Lenny's Podcast: Product | Growth | Career

The hierarchy of engagement | Sarah Tavel (Benchmark, Greylock, Pinterest)

Dec 27, 2023

Sarah Tavel, a General Partner at Benchmark and former product manager at Pinterest, shares her expertise on startup growth. She introduces the Hierarchy of Engagement framework, emphasizing core actions and user retention over vanity metrics. Tavel outlines strategies for marketplace growth, discussing three key vectors and the importance of focusing on niche markets. She highlights real-world examples from Pinterest and other platforms, illustrating how understanding user engagement can lead to sustained success. Tavel's insights provide a valuable roadmap for founders in the dynamic startup landscape.

01:50:54

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Sarah Tavel

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Quick takeaways

Start by focusing on a specific segment or niche when building a marketplace to optimize the user experience and create a strong foundation for growth and expansion.

Once you have achieved product-market fit within your focused market, reach the tipping point where your marketplace gains momentum, accelerates the flywheel, and increases happiness for both buyers and sellers.

After the tipping point, scaling the marketplace becomes easier and more efficient as suppliers and buyers gravitate towards it, leveraging the existing network and ecosystem to accelerate growth.

Having reached dominance, explore opportunities to expand and enter new markets while staying true to the core principles that led to initial success, ensuring sustainable growth and enduring success.

Deep dives

The Hierarchy of Focus: Building a Marketplace

When building a marketplace, it is crucial to start from a focused approach rather than going after a large market. By narrowing your efforts and focusing on a specific segment or niche, you can create a minimum viable product that caters to the needs of a particular group of users. This laser-focused approach allows you to optimize the user experience and create a white-hot center of happy customers. By achieving product-market fit within this focused market, you lay the foundation for future growth and expansion.

Prioritizing Engagement Over Growth Metrics

01:27

The Importance of Dominance in Marketplace Businesses

01:16

Achieving Scale and Happiness in Marketplace Growth

01:37

The potential opportunities of LLMs in expanding supply and improving market experience

01:14

Intro

3min

The Hierarchy of Engagement Framework in Building Products

4min

Defining User Engagement for Growth

19min

Strategies for User Retention and Marketplace Building

28min

Challenges of Marketplace Expansion: The Thumbtack Example

3min

Navigating Marketplace Growth

18min

Navigating Marketplace Dynamics

14min

Unlocking Potential in Niche Markets

17min

Lightning Round: Personal Favorites and Insights

2min

10.

Strengths, Weaknesses, and Life Lessons

4min

Sarah Tavel is a General Partner at Benchmark and sits on the boards of Chainalysis, Hipcamp, Rekki, Cambly, and Medely. She is a founding member of All Raise, the nonprofit organization working to accelerate the success of women in the venture-capital and VC-backed startup ecosystem. Before Benchmark, Sarah was a partner at Greylock Partners. She joined Pinterest in 2012 as their first PM and launched their first search and recommendations features. She also led three acquisitions as she helped the company scale through a period of hypergrowth. In this episode, we discuss:

Sarah’s Hierarchy of Engagement framework for growing a consumer startup

• The three levels of the Hierarchy of Engagement: core action, retention, and self-perpetuation

• The importance of measuring cohorts and maintaining focus on the core action

• Examples of core user actions from Pinterest and YouTube

Sarah’s Hierarchy of Marketplaces framework for building a marketplace startup

• The three vectors of growth for dominating a marketplace

• Advice on “tipping the marketplace” and ultimately dominating the market

• The value of focusing on a constrained market

• How to avoid disruption

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This entire episode is brought to you by Gelt—Redefine your approach to taxes.

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Find the full transcript at: https://www.lennysnewsletter.com/p/the-hierarchy-of-engagement-sarah

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Where to find Sarah Tavel:

• X: https://twitter.com/sarahtavel

• LinkedIn: https://www.linkedin.com/in/sarahtavel/

• Substack: https://www.sarahtavel.com/

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Where to find Lenny:

• Newsletter: https://www.lennysnewsletter.com

• X: https://twitter.com/lennysan

• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/

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In this episode, we cover:

(00:00) Sarah’s background

(03:33) Framework 1: The Hierarchy of Engagement

(06:03) Level 1: Core action

(10:33) Level 2: Retention

(14:00) Level 3: Self-perpetuation

(19:32) The importance of focus

(23:54) The challenge of anonymity

(26:04) Advice for founders who want to increase retention

(29:34) What founders often get wrong

(31:43) Examples of core actions

(37:37) Finding your North Star Metric

(38:12) Who should use the Hierarchy of Engagement framework

(38:54) The Hierarchy of Marketplaces framework

(46:09) Level 1: Focus on a constrained opportunity

(50:19) Sarah’s “happy GMV” and “minimum viable happiness” concepts

(54:47) Thumbtack: a counterexample to this approach

(56:36) Signs you’re ready to move to level 2

(58:06) Level 2: Tipping the marketplace

(01:04:15) Tipping loops

(01:10:53) Not all markets are susceptible to tipping

(01:15:55) The challenge of homogeneity in B2B marketplaces

(01:20:29) Signs you’re tipping successfully

(01:21:43) Level 3: Dominating the market

(01:28:29) The opportunity in underestimated markets

(01:30:11) The challenges of chasing GMV and losing focus

(01:36:36) Recognizing currents and momentum in the market

(01:39:20) You can never rest on your laurels

(01:41:03) How to apply these frameworks outside of marketplaces

(01:42:57) Three ways to find marketplace opportunity

(01:45:10 ) Lightning round

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Referenced:

• Hierarchy of Engagement, Expanded: https://sarahtavel.medium.com/the-hierarchy-of-engagement-expanded-648329d60804

• Pinterest: https://www.pinterest.com/

• Evernote: https://evernote.com/

• Notion: https://www.notion.so/

• Houseparty app: https://en.wikipedia.org/wiki/Houseparty_(app)

• Clubhouse: https://www.clubhouse.com/

• How to price your product | Naomi Ionita (Menlo Ventures): https://www.lennyspodcast.com/how-to-price-your-product-naomi-ionita-menlo-ventures/

• TikTok: https://www.tiktok.com/

• Lessons on building a viral consumer app: The story of Saturn: https://www.lennysnewsletter.com/p/lessons-on-building-a-viral-consumer

• Saturn: https://www.joinsaturn.com/

• What happened to Secret?: https://www.failory.com/cemetery/secret

• How to determine your activation metric: https://www.lennysnewsletter.com/p/how-to-determine-your-activation

• Shishir Mehrotra on LinkedIn: https://www.linkedin.com/in/shishirmehrotra/

• The rituals of great teams | Shishir Mehrotra of Coda, YouTube, Microsoft: https://www.lennyspodcast.com/the-rituals-of-great-teams-shishir-mehrotra-coda-youtube-microsoft/

• Engagement Hierarchy: Core Actions: https://sarahtavel.medium.com/engagement-hierarchy-core-actions-dd4f72042100

• Choosing Your North Star Metric: https://www.lennysnewsletter.com/p/choosing-your-north-star-metric

• Hierarchy of Marketplaces: https://sarahtavel.medium.com/the-hierarchy-of-marketplaces-introduction-and-level-1-983995aa218e

• Mike Williams on LinkedIn: https://www.linkedin.com/in/yoroomie/

• Everything Marketplaces: https://www.everythingmarketplaces.com/

• Fabrice Grinda on LinkedIn: https://www.linkedin.com/in/fabricegrinda/

• OLX: https://www.olx.com/

• DoorDash Loves the ’Burbs as Much as You Do: https://www.wsj.com/articles/doordash-loves-the-burbs-as-much-as-you-do-11605618001

• Thumbtack: https://www.thumbtack.com/

• NPS: https://en.wikipedia.org/wiki/Net_promoter_score

• Sean Ellis on LinkedIn: https://www.linkedin.com/in/seanellis/

• Rekki: https://rekki.com/

• Ronen Givon on LinkedIn: https://www.linkedin.com/in/ronen-givon-535b2514

• Hipcamp: https://www.hipcamp.com/

• Demand driving supply: The little-understood growth loop behind a surprising number of iconic billion-dollar companies: https://www.lennysnewsletter.com/p/demand-driving-supply-marketplaces

• Inside the Revolution at Etsy: https://www.nytimes.com/2017/11/25/business/etsy-josh-silverman.html

• Faire: https://www.faire.com/

• Bill Gurley on LinkedIn: https://www.linkedin.com/in/billgurley/

• Mechanical Turk: https://www.mturk.com/

• Parker Conrad on LinkedIn: https://www.linkedin.com/in/parkerconrad/

• Rippling: https://www.rippling.com/

• “White Space” for Building a Marketplace: How to Find Your Competition’s Vulnerabilities—and Capitalize: https://sarahtavel.medium.com/white-space-for-building-a-marketplace-how-to-find-your-competitions-vulnerabilities-and-79674aa4d399

• Pachinko: https://www.amazon.com/Pachinko-National-Book-Award-Finalist/dp/1455563935

• The Five Temptations of a CEO: https://www.amazon.com/Five-Temptations-CEO-Anniversary-Leadership/dp/0470267585

• The Five Dysfunctions of a Team: A Leadership Fable: https://www.amazon.com/Five-Dysfunctions-Team-Leadership-Fable/dp/0787960756

• Tesla: https://www.tesla.com/

• Reid Hoffman on LinkedIn: https://www.linkedin.com/in/reidhoffman/