Fresh out of YC's Summer 2019 batch, we want to share some of our most interesting learnings. If you're a startup founder or enthusiast and want to learn about product-market fit, growth experimentation and culture setting, you're in the right place!
But before we get started: If you're a female or minority founder and got invited for a YC interview in November/December, I invite you to reach out to me to ask for advice or a mock interview! Only ~10% of founders in my batch were women, and very few were minority founders – we still got a long way to go.
How to know whether you have product-market fit (PMF)
At some point early in the batch, I saw YC partner Dalton Caldwell tweet about the uncanny valley of PMF, and how many startups with a little bit of traction might falsely conclude that they have it:
A dangerous (and common) scenario is a startup with a little bit of traction... just enough traction that they aren't willing to change ideas/markets and not enough traction for them to actually know they have product market fit.— Dalton Caldwell (@daltonc) June 19, 2019
It's the uncanny valley of product-market fit.
This is important, because if you don't have product-market fit yet, then you need to focus on building and iterating on your product until it resonates with your target customers.
If you do have product-market fit, then your priorities will change – you'll need to switch gears and start focusing on accelerating growth by identifying your most powerful growth and distribution channels.
So, how do you know whether you have product-market fit? This question came up many times during YC, and different people had different answers. Here are the three pieces of advice and insights that helped us the most.
1. Check your retention numbers
How well do you retain users over time? If the retention curve flattens and runs parallel to the x-axis over time, then that's a good sign. It suggests that you won't "churn through" the users you acquire over time. Here's what Prolific's retention looks like for researchers and participants:
55% researchers active in Q1 2019 were still active in Q2
74% of participants who took part in studies in Q1 2019 came back in Q2
As you can see, the retention line flattens over time and starts running parallel to the x-axis – score! 🙌
The Median retention for on-demand marketplaces is 22%, so we knew that our retention was solid. Here's what YC consider high retention for different types of verticals (source):
2. You will be able to feel when you hit product-market fit
Besides metrics, multiple successful YC founders who came as guest speakers, as well as YC partners, made the case that you will know that you have product-market fit because you will feel it.
For example, Peter Reinhardt (YC founder and CEO of Segment) defined PMF like this:
"You have product-market fit when people start giving a shit and caring about our product so much that you feel like you've lost control. Customers start demanding things of you and it feels like the market is dragging you forward." - Peter Reinhardt
Rather than wishing for more customers, you will have too many to keep up with! At Prolific we've been under capacity for a while, as our Support Team can attest... We thus felt that we had early PMF in Academia.
3. Product-market fit survey
About halfway through the batch, I stumbled on this article by Superhuman CEO Rahul Vohra, which I highly recommend you check out. Rahul basically reverse-engineered a way of measuring PMF and presents a methodical (user-driven!) approach to achieving it.
Essentially, it boils down to running a survey with your customers, in which you ask: "How disappointed would you be if [insert product] no longer existed?" Apparently, if more than 40% answer "very disappointed", then its an indicator of PMF.
For Prolific, we got a staggering 71% of customers (N = 210) saying that they'd be very disappointed. This was the final data point we needed to firmly conclude that we had PMF in Academia and should double down on growth in this target market.
But how to double down on growth?
Create a culture of fast cadence (but make sure it works for you)
In our very first office hours with our group partner Jared Friedman, we realized that the most critical sticking point for Prolific would be our growth rate.
When we joined YC in June 2019, we had solid revenue, were breaking even and were growing 2x a year organically and through word-of-mouth. But this wasn't fast enough, so we needed to figure out how to grow faster. We didn't know what growth levers to push, so it was clear that we needed to start experimenting with growth.
As part of YC, we set the ambitious goal to double monthly revenue. There are two levers for increasing revenue: It's a function of volume x price. We decided that the main lever we wanted to push in order to boost revenue was to increase the volume of data collected on Prolific, from 70k participant responses per month to 140k responses (within 12 weeks). Back then, Jared said to us:
"You need to set a goal that is so ambitious that you could barely imagine it working, but is theoretically possible." - Jared Friedman
In retrospect, trying to double monthly revenue within 12 weeks was
C-R-A-Z-Y! 🥴🤯 But we gave it our best shot and saw some successes. Here's what we did.
Once you're ready, set up an early growth team
We set up a growth team that owned growth experimentation. It comprised myself, our CTO, our COO, two data analysts, a marketing manager and a growth strategist. We used NorthStar to keep track of our growth ideas and experiments and we'd meet every Monday to discuss how our experiments are going and what to do next.
We've tried to accelerate growth via countless channels: Referrals, SEO and SEM, cold emailing, content marketing, PR, improving customer conversion and customer reactivation, and many more.
We tried to be as creative as possible, asking our team of 15 to nominate their favourite growth ideas. By democratic vote, we'd decide which ones to prioritize.
And here's what we've learnt.
1. Be open to surprising growth channels
We've learnt that unconventional and under-utilized channels can be the most powerful. One of our most creative (and most successful!) ideas turned out to be podcast sponsoring: We ended up being featured on Very Bad Wizards (tune into this and this episode 🎙), which was great fun, boosted team morale and yielded some amazing new customer leads. A data scientist from a Fortune 500 company found out about us that way!
2. Don't feel obliged to iterate implausibly fast
As much as we wanted to iterate on a weekly basis, with most growth channels this wasn't possible. Unlike in consumer startups, it takes our average customer several months to convert into a paying one. So we've learnt that "iterating fast" means different things for different companies.
Weekly iteration wasn't meaningful for us because we couldn't see results quickly enough. Besides, this kind of myopia made us too focused on quick wins and not sufficiently focused on long-term strategic wins. Bottom-line: Find a cadence that works for you. 💯
3. Before ramping up customer acquisition, make sure you're happy with your conversion and retention metrics
YC are awesome at instilling a sense of urgency and I think this has profoundly influenced our mindset.
However, before you try to ramp up the acquisition of new customers, take a look at your conversion and retention metrics first. As mentioned earlier, you don't want to end up in a "leaky bucket" situation where you flush through the market and most of your customers churn.
Conversion is critical, too. If your conversion from registered to paying customer is low (say, 1% or lower), then you should first investigate why. This means: Talk to your customers in person, on the phone, on the internet, or through any other means. Try to understand why they sign up but aren't using your product.
One thing YC urged us to do is to overhaul our homepage by adding clearer information about what Prolific is, our pricing, different use cases, academic papers published about us, testimonials from customers, and an audience checker that lets you explore our participant pool without the need to login. All this was intended to make things more transparent and help boost our conversion metrics.
And indeed, this seems to have helped: We managed to increase our conversion from 9% on average (Dec 2018 to May 2019) to around 14% on average (Jun to Sep 2019).
Humility and ambition as a cultural forcing function
Finally, I think that the most intriguing characteristic about YC is the way it's able to combine humility with ambition. A paradox? Doesn't have to be!
Humility about the process of building a startup
When I say "humility" I simply mean low ego. I noticed this everywhere: In the way YC partners would joke about each other, in the way that dinner was served and in the way they'd relentlessly give feedback on founders' pitches every day till midnight leading up to Demo Day.
And there's a more profound way that makes YC humble: No matter how small or weird an idea might seem, YC will always encourage you to talk to customers and then go from there.
It's their humility about the process of getting successful that's striking: There is no preconceived plan or recipe you can use to make your startup a success. You're the only one who can uniquely figure it out.
So, the only way to build something big is to talk to existing or potential new customers day in day out, build fast, ship fast, iterate fast, and stay a good human along the way.
Yes, we knew the "Talk to your customers"-mantra before spending time at Mountain View. And yet it was a whole different ball game to see fellow founders live and breathe this principle. The speed of execution was deeply inspiring. Some of the founders we met performed the most incredible pivots only within a few weeks' time (thinking of you GreenTiger and Tandem 😉).
Ambition about impact
And then there's ambition, by which I mean the desire to have large impact and create world-changing companies. Paul Graham, one of the YC cofounders, didn't shy away from saying to us: "Your company could be bigger than Google!" (and it sounded like he meant it! 😄).
Paul Graham went on to sketch a vision of the future where Prolific might become the key mechanism in the product creation cycle, the feedback loop between products and customers. He said to us:
"You’re riding a wave of increasingly empirical marketing. It used to not matter 'what people thought' because they only had a few limited options in front of them. Now choice is abundant, so measuring what people think, and what people want, has become very important." – Paul Graham
It's inspiring: YC are ambitious about "the what" and humble about "the how". Unlike some investors we've met, YC won't tell you how to build your business. But they have great advice on the process of figuring out how to build it and how to grow it.
Is there anything YC could do better? Sure as hell. Stay tuned for my next post to find out! 🙂