When Should Your Startup Go Multi-Product?

1. 0:00 – 0:39

   Second product or loss of faith? The core question founders must answer

   1. MSMichael Seibel0:00

      Is the reason why you're doing this second product because you've lost all faith in the first product?

   2. DCDalton Caldwell0:05

      I think that happens a lot, and you call it a second product, but that's more of just, like, a cover story to tell your investors or to tell the world that you're abandoning your initial business. If a cover story is helpful to you, you know, use the cover story, but you should at least be honest with yourself. What is actually happening here? Like, don't lie to yourself.

   3. MSMichael Seibel0:20

      Are we a multi-product company? Yeah. [laughs] This is Dalton + Michael, and today we're gonna talk about should I build a second product? What do you think, Dalton? I'm a startup founder.

   4. DCDalton Caldwell0:33

      Yeah, so-

   5. MSMichael Seibel0:34

      I'm giving you no more context than that. [laughs]

   6. DCDalton Caldwell0:36

      Yeah. Well, the answer is yes. Uh, end of video.

   7. MSMichael Seibel0:38

      Done. Done.

2. 0:39 – 1:21

   Two starting scenarios: failing core vs breakout hit

   1. DCDalton Caldwell0:39

      Um, um, [laughs] look, this is a very common topic, um, br- that, that founders ask for advice on, where they have one thing-

   2. MSMichael Seibel0:47

      Mm-hmm

   3. DCDalton Caldwell0:47

      ... their MVP that does, like, one thing.

   4. MSMichael Seibel0:49

      Mm-hmm.

   5. DCDalton Caldwell0:49

      You know, it's widgets. They're like, "Should we sell this other thing in addition to widgets? And here's all the reasons why it's a good idea."

   6. MSMichael Seibel0:56

      Yes.

   7. DCDalton Caldwell0:56

      And in the abstract, um, I think I would need more information, but maybe just to open up the thinking, if your first product is failing, adding another failing product is usually not the thing, and maybe you should just pivot the whole company. And on the flip side, if your first product is a smash hit growing exponentially-

   8. MSMichael Seibel1:14

      Yes

   9. DCDalton Caldwell1:15

      ... and you have a really good story on why you might wanna add a second product, yeah, the answer is maybe. So that's just my very quick start. What do you, what do you think?

3. 1:21 – 1:51

   The underrated risk: winning but expanding too slowly

   1. MSMichael Seibel1:21

      On this point, I'm more Negative Nancy. I think there's two failure modes, and I think you described them perfectly. And I think what's not talked about probably enough is the failure mode of things are going well and you don't build the second product fast enough. That is a failure mode. Because I think fundamentally, startups try to basically compare themselves against their peers instead of comparing themselves against, like, the incumbents. And often when you look at the incumbent, the incumbent has a suite of products, and often if you're ever gonna compete with them, you must have a

4. 1:51 – 2:18

   Suite competition examples: Slack vs Microsoft, Notion, and the Office analogy

   1. MSMichael Seibel1:51

      competing suite. And so, you know, let's look at, like, an example of, like, Slack versus Notion, right? I think Slack never really figured out how to get this competing suite. Microsoft Teams comes, the enterprise value of Slack goes way down. Notion, on the other hand, I think sees the game and they're like... And another probably classic example would be Google Docs.

   2. DCDalton Caldwell2:11

      Yeah.

   3. MSMichael Seibel2:12

      And they're just like, "If we don't have every Office product, we're probably screwed," and that's exactly-

   4. DCDalton Caldwell2:17

      Well-

   5. MSMichael Seibel2:17

      ... correct.

5. 2:18 – 2:47

   Reality check on playbooks: incumbents weren’t multi-product at year one

   1. DCDalton Caldwell2:18

      And it's funny to even bring up Microsoft, 'cause Microsoft was obviously a one product company for many years.

   2. MSMichael Seibel2:22

      Yes.

   3. DCDalton Caldwell2:23

      [laughs] And then they started adding more, and now you don't think of it as a single product company. And Google was obviously a single product company for many years until our, our friend Paul, uh, created Gmail.

   4. MSMichael Seibel2:33

      Yep.

   5. DCDalton Caldwell2:33

      Um, but it was a single product company for what? Six years? And so it's kinda funny if you're a one-year-old startup copying the playbook of a-

   6. MSMichael Seibel2:41

      Yeah

   7. DCDalton Caldwell2:41

      ... company that's been around for a very long time.

   8. MSMichael Seibel2:43

      Yes.

   9. DCDalton Caldwell2:43

      It's like, yeah, th- they didn't even do the thing you're trying to do.

   10. MSMichael Seibel2:45

       No.

   11. DCDalton Caldwell2:45

       Why would you do it?

   12. MSMichael Seibel2:46

       No.

   13. DCDalton Caldwell2:46

       Right?

6. 2:47 – 3:39

   The VC trap: stacking small 'PMF' businesses rarely builds a great company

   1. MSMichael Seibel2:47

      So it's weird. That failure mode is so weird when it's kind of like, "Oh, we're winning," and then you realize, "Oh, no, we're competing against an incumbent and we're, like, 1% of the incumbent. We're maybe way further behind than we ever imagined, because we never let, let ourselves think that high." But I also think there's this thing that I see, especially in VCDM, where you basically have this product that's in this weird product market fit space. Like, you see descriptions like, "We have product market fit in a small market," or, "We have product market fit amongst the customers who like us."

   2. DCDalton Caldwell3:17

      There's, like, asterisks on it.

   3. MSMichael Seibel3:18

      Exactly.

   4. DCDalton Caldwell3:18

      Yeah.

   5. MSMichael Seibel3:19

      And so I see this kind of game where sometimes a VC will tell a founder, like, "Well, okay, we have this $20 million business. Let's stack another 20 million revenue and another 20 mil- And then, like, somehow if we stack enough $20 million revenue businesses together, you can IPO one day." I don't think I've ever seen that work.

7. 3:39 – 4:06

   Second product vs pivot: semantics vs substance

   1. DCDalton Caldwell3:39

      Well, with hindsight, um, you can tell stories that that worked, but generally the main product is a hit. Otherwise it's not-

   2. MSMichael Seibel3:49

      [laughs]

   3. DCDalton Caldwell3:49

      ... a second product, it's a pivot. Like-

   4. MSMichael Seibel3:51

      Yes. [laughs]

   5. DCDalton Caldwell3:51

      ... it's, it's kind of like-

   6. MSMichael Seibel3:52

      Yes

   7. DCDalton Caldwell3:52

      ... we can, we can use whatever words we want to-

   8. MSMichael Seibel3:54

      [laughs]

   9. DCDalton Caldwell3:54

      ... for, with hindsight.

   10. MSMichael Seibel3:56

       Would you ever see a situation where you've stacked 10 mediocre products together-

   11. DCDalton Caldwell4:00

       Negative

   12. MSMichael Seibel4:00

       ... versus-

   13. DCDalton Caldwell4:01

       [laughs]

   14. MSMichael Seibel4:02

       There are definitely situations where one of the second or third or fourth things-

   15. DCDalton Caldwell4:06

       Yeah

   16. MSMichael Seibel4:06

       ... blows up.

8. 4:06 – 4:28

   What good multi-product looks like: product suite expansion (PostHog)

   1. DCDalton Caldwell4:06

      I mean, the, the, the example top of mind for me is, like, PostHog is a multi-product company.

   2. MSMichael Seibel4:10

      Yes.

   3. DCDalton Caldwell4:10

      They launched multiple products pretty quick, but it actually makes sense that that's a product suite. Their initial analytics product was a hit. It worked.

   4. MSMichael Seibel4:16

      Yeah.

   5. DCDalton Caldwell4:17

      And so, and it made sense. Okay, you're using PostHog for analytics. Let's do session replay.

   6. MSMichael Seibel4:20

      Boom, boom, boom.

   7. DCDalton Caldwell4:21

      Like that-

   8. MSMichael Seibel4:21

      Yes, yes, yes

   9. DCDalton Caldwell4:22

      ... I think that's a great-

   10. MSMichael Seibel4:23

       Yes

   11. DCDalton Caldwell4:23

       ... textbook study of, like, a good multi-product setup. I'm not gonna name any names for negative stories, but we've seen a lot of those.

9. 4:28 – 4:49

   Defensive expansion: when you must broaden or someone else will (DoorDash)

   1. MSMichael Seibel4:28

      We've seen a lot of those. If you're DoorDash and you're doing food delivery well, maybe you can do store delivery. Maybe you can do grocery delivery.

   2. DCDalton Caldwell4:35

      Right?

   3. MSMichael Seibel4:35

      Yes, yes, yes, yes. And almost if you don't, someone else will, so you have to do it. So there are probably a lot more examples of companies that had an advantage and didn't go full force, right?

   4. DCDalton Caldwell4:49

      Yeah.

10. 4:49 – 6:03

    Scaling luck into durability: Zoom’s COVID surge and the suite problem

    1. MSMichael Seibel4:49

       And maybe a classic one was, I think the entire world got on Zoom during COVID.

    2. DCDalton Caldwell4:55

       Yeah, Lord knows we did.

    3. MSMichael Seibel4:56

       Yeah, yeah. Fuck.

    4. DCDalton Caldwell4:58

       [laughs]

    5. MSMichael Seibel4:58

       Yeah. Um-

    6. DCDalton Caldwell4:59

       We talk on Zoom all day, every day now.

    7. MSMichael Seibel5:00

       Exactly. And like, I mean, I think it was damn near subsidized, right? Like, the, the government was-

    8. DCDalton Caldwell5:05

       Yeah

    9. MSMichael Seibel5:05

       ... telling the schools to get on Zoom, and the da, da... And so as a startup founder, that's a situation where you'd just be like, "Man, like..." I don't wanna frame it that way, but, like, how lucky in a negative-

    10. DCDalton Caldwell5:18

        How can we parlay this into, like, an enduring business that when the lockdowns are over we still have a business?

    11. MSMichael Seibel5:23

        Yes.

    12. DCDalton Caldwell5:24

        I think they tried, but as a still Zoom user, I don't think they succeeded-

    13. MSMichael Seibel5:28

        No

    14. DCDalton Caldwell5:28

        ... in getting people to adopt Zoom for non-Zoom use cases-

    15. MSMichael Seibel5:32

        No

    16. DCDalton Caldwell5:32

        ... I think is a fair way to put it.

    17. MSMichael Seibel5:34

        And I think what's tricky is, like, as a founder, it's so hard, 'cause this thing's working so well, to say, "I gotta move my attention to something else." And actually, I think it's really, what's really scary is, like, unfortunately Zoom is a classic office suite product, and we've encountered this so many times. When you're building an office suite product, you're competing with Microsoft Office and Google S- Like, even if you don't think you are.

    18. DCDalton Caldwell5:59

        Yep.

    19. MSMichael Seibel6:00

        If your ambition isn't to go try to become the next office suite...

11. 6:03 – 6:34

    Hockey stick that didn’t compound: Peloton as a cautionary example

    1. DCDalton Caldwell6:03

       I think my other example of that one real quick is Peloton, where they had- Face-melting growth

    2. MSMichael Seibel6:09

       Yes

    3. DCDalton Caldwell6:09

       And they tried a bunch of stuff. I don't think any of that stuff worked, and their stock price is not doing great. But it was like, you know, they, they realized they needed to sell more things. Um

    4. MSMichael Seibel6:17

       Yeah

    5. DCDalton Caldwell6:17

       But ultimately, it was sort of a one-trick pony type deal.

    6. MSMichael Seibel6:21

       And I think that's so sad because I think a lot of founders are like, "Those are success cases."

    7. DCDalton Caldwell6:26

       Yeah. Well, and again, they are, and, like, kudos to the founders, like, hooray, but they didn't parlay the, the hockey stick into, like-

    8. MSMichael Seibel6:34

       Yes

12. 6:34 – 7:55

    How Google got multi-product right: Gmail → broader suite (plus acquisitions)

    1. DCDalton Caldwell6:34

       ... an enduring, continuing hockey stick. They, they unfortunately had a crash. On the other hand, though, um, Gmail, obviously created by our, our friend Paul, um, that worked, and he actually faced a lot of internal bullshit of not, people not wanting to release it. It would be a distraction and, you know, you should listen to the story from him.

    2. MSMichael Seibel6:53

       Mm-hmm.

    3. DCDalton Caldwell6:53

       Um, that's probably a different video, but they got it out, and that was a hit s- second product, and is still, like, the dominant email client, and I think is, like, one of the most popular products in the world to this day.

    4. MSMichael Seibel7:06

       Yes.

    5. DCDalton Caldwell7:06

       Google Docs is a monster.

    6. MSMichael Seibel7:08

       Yes.

    7. DCDalton Caldwell7:08

       YouTube is a monster. Hey, welcome to YouTube, right?

    8. MSMichael Seibel7:10

       Yes.

    9. DCDalton Caldwell7:10

       That's a Google product. Like, holy cow, did Google succeed at going multi-product.

    10. MSMichael Seibel7:15

        Well, and think about this 'cause, 'cause I've heard PB's story, and there was definitely this resistance, but once they figured out Gmail was working, it felt like the rest of their office suite happened-

    11. DCDalton Caldwell7:27

        Yeah

    12. MSMichael Seibel7:27

        ... overnight. Like, I remember in my early startup days just switching from Office to Goo- And it was just like, I remember before Sheets came out, and it was like, "Thank God there's Sheets." Like, "Thank God there's presentations." And-

    13. DCDalton Caldwell7:37

        And a couple of those came from acquisitions.

    14. MSMichael Seibel7:39

        Yes.

    15. DCDalton Caldwell7:39

        Like, everyone forgets this, but it wasn't, that wasn't all in-house stuff.

    16. MSMichael Seibel7:41

        No.

    17. DCDalton Caldwell7:41

        I believe Sheets was an acquisition, right?

    18. MSMichael Seibel7:44

        I think Presentations and-

    19. DCDalton Caldwell7:45

        Yeah

    20. MSMichael Seibel7:45

        ... I think Docs were. Google understood that email is part of the suite.

    21. DCDalton Caldwell7:50

        Yeah.

    22. MSMichael Seibel7:50

        And, like, I mean, my co-founders back in the day were building the calendar, right?

    23. DCDalton Caldwell7:55

        Yeah.

13. 7:55 – 9:27

    Final diagnostic: are you truly multi-product, or just pivoting with a cover story?

    1. MSMichael Seibel7:55

       'Cause Gmail came out, and it was like, I think they realized very quickly, [laughs] it's part of the suite. It's impressive how good Google was at even resisting that move and then taking advantage of it when it worked. The last thing I will say, though, which I think we wanna really highlight, is this, should you be pivoting instead, right?

    2. DCDalton Caldwell8:16

       [laughs]

    3. MSMichael Seibel8:16

       Like, is the reason why you're doing the second product because you've lost all faith in the first product?

    4. DCDalton Caldwell8:22

       I think that happens a lot, and you call it a second product, but that's more of just, like, a cover story to tell your investors or to tell the world that you're, that you're-

    5. MSMichael Seibel8:29

       Yeah

    6. DCDalton Caldwell8:29

       ... abandoning your initial business. And again, if that, if a cover story is helpful to you, you know, use the cover story. But you should at least be honest with yourself. What is actually happening here? Like, don't lie to yourself.

    7. MSMichael Seibel8:39

       Are we a multi-product company?

    8. DCDalton Caldwell8:40

       You know, you wanna, you can-

    9. MSMichael Seibel8:41

       Yeah. [laughs]

    10. DCDalton Caldwell8:42

        You can, you can tell the story to whoever you want.

    11. MSMichael Seibel8:43

        Yes.

    12. DCDalton Caldwell8:43

        You know, it's your-

    13. MSMichael Seibel8:44

        Yes

    14. DCDalton Caldwell8:44

        ... it's your, it's your life, founder, but-

    15. MSMichael Seibel8:45

        Yes

    16. DCDalton Caldwell8:46

        ... don't lie to yourself.

    17. MSMichael Seibel8:47

        Yeah. No, I mean, and, and we have this example at Twitch where, you know, our old Justin TV product was helping to fund Twitch, but I wouldn't say that we were a two-product company. [laughs]

    18. DCDalton Caldwell8:57

        [laughs]

    19. MSMichael Seibel8:57

        Like, that would be many steps too far. There was one primary product. So yeah, I agree. That's the kinda awkward thing that's not talked about enough, is that sometimes things get to 20 million in revenue and stop growing.

    20. DCDalton Caldwell9:11

        Stop.

    21. MSMichael Seibel9:11

        And so, um, just be honest about that. All right. Great chat. [upbeat music]

Episode duration: 9:27