20VC Why Being First Does Not Matter, Why Defensibility on Day 1 Does Not Exist, Three Core Elements To Move into Enterprise Effectively and What Makes Truly Great Product Marketing Today with Des Traynor, CoFounder @ Intercom

In this episode of 20 VC with Harry Stebbings, Des Traynor, co-founder of Intercom, shares insights from his journey in the tech industry. Intercom, now a unicorn, has raised over $2 million from top-tier investors and Traynor has established himself as a leading angel investor with a portfolio including Notion, Stripe, and Miro. Traynor discusses the importance of adaptability, scalability, justifiability, and interoperability in enterprise products, the challenges of prioritization, and the balance of being demanding yet supportive in leadership. He also touches on the personal side, expressing a desire to maintain a strong family life amidst the pressures of the industry. Traynor's candid reflection on his career growth and the interconnectedness of product decisions with broader business impacts provides a nuanced perspective on building and leading in the tech world.

• Harry Stebbings introduces the episode, mentioning the previous appearance of Chris Sacker and the high quality of that conversation.
• Des Traynor, a co-founder of Intercom and an accomplished angel investor, is the guest for the episode.

This is 20 vc with me, Harry Stebings, and do you remember when we had Chris Sacker on the show? It was a long episode because Chris was insanely brilliant and the conversation was just world class. Well, today is very much the same.

The quote sets the stage for the episode, indicating that the conversation will be of similar caliber to the one with Chris Sacker.

• Des Traynor is praised as one of the great product minds and a successful angel investor.
• Intercom, the company he co-founded, has raised over $2 million from notable investors.
• Des's angel portfolio includes companies like Notion, Stripe, Algolia, Miro, and Hoppin.

He's one of the great product minds of this generation, one of the world's best angel investors, and then also cofounder of the unicorn rocket that is Intercom.

This quote highlights Des Traynor's reputation and achievements in the tech industry, emphasizing his role at Intercom and his successful angel investments.

• Harry extends thanks to those who helped coordinate the schedule for the episode.
• Harvard Management Company (HMC) is recognized for managing Harvard University's endowment and being early venture capital investors.
• Mercury is acknowledged for providing banking services to startups.
• OpenPhone is highlighted for offering business phone numbers and related services.

This schedule was a real team effort, Matt and Duggard, iconic Ophelia Brown, Kieran Lee, Paul Adams and many more. Such a team effort and really did appreciate that.

This quote expresses gratitude towards the team that facilitated the episode's scheduling, showing the collaborative effort behind the scenes.

• Intercom originated from a consultancy that built software for others.
• The founding team had several ideas, including a whiteboarding product, which was initially dismissed but later validated by the success of products like Miro.
• The aha moment for Intercom was realizing the effectiveness of communicating with customers within a product.

The real spark was like, when we realized how much more effective that was.

Des Traynor explains the pivotal moment for Intercom's founding, which was the realization of the impact of in-product communication.

• Des discusses the importance of both the quality of the founder and the idea in startup success.
• He argues that being the first to come up with an idea is less important than the ability to sustain and build upon it.

I think ideas are only good until you say them out loud and then all of a sudden everyone hears about it.

The quote emphasizes that the uniqueness of an idea is fleeting and that execution and continual innovation are key to success.

• Des challenges the notion that being first to market is crucial, using examples of companies like Slack and Figma that succeeded despite not being first.
• He explains that sustainable advantage comes from passion and ability, not from simply having the idea first.

Being first doesn't matter.

This succinct statement encapsulates Des's view that the timing of an idea's introduction is less significant than the quality of its execution.

• Des agrees that defensibility is built over time through processes and products, rather than existing on day one.
• He discusses the concept of a "long road to the starting line" for startups with complex products like Figma.

Like real defensibility. No, it does not exist.

Des asserts that true defensibility cannot be established at the outset but must be developed as the company grows.

• Des does not engage in detailed market sizing analysis for his angel investments.
• He focuses on the problem being solved, the number of people affected, and the significance of the problem.

I don't engage in it, and the reason is the checks I write.

Des explains that the size of his investments does not require extensive market sizing, as he looks for problems that are both common and impactful.

• Des questions the relevance of customer acquisition cost (CAC) to lifetime value (LTV) metrics at early stages of a startup.
• He emphasizes the importance of a differentiated route to customers over metrics that are more relevant at scale.

All these numbers matter, but they matter at scale. They just don't matter early on.

The quote highlights Des's belief that early-stage startups should focus on product and customer acquisition strategies rather than on financial metrics like CAC and LTV.

• Des shares how angel investing has provided him with insights into other companies' internal operations and decision-making.
• He discusses the value of understanding how Intercom is perceived by other companies and the importance of prioritizing differentiators.

I think since I wrote my very first check in the very first company, which is a company called Workable, and I've probably written like 50 or 60 since, a few things I've learned...

Des shares his experience with angel investing and the lessons he has learned from observing and interacting with various startups.

• Des explains that he has learned from successful startups and their founders, regardless of their stage.
• He mentions that some of the companies he invested in have surpassed Intercom's valuation and have shown impressive growth.

You learn a lot from seeing success and how that performs.

Des acknowledges the educational value of witnessing the success of other startups and the growth of their leaders.## Miro's Success and Strategy

• Miro focused on perfecting online multiplayer whiteboarding.
• They resisted diversification into becoming a multiplatform suite despite external narratives to expand.
• Maintained focus and intense execution without being distracted by their success.

"What they have actually spent all their time doing is perfecting online multiplayer whiteboarding, and I think that's a really important thing for them to do."

This quote highlights Miro's strategic focus on enhancing their core offering, which has been central to their success.

• Consider team capacity to handle a second product without harming the first.
• Evaluate if the ROI of a new product is greater than further developing the current one.
• Determine if there is a multiplicative value in offering both products under the same company.

"Are we ready to do it from a staff side? Then separately, do we credibly believe... is the ROI of adding a new product definitely greater than increasing the maturity... of the current thing we have."

This quote emphasizes the importance of having the necessary resources and ensuring that a new product offers significant value over improving the existing one.

• Start by proving you can offer something unique and valuable.
• Allocate sufficient resources to fully develop the product, matching the company's brand expectations.

"I think you have to prove out that you have some actual alpha that you can do something that no one else can do... then I think you actually have to show the full set of resources at it."

This quote suggests a two-phase approach: first, validate the unique value proposition, and then commit fully to its development.

• Distinguishing between what constitutes a new product versus an upgraded feature.
• Ensuring that new offerings appeal to distinct buyers and fit into a cross-sell or upsell strategy.

"We've confused products with features and features with product, and we've had to unroll that and fix that back again."

This quote reflects the challenge of correctly categorizing new offerings and the need to rectify missteps in this area.

• Consider the customer's perspective on whether a new offering should be integrated or standalone.
• Assess how customers are currently solving the problem the new feature or product addresses.

"You have to look at it not from a balance sheet... but just what do your customers expect? And how are they currently solving the problem."

This quote underlines the importance of customer expectations and current solutions in determining whether an offering should be a feature or a separate product.

• Analyze the product's trajectory and self-propulsion.
• Consider if continuous promotion is artificially sustaining interest.
• Determine the root cause of a product's failure and take appropriate action.

"If it doesn't have its own momentum as a feature or a product... that's generally a sign that as a feature or product, it's not working."

This quote outlines how a lack of natural growth indicates a product's unsustainability, potentially leading to its discontinuation.

• Product marketing often lacks a user-centric and buyer-centric perspective.
• Effective marketing requires understanding what users and buyers want to know and demonstrating why your product is the best solution.

"One of the reasons we think it's bad is we don't take enough of both a user centric and a buyer centric point of view of product marketing."

This quote criticizes the current state of product marketing for not adequately addressing the distinct needs of users and buyers.

• Determine the typical adoption path for the product.
• Address both buyers' and users' concerns in marketing efforts.
• Tailor messaging based on who is more likely to engage with the marketing material.

"If it's your users, go with that and go for the bottoms up adoption... And then you hope that enough of that groundswell pressure pops into a vp of customer sports saying, I've been hearing a lot from my team about your product."

This quote suggests a strategy for marketing that targets users first to create demand that influences buyers.

• Consider verticalized marketing for different industries and workflows.
• Identify compelling and sizable use cases for targeted marketing.
• Recognize that money tends to bring companies back to solving business problems, requiring a focus on specific verticals.

"You're basically looking for like, what are the most compelling sizable use cases that we can actually play out here and how do we market them?"

This quote discusses the approach to marketing a product with a wide range of applications by focusing on the most significant and marketable use cases.

• Monitor successful customer growth and the behavior of best customers.
• Look for horizontal market saturation before considering moving up market.

"You have to look at your successful customer growth and what's happening with your best customers, and that's the two variables you need to see."

This quote advises on assessing customer dynamics as an indicator for when a company should start targeting higher-end markets.## Upmarket Movement and Product Adaptation

• Companies should only move upmarket if they need to change their product to attract new customers.
• If a company is experiencing high growth without changing its product, it should continue on its current path.
• The decision to move upmarket involves weighing the work required against market expansion and the needs of larger customers.
• Simplicity is highly valued in business and should be maintained as much as possible.
• Brand architecture must be considered when deciding on market movement.
• Software companies selling to other software companies often lose customers who outgrow them quickly.

"If, for example, you find that, hey, without doing anything like kind of taking our hands off the wheel, we're still seeing like three digit percentage growth across for loads of different people, all for the same sort of use case, and they're not coming up with really bizarre different feature requests, then stay where you are. Absolutely, stay where you are."

This quote emphasizes the importance of maintaining a successful growth trajectory without unnecessary product changes or market shifts. It suggests that if growth is strong and customer needs are consistent, there's no need to complicate the business model.

"The only reason you add the second and third line of code is to get more customers."

This quote simplifies the rationale behind product expansion: to attract more customers. It underscores the idea that product complexity should only increase when it's necessary for growth.

"But generally speaking, you want growth."

This quote acknowledges the universal business desire for growth, setting the stage for the discussion on when and how to pursue upmarket opportunities.

• Simplicity in product design is crucial but difficult to maintain as companies scale.
• Every new feature adds complexity not just to the product but to the entire business operation, including marketing, sales, and support.
• High leverage work that delivers the most value with the least effort is the goal.
• The temptation to expand product features must be balanced against the risk of becoming a different type of company.

"I mean, the short answer is you don't. In my opinion, what you do is you fight as hard as possible, but you're going to lose the fight."

Des Traynor acknowledges the challenge of retaining simplicity as a product grows and becomes more complex, suggesting that while the battle to maintain simplicity is difficult, it's worth fighting for.

• Pricing should be aligned with the value delivered to customers.
• Raising prices without considering value can lead to an unsustainable product.
• Companies need to ensure they can reinvest in their product to maintain its health.
• There's a balance between capturing value and not overcharging customers.

"I think align price to value is the thing you have to do and just make sure that you're building the thing that you sell people on and that when you sell them on it that they're actually getting the value you're charging them for."

Des Traynor stresses the importance of aligning price with the value customers receive, rather than arbitrarily raising prices.

• Moving upmarket requires adaptability, scalability, justifiability, and interoperability.
• Large enterprises have specific requirements such as compliance standards, security reviews, and tech stack integration.
• Product changes for upmarket moves are often behind-the-scenes and not user-facing.
• Marketing and showcasing enterprise features can be challenging due to their invisible nature.

"There's a few big buckets that are just immovable... adaptability... scalability... justifiability... interoperability."

Des Traynor outlines the four key areas that must be addressed when moving a product upmarket, which are critical to meeting the demands of larger enterprise customers.

• Investing in SaaS companies targeting under-served industries can be exciting but comes with long sales cycles and a slow realization of value.
• Des Traynor expresses boredom with investment pitches that lack innovation or are easily replicable.
• Radical candor is important when communicating with potential investees, aiming to either convince them or encourage them to stand by their ideas.
• Missed investment opportunities can be due to operational constraints or misjudgments, but they inform future decisions.

"The areas that get me excited is like, I think taking SaaS to industries that don't see much of it is still exciting."

Des Traynor shares his excitement for bringing SaaS solutions to industries that have not been heavily penetrated by technology, despite the challenges associated with it.

"I probably am more known for writing too many checks so probably more known for too many bad checks."

Des Traynor candidly discusses his investment approach, indicating a willingness to take risks and acknowledging the potential for mistakes.

• Consistency in check size for investments is advised for new angels.
• Price sensitivity is generally low unless the investment round valuations are excessively high.
• Follow-on investments and reserves are part of the investment strategy.
• Due diligence is outsourced to lead investors due to time constraints and expertise.

"I know what it's like on the other side, so I'm never going to be the guy constantly bullying my way in going, no, give me 300 grand, or whatever."

Des Traynor explains his flexible approach to angel investing, showing understanding and respect for the fundraising process from the perspective of both investor and founder.## Intersection of Parenting and Leadership

• Both parenting and leadership require similar skills, such as communication, empathy, and the ability to guide without micromanaging.
• Parenting involves being the willpower and discipline for a child, with delayed feedback, similar to leading a team towards long-term goals.
• Effective leadership, like parenting, requires a balance of being demanding and supportive to help individuals reach their potential.
• The principle of being demanding and supportive applies to peers and subordinates alike.

"What you realize with a kid, you have to be their willpower. You have to be their discipline, unlike yourself." "And if you're trying to lead a group of people in a business, there's a lot of similarity there in that you're trying to get everyone on the same page and get them supported and have them understand the principles by which you're trying to push towards certain things."

The quotes highlight the parallels between parenting and leadership, emphasizing the need to provide guidance and support for long-term growth and development, whether it's with a child or a team.

• Performance management involves pushing people to be their best, typically reserved for those with demonstrated potential.
• Structured conversations are necessary when there is doubt about a person's ability to perform a task.
• It's important to set clear expectations and be open to course corrections in a business setting.

"It's rare you'd try that with somebody who you have doubts about because you're trying to push them to perform to begin with." "Here's what I think needs to be done. Here's the sort of time frame I think you need to be done at. Here's the level of quality I think it needs to be done at, and here's the expectation."

These quotes underscore the importance of clear communication and the setting of expectations in performance management, as well as the need for adaptability and honesty in evaluating an individual's capabilities.

• Early career mistakes often involved being impressed by a candidate's previous company rather than their actual impact.
• There is a misconception that hiring from prestigious companies guarantees success.
• It's crucial to discern between those who contributed to a company's success and those who were simply present during successful times.

"Earlier in my career, just being blinded by the logo, I think was probably the biggest thing." "It's only really when you ask them to repeat the magic that you realize they were actually the magician's assistant."

The quotes reflect on the learning experience of recognizing the importance of an individual's contributions rather than being swayed by the prestige of their previous employers.

• Hiring should focus on potential rather than current skill level.
• Teams should be composed of a mix of career stages and ambitions.
• Understanding the trajectory and potential growth of an employee is vital.
• The concept of hiring only "A players" is flawed and unrealistic at scale.

"I think there's a few different things there. One is hire for potential, not for state." "You're always trying to fuse youth...with mid stage career, with late stage career."

These quotes discuss the nuanced approach to building a team, emphasizing the importance of hiring for potential growth and the balance of different career stages and ambitions within a company.

• The book "How Will You Measure Your Life" by Clay Christensen is highly regarded for applying business strategy to personal life.
• Prioritization is a challenging aspect of leadership, requiring the ability to focus on high-leverage activities.
• There's a desire to alleviate the constant pressure and worry that comes with leading a company.
• Reflecting on the journey and the desire for a positive outcome for all involved is a significant concern.

"I think it's probably how will you measure your life by Clay Christensen." "Prioritization. Like finding the most highest leverage activities and then saying no to folks who have most minus one."

These quotes reveal personal insights and the challenges faced in leadership roles, such as the difficulty of prioritization and the constant presence of pressure and concern for the company's future.

• The hope is to continue leading a balanced personal and professional life, with potential changes in role within the same company.
• There's a desire for a technology publication that is run by people who are optimistic and believe in technology's potential for good.
• The startup world could benefit from a more optimistic and technology-positive narrative.

"Personally, I would love to be with Martha, the parent of an eight year old and a five years and nine month year old or whatever, sitting here in Dublin." "I would love there to be one technology publication that has two traits. One, it's run by people who like technology."

These quotes reflect on future aspirations, both personally and for the technology industry as a whole, highlighting the desire for positive representation and a balanced life.