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Building Product, Talking to Users, and Growing with Adora Cheung (How to Start a Startup 2014: 4)
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How to Start a Startup is a series of video lectures, initially given at Stanford in Fall 2014. Lecture Transcript: http://www.tech.genius.com/Adora-cheung-lecture-4-building-product-talking-to-users-and-growing-annotated So you have an idea. How do you go from zero users to many users? Adora Cheung, Founder of Homejoy, covers Building Product, Talking to Users, and Growing, in Lecture 4 of How to Start a Startup. See the slides and readings at http://www.startupclass.samaltman.com/courses/lec04 Discuss this lecture: http://www.startupclass.co/courses/how-to-start-a-startup/lectures/64033
Segments Timeline
From Zero to Many Users
Adora Cheung introduces the key question of how to transition from having no users to many users. She shares insights based on her experiences and mistakes from her startup journey, emphasizing the importance of learning from failures and adapting strategies for success. Cheung encourages aspiring entrepreneurs to take her advice as directional guidance while recognizing that each business is unique.
"thanks for having me so today I am going to be talking about how to go from zero users who many users I'm just assuming that you have many great ideas in your head at this moment and you're kind of th..."
The Importance of Immersion
Cheung discusses the necessity of dedicating focused time to develop startup ideas. She argues that immersive work periods are more effective than sporadic efforts, drawing parallels to coding and the need for deep concentration. This segment highlights the importance of being fully engaged in the startup process to foster creativity and problem-solving.
"college course you know when you start a startup you should basically have lots of time on your hand to concentrate on the startup and I'm not saying you should you know quit school or you should quit..."
Avoiding the Novice Trap
In this segment, Cheung warns against the common novice approach of building in isolation without user feedback. She shares her own experience of launching without adequate user input, leading to a lack of retention. Cheung stresses the importance of early user engagement and feedback to avoid the cycle of failure that many startups face.
"so like I said I sort of first when I wrote this up was thinking what is what are the things that most people some people do or most people do that is not the correct way to do a startup and sort of t..."
Identifying the Right Problem
Cheung emphasizes the need to clearly define the problem your startup aims to solve. She advises entrepreneurs to ensure they are passionate about the problem and to validate it by discussing it with potential users. This segment includes a cautionary tale from her own experience with a previous startup, illustrating the pitfalls of pursuing a problem that lacks personal relevance.
"up with nothing good so the next thing is you know you have an idea and you should really think about what the idea is really solving like what is the actual problem and so their problem statement sho..."
Immersing in Your Industry
Cheung discusses the importance of deeply understanding the industry you are entering. She suggests that aspiring entrepreneurs should spend time working within the industry to gain insights into its workings and inefficiencies. This hands-on experience can reveal opportunities for disruption and innovation, as demonstrated by her own journey in the cleaning industry.
"even a problem we had and certainly wasn't something we're super passionate about building out yet we spent you know almost a year trying to do this and so if you just start you know from Tegel zero j..."
Learning Through Experience
In this segment, Cheung shares her experience of learning the cleaning business by working for a cleaning company. She highlights the value of practical experience in understanding customer needs and operational challenges. Cheung encourages entrepreneurs to engage directly with the service they aim to provide to gain valuable insights.
"provide you know huge overhead costs that you can cut down and so an example of this is you know when we start at home joy when we decided to go we started with the cleaning industry and when we start..."
Becoming an Industry Expert
Cheung stresses the importance of becoming an expert in your industry. She advises entrepreneurs to thoroughly research competitors and market trends to build a strong foundation for their startup. This segment underscores the necessity of being well-informed to gain the trust of potential customers and stakeholders.
"the shoes of your customers from all angles of what you're trying to build the other thing is there's also level obsessiveness that you should have with it too as well like you should to be so obsesse..."
Building a Minimum Viable Product
Cheung introduces the concept of the Minimum Viable Product (MVP), emphasizing that it should be a viable solution to the identified problem. She warns against launching products that lack essential features and stresses the importance of understanding user experience from the outset. This segment provides practical guidance for entrepreneurs on how to effectively develop their initial offerings.
"not just meaning you know the website itself it's meaning you know how does the customer find out about you you know whether it's you know could be thrown out or through a word-of-mouth or whatever so..."
Effective Product Positioning
In this segment, Cheung shares her experience with Homejoy's initial product positioning, which was overly complicated. She explains the significance of a clear, concise one-liner that communicates the functional benefits of the service, illustrating how simplifying the message helped attract users effectively.
"and the second thing is before you put in things in front of a user you should really have your product a simple you know product positioning down and what my what I mean by that is that you know you ..."
Getting Your First Users
Cheung outlines strategies for acquiring initial users, emphasizing the importance of leveraging personal connections. She suggests that founders should use their product themselves and reach out to friends and family for feedback, as well as explore local communities and online platforms to find potential users.
"your first few users should be you know obvious people the people that you're connected with you should use it obviously a you and your co-founder should be using it your mom and dad should be using i..."
Innovative User Acquisition Tactics
Adora Cheung recounts her creative approach to user acquisition at Homejoy, including attending local street fairs and offering free cold water to attract potential customers. She shares how this tactic led to successful bookings, demonstrating the importance of being proactive and innovative in gaining initial traction.
"go to buy the wait homejoy we actually tried all of these so we use it ourself that was fine because I mean we were on cleaner so that was pretty easy and then our parents lived in Milwaukee so we wer..."
Gathering Customer Feedback
Cheung stresses the necessity of obtaining customer feedback to improve the product. She advises entrepreneurs to create channels for users to reach out and emphasizes the value of direct conversations with users to gain insights into their experiences and needs, rather than relying solely on surveys.
"here so and you know I don't suggest I think showing up the fares or I know another startup in the last batch I forgot their name right now but they they showed up they were selling shipping type prod..."
Tracking Retention and User Satisfaction
In this segment, Cheung discusses the importance of tracking customer retention and satisfaction metrics. She explains how to measure user engagement through reviews and Net Promoter Score (NPS), highlighting that these metrics can provide valuable insights into product performance and areas for improvement.
"on what features you need to completely change get rid of or what features you need to build and so one way to do this is to send out surveys you know to get reviews after they've used the product thi..."
Understanding User Honesty
Cheung introduces the concept of the 'honesty curve' in user feedback, explaining how different relationships influence the honesty of feedback received. She advises entrepreneurs to be aware of this dynamic when seeking input from users, particularly distinguishing between feedback from friends, family, and strangers.
"things you you should be building the other thing is I've got to the qualitative thing later but the one thing you should be wary of is the honesty curve which is some people will just lie to you so I..."
The Value of Paid Feedback
In this segment, Cheung explains how paid users tend to provide more honest and critical feedback compared to free users. She emphasizes the importance of understanding user pain points and the necessity of charging for products to gain valuable insights for improvement.
"where people don't care about giving you feedback they just like okay here's a survey type tick tick tock and so you should take this into consideration when getting user feedback now let's say you ma..."
Building Fast and Iterating
Cheung stresses the importance of rapid development and iteration in the early stages of product growth. She advises focusing on features that cater to the next stage of user growth rather than trying to build for a large user base prematurely.
"fast because then that's when you get the real meaty stuff to help you in the future of how you can get more paying users in the door all right so you're getting a lot of feedback and what do you do b..."
Learning Through Manual Processes
Cheung shares her experience with onboarding cleaning professionals at Homejoy, emphasizing the importance of manual processes in understanding user needs. She warns against automating too quickly and highlights the value of collecting data through direct interactions.
"try to automate everything and create software to just you know you know have robots just run everything what you really should do to understand what you should build is to manually do it yourself and..."
Embracing Temporary Brokenness
In this segment, Cheung discusses the concept of 'temporary brokenness' versus 'permanent paralysis.' She encourages entrepreneurs to prioritize progress over perfection during the growth phase, focusing on core user needs rather than edge cases.
"that's when we put on and put in an online application they could apply and then we would ask them maybe serve a lot of the question is doing the interpersonal interview so it's if you try to automate..."
Avoiding the Frankenstein Approach
Cheung warns against the 'Frankenstein approach' to product development, where founders attempt to implement every user suggestion. She advises understanding the underlying problems users face instead of hastily adding features that may not address the core issues.
"and lastly beware of the Frankenstein approach which is great you talk to all these users they give you all these ideas you know the first thing you're going to want to do is go build every single one..."
The Importance of Launching Early
Cheung emphasizes the necessity of launching products early to gather user feedback and avoid the pitfalls of perfectionism. She discusses the competitive landscape and the urgency of getting a product to market to capitalize on user insights.
"feedback that you can get by getting a lot of users because you feel like you know you feel paranoid that someone's going to do this to you and I hate to keep harping on it but this is things I see to..."
Focusing on One Growth Channel
In this segment, Cheung advises startups to concentrate on one growth channel at a time, executing it thoroughly before moving on to others. She highlights the importance of iterating on successful strategies and being adaptable to changing environments.
"focus and you need to you should only you're gonna be tempted to try like five different strategies at one time but really what you should do is take one channel and really execute on it for an entire..."
Types of Growth: Sticky, Viral, and Paid
Cheung introduces the three types of growth: sticky, viral, and paid. She sets the stage for a deeper discussion on how each type can be leveraged for startup success, emphasizing the need for creativity and adaptability in growth strategies.
"it again so and what I mean by that as an example is in the beginning at home joy we had no money so when we try to do we try to buy users from Mary made earth not for Mary mates that's just an exampl..."
Types of Growth: Sticky, Viral, and Paid
Adora Cheung outlines three types of growth: sticky, viral, and paid. She explains sticky growth as retaining existing users, viral growth as gaining new users through referrals, and paid growth as acquiring users through financial investment. This segment provides a foundational understanding of different growth strategies that startups can leverage.
"thing that no one else is doing and do that to the extreme so there are three types of growth when when yeah three types of growth I'm sticky viral and pay growth and hopefully I'll get enough time to..."
Understanding Sticky Growth
In this segment, Cheung delves deeper into sticky growth, emphasizing the importance of delivering a great user experience to encourage repeat usage. She introduces the concept of Customer Lifetime Value (CLV) and retention cohort analysis as metrics to measure the effectiveness of sticky growth strategies, making it a critical lesson for startups focused on user retention.
"sustainability there's a lot of by sustainable growth I mean you know you're basically not a leaky bucket money you put in or time you put in has a good return on investment on it so sticky growth is ..."
Cohort Analysis Explained
Cheung explains cohort analysis, a method for tracking user retention over time. She illustrates how to analyze user behavior by segmenting customers based on their signup date and measuring their return rates. This segment is essential for understanding how to maintain sticky growth and improve user engagement.
"retention cordon alysus knows anyone not know what cohort analysis is or should I go over it okay so I'll go over it okay so CLV is some people call LTV is called customer lifetime which is basically ..."
Visualizing Retention Curves
In this segment, Cheung discusses how to visualize retention curves to assess user engagement over time. She explains the significance of a flattening curve, indicating reduced user attrition, and the importance of continuously improving user experience to achieve sustainable growth. This visualization technique is crucial for startups aiming to enhance customer loyalty.
"when I say cohort basically what you're looking at is this is time so let's just call this yeah time so this is percent of users coming back to you so at time zero rate a period zero we're at a hundre..."
Creating Viral Growth
Cheung outlines the key components of achieving viral growth, emphasizing the need for an exceptional user experience and effective referral mechanics. She discusses how to encourage satisfied users to share their experiences, making this segment a vital resource for startups looking to leverage word-of-mouth marketing.
"don't know 2012 so March 2012 100% of people you have like means N equals 100 people so 100% of the people obviously are using your product because you know that's the definition now once one month la..."
Building a Referral Program
In this segment, Cheung details the elements of a successful referral program, including customer touchpoints and program mechanics. She explains how to optimize the timing and incentives for referrals, providing actionable insights for startups aiming to enhance their viral growth strategies.
"you want is you want this to flatten out over time so that your turn basically goes to zero percent that means you attrition out less less and less users over time and these over here kind of become y..."
Understanding Paid Growth
Cheung discusses paid growth strategies, explaining how to effectively allocate budget for user acquisition. She emphasizes the importance of calculating Customer Acquisition Cost (CAC) against Customer Lifetime Value (CLV) to ensure profitability. This segment is crucial for startups considering paid advertising as a growth avenue.
"the second kind of growth is viral growth and what like sticky growth you need to also deliver a good experience but on top of that you need to deliver a really really good experience like what's goin..."
Evaluating Advertising Effectiveness
In this final segment, Cheung elaborates on how to evaluate the effectiveness of different advertising channels. She discusses the importance of segmenting customer data to understand varying customer values and optimize ad spend. This analysis is essential for startups to maximize their return on investment in paid growth strategies.
"refer other people so that might be just you know after they book or after they sign up there is a you know usually you see these like right after you sign up for is in most for whatever reason most p..."
The Risks of Unsustainable Growth
In this segment, Cheung highlights the dangers of unsustainable growth in startups. She discusses the importance of payback time and how spending beyond one's means can lead to financial trouble. Cheung advises on maintaining a balance between customer acquisition costs and revenue generation to avoid potential bankruptcy.
"being higher and lower they're sometimes you know some ads that might seem good actually don't seem so good at the end of the day now the advanced way of looking at it is this is you can look at this ..."
The Art of Pivoting
Adora Cheung shares her experience with Homejoy, detailing the process of pivoting through multiple ideas before finding success. She outlines key criteria for recognizing when to pivot, emphasizing the importance of having a growth plan and the need for consistent user growth. This segment provides valuable lessons on adaptability in the startup journey.
"you're doing this with credit cards you will definitely find that you're gonna have to you know declare bankruptcy very soon so again payback time is very important you know a safe one to go with us t..."
Overcoming User Resistance
Cheung discusses the challenges of attracting users who are loyal to existing solutions. She shares strategies for differentiating a new product from competitors and highlights the importance of demonstrating clear advantages to potential users. This segment offers insights into user acquisition and the significance of addressing switchover costs.
"a trend like this over time cool so that's pivoting and that's it I can take questions at this point one question right so there is always a switchover cost I'll tell you the example of home and joy s..."