by Y Combinator9/4/2019
We’ve cut down the first week of Startup School lectures to be even shorter and combined them into one podcast.
00:00 – Intro
00:43 – Kevin Hale on How to Evaluate Startup Ideas
2:04 – How can I predict if an investor will like my idea?
2:50 – A startup idea is a hypothesis
5:44 – Problem
6:59 – Solution
8:16 – Insight
8:57 – Unfair advantages
13:45 – Two beliefs about startups
15:19 – Eric Migicovsky on How to Talk to Users
17:36 – Three common errors people make when talking to users
20:20 – Five questions to ask in a user interview
20:28 – What’s the hardest part about doing the thing you’re trying to solve?
21:02 – Tell me about the last time that you encountered this problem
21:22 – Why was this hard?
23:08 – What, if anything, have you done to try to solve this problem?
24:10 – What don’t you love about the solutions you’ve already tried?
25:21 – Three stages in which talking to users is extremely beneficial
26:07 – Idea stage
30:40 – Prototype stage
33:41 – Iterating towards product market fit
Craig Cannon [00:00] – Hey, how’s it going? This is Craig Cannon, and you’re listening to Y Combinator’s podcast. This week we’re going to try something different. I’m going to recap the first week of Startup School. I’ve cut down the first week of lectures to be even shorter and combined them into one podcast. First, we’ll have a lecture from Kevin Hale. Kevin is a YC partner and a cofounder of Wufoo. His lecture is about how to evaluate startup ideas. Then we’ll have a lecture from Eric Migicovsky. Eric is a YC partner and the founder of Pebble. His lecture is about how to talk to users. We put out a lot of content at YC and the Startup School lectures are some of the most valuable things we create, so check these out and let us know what you think.
Kevin Hale [00:43] – This is how to evaluate startup ideas, and this is actually a new set of content that we’ve developed based on a lot of feedback that we saw from the last Startup School and what we noticed is a lot of people’s challenges. Last year’s curriculum actually had a lot of content that ended up being, when we looked at the data for who’s participating in Startup School was like, “Oh, this is much more advanced, it’s much further along.” A lot of people, for instance, like I had no idea or like I have too many ideas that they don’t know which one to pursue as a main reason why a lot of people are only able to work on their startup sometimes part-time. Yes, they might be stuck without resources, but they didn’t have conviction, they didn’t know like, “Oh, what would I have to believe in order to say like I want to quit my job?” This is also a really great sort of skill to sort of have because if you are realizing you need to pivot, how do you evaluate if you need to do that, and then also if you’re pivoting to something else, like how do you evaluate whether something is worth going to? And if you already have a launched company then you might have problems with like, why isn’t this growing or how do I improve it? And evaluating your startup, especially in the way that sort of investors evaluate startups ideas we find is going to be really, really useful. How can I predict if an investor will like my idea? That’s ultimately what we’re trying to figure out. And the answer’s really easy.
Kevin Hale [02:13] – For us at YC, the definition of a startup is a company that is designed or created to try to grow very quickly. If you’re not trying to build a company that grows very, very fast, then you’re just building a normal company, it’s a small business, and there’s nothing wrong with that, but these companies are the ones that investors are interested in. If you’re hoping to build something that will have tons of users, that will have huge valuations, that will be able to attract venture funding, then the evidence that we want is evidence that shows that your company can grow quickly. A startup idea is basically a hypothesis, and this is the way you should think about it. It’s a hypothesis about why a company could grow quickly. Your job is to figure out how to construct your hypothesis, basically the pitch, to the investor so they understand how it can grow quickly. A lot of times people make the mistakes of trying to just accurately describe or over describe a lot of different parts. So I’m going to break this down. Just like a normal hypothesis has a pretty decent structure for this, this will hopefully help you sort of workshop like understanding, “Oh, this is exactly all the reasons why this should succeed.” Even before we start even building anything, we can have an understanding of like, “Oh, here’s the potential path of this company,” or “Here’s the things I need to prove to show that this company could do well.” The first is the problem. So startup ideas come as three parts, the first part is a problem, and it’s basically
Kevin Hale [03:49] – the initial conditions, you have to explain to me like what is the setting for this company that allows it to be able to grow quickly? The second is the solution. This is basically what is the experiment that you’re basically running within those conditions for it to grow really quickly? The third is, what’s your insight? So what’s your explanation why the thing that you’re going to try, your experiment is going to end up being successful? Those are the three components that I’m always trying to figure out when I’m listening to someone’s pitch. Here’s a tip for talking about the problem or to know whether your problem, your initial conditions are correct. The first is, good problems, they’re popular, so a lot of people have the problem. You want to avoid problems that there’s a small number of people that have it. We like problems that are growing, so therefore the market basically like is it growing at a rate that more and more people are going to be having the problem and it’s growing faster than other people’s or other types of problems? We like problems that are urgent, ones that need to be solved very, very quickly. We like problems that are really expensive to solve, because if you’re able to sort of solve it, then you can charge a lot of money potentially. We like problems that are mandatory, right, so therefore it’s like people have this problem and they have to solve it. We like problems that are frequent, ones that people are going to encounter over and over and over again and often in a frequent time interval.
Kevin Hale [05:23] – What you want to have is like some aspect of the problem that you’re working on, at least one of them, and it’s ideal if you have multiple of them. You don’t have to have all of them, but it’s one of those things where it’s like, if your company isn’t growing or if someone’s not as excited about the problem, it’s probably missing some of these characteristics. Our ideal problems are millions of users, right, millions of people have it. That’s why people like to work on consumer companies. It’s why some investors like to focus on them. We like markets that are growing 20% a year, the problem is growing quickly. We like problems where people are trying to solve it right now, immediately. We like problems that just cost a ton of money, so billions of dollars, right, or at least they all add up to some billion-dollar total adjustable market. We like problems where the law has changed, the law has changed and regulation is put there and now people have to solve a bunch of problems. You saw a ton of healthcare startups were born after Affordable Care Act was passed. A lot of that had to do with like there was now all of a sudden opportunity. This problem that all these hospitals and clinics had to solve. We like problems that people need to solve multiple times a day or will use it multiple times a day. Facebook’s a good classic example, but people also really love Slack, right, because it’s like, “Oh, I’m going to be engaged and using it multiple times a day during the workday.” Solution, so there’s pretty much only one piece
Kevin Hale [07:01] – of advice I really have for the solution, that’s the best advice that you can ever follow, and that is don’t start here. What I mean by that is at YC we have an acronym for a problem that we try to avoid or basically an application that we have to go like, oh man, I wish they had started with the problem first, and we call it SISP, it means solution in search of a problem. often what happens is like you’re an engineer, you’re excited about technology, some new technology has come on the scene. Let’s say it’s blockchain, right. Let’s say its like React Native or whatever the new thing is, and you’re like, I want to build something with this. It’s a large reason you start working on a startup project. And then you go like, “Okay, what kind of problem can I solve now? I want to use this no matter what,” and then you try to shoehorn a problem into the solution. What ends up happening is that’s a much more difficult way to grow the company. It’s not impossible for companies to grow this way but super inefficient. It’s much better to be like, let me see what problems people have and then I’ll use whatever is necessary to solve them, and therefore it’s much more likely that you will grow as a result. The last one’s a little tricky, it’s, what is the insight? What’s the reason why this solution is going to work? And this is where a lot of companies start to get tripped up. Because it’s really about like what is your company’s unfair advantage, right? Why are you going to win versus everyone else? Why are you going to be the fastest one to sort of grow?
Kevin Hale [08:37] – Because that insight is what’s needed for the investor to choose you over anyone else, and it has to be related to growth. You have to have an unfair advantage that explains why you’re going to grow quickly. If it’s not related to that, then it’s not going to be something that an investor is going to find valuable, right? Let’s go through the types of unfair advantages that your company have. There’s five different types and companies do not have all of them. Really great ones, not surprisingly, will have all of them and we’ll go through two examples, but you want at least one, and it’s nice if you can have two or three. But for most of you it’s probably just one. So, the first one, so how do you know if you have a founder unfair advantage. And so all of these will be connected to numbers actually, which will help this make this really easy. Is like are you one in 10 of all the people in the world who can solve this problem? Are you a super expert? And 99% of the people we find at YC do not fall into that category. And so if you think it’s like, well, I’m a product manager at Google, there’s a lot of product managers at Google. If you say you’re an engineer at Microsoft, there’s a lot of engineers at Microsoft. It’s like, great, but it’s not one that will make me think, oh, you have a greater unfair advantage than someone else. If you’ve done a PhD, and let’s say you’ve done it on some kind of crazy biotech research and you have like a special patent to be able to cure some kind of disease, then you have a founder advantage.
Kevin Hale [10:24] – Your market, is it growing 20% a year? By default if you just build the solution in the space, you should just automatically grow, because you’re just following a trend. If this is your only company advantage, then it’s one of the weakest ones that you could have. It is great to be in that space, but you want to have something in addition to this. Like you’re going to do like better than average because you’ve picked the right problem space and the right set of customers that want your problem, but, again, if you’re in a market that is stagnating or shrinking, then you’re going to have investors worried about the long-term viability of your company as a result. Product, this is super simple, is your product 10X better than the competition? If it is, then you potentially have an unfair advantage. It has to be very, very clear, someone should be able to look at your product and go like, oh shit, this is so much better than everything else I’ve ever seen, it is 10X faster, it is 10X cheaper, et cetera. If it’s not an order of magnitude, let’s say it’s just like 2X or 3X, again, that’s nice, but it’s not enough for an investor to go like, “Oh, this is a slam dunk.” Acquisition, so a lot of people think that if you go to an investor and you’ve done a bunch of Facebook or Twitter or Google ads and you show your CAC and a LTV, that you will able to prove that you have a sustainable sort of acquisition model. I want you to know that if paid acquisition is the only way that you are able to grow your company,
Kevin Hale [11:59] – then I’m going to discount that channel of growth greatly. That is because if you actually get really popular, you actually start being someone significant, let’s say becoming a $100 million revenue company, then you’re going to attract a lot of competitors in the space. That advantage is going to quickly dwindle over time. Blue Apron is a really good example of this, almost all their acquisitions in paid and then once they ate through that, there was almost nowhere else for them to sort of go. You want to find acquisition paths that cost no money. My favorite companies, the ones that become really great are the ones that can grow by word of mouth, this is a good percentage of the way they grow. In the early days of your startup, if you don’t have any money, that’s actually very great way of exercising how do I grow this without having to pay for it? In the beginning we tell you to do things that don’t scale, but this is what you sort of want to accomplish is like, do I have an advantage that is free? The last one is, do you have a monopoly? We don’t mean this in the monocle Monopoly game sense, so we mean it as like as your company grows, is it more difficult for you to be defeated by competitors? Do you get stronger? And so good examples of that are like companies with network effects at marketplaces, where marketplaces where it tends to be a winner-takes-all, a one company will tend to win. Network effects is just basically as my network grows, the strength of my company and the value of the product or service
Kevin Hale [13:39] – also grows with it. Not every company has it, but when you do have that, works out great. There’s something to keep in mind also, that’s other things I’m looking to believe about a company, and that is something that trips up a lot of founders. There’s two types of beliefs that I have about a company. And so there’s the threshold belief, which is like, what’s the default just for them to even succeed? So oftentimes for me it’s like, “Oh, them building it, can they even build it?” That’s a threshold belief. If they can’t even build it, none of it even matters. And so to me that question is not the most important. What will determine whether I’m going to win the lotto is a miracle belief that like, “Oh my God, if I believe that they can do this, that actually going to be able to take off really well.” And sometimes they’re really simple. So if you are a heavy engineering team or doing a BDB or enterprise startup, again, the default is you have to build it. So if you can’t even build it, then it’s not even going to work. I don’t spend actually a lot of time looking at that. For me, I’m trying to figure out success will be determined by how well you can do sales, how well you can tell the story, how well you can actually convince customers and work through a sales process. I want evidence that shows that you know how to work through that and make that happen. All of work with most of those companies is like not working on product, it’s like, “Hey, all right, let’s prove this other thing that if you have that, that’ll be the thing
Kevin Hale [15:09] – that actually will help people go like, ‘Oh shit, they have the super combo.'”
Craig Cannon [15:15] – All right, now for Eric’s lecture on how to talk to users.
Eric Migicovsky [15:19] – Hi everyone, my name’s Eric Migicovsky, I’m a partner here at YC. I actually started a company that went through Y Combinator back in 2011. I started a company called Pebble. We made one of the first smart watches. I am really excited to be here to talk about talking to users, because this is one of the perennial things that you always hear about as one of the critical factors in starting a company. The best founders maintain a direct connection to their users throughout the lifespan of their entire company. They maintain a direct connection because they need to extract information from their users at all different stages of running their company. Oftentimes people think that they’re the CEO or they’re the CTO, they’re the technical kind of product leads of the company, they can outsource this research to other people in their company. They can hire salespeople, they can hire heads of product. But at the core, the best companies are the ones where the founders themselves maintain a direct connection to their users. If you are the CEO, it is your job, it is in your job description to talk to customers. Take the time to learn how to do it well. All founders need to participate in this process as well. If you’re the engineer, if you’re the developer, don’t think that you can escape this process just because you’re the person who’s coding. There’s a pretty classic scene from the movie Office Space where there’s an individual who says, “I’m the person who is the go-between between engineers and users, I know how to talk to people,
Eric Migicovsky [17:03] – I have people skills.” That is one of the things that you do not want to have happen at your company. You want to make sure that the founders and the core members of your company are the ones who develop the skills for talking to users so you do not have to hire someone like that to be the go-between. Talking to users is so critical that at the core of kind of YC’s teachings there are only two things that you must do in order to start your company. You need to code or build your product and talk to users. The mom test, as Rob actually explains, is three common errors that we make when we try to conduct user interviews. The first problem, the first mistake that we pretty much all make is we talk about our idea. We’re founders, we love to pitch our idea, we love to talk about the product that we’re working on, but during a user interview, that is not the time to be pitching the product. The goal of a great user interview is to extract information from the person that you’re talking to, to extract data that will help you improve the product or improve your marketing or improve your positioning. It is not to sell them on using your product. At the core of a great user interview, you need to learn about their life, you need to talk about specifics around the problem area that you’re trying to solve that the user may be going through. Second mistake that we pretty much all make is we talk about hypotheticals. We talk about what our product could be. We talk about features that we want to build.
Eric Migicovsky [18:41] – We ask questions like, “If we built this feature, would you be interested in using it or would you be interested in paying for it?” That is wrong. Instead, talk about specifics that have already occurred in the user’s life. This will give you stronger and better information in which to make product and company-changing decisions. You also want to talk in general about the user’s life. You don’t want to just talk about the specific problem or, sorry, the specific solution that you’re presenting. Try to extract information about the users, the path that led them to encounter that problem. Ask them questions about their life in kind of more broader ways to extract context around how they arrived at this problem. Learn about their motivations. Learn about why they got themselves into that problem in the first place. The third trap that we pretty much all fall into is that we talk, we talk a lot. We’re founders, we’re always pitching investors, we’re pitching employees, we’re trying to hire people, we’re trying to partner. We tend to spend a lot of our time talking. In a user interview, try to restrain your interest in talking, really listen, take notes and listen to what the user’s saying because in that span of time, the 10, 20, 30 minutes that you spend with the user, you’re trying to extract as much information as possible so that when you return to the office and when you return to your cofounders you’re bringing hard data, real facts about users’ lives to the table. There are five great questions that everyone can ask during
Eric Migicovsky [20:25] – their early customer interviews. The first question is, what is the hardest part about doing the thing that you’re trying to solve? In general, the best startups are looking for problems that people face on a regular basis, or that they’re painful enough to warrant solving. This question can help confirm for you whether the problem that you’re actually, or the problem that you’re working on is actually one that real users feel is a pain point, feel is something that they actively want to solve in their life. The second question, to the point that I was making earlier about trying to get to specifics rather than hypotheticals is to ask the question, tell me about the last time that you encountered this problem. The goal of this question is actually to extract context around the circumstances in which the user encountered that problem. The third question is, why was this hard? The reason why you want to ask this question is because you’ll hear many different things from different people. Going back to the Dropbox example, you might encounter some people who say that maybe the problem, maybe the number one problem that they were encountering was when they emailed files back and forth, they ended up duplicating work because they didn’t have the exact same kind of document at the exact same time. Maybe other people will say that they submitted the wrong document in the end to the professor for their group project because they had like crazy strings of file version numbers on the end. The benefit from asking this question
Eric Migicovsky [22:06] – is not just to identify the exact problem that you may begin to solve with your solution to this problem, but you’ll also begin to understand how you market your product, how you explain to new potential users the value or the benefits of your solution. In general, customers don’t buy what. They don’t buy the what, they buy the why. In the Dropbox example, they may not be excited and overjoyed at saying, “Oh, I now have this kind of file syncing tool that can keep all my files in sync,” but by the why they’ll say, “Well, this product will help with this exact problem that I had just two weeks ago when I was trying to work on a student project with some of my friends.” Answers that you get from customers to this question of why, why was this past problem that you encountered so hard, may actually inform your marketing or your sales copy as you build out the rest of your kind of product. Fourth question is, what, if anything, have you done to try to solve this problem? One of the biggest things that I’ve encountered while helping YC companies over the last few years is that if customers, if potential customers are not already exploring potential solutions to their problem, it’s possible that the problem that you’re trying to solve is not a burning enough problem for customers, for them to be even interested in your better solution to this product. This question tries to get at that root of that issue. Is the person who encounters this problem already trying to solve this? You want to ask this question for two reasons,
Eric Migicovsky [23:49] – one is to figure out whether the problem that you’re solving or you’re working to solve is even really something that people are already looking for solutions to. And the second one is, what are the other competition out there? What will your product be compared against as you end up rolling out your solution and offering it to end customers? The fifth question is very tactical, it’s what don’t you love about the solutions that you’ve already tried? This is the beginning of your potential feature set. This is how you begin understanding what the features are that you’ll build out for your better solution to the problem. Now, note that this is not the question of, what features would you want out of a new file syncing product in the Dropbox example? Because that’s a hypothetical question. Users in general are not great at identifying the next features that they want in the product. Just like the old Henry Ford quote, when we were developing the automobile, our users would have wanted a faster horse rather than car. This question specifically targets what are the problems with the existing solutions that they’ve already tried? These are specifics, and you can begin to kind of figure out what the differential between your new solution and the existing solutions already on the market will be. Talking to users, as I said before, is useful at pretty much all stages of your company, but there’s three critical phases to an early stage company, I would kind of define that as a company that has not yet reached product-market fit in which talking to users would be extremely beneficial.
Eric Migicovsky [25:41] – Those three stages are at the idea stage, before you’ve even begun developing any of your product, at the prototype stage where you have the first kind of rough beginnings of your product but you haven’t really gotten in the hands of any paying customers or any users yet. The third one, which is after you’ve launched and you’re iterating towards product-market fit, how do you guide that journey? I’ll talk about a few tips for each phase. At the idea stage, you may have the back of a napkin idea, you may have a thought, you may be commercializing some technology that you’ve been dreaming of but you don’t yet have any first users. You need to begin finding the first people that will be interested in either providing information about the problem that they’ve encountered or potentially signing up to be first users. People come to me and ask, how can I talk and how can I find my first users? Honestly, some of the best companies are products or services that are built for the founders themself, so start with yourself. Begin, like test your user interview strategy on yourself. Try to walk through a situation where you’ve encountered that problem. The next step after that is to talk to friends, is to talk to coworkers to get warm introductions. It doesn’t take a lot of people, you don’t have to talk to thousands of people. Every good user kind of research strategy begins with just one or two people. The critical feature here is executing a unbiased and detailed customer or user interview strategy rather than just trying to pitch your idea to them.
Eric Migicovsky [27:25] – Another cool hack that we’ve seen some great success with, actually YC Company in this batch is using this to, YC Company in this batch is actually selling products to firefighters, and they realize that cold email introductions was just not working, was not a way that they could get through to customers. What they did was they actually just dropped by fire stations in person, they didn’t even email them to say that they were coming ahead of time, they just showed up and they said, “Hey, could we speak to the fire chief, could we talk to someone about this problem that we’ve got a solution to?” You know what, it worked great. They managed to get dozens of in-person, 10 to 15 minute long meetings just by showing up. When in doubt, if there’s a specific target customer base that you’re looking to get feedback from, just try showing up. It feels a little bit weird because it feels like you’re imposing on someone, but at the end of the day, the mindset that I like to get into is, if you truly think that you’re solving a problem that your target customer base is facing, you’ll actually be doing them a hand, you’ll be helping them out by taking their 15 minutes and learning more about the problem. Industry events are another great way to get a number of new customer interactions. I remember that when I was working on Pebble, we actually went to CES, which is this large consumer electronics show in Vegas. We didn’t have a booth. We just went in guerrilla style, we just like randomly started setting up meetings
Eric Migicovsky [29:00] – with potential users and we met them in like the coffee shop outside of the conference. We did that for zero dollars without any sort of marketing budget, just because that was where a lot of people in the industry were, and we knew that there was like a high concentration of potential people that we could talk to. Some tips for this stage, take notes, take detailed notes, because like I said before, you’ll never know until later which key facts of these user interviews may be useful. If you’re not great at taking notes while you’re talking to someone, bring a friend, bring a cofounder, ask the person if you could record it. When in doubt, capture as much information as possible. Keep it casual. Like I said before, you could just show up, you don’t have to like pre-plan this. You don’t have to have 20-minute blocks on your calendar scheduled for days on end of user interviews. Feel free to react, like honestly you’ll learn so much through the first five or 10 user interviews that your process will dramatically improve from those first interviews to the next batch. Don’t feel like you have to do 100 user interviews all at the same time, just start with one, start with three, start with five, ’til you get the hang of it. The third thing is you need to be cognizant of the other person’s time. Again, going back to what I said at the beginning, we love our idea, we’re founders, we love talking about our idea. You need to keep yourself in check and make sure that you’re cognizant of the other person’s time. Honestly, you’ll be able to get
Eric Migicovsky [30:31] – probably the best information out of, say, a 10 to 15-minute long first interview, and that might be all the time you need just for that initial chat. As you move past the idea stage into testing your prototype with users, the next major kind of benefit that you can get from talking to users is figuring out who will be your best first customer. This is critical because it’s possible that if you choose the wrong first customer that you may be led down a path that constrains you or artificially traps you without actually getting paid by that first customer. We’ve created a framework that you can use to begin to identify before you begin working with them who the best first customers will be. During user interviews at this stage, I love to ask questions that extract numerical answers to three facts about the customer that I’m working with. The first one that I want to get to the bottom of is, how much does this problem cost them today? I like to get a hard number, either in terms of how much revenue do they stand to earn if they solve this problem or how much expense do they currently spend trying to solve this problem, how much money is wasted today as they try to solve this problem? The second one that I like to get to the bottom of is how frequently do they encounter this problem? Do they encounter it on an hourly basis, a daily basis, quarterly basis, yearly basis? The best problems that startups can target are ones that are encountered more frequently. This is usually beneficial for two reasons. One is they encounter a problem on a more regular basis.
Eric Migicovsky [32:17] – It means that the customer’s feeling the pain of that problem on a more regular basis and they’ll be much more receptive to a potential solution. The second reason why you want to tackle a problem that people encounter on a more frequent basis is you’ll get more chances to know whether your product is actually solving a problem. In my case with Pebble, I loved the fact that I was working on a device that was kind of intended to be used every day. You wake up in the morning, you put your watch on. That was great for me because I knew that if they weren’t, if users weren’t wearing their watch on a regular basis, that meant that I was doing something wrong. The best first customers are ones that have this problem very frequently. The third thing that you want to get to the bottom of is, how large is their budget for solving this problem? You can imagine that say you’re solving something for an industrial assembly line, a problem on the industrial assembly line. If you’re talking to the operator, the person who’s actually there on the kind of the assembly line, they may encounter this problem on a really regular basis, but they just don’t have the budget, they don’t have the authority to actually solve the problem. That’s their boss or that’s someone above them in the office or in the headquarters. Again, as you’re trying to identify the best first customers, make sure that you’re asking questions about whether they actually have the ability to solve the problem given the choice. The last stage before product market fit
Eric Migicovsky [33:44] – that can benefit from user interviews is actually the process of iterating towards product-market fit. Paul Graham’s definition for product-market fit is when you’ve made something that people want. Mark Andreesen also has an amazing blog post about product-market fit where he describes it as when the product is just being pulled out of you, when you no longer have to push the product on customers, they’re just pulling it from you. But the problem with these definitions of product-market fit is that they’re vague. They’re also retroactive in that you have to already have product-market fit in order to know that you’ve reached it. They’re not as useful for helping you figure out which features you need to build in order to iterate, in order to improve your product to get to product-market fit. You may have heard of the app Superhuman, which is a super fast email client. Well, the CEO published an amazing blog post a little while ago about how he built a, well, how he was actually annoyed with this vague definition of what product-market fit is and how it was a lagging indicator that didn’t help him predict product-market fit, it only told him whether he’d achieve it or not. He wanted to create a real-time quantitative system that would help guide his company toward product-market fit. And, of course, it involved talking to users. He wrote a great blog post on this, you can just Google it. I’m just going to kind of touch on it, but I would highly recommend reading the entire thing because it is fantastic. But in it he describes a process
Eric Migicovsky [35:15] – where on a weekly basis he asks pretty much all his customers, but it doesn’t even have to be your entire customer base, it could just be 30, 40 users, a critical question, how would you feel if you could no longer use Superhuman? Three answers, very disappointed, somewhat disappointed, not disappointed. He measured the percentage of users who answered the questions very disappointed. These are the users who most value your product. These are the users who your product has now become a key part of their life, it’s kind of weaseled their way into their daily habits. He read some analysis that said that if 40% or more of your user base reports that they would be very disappointed if your product went away on a weekly basis, that that’s kind of the signal, that’s the differentiation point that it says if you get past this point, your product will just grow exponentially. And he evaluated a number of other successful companies and realized that the answer to this question was always around or above 40%. So, again, I probably won’t be able to go into it too much more in detail, but I would recommend reading this blog post if you’re at the stage where you’re iterating and you actively have users that you can ask this question of. This can be an immensely useful thing for quantitatively determining whether the features that you worked on in the previous week were actually benefiting or adding to your product-market fit or potentially detracting from it as well. Some other great tips that we found at this stage is kind of a simple hack,
Eric Migicovsky [36:48] – ask your users for the phone number during sign up. Because oftentimes you’ll be looking at the data and you’ll be wondering, why is the data showing this particular kind of learning about our customers? And you may be like thinking in aggregate like 20% of people have this problem. Sometimes it helps to just get on the phone and talk to one person who’s encountering this problem. I always encourage founders to put contact information, including phone number, which is like a direct connection to customers, pretty high up in the user signup flow. Second one is don’t design by committee. You can’t simply ask your users what features they want. You have to begin to understand whether those features are truly going to help make your product more sticky and more useful. You can do this through kind of the advice that the Superhuman CEO lays out in his blog post, or you could ask other tactical questions like instead of asking, will users be interested in using this new product or this new feature, instead say, here’s an upgrade flow, if you want this new product, put your credit card, or if you want this new feature, put your credit card information or pay more even before you’ve actually built out the feature. This could help give you information about whether the feature that you’re working on is actually something that the users are going to use. The third thing to do during user interviews at this stage is to remember to discard bad data. Some of the kind of worst bad data that you may encounter is compliments.
Eric Migicovsky [38:21] – People may say, “Oh, I love the new design,” or, “Man, this thing is really useful.” You may love that during the course of your user interviews, but they actually are not useful information because it’s not specific, it’s more of a general statement about your product, and it’s not tactical, it’s not giving you correct information on what you can change or what you can improve about your product. The second main type of bad data that you may encounter is fluff, these are hypotheticals, these are generic statements. Whenever you’re in the middle of a user interview and you start getting on to this hypothetical, you know, oh, here’s what the product may look like in the future, try to steer it back to the specifics. Again, you’re conducting a user interview not to pitch your product but to learn about problems or issues that the user has faced in their past so that you can improve it in the future.
Craig Cannon [39:14] – All right, thanks for listening. As always, you can find the transcript and the video at blog.ycombinator.com. If you have a second, it would be awesome to give us a rating and review wherever you find your podcasts.
Y Combinator created a new model for funding early stage startups. Twice a year we invest a small amount of money ($150k) in a large number of startups (recently 200). The startups move to Silicon