Month: August 2021

“The growth industry is definitely maturing. Less hacks, more teams, more focus on velocity,” Ward van Gasteren, founder of Grow with Ward told us in an interview this week. “Everybody within the field is getting to know the best practices very quickly and implementing them even quicker. So then what?”

Working with a growth professional can alleviate some of the pressure on founders who are finding their way. In our discussion, van Gasteren spoke about the importance of knowledge — qualitative feedback, systemic approaches and when/how to experiment.

This week in TechCrunch’s growth marketing roundup, you’ll also find two guest columns from Stewart Hillhouse and Sam Richard’s take on how to hire a growth team. Below you’ll find recommendations of growth marketers from the community. If there’s a growth marketer that you’ve enjoyed working with, please fill out our survey.

Marketer: Maksym Podsolonko, Fractional CMO
Recommended by: Anonymous
Testimonial: “They provide hands-on marketing support and take full ownership of the marketing function. Ideal for companies that don’t need a full-time CMO.”

Marketer: Tate Lowry, Ranq
Recommended by: Anonymous
Testimonial: “They have been on my radar since their co-owner sold the e-comm website Here Pup. Tate and Perrin knew exactly what my site needed to ensure a realistic growth. They didn’t blow up any promises, they didn’t nickel and dime me along the way. Honest and genuine agencies that actually map out how they can and will help you are far and few between.”

 

Help TechCrunch find the best growth marketers for startups.

Provide a recommendation in this quick survey and we’ll share the results with everybody.

 

Demand Curve: Tested tactics for growing newsletters: Stewart Hillhouse, senior content lead at Demand Curve, talks through tactics for email newsletters. Hillhouse tells us that newsletters have nearly 40x ROI, but you have to work in order to achieve that. This article discusses the 60% rule for pop-ups, the strategy behind email timing and the importance of quality over quantity. Hillhouse mentions, “We’ve seen very little correlation between volume of emails and the resulting conversion rate.”

(Extra Crunch) Demand Curve: Questions you need to answer in your paid search ads: Hillhouse also wrote an Extra Crunch article this week about the 14 questions you should be answering with your paid search ads. One question he mentions revolves around acceptance and how “Going shopping in real life is a social activity. Shoppers will peer into the carts of others, compare their tastes and ask those with them for input.” Let’s be honest — we’ve all done it. Hillhouse answers how this behavior can be replicated for online shopping.

(Extra Crunch) How to hire and structure a growth team: Sam Richard, senior director of growth at OpenView, provides insights on what questions you should be asking when you’re hiring a growth leader. Richard says, “A strong growth-minded hire will already have a feel for benchmarks and should be able to identify which growth lever in your customer journey needs the most help.”

How Ward van Gasteren thinks about growth hacking today: In this interview, Ward van Gasteren spoke about common misconceptions regarding growth hacking, like how it’s assumed to be a perfect approach. But, we were told, “The hard data that you see in your analytics tools can only tell you what is slowing down your growth … not why your growth slows down there.”

Is there a startup growth marketing expert that you want us to know about? Let us know by filling out our survey.

Source: Tech Crunch

Brick-and-mortar stores forced to close due to pandemic lockdowns had to quickly pivot to an online-only model. Understandably, newcomers to the digital retail scene found themselves behind the curve in attracting online buyers, particularly in the face of popular established events like Amazon Prime Day. This year’s Prime Day, held June 21-22, was reportedly the biggest ever on the platform.

Online retailers that have opted to forge their own path to generate sales often wonder how they can compete with Amazon.

The reality is that Amazon’s true unique selling proposition is its distribution network. Online retailers will not be able to compete on this point because Amazon’s distribution network is so fast. Instead, it’s important to focus on areas where they can excel — without having to become a third-party seller on Amazon’s platform.

The following are seven key tips that are relevant for online retailers that want to attract and retain customers without having to partner with Amazon or to try to beat it at its own game.

Gain a 360-degree view of the customer

An online retailer needs to consider what kind of experience it wants to create; customers expect smooth processes on every step of their online shopping journey.

One idea is to implement a consumer data platform that will help the retailer gain the best insights into their customers: who they are and what they like, which websites they frequent and other relevant information. Retailers can use this data to then target customers with ads for products they’ll actually want to buy. Consumer data platforms can even help online retailers target consumers across platforms as well as in the store.

Ensure smooth and glitch-free pre-sale transactions

One of the biggest frustrations with online retailers is the performance of a website, from getting on the site through the closing of the sale. If something fails or glitches at any point in the process of searching for a product and paying for it, the customer will leave and not come back.

The solution to this problem involves a lot of testing of the user interface to ensure a good user experience. Tests should be done on all e-commerce segments on a site, including the basket and ad banners. By inserting tags along the customer journey, a retailer can track lost sales and see where problems happen on their website.

Offer a broad variety of payment options

As a payment option, PayPal recently experienced a record 36% year-on-year growth in payment volume between the third quarter of 2019 and Q3 2020. Despite PayPal’s popularity, Amazon does not accept it as a form of payment.

Source: Tech Crunch

Venture capitalists are chatting this week about a recent piece from The Information titled “The End of Venture Capital as We Know It.” As with nearly everything you read, the article in question is a bit more nuanced than its headline. Its author, Sam Lessin, makes some pretty good points. But I don’t fully agree with his conclusions, and want to talk about why.

This will be fun, and, because it’s Friday, both relaxed and cordial. (For fun, here’s a long-ass podcast I participated in with Lessin last year.)

A capital explosion

Lessin notes that venture capitalists once made risky wagers on companies that often withered away. Higher-than-average investment risk meant that returns from winning bets had to be very lucrative, or else the venture model would have failed.

Thus, venture capitalists sold their capital dearly to founders. The prices that venture capitalists have historically paid for startup equity in high-growth tech upstarts make IPO pops appear de minimis; it’s the VCs who make out like bandits when a tech company floats, not the bankers. The Wall Street crew just gets a final lap at the milk saucer.

Over time, however, things changed. Founders could lean on AWS instead of having to spend equity capital on server racks and colocation. The process of building software and taking it to market became better understood by more people.

Even more, recurring fees overtook the traditional method of selling software for a one-time price. This made the revenues of software companies less like those of video game companies, driven by episodic releases and dependent on the market’s reception of the next version of any particular product.

As SaaS took over, software revenues kept their lucrative gross margin profile but became both longer-lasting and more dependable. They got better. And easier to forecast to boot.

So, prices went up for software companies — public and private.

Another result of the revolution in both software construction and distribution — higher-level programming languages, smartphones, app stores, SaaS and, today, on-demand pricing coupled to API delivery — was that more money could pile into the companies busy writing code. Lower risk meant that other forms of capital found startup investing — super-late stage to begin with, but increasingly earlier in the startup lifecycle — not just possible, but rather attractive.

With more capital varieties taking interest in private tech companies thanks in part to reduced risk, pricing changed. Or, as Lessin puts it, thanks to better market ability to metricize startup opportunity and risk, “investors across the board [now] price [startups] more or less the same way.”

You can see where this is going: If that’s the case, then the model of selling expensive capital for huge upside becomes a bit soggy. If there is less risk, then venture capitalists can’t charge as much for their capital. Their return profile might change, with cheaper and more plentiful money chasing deals, leading to higher prices and lower returns.

The result of all of the above is Lessin’s lede: “All signs seem to indicate that by 2022, for the first time, nontraditional tech investors — including hedge funds, mutual funds and the like — will invest more in private tech companies than traditional Silicon Valley-style venture capitalists will.”

Capital crowding into the parts of finance once reserved for the high priests of venture means that the VCs of the world are finding themselves often fighting for deals with all sorts of new, and wealthier, players.

The result of this, per Lessin, is that venture “firms that grew up around software and internet investing and consider themselves venture capitalists” must “enter the bigger pond as a fairly small fish, or go find another small pond.”

Yeah, but

The obvious critique of Lessin’s argument is one that he makes himself, namely that what he is discussing is not as relevant to seed investing. As Lessin puts it, his argument’s impact on seed investing is “far less clear.”

Agreed. Sure, it’s the end of venture capital as we know it. But it’s not the end of venture capital, because if capitalism is going to continue, there’s always going to need to be risky-ass shit for VCs to bet on at the bottom.

The factors that made later-stage SaaS investing something that even idiots can make a few dollars doing become scarce the earlier one looks in the startup world. Investing in areas other than software compounds this effect; if you try to treat biotech startups as less risky than before simply because public clouds exist, you are going to fuck up.

So the Lessin argument matters less in seed-stage and earlier investing than it does in the later stages of startup backing, and doubly less when it comes to earlier investing in non-software companies.

While it’s a little-known fact, some venture capitalists still invest in startups that are not software-focused. Sure, nearly every startup involves code, but you can make a lot of money in a lot of ways by building startups, especially tech startups. The figuring-out of SaaS investing does not mean that investing in marketplaces, for example, has enjoyed a similar decline in risk.

So, the VCs-are-dead concept is less true for seed and non-software startups.

Is Lessin correct, then, that the game really has changed for middle- and late-stage software investing? Of course it has, but I think that he takes the concept of less risky, private-market software investing in the wrong direction.

First, even if private-market investing in software has a lower risk profile than before, it’s not zero. Many software startups will fail or stall out and sell for a modest sum at best. As many in today’s market as before? Probably not, but still some.

This means that the act of picking still matters; we can vamp as long as we’d like about how venture capitalists are going to have to pay more competitive prices for deals, but VCs could retain an edge in startup selection. This can limit downside, but may also do quite a lot more.

Anshu Sharma of Skyflow — and formerly of Salesforce and Storm Ventures, where I first met him — made an argument about this particular point earlier this week with which I am sympathetic.

Sharma thinks, and I agree, that venture winners are getting bigger. Recall that a billion-dollar private company was once a rare thing. Now they are built daily. And the biggest software companies aren’t worth the few hundred billion dollars that Microsoft was largely valued at between 1998 and 2019. Today they are worth several trillion dollars.

More simply, a more attractive software market in terms of risk and value creation means that outliers are even more outlier-y than before. This means that venture capitalists that pick well, and, yes, go earlier than they once did, can still generate bonkers returns. Perhaps even more so than before.

This is what I am hearing about certain funds regarding their present-day performance. If Lessin’s point held up as strongly as he states it, I reckon that we’d see declining rates of return at top VCs. We’re not, at least based on what I am hearing. (Feel free to tell me if I am wrong.)

So yes, venture capital is changing, and the larger funds really are looking more and more like entirely different sorts of capital managers than the VCs of yore. Capitalism is happening to venture capital, changing it as the world of money itself evolves. Services were one way that VCs tried to differentiate from one another, and probably from non-venture capital sources, though that was discussed less when The Services Wars were taking off.

But even the rapid-fire Tiger can’t invest in every company, and not all its bets will pay out. You might decide that you’d be better off putting capital into a slightly smaller fund with a slightly more measured cadence of dealmaking, allowing selection at the hand of fund managers that you trust to allocate your funds among other pooled capital to bet for you. So that you might earn better-than-average returns.

You know, the venture model.

Source: Tech Crunch

Many VCs tout their mentorship and hands-on approach to founders, especially those who run early-stage startups. But in the recent era of lightning-fast rounds closing at sky-high valuations, the cap tables of early-stage startups are becoming increasingly crowded.

This isn’t to say that the value VCs bring has diminished. If anything, it’s quite the opposite — this new dynamic is forcing founders to be extremely selective about exactly who is sitting around their mentorship table. It’s simply not possible to have numerous deep and meaningful relationships to extract maximum value at the early stage from seasoned investors.

Founders should definitely pursue big rounds at sky-high valuations, but it’s important that they recognize how important it is to manage who they allow into their mentorship circles. Initially, founders should make sure their first layer consists of the real “doers” — usually angels and early venture investors who founders meet with weekly (or more frequently) to help solve some of the most granular problems.

Everything from hiring to operational hurdles all the way to deeper, more personal challenges like balancing family life with a rapidly growing startup.

This circle is where the real mentorship happens, where founders can be open and vulnerable. For obvious reasons, this circle has to be small, and usually consist of two to six people at most. Anything more simply becomes unwieldy and leaves founders spending more time managing these relationships than actually building their company.

The second layer should consist of the “quarterly crowd” of investors. These aren’t necessarily people who are uninterested or unwilling to participate in the nitty gritty of running the company, but this circle tends to consist of VCs who make dozens of investments per year. They, like their founders, aren’t capable of managing 50 relationships on a weekly basis, so their touch points on company issues tend to move slower or less frequently.

Source: Tech Crunch

In May, Yahoo! Answers shut down after helping the internet answer its most burning questions since 2005. But now, Quora, which began as a question-and-answer site but expanded to incorporate blogging, is making its platform more appealing to creators.

Quora says it’s “on track to be cash flow positive from ads alone,” implying that the platform isn’t currently in the black. But Quora sees tapping into the creator economy and subscriptions as a way to turn a profit.

“We want to make sharing knowledge more financially sustainable for creators,” Quora CEO Adam D’Angelo wrote in a blog post. “Even though many people are motivated and able to spend their time writing on Quora just to share their knowledge, many others could share much more with financial justification to do so.”

Quora’s first new product is Quora+ — subscribers will pay a $5 monthly fee or a $50 yearly fee to access content that any creator chooses to put behind a paywall. These are the same rates that Medium, which has no ads, charges for its membership program.

Rather than paying select creators, subscribers will pay Quora. Then, each subscriber’s payment will be distributed to creators “in proportion to the amount each subscriber is consuming their content, with more of a subscriber’s contribution going to writers and spaces the subscriber follows.” Creators have the option to enable a dynamic paywall on Quora+ content, which would give free users access to certain posts if Quora thinks they’re likely to convert to paid membership; there’s also an “adaptive” paywall option, which uses an algorithm to decide whether to paywall content for a specific user on a case-by-case basis. This is supposed to help creators strike a balance between monetizing their content and growing their audience to find new potential subscribers.

Quora told TechCrunch that it is still experimenting with Quora+ and can’t yet say what percentage it will take from subscriptions.

The other option is for creators to write paywalled posts on Spaces, which are like user-created publications on Quora. Quora will take 5% of the subscription fee, which the creator can choose at their own discretion — comparatively, the direct-to-consumer blogging platform Substack takes 10% of writers’ profits, which makes Quora a competitive alternative. Other platforms like Ghost ask for a $9 monthly fee, but let writers retain their revenue — for writers making at least $180 per month, Ghost would be more profitable than Quora.

“We’re able to sustainably commit to taking only a minimal fee without needing to increase it in the future because we make enough revenue from ads to fund most of the platform’s development and operations,” D’Angelo wrote. Substack, meanwhile, doesn’t have ads.

Quora reached a $1.8 billion valuation in 2017 after raising $85 million, and at the time, the platform had 190 million monthly users. Now, according to D’Angelo’s blog post, over 300 million people use Quora each month. Despite this user growth, Quora laid off an undisclosed amount of staff in its Bay Area and New York City offices in January 2020.

Space subscriptions will launch today for English language users in 25 countries, including the U.S. The rollout of Quora+ will be less immediate as Quora invites select writers to test the platform and determine what works best for subscribers and creators.

Source: Tech Crunch

Later this year, Apple will roll out a technology that will allow the company to detect and report known child sexual abuse material to law enforcement in a way it says will preserve user privacy.

Apple told TechCrunch that the detection of child sexual abuse material (CSAM) is one of several new features aimed at better protecting the children who use its services from online harm, including filters to block potentially sexually explicit photos sent and received through a child’s iMessage account. Another feature will intervene when a user tries to search for CSAM-related terms through Siri and Search.

Most cloud services — Dropbox, Google, and Microsoft to name a few — already scan user files for content that might violate their terms of service or be potentially illegal, like CSAM. But Apple has long resisted scanning users’ files in the cloud by giving users the option to encrypt their data before it ever reaches Apple’s iCloud servers.

Apple said its new CSAM detection technology — NeuralHash — instead works on a user’s device, and can identify if a user uploads known child abuse imagery to iCloud without decrypting the images until a threshold is met and a sequence of checks to verify the content are cleared.

News of Apple’s effort leaked Wednesday when Matthew Green, a cryptography professor at Johns Hopkins University, revealed the existence of the new technology in a series of tweets. The news was met with some resistance from some security experts and privacy advocates, but also users who are accustomed to Apple’s approach to security and privacy that most other companies don’t have.

Apple is trying to calm fears by baking in privacy through multiple layers of encryption, fashioned in a way that requires multiple steps before it ever makes it into the hands of Apple’s final manual review.

NeuralHash will land in iOS 15 and macOS Monterey, slated to be released in the next month or two, and works by converting the photos on a user’s iPhone or Mac into a unique string of letters and numbers, known as a hash. Any time you modify an image slightly, it changes the hash and can prevent matching. Apple says NeuralHash tries to ensure that identical and visually similar images — such as cropped or edited images — result in the same hash.

Before an image is uploaded to iCloud Photos, those hashes are matched on the device against a database of known hashes of child abuse imagery, provided by child protection organizations like the National Center for Missing & Exploited Children (NCMEC) and others. NeuralHash uses a cryptographic technique called private set intersection to detect a hash match without revealing what the image is or alerting the user.

The results are uploaded to Apple but cannot be read on their own. Apple uses another cryptographic principle called threshold secret sharing that allows it only to decrypt the contents if a user crosses a threshold of known child abuse imagery in their iCloud Photos. Apple would not say what that threshold was, but said — for example — that if a secret is split into a thousand pieces and the threshold is ten images of child abuse content, the secret can be reconstructed from any of those ten images.

It’s at that point Apple can decrypt the matching images, manually verify the contents, disable a user’s account and report the imagery to NCMEC, which is then passed to law enforcement. Apple says this process is more privacy mindful than scanning files in the cloud as NeuralHash only searches for known and not new child abuse imagery. Apple said that there is a one in one trillion chance of a false positive, but there is an appeals process in place in the event an account is mistakenly flagged.

Apple has published technical details on its website about how NeuralHash works, which was reviewed by cryptography experts.

But despite the wide support of efforts to combat child sexual abuse, there is still a component of surveillance that many would feel uncomfortable handing over to an algorithm, and some security experts are calling for more public discussion before Apple rolls the technology out to users.

A big question is why now and not sooner. Apple said its privacy-preserving CSAM detection did not exist until now. But companies like Apple have also faced considerable pressure from the U.S. government and its allies to weaken or backdoor the encryption used to protect their users’ data to allow law enforcement to investigate serious crime.

Tech giants have refused efforts to backdoor their systems, but have faced resistance against efforts to further shut out government access. Although data stored in iCloud is encrypted in a way that even Apple cannot access it, Reuters reported last year that Apple dropped a plan for encrypting users’ full phone backups to iCloud after the FBI complained that it would harm investigations.

The news about Apple’s new CSAM detection tool, without public discussion, also sparked concerns that the technology could be abused to flood victims with child abuse imagery that could result in their account getting flagged and shuttered, but Apple downplayed the concerns and said a manual review would review the evidence for possible misuse.

Apple said NeuralHash will roll out in the U.S. at first, but would not say if, or when, it would be rolled out internationally. Until recently, companies like Facebook were forced to switch off its child abuse detection tools across the bloc after the practice was inadvertently banned. Apple said the feature is technically optional in that you don’t have to use iCloud Photos, but will be a requirement if users do. After all, your device belongs to you but Apple’s cloud does not.

Source: Tech Crunch