so our next speaker and I have something
in common we both started businesses to
allow people to create websites the
difference is that David's business was
massively successful davidenko is the
founder of Weebly which early this year
sold two square and he's going to give
us a talk about how Weebly found product
market fit Thanks
thanks Jeff I'm really happy to be here
I'm actually very impressed with how
full the room is given it's right after
Burning Man did anyone go this year oh
not too many attendees all right we got
one over there okay so so just my quick
way introduction a little bit by myself
if you haven't heard of Weebly Weebly is
an easy way for entrepreneurs to build a
website or an online store before Weebly
got started the only way to do that was
to learn to code yourself and now there
are plenty of tools and services to
allow you to drag and drop and build a
site I wrote the first line of code in
February 2016 so a little over 12 years
ago now grew that company to 50 million
users and around 350 employees sold the
square in May of this year for three
hundred sixty-five million and probably
one of my favorite stats is that half of
the US population visits a Weebly site
every single month the reason it's my
favorite is is because it's reflective
of the success of the entrepreneurs
people building the websites themselves
and actually having success and seeing
those results so I'm here to talk to you
today about how to find product market
fit it's a you know the top problem that
any one deals with I'm gonna try to keep
it fairly practical not theoretical
because I think finding part market fit
is really about the the practical nitty
gritty the hustle so I I want to just
preview real quick talk to you a little
bit about our journey like I said I
wrote the first line of code a little
over 12 years ago which which sounds
really weird that has been that long
this is what it looked like this is a
photo I took from February 2006 it's
where I was to be a Beaver Stadium at
Penn State when I wrote the first line
of code just kind of gives you the
setting but but in college
in August of 2006 so this has been six
months we should introduce this graph so
this is a graph of the new users per day
signing up for Weebly so non-cumulative
just whenever someone signs up you know
you get a one and this is six months in
so we still hadn't launched six months
in we're Dan Chris and I we're all doing
internships that summer you can see here
are our massive record signup day was
twelve users I think we just create
accounts for friends and family
so six months in we still hadn't
launched right just to give you an idea
of how long it takes we worked for six
months and hadn't launched in October of
2006 this is eight months later still
hadn't launched we were hustling for
buzz on forums we had create a sign-up
link you can see here now we had 30-some
users that signed up on our record day
but eight months in and still hadn't
launched in October of 2006 I read about
Y Combinator on slash dot the deadline
was about three hours ago so I think it
was about 1:00 a.m. Eastern when I read
it the deadline for application was
midnight Pacific so I had about two
hours to go to create it to create a YC
application I didn't have time to call
up Dan and Chris my co-founders and
asked them if they want to drop out of
school with me and moved to San
Francisco so I took a guess my guess was
that Chris was gonna drop by school and
Dan wasn't going to I called Chris up
first the next morning and said hey
Chris you want to drop out of school
with me moved to San Francisco and just
on the spot he's like hell yeah let's do
it
I caught up dan I said Dan you want to
drop out at school with me and moved to
San Francisco he said you know what this
sounds like a really promising idea let
me call my parents I'll call you back in
two hours it was a much more responsible
approach but but but I applied with less
than an hour to go we drove up
interviewed and got accepted actually
funny story
we got finally were able to get on
TechCrunch the day of our YC interview
so I'm sure that that didn't hurt at all
this is what that looked like
this doesn't isn't actually what a
normal press bike looks like you'll see
a normal press bike later but in this
particular case we only had two servers
and we really
worried about our servers burning down
an AWS didn't exist back then so we we
basically decided to allow you to sign
up and then say hey you're on the wait
list we'll contact you once you're able
to access your account which is why it's
spread over a few days but the first
tech crunching now this is much more
normal of what it looks like after a
press spike you see it kind of goes down
pretty low it's kind of hovering around
the same level if you're observant
you'll notice here one day we had zero
users that presumably means that we were
the whole site was down which is great
but uh but in January 2007 eleven months
in we dropped out of school packed up
all of our servers in my car I drove
cross-country to San Francisco would not
recommend driving 80 in January got
stuck in Wyoming for three days but
finally made it out here and this is 11
months in so 11 months after writing the
first line of code we're working on
full-time in San Francisco as part of
the YC program here's what that looked
like it's still shocking to me that at
one point this TV was current technology
because it just looks so old now but but
here we are we we went rented a
one-bedroom apartment sorry two-bedroom
apartment in the why scraper we pushed
three desks together and we pretty much
just worked all the time we work 24/7
our only rules we take Saturday's off
but other than that we would work until
we were tired we'd sleep until we
weren't we'd work until we're tired we
sleep until we weren't and just kind of
repeated that process here is a second
TechCrunch press bike that we got in
January this one's much more normal this
is exactly what you should expect if you
get on TechCrunch or any press it goes
straight up and it's really exciting
that day and then it goes straight back
down the next day and but at least
settles a little bit higher in April
2007 this was 14 months in now you
notice we had a couple other press
mentions what you'll notice here these
are going in the wrong direction you
know the number of new users per day is
actually declining declining declining
both of these are heading in the wrong
direction means we didn't have product
market fit yet we're 14 months in it's
over a year and we still don't have
product market fit this was kind of an
interesting moment in our history
because we found ourselves with less
than $100 in our bank account and
I see demo day was coming up soon and we
were you know we kind of had some
excitement and thought you know talking
to investors maybe we'll be able to
raise money but we certainly weren't
sure of that we had just gone to Costco
so we had lots of food for a couple
weeks but rent was coming up and as
everyone knows rent in San Francisco
isn't cheap
so about a week after this I came to
this very room pitched a whole bunch of
investors at demo day and we were
successful in raising a 650 K at the
time that was called a Series A today
would probably call it a precede round
of funding 14 months in this is what a
price for on Series A paperwork looks
like just to give you a perspective to
on a little bit how crazy things have
gotten out here we raise 650k on a two
million dollar pre-money valuation so
two point six five posts that was
considered above average slightly above
average we were all very jealous of
Dropbox who had raised it a five million
dollar post-money valuation and and and
today I think that number would probably
be fifteen maybe twenty so it just gives
you a little bit of perspective on how
you can still be very successful even if
those valuation numbers today might seem
low or you might be angling for a higher
one but but really puts it all in
perspective this is May of 2007 so we
got feature in Newsweek magazine which I
don't even think is in print anymore but
you can see here the spike goes up it
comes back down it settles at a higher
level which is great but look it's going
in the wrong direction again right so
this is now 15 months in still no
product market fit in August of 2007
here's 18 months and we got featured in
Time magazine this time and again it
goes up but now it's coming back down
now it's totally in a higher level which
is good but again this is 18 months in
we're 18 months into the journey and we
still have no product market fit so just
to give you an idea of how long it can
take before having something even as
basic as just having users that enjoy
using your product and are coming back
18 months later we still didn't have it
now now to skip through a little bit of
of the rest of story here here is
October 2007 so now 20 months in you
kind of see we had this moment and then
boom it turns around it turns around and
starts picking up and now all of a
sudden you can see every single day
we're getting almost a thousand people
coming to our front door which is more
than we were getting featured in
Newsweek magazine or or on TechCrunch
first rail traction that we got
fast-forward again at February 2010 four
years in and now you can see we're off
to the races so I wanted to give you a
little bit of snapshot of what it looked
like for us to get product market fit in
the early days before diving into some
of the basics so so let's start with a
definition on what is product market fit
so you've probably all heard Y
Combinator's mantra which is there we go
make something people want
I actually if I was a modify this I
would say make something a lot of people
want because that incorporates a little
bit about the market but we'll talk
about that so first we'll go over the
stages of a company so obviously you
start off with I have an idea and
everything is really exciting and you're
telling all your friends about the idea
this is the very birth of a company
let's go through some of the Fage phases
so this is roughly all of the phases of
a company it starts with idea you get to
prototype phase you then get to launch
traction monetization and growth I put
monetization after traction because
oftentimes that's the way it goes and
actually getting going from launch and
getting to traction is product market
fit monetization is actually a much
easier problem than product market fit
this these are the this is sort of the
initial product market fit search
initial product market fit search is
between idea and traction so getting
from idea to traction is probably the
hardest thing and the thing that kills
the most companies all right here we go
one thing not to forget is that when
you're in this phase two you're still
refining product market fit a lot of
companies forget that they they get so
focused on scaling and so focused on you
know continue to grow the business and
they completely forget that you're still
refining and still building product
market fit at this stage so really
important not to forget this all right
so what are the hardest things at a star
and I'm convinced that there's basically
only two hard things number one is
finding product market fit it's really
really really hard most companies will
not be able to find product market fit
it's incredibly challenging
number two is hiring and building a
world-class team that is also incredibly
challenging it's very unintuitive and
it's very very difficult to sort of grow
through that rapid growth phase and to
and to emerge on the other side with
sort of an enduring long-lasting company
and culture making money I put is a very
distant third it is usually a lot harder
to build a product that a lot of people
really really want than it is to figure
out how to make money from that product
so I would say that's usually a distant
third you could have lots of ideas how
to make money I'd say definitely try to
make money experiment learn but it's a
lot easier to figure how to make money
if you've already got people hooked and
then the fourth one we won't cover this
too much but but to scale to a to a
really big long enduring company you
need to build an organization that's
scalable and repeatedly launches great
products and that's really really hard
because it's not just going to be about
the founders anymore
it's about the organization doing so
scalable and repeatably one one other
sidebar is that the best companies will
create a market so if you look at sort
of what we Blees done if you look at
what air B&B is done if you look at what
Dropbox has done all all companies have
created their own market I say this
because by definition here market
research is not going to help market
research is research on existing markets
right and you're going to create a new
market so how do you do that what does
that look like so first of all you need
to find a hidden need so there's a need
out in the market that a lot of
companies or a lot of people don't
realize exists and if people realize it
exists if it was obvious then everyone
would be doing it and so so so the
hardest part is finding this hidden need
and everyone is going to tell you that
the idea is dumb
everyone's gonna tell you it's stupid I
remember in in the summer of 2006 after
writing that first line of code
I went and pitched we believe at the New
York tech meetup and it was a thousand
people it was we were kind of alpha
stage at that point and it was in front
of a thousand people and I gave a demo
five-minute demo and then Scott the
founder of meetup comm came on stage and
just said he thought it was the
stupidest idea that he'd ever heard and
that no one need to make websites and
that people who need to make websites
already could or people´s had to learn
to code and from a thousand people told
us that it was we had the stupidest
idea he'd ever heard so that the
point I'm making is if it's obvious then
everyone will be doing it so you're kind
of finding a new reason now the hidden
need in in this particular case was that
there was a lot of people who need to
make a website themselves and that was
really hard because a lot of the tools
at the time were geared towards people
who were who were hand coding the
websites basically like front-page and
Dreamweaver
we were able to realize that people
wanted to do that and build a service
that enabled people to do that but
figure out what are you a substitute for
what need are you serving better what
job are people hiring you to do if you
know the jobs would be done book and
framework that's really helpful to think
about what are people trying to do
people aren't trying to make a website
people are trying to launch and grow
their business right so understanding
what's the job people are trying to do
and then what substitutes are there for
that job and so when you think from that
mindset you might think well there's a
website you can also create a Facebook
page you could also there's lots of
different substitutes for that job I
think a really important one is
understanding where are you getting
pulled where are your customers pulling
you as you shouldn't be pushing your
customers towards a solution when you
when things are working your customers
are beating a path to your front door
and they're pulling you in saying no can
you need to do this and you're saying
yeah but that's not what our product
does they say well I'm going to kind of
hack it to do that anyway when you find
people hacking your product to do
something that wasn't intended to do pay
attention to that and double down on
that and then often what you initially
create will seem to fit into an existing
market but with less functionality right
so is the same thing with the iPhone
it's the same thing with Weebly
oftentimes it doesn't have 3G it doesn't
have apps it doesn't have any of these
things initially but what it does do is
it enables a whole new market
whole set of new entrants to come and
use your product and so the success of
the iPhone wasn't that it's successfully
competing in smart phones it sure looked
like a smart phone but it wasn't
competing against any smart phones that
were out there because what happened is
there was maybe at that point in time I
was a heavy Palm Treo user there is
maybe a couple million smartphone users
in the United States what the iPhone did
is made everyone a smartphone user and
so there is all send a whole bunch of
new entrants and then over time it also
cannibalized the existing smartphone
market so a lot of times people may sort
of mistake you for incumbents when
you're creating an entirely new market
so the next is on building a remarkable
product so what does this process look
like and I'll try to break it down into
very literal steps about exactly what
you should be doing so everyone knows
this right step one have a great idea
step two talks customers step three
something happens there and set for
profit right everyone knows this but
what is step three right because that's
where everyone's plotting around in the
desert like trying to figure out what
the hell to do and nothing's working so
let's talk about step three so step
three is literally this list of things
so you talk to customers and develop a
market thesis try to understand exactly
what their pain point is what's that job
they're trying to get done and how can
you help them get it done faster or
better this is really important listen
to their problems not their solutions so
customers will tell you the pain that
they're facing listen to that when they
talk about the solutions they're
proposed solutions you could just
completely ignore that because they
generally aren't that great number three
go through a rapid prototyping and user
testing phase number four you build a
solution to their problems number five
test the solution with them
number six did it work go to one repeat
and then number seven by the time you've
sort of looped on points one to six
you probably looped about twenty seven
times and that has some interesting
implications but no one ever gets it
right on the first shot no one gets it
right in the first shot so there's some
implications there so so let's take
enough on a few of them listen to their
problems not their solutions I like what
did Michael touch on this earlier too
about the real Steve Jobs and fake Steve
Jobs there's this meme out there that
Steve Jobs just didn't
to customers and would just like produce
the magical product that the world
needed like in one shot just straight
from his imagination that's not how it
worked
here's a quote some people say give
customers what they want that's not my
approach I think Henry Ford once said if
I'd asked customers they wanted they
would have told me a faster horse people
don't know what they want until you show
it to them that's why I never rely on
market research that is all a hundred
percent true
don't listen to people's proposed
solutions a market research is probably
not going to show you the way right but
what he didn't say is that he never
talks to customers he didn't say that he
never listens to their problems he
didn't say that he never iterates
because those are all things that Apple
does a whole lot so it's absolutely
critical talk to customers understand
their pain no solution was ever
delivered perfectly in a vacuum
number three rapid prototyping and user
testing so I think this is a really
important point building a fully that we
made this mistake a whole lot early on
building a fully functional product just
to figure out if it's going to work or
not is a really really expensive way to
test the hypothesis um so you could get
caught up in this loop of like build the
product launch it doesn't work
scrap repeat build the product launch
doesn't work and especially like Michael
was saying if you're always searching
for that homerun and it takes you three
months to build that product that is a
really long time to keep iterating the
best thing you can do however you end up
doing it is focus on getting to a
functional prototype as quickly as
possible so that might be there's a
whole bunch of tools now that allow you
to take mock-ups and make them clickable
and make them feel a lot like an app you
can do it by just writing throwaway code
and just getting something really really
quickly out there there's a whole lot of
ways to write to write functional
prototypes but but get in front of users
don't worry yet about scaling I know we
were really obsessed about writing code
that was going to scale because the
underlying assumption there is that as
soon as we launch it millions of people
are gonna be dapat to our front door it
doesn't happen not gonna happen so don't
worry about scaling until you need to I
would say initially don't worry about
monetization either you want to focus on
making sure that the product experience
is right don't shy away from monetizing
your products don't shy away from
charging for them but initially
you need to make sure that your product
is working for people and then expect it
however many iterations you think it
will take expect it'll take about ten
times that many iterations so what are
the implications of that and these are
really important number one keep your
burn low because if you only have enough
cash in the bank for two to three
iterations and it's going to take you 20
to 30 then that's not gonna work
and number two build a team that can do
this really quickly so this is I think
one of the primary reasons why
outsourcing the coding in the early days
generally doesn't work it's because when
you outsource a project that's one shot
well if it's gonna take you 20 to 30
shots not gonna work you need to build a
team that can very very quickly iterate
rinse and repeat okay this is another
important point tests a solution with
customers so here are your here you are
your there's some helpful tools here but
the most important rules are number one
make sure you're talking to a target
customer so it's not helpful to just
talk to anyone make sure it's one you're
targeting but make sure that you are
super flexible on changing your view on
who those target customers are so when
you talk to someone and it seems like
hey this isn't my target customer but
then also there's a whole bunch of them
showing up and they're hacking and doing
really interesting things with your
product you should pay attention to that
and potentially change who your target
customer is number two don't overthink
it I think this is a problem a lot of
smart people can have you obviously you
want to rely on data you want to rely on
market research you get really really
into the weeds and the strategy and you
super overthink everything don't
overthink it
anecdotal is okay just getting in there
and building and launching something and
trying it out and iterating is the most
important thing you can do doing all of
your homework all of your research you
know looking at the market looking at
the strategy it's gonna be the perfect
stretch it's gonna be the perfect
strategy but no one's going to use your
product so don't don't overthink it here
are basically three tools I think these
are probably the only three that you
need number one customer interviews you
probably need about five to ten of these
so basically what this is is it's
talking to a customer probably for about
an hour maybe a little bit longer
whether it's on the phone or going into
their place of business
or going to where they are and just
understanding everything about what
motivates them what their
problems are what their pain is and just
getting that qualitative view of like
what they're experiencing
number two UX testing sessions you only
need about three to five of these and
and we'll go over how to run a good us
testing session I think on the next
slide number three metrics so metrics
are obviously really important tracking
the right metrics is really important
the one thing I'll say is you'll never
have as large of a sample size as you
want
even at Weebly scale today we still
sometimes have difficulty with getting
cisco significance for some of our tests
be very careful about telling too many
stories with your metrics that maybe
aren't supported by the statistical
significance so you'll oftentimes find
this there'll be blogs writing about an
a/b test and how you change the color
from red to blue and increase
conversions by 27% and it's like oh yeah
how many people are there are 17 people
that ran through your test like I'm not
sure that I would pay attention to that
okay UX testing sessions I think these
are the most important thing that you
can do it's really really simple but but
but it can be really painful
number one get someone to use your
Proctor service in front of you in
person whether that's on your phone
whether that's sitting in front of a
laptop or desktop get them to use it
number two encourage them to give open
and honest feedback they will not want
to give you open honest feedback because
it feels awkward telling someone that
their baby's ugly but but you have to
try your best to encourage open and
honest feedback number three ask them to
perform a task you are not allowed to
touch the phone or keyboard you are not
allowed to do anything once you tell
them to perform the task number four and
this is most difficult do not say
anything it's really really really hard
you will go through extreme agony as
they struggle to figure out how the hell
to do something really basic like sign
up for your app and you'll go through
all this pain and it'll probably take
them two to three minutes and you'll get
this visceral gut feeling you you are
not allowed to touch or tell them to do
anything until they successfully
complete the task even when they ask for
your help it's really really hard you
only need three to five testing sessions
I think you really only need three
to be able to tell the most critical and
important UX bugs if you will that you
have I'll tell you one story on this
we were about to launch a home page once
and we want to get the sign up form
fields down to as few as possible to
reduce the friction of signing up to
Weebly and so we figured well you don't
really need confirm password so we got
rid of that one and in fact you don't
really need to confirm your email which
used to be a thing and so we figured
well we could just ask for email and
password that'll be enough and in the
off case someone missed types their
password that just reset so their email
and the chances someone missed types
both their email and their password then
I guess they're gonna had to create a
new account
but that's not that big of a deal so we
so we so we put the signup form and it
said sign up here in probably like
hundred point font and then it had two
fields it said email address password
and we're about to launch it but we had
the practice of doing this before we
launch anything and so I got a couple
people down they were just friends and I
sat in front of the laptop and said sign
up and and these were tech people and at
about 45 seconds later turns I don't I
don't know how to sign up how do you not
know how to sign up it says sign up here
in a hundred point font like what the
hell's going on another side point
people don't read so so and I said well
why don't you know how to set up is
right here and I said oh that makes so
much sense well I just didn't look at
that because I assumed email password as
a login form obviously so wasn't the
signup form as a login form so we added
a gratuitous field that just says your
name so we could have three fields and
all sudden people saw it as a signup
form which is incredible this is the
kind of thing we would have never
discovered if we hadn't done UX testing
so I would recommend doing it all the
time for everything you want you don't
need that many sessions okay here's
another question comes up when should we
launch there's this whole Minimum Viable
Product which i think is a lot of the
thinking is is is good its new since we
launched but I don't really like the
word viable because it's kind of
insinuating that you're gonna put like
the like just the least crappy thing you
can out there
I much prefer
the word remarkable so minimum
remarkable product the product that is
the the least you can build to be
remarkable alright so this is a quote
from Paul bhai that says launch when
your product is better than what's out
there I think this is really important
because it basically incorporates this
idea that that you should build
something that's better than anything
else out there and don't launch until
you have that but as soon as you have it
then go ahead and launch so I think
that's a right time to launch
prioritising okay I think this is
another important point to make is how
do you prioritize because in the early
days it seems like there's an infinite
amount of things to build and you don't
have enough time to build any of them
and and so how do you figure out what
the hell to build next I think there's
two important points on prioritizing
number one there's only one thing that
matters think about that
startup journey from idea to grow stage
focus only on the thing that gets you to
that next stage don't focus on anything
else don't go to conferences don't like
write blog posts don't read the news now
I'm telling this because like I did all
those things it's impossible not to but
just don't if you can't don't do any of
them don't do any of the things that
aren't getting you to your next
milestone in this particular case next
milestone being product market fit
number two I think is a really
interesting point I heard this from
Astro teller who ran Google X and what
most people prioritize almost everyone
prioritizes their lists exactly the same
way which is effectively some kind of
spreadsheet of all the tasks you can do
and then the difficulty of each and then
the expected payoff of each how
impactful right and so and then you may
see sort by cost times benefit but
instead I think when you're trying to
make continuous improvement that's
actually a pretty good approach when
you're trying to make discontinuous
improvement
optimize for learning so basically ask
yourself what is my biggest unknown
right now what's the number-one thing
that I do not know you know about my
business that I need to learn optimize
to learn that thing because when you do
that it might not seem like the biggest
thing it might be a low
effort tasks it might seem like a low
priority task but when you optimize to
learn the most what do you do you
rewrite your whole priority list because
when you learn that thing that actually
completely you throw out all your old
priorities and have a new list of new
ones okay how do I know when I've
achieved product market fit this is
another common question so I think
there's basically three key metrics you
should be tracking number one returning
usage number two NPS and number three
paying customer renewal rates so
returning usage is basically just look
at people who sign up or come to your
site or your app and look at the number
of people who come back within a day
within three days than seven days within
30 days right if you track that metric
more than anything else that is the
indicator that things are working in the
early stages I remember handing out
Weebly logins to all my friends and
family and none of them came back and
those are the people who liked you the
most and those are the people who would
really want you to be successful and if
they're not coming back then no one's
gonna come back and so I think number
one tracking return usage is really
important number two track NPS there's
all kinds of tools to do this now here
NPS some people say 40 I think about 50
oh it's above 50 then you probably
achieve product market fit
NPS if you've ever answered that
question would you recommend this
product or service to a friend that's
NPS it's one question you rank from zero
to ten basically the percentage of
people who answer nine or ten those are
promoters the percentage of people who
answer zero to six those are detractors
and people who answer seven or eight are
thrown out so in the early days
Weebly had in NPS of 80%
that was basically 88% of people
answered nine or ten eight percent of
people answered zero to six and my math
is Right 12% of people answered at seven
or eight so you base take that 88% minus
eight percent equals eighty if it's
above 50 you're doing pretty well the
way this metric is built it can get
negative and that's probably where it
will start and the number three paying
customer renewal rate so when you have
paying customers look at their renewal
rates a quick sidebar I don't like the
churn metric for looking at this a lot
of people use that because it's easier
to calculate but basically churn is not
cohort base
renewals cohort-based sojourn is just
looking at number of subscribers loss
divided by total active subscribers in
any given period I don't like that
because if your denominator is changing
like let's say you're growing really
really quickly you're in denominators
changing faster than you Newman
numerator the numerator is based on last
year's denominator and so basically it's
it's it could be deceptive as to what
your actual churn is but your renewal
rates are great cuz that's looking for
the number the percentage of people who
are eligible to renew and what
percentage those people actually renewed
and that's cohort based so I like
renewal rates a lot better alright next
metrics aren't included so number one
metric that is not included is signups
this is something that was not very well
understood when we got started I would
not pay that much attention to signups I
would pay a lot of attention to active
users if you have good returning usage
and signups translates active users
pretty well if you have bad returning
usage then signups basically like
completely drops off and you have very
little active users in fact that number
may even be shrinking even when your
signups are growing if people are
returning number to conversion rate if
you're thinking of building a SAS
business conversion rates they all start
low they build over time I wouldn't pay
a lot of attention to conversion rate in
the beginning I'd pay attention to some
of the other metrics I think it's the
last point just how does it feel when
you get product market fit you'll know
when you achieved it when your customers
are beating a path to your door when you
don't have it everything feels hard it
feels like you're pushing this huge rock
up a mountain you're pushing your
customers towards a solution they're too
nice to tell you no but they're not
really coming back they're not really
using it when you have it the whole
world is beating a path to your door
everyone wants to use it
the press is writing about it everything
feels easy and every decision you make
feels like you're a genius because they
all go well you know spoiler alert it's
somewhere in between it turns out that
you know as you're scaling your business
over time you'll discover you're maybe a
little less smart than you thought you
were but but but that comes later
but I think this is what it feels like
so if you're not feeling that you know
sort of customers pulling you in a
direction world beat you know beating a
path to your door then you probably
don't have it yet
all right now a couple more points
beyond prime market fit this is a little
bit more theoretical I think the most
important is just the very sort of
tactical like how do you go and build a
product just talk to customers listen to
their problems not their solutions
iterate its Huynh and then keep
launching until you get something out
there focus on a couple key metrics but
a couple points I want to make number
one there's there's fundamentally three
things that a start-up needs to do in
order to be successful and this is a
little bit past just product market fit
number one product needs to be
meaningfully better than the
alternatives I think this is sort of
described in the Paul booth I quote of
launch when what you have is better than
anything else out there number two
you'll need to learn how to acquire
customers in a differentiated way that
scales and number three you'll need to
invent your business model without
killing your attraction this gets into a
little bit more than product market fit
an expanded version here but basically
product market Channel model fit and
what this goes to show is like you can
build a product that works really well
for a market but the model is busted
right your your your your the model the
way that you charge people you know
doesn't work maybe you're not charging
enough maybe you're charging too much
that has a lot of interplay with your
channel this is how you acquire
customers right so if your model if it
for example if you're building a
solution you're trying to charge $75 a
month for it that's probably a pretty
tough spot to businesses because you're
gonna be in the middle you're not going
to be able to afford a Salesforce right
you're not gonna build afford actual
people selling your product to the
customers directly but it's too much
money that people are gonna want to just
whip out their credit card and start
paying that right and so that's why
often times you know between the model
and the channel there needs to be a fit
there as well because if you're gonna if
you're gonna have a sales force you're
probably need to charge people at least
two or three hundred dollars a month to
build afford the Salesforce and if you
are can have a Salesforce and you should
probably charge $25 a month or less this
all of course plays with the product and
market fit which is which is how this
all works together so there's a essay
here which the HubSpot growth framework
which I'd highly recommend reading for a
little bit more on this
another sidebar is on scaling the team
so I think this is a really important
point to make don't scale the team until
you have product market fit so I would
not scale past about 20 people so around
20 people choose between about 23 and 25
is when everything breaks in the startup
because you can no longer be just just
you know completely flat if you look at
any of the essays you know if you look
at you know back in the day 37signals
had this essay of like how big a
perfectly flat company is amazing and no
one ever needs to hire managers and it's
like I could predict to within one or
two employees exactly the size you are
and it's about 23 to 25 and it turns out
that was true because about 23 to 25 it
feels amazing it's completely flat just
another couple people and everything
breaks what you need to do is you need
to start implementing your first layers
of management and it turns out that that
structure is not very good for finding
product market fit it's not very optimal
for that so keep your team small I would
say it's okay to micromanage a little
bit at this stage you should know
everything that's going on you should
know everything important there is know
about your customers your product your
market your channels you should know all
of that what does that mean that helps
you make really great decisions right
because you have all this information
it's actually a huge advantage once a
company scales up then all this
knowledge is distributed across people
and it's really difficult to get all
that knowledge to make a really good
decision in one spot when it's scattered
across a bunch of different people and
takes a lot of different opinions to get
something done so don't delegate
anything important yet however once
you've achieved product market fit and I
think this is a mistake that that we
made scale aggressively once you've
achieved product market fit so at this
point presumably you've either found or
created a new market but it's likely
you're not the only one you may not have
heard of your competitors yet but
there's probably other people out there
doing the same thing you are in a race
to capture this new market and
advantages accrue to the number one
player they always do even if there's
not network effects in your business
just having more people can build
products faster that generates more Rev
that attracts more financing that allows
you to hire more people that generates
more revenue so there's all these kind
of flywheels and cycles advantages that
accrue to the number one company be that
company build a team aggressively but
thoughtfully I think that you should
probably never more than double the size
your company in any given year so I
don't think I know of an example of
hyper growth that works out of companies
that go from 20 you know 20 employees to
300 in a year and that works out because
what would get up doing is you build a
foundation on sand based on a really
shaky soil and it all eventually it's
all great while you're scaling and
eventually the skyscraper comes crashing
down and that always seems to happen you
will need to completely change the way
that you work I'm including a lot more
delegating at this point and no more
micromanagement after you do that so
there's kind of this inflection point in
scaling company I think it's really
important to think about because I would
not scale a company pass about 20 people
before you have product market fit as
soon as you found it go and scale
aggressively as you can and then lastly
I'll talk a little bit about building a
brand because I don't think it's worth
spending too much time thinking about
but I think it's we're spending some
time thinking about when you're in the
early stages so great brands are built
around a fundamental insight a consumer
insight that some truth that's just not
really acknowledged out there and
ideally this is the same one that your
product is built on so it's really
really powerful if you could identify
that insight early on know what you
stand for and build that into all of
your messaging build that through into
your product and that becomes the
foundation of your brand so let me give
you one example I talked to the person
who built Virgin America's brand and so
so here was their story so when they got
started they were they were doing a
start-up airline there are lots of
economies of scale in Airlines and so
they did they went out and started
talking to customers and they realized
that there's only four reasons why
people select one airline over another
the reasons we're scheduled price so
again if it was three dollars cheaper
I'll select that airline
it was destination so if you want to fly
to our SFO or Oakland and it was
frequent flyer programs and they looked
at each one of those and said we're not
gonna win oh we can't win it's
impossible win on any of these so I said
okay well what's our market thesis like
what are we gonna do differently and
then they went out there and talked to
lots of people and they said you know
what the experience of flying sucks the
experience of flying really really sucks
so why don't we create an airline where
it's not gonna be a super premium
airline but it might cost fifteen
dollars more for that ticket but it's
going to be an amazing flying experience
that was their brand that was their
product and their brand they built it in
right from the very beginning and
everything that they did revolved around
that flying experience so that's why you
make a decision to invest in the super
cool lighting that doesn't make any
sense financially right but that is
exactly about the flying experience
that's why you're gonna go and pay your
staff more and they're gonna have a
really great attitude as they're serving
the fliers that's why for every single
PR event that they ever did they did it
on an airplane because they want to
highlight that flying experience and
they create a new reason for people to
buy their tickets and they were very
successful at doing that so I think it's
one thing to understand is I wouldn't
spend too much time overthinking this
but to the extent that you can
understand what is that insight it
should be infused in both your product
and that becomes the basis for your
brand over time so that is it I think
I'll take a pause there and that's it so
any questions
[Music]
yeah so the question is I took 18 months
fine product market fit and what
motivated us and I like to say that it
was just that we were young and stupid
which is super helpful but I think I my
theory on entrepreneurs is that a lot of
people think that entres are risk takers
I don't actually think most
entrepreneurs I know are heavier risk
takers I think they're calculated risk
takers I think that entrepreneurs are
really two primary qualities number one
is they're optimists so they don't see
risks where other people see risks and
number two is they're determined so I
just don't give up so I think you know
generally speaking those are the two
things your company only fails when you
give up right and while you're still
working on a by definition it's still
going and so I think I think having that
determination I wouldn't I wouldn't
blindly plot on when all of the evidence
shows that that this is not going to
work out but but but I think just
continue to be determined and knowing
just having the confidence and knowing
like this is something people need and
just continue to work on it is is key
[Music]
yeah so the question is like common
advice is targeting each audience were
verticalized right which is which is
another way to say that I think you know
you're right we've been an anti-pattern
you know kind of kind of runs counter to
that pattern
I think I'm not 100% sure why but I
think it's because in our particular
case the the verticals
we're not deep enough to be able to
support the pretty heavy investment that
you need to make in the product and so
basically every single person required
actually a ton of functionality it was
we need blogging we need e-commerce we
need you know forms we need you know
like a full CMS we need all these things
and we need to be best class you know
world class and every single vertical
wanted that and no vertical was deep
enough to fully support that on their
own so the the the pattern of what
happened to Weebly in just you know
website builders or or e-commerce
platforms in general is that we is that
we all started off Eric horizontal and
build a platform and then over time once
all that function I was built out then
we started to customize the verticals so
I think that that's what worked in our
case but but building to a specific
vertical is generally good advice yeah
so the questions when you're creating a
market what changed to tell to telling
people like you have this new thing that
they didn't know they needed I think I
think the experience is is likely to be
similar for everyone which is which is
basically the first chunk so I'd say the
first three to four years of weebly's
history we were mostly just trying like
I remember telling reporters like you
just why they're like why do we need to
write a story I was like you need to
write a story because no one realizes
this as possible right no one
so the first three to four years where
us just trying to convince people like
no you really can build a website like
this is possible cuz everyone I mean
everyone assumed unless they knew how to
code everyone assumed that is beyond my
capabilities that's beyond my abilities
so we spent four years probably just
trying to tell people and then
eventually little by little people try
it people try it and then that's that's
that markets great it's that kind of
boom moment when else and people realize
that this is possible you know I think
another probably great example would be
either uber or Airbnb right like Airbnb
was something that I remember even early
on I don't really want to stay with
other people that sounds weird like I
don't want to get in someone else's car
like that's shady but then all sudden
like you know the word just kind of gets
around you try it once enough people try
it once they really enjoy the experience
word gets around once it does that's
that that's that sort of that Big Bang
moment right where the markets kind of
created and then at that point your
problems are completely different at
that point you don't need to convince
anyone anymore because people just think
it's going to be inevitable but then
your problems are more about scaling and
you know continuing to find refine the
product at that point
can we talk about your key KPI is doing
that 18 months off period what we're
measuring to make sure that you are
moving the right brake yeah so the
question is on the key kpi's during that
18-month period
the the the sad answer is we were not
monitoring them we were not measuring
them that's probably why it took us 18
months it probably could have been a lot
shorter I think we were looking at sign
ups which was kind of the thing that
most people were looking at at that
point in time and it's a very poor
metric I think if you look at how our
science would convert to active users
that was very low if you would look at
how our signups were trending sort of on
a daily and weekly basis that was
trending down so by all accounts we
didn't have product market fit and we
knew we didn't have product market fit
it wasn't like a big surprise so so it's
really just a matter of continue to
iterate continue to iterate until you
finally get something that that clicks
sure so the question is I'm pricing
what's a journey we went through I think
people are a lot more rational about
pricing today than when we got started
because in in 2007 and 2008 the
prevailing thinking in Silicon Valley
was that you shouldn't actively not
charge money you should actively be not
making money that was the prevailing
thinking it sounds really really crazy
now but at the time the logic went that
Twitter was the example that if you
charged money then you would have
revenues and once you had revenues they
wouldn't be that big and then you just
be valued on a multiple your revenues so
way better to sell the dream and not
show any revenues than to make money and
then have your valuation come down so
that's what people thought at the time
and we we start up by not charging any
money so it's just completely free from
basically women launched in 2006 through
the summer of 2008 we I'm not even
kidding we had people who would just
unsolicited just mail to check for
hundred bucks
cuz they were like you're gonna run out
of money like you need I just gonna give
you money and like and and we're like
thanks but like it was a completely free
product there's no way to
money unless you mail us a check and and
then we knew we're gonna run out of
money from the round that we raised in
around September of 2009 in G sorry
September 2008 in January of 2008 we
decided to try to make money because we
figured making money was much cooler
than raising another round so we worked
for 6 months from January to June on on
launching Weebly Pro which was the first
version was four dollars a month it was
the first version that you could pay us
any money for we had all of our friends
over in our in our apartment the night
before we launched it and we all took
bets on clearly how many millions of
dollars we're going to be making the
next day like it was like as soon as we
pressed that button it was just gonna
come flown in and and then we launched
it the next day and then after a week we
looked at the sales and it turns out
that we made 10 times less than the
lowest bet so it was like okay I guess
it's not going to work out quite that
well that fast but then we you know we
kept iterating we kept growing from June
of 2008 to December we almost ran out of
money again
but but had the option of cutting the
founders salaries and so we're going
we're going to be cashflow positive we
basically became cashflow positive in
January 2009 more or less we're through
the rest of history of the company
actually use it for three weeks tops
so in that case how would you actually
acted because yeah so the questions it's
awesome that your Weebly user sort of
how do you calculate active usage when
people flake off I think you can still
calculate the same way and I think it's
so valuable metrics so there's a
question with with with talking to
inside baseball with website builders of
are they successfully using your product
even if they're not coming back every
single day and maybe they come back once
every six months I still think it's
useful to look at the metric because
because otherwise you're just flying
blind
yeah so so the questions around the the
just the the word discontinuous
improvement and like what does that mean
and a lot of the writings about
continuous improvement I think
discontinuous improvement is is
effectively when you're making a big
leap not and and sometimes small
incremental improvements don't get you
to that big leap right and so I think
you know imagine yourself starting with
the palm treo right and you're trying to
make continuous improvement right like
what would you do like you'd improve the
OS a little bit maybe you'd improve you
know the way the apps can exist a little
bit maybe you would take that keyboard
and just like make the you know clicking
a little bit better or the typing little
bit better whatever it is but I think by
definition if you're going to create a
new market oftentimes it's discontinuous
improvement and what that means is is
taking a really big leap and taking a
really big leap it doesn't often happen
the same way as taking small steps and
so I think you know again it's it's it's
really about fighting that hidden need
figuring out what people want and
building that solution iterating really
quickly on that front but optimizing for
learning and I think optimizing for
learning is sort of the key here where
you say what's the biggest unknown that
I have and how do I go about answering
that question okay two more questions so
how do you deal with a demographic split
between purchasers and users like we're
a hardware company and our primary
purchasers are probably going to be Gen
X they want an analog version because
they believe it's more reliable and the
primary users of the product will be
Millennials and they all want touch
screens which actually works better for
us and so how do you deal with you know
convincing people later on hey in the
tech roadmap we'd actually like to even
have
you know maybe your old equipment back
and we'll just give you a new one yeah
so the question is hardware startup your
purchasers and your users are different
demographics and and they want different
things yeah how do you make the
transition smooth I mean I think I I
don't have that much information
I'm guessing education oh what coffee
okay then I have no idea but I but if
you want to come talk to me afterwards
we could dig into it a little bit more
oh yeah yeah that's a great question so
on your way to product market fit when
do you start the whole fundraising
process I think so so I think the most
helpful thing to me that I end up
explaining to a lot of people is look at
that slide on the stages of a company
and most companies will not be able to
raise money until they're at the early
traction phase just entering traction
now things may be different for you you
may have some friends and family who may
be able to kind of stake you early on
you may get in a program like Y
Combinator you you may be different
that's certainly possible but most
companies like when you look at those
large early rounds that are raised and
this company raised 40 million dollars
that launching a product and you're like
I can do that too
you can't that that's what I thought it
turns out that in all those cases are
some kind of history it's you know the
the founder or founders of that company
have cred massively successful products
before or maybe they're huge you know
coming in some some part of the industry
or whatever it is I think if your
expectation is that you can trace it
around until you get to early traction
that's probably a realistic expectation
and then at that point sort of what are
the implications of that right so how
the hell do you get to early traction
without raising money right it's a
chicken it's sort of this chicken and
egg problem
everyone solves it differently right
like everyone wanted up solving it
differently it's really really hard
though and I think the key the way that
a lot of people solve it is just you
know effectively sweat
it's just getting a few really smart
people together who can build what they
need to build without anyone else
without outsourcing without hiring
anyone else and keeping their burn
really really low and basically locking
themselves in a room and and continue to
just build as quickly as they can until
until they get to that point and it
looks like you have a follow-up no no so
so the question is lon launch when you
have something is better than what's out
there which which means a full-blown
product no I I think you know maybe this
is something I could add in here don't
don't look at your product in terms of
like a feature grid like a feature
checklist if you think about it like
that you can never win because you're
behind and you can never catch up and
especially if you're comparing to like I
like this phrase of like customers over
competitors because if you're looking
what your competitors are doing right
then you're inherently following because
whatever they've just launched they
started building three months ago right
and so by the time you build that and
you launch that then they're gonna be
launching the new thing and it could be
you know I remember one of our
competitors I won't name them but but
but they're from South Africa and they
had raised 40 million bucks and we had
raised six hundred fifty K and they
things we're not going that great for
them and so they completely ripped off
our interface and they just completely
cloned it and launched it and I was like
we were laughing our asses off because
we were about to launch an update where
at the time that sidebar with the
elements was on top and we were out to
put it on we were about to put it on the
left right we'd spent a lot of time
building that and they launched like two
weeks before we built it right and so I
think you have to focus on your
customers not your competitors and then
it's not about to feature grit because
there's gonna be one particular feature
or one aspect of your product maybe it's
the the ease of use and the usability
that opens it up to a new market maybe
it's one feature that people are just
killing for that's gonna that's going to
make up for the lack of the rest and so
people are going to look at that and say
well it doesn't have XYZ which I do kind
of want in those other products do but
this is the one thing that I need and
they're gonna come and use your product
for that so it's not that
your product has more features than
anyone else is that your product does
that one thing that one job they're
trying to it does that better than
anyone else thanks guys
okay
that concludes today sorry that we ran a
little late it's hard to constrain
fantastic speakers from getting through
their material and all the great
questions you guys are asking next week
Swee aldo she and Gustav Ostrom are from
Mixpanel and Y Combinator respectively
we will continue on our dive into
product talking about measurement and
growth two very important things and
we'll also be posting another video of a
conversation this week that adora is
going to have with us Magog the founder
of gobble and they like the bee gees are
going to be talking about staying alive
if anyone gets that reference all right
thanks everyone
[Applause]
you