Enjoyed the talk. Key takeaway for me was the need for explicit sequencing of product market fit and growth hacking (i.e, don’t bother with growth hacking if you don’t have PM fit). I suppose it is obvious intuitively, but demonstrating PM fit via retention metrics (“make sure your retention flat lines at the appropriate level”) was an interesting take. It can be easy to create work and activity doing growth hacking creating an illusion of progress. Keeping PM fit/growth separate and sequenced is a good lesson.
This needs to be better understood/accepted by startups, but it's a bitter pill to swallow for many entrepreneurs.
I wrote a book on growth hacking and now often get requests (sometimes casual, sometimes formal) on how a startup can "growth hack" or accelerate their growth. Then when I ask about the basics like target market, retention metrics, customer feedback etc - I get a bunch of blank stares.
It's no good driving more traffic or "virality" when people aren't interested in your startup in the first place. I'd say in 9 out of 10 cases, there's still a ton of PM fit work to be done by startups who think they are in the "growth hacking" stage.
The problem is, I'd say most first-time entrepreneurs just think the only obstacle they need to overcome is getting more people seeing their website, or downloading their app. It's hard to accept that your startup is not ready for growth because it's not providing any clear value yet.
Obvious as it seems, I never got a good answer like that from "experts" about how to define PM fit.
There were those guys talking about lean startup, measure everything and stuff; but when come to this crutial question they were all "well, you will know when you have PM fit" or an arbitrary question with an arbitrary answer "ask your clients how disappointed they would be if your startup would shut down now; if 60% answer very disappointed, you have PM fit".
So, similar key takeaway for me: "It is easy to be wrong about having Porduct/Market fit. Make sure your retention flat lines at the appropriate level."
I still haven't got my head around the 'growth' thing is how is it applicable to software/hardware startups that are NOT developing products for mass market.
For example, if someone in telecom industry creates a product that can only be sold to operators. The time it takes to convert an engagement can be upwards of 6 months. In such cases, what would be a good growth metric with which to measure your progress?
Now, we can chose not to call such companies startups but that doesn't solve the problem.
I am sure there are many knowledgeable people on this thread who can provide some insights here. Any pointers to read will also help.
What you are describing is enterprise sales. I co-founded one of those. Early traction is easy to spot:
- at first, you can barely get first meetings with any potential customers. You track how many companies even agreed to meet with you once.
- a few months in, you get your hopes up (incorrectly - usually). A few companies you met are talking about doing an evaluation of your product.
- another few months go by, just one of all your contacts moved to do an evaluation, but then they postponed their purchasing decision to the next fiscal year.
- still no revenue, but now you have a funnel: x prospects in first meeting, y prospects in second meeting, z prospects in eval, 0 prospects have bought. Keep tracking those numbers and the trend will be clear.
I've been a manager working for telco companies so I know a bit about it. Usually the backlog is a good metric but it works from when you have already sold the product.
Usually to assess what happens before the sales team is asked to assess the probability of closing the deal and discount the deal size by that probability. An increase of the scope (and of the total value) or of the probability to close the deal represents your metric.
It is not very scientific but could be made pretty accurate. E.g: you know the price of your product and how much you are willing to give a discount in order to close the deal. Also, even if negotiation, especially with big companies, could be unpredictable, it is usually done in steps and each steps closer means an higher chance of success. A possible sequence of steps is:
- RFI received.
- RFI answered.
- Q&A and first meeting
- Follows Up
- RFP received
- RFP answered
- First round of Q&A/meetings
- Short Listed
- Second round of Q&A/meetings
- Product demo
- Final negotiation (usually price and conditions)
This is the process for RFI, there's a different one (and a little bit more complex) for "cold calls" that probably is more applicable to startups. Obviously some steps are optional and the names could changes but this is how it works.
Just a final note, though. If you are a startup in B2B avoid, at the beginning at least, big corporation as client if you can. They have a huge negotiation power, they will drive down your price like crazy and being your biggest client they will use their force to ask you a lot of extra work than the one negotiated. You will end up loosing a lot of money on the deal and also you will have little ability to follows other deals. Yes, they are useful to qualify for other clients and if you lock them in they could be quite profitable, but unless you have deep pocket they will crash your company.
Thanks for the detailed answer. I suppose tracking stages of sales pipeline is a good metric as you and several others have mentioned. Much better than being completely in dark.
Also by 'backlog', I assume you meant product backlog (e.g. features remaining) or something in the sales funnel?
While tracking the sales funnel is great to use as an indicator of progress, it is not great as a decision-making heuristic internally (e.g. for product features) as pg mentions in his essay 'Startup=Growth'. I suppose product backlog is a good metric for such cases.
Tldr; use sales funnel to track business side and feature backlog internally.
Because of the faster feedback cycles, the web/mobile app world can use the same metric to track internal and external progress.
What do you mean by backlog depends a lot on what you are selling:
- If it is software, usually you sells it in stage or you have to deliver customization/integration at a later stage:
- If it is SaaS is like before but you have also the following months of license (they usually ask for a minimum guaranteed lifetime for the SaaS);
- If it is hardware for internal use usually it is installed in stage, so you could have your sales spread over few months/years.
- If it is something they resell, you will have the projection of sales.
_ If it is a service, you have the service not yet delivered as backlog.
Obviously they can cancel when they want, but it is still your backlog until you deliver it or it is cancelled.
Its very different as you mention. "Growth" in the sense that its talked about here only really applies to products with many feedback cycles where iteration is possible (not hardware). For products with longer sales cycles its generally based on more traditional sales metrics, measuring where people are in your sales funnel and conversion between sales funnel steps.
A very very well delivered lecture. I love that YC is taking a stance against buzzwords like growth hacking, and getting startups to look maniacally at building a solid product that gets to product/market fit quickly. Seems pretty consistent across lectures from PG, Peter Thiel and now Alex as well.
This is a great talk, but I can't help but think this is tailored to bigger companies than YC-application stage start-ups. Alex spends lots of time talking about the distinction between power users and marginal users, which is incredibly valuable advice for the AirBnBs, Dropboxes, Facebooks, etc but a different problem set than the 'normal' start-up.
For emerging product-market fit companies, your power users are your lifeblood. Cultivation super-users early is the make or break for seed companies. These super users are testers, referrals, product-definers, everything. 50M+ user problems are just so limited.
In any case, great talk, but definitely targets growth marketers more than start-up folks. Especially liked the idea of tying 'magic numbers' to logical reasoning, not done enough in the growth world.
Edit: Much better in the tactical section going through marketing tactics.
I think it's a very important distinction to make, especially early on, to make sure that founders focus on power users and completely ignore casuals. It's tempting to try to get interest from marginal users, because there is many more of them than potential power users, but it's going to do you no good if power users don't see value in what you build.
Great talk, but I agree that like a lot of startup advice out there, it is for companies that have a product-market fit.
I've been thinking why the startup community has so few talks about product design. We have a lot of advice about tech stacks, growth hacking, rising funding, building a team, even some about customer research, but surprisingly little about design.
Yet, product design is one of the key activities to achieve product market fit: you can understand the problem, but if your product isn't easy enough to use, PM fit is hard to achieve.
For example, you can find a deep analysis of a different SaaS models, but it is surprisingly rare that someone does a deep analysis of e.g. Facebook's UI and writes a blog post about it.
you are spot on. I was directly focused on the point in Sam's list (idea, product, team, execution) where you decide when to really focus on the execution phase of scaling and then what to do when you hit it. I think it's easy to over-focus on product design though, big companies are really bad at this, they produce polished products with great user flows and so on but miss the big win. Products like craigslist/eBay/Google weren't really great designed products to start with, they just solved a real need. As such I think Peter T's talk is really good on getting to product market fit.
From my perspective what this series of very good lectures has triggered is a common introspective conversation, here in the comments section, that far outweighs the content of the lectures in value.
There is some very smart, intuitive and perceptive people hanging out here; I wish there was an even better algorithm to make these stand out.
Noise is the curse of a community (such as HN, slashdot, reddit -- any social circle come to think of it) as it get more popular; everyone has a different view of what is hacking, startups and noise, as the community broadens the focus dissolves.
This series has drawn out very good reflexion, IMHO.
I find HackerNews pretty good at highlighting the best content in non-flamewar articles. What I mean is that if the article isn't anything to do with the big tech companies we will get good discussions and people will up/downvote rationally. Whenever Apple/Google/Facebook etc. are mentioned the fanbois come out.
Right after minute 32:00 Alex Schultz says "Facebook was viral via word of mouth because of the awesome product". Is this really true? I think "Use your email login and password and invite your contacts" namely contact import was the viral technique. The payload and frequency was high and the CR was ok.
I remember Facebook growth days somewhat well. People logged in with their emails and passwords were asked to provide their email provider passwords (to be fair, somewhat deceivingly) to invite everyone in their addressbook to come to Facebook. And I remember quite well some people didn't event notice the difference between whether they were asked for a Facebook password or their email provider password, and didn't really understand what was asked by inviting their friends.
FWIW Facebook tore through my college in a couple weeks way before they had any type of inviting mechanisms. So PM fit was definitely there and virality was all word of mouth.
you guys are totally right (in the growth tactics I definitely tell you lots of the non-organic stuff). That being said the idea here is "how to start a startup" and so I was trying to focus on what got Facebook the first 50million users not the next 1.3Billion and how we think about growth for products at Facebook and how I think about it when advising companies. It's always cool to see the different comment threads (one saying I'm too optimized for big company growth, one saying I'm talking about too early, I am hoping that means I pitched it about right :) )
Brilliant guy, speaker. I now get why something that's relatively easy for me to make might actually be worth more than a few bucks per hour to a lot of people.
absolutely amazing talk. This needs to be watched several times. My favorite takeaway: Get your users to their 'magical' moment with your product as fast as possible.
OOph.... I can't listen to him longer than ten minutes. Someone please tell him to stop talking that way. What is it??? the upturn at the end of every other sentence.
