Liz Gannes

Recent Posts by Liz Gannes

VC Chamath Palihapitiya Says He Has Cracked the Code for Making Startups Grow

All startups want growth. They want more eyeballs, more traction, more signs that what they are doing is working. They worship at the foot of the mythical hockey stick graph. But growth is a fickle, unpredictable thing — sometimes great products die before reaching an audience. Sometimes companies find tricks to get tons of users, but after the tricks fade away, everybody leaves. You can’t count on growth.

chamath_palihapitiyaNot according to Chamath Palihapitiya. The venture capitalist, whose claim to fame was starting the growth team at Facebook, said his Social+Capital Partnership now has a crew of growth experts that it deploys to portfolio companies. And he claims they can make just about anything grow.

Palihapitiya wants growth to be the main attraction of taking money from his firm. So he’s starting to put together case studies from fledgling companies like the texting-for-teachers startup Remind101, which now has 10 million users, up from 1.6 million last year. Teachers, students and now parents send 65 million messages per month using Remind101, up from 15 million last year.

Palihapitiya and Remind101 attribute that growth to three Social+Capital team members who’ve been helping out the company multiple days per week: Ray Ko, an operating partner responsible for analytics and data science who formerly worked on such projects at Facebook; Andy Artz, who drives the day-to-day product roadmap and previously led analytics for OMGPOP’s Draw Something during its steep growth; and James Wang, who was in charge of engineering after nearly seven years at Facebook.

And not only does Palihapitiya want to brag about his own team, he wants to trash other people’s.

“This is going to come off a little cocky, but all this ‘growth hacking’ stuff is a bunch of bullshit,” Palihapitiya said in an interview this week. “I do think there are a handful of folks who are good practitioners of understanding value in product, probably 10 to 15 of them in the world. Everyone else is a spammer.”

The Social+Capital growth team started working with Remind101 in June 2013. It’s odd that the axes aren’t labeled in this chart, because the company disclosed them for the story.

Of course, Palihapitiya wants to get credit for cracking the code without sharing his answer key.

“It’s not just top-line growth,” he said. “It’s acquisition, engagement, ongoing product value. It’s understanding the core value and convincing people that may not want to use it.”

So would this formula work for an enterprise business? Possibly. Palihapitiya said he’s confident the Social+Capital growth framework will apply to any company that needs consumer adoption or uses Internet marketing. A medical device startup? Probably not.

For Remind101, some key jumps in growth came from optimizing the signup process and measuring what happened to engagement afterward, said VP of product Aditya Bansod. Which, to be fair, is exactly the sort of stuff other “growth hackers” talk about.

Also, isn’t it possible that Remind101 was just a good product that started naturally finding users?

“It’s hard to figure out what stuff is causative and what is correlative,” Palihapitiya admitted. “But most companies are working on something that’s interesting and good. If we decide this is something that should go to the masses, we think there’s a framework we can use.”

Okay, but surely this can’t be a formula with a guarantee. How does Social+Capital explain its investments that have failed to grow?

“Some companies that we invested in sucked,” Palihapitiya said. “We were wrong about the market, wrong about the people. But in cases where we were kind of right, then we’ll be really right.”

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Another gadget you don’t really need. Will not work once you get it home. New model out in 4 weeks. Battery life is too short to be of any use.

— From the fact sheet for a fake product entitled Useless Plasticbox 1.2 (an actual empty plastic box) placed in L.A.-area Best Buy stores by an artist called Plastic Jesus