Alex Schultz, VP Growth, Facebook, on “Growth” in How to Start a Startup

HIPLegal is hosting a brown-bag lunch series for entrepreneurs, to watch and discuss videos of an exciting educational series, “How to Start a Startup.” Sam Altman, President of Y Combinator, is teaching this series as a class at Stanford this fall and is making the classes available online. Along with guest lecturers like Marissa Mayer, Peter Thiel, and Ben Horowitz, he will be covering the fundamentals: how to come up with ideas and evaluate them, how to get users and grow, how to do sales and marketing, how to hire, how to raise money, company culture, operations and management, business strategy, and more.

HIPLegal is holding a weekly brownbag lunch to view and discuss each session on Wednesdays from 4:00-5:30 pm at our office (20195 Stevens Creek Blvd., Suite 250, Cupertino). We watch one video per week (50 minutes) and then hold a discussion for about 40 minutes. We brainstorm ideas, bounce them off each other, and refine them over the course of the series. This is a 20 session program that should be a great program for anyone who is in the process of starting a company or is thinking about one day diving into entrepreneurship. The full curriculum and the videos to date are here.

Please fill out the survey here and let us know if you are interested in attending the series with us.

Session 6 – Alex Schultz, VP Growth, Facebook, “Growth.”


Growth is the key for a start-up. Retention is the key indicator of growth, as those are your fans / ambassadors / power users. You need to understand what number/metric is MOST important to drive retention of your users in your market for your product. That is your key metric or “North Star.”


What matters most to growth? Retention of your customers. If you have a good product, that will drive customers to you, but you need them to stay with you.  Alex referred to this graph.  If you look at your retention, e.g., % active users over the past N days, the curve will either flatten out (indicating your core group of fans who are regularly / repeatedly active within that time period) or continue to decrease (indicating you have a poor product vs market fit.) A poor product vs market fit is the number one problem of start-ups that don’t retain customers.

Identifying metrics for your product in your market

Dimensional reasoning helps identify relevant metrics for retention. Pick a metric that aligns with your vision and that you can stick with as you grow.

Different verticals need different retention rates. Social media products need ~80% retention rate. Other spaces don’t need as high of a retention rate to succeed.

Operating for Growth: Your North Star metric

To grow, set your “North Star” – the customer retention metric for the company to focus on where you want to be. The leader of the company should set the North Star and all your goals and metrics should focus on getting to the North Star. Schultz recommends publishing the same metrics you are internally driving toward, as it gives you public accountability and makes you focus on the correct metrics. For example, the proper metric for Facebook may be users active in the last 30 days on Facebook, not new users on Facebook. Define your North Star and define it to be the best at what you do, then work to it.

As an example, the North Stars for various companies are:

    • What’s App :: Send #s
    • Facebook :: Monthly Active Users
    • AirBnB :: Nights Booked
    • eBay :: Gross Merchandise Volume as a % of eCommerce

You will need a growth team when it is time to scale, but not before. Early stage startups do not need a growth team, because everyone needs to be focused on and driving toward growth. As the company grows, you cannot personally control everyone, but if you optimize the company to focus on the North Star, people are more likely to be focused on it across the company.

That Magic Moment

What is the amazing “magic moment” that gets users hooked on your product or service? For example, on Facebook, it might be seeing your first real-world friend. On eBay, it might be finding that collectable missing from your collection. Get people connected to that magic moment as fast as possible. And then optimize to maximize retention. Focus on the marginal user (not your power user) to drive growth. So, identify the Magic Moment for your product in your market, optimize the way to get your users to that Magic Moment as quickly as possible. For Facebook, it is 10 friends in 14 days, for AirBnB, it is seeing a cool house they can rent immediately.

Aside: Your marginal users drive growth, so optimize the Magic Moment for them. However, you develop your product for your power users to keep them engaged and retained.


    • Internationalization (Facebook was late on that front). Take the time you need to build your product to be scalable, and think about where in the international market you need to focus to be first. Prioritize the right languages when you translate your site.
    • Virality: the relevant metrics here are your payload (how many people you reach per viral blast), your conversion rate, and your frequency (how many times you reach the same person). For example, Hotmail had a low payload (a single line at the end of the email), high frequency (every time someone sent an email to someone) and a fairly high conversion rate. PayPal had a low payload (eBay users, upon checkout), low frequency, but very high conversion rate (using financial incentives, like $10 discounts for getting friends to become active members). It is important to remove friction in the conversion process to get the highest percentage of conversion (“K factor”) through all steps (import contacts, send invite to all contacts, number of contacts who view, number who click, number who sign up). To be viral, you need a K factor above 1.
    • SEO: Keys are: (1) keywords – do your key word research to optimize results. Figure out what people search for, how many people search for it, rank those terms and determine how important they are to you, and how many others want them. (2) links – ensure you have valuable links from high ranking websites on your website (and then internally link them) to maximize your Google page rank.
    • Email: be a good citizen with email (don’t spam) and consider your audience. Email is not the best way to reach people under 25. Be aware of deliverability issues that can arise from how you use email, SMS and push notifications. Key is getting your communications delivered, then getting them opened – so have a compelling subject line – and then click-throughs. Notification emails are better than newsletters. Consider how to optimize your notifications for your marginal users.

Some good resources: Ogilvy on Advertising, by David Ogilvy; Viral Loop, by Adam Penenberg.

“A good plan violently executed now is better than a perfect plan next week.” George S. Patton (source: