Y Combinator Startup Podcast - #145 - Startup School Week 4 Recap - Kat Mañalac and Gustaf Alströmer

Episode Date: September 25, 2019

We've cut down the fourth week of lectures to be even shorter and combined them into one podcast.First a lecture from Kat Manalac. Kat is a partner at YC. Her lecture focuses on how startups should think about launching and why you should do it repeatedly.Then a lecture from Gustaf Alströmer. Gustaf is also a partner at YC and in his lecture he covers how to measure product market fit and growth channels.Y Combinator invests a small amount of money ($150k) in a large number of startups (recently 200), twice a year.Learn more about YC and apply for funding here: https://www.ycombinator.com/apply/***Topics00:00 - Intro00:35 - Kat Mañalac - How to Launch (Again and Again)1:51 - Ways to launch2:14 - Why launch continuously?3:15 - Silent launch4:25 - Friends & Family5:40 - Strangers7:03 - Online communities12:08 - Request access13:29 - Social media15:13 - Pre-order16:13 - New Product or Feature17:42 - Build your own community19:20 - Launching isn't one moment in time19:48 - Gustaf Alströmer - Growth for Startups21:06 - Most startups have nothing22:13 - Do things that don't scale27:13 - Startups take off because founders make them take off28:23 - Measuring product market fit31:20 - Retention34:33 - Worse ways to measure product market fit35:23 - Bad metrics to measure as product market fit36:18 - Growth channels and tactics38:17 - Conversion rate optimization41:26 - Growth channels to explore45:33 - Referrals and vitality48:05 - Paid growth50:09 - Search Engine Optimization53:00 - Making decisions using A/B testing55:02 - Summary

Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinators podcast. Today's episode is a recap of the fourth week of startup school. I've cut down the fourth week of lectures to be even shorter and combine them into one podcast. First, we'll have a lecture from Katman Yalik, Kat's a partner at YC. Her lecture focuses on how startups should think about launching and why you should do it repeatedly. Then we'll have a lecture from Gustav Alstramer. Gustav is also a partner at YC, and his lecture focuses on on measuring product market fit and growth channels. All right, here we go.

I'm Kim Mnialik. I'm a partner at Y Combinator, and one of the things I help founders do a lot is prepare to launch. That is what I'm going to talk to you about today. So I want to change the way that you think about launching. So most people think about launching as something that you get one shot at. But I, so for example, I just talked to a team that's been preparing to launch for six months. They were lovingly trying to get every pixel perfect on their product before they shared it with everyone. And now they are stressing over every line on their landing page. And, you know, they're trying to

line up everything right with timing. But if you're like most startups, you will launch something and no one will care. And if it took you six months to get there, your startup is probably going to be dead before you get another chance to launch. So in the same sort of spirit, I've always be shipping, I want you to think about launching as something you can continually do. I want to destroy the idea that launching is just this one moment in time, because assuming you do well, and assuming you ship new products and new features, you are never going to be not launching. So let's talk about all the ways that you can launch. Here are different opportunities to launch that we're going to go through today. I'll go through each of these except press launches.

We have done a previous startup lecture on press launches, and I'll share a link to that and some resources, you know, after this. But we'll go over most of these, and most of these things are things that you should be doing while you're in startup school. So let's talk about first why you want to continuously launch. So before you even have a fully functioning product, you get a chance to practice your pitch and you can refine it. You can A, B, test it, and see how people actually respond to the idea. And then once you have an MVP or a very early version of your product, launching through different channels will give you an opportunity to see how people will respond to that early version of the product. And then launching to different channels will help you determine whether you're even talking to the right users.

Because, you know, you might launch on one channel and get no response. You'll launch on another channel and you'll get a huge response. And so that will help you identify whether, you know, you're identifying the right user for what you're building. So let's talk about some of the types of launches that you can do while you're in startup school. And I'm excited to hear that, you know, a thousand of you have launched so far since the startup of startup school. That's incredible. So I clicked on 10 random startup school companies from founders who posted on the forum and only about half had landing pages. So this is what I call the silent launch.

And you do not need anything fancy for this. You know, all you need is a domain name, your company name. a short description, a contact, and a call to action. So, for example, this is a random startup school company that I found from a founder who'd posted on the forum. Their company is zinc. They have, you know, a domain name, they have their company name. They have their, you know, short one-line pitch, a short description, and their call to action, which is get in touch. The call to action can be something like, you know, subscribe to our newsletter or subscribe to hear more when we launch.

product hunt, for example, has an actual product for pre-launch companies called Ship. And it's a way to collect potential interest from potential users. So, for example, this is something called Designer School. And it has a quick intro from the founders, a short description of what the company does, and the call to action, which is subscribe. So, you know, you can go on product hunt and set up one of these pages. But of course, you can also build your own landing page incredibly quick. and easily, and this should be something if you don't have one yet, that you do this weekend.

So the next thing is the Friends and Family Launch. So if you're at Idea Stage, you can test out your short pitch on Family and Friends and see how they respond. And once you have an MVP, do a Friends and Family Launch as quickly as possible. So in its earliest days, Reddit was shared just among the founders of their batch at YC. You know, there were only eight companies. It was a really small community. I used the way back machine to actually see what Reddit looked like in its earliest days. It hasn't changed that much. But if you look closely, this is actually before they called upvotes, up votes. They were calling it boosts.

This is like 2005, I think July. So that's how they got their very first users, just sharing it among their community of founders. And so, you know, what I recommend you do is share the product with your friends and family, watch them use it, you know, sit down next to them and ask for feedback. But don't stay in this phase for too long because your friends and family might not be the, exact right, ideal user for your product or what you're building. And so sometimes their feedback isn't quite as helpful as a real user's is. So, for example, if Alexis and Steve had shared this with their parents, their parents might have been like, what the hell is this? So you get, you know, get out of that, you know, family and friend circuit as fast as you can. And so the next move

would be to launch to strangers. So one of my favorite examples of a YC company launching to strangers is the company Lug. So Lug is an app that lets you call Movers. And and delivery people on demand. So even before Lug had built a fully functioning app or product, they would rent a truck and they would go drive to IKEA and they would sit outside of IKEA. So they would watch shoppers and they'd look for people who were having a particularly difficult time tying stuff to the top of their cars.

And they'd run up to those customers and they'd say like, hey, instead of trying to tie this mattress on top of your car, wouldn't it be cool if you could just push a button and someone with a truck would come and help? do this for you and you know the customers would be like sweating and they'd be like yes that's exactly what I need at this moment and you know they'd download the app they'd click the lug button and then the founder would run back to the parking lot drive up in his truck and then the customer would be like oh my god it's you and they were like yeah you know so it was a real hustle at the beginning like none of this was working on the back end but it really confirmed for them that this was a hair on fire

problem for their users and customers and so they decided it makes sense for us to really build this out and spend time, you know, on this product. So launching to strangers will help do that for you. It will help show you whether people are actually willing to download and pay for what it is your building. Let's talk about online communities. This is actually one of my favorite ways to launch. I think you should plan a launch for every single community that you are part of.

So when a company goes through I Combinator, they have the option of launching on Bookface before they launch publicly. So Bookface is our internal platform at Wi-WiComp. It's like Facebook meets LinkedIn, meets Quora. And there are currently over 4,000, you know, other founders on Bookface. So it's a fairly low risk way to launch because it's not totally public, but there is enough of an audience there to get some feedback. And you're launching in front of, you know, fairly friendly people who, you know, want to see you succeed. And so they launch there.

And what I think you guys are particularly lucky because you have startup school and you have the start. And you have the Startup School forum, which about 40,000 founders are on. So if you have an early version of your product, there is literally no reason that you shouldn't be launching to the startup school community in the next few weeks. And so, you know, I also think that founders and other people making and building stuff, they give the best early product feedback. So you have thousands of other founders at your disposal. So I think that, you know, that this, you know, kind of gives you a leg up here. Here's a sort of extreme example of a company that successfully launched in online communities. So magic is an on-demand personal assistant.

When they started in Wycombinator in 2015, they were actually building a blood pressure monitoring app. So they were trying to get this blood pressure monitoring app to grow, and it wasn't growing as quickly as they were hoping. So they decided, you know, let's test out another idea that we had. So they sent a link around to their friends and family. And it just looked like this. It basically said, like, Texas phone number and we'll make anything happen like magic. Like, it was very, very basic. And their friend, one of their friends thought it was so cool that they shared it on Reddit and Hacker News.

And basically overnight, like over the course of a weekend, 40,000 people signed up to use magic. And so, of course, they were like, oh, my God, this is crazy. And let's, you know, let's be honest. This is an extreme case. And almost no one who launches on Reddit and Hacker News is going to get 40,000 users overnight. But my point is it's definitely worth putting yourself out there because you know you might be one of those like extreme cases, but at the very least you'll get some early users and you'll get some great feedback. So many of the startups that go through YC launch on hacker news and product hunt. And you know, we over time have looked at the stats of how well these launches convert. So you know a tech crunch launch versus a product hunt launch versus a hacker news launch. And in terms of converting to users, you know, they're starting to even out in terms of. of their impact and conversion for, you know, whether it's, you know, your signups or, you know,

converting to customers. So if you're launching in these communities and aren't active members of these communities yet, my suggestion is that you spend a little bit of time looking at the communities, you understand the rules, especially if you're posting to subreddits, right? They all sort of have their own moderators have their own rules, understand the best way to talk to these communities. And if it's a community that's known for being helpful, ask for advice, ask for feedback. If you're not part of these communities, I'd reach out to someone who is and ask them for advice. Ask them for the best way to launch because there are going to be tips for every community. And, you know, for example, one company in this batch, you know, was building something that he

wanted to get more, you know, women's perspectives on. And they're, you know, two male founders. And one of the users of Alpha, which is a community for women in tech, said, hey, I'll post that to Alpha for you. And I'll tell you what kind of feedback they got. So I recommend connecting with someone in the community and asking them for help if you're not part of the community yourself. The biggest piece of advice I have for launching on online communities is write like you talk. Do not talk like a marketing robot. People hate that. So don't use marketing language or deep jargon.

Talk like a human when you're addressing the community. So all you need in these, you know, when you introduce yourself in these posts, introduce yourself, talk about what you're building, talk briefly about why you're doing it or how you came across the problem. People on Hacker News, for example, are super intellectually curious. So are there any interesting insights that you've learned from talking to potential users or your users? Is there anything surprising or delightful that you could share with the community? Because people love that. And they also want to ask you questions, but sometimes don't know exactly. how or which questions they should ask you. So tee it up for them. Say, hey, I'm an expert

and X, Y, and Z, and I'm happy to answer questions on these topics. Otherwise, you risk people going down all sorts of weird rabbit holes. And just make sure that you sort of are sharing this community, asking them for advice, try to cut down as much of the jargon and marketing as possible out of these pitches. The request for access launch, the magic story that I share, where you actually reminded me of this other type of launch you can do. So when Magic launched, you know, overnight they got 40,000 people signing up. And of course, they couldn't serve 40,000 users immediately. So they launched a wait list. And they also gave people ways to skip the line. So for example, if you tweeted about magic, you'd get, you know, to skip a few spots in the line.

So you can build these viral elements into your launches that will help get people to spread the word for you. One of my current favorite examples of the... this request for access launch is superhuman. So superhuman is building a better email experience. So you can go to their site here and request access. And you can also ask a current user to refer you, and then that'll help you skip the line. So in the signature of all emails that are sent by superhuman users is a little tag that says sent by superhuman. And so I'm a superhuman user and I get a ton of emails like I'll send a ton out of my emails out to people and I get a ton of emails asking me for referrals so you know people I email email say hey how did you like superhuman

would you mind referring me to the product um so if you have a product um that you can build this sort of viral element into I highly recommend it so we don't have a huge amount of time because obviously social media and launching to bloggers is this huge and long and well-covered topic. But I wanted to skim them briefly and give you an example of a company that we worked with that did it very well. As most of you know, launching to popular blogs that cover your industry or trade can be incredibly powerful. So Joy is a free wedding website builder, and they were one of the fastest growing companies in their batch. And a lot of their early growth, like an alarming amount of their really early growth, was due to being placed on a number of

list like this. They essentially Googled, they looked at, you know, SEO and they Googled, you know, best wedding website builders and figured out who was coming up on, you know, the first couple pages of results on Google. And they reached out to all those bloggers and, you know, they said, hey, we have this new product.

You know, we think your community would love it. Would you be willing to add us to this list? And they, you know, they said that they reached out and basically did a drip campaign to over 50 of, you know, 50 bloggers and only got responses from four, but those four responses made a huge impact for their early growth.

So one note that I want you to keep in mind is that some blogger and influencer opportunities are pay to play. And Joy did not pay early on, and I do not want you paying early on either. If folks are asking you to pay, please find other or creative roots to get around this, because as startups, as early stage startups, you just don't have, you don't have the money to do it. And so it is definitely possible to go this route without paying a ton of money. So figure out, you know, weight routes around the expensive sort of sponsorship dollars.

If you're a hardware or physical product, of course, you can do a pre-order campaign. So, you know, pairing for pre-order launch could honestly be a whole presentation of its own. But take a look at some successful campaigns and get a sense for how they built out their launch strategy. So, for example, ShearTech was a company NYC that was making unbreakable sheer pantyhose. The founder, Catherine, made a great, really compelling video. She pitched press. She launched on Hacker News, where, you know, Hacker News is probably, you know, it's a very male audience. So we were curious how they would respond to something like sheer, you know, unbreakable pantyhose.

But they loved it. They thought it was very clever. They thought, you know, the technical piece behind it was really interesting. And, you know, so I would recommend, like, end. any company, you know, try to launch and see how different communities respond. She launched on Product Hunt. She asked her friends and family and batchmates and investors to help spread the word, and she had an incredibly successful campaign.

And so, of course, there's a new feature or new product line launches. So two very different companies that do this incredibly well are Stripe and Glossier. So both companies are incredibly smart about how they launch new products. So Stripe has always been great from the very beginning. They've been really great at engaging the community. So every time they launch a product, so for example, when they launched Stripe Atlas, they launched it on Hacker News and the founders were in the thread talking to all, you know, potential users and talking about the product and why they were launching it, the problems that they felt it was solving. They blogged about it. They spread the word on social media.

They pitched press. And this is something that they do over and over again. If you look at Stripe's blog, if you look at Hacker News, you can kind of see the history since the beginning. They've been very great at sort of activating the community. Glacier, which is a beauty brand, is incredible at launching new product. And the way they think about it is actually very scientific. They release products on a very specific cadence, at specific intervals. And for every product, they essentially hit every single launch button again and again.

So community, social media, press, advertising. So each time this new product launches, which is basically like every six to eight weeks, they have this cycle going. So there's a constant drumbeat about Glossier out in, you know, out in the world. One last note before we jump into questions is while you're in startup school, you should start to build your own communities. And you can do this even really pre-product. So there was one YIC founder, Gaddy Evron, who is founder of Symmetria. And he had a really particularly successful tech crunch launch. A tech crunch launch. A TechCrunch launch is a story about what they were doing launched in TechCrunch. And I noticed that they had a ton of shares, a ton of engagement. So I asked him to share, you know, how did you set this up? What did you do to share and spread the word about your launch?

And he said that over the years, you know, even before launching the product, he started to build his own email list. So every person he met that he discussed his startup with, even, you know, even very loosely, he would add them to an email list. and they would get, you know, sort of email updates about what he was working on on a semi-regular, like at semi-regular intervals. So when the TechCrunch article came out, he said he sent that email to the list full of all the people that he, you know, he'd ever talked to other startup founders, investors, friends, family, and asked for their help in spreading the news. And he said the response was significant.

And he even saw VCs who hadn't invested in them sharing the story from their own person. Twitter accounts. And he said, you know, you would be really surprised by who comes out of the woodwork to help when you ask for it. So I would recommend while you're in startup school, you have the opportunity to talk to so many people about what you're building and start and ask them, hey, can I add you to my update list? And over time, you know, that you'll get that into the hundreds, maybe even thousands. So I would definitely recommend that you start doing that now. And so to sum up, I would want you to stop thinking about launching as this one moment in time. I don't want you to spend

all of startup school getting ready for this one big day, this one big launch day that you're trying to line up all these things for. This is something that is a continuous process that you can do over the course of the next couple months and into the life cycle of your company. All right. Now for Gustav's lecture. My name is Gustav. I'm going to give a talk on growth for startups. This is going to be for some of you guys not super relevant right now because you might have not launched and thinking too much about growth when you haven't launched isn't that relevant. But for those of you that have launched, this is hopefully going to be good talk. So I'm going to cover three different things today. First, I'm going to talk about product market

fit and retention. 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 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, I learned most of these things I'm going to talk about at Airbnb. I worked on the growth team for almost five years from where we're 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'll learn there.

Most of you are going to be somewhere on this line. Most startups don't have product 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 built my project and it's 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 are 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 it is going to be a problem in the very, very early days. There's a great article that 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 skillsets 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. 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. is social like the most kind of 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 are things that scales your company. So these are two skills, so you have to keep in mind at the same time. In YC, we have this thing where we tell companies that you just launched, you got to do things that don't scale. And we got lots of these MBAs that go and to start. school and said, well, this idea does not scale. Standing outside of this store or standing 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 learn they should only work on things that are really scale, you're going to 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 Airbnb off the ground. It didn't really work. This was the first version of the Airbnb website, AirBatimbreakfast.com. In fact, the website itself didn't really

speak to what the company does. It was started as a website to offer airmanage. to people that visited design conferences. And they had to navigate the way to find the place to where MB is today. When Embed MB joined YC, the first question that got from Paul Graham was, who are your users? And at the time, the site looks something like this.

You click on a listing, and you had three different piece of information. You had a photo of the host. You have one photo, in this case, of the building from the outside. side. And then you have one map of where that place was. Now, at the time, the only comparison to what a site like this would look like would be Craigslist. So Craigslist wasn't a lot better than this. So at least it met that criteria. But it wasn't something that would make Airbnb take

off. They didn't really have in the product that would make Airbnb 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 their host. On their first week in YC, Paul Graham told the founders of Airbnb, you guys go meet your host. Where are your host? Most of our hosts are in New York.

We don't have the many, but most of them are in New York. So the flute in New York, undercover, not on the cover, they claim to be hired photographers for Airbnb, AirB Bread and Breakfast. So when they met all their hosts, they said, we want to come by your home and take photos. They didn't say that they were the founders because they made the company sound much smaller. They came in MF 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 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 used 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 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 front of a computer. they went back to San Francisco

back to Y Combinator and they sent an email the morning after and said, here are all the photos we took of your house. They're now up on Arabianbreakfast.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. That made the hosts love them.

And those hosts became the reason the Airbnb eventually took off. Like doing things that don't scale, fixing the product, making the product work for the early host, which became the backbonds of the early days of Airbnb. So the lesson here is that founders are the ones to make starters take off. The founders, you guys, are the ones to make the starters 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 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, like, you're going to launch because that's the most important that you can do right now. Once you've launched, it's like, how do I get users? Like, you've got to figure out how to do it. And there's different for every company. For many of the company, that means sales. For other companies, that means doing things that don't scale. Typically, people start with their friends, and then friends are friends. And then hopefully you get one step further the people that are now not your friends are friends and they're going to give you a true opinion by a company. Those are the

people that are going to have to reach early on. It doesn't really start with like, I launch 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 product market fit or not? a lot of people like to tell themselves that they do have product market fit it's this thing that we throw around as a way to say my product is great so now I have product market fit

I would argue that there's some ways so 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 if product market fit is to use data unbiased data to understand if you basically have made something that people want. The two ways that I do that, or 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 a startup school. The metric here is like, are people showing up to that 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 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 and the stay. When I travel at Airbnb, I've experienced the value. So now and now where it is about. How often do people do this? Well, travel is actually mostly an annual thing. You don't really try. travel every month. Most people don't do that. So when we were measuring retention at Airbnb, 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 going to 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 photos 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 Gusto, the most valuable thing that they do for their customers is their run payroll. And they pay out money to employees. They're the employees of Gusto's customers.

So how often do you run payroll? Well, it depends, probably every biweekly 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, lift.

You might want to think it's rides here. The rides is the best metric here. It's actually riders. Like the people that are taking the rides are the ones that matter. Because it's the individuals that we want to measure here. And we're not necessarily want to measure the action that they take. And that's 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 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 do I mean by that?

I basically mean that if I had 10 riders this week, the road would lift, they would be calculated on the week zero. Now, how many of the riders that I had last week are now traveling? will lift this week. That is your week 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 BDB company that do annual

contract measuring, say, what do people do with my product could be a really good way on like this regular basis. So even if I pay for Gusto on an annual basis, which they don't do, measuring the activity I use on gusto on a regular basis, let's say biweekly and monthly, is the way to figure out if people actually using the product. So most of the ideas, even your B2B 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. How much retention do you have? Are people actually repetitively using your product? Those are things that are 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 is a good product. Every week, it eventually flattens out, and the people that stop in the product, stop, stop using the product. And eventually here, week eight, nine, ten, we have a flat line of people that continues to use the product every single week. That means that they are retained.

You have product market fit for those users for this product. So I'm not going to 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 30% after two months and 21% after 20% after 20%. months. This is pretty good. So you kept a 50 users 21 months later or 20 months later. It's DoorDash. DoorDash have a monthly retention of 20% two years later, a year and a half later. Here's another company, more like a BDB company. 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 good hub. So retention is the best way to measure

product market fit. talk about specific things. You might want to, that some people think is a better way. I'll argue that they're not. So here's some worse ways to make sure product market fits. Net promoters 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 promoters score. Like the iPhone, Apple, all them have bad net net promoters. Like it doesn't necessarily correlate with good products. It correlates with perceptions of companies. Surveys. The 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 surveys 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 a 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 attention. I was to always try to find a way to measure retention. All right.

So what are some bad metrics for product market fit? These are not the kind of things you want to throw around as evidence for your product is 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 you a 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 it's 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 you pay for a product, they should be paying for the price. All right.

Next section. Let's talk about growth channels and tactics. This section really applies if you have product market fit. 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 can come back, like don't work up this stuff.

Wait with this stuff until you have some people that carry by 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, so 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. So a good example.

I'm going to give you some example in a second, but that's basically what I define is the first section. Most of those people in that photo were in this category. They were engineers, designers, product managers, and the 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. It's a 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. I'm going to figure out the insurance. Google. I'm going to 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, I mean is basically other platforms but your website or your app. So let's talk about conversion rate on my station. What does 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'll talk about this. I've talked about this in earlier I started school talk when he built 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 home page

to the booking page. In the case of Airbnb we call the homepage 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. 1 percent, 2 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 do 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. I'll land on Airbnb all the content speaks to millennials. I have a family. It's not good content. I land on some other website, and the content doesn't speak to me because I'm not the right customer. That's one example of a drop-up that you can fix with content, change in 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 are 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. We saw that Airbnb. I've seen that at Facebook. I've seen that many other companies where translation 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 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, then might just go to the next website. 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 flows, the authentication flow.

copy what they do. They'll probably figure it up. They spend a lot of time optimizing. Omborting. This is a huge effort, specifically for products that need a lot of involvement from the users to be able to become active users. So there are a lot of questions you might want to ask early on in 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, 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 commercial and 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, 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 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 SM, or through SEO. Talk about it in a second.

Second, does your product, the people already share your product through word of mouth? So some products are viral in its nature because it sound really exciting to talk about. Lyft and Uber and Airbnb are examples of those. If that's the case, you want to make sure you focus on virality and referrals. What does that mean? It's 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 product 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, sorry, LinkedIn or a Facebook, than 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 that really succeed in the world of essential products are the ones that really nailed this down, to figure out how it is really well. Many people that make social apps underestimate how important it's going to be to get your friends on that product. If you can make a list of all their customers,

even if that list is 100,000 or 500,000, as long as it's not mainstream enough that it'll be in the tens of millions, you're probably going to do sales. You'll make that list, and you start contacting 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 you complicated by going out in a world that most people aren't going to be relevant

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 churning more money and therefore getting what's called a high LTV, high lifetime value. By getting high lifetime value, you're enabling the ability to buy paid aditizing. 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 online marketing.

Now, the truth is that most companies these days are charting for the products, and 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 on online marketing when they don't have people paying for the product. Here's an insight that you probably didn't think of. Most really big companies didn't use all of those channels. They used one or two channels. If I think of a TripAdvisor, how is TripAdvisor big? big SEO. You guys tap in something on Google, you'll line on TripAdvisor, and that's how you found

this website. Most companies have a setup where there's going to be one or two channels that really matters. If you think of Pinterest, SEO is the real way how Pinterest is going. You type something on Google, they already exist at the Pinterest board for that, and you'll land on that Pinterest board. That's how they acquire new users. All right, I'm going to give some specific 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 your product,

then referrals is going to be one way that you can amplify that word and 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 $40 to sign up to Airbnb, and when they do, I get $20. Pretty simple concept.

We have that on the website and on the mobile app. Now, that's actually more complicated than you might think. It's an 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 is not just as simple as throwing that offer out. That's probably what you want to be in the very beginning. But once you have a referral product, you want to start measuring each of these steps. Like, what is the referral offer?

How many 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 are 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 referral's email invite. So we would spend a lot of time optimizing this step

because there were lots of people getting the referrals email invite at Airbnb. So what are the things you can optimize on a referral invite email? First, who's the sender of the email? If it's just Airbnb, I probably never heard of Airbnb the first time I get this email. If it's Gustav that 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 just 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 going to read about it. 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 an 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 this email. This is me. I live in San Francisco. We can reveal that. I actually have been a member of Airbnb since 2009, and we can reveal that as well. Let's talk about pay growth.

Each of these sections, referrals, pay growth, SEO could be a presentation on his 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 want to go deep on. You're going to 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 lost 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 want really

need all of them. The number one lesson in paid growth, i.e. online marketing, is to not do it unless you have revenue. This is the most common mistake that founders make is to somehow 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 CAQ, customer acquisition cost. How much does it cost to acquire a new paying or new valuable customer? Someone's giving you value back. Many of the aditizing 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, it's going to be that your revenue, or protected revenue from this user, is going to have

to be higher than the KAC, 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 going to have to either wait eight months or you're going to 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 KAC is going to be, maybe one month, two months, three months, 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 that each would rank for tens of millions of keywords.

Now, what I've changed is that they're really big companies starting getting really good at ranking for all those keywords. So at Pinterest or a TripAdvisor might rank for every single travel keyword that you can imagine. That's hard for small companies. What that means that if you are going to rely on search and your optimization to grow, you're going to have to be as good as a Pinterest or a TripAdvisor, eventually, not right away, but eventually. Because it's so competitive to win in this grand, like large role of SEO. When you get started, you can think of this way. SEO is a zero-sum game. Basically, you're competing against others. So what you do in SEO is going to be a matter, and what do you

compared to others. The second thing is that the keywords that people search for are changing constantly. So if you're building something new, let's say ASMR, I think was a thing that came up recently, lots of companies able to rank for that because this is a new keyword. There weren't websites built 10 years ago that 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 the Airbnb search results page. This is what you and me see when we go to the Airbnb. This is what Google see. Google just see texts. So to be good at SEO, you need to understand what text am I showing you. to Google so Google can understand what the website is about. Google 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 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 is searching for ASMR in in in in United States per month maybe I want to try to rank for that keyword will build a website just trying to rank for that keyword start in that 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 um which is called

uh off page optimization or domain authority or um 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 like have high authority, the more valuable your website will be 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 works. If you curious about this, you can Google page rank and go to the Wikipedia article on page rank. Basically will explain sort of like high level how Google works.

Final section, I'm going to go through this one all faster. Most of you guys don't have to focus on AB testing at all. It won't matter for a long time. It is a great decision-making tool later on. Here's the situation the startups tend to get into. I want to launch a new homepage. 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 then sort of like just look at the

the metric over time. Don't do that. There's a better way. First, before you get in the test 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 an 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 the first link you see on Google, and they'll tell you whether it's going to be worth doing. Most of you, it won't be worth doing for quite a well. So here's the example I try to give you on the website. So I want to ship a new experiment, or new design on the homepage. So let's ship it. The metric went up or the metric 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, like two different parallel universes at the same time, one with the new design and one with the old design. If I had that, I can tell exactly what happened. That's the definition of api testing. You basically have two different parallel universes of the thing you shipped at the same time and you measured the metrics that matter to you. The reason this is so powerful, he helps you make decisions at scale. What ends up happening if founders, when they get five or ten people in their company and they'll launch a new design and they're arguing about what costs the thing to go up or go down, the only way to really know is to run an AB test

to figure out what does the metrics say about what it went up or down. This is hard to internalize because most people think of themselves as good product thinkers. Product decisions are really hard, so using data 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 real growth things that growth teams do. So you have to unlearn the things you've learned at your big companies,

or MBA programs and just do things that 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 culture of 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 at some point. All right.

Thanks for listening. So as always, you can find the transcript and the video at blog. dot ycombinator.com. And if you have a second, it would be awesome to give us a rating and review wherever you find your podcast. See you next time.