Joah Spearman is a startup founder in Austin, Texas. You can find out more about his company, Localeur, here. You can find more guest posts from Austin entrepreneurs, investors and operators here, on our sister site, Austin Inno.
I want to talk for a minute about quality versus quantity, but not the kind of battle you’re probably used to in big business. This isn’t about Target vs. Wal-Mart or Suicide Squad’s terrible reviews vs. Suicide Squad’s global box office haul.
This post is about an entirely different version of the quality vs. quantity discussion. A friend of mine, James Andrews, who is CEO of Smashd, posed a question on Facebook earlier this year, asking what marketing trends people expect to see in 2017. One of the early comments was about the anticipation of greater focus on quality moving forward. I agree with this sentiment, but also believe that this push toward greater quality will take root in the way startups are measured, too.
What I see happening right now in the venture capital business, both with private startups or with public companies that relied on VC dollars to grow, is a growing and perpetual lack of concern for quality if the quantities are right. Meaning: if user growth is rapid and revenue is steadily increasing, investors are routinely showing disregard for whether or not companies are doing the right thing. In the cases of Twitter, Snapchat and Airbnb, those decisions are coming back to hurt them.
See, late last month, Snapchat pushed out yet another new filter that led to renewed tweets and Medium posts calling the company racist and offensive. While the unicorn said the filter was inspired by anime (similar to how their April 20th filter that was "inspired by" Bob Marley), many people including Katie Zhu, a product manager for the popular blogging platform Medium, called bullshit.
Let me ask you something: is anyone really surprised? No.
Twitter, another tech darling of the past decade, has had very well-publicized bouts with discrimination internally. First it was the lack of female representation on its board prior to their appointment of Marjorie Scardino in 2013 in the leadup to their I.P.O. Later came chronicled exits of black employees. A year ago, all any investor could seem to talk about was whether or not Twitter will ever grow quickly again to increase its stock price. In 2016, some began to wonder whether a climate of harassment and vitriol was keeping users away. As if on cue, alt-right Twitterati launched a campaign of harassment against celebrity comedian Leslie Jones, who quit the service very publicly (and temporarily). Twitter is waking up to the quality problem. In August it rolled out plans to introduce a quality filter.
Then there’s Airbnb, the hospitality industry disruptor, that is facing the most significant hit to its reputation as a company in what had previously been a largely positive wave of praise on its way to a reported $30 billion valuation. The reason? A number of black users have experienced discrimination by hosts who are less inclined to offer their apartments and homes to people of color. So much for sharing and belonging, right? Airbnb's near-term solution of hiring former Attorney General Eric Holder to help address the problem seems sound, but also less likely to fix the underlying issue at the source (the product itself as Nextdoor realized) than would, say, hiring black engineers and product managers. But perhaps the investors who are about to pour the next $1 billion into the company at a whopping $30 billion valuation don't take the issue as seriously as its CEO.
Money isn’t lost if they’re jerks. Money isn’t lost if you’re late to address a major issue. Money is lost if they aren’t growing. Nice guys finish last in Startupland, according to the ongoing and vibrant action of tech industry investors.
That is the message that is being sent over and over again to tech startup founders, whether you’re Jack Dorsey hiring a white man to run your diversity and inclusion efforts or you’re Evan Spiegel at Snapchat who, unlike Airbnb’s Brian Chesky, has not called his company’s discriminatory practices (or filters) the most challenging issue facing his company today.
How fast are you growing? What’s your recurring revenue run rate? How many monthly users do you have? What is your annual revenue forecast for this fiscal year?
Many of the most important metrics in business, the technology industry in particular, are focused on the quantitative attributes of a company. It’s understandable. Successful businesses need to grow their customer bases, their monthly users and their bottom lines.
But what about quality?
Very few are nearly as adept at predicting the value of quality-driven metrics.
If Uber gets in a fight with a major city’s government officials, exhibits what many of those officials believe to be asshole behavior then leaves the city (as it has in Austin), does that have implications on the quality of the technology or on the quantity of users and revenue potential? Perhaps investors don’t mind this happening in a city of just a million residents like Austin, but what if it happened in Paris or New York? Would that merit investor concern or a valuation adjustment?
Or if Airbnb has highly-publicized issues with discrimination against a segment of its customers as it has with black users in America, is that a factor of the marketplace’s quality or quantity? What happens if those discrimination concerns are coming from the gay community or French people or females? Does that give investors confidence in the company focused on belonging?
These occurrences and these questions should matter to you if you're a founder or startup investor or even if you work for a tech company. The industry today trains itself - the investors, the media, the employees - to be highly skilled at gauging the potential of a startup on quantitative aspects like user growth and revenue. Very few are nearly as adept at predicting the value of quality-driven metrics. Twitter investors who bought in at the company's $45-a-share IPO pop are understandably frustrated with its plummet to less than half that number. Would a better understanding of quality have helped them spot its problems earlier?
We may find out as transparency in business grows. Just look at the growing wave of criticism against tech companies and their lack of diversity since Intel, Apple, Amazon and others began publishing their hiring statistics. Hiring political figures like Eric Holder only goes so far. Eventually these companies - startups, even - will actually need to find a repeatable process that helps them consider quality over quantity. This, as it turns out, will help them recruit people of color, provide equal pay and promotion opportunities to women and stop being assholes in general. Of course, the tech industry wants you to believe this is simply a case of a few bad apples. That would be a lie. When these “bad apples” have as much business ownership as a senior executive at Uber or as much product leadership as the people who choose the filters at Snapchat, there is plenty evidence that this offensive behavior goes largely unpunished by investors who fuel the industry. And it all starts by placing as much focus on quality as quantity, and - in some instances - even more focus on quality if the quantity is lacking.
Today, everything we’re seeing in the business community, be it ethical manufacturing or diversity in recruiting and leadership, points to a growing role for quality (alongside quantity) on the success of companies. The tech industry may be living in its own bubble of sorts, thanks to the continued success of Facebook, Uber, Airbnb and others, but that bubble will pop if enough users continue to feel like this is perpetually breaking the one rule Google was smart enough to deploy as its motto: don’t be evil. Why does a tech company need to tell the public it won't be evil? Because a successful tech company - Google, Apple, Facebook, Uber, Airbnb - can transform an entire industry, people's lives and their behaviors. So if your company is racist or sexist or has a few bad apples in prominent positions, that behavior may just seep out into the mainstream via an apartment for rent or a Snapchat filter.
Quantity is about repeatable processes. Good news in knowing how to measure for it is that you scale more quickly by doing the thing that worked over and over again. Hire another white male engineer. Ignore another complaint from a black user or customer. We’re still growing so who cares, right?
Bad news is you lack diversity because your business relies on duplicating and building on the past rather than constantly seeking out what's new. You miss opportunities to build bridges with city officials. You miss signals from underrepresented employees and users. You miss out on future growth with customers you don’t presently have. There's no filter for failure, but if success looks like a continued disregard for people, then I hope this is what they meant when they said "fail fast."
