The Insane World of VCs & Businesses like WeWork, Uber & Lyft (w/ Josh Wolfe and Michael Green)

By the way, talking about somebody being able to operate in India, the single best drone
pilot in the world today– any idea?
MICHAEL GREEN: Well, I’m guessing India.
JOSH WOLFE: 12-year-old girl in Thailand.
JOSH WOLFE: 12-year-old girl.
And she started playing when she was 8.
And she is better on every metric.
In speed, accuracy, she beats everybody.
Her name is Milk.
And that’s, you know, her call sign.
But a 12-year-old girl in Thailand is the best drone pilot in the world.
MICHAEL GREEN: So it truly is actually Ender’s Game, which is the book by Orson Scott Card
where we rely on children to fight the intergalactic battle.
That’s absolutely amazing.
Let’s think about the nonlinearity for a second.
And one of the topics you wanted to bring up was this idea of liquidity as a nonlinearity.
MICHAEL GREEN: And so one of the things that we see within venture capitals is that there’s
been this explosion of liquidity, particularly exceptionally well-funded growth equity.
So not the true VC stage one, Series A-type round, although that obviously has benefited
from this dynamic, but the Series E pre-public here’s $1 billion, here’s a $20 billion valuation,
here’s a $100 billion valuation.
Talk to me about how you think about this liquidity switch and the impact that that
has on your industry and the impact that has on innovation?
JOSH WOLFE: Well, it ultimately is going to define all the returns.
And if you go back a little bit and say, well, why are we in this situation, where we’ve
called this in the past, the minnows and the megas?
You have lots of these small firms that are starting up that are doing the seed checks,
and then you have these large players that are writing these $100 million plus checks.
Going back 7 years or so, Andreessen— who I think is a brilliant investor, a brilliant
technologist– basically said, there’s only 10 companies that matter in a given year.
And statically, that’s probably true.
Now knowing which 10 is very hard, but he said, you just basically want to be in those
And I that was a meme that really went very wide.
And people said, OK, well, it doesn’t matter if you invest in Facebook at $1 billion, or
$5 billion, or $10 billion because we’re going to be hundreds of billions.
And so does it really matter if we’re negotiating here and quibbling over $1 billion or $2 billion.
Well, of course, it does, but that I think induced a lot of growth investors to
let’s just try to speculate on some of these big unicorns.
And you’ve got this phenomenon of companies that were pining to signal that they were
going to be that next Facebook by attaining a billion-dollar valuation.
And then you got a positive feedback effect where people were funding these things, and
to get access, would write an $100 million check at a $900 million pre.
And they would own 10% in a billion-dollar valuation.
And the problem for the early-stage investors and their limited partners is they were getting
these huge markups.

Forget about Growth. Here’s the Metric that Really Matters.

The growth vs. churn quadrant
Let’s start by looking at when each of these metrics matters more during a product’s lifecycle


1. Low growth, high churn
Whatever you’re doing, it’s not working. You’re hemorrhaging users while failing to add more, so it’s pivot time. Given the goal of righting the ship, growth is a better metric to focus on to see if you’re effectively changing the dynamic by offering and promoting new features and functionality.

2. High growth, high churn
You’re onto something, but execution is the issue. New users signing on means your messaging and value propositions are cutting it, but users aren’t sticking with the solution. The company can’t afford to keep spending money on user acquisition if those people don’t last for long as paying customers. It’s time to take a deep dive into user behavior analytics, surveys and interviews to uncover what’s leaving them cold and causing them to abandon ship, so churn takes priority.

3. Low growth, low churn
With a loyal customer base, there’s a strong foundation to build on strategically. Product development efforts can be selectively chosen to experiment with growing the appeal to new pools of users. Marketing activities should also be reevaluated, and the spotlight can shift to growth.

4. High growth, low churn
The holy grail is in your grasp! New users coming in, old users staying put, revenue solely headed in a good direction. Assured that you’ve got a winning combination, do you double-down on growth or try and squeeze that churn rate even lower?

When it’s churn’s turn
Once a product and its growth campaigns have reached maturity and are both performing well, product management can be more strategic and less reactionary in its prioritization. Product market fit has been achieved and glaring problems or shortcomings in the product have been addressed. This is the time to focus on churn.

Let’s look at the numbers. If a company charges $10 per month, each new user means an extra $10 in revenue, and every lost customer means a loss of $10 in revenue. If it was just as easy to add one new customer as it was to retain an existing customer, then it wouldn’t really matter whether a company focused more on growth or reducing churn.

However, there is usually a cost to acquiring each of those new customers. If it costs $100 on average for each new customer, the company doesn’t even break even until month 11. So now the goal is not only to add new customers, but to keep them around for at least 11 months to even consider that customer profitable—and that assumes there is zero incremental operating cost to adding and maintaining each customer.

This illustrates why it is so important to reduce churn, and why each saved user is more valuable than each new one. Even when the acquisition cost is only $20, it’s still not until at least Month 3 for them to become profitable, and every customer who doesn’t last represents not only a $10 per month loss in revenue but also any unrecouped money spent on acquiring them.

“Focusing on just one year, if you have a churn of 5% of customers a month, you need to grow a staggering 45% in a year just to remain stable,” says Dave Martin of Tes. “In absolute numbers, starting in January with 2,000 customers suffering a monthly 5% churn and acquiring no new customers, results at the end of December in only 1,080 customers… But with a 1% monthly churn this product can celebrate annual growth of 715 customers, or 36% growth. ”

Churn means more than lost revenue
Aside from the purely financial impact of a customer unsubscribing, shedding customers has other negative repercussions. If a customer quits—particularly when it’s due to a negative experience—they are potentially a negative growth agent if they share their unsatisfactory experience with other potential buyers.

This can manifest itself in negative online reviews, poor recommendations, or even industry headlines in an enterprise setting. Definitely not helping your Net Promoter Score.

Additionally, as internal executives and outside investors evaluate the company, higher churn rates can raise a red flag about long term viability. There’s always a ceiling for growth, so stakeholders want to see that even when growth plateaus the business is truly sustainable. If users are consistently canceling their subscriptions, slowed growth can lead to a net negative in monthly revenue over time.

A lost customer is worth more than a new one
The older a customer, the more their departure hurts. New customers are less likely to be a good fit for your product, as the earlier someone adopts the more pressing their need for your solution. Plus that old customer had already paid off their acquisition cost and was a true profit center, while new customers need time to pay that off, plus the amount to acquire them likely was higher as it was more recent.

But you can also learn something from that lost customer, namely why they left. Were they drawn to a competitor? Did the value your solution offered fade over time? Was a missing key feature causing them to bail out? Answering these questions can inform what should be done to retain your current stable of paying customers and attract new ones.

Pay attention to pre-churn indicators
Many people don’t cancel subscriptions the second they stop using them; they might be lazy, want to avoid confrontation, not realize immediately that they’re definitely not using a product anymore, or simply aren’t sure if they’re really going to give it up forever.

Regardless of their reason for putting off cancellation, eventually those people will pull the trigger after seeing a credit card statement or being asked by their boss why they’re still paying for something they never use. So even if customers aren’t immediately heading for the exits, there’s a chunk of users (or potentially non-users at this point) that represent an imminent cancelation.

There are three reasons to pay attention to this cohort. The first is that if you can recognize the tell-tale signs of a user in wind-down mode they could be eligible for revitalization from customer success or account management. Knowing the indicative metric in this case can prioritize those customers for follow-up.

Is churn ever a good thing?
There are cases where losing a customer is a win in the end. They typically come in three flavors:

  • Too high maintenance—SaaS businesses succeed with scale, so when a customer needs constant hand-holding and special treatment or customizations, they may not be worth their monthly or annual fee.
  • Clinging to the past—When a customer leaves because you no longer support an outdated technology they still want to use, it’s the price of progress, but generally one worth paying.
  • Relics of a previous era—Businesses evolve and their new strategies and models may not work for early adopters who signed up for a markedly different service. While you don’t want to leave loyal customers hanging, if it’s a small enough cohort it’s probably best to say goodbye.

Shedding a few old-timers and getting a fresh start with only customers interested in the current offering can avoid distractions and help cull your backlog of irrelevant items.

Google Cloud for Startups program

Startups in our program have access to:

  • Google Cloud credits, free users on G Suite, Hire by Google (US only), Qwiklabs, and more
  • Special events, mentorship, and technical training
  • News and product updates

Qualified startups

  • Have received no more than a Series A funding round
  • Are less than five years old
  • Are based in an approved territory
  • Have not previously received Cloud credits outside of the free-tier offering

Startups who are part of an incubator or accelerator program, or have received VC funding, should check with that organization before applying here as they may be eligible for larger credit levels.

How Teams Can Outperform Using the Startup Ops Pyramid

After aligning around its vision, your team might play the following mad libs exercise to construct its pillars:

“Our vision is to [insert Team Vision], by [Pillar #1], [Pillar #2], and [Pillar #3].”

You can have any number of pillars, but I’ve always found three to be the magic number, as it’s symmetric and easy for people to digest and recall.

Improve the quality of online discourse by creating tools which allow authors, techies and readers to create a competitive citation and moderation ecosystem, enhancing accountability and rewarding accurate and insightful content.

  1. Create a citation tool for authors to credit and rate sources.
  2. Create a browser plugin for readers to view author’s citations.
  3. Create an API for techies to enable them to create a competitive aggregation ecosystem for readers.
  4. Inspire others to create citation and moderation tools for audio and video.

Did I Make a Mistake Selling My Social-Media Darling to Yahoo?

At its height, was the toast of budding social sites known as Web 2.0, had millions of users, and served as a direct inspiration for sites like Reddit and Pinterest. Schachter talked to Intelligencer about his decision sell to Yahoo in 2005 — and how it felt to watch as the company was mismanaged and sold off to a series of buyers before being permanently shut down in 2017.

In the late ’90s, I started a site called Memepool, and people would email me links. At 20,000 links, it got unwieldy. I’d copy and paste the URL into a text file on my Unix box, and then make a Unix comment mark — which is a hash — and a terse note, just a word or two. So, like, “# wifi.” A friend would ask, “Have you heard about this new Wi-Fi thing?” and I’d be like, “Yeah, I’ve been collecting stuff.” I would get the 15 links I had collected about Wi-Fi and paste them into a message. was a way to save things while wandering across the web with low cognitive overhead. You could save and tag. Tags were something I invented, they weren’t a thing before that. Instead of carefully organizing your bookmark folder, you added a word or two. And you could see what other people were working on, and share and contribute with them as well.

.. People say VC is pattern matching, and we were so far out of the pattern that no one could really evaluate us. We got one or two term sheets, but they were small.
.. Companies make you sign a “no shop” before they give you an actual offer, saying you won’t take their offer and turn around to a competitor and try to get a higher price.
.. We went with Yahoo partially because it was the first company to make a real offer, but also because it had already started a major push into Web 2.0. It had already acquired Flickr; it had acquired Upcoming — it felt like it was trying to make a big change in what it did.
.. There was also the technical consideration. The access to a search-engine indexer tech was super exciting. We were getting crushed by the traffic. We had like 30 or 40 machines in the data center, and we were adding to it every time we could. Yahoo told us, “We have a bunch of tech we could bring to bear.”
.. Negotiating with Yahoo was very awkward because it would disappear for days. It turns out it may have been negotiating with Facebook at the same time. Yahoo led with a number and a bunch of terms, and then the lawyers went back and forth on terms and payouts, but the initial sale price never changed.
.. The price of the acquisition was reported in the press at the time as $30 million … I’m fairly sure that “$30 million” is just journalist code for “We have no information; here’s our guess.” That’s the published number, and it’s a wild guess. The actual number is under NDA. It probably doesn’t matter now, since Yahoo isn’t even really a company, but it was definitely less than $30 million.
.. The money was good, but if I had joined tech and risen through the ranks the normal way, it probably could have been about the same.
.. I’ve since become an angel investor, and I’ve done just shy of 200 investments. And when founders sell, they wanna go out and celebrate. As often as not, they’re weird and awkward anyway, so it’s not like … I think a lot of time that selling is not the victory it seems. It takes away all of your forward momentum. Do you take building a product and being vibrant and known and trade that for cash? It may be the intellectually correct thing to do, to ensure your financial stability going onward, but it’s not emotionally rewarding in the same way.
.. Once we were acquired, Yahoo helped us on the tech side, but not as much as it said it would. I think this is common for acquisitions. Before you’re acquired, you’re an important visionary. Afterward, you’re a crazy person who just wants to burn money.
Any decision was an endless discussion. I remember once, we had to present to a senior vice-president. We had a 105-slide deck prepared, and we didn’t get past the second slide because they ratholed about one fucking slide. It was a miserable environment.
.. It took a year for reality to set in. If you wanted to get hardware, you went to the “hardware request committee” with your proposal. They assumed that engineers liked spending money for no reason, so you’d have to go back and present again in two weeks. So there’s a month gone.
.. On top of that, leadership had no vision or mission, so they couldn’t evaluate any decision. Upper management wasn’t taking risks, and everyone else was just optimizing to not get yelled at or stay at work late. My contract was that I had to stay for two-and-a-half years. At the end of my time at Yahoo, I woke up screaming a few times. It was a grind and super demoralizing.
I don’t regret selling to Yahoo. But I do wanna know where it could have gone if I hadn’t sold at that point. Could it have been Pinterest or Facebook? Probably not Facebook. But clearly, the urge to collect is a broader thing than I satisfied with my product. What we had built was pretty narrow; it could have been broader and bigger. And I am frustrated about what happened with at Yahoo. Yahoo Answers ended up being this huge thing, and the engineering team was doing both, and they ended up de-staffing in favor of Yahoo Answers. had, like, one engineer.

There’s a saying: “You can be rich or be king.” You can sell your company for as much as possible, or you can be in charge. Though maybe neither is entirely possible. When I founded my second company, we had seven people, and we still argued over what to do and how to do it. I was CEO and I still didn’t get my way.

Product-Market Fit: To get good startup ideas, look for anomalies

Product Market Fit:

Here’s a gizmo. Wonder if anyone wants it

A classical example of market-product fit is how Sony’s founder Akio Morita created Walkman. He observed teenagers lug heavy boomboxes with them to beaches and realized many places where music is needed are not convenient for a heavy music device. So he asked his engineers to create a version of the boombox that can be carried along.

.. If people aren’t aware of their compensatory behavior, the job of the entrepreneur becomes that of an observer. Look around you and ask: What seems odd? What shouldn’t be happening but is happening? What’s happening but shouldn’t be happening?

Compensatory behavior implies that users know that their existing behavior is compensatory (and suboptimal) to a better solution out there. But that isn’t the case. If users are aware that their behavior is compensatory to something else, they’d go and get something else. This is why you can’t simply survey people and ask “what are your compensatory behaviors”.

.. Once you find these anomalies, then look for the “why” behind such behaviors. Why are people doing this? If it was easier/legal/cheaper/faster, will others do it too? You don’t have to copy customers behaviors and offer it as a solution. Rather you have to understand underlying motivations and design a solution for supporting those motivations.

.. Some examples to make you think about market-product fit:

  • What are people doing in spite of governments not allowing it? Avoiding taxes, buying drugs, speaking freely. What are motivations for those behaviors? How would you address those motivations in a legal manner?
  • What is everyone annoyed by but people still do it anyway? Talking on the phone at movies, long queues at the grocery, not getting enough likes. Why are they doing that?
    Is there a better way?
  • What do your neighbors do that you find surprising? Early morning running,
    multiple locks in-house, not paying enough to maids. Why is it surprising? Are you, not them, an anomaly?
  • What are your friends or cousins obsessed about (that you don’t understand) Trying new bars, photos of their kids, posting good wishes on Facebook. Why are they doing it?
    Is there a better way of accomplishing the same desire?

.. What shouldn’t be happening but people are doing anyway?


Market-product fit:

Oh my. Never seen anyione wear a metallic hat before. What’s going on.