How to find and pull startup growth levers | Matt Lerner (Founder and CEO at SYSTM, Author of Growth Levers)

Brett: I thought maybe we could sort of start at the top, which is sort of outlining how you think about growth levers, maybe what's unique about it and what do you think most people don't get about the topic in the context of early stage startups.

Matt: So the whole idea of growth levers, this came to me when I started, like when I first became a VC and you're a VC, right? And you get pitched and you look at these decks. And since my background was growth, I'd really focused in on their go to market, their strategies. And most of these plans were just lists of tick box of like chat GPT could have written that slide, no problem. But most of these things aren't going to work. And most of them, even if they did work are going to be small and like, fair enough. these people don't have growth experience. And they haven't really started to scale. It's early stage. But I thought about my time at PayPal. And like, when I look back on it, all of our growth, all of like 95 percent of it came from like five things.

So in the beginning, before I got there, it was just getting on eBay, getting eBay sellers to start using it and not turn into a network effects loop. And then when Dave hired me, it was all about web developers, because developers are building all the checkout flows. So we can just do developer relations and get out there.

And so that was like, As curve number two. And then shortly after that, we started partnering with all the e commerce platforms, the shopping carts and hosts and like The progenitors of Shopify, because of course, you know, if you're putting up an e commerce site, you're eventually going to need to add payments.

I had things like That really drove all of the growth, international expansion. But even there, it a very similar playbook to what we'd done. I thought about some other startups that I really started to see this pattern of like, in the beginning, most startups, you just get one thing working really well.

that's good and bad news, right? If you're a founder, it means you don't have to do all the things on your slide. But you can't afford to anyway. So the key is to find your, 10 percent of work. That's going to bring 90 percent of the results. As quickly as possible before you run out of money.

and then I found that the founders I talked to called that growth levers and eventually I ran through this process of how do you narrow down the list? How do you find your first big thing? and so I ran through that process enough where I started to structure it and document it.

And that, process is what I put into the book.

Brett: For folks that want to go super deep, obviously they should just sort of get the book. But if you wanted to give people the cliff notes version or the most important ideas in terms of how to take that general idea and actually apply it, how would you articulate it?

Matt: So I'll just, let me, I'll tell you an example and then we can go backwards and sort of deconstruct it. I got pitched by a team called Popsa they had an app that lets people make photo books and like as a VC, that's not a super interesting business.

It's D to C e commerce, it's kind of low margin, it's not recurring revenue business, and it's a pretty crowded field, right? So why did I even do the deal? So two things, first of all, the founders were like serial builders and they'd been building and launching stuff for a long time. And they had like an app studio where they were building and launching apps, just watching them.

And this one had really started to take off. So thing too, is it had good traction. It wasn't spreading. There was no network effects component, but there was a lot of word of mouth and the people who used it had high repeat rates, good retention, so clearly there was something about this product people really liked. So we invested and I started working with them. We started working with them. And what we figured out was everyone wants photo books, but it's a giant pain in the ass to make them. And the software, like you install it, it's clue gene. You have to go through all your old photos and it's frustrating. And this, software just lets you do it really quickly and easily. And so we're then the next thing where it's like, okay, so where are we losing people here?

So they were in the UK. They were ranking number one in the app store for photo books. Which is great, but their, you know, view to install rate was kind of low. And, you know, with an app store listing page, you don't have a lot of variables, right? There's just like five or six words at the top and like a screenshot and a half.

So we started looking at that and it was fast, easy photo books. And so we started user testing that and people are like, yeah, it means you can make photo books fast and easy. And we're like, okay, what does that mean? And they're like, I don't know, maybe two hours. oh, so easy doesn't mean what we think it means.

So they changed it to photo books in five minutes and they quadrupled their install conversion rate overnight. And they were already ranking number one in the app store. So already you're kind of off to the races. And now suddenly it makes sense to put ad spend behind it and everything because the funnel is doing so well.

So, you know, that's an example of just finding the point, the highest leverage point. So I just checked in with the founder this morning. Actually, they're going to make over 40 million bucks this year. they're growing, they are profitable, bottom line profitable. They're not taking investment.

and they'vey sold 5 million photo books and other products and photo products. So if you go back and pull out the steps of what did we just do there? Step one was to map the growth model. Just map the customer journey in terms of behavioral metrics. From the point they first become aware of the product to the point where they're happy and engaged in using it and looking for like, what are the bottlenecks?

What are the constraints in that flow? And we figured out, okay, it's the install rate. And the next thing we need to do is understand what's going on in the customer's minds. around there. And normally when we work with teams, we do jobs to be done interviews. There's a few techniques, user testing, just find out what's going on in customers minds.

That gives you lots of ideas. Most of them are going to be wrong. Like I told the simple version of the story, but of course we tested lots of things that didn't work. Right. So the last piece is then just running lots and lots of experiments quickly. And so now even today, they're still running 10 experiments a week in their growth team.

So that's the growth leverage process of like, how do you narrow down, find the areas where you can have the biggest impact. Focus on them and then actually get them going.

For each one of those, can you talk in a little bit more detail of how you go about it?So the first thing is we start with the end and work backwards. So the first thing is we figure out what is their North star metric. go to a lot of early stage companies, ask them, what's your North star metric? They say revenue or profit. fair enough. But 

there's lots of ways to generate revenue. You really, at a startup, don't have this huge install base. We have to do is just be better than everyone else at delivering value to customers at getting lots of customers, delighting them, retaining them. So your North star metric needs to be a number that measures value delivered to customers, weekly actives, daily actives, you know, number of photo books made, number of memories, you know, solidified, something like that. And from there, then you just sort of work backwards and say, okay, what's, what are the key drivers? What's the customer journey that leads me to this? So in a marketplace, you know, you may have two or three sides of this leading in, you may have different traffic sources, but ultimately you're looking at each customer behavior point where a customer has to make some kind of decision.

How are we doing there? How many people who see our blog posts are subscribing? How many people who read our newsletter are doing a free trial? How many people who start a free trial are actually doing more than five actions in the product? How many people who do more than five actions of the product end up paying?

And so on. So you can then work through and map that out. And then we just have teams kind of quick pencil sketch, put some numbers over these. Teams love to get deep into analytics. This, this level, you just need to know roughly in a month, how many people see the app store page, how many of them install the app, how many of them, you know, do action X, Y, and Z.

So you just map that out at a high level and you can then go through and start to find. Your bottlenecks.

Brett: And most of it is reducing those bottlenecks? .

Matt: Yeah. You wanna start with the, constraints, right? I used to have a job in a refinery, a used oil refinery. It's a great marketplace business 'cause you get paid to take the dirty, used oil and then you refine it and you sell the clean fuel oil. So you get paid it at both ends, which is wonderful.

The rub on a, on a refinery is that all your revenue is delineated in gallons. Your costs are all delineated in hours, salaries, leases, et cetera. So the more gallons you can refine per hour, more money you make. So in this refinery, they explained to me, theory of constraints that at any given time, there's a narrowest point in the throughput. It might be how quickly we're unloading trucks of dirty oil. It might be the number of centrifuges that are working or a filter is clogged or whatever, it doesn't matter. What does matter is that you find that bottleneck and you address that. Cause if you apply resources to the bottleneck, it makes the whole system run faster.

And if you apply resources anywhere else, it's wasteful and inefficient. And if people are just randomly having an idea and working on this part of a startup or that part. Same problem. Unfortunately, a startup is a little more complicated than a refinery that literally has pipes and liquid flowing through it, but still you can look at each stage and say, how does this look compared to good?

If we don't, can we 10 X this number? If we do, will it make the whole system bigger? and often what you think of the bottlenecks at first don't end up being it those bottlenecks cause it's a complex system, but at least if you start working on them and then watch how everything else in the system moves, you'll discover like the next layer deeper closer to the root cause.

Brett: How do you think about specifically, as it relates to getting new customers, the interplay between where the customer comes from, how they hear about the product, and then the bottlenecks throughout the experience? Because I would assume that all customers aren't the same, right? If I heard about this photo book product on the morning news, my sort of customer journey might be quite different than if I'm just searching for photo books in the app store. And it might be different if I first heard about it on television and then search in the app store and you kind of quickly get into the multi-attribution problem. So things seem to get, I mean, you were hinting at this a second ago, relatively complicated, relatively quickly.

Matt: So let's stay out of the analytics and attribution rat's nest for now. At this point we're not trying to scale and manage spend and double counting and things, we're just trying to get rough numbers but I think your your bigger point is you have lots of different customers who come in from different places with different expectations. First we'd map the growth model and that's the customer behavior side of it. But the other side of that is the mindset funnel. What's in customer's heads at each stage of this journey. And you really need to know that people aren't converting and you're like, well, I read a blog post that, if you slightly animate the signup button, you'll get more clicks.

And it's like, okay, but why aren't they converting in the first place? So you've got to then go through and understand customer's mindset. And the way we do that is through a technique called jobs to be done. The brief summary for your listeners who haven't heard is that people don't buy products or services at random.

They bring them into their lives to help them achieve a particular goal. They probably have been trying to achieve that goal for a while and trying other products or services, and they're going to go through this journey to maybe your product. So we use that interview technique. And the first thing we're trying to figure out is, so we interviewed recent signups. And we talk long before they ever found your product. What were you trying to achieve in the first place? And what you'll find is if you're lucky. You find your best customers all have a single goal that they all have in common. And then you can just basically craft your entire conversation with them, your funnel, to promise them that goal, answer all the questions they have about why you're the best, you know, product to help them achieve that goal, and then sell them your product.

Sometimes, as you suggest, It's not that simple. You might have multiple different customer segments with different goals. Or you might have a single customer who has a lot of goals. And so then there's a few ways to narrow that down. So one option is if you've got multiple customer segments, you can sometimes find something they all agree on.

So for example, we work for the company that does remote identity verification. That's good if you're onboarding lots of employees like drivers for delivery service that works if you're selling houses and you have to verify the identity of the buyer and the seller. It works for lawyers. It works for financial services companies who need to KYC their employees.

But what do they all agree on? 

Brett: And how are you actually interviewing them?

Matt: We start with people who are customers who just became customers, for a couple of reasons. First of all, the purchase journey is still fresh in their heads, but also if they didn't buy, they might not actually be your good customer. They might not have bought because it's not the right product for them.

And everything you learn in the interview is going to lead you the wrong way. So wherever possible, we try to recruit people who just signed up for the product.

anyway, so find something they all agree on. You know, one thing was like, I hate asking people for a copy of their passport. that's something all of their customer segments agreed on. Remotely, verify and onboard employees and clients in minutes, outcome that they all agree on.

So sometimes you can find a single outcome everybody agrees on, and that's great. Sometimes there's still multiple outcomes like calm, the meditation app does this well. And if you go to their site and they say, what brings you to calm? And it's like a multiple choice question. want to sleep better.

Anxiety, improve my focus and performance at work. And so people can just sort of choose their outcomes. So we will figure out what's the best outcome for us in terms of what brings us the customers who are ready to go in pain, have budget, the easiest sales, and we'll start there. And or find one that kind of resonates with lots of customer segments.

Brett: Can you give a, just a few of the questions that you find most illuminating in those conversations?

Matt: So the first thing we'll do is we ask them okay, tell me in your own words, what did you buy? Obviously it's a little weird. Cause you know, it's my company. I just sold it to you. Of course I know, but that anchors them on the purchase. And then the next question is, what would that enable you to achieve?

So we're immediately taking the conversation away from your product and we will never talk about your product in the rest of the interview to their goals. And they're probably going to tell you some basic functional goal. You know, I needed to, you know, get this all in one place and stop using spreadsheets or whatever.

And then we need to explore more around that because there's probably more to the story. So like, why is that so important to you? Who else cares about this outcome? So ask them questions and probe and just really try to get a sense of like, what are all the layers to their goal? And then the next thing we need to do is map the customer journey.

So we'll say, okay, do you remember the first time you started trying to do X? Oh yeah. You know, it was two and a half years ago. And my boss put me on this new project and blah, blah, blah. Okay. What did you do then? And then we're just going to go through that journey. Well, first I Googled this and then I tried this product, but it didn't work.

And we just go through that whole journey and I'm listening for like, a few things. First of all, how did their conception of the project or the goal change, right? You've probably created a new category with your software, so no one's actually looking for it. So if you know what they think they're looking for, that's going to give you a good sense of top of funnel, where can you start to turn up, SEO or influence or whatever.

so what did they think they were looking for? Where did they look? Who did they ask? What criteria were they applying at that point? What other options did they consider? How did those options come up short? So you can position against them. what anxieties or worries or questions do they have?

Because no one's just going to impulse buy your enterprise software, right? And this trust thing, it's usually not just as simple as nobody ever got fired for buying IBM. usually, and even if, if it is just brand, you can't throw IBM's branding budget at your product. So trust can often come down to much more specific nuanced questions.

think Airbnb is a really good example here. if you think back in the beginning, like, okay, I'm not going to stay in a hotel, I'm going to rent a room from a stranger and go stay there with my girlfriend for the weekend. No, that's gross. That's weird. Who knows? So they had to address that.

And if you go through their site, everything on that page is designed to reduce anxiety. Big, beautiful photos, the host, the number of views, reviews they have, the number of stars they have. the house is not, they say enhanced clean. It's not even just clean. It's like enhanced clean.

So you've got to understand what are all the specific worries and questions your customer is going to have and address those at the points in the journey where they turn up. Long story short, establish the outcome, go back to when they first started, not the whole journey. You do that five times, you start to see patterns and that's when you start to get ideas about what to experiment with

Brett: Can you give some more examples of how this work translates into what ultimately becomes a growth lever? 

So a good example of this one of finding a growth lever and how this process works. We recently worked with a company It's a mobile games company and they have a product called smart tails and it's an educational app for children and when we mapped their growth model, the real problem was, they didn't have great retention, but the big problem was their paywall conversion.

Matt: Their ads got people to install the app, just, you know, maybe play with it, but not pay. And so we thought that was a problem. So we did the customer interviews, it's complicated. Why would you get an educational app for your kids? Right? Maybe there's behind in math. Maybe you feel guilty because you're not able to help them as much as you want to., you know, maybe you just want some like worksheets and games and exercises to help them pass their algebra test. So what they found ultimately was their customers wanted to be able to give their kid an iPad without feeling guilty.

That was the core. That was the thing that really resonated with people. you know, they tried changing the, paywall to talk about that stuff. And it was just, it confused people. It was a little more friction. And we realized the problem when people got to the paywall, they didn't understand what they were paying for.

So then they went back. And by the way, this is, I'm talking, I'm like explaining this, like it's a simple thing. This is dozens of experiments, but they went back to the beginning, advertising a new proposition in the ads, updating their app store listing page to talk about the new outcome, adding, you know, questions before the paywall to help cement the outcome and answer people's anxieties.

And at that point, you know, once they improved the top of the funnel, people got to the same old paywall. And we're 65 percent more likely to convert, have better retention, fewer returns, higher lifetime value. So you start where you think it is. And then once you start sort of working on that, you find that actually the root causes is somewhere else.

Brett: When you're trying to diagnose the problem, do you often run into the stated versus revealed preferences problem? Or if you ask high quality questions, it's pretty easy to not get caught into that?

Matt: That's what leads everyone down the wrong path. It's like, well, people said they wanted this. So what we do is we only focus on actual behavior. This is someone who just bought the product. Okay. You just did this thing. Why did you do that? And sometimes, you know, in the interview process, they'll speculate or they say something that doesn't make sense.

And you just remind them of their actions and then they get that cognitive dissonance. And then you can see they're thinking, Oh yeah, that's true. Why did I do that? And that's how you sort of get to the bottom of it. But the key is to focus on their actual behavior and their actual experience. rather than asking them to say what they might do in a particular situation.

 When a product is not meeting the needs of a customer, which means it doesn't retain well, or in that dimension of product market fit, the company is not working. I think there is a tendency for most people to make a bunch of little changes to the product.

Brett: and that almost never works. It's generally a drastic change or they were serving customer X and now they serve customer Y. And I was curious if that type of way of thinking translates to this idea of finding your growth levers or it's actually surprisingly nuanced and detailed and it is three words changed, and then that sort of something you can push against for a while.

Matt: It can be small in terms of, like, scale and effort. It can be small. It can be big. The key to this, there's sort of two criteria I would apply to a change someone's thinking of making. The first one is, where did we get this idea? Because the problem with the text on the button is usually they came from a blog.

Or, you know, something, you know, a best practice, or something like that. It needs to be rooted in some kind of learning about your customer. product market fit is often finding the desperate customers, who are like biting somebody's hand off and trying to come up with workarounds and make sure that you're, you're finding an onboarding them and that the out of box experience immediately reassures them you're going to help them do the thing that they're trying to do. And that, often, you know, that can be as subtle as changing four words, like, yeah, this is the thing you thought it was, or sometimes it's more complicated than that, you know, the out of box experiences, not showing them the value immediately, something like that.

So that the two questions I'd ask, I don't care how much effort it is to do the experiment. I care if this works, how big can it be? Because a lot of times people will just work on a piece of the funnel or something that even if it did amazingly well, you know, it's only moved the needle by 3 percent mathematically.

It's a page that gets very little traffic or it's already converting well, or it's an edge case or whatever. So one is if it works, how big can it be? And two is like what customer insight led us to think that this was a good idea. Now, where people get caught up is I think a lot on the product side, we're taught to prioritize by effort and impact.

Or effort impact and chance of success. And on the growth side, that's tricky because first of all, chance of success is nearly impossible to gauge. Cause if you knew what would work, you'd be doing it right. then the effort thing is tough because most growth experiments fail.

80 percent of product experiments failed, you'd have a big problem, but growth, you need to try things swing for the fences. So if you have ideas that seem big, you want to come up with quick ways to just test only the riskiest assumption. And often when I work with companies, I find that they actually knew they already had the right answer on their backlog somewhere, but they weren't doing it because they thought it was too hard or some other reason.

I worked with a company called fat map. And it's basically it's an app with high def 3D terrain maps of remote places. So it's good for backcountry skiers, hikers, trail runners, things like that. we interviewed there and it turned out their, sort of bottleneck was the top of funnel qualified traffic.

And we interviewed their customers and every one of these people started with a Google search, you know, trail map of Pikes Peak, you know, back route or whatever. I said, guys, you have a database with 300, 000 trail maps in it. Let's expose this to SEO, right? And they said, yeah, yeah, we thought of that.

But our map rendering engine is slow. There's so much data, the pages just wouldn't load fast enough. So they'd cross it off the list. And I said, okay, well, can you just load a static image of the map and then load the map in the background? And I said, Oh, okay. Yeah, we can do that. And they did.

And the traffic went up and they got acquired. And it was more complicated than that, but good things happen. But the point is they cross it off the list because they thought it was high effort. And so that's where I say, don't let that be a factor in your prioritization. Instead, focus on things that are easy, but won't have a big impact.

That makes no sense. It wouldn't have a big impact. Why are you doing it?

Brett: You're sort of getting at this, but if you zoom out sort of slightly, how would you start to group the common failure modes when it comes to working on discovering and executing these growth levers?

Matt: There's lots of reasons companies fail. But when I thought about it, when I was writing the book and actually, so I worked with an editor, he was actually a philosopher.

And so he doesn't know growth and he's like, okay, Matt, explain this to me like I'm a 12 year old, whatever.

So, you know, we're going through the book and he's like, okay, Matt, I think I understand what you're saying is find the area where you can have the biggest impact, you know, for your customers, get ideas, run lots of experiments until you open up the bottleneck. I like, yeah, that's it. He's like, isn't this what every startup does?

You'd be surprised. And he said, so what do they do instead? And I thought about failure modes, and I just started going through cases in my head and I came up with three patterns. So the first one, and I'd be curious, cause you obviously work with a lot of startups, what you think, but there's overthinkers and they just debate and theorize and strategize and talk to more smart people all day and think things through, but they never execute.

And so. You know how that story ends. The next failure mode is the opposite of that. It's these under thinkers and like, fair enough, you know, build, build, build. But if you're just building based on your sense of the market and like, it's not working without a feature and still not working without another feature, you're adding complexity to the product, the code base maintenance.

You're slowing yourself down, but you're not just going to like guess and get lucky most of the time. So I'd call those like under thinkers and then failure mode three are hire and delegate. I don't know if this is a thing in the U S but in the UK you get kind of people who come from a pretty senior role and they're humble and just going to hire experts in all the different functions, but those experts don't have the context. They're thinking in terms of their function, not the entire company. The founder really needs to be involved in growth at the early stage. So, so that doesn't tend to end well. So I think if I had to bucket them, those are the three. But the thing about those so I was like, okay, what are those three modes have in common?

Cause in a big business, you actually need all those things. You need smart, strategic thinkers. You need executors. You need people who can hire brilliant people and delegate. What, why is that a bad idea in a startup? I realized that what's standing between a startup and success is some missing information.

They haven't figured out some piece of the puzzle. Who's the customer? Where to find them? What's the right onboarding experience? How to price the product? There's a million things they have to figure out. And, you know, strategizing and executing and hiring and delegating are great ways to execute, but they're very slow ways to learn.

to do first and foremost is to be humble and open and curious and get into like what I call discovery mode and run this. process that really optimizes, maximizes the pace of learning, useful stuff that's going to get you closer to success.

Brett: One of the things that you hit on there that I think is intriguing is there's certain parts of early stage company building that I think most. Let's just call them good founders understand they have to do. So in most cases, if the founder is not owning product, the company will not work. there's a small number of exceptions, but generally you can't have a general insight and then hand it to a product person.

That's not the founder and CEO. Basically.

Matt: a hundred percent.

Brett: There's something about sales, and there's something about growth that even relatively capable people think that it can be hired for. I have built a good product. I'm not really quote good at sales. I will hire some variant a salesperson, sales leader, et cetera.

and generally speaking, again, there's a few exceptions with extremely complex sales in some cases, but in almost all cases, Founder led sales has to work before you can build, a sales team. And I think what I'm hearing you say is in the context of growth, that's also true. it's not, you know, you have a highly retentive product.

Now let's sprinkle on some growth and get the person that was, senior manager of growth at Facebook at this time, and then it all takes care of itself. So maybe you could linger on that a little bit more and, and talk about why founder led growth and getting some of the early growth levers basically has to be done by the founders.

Matt: You're a hundred percent right. I see that again and again. It's like you'd never hire someone else to be your head of product before you make your first product. Why do you think you're going to hire someone off the street who can do growth? And what ends up happening is people hire someone, you know, if you don't know how to grow the product yourself.

You know, you're hiring someone else, not to be your head of growth, but to like be your figure out how to grow this business person. And that's an extremely hard job. And most of the people who can actually do that are starting their own companies are working for someone who pays a lot better than you do and has more reliable equity package.

So, yeah, I don't, understand why people go that route, but I 100 percent agree. So, I guess you're asking me as a founder, what should I do then? How do I, start doing growth myself? And at what point do I start to think about hiring and who?

Brett: I was first curious about your theory as to why this specific area people tend to think when it is unsolved, I can hire for it. And you were starting to explain kind of the nuances of what it looks like for a founder to do, and maybe why it's required for the founder to do it.

Matt: So I think, I guess I think they can hire for it. Cause they've never done it themselves. And mean, I don't like going and doing a super important mission critical job that I've never done before and have no idea how to do like, it's no fun, but I do think that's something in founder DNA is they're ones who will just get stuck in and try something and like make a mess of it until it's going.

In terms of like the first growth motions, I think it's integrally linked with sales. It's at the coalface talking to customers and, you know, trying to sell the product and just watching the customers and reactions to this and that. But ultimately you got to figure out how the business is going to grow. So like what I'm doing whenever I work with a company is I'm trying to build a mental model of how we're going to grow this business.

And it starts with who's the customers, what are they trying to achieve? Where are they looking now? How are those solutions coming up short and where can I go find those people? You know, it's all the stuff we've talked about, where can I get their attention? What do I have to say to them so they know they're kind of on the right scent trail towards where they want to be?

What questions are they going to have? How can I address them? Most importantly, on the product side, when they first start using that product, they're trying it out. They've got questions. What do we need to demonstrate to them to reassure them and delight them immediately so they'll, keep using it?

I'm trying to, in the beginning, figure all those things out. As I start to get there, then I'll have more of a sense of how the product grows. I mean, in terms of channels, there aren't many, right? There's just like five or six ways fundamentally to get customers. It may be sales driven.

these are all like paper and pencil academic decisions. It might be sales driven, but if it's not expensive, you can't afford salespeople. It might be search engine optimization, but if no one's Googling it, then it's not right. It might be advertising, but If the unit economics don't work and it's not advertising.

So it might be influencers, but if there's no influencers or it's an ugly product, or it's a topic people don't want to talk about, it's not. So you can sort of figure out at a high level what this is going to look like, but that's 5 percent of the battle. 95 percent of it is really figuring out what needs to happen at each stage. Where are we turning up? What are these different messages? What are the different experiences customers need to have?

So I'm trying to map that all out. And at the same time, I'm looking for leverage and that could be, you know, a bottleneck or a pinch point of some kind. That could be a feedback loop or some kind of network effect. And as I'm doing that, I'm getting a sense for what do we need to hire? what muscles do we need to have?

What do we need to be great at to be able to scale this? So my first hires are going to generally be, I'd say junior bright generalists. personally, my best growth people I ever hired had no product and marketing experience at all. They were analytical thinkers, former scientists, who had a bias for action and good people skills and start to get them stuck in on pieces of the problem and they're growing and learning as I am, and they're figuring out the business and hopefully they're going to kind of advance into senior roles.

And then the other piece of it is just figuring out what muscles are we going to need. You guys have great inbound and content marketing. So you've got, you know, great writers and great editors and, build your network of authors. If it's ad driven, it's a different set of skills, right? It's going to be a lot of direct response, creative, tracking, quant, I'm going to need credit and cash flow to be able to finance these ads, right?

So then you start to hire in the direction of where you're going, but still always with a focus on generalists who are bright and fast learners. 

Brett: When you think about the levers, you were mentioning this a second ago. Is it generally just in a handful of buckets? Like there's a handful of areas you can pull from, or every now and again, you do have true invention in something net new?

Matt: It's generally going to be pretty similar, right? There's some network effects, playbooks, there's some ad playbooks, there's some influencer But as soon as you get more specific than that, that's where you need to get creative. And it's not always novel, but sometimes you're copying someone who solved an analogous problem in another business. But a lot of these businesses end up combining a couple of things together, there's content and inbound and then there's a network effects flywheel or something like that. Once you've got your particular bottleneck, I'm looking at who's solved this particular thing really well. So for example, multiple use case customer, heterogeneous customer segments. They'll call and solve that really well with their boarding flow, where you kind of have this multiple choice questions about what you're trying to achieve. So I've now used that with B2B businesses where they have multiple use cases and they go into a similar boarding flow there.

No one's doing that in B2B and it works great. Einstein said, if I had an hour to solve a problem, I'd spend 55 minutes thinking about the problem. So it's really getting super clear on what it is you're trying to solve. And then often when you get in there, like sometimes you need to invent.

Often you can copy something, but it probably won't be from a competitor. It would probably be from someone who's in an industry that's way further along than yours, that's absolutely nailed that particular problem.

Brett: Maybe you can spend a little bit more time talking about. that sort of creative entrepreneurial process to actually solve the problem. So assuming a founder does very, very high quality work to sort of map the customer journey, understand the customer, start to figure out where the bottlenecks are.

Do you have any other thoughts on that sort of iterative process to actually solve it? 

So once I know where I'm stuck, I'll go back to my old customer interviews. I'll do new customer interviews and I'll really focus on that step of the journey and I'm looking for ideas. and insights. And then I'm just going to use that to kind of inspire the next idea for a test, the next idea for a test.

Matt: Like the example I gave before with photo books and they asked someone like, okay, what does fast, easy photo books mean? And they're like, uh, it means two hours that just happened once. But that gave me an idea that that's probably going to work for everybody. So often it's like a particular thing you hear for a particular customer that gives you an idea.

And then, yeah, you want to go test that quickly. then when you're actually experimenting, right. There's a lot of reasons an experiment might not work. And so you want to try to narrow that down. So, you know, maybe it's a landing page or something. Maybe the design's messy and they can't read it. So first I'll just show it to some people for five seconds and see if they can read it.

Okay. They can read it. Do they understand it? So I'll show it to them for five seconds and say, Hey, what do you think that means? we did with the photobook app. So now I'm isolating comprehension as a variable. Okay. Maybe they understand it. Maybe that doesn't appeal to the right customers. So maybe we'll try different targeting with different audience segments and narrow down, is it the right customer?

So you just sort of like, if it's not working, you want to, just like you're debugging code, you want to break it in pieces and isolate each area.

another example of that, we were working with a company called, Sonic Jobs. It's basically an app that helps people get hourly service industry jobs. And it's a marketplace and they were, lots of people want jobs. So they were signing up lots of people, but people were not applying for the jobs.

And so it was like, click here to find jobs. So they had their welcome email and had categories. And they figured out that nobody was looking for like jobs or hospitality jobs. They all had really specific words in their mind. So in their welcome email, they just changed it with the top specific jobs people wanted.

And they put in 15 links, Amazon. Driver, you know, warehouse operative, this and that. And a lot of times it was the same job, just written in three different languages, three different wordings. And that really opened up their activation rate. I mean, that one email changed just double their activation rate, which was massive.

So again, they see someone. Look at the email and just not understand that they were even seeing the thing that they thought. And then that insight led them to this other idea, test and iterate. So it's usually a really particular insight.

Brett: How should a founder think about whether it's time to put the effort into this work, or there's more foundational product work or some other set of insights that are required.

Matt: So normally what we do before we decide to work with a founder is we want to make sure that they have a live working product with some happy customers. If they have some happy customers, we can figure out who those customers are and how to get more of them. And so that's usually a good time to sort of shift your focus to growth.

You know, the instinct for some people, product people is we have some happy customers, we're not growing. Let's add the features, the other customers want, and hope if we add enough features that will grow. And that's usually, you know, not the problem. The problem at that point is probably go to market.

that's when I would suggest that this founder sort of turn the Eye of Sauron, towards. the subject of growth.

Brett: You talked about this a few minutes ago about some of the characteristics of early growth hires when you start to figure this stuff out. But is the fundamental framing as to when I should begin to hire somebody, when I've established a few of the growth levers that are working myself?

Matt: Often your first growth, people are just going to be internal, you know, analysts or customer service reps or product people are engineers and that you're going to start getting them working on growth. So that's often your first hires. As far as an outside hire. Again, if I know a smart generalist and I can just sort of bring them in and like work in a co pilot relationship with them can do that.

But before you really scale hiring in any meaningful way, you need to understand what's our first lever, how are we going to get, one way we can reliably get customers if we just double down. And I guess maybe finding levers makes it sound simpler than it is, right? It's one thing to say, okay, you know, we're mostly going to do inbound and content marketing.

It's another thing to really You know, there's 100, 200 experiments to really get that working in a repeatable, scalable, profitable way. So, you know, that's where your effort's going to go at that point.

Brett: You've touched on this a little bit, but are the general ideas incredibly similar between consumer products and products sold to businesses? 

Matt: So the core stuff that I'm talking about in this growth process, of course, is similar. Customer interview, understand the customer journey. You need to do experimentation. There are bottlenecks in your funnel. Those things are all similar. I mean, I guess, There's a few differences.

One of the bigger differences actually more around the length of the consideration cycle. You know, so there are somewhat impulse buys in business and in consumer, there are consumer purchases that have a longer consideration cycle. but the big things I'm thinking about in B2B are going to be around stakeholder buy in, you know, who else is involved in this purchase?

Who else cares about the outcome of this purchase? How do you handle those stakeholders? and just often the, you know, the length and complexity of the process and the sales cycle. And then the other piece at top of funnel is getting leads. And lead generation is often a different set of playbooks than you would use to get customers.

So someone who's got a 30 a month, you know, SAS, maybe doesn't have a sales team, doesn't need to worry about lead gen, even though it's technically B2B. But someone who does have a sales driven motion and a more expensive product is going to have an entirely different place.

Brett: Do you think there are certain founders that are better At this type of work than others, or generally, however, you would define good founders if they're actually curious about this and focused on it can basically be equally as good?

Matt: when companies want to work with us, they need to apply. And we go through this application interview process. And there's one question we asked, which can very reliably weed out teams we don't want to work with.

And it's the pre mortem question, okay, suppose we're two years out and this didn't work and you've completely, failed and missed your goals. What probably went wrong? And their willingness to acknowledge that that's a possibility already, is there hubris? Like we can't fail or do they mostly blame exogenous risks?

you know, if Google decides to give away the product for free, or if we have another pandemic. If that's the level of their thinking about risk, they're not open to learning and they're not going to be able to figure this out. If they are, then, I mean, the best founders I see are the people who are, have no ego, who are insatiably curious and who are just willing to go try things and screw them up and aren't going to overthink things, but they have a good sense of the unknowns in their mental models.

you'll have an idea of how the business is going to look and the pitch you don't know, you'll sort of paper over with a bunch of assumptions. And in a pitch meeting, you need confidence that you need a coherent story. Fair enough. But then when you actually try to execute it, you sort of need to have the intellectual honesty to know actually.

This is an assumption, but we don't know this is true. And here's a gap like scientists, they go through life. They become an expert in their domain. And they're like, okay, we understand this works on paper, but we don't understand why, and we don't understand this piece of the cell signaling pathway. They have a very clear sense of what they know and they don't know.

And the best founders. In terms of the growth side, have that same thing. They have a really clear sense of the limits of their knowledge, what they need to figure out, and, you know, back to that question, a really sober nuance understanding of the risks that face their business in the next six to 12 months.

Brett: When you're building a product, you generally have a road map or PRD's or a one pager that kind of articulates the feature or customer problem that's formatted in a specific way. Do you think about the same corollary in this sort of growth experiments or it can generally be much more unstructured?

Matt: There's a structure, but it's in a much shorter time cycle. So growth sprints typically take one week. Maybe two. So the documents that you're going to really need to have one is going to be your growth model, which is, you know, kind of the behavioral metrics and conversion rates at each step to is, a fairly detailed map of the customer journey.

You know, at this stage, they're looking for this and they're thinking about this and they're worried about this and they might Google this, et cetera. And when they get to this page, they need to believe this. And you know, we need to answer this question and reassure them about this. So you need that overall.

And then each idea you have, we'll do an experiment document that starts with, you know, observation hypothesis. Everybody make a prediction, do that in groups because it helps eliminate hindsight bias because somebody will be right and wrong and you'll learn better. So outcome metric and a prediction, then you run the experiment.

Then you come back, look at the results, figure out why, whatever a surprise weird thing happened. document all that and save it. So the core of, this process is going to be an experiment doc.

Brett: and you do that for sort of each one and then complete it at the end and sort of infinitum just sort of keep going?

Matt: Yeah, So at any given time, you'll be focused on like one or two or three bottlenecks. So that's sort of the overarching structure, for this quarter we're going to focus on this, and this, and then you're going to go to your backlog and say, okay, right now, what are the big ideas that can have the biggest impact?

Okay. We tried that. It didn't work, but we learned this thing and therefore now we're going to try this other thing. It's more agile than agile in that sense that you're really steering the ship like week by week based on your learnings.

Brett: When you think about the topic we're exploring and a lot of the ideas that you've developed,how have they changed based on the 40th company you've worked with or 50th company versus like the 10th or 15th?

Matt: What I think is important is sort of moved away from the metric side of it and more towards what's in customers minds at any given stage, because the metrics I realize just don't tell you very much. People are coming to the page and not signing up. I have no idea why. Are they not qualified?

Are they confused? Whatever. So I move towards that. And then I think the latest piece of Piece of my thinking it's this new idea, which I mentioned earlier, which is the idea that when you find, you probably already have the right answer and you probably just don't like it.

So the reason you're not growing is because you're missing some important piece of information about the business model, about the market, about your customers. When you find that information, you're going to grow faster.

But when you find it, whatever that lever is, It looks like a lot of times you're going to find it distasteful because if you've been doing this already for two years, you probably thought of all these ideas. You probably tried a lot of them and you've probably tried this one. And for some reason it didn't make sense or you didn't like it or it didn't work.

And so then there becomes this sort of mental resistance. I'm working with a founder now. We'd worked with him about two years ago. We did customer interviews. We came up with this proposition for his business. They sell software to architects in Germany. And I just talked to him and he said, Matt, July was our best month ever.

And I said, that's weird. July. Isn't a great month for selling to architects in the summer. They're out on the job sites. And he said, yeah, we, finally tested this message that we came up with two years ago. Why did it take you two years to test it? And they said, well, it seemed too simple. It wasn't the part of the product that was, it wasn't the hard thing that we do for customers.

You're like, we have all these other ideas. it just didn't seem like the right thing at the time. And it wasn't until he got into a cadence of really rapid testing that they finally got back to it.

Brett: Is that the way you get around that sort of cognitive trap? Basically the sort of experimentation model that you outlined will reduce the chances you get caught in these cognitive traps or loops.

Matt: The pace and quality of learning is absolutely number one. Now the cognitive trap is also what slows us down. I mean, there are just people who have kind of an adversarial relationship with new information for whatever reason. They're defensive, they're set in their ways, they have cognitive dissonance of what they, you know, been telling the world.

And so those people are already going to test and learn more slowly, be less willing to test things that threaten their mental worldview. But then the experimentation is the anecdote to that too, because once you try a few things and you're like, I'm wrong, but we're growing faster. You suddenly start to realize that there are more important things than your, your ego.

So I do find that this process of like experimentation in public and not public public, but within your company. So I encourage teams to post an experiment in Slack and get everyone to vote on which one they think is going to be the winner and let the founder and the head of products and the head of growth be very public about their bets.

And then they're going to be wrong and let them be very public about, Hey, I was wrong about this and I just learned this thing and therefore we're changing. And so if you sort of. model the behavior, you can help open people's minds to this sort of curiosity and humility that is necessary for a quick learning.

Brett: A slightly related topic is one that you surfaced a little bit earlier, which is sort of the power law dynamic and a lot of these growth levers, right? Where the idea is that, 10 percent of the things that you try or do end up accounting for a vast, vast, vast majority of the impact on the business.

why does it follow the power law?

Matt: It's a good question and it doesn't always, but I, I guess it's sort of self fulfilling in the sense that what's a startup, right? 2 million bucks, 20 people, two years, and you've got to figure something out that someday going to be making 200 million, 500 million a year. Right? So you're just like the physics of it.

You're starting with this tiny amount of resources and time. You need to have a big impact, which means you've got to find something that works like crazy, or there's absolutely no way you're going to achieve a goal. so I guess it's just sort of a priority based on the structure of the problem and then it sort of causes you to look for those big things, the most leveraged opportunities. I don't know if it's a law of nature or just selection bias about sort of the way we run the process.

Brett: You hinted at this in sort of various things that you shared, but given that generally is the case, how does it inform what this optimal process needs to look like?

Matt: So that's where I go back to this prioritization. I say. If it works, how big can it be? And if the answer to that, if you cannot on the back of an envelope with a pen, show me that this is going to have a huge impact, it's just not worth our time. And I think that's a huge difference. Another one between a startup and an established company.

I mean, I said PayPal. All their growth came from five things, but they did more than five things, right? , they built products that nobody ever used. They spent hundreds of millions of dollars on ads that didn't move the needle. They had all these projects and this and stuff, and they could, 'cause they were making billions a year and they had like 70% gross margins.

And so like a good marketer in a big company gets promoted by being a good project manager, managing budget well, getting lots of things out the door and making no mistakes. That's completely the opposite of what you need in a startup. You need someone who can take all these things that we probably should be doing, but they're not going to have a huge impact and we're a small team and we have no money, and just push them away.

They need to think much more in terms of the opportunity cost. And again, often the big levers are uncomfortable. They're things we've not done before. They're things that like most people haven't done before. So if you hire a person who's good at buying Facebook ads and they're going to want to do that.

and it's going to be, if they're good at it, it's going to be profitable, but it's not going to be this huge, massive breakout success because they're mature, you know, expensive ways to grow. And so the thing that's really going to work is probably going to be again, something that they've not done before that has this risk.

So you need people who sort of think in terms of the opportunity cost of the work, that we're going to not do and really just focus on potential upside. 

Brett: Maybe you're sort of touching on this, but something that that I've noticed, at least for consumer businesses, that is that basically, and maybe you'll disagree with us, and I'd love to hear your ideas, is that if more traditional paid marketing is required in the very early days, it generally leads to a company that long term can't make an economic model work.

Matt: I mean, ads, you know, let's just be specific. We're talking about Meta and Google, those are the main ways you buy and they're sold at auction, which means ultimately they're going to go to the people who can pay the most, which means the most well funded companies, the companies with the best tracking and analytics, the companies with the best unit economics, the companies with the highest gross margins, and a tiny little startup is going to have a very hard time competing on that kind of a non level playing field.

So yeah, I 100 percent agree. Now, the exception to that is ads are a very good way to get traffic quickly for testing. So suppose, you know, you're an early stage B2B company, you have very little traffic, and you've come up with three, you've interviewed all your customers, and you found there's three different buckets of goals that they're trying to achieve.

So you can run three different ads against the same audience and find out which of those ads brings you the most high quality signups. And you can do that for 500 or 1000 bucks in a matter of a week or two. So it's a very good way to accelerate the pace of learning. But as soon as you start thinking about return on ad spend and budgets and scaling that way, that's going to end badly.

Brett: So do you generally think that when you're looking at growth levers very early on, you should try to avoid traditional paid marketing?

 Yeah. 

Matt: I mean, there's of course always exceptions, and so my mind, broadly I'd say, yeah, absolutely. The exception my mind goes to is if you can show me that you have some weird, crazy advantage inside, you know, approach or something that can't be copied, that's going to allow you to win, even though your funnel is janky and you have terrible analytics and you don't have very much money.

Brett: When you think about company that has a more traditional sales motion. So in most cases, there's a few other examples, but in most cases, it's somebody to be a product. It's probably a product that, you know, you have an ACV that's. Ideally in the tens of thousands to have some higher touch sales motion maybe you can have light, inbound at something lower than 25, 000 or 50, 000, but tends not to work.

So for that shape of company, maybe you can share a little bit, and you were hinting at this a little bit, but how some of these ideas map to the shape of product that tends to be more traditional sales led.

Matt: So at that point, the growth side of this is going to be around lead generation. And at the highest level, you know, I've seen kind of three models of lead gen that work. One is partners. So there may be a partner where your product enables them to achieve their goal with their customer. So I gave early on the example of PayPal partnered with all the shopping cart and e commerce platforms.

Well, the e commerce platforms make a share of your payment volume, so they need you selling, which means they need you to get up and running with the payment method quickly. So that was a great source of leads for PayPal because we help them achieve their goals. 2 would be outbound and, you know, everyone keeps ringing the death bell for a cold outreach and outbound, but, you know, it doesn't seem to be going away. So that can be a way to do it. But again, it's everything I talked about, it's going to be sending thousands of different messages and AB testing different subject lines and offers and sequences, and it's a very, you know, it's like, Oh, we sent some emails and outbound didn't work for us.

It's like, well, no, you didn't test 50, 000 emails across six months and, you know, 200 different variations. and then, you know, my personal favorite is inbound because there's inevitably, if you have customers who are out there struggling to achieve a goal and you help them achieve the goal. They're looking for help somewhere.

They're Googling something. They're following an influencer. They're subscribing to a newsletter. They're going to a webinar. they're asking a professional trade group that they belong to. They're out there looking for information. You can turn up there and give them that information. But I think the mistake people make is they turn up there and they say, buy our product, or they get you to the homepage and it says, book a demo.

And those are very high intent. And then they're like, oh, no one's no one's signing up. Those are very high intent end of the purchase journey. Next steps. What you need to do is understand what are the 1st questions they're wrestling with? And how do we get their attention when their trust and build a relationship over time, so, when they get to the point in the customer journey where they're ready to do the thing that we sell, they'll be our customer. So I, I do this with my business. I know that if someone's trying to hire growth marketers in a startup, someday they're gonna be potentially a good candidate for my service.

So we don't do any recruiting, we don't do any thing around hiring, but I produce a lot of content, answer a lot of questions, put it out in entrepreneur's forums, share it with VCs. So just generally turn up and be helpful and help people like this podcast just develop a more nuanced understanding of growth.

Knowing that at some point, some of those people will get to a point where they're potentially my customer, but I need to know, you know, five miles earlier when that journey started, what were the questions and what were they looking for and how can I be helpful there?

Brett: Did you apply these ideas basically one for one for the way that you think about growing your own business?

Matt: Yeah. And sometimes I'll ask my business partner, what should we do? And he'd say, well, if a founder asked us, what would we tell them? I'm like, Oh yeah, I do know the answer. I mean, mine's more a boutique services business, so I don't have the huge numbers for the experimentation, but we do constant customer interviews.

We look at our growth model. I still have, I drew my first growth model ever when I started the business and I still have it here on my desk with me and everything. So

Brett: I'm curious what it looks like for your business.

Matt: Yeah, it's this one. So, and I drew this again years ago, but it starts, the top of the funnel is okay, podcasts, guest speaking, SEO, guest blogging, which I've also done with you guys, Twitter. So it turned out Twitter wasn't great, but LinkedIn worked better, right? So all this, I get prospects and they subscribe to my email list.

I send them an email, a two minute email every week and I don't try to sell, I just give them a helpful piece of advice for a founder about growth. And then, you know, they read my newsletter, they forward it to their friends. That's a good one. I didn't expect this, but someone gets a helpful tip in their company, they're going to forward it to the other people in their company.

And so then I get like a little growth loop there. And then eventually I'm like, okay, we're opening another cohort. If anyone wants to apply and, people apply, and then we accept some of them and some of them join. And then hopefully they, they generally have a good experience. We have a 96 percent founder likely to recommend.

And so then they do recommend and that brings us more impact.

Brett: And do you think about the, course as a way to drive core consulting or the core thing you care about is the course?

Matt: The core thing we care about is the course, is the transformation that we help companies achieve by going through the course. That's maybe a flaw in my business model. Maybe, you know, I need some sort of ongoing, uh, thing after that.

Brett: right? You always need good, better, best pricing, right? You need the dollar, 10 dollar, 100 dollar, 1000 dollar, sort of

Matt: Yeah. I'm so bad at that. So my newsletter is free. My book is 20 and our course is almost 20, 000. That's

Brett: Yeah.

Matt: Absolutely horrible.

Brett: On this sort of related sort of topic of B2B, what about how the ideas apply to the actual sales process? So I see how they apply to sort of lead generation. And then you have Jane, who's a qualified customer that actually does interact with a salesperson. It seems like a lot of the ideas are directly relatable, even once they have their first 30 minute demo, for example, all the way through being a retained customer. Maybe you could talk a little bit about that.

Matt: A little bit. We're not sales experts and we don't do sales training and we don't claim to be. But one thing I've noticed is the better you understand the struggles that a customer has and the goals they're trying to achieve and give that brief to a salesperson, the better salesperson they become.

I've noticed the more qualified leads you give to a salesperson, the better salesperson they become. And another big piece of this is when we do customer interviews, we'll ask, Uh, you remember one of the first questions I said was who else cares about this outcome? And when you do that process, you'll uncover a bunch of stakeholders It needs to make sure it's complies with our information security standards budget this that whatever there's the 5.

4 stakeholders You've got to navigate and if we know who they are and what their questions are, we can often arm a salesperson with a document that's, you know, very specifically, here's our information security compliance standards and certificates and, for your budget, here's how most people funded.

Here's the line item. Here's the things that budget manager is going to ask you about, you know, return on investment, whatever. And you just give that to the salesperson and that saves them a lot of trouble.

Brett: Are there any other stories that come to mind that bring the ideas to life? You've rattled off some really good ones, but I just think there's no better way to learn often than being inspired by other people.

Matt: So when doing customer research, when I'm interviewing customers, we've talked about going back to the beginning of their journey. I'm looking for something I call a locksmith moment. And what this is, is I was, when I started at PayPal early on, I was living in San Francisco and I came home to my apartment and there was a sticker on the gate apartment complex that said 24 hour emergency locksmith.

And it had a phone number. I thought that's really clever because most of my life I don't need a locksmith. And if I saw an ad for a locksmith, I wouldn't remember it. But if I ever do need one, I'm going to be standing right here looking at this gate. Right. And so it's like for my customers. What are going to be their locksmith moments, where are they going to, so for PayPal, at the time we were doing these partnerships with e commerce, so I'm going to set up an online store, I buy the domain, I get hosting, I get a shopping cart, there's payments right there.

 Airbnb, early on famously advertised their listings on Craigslist because that's where people were looking. Soy milk doesn't need to be refrigerated. It's in the refrigerator section of the supermarket. So again, it's like, where's your customer?

Cause that's where you look for like dairy products, non dairy products that go white liquids that go in your coffee or your cereal. So it's like, where are my customers going to be when they kind of suddenly realize they need me more than anything else? And how can I turn up there and look like that thing?

Brett: how do you figure that out in the context of customer development? Or is this just something you're on the hunt for more broadly, it's not something you're trying to prosecute in a customer conversation?

Matt: Oh, I am. So in a customer conversation, I'm like, okay, where did you, when did you first realize you needed to do this? Where did you look? Who did you ask? What did you do first? What did you do next after that? What did you do next after that? And usually in some conversation that'll come up. So I have an example in my book.

 There's a guy named Bob Moesta. He is the, uh, one of the co creators with Clayton Christensen of the Jobs to be Done framework. And he told me this story. He had a, his business was selling, houses to empty nesters. So smaller houses when the kids, you know, leave and you're going to downsize. And he was interviewing a customer and he said, you know, okay, do you remember like, you know, take me back, talk me through it.

When did you decide to buy this house? And she said, okay. I was having brunch with my husband. And he's like, okay, where were you? We were in this diner downtown. What were you wearing? She said, God was wearing a black dress and you were wearing a black suit. Why were, why are we wearing a suit to brunch on a Saturday?

Oh yeah, we would just come from a funeral. One of our friends had died of a stroke. You know, he was 53 and it was like, Oh my God. And we sort of realized life is short. And then we were like, you know what? We've been thinking and hemming and awing about buying this house. Life is short. We should just go ahead and buy the house.

And that was what pushed them, you know? And like, if I had asked, how do you sell some empty Nester house? You're like, well, doesn't have stairs in it. You know, it's like, whatever, like you come up with all these feature, feature, feature. So Bob took this and they just took their newspaper ads and move them from wherever they were into the obituary section.

And it worked. They increased their sales by like 70%. And by the way, ads in the obituaries are dirt cheap because nobody wants to advertise that. So, it's going to be an insight that you're going to hear in some weird little detail of this customer interview. But you're going to have enough context, the pennies going to drop and you're like, actually, you're not the only one.

We worked with a company I invested. This was, so with 500 startups when I was there, the thesis was we invest in traction first and foremost. And I broke the rule once kind of inadvertently, but the investment committee let me get away with it. I backed founders who were still at idea stage.

and the idea was, metabolic syndrome, basically poor glucose metabolism, sedentary lifestyle, et cetera, is leading to all these chronic health conditions. And these were some brilliant scientists and former consultants who had, uh, basically a weight loss app and they launched. And then I was like, uh, I suddenly realized once we were trying to market it, that weight loss is just the most crowded field.

You know, I like personal trainers and diet plans. There's just so much stuff out there. And frankly, most people who need to lose weight, you know, they tried stuff, it didn't work, they're cynical, they're overwhelmed with all the information and theories. It's just a very tough category to compete.

So they did the interviews and where they eventually got to was, most of the customers they want are stuck on their couches, not doing anything. They're overwhelmed. They're paralyzed. And, you know, we say, I always like talk about what's in your customer's heads and what's in customer's heads was a struggle.

So they ended up building like a boarding flow that was sort of like calm in asking customers questions, take our quiz, do our diagnostic. And then in the experiment still to iterate this flow every day, or at least every week. And so the first thing is what are the challenges or what, what are the goals you're trying to achieve?

You know, I want to look better. I'm worried about my long term health. there's like four or five different outcomes that a person doesn't just want to lose weight. you know, they're dating, whatever they want to feel good. They feel like they're getting old. They want to improve their performance, whatever.

So there's a quiz. First question. What's the outcome. Okay. What have been some of the challenges that you've had too much conflicting advice? I find it hard to stick to diets. I can't prepare different meals for myself and my kids. it's about 20 screens long and it goes through the entire customer journey.

And all they're doing is these customers are reading this and thinking, oh, yeah, this is exactly the product for me. You understand what I'm worried about. You understand my concerns. And so it seems like a very, you know, contrary to popular wisdom, make the boarding flow longer and ask lots and lots of questions actually really help to build intent.

And then by the time they get to the paywall, they had a surprisingly high conversion rate there. part of it was just talking about what was in the customer's heads, which was so far away from weight loss, part of it was understanding all the nuance that weight loss isn't just weight loss, it means a lot of things to a lot of people.

And part of it was experimenting quickly and then trying something that is it very much against best practices, but according to our experimentation, like it's working, let's follow it. Let's add more screens. Let's see if you know what happens to conversion. So that was one really good one. Had another, so I worked with a company, it's called Caribou now. And in the initial iteration, it's a Y Combinator company. It was, well, I mean, it's basically the software that handles cross, uh, what is it, intercompany transfer pricing, and they did some stuff with like cross border and FX and things like that, and what they figured out, and it was for startups, is that that's like step 70 of setting up finance for startups. And by the time people get there, it's too late. So what they did was they created a finance for founders guide and they put it on product time and they put it in their white combinator, book face chats, and they put it out there everywhere.

They couldn't treat it like a product launch. It was basically just a free guide on notion with everything like an entrepreneur needs to know about what all the terms mean, what do you need to file negotiating equity, cashflow, everything. And they just gave that out there for free to everyone. And you captured everyone's email addresses, created nurture sequences, and then ask them questions in their nurture sequences to qualify them about who are starting to have the problems we solve. In those cases with those people, they'd follow up and make offers to those people.

So again, figuring out where does the journey that leads to me start. Let's turn up there and be helpful. They ended up growing 22 X in 18 months off the back of this strategy. So it was massively successful for them.

Brett: Very cool. Um, I wanted to wrap up where we often do, which is I'm curious in this area of sort of growth and the things that you figured out here, who's someone who's had a disproportionate impact on you and like what's sort of the big idea that they left you with?

Matt: I think of all the people I've worked with and for, there's one person who stands out and it's not even close. And he's a gentleman named Peter Karpas and the moment he is the CEO of a company called Bold Commerce. But I worked for him when I was at PayPal. and he was running, I think the North America P and L.

You know, I think we had this problem that every company has, which is we're just moving in too many different directions. And, you know, how do you do fewer things better? How do you do the right things? And I really watched the way he brought an entire organization, hundreds of people reporting into him to really be focused on a small number of things that could have the biggest impact, how to help people prioritize better, how to get people to do their, best work.

And he did it pretty quickly. So he had this really structured first 90 days process where he came in and he sort of said, okay, for me to be effective in this role, I need to really, really understand our customers. I need to understand our business and how it makes money because he'd come from software into payments.

And then I need to understand our team and our capabilities. And he spent his first 30 days making no decisions and just interviewing all the experts in all of these things, market researchers, finance team leaders on his team to just get a sense of how it all works and where the biggest opportunities were.

But yeah, watching him go and how he did all that was a masterclass because it's, you know, it's easy for us to talk about these theories, but to actually get an organization with hundreds of people to align and prioritize and do them, I mean, that's just a massive leadership challenge.

Brett: Awesome, thanks so much for spending the time with us. This was great.

Matt: My pleasure, Brett. My pleasure.