Course Curated By: Dr. G. Danford (London Business School MBA, Helsinki School of Economics PhD)


Advice Before Starting

The only proven method for measuring learning is to take a pre-quiz and post-quiz of the content.

[WpProQuiz 8]

Product/Market Fit

Cases: DoorDash, Teespring, and Twitch

Content

  • How to test a business idea
  • The concept ‘doing things that don’t scale’
  • Why a startup should; ‘test first, launch fast, and not scale’
  • Ways to find first users
  • Processes to delight customers
  • How to determine the optimal product-market fit
  • Steps to get press (publicity)

 

CASE: DoorDash, Stanley Tang (Co-founder)

 

Doordash is an on-demand food delivery company. Doordash operates in eight markets and employs 65. The company recently raised $40 million in Series B funding (including Kleiner Perkins, Sequoia Capital…

 

Doordash first began by talking to around 150 to 200 small business owners, and they brought up this idea of on-demand food delivery. The people they talked to kept agreeing with the idea; “You know, we don’t have delivery infrastructure. It’s such a huge pain for us. There aren’t any good solutions out there.” This led the team to wonder;, ‘why hasn’t anyone solved this yet’? Furthermore, they asked themselves; ‘How can we test this hypothesis?’. The founders were at that time just college kids. They didn’t own trucks or delivery infrastructure and couldn’t just build a delivery company overnight right? So how could they test this assumption?

Doordash decided to create a simple experiment with restaurant delivery. They spent an afternoon putting together a quick landing page. When they went on the Internet, they found some PDF menus of restaurants in Palo Alto. They placed those restaurants on the web and added a phone number at the bottom of the page, which was actually their personal cell phone number. That was it. They called the landing page PaloAltoDelivery.com. and all of a sudden phone calls started coming in. Therefore, they had launched this idea in just about one hour. PaloAltoDelivery.com didn’t have any drivers; we didn’t or any algorithms and they didn’t even have a backend. After that they spent six months building a fancy dispatch system.

At YC (YCombinator) there’s a mantra they like to talk about which is ‘doing things that don’t scale’. This is because, at the beginning it should be all about getting the thing off the ground, and trying to find product-market fit. “If you have to be aggressive about user acquisition when you’re small, you’ll probably still be aggressive when you’re big. If you have to manufacture your own hardware, or use your software on users’s behalf, you’ll learn things you couldn’t have learned otherwise. And most importantly, if you have to work hard to delight users when you only have a handful of them, you’ll keep doing it when you have a lot” (Paul Graham).

 

3 Lessons Learned

  • Test your hypothesis. You must treat your startup ideas like experiments.
  • Launch fast. Doordash launched in less than an hour with a really simple landing page.
  • It’s okay to do things that don’t scale. Doing things that don’t scale is one of your biggest competitive advantages when you’re starting out. You can figure out how to scale once you have your demand.

 

Things That Don’t Scale: Stanley Tang (3:30)

NOTE: this video will start and stop at the pre-assigned times 6:34-10:14

CASE: Teespring, Walker Williams (Co-founder)

Teespring is a commerce platform to design and sell products. The company has raised $56 million in 4 rounds from 6 investors (including Khosla Ventures, Andreessen Horowitz).

 

Teespring allows entrepreneurs to launch products and apparel brands without risk, cost, or compromise. Today the company has about 180 employees (since then they have downsized by by 70). Teespring ship tens of thousands of products each day. Walker talks about one of the most fundamental advantages you have as a start up, and that is; you are able to do things that don’t scale. Walker define things that don’t scale as things that are fundamentally unsustainable; they will not last; they will not bring in the millionth user. Walker focuses on three critical aspects in startups; finding your first users, turning those users into champions, and finding your product/market fit.

The first thing you have to understand is that there’s no silver bullet for user acquisition. The reality is that for the vast majority of companies, and in fact for every company that he has ever had the chance to speak to, that’s it’s just not possible – those are unicorns. Most companies, from the outside at least, look like they’ve had this dream growth curve. The reality is that those first users were impossibly hard to get. 

The second critical aspect is; what happens after you get those initial users? How do you turn those users into champions? A champion is a user who talks about and advocates for your product. Every company with a great growth strategy has users who are champions. The easiest way to turn a user into a champion is to the delight them with an experience that they are going to remember. This requires doing something that’s unusual or out of the ordinary – ‘an exceptional experience’. The easiest way to do this early is to not scale. Alternatively, you should be just talking to users. There are three ways to talk to users; run customer service yourself, reach out to current and churn customers and finally, by employing social media and communities.

The product you launch with will almost certainly not be the product that takes you to scale. Your job in the early days of a startup is to progress and iterate as fast as possible in order to reach that scalable product that does have product-market fit. But you need to optimize for speed rather than scalability and to deliver clean code. A great rule of thumb regarding growth is; only worry about the next order of magnitude. Therefore, when you have your tenth user, you shouldn’t be wondering how you are going to serve one million users. Rather, you should be worried about how you’re going to get to 100 users. When you’re at 100, you should think about 1,000. It’s one of those things where necessity is the mother of invention.

 

Things That Don’t Scale: Walker Williams (3:00)

NOTE: this video will start and stop at the pre-assigned times 18:03-21:02

 

CASE: Twitch, Justin Kan (Founder)

 

Twitch is a social video platform for gamers. The company has raised $35 million from 6 investors (including Bessemer Venture Partners and Draper Associates).

 

Justin talks about press (public relations): how do you get it and how does it work? He presents an abridged version of what they discuss at Y Combinator. When most people get started with entrepreneurship, they think about press. Regarding that, they think press is something that happens magically. They think that journalists trying to get the best stories is like a meritocracy – which is absolutely not the case. Before a startup thinks about press, they should think first about who they really to reach, as well as their actual goal. It turns out that if you don’t have any goals, you’re not going to achieve them. This is pretty much true of everything. With press, if you aimlessly just want to be covered, it’s not going to do anything for your startup.

 

Public Relations: Justin Kan (3:30)

NOTE: this video will start and stop at the pre-assigned times 34:21-37:58

 

Something that people usually don’t think about when they’re trying to start a startup is; they think that everything they’re doing is interesting, but that may not be true for others. What the startup really needs to think about objectively is; if I weren’t the founder of the company, would they want to read a story about what this company is pitching? Therefore, you must take a step back before you invest the time in actually trying to pitch a story, and to consider;, “Will anyone actually really want to read this?” This is because what journalists and bloggers are really looking for are things that people actually want to read.

If you want to get your news into the press, there are basically some really easy steps to follow: The first is that you have to think of your pitch as a story. The second thing is you want to get introduced to any reporter or multiple reporters who are going to write about your thing. Regarding this, the best thing to do is get a face-to-face meeting. Some bloggers don’t actually want to meet face-to-face therefore, you must try to get a phone call. The worst thing to do is just have an email exchange, that is because it’s very easy for them to forget about it or ignore it later. The next step is to actually pitch them. What Justin does is to actually write out the ideal story that he wants to see published (in bullet points), and to memorize that. The next essential thing to do is to follow-up a couple days before (or a day) the actual news goes out. At that point you want to send them an email that says “This is the time we’re launching the app; thanks for meeting…”. You also want to keep your contacts fresh; because this is really a relationship business.

 

The Golden Rule

The last point is a ‘golden rule’ which Justin calls “pay it forward:”

You should always help your fellow entrepreneurs get coverage, because they’ll help you get coverage. The best way to get coverage is really through such introductions. Whenever Justin is meeting with reporters, he throws out names of other things he thinks would be interesting stories for that reporter. This effort usually comes back in a positive way.

A lot of people ask Justin about PR firms. He thinks that in the beginning; everything you do in your startup, you want to do yourself, including PR.


 

[WpProQuiz 8]

Slide Decks:

Teespring: Scale, Product/Market Fit

Twitch: Scale, Product/Market Fit

DoorDash: Scale, Product/Market Fit


In the next session topics include; raising money (Marc Andreessen, Andreessen Horowitz), outlier market-positioning, the perfect pitch (Roy Conway (SV Angel), late to market, seed stage funding (Parket Conrad, Founder, Zanefits) and more.

 

Presenters: Ron Conway (SVAngel), Marc Andreessen (Andreesson Horowitz), Parker Conrad (Zenefits)