether we had product-market fit.** > > We did have retention curves that looked pretty good from early on, especially for paying readers, and writers with paying readers. > > ー[Chris Best](https://www.linkedin.com/in/cjgbest/), CEO and co-founder **DoorDash (9-12 months):** > “We definitely didn’t feel like we had PMF immediately. Lots of days of small volumes and slow growth in the beginning. **At six months, there were finally sufficient volumes where metrics that suggest PMF (retention, order frequency, spend retention) were holding, and we were growing without marketing spend.** I felt we had PMF close to 9-12 months in, after we were able to replicate the same or better success in city 2 versus city 1.” > > —[Tony Xu](https://en.wikipedia.org/wiki/Tony_Xu), founder and CEO **Duolingo (~1 year):** > “In 2011, Duolingo launched as a private beta, where users could sign up to a waitlist to try Duolingo. For about 1 year, Duolingo stayed in private beta and let users off the waitlist in phases. This allowed the team to keep getting feedback from early users and making the product better. W**hen the team felt like the product was in a good place, they did the public launch. The DAU growth started happening immediately after launch (and never stopped after).** > > A combination of the following things made the team feel like they had PMF: > > 1. New sign-ups were growing without any marketing. Word of mouth spread was happening organically and was driving new user growth. > 2. Product changes the team was making were improving retention. As they kept improving the product, retention of the product kept increasing and the team felt like they were working on the right things. > 3. New users and retention going up created sustainable DAU growth. This made team feel good about having product market fit.” > > —[Cem Kansu](https://www.linkedin.com/in/cemkansu/), VP of Product **Outschool (~6 months):** > “We spent two years prototyping and iterating to get to v1 release. It was six months after launch that we knew we had initial PMF based on growth and cohort retention.” > > —[Amir Nathoo](https://www.linkedin.com/in/amirnathoo/), co-founder and CEO **Rover (9-12 months):** > “At 9-12 months, it felt like organic customer and sitter acquisition was taking off on its own in Seattle, and we were able to raise our Series B (which was really an A).” > > —[David Rosenthal](https://www.linkedin.com/in/davidjamesrosenthal), board member **Airbnb (~2 years):** > “When my mom booked her first Airbnb, I said to myself, I think we got something here!” > > —[Joe Gebbia](https://en.wikipedia.org/wiki/Joe_Gebbia), co-founder #### 5. Grind: 2-10 years of iterating on everything, and eventually you get there **Thumbtack (5 years):** > “**It took us five years to get to a place where we felt like we had PMF.** We spent the first two years focused on nothing but building supply, then the next two years focused on nothing but building demand, and finally one year building our v1 revenue model. Finally, at year 5, we had supply, demand, and revenue all come together, and growth took off. After having gone the first five years raising just a couple million dollars and few people paying attention to us, we then over the next couple years raised hundreds of millions of dollars and were finally being noticed.” > > —[Sander Daniels](https://www.linkedin.com/in/sander-daniels/), co-founder **Coinbase (~2 years):** > “I remember this light bulb kind of went off my head. I was like well, if I put a buy Bitcoin button in there, would you have used it? And he was like yeah. > > So we went about the process. Basically had to get like a bank partnership payment rails, basic exchange functionality, all that stuff. **And the minute we launched that feature, where you could just click buy, and it showed up in your account, from that day forward the number of users started go up like this, and so we finally had found product market fit, after two years of wandering in the desert.**” > > —[Brian Armstrong](https://en.wikipedia.org/wiki/Brian_Armstrong_(businessman)), CEO, via [Lex Friedman Podcast](https://youtu.be/VBPTFlpv31k?t=1377) **Udemy (2-3 years):** > “If you ask Eren Bali (CEO and co-founder), we found PMF about nine months after our second launch. At that point, you could argue that we had PMF because we had a product we had successfully sold to the public. The day we had $15K in sales from our first paid course launch. However, growing and building the marketplace from there was a grind and it never really felt stable. > > **If you ask our board or other internal team members about how long it took us to find PMF, you might hear something like 2-3 years. Many people did not really feel confident in the business until we had raised our Series B, which was over three years after launch.** Even then, it took another 3-5 years of scrappy innovation until we realized we had a solid, sustainable business on our hands.” > > —[Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/), co-founder **OpenTable (2 years):** > “PMF Part I: We had PMF for the restaurant software within a year of rolling it out to customers. PMF in this case meant restaurants valued the solution, utilized it every day, and were willing to pay a $99/month software license. > > PMF Part II: We really knew we had PMF when we significantly raised the price. The reality is the initial $99/mo included the software, hardware, and their broadband, which we paid for at $99/mo. Suffice it to say, it wasn’t a winning pricing model absent superb booking fees. We raised the price to $199/mo and handed the broadband contract over to the restaurant. Effectively we tripled the price for many restaurants. We did this in year two and successfully navigated the price increase with very little churn. > > PMF Part III: We had a form of PMF for the demand side of the equation the day we launched the website. We knew it was a superior way to make a reservation, and our diner feedback was positive. However, absent enough supply, the actual benefit of our service to diners was limited. We had true PMF by year two when we could observe repeat bookings and an accelerated growth trajectory on bookings.” > > —[Mike Xenakis](https://www.linkedin.com/in/xenakismike/), ex-SVP **Hipcamp (2 years):** > “**People loved our product pretty quickly, but it took about two years to figure out how to partner with landowners and actually have a revenue model.** > > I knew we had something when I went to meet one of our first landowners, who immediately handed me a letter from a land development company trying to buy her land. She told me she hates these letters because she’s afraid one day she’ll have to call them. She told me Hipcamp makes this junk mail.” > > —[Alyssa Ravasio](https://www.linkedin.com/in/alyssa-ravasio-23114717/), founder and CEO ## What actually *is* product-market fit? I skipped this question up top in order to get right to the meat of things, but I thought it would be useful to get into the nuances briefly. A warning: I’ll complicate the idea of PMF for a bit, but then I’ll come back to where we started. What actually is product-market fit? On the surface, it just means that you’ve built a product that a market (i.e. people) want. If one person wants your product, you have product-market fit with that one person. Nice! But that’s just the beginning. For **True Product-Market Fit**, aka building a real business, your product needs to achieve three things: 1. **Product-market fit:** Enough people want your product 2. **Product-business model fit:** You can make a profit selling your product to these people 3. **Product-growth engine fit:** You can acquire these people sustainably I call this “True Product-Market Fit”: ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b40c4531-24a9-4bf8-972c-982a6cd1045c_2400x1350.png) [Michael Seibel](https://www.youtube.com/watch?v=FBOLk9s9Ci4&t=521s), co-founder of Justin.tv (aka Twitch), shared a perfect illustration of this trifecta (or lack thereof): > #### “If you look back at Justin.tv, by 2010 we were making $8 million dollars in revenue, $1 million in profit, with approximately 30 million monthly viewers on the product. And we were not a product-market fit. > > #### The reason why was that we didn’t have a repeatable engine to create growth. That 300 million monthly uniques—we couldn’t make that number go up. And then the second thing was that unfortunately we had tons of copyrighted content on the site, so we weren’t able to reliably monetize that over time.” Brian Balfour calls this [the four fits](https://brianbalfour.com/four-fits-growth-framework). [Elizabeth Yin](https://twitter.com/dunkhippo33) describes it like so: Companies like [Shyp](https://en.wikipedia.org/wiki/Shyp), [Cherry](https://techcrunch.com/2012/12/23/cherry-car-wash-shut-down/), and [Exec](https://justinkan.com/feed/what-i-learned-about-online-to-offline) found great product-market fit (i.e. people wanted them) but couldn’t find a business model. Products like [Clubhouse](https://www.clubhouse.com/), [Vine](https://vine.co/), and [Yik Yak](https://yikyak.com/) found great growth engines (up and to the right!) but couldn’t keep enough people around long-term. To find *true product-market fit*, you likely need to iterate on your product, your distribution, and/or your business model. Building a product people want is just the beginning. A mental model for thinking about getting to True Product-Market Fit is to imagine a series of milestones that give you increasing confidence in your business: - Milestone #1: One person wants your product - Milestone #2: Many people want your product - Milestone #3: Many people continue to use your product - Milestone #4: You can acquire new users efficiently - Milestone #5: You make money from people using your product - Milestone #6: You make a profit from people using your product - Milestone #7: You can continue to make a profit while acquiring new users efficiently Somewhere along these lines (usually after milestone #2) you hit a point that tells you that you have what most people refer to as “product-market fit”, and as you hit more milestones that confidence grows. If you’re still not sure where you stand, go back to the sections above. But also remember, there’s always a chance you need to re-hit a milestone (e.g. the market’s tastes change as in the case of Clubhouse, Apple’s tracking changes killing efficient acquisition for many startups, etc.). It’s tough out there. All this being said, nothing will will matter if no one wants your product in the first place. Thus, it still makes sense to start in the original spot—staying laser focused on the OG question of product-market fit: How do you build something enough people want? Which brings us to our next topic. ## How do I iterate toward product-market fit? Based on my conversations with many founders who had to iterate toward product-market fit (aka didn’t immediately have it), there are four situations you’ll find yourself in: 1. **Wrong product** 2. **Right product, wrong distribution** 3. **Right product, wrong onboarding** 4. **Right product, wrong audience** Let’s explore each, and what to do about it. > #### “It is not the strongest species that survive, nor the most intelligent, but the most responsive to change.” —Charles Darwin ### 1. Wrong product: Iterate on the product As you’d expect, the majority of companies iterated toward PMF primarily by evolving their product offering. **Duolingo** added some core features (e.g. streaks; improved the teaching experience): > “**The most impactful thing at a high level was focusing product efforts on retention.** D1 retention was the simplest metric to reflect progress, and it was quick to see impact, so the company just focused on improving that. > > **Features that helped improve retention very early on:** > > 1. The daily streak mechanic (this was a very important retention mechanic for Duolingo) > 2. Improving Duolingo lessons to teach better > 3. Improving new-user onboarding > 4. Emails (Duolingo was only on web at first, so didn’t have push notifications back then)” > > —[Cem Kansu](https://www.linkedin.com/in/cemkansu/), VP of Product **Coinbase** added Bitcoin purchasing: > “The thing that I basically launched, the hosted Bitcoin wallet, there were people signing up (I just posted on Reddit and places like that), and maybe like 100 people would sign up and then nobody would come back. In YC, they often tell you to talk to your customers and improve your product—talk to your customers, improve your product; that’s all you’re supposed to be doing. Try to find product-market fit. So I emailed five of the users that had signed up, and I was like, Hey, I worked on this app, I saw you signed up, can I get on the phone with you? > > **I get on the phone with five of these folks and I was like, Why didn’t you come back? And the guy was like, Well, the app was OK for a beta, but I don’t have any Bitcoins, so I didn’t really know what to do with it. I remember this light bulb kind of went off my head. I was like, Well, if I put a ‘buy Bitcoin’ button in there, would you have used it? And he was like, Yeah.**” > > —[Brian Armstrong](https://en.wikipedia.org/wiki/Brian_Armstrong_(businessman)), CEO, via [Lex Fridman Podcast](https://youtu.be/VBPTFlpv31k?t=1377) **Superhuman** added a mobile app and calendar features: > “Once we recognized this, we were able to focus the entire company on serving that narrow segment better than anybody else. > > After some analysis, we found that the main thing holding back our users was simple: our lack of a mobile app. In 2015, we had taken the contrarian approach of starting with the desktop. Most emails are sent from desktop, so that’s where we thought we could add the most value. We were always planning on building a mobile app, but at the beginning of our journey—like every startup—we had the chips for just one bet. In 2017, it was clear that we could no longer delay this, and that mobile had become critical for product-market fit. > > Probing further, we found some less obvious and more interesting requests: integrations, attachment handling, calendaring, unified inbox, better search, read receipts, and so on into the long tail. For example, as an early-stage company, internally we weren’t making heavy use of our calendar and we wouldn’t have prioritized calendaring much at all based on our own intuitions about email. Hence this process of digging through feedback massively moved calendaring up on the product priorities list.” > > —[Rahul Vohra](https://www.linkedin.com/in/rahulvohra/), CEO **Snackpass** added a mobile app (and supply to their marketplace)**:** > “We spent nine months iterating on the product. We added essential features like a mobile app and rewards, plus we added more restaurant and promotion options.” > > —[Kevin Tan](https://www.linkedin.com/in/kevinhuangtan/), CEO Marketplaces only often found PMF once they added enough supply, e.g. **Instacart**: > “The average customer wanted to shop from their favorite grocery store. **So we formed partnerships with top retailers. As a result, customers started to seek us out and word of mouth grew. We then signed more partnerships, reached a larger scale with customers, and in turn attracted more partners.** > > Ultimately we created a marketplace where most customers can shop from their favorite stores, and as a result, customers have a great experience using Instacart and want to share it with their family and friends. > > —[Max Mullen](https://www.linkedin.com/in/maxmullen/), co-founder This was also true for **Airbnb, Thumbtack,** and **Lyft**: > “**It took weeks to months of hard marketplace design work, better marketing, referrals, etc. for it to really start taking off in L.A.** Once we figured out what made it work there, we replicated it in other cities in much better fashion and raised a ton of cash, which we then deployed to essentially speed everything up.” > > —[Evan Goldin](https://www.linkedin.com/in/evangoldin/), started Lyft’s product team Companies like **Udemy** had to make changes across the board: > “It took months and months of trying things out to finally get to our first signs of PMF. The most impactful iterations were **(1) deciding that we would charge for courses, (2) videotaping live in-person lectures instead of trying to convince people to record themselves into a webcam,** and (3) partnering with email newsletters to promote courses.” > > —[Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/), co-founder If you suspect that your product is what’s lacking (which is most likely the case), here’s my favorite advice for iterating your product, from the wise folks at YC: [Watch on YouTube](https://www.youtube.com/watch?v=0LNQxT9LvM0)[Watch on YouTube](https://www.youtube.com/watch?v=IhNnkPsdohY)[Watch on YouTube](https://www.youtube.com/watch?v=C27RVio2rOs) Also some great additional advice: #### 2. Right product, wrong distribution: Iterate on your distribution Though normally your product is the core problem, in some cases, all you need is a spark of distribution. Here are a couple of examples of this that I’ve come across: **YouTube:** > “We did a lot of experimentation during the summer of 2005. Video bloggers. Auction videos. Embeds of videos on message boards. **It ended up being MySpace embeds that drove the true virality of the service and the spread of the brand.**” > > —[Steve Chen](https://twitter.com/stevechen), co-founder **Discord:** > “The tipping point arrived via Reddit. The team was connected with a member of the *Final Fantasy* subreddit and asked them if they’d mention Discord. According to [founder Jason] Citron, they posted something along the lines of ‘Has anyone ever heard of this new voice-over-IP app called Discord?’ > > **That one comment was a miniature inflection point. More users flowed in, and Discord had figured out a grassroots distribution model.** > > In the years that followed, Discord succeeded in growing rapidly, accumulating hundreds of millions of users and close to $1 billion in funding.” > > —[Packy McCormick](https://www.notboring.co/p/discord-imagine-a-place) Duolingo and Udemy also mentioned that distribution changes were pivotal to their PMF journey. Often, it’s a mix of these two. But don’t fall prey to the trap of assuming you’ve nailed the product and all it needs is a spark of growth. #### 3. Right product, wrong onboarding: Iterate on your onboarding Although changes in onboarding only came up a couple of times in my conversations with founders, onboarding goes hand in hand with PMF. Why? If retention is the ultimate measure of PMF, [onboarding is one of the best ways to improve your retention](https://www.lennysnewsletter.com/i/854784/-improve-your-onboarding). Some of the smartest growth minds also point this out: > #### “When people talk about growth, they usually assume the discussion is about getting more people to your product. When we really dig into growth problems, we often see that enough people are actually coming to the products. The real growth problems start when people land … and leave. They don’t stick. This is an onboarding problem, and it’s often the biggest weakness for startups. It can also take the longest to make meaningful improvements when compared to other parts of the growth funnel.” > > #### —[Casey Winters](https://www.linkedin.com/in/caseywinters/), ex-Pinterest, GruhHub, and CPO at Eventbrite > #### “You can often attribute month 1-3 churn to be failure of activation/onboarding. > > #### —[ChenLi Wang](https://www.linkedin.com/in/chenliw/), ex-growth at Dropbox Pulling from [my previous post on the subject](https://www.lennysnewsletter.com/i/854784/-improve-your-onboarding), some tactical advice for improving your onboarding conversion: 1. **Try manually onboarding users:** Superhuman is famous for [their 1:1 onboarding strategy](https://twitter.com/rahulvohra/status/1159611299740803073?lang=en), but in reality, many companies (particularly B2B) start with a hands-on onboarding. Why? Because it’s a lot easier to get your message across person-to-person vs. through the product, and it’ll give you a ceiling on your conversion rates. 2. **Make sure new users experience your value quickly:** How much work, and how long, does it take for new users to experience the value that you provide? What keeps these users motivated to keep going? How could you cut that time down and keep their motivation up, without sacrificing the experience? 3. **Increase the odds that new users have a great time:** What are all of the ways that your users set themselves up for failure? How can you proactively help them avoid this? 4. **Get more users through the flow:** You can’t retain users if they don’t make it through your onboarding, so look for ways to reduce friction, reduce distractions, and increase motivation. For example, a ✨ can go a long way: #### 4. Right product, wrong audience: Change your target audience A final path, and generally underexploited, is to change your target audience. As we saw in [Step 2](https://www.lennysnewsletter.com/p/consumer-business-super-specific-who), Ben Silbermann was struggling to get anyone to care about Pinterest until he realized he was focused on the wrong group (e.g. tech friends vs. female bloggers). This also came up in the PMF stories of Udemy and Typeform. If you’re struggling to find PMF, spend some time with this thought: Is there a different [super-specific who](https://www.lennysnewsletter.com/p/consumer-business-super-specific-who) that may benefit from this product that I haven’t yet explored? You never know—you may already have the perfect solution for a different crowd. With all of this in mind, zooming back out, I hope that you’re clearer on your next steps toward product-market fit. It’s never easy, and rarely a straight path. And nearly every early-stage founder is going through the same frustration, fear, and uncertainty that you’re going through. This is part of the startup journey, and exactly what you signed up for. Worst case, you never get there, and you’ve wasted your time and money, and you move on. Best case, honor and glory. Godspeed. ![Shackleton's Leadership Lessons from the Bottom of the World ...](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2a95b99d-eb47-4553-bb39-ff75cd4d727b_1200x598.jpeg) #### Next week: We’ll be transitioning away from *doing things that don’t scale*, to *scaling the things that you’re doing*: Step 6: SCALE—Building your growth engine 🚀 Don’t forget to subscribe to avoid missing future issues ### 📚 Further study 1. [The Lean Startup Playbook for Achieving Product-Market Fit](https://leanstartup.co/a-playbook-for-achieving-product-market-fit/) by Dan Olsen 2. [Why Too Many Startups (er) Suck](https://steveblank.com/2012/09/21/why-too-many-startups-er-suck/) by Bob Dorf 3. [How to Find Product-Market Fit](https://youtu.be/0LNQxT9LvM0) by David Rusenko 4. [The Never-Ending Road to Product-Market Fit](https://brianbalfour.com/essays/product-market-fit) by Brian Balfour 5. [The Only Thing That Matters](https://pmarchive.com/guide_to_startups_part4.html) by Marc Andreessen 6. [How Superhuman Built an Engine to Find Product/-Market Fit](https://firstround.com/review/how-superhuman-built-an-engine-to-find-product-market-fit/) by Rahul Vohra 7. [How to Justify “Non-Sexy” Product Investments](https://caseyaccidental.com/non-sexy-projects) by Casey Winters 8. [Why Onboarding Is the Most Crucial Part of Your Growth Strategy](https://caseyaccidental.com/startup-onboarding) by Casey Winters See you next week! [Share Lenny's Newsletter](https://www.lennysnewsletter.com/?action=share) ### 📣 Join Lenny’s Talent Collective [Join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to get bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to kickstart and scale a consumer business—Step 5: RETAIN: Iterate until](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join the collective to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply to join](https://www.lennysjobs.com/talent) ### ❤️‍🔥 Featured job opportunities 1. **TaskRabbit:** [Director of Product, New Ventures](https://www.lennysjobs.com/jobs/6c0915d0-3ac3-4ba8-b53e-4684948711a6) (Remote) 2. **Credit Karma:** [Senior Product Manager - Recommendation Systems](https://www.lennysjobs.com/jobs/a2999f74-7e88-458c-bbd3-781b7ce48a3e) (Oakland, CA) 3. **Fountain:** [Senior Product Manager](https://www.lennysjobs.com/jobs/d1cac1a4-674a-4342-82b9-43373ea1c283) (Remote) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [28/44] Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth engine ![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/79703730-2e8c-4cc7-8e68-75ac38d2d1e0_4096x2048.png) Welcome to part six (!!!) of our six-part series on kickstarting and scaling a consumer business. Here’s a recap of our journey so far: - **[Step 1: INSIGHT: Come up with your idea](https://www.lennysnewsletter.com/p/kickstarting-and-scaling-a-consumer)** - **[Step 2: AUDIENCE: Identify your super-specific who](https://www.lennysnewsletter.com/p/consumer-business-super-specific-who)** - **[Step 3: HOOK: Craft your pitch](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer)** - **[Step 4: REACH: Find your early adopters by doing things that don’t scale](https://www.lennysnewsletter.com/p/consumer-business-find-first-users)** - **[Step 5: RETAIN: Iterate until enough people stick around](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer-9c8)** - **Step 6: SCALE: Build your growth engine** ← This post By this point, you have a startup idea, a product, some early users, and hopefully a glimmer of product-market fit. Even if you don’t have any of these, you should still be thinking about how your product will grow as you scale. How you grow will impact what you build, and what you build will impact how you grow. In this post, we’ll look at: 1. **How products grow** 2. **How your product will most likely grow** 3. **The GTM motions of today’s most successful consumer apps** Let’s get those growth engines roaring. *A big thank-you to [Adam Fishman](https://www.linkedin.com/in/adamjfishman/) (Lyft, Patreon), [Casey Winters](https://www.linkedin.com/in/caseywinters/) (Grubhub), [Cem Kansu](https://www.linkedin.com/in/cemkansu/) (Duolingo), [Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/) (Udemy), [Jonathan Badeen](https://www.linkedin.com/in/badeen/) (Tinder), [Kevin Tan](https://www.linkedin.com/in/kevinhuangtan/) (Snackpass), [Max Mullen](https://www.linkedin.com/in/maxmullen/) (Instacart), [Mike Evans](https://mikeevans.com/) (Fixer), [Nickey Skarstad](https://www.linkedin.com/in/nickeyskarstad/) (Etsy), [Scott Belsky](https://www.linkedin.com/in/scottbelsky/) (Behance), [Sriram Krishnan](https://www.linkedin.com/in/sriramkrishnan/) (Calm), and [Tamara Mendelsohn](https://www.linkedin.com/in/tamaramendelsohn/) (Eventbrite) for contributing to this post, and [Natalie](https://www.natalieharney.com/) for illustrations 🙏* ![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/00309642-b56d-4e24-9ba9-8e2539fea5ce_4096x2048.png) > #### “A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of ‘exit.’ The only essential thing is growth. Everything else we associate with startups follows from growth.” —[Paul Graham](https://www.paulgraham.com/growth.html) Growth used to be a mysterious dark art. Fortunately, as you’ve seen in this series, and as you’ll see below, it’s becoming much less so. There are shockingly few paths to lasting sustainable growth, and there’s a growing fountain of knowledge to help you understand each path. In this post, as we transition from doing things that don’t scale to scaling the things that you’re doing, we’ll explore how products grow, how *your* product is likely to grow, and how today’s biggest consumer businesses kickstarted and scaled growth. Let’s get into it. ## How products grow When you’re just starting out, as we saw in [step four of our series](https://www.lennysnewsletter.com/p/consumer-business-find-first-users), there are only seven reliable ways to kickstart your growth (i.e. get your first 1,000 users): ![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/79d04797-0bbb-4d77-a87c-ff90c58f4620_2048x2048.png) To scale your growth, your options are even more limited. There are only four sources of self-sustaining long-term growth, aka growth engines: ![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/663efefc-4bf6-4876-b5d1-594c5f145af9_2048x1456.png) For consumer startups, it’s actually even simpler. There are only three feasible growth engines (since relying on sales is rarely economical): ![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/0840e0f2-580f-48df-b60f-b99126985533_2048x1456.png) Why so few ways to grow? Think about it. How many ways do you find out about most new products? Either you see an advertisement (i.e. paid growth), you find it while searching online (i.e. SEO), someone reaches out and pitches you on it (i.e. sales), or a friend tells you about it and/or you see it shared on social media (i.e. virality). Even more interestingly, the majority of startups grow primarily through just *one* of these engines. For example, nearly 100% of Tinder’s growth came through word of mouth (WOM), Calm’s through paid growth, and Thumbtack’s through SEO. This is true for nearly every startup out there, especially at first. A common pitfall of early-stage startups is trying to invest in too many engines at once and not nail any. At scale, in order to win a market, you have to become world-class at your primary growth engine. To quote Dan Hockenmaier and myself from [a post on this topic](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups): > #### “Once you get to even moderate scale, each of these engines becomes highly competitive. > > #### In the case of paid marketing and SEO, you are competing for a customer’s attention. Paid marketing becomes a business-model competition (who can turn this customer attention into enough value that they can bid more than anyone else for that attention), and SEO becomes a ranking-algorithm competition (who can capitalize on their content in such a way that ‘deciders’ like Google want to continue to send traffic their way).” Over time, most companies layer on an additional engine (usually paid growth, sometimes SEO) in order to continue to grow while their initial growth engine plateaus ([learn about S-curves](https://www.rocketsource.co/blog/s-curve-of-business/#:~:text=Once%20you%20get%20past%20the,tapering%20off%20as%20growth%20slows.) and [adding layers to your cake](https://a16z.com/2012/01/18/a-recipe-for-growth-adding-layers-to-the-cake-2/)). But timing those investments correctly is critical, and that initial engine normally continues to drive the majority of your growth. Note, even though there are a limited set of strategies, there are infinite ways to be creative about how you execute each of them, e.g. Netflix infiltrating DVD forums, Hipcamp setting up tables outside REIs, Airbnb selling cereal. Your job as a founder looking to grow your product is to (1) creatively execute two to three kickstarting tactics and (2) become world-class at one primary growth engine. That’s essentially your high-level GTM strategy. [Here’s a link to the worksheet](https://docs.google.com/document/d/19k7oXAYb9qkra6FTUMPljW75YZfUfWEr0eTITZvDe6s/edit?mode=html) we’ve been using throughout this series to help you plan your GTM. ## GTM motions of today’s biggest consumer apps To bring it all together, here’s an overview of how today’s biggest consumer businesses kickstart their growth, and their primary growth engine. ![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d1c316e1-1d3a-4197-bdc6-1ad12966393c_4792x6620.png) A few stories I’ve gathered from founders and early employees describing their primary growth engines: #### 1. Virality (which can be driven by word of mouth, sharing content, sending invites to your friends, or a referral program) **Airbnb (WOM, referrals):** > “If you look at the composition of growth of Airbnb, **WOM was by far the biggest driver early on. Way over 50% on the guest side and way over 70% on the host side.**” > > —[Gustaf Alströmer](https://www.linkedin.com/in/gustafalstromer/), first head of growth **Instacart (WOM, referrals):** > “What showed up in our data was that **we had strong word-of-mouth growth (people would report hearing about us from a friend, or they would use our referral program with their first order)**.” > > —[Max Mullen](https://www.linkedin.com/in/maxmullen/), co-founder **Udemy (WOM):** > “**Over 90% of our courses were created organically**—which means word spread quickly. People started to realize the value of Udemy and clearly wanted to come.” > > —[Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/), co-founder **Behance (WOM, sharing content):** > “**We had a year of deep focus on viral spread**—syncing Twitter, FB, and other social media accounts to automate sharing every time a member posted a new project, new reasons to share projects even when they weren’t yours, and making sure our SEO game was solid.” > > —[Scott Belsky](https://www.linkedin.com/in/scottbelsky/), co-founder **Instagram (WOM, sharing content):** > “When Instagram launched to the public on October 6, 2010, it **immediately went viral**. It reached number one in camera applications in the Apple app store. > > Within the first day, 25,000 people were using Instagram. Within the first week, it was 100,000, and [co-founder Kevin] Systrom had the surreal experience of seeing a stranger scrolling through the app on a San Francisco bus. He and [co-founder Mike] Krieger started an Excel spreadsheet that would update live with each user added.” > > ー*[No Filter: The Inside Story of Instagram](https://www.amazon.com/No-Filter-Inside-Story-Instagram/dp/1982126809)*, by Sarah Frier **LinkedIn (inviting friends):** > “The site launched on 5/5/03, and after a week we had something like 12.5K registered users ... After about four months we hit 50K users and then 500K a little less than one year after launch. Keep in mind, in the early days there were no public profiles or other ways to view the site as a non-registered user. > > LinkedIn deployed an Outlook contact uploader (very painful to build/support) to allow viral spread among professionals. Even today, nobody else has invested energy in this direction despite the 5-10x distribution per inviter you get from Outlook vs. Webmail.” > > —[Keith Rabois](https://www.linkedin.com/in/keith/) and [Lee Hower](https://www.linkedin.com/in/leehower/), members of founding team, via [Quora](https://www.quora.com/LinkedIn-product-1/How-did-LinkedIn-product-get-its-initial-traction) **Pinduoduo (inviting friends):** > “Pinduoduo’s model was simple: buy everyday items and receive discounts of up to 90% by completing in-app actions or inviting friends to buy them as well. Prices were set by suppliers, and a user’s very first purchase was almost always subsidized at a discount by PDD. Subsequent purchases could be made at the full price or discounted with a team or through in-app rewards. Users could join existing teams in the app, but prices were even lower if users started their own team. Early products were so cheap that there was very low friction to buy. **The K-factor, or the average people a new user invites, was never less than 1. Any money spent to acquire one customer was ultimately acquiring multiple customers.**” > > —[Turner Novak](https://turner.substack.com/p/pinduoduo-and-vertically-integrated?token=eyJ1c2VyX2lkIjoxODQ5Nzc0LCJwb3N0X2lkIjo4MjAzODMsIl8iOiJPQi9ZbCIsImlhdCI6MTU5Njc2OTY0MiwiZXhwIjoxNTk2NzczMjQyLCJpc3MiOiJwdWItMTY5MDciLCJzdWIiOiJwb3N0LXJlYWN0aW9uIn0.lHvZAMBtda_zfkdTMOJ-N94qzxp-aRKm3YoeFdKGG4s) #### 2. SEO **Thumbtack:** > “SEO was a big bet because it takes a long time to see results. Often you start investing in it, and the first results you see are six months in and they’re not very encouraging. You only start to see results that impact the business after 12, 18, 24 months. So we chose deliberately to put the entirety of our engineering, product, design, marketing, and operations resources—which were maybe 12 people at the time—against success in this one channel. It was a company betting decision. > > **For the first three months, almost nothing. And then a trickle of traffic. At six months, there still wasn’t much traffic, but there was at least enough to start analyzing. At 18 months, it became a meaningful share of consumer traffic to the site. At 36 months, it was the primary form of customer acquisition.**” > > —[Sander Daniels](https://www.linkedin.com/in/sander-daniels/) and [Dan Hockenmaier](https://www.linkedin.com/in/dan-hock/) via [First Round Review](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups#approach-1-determine-which-lane-is-a-natural-fit-for-your-business-model#step-1-validate#case-study-3-how-bookingcom-validated-performance-marketing#case-study-3-how-bookingcom-validated-performance-marketing#case-study-1-how-thumbtack-validated-seo#case-study-1-continued-how-thumbtack-committed-to-seo#case-study-1-continued-how-thumbtack-scaled-seo#case-study-1-continued-how-thumbtack-scaled-seo#case-study-1-continued-how-thumbtack-committed-to-seo) **Yelp:** > “We had surprise success with organic search traffic. Mostly we’d ensure the site was SEO-friendly, but that was relatively minor. Mostly traffic came because we actually had quality review content and a decent page for each business.” > > —[Russel Simmons](https://en.wikipedia.org/wiki/Russel_Simmons), co-founder **Etsy:** > “The company was spending ‘next to nothing’ on customer acquisition. This trend remained fairly consistent as the company continued to grow, as revealed in their recent S-1. Since 2011, organic channels have represented 87% to 91% of Etsy’s traffic, while paid ads have been responsible for between just 2% to 7% of traffic.” > > —[GrowthHackers](https://community.growthhackers.com/posts/the-story-of-etsys-crafty-growth-to-ipo-and-a-2-billion-valuation) **Zillow:** > “**SEO was and continues to be an important channel for us.** We took advantage of our PR and content groups to drive traffic and links to our site and created the most comprehensive database of homes, with deep details of every home in the country (not just the ones for sale). We continue to work on providing the most unique and valuable data on every home (with things like 360-degree tours of homes).” > > —[Nate Moch](https://www.linkedin.com/in/natemoch/), early growth leader **Grubhub:** > “The most obvious things were SEO (and some SEM). In particular on the SEO side, we adamantly refused to build things that were meant primarily for search-engine indexing. Instead I focused on the idea that the SEO landing pages should be built with HCI principles and conversion in mind. It turns out that this kind of unique content/highly converting landing page concept also indexes very well, so that worked great. To boost this value, I added the menus for all restaurants in our markets and sorted our paying customers (with their online ordering feature) to the top of the list.” > —[Mike Evans](https://mikeevans.com/), co-founder #### 3. Paid **Booking.com:** > “The founding company behind Booking.com actually started off as a meta-search business, and SEO was a growth driver early on. But eventually, growth started to level off because we were doing some gray-hat stuff and Google started to penalize us. > > So we began exploring new ways to grow. At the time, Google was taking off like a rocket ship, and the users had so much purchase intent while searching. We thought, if we could get good at Google, we’d do really well. We thought—what if we try AdWords? > > We found a company that had a massive list of points-of-interest around the world, about 6 million of them. We realized that if we could do this at scale, we could create 6 million pages to point Google ads to. […] > > It was actually only two guys for a while—one banker (Peter) and one coder. I always believed that the secret to our success was that we were not heavily automated for most of our early spend. Peter (the banker) was extremely competitive. He would scream and shout when he was losing his #1 position. He had a simple success criteria: win the auction for all of the important words, and make money on it. > > This small team continued to run the program even past $100m in spend. We started paid search in 2004, and in 2008 it was the biggest source of growth.” > > —[Arthur Kosten](https://twitter.com/ajknws), early CMO, via [First Round Review](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups#approach-1-determine-which-lane-is-a-natural-fit-for-your-business-model#step-1-validate#case-study-3-how-bookingcom-validated-performance-marketing#case-study-3-how-bookingcom-validated-performance-marketing) **Uber:** > “**The end state for Uber was around 50% paid growth and 50% virality (**15% referrals, 35% WOM). Early days, the mix was closer to 30% referrals, 50%-60% WOM, and the rest was PR and other random things.” > > —[Andrew Chen](https://www.linkedin.com/in/andrewchen/), head of driver growth ### Two bonus growth engines just for marketplaces and platforms: Sales, and Supply driving demand #### Sales As I noted above, sales is rarely an effective growth engine for B2C startups—with the exception of marketplaces and platforms, where the supply is incredibly valuable. In those cases, sales is both an important kickstarting tactic and an important part of the overall growth strategy. **Grubhub:** > **“Supply growth was all sales—door to door, walking into restaurants during their downtime, talking to owners.** It was very sales-driven. What we did was take every excuse they had for not using Grubhub and removed it as an obstacle. Fast-forward to a couple of years later—you only pay when you receive orders, there are no hidden fees, you can cancel anytime. We got to a place where there was zero downside to sign up and to give it a try.” > > —[Casey Winters](https://www.linkedin.com/in/caseywinters/), first head of growth **Udemy:** > “We ended up building a team called ‘content acquisition’ at Udemy that focused on direct outreach. This team is a lot like any other growth team—except that it was much more business-heavy. This team consisted of some virtual assistants (VAs) and some full-time employees to help manage the process and deal one-on-one with high-profile instructors. Here’s the workflow (say we are trying to get courses in Python programming): > > - VA 1 searches for the leading expert(s) in Python programming. VA 1 obtains their email addresses and sends them an email on behalf of a Udemy team member (aka from gagan@udemy.com). > - Some percentage of instructors reply to the email. > - Udemy team member gets on the phone/Skype/email and helps the instructor understand the benefits, answer questions, etc. > - Instructor, sold on how awesome Udemy is, puts up their course over the next 2 weeks to 3 months. > - This created an engine of course acquisition that we still use today.” > > —[Gagan Biyani](https://www.linkedin.com/in/gaganbiyani/), co-founder **OpenTable:** > “On the restaurant side, unfortunately, there were no easy levers in the early days. **It was hire a direct sales force on the street.** **People on the street knocking on doors, carrying the software.** Demo’ing it and showing them how it worked.**”** > > —[Mike Xenakis](https://www.linkedin.com/in/xenakismike/), early growth leader **Etsy:** > “The main thing that I believe really worked was **recruiting sellers in person at craft fairs** and elsewhere. This was a small activity in terms of human effort, but it scaled beyond that since the sellers marketed themselves.” > > —[Dan McKinley](https://www.linkedin.com/in/mcfunley/), early employee **Caviar:** > “For us, for supply growth, it’s direct sales/field sales—no question!” > > —[Gokul Rajaram](https://www.linkedin.com/in/gokulrajaram1), head of Caviar #### Supply driving demand You’ll notice in the table above there’s an additional growth engine, “Supply drives demand,” that again exists only for marketplaces and platform startups. How this works is within a marketplace, your supply (e.g. DoorDash restaurants, Substack writers, Eventbrite event organizers) often drive their customers/audience to your site because it benefits them (e.g. restaurants tell customers to order from DoorDash, writers drive people to Substack to subscribe, event organizers send everyone their Eventbrite ticketing page). Although technically this is a growth engine, and an incredibly powerful one, it won’t be the *source* of your growth because you still need to grow the supply in the first place (usually through sales), and there isn’t a ton you can do to accelerate this engine. But when you do have this engine in place, lean into it big-time because it creates an incredible unfair advantage. A few examples of this engine in action: **DoorDash:** > “**Restaurants did a lot of the marketing for us.** They would actually print placards and stickers and put them up in the restaurant, without our help and often without us knowing. Stickers on the windows worked extremely well. **Restaurant owners are enterprising entrepreneurs and are super-creative at driving demand.**” > > —[Micah Moreau](https://www.linkedin.com/in/micahmoreau/), VP and GM **Etsy:** > “**Sellers were doing their own grassroots marketing**, and that became a big growth driver. Etsy pushed sellers to promote their shops to their communities in order to drive the growth of their shops, which in turn drove the growth of the marketplace overall.” > > —[Nickey Skarstad](https://www.linkedin.com/in/nickeyskarstad/) and [Dan McKinley](https://www.linkedin.com/in/mcfunley/), early employees **Eventbrite:** > “Due to the nature of organizing events, most **event organizers had some built-in demand that they brought with them.**” > > —[Tamara Mendelsohn](https://www.linkedin.com/in/tamaramendelsohn/), CMO **Snackpass:** > “For us these days, it’s 50% restaurant-driven users and 50% word of mouth from users.” > > —[Kevin Tan](https://www.linkedin.com/in/kevinhuangtan/), Snackpass [Learn more about kickstarting and scaling your marketplace here](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-marketplace). ### How *your* product will likely grow I suspect a question you’ve had on your mind this whole time is which of the three growth engines is likely right for you. You’re probably also wondering, “Ooo, how do I grow through virality? That sounds great!” Unfortunately, that’s not how it works. Your product needs to be a fit with the growth engine, and it’ll only work out if it’s a natural fit. Below is a handy guide that’ll tell you which growth engine is likely the best fit. Though it may not be what you want, you’re lucky if you can get even one to work at meaningful scale. What you’re looking for is an unfair advantage that allows you to become world-class at that growth engine. **You’ll likely grow primarily through SEO if:** 1. Your users produce lots of public content (e.g. Glassdoor, Quora, Reddit, Pinterest) 2. You have proprietary data that you can use to generate thousands of pages (e.g. Yelp, Grubhub, Thumbtack, Tripadvisor) 3. Your competitors are having success with SEO—check [Similarweb](https://www.similarweb.com/) **You’ll likely grow primarily through performance marketing if:** 1. You generate revenue directly from new users (e.g. purchasing a product), with a [short enough payback](https://www.lennysnewsletter.com/p/payback-period), which you can then use to fund more ads 2. Customers are not naturally going to be looking for your product, and thus you have to come to them (e.g. new DTC brands) **You’ll likely grow primarily through virality if:** 1. You have to share your product in order to use it (e.g. Dropbox, PayPal, Cameo) 2. Your product is only fun when your friends are using it too (e.g. Snapchat, Facebook) 3. The product is simply super-fun to share (e.g. Tinder, Airbnb, TikTok) How do you truly know if an engine is going to work for you? Pulling from [this previous piece](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups#approach-1-determine-which-lane-is-a-natural-fit-for-your-business-model#step-1-validate#case-study-3-how-bookingcom-validated-performance-marketing#case-study-3-how-bookingcom-validated-performance-marketing#case-study-1-how-thumbtack-validated-seo#case-study-1-continued-how-thumbtack-committed-to-seo#case-study-1-continued-how-thumbtack-scaled-seo#case-study-1-continued-how-thumbtack-scaled-seo#case-study-1-continued-how-thumbtack-committed-to-seo#case-study-2-continued-how-airbnb-committed-to-virality#case-study-2-how-airbnb-validated-virality#case-study-2-continued-how-airbnb-scaled-virality#introduction#the-framework), you should follow three steps: **Step 1: Validate** As cheaply as possible, validate that a given lane is right for your business. There are two approaches to validating this. One, determining which lane is a natural fit for your business model. Two, [looking at your data](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups#approach-2-look-at-your-data#approach-2-look-at-your-data#approach-2-look-at-your-data#approach-2-look-at-your-data#approach-2-look-at-your-data#approach-2-look-at-your-data). **Step 2: Commit** Once you’ve validated a channel, the next step is to commit to the lane. In our experience, most companies underestimate how large and disciplined the effort will need to be to turn any of these lanes into a superhighway. Committing to a lane generally includes doing two things, both of which can be scary, particularly early in a company’s life: - Dedicating a significant amount of cross-functional resources to the effort, including product, design, marketing, and engineering - Influencing the core product roadmap and customer experience to optimize for the lane being pursued **Step 3: Scale** Once you have committed to a lane and start to see meaningful results, the next phase is to become world-class at the lane. The hallmark of this third stage is overcoming diminishing returns. Virtually every customer acquisition channel becomes harder over time because you are acquiring lower- and lower-intent customers. For the sake of brevity, I’ll point you to a few in-depth guides to help you down this road: 1. [Drive Growth by Picking the Right Lane—A Customer Acquisition Playbook for Consumer Startups](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups) by [Dan Hockenmaier](https://twitter.com/danhockenmaier) and myself 2. [The Racecar Growth Framework](https://www.reforge.com/blog/racecar-growth-framework) by [Dan Hockenmaier](https://twitter.com/danhockenmaier) and myself 3. [Winning at SEO](https://www.lennysnewsletter.com/p/crafting-an-seo-strategy-issue-34) by Brian Ta 4. [Content-driven growth](https://www.lennysnewsletter.com/p/content-driven-growth-strategy) 5. [How to increase virality](https://www.lennysnewsletter.com/p/increasing-virality) 6. [Building a referral program](https://www.lennysnewsletter.com/p/this-week-16-building-a-referrals) 7. [How to win in consumer subscription](https://www.lennysnewsletter.com/p/winning-at-consumer-subscription?s=w) ## The Racecar Growth Framework Finally, a helpful (and fun) framework for thinking about your growth strategy broadly, as I shared in [this Reforge post](https://www.reforge.com/blog/racecar-growth-framework), is the **Racecar Growth Framework**. Here’s the idea: The same components that help a car drive faster are also the things that will help your product grow: ![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5da44576-d0ec-4eeb-836c-5597a231d0b8_2730x1396.png) 1. **The (growth) engine:** Your self-sustaining growth loops that drive most of your growth. This is either virality, paid growth, SEO, or sales 2. **Turbo boosts:** One-off events that accelerate growth temporarily but don’t last (e.g. press, influencer posts, events) 3. **Lubricants:** Optimizations that make the growth engine run more efficiently (e.g. improved onboarding conversion, a stronger brand, higher retention) 4. **Fuel:** The input that your engine requires to run (e.g. money, users, content) We’ve already talked about growth engines above, so let’s explore the other three components: #### Turbo boosts These are essentially the same seven tactics we looked at when talking about [kickstarting growth](https://www.lennysnewsletter.com/p/consumer-business-find-first-users)—unscalable short-term boosts of growth—plus a few additional tactics (e.g. events, Super Bowl commercials) that are rarely used early on. Importantly, turbo boosts can often be useful not just to get your engine going but to accelerate it further. For example, **Tinder** saw an acceleration in growth after a big PR event: > “Our growth has been nearly 100% WOM. But we had a large boost when Jamie Kennedy did an interview that included Tinder at the Sochi Olympics. We essentially doubled down on that by going hard on press to talk about Tinder at Sochi.” —[Jonathan Badeen](https://www.linkedin.com/in/badeen/), co-founder As did **Calm**: > “For Calm it was basically profitable and hyper-disciplined paid user acquisition, coupled with amazing brand campaigns like [Naomi Osaka/Calm](https://www.businessinsider.com/naomi-osaka-french-open-press-appearance-fine-calm-app-2021-6) and [election advertising](https://techcrunch.com/2020/11/05/calms-hilarious-cnn-ad-campaign-sent-the-meditation-app-flying-up-app-store-charts/), in addition to great, varied content.” —[Sriram Krishnan](https://www.linkedin.com/in/sriramkrishnan/), advisor **Cameo** saw an inflection in growth from one influencer: > “There was a step jump in August 2017 with ~300% MoM growth. Ronnie Radke was a particular inflection point. > > The team went on famousbirthdays.com and Steven [Galanis, co-founder and CEO] looked up the most famous person on his birthday. It was Ronnie Radke. Steven got Ronnie Radke to respond and buy in. He said, ‘I’m going to break Cameo.’ This is something they would hear a lot, but Radke actually did it. > > He came on Cameo for $25 and started getting booked like crazy. It was so fast that after a couple of hours, he was booked a couple of hundred times. The team realized that at the rate he was going, he was going to get booked 2,000 times and there’s no way a human can fulfill all those Camoes. They thought the startup would fail if they disappointed all these fans with unfulfilled Cameos. > > At what point does Cameo break? Ronnie ended up getting booked 500 times. Three days went by and he hadn’t fulfilled any Cameos. Finally, it’s 7 p.m., they’re watching the feed (Telegram bot of fulfilled orders). A Cameo video gets fulfilled by Ronnie. It’s the worst Cameo ever. It’s seven seconds, bad lighting, and he mispronounces the customer’s name. And then he keeps doing it, with new videos coming in every 30 seconds. > > The team still thinks the fans are all going to be really upset. The reviews start coming in an hour or two later, and they’re ... positive. They say things like, ‘Oh my god, I’ve been a fan of you my whole life, this is amazing.’ They realized the magic of Cameo is about the relationship between the fan and the talent and how special it is to hear your name. And Cameo kept on going.” > > —[Devon Townsend](https://www.linkedin.com/in/devspinn), co-founder Don’t sleep on turbo boosts, especially when your primary growth engine is virality. [Here are 60 examples](https://www.lennysnewsletter.com/p/turbo-boosts) of creative (and successful) turbo boosts. #### Lubricants Lubricants don’t drive growth directly but instead make every other part of your engine more efficient. Also, without enough lubrication, your engine will stop. There are four broad categories of lubricants: 1. **Conversion:** Increasing the percentage of users who get through your flows. [Read more about increasing conversion here](https://www.lennysnewsletter.com/p/this-week-21-strategy-and-tactics). 2. **Retention:** Improving the percentage of customers who continue to use your product. [Read more about increasing retention here](https://www.lennysnewsletter.com/p/how-to-increase-your-retention-issue). 3. **Activation:** Increasing the rate at which customers experience some meaningful value from your product. 4. **Brand marketing:** The stronger your brand, the easier it’ll be to get people on the fence to take the leap. Of these three, retention is by far the most important*,* as we saw in [last week’s post](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer-9c8). #### Fuel Finally, fuel is what your engine runs on, and can be one of three things: 1. **Money:** Paid marketing and sales engines run on money, which can be invested in ads or salespeople. This is why payback is an important metric to measure marketing and sales engines: it determines how long it takes for enough cash to be generated to start the loop again. 2. **Content:** Content engines unsurprisingly need more content, which can be used to attract users. Often this content is generated by users, in the form of things like reviews, photos, or videos. In other cases, the content is generated by the company itself. 3. **Users:** Viral engines require only more users, who in turn refer additional users. A common metric to measure virality is K-factor, or the number of new users each user refers. When this number is >1, the product will grow virally. For much more on this topic, [check out the full post Dan Hockenmaier and I wrote on this framework for Reforge](https://www.reforge.com/blog/racecar-growth-framework). ## In closing As I said at the [beginning of this series](https://www.lennysnewsletter.com/p/kickstarting-and-scaling-a-consumer), starting a company is like being lost in the wilderness, in the dark, with only a vague sense of where you’re heading—imagine if you had a map. My hope is that this series has given you some direction. ![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/714e682b-949e-48ac-9f9c-45ada7ab5269_4096x2048.png) This series took hundreds of hours of research, synthesis, and writing. I hope you found it valuable. Next (later in the year), I plan to do a similar series on B2B, plus explore some of the concepts even further. Please let me know if there’s anything specific you’d want me to dig into further. [Leave a comment](https://www.lennysnewsletter.com/p/growth-engines/comments) For reference, here’s a summary of some of my favorite findings from this series: ![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d7918183-ed08-4fd1-b6c6-3c24596710ce_7144x4524.png)![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/718b6513-c377-4466-bd23-a7b7c94c44a8_3654x3286.png)![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/c9c489a5-3e04-4983-940a-eee9e9b346f1_2374x5634.png)![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/804f31f0-eb40-4f4a-aac6-36b109d4b06d_2374x5634.png)![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b40c4531-24a9-4bf8-972c-982a6cd1045c_2400x1350.png)![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5309b9d5-d2c3-4cd7-b2c5-41c7562b5b58_2400x1582.png) ### 📚 Further study 1. [Drive Growth by Picking the Right Lane—A Customer Acquisition Playbook for Consumer Startups](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups) by [Dan Hockenmaier](https://twitter.com/danhockenmaier) and myself 2. [The Racecar Growth Framework](https://www.reforge.com/blog/racecar-growth-framework) by [Dan Hockenmaier](https://twitter.com/danhockenmaier) and myself 3. [Reforge Growth Series](https://www.reforge.com/growth-series) Thank you for coming on this journey with me. **Next step for you:** Stop reading and start building. See you next week! ### 📣 Join Lenny’s Talent Collective [Join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to get bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from Kickstarting and scaling a consumer business—Step 6: SCALE: Build your growth](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join the collective to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply to join](https://www.lennysjobs.com/talent) ### ❤️‍🔥 Featured job opportunities 1. **TaskRabbit:** [Director of Product, New Ventures](https://www.lennysjobs.com/jobs/6c0915d0-3ac3-4ba8-b53e-4684948711a6) (Remote) 2. **Credit Karma:** [Senior Product Manager - Recommendation Systems](https://www.lennysjobs.com/jobs/a2999f74-7e88-458c-bbd3-781b7ce48a3e) (Oakland, CA) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [29/44] All the ways to grow your product ### 🎖 Big week of milestones What a week: 1. The newsletter crossed **[200,000 total subscribers](https://twitter.com/lennysan/status/1561774321676083202)** yesterday 🫣 2. The podcast is now at over **[1,000 five-star reviews](https://twitter.com/lennysan/status/1561774321676083202)** across [Apple](https://podcasts.apple.com/us/podcast/lennys-podcast-product-growth-career/id1627920305) and [Spotify](https://open.spotify.com/show/2dR1MUZEHCOnz1LVfNac0j?si=056d68e339e04028&nd=1), and over **450,000 total downloads** 😬 3. The [Talent Collective](https://www.lennysjobs.com/talent) made its **1,000th introduction** between a candidate and a company 4. We’re also the **[#1 business newsletter](https://substack.com/discover/category/business/paid)** and the **#[2 podcast](https://substack.com/discover/category/podcast/paid)** across all of Substack 🫠 I can’t begin to describe how thankful I am to you for being a subscriber and for supporting this work. You allow me to do the most meaningful work of my life. Thank you from the bottom of my heart ♥️ *Now, as our [six-part series on kickstarting and scaling a consumer business](https://www.lennysnewsletter.com/p/kickstarting-and-scaling-a-consumer) comes to a close, I’ll be transitioning back to our regularly scheduled programming—answering questions from wonderful readers like you. Here’s this week’s question…* > ## Q: I loved your consumer growth series, but I’m also wondering, are there other growth tactics or levers, beyond what you’ve shared in the last few posts, that founders found effective? Yes indeed, there are. There are two additional growth levers that I didn’t get to cover in the series because they were neither growth engines nor kickstarting tactics. But before I explore them, let’s quickly review where we stand. Coming back to the [Racecar Growth Framework](https://www.reforge.com/blog/racecar-growth-framework), there are five components that help a startup grow: ![Image from All the ways to grow your product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/dbd1d49b-0226-468f-9b9f-7aa7a2153409_2730x1396.png) #### **[Kickstarts](https://www.lennysnewsletter.com/i/38506758/how-to-find-your-first-users)—the seven ways to acquire your early users and get your engine rolling:** 1. [Reaching out to friends and colleagues](https://www.lennysnewsletter.com/i/38506758/strategy-reach-out-to-friends-and-colleagues) (e.g. emailing your friends) 2. [Reaching out to targeted strangers](https://www.lennysnewsletter.com/i/38506758/strategy-reach-out-to-targeted-strangers) (e.g. DM’ing celebs) 3. [Going where your target audience hangs out](https://www.lennysnewsletter.com/i/38506758/strategy-go-where-your-target-audience-hangs-out-online-or-offline) (e.g. college campuses, Reddit) 4. [Enlisting influencers](https://www.lennysnewsletter.com/i/38506758/strategy-enlist-influencers-paid-or-organically) (e.g. people with large Twitter followings) 5. [Getting press](https://www.lennysnewsletter.com/i/38506758/strategy-get-press) 6. [Creating viral content](https://www.lennysnewsletter.com/i/38506758/strategy-create-viral-content) 7. [Getting physical placement](https://www.lennysnewsletter.com/i/38506758/strategy-get-physical-placement) (e.g. flyers, stickers, signs) #### **[Growth engines](https://www.lennysnewsletter.com/i/57395431/-virality-which-can-be-driven-by-word-of-mouth-sharing-content-sending-invites-to-your-friends-or-a-referral-program)—the four self-sustaining growth loops that drive your growth:** 1. [Paid ads](https://www.lennysnewsletter.com/i/57395431/-paid) 2. [SEO](https://www.lennysnewsletter.com/i/57395431/-seo) 3. [Virality](https://www.lennysnewsletter.com/i/57395431/-virality-which-can-be-driven-by-word-of-mouth-sharing-content-sending-invites-to-your-friends-or-a-referral-program) 4. [Sales](https://www.lennysnewsletter.com/i/57395431/sales) #### **[Lubricants](https://www.lennysnewsletter.com/i/57395431/lubricants)—the four optimizations that make your growth engine run more efficiently:** 1. [Conversion](https://www.lennysnewsletter.com/p/this-week-21-strategy-and-tactics) 2. [Retention](https://www.lennysnewsletter.com/p/how-to-increase-your-products-retention) 3. Activation *[Haven’t written about this topic much yet]* 4. Brand *[Haven’t written about this topic much yet]* #### **[Turbo boosts](https://www.lennysnewsletter.com/i/57395431/turbo-boosts)—one-off growth spikes that quickly fade:** 1. PR (e.g. [Snapchat Spectacles launch](https://www.theverge.com/2016/11/10/13584488/snapchat-snap-inc-spectacles-vending-machine-snapbot-available)) 2. Viral content (e.g. [Dollar Shave Club video](https://www.youtube.com/watch?v=ZUG9qYTJMsI)) 3. Influencer posts (e.g. [Kylie Jenner and Casper](https://www.instagram.com/p/0gMVQOnGnn/?hl=en)) 4. Marketing campaigns (e.g. [contest](https://www.lennysnewsletter.com/i/40915593/coinbase-dogecoin-sweepstakes), [giveaway](https://www.lennysnewsletter.com/i/21779937/-offer-a-remarkable-giveaway), [billboards](https://neilshah.com/downloads/venmo-lucas-case-study.pdf)) 5. Co-marketing campaigns (e.g. [Uber and Spotify](https://time.com/3589281/uber-spotify-music-ride/)) 6. Events (e.g. [Hinge launch party](https://www.lennysnewsletter.com/i/38506758/-host-a-launch-party-hinge)) 7. Stunts (e.g. [Half.com renaming a town in Oregon to Half.com](https://www.lennysnewsletter.com/i/21779937/-execute-a-remarkable-offline-stunt)) 8. Mini product launches (e.g. [Calm’s donothingfor2minutes.com](https://www.lennysnewsletter.com/i/40915593/calm-do-nothing-for-minutes)) 9. Getting featured by a highly trafficked platform (e.g. [Amazon on Yahoo’s homepage](https://www.quora.com/How-did-Amazon-get-initial-traction/answer/Anurag-Bhatia-6?ch=10&oid=17256326&share=bfa62c79&srid=pil&target_type=answer)) 10. Creating controversy (e.g. [DHH vs. Apple](https://www.lennysnewsletter.com/i/40915593/-pick-a-fight)) Now, coming back to your question, there are two additional growth levers that we haven’t covered, which I call *mid-stage growth accelerants*: 1. **Channel partnerships:** Getting distribution through someone else 2. **Geographic expansion:** Doing the same thing in more places These are rarely useful in the early stages and aren’t really growth engines (thus why I didn’t cover them in the series up to now) but, when used effectively and at the right moment, can significantly accelerate your growth. Here are stories from founders who utilized these levers to great effect. ### 1. Channel partnerships Channel partnerships are business arrangements where you tap into another company’s channel to distribute your product. For example, [Google made early deals with Netscape, Yahoo, and AOL](https://hackernoon.com/the-deals-that-made-google-the-tech-giant-we-know-today-470f07f09381) to get in front of people searching online, and [Spotify made early deals with telcos](https://books.google.com/books?id=yoTxDwAAQBAJ&pg=PT108&lpg=PT108&dq=spotify+launch+deals+telcos&ots=f_NOgKvDyW&sig=ACfU3U0d31aJrAxYsJUnokCb5-KAHk6w0Q&hl=en&sa=X&ved=2ahUKEwj578K9_Nj5AhU_DEQIHQdWDIIQ6AF6BAgiEAM#v=onepage&q=spotify%20launch%20deals%20telcos&f=false) to come pre-installed on people’s devices. Here are a few additional examples from Kayak, Netflix, and OpenTable: **Kayak: AOL** > “**We struck a pretty cool deal with AOL back in ’04 [the year we launched] to take over travel search for the AOL portal. That got us a lot of attention. AOL travel was a top-five destination back then.** > > I think [avoiding partnerships] is a mistake. Some people say business development (BD) can be a crutch to an inferior product—if you have good distribution, you don’t have to work as hard to build a great product. But the thing I like about BD, and I’d recommend to new startups today, is it’s hard to get those deals but it’s a huge emotional win and PR win when you do. To tell people you’re an unknown startup but you’re powering photo management or travel management for a big company, it gives you a lot of cred that then allows you to ask for other things.” > > —[Paul English](https://paulenglish.com/), co-founder, via *[How I Built This](https://www.npr.org/2021/09/24/1040555343/kayak-paul-english)* **Netflix: DVD manufacturers** > “Launching a startup is not unlike getting a huge truck to move. Throw it into high gear from a standing start, and you’re going to end up with a smoking engine and a burned-out transmission. The only way to take the resources you have and get something moving is to slowly move through the gears. > > For us, getting moving was particularly challenging, since we were so early in the adoption of DVDs. Our first gear was simply trying to make some noise in the random collection of user groups that DVD aficionados congregated at. But we knew that would never be enough to sustain us, so **second gear was going to be partnerships with the DVD manufacturers, in which we placed a coupon in the DVD player box. It took everything we had to convince someone in the ultra-conservative consumer electronics industry to take a chance on an unproven startup, but eventually Toshiba—the perennial number two behind market leader Sony—decided to let us work with them.** > > But of course, even that wasn’t enough, so shifting into third gear meant bringing on others: Panasonic, Sharp, and eventually Sony itself. Eventually we had deals with virtually every significant manufacturer, and from then, we just needed to wait. As our coupons worked their ways into the boxes, and boxes worked their ways into the stores, and the players worked their ways into consumers’ homes, we watched our numbers start to climb, slowly accelerating into the single thousands, and then eventually the tens of thousands. > > We still hadn’t found the repeatable, scalable business model. It still cost us more to fulfill orders than we collected from customers. We still hadn’t found a way to make DVD rental by mail work effectively. That solution was years away. But by having a steady flow of thousands of customers to experiment on, we were on our way.” > > —[Marc Randolph](https://en.wikipedia.org/wiki/Marc_Randolph), co-founder **OpenTable: AOL, Citysearch, Yahoo, Metromix** > “**We leveraged partnerships to drive demand. We partnered with Citysearch, AOL Digital Cities, Yahoo, and Metromix.** Anytime one of our restaurants was listed on an online directory, you could find an OpenTable link (before APIs, you actually went to the OpenTable site). However, despite the breadth of partnerships, it only accounted for about 15% of our bookings. The rest came from OpenTable.com directly or our restaurants’ websites.” > > —[Mike Xenakis](https://www.linkedin.com/in/xenakismike/), early executive This lever is game-changing when you can pull it off but, in practice, normally goes nowhere, or takes far too long to make a dent when you most need it. My advice is to treat this like any high-risk/high-reward opportunity—put some resources into it, but don’t expect it to work out. ### 2. Geographic expansion A second big mid-stage growth accelerant, which is really only applicable to companies that start off serving a single market (e.g. Uber, Instacart, DoorDash, Spotify, and even Facebook), is expanding into new geographies. A few examples: **Instacart:** > “**For many years a big lever for us was expanding geographically.** As we got better at selecting and launching new markets, each new market would reach critical growth milestones faster and faster.” > > —[Max Mullen](https://www.linkedin.com/in/maxmullen/), co-founder **OpenTable:** > “Market expansion was absolutely **one of the most important growth drivers**.” > > —[Mike Xenakis](https://www.linkedin.com/in/xenakismike), early executive **Grubhub:** > “When we began to scale, **expanding geographically was one of our top two or three growth levers** for both supply and demand.” > > —[Casey Winters](https://www.linkedin.com/in/caseywinters/), early growth leader **Rover:** > “**We started in Seattle, kept it focused, learned about the dynamics of the market ... then we flipped the switch and went national.** > > We entered a city by just spending on Google AdWords. We had a concept of ‘activated markets’ and a target list of markets we were trying to activate. When we saw organic growth bubbling up in a new market, that informed where we would go next. For non-activated markets, we knew that performance was going to be bad because liquidity was low. We were willing to let it ride.” > > —[David Rosenthal](https://www.linkedin.com/in/davidjamesrosenthal/), early board member Though this growth lever is fairly obvious, what isn’t obvious is when to make this investment and how to execute it effectively. For more on these two questions, check out my previous posts on [how to choose cities to expand into](https://www.lennysnewsletter.com/p/marketplace-city-expansion) and [how and when to expand internationally](https://www.lennysnewsletter.com/p/this-week-12-expanding-your-business). Broadly, expanding geographically is one of the biggest growth accelerants you’ll have, but it’s also something you can really only do once. From what I’ve seen across the growth stories I’ve gathered, broad geo-expansion normally happens post-PMF but before the growth engine is at full steam. Here are a few examples of the GTM sequences of a bunch of startups: - **Instacart:** Press + physical placement → Virality (WOM) → **Geo-expansion** → Virality (WOM) + Paid - **Tinder:** Go where target audience hangs out (college campuses) → Enlist influencers → **Geo-expansion to new schools** → Virality (WOM) - **Facebook:** Friends → Virality (WOM) within one school → **Geo-expansion to new schools** → Virality (inviting) - **Spotify:** Influencers + press → Virality (inviting) → **Geo-expansion (U.K., EU)** → Virality (WOM) + Paid - **DoorDash:** Targeted strangers + physical placement → **Geo-expansion →** Paid + Sales + Supply drives demand Beyond these two levers, there are certainly other ways to grow (e.g. adding a new business line, M&A), but for one product, within one business, here’s a summary of all the ways to grow (that I’ve collected so far, and that I’ll evolve as I learn more): ![Image from All the ways to grow your product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d7fb7ff7-aabb-416a-9069-be1aa8a3ca07_2411x2260.png) ### 📚 Further study 1. [Racecar Growth Framework](https://www.reforge.com/blog/racecar-growth-framework) 2. [From zero to 10,000 clients in two years using channel partners](https://review.firstround.com/From-Zero-to-10000-clients-in-Two-Years-Using-Channel-Partners) by Alex Rampell 3. [Expanding your business internationally](https://www.lennysnewsletter.com/p/this-week-12-expanding-your-business) 4. [Marketplace city expansion strategy](https://www.lennysnewsletter.com/p/marketplace-city-expansion) 5. [How to kickstart and scale a consumer business](https://www.lennysnewsletter.com/p/kickstarting-and-scaling-a-consumer) Have a fulfilling and productive week 🙏 ### 📣 Hiring or looking for a new gig? Join Lenny’s Talent Collective. [Join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to get bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from All the ways to grow your product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join the collective to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply to join](https://www.lennysjobs.com/talent) ### ❤️‍🔥 Featured job opportunities 1. **Walmart:** [Sr./Principal Product Manager (Store No8 incubator)](https://www.lennysjobs.com/jobs/22be805a-9d53-46f9-ac69-ddf6b158c2fb) (S.F., Manhattan, San Diego, Seattle) 2. **TaskRabbit:** [Director of Product, New Ventures](https://www.lennysjobs.com/jobs/6c0915d0-3ac3-4ba8-b53e-4684948711a6) (Remote) 3. **Credit Karma:** [Senior Product Manager - Recommendation Systems](https://www.lennysjobs.com/jobs/a2999f74-7e88-458c-bbd3-781b7ce48a3e) (Oakland) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [30/44] How to measure cohort retention *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to this month’s ✨ **free edition**✨ of my newsletter. Each week I humbly tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out about work.* *If you’re not a subscriber, here’s what you missed this month:* 1. *[All the ways to grow your product](https://www.lennysnewsletter.com/p/all-the-ways-to-grow-your-product)* 2. *[How to kickstart and scale a consumer business—Step 5: Finding product-market fit](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-consumer-9c8)* 3. *[Kickstarting and scaling a consumer business—Step 6: Building your growth engine](https://www.lennysnewsletter.com/p/growth-engines)* *Subscribe to get access to these posts, and every post.* > ## Q: You talk about retention a lot, but how do I actually measure retention? Specifically, cohort retention. I haven’t found any great guides out there. I was also shocked to find that there wasn’t a great post out there on how to accurately and concretely measure cohort retention. Considering how important it is to all things product and growth—and how costly it is to get it wrong—this is a big gap. So let’s fix it. To help us out, I’ve tapped [Olga Berezovsky](https://www.linkedin.com/in/olgaberezovsky/), author of the wonderful [Data Analysis Journal](https://dataanalysis.substack.com/) newsletter, to get deep into the weeds of retention. Below, she shares the formulas, SQL queries, tools, and templates you need to measure, visualize, and report on retention. I’ve never seen this level of detail and guidance before, and I’m excited to share it here. Thank you, Olga! And enjoy! *You can follow Olga on [LinkedIn](https://www.linkedin.com/in/olgaberezovsky/) and [Twitter](https://twitter.com/OlgaBerezovsky), and [subscribe to her newsletter here](https://dataanalysis.substack.com/).* ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/601ece17-3366-47f7-ab8c-5b0accdbef5e_4096x1368.png) Many analysts (and product managers, founders, and most people) are intimidated by retention. The graphs can be difficult to read, the definitions vary for each product and business type, and the SQL is complex. At the same time, retention is both the most important and the least understood metric at most companies. In my experience, it takes up to six months to nail accurate retention reporting. On every team I was a part of over my 10+ year tenure as an analyst, I would continually work on our retention reporting. As one example, at [Change.org](https://www.change.org/), I was part of the Petition Starters squad, and by monitoring and slicing the Day 7 and Day 30 retention of users who started petitions, we grew “petition starters per day” (our KPI) by 450%. Each new petition generated new signatures, which helped us grow to over 450 million active users. Similarly, at [MyFitnessPal](https://www.myfitnesspal.com/) (where I work now), Day 1 and Day 7 retention are closely monitored for *every* product initiative. **In this post, I’ll share the methods, tools, and strategies I’ve developed over the years to help you calculate cohort retention and understand the nuances of reporting on retention. For a primer on retention, make sure to read two of Lenny’s previous posts on the topic, [How to increase your retention](https://www.lennysnewsletter.com/p/how-to-increase-your-retention-issue) and [What is good retention](https://www.lennysnewsletter.com/p/what-is-good-retention-issue-29), to get an introduction and learn why it’s important to monitor and grow retention.** To recap, retention measures the ability of your product to keep users active over time. Retention for consumer businesses would have a different meaning than for enterprise, B2B, or B2C companies: ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/788ee8c2-6fc8-44fc-968b-ce92ac45c32c_2318x1112.png) ## **Step 1. Define “active”** As you can see above, a fundamental variable in calculating retention for most products is “active users.” But it’s not obvious what “active” means. Below are the most common events used to define “active” across companies. Each of these events has its own downsides and limitations: 1. **Visit:** Too broad; you will overcount users, most likely having a challenge with unauthenticated and not registered users. Only relevant for the web. 2. **Session starts:** You’ll possibly overcount users by pulling in unauthenticated IDs. You will also need to limit the session length to a specific time range that should be unique to your product usage. If you don’t do this, you are likely to count background app refreshes, notifications, and any other app activity that is *not* related to user activity (read more: [This Is Why You Overcount Your Daily Active Users](https://dataanalysis.substack.com/p/this-is-why-you-overreport-your-daily)). 3. **Login or app opens:** Same as above, as you will need a way to exclude new users with their first app open event for cohorted retention and exclude unauthenticated users and duplicates. 4. **Web page views or screen views:** Too broad; most likely will pull in all user types (dormant, lapsers, new users) into one bucket and over-report both DAU and retention. 5. **Main user action** (e.g. item view, search, log an exercise, transaction, etc.): Too narrow, and easy to miss active users who don’t do the main activity you expect but keep using the app ([adjacent users](https://andrewchen.com/the-adjacent-user-theory/) case), or they make a transaction from a different platform (app/web). At different companies, I had to report DAU and retention based on all these event variations, sometimes even mixing a few of them together (session start + app open + main transaction). Most companies use logins or app opens as main events for the “active users” definition.But given that I always aim for the cleanest and most precise data reporting, **I’d recommend using the main user action as the activity event**, for example: ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/4430235c-6770-46b1-b329-e83f6008f80f_2318x2316.png) **Pros to this approach:** 1. It ignores all the “noise” events, like visits, screen views, and logins, and tailors the activity event to only the main transaction or event that you expect a user most commonly does. 2. It gives you the cleanest sample of truly active users, whose behavior you can monitor and validate. 3. It is usually available across all platforms (unlike app open or visits) and data sources, making it easily accessible for reporting and monitoring. Regardless of your business type, **my recommendation is to use the main user action to monitor not only retention but other user activity metrics like DAU, WAU, MAU, and DAU/MAU ratio.** ## **Step 2. Differentiate users from customers** Once your team agrees on what “active” means for your product, the next step is to segment your active users into free vs. paid. Your retention will have a different logic for each of these groups. > #### “A customer is defined as the person/group who is paying you. A user is a person using the product. In subscription products, oftentimes there are multiple users associated with a single customer. Or people are users before they are customers. You need to separate the definition and language between these two things for teams to clearly act on them.” —[Brian Balfour, “Common Mistakes in Defining Metrics”](https://brianbalfour.com/quick-takes/common-mistakes-defining-metrics) Depending on your business model, your retention output will be built on a different metric input, for example: ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/014c7768-3222-4913-a03e-fc177adadd23_2318x1112.png) These metrics are your baseline for calculating retention. Now that you know who your active user or active customer is (e.g. a paid user who logged an exercise or a free user who read an article), you can start building retention to learn how often they come back. Often a mistake I see SaaS companies make is reporting one “blended” retention, with a mix of free and paid users. This can be misleading, because users who pay for the product are likely to use it way more than free users. So the true activity of free users (and your “pool of opportunity” to convert) will be hidden. ## **Step 3. Pick your retention type** The next step in calculating retention is setting your timeline. As a team, you have to agree on what retention reporting type you should adopt: 1. **X-day retention** 2. **Unbounded (rolling) retention** The method you choose will significantly affect your results. #### **1. X-day retention** X-day (also known as N-day or bounded) tells you the percentage of users who come back on a specific day. For example, for all users who join, what percentage return to your app on exactly day 14: ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/1ebda1bb-0adf-463c-b2e3-4b8b543e16c9_1456x1042.png) This is the most conservative retention approach and will return you a lower retention percentage. #### **2. Unbounded retention** Unbounded retention tells you how many of your users got back on a specific day*or later*. For example, for all new users who joined on a specific day, what percentage of users are using the product after 14 days (and not necessarily on day 14). If your goal is to match retention with your user churn, this is the way to go. The unbounded retention value for month 6 gives you the percentage of users who returned after month 6. So which approach should you use? Both are correct, yet both will return completely different retention data: ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b0a226d8-6d58-4572-a70d-e5075a8d038e_1458x794.png) My general favorite method is unbounded retention because (1) I like my KPIs to be connected, proportional, and correlated to each other, and (2) unbounded retention is the inverse of churn, so it gives me another way to validate and test my data, increasing the confidence in my reporting (the higher the churn, the lower the retention, and vice versa). But you should pick the method that works best for your analytical objective and your users’ natural behavior: - **If your users use the product regularly** (e.g. logging foods every morning, recording exercise, or listening to a podcast daily), use X-day retention. - **If your KPIs are coded to a specific time range (e.g. 30 days trial, 28 days active, 7 days resubscriber)**, then you probably want to also count only those users who return to your product within a set period of time and use the X-day method. - **If you don’t expect users to come back on an average daily/weekly/monthly basis**, and the user engagement pattern is more chaotic, then use the unbounded method. - **X-day retention is more appropriate for short-term analysis** like measuring the onboarding funnel or marketing campaigns. - **Unbounded retention is more useful for measuring long-term user behavior**, especially if you want to segment your users into retention groups (6M, 9M, 1 year, 2 years). Overall, a rule of thumb in analytics is that if your product is SaaS, you are likely to be tied to a specific time bound (paid subscription length, trial length, etc.). Because of that, it’s recommended to follow X-day retention. If you are not in SaaS but in a B2C or consumer transactional or social business, then you can be more flexible and adopt unbounded retention. ## **Step 4. Reporting retention from BI applications vs. SQL** #### **1. Getting retention via product analytics tools** Today’s popular product analytics tools support retention reporting. Each application has its own specifics or limitations. Reporting retention from these tools is doable (and becomes common), *assuming you have the right events you need, which often is not the case*. To make things easy, Amplitude, Mixpanel, Kissmetrics, Google Analytics, Adobe Analytics, and others are integrated via SDK with the client side (browser, app, device) and pass you client data, which is usually user and app activity. While some of these events can be used for retention reporting, others won’t be sufficient. Read more to learn about [when to use client-side or server-side events for analytics](https://dataanalysis.substack.com/p/when-to-use-client-side-or-server) and [why most analytics efforts fail](https://www.reforge.com/blog/why-most-analytics-efforts-fail). Often, to make changes to a subscription or a purchase, users are routed from the app to the app store (Apple Store, Google Play, Stripe, PayPal, etc.) to activate a trial, complete a payment, cancel or renew a subscription, etc. That’s why *this payment data is likely not available in the app (client) analytics*. So you won’t be able to access it in Amplitude or Mixpanel right away. Therefore, for SaaS products (those that report retention based on DAPU or DAC), you might not have the ability to replicate retention in product analytics tools, because they won’t have payment data. This is solvable, and your company might already address it. The common solution here is to load payment data into product analytics tools from a database via Segment or a data pipeline (assuming you already receive this data from a payment provider like Stripe/Apple/PayPal). But if you work for a small startup and are in the early process of setting up reporting and analytics, this is likely not the case. And creating cohorted or even simple retention most likely won’t be doable at this stage. Assuming you have needed events loaded in the product analytics tool, you can read the guidance on how to approach retention graphs in [Amplitude](https://help.amplitude.com/hc/en-us/articles/230543327-Retention-Analysis#create-a-new-retention-analysis-chart), [Mixpanel](https://help.mixpanel.com/hc/en-us/articles/115004546883-Retention-Report-Basics), or [Google Analytics](https://support.google.com/analytics/answer/6074676?hl=en#zippy=%2Cin-this-article). ❗Heads-up: Amplitude, Mixpanel, or similar analytics by default report N-day retention. Read more about N-day or unbounded retention differences in Amplitude: [3 Ways to Measure User Retention](https://amplitude.com/blog/3-ways-measure-user-retention). If your business is consumer social, you will have to change retention settings and customize it. ❗❗If you report retention from multiple sources—for example, from Amplitude and also from Tableau, which is sourcing data from a database—it will be very different, because of all the specifics described above: (1) rolling dates/N-day type, (2) different “activity” definition and tracking, and (3) possibly data availability and refresh gaps. #### **2. Getting retention via SQL** This is one of the common questions for analysts during SQL interviews and often is the first project to work on. It’s a multi-step process requiring a deep understanding of the business objective, a flexible approach, and data intuition. Looking back at all the places I’ve worked, I don’t remember a case where you could come in and quickly run some SQL to cohort your users into the right retention groups. Usually, some work needs to be done to the underlying tables to bring the data to the appropriate format and structure to work with retention. Same with DAU, churn, LTV, anything. First, you work on creating *Sessions* or *Users* or an *Activity* table that serves as a foundation for calculating your KPIs later. This table should have the right timestamp of user activity, event ID, user ID, properties, and measures you need. After the new table is tested, you can then work on creating downstream views for retention, DAU, or anything else. When replicating retention with SQL, it’s easy to go wild and overcomplicate your approach. Follow these steps to stay on track and get the correct retention logic: - Step 1: Get the users’ first (initial) action—this is usually sign-up or the first purchase - Step 2: Get the user activity after the sign-up or purchase—based on your activity definition - Step 3: Get the total time in between the initial and consecutive user action (“retained\_time”) - Step 4: Convert the total time to days/weeks/months as needed - Step 5: Group users into buckets based on the total retained time from the previous step - Step 6: Map and order users’ buckets based on their initial action time—sign-up or the first purchase Depending on your underlying data and table structure, these steps can be done via a simple SELECT statement (like SELECT \* FROM ready\_to\_use\_retention\_table) or another quick way, such as ``` SELECT snapshot_date , start_date , n_period , COUNT(user_id) AS n_users FROM subscriptions GROUP BY snapshot_date, start_date, n_month ``` or via multiple subqueries, self-joins, window functions, or a combination of all of the above. That’s why this is such a good interview question—because, given the input values and the business type/case, your output SQL will be completely different. Regardless of SQL complexity, your output raw data may look similar to this for simple retention: ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d00fc185-cfc5-424e-a29d-8e5c9fb9ac56_852x340.png) And this is the underlying table structure for cohorted retention: ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a87bc5bc-dec9-461e-adda-69086fcb7fc5_1278x516.png) Here is a sample SQL to replicate the cohorted table above: ``` WITH new_user_activity AS ( SELECT a.* FROM activity a JOIN signups s ON s.user_id = a.user_id AND s.signup_date = a.activity_date -- if initial user signup counts as activity. If not, either disregard or s.signup_date = a.activity_date ) , active_user_count AS ( SELECT activity_date , COUNT(DISTINCT user_id) AS users_count FROM new_user_activity GROUP BY activity_date ) -- for daily retention: SELECT n.signup_date AS signup_date , DATEDIFF('DAU', n.signup_date, a.activity_date) AS period , MAX(c.users_count) AS new_users , COUNT(DISTINCT a.user_id) AS retained_users , COUNT(DISTINCT a.user_id) / MAX(c.users_count)::float AS retention FROM new_user_activity n LEFT JOIN activity a ON n.user_id = a.user_id AND n.signup_date < a.activity_date AND (n.signup_date + interval '30 days') >= a.activity_date -- retention data for the next 30 days after signup LEFT JOIN active_user_count c ON n.signup_date = c.activity_date GROUP BY 1, 2 ``` Find more SQL solutions for retention types [here](https://gist.github.com/ks--ks/446e6d78e8a49048d4eabf55c3363309). ## **Step 5. Visualizing retention** Once you have your SQL working, the next step is to visualize your data. There are many ways to visualize a retention report. I won’t be going into depth here, because the most common data visualization tools ([Tableau](https://www.tableau.com/), [Power BI](https://powerbi.microsoft.com/en-us/)) require meaningful expertise. Same with [Mode](https://mode.com/) or [Sisence](https://www.sisense.com/). These tools let you leverage their cohorted graphs, and each format can be grouped by (1) time period (e.g. daily, monthly, annually) and then by (2) user segments (e.g. trialers, resubscribers, power users) to make your analytics really powerful. In Excel, you can leverage pivot tables and replicate the same charts there as well. In the pivot table editor, you can drag the initial activity dates into rows and the retained period into columns. For cohorted charts, it’s recommended to apply a color scale (click on conditional formatting, choose a color scale, then pick a color option). Without color-coding, cohorts are difficult to read. If you are looking for a quick template for a cohorted retention graph, I recommend using [Christoph Janz’s cohort analysis template](https://www.dropbox.com/s/cbegrp1ohchgtj5/ChristophJanz_SaaSCohortAnalysisb.xlsx). If you have new customers and their activity dates, you can plug them into his file and get retention calculations. Regarding retention visualization format, quite often I see a line chart or a stacked line chart. Product analytics tools like [Amplitude](https://amplitude.com/) and [Mixpanel](https://mixpanel.com/) by default create line charts similar to these: ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a4fd11c5-8770-4a34-aed4-74204483a9b5_1562x1268.png) For a KPIs dashboard, it’s a good practice to have **a simple summary table** with retention stats: ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ef73ed43-d245-4b31-b242-1119b099d1cd_1296x304.png) The best practice for reporting retention is **cohorts**: ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/875a7a40-cabc-406c-b531-6fe972d41f35_1300x604.png) This chart shows how many users registered each week and how many of them were retained in each subsequent week. It is filtered to only “New Users.” Additionally, you can segment retention reporting for active users, churned users, inactive users, and reactivated users. That can help you locate your power users and understand what makes them stick. It’s expected that retention for these cohorts will be significantly different. So you should always cohort your users into different behavioral segments if you can. Like I said, your ability to create multiple user cohorts is linearly correlated with how well your analytics is set up. In companies with more advanced data stacks, the product team has the ability to locate, test, iterate, and release new features to only specific user segments. Having these groups cleanly and precisely cohorted also speaks to the maturity of the analytical domain. It takes time to get there, though. ## **📗 Takeaways** 🤝 **Retention measures the ability of your product to keep (1) users (2) active (3) over time.** - Depending on your business model and type, “users” can mean customers, free users, or free users with a purchase, so retention calculation and definition will be different. - “Active” can be a range of activity events, and often you have to pick the event that is available, consistent across your platforms, and clean. - “Over time” can be tricky to define—bound to a specific timeline or a rolling average? Pick your X-day or unbounded retention type based on your product usage. 📈 **Reporting retention from product analytics tools has its own specifics.** It’s faster and easier to create a report and slice and dice, but given the analytics setup at your company, it may be limited or lead you further away from the questions you want to answer. [🗄️](https://emojipedia.org/file-cabinet/) **Getting retention data via SQL is not straightforward** either, and your SQL code will be different depending on your underlying data structure and format. Create the foundation metrics tables first, then work on your SQL from there. **📊 Visualizing retention via cohort graphs** is the best practice that gives you the most insights into user behavior patterns. ### **Other things to keep in mind** Given that retention includes so many elements of activity, it’s not the right metric to use for weekly reporting or as a baseline for an A/B test. Too often I have seen how product analytics teams evaluate experimentation against retention and wonder why the increase in user activity doesn’t lead to a change in retention. *Because the activity is only one of the components of retention.* Retention (like revenue) is the [output](https://brianbalfour.com/quick-takes/common-mistakes-defining-metrics) metric. You should monitor it but not strictly utilize it as a goal for testing or campaigning. Additionally, every new executive who comes in pushes for their own definition and reporting format. Therefore, product analytics should be flexible with the dashboards and data sources to adopt whatever new retention meaning is requested (for example, changing app\_open event to login, or 30-day retention calculation to rolling 28 days). I’ll stop here, but there is much more to retention to cover—the specifics of revenue retention reporting, retention differences between SaaS and B2C or B2B, handling user outliers, working with retention curve patterns, retention growth-rate benchmarks, and more. Thank you for reading! If you want to learn more about analyzing, measuring, or reporting user behavior, product metrics, or A/B tests, subscribe to my [Data Analysis Journal](https://dataanalysis.substack.com/), a weekly newsletter about product analytics and data science. ### 📚 Further study 1. [Everything You Need to Know About Retention (Rates)](https://chartmogul.com/blog/retention-rate) from ChartMogul 2. [Lecture 6: Growth](https://genius.com/Alex-schultz-lecture-6-growth-annotated) from Alex Schultz, VP of Analytics, Meta 3. [3 Things Your User Retention Rate Is Hiding](https://mode.com/blog/what-user-retention-hides/) from Mode 4. [Cohort Analysis That Helps You Look Ahead](https://mode.com/blog/cohort-analysis-helps-look-ahead/) from Mode 5. [How to increase your retention](https://www.lennysnewsletter.com/p/how-to-increase-your-retention-issue) 6. [What is good retention](https://www.lennysnewsletter.com/p/what-is-good-retention-issue-29) 7. [User Engagement and Activity Histogram Analysis](https://dataanalysis.substack.com/p/user-engagement-and-activity-histogram) from Olga 8. [Day of the Week Analysis in SQL](https://dataanalysis.substack.com/p/day-of-the-week-analysis-in-sql-issue) from Olga 9. [Excel template for cohort analyses in SaaS](https://christophjanz.blogspot.com/2013/10/excel-template-for-cohort-analyses-in.html) from Christoph Janz 10. [How Cohort Analysis Improves Retention & Reduces Churn](https://heap.io/topics/how-cohort-analysis-improves-retention-reduces-churn) from Heap *Thanks, Olga! Have a fulfilling and productive week 🙏* ## 📣 Hiring, or looking for a new gig? Join Lenny’s Talent Collective. [Join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to get bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to measure cohort retention](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join the collective to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply to join](https://www.lennysjobs.com/talent) ### ❤️‍🔥 Featured job opportunities 1. **Walmart:** [Sr./Principal Product Manager (Store No8 incubator)](https://www.lennysjobs.com/jobs/22be805a-9d53-46f9-ac69-ddf6b158c2fb) (S.F., Manhattan, San Diego, Seattle) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [31/44] When to sunset a feature > ## Q: I’m struggling to decide if I should sunset a feature that’s taking up a bunch of resources. While at Airbnb, I saw many products launched, and surprisingly many sunset. Including many that had launched with much fanfare, like [Guidebooks](https://www.pcmag.com/news/airbnb-app-gets-personalized-matching-guidebooks), [Wish Lists](https://techland.time.com/2012/06/27/airbnb-gets-more-social-aspirational-and-beautiful-with-wish-lists/), [Neighborhoods](https://techcrunch.com/2012/11/13/airbnb-launches-neighborhoods-providing-the-definitive-travel-guide-for-its-guests/), [Match](https://thenextweb.com/news/airbnb-launches-its-match-service-to-help-you-book-places-to-stay-in-a-pinch), [the Apple Watch app](https://www.theverge.com/2015/9/3/9250379/airbnb-launches-apple-watch-app), *[Pineapple](https://www.adweek.com/performance-marketing/airbnb-launching-print-magazine-161478/)* [magazine](https://www.adweek.com/performance-marketing/airbnb-launching-print-magazine-161478/), and even [Stories](https://www.cntraveler.com/story/airbnb-launches-instagram-like-stories-feature). ![Image may contain Advertisement Poster Brochure Paper Flyer Outdoors File Interior Design Indoors and Nature](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/6c5cf750-5349-4c86-be86-6302f33b4b02_1087x568.png) Looking back, not once do I recall that anyone regretted a product or feature being sunset. If anything, teams waited too long to kill these products. But that’s not always the case. When I [polled people on Twitter](https://twitter.com/lennysan/status/1409934916754710528), a few compelling counterexamples came up: Kill a useful feature prematurely and slow future growth—or spur the ire of your most loyal customers. Keep an unnecessary feature around for too long, and precious resources are wasted on low-impact work. Based on some research and conversations with colleagues, I’ve come up with a handy checklist to help decide when it’s time to sunset a feature. If the product or feature checks three of these five boxes, it’s probably time to shut it down: 1. **Low usage:** Less than 5% of your active users are engaging with it. 2. **High cost to maintain:** Takes more than 10% of your team’s resources just to maintain it. 3. **Degrades the user experience:** Gets in the way of users completing important tasks or adding important new features. 4. **Misalignment with strategy:** Does not support your strategy, and is very unlikely to align with your strategy a year from now. 5. **Very few vocal or important users:** You aren’t worried about an outcry or a big revenue hit. Here’s a bit more on each of these points. #### 1. Low usage Obviously if no one uses the product, it’s a great candidate for being sunset. What percentage is low enough? Five percent is a good starting point, but I encourage you to think about it this way: if you were to launch a new product/feature, what percentage of adoption would you consider success? Any feature with lower adoption than that baseline is worth paying attention to. Note, though, usage can sometimes be deceiving, in that a customer may use a feature passively but be totally OK with it going away. As TK suggested below, another way to track usage is how many people complain about it when it isn’t working. *Key question: What features are used by less than 5% of your users?* #### 2. High cost to maintain The idea to sunset a feature generally surfaces from an engineer or a PM whose team is responsible for maintaining a barely used feature. It’ll feel like a huge waste of time—especially when it’s something that got dumped on your team. My team once spent about five months building a product called Milestones, which was designed to delight Airbnb hosts with in-product messages celebrating their hosting milestones (e.g. hitting their 100th review, having a guest from a faraway country, hitting a perfect response rate, etc.). I was really proud of the product, and there was a lot of confidence internally that it would meaningfully impact host engagement, retention, and satisfaction. It did none of these things. Zero measurable impact. After a reorg a few months later, another team ended up owning this product. Maintaining the product quickly began to suck up a large chunk of this team’s resources. Even just fielding bugs ended up taking a lot of the PM’s time. So in the next planning cycle, the PM proposed that this product be sunset. After much debate, leadership eventually agreed, and they were able to kill it and move on to much more important work. Looking back—great decision. How much maintenance time is enough to consider sunsetting a product or feature? I’ll suggest a threshold of 10% of your team’s resources. If 1 out of 10 engineers are taken up maintaining a legacy feature that no one is planning to invest in, it’s a great sunset candidate. *Key question: What legacy feature or product (that isn’t contributing to your team’s goals) is sucking up 10% or more of your team’s resources?* #### 3. Degrades the user experience Another sunset candidate is any feature that gets in the way of your user accomplishing important tasks. [Anu Atluru](https://anuatluru.com/), an early employee at Clubhouse, [shared](https://every.to/p/what-i-learned-at-clubhouse) a great takeaway from her time watching the Clubhouse product evolve: > *“The first version of your product is usually simple. As you keep building, the product becomes more robust in quality, utility, and experience. But there’s a tipping point after which ‘robust’ can sneakily switch to ‘complicated.’* > > *Some signs your product might be too complicated: You’ve launched a bunch of features and haven’t killed any of them. You’re running out of literal surface area to put new features. Users aren’t clear about what to do with the product.”* The [Airbnb Neighborhoods](https://techcrunch.com/2012/11/13/airbnb-launches-neighborhoods-providing-the-definitive-travel-guide-for-its-guests/) product is a good example of this. On the surface, giving people insight into the character of each neighborhood when they are picking a location to stay in sounds incredibly helpful. It turns out, though, people get distracted reading about all of the interesting neighborhoods and end up not booking an Airbnb at all. Though the product, and the content, was beloved, it increased friction for the most important user flow. If a feature is consistently keeping your users from accomplishing key tasks, or is making it significantly more difficult for you to design new and important functionality, it’s a great sunset candidate. *Key question: What feature is making it harder for your users, or your designers, to accomplish more important work?* #### 4. Misalignment with strategy A product may be rarely used, hard to maintain, and degrade the user experience, but if it supports your company [strategy](https://www.lennysnewsletter.com/i/1225083/what-is-a-strategy), then it can still be worth keeping around. Who knows, you may decide to invest in it in the future, or it may be important to your broader story to customers or press. If, however, the product or feature has nothing to do with your strategy and is just there because it’s there, it’s a great sunset candidate. The Milestones product I mentioned above is a good example of this. When it was built, one of our company strategy pillars was increasing host satisfaction. After taking a number of shots at it, including some meaningful wins like the [Superhost program](https://airbnb.com/superhost), we moved on to other priorities. The Milestones product was no longer aligned with our strategy, and as we saw above, was taking a lot of resources to maintain. Thus, it became easier to support the idea of sunsetting, in spite of all the work that went into it. The Superhost program, on the other hand, also saw little measurable impact initially and took a lot of work to maintain, but it was squarely aligned with our long-term strategy (i.e. treating Airbnb hosts like partners, and making it easier for guests to find amazing places). So that program continued, and has become a core part of Airbnb’s DNA. *Key question: What’s a legacy product you’re currently maintaining that no longer aligns with your company strategy?* #### 5. Very few vocal or important users Finally, an important consideration when sunsetting a feature is how much blowback you’ll experience if you sunset it. For example, here’s [Gibson’s](https://twitter.com/gibsonbiddle) experience at Netflix: Also, investigate how important this feature is to that small minority of users: On the flip side, [when Facebook introduced the news feed](https://www.wired.com/2016/09/everyone-hated-news-feed-then-it-became-facebooks-most-important-product/), there was mass freak-out for a while, and then everyone got over it. Now it’s the default for how we experience content on basically every platform. In my experience, if you’re confident a change needs to happen, talk to users who are still using it to see if you’re missing something, but generally index on the side of pushing through the blowback—make the change, sunset the feature, and refocus your efforts on making your core user experience faster, simpler, smoother. > #### “Folks love to build stuff. From time to time, though, you need to prune your product. Get rid of stuff that is no longer relevant. If you don’t, your product will quickly get filled with bloated complexity. In consumer software, keeping things simple is almost always better than solving everyone’s problems, for both the consumer and business.” > > #### —Gibson Biddle And finally, what comes after you’ve decided to sunset the product or feature? Here’s a great simple set of next steps from [Ryan J. Salva](https://twitter.com/ryanjsalva/status/1569714818147581952) (VP of Product at GitHub): If you’ve got any experience sunsetting a product or feature, good or bad, I’d love to hear it 👇 [Leave a comment](https://www.lennysnewsletter.com/p/when-to-sunset-a-feature/comments) Happy sunsetting! ![Image from When to sunset a feature](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d731508b-6025-4fa2-9707-e41cf415b4e7_480x360.webp) ### 📚 Further study 1. [How to sunset a feature](https://www.intercom.com/blog/how-to-sunset-a-feature/) by Intercom 2. [The art of unshipping: How to deprioritize features, phase out projects and sunset products](https://plan.io/blog/deprioritize-and-sunset-projects/) by Planio 3. [Quick Guide: Sunsetting a Product](https://productcoalition.com/i-was-recently-reading-todd-berkowitzs-blog-overcoming-the-sunk-cost-fallacy-when-selling-907963fb5192) by Krishnan Hariharan *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from When to sunset a feature](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 Featured job openings** 1. **Slab:** [Frontend Engineer](https://www.lennysjobs.com/jobs/900e2226-f222-4108-90a8-285824523cec) (Remote) 2. **Walmart:** [Sr/Principal Product Manager (Store8 incubator)](https://www.lennysjobs.com/jobs/22be805a-9d53-46f9-ac69-ddf6b158c2fb) (SF, Manhattan, NY, San Diego, CA, Seattle, WA) ## **🧠 Inspiration for the week ahead** 1. **Listen:** [Tools to Improve Your Focus & Concentration](https://open.spotify.com/episode/0cfMpJd2lk9xtk3hyGy5FT?go=1&sp_cid=8e64ff43e771fbb17cb0525df83e47e4&nd=1), Huberman Lab 2. **Read:** [Lifestyles](https://collabfund.com/blog/lifestyles/) by Morgan Housel 3. **Read:** [Notes on Progress: An environmentalist gets lunch](https://worksinprogress.substack.com/p/notes-on-progress-an-environmentalist) by Works in Progress **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [32/44] How to get better at influence > ## Q: I know that as a PM I need to lead through influence. So how do I get better at influence? First, let’s be real. PMs at most companies actually do have more authority than other functions. Though not explicit, it’s usually there. Nevertheless, leading by authority alone isn’t ever a great idea, and the best product leaders are incredibly good at the art of influence. Just look at any effective leader within your organization—they are almost certainly the best at getting done what they want done. The best way to improve your influence skills is to study people who are really good at it. And imho, one of the greatest influencers of all time is Frodo Baggins. Hear me out. ![The 25 Best Frodo Baggins Quotes, Ranked](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/0ca72db8-3226-42b9-8625-7a11d5c4cb1d_1600x837.jpeg) If you’re not familiar with *[The Lord of the Rings](https://en.wikipedia.org/wiki/The_Lord_of_the_Rings)*, Frodo is a very unassuming character (he’s like 3 feet tall), without any superpowers of any kind. In spite of that, he was entrusted with the most important mission in the world—to travel across Middle Earth to destroy a very dangerous ring. ![Image from How to get better at influence](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5bf8faf2-b464-42a7-a72d-540af114de5f_439x200.gif) And he does it (sorry for the spoiler). Not through any real power over anyone but through grit, determination, and … influence. By studying Frodo’s journey, we can learn how to become better influencers ourselves. I present seven ways to improve your influence skills, as taught to us by Frodo Baggins and *The* *Lord of the Rings*. ![Image from How to get better at influence](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/878661f2-8aa0-4b19-8a03-5d25b7dee9ac_3436x1938.png) ### Strategy 1. Make their goals your goals How did Frodo convince the most badass people in the world to risk their lives and help him get the ring to Mount Doom? By connecting his goals to their goals. ![Image from How to get better at influence](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3f92e051-645a-48f8-9879-70b98634b641_220x124.gif) Everyone wanted this ring destroyed. Frodo knew that. He made it clear that he was going to risk his life to achieve this KPI. Everyone immediately had a great reason to help him get there. In one real-life example, I was leading the launch of the [Superhost program](https://airbnb.com/superhost) at Airbnb, and I had to convince the search team to be OK with adding a Superhost badge to the listing cards (see top left below). ![Image from How to get better at influence](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fe23863b-3c61-4be7-a9e8-7a240b553025_2730x1616.png) The search team was really skeptical, thinking this new visual badge would pull people to listings that weren’t optimal (e.g. lower-ranked listings). Initially, my pitch was around my team’s goals: increasing host retention and host engagement. But after a bit of back-and-forth, I adjusted my pitch to focus on what I knew the search team cared about most: increasing guest-side conversion. I told them this had a good shot at actually increasing conversion, and that we would run a specific A/B test to find out. They finally agreed, the results ended up being positive, and everyone was happy. > #### “Talk to someone about themselves and they’ll listen for hours.” ―Dale Carnegie, *How to Win Friends and Influence People* Before asking someone to do something for you, take 10 seconds to reflect on what *they* want. Put yourself in their shoes. What are their motivations? What are their incentives? What’s important to them right now? ![Amazon.com | Ibeauti Womens Furry Monster Adventure Slippers, Comfortable Novelty Warm Winter Hobbit Feet Costume Slippers for Teens Adults | Slippers](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/cd5d0c8b-4fd9-45ee-8d9e-287e53979c07_500x406.jpeg) **Then, frame your ask in a way that highlights this.** For example, how it will: 1. Help them hit their goals 2. Help them move faster down the road 3. Help the company move its north-star metric 4. Make customers happier 5. Help them as individuals (e.g. in their performance reviews) Here’s some additional great advice from [Wes Kao](https://twitter.com/wes_kao): **Ask yourself:** How will your ask benefit the other person’s goals? ### Strategy 2. Charge your trust battery When people trust you, life is easy. When they don’t, not so much. ![Image](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/f10ca216-2272-447c-8a89-46f5c6631f5b_1200x899.jpeg) My favorite way to think about trust in the workplace is as a battery—as Tobi Lütke (CEO of Shopify) popularized: > #### “People sort of think about trust as almost an on/off kind of thing. Like, I trust my mother, I don’t trust the NSA. But it’s really a gradient … with a lot of different points on [the] spectrum.” —Tobi Lütke You can charge your battery by doing things that build trust, and tap into your reserves when you need people to trust you. **Some ways to charge your trust battery:** 1. Do what you say you will 2. Listen. Make the person feel heard. 3. Help people out—create a foundation of reciprocity 4. Help people reach their personal goals 5. Point out the contributions and achievements of others 6. Make time to talk when you don’t need anything 7. Take people’s feedback into account 8. Assume good intentions Why did [Samwise Gamgee](https://en.wikipedia.org/wiki/Samwise_Gamgee) leave everything behind and risk his life to help Frodo? Because Frodo’s trust battery was off the charts. Frodo has helped Sam his whole life. When Frodo needed help, there was so much trust built up that Sam had no doubts that he’d go to the ends of the (Middle) Earth to help him. ![Image from How to get better at influence](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/64ba6d58-c62b-4310-90f7-ef10aaece786_593x256.gif) **Ask yourself:** What can I do this week to charge my trust battery with influential people? ### Strategy 3. Help them see what you see [Stephen Covey](https://en.wikipedia.org/wiki/Stephen_Covey) (author of *[The 7 Habits of Highly Effective People](https://www.amazon.com/Habits-Highly-Effective-People-Powerful/dp/0743269519)*) teaches, “With people, slow is fast and fast is slow.” Rush people into a quick decision, and they’ll either quickly change their mind or it’ll later likely blow up in your face. Instead, if you take the time to make sure the other person truly sees what you see, and understands why this is the correct (and only) path, they’ll follow you, and stick with you through difficult times. This is how [Gandalf](https://en.wikipedia.org/wiki/Gandalf) influenced Frodo to take on this harrowing mission. He didn’t force Frodo to go. Instead, he sat there for days, explaining to Frodo why the world is in such peril, why he is the only person in the world who can take on this responsibility, and why it needs to happen now. ![The Fellowship of the Ring | Plot, Characters, & Facts | Britannica](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ead1c3b3-55b4-4672-90dc-03ce0fb3bdfc_1600x1181.jpeg) Gandalf explained the why, and brought Frodo on his thought journey. When you last ran into an obstacle trying to influence others, did you bring them on your thought journey and help them see what you see, or did you jump straight to the ask? **Some ways to help others see what you see:** 1. Loop your colleagues in early 2. Spend time explaining the why 3. Invite them to kickoffs 4. Ask them to lay out their concrete objections, and address their concerns 5. Communicate regularly as your thinking evolves 6. Give people a chance to give input 7. Paint a compelling vision of what could be > #### “If you want to build a ship, don’t drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea.” —Antoine de Saint-Exupéry **Remember:** When you’re starting on a project, think ahead to who may end up being involved. Start informally bringing them on your thought journey. ### Strategy 4. Show success Why did everyone continue to help Frodo through the years and months of their perilous journey? In large part, because he was showing success. ![The Lord of the Rings: The Fellowship of the Ring (2001) — Screenplayed](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e46b8b7b-a94c-4d2b-b49b-face35e1096c_2500x1231.jpeg) Similarly, if you’ve often been right before (e.g. have hit your goals, shipped great stuff, made the right calls), people are more likely to trust that you know what you’re doing, and go along with your suggestions. As it should be. This is why more-senior PMs can get things done more easily a lot of times—they’ve shown success many times. The more you succeed, the more influence you’ll have. Amazon even has this concept as one of its core values: **Leaders are right, a lot.** [Watch on YouTube](https://www.youtube.com/watch?v=Cg-q8AxFkdI) If you’re not able to influence others, focus on showing more success more often. Influence will follow. **Ways to show success:** 1. Hit goals, consistently 2. Ship products that are seen as successful 3. Make the right decisions, consistently 4. Make commitments, and deliver 5. Highlight your team’s wins **Ask yourself:** What have you done to give people a reason to trust your judgement? ### Strategy 5. Bring evidence Influencing others is often as simple as showing them hard data. If you’re struggling to convince someone, think about what evidence convinced you of this path. Often we think someone disagrees with us because of a personal issue, when in reality you just don’t have a convincing case. ![Image from How to get better at influence](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/824473b1-d006-48a6-88be-49b92f48c9f6_456x200.gif) In one real-life example, our team was exploring the idea of changing the way the Airbnb review system worked. Instead of seeing the other person’s review as soon as it was submitted, what if we only showed you the review after you left *your* review? Our thinking was that this would lead to more honest reviews. ![Everything You Need to Know About Leaving Reviews on Airbnb - Padlifter](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/185f652b-c007-4cb3-8bd8-0b630ea99e16_1115x1110.png) However, revamping the review system was a huge risk because it was a time-intensive project, could destroy credibility in the review system, and have unintended second effects. To convince ourselves, and then the execs, we pulled together evidence of this idea working in other fields, including double-blind studies, experiment design, and other online review systems. This evidence became the key to influencing our team and others to take the leap. And it proved to be a huge success. It not only [increased review honesty](https://www.forbes.com/sites/sethporges/2014/10/17/the-strange-game-theory-of-airbnb-reviews/?sh=7af1fd3d36ef), it also increased the percentage of people who left a review 📈 If you’re having trouble influencing others, bring more evidence. **Most powerful evidence to bring, in priority order:** 1. Hard data 2. Synthesized user research findings 3. One-off anecdotes 4. Competitive analysis 5. Similar examples of this working elsewhere **Ask the other person:** What evidence would convince you of this being the right decision? ### Strategy 6. Leverage authority You immediately increase your influence if you gain the support of influential people or can refer to trusted credentials. The credibility of other people/institutions will trickle down to you. In *Lord of the Rings*, Frodo becomes an influential person only after Gandalf made it clear that he backs Frodo. There’s no way that people would have trusted Frodo if not for Gandalf’s support. ![Where's Gandalf in Amazon's Lord of the Rings: The Rings of Power? - Polygon](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/95debebd-772f-4500-8276-cf110e8705dd_1200x500.jpeg) In the workplace, you gain influence by building relationships and support from: 1. Team leads 2. Senior managers 3. Executives 4. The CEO 5. Specific influential people around the company A word of warning: The more you rely on authority, the more your authority fades. You start to become just a middle person, without your own voice or decision-making powers. But when you really need to get things done, keep this in your back pocket. **Ask yourself:** Who’s your Gandalf? ### Strategy 7. Be likable A final strategy for increasing your influence is simply to be likable. It may sound trivial, but it turns out it’s one of the most powerful ways to build your influence. As [Robert Cialdini](https://en.wikipedia.org/wiki/Robert_Cialdini) (world expert on influence) teaches, “The more you like someone, the more you’ll be persuaded by them.” And as [Dale Carnegie](https://en.wikipedia.org/wiki/Dale_Carnegie) wrote in *How to Win Friends and Influence People*, “Winning friends begins with friendliness.” Think about it. Who are you more likely to go along with—this guy? ![Image from How to get better at influence](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/500c658f-17be-4aab-8e7a-c36467c207ed_472x200.gif) Or this guy? ![53 Likes, 0 Comments - LORD OF THE RINGS (@middleearth.lotr_) on Instagram: “Keep Smiling Mr.Frodo 😇 #LordOfThe… | The hobbit movies, Lord of the rings, The hobbit](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/11d62b65-d54f-40a6-b372-b84e1828212c_576x576.jpeg) No contest, my precious. There are certainly successful Gollum-like leaders—command-and-control-type people who get stuff done and hit goals—but in my experience, like will be easier, you’ll go further, and be happier, if people like you. **Some easy ways to be more likable:** 1. Smile 2. Say hello when you pass people in the hallway (or appear on Zoom) 3. Ask about the person’s life outside work 4. Give compliments 5. Participate in team events 6. Add fun to people’s day 7. Organize celebrations 8. Be positive 9. Recognize success publicly 10. Criticize privately [Watch on YouTube](https://www.youtube.com/watch?v=9J49LUZrX5k) Note, this doesn’t mean that you let people walk all over you, or that you should optimize for being liked. Your job isn’t to be liked—it’s to drive impact and make customers happy. But be conscious that the more people like you, the easier it’ll be to convince them to do what you want. If you’re in a situation where you aren’t liked, lean on the other skills we talked about. **Ask yourself:** What’s one thing you can do to be more likable? ### In closing To extend this metaphor even further, you can even think of your project as the ring—unpredictable, hard to control, and huge burden. But, if handled well, it’s also something that can bring you great power (e.g. a promotion). ![Image from How to get better at influence](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/aea5410c-26a9-4aba-ad74-7f18d55441de_356x200.gif) Now, with your newfound influence skills, I’m confident you’ll achieve great things. Good luck! ![Image from How to get better at influence](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d7e65c26-1d25-4064-a108-ab802ff069e7_446x200.gif) Here’s a handy recap of how to increase your influence: 1. Make their goals your goals 2. Charge your trust battery 3. Help them see what you see 4. Show success 5. Bring evidence 6. Leverage authority 7. Be likable ### 📚 Further study 1. *[Influence: The Psychology of Persuasion](https://www.amazon.com/Influence-Psychology-Persuasion-Robert-Cialdini/dp/006124189X)* by Robert B. Cialdini 2. *[How to Win Friends and Influence People](https://www.amazon.com/How-Win-Friends-Influence-People-ebook/dp/B0B9ZW9QJS/ref=sr_1_1?keywords=how+to+win+friends+and+influence+people&qid=1663537856&s=books&sprefix=how+to+win+friends+an%2Cstripbooks%2C148&sr=1-1)* by Dale Carnegie 3. *[Great at Work: The Hidden Habits of Top Performers](https://www.amazon.com/gp/product/B074ZKB2QT/ref=dbs_a_def_rwt_hsch_vapi_tkin_p1_i1)* by Morten T. Hansen 4. [Tobi Lütke: The Trust Battery](https://fs.blog/knowledge-project-podcast/tobi-lutke/) by The Knowledge Project *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to get better at influence](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 Featured job opening** 1. **Slab:** [Frontend Engineer](https://www.lennysjobs.com/jobs/900e2226-f222-4108-90a8-285824523cec) (Remote) ## **🧠 Inspiration for the week ahead** 1. **Listen:** [Bill Gates on Progress, Food Technology, and the Battle Between Climate Change and Innovation](https://open.spotify.com/episode/5jE3KgEv7oCCWLi5EGtpTN) by Derek Thompson 2. **Read:** [The 5 Phases of Figma’s Community-Led Growth: From Stealth to Enterprise](https://review.firstround.com/the-5-phases-of-figmas-community-led-growth-from-stealth-to-enterprise#introduction#leave-perfect-at-the-door#whens-the-right-time-to-step-out-of-the-stealth-shadows#whens-the-right-time-to-step-out-of-the-stealth-shadows#phase-2-launch-day-is-important-but-dont-neglect-your-follow-up-strategy) by Claire Butler via First Round Review 3. **Read:** [Stoicism: The Ancient Remedy to the Modern Age](https://gurwinder.substack.com/p/stoicism-the-ancient-remedy-to-the) by Gurwinder **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [33/44] How to get your marketing team to drive more impact *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to this month’s ✨ **free edition**✨ of my newsletter. Each week I humbly tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out about work.* *If you’re not a subscriber, here’s what you missed this month:* 1. *[How to get better at influence](https://www.lennysnewsletter.com/p/how-to-get-better-at-influence)* 2. *[When to sunset a feature](https://www.lennysnewsletter.com/p/when-to-sunset-a-feature)* 3. *[Open thread: What’s your team’s communication rhythm?](https://www.lennysnewsletter.com/p/open-thread-whats-your-teams-communication/comments)* *Subscribe to get access to these posts, and every post from the past.* Working with marketing can be a struggle. Especially as a PM. So many big ideas, so many resources and distractions, but often so little to show for it. I’ve worked with many great marketers and a few not-so-great, and I can tell you that it doesn’t have to be this way. While building and leading marketing teams at [Asana](https://asana.com/), [Carta](https://carta.com/), [Ticketfly](https://www.eventbrite.com/blog/ticketfly-moving-eventbrite/), and [Astro](https://slack.com/blog/news/slack-acquires-astro-to-help-email-and-channels-work-together) (acquired by Slack), [Emily Kramer](https://www.linkedin.com/in/emilykramer/) created and refined a framework called GACCS to help product, marketing, and sales teams collaborate. When I saw [Katie Mitchell](https://www.linkedin.com/in/katherinesmitchell/) (marketing leader at [Sprig](https://sprig.com/)) post this message on LinkedIn, I knew I needed to get Emily here to help spread the gospel. ![Image from How to get your marketing team to drive more impact](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/dd02b8ab-6177-435d-a054-ab07297fe999_1070x1040.png) I’m excited to share this framework, and all of the insights Emily has about building an effective marketing organization, to save everyone countless hours of running in circles. Enjoy! *You can follow Emily on [Twitter](https://twitter.com/EmilyKramer) and [LinkedIn](https://www.linkedin.com/in/emilykramer/), and definitely [subscribe to her newsletter](https://mkt1.substack.com/) (my #1 favorite marketing newsletter). Also, [don’t miss my recent podcast episode with Emily](https://www.lennyspodcast.com/how-to-build-a-powerful-marketing-machine-emily-kramer-asana-carta-mkt1/).* ![Image from How to get your marketing team to drive more impact](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3a2130ff-d956-495f-a21d-09089544a20e_4096x1368.png) My biggest secret to running an effective marketing team isn’t my depth of marketing expertise and skills. [It’s this simple 5-part marketing brief](https://docs.google.com/document/d/1n8juNQVrs0tfM5dTpmsfp6SoQ2KCmf8xHnarTBDkJ_4/edit#). The GACCS framework (Goals, Audience, Creative, Channels, Stakeholders) keeps teams from doing busywork, drives cross-team alignment, and helps marketers produce more work that your prospects and customers—and coworkers—love. In short, it helps stop marketing work from being a waste of time. I created and evolved this framework while leading marketing at Asana and Carta, and I constantly use it with startups I invest in and advise. ### Marketing spends too much time on busywork—and other teams notice It pains me to say this as a marketer, but much of the work marketers produce is a waste of time. Too often marketers spend time on work that doesn’t have an impact and doesn’t align with overall company goals. Typically this doesn’t result from bad intentions or lazy marketers, but from a lack of alignment and not looping in other teams *before the work gets started*. **To break this down more, here’s why marketing work often misses the mark:** 1. **No goal:** There wasn’t a good reason for the marketing work to be created in the first place. Work was created without a good “why” behind it and to check a box that didn’t need checking. 2. **No prioritization:** Everyone *thinks* they’re a marketer, somarketing gets lots of ideas and asks from across the organization. It can get overwhelming if there isn’t a clear set of goals that you use to prioritize. 3. **Created for no one:** The work was created without a specific enough audience in mind, so it doesn’t add value for anyone. 4. **The work doesn’t stand out:** The same thing already exists in the world and is better. The work adds no new value. 5. **No distribution:** The project was a great idea and even well-executed, but it never reaches the right audience. 6. **Experts were excluded:** The work took a long time to create, but it could have gone a lot faster and been higher-quality if the right people were looped in at the right time. You can eliminate many of these issues by getting on the same page before you dive into the work. ## The best framework for driving marketing alignment and impact: GACCS **If OKRs help you define your goals, GACCS helps you hit your goals.** GACCS is a simple yet flexible framework for writing a marketing brief. It’s a common language to get buy-in and alignment on marketing work. You can also think of GACCS as the one-pager for marketing. Don’t start a project without it. ## How to write a GACCS When you are brainstorming a campaign, writing a blog post, planning an event, or creating anything longer than a tweet, you probably need a GACCS. Before you start the marketing project, write out a GACCS to give your work focus, set context for reviewers, and ensure that you have a plan for driving results.[Use this template](https://docs.google.com/document/d/1n8juNQVrs0tfM5dTpmsfp6SoQ2KCmf8xHnarTBDkJ_4/edit?usp=sharing)—it has examples, too. You might think you are too busy to do the pre-work of writing a GACCS, and at first it does take a bit of time to get into the habit. But pretty soon, it becomes the most valuable 10+ minutes you spend on a project or task—it can save you hours of time on back-and-forth later. ![Image from How to get your marketing team to drive more impact](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/6409bef2-c40e-433c-a7b4-2d7aa1bead87_1447x1323.png) ### Goals: Why should I do this *now*? Marketing is a game of prioritization. To determine what to create next, you need to consider the potential impact. The best way to do that is to make sure the work ladders up to a higher-level goal or OKR and to have a clear sense of what you are trying to achieve. It’s also helpful to think through and share *non*-goals. This helps prevent scope creep, especially when work is reviewed by others. Bonus: Including goals on all projects helps you connect the dots between day-to-day work and the annual and quarterly goals you likely spent so much time setting. **Examples:** Support OKR: Increase free-to-paid conversion from x% to y%; Demo product to 100 leads at event and drive 20% to schedule a meeting; Support our overall story that we have the best benchmarks for people teams ### Audience: Who is it for? Pretty much the number one rule of marketing: Know your audience. If you make something for “everyone,” you are really making it for no one. Including the audience in the GACCS should force you to get specific—and if you just put “users,” you are about four levels too high. This is a great chance to reference those ideal customer personas you made and maybe forgot about, like “Sales Sam” and “Security Shaq.” **Examples:** Heads of people teams at 50+-person venture-backed startups; attendees of “Shop ’Til You Drop” conference; active free-product users ### Creative: How will it stand out? There are two main components to this part of the GACCS: the unique point of view, message, or “so what”; and creative requirements for contributors and stakeholders. Both pieces are important to creating something impactful—much like a product needs to be differentiated, so does your *marketing* product. My rule of thumb: Marketing should always add value for your audience. If you don’t have anything unique to say or can’t make a piece of content that is better than what already exists on the topic, don’t make it. **Examples:** Loom video that shows how our feature is 10x faster than the alternative; reuse Pop-A-Shot branded game, and add a discount as a prize; showcase the level of specificity in our benchmarks with a designed report ### Channels: How will you distribute this? Distribution is just as important as, if not more important than, what you are creating. If no one is going to see it, all the time you’ve spent making it is useless. Plus, where work will be distributed impacts what you make—you need to get channel/message fit. For more time-consuming work, just having a distribution plan isn’t enough. You need to make sure you can get “mileage” out of your ideas and work. [Mileage](https://mkt1.substack.com/p/high-impact-content) is my term for taking one content idea or marketing asset and expanding upon it, repurposing it to various formats, and/or using the same research to create a new piece of content. In short, if you have no distribution plan, maybe wait on creating it. **Examples:** Webinar a week after launch of blog post with guest Lenny Rachitsky; email sequence to our existing list of general managers; rank for SEO keywords “work better with marketing” ### Stakeholders: Who needs to be involved? The time spent building great relationships with other teams is useless if they feel left out of the loop and alienated from your work—a GACCS is an easy way to loop them in. Include the directly responsible individual, aka the DRI (hint: if you’re the DRI, you should be the one writing the GACCS), and also who needs to review or contribute to the work. This makes it easy to remember who needs to be involved at each step of the way and also lets people know who *isn’t* involved. It’s a waste of time to get feedback from reviewers if it’s too late in the process or they don’t have the necessary context. So share the GACCS with key stakeholders before you do the work so they can provide feedback before you’ve gone too far in the wrong direction. **Example:** DRI: Emily; reviewers: Lenny, Kathleen; contributors: Nico (design), Keenan (web) ![Image from How to get your marketing team to drive more impact](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b9275a88-a8ef-4405-94a3-3eb5019098d3_1600x1109.png) ### To write a GACCS, go back to basics first If you are struggling to write a GACCS, it might mean you don’t have alignment on your marketing foundation. Your marketing foundation includes having a shared understanding of OKRs or goals, ideal customer personas (ICPs), your addressable market, your overall story, and your primary growth levers. If you don’t have these things, go back and make them. Drive alignment here and you’ll move faster on everything—GACCS writing included. Marketing foundation work that’s helpful for driving alignment and moving a whole lot faster: 1. **Goals:** [Set OKRs](https://mkt1.substack.com/p/goals), define KPIs, and map your funnel to be able to set goals faster. 2. **Audience:** Do [audience analysis](https://mkt1.substack.com/p/weve-been-defining-product-marketing) through customer and prospect interviews, define your ideal customer personas, and do competitive analysis to make it easier to know who to target. 3. **Creative:** [Write your brand story](https://mkt1.substack.com/p/perceptions-our-favorite-marketing), define your brand attributes or values, and [define content pillars](https://mkt1.substack.com/p/high-impact-content) so you know the story you are trying to tell and what you want to be known for as a company. 4. **Channels:** Make a checklist of all your [distribution channels](https://mkt1.substack.com/p/content-roadmap) so you have a clear inventory to reference and don’t have to start from scratch every time. 5. **Stakeholders**: Make an [areas of responsibility list](https://docs.google.com/spreadsheets/d/1TYB3N8Q8IzMfi7lJc04VLX2i6KIQ1flxPv6fUzhXMbY/edit#gid=0) (AORs) for marketing and marketing collaborators (see the bottom of this newsletter). ## When to write and share the GACCS GACCS is super-flexible and scalable for any size of team, and it’s helpful for almost any type of marketing work—from a one-off deliverable to a complex campaign. If founders or product, sales, and CS teams want to have a better and more productive working relationship with marketing, suggest that your marketing team share a GACCS with you before they do the work. If you’re a marketer or growth person (or anyone working on user-facing content), use the GACCS on all of your projects to create more impactful work that everyone in the company is proud of. ![Image from How to get your marketing team to drive more impact](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/336d5cea-aa07-4e07-9c98-b67830c2755a_1109x417.png) ### Tactically, here’s how to use the GACCS: - **Add the GACCS into your working doc and/or task:** Put it at the top of every working doc, whether that’s in Notion, Google Docs, Asana, or anywhere you’re working or your team members will be reviewing work. It could even be pinned to the top of a Slack channel. - **Share it early:** Share the GACCS with relevant stakeholders before you start doing any work. Get alignment and have stakeholders poke holes in your plans. If you share it too late, you often end up too deep on the wrong work. - **Share it with contractors too:** One of the easiest ways to get on the same page with contractors and agencies is to agree on the GACCS before anything else happens. - **Ask stakeholders (nicely) to get out of your way:** After you have buy-in on the GACCS, you should be left to do the work. Some stakeholders may need to be looped in at the end to review, but most should feel confident that you are creating the right thing. This might require some cultural change, so make it clear that this is your intention by sharing the GACCS early. - **Use it to give feedback:** Feedback becomes less subjective when you are responding to the GACCS. “Given my recent customer interviews, I don’t think this will resonate with the stated audience” is better feedback for “This content is bad.” ## Why use GACCS? When marketing work is not moving the needle, complicated systems and processes are often put in place to try to solve the problem—these never work: - Someone adds another status meeting across teams to try to get aligned more regularly. - Biz ops or a chief of staff puts in place an (arduous) process for creating and sharing OKRs across the company—now there are 17 layers of OKRs that are supposed to ladder up to each other that no one looks at. - Other teams stop relying on marketing and work in silos, so the entire customer experience suffers. **Instead, when doing anything in marketing, know why you are doing it, who it’s for, how it will add value, and where you will distribute it. Get buy-in here and you’ll move faster on making high-impact work. The GACCS is the marketing brief that makes this process simple.** [Start using GACCS](https://docs.google.com/document/d/1n8juNQVrs0tfM5dTpmsfp6SoQ2KCmf8xHnarTBDkJ_4/edit#heading=h.8o7wyg5ixh8w) on your next project, and you won’t look back. ## Bonus template: Areas of Responsibility (AORs) To help the marketing organization work effectively with other teams, I also recommend the AORs framework. When working across teams, too much time is wasted figuring out who you should collaborate with. Marketing has many different subfunctions, so it’s especially hard for other teams to understand the various roles. The best solution I’ve found is a shared list of responsibilities across the company, but at the very least across product and customer-facing teams. I learned this system at Asana: areas of responsibility, or AORs. **With AORs, there is extreme clarity on who owns what.** I know exactly who to Slack when I need to collaborate, who to invite to the kickoff, and who to ask for help. This also makes filling out the S part of the GACCS much easier. Here’s [a spreadsheet template](https://docs.google.com/spreadsheets/d/1TYB3N8Q8IzMfi7lJc04VLX2i6KIQ1flxPv6fUzhXMbY/edit#gid=0) for making an AORs list with many early- and growth-stage marketing responsibilities listed out, although it works great in an Asana project or Notion doc as well. ![Image from How to get your marketing team to drive more impact](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/239ecbc4-6317-46f8-bf79-2a7590c3bec2_1600x1047.png) **Here’s how it works:** - Create a shared list of responsibilities for each employee, grouped by team or sub-team. - The main purpose of this list is for other people in the company to be able to look up exactly who owns what, such as product onboarding copy, transactional emails, or web analytics. - AORs aren’t job titles; those tend to not be specific enough for internal use (I mean—they aren’t really useful just in general . . . but that’s another post). - Instead, include ownership areas where the employee is the directly responsible individual (DRI). - If multiple people own the area on the list, you need to get more granular. You have the right level of detail when only one person owns each area. - Each individual is responsible for keeping their responsibilities updated. - Every time there’s a role or responsibility change or a new hire, this needs to be updated. - If two teams are involved on something, such as the onboarding experience, include the owner from each team, like this: “Onboarding—marketing collaborator: Emily” and “Onboarding—product DRI: Lenny.” — For more on building effective B2B marketing functions, check out the [MKT1 Newsletter](https://mkt1.substack.com) or register for an upcoming [MKT1 101 course](https://maven.com/mkt1/building-marketing). We also run a [job board](https://mkt1-jobs.pallet.com/jobs) and [early-stage fund](https://mkt1.co/capital) and [advise heads of marketing](https://mkt1.co/marketers). ### 📚 Further study 1. [‘Give Away Your Legos’ and Other Commandments for Scaling Startups](https://review.firstround.com/give-away-your-legos-and-other-commandments-for-scaling-startups) by Molly Graham, First Round Review 2. [How to Select a Target Market](https://www.aprildunford.com/post/startup-market-segmentation-how-to-select-a-target-market) by April Dunford 3. [RACI model](https://review.firstround.com/how-this-head-of-engineering-boosted-transparency-at-instagram) by James Everingham, First Round Review 4. [DACI: Make Better Decisions with This Framework](https://www.loom.com/blog/daci) 5. [How Asana uses AORs](https://wavelength.asana.com/workstyle-aors/#close) 6. [Crash Course in Marketing Goal Setting](https://mkt1.substack.com/p/goals) by Emily Kramer (me) *Thanks, Emily!* ## 📣 Hiring, or open to new gigs? [Join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to get bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to get your marketing team to drive more impact](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join the collective to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply to join](https://www.lennysjobs.com/talent) ### ❤️‍🔥 Featured job **opening** **Slab:** [Frontend Engineer](https://www.lennysjobs.com/jobs/900e2226-f222-4108-90a8-285824523cec) (Remote) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [34/44] Taking the week off I’m taking this week off to recharge ([per my PTO policy](https://www.lennyrachitsky.com/pto-policy)), traveling through Colorado and Wyoming. If you’re yearning for something to read, here are a few older posts you may have missed: 1. [The Minto Pyramid Principle and the SCR Framework](https://www.lennysnewsletter.com/p/minto-pyramid-principle-scr) 2. [Product management career ladders](https://www.lennysnewsletter.com/p/product-management-career-ladders) 3. [Increasing team velocity](https://www.lennysnewsletter.com/p/increasing-velocity-issue-61) 4. [Content-driven growth](https://www.lennysnewsletter.com/p/content-driven-growth-strategy) 5. [On taking time off](https://www.lennysnewsletter.com/p/sabbatical-time-off) See you next week! ![Image from Taking the week off](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/0353ba9b-fa61-4553-83d2-0a6caa6df917_4032x3024.jpeg) --- ## [35/44] The Racecar Growth Framework—expanded and illustrated > ## Q: Can you go one level deeper on the [Racecar Growth Framework](https://www.reforge.com/blog/racecar-growth-framework)—how do I actually use it in practice? All my research into GTM and growth strategy can be summarized in this one (hot-off-the-press) image: ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2b763a14-9134-4246-812d-0cbc65fdbbaf_8966x4492.png) This image includes not just the components of how your startup grows, but also the most popular tactics within each component. I encourage you to use this as a source of inspiration for your growth ideation. When you’re developing a new growth strategy, or struggling to come up with tactical ideas, start here. Below, I’ll expand on each component and associated tactics, and share some advice for how to use this framework. Generally, here’s when to focus on each component: 1. When you’re just starting out, focus your energy on **Kickstarts**, and maybe a few **Turbo boosts**, until your **Growth engine** begins to drive the majority of your growth. [Here’s a template](https://docs.google.com/document/d/19k7oXAYb9qkra6FTUMPljW75YZfUfWEr0eTITZvDe6s/edit?mode=html) to help you plan your GTM. 2. Once you have a working **Growth engine**, invest in **Lubricants** to help it run more efficiently**,** and the occasional **Turbo boost** to boost growth. 3. Once you’re at a meaningful scale, explore one or two **Mid-stage accelerants**. 4. Before your primary engine asymptotes, experiment with and kickstart an additional **Growth engine**, while continuing to **Lubricate** your existing growth engine(s). 5. [Future posts] To continue growing, layer on an additional business unit, expand to new segments (e.g. enterprise), and grow within existing accounts (e.g. increase NRR). A huge thank-you to [Dan Hockenmaier](https://www.linkedin.com/in/dan-hock/) ([recent podcast guest](https://www.lennyspodcast.com/developing-a-growth-model-marketplace-growth-strategy-dan-hockenmaier-faire-thumbtack-reforge/)!) for partnering with me on initially developing this framework and for continuing to help me refine it. This post will be a living document, where I’ll add to it as I learn of new and effective tactics. Please leave a comment and let me know what I might be missing or have wrong 👇 [Leave a comment](https://www.lennysnewsletter.com/p/the-racecar-growth-frameworkexpanded/comments) ## The Racecar Growth Framework—Expanded #### 1. The Growth Engine ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/40011f61-0c78-42bb-a48c-c9c7fa627f74_3684x1680.png) **The growth engine** is a self-sustaining growth loop that drives nearly all your growth long-term. Of all the components, the growth engine is the most important because it’s the only component that can be self-sustaining—creating an output (e.g. revenue) that can then be reinvested into more growth (e.g. ads). **There are four common growth engines:** 1. **SEO:** You (or your users) create content → People discover your content while searching (e.g. Google, YouTube, TikTok, etc.) → They become users → More users leads to more content 2. **Paid ads:** You run ads online (e.g. FB, AdWords, YouTube), OOH (e.g. billboards, buses), or in-home (e.g. direct mail, TV, podcasts) → Ads drive users → Users generate revenue → Revenue is used to run more ads 3. **Sales:** You hire salespeople → Salespeople get customers → Customers drive revenue → Revenue is used to hire more salespeople 4. **Virality:** User signs up → User enjoys product and shares product with other people (either through word of mouth, inviting their friends through your product, sharing content from the app, or incentivized referrals) → Friend signs up and shares it with their friends **[Here’s an overview](https://www.lennysnewsletter.com/i/57395431/gtm-motions-of-todays-biggest-consumer-apps) of the growth engines behind today’s biggest consumer apps (second column):** ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d1c316e1-1d3a-4197-bdc6-1ad12966393c_4792x6620.png) **[Here are the primary growth engines](https://www.lennysnewsletter.com/p/gtm-motions) of today’s biggest B2B products** (second column)—essentially it’s always sales, though some products have a product-led (aka self-service) element: ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b2774061-76f6-487f-a7f2-1cb6974cb040_2400x9912.png) P.S. In the B2C list, you’ll notice there’s one additional growth engine, “Supply driving demand.” This can be thought of as a growth engine, and an incredibly powerful one at that, but it won’t be the source of your growth, because you still need to grow the supply in the first place (usually through sales), so I don’t spend a lot of time on it. [Read more about this engine here](https://www.lennysnewsletter.com/i/57395431/supply-driving-demand). ### 2. Kickstarts ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/926e599f-b02f-460c-93ad-35be770e6941_5056x2672.png) **Kickstarts** are unscalable tactics for acquiring your first 1,000 users. The nine most common (and effective) kickstarts, including links to examples of each in action: 1. [Share with friends and colleagues](https://www.lennysnewsletter.com/i/38506758/strategy-reach-out-to-friends-and-colleagues) 2. [Reach out to targeted strangers](https://www.lennysnewsletter.com/i/38506758/strategy-reach-out-to-targeted-strangers) 1. Cold DM (e.g. [Cameo](https://www.lennysnewsletter.com/i/38506758/cameo-supply-side-dms)) 2. Cold email (e.g. [YouTube](https://www.lennysnewsletter.com/i/38506758/youtube-supply-side-email)) 3. Phone call (e.g. [Airbnb](https://www.lennysnewsletter.com/i/38506758/airbnb-supply-side-phone-email)) 4. Door to door (e.g. [DoorDash](https://www.lennysnewsletter.com/i/38506758/doordash-supply-side-door-to-door-phone)) 3. [Go pitch your target audience where they hang out](https://www.lennysnewsletter.com/i/38506758/strategy-go-where-your-target-audience-hangs-out-online-or-offline) 1. Online communities (e.g. Dropbox and HackerNews, Discord and Reddit, Netflix and niche forums) 2. Offline communities (e.g. Etsy and craft fairs) 3. Retailers/malls (e.g. Hipcamp and REI, Pinterest and Apple stores, Snapchat and malls) 4. High schools (e.g. Snapchat) 5. College campuses (e.g. Tinder) 6. Business schools (e.g. Morning Brew) 7. Startup offices (e.g. Lyft, Wealthfront) 8. Transit hubs (e.g. Uber and CalTrans station) 4. [Enlist influencers](https://www.lennysnewsletter.com/i/38506758/strategy-enlist-influencers-paid-or-organically) 1. Paid 2. Organically fans 5. [Get press](https://www.lennysnewsletter.com/i/38506758/strategy-get-press) 6. [Create viral content](https://www.lennysnewsletter.com/i/38506758/strategy-create-viral-content) 1. Blog post (e.g. [Superhuman](https://www.lennysnewsletter.com/i/38506758/superhuman)) 2. Video (e.g. [Duolingo](https://www.lennysnewsletter.com/i/38506758/duolingo)) 3. One-off website (e.g. [Calm](https://www.lennysnewsletter.com/i/38506758/calm)) 4. Tweet 7. [Get physical placement](https://www.lennysnewsletter.com/i/38506758/strategy-get-physical-placement) 1. Flyers/handouts (e.g. [DoorDash](https://www.lennysnewsletter.com/i/38506758/doordash)) 2. Table or booth at a physical location (e.g. [Hipcamp](https://www.lennysnewsletter.com/i/38506758/hipcamp-rei-offline)) 3. Signs (e.g. [Tinder](https://www.lennysnewsletter.com/i/38506758/tinder)) 4. Stickers (e.g. [Grubhub](https://www.lennysnewsletter.com/i/38506758/grubhub)) 5. Get on store shelves 8. [Host an event](https://www.lennysnewsletter.com/i/38506758/host-a-launch-party-hinge) 9. [Be first on a platform](https://www.lennysnewsletter.com/i/38506758/be-first-to-figure-out-an-emerging-platform-noom-tiktok-whatsapp) In B2C you have many options, but in B2B you really only have three: friends and colleagues; go pitch them where they hang; and press. Here’s an overview of which products relied on which kickstarts [in B2C](https://www.lennysnewsletter.com/i/38506758/how-do-you-decide-which-tactic-to-pursue): ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/39ffb188-49f1-440e-b2b8-b4e0f51c638a_3572x2878.png) [And B2B](https://www.lennysnewsletter.com/p/how-todays-fastest-growing-b2b-businesses): ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/dac51716-54f1-48dd-bec3-5f9c820abbc1_6000x4074.png) ### 3. Turbo boosts ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/da5d566b-1701-4b34-bce0-8a2bb3f381c5_3732x1420.png) **Turbo boosts** are one-off events that accelerate growth temporarily but don’t last. There’s some overlap here with kickstarts, but the difference is that kickstarts are effective for getting you started (e.g. unscalable, scrappy, low investment), while turbo boosts can accelerate growth at any point. **Most common (and effective) turbo boosts:** 1. Get PR 2. Create viral content 3. Host an event 4. Get an influencer to mention you 5. Run a marketing campaign 6. Sponsor a big event 7. Release a viral mini-product 8. Create controversy 9. Get featured by highly trafficked platform 10. Go on TV/podcast/etc. **Ideas for your own turbo boosts:** 1. [60 ideas to boost your growth](https://www.lennysnewsletter.com/p/turbo-boosts) 2. [Generating buzz](https://www.lennysnewsletter.com/p/creating-buzz-at-launch) ### 4. Lubricants ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/1557658c-f72e-4cca-b30b-321b1195a231_2548x1196.png) **Lubricants** areoptimizations that help your growth engine(s) run more efficiently. Without enough lubrication, your engine will stop. **Examples of lubricants:** 1. [Increasing conversion](https://www.lennysnewsletter.com/p/this-week-21-strategy-and-tactics) 2. [Increasing retention](https://www.lennysnewsletter.com/p/how-to-increase-your-products-retention) 3. Increasing brand awareness [Future post] 4. Increasing activate rate and/or customer success [Future post] 5. Increasing prices [Future post] ### 5. Mid-stage growth accelerants ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/979afb29-6eeb-4e03-b9d2-d4a5137bb088_2702x1580.png) **Mid-stage growth accelerants** aren’t really growth engines, and aren’t useful early on, but when used effectively, they can significantly (re)accelerate your growth. **Examples of mid-stage growth accelerants:** 1. [Channel partnerships](https://www.lennysnewsletter.com/i/31258917/channel-partnerships) 2. [Geographic expansion](https://www.lennysnewsletter.com/i/31258917/geographic-expansion) 3. Category expansion [Topic for a future post] **Ideas for your own mid-stage acceleration:** 1. [From zero to 10,000 clients in two years using channel partners](https://review.firstround.com/From-Zero-to-10000-clients-in-Two-Years-Using-Channel-Partners) 2. [Expanding your business internationally](https://www.lennysnewsletter.com/p/this-week-12-expanding-your-business) 3. [Marketplace city expansion strategy](https://www.lennysnewsletter.com/p/marketplace-city-expansion) ### 6. Fuel ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3a7dea6b-94fc-4405-970e-e50dbcf735f9_1746x994.png) **Fuel** is the input that your engine runs on. The way to think about fuel tactically is to work backward from your engine—the more (right kind of) fuel you have (e.g. more users), the faster you’ll grow (e.g. more virality). **Types of fuel:** 1. **Content** drives SEO 2. **Users** drive virality 3. **Capital** drives paid ads and sales There’s a lot here, so don’t expect to remember it all. Use this post as a reference, and and a source of inspiration when you’re ideating on growth ideas. And when you do, I’d love to hear from you—am I missing anything? Does anything seem wrong? Please leave a comment 👇 [Leave a comment](https://www.lennysnewsletter.com/p/the-racecar-growth-frameworkexpanded/comments) ## 📚 Further study 1. [The original Racecar Growth Framework post](https://www.reforge.com/blog/racecar-growth-framework) 2. [Drive Growth by Picking the Right Lane — A Customer Acquisition Playbook for Consumer Startups](https://review.firstround.com/drive-growth-by-picking-the-right-lane-a-customer-acquisition-playbook-for-consumer-startups) 3. [Kickstarting and scaling a consumer business](https://www.lennysnewsletter.com/p/kickstarting-and-scaling-a-consumer) 4. [How today’s fastest-growing B2B businesses found their first ten customers](https://www.lennysnewsletter.com/p/how-todays-fastest-growing-b2b-businesses) *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from The Racecar Growth Framework—expanded and illustrated](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) ## **🧠 Inspiration for the week ahead** 1. **Read:** [AI Revolution — Transformers and Large Language Models (LLMs)](https://blog.eladgil.com/2022/08/ai-revolution-transformers-and-large.html) by Elad Gil 2. **Read:** [The Tail End](https://waitbutwhy.com/2015/12/the-tail-end.html) by Wait But Why 3. **Watch:** [Abbi and Ilana of](https://youtu.be/utBOYZ0pDo4) *[Broad City](https://youtu.be/utBOYZ0pDo4)* [on](https://youtu.be/utBOYZ0pDo4) *[Hot Ones](https://youtu.be/utBOYZ0pDo4)* [Watch on YouTube](https://www.youtube.com/watch?v=utBOYZ0pDo4) **If you’re finding this newsletter valuable, feel free to share it with friends, and consider subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [36/44] Mission → Vision → Strategy → Goals → Roadmap → Task > ## Q: How do strategy, vision, mission, goals, and roadmap all work together? Where should I start? First, some definitions: - **Mission:** What are we trying to achieve? - **Vision:** What does the world look like when we’ve achieved it? - **Strategy:** What’s our plan for achieving it, i.e. what’s our plan to win? - **Goals:** How will we measure progress? - **Roadmap:** What do we need to build in order to get there? - **Task:** What’s one unit of work we can tackle next? ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/da08427f-3cd6-4a15-bb11-11d93c68ac0b_2400x1186.png) #### Where should you start? Normally you start with your **mission**—why does your team (or company) even exist? What are you trying to achieve? What is your purpose? Some examples of great missions: 1. **Tesla**: “Accelerate the world’s transition to sustainable energy.” 2. **TED**: “Spread ideas.” 3. **Stripe:** “Increase the GDP of the internet.” 4. **IKEA**: “Create a better everyday life for the many people.” 5. **Patagonia**: “Use business to inspire and implement solutions to the environmental crisis.” 6. **Slack:** “Make work life simpler, more pleasant, and more productive.” 7. **Google:** “Organize the world’s information and make it universally accessible and useful.” 8. **World Wildlife Fund:** “Conserve nature and reduce the most pressing threats to the diversity of life on Earth.” 9. **Nike:** “Do everything possible to expand human potential.” 10. **Square:** “Make commerce easy.” #### Vision Next comes your **vision:** What does the world (or your product) look like when you’ve achieved your mission? Some examples of great **vision** statements: 1. **Microsoft: “**A computer on every desk and in every home.” 2. **Alzheimer’s Association**: “A world without Alzheimer’s disease.” 3. **Teach for America: “**One day, all children in this nation will have the opportunity to attain an excellent education.” 4. **Tesla:** “Create the most compelling car company of the 21st century.” 5. **Lyft:** “A world where cities feel small again. Where transportation and tech bring people together, instead of apart.” 6. **Netflix:** “Become the best global entertainment distribution service.” If you start with your vision before your mission, that’s totally OK. Elon Musk likely started with a vision of the world he wanted to see and then developed his mission around that. No problem. Don’t overthink it. #### Strategy Once you have your mission and vision, this is where **strategy** comes in. Your strategy is simply your plan to achieve your vision—your plan to win. [I’ve written about getting better at strategy](https://www.lennysnewsletter.com/p/getting-better-at-product-strategy), and, to boil it down, a strategy is essentially a short description of your plan, with 3 to 5 concrete investments that, if you get right, will bring you closer to winning (i.e. achieving your vision). [Here are some templates](https://www.lennysnewsletter.com/i/683946/strategy) to help you frame your thinking. Here are some high-level examples of **strategies**: 1. **Tesla:** Build a high-priced sports car → Use that revenue to build an affordable car → Use that revenue to build an even more affordable car → While doing so, also provide zero-emission electric power 2. **Uber:** Launch Uber Black → Bring prices down by launching UberX → Bring prices down by launching Uber Pool → Bring prices down by launching scooters, bikes, etc. 3. **[Substack](https://on.substack.com/p/one-million-strong):** Build powerful publishing tools for writers → Help writers become better writers through value-add services → Grow their audience through network effects Additional examples of great real-life strategies: 1. **[GitLab](https://about.gitlab.com/company/strategy/)**: Notice the clear mission, vision, and three-part strategy. 2. **[Salesforce](https://www.salesforce.com/blog/2013/04/how-to-create-alignment-within-your-company.html)**: Simple, but tells you exactly what needs to be done. 3. **[Yahoo’s “peanut butter” memo](https://sriramk.com/memos/garlinghouse-peanut-butter.pdf):** Notice how clearly this identifies the problem, and includes a three-part strategy. (Also, it’s obviously memorable since it’s now known as the “Peanut Butter Manifesto.”) 4. **[Tesla](https://www.tesla.com/blog/master-plan-part-deux)**: Notice the narrative style, the detailed identification of the problems, and the very simple, ambitious yet clear four-step strategy at the end. [Teresa Torres’s opportunity solution tree](https://www.producttalk.org/opportunity-solution-tree/) framework is a great way to think through, and communicate, your strategy: ![A depiction of an opportunity solution tree.](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3bec10e3-def0-4986-b26b-6c2b9e3f0964_550x392.png) #### Goals Next, you can begin to define your **goal**. Goals are simply a way to measure the progress of your strategy toward achieving your ultimate vision. Some examples of visions and their associated goals: 1. **Microsoft:** A computer on every desk and in every home → X% of homes with a computer 2. **Teach for America:** One day, all children in this nation will have the opportunity to attain an excellent education → X% of children with education 3. **Alzheimer’s Association**: A world without Alzheimer’s disease → X% decrease in Alzheimer’s cases [Here’s my advice on setting goals](https://www.lennysnewsletter.com/i/403468/how-to-set-goals) and on [choosing your North Star metric](https://future.com/north-star-metrics/). #### Roadmap And finally, once you have your goals, you can align around and prioritize a **roadmap**. [Here’s a template](https://docs.google.com/spreadsheets/d/1zlx3RuidNOW40Zf7gh07p2SqoR53Ungv9JFT-PhHwxI/edit#gid=184965050) you can use. ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/91b7d355-a384-43ec-92ae-8ff781deaed2_1600x588.png) Within the roadmap, you break out individual **tasks**,the atomic unit of work for your teammates. Why do you need goals before you align around a roadmap and prioritize tasks? Because when prioritizing the many ideas your team has, you look at the ROI—the effort vs. the impact. The *impact* you’re prioritizing against is based on how much you expect the project will impact your *goals*. That’s basically your plan as a product team, from the 10,000-foot mission to the day-to-day work of your team. ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d3dfa1b5-19a1-4a43-8d95-d89fad9f0980_2400x1186.png) As an example, here’s how it all fits together in the case of Tesla: ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2acf78ea-a0c1-4a10-a280-26fc3b055557_2400x1186.png) And finally, let’s look at another “real-life” example: ## Mission → Vision → Strategy → Goals → Roadmap → Task, as taught to us by *Oceans Eleven* ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ce345218-885e-4162-9e50-df262590e3cf_482x200.gif) ### Mission: Rob the Bellagio, Mirage, and MGM Grand casinos, and get back at rival Terry Benedict ![Ocean's Eleven (2001) - Photo Gallery - IMDb](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/dd74c55b-0018-418d-80f7-cc87571f2aa6_2000x1313.jpeg) ### Vision: Great wealth (and get back with Tess) ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/09fca5c0-225a-48a3-8af7-a86730126e9e_356x200.gif)![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/984e66dc-e41d-4044-bef5-12031a46bc71_482x200.gif) ### Strategy: Get into casino cage → get through doors with code that changes every 12 hours → Get into an elevator that requires fingerprints and vocal verification → Get past two guards with Uzis → Get into the vault that all three casinos share → Steal money → Get away ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5ab8ccba-151e-40e4-bdf3-64c113d83155_482x200.gif) ### Goal: Walk out with $150,000,000 ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3b1c8ff3-733c-4b2e-a8a1-de34de7dc3c8_480x199.gif) ### Roadmap: Build a team of ~~10~~11, do reconnaissance at the Bellagio, find all of the routes in and out, tap into the power system, hack the security systems, create a precise replica of the vault, get security codes, find transportation, practice maneuvering through security systems, execute the plan, escape ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/48200814-d7a0-4c9b-910d-1dec863e583e_500x208.gif) ### Task: Arrive at the casino ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a658534a-4190-42e2-a4ef-26bf5d1663dc_350x200.gif) ### It’s a wrap 💰 ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b40775ca-81c1-45b5-af3a-d1027afd7e7e_480x199.gif) P.S. If you haven’t seen the movie, [it’s on Netflix](https://www.netflix.com/title/60021783). ### 📚 Further study 1. [Getting better at product strategy](https://www.lennysnewsletter.com/p/getting-better-at-product-strategy) 2. [Prioritizing](https://www.lennysnewsletter.com/p/prioritizing) 3. [Setting goals](https://www.lennysnewsletter.com/i/415982/how-to-set-goals) 4. [My favorite product management templates](https://www.lennysnewsletter.com/p/my-favorite-templates-issue-37) *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting weekly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from Mission → Vision → Strategy → Goals → Roadmap → Task](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) ## **🧠 Inspiration for the week ahead** 1. **Read:** [50 ways to be ridiculously generous—and feel ridiculously good](https://www.youcangetitdone.com/post/50-ways) 2. **Read:** [Stay in the Game](https://www.albertbridgecapital.com/post/stay-in-the-game) 3. **Read:** [Rules for SaaS Pricing](https://earlygtm.substack.com/p/rules-for-saas-pricing) **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [37/44] What is a good activation rate *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to this month’s ✨ **free edition**✨ of Lenny’s Newsletter. Each week I humbly tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out about work.* *If you’re not a subscriber, here’s what you missed this month:* 1. *[Mission → Vision → Strategy → Goals → Roadmap → Task](https://www.lennysnewsletter.com/p/mission-vision-strategy-goals-roadmap)* 2. *[The Racecar Growth Framework—expanded and illustrated](https://www.lennysnewsletter.com/p/the-racecar-growth-frameworkexpanded)* *Subscribe to get access to these posts, and every post.* > ## Q: What is considered a good activation rate? Increasing activation rate is one of the highest-leverage growth levers across most products, and it’s often the single best way to increase your retention. But knowing what a *good* activation rate is, and how to improve it, has been difficult if not impossible. For that reason, it’s been one of the most frequent questions I’ve received from readers over the years. To finally get you an answer, I teamed up with [Yuriy Timen](https://www.linkedin.com/in/yuriytimen/) (growth advisor and [recent podcast guest](https://www.lennyspodcast.com/how-to-grow-a-subscription-business-yuriy-timen-grammarly-canva-airtable/)) to run a global benchmarking survey, asking readers to contribute their activation rate and what they’ve learned about increasing it. We exceeded our expectations and ended up with over 500 responses, which I believe is the largest survey of its kind. Here’s a sampling of products represented in this survey: ![Image from What is a good activation rate](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8b155a38-2fd3-4dac-8b74-8272a20f9f24_4000x2000.png) Below, you’ll find GOOD and GREAT activation rates (by product type), the most common ways to increase activation rates, examples of great activation milestones, and a bunch of advice for setting and improving your activation rates. We did our best to analyze this data and draw conclusions, but I’m confident we missed something. If you find anything amiss, please let us know by leaving a comment. We’ll integrate feedback and update the post with any additional learnings 👇 [Leave a comment](https://www.lennysnewsletter.com/p/what-is-a-good-activation-rate/comments) And finally, if you filled out [our survey](https://form.typeform.com/to/d6MFIBAL) and shared your activation rates with us, you should have received an email with a link to the raw survey data. If you didn’t get that email, please let us know and we’ll get it right over to you. If you missed the boat and didn’t contribute to the survey but still want to see the raw results, at the end of this post there’s a second opportunity. Let’s get into it. ![Image from What is a good activation rate](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5c9f01f5-5a7b-4c83-be1e-b3296b334dc2_2048x1024.png) ## 1. What is activation rate? Your activation rate is the percentage of your new users who hit your activation milestone. Concretely: `activation rate = [users who hit your activation milestone] / [users who completed your signup flow].` Your activation milestone (often referred to as your “aha moment”) is the earliest point in your onboarding flow that, by showing your product’s value, is predictive of long-term retention. A user is typically considered activated when they reach this milestone. A good activation event is often associated with the beginnings of a user forming a new habit inside the product, and since increasing activation rate is one of the best levers for increasing retention, it’s often a major focus for growth teams. ## 2. What are examples of activation milestones? A good activation metric should be two things: 1. **Highly predictive:** It should be predictive of long-term value delivery to the user, which often manifests itself in long-term retention, monetization, or both. Users who hit your activation milestone should retain at a rate at least 2x better than those who do not complete the activation step. 2. **Highly actionable:** The metric needs to be something growth teams can directly impact. For example, for a multi-user SaaS products (e.g. Figma), teams often set their activation metrics on workspace- or account-level actions (e.g. “workspace with 10 items created and 2+ active editors by W4”) vs. a user taking action. You can’t make a workspace or an account do anything—only users can. In the survey, we looked at activation rates by eight product types: 1. **B2B enterprise SaaS** (e.g. Salesforce, Workday) 2. **B2B prosumer SaaS** (e.g. Figma, Slack) 3. **B2C freemium/subscription** (e.g. Duolingo, Calm) 4. **B2C free/ads** (e.g. Snap, Instagram) 5. **B2C marketplace** (e.g. Airbnb, eBay) 6. **B2B marketplace** (e.g. Faire) 7. **E-commerce** (e.g. Chewy, Wish) 8. **DTC subscription** (e.g. Hims, Athletic Greens) Below are some of the most common activation milestones, categorized by product type: ![Image from What is a good activation rate](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/6abe4714-0ba1-4b9d-98df-0e159b4ccbf1_2400x3556.png) A few of our favorite examples of activation milestones: 1. First day of food and weight logged 2. First 5 survey responses collected 3. First design published and shared 4. First video created that received a view 5. First listen to more than 40% of a track 6. First listen to 3+ sessions in the first week 7. First time booked listing 8. First moved meeting 9. First job application sent 10. 10 posts published in first 2 weeks Below we’ll share the most common mistakes when setting your activation milestone, but by far the most common mistake is to set the activation point too early or too late. Too early would be simply finishing the sign-up process for a SaaS product, and too late would be three purchases in a marketplace or e-commerce site. Activation is meant to be a leading indicator of a new user sticking around and becoming a customer—not the act of becoming a long-term customer. It’s meant to be something your team can do to increase retention, and defining activation as either sign-up or multiple purchases defies the purpose behind an activation metric. ## 3. What is a good activation rate? Based on our survey results, broadly, the **average activation rate is 34%**, and the **median activation rate is 25%**. For just SaaS products (removing marketplaces, e-commerce, and DTC), the **average activation rate is 36%**, and the **median is 30%**. Here’s what activation rates look like by individual product types: ![Image from What is a good activation rate](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/8a395e25-1c25-48d2-aa0f-35f486280d0f_2792x3166.png) #### Why such variance in activation rates? Mostly due to the milestone definition, and how much effort it takes to get there. For example, marketplaces and e-commerce companies have the lowest activation rates because they generally define their activation milestone as the first transaction (i.e. spending money). B2C freemium products have the highest activation rate because their typical activation milestone is low-friction (e.g. starting a meditation session, logging a meal, listening to a music track). ## 4. What are the most common ways to increase activation? In our survey, we asked, “**If you’ve had success improving activation rate, what change has had the biggest impact?**” Here are the eight most commonly referenced tactics: 1. [Simpler onboarding UI/UX](https://www.lennysnewsletter.com/i/77646597/i-simpler-onboarding-uiux) 2. [Reducing onboarding friction](https://www.lennysnewsletter.com/i/77646597/ii-reducing-onboarding-friction) 3. [Emails and follow-up comms](https://www.lennysnewsletter.com/i/77646597/iii-emails-and-follow-up-comms) 4. [Optimizing copy](https://www.lennysnewsletter.com/i/77646597/iv-optimizing-copy) 5. [Smarter top-of-funnel targeting](https://www.lennysnewsletter.com/i/77646597/v-smarter-top-of-funnel-targeting) 6. [Sales outreach](https://www.lennysnewsletter.com/i/77646597/vi-sales-outreach) 7. [Adding incentives](https://www.lennysnewsletter.com/i/77646597/vii-adding-incentives) 8. [Showing value earlier](https://www.lennysnewsletter.com/i/77646597/viii-showing-value-earlier) Here are direct quotes from survey responders sharing what most helped them increase their activation rate: #### **i. Simpler onboarding UI/UX** 1. “Removing distracting CTAs between sign-up event and activation event” 2. “Hiding a confusing button on home page for new users” 3. “Simplifying the flow” 4. “Simplify setup process” 5. “Simplify the flow to make a first booking” 6. “Changed the flow to have fewer steps and improved it 20%” 7. “Reducing number of steps” 8. “Removing unnecessary steps, calming anxieties at each stage” 9. “Break down the core steps to simplify booking flow” 10. “Reducing the number of steps during onboarding” 11. “Reduce steps to onboarding flow” 12. “Reducing the steps required in the onboarding flow” 13. “Reducing multiple steps in onboarding flow” 14. “Reducing steps in the onboard flow” 15. “Shorten funnel” 16. “Shorten steps” 17. “Simplifying the onboarding process and requirements” 18. “Focused onboarding—improving relevance of the features we expose to the customer” 19. “Driving all attention into one seeded task for guided completion” 20. “Order of how tasks are presented made the biggest difference” 21. “Breaking down the learning curve to 3-4 actionable steps and guiding them through it in the product” 22. “Simple, mobile-optimized sign-up flow” 23. “Don’t allow the user to do anything before the group is created” #### ii. Reducing onboarding friction 1. “Making smart recommendations/defaults” 2. “Pre-populating user journeys with relevant content based on job title” 3. “Adding search suggestions in onboarding flow” 4. “Automatic suggestions” 5. “Adding several authentication providers (FB, Google, Apple)” 6. “Adding Apple login” 7. “Adding additional payment methods” 8. “Autofetch of information to reduce burden on user to supply information” 9. “Made the doc creation screen more visible” 10. “Less words to reduce friction to just start” 11. “Removing login gate from initial app interactions” 12. “Creating options that require fewer authentication into third-party platforms” 13. “Reducing friction of the connection/setup process and building more if/then steps into the connection flow to specially handle common errors like incorrect physical installation, Wi-Fi setup problems, etc.” 14. “Adding the modals after each completed step that redirect a user to the next step required for activation” 15. “Login immediately after sign-up” 16. “Changing that page to the default home screen on the app” 17. “Improved accessibility” 18. “Reducing early friction” 19. “Deep-linking” 20. “Providing alternative ways to connect an account” 21. “Offering more pathways toward key actions” 22. “Removing obstacles in onboarding—improving time to value” 23. “Templates and pushing users to start a design with the right template” 24. “Creating templates that get users started easily” 25. “Metric spiked after introducing templates to choose from in the onboarding flow” 26. “Linking to the actions from the dashboard (first page they see)” 27. “Sending new subscribers on an onboard flow that first urges them to complete the download” #### **iii. Emails and follow-up comms** 1. “Email drip sequences with how-to videos” 2. “Email sequencing with more value rather than a simple reminder” 3. “Automated email asking for the details after they’ve registered” 4. “Focused nurturing over their first 3 months on the referral program” 5. “Outbound messages right after activation” 6. “Sending follow-up emails” 7. “Lifecycle comms” 8. “A WhatsApp message with the next steps and their basic information” 9. “Sending SMS after completion of a match” 10. “Email welcome series” 11. “Email automations” 12. “Push notification prompts” 13. “Push notifications with personalization for new users” 14. “Sending more push notifications off the back of writing shorter content” #### iv. Optimizing copy 1. “Copywriting” 2. “Onboarding copy” 3. “Better landing pages” 4. “Clearer value prop to the customer” 5. “Improving onboarding education” 6. “Week 1 educational content” 7. “Educational changes in the onboarding flow” 8. “More education in onboarding and helping users through customer success interventions” 9. “Clearer communication with customer on what requirements they need to have ready to start onboarding” 10. “Giving them clear and understandable information” 11. “Better getting-started documentation/onboarding” 12. “Redoing our onboarding messaging” #### v. Smarter top-of-funnel targeting 1. “Limiting who can sign up” 2. “Better initial selection of target audience” 3. “Better qualification” 4. “Improving the quality of leads at the top of funnel, shifting away from Facebook to Indeed for finding applicants” 5. “Activation segmentation to characterize users who are initially more ‘activated’ ” 6. “One-on-one recruiting” 7. “Better product education during sign-up on who we are *not* for” 8. “Block customers who do not fit our ICP profile to register on our platform” 9. “Going after power users” 10. “Bringing in higher-quality leads” 11. “Better qualifying users while signing up” #### vi. Sales outreach 1. “Doing things that don’t scale. One-on-one Zoom onboarding with clients” 2. “Leveraging our sales team to make calls to customers” 3. “Personal outreach from the sales team” 4. “Personal onboarding” 5. “White-glove onboarding” 6. “Having a phone call with the prospect” 7. “We called everyone who did not complete the onboarding process to complete it” 8. “Personalized onboarding by an account manager” 9. “Concierge onboarding (phone call)” 10. “One-on-one communication” 11. “A ‘welcome to service’ call and instructing them to set up” #### vii. Adding incentives 1. “Offering financial incentive” 2. “First-booking discounts” 3. “Special offers” 4. “First-order incentive; free shipping” 5. “Product discounts, shipping discounts” 6. “Welcome discount” 7. “Use discounted products to drive first sales” 8. “Shipping discounts” #### viii. Showing value earlier 1. “Onboarding that more directly enabled the most popular JTBD” 2. “Getting users into the content catalog as quickly as possible” 3. “Revamping onboarding to make it easier for the users to understand the benefits” 4. “Making our best-known feature not require configuration to try” 5. “Showing core product value as early in the funnel as possible” #### Other: 1. Personalization 1. “Personalized product tour depending on user’s goal” 2. “Personalized onboarding and recommendations” 3. “Personalize first product experience based on user profile/interests” 4. “Customized pitch to every potential client” 2. Checklists 1. “Dashboard with checklists and help resources (our solution is all-in-one and there are lots of features, so it takes time for new users to adopt the main ones; that’s why they need additional resources)” 2. “Embedded checklists” 3. “Adding guided onboarding to the product with a checklist and limiting the number of actions for users at the beginning of their journey” 4. “Adding an onboarding section describing the steps needed to activate” 3. Social proof 1. “Social proof/create peer confidence” 2. “Testimonials on checkout page” 3. “New content with high-profile instructors” 4. “User reviews” 4. Marketplace dynamics 1. “Adding supply” 2. “Limiting supply entering the marketplace. Too much supply for too little demand meant less activation” 5. Dedicated resources 1. “A team dedicated to onboarding” 2. “Hiring more people to build out additional tests, new page design, additional labor to process leads” 6. “Improving install speed” 7. “Dropping users in the community directly after onboarding” 8. “Building features to collaborate with colleagues that led to more users from the same company being engaged” 9. “Adding multiple KYC providers” 10. “Creating a sense of urgency” 11. “Gamification” 12. “Video demos” 13. “Changing the length of the free trial” ## 5. What are the most common mistakes people make when setting their activation milestone? 1. **Too early:** Often companies define activation as simply completing the sign-up flow, which alone is unlikely to show a user the value of your product, and thus is unlikely to be predictive of long-term retention. 2. **Too late:** Marketplaces and e-commerce startups often mistakenly consider “activated” to be when users make multiple purchases. Your activation milestone should be a leading indicator of having built a habit, not having proven the habit. 3. **Not predictive:** Selecting an activation metric that’s not highly predictive (i.e. at least 2x) of long-term retention and/or monetization. 4. **Not actionable:** Selecting an activation metric that’s not easily actionable (e.g. see workspace example above), measurable (e.g. using an offline event that digital growth teams can’t impact), or hard to experiment with (e.g. takes three months to get any data). 5. **Too complicated:** Selecting a multi-stage activation event with multiple different user actions, along with a time bound, where a simpler definition would give you most of the predictability you get with the overly complex definition. ## **6. What percentage of companies have a time-bound activation definition?** Based on our results, about 6% of respondents had time-bound activation, with a median of 10 days and a mode of 7 days. We believe, however, that this is far undercounting the reality, as we didn’t specifically ask about it. Also, about 10% of respondents have a two-part milestone (e.g. get 2+ bookings within 7-day time frame; share 3 documents in 90 days). ## 7. How do you determine your activation milestone, and make sure it’s causally linked to new-user retention rather than just correlated? Initially, your selected activation event will be hypothesis-driven and hence only correlative to longer-term retention and/or monetization. That’s OK. Take your best shot. It is only through structured experimentation that you will be able to tell if there is a causal relationship between your activation metric and longer-term value extraction. Specifically, you would run a series of experiments geared at improving your activation metric. As you accumulate winners, you will monitor your later-stage metric to see if they uptick as well. If so, you have proven out causality. If not, you have the arduous task before you of going back to the drawing board and iterating on your definition of an activation metric. Our advice is to not overthink it—pick a milestone that’s relatively early in a new user’s lifecycle that strongly correlates with long-term retention. Then just go. Facebook’s classic activation milestone is a great example of this bias toward action, as shared by [Adriel Frederick](https://www.linkedin.com/in/adrielfrederick/): [Watch on YouTube](https://www.youtube.com/watch?v=P3xSEIrIoC4) ### Bonus ask: How did you come up with your activation milestone? We’re curious what level of analysis teams have done to determine their activation milestone. What data did you specifically look at? What did you look for in the data? How correlated was the data with retention? If you share details on how you determined your own activation milestone, we’ll share the raw survey results with you 👇🙏 Share how you set activation milestone ### 📚 Further study 1. [Reforge: Retention and Engagement](https://www.reforge.com/retention-engagement-series) 2. [Activation: The Product Metric Everyone Thinks They Need but Can’t Seem to Define](https://openviewpartners.com/blog/user-activation-the-product-metric/) by Open View Partners *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from What is a good activation rate](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join the collective to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply to join](https://www.lennysjobs.com/talent) **If you’re finding this newsletter valuable, share it with a friend, and consider subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [38/44] How to determine your activation metric > ## Q: Learned a lot from your post on [what is a good activation rate](https://www.lennysnewsletter.com/p/what-is-a-good-activation-rate). But can you dive deeper into how to quantitatively determine your activation milestone? I’m building a multi-player B2B SaaS product. In our [post on activation rate](https://www.lennysnewsletter.com/p/what-is-a-good-activation-rate) (which is currently the [fourth most popular post of all time](https://www.lennysnewsletter.com/archive?sort=top) 😮), [Yuriy](https://www.linkedin.com/in/yuriytimen/) and I shared examples of activation milestones across hundreds of companies. But we didn’t get very concrete about how to go about nailing down your actual activation metrics. So I thought I’d do a follow-up post on this. Below, I’ll share a three-step process for finding your activation metric, with real-life examples from a dozen companies. As a bonus, I’ll expand on activation milestones for multi-player SaaS products with help from [Merci Grace](https://www.linkedin.com/in/merci/) (former Head of Growth at Slack), [Lauryn Isford](https://www.linkedin.com/in/laurynisford/) (Head of Growth at Airtable), [Karri Saarinen](https://www.linkedin.com/in/karrisaarinen/) (CEO of Linear), [Ben Williams](https://www.linkedin.com/in/ben96/?originalSubdomain=uk) (VP of Product at Snyk), [Badrul Farooqi](https://www.linkedin.com/in/farooqib/) (first PM at Figma), [Jackie Bavaro](https://www.linkedin.com/in/jackiebavaro) (first PM at Asana), and [Rachel Wang](https://www.linkedin.com/in/wangrachelr/) (Product Lead at Sprig). As always, if you have any feedback, additional suggestions, or questions, just leave a comment 👇 [Leave a comment](https://www.lennysnewsletter.com/p/how-to-determine-your-activation/comments) *Thank you to [Yuriy](https://www.linkedin.com/in/yuriytimen/) for reviewing this post, and to everyone who shared their stories 🙏* ## How to determine your activation metric Follow this three-step process: 1. Brainstorm, and explore your product usage data, for some potential “aha” moments in the user journey. 2. Run a [regression analysis](https://hbr.org/2015/11/a-refresher-on-regression-analysis) to see if there’s an inflection in retention when someone hits any of those moments, to establish a correlative relationship between some potential activation milestones and product retention. 3. Run some experiments to see if increasing the percentage of users hitting that moment increases their retention rate, to see if any of those correlative relationships translate into true causality. A good activation metric is causal for your retention, not just correlative. Here are six real stories from readers putting this process into action: > “For our new products with little or no usage data: > > 1. **We conducted in-depth interviews with our target segment and asked them, ‘What are the signals that this product is solving your problem?’** > 2. **We brainstormed a list of actions that reflect those signals.** > 3. **We ran a quantitative survey targeting the target segment, showing the list of actions and asking respondents, ‘Which of the following is the first moment that you feel that this product solves your problem?’** > > We then picked the milestone that had been selected by the majority. > > For existing products with a lot of historical data, we started with steps one and two above, but after that, we ran regression analyses to find which action completion correlated with long-term retention (30 days in our case).” > “We have a lot of qualitative data from our users because we do interviews on a weekly basis with them. So when we asked this question, we already knew about some candidates for the activation milestone. > > **We focused on when the users were getting value from our product. Then, once we had some candidates, we used data to see which of them were correlated with long-term retention. [Mark Roberge has a really good process on how to do this](https://f.hubspotusercontent10.net/hubfs/6575667/Stage%202s%20Science%20of%20Scaling.pdf).** > > After we saw some results, we just went with the one that ‘felt’ the best. That’s because we don’t have too much data. Around 300 customers. So we know there could be a lot of errors in the numbers, so we thought we shouldn’t do a decision based solely on data if the results were similar.” > “Building [a top-five e-commerce site’s] self-checkout product, we looked at retention rates across customer segments that completed various tasks successfully, for example: > > - Scanning an item > - Completing a checkout > - Placing 1, 2, 3, *n* orders per month > > **We noticed that completing a transaction was the best indicator of long-term retention. Particularly, customers who placed at least two orders retained at a 2x higher rate than with one order. So that became our activation milestone.”** > “I work in B2B enterprise SaaS with a multi-use-case complex product. We don’t have enough data to conduct a causal analysis with conversion. **Therefore, we broke down our product into three main JTBDs that prospects come to us for, as well as required behaviors that need to be set up in order to use the workspace successfully (e.g. import your data). For each of these areas, we conducted an analysis to see what events correlated most with trial retention (two weeks)**. We evaluated what the strongest correlations were and chose activation metrics for each area.” > “We initially focused mostly on qualitative insights to determine this milestone for our customer survey product—interviewing participants, doing guided onboardings and product demos, reviewing Hotjar recordings. > > **We learned that our ‘aha!’ moment occurs when they discover the analysis and automations that are possible with their results—and they can only find that once they’ve got at least one survey participant. So that became our activation milestone: getting you first survey responses.** This gave us an easy-to-measure metric that allows us to focus on building and optimizing rather than tweaking our data forever.” > “**First we selected a few candidates from the early stages of the user journey. Then we tried to validate each by looking at how they could have affected retention in Amplitude.** We came up with the final decision and are still examining if we are right about this metric.” #### How readers tactically correlate a milestone to retention: > “**We ran the correlation analysis between the key events we brainstormed and the four-week retention rate (where we saw the retention curve hit a plateau). We then checked if the frequency of hitting that event (i.e. hitting that milestone multiple times) changes the retention rate. Turned out the answer was no. Then we just tried different thresholds for the number of days by which a user needs to get to that point, and found an interesting threshold.** > > Broadly, we took all the events from after the sign-up step that a user can perform and ran the regression analysis. To get a proxy and not bother the BI team too much, I did it myself through Amplitude to see if there’s a better action that, once performed, gives a higher retention rate.” > “Our B2C free/ads-based app uses the concept of daily streaks. We found that the retention curve flattens most after the seventh-day streak, which also ties into the reward we give on the seventh day. > > **This was as simple as looking at an onboarding funnel on Mixpanel with application installed as step 1, and the day-1 streak through day-30 streak as the rest of the funnel. We then plot out the percentage drop-off until it started to flatten.**” > “**We looked at the steps in a user’s journey after they go past our marketing site, place an order, and book an appointment. For each step, we calculated the percentage of users who completed that step who went on to book at least two more appointments in the following four months (i.e. percentage of users who retained).** > > We then ordered the steps and looked for the point where that percentage jumped by at least 2-3x. It ended up being at the first appointment completion (not booking).” ### Deep dive on multi-player B2B SaaS In our previous post on the subject, we encouraged you to make your activation milestone highly actionable—something that your growth team can impact. That typically means making it a user action (e.g. “sharing your first document”), instead of a workspace- or account-level action (e.g. “workspace has 10 items and 2+ active editors by W4”). However, we’re not against also having a workspace-level activation metric alongside a user-level action. In practice, teams typically work on moving the user-level metric while monitoring the workspace-level metric. For instance, a hypothetical collaboration product may define the following activation metrics (intentionally oversimplified here): - User-level: Create 10 items and invite 2 team members - Workspace-level: 50 items created and 5 active team members In order to move the needle, your experiments will have to focus on users and their journeys, e.g. getting them to create in the product and share it with or invite others. As you do this work, you’re keeping an eye on your active workspaces, to see if the user-level effort is moving the needle on the workspace/account level. To get even more tactical, we roped in a few of the smartest folks we know to get their perspectives on setting your activation milestone for a multi-player SaaS product. #### [Ben Williams](https://www.linkedin.com/in/ben96/?originalSubdomain=uk) (VP of Product at Snyk) > “My opinion is that, yes, activation is often referred to as the ‘aha moment,’ but focusing on just that can be a trap. It’s important to look beyond that, though, and find the moment that signifies the user or team forming a habit around your product such that (as you’ve continued to call out in your post) they will be significantly more likely to continue to realize value from your product in the long term. I mention that as it’s important to disambiguate the (1) aha and (2) habit moments, as I elaborate on below. > > Most of my experience is in B2B PLG SaaS, where the core value prop is most commonly centered around a team. Unless the team realizes value, the product won’t see sufficient adoption and monetization will be unlikely. In these contexts, it should be expected that the definition of activation is team- or workspace-centric. > > **At Snyk, where the core value is teams fixing security vulnerabilities, the activation metric is team-based, and is abbreviated as ‘F30D,’ which stands for ‘fix in 30 days.’** > > Teams that fix a vulnerability using Snyk within the first 30 days have a very strong likelihood of being retained and still fixing using Snyk three months later, along with a higher propensity to purchase. Interestingly, it takes just a single fix to establish this habit. Teams fixing more than once in the first 30 days are not significantly more likely to retain. > > And there’s a user-centric element to this, of course—team- or workspace-level metrics are definitionally aggregations of what individual users are doing. So identifying the user behaviors and actions that are necessary along the way is a critical part of building effective onboarding and post-onboarding activation strategies. > > Ask yourselves: What are the user-level actions that are absolutely necessary as part of the activation process? And then consider what the user-level actions are that may not be strictly necessary but increase the likelihood of reaching the activation milestone, or serve to accelerate a team getting there. > > All of this implies an important nuance in B2B PLG SaaS, in that the different actions that need to happen as part of the activation process might be performed by different people. Often, but not always, you’ll be able to cleanly separate concerns—for example, segmenting the new-user experience for a workspace creator vs. that of a team joining the workspace. > > Visualizing all of this in an org-state model coupled with a narrative supported by data can greatly help with wider communication and evangelism around these metrics.” #### [Lauryn Isford](https://www.linkedin.com/in/laurynisford) (Head of Growth at Airtable) > “Our overall philosophy is to use a few different metrics that assess activation on different vectors, to help diagnose which precise component of activation (aha, habit forming, etc.) you’re driving. At Airtable, we look at both user- and workspace/team-level metrics. > > I’ve also found that it’s better to be precise and see a low activation rate percentage among users with a high likelihood of long-term value than to go broad and see a high hit rate among users with varied long-term retention. > > For Airtable, our overall activation milestone is W4MUA (week 4 multi-user active). It’s our most important activation metric, though we goal on and track/monitor four metrics: > > User level: > > - Activity: **W2A** (week 2 active) rate and **W4A** rate, split by builder and collaborator (our two key personas) > > Workspace level: > > - Activity: **W4MUA** (week 4 multi-user active)—at least 2 users working together in week 4 > - Sophistication: **Build rate**—percentage of workspaces that reach a degree of sophistication (intermediate use and setup) that indicates they’ve built something substantial > > I find this multi-metric approach sets the team free to work on a broader swath of onboarding or ‘getting started’ improvements. Why? We run experiments to test meaningful changes to onboarding, and we learn from those experiments precisely which metric benefits or suffers as a result, which gives us insight into how users responded to the change, e.g. did this tactic improve sophistication at the cost of collaboration?” #### [Merci Grace](https://www.linkedin.com/in/merci/) (former Head of Growth at Slack, CEO of [Panobi](https://panobi.com/)) > “To pick an activation metric, start by exploring your data for good candidates. Partner with the data team and have a strong opinion about what real, human behavior your metric quantifies. Having the product intuition to understand the value your product provides should guide the process of elimination. > > **For Slack early on, our metric was a team with more than two users having ‘a conversation worth’ of 50+ messages within the first seven days. That metric feels pretty obvious once you know it because it describes real behavior. Email between two people isn’t broken like email is for three or more people. And because it’s a team-based product, we were focused on making teams successful.** > > Once you have a candidate for your activation metric, you need to test whether it works for your business. To do that, check that these things are true: > > 1. You can ship experiments. You can build good in-product tests with enough power to make them useful. > 2. You can post wins. You are able to increase the rate of activation over months or quarters. > 3. Increasing the rate of activation does not destroy the relationship between that activation metric and longer-term retention. > > If these are true, you have a foundation to experiment with adjacent funnel levels, like investing more in demand gen or monetization.” #### [Badrul Farooqi](https://www.linkedin.com/in/farooqib/) (first PM at Figma) > “When Figma launched, designers were using a variety of products to design, build design systems, create prototypes, organize files, and, finally, work with stakeholders. Our product solved many of these problems; however, it takes time for someone to really take advantage of the full set of features and appreciate the impact this has on their company. > > As a result, we focused on having designers experience something they didn’t experience before: a single source of truth to design and work with others. This initial experience is differentiated, delightful, and helps inspire customers to continue using the product. > > **Figma’s core activation metric is collaboration in the same file with someone else within 24 hours—specifically, editing or commenting in a file after another user edits or comments in a file. Once this happens, we consider both users activated.** > > This allowed us to focus on the customers we really wanted to win: designers who worked on teams. We also found that those who experienced this aha moment were much more likely to continue using Figma and become paying customers.” #### [Jackie Bavaro](https://www.linkedin.com/in/jackiebavaro) (first PM at Asana) > “There are two ways I like to think about activation milestones: > > 1. A way to reduce the noisiness of the sign-up rate > 2. A way to detect ‘good’ users > > In Asana’s early days, we got a lot of press for being Dustin Moskovitz’s new startup. Each time a new article came out, we’d see a huge bump in sign-ups from people who were just curious. These people would have an awful retention rate because they never intended to use the tool. > > To filter them out from subsequent graphs, we sometimes used the simple milestone ‘visited twice in a week.’ This reduced noise without excluding many people who were actually using the product. > > **Of course, Asana is a*****collaborative*****work management tool. So to detect ‘good’ users, we wanted to filter to users who were collaborating on Asana. As a proxy, we counted any action that sent a notification to another user**, and we did analysis to see how many days of collaborating gave us the best balance of predictive power vs. quantity of our active user base that counted as activated. > > If I remember correctly, we used ‘collaborated 3 times in a week’ as our activation milestone. For activation, we always split the graphs by people who signed up (usually project managers) and people who were invited (usually their teammates). In addition, we’d also drill down in various ways such as people who joined on mobile vs. web.” #### **[Rachel Wang](https://www.linkedin.com/in/wangrachelr/) (Product Lead at Sprig)** > “**At Sprig, we have two activation moments. The first is for single player mode (when a free plan user creates a link survey or concept test and gets a response). Once a user expresses interest in multiplayer mode, they move into a second activation flow where PM and engineering integrates Sprig into their product experience, and receives their first response from an in-product survey.** > > Early on, we discussed whether our activation moment should be when a response is received or when a study is launched. Based on data gathered over time from activation events against customer engagement and retention, we found that launching a research study doesn’t represent that ‘aha moment’ if no responses follow. > > For free plan users, activation (or users receiving at least one response) can happen within a few minutes of creating their account and launching a link survey or concept test. > > For our paying teams, activation looks different even though we use the same metric to measure it. Paid customers integrate Sprig into their product, which enables responses to be collected even more quickly than single player mode. Additionally, targeting specific users based on actions they take within the product creates an even bigger ‘aha’ moment. We’ve found that teams who activate in-product are 21X more likely to stay active and monetize, one to even two years later. With this understanding, we’ve prioritized projects that simplify and drive technical activation, given the valuable downstream effects. > > **This activation metric (first response received within 7, 30 days) is inherently team-based. The key personas doing the analysis (PM, UXR, Design), will typically involve a developer to conduct the technical installation. Having one activation metric that captures individual and team-based activity, as well as the value our customers get from the product, has helped our team prioritize our roadmap to drive the long-term stickiness of the product.**” #### And finally, a contrarian take from [Karri Saarinen](https://www.linkedin.com/in/karrisaarinen/) (CEO of Linear) > “At Linear, we don’t measure activation. Our thinking has been that if we don’t believe a metric is making us build a better product or a company in the long run, we shouldn’t focus or worry about it. > > Many of our prospect customers come to us because they are unhappy with their current tools or they are just curious. Depending on where they are in their interest spectrum, what size of company and type of company culture they have, they will want to know different kinds of things. The tool eventually replaces their other solution, which means there isn’t a real activation until that happens. It’s all kicking the tires until it becomes the tool for the company. > > **The leading indicators to the real activation look like constant and consistent usage over the weeks, with increasing user amounts. Some of our best customers took months or years before fully committing.** > > **Usually how it goes is that there is a champion or a team who wants to use the product. Eventually a team or two might start using it, and then eventually the whole product team or company will adopt it as their main tool. By this time, we might have started some level of relationship with the customer.** > > A lot of this activation happens outside of our product, so our thinking is more how we can design a better overall experience that helps these companies to adopt Linear. Forcing some kind of artificial activation metric can make our team miss the forest for the trees and not lead to a better product or overall experience, which is our main focus.” ### 📚 Further study 1. [What is a good activation rate](https://www.lennysnewsletter.com/p/what-is-a-good-activation-rate) 2. [Reforge: Retention and Engagement](https://www.reforge.com/retention-engagement-series) 3. [How to pick your activation metric](https://rows.com/blog/post/how-to-pick-your-activation-metric) by Henrique Cruz *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to determine your activation metric](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 Featured job openings** 1. **Noom:** [Head of Product Design](https://www.lennysjobs.com/jobs/8dffb755-160d-416e-947a-0f09ccc7d11e) (Remote) 2. **Equi:** [Director, Product Management](https://www.lennysjobs.com/jobs/fb351a31-203b-47f4-8675-c9be18438c6b) (NYC) 3. **Equi:** [Senior Product Manager](https://www.lennysjobs.com/jobs/873a7791-0545-4fc5-a07c-4fa8a75da3fd) (NYC) 4. **Equi:** [Senior Product Designer](https://www.lennysjobs.com/jobs/f2f82806-0fdf-461f-beb7-bdc2771d50f9) (NYC) 5. **Playbook:** [Senior Product Manager](https://www.lennysjobs.com/jobs/608b4297-c97d-45fc-a521-70b74f6d7d65) (NYC, Remote) 6. **Zendoor:** [Head of Product](https://www.lennysjobs.com/jobs/a060efa9-8aaf-43dd-be39-60447a4bb567) (Phoenix, Remote) ## **🧠 Inspiration for the week ahead** 1. **Read:** [A 2023 planner for anyone in your life who overthinks their plans](https://www.amazon.com/Overthinking-This-2023-Engagement-Calendar/dp/1797216708/ref=sr_1_2) (My wife’s latest release with Chronicle Books) 2. **Vote:** [Here’s a handy voting guide if you’re in the Bay Area](https://sig.gy/sfendorsements/) and [a polling place locator if you’re anywhere in the U.S.](https://www.vote.org/polling-place-locator/) 3. **Listen:** [Lex Fridman and Andrej Karpathy: Tesla AI, Self-Driving, Optimus, Aliens, and AGI](https://www.youtube.com/watch?v=cdiD-9MMpb0) [Watch on YouTube](https://www.youtube.com/watch?v=cdiD-9MMpb0) **If you’re finding this newsletter valuable, feel free to share it with friends, and consider subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [39/44] How Figma builds product I’m kicking off a new series where I share how the most effective product teams build product. I’m often asked how to structure one’s product development process. What better way to learn than by studying best-in-class companies? I’m excited to launch this series with [Figma](https://www.figma.com/), one of the most innovative, interesting, and impactful product teams today. I reached out to [Yuhki Yamashita](https://www.linkedin.com/in/yuhki/), Chief Product Officer at Figma, and he very kindly agreed to answer my (many) questions. As CPO, Yuhki leads the product and design teams at Figma. Before joining Figma, he was at Uber for over four years, where he led the redesign of both the rider and driver apps. Prior to that, at Google, he was responsible for the YouTube app on iOS. Thank you for sharing, Yuhki 🙏 # How Figma builds product ![Image from How Figma builds product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9dbd5513-892a-4a64-9a26-f25ab638bde9_3000x3000.jpeg) ### **1. How far out do you plan in detail, and how has that evolved over the years?** Every year, the leadership team sets high-level company priorities to frame key strategic investments. It’s then up to product teams to chart out the path to reach those goals. A bigger planning cycle happens twice a year, with product teams revisiting their own goals and roadmaps. Halfway through each half—or in the alternating quarters—teams have an opportunity to adjust those plans based on learnings and new information. Planning cycles haven’t changed *too* much over the years. They’ve been roughly quarterly in the beginning, but over time, we began formalizing things a bit more, where there was a cadence for different altitudes (annual company priorities, larger half planning, and quarterly refreshes/adjustments). Here’s a link to our [Roadmap Review Template](https://www.figma.com/file/PQkFgQA77plJMrxMs8PXWt/Roadmap-review-template/duplicate) on FigJam, which is essentially how we do planning: ![Image from How Figma builds product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9fb1562e-75d9-489f-a911-fbd9d6e30ecd_2688x1568.png) I partner with Lawrence Luk (our Technical Program Manager) on leading the planning process. Lawrence comes up with the process, and together we handle the comms and implementation. ![Image from How Figma builds product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/5232e363-ae03-4193-b6ac-16f6caae3c36_2000x1180.png) ### **2. Do you use OKRs (e.g. objectives, key results, 70% goals, etc.) in some form?** We’ve had a fun relationship with OKRs. When I first arrived at Figma, I actually deprecated OKRs. We had dreadful companywide OKR meetings where we went through a spreadsheet tracker of hundreds of OKRs that were really more like tasks assigned to individual contributors. While it was good at creating some level of accountability, it was hard to understand why any of this mattered. I asked teams to instead define headlines—essentially, claims that they’d like to make by the end of some time period. For example, it might be something like “Figma is the most efficient way to design,” and the team offers both quantitative and qualitative ways to evaluate that claim. This helped me understand what a team was philosophically going for. It produced the right debates, and it allowed teams to be a bit more creative around how to measure whether they’ve achieved that headline (e.g. a combination of a variety of metrics and qualitative signals). It recognized the reality that some things, like the core experience of Figma, *are* hard to measure and can’t be reduced to a single metric; it gave room for teams to invest in a roadmap of exploring different KPIs versus artificially elevating a metric that ultimately people didn’t believe actually mattered. Once we hired a data-science leader, we brought OKRs back and have iterated on this format a bit. In some areas, we’ve become more sophisticated with metrics. In other areas, they still can be a bit more qualitative. Importantly, we’ve tried to keep constructs that allow for us to check on the philosophical alignment. And we’ve played around with branding OKRs more as a “commitment” to make sure that teams actually felt responsible for achieving these goals (versus it just feeling like the technical measurement of success but not something teams are indexed on day-to-day). Our OKR process is actually run on FigJam. We have teams write “commitments” (our rebranded OKRs) in these widgets that Lawrence made: ![Image from How Figma builds product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/7e5b522d-cbb8-4b36-80d9-96cdc6abb8d6_600x324.gif) ### **3. How do your product/design review meetings work?** We have design crits and product reviews. Design crits are intended to be very generative, and are explicitly *not* about making decisions. Designers share a file (often on FigJam), and we spend 10 minutes heads-down silently leaving stickies and comments to give feedback on the designs before discussing live. Product reviews are more about making decisions and debating directions. [Here’s our template](https://www.figma.com/file/m10kTJd28p5DDQC6xoCmY8/Product-Review-Template/duplicate). We have different kinds: ones where we’re trying to align on the problem or ones where we’re trying to align on the solution. One thing I encourage for both is to first present the “option space”—it’s really powerful to have a framework that maps all possible solutions or problems and use that as a device to discuss high-level tradeoffs or philosophical differences. It’s been interesting to see the evolution of the format. When I arrived, people were projecting docs and there was more of a memo culture. I switched this format to decks, mostly because I wanted to push for more of a storytelling culture (and also so my PMs can use Figma more!). And recently we’ve been using FigJam more, because it allows for more of a two-way conversation and it’s easier to gauge people’s reactions. My favorite is adding the [alignment widget](https://www.figma.com/community/widget/1030848035996871692), which lets people share/vote on their sentiments toward specific decisions; I find this so much more powerful than allowing the loudest people in the room to dictate the outcome! ![Image from How Figma builds product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/488637f5-299f-461a-b3be-f1add4a600b4_2000x1554.png) ### 4. **For design crits, who comes to these meetings, who runs the meeting, and how often do you meet?** Crits are a central part of our design culture at Figma. We have five standing slots each week, and attendance increases in size with each session over the week (e.g. Tuesdays are for tech pillars, Thursdays for Editor and Non-Editor teams, and Fridays are for all of design). Designers have control over booking them and inviting any additional teammates (beyond the pillars or teams already in attendance). We send out an automated reminder each week in Slack for sign-ups. For the larger crits, we also welcome guest “observers” from across the company. We believe it’s important for everyone to see how designers share ideas and offer feedback on projects. We encourage every employee to attend at least one crit per year, regardless of their role or position. Our crits are fairly structured, following a similar format and led by the presenting designer. Typically we get to two topics per meeting, with a rough agenda of: - ~10-15 minutes of presenting (we use Spotlight in FigJam, and attendees are welcome to comment while someone is presenting) - ~5 minutes of lingering questions - ~5 minutes of silent writing and commenting on the file We find that this format gives presenters a greater breadth of feedback, while offering a few different entry points for attendees. For more about crits, our Vice President of Design [Noah Levin wrote about our process here](https://www.figma.com/blog/design-critiques-at-figma/). ### 5. For product reviews, same question. These include all of product leadership, including Dylan Field, our CEO; project leads; and key decision makers. They happen somewhat ad hoc, but generally at critical milestones in a product’s lifecycle, and are typically facilitated by the PM whose product or work is being reviewed. ### **6. How many PMs do you have?** Twenty-two, and [we’re hiring](https://www.figma.com/careers/#job-openings)! ### **7. Do you structure your product teams around products, user types, user journey, outcomes, or something in between? Has this changed over the years?** This is also a fun debate! Right now, we organize around products and platforms. We have two products—Figma Design and FigJam—so we have two teams solely focused on the respective product. We then have “horizontal” platform teams that build features and solve problems across both products, e.g. the “Enterprise” group that focuses on making both of these products amazing for large enterprises and the “Infrastructure” group that ensures the reliability and performance of both products. This has changed a bit over the years, especially when we were a single-product company. At the time, teams were organized more around product surfaces (which roughly corresponded to use cases). Solving team structure is an art, not a science, and something that we expect to revisit continually as we grow. ### 8. **Are product and design part of the same org? Who do PMs ultimately report to, and has this changed over the years?** Design, Research, and Product Management are all part of Figma’s larger Product organization. PMs ultimately report to me. All of Product Design reports into our VP of Design, while Research reports into our Director of Product Research, and both of them report to me. And I report to the CEO. When PM was a new function (prior to my joining), they reported up to our head of engineering. ### **9. What’s your primary tool for task management? And for bug tracking?** We tend to think of Asana as our primary tool for project management and bug tracking. But we’ve leaned on different tools for different parts of the product execution process. For example, using FigJam for planning and visualizing Gantt charts. Or flowing Asana data into Coda, where we can build different views for different types of stakeholders. We love trying new things, especially as makers of tools ourselves! ![Image from How Figma builds product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/944d0001-1680-48b4-adad-17af2e9f349a_2000x1008.png) ### **10. Is there something unique or philosophically core to how the product teams and leaders think about product development?** It’s my belief that PMs are responsible for the “why.” Ideas of what we build come from anywhere (including our community!), and the “how” often comes from design and engineering. But I’m pretty insistent that PMs make it crystal clear *why* we’re solving a particular problem and *why* it’s important over anything else we could do. It’s my belief that if this is clear, everyone on the team will be empowered and equipped to make great decisions, since they understand the underlying motivation for working on something. As such, when the *why* isn’t clear, I really push my PMs to invest in internal storytelling. Aside from this, what I think is unique about our product team is our proximity to customers. We spend a lot of time with them, and crucially, we do our best to maintain a close relationship with the community. Some of our leaders regularly reach out to the community (e.g. on Twitter) to ask what they want to see us do better, and we spend time sifting through all of the amazing discussions that follow on these platforms. Some of our PMs are close enough to customers where we can just text them to ask for feedback on an idea. Dylan spends a lot of time looking at customer feedback because he wants to have a pulse on how our users feel and build intuitions around what’s important to them. So this is part of our DNA, and we’re of course lucky to have a community that is so vocal about what they want to see and willing to engage so deeply with us! ![Image from How Figma builds product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3a772d2a-bb05-43a5-8cec-d778e6f3aa73_4032x3024.png) Thank you, Yuhki! To learn more about FigJam, visit [Figma.com/FigJam](https://www.figma.com/figjam/), connect with Yuhki on [Twitter](https://twitter.com/yuhkiyam) or [LinkedIn](https://www.linkedin.com/in/yuhki/), and Figma is [hiring](https://www.figma.com/careers/#job-openings)! Have a fulfilling and productive week 🙏 *P.S. I’ve got a bunch of companies slated for this series, but I’d love to hear from you. Who else should I cover? What companies have the best product development processes, and what questions would you like me to ask them? Please leave a comment with your thoughts 👇* [Leave a comment](https://www.lennysnewsletter.com/p/how-figma-builds-product/comments) ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How Figma builds product](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 Featured job openings** 1. **Rabbithole:** [Product Manager](https://www.lennysjobs.com/jobs/1d202cac-27f9-40fb-a31d-a8d717f468e5) (Remote) 2. **Noom:** [Head of Product Design](https://www.lennysjobs.com/jobs/8dffb755-160d-416e-947a-0f09ccc7d11e) (Remote) 3. **Equi:** [Director, Product Management](https://www.lennysjobs.com/jobs/fb351a31-203b-47f4-8675-c9be18438c6b) (NYC) 4. **Equi:** [Senior Product Manager](https://www.lennysjobs.com/jobs/873a7791-0545-4fc5-a07c-4fa8a75da3fd) (NYC) 5. **Equi:** [Senior Product Designer](https://www.lennysjobs.com/jobs/f2f82806-0fdf-461f-beb7-bdc2771d50f9) (NYC) 6. **Playbook:** [Senior Product Manager](https://www.lennysjobs.com/jobs/608b4297-c97d-45fc-a521-70b74f6d7d65) (NYC, Remote) 7. **Zendoor:** [Head of Product](https://www.lennysjobs.com/jobs/a060efa9-8aaf-43dd-be39-60447a4bb567) (Phoenix, Remote) ## **🧠 Inspiration for the week ahead** 1. **Listen:** Jack White takes the challenge to name any Beatles song within one second 2. **Read:** [Wealth vs. Getting Wealthier](https://collabfund.com/blog/wealth-vs-getting-wealthier/) by Morgan Housel 3. **Watch:** [Russian SU-25 pilot ejects, recorded by his helmet-mounted camera](https://www.youtube.com/watch?v=qkT7Q5EHOAc) [Watch on YouTube](https://www.youtube.com/watch?v=qkT7Q5EHOAc) **If you’re finding this newsletter valuable, feel free to share it with friends, and consider subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [40/44] Startup to exit: Lessons from a first-time founder *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to this month’s ✨ **free edition**✨ of Lenny’s Newsletter. Each week I humbly tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out about work.* *If you’re not a subscriber, here’s what you missed this month:* 1. *[How Figma builds product](https://www.lennysnewsletter.com/p/how-figma-builds-product)* 2. *[How to determine your activation metric](https://www.lennysnewsletter.com/p/how-to-determine-your-activation)* 3. *[Discussion: What book most helped you become a better product manager?](https://www.lennysnewsletter.com/p/discussion-what-book-most-helped/comments)* *Subscribe to get access to these posts, and every post.* I first met in 2020 when I was starting my life as a solo paid-newsletter person and realized I needed to figure out health insurance. Fortunately, Substack just started offering a perk called Savvy—a monthly stipend alongside a neat tool that gave me easy access to health insurance plans. Suril was the co-founder and CEO at Savvy, which in the early days meant he was my insurance advisor, enrollment specialist, and customer support—basically my personal health insurance guru. He went on to scale Savvy to tens of millions of dollars in payment volume, and earlier this year, Savvy was [acquired by the leading incumbent](https://www.prnewswire.com/news-releases/dallas-based-tech-startup-take-command-acquires-technology-from-silicon-valley-based-startup-savvy-to-expand-benefits-platform-301558414.html) in the market. When I caught up with Suril, he shared his startup story with me, and I found it incredibly powerful and insightful. I asked if I could share it with my newsletter audience, and I’m excited to do so below. Suril was previously the youngest-ever hire on [TPG](https://www.tpg.com/)’s investment team, which led early rounds in Uber, Airbnb, Spotify, Box, and GreenSky. He’s currently advising startups on go-to-market while exploring new ideas in climate and fintech. You can connect with him on [LinkedIn](https://www.linkedin.com/in/suril-kantaria-59522922/) or [Twitter](https://twitter.com/surilkantaria). ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/881aee89-b7a8-4ff0-a4af-5c2f7bb6e141_4096x1368.png) Savvy was the first fintech platform of its kind, offering employees payment cards to buy their own health insurance. We took Savvy from 0 to 1, growing to tens of millions in payment volume across thousands of users, but sold before scaling from 1 to 100. Backed by VCs like Y Combinator and Marc Andreessen, we grew the company to a 15-person team and built the market’s first payment card technology. After three years of building, the company was [acquired in June](https://www.prnewswire.com/news-releases/dallas-based-tech-startup-take-command-acquires-technology-from-silicon-valley-based-startup-savvy-to-expand-benefits-platform-301558414.html) by Take Command, the leading incumbent in the health insurance HRA (“health reimbursement arrangement,” employer-funded health benefit plan) space. While our exit was not a Figma-level home run, it felt like a single to right field and the best path forward for the company. Over the years that we built Savvy, many founders, including from the YC community, would reach out seeking advice. While I always made time for these calls, I often left feeling that I’d shortchanged my peers. There were still so many problems facing our nascent startup, how could I possibly have strong perspectives about another company’s challenges? Now that Savvy has been acquired and I’ve left the day-to-day behind, I’ve taken some time to reflect on our journey and what I wish I had known along the way. Below are the biggest lessons. ## 1. Don’t found a startup. Find a problem. There’s a plethora of writing on [how to identify](https://www.paulgraham.com/startupideas.html#:~:text=The%20very%20best%20startup%20ideas,Facebook%20all%20began%20this%20way.&text=Why%20is%20it%20so%20important%20to%20work%20on%20a%20problem%20you%20have%3F) and [evaluate good startup ideas](https://www.lennysnewsletter.com/p/validating-your-startup-idea?triedSigningIn=true)—we followed none of these. In San Francisco in my 20s, I was in the echo chamber of Silicon Valley looking in. I had been an investor and board observer of unicorn founders and an early employee at a hypergrowth startup. This, I thought at the time, suggested that my pattern recognition was strong and, not one to sit on the bench, I was ready to build a startup. The inspiration for Savvy came after months of research with my friend Kevin Cox on how to fix U.S. health care’s antiquated payments system. These early weeks were a slog. Fresh off quitting our jobs, we toiled from an uncomfortable dining room table, hungry to find a problem to pursue. One day while driving across SoMa, we noticed a billboard stating that the biggest industry conference in health insurance would be taking place in SF the following week. ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/525b11fa-f907-41a0-b148-0aa48faa7a4f_1778x417.jpeg) We were giddy—we immediately scoured LinkedIn to find a way in. After many dead ends, we found our mule in a health insurance sales rep named Ari. He was energized by our hustle and invited us to shadow every meeting he had lined up at the conference. His ask in return? A couch to crash on; hotels were priced through the roof. We had ourselves a deal. ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/714d9002-a5e9-4b8a-8aee-5511bbeb66ac_1600x1127.png) Ari shepherded us like Moses across the conference floor, stopping seemingly every 10 meters to greet an acquaintance. For us, seeing the underbelly of the industry was eye-opening and largely monochromatic—the majority of folks were 55-year-old white men in wool blazers. The “technologists” in booths were demoing what looked like my middle-school online learning software. But just a handful of chats gave us more perspective than months of online research. What’s more, we left feeling energized to grab this aging industry by its horns. After the conference, we spent countless more caffeine-fueled hours researching the payments companies we had met. One observation was consistent: the products in the space were “old-school.” We could build a modern software offering, but what specifically to build? We ultimately landed on the debit cards that accompany employer health plans for out-of-pocket spending. When personally using these FSA and HSA debit cards in the past, we had experienced a high-friction process that required uploading receipts on 1990s interfaces. Paired with the fact that employers are the primary payers in U.S. health care, we had conviction that we’d found the right “wedge” into modernizing health-care payments. ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/2cc9d04d-65a1-40e5-8d68-dfb51615869d_2516x1518.png) Without speaking to a single user, we developed a vision (and written memo) for an alternative future in health-care payments. Visions without defining a problem are dangerous. They are often solutions to made-up problems or, even worse, alternative realities to things that are working just fine. **Looking back, the lesson is clear. Good startup ideas are not about pattern recognition, modernizing, or finding wedges—they are about solving a specific problem.** In the weeks that followed, we brought our vision to prospective customers to validate the market need. At first, we received excitement and validation. However, we realized our first several “interviews” were actually sales pitches (e.g. “here’s this cool new thing, what do you think?”). Far too biased to get any real signal. After reading up on customer interview best practices, we tried again, this time [with an unbiased script](https://www.momtestbook.com/). Not one person brought up health debit cards as a problem they needed to solve. We concluded that our vision, which we had spent many painstaking hours developing, was off the mark. Back to the drawing board—or in our case, the dining table! ## 2. VC funding is my drug ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd4cfb6b-f17d-4455-a5e1-23e56788cb49_512x512.png) VC funding is a powerful drug. You sell your vision to people with money, people who shower you with praise, people with huge Twitter followings, people who write blog posts about your greatness and once-in-a-generation ability. You feel amazing. However, the high fades and is accompanied by amplified lows. Most people don’t talk about the pressure, the late-night investor calls, the rising expectations, the compressed timelines, the recurring fundraising circuit, and the constant external signaling. ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a68ffbda-a158-42a1-aafb-65fab1f00b7c_4032x3024.jpeg) **If there were a Surgeon General warning on this drug, it might read, “Beware. VC funding may lead to dependence and complication. Some users have reported extreme anxiety, loss of control, and nightmares of being on a never-ending treadmill.”** Don’t get me wrong—venture capital can supercharge your company’s growth. And it’s often said that it’s easier to raise early, on the promise of traction, without real data to scrutinize. If you take this road, know that your company is a ticking time bomb and managing cash burn is your only defense. There will be no shortage of external pressures to spend more now and raise more later. In March 2020, our decision to raise a seed round was influenced by being in YC. It’s just what YC startups do. The mantra was if you *can* raise at Demo Day, you *should* raise. We proceeded to line up six investor meetings per day for the next two weeks. But then came the tectonic shift. News of a deadly virus spreading globally sent the markets pummeling. We’d wake up to 3% to 4% drops in the S&P daily. We shifted all our meetings to Zoom, but investors were clearly distracted—risky seed checks were not the priority over their portfolio companies in chaos. The venture market appeared to dry up that Covid spring. For us, it became a game—if select YC peers were closing rounds, why not us? We just needed to dig our heels in and grind, we thought at the time. Days later, San Francisco instituted shelter-in-place. My co-founder and I fled to Tahoe so we could escape lockdown and pitch from the same room. One week turned into six, but we still hadn’t found a lead investor. Our pitch that health care was on the crest of massive change and that Savvy would be first-to-market was fine, but VCs wanted to know how the business would fare in a pandemic. It was an impossible question—no one had any idea what the pandemic would look like, let alone how any single business would perform. But we crafted a narrative: the pandemic would be an accelerant, of course! After three months of daily investor pitches from our Tahoe hideout, we closed a $2.5 million round. We were relieved, but mostly excited to go back to building and get the hell out of our cabin! Looking back, I question why we raised when we did. We didn’t have nearly enough conviction in the business ourselves. While we had a great story for investors, our metrics weren’t compelling, with only a handful of beta customers with whom we hadn’t yet spent any time. We allowed Demo Day FOMO and fear of a market crash to drive our timing. Why is a preemptive raise bad? For one, it’ll take longer to convince enough investors to close your round. What’s more is that by pitching investors on a vision, perhaps without realizing it you’re committing to a set path for the company. Despite a pandemic-altered landscape, we didn’t course-correct from our vision, telling ourselves “if investors backed us, we must be on the right path.” This vote of confidence from investors ultimately delayed us from seeing the truth—the market had shifted and we needed to pivot. Not too long after our fund-raise, investors began asking us, “When is Savvy going to raise a Series A?” and “Why aren’t you hiring faster?” They would point to peer startups with ballooning headcount on LinkedIn. Some were even raising more capital just months after their last round. We had to constantly remind ourselves to ignore these extrinsic signals. As founders, we were the only people in the trenches digging for signs of product-market fit. Finding PMF should be the only input driving the decision to increase cash burn. David Hsu, the founder of the low-code unicorn Retool, shared with me that he kept Retool’s team to only the co-founders for a full year after his seed fund-raise. His logic? A nimble team can pivot quickly until achieving PMF. What’s most important in the early days is that you spend slowly until you find traction and have reason to pour gasoline on sales and product. One final cautionary tale. In the early days, our friends and investors would often congratulate us on each new hire. Absent other signs of traction, growing the team seemed impressive from the outside. Accepting these accolades was a mistake. Headcount is a cost center that requires precious time to grow and manage.[1](#footnote-1) The only metric that merits congratulations is product traction/PMF. Fight the urge to use vanity metrics (like team size or news mentions) as a sign of progress. ## 3. In public we trust ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/364c72fc-b0cc-4938-b924-7f247e4be9fa_1522x1144.png) There’s something sexy about the title “founder of stealth startup” on LinkedIn. It’s mysterious and entices visitors to go deeper into your profile. You’re part of a secret club of 9,000 other stealthy builders. Allure aside, I’ve since learned that building in stealth is always a mistake. I’ve been part of a stealthy but now successful AI startup, and I’ve observed several stealthy founding teams. One observation was consistent: stealthiness inhibits frequent market signal and greatly increases time to PMF. Any perceived gains of building an advantage over competitors by being stealthy are lost when you inevitably take longer to achieve PMF. For companies building new markets, like Savvy, competitors may even be valuable in evangelizing the new market. If a rising tide lifts all boats, you want the tide to rise faster! I’d take a completely opposite tack—be a public startup. As the VC Bill Gurley said to us, you should “shout from every rooftop, tell whomever will listen.” Startups don’t win because their idea is original. In fact, in the early days, many people will think your idea is dumb (which doesn’t matter, because these people are not your customers). Startups win because of hard-earned execution. Building in public invites attention from all sorts of prospects: customers, employees, and even investors. All these inbounds may not be useful, but from my experience, a subset are typically accelerants for your business. In the early days at Savvy, our inclination was to build quietly. It was easy to justify—we were in a new market with a perceived first-mover advantage. We weren’t ready for the spotlight, and competitors would surely steal from our A+ product and marketing. Despite YC’s urging, we delayed a public launch, blog posts, or LinkedIn posts. In doing so, we inadvertently delayed sales inbounds from customers, an understanding of the segments most in need of our product, and market feedback. When speed is your only advantage as a startup, the costs of building in stealth far outweigh the benefits. For us, stealth mode delayed key learnings about our product’s fit with potential market segments, which likely amounted to a six-month setback.[2](#footnote-2) Fortunately, we realized our misconception and eventually changed course. I can’t say the same of other startups I’ve observed that are still operating in stealth, years after founding. ## 4. Are you riding a wave or a riptide? ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/19b733ee-1fd0-4fd2-ae58-075bcb61067d_1024x1024.png) As first-time founders, we had heard of startup accelerator Y Combinator’s legendary history incubating young founders and their early startups (e.g. Stripe, Airbnb, Instacart, DoorDash, Coinbase). When starting Savvy in the fall of 2019, we applied with our idea to build modern employee health debit cards (e.g. FSA, HSA, etc.). Good news: YC selected us for an in-person interview! Not-so-great news: a week before the interview, we concluded from customer research that our idea didn’t have legs. Around this time, I received a cryptic email from a VC: “This looks interesting … check it out.” Attached was a draft copy of a [new federal health insurance regulation](https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/new-final-rule-lets-employees-use-hras-to-buy-health-insurance.aspx) that the Trump administration was working on. Employers could use payment cards similar to FSAs to let employees purchase their own health insurance plan from the open market (also known as the individual, ACA, or Obamacare market). This new option would disintermediate employers from selecting group health plans. Our immediate thought was that this new regulation-driven market was going to be massive, and we could be first movers. Our next thought was that although we had never sold health insurance, we needed to pivot quickly given our YC interview in three days. A poorly researched idea seemed better than a bad idea, so we pivoted to building payment cards for employee health insurance. In the final days leading up to our YC interview, we pored over the draft of the new regulation. One problem—we had little understanding of who would adopt this health insurance model. We needed to talk to customers, fast. An epiphany: the fastest way to talk to businesses was to just show up. We marched down Chestnut Street in SF and knocked on every small-business door. We proceeded to ask about their health insurance. Armed with these insights, when interview day came around, we confidently addressed the intense, 4-on-2 interview panel for precisely 10 minutes. Hours later, we received a call accepting Savvy into YC. Once YC kicked off, our focus quickly became growth. Each week, YC partners pulled us into “group office hours” with five other startups to grill us on customer traction. These sessions lit a fire. Terrified of being caught with our pants down in front of our peers, we sprinted seven days a week to sell our product to whomever would listen. When I say whomever, I mean literally anyone who would entertain a conversation. At YC’s first batch dinner, we recognized that drinks were missing from the menu. Founder thirst became our opportunity. We showed up with a cooler full of sparkling waters and a makeshift sign that read “Benefits & Bubbles.” In exchange for signing up with Savvy, we handed out drinks. To this day, that lemon-sparkling-water stand remains our highest-ROI marketing tactic. ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e7cdd1ad-dacf-4674-9e88-b5b3e2a8d621_4032x3024.jpeg) Even without a clear grasp of what problem we were solving and for whom, we began selling. But therein lay our mistake. We were amateur artists painting frescoes, blindfolded. Our thinking at the time seemed intuitive. The market’s willingness to buy would show us whether there was a big problem to solve. If there was no demand for our product, the signal would be clear. If we saw strong pull with rapid word-of-mouth growth, the market fit would also be obvious. However, there is a dangerous in-between outcome, which is precisely where we landed: steady sales with no acceleration. ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d1ca2084-50ff-4850-9a2e-2c3abb028aac_1922x1540.png) As customers ramped, it felt like we were winning. We even signed up several large companies, which 10x’d our user base overnight. In order to give these clients an incredible experience, we prioritized their feedback. With a two-person engineering team, we couldn’t always build their feature requests into the product, so we designed manual hacks. One large customer wanted Savvy to front all insurance payments on behalf of users. We began fronting funds (effectively a six-figure loan), remitting payment for users, reconciling everything in a spreadsheet, and billing the customer at month-end. We told ourselves that one day we would build technology to automate this, but for now, we’d take on the operations burden to keep the customer happy. Now, doing manual things that don’t scale isn’t bad strategy. Oftentimes, it is the optimal way to scope features and develop customer loyalty. Unfortunately for us, our large, early customers all churned. We found ourselves in a death spiral—these poor-fit customers took up ops and eng time, but before we could release features catering to their problems, they left us. What we missed at the outset is that they were bad-fit customers all along, simply willing to try a bite of the apple. As the cracks of our early startup product became exposed, they were happy to throw away their unfinished apple and pick another. Ultimately, they weren’t desperate enough for our solution. Said another way, they didn’t have a problem that we could uniquely solve. **Key learnings from this part of our journey:** 1. Take the time to build conviction in a specific problem before pitching sales and writing code. This could take weeks or even months, but early customer research will accelerate time to product-market fit later. During this process, it will be easy to paint convincing but dishonest narratives. It’s critical to be brutally honest. The problem must be obvious and specific, and you should know who “good fit” customers are. Focus only on good fits. 2. Perhaps counterintuitive: Pre-PMF you’re looking for overwhelming pull from the market or no sales at all. Remaining in between in the push-to-market territory for too long is dangerous. Some companies can find their way out of this riptide and onto a wave, but many (like Savvy) will not break free. If you find yourself paddling in the riptide, double down on customer research to understand whether your product or execution is limiting word-of-mouth adoption or if your assumptions on problem or market are incorrect. If you decide to keep building, be maniacally focused on customer behavior as you iterate and look for signs of market pull. ## 5. Losing conviction Years after founding Savvy and emerging from Covid spring with $2.5 million in funding, we found ourselves once again searching for signal. After several months of tepid growth, we became pessimistic that our product was solving a big enough pain point for users. We ran experiments to see if we could sell to a different segment of the market who we thought more urgently experienced the problem our product solved. Again, we ran into issues selling. The buyer was apathetic and ill-incentivized to change. They often punted the buying decision to an outside advisor or broker. These advisors had their own set of misaligned incentives (welcome to U.S. health care), and the select few who were interested weren’t looking for the point solution we built. ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/717ec84a-ec9d-42aa-9eea-5cb95fc056d4_4032x3024.png) When you bring a new product to market, you may make discoveries about your market or customer that reduce your belief in your product. These insights will not be immediate—it may take years of selling before arriving at a conclusion. You’ll likely try to pivot. Much has been written about the art of the pivot: altering your business while keeping one foot on the ground. Change the buyer, change your pricing model, change the product to serve a different user or use case, but stay focused on the same problem and market. However, pivoting may not work. What if you lose conviction in the market altogether? Earlier this year, we were asking this very question. Savvy was largely a bet on a new, regulation-driven market. When we lost conviction in our market’s growth, we turned to our investor and former Andreessen partner Louis Beryl for advice. He lit a fire: “It sounds like you’ve lost belief. The worst thing you can do now is do nothing. What you do is up to you, but by the next time we talk, you should have made a move.” We considered our options: shut down, restart, or sell the company. Shutting down requires little explanation—you let go of your team and shut your doors. Restarts are an option for companies like ours that still have cash remaining. The inherent difficulty is that after years focused on one problem with an existing team, you must start from scratch on something totally new, likely with a downsized team. Though hard to pull off, there are examples of success. Some years ago, a failing gaming startup performed a restart by taking its in-game communications technology and morphing it into an enterprise communications tool. This tool, of course, is now Slack. The option that is perhaps most desired by founders, but that they have the least control over, is the elusive acquisition. Certainly at Savvy, an acquisition seemed most compelling—returns for shareholders, a landing spot for the team, and a chance for our product to live on. While the road was a winding, serendipitous one, we successfully closed on an acquisition by the market leader in our industry. There is no one path to getting acquired, but I’ll share some tales and takeaways from our experience. ## 6. How to land an acquisition as a startup **If acquirers come knocking, serve them tea.** Some companies have acquisition targets on their backs seemingly since inception. They’ll receive unsolicited offers early, typically from a larger player in their industry. If you’re in this envious position, resist the urge to ignore these suitors even if the timing is off. When I was growing up in India, guests often showed up at our door uninvited. My family would always welcome them in, serve chai tea, hear the latest happenings, and send them off. Do the same with acquirers. Take the time to understand their interest and schedule infrequent touch points as you build. Savvy received an acquisition offer from Gusto early on. Naively, we declined without entertaining the offer and failed to engage them as we scaled. Years later when we were ready for acquisition talks, Gusto’s “strategy had shifted.” **Startups are bought, not sold.** As a nascent, unproven business, a startup actively looking for a buyer risks being perceived as a failing, problem-ridden entity. For this reason, as our advisor and One Medical CTO Kimber Lockhart explained to me, startups are bought, not sold. Is it possible to avoid this negative signaling? Yes, with some tact. When we spoke with potential acquirers, we hid our true intention behind the guise of partnership interest. We used a product partnership as our Trojan horse of sorts. As soon as we felt strong pull, we’d raise the idea of doing something “more strategic.” Now, is this a 100% transparent way to start a relationship? Maybe not, but it worked for us to successfully seed acquisition interest without raising doubts about our company. Proceed at your own risk! **Time is not your friend.** Acquisition processes are extremely fickle. They require escape velocity to overcome the inertia within big companies. We navigated many conversations where momentum seemed strong, only to be followed by radio silence. Time is not on your side—the more drawn-out processes become, the higher the likelihood of stalling momentum or a dissenting internal stakeholder. When we signed the term sheet to sell Savvy, we granted a four-week exclusive due diligence period. Just two weeks into this period, the stock market began a free fall, which we now recognize as the start of the current recession. With each passing day, we’d wake up to the S&P opening 1% to 3% lower. For technology stocks, our nearest comps, it was a bloodbath. While the deal was nearing the finish line, the acquirer was taking their sweet time (to be fair, they had two weeks of exclusivity remaining). I knew that we were now in wartime—I needed to ratchet up the intensity to get the deal closed. On every call with the acquirer to negotiate the final purchase agreement, I told them we were ready to sign imminently. When our lawyers were slow to respond over email, I implemented twice-daily standup calls to increase their velocity. Anytime I received an email from the acquiring company’s CEO or CFO, I replied within the hour. If I didn’t hear back quickly, I sent a text message referencing my email and reminding them of my enthusiasm to get the deal done. While perhaps aggressive, I knew that a bear market is no time to do big M&A deals. Time was not on our side. In just 48 hours, we finalized the legal documents and were in a position to sign. It was now Thursday. I knew that if we slipped into Friday, there was a risk the deal wouldn’t close until the following week. At 8 p.m. Central time, the CFO called me to say that they were missing signatures from their NYC-based board members. When I heard this, I was near ready to hop on a plane to New York and personally knock on the board members’ doors. I chose not to express this sentiment, but I let her know that I had an urgent personal issue on Friday and we needed to get this done tonight. She proceeded to text and call the outstanding individuals. Fortunately, they weren’t the types who went to bed without checking their phones, and submitted their consent. An hour later, the CFO called me again. This time, she was locked out of her bank account and couldn’t initiate the wire. She asked if we could push signing to Friday, given that it was now 10 p.m. her time. I could sense her fatigue, but even one day could risk the deal closing, with the turbulent macro backdrop. I pushed back and offered to call customer support on her behalf. Fortunately, she was able to get hold of her admin to unlock her account. Minutes later, we closed the deal. Time is not your friend—don’t be afraid to have uncomfortable conversations to get a deal across the line. **Seek out decision makers.** There’s a narrow set of people who can make an acquisition decision quickly. Typically, you’ll find a C and O in their title. This may be obvious, but get in front of this person without wasting time with subordinates. Your path in matters—a subordinate introducing a deal is much less compelling than the CEO bringing you in. While this wasn’t our ultimate path in, your investors may have board-level connections. These board-level intros can often be the highest-impact path in, so pursue this angle aggressively if available.[3](#footnote-3) **Build an acquisition funnel.** We ran our acquisition process like a sales pipeline—build a large top-of-funnel, qualify leads quickly, and spend the majority of time with likely-to-close prospects. At the outset, we identified around 50 companies in our industry that would be most interested in our product. The list included companies across health-care payments, insurance brokerage, insurance, and HR software. When culling the list, we took into account size and scale (with a bias toward well-capitalized, mature companies), ability to move quickly (with a bias toward venture or PE-backed companies), and our likelihood of penetrating senior leadership (insert plug for LinkedIn Sales Navigator). **Stop not till your (realistic) goal is reached.** Startup acquisitions come in a few flavors: IP (technology/product acquisition), team (acqui-hire), or both (company acquisition). An IP or company sale are most accretive and least likely. The acqui-hire is simply a vehicle for another company to interview and selectively hire your team, though surprisingly not a cakewalk to secure. You should be honest about what’s realistic for your company and let this outcome inform the types of companies you reach out to. At Savvy, we were hopeful that the market would value the technology we had built. Many companies in the industry are unsophisticated when it comes to technology—our product, particularly with its unique payments features, would be an accretive acquisition. But we didn’t want to be left at the altar, so we ran parallel processes, one for company acquisition and another for acqui-hire. We started with 50 potential acquirers, but the list narrowed after two months of conversations (where we found a way in) to just a handful of interested parties. A Sequoia-backed health-care staffing company was moving fast to acquire our team. As we were finalizing that conversation, we received last-minute interest in a full company acquisition from the market leader in our industry. We were torn. We knew our team was excited about joining a hyper-growth, Sequoia-backed startup. That said, we wanted to maximize value and also see the fruits of our three-year labor live on. We decided to be transparent with the health-care incumbent to understand if they’d consider buying only our technology, IP, and customers, leaving our team out of the equation. Fortunately, they were enthusiastic. We were lucky to get both processes across the finish line. [Savvy was acquired](https://www.prnewswire.com/news-releases/dallas-based-tech-startup-take-command-acquires-technology-from-silicon-valley-based-startup-savvy-to-expand-benefits-platform-301558414.html) by Take Command Health in June 2022, and much of our team joined Clipboard Health around that same time. ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b421483d-73c7-46f7-a773-ac8396dd2e59_1193x1159.jpeg) *Thank you for sharing your story, Suril 🙏* *Suril is currently advising startups on go-to-market while exploring new ideas in climate and fintech. You can **follow his journey at*** *or connect with him on [LinkedIn](https://www.linkedin.com/in/suril-kantaria-59522922/) or [Twitter](https://twitter.com/surilkantaria).* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from Startup to exit: Lessons from a first-time founder](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join the collective to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply to join](https://www.lennysjobs.com/talent) ### ❤️‍🔥 Featured job opportunities 1. **Antimatter:** [Head of Design / Senior Product Designer](https://www.lennysjobs.com/jobs/6c4bd650-9652-481c-93d0-33c2bba88125) (NYC) 2. **Graphite:** [Sr. Director of Product—B2B SaaS](https://www.lennysjobs.com/jobs/8fbce839-966c-496b-bd08-48f297febd76) (Remote, US) 3. **Teal:** [Sr. Growth Marketing Manager](https://www.lennysjobs.com/jobs/97200c8c-3264-4768-b135-3a91f8dd3d32) (Remote, US) 4. **Rabbithole:** [Product Manager](https://www.lennysjobs.com/jobs/1d202cac-27f9-40fb-a31d-a8d717f468e5) (Remote) 5. **Equi:** [Director, Product Management](https://www.lennysjobs.com/jobs/fb351a31-203b-47f4-8675-c9be18438c6b) (NYC) 6. **Noom:** [Head of Product Design](https://www.lennysjobs.com/jobs/8dffb755-160d-416e-947a-0f09ccc7d11e) (Remote) 7. **Equi:** [Senior Product Designer](https://www.lennysjobs.com/jobs/f2f82806-0fdf-461f-beb7-bdc2771d50f9) (NYC) 8. **Equi:** [Senior Product Manager](https://www.lennysjobs.com/jobs/873a7791-0545-4fc5-a07c-4fa8a75da3fd) (NYC) 9. **Zendoor:** [Head of Product](https://www.lennysjobs.com/jobs/a060efa9-8aaf-43dd-be39-60447a4bb567) (Phoenix, AZ, Remote) 10. **Playbook:**[Senior Product Manager](https://www.lennysjobs.com/jobs/608b4297-c97d-45fc-a521-70b74f6d7d65) (NYC, Remote) **If you’re finding this newsletter valuable, share it with a friend, and consider subscribing if you haven’t already.** Sincerely, Lenny 👋 [1](#footnote-anchor-1) It also takes away from your ability to stay nimble. When we were faced with the decision to pivot or pursue a sale, our team weighed on us. We felt that a pivot would be painful at our size, and the potential products we could pivot to were limited if we wanted to keep everyone on the team. This reality led us to pursue a sale. [2](#footnote-anchor-2) It’s challenging to quantify the real impact. Perhaps we would have received more leads and learned from an inability to close sales that our product wasn’t solving an urgent need. We wouldn’t have been fooled by our early growth metrics, and maybe we would have pivoted within months of launch to a different product. We’ll never really know. [3](#footnote-anchor-3) Friendly reminder: Make it easy for your investors to work for you. Do the research, identify the person at the company you’d like to meet, and write the introductory email text. --- ## [41/44] Lenny’s Newsletter Holiday Gift Guide 2022 Last year, I experimented with a [holiday gift guide](https://www.lennysnewsletter.com/p/lennys-holiday-gift-guide), and it proved to be quite popular (and really fun to do). So here we go again 🎁 🎉 🥳 The items below are products that I’ve used and found to be amazing, along with a bunch sprinkled in that I discovered through [this killer Twitter thread](https://twitter.com/lennysan/status/1592290156002054144?s=20&t=4N3kAJ6nfXIzSlRfww7mgg). None of these products have affiliate links, and I’m not making anything off recommending any of them. For the couple of products where I have a connection, I’ll note it in the description. Are there any other products you’ve found game-changing and want to share with readers? Leave a comment 👇 [Leave a comment](https://www.lennysnewsletter.com/p/lennys-newsletter-holiday-gift-guide/comments) ### 🎉 WIN $500 IN PRIZES FROM THE GIFT GUIDE 🎉 As a bonus, you can enter to win a grab bag of products chosen from the gift guide below, valued at $500. Simply subscribe or follow Lenny’s Podcast on [Apple](https://podcasts.apple.com/us/podcast/lennys-podcast-product-growth-career/id1627920305) or [Spotify](https://open.spotify.com/show/2dR1MUZEHCOnz1LVfNac0j), and fill out this form 👇 Enter to win The grand-prize winner will be notified on December 5th. The contest is open only to U.S. residents (due to international shipping complexity). If you’re already subscribed, you’re also eligible to enter. Good luck! ![Image from Lenny’s Newsletter Holiday Gift Guide 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/34d18c07-2f47-44d6-9e81-6dff45571f29_2048x1024.png) ## Sleep and health 1. **[WAOAW Sleep Mask](https://www.amazon.com/dp/B09712FSLY)**: Originally discovered through [Tim Ferriss](https://tim.blog/), now an every-night staple. My wife and I have tried a dozen sleep masks, and this one has stuck. I suggested it to a friend who was having trouble sleeping, and here’s what he sent me later that week: “That sleep mask is a game changer. Time will tell, but this truly may have a bigger impact in my life than any of your podcast episodes 🤣” ![Image from Lenny’s Newsletter Holiday Gift Guide 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/26c8dddf-625c-45c7-980b-88869fe8fd07_1500x1500.jpeg) 2. **[Future](https://www.future.co/):** After years of rarely working out at all, I now work out three times a week and am the strongest and fittest I’ve been in a long time. Future matches you with a coach who designs custom workouts for you, keeps you motivated, and adjusts to your goals, equipment, and travel plans. The team at Future gave me a special code that will get you the most generous deal they’ve ever offered: your first month completely free. Just use this link to get the deal: [https://future.co/lenny](https://www.future.co/lenny). *[Disclaimer: I’m a small investor in Future. But I only invested after getting hooked on the product.]* ![Image from Lenny’s Newsletter Holiday Gift Guide 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/58dcdd10-0db8-436a-a0ea-e990c79b5556_1660x1660.jpeg) 3. **[Withings Body+ Smart Wi-Fi bathroom scale](https://www.amazon.com/Withings-Smart-Wi-Fi-bathroom-scale/dp/B071XW4C5Q/ref=sr_1_6?keywords=withings+scale&qid=1669400397&sprefix=withing%2Caps%2C195&sr=8-6&ufe=app_do%3Aamzn1.fos.fa474cd8-6dfc-4bad-a280-890f5a4e2f90)**: Pairs well with the above. 4. **[Waking Up gift subscription](https://app.wakingup.com/purchase-gift-card)**: Give the gift of mindfulness 🧘 5. **Water bottles**: Gotta stay hydrated. I don’t have just one personal favorite, so here are a few great options: [Takeya](https://www.amazon.com/Takeya-Originals-Vacuum-Insulated-Stainless-Steel-Bottle/dp/B0188QBELG), [Zojirushi](https://www.amazon.com/Zojirushi-SM-SA60-BA-Stainless-Steel-20-Ounce/dp/B00HYOGUM2?crid=3GHH1BZ4GZ13B&keywords=zojirushi+coffee+mug&qid=1668471359&sprefix=zojirushi+coffee+mu%2Caps%2C118&sr=8-2&th=1&linkCode=sl1&linkId=4e0fff4bff80ecc29bfa3d12a9603736&language=en_US), [Luma](https://drinkluma.xyz/), [Larq](https://www.livelarq.com/), and the faithful [YETI Rambler](https://www.amazon.com/YETI-Rambler-Stainless-Insulated-MagSlider/dp/B07BMDSS3L?th=1). ## Work 1. **[Opal](https://opalcamera.com/):** My go-to webcam. DSLR quality in a beautifully compact webcam. Use code “Lenny” to get past the waitlist. *[Disclaimer: I’m an investor, but only because I love the camera so much.]* ![Opal webcam review: DSLR-style effects for Zoom calls](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/0eafb7d6-fcef-4f22-bd56-2ee574419758_1280x720.jpeg) 2. **[Shure MV7 USB Microphone](https://www.amazon.com/Shure-Microphone-Podcasting-Voice-Isolating-Technology/dp/B08G7RG9ML)**: My go-to mic for podcasting, and now all the things. Don’t forget to grab a tripod or boom arm. 3. **[Anker Nano II 65W USB C Charger](https://www.amazon.com/Charger-Anker-Adapter-Foldable-Compact/dp/B08T5QN2TR/ref=sr_1_3?crid=365CEU5CRZLSF&keywords=nano+ii+65w&qid=1669400042&sprefix=Nano+II++%2Caps%2C135&sr=8-3)**: A compact (i.e. great for travel) replacement for your MacBook Pro/Air charger brick. [Here’s another version](https://www.amazon.com/dp/B09C5RG6KV/ref=emc_b_5_t) that has more ports. 4. **[Double](https://www.withdouble.com/):** Get your colleague (or partner) a virtual executive assistant. I recently got an EA through Double, and it’s been a total game changer. 5. **[Vuori](https://vuoriclothing.com/) joggers ([men’s](https://vuoriclothing.com/collections/joggers?configure%5BclickAnalytics%5D=true&configure%5BuserToken%5D=anonymous-dc4a5211-c61a-4460-958f-c075cb8ba2fd&configure%5Bdistinct%5D=true&configure%5BmaxValuesPerFacet%5D=100&configure%5Bfilters%5D=%28requires_shipping%3Afalse+OR+online_inventory_available%3Atrue+OR+tags%3Aback-in-stock-enabled%29+AND+NOT+tags%3Afindify-remove&configure%5BattributesToRetrieve%5D%5B0%5D=objectID&configure%5BattributesToRetrieve%5D%5B1%5D=title&configure%5BattributesToRetrieve%5D%5B2%5D=handle&configure%5BattributesToRetrieve%5D%5B3%5D=image&configure%5BattributesToRetrieve%5D%5B4%5D=tags&configure%5BattributesToRetrieve%5D%5B5%5D=product_type&configure%5BattributesToRetrieve%5D%5B6%5D=variants_min_price&configure%5BattributesToRetrieve%5D%5B7%5D=variants_max_price&configure%5BattributesToRetrieve%5D%5B8%5D=variants&configure%5BruleContexts%5D%5B0%5D=joggers)/[women’s](https://vuoriclothing.com/collections/womens-joggers?configure%5BclickAnalytics%5D=true&configure%5BuserToken%5D=anonymous-dc4a5211-c61a-4460-958f-c075cb8ba2fd&configure%5Bdistinct%5D=true&configure%5BmaxValuesPerFacet%5D=100&configure%5Bfilters%5D=%28requires_shipping%3Afalse+OR+online_inventory_available%3Atrue+OR+tags%3Aback-in-stock-enabled%29+AND+NOT+tags%3Afindify-remove&configure%5BattributesToRetrieve%5D%5B0%5D=objectID&configure%5BattributesToRetrieve%5D%5B1%5D=title&configure%5BattributesToRetrieve%5D%5B2%5D=handle&configure%5BattributesToRetrieve%5D%5B3%5D=image&configure%5BattributesToRetrieve%5D%5B4%5D=tags&configure%5BattributesToRetrieve%5D%5B5%5D=product_type&configure%5BattributesToRetrieve%5D%5B6%5D=variants_min_price&configure%5BattributesToRetrieve%5D%5B7%5D=variants_max_price&configure%5BattributesToRetrieve%5D%5B8%5D=variants&configure%5BruleContexts%5D%5B0%5D=womens-joggers))**: I’m not embarrassed to say I wear these basically 90% of the time when I’m at home. And 100% of the time during my podcast interviews. Addicted. ![Sunday Performance Jogger | Indigo Joggers | Vuori Clothing](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9811df80-a1f7-4115-b862-95c00478c6ee_1240x1240.jpeg) 6. **[Lenny’s Newsletter](https://lennysnewsletter.com/cybermonday2022)**: Makes a great fit for cross-functional colleagues, friends looking to get into product, and founders. [Get 20% off a 1-year gift subscription using this Cyber Monday deal](https://www.lennysnewsletter.com/subscribe?coupon=eaa29015&gift=true). If you want to get a bulk subscription for your whole team, you can also get a [discount using this group subscription code](https://www.lennysnewsletter.com/holidaygroupdeal). ## Out and about 1. **[Goodr sunglasses](https://goodr.com/collections/top-sellers):** Discovered via [@jess](https://twitter.com/jess/status/1592295735076483073?s=20&t=4N3kAJ6nfXIzSlRfww7mgg) and now my favorite sunglasses. Affordable, polarized, great for sports, and there are dozens of styles. Also check out [Izipizi](https://global.izipizi.com/en/). ![Whiskey Shots with Satan-The OGs-RUN goodr-3-goodr sunglasses](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/310f08ad-194e-41e1-892d-ac68b8b29bad_1000x495.jpeg) 2. **[Herschel Tech Daypack](https://herschel.com/shop/backpacks/tech-daypack?showSales=1&v=10888-00001-OS):** I was gifted this earlier this year, and I’ve never come across a more well-thought-through laptop backpack. Makes you want to travel more. ![Tech Backpack | Herschel Supply Company](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/4397ec7b-d72d-4e30-ac1f-8f23c7b2e141_1500x1001.png) 3. **[JBL Charge 5 Portable Bluetooth Speaker](https://www.amazon.com/JBL-CHARGE-Portable-Bluetooth-Waterproof/dp/B08X4YMTPM):** Best portable Bluetooth speaker I’ve owned. People also like these [Wonderbooms](https://www.ultimateears.com/en-us/wireless-speakers/wonderboom-3-bluetooth.html). 4. **[AllTrails Pro subscription](https://www.alltrails.com/gift):** A thoughtful gift for your outdoorsy friends. I’ve been a paid subscriber for 5+ years now. Inspired by[@skonomics2k](https://twitter.com/skonomics2k/status/1592341108964855808?s=20&t=4N3kAJ6nfXIzSlRfww7mgg). ![AllTrails builds with Mapbox](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/135f7c53-37d9-45e9-81ec-77d7d7fafeff_1600x935.png) 5. **[Kindle Paperwhite](https://www.amazon.com/Kindle-Paperwhite-adjustable-Ad-Supported/dp/B08KTZ8249/ref=sr_1_5?crid=LCP30M5XCGJN&keywords=Kindle+Paperwhite+waterproof&qid=1669399013&s=amazon-devices&sprefix=kindle+paperwhite+waterproo%2Camazon-devices%2C153&sr=1-5&ufe=app_do%3Aamzn1.fos.fa474cd8-6dfc-4bad-a280-890f5a4e2f90):** Did you know this new Kindle is *waterproof*? WAT. 6. **[GCI Outdoor Roadtrip Rocker Collapsible Rocking Chair](https://www.amazon.com/GCI-Outdoor-Roadtrip-Rocker-Rocking/dp/B07N6ZL6J3/ref=sr_1_2?crid=3B37UDH78LQ7C&keywords=camping+chair+rocker&qid=1669403304&s=books&sprefix=camping+chair+rocker+%2Cstripbooks%2C329&sr=1-2-catcorr)**: A gift from my sister last Christmas. Best camping chair I’ve ever had. It rocks 🥁 They also have a [great smaller chair](https://www.amazon.com/GCI-Outdoor-Everywhere-Portable-Hillside/dp/B07C3WTX3X?th=1). ![Image from Lenny’s Newsletter Holiday Gift Guide 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d7c1dde1-8a6f-4b7c-8a6d-7b7ac3bd3020_1237x1500.jpeg) ## Home 1. **[ZWILLING Personal Smoothie Blender](https://www.amazon.com/ZWILLING-Innovative-Engineering-High-Quality-Household/dp/B085XLS8GS):** My wife got us one of these a few months ago, and we’re now making shakes almost every day. Many people also love the [Nutribullet](https://www.amazon.com/Nutribullet-Superfood-Nutrition-Extractor-NBR-0601/dp/B07CTBHQZK/ref=sr_1_3?keywords=nutribullet+blender&qid=1669400646&sprefix=nutribull%2Caps%2C157&sr=8-3&ufe=app_do%3Aamzn1.fos.fa474cd8-6dfc-4bad-a280-890f5a4e2f90). ![Zwilling Enfinigy 20-oz. Personal Blender, Smoothie Blender, Silver : Target](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/93b3be87-eab3-49e7-8ace-fe1b74186c93_488x488.jpeg) 2. **[Kyocera 8” Ceramic Chef’s Knife](https://www.amazon.com/Kyocera-FK-200WH-BK-Revolution-Ceramic/dp/B00JBA447A/ref=psdc_284507_t1_B00QYCBYJO):** Ceramic knives are sharper, lighter, dishwasher-safe, and stay sharp for longer than steel knives. How did I just learn about this? My wife got us these after watching a lot of [Emily Mariko](https://www.tiktok.com/@emilymariko?lang=en). ![Image from Lenny’s Newsletter Holiday Gift Guide 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b68282a0-9fbd-493b-b230-41e0dcf2b3a4_1280x1249.jpeg) 3. **[Brightland olive oil](https://brightland.co/products/the-duo)**: Often recommended by my foodie friends. ![Brightland Extra Virgin Olive Oil, 5 Flavors, Made in California on Food52](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3b39b2ff-1d9a-401a-adbf-af3234ca74dc_1500x1125.jpeg) 4. **[Bierfilzl Merino Wool Felt Square Coaster](https://graflantz.com/collections/coasters/products/6-pack-square-felt-coasters-9?variant=39665697849453)**: The one coaster in our home I find myself actively seeking out when I sit down for a cup of tea. 5. **[Dlyfull Universal Battery Tester](https://www.amazon.com/Dlyfull-Universal-Battery-Resistance-Batteries/dp/B081JGZ554/ref=sr_1_6?keywords=dlyfull+battery+tester&qid=1669400694&sprefix=dryful%2Caps%2C140&sr=8-6)**: Thanks to this thing, I throw away so many fewer batteries now, knowing which are dead and which are still just fine. Works with every battery type. *(Many more gift options for home gifts in honorable mentions below)* ## Art, books, and misc. 1. **[Cindy Hsu Zell](https://cindyzell.com/)** ![Image from Lenny’s Newsletter Holiday Gift Guide 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/780b3696-fc84-4432-9903-82c96f6f559b_1558x952.png) 2. **[Hallie Bateman](https://www.halmart.shop/)** ![Image from Lenny’s Newsletter Holiday Gift Guide 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a40f7d0e-1027-432d-b0d8-1df39ddafe99_1994x1546.png) 3. **[Bobblegifts](https://www.bobblegifts.com/):** Custom bobbleheads of your friends, partner, or pet. I got one of our dog, and it’s incredible. 4. ***[Our America: A Photographic History](https://www.amazon.com/Our-America-Photographic-Ken-Burns/dp/0385353014)*****[, by Ken Burns](https://www.amazon.com/Our-America-Photographic-Ken-Burns/dp/0385353014):** This just came out earlier this month. [Listen to his recent interview with Tyler Cowen](https://conversationswithtyler.com/episodes/ken-burns/) to get a feel. ![Big news: Legendary filmmaker Ken Burns chose two of my photographs for his powerful new book - Shadows and Light](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/42f4380a-cf47-420d-944f-720f8fbcfb27_1280x720.jpeg) 5. ***[Am I Overthinking This?](https://www.amazon.com/Am-Overthinking-This-Over-answering-questions/dp/1452175861/ref=tmm_hrd_swatch_0?qid=1669402472&sr=8-2)*****:** If you don’t have my wife’s book yet, it’s not too late. It’s now on its 7th printing, and on many coffee tables around the world. There’s also a [new 2023 calendar](https://www.amazon.com/Overthinking-This-2023-Engagement-Calendar/dp/1797216708/ref=sr_1_1?crid=49VAOHIIOTZC&keywords=Am+I+Overthinking+This%3F+Engagement+Calendar+2023&qid=1669402551&s=books&sprefix=am+i+overthinking+this+engagement+calendar+2023%2Cstripbooks%2C227&sr=1-1) that’ll help you avoid overthinking your plans. ![Image from Lenny’s Newsletter Holiday Gift Guide 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/f768c6c1-e4dd-41bb-bce5-b3e2f190fd19_1773x1001.jpeg) 6. ***[Tiny Beautiful Things: Advice from Dear Sugar](https://www.amazon.com/Tiny-Beautiful-Things-10th-Anniversary/dp/0593685210)*** **[(10th Anniversary Edition)](https://www.amazon.com/Tiny-Beautiful-Things-10th-Anniversary/dp/0593685210):** Updated edition of one of the most powerful books I’ve ever read. ![Tiny Beautiful Things (10th Anniversary Edition): Advice from Dear Sugar: Strayed, Cheryl: 9780593685211: Amazon.com: Books](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a9bba2f7-5653-482a-bd1d-aac0050c3a2e_324x500.jpeg) 7. ***[The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness](https://www.amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681https://www.amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681)*****[, by Morgan Housel](https://www.amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681https://www.amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681):** For anyone who’s struggling with all of their investments 📉 8. ***[The Great CEO Within: The Tactical Guide to Company Building](https://www.amazon.com/Great-CEO-Within-Tactical-Building/dp/0578599287/ref=sr_1_1?keywords=The+Great+CEO+Within&qid=1669571495&sr=8-1)*****[, by Matt Mochary](https://www.amazon.com/Great-CEO-Within-Tactical-Building/dp/0578599287/ref=sr_1_1?keywords=The+Great+CEO+Within&qid=1669571495&sr=8-1)**: Must-read for any founder, or want-to-be founder. 9. ***[The Overstory,](https://www.amazon.com/Overstory-Novel-Richard-Powers/dp/039335668X/ref=sr_1_1?crid=1A8IIDWYBMCLO&keywords=the+overstory&qid=1669571586&sprefix=the+overstory%2Caps%2C830&sr=8-1)*** **[by Richard Powers](https://www.amazon.com/Overstory-Novel-Richard-Powers/dp/039335668X/ref=sr_1_1?crid=1A8IIDWYBMCLO&keywords=the+overstory&qid=1669571586&sprefix=the+overstory%2Caps%2C830&sr=8-1)**: Will change your relationship with nature. 10. ***[The Carbon Almanac: It’s Not Too Late,](https://www.amazon.com/gp/product/0593542517/ref=ppx_yo_dt_b_search_asin_title?ie=UTF8)*** **[by Seth Godin](https://www.amazon.com/gp/product/0593542517/ref=ppx_yo_dt_b_search_asin_title?ie=UTF8)**: Clear facts about what works and doesn’t work when it comes to fighting climate change. ## Honorable mentions Products I haven’t yet tried but I’m excited to get or gift. 1. **[Whitstable Handmade Leather Wallets](https://whitstablecraftco.com/en-us/products/castle)**: Mine is arriving in a few days 😍 Use code “LENNY” for 20% off. ![Castle](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/b8fbf734-c58c-4c80-b8dd-d8b092555ff9_1445x1445.jpeg) 2. **[Kiva gift card](https://www.kiva.org/gifts/kiva-cards)** 3. **[Silver Mushroom Disco Ball](https://www.etsy.com/listing/1168967179/the-original-silver-mushroom-disco-ball?click_key=8d4e15f12ad8120783a10544c9cae5688001bdf4%3A1168967179&click_sum=ffa178f7&ga_order=most_relevant&ga_search_type=all&ga_view_type=gallery&ga_search_query=sofiest+designs&organic_search_click=1&etp=1&edd=1&awc=6220_1669564008_d69697bb2f22d934b595d71dde136932)** via [@aleenah\_ansari](https://twitter.com/aleenah_ansari/status/1592642961804005378?s=20&t=46MWQJSf3R4CGw4UANdF4g) ![Size large, small, and x-small Background by artist Showmemars from Society6](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ba563307-2b2c-4a99-bee6-22022313c4ae_794x727.jpeg) 4. **[Hitish Corner Floor Lamp](https://www.amazon.com/Hitish-Changing-Lighting-Bluetooth-Dimmable/dp/B09DFQRNL8/)** via [@marilynika](https://twitter.com/marilynika/status/1592312088797777920?s=20&t=nk4IZp6vDtj40yH7Q35AaQ) ![Image from Lenny’s Newsletter Holiday Gift Guide 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3d9dc2c5-5b1b-4527-b7c7-fef7a2b76506_1500x1500.jpeg) 5. **[Xiaomi Portable Electric Air Compressor for bikes and balls](https://www.amazon.com/gp/product/B07XZCLGVQ/ref=ox_sc_act_title_1?smid=A4C8ZXE9ZJZEPhttps%3A%2F%2Fwww.amazon.com%2Fgp%2Fproduct%2FB07XZCLGVQ%2Fref%3Dox_sc_act_title_1%3Fsmid%3DA4C8ZXE9ZJZEP)** via [@AndreyShore](https://twitter.com/andreyshore/status/1592463771217276928) 6. **[OXO Tot Grape Cutter](https://www.amazon.com/OXO-Tot-Grape-Cutter-Navy/dp/B08SZBXL45)** via [@hellojohnpaul](https://twitter.com/hellojohnpaul/status/1592337751843954688) 7. **[KitchenAid Classic Fruit Slicer](https://www.amazon.com/KitchenAid-KE305OHERA-Classic-Fruit-Slicer/dp/B07Q2W18KS/ref=sr_1_1?keywords=kitchenaid+fruit+slicer&qid=1669401202&sr=8-1)** via[@thechadwiki](https://twitter.com/thechadwiki/status/1592348576956702720) 8. **[Panini Press by Cuisinart](https://www.amazon.com/dp/B002YD99Y4/ref=cm_sw_r_as_gl_apa_gl_i_X3TAZF83K2A4DWG888KJ?linkCode=ml2)** via [@lpolovets](https://twitter.com/lpolovets/status/1592296138975199232?s=20&t=nk4IZp6vDtj40yH7Q35AaQ) 9. **[Fellow Electric Kettle for coffee](https://www.amazon.com/Fellow-Electric-Pour-over-Temperature-Stopwatch/dp/B077JBQZPX/ref=sr_1_5?crid=2742AR2FM9BJD&keywords=Fellow+kettle&qid=1669570282&sprefix=fellow+kettle%2Caps%2C1053&sr=8-5&ufe=app_do%3Aamzn1.fos.fa474cd8-6dfc-4bad-a280-890f5a4e2f90)** **and [for tea](https://www.amazon.com/Fellow-Electric-Variable-Temperature-Stopwatch/dp/B07DTMZL56/ref=sr_1_6?crid=2742AR2FM9BJD&keywords=Fellow+kettle&qid=1669570323&sprefix=fellow+kettle%2Caps%2C1053&sr=8-6&ufe=app_do%3Aamzn1.fos.fa474cd8-6dfc-4bad-a280-890f5a4e2f90)** via [@sri\_batchu](https://twitter.com/sri_batchu/status/1592293003171074048?s=20&t=yGm-PdFb8msYW4cwa0BKgA) 10. **[Pizza Steel Pro](https://hansgrill.shop/products/pizza-steel-pro)** via [@alxwestner](https://twitter.com/alxwestner/status/1592340809248288768?s=20&t=46MWQJSf3R4CGw4UANdF4g) 11. **[Whiskware Pancake Batter Dispenser](https://www.amazon.com/dp/B01JG57JJ4/ref=cm_sw_r_api_i_X50JZ6W1FVXW80GSQEEZ_0)** via [@NkemNwan](https://twitter.com/amyneurons/status/1592377780372922368?s=20&t=46MWQJSf3R4CGw4UANdF4g) 12. **[Aeropress](https://www.amazon.com/AeroPress-Coffee-Espresso-Maker-Bitterness/dp/B0047BIWSK)** via [@lewisvrobinson](https://twitter.com/lewisvrobinson/status/1592307723739496448?s=20&t=46MWQJSf3R4CGw4UANdF4g) 13. **[Deiss PRO Lemon Zester & Heavy Duty Cheese Grater & Vegetable Grater](https://www.amazon.com/dp/B0738C7RXF/ref=redir_mobile_desktop?sp_csd=d2lkZ2V0TmFtZT1zcF9waG9uZV9kZXRhaWwp13NParams)** via my editor 14. **[Aesop A Rose By Any Other Name Body Cleanser](https://www.aesop.com/us/p/body-hand/body/a-rose-by-any-other-name-body-cleanser/)** via my editor 15. **[Outer Shell Mini Saddlebag](https://outershell.com/shop/mini-saddlebag)** via my editor Are there any other products you’ve found game-changing and want to share with readers? Leave a comment 👇 [Leave a comment](https://www.lennysnewsletter.com/p/lennys-newsletter-holiday-gift-guide/comments) *Have a fulfilling and productive week 🙏* ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from Lenny’s Newsletter Holiday Gift Guide 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 Featured job openings** 1. **Pogo:** [Product Manager](https://www.lennysjobs.com/jobs/1d236a59-399d-4a81-8dcd-664d76f06cae) (Remote) 2. **Antimatter:** [Head of Design / Senior Product Designer](https://www.lennysjobs.com/jobs/6c4bd650-9652-481c-93d0-33c2bba88125) (NYC) 3. **Graphite:** [Sr. Director of Product—B2B SaaS](https://www.lennysjobs.com/jobs/8fbce839-966c-496b-bd08-48f297febd76) (Remote, U.S.) 4. **Teal:** [Sr. Growth Marketing Manager](https://www.lennysjobs.com/jobs/97200c8c-3264-4768-b135-3a91f8dd3d32) (Remote, U.S.) 5. **Rabbithole:** [Product Manager](https://www.lennysjobs.com/jobs/1d202cac-27f9-40fb-a31d-a8d717f468e5) (Remote) 6. **Equi:** [Director, Product Management](https://www.lennysjobs.com/jobs/fb351a31-203b-47f4-8675-c9be18438c6b) (NYC) 7. **Noom:** [Head of Product Design](https://www.lennysjobs.com/jobs/8dffb755-160d-416e-947a-0f09ccc7d11e) (Remote) 8. **Equi:** [Senior Product Designer](https://www.lennysjobs.com/jobs/f2f82806-0fdf-461f-beb7-bdc2771d50f9) (NYC) 9. **Equi:** [Senior Product Manager](https://www.lennysjobs.com/jobs/873a7791-0545-4fc5-a07c-4fa8a75da3fd) (NYC) 10. **Zendoor:** [Head of Product](https://www.lennysjobs.com/jobs/a060efa9-8aaf-43dd-be39-60447a4bb567) (Phoenix, AZ, Remote) 11. **Playbook:**[Senior Product Manager](https://www.lennysjobs.com/jobs/608b4297-c97d-45fc-a521-70b74f6d7d65) (NYC, Remote) ## **🧠 Inspiration for the week ahead** 1. **Watch:** [We spent 24 hours with MrBeast](https://www.youtube.com/watch?v=IjoTYJNr8DA) by Colin and Samir [Watch on YouTube](https://www.youtube.com/watch?v=IjoTYJNr8DA) 2. **Read**: [The “je ne sais quoi” of TikTok](https://daniel.do/article/the-je-ne-sais-quoi-of-TikTok/) 3. **Read:** [50 ways to be ridiculously generous—and feel ridiculously good](https://www.youcangetitdone.com/post/50-ways) **If you’re finding this newsletter valuable, feel free to share it with friends, and consider subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [42/44] How to activate your investor network As an angel investor, you often get asks from founders—but you rarely get an ask this personalized, crisp, and easy to act on: ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/0004245f-1d58-4fb6-8439-e59a554ed76d_1810x1474.png) Of his many superpowers, [Sam Corcos](https://www.linkedin.com/in/samcorcos/) (CEO of [Levels](https://www.levelshealth.com/)) is in a league of his own when it comes to leveraging his investor network to help him build his company. I’ve never seen anything like it. I believe this one skill has contributed significantly to his company’s success. So I asked Sam to share his in-the-weeds advice about how to make the most of your investor network. Boy did he deliver. If you’re a founder, this post is for you. Note, I’m an angel investor in Levels, which is how I uncovered this superpower. If you’d like to go deeper, Levels [shares their previous investor updates and all-hands meetings publicly](https://www.levelshealth.com/inside-the-company), and you can follow Sam on [Twitter](https://twitter.com/samcorcos) and [LinkedIn](https://www.linkedin.com/in/samcorcos/). Enjoy! ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/336ef919-fa0d-410d-af63-72887ee5946e_8000x4000.png) I talk to a lot of founders who feel like they were sold a bill of goods by their “value add” investor, who ends up doing very little for them. I can tell you from personal experience that **it’s almost always the founder’s fault that they aren’t getting value from their investors**. From June 27, 2019, to October 26, 2022 (about 3 years and 4 months), I personally sent 2,626 requests to our investor network. Of those emails sent out, 1,664 received a response, and 1,151 were able to deliver on what was asked. Investors have very little context into what your company is doing or what you need help with, so it’s unreasonable to expect them to proactively find ways to add value. You need to learn how to ask. This might sound simple, but it actually takes a lot of practice, and most founders are not good at it. I think activating one’s investor network is one of the biggest untapped sources of value at most startups. In this article, we’ll go over a few tactics for how to build a great investor network and how to activate them to get as much value as possible. ### Executive summary 1. Build a great network by optimizing for eigenvector centrality. 2. Make good asks by keeping them targeted, time-bounded, and specific. 3. If you want someone to help you, make it as easy as possible for them. 4. Do the work. Don’t expect to receive value without putting in effort. ## First, build a great investor network What makes an investor network great? Just like with hiring, it’s about getting the right people on board; doing it right takes time. If you develop the skill of activating your investor network, it’ll be well worth the time. The place we should start is at a higher level of abstraction, and think about networks and graphs in general. The way you structure a network has significant implications for how the network performs. We’ll only cover the high-level concepts here, but if you want to do a deeper dive on network theory, I discussed these concepts in more detail in the podcast episodes I did of Funded with Jason Yeh ([Part 1](https://podcasts.apple.com/us/podcast/the-secret-science-of-fundraising-part-1-of-2/id1535885510?i=1000504398857), [Part 2](https://podcasts.apple.com/us/podcast/the-secret-science-of-fundraising-part-2-of-2/id1535885510?i=1000505779011)). ### Eigenvector centrality To build a really powerful network, you should optimize for what is known as eigenvector centrality: > **Eigenvector centrality is an algorithm that measures the transitive influence of nodes.** In other words, it’s not “how many people you know”; it’s “how many people all the people you know, know.” When people think about how well-networked or popular someone is, they typically think about it through the lens of degree centrality. A person with high degree centrality is a mayor of a small town, or the most popular kid in high school. Within the context of a network where everyone knows each other, they are the most connected person in that dense network: ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/15b41a78-233b-4270-8abf-752e8b58ee09_770x661.png) A failure mode of building a network that is optimized for degree centrality is that everyone ends up being similar, and it’s extremely limiting when you have a request that is outside of your normal area of influence. For example, if you create an amazing network of financiers, that’s probably helpful for fundraising, but not if you need to hire engineers, find a mentor for product strategy, or any of the thousands of other kinds of problems you’ll need to solve as a founder. It’s for this reason that you want to focus your attention on adding new people to the network from other dense networks that you don’t already have access to. The ideal network for a founder is one where you know the person with the highest degree centrality in each network: ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/f64d530e-a9e2-4c1e-adc4-bac791de770a_1190x960.png) There’s a lot of evidence that this is true, both from personal experience and academia. For a deeper dive on this, I recommend reading the classic 1973 paper by Mark Granovetter, “[The Strength of Weak Ties](https://www.jstor.org/stable/2776392).” Setting up your network this way significantly increases the chances that you’ll be successful in activating your investors, because you have access to the most possible surface area of connections and expertise. To give you a sense of the diversity of backgrounds of the people we optimized for when building our investor network, here are the backgrounds of the first 15 people in alphabetical order. For reference, these cover only about 5% of the people we have engaged as investors and don’t even get us beyond the letter “a” alphabetically: - Insurance founder - Health tech founder - Health and wellness writer - YouTube creator - Professional basketball player - Product leader at major tech company - Partnerships leader at organic foods company - Growth leader at direct-to-consumer software company - Talent network company founder - Partner at major consulting firm - International expansion leader at major tech company - Podcast host - Sales leader at Fortune 500 company - Education tech founder - Wellness-focused venture capitalist You should also give some attention to other networks you may need to access in the future, no matter how unrelated they might seem today. Having a single entry point into a network is infinitely more valuable than having zero. It makes a huge difference if you know one professional basketball player, one person who is an insurance industry executive, or one person in state government. It’s always best to have every possible type of diversity of people on your cap table. Some of our highest-value angel investors were people with little to no public persona. These tend to be early employees at post-IPO companies who have some liquidity and more time available. Some of our most trajectory-changing advice came from people like Alex Cunningham, Ellen DaSilva, Razvan Roman, Alexey Komissarouk, and other active operators who are under the radar but have a lot to contribute. For some people, you’ll only be able to get their attention for a few minutes per month. Others, you can ask for a few hours per quarter. Having a mix of both is a huge asset. ### Set expectations It’s also important to set expectations early. Ideally, you should be thinking about building your investor network as solving for a matching problem rather than a sales problem (i.e. you’re looking to find the right match, not convince them to join). If you expect your investors to be actively involved, you should let them know before you accept their money. This is really important because it gives you permission to hold them accountable to what they’ve agreed to, and many investors will opt out (example below). That’s fine! People have different priorities and availability. It’s not personal. Here’s an actual snippet that I’ve sent to several investors to set early expectations: ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e0e1f197-2490-4580-9c0c-f6b65c0af0bf_1320x532.png) For example, here’s a conversation I had with a potential investor where, after setting clear expectations that we’d like them to be actively involved, they opted out because they didn’t have bandwidth. And there’s nothing wrong with that! Where these situations get tricky is when those expectations aren’t set early on and one side feels like the other is being unreasonable. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/9915f9a3-8ce0-46d2-a4ff-88c4af8cd56b_1348x308.png) ## Then, activate your network Once you have a network of capable investors involved, you need to spend time extracting value from your cap table. Don’t expect this will happen automatically; it takes serious work, but it’s worth the effort. Here are a few tactical things to keep in mind. ### Abundance mindset The first thing is to remember that **investor requests are not like precious gems**. Many founders think you only get a certain number of “chips” to cash in with your investors (this is an analogy I’ve heard many times). This mindset is not accurate, but it tends to develop after a series of unresponded-to emails to their investors. But most of the time, the investors aren’t responding because the asks are bad. In general, people like being helpful—especially investors! It’s a big part of their job. You know the joy you experience when you’re able to help out another founder? By not asking for things, you’re denying other people that joy. Personally, I love it when I’m able to make an easy intro or give some quick advice to someone that changes the trajectory of their project. Set them up for success by making good asks. ### What to ask As a founder, **you should always know what you and your team need**. I have a snippet in [TextExpander](https://textexpander.com/) called “asks” that I paste in anytime someone says, “How can I be helpful?” in an email, which I then pare down to just the requests that are relevant to them. Most people would be shocked at how many times that simple action has led to significant value creation. Every month, my EA sends a message to our team asking them for two things that they could use help with. The responses are consolidated and added to our investor update, and I add them to my list as well. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a0142d03-13a3-4ce8-b1a7-1bf241166433_998x1510.png) You should make it easy for your team to tell you what they need, but you should also do the work yourself. If you’re the founder, you likely have the most context of anyone else at the company, so your investor asks are probably the highest-leverage in the organization. If you can’t think of anything you need help with, you’re not thinking hard enough. Everyone at every stage needs support. ### How to ask You should approach your investor asks like you would approach building a product. Think about it from the perspective of the person receiving the request. How do you make it easy for them? If I had to simplify what makes for a good investor ask into three main concepts, they would be: - **Targeted:** Only send them to the people who are relevant - **Time-bounded:** Ideally, executing the request should take less than a minute - **Specific:** Be specific in your request, and limit the scope of the request (see [chunking bias](https://thebehavioursagency.com/chunking-bias/)) **Instead of going through each of these concepts individually, we’ll go through a bunch of examples below to show you what a good investor ask looks like.** On a tactical level, we don’t use any special tooling other than email and a list of our investors in a Google Sheet. Anytime we need to send out an investor ask, I skim the list and I personally send an email to each person who I think might be able to contribute. That’s all. No need to overcomplicate it. I find it helpful to ask each investor what kinds of things they typically help with and write them down (I was impressed with one investor in particular who maintains [a Notion doc with everything he can help with](https://www.notion.so/cca7d945ecfd48f19d84d31778ec28a6)), but in general, whenever I have an ask, I spend 5 to 10 minutes looking through the list of people and sending emails to the folks who I think might be willing and able to help. Here’s a redacted screenshot of a subset of the Google Sheet: ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/d5139006-17f0-429f-8ca2-62828c8ad6ed_1734x1216.png) Computers are good at remembering things (like maintaining a list of everyone you have access to), and humans are good at connecting the dots. In my experience, it’s best to use computers for keeping lists of things and use one’s brain to do anything involving people, like crafting and sending asks. **The hard part is committing to put in the work**. No tool can help with that. ### Examples 1. Tom, who leads Partnerships for us at Levels, started working on a marketplace project, and he was looking for advice from people who have built marketplaces in the past. We happen to have two people on our cap table who are legitimately world experts on marketplaces—Jeff Jordan from a16z and Sander Daniels from Thumbtack. This is the email we sent to each of them asking for their time: ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/7424e0f8-fead-478f-8949-f95b5faf9c0a_1328x480.png) 2. Another example is a request from Zac, who runs Legal at Levels. He was looking to connect with other people who have run legal practices within startups, and had some specific questions around fundraising and cap table management. One of our investors, [Katie Biber Chen](https://www.linkedin.com/in/katiebiber/), has led legal teams at a number of tech companies and also has a strong network of other general counsels. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/264e7692-b426-40a4-98fd-28e7eae2bbb2_1346x640.png) 3. As we geared up for our next funding round, we wanted to learn more about independent board member selection. So we sent an email to a few of our investors who are currently or have been founders who work with independent board members, or people who have held independent board member positions. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/3d289110-c742-4309-923b-2d39f4820ba3_1352x638.png) 4. At some point as we increased the size of our engineering team, we felt like our development velocity was slowing down on a per-engineer basis. So we went through our investor list and emailed a few people who have run engineering orgs to get their thoughts on how they think about measuring velocity. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/bb27cc30-a1e8-460f-bacd-a517b712d59e_1254x398.png) 5. After we got feedback from the engineers from the question above, we realized that we needed to get more input—especially from people who have run product orgs. So we emailed a bunch of founders to get a quick request for input. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/4ecdb8ec-3f4d-4fb6-93e8-cfe6bf86256a_1272x364.png) 6. When we started the process for hiring a Lead Designer, we realized that we didn’t know how to run a process or assess the quality of the candidates we were seeing. So we sent a few emails to people who have hired lead designers in the past to find out what they look for. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/44158862-c3d7-40fc-91cc-9b02aa1b34bf_1316x560.png) 7. When we were putting together our [medical advisory group](https://www.levelshealth.com/#medical_header), we knew that we wanted to get Dr. Sara Gottfried on board, so we reached out to a bunch of our investors who we thought might be able to get us one step closer to making that connection. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/42872e34-16d4-4f31-965a-42517df84472_1296x514.png) 8. Sometimes we also request meaningful time from someone if they’re open to it. For example, when we were hiring someone to lead our Growth team, we really wanted to make sure we did our homework and got as many opinions as possible. In this case, we asked a couple of our investors who have led growth orgs before to review the recordings of candidates’ technical interviews to give us feedback. These are big asks and take more than an hour, so be mindful of who you send these to and how much time you’re requesting from them. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/e5e13579-539a-435c-bbe1-a98363fafda4_1312x700.png) 9. When we started increasing our hiring rate for engineering, we wanted to increase our pipeline. Most good engineers know other good engineers, so I wanted to start talking to engineers who our investors thought were great with the hope that they might have someone in their network looking for their next role. This is also a good example of being specific. Specifying “two best engineers” reduces the cognitive load put on the recipient and increases the chances that they send you a response. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/404a9adb-0db4-41ed-8713-90ba22ddaa7c_1298x540.png) 10. And last but not least, here’s an example of an email to one of our investors who, in a previous discussion, mentioned that he was interested in some of the company-building content we’d been producing. So I asked him what kind of content he’d like to see more of. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/a94993f8-3ba5-467f-917b-9b84c3f54627_1304x656.png) ### Always follow up When an investor (or really, anyone) delivers on one of your requests, you should follow up with them at the conclusion of whatever it is they delivered. For example, if they connected you to an engineering candidate or a potential advisor, after you speak with that person, you should send a thank-you note to the person who made the connection to close the loop and let them know that their effort did not go to waste. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/4218a997-55d3-472c-9bb2-ae86e7e03ab4_1436x502.png) Even just a simple note (like the one above) goes a long way, and it significantly increases the likelihood that this person will offer their support in the future. Sending follow-ups and appreciation takes very little time, and yet in my experience, almost nobody puts in the work to do them. ## Analysis As anyone who’s followed our journey knows, [we’re pretty rigorous about tracking things](https://review.firstround.com/an-exact-breakdown-of-how-one-ceo-spent-his-first-two-years-of-company-building). 😆 I keep track of all the requests I’ve sent to our investors since we started the company, as well as the reply rate and the rate at which those requests have converted into something meaningful. [Our EA team](https://review.firstround.com/a-tactical-guide-to-working-with-eas-how-to-make-delegation-your-superpower) keeps it up to date on a monthly basis. ### Results As I mentioned above, from June 27, 2019, to October 26, 2022 (about 3 years and 4 months), **I personally sent 2,626 requests to our investor network**. Of those emails sent out, 1,664 received a response, and 1,151 were able to deliver on what was asked. This also significantly under-reports the number of requests from our company, because this does not include people who directly responded to the asks on our [monthly investor updates](https://www.levelshealth.com/inside-the-company), and it doesn’t include times when people on our team directly reached out to our investors without my involvement. The actual number is likely at least double what I have noted above. Here’s the top 10 list of our most helpful investors: ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/273afb8a-5bfc-4b7e-9711-589612d92939_1150x449.png) ### Helpfulness outliers Something that stuck out to me when doing this analysis (and not something I was actively searching for) is that the women on our cap table have been disproportionately helpful. As measured on an allocation-to-conversions ratio, the women have outperformed by more than 10x. I don’t have a theory for why this is, and the sample size is not small (we have more than 30 women on our cap table). I’m not going to speculate, but it’s an interesting observation. Along those same lines, early employees of post-IPO companies have been extremely generous with their time and have sourced a disproportionate number of great candidates for us. Most of these folks invested relatively small checks but delivered huge value. ### a16z and the “services model” Another interesting fact is that, although only Jeff Jordan and Vijay Pande from the a16z team are listed on the sheet, that tells only a small part of the story. They’re the ones who quarterback requests, but those entry-point requests often turn into several follow-up conversations. One thing that was uncovered from some deeper analysis back in October 2021 was that our team has had meaningful interactions with 94 people on the a16z team. This covers everything ranging from support on HR policy, advice on growth strategy, financial model review, network connections—you name it and we’ve probably asked them for it. Some venture capital firms (a16z in particular) have a “services model,” where they have a team of operators that you can tap into when you have questions or need support. It is in your interest to discover what services are available and take advantage of them. ## In closing Activating one’s investor network is among the most underutilized resources that almost every startup has access to. It takes practice to learn how to do it well, but once you do, it can be a tremendous and differentiating source of value. *You can follow Sam on [Twitter](https://twitter.com/samcorcos) and [LinkedIn](https://www.linkedin.com/in/samcorcos/), and [definitely check out Levels Health](https://www.levelshealth.com/). Thanks, Sam!* ## 📣 Join Lenny’s Talent Collective 📣 If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from How to activate your investor network](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) #### **🔥 Featured job openings** 1. **Pogo:** [Product Manager](https://www.lennysjobs.com/jobs/1d236a59-399d-4a81-8dcd-664d76f06cae) (Remote) 2. **Antimatter:** [Head of Design / Senior Product Designer](https://www.lennysjobs.com/jobs/6c4bd650-9652-481c-93d0-33c2bba88125) (NYC) 3. **Graphite:** [Sr. Director of Product—B2B SaaS](https://www.lennysjobs.com/jobs/8fbce839-966c-496b-bd08-48f297febd76) (Remote, U.S.) 4. **Teal:** [Sr. Growth Marketing Manager](https://www.lennysjobs.com/jobs/97200c8c-3264-4768-b135-3a91f8dd3d32) (Remote, U.S.) 5. **Rabbithole:** [Product Manager](https://www.lennysjobs.com/jobs/1d202cac-27f9-40fb-a31d-a8d717f468e5) (Remote) 6. **Equi:** [Director, Product Management](https://www.lennysjobs.com/jobs/fb351a31-203b-47f4-8675-c9be18438c6b) (NYC) 7. **Noom:** [Head of Product Design](https://www.lennysjobs.com/jobs/8dffb755-160d-416e-947a-0f09ccc7d11e) (Remote) 8. **Equi:** [Senior Product Designer](https://www.lennysjobs.com/jobs/f2f82806-0fdf-461f-beb7-bdc2771d50f9) (NYC) 9. **Equi:** [Senior Product Manager](https://www.lennysjobs.com/jobs/873a7791-0545-4fc5-a07c-4fa8a75da3fd) (NYC) 10. **Zendoor:** [Head of Product](https://www.lennysjobs.com/jobs/a060efa9-8aaf-43dd-be39-60447a4bb567) (Phoenix, AZ, Remote) 11. **Playbook:**[Senior Product Manager](https://www.lennysjobs.com/jobs/608b4297-c97d-45fc-a521-70b74f6d7d65) (NYC, Remote) ## **🧠 Inspiration for the week ahead** 1. **Read:** [52 things I learned in 2022](https://medium.com/magnetic/52-things-i-learned-in-2022-db5fcd4aea6e) by Tom Whitwell 2. **Generate:** [Prompt Engineering 101: Generate Sick Stable Diffusion Images](https://lol.framer.website/notes/prompt-engineering-101-sd) by Jeffrey 3. **Tip:** [A Guide to Holiday Tipping This Year](https://www.nytimes.com/2021/12/17/your-money/holiday-tipping-guide.html) by the *New York Times* **If you’re finding this newsletter valuable, feel free to share it with friends, and consider subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [43/44] My favorite PM courses > ## Q: What are the best PM courses out there? We’re living in a golden age of courses. Courses as far as the eye can see. A great course can change your life (I know many people who’ve had transformational experiences), and a bad course can be a huge time and money suck. So you need to choose wisely. With the end of the year coming and L&D budgets expiring, it’s a great time to lock down a course. Though I haven’t taken many PM courses recently, I did teach a course last year (that I’ve since put on pause to make time for other projects, like the podcast), and through my research prepping for the course, and [this great Twitter thread](https://twitter.com/lennysan/status/1600272528735604737?s=20&t=eW6Z_Rmi66qzCHIuU59Kiw), I feel like I’ve got a pretty good idea of which courses are worth your time. Below, I’m going to go out on a limb and recommend 10 PM courses to check out—five for senior PMs and five for up-and-coming PMs—plus a bunch of honorable mentions if you’re an overachiever. I’m mostly limiting my recommendations to courses that are (1) live, (2) cohort-based, (3) have run a couple of cohorts, and (4) plan to run many more. This list is my best guess of what’s great. I’m sure I missed some and am unaware of others. Please let me know in the comments if you’ve taken a course that you’ve loved that I didn’t list. [Leave a comment](https://www.lennysnewsletter.com/p/my-favorite-pm-courses/comments) ### 5 courses to check out for senior PMs 1. **[Managing your PM career in 2023 & beyond](https://maven.com/shreyas-doshi/product-management-career)** by [Shreyas Doshi](https://twitter.com/shreyas)—just launched and is already beloved by one and all 2. **[Product Strategy](https://www.reforge.com/programs/product-strategy)** by [Reforge](https://www.reforge.com/)—a foundational Reforge course, created by the greats [Casey Winters](https://www.linkedin.com/in/caseywinters) and [Fareed Mosavat](https://www.linkedin.com/in/fareed/) 3. **[Product Strategy Workshop](https://maven.com/gibson-biddle/product-strategy)** by [Gibson Biddle](https://www.gibsonbiddle.com/)—you need to see Gibson in action, especially now that he’s now teaching cohort-based courses on [Maven](https://maven.com/) 4. **[Continuous Interviewing](https://learn.producttalk.org/course/continuous-interviewing)** by [Teresa Torres](https://www.producttalk.org/about/)—will change the way you build product 5. **[Product Leadership](https://www.reforge.com/programs/product-leadership)** by [Reforge](https://www.reforge.com/)—for budding managers, created by [Ravi Mehta](https://www.ravi-mehta.com/) ### 5 PM courses to check out for up-and-coming PMs 1. **[Product Management Foundations](https://www.reforge.com/programs/product-management-foundations)** by [Reforge](https://www.reforge.com/)—probably the best course out there for new PMs 2. **[Simulator for Learning Data-Driven Product Management](https://gopractice.io/course/pm/)** by [Sean Ellis](https://www.linkedin.com/in/seanellis) and [Oleg Ya](https://www.linkedin.com/in/oleg-ya-a5710850/) on [GoPractice](https://gopractice.io/)—I wasn’t aware of this one until recently. It’s not live or cohort-based, but I’m including it anyway because so many people have recommended it. 3. **[Assumption Testing](https://www.producttalk.org/programs/assumption-testing)** by [Teresa Torres](https://www.producttalk.org/about/)—will help you avoid wasting time on the wrong ideas 4. **[The Growth Series](https://www.reforge.com/programs/growth-series)** by [Reforge](https://www.reforge.com/)—never too early to start learning about growth 5. **[The Product Principles Sprint](https://www.section4.com/courses/product/product-principles-sprint)** by [Section4](https://www.section4.com/) and [Prof. Adam Alter](https://www.stern.nyu.edu/faculty/bio/adam-alter)—a recent discovery ### Honorable mentions Here are some additional courses to check out, including a few that are self-paced, in-person, or brand-new: 1. Reforge courses 1. **[Mastering Product Management](https://www.reforge.com/programs/mastering-product-management)** 2. **[Experimentation + Testing](https://www.reforge.com/programs/experimentation-testing)** 3. **[Retention + Engagement](https://www.reforge.com/programs/retention-and-engagement)** 2. Maven courses 1. **[Break into AI Product Management & Get Certified](https://maven.com/marily-nika/technical-product-management)** by [Marily Nika](https://www.linkedin.com/in/marilynika/) 2. **[Launch Your Product Management Career](https://maven.com/peter-yang/launch-your-product-management-career)** by [Peter Yang](https://twitter.com/petergyang) 3. **[Building B2B Marketing](https://maven.com/mkt1/building-marketing)** by [Emily Kramer](https://www.linkedin.com/in/emilykramer/) 4. **[Product Psychology Bootcamp](https://maven.com/behavioral-design/bd-bootcamp)** by [Nir Eyal](https://www.nirandfar.com/) 5. **[Influence Without Authority](https://maven.com/crossing-career-chasms/influence-without-authority)** by [Satish Mummareddy](https://www.linkedin.com/in/satishmummareddy/) 3. **[INSPIRED: How to Create Tech Products Customers Love](https://www.svpg.com/inspired-workshop/)** by [Silicon Valley Product Group](https://www.svpg.com/) (in-person workshop) 4. **[Design Thinking Bootcamp](https://dschool.stanford.edu/executive-education/dbootcamp)** (in person) or **[Product Management certificate program](https://online.stanford.edu/programs/product-management)** (online) by Stanford 5. **[Becoming a Product Manager: A Complete Guide](https://www.linkedin.com/learning/becoming-a-product-manager-a-complete-guide)** by [Cole Mercer](https://www.colemercer.com/) and [Evan Kimbrell](https://www.evankimbrell.com/) (self-paced and online) 6. **[Insurjo](https://www.theproductfolks.com/insurjo-product-management-program)** and **[Upraised](https://www.upraised.co/)** for folks based in India Has any other course transformed how you build product? Are you working on a course that you’d love for me to check out? Let me know by leaving a comment 👇 [Leave a comment](https://www.lennysnewsletter.com/p/my-favorite-pm-courses/comments) ## 📣 Join Lenny’s Talent Collective 📣 If you’re hiring, [join Lenny’s Talent Collective](https://www.lennysjobs.com/talent/welcome) to start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. ![Image from My favorite PM courses](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) If you’re looking for a new gig, join to get personalized opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply Now](https://www.lennysjobs.com/talent/welcome) #### **🔥 Featured job openings** 1. **Pogo:** [Product Manager](https://www.lennysjobs.com/jobs/1d236a59-399d-4a81-8dcd-664d76f06cae) (Remote) 2. **Antimatter:** [Product Design Lead](https://www.lennysjobs.com/jobs/6c4bd650-9652-481c-93d0-33c2bba88125) (NYC) 3. **Graphite:** [Sr. Director of Product (B2B SaaS)](https://www.lennysjobs.com/jobs/8fbce839-966c-496b-bd08-48f297febd76) (Remote) ## **🧠 Inspiration for the week ahead** 1. **Read:** [Is Wine Fake?](https://asteriskmag.com/issues/1/is-wine-fake) by Scott Alexander 2. **Listen:** [Todd McFarlane, Iconic Comic Book Artist—Lessons from Stan Lee, How to Make Art that Outlives You, How to Compete with Corporate Giants and Win (While Having Fun), Dealmaking Strategies, War Stories from Wall Street and Lawyer Land](https://podcasts.apple.com/us/podcast/643-todd-mcfarlane-iconic-comic-book-artist-lessons/id863897795?i=1000590340422) with Tim Ferriss 3. **Watch:** [From Truck Driver to Bestselling Novelist, Overcoming Self-Sabotage, Momentum, and Turning Pro](https://www.youtube.com/watch?v=2RhIp9C5OO8) with Tim Ferriss and Steven Pressfield *[Double feature of Tim Ferriss this week 🤷‍♂️]* [Watch on YouTube](https://www.youtube.com/watch?v=2RhIp9C5OO8) **If you’re finding this newsletter valuable, feel free to share it with friends, and consider subscribing if you haven’t already.** Sincerely, Lenny 👋 --- ## [44/44] The Best of Lenny’s Newsletter 2022 *👋 Hey, [Lenny](https://twitter.com/lennysan) here! Welcome to this month’s ✨ **free edition**✨ of Lenny’s Newsletter. Each week I humbly tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out about work.* ![Image from The Best of Lenny’s Newsletter 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/0cc98a55-f0dc-4adb-9b1d-a50340365e7f_2400x1186.png) What a year. The [newsletter crossed 300,000 subscribers](https://twitter.com/lennysan/status/1605246024909742080?s=20&t=S99u9q3f7F2Rd21EdIjeBg) (from 90K one year ago), the podcast became a [top 10 technology podcast](https://twitter.com/lennysan/status/1602380899802238977?s=20&t=S99u9q3f7F2Rd21EdIjeBg), and the subscriber Slack community continues to [thrive](https://twitter.com/lennysan/status/1603885463302832128?s=20&t=R7X-H8D-6LM5A-FDfBnmDg). I never imagined reaching this scale, and none of this would be possible without you. From the bottom of my heart, thank you. Thank you for reading, for listening, and for subscribing. There’s so much more to come. To close out the year, like I did [last year](https://www.lennysnewsletter.com/p/the-best-of-lennys-newsletter), I revisited all of my past posts (over 250 of them!), picked out the cream of the crop, and categorized them into handy “What problem do I need help with?” buckets, which you’ll find below. This post is now the single best way to find my most popular stuff, across both the newsletter and podcast. My long-term vision with the newsletter and podcast is to have an in-depth answer to every question product builders, growth leaders, and founders have. Likely impossible, but let’s try! Enjoy, and see you in 2023 🥂 # The Best of Lenny’s Newsletter ### Building product 1. [Mission → Vision → Strategy → Goals → Roadmap → Task](https://www.lennysnewsletter.com/p/mission-vision-strategy-goals-roadmap) 2. [My favorite product management templates](https://www.lennysnewsletter.com/p/my-favorite-templates-issue-37) 3. [How Figma builds product](https://www.lennysnewsletter.com/p/how-figma-builds-product) 4. [How to develop product sense](https://www.lennysnewsletter.com/p/product-sense) 5. [Prioritizing a roadmap](https://www.lennysnewsletter.com/p/prioritizing) 6. [Getting better at product strategy](https://www.lennysnewsletter.com/p/getting-better-at-product-strategy) 7. [How to get better at influence](https://www.lennysnewsletter.com/p/how-to-get-better-at-influence) 8. [The Minto Pyramid Principle and the SCR framework](https://www.lennysnewsletter.com/p/minto-pyramid-principle-scr) 9. [The top 5 things PMs should know about engineering](https://www.lennysnewsletter.com/p/the-top-5-things-pms-should-know) 10. [The nature of product, with Marty Cagan (Silicon Valley Product Group)](https://www.lennysnewsletter.com/p/the-nature-of-product-marty-cagan#details) 11. [Five big ideas, with Shreyas Doshi (Stripe, Twitter, Google)](https://www.lennysnewsletter.com/p/episode-3-shreyas-doshi#details) ### Go-to-market (GTM) 1. [How to kickstart and scale a consumer business](https://www.lennysnewsletter.com/p/kickstarting-and-scaling-a-consumer) 2. [How to kickstart and scale a marketplace business](https://www.lennysnewsletter.com/p/how-to-kickstart-and-scale-a-marketplace) 3. [How the biggest consumer apps got their first 1,000 users](https://www.lennysnewsletter.com/p/how-the-biggest-consumer-apps-got) 4. [How the fastest-growing B2B businesses found their first 10 customers](https://www.lennysnewsletter.com/p/how-todays-fastest-growing-b2b-businesses) 5. [The Racecar Growth Framework](https://www.lennysnewsletter.com/p/the-racecar-growth-frameworkexpanded) 6. [GTM motions of 30 B2B SaaS companies](https://www.lennysnewsletter.com/p/gtm-motions) 7. [Positioning](https://www.lennysnewsletter.com/p/positioning) 8. [Generating buzz](https://www.lennysnewsletter.com/p/creating-buzz-at-launch) 9. [Picking a wedge](https://www.lennysnewsletter.com/p/wedge) 10. [Finding your distribution advantage](https://www.lennysnewsletter.com/p/distribution-advantages) ### Growth strategy 1. [Improving retention](https://www.lennysnewsletter.com/p/how-to-increase-your-products-retention) 2. [Improving conversion](https://www.lennysnewsletter.com/p/this-week-21-strategy-and-tactics) 3. [Increasing virality](https://www.lennysnewsletter.com/p/increasing-virality) 4. [Building a referrals program](https://www.lennysnewsletter.com/p/this-week-16-building-a-referrals) 5. [Winning at content-driven growth](https://www.lennysnewsletter.com/p/content-driven-growth-strategy) 6. [Winning at SEO](https://www.lennysnewsletter.com/p/crafting-an-seo-strategy-issue-34) 7. [How to win in consumer subscription](https://www.lennysnewsletter.com/p/winning-at-consumer-subscription) 8. [B2B growth, with Elena Verna (Amplitude, Miro, SurveyMonkey)](https://www.lennysnewsletter.com/p/elena-verna-on-why-every-company#details) 9. [The ultimate guide to SEO, with Ethan Smith (Graphite)](https://www.lennysnewsletter.com/p/the-ultimate-guide-to-seo-ethan-smith#details) 10. [Developing a growth model and marketplace growth strategy, with Dan Hockenmaier (Faire, Thumbtack, Reforge)](https://www.lennysnewsletter.com/p/developing-a-growth-model-marketplace#details) 11. [How to build a powerful marketing machine, with Emily Kramer (Asana, Carta, MKT1)](https://www.lennysnewsletter.com/p/how-to-build-a-powerful-marketing#details) ### Benchmarks and metrics 1. [What is good retention](https://www.lennysnewsletter.com/p/what-is-good-retention-issue-29) 2. [What is good monthly churn](https://www.lennysnewsletter.com/p/monthly-churn-benchmarks) 3. [What is a good payback period](https://www.lennysnewsletter.com/p/payback-period) 4. [What is a good activation rate](https://www.lennysnewsletter.com/p/what-is-a-good-activation-rate) 5. [How to determine your activation metric](https://www.lennysnewsletter.com/p/how-to-determine-your-activation) 6. [How to measure cohort retention](https://www.lennysnewsletter.com/p/measuring-cohort-retention) 7. [What is a good growth rate](https://www.lennysnewsletter.com/p/what-is-a-good-growth-rate) 8. [Choosing your north-star metric](https://future.a16z.com/north-star-metrics/) 9. [The most important bottom-up SaaS metrics to track](https://www.lennysnewsletter.com/p/the-most-important-bottom-up-saas) 10. [The most important marketplace metrics to track](https://www.lennysnewsletter.com/p/the-most-important-marketplace-metrics) 11. [The most important consumer metrics to track](https://www.lennysnewsletter.com/p/the-most-important-consumer-metrics) 12. [The most important consumer subscription metrics to track](https://www.lennysnewsletter.com/p/the-most-important-consumer-subscription) ### Product-market fit 1. [How to know if you’ve got product-market fit](https://www.lennysnewsletter.com/p/how-to-know-if-youve-got-productmarket) 2. [What it feels like when you’ve found product-market fit](https://www.lennysnewsletter.com/p/what-it-feels-like-when-youve-found) 3. [How long it takes to find product-market fit](https://www.lennysnewsletter.com/p/time-to-product-market-fit) 4. [How to validate your startup idea](https://www.lennysnewsletter.com/p/validating-your-startup-idea) ### Career 1. [What is product management](https://www.lennysnewsletter.com/p/what-is-product-management) 2. [How to get into product management (and thrive)](https://www.lennysnewsletter.com/p/how-to-get-into-product-management) 3. [Should I become a product manager?](https://www.lennysnewsletter.com/p/become-a-product-manager) 4. [Becoming a senior product manager](https://www.lennysnewsletter.com/p/senior-product-manager) 5. [Surviving as the first product manager](https://www.lennysnewsletter.com/p/joining-as-the-first-product-manager) 6. [Product management career ladders](https://www.lennysnewsletter.com/p/jobs-of-product-manager) 7. [A comprehensive survey of product management](https://www.lennysnewsletter.com/p/product-management-survey) 8. [Managing up](https://www.lennysnewsletter.com/p/managing-up) 9. [How to know when to stop](https://www.lennysnewsletter.com/p/how-to-know-when-to-stop) 10. [My favorite PM courses](https://www.lennysnewsletter.com/p/my-favorite-pm-courses) 11. [What it takes to become a top 1% PM, with Ian McAllister (Uber, Amazon, Airbnb)](https://www.lennysnewsletter.com/p/what-it-takes-to-become-a-top-1-pm#details) ### Hiring 1. [My favorite PM interview questions](https://www.lennysnewsletter.com/p/my-favorite-pm-interview-questions) 2. [Six rules of hiring for growth](https://www.lennysnewsletter.com/p/hiring-growth) 3. [14 habits of highly effective product managers](https://www.lennysnewsletter.com/p/14-habits-of-highly-effective-product) 4. [How to know if you’re doing a good job as a product manager](https://www.lennysnewsletter.com/p/doing-a-good-job-product-manager) 5. [When to hire your first product manager](https://www.lennysnewsletter.com/p/when-to-hire-your-first-product-manager) 6. [How to interview product managers](https://www.lennysnewsletter.com/p/how-to-interview-product-managers) 7. [The 10 commandments of salary negotiation](https://www.lennysnewsletter.com/p/negotiating-comp) ### Startups and leadership 1. [How to fire people with grace, work through fear, and nurture innovation, with Matt Mochary (CEO coach)](https://www.lennysnewsletter.com/p/how-to-fire-people-with-grace-work#details) 2. [How Notion leveraged community to build a $10B business, with Camille Ricketts (Notion, First Round Capital)](https://www.lennysnewsletter.com/p/how-notion-leveraged-community-to#details) 3. [How Snyk built a product-led growth juggernaut, with Ben Williams (VP of Product at Snyk)](https://www.lennysnewsletter.com/p/how-snyk-built-a-product-led-growth#details) 4. [An inside look at how the New York Times builds product, with Alex Hardiman (CPO at the New York Times)](https://www.lennysnewsletter.com/p/an-inside-look-at-how-the-new-york#details) 5. [Startup to exit: Lessons from a first-time founder](https://www.lennysnewsletter.com/p/startup-to-exit-lessons-from-a-first) 6. [How to activate your investor network](https://www.lennysnewsletter.com/p/how-to-activate-your-investor-network) 7. [Fundraising](https://www.lennysnewsletter.com/p/a-playbook-for-fundraising) 8. [A founder’s guide to community](https://www.lennysnewsletter.com/p/building-community) 9. [Increasing team velocity](https://www.lennysnewsletter.com/p/increasing-velocity-issue-61) 10. [The secret to a great planning process](https://review.firstround.com/the-secret-to-a-great-planning-process-lessons-from-airbnb-and-eventbrite) 11. [The Power of Performance Reviews: Use This System to Become a Better Manager](https://review.firstround.com/the-power-of-performance-reviews-use-this-system-to-become-a-better-manager) ### Pricing 1. [The art and science of pricing, with Madhavan Ramanujam (Monetizing Innovation, Simon-Kucher)](https://www.lennysnewsletter.com/p/the-art-and-science-of-pricing-madhavan#details) 2. [Pricing your SaaS product, by Patrick Campbell](https://www.lennysnewsletter.com/p/saas-pricing-strategy) 3. [Going freemium, adding a trial, business model disruption, and more](https://www.lennysnewsletter.com/p/freemium-trials-free) ### Sales 1. [Founder-led sales, with Pete Kazanjy (Founding Sales, Atrium)](https://www.lennysnewsletter.com/p/founder-led-sales-pete-kazanjy-founding#details) 2. [The Transition: Layering sales onto a bottom-up self-serve product, by Pete Kazanjy](https://www.lennysnewsletter.com/p/sales-bottom-up) 3. [How to hit revenue targets in a recession, with Sahil Mansuri (Bravado)](https://www.lennysnewsletter.com/p/how-to-hit-revenue-targets-in-a-recession#details) To make sure you don’t miss any future posts, and to instantly get access to every past issue, subscribe here 👇 *See you in 2023!* ## 📣 Join Lenny’s Talent Collective 📣 [Join the collective](https://www.lennysjobs.com/talent/welcome) to get personalized job opportunities from hand-selected companies. You can join publicly or anonymously, and leave anytime. [Apply to join](https://www.lennysjobs.com/talent) If you’re hiring, start getting bi-monthly drops of world-class hand-curated product and growth people who are open to new opportunities. [Apply now](https://www.lennysjobs.com/talent/welcome). ![Image from The Best of Lenny’s Newsletter 2022](https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/fd2a86a0-dc08-4cf2-9095-e88dd7f2e5cf_1476x856.png) **If you’re finding this newsletter valuable, share it with a friend, and consider subscribing if you haven’t already.** Sincerely, Lenny 👋 ---