a16z Podcast: Growth in Turbulent Times

Andrew Chen, Brian Balfour, and Lauren Murrow

In normal times, every company operates against some hypothetical growth model—a data-driven framework that describes how your product grows and how you acquire new users. These, of course, are not normal times. In the fallout from the pandemic, most founders and CEOs are in the process of completely revamping their growth models from the bottom up amid new and unpredictable consumer behavior.

This episode explores how to think about growth in turbulent times, according to two growth experts: a16z general partner Andrew Chen, who previously led the growth team at Uber, and Brian Balfour, formerly the VP of Growth at HubSpot, now the founder and CEO of Reforge, a masterclass in growth strategies (in conversation with host Lauren Murrow).


Hi, and welcome to the a16z podcast. I’m Lauren Murrow. In normal times, every company operates against some hypothetical growth model—a data-driven framework that describes how your product grows and how you acquire new users. These, of course, are not normal times. In the fallout from the pandemic, most founders and CEOs are in the process of completely revamping their growth models from the bottom up amid new and unpredictable consumer behavior. 

This episode explores how to think about growth in turbulent times, according two growth experts: a16z general partner Andrew Chen, who previously led the growth team at Uber, and Brian Balfour, formerly the VP of Growth at HubSpot, now the founder and CEO of Reforge, a masterclass in growth strategies. 

The discussion spans four sections: first, how to reassess your existing growth model, particularly when, as Brian says, the data is “completely messed”; next, we drill down into strategy and tactics for surviving the current crisis and talk about how founders can pursue growth even in the midst of widespread uncertainty and cutbacks. Third, we’ll look ahead to discuss scenario planning and how leaders can forge a path forward. Finally, we’ll zoom out and assess the big picture: how various categories of company may be impacted long-term, how this crisis compares to 2008 (and what that means for early-stage founders), and the industries and business models that are now prime for growth. 
We begin by describing a typical a growth model and discuss how that fundamentally drives a company’s business strategy. 
Brian: When we think about a growth model, the question is: how does one cohort of users lead to another cohort of users? And how are you answering that question in a way that describes not only how you acquire users, but the actions that they take in your product, what those actions generate, and how you reinvest whatever that output is back into generating new and returning users.

So within this model, you have hypotheses around the who, the what, and the why. Who are doing these actions, what are the actions they are doing, and why they are doing them? These are all fundamental hypotheses, whether you have them written down or not.

Andrew: I think a very, very simple, simple shortcut version of this might be something like: I find Yelp because I search for best dumplings in San Francisco, and then a Yelp page comes up. I’m excited about Yelp. At some point, some percentage of those users end up actually then leaving reviews. And then those reviews get indexed by Google, and then they end up in Google’s listings, and then more people find it. So that’s how one group of users might indirectly then lead to another group of users. Versus something like LinkedIn, which is focused on getting people to invite their colleagues and people that they’re meeting through professional networking. It’s very focused around getting you to send invites, and that’s a very different type of a loop.

It turns out that there are many, many, many flavors of this. This is the verbal version of it. When you go deeper, you’re able to translate this set of hypotheses and ideas into spreadsheets and numerical models for what’s actually happening in the business and understand the flows.

Brian: Right. You’re operating against this hypothesis, right? That hypothesis gets stronger over time as you run experiments, you validate them, you see the data and that data feeds the quantitative version of this. In this environment, a lot of those hypotheses are thrown out the window and what we validated in the past might have changed. As a result, you might have tailwinds or headwinds. The quantitative variables behind these things either gets stronger or they get worse. But the only way that you actually get a decent picture of that is by going through each one of these individual steps and asking those questions.

Lauren: Once you do drill down into a spreadsheet, what kind of data are you tracking? What are those metrics?

Andrew: If you are a travel company right now, I think you’re seeing very specific metrics dropping. If you start at the end of the funnel, what you’re seeing is: number one, there’s going to be fewer people actually booking and converting. If you’re Expedia or Booking, regardless of whether or not people are looking at flights, my guess is the percentage of people who look up a flight versus actually book the flight, that conversion rate is probably down. You probably have folks that end up doing more research because they’re not quite sure when to fly or they feel like, “I have to check the state department website to see where I can actually go.” And then all the way to the demands question, of how many people are in that activity. Versus, I would guess that if you’re inside of one of these collaboration tools, every user is going to be sending more invites to other users because we’re all living in Zoom right now. As a result of that, all of those metrics go up.

What ends up happening is if you think about the verbal version of the growth model as a series of events that chain together, then what you start to realize is, wow, like there are going to be certain steps that are going to go way, way, way up, that are then going to cause the entire growth model to really radically amplify. Or there’s going to be ones that dramatically tamp things down. And if step one or two of the growth model start hitting a lot of friction, then of course it’s just going to get harder and harder, because each group of users is going to produce fewer and fewer users from an acquisition standpoint. Same thing for engagement, as well.

Brian: There’s a couple things about this, though. One is that I’ve seen a ton of categorical data out there. People saying, “This is what’s happening to B2B SaaS or this is what’s happening to this category.” And I think, specifically for founders who are probably listening to this, the category data is interesting but it’s actually not that helpful.

Everybody sits on a spectrum of people who are experiencing extreme headwinds—ClassPass, for example, who’s probably seen 90 percent of their business disappear overnight—and people who are seeing extreme tailwinds. If you’re sitting on one of those spectrums, your job is easier. The data’s clear. It’s immediate of what is happening and what the net result is. But the founders who are in the middle of the spectrum have the hard job. You actually have to look at each one of these individual steps to understand what might be changing and what might be happening to build specific hypotheses of how your company should act in response.

Lauren: Most companies will need to go to basics and reassess their businesses from the bottom up. So if you are a travel company or an in-person fitness company, how do you go about completely revamping and reevaluating your growth model? How can founders be proactive rather than reactive?

Brian: I know it’s like an old Silicon Valley message, talk to your customers, but honestly this is one of those times where you need to be talking to at least a couple customers a couple times a day. Founders, CEOs, executives, the leaders of the team, because the only way that you’re really going to be proactive is going to get a sense for what is going on in your customers’ lives and how things are changing and what questions they’re asking, and how their behaviors are changing. And by the time that comes through the data, it’s going to probably be too late. So if you want to be proactive, you have to go back and rely on a little bit of founder intuition…and the way that you build that founder intuition is by having lots and lots of conversations, very close to it.

Andrew: I think a really big thing strategically that’s changing right now is there’s a whole discussion around what should the output goal even be, at the moment. I think this is where the growth model overlays with some of the financials for the company, as well. We’ve had several years where it’s all been about top-line growth and you have a lot of companies that are looking for 2X, 3X, 5X, year-over-year growth. And then the growth model ends up needing to support that.

But I think the whole industry is saying, “Okay, maybe top-line growth of that type of several hundred percentage points annually is actually not the focus, because everything’s so uncertain.” We have to watch our cash. So what I’ve seen in the conversations I’ve been in, then, is your growth models are actually as much about how do you grow efficiently from a cash standpoint.

And so, if your whole thing is about: okay, we need 5X growth and that means that people need to invite each other at a certain rate—and if they’re not, then maybe you need to make that up with paid marketing spend; with financial incentives for your users to use the product, whether that’s in the form of free subscriptions or in the form of a lower price point; or, if you’re a marketplace company, you might give people discounts that are dropped into all the consumers’ accounts.

A lot of what Brian and I have been talking about is oriented around product-driven growth, where you’re getting users for free because they’re engaging what you’re doing. You’re potentially evolving your product over time such that you’re able to tap into higher engagement.

Lauren: That’s an interesting point, that this may lead to a broader shift toward product-driven growth, as opposed to some of the previous strategies that we relied upon.

Brian: That shift has been happening for a while, and I think this just probably accelerates it. And so, we’ve seen a product-led growth motion certainly in the B2B space happening slowly. And a lot of companies that don’t have that motion are now like, “Hey, should we develop a free use case for this product?” We know that that mental shift is happening. I also think it probably accelerates a ton of mistakes in this area.

Lauren: How so?

Brian: Because companies that didn’t previously have a free use-case of their product typically think that they can get to a free use-case just by taking their existing product and removing a couple things and turning it free. That’s not how it happens. You build very intentionally for a product-led motion: how you build that first user experience in activation, how it spreads within the organizations, and how you detect the signals that they’re ready to upgrade. All of those things don’t happen overnight or by just removing a couple features of your product and reducing the price.

Andrew: I think those are maybe two distinct things. One is readjusting the output metrics—the extrications that you have for how you’re going to grow—and second is how do you evolve your growth model to tap into the kind of engagement that’s working right now.

I’ll give a quick example: Lunchclub. The previous model was that each week they would set you up in a professional networking context with someone else in the industry, and they would get your profile and what your goals are and match you with somebody really interesting. They give you a time slot, then you meet for coffee. Well, all of a sudden, you can’t do that anymore. But what you can do is you can shift all of those meetings from in-real-life coffee meetings to virtual, which is exactly what they’ve done. You’ve now completely pivoted your growth model from something that encourages real-life interaction to something that’s virtual, which you can do many more of, and in many ways you’re going to be less flaky and you’re going to have better experiences, which is exactly what they’ve seen. And by tapping into that, you actually can get much better growth.

Lauren: But I think one of the challenges is that consumer behaviors are so unpredictable right now. You can have a hypothesis about how changing that model is going to impact the bottom line, But for many businesses, perhaps you’re flying blind until you see if it works or if it doesn’t.

Brian: To the point about unpredictably, if you’re facing headwinds or you’re facing some kind of friction around people converting or people paying, this is the time to basically fill the lakes and dam up the lakes.

Christopher O’Donnell, who’s now the chief product officer at HubSpot, developed this analogy. As we talked about our growth model, he described parts of the user journey that are lakes, and parts of the journey that are rivers. He’s talking about loops and funnels. What he means is there are parts of the user journey where the user gets in there, they’re engaged, they’re kind of hanging out for a while. And at some point, there’s a part in that journey where they’re showing some level of intent that they’re ready to move to the next stage. So you put them through a conversion funnel, let’s say, like a signup, and then they get into another lake.

If people just aren’t in the mindset to convert and you’re seeing headwinds, then the best thing you can do is build up this stored potential that you might be able to convert later, and that’s really where to start to invest.

An example of this that you see a lot of companies doing is like Loom. Loom is this asynchronous video messaging product. So rather than writing a long email, I can quickly record a video and send it to somebody. A method that they went down is that they completely opened up limitations on their free plan and reduced their paid plan by 50 percent. So what are they doing here, in the context of their growth model? Well, a core part of their growth model is this loop where somebody records a video, they share that video with somebody. Somebody sees that video, signs up for Loom, and then they start recording videos on Loom, as well. So what they’ve done is they’ve basically removed all the friction possible from that loop by opening up their free plan and just allowing that loop to spin as much as possible, filling up the lake. And at some point, this pool of people will have more intent to convert or more ability to pay for the product. And so, what they’re really doing is they’re building up stored monetization potential.

There are a number of companies that have taken moves to do this.  Even Peloton did this by offering, I think 90 days free on their product. You see companies both with headwinds and tailwinds doing that, and that’s because this has been an injection of weird customer behavior. And so the question is: how do you respond to that customer behavior? You can either ride the tailwinds or fight the headwinds by filling your lakes and storing that monetization potential for a later date.

Andrew: Why Loom and Zoom and Clubhouse and some of the other new social experiences benefit is that you can use the current boom in engagement and viral growth to build out your network. Then what ends up happening is you get this density, you get all these network effects, you get increased engagement, etc. And that creates this really interesting zero-to-one period of being able to launch into potentially a much bigger network. Even when everything goes back to normal, you can perpetuate this network that you’ve already built up during this time.

Brian: There’s a question here for the super-early-stage startups, those that are experiencing tailwinds: is the tailwind the end, or is it a means to an end? What I mean by that is, let’s say I’m an ed-tech startup that’s focused on some kind of product for home schooling. I’m probably seeing a really big surge right now because parents are just like, “What the hell do I do with the kids?!”  They’re probably seeing a massive surge. That’s probably going to give them a huge injection of fuel right away, but what’s permanent, what’s not permanent?

And so, for companies in situations like that, I’d be thinking about, okay, how do I use this time as like a means to an end? Meaning, if I don’t believe that this behavior change is permanent, how do I like use this as a jumping off point? At some point I’m going to have to transition them to some use-case or change their mindset of how they view this product to something that’s more permanent and more long-term. How do I use this as acceleration fuel? That transition is going to be really key. And those that view this as an end, they’re going to experience massive churn at some point. And so, planning against that and using this as a launching platform, I think, is a big question for startups.

Lauren: I’d like to shift and talk about growth in a downturn—it’s kind of the elephant in the room. The very concept of growth can seem aspirational to some at the moment. Many are having cutbacks and cash flow issues. How do you balance necessary cutbacks with growth?

Andrew: I think the very simplest things to do tend to be: okay, we had a growth model where paid marketing was part of the input. And it turns out that we need to go reevaluate all of it because it no longer converts. Whatever CAC LTV assumptions that we had potentially no longer hold. In a lot of cases, when the companies are facing headwinds, things like that are the first things that get cut.

And that easy evolution is taking some of the channels that potentially no longer work or some components of the growth model that no longer work, and cutting them and saying, “Look, if it turns out that this period is longer than six months, it’s better to get rid of this, and then we can rebuild the function later,” whether that’s from an expertise or infrastructure perspective. And that’s a little bit more evolutionary.

Brian: I want to empathize with the other founders out there, which is I don’t think you ever truly know 100 percent right now if you’re cutting enough versus too much.

And so this is the really hard thing, where you’re essentially taking bets on certain things. When you frame it as: “here’s what we’re taking a bet on,” I think the conversation changes, because you can start to talk about confidence of these bets and different actions. But the things that you should probably be cutting if you’re trying to be really conservative are a lot of the super-specialized functions. And retaining the people that help you adapt and move quickly, the more versatile people, internally. But if you’re starting to cut into the people that allow you to adapt and move, you’re probably only doing that if you’re in a super cash-constrained position and you 100 percent have to.

Lauren: How should companies think about growth if they’re cash-constrained?

Andrew: You end up needing to decide what is considered a specialization. What’s considered optional versus what’s the core of the business? And I think that could be a refocusing strategy discussion for the whole company. I have now had multiple conversations with founders where they do a cut and the team needs to make tougher decisions, more focused decisions, and actually everyone feels really good as a result. Your leaders in the company, your high-performers, they’re going to know if your growth model’s not working, all your dashboards are going haywire, and you’re not making the hard decisions. That’s a red flag for a lot of people on the team. Being early to recognize that and confronting that and making the right decisions, I think, will garner respect from everyone around you, even though it’s obviously an enormously, enormously tough decision that we would rather not make.

Brian: Part of that, too, is writing down the things you’re taking bets on, so that in 30 days you can continually go back to that and be like, “Okay, we made these choices because…do we have any data that points in the direction? Are we right or wrong about these things?”

At least at Reforge, a lot of our revenue comes from company education budgets. And so we went on a big research project to try to understand what was happening with those budgets across different segments of our customers. We opened up all of that data to our team. We said, “Here’s what we think and how we interpret the data. Here’s what we’re going to take the bets on and here’s the resulting things, and we’re going to check back in on this in 30 days.” And so, we enumerated that very clearly to the team.

I think you need to make it super-clear to the company the operational changes that you’re making. You typically have to have the more directive leadership style, versus curating things from the bottom up, in order to move quickly. But if you change that style and you need to actually tell the team, “Hey, we are changing to this style because…” so that they understand that, “Hey, this probably isn’t a permanent way of operating, but it’s necessary and at some point we’ll get back to some of these other methods.”

Lauren: So in good times, many startups take this iterative approach: they run various experiments as they pursue product market fit. I’ve heard a bit from both of you on one hand, saying you really have to cut that out right now and buckle down to your core strategy—or that you need to shift and continue to run these experiments and be reactive and maybe a little quicker to change than you might under ordinary circumstances. How do you think about experiments at a time like this, when we’re in a lot of economic uncertainty?

Brian: It depends on what type of experiment we’re talking about. If we’re talking about an experiment in the context of, “I’m actually running some type of A/B multi-variate task to try to get statistical significance” and stuff like that, I would be throwing them out the window because the data’s completely messed at this point. And whatever results you’re getting isn’t going to be a core learning that’s predictive of the future. So any of those types of experiments, you have to be thinking about running them in parts of the product where you have really high volume that you’re going to get results very quickly, versus those that are going to take weeks to get data and start to influence a core product change that might last for months or years. Those are probably bad experiments to be running right now, because you’re going to be acting on either bad data or bad learnings or on a time window that doesn’t really matter.

But if we’re talking about experiments in the sense of: “I’m trying things and I’m trying to gauge the reaction, either qualitatively or anecdotally,” those are a different set of experiments. What you’re really looking for is an obvious reaction that something is working or not working, versus statistically significant data. I think the question there is, how much of your team’s time should be spent on things that are reactive to the current environment, versus trying to invest resources that feed the business in the long term.

Andrew: A/B tasks and experiments, it’s a context-dependent tool. And A/B tasks are often the most useful for refining something. They’re often very, very good for optimization problems. And so, if you already know exactly the thing that you want, a specific output—you want an invite screen to produce a certain thing, you want a payment screen to have a certain conversion rate—A/B tests are amazing at that. What A/B tests are not very good at are, “well, our product no longer works anymore and we’ve lost product market fit, and who knows if it’ll ever return.” And at that point, I think then you’re basically back to a zero-to-one product market fit search. You’re almost coming up with a new product. And hopefully you can reuse a bunch of what you’ve previously built, but I think in many cases there’s a bunch of companies out there in some of the headwind categories that need to be thinking about pivoting their core product idea.

Lauren: What is your advice to founders? Do you plan to endure or do you plan to adapt?

Brian: I think for most founders, they’re probably first erring on the conservative side of things, shifting back to the endure end of the spectrum, and will then shift into an adapt plan at a quicker rate. That’s what I see most founders doing.

But I also see founders who are in an amazing cash position, even though they’re not experiencing massive tailwinds, doing very aggressive things. Guillaume Cabane, who’s the former VP of Growth at Segment and Drift, came up with this with a lot of his companies: for those in the cash position, they’ve actually been creating a list of all the companies using their competitors, going to them and offering them to switch to their product for free for a year. It’s a very aggressive move that some people might have the option to take, even though they’re not experiencing very obvious tailwinds in this environment. The question is, if you’re in that middle part of the spectrum, what choice do you want to take a bet on?

Andrew: I think ultimately, the act of entrepreneurship is really rooted in optimism. Ultimately, the entrepreneurs out there are going to try completely new things, they are basically going to start new companies, using the resources and the employees that they have, and I’m sure we’re going to see a ton of success cases there. We’re also going to see a bunch of folks that singularly held to a vision and cut the costs that they needed to, and they’ll see the other side of that. And I think ultimately, both strategies can work.

Lauren: I’d like to look ahead to the future, for those founders who are attempting to scenario plan. Where should a founder begin when they’re trying to map out a path forward?

Andrew: As a founder in these really, really uncertain times, you end up needing to be able to keep two complete extremes in your head at the same time. In one extreme, you basically have to say, “The whole ecosystem’s going to fall apart. We’re not going to book any revenue for the next 12 months. And then when things come back, it’s only going to come back at 50 percent, and then after year three, maybe it’ll come back a little bit more.” You need to be really, really conservative about that, like, “Okay, we have to plan around the wheels completely coming off and just complete disaster scenario.” And you have to have that in your brain, which is terrifying because it’s many, many, many multiples of anything that you would ever typically plan…and that’s why we have companies that are basically going into hibernation and thinking about waiting all of this out. That’s one end of the spectrum.

In the same way, you also have to have enough resourcing and optimism and leadership and vision to think, “No, we’re going to get out of this, and this is why this is going to be a huge business in 2021 or 2022” on the other side of this. I think you need to keep both those extremes in mind, because if you only have one, if you only go the conservative route, then what you’re telling the team and what you’re telling your investors is, “We’re not going to do anything for the rest of the year,” and you don’t want that. That’s not an exciting vision for your top people to work in. Then they’ll go somewhere like B2B collaboration tools or they’ll go into games where things are growing really fast, or groceries.

On the other hand, if you’re overly optimistic, you’re creating existential risk where if things don’t come back on the timeframe that you’re predicting then, all of a sudden, you’re gambling the entire fate of your company on that, as well. In a lot of the startup conversations I’ve been having, if you lean too far that way, it doesn’t resonate with people. Because if something feels like it’s overly promising, no one’s going to believe it. It’s not a great look, from the leadership standpoint. Keeping both of those in your head is very, very hard, but I think you have to be able to do it.

Brian: Our monkey brains are not designed to balance those things at the same time. We are not built for that.

At least what we’ve done at Reforge is we’ve looked at our scenarios on a wider range of outcomes than we would typically consider. Everything from a 20 percent cut in demand down to an 80 percent cut in demand over a wider range of time periods. And it’s less likely that those extremes happen, but they’re more likely than in typical situations. So that’s why you have to account for those. And then, as a company you need to decide where on that spectrum of wide outcomes that you really want to sit. And this really depends on where your cash position is, what the status of your investors is that, and how easy it is to go out and generate more cash if one of the extremes happens.

Andrew: I think we would all love to believe that this is this temporary thing. The context there is that it is very likely that there’ll be a cascade such that we’re actually at the very, very, very beginning of a 20- to 30-month market downturn. That feels very plausible to me, that that’s what’s going to happen.

And so, if you start thinking about things in that timeframe, 20 to 30 months, that means that every startup has to think not only about the potential impact on their next fundraise. It used to be that our entire startup ecosystem was all about: you raise money for the next 18 months, because you know that there’s another round down the path. So now, all of a sudden, if you’re thinking 20 to 30 months, then well, the next round might be really hard to do. But also, the next next round might be really hard to do. And so then the discussion becomes: as an ecosystem, what becomes attractive in this kind of environment?

Lauren: Various categories of company are obviously feeling the impact in different ways and on different timelines. How do your planning scenarios differ for different types of businesses?

Andrew: One of the educational and illuminating things that we’ve seen over the last couple weeks is there are very clear industries and product categories that are benefiting from everybody sheltering in place, and then there are clear ones that are not.

If you’re in entertainment, you’re in games, you’re doing something in video, you’re doing something in workplace collaboration, all of those have obviously benefited. You’re seeing across-the-board higher conversion rates, more time in the apps, and as a result, more acquisition. It’s half the price right now to acquire a user for one of these entertainment products.

Pretty much any product that’s subscription and has really high retention on the subscription side is going to be an interesting state, because you can maybe acquire a lot of these customers for cheaper through paid marketing, through more engagement. And if you’re able to then retain a really high degree of renewal after this, then those users will probably keep forever. I’m not surprised that Netflix and Spotify, but also YouTube subscription products and even Fortnight Battle Passes stand to benefit because they can continue to retain these folks over the course of multiple years.

The question then becomes, how do they persist the advantage that they’re getting into the future, and what types of companies are actually able to get that? And I think I would point to a couple things. Number one, growth models that are just extremely efficient and don’t require a lot of dollars in order to create growth. A really good example that we’ve seen is that there are a ton of companies that are building on Zoom as a platform now. There’s a bunch of Zoom dating apps. Run the World, is a conference product that also has integrated video. And so, you look at a lot of products like that and you say, “Okay, wow, these could grow really efficiently. They could take advantage of the current time.”

Lauren: How do you think that these broader societal shifts are impacting growth? Shelter in place, work from home, is that going to have a long-term impact on how companies are going to need to think about growth?

Andrew: I think it is a really, really big assumption even 12 months from now that things are going to go back to normal. Maybe a bunch of consumer behaviors are actually going to fundamentally change as a result of this. Maybe, for example, now that everyone’s used to working from home, all of a sudden a bunch of products that were oriented around that will gain, and a bunch of products that were oriented around in-real-life workplace settings will be less attractive. And that impact may span multiple years. If you start thinking about it that way then you may have to fundamentally evolve the value proposition of your product in a different direction. In the Lunchclub case, that’s one example where I don’t know that that company is going to want to go back to in-real-life meetings after this, because it just turns out that maybe virtual is better, right?

Similarly, Virtual Kitchen Company operates a network of dark kitchens. What they do is sign up local restaurant brands. And once these restaurant brands start doing delivery and they see the value proposition is really, really strong, then do they go back to saying, “Actually, no delivery, we just want to do our brick and mortar thing.” Maybe not. I think that there are huge opportunities. Potentially, we’re pulling forward a lot of the behaviors that were going to happen anyway, but we’re just pulling them ahead five years or something. And then I think there’s going to be things where it’ll happen this way, but it’ll be in the negative, as well.

Brian: I go back and forth on this. I go back and forth on how permanent some of these behavior changes are and how strong our basic human motivations and needs are and how that can just pull us back to the norm. I do think it’s probably accelerated our comfortableness with doing some things online. I think people who have been sitting in offices for 20 years or their entire career were like, “I could never do remote work,” because they’ve never done it, right? But when you’re forced into certain situations and actually do those things, a lot of times you realize, “Oh, okay, this isn’t actually as bad as I thought it would be.”

Andrew: In terms of the growth function, I think that a lot of what Brian and I have worked on over the years has been this emergence of all of these growth teams inside of the top tech companies. And a lot of the reason, foundationally, this occurred was because a lot of the traditional “brand marketing tactics” starting back in the ’90s of buying TV commercials and doing events didn’t seem appropriate for the new generation of consumer companies. Instead, it ended up being these interdisciplinary teams inside of companies that tried to solve tricky problems around: how do you get your product to grow itself?

I do think that what we will for sure see in these types of market downturns is there almost always a bit advertising pullback. We certainly see that if you’re part of the travel industry, those folks are cutting their marketing budgets in a big way. And if you look at the earnings stats from the Googles and other folks they’re saying, “Hey, the next couple quarters may be rough as far as advertising goes.” If you have that and you’re basically like, “Okay, you can no longer grow through advertising,” what do you do next? I do think that there will be a retrenchment into the idea of: you have to build the best product, you have to take advantage of the consumer behaviors that are emerging.

Lauren: What do you see as the differences between ’08, ’09 and now? And do you think those differences are beneficial to founders?

Brian: I think the most important point is globally, the number of people coming onto the internet isn’t growing at such a fast rate. Mobile isn’t growing on a fast rate. We don’t have as open platforms as we used to have. All of these major tailwinds that definitely projected or fueled out of the ’08, ’09 aren’t there. I do think that is a massive difference.

Andrew: I think there are two things that are different from the last era. One is, recall the iPhone platform, the Facebook platform. Those things all got created in 2007, 2008. It’s very much aligned with some really big technologically-driven shifts. I think you could argue that now, audio is very, very interesting for all the Alexa devices, all the air pods. Video is very, very interesting, games is very interesting…we’ll see what happens with Google Stadium and xCloud, but also Steam, and so on. There’s a lot that’s happening around building really compelling consumer-y experiences in the enterprise, that’s very interesting. I do think there’s a couple of these, but it’s not as obvious as the Apple iPhone.

The second thing that I think is really different for 2008, 2009, compared to now is that taking a job at one of the big tech companies is now way, way, way more compelling now than before. Just how competitive the comp packages are, the fact that a bunch of these companies are actually working on interesting things. In comparison, if you were in 2008, it was like, “Oh yeah, do I work for Google or not Google?” But now you’re in a world where you’re like, “Oh, maybe I should work for Pinterest and Airbnb and Slack.” These companies are all working on really, really cool things. I think that will cause new entrepreneurs to maybe second guess on where they want to be.

On the other hand, there’s no time in history that it’s been easier to get your first million bucks in funding. I love that idea that as an ecosystem, we’ve decided that, “Look, if you’re legit, you want to start a company, there’s a community of people willing to take a bet on that.” And so I think some things have gotten easier, some things have gotten harder. But I still remain optimistic that over the next few years that some of the best companies that we’ll see in this generation will be created.

Brian: As a founder, I appreciate the optimistic view. Once again, flipping back and forth between the two sides of the monkey brain.

Andrew: I remember when I was coming out of college people were talking about, “Is it going to be possible to ever make money on the internet?” It was a real question that smart people were asking, right? And we saw the same pattern repeated in 2008, 2009: the companies came in the years right after that ended up being really compelling companies, and I think the same thing will happen here if you can make it to the other side.

Lauren: Yeah, it’s being able to lean into that agility—to shift strategies quickly and adapt.

Andrew: Right. Some of the key things that we talked about today, like collaboration tools and entertainment and social products, all of a sudden, all of those sound really, really good. We spent most of this conversation talking about existing entrepreneurs, like you already have something and you’re trying to figure out what to do with it. I think there’s a whole other very, very interesting question that is: over the next year, you’re going to have a bunch of entrepreneurs that are going to start companies from scratch, and what are they going to pick? And the things I think they’re going to pick are going to be very, very different as well.

I’m certainly very excited and very bullish about how all the tools that we’re going to have for working from home or entertaining ourselves or feeling that social connection even if we’re not there in person, how that’s going to get supercharged. I think over the next two years, we’re going to have the entire generation of entrepreneurs tackling these problems.

Lauren: Thank you for joining us on the a16z Podcast.

Brian: Thanks for having me.

Andrew: This was great. Thanks, Brian.

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