Venture Capital na teoria e prática [Portuguese]

[Editor’s Note] This is a guest post from Gabriela de Salles van der Linden, a participant in our recent Venture Capital Unlocked program at Stanford CPD. Gabriela has 10 years of work experience in the Brazilian venture capital industry, most recently as an executive partner of CRP Companhia de Participaçōes.

O que aprendi no curso da 500 Startups em conjunto com Stanford University

Quando tive conhecimento sobre o curso da 500 Startups em conjunto com Stanford University, o VC Unlocked, me perguntei se de fato um curso com tais características poderia ampliar minha visão depois de quase 10 anos trabalhando com venture capital no Brasil. Seria essa uma boa oportunidade para refletir e atualizar sobre o que está acontecendo sob uma perspectiva global?

Diversidade, Teoria e Prática

O curso une os  aprendizados do Vale do Silício à experiência internacional trazida pelos participantes – ao todo, foram 32 pessoas, das quais 74% de fora dos EUA. O ambiente não poderia ser mais adequado para propiciar um tempo de reflexão, discussão dos principais desafios e, em especial, ver na prática como esse ambiente foi construído e as principais mudanças e tendências.

Class at Venture Capital Unlocked

Pela primeira vez participei de um curso de educação executiva onde quase 50% dos participantes eram mulheres. Além disso, todos os continentes estavam muito bem representados com uma variedade de países, de Rússia ao Hawaii, de Austrália a África, passando também por Colômbia, Índia, China, México, Arábia Saudita. Aqui foi a maior riqueza da discussão – misturar os segredos de VC no Vale do Silício com as diferentes e riquíssimas experiências ao redor do mundo.

A parceria 500+Stanford foi uma ótima combinação entre teoria e prática. A experiência do time de Stanford foi implacável para traduzir o que aconteceu no Vale do Silício e seu histórico de inovação, não só em tecnologia mas também em formas de investimento. Em paralelo, a abordagem da 500 foi de mostrar como a empresa vem fazendo para se diferenciar neste mercado complexo e competitivo. Em sete anos, investiram em mais de 1,7 mil startups globalmente, hoje com três unicórnios no portfólio e dezenas de empresas com valuations que já atingem centenas de milhões de dólares.

Refletindo sobre o curso, não tenho dúvida que a educação é uma iniciativa fundamental para a construção de novos ecossistemas fortes de empreendedorismo, investimento e inovação. Viajar, fazer benchmark, aprender com os mais experientes e sob outras perspectivas é fundamental para vencer os inúmeros obstáculos na vida do venture capitalist. Sai do Brasil buscando essa oxigenação e volto mais convicta de alguns princípios básicos para a formação de negócios de sucesso.

Existe uma fórmula para o sucesso?

Os retornos extraordinários são para poucos. Poucos, porém existem e atuam com características próprias, únicas e que de fato os diferenciam. Embora não exista uma fórmula para o sucesso, alguns elementos são imprescindíveis. Dentre eles, os que acredito serem mais importantes são:

IT’S ALL ABOUT PEOPLE

Selecionar, desenvolver, cultivar relações saudáveis e transparentes. Um time que se entende e compartilha dos mesmos princípios e visões é fundamental para trilhar esta jornada.

O melhor time é construído com alinhamento de valores, princípios e uma complementaridade muito forte.  A formação do time resulta na reputação da empresa. O dia a dia, desde os primeiros contatos com os empreendedores, a condução das negociações e o acompanhamento das investidas vai refletir na forma como a empresa é vista, na atratividade dos empreendedores e investidores para a sustentabilidade do negócio.

Workshop at Venture Capital Unlocked

Nesse aspecto, tivemos a oportunidade de visitar a Andreesen Horowitz. Com uma equipe de mais de 150 pessoas, número bastante atípico para uma gestora puramente de VC, há um foco bastante forte em ter especialistas, time técnico de análise e suporte das investidas. Condição para poucos, considerando o custo para uma estrutura nestes moldes. Entretanto, a preocupação com a qualidade é tanta que um indicador relevante que monitoram é o NPS, o qual avalia  atendimento daqueles empreendedores que tiveram o processo declinado pelo fundo. Esses mesmos empreendedores podem ser amigos de um próximo empreendedor de sucesso ou mesmo virem a ser um em alguns anos. Mantenha a melhor reputação, sempre!

FOCO

É para muito poucos o benefício de ser muito bom em diversos mercados ou estágios. Se você não está neste seleto grupo, simplifique e foque.

A especialização – regional, setorial ou por estágio – nos coloca em outro patamar de conhecimento, com capacidade de identificar as transformações e direcionamentos do mercado. Nos permite a construção de uma rede de parceiros, conselheiros, advisors, executivos de ponta.

Tivemos a oportunidade de ouvir e aprender com a experiência de de convidados ao longo do curso. Gestores de VC e investidores anjo com teses bastante distintas como Andy McLoughlin, SoftTech VC, que investe em early stage, Renata Quintini, Lux Capital, focada em ciência e tecnologias emergentes, e Allen Taylor, Endeavor Catalyst. Em comum, todos afirmam: nós investimos naquilo que a gente conhece.

Renata Quintini

NETWORKING

O acesso às melhores oportunidades, aos melhores profissionais e investidores é a combinação de fazer muito bem o seu trabalho e conectar com as pessoas certas.

Seja em um mercado altamente promissor e competitivo ou naqueles ainda em desenvolvimento, com escassez de oportunidades, vence aquele que acessar primeiro as startups e tiver a capacidade de identificar o potencial – correr o risco na direção certa. Para isso, é fundamental ter uma agenda dedicada a constantemente conhecer pessoas, ouvir, trocar experiências, observar e ajudar.

Temos que manter os nossos bancos sempre muito bem atualizados, sejam de talentos – (CTOs, CFOs, CMOs, etc), de potenciais compradores e coinvestidores, sendo este último aqueles que irão participar do plano de crescimento da investida e ajudar a potencializar o retorno – seja por expertise técnica, atuação em novos mercados ou outra complementaridade de recursos.

Team Potluck at Venture Capital Unlocked

Conclusões

Desvendar os segredos do Vale do Silício é um exercício de constante inquietação e inspiração. É inegável a existência de características únicas desse ecossistema. Mas também é inegável a oportunidade que está sendo criada em novos mercados. Mercados grandes, com potencial consumidor ascendente e cada vez mais pessoas qualificadas para inovar e executar. O Brasil é, sem dúvida, uma destas oportunidades. Há dez anos, não falávamos em aceleradoras, rodadas de investimento, coinvestimento, etc… Hoje temos grupos de investidores anjo, aceleradoras e inúmeros fundos de venture capital que estão cada vez mais qualificados para a construção do nosso ecossistema de empreendedorismo, inovação e investimento de nível global. A jornada ainda é longa e desafiadora, mas vejo que estamos no caminho certo.

Obrigada 500 Startups pela oportunidade e pelo incentivo a educação e a diversidade, acredito nessas iniciativas, abertas e colaborativas, para a evolução do o venture capital no mundo.

Interested in learning more about early stage investing? Check out our next program, Venture Capital Unlocked: Deal Camp at Berkeley from October 23-26, 2017. Deal Camp is an intensive four-day course for investors who want to improve their ability to define, negotiate, and execute early-stage investments. Apply today

You have been accepted into 500 Startups. Now what?

Guest Author – Eugene Vyborov, CTO, YayPay (A 500 Startups Batch 20 Company)

Among the 180+ independent accelerators around the world, American programs hold sway and considerable appeal. Getting into a US-based accelerator is a dream for many startups, especially ones that are based outside the United States. It’s easy to see the attraction: accelerators offer access to the American ecosystem of innovation, collective wisdom of successful entrepreneurs, visibility to prominent VCs, and a trip to the US, all in one package.

From reading cover stories in magazines, one might buy into the idea that once a company is accepted into a prestigious accelerator program, its path to success is clear. The reality is far from it. As I have previously mentioned in “5 Things International Startups Should Know Before Joining a U.S. Accelerator,” acceptance into a top program is just the beginning. My earlier article was based on my experience at Techstars Boston. Now that I have completed Batch 20 at 500 Startups, I am ready to share my thoughts on what it takes to maximize the opportunities and deal with the challenges that come with joining the 500 Startups family.

Let me begin by saying that accelerator programs like 500 Startups are highly competitive. Thousands apply, 30-50 get in. In fact, you have a better chance of getting into Harvard than joining a new 500 Startups batch. If you have been accepted, you definitely have a reason to celebrate. Now, the real work begins.

Here is the thing. Accelerator “freshmen” tend to overlook the need to build a solid foundation in terms of logistics, mental shifts, and financial reserves. By accepting the invitation to join 500 Startups they have signed up for a marathon – and the sooner they begin training the better. Participants must trust the process that is built by experienced investors and entrepreneurs, but they must also come prepared. From having been a part of both Techstars and 500 Startups, I can tell you that the accelerator process is powerful, but it has no magic. All any accelerator can do is accelerate the path the company is on, for better or worse. There are things founders can to make sure they are on the right path – before they pick up the speed.

What does that look like? I have interviewed 3 fellow founders and Marvin Liao himself as they prepared to wrap up their journey with 500 Startups’ Batch 20. Here is their advice:

1. Focus on bringing a great product.

An idea, no matter how brilliant, does not cut it. Some programs (like the Y Combinator) will consider applicants in early stages of development, but both Techstars and 500 Startups require that you have a functional product that’s ready for the market. There are some exceptions (a highly innovative idea, or a proven team with strong credentials and a solid track record) but they only confirm the basic rule.

The “functional product” requirement means that you must have a product and it must be good. The accelerator process will fuel evolution and improvements, but your starting point must be sufficiently strong to allow the product to morph without crumbling. Invest your pre-accelerator time and money into making a product that people love. Resist falling in love with the technical aspects of your product, and get the market to fall in love with the way it solves their problem – before you go any further.

2. Come prepared for the expense.

The cost of participating in the program is covered by the portion of the accelerator’s investment in your company that is held back to cover office space, event facilitation, and other expenses. That is convenient, but it is only a part of the story. Alexey Zenivoch, the co-founder of Belarus-based Friendly Data that builds natural language interfaces for databases, spoke for many of his batchmates when he reflected that San Francisco is expensive. Travel and living expenses can really add up, especially if multiple team members choose to travel to the US and stay for the duration of the program. The investment is well-worth it for the right company, but alumni recommend you consider the whole cost to avoid any surprises.

3. Have a plan for integrating what you learn with the team at home.

The three international startup founders we spoke with all brought several co-workers with them. In the words of Ragnar Sass, the founder of Clanbeat out of Estonia, the ability to include teammates was a “deal breaker” that helped him choose 500 Startups above other accelerators. If your company hopes to break into the US market, it is critical that everyone on the team understands the Silicon Valley, he said.

“I believe that this area is the best environment for developing your business. 500 Startups is also friendly for the non-founders. It is very important that everyone on the team actually understands the Silicon Valley.”

-Ragnar Sass, Clanbeat (Estonia)

That brings us to an important point: few startups can afford to re-locate their entire team to the US for the duration of the accelerator program. You will need a plan for sharing what you learn with your home-base team to bring them along. “Translating” the Silicon Valley culture and conveying the less technical ideas and changes can be difficult. You must have a way of “converting” the knowledge and bringing everyone together, even while you are separated by geography.

4. Get comfortable with networking.

Participants repeatedly state that networking opportunities are some of the key benefits of participating in 500 Startups. And yet, that networking won’t happen by osmosis. You must have a plan for reaching your mentors, building relationships, and establishing connections that will be strong enough to persevere after graduation.

“It’s all about the people. You can meet your new friends and a lot of very smart people. 500 gives you access to strong mentors who help you understand your real market, give you feedback and advice on how to work with your clients.”

-Alex Zenovich, Friendly Data (Belarus)

The good news is that the 500 Startups program is custom-built to encourage collaboration. Because participants share a co-working space, they get to see each other’s victories and defeats. Don’t under-estimate the power of random conversations over lunch!

5. Remember that “sales” is not a dirty word.

500 Startups is strongly focused on customer acquisition. Whether or not you’re a technical founder, you must understand that just building a great product is not enough.

“Openness to learning sales and marketing is really important. You need to have a mindset for it.”

-Marvin Liao, Founder, 500 Startups

Distribution is the name of the game, and organizers structure the content around helping each batch of companies get to their customers fast. Every startup gets a distribution mentor, but you won’t experience traction until you absorb the idea that “selling” is key to your company’s success.

Bonus advice: beef up your English skills!

If you don’t have a high degree of comfort with the English language, there is a limit to how much you will get out of the program. Marvin Liao shared that he would love to see more foreign companies go through the 500 Startups, but the language barrier prevents many great companies from applying. When international teams are present, their conversational facility with English makes an enormous difference on their ability to build the network and maximize their progress.

“Two-thirds of this batch are from the US and a third are from overseas. I do not have a quota. We like international companies, some of our best teams are from overseas. The biggest part is whether they speak English. If you don’t speak English, you won’t do well here.”

-Marvin Liao, Founder, 500 Startups

500 Startups: Lessons learned

Don’t think of joining a US-based accelerator as a binary “yes/no” proposition. The answer may well be “not right now”. Timing matters, as does the degree to which your product is ready for the market. Your team must be open and ready to absorb the volume of sales and distribution learning that has been described as drinking out of a firehose. The application process is highly competitive, and if your team and product have known gaps you may be at a disadvantage compared to companies that are further along in their development. Consider your financial situation as well – your total investment will be greater than just the cost to join the class.

Lastly, think about what happens after the program. Many participants aim to maintain at least some presence in the US after graduation. Mark Masongson, the CEO and Co-Founder of Canadian-based UrbanLogiq, said it best:

“Now that we have access to this network, we cannot close the door on that.”

-Mark Masongson, UrbanLogiq

Marvin Liao has seen companies have success with maintaining an overseas development team and a US-based sales and marketing team.

“The best companies are the ones that keep the engineering team home, but double down on the sales and marketing front in the US.”

Marvin Liao, Founder, 500 Startups

“I won’t say that it’s easy, but we have seen enough examples,” Marvin said, citing the success story of TalkDesk that has a development team in Portugal and a sales and marketing team in San Francisco. The badge of “500 Startups portfolio company” does not come without sacrifice, but it is well worth it!

Eugene Vyborov is technology entrepreneur, geek, Co-founder and CTO of YayPay – Batch 20 company that uses AI and machine learning to accelerate cash flow and automate accounts receivables.


About the Guest Author: Eugene Vyborov is technology entrepreneur, geek, Co-founder and CTO of YayPay, a 500 Startups Batch 20 company that uses AI and machine learning to accelerate cash flow and automate accounts receivables. Follow YayPay on CrunchbaseTwitter, or Linkedin.

3 Visual Marketing Lessons it Took Me a lot of Money to Learn

Guest Blogger – Brittany Murlas, Mentor, 500 Startups

Optimizing adds on Pinterest isn’t necessarily straightforward, and can often involve a lot of trial and error. Brittany Murlas, a mentor for 500 Startups, spent time and money navigating what works and what doesn’t on the platform and imparts her hard-earned lessons below. Read on so you avoid the same mistakes, and instead, profit from BIG growth like she did.

 

Lesson #1: Build for platform.

You know to design your Facebook ads differently than your Google ads, but do you tweak your Facebook ads for promotion on Instagram? Now I do.

We humans open different apps for different reasons. I open Facebook for entertainment, SnapChat for connection, and Pinterest for ideas. My intent varies drastically with each.

So as marketers, if we remain content rearranging the same successful assets and copy, then we leave serious money on the table. With each ad platform, it’s our job to understand the intentions of our potential clickers.

For instance, I go to Instagram to lose myself in aspirational imagery. So my guess is the two beautiful square-ish lifestyle photos below performed very well on Instagram. But I saw them on Pinterest & Facebook instead, and since I open Pinterest for ideas and Facebook for entertainment, neither ad gave me reason to click.

  

 

Lesson #2: Make your ads look like they belong there.

Native ads are the coolest. Native ads are like getting asked to Senior prom when you’re a Freshman. If you fit in, you’re in for the night of your life. Stick out as the Freshman (you are)…well, then you might as well catch an Uber Pool back.

Native ads are a gift to us growth marketers, and we must respect them by blending in as we’re supposed to. Let’s talk through three examples.

While I really like Lyft’s idea here (i.e., I pin stuff I want to do, and Lyft can give me the cash to do those things), their Promoted Pin sticks out as an ad. Sure it grabs my attention and I may click, but I’d never save it my Pinterest account, which limits virality. However, if I came across a Lyft pin titled “How to quit your job and fund your dream” (a very pinteresting title) I’d not only click the pin and read the content, I’d also save it and share it with a friend. Huzzah!

It’s clear SoFi has done its research when it comes to pin design. Even with prominent text, this pin blends in with the Pinterest feed. What I’d change is the copy. The title reads like a HuffPo article, when folks come to Pinterest to browse ideas, not information. Something like “How to use personal loans instead of credit cards” should perform better.

What made me stop on this ad is that I thought it was actually shared on Facebook by my friend Lauren. A reminder that our target audience should be our source of greatest inspiration.

 

Lesson #3: Play with average designs.

Below, “the Real Real” ad below is stunning. It catches my eye. I admire the pretty photo. I read, and then I realize “this is an ad.” I move on.

Tiek’s ad is basic. It’s boring. But it is pure, sweet genius. This pin looks like it was designed by a mom blogger in Illinois, not a NYC-based ad designer, which gives me the trust I need to pour over the details of this ad. This is extraordinarily clickable content (for my boys out there this is a like a, “Are Bose really worth the price?” ad), and when I do click, instead of being taken to the Tiek’s website, I land on an independent review. The reviewer confirms Tiek’s really are worth the price (didn’t see that coming!), so I click to the Tiek’s website, find my favorite color and save it to my “Presents I Want” Pinterest Board.

 

Want MORE Pinterest expertise? Check out Brittany’s talk at 500 Startups Weapons of Mass Distribution 2016:

And her Marketing Hell Week 2015 talk here:

 


Brittany’s been building small enterprises since high school. As BabyList.com’s second employee, Brittany was responsible for 15x growth, making BabyList.com the most popular online baby registry. She is known as an expert in marketing to women and parents. Now, Brittany is building a feminist book club for kids, thelittlefeminist.com. For more from Brittany, you can follow her on Twitter and Linkedin.

What We’re Changing in Our Accelerator after #500BAM

Guest author –

Hi, I’m Michael Rivera. I’ve started (and exited) two companies in my career. I’ve been an early-stage venture investor, advisor and mentor. I’ve recently joined with three brilliant Stanford grads to launch an LA-based accelerator dedicated to consumer products in the health & wellness, toy, and home goods verticals. I just took 500 Startups Bootcamp for Accelerator Managers (April 24th – 28th) and here are some of my reflections. 

During the weeklong Bootcamp for Accelerator Managers, Dave McClure, Christine Tsai, Bedy Yang and the 500 Startups team shared all the successes and failures they’ve had after running 40+ accelerator programs. They were transparent, hilarious, and incredibly inspiring.

It. Was. Awesome.

(Except the part where Dave McClure told us we were crazy for running accelerators and would probably fail. The truth hurts! Thanks, Dave!)

Dave McClure presenting at BAM!

For five days, I sat with my batch mates as we learned about accelerator investment theses, accelerator marketing and positioning, and the accelerator application process among many topics in information-packed sessions. These sessions conveyed best-practices for every facet of accelerator operations and management.

Here are three of the changes we’re making to our program after attending #500BAM:

1. Shifting our mindset from an accelerator to a fund with services.

By starting a private accelerator, we’re really starting a Seed Fund with super-charged value-add components. We owe it to our investors, our strongest performing cohort companies, and ourselves, not to spend limited resources on the worst companies. It sounds harsh, but we’re accelerating the good companies and we’re accelerating the bad companies.

We understand this with greater clarity now so we’re developing internal metrics to identify our least promising cohort companies and develop a process to allocate resources to them accordingly during our program.

2. Paying more attention to timing.

We know that the success of the first fund will determine whether we raise a second fund. We hadn’t fully thought through the timing of LP capital calls and how that impacts fund IRR/LP ROI. So now we’re mapping LP capital calls against our cohort start dates and anticipated follow-on investment windows. Though this may seem like a minor point, any incremental improvement on IRR/ROI is critical, especially for a new fund.

The 2017 BAM! class

3. Engaging partners and sponsors.

We realized we were focused on our accelerator program to the detriment of our sponsors and partners program. As 500 Startups has proven in the private accelerator space, it is crucial to engage corporations, governments, and NGOs via sponsorships, partnerships, and events. If you’re not, you’re leaving tons of operational revenue on the table.

We’re now in the process of developing a fully integrated corporate outreach and sponsorship program. Not only will this strengthen us operationally, we’re further developing relationships with potential exit partners for our cohort companies. As Venture Partner Zafer Younis put it in his session on corporate partnerships, it’s a “win-win-win.”

Zafer Younis presenting at BAM!.

Although I think the challenges that face me and my team are going to be the hardest of my career, after my time at #500BAM, I feel energized and focused. I received invaluable, personalized advice from the very best accelerator operators in the world. I have #500BAM resources and materials to reference as we move forward. I am a part of the 500 Startups ecosystem.

Perhaps most importantly, I have a stronger support network of like-minded accelerator managers. My batch mates hailed from Europe, the Middle East, South America, Asia, and all corners of the United States. We are men and women coming from a mix of private, government, university and corporate accelerators.

BAM participants sharing their experiences.

Some of us have yet to welcome our first group of companies; others have been operating their accelerator for years. And yet our diversity – in all things – was our greatest strength. In truth, we learned as much from each other as we did from our friends at 500 Startups.

If you’re in the accelerator ecosystem, there is nothing else like #500BAM in the world. I encourage you to see for yourself next year.

Thank you to Michael Rivera for contributing to the 500 blog. For more insights from Michael, follow him on Twitter.

Here’s What Happened at #DealCamp at Berkeley

Guest blogger – Adam Sterling is the Executive Director of the Berkeley Center for Law, Business and the Economy, co-founder of Startup@BerkeleyLaw, and a former venture capital and startup attorney.

I returned to U.C. Berkeley almost two years ago to help establish the university (and Berkeley Law in particular) as the world’s leading institution for the study and practice of law and entrepreneurship.

After completing our second Venture Capital Deal Camp with 500 Startups last week, I’m confident that Berkeley is the place to be for investors, entrepreneurs, practitioners, and students interested in innovation.

Below is a recap of Deal Camp – if you weren’t able to join this week, we’ll be back with another session in October! 

Deal Camp is a collaboration between Startup@BerkeleyLaw, our institute for venture capital and entrepreneurship, and 500 Startups, a leading global venture capital fund and startup accelerator. The program is an intensive four-day course focused on the nuts and bolts of deal making for investors who want to improve their ability to define, negotiate, and execute early-stage investments.

At Deal Camp last week, we welcomed over 30 investor participants (our “Deal Campers“) from 14 different countries (Australia, Brazil, China, Finland, France, Germany, Mexico, Norway, Peru, Russia, Singapore, South Korea, the United Kingdom, and the United States).

Our Deal Campers represented various sources of capital (including corporate funds, family funds, and venture capital funds) looking to increase and improve their early stage investments. While our dynamic faculty curated a robust curriculum, our Deal Campers were the stars of the show!

Here’s what happened at Deal Camp:

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Day One – After arriving at Berkeley Law, the Deal Campers spent the morning sharpening their own investment theses (with the support of the 500 Startups investment team) and then headed off to the 500 Startups Mountain View headquarters for the world-famous Preview Day. At Preview Day, the Deal Campers took front row seats to observe pitches from the latest and greatest startups in Batch 19 of the 500 Startups accelerator. After the pitches, the Deal Campers met with the Batch 19 founders to practice applying their investment theses.

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Day Two – Deal Camp returned to Berkeley Law and kicked off with a lecture from Berkeley-Haas professor Gregory LaBlanc on the business case for venture capital. This was followed by a lecture from Neil Dugal of 500 Startups on early stage financing terms and processes. At lunch, the Deal Campers enjoyed a fireside chat between Ben Ling of Khosla Ventures and Bedy Yang of 500 Startups. After lunch, I started a two-part interactive workshop on modeling the economics of early stage finance with my good friend, Scott James of Accel. We then finished off the day with a lecture from leading venture capital expert, and Berkeley Law professor, Robert Bartlett, on the art of the valuation.

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Day Three – We kicked off with a review of the various term sheets and definitive agreements used in early-stage venture capital and was followed up by a case study workshop with Christine Tsai of 500 Startups. Christine explored a few of her more successful investments and interviewed a couple of her favorite founders. At lunch, Berkeley’s very own Peter Minor (founder of the CITRIS Foundry incubator), interviewed Michael Berolzheimer of Bee Partners. Peter and Michael discussed strategies for finding value in new and developing startup markets. After lunch, we kicked off our Term Sheet Olympics and the Deal Campers spent the afternoon preparing and negotiating venture capital deals.

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Day Four – The final day started with a lecture from the New York Times Deal Professor, and Berkeley Law faculty member, Steven Davidoff Solomon. Professor Solomon discussed venture capital exit strategies and the state of M&A in 2017 (along with some very insightful predictions on the future of venture capital). Following the Deal Professor, I completed our cap table training with Quinn Rotchford of AngelList and enjoyed an interview with Ellen Pao of Kapor Capital on the relevance of human capital in the venture capital world. Ellen was fantastic, insightful, and a highlight of the program! After Ellen’s talk, we were treated to a two-hour, no-holds-barred, AMA (“Ask Me Anything”) with Dave McClure of 500 Startups (led by Christine Winnett, executive director of the Berkeley incubator SkyDeck).

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Unfortunately, Deal Camp had to come to an end on Friday, but not without some fireworks! Our Deal Campers each received a certificate from Berkeley (set to music and many, many high fives) and spent the night making future plans with one another over cocktails at Berkeley’s famous Freehouse bar and restaurant.

I’m proud to call Berkeley my home away from home and to declare that #BerkeleyMeansBusiness! Go Bears!

Thank you to Adam Sterling for contributing to the 500 blog. For more insights from Adam, follow him on Linkedin or Twitter.

How to Nail Your SaaS Trial: The proven six-step formula shaped from years of experience

The following guest blog post is adapted from the Nail Your SaaS Trial ebook, written by Autopilot’s CMO, Guy Marion.

When your investors, advisors, and community ask how your product is coming along, you want to tantalize them with stellar activation rates, rampant word of mouth growth, and tweets raving about the onboarding experience.

THIS IS GOOD

good-tweets

Not luke-warm or confused feedback that your product has “great potential” if only they knew where to start.

THIS IS BAD

bad-tweets

After spending years launching, optimizing, and studying SaaS trials, I’ve found there’s a formula for creating a high-performing onboarding experience—one that is educational, accelerates time-to-product success, and sets the right tone for your customer’s experience ahead.

Now it’s yours.

Step 1. Define trial conversion goals

What are you trying to accomplish with your trial, and how will you know if your SaaS trial nailed it? Activation rate, cohort-based conversion rate, and average revenue per user (ARPU) are the three most important metrics you need to track.  

Activation rate is the % of trialists who successfully accomplish key events in your app—and therefore reach “Aha!” moments. This might include adding a tracking pixel, inviting a new user, or integrating a 3rd party app (see Step 2 below). Activated trialists are amongst your most valuable users.

Conversion rate is the percentage of new trialists who convert into paying customers, which you should assess on a cohort basis, attributing the sale back to the trial create date. Some benchmarks I’ve seen for raw (not qualified) trial signup to paid conversion rates:

  • Standard: 7% to 10%  
  • Better: 10% to 15%  
  • Best: Over 15%

You’re getting into Zendesk territory if you’re hitting over 15%. But it takes a long time for companies to rev up to that, if they ever even get there.

Average Sales Price – ASP (often used interchangeably with Average Revenue Per User – ARPU): this is the average revenue each new customer pays, and is simply the new revenue divided by the number of new customer purchases within a given time period.  

Step 2. Pinpoint the key behaviors that correlate with success

Nail down the activities that users need to perform if they are serious about solving their problem using your SaaS app. Here are a few common ways to define activated trials…

  • Completing one or multiple actions: Sharing a file, inviting a user, adding a pixel, or publishing a journey, for example.
  • Crossing usage thresholds: Number of projects created, photos uploaded, code committed. This will vary depending on what your product does.
  • Login frequency or duration: User has logged in more than 10 times, or been in-session for more than x minutes, in the last 7 / 14 / 30 days.
  • Outside-of-product events: Account configuration with a tech specialist, quick start call with an account manager, user training with your customer success manager, etc.

Pro Tip: Trigger automated messages or engage based on usage, as seen below in the case of SaaS app Hint Health.  

hint-health-onboarding-journey

Step 3. Map out your activation nudges

Free trialists like feeling welcomed—getting the red carpet treatment while learning how to solve their problem using your product. They even appreciate gentle reminders to pay, so they don’t risk interrupting their account activity.

So how do you do this tactfully and appropriately?

Nudges.  

Nudging people at the right time can help them overcome hurdles or “stuck in the mud” moments, make decisions, and move closer to buying.

nudges-table

We’ll walk through numerous real-life examples in Step 5.

Step 4. Build your SaaS trial journey

This is where it gets fun—structure your messages and actions into a cohesive trial experience using an engagement or marketing automation app to target, time, and personalize your messaging. Whichever platform you use, you’ll want to choose from the three most common types of SaaS trials to get started fast.

Option #1: Time-based

This is a series of emails (and/or in-app messages) dripped through the course of a free trial. It’s an easy place to start if you’re beginning from scratch, helps you get baseline conversion data fast, and can be quickly updated.

Option #2: Usage-based

In a usage-based model, you target your messages and timing based on users achieving (or not achieving) the key in-app events outlined in Step 3 above. This is typically used by freemium apps that rely on upgrading free users into paid users. Doing so can cut on-boarding times by as much as half.  

first-cta

Option #3: Time and usage-based

This type of trial combines time and usage to create a personalized free trial journey for every user. By combining the best of the usage-based freemium approach with the “clock is ticking” free trial window, this approach is more complicated and takes a bit more time to develop content for, but drives higher engagement and conversion rates.

time-usage-based-free-trial

Step 5. Create your emails and in-app messages

Now it’s time to scrape the best customer messaging from your prior email and hustling experiments, sit down, and write the content for your emails and in-app messages. Download our ebook for plenty of examples—here I’ll summarize a few.

1. Welcome emails. Sent immediately after a user signs up for a free trial to encourage them to log in, and to make them feel welcomed to your service. Inject humor, a friendly face, or simply direct access to key account information.

HTML-BASED WELCOME EMAILS

Asana takes a clear, prescriptive approach in its welcome email—watch a video, take these actions.

asana-welcome-email

Susan Su uses this StudySoup example in the ultimate email playbook, which I highly recommend. It’s email marketing wisdom in a capsule.

study-soup-activation-email

2. Usage tips. Send these after one to two sessions to drive usage and help your user be successful. Target this email or in-app message and personalize the content to help your user achieve the next key event, as outlined above.

Give actionable best practices, or invite abandoned users back in, like in this Dropbox email.

dropbox-usage-tips

Instapage uses Headsup to invite new users to a group demo of its SaaS service. Since launching this in-app message, the company has seen a 30% increase in attendance rate for its weekly demo webinar, leading to increased product usage.

instapage-headsup-message

3. Sales touches. Sent within 24 hours to schedule a sales or success meeting, if needed. Use a text-based email and Calendly to eliminate the hassle of scheduling, and enable a single rep to serve a high volume of customers in a 1:Many manners.

second-cta

4. Usage review. Sent halfway through the trial to give users a bird’s eye view of their progress and suggest areas to explore further

USAGE REVIEW HTML EMAIL – Zendesk

Zendesk takes the usage review email to a whole other level by including aggregated data to benchmark your performance against relevant peer groups:

zendesk-usage-email

5. Expiry warnings. Sent with one week left in the trial to remind users to buy. Be helpful and confident, not pushy and salesy.

Basecamp pings users 5 days before their 45-day trial expires.

basecamp-expiry-email

6. Feedback emails. Sent post-trial if the user didn’t convert to paid. Include a link to a survey that helps gather info to make your product better. Use a thankful tone.

Feedback text-based email from Autopilot. Here’s the feedback survey we send at the end of our trial experience at Autopilot, which gets high response rates and offers a trove of actionable insights.

after-trial-feedback-email

For example, we find that 27% of expired trialists don’t buy because they’re still evaluating their options, providing us an automated opportunity to offer a call with sales, or to nudge them back into product. It’s a win-win.

Step 6. Measure your SaaS trial with these metrics & iterate

Metrics reveal if your trial is actually working or not. Beyond the three goals outlined in Step 1, here are the key performance indicators you’ll want to track:

Leads, customers, and revenue: Measure your performance and share the impact of your killer SaaS trial with your team by creating a dashboard that automatically tracks leads, acquisitions, and revenue.

Your conversion funnel: Use Mixpanel, Heap, or Kissmetrics to track your trial signups, activations, and conversion. Develop an activation to conversion funnel comprised of 1-3 specific events to see where users drop out, and where your event-based opportunities lie.

funnel-example

Open rates and clickthrough rates: Your marketing automation system will offer insights into the individual emails and in-app messages. Open, click, and unsubscribe rates vary dramatically based on the level of personalization and usage-based segmentation you’re doing. Low open rates are 1-5%. High open rates are 30%-50%.

MRR trends and insights: Did your new SaaS trial increase your MRR? How did subscription growth change three months before and after you implemented your new SaaS trial?

Nail your SaaS trial

To recap, here are the 6 steps to wow SaaS users with an amazing on-boarding experience:

  1. Set your high-level conversion goals
  2. Pinpoint the key behaviors that show value
  3. Choose your nudges that help users take the next step
  4. Build your SaaS trial journey
  5. Create your emails and in-app messages
  6. Measure everything and iterate

You now have everything you need to turn free trialists into paying customers. I’m excited to see what you build, and your results!

third-cta

 


Autopilot is visual marketing software for automating customer journeys. With native integrations to Salesforce, Twilio, Segment, Slack and Zapier and the ability to connect to over 700 purpose-built tools, we empower marketers to nurture relationships and grow high-paying customers using email, web, SMS, and direct mail channels. Check out Autopilot’s website and follow them on Twitter, Linkedin, or Facebook.

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What does unconscious bias mean for entrepreneurs, investors, and the tech community?

Guest blogger – Rory Gerberg, Partner at Refound

Bias at work

Every second your brain is flooded with 11 million bits of information, but it can only process 40 bits consciously. To cope, the brain uses mental shortcuts to instantly identify which 40 to notice and remember. These mental shortcuts function like a newsfeed algorithm that filters your lived reality: there’s way too much information out there, so rules of thumb determine what comes on your radar in the first place.

These mental shortcuts or rules of thumb let you focus on the job. But the drawback is that they can cause you to miss important information. This is why after an investor meeting, one investor confident in an entrepreneur’s capability is ready to invest, while another concerned about market prospects isn’t ready to jump the gun. The same goes for entrepreneurs pitching to investors–you might think you nailed your pitch, but your co-founder thinks it didn’t go so hot.

Bias about people

For teams, the most detrimental category of biases are your beliefs about people.  Your ability to communicate and collaborate at work is hampered by how you see social identity groups. Social identity groups include gender, race, sexual orientation, religion, disability, religion, age and class. These biases filter what you notice, hear, and remember–and what you don’t. When a person’s actions are consistent with your bias toward that group, you are actually more likely to remember it. For example, given the bias that women are ‘less financially savvy’, an investor will more vividly remember a woman entrepreneur’s discomfort with her financial models compared to a male entrepreneur in the same position. When both Joe and Barbara are confused by the numbers, Barbara’s confusion will remain etched in your memory.  

For colleagues on the receiving end, biases can create experiences of exclusion. This exclusion decreases the likelihood that excluded colleagues will be creative, speak up in a meeting, or take professional risks. They’re bad for company culture, and they’re bad for your bottom line.

Internal organizational dynamics

Unconscious bias is everywhere. By definition, startups endeavor to create innovative solutions to problems, disrupting the status quo. Given the startup ethos, it is tempting to conclude that startups must be ahead of the game in tackling bias. But in fact, the opposite is the case: a startup’s organizational structure–or lack thereof–makes it even more prone to bias. With few, if any, established standards for conducting business, there is greater opportunity for bias. Bias is more likely to occur in situations of ambiguity, where employees either have increased discretion or are applying a set of rules for the first time. Without established rules of thumb that indicate how to act and respond at any given point in time, biases can inadvertently become a fallback for team interactions.

Questions to ask to start uncovering unconscious bias in your organization:

  • Onboarding: How do you welcome a new member of your team? When does an employee feel like a “culture fit”?
  • Team bonding: How do you bond with your team? What activities or locations do you frequent?
  • Daily decision-making: Who do you consult when making decisions? Who takes the most air time in meetings?

Fundraising

Investors aren’t immune either from unconscious bias faux pas. Initial meetings between investors and entrepreneurs provide only a bird’s eye view of a startup’s team, business model and product.  Investors must make an evaluation based on highly limited information, and often that information is based on uncertain financial data and market conjecture. In early stage investing, there is a strong role of intuition: their “gut feel” about entrepreneurs, the market, the product. In the end, a significant part of the decision to invest in an early-stage startup is the decision to invest in the founding team. And that isn’t an objective evaluation. Rather, it opens up space for investors to fall back on biases. Investors can be influenced by biases about the entrepreneur ranging from salient social identity categories, to seemingly irrelevant characteristics like the geographic distance between the startup and the investor. Generally, the need to make hasty decisions based on limited data leaves investors in a situation ripe for unconscious bias.

Additional questions investors should ask before deciding on a second meeting:

  • What are your biases about the entrepreneur’s social identity group?
  • How has the entrepreneur demonstrated preparedness, commitment, and trustworthiness?

Both entrepreneurs and investors need tools to bust unconscious bias at work.

 

How do you bust bias in your organization? Find out at the Unity Inclusion Summit (Get 15% off with RoryVIP) for a chance to meet 1:1, or learn more about Rory Gerberg’s work on unconscious bias here.

 




rory-refound-professional-headshotCreating diverse teams and inclusive organizations is at the heart of Rory Gerberg‘s work. At Refound, Rory designs and facilitates unconscious bias workshops for clients across all sectors—from tech startups and large corporations to nonprofits and public sector agencies. With a master’s degree from Harvard, she has also advised educational institutions and foundations on gender-sensitive program implementation and sexual harassment response strategy. Originally from New York, Rory moonlights as a salsa dancer and looks forward to her next backpacking trek.  Follow Rory on twitter

Can Muslims in Tech Fight Rising Islamophobia in the United States?

Guest blogger – Dustin Craun, Founder and CEO of Life Beyond Borders

As we enter a new political era built on a combination of misogyny, racism, and fear-based politics, I think of an unlikely hero, Muslims in tech. Muslims in tech in the United States and around the world is one of the biggest stories not being told. Muslim technological talent, founders, and venture capitalists play a central role in the majority of tech ecosystems around the world. This is true of the tech ecosystems in the San Francisco Bay Area, New York, Los Angeles, Seattle, and Atlanta.

There are an estimated 300,000 Muslims in the San Francisco Bay Area, and according to one study upwards of 20% of them work in the tech sector. According to research that we will release in the coming months via Ummah Wide, a digital media company I started to tell stories that transcend the borders of the global Muslim community, hundreds of Muslim founders across the world (the majority in the United States) have raised billions of dollars in venture capital investments for their startups and exits worth tens of billions of dollars. Despite these numbers, as well as the fact that Muslims make up large populations at every major tech company in the US, Muslims in tech still face discrimination on a daily basis. Even microaggressions, like questioning people’s faith or asking inappropriate questions regarding terrorism, have a profound affect on the Muslim community. Because of these discriminations, Muslims feel the need to hide their identity as a Muslim (even at the founder level), often times can’t find a place to pray at work, and Muslim women feel unsafe wearing and keeping on the hijab. Publicly hiding one’s Muslim identity can also take the form of people changing their names at work. Muhammad becomes Mo, or in the case of the owner of the NFL franchise the Jacksonville Jaguars, Shahid Khan becomes Shad Khan.

At another level of the discrimination conversation has been the recent discussion around whether tech companies would help build the proposed Muslim registry being talked about by the incoming administration. With push from groups like MPower, and Color of Change the majority of major tech companies (excluding Oracle) have responded that they would not.

One of the craziest things to me about all of this, as someone who has lived in Muslim-majority countries around the world, is that for American companies, this is not a population they want to discriminate against. In fact, American companies are already making billions of dollars off of Muslims globally. Muslims today make up nearly one-quarter of the world’s population, and by 2050 (according to Pew Research data) there will be nearly 3 billion Muslims, totaling 30% of humanity.

With my company, Ummah Wide, we publish an annual story on the 50 top global Muslim Startups. This story has resonated so deeply with Muslims that it has been translated into six languages and republished around the world. The global Muslim market is one of the largest emerging economies in the world with current spending equaling $1.8 trillion dollars and expected to grow by 5.8% on average over the next 5 years, according to the research firm Dinar Standard.

A recent Mashable article about the United States based Muslim startups explores how “ignorance and fear are big obstacles for Muslim startup founders.” While this may be true for US-based venture capitalists in Silicon Valley and beyond who are missing opportunities to invest in Muslim company’s, Muslim startups are finding major funding around the world led by venture capital funds in Malaysia, the Gulf, and Singapore. This is a quickly maturing startup space with innovative young entrepreneurs as well as seasoned serial entrepreneurs building companies that are growing across borders and developing this global Muslim market. Recently US based Affinis Labs, joining with Elixir Capital (US), and MAVCAP (Malaysia), announced a $250 million dollar global VC fund targeting the Islamic economy. For Silicon Valley, the time is now to play catch up with global firms as the 500 Startups partner Khailee Ng stated recently about Muslim startups in South Asia, “I need to be very interested in investing in Muslim tech startups to be a good investor in this region…If anything, I’m just playing catchup.”

While there is growing investor interest, this is a complex, global emerging market representative of both local economies and diasporic populations who live across borders and whose reach can allow products to grow beyond traditional markets. To best articulate the scale of the emerging global Muslim startup ecology it is best to break it up into 4 areas:

  1. Muslim leadership is prevalent in global tech ecosystems

Muslims entrepreneurs play vital roles in regional startup ecologies around the world from Silicon Valley to Istanbul, Dubai, Kuala Lumpur, Bangalore, Singapore, Jakarta, London, Berlin, New York City, Casablanca and in dozens of other cities and startup communities. In Silicon Valley alone there are tens of thousands of Muslims embedded in every layer of the tech and startup community, including entrepreneurs with major exits like Omar Tawakol, CEO of BlueKai, as well as major players in VC firms, like Mamoon Hamid, co-founder of the VC firm Social + Capital, Qasar Yunus, COO of Y Combinator, and Omar Hamoui, Partner at Sequoia Capital.

  1. Companies and startups that focus on Muslim majority populations and use Muslim-centric branding win

Companies around the world know the importance of creating products for and catering to Muslim markets. Uniqlo created a modest fashion line designed for the Asian market, Marks & Spencer introduced the burkini, and Dolce & Gabbana launched the abaya. Whether it’s creating modest fashion options, or developing advertising campaigns for Ramadan, this is, simply put, a market that can not be ignored by global companies. However, this isn’t new – local companies in Muslim majority countries go above and beyond to market to Muslims, like Careem for example, the Dubai based Uber competitor, who offered free rides to the Mosque in their cars during Ramadan in 2015. The US is the one that needs to play catch up.

  1. Muslim startups should focus specifically on Muslim consumers

This is the area we focus on in our 500 Startups article, where we look at Muslim-centric products that can be created by any entrepreneur, regardless of faith, who sees the global market opportunity. While many of these companies show the real potential for what companies in this space can grow to, it can also be one of the hardest types of startups to get funded. As of today, the largest companies in terms of investments and growth are modest fashion companies like Modanisa (Turkey), Hijup (Indonesia), and Fashion Valet (Malaysia), as well as Halal food companies like Saffron Road (US) and The Halal Guys (US). We believe a third major sector will emerge over the coming years in Islamic FinTech, with early stage companies growing in the space like our company Salaam Bank (US / Malaysia), Finocracy (Dubai), Investroo (US), and Ethis Crowd (Malaysia).

  1. Social enterprise products are rising in Muslim majority countries that use aspects of Muslim branding focused on western markets

There are also an emerging set of companies who are making an impact on Muslim majority markets where products are produced, branded, and sold in Western markets with positive representations of Muslim cultures and values. A great example of this is Port of Mokha, the coffee company founded by Mokhtar Alkhanshali, who is focused on transforming the coffee industry in Yemen, and who recently had their coffees featured at Blue Bottle. Other examples of this include the wide range of social impact companies focused on global refugees like Rumie and Techfugees.

If the tech community wants to stand for the values it preaches, it must take a collective stand against Islamophobia and racism broadly, while also recognizing the major role Muslims play in Silicon Valley and Tech ecosystems around the world. This can take many forms ranging from blocking government requests for data that could be used to police Muslim and other vulnerable communities. To companies conducting research and reviewing hiring policies with special attention paid to how interviewers are responding to job candidates who wear hijab or who are visibly Muslim. Tech companies must also make training on religion and multifaith dialogue a central part of their larger diversity training and discuss issues of Islamophobia in the workplace as a major component of this.

For Muslims in the tech ecosystem in the United States and around the world, the value we bring must not continue to be under-appreciated. In the political era we are entering Muslims in tech can play an important role in combating Islamophobia not only within the tech community but rather within society at large. To do this we must not be afraid to be unapologetically Muslim and have the hard conversations that are necessary for creating a more just, unified and inclusive society for all.

 

Learn more about being Muslim in Tech at our upcoming event: Unity & Inclusion Summit Los Angeles with 500 Startups & Microsoft. Get 15% off with “DustinVIP”

 



12339164_573644486913_8044966082237808524_o-3
Dustin Craun is a social innovator, writer, digital strategist, community organizer, and educator. His writings on race, philosophy, and Islamic spirituality have been published in academic journals and popular publications.

He is the founder & CEO of Life Beyond Borders a digital production studio focused on product development, content and digital strategy, design, and video production. With LBB Dustin has launched three portfolio companies: Ummah Wide, MPower Change, and Salaam Bank, an Islamic finance and banking FinTech platform. Follow Dustin on twitter
*header image courtesy of Samuel Corum – Anadolu Agency

 

Are there ghosts in your convertible notes?

Guest blogger – Adam Sterling is the executive director of the Berkeley Center for Law, Business and the Economy, co-founder of Startup@BerkeleyLaw, and a former venture capital and startup attorney.

Are you investing in convertible notes or securities? Do you know what a phantom liquidation preference is? Did you know it could cost you hundreds of thousands of dollars? Let’s illustrate how with a simple example…

Sally purchases a convertible note with a valuation cap of $5 million in Tuber Corporation for $100,000. Six months later, Tuber closes its Series A with a pre-money valuation of $10 million, selling new shares at $1/share. Thanks to its valuation cap, Sally’s convertible note converts at $0.50/share and she receives 200,000 shares of Series A stock. Sally’s very happy about this outcome.

Source www.billionbackrecords.com

A year later, Tuber is acquired. Unfortunately, the acquisition price is not enough to trigger a conversion of the preferred stock. Series A holders will just receive their liquidation preference. Assuming the Series A investors negotiated a standard liquidation preference, each Series A holder should receive the “original issue price” of their Series A stock. The question for Sally then becomes, is the “original issue price” of her Series A stock $0.50 share or $1.00 share?

Assuming Sally’s convertible notes were silent on this issue, Sally would most likely be entitled to receive a liquidation preference of $1.00/share in the above example or $200,000 (an outcome that greatly benefits Sally). This benefit to Sally, getting $1.00/share as opposed to $0.50/share (which ends up being worth $100,000), is known as a phantom liquidation preference.

While most investors would prefer to keep this phantom liquidation preference, many companies are drafting convertible notes to avoid it. Their argument is that investors are double-dipping — benefiting from the discount/valuation cap when their security converts and again with the liquidation preference. This argument may be valid, but as an investor you should at least be aware of it. As some investors successfully retain the preference, it could be worthwhile to fight to keep it. 

Understanding nuanced concepts like this can provide investors with a critical edge in the crowded venture capital space. To this end, UC Berkeley will be partnering with 500 Startups at Venture Capital Deal Camp in February to breakdown concepts like this and explore other mechanics of early-stage deal making. Deal Camp also features VIP access to 500’s famous Preview Day and simulated negotiations with real companies. Check it out and consider applying!

Thank you to Adam Sterling for contributing to the 500 blog. For more insights from Adam, follow him on Linkedin or Twitter.

WMD ’16: Post-Conference Q&A with Casey Winters

Guest blogger – Casey Winters, Growth Advisor to Pocket, Airbnb, Darby Smart; Former Growth Lead at Pinterest & GrubHub

The below article is comprised of audience questions asked to Casey Winters during his presentation at Weapons of Mass Distribution 2016. Casey took the time to answer the questions in detail post-conference.

 

How do you personalize emails across all the metrics you recommended if you don’t have an in-house email data tool like Pinterest does?

At GrubHub, we organized our user data into a weekly FTP upload to ExactTarget (now Salesforce Marketing Cloud) and built a complicated workflow inside of ExactTarget (you can do the same in Responsys). You can use their APIs too, but I don’t remember them being very good.

What you are doing is creating data tables inside the email tool, and using programs to query those tables for what previous emails your users have received, what they’ve liked, to determine what to send them next. At GrubHub, we were very focused on not sending a similar template over and over, so we would join the tables we uploaded with ExactTarget’s data on what users were sent inside the tool, and then look for templates we had new data that we hadn’t sent them recently. If we were to do this for Pinterest, we would have focused the query on finding the template with updated content that had the highest historical click through rate.

This is all achievable in enterprise email tools like ExactTarget and Responsys. If you’re not on one of those, you have to determine when you have enough scale that it’s worth investing in a switch instead of using a more basic tool like Mailchimp.

 

With constant improvements to your product, marketing, etc, how do you figure out attribution to increased retention and tie it back to specific improvements that you’ve made?

You have to run experiments and have long-term holdout groups. Sure, there will be other experiments those users may see, but there should be an equal amount of those people in both enabled and control. Every time we tried sending a new email, we had a control and enabled group and would at least send the email a few times to see if the effect was a novelty or sustained. In some cases, we did year-long holdouts to make sure something was a sustained lift.

Since it takes a long time to see if retention experiments worked or not, what are some examples of leading indicators you tracked?

Well, you definitely want to see if the experiment is having a short-term impact first. For example, if we designed an experiment to get people to repin more, thinking that will drive long-term retention, the question to ask is are they repinning more in the first week? If not, it’s probably not going to have a long-term impact.

Retention experiments are really about taking a baseline cohort curve, and see if you can adjust. So the early indicators are seeing how the week 1 or week 2 parts of that curve look compared to control, but you have to measure longer to see if it sustains, or goes back down.

What are the best ways to find out reasons for rejection/cause of low retention before testing anything with product or pricing?
The best way is to talk to rejectors. At GrubHub, we’d give people a free meal if they talked to us. We’d also bring people in and watch them use the product to see where people got confused and would give up.

If you have a lot of data, you can also look at what data correlates to people who stick around vs. not. You have to be careful about this because the typical answer from a model will be, if they did anything, they are more likely to stick around. So build some hypotheses, do some data analysis, and see if it makes sense.

For example, we had a hypothesis at GrubHub that number of restaurant results tied into conversion and retention. We pulled the data for how many search results people saw, and how frequent they were. We then graphed the conversion rate by the number of results. We then saw a clear inflection point that was different by city, as well as the point where adding new restaurants had diminishing returns.

 

What program did you use as “personal assistant”? How did you make it scalable?

This is something we built in house due to Pinterest’s volume of users. It was too cumbersome to move data around for over 200 million accounts. I’ll give an oversimplified overview.

So what we did was create a new table that aggregated response rates by template for each user ID. We then ranked each email template for each user by response rate. This is stored as a table in a database and is updated daily.

Then, you have to figure out how many emails to send to each user, and what time/day to send it. We used a model that measured by click through rate by increasing frequency, and we stopped email sends once an additional email sent would have a lower CTR than the previous one. For the day and time, we looked at the most common times people opened emails, and created slots based on the volume per month we’d already determined.

Whenever a slot opens for a Pinner, the system pulls the top ranked email that has content and sends it.

 

Do you have any book recommendations on user retention?

As usual with startups and growth, there aren’t many direct books on these subjects. “Hooked” [by Nir Eyal] is a pretty solid introduction to creating engagement loops. Other than that, I’d recommend general psychology and optimization books like “Thinking Fast and Slow” by Daniel Kahneman and “The Goal” by Eliyahu Goldratt.

 

How did you find out on Pinterest that you should connect men to interests instead of friends?

Through user research, we watched men go through the onboarding flow, get asked to follow friends (who were mostly women), then get a home feed they didn’t like. So, our researchers then asked the research participants something they were interested in and had them type it into the search bar. Then, they saw content they cared about and their opinion changed. So then we brainstormed how we could get men directly to what they cared about. We tried forcing search on them, but it was clumsy. Topics ended up being a better way.

 

How did you convince the restaurants to decrease their minimum and delivery fees? Please provide some examples.

We did a couple of different things. In one instance, we had a local press story we were doing, and told the restaurants they would be prominently featured if they dropped their minimum. They did it to get the exposure.

We built a case study off of that restaurants and talked about it to other restaurants, so they could hear how much total order volume changed.

We also tried ranking lower minimum restaurants higher in search results to get them to try it.

 

How do you define growth KPIs for different products? How do you segment users and personalize a good mix of channels?

The growth KPIs should match the goals of the business. You can look at that from a company mission perspective or from a revenue perspective. At Pinterest, the mission is to help people discover what they love and help them do those things in real life. So, while Pinterest doesn’t know if you did something in real life, it can tell if you found something you love by seeing if you saved it. So that is the key metric the company focuses on.

You then build a cohort analysis based on that metric and see at what point in time if they are doing that action, they will continue to do it. So, you look at where the cohort curve flattens. At Pinterest, it flattens after four weeks.

Once you have that, different parts of the growth team forms goals around getting people to that regular pattern of saving, like bringing in enough traffic, converting enough of that traffic into signups, getting enough sign ups to their first save, etc.

As for segmentation, it depends on the business. When SEO is the start of your growth loop, and what keywords you rank for is based on what content people add to the platform, you give up the ability to target certain people. It’s whoever is attracted to the content on your platform that you’re targeting. So Pinterest’s segmentation was just around usage: new, core (daily), casual (weekly), marginal (monthly), dormant, and resurrected.

At GrubHub, we spent money on advertising, so we had a bit more control. We looked at our early users and found there were four segments based on if you ordered alone or with someone else, and whether you planned to order ahead of time. Two of them were a much better fit than the others. One was attractive if we could build some product additions for them.

 

How do you know the specifics (e.g., time of day) on how users like emails

You just look at the times each user tends to open your emails historically and abstract trends (morning, weekdays, etc.). At Pinterest scale, you can get pretty granular.

 

What types of retention cohorts do you look at most often (ie. by month acquired, channel, device/platform etc)?

At GrubHub, I looked at monthly by source and by platform and by signup method (email vs. Facebook Connect vs. guest).

At Pinterest, we looked at weekly by source and platform and page type (board vs. topic vs. pin vs. home page).

 

Where would you recommend someone redirect focus where retention efforts don’t make sense? (e.g. products that people purchase once every 10 years)

In this case, retention is a lot harder. It has to be an incredibly memorable experience for someone to remember ten years later. So, what most people do is focus on acquisition channels knowing that some of those people will be re-acquisitions. Apartments.com was like this. It’s used to infrequently to expect people to come directly on their own, so we invested in SEO because people naturally go to Google when they don’t know where to find something. Later, the company also did television advertising during major apartment hunting seasons.

 

View Casey’s full presentation at WMD ’16:

 

 


Thank you to Casey Winters for contributing to the 500 blog. For more insights from Casey, follow him on Linkedin or Twitter.

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