Gustaf Alströmer, Partner at Y Combinator, recently hosted an AMA with the Growth Masters community. Having started the growth team and Airbnb, and advised hundreds of startups on their growth strategies, his insights are incredibly helpful. In the AMA, Gustaf shared his thoughts on marketplaces, acquisition best practices, team structure, and more.
If you want more details on some of what's discussed below, check out Gustaf's Growth Masters lesson. Enjoy!
How should product teams be involved with growth?
Many of the best former growth leaders are now running product teams, like Casey Winters, who now runs product at Eventbrite. I think this shows that many of the things that growth teams introduced are now widely adopted by product teams.
Anu Hariharan, Partner at Y Combinator, also wrote a great guide about the relationship between growth and product.
What are the main indicators you watch out for to determine whether a team has a good product workflow and understanding?
There's a lot that goes into building a well-functioning product team that can consistently execute against a plan. To me, a product manager has a couple of primary responsibilities:
1. Understand, measure and drive the business goals
2. Inspire, motivate, and manage the team's execution.
There are, of course, more things that are critical for them to do, but these are the two most important things, in my opinion.
To start with the first point, any company needs to figure out a meaningful metric that represents the value the product is giving users. Ideally, the metric is trackable daily/weekly/monthly so that you can use it to evaluate your own success.
Second to that is goal setting. What are some team goals you can set for that metric, and is the team aware of those goals? Additionally, I'd be wary of single-metric product teams. Nothing is simple enough to measure that you can capture it all in one metric. You'll need both a growth and a quality metric, for example.
Finally, as a PM, you have to inspire and motivate your team. That means giving them the opportunity to do what they do best, praise great work, and provide feedback when improvement is required. A great PM can build a team that drives success. She gives credit to the team when they succeed and absorb the feedback when the team fails. Those are characteristics that give you the respect you need from your team.
What growth metrics do you encourage folks to keep a close eye on while they're in YC? What metrics would you look at when considering investing in a company, and what would the numbers need to be?
For most companies, revenue is a pretty good metric to focus on. Sometimes there are other metrics like GTV/GMV and API calls that work better, but for most companies, its revenue.
You can see a great talk by Anu Hariharan about metrics below:
It's also important to note that when we interview/invest, we don't primarily look at metrics as a proxy for a successful product. We look at metrics as evidence for founders making progress, making sure they launch and get their product in the hands of users. We don't expect metrics to be great in the early days
What are the biggest mistakes that companies can make surrounding growth? What should every PM at a startup keep an eye out for?
I find that early-stage startups often make the mistake of thinking they have product-market fit and then scale up things like employees, sales, marketing, etc. before they are ready.
I think one reason this happens is that after you've raised a funding round, it's easy to mistake funding for product-market fit. Nothing about your product changes just because you get $2M in the bank, but the actions of a startup often do change. PMs should look out for this and always measure the retention of their customers. Make sure they are getting real, repeatable value for your product.
The best thing a great PM can do is just to focus on the customers and their needs. If you build a great product, many of the other decisions become easier over time.
What are the most popular acquisition strategies employed today?
For this question, I'll pull from my experience at Airbnb.
On the guest-side:
Word-of-mouth from existing guests/hosts
Online marketing. Mostly SEM I believe but def other channels as well.
Referrals. The Airbnb referral scheme still drives somewhere between 5-15% of guest growth (I don't have the up-to-date data). Referrals remain an important growth channel for products where the use case is new and unique, and you often need an existing user to convince you to use it.
4. SEO. We have/had an all-star SEO team, but beating Homeaway, Tripadvisor, etc. was not an easy fight. I believe Airbnb still ranks #3 on average for relevant keywords. We should be #1.
What lead gen tools do you recommend when you're just starting out?
I talk about this in detail in the talk below.
You don't need expensive lead gen tools in the beginning. There are affordable tools available out there, and you can get very far with just spreadsheets and email. Here are a few ideas.
What was the most successful single growth tactic that you used at Airbnb?
I think this question is an example of some assumed short-term thinking on our part.
The best growth tactic we did was to set up the growth team, to give them the tools to move independently, to not centralize decision-making, and let each team execute on the areas of the product they were working on.
That led to things like:
a fantastic referral product
the rollout of instant-book
excellent authentication-methods and managing of identity/trust etc
I think you have to have a holistic view of this. What made us so successful was the system that independently creates the ideas/wins, not the individual ideas themselves.
How did the Airbnb growth team change (in terms of roles and structure) as Airbnb grew?
I worked on the "guest" growth team for nearly five years, and if I look back, we certainly learned things over the years that were non-obvious to us back in 2012.
First, on the guest side, Airbnb has a pretty clear funnel with four main ways customers are discovering the product. As I mentioned earlier, those were: word-of-mouth, online marketing, referrals, and SEO.
Each of these functions was important enough to require its own team, and we built an engineering-led team for each of them. We also had three specific teams focusing on signup, login and authentication, translation and onboarding, and engagement and re-engagement.
We learned that onboarding matters more for people that have high intent to book and less for people who are just checking out Airbnb for the first time. This might sound unintuitive, but we simply found that it takes a very long time to learn if you built something great for people that show very little intent to book on your product.
Each of these teams typically started with a single function, maybe an SEO manager and an engineer. In the cases where there were no engineers available, people had to learn to code or pull their own data in order to their job. Over time we staffed every team with engineers, designers, PMs, and data scientists. Each team had specific metrics and goals they were meant to drive. But they had a large amount of freedom to execute and experiment within those bounds.
How does a data team get buy-in from PMs and developers to build a culture of data?
I think this is an equal responsibility between PMs and Data Scientist, not just the data teams. Data is an excellent representation of everything that goes on with your product. It's not the only input – it's hard to feel empathetic about users by just looking at data, but it remains a critical way to run your business.
Some basic things to help build a culture of data in the early days are to:
Make sure you are tracking the right things, using Mixpanel, Amplitude, and Segment.
Set up funnels for the crucial metrics/business metrics.
Share those metrics over emails, in presentation, and on a monitor in your office regularly.
For a two-sided marketplace, how do you recommend balancing supply and demand? How much supply do you need to build up before focusing on demand?
This is a common question I get. In fact, I get the question more often than I see the problem. Most successful marketplaces start with great, almost curated supply. Then you have to work to get the demand. That can come from any number of channels like word-of-mouth, paid marketing, referrals, etc. My friend and co-worker from Airbnb, Lenny Rachitsky, has written some of the best work on how to build supply in the early stages of a marketplace.
In the early days of Airbnb, Brian Chesky spent an entire year staying at different Airbnbs to understand what really matters to customers. What he found is that hospitality is a critical part of the experience and so the company started to care more deeply about the offline experience. Airbnb wasn't just a website with listings. They cared about every step of the Airbnb experience. It wasn't just about supply. It was about a high-quality, reliable supply.
Do you have any strategies or tactics to improve LTV and repeat purchases for a product/service that's notoriously one-off and need-based?
I think this question could mean one of two things:
1. You either have a bad product, and people choose not to use it repeatedly or
2. You have a great product, but for whatever reason, people don't use it repeatedly.
We actually had the second problem at Airbnb, which is quite unique. 90-95% of Airbnb bookers said they had a great experience, but only about half of them would use Airbnb again within 12 months.
We had our best user researchers try to understand why, and their analysis was that people forgot about Airbnb. They didn't know that Airbnb also had listings in cities, vacation rentals, and so forth, so they simply went back to Google when making travel plans.
There were a couple of different ways to deal with this problem. We could build an inspirational re-engagement strategy to get people to be reminded of Airbnb every month. This sort of worked. Or we could make them install the app on their phone and which would make us the default travel search engine.
What made us hopeful was the gradual shift in wallet share towards Airbnb over the first 2-3 years of a customer's lifetime. What's important here is the time-horizon. One booking a year is a very low frequency of use for a product but completely normal in travel.
How do you balance getting a new product in the hands of a good deal of users without leaving a bad taste in their mouth if it is under-baked?
I think founders often make a mistake, believing that "If it's not near perfect, I will blow this launch, and people will not care about this product in the future." In my opinion, this is wrong, and the most likely result of a launch isn't "This is bad. Stay away" but "I don't care".
The truth is that you are launching to learn from your early users. It's unlikely you will impress them, but you may get a few hundred to care enough to tell you what is good about your product and what is not useful. Airbnb famously launched three times because nobody cared the first two times. But the team learned a lot from each launch.
Looking at Airbnb's growth, I would assume the team had many great ideas to develop. How did you effectively choose what to build, no matter how good a new feature seems to be?
This is one of the most important questions for any growth and product team.
To simplify, I would say this: For companies that have product-market fit, you want to spend more time optimizing your funnels/loops in your products than you do building new features.
I would say spending two-thirds of your time on optimization is an ok ratio. In the early days of Airbnb, we spent way too much time building new features, many of which were not used and overlooked things like optimizing search conversion, authentication, booking conversion, listing your space conversion, etc.
The latter was the most important work for our growth, and building new things was less important. The downside of too much optimization is that you will hit a local maxima. You need the experience to know if you've found that.
At Airbnb, when entering new cities, can you talk through how the team "designed" early supply? For example, did you target specific neighborhoods or specific types of apartments? Did you start with user-segments or personas on the demand-side? How high a bar did you set for early supply quality?
I think the most critical thing you can do is to increase friction. You only want a high-quality supply. That requires them to upload photos, verify their identity, write a description and get the details of why it's a good listing.
In the very early days, we had nearly no friction, and I believe that was a mistake we later fixed. To build trust on the platform, people need to give up information, so they don't treat Airbnb like another classified site.
Out of your Airbnb experience, when would you recommend to raise a seed round for the travel P2P marketplace? How much should the check be to maintain sustainable growth?
I think raising a seed round depends on a lot of different things and not merely on metrics. At the seed stage, it's usually just a bet on the team and, to some extent, on the market. What I would look at as an investor is how much the customers and the supply love your product/marketplace.
I would look at a combination of user stories and retention data. I would also look at how important word-of-mouth is as an acquisition channel. It's often a good proxy for a good product. Here's one of my favorite talk about fundraising.