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Silicon Valley network effects, OKRs for your personal life, and more: Podcast Q&A with Product Hunt

I recently did a podcast with Ryan Hoover, co-founder of Product Hunt and my sister Ada Chen Rekhi, previously SVP Marketing at Survey Monkey – here’s what we talk about:

  • The network effects that makes Silicon Valley what it is. The uniqueness of the Silicon Valley tech ecosystem, how network effects conspire to create a “rich get richer” situation for cities, and why new communication tools enabling distributed teams to work together across continents could mean that there will be no “next Silicon Valley.”
  • Big companies versus small ones. Ada shares her insights on the contrasting skill sets needed when working at a big company versus a small startup, after having herself gone from a small startup to a huge organization like LinkedIn back to a two-person startup with her husband.
  • Personal life OKRs. How to port the concept of OKRs — objectives and key results, a personnel management framework originated by legendary Intel CEO Andy Grove — to your personal life from your business (and why you would want to). We talk about you can use them to help manage your exercise, social life and relationship with your SO.

Of course, we also chat about some of our favorite products, including an app that lets you pop in to a luxury hotel for a few hours to shower or have a nap, a super cool way to greet visitors to your office, and a new app for emailing yourself.

Here it is below as an embed, but if you don’t see it inline, you can listen to the podcast via this link too. If you like the podcast, you can subscribe here. Thanks to Ryan for putting this together, including the transcript!

Some quotes from the episode

“When you’re executing at a small startup, or a small team, or just by yourself, it really comes down to ideating, picking and prioritizing, and then rolling up your sleeves and just getting things done as quickly as possible. It’s a night and day difference from a big company.” — Ada

“If you graph cities, there’s a power law: the biggest cities are really big and there’s this long tail of all these little tiny cities, and the reason for that is that there’s a network effect within cities. These ecosystems emerge because the designers are here, because the engineers are here, because the capital is here, because the marketing people are here, and on and on and on.” — Andrew

“When it comes to working at a large company, it’s much more cerebral and much more about the heart. You’re thinking about how to collaborate and communicate across a cross-functional team to get the initiative done: can you communicate what it’s about; can you motivate people to get it done; can you manage all the working pieces?” — Ada

“Either these network effects will continue to hold and the Bay Area will continue to be strong, or we make big structural shifts in how we organize teams and workforces and the network effects become less strong. But that doesn’t mean some other city becomes the next Silicon Valley, there won’t actually be a “next” Silicon Valley — it either continues or will just be distributed.” — Andrew

“The irony of it is that sometimes when you are working on projects with such large scale, because the skill set is so different, it actually feels like you’re not doing anything at all — you’re merely managing the appendages of the other groups and trying to make sure everyone is staying on track and executing.” — Ada

On joining a venture capital firm: “The idea that I would do the thing I want to do for fun as my full-time job feels like I’ve won an ice cream eating competition, and the prize is more ice cream.” — Andrew

Companies and Products Mentioned in This Episode

Transcript

Ryan: Hey everybody, this is Ryan Hoover with Product Hunt Radio and I’m here at Andreessen Horowitz down in Menlo Park with two people I’ve known for a little while now, two brothers and sisters, Andrew Chen and Ada Chen. This is the first brother and sister duo and hopefully the first of many. Thanks for having me over here. First off, Andrew, you joined Andreessen Horowitz, is it six months ago?

Andrew: Yeah, I think I’m on month five. I’m quickly reaching my half year mark, which has gone incredibly fast.

Ryan: Are you completely swamped with meetings and pitches or how has it changed since before Andreessen Horowitz?

Andrew: Yeah, so when I was at Uber I really loved meeting with startups and hearing about new ideas and staying in touch with the tech community, but I can only do it first thing in the morning and on weekends and it quickly filled up my schedule. So I would work at Uber and then I would do that [meet with founders] basically. The idea that I would do the thing that I wanted to do for fun, like as my full time job sort of feels like I’ve won an ice cream eating competition and the prize is more ice cream. I could do as much as I want, which is super awesome.

Ryan: Yeah. And so your, your background, just maybe for those that aren’t super familiar, you were at Uber right before this and then what’s your short version of your history?

Andrew: Yeah, yeah, totally. We were just talking about. So Ada and I, who’s my little sister, by the way, I want to clarify —

Ada: [laughter, eye-rolling and protestation]

Andrew: So we grew up in Seattle, and we both made our way to the Bay Area. Actually, the funny thing is my first job ever was actually in venture capital and was something I did right after college. Then after that I ended up working at a series of startups, I moved to the Bay Area 10 years ago to start my own company. I had actually met Marc and Ben [of Andreesen Horowitz] here and they actually led the seed round for a startup I was working on during the Facebook platform days when everyone was working on crazy viral apps.

Ryan: So that’s around when we met.

Andrew: Yeah, right. Yeah, that’s exactly, that’s right around when we met and they invested out of a Horowitz Andreessen Angel Fund, which was really funny because that would have been like H16N and so different. So, I met them and I worked on that for a while and ended up basically deciding that it’d be better to go to a larger organization, ended up at Uber running various growth teams there. So I spent three years there, like a really, really fun experience —

Ryan: Probably pretty wild too, right?

Andrew: — Yeah, the first 18 months was like really, really incredible startup like hockey stick growth, then the last 18 months were very eventful and everyone’s read about it in the news. So I don’t have to summarize that.

Ryan: Yeah, and Ada, you’ve had a pretty interesting journey at Microsoft, LinkedIn, Survey Monkey, and then a two-person startup with your husband.

Ada: Yeah. Yeah. Actually multiple two person startups as well as, I spent some time in the game space as well at Mochi Media. So, after I graduated from college, I was in Seattle at Microsoft for a year and Microsoft at the time I think was around 80,000-100,000 employees? Very, very structured. Worked in the ad center space and the online advertising space when search marketing was just becoming a thing and exactly 367 days or so later, moved out to the Bay Area in 2007 and so worked at a tiny little startup that had just raised Series A called Mochi Media, which was an online games ad network, and spent multiple years there after it was ultimately acquired by Shanda Games and then actually started my first company which was a contact management app called Connected. It was all about contact management without the work. We raised some funding for that, ultimately sold it to LinkedIn and I had my experience sort of joining LinkedIn as a just as a company that was really maturing at the time. They had just had their IPO. There are about 1700 employees and experienced hyper growth for the first time, focused on things like relaunching Connected as LinkedIn Contacts, growth, learning a lot about subscriptions and consumer SaaS and was recruited out of that to work at Survey Monkey, where I was SVP of Marketing and then recently left a couple of years back to start a new company that’s actually a husband and wife team with Sachin Rekhi and we started a company called Notejoy, which is a collaborative notes app for teams and so we’re really focused on, how do we actually create a fast and focused workspace for teams that gets them out of the noise of chat and email.

Ryan: Yeah, team collaboration and productivity is so important because if you can even improve collaboration and efficiency within a team by like even just 10 percent, it can have such a huge impact on both your productivity but also just like your joy.

Ada: That was actually part of the inspiration behind the name and it’s one of those things where even when you go to a small team like small tight-fitting teams or larger organizations, you see this friction today that still exists when it comes to communication and collaboration and just think about how many decrepit out-of-date Wikis you see and Google Docs that are sort of lost in the ether and then people joining and getting forwarded random emails from way back when because that’s the only place that knowledge lives, we were really thinking about how do we create something that tackles that and productivity has always been a huge space where I’ve been passionate about.

Ryan: This is a really broad question, but what’s it like working at such a big company like LinkedIn and Microsoft and others to now just you and your husband?

Ada: Yeah, I mean it’s hugely different and I think the biggest dimension where I would say working at a large company versus a small startup is different is that effective execution looks completely different. It’s a night and day difference. So when you’re executing at a small startup or a small team or even just by yourself, it really comes down to ideating, picking and prioritizing and then rolling up your sleeves and getting things done as quickly as possible from an execution pace. When it comes to working at a large company, it’s actually much more cerebral, right? And it’s much more in the heart. You’re actually thinking about how do you communicate and collaborate across the cross functional group of teams to get the initiative done. So can you communicate what it’s about? Can you motivate people to get it done? Can you manage all of the pieces?

Ada: And the irony of it is that sometimes when you’re working on projects with large scale, because the skillset is so different, it actually feels like you’re not doing anything at all yourself. You’re actually merely managing the appendages of all the other groups and trying to make sure that everyone’s staying on track and executing. And so as organizations scale, the execution work around how much collaboration it takes gets orders of magnitude greater in terms of how hard it is to get everyone aligned and marching in the same direction versus one person. And so, I really think that that’s one of the biggest differences, like you go to a startup to learn how to do things and maybe not very well and you go to a large company to see how things are done really well, but across a broad range of disciplines and functions and really see how the whole thing comes together as an engine sort of humming smoothly and operating.

Ryan: You mentioned communication is one skill or trait of people in larger companies. And Andrew, you used to blog, I mean you still do, but you used to blog a lot. That’s largely how I think you built a pretty massive following over the past decade or so. How did you even get into writing to begin with?

Andrew: So, first I love writing. That’s kind of the very first thing, and I was always one of these, teenagers where like, I kept a journal and I would like write in it and then delete it and then start a new one and literally I was the only audience. I just like enjoyed it myself. And so before starting my current professional blog, I think I had like three other blogs that I had started over the years. Just basically, just getting going and then deleting them and not really sticking with it over time.

Ryan: Why did you delete the previous blogs?

Andrew: Because you get bored with it, and you’re just kinda like, okay, I’m done, kind of thing. And then like I think on those it was literally, it’s like who’s reading it? It’s like Ada, like my parents, like —

Ada: — Fun fact about Andrew’s early blogs: he would actually forcibly subscribe us to the emails to make sure that we wouldn’t miss anything.

Ryan: That was before some of the ICANN email laws and certainly before GDPR.

Andrew: Yeah, right. Yeah, exactly. So I think, don’t tell a 20 year old who they can subscribe to a blog or not. So I really enjoyed that. And then when I moved to the Bay Area 10 years ago, what I basically decided to do was I was like, I’m gonna write down everything that I’m learning and I’m just gonna start, like going out and so the funny thing, I was learning so much in my first year that I was just writing a lot of, like pretty random snippets, some of it would be like a paragraph or two, and I would do it like, maybe twice a week or something like that. So like pretty often and that’s actually how I met Marc Andreessen originally. It turned out that he somehow randomly had stumbled on my blog via Hacker News and then through that, had ended up seeing some of my content and then he cold emailed me and that’s how I met him in 2007. So it was like a pretty random and amazing adventure but at the time, I was an entrepreneur in residence. I was a 24 year old entrepreneur in residence actually across the street from here, which is really funny. And one of the things that my colleagues would tell me is they would say like, why are you wasting your time blogging, you’re giving away all your best ideas? Like, what are you doing? Like, these are the secrets that you’re going to use to understand the thing. And at the time I was like, well, I’m never going to be a venture capitalist so like it doesn’t matter. And so as a result, I’m just going to give away all this stuff and then, and it’s obviously so ironic now that like, so much of the job is, is obviously, sharing your ideas and giving back to the community via Twitter and Medium and writing, writing essays and all that.

Ryan: Now that’s the norm.

Andrew: Yeah, right, exactly. Yeah. And in fact it was like, it would have been considered very contrarian I think to actually share a bunch. But anyway, so I’ve kept it up and I think, I’m, I’m well into the many, many hundreds of essays, over 10 years and I think at times I’ve taken like a hiatus, I think I took a two year hiatus in the middle. But like I think my goal now is really to publish like regularly, but to do it at the kind of like a high level of quality and to go deeper into ideas and to sort of break new concepts and new kinds of data to the community versus literally the, the early days it was like, it’d be like 500 words, like what did I learn today kind of thing.

Ryan: So I’m going to take a tie into that a little bit. You mentioned a term called, correct me if I’m wrong, but something along the lines of mullet startups, is that correct? Or do you remember that there’s a tweet in a conversation with you and some others around the distributed nature of companies?

Andrew: Oh yeah, okay, mullet, yes.

Ryan: Mullet startups is a catchy term because it’s a trend that we’ve identified. Product Hunt is a mullet startup I guess, we’re headquartered in San Francisco, but we have a distributed team.

Andrew: So The Economist’s cover for this week is Peak Valley, is, is it over in Silicon Valley?

Ryan: Right.

Andrew: So then I think there’s been, there’s been a lot of like really interesting dialogue around that. I think, and obviously a lot of it has to do with like housing and the Bay Area and there’s so much to unpack there, right? But I think that one of the reactions to it has been that we see many companies, with their leadership and their executives in the Bay Area, but when it comes to hiring engineers and designers and all sorts of other folks, then they’re much more likely to distribute the team, anywhere.

Ryan: Right.

Andrew: And so, yeah, to your point, this is sort of the mullet, because it’s sort of business in the front and party in the back kind of thing. AndI think it’s fascinating because it is actually just the reverse of one of the models that we’ve seen over the years where, for example, you’ll have a really strong technical team out of Paris or out of Israel or out of Singapore and they’ll get started, they’ll get funded and then they’ll realize, okay, hey, all of our customers are in the US, let’s move the CEO and the sales and marketing function to the Bay Area. And so you end up with the, the mullet, but just like kind of, but now you do it in reverse. Right. So I think that’s like a pretty interesting, reverse mullet, which is kind of an interesting trend these days.

Ryan: Yeah. So it’s just you two right now Ada at Notejoy, but if you were to, let’s say you needed to hire 10 people tomorrow, how would you approach it? Would you hire in the Bay Area or would you go remote?

Ada: Yeah, I mean that’s actually a fascinating question because it’s something that we’ve debated and thought about because things have changed so much. Not only from the costs, but then also, what is the ability for you to access and interact with people at scale, if they’re located in other places. We actually talked to this close friend of mine who’s a founder who, built his company and scaled it to revenue, pretty substantial revenue in the Bay Area. And he basically said to us, if I were to do it again, I believe that Silicon Valley is the worst place to self-fund a company or to start a company or even to have funding and try to build a team. And the biggest challenge that he was having was actually access to talent. I think it would really depend. I think on one hand I think we have really strong networks within the Bay Area and so it would be possible to kind of peel people off and that’s really how many startups start with their founding team. They pull people that they respect, that they work with, that have shared belief in to kind of create that initial nucleus of a team and that gets you to your first couple of headcount. So maybe we can get to 10 that way, but I do think that now when it’s coming to scale, like yeah, we would definitely be looking very closely at could we build a remote team and create a really distributed workforce for Notejoy.

Andrew: I think one of the distinctions is do you hire a lot of folks who are doing the kind of individual contributor work versus the managers because I do think that it ends up being really hard once you want to find the engineering director that’s managed 200 engineers to find that elsewhere, versus it being, kind of a main thing. So, so there’s a really interesting thing about cities, right? Which is like if you graph the population of cities and sort of like, stack rank them, you’ll see that there’s a power law in it. And like the biggest cities are really, really, really big and then there’s this like there’s this long tail of all these like little tiny cities. And the reason for that is that there’s really like a network effect within cities, right? Like, whether it’s show business in LA or it’s, finance in New York, like these ecosystems that emerge happen because, you end up with the designers who are here because the engineers are here because the marketing people are here because the capital is here because and on and on and on and all in one place. And so one of my colleagues here at Andreessen Horowitz, Darcy, had mentioned, he tweeted the idea that, one of two things will happen, right? Either these network effects continue to hold, meaning that then, actually the Bay Area will just continue to be what it is, right? Or, we actually make really interesting structural shifts in how we organize teams and workforces and all that stuff. In which case the network effects become less strong. But what that means is not that then all of a sudden, some other city like becomes a quote unquote the next Silicon Valley. It actually just means that everyone just lives where they want to live and eat and that’s that. And so, so if you believe that thesis, then you’d actually say there is no quote unquote next Silicon Valley. It either just continues or it’ll just be distributed. Right. I think that’s like a pretty interesting —

Ada: — I think you see that already emerging even within online communities. So when you think about where the discourse actually taking place, right, it’s taking place on Medium, it’s taking place on Twitter, it’s taking place on Product Hunt. We went through the experience of launching on Product Hunt and we were really amazed by how international the community was in contrast to the earlier startup Connected that we’d done several years before that. It may not be as important in the future for everyone to be physically co-located in the same space.

Ryan: Yeah. I’m super fascinated by this space and I’m actually committed to investing in a company that’s rethinking how people communicate with a distributed and remote team by video because we have a lot of different tools out there like Zoom and Google Hangouts and others and they are all kind of utilities in that they’re not much different from each other. It’s just like a big screen with your face on it and they’re rethinking, in a world where everyone is distributed or a group of people are distributed and another group of people are working from their home, how do you communicate more effectively? Yeah, I find it an interesting trend. I think one observation too is that the mullet strategy can work really well if your home base is where your customers are. So like you said Andrew earlier, like if you’re building an entertainment company, it’s probably good to have connections and live in LA so that you can be around those people and that can create a lot of serendipity in business partnerships and so on, but you don’t necessarily need your entire team there. You can also have them around the world. If you can build a culture that can facilitate working effectively remote. I’m pro-remote, if it makes sense for your company. Just saying, I’m slightly biased. It’s been five years now with Product Hunt running distributed.

Andrew: I think what’s hard is that basically there’s a whole class of interactions were being in person is actually better. And so if you’re meeting people for the first time in a partnership type scenario or a sales kind of scenario or in investing kind of scenario, like you do want to go old school, you do want to see the other person. and so I think in those cases, that’s where, that’s actually, I think where the network effects actually kick it right where then it’s like, okay, yeah, let’s get everyone clustered together, in those cases.

Ryan: SF in particular, is so dense. I mean, granted I’m driving down to Menlo Park, but it’s a small, short trip. Whereas LA and New York as well, it’s actually hard to have a lot of meetings within a five hour period because everyone is distributed across different locations. I’m curious to hear from an investing side, are you actively looking at sort of the future of work or distributed teams and looking to invest in companies building for that?

Andrew: Totally. I mean I think, I think there’s a couple different angles on the future of work that are, that are worth mentioning. So I think one is, I learned a ton of really, really interesting lessons at Uber, but I think one of the most important ones is that there are 80 million hourly workers in America. Right? And so these are folks that are often working multiple part time jobs, they don’t have steady sources of income, and what they’re often doing is they are driving Uber kind of between their other things, right. And so I think when you look at that, you’re like, wow, like the future of work has to encompass that industry, which is what are all the other kinds of interesting work that can actually happen? So like just to call out a couple really interesting ones: there’s a company called VIPKID which caters to — the consumer side is basically kids in China and then the supply side of the market is basically often like Midwestern like ex-teachers, stay at home moms, that kind of thing and they’re spending time on video together and they’re getting this whole experience around teaching and tutoring. And this is something that you can do from your home. Like super interesting. Right? There’s obviously lots of really interesting things happening in real estate. Our portfolio company, Airbnb obviously provides a lot of really important, supplemental income —

Ryan: If your HOA will actually allow it. I’m speaking from experience. They will not allow me, unfortunately to rent my place out. But it’s pretty typical, right?

Andrew: I mean, I think within all these different kinds of work, there’s obviously different rules that need to be be in place and that’s true for rideshare and that’s true for many other things as well. But I think that’s kind of one notion of a future of work that I think is important for us to consider even though it’s sort of outside the tech bubble a little bit, but it’s a really huge market. I think the flip side is, I’ve been an on again off again advisor to Dropbox for many years and I’ve known that team for a while and when you look at what these horizontal products are trying to do, it’s sort of like, we’re in a world where, if we can get all of these professional white collar workers — just make their jobs better, right? And just like make all these workflows, these really complicated workflows that you know for the most part are still being managed in spreadsheets and docs and chat and sort of like streamline all that. There’s tons and tons of opportunity across many different dimensions.

Ryan: So let’s talk about some apps or products you guys love. Ada, what’s on your home screen that people need to know about or is there a product you use maybe every day, every week that is bettering your life, changing your life?

Ada: Yeah, that’s a great question. So I am a huge fan of personal productivity and so, every year I make my New Year’s resolutions and one of my resolutions for example, was get to a point where I was working out three times a week and the challenge that I always had was the accountability, right? And tracking. And so this is probably not a particularly popular app, but one of my favorite apps for that is actually this iOS app called HabitShare. And it basically lets you share accountability, like share your to do list, like check I did it today and set a goal and make sure that you’re keeping track of how accountable you are against it. I’m a huge fan of that. And then I think Andrew actually introduced me to this, but I love this app called Captio as well and it’s a very quick way to email yourself and you wouldn’t think that it’s that many taps to email yourself to remember a quick idea. But after you experienced it, it’s pretty mind-blowing.

Andrew: Can we just go on a quick tangent about Ada’s goal setting strategy?

Ryan: Yes. This is one of the reasons why we had brothers and sisters on the show.

Andrew: Yeah. So one of the things that’s impressive, but also a little bit scary is the the level of — she actually uses OKRs, objectives and key results. There’s a whole book about it. In order to handle her goals, but this is the best part. Her husband also does the same, Sachin also does the same and they actually will score each other on the OKRs. Do you want to talk about this a little?

Ada: True story. So, both my husband and I love productivity. I mean, this is why we’ve been spending all of our time working on Notejoy, but I spent probably a decade of my life at this point thinking about productivity apps and so OKRs is actually something that we’ve adopted as a process from LinkedIn, which originally came from Google, which originally came from another company before that. It’s widely adopted.

Ryan: John Doerr actually wrote a book about it recently.

Ada: Yeah, that’s right. And so with objectives and key results, we actually found that it was a really good way of establishing goals that are both measurable as well as very distinct specific. And so we actually do annual OKRs is on a personal level, whether it’s around like personal infrastructure, like fitness or how to relate to your life —

Andrew: — You have like a KR that’s like hanging out with friends three times per month.

Ada: Yeah. So I actually had a reconnection OKR at one point where I basically made a list of people, 50 people that brought me joy that I was really engaged with, always wanted to get to know better, the bar was basically just interesting and that I hadn’t spoken to in four to six months and then the goal was basically to take a one month period and meet with half of them and it was actually one of the most energizing and transforming goals that I’d had because it was a great way to kind of have a focused effort at reconnecting with people and building relationships. And yeah, we score each other on it so we actually have business OKRs in terms of managing the business that we do on a quarterly basis and then I have annual OKRs around some of my goals such as like learning a new skill or whatever else. Thanks for bringing that up.

Andrew: I do not use OKRs to score anything in my life. Do you?

Ryan: Not really. I mean, that is extremely nerdy but also I’m kind of inspired because the beauty of OKRs is when you craft the right OKRs it’s binary, like you pass it or you didn’t and a lot of people they set goals like New Year’s resolutions and they’re like, I want to work out more and that’s their goal. And they end up not actually pursuing it oftentimes in part because it’s not specific. It’s like, well does that mean you need to work out three times a week, minimum, for the rest of the year, and what are your goals and what are your outcomes and expectations out of that?

Ada: Right. Yes. I actually tapped into this HabitShare app in addition to that and specifically with the fitness goal, it was actually, Q1 was like, okay, get to once a week, twice a week, Q3, is at three times a week. And so that’s actually how I’ve been tracking and achieving it.

Ryan: Love it.

Andrew: Okay. So one of my favorite things on Twitter is I, I tried to do this at least once a year where I will just screenshot my, my homescreen and then I’ll just ask everybody else to just do the same and then like reply and it’s really cool. First of all it’s a very personal thing what your home screen is and so I always have to look at it and be like, is there anything like weird on here I don’t want, a stealth beta company —

Ryan: — Right, right, exactly. Yeah, stuff like that.

Andrew: Exactly. And then, and then similarly like looking at other people’s homescreens are really interesting. Like occasionally you’ll see people where they’ll, they’ll like sort their homescreen by like color and that’s how they organize everything and I’m just like, that’s insane. Anyway, so I was going to mention some of the apps that are like on my home screen these days. So I think one, as Ada mentioned, there’s an app called Captio which is great but this morning actually you had tweeted something that the Fin team had come out with a new app called Nota Bene, which is sort of like Captio on steroids. So I actually just installed, I put it on my home screen, I’m actually really excited to try it.

Ryan: Yeah. What, what does it allow you to do for those that aren’t familiar with Kaptio?

Andrew: Right. So, basically both of these apps they allow you to, you basically open up the app, there’s a blank text screen, you type in whatever you want and then you just hit send and then it emails you. So that’s Captio. And then what Nota Bene does is it has a couple more aliases. It has things like, this is something that like I actually really want and need which is sending to my work email versus my home email. And then I might do like work email plus like admin, is a thing. And so I think that’s Fin’s hook to try to get you into the workflow, that way. But yeah. So, I think that that one I use all the time. I was mentioning that, for my first year on the job at Andreessen Horowitz, I moved down to downtown Palo Alto but I’m spending two days a week in the city and so one of the things that I’m finding is that, I’m trying different kinds of like, solutions for like, oh, if I want a place to hang out and do email, like what should I use? And so one of the things that I’ve been trying out over over the last couple months now has been Breather, which lets you rent , basically like a conference room that’s been built out and kind of doing meetings there. Another one is Spacious, which just got launched actually I think in the last couple of weeks. It’s a really cool concept. So what they do is they basically, you have these really high end restaurants, right? And like they have a very nice interior and all that stuff, but they’re basically closed the entire day all the way until like 5:00 PM. And so the idea is between nine to five or eight to five or whatever the hours are, can they actually just literally put like one person there and just have like coffee and water and then you use the interior of this beautiful restaurant. So one of the places in SF is the Press Club, right? Which is this great —

Ryan: — Yeah, great spot.

Andrew: It’s tons of space and so, you can basically just hang out in the press club during the day and it’s basically completely empty and it’s like —

Ryan: — How much does it cost typically?

Andrew: It’s like a membership basis. I think it’s like 90 bucks a month or something like that. And they have spots in Cole Valley and Hayes Valley and the Castro and a bunch of other places. Another one that’s kind of like this, it’s pretty interesting I think when I first heard this idea I like laughed because I thought it was so funny, but, but now I actually have like used it like in a real way which is a company called Recharge and that it lets you rent hotels by the minute. And so you’re kind of like, what is the use case for that? The actual use case is, you need a place to make a phone call. Right. And so in the same way that like Breather or Spacious, it’s like, it’s sort of like, oh well you have all this built-in inventory and like maybe you hold out a room —

Ryan: — Or maybe just a shower. Some people are traveling, flying. I just need in between meetings to have a shower.

Andrew: Right, right. And then you can pay like one fourth the price of a hotel, and like that actually is like kind of useful. So anyway, those are fun. I think I’m now up to, I’m trying one of these like kind of almost on a weekly basis which has been pretty cool.

Andrew: We’re going to talk about Reddit a little bit? Yeah, because I’m like a daily active user. I don’t check it all the time, like I’d probably check it not as often as Twitter, but it’s like, it’s like my default late night read, when I want to just like chill out,

Ryan: You can just turn your brain off. It’s different than Twitter, it’s different from any other community. I actually got a book, a pre-release book by Christine. She’s been writing about this for years now, about the history of Reddit. It’s about 400-500 pages long. You would enjoy it.

Andrew: Well, I just bought a Alexis’s book that he had written a couple years ago, so yeah. I’ve been into Reddit for like several years now, but it’s funny, one of my good friends, Noah Kagan was literally like, you need to go to your favorite subreddits and sign up and follow and actually set up your Reddit and then it’s amazing.

Ryan: Kind of like Twitter.

Andrew: Exactly. Right. Right. And I think I didn’t get it because I would go to the homepage and I would kind of be like, well this is kinda fun, is this like another cat memes website or whatever? I think the one that I want to recommend that folks start out with is actually if you just go to the /bestof subreddit. So it’s like reddit.com/r/bestof. Then it basically just links to some of the best comments on Reddit over the last 24 hours and then you can actually sort it by the last month or something like that. So I think anyway, that that’s a good one. But yeah, I follow a ton of different subreddits at this point. The other one I really like is r/firstworldanarchists and that’s basically, when you have like a sign that’s like don’t step here and then someone takes a photo, like they’re stepping in the grass or whatever, that’s like my kind of like rule breaking. Anyway. So yeah, so there’s that. And then the one, one, one last thing I’ll mention is Bose Quiet Comfort — the wireless noise canceling things as I’ve been commuting from SF and Palo Alto are like amazing. And so they actually have an app that lets you like adjust, how much noise cancellation you want so I use it all the time.

Ryan: These are the ones that just go in your ear, right? Kinda like Airpods?

Andrew: Right. The battery actually hangs on your neck and then they go into your ear. So they’re not over-ear, they’re the ones that go in. But I actually, I have both and yeah, I prefer this one the most and I like bring it with me everywhere at this point.

Ryan: Do you live on, on Reddit at all Ada?

Ada: I’m probably a weekly active user. I check it in and I just like to see r/bestof and see what people are talking about. But you’re right. I mean it’s such a, it’s such a passive way to kind of see a lot of interesting content stream by.

Ryan: What’s also nice about Reddit in a world where content is delivered by algorithms and people you follow and things like that, like on Twitter and Facebook and so on. It’s kind of refreshing to go to a place like Reddit where you can get out of your bubble and you can explore the weirdest stuff if you really want to. It’s not socially curated, it’s not personally curated necessarily to like everything that Reddit knows about you, but it’s really a community of people geeking out about this stuff. One of my favorite subreddits, I don’t visit Reddit all that often, I try to actually avoid it because it’s kind of a rabbit hole, but one subreddit I love is called r/internetisbeautiful and we’ll find there’s actually a lot of really weird projects and websites and little hacks that people are building and it’s almost always delightful. You go there and find something weird, just some crazy website that someone created and the name, r/internetisbeautiful is just such a wonderful feeling. It’s really, really well crafted subreddit. Cool. Thanks for having me over here. By the way, is there anything else you’d like to to plug — anything in the portfolio maybe Andrew? Or anything at Notejoy, Ada?

Andrew: We were talking about how when when you were just signing in at Andreessen Horowitz, I was like, oh, you should install the Envoy app. Yeah. Because it makes it so much easier. You literally get a photo of your face on it and you just tap on it and then like, and you go in and it works over Bluetooth. So anyway, so I always like to plug Envoy, it’s one of our portfolio companies.

Ryan: I mentioned this earlier, but we didn’t get into it. Envoy is such an interesting company. I’m fascinated by social graphs and when you look at the uniqueness of a social graph like Twitter and Facebook and LinkedIn and, and I think some of the most interesting ones that are less talked about is one, like Slack is very interesting, like the people that are in your Slack team or the people that you actually work with, no one else has access to that sort of graph right now. And Envoy is also really fascinating. It’s like a graph of the people and business partners and people that you’re meeting at your company. No one else has that.

Andrew: Well, I mean I think it wouldn’t surprise you to know that the CEO, Larry, was actually really early employee at Twitter. Right. And so a lot of the sort of thinking around both the product experience and just like how nice it is. I think we’ve gotten to, to this whole trend now where your office and your office experience is this extension of your brand. And so now people like really care about it. So they don’t want like this kind of kludgy pen and paper thing. And that product experience is so important. But to your point on the graph is, totally agree — I think that’s also one of the reasons why it’s like, Envoy’s pretty special in sort of the pantheon of these like B2B companies in that it actually grows virally. Like the way that the company grows is that people experience it and they’re like wow, this is really nice. And then as soon as they go back to their office they’re like we should have one. And there’s really not that many products that grow that way. Dropbox grows that way, Slack grows that way. It’s like a viral B2B thing. And so I think, in, in the same way it’s like that, that graph means that not only is it spreading virally and enables that spread, but then the other part I think is wow, okay, cool, you get a list of all the people that are visiting and who they’re visiting and then that can then feed into like all your other like, offline data.

Ryan: Or CRM.

Andrew: Yeah, so you take your offline data and turn it into online stuff and it’s another touchpoint which is super important.

Ryan: You don’t have Envoy at the headquarters, Ada?

Ada: No.

Andrew: I think she has a doorbell.

Ryan: Old school doorbell. So yeah, what’s down the pipe?

Ada: What’s new on the pipe is that we’ve actually been doing a ton of mobile enhancements and so we’re actually bringing Android very soon in terms of bringing it out as an app. It’s interesting now because the bar for consumer and business apps is so much higher than it used to be, right? Like it’s actually really important to be fully multi-platform, so we’ve always had Mac and PC and then the browser and we’ve had iOS but it’s really exciting to actually bring that to Android because that’s been a big factor for a lot of teams that are trying to adopt Notejoy as an overall group and so yeah, just cranking and hard at work.

Ryan: Cool. Awesome. Well thanks for coming on. This will be the first of hopefully many brother-sister Product Hunt Radio shows.

Andrew: Awesome. Thanks for having us.

Ada: Thanks.

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Consumer startups are awesome, and here’s what I’m looking for at a16z (70 slide deck)


Above: New technology has always captivated consumers!

Dear readers,

I’m often asked- so what kind of startups are you investing in at Andreessen Horowitz? And since I’m focused mostly on consumer companies – is there anything exciting happening? After all, if we’re “between” platforms, and there isn’t something as big as the iPhone coming up, is there anything interesting left?

I’m really bullish about what’s around the corner – and I want to unpack what I’m looking for, how I’ve drawn insights from history, and what’s around the corner. In the 70 slide deck below, I cover a couple key concepts:

  • Accelerating technology adoption. Why the telephone took 50+ years to adopt, but the mobile phone was <10 years
  • Three historical examples and their modern antecedents
    • Content marketing. The origin of the Michelin Guide and why content marketing still works
    • Viral growth. How chain letters were invented and rethinking its effectiveness in the framework of viral growth
    • Marketplaces. How to bootstrap marketplace businesses and the cold-start problem, and what the story of toothpaste can tell us about that
  • The most exciting new technologies coming around the corner, and how to evaluate them for producing new startups
    • Video. Why video is big, and will get even bigger
    • Offline. How the offline-to-online channel has been used by scooters and rideshare, to great effect
  • My investing thesis. The intersection of growth hacking, new tech, and pre-existing consumer motivations
  • Closing. Technology changes, but people stay the same

I presented all of this at the Andreessen Horowitz Summit in 2018, which gathers our portfolio companies, partners, LPs, and close friends. It’s great to be able to publish it here as well. Hope you enjoy it.

Another note is that this is closely related to, and complimentary, to this deck: The red flags and magic numbers that investors look for in your startup’s metrics. If the below deck is the macro view of how I’m looking at markets, industries, and technologies, then the metrics deck gives my POV on how to diligence each company.

Finally, before I jump in, it’s true that I talk about what sectors I’m into as well – and here are few areas I’m digging into:

  • Unbundling my Uber expertise
    • Marketplaces (particularly the $10T service economy – more on that here)
    • Transportation and travel
    • The future of work (Bottoms up SaaS, full-stack autonomy, etc)
  • Next generation entertainment and networks of people+content
    • eSports, gaming, virtual worlds
    • Reinventing traditional media (Podcasting, eBooks, etc)
    • Content creator / influencer economy
  • … plus, anything else that looks like a network with network effects

Obviously if you are working on anything in this area, and have some traction in the US, would love to talk more. Get an intro through your investors and come find me! Happy to chat.

Thanks again!

Andrew
San Francisco, CA

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The Deck

Today, we’re going to talk about what’s exciting and new in consumer startups, and what I’m investing in at Andreessen Horowitz. But to hit this topic, I want to start by zooming out. Here’s a graph of many of the new consumer technologies that have been introduced in the US over the past 100 years. The X-axis is years, and the Y-axis is the % of US households that tech reached.

Each line represents a different technology – you can see the car, the radio, air conditioning, the microwave, and so on. Lots of important consumer tech that was new at some point. But you also see something pretty interesting – some of the most important tech took decades to adopt.

Let’s take a look at the telephone, in particular.

Above: Now, remember that the motivation of communicating with your friends and family has been around since the dawn of time. But when you look at the phone, it took 5 decades to break into the majority of US households. Wow! And of course at the time, there were other technologies competing for engagement – there was the telegraph, postal mail, etc. In fact, early on the phone was marketed as the “speaking telegraph.” Nevertheless, for something we now take for granted, several decades is a long time.

Why is that?

Above: Here’s why. These were the kinds of instructions that had to be packaged alongside the Bell Telephone System – how to hold the phone, which side went to your ear and which side was next to your mouth. And if someone called, you were supposed to say hello!

While the human motivation was there to speak to friends and family, we had to build the behavior from scratch.

Above: Let’s contrast this to the cell phone, which took a much shorter time to conquer the market. And in fact, if you were to think about the next few years after it hit mass penetration in the US households, we also know it hit several billion active handsets worldwide. Some developing countries are truly mobile-first – they have mobile phones before they have computers, land lines, or reliable access to water.

Above: Each new technology is able to build on each other. You can use radio ads to market the TV. You can use the TV to market mobile phone services. And so we see an accelerating adoption rate of new technology introduction.

What a time to be alive! It’s only going to go faster.

Above: And yet, even with the backdrop of all of these new technologies, we are still fundamentally the same people from many eras ago. We haven’t physically changed much.

Above: We are the same humans who painted the walls of caves, because we love art, and love creativity.

Above: We are the same people who built massive theaters, because we love to be entertained.

We took selfies as soon as the technology allowed.

 

… and it turns out, we have always loved scooters. In fact, the US Postal Service tried these gas-powered units out to deliver mail a century ago.

Above: In other words, while technology changes rapidly, people stay the same. And that’s the opportunity.

When we spot new startups who can take advantage of a moment in time, at the intersection of new technology, pre-existing human motivation, and can find a clever growth trick to get going – that’s exciting. That gets my attention.

Let’s look at a couple historical examples where these kinds of intersections have happened, and also some modern echoes of their impact.

First example, we’ll go back in time.

Above: It’s 1900, and there’s a new technology – cars. But there’s only 3,000 automobiles in France, because they’re hand-made, they break down all the time, and it’s not actually clear why they are superior to horses.

Above: They look like this.

In the introduction of these new technology, there forms an ecosystem of new companies that stand to benefit from more cars on the road. There’s gas stations, there’s maintenance businesses, and there’s also tires.

Above: One of these companies you’re familiar with – they’re called the Michelin Tire Company. And certainly you recognize the Michelin Man on the left over here.

Now they have a tough problem to get their business to grow. Remember, there’s only 3,000 cars. Selling tires is hard because what you actually need is to get car owners to drive more, and to create more car owners as well. That’s tricky! It’s a very indirect problem that requires a clever solution.

What was Michelin’s solution? We’re all familiar with the answer: They created the Michelin Guide.

Above: This small red book is one of the first Michelin Guides, given out with the subtitle, “Free for Drivers.”

This is a really clever effort for Michelin, because by packaging all the destination restaurants across France, and eventually Europe and the world, they gave people a reason to drive. And for existing automobile-owners, a reason to visit more towns and drive longer. And in fact, the Michelin Guide is so successful that many of us today don’t have much need for their tires, but certainly rely on their recommended restaurants.

This is a great example of a “hack” that gets their core business growing. And today, we’d call it Content Marketing, and it still works.

Let’s us a contemporary example that builds on their content marketing push.

Google wants us all to be engaged in their mobile apps, search functions, and other properties – but they want to be relevant in our lives in other ways too, for example in our culture and media. One way Google does this is that they have a great app, called the “Google Arts and Culture” app, which demonstrates the world’s great works of art. They have virtual tours of museums, 360 degree photos, videos, and more.

But the best feature they built is the “take a selfie and see what kind of famous artwork you resemble” feature. As we saw earlier, we’ve always been obsessed with selfies. So this was successful. Very, very successful.

Above: We saw famous people like Kumail from HBO’s Silicon Valley take selfies and publish them – this is a pretty good one! And not only did celebrities  share their photos, many everyday consumers did too. A lot of them.

This was so viral, in fact, that eventually this app was downloaded millions of times.

In early 2018, it became the most downloaded app at that time. More than YouTube. More than Facebook. Wow! That’s fantastic.

But what does this have to do with Google? This is such an indirect way for Google to tell their message, and to engage us in their products. But it’s a much fancier form of content marketing that lives in a mobile app. It worked for Michelin a hundred years ago, and it works for Google today too.

The second example I’ll talk about is more of a consumer user-generated content play. It starts in 1775.

Above: In 1775, the US Postal Service was founded!

You may know that this guy – Benjamin Franklin – started it.

One way to think of the service, in contemporary jargon: The postal service was a new user-to-user communications platform that allows millions of consumers to communicate with each other for the first time. Before social media, and before email, the postal service let people do what we now take for granted.

There are, of course, a lot of reasons to use the postal service – there’s personal correspondence, bills, advertising, and many other uses. But one of the major uses of mail came unexpectedly, and introduced millions of people to new ways to use mail – the chain letter! It turns out sometimes, as a platform, you’re super lucky, and your customers find new ways to engage and grow your service for you.

In the photo above, you can see one of the world’s first chain letters. When enterprising individuals started to experiment with postal mail, they figured out they could get a ton of engagement when they worded the letters a certain way, and promised certain things.

The variant above behaved like the following: When you received one, it asked you to remove the top name, add your name to the bottom of the list, and mail a new dime to everyone on the list. And then to share the chain letter with 5 of your friends within 3 days. Specific, clear call-to-actions. If you followed the instructions in the letter, you would receive 15,625 letters with $1,500+ in dimes. In today’s dollars, this is about $33,000. What a great outcome! For folks who’d never seen this kind of letter, and who saw their friends slowly getting rich – one dime at a time – this was enticing.

These chain letters worked. In fact, they worked really well – too well. Within the first few months, this chain letter reached tens of millions of copies. It eventually became so successful that the US Postal Service had to shut it all down.

And thus, to this day, chain letters are illegal to send on the US Postal Service!

The chain letter was a clever creation, of course, but today we’d just call this viral user acquisition. Getting people to tell their friends and family to spread the word is something that’s always worked – and it works today as well! The modern version is far more sophisticated.

Above: Companies like Airbnb and Uber have referral programs, where you can send credits to your friends that can be redeemed on their trips. And you get credits in your account when they accept it too – it’s a reciprocal give/get program. Of course, we’ve improved the whole thing based on the latest tech. It integrates into Facebook Messenger and your email addressbook. It has tracking codes so you can see how well it circulates, and you A/B test the whole thing to make sure it’s highly optimized to be viral and spread.

Yet in the end, the mechanics are the same – you can get people to tell their friends and family, if you make it enticing for them, and also for yourself.

The last historical example I’ll use is a story about the “cold start” problem – but we’ll use grocery stories and toothpaste as our example.

In the early 1900s, it was the dawn of consumer packaged goods companies, who were still figuring out their distribution models. Amazingly, many of the household goods that we’re now familiar with hadn’t been invented yet. People still weren’t really bathing on a regular basis. It was an earlier, simpler time for CPG companies.

The amazing thing about the story of toothpaste – the above is a box by Pepsodent – is that toothpaste had to be invented. Even more amazing, people needed to be taught how to use toothpaste, and why.

You could advertise to spread the word with consumers, of course, but there was a second problem: How do you get the toothpaste in the hands of consumers?

Above: Across the US, there were tons of “mom and pop” grocery stores like these. They needed to carry the toothpaste so that consumers could come in and buy them. The problem is, they don’t want to stock the toothpaste (which they would need to buy) if consumers weren’t asking for it. And of course, consumers wouldn’t ask for the product – at least you couldn’t count on it – unless it was in stock.

This is a classic chicken and egg problem. So how do you solve this?

Above: The answer was simple: Advertising, and lots of it, and coupons too. First, it was important for the CPG companies to convince consumers that they had a yucky film on their teeth that could only be solved with toothpaste. And then they offered them coupons to come and try it.

Before running a big campaign like this, they could go to the grocery stores and say, “We’re about to create a ton of consumer demand! Folks are going to come in and ask for toothpaste, so now’s the time to stock it.” This solves the chicken and egg.

Solving the chicken and egg problem was hard then, and it’s hard now. And yet it’s something that every marketplace company has to do.

Above: If this example sounds familiar, it’s because it was used recently by our portfolio company Instacart too. Today, Instacart has deep relationships with the nation’s top grocers. But when they first got started, they just built a great app, got consumers buying things, and started dispatching shoppers to pick up their orders. As more demand was built, eventually Instacart could approach the grocery chains and set up a formal partnership to make the experience even better.

A hundred years ago, CPGs used advertising and coupons to drive demand to solve their chicken and egg. Today, startups use awesome mobile apps to create demand and to solve the same problem. It still works.

Above: As you might imagine, you could go for hours on these kinds of historical examples. There are a ton of them.

The important, core concept here is simple:

  • When there are new technologies and platforms hitting scale…
  • … and products tap in pre-existing consumer motivations
  • … and there are “growth hacks” that create slingshot opportunities to quickly and scalable grow

At the intersection of these three factors, amazing things can happen.

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So it’s my goal to spot new products that look like this, and to evaluate them. (In a separate deck, I talk more about the extensive techniques from the metrics and growth function that can be used to evaluate startups).

Of course, the first of the triumvirate is critical – and that is new technologies and platforms. And there are a ton of exciting ones right around the corner. But let’s first cover many of the new platforms that have hit major scale.

We have IoT devices, particularly voice assistants that live inside Google Homes and Amazon Echoes.

We have over a hundred million units of smart TV devices that combine media and computing. That’s exciting.

We have platforms like YouTube with over a billion active users. Wow!

And wearables with hundreds of millions of units that sometimes run apps themselves, or help augment experiences on your phone.

 

Not only there many platforms at scale, but it’s exciting to see a couple emerging categories as well.

There are Nintendo Switches, which have sold tens of millions of units. They focus on games, of course, but you can run cloud-connected games like Fortnite. And perhaps people will creative about what kinds of other apps work too.

All modern appliances are adding internet-connectivity. Fridges are an obvious one, but we all have seen Amazon add Alexa to microwaves too. What’s next after that??

There continue to be companies working on smart glasses. Above is from North, who are making Augmented Reality inside a pair of glasses that almost look identical to the ones you already have on your face. I think this will be a really compelling category in the next decade.

And finally, as autonomous cars come out, we’ll have to rethink the entire driving experience to mostly be a riding experience. I expect a lot more video, gaming, and interactive media in the car. This is an emerging area too over the next decade.

So there are a ton of new technologies right around the corner. We just need one or two to break out, in addition to the surefire opportunities around marketplaces, B2B, mobile, and other existing categories.

The question is: Which platforms am I most excited about? What are examples of growth tactics that are working now that are super clever? In the intersection of the three things I mentioned earlier, what would I zoom in on?

Let’s talk through a couple.

The first category of products I’d call “Video Native” products.

Above: The new technology at scale is video. We already talked about how big it is – but let’s give a really concrete example.

You all remember Gangnam Style, our favorite Korean pop song from 2013. And we’ve all heard Despacito (even if you don’t know you have). Here’s the link if you need a refresher.

Both videos are very popular, and have been viewed billions of times.

It took Gangnam Style nearly 5 years to be viewed three billion times. It’s an amazing feat, but even more amazing is that it took Despacito just a year!

Today, as of this writing, Depacito has been viewed 5.7 billion times. Wow.

 

Video is huge, but not just for music videos. It can be used by many other forms of entertainment and media to boost their growth as well.

My hypothesis: One of the big opportunities right now is that any product that automatically generates video when users engage will create more video sharing activity, thus more viral acquisition and engagement.

No wonder eSports are such a big deal right now. And it’s one of the reasons I’ve been spending time in this space.

When you look at a game like League of Legends, created by Riot Games, you see some amazing stats.

The 2017 League of Legends championship was viewed by over 100 million live viewers. Compare that to Wimbeldon, which had a mere 9.4 million viewers. That’s over 10X. And yet we think of video games as a vertical niche – it’s certainly not. It’s mainstream, and it’s big.

One startup I’m excited about is Sandbox VR and the category of location-based virtual reality (LBVR). I think this is the format that is most likely to break virtual reality into the mainstream – not in-home. Sandbox asks for people to bring their friends, as a group, to a retail location to use what I think is the best VR experience on the planet. You wear haptic suits, there’s a motion capture system, props, and special effects. It’s next level.

It’s an incredible experience – you can see the trailer here and try it in San Mateo here.

With your friends, you fight pirates and zombies. And pirate zombies. They currently have two games, with more coming.

The whole experience is cool, but part of the reason I’m excited about the company is that they have an awesome growth tactic that connects directly to video.

Above: Every time you go with friends, it’s an event – you take a ton of pictures and video. In fact, Sandbox helps you generate a mixed reality video with that’s shareable. You publish it on Facebook and other social media, and it looks like so much fun that friends want to try it too. All of this generates viral growth! It’s a fantastic growth tactic.

It’s no wonder that one of the company’s slogans is – “Fun to play, but fun to watch too.”

The second example I want to use is “Offline to Online.” We all know about going online to offline, which has been enabled by companies like Amazon, eBay, and more. You can think of the first generation of marketplaces and internet products as filling this niche. However, this is the other way around.

Above: The fundamental technology shift that’s allowing this is everything to do with maps, GPS, and AR – all in your pocket, on your mobile phone. This enables both new product experiences but also new growth tactics too.

 

The growth hack I have in mind is that you can now have highly visible offline experiences that then drive people towards using their app. As online channels become saturated – Facebook and Google ads are expensive, there are literally millions of apps in the app store – it turns out the real world gets pretty attractive.

Let’s look at some examples:

First, there’s Pokemon Go, by Niantic. You see yourself on a map, with Pokemon all around you. Collect them all! It’s fun, but it also means that people are watching others play. Sometimes this is a small reminder, if you see a small group gathered trying to collect a rare Pokemon.

But sometimes it gets big – really big.

Here’s a photo of tends of thousands of people who showed up for a Pokemon event. This is just one example, but Niantic does events all over the world, all the time.

Of course, rideshare looks like this too. Who can forget the pink mustaches from across the city that remind us to try and use Lyft?

Transportation is an intrinsically viral product – they are social activities. You bring your friends and loved ones in the car with you, to share the costs. Even the fully utilitarian version – going from point A to point B – can be social, since there’s often a person on the other side. These mean that the rideshare companies all benefit from significant viral and organic traffic to their products.

Scooters are another great example. Our portfolio company Lime has their scooters deployed across a city, and each scooter is literally a mini-billboard to try it out. And the first time you’ve seen someone ride a scooter, they probably had a big smile on their face! It looks fun. And because of that, they benefit from the offline to online effect.

Above: So these are two quick examples – I’m keeping my eye on more, but again, it’s all about the intersection of new tech, existing consumer behavior, and an insight about growth. If you can get these three together, it’s super interesting.

There are a ton of new plaforms hitting scale. I’m also interested in GSuite, which is hitting critical mass across SMBs and enterprises. I mentioned Alexa. You can see products like Twitch and Tik Tok growing quickly – with the former adding extensions and the ability for apps to integrate. And Minecraft and Roblox are fascinating virtual worlds that bundle social networks and content together in one place – also fascinating to track.

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As these platforms emerge, there will be new startups can be built adjacent or on top of them.

I’m very excited about what’s going on in consumer – and am excited to see what people build.

Again, here’s my investing framework – 1, 2, and 3. It’s important to see the intersection.

The important idea here is simple:

Technology changes, but people stay the same. If we can spot the new, breakthrough products that can grow at the intersection of this technological change, and peoples’ behaviors, then we’ll build the next generation of startups. (And yes, we have really always loved selfies – it’s not a new thing).

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What’s next for marketplace startups? Reinventing the $10 trillion service economy, that’s what.

[Dear readers, this essay is on the future of marketplaces. Is there still room for marketplace startups to innovate? We answer, emphatically, yes! Am excited to share a vision on the past and future of the service economy, in a collaboration by my a16z colleague Li Jin. From “Unbundling Craiglist” to “Uber for X” – we lay it all out in a single framework. Hope you enjoy our thinking! -A]


Above: 4 eras of marketplaces focused on the service economy – and what’s next

Goods versus Services – why a breakthrough is coming
Marketplace startups have done incredibly well over the first few decades of the internet, reinventing the way we shop for goods, but have been less successful services. In this essay, we argue that a breakthrough is on its way: While the first phase of the internet has been about creating marketplaces for goods, the next phase will be about reinventing the service economy. Startups will build on the lessons and tactics to crack the toughest service industries – including regulated markets that have withstood digital transformation for decades. In doing this, the lives of 125 million Americans who work in the services-providing industries will join the digital transformation of the economy.

In the past twenty years, we’ve transformed the way people buy goods online, and in the process created Amazon, eBay, JD.com, Alibaba, and other e-commerce giants, accounting for trillions of dollars in market capitalization. The next era will do the same to the $9.7 trillion US consumer service economy, through discontinuous innovations in AI and automation, new marketplace paradigms, and overcoming regulatory capture.

The service economy lags behind: while services make up 69% of national consumer spending, the Bureau of Economic Analysis estimated that just 7% of services were primarily digital, meaning they utilized internet to conduct transactions.

We propose that a new age of service marketplaces will emerge, driven by unlocking more complex services, including services that are regulated. In this essay, we’ll talk about:

  • Why services are still primarily offline
  • The history of service marketplace paradigms
    • The Listings Era
    • The Unbundled Craigslist Era
    • The “Uber for X” Era
    • The Managed Marketplace Era
  • The future of service marketplaces
    • Regulated services
    • Five strategies for unlocking supply in regulated markets
  • Future opportunities

Let’s start by looking at where the service economy is right now and why it’s resisted a full scale transformation by software.

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Software eating the service economy, but it’s been slow
We’ve all had the experience of asking friends for recommendations for a great service provider, whether it be a great childcare provider, doctor, or hair stylist. Why is that? Why aren’t we discovering and consuming these services in the same digital way we’ve come to expect for goods?

Despite the rise of services in the overall economy, there are a few reasons why services have lagged behind goods in terms of coming online:

  • Services are complex and diverse, making it challenging to capture relevant information in an online marketplace
  • Success and quality in services is subjective
  • Fragmentation – small service providers lack the tools or time to come online
  • Real-world interaction is at the heart of services delivery, which makes it hard to disaggregate parts of a purchase that might be done online

Let’s unpack each reason below:

First, on the complexity and diversity of services, services are performed by providers who vary widely, unlike goods which are manufactured to a certain spec. Even the names of services can vary: what one home cleaning service calls a “deep clean” can be different from another provider’s definition. This lack of standardization makes it difficult for a service marketplace to capture and organize the relevant information.

Second, services are often complex interactions without a clear yardstick of success or quality. The customer experience of a service is often subjective, making traditional marketplace features like reviews, recommendations, and personalization more difficult to implement. Sometimes just getting the job completed (as in rideshare) is sufficient to earn a 5-star review, whereas other higher-stakes services, like childcare, have complex customer value functions, including safety, friendliness, communicativeness, rapport with child, and other subjective measures of success.

Third, small service providers often lack the tools or time to come online. In many service industries, providers are small business owners with low margins; contrast this with goods manufacturing where there are economies of scale in production, and thus consolidation into large consumer products companies. As a result of industry fragmentation, service providers often don’t have time or budget to devote to key business functions, such as responding to customer requests, promoting and marketing themselves, maintaining a website, and other core functions. While major e-commerce platforms have taken on the role of distribution, merchandising, and fulfilling orders for goods, there are few platforms that service providers can plug into to manage their businesses and reach customers.

Fourth, real-world interaction is central to services, which can pull other steps of the services funnel into the offline world as well. Many services are produced and consumed simultaneously in real-world interactions, whereas goods entail independent stages of production, distribution, and consumption. The various stages of the goods value chain can be easily unbundled, with e-commerce marketplaces comprising the discovery, transaction, and fulfillment steps. Conversely, since the production and consumption of services usually occur simultaneously offline, the discovery, distribution, and transaction pieces are also often integrated into the offline experience. For instance, since getting a haircut entails going to a salon and having interactions with the providers there, the stages of the value chain that precede and follow that interaction (discovery, booking, and payment) also often get incorporated into the in-person experience.

All of these factors make it very hard for services to come online as comprehensively and widely as commerce – but there’s hope. We’ve seen multiple eras of bringing the service economy online, and we’re on the verge of a breakthrough!

The 4 eras of Service Marketplaces, and what’s next 
There have been 4 major generations of service marketplaces, but coverage of services and providers remains spotty, and many don’t provide end-to-end, seamless consumer experiences. Let’s zoom out and talk through each historical marketplace paradigm, and what we’ve learned so far.

Above, you can see that there have roughly been four major eras of marketplace innovation when it comes to the service economy.

1. The Listings Era (1990s)
The first iteration of bringing services online involved unmanaged horizontal marketplaces, essentially listing platforms that helped demand search for supply and vice versa. These marketplaces were the digital version of the Yellow Pages, enabling visibility into which service providers existed, but placing the onus on the user to assess providers, contact them, arrange times to meet, and transact. The dynamic here is “caveat emptor”–users assume the responsibility of vetting their counterparties and establishing trust, and there’s little in the way of platform standards, protections, or guarantees.

Craigslist’s Services category is the archetypal unmanaged service marketplace. It includes a jumble of house remodeling, painting, carpet cleaners, wedding photographers, and other services. But limited tech functionality means that it feels disorganized and hard to navigate, and there’s no way to transact or contact the provider without moving off the platform.

We’ve all had the experience of a listings-oriented product, like Craigslist. You find something you want, but everything else – trust/reviews/payments/etc – that’s all up to you!

2. The Unbundled Craigslist Era (2000s)
Companies iterated on the horizontal marketplace model by focusing on a specific sub-vertical, enabling them to offer features tailored to a specific industry. We’ve all seen the diagram of various companies picking off Craigslist verticals – it looks something like this:

As a reaction to the “Wild West” nature of Craigslist, to improve the customer experience, each startup would create value-add via software. For instance, Care.com carves off the Childcare section of Craigslist, and provides tech value-add in the form of filters, structured information, and other features to improve the customer experience of finding a local caregiver. It’s a huge leap in terms of user experience over Craigslist’s Childcare section.

Angie’s List, a home services site founded in 2005, carves off Craigslist’s household services category. The platform has features including reviews, profiles, certified providers, and an online quote submission process. But the marketplace doesn’t encompass the entire end-to-end experience: users turn to Angie’s List for discovery, but still need to message or call providers and coordinate offline.

Unmanaged vertical marketplaces like Angie’s List go a step beyond Craigslist and take on some value-add services like certifying providers when they meet certain standards, but customers still need to select and contact the service provider, place their trust in the provider rather than the platform, and transact offline.

Like previous listing sites, these platforms in this era try to use the ‘wisdom of the crowds’ to promote trust. These platforms have a network effect in that more reviews means more users and more reviews. But user reviews have their limitations, as every user has a unique value function that they’re judging a service against. Without standardized moderation or curation, and without machine learning to automate this process, customers have the onus of sifting through countless reviews and selecting among thousands of providers.

3. The “Uber for X” Era (2009-)
In the early 2010s, a wave of on-demand marketplaces for simple services arose, including transportation, food delivery, and valet parking. These marketplaces were enabled by widespread mobile adoption, making it possible to book a service or accept a job with the tap of a button.

Companies like Handy, Lugg, Lyft, Rinse, Uber and many others made it efficient to connect to service providers in real-time. They created a full-stack experience around a particular service, optimizing for liquidity in one category. For these transactions, quality and success were more or less binary–either the service was fulfilled or it wasn’t–making them conducive to an on-demand model.

These platforms took on various functions to establish an end-to-end, seamless user experience: automatically matching supply and demand, setting prices, handling transactions, and establishing trust through guarantees and protections. They also often commoditized the underlying service provider (for instance, widespread variance on the driver side of rideshare marketplaces is distilled into Uber X, Uber Pool, Uber Black, Uber XL, etc.).

Unlike the previous generations of marketplaces, in which the provider ultimately owns the end customer relationship, these on-demand marketplaces became thought of as the service provider, e.g. “I ordered food from DoorDash” or “Let’s Uber there,” rather than the underlying person or business that actually rendered the service.

Over time, many startups in this category failed, and the ones that survived did so by focusing on and nailing a frequent use case, offering compelling value propositions to demand and supply (potentially removing the on-demand component, which wasn’t valuable for some services), and putting in place incentives and structures to promote liquidity, trust, safety, and reliability.

4. The Managed Marketplace Era (Mid-2010s)
In the last few years, we’ve seen a rise in the number of full-stack or managed marketplaces, or marketplaces that take on additional operational value-add in terms of intermediating the service delivery. While “Uber for X” models were well-suited to simple services, managed marketplaces evolved to better tackle services that were more complex, higher priced, and that required greater trust.

Managed marketplaces take on additional work of actually influencing or managing the service experience, and in doing so, create a step-function improvement in the customer experience. Rather than just enabling customers to discover and build trust with the end provider, these marketplaces take on the work of actually creating trust.

In the a16z portfolio, Honor is building a managed marketplace for in-home care, and interviews and screens every care professional before they are onboarded and provides new customers with a Care Advisor to design a personalized care plan. Opendoor is a managed marketplace that creates a radically different experience for buying and selling a home. When a customer wants to sell their home, Opendoor actually buys the home, performs maintenance, markets the home, and finds the next buyer. Contrast this with the traditional experience of selling a home, where there is the hassle of repairs, listing, showings, and potentially months of uncertainty.

Managed marketplaces like Honor and Opendoor take on steps of the value chain that platforms traditionally left to customers or providers, such as vetting supply. Customers place their trust in the platform, rather than the counterparty of the transaction. To compensate for heavier operational costs, it’s common for managed marketplaces to actually dictate pricing for services and charge a higher take rate than less-managed marketplace models.

Managed marketplaces are a tactic to solve a broader problem around accessing high-quality supply, especially for services that require greater trust and/or entail high transaction value. If we zoom out further, there’s many more categories of services that can benefit from managed models and other tactics to unlock supply.

What’s next: The future of Service Marketplaces (2018-?)
We think the next era of service marketplaces have potential to unlock a huge swath of the 125 million service jobs in the US. These marketplaces will tackle the opportunities that have eluded previous eras of service marketplaces, and will bring the most difficult services categories online–in particular, services that are regulated. Regulated services–in which suppliers are licensed by a government agency or certified by a professional or industry organization–include engineering, accounting, teaching, law, and other professions that impact many people’s lives directly to a large degree. In 2015, 26% of employed people had a certification or license.

Regulation of services was critical pre-internet, since it served to signify a certain level of skill or knowledge required to perform a job. But digital platforms mitigate the need for licensing by exposing relevant information about providers and by establishing trust through reviews, managed models, guarantees, platform requirements, and other mechanisms. For instance, most of us were taught since childhood never to get into cars with strangers; with Lyft and Uber, consumers are comfortable doing exactly that, millions of times per day, as a direct result of the trust those platforms have built.

Licensing of service professions create an important standard, but also severely constrains supply. The time and money associated with getting licensed or certified can lock out otherwise qualified suppliers (for instance, some states require a license to braid hair or to be a florist), and often translates into higher fees, long waitlists, and difficulty accessing the service. The criteria involved in getting licensed also do not always map to what consumers actually value, and can hinder the discovery and access of otherwise suitable supply.

Above: Bureau of Labor Statistics. (11/9/18)

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Five strategies to unlock regulated industries
We’re starting to see a number of startups tackling regulated services industries. As with each wave of previous service marketplaces, these new approaches bring more value-add to unlock the market, with variations in models that are well-suited to different categories.

The major approaches in unlocking supply in these regulated industries include:

  1. Making discovery of licensed providers easier
  2. Hiring and managing existing providers to maintain quality
  3. Expanding or augmenting the licensed supply pool
  4. Utilizing unlicensed supply
  5. Automation and AI

1) Making discovery of licensed providers easier
Some startups are tackling verticals that lack good discovery of licensed providers. Examples include Houzz, which enables users to search for and contact licensed home improvement professionals, and StyleSeat, which helps users find and book beauty appointments with licensed cosmetologists.

2) Hiring and managing existing providers to maintain quality
Companies can raise the quality of service by hiring and managing providers themselves, and by managing the end-to-end customer experience. Examples are Honor and Trusted, managed marketplaces for elder care and childcare, respectively, which employ caregivers as W-2 employees and provide them with training and tools. In the real estate world, Redfin agents are employees whose compensation is tied to customer satisfaction, unlike most real estate agents who are independent contractors working on commission.

3) Expanding or augmenting the licensed supply pool
Expanding the licensed supply pool can take the form of leveraging geographic arbitrage to access supply that’s not located near demand. Decorist, Havenly, Laurel & Wolf, and other online interior design companies enable interior designers around the world to provide design services to consumers without physically visiting their homes (yes, in many parts of the US interior design requires a license!). With improvements in real-time video, richer telepresence technologies, and better visualization technologies, more synchronous services are also shifting from being delivered in-person to online. Outschool and Lambda School are examples of de-localizing instruction, enabling teachers and students to participate remotely while preserving real-time interaction.

Another approach is to help suppliers navigate the certification process. A16z portfolio company Wonderschool makes it easier for individuals to get licensed and operate in-home daycares.

Lastly, there’s the approach of augmenting certified providers so they can serve more customers. Fuzzy, an in-home veterinary service, uses AI and vet technicians to augment the productivity of licensed veterinarians; and a16z portfolio company Atrium builds automation and workflow management to provide efficiency gains in the legal industry.

4) Utilizing unlicensed supply
Some companies utilize unlicensed supply–notably Lyft, Uber, and other peer-to-peer rideshare networks. Another example is Basis, a managed marketplace for guided conversations with trained but unlicensed specialists to help people with anxiety, depression and other mild to moderate mental health issues.

In the pet space, Good Dog is a marketplace that brings together responsible pet breeders and consumers looking for a dog. Going beyond existing breeder licensing, which the company felt didn’t map to what consumers valued, Good Dog established its own higher set of standards and screening process in conjunction with veterinary and academic experts.

5) Automation and AI
Other startups automate away the need for a licensed service provider altogether. These include MDAcne, which uses computer vision to diagnose and treat acne; and Ike Robotics and other autonomous trucking startups which remove the need for a licensed truck driver.

Opportunities for companies addressing regulated services
The last twenty years saw the explosion of a number of services coming online, from transportation to food delivery to home services, as well as an evolution of marketplace models from listings to full-stack, managed marketplaces. The next twenty years will be about the harder opportunities that software hasn’t yet infiltrated–those filled with technological, operational, and regulatory hurdles–where there is room to have massive impact on the quality and convenience of consumers’ everyday lives.

The services sector represents two-thirds of US consumer spending and employs 80% of the workforce. The companies that reinvent various service categories can improve both consumers’ and professionals’ lives–by creating more jobs and income, providing more flexible work arrangements, and improving consumer access and lowering cost.

The companies mentioned in this essay just scratch the surface of regulated industries. You can imagine a marketplace for every service that is regulated, with unique features and attributes designed to optimize for the customer and provider needs for that industry. (A full list of regulated professions in the US can be found here.) We fully expect more Airbnb- and rideshare-sized outcomes in the service economy.

If you’re a founder who is looking to take on the challenge of tackling more complex services and bringing them online, we’d love to hear from you.

Thank you for reading!

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