3 Steps to Scale, Multiply and Thrive with Spencer Kimball, Cockroach Labs

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There'S an incredible attention economy out there. It's very competitive. Trying to get someone to put in 20 minutes on your product. If you can't give them, like an incredible aha moment, it's a hopeless lost cause. I need some traction. You need some traction. Let's get some traction.

Hey, what's up, innovators, entrepreneurs, visionaries and disruptors. This is your Traction podcast host, Lloyd Lobo. We're a community of over a hundred thousand people just like yourself on a mission to help you get the methods, the money, and the madness to explode your business growth. Featuring stories and tactical advice straight from those who've done it before, like Shopify, Twilio, Asana, and many more.

We have a question before we get started. So Spencer has a lot of stuff to share here, but we want to know where to focus. So there's a couple different places to focus, right, and we could focus zero to one, right? No customers to your first couple customers. Or we could focus some to 10 maybe, right? Some customers to a few customers. Or we could focus from few customers to a lot. Put up your hand. 0 to 1. Okay. There's a couple. 1 to 10, couple hands. Everybody's just digesting lunch. I don't know if they even heard the question here, but 10 to 100. Any others? More there? More on the scaling.

Awesome.

Okay, cool. Let's start here. Spencer, what is cockroach? Give us the 30 seconds.

Thanks, John. Yeah. Let me try to describe it for everyone. It's a database, and we named it Cockroach because it's meant to be a very resilient database. And the old joke is that after World War 3, cockroaches would be the only things left alive. And turns out they're very resilient if you've ever had a problem with them. And we're based in New York, so I think all, all of our initial employees probably had problems with them. And it is a name that nobody forgets. So actually talking about these different stages of company growth it's pretty funny to be in the stage we're in now and be in front of a CIO of a Fortune 10 company and have to explain the name to them because it's difficult to forget. But it's also difficult to count. And sometimes people wonder what that line item is in their budget for cockroach. And then we get calls all the time. People think we're exterminators. It's a funny name.

And to explain what you call your.

We call our employees roachers. And the company bus is a roach coach. And you just got to lean into the name.

Awesome. Okay, let's kick it off here. So our topic was around scaling, multiplying, thriving. But we're in a crazy situation now in the world on so many different levels. First job is survival, right?

Yeah, absolutely. Running out of money is the greatest existential risk to a startup in particular. So you do have to manage things for the long term, but at the same time, pay attention to what that Runway looks like.

So when we were chatting earlier, we were talking about starting a company, doing a startup, and one of the core challenges is getting your first customers. And not just getting your first, but actually scaling that to get a lot of customers. But you said too many users or too many customers too soon is a problem. Why?

When you're trying to get product market fit, you want to be very careful that you don't try to boil the ocean. You want to find cohorts of customers initially that are very interested in trying something out and giving feedback. And you actually, I think some people think that on their initial product launch, it would be just truly amazing if everyone enjoys the product, sees huge value in it, and just starts signing up, and you have more demand than you know what to do with even. Right. And when that doesn't happen, I think people are very naturally disciplined. In reality, what you want is 10amazing users to stick around on that initial product launch, and then you just drill in on those users. You live and you breathe what those users are experiencing with your product. And ideally, you get a lot of automated data, but that might not happen when you're trying to fail fast, but you just put in that time to really understand what are the problems they're trying to solve, where are they succeeding, where are they failing? And you learn from them, and then you welcome in the next cohort. And as you start to get traction, where the cohorts last longer. And ideally, you're also working on the cost of a customer acquisition. Things like that make it easier to acquire Those users, then you can broaden those cohorts as you succeed. And having too many things at once, you can lose the signal in what actually ends up amounting to a huge amount of noise with a bunch of users that might not be quite serious in the long term and certain certainly aren't necessarily going to be willing to provide you with quite a bit of feedback.

It's really interesting as well. Obviously you do a startup, you want 50 million people, you want 300 million people, or you want a thousand customers. Whatever your metric is, you want as many as you can get. But you sometimes could you run the risk of becoming the one hit wonder. Right. You flash in the pan, everybody came and then everybody left because it wasn't good enough. You also burned all the potential goodwill for new users because you, you weren't really ready for them, right?

Absolutely. And we've definitely seen that in various features and announcements we've made and so forth. I think slow and steady is the right approach to, to truly building something that's going to last. Yeah, you just want to invest in anyone that will give you their time on the other side.

I sometimes wonder if Clubhouse on the audio side is an example of that. Just zero to a million and then. Yeah. And anyways, along the same lines about not getting too many users too soon, you talk about you may need multiple MVPs. What does that mean?

Yeah, I think the most important thing you can do not just at the startup, but you're constantly building new startups. So this is a perennial advice. It applies at every stage. But you want to use as many sort of iterations as you can to learn. And so it goes back to a bit of what I was saying before. Just really understand your customer and in your NPS that's attached to them, just understand how you're moving towards the sort of metrics you want to see for your product. But multiple MVPs help you learn. Those are sort of successive iterations of more and more refined information. So you want to create an information advantage, an asymmetry versus other people in the market that are your competitors. And you do that best if you're layering in additional capabilities. I think before we did I say we. There's three co founders at Cockroach Labs. We've all been working together for almost 30 years in one case, 20 years in the other case. And we did a startup after we all left Google after a decade. And that startup was a private photo sharing company. And it was cool in my opinion. I loved it. I put my heart and soul into it. But it did not get critical mass. And one of the huge mistakes we made, which I'll tell anyone that's willing to listen. So I guess you're all hopefully willing to listen. We actually thought really hard about the problem space. We built something that evolved for us over the course of a year. We were working on it and it was very thoughtful. It really solved the problem and it was just like crickets when we, our friends used it, of course, and our families and things. And they all thought it was cool because they took the time to put into it. But there's an incredible attention economy out there. It's very competitive. Trying to get someone to put in 20 minutes on your product. If you can't give them like an incredible aha moment, it's a hopeless lost cause. I think that the mistake we made was not figuring out a crappy product that had an aha moment that was going to be pretty obvious to us and just seeing if we could iterate on that and maybe we would build an MVP in that aha moment in that crazy crappy, sort of like minimal MVP that we could get there. I guess that's redundant. That might have also had crickets, but then we would at least been thinking, wow, this idea is maybe not as good as we thought it was. Let's try to pivot a little bit. And I think that is again, very true at all stages of a company because you're either releasing new products or you're releasing new capabilities. If you spend a year working on a new capability, it's probably going to fail and that's a bad iteration cycle time. So I think that lesson just continues to pay off.

Shockingly, you don't have 10 years to get your startup off the ground. Now we were going to talk about the biggest challenges at the various stages. 0 to 1, 1 to 10, 10 to 100. We'll skip 0 to 1 because you covered it there and because that was not the biggest need in the room here. Let's talk about the biggest challenge. From some customers to more customers. You started to get some product market fit, but you really haven't gotten tons of. The ball's not rolling by itself downhill. You're still having to push it really hard. What are the biggest challenges there?

That's a good question. I think it ultimately does come back to just focusing on the customer. If you don't have product market fit, that's where you have to live. And what constitutes product market fit? We're going to look at those scales there's orders of magnitude from 1 to 10 to 100. I think it's up to that 10. Getting the first million actually can be incredibly difficult. You need some degree of product market fit, but then you have get to 10 is a, an exercise, I think in making that product market fit. Obvious. So there's a communications element to it. Like I think you need to really understand you have to build a marketing function at that. But it wasn't quite clear if that would bleed over into the 10 to 100 in the question.

Let's go right there. Let's go. It's perfect segue. Let's go right there. Because the challenges become very different then, don't they?

Absolutely. You can get to 10 with a very tribal organization where everyone knows everybody else and scaling challenges haven't become apparent. You're almost certainly under 150 people. Once you get to the stages of 10 to 100, probably passing that sort of tribal threshold. And you have to start living in the data. So you really have to build a data driven organization. And my God, this is more true just in the last couple years than it's ever been in my career. You're just blind if you're not figuring out how to optimize input metrics. And we've had quite a learning experience at Cockroach Labs around this. Just in every single function of the business, it's very natural to set your targets based on your output metrics. Like here's how much revenue we're trying to get or here's how many adopted users on this new capability. And you set some. We want them to have this many hours per week or whatever using it, whatever your metric is, for an active user, those are very difficult metrics to optimize. And you might think you're living in the data looking at these output metrics, but in reality there's so many different things you could be doing to increase your revenue or to increase your user adoption metric. What you need to do is say what are the things that we can see right right away when someone comes, whether it's, let's say, a new prospect at earliest stages of your funnel or the second stage in your funnel, what are they doing? What do they need to do that actually is going to lead to increasing your output metric? So what you need to do is say what is. Can I run a correlation analysis and figure out which set of input metrics predict the output metric? And this is something that evolves constantly. So you really have to, you need some people with some data science Background, I think, to compete today. And what we found in some cases is it's not just one input metric. It could be a couple or several. But you might have things that you think are incredibly important that you like. This is where we're going to spend our time in terms of optimizing an input metric, because we really believe that's going to lead to more revenue or more adopted usage. And when you run the correlation analysis, that could be like a 0.2 or a 0.15. And then there's two things, let's say two factors that you. You weren't even really paying attention to, you certainly weren't going to optimize. And together those could predict like 0.88 in the correlation. Now, correlation is not causation. Things are complex. But that's a sort of a step further than we were previously thinking about how to optimize our. And we luckily hired some people that brought that approach to the company. And so now we're trying to adopt that everywhere. But it's just, I thought, a little bit of good advice to share, but that's the kind of thinking that can take you to 100 and beyond. And you just want that mindset to permeate your organization.

Do you have an example in your back pocket? Didn't prep you for this at all. Of an input metric that you thought, hey, that's really critical. We got to get that right. If we get that right, boom, we're off to the races. But it wasn't right.

Revenue is kind of the always the top of mind item there. And when you think about revenue, it's okay, we got to get the leads in. And then you want to definitely make sure you have the technical win and get through it. I think most people think, how many accepted leads do we get in there? And I'm not saying that's not ever the most important thing. It could very well be. But what you want to do is a critical path analysis. There's many stages to making that sale work, and they all involve different skills. We have five different stages from when something's accepted by an account executive, and every single one of them matters. If any one of them screwed up, you're not going to get to the closed one sale. And so what you need to do is just understand how those conversions look over time and how they work across segments in your market, how they work across territories that you're trying to sell your product to, and how they work with different managers in enablement cohorts. You can go really Deep in the data. But what we discovered recently, and it's just a constant process of iteration, was just that this sort of top of funnel metric was not as important as the early stages of conversion. Like, we were really not doing as well in those early stages of conversion as we used to do. So it's okay. What could cause that? And then you have to have hypotheses and try to falsify them, and you're left with something that you think this is probably a pretty good description of what's happening in reality. And so that points you very directly at what you can do to try to solve the problem. So it's that kind of analytical mind that can save you from wasting months, maybe years, until you've kind of certainly don't optimize your outcome for the company and for your customers.

Fundamentally, that turned into a really good segue because the next question is, how does your role as a founder change as the company grows? And I'm guessing In the first 18 months or so of cockroach left, maybe the first 36, that was not on your mind. I seen there were other challenges.

I wasn't expecting a global pandemic. And really, you didn't predict that. A war in Europe? Yeah, no. It's been a busy global news cycle, I'd say. I think the role of a founder changes very dramatically. You recede in some ways. And all of the roles of the founders, boy, that can become. They're incredibly important at the beginning. And the energy that you bring as being someone that had a vision that you want to solve, that needs to still be cultivated. And when that's lost, it's a big transition for the company. So you want to keep that in there. But the idea of being a founder or co founder should recede. Right. How important is that? You don't want people to listen to you just because you founded the company and it's eight years later and you're just not important anymore in the grand scheme of things, or that aspect of you is not important. So I'm still CEO, so that does remain important at year eight. But the fact that I was a founder, that shouldn't be something that causes people to listen to me when, for example, other more seasoned executives are saying something different. Right. So I think that what you. The role of the founder should give way naturally to the role of an operator, and that should be the title that matters most.

Let's talk about something else that I think many of us have seen and I suspect many in the audience are feeling Right now or have felt at some point. And that's stress and angst as a founder, and that's different at different levels, right? The 0 to 1, wow, do I really suck that badly? Is my product really that awful? Nobody wants to join, nobody wants to try it, right? This one to 10 where, you know, we got a couple customers, but we can't ever get out of that little niche. And this 10 to 100 where, holy shit, how am I going to scale this thing? Don't know if I'm allowed to say that on stage. But talk about entrepreneur stress and how to manage it.

It's a great question because stress can eat you alive, that's for certain. It's obviously not good for your health, but it makes you miserable, right? And you can choose to take this journey and suffer, or you can choose to take this journey and make it your life's work and enjoy the journey, which, believe me, is more consequential than whatever your outcome is, no matter how much you think that's going to change your life in important ways. I think the. There's maybe two pieces of advice I'd give. One is that your journey is not singular, it's not unique in any way. Everyone has these incredible moments of doubt and to the point where it's black and despairing. This is how I remember with Cockroach, we spent three and a half years just doing R and D. We didn't have any customers. We had some people that were interested, but by the way, those never became customers, or if they did, they churned because they were so early in the journey, like the system didn't work for them properly. They wanted the better version of Oracle and we had an alpha product, right? But boy, year three and a half, when you don't have any customers, you start to wonder whether you're ever going to have a customer, anyone's ever going to pay for what you've been working on for as long as you've been working on it, or just find value in it at least, right? So, yeah, we've had those moments and that's not the only one. So if you can talk to people and you have the right kinds of advisors, you should listen to them, right? And take some consolation from, I think, the good advice that they can give you, especially if you've got an investor that's on your board that knows the business understands, but the good pattern matching matches and they've seen all these things before and so listen to them, seek their counsel. And the other thing, of course, is that and boy, this goes. This speaks to a lot more than just the entrepreneurial journey. This is just general advice for life and stress. We spend a lot of time thinking about mistakes we've made in the past and even more time thinking about how things are supposed to work in the future. How do we hope they're going to work? How do we fear they're going to work? And I would just say that people think that's appropriate and necessary in order to solve problems. I gotta ideate like what could happen, like how do I plan ahead? How do I anticipate a reality that's not real yet, but maybe it will become real. And I've gotta think about all these eventualities and plan for them. People think that's virtuous, but in fact I found that it's not only unnecessary, but it's actually what directly causes the suffering in the journey. Instead, what I think is more fruitful approach is to live in the present. Focus on the problems that are right in front of you, because believe me, there's plenty of them. Focus on the people that are right around you. How do you fix what their problems are? How do you take time to listen to what they're saying? You got a lot more time when you're not sitting there thinking you're solving these problems. Because what else is also true is that when you think you've ideated a potential future and you've come up with a plan, you've even gone into your head and think, this is what I'm going to do, this is what I'm going to say. Say when they ask me that question or that problem arises or that customer objects or he's asking for something. You create these scripts which then you follow. But the reality is always different from what you imagined it to be. And by following those scripts, you're ignoring all of these signals that are coming at you that other parts of you would say, oh, you know what? Actually there's something different here than what I was thinking. They're not actually mad, they're disappointed. So it's easier to act appropriately and with whatever wisdom you can summon based on all of your experience. When you're open to the present moment, that's constantly happening. And by the way, when you do that, there's a lot less stress, okay? I can't solve that problem in the future and I shouldn't even be thinking about it because there's things I need to solve right now. And when that problem does happen, which mostly it doesn't, you can. I think act even more appropriately when you have that sort of beginner's mind, that open mind to confront it.

I think that's great. The one thing I would add find your happy place and spend some time in it, no matter how busy you are, whether it's the lake, whether it is gaming or something like that.

Thank you for listening and we hope you enjoyed this week's episode of the Traction podcast. If you enjoyed the show, please leave us a five star review and you can find all the information mentioned in Today's episode at TractionCoff IO that's T R A C T I o N C O N F IO.