How to Start a Startup — W03

Retention & Growth

Here are a few takeaways from Stanford/Y Combinator CS183b — How to Start a Startup — Week 3 lectures.

Lecture 5 Business Strategy and Monopoly Theory Peter Thiel, Founder, Paypal, Founder, Palantir, and Founder, Founders Fund

Most of Thiel’s lecture was a summary of his book — Zero to One. My takeaways from the book are summarized in a separate post.

Lecture 6 Growth Alex Schultz, VP Growth, Facebook

Growth

Retention

• Retention is the single most important factor for growth.
• Retention comes from having a great idea, a great product to back up that idea, and product market fit.
• Focus on getting product market fit because in the end if you don’t have a great product, there is no point in growing.
• Retention rate depends on the vertical. Different verticals need different terminal retention rates for them to have successful businesses.

North Star

The whole company is the growth team. Startups should not have growth teams. The whole company should be the growth team and the CEO should be the head of growth.

Have a North Star — You need someone to set a north star for you about where the company wants to go and that person needs to be the person leading the company.

• Facebook — monthly active users (not just who signed up).
• WhatsApp — messages sent per user.
• Airbnb — nights booked.
• eBay — gross merchandise volume.

Without a North Star there is no direction and it is not clear to everybody what the most important thing for a company is.

Ask “What is that one metric, that everyone in your company is thinking about and driving the product towards?” That metric in the long-run will make your company successful.

All metrics are correlated so pick a metric that best aligns with your mission and values and one you’re going to stick with for a long time.

Magic Moment

What’s your magic moment? Magic moment is what hooks the customers to your service.

Magic Moments for companies —

• Facebook — Seeing your friends.
• LinkedIn, Twitter and WhatsApp — show you people you may want to follow, connect to, send messages to.
• eBay — finding that unique item like when you see a collectible you are missing.
• AirBnB — The first listing, that cool house you can stay in, and when you go through the door, that’s a magic moment.

Focus on the Marginal User

• Building an incredible product means definitely optimizing it for the people who use your product the most (the power user) but when it comes to driving growth, people who are already using your product are not the ones you have to worry about.
• For growth, focus on the marginal user.

Growth of Facebook

Market entry

Facebook started out as college-only, so every college that it was launched in it was knocking down a barrier. To drive initial growth Facebook focused on

• 10 friends in 14 days.
• Getting users to the magic moment. Zuck drove that. He would say “You really think that if no one gets a friend they’ll still be active on Facebook? Are you crazy?”

Expanding from high schools to everyone else spurred the growth up to 50 million, and then they hit a brick wall.

Overcoming the barrier

• One of the biggest barriers to their long-term growth were the several clones or competitors that grew in other countries when Facebook was focused on the U.S. market.
• They moved slow to move fast. They built a scalable translation infrastructure that actually enabled them to attack all of the languages, so they could be ready for where the future is going to be.

*Photo by: Gerlos