Advice on Organizing and Running Growth Teams from Dan Hockenmaier and Gustaf Alströmer
Gustaf Alströmer is a Partner at YC. Prior to YC he was the Product Lead for Growth at Airbnb.
00:20 – Dan’s most unpopular advice
1:15 – What growth strategies do people jump on too soon?
1:50 – Questions Dan asks a company he’s advising
3:20 – Traits Dan looks for in early growth hires
6:00 – How product and growth are tied together
11:00 – Good/bad learnings from Facebook’s growth team
13:30 – A/B testing
16:30 – Retention and other metrics
20:15 – The importance of experimentation
23:15 – Getting ideas for A/B tests then choosing which to do
24:30 – Advice for employees who want to get a growth program going
28:30 – B2B vs consumer growth tactics
33:30 – Pricing experiments
35:00 – Paid marketing
39:00 – Launching in new markets
39:45 – Hiring for marketing
43:15 – Metrics for marketing hires
45:15 – Toni asks – Why did Airbnb grow so fast?
48:15 – Step function growth changes for companies that already had scale
49:25 – Michael Savage asks – It would be great to discuss growth into new regions for example Africa and UAE. What would their approach be, how does it differ from region to region, culture to culture?
52:00 – Justin LaRosa asks – What are some of the most common drivers of viral growth?
54:50 – Hiring a growth agency vs building your own team
57:50 – How do you think about growth in the context of improving humanity?
Craig Cannon [00:00:00] – Hey, how’s it going? This is Craig Cannon and you’re listening to Y Combinator’s podcast. Today’s episode is with Dan Hockenmaier and Gustaf Alströmer. Dan is the founder of the growth strategy firm Basis One. Prior to Basis One, he was the director of growth marketing at Thumbtack. You can learn more about Dan at basisone.com. Gustaf is a partner at YC. Prior to YC, he was the product lead for growth at Airbnb. You can find Dan on Twitter @danhockenmaier and Gustaf is @gustaf. All right, here we go. Today we have Dan Hockenmaier and Gustaf Alströmer. Dan is the founder, investor and advisor at Basis One, which is growth strategy consulting, and previous to that, you were director of growth marketing at Thumbtack. Gustaf’s a partner at YC and also was a product lead for growth at Airbnb. Gustaf, why don’t you start it off.
Gustaf Alströmer [00:00:50] – Sure. I was thinking about getting it right into it. Dan, you advise a lot of startup on growth and you kind of get into their teams and work directly with them on growth. What is the most unpopular advice that you give the founders of the companies that you work with?
Dan Hockenmaier [00:01:07] – I’d say nine times out of ten we are talking them out of doing things that they want to do. There’s this huge power law to growth. Most of the gains come from one channel, a handful of tactics, and most early teams are really good at coming up with good ideas that they want to try and often that has diminishing returns, and so we’re often talking them out of things. The second class of things would be actually that the company may not be ready for a traditional growth effort, and so I think it’s really important to think about where they are in terms of product-market fit and when the right types of tactics should be used.
Craig Cannon [00:01:41] – In terms of being specific around that, what are the most common things that people are trying to jump on too soon?
Dan Hockenmaier [00:01:47] – Really heavyweight acquisition, particularly if it’s unsustainable, prior to having the right kind of retention. You don’t have to have best in class retention numbers but you need to be seeing some cohorts of people for which retention truly levels out and they use the product very long-term, and if you don’t see that, you’re not ready, and particularly if you’re doing things like paid marketing or others which can have big burn implications, you can get to that too fast and that can be really problematic.
Gustaf Alströmer [00:02:14] – Let’s say I run a Series B company. It’s a consumer company and I just hired you to help me figure things out. What are the questions you’re going to ask me and what are the data you want from me?
Dan Hockenmaier [00:02:24] – It’s a really healthy exercise to actually start with a pretty traditional spreadsheet model. What are the kind of channels of acquisition? How does traffic convert, activate, retain? What do your different cohorts of retention look like? And how does all this link up? How do your existing users then start referring other users? How does monetization fuel your paid growth strategy? When you build something like this, you can play around and say, what happens if our activation rate goes up by 5%? Usually that’s really powerful, much more powerful than a 20% increase in acquisition. Think about the kind of full stack of things and how it all links together and it’s a really good starting point for where there’s leverage.
Gustaf Alströmer [00:03:05] – If I am that founder and I can hire you, I can afford you, who is the person on my team that should make that spreadsheet? Like, where do I start if I don’t hire you?
Dan Hockenmaier [00:03:15] – I’m a big fan of smart analytical generalist, actually, and it depends a little bit on whether you need more of a marketing business-type person or more of a technical person, but somebody who one, has low pride of ownership and just wants to move fast and test things and figure out what works and is deeply analytical can often get a lot of that work done. We can talk about the composition of a large scale growth team but that’s a luxury that many don’t have and so finding somebody who can do lots of those things before you know what’s really going to work is really valuable.
Craig Cannon [00:03:48] – What signals during the interview would you look for?
Dan Hockenmaier [00:03:52] – The big thing is, can they hold the equation of your business in their head? Do they know how a change is going to impact the overall output of what your business is optimizing for, whether that’s weekly active users or transactions in a marketplace, and do they have an intuitive sense for where the important things to work on are? And then the other type of stuff like learning channels, most people can get up to speed on that pretty quickly. It’s much harder to teach the kind of strategic understanding of where to focus.
Craig Cannon [00:04:25] – Did you find that true at Airbnb as well?
Gustaf Alströmer [00:04:28] – Yeah, I would say so. That’s probably true.
Dan Hockenmaier [00:04:31] – I’d be curious if you have any counterpoints or areas where you needed more specialty earlier on.
Gustaf Alströmer [00:04:38] – I would say that the story of Airbnb was basically, we had probably one of the best product-market fits that I’ve seen, but not necessarily thanks to like an amazing user flow and amazing onboarding or even amazing acquisition channel. It’s just like a really good experience. If you think about the early days of Airbnb, half the price, the most unique experiences that you can imagine, was actually very compelling. You can like think about the neighborhoods. If you want to live in New York, your options were to live in a hotel in Midtown versus living somewhere in a real neighborhood where there are real people and you can go down to the corner and grab a coffee just like normal citizens. That is a great product experience, and it sort of sells itself, and I give you an early example, like before we had what we call it Instant Book, the way that you would book an Airbnb is that you would send a request to someone and that person had to then request to book and that person had to then confirm that booking before you actually got the booking. In many cases, actually the majority of cases in the early days, the request was not confirmed. You wanted to book something and, sorry, it didn’t work out. And that was sort of like, if you think of the idea of Airbnb which is book any house or room in the world as easy as booking a hotel, wasn’t really true. You think of that kind of product experience, there’s a lot of friction in the early days that sort of, sort of didn’t, it mattered but it didn’t,
Gustaf Alströmer [00:06:01] – also didn’t really matter for the success of the company. When I joined Airbnb we were like, whoa, this is really working, but what are all the things that we can optimize? We optimized for like the onboarding flow, we optimized all the different acquisition channels, SEO, paid marketing, referrals. We’ve tried looking at retention. All of those different things but fundamentally what worked for Airbnb was this great product experience and we just want to make it more available to the world.
Craig Cannon [00:06:22] – Right. This is a key question, and perhaps a dichotomy between growth and product, right? The classic YC advice is build something people want. Where do you guys fall in this debate? How much of it is just building a great product and how much of it is being great at growth?
Dan Hockenmaier [00:06:38] – Maybe the better way frame this is not which is more important because we can debate that, but rather obviously, both play a role long-term, it’s more how the two are tied to one another, and so f you think in particular on the consumer side but it’s true for B2B as well, to get to 100 million in revenue typically 70%, 80% of all new customer acquisition is coming from one channel, and so the best products are the ones that are built to optimize for that channel. If it’s paid marketing, you need to monetize quickly and deeply, if it’s SEO, you have to have a really good way to generate and curate content or else you just can’t compete because the other products are doing that. I get a lot of questions around how do we kind of add some SEO on top of this product, or add virality, and it’s just, that’s just never the answer because you need to be asking that question two years ago, a year ago, and so you can build for it and so I think that piece is really important. I do think there are examples where a product is so unique that it allows them to compete on kind of like a different vector, you know? Zoom’s S-1 that everybody’s looking at, the metrics are incredible, and one of the reasons is they came in the backdoor, basically, they have a product that people love and it becomes viral and they’re already pre-qualified before sales gets to them, and everybody, all their competitors are knocking
Dan Hockenmaier [00:07:53] – on the front door in this much less efficient way, and so that was a case where the product let them do something different on the distribution side that nobody else could do, like Square being able to go after SMBs with a automated underwriting product is a similar example. Yes, product blew those markets wide open but it’s still not the same as saying you don’t have to go build the distribution. You still need to do the work on the growth side.
Gustaf Alströmer [00:08:20] – We have this YouTube video when I talk about growth in Startup School and there’s the first couple slides then that talk about the evolution of Facebook and their growth. I would argue basically that a bad product will not grow a good product will grow to some sort of, like, general natural adoption curve, and that curve could be fast in the beginning but eventually it’ll slow down a lot, and the role of the growth team for a good product is to make sure that doesn’t slow down. Kind of builds on top of multiple layers of new channels or new onboarding or better conversion and the role of the growth team is just like identify all those things and all those opportunities and just do it. I agree with Dan. A great product is going to have a sense of natural adoption, it’s just going to go not towards its full potential. There’s really a lot of things that great product can do, and I use a lot of great products on my phone and my computer and I know that they’re not reaching their potential in terms of adoption because many basic things are not optimized. I’ll give a very concrete example. At Airbnb, we have this thing called authentication. They were working on signup and login. Very basic things. A lot of startup founders thinks that those are just two things you check off the box. I build signup and I build the login and then I am done. It is actually incredibly difficult to make a 100% perfect signup and login experience, which meant that team existed for several years, and because the people who are signing up and logging in to Airbnb had a very clear goal
Gustaf Alströmer [00:09:48] – like booking or leaving a review or something along those lines, it was actually very valuable. For us to fail on that was complete, like, so like, that was not acceptable. We just kept optimizing and optimizing and optimizing, and I’ll give you a specific example, in the early days of Airbnb, we used to automatically log you out after like, I think two days, and we were like, why do we do that? Well, security reasons, that makes sense. Then we would run an experiment, we set the expiration date of that cookie to seven days and then 30 days and then unlimited and I think we lifted that experience, the outcome experience, over 1% increased in revenue for the whole company just by extending the session length and making it a little bit easier to login and the security aspect of that we actually solved that in a different way. We made it kind of like Amazon where if you want to do something sensitive to the site, you’d have to go and login again or authenticate again.
Craig Cannon [00:10:41] – If you were going to book, then you have to put in your password?
Gustaf Alströmer [00:10:42] – Yeah, but that’s just like, the amount of code required to make that change was like, minutes or hours, but the impact on the company was crazy. But I think what that tells the story is that there are these things that really makes it easier for a user to kind of like access that really good product, but as a founder, you don’t really think about it unless you actually make the spreadsheet, actually know what’s happening in the product and go deep on it.
Dan Hockenmaier [00:11:10] – Yeah, absolutely.
Craig Cannon [00:11:11] – Do you think Facebook recognize that they weren’t hitting their full potential when they started their growth team?
Dan Hockenmaier [00:11:17] – That’s a good question. I wasn’t there. But I think probably, they did understand that they had this amazing thing, you know, and you start to realize that if you accelerate growth in very small percentages, you get something really, really good. I actually think like the legacy of that growth team, and then like Twitter and LinkedIn and the others that followed is actually maybe problematic when we think about some of the applications of growth later on, because they were applied in this case of like, extreme product-market fit, and the things you do in that scenario are slightly different than when you’re earlier stage and trying to figure out how it works, and so I think like, out of that we got a little bit of this kind of of growth hacking mentality, just like throw things at the wall and see what fits and don’t think about product market fit, because it’s assumed that that is solved for, which in many businesses it’s not. We’re recovering from that legacy in growth for a while.
Craig Cannon [00:12:08] – And that’s just, in practical terms means, just don’t throw gasoline on every fire… Ehat do you mean by that specifically?
Dan Hockenmaier [00:12:15] – Think about the metrics you’re optimizing for, making sure they’re long term, making sure they’re sustainable. One of the mistakes that companies make a lot is this idea that speed of testing or velocity of testing is the most important thing. It is important to move fast because it is quite hard to have good hypotheses about what’s going to work, like I am constantly wrong about trying to predict the results of experiments, and so you do need to just test a lot of things, however if you optimize for speed at all cost, you know, you should be instead thinking about things like how do we test really disparate things to make sure that we’re really testing at the ends of the experience to understand, you know, what’s going to drive, so instead of like moving minor things around, the conversion flow, testing entirely different flow or very different experience, not only will you learn more, you know, based on kind of where the result nets out, but you actually will get results back faster because sample size is a product of your effect size, and so like driving a higher effect is more important. The other thing is if you like look at a backlog of 80 or 100 experiments, often there’s only four or six hypotheses underneath that, and you should really be like thinking about which hypotheses you’re testing rather than just trying to run through all 80 tests. In the example of Thumbtack, when we’re optimizing conversion, we may think they need more education
Dan Hockenmaier [00:13:34] – as they’re moving in, we may think there’s a trust issue, we may think we actually don’t even have the right types of users in the flow overall. There’s different sets of experiments will test those things, do like the one or two right things against each hypothesis, validate or invalidate it, and then move on, and so I think like, just a more thoughtful, slightly slower actually approach can sometimes work really well.
Gustaf Alströmer [00:13:54] – I would love to dive into that. Let’s talk about A/B testing and experimentation. So this is something that I tend, I used to say that like, if you ask any product manager at Airbnb what’s the most useful tool that you ever used there, and they would say it’s the experiment framework. They built it to run A/B tests and easily measure the impacts of new changes. When you meet with startups, how far along are they, and sort of like in terms of their ability to run experiments, and what other type of advice you give them? I’ll give you a common question again, in the early days, sort of like what tools should I use, but I’m not sure if that really applies at your stage, but I’d love to hear what do you think?
Dan Hockenmaier [00:14:28] – Yeah, so we’re typically working with companies that are a little bit later, so kind of series B and on offense, so they have some of this. Earlier stage, I think there’s like, a first order question ahead of experimentation which is like, is the site instrumented in the right way? Are you updating that instrumentation as you change features? Is all of this kind of queryable in SQL and serviceable to the company, all that stuff has to happen first, I think, so that you have kind of the integrity of data, but then building a thoughtful framework on top of that, an experiment framework, I think increasingly the third party tools to do this, the full stack tools are pretty good actually, and so even for quite talented teams, the answer is usually not to build it yourself right away. You know, I’d love to hear if you have a rule of thumb on this. I think generally, if you can be comfortable with the fact that an entire engineer is going to be maintaining that infrastructure in perpetuity, then maybe that’s okay. If that feels like too much, then you probably should be thinking more about a third party type infrastructure prior to that.
Gustaf Alströmer [00:15:25] – I used to recommend building your own tool because that’s sort of like my primary experience at Airbnb. We started with an external tool, but then we built our own thing, and I describe often how incredibly simple the first tool was. It was basically a feature flagging tool that would like, you can show things to some users, and other things were not visible to some users, and then you would basically just sort of like, run that 50-50, the feature flagging tool, and then you run queries on your database, and that’s sort of how we got started, like the first year or two, I remember all A/B tests was basically an Excel output, which some, my calculation on this is close in significance, then 2014, 2015, we built this like really elaborate tool that would do all things automatically and it’s just like magic, but that wasn’t how we got started. Rally we started with just the feature flagging tool, and those exist as tools that you can use, and as long as, like you said, you can query the data, you would know sort of like, feel pretty comfortable about how a certain new feature would perform. The one thing I would say is the thing you want to decide early on is who, sort of like, what is the thing that you’re controlling the experiment on, and I would recommend that it’s going to be user accounts. Doing it on visitors or something like that is going to be typically much harder, but doing it on user accounts is like relatively hard to fail. Even doing like the market level experiments
Gustaf Alströmer [00:16:46] – or search experiments, those are difficult. Those are like difficult that data scientists at Airbnb would make mistakes early on and you kind of have to throw things away, but if you just do simple user account experiments, it’s pretty straightforward.
Craig Cannon [00:16:57] – How else did you break apart metrics? You have all this tooling, but then how do you start thinking about, like, “Okay these are the things that matter, these are the things we’re going to start tracking.”
Gustaf Alströmer [00:17:06] – In the first week of YC, we had the growth bootcamp, and the first talk I gave at growth bootcamp is on retention. I basically walk through the kind of connection between product value and retention, and how a great product often have, it’s completely reflected in that retention graph, and I asked everyone, are you measuring any of these things that, basically what is the metric that measured the product value? Do you measure that over time, and then if you do those things, you kind of have a retention graph. In many products, B2B and consumer this applies, and is something that companies should be doing, and you don’t need enormous sample size to get useful data from that. That’s typically what I start. The second thing is sort of like where is users coming from. Some basic analytics, or basic just like source tracking is a good place to start. After that, I like to have a survey asking people sort of like how they heard about the product because some things can be hidden in the source tracking sometimes.
Craig Cannon [00:18:02] – You have a survey on checkout or over email?
Gustaf Alströmer [00:18:05] – At signup, like for example, if you come in through Google Brand, or if you come in through Google, you kind of have to determine is that someone who know about your product before, not knowing about your product before, if they know about your product, how did they hear about it? Well, Google isn’t going to tell you that, or the App Store isn’t going to tell you that, you kind of have to find out from the users, and it’s sometimes useful to just break it down a little bit deeper and sort of like, how do people hear about the product in the first time? Is it through friends? Is it through workplace, or whatever. I think those things are important. And then, after that it’s the end-to-end funnel. It’s sort of like, what are the steps from the first time I heard about your product to I get to that product value. There’s lots of things you can measure there.
Dan Hockenmaier [00:18:41] – That’s a great overview. One thing I would add is, if you are working on retention or trying to optimize your retention metric, very often the way to do that is actually quite early in the product experience, the types of ways that you set a user up for good retention, and it could be the first session, first week with a product, and so the next set of metrics you need after retention is what are the early proxies for retention. You can experiment on that, and so this is like a slightly harder question that we work with companies on, but I think, you know, there’s one level which is just, what are all the things that correlate to retention or satisfaction? And then you’ve got to go start experimenting to understand causality, but that set of metrics and having really good metrics for what does healthy activation look like? When do we know a user is on the right path? That stuff is a really kind of important add to the model once you’ve got the basics built.
Craig Cannon [00:19:29] – What was an example of that at Thumbtack?
Dan Hockenmaier [00:19:31] – In this case and in general for marketplaces, the kind of north star or the top metric is not something like weekly active users, because you need something that combines both sides of the marketplace, so in our case it was transactions or requests placed. It’s probably quite similar for Airbnb. The real world product, the thing we’re optimizing for is hires happening in the real world, so a professional getting hired by a consumer. We didn’t actually have full data transparency into what was happening off the platform, and so we had to look for upstream proxies for when that was going to happen, and the main thing was, when a consumer got a certain number of quotes from a pro, they then believed that we did the job for them. We gave them options, they could go choose, their hire rate was much higher, their NPS would actually like, you could watch it spike at a certain number of quotes, and so the metric we were going on was the number of customer requests that had that many quotes, and actually liquidity metric in each market, when you looked at general contractors in New York, the way we measured the health of that market was what percentage of consumer requests were getting a sufficient number of quotes, and that’s what set us up on kind of a healthy trajectory in that market.
Gustaf Alströmer [00:20:38] – I want to go back to an early question, we were talking about experimentation, well one of the experiences I’ve had is I’ve kind of like, started talking to later stage companies, maybe Series B, Series C, and I’m like, “Do you run experiments?” They’re like, “Yes we do,” so, “How many have you ran in the last 12 months?” It’s like, 12, and that would be on a large engineering team, so I often find that people understand the idea of an A/B test, they understand sort of like what it could be used for, but they haven’t fully immersed into doing it, and they haven’t fully got the entire company rallied around it as a way to validate, sort of decisions. I’m curious to see, like, what have you seen, if that was the case, you came at a company and I said I’ve ran 12 experiments in the last year, I have 50 engineers, like what would you tell me and how to change that?
Dan Hockenmaier [00:21:25] – The big thing here is like, growth increasingly I think is less of a like team or atomic unit, and it’s just like the way of running a business, using data and experimenting, and I think that is quite hard to just talk somebody into. It’s like a philosophy for how you run a business, and so I think the most successful way to do that is kind of like bottoms up and organically, which is why I think you sometimes see these like small SWAT team like growth teams that start to optimize and get quick wins on one part of the product, and like just showing it through numbers is often the very best way to get to that answer, and so like one of my favorites examples here is the team, the early team at SurveyMonkey did a great job of this, like there’s one page in a product, which is the end of the flow when you take a survey, you have like millions of people hitting this page that could ultimately, at some point become survey creators as well, and they had done no testing on that page, and so the growth team basically just said, we’re just going to make it our job to optimize this specific page and started running tests there, and the results became so evident that the kind of influence of the growth team expanded over time, and so I think this kind of like, I’m just not sure it’s something you can talk somebody into, I think you kind of build it.
Gustaf Alströmer [00:22:37] – Yeah, like, how do you deal with a founder who’s like, well I made a great product, it worked, now I have lots of users and I’ve raised lots of venture capital, but I’m not running experiments so, like how do you change, sort of like, I understand you can’t talk me into it, but like, I’m interested in the idea of making progress, but I’m not interested in having my ego sort of like hurt by having data tell me whether this product is actually better or worse.
Dan Hockenmaier [00:23:01] – It becomes the culture around the way that you think about experiments. One of the most powerful things of experimentation or elements of it is that when it’s done, you send it out to the whole company and talk about why it won or lost. You can even get into a culture of like, unveiling the results of the experiment and having people guess which one kind of went well or not well, and I think that becomes something that people really like, and it’s like you realize that it is teaching you a lot about your users and the business that would be hard to get otherwise, and so I think building this kind of culture around it is really important.
Gustaf Alströmer [00:23:33] – What’s, in your experience, a great way to get ideas for A/B tests to run? Let’s say okay, I have my experiment framework figured out, like I know how to run experiments now, I need lots of ideas of things to test. How do you, in your experience, go about that?
Dan Hockenmaier [00:23:45] – Ideally they come from everywhere. We actually like basically kind of like open this up, pretty broad funnel, so certainly everybody on the growth team, but even others outside of that. We’re basically all adding stuff in a brainstorm or a Google Doc or whatever it was. You do have to have somebody synthesizing that that is not in a crowdsourced function, but I think like, many of our best ideas came from engineers in other parts of the company who just had some insight into a part of the product or user experience that nobody else had, and so I think like, basically broadening the scope and then having some kind of synthesis.
Gustaf Alströmer [00:24:20] – Who decides what to work on first, so say you have 15 ideas of things to fix on the onboarding flow, who decides what to work on first and what’s a good framework in your experience too?
Dan Hockenmaier [00:24:28] – There’s a kind of a central point which is a product manager thinking about that point and an engineering lead thinking about that part of the product. I do come back to this like hypothesis driven approach, so like what do you believe you’re testing and what is the best way to test that thing I think is a really good way to force that conversation. I do think it’s hard to be very collaborative at that end stage when you’re deciding what to choose.
Gustaf Alströmer [00:24:54] – People have different roles, so that makes sense.
Craig Cannon [00:24:56] – As an employee, so Gustaf, you’re talking about advising founders of these later stage companies, but then you mention these bottom-up approaches. What are other good examples of employees at companies being like, “Hey, I want to take a growth driven approach here,” and then getting buy-in across the whole company? We mostly talk about advice in the context of founders, but let’s give some advice for employees who like really want to get a growth program going.
Dan Hockenmaier [00:25:21] – Absolutely. There are certain classes of things that are easier to get off the ground and test, and so actually one of the reasons that paid marketing is so common early in companies is just like very quick to get off the ground, and you can validate that, and so I think finding those types of things where you can really prove something with a small budget or small team are super important, and very often, you know, testing a new channel in that way can be a way to really prove something. You don’t have to go get permission to do that in many cases, and so I think there’s like many examples in the acquisition area of just going and finding this thing that may work.
Craig Cannon [00:25:59] – Cool, do you agree?
Dan Hockenmaier [00:26:00] – Curious if you have others.
Gustaf Alströmer [00:26:01] – I’m trying to think of good examples here, but I would say, what you said around publicizing, what is the goal and publicizing any effort towards that goal, towards the company is a great way to doing it. I really like when you have a weekly email of all the metrics in your company that goes out to everybody. Now that will anchor people, so say, “Oh, it’s bookings, that’s the thing that we’re going for is bookings.” Okay, so then the next actual question would be what are the drivers of bookings? Well let’s do a funnel, and then if you are any of those teams that are the driver of the funnel, of that metric bookings, now you need to improve that metric, and if you run an A/B test, you can actually prove that you improved that metric. What we did at Airbnb was effectively, we would have a top line metric, which was bookings, and then we would say to a bunch of different teams, growth team, marketplace teams and others, that you guys are in charge of driving incrementality to that metric, and as an engineer or anyone on any of these teams, you just come up with the best idea that you can impact that bookings metric in some way, and then you start running experiments. They could be, like, I really love this idea of allowing everyone to come up with ideas on what to fix, because the more ingrained you are with a certain part of the funnel, let’s say you are working on signup, for example, or say let’s say you’re working on even something deeper, referral signup, so at Airbnb there would be tens of thousands of people that would sign up from a referral link every day.
Gustaf Alströmer [00:27:27] – They have high intent to become users and maybe eventually spend that money, but if that signup flow is not perfect, well there’s a lot of things you can do there, and there’s some engineer who knows that flow really well who’s going to know that, well this is like five examples of things are not working, if I fix them then that’s the kind of thing you want to share to the company so that people will start understanding the incrementality of these small things. If I’m a general engineer, I would say try to think about, orient yourself around what’s high intent. This is different for different companies, but in the case of Airbnb, the early wins are often in the high intent flows, so like, were people actually thinking about booking or actually about to book? Search conversion is an important one, signup conversion is an important one, sort of like online marketing traffic was an important one for us, versus, for example, homepage, it’s super confusing, and there’s many companies that have this experience where like, people come into your homepage, it is a combination of people that really want to do the thing that you offer, people just looking around, people accidentally ended on your page, it’s just a hard place to start, versus like, if you were optimizing the landing pages for Google conversion, well that’s going to be a lot of people that want to do exactly what you offer.
Dan Hockenmaier [00:28:37] – Right. It’s a great point, you’re probably trading off intent and scale, because you don’t want to go so deep that you’re dealing with 2% of the population, but too high funnel doesn’t work.
Gustaf Alströmer [00:28:46] – That was the mistake that we made, we actually made the mistake of going all focusing on the onboarding for the homepage, because they’re like, well that has the biggest scale by a long shot, but it turned out that only like 10% of the people that come to the homepage actually have a booking in mind, and everybody else had something else in mind when they come to the Airbnb homepage for the fist time.
Craig Cannon [00:29:01] – That’s crazy. When it comes to advising companies, what are the main differences in growth between a B2B company and and consumer, when you’re advising them?
Gustaf Alströmer [00:29:12] – I think consumer has been kind of leading the charge on what to do for the last like 10 years. Many of these tactics and strategies are now being adopted by B2B, and one thing that I, if you see YC companies coming and doing YC in their early stage program, now the most common advices are like, build a framework to figure out how to do more sales faster, and like, that’s a funnel, and we kind of give them advice, so like, start at the end and say, if I need to sell 10 to 10 customers every week, work your way backwards from how many people need to pick up the phone, how many people they have to show a demo to, how many people they’ll have to email or some other way reach to get to that demo, and just like, build a funnel and sort of like, start that way, and now you know what the early days, the early part of that funnel looked like. There are many of the tactics they use in consumer that now are being applied to B2B, but it came a little later. The benefit of B2B is you typically have much higher LTV, so you can spend, you can be a lot more creative on online marketing. Often, the first question I ask companies is sort of like, “Can you make a list of all the potential customers in the world?” Hopefully if that list is sort of like in the hundreds of thousands or smaller, make that list, like find a way to make that list, and then like, take those people and put it through all the different go channels that exist, whether it’s online marketing, whether it’s sales, automated sales, just like, go after that list. If your product is so mainstream
Gustaf Alströmer [00:30:39] – that it’s in the millions and millions, then you’re going to have a consumer company, because you’re going to go after the same kind of strategies that a consumer company would go after.
Craig Cannon [00:30:49] – But what if you went after a big client in the wrong way? People talk about fundraising in this context, like maybe you shouldn’t try your pitch on Sequoia the first time, for example, right? How do you think about that?
Gustaf Alströmer [00:31:02] – There’s a distinct difference to me between SMB and enterprise, and they often have very different sort of like closing, kind of cycles, if you want. SMB company, often what you do is you have this top of the funnel on your sales funnel, and then you have a relatively automated way to sign them up, so that maybe is one video demo, and then you have a customer, and this is typical for SaaS companies I think is that you have some way of scaling up the ability to sign up these customers. In the enterprise world, which I have much less experience, the end closing event there’s going to be through real traditional sales in some way. Now you can build up the excitement through content marketing that can even be targeted content marketing, trying to figure out who is the decision maker and target those people, there are lots of things you can do. In many cases, social proof is a super critical thing here, because it’s relatively easy to understand how companies make decisions about a new product, and you kind of have to just like deeply understand that and then mimic your growth strategy towards how that has happened, and I think in that SMB kind of group, there’s just a lot more distributed how people make those decisions, and I was one of the first users of Slack inside Airbnb. I certainly wasn’t the buyers of communication software. But me and a few other people, we were like, “Hey, we should try this new thing, it seems awesome,” and then like, a year later everyone’s on Slack, so if you’re in that category, you can grow much more bottom up versus if you’re enterprise category,
Gustaf Alströmer [00:32:44] – you have to identify that list of those people first and be like, these are the people I’m going after.
Craig Cannon [00:32:48] – Right, yeah, I was just curious about like, potentially putting your highest value potential customer in some kind of weird experiment and like churning them out, but I mean like, “Oh shit, oops, maybe we shouldn’t have changed the color to purple,” or whatever.
Dan Hockenmaier [00:33:01] – One of the things that I’ve learned working with more and more companies is that more types of decisions are type two decisions than you think, the type of decision you can actually roll back and get another shot at. We don’t work with companies that are dealing with large enterprises, typically more SMB, and so you maybe have a little bit more leverage there, but even things like pricing, features, packaging, those types of things that feel very final, you often get leverage to keep testing, and so in general I think testing some of those things is okay, particularly early on while you’re finding the right mix of things, and so I wouldn’t worry too much about like, burning that audience. Of course, you know, the reputation, the community, those types of things is important, but as long as you go into experimentations with good intent and think about the end use, I think you’re okay.
Gustaf Alströmer [00:33:56] – You have a lot of experience with pricing experiments or pricing?
Dan Hockenmaier [00:33:59] – Some experience.
Gustaf Alströmer [00:34:00] – Yeah, so in your experience, so like what’s the best advice to a Series A funded company or a seed funded company where like, I have a price for my product. It somehow is correlated to LTV. I want to figure out if that’s the right price or not. Like where would you start?
Dan Hockenmaier [00:34:15] – Yeah, so I think with like backing up one step and saying, are we growing, you know, virally, and is basically therefore, it’s all about removing friction, and price is a good way to remove friction or lowering price, or are we going to need to fund this through paid marketing and other things, in which case you actually need a significantly higher margin, so like what’s the starting point, I think is a really important piece, and then the second one is price and anything related to monetization is really tough because it’s basically a system of incentives, and it will change people’s behavior and so you have to observe these things over very long periods of time to make sure you’re getting the right answer, and so I’m like a big fan of running A/B tests for a sufficient amount of time, and them flipping it to, you know, maybe 5% remaining in the original test for a very long term to observe the thing you thought happened continues to happen, and validating that, but I think if you start from a place of where do we want our margins to be, and how’s that fueling our growth strategy, and then thinking about long-term metrics now, you use pricing to influence that.
Gustaf Alströmer [00:35:14] – Let’s say I run a subscription product and you bump the price from $10 to $15, I should hold that group for a long period of time on the $10 bucket.
Dan Hockenmaier [00:35:22] – I think often that gives you a much richer kind of insight into how it changed people’s behavior.
Gustaf Alströmer [00:35:26] – Got it, got it, I see.
Craig Cannon [00:35:28] – Cool, so when it comes to paid, how do you guys feel about paid marketing, especially in the context of the dynamic shifting over the past five years, say? What do you think about paid marketing?
Gustaf Alströmer [00:35:40] – I would say that the big untold story of growth is that we’ve shifted from free channels to paid channels. Paid channels are paid marketing, referrals to some extent, but paid marketing is the one that is the most obvious one. The reason that happened is because the platform shifted from offering free traffic to offering paid traffic, and there is benefits with paid traffic, because it’s highly targeted, like much easier to target the campaigns you’re running towards specific users, whereas in the free channels, targeting is not that easy. So I think that’s really the general trend, which means, to me, that it’s not easier, because it’s equally competitive if you are a subscription service or an e-commerce service that are acquiring people through paid, that’s very competitive ’cause there are lots of other companies doing the same thing going after the same customers, so you have to learn how to be data driven, creative and just really treating online marketing as something that you constantly have to innovate on, versus something that is just sort of like set and forget, here’s my online marketing team, and then they just try to hit their targets. It’s something you constantly invest in, and I’m not sure if this is good advice for seed funded companies, but if you look at the evolution of the online marketing at Airbnb, it went from like, one or two engineers to when I left, I think we were like 15 or 20 engineers on online marketing, and they were building everything from attribution system to automated bidding to all these different things,
Gustaf Alströmer [00:37:12] – and I think that general trend for online marketing is it’s going towards more data driven, more automation and just less, elevating the humans to sort of like making more high level decisions.
Dan Hockenmaier [00:37:24] – Absolutely. Totally agree, I mean just to add on this, I think it’s becoming more common, and there’s an important place for paid marketing. It’s fast to get off the ground, it’s relatively easy to test. If it becomes your primary channel, it’s a very hard thing to sustain, because it’s expensive, but also because it degrades pretty quickly actually. You look at the D2C companies or Blue Apron I think, you know, they grew really quickly on the back of paid marketing, and then they realized later, cohorts got more expensive,
Gustaf Alströmer [00:37:50] – they retained less well, and so this kind of like has this compounding negative effect, and it can be a scary place to be, and so I think if you’re thinking about paid marketing more as an accelerant rather than the growth strategy, it’s a much healthier place to be, and so like, you know, a couple examples of a place I think it’s used very effectively is to seed a new market you might be launching, for example, or at Thumbtack or other marketplaces it’s very often used to help balance the marketplace, beause it can be much more surgical than, you know, organic or SEO or something like that, and so we knew maybe we needed more general contractors in New York, but not, you know, plumbers in Phoenix, and so we were willing to pay a lot for one area not the other, and it was helping play this function, but the core of the growth was still organic and SEO, which is more sustainable over time. What do I do if I have that? So let’s say I have 70% of my user acquisition coming from Instagram ads. Is that a problem for the growth team or the online marketing team, or is that a product problem? Like where should I start if I have that situation?
Dan Hockenmaier [00:38:48] – It is primarily a product problem if you have tried other things and they haven’t worked, you typically need to do core product work to enable yourself to go into these other types of channels. I think the other thing is these are all, like we were just talking earlier, business model competitions where like the best companies at monetizing are going to win in paid marketing, and so if your product is better at monetizing, it allows you to then go do more of that, and so I think it’s like, it’s very hard to get in this place where you were just spending more and more into some of these core channels and watching that degrade, and so thinking about, yeah, what are the enablers of that?
Craig Cannon [00:39:26] – How do you think about that when you don’t necessarily have all the data? You’re talking about like, say you’re entering New York City, right, and you’re like, all right, we’re going to do a lot of paid to enter New York City, but you don’t necessarily know how long you can maintain that, and at what rate the ratio will shift and you start getting organic growth, you know what I’m saying? So like how do you even think about that in the early days of a new market?
Dan Hockenmaier [00:39:47] – It’s really hard. You certainly will be spending into negative ROI to start, and in these cases. You hopefully have built a model over time as you launch markets where you can understand what that curve looks like, and figure out where you are on that maturation curve, but I think understanding the shape of that curve is the most important thing, and you’re just going to have to test your way into it for the first few.
Gustaf Alströmer [00:40:11] – Dan, one of the kind of experiences that I’ve seen now becoming a pattern is, I worked with this YC company, they get funded, they get Series A funding, and then maybe even B funding, and then somewhere in that line, they get a board member, and that board member said, “Oh, you need a VP of Marketing, and you need a Head of Product Marketing,” and you already have maybe a growth person or online marketing person, and now you have these like multiple roles who are going after the same thing, and that tends to create friction, so I am curious as to learn and you have experience here so like what kind of advice do you give founders?
Dan Hockenmaier [00:40:47] – Absolutely. First of all, most companies can go longer without a VP of Marketing than they think they can. As a general rule of thumb, one of the problems we have in the market is how many really good experienced team builders who also know growth marketing and fit this VP Marketing profile are there? There’s not that many of them, and so like hiring the perfect person for that is very tough, but if you kind of like disaggregate the things that that person’s going to be asked to do, it’s, you know, growth marketing, which often should be closer to product actually or more like a real growth effort. Messaging, or like product marketing, those kinds of things, that can often be product marketing, and it may live in product or design or something like that, and then sometimes PR is also put into this which can also be a distinct thing, and so I think like, are you just solving, do you want all these things that you’re just trying to find the person that can do all those, or is there a way to solve your individual challenges with individual people that may be part of existing teams? I think one of the symptoms of bad organizational friction is when you have multiple teams working on the same metric without joint accountability. It’s like very classically a retention metric will get split between in product growth stuff and a marketing team owning email and push notifications, and it’s really hard if you get a disjointed consumer experience ’cause two teams are thinking about the same problem
Dan Hockenmaier [00:42:11] – and it’s much better if you can combine that into one, and adding somebody like a VP of marketing in the mix, can make that an even harder problem because both these leaders think that they own that.
Gustaf Alströmer [00:42:19] – If you make all these decisions, like how would you organize that? You have email, push notification, the classical CRM marketing stuff that often comes in a box from the company, and then you have the retention product team. If you make these decisions, like, what would you decide?
Dan Hockenmaier [00:42:35] – It depends a little bit on the company’s DNA. If they are at a place where they really understand analytical experimentation based approaches then maybe it’s easier to just build it as part of the product team. If you need to like prove that this works and evangelize it, you might want a standalone team where you go get a growth person, so I think that’s probably like the right starting point. I also think different areas of the funnel lend themself to different type of approaches. Acquisition is a little bit easier to disaggregate, because they’re unique channels where you know, some are more marketing heavy, like paid acquisition, which becomes very engineering heavy over time, some start very engineering and product heavy from the start, conversion and retention, those types of things, and so I think like thinking about the type of problem you’re trying to solve, but specifically for this retention question, I think it is typically healthier for that all to be within product pretty early on.
Gustaf Alströmer [00:43:29] – Do you think that every single person that you mentioned now should have a way to measure their ability to sort drive incremental growth for the company? Whether you’re in brand marketing or PR, or online marketing or product, should all of them sort share this incrementality metric, or are they kind of going after slightly different things?
Dan Hockenmaier [00:43:49] – Slightly different things. The growth stuff, the growth marketing stuff certainly should be all kind of contributing to this north star metric in a very clean kind of tree. I think where you have a challenge when you have these like, very hard to measure outside inputs like PR and brand and those types of things, I think, you know, brand is this like topic that we get all spun up on, but really like, the output of brand, like trust and reputation and things you care about, that is obviously very important, but what you can do with brand marketing is like actually a small piece of that. It’s like the awareness piece, it’s like maybe wrapping it in like a hook that people can remember it by. That’s not brand, that’s a way to accentuate brand, and so actually like, if you have a great product that people love, brand is just accumulated customer good will, so maybe actually the best way to grow your brand is just to get more people to your product, and that’s a growth team, you know? And so like I think, very often we’ll talk to a team that they have like, you know, their kind of paid marketing stuff going over here that’s very performance focused and they, for just some reason, have this other budget over here that doesn’t have any metrics tied to it and they’re willing to just spend on, “brand.” Very often that budget is wasted, and so I’m much more kind of amenable to as much about measurable core growth activities that ladder up to a metric.
Gustaf Alströmer [00:45:06] – Is it important for a startup, like even in the later stages, to measure brand awareness and brand consideration, like traditional brand marketing metrics, like is that useful?
Dan Hockenmaier [00:45:16] – The sentiment is very important, how many people, what your NPS is, how many people would be disappointed if you went away, those kinds of things are a really good signal around fit. Raw awareness and benchmarking, its competitors and those types of things, I have rarely seen that become actionable in a product, maybe with the exception of knowing when you’ve kind of tapped out a core market, but that’s a late stage problem
Craig Cannon [00:45:41] – Related to this, Tony asked about Airbnb, so you could talk about Airbnb in the context of “Wow, they have such a great brand,” but on the other hand, they have a great product. Tony asks, “How can a startup like Airbnb grow so quickly? Was it the need of the customers, was it marketing strategies, was it the idea of just travel in general and the dream of vacations?” What do you think?
Gustaf Alströmer [00:46:04] – I think that what made Aribnb unique on the guest side, so there’s two products, the host product and the guest product. On the guest side, it was the viral nature of this unique experience. If you go to New York and you stayed in an apartment that was in a local neighborhood and you just had a very unique experience that you’ve never had before, it is fundamentally something that you talk about when you come home, and we kind of studied this, we studied when do people talk about travel? Well, before you about to go travel, you ask your friends where to go. When you’re traveling, you post lots of photos and stuff online. That’s actually one of the prime things we do when we travel is to share information to our friends about it, and then when you come back and you tell all your friends how great it was, so this is natural things that people talk about, and similarly to how Uber and Lyft is sort of viral in their nature because it’s a new experience, and it’s something that we often do together with friends. I think that was the primary driver of this new, really great product. In terms of tactically, what we did, like I’ve seen graphs on the incrementality on online marketing in the old days of Airbnb, and it was very important. Like, had we not done online marketing early on, we would certainly not been as big as we are today, so that was critical. That was sort of pretty proven stuff. It was people Googling for things that related to Airbnb, or related to staying in homes or apartments, and we just bought those keywords,
Gustaf Alströmer [00:47:21] – and that helped us drive growth, and like Dan said, that was a very good way to be strategic about where we wanted to grow. Maybe it wasn’t super useful to buy these keywords in San Francisco, but if you were in Europe or in Asia or in Russia or somewhere, it certainly was very important to kickstart those market, and then after that, it was the word of mouth that drove most of it, but if you look at the composition of growth of Airbnb, word of mouth if by far the biggest driver, so I think it was like, way over 50% on the guest side, and way over like 70% on the host side of people that heard of Airbnb for the first time from a friend. After that, it was online marketing, referrals and SEO. Those are the three, sort of like teams and channels that we had, and remains very important, all those three channels, and at the scale it got to the point where like yeah, every single small tenth of a percent improvement matters a lot, so that’s sort of like, when you get to that scale, it’s not like you spin up a new channel and now you have lots of new growth in that channel, it doesn’t really work that way. There is this like, pretty expected ways that people will discover a product like Airbnb, and we just made sure we optimized them like crazy.
Craig Cannon [00:48:28] – Are there any examples of a already big company doing something and it’s like a step function improvement in retention or conversion?
Gustaf Alströmer [00:48:38] – The example I give on the Facebook graph on my YouTube video from Startup School, there were more product changes than there were anything else, but when Facebook figured out to translate and nationalize the site, it was very important for their growth. Obviously when they made it available outside of just university, this is a really big one, but then mobile was a huge one. I don’t know if we’ve seen a platform shift like that in the last five, seven years, but when we saw mobile happening, if you were a desktop app, then you were only speaking to a very small audience compared to what was going to happen, so rearranging Facebook for mobile, if you look at both Instagram and WhatsApp are mobile products, so that was a really big step function for them, and the last thing was making Facebook available in sort of like very data constrained and hardware constrained markets, so making like Messenger Lite and sort of like even acquiring WhatsApp and making Facebook available in places where like, the native Facebook app that we’re used to here wasn’t actually a great user experience.
Craig Cannon [00:49:45] – It was too heavy.
Gustaf Alströmer [00:49:45] – Yeah, and I think those are all product changes, but they are step functions for a company like that.
Craig Cannon [00:49:50] – Another international question, Michael Savage asks, “It would be great to discuss growth into new regions, for example Africa and UAE. What would their approach be? How does it differ from region to region, culture to culture?”
Gustaf Alströmer [00:50:06] – When we grew Airbnb, we actually divided international growth into two different buckets. One what we call, sort of like product limitations, and one we call, sort of like cultural impacts. I dunno, those are not the right words, but effectively trying to say, everyone said, “Oh, people in Germany are so different, people in France are so different, people in Japan are so different,” and that is in the hypothesis, often coming from people who live in those countries saying that we are different, so therefore we need a different experience, and it’s a very common thing that’s hard to prove, which is why everyone, a lot of people share that opinion. Now we needed to prove those things to be able to actually build a team around making the product different by cultures. In my experience, we basically started that process by asking around, and we didn’t find a lot of massive cultural differences. The stack was basically mobile phones, iOS and Android, desktop, Chrome, Facebook, Google, this is true for most markets in most countries. The exceptions are China, South Korea, Russia, maybe a handful other countries, those are the exceptions, but everyone else, kind of like the stack that I described, is sort of how people use your product. Within that, it was very hard for us to prove material changes and how people culturally use products. Now, the other thing, on the product side, for example, if you don’t have the stack, than that’s a difference, for sure, if you have slow internet or slow phones,
Gustaf Alströmer [00:51:28] – or any of those examples or like, that will materially impact, sort of like, how you use your product, but the thing about the top of the funnel in some of these countries is, for example, Google is not available in the sense that like it’s not a search engine in Russia or in Korea, or in China, so you have to do something else there. In the Middle East, and many of the more emerging markets, the ads are actually quite a good arbitrage for some of these companies, because there are not a lot of premium services that charge for things, and a lot of the brands have actually not gone on to these platforms yet, which means there’s a good arbitrage moment for startups.
Craig Cannon [00:52:08] – Ads anywhere, or ads on–
Gustaf Alströmer [00:52:09] – Ads on Facebook, or ads on Instagram or ads on Google, because the prices are so low and there aren’t like a lot of well developed companies that are actually sort of like able to take advantage of it, and there’s just as much usage on these platforms in these countries as there are here, if not more.
Craig Cannon [00:52:26] – Next question. Justin LaRosa asks, “What are some of the most common drivers of viral growth?”
Dan Hockenmaier [00:52:33] – I would say, my early part of my experience of my career was working on messaging and growing services like Voxer, through viral growth. It changed a lot, so the viral growth depended on certain platforms, typically platforms that have some sort of list of contacts, or list of friends that you grew through. Obviously Facebook is a different example of that. All of these platforms have changed in different ways, and we’re less susceptible to that today. There are pockets of interest, I think,
Gustaf Alströmer [00:53:06] – there’s like value growth inside corporations, like that is a really interesting one. I see a lot of companies are utilizing that in a different way, whether that is through your, let’s say, there’s a YC company growing through teachers that have nailed this really well, there’s another one who’s growing through sort of like the Google apps and sort of like, using the social proof, the coworkers using products, that’s a really strong one, and then I think you see these more, new niche variations of viral growth than you see the general, sort of like, viral growth, it’s just much more difficult these days to do it, and the channels aren’t generally available in the same way. The thing that still seems to be working pretty well is referrals, like incentivized viral growth, you just have to make sure you can measure the incrementality of that because you are giving away money for new users, but I often see YC companies sort of like, taking some of their referrals advice from Airbnb, and then coming back and saying actually, that was really meaningful for us and now we’re growing faster, so I have seen that continue to work versus the general viral channels have been, in many cases, saturated and not a good way for startups to grow anymore.
Dan Hockenmaier [00:54:17] – Virality is much harder, I totally agree, it’s like a much more kind of like closed networks rather than open networks. The other thing is, referrals are potentially more like paid marketing than they are like virality in some ways, and so thinking about it in that way and payback and the other things is really important, and so when we talk about the growth of referrals, we’re talking about another form of growth of paid marketing. A different end person who’s getting paid. Until we see a big platform shift, virality is harder and harder.
Craig Cannon [00:54:48] – What do you think about that in the context of a bootstrap company? How should they think about growth in that way?
Dan Hockenmaier [00:54:55] – Well one advantage of referrals is you have control over the lever such that you can make it ROI positive or you can make it work for you, so I think where companies get over their skis is when they’re not thoughtful about payback on these things. I just think thinking about it as free growth is not kind of the right way to approach it.
Craig Cannon [00:55:16] – Okay, yeah. AWS is so cheap, whatever.
Gustaf Alströmer [00:55:20] – After you left Thumbtack, you started your own growth agency, Basis One. If I’m a Series B founder out there looking to get help with these things . Should I go and hire a growth agency? Sort of like, why should I do that versus build my own team, just tell me a little bit about that.
Dan Hockenmaier [00:55:40] – The first answer is, you should not hire consultants in many cases. For almost all things related to growth, paid marketing, not only do you want to build that mostly yourself, but it’s like the front line. You’re dealing with your customers, and the feedback is so rich that if that person is not sitting next to somebody else in your team, you’re missing all of that learning, and so, maybe an agency or a consultant can help you get off the ground, give you best practices, particularly true if you were in like a well known space like e-commerce where there are frameworks you can apply, but typically your aspiration should be to have a smart, in-house team as quickly as possible. The way that we work with companies is somewhat tangential to this, which is focusing on really acute, high-leverage problems that we can, we have leverage on because we’ve seen them before, so why our customers churning, how do we use monetization to drive growth, and we’re not trying to replace the team, but rather unblock them such that they can execute really quickly and deliver them some insights that would take longer to get otherwise, but in most cases, particularly when it’s more operational, I would say build it yourself.
Gustaf Alströmer [00:56:45] – When are you done? Sort of like, if you work for the company, you’re like, my work is done here, like how do you know when you’re like, okay, I’ve completed my mission here.
Dan Hockenmaier [00:56:54] – It’s when the mental model is internalized, right? When they’re like, the conversation becomes really seamless, like that’s the right place, where they’re clearly off and running with it, and there is some insight about how the product grows, who the customer is, what they need, that is being internalized and acted upon that we feel really good that they’re going to take it from there.
Gustaf Alströmer [00:57:15] – And how long is typical an engagement for you guys?
Dan Hockenmaier [00:57:18] – We typically start around three months, sometimes we go longer than that, but sometimes that’s all you need to actually get up the curve and understand some of these things, and like, this is a never ending problem. Things like monetization growth you will always be optimizing, but at least for that kickstart or what are the spark or where are the areas to start, kind of what are the deep wells to start mining, that piece can be relatively quick.
Gustaf Alströmer [00:57:36] – Why did you start a consultancy versus just sort of like joining another company and working growth in another company?
Dan Hockenmaier [00:57:41] – I tried to join another company actually. I was working with founders and CEOs and like the journey at Thumbtack from like 30 to 500 was so fun, and I was going to go do that again, but I just started to see a consistency of the type of questions I was getting, and there weren’t really people on the other side that were able to effectively answer them. As an independent advisor, it was kind of hard to provide the help that they needed, but when we started pairing it to analytics and user research and the ability to like really wrestle a problem to the ground, that’s when it became really powerful, so I mean the short answer is we kind of like, grew into it organically and it’s just really fun to get to work with a lot of these founders, so we’ve stuck with it.
Craig Cannon [00:58:20] – Cool. Last question, which was actually submitted by Gustav, as two people who both advise and work in growth, how do you think about growth in the context of improving humanity, given that a lot of these products have filter bubbles, like, can create addictive responses, and on the other hand, like you’re trying to make the world a better place. How do you balance that?
Dan Hockenmaier [00:58:47] – I’m optimistic here. I think there are maybe two reasons for that, one of which I think is more valid, but I think one is, companies like Facebook and others maybe got some flak because they were optimizing for these short-term metrics like click through rate and time on site and those types of things, that over time has become more sophisticated and measure longer term metrics, you can optimize more, you know, in keeping with both the interest of the company and the consumer, so that’s one angle of it. The one that I give more credence to is that like, this stuff, the cat’s out of the bag, right, like we’re not going back to a world where we don’t have these addictive products competing for our attention, but we can weaponize these same tools we have learned for good things. Other products are wanting to come in, you know you see this happening with meditation apps and exercise apps and healthy eating apps, they’re using all the same growth tactics to turn you into a better person, and I’d like to see more and more of that, and so I think like, the way is not to try to like, put the cat back in the bag, but just to fight back with the channels or the tactics we’ve already built.
Gustaf Alströmer [00:59:54] – I asked this question, I thought about it a lot in the last year. I think as a growth team, you should have principles. You should be like, try to figure out, these are the principles that I want to follow. Some of that means I’m not going to have any dark patterns in our app, and the most important thing is to ask the question why. Like if something is really working, why is it working? Like why is it that this is now sort of like changing the behavior of my users, and the more you understand that I think, the more safer place you are in terms of sort of like, making good decision for the company, and then I would say, much of this that we’re talking about is actually tied to engagement driven products, so products like you mentioned that are fighting for our attention. That’s sort of like where much of this have happened, and I think there is a fundamental problem, sort of like with the driving the attention and then sort of like having advertising as a monetization engine. If you changed that and you say, actually, I am the customer, I’m paying for the product, then you get different outputs, because now you’re optimizing for me as a customer. You’re not optimizing for someone else. I think there’s like, there are nuances here, and I think these are probably the most challenging questions to answer for companies that are fighting for our attention, especially if you’re a free product fighting for our attention, versus for many other products like, I think it’s actually massively beneficial to them to do a lot more of this.
Craig Cannon [01:01:15] – That’s great, all right, thanks for coming in.
Gustaf Alströmer [01:01:16] – Thank you so much.
Dan Hockenmaier [01:01:16] – Thank you.
Craig Cannon [01:01:19] – All right, thanks for listening. As always, you can find the transcript and the video at blog.ycombinator.com. If you have a second, it would be awesome to give us a rating and review wherever you find your podcast. See you next time.