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2018-04-24T10:57:45.314Z
0
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Hi readers,

Big update: I’m joining Andreessen Horowitz as a general partner!

Starting in April, I’m returning to my roots to invest in and help grow the next generation of startups. I’ll be focused on consumer startups, bottoms up SaaS, marketplaces, and more – utilizing my expertise in growth to launch and scale new companies. Incredibly excited.

How this came together tells you a lot about Marc and Ben, and how Silicon Valley works. I moved to the Bay Area in 2007, as a first time founder with a lot of energy and a lot of questions. I spent the first year meeting everyone I could, reading everything about tech, and writing down all that I was learning. A few months in, I was shocked to get a cold email from Marc introducing himself. Who knew that sort of thing happened? My blog was pretty much anonymous and I could be anyone – but he reached out to talk ideas, which made a big impression. I learned a lot about Silicon Valley that day.

Marc soon introduced me to Ben, and together, they provided a regular stream of advice/ideas/frameworks over breakfasts at the Creamery, Hobee’s, Stacks, and other assorted Palo Alto diners. I was a first-time founder, and the real-life entrepreneurial...

Dear readers,

2017 was a big year, where we got Trump’s first(!) year in office, a renaissance in interest around cryptocurrencies, Brexit, Puerto Rico, and oh yeah, things got a little crazy at Uber too. I want to take a moment to share some of my writing from the past year, a few books I’ve read recently, and also include stuff from the last year just for completeness. One of my 2018 goals is to spend more time writing – stay tuned for that – and am looking forward to sharing some incredible learnings I’ve gotten from Uber over the past few years.

As always, thank you again for reading!

Andrew
Hayes Valley, San Francisco, CA

Essays from 2017

Startups are cheaper to build, but more expensive to grow – here’s why
Lots of important trends – cloud computing, open source, etc. – are making it cheaper to start a company. However, growth is getting harder and more expensive because of consolidation, making paid acquisition one of the few channels that still work. Startups are responding by raising more money, monetizing earlier, trying paid channels, and experimenting with referrals instead of virality.

VIDEO: Three things you need to know to raise money in Silicon Valley
I spoke to an audience of French entrepreneurs and tech folks, and explained some of the key lessons from watching startups raise money in San Francisco versus elsewhere. This means focusing...

Building your personal bat signal
I want to cross-pollinate a tweetstorm on lessons I’ve learned from a decade of professional writing. In a way, it’s a followup to some more general life lessons from 10 years of living in the Bay Area. Writing has been enormously impactful from a professional standpoint, and I continue to recommend to everyone – especially folks who are new to the Bay Area – to do it as a way to send out the “bat signal” on their aspirations, ideas, and interests.

It’s awesome, but insanely hard to get started. Of course, everyone knows the mechanics of setting up a blog – but the hard part is finding your voice, figuring out topics that are interesting for other folks to read, and building a long-term habit.

The lessons
Without further ado, here are a few opinions I’ve developed up along the way:

  • Titles are 80% of the work, but you write it as the very last thing. It has to be a compelling opinion or important learning
  • There’s always room for high-quality thoughts/opinions. Venn diagram of people w/ knowledge and those we can communicate is tiny
  • Writing is the most scalable professional networking activity – stay home, don’t go to events/conferences, and just put ideas down
  • Think of your writing on the same timescale as...


I recently was interviewed by Tim Chang, Managing Director of the Mayfield Fund at the Manifesto conference. We talked about growth, what I has learned from trying different tactics, and how to evaluate the success of growth initiatives. (By the way, SC Moatti, the co-producer of Manifesto, also a tech entrepreneur and ex-Facebook PM, is writing a book on the business mobile called Mobilized. I had a chance to read it and find her insights really valuable. And the next Manifesto is dedicated to mobile.)

You can watch the full video of my talk here.

Here’s the key points of the Q&A below. (Thanks to David Grotting for helping with these)

How Did You Get Started?

  • Started in Venture Capital as an entrepreneur in residence at Mohr Davidow Ventures.
  • One of my most important experiences was working in Ad Tech
    • You spend all of your time thinking about quantitative customer acquisition for tens of thousands of customers.
    • You learn all the interesting nuances of different business models and gain a keen sense of customer funnel optimization and key metrics like cost per customer and LTV.
    • One example being working with a dating site and realizing that the average time for a dating “match” was about 4 months so it’s important to get users to sign up...

Push notifications are a cornerstone of every mobile app’s engagement and retention strategy, yet we know so little about them. Previously I’ve written about why 60% of users opt-out of push notifications and why some pushes are getting 40% CTRs.

Today, we’ll look at some push notification data from Leanplum, a mobile marketing automation tool, which breaks down 671 million pushes to uncover some interesting trends, particularly on time of day targeting for push notifications.

Average weekday push notification activity in North America
Let’s first look at when marketers are sending push notifications, by hour, and how users are interacting with these pushes. The graph below shows the metrics for push notification sends and opens for the average weekday in North America, on a sample of millions of notifications. The data is normalized by local hour, and represents the raw sends and opens for that given hour. The blue line shows the raw number of sends and uses the left axis. The red line shows the raw number of opens and uses the right axis.

You can see an interesting trend here- you can see pushes sent and opened trending upward throughout the day, with a small peak around noon, a slightly larger one around 3pm, and the largest in the evening. The post-evening trend is interesting – after 6pm, on a relative basis, Pushes Opened starts to trend higher, relative to previous hours, and Pushes...

[Hi readers, I recently met some amazing folks at Mixpanel – Justin Megahan and Amelia Salyers – who interviewed me for their “Grow and Tell” series. This was originally published on the Mixpanel blog, and I’m excited to re-publish it here too. Thanks to Suhail, founder/ceo of Mixpanel, for helping set this up. Hope you enjoy the interview. -Andrew]

After navigating a few winding hallways at Uber HQ to find a tucked away conference room, I’m chatting with Andrew Chen about one of his favorite topics: growth hacking.

Across the table, he’s telling me about the importance the product plays in growth hacking, all as he taps away on his iPhone. On the other side of the glass is a growth team of engineers, data scientists, product managers, and who knows what else. They are, Andrew assures me, one of the best teams in the game.

He would know. When it comes to growth, there are few names that carry the weight of Andrew Chen. In a relatively new field, Andrew is an elder statesman. He’s been at this for a while. His early posts on growth hacking helped put the term on the Silicon Valley map. Thousands subscribe to his newsletter to get articles explaining the viral loop or the Law of Shitty Clickthroughs.

And currently he’s explaining to me why my observation—that the popular growth hacking tactics seem...

Marketplaces are easily underestimated
When marketplaces get big, they can get really big. Some of the biggest tech successes ever – eBay, Airbnb, Alibaba, Uber – are marketplaces worth tens of billions of dollars each.

And yet marketplaces often start small, in niches and weird corners of the Internet. As we all know, when eBay got started in 1995, it was focused on collectibles. The venerable venture capital firm, Bessemer Venture Partners, famously passed on an early investment:

“Stamps? Coins? Comic books? You’ve GOT to be kidding,” thought David Cowan, a partner at Bessemer. “No-brainer pass.”

An early investment in eBay would soon yield a 50,000% return from Series A to after the IPO, as the company started to help transact on everything from electronics, cars, homewares, and more.

Two decades after eBay was founded, a similar story unfolded itself, this time over Uber (my current employer!) and the taxi market. NYU Professor Aswath Damodaran asserted that Uber was overvalued after a 2014 investment round. Based on data points from the global taxi and car-service market, he concluded the real number should be $5.9B. Since the 2014 article, Uber has blown past his estimate by 10X, with top line revenues to support it. Not bad. The reason the estimate was so off, as investor Bill Gurley pointed out, is that Uber goes beyond taxi use cases and grows the market substantially by unlocking many new...

 

Raising money is hard. And it’s even harder if you’re an entrepreneur from outside the Bay Area.

Entrepreneurs from outside of Silicon Valley often struggle to raise money here. There’s issues with culture and style, differences in expectations, as well as our emphasis on growth over monetization. I’m reminded of this every time I travel and meet startups. Earlier this year in Paris, my girlfriend Brianne (at Zendesk!) and I gave a talk that touched on many of these issues. We recorded the session and wanted to share it with you.

The video has a variety of topics, including:

  • How the startup ecosystems are different in SF and in Sydney (and Paris!) (2:30)
  • An alternative to influencer marketing, for startups (5:09)
  • A different way to think about your competition (7:02)
  • Customer service as a competitive advantage (9:25)
  • Why ecosystem matters, and why the Bay Area is cushier than most people think (12:50)
  • Why you should look for failed experiences if you’re hiring or interviewing (14:56)
  • Insights on Uber’s “give / get” program (18:17)
  • Breaking into VC as a teenager (19:02)
  • Advice for starting your own blog or thought platform (26:27)
  • Biggest fiascos working in growth and the downsides to being “too good” at acquisition (29:20)
  • The 4 -5 stages to building a great growth team, and what profiles to look for (33:13)
  • Does the rise of “growth” mean that “marketing” is dying, and should we expect to see the end of the CMO? (36:18)
  • Why...

Startups should be getting cheaper to build. After all, the industry’s created several waves of innovation that’s supporting this across multiple layers in the stack:

  • Open source software instead of paid developer tools
  • AWS instead of your own datacenter
  • Per-click ads instead of Superbowl commercials
  • Off-the-shelf SaaS tools versus building your own
  • App stores for efficient global distribution

Not only do a number of these trends make building new products cheap, in many cases it’s about driving the costs down to zero. If we zoom just into AWS / cloud computing, you see how a massive amount of competition is leading to significantly lower costs – even some vendors giving away their services pro bono:

As cloud providers rush to build new data centres, and battle for market share, businesses are finding that the cost of putting their computing and data storage into the online cloud is getting ever cheaper. In the past three years prices are down by around a quarter, according to Citigroup, a bank; and further significant falls look all but inevitable. Some providers, such as Microsoft, have started providing their services free to startups, in the hope of turning them into paying customers as they grow. (Economist)

However, this is opposite of what’s happening. Instead, startups are raising more capital and burning more capital to get to their Series As. It might be cheap to build the v1 of your app, but getting traction is a whole...

Readers,
As you can tell, I’ve been a bit more active writing in the last few months. I wanted to do a quick roundup of my essays over the last year, in case you’ve missed any of them. I’ve published a number of guest essays and original writing on topics like growth metrics, consumer psych, the startup ecosystem in the Bay Area, push notifications, and much more.

If you want future updates, you can always subscribe to get the newsletter.

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For your convenience, I’ve written a couple blurbs underneath each essay so you can get a sense for each article.

Finally, I wanted to note – can you believe I’ve been writing for almost 11 years now? Who knew I’d be able to keep it up...

The end of the cycle
One of the best essays written last year was Elad Gil’s End of Cycle? – referencing our most recent 2007-2017 run on mobile and web software, and the implications for investing, startups, and entrepreneurs. Although he doesn’t directly talk about it, the end of a tech cycle has major implications for launching new products, growing existing product categories, because of a simple thing:

It gets much, much harder to grow new products or pivot existing ones into new markets

The reason for the above is that there are multiple trends – happening right now – that impede growth for new products. These trends are being driven by the biggest players – Google/Facebook, et al – but also by the significant leveling up around of practitioners in design/PM/data/growth.

We’ll look at a couple trends in this essay, including the following:

  1. Mobile platform consolidation
  2. Competition on paid channels
  3. Banner blindness  = shitty clickthroughs
  4. Superior tooling
  5. Smarter, faster competitors
  6. Competing with boredom is easier than competing with Google/Facebook

These trends are powerful and critical to understanding why all of a sudden, entrepreneurs/investors are starting to get into many new fields (genomics, VTOL cars, cryptocurrency, autonomy, IoT, etc) in order to find new opportunities. After all, if you can’t grow in the existing markets, you very quickly need to get into new ones, as Elad describes:

One sign that technology markets often exhibit at the tail end of a cycle is a fast diversification...

2015
This pic is from two years ago, taken at Uber’s HQ on 11th and Market. After weeks of discussion with the product team, we’d hit the final stretch, and TK and I holed up for a few hours in a conference room to finalize my role at Uber.

There were a couple things that got me over the line: TK’s insanely big vision for Uber, the already huge impact the team was making, and the entrepreneurial culture he’d created. It won me over. We shook hands, TK wrote and signed the offer letter on a sticky note (blocked out for obvious reason!), and took a selfie for posterity. I’ve never shared this photo publicly before, but here it is now. Happier times.

Starting at zero
TK (and RG+Garrett!) started a company at zero that’s creating work for 13,000+ people at HQ and millions of drivers. I want to take a moment to acknowledge – even as we’re at the peak amount of noise in the press – all the amazing qualities that Travis embodies as an entrepreneur and leader, especially in the context of a guy whose last startup had <10 people.

Yes, there are changes that need to be made and passionate folks working on addressing the many serious issues that have been surfaced. It will take years and a lot of hard work, to make that happen.

At the same time, one of the most important startups has been built in the last few...

[Hi readers, my good friend Darius Contractor (currently growth eng at Dropbox) has a brilliant new framework how user psychology has driven growth at companies like Bebo, Tickle, PhotoSugar and of course, Dropbox. Thanks to Darius and the folks at Reforge for putting this together. Hope you enjoy the writeup here! -Andrew]

Increase your funnel conversion by getting users Psych’d – by Darius Contractor

Have you ever wondered why people are bouncing from your nearly-frictionless onboarding flow? Why the same change can result in a lift on one page and cause drop-off on another? Or why people who find you via search bounce away after a few moments?

Having spent years focused on building experiences that got millions of users sharing, onboarding and inviting their friends, I’ve learned 2 things:

1. Every element on the page adds or subtracts emotional energy
2. Inspiring users is as important as reducing friction

A secret of the top growth experts in tech is to think about every UX interaction as an emotional event. But far from being random or beyond our control, emotion-driven interactions can be broken down into components, optimized at each step and replicated to get better results for onboarding and conversion.

The Psych Framework

Today I’m sharing the Psych Framework I’ve used to help grow companies like Tickle, Bebo and Dropbox. It is a systematic way to detect and improve the way an experience affects user emotional energy, which we call “psych”.

I recently did a video interview on the topic of how your growth strategy changes from being a small startup versus becoming a larger company. It’s hard to compete when you’re launching a new product and you have to think asymmetrically for your growth efforts to work. I walk through each stage, step by step, and talk through some of the strategic dynamics to think about. (Thanks to the Reforge folks for setting this up!)

Video
You can watch the full video here, and check out the notes below.

 

 

Notes
New startups have to focus on underrated acquisition channels for early growth efforts [0:00]

  • Look for channels that are too small for the big companies to worry about — this is how smaller companies can gain an asymmetric advantage
  • Examples: niche communities, sub reddits, mailing lists, offline, blogs, linkedin groups, facebook groups
  • The best underrated channels are all small but high-intent

Find underrated channels that directly match your product’s target market [1:45]

  • Look at what are the channels that match your product the most.
  • It has everything to do with finding lots of little channels with high relevance.
  • Regardless of where you start, you need to quickly be able to cobble together a bunch of small channels to get going — not just one or two.

Learn with very small channels by focusing on qualitative feedback to start [2:48]

  • Any small channels that...

Benedict Evans at a16z recently tweeted the following:

There’s so much truth in this tweet. And it resonates so much, I think it deserves a name:

The Bad Product Fallacy
Your personal use cases and opinion are a shitty predictor of a product’s future success.

I’ve been in the Bay Area for 10 years now, and nothing stings more than whiffing on the prediction of whether a product will be success. Getting this wrong can hurt the ego and sometimes the checkbook too – just ask the dozens of investors who’ve passed on Facebook, Google, Uber, and so on! Personally, I missed completely on Facebook’s potential, and that’s just one of many bad predictions over the years.

The Bad Product Fallacy happens because the trajectory of a product evolves quickly – it’s just software, after all – and a simple set of features can quick grow into a rich, complex platform over time.

Let’s look at some of the comment root causes of the Bad Product Fallacy:

It all starts with a toy
The first and most well-studied root cause of the Bad Product Fallacy is from the theory of disruptive innovation. Many products can look like toys before they become successful. Just take Instagram as an example – it was just a photo filters app at the beginning, and is now one of the largest media properties in the world. Or personal computers, which was initially meant for hobbyists since they were underpowered and weren’t useful for business applications.

This whole phenomenon...

[I recently gave the keynote at the largest startup conference in Australia, StartCon. Many awesome growth folks were there, including Elena Verna at SurveyMonkey, Nate Moch at Zillow, Sean Ellis at GrowthHackers, etc. My talk is below, with links to my talk, preso PDF, etc at the bottom. If you want to see all the conference talks, they’re here. 25% off code: WHATSNEXT. Thanks! -A]

In tech, we’re always thinking about the future.

This is why it’s no surprise that one of the most common questions I get is: What’s next in growth? As practitioners in growth, marketing, entrepreneurship, and tech, we’re looking for the edge that’ll give our products a chance to succeed in an extremely competitive and dynamic environment.

The answer to this isn’t simple – there isn’t an obvious closed form solution, so I won’t try to give a “tips and tricks” kind of answer. Instead, let’s talk about how to systematically answer this in a way that’ll be relevant today as well as 10 years from now.

First, we have to zoom out.

Technology, products, growth, and marketing don’t exist in a vacuum. There’ve been many products, and lots of smart folks thinking about this problem for a long time. If we look back at what’s come before us, we can try connecting the dots to see if we can spot any patterns.

The first thing...

January 2007
Ten years ago this week, I took a long, cloudy drive from Seattle to Silicon Valley on Highway 1 to start a new job and new life. I was barely 24 years old, in a hurry to change the world, and eager to begin my first day at MDV, a Silicon Valley venture firm, as their new Entrepreneur-in-Residence. It was 2007, and the iPhone hadn’t been released yet, YCombinator was just getting started, and MySpace was still bigger than Facebook. And who’s this Obama guy that folks are talking about?

That was a long time ago :)

A decade later, the world is incredibly different. And I’m different too, because the Bay Area has profoundly and fundamentally changed me. Along the way, there’s been good decisions and plenty of bad. I want to share some high-level observations/thoughts, focused on mostly career/professional stuff but a little bit of personal too.

Let’s dedicate this essay to all the new folks starting out in the Bay Area. Welcome!

People are the secret sauce
First, what makes the Bay Area special for tech is the people. I barely knew anyone when I first arrived here, so I had a simple goal in 2007:

Meet 5 new people per day, every day.

It helped that working at a venture firm is all about networking, so I picked aggressive goal! I started by emailing my tech friends to intro me to smart people working on cool products. Upon grabbing coffee with them, I followed...

[Andrew: Paid marketing remains an integral part of many products’ acquisition channels, and one of the key metrics is Cost of Customer Acquisition, which is a nuanced calculation with lots of gotchas. My good friend Brian Balfour (ex-vp growth at Hubspot) put together this incredible essays with details on how to think about it.]

Brian Balfour (ex-VP Growth at Hubspot):

In everything from growth projections to company valuations, it’s common to use CAC and CPA interchangeably — but it’s wrong, and it can cost you. In this post, I break down growth’s most important jargon to demystify the true cost of acquisition, and dig into the most common mistakes leading growth teams off track.

Note: This is a big topic that’s best addressed with live examples and interactive frameworks. To that end, I’ve included a number of examples of real companies, plus interactive spreadsheets that you can access throughout the guide. To adapt any spreadsheet for your own calculations, click here, then go to File > Make a copy to create your own version.

Customer acquisition is not CPA – Three examples

To start off, let’s address a common myth. Customer acquisition cost (CAC) and cost per acquisition (CPA) are commonly conflated, and yet in reality they’re completely different metrics. Understanding the difference is the start to understanding CAC in depth.

CAC specifically measures the cost to acquire a customer. Conversely, CPA (Cost Per Acquisition) measures the cost to...

[Andrew: Excited about today’s guest post! I was recently interviewed by the folks at Reforge, a new company started by my friends Brian Balfour and Susan Su focused on advanced professional education. They asked a great question – how do you interview for growth folks? I gave some my 2 cents based on my experience helping startups and growth folks. They pulled together a great essay below!]

Growth Interview Questions

Guest Essay by Susan Su, Reforge

Together, Shawn Clowes (Atlassian), Elena Verna (SurveyMonkey), Nick Soman (Gusto), Andrew Chen and Brian Balfour (Reforge, previously at Hubspot) have interviewed or screened over 1,000 individual candidates for growth roles – both for their current and previous companies, plus startups where they’ve invested/advised.

Growth is an emerging field, and there’s hardly a playbook on how to ace your growth interview (whichever side of the table you’re on), and yet hiring and team could be the most important “growth hack” of all. I recently asked a handful of folks from the Reforge Collective about the questions they ask when interviewing candidates for competitive positions in growth.

Here are some of the questions we’ll cover:

1. The Golden Gate Bridge
2. Growth Hacking a City
3. Are you an early adopter?
4. Live brainstorm an experiment backlog
5. What Are Your Setbacks?
6. Look for opportunity, not just risk
7. But… why?
8. The Bullshit Test
9. The Trajectory of Growth
10. Probe on Metrics
11. And on Culture
12. 6-Month Roadmap
13. Growth Resources
14. Low Hanging Fruit

If...