#54 - Growth Office Hours: Round 2

**Craig Cannon** (0:00)
Hey, this is Craig Cannon, and you're listening to Y Combinator's Podcast. Today's episode is with Anu Hariharan and Gustaf Alstromer.
Anu and Gustaf are both partners here at YC, and they came in for round two of Growth Office Hours, where they answered questions from you guys on Twitter. All right, here we go. So let's start with, when should you build a growth team? What do you think?

**Anu Hariharan** (0:23)
I think most companies think about building a growth team when they have strong retention.
We touched upon this in the last Office Hours as well. But when exactly is that, right? For many companies, it's roughly when you have maybe 15 to 20 people in your team, at least two product managers. And if you have figured out that you have strong product market fit with retention, then the third PM that you bring on the team might actually be a growth PM. And so that may be the time when you start investing in a growth team. But it's never too late to invest in a growth team, but too often the mistake I've seen most companies in Silicon Valley do is they actually wait too long. But it's not like the consequences are that negative as long as you realize that the team is actually helping and you have formed the team and you have put them in place in the right direction. The companies that have actually done this early have benefited a lot from it. So Slack, to give you an example, was actually one of the very few companies that hired a growth PM 14 months after launch.
And I think it was roughly 1 million DAUs, so fairly early in its evolution. But it really helped, having a growth team in place helped accelerate the entire company towards scaling it from 1 million to 5 million DAUs in less than two years, which is no easy feat. So the sooner you invest, the more benefits you get, but the most important thing is you should know when you're ready, and for that, you need to look at retention.

**Craig Cannon** (2:00)
Okay, would you agree with that?

**Gustaf Alstromer** (2:01)
Yeah, I agree. I think the biggest mistakes people make is that they don't look at retention, and they don't really know when they have a product market fit, and they fundamentally haven't built something that people keep using on and on again. And that's not the right time to build a growth team. You still have to figure out why is the product not good enough, why is retention so low, why is the decline to zero effectively?
Once you figure that out, growth team can help you with many things, but there are many specific funnels that drives towards your product value that you can accelerate. And I've seen pretty much every single step you can make a massive increase on if you just have this laser focus that a growth team can have.

**Craig Cannon** (2:40)
Okay, and do you have benchmark retention numbers that you advise people to look for at the, yeah?

**Anu Hariharan** (2:45)
Yeah, I mean, I think that's another mistake companies do, which is they don't really benchmark retention to the peers in their space or vertical. And it's extremely important to do that. So to give you some examples, for example, even if you're building a social network, you should have long-term retention of 50% or more. Because if you're building a messenger, someone should be checking in daily. If you're something like a Facebook, people still, 50% of them still log in daily.
But if you're building a social app that has less than 20% retention in month six or month 12, that's worrisome, right? So you should really pay attention to what your sort of space or vertical is in. Now, if you're an on-demand delivery company, the median retention long-term is usually 20 or 30%. So they don't have to have 50 or 60%.
But for them, 20 to 30% means it's probably good retention. The general rule of thumb we often tell companies is if you have anything less than 20%, like you've got to start paying attention, no matter what space you're in. So there, you have some sort of a benchmark, depending on wherever you are, you can sort of pay attention to, is this really weak retention or not? But beyond that, you have to start paying attention to what space you're in. And sometimes the periods also differ. So for on-demand delivery companies, we actually look at it depending on food or ride sharing versus grocery, you can actually do it weekly versus monthly. You eat food weekly, you tend to order weekly.