Lecture 4 - Building Product, Talking to Users, and Growing (Adora Cheung)

1. ACAdora Cheung0:03

   [clapping] Thanks for having me. Um, so today I am going to be talking about how to go from zero users to many users. Um, uh, I'm just assuming that you have many great ideas in your head at this moment and, um, you're kind of thinking about what the next step is. So I wrote this up, um, early this morning, and a lot of this is based off of mistakes I've made in the past. Um, so as Sam mentioned, I went through YC in 2010, and, uh, spent a number- three years basically going back and forth, pivoting a bunch of times, starting over a bunch of times, um, and have learned a lot about what not to do if I were to start another startup after Homejoy, um, if that should ever happen. And, uh, so a lot of it comes from failure and just telling you about what you shouldn't do, um, and kind of making generalizations of what you should do from that. Uh, so just a reminder that this is sort of, you know, all advice you should take as directionally good guidance. Like, it's all, it's, like, it's kind of in the right direction, but every business is different, ev- you're different, I'm not you. And so, um, just take everything with, you know, that in mind. Um, so since this is a college course, you know, when you s- start a startup, you should basically have lots of time on your hand, um, to concentrate on the startup. And I'm not saying you should, you know, quit school or you should quit work. What I'm saying is you should have a lot of time, compressed time in a, in a row, um, really dedicated to immersing yourself in the idea and, and developing problems or developing the solutions to the problem you're trying to solve. Um, so for example, if you're in school, you know, it's better to have one or two days straight of per week on working on your idea versus, you know, spending two hours here and there every single day during the course of the week. Um, it's sort of like, I think this is engineering class so, uh, it's sort of like coding. Like, there's a lot of context switching and, and just being able to really focus, um, uh, uh, really, really focus and immerse yourself is very, very important. So like I said, I sort of first when I wrote this up was thinking what is, uh, what are, what are the things that most pe- some people do, or most people do that, um, is not the correct way to do a startup? And, um, sort of the novice approach I think is what you see up here, which is, you know, I have this really great idea. I don't wanna tell anyone about it. I'm gonna build, build, build, build. I'm gonna maybe tell one or two people and then I'm gonna launch it on, you know, I'm gonna launch it on TechCrunch or some- somewhere like that. Um, then I'm gonna get lots of users. But what really happens is because you did not get a lot of that feedback and stuff like that, you know, maybe you get a lot of people to your site, but, um, no one sticks around because you didn't get that initial user feedback. And then, you know, if you, you know, if lucky enough you have some money in the bank, you might go buy some users, but sort of it just whittles out over time and, and you just give up. And it's a sort of a vicious cycle and, you know, I actually did this once, and I did this while I was in YC, and that was, you know... Like, when I went through YC, I didn't even launch a product. Like, I didn't even launch on TechCrunch, which is the thing that you should definitely do. Um, and, and so you don't want to ever get into that cycle because, uh, you'll just end up with nothing good. So the next thing is, uh, you know, you have an idea, and you should really think about, uh, what the idea is really solving. Like, what is the actual problem? And so their problem statement should, you should be able to describe it in one sentence. And then you should think, how does that problem relate to me? Am I really passionate about that problem? And then you should think, okay, it's a problem I have. Is it a problem that other people have? And sort of verify that by, you know, just going out and talking to people. Um, one of the biggest mistakes I've made is, you know, we started, uh, my co-founder and I, who is also my brother, he and I started a company called Pathjoy in 2009, 2010. And our goal was basically to, you know, we, we had two goals in mind. One is to create a company that made people really happy and, uh, a- a- and, um, create a company that was very, very impactful. And a good proxy for that is to just create a huge, big company. And so we thought, okay, here's the, h- here's sort of what we're gonna solve is, you know, make people happier. And our f- we first went to the notion of who are the people that made people happy, and we, you know, we came up with life coaches and therapists. Um, so it seemed kind of obvious to just create a platform for life coaches and therapists. And what happened as a result, though, was that, you know, when we started using the product ourselves, we, we, you know, we're not cynical people by any means, but life coaches and therapists are just not people we would use ourselves. Um, it was sort of useless to us. And so it wasn't even a problem we had, and certainly wasn't something we were super passionate about building out, yet we spent, you know, almost a year trying to do this. And so if you just start, you know, from T equals zero, just like think about this before you even build any product, I think you can save yourself a lot of headache down the road, um, from doing something you don't wanna do. So say you have a problem and you're able to state it. Um, where do you start? Like, how do you think of solutions? Um, so the first thing you should do is think of what the industry that you are getting yourself into. Um, whether it's big, whether it's huge, you should really immerse yourself in that industry. And there's a number of ways to do this. One is, you know, to really become a cog in that industry for a little bit. And so it might seem a little counterintuitive to do this because most people say, you know, if you really wanna disrupt an industry, you should really not be this, you know, player in it. You should, you know, it, it... You know, someone who's spent twenty or thirty years in an industry probably does, you know, sit in their ways and is just used to the way things work and really can't think about what the inefficiencies are or things that you can, quote unquote, disrupt.But however, as a noob, like coming into the industry, you really should take, you know, one or two months just really understanding what all the little bits and pieces of the industry are and how it works. Um, because it's when you get into the details, that's when you start seeing things you can exploit, things you can really ... Th- things that are really, really inefficient and provide, you know, huge overhead costs that you can cut down. Um, and so an example of this is, you know, when we started Homejoy, when we, we, we decided to go ... We started with the cleaning industry. And when we started, you know, we just were cleaners ourselves. And we started to clean houses. And what we found out really quickly was that we were very bad cleaners. Um, and so as a result, you know, w- we said, "Okay, we gotta learn more about this," and we went to buy books. Um, and, uh, we bought books about how to clean, which helped maybe a little bit. We learned a little bit more about cleaning supplies. Um, but it's sort of like basketball, you know? Y- y- you, you can watch and you can learn, or you can watch and read about basketball, but you're not gonna get better at it if you don't actually, you know, train and, you know, throw, throw a basketball around and throw into the hoop. And so we decided one of us basically had to go and learn how to clean. And so we went, um, or get trained by, you know, a professional ... Sort of some sort of professional training program if that existed. And that meant we actually went to get a job at a cleaning company itself. And the cool thing was that, you know, I learned how to clean, um, from, you know, training for the few weeks that I was there at the cleaning company. But the even better thing was that I learned a lot about how a local cleaning company worked. And in that sense, you know, I learned h- why a local cleaning company could not become huge like Homejoy is today. Uh, and that's because they have ... You know, they're pretty old school, and they have a lot of things, um, just, just from anywhere from booking the customer to, um, optimizing the cleaner's schedules, uh, was just done very inefficiently. And so there's ... So, so, so, so when you go ... If you are in a situation like mine where, you know, there's a service, there's a service element of it, you should go and do that service yourself. You know, if your work, if your thing is related to restaurants, you should become a waiter. If, if, if it's related to, you know, painting, you know, become a painter, and kind of get in the shoes of your customers, um, from all angles of what you're trying to build. Uh, the other thing is there's also a level of obsessiveness that you should have with it too as well. Like, you should, you should be so obsessed to know, like, what everybody in the space is doing. And it's things like, you know, writing a list of all the potential competitors or similar types of companies, um, Google searching it, and clicking on every single link and reading every single article from one ... From, like, s- search result number 1 to 1,000. You know, I, I found, um, all potential competitors, big and small, and if they were public, I would go read their S1s. I would go, I would go read all their quarterly financials. I would, you know, sit on the earnings calls. Um, there's ... You know, most of these, you don't get much out of it, but there's just th- these golden nuggets that you'll find once in a while. And you c- you won't be able to find that unless you actually go through the work of, you know, getting all that information in your head. Um, so yeah, you should become an expert in the industry. Um, there should be no doubt, uh, when you're building this that, that you are the expert so that people trust you when you're building this product. The second thing is identifying customer segments. So, you know, ideally, at the end of the day, in the endgame, you've built a product or a business that everybody in the world is using. Uh, but realistically, in the beginning, you kind of want to corner off a certain part of the c- the customer base so that you can really optimize for them. And that's just ... You know, it's just about matter of focus and a matter of, you know, just, you know, catering towards whether it's teen girl, teenage girls, or whether it's, you know, soccer moms. Um, you'll just be able to, you know, like I said, focus a lot on, on their needs. And lastly, um, before, you know, before you even s- s- create the product, before you put code down, you should really storyboard out the ideal user experience of how you're, how you're gonna solve the problem. Um, and that, and that's not just meaning, you know, the website itself. It's meaning, you know, how does the customer find out about you? You know, whether it's ... You know, it could be through an ad or through word of mouth or whatever. So they find out about you. They come to your site. They learn more about you. What's all that text say? What are you communicating to them? To the actual, when they sign up for the product or they purchase the service, what are they actually getting? To after they've finished using the product or actually, after they've finished using the service, what's ... You know, there's, there's sort of like an evaluation period. Like, they leave you a review or, um, or, or they leave comments or whatnot. And just being able to, uh, uh, go through that whole flow and, and visualize in your head, like just envision what the perfect user experience is. Um, and then put it down on paper, and then put it into code, and then start from there. Um, so you have all these ideas in your head now. You kind of know what the core customer base you wanna go after is, and you know, like, everything about the industry. What do you do next? So you start building your product. Um, and, you know, the common phrase that most people use these days is, like, you should build a minimal vial- the MVP, minimal viable product. And I underline viable because I think a lot of people skip that part, um, and they just go out with a feature, and then the whole user experience in the very beginning, um, like, is flat. So minimal viable product, viable product pretty much means, you know, what is the smallest feature set that you should build, um, to solve the problem that you're trying to solve?And, um, I think if you go through the whole storyboard experience, you can kind of figure out that very quickly. Um, but again, you have to be talking to users, right? You have to be, potential users. You have to be seeing, uh, what i- what exists out there already and what you should be building to solve their immediate needs. Um, and the second thing is, before you put in, things in front of a user, you should really have your product, a simple, you know, product positioning down. And what my, what I mean by that is that, you know, you should be able to go to, you know, a person, and you should be able to say, "Hey, you know, this does X, Y, and Z," within a sentence. Um, and so for example, you know, at Homejoy, we started off with something actually super complicated. We're like, "We're an online platform for home services. We start it with cleaning, and you can choose, you know, blah, blah, blah, blah." And it, it just went off for paragraphs and paragraphs. Um, when we would present, and we went to, you know, potential users to come on our platform, they'd just get, kinda get bored after the first f- first, first, uh, first few sentences. And so what we dis- what we found out was that, you know, we, we really need this one-liner. The one-liner is very important, and it kinda describes the functional benefit of, of what you do. You know, in the future when you're trying to build a brand or whatnot, you should, you should, you know, be able to describe, you know, what are the emotional benefits and stuff like that. But if you're starting with no users, you really need to tell them what they're gonna get out of it. So we simply, after we changed our positioning to get your place cleaned for $20 an hour, then everyone got it. Um, and we were able to get, you know, users to, users in the door that way. So you have a MVP going out there. Now, how do you get your first few users to start trying it? Um, so your first few users should be, you know, the obvious people, the people that you're connected with. Uh, you should use it obviously. Uh, you and your co-founder should be using it, your mom and dad should be using it, your friends and coworkers should be using it. Beyond that, um, you wanna get more user feedback. And so you... And I've listed here kind of some of the obvious places to go to, and depending on what you're selling, you know, you can take your pick of the, pick of the draw here. Um, so online communities, um, there's, you know, on Hacker News now there's the #showhn. That's a great place, especially if you're building tools for developers and things like that. Local communities, so if you're building consumer product, you know, there are a lot of influential, um, local community mailing lists, um, uh, especially those for, you know, um, parents. Um, so those are places you might wanna hit up too. Uh, okay. So when you go to, uh... By the way, Homejoy, we actually tried all of these. So, um, we used it ourself. That was fine 'cause, I mean, we were our own cleaner, so that was pretty easy. Um, and then our parents lived in Milwaukee, so we were based in Mountain View, so that didn't work. Friends and coworkers are kinda, like, in San Francisco and elsewhere, uh, so we didn't have too many of them use it. So we're actually f- um, ended up in a dead end of, um, not being able to convince many people to use us in the beginning. Uh, so what we did was, because we're in Mountain View, some of you guys might know on Castro Street, they have, uh, street fairs there during the summertime. And so we'd go out and basically chase down people and try to get them to book a cleaning, and almost everyone would say no. Uh, until one day, um, we just took advantage. You know, it was a very hot and humid day, and what we noticed was... You know, and this is like in any, uh, any fair. People, you know, there might be arts and crafts and things like that, and random people will, you know, gravitate towards that. But everybody gravitates towards the food and drink area, especially on a hot day. So what we did was, okay, we need to, we figured we need to get in the middle of that. And by getting in the middle of that, we just took water bottles, froze them, and then we started handing out free, free bottles of water that were cold, and people just came to us. We, I think we basically guilt-tripped people into booking cleanings. Um, but the proof in the pudding was that I figured most of these people were guilt-tripped into doing it, but, uh, when they went home, they didn't cancel on us. Well, some of them did, but, uh, a m- majority of them did not. And so we felt, like I, I thought, "Okay, that's good. I gotta go clean their houses, but, uh, at least, you know, there's something we're actually solving here." Um, so, uh, a- and you know, I don't sugge- I think showing up to fairs or, I know another startup in the last batch, I forgot their name right now, but they s- uh, they, they, they showed up, they, they, they were selling shipping-type products or trying to replace shipping products or, or the concept of mailing stuff. And so they would show up to the US Postal Office and just, like, find people who were trying to ship products and just take them out of line and try to get them to use your product and have them ship it for him. Um, so you just have to go to places where people are gonna sh- really show up and, you know, your conversion rate is gonna be really, really low. But to go from zero to one to three to four, um, these are kinda things you, um, might have to do. Okay, so you got some users using you. Now, what do you do with all these users? Um, customer feedback. So one, the first thing you should do is make sure there's a way for people to contact you, so support@homejoy.com. Um, ideally, there's a phone number. Um, and, uh, if you put, hook up a phone number, one really good idea is to, um, make sure that, uh, you have voicemail or something like that so you don't have to be picking it up all the time. Um, but in any case, a way for people to get inbound pe- or to, to get inbound feedback is good. But really what you should be doing is going out to your users and talking with them. You know, get away from your desk and just get out and do the work. It's, it seems like a slog and it's going to be a slog, but this is where you're going to get the best feedback ever for your product. And this is gonna teach you on what features you need to completely change, get rid of, or what features you need to build.And so one way to do this is to send out surveys, you know, to get reviews after they've used the product. Um, this is okay, but generally, you know, people are only gonna respond if they really love you or they really hate you, and you never get, like, the in between. Um, so kind of get the in between, not get all the extremes, is to go out and actually meet the person that is using your product. And, um, it's not a good idea to... You know, I've seen people go out, meet the user, and they sit there, and it's like a laboratory, and it's, it's like an inquisition almost, and you're kind of just, like, poking and poking and poking them, like, "Why don't you do that? Why don't you do that?" That's not going to give you the best results. What you should really do is make it into a conversation. Get to know them, get them to feel comfortable, because you wanna get them at a level where they are, they feel like, you know, they should be honest with you to, to help you and, and, and improve, improve things for you. So I found that actually taking people out for drinks and stuff like that was a very good way to do that. Um, not sure if all of you are old enough to do that, but you can take them for coffee. Um, so another way, another thing you should be tracking is, um, how are you doing in general at, from, like, the macro perspective. And one way to do that i- the best way to do that is, um, by tracking customer retention. That is, the number of people that came in the door today, how many are coming back tomorrow, the next day, and so on and so forth. Um, usually over time you're kind of looking at, you know, monthly retention. So, you know, people who came in the door today, are they still using it next month, and so on and so forth. The problem with that metric is that it's, you know, it takes forever to collect that data, and you don't have, sometimes you don't have a month or two months or three months to, you know, to, to figure that out. So a good leading indicator is actually, um, collecting reviews and ratings, like five-star, four-star reviews, or collecting some notion of NPS, which is net promoter score. Um, so you're basically asking them from a rating from zero to 10, um, how likely are they to recommend you to a friend, and calculating the NPS. And so over time, what you'll see is as you're building in new features, you should be able to see that the reviews or the retention is going up over time, which means you're doing a good job. If it's going down, you're doing a bad job. Um, and if it's kind of staying the same, that means you probably need to go out and figure out what new things you, you, you should be building. Um, the other thing is... I'll get to the qualitative thing, um, later. But the one thing you should be wary of is, um, the honesty curve, which is some people will just lie to you. Um, so I was gonna just, just do... So I mean, this is like degrees of separation from, from you, and this is like level of honesty. Like, so here it's, here, this is your mom. This is, like, your friends of friends. And here's, like, random people. So I don't know if you can all see this. But, um, so your mom is going to be, you know... They, she shouldn't use your product, but she's gonna be proud of you anyway. Um, and so she'll, like, maybe be honest, like, this much, and your friends will, you know, they'll be pretty honest with you and give you feedback 'cause they care about you. By the way, this is assuming it's a free product that you're giving them.

2. SPSpeaker22:09

   [laughs]

3. ACAdora Cheung22:10

   And then over time, like, as you get more and more random pe- these people don't even know who you are, um, it doesn't go like this really, but it kind of goes like this, uh, where people don't care about giving you feedback. They just like, "Okay, here's a survey," tut, tut, tut, tut. Um, and so you should take this into consideration when getting user feedback. Now, let's say you make, you pay. It's a paid product, right? Well, let's just do this in green. So the paid, you know, your mom is gonna be, like, down here. Like, she's just gonna lie to you and say, you know, she's just gonna feel sorry and say, "This is a great product, of course." Um, but then you, kind of it goes like this, right? Which is to say that, you know, your friends are kind of gonna give you the right, um, they're, they wanna support you and give you the right feedback. But it's actually these random people out here that, you know, if, if they, if they really don't think what they paid for was worth it, they're gonna really tell you, um, because, you know, it's money out the door. And so this is another way of saying you're gonna get the best feedback, like, this is obviously, you know, down here, you're gonna get more feedback, um, if you just make someone pay for it. So that's not to say, you know, you should, you know, the first time out make people pay for it, but it's to say that you should very... If you're gonna build a product that you're gonna eventually need to, you know, they're gonna pay for, for the, for the software or for the hardware or whatever, you should do that, get to the point where you can do that very, very fast. Um, because then that's when you get the real meaty stuff to help you in the future of how you can get more paying users in the door. All right. So you're getting a lot of feedback, and what do you do before you la- officially launch the product? Um, so what you wanna do is you always want to be building fast, right? And you want to be optimizing for this stage of growth. That is, you know, you, you might have 10 users at this point. Don't-- There's no point in trying to build features for the point when you have a million users, right? You want to optimize for the next stage of growth, which is gonna be 10 to 100 users. Like, what are the features you really need for that? And, um, just go with that. Um, someti- And, and basically on this slide is just many ways of stating that notion. Manual before automation. Um, one of the things that I found when building a marketplace is that process is very, very important, um, over time as you scale.But you need not try to automate everything and create software to just, you know, you know, have robots just run everything. What you really should do to understand what you should build is to manually do it yourself. Um, and, and an, an example of this is, um, when we started taking on cleaning professionals onto our platform, we would have them, um, appl- we, we, we would ask them a bunch of questions, um, over the phone, and then in person we'd ask them a bunch of questions, too. And then they would go to a test clean, and then they would, you know, um, get onboarded to our platform if they were good enough. Uh, and so this took a l- doing all this question askings for that many candidates, you know, we had about a, a 3 to f- 3 to 5% acceptance rate, and so you can imagine all the people we were talking to in the beginning of the funnel that, that never even made it onto the platform. But what happened over time was that we learned certain questions, um, that we were asking, uh, were, that were indicators of whether they're gonna be a good or a bad, um, performer on the platform. We, um, through just, like, data collection and just, you know, looking at, looking at everything, um, we could just a- ask on an online form. So that's when we put on... put in an online application. They could apply, and then we would ask them maybe several other questions in an in-person interview. Um, so it's... If you try and automate things too fast, then you run into this problem, potential problem of, you know, not being able to move quickly on trying to iterate, you know, with things like questions on an application and stuff like that. Um, and the third point here is temporary brokenness is much better than permanent paralysis. Uh, by that what I mean is, you know, perfection is irrelevant during this stage. Um, you should, when you get to the next stage of growth, like, what you're trying to maybe perfect in this one stage is probably going to not matter anyway. And so do not worry about all the edge cases when you're building something. Just worry about the generic case of who your core user is gonna be, and then as you get bigger and bigger and bigger, the volume of those edge cases will increase over time, and you'll want to, you know, build for that. And lastly, beware of the Frankenstein approach, which is, great, you talk to all these users, they give you all these ideas, you know, the first thing you're gonna wanna do is go build every single one of them and then go show them the next day and, um, make them happier. Uh, you should definitely listen to user feedback, but when someone tells you to build a feature, you shouldn't go build it right away. What you should really do is, you know, get to the bottom of why they're asking you to build the feature. It's usually... Usually, what they're suggesting is not the best idea, but what they're really suggesting is, "I have this other problem that you've either created for me while using the product," or, you know, "I really need this problem solved before I'm ever going to pay to use this product." And so figure that out first instead of piling on a bunch of features, um, which then hides the problem altogether. So you have, uh, so, so, so you have a product that you're ready to ship, and, um, so some people at this point will continue building their product and not ship it at all. And, um, I think the whole idea of being stealth and, you know, perfecting the product to, to no end is, um, is the idea that, you know, im- uh, imitation is, um, is, is cheaper than innovation in, in terms of time and, um, and money and capital. And so I think everyone should just always assume in general, like, there's gonna be... If you have a really good idea, no matter when you launch, someone's gonna, someone's gonna be, you know, someone's gonna fast follow you, and someone's going to execute, um, as hard as they possibly can to catch up with you. And so there's no point in holding out on all that user feedback that you can get by getting a lot of users, um, because you feel like, you know, you feel paranoid that someone's gonna do this to you. Um, and I hate to keep harping on it, but this is things I see today with founders. This is something I went through as well. Um, a- and I think unless you're, unless you're building something that requires hundred- like, tens of millions of dollars just to start up, there, there's really no point in, in waiting around to launch your product. So say you have something that you feel ready to get lots of users on. Um, so what do you do at this point? So I'll... I'm looking at my time. Um, so-

4. SPSpeaker29:37

   20 minutes.

5. ACAdora Cheung29:38

   20 minutes? Okay. So I will go over, um, various types of growths in the next slide. Um, but the one thing to note here, early on when you are trying to get, um, when it's just you and your co-founder and maybe, like, couple other people building, um, you're not gonna be, uh, you know, create a team just for growth. It, it's gonna be one person and one person only. And so you need to really focus, and you need to, you should only... You're gonna be tempted to try, like, five different strategies at one time, but really what you should do is take one channel and really execute on it for an entire week and, and just focus on that. And then if that works, continue executing on it until it taps out. If it doesn't work, then just move on. Um, by doing this, you will feel more certain that, uh, that, that, that, that channel that you were working on, that initial hypothesis is wrong. Um, you'll be, you know, than if you tried only working a third of your time on it over the course of, you know, three or four weeks. Um, so learn one channel at a time. Second is always be-It, when you find channels that work, you find strategies that work, always be iterating on it. You can potentially give it to some- like, create a playbook and give it to somebody else to iterate on it. Um, but these channels always change. You know, anything from Facebook ads to, you know, even Google ads to, you know, the, uh, the, the distribution channels, um, the, the environments that you don't control change all the time, and so you should be always iterating and optimizing for that. And lastly, um, f- in the beginning, you're probably n- when you see a channel that fa- fails, you, you know, just get rid of it and go on and move on. There's many other things to try. But over time, go back to those channels and, um, and look at it again. So, and, and, and what I mean by that as an example is, in the beginning at Homejoy, we had no money. Um, so when we tried to do, um... We tried to buy con- users from, um, Mary Maid. Or, not from Mary Maids, f- that's just an example of a competitor. We tried to buy Google ads, um, to get users in the door quickly. And what we found was that, um, Mary Maids, Molly Maids, all these other national companies, they had more money than us. They were making a, a lot more money on the job than us, and so they were able to pay for users at a much higher, um, at a much higher CAC, a much higher, um... They were able to acquire them at a much higher cost than us. And so we couldn't afford that, and we had to go to another channel, which turned out to be something else. Um, but today, you know, we make more money on the job. We're much better at certain t- things, and so we should probably revisit the idea of buying Google ads and buy, you know, going to the SDM channel. Um, and so what, that's what I mean by that. And the key to all this is creativity. Uh, performance marketing, you know, or marketing or growth in general, um, s- can, can be very technical. Um, but it's actually technical and you have to be creative because if, if it wasn't, if it was really easy and bland, you know, like, everyone would be growing right now. Um, and so you always have to find, like, that little thing that no one else is doing a- and, and do that, um, to the extreme. So there are, uh, three types of growth, um, when, when... Yeah, three types of growth. Um, sticky, viral, and paid growth, and hopefully I'll get enough time to talk about all of this. Uh, so really briefly, sticky growth is trying to get your existing users to come back and pay you more or use you more. Um, second is viral growth. So that's when people talk about you. Um, so you use a product, you really like it, then you tell 10 other friends, um, and they like it, and that's viral growth. And the third is paid growth. So if you happen to have money in the bank, um, you're, you're gonna be able to perhaps use part of that money to, to, to buy growth. Um, and the central theme I'm gonna go through is sustainability. There's a lot of, um, sus- by sustainable growth I mean, you know, you're basically not a leaky bucket. Money you put in or time you put in, um, has a good return on investment on it. So sticky growth is, like I said, getting your existing users to keep buying stuff. Um, so the only thing that really matters here is that you deliver a good experience, right? Um, if you deliver a good experience, people are gonna keep wanting to use you. If you deliver an addictive experience, people are gonna keep wanting to use you. Um, and the way to measure this and to really look at this and how you're doing over time of whether, you know, you are providing, um, good sticky growth, is to look at, um, the CLVs and retention cohort analysis. Now, does anyone not know what cohort analysis is, or should I go over it?

6. SPSpeaker34:38

   Yeah.

7. ACAdora Cheung34:38

   Okay, so I'll go over it. Okay, so CLV is, um, some people call it LTV, s- is called customer lifetime, which is basically the amount of the net revenue that a customer brings in the door for you over a certain amount of period. So a 12-month CLV is how much net revenue does a customer, um, give you over 12 months, and sometimes people look at three months and six months and so on and so forth. Um, so, so when I say, uh, cohort, basically what you're looking at is, this is time, so let's just call this, yeah, time. So and this is percent of users coming back to you. So at time zero, right, at period zero, we're at 100. I'm losing... 100%. So, so, um, cohort is, is another name also for, like, customer segments and stuff like that. So you can, like, you might look at the female versus male cohort. Um, you know, people in Atlanta, Georgia, versus people in Sacramento, California. Um, but, uh, the most common one is by, by month. Um, so cohort equals month. And let's just say for this exercise we are looking at, um, like March of, I don't know, 2012. So March 2012, 100% of people, you'll have like at least N equals 100 people. So 100% of the people obviously are using your product because, you know, that's the definition. Now, months, one month later, um, you might have, you know... The scale is not right, but 50% might come back, and so you come here. Now, in the second month, how many people that came in March come back in the second mon- or two months later, and that might be, you know, down here. And so over time you'll have a curve that looks like this.There's always some initial drop-off. You know, the reasons why people don't stay after the first use is, you know, it wasn't worth it, um, had a bad experience, stuff like that. And then over time, what you want is you want this to flatten out over time so that your churn basically goes to 0%. That means you attrition out less, less and less users over time. And these over here kinda become your core customers. These are ones that are, like, sort of staying, staying with you for a long time. And now, now cohort analysis or, you know, using this as a way to show if you have sticky growth or not is... Now, say you're, say, you know, say we're one year later and you've built a bunch of stuff, right? You graph out the same thing, and hopefully what you'll see is that you have a curve like this. That is, in the first period, even more people than 50% came back to you, and more and more people are sticking with you. A really bad, you know, retention curve looks like this, which is like after the first use, they just hate you so much, no- like no one even comes back. It's just like zero, right? And I don't know what kind of business that is. I mean, it's obviously a shitty business, but, um, I, like I, I can't explain a good business that has a retention curve like that. Um, so anyway. So over time, as you are thinking of strategies to increase this curve, like keep making it go up and up and up, um, uh, you want to basically look at this analysis, um, over time to see if, if that, uh, strategy is working for you. Okay. Does that make sense? Okay, cool. Um, the second kind of growth is viral growth. And like, like sticky growth, you need to also deliver a good experience, but on top of that, you need to deliver a really, really good experience. Like, what's going to make these people shout out loud on Twitter, on Facebook, whatever, and tell all their friends, um, and email all their friends and family members about you? You have to really deliver a good experience. Combined with that is you need to have really good mechanics for the referral program itself. Like, you have 100 customers who really wanna talk about you, now how are they gonna talk about you? So to, so in that sense, a viral growth chan- uh, the viral growth strategy is all really about, one, building good experience, but if you have that, it's how do you build a good referral program? And so I've listed the three main parts of that. One is the customer, customer touch points, which is where are people, um, learning that they can refer other people? Um, so that might be just, you know, after they book or after they sign up, there is a... You know, usually you see these, like, right after you sign up, for a reason, most, for whatever reason, most people just immediately tell you to invite all their friends even though you've never used the product before. And so, but that's a customer touch point. It's just right after you sign up. A better one is after they've used the product after a while and you see that they're highly engaged, then to show them that link, um, and get them to send it out to everyone. Another one is if you're doing more of a platform-type play, like for Homejoy, we actually go inside the homes. Um, so now the customer touch point is when the cleaning professional's inside the home, they can have a leave behind, and, you know, we can show them something there too as well. Um, so you wanna, you wanna basically put the customer touch points and put the actual, um, link or whatever it is, how they're gonna refer all their friends, at a point in time when they're highly engaged and you know they're loving you. Second is program mechanics. And so that's sort of like, you know, the most common thing that I've seen is $10 for $10. That is, you get $10 if you in- invite your friend and they use it, and, and they get $10. And so you should ha- and so you should try different types of mechanics in that sense and try to optimize for, you know, whatever works for you. You know, it could be 25 for 25, it could be 10 for zero, it could be many, many, many of these things. And lastly, it's, you know, when the, y- when your friend clicks on the link, when y- you, on your referral link, when they come back to the site, it's very important to really optimize that conversion flow of how they're going to sign up. Um, and so sometimes you need to just sell them in a different manner or upsell that their friend has, um, has suggested they use this, and so on and so forth. So all these combined, you need to, um, really, uh, play around with, uh, wi- with these, um, different dimensions and, um, come up with a good referral program. And lastly, it's paid growth. So examples of paid growth is, is this right here, and these are the most obvious ones, but I'm sure you guys can think of more. Um, and paid growth is basically, you know, you happen to have money, you can spend. You might have credit cards, whatever, but you can spend something to get users. Um, so the correct way to think about paid growth is that, okay, you're gonna put money, you're gonna risk putting money out there. What are you gonna get in return? The simple way to think about it is, is your CLV, your customer lifetime, the amount of money, the net revenue, the amount of money that people, you know, that your customer returns back to you, is it more than your CAC? And your CAC is a nu- it's a abbreviation for customer acquisition cost. Um, so an example is, you know, you pay... Actually, the slide, uh, the slide, the slide here has an example here. So say you run a bunch of ads, these are four ads. Over, over, you know, uh, 12 months, uh, the customer is worth $300 to you. Each one of these ads, um, when you click on it, the CPC is, costs this, all this, you know, costs different ty- types of money. And then when they click on it, when they click on the ad, then they have to come to your site and sign up or buy something, and the conversion rates are different for all these ads. Um-And then, you know, the CAC is calculated simply by the CPC divided by the conversion. And so you see that there's different acquisition costs for different types of ads. And to determine whether, you know, that is a good ad or a bad ad, you, all you have to do is, you know, CLV minus CAC, is it more than zero? Um, if it's at zero, then you've, you know, you- that's, that's fine. But hopefully it's actually more than zero, and so you actually, um, are earning a profit on it. Um, so we see that despite the CLVs remaining the same and the conversions being higher and lower, there's sometimes, you know, some ads s- that might seem good actually don't seem so good at the end of the day. Now, the advanced way of looking at it is, this- you can look at this for your whole entire customer base, for all, you know, aggregating all your customers together. But the advanced, the better way of looking at it is to break it down by customer segments. So, you know, um, if you have, for example, if you're, if you're building a marketplace, I don't know, for country music, you know, y- the CLVs of someone in Nashville, Tennessee is going to be much larger than the CLVs and, um, lifetime value of someone in Czechoslovakia. So, or I just assume that's the case anyway. Uh, so you'll need to, you'll want to make sure that, um, when you're buying ads for these type, different types of cohorts or these types of customer segments, that you know what the differences are, um, and that you don't, y- you don't wanna mix, like, everything together. Um, so the last point on payback time is sustainability. You know, I think a lot of businesses get in trouble, and it turns into a bad business when they start spending beyond their means. Um, and, um, and it has a lot to do with risk tolerance or risk, you know, how much risk you're willing to take on. So when you look at these CLVs, let's just suppose, you know, you get a customer for 300, you know, a customer is worth $300 after 12 months. That is, in the first month, they're worth $100. If you wait to the end of the 12-month period, then they give you the n- the other $200. But if in the first period you're actually paying, you know, $200 for them, then you're in the hole for $100 until the end of the 12-month period, and that's when you start getting into potentially unsustainable growth. Um, which is, something could happen where, you know, at the end of the 12 months, they actually, you don't actually get the 20, the, the $200 from the customer. Um, and you end up in a very bad situation. And essentially just at the end of the day, you could be running out of money and it... And if you're doing this with credit cards, you will definitely, um, uh, find that you're gonna have to, you know, declare bankruptcy very soon. Um, so again, payback time is very important. You know, a safe one to go with is three months. If you have very high risk, um, if you're very risk-loving, you know, maybe 12 months is better. Um, beyond 12 months is very, is very much an unsafe territory. Okay. Um, how much time do I have? Uh.

8. SPSpeaker46:25

   About 11 minutes.

9. ACAdora Cheung46:26

   11 minutes. Okay. Um, so I'll just go into this. So the art of pivoting. So a lot of people ask me, you know, Homejoy went through, Homejoy in its current concept is, was a, was a f- literally the 13th idea, um, we fully built out and tried to execute on and tried to get customers for. And so a lot of the questions I get is, how did you even, like, get to that 13th idea? And how did you decide when to, you know, move on? Um, and so the best guidance I can give on that is to kind of look at these three criteria, which is once you realize you can't grow, or once you realize, you know, despite, you know, building out all these great features and talking to all these users, none of them stick, or none of them, you know, you don't have any good high-retaining users, or the economics of the business just doesn't make sense, then once you make that realization, you just need to move on. And I think the trickiest one is probably the growth one, because there's so many stories out there where a founder stuck with the idea and then after three years, all of a sudden it started growing. So the trick here is basically what you really should do is you, you should have a growth plan when you start out, which is, you know, you should ideally just have what is, what is the, what is an optimistic but realistic, um, way to grow this business? And so it might look something like this. And this is T, and this is, um, this is number of users. Um, so, you know, in week one you want, you just want one user. In week two, you want maybe two users, and so on and so forth, and you can keep doubling, you know, up and up. So in week one, you should basically do as much as possible, build whatever you have to build to get that one user. And then week two, so on and so forth, you know, you, you, you build whatever you need to get two users, four users, eight users. In the beginning, it's, it should be fairly s- if you have a product that people actually want, you should be able to maintain this growth curve pretty easily just by walking around and manually finding people. Um, it's when you get to, like, a you need 100 users a week, where you need some of these more, you need these growth strategies to start working. Um, and so what I tell people is usually if you're fully executing on, on your product, and you're really working really, really hard, then if you go three or four weeks in a row of no growth-Um, backwards growth, then either, then it's time to maybe consider a pivot in the sense that, not starting over, like completely come up with a new idea, but you're probably fundamentally doing something wrong because th- in that early stage of a startup you should always be growing. And so it's not ... And this is optimistically what it looks like, and the, this is like kind of the growth curve I set forth and put out when I started Homejoy. But really, what it looks like is like this. Um, and so you wanna make sure that when you're in a lull, like over here, that you don't just stop, right? And that's why you should wait two to three weeks. Um, as long as you keep working hard, you'll eventually get back here and you'll see a trend like this over time. Um, cool. So that's pivoting. And, um, that's it. I can take questions at this point.

10. SPSpeaker49:57

    Let's do one question.

11. ACAdora Cheung49:58

    Yeah. One question.

12. SPSpeaker50:03

    So one question online was, uh, if you, uh, if your users have a product that they're already somewhat comfortable with, how do you get them to switch to yours?

13. ACAdora Cheung50:11

    Right. So there's always a switchover cost. Um, I'll tell you the example of Homejoy. So Homejoy, we actually were creating a new market in the sense that a lot of our initial users never had cleanings before, so it was pretty simple to get them on board. Um, and a lot of people who have cleaners already really trust their cleaner, and they will, you know, it ... To, to get them to come and use something else is actually probably the most difficult task in the world. Um, and so when you're, when you're building things and trying to get people to switch over to you, what you really need to do is find the moments where your product or what you're offering is much better or very much differentiated from the existing solution they have. So an example is someone who had a regular cleaner, and maybe they had a party one day and they needed a cleaning almost the next day. And because Homejoy in most of the areas has next-day availability, they would just come to Homejoy and use it because they knew they couldn't get their regular cleaner. And once they start using the product, then that's when they start realizing the advan- the little advantages of using Homejoy, which adds up to a big advantage. So, you know, a lot of things are, you know, uh, realizing that, you know, leaving cash out or leaving checks was really annoying, and so being able to do online payment was more convenient. Being able to book, cancel, and reschedule, you know, according to your own schedule was very convenient. Um, and so on and so forth. And so it's just, you know, it's really hard to ... A lot of people, when they build a product are like, "And these 50 things are better than, a little bit better than the existing solution." It's really hard, even if the benefits outweigh the switchover cost, it's really hard to actually tell that to a user, um, and try to get them to aggregate all those, you know, benefits over many little things. It's better to just have one or two things that clearly differentiate yourself from, um, a product. So ...

14. SPSpeaker52:09

    Thank you very much.

15. ACAdora Cheung52:10

    Yeah, cool. [audience applauds]

16. SPSpeaker52:16

    That was awesome.

17. ACAdora Cheung52:18

    Yeah? Okay.

Episode duration: 52:21