20Growth Top Five Growth Lessons Scaling Stitchfix to IPO, How to Master the Art of Paid Marketing, Why CACLTV is a BS Metric & How To Use Payback Period as an Alternative to CACLTV with Mike Duboe, Partner @ Greylock

Summary Notes


In this episode of "20 Growth," host Harry Stebbings interviews Mike Dubois, a venture investor at Greylock and former growth leader at Stitch Fix and Tilt. Dubois shares insights from his career, emphasizing the importance of understanding growth as a holistic system, not just a series of micro-optimizations. He details how growth should be integrated into product strategy, advocating for cross-functional teams and a culture of experimentation to accelerate learning. Dubois also touches on the pitfalls of over-reliance on paid marketing and the flaws of the CAC to LTV metric, suggesting a focus on payback periods and incrementality testing for more accurate channel performance evaluation. Additionally, he stresses the significance of learning from failures and the value of referencing deeply when hiring for growth roles to ensure alignment with company goals.

Summary Notes

Experiment One-Pagers Framework

  • Objective hypothesis: a clear statement of what the experiment aims to achieve or prove.
  • Testing design: the methodology and approach for conducting the experiment.
  • Resources required: what is needed in terms of time, budget, personnel, etc., to carry out the experiment.
  • Timeline: a schedule for the experiment from start to finish.
  • Quantifiable success: specific metrics or outcomes that will indicate the experiment's success.
  • Next steps: predetermined actions to take depending on whether the experiment fails or succeeds.

"First is experiment onepagers, so anyone could submit an experiment idea, but we built this very simple onepager framework that included an objective hypothesis. You're testing the design or resources required to execute the experiment timeline, and then what success quantifiably looks like. And then finally the next steps that one takes if the experiment fails or succeeds."

This quote outlines the structure of an experiment onepager, which serves as a blueprint for proposing, conducting, and evaluating experiments within an organization. The framework is designed to ensure clarity and prepare for both outcomes of the experiment.

Harry Stebbings' Introduction

  • Harry Stebbings hosts the monthly show "20 Growth," focusing on growth strategies.
  • Mike Dubois, a former growth leader and now venture investor, is the guest.
  • Mike's background includes working at Stitch Fix and Tilt, and he has been involved with YC's growth advisory council and as a lecturer at Reforge.
  • Harry requests audience participation to suggest future guests via Miro, a visual collaboration platform.

"This is 20 growth with me, Harry Stebbings now this is the monthly show where we sit down with the best growth leaders to reveal their tips, tactics and strategies to scaling the best growth teams today."

Harry introduces the podcast's purpose, which is to share insights from top growth leaders on how to scale effective growth teams.

Mike Dubois' Background

  • Mike studied engineering at the University of Michigan.
  • He joined Bain for the variety of problems and clients, which helped him become a structured thinker.
  • Mike is passionate about the food scene and sought opportunities in the food startup space upon moving to the Bay Area.
  • He worked at a chef marketplace called Kitchen, which was his first exposure to growth.
  • At Tilt, Mike focused on understanding why the company was growing and how to accelerate it.
  • He joined Stitch Fix through a connection with Brian Burtwhistle, and was responsible for building an in-house user acquisition muscle.

"Yeah, so I'll go back and I'll start with my undergrad. So I studied engineering undergrad. I finished up University of Michigan in 2007."

Mike provides context on his educational background, which laid the foundation for his analytical and structured approach to growth.

Stitch Fix and Growth Lessons

  • Importance of getting the objective function right, ensuring teams have a holistic view of growth.
  • Understanding incrementality in paid marketing, using holdout testing for accurate measurement.
  • The impact of a strong retention team foundation on acquisition strategies.

"The first one's probably about the importance of getting your objective function right."

This quote highlights the significance of defining clear goals and metrics for growth teams to ensure alignment and effectiveness.

Role of Head of Growth

  • Responsible for accelerating the company's pace of learning through experiments.
  • Engineering systems to help control the company's north star metrics.
  • The role can vary but generally includes a focus on experimentation and systematization of growth processes.

"I prefer a broad definition, which is someone who's responsible for two things. One is accelerating the company's pace of learning."

Mike defines the role of a head of growth as pivotal in driving the company's learning and control over key growth metrics.

Cross-Functional Growth Pods

  • Preference for cross-functional growth pods with PMs, engineers, marketers, analysts, designers, and user researchers.
  • Growth teams should operate autonomously and at a faster pace than the rest of the company.
  • Growth may report to the CEO or sit under the product division, depending on the company's scale and structure.

"I think part of the magic of cross functional growth pods, which is generally the structure I prefer, is you can actually be fully autonomous in going and running an experiment to validate or invalidate a hypothesis without actually needing to step in the roadmap of other teams in a company."

Mike advocates for the autonomy and efficiency of cross-functional growth pods, emphasizing their ability to run experiments without being hindered by other departments.

Marketing and Product Discipline

  • Marketing strategies are particularly applicable to ecommerce companies with straightforward products.
  • Performance marketing teams are often a part of the marketing department.
  • Growth marketing, when involving product changes, is ideally positioned under the product team for better integration.

Marketing really only makes sense for ecommerce companies where the product is like simple and linear.

The quote emphasizes the suitability of marketing for simple, linear ecommerce products, suggesting that complex products may require different approaches.

Growth Teams and Engineering Alignment

  • Growth teams should not operate independently from engineering to avoid disrupting workflows.
  • Integrating growth strategies with product development ensures alignment and prevents conflicts.

Growth teams come in bluntly, tinker with code and then fuck off.

This quote illustrates the disruptive nature of growth teams operating in isolation and the importance of integrating them with engineering teams.

Timing of Growth Hires

  • Growth personnel should not be hired before achieving product-market fit.
  • Early-stage companies can benefit from generalists who focus on finding product-market fit.
  • Hiring growth teams prematurely can harm company retention and understanding of user demographics.

Never hire a growth person pre product market fit.

The quote advises against hiring growth-focused employees before establishing that the product meets market needs, emphasizing the importance of timing in building a growth team.

Analytics as a Foundation for Growth

  • Analytics is crucial for understanding user behavior and guiding growth strategies.
  • Hiring individuals with strong analytics skills from operations backgrounds can lay a solid foundation for growth.
  • Analytics debt occurs when a company cannot easily access or interpret basic user data.

Analytics debt is just as common, if not more common.

This quote highlights the prevalence of analytics debt, comparing it to the well-known issue of technical debt, and underscores the importance of good analytics practices.

Identifying Core Metrics and Growth Models

  • Companies should identify a core metric or North Star that aligns with their business model.
  • Understanding the growth mechanics of a product is crucial for setting appropriate growth goals.
  • North Star metrics may evolve as the company grows and its objectives change.

Write down how your product actually grows and how it should grow.

The quote suggests documenting the growth process of a product to clarify the mechanisms that drive key metrics, which is foundational for strategic growth planning.

Hiring for Growth Roles

  • Defining success for a growth role is the first step in the hiring process.
  • Calibrating expectations by learning from companies with similar growth patterns is beneficial.
  • Writing a job specification helps clarify what the company needs in a growth hire.
  • References should be checked early in the hiring process to filter candidates effectively.

A lot of growth hires will ultimately fail, in part because a company doesn't have a clear idea of what they're hiring for.

This quote points out that clarity on the role and expectations is vital to avoid failure when hiring for growth positions.

Assessing Growth Hire Candidates

  • Asking candidates to explain how their favorite product grows can reveal their holistic understanding of growth systems.
  • Discussing past failures can indicate a candidate's comfort with risk and learning from mistakes.
  • Requesting candidates to present a daily dashboard can show their ability to focus on key metrics and apply them to business contexts.

Pick your favorite product and tell me how it grows.

This quote is an example of a question that can help assess a candidate's understanding of product growth and their analytical thinking.

Exercises for Growth Candidates

  • Assigning tasks like creating an experiment roadmap can test a candidate's ability to prioritize and think ROI-first.
  • Writing out a growth model for a relevant product can demonstrate a candidate's ability to think strategically and holistically about growth.
  • Allowing time for candidates to complete exercises can ensure a thorough evaluation of their skills.

Bring me a prioritize experiment roadmap for x feature.

The quote suggests a practical exercise to evaluate a candidate's strategic thinking and prioritization skills in the context of growth initiatives.

Compensation for Growth Hires

  • Equity can be an important part of the compensation package for early growth hires.
  • Compensation packages may vary based on the company's stage and funding level.

I like being more generous with equity early on.

This quote reflects the speaker's preference for offering more equity to early hires, implying the value of incentivizing long-term investment in the company's success.

Key Theme: Importance of “Barrels” in a Company

  • Barrels are key personnel who drive multiple initiatives, as opposed to "ammunition" who are executors of specific tasks.
  • Identifying and retaining barrels is crucial for a company's capacity to undertake simultaneous projects and grow rapidly.
  • Barrels often hire other barrels, creating a multiplying effect on a company’s capabilities.
  • Early growth team members can be instrumental as barrels in a startup.

"But no matter how much ammunition you have, if you only have five barrels, you can only do five things simultaneously."

This quote emphasizes the limitation of a company's operational capacity without the presence of multipliers like barrels.

"When you find one, do everything in your power to keep them engaged."

Mike Dubois stresses the importance of retaining these valuable employees by providing incentives such as increased responsibility and equity.

Key Theme: Compensation for Mid-Career Professionals at Series B Companies

  • A salary range for mid-career hires at a Series B company is between $150,000 and $250,000.
  • Compensation packages may include a balance of cash and equity.
  • Equity compensation could reach north of a point, but typically ranges between half a point to a point.

"Probably you could go between 150 and 250 in salary and then maybe a sliding scale between cash and kind of equity."

Mike Dubois provides a specific salary range for hiring mid-career professionals at a Series B company, indicating the level of investment a company should be willing to make for key hires.

Key Theme: Operationalizing Growth as Loops vs Funnels

  • Loops are self-reinforcing systems where outputs are reinvested into inputs, leading to compounding growth.
  • Funnels represent a linear trajectory of growth that can decay with scale.
  • Operationalizing growth as loops involves integrating product, channel, and monetization strategies.
  • Loops encourage cross-functional team collaboration, which can lead to more innovative solutions and compounding results.

"Loops, they're powerful because they lead to compounding growth systems versus typically funnels are more linear growth trajectories that will oftentimes decay with scale."

Mike Dubois contrasts loops with funnels to highlight the sustainable and exponential nature of growth through loops.

Key Theme: Experimentation and Iteration Process

  • Encouraging idea submissions from the entire company reduces friction and fosters innovation.
  • A culture that embraces risk-taking and learns from failures is vital.
  • Experimentation involves a structured process with clear objectives, hypotheses, designs, timelines, and success metrics.
  • The ICE framework (Impact, Confidence, Effort) is used to prioritize experiments.
  • Cross-functional teams are often the most effective at operationalizing growth experiments.

"The only real failure is not implementing learnings from an experiment."

Mike Dubois emphasizes the importance of learning from experiments, even if they fail, to continually improve and innovate.

Key Theme: Documentation and Communication of Experiment Learnings

  • Weekly experiment reviews and company-wide presentations are key for sharing learnings from growth experiments.
  • Documenting and codifying lessons learned ensures that insights are shared and can influence future strategies.
  • Engaging the entire company in the growth process can help debunk myths and align everyone with data-driven insights.

"Communicating that out, I think live is best."

Mike Dubois advocates for live communication as an effective way to disseminate learnings from growth experiments across the company.

Key Theme: Good vs. Bad Learnings from Experiments

  • Good learnings are specific and actionable, guiding future product or strategy iterations.
  • Bad learnings are vague, non-quantifiable, or confined to a single function, limiting their impact on broader strategy.
  • Integrating learnings from paid marketing into product messaging is an example of leveraging good learnings across functions.

"A bad learning might be one that's not quantified or not specific enough to change your core product strategy."

Mike Dubois defines a bad learning as one that lacks the specificity to influence meaningful change in strategy or product development.

Key Theme: Paid Marketing as an Accelerant, Not a Crutch

  • Paid marketing should not be the sole driver of user acquisition, especially if product-market fit is not established.
  • Over-reliance on paid marketing can mask underlying issues and lead to unsustainable growth.
  • A healthy mix of organic and paid user acquisition is recommended, with the balance varying by business type.

"One measure of product market fit health is what happens when you turn off all nonorganic acquisition activities."

Mike Dubois suggests that the ability of a product to retain and attract users without paid marketing is an indicator of true product-market fit.

Key Theme: Channel Concentration and Diversification

  • Early-stage companies can focus on a single effective channel but should diversify as they scale.
  • Over-concentration in one channel can lead to risks, especially if the channel's performance fluctuates.
  • Diversification helps weather uncertainties and ensures stability at larger scales.

"You don't want to be too exposed to any one channel at scale, there's a lot of diversification risk."

Mike Dubois shares a lesson from Stitch Fix’s experience, underscoring the importance of channel diversification to mitigate risks.

Key Theme: Effective Paid Marketing Strategies

  • Early success in paid marketing may not be solely due to savvy media buying but could be influenced by various factors.
  • Companies should not hastily diversify their marketing channels if one is performing exceptionally well.
  • It is crucial to understand the payback and customer value when investing in paid marketing.

"The thing that many people miss early on is that paid degrades with scale."

Mike Dubois warns about the common misconception that paid marketing performance will improve indefinitely with scale, which is not the case.

Performance Marketing Insights

  • Performance marketing focuses on finding arbitrage opportunities on channels like Facebook.
  • Over time, these opportunities get arbitraged away, making sophisticated measurement and creative volume the only sustainable advantages.
  • A unique user hypothesis and resonating creative at scale are the core of performance marketing.
  • At Stitch Fix, lowering the bar for creative content production proved impactful.
  • Incrementality testing is crucial, using holdouts across channels to measure true impact.

"That type of alpha gets arbitraged away over time. And ultimately what makes one great or the only sustainable advantage on channels is having great measurement, being sophisticated measurement, and then having great volume of creative and great creative that performs."

This quote emphasizes the importance of sophisticated measurement and creative quality over simply finding temporary arbitrage opportunities in performance marketing.

Incrementality Testing and Attribution Models

  • Simplistic last-click attribution models are overly relied upon by marketers.
  • Such models inaccurately attribute 100% of the credit to one channel, often search due to high intent.
  • Incrementality testing involves running holdouts to measure the actual cost incurred by marketing channels.
  • For TV advertising, spike analysis is commonly used but ignores halo effects on other channels.
  • A better approach is to pause national TV advertising, run local spots, and measure lift, as done by Stitch Fix.
  • Understanding incrementality allows for the adjustment of attribution models to more accurately reflect channel performance.

"Incrementality testing involves running holdouts across channels that actually incur a cost."

This quote explains the process of incrementality testing, which is crucial for understanding the true performance of different marketing channels.

Budget Allocation and Payback Period

  • Founders should use return on ad spend (ROAS) or payback thresholds to allocate marketing budgets.
  • Subscription businesses should aim for payback within a year, while e-commerce should target immediate payback.
  • Stitch Fix used a one-year contribution margin payback threshold, with data to support tighter controls.
  • Payback period should guide budget allocation decisions.

"Most teams should actually have some return on ad spend, either Roas or kind of payback threshold, and you could be tight with payback."

This quote advises that ROAS or payback thresholds are essential metrics for determining budget allocation in marketing.

Flaws of CAC to LTV Ratio

  • The lifetime value (LTV) metric is flawed due to the uncertainty of customer lifetime early in a company's journey.
  • LTV often ignores variance in customer quality across different channels and audiences.
  • Payback period is a better metric, focusing on the time to recoup the initial customer acquisition cost (CAC) without assuming a lifetime.
  • Calculating payback on a granular level, such as by channel or keyword, is more effective.

"There's two primary flaws with it. I think one is just this notion of lifetime, which is the l and LTV."

This quote highlights the problem with assuming a fixed customer lifetime in the LTV metric, making it an unreliable measure for early-stage companies.

Growth Mindset and Learning

  • Growth should not be pursued at all costs as it can mask underlying problems.
  • Lifelong learning is a key personal value, with a focus on feedback and continuous improvement.
  • Engaging with diverse people leads to joy and personal growth.
  • Growth is not solely the responsibility of the growth team; it should be a company-wide effort.
  • Over-incentivizing usage can have negative long-term effects, as seen in the case of Tilt.
  • A holistic system that includes big bets is more effective than focusing on micro optimizations.

"Growth solves all problems, which is something we used to say back then. But I think growth might mask certain problems, but there's always second order effects and subsequent hills to climb."

This quote reflects the speaker's evolved view on growth, recognizing that it can sometimes hide more profound issues rather than resolve them.

Referral Programs and B2B Marketplaces

  • Referral programs are often underutilized and can be powerful for growth, especially in B2B contexts.
  • Fair's B2B referral mechanic was particularly impressive, driving significant growth through cross-side referrals.
  • Understanding the nuances of referral systems can lead to better implementation and results.

"I think referral systems and referral engines typically there's always more juice from a referral program to squeeze than companies realize, but they typically are thought of in a consumer context."

This quote points out the untapped potential in referral programs, especially when applied to B2B marketplaces.

Feedback and Personal Growth

  • The ability to take feedback is essential for personal growth.
  • Many people fail to take feedback effectively due to fear, defensiveness, or discomfort with the truth.
  • Accepting feedback requires overcoming ego and insecurity.

"Taking feedback. I've conditioned my mind to absorb it all as inputs to my own personal growth model that I could use to iterate and improve myself."

This quote emphasizes the importance of viewing feedback as a tool for self-improvement rather than a personal attack.

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