Why Initialized Capital Invested in Open Listings

Buying a home has gotten easier, faster & more attainable with software

Homebuyers don’t want an agent. They want a home. Here I am in my home, thanks to Open Listings.

In 2015, I needed help buying a home in San Francisco and turned to the founders of Open Listings. It was quick and painless. I knew what I wanted, and they were able to get me that home on my terms.

A few months ago, we caught up with them again in LA to talk about their business, and it became quickly obvious that they had made a lot of progress. What these founders have done since graduating Y Combinator in the Winter of 2015 is remarkable. They’ve built a product that delights customers — they closed over 64 homes last month alone — and saved buyers millions. (Open Listings splits 50% of the commission with homebuyer, which is $8,000 on average).

It’s a win-win situation for their buying agents as well. The key? Efficiency.

Traditional agents normally spend 80% of their time looking for new clients or driving potential buyers around. Since buyers come to Open Listings directly and browse homes on their own time, agents only have to focus on getting offers accepted. This allows them to pass the savings along.

With housing prices steadily increasing, this commission refund is real money for the young families, first-time homeowners & immigrants that turn to Open Listings. As house hunting becomes more digital, software efficiency should save buyers time and help make home buying more affordable. We continue to be excited by founders who show relentless discipline and commitment to making something people love. They’ve done the hardest part, and now it’s time to focus on growth. The Initialized team is thrilled to roll up our sleeves and dive in.

It certainly doesn’t hurt when one of us is already a very happy customer.

Go ahead, start househunting!

Why Initialized Capital Invested in AdQuick

We love the idea that file-cabinet industries are doomed. People are used to world-class software for taking photos of their kale salads at lunch, but come back to the office to do their jobs using terrible or no software. That’s an opportunity. You can see the theme in our seed investments investments like FlexportOpenDoor, and Bellhops. Today we’re announcing that we led the seed round in AdQuick.

Buying out-of-home advertising is no exception: information asymmetry, multiple phone calls, and dozens upon dozens of emails and attachments. And it’s a $40 billion global business that’s not going away if you believe we will keep leaving our homes. It’s also the only growing traditional ad medium.

Wasted time, human error, and unnecessary costs can be curbed with software and Adquick was the first of these companies promising that future who actually delivered a quality software product in the present. I’m no stranger to buying billboards, so the concept resonated with me immediately, but it wasn’t until Garry and I sat down with the founders (former Instacart [Fund I] employees) that we saw how diligent they’d been with little to no funding.

We’ve seen pitches for this business for almost a decade, but this was easily the most impressive technical execution and at a remarkably early stage.

Starting a company in the internet age means you don’t need to open a factory, you only need to open a laptop, but far too few founders have as much to show for it as Matt, Fahim, and Connor did. A modern, searchable map interface combined with unique tracking data to help marketers show elusive ROI on out-of-home ads made this a really formidable pitch despite only being a 5 month old business.

It helped that I’ve ordered some outdoor advertisements, but the reference checks ranged from incumbents like H&R Block to upstarts like OVO all came back effusive. If a range of customers, who learned about you organically, love your b2b product that much and you’ve only just begun — we’re interested.

What To Do If Your Product Isn’t Growing

How ‘Critical User Journeys’ can help a product take off

As a founder, product lead at Pinterest and PM for a couple products at Google, as well as a growth partner for Initialized Capital, I’ve seen many product teams struggle to grow. Many products start out with a bang. Some find product-market fit with sustained growth. Few have gone through spurts of hyper-growth. But more often than not I’ve seen most of them linger then fizzle.

Throughout these experiences, I have noticed a common pattern that almost every startup founder falls into as they begin this journey. Founders launch their product, wonder why it isn’t growing like gangbusters and then immediately try to fix their growth problem.

They turn to growth tactics like optimizing their on-boarding funnel, SEO or push notifications before really understanding what they are building and who they are building for. This may create an initial burst of short-term growth. But it ultimately leads to high churn of your possible customers, while ignoring problems in the core product.

Before trying different growth tactics like throwing spaghetti at a wall, startups need to take a fresh look at their users, evaluate their product end goals and re-define the journey they want their users to take to get there. Here are some tips that can help define a path which will clarify the different steps needed to unlock product growth.

Map out your ‘Critical User Journey’

Many startups build a product without knowing what path they want their users to go down. If you look up the phrase “Critical User Journey,” you’ll find a plethora of UX frameworks and user maps. These are great, but can be overwhelming and daunting.

Early startups should start simple and make sure they know the optimal journey they want their product to fulfill for the user.

Your Critical User Journey should focus on a single use case with a specific goal and include the surrounding context for the user. For example, one of the journeys that Pinterest is focused on is helping a user find ideas around their own personal style. A Pinterest user typically starts from browsing a large visual catalog of style ideas, and then progresses to discovering the right looks that fit their own style.

Then Pinterest allows users to curate their own look books, style boards and eventually make it seamless to buy those looks, whether that’s directly on Pinterest or through a deep link to the merchant. The happy case is that the whole journey is completed on Pinterest. Now Pinterest has grown over the years to become a large company and fulfills multiple user journeys.

Pinterest guides users through each step of Personal Style Discovery: Browsing, Filtering, Curating, and Fulfilling

Founders starting out need to have clarity on the specific ‘Critical User Journey’ they are fulfilling. Then they need to understand how their product helps users along each step of that journey.

Measure your ‘Critical User Journey’

Once founders have a crafted a user journey, they need to be ruthless and specific on how they measure it. All successful startups have a plethora of top-line metrics (or KPIs) they measure and there are many great tools to help visualize this. For startups just starting out, it’s very easy to fall into choosing vanity metrics like MAU (Monthly Active Users) or a sum total measurement metric that looks like it is growing and lose sight of what is actually happening.


source: https://blog.kissmetrics.com/throw-away-vanity-metrics/

Instead, early startups should start with actionable top-line metrics to measure each step of the Journey. Start with two metrics: One user acquisition metric at the top of the funnel that measures how many new users are signing up and taking their first action. And then one user engagement metric further down the funnel that measures how often these new users engage with the product over time. Together, these two metrics define a product’s activation rate in how it graduates new users into becoming active users. From here you can add additional top-line metrics that are specific to your product and user journey.

The more specific top-line metrics are to a product’s user journey, the better they are at helping startups make decisions.

For example on Google Assistant, we measure user activation based on the user making at least one successful query that day on a specific surface (i.e. Pixel phone) in a specific country (i.e. U.K.) using a specific feature (i.e. Ask about “My Day”) within their first two weeks.

Identify ‘product levers’ that help move users along their journey.

Many startups chose top-line metrics but are not able to directly move any of them in a measurable and systematic way through projects and work streams. Having numbers to measure is only good if you know how to move them with the right product levers.

A product lever is something that is moveable and measurable that connects projects your team is working on on to top-line metrics that you care about.

For example, one of Initialized Capital’s portfolio companies I worked closely with chose the top-line metric ‘L7 Engagement,’ or the number of days a user has been active on the product during the last seven days). They chose the primary product lever to drive this as “Additional Actions taken per User.” They narrowed down the projects they were working on to only ones that drove additional actions per user (such as showing more in-line suggestions, creating off product promotions, sending contextual follow-up notifications, etc.) and cut the ones that didn’t. They saw their L7 Engagement rate turn around after a few experiment cycles and they expanded their focus to an additional product lever to drive L7 Engagement.

Don’t add so many features that the ‘Critical User Journey’ becomes obscured.

Another common pitfall all founders are pulled into is to “fix” growth by adding more and more to your product to “see what sticks.” Growth by product addition is hard to measure and rarely scalable.

For example, I worked with one portfolio company that had a great product serving a user need. They were driving a meaningful metric yet they were seeing stagnant month-over-month growth. Upon looking closer, we saw that they had built multiple convoluted activation flows on top of each other. Each flow they released showed slight overall gains, so they kept going and building more flows on top of each other. Soon enough, they couldn’t tell which flow was directly responsible for retaining or losing users. Their product became a Rube Goldberg machine spitting out one user at a time.

A Rube Goldberg machine — complicated mechanics for a simple output

Once we simplified the product down to one activation pathway with each flow directly moving a specific product lever, their conversion rates went way up. This was mostly because their product became simpler. It was easier for users to understand and easier for the company to see what was going when users got stuck.

Taking a step back to simplify and focus freed the product to grow.

Let your most engaged users show you the way.

This one may seem obvious, but sometimes users have done the hard work for you. Startups should look at their most engaged users and deeply understand the actions and pathways they took to get there.

Find a cohort of your most engaged users and look backwards. Identify what actions they took the first day, the week, the first month, and subsequent time periods to get to their state. Identify these actions as pivotal moments you want new or casual users to take at each step of the journey. For example, if taking four actions in the first week led users to be more engaged the second week, prioritize these actions for new users in their first week over anything else.

Create engagement loops around these actions to encourage users to continue down the pathway to take another action after completing a previous action. And of course, measure and monitor how many users are taking these actions at each step of the journey to see the holistic engagement picture of your product.

If you know exactly what actions and steps your best users took, you should try to replicate their journey for others.

Defining one ‘Critical User Journey’ for your product is a start and will serve as an early guide to define metrics, clarify what users need to do at every step, and help prioritize the right product levers to create sustainable growth.

When you are ready, this framework can expand to several user journeys that either deepen engagement of existing users or broaden use cases to reach new sets of users.

Welcome Alda and Brett!

I’m pleased to announce that Alda Leu Dennis and Brett Gibson have joined the Initialized Capital team.

A common refrain at our firm is that we’d be a pretty killer startup if we weren’t busy funding and advising tomorrow’s best early stage startups. Our partnership has expertise in almost every essential discipline needed to build high growth startups: engineering, design, product management, operations, legal, finance, communications and marketing.

We’re proud to say Alda and Brett are helping us get both deeper and wider on that front.

Alda Leu Dennis joins us as Partner & COO. She’s bringing decades of sharply honed legal and operating experience to both Initialized and our portfolio companies. She previously was a managing partner at 137 Ventures where she led investments in Planet Labs, Wish and CourseHero. Before that she was COO at Airtime, General Counsel at Founders Fund, Assistant General Counsel at Peter Thiel’s Clarium Capital Management, and practiced as a litigator for IP disputes at WSGR. She graduated from Stanford with bachelors degrees in economics and political science, and a JD from UCLA.

Brett Gibson joins us as a Partner. He’ll be working closely with our portfolio helping them build world-class software teams, as well as build software that supercharges what we can do as a partnership and founder community. He co-founded both blog platforms Posthaven and Posterous (which was acquired by Twitter) and also worked closely with me on the Y Combinator software team, where the two of us built and re-wrote many of the essential software systems that run interviews, applications, events, and the internal alumni social network. He was a founder in the YC S08 batch with Slinkset, a link-sharing community site. Prior to that he cofounded DrawHere, a browser drawing startup acquired by DeviantArt in 2006. He graduated with a BA in philosophy from University of California, Santa Barbara.

Most venture capitalists end up lone-wolfing the way they do their business. We’ve built our team in a way where the opposite is true — when Initialized funds you, you’re not alone. You get the full force of our partnership to help you think through the engineering, design, product, marketing, legal, and strategic challenges that every startup must overcome.

A newly funded Initialized portfolio founder recently told us they got so much out of our team that they wanted to double check that they weren’t going to get a consulting bill. We laughed and said our investment check to them was all the compensation we needed.

In Seattle? Come hear Garry Tan talk about going from a Level 59 Microsoft PM to startup founder, then investor

Space is limited. Please RSVP to [email protected] if you can make it.