Article by Jason Calacanis about Scaling
It’s much easier to sit in a room and dream about the killer feature that will save your startup. I’m going through this right now with Inside.com, and I see my other startups work on this as well. It’s fine to explore new features, test things, and even “build for yourself.”
In fact, one of the best things to do is “build for yourself.” However, there is a point in time where you’ve created 5, 6, 7, or 10 features for your product and it’s time to say “enough” and start studying the metrics, doing user interviews, and testing.
As far as I’m concerned this happens at 1,000 daily users for a consumer product and 250 daily users for an enterprise product. At that point you have enough users to solicit feedback and break people into two groups to do A/B tests.
We are getting thousands of daily users at Inside.com and we are very focused on two things: a) figuring out what behaviors increase people’s time in the App and b) figuring out how to get new people into the product.
In order to really grow a startup you need to increase your knowledge of how your product is being used. There are two basic ways to do this: study people’s behavior and talk to your users.
In terms of metrics you need to figure out how people are using your product with analytics packages like Localytics (mobile), Google Analytics (web), Chartbeat (live web; disclosure, I’m an investor) and Mailchimp/Sendgrid/Dyn (mail open rates, conversions, etc.).
In terms of talking to users I created three groups for Inside (alpha, beta, and delta) in the early months using a Google Group for each. I solicited members for these groups from inside the Inside.com app (literally said “email us to join our beta group to talk about new features!”). Everyone on our team joined these lists and listened. It was eye-opening: our users were wildly more sophisticated than we thought! They were really interested in very, very specific features and they were super loyal to us. Huge win.
I don’t know what the proper budget is for startups, but I actually think growth should be at least 25% of your budget after the product is completed – perhaps 50%.
The problem is that you need this huge group of people to launch a product, and after the product is done you need half that amount to maintain it.
Of course, hiring 15 people for six months of building the 1.0 and then shifting gears and firing five in order to put that money to work on buying installs, ads, and doing marketing is really not practical – it’s mercenary and would kill your culture.
So what most folks do is they burn $150k a month on 15 team members and an office, and once the product is in market they say “we have no budget left for marketing this awesome product!”
Then they look at their resources, the team they do have, and they default back to the “feature race,” adding more features.
A startup should basically fund itself with an expectation that they will spend 2/3rds of the eventual monthly budget building (say $100k) and then pop in the $50k a month in marketing in month seven when they launch and learn how to spend it effectively (or if they even should market the product – they might not want to if it’s a dog!).
Founders get really scared right after their products launch because of the very typical “launch bump” and the eventual “pit of despair” when the press and social media stop caring about you.
You have to fight the urge to be paralyzed and “search for a pulse.” Is there a “sign of life” in your product? Do folks like it enough that they can’t live without it?
There is an easy way to find out: ask them. One way to phrase it is: “how much would it cost to replace my product – in time or money – if we didn’t exist”? Another way is to say “What would you replace us with?” or “How did you solve this before you found us?”
If the product was, say, Thumbtack.com (I’m an investor) it would be something like, “Well, I would have to spend five hours: first calling 10 house painters, then getting five to call me back, three to visit and two to give me quotes.”
That answer means, “f@#k, life without Thumbtack.com would really suck.”
With a consumer product, this can be hard to judge sometimes: questions like “what would life be like without Calm.com or Vine.com?” might elicit the answers:
“Well, I wouldn’t meditate regularly, if at all, without my Calm.com App,” or, “I wouldn’t laugh as much without Vine – I would miss it!”
Those are valid answers, but it’s sometimes hard to put a cost on something that is just delightful. What’s the cost of losing the funniest guy at your poker game? Well, you have a boring game and folks say “I wish Pollak were here!”
Sure, everyone should be thinking about growth, but do you need a specific person in each company focused on this? When I have a growth person at one of my companies, they are solely responsible for seeking the truth around the brutal inevitabilities all founders face: “why are we not growing?” or “why is growth slowing?” or “why are we shrinking?”
In order to plan for growth you need to have someone build that plan, execute that plan and study the results so the next plan can be 20% better. You need someone obsessed with this.
Worse than this is a startup that does have growth positions, or positions with growth responsibility, but they are not given the authority to “grow.” Second guessing folks who you’ve hired to grow the product is worse than not having growth people – because you’re getting all of the costs and none of the benefits. Listening to the growth team is as critical as having them.