Gustaf Alströmer - Growth for Startups

Summary

In this insightful talk, Gustav from Airbnb's growth team shares his expertise on scaling startups. He emphasizes the importance of achieving product-market fit and strong retention before focusing on growth. Gustav outlines key growth channels and tactics, highlighting the significance of conversion rate optimization and leveraging platforms like Google and social media for discovery. He also stresses the value of data-driven decision making through A/B testing to steer clear of biases and make informed choices for sustainable growth. This talk is a must for founders looking to scale their startups effectively.

Takeaways

• 🚀 **Do Things That Don't Scale**: In the early stages, founders must do things that may not feel natural or scalable to get the startup off the ground.
• 🔍 **Product Market Fit First**: Focus on achieving product market fit and good retention before concentrating on growth, as growth efforts without these are futile.
• 📈 **Measure Retention for Growth**: Use unbiased data and focus on retention as a key indicator of whether you have a product that people truly want and will continue to use.
• 🛠️ **Iterate Based on User Feedback**: Engage directly with customers to identify pain points and iterate on the product to improve the user experience and satisfaction.
• 🤝 **Leverage Word of Mouth**: Utilize referral programs that incentivize users to bring in new users, which can be a powerful way to grow through word of mouth.
• 💰 **Understand Your Costs**: Be clear on the customer acquisition cost (CAC) and ensure that the lifetime value (LTV) of a customer is higher than the cost to acquire them.
• 🌐 **Optimize for Growth Channels**: Once you have product market fit, focus on growth channels like SEO, paid marketing, and viral loops to scale your user base.
• 🔗 **SEO is Competitive**: Recognize that SEO has become highly competitive, with large companies dominating keyword rankings, so focus on being as good as the best.
• 📊 **Use A/B Testing for Decision Making**: Implement A/B testing to make informed decisions about product changes and to avoid relying on gut feelings or biases.
• 🌟 **Cultivate a Culture of Experimentation**: Develop a company culture that values experimentation and data-driven decision making to guide growth strategies effectively.
• 📝 **Track the Right Metrics**: Focus on tracking metrics that represent the value of your company and avoid vanity metrics like registered users or visitors that don't indicate product-market fit.

Q & A

What are the three main topics Gustav covers in his talk on growth for startups?

Gustav covers product market fit and retention, growth channels and tactics, and decision-making processes when scaling a team.

Why is focusing on growth before achieving product market fit and good retention not advised?

Focusing on growth before product market fit and good retention is not advised because it's inefficient; you need a solid foundation and a product that people want before trying to scale up.

What is Gustav's background, and how did he learn about growth strategies?

Gustav worked on the growth team at Airbnb for almost five years, growing the team from two to over 100 people, and he learned most of the growth strategies there.

What is the importance of 'doing things that don't scale' in the early days of a startup?

In the early days, founders need to do things that don't scale to understand their customers and product deeply. This hands-on approach helps in learning and iterating on the product effectively, which is crucial before scaling.

Why is it a mistake to assume that launching a product will automatically lead to success?

It's a mistake because the world is busy, and people are not waiting for your product launch. Success requires deliberate efforts to reach out and convince people to try and adopt your product.

How did Airbnb's founders initially improve their product during the early days?

Airbnb's founders acted as hired photographers for their hosts, improving listing photos and talking to hosts to understand their challenges and how they used the product, which helped them iterate and improve the service.

What is the significance of retention in measuring product market fit?

Retention is significant because it shows whether users are repeatedly using your product over time. High retention indicates that users find value in your product, which is a strong sign of product market fit.

Why are vanity metrics like registered users or visitors not good indicators of product market fit?

Vanity metrics like registered users or visitors do not indicate whether users are actively engaged with the product or if they are deriving value from it, which is essential for assessing product market fit.

What are some examples of growth channels that Gustav mentions in his talk?

Examples of growth channels include Google (for SEO or SEM), social media platforms like Facebook and Instagram for advertising, referrals, virality, and sales for B2B products.

How can startups effectively optimize their conversion rates?

Startups can optimize conversion rates by improving internationalization, authentication flows, onboarding processes, and purchase conversion experiences, ensuring each step of the user journey is smooth and compelling.

What is the primary advice Gustav gives regarding paid growth or online marketing for startups?

Gustav advises startups not to engage in paid growth or online marketing unless they have a revenue stream and a clear understanding of their customer acquisition cost (CAC) and the lifetime value (LTV) of a customer.

What is the role of A/B testing in decision-making for growing startups?

A/B testing is crucial for making data-driven decisions at scale. It helps determine the impact of changes like new designs or features by comparing them against a control group, providing clear insights into what works best for the users.

Why is it important for startups to build a culture of experimentation and data-driven decision making?

A culture of experimentation and data-driven decision making ensures that the loudest voice in the room doesn't dictate the direction of the company. Instead, it relies on empirical evidence to guide the growth and development of the product and the business.

Outlines

00:00

🚀 Introduction to Growth for Startups

Gustav introduces the topic of growth for startups, emphasizing the importance of addressing growth strategies only after launching. He mentions that the talk will be particularly relevant to those who have already launched their products. The speaker outlines three main topics for discussion: product-market fit and retention, growth channels and tactics, and decision-making within a team. Gustav shares his background, highlighting his experience at Airbnb where he worked on the growth team, growing it from two to over a hundred people. He stresses the importance of recognizing that most startups do not have product-market fit and that founders often deceive themselves into thinking otherwise. The paragraph concludes with a recommendation to read Paul Graham's article on 'doing things that don't scale,' which is relevant to the early stages of a startup.

05:02

🔍 The Importance of Product-Market Fit and Retention

Gustav discusses the significance of product-market fit and retention in the context of growth. He explains that working on growth without achieving product-market fit and good retention is not advisable. The speaker shares his insights on how Airbnb's founders personally visited hosts to understand their challenges and improve the product. This hands-on approach led to fixing bugs and enhancing the user experience, which contributed to Airbnb's success. Gustav emphasizes that founders play a crucial role in making startups take off by doing things that may not feel right or scalable but are necessary for growth. He also touches on the importance of reaching beyond friends and friends of friends to gain unbiased feedback on the product.

10:02

📊 Measuring Product-Market Fit with Data

In this section, Gustav explains how to measure product-market fit using unbiased data. He argues against relying on net promoter scores or surveys, which can be biased or misleading. Instead, he suggests focusing on retention rates as a key indicator of whether users genuinely want the product. Gustav provides examples of different companies and how they define their metrics for measuring value and usage frequency. He illustrates the concept of plotting retention over time to determine if a product has achieved product-market fit, showing that a flat retention line indicates a stable and satisfied user base. He also warns against using poor metrics like registered users, visitors, conversion rates, or free product giveaways as indicators of product-market fit.

15:04

🛠 Growth Channels and Conversion Rate Optimization

Gustav shifts the discussion to growth channels and tactics, applicable once product-market fit is established. He differentiates between product growth (led by engineers, designers, and product managers) and growth channels (platforms where people discover products). The speaker lists examples of growth channels, such as Google, Facebook, and Instagram, and explains their importance in product discovery. He then delves into conversion rate optimization, detailing the importance of every step in the product experience as a funnel that can be measured and improved. Gustav outlines specific areas to focus on, such as internationalization, authentication, onboarding, and purchase conversion, to enhance the user journey and increase the number of successful conversions.

20:06

🌐 Exploring Growth Channels for Scalable Growth

The speaker continues the discussion on growth channels, emphasizing the importance of understanding which channels are relevant for a product to grow at scale. Gustav explains that most successful companies rely on one or two key channels rather than spreading efforts across multiple avenues. He provides examples of companies like TripAdvisor and Pinterest that have grown significantly through SEO. The speaker also discusses the importance of virality and referrals, particularly for products that naturally inspire word-of-mouth. Additionally, he touches on the effectiveness of sales for targeting specific customer lists and the increasing significance of paid advertising for companies with high lifetime value products. Gustav advises startups to focus on the most effective channel for their specific product and to avoid spreading resources too thin.

25:07

💰 Navigating Paid Growth and SEO

Gustav addresses the complexities of paid growth and search engine optimization (SEO). He warns against investing in online marketing without a revenue model, as it can lead to unsustainable spending. The speaker stresses the importance of understanding customer acquisition cost (CAC) and ensuring that the lifetime value of a customer exceeds this cost. He also discusses the competitive nature of SEO and the challenges faced by smaller companies in ranking alongside well-established giants. Gustav provides insights into on-page and off-page SEO strategies, emphasizing the need for a clear value proposition and authoritative inbound links. He concludes by advising startups to focus on mastering one or two growth channels rather than attempting to excel in all areas.

30:07

📈 The Power of A/B Testing for Decision Making

In the final section, Gustav introduces the concept of A/B testing as a critical tool for making informed decisions at scale. He explains that relying on instincts or opinions can lead to incorrect conclusions, whereas A/B testing provides a data-driven approach to determine the effectiveness of changes. The speaker shares examples from Airbnb's experience, where they tested different designs and features to measure their impact on user engagement and conversions. Gustav emphasizes that A/B testing helps to eliminate bias and provides a clear understanding of what works and what doesn't. He advises startups to embrace experimentation and data-driven decision making as they grow, as it will become increasingly important for scaling effectively.

35:08

📝 Summary of Growth Strategies for Startups

Gustav concludes the talk by summarizing the key points for startups to consider when thinking about growth. He reiterates the importance of doing things that don't scale in the early stages, as traditional growth strategies may not be applicable yet. The speaker stresses the need to measure retention to assess product-market fit accurately. Finally, he encourages the development of a culture of experimentation and data-driven decision making, which will become invaluable as the startup grows. Gustav reminds the audience that while some of the topics discussed may not be immediately relevant, they will become crucial at certain stages of growth.

Keywords

💡Product Market Fit

Product Market Fit refers to the stage in a startup where the product meets the needs of the market. It is essential for growth because focusing on growth without achieving product market fit can be futile. In the video, Gustav emphasizes the importance of ensuring a good product market fit before attempting to scale, as demonstrated by his experiences at Airbnb.

💡Retention

Retention is the ability of a product to keep its users over time. High retention rates indicate that users find value in the product and continue to use it. Gustav discusses how measuring retention can help determine product market fit, using examples like Airbnb and Instagram to illustrate how often users should engage with the product.

💡Growth Channels

Growth Channels are methods or platforms used to acquire new users for a product. These can include SEO, paid advertising, and word-of-mouth referrals. In the video, Gustav outlines different growth channels and tactics that startups can employ after achieving product market fit to expand their user base.

💡Unscalable Tactics

Unscalable Tactics refer to early-stage strategies that are not designed to scale but are crucial for initial growth and learning. Gustav explains how Airbnb's founders used unscalable tactics like personally visiting hosts to gather feedback and improve the product, which eventually led to their success.

💡Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) is the cost associated with acquiring a new customer. It includes expenses on marketing, sales, and other efforts to attract users. Gustav highlights the importance of ensuring that the revenue from a customer exceeds the CAC, especially when using paid growth strategies.

💡Viral Loop

A Viral Loop is a self-perpetuating cycle where existing users attract new users, typically through referrals. This concept is critical for products that benefit from network effects. Gustav mentions how social products like LinkedIn and Airbnb leverage viral loops to enhance user acquisition and engagement.

💡A/B Testing

A/B Testing is a method of comparing two versions of a product to determine which one performs better. This technique helps in making data-driven decisions. Gustav describes how Airbnb used A/B testing to optimize features like the sharing sheet and the sign-up process to improve user engagement and conversions.

💡Net Promoter Score (NPS)

Net Promoter Score (NPS) is a measure of customer satisfaction and loyalty, based on how likely users are to recommend the product to others. Gustav argues that while NPS can provide insights, it is not as reliable as retention data for assessing product market fit, as illustrated by examples of well-known products with varying NPS.

💡SEO (Search Engine Optimization)

SEO involves optimizing a website to rank higher in search engine results, thereby increasing organic traffic. Gustav discusses the significance of SEO for products that address rare behaviors and how companies like TripAdvisor and Pinterest have successfully utilized SEO to drive growth.

💡YC (Y Combinator)

YC, or Y Combinator, is a startup accelerator that helps new companies by providing funding, mentorship, and resources. Gustav references his time at Y Combinator and the guidance provided by mentors like Paul Graham, which helped Airbnb refine its product and growth strategies through unscalable tactics and direct user interactions.

Highlights

Gustav is giving a talk on growth for startups, focusing on product market fit, growth channels, and decision-making as the company scales.

Emphasizes the importance of achieving product market fit and good retention before focusing on growth.

Shares personal experience from Airbnb's growth team, scaling the team from two to over 100 people.

Discusses the common misconception that launching a product will naturally lead to success and customer acquisition.

Recommends reading Paul Graham's article 'Doing Things That Don't Scale' for insights on early-stage startup growth.

Highlights the need for founders to perform tasks that don't scale in the early days to understand and improve the product.

Airbnb's founders personally improved listings by visiting hosts and taking photos, demonstrating hands-on early growth strategies.

Stresses the significance of founders in making startups take off through unconventional and necessary actions.

Introduces the concept of measuring product market fit through unbiased data and retention rates.

Argues against using net promoter score and surveys as accurate measures of product market fit.

Advises using clear metrics like repeat usage to determine if a product has product market fit.

Provides examples of how different companies, such as Lyft and GitHub, measure their product market fit through retention.

Warns against using vanity metrics like registered users or visitors as indicators of product market fit.

Outlines the two main ways to grow at scale: product growth and growth channels, including tactics like conversion rate optimization.

Details the importance of conversion rate optimization, including internationalization, authentication, onboarding, and purchase conversion.

Explains the role of growth channels like Google, Facebook, and Instagram in product discovery and acquisition.

Discusses the power of referrals and virality in growth, as well as the importance of understanding customer acquisition cost in paid marketing.

Advises startups to focus on one or two key growth channels rather than spreading efforts too thin.

Talks about the importance of SEO and the competitive landscape for startups looking to rank in search results.

Introduces A/B testing as a crucial tool for decision-making at scale and the value of data-driven decisions.

Encourages building a culture of experimentation and data reliance for effective decision-making as the company grows.

Transcripts

my name is gustav i i'm gonna give a

talk on

growth for startups um this is gonna be

for

um some of you guys not super relevant

right now because you might not not

launched

and thinking too much about growth when

you're having launch isn't that relevant

but for those of you that have launched

this is hopefully going to be good

talking

so i'm going to cover three different

things today first i'm going to talk

about

product market fit and retention uh the

reason that that relates to growth so

much

is because working on growth before you

have product market fit

and good retention is not a good idea

the second thing i'm going to talk about

is growth channels and tactics these

things definitely apply

after you have launched and often after

you have

a good product market fit you've found

something that people really want and

then you want to scale it up to the

the larger world and lastly i want to

talk about how you make decisions

when you have several people on your

team you want to start redoing things

and you're not really sure exactly

if you're making the right decisions or

not and this is also things that apply

when you're a little bit bigger

so my background uh i learned most of

these things i'm going to talk about at

airbnb

i worked on the growth team for uh

almost five years from where

two people until over 100 people

on that team this is the team back in

2015

most of the lessons i'll talk to today

are things i learned there

most of you are going to be somewhere on

this line

most startups don't have price market

fit founders tell themselves that

they do and they try to convince

themselves that this is working

but the truth is for most companies is

not working so

that means you're going to be somewhere

on this line

people also have this idea that if i

launch my

product it will work somehow it's going

to work if i just tell the world

that i am my i built my is not

now there

now unfortunately that's not the case

the world is a really busy place

and there isn't really lots of people

waiting for you to launch your product

they're not standing there and they're

not going to try it the moment you

launch it

that is unfortunately not the truth and

for many people

who have never thought of these

questions before of how do i reach the

world

this actually comes as a surprise people

have been used to working in big

companies

where this is not a problem people be

used to going to

school or other areas where this is just

not a problem in this case when you

launch a

startup it's all down to you and these

are it is going to be a problem in the

very very early days

there's a great article that i recommend

for you guys to read on this this is

called

doing things that don't scale about paul

graham he wrote that

six years ago it is about the early days

of the airbnb

story and the thing that's really

important about this

is as a founder you need to keep two

different skill sets in mind

as your company grow in the beginning of

your company you're going to do a lot of

things that don't

feel right at the when they don't feel

natural to you because it's not the kind

of thing that you learned in your

previous jobs or in school

it's just like the most kind of um

physical or real things that you have to

do that you aren't going to be relevant

later on

but later on as your company grows

bigger you're going to be doing a lot of

things that

are things that relate directly to

software and other things to scale your

company so these are two things two

skill sets so you have to keep in mind

at the same time

nyc we have this thing where where we

tell companies that

you just launched uh you got to do

things that don't scale

and we got lots of these mbas that go

went to school and said

well this idea does not scale standing

outside of this store or sitting in this

in this elevator to sell people

something that certainly doesn't scale

correct that does not scale but that is

where everyone needs to start

and if you went to school and you

learned they should only work on things

that really scale

you're gonna have to unlearn that skill

because when you start your company

the most important thing is going to do

things that don't scale so if you get

comfortable with that idea

this is the early days of airbnb so this

is sometimes in 2009

they were just a few people the article

i mentioned earlier doing things that

don't scale

tells the story of the first year or two

of airbnb

when the founders came to yc they had

spent

almost a year trying to get mb off the

ground

it didn't really work this was the first

version of the airbnb website

airbed and breakfast.com in fact the

website itself

didn't really speak to what the what the

what the company does

it was started as a website to offer

air mattresses to people that visited

design conferences

and they had to navigate the way to find

the place to

where mb is today whenever we joined yc

the first question they got from paul

graham

was who are your users and at a time the

site looks something like this

you click on a listing and you had three

different

pieces of information you had a photo of

the of the host

you have one photo in this case of the

building from the outside

and then you have one map of where that

place was

now at the time the only comparison to

uh what a site like this would look like

would be craigslist

so craigslist wasn't a lot better than

this so at least they met that

criteria but it wasn't something that

would make airbnb take off

they didn't really have in the product

will make everybody take off

the things that were missing is is this

a good listing

how does this listing actually look like

can i trust the host

lots of things that were missing in that

early product and how do you learn that

the way they learned that is they went

and talked to the host

on their first week in yc paul graham

told

the founders of amb you guys go meet

your host where are your hosts

most of our hosts are in new york we

don't have that many but most of them

are in new york it's the flu to new york

undercover not on the cover they claim

to be um

hired photographers for airbnb and

breakfast

so when i met with all the hosts they

said want to come by your home and take

photos

they didn't say that they were the

founders because that made the company

sound much smaller

they came and met with a host and while

one of the founders were taking the

photos of the listings

to make this look a lot better the other

founders sat down with the host and

asked them questions about

how what what are the challenges you're

having with the product

like what are the things that are not

working can you show me how you use the

product

and by doing that they got for the first

time to meet the people that were the

customers

which they really haven't done before

and they got to see how they use the

products

that's doing things that don't scale and

that is nothing that scales

you can't go and fly to meet every

single one of your customers but when

you start doing that

you will learn things that you can't

learn sitting in front of a computer

so they learned that this payouts things

didn't work or this

there was a big ui bug on this page or

didn't work on an internet explorer well

all these things that you can't learn

sitting in your in front of a computer

they went back to san francisco um

back to y combinator and um they sent an

email today the morning after and

said here are all the photos we took of

your house they're now up on

urban breakfast.com and by the way we

fixed half of the bugs

that you emailed us about or we fixed

the bug that you told us about yesterday

um that made the host love them and

those hosts became

the reason their b eventually took off

like

doing doing things that don't scale

fixing the product making the product

work for the early host we which became

the backbones of the early days of a b

so the lesson here is that founders are

the ones who make starters take off

the founders you guys are the ones that

make the stars take off

you're going to have to do

unconventional things

you're going to have to do things that

don't feel right certainly going to do

things that you didn't learn in

in business school and just going to do

the things that are needed

and this is basically what the yc batch

is about

when someone joins yc we're going to be

like you're going to launch

because that's the most important thing

you do right now but once you've

launched is like how do i get users like

you got to figure out how to do it and

it's different for every company for

many other companies that means sales

for other companies that means doing

things that don't scale typically people

start with their friends

and then friends of friends and then

hopefully you get one step further

the people that are now not your friends

and friends and they're going to give

you true

opinion about your company those are the

people you're going to have to reach

early on

it doesn't really start with like i

launched my website and i put up

google ads or i launched my website and

somehow it's being discovered

that's not how companies get started

that's how they end up much later but

that's not how they get started

there's only one way to grow when you're

really small and that is doing things

that don't scale

all right next topic i'm going to talk

about product market fit

this is a terminology that probably most

of you have heard of

this is a thing that's been hard to

measure

or hard for people to say do i have

project market fit or not

a lot of people like to tell themselves

that they do have product market fit um

it's this thing that we throw around as

a way to say

my product is great so now i have price

market fit

i would argue that there are some ways

you can measure product market fit and

there are many ways that you can't

so let's talk about the one thing that i

think is the best way to do that

i think that the best way to figure out

a product market fit

is to use data unbiased data

to understand if you basically have made

something people want

the two ways that i do that when i start

that the first way is i try to figure

out

what is the metric the data point

that represents the value of your

company that's the first thing i do

the second thing i do is try to figure

out how often should i really be doing

that

a great example might be startup school

the metric here is like

are people showing up to the video talks

at startup school

how often is that it's every week all

right that's pretty easy

but most companies can be defined this

way

let's give some example so airbnb

what is the the metric that represents

the value

well it's the bookings and the stays

it's not the searches

search is not that it's going to be the

bookings in the state when i travel and

b

i've experienced the value so now i know

what it is about

how often do people do this well travel

is actually

mostly an annual thing you don't really

travel every month most people don't do

that

so when we were measuring retention um

at air b we're looking at annual let's

look at instagram

what's the expected use case of

instagram

it's basically just coming back to

instagram most people are not expected

to post photos every day

it's just gonna be coming back to

instagram and viewing photos that's what

most people do

and that's fine that's actually what

they want they want some people to post

for sometimes

but most of the time just coming back is

good enough how often

probably every day let's think of a b2b

company gusto

so for gus though the most valuable

thing that they do for their customers

is their own payroll and they pay out

money to employees they're they're

the employees of customers gusto's

customers so

um how often do you run payroll well it

depends probably every bi-weekly

or monthly and by measuring these two

things

how many people am i running payroll and

are they continually running payroll

with me

that's probably the best way to figure

out if people enjoy using gusto if

they're going to switch to some other

payroll provider

and finally lyft you might want to think

it's rides here

the rides is the best metric here it's

actually writers

like the people that are taking the

rides are the ones that matter because

um it's the individuals that we want to

measure here

and we not necessarily want to measure

the the action that they take

and that's it probably weekly or monthly

so now we have these two metrics we have

a bunch of examples of those companies

let's put in my graph one piece on the

graph is going to be the metric

and the other one is going to be the

time window so every single

uh time window we can put some

percentage of those people on the graph

so let's give an example on week zero

in the case of lyft you had 100

drivers so what i'm what do i mean by

that i basically mean that

um if i had a hund like let's say 10

riders this week

the road would lift they would be

calculated on the week zero

now how many of their riders that i had

last week

are now traveling with lyft this week

that is your week not one number

and the week two number and the week

three number now why is this important

because we're trying to measure repeat

usage repeat usage is the

best most unbiased way to figure out if

someone is liking your product

it's more true than what they tell you

they might tell you things

but what they do is going to be the most

important thing so

most companies can be defined this way

even if you have a b2b contract company

that do annual contracts

measuring say what do people do with my

product could be a really good way

on like this this regular basis so even

if i pay for gusto

on an annual basis which they don't do

measuring the activity are you using

gusto

on a regular basis let's say bi-weekly

and monthly

is is the way to figure out if people

actually using the product so most of

the ideas even your bdb or consumers

could be plotted on this line now why is

this important

well if you're ever going to raise money

this is a graph that investors are going

to ask for

like how much retention do you have like

are people actually repetitively using

your product

those are things they're really curious

about because they know there are other

metrics that you might have that don't

matter

this is a sign of a bad product

basically every single week

after i started using this product fewer

and fewer and fewer people continue to

come back and use the product

so this graph can be plotted and

basically show that this wasn't a good

product

this however is a good product every

week it eventually flattens out

and the people that stop from the

product stop stop using the product

and eventually here at week 8 9 10

we have a flat line of people that

continues to use product every single

week

that means that they are retained i they

you have product market fit for those

users for this product

so i'm not gonna ask you these questions

but here are two examples of two

companies that

i would argue have product market fit

the first one here has thirty percent

after two months and

twenty one percent after twenty months

this is pretty good so you kept

a fifty users 21 months later or twenty

months later

store dash door dash have a monthly

retention of 20

two years later a year and a half later

uh here's another company

more like a b2b company um so 80

retention after one month and then

30 after 60 months it's really good this

is a really good product

very sticky people like this product and

they don't stop using it it's a github

so retention is the best way to measure

product market fit

let's talk about specific things you

might wanna

uh that some people think uh is a better

way i'll argue that they're not

so here's some worse ways to make sure

product market fits

net progress score why is it not good

well you can just google the best

products and best companies in the world

they all have bad net promoter score

like the iphone apple all of them have

bad enough for more scores like it

doesn't necessarily correlate with good

products

correlates with perceptions of companies

surveys

problem with surveys is they are going

to be biased so if you ask your users

you're going to have some level of bias

there are good ways to use service to

improve your products but it's not going

to be the best way to figure out this

metric

there is one cool question you can ask

user which is

how would you feel if you can no longer

use this product

sometimes this works it can give you an

idea but i wouldn't do it instead of of

attention i was to always try to find a

way to measure retention

all right so what are some bad metrics

for prime market fit these are not the

kind of things you want to throw around

it's like

evidence for your practice working

registered users

really bad does not say anything about

repeat usage or if they liked you or not

visitors also bad does not say anything

about whether your product is going to

be valuable conversion rate

we have this conversion rate of visitors

to something else

well that doesn't really say much

because you don't know what people

you're converting

you don't know who they are so this does

not say much about

market fit either and finally something

that should be a paid product

you're giving away for free is not a

good sign of product market fit

like you want to figure out if people

are willing to pay for it because price

if someone says i love this if it's free

but if it costs money i'm not going to

use it

that's pretty bad like then they're not

going to work out for you

so you want to make sure that the people

that are doing something like this on

this graph

if it's expected that you pay for a

product they should be paying for the

all right next section let's talk about

growth channels and tactics

this section really applies if you have

product market fit

if you if most of the people that come

to your product

go down the drain right away and they

never come back this section doesn't

matter like why would you work on trying

to get more people to a product

that if no one is using your product

anyway

if most people are just churning and

like they try it once and then they're

going to come back

like don't work out the stuff wait with

this stuff until you have

some people that care about your product

you can try to use some of these

channels to reach those people

specifically there's really two ways

that you can grow at scale

so when i looked at that team they saw

the photo of the airbnb

team they worked on two things they

either worked on what i call

product growth or conversion rate

optimization

what this means is you have typically

engineers designers

data scientists product managers working

on improving

specific parts of your product to get

more people through that funnel

it's a good example i'm going to give

you some example in a second but that's

basically what i

defined as the first section most of

those people in that photo

were in this category they were

engineers designers product managers and

their scientists

the second group is what i call growth

channels growth channels is basically

platforms in the world that people tend

to discover products on

let me give you some specific examples

google huge

platform for new products to be

discovered anything that you want to use

that is a rare behavior in your life

google that's what you do insurance so i

forgot insurance

google when i find a doctor google

everything you do rarely is going to be

google

which means lots of products are being

discovered on google

and growth channels like google is an

extremely important one for many

companies

another one might be facebook instagram

advertising on facebook and instagram is

critical to companies growth these days

what i mean by growth channels that

means basically other platforms about

your website

or your app so let's talk about

conversion rate

optimization what does it mean every

single step

of your product experience is a funnel

that like the retention curve can be

measured you can have a metric and i

think i think

ilya talked about this since earlier

shop school school talk when you build

funnels

if you put a metric on every single page

in your product you will know what

percent of people

that make it from the first page let's

say the homepage

to the booking page in the case of

airbnb we call the home page p1

the search results page p2 and then the

booking page

and the listing page p3 and then the

booking page was p4

four pages that was the entire website

now what's the funnel

what percent of people make it from p1

to p4 what percent

not that many one percent two percent

most people don't make it that far your

job is to figure out

how many people make it that far why are

they dropping off

what can i do to increase that number

that's basically multiple teams or

multiple people at startups that work on

those things

every single step in that funnel is

going to have some kind of drop up for

some reason

they might be that the content on the

page is not suited for them latin airbnb

all the content speaks to millennials i

have a family

it's not not good content i land on some

other website and the content doesn't

speak to me because i'm not the

the right customer that's one example of

a drop-off

you can fix with content content

changing the content another one might

be

i'll land on the website it doesn't work

because internet explorer is not

optimized for that it's not optimized

for that

you're going to drop off so you've got

to fix that too there's lots of

different reasons

people want to drop off here are some

specific things that people tend to work

on when they work on

conversion rate optimization

internationalization if your website or

your product is

international translating it the product

is really

a good idea uh we saw that airbnb i've

seen that at facebook

i've seen that many other companies

where translation is is is really really

important

authentication most products have some

flow where you're signing up

now that flow probably your products too

have some kind of authentication flow

that flow is very um critical

and the users are kind of vulnerable in

that case because they don't really

have time for too much friction so if

it's not working perfect

they might just go to the next website

uh so make sure the authentication flow

works really well

look at the best websites in the world

look at pinterest look at airbnb

look at some of those sites they have

teams optimizing these these these flows

the authentication flow copy what they

do they probably figure it out they

spend a lot of time optimizing

onboarding this is a huge effort

specifically for products that need a

lot of involvement from the users

to be able to um become active users

so a lot of questions you might want to

ask early on on a new product

the more you can onboard users by asking

them questions that make the experience

better

the more active and the more retained

they will be so onboarding the lots of

things you can do

and finally purchase conversion when

you're about to purchase

a lot of things around urgency and

scarcity

and just user flow and ui all of these

things

matters and that's another great example

of version of optimization

so let's talk about growth channels so

again

don't get here until you have some good

sense of that this is something people

want

first one um like i said earlier if this

is a rare behavior

most new ideas are rare behaviors either

because they don't exist yet

or because they're not something you do

every day we tend to go to google

to learn about rare things that we don't

do very often

so that's why if that is the kind of

product that you have

being on google is going to be really

important it can be either on google

through paid marketing

through sem or through seo i'll talk

about in a second

second does your product

already the people already share your

product through word of mouth

so some products are viral in this

nature because they sound really

exciting to talk about

left and uber and airbnb are examples of

those

um if that's the case you want to make

sure you focus on virality

and referrals what does that mean is

you're building into your product a flow

that friends can tell other friends

about the product referrals is a way

that you can do that

by giving some kind of financial

incentive does the proc get better

if you have more users well this is true

for marketplaces but it's

specifically true for anything that's

social so if you think of a linkedin or

an airbnb

so linkedin or facebook then having more

people on the product is going to make

it better

so it's going to be really important for

you to get more people and those people

on your site is going to be the ones

doing it

so you want to figure out a good viral

loop so when you sign up to linkedin the

first thing they ask you is to

invite more people that's because your

experience get better and there are more

people on linkedin

now many products do work this way and

this can be perfected

and the ones who really succeed in the

world of of um

of the social products are the ones that

really nailed this down to figure out

how it is really well

the many people that make social apps

underestimate how important it's going

to be

to get to get your friends on that

product

if you can make a list of all your

customers

even if that list is a hundred thousand

or five hundred thousand

if as long as it's not mainstream enough

they'll be in the tens of millions

you're probably gonna do sales you'll

make that list

and you start counting on those people

why make it any more complicated why go

out and reach the world

for people if there are only a few

people that you really want to reach

so most companies in yc these days i ask

them this question

can you make a list of your customers

yeah right make that list

start listing them out who are the

people decision makers in those

companies you're trying to sell to

these people make the list email

addresses phone numbers try to figure

out how to reach them

but start by making the list don't make

it complicated by going out

in a in a world where most people aren't

going to be relevant for for your

product

and finally this is a channel that

nowadays

is bigger than it ever has been and more

important than it ever has been

which is if you look at how the entire

world of startups has changed in the

last 10 years

more and more of them are turning more

money um and and

therefore getting what's called a higher

high ltv high lifetime value

by getting a higher lifetime value

you're enabling the ability to buy

paid advertising if you don't have

people paying for your product where

you're making money from your product

you should not be spending time on on

online marketing

now the truth is that most companies

these days are charting for the products

they are making money from the product

and therefore they spend money on online

marketing

if that's true for you this can be an

extremely powerful channel

the biggest mistakes founders make is to

start working online marketing

when they don't have people paying for

the product here's an insight you

probably didn't think of

most really big companies didn't use all

of those channels

they use one or two channels think of a

tripadvisor how is supervisor big

seo you guys type in something on google

you land on tripadvisor

and that's how you found this website

most companies have

um have a setup where there's gonna be

one or two channels that really matters

if you think of pinterest seo is the ra

the real way how printers is going

you type something on google they

already access the pinterest board for

that you'll land on that pinterest board

that's how they acquire new users all

right i'm going to

give some specific uh tactical advice on

some of these channels

the first one i talk about is referrals

and virality so referrals

is word of mouth if word of mouth is a

strong drive

of a product then referrals is going to

be

one way that you can amplify that word

of mouth how do i define referrals

financial incentive to tell your friends

about the product

that's my definition this is the airbnb

referral product

you give someone forty dollars to sign

up to airbnb

and when they do i get twenty dollars

pretty simple concept

uh we have that on the on the website

and on the mobile app

now that's actually more complicated

than you might think this entire product

funnel

where there's multiple steps in that

funnel i'm not going to go into detail

here but if you think of a referral

product it's not just as simple as

throwing that

offer out that's probably what you want

in the very beginning but once you have

a referral part you want to start

measuring each of these steps

like what is that referral offer and

people go to that page

how many people send invites how many of

those invites are being clicked on

how many of those people sign up from

those invites how many of those people

that sign up end up booking

each one of those steps is a step in

this funnel let's talk about one

specific step

the referrals email invite so we would

spend a lot of time optimizing this this

step

because there were lots of people

getting the referrals email invited at

airbnb

so what are the things you can optimize

on the referral invite email

first who's the sender of the email if

it's just airbnb

i probably never never heard of air b

with the first time i get this email

if it's gustav they send the email and i

send it to my friends they have heard of

me

that's the reason to open the email so

people open the email clear value

what is this email about many emails you

start with text

don't start with text just have the

clear value prop at the top

why should i care about this email in

this case it's extremely simple

gustav sent you 40 for your first trip

that sounds good

what is that about i'm gonna read about

it um when do i have to care about this

by this date in the next month so i

can't just leave this email and never

open it again i have to do it right now

what do i have to do here well i could

sign up which is a

undefined thing that you can do sometime

in the future or

i can do what we did here was accept my

invitation this sounds more exclusive

it sounds like something that is just

for me it doesn't sound like something i

can do anytime

in the future and finally here's some

social proof

from uh this email this is me i live in

san francisco we can reveal that

i actually been a member of mmb since

2009 and we can reveal that as well

let's talk about paid growth each of

these sections referrals pay growth seo

could be a presentation on its own so

it's impossible for me to go into

deep details on this but if you're

determined that you have product market

fit

you want to grow one of these channels

and this is the channel you wanna you

wanna go deep on

you're gonna have to go really deep on

it because being really good at one of

these channels require a lot of work

so there's lots and lots of stuff online

about how to get really good at one of

these channels

it doesn't really make sense to get good

at all of them because most of you won't

really need all of them

the number one lesson in paid growth ie

online marketing

is to not do it if you unless you have

revenue

this is the most common mistake that

founders make is that someone start

buying ads

for products and they'll never be able

to pay them back don't do that

the next thing you want to figure out is

what's called cac customer acquisition

cost

how much does it cost to acquire a new

paying

or a new valuable customer someone's

giving you value value back

um many of the advertising tools like

google and facebook

have a very clear system for how they

calculate this and once you start

running ads they'll start telling you

what the cost is going to be

next is going to be that your revenue or

protected revenue from this user

is going to have to be higher than the

cac higher than the cost

very simple otherwise you can't do this

so

how do you know this is the common

question you get early on in paid

marketing

well it seems like in eight months it

will be higher but not in the first

month

well you can't take all your money and

spend on something that you have no

clear certainty of is going to happen in

the future so you're gonna have to

either wait

eight months or you're gonna look for

early indicators

that your hypothesis about the value is

going to be stronger

the best thing startup can do is don't

wait eight months just have a much

lower like a much lower target on what

your cac is going to be

maybe one month two months three months

first first transaction

something like that that's a much better

way to do it the main channels for

online marketing these days is going to

be google

facebook instagram that's pretty much it

let's talk about search engine

optimization

this has changed a lot in the last

couple of years it's very competitive

and what changed is there used to be

millions of websites

each would rank for tens of millions of

keywords

now what i've changed is that the really

big companies starting

getting really good at ranking for all

those keywords

so a pinterest or a tripadvisor might

rank for every single travel keyword you

can imagine

that's hard for small companies what

that means that if you are going to rely

on search engine optimization to grow

um you're going to have to be as good as

a pinterest or

or supervisor eventually not right away

but eventually

uh it's so competitive to win in this

grant like large world of seo

when you get started you can think of

this way seo is is a zero-sum game

basically you're competing against

others so what you do in seo is going to

be

matter and what do you compare to others

the second thing is that the the

keywords that people search for are

changing right

constantly so if you're building

something new let's say asmr i think was

in

a thing that came up recently lots of

companies able to rank for that because

it's a new keyword there weren't

websites built 10 years ago they rank

for that because the thing didn't really

exist

all right let's talk about seo how it

works on the technology side

this is their b search results page this

is what you and me see when we go to the

mb

this is what google see google just sees

text

so to be good at seo you need to

understand what text am i showing to

google

so google can understand what the

website is about people can't understand

what your site is about

it's not going to rank it what are the

two main levers for seo

the first one is going to be things i do

on my page

so for example what's the title of the

page can google read the

the page does the page throw errors what

specific

page in my keyword am i trying to rank

my page for

well start with the keywords do some

research and see what are people

searching for how many people are

searching for asmr

in in in the united states per month

maybe i want to try rank for that

keyword we'll build a website just

trying to rank for that keyword start in

that that

start with google don't start with your

own content you don't know exactly what

people are searching for

you're going to start doing some

research the second thing is the thing

you can't

do that much about which is called

off-page optimization or

domain authority or or something like

that

which basically means how valuable does

google perceive your website to be

in the grand scheme of all websites and

the more inbound links you get from

press

the more links you get from all kinds of

people

that are also authorized like have high

authority the more valuable your website

will be in the in the eyes of google

which means it will rank you higher on

some of the keywords you're trying to

rank for

because it will compare you to other

websites and see if they seem

more or less authoritative i'm going to

details here but that's basically how

google work if you're curious about this

you can google

pay track and go to the wikipedia

article on page link basically will

explain sort of like

high level how google works final

section i'm going to go through this one

a little faster most of you guys don't

have to focus on a b testing

at all it won't matter for a long time

it is a great decision

making tool later on here's the

the situation the startups tend to get

into i want to launch a new

um home page i want to launch a new

design i did and the numbers went down

what happened it's a really hard problem

to

launch something new and sort of like

just look at that the metric over time

don't do that there's a better way first

before you get into that stage you want

to figure out

is a b testing something i want to do

the best way to do that is to

go to google and type in a b testing

calculator think of the metrics that

you're trying to change here so like

visitors to some conversion metric put

them into that first link you see on

google

and that'll tell you whether it's going

to be worth doing most of you it won't

be worth doing for quite a while

so here's the example i'm trying to give

you on the website so i want to ship a

new

experiment our new design on the

homepage

so let's ship it the metric went up or

the magic went down

either way like i don't know if the

website actually cost it or not

the only way for me to know if this new

design actually changed the metric

is if i had an alternative alternative

side of history

because two side to two different um

parallel universes at the same time

one with the new design and one with the

older sign if i had that i can tell

exactly what happened

that's the definition of a testing you

basically have two different

parallel universes of the thing you

shipped the same time

you measured the metrics that matter to

you the reason this is so powerful

helps you make decisions at scale what

ends up happening if founders when they

get five or ten people in the company

and they launch a new design and they're

arguing about

what caused the thing to go up or go

down the only way to really know is to

run an a test to figure out

uh what does the metric say about what

it went up or down

this is hard to internalize because most

people

think of themselves as as good product

good product thinkers so we're talking

about one thing called experiment review

this is airbnb how many here think that

you guys have good product instincts

they usually hand now you guys are

founders you have you should have good

products these things

all right let's see let's say go there

um all right so i'm gonna give you two

examples

so at airbnb we launched uh a new

sharing sheet for the

mobile app and um this was the old

version which was the

the native share sheet that you've seen

on ios uh you click on share and then

you see a bunch of sharing options

and then we just tried this new sheet

that showed more options uh we call this

the experiment but it

didn't really look native so the

question was which one was better

well we didn't really know so we

launched an a b test we launched both of

them at same time for different users

the goal here was to measure the number

of shares so

all right how many here think that the

control

was better how many people think that

this experiment was better and people

thought there was no difference

this is quite common this is about forty

percent better for us

so thank god a bit of an experiment

because if this was the decision making

group then we wouldn't have made the

right decision

next one should we have a sign up wall

or not in the app

now these are not necessarily learnings

you can apply to your companies right

away

but it was an important decision for us

to determine so should we have people

just open air b app and go straight into

the app or should we

have an experiment where you can click

out and x out the sign up wall

or should we have a sign up wall that is

a wall that you can't climb over you

have to sign up otherwise you can use

the mb app

which one is better how many here think

that the control

no sign up wall is better raise your

hand how many

people thought that the experiment where

you can x out and then sign up was

better

and people thought that just like this

wall you can't climb over it was better

that's a few amount of people all right

so this is a lot better

um we got 2.6 more bookings from ios

by making people sign up through a

signup wall in the app

why is that well we knew something about

them so we can send we can show them

more personalized stuff

and when they were about to book we

already had them signed up so they don't

have to

at the time of booking go through the

motions of signing up

you want to learn why why cost this the

whole point is basically when you get

big enough

when you're starting to grow and you

have these decisions about should i

launch this thing or not

um this is a really good way to do it

practice decisions are really hard

so using data to to to make them is a

good way

most of you won't have to worry about

this for a while so don't worry about it

here's the summary of my talk today most

of you

need to do things that don't scale you

are not at the place where you can think

about

um real growth things that growth teams

do so you have to unlearn the things

you've learned at your big companies or

in mba programs and just do things they

don't scale

secondly you want to measure your

attention to understand

if you have product market fit there are

other ways too but that's the best way

in my opinion

and third you want to build a cult

culture experimentation

you want to use data and not have the

loudest voice in your room

decide what the best decision is but you

want to use data and experimentation to

decide

what is the best decision probably

doesn't matter right now but it will

matter some point

thank you

you