Taking on an $80 Billion Dollar Market with Gen Z | Dylan Diamond

0:00We have General Catalyst, KOTU, Insight, O1 Advisors, Jeff Bezos, Mark Benioff, Dylan, how did you land all of these great investors? During the summer months, we reach number two on the entire app store, number one in productivity. Calendars are extremely sticky products. Yes. I think I look at my calendar more than I look at my text messages. The high school market is very important to us because it's the first touch point with the user, and we want to build a relationship with them for the rest of their lives. But then you must retain the user. Please tell me all of your Gen Z insights. What do they want?

0:35What's coming next? Dylan Diamond. It's a pleasure to have you. Molly O'Shea, thank you for having me. Last time I saw you, we were in front of a packed audience of 500 people in this incredible small town. Westport Library. Called Westport, Connecticut. Yeah. Wouldn't trade it for the world. The fame of Westport, Connecticut. No, that was a fun event. You did a great job. And I thought the crowd really liked it. Thank you. I think you did a great job as well. Thank you. Very fun crowd. interesting, interesting times. Well, what's cool was being there was all these kids. It was like the eighth generation of what was called iStaples, but Saturn at that school.

1:18So it's cool to actually meet all the users where it all got started. Do you visit schools often? Like, do you go and meet? It was easier when I was 19. Now I feel like they're like, why is this adult in the school? But we do visits like, you know, a couple of times a quarter, like user research visits and stuff. I have not been back to Westport, though, since 21. So it was really fun to be back. Yeah, it's nice. Yeah, it's refreshing. Yeah. Well, you are a big deal. You raised over$68 million in funding by very large names in Silicon Valley. I'm going to name them out. Okay. We have General Catalyst, KOTU, Insight, O1 Advisors, Jeff Bezos, Mark Benioff, Dara, Neo, Elad Gill, Dylan Field, and Inspired Capital, and I'm sure there's more.

2:07So Dylan, how did you land all of these great investors? I think they're all builders. You look at everyone from Bezos to Benioff to O1 Advisors, which was the Twitter management team. You have Dick and Adam and David Fisher. They were at the helm of some of the most transformational companies ever. And specifically in consumer, they teach us everything. So, you know, whether it was GC to, you know, Snapchat, Series B, meeting 01, these people are builders. And in a world where a lot of venture capitalists haven't operated in the field as much, we learn everything from, you know, the go-to-market strategy to building out the first new ad unit in years, which we'll talk about.

2:53These advisors, these investors have all been there and done that. And we're super grateful to work with some of the best and learn from them all the time. We talked about this a little bit. We both grew up in Westport. We went to Staples High School. The company came out of Staples High School. So can you just talk about the transition from a Staples High School app project, small thing, to now a full-fledged VC-backed company? Yeah. So at Staples, you probably, you know, I built a bunch of apps. I built an app to let kids better check their grades because the school's website wouldn't really work on your phone.

3:28I was using it just as a tool for myself. People over the shoulder would see it. They asked for the product. That continued to grow and then kids from other schools wanted that and it became the number one grossing app in the education store at the time. Built an app for Tesla and ended up working there just as a tool for myself. And then the product that is called Saturn today started off as iStaples. And it was a website where you would upload your schedule, type in your classmates and see is your best friend, is your crush, who's in your class, who are you going to be stuck with for eight months of the school year.

4:02And that was all word of mouth spread. And you remember posting your schedule on Facebook and being able to like and comment if you have classes with people, doing it then on your story, and then later on iStaples. And that was a product that started as a schedule sharing. So it was used in the peaks of the semester and then staples a schedule as our most high school schedules, incredibly complicated. So I took that schedule sharing product. I had the graph and the database of everyone's schedule and made it a calendar. So it could be used on a daily basis. And that spread word of mouth around my junior year.

4:36And then it spread from around 30 % to 50 % to 80 % to 90 % of all the students using the product every day, even after I left. And it was all word of mouth and just building tools for myself and then friends and classmates. Calendars are extremely sticky products. I think I look at my calendar more than I look at my text messages. just to put some numbers against it. Like maybe how many users have you had in total or how do you measure the kind of success like daily active users? So we've always been a retention-based business. And I think the reason my co-founder Max partnered up with me was he saw the early Google Analytics data back in like 2019 from Staples and saw that step function increase in DAO daily active users over the enrollment and saw that even after I graduated, the engaged percentage of the student body continue to increase.

5:31So we look at a lot of things. We have our Dow now, the stickiness daily active, the percent of monthlies that are active every day is over 50%. Our D30 retention of brand new users is well over 30 % with 70 % for existing. 90 % of new users return every single year. So that's why freshmen use it as sophomores and kind of grow up with the product. Um, you know, we have millions of users at 18 ,000 schools right now, but retention is always what we focused on. I think a lot of other products in the space may have focused just on user acquisition numbers and we probably grow more slowly than some would like.

6:10It's not been an overnight journey. We've been at this for five and a half years, but during the summer months, you know, we reach a number two on the entire app store, number one in productivity, uh, ahead of some great tools like ChatGPT and others, TikTok, just because we focus on the K-factor, we focus on the user acquisition, but then you must retain the user. I think that just acquiring users is not really building a sustaining product. Love what you're hearing on Sorcery VC? Unlock even more. With passes, you'll find exclusive bonus content from this podcast. Deep dives, behind the scene insights, and extra resources tailored for founders, investors and startup enthusiasts head to passes.com to access everything you need to take your knowledge to the next level how does this stack rank against other calendar apps well i think with the high school demo they're not really using other calendar apps their solution are pieces of paper notes reminders their parents telling them what to do um but in terms of you consumer social.

7:13A16 quotes it as anything above 25 % in the D30 is like best in class. We're well north of that. And I think calendar apps don't grow virally. They're enterprise tools that your companies give you, or they're single player products that you use as kind of a notes app, but you don't really use it socially. So we look at consumer social metrics more than calendar apps. That said, we have the viral growth, but we also have the retention. So you're correct that whether it's a calendar or a calculator app, you're probably going to use it a lot, but it might not grow virally. You got to kind of blend the two to both have viral acquisition, but the stickiness that you need to endure.

7:51And there have been a lot of social products since we've started the company that have grown much faster, but then they have the reverse K factor where your friend tells you to use it, you use it, your friend stops using it, and then you stop using it. And with Saturn, it's a great calendar for you. It gets even better when your friends join, but if your friends stop using it, your usage is the same. How do you deal with the cyclical nature of school seasons? You know, I mean, it's tough. Like we are, um, it requires a lot of effort and focus to prepare for the back to school season. We're acquiring over a hundred thousand new users per day during that time period.

8:27Uh, and the average user invites between four and five friends to the platform, propelling the growth. They're sharing their schedule on different platforms, which is all organic led growth. you know, you could have a company that's more spread out growth like month over month. Saturn is a little untraditional in that it is the growth is really confined to the back to school window compared to the rest of the year. But the retention is the same. So if you look at it on a yearly basis, you know, it all kind of nuts out. I want to go deep into this part because you mentioned it a couple of times, but the viral factor of the product itself.

9:00Of course. Last year, you were featured as a collaborative piece in Lenny's newsletter. He has almost a million subscribers. Lenny's amazing. The most popular newsletter ever. Yeah. Could you just break down what builds that consumer product for you guys? Like what is the recipe there? Yeah. So for the first couple of years of the product, we didn't even ask the user for their contact book. We had no invite flows. It was all word of mouth. That was slower, but it allowed us to focus on the downstream retention and the core jobs to be done in the product. I think a lot of times people will build a viral flow, but they won't think about retention.

9:42And then you will see that reverse K-factor effect. Users won't actually engage with the product. And you could acquire users more by either if daily active users equals acquisition minus churn, increasing your retention reduces churn. But acquiring more users without reducing churn is not, I think, a recipe for success. Users will invite people to products without knowing what they do. We've seen time and time again products reach the top of the app store for one or two days and then completely die off. There is a playbook to that. We took a pretty hand-to-hand approach with building out the products early.

10:21In the newsletter piece, we talked about how we would white label each product. So if at Staples, it was called iStaples, Westin was iWestin, Greenwich was iGreenwich, and the app felt really homemade. It was easy to spread word of mouth. It was branded in the app store for your specific school. And that drove us to getting 50 plus percent penetration, sometimes within 48 hours, often within the first week at those couple dozen schools. And that was before any of the playbook growth hacks that you might think of today. as we've hit more scale, we've been able to do the usual growth work with contact book and invitations.

10:57But really, the value prop has to be communicated to the user, which is, hey, share your schedule with your friends, see who's in your class, set your calendar up in minutes. And that's, I think, what we've perfected over the years. But it's an evolving science. And as Apple updates their OS, things change and you got to stay ahead. Have you ever incentivized with money? How do you think about gamifying it? Well, it's more about what's the value prop for the user. All the referrals that have been monetarily incentivized have failed. So saying invite your friend for$5, no. And we even had Bieber tweet out the product once and the retention is not strong.

11:34I think if your best friend tells you to use something, you're much more likely to use it than if a celebrity tells you to use it. I know that onboarding was a hard process for you in the beginning. Very. Getting people. You know of all people. I know of all people. Thank you again. Back in the day, I'm friends with Denali on your team. Denali is phenomenal. Love Denali. Five years later, she's leading product and she's crushing it. Good. We are so lucky to have her. Shout out to Denali. But yeah, I got close to Rough Draft Ventures in college and she worked for General Catalyst and yada, yada, yada.

12:12next thing i know i'm in your office helping out with your lead gen strategy and i'm cold dming yeah high school students um for saturn and i got completely burnt down they are we've all been there i know i look back at my former high school self when i wonder i'm like i hope i wasn't that bad like wow they they are something if you need your ego checked talk to a high schooler yeah talk a high schooler. Maybe don't DM them. That's - Do not DM them. That'd be weird. Um, but let's, let's

12:49let's talk about the onboarding flow now. So what was the process of working that out? So we started off with my cousin who went to Weston High School and he gave us his friend who was our first ambassador and actually interned for Saturn for many years. Um, And we would then use her to go to a boy at Greenwich and a kid at Darien and sort of all word of mouth, no paid, no incentives, just, hey, we need to launch the product. And often when we would encounter a new school, we would need to work with that ambassador to build the schedule infrastructure for that school. It was not done over the air.

13:23We were hard coding apps. So the ambassador felt like a product builder. They were enlisted on the team working with us for a couple of weeks to get the school off the ground. You know, flash forward kind of, you know, five and a half years, we've, you know, it's all done with AI over the air. We don't need ambassadors. But you know, at the time when you were here, we were focused on, okay, Saturn is not established as a brand. How do we convince a kid to one, want to work with an app called Saturn that they cannot use and download yet. They're on a wait list and give us all this data. I realize in hindsight how that may have been a lot of asks for the user.

13:59And, you know, you were phenomenal with everyone else who had to, you have to kind of do the unscalable to ultimately make breakthroughs. And working with ambassadors at the time was a multi-step process. They would churn. We'd recruit them all early in the summer. You hit Labor Day. They're all gone, right? They'd be in a spreadsheet and then you'd go to message them to launch the school. It would all be gone. So we started with manual ambassadors. We've then evolved to having a waitlist product where people could fill out a form. They would log into Saturn. And if their school wasn't online yet, they would fill out a form, give us the bell schedule, other things we needed to launch the school.

14:35And then later on, we made the decision, hey, why don't we just launch all 18 ,000 public high schools in the country and have the users come to us? And even if in year one, the school doesn't get to 50%, it might in year two, three, four. That's what our data shows. So we actually reduced the high touch component of launching a school by working with a high schooler. Instead, we are demand led now where we did the wait list and then now every school is online. So schools can just grow on their own through our invitation hooks and through people just discovering the product. I feel like that's very hard, though, because as a startup, you have so much pressure to grow super, super fast.

15:15You do. I mean, we made bad product decisions, I think, early on when either investors wanted shorter term growth. COVID was a huge hurdle for us because our user base went to zero overnight. We had to adapt. We built a web app that worked on Chromebooks and, you know, that was great. It got like an hour of usage a day, but then we pivoted back to kind of the mobile strategy after COVID. But yeah, one of our board members says our growth is fast and steady. It's not overnight domination, But ultimately, it endures. It prevails. And I think that we now have six, seven years of cohort data that shows that schools grow significantly year on year.

15:54As an anecdote, the first 50 schools when they launched, 7 % of all the high schoolers who were enrolled at all those 50 schools were active weekly. Now it's 60%. Wow. Schools grow year on year. Saturn becomes a fixture at the campuses, but you just got to have patience. And a lot of investors didn't have that patience and we're grateful for the ones that do. What was your thinking being in the founder seat, like shifting over to a long-term mindset? Like I can't imagine that. It was not a decision that we said, let's shift to a long-term mindset. It was more, it just happened. And you've got to persevere to see it happen.

16:30But I remember We were seating all these schools in like 2021, 22, and they were getting maybe a couple dozen installs. And we were frustrated. But then the following year at Back to School, those schools would go from 30 DAO to 1 ,200. All because you had people on the campus who kickstarted the seed who were then able to penetrate the school. Hey, it's Molly. If you enjoy our interviews, check out our newsletter, Sorcery.vc, where we deliver a one-time-a-week top deals and tech headlines report and go deeper on our conversations. Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple, or wherever you listen.

17:13The link is in the description to sign up. Shifting to the Gen Z perspective on this, how has Gen Z trends affected the growth of virality or at least the adoption of the company itself? I'm sure other products have popped up, but how do you stay relevant with it? It's affected the marketing strategy. When we were in high school, TikTok wasn't a thing. And I'm cognizant that I built the app with no design team, no UXR team. I would just build for myself. Now, trends are a little bit different as you think about the needs of other people. I'll talk about AI in a little bit of just how we've been able to make the calendar a lot more approachable to people who otherwise were put off by archaic traditional interfaces.

17:58I think also with Gen Z, they're super smart and they have really high standards for products. So if you think about all the products that will be on a young person's home screen, their dock even, the bar is really high. So we use 10 plus times a day. We need to compete on that side. And whether it's mobile design, performance, the size of the app, a lot of kids have older phones. They don't have strong cell service. The product needs to work offline. You need to adapt for all these things so that the product can work, whether you have low, high bandwidth, new phone, old phone. And kids are very twitchy.

18:37Their attention span is quite short. I think that's also what separates Saturn from traditional calendar and products. Have you had to implement new features or any features because of those behavioral aspects? We built an Apple Watch app, a live activity. We've done a lot of work around trying to predict when the user will open Saturn and notify them in advance. Even though as an investor, you might see that hurts like number of sessions. We don't really care because it spreads word of mouth. If you're putting content on the user's lock screen for them, the onboarding flow, they used to be eight minutes.

19:15We cut that in half and then cut that in half again with AI. Just like take a picture of your schedule, upload it much faster than typing things in. So there, you know, there are always changes. Well, like what are like the social aspects between friends and like that? Oh, I mean, you want to make it something that people will invite their friends to. So whether that's posting to their Snap story, then doing that on Instagram, then, you know, iMessage is sort of taken off even more. So you want to make it that you drop your Saturn link in, you get all your friends on the product. Uh, you want to be careful of privacy.

19:45I think a lot of people are more privacy conscious. So being in control of who you're sharing your calendar with, we've had to do a lot of work on verifying that you are an actual student in that high school for a lot of the social effects, like browsing your friends, uh, schedules and calendars and your classmates. We used to only work with schools that used a school email. Now we work with schools that don't. So you need to always adapt and make sure that it's still really fun, but also a secure environment. Going into the AI element of it. So where are you at now with AI implementation within the app?

20:20So we've done two things with AI. We've been using it already for years. And obviously in the last like 18 months, in the last week, it's every week, it's crazy, but It's accelerated our school launching process and really reduced OpEx. So if you think about every school website has all these calendars out there and we're the only ones crazy enough to want to structure that data. But now you can agentically crawl all the sites, get the data, always keep it up to date. We built crowdsourcing tools in the product. So if it's a snow day and early dismissal, you can just snap a picture of the schedule, take a screenshot.

20:51Boom, it's in your schedule. If enough people do it, it propagates to the whole school. Kind of like how Waze, if someone reports an accident or a police officer, after a couple people do it, it'll appear on the map for everyone else. And we used to have agents overseas that would do it. Now the agents are AI. So it's obviously lower latency, higher retention, and kind of lower OPEX. And then in the product, what's really cool is you can talk to your calendar now. So your calendar will give you a summary of your day. You can talk to it through voice and text. And I think that type of interface is approachable to young people because they do their homework on ChatGPT.

21:24They're the fastest adopters of LLM. They're the most receptive to it. Outside of all software engineers, young people are adopting the technology at the fastest clip. And I think it enables you to take a generation of people that otherwise would not be a calendar user because you think about traditional calendars, you open them for the first time, they're empty. You need to learn what recurring events are, structuring your day in minutes. And if you're not taught that in an enterprise setting, it's really hard. So you use notes. You don't structure. You use reminders. You scribble things down.

21:53your parents tell you what to do. And if the calendar can kind of gently prompt you for that information, you don't need to structure it. It'll structure it for you. So we're building with our team a lot of new modalities and tools in the app to help you stay organized and input data into a calendar that are not those kind of, I joke, it's a global entry application to create an event. There's so many fields, it takes too long. And I don't think the voice control on a lot of products is good enough. And high school kids want to just talk like they talk to a friend. Right. How do you work with schools?

22:24So we're all bottoms up, all word of mouth. School is a part of your day, but it's not your whole day. High school is the first chapter of your journey. And we want to stick with you through college and beyond. Today, we are millions of people's first calendar, but our ambition is to be your last. And we have a harmonious relationship with schools, but we don't need to work with them. And our business model is built right now. We're doing advertising with some top brands. And I think, you know, we don't really need to work with the school for that. Okay. So they're not one of your customers. No, we work with, you know, Nike, Uber, huge brands.

23:01Let's talk about that. So let's get into the ad model component because this is new. This is newer, right? Yeah. So it's really exciting. And, you know, we've built the first new ad unit in consumer in years. I think since stories are really what Snap did to the camera, which was amazing with the geo filter, we're doing to the calendar. and actually making it a ripe canvas. Monetization is a stakeholder in that, but I think UGC and recommendations and making the calendar rich is the vision. And you care about so many things that are on the dimension of time that have events, whether it's, you know, a new movie coming out, whether it's a basketball game with the NBA, brands can play into that.

23:41And it's not just ads. Ads are a component to it. But I think that in the future, everyone will have a Saturn. You'll have an Instagram for your, photos, you'll have an X to speak your voice to your customers, and you'll have a Saturn to communicate all your events. And if that content can be rich, engaging, live in people's calendars where they already are, we think that's really beneficial. And we've been fortunate to work with great partners who feel that young people shouldn't be scrolling all day, that the form of advertising that is dominant right now is not necessarily highest converting, most engaging, even though there are more eyeballs there.

24:14Our ad unit, we are confident is higher performing, is more engaging, can actually get people doing things in the real world with others. What does the placement look like inside the app? It's really cool. You're scrolling in your calendar and you get a video feed of, you know, it's a video of what's going on. So it could be a movie, it could be an ad. Like Nike ran their Super Bowl ad to millions of young people on Saturn yesterday. Oh my God. Which is really cool. And it was their first Super Bowl ad in years. The team there is is phenomenal. But you know, you could have a CTA do RSVP, see which friends are kind of going, even if it's not a real event, it's still fun to create a conversation.

24:53Right. Unlike other ad platforms, where if you and I each pull out, you know, our Instagrams, we're going to see different ads and we expect that. If you're in a high school, college setting and you're all having lunch together, it's really cool to all see the same ad together and have a conversation about that topic. So brands want to create conversation among their customers and kind of be part of the culture. And we have video. It could be static. You can link to a different page. But the engagement's really good. I think Nike did the thing yesterday. They were offering free t-shirts. And I think it was within a couple minutes, they ran out of free shirts because the click-through was so high on the ad.