How to Set Goals Before Product-Market Fit

Dalton Caldwell 0:00 So do you think that your product is helping them in any way in their business, in their, like in their goals? And that- they give, they give me that look. They're like-

Michael Seibel 0:09 [laughs]

Dalton Caldwell 0:10 Is that what products are supposed to, like-

Michael Seibel 0:12 Yeah

Dalton Caldwell 0:12 ... I thought we were supposed to be growing 7% week over-

Michael Seibel 0:14 Yeah. [laughs]

Dalton Caldwell 0:14 Like... This is Dalton + Michael, and today we're gonna talk about setting goals as a pre-product market fit company. So Dalton, we just launched, and I know that, um, if we're not growing 7% week over week, we're failing, right?

Michael Seibel 0:35 I mean, let me, let me-

Dalton Caldwell 0:36 I'll just start you with a banger. [laughs]

Michael Seibel 0:38 Uh, let me attack, let me attack this from a different direction.

Dalton Caldwell 0:41 [laughs]

Michael Seibel 0:41 Let's say you used to work at Google or Meta-

Dalton Caldwell 0:46 Mm-hmm

Michael Seibel 0:46 ... or whatever, and you know a lot about product and analytics.

Dalton Caldwell 0:50 Yes.

Michael Seibel 0:50 And you're used to, like, working in those environments, and you get into YC.

Dalton Caldwell 0:54 Yeah.

Michael Seibel 0:54 And you launch, and you come in, and you wanna show, show me some graphs, and you wanna tell me about your AB test and all this stuff. And I'm like, "How many users do you have?" And they're like, "Three."

Dalton Caldwell 1:08 Yeah.

Michael Seibel 1:08 And I'm like, "Okay, never show me these graphs again." Like, graphs are a waste of time.

Dalton Caldwell 1:14 [laughs]

Michael Seibel 1:15 Measuring weekly growth when you have zero users-

Dalton Caldwell 1:19 Like, they're like, "We have three users."

Michael Seibel 1:20 ... are projecting.

Dalton Caldwell 1:20 "And they all churned."

Michael Seibel 1:21 [laughs] Yeah.

Dalton Caldwell 1:22 So what you're saying is you have zero users.

Michael Seibel 1:24 Yes.

Dalton Caldwell 1:25 Let's not talk about weekly growth.

Michael Seibel 1:27 Yes.

Dalton Caldwell 1:27 And, and so where I'm going with this, and I know we're on the same page, is that the tactics and skills that you have working at a post-PMF company have no relation-

Michael Seibel 1:39 No

Dalton Caldwell 1:39 ... to tracking progress and goals in an early-stage company. If anything, I noticed that college kids that knew nothing about analytics were sometimes ahead of the game 'cause I- they didn't have to unlearn all this crap-

Michael Seibel 1:49 No

Dalton Caldwell 1:49 ... of, like-

Michael Seibel 1:51 No

Dalton Caldwell 1:51 ... how they were trained at Meta to establish if a product is working or not, right?

Michael Seibel 1:54 Yes. Well, you can run an AB test on 1% of Utah and, like-

Dalton Caldwell 1:57 Right. Like at Meta-

Michael Seibel 1:58 [laughs]

Dalton Caldwell 1:58 ... they have all these great... You know, it's great, and if you work at Meta, you know, good for you that you have-

Michael Seibel 2:01 Yeah

Dalton Caldwell 2:01 ... this stuff.

Michael Seibel 2:02 Yeah.

Dalton Caldwell 2:02 Does not help you when you have no users.

Michael Seibel 2:04 No, no. [laughs] But I think you're, I think you, you, you dodged the, the gotcha question.

Dalton Caldwell 2:08 Go ahead.

Michael Seibel 2:09 I think the gotcha question is, I think growing 7% week over week is great or horrible depending on how you do it. I think the genius of that advice is that when you're small, growing 7% week over week is not actually-

Dalton Caldwell 2:25 Hard

Michael Seibel 2:26 ... adding that many users.

Dalton Caldwell 2:27 Yeah.

Michael Seibel 2:27 Right? I think the other genius of that advice is that it's a lot harder to grow 7% week over week if you're churning all your users every week.

Dalton Caldwell 2:35 Sure. You and I both know, and this is where we're going, what people do is they choose metrics that cheat.

Michael Seibel 2:39 Yes.

Dalton Caldwell 2:39 And they're like, "Oh, we're not gonna do, uh, DAU. We're gonna use cumulative users that ever signed up, and we're not gonna worry about if they're using the pr-" Like, they're basically founders.

Michael Seibel 2:48 Yes.

Dalton Caldwell 2:48 I think the term is good-hearting. What they'll do is just, like, find a way to doctor the metric so that they hit it.

Michael Seibel 2:54 Because-

Dalton Caldwell 2:55 And all you're doing is screwing yourself.

Michael Seibel 2:56 Well, because the, the i- because it's like, I think that growing 7% week over week is a result of doing a lot of things right.

Dalton Caldwell 3:03 Yeah.

Michael Seibel 3:03 Whereas they think it is the cause of the company-

Dalton Caldwell 3:06 Amen

Michael Seibel 3:06 ... working, and it's just like, th- ah. Like, when you mix those things up, you really screw up. The number of times I talk to a founder where I'll be like, "These users do you have, how many of them spent more than five minutes in your pro-" Actually, no. The first question, because it's a gotcha, it's like, "To get value out of your product in a week, let's say, how much time should your users be spending in the product?" And they'll always be like, "Oh, you know, like an hour a day. Like, this is a core-

Dalton Caldwell 3:32 Yeah

Michael Seibel 3:32 ... workflow. Like, this is really important to them. Da, da." And then I'll be like, "Great, so how much time are they spending in the product?" And there's always, like, two answers I love. One, "We're not measuring."

Dalton Caldwell 3:41 And you're like, "Oh, we'll have to get back to you." [laughs]

Michael Seibel 3:42 Yeah. It's like, you only have, like, six u- like, you don't know? Y- and then two, "Oh, it's like an hour a week." And you're like, "So you said that to get value out of the product, they have to be using it this much. Are they getting value?" "I don't know." Then, you know, I like to pile on. It's like, "So do you think that your product is helping them in any way in their business, in their, like in their goals?" And that- they give, they give me that look. They're like...

Dalton Caldwell 4:09 [laughs]

Michael Seibel 4:11 Is that what products are supposed to, like-

Dalton Caldwell 4:12 Yeah

Michael Seibel 4:13 ... I thought we were supposed to be growing 7% week over week. [laughs]

Dalton Caldwell 4:15 Yeah.

Michael Seibel 4:15 Can we get back to the point?

Dalton Caldwell 4:16 And, and again, where we're going with this is you do this line of thinking, and you know where we end up, which is we have zero users.

Michael Seibel 4:23 Yeah. [laughs]

Dalton Caldwell 4:23 Like, like basically you, you go through this line of questioning-

Michael Seibel 4:25 Yeah

Dalton Caldwell 4:26 ... and, and-

Michael Seibel 4:26 We have a graph like this, and we-

Dalton Caldwell 4:28 And it's like-

Michael Seibel 4:28 We're like, "Uh." [laughs]

Dalton Caldwell 4:30 We actually, we have zero users.

Michael Seibel 4:30 We got it. We got it. [laughs]

Dalton Caldwell 4:31 And you're like, "Okay, well, I'm glad we had that little chat." And, and so where this goes is-

Michael Seibel 4:37 [laughs]

Dalton Caldwell 4:38 It's t- yeah, it's so true. Um, where this goes is you don't worry about the graph when you have zero users.

Michael Seibel 4:44 Yes.

Dalton Caldwell 4:45 And you're not helping anyone.

Michael Seibel 4:46 No.

Dalton Caldwell 4:46 And you're just, you just wanna make something that a few people think is awesome.

Michael Seibel 4:52 Yes.

Dalton Caldwell 4:52 And you don't need a graph to know that now. You're like-

Michael Seibel 4:54 'Cause you're talking to them

Dalton Caldwell 4:55 ... do you have three people-

Michael Seibel 4:57 Yeah

Dalton Caldwell 4:57 ... that love your thing?

Michael Seibel 4:58 Yeah.

Dalton Caldwell 4:58 Do you have five people that love your thing? And that, and I always think you should start with that.

Michael Seibel 5:02 Yes.

Dalton Caldwell 5:02 Don't even worry about graphs and charts-

Michael Seibel 5:04 No

Dalton Caldwell 5:04 ... and weekly growth. Just get something that someone loves, right?

Michael Seibel 5:08 It's almost impossible, in my experience, to have something that 100 people love that's, like, somehow not growing.

Dalton Caldwell 5:14 Yep.

Michael Seibel 5:14 You're either lying about the love, or you're not looking at the growing. Like, it's really, really hard. And I would say that the sad truth of the 7% is that, like, sometimes it takes time to get someone to love it. Sometimes it takes time for you to figure out what the hell to build that someone would love.

Dalton Caldwell 5:31 You know, we, we speak about him a lot, but our colleague, uh, Paul Buchheit, created Gmail.

Michael Seibel 5:36 Yeah.

Dalton Caldwell 5:36 And this is how he created Gmail, just in case you haven't heard this story, friends. Um, he built it for himself, and he was the first user.

Michael Seibel 5:42 Yes.

Dalton Caldwell 5:42 And then he gave it to other people internally at Google. He would only add one or two people a week, and he would ask them what he needs to add to, to Gmail.

Michael Seibel 5:49 Yeah.

Dalton Caldwell 5:49 And so it went through this state for months and months and months where it had less than 100 users, but he wanted to build something that people loved.

Michael Seibel 5:56 What I love about that story is by the time Gmail was beating- Right? It wasn't even open distribution. It had hundreds of people who loved it.

Dalton Caldwell 6:07 They lo- And they, again, love is the word.

Michael Seibel 6:09 Yes.

Dalton Caldwell 6:09 They weren't like, "Oh, I guess I could take it or leave it."

Michael Seibel 6:12 It was their email client [laughs] .

Dalton Caldwell 6:12 They ran their life off of it.

Michael Seibel 6:14 Yes.

Dalton Caldwell 6:14 And so when you think about that this is the most popular consumer product in the world, I use it every day, you use it every day, how did that product come to life?

Michael Seibel 6:21 Yes.

Dalton Caldwell 6:22 It was someone that wasn't trying to get a hockey stick graph-

Michael Seibel 6:25 Yes

Dalton Caldwell 6:25 ... within two seconds of building it. It was someone that took the time and the care to make something that a small number of people loved-

Michael Seibel 6:34 Yes

Dalton Caldwell 6:34 ... and, and w- were willing to run their life on. And again, I can't emphasize this enough, this is how you build great products.

Michael Seibel 6:40 But Dalton, I have to fundraise in N months, and you know that investors love graphs. It's gonna take too much time. It's gonna take too much time to build something that people like. You're not solving my immediate problem, which is how do I build something that investors will give money to [laughs] ?

Dalton Caldwell 7:02 Yeah. I think that's just the classic self-defeating mentality, where you, what you're saying, founder, is that you're building something for investors and not for users.

Michael Seibel 7:12 Build something investors love.

Dalton Caldwell 7:13 Yeah, like-

Michael Seibel 7:14 That's our model [laughs]

Dalton Caldwell 7:14 ... basically you just ex- you just made the pitch-

Michael Seibel 7:16 Yeah

Dalton Caldwell 7:17 ... that your actual customer is an investor.

Michael Seibel 7:19 Yeah.

Dalton Caldwell 7:19 And nothing good will come of that. Again, like-

Michael Seibel 7:21 Yeah

Dalton Caldwell 7:21 ... this is, these are not the droids you're looking for.

Michael Seibel 7:23 No.

Dalton Caldwell 7:24 If you start thinking this way, that your entire startup is a product made to convince investors, you will not win.

Michael Seibel 7:31 You will not win. Well, okay, no, no, no, no, no, no, no. You will win in the short term.

Dalton Caldwell 7:36 Yeah.

Michael Seibel 7:36 I bet you, I, I, I... If you're smart and somewhat capable, you could probably win in your seed round. But what I love about that seed round, what's the winning percentage of ultimately winning when you raise your seed round?

Dalton Caldwell 7:50 It's not, it's, I mean, it's better than zero, but, you know, it's just-

Michael Seibel 7:53 [laughs]

Dalton Caldwell 7:53 [laughs] Yeah.

Michael Seibel 7:56 2% chance?

Dalton Caldwell 7:57 Yeah.

Michael Seibel 7:57 Okay, so you just took your odds down to 98% chance of failure. What if it's, you spent that same amount of time actually interacting with your customers-

Dalton Caldwell 8:06 Right

Michael Seibel 8:06 ... learning what they needed, learning whether any of your hypotheses are right, learning how to make their businesses better, their lives better.

Dalton Caldwell 8:12 And how many stories do we have of founders that did a poor job of fundraising a demo day, but they had the half million dollars from YC, and they just powered through, and then a year later, they followed this advice we're giving-

Michael Seibel 8:25 Yeah

Dalton Caldwell 8:25 ... and they're doing phenomenally well.

Michael Seibel 8:27 Yeah.

Dalton Caldwell 8:27 Way better than their batch mates that were actually... They weren't making something that people want, they were making something for investors, making something investors want. And-

Michael Seibel 8:35 Competing for the highest price.

Dalton Caldwell 8:36 Right?

Michael Seibel 8:36 Yeah.

Dalton Caldwell 8:37 There's nothing good comes of that, friends.

Michael Seibel 8:39 Well, and to your point about, like, that's habit-forming in a negative way. Like, you don't want your culture-

Dalton Caldwell 8:44 No

Michael Seibel 8:45 ... "Oh, we're just gonna worry about investors now, but after we raise money, then we'll worry about the-"

Dalton Caldwell 8:49 You know, yada, yada, yada.

Michael Seibel 8:50 [laughs]

Dalton Caldwell 8:50 We'll talk to users. Yeah, whatever, guys.

Michael Seibel 8:51 Yeah [laughs] .

Dalton Caldwell 8:52 Um, let me give you another example. Stripe is a company that we talk about a lot at YC. Phenomenal company. It's w- 100 billion dollar company, you know, just-

Michael Seibel 9:01 Yeah.

Dalton Caldwell 9:02 What a lot of people don't understand is, like, they didn't launch for something like two years. They weren't in the batch growing 7% week over week. And like, no, I mean, that's not how they built Stripe, man. It was invite-only. It was beta-only. They built it for themselves for a side product, and they only added customers super slow. And I, again, it was two years plus before they publicly launched, right?

Michael Seibel 9:30 Yep. And I remember back then, um, 'cause they pitched us at, at Justin TV to use it, and, and it, it wasn't good enough.

Dalton Caldwell 9:38 Yeah.

Michael Seibel 9:38 Like, we didn't use it. And it turns out to make a payments product that, like, we had a global audience. Like, to make a payment product that could accept payments around the world, that you don't just MVP the-

Dalton Caldwell 9:49 You can't do that in two weeks.

Michael Seibel 9:49 Yeah, no [laughs] . Doesn't, no. Doesn't.

Dalton Caldwell 9:53 And, and they did all this amazing stuff, where we talk about the Collison install-

Michael Seibel 9:57 Yeah

Dalton Caldwell 9:57 ... where they would come and sit down with you at your computer and help you implement Stripe into the payments flow.

Michael Seibel 10:03 Yeah.

Dalton Caldwell 10:03 They were that customer-obsessed. I was actually an early Stripe customer at my startup.

Michael Seibel 10:08 Okay.

Dalton Caldwell 10:08 We were probably the first couple hundred customers.

Michael Seibel 10:10 Yeah.

Dalton Caldwell 10:10 And I remember Patrick would send me messages in Google Talk all the time.

Michael Seibel 10:16 Mm.

Dalton Caldwell 10:16 And so I had my new friend, Patrick Collison-

Michael Seibel 10:19 Yes

Dalton Caldwell 10:19 ... um, because I was an early customer, I'd probably talk to him, like, every day.

Michael Seibel 10:23 Yeah.

Dalton Caldwell 10:24 And he'd be like, "How's it going?" Like-

Michael Seibel 10:25 Yeah

Dalton Caldwell 10:25 ... like we were an important customer to them.

Michael Seibel 10:26 Yeah.

Dalton Caldwell 10:26 And how cool was that for me, as a consequence of being an early customer, to feel like my payments provider cared about me that much.

Michael Seibel 10:33 Yes.

Dalton Caldwell 10:33 That I had a relationship with the CEO.

Michael Seibel 10:35 Yes.

Dalton Caldwell 10:35 And that he really cared if we were happy. And if something went wrong, I could just-

Michael Seibel 10:40 Boom

Dalton Caldwell 10:40 ... I could just, you know, message him.

Michael Seibel 10:42 Yeah. No, I think that that is a superpower that founders never wanna tell. And here's what I'll say. Th- this will be my closing point. Pre-AI, it was hard to do research on how companies won, right? Like, you have to go through articles, and you have to listen to a bunch of podcasts. Like, if you wanna hear the early, early stories of Stripe, it might take a couple hours, and maybe that's too hard. And certainly, if you wanna hear the early stories for 50 companies, that, that's, that's a lot of research. It's a lot easier to accept, like, the pop knowledge. And I'll tell you, like, with, with AI, research is easy now. You can hear about the companies that you like. You can learn about what they were like when they were small. And I just, like, I challenge you to take whatever assumptions you have about early-stage startups and test them against your top-

Dalton Caldwell 11:29 Yeah

Michael Seibel 11:29 ... 10 favorite companies.

Dalton Caldwell 11:30 How long did it take for them to launch from when they created the company? How long did it take them to get 100 users? How long did it take to get them to a million in revenue?

Michael Seibel 11:38 Yeah.

Dalton Caldwell 11:38 And you're gonna be shocked-

Michael Seibel 11:40 Shocked

Dalton Caldwell 11:41 ... that the real stories are not what you think they are.

Michael Seibel 11:43 And, like, that doesn't mean you have to do it the same way, but it's just like, hey, just get that stuff in your head. 'Cause I, I... You see that graph where it's, like, the companies that are fastest to 100 million in revenue. It's like, is that the race that we're... That's not the race, guys.

Dalton Caldwell 11:57 It's long-term value, right? Like, it's-

Michael Seibel 11:58 Yeah

Dalton Caldwell 11:59 ... that's the ultimate thing we're trying to do here, is to create enduring value to help customers and to build enduring businesses and not- ... flash in the pan type stuff, right? Or at least that's why I'm here. Um-

Michael Seibel 12:10 Well, and not only that, even if you're o- like, let's just say you're agnostic.

Dalton Caldwell 12:16 Yeah, you're like, "Either way." [laughs]

Michael Seibel 12:17 Either way, right? Like, this is the way that is a higher likelihood of success. Like, so like, yeah, you can like it because, like, yeah, you like helping people, or you can like helping people 'cause, like, that's gonna get you richer. Like, either way- [laughs]

Dalton Caldwell 12:30 Yeah

Michael Seibel 12:30 ... like, you get to the same answer.

Dalton Caldwell 12:32 And the inventory you should do, person watching this video, is to be really honest with yourself. Do I have any users that love my product? And I would use that word. How many love my product? If they don't, what can I do to cause them to love my product? And just break it down and think about it that way, instead of just staring at graphs all day, 'cause that's, that's dehumanizing to your users. Again, if you're, if you're Meta, I get it, they stare at graphs all day.

Michael Seibel 12:58 Yeah.

Dalton Caldwell 12:58 But if you're dehumanizing your user base and staring at graphs, and you're not thinking about the people that you're serving and whether they love you or not, y- you're hurting yourself.

Michael Seibel 13:07 So I have a controversial question to ask you at the end here. We started this with how we should set goals as a pre-product market fit company. Have we answered that question?

Dalton Caldwell 13:16 I think it's do you have more than zero users? So again, this is what I would do at YC, is do you have one real user with no asterisks. You know, like-

Michael Seibel 13:24 Yes.

Dalton Caldwell 13:25 [laughs] Okay, then I would say, "Okay, do you have 10?" And then I would say, "Do you have 50?" And then I would say, "Do you have 100?"

Michael Seibel 13:30 Yes.

Dalton Caldwell 13:30 And if you could get 100 users or customers that love you, that is an awesome goal, and that's when I would start to graduate to graphs. Like, that's-

Michael Seibel 13:39 Yes

Dalton Caldwell 13:39 ... that's kind of the point where you're like, "Okay, now let's start talking about graphs."

Michael Seibel 13:42 Yes. And I think the only thing I would add is, like, I love talking to startups about how do we define love, especially early.

Dalton Caldwell 13:47 Yeah.

Michael Seibel 13:47 Because, like, so we don't cheat it. And the second thing that I like to think about is that is there any way you can measure the benefit that you're providing the customer, right? Like, you worked with Whatnot. In a marketplace, it's really easy, right? The GMV is the benefit. [laughs]

Dalton Caldwell 14:02 Yeah. Well, their sellers were making so much money.

Michael Seibel 14:05 Yes.

Dalton Caldwell 14:05 It was life-changing.

Michael Seibel 14:06 Yes.

Dalton Caldwell 14:06 So yeah, with Whatnot, someone would start selling on Whatnot-

Michael Seibel 14:09 Yes

Dalton Caldwell 14:09 ... and you could see how much money they were making, and it was like, "Wow!"

Michael Seibel 14:12 Yeah.

Dalton Caldwell 14:12 These people are, like, earning a crazy living on this thing.

Michael Seibel 14:15 Yes.

Dalton Caldwell 14:15 It was obvious they were providing value.

Michael Seibel 14:17 I mean, DoorDash, similar example. Like, you wake up and DoorDash is a third of your restaurant's revenue. Okay. Like, you might have opinions, but for us at Twitch, like streamers, they could quit their jobs. That's the thing that I wish I said more in years past, was that, like, can some part of love, can you quantify the actual benefit of the customer, as opposed to just time with you or that kind of stuff? Like, if we could put a dollar amount on the benefit of the customer, now we're cooking with gas. All right. Good chat. Good luck with your goals.

Dalton Caldwell 14:50 Sounds good. Thanks, Michael. [upbeat music]