3 Rules for Building a Multi-Product Company with Shadi Rostami, Amplitude

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Customer pain as companies and being a multi product going public, these are all means to that end. None of these are the goals. So there are companies that don't go public and they're very successful and they're solving customer pain. There are companies who are single product and they're very successful in solving customer pain. Having that customer focus as a North Star really drive you to decide what is right for you and for your company. I need some traction. You need some traction. Let's get some traction.

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To talk about building multi product companies is a good point for a company to even start thinking about building multiple products.

People come and tell me, you know, last year you had ipo. It's a big milestone for your company. Congratulations. How has things changed after the ipo? I always tell them, IPO is very important, is an important milestone. But if I think about the milestone in the life of a company, going from a single product to multi product is probably a more important milestone than actually going public. And because there's a lot that happens. But going back to your question, it is very important to think about when is the right time to go multi product. Because if you don't do the timing right and make a mistake, it can be problematic for the success of your company. If you take your eye off your main core value product because you want to go spread yourself, you might end up spreading yourself too thin and basically your competitor comes and take over your core product and you are not in a good shape. So the first thing that I think is important across the board, there are some exceptions, but the first thing that is very critical is that you are the number one in your core product. You have won that market. The customers are seeing the value you have that dominance and now you want to build upon that. And I think that is the first important thing. But as I always say that whenever something is right to do, it's not easy to do necessarily. So if you have that, if you have already won and you know that you're not taking the eye off your core product, there's a lot that needs to work together to actually on the execution of actually making it happen.

Just to take a step back there. If I'm the number one in my field, what would motivate me to add another product at that point? Can I just add features?

Yeah, that's a very good question. Not every company has to become a multi product. I think the important thing you always have to look at your customer. What is the value that you need to create for your customer? I think that's a North Star that's going to help you make the right decision. If you just want to become a public company or a multi product company, these are all means to an end. The end is customer happiness, solving customer pain. So as you look at your customer and you figure out okay, can I just do that or is it a. I can actually give an example of amplitude at amplitude. We started as a product analytics, we were doing product analytics. We had great partnership with CDP's customer data platform solution that would help collect the data from a customer and they would send it to us. But one of the important thing about doing analytics is, is to have a high quality data. So data governance becomes a very important piece and because you're doing analytics you have a lot of insight to help improve the quality of that data. We were adding feature in our product to do data governance but later on we realized that yes we can do the data governance for just analytics, but that data that is being collected upstream goes to other places other than analytics. And if you're just cleaning up here and it's going go non quality to another place that might be problematic for a customer. And that's what I think triggered us that okay, we now go and need to build a CDP product that we just launched this year. But this was mainly about what is the customer problem that we are trying to solve and go back and see what is the solution and can I execute on that solution and that's a.

Logical point to start thinking about adding products. And I think for some startups maybe they're not number one in their field at that point and they want to just expand into a different area instead of maybe pivoting all the way. Have you seen that? And what does that usually look like?

Yeah, I think there are couple of ways to think about. Sometimes it's important to be honest. If things are not going well and you have an amazing team, maybe it's just best to pivot and switch to something else and put all of your focus in there. If you say, okay, I think I'm gonna have my core and then I'm gonna create another one and I'm gonna create another one and trying that can be problematic because you don't have the focus. You're spreading yourself too thin because you are not admitting that this thing didn't stick. I don't have product market fit on the first one. So it's very important to just be honest and see. Okay, sometimes it's okay to fail, that's perfectly fine. And I think one of the things that we want to try to fail fast is get the feedback and say whether it's working or not. But there are other times that you have a product that you realize actually it doesn't complete the feature because of my product. If I add another product, it's very complementary, it can complete the workflow, it can complete the feature. That might be the right way to do it. So it's very important to be really thinking about, be honest to see whether if I add this other product, is it going to make my core product better? Is it is a core product has a chance of a success or shall I just call it a day and say I'm gonna focus to product B and if you have amazing team, you can always go and move from one product to another product. That's perfectly all right. And actually that's how a lot of VCs invest in you. They look at your team and they know you're a good team. And even if the first product is not good, you can pivot and do the other one. Because they are really investing in people.

That is such a cliche, but also true. But they do, they do invest in people. Now you mentioned a couple of times there's the risk of spreading yourself too thin. But how do you set up the organization so that doesn't happen?

Yeah, that's a very important point. And that's why I say moving from a single product to multi product is a very challenging process. Couple of things needs to happen. First of all, this needs to be not only I'm an SVP of engineering, I only think about product development and engineering. However, going from a single product to multi product is a company wide effort. So you have to make sure that The GTM is on board. The customer success is thinking about that, the sales are thinking about that. So it's a company wide effort to basically go from a single product, multi product. But even in product development you probably have to do some form of reorganization to make sure that you're going to be successful. Because for example, at Amplitude, when we had a single product, we had a functional team, we had a product engineering team, we had an infrastructure team, and these are people who were functional expertise and they were all working on a single product. As we decided that we want to add a couple of other products, we basically created kind of some foundational infrastructure platform layer that has that. And then we let those teams basically move at their own speed. Because one of the things that is important for a more established product, the requirements and quality, the requirements on scalability, is very different than a brand new startup product. So you have to create a model that this new product can operate like startup within a big company. And part of that is that if you're a startup, you don't know whether you have the product market fit. So you have to throw a lot of thing at the wall to see which one sticks. So you will have different processes. If you are more established, you have a lot of ritual and processes and so on and so forth. So you want to make sure that you're creating that model that you're optimizing for speed, for iteration, for getting feedback for your brand new product. While in your more established product you might be operating, focusing more on operational excellence, scalability and other comments. So you have to really balance that and know which one basically what is it that you're optimizing and what are the things that from the foundation, from the core product or core team, you can gain the value and expertise. But don't take the baggage because there is always so that these are all of the trade offs that you have to be going and executing. That's why I said execution is challenging.

But you also have to allow that other product to fail if things don't go well, right?

Yes, absolutely. And I think for example, it's funny, you have to set goals to see whether you are successful. One of the mistakes that we made at Amplitude was that we set for one of our new products a dollar revenue goals and we wanted to get to $10 million by this period of time. What happened was that it motivated the team to go after bigger deals. So they become a little bit like a consulting for those bigger going after that and the learning from us for the future product after that the goal as the number of pay paying customer, you need customer to pay a little bit. Otherwise they can all say it's a wonderful thing to do but it shouldn't be about how much you want to get a number of customers so that you are not. You're building a product that can solve. It's solving a lot of different customers problems. So these are a lot of learnings that you would go along when you're taking on that path.

For sure. Now so far we've talked about building that other product. What about acquisitions? Maybe if you're in seed stage, you're not necessarily thinking about acquisitions right now, but at some point you probably will. And how do you handle that to add another product to your portfolio?

Yeah, you always have to think about build by partner. This is the model that you always think about as you're thinking about adding functionality. And I think there is no perfect solution. You always have to look at the case, the time and so on and so forth. But acquisition can be a really valuable tool in your toolbox if you have some money of course to get that. And you have to see what are you trying to get. For example, in the example that I mentioned about Amplitude used to be partnered with the CDP product. But we decided that we want to build a CDP because it's valuable for our customers. Then we decided that it's valuable to acquire somebody who's really expert in that field. So acquired a smaller company iteratively that actually they had. Their founders were thinking about taxonomy management and skills schema management all day and all night. So they really brought that expertise into Amplitude and it was valuable to do that. But I have a lot of horror stories of acquisition that don't go well.

Tell us some of those.

Okay, I don't name name but at some of my previous companies. So we acquired the company. It was a very small company. We acquired them and we really did not have the culture match. We were very a company that were down to earth produce value and they were a little bit company that was all about marketing and talking about. So when we acquired this company actually the market really loved it. Our market cap increased more than what we paid for that. So if you think about short term was success. But two years into it, none of those people were still at our company because they really didn't fit with the company. The culture was not there. So one thing that happen if you don't have the right culture match the value of company and the new company. You either if you acquire big company, they come and Destroy your culture or change your culture, or if you acquire a small company, they basically won't last because they won't be able to integrate into your culture. So that's very important. That's the first important thing is to think about whether there is a culture match between the two.

It's not a panel about acquisitions, but how do I ensure that it will be a culture match? How do I even know that beforehand?

You never know. Of course. There's always a risk, right? It's like hiring somebody. You do all of your interview process and it might not be, but you have to do your homework the same way that when I hire somebody, I spend a lot of time interviewing. I spend a lot of time doing reference check. I spend a lot of time. You apply the same model when you're acquiring company, you do a lot of reference check with their customers. You get a sense, you actually talk with each individual people to see whether you would hire these people as individual employees. So all of you have to really do the homework. And I think in life in general, when you make the decision out of desperation, they're not good decisions. So make sure that you are not acquiring out of desperation. You're really going to and going from a point of strength and doing your due diligence to do that, to make sure that it's right. But it can go wrong too. But hopefully it will go.

It's a 50, 50 chance. What about your existing customers? As you're building out that product portfolio, how do you think about them? And do you think, should startups think about that new product as kind of addition to the existing one and just helping the existing customers or bringing in new customers? How do you balance all of that?

Yeah, that's a very good question. Actually. I have a story of what we did at Amplitude that was not correct. So we had a team that we told them, you are a distribution team, so you're gonna work on some new product. But you cannot talk to our existing customer because we want this to distribute and increase our basically pipeline. So that team was not very successful because they were spending all of their time sending LinkedIn messages to get people to talk to them so that they actually validate whether the idea is right or not. People were not. You basically go back to being a tiny startup. You basically lose the benefit of being part of a company that is established. You are not getting the leverage out of the credibility that you have. So one thing that worked for us afterward, we say, okay, start with the existing customer. We call something customer partners, customer development partner, get these customer development partner to work with them so that as we are deciding what to build, what is sticking to the wall, what is not, what is right, have those, they're willing to take your call, you have the credibility build with them. But later on as you build and you might decide, okay, no, actually this product is, can actually be something that can land with the customer too. But because you have done that work that for example happened at amplitude. When we built Experiment product, which is an experimentation, we work with our existing customer, we build with them, they saw the value. But afterwards, right now we have lands that land with Experiment. There are customers who are actually mainly looking at experiment as the first thing that they're looking at. So you have to go through that transition to get the, you want to get all, all the leverage you can get from your existing company. And I think that was useful for us.

It's a difficult position to be in though, because again, you could be spreading yourself way too thin at that point.

No, but at the beginning you're defining, okay, I am going to build this product for my existing customer. You focus on them, you build with them, you make sure you're building the right thing. And then after that successful into stage, then you say, okay, can this be something that we go and land with ourselves, guys, what are the things that needs to be added if a customer is not already and think about it, but staging and timing is very important. Absolutely. We want to have an area of focus and you want to see what are you optimizing for. Like always in life you have to be very clear what are you optimizing for?

You hinted at it at the beginning, but does every company have to become a multi product company?

No. I think it's very important that we think about what is our goal. Our goal is to solve customer pain. As companies and being a multi product going public, these are all means to that end. So none of these are the goals. So there are companies that don't go public and they're very successful and they're solving customer pain. There are companies who are single product and they're very successful in solving customer pain. So it's very important to not mistaken what is the ideal goal. I think having that customer focus and having that as a North Star really drive you to decide what is right for you and for your company.

Thank you very much.

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