Justin Mares

Think about the last time you were at a restaurant. Great meal, enjoyable conversation, a few drinks and a fun night out. You’re enjoying the company, the time away from work, the background noise and the conversation.

Then the check comes. Confusion ensues.

Even though we can print organs, fly to space, create self-driving cars and eradicate smallpox, for some reason splitting a check among 3 or more people still remains nearly impossible.

Plenty of times I’ve wondered why this is. Splitting a check should be relatively straightforward – each person takes what they ordered, adds a 20-25% tip and pays that.

The act of splitting a check is so complex because it involves other people. When emotions get involved in otherwise rational decisions, they quickly make a simple situation more complex. They force new decisions on you. Do I want to be a nice guy and pick up the check? Can I get away with having the bill split evenly, even though I ordered the most expensive item on the menu? Can I under-tip and hope nobody notices?

These internal questions add layers of emotional complexity to what is otherwise a basic equation. Your answers to these questions can depend on how you’re feeling at the time, whether or not you recently got paid, how your relationship with your girlfriend is, and so on.

Emotional complexity is everywhere: hiring, firing, working with others… The ability to successfully navigate this complexity can literally make or break your career. Rationally, you hire someone to do a certain job. You set goals, benchmarks and metrics to help judge whether or not someone is meeting expectations and doing a good job. Again, rationally, if they aren’t hitting the goals you’ve established, you should part ways. No hard feelings.

We all know this isn’t how it actually works. I’ve been fired, seen others fired, and recently been the one actually doing the firing. For those that haven’t done it yet: it sucks.

I’ve been laid off once and fired twice. Once because the company was going through some hard times, another time because I took off 18 days in a row (sorry LA Fitness), and another because I underestimated how much work 20 hours a week was when you’re trying to get a company off the ground.

Being fired was not fun, to say the least. As the one being fired, I didn’t think rationally about how I was late on a few projects, or how my last project wasn’t exactly my best work. My immediate thought was that it was personal – they didn’t like me, I had somehow offended the wrong person, I would never be successful in a career, etc. My emotions got involved and made the firing more painful and personal than it should have been. It removed the possibility of treating it as a learning experience, and instead made the event a blow to my self-confidence.

As hard as they can be, such situations can also be an advantage. In the case of getting fired, I was able to get some clarity (once I got over the emotional aspect) about what I wanted to learn and what I wanted to do with my life.

This can apply to other situations, like finding a job. Rationally, a hiring manager *should* go with the most qualified candidate, but will often hire someone they know and like. What this means for the “unqualified” candidate – someone without the perfect resume or the right connections – is that you can get a job by introducing emotion to what would otherwise be a purely rational choice. Take them to coffee, do informational interviews, keep in touch via email, etc. Build a relationship instead of a resume to turn a rational decision into one based largely on emotion.

There’s nothing incredibly insightful here that others far smarter haven’t talked about. I guess my main point is that I’m constantly surprised at how many decisions in the world are driven by emotions and relationships instead of the intelligent, rational adult mind that I thought dictated most things. Envy, greed, fear of missing out, kindness and reciprocity are all very human emotions that have a real impact on how the world works. And I didn’t realize that until I started thinking about how to split a check.

As a business that’s trying to make money, you live and die by this evaluation: LTV > CAC.

For those that don’t know what the above means (aka me 6 months ago), it’s a more complex way of saying that in a real business, you make more from your customers than you paid to get them. Their lifetime value (LTV) must be greater than your cost of acquisition (CAC).

Let that sink in for a moment. As someone who (presumably) wants to make more money, there are two clear ways to get you closer to that Ferrari/Thailand trip/guitar studio: lower your CAC, or increase your LTV. Lowering your CAC involves things like pursuing virality, building referral engines and testing new marketing channels (which we cover extensively in Traction Book). I’ll cover that more in future posts.

For now, let’s take a look at how you can increase your LTV. Here’s a thought experiment for a bootstrapper running a SaaS software business. You hate paying for software and figure others do too, soo… you are thinking of pricing your app at $10/month. Let’s say the nearest comparable product sells for around $29/month. Where should you price it?

Let’s take a look at something completely obvious:

Yes, charging (roughly) 3x more per month means you have (roughly) 3x more revenue at the end of the year with one customer. Now before you hit the back button, let’s take a look at how this impacts your CAC.

We’ll assume for the purposes of this thought experiment that you’re somewhat of an Adwords guru and can buy clicks at $0.50. Let’s also assume that of those lucky individuals who click on your ad, 15% of them are blown away by your landing page and the value you’re offering that they sign up for a trial. Of those, 20% are so amazed with your product that they sign up for a paid account. That leaves you with a CAC of $16.67.

Not bad! In this (admittedly optimistic) scenario, you’re looking at about 1.5 months to recoup your investment in acquiring a $10/month customer, and about 2 weeks to recoup with the $29/month plan. Again, pretty intuitive.

What’s not intuitive is just how large an impact this can have on your ability to acquire more customers. Let’s say you are running your SaaS business as a bootstrapper, and don’t have oodles of VC money. In this case, you’re only reinvesting revenues into acquiring more customers. Where would this put you after a year?

Nice! After a year of work, you’re pulling in $1420 a month. Depending on your expenses, this might be enough to quit your day job – just stay away from San Francisco or New York.

Now, let’s compare the above to where you’d be if you charged $29/month and reinvested revenues into user acquisition. You know about things like compounding (you’re smart), so you take a tentative guess that charging 3x would probably result in something like 10x revenues. Let’s see how the two approaches stack up:

Um. What? That’s not a super useful comparison. Let’s try again at 6 months:

3 months?

Finally, a useful graph! Who would have thought that after a year, charging 3x more would have resulted in 819x more monthly revenue than otherwise. That gets you to your financial goals a lot faster. After just 6 months, you’re pulling in nearly $36k per year!

Making real money as a business changes a lot of things. More revenue allows you to build a real business where you have the resources to invest in things like better support and new features. One of my mentors (a guy who’s built 5 successful software companies) told me that when a company would object to his prices being slightly higher, he’d respond along these lines:

“At $5/month I can’t build a real business. If I can build a real company, I can help you to blow up your business. I can provide support, product upgrades, and create more and more value for you. At $5/month, I can’t do anything real to help you build your business.”

Something to think about when pricing your next app.

Want access to the spreadsheet I used to calculate the above metrics (CAC, LTV, compounding revenue growth)? Sign up for my free mailing list – no spam, emails 1-2x per month, occasional goodies I don’t post to the blog.

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Thanks to the guys at Lean Analytics for letting me get an early copy of their fantastic book, which inspired a lot of this post, as well as Kevin Espiritu and Nate Speller for edits.

I was sitting there at lunch, sweating, staring at the stranger across from me. I had no idea what to say, no interesting topics to bring up. The lone thought racing through my mind, other than wishing this would end, was the disappointment I felt in my inability to make simple conversation for even 10 minutes.

That was the first day of my social workout.

Two years ago, I made a conscious effort to work on improving my social skills. Around the time I started Roommatefit (while still in college), I realized my mediocre interpersonal skills weren’t going to help me succeed. I needed to get a lot of help from others smarter than me, and talking to people via email and Twitter wasn’t going to cut it.

Beginning my junior year, I made it a habit to grab coffee with at least 1 new person each week. The summer I was in San Francisco, I got coffee or lunch with a new person 3x per week, and went to a startup event once a week with the goal to initiate at least 5 conversations. At the beginning it was horrible. I would jump from awkward conversation to awkward conversation, have one good one, and follow it with a painfully strained exchange of sentences that some would characterize as talking. But I practiced, and I improved.

I know since I consciously started working on this I’ve been a lot happier. Today, for example. I went to a lunch with a friend, an acquaintance and a few other people I didn’t know. Two years ago, such a situation would have made me nervous – I would have been unsure of myself, forced conversation and had a horrible time. Now, it’s not a big deal. I had a great time, met some cool people and am grabbing coffee with one of them later this week.

Being a pretty awkward guy has also helped me relate to others who may not have spent as much time practicing their social skills. I understand how others are feeling when meeting someone for the first time, and it’s easier for me to lead conversations to a place where both parties are comfortable. Even a slight improvement in my social skills meant a big leap in my ability to connect with people, which has led to new and better relationships.

Now, although my social fears are (mostly) gone, I’m still working on them. Telling better stories, using more pauses, and adding verbal inflection (I’m a pretty monotone speaker), are all things I need to work on. I’ve learned that your social skills are like a muscle – you can let them wither, or you can work on making them stronger. Improving them followed the same pattern as lifting: you suck, you suck, you see some improvements, you suck more.You don’t have to be that quiet guy forever. After working on this for 2 years I have met more than 300 new people, many who have become friends.

The point of this isn’t that I’m some amazing socialite. I’m not. The point is that I’m better socially than I was, and happier for it. Working on my social skills have had a larger impact on my life than anything else I’ve tried to improve.

Thanks to Nate Speller and Dan Shipper for reading drafts of this. And to all my lunch and coffee partners for their patience over the past two years.

For two years now I’ve been drawn to starting companies. From my perspective it looks like there are few better ways you can have an impact on the world. Success (seemingly) requires hard work and smarts, less so connections and political savvy (though they help). Media, politics, large corporations all have billions of dollars of entrenched interests to keep the top dogs where they are. Startups less so.

Though there are good reasons to do do them, I’ve come to appreciate just how difficult the mental side of startups is. The experience of starting a company is the hardest thing I’ve done so far. There’s not much that can compare with the ups and downs, the emotional attachment you have to doing something that hasn’t been done before. And I’m not even tackling a problem like sending rockets into space, or changing payments on the web.

After meeting a lot of people in the space, I think that it is almost more important from a career standpoint than anything else. You can’t do well if you’re constantly focusing on negatives, if you have difficulty finding happiness in your day-to-day, and if you’re not in a good place emotionally. This stuff is hard, and being miserable throughout the process is a sure way to get out of startups altogether. I know too many talented, ambitious people who don’t have the mental makeup to stay involved in the game.

Gabe talks about this a bit with his Startup Career Path post, but I hear a lot of people talking about startups as if they are a one-shot deal. As if their current thing doesn’t work, they leave the game. Even if you don’t get out altogether, being miserable while being in startups is hard. It sucks, and it makes people less effective and productive, to posts like this.

The more people who can be happy and start companies, the better. If humanity is going to advance more quickly, we want more smart people starting companies to solve real problems. This means we need more people who can mentally cope with the ups and downs of striking out on their own. This is valuable even for those that fail, as starting a company leads to drastically accelerated learning.

There’s still a lot for me to figure out, but I’m starting to believe that personal development and growth should be a focus before (and during) the process of starting a company. Getting your head right should be as important as anything else. After all, if you succeed at the cost of being a happy, healthy, real human, I’m not sure that’s a positive. This is why I’m working hard to do things like the Daily Practice. To focus on the good things in life and try to take a long-term view of things.

There are so many things I want to improve: my writing, strategic thinking, productivity, health… things most people struggle with. What I don’t want to deal with is a life of work that makes me miserable and unhappy. And too many times I worry that’s where I’m headed.

Thanks to Nate Speller for reading drafts of this. I’d love to hear what you think of this type of post vs more marketing-related posts. Thoughts?

To start the new year, I’ve been thinking a lot about playing for the long term. About applying strategic thinking to both my life, projects and my blog for the first time ever.

I’ve learned a lot over the past year. One of the biggest lessons I’ve learned (that I touched on in Reification) is just how much stuff is fluff, and is guided by poor, short-term thinking. I’m talking about media’s reaction to startup launches, “new” SEO/marketing tactics that read like the newest flavor of the month, anyone calling themselves an entrepreneur, and the hundreds of people starting a blog working towards passive income.

I finished the book Mastery last week. In the book, Robert Greene examines the lives of some of the greatest individuals in human history: thinkers and doers like Ben Franklin, Charles Darwin and Leonardo DaVinci. One of the biggest takeaways from the book was realizing just how long their accomplishments took, and how much work it took for them to achieve any level of success. For example, Paul Graham was bouncing around, painting and doing consulting until he was 30, and didn’t start YC until he was 41! That means for 10+ after college years he was hacking, painting and developing his creative skills. Then, for 11 more years he was applying that creativity towards his own startup and thinking about them in general. Only after all of this did he have his breakthrough idea about how startups worked and started YC – a full 7 years after he sold Viaweb. 20 years after he graduated college.

20 years. That’s a timeframe I can’t begin to comprehend right now. 10 years ago I didn’t even know what a startup was, much less how one worked. Unfortunately, I think a lot of startup thinking is focused on the short-term. People forgo their health, friendships, relationships and happiness chasing a short-term financial payoff. I’ve felt myself falling into this before. It’s easy to do: every time you see a story about a 26 year-old worth $x million, it’s easy to think “that guy has it all”. This type of thinking seems too common in the Hacker News/TechCrunch driven startup culture of funding, disruption potential and acquisitions. This type of news can even make it seem smart to play for the short-term: raise a big round, hire celebrities, etc.

What Robert talks about in Mastery is different. His big point is that to succeed, you must subsume your ego to strategy. Let your goals dictate your actions, rather than the latest emotion you’re reacting to. This is the difference between copying a competitor’s latest feature, dropping other priorities in the process, and focusing solely on executing your company strategy. This is playing for the long term.

I’ve thought about it in the context of this blog lately. I could probably focus on writing better headlines, blogging more often and covering prominent topics to boost readership. I’ve decided I don’t want to go that route. I figure no matter what happens, if I keep writing 20-30 posts a year for the next 10 years of my life, my audience will grow no matter what I do. I’ll become a better writer and hopefully have things to say that others will respond to.

This approach brings with it a sense of calm. I don’t have to worry about traffic stats, subscribers or tweets. It allows me to let go and focus on the hard work of improvement, less on the shallow results. I can let go of the short-term, the daily worries about success, the ups-and-downs of vanity metrics, and focus on the long-term hard work. At the very least, I can try.

My recent post, Entrepreneurship and Envy, has gotten more attention than anything I’ve ever written. In the process of reflecting on it, I started thinking about what causes envy in the first place. Why do I care so much about the success of others? Why is it something that bothers me and I have to work to overcome it?

I think a lot of it comes down to how you define yourself. It’s easy to make small amounts of progress towards starting a company and call yourself an entrepreneur. The title comes easily, the work less so.

I’m starting to realize all the posturing, the self-titling, is harmful. It isn’t real and has no impact on a reality. Roommatefit will not succeed or fail based on whether or not I call myself an entrepreneur. Startup success occurs in the sphere of reality, not in the fluctuating world of Twitter bios, business cards and LinkedIn profiles.

For me, this is so easy to do. Thinking about selling a company and what that would bring – money, success, happiness – none of those thoughts are real. The fake titles, the hollow accomplishments (1000 Twitter followers) – this is how envy begins. You build yourself up as someone and expect reality to conform. When it doesn’t, when the titles and expectations and things you’ve built up in your mind don’t happen, it impacts your actual wellbeing. Reification. Things that have never happened, impacting how you feel about yourself on a daily basis. And that sucks.

Doing this can also be strategically limiting. Define yourself as an entrepreneur and it makes you reluctant to take a job – even if that job may be the best move for you at the time.

How am I trying to deal with it? By going back to philosophy, by being present. By focusing on putting in the work and trusting that results will come at some point. By punching the clock at the end of the day, knowing I’ve done all I could to move forward in the 24 hours I’ve been given.

True happiness is.. to enjoy the present, without anxious dependence upon the future – Seneca

One of the more pervasive themes in startup-land is the “founder as world changer”. There’s a strong idea (exemplified by posts like these) that those who start companies do so for a shot at changing the world – a shot at doing something transformative and in the process becoming important and influential.

I’ve been thinking about this a lot lately – not only the mentally short time horizons we give ourselves (which is something I plan to write about later), but also about whether or not starting a company really maximizes your chance to make an impact.

Spending a few months at home with my family was fantastic, and also opened my eyes to something I had forgotten about – the average family watches a lot of TV. People consume content all the time – books, movies, TV shows, music, blogs, social media, etc. In a way, you could view some of the most successful startups (Google, Apple, Facebook) as so transformative because they changed the way we accessed content. Google made content searchable and accessible from a central point, Apple connected us all to a constant stream of content in our pocket, and Facebook allowed us to create and digest social content that was previously offline.

If you’re focusing heavily on making an impact, my thesis is that you may be better served creating a media or content property than doing a tech startup.

Here’s why. Major hit TV shows (think The Office, Jersey Shore, etc.) have a larger impact on how culture thinks about topics than just about anything. Other forms of content (blogs, podcasts, videos) also have more of an impact on the way people think than do most startups. With so much content available, much of it for free, it’s easier than ever for individuals to pick and choose what types of media they want to engage with. Over 4 billion videos are watched each day on YouTube, each view representing a decision made by a viewer.

This is even more true for creatives, like artists and authors. Because content can spread so rapidly, and because there’s an incredible demand for more and more of it, we’re seeing ideas spread faster than a company ever could. Tim Ferriss has had a bigger impact through his books than he could have by starting almost any company. In another example, it will take a company like Knewton some time to catch on and change the education system. In the meantime, Peter Thiel, a prominent media figure and venture capitalist, has added his thoughts on the college bubble to the conversation, can spark discussion and change the conversation around the value of college with his comments about the “education bubble” and funding of the 20 under 20 program. Seth Godin is a far more successful author and thought leader than he ever was an entrepreneur.

Media is pervasive because it (intentionally or unintentionally) frames the way people think about issues. When a show like Teen Mom can force teenage pregnancy into the national conscience, they have the opportunity to frame it.  The question shifts from “why is this a consistent feature of lower-income communities?” to “is MTV right to exploit these young girls for entertainment?”. Books like the 4 Hour Workweek frame the way you think about wealth and your job. It doesn’t allow you to ask if you actually need to escape a job you like. Or if the purpose of life is to work 4 hours per week. It starts with an assumed premise (nobody wants to work 40 hours, no matter the job) and builds on that assumption, creating a false sense of what the populace wants that infiltrates the culture.

Startups can change what you do. Media can change how you think.

From an emotional standpoint, startups are really, really hard. Every day I’ve faced emotions and challenges that are completely new to me – hiring, setting company strategy, motivating a team and making product decisions.

On top of the emotional challenges, part of your “job” in a startup is to stay current with the latest technologies, startup advice, Paul Graham’s essays and things happening in startup land. As part of this, you will hear about people far more successful than you are. Far, far more successful. And sometimes, it kind of sucks.

It can be easy to occasionally feel envious or jealous of other’s success. Not a constant, obsessive feeling or anything like that – just enough of a problem where I recognize that this is something I have to deal with. Where I’ll read something on TechCrunch and think “wow look at how successful company x is.” I haven’t seen much written about this, but suspect (due to conversations I’ve had with other founders) I’m not alone in thinking/feeling this way.

After dealing with this for about a year, I’m doing far better. I rarely now experience feelings of envy for other’s successes, though some weeks are harder than others. There are a few things that have helped me tremendously to deal with jealousy and envy.

Focus on my friends and relationships. I’ve been incredibly lucky to have a great group of friends that are supportive, fun and smart. Even if I was to have a huge startup exit, these are people I’d still love to spend time with every day. I don’t know that everyone can say the same. Even if they can, I’m still incredibly lucky to enjoy the company of such awesome people every day.

Time freedom. Being able to wake up whenever I want, work out in the middle of the day, play basketball in the evenings and take lunches with friends is really enjoyable, and something most people don’t have the freedom to do. I can take midday walks, work whatever hours I want and still be productive. That is a real gift. Regularly interacting with people outside of tech/startups has also helped me realize how lucky I am to have such freedom with my time.

Career freedom. This might be a heavy bit of rationalization, but in a way not having a massive success is freeing. Success, while awesome (I’m sure), also locks you into things. If you have a successful exit, pressure is greater for your next company. If you’re the founder of a hot startup, the pressure is to improve upon that success. Think how the founders of Twitter feel – millions and millions of users, one of the most popular products in the world, and the startup community is hating on them for lacking a business model. With no success under my belt, I have complete freedom. If Roommatefit doesn’t work out within the next year, I can take time to travel, work with anyone I want, start something new, take on new projects, or work a job and relax for a while. Such freedom of choice shouldn’t be taken for granted.

Focus on the positives. There are so many good things about my life, it’s sometimes hard to appreciate just how good I have it. I’ve found it helpful to focus on things I’m doing well with, and be grateful for what I do have. Am I meeting interesting people who I enjoy spending time with? Am I healthy? Having fun? Learning new things? Taking risks? Building good habits? Asking myself these questions helps put things in perspective and realize I’m on a good path, even if it doesn’t lead to an immediate $1b valuation.

Get mentors. This is critical to dealing with the inevitable feelings of self-doubt, questioning and uncertainty that come with trying to start a company. My personal mentors have helped put things in perspective and keep me sane, while also giving great business advice. This is probably the most helpful thing I’ve found to deal with feelings of envy and doubt.

Focus on the work and not the results. Steven Pressfield uses a great quote in the War of Art: “we have a right to our labor, but not to the fruits of our labor”. This is really, really hard to do. However, I’ve been working to trust the fact that if I work hard and stay on task, good things will happen (this is especially true when writing a book). My focus right now is on building skills and discipline with the projects I’m involved with, and not as much on making tons of money. Or, at least, that’s what I’m shooting for.

Realistically determine what my goals are. Goals are incredibly important. Am I working to craft a life that makes me extremely happy, or working towards doing something massive that has the potential to change the world? At some point, something will have to give. Changing the world isn’t easy, and requires tons of personal sacrifice. This is one of the main things I took away from Steve Job’s biography, just how large a sacrifice he made to do what he did. If I’m working to optimize my happiness, why should I be jealous of someone who’s out to change the world by solving an incredibly difficult problem? They are on a different path that requires a different level of sacrifice and work.

Make a conscious effort to realize other’s successes exist independently of me. This is a hard one, and something I’ve taken from the Last Psychiatrist. As stupid as it sounds to write it out, it can be easy to see other’s successes as a reflection of your failures. Other’s successes exist independently of me. If someone I know sells a company, raises a ton of money or does really well, I had nothing to do with it. That action occurs completely outside of me, and has nothing to do with what I’m doing or working on. It’s the height of narcissism to think otherwise.

Don’t worry about potential or what others think. It can be easy to worry about what others think of you – how things are going, how well you’re doing, etc. I’ve been trying to focus on improving myself and becoming a better human. As one of my mentors put it, what matters more – being seen as high potential, or being a genuine human being people like and want to be with? In the end, even the rich and powerful want the same things: to be liked, have friends and be happy with yourself. Each of those things is accessible, regardless of how successful I am.

Don’t read tech news. Mark Suster has a good post on this. If it doesn’t help you or make you happier, why bother reading it?

Work with people in different situations. I’ve started volunteering as a 6th grade mentor at a low-income school nearby. It’s weird: outside of a startup context, you realize that other people are happy, even though they may not be changing the world or making gobs of money. Even outside of this reality check, it’s good to work on something that concretely helps another person and isn’t focused on making money. It’s helped me realize it’s a privilege to worry, even for a second, that I’m not running a company with the potential to make $100m in revenue. Most people have much larger problems.

Objectively look at the career ladder. It helps to think about how I feel right now (envy, not like a success) and compare that to where I was last year. For me, if you told me two years ago that I’d be running my own company, be in Entrepreneur magazine, had the chance to work with Gabe Weinberg and Noah Kagan, and live in SF for 4 months, I would have told you I’d be ridiculously happy. That’s how I would have defined success two years ago. I am ridiculously happy – but in terms of my career, don’t feel at all different. Instead, I want to sell a company, become an “influencer” and take on even more ambitious projects. My (very) small successes have only opened up a new level of wanting in terms of career achievement.

Practice stoicism. I am constantly trying to remind myself that in the long run, none of this really matters. There are so, so few men who really stand the test of time. And for those that did, what good did it do them? I love this quote from Sebastian Marshall:

That leads me to the final point, which is you gotta remember this is all a circus. Life is really a circus. Are you such a big deal that you can’t be embarrassed, or make a mistake, or do something wrong? No, you’re not. You’re not a big deal. At least, I’m not a big deal. I’ll say some stupid shit at some point, and get embarrassed, and look bad. Oh well. If things break the right way, I’ll also found branches of science, inspire people, build amazing businesses, found charities that actually work, make art, fund art, fund science, build a virtuous international dynasty, and all sorts of other stuff. But if I try and fail? Well, whatever, I’m not such a big deal. I can be embarrassed. It’s okay if I get something wrong or say something stupid. Most of what we obsess over is going to turn to dust anyways.

I hope this is helpful to someone out there. It’s helped me to reflect on the above, and just realize that life is short. In that context, it seems silly to worry about the millions or billions of dollars you don’t have. I’m working on improving myself and putting in the work to do big things. Hopefully, one day, some measure of success will follow. If not, I’m working on being ok with that.

Thanks to Jordan Messina, Nate Speller, Josh Albrecht and Adam Paulisick for reading drafts of this post. Special thanks to Adam, who’s thoughts and advice have helped me think about this issue over the past year.

In his recent essay, “Startup=Growth”, Paul Graham talks about startup growth and what he’s learned from the hundreds of companies that have come through YC.

One of the essay’s core ideas is to use growth as a way to benchmark progress. By turning growth into an optimization problem (he suggests 7% weekly growth as a good target to aim for), you can determine if you are succeeding or failing as a startup for a given week.

This got me thinking. If you were to take PG’s advice and focus on optimizing growth, what would that look like? Through my work on Traction Book (and interviews with over 25 entrepreneurs) I’ve noticed a few things successful founders have in common.

Spend half your time on traction-related activities

This idea that growth is the core component of a startup hints that there is more to a successful company than just building something people love. If success is determined by how much you grow, your focus should be on more than just the product you’re building.

If the success of your startup is determined by your growth rate, what does this mean when a startup fails? It follows that failure occurs when a company cannot grow fast enough to support itself on revenues, or does not have promising enough growth on which they can raise money. In short, most startups are failing because they cannot hit their growth targets, and not because they fail to build a working product.

What this means is that you should be investing just as heavily in growth-related activities as in product-related ones. We’re suggesting about half your time should be spent on traction, and half on product.

At Unbounce, founder Rick Perreault told us they spent the first six months of the company’s existence building an audience through their blog – before they even had a product. In fact, their first hire was a blogger! When they launched, they had several thousand customers signing up for their beta.

In most cases, this can mean buying ads, commenting on blogs and forums, reaching out to potential customers or partners, and making a strong effort to raise awareness of your startup.

Apply lean startup principles to getting traction

The Lean Startup movement advocates running small experiments to determine what your customers want in a product. Treating growth as an optimization problem also suggests a test-driven approach to gaining traction. Think of several traction verticals that could potentially work for you, and come up with cheap ways to test them as acquisition channels.

For example, if you think PR could be a strong traction vertical for your mobile app, spend a week pitching media outlets and see what kind of user adoption/traffic come about as a result. This systematic approach will quickly allow you to hit on key traction verticals, and increase your chances at finding the distribution channel(s) that will allow you to hit 7% weekly growth. Strong growth channels like that are difficult to find by chance.

Use Quant-based marketing

Using growth as a success benchmark also works perfectly with the Quant-based approach to marketing that we recommend. One of the difficult things about marketing is that companies often have no concrete goal they want to hit. They start buying Adwords and hoping their customer numbers keep going up.

Noah Kagan did this extremely well at Mint. He wanted 100,000 customers 6 months after launching, and worked backwards (using traffic and conversion rates) to figure out how he could acquire those customers. After six months of this approach, Mint had over one million users.

This approach makes it easier to focus on only the key marketing activities that get you closer to your goal. You can figure out what you need to do, and safely ignore the latest social media marketing tactic you read. What number of customers do you need in order to hit your next company milestone? Figure that out, and then look at traction verticals you can take advantage of to hit those numbers.

Discuss this post on Hacker News

Between working on my own startups and a book about how startups get traction, I’ve been thinking about startups and problems they tackle for a little over 2 years now. A byproduct of working in startups is coming up with plenty of ideas for other companies – in my case, over 200 I’ve taken the time to write down. Of course, I can’t implement every idea I have (nor would I want to). But I do believe that getting feedback on ideas is valuable. In fact, it’s what led to every company I’ve ever started.

Below are just a few ideas I’ve been thinking about lately. The list isn’t in any particular order. I’m also sure some of these exist, but I just haven’t heard of them – if that’s the case, just let me know in the comments.

Replace the Pharmacy
Tagline: Redbox for pharmaceuticals

My roommate in college was in Pharmacy school, so I know a little bit about how the Pharma industry works from the employee side (community, hospital and primary care). The average salary for a pharmacist is $115k, and most of what they do (especially on the community side) involves looking at a patient’s scripts and determining if there are potential negative drug interactions or side effects. It seems to me that you could program a machine to algorithmically determine these potential negative interactions and automatically dispense medications to customers (and potentially integrate with Surescripts or Express Scripts). With many big Pharma companies hitting a “patent cliff” between now and 2015, many of these companies will be looking for ways to save money and distribute their drugs more cheaply. I think automating the pharmacy is a likely step in that direction.

High-Quality Mechanical Turk
Tagline: Mechanical Turk for ___ problem

There are certain tasks that are pretty well-defined (running a statistical analysis on a data set, installing WordPress, setting up KPIs on Google Analytics) but still require a bit of research and work on your end to accomplish. It rarely makes sense to outsource these small tasks, as going through 40+ applications on Odesk takes time and isn’t much fun. If you’ve never done it before, learning to install WordPress can be difficult and still take up a lot of time. This service would allow you to buy services like splicing an audio and video track or setting up a hosting service, all for a fixed price. You pay a reasonable rate, this company would take the difference between that price and the person they sourced it to. For anyone who’s not super technical (or even someone who is, but has better things to do), this would be a quick and easy way to save time and money.

Market Research as a Service
Tagline: Odesk for market research

Large reports on market research cost thousands of dollars and only give you a sense of the market at a given point in time. Why isn’t there a company offering market research for a lower cost? By hiring a few researchers, you could pull together a report for several thousand dollars and sell access to it at lower cost. In addition, you could offer ongoing research as a subscription service – pay $20 a month and we’ll send you all relevant updates on your industry/other companies in a nicely packaged format. This would be great for busy professionals (especially in larger corporations) who want to stay up to date but don’t have time to read through industry journals.

Hands-off Accounting Service
Tagline: H&R Block meets Yodlee 

Accounting is still a huge pain. Tons of services (Wave Accounting, Xero, InDinero) have made this easier, but it’s still a painful process that takes up time. Why isn’t there a service that allows your accountant to log into all of your business’ financial accounts and do your taxes without any input from you? I’m imagining a service that you provide your bank passwords to, it logs in for you (using Yodlee) and then allows your accountant to see to your financial accounts – all without actually sharing your passwords with anyone but the service. I can’t really imagine making accounting any easier. This type of site could also work with things like hiring a freelancer to fix up some code, etc.

Decorate My Apartment
Tagline: Dribbble for interior design

I suck at anything resembling interior design or decorating. This type of service would allow people like me to post pictures of your apartment or room, and individual designers could then recommend certain posters, furniture or decorations to make the place look nice. You could also build some cool imaging technology where you superimpose images of furniture/art on top of the pictures of your apartment. Designers could take an affiliate commission when users buy things they suggest would look good. You could also hold contests for the best interior designers, much like 99designs.

Inexpensive Legal Documents
Tagline: Mechanical Turk for legal drafts

Law students need experience. I want (most) legal documents as cheaply as I can get them. This service would connect you with law students who could pull together a basic legal document for cheap, which you could then give to your lawyer for a quick review and touchup. I think this would work especially well for startups, who often don’t have a ton of money but need to create basic legal agreements (NDAs, partnership terms, etc.). Minimizing the hours required from real lawyers would save hundreds of dollars for each document that went through this company.

Drone-based Shipping
Tagline: Matternet for localized shipping

Matternet is doing some cool things with drug delivery in rural areas, but I think the commercial potential of drones goes much farther. Drones are likely perfect for local deliveries of physical objects or documents that weigh less than 5-10 lbs. They have a short range, can be tracked with a GPS, and are relatively cheap to build and operate. A drone delivery network could be used to deliver things like food and important documents, and would never get caught in traffic. The downside is that drones are likely to become very heavily regulated in the near future. I think this idea has potential, but would be really difficult to pull off.

Real-Time Betting
Tagline: Watch TV, make money

This would likely work best as an app, but basically something that would allow you to create mini-bets with your friends about things that are happening in real-time. For example, you could bet that LeBron would make a free throw during one of the NBA finals games, or which contestant on Jeopardy would answer the next question correctly. This app would make watching TV a lot more engaging and fun, and would be a way to control those smaller bets you make with friends.

Injury-free Lifting
Tagline: Lifting coach in your pocket

So many injuries at the gym occur because people don’t realize how to properly do certain lifts. Doing a deadlift wrong can have very serious consequences, and without a trainer or coach to watch you it’s very difficult to tell when you’re doing something wrong. With the iPhone’s accelerometer, I’m betting you could detect when someone is doing a lift improperly, and have suggestions to improve it. For example, if you strapped the iPhone onto your thigh and turned this app on, it could tell if you were out of alignment or overcompensating during your lift, and show you how to improve your form. You’d have to build a few different algorithms here, but I think it’d be very doable. It could also track your lifts, and show you how you’ve improved over time.

Hackable Hardware
Tagline: BugLabs for the iPhone

One of the constraints with hardware innovation is the lack of platforms that people can develop on. Apple’s hardware is entirely closed, and Google’s isn’t much better. There’s a major opportunity for startups that can build hackable hardware platforms that interface with consumer electronics like the iPhone. This idea is less fleshed out, but I’d imagine you could build a lot of cool stuff on top of an iPhone case that interfaced with the phone (whether through the iPhone’s ports or some sort of Bluetooth). Things like LittleBits, RaspberryPi, Sifteo and Twine are a step in the right direction towards more open hardware, but there’s a lot more to come.

That’s it! Glad to get some of those off my mind. Hope some of these are interesting, and I’m happy to hear any feedback.