20VC Biggest Lessons From Opendoor's Scaling Journey, How To Implement Systems for Growth & The Right Way To Structure Customer Discovery Processes with Julia DeWahl, Angel Investor

Abstract

Abstract

In this episode of "20 Minutes VC," host Harry Stebbings interviews Julia Dewal, a former Bain consultant and early Opendoor employee who has transitioned into a prominent angel investor in the Silicon Valley community. Julia shares insights from her experiences at Opendoor, from scaling operations to the importance of founder-market fit and the necessity of owning the vertical solution for end-to-end customer experience. She also emphasizes the value of customer development from the start, the use of paired metrics to avoid sacrificing important aspects for growth, and the significance of maintaining a growth mindset for scaling with a company. Julia's angel investments include innovative companies like Primer, and she advocates for investing in solutions that are ten times better than existing alternatives, wary of "vitamin" products that may falter during economic downturns. Additionally, Julia is setting up a women's cycling apparel line, paralleling her dedication to building and investing in ventures that endure and excel.

Summary Notes

Introduction to Julia DeWahl

  • Julia DeWahl is a rising star in the Silicon Valley angel investor community.
  • Her portfolio includes companies like Linear, Modern Fertility, and Prime.
  • Previously, she was an early employee at Opendoor and a consultant at Bain.
  • Julia is also an avid cyclist and is launching a women's cycling apparel line.
  • Acknowledgements to Mike Vernal at Sequoia and JD Ross at Atomic for question suggestions.

"Now Julia is one of the rising stars of the Silicon Valley angel investor community, with a portfolio including the likes of Linear, Sequoia backed, modern fertility backed by USV, and Prime, backed by founders Fund."

This quote highlights Julia DeWahl's current status as a prominent angel investor with a notable investment portfolio.

Julia DeWahl's Background and Transition to Angel Investing

  • Moved to the Bay Area in 2013 to join the tech industry.
  • Joined Opendoor as the 10th employee and took on various operational roles.
  • Exposure to angel investing began at Opendoor through CEO Eric Wu.
  • First investment was in Modern Fertility, followed by joining Sequoia's scout program.
  • Emphasizes the importance of founder-market fit in investment decisions.

"I first heard about Opendoor through a TechCrunch piece in the summer of 2014 and was really compelled by the idea."

Julia describes her initial attraction to Opendoor and her subsequent involvement with the company, which laid the foundation for her angel investing career.

Key Takeaways from Opendoor Experience

  • Importance of matching founding team and early hires to the business's core competencies.
  • Founder-market fit is critical; founders should possess the necessary skills for the business.
  • Example of Opendoor's focus on pricing accuracy and operations.

"People solve problems with the tools that they have."

Julia explains that a startup's success depends on the founding team's ability to address core problems with their existing skills and tools.

Vertically Integrated Business Model

  • Believes in owning the end-to-end customer experience.
  • Vertically integrated businesses are challenging to build but offer control and cohesive customer experience.
  • Example of Opendoor's seamless process compared to the fragmented traditional home buying and selling experience.

"Oh, I'm a big believer in owning the vertical solution, the end to end customer experience, because ultimately you have control that way."

Julia advocates for businesses that control the entire customer journey, as it leads to a better and more consistent experience.

Career Advice for Graduates

  • Encourages graduates to consider starting their own startup.
  • Highlights the value of thinking big and exploring entrepreneurial opportunities.
  • Discusses the benefits of joining a startup or larger company.
  • Emphasizes the importance of feeling challenged and learning, regardless of the chosen path.

"I would encourage everyone to begin with considering the start a startup path. I think it's like, why not?"

Julia encourages graduates to explore the possibility of entrepreneurship, emphasizing the personal growth and opportunities it presents.

Customer Development Process

  • Engaging deeply in customer development is essential from the beginning of the customer lifecycle.
  • Continuous customer interaction uncovers nuances and insights that refine the initial idea and identify potential power users.
  • The concept of "value hacking" is crucial to understand if a product is truly valuable and to identify who loves it.
  • Assessing the broader market is important to avoid building a product that is too niche.

"I'm a huge advocate for talking to customers as much as you can." This quote emphasizes the importance of frequent customer engagement to gain valuable insights and refine the product concept.

"Are there other customers like this who are going to become power users? Or am I risking building something that's a bit too niche?" This quote highlights the need to evaluate whether there is a broader customer base for the product to ensure it is not too specialized.

Discovering Customer Desires

  • Start with broad, open-ended questions to allow customers to express their concerns and priorities.
  • Specific questions may inadvertently direct customers, potentially missing out on valuable insights.
  • Real-world customer experiences can transform product perspective and marketing, as seen with Opendoor's seller product.

"You really can't go wrong there. This allows the customer to actually more proactively bring up areas of concern or frustration that they have just to share what matters to them." This quote suggests that open-ended questions are effective in eliciting genuine customer feedback that can reveal key concerns and values.

"That really transformed the way we saw ourselves and we saw the Opendoor product selling was often in combination with buying." This quote reveals how customer feedback led to a pivotal change in Opendoor's product marketing strategy by understanding the interconnectedness of selling and buying homes.

Utilizing Customer Discovery in Product Marketing

  • Asking customers how they would describe the product to a friend can reveal the product's value proposition and positioning.
  • Using customers' own words in marketing ensures authenticity and resonance with the target audience.

"I find that this allows you to really understand how someone else would describe the value proposition or the positioning of your company better than a realtor for XYZ reasons, those sorts of things, they really end up emphasizing what's important." This quote underscores the effectiveness of understanding customer language to refine marketing strategies.

Feedback Integration in Product Development

  • Customers share feelings and frustrations, but it's the product builders' responsibility to envision and craft solutions.
  • Avoid asking customers for specific features; instead, synthesize their feedback to create visionary products.

"The customer is not meant to be the one coming up with the vision for your product." This quote clarifies that while customer feedback is crucial, the responsibility of product vision and innovation lies with the developers.

Building Systems for Growth and Metrics

  • Establishing systems and processes is key for efficiency and scalability.
  • Start with simple tools and iterate before committing to code.
  • The time to code a process varies based on operation complexity and business growth pace.

"Building systems is really important to allow other people to come into the company and start operating." This quote highlights the importance of systems for enabling new team members to contribute effectively.

"It depends on how complex your operations are." This quote indicates that the decision to code a process should consider operational complexity and business growth.

Moving Metrics and Prioritization

  • Moving metrics indicate areas that need attention and improvement.
  • Using the "five whys" framework helps identify root causes of stagnant metrics.
  • Communicating priorities across the company should be simple, memorable, and explain the why.
  • Paired metrics can balance growth goals with profitability.

"Moving metrics usually means they're stuck, right?" This quote implies that when metrics are not progressing, it signals a need for investigative action to identify and address underlying issues.

"Keep it simple, make it memorable, and explain the why." This quote advises on effective communication strategies for disseminating company goals and priorities.

Checklists in the Scaling Process

  • Checklists are a practical tool for ensuring consistency and thoroughness in complex processes.
  • They can be particularly useful for individuals who are not naturally detail-oriented.

"I am not a perfectionist or overly detail oriented person, so this is absolutely a hack." This quote suggests that checklists serve as a compensatory tool for those who may not have a natural inclination for meticulousness.

Checklist Manifesto and Operations at Opendoor

  • Checklists are about delivering consistent quality.
  • Operations team mandate at Opendoor was to deliver consistent quality.
  • Checklists should be created and owned by the person doing the checking.
  • Team involvement in creating and managing checklists is crucial for their effectiveness.

"Checklist manifesto with the subtitle how to get things right. And that's exactly what they're so checklists are really about delivering consistent quality."

This quote emphasizes that the primary purpose of checklists is to ensure consistent quality in processes or tasks.

"Nobody wants a checklist if it's not actually useful. This is not one of those things where the manager writes it and hands it down to the team."

This quote highlights the importance of practicality in checklists and the need for the team to be involved in their creation to ensure their usefulness.

Accountability in Checklists

  • Assigning a single task on a checklist to multiple people can dilute accountability.
  • At Opendoor, each checklist item was assigned to a specific role and person.
  • Clear assignment of tasks is crucial for accountability and troubleshooting issues.

"Absolutely not. You need to have one person accountable."

This quote stresses the importance of having one person accountable for each task to maintain clear responsibility.

Scaling with Companies

  • Some people can scale with fast-growing companies, often due to a strong growth mindset.
  • Not everyone will scale with a startup, and being layered (getting a new manager) can be challenging but also a learning opportunity.
  • Company growth leading to new management layers is generally a positive sign.

"I've seen some people scale remarkably well with the growth of fast growing companies, and I think they all typically possess a really strong growth mindset."

This quote suggests that a growth mindset is a common trait among individuals who can adapt and scale with a fast-growing company.

"But oftentimes people really do end up learning a lot from that person who is hired to be their new manager."

This quote acknowledges that while being layered can be difficult, it can also be an opportunity for professional development.

The Right Way to Layer

  • Transparency and communication are key when layering (hiring a new manager above someone).
  • Involving team members in understanding the rationale for hiring above them can prevent feelings of being blindsided.
  • Emphasizing the company's success and the value new senior executives bring to the team helps maintain morale.

"Yeah, I think it's important to actually bring the person in on the fact that you are going to be hiring someone in above them."

This quote advises on the importance of informing team members about management changes to manage expectations and maintain trust.

Thriving as a Generalist

  • Generalists excel in environments with nebulous problems and no need for overly specific skill sets.
  • They thrive at the intersection of multiple disciplines and are valuable in the early stages of startups.
  • Generalists should be open to taking on specialist roles and learning quickly on the job.

"With scale, generalists tend to thrive in environments where there are a lot of nebulous problems to solve."

This quote points out that generalists are well-suited for the dynamic problem-solving required in the early stages of a startup's growth.

Evaluating Founders for Complex Businesses

  • Founders of complex businesses should be systems thinkers, detail-oriented, and strategic about their business model.
  • They should understand economies of scale, technology deployment, and the role of data analysis.
  • Evaluating a founder's mindset requires understanding their approach to business structure, margins, costs, and operational strategy.

"For what it's worth, I'm also intimidated by financially and operationally complex businesses."

This quote conveys a shared sentiment about the challenges of complex businesses, setting the stage for the importance of certain founder qualities.

"I look for systems thinkers who are detail oriented, but can also think strategically about the structure of their business model."

This quote identifies the key characteristics needed in founders who manage complex businesses, emphasizing the balance between detail orientation and strategic thinking.

Angel Investing and Self-Assessment

  • Angel investing involves learning from others, including through blog posts, Twitter, and conversations with experienced investors.
  • Self-assessment in angel investing is challenging due to the long timelines for company exits.
  • Strengths in supporting founders include customer development, hiring, and scaling operations.

"Angel investing in some ways isn't too different from learning anything else."

This quote relates angel investing to the broader process of learning and adapting to new roles, emphasizing the importance of learning from others.

"Talk to me in a decade and I will be able to give you a much better answer."

This quote acknowledges the long-term nature of angel investing and the difficulty in assessing success in the short term.

Influence and Knowledge Building

  • Individuals influential in one's professional growth may include those whom one has never met.
  • Reading essays and archives from thought leaders can significantly impact knowledge and adaptation to new roles.

"Well, there are some people who I've actually never met who have been influential on me."

This quote highlights the impact that thought leaders can have on professional development, even without direct personal interaction.

Key Influences and Networking

  • Harry Stebbings mentions Mike Maples and Mike Fernando as influential figures.
  • Mike Maples is praised for his generosity and amazing thinking.
  • Mike Fernando from Sequoia is noted for engaging in good discussions and asking probing questions.

Mike Maples who has been generous. We've had a couple Zoom calls. Love listening to him on podcasts. I think he has some amazing thinking. Mike Fernando has been amazing over at sequoia.

  • Mike Maples is recognized for his thought leadership and willingness to connect via Zoom calls.
  • Mike Fernando is acknowledged for his responsiveness and valuable input during discussions.

Investment Philosophy: Vitamins vs. Painkillers

  • Julia DeWahl discusses the difference between vitamin and painkiller businesses.
  • She emphasizes the importance of a product being significantly better than existing alternatives.
  • Concerns about high customer acquisition cost (CaC), low conversion, and high churn with vitamin products.
  • Vitamin products are often the first to be cut during economic downturns, hence the focus on must-have products.

I think of the vitamin painkiller metaphor as more of a spectrum... I'm very wary of that. I also think that you can risk things like high CaC and low conversion and high churn if you're not really clear upfront about the product being ten x better than the alternatives today.

  • The metaphor is used to evaluate startups on a spectrum rather than a binary choice.
  • The quote stresses the risks associated with not having a product that is significantly better than what's available.

Customer Acquisition Cost (CaC) in Early-Stage Investing

  • Julia DeWahl and Harry Stebbings discuss the role of CaC in early-stage investing.
  • CaC is considered a less reliable metric at the seed stage due to its variability.
  • Julia looks for founders who have a thoughtful approach to CaC, including a blend of paid and organic strategies.

I think it's hard at the very early stage... I do look for people who have given it some thought... So if someone is being sort of holistic about how they're thinking about that blended CAC, I think that's really important.

  • The quote reflects the difficulty of accurately assessing CaC in the early stages but highlights the importance of founders having a strategic approach to customer acquisition.

Quickfire Round: Personal Insights and Preferences

  • Harry Stebbings conducts a quickfire round with Julia DeWahl, asking for immediate thoughts on various topics.
  • Julia recommends the book "The Courage to be Disliked" for its philosophical insights and practical wisdom.
  • She identifies time management as a key challenge for angel investors.
  • Julia cites a quote by Maya Angelou on the lasting impact of how one makes others feel as a guiding principle in interactions.
  • Operating a business and investing simultaneously is seen as complementary, allowing for strategic thinking and practical understanding.
  • Julia draws parallels between the challenges of cycling and scaling businesses.
  • Joining Bain & Company was an inflection point for Julia, teaching her work ethic and the value of effort.
  • Her most recent investment in Primer was driven by the team's capabilities and the potential for innovation in homeschooling software.

The courage to be disliked is one of my favorite books... I love the saying by Maya Angelou... operating and investing are incredibly complementary... cycling and scaling businesses... Joining Bain out of college was a big inflection point for me... My most recent publicly announced investment was in Primer...

  • The book recommendation and the quote are indicative of Julia's focus on personal growth and impact on others.
  • Her views on the synergy between operating and investing reflect a belief in the value of diverse experiences.
  • The cycling analogy and Bain experience highlight the importance of resilience and effort in achieving success.
  • The investment in Primer showcases her focus on team strength and market opportunity.

Podcast Promotion and Recommendations

  • Harry Stebbings promotes Julia DeWahl's Twitter and their Instagram accounts.
  • He endorses Carter for equity management and valuations, and Digits for intuitive financial software.
  • Terminal is recommended for building and scaling remote engineering teams.

You can find her on Twitter at Julia DeWahl... Instagram at Hdebings 1996... Carter simplifies how startups and investors manage equity... Digits... creating the most intuitive financial software... Terminal... connecting you with global talent...

  • The promotion provides listeners with ways to connect with the hosts and guests.
  • Carter, Digits, and Terminal are recommended for their respective services in equity management, financial software, and remote team building.

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