Replay: Edu - What Is A Startup? An Antidote To Small Business Syndrome

Chris Saad: This is a remastered replay of

one of our most popular episodes. Enjoy!

Yaniv Bernstein: Once you have your product up and running and growing, you have a money printing machine.

But the money printing machine takes a lot of money to build in the first place. And so it's extremely sensible to say, well, okay. We're going to take a lot of money, and for a long time, we're just going to spend it on building this machine, building this machine, building this machine...

Yaniv Bernstein: We'd like to pretty much jump straight in and give you some good content on startups, but we thought we should on this very first episode quickly Uh self. So Chris, who are you and why should people with.

Chris Saad: I am Chris Saad. I'm a Brisbane born, guy did about a decade here in Australia, building companies and startups, and then moved to Silicon valley for 10 years, working on a whole bunch of venture backed.

I'm a serial builder of startups, products, brands, ecosystems go to market strategies. And I had a few claims to fame along the way, but the shiniest thing on my resume is I helped build some of the early Uber products . And now I'm back in Australia and advising a small handful of companies on how to avoid landmines and dead ends and do it. The Silicon.

Yaniv Bernstein: Fantastic. Thanks, Chris. So, yeah, I'm Yaniv Bernstein. Chris and I, we, found each other actually, on LinkedIn. We have similar views on startups and how to build amazing products. So my background is as a software engineer I spent 10 years at Google working across quite a few different parts of the company. Search maps, YouTube probably the most interesting thing I did there was working with. Content ID, which is YouTube copyright fingerprinting system does audio visual cover song recognition. We actually won an Emmy for that. So that was sort of fun. since then I've been a check executive at Ozzy scallops, but the VP of engineering on chief operating officer more recently I've done a whole bunch of advising investing, consulting, coaching and recently I've actually become a co-founder in my own startup called sir.

Chris Saad: So you're the guy we should blame when we get copyright take down notices on YouTube.

Yaniv Bernstein: Absolutely. One of the people you should blame. I'm proud of that.

Chris Saad: Excellent. So we post on LinkedIn a lot fairly short to medium Posts about our thoughts on startup life

and so we thought we'd try an audio version of that and see how that goes. And really, I think that goal is to cover the news and views of startup life bringing in the Silicon valley high growth disruptive venture backed perspective, which we've both observed.

A little bit ill understood or totally misunderstood. And so if we can bring some clarity to that, I think we've, done a good job.

Yaniv Bernstein: so let's jump in. And as you said, Chris one of the first things is to really understand what a startup is.

We feel that sometimes in

the

community there's actually a misunderstanding of what makes a tech startup, a tech startup. So. tell us Chris. How do you think of a startup?

Chris Saad: Yeah, it's interesting. Actually, I joined one of the Australian startup communities on Facebook and there was definitely it seemed a lack of understanding of what a startup was.

And I linked to Paul Graham's post about startups and. People told me to stop gatekeeping. And it turned out that very same link was in the about description of the group declaring that that was the, formal definition of startup. But really in my mind, The difference between a startup and a small business is a small business is designed to grow organically, to earn revenue and spend it.

And a startup is designed to grow inorganically, to raise capital and burn it. And so, really the key difference is the speed and the ambition it's to move really, really fast and to have really national or global ambition. And the final thing I'll say is that the word startup.

Implies the word tech. So it is, typically a tech startup or a startup that is accelerated or disruptive in some way, because, it uses technology to develop an unfair advantage. Even though it might be in finance or in dating or in alcohol, you still want to know about how.

Minimal user centric and tech forward way.

Yaniv Bernstein: Yeah, absolutely. I completely agree. That's great definition. And I think it's worth maybe breaking that down a bit and understanding

the

different paces and how they work together. So tech startups, what we've got here is a company that uses technology and generally takes outside capital.

obviously they're a bootstrapped startups. We can talk about them another time. But the fact that. These companies take outside capital and the nature of technology. Two things that go very strongly together. And I think one of the things that people who maybe are less experienced with startups don't understand is what is the point of a business that just spends many years losing money?

Why is that a sensible thing to invest in? And why is technology. At the core of it in that way.

Chris Saad: Yeah, that's right. it's all about framing, isn't it? It's about understanding, is it losing money or is it investing, growth? And so there's a very clear distinction between those two things, even though they look like the same thing.

that's actually related to tech actually. So let's unpack those two things. Technology gives you unfair advantages in terms of efficiencies and scale. So it allows you to deliver. A growing amount of value to a growing number of people where the costs are disconnected from the value created and potentially the revenue and profit made.

So the more people you serve, the cheaper it is to serve each person. And so you are able to create outsized returns at scale, right? So you have to get to scale in order for the software advantages to kick in typically. And so that's why it's okay to in a startup. To deeply invest in growth otherwise known as lose money, burn capital so that you get to that scale.

And you get this kind of just incremental cost to serve where a traditional business, where you're buying widgets from one guy and selling them to another it just gets more and more expensive to buy more widgets and sell them to another person. That's just a, kind of a linear relationship between the costs and the revenue.

Yaniv Bernstein: So, you I guess economic. Software enables really low marginal costs and therefore high margins on products that are produced and also nearly limitless scale. So the way to think about it nearly is once you have your product up and running and growing is you have a money printing machine.

but the money printing machine takes a lot of money to build in the first place. And so it's extremely sensible to say, well, okay, we're going to take a lot of money. And for a long time, we're just going to spend it on building this machine, building this machine, building this machine, and then one day.

And of course it's not as binary as this, but you know, one day you switch this thing. And huge amounts of cash. Start raining,

Chris Saad: building the machine and

building the user base. Right. And so it's all about growing that user base and measuring the right thing. Right is perhaps is obvious.

But if you're following the track that we're talking about, then the primary. KPI, the primary metric you're tracking is not revenue then it's user engagement, user growth. , rather than the, revenue number initially.

Yaniv Bernstein: Yeah. We'll, come back to metrics in the moment. Cause I reckon that's a really important topic and something I like to rant about a lot, for sure.

the interesting thing here is these are capital intensive businesses that require a lot of upfront. And then achieve massive scale at low marginal costs. And that is the perfect recipe for something like venture capital. And you know, I think it's interesting. There was actually one other industry outside of software tech that has a very strong venture ecosystem and that is pharmaceuticals.

And interestingly, although there are some significant differences between pharmaceuticals and. That fundamental economic fact is similar, right? you have to spend a huge amount of money upfront in research and development. And then once you've nailed it in the case of pharmaceuticals, you know, that drug works and has all the approvals, then the margins on manufacturing.

 Uh

Epic. Right? And so again, the idea of taking outside money for a quote unquote loss-making business for many years it makes a huge amount of sense. And so I think understanding that is actually at the core of understanding what a startup is. And then a lot of the other things that I think we planning to discuss this episode, including what you measure kind of derived from.

Chris Saad: Yeah, that's absolutely right. I love the way you put that I guess the accusation here might be, the same one I got in one of these startup groups is like, stop gatekeeping. You know, how dare you define or declare or limit what people think of as a startup and.

I just think words have meaning. And they were, they were created for a reason and they are shorthands to understanding each other. And I think it's absolutely fine for you to be building a small business and it's perfectly fine to not want to build a startup, but just call it the right thing so that we have a common shared understanding of what you're trying to do and how an investor might help you, how employee might help you, how your stakeholders might think about you.

it helps create alignment around you and for you. And so you need to pick the right words to kind of articulate your vision and your.

Yaniv Bernstein: I completely agree with that. I think it's even worse than that though, because I think beyond diluting the meaning of words and creating this alignment, it actually leads to very poor decision-making.

If, if you think you're a startup, but you are not in the sense that we've described, then you need to be running your business in a different way, right? In HIV taking investment in a different way, you need to be growing different. You need to be looking at different metrics. And so I guess maybe leads to this, term that we came up with in our chat before, which was small business syndrome.

Right? In a sense when there is a company that calls itself a startup, but doesn't operate like a startup or a company that operates like a startup without having the economics of a startup. And either way you end up with ultimately a business. Not going to be very successful or best, I guess you'd say successful, but a whole lot less successful than it could have been if you'd been operating it in the correct.

Chris Saad: Yeah, that's right. And actually, it's not just, are you going to be successful as a founder building a startup, but are you going to be successful as an investor investing in startups? you see a lot of angel investors and even institutional investors, VCs who are quote unquote startup investors but are really looking for.

Small to medium business metrics or giving guidance based on their historical experience with building more traditional businesses, which confused founders or they're investing in founders or companies that are. Actually acting like startups, they're a bit confused about why their capitalism delivering the results they want.

So there's just a lot of suboptimal behavior and investment that goes on that's okay. there's learnings to be had. And, each cycle is really valuable learning cycle, but there are ways to just add some efficiency to the, ecosystem. If we can strip out a little bit of this misunderstand.

Yaniv Bernstein: you know, one of the reasons I'm passionate about this is, when I look at the, the Turkey ecosystem I see so much good stuff happening, but I also see so many missed opportunities that come from this misunderstanding of, the game that's being played.

And feel like it's just so important for this country's future and every country's future, really, to be able to play well. In tech startups because everything and software is eating the world as I think it was mark Andreessen said, and he's absolutely right. fixing some of these misconceptions are really helpful.

so let's talk about small business syndrome and maybe break it down into some of the different pieces that form the syndrome. And, you've alluded to measurement and metrics a couple of times already, Chris. So reckon that's a pretty good place to start because I completely agree.

That's one of the challenges. Tell me a little bit about metrics and measurement and how that might differ from a traditional business and to our technology.

Chris Saad: Yeah. So as I mentioned you know, a traditional business wants to earn revenue and spend it. They want to quickly get to profitability so they can sustain their existence.

Whereas a startup wants to raise capital and burn it. Part of that means revenue is not the first priority. I want to stress here. I'm not saying revenue should be. Avoided or that it's not important, but it is not the first priority. what that means is need to raise capital in order to give yourself operating capacity in order to make decisions that are optimized for growth and optimized for a abroad model problem rather than optimized for a specific account and optimize for closing a deal and meeting the needs of any one particular customer setting the goal in the wrong place creates all sorts of suboptimal behaviors by the business, because if you prioritize.

Revenue then you will want to close every deal in front of you. You will want to focus perhaps even on the wrong business model, the B2B business model instead of a B2C business model and you will prioritize your roadmap around the needs of a particular customer. And that leads you to. typically becoming a technology backed services company where you're just racing around, trying to build what the sales team sold rather than a disruptive product led company, where you're selling what you built and better.

Potentially not selling to business, but disrupting legacy companies with perhaps even a direct to customer business. So really changes entire way you think about your go to market, your business model your priorities and everything.

Yaniv Bernstein: You talked about the importance of measuring user growth and other metrics like that over revenue, but of course, I am of a business is to make money at some point, right.

And that's true of a startup as well. the journey is different but in a sense, what you are trying to do to go back to the money printing machine is as you're building the machine, what are the things that you need to look at to make sure that you're on track, that you're building a machine that will ultimately be able to print.

you talked about user growth which I think is really important. there are a couple of other ones that typically come up that I think are worth breaking down. One of them is retention. And, there's sort of goes into the broader topic of product market fit, which I think is always a very rich and controversial one.

But I think it's one thing to get users. And of course it's another thing to keep them and for long-term sustainable growth, what you really want to do is create a product that is attractive to new users. But also it's extremely important that it's valuable to existing users so that they stick around.

And they don't leave. And so you get this compounding effect on the growth, where you add new users, you keep your existing users and say your total number of users grows and grows. I think one of the things that can go wrong early on, as you can focus on that top line growth, the new user acquisition without looking at your retention numbers, And then what happens is early on, you can sort of overwhelm the fact that. Your existing users are leaving by just adding more and more new users. But if you want to get to that money printing machine, you really need to be able to keep the users that you are.

Chris Saad: I agree. And really think it's important here to highlight that there are broadly speaking, two big buckets of business model and your behavior may differ or not between the two.

So there is B2B where you're selling to. Business customers who need to buy and then use your product, presumably either behind the scenes or to deliver something new to their users, their customers. And then there's B2C where you're selling directly to end users who can pick it up and use it. there are some really important distinctions between those two things, but there are also some really important similarities that are often overlooked.

And so, for example, What you just talked about, which is focusing on user growth. I would say user value and user value. Often a B2B company will focus more on the customer than the end user growth. And in many cases, if it's a B2B to C company, you actually. still want to focus on the end user growth, right?

And so it's not enough to sell it to your customer. You need to sell it through to their end users and focus on their growth. There's a startup that I've worked with, where they were providing services to students, and they were having quite some success selling it to university admins, but the end users, the students didn't want.

And they're just never going to succeed that way. you have to look through the customer to the end user and something which we don't have to talk too deeply about right now. But the other thing is oftentimes people will pick the wrong business model because of that focus on revenue because of a lack of capital in the market.

 An example I like to give is Uber didn't build. Taxi dispatch software, they disrupted taxi. And I think most companies in Australia would because of looking at revenue, looking at distribution mechanics that say, oh, it's easier to build software for taxi companies because they have money and they'll give us money.

And it's easier for me to talk to them, but that's the. $10 million, $50 million, a hundred million dollar business. Whereas disrupting taxi with a direct to customer business is a multi-billion dollar business. And another example might be, you know, Netflix didn't help blockbuster rent DVDs. I think this is a, just a fundamental mistake.

That SOPs make because of the focus on revenue, because of the focus on short-term gains and because of the perception that it's easier to go get that from businesses rather than going directly to customers and disrupting legacy companies.

Yaniv Bernstein: That's really interesting. And there's something on metrics I want to come back to, but.

Just to break down the jargon a little bit for some folks listening. So B2B to C stands for business to business, to consumer, right? and what that means is effectively you selling software to businesses, but that software faces their customers. Right. So in a sense, as you were saying, Chris, like there's a distinction between the customer and the user in that case.

And it can be really easy to say, okay, well, it's the customer. Who's paying me. It's the customer who makes the purchasing decision. Therefore, it's my job to keep the customer happy. The users are not my problem. you can see that with a lot of old enterprise software where, had the misfortune of using IBM notes used to be called Lotus notes, which is a sort of email and other stuff, client, which is absolutely a horrible experience to use.

But big enterprises bought it because it had incredible administrative. Capabilities. Right. So the customers where the it department of these big companies, they users was everyone at the company who needed email and all the users hated it. And of course, IBM notes was a good business for a long time, but eventually tools like Gmail outlook whatever you think about outlook delays, maybe it's better than notes focused on that user experience and eventually one.

So maybe we should talk a little bit of. The importance of user love and why that soft St and concept is so important to building a multi-billion dollar business these days?

Chris Saad: Part of it is the internet, right? There are incredibly beautiful, delightful tools that users can pick up and use without permission.

You know, you put your credit card in, maybe there's a free tier, in fact you know, a good example here is. I don't need to use my internal corporate clunky piece of crap. Because I can just spin up a quick slack group and start chatting with my colleagues over slack.

So it's, no longer. Sustainable. It's no longer something you can get away with to build a product that is optimized just for the it buyer, because the most modern B2B products are actually sold directly to the end user and it only finds out about it later.

I guess the broader point I'm making is. When you're focusing on the right metrics, which is user growth, even when your product is ostensibly being sold to customers you are actually focusing on the right thing. You're building something that, will actually stick and potentially even grow from the bottom up in a user base.

And so it's a really important to be measuring the right thing, even if you might think, oh, well, I'm going to beat a beat business. And so what I need to be measuring is customers and revenue. What you probably also should be measuring is end user engagement and growth on that side as well.

Yaniv Bernstein: absolutely. I mean, I think these two classes of metrics that we've talked about so far, in a sense, I've referred to them as acquisition and retention. It comes down to. Can you create a product that people. Want to try.

And then once they try it that they love it and they stick with it. those two things are pretty much what allows you to get that sort of money printing sort of growth. There's one other class of metric that I think is interesting and more controversial. And I think, especially, with your experience at Aruba, Chris so we talked about how revenue itself is not the best thing to track.

especially at these earliest stages but there is a sort of a subclass of financial metric, the unit economics, Which is how much money for each user you have, how much money does it cost you to get and keep that user and service them versus how much money do they make for you. So let's say.

$30 to acquire the user through marketing channels or sales or whatnot. And then another $20 to service them over their lifetime. If they on average, pay you a hundred dollars, then you have positive unit economics, right? You pay $50 for the customer and they give you back a hundred dollars. If you pay $50 for the customer and they finally give you $30 back over their lifetime, then you lose money on each customer.

And the more you grow, the more money you lose.

And so I think, some startups have failed at scale because they've grown without paying any attention to the unit economics and, anybody can grow a lot. selling a dollar for 90 cents. So you do have to think about that aspect of economics.

But the confounding bit is early on. Your unit economics might be. I believe Uber's certainly where, in some cases I'd love to hear from you on that, Chris. So it takes some nuance here, but definitely it's something that is important to keep an eye on.

Chris Saad: is a really good point.

while you don't want to focus on revenue broadly, you do absolutely want to focus on unit economics, specifically this kind of per unit, as you described, how much does it cost to acquire and how much do you get back from a customer now, as you said, initially, It's almost guaranteed that your unit economics will be negative.

you will be spending more to acquire a customer than they may be initially worth to you. And again, I'll use the phrase that's investing in growth. that's okay. It's absolutely. Okay. In fact, it's typical but what's key is that you understand. How much you're investing in growth. Are you investing that 20 cents or 30 cents or 50 cents?

How negative are you? And you may be a hundred percent negative because you're giving the initial product away for free. But the other thing to keep in mind is that startups run on this thing called aggregation theory where traditional businesses try to aggregate suppliers and sell one kind of thing to a customer, whereas startups, they try to aggregate users and then they add more and more things that they sell to that user. And so as you improve your marketing, As you improve the quality of your product as you, improve the conversion rate of your onboarding flow, as you improve the stickiness of the experience, as you add more features, as you add more pricing tiers, and as you add whole new capabilities for that existing user base, your unit economics start to change dramatically and going all the way back towards the beginning of this conversation, Things start to flip and your, incremental cost to serve changes.

And so you blast through the negative unit economics and get into very, very positive unit economics. for a great case study in this. So you want to look at Amazon who was losing money from decades. But when that, flip occurred they became unstoppable you need to have line of sight to how you're going to make the unit economics positive.

You can't ignore that for too long and, not have plan for how to.

Yaniv Bernstein: comes down to maybe thinking a little bit about how do you see into the future?

And I actually think that's another one of the things that can be very different between a startup. I am a traditional business. And as part the small business syndrome, which is the future is ultimately unpredictable. But it's unpredictable in different ways. And one of the things I've seen in this syndrome is fixation on forecasting and predicting growth and trying to get accurate about that.

And I've found that in tech, that is not. Accurate, no helpful. Trying to predict how much your revenue is going to grow or even your user base over the next 12 to 18 months is horribly inaccurate and trying to focus on that forecast. Well, turning that into a target on its own can be really quite misleading, but a startup still needs to be able to predict things about the future.

for example to your point about unit economics you might have bad unit economics now, but you need to be able to predict credibly. How you are going to make those unit economics positive over time. maybe we should talk a little bit about how do you do that and how do you think about it and how does this then come into company planning, deciding what to focus on and ultimately strategy?

Chris Saad: very complicated. entirely depends. What is keeping your unit economics negative, right? Is it the cost to acquire a customer through marketing? Is it your sales team? Is it the sales cycle? Is it how sticky your product is or what the underlying cost to serve is, and, and so on and so forth.

But one of the ones that. Kind of stresses me out and it's particularly egregious in the Australian community is because there's a focus on revenue. There tends to be a focus on the B2B business model. And then there tends to be a focus on the sales channel building a sales team and selling.

 You up for a lot of contractual obligations and then you end up building kind of a, technology that doesn't serve any particular use case very well. And so you have to build a big thick customer support layer those sequences events, what they ended up doing is they ended up having you build

what is called a technology backed services company. So you're essentially an agency you're essentially an it department for the big accounts that you've closed. And basically building what the sales team sold and that. Destroys unit economics, because if it costs a service massive to go through the sales cycle, to scope, to figure out the Delta between what you have and what they need to, configure.

 You want to do to economics will never come out of that hole. It's a disaster. And you might even have like multi hundred thousand multimillion dollar deals, but the economics suck and you're never going to get out of that hole. Whereas the other model, which is really the only way to scale is to first decide who are your customers?

And what specific, very specific problem they have that you want to solve and building a product that addresses that And then finding a relatively low touch way to put it in front of users and have them adopt it, whether they're businesses or end users.

Yaniv Bernstein: I really strongly agree with everything you said, Chris. So I think from my point of view, one of the things I see happening is, you know, as we know, it affects the unit economics, it affects the quality of your product, but it's not necessarily terminal. And in a way that in itself is a problem.

Because I say is a lot of companies that actually reach pretty good scale and they become. Half billion, billion dollar companies. And I can feel strange to criticize a company's approach when it's actually achieved really quite a lot of success. But when I look at a lot of these companies, what I see is that they could have been $10 billion companies.

If they'd focused on the users, if they'd focused on the unit economics and instead they're $1 billion companies. Although it feels strange to criticize the success. you say is the missed opportunity and you talked earlier on about Uber and Uber could have been a taxi disruptor.

SaaS provider. But instead they revolutionized the texting industry, right? if they'd done the form that could easily have become a billion dollar company, you wouldn't have heard of them. Right. And they would have missed the opportunity to really have that massive impact and reach that massive scale.

And so, you see a lot of that here and also has a downstream impact on the whole ecosystem, because if you look at venture capital, so I guess. Add some complexity to my money printing machine analogy. What you have here is the opportunity to build a money printing machine, but you don't know until you've invested a lot of capital, whether that particular approach will actually result in a money printing machine.

And so the way venture capital works is they make a lot of smart, but. But they have that's in the sense that they don't know which of them will pay off. Right. And make many investments in many startups. And what they expect to happen is that they will lose all of their money on most of those startups.

They simply will never get to that point of becoming a money printing machine, but the one or two that do. That become a $10 billion or $50 billion business type type for all of those failures and then some, and so the whole economics of the entire ecosystem actually depends on that being these gigantic successes.

Right. So if you lower the ceiling, if you say, instead of the typical. Outside success being $10 billion. It's $1 billion. That's actually sucking a huge amount of vibrancy from the entire ecosystem. So it's quite pernicious, right? Because it doesn't look like failure that in a subtle way, actually is.

Chris Saad: you have to look a little further out on the horizon to see the failure because What often happens is you will build a really solid business for a period of time. But eventually someone, somewhere, typically a Silicon valley company will be funded very, very well.

To build a really solid, scalable product led business that will ultimately come and disrupt you. And so at best you become the regional player that gets acquired out of existence, or you will be disrupted by another disruptor who builds the YouTube or the Twitter or the, Uber that is the massively scalable play.

and you're right. It does seem strange or arrogant or you know out of touch to criticize. seemingly very successful businesses. and I think it's especially, so from a kind of an Australian cultural context of like, who do you think you are? Or, why isn't that good enough for you?

Or, you know, we do it our way. You can imagine all sorts of people reacting in all sorts of ways to what we're saying, but we have to stress here. The purpose of this podcast is to really give you the Silicon valley perspective. So the perspective that's worked very, very well for the household names you've heard of and use and love or hate.

And. That is a counterintuitive and decidedly different perspective than the one we're most familiar with here. Now you may love it and you may hate it. You may despise it, but it is different and it is worth understanding and it's in some cases worth learning from and mimicking.

Yaniv Bernstein: Now the interesting thing here is, you know, you talk about it is this like in Australia, Thing. And, you know, one of the cultural attributes that we often consider as total poppy syndrome, right? Where we don't like anyone to get too successful. But actually what I, see in the, text saying here is nearly the opposite.

it's sort of a short poppy syndrome. where are we? Put certain companies up on a pedestal, despite the fact that I have not been spectacularly successful enough. Yeah. Again, you can call it arrogance, but actually a question of the tyranny of low expectations, right? Our expectations are not elevated enough.

And you know, when you look at, I suppose we've avoided naming companies so far, but you look at at Wesleyan and more recently Canva which I would say The two exceptions that nearly proved the rule that, by far the biggest companies here by valuation and in the tech sector, and also the ones that follow that traditional Silicon valley playbook the most.

And so you can see what you can achieve as a global player . If you dare to drain, right. And don't follow that more traditional business playbook.

Chris Saad: I remember playing footy in the streets of San Francisco with Mike Cannon Brookes way back in the day.

sure. It doesn't know me from a bar of soap now, but we were hanging out with the Michael Arrington's who found a tech crunch and the really interesting. Web 2.0 founding community, if you will. And we just learned so much from that community about how to behave and how to execute he absorbed that applied his own ingenuity and absolutely crushed it. And there's just so much to learn from that pattern

Yaniv Bernstein: fluently. And I'm sure Mike's listening to this podcast, so hi Mike, but yeah, exactly.

Right. And you know, in fact, you sort of, talked about arrogance before and you also show. the challenge when you're building this sort of software back services company is you're, dancing to the tune of your customers and you are building what they tell you to build. And, you sort of hinted at the fact that tech startup doesn't really build what is told to build it, listens to it, to use, as it understands that.

But then it decides what to build. So I wonder if you've got any thoughts that sort of enlightened arrogance around, what that means, then this might be sort of a good place to start landing the plan for this episode

Chris Saad: You know, we've been talking both of us about how our comments can be interpreted as arrogance I don't think it's arrogance. I think it's confidence. I think it's ambitious. And I think it's discipline and that's a different thing, right? Knowing what you're trying to build and how you're trying to build it and all.

I want to stress this again. It's okay. If you're not following this pattern and it's okay. If you don't want to follow this pattern and you're actually following a different pattern, it's just important to know which pattern you're following and follow it well. so how do establish this discipline, this focus?

Above and beyond everything we've already discussed too, around this kind of focus on revenue, this focus on customers and building what's been sold. I think the last thing we should touch on today is the other root cause here is an underinvestment and a misunderstanding in the role of product managers.

And product. And what you see is a lot of people calling themselves product managers or product owners or hiring business analysts or CTOs, when what they actually need is again, in the context of a Silicon valley style tech startup is a Silicon valley style product manager who understands Silicon valley style product, which is to say, That they don't listen to any particular customer or user, but try to triangulate the needs of a persona of a market based on a wide range of data, competitive analysis.

Market analysis, quantitative and qualitative data. The goals of the business and business model telemetry from the product, a whole range of data, not any one customer contractual obligation, and then to develop a principled roadmap, a focused principled roadmap that ladders up to some kind of high quality product straps.

A beautiful, delightful self adoptable retainable product, that's really hard work. And it requires finding product managers with taste, with experience, with Croft and empowering them to lead and to drive alignment in the business. And then by extension allowing and empowering the product to lead in the go to market motions and in the growth of the.

Yaniv Bernstein: I'd even build on it. And so when you say a lot of the. people in product management roles. One of the big understandings is that they see themselves as being in the solutions business. Whereas actually I would say the, lion's share and the most important part of the product managers draft is being in the trouble and business understanding and clearly articulating a problem that needs to be sold.

And then when it comes to building a solution I mean, this is multiple episodes on its, right? Because it's stats, talk about lean startup and agile principles, but building a solution should not be the product managers. So presented that is actually a collaboration between product management, product design, and engineering and marketing, and you know, many other functions to actually explore that solution space.

The product manager is the absolute master of the problem. Of understanding what it is we're trying to solve and what approach they're going to take to solving it and what solution we're going to use, but how are we going to tackle that problem?

Chris Saad: Yeah, the

thing is, you know, as I think people hear you there's still a risk that problems that they're trying to understand and solve are the ones that came from sales for a customer.

And it's important to define. the one problem, the right problem that will carry you through to a, wide range of users. and really, have you focus on that problem in a sustained way, and then identifying sub problems, within the product. But as you say, this is Probably another five episodes worth of discussion that we need to have. And so we'll, start to unpack this a lot more. When we have more of these fun episodes hopefully this. You know, an interesting conversation for you all listen to it. You know, I think this only works if people like it and resonate with it and, react to it.

Otherwise I think you and I will both lose some motivation. So hopefully anyone listening can drop us some feedback in whatever channel you can find us on. And let us know what worked for you, what didn't work for you. Check the notes that are around this audio that you're listening to and follow the links and, drop us a line subscribe and let us know what you'd like to hear.

Yaniv Bernstein: It's been so much fun Chris on. I hope everybody enjoyed that. Like all content creators, we are deeply insecure.

So please, please affirm our existence and give us that feedback. We would love to hear it. Thanks so much for listening and thanks, Chris. That was a heap of fun.

Chris Saad: Tons of fun. Thanks for pushing to get this done. And I look forward to doing it again.

Yaniv Bernstein: All right. Cheers man.

Chris Saad: Bye-bye.