Many people in Silicon Valley would pay $10,000 to sit down and talk business with the extraordinary David Sacks, one of the greatest entrepreneurs of all time.
He is the founder and CEO of Yammer, which was sold to Microsoft for a whopping $1.2 billion.
He was also part of the original PayPal team and was an angel investor in Facebook, Airbnb and SpaceX.
Now, he’s having incredible success in VC at Craft Ventures. And as a podcaster on the show “All In.”
David has been on my podcast a few times and shared with me one way founders can go viral is to focus on their product hook rather than their value proposition.
So the strength of the hook – or viral attention – your business initially gets is a good barometer for how successful it will be.
David’s insights on how to recognize, and create, a successful business are invaluable.
Just like a hit song needs a catchy chorus (Hey! Ho! Go!), your product needs a hook if you want to build an extraordinary company.
Without a hook, no one will engage with your product and potential customers won’t have the opportunity to discover the value it brings.
When David is considering whether to invest in a startup, the first thing he does is look for the product hook: a simple, repeatable transaction, flow, or behavior.
Think of it like the Google search box, the Twitter status update, or sending a friend request on Facebook.
The simpler and more discreet, the better.
Many founders add a lot of complexity too soon.
Think about additional features, extra services, premium options.
But the problem with complicating the hook too early is that users need to commit to the product before they’re willing to grow with it.
Before launching Yammer, David had been mulling over the idea of creating a corporate social network for a year.
But it wasn’t until Twitter launched that he realized what the hook needed to be: the status update, but for the workplace.
Once he figured out what to focus on for the product—and, in turn, how to get users on board—he launched Yammer.
At the time, “freemium” in the enterprise space was still fairly new as a hook.
And he is a pioneer because he used it expertly.
But it is not enough to have an attractive product.
The really big companies have a distribution trick, too.
Something that allows them to grow at an explosive rate.
David has done a great job managing explosive distribution with many companies.
At PayPal, for example, it embedded PayPal logos in eBay auctions to accelerate growth.
And money could be owed to someone who didn’t have a PayPal account, which attracted new users.
With Yammer, you allowed individuals to sign up directly, rather than asking permission from your company’s IT department.
Electric scooter startup Bird was the first check David’s venture fund wrote, and it also had a great distribution strategy.
When people walked down the street or drove in their cars, they saw these scooters speeding by and were curious.
My friend, John Bielenberg, the legendary designer, would call this layout trick:
«Find the dog with the hat».
If we walk down the street, there are a thousand normal things that we don’t notice: signs, pedestrians, cars.
So when there’s something unusual, like a dog wearing a hat, people naturally notice.
The Bird scooters placed all over the sidewalks of a city are a dog wearing a hat.
David recognized the genius of allowing anyone with a smartphone to scan the QR code and easily become a cyclist.
And now Bird is skyrocketing: it’s the fastest-growing unicorn in history.
Many founders think that good marketing is the key to making a product massively successful.
But making your business go viral requires more than just the right story—you have to carefully build your business from the ground up and design in plenty of opportunities for virality.
David has a saying:
«Architecture is destiny».
In other words, the way you structure your product determines how it can grow, and it’s much easier to get it right from the start than to change the project later.
Because Yammer strategically designed its software to be cloud-based from the start, the product outperformed other similar companies that later had to correct course.
Bird’s QR code is another example of deliberate design and viral engineering.
He was a fundamental part of the company from the beginning.
As a VC, David has realized that most companies either get off the ground quickly or they don’t get off the ground.
There is very little or nothing in between.
PayPal and Yammer were less than four years old when they were sold to eBay and Microsoft, respectively.
There is no simple recipe for creating a thriving business, but designing your product and distribution model with the goal of making it go viral will set you up for success.
