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Posts from the ‘Greylock’ Category

Did You Like Being an Executive in Residence (EIR)

This is the fifth and final post of a multi-part series on being an Executive in Residence (EIR). The initial post outlining the full series can be found here. The previous post was “Challenges of Being an Executive-in-Residence (EIR)

As I’m writing this post, I’m feeling a bit sheepish as I promised the to finish this series last year. I was reminded last weekend that people are finding significant value in the series, largely because so few people actually write about being an EIR. In my previous four posts, I stayed objective and incorporate lessons from other EIRs that I’ve had the opportunity to both know and work with.

Despite the series, I still receive questions about my time as an EIR, and the most common question I still get is:

Did I like being an Executive in Residence?

For those who want the short answer, it’sYes, I did.

For the complete picture though, I’ll try to put into my own words why I liked the experience of being an Executive-In-Residence at Greylock Partners, and why I’m grateful for the opportunity.

My Three Top Reasons for being an EIR:

1. The Typical Benefits

As I wrote in my earlier post, “Should I be an Executive-In-Residence (EIR)?“, there are a number of benefits to being an EIR, and my case was no different.

The position gave me the opportunity to create, build and grow relationships.  While I was heads down at LinkedIn, it was often hard to do this well outside the company.  My time as an EIR definitely helped me go into my next role better reconnected into my professional (and personal) networks.

My time as an EIR also allowed me to both broaden & deepen knowledge about multiple markets. I had both the time and the connections to explore a wide variety of product categories and sub-sectors, and more importantly, learn more deeply about what strategies and tactics were finding success.

One of the most obvious benefits of being within a firm like Greylock Partners was the incredible visibility into the startup community. There are so many incredibly talented entrepreneurs and executives building new businesses, and being an EIR provides not only exposure to them, but the opportunity for deep & frank discussion & debate.

Lastly, at a venture capital firm you quickly discover what are the unique knowledge sets where others in the startup community find value.  At Greylock, I had the time and focus to both clarify both my thinking and content around product leadership and growth, two topics that continue to be in high demand.  The investment in thought leadership, that I was able to make during my EIR role has continued to pay dividends well beyond the relatively short time I spent in the role.

2. A Time for Self Discovery & Clarity

About six months into the role, I had the good fortune to experience one of those rare life events that gives you both the time and the catalyst to think deeply. In May 2012, my wife & I welcomed our daughter into the world, and I took a month off to both manage the chaos that comes with a new addition, and reflect a bit on next steps.  (For fans of my blog, this is when I wrote my piece on the Combinatorics of Family Chaos).

During that time, I came to a new level of clarity about what I was looking for:

  • Product. As someone passionate about product & design, it had to be a consumer product & service that I was passionate about.
  • Stage. I’ve had the good fortune to work for both startups and large companies at almost all stages.  That being said, there’s no question that I deeply enjoy the technology, product & strategy issues that come with hypergrowth.
  • Role. After a range of technology & leadership roles, I realized that I wanted the opportunity to help build and lead a company. I wanted to be the CEO.

Finding a company that fit the above felt a little bit like finding a needle in a haystack, but fortunately Silicon Valley turns out to be one of the better haystacks in the world, and the EIR role gave me time to find my needle.

3. Finding My Needle

In the summer of 2012 I met Andy Rachleff for the first time, through an introduction by Jeff Markowitz at Greylock. While I knew of Andy by reputation, we had never had the chance to meet in person. Wealthfront was not a Greylock investment at that time. I told Andy that I loved what Wealthfront was doing, and that I had opened an account almost immediately after it launched in December 2011. That being said, I told him that the only way to make Wealthfront succeed would be to find the right talent and the right growth strategy.

Over a few months we met and debated different ways to attract the right talent to Wealthfront and find a growth strategy that would succeed. One day, as I was discussing the company with my wife, Carolyn, she provided me with exactly the final clarity I needed.  She said, “It seems like you really like Wealthfront and want it to succeed.”

It was true. I not only liked the idea of Wealthfront, but I also liked the idea of a world where Wealthfront was successful. I signed on before Thanksgiving (Wealthfront had about $79M under management at that time), and formally joined after the new year. Andy wrote his own version of his decision to bring me on as CEO on the Wealthfront blog, but I credit the EIR role with the time, the relationships, the clarity and the opportunity to find my dream job.

Right product. Right team. Right role. Right time.

 

Challenges of Being an Executive in Residence (EIR)

This is the fourth post of a multi-part series on being an Executive in Residence (EIR). The initial post outlining the full series can be found here. The previous post was “How do you get an Executive in Residence (EIR) role?

If you’ve made it this far in my Executive in Residence series, you might be thinking, “This job sounds like a dream come true.  What could be better than a role where I’m working with intelligent people, meeting brilliant entrepreneurs and given time to think carefully about my next company?”

I’m a big fan of the Executive in Residence (EIR) role, when it’s taken for the right reasons and with the right firm.  That being said, the EIR role is one of the more unstructured positions out there, and can easily lead to an unproductive outcome for both the executive and the venture firm without the right perspective and motivation.

Time Management

There is no question.  The biggest lurking challenge around being an Executive in Residence is time management.

For an operating executive or CEO, you likely have gotten used to the implicit structure imposed by running an operating business.  There are people and teams who report to you, guidance you give regularly on talent and strategic decisions, key results you are responsible for.  If you’ve worked for a company of any scale, your biggest issue previously was likely paring your calendar back regularly to give yourself time to think.

You know what greets you as an EIR on your first day?  A calendar full of empty.  More importantly, while there are meetings all the time, you aren’t actually required for any of them.

As a product manager, it’s second nature to think backwards from your goal, and create a set of milestones and checkpoints.  As an EIR, I’d recommend thinking about the following milestones, within a rough timeline of one year:

  • What’s your investment thesis / area of focus?
  • Are you going to be an investor or an executive?
  • Are you going to start something or join something?
  • Are you going to look at companies outside your firm’s portfolio?
  • What stage of company and role are you looking for?

Investment Thesis & Focus

The first thing that happens when you join a venture capital firm is that you realize the world of successful startups is much broader and more diverse than you thought.  This goes beyond simple descriptors of “consumer” and “enterprise”.  Given your unique experience and skills, you may find yourself fascinated with marketplaces, collaborative sharing, mobile communication, next generation CRM, big data infrastructure.

The problem is, no one can be deep on everything.  It’s all too easy to find yourself broadly exploring an ever increasing number of sub-segments, business models and industries.  In a partnership, you’ll find that every partner has levels of expertise and exposure on multiple domains.  As an EIR, you could potential spend time digging into any one of them.

Some of this is good, to be sure.  One of the perks of the EIR role is the time and access to broaden your horizons.  However, the challenge for an EIR is that, in a limited time frame, you have weeks and months to explore, not years.  Most successful EIRs come to an opinion fairly quickly (within 6-8 weeks) of the rough dimensions of the currently exciting areas of innovation to focus on.

Investor vs. Executive

Being at a great venture capital firm inevitably forces even stalwart operators to ask the question of whether or not they want to be an investor.  Most likely at this stage in your career, you’ve already started to take advisory roles or participated in seed rounds as an angel investor.

EIRs rarely transition to investing partners, but it happens more often than you might think.  (Most recently, Simon Rothman transitioned from an EIR role to a general partner at Greylock).

The real issue is one of time frame and priorities.  In the end, the process that investors go through to evaluate companies and opportunities has very different dynamics than finding a good fit for a CEO role.  While most EIRs have this internal debate at some point, the sooner you can resolve the issue with confidence internally, the sooner you can optimize your efforts towards a successful outcome.

Let’s face it: defining success is a big part of achieving it.

Entrepreneur vs. Executive

Alright.  You’ve figured out your investment thesis and areas of focus, and you’ve got confidence now that while you respect venture capital quite a bit, you’re an operator.  The next challenge that rears its head: are you sure you don’t want to start something yourself?

Meeting with successful, passionate entrepreneurs day-in and day-out does a funny thing to you.  It’s addictive.  Their energy is tangible.  And when you work with a great firm, more often than not, you meet superlative entrepreneurs, many at later stages of company development, proving that not only can it happen, it actually happens more often than you thought.

In my first post, I tried to explain the differences between an entrepreneur-in-residence and an executive-in-residence.  As it turns out, however, at most firms, there is a lot of flexibility around this issue.  At least in Silicon Valley, no one is going to talk you out of building something from scratch if you get set on doing it.

I hate to be cynical, but watching a number of colleagues go through this, the pattern is fairly predictable.  The reality is, most people actually have the answer to this question before they start their role as an EIR.  What actually happens is that EIRs tend to forget this fact quickly, spend some time debating it internally, and then realize that their initial assessment was correct all along.

Navigating Firm Bias

Another challenge that confronts EIRs is firm bias.  By taking a role with a specific venture capital firm, a number of questions are raised:

  • Will you only look at companies that fit the firms / partners current investment thesis?
  • Will you only look at companies that the firm has invested in?
  • Will you engage with recruiting partners from other firms or third parties?

Underlying these questions is an implicit misalignment between the EIR and the firm.  The firm is investing time (it’s most precious resource), reputation and knowledge with you.  At the same time, as an EIR, finding the right fit of company, stage, product, team & timing for a CEO role is exceptionally difficult.  Spreading the net as far as possible definitely can increase chances for a successful fit in a given time frame.

For most EIR roles, the answer to these questions is best resolved directly, with the firm, before joining.  Personally, I was fortunate enough to be an EIR at Greylock Partners, where the firm’s perspective was that any area or company that was interesting enough for me to engage with was by itself a strong vote of confidence.  Greylock is one of the oldest and most successful early stage venture capital firms, and sees its network as extending, through people, more broadly than just to the specific companies where they are currently invested.

By the way, for this reason, it’s not unusual to see EIRs split their role between two firms, just to signal strongly to both the firms and the outside world that they are not committed to a single firm.  While I don’t believe this is necessary for a successful EIR role, I do personally recommend that EIRs broaden their network to companies and opportunities beyond a single firm.

Company Stage & Role

This might be one of the biggest challenges an EIR faces in their search.  What are you actually looking for?

  • Are you interested in a startup that is pre-product/market fit?  Or do you operated best when product/market fit has been established?
  • Do you add the most value at a 20-person company going to 100+, or a 300 person company going to 1000+?
  • Are you willing to consider a COO role, or only a CEO role?
  • Will you consider GM roles or functional leadership roles at larger companies?

To some extent, you have time to entertain and consider a wide variety of roles.  There is significant learning, both about the company and yourself that takes place when you engage on a potential role.  That being said, spending time on roles you are not inclined to actually take is expensive, for both you and the company.

Tell Us Your Story

In the previous four posts, I’ve tried to remain objective and incorporate lessons from other EIRs that I’ve had the opportunity to both know and work with.  Due to popular demand, however, my final post in this series, Did you like being an Executive in Residence (EIR)?, is coming up next.

How Do You Get an Executive in Residence (EIR) role?

This is the third post of a multi-part series on being an Executive in Residence (EIR). The initial post outlining the full series can be found here. The previous post was “Should I be an Executive in Residence (EIR)?

One of the most mysterious aspects of the Executive in Residence role is the relative obscurity about how these roles come into being in the first place.  After all, you’ll never find a job posting on LinkedIn for an EIR, and as a result there is no obvious description of the requirements or the process to get one of these roles.

However, a simple search on TechCrunch or Pando Daily reveals a fairly regular stream of people joining top tier venture capital firms as Executives in Residence.  How did they get that role?

Relationships Matter

Venture capital partnerships value relationships, and so it’s rare that you’ll find an Executive in Residence that doesn’t have some direct relationship to the firm that brings them onboard.  The three most typical ways executives form these relationships are:

  • They were an executive or founder at a company backed by that venture capital firm.
  • They worked with one of the partners at the venture capital firm in a previous operating role.
  • They sat on the board of directors of a company with a partner from that venture capital firm.

There are of course exceptions to these examples, but in most cases the most likely way to get an Executive in Residence role will be from one of the venture capital firms that you’ve personally worked with in the past, where they have a high opinion of your capabilities as an executive, your relationships in the entrepreneurial community, and your expertise in an area that the firm has prioritized.

Situations Matter

The Executive in Residence role is typically opportunistic in relation to timing.   There is some event, some inflection point where a talented executive ends up potentially free from an existing role, and yet will be looking for time to assess the market and decide on their next operating role.

The most common events that lead to this situation are:

  • Acquisition of a company. During acquisitions, executives either leave on completion of the acquisition or after some reasonable transition period.
  • Reorganization of a company.  As companies grow, they periodically will hit strategic shifts or management inflection points where it makes sense for some executives to leave the company.
  • Long tenure / Company size.  Sometimes as companies grow, executives who prefer earlier stages of company culture and growth will decide they want to pursue a role a new startup, but don’t necessarily have visibility into the full field of opportunities.

Once again, while there are exceptions to the above, you’ll find that almost all Executives in Residence come from a situation that generates a need to leave their current role, without sufficient time for the research and match-making process involved in placing a CxO.  These situations can also generate the catalyst for a venture capital firm to take the opportunity to deepen their relationship with a talented executive.

Reputations Matter

In the end, venture capital firms bring on Executives in Residence in order to bolster both their access to talent as well as their relationships in the startup community.  As a result, the reputation of the executive matters quite a bit in terms of getting an offer to join a firm as an EIR.  Common attributes are:

  • An executive with a well known reputation, or strong ties to a recent, well-known successful venture-backed company
  • An executive whose reputation will be compatible and additive to the brand of the venture capital firm
  • An executive whose existing relationships in the technology community will be compatible and additive to the venture capital firm.
  • An executive with expertise in an specific market or technology sub-sector that the venture capital firm is strategically interested in going forward.

You Don’t Ask, You’re Offered

The Executive in Residence role is, by its nature, a fairly opportunistic hire on the part of the venture capital firm.  If you are a founder or executive at a venture backed company, and one of the situations described fits your condition, make sure you are investing some of your time in relationships and being “top of mind” with venture capitalists you’ve worked with.

My next post in the EIR series will attempt to answer the question: “Challenges of being an Executive in Residence (EIR)

EIR Series: Should I be an Executive in Residence (EIR)?

This is the second post of a multi-part series on being an Executive in Residence (EIR). The initial post outlining the full series can be found here.  The previous post was What is an Executive in Residence (EIR).

The most common question in relation to the Executive in Residence role has been a simple one:

Should I be an Executive in Residence?

The truth is, when people ask me this question, they are very often asking two similar, but different questions:

  1. Is the Executive in Residence Role a good opportunity?
  2. Is the Executive in Residence Role something I should pursue?

The answer to the first question is fairly simple, but it has an over-arching caveat.  Like most things relating to venture capital, the quality of the partnership that you’ll be working with and the expectations of that partnership around the role are paramount.  As long as there is strong alignment of expectations between the partnership and the executive about the expectations for the role, the Executive in Residence role can be a unique and fantastic opportunity.

The second question, however, is much more complicated.  And that’s because it implicitly brings up some of the most difficult career questions we have to ask ourselves.

What Do You Want From an EIR Role? 

Last year, John Lilly wrote a simple blog post about leadership and the key questions to ask when you’re asked for advice.  If you are at the point in your career where you are qualified to be a CEO, then the question of what you want from your career becomes increasingly dominant.

What are you optimizing for?  Is it passion for the product you’re building, particular technology or a target market?  Are you looking for a particular business model, corporate culture or lifestyle? Are you looking to join the ranks of the Forbes 400?  Are you looking for power & influence and if so, in what industry / sector?

These questions can become increasingly difficult as you progress in your career because to be uniquely qualified to lead a company, there needs to be incredible alignment between your values and goals, and the goals of the company you want to lead.  Put another way, matchmaking for the right company actually requires a deep understanding of your own motivations, values & priorities.

Benefits of the EIR Position

The Executive in Residence role offers a lot of unique benefits.  These include:

  • Create, Build & Grow Relationships.  It’s an incredible opportunity to make new relationships, re-establish dormant relationships, and deepen existing ones.
  • Broaden & Deepen Your Knowledge of the Market. When you are in an operational role, you tend to become extremely deep on the companies related to your market and space, and tunnel vision sets in.  The EIR role gives you the opportunity to explore a much wider range of product categories and sub-sectors, and learn more deeply what strategies and tactics have been successful outside your specific niche.
  • Learn about New Companies.  We all like to think that we’re in the flow of knowing the important, successful private companies being built in Silicon Valley.  The truth is, there are a shockingly large number of amazing private companies that you haven’t heard of.  The EIR role gets you fantastic exposure to a large number of companies you haven’t heard of.
  • Platform for Thought Leadership.  Top tier venture firms have great reputations, and EIR roles offer a unique opportunity for you to nurture, develop & grow your own reputation around specific topics and issues.  The venture firm benefits from its association with thought leadership, and the EIR benefits from its association with the firm.  The end result can be magnified opportunities for both parties.
  • Try Before You Buy.  The EIR role gives you an exceptional ability to spend time with portfolio companies.  They are usually extremely happy to get additional help, and the time spent can help both parties figure out if it’s a potential good fit or not.  The best part about the role is that if it isn’t a good fit, the time spent was without firm commitment, and can be easily ended at any time without few (if any) negative relationship or reputation effects.
  • Self Discovery.  The EIR role is structured to give you time to ask the hard questions about what you are looking for in a company, a product, a market, a culture.  It’s structured enough to provide stimulus and ideas, but unstructured enough to give you gaps to ask (and answer) the hard questions.

Problems with the EIR Position

While I’m extremely positive about my experience as an EIR at Greylock Partners, I’m one of the first to caution people who ask me about the role that there are real issues to consider.

  • Firm Lock In.  When you are immersed in the people & culture of a particular firm, it’s very easy to de-prioritize networking and intellectual debate outside the firm.  Venture firms tend to discuss their own successes and failures, and the burden is really on the EIR to ensure they broaden & deepen their relationships outside the firm.  This is why, for example, some successful executives will take EIR roles at two different firms.
  • Paradox of Choice.  We are all human, and humans don’t do well with a massively expanded selection set.  The more companies, industries, products & concepts you are exposed to, the harder it can be to assertively make a choice to pursue a single company.  This is why, for example, successful EIRs will often frame their time in waves – spending weeks or months on a particular area or topic, and then shifting to another, rather than trying to explore and pursue everything at once.
  • Portfolio Work vs. Discovery.  Working with portfolio companies takes a certain amount of time and effort to be effective.  If you are going to spend 1-2 days a week with a company, you’ll quickly run out of days of the week.  As a result, it’s important for EIRs to find a system that allows them to balance networking & discovery time with active engagement with companies.  6-12 months can pass unbelievably quickly, and in the end, your goal is to find that next great role.
  • Operating Skills / Credibility.  Technology moves incredibly quickly, and it’s amazing how even in a matter of months the landscape of ideas and tactics can change.  Venture capital firms tend to be comfortable places, but never forget that you always need to be learning & growing, most likely by engaging and helping entrepreneurs with real challenges they have today.  The lessons from 2012 are interesting and useful in 2013, but the half life of those lessons can be shorter than you might think.

So, Should You Do It?

I’m colored by own personal experience, which was with a great firm and a great outcome (I’m exceptionally happy with my role at Wealthfront).

If you are looking for either your first CEO role, or your next CEO role, and you have the opportunity to be an EIR with a great firm, I believe the Executive in Residence role can be a unique & excellent opportunity.  Going into it, however, you need to do two things to be successful: be prepared to take advantage of the unique opportunities of the role, and be extremely cognizant of the potential pitfalls and issues inherent with the position.

Going forward in this series, I’ll be focusing on the Executive in Residence role. My next post will attempt to answer the question: “How Do You Get an Executive in Residence Role (EIR)?

EIR Series: What is an Executive in Residence (EIR)?

This is the first post of a multi-part series on being an Executive in Residence (EIR). The initial post outlining the full series can be found here.

One of the first things I learned when I accepted the role of Executive in Residence at Greylock Partners was that almost no one actually knows what that means. (I can hear my father asking me now, “You’re a resident now? Like a doctor?”)

In fairness, the role is rare enough that, outside of the Silicon Valley venture community, you might never run into it. It’s almost pathologically designed to be cryptic. Not only is it rare, but it’s also designed as a short term role, not a permanent one. If that wasn’t tricky enough, it turns out that there are a few flavors of “EIR” just to add a good dose of acronym confusion to the mix.

So before discussing the details of the Executive in Residence role, let me clarify the three different types of EIR you may come in contact with. (As a side note, the following definitions and examples are certainly biased towards my recent experience at Greylock Partners.)

  • Entrepreneur in Residence. The original EIR role, the Entrepreneur in Residence role is designed for entrepreneurs who are actively working on both the conception & execution of their next company. These roles are generally structured as 3-6 month engagements without compensation, but the entrepreneur is given resources & a place to work, and significant time & exposure to the investment team at the venture capital firm. The entrepreneur benefits from the constant challenge & framing of world-class investors, and a higher than average likelihood of funding from the venture capital firm. The firm, on the other hand, gets a significant degree of proprietary access and influence over the new company.

    Notable recent examples: Nir Zuk, co-founder of Palo Alto Networks (PANW, $3B+), Josh McFarland, founder of TellApart.

  • Executive in Residence. Sometimes referred to as an XIR, the Executive in Residence role is designed for executives, typically CEOs, who are in between companies. These roles are typically structured as 6-12 month engagements with limited compensation (well below typical executive salaries). The executive is given an office, with an expectation that they will split their time between working with portfolio companies, helping with due diligence on potential investments, and completing their own search efforts for their next role. The executive gets a platform for broadening their strategic thinking, networking and inside access to a number of extremely promising companies, while the firm gets inexpensive support for their portfolio companies and disproportionate access to top executive talent.

    Notable recent example: Jeff Weiner, CEO of LinkedIn (LNKD, $20B+)

  • “Something Else” in Residence. Behold, the age of the SEIR. In recent years, there have been a few top venture capital firms experimenting with other “in residence” roles. There have been designers, engineers, data scientists and even growth strategists in residence. The basic proposition for this role is similar to the traditional executive in residence role, with a notable tilt towards work with portfolio companies and PR to help build the reputation of the individual and the firm.

    Notable recent examples: DJ Patil, Data Scientist in Residence, Andy Johns, Growth Strategist in Residence.

There have been quite a few good blog posts on the pros & cons of the Entrepreneur in Residence role. On the other end of the spectrum, it’s probably too early to talk categorically about the plethora of new “in residence” variants as a class.

Going forward in this series, I’ll be focusing on the Executive in Residence role. My next post will attempt to answer the question: “Should I be an Executive in Residence (EIR)?

The Executive in Residence (EIR) Series

It’s hard to believe, but it is now exactly six months since I left my role as an Executive in Residence at Greylock Partners, and joined Weathfront as COO.

Diving into a startup is all encompassing, but over the past few months quite a few people have asked me questions about the Executive in Residence (EIR) role.  Some of these people have had offers to become EIRs, others are curious about the role and whether they should pursue it as a career option.  For most, however, it’s just genuine curiosity  the EIR role is largely a low volume, undocumented role that is very unique to the private equity & venture capital ecosystems.

One of the guide posts for this blog has been a dedicated effort to take the questions that I receive regularly, and translate them into thoughtful and useful content to be broadly shared.  So before my experiences of 2012 fade into the shrouds of history, I’ve decided to write a quick series about my experience as an EIR, and the most common questions I’ve received.

The series will cover the following questions:

  1. What is an Executive in Residence (EIR)?
  2. Should I be an Executive in Residence (EIR)?
  3. How do you get an Executive in Residence (EIR) role?
  4. Challenges of being an Executive in Residence (EIR)
  5. Did you like being an Executive in Residence (EIR)?

As always, I’m hopeful that the information will be both interesting and even useful.

Joining Wealthfront

It’s official. As per the announcement on the Wealthfront Blog today, I have officially accepted the role of Chief Operating Officer at Wealthfront. I feel incredibly fortunate to be joining such an amazing team, with an opportunity to help build an extremely important company.

WF Logo New

From Human Capital to Financial Capital

One way to imagine your professional life is overlay of two types of capital: the building and growing of your human capital, and the transformation of that human capital into financial capital.

It feels like just yesterday that I was writing a blog post here about my first day at LinkedIn. At its heart, LinkedIn is building, growing & leveraging human capital throughout your career.  Wealthfront provides an answer to the second part of that equation – how to grow and leverage the financial capital that you accumulate throughout your career.

As Marc Andreessen put it, software is eating the world, and it is providing us a platform to bring the features and sophistication previously only available to the ultra-rich, and making it available to anyone who wants to protect & grow their savings.

Too many good, hard-working individuals today lack access to many of the basic advantages accorded to people with extremely high net worth.  With software, Wealthfront can bring features and capabilities normally available only to those with multi-million dollar accounts to everyone, and at a fraction of the cost.

Personal Finance as a Passion

For regular readers of this blog, the fact that personal finance has been a long standing passion of mine comes as no surprise.  What many don’t know is that this passion dates all the way to back to my time at Stanford, where despite one of the best formal educations in the world, there was really no fundamental instruction on personal finance.

In fact, upon graduation, I joined with about a dozen friends from Stanford (mostly from engineering backgrounds) to form an investment club to help learn about equity markets and investing together.  (In retrospect, the members of that club have been incredibly successful, including technology leaders like Mike Schroepfer, Amy Chang, Mike Hanson and Scott Kleper among others.)

A Theme of Empowerment

As I look across the products and services that I’ve dedicated my professional life to building, I’m starting to realize how important empowerment is to me.  At eBay, I drew continued inspiration from the fact that millions of people worldwide were earning income or even a living selling on eBay.  At LinkedIn, it was the idea of empowering millions of professionals with the ability to build their professional reputations & relationships.

With Wealthfront, I find myself genuinely excited about the prospect of helping millions of people protect and grow the product of their life’s work.

We’ve learned a lot in the past thirty years about what drives both good and bad behaviors around investing, and we’ve also learned a lot about how to design software that engages and even delights its customers.  The time is right to build a service that marries the two and helps people with one of the most important (and challenging) areas of their adult lives.

A Special Thank You

I want to take a moment here to voice my utmost thanks to the team at Greylock Partners.  My year at the firm has given me the opportunity to learn deeply from some of the best entrepreneurs, technology leaders and venture capitalists in the world.  The quality of the entrepreneurs and investors at Greylock forces you to think bigger about what is possible.  Fortunately, Greylock is also a partnership of operators, so they understand the never-ending itch to go build great products and great companies.

… And Lastly, A Couple of Requests

Since this is a personal blog, I don’t mind making a couple of simple requests.  First, if you have a long term investment account, whether taxable or for retirement, I would encourage you to take a look at Wealthfront.  I’d appreciate hearing what you think about the service and how we can make it better.

Second, and perhaps most importantly, we are hiring.  So let me know if you are interested in joining the team.

The Future of Social Networking at Singularity U

Last week, I was asked to give a guest lecture at Singularity University on the topic “The Future of Social Networking

To frame the discussion, I chose to walk through the following structure:

  • Web 1.0 vs. Web 2.0
  • Social Networking as a disruptive platform
  • LinkedIn as an example of a social platform
  • Mobile as a disruptive accelerator for social platforms
  • Thoughts on future disruptions

On a personal note, I hadn’t actually been back to visit NASA Ames Research Center since my internship during my senior year in high school (21 years ago).  Back then, I was helping develop simulation software for fluid dynamics simulations in Fortran.  Thankfully, no one asked me to code in Fortran during the Q&A.

The team at Singularity U was incredibly gracious, and I appreciated the opportunity to talk to the class.

The Game Has Changed. Design for Passion.

One of the most exciting developments in software has been a resurgence in the focus and priority on design.  With the growing dominance of social platforms and mobile applications, more and more people are growing comfortable productively discussing and utilizing insights about human emotion in their work.

Google: The Era of Utility

The progress of the last five to seven years is really a significant breakout from the previous generations of software design.

For decades, software engineers and designers focused on utility:  value, productivity, speed, features or cost.

If it could be quantified, we optimized it.  But at a higher level, with few exceptions, we framed every problem around utility.  Even the field of human-computer interaction was obsesses with “ease of use.”  Very linear, with clear ranking.  How many clicks? How long does a task take?  What is the error rate?

In some ways, Google (circa 2005) represented the peak of this definition of progress.  Massive data.  Massive scalability. Incredibly utility.  Every decision defined by quantifying and maximizing utility by various names.

But let’s face it, only computer scientists can really get passionate about the world’s biggest database.

Social: The Era of Emotion

Like any ecosystem, consumer technology is massively competitive.  Can you be faster, cheaper, bigger or more useful than Google?  It turns out, there is a more interesting question.

Social networks helped bring the language of emotion into software.  A focus on people starts with highly quantifiable attributes, but moves quickly into action and engagement.

What do people like? What do they hate? What do they love? What do they want?

In parallel, there have been several developments that reflect similar insights on the web, in behavioral finance, and the explosion in interest in game mechanics.

Human beings are not rational, but (to borrow from Dan Ariely) they are predictably irrational.  And now, thanks to scaling social platforms to over a billion people, we have literally petabytes of data to help us understand their behavior.

Passion Matters

Once you accept that you are designing and selling a product for humans, it seems obvious that passion matters.

We don’t evaluate the food we eat based on metrics (although we’d likely be healthier if we did).  Do I want it? Do I love it? How does it make me feel?

The PayPal mafia often joke that great social software triggers at least one of the seven deadly sins. (For the record, LinkedIn has two: vanity & greed).  Human beings haven’t changed that much in the past few thousand years, and the truth is the seven deadly sins are just a proxy for a deeper insight.  We are still driven by strong emotions & desires.

In my reflection on Steve Jobs, he talks about Apple making products that people “lust” for.  Not the “the best products”, “the cheapest products”, “the most useful products” or “the easiest to use products.”

Metrics oriented product managers, engineers & designers quickly discover that designs that trigger passion outperform those based on utility by wide margins.

The Game Has Changed

One of the reasons a number of earlier web giants are struggling to compete now is that the game has changed.  Utility, as measured by functionality, time spent, ease-of-use are important, but they are no longer sufficient to be competitive. Today, you also have to build products that trigger real emotion.  Products that people will like, will want, will love.

Mobile has greatly accelerated this change.  Smartphones are personal devices.  We touch them, they buzz for us. We keep them within three feet of us at all times.

Too often in product & design we focus on utility instead of passion.  To break out today, you need to move your efforts to the next level.  The questions you need to ask yourself are softer:

  • How do I feel when I use this?
  • Do I want that feeling again?
  • What powerful emotions surround this product?

Go beyond utility.  Design for passion.

User Acquisition: Mobile Applications and the Mobile Web

This is the third post in a three post series on user acquisition.

In the first two posts in this series, we covered the basics of the five sources of traffic to a web-based product and the fundamentals of viral factors.  This final post covers applying these insights to the current edge of product innovation: mobile applications and the mobile web.

Bar Fight: Native Apps vs. Mobile Web

For the last few years, the debate between building native applications vs. mobile web sites has raged.  (In Silicon Valley, bar fights break out over things like this.) Developers love the web as a platform.  As a community, we have spent the last fifteen years on standards, technologies, environments and processes to produce great web-based software.  A vast majority of developers don’t want to go back to the days of desktop application development.

Makes you wonder why we have more than a million native applications out there across platforms.

Native Apps Work

If you are religious about the web as a platform, the most upsetting thing about native applications is that they work.  The fact is, in almost every case, the product manager who pushes to launch a native application is rewarded with metrics that go up and to the right.  As long as that fact is true, we’re going to continue to see a growing number of native applications.

But why do they work?

There are actually quite a few aspects to the native application ecoystem that make it explosively more effective than the desktop application ecosystem of the 1990s.  Covering them all would be a blog post in itself.  But in the context of user acquisition, I’ll posit a dominant, simple insight:

Native applications generate organic traffic, at scale.

Yes, I know this sounds like a contradiction.  In my first blog post on the five sources of traffic, I wrote:

The problem with organic traffic is that no one really knows how to generate more of it.  Put a product manager in charge of “moving organic traffic up” and you’ll see the fear in their eyes.

That was true… until recently.  On the web, no one knows how to grow organic traffic in an effective, measurable way.  However, launch a native application, and suddenly you start seeing a large number of organic visits.  Organic traffic is often the most engaged traffic.  Organic traffic has strong intent.  On the web, they typed in your domain for a reason.  They want you to give them something to do.  They are open to suggestions.  They care about your service enough to engage voluntarily.  It’s not completely apples-to-apples, but from a metrics standpoint, the usage you get when someone taps your application icon behaves like organic traffic.

Giving a great product designer organic traffic on tap is like giving a hamster a little pedal that delivers pure bliss.  And the metrics don’t lie.

Revenge of the Web: Viral Distribution

OK. So despite fifteen years of innovation, we as a greater web community failed to deliver a mechanism that reliably generates the most engaged and valuable source of traffic to an application.  No need to despair and pack up quite yet, because the web community has delivered on something equally (if not more) valuable.

Viral distribution favors the web.

Web pages can be optimized across all screens – desktop, tablet, phone.  When there are viral loops that include the television, you can bet the web will work there too.

We describe content using URLs, and universally, when you open a URL they go to the web.  We know how to carry metadata in links, allowing experiences to be optimized based on the content, the mechanism that it was shared, who shared it, and who received it.  We can multivariate test it in ways that border on the supernatural.

To be honest, after years of conversations with different mobile platform providers, I’m still somewhat shocked that in 2012 the user experience for designing a seamless way for URLs to appropriately resolve to either the web or a native application are as poor as they are.  (Ironically, Apple solved this issue in 2007 for Youtube and Google Maps, and yet for some reason has failed to open up that registry of domains to the developer community.)  Facebook is taking the best crack at solving this problem today, but it’s limited to their channel.

The simple truth is that the people out there that you need to grow do not have your application.  They have the web.  That’s how you’re going to reach them at scale.

Focus on Experience, Not Technology

In the last blog post on viral factors, I pointed out that growth is based on features that let a user of your product reach out and connect with a non-user.

In the mobile world of 2012, that may largely look like highly engaged organic users (app) pushing content out that leads to a mobile web experience (links).

As a product designer, you need to think carefully about the end-to-end experience across your native application and the mobile web.  Most likely, a potential user’s first experience with your product or service will be a transactional web page, delivered through a viral channel.  They may open that URL on a desktop computer, a tablet, or a phone.  That will be your opportunity not only to convert them over to an engaged user, in many cases by encouraging them to download your native application.

You need to design a delightful and optimized experience across that entire flow if you want to see maximized self-distribution of your product and service.

Think carefully about how Instagram exploded in such a short time period, and you can see the power of even just one optimized experience that cuts across a native application and a web-based vector.

Now go build a billion dollar company.

User Acquisition: Viral Factor Basics

This is the second post in a three post series on user acquisition.

In the first post in this series, we covered the basics of the five sources of traffic to a web-based product.  This next post covers one of the most important, albeit trendy, aspects of user acquisition: virality.

Lot-of-Rabbits

It’s About Users Touching Non-Users

Look at your product and ask yourself a simple question: which features actually let a user of your product reach out and connect with a non-user?   The answer might surprise you.

At LinkedIn, we did this simple evaluation and discovered that out of thousands of features on the site, only about a half-dozen would actually let a user create content that would reach a non-user. (In fact, only a couple of these were used in high volume.)

I continue to be surprised at how many sites and applications are launched without having given careful thought to this exactproblem.  Virality cannot easily be grafted onto a service – outsized results tend to be reserved for products that design it into the core of the experience.

Useful questions to ask, from a product & design perspective:

  • How can a user create content that reaches another user?
  • How does a users experience get better the more people they are connected to on it?
  • How does a user benefit from reaching out to a non-user?

Understanding Viral Factors

One of the most useful types of metrics to come out of the last five years of social software is the viral factor.  Popularized by the boom of development on the Facebook platform in 2007, a viral factor is a number, typically between 0.0 and 1.0.  It describes a basic business problem that affects literally every business in the world:

“Given that I get a new customer today, how many new customers will they bring in over the next N days?”

“N” is a placeholder for a cycle time that makes sense for your business.  Some companies literally track this in hours, others 3 days, or even 30.  Let’s assume for now that 7 is a good number, since it tells you given a new customer today, how many new customers will they bring in over the next week.

Basic Viral Math

The good news is, once you identify the specific product flows that allow users to reach non-users, it’s fairly easy to instrument and calculate a viral factor for a feature or even a site.  But what does the number really mean?

Let’s assume a viral factor of 0.5, and an N of 7.  If I get a new user today, then my user acquisition will look like this over the next few weeks:

1 + 0.5 + 0.25 + 0.125 ….

It’s an infinite series that adds up to 2.  By getting a new user, the virality of this feature will generate a second user over time.

Two obvious epiphanies here:

  • A viral factor is a multiplier for existing sources of user acquisition.  0.5 is a 2x, 0.66 is a 3x, etc.
  • Anything below 0.5 looks like a percentage multiplier at best.

What about a viral factor of 1.1?

One of the memes that started to circulate broadly in 2008 was getting your viral factor to “1.1”.  This was just a proxy for saying that your product or service would explode.  If you do the math, you can easily see that any viral factor or 1.0 or higher will lead to exponential growth resulting in quickly having every human on the planet on your service.

I don’t want to get into a Warp 10 debate, but products can in fact have viral factors above 1.0 for short periods of time, particularly when coming off a small base.

Learning from Rabbits

The key to understanding viral math is to remember a basic truth about rabbits.  Rabbits don’t have a lot of rabbits  because they have big litters.  Rabbits have a lot of rabbits because they breed frequently.

When trying to “spread” to other users, most developers just focus on branching factor – how many people they can get invited into their new system.  However, cycle time can be much more important than branching factor.

Think of a basic exponential equation: X to the Y power.

  • X is the branching factor, in each cycle how many new people do you spread to.
  • Y is the number of cycles you can execute in a given time period.

If you have a cycle that spreads to 10 people, but takes 7 days to replicate, in 4 weeks you’ll have something that looks like 10^3.  However, if you have a cycle that takes a day to replicate, even with a branching factor of 3 you’ll have 3^27.  Which would you rather have?

In real life, there is decay of different viral messages.  Branching factors can drop below 1.  The path to success is typically the combination of a high branching factor combined with a fast cycle time.

As per the last blog post, different platforms and traffic channels have different engagement patterns and implicit cycle times.  The fact that people check email and social feeds multiple times per day makes them excellent vectors for viral messages.  Unfortunately, the channels with the fastest cycle times also tend to have the fastest decay rates.  Fast cycle times plus temporary viral factors above 1 are how sites and features explode out of no where.

Executing on Product Virality

To design virality into your product, there really is a three step process:

  1. Clearly articulate and design out the features where members can touch non-members.  Wireframes and flows are sufficient.  Personally, I also recommend producing a simple mathematical model with some assumptions at each conversion point to sanity check that your product will produce a strong viral factor, layered over other traffic sources (the multiplier).
  2. Instrument those flows with the detailed metrics necessary for each step of the viral cycle to match your model.
  3. Develop, release, measure, iterate.  You may hit success your first time, but it’s not unusual to have to iterate 6-8 times to really get a strong viral factor under the best of conditions.  This is the place where the length of your product cycles matter.  Release an iteration every 2 days, and you might have success in 2 weeks.  Take 3-4 weeks per iteration, and it could be half a year before you nail your cycle.  Speed matters.

You don’t need hundreds of viral features to succeed.  In fact, most great social products only have a few that matter.

What about mobile?

Now that we’ve covered the five scalable sources of web traffic and the basics of viral factors, we’ll conclude next week with an analysis of what this framework implies for driving distribution for mobile web sites vs. native applications.

User Acquisition: The Five Sources of Traffic

This is the first post in a three post series on user acquisition.

The topic of this blog post may seem simplistic to those of you who have been in the trenches, working hard to grow visits and visitors to your site or application.  As basic as it sounds, however, it’s always surprising to me how valuable it is to think critically about exactly how people will discover your product.

In fact, it’s really quite simple.  There are only really five ways that people will visit your site on the web.

The Five Sources of Traffic

With all due apologies to Michael Porter, knowing the five sources of traffic to your site will likely be more important to your survival than the traditional five forces.  They are:

  1. Organic
  2. Email
  3. Search (SEO)
  4. Ads / Partnerships (SEM)
  5. Social (Feeds)

That’s  it.  If someone found your site, you can bet it happened in those five ways.

The fact that there are so few ways for traffic to reach your site at scale is both terrifying and exhilarating.  It’s terrifying because it makes you realize how few bullets there really are in your gun.  It’s exhilarating, however, because it can focus a small team on exactly which battles they need to win the war.

Organic Traffic

Organic traffic is generally the most valuable type of traffic you can acquire.  It is defined as visits that come straight to your site, with full intent.  Literally, people have bookmarked you or type your domain into their browser.  That full intent comes through in almost every produto metric.  They do more, click more, buy more, visit more, etc.  This traffic has the fewest dependencies on other sites or services?

The problem with organic traffic is that no one really knows how to generate more of it.  Put a product manager in charge of “moving organic traffic up” and you’ll see the fear in their eyes.  The truth is, organic traffic is a mix of brand, exposure, repetition, and precious space in the very limited space called “top of mind”.  I love word of mouth, and it’s amazing when it happens, but Don Draper has been convincing people that he knows how to generate it for half a century.

(I will note that native mobile applications have changed this dynamic, but will leave the detail for the third post in this series.)

Email Traffic

Everyone complains about the flood of email, but unfortunately, it seems unlikely to get better anytime soon.  Why?  Because it works.

One of the most scalable ways for traffic to find your site is through email.  Please note, I’m not talking about direct marketing emails.  I’m referring to product emails, email built into the interaction of a site.  A great example is the original “You’ve been outbid!” email that brought (and still brings) millions back to the eBay site every day.

Email scales, and it’s inherently personal in its best form.  It’s asynchronous, it can support rich content, and it can be rapidly A/B tested and optimized across an amazing number of dimensions.  The best product emails get excellent conversion rates, in fact, the social web has led to the discovery that person to person communication gets conversion person over 10x higher than traditional product emails.  The Year In Review email at LinkedIn actually received clickthroughs so high, it was better described as clicks-per-email!

The problem with email traffic generally is that it’s highly transactional, so converting that visit to something more than a one-action stop is significant. However, because you control the user experience of the origination the visit, you have a lot of opportunity to make it great.

Search Traffic

The realization that natural search can drive traffic to a website dates back to the 90s.  However, it really has been in the past decade in the shadow of Google that search engine optimization scaled to its massive current footprint.

Search clearly scales.  The problem really is that everyone figured this out a long time ago.  First, that means that you are competing with trillions of web pages across billions of queries.  You need to have unique, valuable content measured in the millions of pages to reach scale.  SEO has become a product and technical discipline all it’s own. Second, the platform you are optimizing for (Google, Microsoft) is unstable, as they constantly are in an arms race with the thousands of businesses trying to hijack that traffic. (I’m not even going to get into their own conflicts of interest.)

Search is big, and when you hit it, it will put an inflection point in your curve.  But there is rarely anysuch thing as “low hanging fruit” in this domain.

Advertising (SEM)

The fourth source of traffic is paid traffic, most commonly now ads purchased on Google or Facebook.  Companies spend billions every year on these ads, and those dollars drive billions of visits.  When I left eBay, they were spending nearly $250M a year on search advertising, so you can’t say it doesn’t scale.

The problem with advertising is really around two key economic negatives.  The first is cash flow.  In most cases, you’ll be forced to pay for your ads long before you realize the economic gains on your site.  Take something cash flow negative and scale it, and you will have problems.  Second, you have solid economics.  Most sites conjure a “lifetime value of a user” long before they have definitive proof of that value, let alone evidence that users acquired through advertising will behave the same way. It’s a hyper-competitive market, armed with weapons of mass destruction.  A dangerous cocktail, indeed.

While ads are generally the wrong way to source traffic for a modern social service, there are exceptions when the economics are solid and a certain volume of traffic is needed in a short time span to catalyze a network effect.  Zynga exemplified this thinking best when it used Facebook ads to turbocharge adoption and virality of their earlier games like FarmVille.

Social Traffic

The newest source of scalable traffic, social platforms like Facebook, LinkedIn and Twitter can be great way to reach users.  Each platform is different in content expectations, clickthrough and intent, but there is no question that social platforms are massively valuable as potential sources of traffic.

Social feeds have a number of elements in common with email, when done properly.  However, there are two key differences that make social still very difficult for most product teams to effectively use at scale.  The first is permission.  On social platforms, your application is always speaking through a user.  As a result, their intent, their voice, and their identity on the platform is incredibly important.  Unlike email, scaling social feed interactions means hitting a mixture of emotion and timing.  The second issue is one of conversion.  With email, you control an incredible number of variables: content, timing, frequency.  You also have a relatively high metrics around open rates, conversion, etc.  With social feeds, the dynamics around timing and graph density really matter, and in general it always feels harder to control.

The Power of Five

Eventually, at scale, your site will likely need to leverage all of the above traffic sources to hit its potential.  However, in the beginning, it’s often a thoughtful, deep success with just one of these that will represent your first inflection point.

The key to exponential, scalable distribution across these sources of traffic is often linked to virality, which is why that will be the topic of my next post.

Product Leaders: User Acquisition Series

I can be pedantic about user acquisition.  The truth is that consumer web and mobile applications are under increasing pressure to demonstrate explosive exponential traction.  Building a great product is no longer sufficient, lest you be left with the best product in the world that no one has discovered.

As an engineer and designer by training, I didn’t always put this level of focus on traffic acquisition.  It wasn’t until we tried to build an entirely new site under the eBay brand (eBay Express) that I was forced to focus our team’s efforts on one large fundamental challenge: traffic acquisition.

Those struggles, some successful (and some not) led me to appreciate how profoundly the social web changed the metrics of distribution.  When we founded the growth team at LinkedIn in 2008, we were able to structure our thinking around user acquisition, measure it, and bend the curve significantly for the site. 

A special thanks to both Reid Hoffman and Elliot Shmukler, who both contributed significantly to my thinking on the subject.

History is Written by the Victors

History is written by the victors, and on the consumer web, victory is often defined by market distribution.  Growth does not just happen, it has to be designed into your product and service.

The following posts attempt to capture some of the fundamentals that I’ve personally found useful to structure thinking around social user acquisition, and extend those concepts from the web to mobile applications:

Remember, Product Leaders win games.  Now let’s get started.

Top 10 Product Leadership Lessons

On Sunday, I was fortunate enough to give a talk at the 9th annual Harvard Business School Entrepreneurship Conference.  I’m trying to be better about posting the slides from these talks as they happen.

Context & Caveats

This talk is based substantially on a lecture I gave at LinkedIn on August 31, 2011.  It’s heavily based on the unique product, strategy and organizational issues that you see currently in fast moving, hyper growth, consumer-focused software companies.

At the same time, many of the higher level business and management issues discussed are fairly universal, so hopefully there is something useful here for anyone who is passionate about building organizations that build great products.

So take a look, and I look forward to the comments.  FWIW The Optimus Prime quotes are from this excellent list of Optimus Prime quotes for the workplace.

Be A Great Product Leader

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