July 14, 2022
How to Launch a Marketplace | Derrick Fung, Founder of Drop
How do you launch a marketplace? How do you get beyond the chicken-and-egg problem? Derrick's answer: Fake it Till you Make it. When launching Drop (a rewards app with millions of downloads), Derrick needed both consumers and brands to join. Instead of going after both at once, he found a way to seed supply and added brands' logos to his website, whether they had joined or not. It may have led to some Cease and Desist letters (or Conversation and Discussion letters, as he called them), but i...
How do you launch a marketplace? How do you get beyond the chicken-and-egg problem? Derrick's answer: Fake it Till you Make it.
When launching Drop (a rewards app with millions of downloads), Derrick needed both consumers and brands to join. Instead of going after both at once, he found a way to seed supply and added brands' logos to his website, whether they had joined or not. It may have led to some Cease and Desist letters (or Conversation and Discussion letters, as he called them), but it also led to considerable growth.
If you're about to launch a marketplace or are struggling to get it off the ground, listen to this episode and see how Derrick did it.
01:56 - Coming up with the idea
04:15 - Fake it till you make it
06:33 - Founders need to take risks
11:46 - Launching in Canada vs US first
17:19 - Growth at all costs
22:52 - Recap
WEBVTT
00:00:00.029 --> 00:00:00.330
It was contentious.
00:00:00.331 --> 00:00:03.600
We did get cease and desist letters.
00:00:03.629 --> 00:00:05.759
We called it conversation and discussion.
00:00:06.209 --> 00:00:08.759
And so, we said,"we know you sent us a cease and desist.
00:00:08.400 --> 00:00:12.330
Okay, we'll remove your logo, but hey, why don't we just do a deal?
00:00:12.330 --> 00:00:15.099
We're going to be driving you sales, so we can prove it."
00:00:15.330 --> 00:00:20.399
Welcome to The Product Market Fit show brought to you by Mistral, a seed stage firm based in Canada.
00:00:21.210 --> 00:00:23.609
I'm Pablo, I'm a founder turned VC.
00:00:23.699 --> 00:00:26.640
My goal is to help early-stage founders like you find product-market fit.
00:00:26.431 --> 00:00:38.100
Today, we have Derrick, the co-founder and CEO of Drop, a mobile app that helps you earn rewards from all types of merchants.
00:00:38.369 --> 00:00:39.600
Drop is based in Toronto.
00:00:39.630 --> 00:00:42.689
They have about a hundred employees and have raised over$15 million.
00:00:42.929 --> 00:00:46.070
Derrick, it's a pleasure to have you here today.
00:00:46.229 --> 00:00:47.280
Hey Pablo, great to be on.
00:00:47.670 --> 00:00:53.130
The topic of today's episode is how to launch a marketplace.
00:00:53.131 --> 00:01:05.459
And founders know that launching a marketplace is notoriously hard because you have that… launching any product is hard, but launching a marketplace, you have two sets of customers, and you have that classic chicken and egg problem.
00:01:05.760 --> 00:01:16.799
And you have to think about how do you get one side without getting the other, and how do you fake it until you are post-launch, and you have flywheel effects, and then things start to hopefully get a little easier.
00:01:16.801 --> 00:01:18.859
Let's start, maybe in the early days.
00:01:18.930 --> 00:01:24.989
As I understand it, you were an EIR at another VC firm, and you kind of came up with this idea of rewards platform.
00:01:24.990 --> 00:01:26.129
Let's touch on that a little bit.
00:01:26.370 --> 00:01:28.920
How you came up with the idea itself.
00:01:29.430 --> 00:01:30.150
Yeah, for sure.
00:01:30.150 --> 00:01:31.260
As of yesterday...
00:01:31.260 --> 00:01:34.549
yesterday was our five-year anniversary...
00:01:36.000 --> 00:01:36.269
Nice, congratulations.
00:01:36.000 --> 00:01:42.959
Thank you, and to your point, actually, it does not mean it gets easier over time.
00:01:42.960 --> 00:01:54.390
I think the problem that you're really trying to solve evolves and potentially even changes.
00:01:54.430 --> 00:01:56.010
I'm a serial entrepreneur.
00:01:56.010 --> 00:02:05.700
My last company was exited in 2013, I believe, and the buyer, called SFX Entertainment, they IPO'd, we m oved to New York.
00:02:06.120 --> 00:02:07.950
The CEO of SFX started Live Nation.
00:02:07.501 --> 00:02:12.900
So, we owned and operated massive music festivals.
00:02:12.901 --> 00:02:15.330
And I then found myself in New York, a fter selling, thinking a lot about...
00:02:15.781 --> 00:02:24.900
because the CEO came up t o me and said, Hey, Derek, we have hundreds of thousands of young people coming to our music festivals.
00:02:24.901 --> 00:02:27.900
Tomorrowland was the big one that we owned in Belgium.
00:02:27.901 --> 00:02:41.310
It's great, but as you know, part of our business model is sponsorship, and we have a ton of big name sponsors, but the challenge is the fans are coming to our festivals when they leave, what happens?
00:02:41.759 --> 00:02:51.659
And how do we then prove that you came to our festival, you saw our sponsor's logo, and you actually went in store and started shopping and buying their product?
00:02:51.781 --> 00:02:56.129
And so, we started thinking a lot about, s h opping data.
00:02:56.131 --> 00:03:04.990
We st arted thinking a lot about interacting, engaging with consumers in those 360 days of the year when they're not at any of our music festivals.
00:03:04.990 --> 00:03:08.349
And then we just sta rt th inking a lot about loyalty and rewards, and that was, 2 0 13, 2014.
00:03:08.710 --> 00:03:21.340
A s a Canadian, we all know Air Miles, we all know, that if you walk into one of the few grocery stores, one of the few pharmacies, one of the few gas stations, you'll probably see Air Miles' sig nage.
00:03:21.341 --> 00:03:24.370
And, yo u probably are a member of Air Miles.
00:03:24.371 --> 00:03:29.110
I think something like one in three Canadians are a member of Air Miles.
00:03:29.110 --> 00:03:34.419
So, this concept of cross merchant loyalty rewards, I k n ew it wa s very big.
00:03:34.900 --> 00:03:44.259
But I started then play ing around with the products, and realized, wow, they're so outdated, they're archaic, you have to swipe a physical card at the checkout.
00:03:44.260 --> 00:03:45.789
The mobile experience wasn't great.
00:03:45.790 --> 00:03:47.349
The merchants on the platforms weren't great.
00:03:47.350 --> 00:03:53.500
So then I just started thinking beyond just music festivals and thought there was something much bigger, outside of that.
00:03:53.501 --> 00:03:59.650
That was five years ago and fast-forward to today, we've become one of the larg e st mobile rewards platforms in North America.
00:04:00.490 --> 00:04:01.960
What were the pieces you needed for launch?
00:04:01.721 --> 00:04:05.139
First of all, in the marketplace side, what were the two sides?
00:04:05.199 --> 00:04:07.449
Obviously consumers on the side, I assume merchants on the other.
00:04:07.900 --> 00:04:13.840
And then, as you thought about MVP, what were some of the key things you knew needed to be in there?
00:04:14.439 --> 00:04:15.340
It's a good question.
00:04:15.221 --> 00:04:24.399
Marketplaces are notoriously hard to build, especially when you think about an Air Miles type of model where you actually need the merchant.
00:04:24.790 --> 00:04:27.430
They have to let you build into their point of sale terminals.
00:04:27.910 --> 00:04:34.060
We said if this works, we're going directly to consumer.
00:04:34.209 --> 00:04:38.290
They put in their banking information, we don't need to do any integrations with merchants.
00:04:38.410 --> 00:04:48.579
And so, instantly the consumer side is a lot easier… sorry, the merchant side is a lot easier because we then said to ourselves, could we not fake it till we make it?
00:04:49.000 --> 00:04:54.459
Could we not just put up logos because if the consumer is linking their bank account, we know already where they're shopping.
00:04:54.461 --> 00:05:02.110
And could we not just say, shop at these places, get points, and they do, and we see it without any merchant integration.
00:05:02.139 --> 00:05:07.509
And so, that was the big secret sauce, aha thing, kind of realization we had in early days.
00:05:08.170 --> 00:05:12.459
It's why we've had to raise the amount of money that we've had to, to essentially...
00:05:12.670 --> 00:05:15.279
Was that contentious because first of all, you're faking it.
00:05:15.281 --> 00:05:18.639
And second of all, you are taking those points out of your bank account.
00:05:18.670 --> 00:05:20.110
Those points translate to dollars, right?
00:05:20.110 --> 00:05:21.730
You're effectively just putting that up.
00:05:21.759 --> 00:05:25.269
It was contentious, but we did get cease and desist letters.
00:05:25.300 --> 00:05:33.759
We called it communication and discussion, whereby we actually reached back out and said...sorry, conversation and discussion.
00:05:34.209 --> 00:05:36.759
And so, we said,"we know you sent us a cease and desist.
00:05:36.401 --> 00:05:40.689
Okay, we'll remove your logo, but why don't we just do a deal?
00:05:40.720 --> 00:05:46.269
We're going to be driving you sales, and we can prove it." The thinking and strategy really is pretty simple.
00:05:46.271 --> 00:05:51.939
It's how do you keep this consumer engaged as much as possible, to open up the app as much as possible.
00:05:51.940 --> 00:05:55.029
When you really think about it, is having as many relevant offers.
00:05:55.449 --> 00:05:58.490
So, we knew everyone shops at and everyone loves Amazon.
00:05:58.490 --> 00:05:59.600
Everyone loves Starbucks.
00:05:59.600 --> 00:06:03.110
Everyone loves Metro in Canada for grocery.
00:06:04.910 --> 00:06:09.170
And because we launched Canada first, when we went to US, whatever the relevant U.S.
00:06:09.170 --> 00:06:11.389
Grocery is, and that's it.
00:06:11.391 --> 00:06:28.310
And then we said, Hey, this ball's simple, and all these other ones are the cherry on top for now because we just need to get enough users to then go pitch the actual merchants to do actual deals with them so that they would actually listen because we can then say we have users, and we have a product that works.
00:06:28.339 --> 00:06:32.899
And so, that was the big focus for, I'd say, the first year or so.
00:06:33.230 --> 00:06:35.959
Let me just dive into that cease and assist for a second.
00:06:36.079 --> 00:06:42.139
In one sense, it's kind of an obvious thing to do, it just speeds up the flywheel so much, but how did you think through that?
00:06:42.149 --> 00:06:45.170
Because a lot of founders might look at that and say, what if.
00:06:45.531 --> 00:06:48.529
What if they would have not just sent cease and desist letters but.
00:06:48.531 --> 00:06:50.480
can they sue you, what can they do?
00:06:50.480 --> 00:06:52.129
And is t hat where you want to be stuck at?
00:06:52.519 --> 00:06:53.990
I think it's a hundred percent the right choice.
00:06:53.990 --> 00:06:56.810
And when you look at Uber and Airbnb and t he stuff they had to do...
00:06:57.079 --> 00:06:57.500
What's the thinking?
00:06:57.380 --> 00:07:03.439
You're talking about first time founder right now who has this kind of choice to maybe fake it and go into, let's say, a grey area.
00:07:04.069 --> 00:07:05.360
How do you think through that?
00:07:06.920 --> 00:07:12.860
I don't think there's much thinking other than founders that figure it out.
00:07:12.860 --> 00:07:16.670
And if you look at companies like, even Instacart.
00:07:17.449 --> 00:07:30.709
I've met, not too long ago, the early CFO of Instacart who, they would get the police called on them because shoppers a re illegally going into a grocery store without permission, and they would get kicked out of places.
00:07:30.711 --> 00:07:33.740
And so, I feel like it's really just the strength of the vision.
00:07:33.740 --> 00:07:39.949
I think there has to be true conviction, a hundred, 200% conviction to build these types of businesses.
00:07:39.951 --> 00:07:44.569
And if you don't have that level of conviction, don't do it because it's g oing t o be hard.
00:07:44.571 --> 00:07:53.959
And I think it's why V Cs, a c tually lik e th e fact that we were doing this to get to scale because a lot of companies maybe wouldn't have gone that far.
00:07:53.961 --> 00:07:59.269
And leading up to the launch, what are you doing from a go-to-market marketing side?
00:07:59.271 --> 00:08:04.220
Are you doing anything up until the launch, or are you waiting until you launch and just putting it out there?
00:08:04.250 --> 00:08:06.139
What are those pre-steps that you're taking?
00:08:07.100 --> 00:08:07.399
Yeah.
00:08:07.401 --> 00:08:14.029
I'd say, having been a t this now, in s tartups, for almost a decade, I'd say, I've been...
00:08:14.031 --> 00:08:20.360
my view of like press and media has evolved and changed.
00:08:20.360 --> 00:08:26.060
I'd say even a lot of consumer companies launching at South by Southwest, it's so noisy.
00:08:26.331 --> 00:08:28.790
I think the big focus was just consumer value.
00:08:28.790 --> 00:08:31.220
It was just, hey...
00:08:31.221 --> 00:08:37.370
A n d I ran the Facebook ads in the early days, so I actually can talk a bit about what we thought that value was.
00:08:37.370 --> 00:08:51.559
And the value was t h e ads would say things like earn points at McDonald's, Amazon, Starbucks, brands that we knew that they would like, no-brainer, that would normally actually not pay out points.
00:08:51.590 --> 00:08:54.200
Like McDonald's, back then, didn't have a loyalty program.
00:08:53.660 --> 00:08:57.389
Amazon still doesn't really have a loyalty program.
00:08:57.390 --> 00:08:58.980
So, that was the focus.
00:08:58.980 --> 00:09:07.980
It was really just focused maniacally on how do we have a no-brainer value p rop t hat we can go to market with, and then we just essentially ran ads against that.
00:09:08.220 --> 00:09:10.440
Like an ad that looks like an ad, and it didn't really work.
00:09:10.470 --> 00:09:16.110
And then an ad that, literally, was a photo of a chick e n nugget and people just loved it, and they clicked it, they downloaded Drop.
00:09:16.139 --> 00:09:20.279
And so, they linked their card, and they were then seamlessly earning points.
00:09:20.299 --> 00:09:20.700
I think that...
00:09:20.701 --> 00:09:23.190
This was before the launch or only after?
00:09:23.191 --> 00:09:25.409
Did you get a waitlist going or anything like that before?
00:09:25.440 --> 00:09:27.240
We did a waitlist, we did an event.
00:09:27.299 --> 00:09:29.399
I'd say all that was good hype.
00:09:29.400 --> 00:09:32.490
That hype though was to help us get merchants, not consumers.
00:09:32.610 --> 00:09:33.059
I see.
00:09:33.750 --> 00:09:36.389
To make Drop a more real brand company.
00:09:36.390 --> 00:09:54.389
I remember we would take photos from our launch parties and whatnot, and just find ways to share them and have potential partners that w ere pitching, see them on our LinkedIn or meet just casually in conversation: oh yeah, we had a party, take a l ook, it's cool.
00:09:53.971 --> 00:09:57.690
That was really the point of...
00:09:58.049 --> 00:10:06.929
that's what we did on the merchant side because we didn't run any ads on the merchant side, we just tried to make us more real through events and that type of stuff.
00:10:06.931 --> 00:10:09.269
And then on the consumer side, just consumer value.
00:10:09.659 --> 00:10:21.090
But when it comes to apps and digital products for consumers, do you feel you kind of have to wait until there's a launch in order to run the ads and see?
00:10:21.091 --> 00:10:25.019
Because maybe you launched when the cap was way higher than you expected it.
00:10:25.020 --> 00:10:25.740
Now, what do you do?
00:10:25.740 --> 00:10:26.370
How do you think through that?
00:10:26.370 --> 00:10:27.240
You did it a certain way.
00:10:27.240 --> 00:10:32.100
Is that the way you would do it or would you today say, you know what, let's launch ads at the beginning, see what the CAC is.
00:10:32.669 --> 00:10:37.649
Would I've done things differently?
00:10:37.650 --> 00:10:40.830
Maybe run ads before raising money and then use that.
00:10:41.159 --> 00:10:45.149
And maybe we would've raised more money or got a better valuation because we had more data.
00:10:45.150 --> 00:10:48.509
So maybe that, but I'd say we just had a really good gut.
00:10:48.510 --> 00:10:50.340
Why would a consumer not want this?
00:10:50.520 --> 00:10:57.990
And even to this day, Drop, the reason why we're top 20 in the app store i s because it's such a n o-brainer value prop.
00:10:57.990 --> 00:11:08.429
And the only thing really stopping consumers is friction or opportunity costs, are there other apps that are better or are they open to giving up banking data.
00:11:08.431 --> 00:11:13.679
Because that was a big part in the early days of Drop, you had to link your banking credentials to use the app.
00:11:14.370 --> 00:11:19.200
And so, I'd say I'd still think that's the way to think about it.
00:11:19.201 --> 00:11:24.000
But it depends on the product, and for our product, I think that was the right way to think about it.
00:11:24.000 --> 00:11:27.809
I look bac k, I actually wish we just launched the U.S.
00:11:27.811 --> 00:11:29.309
r i g ht away.
00:11:28.801 --> 00:11:32.669
I do give founders now advice if they can launch the U.S.
00:11:32.671 --> 00:11:39.299
right away, just do it beca use I l ook bac k and th e r e was nothing...
00:11:39.301 --> 00:11:41.549
Canada, U.S., we l earne d there wasn't a big difference in the market.
00:11:41.551 --> 00:11:42.929
We had our gut.
00:11:42.931 --> 00:11:45.990
We should have trusted our gu t m ore and just launched the U.S.
00:11:46.019 --> 00:11:46.500
first.
00:11:46.590 --> 00:11:48.870
Why at the time did you decide to do Canada first?
00:11:48.870 --> 00:11:51.870
And why might you today just do it all at once?
00:11:52.169 --> 00:11:57.019
I think it was a combination of we were thinking about launching U.S.
00:11:57.399 --> 00:12:01.509
It's very scary, it's this massive market.
00:12:01.510 --> 00:12:02.649
Who knows what will happen.
00:12:02.650 --> 00:12:09.100
What if we get sued in the U.S., will that bring down a company quicker?
00:12:09.159 --> 00:12:09.279
U.S.
00:12:09.850 --> 00:12:10.149
i s more litigious.
00:12:09.971 --> 00:12:16.480
A lot of that stuff, we weren't really sure the regulatory and all of that.
00:12:16.480 --> 00:12:21.669
And also, we just had more relationships i n getting offers from our network in Canada.
00:12:22.059 --> 00:12:28.149
But when I think about it looking back, y e a h, definitely, should have just launched the U.S.
00:12:28.600 --> 00:12:35.710
and then, same playbook and maybe just not as quickly, slowed it a little bit, but, that w a s another...
00:12:35.740 --> 00:12:39.009
that was a big learning curve for me as I look ba ck int o the early days.
00:12:39.909 --> 00:12:42.399
In a launch, what's the hardest parts of the launch?
00:12:42.400 --> 00:12:49.779
And I think driving traffic has to be at the top of that pyramid and driving quality traffic for an appropriate price.
00:12:50.171 --> 00:12:52.330
Just on social because I think it's a g o- to place.
00:12:52.061 --> 00:12:58.090
Today you're launching this new product, and you're probably thinking I'm going to run Facebook ads, pay-pe r-click, IG, whatever.
00:12:58.120 --> 00:13:01.360
Five years ago, that playbook versus today, how do you feel about it?
00:13:01.460 --> 00:13:05.379
Has th at ch anged or that's still the number one way to go for most consumer products.
00:13:05.740 --> 00:13:08.529
It's definitely changed, especially in our categories.
00:13:08.860 --> 00:13:10.120
It's gotten more crowded.
00:13:10.570 --> 00:13:20.500
It depends on your stage of company, but early days, focusing on number of installs, costs of installs is important.
00:13:20.799 --> 00:13:32.289
It shows consumers high-level want to use a product, download it, but you know, the average- t his is a crazy stat, and I'm pretty sure it s till applies- the average number of apps that consumer downloads a year i s zero.
00:13:32.320 --> 00:13:35.049
They del ete just as many apps as they download.
00:13:35.051 --> 00:13:37.960
So, it's gotten a lot more competitive to get consumer attention.
00:13:37.961 --> 00:13:39.190
There's a lot of apps.
00:13:39.191 --> 00:13:49.240
So, I'd say, fo r founders, I think early days for sure, that t he foc us still should be top of the funnel growth, but I would advise, what is that metric?
00:13:49.269 --> 00:13:53.590
Is it cost per install, but think, be thoughtful about that.
00:13:53.620 --> 00:13:54.820
What is that top-line metrics?
00:13:54.821 --> 00:13:59.679
So for Drop, early days, we would say, let's optimize the heck out of installs.
00:14:00.399 --> 00:14:09.100
But if I were to be really tough on myself, or ourselves, I would have said, no, the focus should be, you've downloaded the app, you've onboarded.
00:14:09.100 --> 00:14:14.470
If you want to take a step further, even more, you've downloaded the app, you've onboarded, and you've clicked on an offer.
00:14:14.471 --> 00:14:19.240
And if you want to take it even a step further, you clicked on the offer, and you actually completed it.
00:14:19.240 --> 00:14:26.230
And if you want to take it even a step further, and this is where now, many years in, this is what we're focused on.
00:14:26.230 --> 00:14:30.580
It's like you've gone, done all that, and y ou've redeemed for something.
00:14:30.581 --> 00:14:34.779
If you think about it, like that is ultimately when the consumer really gets value.
00:14:34.900 --> 00:14:40.149
What does it mean if a cons umer is o n your app for 20 minutes, or what does it really mean now when the y've downloaded an app?
00:14:40.480 --> 00:14:48.070
There's just so much noise out there that I think founders need to be very thoughtful about wh a t that should be.
00:14:48.399 --> 00:14:54.169
The traffic itself, in all likelihood, for a consumer startup in the early days is coming from paid channels.
00:14:55.039 --> 00:14:57.440
We were doing a lot, we were doing paid, but I'd say these days...
00:14:57.441 --> 00:14:59.509
I remember when fundraising...
00:15:00.259 --> 00:15:09.409
especially at this stage, but I definitely would presume in early stages, investors will still ask what is your proprietary channel?
00:15:09.711 --> 00:15:13.009
What is something in wh a t yo u can get scale and us ers and what you're not paying.
00:15:13.010 --> 00:15:17.539
Because t here's that running joke, 50% of VC dollars go to Facebook ads and Google Ads.
00:15:17.541 --> 00:15:18.259
So, everyone...
00:15:18.679 --> 00:15:21.049
That's where ClearBlanc was b orn.
00:15:21.679 --> 00:15:22.129
Exactly.
00:15:22.971 --> 00:15:29.809
I think everyone does it, but what is t hat one thing you know that others may not.
00:15:29.811 --> 00:15:33.470
And I think for us, it was, a value prop.
00:15:33.490 --> 00:15:35.629
I think it was just like really focusing on the va lue prop.
00:15:36.919 --> 00:15:45.860
Did you go pretty heavy on either affiliate or influencer or especially referral and getting people to invite other people and build in vitality from day one, or was that a later thing?
00:15:45.889 --> 00:15:47.059
How much emphasis do you put on that?
00:15:47.360 --> 00:15:48.919
We did that when we launched the U.S.
00:15:48.921 --> 00:15:55.730
and looking back, it was both, it was a double-edged sword because I think it was a big part in helping us.
00:15:55.160 --> 00:16:04.159
We charted in the lifestyle category of the app store to number two under Tinder.
00:16:04.190 --> 00:16:14.779
We've since moved to shopping category where we're continuing to chart, but that helped us raise arou nd, tha t got us hundreds of thousands of users a month.
00:16:14.451 --> 00:16:35.419
By l e veraging referral, by leveraging a combination of, at t h e time Snap stories was just starting out, and so the costs were low the en g agement was insane, certain S napchat influencers, we found a way to them.
00:16:35.421 --> 00:16:39.649
And so, literally, over a weekend, we get 25,000 downloads from one influencer at a dollar CPI.
00:16:39.650 --> 00:16:51.620
And, how they would promote the product though was, download the Drop app, link your card, do a bunch of stuff that you're going to do anywa y, get free points, and you ca n redeem for, use my code, and you get a lot of top-line growth.
00:16:51.649 --> 00:16:52.789
But then, we bled money.
00:16:52.791 --> 00:16:56.450
And also a lot of those users just did that and disappeared.
00:16:56.451 --> 00:16:58.129
They're like, okay, well, this influence i s t elling me a t hing.
00:16:58.130 --> 00:17:02.809
I like this influencer, I'm go ing t o d o it and then churn.
00:17:02.811 --> 00:17:06.019
And so, again, it goes back to stage, it goes back to where you're at as a company.
00:17:06.020 --> 00:17:18.470
And I think for us, it did help raise our round, and it helped show top-line growth, but then it sort of, ultimately, b a c kfired a bit because, longer term, a lot of those users churned, an d our cohorts suffered as a result.
00:17:19.400 --> 00:17:32.210
That's just such a classic story in consumer startups that get crazy virality for whatever reason, a nd then it all kind of, not all comes crashing down, but it kind of c omes way back down once there's not many left to spread to.
00:17:32.599 --> 00:17:46.039
But in the early days, and thinking fake it till you make it and so on, what I'm hearing between the lines is that happened at D ro p to an extent, and yet it was still potentially positive, like net positive, right?
00:17:46.040 --> 00:17:47.210
How do you think abou t tha t?
00:17:47.211 --> 00:17:50.700
You' re an early, early founder and you have these growth hacks in mind.
00:17:51.059 --> 00:18:02.400
Do you leverage them in order to grow top line, in order to get to some next milestone, which will then help you, et cetera, et cetera, or do you do watch a lot of the retention and the true value super early on?
00:18:03.630 --> 00:18:15.029
If I had perfect information looking back, and for example, knew that there would be a VC that would just keep funding that all day long, funding the business at negative gross margin, as long as we keep growing, then sure.
00:18:15.510 --> 00:18:28.559
We would not have made some of those tough choices, but, we made them because, now it's 2019 and to fundraise, there was a big focus on unit economics and payback and all of that.
00:18:28.829 --> 00:18:33.809
And I think, it did n' t have to be fully solved, but we needed a story.
00:18:33.810 --> 00:18:52.259
And as we were operating in a v er y unideal state around cost margi ns and whatnot, we just said to ourselves, this is just the right thing to do because this business isn't sustainable becaus e we're just burning through investor money and not doing deals with merchants and partners and have them pay.
00:18:52.260 --> 00:19:00.359
So, I'd sa y t here's no playbook for sure, and t h e ma cro climate for sure was part of our decision-mak ing around some of these things.
00:19:00.809 --> 00:19:06.059
When you look at something like B2B SaaS, on the other hand, the classic playbook is if you can worry about...
00:19:06.060 --> 00:19:11.099
you have growth on one side, you have retention on the other, how do you get to a hundred million dollars in ARR?
00:19:11.101 --> 00:19:15.180
Do you worry about growth first and then solve retention, or retention first and then solve growth.
00:19:15.210 --> 00:19:23.700
And it's kind of the standard answer that you should solve retention first, make sure you don't have a leaky bucket, make sure you really understand it, who gets true value and why.
00:19:23.940 --> 00:19:28.200
And then you can always figure out top line and start dialling for dollars and scale that side of the business later.
00:19:29.039 --> 00:19:32.789
What I'm not sure about, and maybe it's a bigger question mark for consumer.
00:19:33.420 --> 00:19:36.210
And that's what I'm trying to drive at, is that, is that even true in consumer?
00:19:36.390 --> 00:19:38.099
Because in consumer, you kind of need to get above the noise.
00:19:38.101 --> 00:19:40.109
You do need to be hot, right?
00:19:40.111 --> 00:19:43.380
You have to be top two or top three in order to really drive momentum.
00:19:44.220 --> 00:19:47.579
And maybe you got to get there in ways that aren't so scalable when you fix it later.
00:00:00.029 --> 00:00:00.330
00:00:00.331 --> 00:00:03.600
00:00:03.629 --> 00:00:05.759
00:00:06.209 --> 00:00:08.759
00:00:08.400 --> 00:00:12.330
00:00:12.330 --> 00:00:15.099
00:00:15.330 --> 00:00:20.399
00:00:21.210 --> 00:00:23.609
00:00:23.699 --> 00:00:26.640
00:00:26.431 --> 00:00:38.100
00:00:38.369 --> 00:00:39.600
00:00:39.630 --> 00:00:42.689
00:00:42.929 --> 00:00:46.070
00:00:46.229 --> 00:00:47.280
00:00:47.670 --> 00:00:53.130
00:00:53.131 --> 00:01:05.459
00:01:05.760 --> 00:01:16.799
00:01:16.801 --> 00:01:18.859
00:01:18.930 --> 00:01:24.989
00:01:24.990 --> 00:01:26.129
00:01:26.370 --> 00:01:28.920
00:01:29.430 --> 00:01:30.150
00:01:30.150 --> 00:01:31.260
00:01:31.260 --> 00:01:34.549
00:01:36.000 --> 00:01:36.269
00:01:36.000 --> 00:01:42.959
00:01:42.960 --> 00:01:54.390
00:01:54.430 --> 00:01:56.010
00:01:56.010 --> 00:02:05.700
00:02:06.120 --> 00:02:07.950
00:02:07.501 --> 00:02:12.900
00:02:12.901 --> 00:02:15.330
00:02:15.781 --> 00:02:24.900
00:02:24.901 --> 00:02:27.900
00:02:27.901 --> 00:02:41.310
00:02:41.759 --> 00:02:51.659
00:02:51.781 --> 00:02:56.129
00:02:56.131 --> 00:03:04.990
00:03:04.990 --> 00:03:08.349
00:03:08.710 --> 00:03:21.340
00:03:21.341 --> 00:03:24.370
00:03:24.371 --> 00:03:29.110
00:03:29.110 --> 00:03:34.419
00:03:34.900 --> 00:03:44.259
00:03:44.260 --> 00:03:45.789
00:03:45.790 --> 00:03:47.349
00:03:47.350 --> 00:03:53.500
00:03:53.501 --> 00:03:59.650
00:04:00.490 --> 00:04:01.960
00:04:01.721 --> 00:04:05.139
00:04:05.199 --> 00:04:07.449
00:04:07.900 --> 00:04:13.840
00:04:14.439 --> 00:04:15.340
00:04:15.221 --> 00:04:24.399
00:04:24.790 --> 00:04:27.430
00:04:27.910 --> 00:04:34.060
00:04:34.209 --> 00:04:38.290
00:04:38.410 --> 00:04:48.579
00:04:49.000 --> 00:04:54.459
00:04:54.461 --> 00:05:02.110
00:05:02.139 --> 00:05:07.509
00:05:08.170 --> 00:05:12.459
00:05:12.670 --> 00:05:15.279
00:05:15.281 --> 00:05:18.639
00:05:18.670 --> 00:05:20.110
00:05:20.110 --> 00:05:21.730
00:05:21.759 --> 00:05:25.269
00:05:25.300 --> 00:05:33.759
00:05:34.209 --> 00:05:36.759
00:05:36.401 --> 00:05:40.689
00:05:40.720 --> 00:05:46.269
00:05:46.271 --> 00:05:51.939
00:05:51.940 --> 00:05:55.029
00:05:55.449 --> 00:05:58.490
00:05:58.490 --> 00:05:59.600
00:05:59.600 --> 00:06:03.110
00:06:04.910 --> 00:06:09.170
00:06:09.170 --> 00:06:11.389
00:06:11.391 --> 00:06:28.310
00:06:28.339 --> 00:06:32.899
00:06:33.230 --> 00:06:35.959
00:06:36.079 --> 00:06:42.139
00:06:42.149 --> 00:06:45.170
00:06:45.531 --> 00:06:48.529
00:06:48.531 --> 00:06:50.480
00:06:50.480 --> 00:06:52.129
00:06:52.519 --> 00:06:53.990
00:06:53.990 --> 00:06:56.810
00:06:57.079 --> 00:06:57.500
00:06:57.380 --> 00:07:03.439
00:07:04.069 --> 00:07:05.360
00:07:06.920 --> 00:07:12.860
00:07:12.860 --> 00:07:16.670
00:07:17.449 --> 00:07:30.709
00:07:30.711 --> 00:07:33.740
00:07:33.740 --> 00:07:39.949
00:07:39.951 --> 00:07:44.569
00:07:44.571 --> 00:07:53.959
00:07:53.961 --> 00:07:59.269
00:07:59.271 --> 00:08:04.220
00:08:04.250 --> 00:08:06.139
00:08:07.100 --> 00:08:07.399
00:08:07.401 --> 00:08:14.029
00:08:14.031 --> 00:08:20.360
00:08:20.360 --> 00:08:26.060
00:08:26.331 --> 00:08:28.790
00:08:28.790 --> 00:08:31.220
00:08:31.221 --> 00:08:37.370
00:08:37.370 --> 00:08:51.559
00:08:51.590 --> 00:08:54.200
00:08:53.660 --> 00:08:57.389
00:08:57.390 --> 00:08:58.980
00:08:58.980 --> 00:09:07.980
00:09:08.220 --> 00:09:10.440
00:09:10.470 --> 00:09:16.110
00:09:16.139 --> 00:09:20.279
00:09:20.299 --> 00:09:20.700
00:09:20.701 --> 00:09:23.190
00:09:23.191 --> 00:09:25.409
00:09:25.440 --> 00:09:27.240
00:09:27.299 --> 00:09:29.399
00:09:29.400 --> 00:09:32.490
00:09:32.610 --> 00:09:33.059
00:09:33.750 --> 00:09:36.389
00:09:36.390 --> 00:09:54.389
00:09:53.971 --> 00:09:57.690
00:09:58.049 --> 00:10:06.929
00:10:06.931 --> 00:10:09.269
00:10:09.659 --> 00:10:21.090
00:10:21.091 --> 00:10:25.019
00:10:25.020 --> 00:10:25.740
00:10:25.740 --> 00:10:26.370
00:10:26.370 --> 00:10:27.240
00:10:27.240 --> 00:10:32.100
00:10:32.669 --> 00:10:37.649
00:10:37.650 --> 00:10:40.830
00:10:41.159 --> 00:10:45.149
00:10:45.150 --> 00:10:48.509
00:10:48.510 --> 00:10:50.340
00:10:50.520 --> 00:10:57.990
00:10:57.990 --> 00:11:08.429
00:11:08.431 --> 00:11:13.679
00:11:14.370 --> 00:11:19.200
00:11:19.201 --> 00:11:24.000
00:11:24.000 --> 00:11:27.809
00:11:27.811 --> 00:11:29.309
00:11:28.801 --> 00:11:32.669
00:11:32.671 --> 00:11:39.299
00:11:39.301 --> 00:11:41.549
00:11:41.551 --> 00:11:42.929
00:11:42.931 --> 00:11:45.990
00:11:46.019 --> 00:11:46.500
00:11:46.590 --> 00:11:48.870
00:11:48.870 --> 00:11:51.870
00:11:52.169 --> 00:11:57.019
00:11:57.399 --> 00:12:01.509
00:12:01.510 --> 00:12:02.649
00:12:02.650 --> 00:12:09.100
00:12:09.159 --> 00:12:09.279
00:12:09.850 --> 00:12:10.149
00:12:09.971 --> 00:12:16.480
00:12:16.480 --> 00:12:21.669
00:12:22.059 --> 00:12:28.149
00:12:28.600 --> 00:12:35.710
00:12:35.740 --> 00:12:39.009
00:12:39.909 --> 00:12:42.399
00:12:42.400 --> 00:12:49.779
00:12:50.171 --> 00:12:52.330
00:12:52.061 --> 00:12:58.090
00:12:58.120 --> 00:13:01.360
00:13:01.460 --> 00:13:05.379
00:13:05.740 --> 00:13:08.529
00:13:08.860 --> 00:13:10.120
00:13:10.570 --> 00:13:20.500
00:13:20.799 --> 00:13:32.289
00:13:32.320 --> 00:13:35.049
00:13:35.051 --> 00:13:37.960
00:13:37.961 --> 00:13:39.190
00:13:39.191 --> 00:13:49.240
00:13:49.269 --> 00:13:53.590
00:13:53.620 --> 00:13:54.820
00:13:54.821 --> 00:13:59.679
00:14:00.399 --> 00:14:09.100
00:14:09.100 --> 00:14:14.470
00:14:14.471 --> 00:14:19.240
00:14:19.240 --> 00:14:26.230
00:14:26.230 --> 00:14:30.580
00:14:30.581 --> 00:14:34.779
00:14:34.900 --> 00:14:40.149
00:14:40.480 --> 00:14:48.070
00:14:48.399 --> 00:14:54.169
00:14:55.039 --> 00:14:57.440
00:14:57.441 --> 00:14:59.509
00:15:00.259 --> 00:15:09.409
00:15:09.711 --> 00:15:13.009
00:15:13.010 --> 00:15:17.539
00:15:17.541 --> 00:15:18.259
00:15:18.679 --> 00:15:21.049
00:15:21.679 --> 00:15:22.129
00:15:22.971 --> 00:15:29.809
00:15:29.811 --> 00:15:33.470
00:15:33.490 --> 00:15:35.629
00:15:36.919 --> 00:15:45.860
00:15:45.889 --> 00:15:47.059
00:15:47.360 --> 00:15:48.919
00:15:48.921 --> 00:15:55.730
00:15:55.160 --> 00:16:04.159
00:16:04.190 --> 00:16:14.779
00:16:14.451 --> 00:16:35.419
00:16:35.421 --> 00:16:39.649
00:16:39.650 --> 00:16:51.620
00:16:51.649 --> 00:16:52.789
00:16:52.791 --> 00:16:56.450
00:16:56.451 --> 00:16:58.129
00:16:58.130 --> 00:17:02.809
00:17:02.811 --> 00:17:06.019
00:17:06.020 --> 00:17:18.470
00:17:19.400 --> 00:17:32.210
00:17:32.599 --> 00:17:46.039
00:17:46.040 --> 00:17:47.210
00:17:47.211 --> 00:17:50.700
00:17:51.059 --> 00:18:02.400
00:18:03.630 --> 00:18:15.029
00:18:15.510 --> 00:18:28.559
00:18:28.829 --> 00:18:33.809
00:18:33.810 --> 00:18:52.259
00:18:52.260 --> 00:19:00.359
00:19:00.809 --> 00:19:06.059
00:19:06.060 --> 00:19:11.099
00:19:11.101 --> 00:19:15.180
00:19:15.210 --> 00:19:23.700
00:19:23.940 --> 00:19:28.200
00:19:29.039 --> 00:19:32.789
00:19:33.420 --> 00:19:36.210
00:19:36.390 --> 00:19:38.099
00:19:38.101 --> 00:19:40.109
00:19:40.111 --> 00:19:43.380
00:19:44.220 --> 00:19:47.579