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

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 you are 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 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 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 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 2 hours here and there every single day during the course of the week um it's sort of like I think this is in 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 really really focus on immers 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 here which is you know I have this really great idea I don't want to tell anyone about it I'm going to build build build build I'm going to maybe tell one or two people and then I'm going to launch it

on you know I'm going to launch it on Tech runch or some somewhere like that um then I'm going to 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 visal 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 in Tech runch 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 path jooy in 2019 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 and 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 here's of what we're going to solve is you know make people happier and our

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 therapis 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're 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 z 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 want to 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 want to 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 20 or 30 years in an industry probably does you know sitting their ways and is just used to the way things work and really can't think about what the inefficiencies are the things that you can quote unquote disrupt but however as a new 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 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 start at home joy 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 very bad cleaners um and so as a result you know we said okay we got to 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 you you can watch and you can learn or you can watch and read about basketball but you're not going to get better at it if you don't actually you know train and you know throw throw back basketball round 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 s 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 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 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 you 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 to know like what everybody in the space is doing and it's things like you know running 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 what from like search result number one to 1000 you know I I found um all potential competitors big and small and if they're public I would go read their S1 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 these golden nuggets that you'll find once in a while and you 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 I 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 realistic like in the beginning you kind of want to corner off a

certain part of the of a customer base so that you can really optimize for them and that's just you know it's just a 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 create the product before you put code down you should really storyboard out the ideal user experience of how you're how you're

going to 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 a 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 Tech say what are you communicating to them to the actual when they sign up for the product or they purchased the service what are they actually getting to after they

finished using the product or act after they finished using the service what's you know there's they're sort of like an evaluation period like they leave 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 es 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 want to 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 today is like you should build a minimal VI the MVP minimal viable product and I underlined 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 you have to be talking to users right you have to potential user you have to be seeing you what is 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 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 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 started with cleaning and you can choose you know blah blah blah blah and it just went off for

paragraphs and paragraphs um when we present we went to you know potential users to come on our platform they just get kind of get bored after the first first first uh first few sentences and so what we just what we found out was that you know we we really needed this oneliner the one liner is very important and it kind of 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 you're starting with no users you really need to tell them what they're going to 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 on 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 users should be you know the obvious people the

people that you're connected with uh you should use it obviously you and your co-founder should be using it your Mom and Dad should be using it your friends and co-workers should be using it beyond that um you want to get more user feedback and so you and I've listed here 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 show hn 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 want to hit up to uh okay so when you go to uh by the way homejoy we actually tried all of these so um we used it oursel that was fine cuz I mean we were on a 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 co-workers are kind of like in San Francisco and elsewhere um so we didn't have too many of them use it so we're actually um ended up in a dead end of um not being able to convince many people to use this in the beginning uh so what we did was because we're in Mountain View some of you guys might know on cter Treet they have uh street fairs there during the summertime and so we go out and basically chase down people

and try to get them the book of 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 an any any fear 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 Trip people into booking cleanings um but the proof in the pudding was that I figured most of the people were guilt tripped into doing it but uh when they went home they didn't cancel on us or some of them did but uh majority of them did not and so we felt like

I I thought okay that's good I got to go clean their houses but uh at least you know there's something we're actually solving here um so uh and you know I don't Sugg I think showing up the fairs or I know another startup in the last batch I forgot their name right now but they uh they they showed up 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 are trying

to ship products and just take them out of line and try to get them to use your product and have them ship before him um so you just have to go to places where people are going to really show up and you know your provision rate is going to be really really below but to go from Z to 1 to 3 to four um these are kind of 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 and uh if you put hook up a phone number one really good idea is to uh 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 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 SLO in it's going be a slog but this is where you're going to get the best feedback ever for your product and this is going to 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 going to 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 when and 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 you're kind of just like poking and poking and poking them like why don't you do why didn'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 give them to feel comfortable because you want to 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 from like the macro perspective and one way to do that is 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 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 are collecting some notion of NPS which is net promoter scoar um so you're basically asking them from a rating from 0 to 10 um How likely are they to recommend you

to a friend and calculating the MPS 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 going to just let's 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 are 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 should use your product but she's G to

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 because they care about you by the way this is assuming it's a free product that you're giving them and then over time like as you get more and more random 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 type type um and so you should take this into C 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 going to be like down here like she's just going to lie to you and say you know she's just going to 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

going to give you the right um they want to 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 going to really tell you um because you know it's money out the door and so this is another way of saying you're going to get the best feedback like this is obviously you know down here you're going to 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 going to build a product that you're going to eventually need to you know they're going to pay for for the for the software or for the hardware 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 want to 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 going to be 10 to 100 users like

what are the features you really need for that and um just go with that um sometime and in basically on the 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 example of this is um when we started taking on cleaning professionals onto our platform we would have them um app we we would ask them a bunch of questions um over the phone and then in person we ask them a bunch of questions too and then they would go to a test clean and then they would you know um get on boarded to our platform if they were good enough uh and so this took a doing all the question askings for that many candidates you know we had about a a three to 3

to 5% acceptance rate and so you can imagine all the people we were talking to in the beginning of the funnel that never even made 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 going to be a good or 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 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 dur the interperson interview um so it's if you try to 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 this 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 the 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 going to 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 going to want to 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 a 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 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 in you know perfecting

the product to to no ends is um is the idea that you know 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 going to be if you have a really good idea no matter when you launch someone's going to someone's going to be you know someone's going to 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 in all that user feed feedback that you can get by getting a lot of users um because you feel like you know you feel paranoid that someone's going to do this to you um and I hate to keep harping on it but this is things I see today with Founders is something I went through as well um 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 look at my time um 20 minutes okay so I will go over um various types of growths in the next slid 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 a couple other people building um you're not going to be you know create a team just for growth it it's going to be one person and one

person only and so you need to really focus and you need to you should only you're going to 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 caps 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 then 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 optimizing for that and lastly um in the beginning you're probably not 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 what I mean by that is an example is in the beginning at homejoy we had no

money um so when we try to do um we try to buy users from um merrymaid or not from merrymaid that's just an example of 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 have more money than us they were making 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 CA a much higher 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 things and so we should probably revisit the idea of buying Google ads and buy you know going to the stdm 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

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 and 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 pay 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 your 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 they like it 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 going to be able to perhaps use part of that money to to to buy growth um and the central theme I'm going to

go through is sustainability there's a lot of um 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 going to keep wanting to use you if deliver an addictive experience people are going to 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 coord analysis now does anyone not know what cohort analysis is or should I go over it okay so I'll go over it okay so clv is um some people call LTV 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 3 months and 6 months and so 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 this is percent of users coming back to you so at time zero right a period zero we're at 100 I'm 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 maybe n equals 100 people so 100% of the people obviously are using your product because you know that's the definition now month 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 month 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 turn basically goes to 0% that means you attrition out less less and less users over time and these over here kind of become your core customers these are ones that are like sort of staying staying with you for a long time and now now cord 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 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 makes sense okay cool um the second kind of growth is viral growth and like like sticky growth you need to also deliver good experience but on top of that you need to live a really really good experience like what's going

to make these people shout out loud on Twitter and Facebook or 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 a 100 customers who really want to talk about you now how are they going to talk about you so to so in that sense a viral growth channel 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 whatever 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 home joy we actually go inside the homes um so another customer touch point is when the cleaning professional is inside the home they can have a leave behind and you know we can show them something there

too as well um so you wna you want to basically put the customer touch points and put the actual um link or whatever it is how they're going to 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 I've seen is $10 for $10 that is you get $10 if you invite your friend and they use it and they get $10 and so you should have 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 when your friend clicks on the link when you 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 and so forth so all these combined you need to um really uh play around with uh with these and different dimensions and um come 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 pay 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 going to put money you're going to risk putting money out there what are you going to 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 an it's an abbreviation for a customer acquisition cost um so an example is you know you

pay actually the slide uh the SL 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 cost different 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 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 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 you

see that despite the clvs remaining the same and the conversions being higher and lower there's sometimes you know some ads 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 advanc the better way of looking at it is to break it down by customer segments so you 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 the clvs of someone in Nashville Tennessee is going to be much larger than the clvs than U lifetime value of someone in Czechoslovakia so or I just assume that's the case anyway uh so you'll need to you 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 you don't want to mix like everything together um so the last point on payback time and

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 TVs 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 the other $200 but if in the first period you're actually paying you know $200 for them then you're in the hole for1 $ 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 and if you're doing this with credit cards you will definitely um um uh find that you're going to 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 a 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 five 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 what the was literally the 13th idea um we fully built out and try to execute on and try 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 3 years all of a sudden it started

growing so the trick here is basically what you really should do it should 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 and week two you want maybe two users and so 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 where you have to build to get that one user and then week two so 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 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 you

need a 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 and you're really working really really hard then if you go three or 4 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 with a new idea but you're probably fundamentally doing something wrong because 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 home Joy but really what it looks like is like this um and so you want to 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 question questions at this point one question yeah one question so one question online was uh if you if your users have a product that they're already somewhat comfortable with how do you get them to switch to yours right so there's always a switch over 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 would 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 the cleaning almost the next day and becomes 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 the regular cleaner and once they start using the product then that's when they start realizing the advant the little advantages of using homejoy which adds up to a big Advantage so you know a lot of things are you know realizing that you know leaving cash at out or leaving checks was

really annoying and so being able to do online payments was more convenient being able to book cancel reschedule you know according to your own schedule was very convenient um and so and so forth and so it's just you know it's really hard to a lot of people when they build a product they're 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 switch over 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 thank you very much yeah [Applause] cool yeah okay