Quiz. Which business would you pick?
a) Enterprise software - US$ 250k one time license
b) Enterprise software - US$ 30k/month recurring subscription
1/ Unit economic for founders thread.
Despite being a founder and a student of the subject, I missed out on a key point growing up.
Length of relationship with your customers, order frequency, product usage and utility matter.
They didn't teach me this in business school.
Quiz. Which business would you pick?
a) Enterprise software - US$ 250k one time license
b) Enterprise software - US$ 30k/month recurring subscription
Twice in my life I picked A. They were both great businesses, but they didn't compare to B. Especially in the long run.
Looking back, with hindsight, I know I should have picked B.
Why?
When those customers leave after a few orders, your investment in that relationship is written off.
But it is not just about the relationship or investment. It is also about scale.
What are the easiest ways to scale a business?
a) Get more customers - acquire
b) Get existing customers to order again - retain
c) Increase order size - up sell
d) Increase order frequency - cross sell / new use case
e) Get existing customers to get you new customers - referral
(b) to (e) are free.
a) Length of relationship
b) Order frequency
c) Order Size
d) Contribution Margin
e) Retention rates
Crude approximation but it makes the point we want to make. Increase value by increasing these.
It takes 8 to 12 years to get a business to a point where it pays off for the founders. Given a choice of four different businesses which one would you pick?
a) FTC
b) Maya
c) Produce A
d) Product B
(c) turns off customers because it delivers late with hit or miss product quality and has a terrible customer experience.
(d) is fanatical about customer service and experience.
Compare that with (a), (b)
In the long run it loses out to (d). If LTV was representative of franchise value, (d) would be 6 times more valuable than (a)
(d) would be more operationally complex because of logistic, so perhaps more headaches. Also more points of failure.
But financially speaking, which one would you rather build?
Order frequency and customer shelf life matters. Pick ideas where customers buy more frequently over ideas where they buy once
Full lecture here
https://t.co/eZGtwCLbOI
More from Economy
Does raising the minimum wage reduce the number of low-wage jobs?
No.
"We also find no evidence of disemployment when we consider higher levels of minimum wages."
https://t.co/vlgagEHeyy
Minimum wage increases reduce crime.
https://t.co/1G1clXqF9t
When you increase the minimum wage, you decrease infant mortality among poor families.
https://t.co/iwW1FDsLYG
Increasing the minimum wage improves kids' health.
https://t.co/66DLHERpOJ
The minimum wage reduces racial income inequality.
https://t.co/wkn9Ajotlx
No.
"We also find no evidence of disemployment when we consider higher levels of minimum wages."
https://t.co/vlgagEHeyy
Minimum wage increases reduce crime.
https://t.co/1G1clXqF9t
When you increase the minimum wage, you decrease infant mortality among poor families.
https://t.co/iwW1FDsLYG
Increasing the minimum wage improves kids' health.
https://t.co/66DLHERpOJ
The minimum wage reduces racial income inequality.
https://t.co/wkn9Ajotlx
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The entire discussion around Facebook’s disclosures of what happened in 2016 is very frustrating. No exec stopped any investigations, but there were a lot of heated discussions about what to publish and when.
In the spring and summer of 2016, as reported by the Times, activity we traced to GRU was reported to the FBI. This was the standard model of interaction companies used for nation-state attacks against likely US targeted.
In the Spring of 2017, after a deep dive into the Fake News phenomena, the security team wanted to publish an update that covered what we had learned. At this point, we didn’t have any advertising content or the big IRA cluster, but we did know about the GRU model.
This report when through dozens of edits as different equities were represented. I did not have any meetings with Sheryl on the paper, but I can’t speak to whether she was in the loop with my higher-ups.
In the end, the difficult question of attribution was settled by us pointing to the DNI report instead of saying Russia or GRU directly. In my pre-briefs with members of Congress, I made it clear that we believed this action was GRU.
The story doesn\u2019t say you were told not to... it says you did so without approval and they tried to obfuscate what you found. Is that true?
— Sarah Frier (@sarahfrier) November 15, 2018
In the spring and summer of 2016, as reported by the Times, activity we traced to GRU was reported to the FBI. This was the standard model of interaction companies used for nation-state attacks against likely US targeted.
In the Spring of 2017, after a deep dive into the Fake News phenomena, the security team wanted to publish an update that covered what we had learned. At this point, we didn’t have any advertising content or the big IRA cluster, but we did know about the GRU model.
This report when through dozens of edits as different equities were represented. I did not have any meetings with Sheryl on the paper, but I can’t speak to whether she was in the loop with my higher-ups.
In the end, the difficult question of attribution was settled by us pointing to the DNI report instead of saying Russia or GRU directly. In my pre-briefs with members of Congress, I made it clear that we believed this action was GRU.
