20Growth Should Startups Hire Advisors When is the Right Time How Much Should They Be Paid How Should Founders Approach the Hiring Process for Advisors What Should They Expect From Them What are the Biggest Mistakes Made and more with Ely Lerner

In the latest episode of "20 Growth" with host Harry Stebbings, guest Eli Lerner, an experienced advisor and former head of consumer product at Chime, delves into the nuances of growth strategy and the importance of founders owning their primary growth lever strategy. Lerner emphasizes the value of engineering teams owning outcomes rather than outputs, and the need for founders to understand and leverage their Ideal Customer Profile (ICP) during activation to boost retention. Additionally, Lerner critiques the overuse of "growth hacks" and advises against setting up teams focused solely on churn, suggesting instead to concentrate on activation and retention. He also discusses the evolution of advisory roles, the impact of incentive alignment on growth, and the strategic importance of distinguishing between offensive (growth-driving) and defensive (risk-avoiding) company initiatives. The conversation touches on the benefits of embedded growth strategies within organizations and the potential pitfalls of not questioning strategic bets frequently enough.

• Founders often mistakenly delegate core strategy elements rather than maintaining ownership.
• The primary growth lever strategy should be owned by the founder to ensure high-functioning engineering teams.
• Engineering teams must have ownership of outcomes to drive success.

"One mistake I see founders make a lot trying to delegate core pieces of their strategy. You should be owning the strategy for your primary growth lever. You cannot delegate that strategy."

This quote emphasizes the importance of founders retaining control over their company's core strategic decisions, particularly those that drive growth, to ensure alignment and accountability.

• Harry Stebings introduces the show 20 Growth, which focuses on growth leadership discussions.
• Eli Lerner, advisor to growing companies and former head of consumer product at Chime, is welcomed as a guest.
• The show aims to share insights on starting, scaling, and maintaining growth organizations.

"Welcome back. This is 20 growth with me, Harry Stebings. Now 20 growth is the monthly show where we sit down with the best growth leaders to discuss starting scaling and maintaining growth orgs today."

Harry Stebings sets the stage for the podcast, explaining its focus on growth leadership and introducing Eli Lerner as a distinguished guest with a background in product growth.

• Miro is sponsoring the episode and is described as an online workspace for innovation.
• Listeners are encouraged to use Miro to provide input for future show content.
• Miro integrates with various tools to enhance collaboration and productivity.

"Today, I'm refreshing the 20 VC Miro board and I'd love your input."

The quote invites listeners to engage with the show's planning process by using Miro, an online collaborative platform that sponsors the episode.

• Statsig is presented as a platform that aids growth and product teams in making data-driven decisions.
• The platform automates experimentation, feature flags, and analytics, saving time for teams.
• Statsig's impact is exemplified by Ancestry.com's increased experimentation rate.

"Teams are obsessed with making data driven decisions. But getting good data is hard, and growth and product teams have to spend hours each week configuring metrics, setting up experiments, and writing custom queries."

This quote highlights the challenges growth and product teams face in obtaining and utilizing good data, and how Statsig offers a solution by streamlining these processes.

• Funnel is introduced as a marketing data hub that eliminates manual data collection efforts.
• It allows for blending data from different platforms without coding, facilitating deeper insights.
• Top brands use Funnel for efficient marketing analysis and reporting.

"You're not alone in not knowing these answers. Even though marketing is now all about the data, most companies still use manual spreadsheets for reporting and analysis."

The quote addresses the common challenge companies face with data-driven marketing and introduces Funnel as a tool to overcome these obstacles.

• Eli Lerner shares his journey from engineering to product management.
• He highlights the benefits of working across various marketplaces at Yelp and the experience of acquiring and selling Eat24.
• Lerner discusses the importance of having P&L responsibility when incubating new business lines within established companies.

"I was at Yelp for a little over eight years across a whole bunch of different areas of that product and business."

Eli Lerner describes his extensive experience at Yelp, which provided him with a broad perspective on product and growth across different marketplaces.

• The discussion covers how large companies can rapidly integrate new technologies like AI.
• Lerner differentiates between enhancing existing processes with new tech and creating entirely new products or services.
• He suggests that success in zero-to-one initiatives within large companies requires a startup-like approach with P&L responsibility.

"I think big companies can do these things quickly."

Eli Lerner acknowledges that large companies have the potential to implement new technologies efficiently but emphasizes the need for a structured approach when pursuing innovative projects.

• Lerner discusses the power of incentive alignment in business models, drawing on his experiences from Yelp and Chime.
• He explains that successful businesses align their incentives with their customers, which drives growth.
• This concept is further connected to Brian Balfour's ideas on business model fit.

"Incentive alignment is the most powerful lever you have in a business."

The quote underscores the significance of aligning company incentives with customer value as a key driver for business success.

• Advisory roles are evolving to be more structured and targeted in providing value to founders.
• Lerner outlines the different types of advising: company level, functional, and domain-specific.
• He differentiates company level advising from coaching, focusing on business growth versus personal development.

"We are at sort of the early stages of an evolution of much more targeted ways to exchange value between founders and people that can help them and much more structured ways."

Eli Lerner explains the changing landscape of advisory roles, indicating a trend towards more strategic and impactful engagements with founders.

• The timing for engaging advisors varies based on the company's stage and needs.
• Founders often struggle to identify the right time to seek different types of advisory support.
• Lerner suggests that founders should seek advisors who can help grow their business at the appropriate stage.

"Yeah, this is a great question. I think I see founders struggle with this."

Eli Lerner acknowledges the challenges founders face in determining when to seek advisory support and implies the importance of timing in these decisions.

• Founders should own the strategy for their primary growth lever.
• Delegating core strategy due to lack of background is a common mistake.
• Founders need to leverage functional advisors without relinquishing strategic control.
• The primary growth lever is the most crucial aspect of the business.
• Founders are uniquely positioned to take the correct level of risk and have a comprehensive company perspective.

"As a founder, you should be owning the strategy for your primary growth lever."

This quote emphasizes the importance of founders maintaining control over the main driver of their business's growth, regardless of their personal expertise in that area.

"You cannot delegate that strategy."

The quote stresses that strategic direction, especially for the primary growth lever, must remain with the founder and not be handed off to others.

"Only the founder is going to take the right level of risk."

This quote highlights the unique position of the founder to take risks that others within the company may not be inclined to take due to different levels of investment in the company's success.

• Founders must distinguish between hiring for leverage and delegating core responsibilities.
• Offensive areas (primary growth levers) should not be fully delegated but can be supported by experts.
• Defensive areas (non-primary growth levers) can be delegated, like customer service.
• Founders should focus on high-leverage activities and bring in support when necessary.

"You need to be owning that at the end of the day and leveraging that expertise to help make you do the job better."

This quote reinforces the idea that while founders can and should hire experts, they must still retain ultimate responsibility for core growth strategies.

"You absolutely can hire an experienced CS leader to run that area for you and just take it totally out of mind."

The quote provides an example of a non-primary growth lever (customer service) that can be delegated to a hired expert, freeing up the founder's time for more strategic tasks.

• Founders should consider the time factor when deciding between an advisor and a hire.
• Advisors are beneficial for teaching and guiding strategy, while hires provide leverage in executing strategy.
• A fractional hire can bridge the gap when the startup is not yet ready for a full-time head of growth.
• Functional advisors can support junior managers by providing expertise and thought leadership.

"A fractional person can sort of bridge that gap for you where you're not to the point yet where you need to hire."

This quote suggests using fractional hires as a temporary solution for startups that are not large enough to justify a full-time position but need additional support.

"Functional advisor can be really helpful to sort of bridge the gap between the person who's actually executing the."

The quote explains how functional advisors can assist junior managers by providing guidance and expertise without taking over their role.

• Founders should identify their primary growth lever and seek advisors with relevant experience.
• Company-level advisors vary in engagement depth, from high-level guidance to hands-on advising.
• Hands-on advising involves close collaboration and weekly engagement with founders.
• The right advisor should have experience in developing or scaling the specific playbook relevant to the startup's stage and growth lever.

"Bring in somebody who has done that thing at similar types of companies to yours and at similar stage to help you with that lever."

This quote advises founders to seek functional advisors who have successfully managed similar challenges at comparable companies and stages.

"I'm sitting down with that founder every week. We are diving in and working on whatever is the highest leveraged thing for the business at any given time."

The quote describes the hands-on advising approach, which involves regular, in-depth sessions with founders to tackle high-priority issues.

• Founders should engage with advisors on a trial basis to determine fit and value.
• Formalizing the relationship should be based on mutual recognition of value after initial consultations.
• Compensation structures can include a mix of cash and equity, scaled to the advisor's time commitment.
• Equity packages for advisors should reflect the proportional value of their contribution without a cliff.

"I don't try to make claims with Founders. My model is, I meet as many founders as I can, and I help them as much as I can for free."

This quote illustrates an advisor's approach to establishing trust and demonstrating value before entering into a formal agreement.

"The package that I do is, let's call it 80 20 cash and equity, but again, on a month to month basis for this hands on advising."

The quote provides insight into a typical compensation structure for hands-on advising, balancing cash and equity and allowing for flexibility in the engagement duration.

• In the early stages of a startup, equity is traded for value but with a skew towards cash compensation.
• This is because the company is not giving away much equity relative to the value it is receiving.
• The exchange of value is seen as a transaction that evolves over time.

"But early on, you're not giving away that much equity for the value that you're getting. Right. You're actually skewed more towards the cash, because it's sort of this, like, we're exchanging value as we go."

The quote emphasizes that during the initial phase of a startup, equity distribution is minimal and there is a preference for cash compensation. The transaction is viewed as an ongoing exchange of value.

• To set up a successful relationship with an advisor, focus on three key areas: questioning data, questioning customers, and shipping small things quickly to learn.
• These areas are crucial levers for early-stage strategy development.
• Struggles in any of these areas can be a red flag; for example, a team that cannot ship product quickly may need to address internal issues before proceeding.

"There's sort of three key things I see as signals of successful relationship, really, especially when you're early on and trying to figure out strategy. You can ask questions of data, you can ask questions of customers, and you can ship small things quickly to learn."

The quote outlines the three fundamental actions an early-stage company should take to foster a successful relationship with an advisor and to effectively develop its strategy.

• Teams often struggle to ship product due to a lack of engineering ownership over outcomes.
• Engineering teams may feel they are tasked with producing output rather than achieving outcomes, which affects productivity.
• The distinction between output and outcomes is critical for high-functioning engineering teams.

"Very frequently you get teams that set up where the engineering team feels like it's owning output and not outcomes."

This quote highlights a common issue where engineering teams are focused on completing tasks (output) rather than contributing to the company's goals (outcomes), which can hinder a team's effectiveness.

• The framework divides activities into 'offense', 'defense', and 'neither', with the goal of focusing on high-impact work.
• Offense includes growth-focused activities and strategic bets aimed at taking the business to the next level and should be compounding in nature.
• Defense covers essential activities that protect against downside risk, and it's crucial to recognize the point of diminishing returns to avoid over-investment.
• Activities that are neither offense nor defense should be critically evaluated and potentially cut to allocate resources more effectively.

"Offense is things that are really, like, targeted at a small number of bets that are targeted at pushing your business to the next level."

The quote explains that offensive activities are strategic bets with the potential to significantly advance the business and should be focused and limited in number.

• Teams should be aligned around offensive and defensive strategies to maintain focus and drive progress.
• A 'core experience' team can handle all defensive tasks, allowing them to prioritize effectively.
• Separate teams or 'orgs' should be dedicated to each offensive bet, ideally limiting to three core strategic bets.

"Aligning your around offensive and defensive bets can also be really powerful because then it allows you to have really focused teams on those offensive bets that are not getting distracted by other things."

This quote stresses the importance of organizational alignment with strategic priorities, ensuring that teams are focused and not sidetracked by unrelated tasks.

• Offensive bets can become defensive as growth loops reach their peak and enter an extraction phase.
• Conversely, defensive activities can become offensive if they overcome a core barrier to value delivery, as seen with Airbnb's investment in trust and safety.

"You definitely do. The most common place for that is as you top out a growth loop, the first growth loop for your business at some point is going to kind of start topping out that s curve and be more an extraction phase."

The quote illustrates how strategic bets can shift from offensive to defensive as the company grows and the initial growth strategies begin to yield diminishing returns.

• Defensive strategy is critical to a company's survival and should be celebrated alongside offensive wins.
• Celebrating the identification of diminishing returns and resource reallocation can foster a culture that values both offensive and defensive efforts equally.

"Defense is equally important to offense, if not more important. The whole point is that these are existential. If you do not do these things, you're not going to have a company to invest in offense."

The quote emphasizes the existential importance of defensive strategies, highlighting that without them, there would be no foundation upon which to build offensive strategies.

• A common mistake is failing to choose and focus on a few high-leverage offensive bets, leading to overextension and reduced chances of success.
• Another mistake is over-investing in defensive strategies without considering the law of diminishing returns and the high opportunity cost of doing so.

"The biggest mistakes I see are not choosing is one. Right. On the offensive side of like the whole point of strategy is to say no to most things and focus in on a small number of really high leverage things."

This quote identifies the critical error of not being selective and focused when it comes to offensive strategy, which is essential for maximizing impact and success.

• Advisor relationships fail when advisors apply their past experiences without considering the unique context of the business they are advising.
• Founders must be willing to engage and commit to the relationship with the advisor for it to be successful.

"When you get a kind of advisor who has done a bunch of things before and essentially their advice is do the things I did because they worked for me, that happens a lot."

The quote points out a common pitfall in advisor relationships where advisors offer generic advice based on their own experiences rather than tailoring their guidance to the specific needs of the business they are advising.

• The success of a founder-advisor relationship hinges on active engagement and consistent collaboration.
• Founders who are too busy or disengaged will not benefit from high-level advisors.
• A working relationship requires alignment on driving outcomes for the business.
• Retention and activation are key to maintaining a productive advisor relationship.

"Like, at the end of the day, if the founder is not going to engage, not going to show up... It's just not going to work."

This quote emphasizes that without the founder's active participation, the relationship with an advisor will fail to yield desired results.

• An individual can handle multiple advisory positions simultaneously, depending on the level of advising.
• High-level advising allows for a larger number of clients due to less time-intensive involvement.
• Time commitment varies with the depth of advising; more in-depth advising requires more time per client.

"I think have like six people that I'm working with at the same time... I'm pretty close to the ground though."

The speaker indicates that they are currently advising six people and suggests that there is a limit to how many advisory positions one can effectively maintain.

• The diminishing value from an advisor becomes apparent when business needs evolve.
• Advisors may excel in certain areas, and as the business grows, its needs might surpass the advisor’s expertise.
• Recognizing the shift in value is crucial for deciding when to seek new advisory expertise.

"You're going to pretty quickly know that you're not getting the same level of value from that relationship."

This quote suggests that it becomes evident when the value an advisor provides no longer aligns with the evolving needs of the business.

• The modern approach integrates growth strategies across all functions of a company.
• Previously, separate growth organizations were formed to focus on growth, but the trend is shifting towards integration.
• Companies in early stages might benefit from a separate growth team but should aim for full integration eventually.

"If you are a company that is at the first stage, it may well be the right step for you to go to having a separate growth, but you should think that your end goal is to integrate growth into everything that you're doing."

This quote explains the progression of growth team structures and the ultimate goal of integrating growth into all aspects of a business.

• The most impactful growth decisions are in the area of activation.
• Activation converts potential value into engaged, habitual use of a product, which in turn drives retention and virality.
• Retention is fundamental as it builds the foundation for sustainable business growth.

"Honestly, the growth things that drive the most upside are always in activation."

The speaker highlights the importance of activation in the growth process, stressing its impact on long-term user engagement and business success.

• A common mistake is not understanding the Ideal Customer Profile (ICP).
• Focusing on overall conversion metrics without considering the fit of the customer leads to marginal improvements.
• It's essential to identify and focus on the ICP within the activation funnel for higher leverage improvements.

"One of them is not understanding your ICP... The problem is a bunch of those people are not ICP and they're never going to convert anyway."

This quote points out the inefficiency of trying to convert users who do not match the Ideal Customer Profile, emphasizing the importance of targeting the right users for better conversion rates.

• Horizontal products, which serve a broad range of industries, still have an ICP based on attributes rather than personas.
• The ICP for horizontal products involves common attributes that make the product a good fit across various verticals.
• Narrow focus is recommended even for horizontal products, targeting acute problems shared across different types of businesses.

"Horizontal products have an ICP because the true ICP should be defined in terms of attributes, not personas."

The speaker clarifies that even products with wide applications must identify their ICP based on attributes that are common to their most suitable customers.

• Early career mistakes often involve focusing too much on features rather than outcomes.
• Product and growth practitioners should prioritize the outcomes for customers and the business.
• Starting with zero to one products forces a broader perspective on outcomes and ownership.

"Be too focused on solutions, right? Be too focused on the feature and not think about the outcome."

This quote reflects on a common early career mistake, emphasizing the importance of focusing on the desired outcomes of a product rather than just its features.

• The concept of growth hacks as quick wins is becoming outdated.
• Growth is about finding and exploiting leverage, not about one-size-fits-all tactics.
• Specific channels like push notifications and paid ads are oversaturated but still have niches where they are effective.

"Honestly, the concept of growth tactics has died a death."

The speaker dismisses the idea of generic growth hacks, advocating for a more strategic approach to finding leverage points for growth.

• Growth leaders should assess whether the founding team understands and embraces a growth mindset.
• The ability to instill growth across the company's functions is crucial for a growth leader's success.
• Data for decision-making doesn't need to be perfectly clean, but there should be a process to iterate and learn from it.

"Does the founding team understand the growth mindset?"

This question is posed as a critical consideration for growth leaders before starting a new role, highlighting the importance of a company-wide commitment to growth principles.

• Appreciation for network effects and marketplaces as a growth strategy.
• Market shifts and technological advancements can create new opportunities for network effects.
• Companies that leverage these shifts effectively can build impressive growth strategies.

"I'm most excited by network effects."

The speaker expresses enthusiasm for growth strategies that capitalize on network effects, indicating a preference for this type of scalable and self-reinforcing growth.