20 VC 082 500 Startups Week Growth Hacking 101 How To 10x Your Conversion with Matt Lerner, Head of Distro Dojo London



In this episode of the 20 minutes VC, host Harry welcomes Matt Lerner, a distro partner at 500 Startups, who shares his journey from PayPal to venture capital and the growth-focused approach of 500 Startups' Distro Dojo in London. Lerner emphasizes the importance of analytics, understanding customer behavior, and the iterative process of growth hacking, debunking the myth of silver bullet solutions. He also highlights the value of paid advertising for quick testing and scaling, provided customer acquisition cost is lower than customer lifetime value. Lerner recommends resources like Sean Ellis's work and the book "Do You Talk Funny?" for public speaking tips. The conversation also covers common startup mistakes, such as optimizing for the wrong metrics and wasting money on inefficient paid channels. Notably, Lerner's recent investment in Tamatem, a Middle Eastern mobile games publisher, exemplifies a successful growth model through localization and cross-promotion.

Summary Notes

Introduction to 500 Startups and Matt Lerner

  • 500 Startups is a renowned venture capital firm.
  • Matt Lerner is a Distro Partner at 500 Startups and runs their London office.
  • Lerner specializes in conversion optimization, analytics, engagement, and retention.
  • He has a background as a digital marketer with 17 years of experience.
  • Lerner was a marketing director at PayPal before joining 500 Startups.
  • He has helped over 40 companies develop and execute growth strategies.

"Matt is a distro partner with 500 startups and he runs their London office specializing in conversion optimization, analytics, engagement and retention."

This quote introduces Matt Lerner's role and areas of expertise within 500 Startups, highlighting his focus on key growth metrics.

Matt Lerner's Backstory and Transition to VC

  • Matt Lerner has a background in digital marketing.
  • He was hired by Dave McClure at PayPal in 2004.
  • Lerner built and managed growth teams at PayPal for over a decade.
  • He transitioned from PayPal to venture capital with 500 Startups.
  • His move was influenced by his previous mentoring role with 500 Startups.

"Dave McClure, who's the founder of 500 startups, actually hired me at PayPal back in the day, so that's how he and I became acquainted."

This quote explains the connection between Matt Lerner and Dave McClure, which eventually led to Lerner's involvement with 500 Startups.

Attraction to Venture Capital

  • Matt Lerner was attracted to the VC world due to the fast cycle times to results.
  • He enjoyed mentoring startups and seeing immediate impact from his advice.
  • The variety and novelty of different business models were appealing to him.
  • Lerner appreciated the opportunity to work with brilliant founders.

"I just love that quick cycle time to results and the fact that each business is a totally new and ingenious and different challenge."

Here, Lerner expresses his passion for the dynamic and result-oriented nature of working with startups in the VC environment.

500 Startups Operations in the UK

  • The UK branch of 500 Startups is focused on growth.
  • They run a program called Distro Dojo, which is like an accelerator but only for growth.
  • Distro Dojo invests in later-stage companies, post-seed and pre-Series A.
  • The program looks for companies with a live product and a small but passionate customer base.

"We're like an accelerator, but we're really specifically focused on helping you grow your business."

This quote summarizes the mission of the Distro Dojo, emphasizing its concentration on growth and scaling for startups.

Investment Thesis of Distro Dojo

  • Distro Dojo's investment thesis is geared towards early-stage investment.
  • They focus on companies that have achieved some level of product-market fit.
  • The ideal candidate for investment has a live product and a customer base that appreciates the product.
  • The aim is to take companies with potential and help them grow rapidly.

"I'm looking for companies who have got a live, functioning product out of beta, and a corpus of customers who really like the product."

Lerner outlines the criteria for startups that Distro Dojo considers for investment, emphasizing the importance of a functioning product and positive customer feedback.

Misconception of Growth Hacking

  • Growth hacking is often misunderstood as a quick fix or "silver bullet."
  • Success in growth hacking is actually the result of continuous trial and error, optimization, and iteration.
  • The concept of overnight success is misleading; it usually involves a long process of hard work and refinement.

"There's a big misconception around that, but people think there's like this silver bullet growth hacking thing that you do." "It took me 17 years and 114 days to become an overnight success. It all looks so easy in hindsight."

  • Matt Lerner emphasizes that growth hacking is not an instantaneous process but involves a lot of groundwork.
  • The quote references Lionel Messi to illustrate that perceived instant successes are often the culmination of years of effort.

The Dojo's Growth Scaling Process

  • Understanding the business is the first step in the dojo's process.
  • Questions are asked to gauge customer profiles, product love, information sources, product acquisition, key metrics, and measurement methods.
  • The process includes hypothesis generation, idea documentation, and identifying key metrics and limiting factors.
  • Ideas and tactics are prioritized based on effort and potential impact.
  • Weekly lean sprint cycles are used to experiment and measure results.
  • A weekly review of KPIs and test results is conducted to determine what changes or optimizations are needed.

"We bring these folks in, and the first thing we do is just understand their business and ask them lots of questions." "So then we take that backlog of brainstormed ideas and tactics and we prioritize them." "And then once a week, we get together and we look at your KPI, your key performance indicator dashboard."

  • Matt Lerner describes the initial deep dive into understanding a company's fundamentals.
  • The dojo employs a structured approach to prioritize and test growth strategies.
  • Weekly meetings ensure continuous analysis and adjustment based on performance indicators.

The Essence of Growth Hacking

  • Growth hacking is often misinterpreted and has garnered a negative reputation due to misuse of the term.
  • Successful companies like PayPal, Airbnb, and Facebook have grown significantly without traditional sales or marketing.
  • Growth hacking involves a process and mindset focused on customer acquisition through experimentation, optimizing flows, leveraging social networks, and building referral systems.
  • It requires continuous iteration and improvement based on testing and results.

"But if you look back over the last 15 to 20 years, there's a bunch of companies like PayPal, Airbnb, Facebook, Hotmail, Twitter, LinkedIn, Dropbox, WhatsApp, Quora, Reddit, a bunch of companies who've gotten really big, really fast without doing any traditional sales or marketing."

  • Matt Lerner defines growth hacking as a systematic approach to customer acquisition, beyond the buzzword.
  • He cites examples of major companies that have achieved rapid growth through innovative, non-traditional methods.

Effective Growth Hacks and Experimentation

  • There is no one-size-fits-all growth hack; successful companies have tried numerous approaches before finding what works.
  • 500 Startups invests in a wide variety of companies, which means growth tactics can vary greatly.
  • Focus areas in the funnel can include awareness, traffic generation, conversion optimization, engagement, referral, or retention.
  • Brainstorming sessions with experts can generate a multitude of growth hack ideas for businesses.
  • Simple tests, like changing a button color, can sometimes yield significant improvements, but ongoing experimentation is necessary.

"There are no silver bullets. If there's one thing I can tell you that I'd like people to remember from this whole conversation, it's that there are no silver bullets." "One of the things we do in the dojo is once we understand your business, we call it brainstorm with the sensei."

  • Matt Lerner stresses that there's no single tactic that guarantees growth; it's about a broad range of attempts and learning from them.
  • The dojo facilitates creative brainstorming sessions to help businesses identify potential growth hacks.

Starting Growth Hacking for Startups

  • The first step for startups looking to growth hack should be to establish tracking and analytics.
  • Understanding what to track and how to interpret the data is crucial for informed decision-making.
  • Startups should determine which aspect of their business to focus on, such as retention or increasing site visitors, based on analytical insights.

"The very first thing is tracking and analytics."

  • Matt Lerner advises startups to prioritize setting up proper tracking and analytics to monitor growth effectively.
  • This foundational step is essential for startups to understand their performance and identify areas for growth hacking efforts.

Key Theme: Importance of Proper Analytics and Metrics

  • The initial step for working with companies involves conducting an analytics audit to assess their dashboards and targets.
  • Most companies do not track the correct metrics or track them properly upon first evaluation.
  • Measuring the right metrics is crucial because it dictates what the company optimizes for.
  • Companies often make the mistake of optimizing for the wrong targets, leading to issues.
  • Identifying what constitutes success is a key factor in setting the right targets.
  • It's essential to understand the nuances of customer behavior, such as distinguishing between a retained customer and a churned customer.
  • Companies need to determine if they have issues with traffic, conversion, or retention.
  • Proper measurement involves defining what each metric means, such as the difference between total visitors and qualified unique visitors.
  • Documenting goals and ensuring the right tools are in place to measure them is a foundational step.

"And the first thing we do with any of these companies is we sit down and do an analytics audit and have a look at their dashboard and what their targets are."

This quote highlights the initial step in working with companies, focusing on evaluating their current analytics and targets to identify any issues.

"You get what you measure. So if you're measuring the wrong thing...people were optimizing for the wrong target."

This quote emphasizes the importance of measuring the correct metrics to ensure that optimization efforts are aligned with the company's actual goals.

"Understand what is success for you...it's not clicked the green button, it's something deeper in the funnel than that."

This quote suggests that companies need to define success in a meaningful way that goes beyond superficial metrics, such as button clicks.

"Once you figured out, do I have a traffic problem, a conversion problem, a retention problem? And then how do I measure that?"

This quote points to the need for companies to identify their core issues in traffic, conversion, or retention and then find appropriate ways to measure and address them.

Key Theme: The Right Time for a Mindset Shift Towards Growth

  • It's never too early to focus on growth.
  • Experienced marketers who start businesses often build growth considerations into their product from the beginning.
  • For others, the shift towards objective, goal-setting, and growth should happen once there is evidence of product-market fit.
  • Having a customer base that is actively using the product indicates a readiness to leverage what customers like and expand the customer base.

"I'd say it's never too early to focus on growth."

This quote suggests that companies should prioritize growth early in their development rather than waiting until later stages.

"So in the rare case where a business is being started by an experienced marketer...he's built the entire business with growth in mind."

This quote provides an example of a company that has successfully integrated growth-focused strategies from its inception due to the founder's marketing expertise.

"Then it's the point I talked about before, which is, okay, the product is live, and you've got this corpus of customers who are really using you."

This quote indicates that once a product is live and has an active user base, it's time to leverage those customers for growth.

Key Theme: Common Mistakes Startups Make

  • Many startups fail because they don't get their product in front of customers.
  • Not listening to customer feedback is a significant mistake.
  • Measuring and optimizing for the wrong goals can lead to misdirected efforts.
  • Wasting money on inefficient paid advertising channels is a common pitfall.
  • Tactical adjustments can greatly increase the efficiency of advertising spend and reduce burn rates.

"The first reason most startups fail is they just don't even get their product out there in front of customers at all."

This quote identifies a fundamental issue where startups fail to expose their product to potential customers.

"Measuring and optimizing for the wrong goals and targets, wasting money on paid advertising channels."

This quote lists common mistakes startups make, including focusing on the wrong objectives and mismanaging advertising budgets.

Key Theme: Paid Advertising and Testing

  • Paid advertising is valuable for quick testing and getting eyeballs on a product or idea.
  • It can be an effective growth channel if the cost per customer acquisition is lower than the customer's value.
  • However, businesses should also focus on organic growth channels and not rely solely on paid acquisition.

"Advertising is a great way to get a lot of eyeballs and test stuff quickly."

This quote highlights the advantage of paid advertising as a tool for rapid testing and exposure.

"If you can do paid acquisition in a way that your cost per customer acquisition is much smaller than the proven value of your customer, you can grow really quickly through advertising."

This quote explains the conditions under which paid advertising can be a powerful tool for growth.

Key Theme: Admiration for Growth Hackers

  • Sean Ellis is admired for inventing the term "growth hacker" and for his work at Dropbox.
  • Dave McClure is recognized for his "move fast and break things" mindset and his contributions to the growth hacking community through his pirate metrics talk.
  • The speaker also mentions other growth hackers who have had a significant impact.

"So Sean Ellis invented the term when he worked at...he owns the growth hackers.com domain now, and he mentored me a little bit when I was at PayPal."

This quote acknowledges Sean Ellis as a pioneer in the field of growth hacking and as a mentor to the speaker.

"Dave's pirate metrics talk, it's guaranteed. It's required reading, required viewing."

This quote recommends Dave McClure's pirate metrics talk as essential for understanding growth hacking principles.

Andy Johns and Growth Leadership

  • Andy Johns is currently running growth at Wealthfront.
  • Previously, he worked on growth at Quora and was part of the Facebook growth team.
  • Andy Johns is not prolific in public speaking or writing articles, but his insights are highly valued by Matt Lerner.

Andy Johns, he runs growth at Wealthfront now. And then before that, he used to run growth at Quora, and before that, he was on the legendary Facebook growth team.

This quote outlines Andy Johns' career trajectory and his significant roles in growth at notable companies.

Millen Paris and Growth Hacking Expertise

  • Millen Paris is considered the top growth hacker in London.
  • He runs growth at TransferWise and mentors at Matt Lerner's dojo.
  • Millen Paris is known for his efficient and precise consultations, providing actionable advice after a detailed listening and questioning process.

He doesn't do a lot of public speaking, doesn't write a lot of articles, but whatever he does, I read it voraciously because he's a genius and everything he says, and he's such a decent, humble guy.

This quote emphasizes the respect and admiration Matt Lerner has for Andy Johns' expertise and character.

He mentors at our dojo. And one funny story was he came in to talk to our companies, and time is quite precious. His time is quite precious. So each company gets 30 minutes with him, not 31.

This quote describes Millen Paris' mentorship approach and the value of his time.

Growth Hacking Misconceptions

  • There are no silver bullets in growth hacking.
  • Growth hacking is a process and a mindset, not a one-time solution.

Okay, in case it hasn't been abundantly clear in this podcast, there's no silver bullets.

This quote from Matt Lerner dispels the common misconception that there is a single solution to growth hacking challenges.

Favorite Growth Hacking Tools

  • Matt Lerner recently spoke about growth hacking tools at the Martech London conference.
  • A top ten list of tools was created based on a survey of the 500 startups growth hacking team.

So I just actually gave a talk about this at the Martech London conference last week. I surveyed the whole 500 startups growth hacking team, asked them for their favorite tools, and I came up with a top ten list and then a full list of 35.

This quote details Matt Lerner's method of compiling a comprehensive list of growth hacking tools favored by his team.

  • Matt Lerner enjoys "Do You Talk Funny?" by David Nihill and "The One Thing You Need to Know" by Marcus Buckingham.
  • These books offer insights into public speaking, comedy, leadership, and achievement.

So I'm just finishing a book now called do you talk Funny? By David Nyhil...a really good book by a british guy named Marcus Buckingham called the one thing you need to know where he actually really just lays out what is the essence of leadership?

This quote shares Matt Lerner's current reads and the impactful wisdom they contain regarding public speaking and leadership.

Exciting Investment Opportunities

  • Matt Lerner is excited about Tamatem, a Middle Eastern mobile games publisher.
  • Tamatem localizes successful games to Arabic and markets them across the Middle East.

They're in the dojo now, and they're a Middle eastern mobile games publisher. So what they do is they take games that are successful in other markets and they license them, localize them into Arabic, and then promote them across the Middle east.

This quote explains the business model of Tamatem and why Matt Lerner finds it to be a promising investment.

Final Acknowledgments

  • Harry thanks Matt Lerner for his participation in the show.
  • Listeners are encouraged to check out Matt Lerner's growth hacking slide deck and other resources mentioned.

This was great fun. Harry, thanks for having me.

Matt Lerner expresses his enjoyment of the podcast and gratitude to Harry for the opportunity to be on the show.

And I would like to say a huge thank you to Matt for giving up his time to be on the show today.

Harry extends his thanks to Matt Lerner for contributing his time and expertise to the podcast.

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