With more than a decade of experience in venture capital, Jeremy is currently a Partner at Lightspeed where he has led several notable investments in consumer tech: Snapchat, The Honest Company, Whisper, Affirm, Living social, Bonobos, Distractify, Flixster, Playdom to name a few. “Why winners win” was an interesting masterclass with Jeremy where he spoke about how founders in leading consumer companies execute.
Here are the key learnings from the session, hope you find the read interesting!
Surface “brag rights” of your product to generate virality
You need to think about what makes your consumer talk about your product to lead to word of mouth virality. Word of mouth won’t happen unless your product comes with “brag rights” i.e. The product makes the user look good, sound smart or seem interesting. For example The Honest Company, Jeremy shared, sold diapers which had whimsical prints over them. Looking at a mom changing her baby’s diaper in the playground made other mom’s ask, “Oh! Where did you get the diaper from?” and then the mom would go on to share the benefits of product on the company’s behalf. Similarly, it was the ugly selfies and filters on snapchat that attracted attention. “Your product needs to be distinctive enough to trigger a question or a comment.”
If you live by the side, you can die by the side
When asked by one of the teams on how to think about growth when building on other platforms (think Zynga on Facebook or slack bots/tools), Jeremy shared that, “If you live by the side you can die by the side.” Being heavily dependent on pre-existing platforms can create issues when there is divergence of interests. On the other hand, if you create your own product from the beginning then you might be screaming in the void and might never get to critical mass.
“If the pre-existing platforms are working for you then you shouldn’t stop using them but be mindful of the fact that the benefits will not last forever.” Think of the long-term strategy. How will you make customers follow you to your new platform without losing them? A lot of companies have failed at making this happen. If people are not using you as a must have feature on the platform then they don’t really love you and you’re likely to lose them if you go away from the platform. So, it is essential to think about this actively and place this transition on your roadmap.
Tackle incumbents by understanding their priorities, and identifying non-overlapping use cases or audience
Competition is hard to define because a lot of incumbents might be into multiple things, for instance, Amazon has private label business, baby products, cell phone accessories, AWS etc. So, the question you need to ask is, “Is what you’re building among the top 3 priorities of the incumbents?”. If the answer is yes, then it will be tough to go against the big players, but if it is not then you shouldn’t worry too much about competition, at least in short term.
You also need to think if there is a specific use case or an audience you are targeting which is differentiated relative to the incumbents. Such use cases give you the opportunity to grow in isolation before having to tackle the incumbent. For instance, people thought Snapchat might compete with Facebook but in reality, the use case and type of audience Snapchat targeted was very different.
Insight does not come from reading about your users
Making the use of your product a habit and identifying a scalable and repeatable mechanism for acquisition is predicated on unique insights. These unique insights come from unique perspective; it is difficult to get unique insights from reading a newspaper or a blog. Being part of your target audience helps in getting these insights. From the experience with Evan Spiegel, co-founder of Snapchat, Jeremy shared that since he was part of the target audience, Evan had three unique and insightful observations:
- Popular social platforms like Facebook and Instagram were designed to showcase how perfect one’s life is and this led to performance anxiety which led to users posting less
- People were placing limited information on these platforms. But it is difficult to form a meaningful relationship by viewing just 10% of someone’s life
- All platforms had permanency – posts would stay on the platform forever. This is not how interactions work in real life. In reality friends argue or discuss a subject but forget about it and move on next day
Make your product a habit: part of popular culture
Jeremy shared that, “On an average a person uses 27 applications in a month, a number which is suspiciously close to number of apps on the home screen of an iPhone.
If your app is not on the home screen then the user is not habituated to use your product.” You need to track certain metrics which can give you an indication if your app is becoming a habit. Examples of such metrics are – sessions/user/day, Day 1/Day 7/Day 30 retention, DAU/MAU ratio.
“It is better to become a habit for a small sub-set of users than to not be a habit for large set of users.” But the next question is, whether the small subset is representative of popular culture which will make the product grow organically. It is critical to identify this subset. For example, in the U.S, young women tend to be early adopters of popular culture. So, a product that is habit forming for this group, is likely to scale rapidly over time.