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Welcome back to the second session

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In the second session,

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we are going to talk about the product-market fit

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So, product-market fit is very important because

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this product-market fit is highly intertwined

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with the value proposition that we discussed before

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And surprisingly,

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not too many people understand
the real meaning of the product-market fit,

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although we talk this concept frequently

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For example, in the startup scene,

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everybody talks about how to achieve the product-market fit,

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or did you achieve the product-market fit,

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or venture capitalists argue that

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you'd better achieve the product-market fit as soon as possible

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Other than that, we cannot invest our money, something like that

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So, my question is, what is the product-market fit?

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Again, this concept is not an academic concept

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This concept came from

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the practical field

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So, the venture capitalists talk about product-market fit,

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and startup founders talk about product-market fit

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So, in the university, not too many people explain it clearly

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So, don't worry about it

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I am the person who can explain

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the concept very clearly to you

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Let's begin with the product-market fit together

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Before we go into the main topic,

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I want to show you the pictures

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Look at this picture

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The guy who wears the blue shirt is Mr. Lee

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And it looks like Mr. Lee suggests some kind of

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idea to the old guy, right?

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Well, actually, in 2005,

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Mr. Lee was working at a motel,

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which is a love hotel in Korea, as a janitor

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He was cleaning up the motel floor

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At the same time, he was running

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a very popular internet community

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about the love hotels

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This internet community was called Motel Tour

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So, again, he was a running manager of

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the internet community called Motel Tour,

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and at the same time, he was a janitor in 2005

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So, the internet community, Motel Tour,

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covered many information about

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the love hotels in Korea, right?

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And, of course, he knew many

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owners of love hotels or motels

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And this old man in the picture is one of the

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motel owners, right?

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And then, now, they met together,

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and they discussed about current revenue

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of the old man's love hotel

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And the old man was really worried about the current

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revenue that was not going up

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So, Mr. Lee suggested to him,

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what about putting an advertisement?

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What about putting an advertisement of your love hotel

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to my internet community, Motel Tour?

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Then, probably, we expect to have increased sales,

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for sure

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This is another option

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If you decided to advertise your love hotel

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on my internet community,

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then, if the revenue

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if the revenue was not increasing,

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then I will fully refund the money

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The advertisement costs $1,000

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Will you do it or not?

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Something like that

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So, from the love hotel owner's point of view,

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so, why not?

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Just $1,000

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So, he can invest $1,000

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just one month

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And then, he can expect to have increased sales

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If it is not working, then,

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his money is fully refunded

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Why not?

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So, he said that, let's go together

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So, he decided to advertise his love hotel

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onto the internet community, which is Motel Tour

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Mr. Lee accepted this advertisement

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This is the first advertisement

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in this internet community

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And then, he wanted to make
the revenue of this love hotel increase, for sure

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So, that's why he gave room service,
kind of a free room service,

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to the consumer who saw
the advertisement from the internet community,

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so that

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the love hotel's sales would go up,

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no matter what

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You know what I mean?

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So, he said that, yes, I keep my promise

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Finally, sales went up

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Then, the love hotel owners were very happy

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This is the moment

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Then, what happened later?

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This rumor spread very quickly

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And then, the love hotel owners' friends

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found out this rumor, found out this story

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And they are all motel owners

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They are all love hotel owners

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So, they let him introduce

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Mr. Lee to his friends

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So, all of a sudden, Mr. Lee was introduced to

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50 love hotel owners

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and attracted 50 advertisements

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So, let's focus on this moment

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That moment when the consumer comes to visit us

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on their own,

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even though we didn't spend

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much money on our promotion or our marketing

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So, we describe these types of moments

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It's the moment when the product-market fit

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is finally achieved

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So, now you understand what is
the true meaning of the product-market fit

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Right?

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So, anyway, this is a kind of

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humble starting story of Yanolja

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Have you heard about Yanolja?

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Yanolja is one of the unicorn companies

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You know, once Yanolja became the decacorn once

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Decacorn means

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some startup company valued more than $10 billion

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Not million, billion

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So, this $10 billion valued company

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started from just Internet-based communities

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Motel tour

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Right?

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Isn't it interesting?

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So, currently, the Yanolja revenue is almost $1 billion,

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and Yanolja achieved around

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$45 million as a profit

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Think about it

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This profit is $45 million,

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and the revenue is almost $1 billion

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And the CEO, Mr. Lee, the founder, Mr. Lee,

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and his name is Lee Soo-jin,

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became the unicorn company founders

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Right now, it's a unicorn company

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And then we expect Yanolja to

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go IPO maybe this year

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I don't know

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So, we expect that

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As I already mentioned,

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the concept of product-market fit came from the practical field

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Right?

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So, originally, this concept came from a famous investor,

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who wrote a blog in 2007

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Of course, the industry has been using it a lot for a long time

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His name was, this expert's name was Mark Anderson

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He's a very famous man in the field of entrepreneurship

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because he developed the Netscape

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Have you heard about the Netscape?

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Netscape is an early version of internet search engines

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Of course, everybody used the Netscape before

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the Microsoft Explorer

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So, the Netscape was sold to the AOL,

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with $4.2 billion

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Think about $4.2 billion

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So, the founder of Netscape, overnight

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who is Mark, became the billionaire overnight

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So, with that money, he started a venture capital company

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And right now, he became the very famous venture capitalist

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in the world

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His name was, again, his name was Mark,

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and he's an investor at one of
the very famous venture capital companies

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And he said that product-market fit means

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being in a good market with a product that can satisfy the market

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So, again, the product-market fit can be defined as a moment

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It's a moment when the startup

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builds a product or service that satisfies strong market demand

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Of course, product is well aligned with the market needs

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That growth can happen naturally,

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without any too much effort to
promote your service and product

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You achieve the growth

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And your growth, your company's growth can happen naturally

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So, the real users are willing
to use it, pay for it, and recommend it

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Without any marketing

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Right

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So, this is a kind of a moment of the product-market fit

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There are three signs,

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three signals of the product-market fit

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The first signal is,

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if you notice that your product and services

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suddenly pulled from the market,

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then you feel that you achieved the product-market fit, like these companies

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And second signal was that

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if you experience gradual increase, but compounding pull from market,

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then you feel that you achieved the product-market fit

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Because it is one of the signals of the product-market fit

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For example, Instacart

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Instacart increased gradually,

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but they experienced compounding pull

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from the market

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And third one,

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if the services and product

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hit the milestone that proved it is working,

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then it is one of the signals for the product-market fit

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So, for example, Airbnb

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Right

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Airbnb

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When founders of Airbnb started this company,

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then, many years later,

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they found that the business is perfectly working right now

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So, it is kind of one of the signals of the product-market fit

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And there are different time frames

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to the product-market fit

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Some companies achieve the product-market fit relatively fast

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Other companies' product-market fit,

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achieve the product-market fit relatively slow

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For example, Kevya

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Do you remember the business model of Kevya?

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Kevya founded by the college student from University,

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UC Berkeley

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Right

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UC Berkeley

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And they created some kind of mobile application

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and target to the high-end restaurant

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and provide the individual contract delivery service

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with the high-end restaurant and the consumers

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So, anyway, three months later after inception,

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the Kevya achieved the product-market fit

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And there's a quote

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The CEO of Kevya said that,

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we saw the same group of super-users over and over again

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And retention

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Think about retention

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Retention stays strong despite not having an iOS app

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We don't have an iOS app, but the retention stays strong

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What is retention?

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We are going to talk about retention later

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Retention means how many people, how many users

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keep using your services

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This is kind of retention

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What about DoorDash?

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DoorDash

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DoorDash achieved the product-market fit after around 12 months

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So, one year after its founding,

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DoorDash achieved the product-market fit

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They said that, we felt we had a product-market fit

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close to 12 months in after

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we were able to replicate the same
or better success in the CD2 versus CD1

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Something like that

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And Uber

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Uber achieved the one year

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Udemy achieved two years

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product-market fit

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It takes two years for them to achieve the product-market fit

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Have you heard about Thumbtack?

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Thumbtack, valued, these days, valued $3 billion,

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which is a big company

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But it took five years for them to achieve

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the product-market fit

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The CEO and founder of Thumbtack said that at year five,

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we had the supply, demand, revenue all come together

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And growth took off

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So, again, different companies have a different time,

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different time to achieve the product-market fit

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If you achieve product-market fit very fast, you are lucky

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But, don't be panic

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If you achieve the product-market fit late, don't worry about it

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It is natural

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So, how to know if you

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achieve the product-market fit or not?

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There are several metrics,

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several metrics to check out

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whether you achieve a product-market fit

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The first metric is kind of word of mouth

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You can check it out word of mouth

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Second metric is simple survey questions

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Third metric would be user engagement

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And next metric is paying ICP consumers

274
00:14:50.000 --> 00:14:52.000
I will explain more detail

275
00:14:52.000 --> 00:14:56.000
And another metric would be the retention curve

276
00:14:56.000 --> 00:14:58.000
Another one is bond multiple

277
00:14:58.000 --> 00:15:00.000
And the last one, CLV

278
00:15:00.000 --> 00:15:03.860
divided by CAC, ratio

279
00:15:06.800 --> 00:15:09.800
Let's look at the word of mouth,

280
00:15:10.700 --> 00:15:14.090
So you need to check out your word of mouth,

281
00:15:14.640 --> 00:15:17.580
About your brand name, about your product,

282
00:15:17.580 --> 00:15:18.959
about your services

283
00:15:18.959 --> 00:15:23.139
The first one, you can track your brand mentions,

284
00:15:23.139 --> 00:15:25.100
especially in the social media

285
00:15:25.100 --> 00:15:27.059
So you visit many social media,

286
00:15:27.059 --> 00:15:29.459
such as Facebook and Instagram,

287
00:15:29.459 --> 00:15:32.520
and you can check and you can monitor

288
00:15:32.520 --> 00:15:35.040
how many people, how many times

289
00:15:35.040 --> 00:15:37.560
they mentioned your service or product

290
00:15:37.560 --> 00:15:41.210
If they mentioned your service, your product,

291
00:15:41.210 --> 00:15:42.200
too much,

292
00:15:42.200 --> 00:15:44.740
then you feel that, wow,

293
00:15:44.740 --> 00:15:48.040
there is a word of mouth spread out, right?

294
00:15:49.040 --> 00:15:53.480
Second, you can search for your brand

295
00:15:53.480 --> 00:15:55.900
through, what about the Google Trend?

296
00:15:55.900 --> 00:15:57.599
You can use the Google Trend,

297
00:15:57.599 --> 00:16:01.540
and you can check out about your trend

298
00:16:01.540 --> 00:16:03.880
or your brand name, right?

299
00:16:03.880 --> 00:16:06.400
Third one, you can check out

300
00:16:06.400 --> 00:16:10.320
how many people visit your homepage

301
00:16:10.320 --> 00:16:13.099
So it is organic traffic to the homepage

302
00:16:13.959 --> 00:16:17.540
Let's move to the survey question, survey

303
00:16:18.599 --> 00:16:21.239
Well, there is a very famous survey question

304
00:16:21.239 --> 00:16:23.040
It's a CNList test

305
00:16:23.040 --> 00:16:26.080
CNList test is kind of one simple question

306
00:16:26.080 --> 00:16:29.030
How would you feel if you

307
00:16:29.030 --> 00:16:31.000
cannot use this service

308
00:16:31.000 --> 00:16:33.150
or product no longer,

309
00:16:33.150 --> 00:16:34.400
anymore?

310
00:16:34.400 --> 00:16:38.160
How would you feel if you could no longer use this product?

311
00:16:38.160 --> 00:16:40.339
And you can provide three options

312
00:16:41.459 --> 00:16:44.480
Yeah, they're very disappointed

313
00:16:45.559 --> 00:16:48.199
Second, somewhat disappointed

314
00:16:48.199 --> 00:16:52.620
The last one, I don't care, not disappointed

315
00:16:54.720 --> 00:16:57.620
There is a rule of thumbs

316
00:16:57.699 --> 00:17:00.820
If we ask these types of question to your consumers,

317
00:17:00.820 --> 00:17:04.500
four out of 10 consumers, four out of 10,

318
00:17:04.500 --> 00:17:07.699
four out of 10 consumers should say

319
00:17:08.539 --> 00:17:10.820
it could be very disappointing

320
00:17:10.820 --> 00:17:12.940
Not using your service?

321
00:17:12.940 --> 00:17:14.320
You close down your service?

322
00:17:14.320 --> 00:17:16.500
Oh my God, I'm really satisfied

323
00:17:16.500 --> 00:17:17.779
I'm really, I'm sorry

324
00:17:17.779 --> 00:17:19.419
I'm really disappointed

325
00:17:19.419 --> 00:17:21.259
I'm really disappointed

326
00:17:21.259 --> 00:17:25.220
The fact that I cannot use your service right now

327
00:17:25.220 --> 00:17:29.539
Four out of 10 consumers should say very disappointed

328
00:17:29.539 --> 00:17:31.259
This is a 40% rule

329
00:17:31.259 --> 00:17:33.820
40% is answering very disappointed

330
00:17:33.820 --> 00:17:34.860
It's the strong,

331
00:17:34.860 --> 00:17:37.580
it's a strong signal of a product market fit

332
00:17:37.580 --> 00:17:38.720
Other than that,

333
00:17:38.720 --> 00:17:41.979
you cannot say you achieved the product market fit

334
00:17:43.580 --> 00:17:46.820
Let's move on to another metric, which is user engagement

335
00:17:46.820 --> 00:17:50.259
User engagement mean there are several

336
00:17:50.259 --> 00:17:52.779
several indication of the user engagement

337
00:17:52.779 --> 00:17:56.460
The first one is how actively and meaningfully

338
00:17:56.460 --> 00:17:58.660
users are involved with your

339
00:17:58.660 --> 00:18:00.419
services or product

340
00:18:00.419 --> 00:18:03.259
And we can measure this engagement

341
00:18:03.259 --> 00:18:07.580
throughout kind of active user

342
00:18:07.580 --> 00:18:11.100
monthly, I mean, daily active users

343
00:18:11.100 --> 00:18:13.419
or monthly active users

344
00:18:13.419 --> 00:18:17.940
You can identify how many users are daily active users

345
00:18:17.940 --> 00:18:21.979
or how many users are monthly active users

346
00:18:21.979 --> 00:18:26.979
Secondly, you can check it out the average time,

347
00:18:27.899 --> 00:18:32.899
average time your users spend on your website

348
00:18:32.979 --> 00:18:34.100
or on your service

349
00:18:34.100 --> 00:18:37.460
So how long users stay per visit

350
00:18:37.460 --> 00:18:39.539
So you can check it out the length of time

351
00:18:39.539 --> 00:18:41.820
For example, Facebook

352
00:18:41.820 --> 00:18:45.380
So users of the Facebook stay long time,

353
00:18:45.380 --> 00:18:46.580
when they use the Facebook

354
00:18:46.580 --> 00:18:49.740
So that's why Facebook charging premium prices

355
00:18:49.740 --> 00:18:53.580
on the advertisement option for the advertisers

356
00:18:53.580 --> 00:18:56.699
Because Facebook already achieved the product market fit

357
00:18:56.699 --> 00:18:58.539
in terms of the session length

358
00:19:00.380 --> 00:19:01.820
Another one is that

359
00:19:01.820 --> 00:19:03.899
you can check out the user engagement

360
00:19:03.899 --> 00:19:05.940
throughout the click-through rate,

361
00:19:05.940 --> 00:19:10.100
So engagement with the contents or buttons

362
00:19:10.100 --> 00:19:14.300
You can count the click numbers

363
00:19:14.300 --> 00:19:15.539
Click-through rate

364
00:19:15.580 --> 00:19:18.420
So anyway, based on those metrics,

365
00:19:20.299 --> 00:19:22.100
you can make a graph

366
00:19:22.100 --> 00:19:24.739
So for example, if your product or service

367
00:19:24.739 --> 00:19:26.940
achieved the product market fit,

368
00:19:26.940 --> 00:19:28.740
then we can find out

369
00:19:28.740 --> 00:19:31.579
these types of graph

370
00:19:31.579 --> 00:19:33.879
So your user engagement

371
00:19:33.879 --> 00:19:36.220
will be increased as time goes

372
00:19:36.220 --> 00:19:40.170
Then probably your companies

373
00:19:40.170 --> 00:19:41.570
will be increased

374
00:19:41.779 --> 00:19:43.100
Your company will grow

375
00:19:44.059 --> 00:19:46.700
If you do not achieve the product market fit,

376
00:19:46.700 --> 00:19:49.339
then of course your user engagement

377
00:19:49.339 --> 00:19:53.420
is a decrease or same low

378
00:19:53.420 --> 00:19:57.059
Then your company didn't grow

379
00:19:57.059 --> 00:19:58.059
Do not grow

380
00:19:58.059 --> 00:20:01.380
So this is a kind of a user engagement, right?

381
00:20:02.299 --> 00:20:03.380
Let's move on

382
00:20:03.380 --> 00:20:06.380
It's a paying ICP consumers

383
00:20:07.420 --> 00:20:08.980
What is ICP consumers?

384
00:20:08.980 --> 00:20:13.299
ICP consumers refers to ideal consumer profile

385
00:20:13.299 --> 00:20:17.059
Ideal consumer profile is kind of

386
00:20:17.059 --> 00:20:21.380
your most valuable consumer segment

387
00:20:21.380 --> 00:20:24.700
It is a little bit different from the consumer persona

388
00:20:24.700 --> 00:20:27.700
Consumer persona is kind of individual users,

389
00:20:27.700 --> 00:20:29.299
individual users,

390
00:20:29.299 --> 00:20:32.299
but ICP is kind of a

391
00:20:32.299 --> 00:20:34.999
consumer segment

392
00:20:35.420 --> 00:20:37.339
Consumer segment

393
00:20:37.339 --> 00:20:39.820
Well, think about it

394
00:20:39.820 --> 00:20:42.700
User persona is kind of a description

395
00:20:42.700 --> 00:20:44.140
of the individual users

396
00:20:44.140 --> 00:20:46.890
So for example,

397
00:20:46.890 --> 00:20:48.540
who is our user

398
00:20:48.540 --> 00:20:51.640
with this internet lecture

399
00:20:51.940 --> 00:20:54.260
provided by Hanyang University?

400
00:20:54.260 --> 00:20:57.460
Well, the users would be

401
00:20:57.460 --> 00:21:00.560
kind of 20 to 25 years old

402
00:21:00.980 --> 00:21:02.619
university student,

403
00:21:03.640 --> 00:21:06.790
who lives in

404
00:21:06.790 --> 00:21:09.790
kind of other Asian countries,

405
00:21:09.859 --> 00:21:12.100
out of Korea,

406
00:21:12.100 --> 00:21:14.000
and also who are

407
00:21:14.000 --> 00:21:16.660
very interested in Korean culture,

408
00:21:16.660 --> 00:21:18.339
and also who are very interested

409
00:21:18.339 --> 00:21:21.579
in kind of the entrepreneurship or startup,

410
00:21:21.579 --> 00:21:22.940
something like that

411
00:21:22.940 --> 00:21:25.619
And then they have some kind of motivation,

412
00:21:26.540 --> 00:21:28.579
of taking the online course

413
00:21:28.579 --> 00:21:32.140
because they don't have time to visit Korea,

414
00:21:32.140 --> 00:21:34.790
and also they

415
00:21:34.790 --> 00:21:36.820
should do part-time job

416
00:21:36.820 --> 00:21:39.380
while they're taking class, something like that

417
00:21:39.380 --> 00:21:42.220
And also they need some kind of credits

418
00:21:42.220 --> 00:21:44.179
There are several motivations

419
00:21:44.179 --> 00:21:47.299
And also we can figure out who are they, right?

420
00:21:47.299 --> 00:21:51.149
In terms of their life cycle, their

421
00:21:51.149 --> 00:21:52.899
family background,

422
00:21:52.899 --> 00:21:54.220
their education level,

423
00:21:54.220 --> 00:21:56.380
and their personality, something like that

424
00:21:56.380 --> 00:21:58.880
And also we can provide

425
00:21:58.880 --> 00:22:00.579
several different persona

426
00:22:00.579 --> 00:22:01.540
for this class

427
00:22:02.260 --> 00:22:04.059
And this is a persona approach,

428
00:22:04.059 --> 00:22:05.929
but ICP is different

429
00:22:05.929 --> 00:22:07.229
ICP is

430
00:22:07.229 --> 00:22:10.579
this class target to

431
00:22:10.911 --> 00:22:14.110
target to the foreign countries

432
00:22:14.420 --> 00:22:18.649
foreign country that interested in Korea

433
00:22:18.899 --> 00:22:21.779
And foreign country that are ready

434
00:22:21.779 --> 00:22:24.739
to taking the English courses

435
00:22:24.739 --> 00:22:27.939
Foreign country that

436
00:22:27.939 --> 00:22:29.489
have many university students

437
00:22:29.489 --> 00:22:33.420
who are interested in Korea

438
00:22:33.420 --> 00:22:36.459
and who are interested in the entrepreneurship class,

439
00:22:36.459 --> 00:22:37.420
something like that

440
00:22:37.420 --> 00:22:39.500
So the IPC is much bigger,

441
00:22:39.500 --> 00:22:43.019
and we target for the specific group of the segment,

442
00:22:43.019 --> 00:22:44.899
specific consumer segment

443
00:22:44.899 --> 00:22:47.779
And this segment is the most valuable, right?

444
00:22:47.779 --> 00:22:50.739
Anyway, think about if you have a service,

445
00:22:50.739 --> 00:22:52.619
if you have a product,

446
00:22:52.619 --> 00:22:55.220
and of course you have a lot of consumers

447
00:22:55.220 --> 00:22:57.660
And some of the consumers don't pay anything,

448
00:22:57.700 --> 00:23:00.660
and other consumers pay the service

449
00:23:00.660 --> 00:23:02.339
Think about Spotify

450
00:23:02.339 --> 00:23:04.779
And Spotify's valuable consumer segment

451
00:23:04.779 --> 00:23:07.579
would be the group of people

452
00:23:07.579 --> 00:23:11.500
who listen to kind of a minor musics

453
00:23:11.500 --> 00:23:15.850
So that's why Spotify created some kind of

454
00:23:15.850 --> 00:23:17.400
the platform

455
00:23:17.579 --> 00:23:20.479
because of the people,

456
00:23:20.479 --> 00:23:22.929
target consumer,

457
00:23:23.019 --> 00:23:26.420
who need some minor musics

458
00:23:26.420 --> 00:23:29.579
So anyway, there are a lot of consumers for the Spotify,

459
00:23:29.579 --> 00:23:33.619
and they figure out who would be our ideal consumer profile

460
00:23:33.619 --> 00:23:35.099
Again, the consumer profile,

461
00:23:35.099 --> 00:23:37.340
ideal consumer profile for the Spotify

462
00:23:37.340 --> 00:23:38.780
would be group of consumer,

463
00:23:38.780 --> 00:23:42.580
group of consumer who seek for the minor music

464
00:23:42.580 --> 00:23:45.619
So anyways, the Spotify go there

465
00:23:45.619 --> 00:23:48.940
and ask them whether they pay the service or not

466
00:23:48.940 --> 00:23:50.890
So ideally,

467
00:23:50.890 --> 00:23:53.820
we should have a lot of ideal,

468
00:23:53.820 --> 00:23:57.580
the consumer profile among your basic consumers

469
00:23:57.580 --> 00:24:00.830
Then we say, yes, you are approaching

470
00:24:00.830 --> 00:24:03.730
product market fit,

471
00:24:04.659 --> 00:24:06.539
It's a little bit complicated,

472
00:24:06.539 --> 00:24:08.820
but it's very important concept, right?

473
00:24:11.539 --> 00:24:14.700
Next one is the retention curve

474
00:24:14.700 --> 00:24:15.820
What is the retention?

475
00:24:15.820 --> 00:24:18.460
How many users continue to use a product

476
00:24:18.460 --> 00:24:20.739
over and over

477
00:24:20.739 --> 00:24:23.219
So we can test the retention curve

478
00:24:23.219 --> 00:24:26.580
from the cohort test

479
00:24:26.580 --> 00:24:28.500
So for example, today,

480
00:24:28.500 --> 00:24:31.099
how many people register for our services?

481
00:24:31.099 --> 00:24:34.580
How many people started subscription of our service?

482
00:24:34.580 --> 00:24:36.700
Yes, 100 of them

483
00:24:36.700 --> 00:24:38.050
As time goes,

484
00:24:38.050 --> 00:24:41.700
not all 100 of the consumers

485
00:24:42.020 --> 00:24:44.140
continue the services

486
00:24:44.140 --> 00:24:46.820
Some of them give up the service,

487
00:24:46.820 --> 00:24:50.619
some of them just left the company, something like that

488
00:24:50.810 --> 00:24:54.219
Some of them do not subscribe the service anymore

489
00:24:54.219 --> 00:24:57.669
So anyway, so we expect

490
00:24:57.669 --> 00:25:00.519
the half of the consumers

491
00:25:00.700 --> 00:25:03.940
do not continue the service again and again

492
00:25:03.940 --> 00:25:07.739
So our retention rate will be decreased at first,

493
00:25:07.739 --> 00:25:09.859
but if you achieve the product market fit,

494
00:25:09.859 --> 00:25:13.340
then this retention rate stay same

495
00:25:13.340 --> 00:25:16.500
But if you do not achieve the product market fit,

496
00:25:16.500 --> 00:25:20.059
then the retention rate continuously declines

497
00:25:20.059 --> 00:25:22.979
Continuously decreased, sorry

498
00:25:22.979 --> 00:25:26.580
Continuously declined, continuously decreased

499
00:25:26.580 --> 00:25:27.940
So look at this picture

500
00:25:29.659 --> 00:25:31.859
So from this graph, you can figure out,

501
00:25:31.859 --> 00:25:33.700
you can understand whether you achieve

502
00:25:33.700 --> 00:25:35.219
the product market fit or not

503
00:25:36.140 --> 00:25:38.380
Next one is a calculation,

504
00:25:38.380 --> 00:25:40.099
a little bit complicated calculation,

505
00:25:40.099 --> 00:25:43.900
which is called Burn multiple, Burn multiple

506
00:25:43.900 --> 00:25:46.700
Burn multiple means how much you spend

507
00:25:46.700 --> 00:25:48.619
to grow the revenue

508
00:25:48.619 --> 00:25:51.460
In order to generate new revenue,

509
00:25:51.460 --> 00:25:54.299
you should spend some of the money

510
00:25:54.299 --> 00:25:57.699
for promoting your service and product

511
00:25:57.699 --> 00:25:58.859
to the consumers

512
00:25:58.859 --> 00:26:01.299
It is kind of marketing fee,

513
00:26:01.299 --> 00:26:05.020
marketing money, or kind of sales money, right?

514
00:26:05.979 --> 00:26:08.179
So the rule of thumb is,

515
00:26:08.179 --> 00:26:10.460
the less you spend,

516
00:26:10.460 --> 00:26:14.619
the less you spend, the more efficient your growth

517
00:26:14.619 --> 00:26:18.219
The less you spend is good for your product market fit

518
00:26:18.219 --> 00:26:20.219
product market fit

519
00:26:21.099 --> 00:26:22.780
So in order to understand

520
00:26:22.780 --> 00:26:24.500
whether you achieve product market fit,

521
00:26:24.500 --> 00:26:27.219
we should calculate the Bern multiple

522
00:26:27.219 --> 00:26:31.140
Bern multiple can be calculated by your money,

523
00:26:31.140 --> 00:26:34.780
your money for the marketing, net burn, we say net burn

524
00:26:34.780 --> 00:26:36.820
You just spend the money, net burn

525
00:26:37.979 --> 00:26:39.099
Divided by what?

526
00:26:39.099 --> 00:26:41.859
Divided by net ARR

527
00:26:41.859 --> 00:26:44.900
ARR refers to annual recording revenue,

528
00:26:44.900 --> 00:26:47.900
kind of a recording revenue, annual revenue, okay?

529
00:26:47.900 --> 00:26:50.500
New annual revenue

530
00:26:50.500 --> 00:26:53.900
So again, in order to generate the new revenue,

531
00:26:53.900 --> 00:26:56.659
you should pay, you should spend your money

532
00:26:56.659 --> 00:26:57.900
for the marketing

533
00:26:57.900 --> 00:27:01.619
So net Burn multiple mean,

534
00:27:01.619 --> 00:27:05.299
this is kind of a ratio between your spend money,

535
00:27:05.299 --> 00:27:10.299
your spending money, divided by your new revenue, okay?

536
00:27:12.099 --> 00:27:13.140
New revenue

537
00:27:13.140 --> 00:27:16.780
Ideally, you pay nothing for the marketing,

538
00:27:16.780 --> 00:27:18.619
you pay nothing for your promotion,

539
00:27:20.140 --> 00:27:23.099
but you have a lot of new revenues,

540
00:27:23.099 --> 00:27:25.599
then you achieve the product market fit

541
00:27:25.599 --> 00:27:27.099
for sure, right?

542
00:27:27.099 --> 00:27:29.700
Like Mr. Lee case

543
00:27:29.700 --> 00:27:32.299
Mr. Lee, right, at first,

544
00:27:32.299 --> 00:27:35.020
Mr. Lee didn't pay anything about the promotion,

545
00:27:35.940 --> 00:27:39.140
but he had 50 new contracts

546
00:27:39.140 --> 00:27:40.500
His new contracts,

547
00:27:40.500 --> 00:27:42.820
each contract is 1,000,

548
00:27:42.820 --> 00:27:45.220
he earned 50,000,

549
00:27:45.220 --> 00:27:47.820
one time, 50,000, right?

550
00:27:48.419 --> 00:27:49.820
So we can easily calculate it

551
00:27:49.820 --> 00:27:52.419
He paid nothing divided by 50,000,

552
00:27:52.419 --> 00:27:55.140
and then we can calculate the score

553
00:27:55.140 --> 00:27:57.979
That score should be really low

554
00:27:57.979 --> 00:27:59.260
So in other words

555
00:27:59.260 --> 00:28:02.260
Burn multiple should be low, right?

556
00:28:02.260 --> 00:28:03.979
Let's calculate the Burn multiple

557
00:28:03.979 --> 00:28:07.340
with a hypothetical situation

558
00:28:07.340 --> 00:28:09.979
There are five new consumers,

559
00:28:10.380 --> 00:28:12.659
500, I'm sorry, 500 new consumers

560
00:28:12.659 --> 00:28:15.739
who pay $50 monthly, like ChatGPT

561
00:28:15.739 --> 00:28:18.380
ChatGPT charged me $20 every month

562
00:28:18.380 --> 00:28:21.260
So anyway, there are five new consumers

563
00:28:21.260 --> 00:28:23.859
who pay $20 monthly

564
00:28:23.859 --> 00:28:27.099
Then, we can calculate annual revenue, right?

565
00:28:27.099 --> 00:28:30.700
Annual revenue based on your new consumers

566
00:28:30.700 --> 00:28:33.340
They pay $20 every month,

567
00:28:33.340 --> 00:28:35.299
then multiply by 12 months,

568
00:28:35.299 --> 00:28:38.059
then multiply by how many consumers, new consumers?

569
00:28:38.059 --> 00:28:38.979
500

570
00:28:38.979 --> 00:28:42.900
So our new annual revenue would be,

571
00:28:42.900 --> 00:28:45.460
$120,000

572
00:28:45.460 --> 00:28:48.659
So you generate, right now, you generate a new revenue

573
00:28:48.659 --> 00:28:49.500
How much?

574
00:28:49.500 --> 00:28:51.780
$120,000

575
00:28:51.780 --> 00:28:56.020
Right now, let's say we spend $300,000,

576
00:28:56.020 --> 00:28:58.500
$300,000 for the promotion fee

577
00:28:58.500 --> 00:29:00.419
to generate the new consumers

578
00:29:00.419 --> 00:29:03.849
So you already spent $300,000

579
00:29:04.299 --> 00:29:07.340
Then we can calculate the ratio between,

580
00:29:07.340 --> 00:29:09.340
how much you spend

581
00:29:09.340 --> 00:29:12.500
and how much you get as a new revenue

582
00:29:12.500 --> 00:29:14.059
Then let's calculate, I'm sorry

583
00:29:14.059 --> 00:29:15.299
Let's calculate it

584
00:29:15.299 --> 00:29:18.900
Then, bond multiple is 2.5

585
00:29:18.900 --> 00:29:23.140
$300,000 divided by 120,000

586
00:29:23.140 --> 00:29:25.380
So we got 2.5

587
00:29:25.380 --> 00:29:29.580
2.5 mean, in order to,

588
00:29:29.580 --> 00:29:32.659
in order to generate $1,

589
00:29:32.659 --> 00:29:35.260
in order to generate one new dollar,

590
00:29:35.260 --> 00:29:37.619
you spend $2.5

591
00:29:38.659 --> 00:29:39.500
What do you think?

592
00:29:39.500 --> 00:29:40.619
Is it efficient or not?

593
00:29:41.500 --> 00:29:43.260
It is not efficient, of course

594
00:29:43.260 --> 00:29:44.099
It is not efficient

595
00:29:44.099 --> 00:29:46.500
You pay too much, right?

596
00:29:46.500 --> 00:29:49.859
In order to generate just $1, you pay $2.5

597
00:29:49.859 --> 00:29:50.940
It's not efficient

598
00:29:50.940 --> 00:29:54.260
So this number should be low

599
00:29:54.260 --> 00:29:57.179
So there is some kind of the rule of thumbs,

600
00:29:57.179 --> 00:29:59.140
some kind of rule of thumbs

601
00:29:59.140 --> 00:30:03.140
The number, burn multiple is less than one,

602
00:30:03.140 --> 00:30:07.460
then you achieve the product-market fit

603
00:30:07.460 --> 00:30:09.419
And we got 2.5

604
00:30:09.419 --> 00:30:14.419
2.5 is kind of bad signal

605
00:30:14.900 --> 00:30:17.140
So now you understand what I mean by that

606
00:30:17.140 --> 00:30:19.539
This is the concept of the bond multiple

607
00:30:19.539 --> 00:30:21.580
in order to understand whether you achieve

608
00:30:21.580 --> 00:30:23.659
the product-market fit or not

609
00:30:23.659 --> 00:30:27.759
So the last metric is CLV

610
00:30:27.759 --> 00:30:30.109
and CAC ratio

611
00:30:30.159 --> 00:30:34.750
Have you heard about the term CLV, CAC?

612
00:30:34.750 --> 00:30:37.000
Don't worry about it, right?

613
00:30:37.250 --> 00:30:40.760
This ratio tells us how efficiently

614
00:30:40.760 --> 00:30:43.060
you are calling the consumers

615
00:30:43.060 --> 00:30:45.569
The behind the philosophy is pretty much similar

616
00:30:45.869 --> 00:30:47.459
to the bond multiple

617
00:30:47.459 --> 00:30:51.880
Again, this is the ratio by dividing by the CLV,

618
00:30:51.930 --> 00:30:53.929
dividing CLV by CAC

619
00:30:53.929 --> 00:30:55.501
What is CLV?

620
00:30:55.501 --> 00:30:57.889
CLV is a consumer's lifetime value

621
00:30:58.260 --> 00:31:02.860
CAC refers to consumer's acquisition cost

622
00:31:04.059 --> 00:31:06.179
Let's look at the CLV first

623
00:31:06.179 --> 00:31:07.179
How to calculate?

624
00:31:07.179 --> 00:31:10.229
CLV can be calculated by

625
00:31:10.229 --> 00:31:12.179
average order value

626
00:31:12.419 --> 00:31:15.140
multiplied by respected, I'm sorry,

627
00:31:15.140 --> 00:31:16.780
repeated sales,

628
00:31:16.780 --> 00:31:20.299
multiplied by average retention time

629
00:31:20.299 --> 00:31:21.739
I will show you example

630
00:31:21.739 --> 00:31:24.020
If you are e-commerce company,

631
00:31:24.020 --> 00:31:28.020
then you can easily understand the average order values

632
00:31:28.020 --> 00:31:30.539
Let's say it is $100

633
00:31:30.539 --> 00:31:34.859
Average consumers pay $100 when they

634
00:31:34.859 --> 00:31:37.179
they purchase a product from your website

635
00:31:37.179 --> 00:31:40.460
And also, they use your website

636
00:31:40.460 --> 00:31:42.619
at least four times a year

637
00:31:42.619 --> 00:31:44.780
So the repeated sale, four

638
00:31:44.780 --> 00:31:46.820
And what about average retention?

639
00:31:46.820 --> 00:31:49.419
Retention, the average consumers

640
00:31:49.419 --> 00:31:52.260
continue your service at least three years

641
00:31:52.260 --> 00:31:54.979
So the retention, three years

642
00:31:54.979 --> 00:31:57.500
Repeat sale, four times a year

643
00:31:57.500 --> 00:32:00.500
And average order value, $100

644
00:32:00.500 --> 00:32:02.619
Then we can easily calculate it,

645
00:32:02.619 --> 00:32:04.619
lifetime value of your consumers,

646
00:32:04.619 --> 00:32:08.060
which is $100 multiplied by,

647
00:32:08.060 --> 00:32:10.020
four times multiplied by three years

648
00:32:10.020 --> 00:32:15.020
So total, total $1,200 would be your,

649
00:32:15.060 --> 00:32:16.780
the consumer's lifetime value

650
00:32:16.780 --> 00:32:19.180
So they spend, basically they spend

651
00:32:19.180 --> 00:32:21.780
$1,200,

652
00:32:21.780 --> 00:32:24.780
for their life

653
00:32:24.780 --> 00:32:28.540
In terms of your service, $1,200

654
00:32:28.540 --> 00:32:29.859
What about CAC?

655
00:32:29.859 --> 00:32:34.500
CAC is the total money, total marketing money,

656
00:32:34.500 --> 00:32:37.819
to get your consumer, new consumers

657
00:32:37.819 --> 00:32:40.420
So you spend the money, how much?

658
00:32:40.420 --> 00:32:41.660
There is some money

659
00:32:41.660 --> 00:32:43.900
Then you have new consumers

660
00:32:43.900 --> 00:32:45.939
So we can get the ratio

661
00:32:45.939 --> 00:32:47.180
So ratio

662
00:32:47.180 --> 00:32:49.939
So the consumer acquisition cost

663
00:32:50.939 --> 00:32:53.780
Then, we can calculate this ratio

664
00:32:55.140 --> 00:32:57.099
It's based on the marketing,

665
00:32:57.099 --> 00:33:00.099
total marketing fee divided by

666
00:33:00.099 --> 00:33:01.260
the number of consumers

667
00:33:01.260 --> 00:33:02.699
Then we can get

668
00:33:02.699 --> 00:33:04.199
how much you spend

669
00:33:04.199 --> 00:33:07.260
to get one new consumers

670
00:33:08.459 --> 00:33:13.459
So let's say you spend $50,000

671
00:33:13.482 --> 00:33:14.482
as a marketing,

672
00:33:14.540 --> 00:33:17.699
then you got 100 new consumers

673
00:33:17.819 --> 00:33:20.380
Then we can easily calculate the CAC

674
00:33:20.380 --> 00:33:22.099
Your CAC is how much?

675
00:33:22.099 --> 00:33:23.619
$500

676
00:33:23.619 --> 00:33:25.219
What do you mean by that, $500?

677
00:33:25.219 --> 00:33:27.500
So you spent $500

678
00:33:27.500 --> 00:33:32.380
to get one new consumer, $500

679
00:33:32.380 --> 00:33:35.099
And these new consumers spend how much?

680
00:33:35.099 --> 00:33:37.339
Averagely, $1,200

681
00:33:37.339 --> 00:33:39.540
This is a lifetime value

682
00:33:39.540 --> 00:33:43.380
Then, we can easily calculate the CLV

683
00:33:43.380 --> 00:33:45.780
divided by CAC ratio

684
00:33:45.819 --> 00:33:48.099
And, CLV,

685
00:33:48.099 --> 00:33:51.859
consumer's lifetime value is $1,200

686
00:33:51.859 --> 00:33:56.060
And this number can be divided by CAC average cost,

687
00:33:56.060 --> 00:33:59.859
for the new consumers, which is $500

688
00:33:59.859 --> 00:34:02.109
So then we got 2.4

689
00:34:02.109 --> 00:34:04.859
as a score, 2.4

690
00:34:05.060 --> 00:34:06.660
What do you mean by 2.4?

691
00:34:06.660 --> 00:34:10.900
It means you spend $1

692
00:34:10.900 --> 00:34:14.900
You spend $1 to get new consumers, $1

693
00:34:14.939 --> 00:34:16.260
You spend $1

694
00:34:16.260 --> 00:34:18.140
And these new consumers,

695
00:34:18.140 --> 00:34:21.540
new consumers contribute to the company

696
00:34:21.540 --> 00:34:23.140
$2.4

697
00:34:24.020 --> 00:34:26.070
So you pay $1,

698
00:34:26.070 --> 00:34:29.020
but the consumers pay $2.4

699
00:34:30.180 --> 00:34:31.979
I think it's good, right?

700
00:34:31.979 --> 00:34:34.900
But, there's a rule of thumbs

701
00:34:34.900 --> 00:34:39.000
This ratio, this number, should exceed

702
00:34:39.000 --> 00:34:40.450
threes,

703
00:34:41.140 --> 00:34:43.180
So the at least three multiple,

704
00:34:43.180 --> 00:34:47.819
At least three is ideal for the product-market fit, right?

705
00:34:47.819 --> 00:34:50.619
So you spend just $1,

706
00:34:50.619 --> 00:34:53.569
but your consumers pay $3,

707
00:34:53.569 --> 00:34:55.619
At least $3

708
00:34:55.979 --> 00:35:00.180
Then you can understand your approach to product-market fit

709
00:35:01.780 --> 00:35:05.380
So now you understand the

710
00:35:05.380 --> 00:35:06.420
clear meaning

711
00:35:06.420 --> 00:35:08.540
of the product-market fit,

712
00:35:08.540 --> 00:35:10.939
and also signs of product-market fit,

713
00:35:10.939 --> 00:35:13.619
and then different time of the product-market fit,

714
00:35:13.619 --> 00:35:18.180
and how to understand

715
00:35:18.180 --> 00:35:20.979
if you achieve the product-market fit or not

716
00:35:20.979 --> 00:35:23.099
I provided several metrics

717
00:35:23.099 --> 00:35:26.459
It will be very helpful in practically, right?

718
00:35:26.459 --> 00:35:28.180
Thank you for the listening