

Half a Decade After Demo Day - vasusen
http://blog.billclerico.com/half-a-decade-after-demo-day

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AndrewKemendo
Great write-up. Something you wrote in there piqued my interest as we
encountered a similar problem:

 _our users didn’t send money all that often (a few times a year, on
average)._

Can you say how you guys were able to navigate this problem successfully? We
think we found our solution by expanding what we offer, but this problem made
segmenting by service use (arguably the best way to monetize) incredibly hard.

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billclerico
We weren't able to navigate it, unfortunately. So we took what we had built (a
payments platform & risk engine) and applied it to a new usecase.

It feels like frequency of use is a key indicator of product success. The most
successful products get used very regularly.

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nostrademons
Google uses this as a key litmus test for which businesses it wants to enter -
the media's reported on Larry's "toothbrush test", where he's only interested
in products that get used at least twice a day.

This is also behind the increasing focus on traffic & turn-by-turn navigation
in Google Maps, and the acquisition of Waze. Google Maps as web-based
satellite mapping software gets used only once or twice per year, when you go
on a trip to an unfamiliar location. Google Maps as a local business directory
gets used once or twice per week, when you're looking for restaurants or
coffee shops to meet at. Google Maps as a traffic-avoidance system gets used
once or twice per day, to figure out the best route around jams.

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finkin1
Great read. Tweaking your business model to get it right is certainly hard.
I'm on the 3rd 'pivot' of my business. I'm curious - why did you decided to
build an API and what other directions were you considering at the time?

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billclerico
Thanks!

We were running concurrent experiments - one focused on easy payments for
small businesses (think ecommerce version of Square, with tools like invoicing
& storefronts), and one focused on an API for crowdfunding sites.

Small business payments got earlier traction, but the economics of it weren't
sustainable. (it cost us about $400 to acquire a customer that had a lifetime
value of ~$250). We iterated for a bit to see if we could significantly lower
CPA or raise LTV, but only made marginal gains.

Our API was started as more of a skunkworks project. It took a little longer
to build traction, but it grew like wildfire (double digit monthly growth
since launch, sustained over many years). Once platforms integrated it, they
stayed, and they grew really fast. So not only were we adding new customers,
but they were all growing month over month as well.

Last year, we made the decision to shut down our small business products, and
invested further in our API, expanding it to marketplaces & those building SMB
software as well.

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alphagenerator
Bill, I enjoyed this article a great deal.

Can you explain the basics behind your process for speaking to investors after
demo day? Did you just compile a list of people to speak with, or was there
networking involved at YC which led to the right people?

Sorry if this sounds basic. I've read a lot of articles, but the process of
talking to investors still seems hazy to me.

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billclerico
We took a hybrid approach.

First, we compiled a list of the best possible investors (for us, Max Levchin
was on the list given his PayPal background) and found ways to get to them.
(warm introduction is best, but not always possible)

We also were very open to meeting people along the way through
recommendations. For example, one of my good friends Nils Johnson knew Eric
Dunn very well and recommended that we talk given his deep payments
background. This conversation was what ultimately catalyzed our seed round.

I think cold emails to investors rarely work. What you really want to do is
build a network of folks who believe in you. Hopefully some of those folks
have money to invest, and others who don't can help add new nodes to the
network.

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alphagenerator
The e-mail thing is the killer. Can you make recommendations for how to
network with investors when someone is coming from outside Silicon Valley?

I too am in the finance space and my networks are concentrated in NY and
Chicago. However, because I want to take a more product-centric approach
initially, I feel like I should be talking to people in California instead.
Just one problem: I don't know too many finance people in California.

Is the short answer to just fly out there and do my best to network within the
span of a few months?

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billclerico
I don't really like the word "network" as a verb. It implies that you are
trying to schmooze your way into getting people to like you at cocktail
parties. (I'm not saying you are, I'm just saying that's what the term implies
to me) I don't think that's an effective strategy.

What I might recommend is spending a few months out here building some real
relationships with smart people who are genuinely interested in your business.
If you've got a quality concept & product, then good people will take notice.
But it's a long process, measured in many months (maybe a year).

Note that YC is probably the most effective way to short circuit this, since
it provides a strong signal of quality and helps open a ton of doors - but
most importantly it gives you a large, smart & well connected peer group with
whom to build relationships with.

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alphagenerator
Thanks for the wisdom. I appreciate it.

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aj_icracked
WePay + iCracked = WeCracked ... We should merge!!!!

