Secrets You Can Learn From Your Customers

And some point during this coffee session, the guy was like, "Hey, oh, you want my nose? You want to see my, would you like a gold mine? Yeah, for all of my thoughts, all of my everything."

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Hello, this is Michael Seibel with Dotson Caldwell, and today we want to talk about our secret for learning as much as possible from your early stage customers. One of the things that we have to fight a lot for these Founders, early stage Founders, we had to fight, is this idea that when we're started the company, we understand the problem really well that we're trying to solve. We understand the customer really well. We understand the solution really well. Yeah, we have it all figured out, right? Day one, we got, we nailed it. We know, you know, we have our next 10-year plan all lined up. And why would you start a company if you didn't have the plan? Like, if you didn't know, right?

It's true; overconfident foolishness is a key part of doing anything ambitious in life. So I just, you're right, you gotta love that. You gotta start there and then immediately switch. Maybe we don't know anything. That's not possible, but you only switch after you burn the bridge behind you. Yeah, that you can't quit. Yeah, you have to hear far enough along; quitting's not an option before you realize you don't actually know too much. And then at that point, you have to learn.

You know, one of the things that we've seen, and we'll give some examples today, is that the fastest way to learn what you need to know, both about the problem and how to solve it, is to care about your customers. Right? If you care about your customers, and then as a result, you spend time with your customers, you can really learn what their problems are and how to solve them so much faster.

You know, one example—and we talk about Airbnb a lot—but one example that came up when they most recently spoke to the batch that really clicked in my mind was they retold a story about how they were emailing their hosts, and they saw their host had horrible photographs on Airbnb. And they knew their hosts were listing their properties on other sites, and they had horrible photos there too. And they said, "Okay, we're just gonna help them get better photos." Right? We're just gonna help them get better photos. We're gonna email them, we're gonna go to their homes and give them better photos.

And I think what's interesting about that was that they knew that those hosts were going to use those photos in other places, right? They sure did. They knew that like maybe their company was going to be dead in three months, right? Yep. And they knew they were kind of losing money on the deal because they flew. Yeah, yeah, exactly. They won 100 losing money on the deal; it didn't pencil out. Yeah, it didn't pencil out, but they did it anyways, and they had empathy for the users. And they're like, "You know, those photos suck; this is something we can solve for them."

And it's kind of human nature that if you do something nice for someone, they'll appreciate it; they remember it. Okay, it helps you to trust, like you establish some trust when you break down the barriers between yourself and the folks you're trying to serve and do something nice from them.

Who knew something valuable? Who knew? And they didn’t—they were like, "Here's your invoice." Yeah, no, no, no, no, no, no. Um, and I think what was interesting was that when Joe tells the story, he talks about one host who, after they took all the photos and they arranged the lights the right way and were like, they showed them photos, like, "Oh, the place looks great," the host was like, "Hey, do you want to sit down for coffee?"

And it was so funny because that was the moment in the story where I was like, a lot of Founders would have said no. Yes, a lot of Founders would have been like, "I have someone else on the list; I'm just doing this to try to make my website better. I don't really like you; I'm actually kind of pissed that like you have shitty photos of my site. So like I got what I need, I'm getting out of here."

And Joe actually cared about his users, and Joe was like, "Sure." And as he tells that story, he learned that that host had been renting out his apartment for I think 10 years. And throughout the process of learning how to do it, he had taken notes in this notebook. And some point during this coffee session, the guy was like, "Hey Oh, you want my note? Do you want to see my, do you want my notes on being a host for the last 10 years? It's like, would you like a gold mine? Yeah, for all of my thoughts, all of my everything."

And Joe's Lou, yeah. And, um, what was so funny was that that whole process, that whole thing of learning what he probably couldn't have learned if he had talked to a hundred hosts casually, he got by caring about one host. Those moments never happened; that learning never happens if you don't care.

Yeah, we always talk about these guys a lot, but you know something that you can't fake that they always do is they remember the names and the life stories of their first customers. Like when they talk about the original Airbnb, they weren't like, "Yeah, we hid behind our keyboards, and we bought some Facebook ads. We put out a landing page, and we spammed some people, and they signed up, and you know, we scraped."

No. Yeah, when they tell the story, it's a story about people. Yes, and they know all their names, and they keep in touch with all their original hosts and the people that stayed with them. Yes, to this day, and they just cared more. Yeah, and you can't fake that. In many ways, they didn't have many other advantages; like they didn't have many other events.

So that's Airbnb talking. Before you were saying that the Brex folks have figured this out a little bit too. What?

Yeah, other story we've spoken about the Brex pivot in various other contexts. And so folks know they started with an idea that was like, "Hey, VR is the future. I guess let's make some VR headsets." Hypey, scene-stir idea of the moment. Yes, and again, it makes sense they had the sense that that was what a startup should be whenever the current zeitgeist was popular. Fair.

And the issue was, you know, I don't know where to begin. They didn't know a ton about that. They were programmers, but they had only worked on fintech stuff before. They didn't really understand the use cases. They weren't really sure why the other products weren't good enough. Like it was just basically DOA. It was a complete mess.

It was a mess. Yes, and then they tried a couple of ideas. Again, you know the story. But at the end of the day, they really understood other Founders, other people in the YC batch. Yeah, and once they got the idea for Brex, it was very clear what to do next, which was to talk to the people all around them in YC, literally in this building we're in right now. Yeah, and ask them stuff like, "Oh, do you have a credit card? Oh, you don't? Cool. Do you want to use our thing?"

Okay, and then they were able to spend so much time with these customers, understanding the complexities, what they're trying to do. They could very quickly ship the product. And again, let me give you another example for them.

A lot of folks that have companies in different countries or employees in different countries, there's all this complexity that you get if you're not American and your company's not American, and your employees aren't in the United States. Yes, right? Yes. And these guys are building all the software now to this day, which involves really going deep and caring about all those edge cases.

Yeah, and it's because they employ people. What's funny is they can be their own guinea pig on this stuff. Yes, there's no way you could fake that. If they weren't Founders, if they hadn't gone through this themselves, it’d be much harder to hire some PM in a big company to build all these solutions.

What I love about this story is that while they were in the YC batch, and they were asking people, "Do you need this?", they were finding people who were getting screwed. Right? It was like, "Oh, you're under 25? Yes, you can't get a credit card. Sorry, no can do."

Yeah, there's no like fill out extra forms, it's like completely getting screwed. "Oh, you're not from America? That's a no. Sorry, you don't have a credit; you can't get." And so like what I loved about it was that their product didn't even have to be amazing to start because the alternative was nothing.

Yeah, when you're competing with literally nothing. No, and it's like the perfect example of the big company not caring. It's like, "I don't care so much that you just can't use my product at all." And like all they had to do was care more than that. Right? More than "No, like we'll figure out how to make it work for you."

And I think that it always just comes back to this. Like those Founders in the batch, love those guys. Yeah, their customers were their friends. They were people they knew. Yes, and they could relate to them. They could talk to them. They would go out to dinner with them. And they genuinely knew the stories; they're customizing and cared.

So I would say the last story on this, um, was a story I experienced at Justin TV and Twitch. And I would say, to be honest, right, we experienced both sides of this in the early part of the story. We had a very troubled relationship with our users. On one hand, they were streaming content on our site; it made a lot of traffic, and we were able to monetize traffic a little bit. But on the other hand, they were streaming content they didn't have the rights to. Yeah, didn't have the rights to.

It was like soccer, soccer, sports, movies, TV, boxing—boxing was big, UFC, I guess they liked us. It's very popular. Very popular. And they were creating problems for us, like we could get sued; we were getting sued, like all kinds of issues. We had a really complicated relationship with our customers.

And even just the UGC content, right? Or people in chat saying bad things, right? It was like for a lot of the time, I only said nice things. I know sometimes you say bad things in chat. And so for a lot of the time, we had this really complicated relationship with our users.

And then I think that really changed when Emmett and Kevin started talking to streamers. Right? The way the story goes is that, you know, some people started streaming Starcraft 2, and it was a big Starcraft fan, and he just loved watching this stuff. And he started talking to the streamers. And like not sending a mass email to all streamers, yeah, if you're a streamer 257, like you know, it was like weird.

Like yeah, she literally reached out one by one with Kevin. And if you're a streamer, Justin Timber at this point—Justin TV is like five years old, and you're on a phone call with like the CEO and the CEO—that's pretty cool, right? And you care about your Starcraft channel. Yes, you're starting—what did they play? Were they like—

They were, his name is—he a Protoss guy? Emmett could kill me with every race in Starcraft. Okay, so I don't even know, we should ask him. Yes, I was like a Zergling Rush guy. Okay, Emmett figured out in four seconds and then just had infinite ways. I would play Terran back in the day; that's really—yeah, siege tank, I don't know.

Anyway, carry on, sorry. Sorry. Yes, yes. So, um, I'm gonna get on the phone with these streamers, and basically just asking them what do they need. And I think that was funny is the streamers tested them a little bit. The first things they said were things like, "Well, can you let me stream in higher resolution?"

Right? And you know, it was funny because talking to Emma and Kevin afterwards, it was like yes, in fact, that's one of the easiest things. They thought that people would be asking for all those really hard stuff, and what they asked for was embarrassing because it was so obvious and easy to implement.

So it’s just that they never bothered to ask. Never bothered to ask. And actually, it was even more insidious than that for these users. They made a complicated relationship with increasing the bit rate of their streams, increased our costs. Yeah, that was kind of a negative feedback loop.

And, but for these folks, like there was no issue with their content. It was perfectly fine; there were no rights issues and so forth. And hilariously, because we had a really strong technical team and tech co-founders, we built our own video system. Changing the bit rate was like a number like, yeah, it was probably setting it. It was like the easiest thing in the world.

And so bam, we had that feedback loop of like they asked for something; we called them two days later, we built it—all mind blown. And then after a couple of other conversations, they started teasing the city. I was like, "Can you help us make money?" And once again, we, Kevin and I, were like, "Not a lot of money, but we are barely alive."

So like how much money do you want to make? And there was like, "Any money." And once again, Emmett was like, "Really? Any money?" And they would do the math on some channel and be like, "Well, if we split that revenue with you on this channel, we could send you a check for twenty dollars a month."

And the people, the streamers, were like, "That's amazing." And it was like, "Oh really? That's amazing? Okay, well, you know." And I remember back in the day, like Kevin would handwrite and mail the checks. And so to me, it was just like the third example of putting yourself out there five years in, not in the beginning, five years in, caring about that customer, asking what they want, and then you start learning.

Oh crap, the core learning of Twitch was if you could help these streamers make money, and they could quit their job and stream the content that they love, they will make stuff that millions of people want to watch. Right? That was the core learning, and the only reason we accomplished it was because Emmett and Kevin called them and gave them—because think about it—that story could have been they asked the PM to do a report.

Exactly right. Go do a survey from your data science team, or you have you asked your investors to go do a report? Go do some data science? Like think about the million different ways. Yeah, they could have not personally cared enough to get on the call. Yes, and everyone around them would have been okay with those.

Yeah, those all sound more professional, right? Yeah, get a real report, you know. Yeah. And so I think what's interesting about all three of these stories is that they all start with just caring, just like giving a right about the people using your product, or wanting to use your product, or having a problem.

And so much value is created; so much learning happens so quickly. And we see so many Founders that are just flailing, putting so much effort and not getting results. Yeah, and it's like if they were just doing these things. Yeah, and it's not a question of money. I think a lot of folks think you need more money to get these insights.

And I again, I think what we're saying is, you know, maybe less money would help getting these insights. But you see what I'm saying? It's almost like money's tangential. Money's tangential. In fact, if you think about doing these things with a lot of money, that's how you get to the "let's hire, let's have many people between me and the customer."

The more layers there are between, the better we'll do, the smarter, the more we'll learn, the more people we can talk to. All right, so the final takeaway here is that if you really want to accelerate your learning, care about your customers. Go talk to them. Go spend time with them one-on-one, and you'd be surprised at one, how special they'll feel and two, when they feel special, how much they can help you learn about their problems and how to solve them.

It's often great to see you, man. Thanks.

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