A Product Market Fit Show | Startup Podcast for Founders
00:00:00 · Jeremy Liew
[00:00:00] S0: Kevin and his product insight, his understanding of the consumer has led to building a product that started at 50% DAU MAU and then went to 60 and 70 and it just keeps on going up because he understands the user. It's not about a clever growth hack; it's about understanding the user and what they want.
00:00:17 · Pablo Srugo
[00:00:17] S1: Welcome to the Product Market Fit Show brought to you by Mistral, a seed-stage firm based in Canada. I'm Pablo. I'm a founder turned VC. My goal is to help early stage founders like you find product market fit. That was Jeremy Liew. He's a partner at Lightspeed and he's the VC who made the first investment into Snapchat; we're talking back in 2012, so over 10 years ago when the company was valued at just shy of $5 million, if you can believe it. He was able to get 10% of that company for just under 500K. You'll hear from him later about what it was that he saw in Evan and in Snapchat back then and why he thinks that Snapchat had the success that it had. Before we start, I'll just mention that most of what you hear on today's episode is from my own research into a bunch of different sources including the book on Snapchat, "How to Turn Down a Billion Dollars," several Snapchat podcasts and interviews like Acquired and OMR and other online research. Just to set context, today Snapchat is a $18 billion company. They're doing just shy of $5 billion in revenue. They have 800 million monthly active users, 400 million daily active users. It's funny. I always talk about how you don't want to start a startup with this, wouldn't it be cool if, mindset because if you start with that, you tend to be led pretty astray. This is a total exception. If you look at how this started, it's not even Evan by the way. Evan Spiegel, he's the CEO. He's one of the founders of Snapchat. He didn't have the idea. It was his frat bro. It was Reggie Brown. He's like, hey, these guys are 21 years old. They're at Stanford in frat house. They're hanging out, throwing parties every few days. They're doing the classic things that you would expect happen in a frat house when you're 20, 21 years old. Reggie one day is sending pictures to some girl he knows and he just literally has this aha moment, completely textbook classic case of wouldn't it be cool if. He just goes to Evan and he's like, "Dude, wouldn't it be cool if I send somebody a picture and it just automatically disappeared?" Evan loves it. Evan just loves that idea and he jumps on it. That's, believe it or not, how an $18 billion company is born. To understand how it all really played out, you got to understand some of the context because today, I mean we're 2024.
00:02:20 · Pablo Srugo
It's hard to remember what the world was like back in 2010, 2011. Just some facts to throw at you, I mean, today there's 1.5 billion iPhone users. That's how popular the iPhone is and obviously there's more Android users than that. There are billions and billions of mobile phone users in the world. The iPhone started in 2007. The App Store didn't launch till 2008. By 2011, which is when Snapchat gets created, there's only 150 million total iPhones that have been sold. The market is about 10% what it is today and this is really the age of mobile. If you look at the period from 2008 to 2012, that is when all of the $10 billion plus mobile first companies were created. Uber, Lyft, Postmates, Spotify, Venmo, WhatsApp, they all were created during that time but they were still in their infancy in 2011. Think about WhatsApp, which is probably the best comparable to Snapchat because it's another one of these messaging applications. WhatsApp at 10 million users in 2010, by 2011 it had 50 million users. To give you a comparable, in 2011 when WhatsApp had 50 million users, Blackberry, BBM, if you remember Blackberry Messenger, which was the hottest thing back then, had 60 million users. Blackberry Messenger in 2011 is more popular than WhatsApp. This is the world that Evan's living in. We're talking about people who had flip phones for most of their lives. Even at this point in 2011, only a third of teens have a smartphone and about two-thirds of college students have smartphones. Even in college where they're at, there's a third of their friends that don't have one. I mean, that's unimaginable today, but this is the world they were living in. It's in this context that this idea of a disappearing image comes to Reggie. This is a huge reason why things played out as you'll see the way that they did. There is this tailwind. There is this undercurrent, this tailwind that to be clear, they did not identify. This I think is very -- and I go on these tangents because I think at the end of the day, we're not just telling stories for the sake of it. We're telling stories so we can understand what it takes to get product market fit and hopefully build a massive company. You can see very clearly neither Evan nor Reggie nor the other co-founder, the technical co-founder that comes in later, Bobby, they don't have a thesis about mobile.
00:04:26 · Pablo Srugo
They haven't really thought through strategically what's happening now that the App Store is out, now that these mobile apps are coming out. They end up landing on it and they end up benefiting from this tailwind. This is super common. I'm not taking anything away from Evan. I'm saying that actually this is the way things typically work out. Now Evan, he's a designer. He's a product designer type. He actually can't code. The first thing he does, going back to when Reggie pops into his room and says, hey, disappearing images, as he starts thinking through this idea and really buys into it, he gets his friend Bobby Murphy who's a couple years older, is 23 years old, he just graduated. At this point to be clear, Evan and Reggie they're sophomores. They're in their second year. Evan's friend, Bobby, he has just graduated. He has a full-time job now. The reason that he goes to Bobby is because actually Evan and Bobby had previously worked together on another startup. This is another thing that I find so interesting about this story is that in a way, Evan did everything wrong. It worked out tremendously well, but we talk about, you don't want to start a startup with "would it be cool if." You also don't want to start a startup by forcing it. The last thing you want as a founder is to be like, "I just want to start a startup. I just want to be a founder" and you're just chasing ideas. I did that at Gymtrack and I can tell you it's so likely that you come up with an idea that sounds good on paper but doesn't work in reality. The best way to actually uncover great ideas is to just get interested in spaces and solve problems almost for the sake of it and you end up uncovering more interesting problems most of the time that way. This was not the case. Evan and and Bobby had worked together on previous startup ideas before because they so desperately wanted to be founders and one of these was Future Freshmen. The idea with Future Freshmen was informed by what Evan and Bobby had lived through. I mean, they were students at the time. They were 20 years old. They've only really been students their whole life. They haven't had a job yet. Their whole idea of the world is framed by that. One of the problems that they encounter was, hey look, when you're applying to university, when you're looking for universities to apply to, it's a mess.
00:06:31 · Pablo Srugo
You have to click through all these websites. You have to go through all these places to just understand what the programs are where you might be a fit, where you might not be a fit. They built out Future Freshmen , which was this website, this portal, let's say, that you could go into. You could figure out which college you should go to, which university you should go to. They wanted to sell it actually to schools. They wanted to sell it to advisors at high schools and these sort of things. They worked on it for over a year. They actually funny enough got their pledges from their fraternity to work on it obviously for free. I mean, Evan talks about this a lot. It just didn't work for a variety of reasons, but I think one of the main reasons is they really weren't building for themselves. They really didn't understand the problems at all that well. They were informed by their own opinions, but the reality is he even said he had his younger sister and Bobby's younger brother, neither of them used it because the honest truth is most high school students they just don't care that much. Even if they use the platform, they're certainly not going to pay for it. Now you got to go sell to schools. These guys have no idea how to sell to schools. They don't actually understand and neither do they do the research to figure out what the problem looks like for the counselors, for the advisors that are in the high schools. This project totally doesn't work, but they obviously enjoyed working together. This is the first person that Evan goes to to work on Snapchat. Bobby ends up playing a critical role because turns out that Reggie, even though he had like the first idea, I mean the idea of disappearing pictures, he beyond that really didn't play much of a role. I mean, initially there were three co-founders, right, Reggie, Evan and , and Bobby. But even in the very early days, Evan and Bobby start really doing kind of all the work. Reggie ends up kind of like leaving the company or getting kicked out of the company depending on who you ask. I mean, there's a whole lawsuit about this that we won't get into here. But the bottom line is that the key people at the beginning were really Bobby and Evan.
00:08:29 · Pablo Srugo
I mean, Evan spent most of his time on vision and design and Bobby was a key person on product and tech and ultimately built a team that really scaled and pioneered a lot of the computer vision, the lenses, the AR stuff that ended up making Snapchat what it is today. They get to working and their first idea is actually not to build an app but to build a website. Why is that? Today it seems so weird. Back then in 2011, that's where you went first. The age of mobile was really just coming up. If you recall, this is about the time where actually Facebook was making the transition from web to mobile. This is where they start off. They build this web app thing. They call it Peekaboo, by the way. It wasn't called Snapchat back then. It was called Peekaboo. That was the first name. They work on it through summer 2011 while they're on summer break. They launch it and it just falls flat, totally flat. They get zero downloads on day one. They keep pushing and pushing. It's funny. Evan talks about he goes to the mall. He actually goes to the mall to convince people to join this platform. They do at some point end up launching a mobile app, but even still by August, September we're talking five months in, five, six months in after the original idea happens, they have only 127 users. It's certainly not flying off the shelves by any means. And this is a consumer app. I mean, you need tens of thousands, hundreds of thousands of users before this gets interesting at all. Evan with his tail between his legs so to speak, has to go back to school. He wanted to drop out. He wanted to be a founder but the thing just wasn't hitting. Now in the meantime, and to their credit, what they are doing is they're making it as simple to use as possible. This is something that I thought was a huge reason why it ultimately took off, which is when you opened up the app, it was instantly on camera. If you remember back in these days, 2010, 2011, when you opened up the camera on your actual iPhone, you went to the camera app, it had this weird animation. It was the camera lens opening up. That added about a second. And they actually hacked the software to be able to get rid of that animation so that loading up Snapchat's camera was faster than loading up the iPhone camera. They're doing all these little design tweaks, product tweaks to make the product easier and easier to use.