20VC Greylock's Josh Elman on Why We Are Not In A Consumer Downturn, The Next Wave Of Social and What Twitter Should Do Next

Abstract

Abstract

In this episode of "20 Minutes VC," host Harry Stebbings interviews Josh Elman, a partner at Greylock Partners, who shares insights from his career at tech giants like Twitter, Facebook, and LinkedIn, and discusses the future of consumer products and services. Elman emphasizes the importance of building relationships in venture capital and finding startups with the potential to scale and impact hundreds of millions of users. He also talks about the evolution of social media, highlighting the significance of live, interactive experiences and the untapped potential of video. Additionally, Elman shares his investment in Discord, a gaming-focused communication platform, noting its organic growth and the strategic advantage of tapping into the gaming community. He concludes by stressing the need for transparency in VC-founder relationships and the challenges of finding the right match for investment partnerships.

Summary Notes

Introduction to Greylock Partners Feature Week

  • The podcast episode marks the start of a special feature week focused on Greylock Partners.
  • Josh Elman, a partner at Greylock, is the guest on the show.
  • Josh Elman has experience in designing, building, and scaling consumer products.
  • Elman has been part of companies that have grown to over 100 million users, including Twitter, Facebook, and LinkedIn.

Welcome to the 20 minutes vc with your host Harry Stebings.

This quote is the opening line of the podcast, introducing the host and the show.

Now joining me on the show today, I'm delighted to welcome Josh Elman.

This quote introduces the guest of the episode, Josh Elman, highlighting his role and expertise.

Josh Elman's Background and Career

  • Josh Elman started his career as a programmer at Real Networks (formerly Progressive Networks) working on real player and real audio.
  • Elman's first full-time job involved shipping the Real Player product to millions of people.
  • He was involved in encoding technologies at Real Networks.
  • After Real Networks, Elman worked at LinkedIn, Zazzle, Facebook, and Twitter, contributing to their growth.
  • Elman experienced the scaling of companies from small teams to large enterprises.

When I was graduating from Stanford, I really wanted to move back up to the Seattle area.

This quote explains Elman's early career aspirations and geographical preferences post-graduation.

I got super excited about real networks, or they were called progressive networks back then, making real player, real audio.

Elman discusses his initial excitement about joining Real Networks and the innovative work they were doing at the time.

Transition to Venture Capital

  • Josh Elman decided to join the venture capital industry after being asked to leave Twitter during a restructuring phase.
  • His experience with growing companies from small teams to large organizations influenced his decision to become a VC.
  • Elman wanted a role where he could apply his experience in growing companies in parallel, rather than serially.

I honestly got kicked out of Twitter. In some of the turmoil of Twitter, they were restructuring the product team and asked me not to go to work the next day.

This quote details the circumstances under which Elman left Twitter and how it led to his transition to venture capital.

Key Learnings from Hypergrowth Companies

  • The growth of a company requires deliberate decision-making focused on long-term goals.
  • Decisions should be made within a framework that scales, rather than on a one-off basis.
  • Hypergrowth involves transitioning from unscalable, individualized efforts to scalable, strategic decision-making.

The biggest learning for me is it really does take a village to build a company, and you have to spend as much time just being really deliberate about everything you do.

Elman emphasizes the importance of collaboration and deliberate action in growing a company.

Josh Elman's Perspective on Twitter's Future

  • Elman is asked about his thoughts on what he would change about Twitter if he had the opportunity.
  • He praises Twitter for its ability to curate a timeline of interests for users who have it set up correctly.
  • Elman suggests that Twitter's challenge is making it easier for most people to achieve this optimized experience.

When you get Twitter set up and you are following people that are interesting to you, that hit multiples of your passions, you open Twitter and your timeline is just one after the other.

This quote reflects Elman's view on the ideal user experience on Twitter and the potential for the platform when set up effectively.

(Note: The transcript ends abruptly, and thus, the notes end with the last complete idea presented by Josh Elman regarding Twitter.)

Tuning Twitter Feeds

  • Twitter can be made easier by helping users tune their feeds based on broad interests.
  • Users can select categories like consumer tech, startups, mobile apps, games, or social products.
  • A system could be implemented for users to express interest in topics, possibly with a Tinder-like swipe interface.
  • Twitter could create personalized channels for each user's interests, simplifying content discovery.

"If you're into tech, let's help you just say, I'm into tech, not figure out which vcs, founders, reporters, publications to follow but just say, I'm into this kind of tech, and we can get pretty discreet."

This quote emphasizes the idea of simplifying the process of curating a Twitter feed by allowing users to select broad interest categories rather than specific accounts.

Onboarding Process

  • Twitter's onboarding process should guide users step by step, similar to how games do.
  • The "ladder of engagement" at Twitter involved understanding tweets, following for a timeline, and checking for new content frequently.
  • The goal is to gradually lead users to engage more deeply by replying, retweeting, favoriting, and eventually tweeting and building a follower base.

"We used to talk at Twitter when I was there about what I called the ladder of engagement, which is how do we, through the process of revealing Twitter to you, get you step by step."

Josh Elman describes the structured approach to onboarding new Twitter users, ensuring they understand and engage with the platform's features gradually.

Consumer Software Ecosystem

  • The consumer mobile ecosystem is challenging due to the abundance of existing communication methods.
  • New apps must offer distinct and profound ways for people to connect to succeed.
  • There are still opportunities for growth if an app can tap into new ways for emotional connection or meet unserved needs.

"So if you're building a new friend communication app, there's a lot of other things people are already using to do it that have to be displaced."

Josh Elman discusses the difficulty of breaking into the consumer software market, highlighting the competition with existing popular apps.

Metrics in Growth and Retention

  • Metrics for growth and retention focus on pockets and clusters of dominant usage rather than broad numbers.
  • Success is indicated by a product's ability to become integral to a specific group's daily life.
  • The scalability and replicability of this success to other groups are key indicators of potential growth.

"But what I really look for are pockets and clusters, where you have dominant usage, where you have figured out how to take over some group in the real world or in the online world."

Josh Elman explains that he looks for strong, localized adoption as a sign of a product's potential for wider success.

Addressing Retention Challenges

  • Retention is a major challenge in consumer software, where initial excitement can lead to high user numbers that may not be sustainable.
  • Strategies for addressing retention must be considered following PR and launch phases to maintain user engagement.

"How do you address retention in these often very excitable industries where you get huge amounts of users and then the retention slowly slides off following pr and launches?"

This quote raises the issue of retaining users in the consumer software industry, where initial growth can be followed by a decline in user engagement.

Retention and User Behavior

  • Retention is linked to users who adopt new behaviors around a product.
  • Real users are those who find the product meaningful and integrate it into their lives.
  • A small, dedicated user base can indicate that a product has potential.

"You have to find that group that sticks to it and has a new behavior together and has already adapted to it."

This quote emphasizes the importance of identifying a core group of users who not only try out a product but incorporate it into their daily habits, signaling true retention and product-market fit.

Social Media Innovation

  • The next medium for social media innovation is uncertain, but live interactions and video are promising areas.
  • Discord is an example of a platform that creates a live connection among gamers.
  • The potential of video in social media has yet to be fully realized, despite the prevalence of video creation apps.

"The short answer is, if I knew, I would already be there."

This quote reflects the speaker's humility and acknowledgment that predicting the exact direction of social media innovation is challenging.

Integration of Offline and Online Experiences

  • Social media is increasingly integrating offline and online experiences, such as Tinder leading to real-world interactions.
  • Operator is an example of a platform that connects users with experts for shopping assistance via messaging.
  • The blend of AI and human expertise is key to the scalability of such services.

"I look for a lot of things that get us back out in the real world."

This quote highlights the speaker's interest in technologies that encourage real-world interactions and experiences, bridging the gap between the digital and physical realms.

Business Models and Scalability

  • Operator aims to modernize the interaction between consumers and businesses through messaging.
  • The platform seeks to replicate the personalized service once found in physical stores.
  • The balance of AI and human interaction is crucial for providing expert assistance and creating a scalable business model.

"Our big vision there is how do we help you get connected with the right expert?"

This quote explains the core mission of Operator, which is to facilitate connections between consumers and experts to enhance the shopping experience through messaging.

Investing Thesis and Market Dynamics

  • The speaker's investing thesis involves supporting founding teams with a clear vision and a proven concept in a specific community.
  • The investment focus is on companies that are ready to scale their product to a larger audience.
  • Market opportunities and challenges are constantly changing, requiring adaptability in investment strategies.

"What I'm looking for is great founding teams with a big vision of what they want to take over the world."

This quote outlines the speaker's primary criterion for investment decisions, which is the presence of ambitious and capable founding teams with scalable ideas.

Transparency in Founder-VC Relationships

  • There is a need for greater transparency between founders and venture capitalists (VCs).
  • The speaker advocates for treating the addition of a VC to a board as a critical hiring decision rather than a mere financial transaction.
  • The relationship between founders and VCs should be collaborative and supportive.

"We're really trying to find just a match on somebody on your team."

This quote stresses the importance of compatibility and teamwork between founders and VCs, emphasizing the relationship aspect over the financial one.

Venture Capital Challenges

  • Venture capital involves a selective process of forming relationships and making investment decisions.
  • Not every desired collaboration with entrepreneurs is possible due to limited opportunities.
  • The alignment of vision and the potential for a multibillion-dollar outcome are crucial in decision-making.
  • Getting the partnership on board with investment decisions is a necessary step.

"I can't work with everybody I want to. I don't always get the chance to work with the ones I most want to work with, and I can't work with everybody."

This quote emphasizes the selective and often difficult nature of venture capital, where an investor cannot always engage with every entrepreneur they find promising.

Importance of Long-Term Thinking

  • "Built to Last" is a book that influenced Josh Elman's perspective on building enduring companies.
  • The book counters the short-term mindset prevalent in the business world.

"Built to last, completely reset. How I think about building long term."

Josh Elman credits "Built to Last" for reshaping his approach to building companies with a long-term focus, suggesting it has been a significant influence on his investment philosophy.

  • The explosion of live video, through apps like Meerkat and Periscope, was a notable launch.
  • Despite their initial success, the best launches are expected to be more organic and under the radar.
  • Discord's growth within the gaming community is highlighted as an exemplary organic launch.

"The best launches we're going to see, the best launch 2015 will look back historically and have seen something that launched a little bit more organically, a little bit more under the radar."

This quote reflects Josh Elman's belief that the most successful product launches are those that grow organically and subtly, rather than through forced or artificial means.

Mentorship and Admiration in Venture Capital

  • David Z, a partner at Greylock, is admired by Josh Elman for his long-term belief and supportive role to CEOs.
  • The relationship between David Z and Reed Hoffman is cited as an example of a strong VC-CEO partnership.

"I watched him and Reed Hoffman, who's now another one of my partners at Greylock. Just build this incredible lifelong friendship as a vc, as a partner, and helping Reed build LinkedIn."

This quote illustrates the value of mentorship and the impact it has had on Josh Elman's career, highlighting the importance of strong, supportive relationships in the venture capital industry.

Technology and Consumer Behavior

  • Twitter is the most used app on Josh Elman's phone.
  • Discord is noted for its strong organic growth and high user engagement.
  • The gaming industry's growth and spending power are significant factors in investment decisions.

"It was the first thing I'd seen a long time that was spreading organically, word of mouth from gamer to gamer and taking over a community."

This quote underscores the importance of organic growth and community adoption in the success of a technology product, in this case, Discord.

Investment Decision Rationale

  • Discord's organic spread and community adoption were key reasons for investment.
  • The app's high engagement and unique position in the desktop market were seen as advantageous.
  • The counterintuitive nature of investing in a desktop app in a mobile-dominated market was considered a potential strategic move.

"So I thought a product that really captures a communication network for that audience can be very, very big, and it might sit just slightly outside the current wisdom of mobile and social and everything else."

Josh Elman explains his rationale for investing in Discord, highlighting the potential of a product that serves a specific and growing community, even if it contradicts prevailing market trends.

Personal Endorsements and Recommendations

  • Harry Stebings endorses Lisa mattresses, emphasizing the convenience of online shopping and the quality of the product.
  • The company's social impact through donations is also highlighted.

"They've thrown out the old system of awkwardly posing on a bed in a showroom, as you always do in your own room, I'm sure, and offer a fully online shopping experience where the mattress is delivered to your door in a box."

This quote from Harry Stebings promotes Lisa mattresses, emphasizing the disruption of traditional mattress shopping with an innovative online experience.

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