In this episode of The Breakout Growth Podcast, hosts Sean Ellis and Ethan Garr sit down with Vickie Peng, a partner at Sequoia Capital and former product leader at Instagram and Polyvore.
Vickie shares her journey from leading product growth to the world of venture capital and offers a deeper look into how Sequoia identifies and supports early-stage startups on their path to product/market fit (PMF).
Through her experiences, Vickie outlines the critical factors that lead to sustainable growth, including why “conviction” is a key component in building for success, and why laser focus on customer happiness is important for startups navigating their way to PMF.
What You’ll Learn:
Sequoia’s ArcProgram: How Sequoia Capital supports pre-PMF companies and why it matters in accelerating growth.
Framework for Conviction: Vickie’s four areas of conviction—problem space, customer needs, product value, and growth potential—and why mastering these is critical before scaling.
The Role of Cross-Functional Teams: How Sequoia’s EPD (Engineering, Product, Design) team works with startups to align strategy and execution and builds products for their investors, founders, and members of their ecosystem (such as their Scouts and Builder network).
Retention vs. Growth: Key insights from Vickie’s time at Instagram, where she managed SMB ad products, and how retention often serves as the foundation for sustainable growth.
The Importance of the Right Metric: How finding your North Star Metric can help maintain focus on customer happiness and long-term success.
Key Takeaways:
“Growth only comes after you nail the product and the customer experience.” — Vickie Peng
“Conviction is about understanding the customer’s pain and knowing exactly why your solution matters.” — Vickie Peng
“You need a North Star Metric that helps you measure customer happiness, not just growth.” — Vickie Peng
Timestamps:
[00:00] – Intro: Sean Ellis and Ethan Garr introduce Vickie Peng and her views on product/market fit.
[05:30] – Vickie’s journey from product leader to VC and how that shapes her view on PMF.
[10:50] – Sequoia’s ArcProgram: How Sequoia supports early-stage startups pre-product/market fit.
[20:00] – The four areas of conviction: Understanding the customer and problem space before scaling.
[28:10] – Lessons from Instagram: Retention, growth, and the delicate balance between the two.
[37:30] – Finding the right North Star Metric and why customer success should be your focus early on.
Why Listen:
Startup founders, growth leaders, and anyone looking to better understand the road to product/market fit will benefit from this conversation. Vickie Peng offers insights from both her time leading product at Instagram and Polyvore, as well as in her current role as a VC at Sequoia Capital. Whether you’re pre-PMF or scaling your business, the frameworks and principles shared in this episode will help you sharpen your strategy and avoid common pitfalls.
Links & Resources:
Sequoia Capital – Learn more about Sequoia’s Arcprogram
Follow Vickie Peng on LinkedIn – Connect here
Subscribe to The Breakout Growth Podcast – Subscribe here
Join the Conversation:
If you enjoyed this episode, share your thoughts on social media and tag us! Don’t forget to subscribe and leave a review—it helps more people find the show.
Transcript:
Sean (00:01)
All right. Hey, Vicki, it’s fantastic to have you on the breakout growth podcast. Welcome.
Vickie Peng (00:05)
Sean, Ethan, thank you so much for having me. I’m so excited to be here, talk PMF with you guys. I also have to say, it’s a little bit surreal for me to be here with you, Sean, because I think many of the things that you’ve, know, frameworks and things that you’ve created are just accepted as best practices as a product manager. So it’s really fun to be here and chat with you.
Sean (00:24)
I appreciate it. Definitely, I’m sure you have a different perspective on some things with all the companies you guys touch at Sequoia. So we can probably go really, really deep on this topic. So it’ll be great. So yeah, as you mentioned, Ethan is also on the call and I know you’re as excited as I am about digging into it with Vicky.
Vickie Peng (00:34)
Yeah, excited to get into it.
Ethan Garr (00:42)
Yeah, absolutely. As a product guy, I’m super excited to chat with you, Vicky. So thanks for being here with us.
Vickie Peng (00:47)
Awesome, excited to talk shop.
Sean (00:49)
Yeah, so let’s jump a little bit into your background just to give listeners some context. So you started your journey in product management before you went into venture. So let’s start with what got you into product in the first place. What drew you there?
Vickie Peng (01:06)
Yeah, so actually product is my third time’s a charm career. I actually started my career in investment banking, found out probably in matter of weeks that that wasn’t going to be my life’s journey. And then switched to kind of this strategy consulting role inside a tech company that I loved, you know, the strategy portion of it, you know, having this big kind of ambiguous question and breaking it down into tractable problems that you could actually action against. But the problem with being a strategy consultant is you don’t get to action against them.
Sean (01:11)
Okay.
huh.
Vickie Peng (01:35)
And so, you know, that’s actually when I learned about product management as a role where you could both kind of set and frame a strategy, but also see it through and see how actual users respond to whatever your hypotheses were and kind of rinse and repeat from there. But at the time, they, you know, especially the larger tech companies required having a computer science background or something more of a technical background to become a PM.
Sean (01:43)
Mm -hmm.
Mm -hmm.
Vickie Peng (01:57)
And so that’s actually what led me into the world of startups. And I remember my first role was like, you know, they made up a title product strategist. I’m not sure what that is. I’m not sure anybody since then has ever had that title. But they’re like, until we know what you can do in and around product, like, let’s give you this kind of separate label. But it’s kind of been fun reflecting back and preparing to chat with you guys today. I realized that all of my kind of major IC product roles were a situation where I
Sean (02:11)
Yeah.
Vickie Peng (02:24)
walked into a business that already had found PMF in a core business and that I was kind of handed this experimental or labs offshoot or maybe, you know, this kind of side bet that they were hoping would be a part of the core business. So at Trial Pay, you know, we had product market fit in an e -commerce kind of business line and they wanted to expand it to social gaming.
Sean (02:28)
Mm -hmm.
Vickie Peng (02:44)
At Polyvore, we were a thriving consumer kind of fashion community and they needed to actually have it be a monetized platform and build monetization around it. And same thing in Instagram, we had obviously, for the largest, deepest pocketed advertisers had a really, really robust and performant ad platform. But I was handed kind of these small and medium business kind of portion of things. And so it was really kind of fun to reflect on how
Sean (02:53)
huh.
Vickie Peng (03:11)
you know, even though it’s not the same as starting a company and building from zero to one, I think being handed this kind of like more experimental part of the business and building not just the product from scratch, but also kind of the belief. Like you have to build belief in the customers that you’re targeting. You have to build belief inside the building that this could actually be a real part of the company. You know, I’m, you know, it was fun also to reflect on the fact that the two businesses that I kind of helped lead at both TrialPay and Polyvore were like key parts of the reason why those companies ended up getting acquired. So.
Sean (03:23)
Right.
Vickie Peng (03:41)
It ended up working out in the end.
Sean (03:41)
That’s awesome. Yeah. I just want one quick reflection on what Vicky was saying there. It’s interesting. The journey to product market fit is hard in any situation. One of the things that attracts me to the zero to one opportunities is that a lot of times you don’t have kind of the organizational challenges as much, the inertia of like, you know, they’re doing something one way and…
Ethan Garr (03:42)
Yeah. So what? sorry. ahead.
Sean (04:09)
Everyone kind of knows you’re working from a blank slate and you need to create something. I’m just curious if, obviously you were successful with what you did, but did you find that was a big challenge in kind of getting people back in that mode of product market fit?
Vickie Peng (04:27)
Yeah, that’s a great question. I think what I actually would say was a challenge. Each of these organizations that I mentioned, we kind of had carved out this separate side space, side team, side almost even different conference rooms, different meeting cadences, different team culture that we kind of established from the ground up. So was actually really organic to split the teams and the cultures so that we could run more, you know, kind of experimentally, just operationally. The thing that I actually would say was the bigger challenge was integrating
Sean (04:46)
Hmm.
Vickie Peng (04:56)
once you saw something take off or once you saw, something might be working here, how do you actually mesh then this more hacky, scrappy, pirate -like culture, right, with the main one? And I actually do remember specifically at Polyvore when thinking through monetization and, you know, we have a funnel, it’s math, it’s black and white, it felt very different than the kind of intuitive, you know, customer delight, like this kind of side of the business where people would run product in very different ways.
Sean (04:57)
Yeah
Ethan Garr (05:06)
Hahaha
Sean (05:25)
Mm -hmm.
Vickie Peng (05:25)
And I’d be here drawing formulas on the board and people are like, but is it delightful? And I remember kind of the clash of those cultures and figuring out how to actually integrate the two was something that stood out in my mind as more of the challenge.
Sean (05:36)
So you’re able to find product market fit probably a little easier by running things more independently. But then once you had it, integrating it back in is, yeah, you create a challenge down the line. But it still feels like that’s probably the right way to go because finding product market fit is already so hard that if you’re also trying to sync with the rest of the organization, it would be almost impossible.
Vickie Peng (05:48)
How does it dovetail? Yeah, exactly.
Exactly, yeah, I totally agree with that.
Ethan Garr (06:05)
So by the way, going back to strange titles, the first title I had working for Sean was Concept Strategist, so it was probably equally vague, to this day, neither one of us knows what I was supposed to do with that.
Sean (06:11)
You
Vickie Peng (06:11)
yeah. I’m sure there’s a total search results of one on each of our former titles.
Ethan Garr (06:20)
But yeah, I also agree. I think the zero to one, one of things that makes it interesting though is that
your North Star at that point is product market fit. So it does allow you to really put very deep focus just on like, anything that’s not about finding product market fit is just distraction. So it’s always interesting, but just going back a little bit. So obviously these experiences, they eventually led you to your role here at Sequoia where you’re the product partner. I think a lot of our audience might be surprised that Sequoia even has a product partner, let alone an EPD team. We had to look up what an EPD team is, but maybe you could tell us
us a little bit about both your current job and the role and what is the role of product at a company like Sequoia.
Vickie Peng (07:05)
Yeah, you are by far not the first person to hear that title and say, okay, what does that mean? EPD stands for engineering product data science and design. We stuck an extra D in there. But yes, most people are surprised to hear that we basically have our own version of a cross functional product development team, like a mini startup inside Sequoia. And that started about five years ago when I joined the firm. Basically before that, a few of the partners had this thesis in their mind that, you know, hey, we spend
Sean (07:10)
You
Ethan Garr (07:11)
Hahaha
Hahaha
Vickie Peng (07:34)
all day intersecting with and investing in and partnering with technology companies, what would it look like if Sequoia looked less like a law firm and more like a tech company ourselves? If we were to build our own technology platform to help us kind of supercharge the motions of sourcing, of picking and diligence, of winning, of building, would that make us better as a firm? And so, you know.
the few partners went out and said, why don’t we try to build our team and see, build the team in -house and see what becomes of this thesis. And so that’s basically what I was kind of tasked with when I came in the building. And essentially we have kind of three pillars within our team aligned across different customers. And we actually build products for our investors as customers, for our founders as a customer, for members of our ecosystem, like our scouts and our builder network as customers.
And it’s all about building tools and Intel and platforms to help them kind of do their jobs better. And a lot of it really came out of something, a core belief at Sequoia, which is that we really wanted to make sure that we could keep our investment team small because our partners believe that that’s how you make the best investment decision. So our entire investing team fits around a conference room table. And that’s where you can have, you know, the relationships and the discussions and the full contact conversations necessary to make the best investing decisions. But in order for us then us as a firm to
keep an investment team so small, but still cover all the GOs, all the sectors, all the stages that we do as Sequoia Capital, we needed to find leverage somewhere else, right? And so the thesis was that technology was going to be that leverage. So for example, where another firm might have a really large army of associates or analysts out there kind of figuring out what companies are out there that are possible to partner with and kind of seeing who’s fundraising and things like that, we would approach that by doing it with
data science, intelligence, and our technology platform. So that’s kind of one example of how this comes to fruition.
Ethan Garr (09:25)
Is there like a specific example that you can think of of where like that approach you feel like really sets the Koya apart in some opportunity?
Vickie Peng (09:35)
Yeah, absolutely. I think from a sourcing standpoint and just knowing who is out there that could be a potential outlier, I think it’s really impossible to think, especially at the very, very early stages where there’s not even a company, there’s not a website, there’s not really anything to, there’s not a pitch deck floating around the internet. You really just need to know great people and where they’ve been and what’s interesting about them. I think having a technology platform that basically is…
understands what we look for, but is able to just cover so much more ground than one human trying to meet with ex -companies a week. I think we’ve seen cases where we’ve surfaced interesting people, interesting, for example, like open source projects or things that are happening, advancements in technology, just a little bit earlier maybe than a human would have come across them.
Ethan Garr (10:08)
Mm
Sean (10:28)
Yeah, that seems like it would be so important these days. There’s so much venture capital even from early in my career to where it is now. There’s just such a long tail of people in venture now. Obviously Sequoia has got the big name or the biggest name or at least everyone would say top tier for sure. But it seems like you have to keep reinventing yourself like you would in any market that’s constantly in transition.
Vickie Peng (10:58)
Yeah, that’s something I actually have to say. really just as an individual, you know, that has had a career elsewhere and then came into the walls of Sequoia, like the idea of constantly disrupting yourself and reinventing yourself and challenging, hey, what got us here isn’t what’s going to get us there. You know, we’ve been around for 50 years. We’re not going to be around 100 by doing the exact same thing. And so what can we really do radically differently? And the fact that they actually
Sean (11:08)
Mm
Mm -hmm.
Vickie Peng (11:23)
built this team, supported us in investing to this level or against this thesis was like, mean, just really impressive to see how much they really mean by, you know, we got to keep innovating or else we’ll get out innovated ourselves.
Ethan Garr (11:37)
That’s got to set such a great example for your portfolio companies. I would imagine founders as they see that approach, it challenges them to keep thinking, okay, what do we have to do differently to stay ahead? Especially in the world of AI where there’s 175 companies that are saying they do the same thing as you. How are you differentiating yourself? Well, it’s through that kind of thinking, that kind of innovation.
Vickie Peng (12:00)
Absolutely. That’s something we also, we apply to ARC, which I think, you know, we might touch on a little bit as well. That’s our pre -seed and seed stage company building immersion program. We talk through, we actually think of ARC, even though it’s a program, we think of it as a product that constantly is seeking and refinding PMF as well. And so from an iteration standpoint, we want to out innovate and out disrupt ourselves. And so not even just cycle to cycle, but week to week within the program, we are constantly changing things about that program.
Sean (12:05)
Yeah.
Hmm.
Vickie Peng (12:28)
And I think, as you mentioned, as founders, kind of see that and see the dynamic of us saying, hey, we really want and respect your feedback, and we will act on it immediately as soon as next week when we see you again. I think that also kind of sets the example in terms of just being iterative and constantly trying to delight your customer.
Sean (12:28)
Mm
Yeah, mean, obviously Sequoia has been in Seed, even though it’s like known as a really big firm. But even when I was at Dropbox, I don’t think a lot of people, it was kind of an under the radar investment, but Sequoia was the seed investor at Dropbox before the A. there’s a lot of history there. I’m curious like how ARK
like why Arc was added to the mix and how it improves your ability to work with seed stage startups.
Vickie Peng (13:20)
Yeah, it’s still wild to me that Arc, I still think back to when Arc was a memo. I remember authoring, know, being one of the co -authors of the, we should really think about whether we want to have a new and innovative approach to the way that we work with seed stage companies. And now what it’s become has been amazing to look back on. But essentially the thesis was when you are at the seed stage, a lot of, especially for first time founders, obviously we as a partner that works with you, we want to support you in every way we can, right? And so any question that you have on
hey, what kind of law firm should I hire and when? Or when should I bring a designer in full time? Or how do I look to hire a salesperson when I’ve never been a salesperson? I know nothing about hiring salespeople. A lot of these kind of get handled in this hub and spoke model, right? Where each individual company has the same set of foundational questions in terms of how to build the right foundations for their company. And they come to the partner and the partner has a lot of these kind of almost like bespoke one -on -one conversations as like the hub to all these spokes. And we said, you know what, what if?
we actually thought to batch these conversations together and actually try to distill down what we’ve learned over the last 50 years of working with all these companies so that they are applicable to companies today and actually kind of teach these foundations and these frameworks together with companies at the same stage so that they can benefit from knowing one another, they can benefit from really being immersed and almost like bear hugged by Sequoia at this early stage.
Sean (14:43)
Mm -hmm.
Ethan Garr (14:43)
You
Vickie Peng (14:44)
What would that look like? And so really it was, once again, a hypothesis. It was kind of a thesis of, hey, would batching together companies at this stage and really teaching this distilled knowledge that we’ve had help accelerate them? And it’s called ARC because we expect that if you establish the best practice foundations early on, it will actually bend the arc of your trajectory, right? Just like if you’re driving down the highway and you turn the steering wheel two degrees, it might not feel like that much now, but you’re going to end up in a totally different place based on that.
Sean (15:06)
Yeah. Ethan and I are both sailors, so we know the dangers of being a little bit off with a slight turn of the wheel.
Vickie Peng (15:17)
Yeah, and so it’s really built on kind of these kind of the three pillars, the one around being, you know, just foundational frameworks for the parts of the company that will, you know, endure and that you need to set early and well so that your company can be enduring. Then you have this kind of exceptional peer set around you. And when I say that, you know, a lot of people will say, you know, everybody kind of kind of touts having an exceptional peer set.
These are all Sequoia portfolio companies. We’ve had the former CEO of Tinder. We’ve had the creator of GitHub Copilot. We’ve had the former CEO of CPO of HubSpot go through arc with us. And so, you know, these are people that have already done such amazing things in their career, but still thought they would benefit in being, you know, immersed in kind of like the way that Sequoia thinks about building companies from scratch.
Sean (15:40)
Yeah, I was gonna say.
Vickie Peng (16:03)
And then finally, this bear hug that I’m mentioning, like we just get to be around these companies for weeks at a time and figure out where we can plug them into our network, to our builders that are helping with certain functions, to our marketplace. What early stage company wouldn’t want to save up several hundred thousand dollars on Nvidia credits or what have you, right? And so I think just all this package together ends up being this like deep immersion in how to start your company right.
Sean (16:20)
Right, yeah, yeah.
And is there different, just one quick follow up. Is there different PMF levels within these companies? some of them totally unvalidated and at idea stage and others have solid product market fit or is there a variety there?
Ethan Garr (16:28)
Can you just, sorry, gotcha. Yeah, go.
Vickie Peng (16:43)
That’s a great question. I would say the only common denominator is that none of these companies have truly found PMF yet. So it is truly is very much a pre -PMF kind of program and offering. But I will say that some have gone as far as actually having design partners and actual live product, you know, things that are out in market and others literally, you know, when they join the program and it’s week one of the program, it’s week one of their company’s life. Like they incorporate the day that they start the program. So.
Sean (16:48)
Okay.
Mm
Okay, yeah.
Vickie Peng (17:08)
There is quite the kind of gamut of places and journey with respect to, but they’re all pre -PMF companies.
Sean (17:15)
Okay, that makes sense. Ethan, you had a question?
Ethan Garr (17:17)
No, actually that covers it, so why don’t you go ahead Sean.
Sean (17:20)
Okay, perfect. So yeah, the other thing I wanted to jump in speaking of PMF was I heard and have read some of your ways of categorizing PMF and want to see if you could maybe take us through, I’ll let you tell what those categories are, but maybe what it kind of means in terms of how you should approach different opportunities based on these categories of PMF.
Vickie Peng (17:31)
Mm -hmm.
Sure, okay, buckle up guys. This is gonna be a lot that we’re gonna go through here. But basically, we kind of released this framework publicly earlier this year and we kind of focus on three core archetypes of finding PMF. We have hair on fire, we have hard fact, and we have future vision. And mostly people are saying, whoa, these are kind of interesting terms. Like, how did you come to those terminology? But the core insight and anchor of the framework is actually that
know, when you think about PMF, a lot of people really focus on the product and it’s getting your product out there in front of a customer, your product sticky, your product retention. And we kind of flipped it and said, actually, the core real insight or the thing to really obsess over is the market. And because the market is a preexisting condition that your product is going to meet, right? And specifically within the market, the customer’s perspective on the problem that you’re trying to solve. And that’s actually what these three archetypes are named after.
Sean (18:29)
Right.
Vickie Peng (18:37)
a hair on fire suggests that the customer believes that the problem you’re solving for them is a hair on fire problem. That means that they are urgently looking for a solution to put this fire out. But what that also means is from that mindset kind of comes a lot of things that you are going to have to overcome as a company and, you know, kind of building a solution in this space. So, for example, if it’s hair on fire, it’s going to be obvious not just to you, but to other folks in the space as well. There’s going to be other competitors out there trying to capture this demand. And as a result of that, I think you mentioned, Ethan,
Sean (18:48)
Mm
Mm
Vickie Peng (19:05)
You know, today there is 100 ,000 companies saying they do exactly the same thing. All of their websites say the same exact language. It’s noise. You have to figure out how to overcome noise. And that means you actually have to have a difference, not just in the product and the way that product actually works and it is different and actually solves the solution, know, solves the problem in a different way, but also that that difference resonates with that customer such that they can pick you out from the sea of 75 ,000 companies saying the same thing to say, this is actually the one that’s like, need to try. I need to understand if this works. And so that’s kind of the hair on fire path.
Ethan Garr (19:08)
You
Sean (19:09)
Mm
Mm
Mm
Vickie Peng (19:37)
When you think about the hard fact path, if the hair on fire customer was leaning in with their hair literally on fire, hard fact customer is leaning back and saying, it is what it is. This is a problem I’ve accepted about life. It’s a hard fact of life. And you are, as a founder, trying to solve this problem for them saying, no, it’s not a fact. It’s a problem that I can solve for you with this company that I have, this product that I have. And so the thing you’re overcoming here, it may sound more attractive than…
Sean (19:41)
Mm
Mm -hmm.
Mm -hmm.
Vickie Peng (20:02)
tons of competitors you’re elbowing, you’re overcoming habit and skepticism. You’re overcoming the fact that this customer is like, you know, it’s like, honestly, I’m resigned to live my life this way. And I’ve already just like, it’s fine, right? And like, that’s actually, if you’re selling not just your solution, but also the problem and the fact that the problem can, you know, can be solved in the first place, that has its own challenges, right? And so that means your solution really has to really…
Sean (20:06)
Right.
Yeah, Thomas, it’s just it’s fine.
Mm -hmm. Yeah.
Vickie Peng (20:28)
almost produce an awakening. We use almost the word epiphany and it sounds a little bit lofty, right? But they really need to see that, there is a different way here. And I think the first time any of us stayed in an Airbnb or gotten an Uber or realized that something like this would be truly life changing to the way that we think about transportation or we think about going on vacation, it’s that kind of awakening that needs to happen in that customer. Because otherwise, yeah, I was going to stay at a hotel. That was it, right? And then the last path is called future vision.
Sean (20:31)
Right.
Mm
Yeah.
Vickie Peng (20:58)
And this is where the customer is really they’re like, yeah, right, right? They’re you’re talking about flying saucers and teleportation and things that they just don’t believe will exist And so the thing you’re really overcoming here is disbelief disbelief in the validity the almost technical validity of the product if I told you ten years ago that we’d be typing things into boxes and then the boxes would understand everything on the internet and summarize to you in You know rap lyrics by Snoop Dogg
Sean (21:05)
Hmm.
Okay.
Vickie Peng (21:23)
I don’t think we would have believed each other, right? Something like, but here we are. And with all the kind of advancements day to day in AI, it’s like impossible. I mean, I remember when this all actually would have sounded like science fiction and it wasn’t that long ago. so, know, absolutely, which it did this morning on the way to here at the office. So, you know, and I think this is where if you’re overcoming disbelief, that is also a totally different path like for you as a founder to kind of consider and how to approach.
Sean (21:25)
Right.
Yeah. My car will drive itself, like some of that kind of stuff. Yeah.
Ethan Garr (21:39)
Hehehe
Hehehehe
Vickie Peng (21:53)
So these are the archetypes that we saw as patterns in the portfolio that we’ve worked with over the decades that we have. And it’s really been great to see the reception, I think, ever since we launched this framework publicly. We have a Scouts program. They’ll come to us with a new opportunity and say, hey, we really think this is a hair on fire problem that they’re solving. in our upcoming cohort, we’ll be running our seventh cohort of ARC in a few weeks.
And in the ARC applications, people will say, hey, I really think that this is a hard fact problem that I’m solving successfully. And so it’s really nice to see it kind of taking and making people think about their problem space in a different way.
Sean (22:31)
That seems really smart because the thing I particularly like my time in Silicon Valley is just like people are so solution oriented or maybe solution might even be the wrong word. Just like I want to do what’s possible oriented that they kind of just want to jump right into building and not understanding the problem side is I think a lot of the challenge with product market fit. So just having that framework is enough to hopefully shift them to be more
problem focused.
Ethan Garr (23:02)
Yeah, I love that approach because I think like, you know,
It’s sort of building on like, know, vitamin or painkiller, which is so sort of, you know, overdone. also it’s like, well, my product fits in both, or, you know, I think this kind of helps you really kind of touch, you know, put your hand on that a little bit more, more tangibly. that’s, it’s, it’s interesting. And I think, ultimately, you know, it’s as you take that and you apply that into how to get to product market fit, you know, Sean and I often talk about that product market fits often not really well understood just as a concept.
I guess I’m curious what your definition of it is and what you see as the biggest misconceptions about product market fit, especially amongst early stage founders.
Vickie Peng (23:41)
you
Yeah, definitely. OK, so I’m going to answer that in reverse order. So I’ll start with the misconceptions and then kind of start defining and how we talk about it with our founders. So misconceptions, would say, Sean, totally, I 100 ,000 % agree with what Sean said, which is this over rotation towards the solution or getting to building, building what’s possible versus actually identifying a problem. I would say this idea of product market fit, people focus on the product and they think about the
Ethan Garr (23:49)
Hahaha
Vickie Peng (24:11)
product in a vacuum instead of the market that it’s meeting. And I think a subset of that is this obsession with the solution over the problem. Like you want to get a prototype, you want to get features, you want to get buttons, you want to get the check boxes of you and your competitors and who has what. And people are obsessed with the solution without actually being obsessed enough with the problem and why it matters at all to solve. So to your point about vitamin and aspirin, Ethan, I think
Ethan Garr (24:37)
Hahaha
Vickie Peng (24:38)
at the end of the day, people obsess over these things and it ends up being a vitamin, right? And really, if you had obsessed over the problem from day one, you might have saved yourself a bunch of cycles there. you know, that’s why when we, you know, even in our application for Arc, we have a whole series of questions around who is your customer, what is their problem, and why do you think this problem is even worth solving for them, right? Not just like, tell us about your product, what does it do, how long has it been there, how many users do you have? Let’s start with what you know about your customer and their problem.
Sean (24:43)
Mm
Mm
Vickie Peng (25:06)
And I think also a lot of the default behavior here is like, my customer has the problem that they don’t have my product and the solution is that they should use my product, right? But like your customer is a whole 3D person that lives 24 hours a day, seven days a week, you know, whether they’re using your product or not. And I think deeply understanding how this problem space fits in the context of that person’s life is really important. It sounds kind of out there, you know, but that’s actually, I think the nudges that we end up having to, you know, kind of…
Sean (25:17)
Right.
Vickie Peng (25:33)
encourage our founders to think more about is like think more expansively about what it is that you’re trying to do here. What will be different once your product is actually adopted? So going back to the question of how do you even define PMF? I think one thing that’s really great is that there’s so much great PMF content out there, some created by you guys, right? That’s out there. And I think a lot of PMF content is really great about specifically analyzing the output or the diagnostic, right? Like one of my favorites I still use is the like
extremely disappointed, the 40 % benchmark. And I think that is a really crystal clear way of knowing whether something has or has not, you know, kind of hit a certain benchmark of, you know, being needed in a customer’s life. So what we tried to do is not add to the noise or, because I agree with many of the things out there, is try to pick apart and deconstruct the inputs into PMF. So instead of thinking of it as like one giant monolithic black box that you either have or you don’t, how would you break apart?
Sean (26:04)
Mm
Ethan Garr (26:05)
You
Vickie Peng (26:32)
the components of PMF. And so there’s actually second part of the PMF framework that we haven’t released publicly. So this is a little bit of a sneak peek, I guess. There’s kind of four what we call areas of conviction that you have to build as a founder, you have to build, or actually as a product owner, you know, if any, it doesn’t have to be a founder, that you have to build conviction in with respect to product market fit. So the first is actually what we call originating belief. Do you have a right to exist? Do you have some sort of unfair advantage or unique insight that suggests that you are the
the person or company or product that will actually solve this problem in some sort of unique way that will capture hearts and minds of customers. So originating belief is the first one. The second is problem. Is this problem worth solving? How much conviction do you have that this problem is worth solving and for who and why and what nuances of the problem? What are the crevices of the problem that you need to deeply understand to actually have conviction that the problem is worthwhile, worth your time? The third one is conviction in the solution. Product market fit and specifically around solution is about
behavior change, right? At the end of the day, have product market fit if a customer is doing something differently after they saw your product than what they did before they saw your product. And this is the part that everybody tends to focus on is, does the product have retention and engagement and virality and all these various components? But at the end of the day, it’s about understanding what behavior existed prior and then changing that behavior with your solution. And so this is kind of conviction in the solution. And then the last piece is actually what we call conviction in the value prop.
Sean (27:33)
Mm
Right.
Mm -hmm.
Mm
Vickie Peng (27:57)
which is something that we debated including, because I do think that in a lot of circles, PMF, the definition of PMF kind of ends at conviction in the solution, right? If it’s engagement and retentive and all these things, there you go. have PMF. If your servers are falling over because like people are obsessed so much and they’re using it so much, that’s PMF. This last component is about value exchange though, because assuming you are trying to build a company or a business and not just a product, there has to be some value that that customer is willing to exchange for usage of your product.
Sean (28:14)
Mm
Vickie Peng (28:26)
And it has to be the value close to the value that you’re actually seeking for that thing, right? And so I think that last component, I would say, was one that we debated internally. But at the end of the day, I actually do believe it is part of the definition of PMF in that the value exchange is fair to the customer and to the business. And so those are the four, you do you have a right to exist and unfair advantage? Is this problem actually worth solving in the first place? Does your solution actually change behavior such that it actually solves the problem? And then is there a fair value exchange that the customer is willing to adopt?
Sean (28:30)
Mm -hmm.
Mm -hmm. Mm -hmm.
Mm
Ethan Garr (28:56)
I love, I actually love that last one. Sean, it sounds like before I ask my question, you might have something you wanted to add. Just at Sequoia, you’ve probably seen such a wide range of approaches to product market fit. Are there patterns or I’m sure they’re informing these four concepts, but what patterns or lessons kind of stand out to you when comparing different startups?
Sean (29:01)
No, go for it.
Vickie Peng (29:18)
Yeah, it’s exactly that. As you said, it’s informing these four. People jump straight to station three to areas of area three solution, right? Like, what am I building? What does my competitor have? Why are we better than the incumbents? Without taking a step back and saying, OK, there’s got to be some nugget of belief that you have an unfair advantage and a right to exist. And there’s got to be some really hardcore conviction that this problem matters to people. And I think when we
Ethan Garr (29:21)
You
Vickie Peng (29:43)
look back on just the last few years, is kind of ups and downs in the market. There’s been a lot of contraction and turn at various, know, if you’re looking at SaaS startups and things like that. At the end of the day, what contraction and turn and, you know, kind of how do I battle that? That ends up being the true kind of like the determinant at the end of the day of whether this was a need to have or a nice to have, right? And so I think we’re seeing a lot of startups for the very first time face like, everything is not just up and to the right and constant expansion, right? Because
Sean (30:05)
Right.
Vickie Peng (30:13)
somebody is going line by line through the P &L saying, which of these costs can we get rid of, right? And which of these do we need to actually double down on and we absolutely need and which ones are really truly nice to have. And so I think this idea around specifically around problem, going back to what Sean said 20 minutes ago, is that this obsession with the solution needs to be rotated at least as much towards an obsession with the problem.
Sean (30:38)
Do you ever find that people accidentally stumble into solving a different problem, maybe that they didn’t intend to? so, product market fit ultimately ends up looking a little different than what you started out doing in the first place?
Vickie Peng (30:55)
Absolutely. think that’s actually, so there’s the element of luck, right? Where you put something out there and it actually just catches like wildfire and it has PMS without you even knowing how or why. And you can’t even explain the problem or the origin of belief. And I think that does happen, obviously. Especially I would say in like, for example, know, consumer social, like who would have known that, a disappearing image or pretty filters or what have you would actually turn into this like, so, you know, sticky and kind of legendary sets of social networks or various things like that.
Sean (31:02)
Yeah.
Mm
Mm -hmm. Yeah.
Vickie Peng (31:25)
But I think through breaking down these kind of inputs and through, you know, those areas of conviction that we talked through, I think there’s a way to kind of debug and understand so that you can double down on and further expand on your PMF. So even if you end up in a place where, hey, it seems like we have fit with something, some market for some problems, right? But like then actually kind of reverse engineering that, like, okay, who is this sticky with and why? And what was their issue before? And what was their status quo? Because
Sean (31:42)
Right.
Ethan Garr (31:43)
you
Sean (31:51)
Right, exactly, yeah.
Vickie Peng (31:53)
Eventually, you’re going to have to continually say, how do we keep building on this? Are there more people like this? Are there similar use cases like this? You don’t get to just stop and go on vacation for the rest of your life. There are going to be other things that you want to build upon. And so you really, at the end of the day, have to still look back and understand where this came from, I would say.
Sean (31:57)
Right.
Heh.
Yeah. And even if you luck into it, you don’t want to start out with the approach of saying, yeah, let’s just start building and maybe we’ll luck into creating value for someone. That is probably not a high success ratio strategy. Your chances of finding product market fit are probably a lot stronger with that problem orientation that you talked about. But you also need to be receptive to the signals that are coming in that maybe there’s a use case that you hadn’t intended that
Vickie Peng (32:33)
What are they?
Ethan Garr (32:37)
Yeah.
Sean (32:40)
that ends up being a really valuable use case.
Vickie Peng (32:43)
And it’s so rare that companies build and ship and find PMF with exactly the original thesis of what, I mean, I think it’s almost impossible for you to write the one pager or the day zero of your company and then have that actually be the thing. Like if you’re not bobbing and weaving and kind of responding to what sticks and what doesn’t and kind of adapting to that, I think it’s gonna be a problem, absolutely.
Sean (32:49)
Mm -hmm.
Right.
Ethan Garr (33:06)
I think with the problem with luck and product market fit is if you depend on it, you tend not to focus on the understanding your product market fit and you can fail. You can fail to grow simply because you didn’t have enough deep understanding of your product market fit to actually leverage it and use it to drive improvement. So, I think that’s super important. Something that, you know, I really, think I’ve learned working with you, Sean, over the years, like it’s not just about finding it. It’s not a gate that you go through. It’s about finding it and continuously dialing in the.
Vickie Peng (33:25)
Exactly.
Ethan Garr (33:36)
understanding. So I think Vicki that really speaks to that. I’m really curious what your answer to this question is. Do you you agree with the statement if you’re not sure if you have product market fit then you probably don’t have it?
Vickie Peng (33:50)
I love that. We actually use a variation of that when we talk through the PMF framework during ARC, which is like, you’ve probably heard this. You’ll know it when you see it or something, right? Like if you’re asking, then you don’t have it kind of thing. So, okay, I will say I somewhat agree, somewhat disagree. And let me break that down, I guess. Implying, obviously the face of the statement is that,
Ethan Garr (34:00)
Hahaha
Sean (34:00)
Yeah.
Ethan Garr (34:10)
You
Vickie Peng (34:17)
once usage has hit you in the face, you have PMF and that’s enough to call it PMF. And if you don’t have that and your servers aren’t falling over, you know, there’s the whole thing around, you’re pushing a boulder up the hill and then all of sudden it starts rolling down the hill and like, know, when that changes. I agree with that. However, that doesn’t necessarily, based on the four areas of conviction that we talked through, that fourth area conviction is not actually, which is value prop, is not actually covered by usage that hits you in the face. usage that hits you in the face is probably…
Sean (34:24)
Yeah.
Okay
Ethan Garr (34:42)
You
Vickie Peng (34:46)
necessary but not sufficient to call it fully PMF because, you know, it could be a free trial. could be, you know, it could be a whole bunch of different things that cause this to really take off but not stick and not actually warrant the value exchange that you’re seeking from that customer. So I would say that last piece is the one that I would still have questions about even if it does look like, hey, this is obviously working.
Sean (34:58)
Mm -hmm.
Yeah. And even just that, what you touched on that kind of definition that I think probably chases back to Marc Andreessen. was sort of the first time I got exposed to the term product market fit was like, you’ll know if you have product market fit because people will be knocking down your product to buy it. Your servers are exploding. I’ve been fortunate to be on the ground floor of a lot of unicorn startups over the years.
And maybe Dropbox might’ve been the closest to that, but it still took a lot of execution and, and, you know, fixing and perfecting to keep building momentum in the business. And it wasn’t like it just like, just step back product market fits here. Let’s let’s ride this into the future.
Vickie Peng (35:51)
Let it go, let it rip. Yeah. Or I mean, I would also say maybe that could be the case. I’m sure there’s companies out there where people say, hey, yeah, it just all kind of happened. then when you think about what happened relative to the ceiling of what was probably possible, if you actually deeply understood it and really optimized it and pushed it further, you never know. Right. And so, yeah.
Sean (36:00)
Yeah.
Yeah.
Yeah. But I mean, obviously Sequoia has an amazing portfolio of successful companies over the years. Do you think, have you seen in your time there, or is there kind of like belief across the firm of, know, product market fit looks different in a lot of companies. And sometimes it’s the seeds of early momentum that can be built on that builds great companies. And other times it’s just like, there’s a tidal wave coming and let’s just ride it or.
Vickie Peng (36:41)
Yeah.
Sean (36:41)
you know, do you see a variety in the way that product market fit looks or is it pretty similar?
Vickie Peng (36:48)
Yeah, I mean, obviously every story and the details of every story is different. Every journey is different. But I think one thing, the common denominator is actually when you look back at debugging these four areas of conviction, everybody, the destination is kind of the same. Like everybody ends up checking off, we had an unfair advantage, reason to exist, problem, solution, and value. Those are boxes that are checked. The journey to actually checking those boxes and which mountains and which of those ended up being more challenging and more of the sticking point, I think.
Sean (37:01)
Mm
Mm -hmm.
Vickie Peng (37:17)
definitely does differ. actually, differs even when you think about the different archetypes we talked about. So if you are, you know, you are a hard fat company like Uber, you’re basically saying, hey, you you thought to get from point A to point B, you had to either catch a cab on the street or walk yourself to point B. We’re trying to tell you all the cars you see on the street are also ways for you to get from point A to point B. And people are like, you know, right? And so like educating and then making the customer, the customer’s number one skepticism, probably safety and.
Sean (37:32)
Mm
Mm -hmm.
Ethan Garr (37:39)
Hahaha
Vickie Peng (37:46)
trust and, you know, and Uber spent a lot of time building their kind of systems early on so that customers would actually feel safe, right? And so kind of getting over the skepticism around this problem statement being solved in this completely novel way and approaching that, that was their journey, right? And so they had to really convince customers that the problem was solvable, right? Versus if you are a hair on fire company, there’s a security company or portfolio called Wiz.
Sean (37:47)
Mm -hmm.
Mm -hmm.
Mm
Vickie Peng (38:10)
And they were just, they were a cloud security company launching into a sea of cloud security companies that all said that, we can help detect the vulnerabilities the best and the fastest and the, know, like easiest to install and et cetera way using all these same languages. But their, their kind of solution actually was technically more advanced and better at doing the job and solving the problem. And so their difference and like actually standing out amongst the competitors and really like.
Sean (38:16)
Mm
Mm
Mm -hmm.
Vickie Peng (38:36)
kind of flooring the gas pedal when their difference really came through and making sure that that actually captured the opportunity that it could. That was their kind of focus part of the journey, right? was like, so I think everybody ends up with the same four boxes checked. It’s just a matter of how and which ones are the harder ones, I think, that we’ve seen in terms of patterns.
Sean (38:53)
Mm
Ethan Garr (38:56)
All right, so your startup finds product market fit, a degree of product market fit. You validated it. What’s next? From your perspective, what is the next thing companies need to do to start thinking about and preparing for growth from that point?
Vickie Peng (39:10)
Well, we’ve talked about just going on vacation and letting it ride, right? So I think we do that first. No, I mean, so this is going to sound super cliche. And so you can roll your eyes ahead of time. like PMF. think honestly, it is a journey, not a destination. You don’t ever just find PMF and you’re done. Like you are the market is constantly changing. Your customers constantly changing. The competitive space constantly changing. What they’re expecting from you is constantly changing. So.
Ethan Garr (39:13)
hahahahah
Sean (39:13)
Hehehehe
Vickie Peng (39:36)
to say you have it at a point in time does not mean at all that you will keep it or build upon it. And so I think once you are able to say, hey, these four questions, these four areas I have conviction in right now, you’re immediately asking, OK, who else does this apply to? Right? Or like, first of all, within the original ICP and the original use case, I have 100 users. Should there be 100 ,000? Should there be 100 million? How many of these people are out there? And where do I find them? And how do I kind of think about getting my solution in front of them?
Sean (39:52)
Vickie Peng (40:05)
But then you start thinking about, even if you’ve reached the ceiling of that initial combination of ICP and use case, which directions can I expand to further build upon and extend this lead? And so when we think through this with the founders that go through Arc with us, there’s this horizontal expansion path you can think of, or a vertical expansion path. Generally, just two structures. Horizontal, if you’re shifting the ICP slightly, let’s say you’re building a
For example, there’s a company that we’ve worked with called Squint, which is an augmented reality overlay for factory floor workers. So this is a really interesting problem to apply AR to, but you are working with really complicated machines that could be dangerous if you don’t know how to operate them correctly. And the status quo, the other solution is a coffee -stained 800 -page manual at the bottom of somebody’s cabinet, right? But instead now we’re telling you, you can use AR and it will walk you step -by -step through how to learn something, right?
Sean (40:57)
Mm
Vickie Peng (41:02)
The original use case in ICP was kind of training and onboarding. And as somebody new joins, how do they learn to safely use a machine? But if you then think about, hey, horizontally, who else around this customer could have a similar use case? What about maintenance? What about safety? What about training? What about all the various different things that happen on a factory floor that actually could also use this AR use case? You have to then go back and re -ask the same four questions. Do we have an unfair advantage here? Is this problem actually worth solving for this customer?
does our solution actually solve the problem such that they’ll use it and then are they gonna pay us for it? And so when you think about shifting horizontally and looking for different ICPs or use cases that are nearby, same thing for sales tech companies that end up shifting slightly to marketing as well or vice versa, I think that’s one way you think to expand. The other way we see companies expand is vertically, obviously. So you have one core part of the workflow or use case, like say you’re linear, which is a task tracking tool.
Sean (41:34)
Mm -hmm. Mm -hmm.
Vickie Peng (41:58)
I don’t know, since we’re all product people here, I’m sure we’ve all had histories with Jira or Asana or various tools, right? My engineering team here at Sequoia is obsessed with linear, such that they actually wrote a manifesto so that we could keep it because we were trying to consolidate tools and they’re like, this is the one we need. And so obviously they nailed the engineering execution of a cycle of a sprint, right? And it was so opinionated, so simple, it got out of their way. They didn’t think of it as TPS reports and overhead that they had to work through.
Sean (42:02)
Mm
Nah.
Ethan Garr (42:14)
you
Sean (42:19)
Mm
Vickie Peng (42:26)
But then they start thinking, okay, what are the other parts of the product development cycle, right? Of course, the PM has a part of it, the planning, the product strategy, the road mapping, the prioritization. There’s things that happened before that like brainstorming and customer feedback and user research. So how do I think about the life cycle of the journey that my customer’s on and how can I tackle and approach and expand into that as well? So I think, like we said, it’s not a destination. So there’s always gonna be some other question that you can answer in some place to expand.
Sean (42:47)
Mm
Right.
Ethan Garr (42:53)
I
I don’t think that answer is cliched at all. In fact, I love the fact that you’re saying it’s basically those same four questions. The same ones you’re asking while you’re trying to get to product market fit are the same ones you should be asking after. I’ve often told Sean with RoboKiller when we found quote unquote product market fit, what do we do the next week? We asked the same product market fit survey question and we kept asking it and asking it because you’re right. It’s not product market fit can be fleeting. It may just because you have it today doesn’t mean you’ll have it tomorrow. So if you’re asking those questions, the right questions consistently,
then you can actually measure the changes against that. So I think it’s super important.
Sean (43:30)
But I also think just coming back to that concept of journey that the, is a point like, yeah, product market fit may evolve and change over time. New players come in, customer choices change, but there’s also, and I’ll frame it as a question. So I’m not just putting an answer out there, but is there a point at which there’s enough product market fit validation?
Ethan Garr (43:49)
You
Sean (43:57)
that you’re not gonna kill the company if you try to scale into it. And again, there may be different types of situations. Network effect business is gonna probably be a little different than a single value proposition, but having enough product market fit might be the better phrasing there to support scaling. Do you think there’s an important point in time when that happens?
Vickie Peng (44:24)
I think there is a point in time probably that you’ve hit some sort of escape velocity where your business will exist on an ongoing basis. And that, like you said, if you kind of pour fuel on the fire, it will grow. But I think the dangerous, I tend to.
I tend to bias towards the opposite direction, which is constantly thinking about the marginal person that you acquire, right? And thinking about if you’re going to grow, it costs a certain amount of money to acquire and retain that customer. And over time, that cost is going to get higher and higher such that, you know, it is not going to be economical. And I do think that that’s the point that companies are not like, we got it, let’s rip it, you know, and we’re going to go and spend all the money. I worked in ad tech for 10 years, so I know what it is like when people are really excited to like try to acquire new customers even before maybe some of the
Sean (44:45)
Mm
Sure.
Yeah, right.
Vickie Peng (45:10)
core mechanics are really figured out to a state. So I do agree, Sean, that there is a point that you hit that your business will exist by default rather than not exist by default. But I think if you lean too heavily into growth, you actually could jeopardize that, I guess, is what I would say. And so this understanding this marginal cost and benefit, marginal LTV, marginal CAC, I think is really important.
Sean (45:11)
Mm
Mm -hmm. Mm -hmm.
And then I’ll frame it the other way. Is there a point at which you’re crazy to try to grow the business? And what does product market fit look like at that point or lack of product market fit? Yeah.
Vickie Peng (45:37)
Yeah.
It’s not there. Yeah, I actually, so my own personal experience, would say at Instagram is falls exactly into this where I, as I mentioned, kind of led the small and medium business. If you’ve ever bought anything off of an Instagram ad, you know, that you’ve never heard of before, but like, this is exactly what I needed in my life. Like that’s, that’s the part of the business I worked on. But that business basically had.
Sean (45:55)
Mm
-huh.
Vickie Peng (46:05)
Our goal for that business was monthly active advertisers. So we just wanted that number. It should be in the millions. It goes up into the right, right? But when you looked at the numbers behind the numbers, 40 % of customers retained month over month, which means six out of 10 never came back.
Sean (46:18)
Yeah. That’s not good. Right?
Vickie Peng (46:23)
We had millions of, this was not a small customer, we have the first thousand, let’s see whether we should add the next thousand. This was millions of customers. And so we treated this as if it was a mature business line with PMF and we were just looking for growth in acquisition, but really, you know, peeling that back and completely shifting the ship from acquisition towards retention. How do we get that number to a reasonable number such that we actually have faith that our value proposition, you know, once again, we’re back at conviction and solution and like behavior change.
Sean (46:30)
-huh.
Hmm.
Mm
Vickie Peng (46:53)
It’s not sticky behavior change. The customer tries your product and never comes back again the next month. And all you’re doing is going through net new businesses, right? Because new SMBs get started. Like that is not PMF. And so this like leaky bucket idea, we called it burning through the forest, you know, internally at Instagram. I was known as like the forest firefighter, right? We really have to think about how to plug the leaks in the bucket before you consider growing. So we cannot.
Sean (47:00)
Right.
Yeah.
Yeah.
Ethan Garr (47:13)
Hahaha
Vickie Peng (47:18)
goal off of a metric that is growth related when we are not ready for growth. And so that was, yeah, my own very personal experience with that problem -saving. It is.
Sean (47:27)
And it’s also hard to roll that back. Like once you’re setting growth targets and to say, well, we just can’t retain, so we got to retrench and rethink this. That’s a cultural change in a business. It’s pretty hard to often convince investors, but kind of all the way through a business.
Vickie Peng (47:41)
It is.
building the belief in that and actually shifting, like I became this, you, I think then as a product owner, you have to become the evangelist that you’re writing, white papers about retention and like the creation rate of businesses versus the destruction rate of our like churned users and things like that. Like at the end of the day, actually at Instagram, kind of funny anecdote, we used to have this, I think it was called the PM -ees. All of our PMs had little trophies for like funny, you know, jokes at the end of like each year after the planning cycle or something. And mine literally said, retention is greater than acquisition.
Sean (47:54)
Yeah.
Vickie Peng (48:16)
On it because I became known as this evangelist of like no guys like Lee. can’t grow a leaky bucket
Sean (48:16)
-huh.
Yeah, that’s really cool that that’s become a lot more accepted across a more companies in the last decade or so, but nobody really talked about retention much before that.
Vickie Peng (48:33)
It’s also extremely hard to move. So it’s much easier to grow.
Sean (48:35)
Yeah, I think the best way to move it is through activation, but that’s a whole other podcast story. Get people to the right first experience, they’re much more likely to keep using.
Ethan Garr (48:36)
Yeah.
Hehehehe. Hehehehe.
Vickie Peng (48:41)
yes, R.
Sean (48:51)
Do we have time for North Star Metric question, Ethan?
Ethan Garr (48:51)
Set.
Yeah, so I think that’s good question to kind of start wrapping up here on Vicky. This idea of the North Star Metrics really gained traction in the last several years. think Sean really evangelized it quite a bit. I’ve taken the torch on that one quite a bit as well. I think it’s super powerful. what’s been your experience with North Star Metrics? Do you feel like it’s critical for aligning broader teams? Do you feel like it’s something that your portfolio companies should really be focusing on?
Vickie Peng (49:05)
Yeah, thanks to you guys.
Absolutely critical. And so thank you again for putting that out there into the ether. Couldn’t agree more. Yeah. Yes. So I mean, so I obviously come from Meta as well. And so I have this deeply ingrained in me. But I also, so one of the weeks, one of the foundational weeks of Arc is product week and I teach product week. And there’s a four part framework that I teach that is largely from the things that you teach Sean, from things that learned at Meta. But basically it’s.
Ethan Garr (49:26)
Hahaha
Sean (49:27)
Well, thank you to Meta for probably putting it out there more.
Ethan Garr (49:31)
Hahaha
Vickie Peng (49:50)
The mission of your product, identify what does success look like qualitatively, what changes about your customer, the metric that measures it, and then from that, the strategy that you have, your hypotheses, and then the tactics. So mission, metric, strategy, tactics. And without the metric, the mission is this like lofty, here’s the top of the mountain, here’s what changes about the world when our product gets out there. The metric is the thing that actually grounds it into something operational, right? That is black and white, that is measurable, that tells you whether you’re moving towards that direction at the
the top of the mountain or not. And I think without that metric, that singular one single metric, not a whole panel of 75 of them, you have no idea which way is up or down. And so the metric and identifying especially the right metric at the right time is so critical. Even just going back to that Instagram example I talked about, when your metric is growth, you’re going to focus on growth, right? And so your whole team is going to be thinking about all the different ways that you could grow regardless, you know, retention, leaky bucket or not, right? And so we had to really change that metric. So the teams were oriented
Sean (50:41)
Mm
Vickie Peng (50:49)
around what are the strategies, what are the hypotheses we have for actually moving this thing that matters. And so metric is critical component to operationalizing an actual product strategy in my mind. And it’s something that we teach to all of the founders that go with us through Arc.
Sean (51:05)
Awesome. think we could go into a very long conversation about Northstar Metric, but I just say to listeners, if you’re not familiar with the concept of Northstar Metric, it’s definitely worth digging into. It does relate very closely to Mission, but I think it also connects to product market fit and that hopefully all of those are in sync and that, yeah, something to…
Ethan Garr (51:07)
Ha
Vickie Peng (51:28)
Yeah. That’s one thing we actually talk through specifically, which is when you’re pre -PMF, picking the right metric is even more critical because you’re picking what we say in ARC is to pick a metric that represents customer happiness. Like I think about a customer every time this metric moves is the customer hitting a button or raising their hand saying, this is great. I love this, right? This is great. I love this. And people overly rotate towards, OK, revenue, contract, sign, seats.
Sean (51:46)
Yeah.
Yeah.
Vickie Peng (51:52)
you know, all these kind of growth, like top line things, but like that has nothing to do with the customer is actually using your product the way that you expect it to be used and like whether they are happy with that or not. And so I think pre PMF is even more important to find the right north star metric to operate around.
Sean (51:59)
Right.
Yeah, it’s kind of, it’s interesting. One of the companies that’s a Sequoia portfolio company over the years, HubSpot. I don’t know if you ever heard about the Chi metric that they talked about. It’s the
Vickie Peng (52:17)
yes, I think I’ve heard Brian talk about this, but yeah. Yes, yes.
Sean (52:20)
Yeah, customer happiness index. And I think what was really cool about it, at least as far as I understand, could have it wrong, but it was even part of the sales team compensation that they needed to have a high enough customer happiness index because if you convert someone, it’s pretty easy as a salesperson to promise the world and have it not deliver on those things. And so being able to make sure that once you acquire and convert that customer,
that it’s meeting their expectations, set the right expectations, and having that tied back. Because obviously, as a SaaS business, retention comes back to retention as we talked about. Retention is going to be a function of delivering or hopefully even over delivering on those expectations.
Vickie Peng (53:01)
Absolutely. What a great example. Yeah, totally.
Sean (53:03)
Yeah, but the fact they even called it the customer happiness index. Super cool. Yeah.
Ethan Garr (53:06)
haha
Vickie Peng (53:07)
And it’s everyone’s problem, right? It’s like if you even feel that that’s past you, that’s not true.
Ethan Garr (53:09)
Yeah.
Sean (53:12)
Yeah, yeah. So I think that just a good question to wrap up on maybe maybe bring some of these things together for any of the founders who are listening. Just any any last advice, Vicki, that you have for founders on navigating that challenging journey to product market fit and maintaining product market fit once you once you have a sufficient level of it to be able to support growth.
Vickie Peng (53:36)
Yeah, obviously it seems like we could talk about this for hours. So I know we have to wrap up here. think like when I think about the founders, I would actually even take a step back from more tactical device and say, like, as a founder, whether you come from a product background or not, you are now a product person. And like you, it’s time to embrace that. think product, oftentimes to people that don’t come from the background and even to those of us that are, you know, product people is thought of as this kind of like dark magic or black box.
Sean (53:39)
Yeah.
Mm
Vickie Peng (54:04)
Right? That like you either know how to do it or you don’t. But I think we’ve seen as we talk through some many of the frameworks that you’ve released, Sean, the ones that, know, product market fit that we talked through the product framework, the areas of conviction, there’s ways to kind of decompose and like logically and methodically think through how to approach building a product and getting to PMF. And I think regardless of whether you have a background in this function or not, like we all I think are capable of, you know, leaning into that and really owning that role. So that’s, you know, maybe more of a meta point than you were bargaining for. But.
Ethan Garr (54:06)
you
Sean (54:27)
Mm -hmm.
Vickie Peng (54:34)
I would say that I’ve worked with founders during ARC that are saying to me, you know, I don’t think of myself as a product person. I think after hearing some of these things, now I do. I realize I have to be, but also that I can be. And I think that’s really what founders should really hear and embrace, I would say.
Sean (54:43)
Yeah.
Right. Well, I mean, as a founder, they have so much upside in the success of the business and so much of that is tied to where product meets market.
Vickie Peng (54:56)
Yeah. Exactly. And I get really worried about companies that are trying to bring in product people in the first five or 10 people, right? Because really the founder should be the product person at companies that small. But I also know that maybe of your audience, some of us are not all founders. Some of us are product practitioners. And so one thing I do want to say to those folks is it may not be obvious from my career path, but I’ve been a forever IC. I’m an individual contributor.
Sean (55:23)
Hmm, me too. Yeah, my preference anyway.
Vickie Peng (55:24)
I don’t, yeah, see, okay, so many of us, yeah, like many of us don’t know that there’s a lot of us out there that just prefer that path, right? And as an engineer, there’s the architect or principal path versus the engineering manager path, and it’s totally normal. But I think as a PM, you get a lot of pressure to kind of take on orgs and teams and things like that. And I just have preferred to stay closer to actually owning and shipping product. And so, I don’t know, I think even if the path isn’t…
Ethan Garr (55:28)
You
Vickie Peng (55:49)
I would say you can always carve one and you know, you’re not alone out there if you are one of the kind of forever I see folks like me and Sean
Sean (55:53)
Yeah.
Ethan Garr (55:56)
Hahaha
Sean (55:56)
Absolutely. And for anyone who is not familiar with IC individual contributor, just for it’s so easy to get caught up in the day to day abbreviations out there as we started with just trying to figure out the early abbreviation of, what was it? EPD. So thank you for walking us through that as well. So Ethan, I have some great takeaways, but I’ll let you go first. Do you have any takeaways from this conversation you want to share?
Vickie Peng (56:13)
EPS.
Ethan Garr (56:13)
Hahaha
Yeah, I think the two things that really stuck out from this conversation, Vicki, one is, you talked about product market fit, I don’t think this idea of building conviction is often as much a part of that conversation as it probably should be. And I probably haven’t thought of it in those terms, but it seems super important, especially when you start to think about that sort of over indexing on the product side. And look, you’re a product person saying don’t over index on the product side. The market side is at least equally important. So I think that’s a.
a really important point for our listeners to think about. And I love the four pieces of your strategy, super helpful. And then,
Just what you just said recently, I think that focus on happiness for early stage companies is super important. I I would argue that every North Star metric should focus on customer happiness to some degree, but it’s, think, exceptionally important in that early stage when you’re trying to find product market fit. Think about what is really driving value for the end user. If you can do that, then you can find that intersection where both the product and the market meet. So super helpful.
Thank you so much for this.
Sean (57:34)
Yeah. then on my takeaways, I think one, it’s very easy to look at this conversation and say, okay, we’re talking about early stage startups. But just to touch on what you said, Vicki, that it’s a, never ends. It never stops. You can, you can fall out. just watched the movie recently, Blackberry, and it’s just the hottest company. But then, then Apple comes out with the iPhone and that market changes completely. so being able to, you know, probably Margaret Fitz going to be
be critical for businesses of any stage and critical to long -term success. But in the four areas of conviction, thank you for previewing that to the world. That’s super, super cool. Yeah. The second one, to me, I think is really critical on there. A problem worth solving, just because the problem exists.
Vickie Peng (58:17)
You heard it here first.
Ethan Garr (58:19)
Hehehehe
Sean (58:31)
if it’s not something that people really care that much about solving, then the perfect solution is not going to matter that much. So all of those are important, but that one stood out to me in particular. But any last comments, Vicki?
Vickie Peng (58:45)
No, this has been so fun to talk through with you guys. think you’re just spot on with so many of these, like the problem orientation and the fact that it’s not a destination, it’s a journey. It seems like we’re quite a lot. I could talk about this stuff with you guys for hours. So it’s been super fun to dig into certain parts of this today.
Ethan Garr (59:03)
Well, I’ve got 50 minutes till my next meeting. know what I’m just kidding. just because I was the concept strategist doesn’t mean I don’t have a real job.
Sean (59:06)
he
Well, thank you so much, Vicki, for taking the time. And I know our audience is going to get a lot out of this and for everyone tuning in. Thanks for tuning in. And we’re excited to get this one live.
Vickie Peng (59:29)
Sean, Ethan, thank you so much for having me. This has been great.
Ethan Garr (59:29)
Thank you very much.
Thanks.