(Ep 6) ALPHA -> Driving innovation through rapid customer research 🕵️
Nis Frome | Co-Founder & VP Product
What up founder fam!
Back again with another edition of The Founder Newsletter - this is Episode 6. If you’re new here, my goal is to give you a quick synopsis of what got me thinking from this week’s episode of The Founder Podcast in 5 minutes or less.
If you missed them, check out previous episodes with Cleveland Cookie Dough Company, Thursday Boots, and Loopie (laundry) [full list at the bottom, here’s the homepage]
(But what’s The Founder Podcast?)
The Founder Podcast is a weekly show where I sit down founders and have real-talk chats about the highs and lows of their entrepreneurial journeys. We cover things from where the spark for their idea/company came from and making prototypes to marketing tactics, wellness tips and what’s keeping them up at night.
Imagine if Joe Rogan and Guy Raz had a baby and named it Kallaway 👶.
I’ve found the conversations with founders to be really helpful for motivation, inspiration and generally fascinating to learn more about my favorite brands - I think you might too.
Alright, to get this out of the way, here’s the:
Podcast show link (direct to Apple Podcasts)
Instagram (where I spend way too much time making quotes and audiogram content)
Discount codes from all our founders’ companies
Recommended learning resources from all our founders
(And who are you?)
I’m Kallaway - a future founder trying to get some answers before I jump in the ball pit myself. Let’s get it.
This Week’s Episode (Ep 6) 🕵️
Nis Frome, Co-Founder and VP Product of Alpha.
Listen to the episode on Apple Podcasts, Spotify, or Google
Alpha also runs a podcast called This is Product Management
A few things we talk about…
🎙️ Why creating a product management podcast was critical in Alpha’s growth
💡 How to think about innovation within an organization
🤑 How Alpha thinks about equity as a part of compensation for their employees
🧑🤝🧑 How Alpha thinks about hiring for a startup
👼 Angel investing approach and philosophy
Summary 🔍
What’s Alpha?
Alpha is a platform that enables companies to better understand consumers by collecting rapid feedback (survey-like questions) and testing concepts (e.g., which screen design, messaging or feature do you like better, A B C or D, etc.).
Companies take the information learned through tests/experiments on Alpha and are able to make better product, marketing and innovation decisions. It’s pretty simple - if a company doesn’t know what its consumers want/need, it’s tough to make products/services that they’ll buy.
What’s cool about Alpha is that they’ve completely transformed the way this type of research has been done for last several decades.
Before Alpha, companies would hire a market research agency that would conduct this type of research for them. The company would tell the agency what questions they wanted answered about their customers (e.g., how do my customer preferences break down across different segments, do they like these things, are their preferences changing, etc.) and the agency would spend 4-8 weeks running a detailed study to find the answers. At the end of that 4-8 weeks, they would deliver a polished report to the company with their findings. Turns out, this isn’t the best process for a couple of reasons:
Timing - As the world evolves at exponential speeds, 4-8 weeks is too long to go from having a question to getting an answer. In today’s environment, if a company waited 8 weeks to understand something about their customers, either the customers’ preferences would have changed, the business question would have changed, or both. Businesses need to cut down cycle times - the time it takes to go from question to answer.
Cost - As you can expect, these market research agencies charged a lot for this sort of project. And it makes sense from their perspective, not only do they have to pay for the salaries of all their team members that work on the study, but also, they have to build in costs for overhead (their fancy office and equipment) as well as the costs to pay customers to give them responses, etc. If companies had someone in-house that knew how to conduct research (which many do), why do they need to pay a middleman?
Delivery - Companies don’t care about a pretty PowerPoint deck. What they really care about is getting to the learnings about their customers so they can make better, more informed decisions. The agencies are adding more time and charging more money, to take those raw learnings and dress them up in a fancy report. That just isn’t what the customer wants.
To give the agencies credit, they’re not offering zero value. The personnel working at market research firms typically have more “know-how” when it comes to running a research study, knowing what questions to ask consumers, etc., compared to the in-house team at a company. However, what Alpha hypothesized was that if they could help automate some of that “know-how” through templates/support, drive the cost and time to deliver down, there was a big opportunity.
Today, when you run an Alpha test, you get responses back from up to 300 consumers in just 3 days! That’s apples to oranges compared to the 4-8 weeks of traditional market research firms.
Who’s Nis?
Nis got an early start to the entrepreneurship game.
After starting his first business in web design and marketing when he was 17, he launched a couple of other companies in college and was able secure funding for Hublished, a platform that promised to help content producers market their content through webinars.
Although Hublished in 2013 was too early for the webinar craze we’re experiencing today, he was able to meet his Co-Founder, Thor, and launch Alpha in 2014.
In addition to running Product for Alpha, Nis is an active angel investor and spends his free time flying drones and riding his Peloton.
Nis’s Startup Manifesto 🗣️
What’s a Startup Manifesto?
At the end of every episode, I ask my founder guests the same question:
If you had to write a Startup Manifesto with 5 of the most important key lessons or pitfalls to avoid when starting out, what would they be?
Here’s what Nis had to say:
Startup Manifesto 📜
Invest in validated opportunities, but be patient about experiments. I think a lot of companies get that backwards, they’re not patient about experiments and they invest in those experiments way too early, and then they don’t invest in validated opportunities soon enough. They make it really painful to grow things that just need resources.
Decide what you won’t compete on and call them out explicitly. What are you not competing on? What are you not prioritizing? Who are you not hiring? When you state what you’re not doing, it’s much easier for people to understand. When you say who you are hiring, yeah, you want high performing people - everyone does. But what are the things you don’t want?
Create a culture of incentives and not rules. Rules work at a moment in time and quickly become outdated. Incentives generally transcend time a little better and allow for a lot more experimentation and customization at team levels.
Optimize for customers. I think optimizing on behalf of your customers is the best way to do it. Do what’s right for them and that may mean telling them to use a competitor’s solution.
Take risks, but always stay in the game. Every venture is going to be risk-taking, but to a certain point you need to consolidate your gains and say, “Okay, we need to make sure there’s no single dependency or single risk that could wipe us out of the game.” Bias towards risk taking, but no single game-ending risk, because you can’t come back from that.
Nis’s Thoughts 💭
On competition…
“There’s different schools of thought in terms of competition - obsess over them vs don’t obsess over them, give them the time of day vs don’t.
I am personally of the mindset that information on the internet is free - you’re not gonna hide competition. I’m pretty straightforward and maybe the sales team doesn’t love when I’m on prospective customer calls because I will literally just recommend a different tool if I think it’s a better fit. And sometimes, I’ll recommend another solution and people will insist on buying Alpha and that’s fine as well.
I want a customer who we are the right solution for, there’s good fit, and there’s going to be a good long-term partnership. When you can recommend the competition for different use cases, it’s great, because that’s how you differentiate.
If you get to the point where you say, ‘Wait a minute, I’m recommending the competition too often.’ Great. You should be the first one to know you have a problem, you shouldn’t be the last one to know.”
On angel investing…
“My perspective is informed by the things I’ve seen. My focus is future of work because that’s the area I know - I won’t be investing in CPG or anything like that.
In angel investing, there’s 2 competitive advantages you can have - the first is deal flow. Step 1 of doing angel investing is to know the best and most successful entrepreneurs. Step 2 is to obviously be early, but then to have some sort of contrarian thesis. Otherwise, you’re going to be behind on virtually everything.
I co-invest with a couple buddies. Our thesis is the opposite of automation. We actually think most things will not be automated. We call it ‘scaling artisanal’ - things that don’t look scalable at all, but are interestingly scalable.
Here’s a couple examples:
We invested in a company called RoomService that enables real-time collaboration in any app. That capability of 3 people on a document at the same time in Google Docs is actually really difficult for most companies to build themselves. They built a way to do that really easily.
We also invested in another company that does personalized benefits at scale. It lets individuals customize their own wellness benefits and reads their credit card transactions and reimburses them for qualifiable expenses.
These are all pre-seed - we like to be the first check or we’ll pass.”
Some of the companies Nis is invested in include Funnelguard, JOON, Realm, RoomService, Metapair, Tetra Insights.
On hiring process and applicant criteria…
“I presume that any rockstar is going to have 6 or 7 other opportunities at various stages. For me, the most important thing in interviews is mutual fit, which isn’t just ‘are they a rockstar to us’ but ‘are we/could we be a rockstar to them?’
The sorts of questions I ask and sorts of things I look for are like, “What other opportunities are you looking at? What do you want to be doing in 2-3 years? What sort of company size?
If I get the sense that a candidate is interviewing for a role at Google or Facebook, we’re just not a fit and I’ll tell them that. We’re not a fit because we’re offering a completely different set of opportunities to that. First of all, we’re offering half as much money and second of all, [at Alpha] you’re going to make an impact, you’re going to do a lot of work, you’re going to break code on the site, you’re going to ship bugs to customers and they’re gonna yell at you and you’re going to have to go through that. That’s not going to happen at Google or Facebook. They’re going to do your laundry for you. It’s a completely different world.
I look for what motivates them and try to find a mutual fit.”
What Got Me Thinking From the Episode 🤔
After reflecting on my conversation with Nis, here’s something that really got my wheels spinning:
Angel Investing 👼
Nis was the first founder I’ve interviewed that also doubles as an angel investor. I’ve always been fascinated by individual angel investors and how they evaluate opportunities to invest in.
At a corporate level (VC or PE), there seem to be better systems in place to mitigate huge misses and enable more thorough due diligence at scale. To make the baseball analogy, these companies have more batters on the team which mean they see more pitches, take more at bats, share notes in the dugout, etc. They’re able to more systematically break down a pitcher (investment target) and understand them more quickly.
For an individual, it seems a bit like the wild west. They are the only batter (think the All-Star game) and they only have so much bandwidth to get to know the founders, go through due diligence and evaluate the opportunity. The might only get a couple pitches to figure it out, literally.
That’s why it amazes me when you see some of these current founders that angel invest on the side with such a great hit/miss record. You read Nis’s philosophy above on how he invests, but I think for individual investors that have disproportionate success, it boils down to a couple things (also, this is my opinion off of limited data, but excited to refine as I talk to more founders):
They know what to look for in the founders they invest in - Most of the people I’ve talked to thus far have stated that the founders are one of the biggest reasons for why they invest in a company. They want to know that the founder will be able to steer the ship through hard times and make the critical decisions when needed. If they [the investor] are a current founder, and are angel investing, they’ve likely had some level of success steering the ship for their own company. Who better to evaluate that ability than a founder has been through it themselves? Seems like a logical explanation for why so many VCs are former founders.
They invest in their lane or know someone who’s in the lane they want to invest in. When a founder has spent 5-7 years building a successful company, they are one of the most well-informed thought leaders in that industry. They know the tactics, the strategies, the KPIs, the supply chain, the potential issues, the actual issues, etc. When it comes to doing due diligence, I’d imagine a founder could cut down the time to assess a viable investment by leveraging that knowledge. On the flip the side, they likely do not have that knowledge about almost every other industry unless they have built a company in that space as well, so they probably need to leverage a friend or someone else in their network to help them understand it. Per Nis’s commentary, he’s used this logic to help narrow the focus of the majority of his angel investments.
They have less cash to deploy, so need to be more selective with their opportunities. Unless a founder has had a big exit event in the past, they don’t all have unlimited capital. Compared to the VC and PE shops (for which they are legally mandated to deploy their capital in a certain time period), individual investors need to be more selective in where they place their bets because they simply have less chips. My hypothesis is that this leads to a higher floor of investment criteria and helps eliminate more misses.
They have strong deal flow. Per Nis’s point above, angel investors live and die by the deal flow they see. If they are well connected and have a strong network of former founders, they are likely to see a lot of deals and have better quality investment opportunities. That means less wading through the muck and more high quality leads.
I’m excited to hone these hypotheses as I talk to more founders. What are your thoughts?
Wrapping it Up 📕
I hope you found this semi-interesting and inspiring/helpful in any way. If so and you want to help support The Founder, here’s a couple things that would be valuable to me and the show:
If you enjoyed this post, share it with a friend you think is on the same wavelength. Can’t hurt and would help spread the word!
If you haven’t already, subscribe to the newsletter so you can get them delivered to your inbox each week!
Listen to the full podcast episode with Nis on Apple or Spotify. Or, if you don’t have an hour to listen to the full episode, pick a couple topics and skim through (topic time codes in the show notes).
If you’re feeling super giving:
Go to the show on Apple Podcasts, subscribe, give a 5-star rating and a couple sentence positive review - https://apple.co/2VCosu6
Give our Instagram a follow - I promise you won’t regret it!
Till next time ✌️
Kallaway