Exponential Growth Ninjutsu From 0 to IPO with Brian Rothenberg, defy.vc

I agree. I think being rigorous in terms of what are the levers and have we experimented with them, which ones work, which ones don't help to de risk that future question of can it keep growing at a high rate for a long period of time? I need some traction.

You need some traction. Let's get some traction.

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Super excited to have Brian Rothenberg with Defy VC and one of the most popular growth marketers I know. Brian spoke at Traction a couple years ago on scaling, building and scaling a marketplace from zero to a billion and it's probably one of our most viewed YouTube videos. We've been getting a lot of requests on doing a follow up session with Brian, he helped Eventbrite get to ipo. Before that he founded Skill Slate and exited it to Taxrabit, which was then bought by Ikea and then took Eventbrite, helped them get to 5 billion revenue and through IPO and now he's investing. So people wanted a second take from Brian and I'm super excited to have you. Over the last decade or so you've gone from founding a company through taking Eventbrite to ipo and now investing. You've seen a ton of startups you've seen everything on the planet pretty much in terms of growth. You're unique in a position where you've seen different kinds of business models, from SaaS to consumer to marketplaces, across different stages of a company's life cycle. So I'm curious, where does a company start when it comes to growth and what are you looking at for the earliest stages?

Yeah, I think step zero, before you even get to step one is really that you're building something that people want and need. Right. To state the obvious, at our firm Defy, we often talk about the authentic entrepreneur. It's an attribute that we really look for in people and it's somebody who's stumbled upon a non obvious, a real pain point through their own lived experiences. And usually this type of founder has the magic insight that helps to catalyze the product and it starts and ends with this new product, has to delight the end user. So generally, like it's an order of magnitudes better solution than the alternatives. We tend to really like products that are going after greenfield opportunities. So there aren't a ton of competitors. There's replacing existing workflows. At Eventbrite, it was a lot of people think there are a lot of ticket competitors. We talked a moment ago, Lloyd, about ticket, leap, et cetera, but the biggest competitor was actually people using pen and paper and PayPal and cash at the door. And that's the market that Eventbrite took over just because it was a better product and accessible to anyone who wanted to use it. Yeah. So I think it starts with building something that people want and then from there it comes down to how do you get these new users as they're exposed to your product to understand that first magic moment, like what is the moment where people say, oh, I get it, I understand how this can benefit me and help me run my business better, help me use my time better as a consumer or deliver more value. And so that initial value prop that product hook is absolutely critical. And one thing I've learned through my own operating experience, honestly, probably the hook of my startup skill slate was not super strong, whereas it was much stronger at TaskRabbit and then even stronger at Eventbrite is there's a big variance between how powerful that hook is and products where the value like we were just talking about a moment ago, Lloyd, if you're offering somebody free money, like more money, make more money, save time, like those are super powerful hooks. And so thinking about how do you deliver that value through the product and then get people to experience it quickly and then lastly, I think once you get people to experience that magic moment, once it's about how do you bring them back and have them experience it as often as makes sense within the frequency of how they might use your product. So how do you remind them in the right ways? How do you send them triggers? It could be in a marketplace business, somebody might become a seller, they might sell one product. How do you get them to come back? Maybe you message them, hey, 27 people viewed your storefront today, come back and sell something new. So you're showing that there's activity, that there are things happening.

Definitely, definitely. I want to stay on that segment here because it's early stage. You found the magic moment, you have the hook. People come to your product effectively to get a job done. They experience that aha moment and between them experiencing that magic moment, meaning they wanted to get a job done, you found their product, they got in, they got to that magic moment as quickly as possible. Before we get into the next step, at what point do you consider a company has product market fit?

Right?

Early early stage company, maybe at Skill Slate or different features that eventbrite. At what point does this company say they've got something here and let's keep going deeper and deeper. Is there. There's some metric or something you look at?

I think people often refer to product market fit as either you don't have it and then you have it. It's very binary when I think it's much more of a grayscale and an ongoing evolution. And one thing that we often look for and I do, is really the next step in moving towards product market fit is validating that there's a core group of people that really want it. You might start with just your friends who really want it and like it. But then who are the next thousand or so people who show evidence that they really want it and need it? And often it can take unnatural acts to bootstrap and get to your first thousand or so users. An example@ TaskRabbit is they used to go to local mommy groups early on to get their initial customers. Moms are busy, they often my wife, super busy, need an extra hand. That seems like a good way. Is that super scalable? Probably not. But a good way to test does this resonate with our target audience. So talking to these early adopters using a hypothesis framework to prove or disprove your hypotheses and get feedback is super critical. And then with assuming you get to that modest or small base of initial users, I think one Thing we look for is feeling pull from the market and that's a very hard thing to quantify. But it often is businesses where north of 50% of their new users are coming from organic channels or unpaid. There's clear word of mouth. Users are saying that they love it and they tell others. One of the foundational metrics that we do look at is their high retention of the product. So if people who come in and use it, do they continue to use it and are they highly engaged? So it's a little squishy at times, but yeah, it's users loving it. They stay engaged and they're telling others about it.

Awesome. And then at some of the companies you worked at, definitely at Eventbrite, you guys were offering a free product and then also a paid product. Right. Was there always a free product?

That's a great question. No, it was not. So this was one of those things where you stumble into something that ends up being so critical to the company's growth. The product was built to only process paid tickets. It was going to be, you sell tickets online. Eventbrite's model was we'll take a small percentage of that and that's how we'll monetize. But because it was a self serve, very accessible software platform, people would sign up and start using it in interesting ways. And one thing that the early team noticed is people. There was no free ticket option. It was people putting in $0 in the how much this event costs field. And I think a lot of companies would have thought, oh, that's a workaround. People are finding a way around our monetization model. But the founders embraced that and they said, oh, this is great. It'll just get bigger and broader distribution. And what we found over time is that a very consistent percent of users who started out using the free product would convert into users of the paid charging for tickets product. And I recall in our S1 filing, when we went public, we disclosed that as being a core lever for the business. And so 17% of users who started out free over time become paid users. And it was just a huge growth loop that we didn't even plan for. We just saw the opportunity and then capitalized on it.

Just by observing and segmenting your users and what actions they were taking in the product can create awesome new opportunities. I'll dive into, I want to dive into the whole Eventbrite journey. But before that, once you think you have that initial value and hook, what's next?

Yeah, I really look for ways to build a machine in businesses. And one of the ways that I think about that is I don't know if you all have heard of the concept of growth loops. And so maybe I'll start with growth loops, how they're a little bit different from funnels and then how to think about building those. And so with traditional product or marketing funnels, I think, and you put in some inputs at the top of the funnel and conversion drops at each step and you get something smaller at the bottom. And really you need to invest more at the top of the funnel to continue to grow. So it tends to be a little bit more linear. This is the classic enterprise sales model. You add some leads and some salespeople, you get some money at the bottom of the funnel and it's a good way to grow. You can grow consistently, but it's tends to lead to more linear growth and that's fine. But what you really want for the multi billion dollar outsized enduring companies is to find that compound growth. And that's where loops come in. And so I found the fastest growing products are better representatives, these systems of loops. Let me just share an example for DocuSign. So you have a new user, they sign up for the product. Some percent of those new users add a contract to be signed by others. Some percent of those people share that contract to be signed by other people who maybe haven't heard of DocuSign or use the platform before as the people that they've been invited to sign the contract. As they finish signing the contract, they're presented with a DocuSign landing page that basically says hey, you can use DocuSign to sign your contracts as well. And then a certain percentage of those people, now that they've had that idea in their head, they start using the product and sign up as a person to have contract signs. So you can see it's this loop that puts back into the top just by using the product as opposed to a traditional sales and marketing funnel. And sticking with the DocuSign example, that's now a $39 billion company as of yesterday. So it's super powerful when done well.

You have this base of initial users and the pull from the market. What are some ways that you may have implemented that loop at let's say your early company?

Because maybe you didn't right.

Or some way to go back and change it. What would you have done differently?

Sure, I'll share an example at my early company, Skill Slate. So again, this was a company started from zero. My co founder and I, we raised a seed round and built the product. And the product was a marketplace focused on helping independent service professionals. So like a handy person or a house cleaner build a profile online and basically build a marketplace much like a thumbtack. Today we started at the same time as thumbtack and how we thought about building loops in early is one. We built a crawler that crawled the web and found people who were posting on Craigslist and other sites. We would start to use systems to structure that information from these classified listings into business profiles for them. And then we would invite them programmatically to claim their business listing. Once they did so, they would augment that data and make their profile much more robust and add a lot of user generated content. So this is content that Google tends to love, right? Like new content written by other people in a very structured profile. And this was they didn't have websites or profiles on before. And so where that led to is then these profiles would get indexed in Google search. New people would find them, both consumers and other service professionals. And that led to new business professionals joining the platform. So you can see how like it was very systematic and structured and mechanical versus and as we added new people it drove both more consumers and more service professionals to the platform. So it was a system, not a one off like I'm going to run a Facebook campaign.

This is interesting, right? Because like companies like I had Calendee's head of product a couple of weeks ago talking about really reverse premium and how do you go from a company that's that sales led to product led, some Dropbox and whatnot. But these are products that are inherently viral, right? So what you did there is super interesting with Skill Slate is you're scraping and creating a profile to create a trigger for them to come and activate on your product. That's brilliant actually. So what are some other keys to successfully defining and utilizing growth loops?

You hit on a key one right there. We look for products and I'm always thinking about products that are basically engineered or the use case is inherently viral. Sticking with eventbrite for a moment, like it's just viral. You create an event, you're motivated to share that event and promote that event. Let's think about this webinar. You created this event, you shared it with your audience. Those people chose to join and I'm sure some of them shared it with other people that they thought might like the content. So that's just how people operate. And so building the product in such a way that helps to make that easier and make it more systematic is really Important. You mentioned Dropbox being a great one. Calendly is another docusign. There's so many, it's actually a small subset of the overall base. So something to look for. And then not every business has that. But I think it's important for people to ask what is my businesses or my team's unique advantage? So how do I identify and lean into the built in levers or loops or those advantages first versus trying to do everything? The nature of startups is you're inherently resource constrained all the time. No matter how much funding you've raised, your resource constrained. So picking where to focus is critical, especially early and leaning into them. So once you maybe have one of those hypothesis for hey, I think this is an advantage that we can capitalize on. What I typically advise next is forming hypotheses around them and figuring out okay, so what is the loop? How impactful do I think it can be? This can even be like napkin math or you're trying to figure it out and then look for evidence to support or refute each one. So if we go back to the Eventbrite, the freemium example that you brought up earlier, like we saw evidence that it was happening already, that can be a strength. Lean into it and do more. And then from there I often this can be founder led early on, it can be a small discrete team for a slightly later startup, build a cross functional squad or team to help address that opportunity. And so it can be like, okay, we see freemium happening, how do we lean in and make it happen more? Have a team focus on that for a period of time and it should touch product, it should touch marketing. And you should have somebody who's deep in the analytics to understand that as well as talking to users to understand how can you lean in further. And then one more thing I'll touch on quickly is I found it helpful to visualize what you think the loops are in your business and how they all flow together. I can probably share an example after this how Eventbrite's growth loops looked. But visualizing tends to be really helpful in mapping out how the whole system can work. And this can start as a whiteboard and then become more formal over time, but it can help the company see all of the channels, all the paths, all the loops laid out visually.

Definitely. I want to stay on that 80% for a moment. Not all products are inherently viral. Maybe more like 10% of the products probably have that built in loops. But you said the key is identifying and leaning into built in levers, loops and 80% of the companies may not have that or are not good at identifying it. From the onset you come across companies that weren't inherently viral and they did something that changed a loop for them.

Not many to be honest. And I think that's where the 80% number that we talked about earlier was more about. I think 80% of the battle and choosing where to spend your time and what company to build is picking the right place with these advantages. And so I have not seen tremendous success in like adding virality to something that is just inherently not viral. Like it's just that people aren't inclined to share these things. Maybe it's something that's very private, let's use that. Like I'm having trouble thinking of an example but it's something that I just don't want people to know about. But I like I use this product, you're probably not going to make that viral. So I think it's thinking through. But maybe that product has another great advantage. Maybe it solves a really core pain point and maybe it does need an enterprise sales model to help communicate that. So I don't mean to. I guess the point is this approach is not right for every business. But I think most of the huge outcomes that I've seen tend to have a lot of these things in common.

Yeah. Because if you look at it, some of the most valuable companies on the public market in the last decade, the last decade have been sort of product led or inherently viral loops in there like outside of Eventbrite, you look at Dropbox, you look at Zoom, you look at Slack, are three big, Shopify being another one.

Right.

They all have those elements. That's why I was curious. I think we need to do a webinar on a topic on how to make non viral products viral. But I want to ask one question around the company that you had earlier talked about is one of the companies you invested in. Product hook is essentially giving away free money and people tend to be private about how they take debt and whatnot. What sort of loops did you see in that company or how are they leveraging loops?

Yeah, it's just such a compelling hook around. Here's a way that you hadn't probably thought of before to make more money and you just have to pay a small fee and it's all completely legit and legal, et cetera. So it's not, it's viral in the sense that it's being shared via word of mouth. So people like they come in the hook is so compelling and so strong that the conversion rates through the onboarding funnel are among the highest I've ever seen. And payback period on paid acquisition is incredible. And then people get it and they get their, their first free money and they tell their friends because it's just so great. And so I think there are ways that this can build in triggers and the team is working on building in again. When you have that aha, moment of delight of hey, money, just hit your account, then ask those users to then share it with friends, right? Because it's coming off of such a high and asking them to take the action that you want them to take, that's probably the right time.

What are some pitfalls or some of the biggest pitfalls? Missing ingredients in companies that haven't been able to leverage loops properly.

And you talked about, I think again going back to step zero being creating value. I think some companies, unfortunately for better or worse, aren't solving a big enough or real enough customer pain point for enough customers. Honestly, I see a lot of companies leaning into growth before they figured out that core value creation component. A different flavor of this is scaling a business aggressively without positive unit economics. So like really there's no path to making money. It can often be like using an example, it might be that the cost to service each new customer is much greater than the revenue that you can extract from each of those new customers. So then you're basically as you grow, you're losing money with every new customer you add. And that's just a, a faster way to dig your own grave in a sense. And I saw this happen. I was an early advisor to the company ship, the sort of on demand delivery company, really great product. Consumers loved it, they raised a ton of money, but they didn't have positive unit economics. And so all the growth led to just losing more money. And sadly, despite a great product, they ultimately had to shut down because they just, they couldn't sustain it. And then I think one other place where companies can stumble here is the team might go after it with a very functional approach. And what I mean by that is a company, you know, CEO might say marketing. It is your job to drive the growth of the overall business. And sure, marketing plays a role and it's very helpful, but it often works best when it's all hands on deck. So product is thinking about what is the conversion through each of the key steps of the product flow. How do we build referral mechanisms into the product to help with overall growth? Are we delivering enough value? How do we increase the value that we deliver, et cetera. And so I've typically seen the best impact come from when all of these functions are working together, sitting together. Oftentimes if it's this cross functional growth squad and all really rowing in the same direction to drive a company's growth. But it just doesn't always happen. And then I would say the last pitfall I would call out is I see a lot of companies, especially at the early stage, getting hooked on paid marketing, where it just becomes you're playing the Facebook Google paid acquisition game and it becomes 70, 80, 90, 100% of new customer acquisition. And it's just dangerous, it can be hard to scale, it's typically very expensive and they get hooked and never really build in the organic sort of, as you mentioned, product led growth that other companies, more successful companies tend to do.

I think I would summarize that last one as owning the channel. And when I say owning the channel, meaning if you're spending money on ads, and I've seen this ourselves, giving you traction as an example, not even boast, we tried all kinds of things, email marketing, ads, partnerships. Owning an email subscriber base has always generated us the highest number of ticket sales because Facebook, Google, Twitter ads, every year it's gotten incrementally more expensive to get the same roi.

Yes.

Imagine businesses building their whole acquisition model on that. They're just gonna be paying more and more. You also talked about the data wheel of death.

What is that? I've seen this happen in a couple ways. One of the key ones is I've seen companies grow and that's great. They're growing and they're happy, but sometimes they just don't know why they're growing. And eventually this catches up and growth stalls out. And I'll use a personal example. When we sold our company, TaskRabbit at the time was one of those Silicon Valley darling companies. It was the start of the sharing economy. It was growing really fast, like 20, 30% month on month, every month. And I don't know if there was enough rigorous scrutiny around how are we growing and what's the underlying retention of users that we acquire, consumers and the supply base. And so when we got into the company, we started digging deeper and what we found was there wasn't enough rigor, I would say, and there wasn't enough data implementation at the time to understand the underlying levers. And what there was a core issue where when a consumer would come in to use TaskRabbit, they post a task to be done. And unfortunately it was only fulfilled, meaning they successfully were matched and had the job done some percentage of the time that was 100%. And if a consumer came in and didn't get their job fulfilled, they would never come back. Basically you churn out those consumers. And so what happened is this massive top line growth was masking that underlying churn issue on the consumer side. And we saw this and we realized growth is definitely going to stall out, which it did slow down. And there's been a lot of public postings on this and the company had to reinvent the product that it was delivering to help solve that problem, which to their credit, after I left they did and they did a tremendous job at it. But I guess the point I'm making is you don't have the requisite data to understand what's really going on. So you might be growing, but if you don't know why, you can be a step or two away from slowing down and not growing at all. And the last point I'll make on the data wheel of death is this is typically at larger companies, although it can be small when people stop trusting the data, it's not instrumented properly or whatnot, people can lose trust and faith in the data and then revert back to just making decisions based on gut instinct versus being data driven. And that can be a huge problem as well.

I think this partially ties to also, I don't know, you probably see a lot of earlier stage startups or free Series A. Maybe they'll come and say, man, we're growing really well and we have no marketing. When I hear that and maybe some, some advice for entrepreneurs on that is when I hear that effectively, I hear that I don't have a methodical way to get, keep and grow customers.

Yeah, you're hitting on a key point I think most investors are looking for. Can this business sustainably grow at a high rate over a very long period of time. And so yeah, you do want repeatability of the model and ideally opportunities that are obvious to lean in and do more and go faster and be more profitable, more efficient, et cetera. And I agree, I think being rigorous in terms of what are the levers and have we experimented with them, which ones work, which ones don't help to de risk that future question of can it keep growing at a high rate for a long period of time?

Yeah, and you hit a bunch of things in this segment here on when is it the time to invest in growth? Because if you do it before that, you're gonna just throw money in the Fire. And I still remember previous company speakeasy. We had 10,000 users. We're spending lots and lots of money on Facebook ads. Those users were churning. And so we would spend equally equal amount of money to get like tens of thousands of users every month. They would churn primarily because there was no, like, there was no theme around one type of user getting one type of value, all kinds of people using for all kinds of things. And we didn't fix the churn problem in the sense why were they churning and what is the ICP or user profile? And we continued spending money on ads. And the other thing tied to it was at a partner meeting at Venrock and we were pitching and Venrock's like all this is great. What are your cogs? And we were a calling platform for salespeople built on top of third party calling infrastructure. And the cogs are very high on telecom and everything fell apart there. So two of the worst things like high cogs, the more users you get, the more it costs you. And then they're churning. So don't spend on growth if you have those two things. Two issues is key theme I heard from that segment. Awesome. Let's dive into Eventbrite a little. How would you define Eventbrite's growth model?

Yeah, so it evolved over the years and I was there for almost seven years so saw it over quite a run. And I'll say it's really a platform with a two sided network. So there's supply and demand and especially early on. But I think it still holds true today. And again, I'm not affiliated with the business, I've been out of it for a couple of years. But early on it was very supply centric. So supply being how do you get as many quality event creators on the platform that bring their events to the platform? Because that's the supply, that's the products on the shelves, so to speak are the events that consumers can then discover and buy tickets to. And with that in mind around it being very supply focused, there was a funnel at the top where we thought about brand awareness channels like SEO, direct, paid acquisition, et cetera to put these creators into the funnel. We thought about the onboarding flow and how do we get more quality users through. And again, understanding the aha moment of value for how they can use the product. You already touched on this. We talked about it a bit, but we had the free product and the paid and that was a really powerful loop in and of itself. So we would work to get free users to become paid and then we would help and work to get first time paid users to be repeat successful paid users. And then from there. So once a creator would post an event on the platform, there were a couple different ways for them to disseminate it, distribute it to drive their own sales, or drive sales. One is doing so themselves. So we talked about earlier, Lloyd, with this webinar, oftentimes the creators had their own networks of people, their own audiences that they would market those events to. Or they might do their own broad marketing. So they might buy their own Facebook ads, their own Google Ads, and point to their Eventbrite page to sell tickets. So that was really powerful in and of itself. When you get a base of users helping to drive the other side of the network and drive sales in between, that was super powerful. And then I would say over time, and this kind of came a little bit later, we staged our way into it. There were efforts around how do we drive more consumer demand, so how do we drive more ticket sales? And this was a lot of effort around SEO being a huge channel for the business. And I can go into a couple reasons why this was an inherent advantage for the business. But you had people creating these events using again, user generated content. Eventbrite was one of the most linked to sites on the Internet, which was a huge advantage. And then it just drove a lot of consumers. And we created ways to create structured pages for the best events in San Francisco, the best wine tasting events. I think you get the point. And we just had such great distribution through Google and others. It sold a lot of tickets. And over time we did partnerships with Spotify and other platforms to help people discover events off of our network. And all of it contributed to helping to get those marketplace dynamics going. And then one of the other areas I'll touch on that was really important is again, the virality. And so you had, we already talked about it, event creators inviting other people to come purchase tickets. That was one form. And another really key form was people would often start using Eventbrite's platform as a, as an attendee, they would come to buy a ticket and attend an event. That was a really important awareness vehicle where people would be introduced to the product. And then in the future, if they had a need to host an event and sell tickets or offer free registrations, they would think to Eventbrite because they had a positive experience registering for an event as an attendee. And we found these really unique points in the data where people would be much more likely to convert from that attendee into an Event creator. And we leaned into it and we also filed this in our S1, our IPO prospectus, that about 70% of awareness for Eventbrite came from either word of mouth, virality, or this loop of people starting out as attendees and becoming creators. So all of these pieces together, it was a very robust network of loops and systems, a system of growth loops that really powered the business.

One thing that Eventbrite did, I'm a SEO fiend and that I observed. So with Eventbrite, you could either spin up your own ticketing page or you could embed a ticketing widget on your website. And Eventbrite dominated the SEO for keywords like Buy Tickets online, Sell Tickets Online ticketing software platform. And what you would do, I think you guys dynamically created the widget where under each widget it was Buy tickets online or ticketing software, it would just rotate those keywords and when you embed them, those keywords would link back to Eventbrite site. You got thousands of websites or like hundreds of thousands of websites embedding Eventbrite widgets. That gave you all this backlinking juice, which ranked Eventbrite very high for those keywords is what I observed, is what.

You guys are doing.

I tested it out.

That's why that was one of the things that my team implemented in my first six months on the job. Those widgets were created before I joined, but they had no SEO link embedded in them. And we added that and it was hugely powerful for the business.

Yeah. Cause I was. I observed that.

Geez.

Like in 2009 or 10. And I was like, how are these guys getting link juice here? And then I looked at the widgets and I played with a few of them and they were dynamically getting created. And so you guys were.

That was brilliant, by the way.

I think a lot of companies that have that opportunity, people say backlinking is dead, which is not true.

I think today you can do that. Totally true. Yeah. And I think one of the other things I was super proud of is this was also in our IPO prospectus. Eventbrite was one of the 100 most linked to sites on the Internet. From that and others. But thinking about every site in the Internet top 100 is crazy. And so it just had this inherent advantage in SEO and we really capitalized on it.

Definitely. Awesome. How was Eventbrite's growth team structured and how instrumental is org design and structure to growth?

Yeah, it went through a tremendous number of evolutions through the years. I was the first head of growth There was no head of growth before I joined the company. And I would say it started out as being pre function led. We had, we were structured around there's marketing group, there's the product team, there's engineering, et cetera. And what I observed is everyone was trying to drive growth, right? That's the company's mission, is to grow and deliver value. But it wasn't in a sort of aspect tied together ways it could be. And we worked to first start this single cross functional growth team where it was me as the head of growth. It was, we had a, I had a partner as a product manager for growth, we had a few engineers, we had an analyst and a designer. And we focused on first one of the core growth loops for the business which was that virality of attendees converting into event creators. And probably the next area we focused on was SEO. But we worked to all come together right. We had all the right functional skills, we could code, we could get things built in the product, we could use marketing channels to reinforce the loops that we were trying to build in. We had the right analytics to set everything up. And we showed to the company that we were making progress and that it was really moving the needle. And I think with that sort of early success and getting buy in everyone from Kevin, our CEO through to the other functional leaders, it gave us more credibility in the organization and ability to do what we ultimately wanted, which was to really empower every team at the company to be their own sort of growth minded teams. And so we did things like we created meetings at the company to share, we call them weekly experiment meetings. And we would share AB tests we had run in prior weeks. We would show people the different AB visual designs and ask them to vote on which one they thought would be the winner and then we would show them which one actually won. And I think one thing that trained people on is like our gun isn't as good as we think it will be. And often by testing we'll learn something that goes against our guts. We have to test. We also did things like our team built the company's internal A B testing framework, we built our own proprietary one, but we then empowered everyone at the company to run their own A B test and taught them how to use the tool, et cetera. So we basically around when I left, there were a bunch of teams working on different parts of the product and all approaching it in a very growth minded way. That's what we experienced there. I think at other companies it just takes constant experimentation and evolution and what works at one company may not work at the next. I reported to our cmo. I reported to our head of product, our CEO, our chief revenue officer. I sort of had to find my place within the organization and where I could make impact. And I think that's important for any company. Like figure out what is the right place, get the right people together and give them the time and space to drive the results.

While you were explaining that, I quickly went into ARFs and I saw Eventbrites. I just was curious to see what their domain authority is. And it's 93 with almost a million people backlinking. That's amazing. Your domain authority is probably better than most sites up there with Netflix and better than most media sites like TechCrunch and whatnot. That's just amazing. Fantastic.

Again, we can't take all the credit because it was just baked into how the business worked also, which goes back to find what works and do more of it.

Definitely. Because considering the fact that you guys didn't always start as that freemium product and making it freemium probably just made it exponential.

You're exactly right. There were. I think it's public yet. It is public. There were more free events than paid events on the platform. So if you think about those free events then linked back to Eventbrite, which reinforced the value for the overall platform at a much greater scale. Yeah, it was all very reinforcing.

Yeah, definitely. How are growth teams changing today? Let's just dive more into that.

Yeah, like I would say, Facebook gets a lot of credit for popularizing growth teams and creating these hacker teams together. And then it's as more startups built their own growth teams, they were these again, these cross functional dedicated growth squads. I've seen it distribute more into the various functions. And so I think the head of growth and the growth function is an intermediary step for companies to learn these ways of building and growing a business. And over time, the chief product officer, the head of product, the head of marketing, they should all think this way and they should find ways to work together that drive growth in these ways. So I think over time it'll be more common to be distributed amongst these product and marketing and engineering leaders. Whereas marketers heads of marketing 10 or 15 years ago tended to be much more like soft brand, a little bit fluffy, not as quantitative. But now those skills are expected at the head of the traditional function levels. I also think growth is more important than ever because there haven't been major platform shifts over the last few years where mobile was a huge platform shift 10 years or so ago, a little bit more. Those shifts empowered a slew of companies to build apps and products that people wanted get new distribution via the App Store largely for free. And without a shift like that, channels are getting really saturated. Like Lloyd, you mentioned, every single year Facebook keeps getting more expensive. There's a reason for that. The number of eyeballs on their site aren't growing dramatically, at least in the US and Canada, but they keep increasing. There are more advertisers, which means more higher cost per impression, cost per click, et cetera. So again, channels become saturated. It's harder for new entrants to grow. And that's why I think more companies are investing in these head of growth sort of growth teams.

Definitely. Like myself, I think you come across a lot of startups where they're focused on running before they can walk. What other sort of pitfalls or mistakes startups make when it comes to growth?

One is I see these very early stage teams trying to apply similar growth tactics as a late stage startup or even like a Facebook. So when you're at Facebook scale, if you're a B testing a button color, it may actually result in a pretty big lift. Even if you move conversion like a tenth of 1% at a smaller startup, it's not going to work that way. Like it's just a smaller numbers and so it's not going to end well. Like you're devoting your resources to something that ultimately won't move the needle. And that's my belief that a startup's growth strategy needs to fit where they are in the moment. People I think associate growth with these smaller micro a B test. But most startups particularly at the early stage aren't at the scale where these micro optimizations work. So I guess the meta point is optimization is important and increasingly important as a business scales, but it's at this early stage, especially the larger innovations and focusing again very rigorously on delivering core customer value, that's what generates growth more than those micro optimizations.

Definitely. Now there's also a common thing that I'm seeing happening in the industries. A lot of marketers are changing their titles to growth or growth marketers, which creates this perception that growth is just customer acquisition or like you get somebody to sign up and growth is much more beyond that.

Right.

There's far deeper connotations to growth. Walk us through that. What is the complete picture of growth?

Yeah, I think we even in this conversation we probably skewed more towards acquisition and that's a common thing. But in my opinion, retention and engagement of customers is really the most powerful driver of a business. Especially as the business ramps up, it's typically the hardest to improve upon. And so it's everyone's job really. But it starts and ends with the product and the ongoing value that the product delivers to the customer. There's, you know, for folks who want to read more about retention, there's a great retention benchmarking study that my friend Lenny Richicki and Casey Winters published called what is Good Retention? I'm sure we can link to it later and what you'll see is it benchmarks retention by business type, whether that's SaaS or consumer social or what have you. And what you'll see is nearly all of the iconic companies, companies that you would know and recognize, the Netflixes of the world, et cetera, they all have incredibly high retention. And it's no coincidence, right? Like again, the iconic companies have high retention partly because they deliver so much value and there's a high correlation. Another thing I've seen is with retention, even modest gains in retention can have a huge outsized impact on the business, particularly as it grows. So for example, in SaaS, returning cohorts of customers become a bigger and bigger portion of the overall revenue base for a company. So then upsell and expansion of those existing user bases become huge drivers to the overall business. Another point I'd make is if you can improve retention and monetization even a little bit, you can improve your ltv, your lifetime value of your customers and thereby that can also reinforce your customer acquisition. Whereas if a channel may not have had a good return when your LTV was X, if you make your LTV X + 20%, maybe that acquisition channel is now profitable and it can drive future growth. Again, retention and engagement is a huge part of the overall picture and I think probably not spoken about enough.

We put a head of growth title and all the folks that applied are essentially, if you look at LinkedIns and whatnot, they are marketers, which is need a marketer for sure. But growth is far beyond that, right? If you break the funnel, there's like people who sign up, there's people who onboard, there's people who keep coming back to get that core value, there's people who pay, refer, etc. And growth has impact across each part of that of that funnel. Let's dive into marketplaces in the early stages. Should we focus on increasing the total volumes of goods and services transacted in a marketplace or increasing marketplace revenues?

I think the most basic Step and my friend Sarah Tavel at Benchmark published a great blog post recently on marketplaces and the way she said it is great. I think it's about early on delivering happiness to both sides of the network in the marketplace. And that can be quantified in a bunch of different ways. And there's a bunch of ways to do it, but I'd start there. Are you delivering value again to either side and that could be done? It might be. I really like SaaS enabled marketplaces. So maybe using a Vepres model, you create tools and software that really help the supply side, for instance, with the jobs that they need to be done and that keeps them really happy. And then on the demand side, people like an easy purchase process and they like discovering new events. You make that really easy and both sides are happy and then you can start driving more transactions through. So again, it's different for every business but focus on happiness first and then from that I generally think GMV is a better metric. So the question was really about is it total goods and services transacted or GMV or is it focus on revenues? I like to not focus as much on revenues early on especially and partly because marketplaces tend to be winner take most or winner take all in most markets they operate. So if you focus on driving gross merchandise value or GMV that is typically more correlated, more aligned with achieving liquidity. And when you can get to liquidity in a marketplace and you're driving substantial volume, you then get to cross side network effects whereby you're driving a ton of transactions with every additional product you have on the shelf, more buyers want to be there with more buyers, more sellers want to come. And once that flywheel is going, you really drive lock in and you can then increase your take rate. So how much revenue you're extracting from the gmv and you have a lot more power to increase that over time. So again, I think revenue tends to trail in marketplace businesses and it's better to focus first on happiness of both sides, then on total volume flowing through and then on revenue last.

Definitely. And I think this ties. This could be an answer to Eileen here. She's talking about how do you recommend balancing the kind of engineering resources to support growth versus core platform functions. And I think you answered it right there. Value first before growth.

That's right. Without value there is no growth. So you have to prioritize the core to start. I think it's and it depends. And so once you're confident you're delivering that core value, think about what Are the biggest risk points in the business you want to de risk first? Are we delivering value? And then you need to shift pretty quickly into how do we de risk distribution? Because the best product doesn't always win. It's about a good to great product with great distribution that typically wins. So it's a shift that happens over time and there's no sort of formula that I found that works across all situations.

Definitely. I'm going to take a couple more questions and then dive into your investment side, which is what you look for in startups. But before that, what are some recommendations you've seen to scale a marketplace that's very trust dependent, like when it comes to financing or this is tail from Nigeria, they're building a platform to provide small business financing.

So I think the core premise of marketplaces is to facilitate and foster trust. So I liked that question. I think the higher the trust and hurdle required for a transaction, the more it needs to come from a referral from somebody who has used it. So I would lean into how do you get your early customers who have used it to tell their friends about it? Obviously that's the holy grail of you'd love to have every new customer come from referrals, but especially when the bar is high to to make that transaction, it should come from a trusted source. I would strongly bet that Lloyd, as you mentioned, paid acquisition is probably not going to work super well if nobody has heard of your brand. It's a super high trust transaction, bringing people in who have never heard of your brand are coming in through a more passive channel, like looking at a Facebook ad. Probably not going to work well. So again, start with the core base of users. Ask them to refer new customers. The referral tends to translate into more trust and go from there.

Definitely. And no growth conversation is complete without tools of the trade and some books and resources. Quickly tell us what are some low cost or efficient tools you've used to manage the growth stack in the past? Or maybe things that you recommend, your.

Teams, the startups that you're advising, and maybe a couple books. Yeah, let's start with some free resources. Hacking Growth by Sean Ellis is a good one. I don't love the phrase growth hacker, but Sean is a friend and I like the book Anything by Casey Winters. He's a friend. He's awesome. Go look up his blog. Lenny Rachitsky writes a lot on marketplaces and growth. He was the former growth lead at Airbnb. Follow me on Twitter please mrothenberg.com share a lot of Great resources from folks. Dan Hockenmeyer on Twitter Andrew Chen of course, anything that he writes is great. Those are a few ideas. What else? Let's see on tools we're big fans of Abused Amplitude quite a bit. Really like their products. On the analytics front, what else? For any B2B companies we have a great company that we invested in called Verse IO and they do SMS based and AI plus human driven lead conversion. So as leads come into your funnel they understand when they should be reached out to via mobile and help to convert those leads at a much higher rate. And again, given how expensive it is to generate new leads, getting leverage deeper in the funnel through conversion, it can be really powerful. I like attentive mobile in the mostly e commerce space. They do some SMS based conversion too for e commerce businesses.

The last question we'll end with this is what do you look for in early stage startups before investing? Firstly tell us more about like Defy and what is the sweet spot and and then go in what is the ideal founder profile for you?

Yeah, so Defy is an early stage venture capital firm. We are a new firm we started about three years ago. My two partners Neil and Trey come from bigger firms, Kleiner Perkins where Trey was there for 11 years and Neil was at General Catalyst for 11 years and wanted to create a new firm really founder friendly and founder focused and we invest mostly in and around the Series A, although we we call it early stage Frame A reason names are changing. We do some seed and we do some slightly later stage investments as well. We are a $413 million fund that we have closed over the last two, three years. We have about 25 portfolio companies and we invest across consumer, enterprise and deep technology. In terms of what we look for, we tend to be really founder led and we're looking for, I mentioned this before, but authentic entrepreneurs. So people who have discovered a unique insight around a pain point in the market through their own experiences, whether that be operating or otherwise. And you know, these are people who are just tenacious and obsessive about solving this problem. They just wake up and think about it morning, midday, night and when they're sleeping. And so that's one thing we look for but I would say broadly speaking and then I'll go into a little bit more about what I personally look for for we're looking for exceptional teams solving a real problem with an early product that customers love. Ideally it's in a large or quickly growing market and this can be a non obvious huge market, but one that we think can get really big with some evidence of traction and a path towards sustained long term growth. And then the last point, we talked about unit economics earlier. A viable business model that can generate future profits. It doesn't mean it has to be generating revenue even, but you can see a path to it generating profitable revenue. And then for me personally I touched on the authentic and tenacious founders which we're really big on. I want to see a product that's demonstrating value to that core base of users, even if it's early. Just signal that people are loving it and sharing it. And then lastly, one trait that I look for is even if it's software, I really prefer self serve products that have early evidence and or a path to those built in growth loops. What we talked about, not every business has it, but if it has a path to having an inherently viral loop, amazing. If it has some way to have user generated content that leads to an SEO strategy, that's awesome. So those are the key attributes that I tend to look for and we look for as a firm.

Thank you so much Brian. I need some traction thank you for.

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