Ely Lerner: Should Startups Hire Advisors & How much should they be paid? | E1075

Ely Lerner 0:00 The whole point of strategy is to say no to most things and focus in on a small number of really high leverage things. Like, you have to make that bet. When you see companies with nine company level OKRs at the top level or whatever, right, they are just trying to do all the things. Your chance of success is already low. If you do not focus down on one or two core key bets and do that strategy work to figure out where that leverage is, you're not gonna succeed.

Harry Stebbings 0:20 (instrumental music)

Harry Stebbings 0:21 Eli, I have heard so many good things from many different members of the Reforge community, so thank you so much for joining me this day, first.

Ely Lerner 0:28 Yeah. Happy to be here, man. Excited to have a fun convo.

Harry Stebbings 0:31 Uh, it's gonna be great. But I wanna start, we look at Chime, we look at Yelp, these are some incredible product orgs. How did you first make your way into the world of product and growth, and what did that entry point look like for you, Eli?

Ely Lerner 0:42 Yeah. Great question. Um, so if you go all the way back, uh, I've got, uh, a couple of degrees in computer science. I did bachelor's, master's in computer science. I was an engineer, engineering manager for a while. I think this used to be a more common path into product, right? It used to be one of the most common paths. These days, it's much less, which is, like, good, I think. But, so I was the engineering path. I had a startup of my own for a little while. Like, a big chunk of my product career was at Yelp. I was at Yelp for a little over eight years, across a whole bunch of different areas of that product and business. One of the cool things about Yelp is it's really like 10 different vertical marketplaces combined into a single product, which was a fantastic place to sort of like up-level and grow up as a product and growth professional, because you really see, like, all the different kinds of dynamics in marketplaces. It's also consumer. It has a big SMB play. It also actually has a pretty big enterprise, uh, play. And I worked across all of those things, and so it was a really good kind of like growing up (laughs) in this space. So I did, I did a whole bunch of different things at Yelp. I tended to be the person that got tapped to do zero to one stuff there a lot. I think organizationally maybe we didn't have a lot of organizational muscle around doing that, and so I got tapped to do that in a number of different areas a few different times, which was super cool. One of the ways that we built new product there also was through acquisition. And so back in 2015 now, we, we bought a company called Eat24. It was a food delivery startup.

Harry Stebbings 1:59 Yeah.

Ely Lerner 1:59 Um, and so I kinda got dropped in to be head of product for that subsidiary, helped grow that business. This wasn't our original intent, but we actually sold it to Grubhub just about two years later for almost double what we paid, a little more than double what we paid, plus a fantastic partnership agreement that got us out of the fulfillment game but let us keep a lot of the much higher margin sort of lead gen revenue in the food delivery business, which was fantastic. That was a really fun experience. And then I kind of rolled back into the mothership at Yelp. Uh, worked across a, again, a number of kind of cross-functonal marketplace type initiatives. And then at my last sort of stint there was this, like, building out, again, brand new, zero to one, brand new product and business line kind of in a hybrid GM product leader role with P&L. This is, I think, we can, we can talk more about this if you want, like, one of the things that I have seen myself and with companies that I advise is if you're trying to fi- do true zero to one inside of a later stage company, and, like, find your next horizon, trying to do it inside of the sort of legacy product, product org, vastly reduces your chances of success. And, and don't even get me started on kind of like innovation orgs or, or those kind of things. But the model that I've seen most successful is the model that I did at Yelp, where you actually really give somebody P&L responsibility as, like they are a founder, right, and treat them like a founder. We actually did board of directors meetings with, with the C-suite for, for the sort of, uh, businesses that we were incubating like that.

Harry Stebbings 3:20 I just wanna get at, 'cause we're seeing every big company now say, "Oh, we're integrating AI into new products, into existing product lines, and we're able to move faster now. But we can move fast, we can move fast."

Ely Lerner 3:30 Yeah.

Harry Stebbings 3:31 Can they, having done it inside an incumbent?

Ely Lerner 3:34 Yeah, that's a great question. I think big companies can do these things quick. I think there are two versions of what you're talking about actually. One is the, like, let's supercharge the things we are already doing with this new tech. That's sort of a fairly unique thing in this new LLM wave that you didn't have particularly often before. And, uh, you've actually seen a few companies do a decent job of, like, the first step of that very quickly, which is impressive for, for those w- for those companies. True zero to one though, where you really, like, you're serving a new need or a new customer or a new vertical, like, you're really expanding, solving a problem you hadn't really solved before, that really requires you to do ... Again, my, like, what I have seen is your highest chance of success is if you carve out a startup org, and, you know, everyone likes to throw around, "We're a startup within a big company." If, like, the leader of that doesn't have P&L, you're not, you're not a startup within a big company, right? I think that is the important piece, which is, like, you need to fund this as an independent unit that is looking at a business line holistically and is autonomous within the sort of, like, spending of that capital, right? Like a startup, you should fund them a little bit at first, right? And they should come back and show progress and ask for more funds as if, you know, they're doing their C, they're doing their A, right? Like, that's how you should do that, because that's the only way you really, like, succeed at those hard problems.

Harry Stebbings 4:50 Eli, I'm loving this because we're just rolling. Why on earth would brilliantly talented people do that in a company

Harry Stebbings 4:57 where they don't own it?

Ely Lerner 4:58 Yeah.

Harry Stebbings 4:58 Like, go out and ra- raise money for your own company when it comes to people like me who will give you millions of dollars?

Ely Lerner 5:04 Yeah. It's a great question. I think their biggest reason is there are some things that only can be built as an extension of a successful business, that cannot be built as a standalone business, right? And so I think, like, some people do this, if you are trying to build a totally adjacent business inside of a large company, don't do that. The company shouldn't do it. You shouldn't do it. It's not a good idea. The way that you succeed is you build something that leverages some aspect of the success that the business and the legacy product has already had to be able to build something that nobody else could build, right? And so I think that's the thing that you're doing there, of like building zero to one inside of a larger org. You are leveraging all of the advantage, all of the customers, all of the data, all of the tech, like, all of that is at your disposal to build something that in, most cases, couldn't have been built outside the company. That's the main reason.

Harry Stebbings 5:55 I also think about speed to distribution as well.

Ely Lerner 5:57 Exactly.

Harry Stebbings 5:57 Which is like, you probably could do the product, but it would-

Ely Lerner 6:00 Yeah.

Harry Stebbings 6:00 ... take five years of distribution build to get to a point where you have enough customers to actually-

Ely Lerner 6:05 Yeah.

Harry Stebbings 6:05 ... do it meaningfully. And actually, it may not be the passion of your career, but it's something that's cool to do. Do you see what I mean?

Ely Lerner 6:13 Absolutely. I think that's true. And it, and it, in terms of speed of learning, right, I actually think it's a fantastic sort of like, as you said, accelerant to the speed of learning in a bunch of these areas because you can turn on-... to distribution however you want overnight when you're ready to do it. Turn it on to learn, turn it back off, right? Like, you have these levers that you don't have when you're in a small startup.

Harry Stebbings 6:33 I, I, I totally agree with you. Can I ask, when we look at Yelp in all its wonderful varieties, and then when we look at Chime, which we haven't discussed but you spent time at for, kind of, close to two years (inaudible) one takeaway from each, Eli, that really impacted how you think about product-

Ely Lerner 6:51 Yeah.

Harry Stebbings 6:51 ... what would it be from each?

Ely Lerner 6:52 The first thing that comes to mind is actually the same takeaway, and it's, sort of, the reason that I joined Chime. I think a lot of people, sort of, look at like, hey, you're doing consumer and marketplaces and you went to a fintech. Like, that's so different. Like, most people don't, don't shift. That's, like, a very different market. The thing for me is, I mean, one, Chime is actually much more of a consumer product company than it is a fintech at the end of the day, and so that, that kind of came. But the, sort of, takeaway for me here is incentive alignment. Like, one of, I think, my core learning from every different vertical of marketplace that I worked on at Yelp is incentive alignment is the most powerful lever you have in a business, definitely in a marketplace. But I think Chime is actually an example of Chime is not a marketplace, but Chime has this, an amazing level of incentive alignment between the business model of the company and value to the customer that has really led to a lot of Chime's success. And I think that w- like, that was my learning from marketplaces is like if you ship something where it makes it better for the supply side, the demand side, and the company's P&L, that's when you can really accelerate a marketplace. And when marketplaces don't have that, they struggle because they're trying to make these trade-offs between supply or demand or their P&L and, like, everything is challenging. When you find that incentive alignment, everything takes off. So that, I think, was my takeaway from Yelp. And Chime has the same thing, actually. Chime has that same dynamic between their own business model and their customers' incentive, which is really what has driven their growth curve. So there's maybe one takeaway, but it's like, it's a, it's a key takeaway.

Harry Stebbings 8:11 It's so funny that you say that. It reminds me, actually, of Brian Balfour's, uh, episode that we did from Reforge where he talks about business model fit and when that works in a similar way,

Harry Stebbings 8:21 it really creates incredible outcomes.

Ely Lerner 8:23 Yeah.

Harry Stebbings 8:23 So I, I, I love that. Can I ask you, you know, you, you're an advisor now.

Ely Lerner 8:28 Mm-hmm.

Harry Stebbings 8:28 And I wanna, kind of, really deconstruct this because I think there's so much opacity, actually, to it and the term's thrown around a lot.

Ely Lerner 8:36 Yeah.

Harry Stebbings 8:36 When I say advisor and advisory roles, what does that mean, Eli?

Ely Lerner 8:42 Yeah. That's a great question and I think it's especially appropriate because I think the, it has, it is changing. I think historically, again, it was a very opaque thing that was maybe applied inconsistently and the word got thrown around and people were doing, sort of, different levels of things but nobody, both founders and operators who might be advisors didn't really understand what that looked like or what they should do or how they should do it. We are sort of the early stages of an evolution of much more targeted, kind of, like, ways to exchange value between founders and people that can help them in much more structured ways. And so I think this is, this is what I've been doing, and I love it. I think there's a lot of exciting stuff here.

Harry Stebbings 9:18 So how does that look then? If we take that one step further, what does that look like in reality?

Ely Lerner 9:23 A few different pieces here. I see, kind of, like three top level shapes of advising today. The first one is company level advising or founder level advising where the perspective is across the whole company, the whole business, you're really like a partner to that founder. This is the kind of advising that I do and there's sort of sub areas here. You then see functional advising so think like a marketing advisor, right? Like that person is really coming in to help bridge a gap within a particular function. And then you have, sort of, like domain, like deeper, deeper domain kind of advising so think like SEO or if you're in a deep domain like international logistics, like people who are deep in that domain, right? These are sort of the three high level shapes of advising that I think you're seeing now.

Harry Stebbings 10:01 When you think about company level advising, how does one do that really 'cause everyone, to an extent, is a functional leader?

Ely Lerner 10:08 Right.

Harry Stebbings 10:08 Is that like CEO coaching? Is that like CEO therapist?

Ely Lerner 10:12 That's a great question. I, I can dive more into that but I think that coaching is a different thing here that I think is also good to lay out in this map, right? You may know but just for folks, I think CEO coaching is something that has gotten more visibility recently and so people are more familiar. But coaching is really about personal and professional leadership development, right? Like that is the core of what coaching is about. I think even a sports coach, they're like helping you at the core aspects of being a leader. Some coaches have a functional flavor, right? So you see folks like Ken Norton who's a leadership coach with a product flavor, right? Um, but at the end of the day, they're a coach. They're helping you uplevel as a leader. And actually this is where you see a number of folks have coaches who are not in the function that they came from and that's totally okay because leadership is pretty universal actually, right? Like that's something that works across the board. And so that's actually its own distinct piece here. When I talk about company level advising, um, and I can dive a little bit also into kind of like my thing specifically, but just saying high level for a second. Company level advising, like the reason founders are talking to me is because they want help growing their business. Like that, at the end of the day, that is the purpose of the company, that is the founder's job is to grow the business. The ways they do that span across people, org, culture, uh, and all of their different functions, right? And so company level advising is really that, like, I'm helping you do your job at that highest level with the, the goal of growing this company whereas coaching is I'm helping you become a better version of yourself.

Harry Stebbings 11:34 So when we think about, like, timings for different advisory positions, is there a right or a wrong time for different advisory positions within different companies and spaces?

Ely Lerner 11:45 Yeah. This is a great question. I think I see people, founders struggle with this question quite a bit. Maybe starting with functional advisors, there's, I think there are two things to consider when you think about functional advisors. One mistake I see founders make a lot is trying to delegate the core pieces of their strategy because of their own background. And so I think one, one sort of, like, piece of advice I give a lot to people is, as a founder you should be owning the strategy for your primary growth lever. If that's product...... marketing, sales, right? Like, whatever the primary growth le- lever for your business is, you should not delegate that thing. I think a lot of founders are like, "Hey, I don't have a lot of background in X. Like, I need to bring in somebody who's super experienced in X." It is okay to bring somebody in to leverage and help you learn and help you through it. But at the end of the day, you need to own that strategy. You cannot delegate that strategy. (laughs) And so that, I think, is something to be careful of in general, both for full-time hires and for functional advisors 'cause I see people do that. Yeah, jump in.

Harry Stebbings 12:47 So you can't even delegate it if you hire it? Say it's product, say it's p- uh, uh, no.

Ely Lerner 12:52 Yeah, you can't. It's ... I m- and at the end of the day, like, again, if it's the primary growth lever for your business, it is the most important piece of your business, and at the end of the day, the person you hire will not have the full company perspective that you do, they will not have the right level of skin in the game, and they will not be incentivized to take the right level of risk. Only the founder is going to take the right level of risk that is required, right? You definitely can hire. Hiring is important. You need leverage, you need experts in different areas. But if those are offensive areas, which we'll talk about offense and defense, uh, later on if you want, but if those are offensive areas, which are like the primary growth levers for your business, you need to be owning that at the end of the day and leveraging that expertise to help make you do the job better, but you need to be owning it. For defensive areas, absolutely you can hire and delegate, and you should hire and delegate, right? So like customer service. If customer service is not a primary growth lever for your business, which o- once in a while it is, but usually it is not, you absolutely can hire an experienced CS leader to run that area for you and just take it totally out of mind. But if you're a product-led business, if product is a major growth lever for your business, hiring a experienced product leader and then hoping that they are going to figure out the strategy for you is just not a good path.

Harry Stebbings 14:02 Okay, so if we decide that we do actually need some external expertise and it's not a core lever, and so we're able to and we should-

Ely Lerner 14:08 Yeah.

Harry Stebbings 14:09 ... how do we determine whether we should bring in a consultant and an advisor, essentially, an incredible growth leader, like anyone in the Reforge community, or bring in a head of growth full time?

Ely Lerner 14:20 Yeah.

Harry Stebbings 14:20 How do we decide between advisor versus hire?

Ely Lerner 14:23 Yeah, that's a great question, e- especially if you think about function. Um, there tends to be sort of a, a time factor here. That's, again, because if, let's say, product-led growth is sort of the primary lever that you're using, you need to be owning that. An advisor, a company-level advisor who is sort of leaning in to teach you to fish, right, which is kind of, to me, the, the advising side of the line here, is fantastic even from the very beginning, because that person has got that experience. You're the one actually making the decisions, you're the one actually executing at the end of the day, but they are helping you get better at doing that thing and giving you guidance. That's good early on. At some point as you scale, you're gonna have to start building a function around this. As that function grows bigger, you will need leverage in running and managing that function that is executing on your strategy. There tends to be a gap period for most startups where they are not yet big enough, it doesn't yet make sense to hire a full head of growth, head of marketing, head of product, but it's getting big enough that it's taking too much of that founder's time, or it's, really what it's doing is taking lower lever- it's m- you're using your cycles in a lower leverage way than you should be as a founder. Again, it's not because you wanna step back from product strategy, but it's that you wanna be focused on the highest leverage pieces there. That's where fractional can actually be really useful. And so a fractional, uh, person can sort of bridge that gap for you, where you're not to the point yet where you need to hire, you're not big enough to hire a full-time person. So that's one approach. Functional advisor is the other one. So sometimes you'll have sort of a more junior people manager in one of those functional areas, and a functional advisor can be really helpful to sort of bridge the gap between the person who's actually executing the org and kind of like the thought leadership you need in that functional area.

Harry Stebbings 16:04 A functional advisor would be like out-of-home expert in terms of marketing, and they would sit on top of a demand gen team-

Ely Lerner 16:11 Mm-hmm.

Harry Stebbings 16:11 ... and they would provide out-of-home ex- Is, is that a good example?

Ely Lerner 16:15 Exactly. I think that's exactly right. Yeah.

Harry Stebbings 16:16 Okay. Totally, yeah.

Ely Lerner 16:17 Um, and then at some point you will get to the point where you do need to hire somebody.

Harry Stebbings 16:21 So we get to the point where we actually wanna hire this advisor, okay? What should we look for in the advisor specifically? Should they have done it before? Should they have been at a similar company to us? Should they have been advisors before? What is a good advisor to get?

Ely Lerner 16:37 This is a great question. Again, I think this actually goes back to that shape, uh, thing as well. For a functional advisor, let's again use maybe the marketing advisor as an example. For a functional advisor, I would say you, you wanna figure out what the lever is, right? To your point about performance or brand or SEO, content, like, you don't wanna delegate figuring out what the lever is. You should be figuring out what the lever is. Once you figure out what the lever is, bring in somebody who has done that thing at similar types of companies to yours and a similar stage to help you with that lever. That's a fantastic, uh, sort of step path for that functional advisor. On the company-level advisor side, it is more difficult. (laughs) The company-level advisor thing, this is where you kind of have this depth of engagement spectrum. Uh, you, you have your traditional kind of high-level company advisor on one end, right? This is, this is I think was your most common sort of company-level advisor historically. When you're a high-level advisor, you're doing this thing where essentially you're meeting with the founder once a month, sometimes every other month 'cause they got busy. The founder's coming to you with some problem that they're facing, right? They're, and they're like, "Hey, here's this problem we're facing." You're like, "Oh, yeah, I've seen something like that before. Here's what we did, here's what we learned, here's what we tried."... good luck. (laughs) And then the founder goes away. That's your typical sort of high-level advisor. The newer model and the model that I'm doing is what I've been calling hands-on advising. And so getting back to earlier when I was talking about this line between advising on one side where it's all about teach to fish, and then sort of consulting, contract, contracting, fractional, interim, full-time on the other where delivery is happening, right? What I'm doing, this hands-on advising thing, is on the advising side of the line, so I'm there to teach you to fish, not to fish for you, but I'm about as close to the line as you can get without crossing it, right? And so what that, uh, ta- tactically means is my engagements with founders tend to be weekly, like I'm sitting down with that founder every week. We are diving in and working on whatever is the highest leverage thing for the business at any given time, and then I'm spending some of my own time outside of those weekly sessions diving into their data, watching their qual, getting up to speed enough on the product and their business and their customer to be a thought partner in those weekly sessions, which is something you don't get to do when you're doing a high-level advising. You're just not close enough to the ground to really be a thought partner. They're getting value from mining your experience if your experience lines up with what they are doing. This is maybe to your question about what you should you look for. If you're doing high level, you gotta make sure that that person ... You kinda have to make some bets on what kind of problems do you think you're gonna run into (laughs) and hope you get some people that have seen exactly those kinds of things before. The hands-on thing is nice because you get to combine the experience with those things before with true thought partnership in doing the job week to week, right? And this is why I love doing this hands-on advising. I feel like I provide way more value in the hands-on advising space. I also learn way more. Like li- my learning velocity as a hands-on advisor is honestly like exponentially faster even than when I was an operator.

Harry Stebbings 19:26 Do you not want to take it one step further though, actually, and actually go down into the functional weeds? 'Cause now you're relying on the CEO to relay everything to the functional leader. I would want you with my market-

Ely Lerner 19:35 Yeah.

Harry Stebbings 19:35 ... team, with my product team to actually relay and teach.

Ely Lerner 19:39 Yeah. Great. This is a great point. This comes up a lot. This is where the teach to fish is really important, right? Because the founder can't rely on me. If they are not able to run the functions of their company, that's gonna be a problem. And so it's much higher leverage for me to help them up-level in how they execute. This is where, again, at the hands-on level, we work on everything from strategy to then how do I set up my org to execute on this to we did this last week, and here's what we learned, let's think about that and make new decisions going forward. Because you're there every week, you're, you're sort of like, you're a second brain for that founder all the way through the process, and you're helping them up-level all the way across. If you try to embed me in one of your functions, then you're getting too far away from that function if it's a core offensive leverage growth function for your company, which you shouldn't be. And if you need me to do those things, that's gonna be a problem, 'cause I'm not gonna be there the whole time, and I'm only there an hour a week, right? And so like, you really need to be able to do it, and I can help you get better at doing that thing.

Harry Stebbings 20:35 But if you're thinking about creating virality in the referral mechanism of your consumer fintech app-

Ely Lerner 20:40 Yeah.

Harry Stebbings 20:41 ... just fuck off and, and I mean this in the nicest way.

Ely Lerner 20:43 (laughs)

Harry Stebbings 20:43 Talk to my head of product.

Ely Lerner 20:45 Yeah.

Harry Stebbings 20:45 He's on it. I'm getting banking licenses. I'm getting fundraising. I'm stopping the business going out-

Ely Lerner 20:51 Yeah.

Harry Stebbings 20:51 ... of cash. My head of product-

Ely Lerner 20:53 Yeah.

Harry Stebbings 20:53 ... is the person for you.

Ely Lerner 20:55 Yeah. That's-

Harry Stebbings 20:55 A- am I wrong?

Ely Lerner 20:57 I, you, you are if incentivized virality is going to be the primary growth lever for your business.

Harry Stebbings 21:03 But if it's the primary growth lever for your business, I'm not hiring.

Ely Lerner 21:06 Yeah. Right. You don't want to hire for that person. This is what I'm saying. The CEO founder needs to own that strategy, and I help them figure it out and execute on it, right?

Harry Stebbings 21:15 But that's what I'm saying. If I, if it's the primary, I'm not hiring you 'cause it's the primary. If it's the secondary, then-

Ely Lerner 21:22 Yeah.

Harry Stebbings 21:22 ... I can delegate it to someone else, and you work with them.

Ely Lerner 21:26 Yeah. I think the thing here is people can y- get a lot of help from a hands-on advisor who knows how to do this stuff and has done it before on-

Harry Stebbings 21:36 Yeah.

Ely Lerner 21:36 ... the primary lever. That's, I think that's the key thing. The primary lever's what's important. That's where the founder should be spending their time. That's where I can actually provide the most value.

Harry Stebbings 21:44 But there's still value in secondary levers. And I would, I would-

Ely Lerner 21:47 Absolutely, there's values in-

Harry Stebbings 21:47 ... I would have advisors in each, like I want out of home billboard advisor. I want virality in the consumer br- referral product. Fuck it.

Ely Lerner 21:56 Yeah.

Harry Stebbings 21:56 Let's have an advisor for each.

Ely Lerner 21:58 Uh, you probably heard this from Bryan too. At early stages of startups, you are almost always much better off focusing on one primary growth lever and ignoring the rest. You need to layer them on later, but you shouldn't be doing it in early stage. So when you are laying those on, you are now growing the org and you're actually probably hiring in some of those places to layer those, those on.

Harry Stebbings 22:17 So what, what stage of company are we on here then, Eli?

Ely Lerner 22:19 Yeah.

Harry Stebbings 22:19 Are we like series A, B or ...

Ely Lerner 22:22 So yeah. Most of the companies I advise are from seed to C, so series C. I also have a few, actually a handful now, of clients that are actually much later stage businesses where they're doing this incubation of their wave two. This is the one place where I advise non-founders. If they've set up the structure that we were talking about before where they have a GM with PLN ownership doing this wave two, zero to one kind of product market fit work, I can advise that person as if I was advising a founder. So that like, that tends to be the split. I'm helping them from seed through C, and then I'm helping them sort of like wave two out the sort of extraction side of the curve.

Harry Stebbings 22:55 Okay. I totally get you there. You mentioned seed. Is it too-

Ely Lerner 22:59 Yeah.

Harry Stebbings 22:59 ... early at seed for most growth advisors given the fact that you don't really have any form of flywheel or traction yet?

Ely Lerner 23:08 Yes. Most traditional growth advisors are more like that functional advisor, right? They are good at a particular type of growth. And once you figure out the right type of growth for you, having that person helps a lot. I actually help people earlier than that because some of the things I help them with at seed is let's figure out what is the right type of growth for you, right? That's where, again, I sort of see myself as a holistic founder advisor, not just a growth advisor.

Harry Stebbings 23:33 I totally get you. Okay. No, that makes sense, and should these advisors have done it before at the stage of company that you are at, in the geography that you are? 'Cause you can imagine like you have a, a Facebook growth advisor who did-

Ely Lerner 23:47 Mm-hmm.

Harry Stebbings 23:47 ... you know, Facebook news feed.

Ely Lerner 23:49 Right.

Harry Stebbings 23:49 It may be very different if you're being hired into Chime where-

Ely Lerner 23:52 Yeah.

Harry Stebbings 23:52 ... it's very different. Should they have done it before?

Ely Lerner 23:55 I think it helps a lot. Um, I think the things that are ... It doesn't have to be identical, because if it's identical, you're never gonna find the person, right? I think the things that matter most are ...One is like, did they develop the playbook or did they scale the playbook? I think you see a lot of split between somebody who scaled a playbook that was developed prior to them, or they developed a playbook from scratch. And you- in- in all of these different areas, you should be thinking about, are we developing the playbook or are we trying to scale the playbook? And you want to match your sort of advising to which stage you're at from that perspective. Within the sort of functional places, I think, again, on the growth side, like if your primary lever is virality, definitely get somebody that did virality stuff, right? If they come from a performance world, they're gonna not have, they're gonna struggle to help you with, with the core virality stuff and vice versa, right? I think that matters a lot. Geography also mostly matters. There- this is where it depends, right? I think there are things where the geography matters a lot and there are things where the geography matters less. (laughs) So like brand, brand people need to know the- the culture of the place that they are doing branding too. Performance works pretty similarly in a lot of different places, (laughs) right?

Harry Stebbings 25:00 Yeah.

Ely Lerner 25:00 And then like maybe FinTech is a good example where just like the core business models and the, and the infrastructure dynamics are very different in different geographies, right?

Harry Stebbings 25:08 How do you advise founders when they get ... so there's a lot of like consultant/advisors now who come out and say, "I did this, I did this."

Ely Lerner 25:16 Yeah.

Harry Stebbings 25:16 How can founders determine true attribution of who did what?

Ely Lerner 25:20 I- this is, I think a, a general problem. I'll tell you my approach to it, and I think may- more people should maybe do this and maybe more founders should do it, which is like, I don't try to make claims with founders, I just help them. My model is I meet as many founders as I can and I help them as much as I can for free, and we work together, and if at some point we feel like I have capacity and there's a good fit and w- I'm bringing a lot of value, then we formalize the relationship. That to me is the way to do it, because then nobody has to believe anything. (laughs) Just work with somebody and then you can see if they're valuable for what you need and you can see if there's a fit, right? It's both their experience and their knowledge, but also like you're working pretty closely with this person. You gotta be able to work together, right?

Harry Stebbings 25:56 I- I- I totally agree. I- it's like a freemium trial in many ways. (laughs)

Ely Lerner 26:00 It's- uh, it is absolutely a freemium trial, yeah.

Harry Stebbings 26:02 When does it convert?

Ely Lerner 26:04 It depends. I think usually with the people that I work with after three or four calls together, we are both probably at the place where we're like, okay, like we should- we either are super jazzed to work together and we're gonna do this, or this is probably not the right time or not the right fit and we should- we- you know, we can check back in, in- in six months or something. So it's- it's usually within that amount of time that you kind of get it. It also affects sort of like the help that I'm giving them. I a- I want to figure out like, hey, if we're going to work together week to week, I want to help you with these things. I don't need to help you as much with these things 'cause I'm gonna be there to help you with those. If I'm not gonna work with you, let me set you up for success, like l- let me give you the things to try to execute on this yourself. And so again, by sort of like the third or fourth time we've worked together, you kind of have to start making that split of like, am I trying to set you up for success or I'm gonna be there with you?

Harry Stebbings 26:49 In terms of setting up for success, I think failure-

Ely Lerner 26:51 Yeah.

Harry Stebbings 26:51 ... happens in surprises.

Ely Lerner 26:53 Mm-hmm.

Harry Stebbings 26:53 What do you want to set up or align on-

Ely Lerner 26:56 Yeah.

Harry Stebbings 26:56 ... before agreeing to a formal commitment?

Ely Lerner 26:59 Yeah, that's a great question. I actually think it's more important in the place where we are not going to work together, but I'll also answer your question. When we are not going to work together, I'm really trying to set you up with like core frameworks and approaches to maximize your chances of success without me there. (laughs) So that- that's sort of what I'm looking for there. Again, this is maybe a difference between your traditional high level of five fast advisor and the kind of advising I do. My advising is month to month, week to week. Like the way that I'm doing my engagements is we just work together and then if at any given time either of us feels like we're not getting enough value out of the relationship, we just stop. And there's- you're not- there's no more equity that you're giving me, there's no more cash that's changing hands. Like we can just stop whenever we want. We can pause. I've actually had clients where we worked together for a while, we pause, they go focus on something else, and then they come back later and then we work together again. And so I- again, I think that model works much better because then you're not... there's no- there's no commitment on either side. You can just start working together and see how it's going. And if you're getting value, you're getting value, and if you're not getting value, you stop.

Harry Stebbings 27:55 I totally agree with you. When we think about kind of the- you mentioned that equity, you mentioned, you know-

Ely Lerner 28:00 Yeah.

Harry Stebbings 28:00 ... obviously cash I'm sure is part of it too.

Ely Lerner 28:02 Yeah.

Harry Stebbings 28:02 How should founders think about compensation for advisors in this way?

Ely Lerner 28:05 Again, depends on the shape. Maybe all these answers depend on the shape. For company level advising, for the thing that I'm doing really, like what you're thinking about is like, do you believe this person is going to have a substantial probability of helping you bend the curve, right? Like the reason I'm there is to help you bend the curve essentially. If you believe there's some percent chance that I'm gonna be able to help you do that versus not working with me, then it's worth the value. (laughs) If you don't, you shouldn't work with me, right? (laughs) I think that's the key thing. The fractional and like functional level advisors are a little bit different

Ely Lerner 28:36 because they're more- they're more like comps to benchmark against there, right? Like you- 'cause you could hire a full-time person, you maybe hire a more junior person. And so usually the way you're thinking about compensation in those is sort of scaled from what a full-time version of that person would look like, if that makes sense.

Harry Stebbings 28:51 I totally get you. And so when we think about that, like what does that actually look like in equity and the salary package?

Ely Lerner 28:57 For a fractional?

Harry Stebbings 28:58 Yeah.

Ely Lerner 28:59 Yeah, I mean, again, like I think when you're- so let's take a fractional CMO, right? As an example. Or fractional CTO is one I- I've been seeing more commonly now too. Usually what you would do is you would look at what you would hire a full-time C-level in that position for, and then you would just scale it back by the fraction. So usually it's like two days a week or three days a week. Those tend to be the most common versions of that. And so you're really just scaling that back. So you also generally don't put a cliff on the equity because they- you know, sometimes it's a six month engagement or whatever, but you're really just taking what you have and scale it back down to the three or two. That's like a very broad rule. Sometimes there are other things to do there, but like that tends to be the common path.

Harry Stebbings 29:36 Respectfully, if you want Casey Winters, if you want Alaina Verna-

Ely Lerner 29:40 Yeah.

Harry Stebbings 29:40 ... if you want any of these guys-

Ely Lerner 29:42 Yeah.

Harry Stebbings 29:42 ... you gotta pay them up.

Ely Lerner 29:42 You're gon- yeah, exactly. Well, a- again, I think like (laughs) Alaina and Casey know I've- I've talked about this a few times actually, like-This is also where choosing, choosing which product you want to buy from this person is important, right? Because Elena does also more of the kind of hands-on advising things that I do, and she does these interim gigs, right? She's at Dropbox right now. She was at Amplitude before. To get her in-house like that, in that interim gig, is very expensive, (laughs) right? But that, that's the product they wanted to buy. But also she got, when she's not doing those gigs, she's offering the same kind of high level advising that I am, where there's just more leverage, right? Again, it depends on what you need from her, and sometimes you can't get it at the smaller sort of engagement style, but the higher leverages, you're getting more impact to your business per hour, you're paying more comp for, like, the number of hours that they're putting in, but it's less total comp because you're getting the high impact hours. That's how I think about what I do too, is, like, I'm trying to maximize the impact of my focus cycles.

Harry Stebbings 30:37 Okay, I get you. So we agree then on this compensation structure. In terms of equity, what, what do the equity packages look like? Just to help me again. I know it's, it's detailed and money's always uncomfortable to talk about, but so many fans are listening.

Ely Lerner 30:50 Yeah.

Harry Stebbings 30:50 And they're like, "What does it actually look like? Just help."

Ely Lerner 30:53 The package that I do is, let's call it 80/20 cash and equity, right? And, but again, on a month to month basis for this hands-on advising. The nice thing about that is, it's not a lot of equity up front, right? If we end up working together for years, and this does happen sometimes. I mean, Casey has clients he's done two-plus years on. I'm, I'm now at, I have somebody I'm working with that I've been working with for at least a year and a half. So sometimes you actually find really high value long-term engagements, and then that starts adding up a little bit. But early on, you're not giving away that much equity for the value that you're getting, right? There, you're actually skewed more towards the cash,

Ely Lerner 31:27 because it's sort of this, like, we're exchanging value as we go.

Harry Stebbings 31:30 I totally get you. Okay, so 80/20 there. Okay, so we agree on this 80/20 split. Now, thank you. You are advising me. I'm very excited. I'm a hypothetical founder and you're working with me.

Ely Lerner 31:43 Yeah.

Harry Stebbings 31:43 What can I do, Eli, to set you and us up for success in that first month?

Ely Lerner 31:49 There's sort of three key things I see as signals of successful relationship. And again, I'm, I'm looking for these things in this sort of free trial mode to decide if I want to work with you. But just so you understand, right? Like, really, especially when you're early on and, and, like, trying to do, figure out strategy, you can ask questions of data, you can ask questions of customers, and you can ship small things quickly to learn. Like, those are the levers that you need to be able to pull. If you cannot pull all three of those levers, that can be a challenge. There have been times where one of those levers people are struggling with, and I can come in, again, because I'm teach you to fish at the ground level, if you just really struggle to ship quickly, I've actually done that. Like, I've worked with people where we start working on strategy, and then we realize their teams just can't ship. And so we sort of put the strategy on pause for a little bit, and I help dive in and say, like, "Let's, let me help you figure out how to get your teams to a place where they can ship really quickly." So if that can happen, we can do that. Data is one where, like, if you just have no data, it's gonna be hard. We, I probably need to say, like, "Come back to me when you have instrumentation."

Harry Stebbings 32:46 I, so, I've got a couple of questions.

Ely Lerner 32:47 Yeah.

Harry Stebbings 32:47 Why do teams struggle to ship?

Ely Lerner 32:49 (laughs) Yeah, that's a great, you wanna do that question first? There's a, we could do a whole session on that, but-

Harry Stebbings 32:54 (laughs)

Ely Lerner 32:54 Um, lots of different reasons. Um, but the most common ones are engineering ownership of outcomes, I think. The, like, the strongest lever that you can pull to really drive high functioning engineering teams is engineering ownership of outcomes. I think very frequently you get teams that set up where the engineering team feels like it's owning output and not outcomes, and that leads to all kinds of things. So that's one.

Harry Stebbings 33:22 Pause, pause. What, what, what, what-

Ely Lerner 33:23 Yeah, yeah, yeah.

Harry Stebbings 33:24 What's output, not outcomes? Just so we understand that.

Ely Lerner 33:27 Shi- ship the feature, right? Like, uh, you know, I get, I'm engineering, a ticket shows up in my Jira or whatever, it says we gotta build X, I build X, right? I feel like my job is to build the thing you tell me to build. That, like, that is, I think, one of the biggest gaps between really high output engineering teams and engineering teams that struggle to have high output. That's one of them.

Harry Stebbings 33:49 Okay.

Ely Lerner 33:49 That, that answer that question? Yeah. Um-

Harry Stebbings 33:51 Yeah, no, you tot- you totally did that. Sorry, carry on.

Ely Lerner 33:54 Yeah. Two is actually this offense and defense thing. And so I think another very common thing we see, and this is, uh, we may not even have time to jump into this framework, but we can if you want, which is, like, I have this framework that I've written about that I've used with almost every company (laughs) that I advise of thinking about everything you're doing as a company, especially things that your product and engineering teams are doing, because that's the highest leverage, highest opportunity cost as either offense or defense. And then there's neither, which you probably shouldn't be doing. You see a lot of companies where a lot of cycles are going to things that are very sort of, like, marginally impactful to the business overall, right? And to maybe preview the framework a little bit, offense is things that are really, like, targeted at, it's the small number of bets that are targeted at pushing your business to the next level. If it's 10 things, that's also a problem, and they have to be things that are really focused on pushing your business to the next level. Defense is things you have to do. There are always things that are not doing, like, moving business metrics that need to happen, mainly because they are protecting against downside risk, right? Like, if they didn't

Ely Lerner 34:57 happen, there, if you didn't do it at all, there's some downside risk that's gonna happen.

Harry Stebbings 35:00 So my question to you is then, if we have, like-

Ely Lerner 35:02 Yeah.

Harry Stebbings 35:02 ... defensive, it's reliability, it's security-

Ely Lerner 35:05 Mm-hmm.

Harry Stebbings 35:06 ... it's small upgrades, i- isn't offensive a copilot strategy for Figma or a new product?

Ely Lerner 35:15 Could be, yeah.

Harry Stebbings 35:15 What, what's offensive and what's in between?

Ely Lerner 35:18 Great. And then we should talk about how you should think about those defensive bets, 'cause this is the other place that people fall down.

Harry Stebbings 35:23 Yeah.

Ely Lerner 35:23 Offensive bets, absolutely. So I think in earlier stages of companies, they tend to be growth focused, right? It's like, what is your probably one primary growth loop and how do you accelerate that growth loop? Because you're, again, you're looking for offensive bets should be compounding. You wanna find things where the more you invest there, you get more and more compounding returns, right? As opposed to these little short term one-off, you can move a business metric one off, but it doesn't do it in a compounding way. That's not offense. At later stages, things like product market fit expansion absolutely are your offense, right? To your point, if you're Figma and you're building your copilot, that is probably one of your core one to three...... key strategic bets for the company, for sure. On the defensive side, I think a key thing about performance is a good one, risk and fraud is another one, right? Technical scaling, all of these things are in this space. A key aspect of defense is that there's almost always a diminishing returns curve. There's a point on that curve where you have reduced the risk of the downside to a significant amount, not to zero, because if you try, like, if you try to move the risk to zero, you're going to be way down in the diminishing returns curve. It's gonna take massive amount of investment, and you're still probably not even gonna get the risk to zero, right? So really, it's about finding that diminishing returns point and not investing past that point, because every cycle that you're investing past that diminishing returns point, you could be putting into offense, which is just the opportunity co- People really undervalue the opportunity cost of those cycles, right? Especially because, as we said, offense is compounding, and so things that compound, like the time value of money here, right? The sooner you invest in those things, the more that curve is gonna bend over time.

Harry Stebbings 36:53 And so the opportunity, just so I understand, so the opportunity-

Ely Lerner 36:55 Yeah.

Harry Stebbings 36:55 ... cost of getting, um, security and reliability at 95%-

Ely Lerner 37:01 Yeah.

Harry Stebbings 37:01 ... instead of 100%-

Ely Lerner 37:02 Yeah.

Harry Stebbings 37:02 ... is actually, it could, we could move those engineers to an offensive strategy and have an-

Ely Lerner 37:08 Yeah.

Harry Stebbings 37:08 ... alternating strategy with those resources.

Ely Lerner 37:10 With compounding returns, exactly, right?

Harry Stebbings 37:13 Good.

Ely Lerner 37:13 It's exactly right.

Harry Stebbings 37:13 How do you, how do you know where that break point is, though?

Ely Lerner 37:17 Yeah. This is a great question. I think it depends, and one of the big key things here on building a really high-functioning engineering team is hiring engineering leadership especially, and folks who are able to think this way and are really good at making estimations of where these things are. And so one example I think is, like, technical scaling, right? It's like, all right, our infrastructure, once we hit 10 million users, like, we know our infrastructure is gonna fall over or somewhere in that range, right? And it's okay to pad that a little bit. Like, you can be careful and be like, "You know what? Let's make sure we don't get past 8 million," (laughs) right? Just to be sure, 'cause we're not gonna be perfect about it. And then what you can do is work backwards, right? And you can say, "Okay, we're, we're pretty sure that the effort required to move our infrastructure to the next level of scale is gonna be four months of work." We have projections, like our CFO should have projections about where we think we're gonna grow over what amount of time. We can work backwards from those projections and say, like, "Okay, this is gonna take us four months of work. We're gonna hit eight million users we think by this point," and so, like, again, let's buffer ourselves. You don't wanna be right on, it's okay to not be right on the line. Let's be like, "Let's start that five months early, but we're not gonna start it now. We're gonna wait until the last possible moment to start that thing," because again, the opportunity cost of those cycles now, we should be putting into that compounding offensive thing. That said, you gotta keep an eye on it. Like, don't just do that one time and then assume you were right. Like, those projections are gonna change all the time. If something, you start growing faster, you're gonna have to pull that back in. But that really helps you optimize kind of how you're investing those resources.

Harry Stebbings 38:41 So for me as a CEO, do I sit down with the CPO or the product leader, and do we literally map out offense and defense and then map out resources accordingly? How, how do we kind of-

Ely Lerner 38:52 Yeah.

Harry Stebbings 38:52 ... top down and still uh...?

Ely Lerner 38:54 Exactly. I think that's exactly right. The other piece of this is actually org. I've been working on a workshop for this actually, that I've, like, come into companies and tried to, like, help them up-level at this really quickly, so I've, we've done a couple of these now. But, like, the core sort of phases of this generally are, once you understand the concepts really well and your org understands the concepts, go in and look at everything you are planning to do right now. Like, your whole roadmap. And essentially tag all the things as offense and defense and figure out, and neither, because you're gon- You're always gonna have a bunch of things that are like, "This is actually not offense, it's not really defense. Should we really be doing this right now? Maybe we shouldn't," right? And that's gonna help a lot. But once you do that, actually one of the things that can be really high leverage is aligning your org around offensive and defensive bets can also be really powerful, right? Because then it allows you to have really focused teams on those offensive bets that are not getting distracted by other things, and focus is how you make progress, right?

Harry Stebbings 39:45 But what does that look like in reality, aligning the team around offensive and defensive bets?

Ely Lerner 39:50 Yeah, so again, I think, like, the most common version of this is actually, you have, sometimes this is called, like, a core experience org that really owns all of the defense. One of the things that I've seen be really effective is when you have a core experience org that owns every piece of the defense, all of the defenses within that org, and no non-defense is in that org, that really lets them prioritize apples to apples, defense against defense. That is mu- You're, you're empowering them in a much stronger way. And then you have an org for probably each of your offensive bets. Again, like you should at most have three core offensive bets and an org that is dedicated to each of those things.

Harry Stebbings 40:23 Do you ever see an offensive bet turn into a defensive and a defensive turn into an offensive?

Ely Lerner 40:29 Yeah, that's a great question. You definitely do. The most common place for that is, um, as you top out a growth loop, and so I think, like, you can imagine, you know, the first growth loop for your business at some point is gonna kind of start topping out that S-curve and be more an extraction phase, right? You need to be layering on a second one. You should start before it totally starts topping out. Like, that will become the offensive bet. Once it starts topping out, you, you still need to invest in it. Like, you still need to be, right? Like, if it's a virality loop, like, you can't just be like, "Okay, it's, we're starting to get lower returns. We're just gonna ignore it from now on." It starts turning into a defensive thing where you're like, "We need to keep maintaining this, but additional resourcing on it is not producing additional returns," right? "We're now in this diminishing returns curve." So then that moves, like that virality, those things move into the defensive sphere. The opposite one also happens. Actually, an example of the opposite one here that I think I see is trust and safety. Trust and safety is usually defense, right? It's, you're, you're avoiding downside risk, but sometimes it becomes offense, and like Airbnb is a good example actually, where trust and safety becomes offense, because, like, a core barrier for Airbnb is this idea that, like, "I'm in somebody else's home" (laughs) , right? Like, that's a core barrier to value delivery for your product, and so that's a place where actually, like ... And, and they've invested a huge amount of (laughs) in trust and safety overall, and the reason for that is they are getting outside returns by doing that, because every sort of incremental point of trust that people have in, that, like, "I'm gonna go to somebody else's home and it's gonna be okay," they're driving sort of, like, net new demand that didn't exist when they didn't have that trust, right? And so that's, again, like, in, in some cases trust and safety is, most cases trust and safety is defense, but sometimes it can actually be offense.

Harry Stebbings 42:06 How do I make the defense s- org...... people not feel like staples and bread and butter that's a bit boring?

Ely Lerner 42:15 I mean, the one thing to remember here, I mean, it- talking about this is really important and how you talk about it is really important. But the one thing to remember here is, defense is equally important to offense if not more important, (laughs) right? Like, the whole point is that these are existential. If you do not do these things, you're not gonna have a company to invest in offense. You need to be making sure that everybody understands how important these things are. You need to be celebrating it in the right way. I think this is another thing that people do wrong, is they tend to celebrate offense. They tend to celebrate metrics movers, right, in their org, and that makes people working on defensive things feel crappy because they never get celebrated. But really, you need to build a culture that celebrates, like, finding points of diminishing return and giving back resources. People should be s- that's so valuable to the business because of the opportunity cost of that, right? And so you should be celebrating this idea that, like, "Hey, we actually think we only need to invest this much in this tech debt and no more, and we've, we've figured out a way to cut that in half." Celebrate that all day, right? That's a huge impact to your business because of the opportunity cost of the savings that they have found, right?

Harry Stebbings 43:16 Do you ever find conflicts between offense and defense teams?

Ely Lerner 43:21 That's a good question. Um, I mean, on a, on a really tactical, you just get deep, a little deep in the weeds on the eng side, there's a, there are pros and cons. Strategy-focused orgs tend to have multiple teams hitting the same pieces of the code base, right? This is, I think, a lot of companies have gone through this, this shift over the past 10 years maybe of, like, you know, the old style was we have teams that own features, right? Which, like, is very nice from a "We touch this piece of the code base, nobody else touches this piece of the code base," but isn't very good for driving business outcomes, (laughs) right? And so, like, when you shift into the model of, "We have teams aligned to business outcomes," and defense is definitely one of those, you're gonna have different teams touching different parts of the code base, so you have to deal with the coordination overhead and challenges of doing that. It's a pro and con. Like, you, you pay that tax to be able to get that benefit.

Harry Stebbings 44:06 What do you think are the biggest mistakes that founders make when it comes to this mindset of, of, of, well, founders and product leaders, when it comes to this mindset of offensive and defensive?

Ely Lerner 44:16 The biggest mistakes I see are treating anything, uh, like, not, not, (laughs) not choosing is one, right? On the offensive side of, like, the whole point of strategy is to say no to most things and focus in on a small number of really high leverage things. Like, you have to make that bet. And so when you see companies with nine company-level OKRs at the top level or whatever, right, it's like, they're just trying to do all the things. If your chance of success is already low, if you do not focus down on one or two core key bets and do that strategy work to figure out where that leverage is, you're not gonna succeed. So that's one, it's just having way too many things that you're calling offense. That's one mistake. The other mistake actually is way too much defense, right? I've seen this in actually, like, logic books. There's sort of a human fallacy of, "Because X thing is important, I'm just gonna assume any- anything I do in that direction is important," right? And they just forget about this concept or they're not thinking about this concept of diminishing returns. That is very, very common because they're like, "Well, we have to invest in X, like, of course we do." It's like, "Yes, you do, but you're investing way too much and the opportunity of cut- doing that is way too high."

Harry Stebbings 45:16 Eli, do you ever have it where an f- an, I'm sorry, my voice is going, I sound like a sexy Rod Stewart. Um.

Ely Lerner 45:22 (laughs) .

Harry Stebbings 45:23 Wasn't expecting that in a podcast. Um, do you ever have an offensive which actually turns out to be a neither? It could be a new feature, it could be a new product-

Ely Lerner 45:31 Yeah.

Harry Stebbings 45:32 ... and doesn't work. What happens then?

Ely Lerner 45:34 Offense should not be about the solution. Your offense is not the solution. The offense is the leverage point that you are trying to move. And so that team's goal is to figure out how to move that leverage point, figure out what they need to do to move the metrics in that leverage point, and be learning as quickly as possible if that is the wrong bet, right? Like, this is, this is the thing, is that, you, this is another mistake you see a lot which is, like, "I did some work to try to determine where that leverage is. I made a bet, and then I didn't question that bet for a long time," (laughs) right? That happens all the time. Really, the thing to know is, like, you need to be building confidence over time and you need to pull forward the key riskiest assumptions in that bet, right? I think this is one of the key thing, this is, again, something I help founders with all the time, which is, how do we identify what the key riskiest assumptions are? And then how do we do things very quickly to essentially learn if we are wrong about one of those key assumptions that would mean that this is not the bet to be taking? And this, the earlier you can do those things, the better.

Harry Stebbings 46:29 When you say there about kind of really understanding what you're driving

Harry Stebbings 46:32 towards in terms of, like, the incentive metric or the, the output, not-

Ely Lerner 46:37 Yeah.

Harry Stebbings 46:37 ... the future, so to speak-

Ely Lerner 46:38 Yeah.

Harry Stebbings 46:38 ... it makes me think of a conversation I had with Alex Schultz-

Ely Lerner 46:42 Mm-hmm.

Harry Stebbings 46:43 ... actually at Meta. And he said, actually, "Retention is king. Retention is king."

Ely Lerner 46:47 Mm-hmm.

Harry Stebbings 46:47 How do you think about kind of the prioritization of retention today? (laughs) And I know you have some contrarian views on this.

Ely Lerner 46:54 I mean, the one contrarian view that you see a lot is, people tend to build, uh, teams focused on churn, and I think that's a mistake. I don't think you wanna focus teams on churn. Retention is actually the thing you wanna focus on, and actually, most of that is probably activation. The, um, I, I assume Bryan, I think Bryan probably talked to you about this 'cause he and I talk about this a lot, but, like, generally, new user activation and getting people to the place where they experience the core value of your product and then build a habit around that value is your strongest lever to retention, which is the thing that is gonna impact your churn metric. If you try to focus on churn, you're, you're focused on the w- these, these people are already lost. One, they maybe aren't even your ICP in the first place. Like, you, you shouldn't be focusing your effort of trying to prevent people from churning who are not a good fit for your product. Or you've already lost them, even if you're ICP, right? And you really should be moving your focus back probably to activation to really build strong retention. But absolutely, retention is important. You, retention is the, the most important thing, for sure.

Harry Stebbings 47:52 Can I ask, when it comes to advisor roles-

Ely Lerner 47:55 Yeah.

Harry Stebbings 47:55 ... again, we'll get back to that, what are the number one reasons they don't work out?

Ely Lerner 47:59 I think one of the things I have heard from founders, since I'm on the other side of the table here but I've heard from founders about other advisors, is when you get a kind of advisor who has done a bunch of things before and essentially their advice is, "Do the things I did because they worked for me," that happens a lot. And what ha- what the challenge is if-... their situation was meaningfully different from yours in a way that you may not even totally understand, that you're gonna burn a lot of time trying the playbook that worked for them that doesn't actually work for the nuance of your business. You know, and this is why I'm such a fan of the hands-on approach, which is like, yes, I'm bringing all of my past experience to bear, but I'm also in there with you, making intentional decisions based on what's actually going on in your business.

Harry Stebbings 48:39 I totally agree. Okay, so we have that as one reason. Any other reason why it doesn't work out as well?

Ely Lerner 48:44 Uh, like on the founder side of that, if the founder is not willing to engage and commit to the relationship, then it doesn't work, right? Like, at the end of the day, if the, if the founder's not gonna engage, not gonna show up ... Like, this happens sometimes, especially with high-level advisors. The founder's just too busy, (laughs) right? Like, it's just not gonna work. You need to get to that working relationship where you are aligned and working together on driving outcomes for your business, and you're doing that in an engaged period. Again, it's, it's kind of retention. It's kind of activation, right? You gotta get the activation for that thing to go so that that founder has a habit of working with this advisor consistently and, and driving outcomes.

Harry Stebbings 49:17 How many advisor positions do you think you can have? How do you think about capacity and load on the advisor side?

Ely Lerner 49:23 Depends on the person. I can tell you about me. So again, I do this full-time right now, and I, right now, I think have, like, six people that I'm working with at the same time. I probably can do a couple more than that, but that's about as many as I want to do at a, at any given time. I'm pretty close to the ground though. Like, I'm spending an hour with them every week, plus additional time where I'm just diving into their stuff. And so I think, like, depending on the level of advising you're doing, you could do more. At high-level advising, you could take tons of clients.

Harry Stebbings 49:47 How do you think about when you've extracted enough value from the advisor? A- again, like, like therapists, sometimes you need-

Ely Lerner 49:53 Yeah.

Harry Stebbings 49:53 ... to change or you-

Ely Lerner 49:54 Yeah.

Harry Stebbings 49:54 ... don't need to see them anymore.

Ely Lerner 49:56 Yeah.

Harry Stebbings 49:56 How do you know when's the end life of that?

Ely Lerner 49:58 Yeah. Again, if you are working closely with them, this is the, if you ... you need to be doing that. If you're working closely with them, it's gonna start getting obvious that you're not getting the right value out of that relationship. You're gonna know. You're gonna get to the point in your business ... And this does happen, right? Like, advisors will be better at certain types of things than other types of things, and if the things that are important for your business are the things that they are good at, you're gonna get lots of value. And as your business progresses, if you move into things that they are not as good at, you're gonna pretty quickly know that you're not getting the same level of value from that relationship and you need to start looking for somebody who is really good at the next set of problems that you have.

Harry Stebbings 50:30 What do you personally find the hardest things about being an advisor?

Ely Lerner 50:33 Top one is probably that it's kind of lonely, right? Like, this is the solopreneur lifestyle. Like, when you're an operator, you have a team around you, you're there every day, you're in person sometimes, though maybe not these days, right? As a solopreneur, you kind of have to find that. I mean, this is where, you know, I, I have coffee with Casey. Luckily, he lives here. Alanna doesn't come to town that much anymore. But, like, getting together with o- other solopreneurs is definitely one of the things I do to help have a community. But that is one of the big downsides, is you don't really have a team, right?

Harry Stebbings 51:01 I, I totally agree. Sorry, I'm just peppering you with questions now that I have-

Ely Lerner 51:05 No, yeah, yeah, yeah. I love it.

Harry Stebbings 51:06 Should, should gr- And this is one that I get a lot. Should growth teams be independent? Should they sit with inside product teams? How do you advise on that?

Ely Lerner 51:13 It depends, but let me kind of break down some of the factors here. I think, in general, uh, the, the model now is to have growth be embedded in everything that you're doing. There was a period of time, and there still may be companies who need to do this, there was a period of time from essentially nobody thinking about growth. It was necessary to pull those things out into their own orgs to help that org sort of make that maturity step into starting to think about growth and

Ely Lerner 51:39 starting to bring together those functions. Honestly, a bunch of those companies have now moved to the third step, which is now integrating that into everything they do. So, if it isn't, if you are a company that is i- at the first stage, it may well be the right step for you to go to having a separate growth org, but you should think that your, uh, end goal is to integrate growth into everything that you're doing.

Harry Stebbings 51:56 Eli, what's the best growth decision you've made, and what did you learn from it?

Ely Lerner 52:00 Honestly, the growth things that I have seen that drive the most upside are, are almost always in activation, (laughs) just to come back to that one, right? Activation is really that place where it makes the difference between you, you've got a bunch of people who could h- have value from your product to getting them to the point where they have a, have a engaged habit long-term, getting value from that product. And again, this is back to the, like, retention is king, right? Like, retention stacks your business. Retention drives engagement, which drives virality. Like, it's just all of the things. And so, like, if you, you know ... There's a whole process you should go through to figure out where your leverage is and focus on the top leverage area, and it is not always activation, but it, it ... that, that one has come to the top the most.

Harry Stebbings 52:45 What are the biggest fuck-ups people make in activation?

Ely Lerner 52:48 (laughs)

Harry Stebbings 52:48 Is, is it messaging? Is it not building a habit? Is it shitty i- onboarding where there's no customer education and it's like a blank screen of death? What are the activation fuck-up you see the most?

Ely Lerner 53:00 Yeah. That's a good question. I mean, one of them is not understanding your ICP. Because again, it, depending on your, how good your top of funnel is, you are likely acquiring a lot of people who are not a great fit for your product. And so one of the biggest ch- things I see people do wrong is they see they have a conversion problem, they point a team at conversion, and they look at the conversion metric overall. (laughs) The problem is, a bunch of those people are not ICP, and they're never gonna convert anyway. And so you're s- you're spending a lot of time trying to convert a bunch of people, and you're gonna get marginal improvements to conversion 'cause it's not all the way to activation. Like, you can make the button bigger. Like, things will happen. You'll move that metric. But it's just super under-leveraged, as opposed to really understanding who your ICP is, being able to track your ICP in that activation funnel so you know how well the ICP is doing, and then finding the highest leverage gap for those core ICP users and targeting that specifically.

Harry Stebbings 53:50 I totally agree there. I, I find so many people actually don't even know their ICP, especially with this rise of horizontal products. They're like, "We'll-"

Ely Lerner 53:57 Yeah.

Harry Stebbings 53:57 "... we'll see." And you're like-

Ely Lerner 53:59 Yeah. Yeah.

Harry Stebbings 53:59 "... Fuck, no we won't."

Ely Lerner 54:00 Yeah. Well, horizontal products also have an ICP. This is, I d- I love this one. I'm gonna call this out even though you didn't ask, 'cause I think it's an important one for so many people. Horizontal products have an ICP because a true ICP should be defined in terms of attributes, not personas. It's about attributes. And attributes can be horizontal attributes. They are the attributes that the core group of people across a number of...... verticals or whatever have in common that make your product such a good fit for them.

Harry Stebbings 54:26 Help me out here. What do you mean by that? So if we have like Airtable, it can be used by dentists and it can be used by PMs.

Ely Lerner 54:32 Mm-hmm. Right. Yep.

Harry Stebbings 54:32 What are the attributes that we would take from that as a horizontal product?

Ely Lerner 54:36 Yeah. So I mean, in the Airtable case, it's probably something like they have key problems in their business that require like collaboration on sets of data or something that is shared by a set of people. There are probably a number of other attributes that are sort of correlated to having that problem also, which you can then use for tracking and, and targeting and things like that. But they have that need.

Harry Stebbings 54:57 Do you not worry that if you actually try and be everything to everyone, "Hey, collaborate more efficiently on datasets," it doesn't resonate with product orgs-

Ely Lerner 55:06 No, no, no, totally.

Harry Stebbings 55:07 ... it doesn't resonate with dentists. But you are right-

Ely Lerner 55:10 Yep.

Harry Stebbings 55:10 ... but it's not home.

Ely Lerner 55:12 Yeah. So you, you shouldn't try to be everything to everyone. You, again, actually like when you're first starting a product, the general wisdom, and this holds true for horizontal as well, is that you should probably be pretty narrow. It's just in horizontal, you're narrow horizontally. Again, it's sort of like there's a core set of people across a number of different functions or business types where they have a really acute problem that is actually structurally similar to that really acute problem in a number of other verticals. And it's just those people that you're focused on, and you're focused on that kind of acute problem. Not every dentist, because every dentist doesn't have that same acute problem that Airtable needs actually.

Harry Stebbings 55:47 I get you. And it's like the data entry ones who have large scale data entry problems or whatever that is. Eli, final one before we do a quick fire.

Ely Lerner 55:55 Yeah.

Harry Stebbings 55:55 What's the biggest mistake you've made in product and how did you change your mindset as a result?

Ely Lerner 56:01 Early in my career, I, I did the thing that I think a lot of people do, which is be too focused on solutions, right? Be too focused on the feature and not think about the outcomes. I mean, this is part of the reason I'm now preaching this idea of outcome so much is these are the mistakes I made. Offense, defense, these are all mistakes I personally made, right? You see this in a lot of people is like they think about product as like we, you know, we want to build the coolest X or whatever. We wanna make this thing better. And really they need to be thinking about the outcomes they're trying to drive for the customer and for the business and where those things overlap.

Harry Stebbings 56:37 How did that show itself in real life for you?

Ely Lerner 56:40 I don't know if there was a ... I don't know if I have a point in time that I can point to where I was like had a light bulb over my head. I mean, I definitely think some of the sort of like zero to one GM roles that I had pushed that home. Like this is maybe w- maybe, may- maybe this is it now that I'm reflecting, which is like when you start out your product career or growth career working on a more mature product, it's easy to not really see the forest for the trees, right? Like you've got a lot going on. There's a lot of things already there. You're sort of a small piece. When you are doing zero to one holistically, especially when it's a business unit, you have P&L, you

Ely Lerner 57:12 have to see the forest. That's how that, that's, you're, that's your j- you're, you now own the forest, right? You own the full set of outcomes. And so I think that, that shift maybe helped me make that, made that mental shift.

Harry Stebbings 57:22 Eli, I want to do a quick fire with you now. So I-

Ely Lerner 57:25 Sure.

Harry Stebbings 57:25 ... state m- and you give me your immediate thoughts. Does that sound okay?

Ely Lerner 57:28 Let's try. Yeah.

Harry Stebbings 57:29 So what growth tactic has died a death in the last five years?

Ely Lerner 57:34 (laughs) I mean, honestly, the concept of growth tactics has died a death, like this whole idea of growth hacks and there's a set of growth hacks that everybody can throw on to get quick wins. Growth is not about growth hacks, right? Growth is about-

Harry Stebbings 57:46 What ab- what about like-

Ely Lerner 57:46 ... intentionally finding leverage and exploiting it. Yeah.

Harry Stebbings 57:48 What about like growth channels? Like push notifications generally today irritate the fuck out of people and don't work.

Ely Lerner 57:55 Yeah.

Harry Stebbings 57:55 Before they did.

Ely Lerner 57:56 Yeah. 'Cause they're oversaturated. I mean, lots of things are oversaturated. Paid is oversaturated in a lot of ways. I would say though that they're not, these things are not dead. They're dead as broad brush tools. Paid has, has channel, like has specific niches where it works well. Push notifications have specific niches where they work well. I think the idea that you can just slap a thing on, you know, slap push notifications on something and drive up engagement, that's dead.

Harry Stebbings 58:20 What one piece of advice would you give to a growth leader before they start a new role?

Ely Lerner 58:25 Um, I mean, I'd say the most important things are understand that business. Like is there opportunity? Is there leverage to be had in the business? I think this is something like they're hiring you 'cause they need to help to grow. But you wanna figure out if they're actually, if you're actually gonna be able to be successful there. And two, does the founding team understand the growth mindset, right? This is a point about is c- can we instill growth in everything we're doing? They may not have that yet if they're hiring you, but do they get it at the top level where they're gonna be, be able to make that shift? Because if they're not gonna be able to make that shift, you're gonna be running uphill the whole time you're there.

Harry Stebbings 58:58 You mentioned that before you joined, you need to have like data to take action or to make decisions. Is it the founder's job to have clean and structured data for incoming data and product people?

Ely Lerner 59:10 I don't think it needs to be clean and structured, but they need to be able to, uh, iterate towards the things they need to learn. And so they need to have some data and they need to have the ability to say, "Hey, we need to be able to measure X 'cause X is really important and we know how to go get that instrumented quickly."

Harry Stebbings 59:26 Final one. What one company growth strategy have you been most impressed by recently?

Ely Lerner 59:32 Oh, this is a hard one. I think, (laughs) I mean, the obvious one here is ChatGPT, but I feel like everybody, that's like too easy of a-

Harry Stebbings 59:40 Well, for me-

Ely Lerner 59:40 ... of an answer.

Harry Stebbings 59:40 ... I think Canva Tok is amazing. Canva's TikTok is incredible. I think Notion's-

Ely Lerner 59:45 Yeah.

Harry Stebbings 59:45 ... YouTube videos have been exceptional.

Ely Lerner 59:47 This is such a hard question. This is like you ask the, the foodie what's their favorite food, man. Um, (laughs) you know, I'm an old school marketplace guy. I'm most excited by network effects. And so I really think the place, like network effect things tend to be the things that get me most excited actually. Those are the places that I'm most excited about. I think right now you're actually in an interesting place of a bunch of really early, and this wasn't exactly your question, but a bunch of really early kind of like potential network effect businesses and then a bunch of much later stage, right? You've got your Instacarts, your Uber, your Lyft, they've kind of like gotten to where they need to be. There isn't actually very many people in that middle zone in terms of marketplace network effects today.

Harry Stebbings 1:00:24 Which one are you most excited about in the early zone?

Ely Lerner 1:00:26 So in the really early zone, uh, maybe I'll throw out a company that you haven't heard of 'cause it's really, really early. But I know a founder of this company called Cash Flow Portal that is essentially building the angel list for real estate investing in a way that has just never been done before. And I think this is a place where there are potential for network effects where there didn't used to be because of a market shift. I mean, this is, you know, the core thing is like, has something changed about technology or something changed about a market that makes something possible that wasn't possible before?

Harry Stebbings 1:00:55 I always ask that. Eli, listen, you put up with my incredibly intrusive questions.

Ely Lerner 1:01:00 Yeah.

Harry Stebbings 1:01:00 I've loved this. Thank you so much for joining me.

Ely Lerner 1:01:02 Super fun.

Harry Stebbings 1:01:02 Meant, this has been a lot of fun.

Ely Lerner 1:01:03 Yeah. Thanks for having me, man. It's always fun to chat.