Lenny's Podcast: Product | Growth | Career

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

Dec 27, 2023

50:50:54

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Sarah Tavel, General Partner at Benchmark, discusses her Hierarchy of Engagement framework for growing a consumer startup and her Hierarchy of Marketplaces framework for building a marketplace startup. She highlights the importance of measuring cohorts, focusing on core actions, and dominating the market. Tavel provides examples of core user actions from Pinterest and YouTube, and emphasizes the value of starting in underestimated markets. Plus, a lightning round of questions and answers.

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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

01:01:27

Marketplace Building Strategy: The Power of Focus

01:01:27

Layer 3 of the engagement hierarchy: Make a Product Self-Perpetuating

00:59

Increasing Retention for Consumer Products

01:01:18

Introduction

3min

The Hierarchy of Engagement: Focusing on Core Actions for Successful Consumer Social Products

4min

Defining Active Users and Core Actions

22min

Finding the Core User Action

24min

Building a Marketplace and Cornering the Buy Side

3min

Creating a White Hot Center

14min

Building a Successful Marketplace

18min

The Importance of Starting in Underestimated Markets

17min

A Lightning Round of Questions and Answers

2min

10.

Convenience of Tesla Keys, Strengths and Weaknesses, and Rugby Camaraderie

2min

11.

Connecting with the Guest and Their Interests

2min

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.lennyspodcast.com/the-hierarchy-of-engagement-sarah-tavel-benchmark-greylock-pinterest/

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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/