Startup Field Guide Episode 2

In this episode of the Startup Field Guide podcast, Sandhya Hegde chats with Nextdoor's co-founder, Sarah Leary—Sarah is currently a venture partner at Unusual Ventures. Sarah describes the early days of Nextdoor including the pivots they made, the community-building strategies they used, and how they found product-market fit on their path to being adopted by over 250, 000 communities in 11 countries.

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Be sure to check out more Startup Field Guide Podcast episodes on Spotify, Apple, and Youtube. Hosted by Unusual Ventures General Partner Sandhya Hegde (former EVP at Amplitude), the SFG podcast uncovers how the top unicorn founders of today really found product-market fit.

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If you are interested in learning more about the topics we discuss in this episode, please check out the Unusual Ventures Field Guides on starting a company, iterating to MVP, and early customer validation.

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TL;DR

• In the first three months of Nextdoor, the team focused on talking to users and really understanding their pain points. These interviews helped unlock Nextdoor’s core user personas and provided insights into who they were building their solution for and why they wanted the service. 
• When it came to prototyping, the team initially built crude paper prototypes as a way to test their value hypothesis. The feedback from this process informed the first version of the platform which they tested in a single neighborhood. During that test, the dominant types of use cases around recommendations, local events, and items for sale quickly emerged on the platform and gave the team enough conviction that they could start building out more of their product.
• When it comes to community-based solutions, there has to be an authentic sense of community from the beginning. Community cannot be layered on as an afterthought. It has to be part of the product from day one. 
• Founders should ask themselves if they have a real market opportunity, and work through the exercise of finding product-market fit by talking to users and understanding their pain points. This foundation will serve them well in the long run regardless of market conditions.
• Founders should not skip the customer discovery phase since it’s a great opportunity to get to know their users and design products with a specific customer in mind. This helps provide focus and prevents startups from wasting time and resources by overbuilding solutions that are not informed by user research and feedback. 

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Episode transcript

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Sandhya Hegde:

I feel so fortunate to be able to call you my partner at Unusual Ventures. For those of you who don't follow us, Sarah leads all our investments in consumer software and marketplaces. But before she joined the dark side of Venture, she was the co-founder of Nextdoor, which is an app that is used by over 300,000 neighborhoods across 11 different countries to stay connected. And Nextdoor actually started as a company around 2010. They started as a team in 2008, we'll hear more about that. But they were definitely a company that got started during the last major market crash and then actually went public late last year at the height of the market boom. So we are going to dive into a little bit of that around how founders should think about market timing as well. So Sarah, how are you feeling today? Are you excited to go back?

Sarah Leary:

Excited to go back. It's so funny when you talk about whether the work at Unusual or the work at Nextdoor, it's all about the team. And there's a good team of us over on the consumer side that's leading the charge. And that's a theme throughout my life and certainly was part of the origin story for Nextdoor and part of the key to its success. And so, I always think of startups as one of the ultimate team sports. And no one has ever been able to build a great company solo. And so excited to share a little bit about our team's journey through the early stages, the pivot, as well as finding product-market fit, and then, let's see the 12 years that followed after that. So it's been quite a journey.

Sandhya Hegde:

The overnight success that only takes 12 years.

Sarah Leary:

Don't you love that? Don't you love that? Everyone's like, "Oh my gosh, overnight." And you're like, "I guess you haven't been paying attention to the last decade." And I don't think anything of any value in this world is ever built overnight. And oftentimes if it's harder to build, it also has more durability and is more defensible. And that's certainly part of the story of the creation of Nextdoor.

Sandhya Hegde:

Absolutely. So let's just go back to day zero when Nextdoor wasn't even an idea, but you-

Sarah Leary:

Wasn't even a twinkle. It wasn't even a twinkle in our eye.

Sandhya Hegde:

Yeah. What was it like in 2008? What was going on?

Sarah Leary:

It's interesting. If you go back to 2000, it was actually the very end of 2007 going to 2008. And Nirav Tolia and I started thinking about the types of companies that we wanted to start. We were entrepreneurs-in-residence over at Benchmark and working on new ideas. And it was a pretty frothy time in the market. And we had a lot of experience in building a previous company together, Epinions, which was billed as one of the first places where anyone could write reviews about products and services. And so we had had a lot of experience in building online communities during really the tail-end of Web 1.0 going into Web 2.0. And so we learned a lot of the hard lessons along the way about how you build identity and trust, and how you build quality and feedback loops, and thinking about egoboo, and other things that give recognition to people, and really what motivated people to participate in these online communities. And we were fascinated by that.

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And I think a lot of the ideas that we delved into early on was trying to think about how do you take what we had learned in building online communities and apply it to other types of areas that had been under-served. And at that time in 2008, one of the ideas that we got very excited about was one of the communities that we thought was under-served, that had a lot of passion, that had a lot of excitement was around people being fans of college and pro sports teams. And actually, when we first left Benchmark, the first idea that we were excited about was to build something for that community and for a company that at the time we called Fanbase. And it's actually part of the early days of Nextdoor because we spent two and a half years working on that idea, bringing it to market. We got up to 15 million unique visitors after we launched. It took us a long time to get to market. And we did get some of that initial excitement right out of the gate. And we thought at the time we had product-market fit.

Sandhya Hegde:

I cannot really imagine being in that place where you have 15 million visits. I mean, today most founders start getting excited if they have a hundred thousand people checking them out, seeing what the product does, and signing up. What did it feel like? Why didn't you decide, "Yes, this is the company we are building. It's done. Let's go raise a series A?"

Sarah Leary:

Well, we had raised a lot of money. In fact, fortunately, we still had a lot of money in the bank. We'd raised money right before we launched Fanbase. And at the time we had a lot of great press, we had a lot of SEO, we had a lot of people coming in, and frankly, kicking the tires. But as we looked at the data, it became really clear that people were not engaging in the content the way that we had hoped. And we were looking at the retention numbers of people coming in. And we saw that there was a problem. So you have to be really careful in the beginning. You want to be data-driven, you look at those top-of-funnel metrics and you can get really excited. But you have to be honest with yourself, is this creating an enduring set of users, a group of people that are going to refer other people to the product?

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And we could see some of those weaknesses early on. And we spent about six months, "Trying to fix it." And we tried many different things that were in Vogue at the time. A lot of it had to do with integrating with different social media products, thinking about viral loops, and trying to fix the problem. And we realized that we weren't onto the next great sports website. It wasn't going to be the next ESPN. And it was really hard set of conversations that we had as a founding team to figure out what to do next. And first, amongst the co-founders, we had that hard conversation because we're not quitters, we want to push through. But one of the most important things that you have as a founder is your time. And if you're working on something that you don't feel like can be the next big thing, that you feel like you're losing faith in, you've got to listen to that.

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And also, you got to look at the data. And the data was telling us that we weren't building these really strong cohorts of users that were going to be a foundation of a great community, which is essential. If you don't have that in the beginning of a community, it's not suddenly going to show up later on in your community's life cycle. It doesn't work that way. So we actually went back to our original investor, Bill Gurley. We offered to give the money back and he said, "I bet on the team." He also kind of joked that's the easy way out. And he gave us a couple of months to work on new ideas. And he said it didn't have to have anything to do with Fanbase. And we went back to the drawing board. And we actually were not beholden to anything that we had built to date.

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And so even though we referred to this as the pivot, it was a pretty dramatic restart that we went through. We shrunk the team down. A couple people left because they didn't want to go on a restart type of journey. And we took a radically different approach to how we were going to think about ideas, test and iterate the ideas to find some early signs of product-market fit. Because in the Fanbase example, we had been in stealth for I think a year and a half. And as a result, we weren't getting that product feedback. We weren't understanding where the community was going to be excited about things. And we kept building, and building, and building. And so we had a little bit of that big bang type of launch. And the big bang kind of blew up in our face to be honest with you.

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And so when we started on what eventually became Nextdoor, we just had a very different approach. We had multiple ideas that we were working on, we were testing and iterating them before we ever wrote a line of code. And a lot of that was spending time with potential customers, users of the various ideas that we had. And the idea that emerged from that summer of 2010 is what we now know of as Nextdoor. And we were really motivated by this idea of what are other communities where there really hasn't been a platform built to help you connect with one another. And so at the time you had Facebook for your friends and family, you had LinkedIn for your professional connections, you had Twitter for people and topics of interest. And yet you didn't have an easy way to connect with the people who lived right down the street from you.

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At the time, I had lived in San Francisco for about seven, eight years, and I knew one of my neighbors. And it was very clear, when you live in a place like San Francisco and you're told in the event of an emergency like an earthquake, you have to be able to survive on your own for at least 72 hours and probably up to seven days. And pretty quickly you realize that the people who live around you, it's not just nice to know them, it can be a matter of life and death. And all of a sudden I'm scratching my head and said, I knew the people who lived around me growing up. And here I was in a city that I didn't know the people around me. And so why can't we use this mobile phone, all this technology to be able to connect with the people who live right around us? And so that was the inspiration, but we spent a lot of time testing the idea before we ever wrote a single line of code.

Sandhya Hegde:

So say more about that. How did you test the ideas without actually building MVPs or products? And what were some of the other similar things you tested out until you kind of arrived at this Nextdoor idea? Because often it feels like, oh, maybe Sarah just woke up with this genius idea fully found in her brain. But yeah, especially the testing bit testing without writing code, what exactly were you showing people and what were you listening for?

Sarah Leary:

It is a great question. So we had all these brainstorming sessions. And again, we were thinking a lot about communities and online communities that would be vibrant. And one of our teammates came in and had a pothole on his street, and he was trying to figure out how to get the attention of the city of San Francisco to pay to fix it. And he realized that all he had was this Yahoo group and a Listerv. But it was very limited on who he could communicate with. And so we just kind of scratched and said like, "Wow, can't we do better than that? At the time, we were also looking at things like Craigslist, and how local businesses, and how people were listing things for sale. There were all these things that were happening. At the time Groupon was very popular and we scratched our heads and said, "That's not a great business. But clearly, local businesses are looking for a way to use the internet to connect with local customers."

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So all these things were kind of swirling around. But eventually you have to land on an idea and a real problem. And for us, we started to say, "Okay, well we think that there's something around local community and there's something special around neighborhoods." But we were very quick to say, we don't have the answers. So we went out and we did a series of interviews with people who were very involved in their community. And we didn't start with a survey. We started with one-on-one interviews and we did about 15 of them. And we would meet with different people, we'd try and meet them in their community to see how they would talk about community. Some of them ran like neighborhood improvement associations. Some of them had an HOA. Some had a community garden. And we were just trying to understand what they were trying to do.

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And for a lot of them, they were looking for ways to get more people, new people into the community. But they didn't know their neighbors. At the same time, we were doing research and we recognized that surprisingly, a large number of Americans didn't know any of their neighbors, that maybe they knew one or two. They certainly didn't have their email addresses. Which was essential if you were going to use any of, at the time, dominant social media platforms. Facebook was a place where you connected to people who you already knew, you had their email addresses. And so the big aha for us was like, "Hey, can we connect people based on where they live, and use their address as a way to connect people to one another?" So in that first month, it was one-on-one interviews. We then did a survey to do a broader set of questions. And amazingly, we found people who wanted to know more about what was happening in their local community up over 75%. And that the tools that they were using were maybe a Listserv, a mailing list, maybe it was a newspaper.

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I mean, they were very antiquated tools that people relied on. And yet for those of us who are used to being in Silicon Valley, when you would share ideas and be like, "Oh, people have done that before. They've tried, it's never going to work." And we just kept thinking about that saying, well, why hasn't it worked? What is it that people haven't gotten right? And if you looked at other players, they hadn't solved this problem around how you connect neighbors to one another who don't previously know each other. And so at that point, we started to have a thesis about how to solve that problem. Which was to use the address and a verified address to then build everything on a map infrastructure. Because we had the lat-long of every home,  we could drill, draw a boundary around an individual neighborhood. And if you lived within that perimeter of the neighborhood, then you were allowed to join that community.

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And a lot of this was our ideas and it was going to be hard to build it and all that. But the first thing that we were religious about was, well, we have to make sure that this is something that people will respond well to.

Sandhya Hegde:

Right. Right. What is the hair on fire problem? Or is it, "Yeah, I would like to know who my neighbors are. But there's a reason why I haven't knocked on every door and asked them, 'Hey, who are you?'"

Sarah Leary:

That's right. Then we went out and we started to build a very simple prototype, the ugliest prototypes probably that you could have ever imagined, to be honest with you, we didn't have a designer on staff. And they were very crude. But the idea was to show this is what it would look like. It would have a map, and you would be able to visualize your neighborhood on the map, and you would be able to ask questions. And I thought it was really important that when we have those interviews that I want to be sitting across from someone. And I want to see the subtlety when they would light up or when they'd wince. And it's not the type of thing you would've picked up on a survey, but you're trying to get like is there an emotional response? I think that's particularly important on the consumer side of a product.

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And it was very clear when we showed people the map, they lit up, they got it, they understood the whole thing. And so that proceeded for another month and a half. And then once we were starting to hear the same things again and again, we started to say, "Okay, we think we have something here. But again, we're just talking about it theoretically, let's build a very simple prototype." And I think one of the important things is that a lot of times as product builders, we want to build the whole thing. We're so excited about all the things that are possible. And I think one of the things that we got very right at this point is that we tried to reduce the prototype to isolate a variable and test the simple hypothesis. Which was if we could get a group of neighbors together on a platform, would they have anything to talk about?

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And if the answer to that was no, nothing else mattered. It didn't matter if we could draw the neighborhood boundaries, that we could verify people's addresses, that we could figure out how you could invite more people to the platform, all the notifications, the mobile app, all those things that were going to be really a lot of work to build, would not matter if it turned out that neighbors didn't have anything to talk about. And so we built the simplest prototype just to test that one question, would our members have anything to talk about with their neighbors? We launched that in one neighborhood in Menlo Park, and God bless those people for allowing us to work with them and to test it in their community. We happened to launch... This is where we got a little lucky, we launched three weeks before Halloween, which is the most neighborly of all holidays.

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And sure enough, on the platform we gave no limitations on what you could talk about. Very simple prototype. People asked for recommendations, they wanted to list an item for sale, someone was looking for a tutor, someone was looking for a piece of felt for a child's costume. Someone else was trying to organize a parade of all the kids in the neighborhood before they went trick or treating. And it was amazing. The dominant types of use cases that we later saw on Nextdoor over the course of 10 years, revealed themselves in the first two weeks that people were using Nextdoor in this one community.

And on the basis of that, we started saying, "We have something here. And let's start building it out." Now I have to be clear, I can look back and say, wow, the light bulb went on. We still weren't a hundred percent sure that we had found it. And so then we wanted to test it in multiple different locations around the country, just to make sure that we weren't just finding something that would work in the Bay Area. We wanted to find something that could work across the country.

Sandhya Hegde:

Right. Right. But I think what's incredible is that in that small kernel of one neighborhood, you still had more reason to be excited than when you launched Fanbase and got a lot of visitors because they didn't stick around to talk to each other while this one neighborhood had started talking to each other.

Sarah Leary:

Well, not only were they talking to each other, but they started to refer it to bordering neighborhoods. And they started to say, "Can you launch Nextdoor in this other neighborhood? And how about this one? And I have a friend in Seattle. And I have a friend in Texas." And we started to get people giving word-of-mouth recommendations. And for me, you know you have something when people are banging on the door, asking for more, wanting to refer it to other people. That was a sign to us. And so then we grew to about 15 neighborhoods. And I'll never forget the day that we were trying to upgrade one of the databases, and we still only had a team of six of us at this time. And everyone still had my cell phone. If you had started a neighborhood, I had been on the phone with you, I had helped to draw the neighborhood boundaries, so customer support was calling me. That's how they would get help.

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And we took the database down around lunchtime because we needed to upgrade the database, and the engineers didn't want to be up late at night. And so they said, "We'll do it at lunchtime." And we did that, and we went off to lunch, and my phone starts ringing, "The website is down. I can't get to the directory." And I was like, oh my goodness. We've built something that people want and people need, so much so that they're picking up the phone and calling. And that was a sign that this was real. This wasn't just theoretical. Now, I will say we still spent another six months building out the product and testing our go-to-market strategy. And that took time because the first version of what we built was very manual. I'm hand-drawing the neighborhood boundaries. We're creating customer support with my cell phone, that's not scalable.

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And yet we learned so much during those first four or five months where we were frankly kind of eyeball to eyeball with our users. And hearing their feedback, that then allowed us to come up with innovative product solutions that could then create a more scalable platform, that has allowed us to then grow to be up over 250,000 neighborhoods across 11 different countries. But it started with the first one, the first five, the first 25, the first hundred neighborhoods. And in fact, when we launched our national launch in October of 2011, we had 276 neighborhoods in 24 states in the United States. But just think about that, 270, I was like, that's nothing, and that's a drop in the bucket. But it had given us enough confidence to know we weren't just talking to people who we knew, and our friends, and our friends of friends. We had built something that was repeatable and therefore, would be scalable.

Sandhya Hegde:

And your addressable market was any neighborhood where people had access to the internet as opposed to only this certain type of neighborhood. So it sounds like you essentially kind of used a year of private beta to test out, okay, does this product appeal across different types of neighborhoods? And what would be our playbook to roll out a new neighborhood? And what's the core product value? What other types of conversations do people want to have? What about monetization? Did you have any hypothesis testing for that during the private beta? Is that something you touched upon later? Because that's an important part of product-market fit, okay, is the revenue model eventually going to work?

Sarah Leary:

Yes. We looked at that pretty closely to see what types of things people were talking about. And from the very beginning, there was a large percentage of the conversations where people were looking for local businesses, local service providers. And that's something that we watched very closely from the beginning. And it gave us a lot of confidence that we would be able to build a platform that would allow local businesses to reach their local customers. At the same time, and this is distinct on the consumer side, you have to build a large enough audience and you have to become the de facto platform for local conversations before you have enough scale to be able to build out true monetization. And we knew that. We also knew that it was a race because people were going to be a part of one local neighborhood platform, not multiple ones.

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And so we used to talk about homesteading and how many neighborhoods did we get started? And then the other thing that I think we spent a lot of time thinking about was for a local community to be authentic, you have to have local representation who are really the local champions. And so we spent a lot of time in that first year thinking about who was the founding member, how are they going to get the word out, and how are they going to start inviting their fellow neighbors to join the platform? We don't have the luxury for community to be layered on later in the lifecycle of Nextdoor. It is part and parcel of the entire product from day one. And so, really thinking about how do you get these local champions who are not only going to help the neighborhood get started, but they're going to be the ones that oftentimes are starting the conversation and bringing others into the conversation.

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And so I think a lot of the work that we did in the first year, first two or three years, was really getting good at identifying who would be a good founding member to bring Nextdoor to their community. And just so you know, every single neighborhood across the world for Nextdoor has some of these founding members who have raised their hands and have decided, "I'm going to be the one who gets this started. I'm going to be the one who's going to invite the next five or 10 people." And also create the type of community where it's really the members who are growing the user base for their local community. So that was something that was essential for us to get right from the very beginning.

Sandhya Hegde:

Right. I'm sure you get this question a lot, which is what is the secret neighborhood launch playbook? How do they grow from neighborhood to neighborhood? And sounds like these founding members were a really critical part of that playbook. How did you acquire and build relationships with these founding members? What's that secret sauce?

Sarah Leary:

Well, they are essential because one of the most important things about getting community right is authenticity. And I think it's obvious if you think about what works in a neighborhood in San Francisco is different than what's going to work in a neighborhood in Loudoun, Tennessee, or one in Texas, or one in New York City, or one frankly, in Frankfurt, or in London. And so there was no way that we could figure out exactly how a neighborhood was going to take off and who were the right people to have on the platform given the diversity of communities that we were supporting. Instead, we needed to find the local champion and give them the tools to be able to do it themselves. And so we spent a lot of time thinking about these different areas where community volunteers tended to congregate. So it could be related to schools, it could be the community garden, it could be a volunteer group.

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There was a patchwork of people and organizations that these folks tended to gravitate towards. And what they got excited about with Nextdoor was that we were giving them a platform that then they could use in their local community to organize whatever local events made sense for them. So if you look at one down in Australia, for example, the idea of these swim groups that they have in Australia, they're very important in Sydney. Lots of kids participate in them. Moms are using Nextdoor in Sydney to organize around these groups. That's something that obviously might not make sense in the middle of Manhattan, for example. But the whole idea is that this is a platform where you can bring together your neighbors for collective action, and you describe what's the collective action that makes the most sense in your local community. And so that was one of the really important things. And it's something that I think our history of having built online communities over multiple companies really was part of the special sauce that we infused into the DNA of the company from the very beginning.

Sandhya Hegde:

Makes sense. I love the idea of like, okay, here's the platform. You discover the use cases for your neighborhood. I'm curious, did the way that you brought on a new neighborhood online or onto Nextdoor, did that change as Nextdoor became bigger or was it always the same? The way you seed one neighborhood, was it kind of more or less the same or did it get more digital, less in person? How did it change pre and post-product-market fit?

Sarah Leary:

Well, in the beginning it was very hands-on. It was us being directly involved in recruiting those founding members, and then listening to what were the tools that they needed to be to be successful. One of the things that we did, for example, in the beginning is that I would regularly be on the phone with someone in those first 25 neighborhoods, be like, "Okay, you need to grow the size of the neighborhood. Just two or three people. There's not enough people for a conversation." And that was great. We'd help them get to 10, 15, 20. And we would learn they need to have flyers, maybe we need postcards, they need email. They needed tools to be able to get the word out. But obviously, as you start to scale, I can't be on the phone with everyone. And instead, we built something that we referred to as the Pilot program where the first founding member would come in, and they had 21 days to recruit nine other people to join the neighborhood. And that founding member gave the neighborhood a name and drew the neighborhood boundary.

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And you can imagine not everyone could do that. And therefore, they weren't a good founding member for us. If they couldn't grow the neighborhood to a certain size, that also was another sign. Now we would give them an extension a little bit more time if they were getting close and try and help them get over it. But we had to build all of those pieces of the platform such that it was a scalable way to not only find the founding member, but also to get those initial seeds of the community right from the beginning. And so it absolutely became more digital. But we have always had an element of it in the real world versus the online world. Because I think that's part of the magic of Nextdoor, and it's part of what makes these communities special is that when you walk outside your front door, you're going to run into the folks in your neighborhood.

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And so you want to be able to take advantage of that. So encouraging people to host in-person events, going to in-person events and telling them about Nextdoor because it turns out that if people are talking online, they're more likely to show up to the local events. And then when they go to the local events, they're more likely to continue the conversation in between events on Nextdoor. And so in that regard, it's mutually beneficial.

Sandhya Hegde:

Awesome. Oh, that was so helpful. Thank you so much for sharing that story.

Sarah Leary:

It's fun. It's fun to go back down memory lane.

Sandhya Hegde:

Yeah. Being the first customer support person when the servers are taken offline, is always a fun experience.

Sarah Leary:

Yes, it is. That definitely is motivation to build a product that's better and doesn't go down because you don't want to be getting those phone calls.

Sandhya Hegde:

One of the things that I've noticed is the word community has definitely become a big buzzword in startups. Almost like what machine learning was 10 years ago when it wasn't really making a difference, but everyone had it in their pitch deck. And whenever you ask someone, "Okay, what's going to be your differentiator?" It would always be AI. And in some way I feel like that has become true for both consumer and interestingly, B2B and hardcore enterprise software today because one in maybe two or three startups that pitch us bring up community as their hopes and dreams for go-to market strategy. So how do you feel about that? 

Sarah Leary:

Finally. Finally everyone understands.

Sandhya Hegde:

Yeah. Yes. But as a human being, you're only going to be a part of two or three, "Communities," or maybe, I don't know, you probably are a part of more. But the average introverted person is part of maybe your community. So how do you think about what kind of startup should or can leverage community as a part of their strategy? What are the fundamentals required?

Sarah Leary:

Well, I definitely chuckle a little bit when someone's like, "Oh, and then we're going to build community." I'm like, I roll my eyes because look, you can't fake community. And I think that it's really, really hard to bolt on community later on. It is something that I think has to be in the DNA of a company for it to be authentic. And I think that people who try and add it on later because they think it's the solution de jour are going to fail. Because users, customers, they can sniff out something that is inauthentic. And so to me, it's really looking at are you building a product that is hitting a pain point for a group of people for whom the community that you are trying to create is part of their identity? So this was something that was very important for us early on. And Nextdoor was all about your local community.

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If you meet someone for the first time, you might say, "Oh, where are you from? Where'd you go to school? Where do you work? Where do you live?" And if you say that you live in San Francisco, for example, "Well, where in San Francisco?" And there's different parts that says something about you. You live in Oakland, that says something about you. This is part of your identity, it's part of your affinity. And so therefore, being a part of that community feels very natural. Even on the enterprise side, I think that the most successful communities have been ones who have tapped into a group of people for whom it's part of their identity. I'm a data scientist, that is part of who I am. And I'm looking for other data scientists to share kind of best practices, and how do I get myself out of a jam because I've found a problem and I don't have anyone else in my workplace that has expertise to reach out to the community.

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And so if it's not a group that identifies as a part of that community, that's a problem. You look at what Salesforce did with Dreamforce. And they created a sense of identity. If you are someone who knows how to operate Salesforce and you're an administrator, they created that sense of community. So kudos to them. That was extraordinary. They spent a lot of time and a lot of money to make that happen. And I think most of the time they're not really even talking about Salesforce software anymore. But they created this thing that people wanted to be a part of and they wanted to show up to on a regular basis, both in person and online. And that's special when you do that.

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And I think some of the best brands out there have that really strong sense of identity that then you can build community around. But it has to have a real sense of togetherness, people wanting to come together. There has to be real content. And this is really important. It cannot just be the company communicating with the customers or the members of the community. The community has to start communicating with each other to the point where the company could step away and the community is still going. That's a real community.

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And it's not something that you can just build in a month or a quarter, and then walk away from it. You have to cultivate it time and time again over years, and you have to keep cultivating it. And that's something that I think fewer companies actually want to make that investment. And typically, it's helpful that you have hopefully a team, but at least a person who is the internal voice of that community at every turn. It's nice if it's one of the founders, but it can also be an early employee that really carries the torch for the community inside of the company. Can champion resources, and information, and communication on a regular basis such that the community is almost like an extension of the company. And so, you have to be committed to having not just investing tools, but also investing in communication and building the trust with that community. And that's not for the faint of heart.

Sandhya Hegde:

Yeah, and I really love how you use the word cultivate because it says you need the seed to already exist. You cannot manifest the seed, which means if that behavior isn't actually happening organically in real life, you cannot grow this plant out of no seed. Even with Dreamforce you could argue that yes, you had, at its heart, a sales kind of community that in small groups were already, would they love to talk about what made them good salespeople? They already had this desire to meet, and network, and share stories, and they had excellent war stories. And so, there was that kernel that you could take, and cultivate, and grow, and make it easier and easier for larger collections of people to learn about each other, and interact, and find resources.

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But you are more harnessing the community than creating it. I think what makes me nervous, especially with B2B startups that say, "Oh, well, we have a community-led growth strategy," is you have folks in a Slack channel who signed up for some content, that's not community. Community is a group of people who identify themselves in a certain way and are all interested to talk about the same problem. If you have that, yes, let's talk about community. But just because you have a lead list that is not in a CRM but is in Slack doesn't mean you have a community. And actually just throwing a community manager at that problem is not going to solve it.

Sarah Leary:

No, it usually is a road to disaster, to be honest with you, because it seems inauthentic and therefore, that becomes part of the brand. And I do think you're absolutely right. Are they having conversations with each other without you? Are they trying to find each other? And at that point you're like, "Wow, there's something there. And let's support it and host it." I think back to my time when I was at eBay after Epinions and Shopping.com. And I got a chance to see eBay live and to just hear these stories about how these power sellers used to share best practices, and they couldn't wait to get together each year, and then update each other on what was working and what was not working. And frankly, eBay corporate was just there to allow them to have those interactions and hopefully, give them updates and the roadmap of what was coming. But it was a community that had its own life force.

Sandhya Hegde:

Right. Right. And what is your advice to founders who are thinking about starting out right now? It feels a little bit like 2008. It's not the same, but it rhymes a little as they say. And plus in general, starting a new company is really hard, especially when you're thinking about the consumer space, where it feels like you are trying to catch lightning in a bottle, get timing right. You're always competing with really big companies that might copy your idea if you move too slow. How do you think about being a founder in this time, especially for a consumer startup?

Sarah Leary:

It's a great question and it's something I've been thinking about recently. I've actually lived through a couple downturns. I lived through 1999 in 2000. And then 2009 and '10 in that period of time. And I actually think that there's no better time to be a founder and to get started. In part because you can put your head down and work on building. You don't need a lot of capital to get going. And you can ignore the noise because I think for the last year, year and a half, it's gotten crazy and there's been a lot of, what is everyone else doing? And should I be doing that too? And I don't think that that's always healthy for building the business. And I think we're in a period of time where it's going to be easier to recruit and retain talent, which is essential to getting a company off the ground.

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So it's funny because when I look back to 2009, 2010, which was the Fanbase and the pivot, the broader macro market did not impact us hardly at all. It was all about us trying to find that product market fit, and that had almost nothing to do with the macro market. And if you can find that product market fit when everyone else is distracted by the macro market, well when the markets come back, they look around who's figured it out, and all of a sudden you're at the right place at the right time to be able to take advantage of the fact that, as you know, there's a lot of firms out there that have raised a lot of money, especially in the fourth quarter of last year. And so, there's a lot of money that wants to look for good ideas. And I've always thought that we were in a market which was long on capital and short on high-quality teams with great ideas that were building something great.

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And I do think that a lot of companies that I've worked with over the course of the last year as the market got really, heady, I kept telling them, you're going to have to still land on the curve. You're going to have to build the product, find product-market fit, grow the business, and grow revenue. There is no getting out of that in this whole exercise. And so don't worry about the market timing, worry about do you have a real market opportunity. Do you see something that is under-served in the market? Do you have an insight about that product? Can you build a team that is uniquely equipped to go after that opportunity, and then to some degree work the problem, work the problem with a customer, with a user? I think that's one of the most important things that I've learned over the course of the last 20 some odd years is that I think in the beginning people think it's like a bolt of lightning and you just come up with this great idea.

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And the more and more that I've experienced it's you've got to find something that inspires you, and you're excited about, and you see that there's a market opportunity. But then the most important thing is to actually work the problem, sit with users, understand what they actually feel is the pain point.

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You're going to have a long list of hypotheses, go test them. And it's amazing. People will tell you where their problems are and they can solve them. And you will come up with innovative solutions because you're testing and iterating. I think that the second thing that really comes to mind for me whenever I'm asked about how do you navigate this is, we all want to build something huge, whether it's, you think about that as a 10 million idea, a hundred million dollar idea, a billion or 10 billion. But we take an idea, it's like, oh, how big can it be? What's the total addressable market? And you have to be able to do that to be able to then say, "Gee, this is why I think that this is a great opportunity. Either come join my company, come believe in what I'm building, come invest in my company," all those things.

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Founders are trying to tell the story about the growth and the potential going forward. And you have to do that. But then to some degree, you have to park that and you have to go back down to how do I get my first user? How do I get my first 10 users? How do I get the first 100? And instead of making it seem like you have to build the whole solution to get them, start with thinking about how do I really try and problem solve and test these hypotheses as quickly as possible? And how do I do that in a way that maybe is totally non-scalable. Me being on the phone with founding members in the beginning is totally unscalable. But if I thought about it for more than a nanosecond, I would've stopped and tried to figure out, well, we probably take two months to build the entire platform.

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Where the reality is not only is it just good way to test and iterate, it is going to inform you so you can come up with much more innovative creative solutions. We came up with lots of solutions on how Nextdoor could get off the ground and therefore, overcome what a lot of other local businesses had struggled with early on, in part because we worked the problem. And there were solutions that they weren't the easiest, they weren't the most elegant, but we knew that they would work because we had already done them with five, 10, 15, 25 different neighborhoods. And then we could reverse engineer a product solution that would solve that problem. And so I just encourage people, even though we want to dream big, start small in the beginning. And do not skip the stage of spending time eyeball-to-eyeball with your customers and your users.

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It just informs the problem-solving. And at least for me, that's how I found our team was able to come up with innovative solutions because we had a specific customer in mind who we were trying to solve for, a specific neighborhood in our case. And it allows you to narrow down what you're trying to solve for and ignore everything else. And that leads to better prioritization. I think too often in early-stage startups, you have a lot of smart people around the table who are trying to be impressive and come up with cool ideas. And they overbuild what they need to get into the market. And therefore, they miss the opportunity or they take the company in the wrong direction. And frankly, that was my experience with Fanbase. That's what we did. We had a lot of smart people in the room. We had a lot of people telling us, "Oh, you're really onto something."

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But if you spend 18 months working on something with no product feedback, it's almost impossible that you're going to get it right. And so it's much better to spend 18 days building something and then sit down with a user and have them puke all over it or give you a suggestion that's going to make a really big difference in terms of getting that true product-market fit that is essential for any company to grow up and be hugely successful.

Sandhya Hegde:

Well said. It is so easy to be in denial when you don't have to confront the lack of excitement on your end user's face. It's easy to convince yourself, "Oh, we just have to build a few things to remove friction." It's very easy to tell yourself, "Oh, if we just do these two other things, it'll probably be solved and nothing.”

Sarah Leary:

You mentioned something like being face-to-face with someone, you're realizing, are they really enthusiastic here? Are they just right?  It needs to be something where they light up and they're like, "Oh my gosh, I want this." You want them following up and calling you, "When can I get it?" Most consumers, most businesses don't like change. So they'll stick with the status quo unless there's something demonstrably better. And so you want to make sure that if you're starting a company and building a product from scratch, you're building something that is clearly demonstrably better. I always say if a 10-year-old couldn't pick up on the fact that someone liked your product, it's not good enough. It has to be obvious. It can't be something that you're measuring in a survey that you need to squint in order to see. Not good enough.

Sandhya Hegde:

Makes sense. Awesome. Well, thank you so much for sharing these stories, Sarah.

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