Here’s what’s covered on this week’s pod:

A step by step guide on how to iterate your MVP. Phuong and I discuss the importance of testing Minimum Viable Products (MVPs) to iterate and achieve product-market fit. She outlines a step-by-step process for testing MVPs, starting with defining test objectives and creating metrics to track performance. Fong emphasizes the significance of creating user personas and recruiting testers that represent different user types. By gathering feedback from testers, entrepreneurs can optimize their products to better serve each user group. Fong suggests providing clear instructions to testers and analyzing usage data to understand user behavior and identify areas for improvement. The iterative process of updating and refining the product based on feedback and data is also highlighted.

The Dos and don’ts for portfolio/vc relationship ethics. Mike and I delve into the ethics of the portfolio venture capital (VC) relationship. They acknowledge that transparency and ethics should be the guiding principles but highlight instances where founders may skew data or misrepresent numbers. Mike suggests that founders should be open, transparent, and willing to ask for help when needed. He emphasizes the significance of maintaining trust and a healthy relationship with investors by being transparent about challenges and seeking support.


Transcript (this is an automated transcript):

MPD: Welcome everybody. I'm Mark Peter Davis, managing partner of Interplay. I'm on a mission to help entrepreneurs advance society, and this podcast is part of that effort. We've restructured the format a little bit, continuing to experiment and dabble with our content. My partner in crime here on the podcast Will, has been coming up with ideas.

We are doing something a little different now. Instead of having. Four segments in the partner meeting format. We've cut things into different podcasts, so throughout the month, each week might have a little bit of a different flavor. Couple times a month, we're gonna have Mike and Fong come on and talk about all things startups related to the market and business insights about how to operate them once a month.

We're gonna get on with Chris, and Chris is gonna be talking about geopolitics and global macro markets. So a little bit of a deeper dive, less frequently. And then we're gonna sprinkle in once a month an interview with an outsider, someone who's given us some really good wisdom and has unique perspective.

We've had incredible people come through and honor us with their time before, and we'll keep doing that. So that's the new paradigm. And without further ado, today is gonna be about the startup market. We're gonna get a convo with Fong. Talking about how to test concepts. And then we're gonna jump on with Mike and we're gonna talk about startup ethics interesting topics.

Good sh session. I hope you enjoy.

Hello Fong. Hi Mark. How are you? Good. Where are you today? 

Phuong Ireland: I'm actually in St. Louis at my brother's house for the weekend. My whole family lives here. Back home. Yeah, 

MPD: back home. Remote recording. I like that. Exactly. Yeah. All right. What do you have for us? 

Phuong Ireland: On previous episodes we've talked about how to validate your business idea.

Then after that we talked about how to plan your M V P. So today what I wanted to talk about is the next step after that. So once you have your M V P, how do you test it? So remember, the whole point of testing your MVP is so that you can iterate on your product and get to product market fit. So it's really important to be deliberate and thoughtful about how you set up your beta test, gather feedback, and then implement learnings to improve your product.

So I wanted to just go to go through a step-by-step outline of how you should be thinking about the process. So the first step is to define your test text objectives. So this is important, and it goes with that sta saying, but don't start the test until you know what you're trying to achieve with the test.

So some example goals are validating the business model, identifying usability issues and evaluating the user experience. Once you have your goals, make sure you create metrics that track the performance towards those goals. So for example, if you are going after user experience, you can assess that by tracking your net promoter score.

Step two is to create user personas and then recruit testers that represent them. So this step is really critical to understanding how well your product is working for different types of users, and then gain insights to the preferences of each of those types. So you can create personas by defining demographics and psychographics of core user types.

Then taking the into consideration the needs of each persona. You can create test scenarios that reflect the real life interactions with your product. This helps you optimize your product to better serve each group. You can prioritize features, address pain points, and make improvements based on the feedback you get from each persona group.

Next step is to provide clear instructions to your testers. So make a detailed document that explains exactly the purpose of the beta test, and then outlines the tasks the testers should perform and provide specific guidelines, clearly define the roles and responsibilities of each user group, and explain how they should be interacting with the product during the test.

Step after that is just to have the users test the product and gather their feedback. So ask your beta testers to explore the product and perform different actions that are relevant to their user group. So for example, say you're testing a marketplace, buyers should be browsing and purchasing items, and then sellers should be creating listings and managing their inventory.

Encourage testers to give feedback on the product's functionality, how easy it is to use and any issues they encounter, and make sure you establish a process for testers to submit their feedback. They can do this through an online form, a dedicated feedback email, or maybe a community forum where testers can talk about their experience and report any issues.

You should also be analyzing usage data. So collect data and how inter, how testers interact with your product to understand their behavior. Some key data you should be collecting are user engagement, so how lo often they're logging in, how long they're staying feature usage, so which features are they using most and which do they not even care about?

Conversion rates, so this could be an on any number of activities, signups, purchases, completing a specific task. And then user flow. So see how users are moving through the product and identify bottlenecks where people are dropping off, or any place that's like a confusing navigation path. And then the last step is to iterate and then repeat the process over again.

So based on the feedback and the data you collected, make updates to enhance the functionality, user experience, and overall performance. And then do multiple rounds of testing. Each round should build upon the insights you've got from the previous round, and then refine your product and address any of the remaining issues.

And if you do that a few times, there shouldn't be any re. Any remaining issues by the time you launch. So remember to have an open communication line to your beta testers and tell them how thankful you are for their participation, because their feedback is gonna be a really important driver of how successful your product is.

MPD: This is awesome. That's it. Great topic. Great coverage on it. There's one thing that I always found really helpful, which is watching people use the product their first time. Yeah. And not saying anything. Not re resisting the urge to say no, click there, watch them struggle, watch them figure, see where it's not obvious to them because that's when you identify, real gaps in the user experience.

That's the one thing I would add into that, that I think is super helpful and it's intuitive cuz we figure tech, in tech people are gonna be using their software remote from you. So you right model the beta after the future usage, but there's a lot to be seen when you see people struggle.

Phuong Ireland: Yeah, for sure. And you're so close to it and it's so obvious to you that when you see someone just blindly go at your product and not be able to understand something that you spent, hundreds of hours on it's pretty eye-opening. 

MPD: Totally good. Good topic. Thank you, Fong. Have fun out there. Mike.

How are the waves, my man? We're back. 

Mike Rogers: World day weekend, summer's kicking off. Water was packed. Freezing cold still, but nice. Are 

MPD: you territorial? Are you that guy on the waves where you're like, get the fuck out of my space? 

Mike Rogers: So you in a crowded water, you I'm not a, I'm not an asshole, but you have to be like aggressive.

Otherwise, you won't surf any waves. So you have to be aggressive within reason. And especially out here, like in ditch planes, like you have a lot of noobs out there who don't know how to surf. So you you have to be a little aggressive within reason. 

MPD: But no, I'm not being how was the indoor surf park?

No comment. No comment. Are you not allowed to talk about it? 

Mike Rogers: It's too good. I don't want to, I don't want to, try to keep on the deal. Whoa. Okay. So you are 

MPD: territorial about your waves. Okay. There we 

Mike Rogers: go. No, this is different. We can talk about this one offline. 

MPD: All right. I got a question for you today.

Yeah. Real time. Gonna throw it at you. How do you think about ethics? In the portfolio VC relationship, what are the dos and don'ts? It's this weird paradigm. Let me just cue it up while that you, you process that for a second. You've got this weird paradigm, right? You've got a account, you're counterparties, right?

In theory, you're negotiating against each other, entrepreneur versus vc, and then your partners, and then every 6, 12, 18, 24 months, your counterpart is at some level again. Negotiating the new financing, whatever. Yeah. And so there's this weird dynamic where people are on your team, but across the table it's partners that you're negotiating with.


Mike Rogers: The term is co-opetition basically, right? Yeah. How do you Cooperating? But you're competing. Yeah. Yeah. 

MPD: How do you think about Dos and don'ts, lessons learned. What comes to mind when I throw that out? Yeah. 

Mike Rogers: Oh man. This is a good one to unpack. Listen, at the end of the day, the short answer is, obviously everyone should just be transparent and ethical.

Unfortunately, that's not the world that we live in. Founders skew data. They show what they wanna show. They, I will say some go as far as lying. We've had founders lie about numbers before, and do I think it's always in like an unethical way? Maybe sometimes yes. Maybe sometimes no. Sometimes I think they also genuinely just don't really know it.

And they, and there's so much pressure to have accurate data and to seem like, the numbers that you might. Try to co-op something into being what you want it to be. And there's a lot of pressure on founders too, so I sympathize for them. But at the end of the day, if you don't know, I think it's fine to say you don't know.

Or, Hey, let us get back to you on that. Or, Hey, let the team go do the work. Or Hey, how do you think about calculating that? C's a good one. So a lot of founders will show CAC or payback period, and they'll use revenue instead of gross margin. It's just not the right way to think about it, right?

It's not an accurate number when you show revenue and they'll say some people call revenue. I'm like it's not revenue. Do I think they're unethical in doing that? No. But do I think that. There is a a clear interest in theirs in not showing the accurate data. Yes. 

MPD: This is a, it's a tough dynamic.

I, I think the big unlock in psychology here is when you're a founder, you feel like you have an obligation for all prior investors, employees, your team, your co-founders, and also yourself. But that may not be the thing that's weighing on people the most to try to make the company win almost at all costs.

And I think the line. Is you have to know that you don't have to win. What you have to do to honor all those people is your best. And that's a big distinction. Because it means that you can go out and be transparent and ethical and honest, and if you fail, it's okay because failure happens particularly in startups, but in life.

But as long as you're going out and doing your best, Everyone's gonna be okay with the outcome. Yeah. Really trying and being humble. So I think that's the thing that I think is the unlock for when founders feel caught between a rock and a hard place between their values, maybe what they think is right and doing what they feel like they're supposed to.

Those two things should converge, right? The right thing and what they're supposed to is the same thing. But I think that unlock to get them aligned is to know that. Your job isn't to succeed, it's to do your goddamn best. Yeah. And there, there might be a space between those two. 

Mike Rogers: I couldn't agree more. I think the other thing that, on the investor side, we have to remember sometimes is that founders live on an island for the most part, and.

In that they don't have the same data set that we have in terms of what other founders say. What's okay, what's not okay? It, you're right. It's okay to ask for help. It's okay to fail. It's okay to be like, Hey, we need help here. Those are conversations that VCs are having with their portfolio companies every day.

And those are the healthiest conversations, right? The unhealthy conversations are when founders are obscuring data, hiding something, not being open and transparent about it, and then the investor finds out later. Because then at then you have this feeling of deception, oh, I've been lied to. Oh, they're not being honest with me.

Oh, then can I trust them going forward? So it's really easy to break it down. But to your point, I think, we know that the founder's seat is really hard. We know that all we can ask for is you to give it 120%. And anything on top of that is is gravy. Just stay aboveboard, be transparent.

Ask for help when you have problems, and I think you'll have a great relationship with your investors and it will grow and thrive. And then when you do need capital, they'll know they can trust you. Or when you need advice or you need an introduction, say, oh no, we know they're aboveboard. We'll make it happen for them.

MPD: There's a there's a, I'm probably butchering the phrase, but it's like the first board meeting surprise, right? Yeah. You do, you make an investment, you go to the first board meeting, and then you find out all the stuff they didn't tell you in the pitch. Yeah. There's no need for it, but, it's a hard, it's a hard spot, particularly in the fundraise when you're bringing on new partners because you are selling, right?

Yeah. You're trying to convince people to pick you out of many. Totally. And then, Everyone's got an Achilles heel. Everyone's got a weakness, right? There's something wrong with every company. Totally 

Mike Rogers: agreed. And I think the The market shift in the last year or so now has made this very clear because prior to when we were getting term sheets with no diligence, so founder would, pitch deck, pitch term, sheet first, board meeting.

Oh my God, what do we buy now? Multiple calls, real diligence, real relationship building, real skeletons in the closet, real understanding of the business model. Weigh less of that at the first board meeting, I'm sure. We're not at every deal in the country, but I'd assume that the skeletons in the closet board meetings are down significantly from where they were.

And our view, I know you feel the same way, is that this is the best healthy relationship for founders and their investors. 

MPD: Yeah. All right. My man. Back to it. Good seeing you. Thanks for jumping on.

All right, that's a wrap. Hope you enjoyed it. As always, you can find us on Twitter and on our website, interplay vc. I'm on Twitter at M p d. Feedback insights, ways we can help let us know. And until next week, hope you have a good Memorial Day weekend. Cut that part cause it's the wrong timing, and until next week.