Startup lessons from Ben Silbermann, Founder and CEO of Pinterest August 30, 2012
Posted by johnvrionis in 2012, hiring, management, start-up, Summer Program.Tags: startup advice, Summer Program
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As a part of our Summer Fellowship Program, we bring in influential speakers from around the valley each week to share their insights, lessons learned and tips with our teams. The program has now been in place for six years, so with recent fellowship classes I have been fortunate to pull from our list of alumni when curating the speaker list. One of those alumni, Pinterest CEO Ben Silbermann, was generous enough to join us this past week for lunch with our fellows and alumni from past years.
During lunch, Ben shared details of his background and thoughtfully explained the journey of how he came to be CEO of one of the hottest startups in the consumer internet space. He also shared a number of insights and lessons which I think we can all learn from:
Hire Great People, regardless of if you have a defined role for them: Ben shared that one of the things he is thankful he did in the early days was to hire people that he thought were great people even before he knew exactly what their role would be. Great people, he explained, can add value in various roles and often provide key solutions to problems that arise throughout your lifecycle.
Learn from No: Whether you are seeking funding, making offers to potential employees or trying to build partnerships, as a startup you are going to hear the word no a lot. What makes Ben a great entrepreneur is that he recognizes that most of the time, people are saying no for a good reason. He had the patience, self-awareness and intellectual honesty to evaluate the situation and make the necessary changes. Whatever the reason for No, Ben stressed the importance of using it as opportunity to learn and to correct so that you are moving your company into a position where you can start getting some yeses.
Decide what will make you happy and commit 100% to doing it: One of the things Ben said he learned early on was that while being an entrepreneur meant that he had control over what he was building and doing, it also meant that he lost control over a number of things like a steady paycheck or the resources of a large organization. But, ultimately, the tradeoff was worth it for him to keep going. His advice to the group may seem simple and obvious, but it can be hard to follow! He was convincing – you have to find what makes you happy, because ultimately, that is the person you have to answer to first. Building a startup is really hard, but if you are doing something you love or building a product you are passionate about, it is one of life’s greatest rewards.
Foster your co-founder relationships: Like any relationship, you are going to have some ups and downs as founders so it’s important to foster a good, highly communicative relationship with your co-founder(s) so that you can make it through those rocky days. Again, it may seem fairly straightforward, but it is one of those things that requires consistent attention and can make all the difference.
Recognize what you don’t know and tackle it head on: This was less of a tip and more of an anecdote that Ben shared, but one that I thought was worth mentioning. Every weekend, he reads a different business book in an effort to hone his business, marketing or technical skills. Having a ready appetite to learn and grow as a person and a leader is no doubt a part of Pinterest’s secret sauce and something I encourage any entrepreneur to foster throughout their careers.
It was tremendous to have so many alumni back at Lightspeed and thanks again Ben for your time and thoughts.
If you found this post useful, follow me @jvrionis or Lightspeed at @lightspeedvp on Twitter.
How Nutanix is Disrupting the Market for Datacenter Infrastructure and Storage August 22, 2012
Posted by ravimhatre in 2012, datacenter, Infrastructure, virtualization.Tags: 2012, appliance, converged, data center, datacenter, enterprise IT, funding news, infrastructure, Nutanix, storage, virtualization, vmware
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Over the past two years we’ve seen a lot of disruption in the enterprise storage market with everything from the game-changing performance of flash to next-generation storage architectures required to support the cloud and virtualized data center environments
And notwithstanding some early wins from companies like Fusion-io, we believe the underlying data center compute, storage and networking transformation is still in early innings of playing out. A case in point is Nutanix, a company worth paying attention to and one where we recently led an oversubscribed growth round of financing.
So why are we so excited about Nutanix? We believe the company represents the next-generation of IT infrastructure – a CONVERGED storage and compute platform uniquely able to cost-effectively power the datacenters of today and tomorrow.
Nutanix combines enterprise-class compute and storage resources into a single, inexpensive x86 system. It also incorporates elastic scale-out technologies that have historically only been available to some of the world’s largest, and most technically sophisticated companies like Google and Facebook. Now, for the first time, this revolutionary computing paradigm is being delivered to mid-range and large enterprises that are also looking to ride the disruptive economic wave afforded by cloud computing and large-scale virtualization.
The Nutanix magic is in its’ software which is highly sophisticated and delivers the world’s first SDS (Software-defined Storage system), similar to Nicira, also a LIghtspeed portfolio company, which built the world’s first SDN (Software Defined Network system). The combination of SDS, inexpensive compute, and a radically simplified appliance form factor which is easy to deploy and manage has customers excited and highly engaged. They are calling Nutanix Complete the world’s first “datacenter in a box.”
Beyond the technology, we have been hugely impressed by the team at Nutanix. We’ve had the privilege of working with them from the earliest days of the company when Lightspeed originally lead the Series A financing more than two and half years ago. The founders came to us with an extremely bold vision to redefine datacenter storage and computing and we’re incredibly excited to see how emphatically the market is now embracing this vision.
If you found this post useful, follow me at @rmtacct and follow Lightspeed at @lightspeedvp on Twitter.
People still can’t do math – and what it means for pricing August 19, 2012
Posted by jeremyliew in Ecommerce, pricing.add a comment
Really fun post from ConversionXL about pricing experiments, many rooted in people’s inability to do math, and the lessons of Influence and the Power of Persuasion.
Definitely worth reading and experimenting with if you’re in ecommerce.
How to Project Customer Retention for a Subscription Business August 6, 2012
Posted by seanrmoran in 2012, ltv, models, subscription.Tags: LTV, model, retention, subscription
2 comments
We’ve posted before about how to estimate lifetime value (“LTV”) for an ecommerce business and for a subscription business, and have provided a sample cohort analysis for each (ecommerce and subscription). This is one of the most important factors in understanding unit economics.
Recently, Eric Liaw sent us a very interesting May 2006 paper entitled “How to Project Customer Retention”, authored by marketing professors Peter Fader (Wharton) and Bruce Hardie (London Business School) and published in the Journal of Interactive Marketing in 2007. In it, the professors explain how previous attempts to project retention rates using line-fitting regression models failed, even after introducing quadratic or exponential functions. Since we had advocated essentially using an exponential line fit for subscription LTV estimation, we figured it was worth reading. The authors show that exponential form fitting is too conservative and underestimates actual retention rates.
Professors Fader and Hardie decide to start from scratch with a simple assumption: what if each customer has a fixed probability of renewing his or her contract at the end of each period? So if I’m a big movie fan, let’s say I’m 80% likely to renew Netflix each month, but you’re caught up on Breaking Bad and only 30% likely to renew each month going forward. Probability varies by customer, but each customer’s rate remains constant over time.
It turns out that, based on probability theory, this simple assumption implies that the distribution of renewal rates can be characterized by a statistical model. Over time, the difference in each individual’s probability to renew suggests that individuals with lower renewal probabilities will generally drop out before those with higher probabilities. Incidentally, this also explains why incremental retention may appear to improve over time, when it’s actually a likely side effect of the remaining customer mix.
After some mathematical gymnastics, the authors unveil the model they’ve derived: the shifted-beta-geometric distribution. The authors tested the model by using the first seven years of data from a given sample to project renewal rates at the end of the final five years in the sample. The model proved to be quite accurate, within 3% of actuals, and much better than linear or exponential form fitting.
A few quick caveats: this model is appropriate only when the data reflects a discrete renewal period, such as a defined monthly or annual cycle. Also, the model should be reserved for projecting behavior in contractual settings, such as subscription renewals and other observable customer exit points, rather than ecommerce or other businesses where the customer can remain dormant for long periods between orders.
We’ve uploaded a spreadsheet here, along with directions for how to use it yourself.
Hope this is helpful. We look forward to hearing from you regardless, but especially if:
1) You use the model and have any feedback on results
2) Your company uses any other methods to capture, analyze, and project customer retention
3) Your innovative company achieves valuable unit economics. As previously mentioned, we like to see LTV / Customer Acquisition Cost > 2.5 and payback periods under 12 months.
If you found this post useful, follow us @lightspeedvp on Twitter.
Investing in Loyalty August 2, 2012
Posted by peternieh in 2012, Consumer internet, startups.Tags: consumer, funding news, loyalty
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“Customer loyalty is the single most important driver of growth and profitability. – Harvard Business Review
Today, we are excited to announce our investment in FiveStars. Founded by Victor Ho and Matt Doka, FiveStars makes it easy, and affordable, for retailers and merchants to reward their most valuable customers. It is the first loyalty offering that integrates directly with over 90% of existing point of sale (POS) systems and is already being used by hundreds of merchants.
So why loyalty and what makes this company and market interesting to us?
In the face of economic pressures, consumers are thinking more carefully about every purchase, and retailers now face more competition than ever. However, smart retailers are facing these challenges and actually growing their businesses, and bottom lines, by retaining their most loyal customers. A recent student by Harvard Business School found that a 5% increase in customer retention yields an increase in profits between 25 – 100%.
The key, however, is how to retain these customers without increasing complexity and costs. As a former loyalty consultant at McKinsey & Company, Victor Ho has a keen understanding of the challenge that retailers face and has delivered a product that not only meets those needs, but also does it in a way that works seamlessly within their existing business structure and is frictionless for consumers to adopt. It literally “slides in.”
FiveStars offers consumers a single card that they can use to earn rewards for everything from picking up coffee to getting a massage without the hassle of keeping track of multiple cards. A consumer registers once by just giving their phone number and then simply provides the card to merchants on checkout. And because the company integrates directly and easily with the POS, retailers can be up and running with FiveStars in literally minutes. No extra equipment is required, like iPads or smartphones which add to complexity and decrease adoption. Furthermore, Five Stars allows merchants to track spending habits and better personalize promotions and rewards.
The proof is in the pudding, and the company has already signed up several hundred merchants in its first several months of selling with very little marketing or advertising. They have developed a winning formula and with the new capital will be looking to accelerate their go-to-market activities.
It’s a great product, built by a great team and addressing a huge market. We couldn’t be happier to partner with them as they think big and move fast.
If you found this post useful, follow us @lightspeedvp on Twitter
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