Fintech 2025: The Next Wave

When I first joined Greylock at the end of 2011, Fintech wasn’t even a word that was commonly used in the venture capital community. Less than a decade later, however, Fintech has become almost ubiquitous. The category has not only proven that it can generate real revenues and scale, but also that it can create a large number of multi-billion dollar companies.

Unfortunately, when you are looking at seed stage opportunities, you have to think clearly about markets where there is the potential to build new multi-billion dollar product & companies.

When the bubble burst in 2000-2, there was a lot of thought put into what had worked and what hadn’t worked with Web 1.0, and those insights formed the basis of the next wave of software companies (Web 2.0 / Social). Some of those same issues have plagued Fintech 1.0, and may instruct how to think about Fintech 2.0.

As 2019 drew to a close, I took the opportunity to spend some time thinking about exciting new opportunities in consumer fintech. These continue to be areas that I’m investing against both as an angel and as a founder.

Beyond Millennials

For the last decade, a vast majority of consumer fintech startups have focused on millennial customers. This really isn’t surprising because the traditional financial services industry is so heavily invested in their older customers. By the numbers, households tend to build income and assets as they age, and the incumbents have spent decades servicing this customer base.

Young people, on the other hand, were the perfect market for new, unproven products and services. Young people are less tied to existing brands and services, more likely to be technophilic, and have simpler financial needs.

As we enter the next decade, however, consumer acceptance of new financial products & services will continue to grow, leaving new demographics open to new products & services. This would have been true regardless, but it seems clear that the COVID-19 pandemic has accelerated this opportunity.

These customer segments will be more competitive, but also potentially more valuable, as they collectively are much larger than the millennial market.

Single Player to Multiplayer

Traditional financial products & services are single player, which makes sense since people tend to expect a high degree of privacy around their finances, and products built for individuals are much simpler to design, market, and activate.

However, many new fintech services are built around a subscription-model, where three numbers tend to dominate: acquisition costs, average revenue per user, and churn rate. The last, of course, is a heavy determinate of lifetime value.

Multiplayer products & services have a number of advantages. Multiplayer products are inherently viral, pulling more people into the system and lowering average acquisition costs. More importantly, multiplayer products are fundamentally stickier, leading to lower churn rates and higher lifetime values.

One of the big shifts from Web 1.0 to Web 2.0 was designing products & services to be intrinsically multiplayer. This was one of the fundamental differences between the design of LinkedIn (Web 2.0) and Monster.com (Web 1.0).

Novel Products & Services

When web development began in earnest in the 1990s, most initial product concepts were just moving existing products & services online. Mail order catalogs already existed, but we put them online. Yellow pages already existed, but we put them online. There were a few novel products (eBay), but for the most part, we collectively just moved a lot of products into the cloud, with all the advantages that global reach & distribution brought.

Fintech 1.0 has also mostly replicated existing products, put them on modern technology platforms, and made them broadly available to customers (like young adults) who have been mostly underserved.

However, one of the great opportunities in Fintech long-term is leveraging technology platforms and distribution to create products & services that were not viable, or even possible, in the physical world. With Web 2.0, we saw a large number of products & services that just couldn’t have existed offline.

2020 Examples

Not surprisingly, ambitious founders have already started building products & services along these new dimensions.

Carefull is a novel service that connects Millennial & Gen X adults with the finances of their aging parents. Once connected, it provides peace of mind for customers that if anything unexpected happens with their parents’ or grandparents’ finances, they will be alerted.

PaceIt, led by Prof. Shlomo Benartzi, is working to tackle the problem of retirement income directly by building a service designed with retirees (or near retirees) in mind. This is one of the most challenging and potentially valuable financial services, and PaceIt believes they can deliver a highly differentiated service based on sound insights from behavioral economics.

Braid is a novel debit card designed from the ground-up for households and small groups (e.g. roommates), providing a standard way to transparently share expenses between groups of people.

Pillar Life is a digital platform that helps people protect and care for their aging loved ones. Pillar replaces outdated & messy physical files with a secure online vault where you can easily store, organize, and share all your family’s most important information like financial accounts, legal documents, medical records, and more.

2020 may have been a terrible year on most dimensions, but as an angel investor for over nine years, it turned out to be my most active one yet. Hopefully, this bodes well for the future of Fintech, and for the financial products & services we’ll all be able to enjoy in the coming years.

 

Joining the Board of Directors at Shift

ShiftToday, I’m happy to announce that I’ve joined the Board of Directors of Shift, a company that has spent the last 6 years reimagining the used car experience. Shift is a marketplace that buys and sells cars directly from consumers without all the usual shady tactics that run rampant in the industry. With Shift, buying & selling a used car is  simple.

In 1991, when I turned 16, I had my first used car buying experience. My father took me to several different lots where we looked at the almost random assortment of cars in our price range. As it turns out, my father is a surprisingly good negotiator and had no trouble walking away from a bad deal. Unfortunately, that meant we walked off each and every lot we visited that day empty handed.

Fortunately for me, my uncle saved us from having to do another day of traditional used car shopping, and I drove his used Toyota pick-up all through college and grad school. But for millions of people, buying & selling a used car is still too painful, expensive, and complicated.

A Better Way to Buy & Sell Used Cars

When George Arison & Minnie Ingersoll came to visit me to talk about the new company they had started, I was immediately impressed with their excitement for a truly mobile-first approach to buying & selling used cars. Over the years, I’ve been phenomenally impressed with the way the team iterated and expanded on their original vision. In 2017, I had the opportunity to sell a used car on the platform, and it was transformationally better than my previous experiences trading in cars to dealerships or selling the car directly through classified ads.

As a product leader & angel investor, I try to focus on products & companies that are working to reinvent a key customer experience. In 2014, I invested in just six companies; they included Gusto, OpenDoor, and Shift.

For many people, buying and selling a car is one of the largest transactions they make in their financial lives. The system has long been littered with opaque practices, overblown loans, and sleazy sales tactics. Taking the high road, Shift has made transparency their hallmark, listing out any fees, doing away with haggling, and making financing more user-friendly and easier to understand. They even built out a loan term predictor so customers can know for certain what they can afford before they even start shopping. 

The company is now slated to go public in the coming weeks, and has grown considerably on the West Coast, aided by its  first-class operations and Silicon Valley culture. Customers finally have a way to buy or sell a car for a fair price without leaving their driveway.

Joining the Board of Directors at Shift

I’ve spent my professional life working to build products that truly improve the lives of ordinary people: whether a working mom who uses eBay to earn a little extra income on the side, a young college grad beginning to build their professional reputation, or the up-and-coming eager to start saving & investing.

I felt fortunate to have been one of the original angel investors in Shift. I was delighted when we sold our car through the service. I’m now grateful for the opportunity to join George, Toby, and their team as they make the transition to being a public company.

If you are looking to buy or sell a used car, please get Shift a try. Reach out, and let me know about your experience. We’re excited about the road ahead.

A New Year & A New Adventure

Some personal news to share today.  After a great tour of duty at Dropbox, I’ve decided to take the leap into something new.

Having a January birthday has always added a little weight to my New Year’s resolutions, and as it turns out, 2020 was a big one for me. 45 might not be the biggest milestone birthday, but combined with the weight of a new decade, it had me thinking deeply over the holidays. Fortunately, I was able to spend a good deal of time with friends & family, and by New Year’s Eve I felt comfortable with a simple, but important, decision.

2020 will be different. This will be the year that I go off on my own.

The hardest part of this process was telling my team at Dropbox. I feel so very fortunate to have had the opportunity to lead such an amazing group of professionals. And as proud as I am of what we accomplished in 2018 & 2019, I’m even more excited about what this team will deliver for their customers in 2020 & beyond. 

For me, I’ll be spending the next few months preparing for the long road ahead founding a company. As one of the growing number of “operator-angels,” I’ll continue to advise and support the talented teams at the companies where I’ve invested over the past 8 years. Primarily, though, I’ll be spending time on a couple of specific fintech ideas that I think have the potential to be great companies. 

I have spent over 20 years learning to build & design great products and great companies, but somehow never my own. As an angel investor, I’ve now helped fund and advise over fifty amazing founding teams, and have had a front row seat to their struggles and successes. It’s time to take the plunge.

And who knows? I hear 45 is the best time to start.

Three Types of Risk: Making Decisions in the Face of Uncertainty

Image result for risk

One of the fond memories I have of my first two years at LinkedIn was coming into the office almost every Sunday to spend a couple of hours with Reid Hoffman.

Our conversations covered a wide range of topics, but the time ensured that we were fully aligned on the strategy of the company and the priorities we were pursuing.

One of the topics that I was most fond of discussing was the nature of risk, and how to best lead teams when facing the various types of risk that are commonplace at hypergrowth startups.

Here, Reid never varied, and I quickly adopted his framework as my own. In the end, most of our productive discussion involved deciding which of three types of risk a particular decision involved.

Three Types of Risk

Categorizing the type of risk you face is incredibly useful in helping teams understand how much effort and consideration to spending on making various types of decision in the face of uncertainty.

For hypergrowth startups, risk can be categorized as one of the following types:

  1. Fatal Risk
  2. Painful Risk
  3. Embarrassment Risk

Fatal risks are true bet-the-company issues. They are not that common, but they deserve clarity and focus. If you get the answer wrong here, the company is dead. These risks are unavoidable in early-stage startups, but as companies grow they become more and more uncommon. In fact, most large companies lose the ability or even recognition of these type of risks as they age.

Painful risks involve decisions that have significant repercussions if they go the wrong way. You might miss a key goal, or lose key people. They are recoverable, but there are real ramifications to getting the answer wrong.

Embarrassment risks have no significant impact if they are missed. All that is necessary is to acknowledge the mistake, change course, and move on.

Embarrassment risks are particularly difficult for smart & ambitious people, largely due to insecurity and ego. People want to be perceived as intelligent and successful, and they incorrectly map that to always being correct.

Unfortunately, most people at hypergrowth startups spend far too much time debating embarrassment risk, and they don’t take enough painful risks.

What About Type 1 & Type 2 Decisions?

Jeff Bezos has more recently popularized a different framework, based on two types of decision. This framework is often described in the context of the decision to move forward with Amazon Prime, which at the time was mostly a judgment call versus a data-driven decision.

In his framework:

  • Type 1 decisions are irreversible. Spend time on them.
  • Type 2 decisions are reversible, like walking through a door. Make them quickly and move on.

Overall, this framework is helpful. Thinking through the reversibility of decisions helps prioritize speed vs. perfection. When it comes to execution, the perfect truly can be the enemy of the good enough.

The problem is that almost every decision at a company is reversible, so it tends to not provide that much insight into why some risks feel harder to take than others.

Lessons in Execution

In some ways, you could describe painful risk & embarrassment risk as two sub-categories of Type 2 decisions. The speed of execution depends on taking these type 2 decisions quickly and aggressively, framing them as risk, and clearly articulating what the team will do if it doesn’t play out as expected.

Leaders need to embody this type of decision making, to give permission to newer employees to take risks and communicate their decision making effectively.

Otherwise, a spiral of low expectations and low-risk options will quickly put you in a vice when faced with more aggressive competitors. Worse, you won’t be taking enough shots on goal to learn fast enough to have high odds of success.

Large companies trend towards this problem because decisions become increasingly about the personal positioning of individuals for their own advancement, rather than optimizing for the best results for the company or their customers.

Ironically, taking painful risks may be the only way to set yourself up for exceptional outcomes.

The next time you see your team facing a decision in the face of uncertainty, try to quickly agree on what type of risk you are facing and what type of decision you are making. In most cases, you’ll be able to make decisions more quickly and save your time for the rare, but very real, risks that you have to navigate with your product and your business.

 

The Future of Drone Safety

Every time I go to the CODE Conference, I learn something new. There is something about watching some of the most prominent technology executives and founders responding to questions from talented journalists that gets me thinking.

Four years ago, I wrote about the transition technology CEOs needed to make from economics to politics. Coming back from this year’s gathering, there  is no question in my mind that this insight turned out to be true. Responsibility was a significant theme this year. As the technology industry continues to grow and mature,  more and more people are looking to investors and technology leaders to think ahead about potential issues that will happen when their creations become ubiquitous.

It got me thinking about drones.

The Problem with Drones

The FAA projects that the number of drones will reach 7 million in just the US alone by 2020. The growth rates for both consumer and commercial drones continue to grow at a rapid rate. The FAA estimates that there will be over 3.5 million hobbyist drones in the US by 2012.

Over the past few years, I’ve made a few investments in startups in the drone space. But until last year, I hadn’t given significant consideration to all of the safety issues around drones, particularly as they fly over large crowds or critical infrastructure.

The problem is fairly simple. Large venues, like sports stadiums, and critical infrastructure are largely defenseless against drones. Whether it’s a music festival, a weekend football game or anything of that sort, most people don’t realize that event managers really have no solution to protect a crowd. Whether accidental or intentional, there is a real risk that a malfunction or crash could harm people.

The Need for Active Measures

Long term, of course, we can imagine a world where drones can be programmed to avoid these spaces, (Airmap is a great example of a company making this happen). However, We can’t just assume or depend on this to be universally true – that risks the mistake of being overly idealistic. There needs to be an active solution to protect critical areas.

There are a number of companies working on solutions that involve intercepting and disabling drones that enter space that needs to be protected. In fact, there are solutions like drone on drone capture (with nets) 🕷, projectile solutions (shoot it down) 🔫, even flamethrowers! 🔥

Unfortunately, these kinetic measures make little sense in cases where the drones are flying over areas that need protection. If the concern is a drone crashing into a crowd or important infrastructure, these solutions run significant additional risk of the drone or pieces of the drone causing damage on impact. While there is definitely a market for kinetic solutions in the military and related markets, but it seems like a bad fit for the majority of the simple but real threats out there.

A Software-Based Solution for Drone Protection

Last year, as the co-chairman of ICON, I had the good fortune to meet Gilad Sahar, the co-founder and CEO of Convexum. With the unique insight that comes from military experience with both the costs & benefits of active solutions, they have developed a non-violent, software-based active measure to help automate perimeter protection from drones.

The concept is fairly simple.

Convexum has developed a device that allows companies & governments to detect when a drone is entering a restricted space, take control of the drone, and land it safely. A cloud-based service ensures that all Convexum devices have up-to-date signatures for known drones.

Initially, they are seeing significant demand for this solution around critical infrastructure, like energy development, and sporting venues. Long term, I can easily imagine a future where a non-violent solution for drone protection would be highly desirable anywhere we don’t want to bear the safety risk (like schools).

Working with Government

Europe has already provided a clear path for companies and government entities to receive the permits & exemptions needed to deploy this type of solution. (In fact, Enel has already deployed a solution to protect power plants.) Congress & Senate debating this now in the US, but seems to be one of the few remaining areas of true bi-partisan alignment.

I’ve personally been so impressed with Gilad & Convexum, I’ve decided to help them by becoming an advisor to the company.

Let’s hope this is part of an increasing pattern of entrepreneurs and investors thinking ahead about safety and regulation, and supporting technologies early that can help solve these eventual problems.

 

 

Every Function Has a Superpower. What’s Yours?

Over the course of my career, I’ve been fortunate enough to work in a variety of different functions.  No matter whether it is engineering, design, product, or service, every role has its own unique set of requirements and challenges.

Maybe that’s why I have always believed strongly that software is a team sport. If you want to build exceptional products, you have to find a way to harness the unique and diverse viewpoints of a team of professionals across a wide variety of functions.

Unfortunately, even at great companies, there is a repeated pattern where people in some functions feel disempowered. This doesn’t need to be the case.

Every function has a superpower. Make sure you know what yours is.

Every Function Has Value

Hypergrowth software companies are relentless in their pursuit of efficiency. Everyone who joins a new company dreams of building something new, something better than the companies that came before it. As a result, startups are always questioning the breakdown of functions in older, more established companies. In addition, resources are always tight, as companies stretch to make every dollar of funding count.

Unfortunately, this also means that many startups repeat the same mistakes over and over again when it comes to recognizing the value of different functions in a modern software company. This can be compounded by having a founding team or early employees who have never worked in those functions before.

You don’t really know a function until you know someone who is exceptional at it.

Inevitably, most startups, even when they have grown to hundreds of people, have gaps in their understanding and appreciation of some functions.

Avoiding Decision By Committee

Besides the lumpy build-out of different functions at fast-growing companies, the need for fast decision making also tends to bias the product process.

Great companies tend to be opinionated in their decision-making process around product, and those processes can vary significantly. Some companies may overweight decisions from engineering, others might look to a strong product function. There are companies that are largely sales-driven, and others that rely on general managers. There are companies where decision-making is hierarchical, deferring to the CEO or founder for key product calls, and others where decision-making is distributed broadly to the teams.

This isn’t surprising, however, because there is a direct tension at companies between the speed of execution and the exhaustiveness of a process. As a result, almost every product-centric company seeks to avoid “decision by committee” by assigning decision responsibility to a function or a hierarchy.

No matter what system exists, there are always people and functions that feel disempowered by the process.

Know Your Superpower

While you may not be the one to make the final product decision, it is a mistake to feel disempowered. Your function has unique value, and you can dramatically shape any product decision through your efforts.

The key is to know your superpower.

Every function has one. Here are just a few examples:

  • Engineering. Every engineer has the ability to take what is and isn’t possible off the table. I’ve seen product strategy discussions completely changed in a single weekend by engineers building something that no one else had even considered. The power to create is an awesome one, and the best engineers use this power to open the eyes of their teammates to what can be accomplished.
  • Design. Most people can’t visualize the different options that are possible around a given feature or product, and design has the power to reshape discussions completely based on visualization. Design can eliminate theoretical options, define the choices available, and most importantly trigger a deep, emotional response to certain choices in decision makers.
  • Product. At some companies, product managers have procedural power to make decisions. However, the most effective product managers use their power to frame the discussion with strategy and metrics to help drive decisions. The power to define the framework for a decision often is the power to control the decision.
  • Client Service. If you spend your day talking to real customers about real problems every day, you have amazing power to bring issues to the fore. Sometimes a decision is swayed by the scale of the problem, other times by the severity. Never underestimate the power of narrative, driven by real customer stories, to shape decisions on product and prioritization.

Every function has a superpower and everyone has the ability to do the extra work necessary to tap the unique capabilities and resources of their function to use that power to shape decisions. It requires work, but no matter what your function or role is, you can heavily influence critical decisions.

You just need to find your superpower.

 

Solve the Product Maze Backwards

As the father of young children, I can tell you that there is a special place in my heart for restaurants that provide puzzles and crayons for small children to pass the time.

On a recent trip out to The Counter in Mountain View, Jordan (who is 8)  was really struggling with a large maze puzzle on one of these activity sheets. It was a fairly large maze, and he was frustrated by his inability to see the dead ends ahead, forcing him to retrace his somewhat tortured crayon path.

I told him to try to solve the maze backwards.

As you can probably guess, he began at the end, and was able  to find a path back to the beginning in just a few seconds . He was delighted, and a bit surprised, to see how simple the puzzle looked like from a different perspective.

Surprisingly, I find that both entrepreneurs & product leaders miss this important lesson when evaluating ideas for either their company or their products.

Three Questions in Product Prioritization

In my experience, there are three common questions that often come up when product features are being debated:

  1. Should we build this?
  2. When should we build this?
  3. How should should we build this?

Unfortunately, even highly talented teams can become  get bogged down in debate and uncertainty when all of these questions become entangled. As engineers & designers are professionally trained to answer the question of “How,” the worst debates tend to happen around the questions of  “Should” and “When.”

Too often, when debating what feature to work on next, debates around timing quickly devolve into debates about whether the feature is needed at all.

Solving the maze backwards does a fantastic job of disentangling these two questions. Simply asking the question of “If we are successful, will we have this feature in 3 years?” tends to illuminate whether the debate is about “Should” or “When.”

If the answer is yes, you will have that feature, then the question is simple. You are just debating priority.

Avoid the Local Maximum

One of the well known issues with iterative processes for delivering product features is the “local maximum” problem.

The assumption is that where ever you start with your product, your team keeps working on improvements. Each improvement is measured to ensure it is “better” than the product before the change. However, you can reach a point where every change you make hurts the metrics that you measure. The fear is that there is a better version of your product (the absolute maximum), but it requires a change bigger than you can get to from the current design.

It’s called a local maximum problem because of the similarity to the concept in mathematics when you are traveling along the curve. From the local maximum, every move is down, even though the curve ends up higher eventually.

Solving the maze backwards can help.

By asking the simple question about whether or not your product in the far future has a given capability, it can unblock your thinking about what leaps and changes will be necessary. Whether the limitations are in technical architecture or product design, clarity on your long term vision can help your team visualize a future not trapped by their current constraints.

Too often, the real limitation is not related to either technical or design constraints, but rather a lack of clarity and imagination about what might be possible. Just like a maze, it is easy to get lost in the middle. Thinking backwards from the end goal can help the team escape a Zeno’s paradox of minor feature improvements.

Founders Can Solve the Maze Backwards, Too

It may seem hard to believe, but in early 2009 when I took over LinkedIn’s mobile efforts, there was still active debate within the company about whether to dedicate significant effort to mobile. Why? Well, back in 2009, the Blackberry was still hitting record sales, the  app store was a year old, and from a web metrics point of view, mobile views represented less than 1% of LinkedIn’s traffic. Like every hypergrowth startup, LinkedIn had a huge number of initiatives it wanted to pursue around growth, engagement & revenue, and it wasn’t obvious that mobile would move any of these needles for the company in the next few years.

Solving the maze backwards helped.

What was fairly obvious in 2009 was that the growth rate of mobile engagement was compounding at a phenomenal rate. LinkedIn, as a professional use case, might have been slightly behind social use cases for mobile adoption, but it was fairly clear that within 5 years (by 2014), mobile should represent a majority (over 50%) of all visits to LinkedIn.

Thinking backwards helped give us the confidence to invest in both talent and technology that had little short term payoff, but would become essential to engagement over the next five years as those predictions came true.

Fast forward to 2017. I was recently meeting with a founder who was debating whether they should hire a Vice President of Marketing. As he walked me through his thinking, the argument wandered, and became more focused on whether or not the company “needed” marketing.

I asked him if there was any way, if the company hit their numbers over the next three years, that the company would not need marketing, or an experienced marketing leader?

The CEO quickly responded that marketing would be essential to hit the numbers they were looking for in three years. All of a sudden, the conversation changed. The question wasn’t whether or not to invest in marketing, but more a question of when they need to.  Was this a 2017 or a 2018 problem? Is this something they would need to hit the milestones to raise their next round of funding, or something that they would invest in during the next cycle?

It was now a question of when.

Questions of “Should” vs. Questions of “When”

“The essence of strategy is choosing what not to do.” — Michael Porter

Being clear about what your product will and won’t do is a critical element of product strategy. However, because it is so important, even well-meaning teams can turn almost any feature into an existential debate.

Thinking backwards can help differentiate questions of “should” from questions of “when,” and that can be incredibly productive in moving the discussion to prioritization.

This is not intended to be dismissive of questions of prioritization. Phasing decisions are some of the most important decisions start ups make. Financing for startups is phased. Small teams can only work on a few projects at a time. Customers can only absorb so many new features at once. As a result, prioritization decisions are incredibly difficult to make.

Greedy algorithms are very good, but can be traps if you are working against competitors and an ecosystem that is willing to make bets that lie across the gap from your product’s current local maximum. Thinking backwards can help illuminate long term goals that are across the gap.

When you are building a product roadmap, and get stuck on debates about a short term feature that doesn’t move the numbers, I encourage founders to take a moment and try to solve the maze backwards.

It worked for Jordan, right?

Helping People Save is a Job Worth Doing

“Every day stuff happens to us. Jobs arise in our lives that we need to get done. Some are little jobs, some are big ones. Some jobs surface unpredictably. Other times we know they’re coming. When we realize we have a job to do, we reach out and pull something into our lives to get the job done.” — Clay Christensen

In the summer of 1993, after declaring computer science as my major, I got my first high paying software development internship. Over that summer Hewlett-Packard paid me over $5,000, which seemed like an unbelievable amount at the time.

Unfortunately, like a lot of people, I was so excited by receiving this windfall that I promptly spent it. By Thanksgiving, I was shocked to find that my bank account was nearly empty. All that money, gone. It literally sickened me.

That was the moment when I decided to learn as much as I could about personal finance and I got religious about saving.

The Theory of Jobs to Be Done

For a lot of people, there is a moment they can recall when they consciously decided that they wanted to start saving.

When I attended Harvard Business School at the end of the dot-com era, I was incredibly fortunate to spend time with Clay Christensen, who at the time had just recently published the now famous book, The Innovator’s Dilemma. In his class, we studied his new theory of disruption, and how industrial giants filled with smart people would make seemingly smart decisions that would lead to their downfall.

One aspect of his theory, which later went into his book, Competing Against Luck, is the Theory of Jobs to Be Done. Quite simply, Clay believes that companies can go astray by focusing too much on the data about their customers and the features of their product. Instead, he argues they should focus on the end-to-end experience of the job that their product is being hired to do.

In the past few years, I’ve come to believe that saving is a job that a huge number of people want a product to help them do and help them do it well.

Saving Itself is a Goal

Our lives are filled with a large number of small financial decisions and problems, but there are only a few very large financial moments that warrant the creation of an entire companies to support. Spending, borrowing, investing and financial advice all certainly fit that description. I believe that saving belongs on that list as well.

Americans are in a terrible state when it comes to saving. 6 in 10 Americans don’t have $500 in savings. An estimated 66% of households have zero dollars saved. If you are cynical about small, one-off surveys, The Federal Reserve itself estimated in 2015 that 47% of households didn’t have the means to cover a $400 emergency expense.

Saving is a huge problem, so it isn’t really surprising that tens of millions of Americans seem to be looking for something to help them save. Enter Acorns.

Hiring Acorns

Over the past two years, it has been astounding to watch Acorns grow. An elegantly simple product, designed from the ground up for a mobile generation, Acorns has grown to over 2 million accounts in less than three years. In the first half of 2017 alone, Acorns added over 600,000 new customers. Their overall mission is to look after the financial best interest of the up-and-coming, something I personally care deeply about.

It isn’t really surprising to see why so many Americans have decided to use Acorns to help them save. 75% of Americans have a household income under $100K. Acorns simple features like Round Ups automate the process of making sure that as you spend, you save. Acorns has now performed over 637 million round-up transactions for their customers – each one an action designed to help people save more. I believe that on any given day, thousands of people decide to hire a product to help them save, and increasingly they are hiring Acorns.

When I met the founders of Acorns two years ago, we immediately connected over the common ground between their culture and Wealthfront’s (the company I was running at the time.) They are very different services, focused on different problems and audiences, but with a shared belief in the power of automation. This is a company worth supporting, and I feel fortunate to serve on their Board of Directors.

At a time when people continue to grow more and more frustrated with the solutions offered by incumbent banks and brokerages, I continue to be excited about the opportunities for new products that are built around automation and world-class software design.  As an industry, we can and should radically improve the financial solutions that are available to everyone. Acorns is proving that saving is a job worth doing.

Spend Time Thinking About The People Who Don’t Use Your Product

on-the-outside-looking-in

This is an extension to my original three post series on user acquisition.

Today, AirBnB announced that it had reached a settlement with the city of San Francisco on how to effectively register and monitor legal listings in the city. I am a huge fan of the company, and it seems like a positive outcome for both San Francisco and AirBnB.

For many, the issues around many of the sharing economy companies, including AirBnB, are examples of regulators trying to find a way to both control and incorporate rapid, disruptive innovation.  There is, of course, some truth to this point of view.

However, as a product leader, there is another important takeaway that seems to be too often forgotten. Most of us spend too little time thinking carefully about the people who don’t use our products. 

The people who don’t use your product often won’t show up in your core metrics. But if you don’t spend time understanding them, you will eventually feel the negative effects in your growth and your brand.

It’s Natural for Companies to Obsess About Their Users

When a startup launches a new product, it is natural to obsess with every user it touches. Every click, every tap, every piece of data is precious feedback about your features. The data is one of the most objective sources of information about what your users are doing with your product and when they are doing it. In the early days, before finding product/market fit, a huge amount of time tends to be spent on the people you touch but who don’t convert. In fact, that may be where most people at the company spend their time.

As consumer products find product/market fit and hit escape velocity, more and more engineers and designers spend a disproportionate amount of time on users. The people who work on growth & marketing will still often continue to look at the data on leads, trying to find ways of converting those non-users to users. However, as a percentage of the company, fewer and fewer engineers, designers & product managers will be looking at data from non-users.

This makes sense, of course, because as your product grows, almost all feature development is focused on your users. In 2008, when we established the Growth team at LinkedIn, we discovered that of the hundreds of features on linkedin.com, only three features reliably touched non-users. (For those of you who are curious, those features were the guest invitation (email), the public homepage (linkedin.com), and the public profile (in search.))

Customer obsession, of course, is generally a good thing. But as we learned at LinkedIn, if you want to grow a viral product, you have to spend a considerable amount of time thinking about the non-user, where they touch your brand and your service, and find ways to both reach them and convert them to users.

You Have More Non-Users Than Users

Few brands and products could ever claim that their conversion rate for everyone they touch is over 50%. It is even possible that Facebook, with nearly 2 billion users, still has more people in the world who have heard of the company than who use it.

In 2011, I remember talking to the great founders at CardMunch about a new email they were proposing to add to their service. CardMunch was a wonderful app that made it effortless to scan a business card and then have it automatically entered into your address book, with almost no errors. The proposal was to add an email so that the person whose business card you scanned (non-user) received an email from the CardMunch user with their business card in electronic form.

The team was ready to whip something together quickly and test the idea, and the concept was good in principle. But given some of the experience of Plaxo a decade before, it was prudent to ask the simple question: “How many people will see this new email?” Within a few minutes, we figured out that the number of people who would receive this email within the first three months would be 30 to 50 times the total user base of the application.

Some of you are probably thinking, “sounds like a great growth feature!” Others are likely venting about why we have so many emails cluttering our inboxes. Both reactions are fair.

The guidance I gave the team, however, was to consider the fact that, once they launch this feature, most people who have ever heard of CardMunch will have only heard of it through this email. The product and the brand. I asked them to spend a bit more time on the design on the email, in that context, to ensure that all of their hard work on a wonderful product wouldn’t be drowned in an avalanche of poor experience.

In the end, Sid Viswanathan & team did a great job brainstorming ways that they could show the value of a connected addressbook in the email, including LinkedIn features like people you know in common. Once framed properly, it was simple to think about what they wanted non-users to think about their brand and their product.

Non-Users Matter

Marketers, of course, have known this for decades. It is a brand marketing staple that it takes at least three touches of a brand before it will stick with a potential customer.

Somewhere along the way, software companies lost touch with the basic idea that every piece of content that contains their brand is a potential touch. It is not just the users of the core product that matter for long term growth.

Market research and customer development are often essential for discovering and understanding new potential users for your product. The case can be made that viral systems can, in fact, spread to these new pockets automatically. However, truly viral products are few and far between, and in most cases these new markets will not be in the data sets that your product & engineering teams are focused on.

Brand will also impact your company well beyond new user acquisition. With AirBnB, we now know the many ways in which their service and brand touch non-users. Neighbors, for example, have natural questions and concerns when a house or a unit near by is available on the platform.

Software companies, especially successful ones, tend to have passionate and talented designers and product leaders who are eager to find clever solutions to real user problems. Given the right data and focus, there is no question that these teams can also design and build features that address non-user concerns.

Tesla spends time thinking both about the feeling a driver has in the car, as well as the experience of a non-Tesla owner who is watching that car drive by.

Spend more time thinking about all of the people who touch your product & your brand, not just your users.

 

Product Leaders as Curators & Editors

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A few years ago, I wrote a few posts to outline the requirements for exceptional product leadership:

While I have been gratified that people continue to find utility and value in these posts, I’ve come to believe that product leadership, particularly the issue of prioritization and phasing of a product roadmap, remains daunting and challenging for most teams.

In particular, the need for organizational scalability and speed of innovation has driven the widespread popularity of small, independent teams building product and features. Unfortunately, the side effect of the explosion of small teams has also amplified user-experience fragmentation and the haphazard quality of many web-based and mobile software applications.

As a result, I’ve come to believe that there are two facets of  product leadership that have become increasingly important for delivering a high quality product experience: curation & editorial.

Curation Amplifies Your Product Experience

Around 2014, I remember first being struck by a product management job description at Pinterest which incorporated the concept of curation as a core responsibility of product management.

The dilemma of product prioritization is always simple to understand: most software teams, filled with talented people, have more ideas for great features that the capability to execute. As a result, there has to be some process for filtering down the ideas to answer the question of “what do we build next?”

Prioritization on metrics, customer requests and delight is not hard to operationalize, but it still leaves open critical questions:

  • How does the product & experience come together for the user after we ship?
  • How does the product communicate the changes to the customer in way they can easily understand and utilize?

I believe curation is the key to answering these questions.

Curation is an under-appreciated skill in software design. In the world of art, curation is a critical and valued function. A curator ensures that the pieces of art not only combine to amplify each other collectively, but also gives thought to the experience a viewer will have when engaging with the collection.

Users need some level of coherence in new versions of your product. With proper curation, features and changes amplify each other, and lead to a greater customer appreciation of your efforts through a product experience that is more coherent and easier to communicate.

Without curation, software feature prioritization tends to devolve purely into the line-item value of a given feature, rather than how it fits in general with the whole product, or the product release. Great curators won’t think twice about cutting a piece that doesn’t fit the theme of the show, even if it is exceptional.

Designers, not surprisingly, tend to intrinsically understand the value of curation, and valiantly attempt to connect features together into a coherent product experience. Unfortunately, they often are forced to incorporate together a hodge-podge of features that have been prioritized independently by different small teams.

This is not an argument against constant enhancement and iteration of code, or the constant shipping of bug fixes and small feature enhancements. But for user-facing features, teams need to be wiling to hear from product leadership that a great idea for a new feature is not enough to qualify it for immediate prioritization. Customers cannot endlessly absorb a haphazard array of changes and feature enhancements. The perceived quality of the product drops, and customers fail to perceive the value in the features that are shipped.

Every Creator Needs an Editor

Understanding the value of editorial comes easily to professionals who have worked in content & design.

In my experience, many otherwise talented engineers and product managers balk at receiving critical review of their work. Sure, most software engineers understand the value of pair programming and code reviews. But for some reason, when it comes to overall feature design, the sentiment almost always shifts to stubborn independence.

Unfortunately, just like in writing, having a great editor is essential for the overall quality  and consistency of the finished work.

Even the best writers benefit from having a great editor. J.K. Rowling may have written all seven Harry Potter books herself, but she had a team of editors ensuring everything from line level quality to the plot consistency of the overall series.

Why editors? In general, editors provide three levels of assistance to writers: proofreading (spelling, punctuation, grammar), copy-editing (phrasing, style), and developmental-editing (plot, character development, pacing, tone, and effectiveness.)

Most writers at first balk at the idea of an editor. They are professionals, after all, and incredibly skilled. Why do they need someone in between them and their readers?

The answer is two-fold: first, editors provide a more objective “second-pair of eyes” not affected by the sunk cost and confirmation bias inherent in any creative process, and second they are typically individuals who are exceptionally talented at finding errors and issues that will be perceived by the target audience.

The same applies to software products.

Even exceptionally talented engineers & designers become blind to their own work. While each function can have their own version of an editorial process, my experience has been that if product leadership doesn’t actively engage in the editorial process, the quality and the coherence of the product suffers.

Product Leaders as Curators & Editors

Most software companies have moved to a bottoms-up, distributed organization process for their engineering, design & product teams. Amazon, of course, is famous for their two-pizza team concept. As a result, the need for curation and editorial to keep the product experience coherent has become critical.

If you look critically at organizations that have a distributed culture, but still ship high quality product experiences, you’ll find that there is an accepted culture of curation & editorial in their product process, connecting all the way to the CEO.

If you are a product leader, think carefully about how you can incorporate curation & editorial into your process as you scale.

Forget the Turing Test. The Key to Conversational Engagement Might Be Trampoline Moments

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In 2016, voice-based interfaces exploded into the imagination of the startup community as a potential new consumer platform. Amazon deserves much of the credit for this radical shift, as the Amazon Echo seemed to jump the chasm from early adopters to a more mainstream market. Of course, voice has been a hot topic now for years, as Apple & Google both leveraged their ubiquitous mobile platforms to launch Siri & Google Now, and Microsoft & Amazon have demonstrated incredible technical progress with Cortana & Alexa.

Unfortunately, as the excitement around voice shifts into practical execution, there is an uncomfortable consensus growing that there is something amiss with these new conversational platforms. The issue? The engagement numbers just aren’t as strong as expected, or even as strong as engagement numbers for traditional web or app-based interactions. One of the biggest issues? Retention.

I believe the issue is real, and will be a persistent problem for developers and designers looking to create the next generation of conversational interfaces. But if I had to give one piece of advice to those creative professionals, it would be this:

Deliver trampoline moments.

Lessons from PullString

Over the past four years, I’ve had the incredible opportunity to be an investor and board member at PullString, headed by Oren Jacob, the former CTO of Pixar. This company set out with the audacious goal of reimagining conversational interfaces designed for entertainment, rather than for utility. With a bit of that unique Pixar magic, this incredible team believed in two things that even to this day seem quite at odds with the conventional wisdom of Silicon Valley:

  1. Conversation is a fundamentally new medium for creative content, and would expand beyond the pure utility of a search engine interface to a platform for engagement & entertainment.
  2. A platform to deliver truly engaging entertainment through conversation would require the combination of both technical and creative contributors to the content creation process.

Over the past few years, Pullstring has delivered a wide range of industry-firsts for voice-based engagement for a wide variety of audiences, ranging from young children to adults. Large brands, like Activision’s Call of Duty, Disney’s Marvel and Mattel’s Barbie trust Pullstring’s platform because of its unparalleled scalability and its unique ability to integrate content from creative professionals with expertise in sound, voice, character and dialogue. Even Amazon counts on Pullstring when they want to deliver high quality conversational content.

However, one of the key insights about conversational engagement came early on, during one of their rigorous rounds of user testing & prototyping. After session after session with children, who would use, but not deeply engage with a conversational application, they found it. A trampoline moment.  

Child: Hey
Pullstring: Quick! Name three things you like that are outside.
Child: I think please I’m Chris taxes and jumping on trampolines
Pullstring: W-w-w-w-w-w-wait…you mean like, a real trampoline?
Child: Yeah
Pullstring: Do you think I could go on it sometime? I’ve been using your bed up until now and I think the springs are worn out…
Child: Are you really able to
Pullstring: My oh my, what a day I’ve had…It was so strenuous I can barely remember what I did…Ellington? What have we got in the log?
Pullstring: Right. We sat on the bed. Ellington needed a little rest time from our usual forays.

A couple things you’ll note here:

  1. Speech recognition for children’s speech was very imprecise at the time. The text is not actually what the child said, but the text fed back from the best speech recognition engine of that time.
  2. The child’s willingness to “believe” in Winston (the virtual character, with his friend Ellington) changes dramatically when he demonstrates active listening around one of her favorite things, the trampoline.

This session went on not just for a minute, not just ten minutes, but over 30 minutes. The child had clearly decided to engage, and continued to engage, despite a huge number of imperfections in the interaction.

Why? The trampoline moment.

Turing Test or Trampoline Moment?

For decades, the high bar in artificial intelligence has been the Turing Test, invented by Alan Turing in 1950. The test was fairly simple: an evaluator (human) would have a conversation with two entities, one human and one artificial. If the evaluator could not reliably tell the human from the computer, the machine would “pass” the test.

While there are a number of criticisms of the Turing Test, there is no question that it has profoundly affected the way many evaluate machine-generated conversation.

The insight from the trampoline moment was different, and takes more of its heritage from the world of fiction. The question can be reframed not whether or not the consumer believes the character is human, but instead are they willing to suspend their disbelief long enough to immerse themselves in the experience.

Most people don’t believe that Iron Man is real, or that they are witnessing an accurate portrayal of Alexander Hamilton. They know that the actors in their favorite romantic comedy aren’t really in love, and they forgive plot holes and shallow character development. Even highly critical audiences of science fiction often can and will forgive obvious scientific flaws in the technology presented. (Well, not all of them)

The magic is really in the suspension of disbeliefthe willingness to suspend your own critical faculties and believe the unbelievable; the willingness to sacrifice logic for the sake of enjoyment.

Is it really surprising that a critical insight to human engagement might stem from the arts, where creative geniuses have spent thousands of years attempting to engage and entertain notoriously fickle humans?

Focus on Trampoline Moments, not Intelligence

The progress in artificial intelligence, voice recognition and conversational interfaces has been astounding in the past few years. There is no question that these technologies will reshape almost every facet of our economy and daily lives in the coming decade.

That being said, in Silicon Valley, it is sometimes too easy to focus on the hardest technical problem, rather than the one that will bring the consumer the most delight.

The reason Pullstring spends time talking about finding “trampoline moments” is likely the same reason talented product leaders talk about finding “magic moments” in their product experience. If you can connect with your customer emotionally, you will inevitably find that engagement and retention increase.

Trigger their suspension of disbelief. Find your trampoline moments.

When Is It OK for a CEO to Take a Stand?

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“A great business has to have a conscience. You have to know who you are and who you are not.” 

— Howard Schultz, Starbucks

History has shown that conventional wisdom in corporate communications has been to keep company statements high-level, formal, and uncontroversial. In the past decade, however, we have seen a secular shift from leaders of large companies like Apple, Costco and Starbucks, who are now more inclined to take a risk and speak up on issues that can be polarizing to different audiences.

In the past six months, I’ve had the opportunity to take a public stand for Wealthfrontthree times, and we’ve been fortunate enough to see those efforts rewarded in our growth. But speaking out as a CEO is never easy and it is never comfortable, so many are now asking the question:

When is it OK for a CEO to take a public stand?

Three Things to Think About

Leaders reflect strongly on their organizations, and CEOs cannot escape explicit and implicit comparisons with a company’s brand. So when a CEO makes the decision to take a stand, it has to be evaluated in the context of what’s best for the company. There is no real way for a CEO to divorce their position from that of their business, and a public position can trigger a reaction from all stakeholders.

Because of this, there are three core questions CEOs needs to ask themselves before taking a public stand:

  1. Do you have a mission-driven culture?
  2. Who is your customer base?
  3. Who are your suppliers, partners and investors?


Do You Have a Mission-Driven Culture?

“I think the currency of leadership is transparency. You’ve got to be truthful. I don’t think you should be vulnerable every day, but there are moments where you’ve got to share your soul and conscience with people and show them who you are, and not be afraid of it.” 
— Howard Schultz, Starbucks

One of the most difficult, and yet valuable aspects of building a successful company is building its culture. If your company is mission-driven and values transparency, you’ll find that taking a public stand is often rewarded with increased passion, engagement and pride from your employees. It can also help amplify the appeal of your organization to talent seeking purpose in their professional endeavors.

For example, the leadership at Tesla has made a conscious effort to ensure their mission to accelerate the transition to sustainable transportation drives (pun intended) the company culture, so when Elon Musk takes an aggressive stand, people, whether they agree or not, listen carefully. It is much harder for the leader of General Motors to take an aggressive public position.

There is no way to take a strong position on a controversial issue and not produce waves, both inside and outside the company. But mission-driven cultures are not only more tolerant of that debate, but also often deepen and strengthens because of it.

Who are your customers?

“Great companies that build an enduring brand have an emotional relationship with customers that has no barrier. And that emotional relationship is on the most important characteristic, which is trust.” 
— Howard Schultz, Starbucks

There is a saying in design that if you try to design for everyone, you end up designing for no one. Great consumer brands are like great designs – they resonate emotionally with a specific audience.

It is naive to think that taking a stand on ethical issues will result in universal support. That’s why it is incredibly important to not only know who your customers are, but also have a deep understanding of how they will react to a public position and specifically the one you are taking. While the specific position taken matters, too often leaders ignore the more subtle, but powerful issue, or whether or not their brand supports the idea of taking a strong, public position on the issue.

There is a reason why it’s easier for Costco to take a public position on some issues than Wal-Mart. It’s customers are primarily urban, mass affluent and well-educated. Their revenue per employee is much higher, and that allows them to pay their average worker more. As a result, it’s easier for Craig Jelinek to take strong public positions on issues like employee compensation and benefits that align with their brand and their customer base.

So if your position aligns with your brand and your customers, you’ll find a natural platform to amplify your message. But if it conflicts with what your customers expect from your company, it will not only detract from your message, it can also harm your company.

Who are your suppliers, partners and investors?

Companies have a wide variety of stakeholders, but one of the largest limiting factors in CEOs taking public stands on controversial issues are the often invisible dependencies they have on suppliers, partners and investors.

In the 1990s, Microsoft was infamous for exerting a strong level of silent influence over software and hardware partners who were dependent on their platform. Investors also can wield influence, sometimes directly through the Board of Directors, and sometimes less obviously through financing and other relationships. This is why it is incredibly important to be picky about your partners and chose those who align with your audience.

A CEO who takes a public stand at odds with critical suppliers, partners and investors can quickly find themselves and their companies in a difficult position. This is probably the most common reason that, historically, most CEOs have been forced to avoid controversial issues.

Leadership Beyond Metrics

By definition, opinionated positions will be polarizing. As a result, I’ve worked tirelessly at Wealthfront to build a company with purpose and mission, and build a brand supportive of taking on industry change directly. As a result, we’ve been incredibly vocal on issues that reflect the priorities and beliefs our our employees, our customers and our investors.

This past June, it was gratifying to see that our efforts around the fiduciary standard had an impact. In his four-page opening statement to Congress, Labor Secretary Thomas Perez cited Wealthfront as an example of a company serving the small investor and keeping their best interest front and center.

In July, it was heartening to see Acorns, another company in our space, respond positively to my call to fintech CEOs to drop monthly fees on small accounts. Their founder and CEO, Jeff Cruttenden decided to remove their monthly fee for students and investors under 24. Acorns is a mission-driven company, and it’s no surprise that they have quickly built the automated investment service with the most clients.

In general, taking a stand on an ethical issues is rarely good marketing, or positive for the metrics. Fortunately, July was a record month for Wealthfront. Over 3x as many people signed up for the service in July as did in January 2015, just six months ago. As it turns out, there is a huge population of young investors out there who are tired of business as usual, tired of the traditional financial services industry, and tired of rationalizations and empty promises.

Change does not come without risk, both personal and professional. Companies have to decide what they stand for, and leaders have to decide when it’s appropriate to take a stand.

Note: This post originally appeared on LinkedIn on August 13, 2015. It has been replicated here for archival purposes.

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.

 

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)?