Ten years of lessons learned and how to be an inch-wide and a mile-deep and capture a niche
Alright, good afternoon. We are in the home stretch here I promise. Three speakers left. Let’s see if we can roll through here. Folks, my name is Mark Gainey. As Adam mentioned, I’m the co-founder and executive chairman at Strava and I’m here today to do a couple of things. One, just to tell you the Strava story. We’ll keep it short and simple. I’ll walk you through some of the basics but really want to get into some of the lessons we’ve learned over the last 10 years that we’ve now been around. And in particular this one. Being an inch wide and a mile deep, what it is to go after that niche and do it with a fanaticism knowing full well, it may not be the largest niche in the world, but if you do it right, it leads to some really great things and a valuable business.
A little bit of background on me, so who am I? Story is really short and simple. I grew up in Reno, Nevada, was fortunate enough to head out to Harvard where I studied art history. As fast as I could I made it to the West coast. I had to get out of the snow. I came back out here in 1991. I’m a dinosaur. I started my career in Palo Alto working for a venture capital firm called TA associates. Great for two reasons. One, I learned the language of investors, but more importantly I got to meet tons of startups. And in doing so, I caught the bug to be an entrepreneur. So in 1995 my best friend Michael Horvath and I, we created a company called Khana software. We went after a niche. We found a problem in the market. It was customer email response.
Basically this was the early days of the internet, companies were just learning how to deal with customer email and it was a major problem. So despite a lot of people telling us, “That’s not a company that’s a feature at best.” We had customers, they were paying us, so we just started pursuing it with a vengeance. That was 1995. By 2000 we had 1200 employees. We were generating hundreds of millions in revenue. We were public on NASDAQ. We had a market cap of 11 billion. We really proved to people that you could take that niche and if executed well, you could build a valuable business. The other thing we learned was it’s a ton of fun to build startups. So after a few years out of Khana and Michael and I came back together and that’s when we founded Strava. Founding story, now we founded it officially January 1st of 2009, but to be clear it’s origins go all the way back to the last century.
Michael and I, we met on the crew team in Harvard, in fact, it in that boathouse right there. That’s a new boat house on the Charles river. Important for two reasons. One, it’s where I forged a friendship that’s now been 30 plus years. We’ve been business partners for 25 of those. It’s important to have a great co founder and partner in businesses. But the second reason is what happened in that boathouse became really the Genesis for Strava. To be on that team, to experience the esprit de Corps, the comradery, the trash talking, the training, everything that came with that, it was an amazing experience. The only problem, we graduated, then poof that whole opportunity was gone. So for the next three or four years, Michael and I tinkered with “How could we recreate the experience we had in the boathouse.”
And as early as 1995 we had this business plan. It was called Khana Sports, named after my dog. And we were going to go recreate the experience that we had in the boathouse, but do it on the internet. There’s a virtual locker room. Now, this is 1995 so there was some good news and bad news. The bad news was the technology wasn’t there yet. It was nowhere close for us to be able to really pull people together online. And frequently even consumer behavior wasn’t there. People weren’t ready to share that information. But the good news was it actually introduced us to the customer email problem. In the process of pursuing that opportunity, we did find the customer email problem, which allowed us to build a great company. And frankly the idea never died, so even though we weren’t able to do it in 1995 we had it in the back of our minds and by the time 2009 came around, things had changed. The world was very different. Now you had wearable devices and smart phones, really easy ways to capture workouts and you also had consumers who are willing to share their information. So that’s what we did. We launched in 2009 with really a very simple vision. Could we ultimately bring together a global community of athletes where we could inspire them to achieve their personal best?
So how did we get there? Well, rather than starting with “How do we go grab this global community and bring them all together?” We took a page out of the Khana playbook. We went back to this idea of a niche. And the niche in our case was to go and look at these passionate cyclists. In fact, there’s an affectionate name for them, they’re called mammals, which stands for middle age men in Lycra. That was our target audience. And trust me, this group, again, a lot of skeptics in the room. When we started to go after this, we were told by investors and prospective employees, “Guys, you’re just building a hobby. This can’t be a real business. The market’s too small. The addressable market’s not there, it’s too narrow. How are you going to build a business here?” But the interesting thing was when we looked at this niche, there was some really good things.
First off, these passionate cyclists, they were addicted to their sport and willing to invest real dollars, super tech savvy, these were into their data, into their technology, spending a lot of money on their bikes, great demographics, well educated, disposable income, and frankly nobody was taking care of them on the web. They really weren’t building anything for them, so there was a need and opportunity. So based on that, we said, “Let’s forget the naysayers. Let’s go an inch wide and a mile deep with this group.” And what we did was to build in really three basic principles. And we went this way and we went after this niche, we did these things. One was, we did something we called recruiting small. And what I mean by that was rather than start by, “How do we get our first thousand or 10,000 cyclists on the Strava?” We said, “How do we get our first dozen? And with that, how do we go create a conversation with them?”
So we spent a lot of time, I mean this is 10 years ago, but we spent a lot of time with our first dozen cyclists just having conversation, trying to pick up on the nuance of why they love their sports so much and why it was so fun. And in doing that, how could we recreate that experience or capture it inside Strava? I’ll give you a simple example. When we talked to cyclists, it didn’t matter whether they ran or rode five miles or a hundred miles, it was always about that one Epic climb somewhere in the middle of that ride that they cared about. So, “Oh, if there was a way we can memorialize those climbs inside Strava, maybe that would be a really interesting thing for them.” Well, for those of you who know Strava, that’s the birth of what are called segments.
Mark Gainey: Today there are hundreds of millions of segments that are basically captured on Strava at any given day, and these segments really formed the basis for the entire sort of experience inside Strava. But it was because of those conversations that we allowed it to happen. Second thing we did, we picked one KPI, one key performance indicator in Strava and just obsessed over that, and that was engagement. So again, rather than worrying about how we were going to acquire more customers and bring more cyclists in, we were focused on how do we take our existing members and make them as happy and active as we possibly can. It was all about that doubt amount. It was all about sort of how do we get them engaged, engagement, engagement, engagement. And that really proved to be valuable because once they were engaged, they were telling their friends about Strava and the growth started to naturally happen.
And then the third thing that we did, we talk about the community that we built, but to make a mistake, the way we started was thinking about what we call a single player mode. What I mean by that is we had to keep asking ourselves, “If we have one cyclist who’s using our app and uploading a ride to us, what’s the magic they get back? What’s that single player experience?” And unless we’re giving them really high utility and higher entertainment, we’re never going to be able to think about a community on Strava. So with those three things, we began to sort of see this authenticity get built and we began to see them telling their friends and see this organic growth that happened.
Last thing we did was we built patients into our model. We will talk about this a little bit, but what was critical was that we were patient and we waited till we could get to number one in this cycling position. Our thought process is really simple, “If we’re not number one, how are we ever going to expand with any kind of confidence?” But by getting a number one, even when it was this too small a niche by many people’s sort of a recommendation, the fact of the matter was we now had street credibility. We now had this ability to have a voice, a place at the table. And as I mentioned, we started have confidence internally. Now that we were number one in the position, now we can begin to really think about how do we expand strategically, which is what we did three years later. We always knew we wanted to build out across different sports.
Three years later, we went after running. Lots of hard lessons along the way, but fundamentally what we did was very similar to what we did with cyclist. Sit down with a small group of runners, begin to understand their experience and how could we build something that was authentic for them. And in doing that, good news, what we started to see was this viral network start to fly, and the fly would start to spin faster and faster. And here we are 10 years later, it’s already out of date. We’re about 49 we’re about to hit 50 million athletes on Strava today. We’re in 195 plus countries. We’re truly global. We serve the 33 different sports today, in fact, you can upload anything from a hike, or a Sunday walk, to kiteboarding and Nordic skiing. Really cover across a broad range of athletic endeavors. What’s happened is that Strava has gone from being this cycling app to now really being the athletic home across this global audience. It’s the place where they can post their workouts and connect with others who have shared interests and shared goals, but it took time.
And also, just to be clear, we’re still obsessed with engagement. It says here, we measure success by how many athletes sweat. Important metric for us was already how many activities are coming in? We average between 15 and 20 million activities per week. Interesting stat. It took us eight years to see our first billion activities on Strava. It took us 18 months to see our second billion. We’ll see our third billion in less than a year. So again, once that flywheel goes, it starts to generate more and more opportunity for us, but it took time. Probably my favorite stat inside of Strava is what we call the 50 to one ratio, and what that represents is that for every one minute that a Strava member spends in our app, they’re averaging 50 minutes working out. So we’re achieving that vision that we ultimately had. How do we inspire these folks to go and live active, healthy lives? And the beauty for us, even though we’re 10 years old, we look at this, the playground in front of us is unbelievable the opportunities. It’s just an exciting time. We feel like we’re just getting started.
So I’ll tell you that quick story. Really simple. Pick a niche, expand, go global. It all just happens. Bata bing, bata bang, bata boom. Not quite, right? I’ll be the first to acknowledge doing these things is incredibly hard. I could spend the next five hours walking you through all the mistakes, all the blunders, all the miscues that we went through moving from that niche, that one opportunity for cyclists, to now serving as global audience. Now I’ll give you just two really simple examples. All right. One, quoting Homer. Homer once said, “Do you serve too many masters? You’ll soon suffer.” Strava has suffered many, many times over and over. Why? Not only because we have lots of different kinds of athletes and sports that we support across lots of different geographies, but over time we’ve seen that there’s incredible opportunities with companies that want to connect with our athletes and governments who want to understand our data, all sort of interesting customer opportunities, but the problem is the more you start to focus on those different business models and so forth, the more you’re straying from your core competency.
And so for us, we’ve always had to come back and remind ourselves, and anybody who works with us, our customer, our primary master is the athlete, and anybody who works with us as a partner in that endeavor. Another great example that we have at Strava I often refer to as the noise of opportunity, but it leads to something that we referred to internally at Strava as launch and leave. I’m going to warn you now, it happens to all software companies, but for us we’ve been horrible at it, which is, we’ll see a great opportunity to bring a new service to our athletes and we’ll launch that MVP version. Great. We’re all excited. We high five, we get it out and we immediately move on to three other features that we want to build for our athletes. But we’ve left it in MVP mode, right?
And so launch and leave, what happens there is that you have what I call sort of wildfire expansion. Instead of sort of strategic expansion, sort of one block building on the other, we had like this wildfire phenomenon where we’re expanding in all these different directions without really controlling it. These are just simple examples folks of the way in which we kind of do miscues and make mistakes and kind of come back to the drawing board. What I always remind my team and everybody else here, startups are what I refer to as type two fun. I don’t know how many of you are familiar with type two fun, but type two fun means in the moment it’s miserable. You are not enjoying it, but afterwards, in retrospect, it was fun. It was great. It’s like a marathon. Nobody likes running a marathon, but when they hit the finish line, it feels great. Well that’s what this has felt like at Strava, and we just kind of get used to that type two fun and we have some fun along the way.
Alright, with the time that I’ve got left, let me just see if I can give you five takeaways, five tips around this idea of by using the niche as your go-to-market strategy, can I prove to you that it is a valuable way to go about it? Takeaway number one, please don’t confuse, go-to-market with vision. These are two very different things and you need both. Vision is your Holy grail. It’s the longterm dream that you have. At Strava, our vision was, could we ultimately bring together this global community of athletes that would inspire one another that we could serve in perpetuity? But go-to-market? That’s a strategy. That’s a strategy just along the way to the journey. That’s just the way in which you get started. For us it was about picking those cyclists and being authentic with them, creating something really great for them. And again, you need both. If you don’t have both, it gets really confusing. It gets confusing for investors, for prospective employees, but don’t mistake one for the other.
Takeaway number two, remember the Starbucks test? So a quick anecdote, number of years ago I was sitting in a Starbucks with a good friend of mine, happens to be an expert in community based businesses and subscription models. And she asked me a simple question. She said, “Mark, tell me about your target audience.” And I looked across the Starbucks and they’re at a table where a bunch of cyclists post ride who were sitting there having their lattes. And I said, “We’ll see that group over there. That’s our target audience.” And her eyes lit up and she’s like, “It is so good to hear you say that, because every time I asked this question of entrepreneurs, what I often get is the answer that, we’ll see everybody who’s here, our product is awesome because it meets this big, broad addressable market.” It’s counterintuitive, but it’s really hard when you have that broad an audience that early in your career as a company. And so the Starbucks test for me, I’ve always sort of remembered as scary as it sounds, to pick that one table, that one group that you know that’s your focus audience, it leads to the kind of conversation to the kind of longterm customer relationship that then gives you the competence to expand.
Take away three. Single-player mode versus multi-player mode. I mentioned this earlier, single-player mode is critical. If you don’t think about what that one customer on your app is able to succeed with and why they’re using it, it’s very hard to then think about growth. Multi-player mode is also important. Again, it’s not either or, you ultimately need both, particularly if you’re building a community based business like Strava. Be clear. When I define community based, I mean not just that we have lots of customers, our customers interact with each other. So multiplayer mode does become important. The way in which we build features that allow them to share the Strava experience, whether that’s through comments and kudos, high fives or leaderboards and different ways to compete. Ultimately multiplayer mode is a really important facet of it, but it’s sequenced. You have to get the single player mode right before you can even contemplate going into multiplayer mode.
Take away four. Do not underestimate the value of being number one, even if it’s a small niche, I promise you it’s worth it. Three reasons. One, I’ve already mentioned street credibility. I don’t care how small the niche is, if you’re number one, if you develop leadership, people will listen to you. It’s fascinating but they will. You’ll have a voice in the room, you become a domain expert, you’re a thought leader, and that affords you the opportunity to begin thinking about how you expand. Number two, internally, the reason that it’s so important, it’s just about confidence. These software companies are hard. Everybody thinks about the technology, it’s not. It’s about the people who are working with you. It’s about your team, and if you’re number one in a space, you’re winning. You’re competing and you’re beating other companies, which gives you the confidence to think about your next bets that you want to make and inspiring the team to move forward.
And the third reason, I can tell you more often than not, at least in the two times I’ve done this now, those niches turned out to be much bigger markets than people thought. Again, with the customer email problem, it turned out to be huge. We took it public on that problem. And in Strava, the fascinating thing, if you’d asked me 10 years ago, we would’ve said cycling is a perfect little starter market for us, but we know we have to expand. The irony, we just caught an amazing tailwind cycling as sort of a growth participation sport in the last 10 years has been on this Renaissance. We are still growing in cycling today. It’s been fascinating, so don’t underestimate the value of that niche, even when other people tell you it’s too small.
Last takeaway, please focus on great, not big. There’s a problem in this valley, I call it GBF. Everybody is focused on get big fast, right? It’s all about addressable markets and growth hacking and how do we add them in. Our experience has been when you execute that way, you might have that growth, but it’s fleeting, but instead, if you focus on that product market fit, if you’re willing to be patient, build patience into the model. This mean monitor your burn and so forth, but build patience in and create something great for that initial customer. Now you have the kind of loyalty where you won’t see this huge acquisition rates, but also a huge churn, but instead you can start to acquire the customers in an organic way that leads to longterm retention. So again, great. If you focus there, I can promise you big will come, but it just takes time.
All right, bottom line. We can go to some questions here. Alright, so just at the end of the day, if you just take away two things, please have confidence in the niche. I’m two for two. I may be sort of speaking out of turn, but I can tell you it’s work for us. It’s worth a try. And the second I would just say commit to great. Alright? great leads to wins. It does. And wins leads to confidence. And if you have confidence, that’s when you can expand, you can expand with strength and you ultimately build the valuable businesses that we all want.
Adam: Alright. Mark, I’ve got some questions for you from the audience. The first one we’re going to tackle is the most up voted one. How did you know the moment that you had to broaden into running and other sports?
Mark Gainey: Yeah, so as I mentioned, one of the things was A. How are we doing in cycling? And we knew we had reached this point where we were the definitive number one app. We had people who were literally starting to talk about using Strava as a verb. They were out there talking about, “We’re going Stravaing for the day.” So part of it was intuitive. We could see where our position was in cycling, and then the other thing that was happening was our existing customers, it turned out that they weren’t just cyclists. Most people in the world are what we call multi-sport athletes. We’re doing lots of things. We ride bikes on the weekend with our friends, but we also go for that short run during the week, and when winter comes we love to go skiing, or we go hiking on Sunday afternoons with our family. We’re all multi-sport, so our own existing customers really started to push us to add the notion of running and other things into Strava.
Adam: This first question I asked you backstage as well. How does Strava make money and is it ads or other revenue streams?
Mark Gainey: No ads. Strava dies bit have ads. From day one, we were a freemium model, so we were a subscription model. You can absolutely download Strava and use a lot of features for free, in fact, we’ve been accused now for 10 years of having way too good a free solution, but that’s what we’ve done. It’s worked really well for us and then there’s a whole bunch of other great features that come if you upgrade, that’s our primary business model today.
Adam: How long is it before someone normally gets enough value where they convert to a subscription, or do they do it almost immediately?
Mark Gainey: Two ways I would answer that. Organically we see you at a three to six month process where they have to get an actually start to really experience those unique features inside Strava. There are things that we now do today around trials and so forth that accelerate that process, but our best chance is to give people time. I keep talking about patience, trying to build patience even into our business model has been critical.
Adam: And this will be the last question. A competitor, this is interesting that they framed as competitors you might talk about these as partners potentially, but competitors offer products in your space like Apple watch, Fitbit, a company software, how do you guys view that with your service?
Mark Gainey: Yeah, so we’ve been really fortunate. One thing I didn’t mention, when we started 10 years ago, we started purely as a web service. The only way you could participate with Strava was to literally take a Garmin device connected to your computer and upload it to Strava. The reason that’s important is that we quickly realized we needed to be Switzerland when it came to all these different devices in ways in which you basically go and work out. So today we work with something like five to 600 different devices, whether it’s an Apple watch, a Garmin device, a Polar computer, you name it, a Fitbit device, they all work in, are compatible with Strava. We’re Switzerland when it comes to that. Our thesis is we’re the home where you ultimately can put that data. And so these folks have all become great partners for us and continue to help contribute to our growth.