Growth Hacks for Startups from Elliot Shmukler of InstaCart, LinkedIn and now Anomalo | E1926

0:00Explain, Elliot, why it's such an important signal for startups to find a user who is willing to tell their friend about a product or service. Jason, very simple. There are no great products in the world that don't have phenomenal word of mouth, right? Word of mouth, people telling their friends about that product is always the number one growth channel that you can have. And it's the foundation for everything. This Week in Startups is brought to you by NetSuite. NetSuite is the number one cloud financial system bringing accounting, financial management, inventory, and HR into one platform, giving you one source of truth.

0:39Now through April 15th, NetSuite is offering a one-of-a-kind flexible financing program. Head to netsuite.com slash twist. Squarespace. Turn your idea into a new website. Go to squarespace.com slash twist for a free trial. When you're ready to launch, use offer code twist to save 10 % off your first purchase of a website or domain. And HubSpot. Join thousands of companies that are growing better with HubSpot for startups. Learn more and get extra benefits for being a Twist listener now at HubSpot.com slash startups. All right, everybody, welcome back to Twist. This week in startups, we do the show about four times a week.

1:22I've been doing it for about 13 years. We're almost to 2000 episodes. Why do I do the show? Because I like to learn. I love entrepreneurs. I like to invest in companies. And I'd like to help build the future. That's why This Week in Startups exists in the world. That's why after 12-13 years and almost 2000 episodes, I keep doing it. I love to learn new strategies, techniques, and just to meet the people who are building the future. Today will be no different. Two of the great companies, two of the great products I use and love, Instacart and Wealthfront, they grew like weeds. You've heard of these companies, right?

1:55Wealthfront had amazing tactics on how to grow. Incredible strategies. And Instacart just IPO'd last year. Stock keeps growing. People love that product. I use that product every week. I use Wealthfront. But who was the growth officer? Who did growth at those companies? Today's guest was the chief growth officer at Instacart and the VP of product and growth at Wealthfront. His name is Elliot Schmookler. I got it correct, right, Elliot? you got it exactly right and um his company is anomalo a-n-o-m-a-l-o we're going to talk about anomalo in the second half of the show but for the first half i want to do a primer on growth modern day growth at startups for all the the founders who are listening so let's start with how does one at a early stage startup how should they think about growing their company When should they start having a growth team?

2:51Or should everybody in the company have a growth mindset? Should it be a dedicated group? How should this work? And welcome to the program. Yeah, thanks for having me, Jason. It's great to be here. Let's talk about growth, right? So how do you begin? When should you start? Should you have a team? You know, one of the major things I want to make sure all your listeners understand is what I've traditionally done with growth is something you do after product market fit. Okay. So before product market fit, You should be doing whatever you can to get those initial users, right? There's no playbook, no techniques.

3:24Go out on the street and find people. Go to your network, right? Do whatever you can to get those initial users because nothing else will really work, right? Paul Graham, I think, has a great blog post about this. Do things that don't scale, which is kind of the opposite of the advice you get in later stages in your startup, right? You want to start scaling stuff? Well, before product market fit, just do things that don't scale. Got it. So product market fit, it must occur before you start applying growth. Why is this so important for founders to understand? What happens if you add growth before product market fit?

4:01It just won't work, right? Or you're going to be wasting your time and your money. I'll give you some very simple examples. Let's say you're going to grow through paid marketing or paid advertising. Well, before you've achieved product market fit, you don't know who to advertise to, right? You don't know who your users are or what messages they resonate with. There's really no foundation for you to build stuff. Or a lot of the things I did at WellFront and Instacart were about taking an existing stream of users that were interested in using these products and just magnifying and amplifying, right?

4:34Making sure more of those users actually use those products more heavily, right? Well, if you have no existing stream of users, there's nothing to magnify and amplify. So none of those strategies actually end up being working. So, you know, the first few years of a startup and I went through this at Anomalo as well are kind of dark times, right? Where you're looking for product market fit, you're trying everything. And once something is working, once you have a set of users that are passionate about your product, now kind of thinking systematically about growth can begin so uh you get a small number of users to try a product you can do that by emailing them you can meet them at a grocery store if you were doing instacart literally just talking to somebody as they're in the parking lot and saying hey i'm jason i'm the founder of instacart we want to let people order their groceries on their on their phone is that something you might be interested in because i'm looking for 10 beta users like it sounds silly but that is actually the best way to get the first 10 users for instacart is it not that's exactly right and my favorite is actually not from instacart but it's what uber did in the early days they would send people to like sporting events right these huge events right thousands of people leaving the stadium that all need a ride and they're they'd be like do you need a ride here's an app you can try to get you a ride home wouldn't that be great yes press a button get a ride right things that don't have to pick up the phone right you know completely manual but hugely powerful these were folks with exactly the need that uber you know was trying to solve and you just needed to expose enough of them where you now had a core passionate group of users that would ultimately tell their friends and you know your growth engine could could start now you you said something very uh specific in there they could tell their friends people should at this point, pause, look up net promoter score and understand what net promoter score is and about virality and people telling their friends and why that is such an important signal.

6:37Explain, Elliot, why it's such an important signal for startups to find a user who is willing to tell their friend about a product or service. Jason, very simple. There are no great products in the world that don't have phenomenal word of mouth, right? Word of mouth, people telling their friends about that product is always the number one growth channel that you can have. And it's the foundation for everything. You know, when I was at LinkedIn, right, people kind of know LinkedIn about, you know, through their, it's viral growth, right? Those invitations that you get that you accept, and maybe you sign up for LinkedIn if you're not a user yet.

7:15That was all important. But guess what? No matter how much we optimize those things, about 20 % of our growth was still word of mouth, right? You bump into someone at the office and you're like, oh, you should try this thing, this LinkedIn thing, it will help you. And they go and they sign up. So you must have word of mouth. And once you have word of mouth, you can kind of amplify that word of mouth through other things, right? You can have invitations blows that amplify it. You can have other ways of capitalizing on it. A referral program would be the obvious low-hanging fruit. Instacart, Wealthfront, and Uber all had that.

7:50Let's pause for a second. if you have users who are willing to tell their friends about the product it means that they love the product and they don't want to sucker their friends into a bad product so no amount of incentive is going to take a user and have them abuse their friends with a crummy product if you don't like a restaurant and they say we'll give you two for one entrees three for one entrees 10 for one entrees, no reasonable person is going to send somebody they love, or a friend, or even an acquaintance for a five for one entree, if the food is terrible. So you must first have a meal that people love.

8:29So let's assume you have the hamburger that everybody's crazy about, or the app, Wealthfront, Instacart, Uber. How do referral programs work in today's environment? Why are they so powerful? And I'm sure you've worked on them because I know Wealthfront, Instacart, they really did have really great referral programs, correct? Yeah, absolutely. And very powerful growth drivers for both companies. So the absolute best thing is to build a product where referring people to the product is just a part of you using the product. If you think about LinkedIn, LinkedIn is a professional networking product.

9:08Part of the product is connecting with people. in your professional network, people that you meet, people that you see at a conference, what have you, right? So kind of referring people, inviting people to connect is a core part of using your product. Slack is similar, right? Slack had amazing growth for many years because what you want to do in Slack is once you get on Slack, well, you want your team to be on Slack. So you invite them, right? Dropbox and Notion are very similar products in that sense as well. You have a document on Dropbox you want to share it. You have a document in Notion you want to collaborate with other people on it.

9:45So there's more of an invitation mechanic that's just built into the product. That's the absolute best you can do. If you can choose a product to work on that has sort of referrals built into your day-to-day use, that's going to be really amazing growth for you. All right, let's do some quick math. The less your business spends on operations, on multiple different systems, and on delivering your product or service, the more margin you have. And margin is everything today. We are past the peak ZERP. We are now in brass attacks. And the more margin you have, the more money you keep, the more money you can invest, and the more people will be interested, paradoxically, in investing in your company.

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11:04Over 37 ,000 companies have already made the move. So do the math to see how you'll profit with NetSuite. Now through April 15, NetSuite is offering a one of a kind flexible financing program. Head to NetSuite.com slash twist. That's NetSuite.com slash twist. Now, that is particular to social networks. Yes. Instacart and Wealthfront are not social networks yes yes then the second best thing you can do is make the product something that people want to brag about oh okay this is not something i thought about a product people are willing to brag about a product that confers some sort of status got it how does instacart do that and how did you do that at instacart so instacart is an interesting one because you know the heavy users of instacart are usually kind of families they're heavily pressed for time and so one of the things that confers status on them is being able to do more things right without uh you know in the same amount of time got it right and so that was what folks would talk about right when folks would discuss yes they would say oh it was no problem for me to put that party together i I just ordered all the things via Instacart.

12:22You know, look how amazing I am in discovering this new tool. Yes. With Wellfront, we had that with our sophisticated investment strategies, right? Wellfront offered things like tax loss harvesting that, you know, until Wellfront launched that, you couldn't get it. You could, you know, maybe you could get it at like Goldman Sachs with$10 million in your account. But, you know, the average investor couldn't sign up for that strategy. And so if you were with your friends and you're talking about investments, you can be like, well, are you guys doing tax loss harvesting? That's a great flex. Yes.

12:58Yeah. And for people who don't know what tax loss harvesting is, it's a pretty sophisticated technique. You're looking at your portfolio. You have some gains over here. You have some losses here. So if you were looking at jtrading.com, where I did the public trading, I'm going to start that up again this year. Let's start trading some more. I have like three of my 15 companies, huge losses, Warner Brothers, Stitch Fix. I think Disney, maybe I'm even in Twilio, I'm down a little bit. So I had like maybe three or four names where I'm down. I could sell some Amazon, Facebook, Uber, where I had massive profits.

13:28And instead of paying taxes on those profits, I could then sell the losers, take the loss. And then those gains would be tax free. This is a very sophisticated strategy. The way I've explained is very simple, but across an entire portfolio, you know, this is something very efficient that, you know, if you have like, let's say income producing stocks, like dividend paying stocks that Andy put together at Wealthfront. And so that's a super flex for sure. Yeah. And, you know, Uber had this too, by the way, you know, I remember in the early days, folks would arrive at the restaurant and in their Uber black car, and that would be a kind of flex there.

14:04I'm like, how did you get here? They're like, Oh, I just used Uber. Super cool. Right? Yeah. or I have my Uber waiting for me, would you like me to drop you off? Exactly. When you think about it, integrating into the product, adding a stop, and now you can add up to five stops. That is a viral feature. The fact that I can have you come in and I can drop you off after or before, and I can do it during the ride, which is kind of sophisticated when you think about it. I'm in the ride, I'm heading to my house, and I'm like, Elliot, where do you live? Oh, yeah, that's after me. I'll just add it after me.

14:36You can use my driver. Pretty viral. Pretty viral. And Uber had this built in because one of the top use cases was going out to social things and coming back from social things so that you were guaranteed to run into people, right, that were arriving at that place at the same time or were leaving that place at the same time. And so that was an optimal way for you to kind of spread the idea that you were using this new thing. Also group, you also have group ordering on Uber Eats, DoorDash, and Instacart now. So when my wife is ordering food, she will share it with me. Hey, I have the basket. Put in your email address.

15:12And then a person, we've all experienced this now on Uber, where you just, they made it so fluid. You just send a URL to a group chat. Everybody put your Starbucks order in. Boom, you have, and you can even put a time. Like, I'm ordering in 15 minutes. Get your order in or not. Yeah, exactly right. A huge, you know, I remember that feature from Instacart. Huge for offices that were ordering snacks, right? You could send it around and be like, which snacks do you want? just add them to the cart, right? And suddenly you expose the entire office to the idea of Instacart, right? And the idea that they can get stuff delivered.

15:45What about gift to get? Hey, get a free ride, give a free ride, get$5, give$5. Are people burnt out on that? Does it work? Is it like negative ROI for companies? How do you think about that? Because Wealthfront had a feature that was a gift to get maybe you could explain and do those work today? it definitely still works and it's a feature you must have i launched it at both wellfront and instacart right so well for the future you know the more people you invited to the platform the lower your fee was for the wellfront service so you kind of got a direct discount for helping wellfront grow and they've actually enhanced it quite a bit since i left now you get higher interest rate on your cash deposits at wellfront by inviting folks you get an extra half percentage point of interest, which is pretty significant for inviting folks to the platform.

16:36And then we have the same thing at Instacart. The more people you referred to Instacart that went on to place orders, you got a coupon, essentially, you got a discount off your next order or your series of orders. These things definitely work. They don't work as well as the first two, right? As kind of, you know, build in something viral into your product to begin with or to really create situations, create dynamics where I can brag about this thing. Got it. So build virality in, hey, we got a group shopping order. Hey, you're adding people to your network. You're adding people to your Slack. That's the gold standard.

17:14That's number one. Number two, hey, I can brag. I can flex. Hey, yeah, no, that's my Uber waiting for me outside. Do you need a ride? I'll jump on in. Number three, maybe referral programs give to get. hey, I give you a ride, I get a free ride. Tell me about the abuse in that third item. Because it does seem people can abuse it. What was like the worst abuse you've ever seen? Do they have to have caps on it? How do you deal with abuse? And I have some stories of it, but I want to hear from your side about abuse. Yeah, yeah. Some of it is self-limiting, right? So if you set up your incentives correctly, some of the abuse can be self-limiting.

17:50So for example at wellfront we would never give you the reward unless not only did your friend sign up but they deposited money got it into wellfront right so they took they took a pretty heavy weight action and so it was hard for you to really abuse it in that sense uh but yeah there's some there's some basic cases like you can you know have multiple accounts right and kind of psycho rewards through all of your accounts hard to do in wellfront where everyone needed a social security number and all those things. But for Instacart, we definitely saw those cases, right? And we had to put in caps, we had to use, you know, machine learning signals to spot those patterns and terminate them.

18:30I had this happen to me at Robinhood. I was one of the angel investors in Robinhood. I have a lot of followers. So I tweeted, hey, join Robinhood, use my affiliate link. And I did it also for Tesla. With Tesla, I wound up getting like, if you ever see me tweet my bulldogs in like Tesla cars. That's because I did so many referrals that I got two or three of those little mini cars, the battery powered cars for kids. Those things cost like six or 700 bucks. Yeah. So I probably got like$2 ,000 worth of those for free, but I'd also gotten 100 people or 50 people to buy model threes. And then with Robinhood, at a certain point, I think I had 250 people had signed up for Robinhood because of me and they give you a free share every time that it said no more free shares for you jake and i said it to vladen i was like um i don't care about the free shares it's like just a three dollar share i just sell it immediately and you why because i don't want the clutter in my account um but you know like you can leave my referral thing on and not pay me i don't care and i think they just actually reversed it and then for uber i remember this with the free ride to get one somebody took their uber link and they bought google ads yeah uh and it was a friend of mine and they bought google ads in the early days you know uber in la get a ride uber in santa monica get a ride they just picked like you know certain like long tail keywords and they had i think like 300 free rides and then uber found it out because they tracked back the urls and they just turned them all off yeah and my friend was pissed and i'm like it's against the terms of service to do that but in a way it doesn't really matter that arbitrage because like, does it matter?

20:05Like, I mean, it's annoying, I guess, for the growth person because it perverts the statistics, but it doesn't matter because the person did take a ride. Yeah, it doesn't really matter, right? If you structure your program correctly, it's relevant. And we had the folks doing, you know, Google ads for Wealthfront, right? Because there was a monetary incentive. And we actually figured out that most of them lost money on the Google ads, because it's actually hard to be ROI positive when you don't control anything in terms of where the person lands and how they're going to sign up. And so ultimately it doesn't matter.

20:37One thing that drives me crazy is when I want to buy something on a website, but there's too much friction when I go to checkout, right? I want to make the impulse purchase. I'll be totally honest. I see something I like. I got these new reader glasses. You know what? It was so easy because there was no friction. That's what I want. I want to be able to have a smooth and easy payment experience, but it's got to be safe and secure, right? I don't want people hacking my credit card. And I like to have many different ways to pay. I want to use my digital wallet, obviously. And then, you know, other people might be in the buy now, pay later period of their life.

21:04No judgments there. If you want to be on a payment plan, that might be a good idea for you. If you're a merchant, you got to be able to offer alternative payment methods, APMs. This is critical. And you know who's the best at this? That's right. Our friends at Squarespace. Squarespace payments makes it easy for customers to make purchases, which equates to more revenue for your business. Super easy to set up and it's going to keep your revenue growth going up and to the right. So check out squarespace.com slash twist for a free trial. squarespace.com slash TWIST. You get a free trial. When you're ready to launch, you just go to squarespace.com slash twist and you get 10 % off your first website or domain purchase.

21:38Squarespace has the best design. They constantly release great features like Squarespace payments. They study their customers, you and I, and they ask you, hey, how can we make this better? And when they make it better, they give it to you and it's for the same price. That's what I love about Squarespace. Every day I wake up with new features in that same affordable price. Squarespace.com slash twist for a free trial. Okay, so we have three so far. build virality into the product. Got it. Number two, the flex, be proud. Tell people, hey, I'm saving time. I'm saving money. I've got a cool car. I got my own driver.

22:10I could drop you off. Number three, give to get programs. What else is in your playbook for growth? What other items are there? Yeah. So that's kind of the critical viral stuff, right? Then once you have some virality going, one of the critical growth things you should be doing is what the technical term is conversion rate optimization. Okay. Any sequence of steps that a user has to go through to take an action that you care about, it could be signing up, it could be deposit of money, in Wellfriend's case, it could be placing a grocery order on Instacart, ordering a ride from any kind of sequence of steps that they go through.

22:47You should be collecting all the data you can about how folks are flowing through that sequence of steps and generating tons of ideas in terms of optimizing that process, right? But the idea that the simpler you can make that sequence of steps, the fewer steps, the easier the steps, right? The more whatever the incentive is, is reiterated on those steps, the more people will actually complete that process. Because that's what really hurts a lot of growth efforts. You know, you might have a great viral hook that gets 100 people to come to LinkedIn because they were invited, but maybe only 10 of them sign up.

23:27So kind of 90, you know, are gone. They were there, but it was just too hard or not compelling enough for them to go through the process. So the optimization of funnels is critically important. Walk us through what, who does that? Who is the optimizer? Because you have designers, UX designers, they like to make things pretty. In some cases, they want to win design awards. you got developers they want to push code they want to use the latest tools okay um and then you have like a product manager they are kind of like a maestro some ceos yelling at them you got a ceo who's probably got their you know important ideas and then you have growth people who where does this land in an organization let's assume we've got a company with 10 000 users and 20 employees and three million dollars in funding now we're starting to build a team how do you think the team should be composed because i know i talk to startups hey who's responsible for the funnel and they're like yeah i guess well the developer built it and the ceo said what they wanted and there's a ux designer they did some of it as a product manager as a growth team like that's five different people a lot of cooks in the kitchen what's elliot's version of optimizing this kitchen?

24:45Absolutely. So typically, the closest role, the closest functional role to doing the right things is the product manager. Think about product managers. Ultimately, they're the good ones, of course, right? Are outcome oriented. They want to have some sort of goal. They want to sign up as many users as possible. They want to get as many pictures shared as possible. They want to have as many rides as possible, whatever. They're typically very outcome oriented. And they understand the worlds of design and they understand the worlds of engineering. And often they can get deep into the data, right? Or work effectively with data analysts, data scientists to get deep into data, to combine those three perspectives, design, engineering, data.

25:24But with this sort of outcome orientation, what can we do now, whether in engineering or in design or using data to achieve our goal? They don't care typically if they're going to win awards for the UI design, they care more about that UI design being effective in achieving that goal. What's the most effective signup today? I run into all kinds of signups. I noticed on my phone, there's a lot of apps that are just like, give me your phone number, here's your secret code. They don't even ask you to put a password in. They don't ask you to name an account. It's just like your phone number is enough.

25:58That's our single source truth. Then I have other things I log into and they're like, hey, Google, hey, use the Apple signup. What signup is the most effective at getting people through the process quicker and then how do you deal with this like multi sign up madness that's occurring right now because i will sign up for something using apple but then i try to sign up my phone number it's like oh do you want to merge these accounts this just seems to be one of the massive friction points if you were advising a startup what would you tell them to do yeah yeah so it tends to be very product specific uh at well front we actually found that if we made the account creation easier folks wouldn't come back as much after they created their account than if we made it just a little bit harder so we worked on making it just hard enough where after creating the account folks felt like they had you know invested uh skin in the game skin in the game okay so explain to me what additional information you asked for?

27:00Well, Wavron's very heavy, right? You know, if you're going to open a Funger account, you got to have your address, your real name, your social security number. Okay, yeah. That's very, very heavy. But we found even in the early steps, if we didn't have you create a password, right, if we used one of these, you know, you're going to put your phone number in, we'll send you a code. Folks just wouldn't come back enough. Wow. Even thinking of the password and the big growth. So counterintuitive. Yes, but again, it's a different kind of product, right? Sure. In a different kind of app, I could believe that using the code or have it is the best thing to do when ultimately I want folks to give us their social security number and put money in, you know, a few steps later, making it seem more solid and more secure and more trustworthy by asking for that password was actually important.

27:54You know, it's super interesting. I force people when they sign up for my events, like in-person events, liquidity, which we're doing in June, like VCs and GPs. I force them to have, they apply for a ticket with their credit card. And then we will either accept them or not, but they have to have a LinkedIn. And one out of 50 people, one out of 100 people is I don't have LinkedIn, I don't use LinkedIn. And we're like, okay, well, you need to have a LinkedIn to come to this event. So create a LinkedIn professional account, we want to make sure we know who you are, or send us some information. you know, email us from your corporate account kind of thing.

28:26And what we found was this was like the ultimate way to weed out people we didn't want to have at events. And we do this also for the all in summit, which is$7 ,500 ticket, but having the apply process looking at it, we didn't want the events to be infected with too many service providers, because you have like, 50 real estate brokers show up for 100 person or 200 person event. Now everybody's trying to sell you a home or finding out how much your home's worth and it just ruins the event no no no no shade to real estate brokers i'm sure there's some great ones out there haven't met them yet um but you know the people who tried to circumvent it were service providers who are trying to hack the system and so a little bit of friction really good you know who else did friction was thumbtack when you went to thumbtack we were the first investors in thumbtack jonathan's company and marco and in thumbtack when you said i want to paint this room here he would say okay how many rooms are you painting five it's okay are there any cabinets say yeah there's cabinets do you want to paint the cabinets yes okay are you painting the inside of the outside of the house are you providing the paint or are we providing the paint okay is there molding okay uh and by asking these questions do you have to do you want to strip the wood and you could say no or i don't know but by creating a longer dossier the longer you filled out the more vested you were then they had more information to give to the service provider which increased their chances of wanting the customer.