Discover Your Startup Core Strengths – Matt Lerner, ex-PayPal and 500 Startups

Discover Your Startup Core Strengths – Matt Lerner, ex-PayPal and 500 Startups

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If you’re a startup founder, you’ll find our conversation with Matt Lerner super valuable. Matt is the founder and CEO of Startup Core Strengths, a growth accelerator and training for early-stage startups. With 11 years at PayPal and almost 4 years at 500 Startups in his resume, he’s the perfect person to learn from when it comes to startup marketing. He believes that 10% of what you do drives 90% of your growth and he shared with us his advice on how to discover the 10% you should focus on.

In this episode of The Product Show, we discussed:

  • What are the 5 core strengths that form the foundation of every successful startup?
  • How does messaging affect early adoption?
  • When is the right time to invest in branding and how much should you invest in it?
  • Is paid marketing right for you and how to discover your best distribution channels?
  • What if you only have one successful acquisition channel?
  • How do you know it’s time to give up – are there any clear signals suggesting you’re not going to “make it”?
  • What’s the biggest mistake founders make when it comes to metrics?
  • Which part of the business an early-stage founder should never outsource or delegate?
  • The industries that will keep growing in the next decade

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Desi Velikova  00:00

Hey everybody. If you’re looking for a startup growth expert, I’ve got the perfect guy for you. Matt Lerner is the founder and CEO of Startup Core Strenghts, a company that offers growth training and coaching to early stage founders. With 11 years at PayPal and almost four years at 500 Startups, Matt is the perfect person to learn from when it comes to growing a startup. He believes that 10% of what to do drives 90% of your growth, and here is his advice on how to discover the 10% you should focus on. Enjoy this episode. And don’t forget to subscribe to our channels, wherever you’re watching. or listening.

Desi Velikova  00:57

Hi, Matt, welcome to The Product Show.

Matt Lerner  01:00

Hello. Good to be here. Thank you for having me.

Desi Velikova  01:03

It’s a pleasure to have you. So you’re basically a startup growth expert. You’re the founder of Startup Core Strenghts. Before that you spent 11 years at PayPal, and almost four years at 500 Startups. So tell us a little bit more about yourself and what exactly, Startup Core Strength does.

Matt Lerner  01:24

Yeah, sure thing. So yeah, I spent most of my career in Silicon Valley, I worked for a few startups that you’ve never heard of that didn’t do so well. And then yeah, I joined PayPal in 2004, when it was still kind of scrappy, and stayed there for 11 years, moved to the UK and I became an early stage VC with 500 Startups. Ended up investing in 35 companies. But I probably heard more than 500 pitches in those almost four years. And so as a person who spent my entire career doing marketing in Silicon Valley, to look at it 500 different companies and how they were bringing their products to market and how they were thinking about marketing and who they were hiring, I saw a lot of people making a lot of mistakes. And then I mean, the big ones, I sort of like people trying to build a small version of like a big company marketing team, and doing big company marketing stuff instead of, of, you know, when you’re a startup is really you align the whole company around growth, and you figure out how are we going to do this. And if you look at any successful startup, and you go back, you see that like 90% of their growth came from a small number of things they did and so much of it is just figuring out, how are you going to grow? How are you going to work that puzzle. And I think a lot of people, it’s still just sort of trial and error, you know, oh, well, let’s do a rebrand. And let’s try hiring someone. And let’s try Facebook ads and, and they’re not thoughtful and systematic in their search anyway. So I found a startup course drinks to take companies, once the product is ready. As we were talking about earlier, before the recording started, once the product is ready, once I know who their customers are, and it’s time to focus on marketing, and how people sort of learn to work from first principles and align their company around finding the right routes to growth and finding like the 10% of stuff that’s going to cause 90% of the results. So we run a virtual accelerator, and we help companies at that stage, typically seed or series A to work through that piece of their growth, hire the right people find their biggest levers track the right metrics, I’m sort of getting ahead of myself, but that’s what we do.

Desi Velikova  03:29

Fantastic. And before we go into details of how you help startups, let’s discuss a little bit more your time at PayPal. So you spent there 11 years starting as a marketing manager in 2004. And then leaving is a director of marketing in 2015. So that’s quite a journey! What are the key lessons you learned there that gave you the foundation for becoming a startup growth expert, and ultimately founding Startup Core Strenghts, how much help you the big company to help us little guys?

Matt Lerner  04:05

Well, you know, when I joined, it wasn’t a big company. And I guess it was, but it was like a startup working in a big company. Let me just turn off my notifications here. And so I remember, like one of my first weeks there a guy named Dave McClure, who was my boss when I joined, you know, I was like, Are we allowed to do this? And can we do this? This is against some policy. And he said, it’s always better. It’s easier to ask forgiveness than permission. Right? And so the first thing was already just kind of like, don’t worry about what’s the right process and following the rules. But think it through from first principles, figure out what makes sense. And a lot of the stuff we did at PayPal was nothing like marketing I’d ever done in my career before. It wasn’t like things you’re supposed to do. It was like let’s think about this problem and what we’re trying to do and figure out what makes the most sense in this situation. So I guess the the big lessons early on, we’re like working from first principles. I’m just Like the, you know what, what it does in the book. And it’s better to seek forgiveness than permission, like, just go ahead and do it and take the risks. I think those were kind of the big ones. The other one, there were some really extraordinary people that PayPal, some really bright, talented people, and immediately being around those people and talking to them, raise the level of my thinking. And, you know, there’s a saying, they say you become the average of the five people you spend the most time with. And the other takeaway was like, don’t spend my time with people who bring me down, spend my time with people whose thinking is ahead of mine, people who are smarter than me, people who are bright and dynamic. And that’s the way to uplevel myself, and you can do that you can be very thoughtful about which companies you join, and who you choose to work with.

Desi Velikova  05:48

Right, amazing. And the way that you were doing marketing, as you describe, it sounds like the almost the foundation of growth marketing, and like the term growth marketing for me, for me, it’s like, what is growth marketing? Isn’t marketing always been about growth? Is that like kind of a fancy new way to call marketing? So do you think there is any difference between growth marketing and marketing as we know it? Or is just this a new way of doing marketing and the way we should be doing it in 2021?

Matt Lerner  06:24

Let’s say, in my years, in my many years at PayPal, you know, I think I told you, I said this in the beginning, like with any startup, if you look back in hindsight, 90% of their growth came from 10% of the stuff they did. And the same was true at PayPal, like the very first growth came from eBay sellers. And then after that, they started reaching out to web developers to get websites that were outside of eBay. And then they started, they said, Hey, most people are using shopping carts. So they went out to you know, the shopping, it was like Shopify, but before Shopify, like the popular shopping carts, and people were using in 2005. And they, you know, partnered with all of them, and then a bit of phone sales, that’s pretty much drove, and then later, you know, some SEO and things, but I’m pretty much drove all the papers growth. That’s not all we did, though. You know, we redid the logo twice. When I was there, do you know how much it costs to change the logo in a big company that literally millions of dollars and months and months of work. And the logos looked almost the same, like the customer service reps, had to have a little card on their desk to show them it to tell the difference of whether it was the new logo or the old logo. So they would check their communications when they went out to customers like, so people, if you look at a marketing budget, if you look at your marketing headcount, in a big company with a lot of money, there’s a ton of stuff in there, there’s never going to make a difference in your business, if you’re honest with yourself. And so I guess what I’d say is growth marketing is if you’re in a tiny startup, and you’ve got nine months of runway, and half a million in budget, and three headcount, and you’ve got to get to 100,000, MRR or you’re not gonna be able to raise your next round of financing. You can’t afford to waste money or time on anything. So you have to be very smart and thoughtful about the work you’re doing. And it has to have a direct and immediate impact on the growth of your business. So for me, that’s what I’d say is growth marketing as a subset of marketing.

Desi Velikova  08:21

Right, perfect. Okay, and so let’s go back to your time at 500 Startups. When you were there, you invested in 35 startups, but you just mentioned that you’ve made how many 500?

Matt Lerner  08:37

I probably saw over 500 pitches. Yeah,

Desi Velikova  08:40

yeah. So so that’s crazy. So I guess you kind of learned the way to spot the best and the worst in people. Right? So tell me, tell me, what are you looking for when meeting new teams? And what are you staying away from?

Matt Lerner  08:54

It was an incredible experience. So first of all, we were investing at seed stage and pre-seed stage. And the main lesson, I think, that that we got from it. So I didn’t, I didn’t come up with the investment thesis, I got hired into this organization, and the general partners, we had a few general partners who’d invested in multiple unicorns. They’ve been doing this for five or 10 years, you know, and they backed companies like grab Udemy and Twilio and sendgrid. So they can go back to their early meetings. And you know, and they, you know, they passed on Transferwise. And Uber. They did, they could have invested in they didn’t because at the time, they thought those were bad investments. So they were able to go back to those early meetings and say, What did I know at the time? What was I thinking at the time? And the main thing they came back with is you really don’t know. It’s very hard to know. And so what we do in 500 Startups is we would invest in a lot of companies. And we know that at the end of the day, our portfolio returns the majority of them would come from five or 10% of the companies in a fund. But those five or 10% of companies will end up being worth 50 times 100 times 400 times our initial investment. And that’s enough to fund you know, the 90 to 95% of companies that don’t turn out to be great investments. So basically, what we were filtering, and the criteria we use to filter for our investments, were really clearly specifically the founders, the business model, and traction or product traction, or the level of product market fit. And the, you know, ultimately, the founder is probably, you know, outside of luck, the founders are probably the biggest predictor. But they’re also you know, it’s very hard to spot if a founder doesn’t already have a track record, it’s hard to know, you know, who’s gonna be the next, you know, Jeff Lawson, or, or, you know, Jeff Bezos or any of these people. So you want to spend time with the founders, but what you’re looking for is over time, you know, in multiple meetings, how are they thinking, changing? How are they taking in feedback? What’s the speed they’re moving at? And also, if they have previous history, either in this industry, or as an entrepreneur, like, what have they done in the past, traction is a very good validator. Because, you know, like, you know, when you’re investing in a company that does something in health tech, that deals with a condition you don’t have, and you’re not a doctor, like it’s impossible to know, right. But if people are signing up for this product, using it all the time and telling their friends about it, that’s a really good validation that they built the right product, they found good routes to market, they have messaging that appeals to people, and they’re delivering good experience. So traction is a really strong signal. And then business model is actually fairly straightforward. But it may just look like making hardware and managing a supply chain. It’s very low margin, it’s hard work, selling a commodity product, like deodorant, or petrol that other people can sell, it’s very hard work, it takes a long time to build a moat in an area like that. Whereas something like SAS is an extremely profitable high margin business model, it’s just much easier to make money on SAS business. So we would just sort of try to stick to business models, marketplaces, and SAS and things that we knew worked.

Desi Velikova  12:16

Okay, and what do you think, an early stage founders should never outsource from the founders that you might you think many of them were doing a mistake to outsource key parts of growing the business that ultimately impacted their growth and the future of their company?

Matt Lerner  12:35

I guess if you go back to it, like, especially early on, it’s not so much like whether you can trust people to delegate or not, but realistically, your founders in the beginning are probably going to be the smartest, most motivated people in the company. Because until a company gets to a certain point, it’s hard for them to attract world class talent. So you know, the founder needs to make sure that they’ve got always got their attention and their thinking on the most important things it takes to make a business go. So business, if you strip back, all the unnecessary stuff is two things, a product, your service, and distribution. So literally, if you if you don’t have a good product or service, and you don’t have a way to get customers, you don’t have a business. So I would start there and say, you know, like the product that the founder needs to stay focused on that stuff, until it’s working until they’ve got an organization around it. And you know, even if you look at very big successful companies today, often the CEOs are still quite heavily involved in product and distribution.

Desi Velikova  13:37

Absolutely. So let’s go back to Srartup Core Strenghts and the five strenghts that you believe forme the growth core of a company. So these are Message, Metrics, Focus, Team and Process. So can you elaborate a little bit on each one of those and tell us why you think this is a winning formula.

Matt Lerner  13:57

Yeah, and this is a metaphor, you know, core strength is what you’d learn in any sport, you know, it’s you’re going to be a better golfer, or a skier or dancer, if you’ve got strong abs and a strong hips, and you know, this, these foundational things that everybody needs to be successful in sports and avoid injuries and stay healthy. So I find the same thing with startups because as a VC, I would see and work with everything from, you know, a consumer meditation app to meal delivery service to a b2b SaaS product that cost $5,000 a month, it only sells to big corporations. And these are the things that no matter what you need, and so the message is understanding your user psychology. What are they? What’s the progress they’re trying to make in their life? What are they trying to do? Where are they looking for solutions? What fears and doubts Do they have about potential solutions? Because if you can’t speak to the customer in their language, you’re not going to convert metrics. Very simply, you get what you measure, and you’ve got to align the entire team or Round a small number of things and get them to do it, or else your business isn’t going to grow. And that kind of brings to focus, the idea of focus, which is if you’ve got, again, a small team of five people or 30 people, you’re trying to do too many things. You’re gonna do them all badly. And there are right and wrong things, there are right answers. So what you got to do is build that focus where you align the product team, the marketing team, the sales team, the legal team, the biz dev team, they’ve all got to be focused on a small number of goals. It has to be the right stuff. Now team, I don’t think I need to explain this to you, right, a company is only as good as the people you can get around the table. That’s, that’s kind of a cliche. But sometimes startups, you know, the right team for a startup isn’t necessarily the team, you’d want to hire in a big company or in a late stage company. And so I think a lot of times people apply the wrong filters, and aren’t necessarily looking for the right things. So figuring out what it is, what’s the hard stuff you need to do? And what are the right skills and abilities and kind of people you need to get into build the startup. And then the process piece is a weird one. This is one where I think the world is still a couple of decades behind. So I’m the product management side. You know, we got rid of waterfall, we started doing lean agile sprints 20 years ago, but in marketing, it’s still like hire marketer, give them a budget, give me a two year plan. And that’s just silly. In a startup, you don’t know what you’re going to how much money you’re going to need or what you’re going to be doing for the next two years. So when we work with companies, we get them running growth sprints, where they come up with ideas, and they run experiments and they figure out they test out hypotheses and figure out what’s going to be our big successful, you know, routes to market places, we get customers, which messages are going to work, things like that. So we teach people to run weekly growth sprints.

Desi Velikova  16:52

Oh, wow, amazing. Can you give us examples of you know, some of the growth experiments that you’ve run recently? And some interesting findings from it?

Matt Lerner  17:02

I guess. Yeah. I mean, just very recently, right now, I’m working with a company. And it’s a marketplace for a business catering. And I think they were, you know, what, what they’re, what they’ve learned is recently is that people don’t necessarily need to trust the marketplace, they need to trust that they’re gonna find good caterers. And so having messaging around, hey, where this great marketplace, didn’t do, as well as messaging around, you know, just giving them feedback on the different caterers and making it easy for them to select the right and caterer for their needs. And so they did some, you know, they had this idea from customer interviews, and they did some AV tests of different messaging. And they found that this had a really big impact on their conversion rate.

Desi Velikova  17:47

Yeah, I agree that the messaging is often overlooked in the early days. And the impact of getting it right is much higher than what founders usually expect. But this also relates to tone of voice, language, and even branding. In the last couple of years, we’ve seen a surge in the number of companies willing to invest in their branding early on. While before it was all about product, product, product, we’ll figure out branding and design later, we now see more and more companies building their brand alongside the product, they almost see it as a key component of their go-to market strategy, like a really important differentiator in a usually very crowded industry. So do you think that increased competition in almost any sector would fuel this trend even further? Should companies be thinking beyond getting the product right, and thinking about building their brand early on?

Matt Lerner  18:52

So in general, I think it’s very good if you’re thinking about distribution, not just making your product in the beginning. But there’s a couple of questions like how much should a company focus on branding in general? And then when is the right time to think about it, ultimately, the brand has to match the market and the need. You know that because you’re gonna have you know, there’s obviously those luxury. There’s like a b2b trust and security type brand. There’s so many head and heart, there’s so many angles, you can go. So until you understand who are your customers? What are they trying to do? What do they care about? What are they worried about? What are they comparing you to? Any brand work you do is going to be a guess. Right? So I think it’s very important to understand who your customers are, and why you know, what they’re comparing you to and what it is you’re kind of helping them do in their lives, what anxieties and doubts they have about products in this category. Before you can do a good job with branding. And sometimes the founder already knows this implicitly in their own head because they’re building a product and category that they’ve been working in for a long time. But that has to be clear on a piece. A paper that you can give to all the designers and the writers and the marketers and everybody, so that they can craft something, you know, based on the information that’s in your head. So I’d say in that sense it too early is before you really understand who’s excited about this product, and who’s going to use it. And then how much or how little to invest in branding. I mean, I think of that as a brand is a potential source of competitive differentiation for you. It’s like a “moat”. Now, there are successful companies who have horrible branding, like Amazon, Walmart, Cisco, but they obviously very successful businesses. But that’s eBay. But that’s because they have other things, you know, they have high, very high switching costs, you can’t rip out Cisco gear and completely rebuild your network hardware. They have network effects, you know, like eBay and Amazon, they’ve already got so many customers have so much momentum, Walmart has a supply chain and pricing distribution advantage. So you’re or maybe like a biotech company has intellectual property and patents that no one else can copy. So those are all good ways to defend a business. But if you’re selling a product that anyone else can copy, where there’s a bunch of players in the marketplace, and you don’t have any of these other moats, you’re going to have to differentiate yourself based on brand. So that’s where you see in categories where there’s a lot of players, whether it’s shoes, or wristwatches, or fast, you know, fmcg, you know, products on the shelf in a supermarket. Branding is super important, because you need some way to differentiate yourself in the market and keep your competitors out. So I would say, if you’re early stage, what is your if you’re successful, long term, what’s your competitive differentiator going to be? What’s going to protect you from those competitors? What’s your moat? And does it need to be brand building? And if so then is never too early to start thinking about how you’re going to win people’s trust, and how you’re going to stand out in a crowded marketplace.

Desi Velikova  21:57

Right? And when it comes to paid marketing, when do you think is the right time in the startup lifecycle to invest more heavily in paid advertisement? I know this is a very broad question. But generally, when do you think companies should feel confident – Okay, now is the time to put some money behind it.

Matt Lerner  22:18

So the first thing is, paid marketing isn’t always the best strategy for everybody. I mean, sometimes it’s a good compliment. But, you know, a company like Canva, built their entire business around SEO, Dropbox built their entire business around referrals and slack around referrals and network effects. Salesforce built their entire business around b2b sales and outbound calling. So first, just ask yourself is page advertising going to be the right the best channel for us? how you think about that? Well, if a lot of people are out googling for things, like Canva, a lot of people were searching for birthday invitation design template, things like that, there’s a lot of search volume, you’re probably going to want to be buying search keywords, if your product is an impulse buy that nobody’s looking for, but it’s very visually compelling. You know, then Facebook advertising is an obvious channel for you because or Instagram, because people are scrolling through their feed. And if they see your cool new magic toothbrush, and they know it looks way cooler than their toothbrush, and it’s only 40 quid because it’s a toothbrush. And that’s a perfect, you know, product for paid. So first, it’s just will, because like I said, in the beginning, 90% of your results are going to come from 10% of the stuff you do. Most companies are only really going to get one or two channels working to drive most of their growth. And that’s okay, so is paid the right channel for you or not? And then back to your main question, which is when do you invest? Well, I think you have to start testing early. And paid is a great way to do that, you know, for 500 bucks, you can show four different ads to 2000 people each on Facebook in a week and get very quick results on message testing. So it’s good to start testing early. But the problem is people get to a point where it’s like this is kind of working, you know, and you know, for every dollar we spend, we’re getting like $1.30 in return after six months, but the unit economics aren’t great, and they’ll just keep putting more and more money behind it. That’s a bad idea. You want to get to a point where the unit economics obviously make a lot of sense. I mean, I’ve worked with a company who you know, spends $20 to get a customer and within three months, that customer is reliably worth $100. So for those folks who borrow money, like as much money as you can put into that machine, that’s a great idea. And you want to so I’d say paid in the beginning as testing and wait till the unit economics really makes sense. Before you you go whole hog and really pour money into it.

Desi Velikova  24:48

Right. Okay. So let’s say I found my perfect acquisition channel. brilliantly. It’s repeatable. It’s very predictable, so I know how much I’m getting from Each bound time based. The problem is it is just one channel. Do you think this is a dangerous trap? Should I avoid it? And if so, how are we doing? That’s okay, for early stage companies.

Matt Lerner  25:14

I mean, it does, it does depend what stage you’re at. But if you’ve got a single channel working, obviously, especially if it’s a paid channel, you know, algorithms change things, spaces become more or less competitive, it’s all price based on auction. And you can get banned. So there’s, there’s obviously all kinds of risks and being dependent on a single channel. That said, a lot of companies have gotten very, very big off of a single channel. Now, I guess I would say, I would think about it a few ways I think about it instead of channels, but more like lanes. And this is an idea from a great article by a guy named Lenny rucinski. But Elaine is going to be a group of channels that work similarly. So you can hire the same team and have the same expertise. So like, paid traffic would be a lane, Facebook, Instagram would be a channel native ads would be a channel App Store, advertising would be a channel and Google Display Network would be a channel all within that lane. So you’re getting some diversification. But that expertise, you build around good creative, good funnel optimization, good analytics, and attribution, those skills and muscles are going to help you, you know, capitalize on that channel. Now, the other thing to think about is if you go back to your customers say, Where are they getting information? How do people buy stuff in this category. And there may just be multiple places they look like with PayPal, some people were asking their web developer to figure out payments. So web developers became an important channel for us. Some people were getting it in their shopping carts. So shopping carts became an important channel for us. Some people were googling online payments. So paid search and SEO became an important channel for us. So go to your customer work backwards and say, Where are they going to be looking? And where are they going to find this product and make sure that you turn up in all of those places? But the mistake I guess, sorry to ramble here, is I think people just sort of have a list of channels, and they go through it like, Oh, you know, have you tried putting adverts on the to be at? You know, have you tried trade shows yet? What about PR, and they just sort of do this random list of things you can spend money on, instead of starting with our customers and saying, Where are these people finding products? And how can we turn up there?

Desi Velikova  27:25

Right, and this would narrow down your channels to just a few to start testing with. And instead of just trial and error with everything. And when it comes to metrics? And KPIs. What do you think is the biggest mistakes founders usually make?

Matt Lerner  27:44

The biggest mistakes, there’s two of them, one is just overthinking it. And like just chasing too many different metrics all at once. I see people just moving in too many directions, and no focus, and constantly debating this number and that number. And the second one, this is kind of weird, but it’s obsessing about revenue too early. Now, the reason this is controversial is because it’s a company. And of course, it’s supposed to make revenue. Right? But the problem is, there’s lots and lots and lots of ways to make revenue. What you need to do in the beginning, is find product market fit. And so for example, if I have a startup, the thing I could do to get revenue fastest is probably doing services for companies and doing a little custom coding and high upfront integration fees. But then suddenly, I’m running a web developer, or you know, in a coding development shop, which is a great way to make money, but a horrible way to build a unicorn startup. So instead, what I say is focus on customer engagement on getting and delighting and keeping customers in the first instance. And you see this again, if you look backwards at any great startup, each one will have a Northstar metric. And the Northstar metric is not revenue for Airbnb, it was nights booked. At PayPal, it was total payment volume. at Amazon, it was number of repeat purchases, if Facebook is daily active users, and these made sense in the very beginning. And they make sense now that they’re giant corporations. And the thing is, if you can nail customer engagement, if Airbnb gets a lot of nights booked, if a SaaS company gets a lot of weekly active users, you can make money off of that. That’s not hard at all. So the second big mistake is focusing on revenue instead of focusing on getting and delighting customers and customer metrics that will inevitably lead to revenue.

Desi Velikova  29:29

You mentioned product market fit – the most important topic for any startup. But very often the elephant in the room. I heard you saying, if you don’t know if you have product market fit, you don’t. And it sounds so logical. It’s so obvious, right? But when you’re a startup founder and you’ve reached the point where you’re growing but not fast enough, you’ve got some traction but deep down you know the economics are not quite right. You raised some funding, but you don’t know when the next round will be, and you live in this intersection between life and death. And you don’t know for how long this will continue. There are so many startups in this situation! As a founder, how do you know it’s time to stop, reevaluate what you’re doing, and maybe potentially give up on this venture? Are there any universal signals from your experience that founders should be looking for? To help them make their decision if they’re in this situation?

Matt Lerner  30:34

You know, most of the questions you’ve asked, I’ve, I’ve thought through and I’ve got like an easy answer. This is a hard one, because this is a very deeply personal question. And the journey to product market fit, it can be very long. You know, it, Airbnb, I think, yeah, it started in 2007, or eight, and they didn’t really get product market fit for about five years. Notion. I mean, he started doing that in I think, 2010, or 2012. And they really started taking off in like, 2019, Slack, same thing, and started as a games company, and again, like five or six or seven years to product market fit. So it’s a long time. And it’s a journey of indeterminate length, it’s like you don’t know when things really going to start ticking over. So it’s like, you don’t you could be giving up right before you get there. Or it could still be a long road ahead. So I think it’s a very personal decision, I almost never see founders who have the intellectual honesty or emotional distance to walk away from a business, I find most people are just really, really committed to it. And now I see a lot of times where company try something and try something and fails, and then someone else does it. Right, like how many social networks tried and failed like MySpace and a bunch we’ve never heard of before Facebook absolutely nailed it. So I think, you know, you’ve got to ask yourself, first of all, like, any business is built on risky assumptions, and one of those risky assumptions is like, there’s a lot of people out there who have this goal that we help people achieve. Like, there’s a lot of people out there trying to do the thing that we help people do, if the market just literally isn’t out there, and we see that a lot people have a really good business for a really small number of customers. If the market is not out there, you can’t fix that you can’t turn you know, lack of demand into demand. But assuming there is a market out there, I think like why are you doing this? You know, Ivan kept working on Notion for that long time, because he was obsessed with, you know, building this product, he, he’s a product person, he loves doing this stuff. So you know, and he was happy, and you know, eating literally eating ramen, and coding on his product all day. So like, why are you doing this? Is this really how you want to spend your life? And if not, you know, then maybe it’s time to think about how you do want to be spending your life. But as much as you can, you want to if you don’t have product market fit, you want to keep your burn rate low, and your rate of learning and experimentation high. Because again, you’re on a journey of indeterminate length. And you’re gonna have to learn and do a lot of experimentation before you’re gonna find product market fit.

Desi Velikova  33:10

Right? So we live in an era where I think like everyone is trying to sell us convenience, we kind of literally spammed with different offline, like startups competing to bring me my groceries in 10 or 15 minutes, because gonna be faster is if I need my groceries in 15 minutes. So I’m just curious, do you think this is sustainable? And also, where do you see the startup ecosystem, especially in Europe progressing in the next decade or so? What do you think is going to be the next hype?

Matt Lerner  33:47

So the convenience thing, this is a very long, long trend. I mean, if you look back to ancient Rome, people got money so they could buy slaves to do the work for them, so they wouldn’t have to do work. Right? Like, this isn’t like a new thing. You know, microwavable TV dinners in the 80s. Now you can go online, you can buy electric scissors, you can buy a self stirring coffee mug, I mean, people are literally too lazy to stir their coffee. So I don’t think that’s going to change. I think if you’re building a business that makes people like even easier for people to just sit on their butts and do nothing all day, you’ve got a great business.

Desi Velikova  34:30

So I do need people to bring me my groceries in less than 10 minutes, then that is that is a real need.

Matt Lerner  34:37

Yeah, I think as long as you’ve got people with money that people just it’s not that people are inherently lazy. It’s that people want to do the stuff that they want to do. And they’re excited about going and doing their thing and they don’t want to go do other stuff that is no fun for them. So but you know, says more generous interpretation, but in short, yeah, I would always bet on him. Increasing convenience. No question. Other trends? So I guess when I look at the market, I just sort of think about, you know, where are their big incumbents who are making a lot of money and have a lot of unhappy customers? Where are their sort of gaps in the world, a couple that really jumped out at me one is the insurance industry. So you know, we’ve had in, you know, FinTech is an entire vertical now of companies that steal customers and money from banks, right. And that’s been going for 15 years now. And we see it in so many other verticals, you know, restaurants and food delivery. And, you know, so many business to business functions are being replaced by SAS. But people are still, for the most part, buying insurance policies from big old insurance companies. And if you look on trustpilot, most of them have a lot of unhappy customers. And that’s a trillion dollar industry. Another one that’s less like stealing and disrupting old industries, I guess the other one for b2c is mobile. Like, if you look at, you know, the Vodafone and E, and those guys, Virgin, they tend to have very low trustpilot ratings, and they’re still very popular and ubiquitous, and low cost and barriers to entry. Now, the other thing I think about is like, Where is there, no industry at all, and I see one growing, and the one there I’m most excited about is health tech, right? Because, you know, you’ve sorta got, like, you know, supplements and fitness and fmcg, you know, products you’d buy in the health aisle of a supermarket. And then you’ve got super fancy biotech stuff. And I’m starting to see, people are starting to take control of they’re in charge of their health. It used to be you just go to the doctor, and the doctor tells you something and you do it. And the same thing, like if you look at investing, it used to be a few people had, you know, brokers and investment managers, and now you’ve got Robin Hood. And you know, robo advisors, and everyone’s taking charge of their own finances. And I think it’s inevitable that’s gonna happen in health. And it’s not just a few weird biohackers. But I think a lot of people are going to be wearing continuous glucose monitors. And you know, so when I was an investor, I invested in thrive, and a company called second nature. And I feel like there’s a huge space between biotech and sort of fmcg of health tech, that’s going to be very popular mainstream.

Desi Velikova  37:24

Yeah. And it’s definitely been in the spotlight in the last couple of years. So totally agree with, there’s so much we could be doing. I mean, we are sending people on the holiday to space, but we can’t deal with the pandemic, and we don’t have the technology and the infrastructure to do it. So yeah, it’s a huge challenge for all of us. And before I let you go, Matt, so you, you’ve analyzed over the hundreds of startups, 100 stories, what would you say to our listeners, who they think they have a great idea, they’ve got the skills, the capabilities to build it, they’re really passionate, they believe in it. What are the first things to consider before quitting your job and embarking on the journey to build start? Obviously, off the bat.

Matt Lerner  38:16

So I would say it’s important to validate the idea. And by that I mean, you know, validate that there’s other people out there who actually want this thing. And the simplest ways to do that, before you quit your job, are just to put up a fake landing page for this imaginary product, and go, you know, spend 500 bucks and buy some Facebook ads and send people to the landing page, and see if they click Buy. And if they click Buy, just put them on your waiting list. Or if you’ve read the book, the mom test, you can do some interviews in a way that will validate not just if people tell you Oh, that’s a great idea. But if they’d be willing to pay for it, you can ask people, for example, if they tried to if they have this problem, and if they’ve tried to do something about this in the past. So there are lots of quick lean ways in which you want to validate is, Are there people out there who have this struggle or this goal that they’re struggling to achieve? And are they willing to take action and time and effort and money to achieve that goal? And those are, there’s lots of clever experiments and things you can do on the side hustle in your part time to validate that, even just as simple as doing keyword research and seeing if anyone’s googling this, you know, this challenge, how many people are googling it? And what are the current results look like for that search?

Desi Velikova  39:30

Right, perfect. Thank you so much for your time, where can people find you online?

Matt Lerner  39:36

So my website is StartupCoreStrengths.com. And there’s a bunch of stuff on there free stuff. I’ve written a book called Growth Hacking for Founders,

Desi Velikova  39:45

I highly recommend it!

Matt Lerner  39:47

Thank you. Also to your last question about just starting out, there’s a startup marketing strategy template on there. So just sit down with a cup of coffee and we’ll talk you through from first principles. You know, these are all the thing you need to think about as you’re planning what you’re going to build and what is your route to market, and I did it by actually going back to the original pitch decks of like Uber, LinkedIn, Transfer Wise. So first of all, you can see how to write a good pitch deck. But also you can kind of see what their thinking was at each step of the way and apply the same sort of process to your startup. So those are both on my website StartupCoreStrengths.com.

Desi Velikova  40:24

Perfect. Thank you so much for your time, which shows the thing does a great chatting to.

40:31

20-minute interviews with founders and product makers sharing how they hacked early growth.

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