Startup Class Lecture 6 Notes – Alex Schultz

These are my notes from Lecture 5 of the Startup Class taught by Sam Altman. Alex Schultz, gave a guest lecture on growth.

Also, my notes from the previous lectures are here.

Product Market Fit

  • Retention is the most important thing for growth
  • Before you start focusing on growth, need to make sure you’ve achieved product market fit
  • If you draw a curve of % of monthly active vs number of days from acquisition, and it flattens out to a line parallel to the x axis, you know you have a good product and have achieved product market fit
  • If it intercepts the x axis, that’s when you have an issue

Retention

  • What good retention looks like varies depending on the business.
  • You can use dimensional reasoning to figure out retention rates of companies
  • What’s the number of users in their market? How many users do they have? Divide the latter by the former and you know that their retention has to be at least that high
  • Different verticals need different terminal retention rates to have a good business
  • For e-commerce websites, 20% could be enough. For social media websites, unless you have 80%, you probably won’t grow very big

“Retention is the single most important thing for growth and retention comes from having a great idea and a great product to back up that idea, and great product market fit.”

Scaling and Growth

  • Startups should not have growth teams, because the whole company should be the growth team
  • The CEO should set a North star, which is the metric that everyone in the company is held responsible to
  • It doesn’t always have to be monthly active users
  • Whatsapp used number of sent messages, Ebay used gross merchandise volume

Magic Moment

  • You need to think about the magic moment of your product/service
  • What is going convince people to want to use your product and stay on your product
  • For Facebook, it was seeing their friends profiles as they signed up/receiving their first like/getting to 10 friends within 14 days

Marginal User

  • To build great products, need to think about power users
  • To grow products, need to think about the marginal user and figure out what will convince them to stay.

Tactics that helped Facebook

  • Internationalization
    • scalable infrastructure built for where world was going in future
  • Focusing on Magic Moment (10 friends within 14 days)

Tactics for growth

Virality

  • Sean Parker outlined 3 things to consider when thinking about virality
    • Payload: how many people is it reaching
    • Frequency: how often is it reaching them
    • Conversion Rate: how likely are they to convert from one message
    • Ex: Hotmail’s “email sent using hotmail”: low payload, high frequency, pretty high conversions.
  • Ed Baker from Uber’s framework:
    • You get someone to import contacts on that site
    • How many of those people actually send imports?
    • To how many people?
    • How many of those that received it click?
    • How many of those that clicked sign up?
    • And then how many of those import? (completing the circle)
    • You can multiply the percentages and number of these out to get the k-factor
    • Need the factor to be >1 to go viral

SEO

3 things are important in SEO

  • Keyword research:
    • What people search for related to your site
    • How many people search for it (demand)
    • How many competitors are there (supply)
    • How valuable ranking well it is for you (value)
    • Google’s keyword tool is pretty good
  • Getting links from authoritative websites
  • XML Sitemaps and ensuring you have the right headers

Email/SMS/Push

  • Email Effectively dead for audience under 25 – they’re using facebook, snapchat, sms. Email still works well for older audience
  • Deliverability is key in these channels
  • Don’t want to spam power users and risk these channels being ineffective completely
  • Other than that, the important factors are open rate and click rate
  • When creating these campaigns, remember what works for one user won’t work for the other
  • E.g.: At Facebook, active users don’t get emails about every like. However, new users do because that first like is a magic moment for them

“A good plan, violently executed today, is better than a perfect plan tomorrow.” – General Patton