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Peter Reinhardt on Finding Product Market Fit at Segment | Y Combinator | YouTubeToText
YouTube Transcript: Peter Reinhardt on Finding Product Market Fit at Segment
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the average person probably doesn't know
what segment is mm-hmm
so could you explain for sure so segment
helps companies give their customers a
better customer experience and we do
that by helping them organize all of
their internal data about all their
interactions with the customer so for
example if you go to the bank they
interact with you at the ATM at the
teller via a phone call center they have
a web web app a mobile app they send you
emails they're interacting with you
across this huge surface area and they
need to be able to coordinate that
interaction right they need to know that
if you encountered an error on the ATM
the teller needs to be able to say like
I'm so sorry you encountered an error
about to be able to help you and so what
we do is we help sort of bridge that gap
of having a single record of all those
interactions with each customer mm-hmm
because previously companies would build
all this in-house or not at all maybe
yeah there's there's sort of two worlds
one is they would build it all in-house
exactly I'm gonna be a rat's nest of
data pipelines from one place to another
and so the engineering team would spend
all their time building these data
pipelines rather than actually building
things for the customer that's one world
the other world is one where it really
used to be a one-on-one relationship
with a bank branch manager for example
and they might keep the information in a
CRM mmhmm right but if you are similar
would be an optometrist right you go in
they have your past orders etc but now
the world is moving much more to a Warby
Parker kind of world where you're not
interacting with a person so a CRM
doesn't even make sense it's like not
the right technology for understanding
what interactions are having with a
customer and instead it's all these
different digital channels so that's
where we come in and your first
customers were they large scale
companies like banks or who did you get
in the beginning at the very beginning
we actually launched as an open source
library on Hacker News yeah and it took
off there blew up basically overnight so
to be fair it was kind of like the long
road that's not a year and a half of
dark times yeah yeah we shouldn't we
shouldn't totally go over that but okay
yeah so anyway you you blew up overnight
again once it once it went live on a
Chen it blew up overnight and so our
first customers were the folks hanging
out on on hacker news it was basically
small companies for the most part
founders who were looking for better
ways to insta
their web applications and mobile apps
mm-hmm with this sort of analytics
tracking and so the initial growth was
that was just completely unpaid
customers right so they're just using
the open source whatever you put up on
github right so the strange thing about
the open source library which is sort of
this data router so you put in one piece
of data customer did X and then we turn
around transform it and fan it out tall
it from places downstream and what's
funny about the library is if you want
to turn on a new tool if you want to
send the data to a new place you need to
recompile the library and redeploy it to
your website so it doesn't actually the
open source library doesn't quite
actually solve the problem which is
really a market or a product manager
wants to use a new tool so what happens
is you really want to use the hosted
version yeah so almost no one actually
uses the open-source version as was
addressed by design no no this is
completely accidental really yeah
there's just no way to make a good
open-source product around it yeah
that's crazy so okay so what did you
apply to icy with we actually applied as
a classroom lecture tool so the idea was
to give students this button to push to
say I'm confused and the professor would
get this graph over time of how confused
the students were we thought it was a
really cool idea we were college
students at the time and we had a bunch
of professors who were excited about it
at MIT and elsewhere I'll never forget
our in our YC interview we were pitching
this and PG was getting pretty excited
and then he turns to professor Miller
from from MIT who we had talked to and
had given us the original idea for it
and says hey would you use this and
we just rolled with the punches and said
yeah well you know we talked like twenty
other professors and and they were all
excited about it oh man but then you
went through YC with this all right yeah
building it out right we went through
the whole whole YC with this idea built
it out hundreds of thousands lines of
code super complicated class or
electrical product to have like
presentation view and people could ask
questions it's very complicated
we were actually even raised money at
demo day with this idea about 600k
finally we deployed it in the classroom
as the fall semester got started after
demo day it was just a total disaster
all students are my laptops and then I
went straight to Facebook so the way we
discovered this is we were standing in
the back of the classroom
counting laptop screens it'd be looking
over the shoulders of the students near
one two three and yeah we discovered at
the beginning of class about 60% of
students were on Facebook and by the end
about 80 percent were on Facebook oh me
in other words they were supposed to be
using your desktop app the whole time
that's right in the professor at the
beginning class had been like can
everyone please get out their laptops
we're going to use this mute and all of
a sudden all these students are
distracted by Facebook so we had
accidentally sort of put in an attention
attention bomb if you want yeah and you
hadn't brought on any users during why
so you were in the suit wait I wrote it
you were in the summer 2011 bat that's
right summer 2011 and you weren't
testing during the batch we tried
testing but there's not that many
classrooms that are in session during
the summer right the school year starts
in September so we had beta tested in a
few summer computer science classes at
both Stanford and Berkeley yeah but
there was always technical difficulties
and other things that sort of prevented
us from getting like a real sense of
what was happening often times it's
pretty Yolo I don't I just we didn't
really get tests rolling until right
until the fall okay
and so what was the like the come to
Jesus moment where you realize you had
to change the product standing in the
back of a BU classroom as an
anthropology class and I remember
arriving at the 60% and the 80% and we
went up and apologized to the professor
and and at that point you're just like
okay we got to kind of shut this down or
figure out what to do with the money yes
right well we had we had just gotten
wires for these for these checks for
this money like literally a week before
right so we called back all the
investors and we were like well it turns
out this is a terrible idea so what do
you want us to do with the money and
almost all of them said well you know we
invest it for the team so so go find
something else okay um okay next day
next day we're like well what are we
gonna do and we realized we should have
been able to figure out some of this
analysis by not just standing in the
back of the classroom like we should've
been able to see some of this digital
you couldn't see it in the analytics
metrics at all so we decided hey let's
build an analytics tool let's build a
better web analytics mobile web app
analytics tool to compete with Mixpanel
and Google Analytics the idea was to
give really advanced segmentation
because we also wanted to understand how
some computer science classrooms at MIT
we're using it differently than
anthropology classes would be
and we couldn't do that analysis and the
tools we had so that was the idea was to
build an analytic tool mm-hmm we spent
about a year building the infrastructure
necessary to do the analytics and really
we're not succeeding in getting any
customers during that timeframe so you
had I mean did you have a whole
onboarding process was it like a landing
page what did it look like oh yeah we
had a landing page I was going on little
sales trips I was meeting with people
tell you so you were trying oh yeah we
were trying okay but it was it was not
going well basically what happened is
people would say well I already have
this other analytics tool installed so
like it's not that interested you
definitely you have the time you were
not 10x better than Google no no yeah
yeah were you at parity we were at
parity in certain dimensions and we were
exceeded in other dimensions but they
just weren't them dimensions that
mattered apparently right okay so you're
just kind of like blow up overnight with
accra news and that like this is well so
positive we're not even this is just the
analytics tool which we realized in
December 2012 was failed so we're like
well over a year into the analytics tool
we're now have tried two ideas both have
failed neither is clearly gonna work at
all yeah we realized that we're screwing
up so we decide to have office hours
with YC again I would come back walk
around a little cul-de-sac by YC with
with PG he started comes ta stop and
says so just to be clear you've spent
half a million dollars and you've
nothing to show for it gulping moment
yeah I guess that's true and it was a
good sort of come-to-jesus moment though
and you got a pause there and then
rewind all the way back to the first
week of YC and it was in that first week
that we'd been like well we should have
analytics tools on our classroom extra
tool say we've googled analytics and we
found Google Analytics Mixpanel and
KISSmetrics and we're looking at them
we're like we don't know which one of
these things we should use all right
like they're kind of all similar but
Google Analytics is a little more
marketing a KISSmetrics is a little more
revenue we mix panels a little more
product II in terms of the sorts of
insights they can give you and at the
end of the day that they all collect the
same data they all collect
basically who is the customer and what
are they doing mm-hmm so we decided to
write this little tiny abstraction that could
could
data to all three I was like 50 lines of
code among the hundreds of thousands for
this classroom lecture tool and then we
decided we'll just send it at all three
we'll look at all the tools and we'll
just pick the one that we need so it'll
give us a lot of option allottee
basically for free yep and then we
forgot about it for like four months
so months later we clean it up a little
bit more four months later it cleans up
a little bit more as I mentioned now
we're struggling at that point we're
struggling with this question of why I
already have mixed panel installed so I
don't really want to use your analytics
tool yeah so my co-founder Ilya has this
idea he's like remember that little
library wrote that sort of abstracted
away the differences between these tools
and what a Sun data to all three what if
we added ourselves just the fourth
service that I could send data to you
and then every time someone has that
objection we hit him back with an open
source library that they can use to send
to us and them that cause seems like a
clever growth hack it like gets us
around this problem so we did that
cleaned it up open sourced it and people
started replying like all this libraries
great we'd love to use it couple weeks
later we'd follow up and be like hey
well we saw you're using you know the
open source library but all you have to
do is copy paste our API key so that you
can use our analytics tool could you
just copy paste the API key yeah no like
yeah so we started just feeling like
there's some traction on on this little
routing library which is maybe up to
like 25 stars on github or something
like that like not not much but some
people are issuing pull requests and
it's the first time we've ever faults
are like pull like it if you always we
weren't just pushing a boulder uphill
this is a little different but subtle we
had this conversation with Paul Graham
the next day we sit down this is our
second time with this we're like okay we
have 100k left in the bank what's our
final shot and my co-founder Ian is like
you know what I think there's a big
business behind analytics j/s which is
this routing library like that is
literally the worst idea I've ever heard
like it's 500 lines of code to grow a
little bit's 500 lines of code in it's
already open source I have no idea how
you build a business around that yeah
and so we fought about it all day long I
was four of us I was the most skeptical
I think just literally like brutal
brutal fighting I went home and I was
trying to figure out how to kill the
idea was awake half the night finally
figured it out came in the next day I
was like alright guys here's we're gonna
do we're gonna build like a beautiful
landing page really gonna pitch the
value of this analytics j/s open-source
library and it'll have
a form at the bottom so that we can get
people to sort of express interest put
it up on Hacker News and we'll see what
happens I was thinking like totally kill
it right I think that's well in hacker
news right yeah so we'd build a landing
page put it up on Hacker News and this
is where we have this you know you're in
half in the making overnight explosion
yeah and that that kind of segues into
your whole startup school talk right
about legs right basically real product
market fit yeah and up to that point in
your life had you launched anything
where the market I mean this is a Marc
Andreessen quote because he kind of
coined the term it pulls it out of you
right that's right I think you
experiencing hmm I think that's an apt
description I had never experienced it
before and it feels very much like
losing control
right like previously you're like
building a thing and you roll it out in
a building a thing you're pushing it out
and all of a sudden you like put a thing
out there and people start running away
with it and using it in ways that you
didn't necessarily expect and you're
sort of like what it's just an it's just
a man like stop stop it like we need to
fix these other things because otherwise
it's like this feeling of losing control
and almost like the market is dictating
to you now what the rules of the road
are and what needs to get built interest
so would you're a different feeling yeah
would you differentiate that from
overwhelming demand for one particular
feature versus like we're just gonna
take this and use it however we want but
there's a ton of demand there would you
separate those two things not really I
think the people always want more
features yeah but the the thing that
flipped was people would previously tell
us they wanted a feature but not use it
whereas now people were using it and
they would want a second feature and the
it's a super important distinction I
think a lot of founders get caught in
this sort of I call the the death spiral
of user feedback yeah where they keep
going and showing someone their product
and asking them for feedback they give
them you know some feedback about how
they could make it better but they don't
use it and then they bring it back with
those fixes and they ask if this is
better and it's just like the death
spiral where it never gets anywhere but
once someone starts using it they'll
have more requests and that just means
they're gonna pay you more over time
right yeah I like how you put it in the
lecture where you basically if you have
to ask yourself it's not product market fit
fit
yeah it's it's you really can't miss it you
you
and said this was now six years ago five
five or six almost almost six years ago
yeah right and half you and you're so
feeling the same way yeah yeah and since
then we've had a few more sore a
secondary product market fit moments
like what about two years in we
discovered that all of our most valuable
customers were sending their data to an
s3 bucket there's basically they're
keeping log files of the raw data which
was a little weird because typically
what people were using the data for was
to send to an analytics tool an email
marketing tool and a CRM and help desk
like places where a business person is
deriving value log files is a little
different that's a little weird it's
unclear what the use case is so we went
on this sales trip to New York myself
and our first sales person RAF we met
with five customers that were using this
s3 bucket let me just ask them oh my god
what are you doing with the s3 bucket
the first customer was like well you
know we have a data engineering team
that's taking the data out of the bucket
and converting it into CSV files and
then they're uploading it to our data
warehouse which is a redshift cluster so
basically they were using it as the
initial endpoint input into a ETL
pipeline like oh that's interesting but
man to the next meeting second customer
is like well we have a data engineering
team who's taking the data out of s3
converting it miss yes okay drops and
that's interesting and then the third
fourth and fifth ones all said exactly
the same thing and and that was the
point at which I started becoming a
conspiracy theorist yeah it seemed it
seemed like some pre meeting had
happened now but they were all doing
exactly same thing so it was really
obvious we just built a way to load data
directly from segments into a regio
fluster huh and that was a huge thing
like you you was really go out that it
was product market fit again yeah it was
very explosive
so we you know we'd grown revenue from
zero to two and a half million in the
first year and then we launched this red
shift connector and the next year one
from two and a half to ten but people
weren't asking for that that's right it
was one step too far for them to realize
that we could do it easily yeah their
mentality I think was that oh segment is
a way that I integrate marketing tools
and so a data warehouse is in a
marketing tool it's a bi tool surely
segments can integrate that just didn't click
click
ahead to go
by asking hmmm interesting and and your
growth how how how does that happen is
it has it come through developers I go
to market model is primarily through
through engineers yeah we talk a lot
about sort of the way that we've built
our infrastructure over Jim
we obviously process a lot of data so
there's a lot of interesting
infrastructure problems I think now
we're processing you know hundreds of
thousands of user actions per second so
there's a lot of data going through
there we write about that
that's generally interesting to that to
the hacker news and an engineering crowd
and yeah typically an engineer is the
one that brings this brings us in
sometimes that really technical product
manager but it's someone who's like yeah
this is gonna solve this weird rat's
nest data pipeline problem that I've got
well and how much of it is open source
still a good portion of it is is open
source but most of the value that we
deliver is actually by running the
hosted version right cuz it's like at
the end of the day it's not just the
develop like you're you're saving the
developers time but it's these business
people that really need it yeah and and
frankly most of the complexity is hidden
away and how you actually operate and
scale a data pipeline that that is
processing the data yeah so you know our
JavaScript libraries open source our iOS
SDK is open source or Android SDKs open
source II wouldn't sort of collected
data from anywhere and those collection
libraries are our open source but the
sort of core infrastructure pipeline is
not hmm okay and so right before you
guys launched on HN where did this like
small tiny micro launch I whatever it
might be
were there other avenues that you were
considering pursuing like in that debate
in the day before mmm were you thinking
about other stuff I think the debate was
whether to build out the full product
and then test for product market fit by
trying to sell it to people versus this
super super lightweightt MVP landing
page that we wouldn't put on Hacker News
to see if there was interest in the
concept yeah and and what drove us
towards the super super lightweightt
test was actually the fact that there
was a skeptical divide among the
founders and since the founders couldn't
agree the only way to answer the
question was to go to customers a SAP
and get an answer okay it's tough like
the the launching early thing is always a
a
because I think there have been
instances where people are like I will
just launch this early but because
they're like 10% off of what that
product ought to be or they're not very
good at communicating it they never
really get the feedback that they need
right like how do you how do you kind of
balance that out like this is kind of
like fully formed enough or were
communicating it clearly enough that we
can launch it like how do you determine
that usually that test is so cheap to
run that it's worth running even if you
decide that it was inconclusive and you
should go a step deeper mm-hmm but I
also think that the way frame fit is
actually an excuse that a lot of
founders use for not doing the cheap
early tests when in fact they they
should yeah I I get the the same
questions like almost every single
podcast and I should be a little bit of
a devil's advocate here but yeah these
are kind of like straw man arguments
right I think the really big product
market for moments for every company are
pretty unmistakable like the Dropbox
founders have called a stepping on a
landmine I just I really don't think you
can mistake it it really happens in a
way that you you lose control it's very
obvious every much metric goes haywire
people are talking about it a lot it's
not it's not mistakable or like oh well
you know this person said that it looked
valuable and was really exciting and
blah blah blah if they're not using it
like it's not there yeah okay well okay
so there's a question from Twitter it's
clear that a bunch of people have
watched your your lecture so this first
one from Aaron Evan Farrell he asked you
mentioned in the startup school lecture
that you had to pivot to analytics j/s
to find Prada market is it possible to
purely iterate on something like that to
find product market fit or should be
clear from the outset if a new idea is
something people want there's two
versions of this I will say the Airbnb
version of product market fit is much
more iterative they struggled for years
and years and made slight iterations and
iteration that iterations and finally I
caught on and obviously they're they're
their runaway success my feeling is that
that's extremely rare and that again
this is a really dangerous place to be
because you can stay in this iterative
mode for years yeah and it is unlikely
that the iterations are going to get you
to a good place
so I remember very clearly early on
being really inspired by the Airbnb
story and it being a logical reason why
we should keep plugging away at a bad
idea and I think we abused the Airbnb
story to just keep stringing ourselves
along on a bad idea so I would be very
very careful of following their B&B
example I don't know many other
companies that that hit proud of market
fit that way right and so how long do
you give an idea at this point I
actually don't think that it's quite the
right frame to think about it in terms
of how long to give an idea okay I think
what you want is someone either yourself
or someone else on the founding team
who's a skeptic so someone who is going
to have enough context with whatever the
specific idea is and whatever the sort
of regime or market you're in someone
who's skeptical who will question and
push for the fastest reasonable test so
in other words if you have an optimist
and a skeptic and they both agree on
what a valid test is then I think you
actually lend up with a good test but if
you have three optimists in a room who
all agree on what a good test is I don't
believe that that's a good test did over
skeptics but yeah do you have you
recruited skeptics or did you just kind
of like luck into that I think we lucked
into it the first time yeah I do think
we have some folks on the team that
segment some early folks who are who are
skeptics usually about future product
market fit moments that we've had and I
think it's been enormously helpful
that's really interesting what how do
you test for that like in an interview
scenario we didn't test for we just got
lucky again but yeah okay so not even
just with co-founders like with early
employees as well that's right yeah
how interesting like how hurtful can it
be if someone is like well I really
think you haven't thought this through
there's like these three things that you
should really test ASAP because I don't
really believe that you have product
market fit here right that's what you
want you want someone who's gonna be
like pushing it and you're like what happen
happen
yeah how would we and then who's willing
to collaborate with you on how you
should reasonably test whether those
things are the case so the sorts of
tests that we have run for example with
this mindset recently and even in the
past year yeah where should we switch
from a technical buyer to a marketing buyer
unclear how to test that well so the
this early skeptic who's amazing her
name is Diana she I was like well I'm
just gonna go to a conference with
marketers and I would try pitching a
bunch of marketers just flew to Florida
and pitched a bunch of marketers came
back she's like nope not a good idea and
I read my own set of tests so like the
the hacky ways to test these things I
think are very valuable in it and it it
comes from having skeptics who and
different perspectives of people willing
to go test those things okay
and so I imagine these these tests from
skeptics occur on a maybe daily but
probably like at least a monthly basis
right in terms of you guys working on
your product yeah I'd say maybe more on
like a pre idea basis so like if we're
gonna launch a new product then it's
really helpful to have a skeptical
perspective of like here's why this
might not actually be a good idea and do
you rely more heavily on data or actual
customer interaction like in the early
part of the product development process
it's all qualitative it's all talking
with customers okay because this is the
thing that bugs me more is like when
people are just like putting up landing
pages left and right and like thinking
that they can like kind of uh I forget
what it's I will call it like what do
they do it doesn't know yet like
Imagineer your way towards them like
winding down this path to finding it in
an advanced inefficient with time yeah
they're scared yeah and and when you
actually go and talk to a customer if
you have that conversation in the right
way you'll learn a thousand times more
from that conversation than you will
from them from putting up a landing page
yeah and I think ultimately we learned a
lot more from talking to our customers
after the hacker news landing page than
we did from the landing page itself yeah
totally so what are your what are your
tactics when you're talking to customers
yeah I'd say the main thing is most
founders are not familiar with how a
sales process is actually run and you
basically want to run a sales process so
the the sort of typical founder motion
with running a sales process is the they
come in and they say okay I'm going to
give you a demo and it's like really
shiny polished pitch and then the
customer decides at the end of that
pitch whether they're interested or not
that's not actually how good sales works
at all the way good sales works is you
do qualification up front
so you have some method
of understanding the customers problem
better than they understand it
themselves and then you do the
computation in your head as to whether
your product is a fit for their problem
there's a lot of methodologies for this
the methodology that we use that segment
is one called medic ME ddic it's
literally just a list of sales
qualification criteria and this is this
is what sales reps do if a sales rep
comes back and we're like we're gonna
close you know this this this deal the
sales manager says okay well let's go
through and metrics what are the metrics
by which this company is going to judge
whether or not the product works for
them and if the sales rep can't answer
metrics economic by our decision-maker
decision process the identified pain and
doesn't have a champion if they can't
have all six of those things yeah
there's no deal and so when you're
searching for product market fit you can
just go through all of those things by
asking the customer a ton of questions
mm-hmm and then you can grade whether or
not you're actually going to build a
product that will solve the problem
right well this is it kind of ties into
this like skeptic versus like optimist
idea right you have someone who's like a
champion of the product and in many ways
I mean maybe this is you like the
optimist who just sees the world and
they see this future and it looks
awesome it's amazing but you need that
skeptic who sees the world as it really
is that's right and a sales
qualification criteria is is a way of
almost putting the skeptic out as they
like structured process that enforces
some level of skepticism yeah I think
it's so dangerous when you're the author
because I fall into this camp for the
most part like when you get good at
sales you can kind of sell many people
on almost anything but if that product
doesn't exist yet it's very easy to just
kind of mold it in the way when you're
reading someone you're like oh I can
totally kind of want it to be like this
so I'm gonna kind of go down this path
but then when you actually show them the
product and they're like like you said
they won't even install it then you see
the world that's it really is
yep and that's the thing and so we you
guys are just like going out and how are
you still having these conversations
with people personally sometimes yeah
for sure yeah yeah because this is one
of the things that like people I think
in large part because they're influenced
by your startup school talk they have so
many questions about it and so Benjamin
Liam asked like you know how do you even
how do you find that you have the right
messaging around you're explaining your
product oh man this is super hard I'm
not even the right person to ask about this
this
I should Diana who I mentioned before in
our VP marketing Holly are the two
people who have really refined our
messaging over the years and we're
always trying to refine it so I don't
know how you know that you have the
right messaging you know that whatever
messaging you can sort of test whether
alternate messaging is going to work and
you can do that yeah qualitatively in
interviews with customers you can try
explaining it one way and see if their
eyes light up you can try explaining
another way and just sort of see what
what resonates I think a really talented
early salesperson will also have this
sort of pattern in their in their habit
of how they pitch that they'll always be
testing different ways of explaining the
product that was definitely true for for
the first salesperson that we hired he
was fabulous it just like constantly
experimenting with different ways of
doing it so I don't know if you there's
you never know if you have the best
messaging but you are constantly
searching and testing for four different
ways of explaining it okay but but again
like if it if it's about you know really
finding a good product market fit yep do
you think that leave these like minor
changes and how you communicate
something will will make the difference
I don't think I don't think minor
changes then it will make the difference
now once you have product market fit
then sure you can optimize the messaging
okay so then we should talk about idea
generation because that seems more
important yeah and these like minor
deviations yep weird where do you begin
yeah I think the best ideas that we've
had come so there's a big difference
between the first idea and these sort of
like follow-on ideas and and the reason
so the first idea meaning like the core
product that's and then the individual
features that's right okay and not just
individual features you might have
entirely new products that come along
but those are much easier right the the
problem with the first product and
product market fit is that you can move
the product and you can move the market
because it's fit between these two
things and so it's unclear and they move
in some crazy multi-dimensional space
and so what's the the issue is that to
get them to both match up you can always
move either one and in different conversations
conversations
in one conversation you might shift the
product and you might in a different
conversation realize you need to shift
the market so that's super tricky I
don't think there's a repeatable way to
do that mmm I think you just have to go
very very deep into a particular market
and understand the problems that people
have in that market so do you have a
particular a process for idea generation
or you just you get into something and
you're like man just go super deep yeah
for that first idea you just have to go
super deep you just have to understand
the market and the ecosystem and the
customers upside down backwards better
than they do themselves okay so you were
booted from segment today do you know
where you would start you'd have to
start with something that was
interesting to you personally and then
you'd go dig in in a deep direction I
think that it becomes more repeatable
when you are finding a second product so
at that point you've mostly lost the
market side right because you already
have a buyer you already have a go to
market motion you already have like an
area of interest which for us you know
is these sort of data pipelines and data
infrastructure customer data
infrastructure then it's much easier
because you know exactly who you need to
go to and you know roughly the like type
of questions that you need to ask and
then you can run a process which is much
a much deeper x-ray of the customer than
you might be comfortable with at least
it was much deeper than then I was
comfortable with when I first got
started like as an example we recently
were testing product market fit for our
product we're gonna announce at our user
conference in September and that's now
in beta and it's doing really well but
the initial way that we were sort of
testing fit there
we would go in and say like oh hey do
you have you know a problem with with
data cleanliness and the person would be
like oh yeah yeah totally that's one of
our big problems yeah I get cool cool
like okay - that is and we might ask
like two or three more questions but
like that was sort of the depth but the
actual level of question needs to be
like okay well like what do you mean
Didache like how do you do you currently
invest in data cleanliness at all no
like oh well yeah we actually you know
we have a team of like six people who do
data QA con all the time like oh well
those data QA people like where are they
based or they're based in LA Oh
interesting so they have like real
salaries and their knobs
overseas they're like real like us
salaries like yeah yeah okay so what
like 80k a year 100k yeah yeah yeah
that's about right so like okay so
you're spending you know like 750 K a
year for this data QA team and like tell
me more about that process like what are
they queueing exactly oh well they're
clicking this button in the app and
they're like well which button yeah and
then are they like in the OP where they
do when they find a bug and so we would
ask like literally 45 minutes of
questions like this and now we actually
understand their problem and we
understand what they're doing we
understand where their cost centers are
we understand how this thing and then
we're like oh well what if we did a
product that did X yeah which is exactly
what they just explained to us for the
previous 45 minutes and they're like
that would be amazing they're like okay
now wait now this is that was both sales
qualification and discovery yeah which
is a standard sales process but now it's
being used for product development and
that's such a good learning because
people aren't gonna tell you no way I
think a lot of people just get scared to
like ask these questions totally the
customers will tell you yeah especially
if you if you take the champion part of
medic their last one the C and you just
start by asking like what's your vision
for X thing that you do John will tell
you you're like oh we our mission is
similar because that's why you got the
meeting in the first place that person
is instantly aligned with you they'll
talk for 45 minutes about their problems
before you have to tell them anything
yeah I think that's one of the things
that most people don't realize it like
many of the best salespeople don't talk
that much the best salespeople at
segment ask why to the point of
uncomfortableness from everyone else on
the team including myself yeah
interesting yeah I wonder what the
correlation is between sales and
skepticism it's probably pretty high and
people who are questioning things and I
can see the angle yep hmm all right next
Twitter question so Danny Pro first of
all he says go Peter and his question is
about a culture so he says what values
and standards do you have in place for
your team at segments and how do you
actively build that culture into your
company yes we have four values that
segment that we're quite dedicated to
the first is karma which is we want to
have a positive impact on the world and
that manifests itself in a bunch of ways
one of those ways is we really care
about the customer having sort of
getting value out of our entire process
so you'll notice that all of our
marketing materials for example are
often like highly educational we have a
really high bar for what an education
piece of educational material looks like
even in the sales process we want to be
helpful if we're not the right fit will
tell you and sort of like refer you to
the right places
separately we really care about doing
the right thing by the end-user this is
still within karma and that's from like
a data privacy perspective so we're very
interested in helping companies
understand all of their own first-party
data so all their interactions with
their own customers within their four
walls we're super uninterested in
helping companies data broker data
between different companies schedule a
we call it data gossip it's gross we
don't want anything to do with it there
are plenty of other companies out there
that that have stuff like that it's
gonna go away and die eventually
so that's Karma we care a lot about that
the second one is tribe which is a
segment we're all there to support each
other we're all there to accomplish the
same thing and so what we expect is that
and what we value is that people really
support each other both when they may be
struggling with something but also
giving them giving them crit so really
try to reward folks who are who are
willing to go the extra mile to give
create when it may be hard could be
giving crit across teams or up several
levels or whatever that's that's really
something that we value hmm the third is
Drive much more self apparent we like to
get done we value people who are
getting done and the fourth is
focus which is not just sort of the
ability to sit down and get stuff done
but more power through something but
actually thinking carefully about
prioritization we've done a lot of
research around how to make the office
environment you can actually focus so
check out our blog we've we've written
about sort of sound decibel levels that
we've measured around the office and how
we've mitigated that did pretty well
that piece did pretty well read yeah and
and it was a surprising result for us to
discover the different parts of the
office had very different sound levels
that were not correlated with people
talking but were just correlated with
the sort of acoustic shape of the of the
office and so just moving people around
into different places helped a lot
depending on how much noise they were
willing to tolerate and sort of need it
in their role hmm so anyway those are
those four values we they are literally
the things we value and so we pushed
into all the places where you would
expect what you value to have an impact
so it's who gets highlighted at all
hands we have a citrus prize which is
someone who's living all the values
promotions hiring we have a strict
interview in the hiring process we have
performance we need a strict interview
sorry we have a culture interview where
we have these four values and waste
specific ways that we're going to test
for them when we run performance reviews
the performance of you is literally the
four values are usually like these this
is what we value and therefore it's what
we test and measure by and I think
ultimately it's that cycle of giving
feedback and measuring by it that is
what drives huh culture to stick and it
has this been something that like came
natural to you like building culture or
did you have to learn it I don't think
so I think we I think we learned it mmm
we got to about 25 people before we
realized that it was something that we
should write down and we went off site
four founders went off site and we tried
to synthesize the values out of what it
was that we really liked yeah there was
Apple Reddy happening and what it was
that we didn't like that we had a scene
already happening and not just among the
team but amongst ourselves to like what
were we not proud of that we had done
and what were we proud of that we had
and that that ultimately was what got
synthesized into those four values hmm
and so those were just interactions with
other people or like literally product
building no interactions with other
people and and interactions with
partners and customers and things that
we were proud of
mm-hmm that we wanted to see more of
right on so next question
Ashwin doke asks how is GDP are impacted
segments business model so GDP are for
those who don't know is a new EU
regulation which basically gives
end-users a lot of rights about the data
that's collected about them and first
off I think it's an awesome regulation
both as a consumer but also wearing my
segment hat it's interesting in that it
impacts the entire globe because if you
are storing data about in use it isn't
it doesn't matter what Roche diction you
run your company in you were still
responsible to do that for an EU citizen
the biggest impact
broadly on the
overall ecosystem is it really
negatively impacts third-party data and
third-party data brokers because they
have no real consent path to the user
for sharing and buying and selling the
data because we help companies purely
with their first party data it's not
like a existential threat to us in any
way and in fact it's something that
we're really sort of aligned with for
another reason as well which is because
we're routing the data out to all the
different places where people are using
it so we're routing it out to an
analytics tool to an email marketing
tool to a data warehouse to a CRM to a
help desk to ad conversion pixels if
that user shows up and says hey I want
you to delete me from your system well
it's actually like 20 systems for most
companies and we're already plugged into
those 20 systems so it's actually now a
feature of segments that we can go to
those 20 systems and delete whatever
user is requesting it and clean up that
record across all those different
systems so for us GDP r1 is like aligned
with our values philosophically - is
actually an exciting new feature sort of
requirement that we can support and a
sort of value that we can provide to our
customers so we're huge fans nice that
was a unsuspecting sir but uh people
have been stressed out about it my
friend makes Instapaper and they have a
big issue with it's a big problem in
publishing where they relying on
third-party damn yeah especially these
like little tiny products that are parts
of really big companies even they didn't
necessarily know and yeah another
everywhere cool all right so next
question and roopa cool asks any advice
that you have on asking for more money
than you're comfortable asking for this
is part of your startup school lecture
well I guess one of your sales reps was
forcing you to ask for more a lot more
yeah yeah we had a sales advisor who is
well I gotta back a little bit we were
initially selling our product for ten
dollars a month and you know hundred
twenty dollars a year and we brought on
the sales advisor and his first advice
was well you have to ask for $120,000 a
year and I was like that's a thousand
acts that's crazy so we were going to
the first sales meeting me and him and
is with a company called xamarin
and I've since told NAT this story which
he found amusing but now was the CEO of
xamarin and as we're walking up our
sales advisor says okay you have to ask
for a hundred and twenty K yeah him this
meeting and I was like that's the most
ridiculous thing I've ever heard I'm not
doing it and he's like well if you don't
do it then I quit as your sales advising
alright I guess I'm asking 420 K so we
go in we have to you know demo and
everything yeah and he says okay well
what's the price and it's 820 K and I
turned beet red and he says well how
about 12 K a year I said okay well how
about 18 and he's like okay fine
so from his perspective 85% off from my
perspective I got 150 X and it was a
successful negotiation I I think I think
it's really hard to offend people with
price at least if you're sitting in the
same room or or on the phone it's
probably not a good idea to share
pricing information via email if you do
that then it's really easy for them to
hang up but if you're on a phone call or
in person there's a bit of a social
contract to a continue engaging
particularly in person you can recover
so I would encourage you to not be
scared of offending someone with a high
price yeah but maybe just start in
person which is probably the most
uncomfortable place to do it but gives
you the most opportunity to recover
right and the thing is like if it
actually banished your business then
that's just what it costs yeah you're
gonna have well and you have no other
way of assessing the value yeah yeah and
then in fact what will happen is when
they say that's crazy then you say why
and then they'll explain to you how they
actually value the product and then you
say okay and you value it according to
their logic and you ask for that price
and how long did it take you well are
you charging them 120 now for sure yeah
we have customers to get way more value
than that out of it now yeah exactly and
so how many customers did it take you to
reach that six-figure amount a dozen at
most yeah so it was amazing yeah yeah
cool one carlos garza asks how did YC
help to get segment where it is right now
now
YC was super helpful the most impactful
thing early on is just demo day you're
not going to find a bigger concentration
of investors who are excited about
investing in startups creates a
compelling event structures the timeline
in crowd
way helpful for a first round of
financing that can easily get strung out
and waste a lot of your time yeah that's
the first thing the second thing really
is the is the founder network there's
not only a lot of reasonably high
profile companies now that you can learn
from or companies that are sort of
farther ahead that you can learn from
now but there's companies at all stages
so there's almost always a group of
people in your area or in your market
that you can learn from and share from
so all the there are tons of little
groups that spring up you know like a
group of enterprise founders that are
all between like 70 and 100 people in
San Francisco and you can have dinner
once every two months yeah and that
becomes an incredible support group and
sort of way of learning about about
what's going on have you stayed in touch
with people from your batch a few yeah
exact same some good go right on yeah
I've heard of like these informal
founder meetups happening quite a lot
and again yeah it seems to be great and
uh it's a trusted network there's no
replacement for that yeah totally I
definitely didn't get that from college
all right Juan has another question in
the early stage what's the thin line
between ignoring a customer's suggested
feature or moving a customer's requested
feature to the core of your application
or product I think what I think what he
is trying to ask is basically like at
what point do you say like hey this
customer is requiring or asking for this
feature and we have to kind of hold the
line because we don't want to become a
custom dev shop
so should we integrate this or tell them
to you know find someone else the best
defense against that is having a clear
product vision for where your product is
going to go long term and if you have a
clear product vision for where it's
going long term it's a very simple
question of yeah is this thing in that
picture long-term or not and if it isn't
that picture long-term then you can
prioritize it to be sooner or later
depending on whether a customer is going
to pay for it or not yeah and if it's
not then it's not and you probably
shouldn't build it right yeah I think
that's like that
the infamous customers you don't want in
Scenario yeah where you just have to let
them go yes I
I guess the important thing is like
imagine the entire timeline of
everything you're ever gonna build feel
free to move things around we do this
all the time we move things around based
on like what customers actually want has
it's a reasonable signal of what's
actually more important yeah
but I wouldn't I wouldn't add major
things or remove major things from it
just based on one customer mm-hmm so
since you've done YC and it's been
several years now would have been the
biggest learnings since oh my gosh so
many a huge bucket or a huge area of
learning for me as weird as finance like
I mean I came from an aerospace
engineering background and then we were
doing software engineering for the first
couple of years and so you just start
completely unprepared for preferred the
like business side of of things so I've
learned a tremendous amount about about
finance as we've raised money and and
and you know learned to manage your
business with a piano and all those
things not that you should rush into it
but it's it's a huge area that can be
leveraged I think and you would have if
you were to do it again hired someone
earlier on who knew what they were doing
in on the finance side I actually think
we did a reasonably good job of that so
we hired a part-time CFO around town
that raised our series a so we were
about at about a million in revenue and
we were raised to fifteen million
dollars here he's a we had had a
bookkeeper up until that point but we
were like I feel like we should have
someone like you know point us as to
what we should be doing with the money
and maybe have like a plan or a model or
something so that was definitely the
right time to hire a part-time CFO and
Jeff berkland was super impactful over
the years
intro would have been the other big
important hires for you that I made like
a huge difference I'll have remembered
the exact hammer a whole bunch of people
but advisors maybe is an interesting
category sure part time CFO I think is
in that bucket
we had an HR advisor who was really
impactful we've invested more in HR than
most startups yeah of our size and I
think that was the right thing a lot of
startups like uber for example do not
and end up with I think really high
prices for this way I think it's a
challenge right because if you if you go
around and start googling like should I
hire CMO should I hire CFO should I hire
XYZ I think you can always find someone
strongly advocating for any particular
role but the challenge is like okay you
know you only have so much
and so much time and you can only find
so many great people so like where do
you and where and when do you decide to
hire those like optimal people for this
stage in your company right and so yeah
just kind of curious if there are any
big turning point moments for you it was
a huge turning point around 10 million
in revenue when we hired the first team
sort of execs to the team yeah one is
our VP of engineering and the other was
a VP of people they were the first
people who had previously been managers
and our VP of engineering had managed a
team of 150 at Dropbox so we went from
literally zero management experience
aside from what had been picked up along
the way going from zero to 50 people to
having someone who really knew it or two
people who really knew what they were
doing that was hugely impactful and we
should have figured out a way to do that
earlier 50 people in 10 million revenue
or whatever it was was way too late
yeah cool if you weren't working on a
segment right now do you have an idea of
what you would oh man I get to
occasionally invest in YC companies nice
and there's a lot of cool things
happening there I was blown away by this
like breadth of things that are
happening in the batch this batch there
was a really exciting company building
in space rocket engine and another that
was doing industrial inspections by
drone I just can't imagine a world where
we continued have people in harnesses
hanging off of wind turbines that's I
can't imagine that that continues for a
long time so that seems like an obvious
market opportunity so flying things I
have a background in aerospace
engineering cool man so if people want
to learn more about segments where
should they go if they want to learn
more about you yeah segments just go to
segment com or you can tweet at me on
twitter i'm ryan pique rei NPK okay cool
yeah we'll link it all up all right
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