Pod Insights The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 20Growth: Should Startups Hire Advisors? When is the Right Time? How Much Should They Be Paid? How Should Founders Approach the Hiring Process for Advisors? What Should They Expect From Them? What are the Biggest Mistakes Made and more with Ely Lerner About this episode Ely Lerner is an EIR at Reforge and an advisor for startups transitioning from traction to hypergrowth. Previously he was Head of Consumer Product at Chime, and before that spent an incredible 8 years at Yelp in a number of different roles including Head of Product at Eat24, and Product Leader/GM at Yelp. In Today's Episode with Ely Lerner We Discuss: 1. Entry into Growth: How did Ely make his way from engineering manager to growth leader? What are a couple of his single biggest takeaways from his time with Yelp and Chime? Why do employees in large companies have to have P&L ownership when innovating within the larger company they are in? 2. Advisors: What, When and How: What are the three different types of advisors founders can work with today? When is the right time to engage with each of them? Should the advisor have had direct experience with the problem you need help with? How should these advisors be compensated; what is normal? What are 1-2 of the biggest reasons startup advisory roles do not work out? 3. Offense vs Defence: The Tricky Balance: What is the difference between offense and defense in product strategy? What should the resource allocation be between the two? What is the right amount of offensive strategies to have on at the same time? How can leaders prevent their defensive teams from feeling like second-class citizens? 4. Ely Lerner: AMA: Why does Ely disagree with many and suggest that horizontal products do have a core ICP? Should growth teams sit on their own or within functions in the org? What are the core reasons teams fail to ship fast? What state should your data be in when you bring in your first growth hire?
Transcript 11,506 words · 2 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 One mistake I see founders make a lot, trying to delegate core pieces of their strategy. You should be owning the strategy for your primary growth lever. You cannot delegate that strategy. The strongest lever that you can pull to really drive high-functioning engineering teams is engineering ownership of outcomes.
0:20 Harry Stebbings? Welcome back. This is 20 Growth with me, Harry Stebbings. Now, 20 Growth is the monthly show where we sit down with the best growth leaders to discuss starting, scaling, and maintaining growth orgs today. And I'm so happy to welcome Eli Lerner. Eli is currently an advisor to some of the best and fastest-growing companies. And previously, he was head of consumer product at Chime. And before that, spent an incredible eight years at Yelp in a number of different roles, including head of product at Eat24 and product leader at Yelp. But before we dive into the episode today, I'm refreshing the 20 VC Miro board, and I'd love your input again. It's really easy. Just head on over to miro.com/20vc and leave your guest suggestions for future shows. And you can do it with a digital sticky
1:02 Harry Stebbings? note or a comment. You can head over to miro.com/20vc. And Miro actually sponsored this episode. If you haven't already tried it, I think you'll love it. Miro is the online workspace for innovation. It's packed with the right capabilities to be your dream product's home base, that you can visualize content, data, and research findings, all in one space with no problem. It means this space is where you map customer journeys with the whole product team, create user behavior dashboards, and map process diagrams. And finally, it's where you'll run productive team sprints, using integrations with tools you already love and use, like Jira for developers, Asana for project managers, Figma for designers, and so on. We use Miro
1:43 Harry Stebbings? and love it to brainstorm future shows, vote on potential guests, and leave feedback for the rest of the team in our own time. And right now, I'm using it to hear from you. Leave your thoughts on the board at miro.com/20vc. That's miro.com/20vc. And 20 Growth is obviously focused on building the best growth teams. And great growth teams are obsessed with making data-driven decisions, but getting good data is hard. And growth and product teams have to spend hours each week configuring metrics, setting up experiments and writing custom queries. Or what if your growth team could get this time back? With Statsig, they can. Thousands of companies, from huge enterprises to startups,
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4:09 Speaker 00 You have now arrived at your destination.
4:12 Harry Stebbings? Eli, I have heard so many good things from many different members of the Reforged community, so thank you so much for joining me today first.
4:19 Speaker 00 Yeah, happy to be here, man. Excited to have a fun convo.
4:22 Harry Stebbings? But I want to start, we look at Chime, we look at Yelp, these are some incredible product orgs. How did you first make your way into the world of product and growth? And what did that entry point look like for you, Eli?
4:32 Speaker 00 Yeah, great question. So if you go all the way back, I was an engineer, engineering manager for a while. I think this used to be a more common path into product, right? It used to be one of the most common paths. These days, much less, which is like, good, I think. But so I was the engineering path, I had a startup of my own for a little while. And then, a big chunk of my product career was at Yelp. I was at Yelp for a little over eight years, across a whole bunch of different areas of that product and business. One of the cool things about Yelp, it's really like 10 different vertical marketplaces combined into a single product, which is a fantastic place to sort of like, up-level and grow up as a product and growth professional, because you really see like, all the different kinds of dynamics. In marketplaces, it's also consumer, it has a big SMB play, it also actually has a pretty big enterprise play, and I worked across all of those things. And so it was
5:16 Speaker 00 a really good growing up in this space. I tended to be the person that got tapped to do zero-to-one stuff there a lot. I think organizationally, maybe we didn't have a lot of organizational muscle around doing that. One of the ways that we built new product there also was through acquisition. And so back in 2015 now, we bought a company called E24, it's a food delivery startup. And so I kind of got dropped in to be, had a product for that subsidiary. This wasn't our original intent, but we actually sold it to Grubhub just about two years later, for almost double what we paid, a little more than double what we paid, plus a fantastic partnership agreement that got us out of the fulfillment game, but let us keep a lot of the much higher margin, sort of lead gen revenue in the food delivery business, which was fantastic. And then at my last stint there, brand new product and
5:57 Speaker 00 business line, kind of in a hybrid GM product leader role with P&L, this is, I think, One of the things that I have seen myself and with companies that I advise is if you're trying to do true zero to one inside of a later stage company and like find your next horizon, trying to do it inside of the sort of legacy product product org vastly reduces your chances of success. And don't even get me started on kind of like innovation orgs or those kind of things. But the model that I've seen most successful is the model that I did at Yelp, where you actually really give somebody P and L responsibility like they are a founder, right? And treat them like a founder. We actually did board of directors meetings with the C suite for the sort of businesses that we were incubating like that.
6:36 Harry Stebbings? I just want to go there because we're seeing every big company now say, oh, we're integrating AI into new products into existing product lines and we're able to move fast now. But we can move fast. We can move fast. Can they? Having done it inside an incumbent?
6:48 Speaker 00 Yeah, that's a great question. I think big companies can do these things quick. I think there are two versions of what you're talking about, actually. One is the like, let's supercharge the things we are already doing with this new tech. That's sort of a fairly unique thing in this new LLM wave that you didn't have particularly often before. And you've actually seen a few companies do a decent job of like the first step of that very quickly, which is impressive for those companies. True zero to one, though, where you're really like, you're serving a new need or a new customer or a new vertical, like you're really expanding, like solving a problem you hadn't really solved before. What I have seen is your highest chance of success is if you carve out a startup org. And, you know, everyone likes to throw around, we're a startup within a big company. If like the leader of that doesn't have P and L, you're not a startup within a big company. I think
7:31 Speaker 00 that is the important piece, which is like, you need to fund this as an independent unit that is looking at a business line holistically and is autonomous within the sort of like spending of that capital. And like a startup, you should fund them a little bit at first, right? And they should come back and show progress and ask for more funds as if, you know, they're doing their C, they're doing their A, right? Like, that's how you should do that. Because that's the only way you really succeed at those hard problems.
7:56 Harry Stebbings? Eli, I'm loving this because we're just rolling. Why on earth would brilliant and talented people do that in a company where they don't own it? Raise money for your own company and come to people like me who'll give you millions of dollars.
8:09 Speaker 00 Yeah, it's a great question. I think the biggest reason is there are some things that only can be built as an extension of a successful business. That cannot be built as a standalone business, right? And so I think like, if you were trying to build a totally adjacent business inside of a large company, don't do that. The company shouldn't do it. You shouldn't do it. It's not a good idea. The way that you succeed is you build something that leverages some aspect of the success that the business and the legacy product has already had. To be able to build something that nobody else could build, that's the thing that you're doing there of like, building zero to one inside of a larger org. You are leveraging all of the advantage, all of the customers, all of the data, all of the tech.
8:49 Speaker 00 All of that is at your disposal to build something that in most cases couldn't have been built outside the company. That's the main reason.
8:55 Harry Stebbings? Like speed to distribution as well, which is like you probably could do the product, but it would take five years of distribution build to get to a point where you have enough customers to actually do it meaningfully. And actually, it may not be the passion of your career, but it's something cool to do. Do you see what I mean?
9:12 Speaker 00 Absolutely. I think that's true. And in terms of speed of learning, right? I actually think it's a fantastic sort of like accelerant to the speed of learning in a bunch of these areas. Because you can turn on distribution however you want overnight when you're ready to do it, turn it on to learn, turn it back off, right? Like you have these levers that you don't have when you're in a small startup.
9:30 Harry Stebbings? When we look at Yelp in all its wonderful varieties, and then when we look at Chime, which we haven't discussed, but you spent time at for kind of closest two years. One takeaway from each Eli, that really impacted how you think about product. What would it be from each?
9:45 Speaker 00 The first thing that comes to mind is actually the same takeaway, and it's sort of the reason that I joined Chime. I think a lot of people sort of look at like, hey, you're doing consumer and marketplaces and you're into a fintech. I mean, one, Chime is actually much more of a consumer product company than it is a fintech at the end of the day. And so that that kind of came. The sort of takeaway for me here is incentive alignment. I think my core learning from every different vertical of marketplace that I worked on at Yelp is incentive alignment is the most powerful lever you have in a business, definitely in a marketplace, but I think Chime is actually the example of, Chime is not a marketplace, but Chime has an amazing level of incentive alignment between the business model of the company and value to the customer that has really led to a lot of Chime's success. And I think that was my learning from marketplaces is like, when you have incentive alignment between, you know, you can,
10:29 Speaker 00 if you ship something where it makes it better for the supply side, the demand side and the company's P and L, that's when you can really accelerate a marketplace. And when marketplaces don't have that, they struggle because they're trying to make these trade offs between supply or demand or their P and L and like, everything is challenging. When you find that incentive alignment, everything takes off. So that I think was my takeaway from Yelp and Chime has the same thing, actually. Chime has that same dynamic between their own business model and their customers' incentive, which is really what has driven their growth curve. So.
10:54 Harry Stebbings? It's so funny that you say that. It reminds me actually of Brian Balfour's episode, Reforged, where he talks about business model fit. And when that works in a similar way, it really creates incredible outcomes. You're an advisor now and I want to kind of really deconstruct this because I think there's so much opacity actually to it and the terms thrown around a lot. When I say advisor and advisory roles, what does that mean, Eli?
11:19 Speaker 00 Yeah, that's a great question and I think it's especially appropriate because I think it is changing. I think historically the word got thrown around and people were doing sort of different levels of things, but nobody, both founders and operators who might be advisors, didn't really understand what that looked like or what they should do or how they should do it. We are at sort of the early stages of an evolution of much more targeted ways to exchange value between founders and people that can help them and much more structured ways. And so I think this is what I've been doing and I love it. I think there's a lot of exciting stuff here.
11:47 Harry Stebbings? So how does that look then? If we take that one step further, what does that look like in reality?
11:53 Speaker 00 A few different pieces here. I see kind of like three top level shapes of advising. The first one is company level advising or founder level advising, where the perspective is across the whole company, the whole business. You're really like a partner to that founder. This is the kind of advising that I do and there's some sub areas here. You then see functional advising. So think like a marketing advisor, right? Like that. Person is really coming in to help bridge a gap within a particular function. And then you have sort of like deeper domain kind of advising. So think like SEO, or if you're in a deep domain, like international logistics, like people who are deep in that domain. Right. These are sort of the three high level shapes of advising that I think you're seeing now.
12:28 Harry Stebbings? When you think about company level advising, how does one do that really? Cause everyone to an extent is a functional leader. Is that like CEO coaching? Is that like CEO therapist?
12:39 Speaker 00 Coaching is really about personal and professional leadership development. Company level advising, like the reason founders are talking to me is because they want help growing their business. At the end of the day, that is the purpose of the company. That is the founder's job is to grow the business. The ways they do that span across people, org, culture, and all of their different functions. Right. And so again, company level advising is really that I'm helping you do your job at that highest level with the, the goal of growing this company. Whereas coaching is I'm helping you become a better version of yourself.
13:09 Harry Stebbings? So when we think about like timings for different advisory positions, is there a right or a wrong time for different advisory positions within different companies and spaces?
13:19 Speaker 00 Yeah, this is a great question. I think I see founders struggle with this question quite a bit. I think maybe starting with functional advisors, I think there are two things to consider when you think about functional advisors. One mistake I see founders make a lot is trying to delegate the core pieces of their strategy because of their own background. And so I think one sort of like piece of advice I give a lot to people is as a founder, you should be owning the strategy for your primary growth lever. If that's product, marketing, sales, whatever the primary growth lever for your business is, you should not delegate that thing. I think a lot of founders are like, hey, I don't have a lot of background in X. I need to bring in somebody who's super experienced in X. It is okay to bring somebody in to leverage and help you learn and help you through it.
14:04 Speaker 00 But at the end of the day, you need to own that strategy. You cannot delegate that strategy. That I think is something to be careful of in general, both for full-time hires and for functional advisors. Cause I see people do that.
14:13 Harry Stebbings? You can't even delegate it if you hire it.
14:16 Speaker 00 You can't. If it's the primary growth lever for your business, it is the most important piece of your business. And at the end of the day, the person you hire will not have the full company perspective that you do. They will not have the right level of skin in the game and they will not be incentivized to take the right level of risk. Only the founder is going to take the right level of risk that is required. You definitely can hire. Hiring is important. You need leverage. You need experts in different areas. But if those are offensive areas, we can talk about offense and defense later on if you want. But if those are offensive areas, which are like primary growth levers for your business, you need to be owning that at the end of the day and leveraging that expertise to help make you do the job better. But you need to be owning it. For defensive areas, absolutely, you can hire and delegate, and you should hire and delegate, right?
14:58 Speaker 00 So like customer service, if customer service is not a primary growth lever for your business, which once in a while it is, but usually it is not, you absolutely can hire an experienced CS leader to run that area for you and just take it totally out of mind. But if you're a product-led business, if product is a major growth lever for your business, hiring an experienced product leader and then hoping that they are going to figure out the strategy for you is just not a good path.
15:20 Harry Stebbings? Okay, so if we decide that we do actually need some external expertise and it's not a core lever, and so we're able to and we should.
15:26 Speaker 00 Yeah.
15:26 Harry Stebbings? How do we determine whether we should bring in a consultant and an advisor, essentially, an incredible growth leader, like anyone in the Reforged community, or bring in a head of growth?
15:36 Speaker 00 Yeah.
15:37 Harry Stebbings? How do we decide between advisor versus head?
15:39 Speaker 00 Yeah, that's a great question, especially if you think about function. There tends to be sort of a time factor here. Because if, let's say, product-led growth is sort of the primary lever that you're using, you need to be owning that. Company-level advisor who is sort of leaning into teach you to fish, right? Which is kind of, to me, the advising side of the line here is fantastic even from the very beginning. Because that person has got that experience, you're the one actually making the decisions, you're the one actually executing at the end of the day, but they are helping you get better at doing that thing and giving you guidance. That's good early on. At some point, as you scale, you're gonna have to start building a function around this. As that function grows bigger, you will need leverage in running and managing that function that is executing on your strategy.
16:23 Speaker 00 There tends to be a gap period for most startups where they are not yet big enough. It doesn't yet make sense to hire a full head of growth, head of marketing, head of product. But it's getting big enough that it's taking too much of that founder's time. Or it's really what it's doing is you're using your cycles in a lower-leverage way than you should be. As a founder, again, it's not because you want to step back from product strategy, but it's that you want to be focused on the highest leverage pieces there. That's where fractional can actually be really useful. And so a fractional person can sort of bridge that gap for you where you're not to the point yet where you need to hire, you're not big enough to hire a full-time person. So that's one approach. Functional advisor is the other one. So sometimes you'll have sort of a more junior people manager in one of those functional areas.
17:04 Speaker 00 And a functional advisor can be really helpful to sort of bridge the gap between the person who's actually executing the org and kind of like the thought leadership you need in that functional area.
17:13 Harry Stebbings? Yeah, a functional advisor would be like out of home expert in terms of marketing. And they would sit on top of a demand gen team and they would provide out of home. Is that a good example?
17:23 Speaker 00 Exactly. I think that's exactly right. Yeah. And then at some point you would get to the point where you do need to hire somebody.
17:28 Harry Stebbings? So we get to the point where we actually want to hire this advisor. Okay, what should we look for in the advisor specifically? Should they have done it before? Should they have been at a similar company to us? Should they have been advisors before? What is a good advisor to get?
17:43 Speaker 00 For a functional advisor, let's again, use maybe the marketing advisor as an example. For a functional advisor, I would say you want to figure out what the lever is, right? To your point about performance or brand or SEO content. You don't want to delegate figuring out what the lever is. You should be figuring out what the lever is. Once you figure out what the lever is, bring in somebody who has done that thing at similar types of companies to yours and at similar stage to help you with that lever. That's a fantastic step path for that functional advisor. On the company level advisor side, it is more difficult. The company level advisor thing, this is where you kind of have this depth of engagement spectrum. You have your traditional kind of high level company advisor on one end, right?
18:25 Speaker 00 This is, this is, I think it was your most common company level advisor historically. When you're a high level advisor, you're doing this thing where essentially you meet with the founder once a month, sometimes every other month because they got busy. The founder's coming to you with some problem that they're facing, right? And they're like, hey, here's this problem we're facing. You're like, oh yeah, I've seen something like that before. Here's what we did. Here's what we learned. Here's what we tried. And then the founder goes away. That's your typical sort of high level advisor. The newer model and the model that I'm doing is what I've been calling Hands on advising. And so, you know, back to earlier, we were talking about this line between advising on one side where it's all about teach to fish. And then consulting, contracting, fractional interim, full time on the other where delivery is happening, right? What I'm doing is hands on advising thing is on the advising side of the line. So I'm there to teach you to fish, not to fish for you.
19:08 Speaker 00 But I'm about as close to the line as you can get without crossing it, right? And so what that tactically means is my engagements with founders tend to be weekly. Like I'm sitting down with that founder every week. We're diving in and working on whatever is the highest leverage thing for the business at any given time. And then I'm spending some of my own time outside of those weekly sessions, diving into their data, washing their call, getting up to speed enough on their product and their business and their customer to be a thought partner in those weekly sessions, which is something you don't get to do when you're doing the high level advising. You're just not close enough to the ground to really be a thought partner. They're getting value from mining your experience if your experience lines up with what they are doing. This is maybe to your question about what you should you look for? If you're doing high level, you kind of have to make some bets on what kind of problems do you think you're going to run into? And hope you get some people that have seen exactly those kinds of things before.
19:53 Speaker 00 The hands on thing is nice because you get to combine the experience with those things before with true thought partnership in doing the job week to week. And this is why I love doing this hands out advising. I feel like I provide way more value in the hands on advising space. I also learn way more, like my learning velocity as a hands on advisor is honestly like exponentially faster even than when I was an operator. Everybody doing high level advising will tell you that they don't learn anything. They get bored doing that.
20:19 Harry Stebbings? Do you not want to take it one step further though? And actually go down into the functional weeds because now you're relying on the CEO to relay everything to the functional leader. I would want you with my market team, with my product team to actually relay and teach.
20:31 Speaker 00 This is a great point. This is where the teach to fish is really important, right? Because the founder can't rely on me. If they are not able to run the functions of their company, that's going to be a problem. And so it's a much higher leverage for me to help them up level in how they execute. This is where, again, at the hands on level, we work on everything from strategy to then how do I set up my org to execute on this? So we did this last week and here's what we learned. Let's think about that and make new decisions going forward because you're there every week. You're a second brain for that founder all the way through the process and you're helping them up level all the way across. If you tried to embed me in one of your functions, then you're getting too far away from that function if it's a core offensive leverage growth function for your company, which you shouldn't be. And if you need me to do those
21:15 Speaker 00 things, that's gonna be a problem because I'm not gonna be there the whole time. I'm only there an hour a week, right? And so like you really need to be able to do it and I could help you get better at doing that thing. At early stages of startups, you are almost always much better off focusing on one primary growth lever and ignoring the rest. You need to layer them on later, but you shouldn't be doing it in early stage. So when you are laying those on, you are now growing the org and you're actually probably hiring in some of those places to layer those on.
21:40 Harry Stebbings? So what stage of company are we at here then, Eli? Are we in a series A, B?
21:44 Speaker 00 So yeah, most of the companies I advise are from seed to C, so it's series C.
21:49 Harry Stebbings? And should these advisors have done it before at the stage of company that you are at, in the geography that you are? Because you can imagine like you have a Facebook growth advisor who did, you know, Facebook news feed. It may be very different if you're being hired into Chime where it's very different. Should they have done it before?
22:07 Speaker 00 I think it helps a lot. It doesn't have to be identical because if it's identical, you're never gonna find the person, right? I think the things that matter most are, one is like, did they develop the playbook or did they scale the playbook? I think you see a lot of split between somebody who scaled a playbook that was developed prior to them or they developed a playbook from scratch. And in all of these different areas, you should be thinking about, are we developing a playbook or are we trying to scale the playbook? And you want to match your sort of advising to which stage you're at. Within the sort of functional places, I think, again, on the growth side, like if your primary lever is virality, definitely get somebody that did virality stuff, right? If they come from a performance world, they're gonna struggle to help you with the core virality stuff and vice versa, right? I think that matters a lot. Geography mostly matters. This is where
22:49 Speaker 00 it depends, right? I think there are things where the geography matters a lot and there are things where the geography matters less. So like brand, brand people need to know the culture of the place that they are doing branding to. Performance works pretty similarly in a lot of different places. And then like maybe fintech is a good example where just like the core business models and the infrastructure dynamics are very different in different geographies, right?
23:12 Harry Stebbings? How do you advise founders? There's a lot of consultants slash advisors now who come out and say, I did this, I did this. How can founders determine true attribution of who did what?
23:23 Speaker 00 This is, I think, a general problem. I'll tell you my approach to it. I don't try to make claims with founders. My model is I meet as many founders as I can and I help them as much as I can for free. And if at some point we feel like I have capacity and there's a good fit and I'm bringing a lot of value, then we formalize the relationship.
23:39 Harry Stebbings? It's like a freemium trial in many ways.
23:41 Speaker 00 It is absolutely a freemium trial.
23:43 Harry Stebbings? When does it convert?
23:44 Speaker 00 I think usually with the people that I work with, after three or four calls together, we are both probably at the place where we're like, we either are super jazzed to work together and we're going to do this, or this is probably not the right time or not the right fit and we should, you know, we can check back in in six months or something. So it's usually within that amount of time that you kind of get it.
24:04 Harry Stebbings? In terms of setting up for success, I think failure happens in surprises. What do you want to set up or align before agreeing to a formal commitment?
24:13 Speaker 00 I actually think it's more important in the place where we are not going to work together, but I'll also answer your question. When we are not going to work together, I'm really trying to set you up with like core frameworks and approaches to maximize your chances of success without me there. And if any given time, either of us feels like we're not getting enough value out of the relationship, we just stop. And there's not, there's no more equity that you're giving me, there's no more cash, there's changing hands. Like, we can just stop whenever we want. There's no commitment on either side. You can just start working together and see how it's going. And if you're getting value, you're getting value. And if you're not getting value, you stop.
24:43 Harry Stebbings? You mentioned that equity, cash, I'm sure is part of it too. Like, what does that actually look like in equity and the salary package?
24:49 Speaker 00 Usually what you would do is you would look at what you would hire a full-time C-level in that position for, and then you would just scale it back by the fraction. So usually it's like two days a week or three days a week. Those tend to be the most common versions of that. And so you're really just scaling that back. So you also generally don't put a cliff on the equity because they, you know, it's sometimes it's a six month engagement or whatever. But you're really just taking what you have and scale it back down to the three or two.
25:12 Harry Stebbings? So we agree then on this compensation structure. In terms of equity, what do equity packages look like? Just to help me again, I know it's detailed and money is always uncomfortable to talk about, but so many listeners, they're like, what does it actually look like? Just help.
25:27 Speaker 00 The package that I do is, let's call it eighty twenty cash and equity. But again, on a month to month basis for this hands-on advising. The nice thing about that is it's not a lot of equity upfront. If we end up working together for years, and this does happen sometimes, I mean, Casey has clients he's done two plus years on. So sometimes you actually find really high value long-term engagements and then that starts adding up a little bit. But early on, you're not giving away that much equity for the value that you're getting, right? There you're actually skewed more towards the cash because it's sort of this like, we're exchanging value as we go.
25:59 Harry Stebbings? Okay, so we agree on this eighty twenty split. You are advising me, I'm very excited. I'm a hypothetical founder and you're working with me. What can I do, Eli, to set you and us up for success in that first month?
26:12 Speaker 00 Yeah, that's a great question. There's sort of three key things I see as signals of successful relationship. Really, especially when you're early on and like trying to figure out strategy. You can ask questions of data, you can ask questions of customers and you can ship small things quickly to learn. Those are the levers that you need to be able to pull. If you cannot pull all three of those levers, that can be a challenge. There have been times where one of those levers people are struggling with. Like I've worked with people where we start working on strategy and then we realize their teams just can't ship. Data is one where like, if you just have no data, I probably need to say like, come back to me when you have instrumentation.
26:47 Harry Stebbings? So I've got a couple of questions. Why do teams struggle to ship?
26:50 Speaker 00 That's a great, you want to do that question? We could do a whole session on that, but lots of different reasons. But the most common ones are engineering ownership of outcomes. Like the strongest lever that you can pull to really drive high functioning engineering teams is engineering ownership of outcomes. Very frequently you get teams that set up where the engineering team feels like it's owning output and not outcomes. That leads to all kinds of things. So that's one.
27:18 Harry Stebbings? Pause, pause. What's output, not outcomes? Just so we understand that.
27:22 Speaker 00 Ship the feature. A ticket shows up in my Jira or whatever. It says we gotta build X. I build X. I feel like my job is to build the thing you tell me to build. That is, I think, one of the biggest gaps between really high-output engineering teams and engineering teams that struggle to have high output. That's one of them. Two is actually this offense and defense thing. And so I think another very common thing, I have this framework that I've written about that I've used with almost every company that I advise, of thinking about everything you're doing as a company, especially things that your products and engineering teams are doing, because that's the highest leverage, highest opportunity cost as either offense or defense. And then there's neither, which you probably shouldn't be doing.
28:00 Speaker 00 You see a lot of companies where a lot of cycles are going to things that are very marginally impactful to the business overall. And to maybe preview the framework a little bit, offense is things that are really like targeted at a small number of bets that are targeted at pushing your business to the next level. If it's 10 things, that's also a problem, and they have to be things that are really focused on pushing your business to the next level. Defense is things you have to do. There are always things that are not moving business metrics that need to happen, mainly because they are protecting against downside risk.
28:30 Harry Stebbings? So my question to you is then, if we have like defensive, it's reliability, it's security, it's small upgrades. Isn't offensive a co-pilot strategy for Figma or a new product? What's offensive and what's in between?
28:47 Speaker 00 Yeah, great. Offense and bets, absolutely. So in earlier stages of companies, they tend to be growth focused, right? It's like, what is your probably one primary growth loop and how do you accelerate that growth loop? Because you're, again, you're looking for offensive bets should be compounded. You want to find things where the more you invest there, you get more and more compounding returns, right? As opposed to these little short-term one-off, you could move a business metric one-off, but it doesn't do it in a compounding way. That's not offense. At later stages, things like product market fit expansion absolutely are your offense, right? To your point, if you're Figma and you're building your co-pilot, that is probably one of your core one to three key strategic bets for the company. On the defensive side, I think a key thing about performance is a good one. Risk and fraud is another one, right? Technical scaling, all of these things are in this space.
29:30 Speaker 00 A key aspect of defense is that there's almost always a diminishing returns curve. There's a point on that curve where you have reduced the risk of the downside to a significant amount, not to zero. Like if you try to move the risk to zero, you're going to be way down the dimension returns curve. It's going to take massive amount of investment and you're still probably not even going to get the risk to zero, right? So really it's about finding that diminishing returns point and not investing past that point. Because every cycle that you're investing past that diminishing returns point, you could be putting into offense, which is people really undervalue the opportunity cost of those cycles, right? Especially because as we said, offense is compounding. And so things that compound, the time value of money here, right? The sooner you invest in those things, the more that curve is going to bend over time.
30:13 Harry Stebbings? And so the opportunity, just so I understand, so the opportunity cost of getting security and reliability at 95% instead of 100% is actually we could move those engineers to an offensive strategy and have an alternating strategy with those resources.
30:28 Speaker 00 Right, with compounding returns, exactly.
30:31 Harry Stebbings? So for me as a CEO, do I sit down with the CPO or the product leader? And do we literally map out offense and defense and then map out resources accordingly? How do we kind of top down and still that?
30:43 Speaker 00 Yeah, the other piece of this is actually org. Like the core sort of phases of this generally are go in and look at everything you are planning to do right now, like your whole roadmap. And essentially tag all the things as offense and defense and figure out, and neither, because you're always going to have a bunch of things that are like, this is actually not offense. It's not really defense. Should we really be doing this right now? Maybe we shouldn't, right? And that's going to help a lot. But once you do that, actually, one of the things can be really high leverage is aligning your org around offensive and defensive bets can also be really powerful. Because then it allows you to have really focused teams on those offensive bets that are not getting distracted by other things and focus is how you make progress, right?
31:19 Harry Stebbings? What does that look like in reality, aligning the team around offensive and defensive bets?
31:24 Speaker 00 Yeah. So again, I think like the most common version of this is actually you have sometimes this is called like a core experience org that really owns all of the defense. Like one of the things that I've seen be really effective is when you have a core experience org that owns every piece of the defense, all of the defenses within that org and no non-defense is in that org. That really lets them prioritize apples to apples, defense against defense. You're empowering them in a much stronger way. And then you have an org for probably each of your offensive bets. Again, like you should at most have three core offensive bets and an org that is dedicated to each of those things.
31:56 Harry Stebbings? Do you ever see an offensive bat turn into a defensive and a defensive turn into an offensive?
32:02 Speaker 00 Yeah, that's a great question. You definitely do. The most common place for that is as you top out a growth loop. You know, the first growth for your company, for your business at some point is gonna kind of start topping out that S curve and be more in extraction phase, right? You need to be layering on a second one. You should start before it totally starts topping out. Like that will become the offensive bet. Once it starts topping out, you still need to invest in it. Like you still need to be right. Like if it's a virality loop, like you can't just be like, okay, it's we're starting to get lower returns. We're just gonna ignore it from now on. It starts turning into a defensive thing where you're like, we need to keep maintaining this. But additional resourcing on it is not producing additional returns, right? We're now in this diminishing returns curve. So then that moves like that virality, those things move into the defensive sphere.
32:43 Speaker 00 The opposite one also happens. Actually, an example of the opposite one here that I think I see is trust and safety. Trust and safety is usually defense, right? You're avoiding downside risk. But sometimes it becomes offense and like Airbnb is a good example, actually, where trust and safety becomes offense because a core barrier for Airbnb is this idea that like, I'm in somebody else's home. Like that's a core barrier to value delivery for your product. And so that's a place where actually like, and they've invested a huge amount in trust and safety overall. And the reason for that is they are getting outside returns by doing that because every sort of incremental point of trust that people have in that like, I'm gonna go to somebody else's home and it's gonna be okay. They're driving sort of like net new demand that didn't exist when they didn't have that trust, right?
33:28 Speaker 00 And so that's again, like in some cases, trust and safety is, most cases, trust and safety is defense, but sometimes it can actually be offense.
33:34 Harry Stebbings? Make the defense people not feel like staples and bread and butter. That's a bit boring.
33:40 Speaker 00 Talking about this is really important and how you talk about it is really important. But the one thing to remember here is defense is equally important to offense, if not more important. The whole point is that these are existential. If you do not do these things, you're not going to have a company to invest in offense. They don't exist. You need to be making sure that everybody understands how important these things are. You need to be celebrating it in the right way. I think this is another thing that people do wrong is they tend to celebrate offense. They tend to celebrate metrics movers. And that makes people working on defensive things feel crappy because they never get celebrated. But really, you need to build a culture that celebrates finding points of diminishing return and giving back resources. Like, that's so valuable to the business because of the opportunity cost of that, right? And so you should be celebrating this idea that like, hey,
34:23 Speaker 00 we actually think we only need to invest this much in this tech debt and no more. And we we figured out a way to cut that in half. Celebrate that all day, right? That's a huge impact to your business because of the opportunity cost of the savings that they have found, right?
34:36 Harry Stebbings? What do you think are the biggest mistakes that founders make when it comes to this mindset of founders and product leaders? When it comes to this mindset of offensive and defensive?
34:46 Speaker 00 Yeah, that's a great question. The biggest mistakes I see are not choosing is one, right? On the offensive side of like, the whole point of strategy is to say no to most things and focus in on a small number of really high leverage things. Like, you have to make that bet. And so when you see companies with nine company level OKRs at the top level or whatever, right? It's like, they're just trying to do all the things. Like, your chance of success is already low. If you do not focus down on one or two core key bets and do that strategy work to figure out where that leverage is, you're not going to succeed. So that's one, it's just having way too many things that you're calling offense. That's one mistake. The other mistake actually is way too much defense, right? I've seen this in actually like logic books. There's sort of a human fallacy of because X thing is important, I'm just going to assume anything I do in that direction is important, right?
35:28 Speaker 00 And they just forget about this concept or they're not thinking about this concept of diminishing returns. That is very, very common because they're like, well, we have to invest in X. It's like, yes, you do, but you're investing way too much and the opportunity of doing that is way too high.
35:40 Harry Stebbings? Eli, do you ever have it where, and sorry, my voice is going, I sound like a sexy Rod Stewart while expecting that in a podcast. Do you ever have an offensive which actually turns out to be a neither? It could be a new feature, it could be a new product, doesn't work. What happens then?
35:56 Speaker 00 Absolutely. This is a great example where offense should not be about the solution. Your offense is not the solution. The offense is the leverage point that you are trying to move. And so that team's goal is figure out how to move that leverage point, figure out what they need to do to move the metrics in that leverage point and be learning as quickly as possible if that is the wrong bet. This is another mistake you see a lot, which is like, I did some work to try to determine where that leverage is. I made a bet and then I didn't question that bet for a long time. That happens all the time. Really, the thing to know is like, you need to be building confidence over time and you need to pull forward the key riskiest assumptions in that bet, right? I think this is one of the key things. This is again, something I have found out all the time, which is how do we identify what the key riskiest assumptions are?
36:38 Speaker 00 And then how do we do things very quickly to essentially learn if we are wrong about one of those key assumptions? That would mean that this is not the bet to be taking. The earlier you can do those things, the better.
36:48 Harry Stebbings? When you say there about kind of really understanding what you're driving towards in terms of the incentive metric or the output, not the feature, so to speak, it made me think of a conversation I had with Alex Schultz, actually at Meta. And he said, actually, retention is king. Retention is king. How do you think about the prioritization of retention today? And I know you have some contrarian views on this.
37:10 Speaker 00 Yeah. And the one contrarian view that you see a lot is people tend to build teams focused on churn. And I think that's a mistake. I don't think you want to focus teams on churn. Retention is actually the thing you want to focus on. And actually, most of that is probably activation. Generally, New Year's for activation and getting people to the place where they experience the core value of your product and then build a habit around that value is your strongest lever to retention, which is the thing that is going to impact your churn metric. If you try to focus on churn, these people are already lost. One, they maybe aren't even your ICP in the first place. You shouldn't be focusing your effort of trying to prevent people from churning who are not a good fit for your product. Or you've already lost them, even if you're ICP, right?
37:51 Speaker 00 And you really should be moving your focus back probably to activation to really build strong retention. Retention is the most important thing for sure.
37:58 Harry Stebbings? When it comes to advisor roles, what are the number one reasons they don't work out?
38:02 Speaker 00 When you get a kind of advisor who has done a bunch of things before, and essentially their advice is do the things I did because they worked for me. That happens a lot. What the challenge is if their situation was meaningfully different from yours in a way that you may not even totally understand, that you're going to burn a lot of time trying to playbook that worked for them that doesn't actually work for the nuance of your business.
38:22 Harry Stebbings? So we have that as one reason. Any other reason why it doesn't work out as well?
38:26 Speaker 00 On the founder side of that, if the founder is not willing to engage and commit to the relationship, then it doesn't work, right? Like, at the end of the day, if the founder's not going to engage, not going to show up, like this happens sometimes, especially with high level advisors. The founder's just too busy, right? Like, it's just not going to work. You need to get to that working relationship where you're aligned and working together on driving outcomes for your business, and you're doing that in an engaged period. Again, it's kind of retention. It's kind of activation, right? You've got to get the activation for that thing to go so that that founder has a habit of working with this advisor consistently and driving outcomes.
38:58 Harry Stebbings? How many advisor positions do you think you can have? How do you think about capacity and load on the advisor side?
39:04 Speaker 00 Right now, I think I have like six people that I'm working with at the same time. I probably can do a couple more than that, but that's about as many as I want to do at any given time. I'm pretty close to the ground, though. Like, I'm spending an hour with them every week plus additional time where I'm just diving into their stuff. And so I think like, depending on the level of advising you're doing, you could do more. At high level advising, you could take tons of clients.
39:22 Harry Stebbings? How do you think about when you've extracted enough value from the advisor? Again, like therapists, sometimes you need to change or you don't need to see them anymore. How do you know when's the end life of that?
39:34 Speaker 00 If you're working closely with them, it's going to start getting obvious that you're not getting the right value of that relationship. You're going to know. You're going to get to the point in your business. And this does happen, right? Like, advisors will be better at certain types of things than other types of things. And if the things that are important for your business are the things that they are good at, you're going to get lots of value. And as your business progresses, if you move into things that they are not as good at, you're going to pretty quickly know. That you're not getting the same level of value from that relationship and you need to start looking for somebody who is really good at the next set of problems that you have.
40:02 Harry Stebbings? Sorry, I'm just peppering you with questions now and this is one that I get a lot. Should growth teams be independent? Should they sit with inside product teams? How do you advise on that?
40:10 Speaker 00 I think in general, the model now is to have growth be embedded in everything that you're doing. There was a period of time, and there still may be companies who need to do this, there was a period of time from nobody thinking about growth. It was necessary to pull those things out into their own orgs to help that org make that maturity step into starting to think about growth and starting to bring together those functions. Honestly, a bunch of those companies have now moved to the third step, which is now integrating that into everything they do. If you are a company that is at the first stage, it may well be the right step for you to go to having a separate growth org, but you should think that your end goal is to integrate growth into everything that you're doing.
40:46 Harry Stebbings? Eli, what's the best growth decision you've made and what did you learn from it?
40:50 Speaker 00 Honestly, the growth things that drive the most upside are always in activation. Activation is really that place where it makes the difference between you've got a bunch of people who could have value from your product to getting them to the point where they have an engaged habit long-term getting value from that product. And again, back to the like retention is king, right? Like retention stacks your business, retention drives engagement, which drives virality. Like it's just all the things.
41:18 Harry Stebbings? What are the biggest fuck-ups people make in activation? Is it messaging? Is it not building a habit? Is it shitty I-onboarding where there's no customer education and it's like a blind screen of death? What are the activation fuck-up you see the most?
41:31 Speaker 00 I mean, one of them is not understanding your ICP. Depending on how good your top of funnel is, you are likely acquiring a lot of people who are not a great fit for your product. And so one of the biggest things I see people do wrong is they see they have a conversion problem, they point a team at conversion and they look at the conversion metric overall. The problem is a bunch of those people are not ICP and they're never going to convert anyway. And so you're spending a lot of time trying to convert a bunch of people and you're going to get marginal improvements to conversion because it's not all the way to activation. Like you can make the button bigger, like things will happen, you'll move that metric. As opposed to really understanding who your ICP is, being able to track your ICP in that activation funnel. So you know how well the ICP is doing and then finding the highest
42:12 Speaker 00 leverage gap for those core ICP users and targeting that specifically.
42:17 Harry Stebbings? I find so many people actually don't even know their ICP, especially with this rise of horizontal products. They're like, we'll see. And you're like, no, we won't.
42:25 Speaker 00 Yeah. Oh, horizontal products also have an ICP. I love this one. I'm going to call this out, even though you didn't ask. I think it's an important one for so many people. Horizontal products have an ICP because the true ICP should be defined in terms of attributes, not personas. It's about attributes and attributes can be horizontal attributes. They are the attributes that the core group of people across a number of verticals or whatever have in common that make your product such a good fit for them.
42:49 Harry Stebbings? Help me out here. What do you mean by that? So if we have like Airtable, it can be used by dentists and it can be used by people. What are the attributes that we would take from that as a horizontal product?
42:59 Speaker 00 Yeah. So I mean, in the Airtable case, it's probably something like they have key problems in their business that require collaboration on sets of data that is shared by a set of people. There are probably a number of other attributes that are sort of correlated to having that problem also, which you can then use for tracking and targeting and things like that. But they have that need.
43:19 Harry Stebbings? Do you not worry that if you actually try and be everything to everyone, hey, collaborate more efficiently on data sets, it doesn't resonate with product orgs?
43:27 Speaker 00 No, no, no.
43:28 Harry Stebbings? It doesn't resonate with dentists, but you are right, but it's not home.
43:32 Speaker 00 Yeah. You shouldn't try to be everything to everyone. When you're first starting a product, the general wisdom, this holds true for horizontal as well, is that you should probably be pretty narrow. It's just in horizontal, you're narrow horizontally. Again, it's sort of like, there's a core set of people across a number of different functions or business types where they have a really acute problem that is actually structurally similar to that really acute problem in a number of other verticals. And it's just those people that you're focused on and you're focused on that kind of acute problem. Not every dentist, because every dentist doesn't have that same acute problem that Airtable needs, actually.
44:05 Harry Stebbings? It's like the data entry ones who have large scale data entry problems or whatever that is. Eli, final one before we do a quick fire. What's the biggest mistake you've made in product? And how did you change your mindset as a result?
44:18 Speaker 00 I mean, I think like early in my career, I did the thing that I think a lot of people do. Be too focused on solutions, right? Be too focused on the feature and not think about the outcome. You see this in a lot of people is like, they think about product as like, we want to build the coolest X. And really, they need to be thinking about the outcomes they are trying to drive for the customer and for the business and where those things overlap.
44:40 Harry Stebbings? How did that show itself in real life for you?
44:43 Speaker 00 Some of the sort of like zero to one GM roles that I had pushed that home. When you start out your product career or growth career, working on a more mature product, it's easy to not really see the forest for the trees, right? Like you've got a lot going on and there's a lot of things already there. You're sort of a small piece. When you are doing zero to one, you have to see the forest. You now own the forest, right? You own the full set of outcomes. And so I think that shift maybe helped me make that mental shift.
45:06 Harry Stebbings? Eli, I want to do a quick fire with you now. So I say a statement and you give me your immediate thoughts. Does that sound okay?
45:11 Speaker 00 Let's try, yeah.
45:12 Harry Stebbings? So what growth tactic has died a death in the last five years?
45:16 Speaker 00 Honestly, the concept of growth tactics has died to death, right? There was a whole, like this whole idea of growth hacks. And there's a set of growth hacks that everybody can throw on to get quick wins. Growth is not about growth hacks, right? Growth is about only finding leverage and exploiting it. Yeah.
45:29 Harry Stebbings? What about like growth channels? Like push notifications generally stay irritate the fuck out of people and don't work.
45:36 Speaker 00 Yeah.
45:36 Harry Stebbings? Or they do.
45:37 Speaker 00 Cause they're oversaturated. I mean, lots of things are oversaturated. Paid is oversaturated in a lot of ways. I would say though, that these things are not dead. They're dead as broad brush tools. Paid has specific niches where it works well. Push notifications have specific niches where they work well. I think the idea that you can just slap push notifications on something and drive up engagement, that's dead.
45:56 Harry Stebbings? What one piece of advice would you give to a growth leader before they start a new role?
46:00 Speaker 00 Does the founding team understand the growth mindset, right? This is a point about can we instill growth in everything we're doing? They may not have that yet if they're hiring you, but do they get it at the top level where they're going to be able to make that shift? Cause if they're not going to be able to make that shift, you're going to be running uphill the whole time you're there.
46:15 Harry Stebbings? You mentioned there before you joined, you need to have like data to take action or to make decisions. Is it the founder's job to have clean and structured data for incoming data and product people?
46:26 Speaker 00 I don't think it needs to be clean and structured, but they need to be able to iterate towards the things they need to learn. And so they need to have some data and they need to have the ability to say, hey, we need to be able to measure X because X is really important. And we know how to go get that instrumented quickly.
46:41 Harry Stebbings? Final one, what one company growth strategy have you been most impressed by recently?
46:46 Speaker 00 Oh, this is a hard one. I think. I mean, the obvious one here is ChatGPT, but I feel like that's too easy of it.
46:52 Harry Stebbings? Like, for me, I think Canva talk is amazing. Canva's TikTok is incredible. I think Notion videos have been exceptional.
47:00 Speaker 00 I'm an old school marketplace guy. I'm most excited by network effects. And so I really think the place like network effect things tend to be the things that get me most excited. There isn't actually very many people in that middle zone in terms of marketplace network effects today. So in the really early zone, maybe I'll throw out a company that you haven't heard of because it's really, really early. But I know a founder of this company called Cashflow Portal that is essentially building the angel list for real estate investing in a way that has just never been done before. And I think this is a place where there are potential for network effects where there didn't used to be because of a market shift. I mean, this is, you know, the core thing is like, has something changed about technology or something changed about a market that makes something possible that wasn't possible before?
47:39 Harry Stebbings? I always ask that. Eli, listen, you put up with my incredibly intrusive questions. I've loved this. Thank you so much for joining me. This has been a lot of fun.
47:47 Speaker 00 Yeah, thanks for having me. It's always fun to chat.
47:51 Harry Stebbings? I mean, so many amazing takeaways in that episode. I feel there's so much ambiguity and opacity, actually, to the advisor to see your relationship. So I hope that that helped to answer some of the core questions. If you'd like to see more from us, of course you can on YouTube by searching for 20VC. But before we leave you today, I'm refreshing the 20VC Miro board and I'd love your input again. It's really easy. Just head on over to miro.com/20vc and leave your guest suggestions for future shows. And you can do it with a digital sticky note or a comment. You can head over to miro.com/20vc and Miro actually sponsored this episode. If you haven't already tried it, I think you'll love it. Miro is the online workspace for innovation.
48:33 Harry Stebbings? It's packed with the right capabilities to be your dream product's home base, that you can visualize content, data and research findings all in one space with no problem. It means this space is where you map customer journeys with the whole product team, create user behavior dashboards and map process diagrams. And finally, it's where you'll run productive team sprints using integrations with tools you already love and use like Jira for developers as Sana for project managers, Figma for designers and so on. We use Miro and Love It to brainstorm future shows, vote on potential guests and leave feedback for the rest of the team in our own time. And right now, I'm using it to hear from you. Leave your thoughts on the board at miro.com/20vc. That's miro.com/20vc.
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51:28 Harry Stebbings? As always, I so appreciate all your support and stay tuned for an incredible episode this coming Monday with Matt, co-founder at CloudFlare.
Previous 20VC: Scaling to $50M ARR in 3 Years, Scaling to $20M ARR with Just $2M Invested; The Story of PhotoRoom, Is This YC's Most Capital Efficient Company with Matthieu Rouif, Co-Founder & CEO @ PhotoRoom Next 20VC: The Three Types of Seed Round Today, Why Seed Has Never Been More Competitive, Why Pricing Has Never Been Higher, Why Boards at Pre-Seed Can Be Helpful & How Too Much Cash Too Soon Can Harm Companies with Ed Sim, Founder @ Boldstart Page updated September 29, 2026 · transcript and summary are machine-generated
