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a16zGrowth vs Efficiency: Can You Have Both?
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EVERY SPOKEN WORD
55 min read · 10,720 words- 0:00 – 3:00
What growth opportunities exist in 2023?
- KFKieran Flanagan
We need to try to get back to, like, fundamentals, and how do we actually iterate and ship fast.
- GGGina Gotthilf
We have to build products that are constantly evolving and that are constantly learning and evolving from those learnings.
- BKBryan Kim
The only way really to stay ahead of the curve on that consumer side is get the lightnings keep hitting.
- SSSteph Smith
I mean, that sounds hard.
- BKBryan Kim
Let's be real, that's incredibly hard. Second product hitting, so rare. Third product hitting, you're a generational company.
- SSSteph Smith
It's like there's this, this big wave coming, and it might hit your ship.
- BKBryan Kim
Is there a way to avoid the wave? I, I don't think so. I think it's kind of a tsunami. If you sit there, it's just gonna wash you away.
- KFKieran Flanagan
People will wanna talk to people, so, like, community becomes much more important, referral becomes much more important, word of mouth becomes much more important.
- BKBryan Kim
The new limiting factor is possibly creativity. That's a very, very fun place to be.
- SSSteph Smith
Despite it being easier than ever to build a product, it may actually be harder than ever to grow one, especially sustainably, with many tried and true channels no longer working as they once did. Paid platforms were hit with app transparency tracking, SEO is now threatened by AI chat, social graphs have moved to interest graphs, product lead growth is easier than ever to copy, and virality is just as transient, if not more transient, than before. And those are just a few of the examples that founders are facing. So what growth green space still exists, especially in an era of austerity? How do you balance efficiency and profitability while still growing, and what channels matter, and how do you master them in 2023? These are just a few of the questions we address in this episode, together with three people that have successfully grown companies through similarly confusing waves of the past. First off, we have Gina Gotthilf, now leading Latitud, but perhaps most well known for her impressive reign as the VP of Growth at Duolingo, growing them from three to 300 million users with no paid budget. We also have Kieran Flanagan join the conversation, longtime SVP of Marketing at HubSpot, where he was a founding member of their international business, all the way up to HubSpot hitting over one billion dollars in ARR. And finally, we have our very own Bryan Kim, Partner at a16z, who also held several leadership roles at Snap, from their hypergrowth days all the way through IPO. All right, I won't keep you waiting any longer. Let's dive in. As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any a16z fund. Please note that a16z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see a16z.com/disclosures. [upbeat music] What are you seeing
- 3:00 – 5:02
What still works in growth?
- SSSteph Smith
in terms of growth that still works in 2023? Are there white spaces that companies can, can tackle?
- KFKieran Flanagan
What's happening is kind of really interesting, because there may be... Like, AI is somewhat of a tailwind for, like, maybe 12 months or 18 months for the best people, and then who knows after that. Maybe a headwind across everything. So I think certainly in search, I've really dug in there, and there are lots of examples of the click-through rate decreasing and the amount of traffic you get from Google search pages, pages decreasing, but I still think there's, like, a lot of value in that. Paid ads, very similar. I still think there's a lot of value in that. What really happened with, with the popularity and growth of the internet is, like, marketing growth became much more measurable, and they could have a seat at the revenue table, and they could say, "Hey, I put a dollar in here, and I get $3 out here."
- SSSteph Smith
Mm-hmm.
- KFKieran Flanagan
And the growth that's starting to happen today or where things are starting to shift is a little bit back to, like, this indirect causation. These channels, like, if you look at the platforms that- that's growing, it's, like, short- short-form video, TikTok, YouTube, like, these kind of media channels. If you look at where I think things will go with the evolution of AI, people will wanna talk to people, so, like, community becomes much more important, referral becomes much more important, word of mouth becomes much more important. All of these things are, s- uh, gonna shift us back into, like, the place where we have to be okay doing things where you can't measure everything directly all the time, and I actually don't think that's a bad thing, 'cause, like, because I think the over-index of measurements forces everyone into the middle, and everything becomes, like, mundane and lacks creativity. And so I think that there's, like, some pros and cons to actually this happening, but there's certainly a change in terms of how you are able to do your work and actually relay the value of that work to, like, the founder, who the founder is, for the most part, still gonna be stuck in the binary, "Give me $3 for the dollar that I give you."
- SSSteph Smith
We're almost, like, going back to the origins of advertising. Isn't that... Like, there's that saying that says you need to hit someone seven times before they convert, and Facebook maybe changed that. Maybe it was, like, two times, and then it feels like we're sliding back in the other direction.
- 5:02 – 7:02
The fundamentals and framework of growth
- GGGina Gotthilf
I think it has always been the case that people need repetition to really notice something, and yes, more and more, there's more media, there's more for us to watch and listen to, and, and we're more distracted, so I think that that becomes even more the case. But I, I may be s- uh, you know, simplistic, but I don't think that much is changing, because to me, thinking about growth is about the framework for understanding what makes people tick, what people care about, how to reach
- SSSteph Smith
One person or one media outlet or one channel, whatever it is, that will reach a lot more people in the most efficient way possible. What are the th- the moments in your product that people really, really care about? Meaning, like, number of people who actually encounter that moment, and if you actually make a modifica- like, make some sort of, like, A/B test or change, um, you'll actually see significance as the school results on the other end because, you know, people really care about that one moment. It could be a notification, it could be a screen. You know, we, we keep seeing these trends and, and thing- things grow and ebb. Uh, SEO rules are constantly changing because we're at the whim of algorithms, and so we're just constantly trying to ado- adapt. Places become saturated. Like, at one point, it was really trendy and, and cool to do ads inside, um, uh, the subway in New York City. Like, that was-
- BKBryan Kim
Mm-hmm
- SSSteph Smith
... like, someone discovered that in 2012, which is funny 'cause it feels pretty obvious. Then suddenly everyone was doing it. Everyone's testing with notifications, and everyone's saying notifications are just, there's too many and it doesn't matter. I think all of those channels are still very relevant. It's about finding how to actually impact how people feel, and finding, you know, new ways of impacting people that are cheaper because less people are using it over and over. So I think that that will continue to be the case and, you know, it, it just depends on, on what's the trendy channel and what are people paying attention to. But if you think a priori like that, like, how do I reach one that can then reach a lot, or what are the things that I can modify that actually make a difference, then I don't think that much has changed.
- BKBryan Kim
I, I have, like, a slightly heretical take, so this is gonna be fun. But, um, you know, when, when we talk about growth,
- 7:02 – 9:33
Assessing growth potential and product lead growth
- BKBryan Kim
especially, I, I know a16z, we're all, we're all Silicon Valley, and the stalwart, what have you. But when I think about growth, this, like, growth tactic, growth, uh, you know, channels, and, uh, you know, even the word growth hack, uh, became very popular in that, you know, there's this, this prevalent theory, and, and sort of Kieran touched on it, where you can put in a dollar and get back Y. And, like, I, I put an X dollar, get, get Y, Y back. And I think that certainly became true. A- and, you know, there became so many channels, and there became so many wisdoms and tried and true tactics, whether it's SEO or ambassador program or community building, where everyone's trying to learn from each other and like, "How do I hack this thing?" Gina said something interesting where, this is sort of how I think about it, where, like, moments in the product when people go, "Aha," like, "This is great." At the end of the day, I think growth, we're, we're sort of conflating two things. One is the actual product. Is, is it sticky? Does it, does it, does it enable you to continue to come back? Because growth at the end of the day is, like, how many people continue to use your product? It's, like, not a singular metric of, like, on day X, how many people showed up. Well, that's useful for today. But actually for a company, that is an ongoing concern. What you wanna know is, like, how many people consistently show up, and how does that grow, right? It's a cumulative concept, which means that, you know, the, the fact that people come back day in, day out is probably one of the most important factor in, in assessing the growth potential and growth of it. Which, to me, goes back to a little bit of product, where when people first come on, like we all know this, but, you know, the biggest drop-off typically day one or day zero. When, you know, people come on, they, they do onboarding, and maybe they didn't get to the aha moment quickly. So why would they come back?
- SSSteph Smith
Mm-hmm.
- BKBryan Kim
If they don't come back, then your game as a growth is, like, how do I get more acquisition, right? Because growth to me is also sort of a, you know, numerically almost an equation. There's, like, you know, people who showed up yesterday plus new people that you acquired minus the churn people plus the resurrected people. That's sort of like an equation. And when you think about r- you know, how to get the retention up, I, I think it, it all goes back to product. Why, a- as founders and operators, wh- why is there growth in your product? Like, why is it useful for more people? And i- is, is your product, you know, constructed in a way, as Gina said, like, gets you, you know, h- helps people understand what your product is about when they first use it? Can you deliver that product value again and again consistently? I think now we call it product lead growth. But it's, it's honestly, like, a core product value and how you actually define that is one.
- SSSteph Smith
Yeah.
- BKBryan Kim
And a lot of things that we're also talking about here is, like, distribution.
- 9:33 – 11:15
Distribution
- BKBryan Kim
So there's, like, a product and the distribution side of it.
- SSSteph Smith
Hmm. Yeah.
- BKBryan Kim
And if we think of, like, distribution, I think, you know, uh, the, the panel is exactly right. There are, you know, there are, uh, you know, areas where it's less good now, and there are areas that are continuing to be good. You know, you, you talked about advertising. There's that, that saying that, you know, you never know where half of it goes. A- and, you know-
- SSSteph Smith
[laughs]
- BKBryan Kim
... maybe we're going back to that, but-
- SSSteph Smith
Yes
- BKBryan Kim
... you know, I think there are many other areas that continue to do wor- work well, whether a subway ad or remnant TV ad or radio. It depends what your product is and when your at- intended audience is. If you're, you know, marketing or, or, or appealing to young generation of, you know, gamers or communities or niche areas, then Reddit and Discord are actually pretty good places. I also think, you know, ATT did kneecap a lot of the sort of advertising, paid advertising, uh, side of things. But, you know, the AI, uh, like Kieran also talked about, can also be used for that purpose, right? You know, Facebook or Meta, uh, is investing heavily on, you know, AI side of it so that all... Sometimes all you need to do is just say, "Hey, like, I have this idea. Here's, like, the base creative." And now they're able to, like, change what, how it looks, add different-
- SSSteph Smith
Personalize
- BKBryan Kim
... you know, copy, like, change a thing to see what works automatically at scale with AI and deliver higher value. And that's also, you know, very promising, uh, I think, direction that we're seeing, where the efficacy of the paid side, it, it may also be restored.
- SSSteph Smith
Yeah, I mean, I like the breakdown between there is product and there is distribution. Those ladder up to growth. But maybe if we just attack this idea of building a good product. That's not a new idea, but it does feel like, at least
- 11:15 – 14:00
Your moat and growth
- SSSteph Smith
to me, maybe we are in a different era where it's easier to copy products. And so is it just about being a first mover? In, in an era where things are easier than ever to build. And maybe Gina, you can speak to that, because Duolingo kind of famously grew with no marketing budget. Is that correct? Or very little marketing budget. And it was, it was exactly product lead growth that resulted in, in that company becoming so big.
- GGGina Gotthilf
Yes. So I, what I think has really changed with tech is that people could say, "Oh, my product was really good before," but, like, it wasn't a- as easy to know whether a product is good or not good as it is now, because you can actually see that in metrics in terms of, as Brian was saying, just in terms of retention and people coming back again. So now that defines what a good product is. But I, it's not just about building a product that's good, but also the fact that with tech, we have to build products that are constantly evolving and that are constantly learning, and evolving from those learnings. But the main thing I think that, like, when you talk about Duolingo, um, what we're trying to do at, at Latitud now, which is my new company, the importance of not just building a great product, but understanding really clearly what your moat is. And your moat needs to be something that makes it really hard to replicate your product. Um, and it, it can be anything, right? Like, so for example, if Kim Kardashian laun- launches a shoe that's exactly just like every other shoe that exists out there, the moat is Kim Kardashian.
- SSSteph Smith
[laughs]
- GGGina Gotthilf
Because her brand and her audience, and, like, the fact that she is an influencer, she's now telling people to buy the shoe, that's a moat. It means that, like, it's the thing that makes it really hard for you to go and just do that again. With Duolingo, the product is the moat, and that's the most incredible thing. Because of what I just said before about the iteration and the iterative practice, anyone at any particular moment in time, and many did try, could actually go and copy exactly what Duolingo was doing. They could... They, in fact, use the same font. In many cases, they use the same design colors, like the same format. You can do that, but you don't have the data and the team behind it that knows how to use that data, that is constantly learning from every single day of, you know, all of the usage that we're getting, and understanding what's leading to every single decision and why we're modifying way, things in a particular way. That's impossible to catch up to. So at every moment in time, even if you mimic exactly what Duolingo is, there's no way you're gonna get to the next day of Duolingo, because you don't have all of that history or the knowledge of how to use that history. So you could just spend all your time trying to, like, copy Duolingo every single day, but that doesn't actually get you to solve a, a problem for a consumer, and understanding how what you're doing is actually solving a real problem, which is at the core of, as we were saying, a retentive product that people actually like. And that defines a good product. Um, so it's not as easy as it sounds.
- SSSteph Smith
It's definitely not as easy as it sounds. Kieran, I want you to tap in here.
- 14:00 – 16:23
Integrating AI for product lead growth
- SSSteph Smith
You now are the CMO at Zapier, which I feel like actually is, is a great parallel to what Gina just said. I mean, Zapier has so many, you could say clones or competitors, right? Like, I've used many of them. Many of them are cheaper. How do you think about that differentiation and building a product, and to Gina's point, like, getting the right data and, and involving it in a way that you can stay ahead, you can have a moat?
- KFKieran Flanagan
Yeah. I think first mover advantage is useful if you can build a health- healthy retention curve, and that retention curve helps you make that product much better over time. And so you're just, like, making it much harder to compete with you. And that can be in all manner of things, like Zapier's moat for some time was just they had much more expansive coverage of apps and the amount of things that you can automate with. And then, like, more recently, it's like, how do, how do we integrate AI? How do we make automation much, much easier for companies? How can they actually do natural language within their apps? Like, one of the things that's super interesting about the, the, the AI part, just going back, like the distribution and the product part, and the product lead growth, and, like, AI is a phenomenal unlock for product lead growth, because product lead growth will get naturally built into every single product, because every single product will have a natural language interface. And so, like, you will actually be able to onboard products and use products without actually any human intervent- intervention. And so, and I think that's an incredible, like, augmentation of, like, how, how apps work, uh, in general. But I think the, the, the moat part is going to be much more complex. Like, I'm talking through the lens of B2B, not through consumer apps. But certainly for B2B, it's gonna be somewhat more complicated to figure out over time, because AI does commoditize things and make things much easier to replicate. And we've seen, like, AI may be one of the few platform shifts that actually skews towards the monopolies and conglomerates versus, like, these individual companies who just get sucked up, and there are features of these existing platforms. Like, it kinda skews towards if you have distribution, you might win, 'cause I think AI features might be more of a retention play than an actually new acquisition play, which is like if you build the AI features into a platform, no one will leave to you to actually use all these different, like, point solutions. Uh, so I think the moat thing is, I, I think moats will exist, uh, in, in similar formats. There may be just companies with less of them, and I do think distribution is a moat, retention is a moat, network effects will still be a moat, com- community is a moat. And so I think, I think of all of those things in relation to Zapier, like how, how are we touching on all of those things as we cont- continue to grow as a company.
- GGGina Gotthilf
One thing I want is, respond to what Kieran said. Um, you know, at Latitud, I would say the community is our moat, but the
- 16:23 – 17:23
Trust as a moat
- GGGina Gotthilf
reason why the community is our moat, in addition to the distribution aspect of it, is the trust building. So trust can be a moat, because that takes a while to build. So for B2B product, I think that's also super relevant, because someone can come into the market and just, like, offer the same product, but you've built a brand on Zap- Z- Zapier side that is super trustworthy. And, you know, and so people will, will continue to, to trust new features or new solutions that you put out there instead of trying to, you know, maybe try a new product. I, I think that that's another aspect worth considering.
- SSSteph Smith
By the way-
- KFKieran Flanagan
Yeah
- SSSteph Smith
... Kieran, how many times a day do you get asked if it's Zapier or Zapier?
- KFKieran Flanagan
I don't even know if I say it correctly.
- SSSteph Smith
[laughs]
- KFKieran Flanagan
I say Zapier, but it may be Zapier. [laughs] I should probably ask, like-
- SSSteph Smith
No, no, I, I heard, uh-
- GGGina Gotthilf
It's Zapier
- SSSteph Smith
... one of the founders say it's, it's Zapier. It rhymes with happier, because it makes you happier.
- KFKieran Flanagan
Oh, there you go.
- BKBryan Kim
Okay, great.
- GGGina Gotthilf
Yes.
- KFKieran Flanagan
I, I, I learned something about, I learned something about a company.
- GGGina Gotthilf
No, but it zaps, right?
- BKBryan Kim
Yeah. That's how I thought about it.
- GGGina Gotthilf
Like, the Zap means it.
- BKBryan Kim
Yeah. It zaps, like-
- KFKieran Flanagan
Yeah, yeah
- BKBryan Kim
... Zapier, Zapier
- KFKieran Flanagan
... that's the main reason I joined, is just I like saying the word zaps. Like, it's just a cool word.
- BKBryan Kim
I know we
- 17:23 – 18:51
B2C growth - discovery and breaking through
- BKBryan Kim
talked a little bit about B2B. Uh, uh, just talking about more the consumer side, growth, uh, and sort of thinking about distribution, it, it, it has changed. I, I think, you know, a long time ago already, Mark Zuckerberg at, at Meta already said, you know, it's, it's a battle for the, you know, home screen. A- and more and more, even recently, people are downloading less and less apps over time-
- SSSteph Smith
Mm
- BKBryan Kim
... part one. Part two is, [chuckles] it's harder and harder to get discovered in the App Store. Uh, you know, App Store ranking is, uh, is as hard to sort of, uh, get discovery now. So now you have this issue of, one, people are less willing to download brand-new things, and two, even if they sort of kinda heard about you, it's, like, harder to get discovered. So I, I think part one of the consumer side, the, the platforms have, [ts] uh, for lack of a better word, maybe I can call it ossified, where there are two distribution platform, Google Play and, and Apple Store, great, and they just distribute apps. And people re-download ton of apps, they retry a lot of things, but brand-new things, not so much, or certainly less than before. So now you have this, uh, conundrum of, like, okay, like, it's just harder to break through the noises. And we, we talked a little bit about, uh, especially Kieran talked about, you know, maybe AI is a, is an accelerant for retention, maybe less of an acquisition. I, I, I think that's, that's correct, and that's interesting, where also we have a lot of these, like, incumbents, right?
- 18:51 – 22:03
Can you get ahead of the incumbents?
- BKBryan Kim
Like, especially in the consumer side, incumbents come with incredible moats. They already have the network effect. They already are synced to everything. They already have login for everything. They already have all your data. They know what you bought. They, they h- they know you. So you talked about how do you, how do you stay ahead? It's very, very, very difficult, actually. Even if you have a clever hack, all these companies come up with incredible new consumer products a- and they enter the zeitgeist. And through entering the zeitgeist, they're able to solve the, you know, first order question, how do I break through the noise and get distributed initially, and have more people to try it out? That alone is a feat. That's incredible. If you have highly retentive product on top of that, legendary. That's amazing. Fantastic. And all these, all these, uh, product that we talked about did have that. Now the question is, okay, copying. Gina, you talked about people copying down to fonts. I, uh, I understand that so deeply. I was at Snapchat for four, four or five years, and, uh, you know, down to the font and every single, like, UI level, yes, they, they copy everything. And, um, how do you actually fight that as a new entrant? Especially when incumbents come, uh, you know, bearing a lot of these already, like, weaponries, if you will, that have retention and data and everything. It's hard, and I, and I think actually, uh, and this is, like, a sort of difficult answer, the only way really to stay ahead of that curve on that consumer side is get the lightnings keep hitting, which is so, so, so hard. I think getting, uh-
- SSSteph Smith
I mean, that sounds hard
- BKBryan Kim
... you know, the first hit is so hard. Second product hitting, so rare. Third product hitting, you're a generational company. So, uh, you know, it's sort of that innovation curve that I think is, like, very interesting. So for the companies that are newly entering and bringing, building new product, and we're on the side of the builders, right? Incumbents may have, like, all the advantage, but we wanna see new products. We wanna see new, you know, uh, hungry founders that are building for the next generation. A- and they're not happy with the current set of solutions. So the only way potentially is, you know, there are a series of things, but, like, step one boss game is, like, how do you get through the distribution noise? Step two boss game is, you know, how do you get retentive product? Great. Step three, and this is like the holy grail in my mind, is, like, how do you keep hitting that lightning, like, get, get that lightning to hit? Continue to enter zeitgeist. And for that, you know, I think it's thoughtfulness. I think it's the structure of the company. I think the culture of the founders and the team of wanting to continue to put out the best and brightest work that they have continuously versus potentially resting on laurels or optimizing for things that have worked in the past and, and thinking that their first iteration product is, is what is gonna bring them to the next, next, next level, because they may not be because the distribution advantage of, of the incumbents as well as the difficulty of getting further discovery.
- SSSteph Smith
What's an example of that? That sounds really hard. Is there an example of a company that you've seen
- 22:03 – 24:59
Examples of companies and products
- SSSteph Smith
execute on that hard mode really well today?
- BKBryan Kim
[sighs] I mean, you know, one of the last examples, uh, I've seen in, you know, one of our portfolio companies, BeReal, has, has done that too with, with certain features. But if you think about the... I'll, I'll talk about Snap since that's the name I know well and, you know, it, it's been copied so many times, what have you. You know, the first hit one may, uh, think is the disappearing images. That was revolutionary, that people thought of images as something to k- keep on your phone. It's, like, for recording and for keep- keepsakes. You turn that into disappearing thing, which made the medium itself a message, communication method. That's revolutionary, very interesting. You know, sexting was the first use case, but it, like, catapulted the company to new, new h- new heights. Great. So that was going really well. Now then the kicker is they then started to add stories, right? Stories of, you know, these disappearing photos, like, linked together that shows you a day and time in your life in a passive way, but also goes away. Revolutionary in that w- in that sense. Then that to me is a second zeitgeist hit, hit that enabled the likes of, you know-
- SSSteph Smith
Which by the way, what a great example of something being copied too, right?
- BKBryan Kim
Everyone has it now.
- SSSteph Smith
By so many different applications now.
- BKBryan Kim
Everybody has it. E- Like, like LinkedIn has stories. Like, no, no dig on LinkedIn, but, like, everyone has stories now.
- SSSteph Smith
[laughs]
- BKBryan Kim
So, you know, it, it's a medium and, like, a, it's a thing that worked really, really well, and potentially even birthed, like, the short video, uh, type thing, uh, uh, the, the trend. So to think about the second innovation, that's, like, a huge innovation. Third also is, you know, th- they didn't rest there. It was like, "Okay, we, we are seeing more and more people abandon the front, front result of the front-facing camera. What is the problem? Well, they don't like what they look like. Well, let's add dog ears O- on people's face. Let's, let's, uh-
- SSSteph Smith
[laughs]
- BKBryan Kim
Like rainbow pukes o- on people's face.
- SSSteph Smith
[laughs]
- BKBryan Kim
A- and honestly... And again, that's another thing, uh, Steph, where everyone copied. Like, everyone has lens now. Like, it's, it's very, very ubiquitous on-
- SSSteph Smith
Everyone has dog ears now
- BKBryan Kim
... on TikTok. [laughs] Uh, you know, puking rainbows, blue eyes, what have you. But these augmented reality effects, uh, are, are now prevalent in consumer products. So this is one example where I think each subsequent hits have essentially catapulted the company to new heights, and that, I know from inside, was very difficult, very long-term, with several bets going at the same time. Uh, a- and be- kind of being very thoughtful of what to kill and what to put out there. So it's that system of innovation, it's that hunger and continues- continuous path that I think is, is very important. That speed and hunger and being able to, like, implement all that at a fairly large and established company, I think is a very difficult thing. So I think there's a cultural aspect. I think there's a founder's mentality of always wanting to be ahead of the curve, always implementing and sort of, uh, looping in the new products that the users are looking for.
- 24:59 – 28:38
How do you foster a growth culture?
- SSSteph Smith
How do you foster that culture, I think especially in 2023, where maybe budgets aren't as big, maybe some of the talent you had before is not used to that austerity or that, that idea of having to ship really quickly, maybe spend less money and just figure it out?
- KFKieran Flanagan
I've talked to a lot of companies this year that were C, D public. I feel like a lot of founders are actually excited to get back to shipping. Like, I, like, I think we went through this ballooning of companies during COVID, [laughs] and everyone was like, "Wow, like, I don't really know-"
- SSSteph Smith
[laughs]
- KFKieran Flanagan
"... how this company even works anymore."
- SSSteph Smith
Yes.
- KFKieran Flanagan
And we need to try to get back to, like, fundamentals. Uh, and how do we actually iterate and ship fast? But I think what really is exciting in tech is, like, getting back to the reason that people were excited to get into tech, like certainly I was as a failed software engineer, is, like, to do work. [laughs] Like, like, like not to, like, figure out how to, like, coordinate hundreds of people, but I actually like to get back and do work and ship things. And I think the sh- the faster you ship, the more you learn. So I think it comes from the founder. Like, I guess as a long-winded way to say, like, I think you'll have some founders that embrace this, and actually at, at the heart, they actually thrive in the kind of chaos. They actually enjoy this period of time, especially, like a lot of founders who are building with AI, I've met lots who are like, "This is the best time to be a founder, because we have no idea how this is gonna go." And they love that. They don't... They love, like, not knowing what the end result is, rather than just tweaking the dials and trying to eke out little bits of growth each and every day. And that trickles down from them, right? They, they set the tempo, and it's up to the rest of us to up level to meet that bar.
- GGGina Gotthilf
This comes from two places. One, as, as Kieran said, from the founder, so from the top. And I think that what the, the founder can do is come up with artificial deadlines. For example, we have to launch in September because we're doing an event for 4,000 people, and that's when we need to launch, and that's it. Or like at Duolingo, we'd be like, "Oh, you know, we told Apple that we're actually gonna make this sprint, and now that's, that's there, so we just have to do it." And so suddenly it's not, like something that, like, can be pushed, because there's this external deadline. A lot of times it was artificial because you kind of create it, but now it's set in stone. So I think you can help from that perspective. And the other one I think is actually creating a culture from the very practical point of view of, like, a process. Like, for example, sprints, you know? So you have, like, two-week sprints, and that's sort of the cadence at which things happen, and maybe that's the cadence at which you're doing A/B testing. Making sure that you are prioritizing as part of that sprint, and that you actually have... That you're not just shipping to ship, because then you can just, like, spray and pray. But you need to, like, really be learning from everything that you're shipping and, and iterating. So that has to be part of the process, whether it be retrospectives or whether it be having accountability, like our, our product team at Latitud, um, has a, a show and tell every two weeks, and we're... And sort of the whole company is there expecting to see what's evolved. Um, at Duolingo, we had a practice of making sure that every experiment had a proper write-up in the beginning, with, like, all of the hypotheses and what we actually expected.
- SSSteph Smith
Mm-hmm.
- GGGina Gotthilf
And then, like, two weeks later, to be able to come back and then look at all of those, because otherwise we'd be running around thinking about the next test, and we'd forget to go analyze, think about what we learned, and apply. So I think that all of those, you can sort of have little levers that create the culture from a practical standpoint, so that you can set and forget, and not have to, as a founder, keep watching and seeing if people are, are moving fast and, and, you know, and iterating.
- SSSteph Smith
It's so funny you mention the artificial deadlines, because I was, uh, I was thinking about this recently, about how, you know, when you go through college, you have exams, you have projects that have due dates. And then when you enter the workforce, especially over the last few years, you have those, but they feel very, very gray. And so I think it's a, just a funny acknowledgement about how sometimes that works in the workforce. But, um, you know, you spoke to experimentation. How do you, how do you think about
- 28:38 – 34:20
Experimentation
- SSSteph Smith
that in, you know, in 2023? Should companies, especially when things are tighter, should they be leaning more into experimentation? 'Cause it's like, okay, we gotta figure this out. Like Kieran said, we don't know where AI's going. Or should they be really drilling down on, you know, maybe the one or two channels that they know work?
- KFKieran Flanagan
I always think of, like, your growth initiative as a portfolio of bets, and your portfolio is, like, very similar to, like, how you think about investing. You wanna have a spread across things that you have a high degree of confidence in. And the thing that you have a high degree of confidence in is where you have historical context to say, we've done something similar before, and it will likely work, and I can measure that against, like, what's the potential upside? But you definitely wanna take some things that are, like, more my speculative guess. Now, all my speculative guess, in terms of investing from 2020 to 2022, are all down by 80%, so they definitely do lose. I've a lot of- I've lost a lot of money.
- SSSteph Smith
[laughs]
- KFKieran Flanagan
Uh, but in terms of your growth portfolio, you wanna take those big swings. And I think one of the things that happened, to your point, Steph, like that phenomenon of, like, this is kind of a deadline, but it's not really a deadline.
- SSSteph Smith
Fake deadlines.
- KFKieran Flanagan
That definitely is... Like, that had, that definitely... Like, I've been in tech for a while. That definitely was not always the case, and became the case when tech was ballooning. And I think it's good to get back to actually, like, this stuff truly matters, and hitting these dates truly matter. But I think the other thing that we've got away from is, like- Having people in the company who will take risks, who have deep conviction a- about things, who will take risks, who will, like, say, "Hey, we think this is the right thing to do. Give me a couple of people, and I'll either, either prove this at weekends, or nights, or, or, or evenings, or... And I'll figure out if this is, like, worth doing or not. And I don't have any historical context to say this is a good idea, but, like, I've talked to customers, and I think this is the thing that's gonna work." And so I do think that we need to have experimentation across the entire spectrum, like, from, like, high degree of confidence, high impact to, like, high, like, really game changer thing, not a lot of content, uh, historical context to say this works, but, like, is a real thing worth doing.
- GGGina Gotthilf
And if you are at the point where you can have statistical significance because you have a lot of users, then I think, you know, you have to. Everything in it needs to be an experiment, even the things that you already know, like the channels that are already working. Because if it's not an experiment, then you are not looking at it from a very scientific perspective and gaining data that will actually tell you whether you can replicate this when, when you launch it to a lot of users. So I don't think that they're... But I agree 100% with, with Kieran in the portfolio approach. It's not either/or. It has to be and. Um, but I, I do believe in being as data-driven as possible. Of course, there are exceptions, and there's an art to things, but to be as b- data driven as, driven as possible, and that's where you'll find experimentation to be super important. And if you are an early stage startup, you need to take big swings. Because if you get in- in- incremental improvements and things, you're just not gonna get anywhere. You can, like-
- SSSteph Smith
Mm-hmm
- GGGina Gotthilf
... improve things 2% over and over-
- KFKieran Flanagan
Yeah
- GGGina Gotthilf
... and no one will notice you. And the way that I would approach it from a very tactical perspective is I would list all of the ideas of things that I would like to work on, whether it be, like, tried and true, true channels that I wanna iterate on or big swings, um, and I would just try to rank them based on ROI. Like, how hard is it gonna be to do this? Uh, what do I think is the return gonna be? And then just try it. And that's how I would use, like, that, that's the information I would use to make a decision about the portfolio of things we'd be working on as a team.
- KFKieran Flanagan
Yeah, just to give one example on the big bets, just to... Because I think sometimes it's like we think of these things as, like, the kinda A/B test. Like, for HubSpot, when we acquired, like, acquiring The Hustle for us was a bet, right? We had deep conviction about the, the future of B2B mark- or, like, content needing to be much more engaging, needing to be part of the everyday presence of how people, you know, interacted with content, wanted to engage with content, but we had never bought a media company before. We had never-
- SSSteph Smith
You can't A/B test that
- KFKieran Flanagan
... actually had... Yeah, we had, like, never had, like, media talent that we had to, like, figure out how to integrate to the company. Um, and we used that talent to, like, build a podcast network. You built the creator program for us, Steph. We built all of the, all of this stuff, our really incredible presence on YouTube, and we got incredible talent that I think is a real moat against most B2B companies 'cause they do not have this talent within that company. That's, like, an example of, like, a sizable bet mapped to something that we had deep conviction about. Um, so I think the, the, I think those kind of things do matter.
- BKBryan Kim
There's, like, a fun mat- matrix of, like, important and urgent and important, non-urgent, like, a two-by-two type thing. And, you know, some of the bets are, you know, both important and non-urgent, im- important and urgent. Um, but then you have these other, you know, ideas where you have this inkling, um, especially in the consumer side, it's, it's nearly impossible to predict how something will do, uh, especially if it's, like, a fairly large bet. So there's a little bit of an intuition where, you know, you sort of rank a couple of options and, like, look, like, I, I think this is a big product bet, and that, that could be one of the experiments or, or sort of projects that, that you work on. Kieran, you said something earlier where, uh, I really loved, which is, uh, at the end of the day, we're, we, we, the founders and operators do what they do because they wanna ship, ship things, and, you know, ship things that people use. And, uh, back to the fundamentals. I keep thinking this one line where, like, the calm sea, uh, never made good sailors. And so-
- SSSteph Smith
[laughs]
- BKBryan Kim
... you know, we're, we're not at a, like, a calm sea. And then, you know, what, what, what are good sailors made of? And they're, they're probably made of, like, lot of, uh, ex- ex- experience, but also knowing how to do the basics really well, really, really, really well. Uh, and sort of going back to that fundamentals, to me, is really interesting because there are two different ways to deal with this, which is like, how do I get out of this, and what do I do? And there's all these, like, tactics and hacks that you might be able to do, but there's a other point of, like, no, actually, the, the, the way we become, like, an important generational e- enduring company is to get back to the f- foundation and, and fundamentals and build stuff that people wanna use and genuinely is helpful to them.
- SSSteph Smith
Mm-hmm.
- BKBryan Kim
And, and I, and I think that constitutes some of the ways as, as how people can think about making big bets.
- SSSteph Smith
Totally. Um, maybe one topic we could just
- 34:20 – 44:43
How companies using AI in distribution
- SSSteph Smith
address directly is AI. Because on one hand, it, you know, you're all kind of speaking to this idea of the fundamentals, right? Focusing on what really matters. But then you have this big wave, like, you know, to use your sailor analogy, Bryan. It's like there's this, this big wave coming, and it might hit your ship, and you gotta figure out how to, how to integrate it, avoid it. How are you seeing companies really kind of intelligently, creatively, on more so the distribution side or thinking about how companies can grow?
- GGGina Gotthilf
But, you know, look, this is very new, and I, I, I'm very new to understanding AI. So I, you know, I'll just put that there. But I think that from a distribution perspective, there's two ways to approach AI. One, what are the ways in which we can use AI to reduce the work that we're putting into things? So, like, when we're talking about ROI, like, that's the investment, is just, like, reduce amount of time spent on things, like for example, copywriting or image generation. I am a purist when it comes to copywriting, so, like, I think that everything needs to be, like, a, you know, Pulitzer Prize winning copy. So I don't actually like copy written by ChatGPT, but it's actually, like, 75 to 80% of the way there. And so I think that you can probably use that, you know, to benefit your company in many ways, either by com- you know, helping organize ideas or coming up with a V1 of copy, and I think you may be able to do that with image and potentially video as well. So I would, I would think about how to leverage AI to reduce work, to automate things, and just make things cheaper from the, a time and, and spend perspective.
- SSSteph Smith
Gina, by the way, you gotta incorporate that into your prompt. You gotta say YouTube thumb- YouTube title written by Pulitzer Prize-winning writer.
- KFKieran Flanagan
[laughs]
- GGGina Gotthilf
Yes. I'm, I'm sure, I think, you know, maybe we'll get there. But here's why I don't think it will get there, because I think that human emotion and the ability that humans have to understand each other, and how to make each other feel, is really gonna be really hard for AI to pick up on. And so we are able to come up with just that one word or just that one punctuation that really, like, drives a message, and that's gonna be hard to replicate unless it becomes a little bit of a recipe, at which point it stops impacting people because people become a little bit numb to that. But then that drives me to the second point w- in which I think we can use AI interestingly, which is people are very impressed by AI right now, which means they're more likely to pay attention, which means they're likely to think it's funny, which means they're likely to think it's moving or shocking. And all ... Those are all things that help your brand become remembered, and ultimately, that's what marketing and brand work is. And so I would leverage AI in as much as I can to accomplish that.
- KFKieran Flanagan
When I think of AI for distribution, I kind of split it into two categories, and Gina covered one of them, which is there's a lot of people that are just using AI to replicate the things they do. And so that really is just, like, a cost saving. You know, marketing I think might move f- from, like, more of a channel domain expertise to more a generalist. Like, we have generalists in early startups. I think that will actually be true of late-stage companies, 'cause these generalists will be able to stitch together, uh, like, these kind of micro apps f- to create customer experiences by just using data sets and using AI modeling, and that will suit, like, operators and technologists.
- GGGina Gotthilf
That's great news, by the way, 'cause, like, so many of us are generalists, and I'm like, "Oh, great, I'll have a job." [laughs]
- KFKieran Flanagan
Yeah, yeah. And I think, I think if people are, like, enjoy data, enjoy learning how to use apps, and are able to, like, think like product builders, 'cause I think marketers and growth people need to think like product builders. Like, how can I use this to stitch together some sort of, build us an experience for someone, and I actually, how do I creatively do that with these apps and data? The other, the ... So I think there's, like, the replicating what we already do, and you see a lot of this with, like, outbound sales, right? Like, that's the number one use case you see right now. Hey, I can drag in all this content and use ChatGPT to create very, very cool, like, outbound sales. The stuff that I'm interested in is, like, maybe, maybe that's 90%. The 10% that is, like, what are things you can do with AI that is not possible today that helps in distribution? I'll give you, like, one quick example. So, like, if you, if you come into Zapier, because there's, like, 6,000 apps and there's, I think if you actually ... All the different, like, triggers and things, like, millions of different variations of what you could actually automate. So how do, how do, how would I ever know to figure out, like, what I can onboard you to, or, like, what you need to do when you actually sign up as a user? And the best way I could do that is, like, build an automation guide just for you, right? And today, w- the way I would do that is I would get someone to reach out, talk to you about your tech stack, figure out what role you are, and then contextualize workflows in a language you'd understand that are-
- GGGina Gotthilf
Mm-hmm
- KFKieran Flanagan
... like, contextual to your job, right? Hey, Steph, you're a marketer. You wanna generate more leads. You wanna send leads to the sales team. You wanna enrich them. You wanna make sure they can close on the customers more. Like, you understand that language, and you understand why that's valuable. Again, today, human would need to reach out, write the automation guide for you, so not economical, not scalable. We, like, one thing I've been testing is, like, we've been testing, like, ChatGPT being able to do this. Like, grab data from, like, something like Cr- Clearbit or something like that tech stack, be able to feed in your role, be able to feed in contextual information about your tech stack company, and then have that write an automation guide for you, and then actually be able to surface that automation guide, whether through sales, whether through chat, whether through all these different mediums. And it's really good, like, surprisingly good. Like, the first time I did it, I was like, boy, like, this is, like, wow. Like, this is something we cannot do at scale today. That's the 10% that I think if you do as a f- fast mover, you get this, like, little window of time before everything-
- GGGina Gotthilf
Mm-hmm
- KFKieran Flanagan
... gets commoditized and everyone just does the same stuff, that again, if you have good retention, you actually get meaningful growth there because you have that retention curve. You can get those users to stick, upsell, cross-sell, and actually, that's really, really valuable. So there's the 90% that I think most people are trying to replicate the things that we already do, but that 10%, like, is super interesting, which is what are the things we can do at scale today that we could not do previous to actually having this technology?
- SSSteph Smith
I'm smiling because, uh, I heard this quote once, uh, which is that the best growth hacks are never shared. Um, so you gotta be careful, Kieran-
- KFKieran Flanagan
I know, I should. I know, I know
- SSSteph Smith
... sharing that 10% on, on the podcast. You gotta-
- KFKieran Flanagan
I know. I need to, uh-
- SSSteph Smith
[laughs]
- KFKieran Flanagan
I'll keep the rest-
- SSSteph Smith
I'm kidding
- KFKieran Flanagan
... to ourselves.
- SSSteph Smith
[laughs]
- KFKieran Flanagan
[laughs]
- BKBryan Kim
This is true. I, I'm smiling because this is such a fun conversation, and, and, and Gina and Kieran, you both hit on, like, sort of the non-replicability of, like, human. And I'm thinking about this Nikon ad that just, like, came out a few, few days ago, which is like, "Don't give up on the real world." And, like, it has these unbelievable image of real places, and, like, a fake prompt that, like, uh, that it would generate such real image. And it, it was a very powerful message of, like, look, like, yes, you know, uh, AI can do a lot of things, but don't, don't give up on the real world. And it was very powerful, and it's creative, and, you know, can AI come up with that? I don't know. But so, like, it, it, it's, it's very interesting. The, on the consumer side, couple things. Uh, going back to your question, Steph, uh, it was like, what can the companies do to use it to your advantage? One is the willingness to try, as Gina said, is, is, is, is quite high, meaning, uh, at least for the consumers, for the first time in a while, they're willing to give it a shot. They're willing to actually download and use a product, and try it out, uh, and go through the app download and all the things, which they weren't before. So for the first time, actually, you have this window of opportunity where people are willing to give it a shot. So on a acquisition side, uh, you, you have this sort of potential window where you can appeal, uh, as, like, either a first mover or a great product to, to get a lot of sort of usage. Um, you know, Kieran shared a, a Zapier example where you could also use it, uh, very strategically to deepen your core product value. Like, why are people using the product that you have out there? And how do you actually use this new capability, uh, new wave, if you will, to further strengthen and deepen the reason why people u- use your product? And sure, you can brand it AI and make it sexy and, like, more people will be excited, what have you, but you know, I learned one thing from Snap where the, the Look 3, the, the sort of lens product, was a state-of-the-art AR product, like augmented reality product. We did not call it augmented reality for four years, and we actually implicitly banned it in, in, inside a company to call it an augmented reality because that's technology. That's not the point The point is for users to giggle and use it and have that emotion. So, as you think about, like, these new technology that are being enabled, and, and Kieran talked about the 90% and 10% net new things, but there are these, like, ways to deepen the core product value of why your product exists that I think, you know, you can call it AI, you don't have to call it AI. It could be abstracted away. It doesn't matter. If it makes the job that you do much easier in two ways, one, either take care of the rot things that you're doing in a mechanical turkey way, great, or, you know, all of a sudden deliver value that wasn't possible before because they were cost-prohibitive or net new, I think that's incredible. So, you know, people, you talked about, you know, is there a way to avoid the wave? I, I don't think so. I think it's kind of a tsunami. If you sit there, it's just gonna wash you away. So you do need to respond, and how you respond I think is important, where rather than saying, "Oh, there's, like, a new shiny thing. We're gonna bolt it on," I, I actually think it's going back to the fundamentals to say, "Hey, like, why do our product exist, and why do customers use our product every day in a, day in and day out? How do I use this new capability to actually augment that and make that even easier?" So I, I get very, very excited about, um, you know, e- e- existing companies as well as net new companies because they both now have a new thing. Why, right? Like, for existing companies, there are ways to actually deepen your moat actually and then use this product, abstract it away to make it so much more useful than before. New companies, all of a sudden you have this moment in time where people are willing to give it a shot. And in the consumer side, what I also get really excited about is there are these net new behaviors, right? I, I know, you know, we, we talked about how we'll never sort of fully rely on, you know, computers for creativity, but you know, the cost of creation has nearly gone to zero now. The, the post-production of this podcast, the actual creation, the ums and ahs and the, the eye movement, everything, you can actually pretty easily do that through AI potentially with a lot of new products out there. And then, and all of a sudden, you know, maybe you don't need a huge studio. Maybe you don't need all these amazing fancy gadgets to, to do what we do. And the bar is lower. The entry, entry point is lower, meaning that, you know, all of a sudden the marginal cost of creation overall, whether it's image or video or prompt or pod, what have you, may be quite low, which then means the new limiting factor is possibly creativity, and that's, that's a very, very fun place to be.
- SSSteph Smith
Speaking
- 44:43 – 49:11
Growth challenge: What would you do with $10K?
- SSSteph Smith
of creativity, I wanted to end this with a little bit of a challenge, uh, a prompt for the three of you. Um, you know, we talked about a lot of different things. Um, we've talked about product and distribution and how those come together. And you know, one product that I work on is the a16z Podcast. And if we think about austerity and trying to grow in turbulent times when, you know, maybe budgets aren't as high, if we had $10,000 to grow the a16z Podcast, given all the channels that you could invest in, how would you think about that? And please don't just tell me, "Build a better product," 'cause we're-
- BKBryan Kim
[laughs]
- SSSteph Smith
... working on that.
- KFKieran Flanagan
[laughs]
- SSSteph Smith
But on the distribution side, how would you use that money?
- KFKieran Flanagan
Well, from someone who has built two, tried to build two podcasts, my favorite word for podcast growth is, like, grind. It is-
- SSSteph Smith
Yeah. [laughs]
- KFKieran Flanagan
... like grind, gr- you know, 'cause there's not a lot of meaningful things that work for podcast promo. So, like, one idea... I'll give you, I'll just give you a, a wacky idea instead, uh-
- SSSteph Smith
Okay
- KFKieran Flanagan
... that may, may or may not be usable. So one of the things I would do, and this has kind of been done I guess before, but it might be a more novel way to do it, is, like, get your audience. Like, pick 10 entrepreneurs from way back in the past that are no longer with us, like all the way back to Henry Ford and all these incredible entrepreneurs. Get your audience to vote on, like, what's the number one person you would like to hear interviewed in this pod? Uh, get them to vote. Whatever the top one is, use the 10K to give to someone to create an AI version of that, like, person.
- SSSteph Smith
Hmm.
- KFKieran Flanagan
You know, it's pretty easy to create a, a deep fake version, and then you should just interview them for half an hour and, like, put that out into the interweb, and that's probably a good way to, like, get interest in the podcast through something that will hopefully get a lot of social traction.
- SSSteph Smith
I like that. Gina, Brian, what would you do with 10K?
- BKBryan Kim
I have a equally wacky idea. Uh, being of consumer mindset, I, I think one of the distributor, distribution channel that works these days is TikTok. So 10K, not, not a lot, but, uh, you know, maybe, maybe the way to do it is, uh, you know, fight, uh, find a intentionally quite controversial topic. We talk about it. Put a, uh... Use AI to splice it up so that it's, like, entertaining and, like, very easy, like, to the point. And then essentially the callout is, "Fight us. Stitch incoming. Fight us." And like, a hot take, "Fight us." And, you know, actually use that remix culture of the internet to let that sort of do what it does. And, you know, the reason why the dollar would be interesting is sometimes it's interesting to seed these things. So have, like, one or two, you know, influencer, what have you, or, like, other founders who, who, like we can, you know, invite over and, like, "Here's a piece of content. Now go debate that," and actually be pretty brutal because, like, people love a good fight. A- and put it out there and [laughs] see how that does.
- SSSteph Smith
I actually kinda love this idea. Even just the, the tag, fight us, is so strong.
- KFKieran Flanagan
It's cool.
- GGGina Gotthilf
Yes. I thought about it, and I have a very boring idea, but this is what I would do. I think that your bet here would be to try to increase your audience by looking at places where your audience isn't, but, uh, you have a huge potential audience. And for me, that would be people in older demographics that are very business savvy and have been very active their whole lives and kind of get technology, but are a little bit out of the loop and don't know what a16z is and have never heard of anything related to it. And I, I have had conversations with brilliant people in finance who are maybe, like, in their 60s, let's say, maybe even 50s, who have no idea what a16z is, and which in my world is crazy, and those people read The Wall Street Journal, and those people read The New York Times.
- SSSteph Smith
Mm-hmm.
- GGGina Gotthilf
So I would go and do s- you know, something with one of those massive publications to reach those audiences. The thing about growth is that it's not just about growing, but you have to grow in terms of, like, the right people. So one way to game your question, which is something that growth teams do all the time, is I'm just gonna go to a country where buying a user or buying a listener is super cheap, and I'm gonna go and, like, you know, do some sort of massive campaign because $10,000 goes so far in, like, Southeast Asia or, like, Latin American countries. And then just get a bunch of people to listen to a16z, but it won't actually list- matter because they're not your core audience. But that's just, you know, that would be a gameable response, which I just wanna leave here because I think, um, it's really core to growth. In order for you to actually come up with a go- good growth strategy, you have to think about how can you game this problem, and if you can easily game it, then you're looking at the wrong thing.
- SSSteph Smith
Totally. Thank you all. This was so fun. [upbeat music] Thanks for listening to the a16z Podcast. If you like this episode, don't forget to subscribe here on YouTube to get our exclusive video content. We'll see you next time.
Episode duration: 49:21
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Transcript of episode A-WcoEe6OkA
