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Lenny's Podcast

The hierarchy of engagement | Sarah Tavel (Benchmark, Greylock, Pinterest)

Sarah Tavel is a General Partner at Benchmark and sits on the boards of Chainalysis, Hipcamp, Rekki, Cambly, and Medely.

Sarah TavelguestLenny Rachitskyhost

Dec 27, 20231h 50mWatch on YouTube ↗

Summaries, chapters, transcripts, and FAQs on this page are made by uListen, not YouTube.

CHAPTERS

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Chapter summaries

Cold open: Markets as “currents,” not oceans
Sarah frames how she evaluates markets: not by static size, but by momentum and change dynamics that can pull a company forward. She contrasts markets with natural tailwinds (“currents”) versus those that require heavy lifting to make progress.
- •Markets should be evaluated by momentum and rate of change, not just TAM
- •“Plank of wood on a river” metaphor: strong currents make execution easier
- •Founders should look for dynamics that make something newly possible
- •Why Benchmark can care less about raw market size
Sarah’s background and why Lenny broke his “no VCs” rule
Lenny introduces Sarah as a product-minded investor with deep operating experience from Pinterest. He previews the two core frameworks they’ll explore: the Hierarchy of Engagement and the Hierarchy of Marketplaces.
- •Sarah is a partner at Benchmark focused on consumer + marketplaces
- •Former first PM at Pinterest; led discovery surfaces and engagement work
- •Episode roadmap: two frameworks for building durable startups
- •Setting expectations: deep, product-and-growth-oriented conversation
Why the Hierarchy of Engagement exists: escaping vanity metrics
Sarah explains how seeing founders pitch “up-and-to-the-right” download/MAU charts pushed her to create a clearer engagement lens. The goal is to determine whether a product is building enduring value—beyond superficial growth charts.
- •Allergic reaction to vanity metrics like MAUs/downloads
- •Founders over-index on growth-hacking-era dashboards
- •Engagement—not sign-ups—is the foundation of endurance
- •Framework created to force focus on the real drivers
Engagement Level 1: Define the core action (and design everything around it)
Sarah defines the ‘core action’ as the foundational user behavior that proves understanding and predicts return. She explains why clarity on this action guides onboarding (NUX), experimentation, and what “active” truly means.
- •Core action examples: Facebook friending, Pinterest pinning, Evernote note creation
- •Active user ≠ just opening the app; it’s completing the core action
- •Picking the right core action shapes roadmap and prioritization
- •Activation/NUX success = getting users to complete the core action
Engagement Level 2: Retention—products must get better with use
Sarah shares her retention test: the product should improve as users use it and create ‘mounting loss’ if they leave. She uses Pinterest personalization and Evernote’s data lock-in as examples of increasing value over time.
- •Retention test: ‘better with use’ + ‘more to lose by leaving’
- •Pinterest ‘Picked for You’ feed: personalization powered by pinning
- •Repository/identity concept: saved content makes leaving costly
- •Evernote as a retention case study (and the role of export friction)
Engagement Level 3: Self-perpetuation—turn user energy into loops
Sarah describes how great products recycle user ‘kinetic energy’ into growth and re-engagement. She highlights network effects and other loops, plus why some products fail to achieve self-perpetuation (or even break under scale).
- •Network effects as the strongest self-perpetuating force
- •Growth loops: sharing, SEO/metadata, collaboration, invitations
- •Re-engagement loops: notifications triggered by other users’ actions
- •Failure modes: Evernote lacks loops; Houseparty/Clubhouse overwhelmed by push-notification dynamics
The importance of focus, the anonymity trap, and how to improve retention
Sarah and Lenny discuss why focus is the central operating advantage for early consumer products. They dig into anonymity as a retention/community risk, then get practical: measure cohorts honestly and avoid spreading early growth too thin (e.g., across geographies).
- •Focus is essential because there’s no universal playbook
- •Anonymity vs pseudo-anonymity: persistent identity enables accruing benefits
- •Anonymity can invite bad behavior and weakens mounting loss
- •Retention advice: track cohorts (weekly), look for plateaus/smile curves, and avoid diffuse acquisition
What founders often get wrong: overbuilding before nailing activation
Sarah explains a common early mistake: founders copy the ‘full expression’ of mature products and overload new users. The fix is ruthless prioritization around the core action so first-time users quickly reach the ‘aha’ moment.
- •Early products become too complex and hard to understand
- •Over-featured onboarding diffuses attention away from the core action
- •Activation and repeated core action usage are the real goal
- •Framework as a forcing function for prioritization discipline
Core action examples and finding your North Star Metric (Pinterest + YouTube)
Sarah walks through Pinterest’s bottom-up and top-down analysis that confirmed pinning as the North Star (weekly active pinners/repinners). She shares a surprising YouTube insight: over time, ‘subscribing’ became more core than ‘watching,’ linking engagement to both sides of the network.
- •Pinterest method: rank actions by % of users and propensity to return
- •Top-down test: does the action prove the user understands the product’s purpose?
- •YouTube shift: core action evolved from watching → subscribing
- •Core action often maps to the company’s North Star Metric
Who should use the engagement hierarchy—and when it matters most
Sarah clarifies the primary audience: consumer founders, product leaders, and teams shaping a roadmap under uncertainty. The framework helps diagnose what’s missing and where to invest next when growth stalls or feels noisy.
- •Best for consumer (especially social) products, but generalizable
- •Use it to decide the ‘big rocks’ for the next phase
- •Creates a shared language for prioritization across teams
- •Helps avoid chasing vanity metrics and surface-level growth
Marketplace hierarchy overview: GMV as a vanity metric and the 3-level path
Sarah introduces the Hierarchy of Marketplaces and explains why GMV can mislead the same way MAUs do. She outlines the progression: focus on a constrained wedge, tip the market via scalable loops, then pursue dominance—because profitability correlates with being decisively #1.
- •GMV can steer founders into the wrong race (like MAUs in consumer)
- •‘$1M GMV’ milestones aren’t comparable across strategies or market shapes
- •Marketplaces are hard: two businesses (supply + demand) that must align
- •Hierarchy: Level 1 focus → Level 2 tipping → Level 3 dominance
Marketplace Level 1: THIMBLE focus, ‘happy GMV,’ and minimum viable happiness
Sarah argues ambitious marketplace founders should concentrate their ambition like a laser on a small ‘thimble’ market. The goal is not raw GMV, but ‘happy GMV’—transactions that create real buyer/seller satisfaction and repeat behavior—until the marketplace reaches minimum viable happiness.
- •THIMBLE: constrained wedge beats boiling the ocean
- •Scarcity constraints: capital and founder attention
- •DoorDash vs Postmates as focus vs breadth case study (suburbs vs major cities)
- •‘Happy GMV’ and ‘minimum viable happiness’ as the real early success criteria
Thumbtack as a counterexample—and signs you’re ready for Level 2
They discuss Thumbtack’s national, multi-category approach and why infrequent purchase cycles make demand-side ‘default’ behavior hard to establish. Sarah then describes the qualitative signals of a ‘white hot center’—a core persona retaining and actively reporting delight.
- •Infrequent use cases (e.g., plumbers) weaken habit formation and demand capture
- •Cornering the buy side is critical but harder with low-frequency needs
- •‘White hot center’: a core segment retains and repeatedly comes back
- •Preference for ‘Sean Ellis PMF question’ over NPS for gauging fit
Marketplace Level 2: Tipping the marketplace with growth loops + happiness loops
Sarah defines tipping as the moment scaling becomes easier—when the boulder starts rolling downhill. She illustrates tipping with Reki’s supplier pull, then breaks down the two loop categories that create scalable momentum: growth loops and ‘happiness loops’ that maintain quality as you expand.
- •Tipping requires market saturation—another reason Level 1 focus matters
- •Reki example: suppliers push onboarding lists once enough orders flow via Reki
- •Growth loops: buyer→buyer invites (Hipcamp), seller→seller referrals (Uber drivers), supply bringing demand (Etsy cards)
- •Happiness loops: ranking and reputation systems to reward great suppliers and churn bad ones
When tipping fails: markets that don’t tip, B2B homogeneity, and competitive context
Sarah cautions that not all markets are structurally susceptible to tipping. They explore key blockers like supply-side concentration, homogeneity in B2B/labor marketplaces, and entrenched incumbents that change the feasibility of tipping in a given geography or category.
- •Not all markets tip; you must test structural conditions
- •Supply concentration can prevent hungry suppliers from leaning in
- •B2B/labor marketplaces can suffer from homogeneous supply (e.g., Mechanical Turk) limiting flywheel benefits
- •Competitive context matters: NYC delivery dynamics vs suburbs; incumbents and culture affect tipping odds
Marketplace Level 3: Dominating the market—repeatable playbooks, expansion vectors, and GMV traps
Sarah explains that Level 1 and 2 produce a repeatable playbook; Level 3 is about scaling it without losing the ability to win decisively in each market. She covers expansion vectors (deepen, expand use cases, expand markets), why underestimated markets can be strategic, and how chasing GMV can erode trust (Etsy example).
- •Dominance strategy: fewer arrows, more wood—win markets decisively
- •Expansion vectors: deepen within market, expand use cases, then expand geographies/categories
- •Underestimated markets can be easier to tip due to low early competition (Airbnb/Etsy/Hipcamp)
- •GMV-chasing warning: Etsy’s trust erosion from mass-produced goods creeping in
Currents, applying frameworks beyond marketplaces, opportunity hunting, and lightning round wrap-up
Sarah returns to the ‘currents’ mental model for market selection and debates timing nuances (e.g., stablecoins vs broader crypto). She then generalizes the lessons to open source and SaaS (focus + happiness), shares three ways to find marketplace opportunities (plus how LLMs may expand supply), and closes with a lightning round and how to reach her.
- •Markets as currents: ‘why now’ and momentum matter more than static size
- •Frameworks apply broadly: solve a constrained need extremely well, then expand
- •Three marketplace opportunity paths: fix low-NPS wedge, pursue ignored niche, change the atomic unit of supply
- •Lightning round: book recs, Tesla product love, leadership motto, rugby stories, and contact info

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