[WMD 2016] NFX Guild, James Currier "Unlocking the secrets of growth"

my name is James Courier and I'm the managing partner of n FX guild an accelerator running out of palo alto and i've been involved in the last 10 15 years in building lots of businesses that have grown to tens of millions of users i've invested actually co-founded and that was the CEO of four successful venture backed companies we've invested and started another another 20 companies myself in the last year and a half I've been helping we've invested in 45 companies in the accelerator which means that I've spent 1,100 hours in office hours working on product and growth with these 45 different companies and about 60% of them are b2b so if you are in the b2b space don't believe this is only for consumer products okay so that's my background so I'm a student of growth and all of us need to be students through growth I don't think you can do what we do and not consider yourself a student so my greatest mentor and leader of course like all of you must be Oda and I love what yo do says in the Empire Strikes Back which is unlearn what you have learned and in the last 18 months working with these 45 companies very intimately I've been unlearning a lot of things and I want to share eight of those things with you today the first thing I want to talk to you about is something that I've held for years and years which is that I really hate pay growth I I feel and there's good reasons why I don't like pay growth and you know the first one and and when we talk to people we say look I actually have zeroed paid growth because if you have even a little bit it tends to corrupt your culture it warps your mind about how you're gonna grow your business it keeps you and your team from doing the valuable thinking about the product and the language so that you can get to the organic growth and if you look around at the really big companies which have been built most of them had zero paid acquisition they were all growing organically and so this has been my mantra for a long long time all right and in fact what you're doing is you're simply trading in your equity for advertising right you are building up equity and value in your company and yet you're just giving it away to the VCS taking their money and then paying the advertisers to get your company to grow and so I've always disliked paid growth I've encouraged people to go to zero pay growth if they can but here's what's happening some of you might have seen this before but if you look at the history of what's going on with three free growth channels myspace came and went Craigslist email things have changed over time okay in terms of the free growth channels but what we're noticing is that we are at a unique point in history right and I've been doing this for 15 years we're do unique point of history look how low it is the free growth channels have really been reduced in the last few years it's getting harder and harder to grow organically or at least instrument your virality now pokemons go they grew again okay right James absolutely that's what we call entertainment virality and that is random okay they had to pretty much the same game and then they just had to pokemons onto it and boom off it went and now it's shrinking fast okay so this is what we call entertainment virality it's not something that you as an entrepreneur or as a growth hacker can predict and therefore it's outside the realm of what we're talking about if you want to predict your growth if you want to manufacture your growth and grow your growth there's very few places to go these days outside of just general word-of-mouth entertainment and then the paid Channel history is is coming along as well and what we're seeing here is that the number of paid channels is actually increasing okay and if you look at the trend line it's really getting better over time over the last 15 years there just didn't used to be these accurate paid channels available to us before now if you look beneath all that data on there what you'll actually notice is it's mostly Facebook Inc okay it's mostly Facebook web Facebook Mobile Instagram okay where you're getting your accuracy and your and your and your distribution okay so the story of our time is Facebook and this has really changed in the last few years these guys Rob Goldman is building their their ads platform the accuracy with which you can target to people is so good now okay and they are growing so fast that you can actually spend a dollar to get something worth five dollars and this has not always been true okay so for instance Google when they opened up their ad platform you by a dollar and you get back two dollars but within a year and a half you'd spend a dollar and you'd get back 50 cents of value because all of us moved and started buying the traffic and the value per click dropped for us though or the cost per click went up and so the value came down and so so but Facebook is growing so fast that they're actually exceeding our ability to buy all of their ads right now I don't know how long that will last it might last year it might last two years it's not going to go on forever now is a historical moment for us to take advantage of this platform that's been true for the last two years okay so I'm trying to learn to be grateful to the enabling Empire of Facebook because they do have a fantastic product product for us so when is it best to use paid acquisition when is it best it's best when you have high lifetime values often with b2b companies okay you can actually use the Facebook's platform to do a really good job on b2b not just b2c you often want to buy a lot of paid acquisition when you've got a lot of competition because you're in competition to raise money from the VCS you're in competition to hire the best people you're in competition to get the journalists to write about you so that people believe in you you get more customers if you need to outdistance your competition you are going to have to do some paid acquisition from time to time often you want to do paid acquisition when it's better than no growth if you're not growing at all all your constituencies aren't going to be able to believe in you unless you're growing so sometimes doing the paid growth can help you build your business in general hiring people raising more money etc and then there are times where if you hit it really hard with a bunch of paid acquisition you can vault into a place where the growth cycle becomes self-sustaining okay there are times it's pretty rare but there are times where you can really hit it hard the short of it the thing I have been unlearning and now learning again learning new is that paid growth is now more necessary than ever because of the big trends and the big shifts we're seeing in the unpaid channels and the paid channels which is another thing we could talk about for a whole day if you wanted to but fundraising becomes even more necess in the new world because of this for our startups I won't get into that okay that's a corollary all right number two the second thing I have always believed that language is the foundation of growth and I still believe that to this day but most people don't right and most people most of us are builders most of us have learned to build things we have a problem that we see in the world we say oh I'm gonna build this product and that product is gonna solve the problem and then I'm gonna build it and then at the end I'm gonna stick some language on it I'm gonna market it I'm gonna explain to people why they should use this product you stick the language this turns out is the wrong way to go about it this is what you must unlearn and I don't know where we all learn this I learned this in the 90s myself at some point but through experimentation and through working building so many companies many of which failed some of which succeeded I have learned that this is the wrong way to approach it so we must unlearn this idea that start with the problem then have the solution then market it you actually have to start by thinking about the language right think about the language that people are using in their minds to talk about what they want when you find that language then think about what is the product that fulfils on the promise that you need to make to people with the language you're putting in front of them either through an ad or through or through your homepage or wherever so we have been learning over the last many years that we have to go backwards we have to go to the language first so let me give you some examples of this so we built a company about 10 years ago where it allowed you to store your photos right this was in digital photography was emerging and the website said store your photos worked really well nobody used it so what we did was we changed the language on the homepage just to say share your photos and the team working on the product came in the next morning and said but our product doesn't allow you to share your photos so I said okay go fix that go go make that work and so they started thinking about the product in a new way they started changing the features they started changing the language on the site throughout the whole experience and with within six months we had registered 47 million users this is back when the internet had 600 million people so there was explosive growth simply with a language change this was really one of my first 'has around this idea that language drives the product which drives your growth and most people think the problem drives the product and then you market it and then you grow it okay and the key realization is that it's not just that the consumer or the business who's looking at your website says oh this is a website to share my photos that's very important that they see share my photos because then they realize oh I'm where am I going to share it oh I need to send it out and now more people come in and you've got some viral growth very important but the key insight is that you think differently about your product when you change the language okay that was the key insight for me about how it transformed what we were doing and then before long we had millions of people registering a week another example we had a website that was basically find a date it was a typical matchmaking site and we would buy all this traffic from Google we'd spend two dollars and 40 cents it was worth about a dollar eighty to us but we needed to do it in order to keep the network effect of the matchmaking site going it was kind of a break-even activity maybe doing five million in revenue a year Matt boring so what we did was we changed the language to help people find a date so suddenly everyone on the site can be helpful even if they're already married or if they're already in a relationship because it's a place to help others find a date oh and by the way I might find a date myself and we registered 29 million people in eight months with that message because the product was transformed the experience was transformed the mentality of the user was transformed by simply changing that phrase okay here's another example so if you think about the Facebook platform six years ago one of the big things that emerge was gaming and we were building games on Facebook platform and they weren't really working but what we knew was that most games were named something like I'm going to be doing you know realms of Mars or battles of the Amazon or something and this was the typical way you named a game so we're like okay we're gonna build a and it's gonna work this time and so let's figure out what to call it so we needed to figure out what was the thing we were doing and in what place was happening there's gonna be a battle but we didn't know where it was gonna be so we started testing on Facebook Ads we started putting up ads with all these different places okay and we tested them all out and we did you know probably spent I don't know eight hundred dollars in ads and we found out that the biggest click-through was around Atlantis whoo that I didn't even know how the Atlantis got on the list but it was the highest click-through thing so like all right apparently we're gonna have a battle in Atlantis so the question is what are we going to be doing what type of battle are we gonna do is it going to be Amazons is it gonna be realms is gonna be Wars is it gonna be trolls of Atlantis I didn't know so again we spent another 1,500 bucks to test out what was the highest click-through rate and what do you think the highest click-through rate was Amazon's so my team said well let's do Amazon's of Atlantis and and then you have to apply your intelligence a little bit and you have to realize people are clicking through to see naked breasts they're not actually thinking through to have a battle so what was number two so number two was dragons so I said okay team apparently we're building a Dragons of Atlantis game and that was at lunchtime and by dinner time they had all these mock-ups and they had this whole idea about what we were gonna do with Dragons of Atlantis and sure enough we launched the darn thing five months later and in the second year we did one hundred and twenty million dollars in revenue it's not always gonna be that simple but when you nail the language boy does it work okay so that's something you must unlearn it's not about problem product marketing it's about what do you what's the language and then what's the product you need to build to fulfill on the language people seem to want alright the third thing so the third thing is that the people get wrong is that they believe they need to convince users that their products great because you work on your product for six months or a year two years and then you want to make sure you're the marketer you're trying to make sure that everyone understands how great your product is and that's why people are gonna use the damn thing but it turns out nobody cares about your product nobody cares about you and you say well if they don't care about the product why would they use it well because they care about themselves you see all of our favorite and all of you in the it's funny I know what your favorite subject is each and every one of you I know what your favorite subject is it's yourself the sweetest word in any language is your name people really will listen for hours to you talk about them but they will not listen to you for a minute talking about yourself okay so you've got to unlearn this idea that you've got to convince them that they should use your product or that you're gonna do something good for them they don't care about you you gotta get yourself out of that you've got to make it about them not about you now let me give you some examples because I know a lot of you are thinking that you're you're telling keep telling them about themselves so here's an example signing it with Facebook will make our app work better for you well it's about them signing in for Facebook and it's about them but it's not really right in fact if you copy what whatsapp did which is feeling lazy signing with Facebook you know we've seen that we get about a 20 percent lift just by getting us out of there our app they don't care about our app they just care about how they're feeling feeling lazy signing with Facebook done just about me much better phraseology another example would be hey let's tell them about the community they're joining because that's about them right no not really you know 232 new members joined your business this week congratulations to our community not enough doesn't go far enough another person who works at Google is now connected to you see who it is has nothing to do with my app nothing to do with my business not to do with our community as to do with you you you you you're gonna be much more interested in this okay 36 percent lift from this change air BB does an excellent job of this you won't be able to see this from your seat but everything in blue is about my friend and everything in red is about me and there's almost nothing in there about anything other than my friend okay doing a really good job so a foundational story to help you think this through in New York there was a really slow elevator in a small building and the people who lived in the small building complained to the landlord's all the time that the elevator was slow so one of the landlord's got the idea I'll put up a beautiful picture of art next to the elevator and then people will stop complaining because they'll be so fascinated with the great art and sure enough for three weeks no one complained but after three weeks the complaints started rolling in again so they put up another piece of art sure enough for two weeks no one complained but at the end of two weeks people started complaining in because they had seen every pixel of the art and they were done so one of the landlord's got a great idea what do you think they did they put up a mirror complaints never came again they never had to fix the elevator all right think of this story when you think about every page every line every piece of language of your product as a foundation for growth unlearn that it's about the value learn that it's about the people trying to get the value okay fourth idea network effects so network effects we've identified 13 different network effects we just identified two more in the last six months we focus on network effects that's what we call network of an FX guild that stands for network effects we're very into this stuff because it's about retained growth okay and most people look at top-line growth and talk about that but if you want to look at retained growth which is where the money is where the real value of your products are you've got to look at things like network effects there's very few defense abilities very few reasons people stick around for stuff the network effects is probably the main one and you've got to focus on that okay so unlearn the idea that you have to just bring people into your funnel learn the idea that you've got to build this retaining network effect into the product between people between users or buyers and sellers etc in order to retain them and a lot of our companies at FX guild actually changed the name of their business to be a network they actually conceptualize the business differently as a network instead of a point product or a SAS product so the two at the top of the list actually changed through the hotel's Network I mean that's what they're called now and a bunch of the other companies have moved from being SAS products into being networks and this is a common shift that you need to make mentally in order to give you a foundation for growth because the fact is if you have a network effect a network effect doesn't make you grow I can actually pay a thousand dollars times ten thousand users and build a network effect business among those ten thousand users never have any viral growth we're not talking about Barger the network effect is for the retention but on top of anything that is a network there's a lot of language available to you that will create viral growth and create top-line growth and what we're seeing is that we're getting massive new user growth out of changing things into a network but more importantly we're getting massive retention from changing it to network so think of your businesses in network number five speed okay so this is true the number one advantage of a startup is speed I can't you don't do not unlearn that because this is absolutely true however oh the other thing is it I really believe this if you can move twice for your competitions once you're gonna beat them every time but the fact is your speed bar is set to low right you must unlearn what you think of as speed your speed bar set to low and I think I've identified the culprit the culprit is the schools you went to everybody in this room went to good schools everyone in this room was successful everyone in this room has proven themselves but what you learned but you didn't know you were learning it is that someone was teaching you that things travel at a certain speed and schools travel at a certain speed and you were successful there your success in school is limiting you in understanding how fast you can actually go the other culprit is any big company that you've worked for including even fast companies like Google ok you've been successful at these companies and they move at this pace but a start-up needs to move at a much much different pace and the fact is it isn't painful we advocate that every month you've got to be going through twenty to a hundred different experiments if you're not moving at this speed then you're not even in the same realm you know you know I have to look at you and say I'm not even sure you understand where you're supposed to be you need to get much many more experiments under your belt one of the companies that came into the class was growing at 150 people a day and we got them to release at least once a day guys we come on once a day that's not asking that much make it make a change and they say but we want to build this and like stop that thinking don't think about what I want to build how long is it gonna take say what can I launch today what can I build today and when they did that now they're growing it at 7,000 people a day okay there was a bunch of other stuff but that was the fundamental shift on the speed in terms of how fast they were releasing trellis which just came out in the last class you know they moved to two times daily releases instead of once a week and they got in so many more experiments and had so many more aha that they were able to transform the product to a place where it just really really took off okay so your speed bar is set to low unlearn the implied speed that you've been given by your schools and your companies the sixth thing most people think about growing their users and most of you may be as marketers are being asked by your CEOs and boards to just grow our users this is usually not what's gonna make the big difference it'll increase you 20% or 30% but whatever we're looking for four thousand percent increases right so you've got to go back take a step back grow your business not just your user base to grow your business you've got to sometimes just look at monetized growth so a lot of people are saying well we're gonna get users and we're gonna get retention and then we're gonna monetize and like why do you just think about jumping to monetize today how could you get $1 in the door today I know that's very European and we've sort of looked at Europeans disparagingly over the last 15 years as we've built all these businesses with zero revenues and had a great time but increasingly because we're doing more paid acquisition increasingly because there's more competition among entrepreneurs it is a really good discipline to move to monetize to grow your business not just your user base make that mental shift another mental shift you have to take a step back to give you the foundation for rapid growth is to actually think about who you're targeting is your customer the customers I'll give you some examples of the companies in the class so we had a company in our in two classes ago which was five people they were doing both supply and demand classic marketplace five people trying to basically build two different companies really hard to do wasn't working so what we did was head let's just focus on supply in fact let's just focus on power sellers within supply really focus it down decide who that customer is they and a day and a half created mocks and Photoshop they went out in a week talked to ten of these power sellers and nine of the ten said they would use it that company will do ten million in gmv this year from zero in January and February and March of and then they would probably do forty to fifty just on contracts they've already signed because they focused down in and rethought who is my customer okay another example would be a company we had in the guild who is focusing on mid-sized software companies but they were targeting the customer success teams inside these companies and so what we did is we said hey guys go out and talk to everyone in your in your customer base not just the customer success folks get them to introduce you to sales people to to marketing people to and and figure out if you actually have the right customer for this product and what they found was it by going to sales development reps they moved from getting four out of twenty four people interested in their product to getting 23 out of 24 people understand their product and the company is growing like crazy right now okay so they they didn't they came to us asking hey just help us grow this into the customer service the customer success people and I'm like I don't think that's gonna get us there because only four out of twenty four are interested in it to begin with okay so we had to rethink who it was found you know we kind of moved back moved over and now the growth is exploded and the fact is it doesn't really matter which channels they use now when they call people they say yes when the email people they say yes when they send them a flyer a piece of paper in the mail they say yes you know so so which channel and which distribution tactic you use ends up not mattering if you can just go back and find the right customer and the right language to reach the customer okay so this is where you get the the major growth from these startups by backing up and rethinking going after monetization going after customer but there's a problem right there's a dark side to this that you guys need to manage what you need to manage is that it's really hard on your teams because when they were hired they were bought into selling into customer success people maybe they don't want to sell to sales development reps you know they were maybe bought into selling to consumers and that was where they were gonna get their juice and why they loved your company and now you're selling to you know the the business side of the marketplace and you're focused on the supply side instead of the consumer side and so some people need to leave if they're not going to be excited about the new customer some people are gonna need to leave if they don't want to really focus on the monetization okay so this is the challenge for your team and making those differences and a lot of companies don't have the courage to back up and make the fundamental changes which will allow them to grow okay because of these conversations because of the disappointments because of people saying but you told me okay so when you're hiring people make sure to give yourself the room that you might make changes like this so that they can't come back to you and say but you told me something different because then you as the leader may not make the changes you need to make to your company to actually let it grow as fast as it should grow as a startup okay it's these are emotional things for people last thing it turns out that when you change your customer it turns out when you really find a rapid growth channel it's often needed to change you often need to change the name of your company 60% of the companies of the 45 companies that have come through and effects Gildan last 18 months have changed the name of their company they've had to go through the process of changing the name find the URL and relaunching the company and when I had a company called --mode e e mo de nobody could remember the name nobody could spell it it was a mess we changed the name to tickle the value of our company doubled in three months went from about 45 million to about 110 million dollars in three months and our traffic went up fifty percent in three months because the name was memorable spell Obul trademark able all that sort of thing we I was an investor in Infoseek back in the 90s and they were a year ahead of Yahoo every way Yahoo ended up copying almost everything they did and Infoseek got killed because their name was so boring and no one wanted to talk about it and all the journalists and other consumers wanted to talk about Yahoo with the exclamation point you know it was exciting it made a huge difference and I had to sit there month by month and watch Infoseek get decimated by this new comer Yahoo okay and and I was told you the six percent so what's happening why is the name so important think about this when I tell you about Twitter I'm actually handing you something it's a medium of exchange the words I say the sounds I make it's a medium of exchange between me and you okay this is what creates by reality this which creates retention and it's very very important and most people aren't willing to take the emotional step back to change the name of their company so unlearn a lot of the things you have learned listen to Yoda enjoy your building I think we have time for one question what's the question why do you think of Disney's plans to grow the Star Wars franchise I think the idea of growing the franchise is good I think Disney screwing it up right now we'll see how they do it's it's not good right now right one more question Oh Dave what do you think about visual language versus spoken word language I think visual language is awesome especially with these mobile phones and the small the small devices we've got don't confuse it with icons no one knows what the hell icons are okay this is controversial for all the designers who love doing icons and getting paid to do it icons are horrible you just want to use language but visual language not being icons is great like app the way Apple does it where they just show you you know people doing so those are great but don't don't confuse it with icons visual language is fantastic particularly for virality and for onboarding great question so I'm out of time because I spoke a little bit long but I'll be here afterwards thanks so much

Channel: 500 Global

Views: 6,244

Keywords: 500 Startups, 500 strong, Silicon Valley, Venture Capital, Startups, #WMD2016

Id: jEdKE4tNhGQ

Length: 28min 59sec (1739 seconds)

Published: Wed Nov 09 2016