Lecture 6: How to Start a Startup – Growth

Presenter – Adam Schultz

  • Retention is the biggest key to growth. Look at a retention curve of % monthly active vs days from acquisition. If your Y axis ends up parallel to the X axis metric, you are able to
  • What % of your users on day 31 were monthly active?
  • Ask: does this curve flatten out? If it does not, focus on product/market fit.
    • People usually don’t have product/market fit when they think they do
  • Different verticals have different retention rate requirements
    • Social media sites should be high: 70-80%
    • More specialized could be 20-30%
  • Startups should not have growth teams
    • It should be the whole team
    • CEO should set the direction for where you need to go
      • Mark Zuckerberg used “monthly active users” vs total registered
      • AirBnB – Nights booked
      • Yam – Messages sent
      • The second you have more than one person controlling things, you lose direction on what you should be doing
      • Each company should have its own single ‘North Star’
  • How do you drive towards the ‘magic moment’
    • There are two videos linked in the lecture notes
      • Alex Schultz and Naomi talking about it
      • Danny Farante on growth
  • When we think about growth, the biggest mistake is that we optimize for ourself
    • “I am getting too many notifications, we should optimize notifications”
      • Instead you should focus on the marginal users. Example is Facebook users that don’t have very many friends – making it easier for them to find their friends.
      • Don’t think about yourself, your issues. You are a power user, you should worry about keeping the marginal user than someone who is already firmly in the product.
  • Tactic
    • “If we build it, they will come” is an easy trap to fall into, but the worst trap to fall into.
    • Facebook was late to expanding internationally, but they were able to scale quickly because they were able to focus on the languages.
      • Built a scalable translation infrastructure that allowed Facebook users to translate themselves
    • More tactics
      • Virality –
        • Viral loop – Adam Penenberg  is a good book
        • Payload – how many people can you hit in one blast
        • Frequency – how many times you can hit them
        • Conversion rate – %
        • Virality example is Hotmail
          • “link at bottom of email saying ‘sign up for free email here’. Individual emails didn’t have much payload, but they had very high frequency (multiple emails a day) and high conversion since people were stuck paying their ISP for email service
        • Paypal example
          • Ebay was their vehicle for viral growth- conversion rate was extremely high with ‘sign up for PayPal and you will get $10’ but their payload and frequency were very low
        • You should go through this scenario in your business. Look at how your business drives the three legs of virality.
      • K-Factor – multiply out all of the % below
        • Import
        • Send
        • How many people? 100 people
        • How many click? 10% = 10
        • How many signup? 50% signup = 5
        • 10-20% import, which means your K-Factor is between .5-1.0 and if it is less than 1 you will not be viral
        • Don’t bother with this until you have a large retention to begin with
      • SEO
        • Keyword research – do your research first before you set your keywords
          • How valuable is it for you
          • How many people are searching for it
          • How many people are supplying it (competition)
          • Google Adwords
          • Get valuable links from popular sites
      • ESPN
        • Email is dead for people under 25
        • Be a high class citizen
        • You care about email rate and click-through rate
        • The most effective email is a notification
          • For Facebook, they only sent notifications for marginal users. Turned it off when people got a lot more friends so it didn’t become spam
      • SEM
      • Affiliates/Referral programs
  • “A good plan violently executed today is much better than a perfect plan executed next week” George S. Patton



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