Fundraising is often presented as the most important step on a founder’s journey, but that is placing the cart before the horse.
Until a company builds a growing base of customers who are deeply engaged with its products, asking investors for money is a largely egotistical exercise. After a startup reaches product-market fit, however, savvy investors might compete for a chance to participate.
Achieving product-market fit is not a linear process, which means each company must find its own way, according to Frederique Dame, an investing partner with GV who previously led product and engineering teams at companies like Uber, Smugmug and Yahoo. In her capacity as partner, she offers portfolio companies’ founders a range of services that includes advising them on recruiting, marketing and comms, and product development.
In a fireside chat at TechCrunch Early Stage, we discussed her experience validating product ideas, gathering actionable customer data, creating user-centric work cultures and handling some of the unique challenges that come with scaling teams from a few dozen people to several thousand employees.
At Uber, Dame led strategic programs that helped the company grow from 80 employees to 7,000, which included transitioning from spreadsheets to systems that created transparency and accountability. Early-stage employees are accustomed to using ad hoc processes to get their work done as they sprint for growth, so I asked how she approached the work from a cultural perspective.
Set aside your ego and listen closely to customers
Trust me with what you don’t know or what’s not working, because once we invest, we’re going to have to work on this stuff anyway. Frederique Dame
“I think that the first thing you need to do is hire people who have low ego and have low ego yourself,” she said. After Uber launched, early customers frequently encountered surge pricing because the platform wasn’t onboarding drivers quickly enough. In response, Dame directed members of the company’s separate rider and driver teams to focus on a single problem.
“We realized that there were multiple products that were conflicting … between onboarding drivers, internal systems and [including] driver directions within the app,” Dame said. “It’s important to have driving directions, but if you have surge pricing every time you get into an Uber or if you cannot get an Uber, there is no point of having Uber.”
After doing driver outreach, it became clear that they hadn’t been listening closely to customers: In 2011, most drivers used flip phones with rudimentary web browsing capabilities. To sign up, many visited internet cafes that were not running the latest versions of Internet Explorer, Firefox and Chrome.
“They were looking at an error page, and they were failing. Understanding the user journey of your customers and what you’re doing with your product is really, really important,” Dame said. “Be obsessive and talk to customers as much as you can.”
Test as many ideas as you can (without asking engineering for help)
To reach product-market fit, teams must iterate rapidly and repeatedly to gather customer data, but there’s an inexorable tension between the need to test new ideas and the desire to make sure that road maps shared with investors remain aligned with actual product pipelines.
Unless you can make a strong business case — or convince someone on the engineering team to do you a favor — it can be difficult, if not impossible, to insert an experiment into an upcoming engineering sprint. To get around this problem, product leaders must cultivate a DIY attitude, said Dame, citing early experiments to gather data for Uber Eats.
The food-delivery service, which last year earned more money for Uber than its ride-hailing operation, was initially launched in Los Angeles as a stopgap to maintain driver volume between peak commute hours, said Dame. To test their experiment, they added a new car type to the system that was literally a sandwich.
“You just pushed the sandwich option and we delivered it to you and used zero engineering resources, because it was just a car type in the back end,” she explained. “We managed to validate that people actually wanted to have food delivered to them. This was a great way with low effort from the HQ side to validate a concept.”
PMF and MVP are BFFs
A minimum viable product is a basic requirement for PMF, but “you will never ever, ever have a perfect product,” said Dame, which is why founders must be disciplined around defining their MVP and identifying the right success metrics.
“Even when you think you launch a product that is perfect. It’s already expired the moment you launch it because of market conditions, competition, you name it,” she said. “But from the user experience, even though you have an MVP, it doesn’t mean that you need to compromise. You have one chance at a good experience. People are going to talk about it, so you want to do it the right way.”
“Hire a data analyst from day one”
Today, Dame said she advises GV portfolio companies to add a data analyst to their founding team.
“I don’t think there is a better way to throw yourself [into] managing and understanding what type of KPIs you want to identify for the success of your product,” she said. “I think that data are extremely important to keep the team updated on what’s happening with the business, but also [create] accountability for every department in the company.”
At Uber, product teams captured reams of real-time data to create internal dashboards that aggregated critical information about drivers and riders, such as the ratio of drivers that were hourly versus on commission, how long riders opened the app without requesting a ride and where rides were taking place.
“These dashboards were available to everyone, so you could go to a drop-down and understand the health of any city, which was extremely important for visibility, accountability and iteration as well,” Dame said. “What I love about dashboards is that it gives you the health of the business very early on and you know what lever you need to push and pull very quickly. You’re adding this transparency of data will be so critical for your business.”
Develop customer personas and share them with stakeholders
To promote cohesion, Dame recommended creating customer personas — detailed psychographic profiles of your target users — and sharing them with everyone inside the company. In some cases, she said GV will assign a user researcher and a design team to craft personas and define customer segments.
Startups that don’t have that level of support can spin up their own customer personas, she said. “You can do a collaborative effort with your team, but adding an external consultant can actually be good to also moderate and [remove] any bias within the company,” Dame said. “I’m always so nervous about bias because we all have our own tunnel vision about what the product should be.”
Be vulnerable with your investors
Although founders are conditioned to project confidence when fundraising, Dame said more entrepreneurs should reach out to investors for advice, particularly when it comes to PMF issues.
“Trust me with what you don’t know or what’s not working, because once we invest, we’re going to have to work on this stuff anyway. I’d rather start working on this stuff early on,” she said. “How do we build on each other’s ideas? How do we collaborate? I call myself the therapist of the entrepreneur: How do we problem-solve together? Because this is what’s going to be real life once we invest. So why don’t we get started now?”