32 ms·

Before Growth

364 points by firloop 11y ago

ivankirigin 11y ago
It seems like there are a million different ways to say the same thing: early on focus on retention. You can get this from your data at sufficient scale. You can get it from surveys like NPS. You can get it from talking to customers. One problem I have with the word "growth" is that it implies top level acquisition. A better definition would be hitting your goals. If you want to grow your retained userbase, then getting top level acquisition isn't actually hitting your goal.
- solve 11y ago
  Retention and NPS seem orthogonal.
  - ivankirigin 11y ago
    Nope. NPS is a measure of satisfaction. You care about the word of mouth component, but it isn't measuring something different than retention.
    - solve 11y ago
      Nope. They're literally measuring two different things, return rates vs "would tell a friend" rates. Whether those two happen to coincide is quite product-dependent. Finding examples where they significantly diverge is trivial.
      - tyre 11y ago
        A recent example of this is Peach. Did people want to tell their friends? Yes, but not because they loved the product. Because they wanted to be seen as cutting edge. Most of the product hunt/tech crunch circle jerk is stuff like this. Lots of fluff with short-term spikes but little long term retention because the product doesn't solve a real need.
  - rgbrgb 11y ago
    I'd say they're different, but definitely not orthogonal. NPS asks if you'd recommend the product, retention is how long you stick around after first use. Both metrics embed the user's affinity for the product (which is the underlying thing sama's saying to measure and improve).
bsbechtel 11y ago
Also, good unit economics or a plausible path to get to good unit economics for your product (i.e., technology pipeline will dramatically reduce some key cost for your company).
pquerna 11y ago
I think the right initial metric is “do any users love our product so much they spontaneously tell other people to use it?” Many larger companies use "Net Promoter Score", as a way of telling this: https://en.wikipedia.org/wiki/Net_Promoter https://en.wikipedia.org/wiki/Net_Promoter Of course, like Agile, there are Consultants, a methodology and books, but there is some truth in asking your customers if they would promote you to another person.
Aqueous 11y ago
I don't really understand why they need to grow quickly. You only need to grow quickly if you take millions of dollars and need to distribute a profit to your investors before too long. Whatever happened to growing slowly, proving the revenue stream before you throw millions of dollars at something? Why is that such a bad thing? I understand from a VC's point of view why it's a bad thing, and that's the point of view which YC and other incubators are coming from. But why is it a bad thing for the entrepeneurs? Taking time to consider what you're building is important. Taking time to grow is also important.
- jryan49 11y ago
  Because the point of starting startups isn't to create a successful business. It's to trick VCs into giving you money to burn! /s
  - JonFish85 11y ago
    I think this comment still stands without the "/s". The extension is that VCs pawn the company off to the public markets, take their money and are long gone when reality catches up (Twitter, Square, GoPro, Zynga, Groupon...).
    - daniel_levine 11y ago
      definitely... MSFT, Facebook, Google, Apple, Salesforce...
      - JonFish85 11y ago
        I'll give you Facebook and Salesforce, they're the only ones comparable
      - slededit 11y ago
        MSFT was profitable from almost day 1. I don't think its a good comparison.
      - smacktoward 11y ago
frik 11y ago
Two months ago: https://news.ycombinator.com/item?id=10495402 https://news.ycombinator.com/item?id=10495402 (Altman's previous blog article) How much or little has changed?
thedaveoflife 11y ago
So his advice is to build a great product?
- beat 11y ago
  Or "If you don't build a great product, nothing else you do matters".
minimaxir 11y ago
> A startup that prematurely targets a growth goal often ends up making a nebulous product that some users sort of like and papering over this with ‘growth hacking’. That sort of works—at least, it will fool investors for awhile until they start digging into retention numbers—but eventually the music stops. But by then, the startup has already won. They already got the funding thanks to their sleazy marketing, and the social validation/connections that comes with it. The essay doesn't contradict the "it is easier to ask for forgiveness than permission" idiom, unfortunately.
- salmonet 11y ago
  >But by then, the startup has already won. They already got the funding thanks to their sleazy marketing, and the social validation/connections that comes with it. Only if getting seed money and failing in 18 months is their idea of winning. I have a hard time seeing how this is an ideal outcome in either the short or long term for anyone.
- Mahn 11y ago
  > But by then, the startup has already won. Has it, though? You will run out funding eventually, and if your revenue isn't cutting it, your users are leaving, the few employes you have quit, etc... Getting funded doesn't solve everything magically.
- beat 11y ago
  They've maybe won the game they thought they were playing - the one where you get an investment and maybe mentioned on TechCrunch and stuff. They lose the game they're actually playing, which is to build a sustainable business.
sharemywin 11y ago
I'm curious what happened to HomeJoy? They talked about having good cohort analysis numbers(retention) and then they blew up?
- beat 11y ago
  They ran out of money, basically.
andrewmcwatters 11y ago
Isn't Y-Combinator's whole thing "Make something people want."? That's a rather succinct and meaningful statement on its own. A very powerful one that should be held above perhaps all others. I'm sure that whatever your business practices are, after boiling everything away, you should be doing this above all things. An article like this suggests perhaps some sizable amount, or many organizations are losing sight of the way.
EGreg 11y ago
NAIL ENGAGEMENT FIRST. THEN GROWTH. Otherwise you are just bruning through users. Your best hope is to attract them back later via transactional notifications.
- cdmcmahon 11y ago
  Yep. Growth almost never happens by continually attracting more users than you lose. It happens by not losing your current users and continually adding more.
magicmu 11y ago
> I think the right initial metric is “do any users love our product so much they spontaneously tell other people to use it?” Until that’s a “yes”, founders are generally better off focusing on this instead of a growth target. It all comes back to this. I was listening Aaron Harris' interview with Digital Ocean's Mitch Wainer on Startup School Radio the other day (phenomenal podcast). Wainer mentioned how people actually love Digital Ocean, and how rare it is for that word in particular to be paired with the name of a company. I think it's said so often that it can easily be glossed over, but that word is not chosen lightly. Having a product users actually love is extremely difficult, and extremely rewarding.
- blizkreeg 11y ago
  I've wondered what about Digital Ocean users love so much (I'm a customer)? They are not the first to offer cloud housting at cheap prices (I've used slicehost, EY before they became pricey in the past). Is it price? Is it ease of setup? Something else?
  - rgbrgb 11y ago
    What appealed to me initially was that they were charging the same as the shady ultra cheap VPS providers but had an actual brand I could trust and were actively developing software to make managing their boxes easier. When I first saw them I was in college, so very price sensitive. They also have had a really effective content strategy from the start [0]. The tutorials are mostly on open source stuff you can do on any infrastructure provider, but the quality is pretty good and reinforces the trustworthiness of the brand. [0]: https://www.digitalocean.com/community/get-paid-to-write https://www.digitalocean.com/community/get-paid-to-write
  - magicmu 11y ago
    For me, it's the wealth of tutorials and set-up information, as well as the straight-forward nature of their interface (both at a web and shell level). The pricing model is also fantastic.
betadreamer 11y ago
Great post where great product -> growth, but I think it's not stating the real problem. We need to ask why founders are starting to have this mentality. From my perspective this is because YC tends to give too many generic advices and some sticks more than others. The big one that caused this is PG's startup = growth post, and yes he is right and it specifically states you really need to concentrate on growth. If you have to take away one thing, then it will be growth but this generalization is very dangerous because as Sam's post states you need a product before growth. The better advice is to not concentrate on one thing but to bluntly say you need to have everything and everything will all come together. You need great team, great product, and great growth. If one is weak, you need to fix it.
steve-benjamins 11y ago
As Warren Buffet has said, the best strategies are “simple but hard.” This is YC advice at it’s best. (I'm paraphrasing Buffet)
applecore 11y ago
This is closely related to Aristotle's concept of potentiality[1] and the active intellect. More succinctly, a startup must build up the potential energy of its product prior to transforming it into the kinetic energy of growth. [1]: https://en.wikipedia.org/wiki/Potentiality_and_actuality https://en.wikipedia.org/wiki/Potentiality_and_actuality
- erikpukinskis 11y ago
  I like this. I am also reminded of something I read about agriculture and food forests. The idea was that all land "wants" to return to its forest state, and that traditional agriculture requires constant energy inputs to hold the land in a raw, tilled state that can be quickly planted. The alternative is planting multiple compatible canopies—an edible forest—so it can stably sustain itself without inputs. I think something similar happens socially... Whenever you diverge from the standard model of doing things (as startups do) it requires a massive amount of energy to stay in that raw state. Markets, employees, everything "wants" to pull you back to the typical way of doing things. The forest of the status quo fights like hell to grow back. So ideally what you want to do is clear a little land and ASAP plant a complete ecology that can fill that little space. I think this is where I get to the potential energy.... If you are going to have to wait a long time to plant all the different parts of the ecology, you need more potential energy to hold the land open. If you are going to plant a balanced ecology right away, you can get away with less energy. Anyway. Mixed metaphors but I appreciate the opportunity to mix in your idea to things I've been thinking about.
mildbow 11y ago
This is interesting in how un-interesting it is. Find product-market fit before taking investment. Because the only reason to take VC investment (for the etype of startups we are talking about) is as a steroid injection towards growth. Why is this the only time it makes sense? Because that's the only way you and your investor's incentives are aligned. Now, whether you need to/should grow fast to survive in the long term is another question.
- danielrhodes 11y ago
  This. It's fine to raise a seed round (< 1M) to experiment with some ideas, but raising money after that without product market fit is a recipe for failure. If you don't have P/M fit and you raise a bigger round, you're going to hire people and create an organization around something that doesn't work. With those extra people and processes, things are going to slow down to the point where finding that P/M fit becomes much harder. Moreover, you are now accountable for expectations and a reasonable return for your investors, which is not a bad thing, but it is a distraction when it comes to P/M fit. For B2B businesses, raising a Series A means being able to hire your first sales/marketing people. For consumer businesses, raising a Series A means being able to pay for the growth that's happening without worrying about revenue right away.
throwaway41597 11y ago
small typo: "and that also usually gets figure out early" => figured
beat 11y ago
This reminds me of pg's comments about "playing house". The appearance of a startup is more important than the reality of a startup, for founders whose core drive is to "be a startup founder", not "create this product the world desperately needs so maybe it will stop haunting my dreams". I've met founders like this, recently. They're building some sort of social app that does something no one needs and no one would pay for. Maybe I'm being dense and they're actually geniuses, but I don't think so. Most startups fail, and I think a lot of that is because a lot of startups are really stupid. They're "solving" worthless non-problems because the founders aren't doing the hard work of finding real, valuable problems to solve. Building a great product is really hard. And it can't all be done completely lean - at some point, you need to envision something so profound that people don't realize how much they need it. You don't just write Hello World, charge a buck, growth hack, and brag about how you got two bucks for it the next week. As Henry Ford said, if he'd asked customers what they wanted, they'd have said faster horses. Don't build a faster horse. You won't be great that way.
- gxs 11y ago
  As an aside, reading posts like this makes me feel a little better. I'm 31, have a great job etc., but have always wanted to start a company. The problem is, I've never encountered a problem big enough that would want me to do this and rather than start a company for the hell of it, I've just stayed put. What is the right move in this scenario? Start a shitty company, or keep the nice job and potentially regret never starting a company? Viewed from this perspective, it's not as clear.
  - api 11y ago
    Find a problem. What would you pay to have solved? Now out of that list, what do you have the skills and experience to address?
    - cookiecaper 11y ago
      Don't forget to ask "Am I going to get to $50 million in revenues before a big company sues me?" If not, recognize that room for your existence is limited.
hitekker 11y ago
>I think the right initial metric is “do any users love our product so much they spontaneously tell other people to use it?” Until that’s a “yes”, founders are generally better off focusing on this instead of a growth target. I have a warning for future, young developers: do NOT join a startup that hasn't found product/market fit, and isn't trying, with all of its might, to find that product/market fit. And when I say, by all of its might, I mean companies that product/market fit isn't the first and foremost goal of the startup. This is really hard to determine from the outside. For example, a friend of mine is working in a well-funded, post series A startup that just declared internally its biggest target was a billion dollars of products shipped by the end of the fiscal year. The team is smart, the founders are passionate, and they've been judicious with their funding. Problem is that the CEO herself admitted that they don't yet have product/market fit. Which is to say their "guiding light" metric is a lagging indicator, i.e. it measures that tail-end of their efforts, and certainly not how much customers love them (and are willing to pay). It's the equivalent of early Facebook using advertising revenue or page views as their growth target instead of monthly active users. As Sam Altman points out, everything they do will be "hacking" or, as PG puts it, doing tricks that are not sustainable for a real, billion dollar company, in attempts to achieve that misleading number. At least from what she told me, the most senior engineer said that this isn't bad: the engineers will focus on product/market fit and the sales/marketing teams will focus on growth. Of course, she didn't say that, in a conflict between the fake growth target and product/market fit, the fake growth target always wins. Even now, I'm trying to pull my friend out, before the mental gymnastics set in. Don't be fooled. A startup needs a real, sometimes small, star in the sky to navigate churning waters. A ship that chases the moon is a ship that will soon be sinking.
- magicmu 11y ago
  This is absolutely true. I work for a YC-backed startup and sometimes felt like that "star in the sky" wasn't there, and worried that my lack of faith was disturbing (to quote movies). Thankfully, the founders here are open enough that I was able to voice my concerns, and it turns out that I had a totally incorrect idea of the product/market fit that they were/are aiming for. As a core member of the dev team, this could have been a potentially catastrophic misunderstanding. So yeah, everyone being on the same page and seeing that same goal is really crucial.
gustaf 11y ago
This is a great post. This is the by far most common miss-understanding I get from new startups. People are far too confident their product have reached product-market-fit before that is actually true - often making this claim with very little data. I've seen many VC's who are not data-literate enough to be able to understand the difference between measuring product value and growth without substance.
rdlecler1 11y ago
Sometimes it's best to grow more slowly at first, build your brand, your culture, figure out your process, don't burn through mountains of cash (if you're lucky enough to have that problem) and wait for the market to come around.
hammock 11y ago
Sam is talking about the importance of watching leading indicators when there is a good bit of time between your present actions and future performance. If you are relying on your users to drive growth, an easy-to-measure proxy of "do any users love our product so much they spontaneously tell other people to use it?" is Net Promoter Score[1], or the difference between the % of users who would recommend you, and those who would not. There are other (perhaps non SV startup) businesses that dont rely on users to drive growth. For example, if you rely heavily on distribution arrangements or retail placement. In that case you might want to look at other metrics that are leading indicators of growth. [1]https://en.wikipedia.org/wiki/Net_Promoter https://en.wikipedia.org/wiki/Net_Promoter
- shawn-furyan 11y ago
  If you are bothering the user with a modal, popup, post-install screen, etc., then why not ask your customers TO promote the product providing Email and Social sharing options? Then you can measure how many people ACTUALLY promoted your product, instead of how many said they would (but mostly probably didn't). Declared action is a notoriously unreliable signal.
  - deleted 11y ago
    [deleted]
danieltillett 11y ago
The alternative to this is focus on getting your customers to pay you in advance for your product. Not only will this tell you if your customers really love your product, but it will provide you with all the cash you need to grow as fast as you want. The downside is very few products are that loved that customers will pay for 12 months in advance.
muxme 11y ago
I'm running into the growth problem with my website: http://muxme.com http://muxme.com. Lots of people say the love the website, but it seems like no one is telling their friends. I was thinking of maybe adding user created sweepstakes, because I think the only way people would spontaneously tell their friend is if they win something from the site. More winners = more people telling their friends, but I can only go so far on my budget. What do you guys think?
- dsugarman 11y ago
  when you talk to your users, ask them if they've shown this to their friends. If they haven't ask them why they haven't. If they have ask them why their friends didn't like it. I would also recommend sending out a NPS survey to all your users
- seibelj 11y ago
  how would your website ever make money? Why would someone post a sweepstakes?
  - muxme 11y ago
    I'm not worried about money, I'm worried about growth. There are services like RaffleCopter / Gleam / KingSumo / Woobox / etc. which let you create Sweepstakes to promote viral growth for your website or business.
- beeboop 11y ago
  I don't think anyone I know would be interested in this website. So even if one person likes, it doesn't mean any of their friends will. As a web savvy person, I assume services like this are not worth trying because 1) it's just as likely to be a scam as not and 2) even if it's worth it right now, it will soon not because because of people gaming/spamming the system. The odds of winning an item for free are not displayed, and therefore are assumed to be astronomically high. It's assumed it's not a good return on my time to register and enter. That said, it's a cool site, and I like your intentions. I do not think there's going to be a feasible way to prevent gaming and spamming unfortunately.
compumike 11y ago
Great essay, Sam! I want to expand slightly from a founder's perspective: You always have two constituencies to think about: (A) your users / customers, and (B) your not-yet-users/customers. "Before growth", you should really pay very very little attention to constituency B. If you're doing anything interesting, there will always be a torrent of skeptics, doubters, and haters. (That sucks, but it's very human, and you just have to ignore it.) Focus entirely on constituency A. There are three "R" metrics to look for: (1) Retention. (2) Revenue. (3) Referrals. (Note: these are the three "RRR" of the classic "AARRR" model.) Initially, constituency A might just be your friends or extended network who you can convince give what you've built a try. You may be able to get them to try your new product once or twice, but that's about it. However, if they keep using it again and again voluntarily, that's a really good sign (Retention). If they voluntarily and happily pay for it, that's great (Revenue). And if they voluntarily tell other people they know about it (Referrals), that's amazing! Until you have those nailed -- or at least retention and referrals if you're deferring monetization -- don't worry at all about the "B" group (i.e. don't worry about acquiring new leads at the top of your funnel), because you don't have product-market fit yet. Once you do have a product that the constituency A people love, only then can you start thinking about constituency B and how to turn them into new happy users / customers. (While continuing to make your constituency A happy!) I think Sam is going a step further to place extra emphasis specifically on Referrals out of all three of these metrics. This is a subtle but powerful insight. Whether your product is B2C or B2B, most purchasing decisions have a huge emotional component. If your product is so good that your users want to tell other people about it, that's a huge step above being merely satisfactory, and goes a huge way toward powering your growth. I don't care if you're buying a burrito, a car, CDN bandwidth, or an analytics SaaS. You as a buyer want a reasonable degree of certainty that you're going to feel good about that purchase after you've made it. Hearing that referral from your peer, whether a friend who tried that food truck before, or another engineer who used that SaaS provider before, goes a huge way toward giving you that pre-purchase confidence. If your users aren't excited enough about it to be talking about it with their peers, you may have to adjust your product or your segmentation of the market until you get there.
cdmcmahon 11y ago
This definitely rings true to me. The company I work for has been around for ~6 years and while we have made money and grown in that time, it wasn't until the last year really that we hit on exactly what our clients love about our product and continued to nail that. It can take way, way longer than some entrepreneurial people are comfortable waiting for. But now that we've found it, and are continuing to expand our product around what we've found, growth is starting to come much more easily.
free2rhyme214 11y ago
Didn't Alex Schultz, VP of Growth at Facebook, already say this... https://www.youtube.com/watch?v=n_yHZ_vKjno&feature=youtu.be&list=PLXIzh6qwMf9htBjuMGPWVoPE-1Jk0oeep https://www.youtube.com/watch?v=n_yHZ_vKjno&feature=youtu.be...
edanm 11y ago
'I think the right initial metric is “do any users love our product so much they spontaneously tell other people to use it?' Question - is this a valid metric when talking about B2B companies? I would imagine there are plenty of B2B solutions which became huge, but which don't exactly have companies rushing out to tell everyone to use them. I tend to think sama's question is only relevant for B2C, but I'd love to be proven wrong.
- baldajan 11y ago
  I would imagine it also applied for B2B. Think about apps like Coda, or services like GitHub. I remember using a task tracking system that I completely swore by and told everyone I knew about. All it did was track tasks and is very much B2B, but my obsession with its UI made me more productive and those became a talking point, where I'd always highly recommend it. Slack is another great example of a B2B co that passes that test.
colund 11y ago
This growth belief reminds me of the trap of focusing on 'what' instead of 'why' as in https://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action https://www.ted.com/talks/simon_sinek_how_great_leaders_insp... It seems stupid to do something just because you think you're expected to do it rather than think for yourself and do what you want to do and think would be a good idea.
Mz 11y ago
So, basically, get the seeds right, then plant, water, and tend. Don't get crappy seed ideas and try to overcome their deficiencies with some kind of fertilizer. (fertilizer AKA "manure"/bs.)
adamb 11y ago
Perhaps I'm the only one that sees this, but this essay appears to be a significant departure from the YC rhetoric I've observed in the past few years. Every time I've heard retention discussed (at YC) in the context of growth, it's cast as something you address when your growth has stalled. Not, as this essay would lead you to believe, a prerequisite of growth itself. This essay, while it discusses a really important idea, comes across as saying: "Foolish, fashion-focused founders! Clearly retention comes first! We would never imply that you should focus on growth before your product had adequate retention!" But that's exactly what I've seen YC partners do. Recommend that companies focus on growth, because that's what YC's definition of a startup is: a company that grows very quickly. Having seen both sides of the curtain, the essay leaves me with a greasy, queasy feeling. Am I missing something here? Sam, are you changing your standing advice from "focus on growth" to something else? If that's what this post signals, please take ownership of the change and spell it out. It's poor form to imply that misguided founders (and their devotion to a fad) are driving the growth zealot craze when you've had a hand on the wheel for years.
- sama 11y ago
  Our motto is "Make something people want!" If that's not a statement about retention, I'm not sure what would be. And a startup needs to grow quickly. It's not an either/or--at most, it's a sequencing issue. Most founders fail because they don't make a product product some users love, or they never make a product at all. Others fail because they don't figure out how to grow fast. But the best way to grow fast is to have a product that's so good people tell their friends about it. All I'm saying is that I think things have shifted--perhaps because we've given bad advice, but also probably for lots of other reasons--and founders should course correct.
  - adamb 11y ago
    It's definitely a sequencing issue. Glad you mention the "make something people want" motto :). I've recently realized that it's actually wrong. Well, backwards. A more instructive formulation is: "find something people want and make it." Better to acknowledge the value of the search (and confidence in the finding) before encouraging the making. I have seen many founders struggle to understand when the time to grow is. Pressure to raise deepens the struggle. On the topic of growth vs retention, of the hundreds of founders I have met or read about, I have been most inspired by the actions of Ooshma Garg (of Gobble). The quality of her service is second to none. She's the only founder I've ever met that has completely shut down her product because it wasn't good enough, only to reboot it to better quality, retention, sales, and growth than ever before. In my experience (flawed and narrow as it is), the best way to course correct is to issue a recall. Treat bad advice like bad goods. Post the criteria where those affected will recognize themselves and make needed reparations. As a community, we need to better celebrate founders that are doing it right. Not mock those of us still figuring it out. If YC wants to get the word out about prioritizing product market fit above growth, it should elevate Ooshma's perspective, along with other founders that have made similar gut-wrenching decisions to invest heavily in retention while sacrificing weekly growth targets. Overall I'm glad you wrote and posted the essay. And I appreciate any humility you may have felt while drafting it.
amelius 11y ago
> The other thing that these companies have, and that also usually gets figured out early, is some sort of a monopoly. I wonder how this would apply to, say, Uber and AirBnB. What kind of monopoly do they have?
avivo 11y ago
I've been explaining this perspective to most clients for years, almost word for word. Specifically the question/focus: "do any users love our product so much they spontaneously tell other people to use it?" I'm excited to now have an "official" source I can easily cite for it! I think there are some businesses where this might be less true, but it's pretty rare.

364 points by firloop 11y ago

It seems like there are a million different ways to say the same thing: early on focus on retention. You can get this from your data at sufficient scale. You can get it from surveys like NPS. You can get it from talking to customers. One problem I have with the word "growth" is that it implies top level acquisition. A better definition would be hitting your goals. If you want to grow your retained userbase, then getting top level acquisition isn't actually hitting your goal.

solve 11y ago
Retention and NPS seem orthogonal.
- ivankirigin 11y ago
  Nope. NPS is a measure of satisfaction. You care about the word of mouth component, but it isn't measuring something different than retention.
  - solve 11y ago
    Nope. They're literally measuring two different things, return rates vs "would tell a friend" rates. Whether those two happen to coincide is quite product-dependent. Finding examples where they significantly diverge is trivial.
    - tyre 11y ago
      A recent example of this is Peach. Did people want to tell their friends? Yes, but not because they loved the product. Because they wanted to be seen as cutting edge. Most of the product hunt/tech crunch circle jerk is stuff like this. Lots of fluff with short-term spikes but little long term retention because the product doesn't solve a real need.
- rgbrgb 11y ago
  I'd say they're different, but definitely not orthogonal. NPS asks if you'd recommend the product, retention is how long you stick around after first use. Both metrics embed the user's affinity for the product (which is the underlying thing sama's saying to measure and improve).

bsbechtel 11y ago

Also, good unit economics or a plausible path to get to good unit economics for your product (i.e., technology pipeline will dramatically reduce some key cost for your company).

pquerna 11y ago

I think the right initial metric is “do any users love our product so much they spontaneously tell other people to use it?” Many larger companies use "Net Promoter Score", as a way of telling this: https://en.wikipedia.org/wiki/Net_Promoter https://en.wikipedia.org/wiki/Net_Promoter Of course, like Agile, there are Consultants, a methodology and books, but there is some truth in asking your customers if they would promote you to another person.

Aqueous 11y ago

I don't really understand why they need to grow quickly. You only need to grow quickly if you take millions of dollars and need to distribute a profit to your investors before too long. Whatever happened to growing slowly, proving the revenue stream before you throw millions of dollars at something? Why is that such a bad thing? I understand from a VC's point of view why it's a bad thing, and that's the point of view which YC and other incubators are coming from. But why is it a bad thing for the entrepeneurs? Taking time to consider what you're building is important. Taking time to grow is also important.

jryan49 11y ago
Because the point of starting startups isn't to create a successful business. It's to trick VCs into giving you money to burn! /s
- JonFish85 11y ago
  I think this comment still stands without the "/s". The extension is that VCs pawn the company off to the public markets, take their money and are long gone when reality catches up (Twitter, Square, GoPro, Zynga, Groupon...).
  - daniel_levine 11y ago
    definitely... MSFT, Facebook, Google, Apple, Salesforce...
    - JonFish85 11y ago
      I'll give you Facebook and Salesforce, they're the only ones comparable
    - slededit 11y ago
      MSFT was profitable from almost day 1. I don't think its a good comparison.
    - smacktoward 11y ago

frik 11y ago

Two months ago: https://news.ycombinator.com/item?id=10495402 https://news.ycombinator.com/item?id=10495402 (Altman's previous blog article) How much or little has changed?

thedaveoflife 11y ago

So his advice is to build a great product?

beat 11y ago
Or "If you don't build a great product, nothing else you do matters".

minimaxir 11y ago

> A startup that prematurely targets a growth goal often ends up making a nebulous product that some users sort of like and papering over this with ‘growth hacking’. That sort of works—at least, it will fool investors for awhile until they start digging into retention numbers—but eventually the music stops. But by then, the startup has already won. They already got the funding thanks to their sleazy marketing, and the social validation/connections that comes with it. The essay doesn't contradict the "it is easier to ask for forgiveness than permission" idiom, unfortunately.

salmonet 11y ago
>But by then, the startup has already won. They already got the funding thanks to their sleazy marketing, and the social validation/connections that comes with it. Only if getting seed money and failing in 18 months is their idea of winning. I have a hard time seeing how this is an ideal outcome in either the short or long term for anyone.
Mahn 11y ago
> But by then, the startup has already won. Has it, though? You will run out funding eventually, and if your revenue isn't cutting it, your users are leaving, the few employes you have quit, etc... Getting funded doesn't solve everything magically.
beat 11y ago
They've maybe won the game they thought they were playing - the one where you get an investment and maybe mentioned on TechCrunch and stuff. They lose the game they're actually playing, which is to build a sustainable business.

sharemywin 11y ago

I'm curious what happened to HomeJoy? They talked about having good cohort analysis numbers(retention) and then they blew up?

beat 11y ago
They ran out of money, basically.

andrewmcwatters 11y ago

Isn't Y-Combinator's whole thing "Make something people want."? That's a rather succinct and meaningful statement on its own. A very powerful one that should be held above perhaps all others. I'm sure that whatever your business practices are, after boiling everything away, you should be doing this above all things. An article like this suggests perhaps some sizable amount, or many organizations are losing sight of the way.

EGreg 11y ago

NAIL ENGAGEMENT FIRST. THEN GROWTH. Otherwise you are just bruning through users. Your best hope is to attract them back later via transactional notifications.

cdmcmahon 11y ago
Yep. Growth almost never happens by continually attracting more users than you lose. It happens by not losing your current users and continually adding more.

magicmu 11y ago

> I think the right initial metric is “do any users love our product so much they spontaneously tell other people to use it?” Until that’s a “yes”, founders are generally better off focusing on this instead of a growth target. It all comes back to this. I was listening Aaron Harris' interview with Digital Ocean's Mitch Wainer on Startup School Radio the other day (phenomenal podcast). Wainer mentioned how people actually love Digital Ocean, and how rare it is for that word in particular to be paired with the name of a company. I think it's said so often that it can easily be glossed over, but that word is not chosen lightly. Having a product users actually love is extremely difficult, and extremely rewarding.

blizkreeg 11y ago
I've wondered what about Digital Ocean users love so much (I'm a customer)? They are not the first to offer cloud housting at cheap prices (I've used slicehost, EY before they became pricey in the past). Is it price? Is it ease of setup? Something else?
- rgbrgb 11y ago
  What appealed to me initially was that they were charging the same as the shady ultra cheap VPS providers but had an actual brand I could trust and were actively developing software to make managing their boxes easier. When I first saw them I was in college, so very price sensitive. They also have had a really effective content strategy from the start [0]. The tutorials are mostly on open source stuff you can do on any infrastructure provider, but the quality is pretty good and reinforces the trustworthiness of the brand. [0]: https://www.digitalocean.com/community/get-paid-to-write https://www.digitalocean.com/community/get-paid-to-write
- magicmu 11y ago
  For me, it's the wealth of tutorials and set-up information, as well as the straight-forward nature of their interface (both at a web and shell level). The pricing model is also fantastic.

betadreamer 11y ago

Great post where great product -> growth, but I think it's not stating the real problem. We need to ask why founders are starting to have this mentality. From my perspective this is because YC tends to give too many generic advices and some sticks more than others. The big one that caused this is PG's startup = growth post, and yes he is right and it specifically states you really need to concentrate on growth. If you have to take away one thing, then it will be growth but this generalization is very dangerous because as Sam's post states you need a product before growth. The better advice is to not concentrate on one thing but to bluntly say you need to have everything and everything will all come together. You need great team, great product, and great growth. If one is weak, you need to fix it.

steve-benjamins 11y ago

As Warren Buffet has said, the best strategies are “simple but hard.” This is YC advice at it’s best. (I'm paraphrasing Buffet)

applecore 11y ago

This is closely related to Aristotle's concept of potentiality[1] and the active intellect. More succinctly, a startup must build up the potential energy of its product prior to transforming it into the kinetic energy of growth. [1]: https://en.wikipedia.org/wiki/Potentiality_and_actuality https://en.wikipedia.org/wiki/Potentiality_and_actuality

erikpukinskis 11y ago
I like this. I am also reminded of something I read about agriculture and food forests. The idea was that all land "wants" to return to its forest state, and that traditional agriculture requires constant energy inputs to hold the land in a raw, tilled state that can be quickly planted. The alternative is planting multiple compatible canopies—an edible forest—so it can stably sustain itself without inputs. I think something similar happens socially... Whenever you diverge from the standard model of doing things (as startups do) it requires a massive amount of energy to stay in that raw state. Markets, employees, everything "wants" to pull you back to the typical way of doing things. The forest of the status quo fights like hell to grow back. So ideally what you want to do is clear a little land and ASAP plant a complete ecology that can fill that little space. I think this is where I get to the potential energy.... If you are going to have to wait a long time to plant all the different parts of the ecology, you need more potential energy to hold the land open. If you are going to plant a balanced ecology right away, you can get away with less energy. Anyway. Mixed metaphors but I appreciate the opportunity to mix in your idea to things I've been thinking about.

mildbow 11y ago

This is interesting in how un-interesting it is. Find product-market fit before taking investment. Because the only reason to take VC investment (for the etype of startups we are talking about) is as a steroid injection towards growth. Why is this the only time it makes sense? Because that's the only way you and your investor's incentives are aligned. Now, whether you need to/should grow fast to survive in the long term is another question.

danielrhodes 11y ago
This. It's fine to raise a seed round (< 1M) to experiment with some ideas, but raising money after that without product market fit is a recipe for failure. If you don't have P/M fit and you raise a bigger round, you're going to hire people and create an organization around something that doesn't work. With those extra people and processes, things are going to slow down to the point where finding that P/M fit becomes much harder. Moreover, you are now accountable for expectations and a reasonable return for your investors, which is not a bad thing, but it is a distraction when it comes to P/M fit. For B2B businesses, raising a Series A means being able to hire your first sales/marketing people. For consumer businesses, raising a Series A means being able to pay for the growth that's happening without worrying about revenue right away.

throwaway41597 11y ago

small typo: "and that also usually gets figure out early" => figured

beat 11y ago

This reminds me of pg's comments about "playing house". The appearance of a startup is more important than the reality of a startup, for founders whose core drive is to "be a startup founder", not "create this product the world desperately needs so maybe it will stop haunting my dreams". I've met founders like this, recently. They're building some sort of social app that does something no one needs and no one would pay for. Maybe I'm being dense and they're actually geniuses, but I don't think so. Most startups fail, and I think a lot of that is because a lot of startups are really stupid. They're "solving" worthless non-problems because the founders aren't doing the hard work of finding real, valuable problems to solve. Building a great product is really hard. And it can't all be done completely lean - at some point, you need to envision something so profound that people don't realize how much they need it. You don't just write Hello World, charge a buck, growth hack, and brag about how you got two bucks for it the next week. As Henry Ford said, if he'd asked customers what they wanted, they'd have said faster horses. Don't build a faster horse. You won't be great that way.

gxs 11y ago
As an aside, reading posts like this makes me feel a little better. I'm 31, have a great job etc., but have always wanted to start a company. The problem is, I've never encountered a problem big enough that would want me to do this and rather than start a company for the hell of it, I've just stayed put. What is the right move in this scenario? Start a shitty company, or keep the nice job and potentially regret never starting a company? Viewed from this perspective, it's not as clear.
- api 11y ago
  Find a problem. What would you pay to have solved? Now out of that list, what do you have the skills and experience to address?
  - cookiecaper 11y ago
    Don't forget to ask "Am I going to get to $50 million in revenues before a big company sues me?" If not, recognize that room for your existence is limited.

hitekker 11y ago

>I think the right initial metric is “do any users love our product so much they spontaneously tell other people to use it?” Until that’s a “yes”, founders are generally better off focusing on this instead of a growth target. I have a warning for future, young developers: do NOT join a startup that hasn't found product/market fit, and isn't trying, with all of its might, to find that product/market fit. And when I say, by all of its might, I mean companies that product/market fit isn't the first and foremost goal of the startup. This is really hard to determine from the outside. For example, a friend of mine is working in a well-funded, post series A startup that just declared internally its biggest target was a billion dollars of products shipped by the end of the fiscal year. The team is smart, the founders are passionate, and they've been judicious with their funding. Problem is that the CEO herself admitted that they don't yet have product/market fit. Which is to say their "guiding light" metric is a lagging indicator, i.e. it measures that tail-end of their efforts, and certainly not how much customers love them (and are willing to pay). It's the equivalent of early Facebook using advertising revenue or page views as their growth target instead of monthly active users. As Sam Altman points out, everything they do will be "hacking" or, as PG puts it, doing tricks that are not sustainable for a real, billion dollar company, in attempts to achieve that misleading number. At least from what she told me, the most senior engineer said that this isn't bad: the engineers will focus on product/market fit and the sales/marketing teams will focus on growth. Of course, she didn't say that, in a conflict between the fake growth target and product/market fit, the fake growth target always wins. Even now, I'm trying to pull my friend out, before the mental gymnastics set in. Don't be fooled. A startup needs a real, sometimes small, star in the sky to navigate churning waters. A ship that chases the moon is a ship that will soon be sinking.

magicmu 11y ago
This is absolutely true. I work for a YC-backed startup and sometimes felt like that "star in the sky" wasn't there, and worried that my lack of faith was disturbing (to quote movies). Thankfully, the founders here are open enough that I was able to voice my concerns, and it turns out that I had a totally incorrect idea of the product/market fit that they were/are aiming for. As a core member of the dev team, this could have been a potentially catastrophic misunderstanding. So yeah, everyone being on the same page and seeing that same goal is really crucial.

gustaf 11y ago

This is a great post. This is the by far most common miss-understanding I get from new startups. People are far too confident their product have reached product-market-fit before that is actually true - often making this claim with very little data. I've seen many VC's who are not data-literate enough to be able to understand the difference between measuring product value and growth without substance.

rdlecler1 11y ago

Sometimes it's best to grow more slowly at first, build your brand, your culture, figure out your process, don't burn through mountains of cash (if you're lucky enough to have that problem) and wait for the market to come around.

hammock 11y ago

Sam is talking about the importance of watching leading indicators when there is a good bit of time between your present actions and future performance. If you are relying on your users to drive growth, an easy-to-measure proxy of "do any users love our product so much they spontaneously tell other people to use it?" is Net Promoter Score[1], or the difference between the % of users who would recommend you, and those who would not. There are other (perhaps non SV startup) businesses that dont rely on users to drive growth. For example, if you rely heavily on distribution arrangements or retail placement. In that case you might want to look at other metrics that are leading indicators of growth. [1]https://en.wikipedia.org/wiki/Net_Promoter https://en.wikipedia.org/wiki/Net_Promoter

shawn-furyan 11y ago
If you are bothering the user with a modal, popup, post-install screen, etc., then why not ask your customers TO promote the product providing Email and Social sharing options? Then you can measure how many people ACTUALLY promoted your product, instead of how many said they would (but mostly probably didn't). Declared action is a notoriously unreliable signal.
- deleted 11y ago
  [deleted]

danieltillett 11y ago

The alternative to this is focus on getting your customers to pay you in advance for your product. Not only will this tell you if your customers really love your product, but it will provide you with all the cash you need to grow as fast as you want. The downside is very few products are that loved that customers will pay for 12 months in advance.

muxme 11y ago

I'm running into the growth problem with my website: http://muxme.com http://muxme.com. Lots of people say the love the website, but it seems like no one is telling their friends. I was thinking of maybe adding user created sweepstakes, because I think the only way people would spontaneously tell their friend is if they win something from the site. More winners = more people telling their friends, but I can only go so far on my budget. What do you guys think?

dsugarman 11y ago
when you talk to your users, ask them if they've shown this to their friends. If they haven't ask them why they haven't. If they have ask them why their friends didn't like it. I would also recommend sending out a NPS survey to all your users
seibelj 11y ago
how would your website ever make money? Why would someone post a sweepstakes?
- muxme 11y ago
  I'm not worried about money, I'm worried about growth. There are services like RaffleCopter / Gleam / KingSumo / Woobox / etc. which let you create Sweepstakes to promote viral growth for your website or business.
beeboop 11y ago
I don't think anyone I know would be interested in this website. So even if one person likes, it doesn't mean any of their friends will. As a web savvy person, I assume services like this are not worth trying because 1) it's just as likely to be a scam as not and 2) even if it's worth it right now, it will soon not because because of people gaming/spamming the system. The odds of winning an item for free are not displayed, and therefore are assumed to be astronomically high. It's assumed it's not a good return on my time to register and enter. That said, it's a cool site, and I like your intentions. I do not think there's going to be a feasible way to prevent gaming and spamming unfortunately.

compumike 11y ago

Great essay, Sam! I want to expand slightly from a founder's perspective: You always have two constituencies to think about: (A) your users / customers, and (B) your not-yet-users/customers. "Before growth", you should really pay very very little attention to constituency B. If you're doing anything interesting, there will always be a torrent of skeptics, doubters, and haters. (That sucks, but it's very human, and you just have to ignore it.) Focus entirely on constituency A. There are three "R" metrics to look for: (1) Retention. (2) Revenue. (3) Referrals. (Note: these are the three "RRR" of the classic "AARRR" model.) Initially, constituency A might just be your friends or extended network who you can convince give what you've built a try. You may be able to get them to try your new product once or twice, but that's about it. However, if they keep using it again and again voluntarily, that's a really good sign (Retention). If they voluntarily and happily pay for it, that's great (Revenue). And if they voluntarily tell other people they know about it (Referrals), that's amazing! Until you have those nailed -- or at least retention and referrals if you're deferring monetization -- don't worry at all about the "B" group (i.e. don't worry about acquiring new leads at the top of your funnel), because you don't have product-market fit yet. Once you do have a product that the constituency A people love, only then can you start thinking about constituency B and how to turn them into new happy users / customers. (While continuing to make your constituency A happy!) I think Sam is going a step further to place extra emphasis specifically on Referrals out of all three of these metrics. This is a subtle but powerful insight. Whether your product is B2C or B2B, most purchasing decisions have a huge emotional component. If your product is so good that your users want to tell other people about it, that's a huge step above being merely satisfactory, and goes a huge way toward powering your growth. I don't care if you're buying a burrito, a car, CDN bandwidth, or an analytics SaaS. You as a buyer want a reasonable degree of certainty that you're going to feel good about that purchase after you've made it. Hearing that referral from your peer, whether a friend who tried that food truck before, or another engineer who used that SaaS provider before, goes a huge way toward giving you that pre-purchase confidence. If your users aren't excited enough about it to be talking about it with their peers, you may have to adjust your product or your segmentation of the market until you get there.

cdmcmahon 11y ago

This definitely rings true to me. The company I work for has been around for ~6 years and while we have made money and grown in that time, it wasn't until the last year really that we hit on exactly what our clients love about our product and continued to nail that. It can take way, way longer than some entrepreneurial people are comfortable waiting for. But now that we've found it, and are continuing to expand our product around what we've found, growth is starting to come much more easily.

free2rhyme214 11y ago

Didn't Alex Schultz, VP of Growth at Facebook, already say this... https://www.youtube.com/watch?v=n_yHZ_vKjno&feature=youtu.be&list=PLXIzh6qwMf9htBjuMGPWVoPE-1Jk0oeep https://www.youtube.com/watch?v=n_yHZ_vKjno&feature=youtu.be...

edanm 11y ago

'I think the right initial metric is “do any users love our product so much they spontaneously tell other people to use it?' Question - is this a valid metric when talking about B2B companies? I would imagine there are plenty of B2B solutions which became huge, but which don't exactly have companies rushing out to tell everyone to use them. I tend to think sama's question is only relevant for B2C, but I'd love to be proven wrong.

baldajan 11y ago
I would imagine it also applied for B2B. Think about apps like Coda, or services like GitHub. I remember using a task tracking system that I completely swore by and told everyone I knew about. All it did was track tasks and is very much B2B, but my obsession with its UI made me more productive and those became a talking point, where I'd always highly recommend it. Slack is another great example of a B2B co that passes that test.

colund 11y ago

This growth belief reminds me of the trap of focusing on 'what' instead of 'why' as in https://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action https://www.ted.com/talks/simon_sinek_how_great_leaders_insp... It seems stupid to do something just because you think you're expected to do it rather than think for yourself and do what you want to do and think would be a good idea.

Mz 11y ago

So, basically, get the seeds right, then plant, water, and tend. Don't get crappy seed ideas and try to overcome their deficiencies with some kind of fertilizer. (fertilizer AKA "manure"/bs.)

adamb 11y ago

Perhaps I'm the only one that sees this, but this essay appears to be a significant departure from the YC rhetoric I've observed in the past few years. Every time I've heard retention discussed (at YC) in the context of growth, it's cast as something you address when your growth has stalled. Not, as this essay would lead you to believe, a prerequisite of growth itself. This essay, while it discusses a really important idea, comes across as saying: "Foolish, fashion-focused founders! Clearly retention comes first! We would never imply that you should focus on growth before your product had adequate retention!" But that's exactly what I've seen YC partners do. Recommend that companies focus on growth, because that's what YC's definition of a startup is: a company that grows very quickly. Having seen both sides of the curtain, the essay leaves me with a greasy, queasy feeling. Am I missing something here? Sam, are you changing your standing advice from "focus on growth" to something else? If that's what this post signals, please take ownership of the change and spell it out. It's poor form to imply that misguided founders (and their devotion to a fad) are driving the growth zealot craze when you've had a hand on the wheel for years.

sama 11y ago
Our motto is "Make something people want!" If that's not a statement about retention, I'm not sure what would be. And a startup needs to grow quickly. It's not an either/or--at most, it's a sequencing issue. Most founders fail because they don't make a product product some users love, or they never make a product at all. Others fail because they don't figure out how to grow fast. But the best way to grow fast is to have a product that's so good people tell their friends about it. All I'm saying is that I think things have shifted--perhaps because we've given bad advice, but also probably for lots of other reasons--and founders should course correct.
- adamb 11y ago
  It's definitely a sequencing issue. Glad you mention the "make something people want" motto :). I've recently realized that it's actually wrong. Well, backwards. A more instructive formulation is: "find something people want and make it." Better to acknowledge the value of the search (and confidence in the finding) before encouraging the making. I have seen many founders struggle to understand when the time to grow is. Pressure to raise deepens the struggle. On the topic of growth vs retention, of the hundreds of founders I have met or read about, I have been most inspired by the actions of Ooshma Garg (of Gobble). The quality of her service is second to none. She's the only founder I've ever met that has completely shut down her product because it wasn't good enough, only to reboot it to better quality, retention, sales, and growth than ever before. In my experience (flawed and narrow as it is), the best way to course correct is to issue a recall. Treat bad advice like bad goods. Post the criteria where those affected will recognize themselves and make needed reparations. As a community, we need to better celebrate founders that are doing it right. Not mock those of us still figuring it out. If YC wants to get the word out about prioritizing product market fit above growth, it should elevate Ooshma's perspective, along with other founders that have made similar gut-wrenching decisions to invest heavily in retention while sacrificing weekly growth targets. Overall I'm glad you wrote and posted the essay. And I appreciate any humility you may have felt while drafting it.

amelius 11y ago

> The other thing that these companies have, and that also usually gets figured out early, is some sort of a monopoly. I wonder how this would apply to, say, Uber and AirBnB. What kind of monopoly do they have?

avivo 11y ago

I've been explaining this perspective to most clients for years, almost word for word. Specifically the question/focus: "do any users love our product so much they spontaneously tell other people to use it?" I'm excited to now have an "official" source I can easily cite for it! I think there are some businesses where this might be less true, but it's pretty rare.