- Companies should consider building a growth team when they have strong retention, typically when they have around 15 to 20 people and have identified product-market fit.
- It's never too late to invest in a growth team, but many companies wait too long to do so.
- Companies that have invested in a growth team early have seen significant benefits, such as Slack accelerating its user base from 1 million to 5 million daily active users in less than 2 years.
- Benchmarking retention to peers in the same industry or vertical is important, with long-term retention goals varying depending on the type of product or service.
- Tracking key metrics related to customer engagement and retention from the beginning is crucial, especially when raising funds.
- The first hire for a growth team should be someone who is curious, has a low ego, and can quickly identify the smallest possible test to validate hypotheses.
- Engineers are typically the most important role in a growth team, followed by data-savvy individuals, designers, and product managers.
- Former founders often make successful leaders of growth teams due to their self-initiative, willingness to experiment, and ability to persevere through failure.

- The speaker got into growth because they were building a product that wasn't growing.
- Growth is not always a concern for big companies, but for founders, every step matters.
- Companies look for internal product managers with a growth mindset and data-driven curiosity.
- The growth team needs to work collaboratively with other teams and have social capital.
- Hiring externally may be necessary if internal PMs don't have the growth mindset.
- Hiring is based on cognitive ability and the ability to do the work.
- Some companies trial candidates for a few days to assess their fit.
- Hiring from growth teams at other companies is also an option.
- It is important to assess if candidates understand the specific context and problems of the company.
- Paid marketing should not be the main focus for startups in the early stages.
- Startups should focus on organic channels and wait to use paid marketing.
- Paid marketing can provide quick results, but long-term retention and profitability need to be considered.

- Paid marketing only works if you have a high enough customer lifetime value (LTV) to recoup the cost
- Measurement is crucial for successful marketing, especially across different channels
- Marketing for a free product is not effective, focus on customer development instead
- Mistakes include not considering incrementality and not measuring retention and LTV
- Focus on 1 or 2 scalable marketing channels rather than spreading resources across multiple channels
- Communicate the importance of data to leadership through regular reports and anecdotes
- Track and analyze data to understand what is driving growth and make informed decisions
- Show solutions with data to gain buy-in from others in the company
- Eventually, aim to gain permission to run experiments and make data-driven decisions.

- The speaker suggests running experiments without permission to prove new ideas
- The growth team at Airbnb focused on product gaps and translation when expanding internationally
- Cultural differences don't require drastic changes to the product, but rather small tweaks
- Data alone is not sufficient to understand user behavior in different countries, on-the-ground research is necessary
- Easy cultural reasons for lack of growth in certain countries are often not the main issue, but rather a lack of marketing efforts or growth sources
- Having a growth team in every country is not necessary, as international growth can be managed from a central location.

- The growth team in San Francisco is likely to have more experience and compounding effects compared to a local growth team.
- The approach to growth differs between B2C and B2B companies, and within each category, it varies depending on the type of product.
- B2B companies can be categorized into three buckets: consumerization of the enterprise, sales-driven with organic growth, and traditional enterprise sales.
- The level of involvement needed in the sales process determines whether a growth team is necessary or if automation can be used.
- Product channel fit is important for companies to determine which platform or channel they should focus on for growth.
- Prioritizing growth metrics should start with analyzing the funnel, understanding drop-off rates, and benchmarking channels.

- Airbnb's approach to opportunity assessment involves considering the impact, likelihood, and effort involved in a project.
- Startups should prioritize measuring the bottom of their funnel, focusing on converting users and addressing churned users.
- Word of mouth has been the biggest driver of Airbnb's growth, especially due to the radical nature of the concept.
- Airbnb initially invested in paid marketing, referrals, and SEO to further drive growth.
- Social media integration and tying the experience to the brand could have been explored further by Airbnb.
- Product market fit is crucial for word of mouth success, with the product needing to be 10x better than the competition.
- Influencers and content marketing can be effective in generating word of mouth for e-commerce companies.
- Airbnb focused on capturing the identities of users' friends to expand their audience and increase bookings.

Companies should consider building a growth team when they have strong retention and have identified product-market fit. Investing in a growth team early can lead to significant benefits. Benchmarking retention and tracking key metrics related to customer engagement and retention are crucial. The first hire for a growth team should be someone who is curious and can quickly validate hypotheses. Engineers are typically the most important role in a growth team. Former founders often make successful leaders of growth teams. Companies should look for internal product managers with a growth mindset. Startups should focus on organic channels and wait to use paid marketing. Measurement and data analysis are crucial for successful marketing. The growth team should focus on 1 or 2 scalable marketing channels. Data-driven decision-making and experimentation are important for growth. Cultural differences when expanding internationally can be addressed through small tweaks to the product. On-the-ground research is necessary to understand user behavior in different countries. Having a growth team in every country is not necessary. The approach to growth differs between B2C and B2B companies. Prioritizing growth metrics should start with analyzing the funnel and benchmarking channels. Word of mouth is a significant driver of growth. Product market fit is crucial for word of mouth success. Influencers and content marketing can be effective for generating word of mouth. Airbnb focused on capturing the identities of users' friends to expand their audience.

Anu Hariharan and Gustaf Alstromer are partners at YC. 

https://twitter.com/anuhariharan

https://twitter.com/gustaf

This episode is a follow-up to Anu's Growth Guide - http://blog.ycombinator.com/growth-guide2017/

The YC podcast is hosted by Craig Cannon - https://twitter.com/craigcannon

So let's start with, when should you build a growth team?

I think most companies think about building a growth team when they have strong retention.

That's, we touched upon this in the last office hours as well, But when exactly is that, right?

You know, for many companies, it's roughly when you have maybe 15 to 20 people in your team, at least 2 product managers, and if you have figured out that you have strong product market fit with retention, then the third PM that you bring on the team might actually be a growth PM.

And so that may be the time when you start investing in a growth team.

But it's never too late to invest in a growth team.

But too often, the mistake I've seen most companies in Silicon Valley do, is they actually wait too long.

But it's not like the consequences are then negative as long as you realize that the team is actually helping and you've formed the team and you've put them in place in the right direction.

The companies that have actually done this early have benefited a lot from it.

Slack, to give you an example, was actually 1 of the very few companies that hired a growth PM 14 months after launch.

I think it was roughly 1000000 DAUs, so fairly early in its evolution.

But it really helped, having a growth team in place helped accelerate the entire company towards scaling it from 1000000 to 5000000 DAUs in less than 2 years, which is no easy feat.

So the sooner you invest, the more benefits you get, but the most important thing is you should know when you're ready, and for that you need to look at retention.

I think The biggest mistakes people make is that they don't look at retention and they don't really know when they have product market fit and they fundamentally haven't built something that people keep using on and on again.

And that's not the right time to build a growth team.

You still have to figure out why is the product not good enough, why is retention so low, why is it declined to 0 effectively.

Once you figure that out, Growth Team can help you with many things, but there are many specific funnels that drives towards your product value that you can accelerate.

And I've seen pretty much every single step you can make a massive increase on if you just have this laser focus that a growth team can have.

Okay, and do you have benchmark retention numbers that you advise people to look for?

Yeah, I mean I think that's another mistake companies do, which is they don't really benchmark retention to the peers in their space or vertical.

So to give you some examples, for example, even if you are building a social network, you should have long-term retention of 50% or more.

Because if you're building a messenger, someone should be checking in daily.

If you're something like a Facebook, 50% of them still log in daily.

But if you're building a social app that has less than 20% retention in month 6 or month 12, that's worrisome.

So you should really pay attention to what your space or vertical is in.

Now, if you're an on-demand delivery company, the median retention long-term is usually 20 or 30%.

So they don't have to have 50 or 60 percent.

But for them, 20 to 30 percent means it's probably good retention.

The general rule of thumb we often tell companies is if you have anything less than 20%, like you've got to start paying attention, you know, no matter what space you're in.

So there, you have some sort of a benchmark depending on wherever you are, you can sort of pay attention to like, is this really weak retention or not?

But beyond that, you have to start paying attention to what space you're in.

So for on-demand delivery companies, we actually look at it depending on food or ride sharing versus grocery.

You can actually do it weekly versus monthly.

You eat food weekly, you tend to order weekly.

Ride sharing, you take trips 2 or 3 times a week, so weekly makes more sense.

Something like travel, like Airbnb, it's more yearly, you don't travel every month, right?

So defining the period and then benchmarking what your long-term retention is, versus your peers, become extremely important.

So that's tricky, So say you're Airbnb and you're only a year old.

Do you, what are you looking for in retention if it is actually an annual thing?

Well, that's a classical problem when companies go and raise money.

It's like, oh, my retention curves, or my retention data set is too small.

That's why when you start a company, you should start tracking those key metrics that matter for your business.

If it's bookings, if it's deliveries, if it's orders, or whatever it might be, just make sure you track them from day 1 because they will matter and someone's gonna wanna look at them when you're raising money.

If you, let's say I've been at it for a year, like say, Airbnb's first year, and you look at the retention cycle as yearly, well there's a lot of predictions probably what predict the next booking.

At some point you're going to be like, yeah, this seems to be a strong enough prediction.

Let's say coming back and searching with dates.

That's a strong enough prediction that I probably will book if I find something that's good.

And on that point I would add, return visitors is a way to sort of engage that versus booking.

1 of the things you still have to keep in mind, you know, and I was there even in the early days of Airbnb when they were raising, most investors could not comprehend that because they didn't know is this really sticky or not.

1 of the reasons why it took you know Airbnb maybe harder in the earlier years to race was exactly that because it was travel, velocity of use is really low, and there was not enough predictability on retention.

So it's a great case study for our founders out there if you're wondering, should I keep at it or not?

Find other ways to measure customer engagement.

And you can teach the investors on what those metrics should be and how you are building confidence that the retention will look good.

So I also want to clarify that the term retention might to some people sound like, oh, this is just the growth teams kind of like their own metric that we don't have.

It's like a representation of the value that someone gets out of your product.

And no matter if you care about the word retention or not, you care about growth theme, you want to build a product that people get a lot of value from.

And it turns out that retention is just a really, really good way to measure the value you get out of that product.

No matter if you believe in what growth teams does, if you believe in the term retention, it just applies to everyone.

And so at the point that you've decided that you're going to build that growth team, What does that first hire look like?

There's the personality of the person you wanna hire, and then there's the discipline that role you're looking for.

Generally for personality, I look for people that are curious.

So a good example of this is like, what's the first website you look at when you come in in the morning?

Well, if that's the dashboard, that's the experimental analysis, you're a curious person.

You're curious to see what the results of the thing you shipped yesterday is, or what the metrics are doing, or try to tie in the numbers with the thing that you're building.

The second thing is just someone who has a low ego.

You're going to have to throw away a lot of code.

You're going to see a lot of results that basically might be contradictory to what you believe.

And you just have to deal with it, because you don't actually know.

You don't actually know what's going to work, and you have to be fine with trying a lot of things.

Whether that's an engineer, whether a designer, or a product manager, you just have to try a lot

And then someone who can quickly get to the point of what's an MVP or what I'm trying to build, what is the smallest possible test I can run to test this hypothesis that I have?

And it usually doesn't mean you have to spend a month building something, it usually is a lot less.

Now In terms of the disciplines, the most important person is an engineer.

If you're just a product manager or just a designer, you can't really do anything.

If you're just an engineer, you often can ship something.

The critical roles after that is someone who's data savvy.

It doesn't have to be the product manager.

You can start with the engineer itself, you can start with an analyst or data scientist or a product manager.

And then you want, basically, you basically want these things to come in hand.

So start with an engineer, get someone who understands the data, then maybe add a designer, then another engineer, eventually a product manager, it kind of comes that way.

But very often, product managers play this early role of leading this team, which is typically why product managers are often in the very, very first incarnation of these growth teams.

Yeah, and that's something we heard when we were talking to a lot of the growth teams as well.

1 additional nuance, which Gustav Denad Braal mentioned it, is Gustav himself is a former founder, and we actually saw that at least 40% of the growth teams that were led in Silicon Valley were former founders.

So we asked some of the CEOs why that was the case.

And it goes to the point that Gustav mentioned earlier, which is you have to be self-initiated and so comfortable with throwing away a lot of code because a lot of it is experimentation.

So you need someone with a lot of grit who can withstand a lot of failure and would still keep pushing to figure out the 1 third of those experiments that's going to make a meaningful difference.

And where do you find that characteristic?

So I think it's no coincidence that you see that.

We've seen growth teams that have been very successful without founders too, but it is an interesting observation that a good chunk of the growth teams are actually led by former founders.

And we've also heard that from CEOs saying they explicitly try to hire a former founder in that growth PM role if they can because they are looking for that experimentation mindset.

And the reason I got into growth in the very early days was that I was building a product that wasn't growing.

So I had a problem and let's say you worked in a very big company that never had that problem.

Growth is just free, you just always have growth.

Well then you're not gonna start thinking about what matters to growth.

You're not gonna look at this specific funnel and try to care about what matters.

Like literally every single step matters when you're starting from scratch.

So I think that's probably the reason why this works really well for people with founder background.

I mean, you obviously can read their resume and see founder, but what were you guys advised when you were like surveying other companies?

Yeah, so when we talk to a lot of companies, I think the first step they try to do is see internally whether there is 1PM with that sort of mindset, especially the data-driven curiosity, using data to help answer versus just going with product intuition.

Because I think it's very important for this growth PM to look at a lot of data.

In fact, George Lee, who was the head of growth at Instagram, puts this really well.

He says, the scariest day is when your metrics go down, but the second scariest day is when your metrics go up and you don't know why.

So the growth PM really has to have that mindset of what is really driving each metric that day and truly understanding the behavior behind it.

You know, they have to have the grasp for that.

So, the reason they look at internal PM first is simply for 1 reason, which is social capital.

Meaning, the growth team has the onus of working with all other teams in a more collaborative way, because if they were just focused on what they were doing, it probably wouldn't work.

You're running a lot of experiments, you may need to make tweaks to the product, you may also have to make design changes, and when you're often establishing a team early on, you don't have all the resources, so you've gotta work with the product team, you've gotta work with the engineering team.

So Having a PM who already has that internal social capital and can debate ideas and experiments and convince people on why that's required is an easier move.

But not all companies are able to do that.

So sometimes you have to hire externally because maybe the 2 p.m.s or the 3 p.m.s you have on your team don't have that growth mindset.

You know, and it has worked in other cases too.

But I think the most important lever you need there to make sure the new person that comes in is successful is that endorsement from the senior leadership, especially the CEO, that it's an important function and you want everyone to work together.

And so to dig into that a little bit more specifically, were you guys, you know, trialing people at Airbnb Or if it's just your first growth person, are you having multiple candidates do a month at a time competing with each other?

There's a book called Worker Rules by Laszlo Bock, which is probably the best book I've read about hiring.

And there's 2 things that he talks about in that book.

Basically, he's trying to answer the question, what makes a great hire?

And 2 things that comes out of that is, 1 is cognitive ability, like problem solving skills effectively.

And the other 1 is like, can you do the work?

So when we did hiring Airbnb, the second was very, very critical.

So we would put them, like for PM, we were just like, here's a growth problem, most likely something that we actually are facing right now or something that we faced like a couple months ago where we know a little bit more about, we basically asked them to give us your best recommendation, like how should we solve this?

And the output of that is maybe you spend 24 hours making a presentation, you spend an hour presenting it for the panel, and basically that helps us determine can you do the job in a much better way than you would do in an interview.

Interview you ask hypothetical questions, but at the same time real use cases, you spend an hour actually talking through things.

You can ask a ton of detailed follow up questions on very specific things.

Once you've hired someone, you've hired someone.

I'm not sure if I believe in 3 months trial because you have to give up a job in order to get hired somewhere.

So there are some downsides with leaving your previous jobs.

In terms of internally, So the way it worked at Airbnb is that engineer would join Airbnb and different teams would pitch that engineer.

And we would look for those characteristics that I mentioned earlier for the kind of people that would be good for growth.

And we basically would spend time with them and kind of figure out if they fit the kind of person that we were looking for, and not everyone did.

And that's totally fine, there are lots of other teams you can work on.

But some people were like, I want to do growth from day 1.

They just came to us like, I want to be on the growth team.

Yeah, I think that different companies obviously have different models.

I have seen at least 2 companies that actually have the model of come work with us for 3 days, not a month.

But even if you get someone to work with you for 2 days, you get a lot more color into their personality, how they think, how they collaborate with other team members, and how much of the job do they really understand.

So those are elements you can get a sense of.

They in fact offer it as a paid vacation day, or ask the interviewees to negotiate that.

But they do it, obviously, with a select few.

That was an interesting approach I saw with a couple of them.

In other cases, you could probably, today there are so many growth teams out there, you can actually hire someone from a growth team.

Facebook has more than 2,000 people and a lot of Facebook growth folks are now at other companies.

And similarly, you can hire now from lots of other teams.

So I think growth teams are no longer a novel concept.

And so founders have said that they find it fairly easy versus 5 years ago to sort of tap into that, you know, growth PM recruiting pool.

And is it fairly easy to suss out the people who are very effective on those growth teams?

Say you're hiring someone from Facebook and you're like, we're growing, pick a product, like 10% month over month.

How do you know it's that person that you're hiring that's affecting that change?

It's not easy to do, but I think that's where Gustav's example of presenting your problem during the interview and seeing how they think through that and react gives you a better pulse for is this person really wired for what we are trying to build?

Because many people assume that if it's from Facebook, they'll know everything.

But it was a social network at the end of the day.

And the way you grow a social network is very different from how you grow e-commerce, or how you grow something like travel, which has extremely low velocity of use.

So I think you have to always test the person in the realm of your context to test out 2 things.

1, do they have the depth of understanding that you need about the problems you're solving?

And are they able to bring their own creativity versus just saying, at Facebook, this was the experiment we ran and we need to do it.

It's absolutely the approach that's the key thing here.

So if you work at Facebook, then you will be dreaming DAU, MAU, and those kind of metrics, which actually didn't apply to Airbnb at all.

Those are not the kind of metrics we cared about at all.

So if that's you, you've got answers like, oh, I'm looking at these metrics when I'm evaluating a product at Airbnb, then you weren't thinking hard enough about the type of product that Airbnb was.

So I think the signal you get from having someone spend an hour presenting a solution, we don't expect you to know the specific channel tactics or any of those things.

That would be great if you do, but that's not really what we're looking for.

We're looking for the creativity and the ability to solve the problem and come up with how would I, like a common question in that challenge would be, what are the metrics that you would use to evaluate whether you have solved this or not?

And that's kind of like, it's not, like you just have to think and use the product and you can come up with what those metrics are.

And so now let's assume we have a growth team going.

When should we start thinking about paid marketing?

Yeah, I think just because you have a growth team doesn't mean you should start doing paid marketing.

You know, the growth team can actually really spend a lot more time on the 1 or 2 organic channels that the product has been doing very well on, including referrals.

Gustav, I'm sure, can talk a lot about referrals from Airbnb.

But I think the big mistake I see companies doing the moment they hire a growth team, they feel like they have to give them a marketing budget and that suddenly the company has to go from organic to paid.

And that's the biggest mistake I've seen.

Because paid marketing will give you some results, for sure, but You won't know the retention of those users for a while.

And so how do you know whether all the experiments you're doing and the acquisition of these customers is good or not long term?

And second, if you're a startup, the longer you can wait to use paid marketing, you should.

To the extent you can actually get a lot of it from word of mouth, or through even SEO or referrals, you should tap into those first before you turn into paid marketing.

You can always experiment a little bit with paid marketing gear in there, just to get a sense for which channels you might tap into.

But it should, at least in the second and third year of your startup, that should not be your main channels.

I would say The amazing thing about paid marketing is that it's a tactic you can deploy with 0 time.

Basically, you can start tomorrow and you can buy lots of stuff.

Most channels don't have that opportunity.

The biggest problem, though, is that if you aren't making the money back that you're spending, you don't have anything.

Like, literally, you don't have anything.

So let's say I bought a thousand users and I'm not charging enough to make the money back to spend on them.

Well I really haven't learned much because I can't buy another thousand users because eventually that strategy will fail.

So the only other way that the paid marketing works, if you have high LTV, high enough that you can recoup the cost of the marketing that you spend, that's the only way it really works.

And you kind of need to be sure that those cohorts and the retention of those paid marketing users are actually worth as much as the previous ones.

So once you get the answer to that, then you have a lot of opportunity.

The hard thing at that point becomes around measurement.

So the more different marketing channels you have, you have to be pretty good at measurement.

I mean, it's not like it's rock and science, but you have to do it.

And people fail often in the measurement side in the early days If you have a free product, you won't really learn anything from your marketing.

You just just shouldn't do it at all Like you might do it in the in the product kind of customer development face You just get a few users, but that's when you're talking about less than a thousand users.

But if it's a free product, marketing won't really help you.

And so aside from, you know, jumping into paid marketing without knowing these stats, what are the other big mistakes people make?

I think, let's see, I see some mistakes around the word incrementality.

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Growth Office Hours: Round 2