The Hierarchy of Engagement

And why you should learn from others' mistakes

Author

Michael Houck
June 20, 2023

On Saturday I shared a deep dive on the current Reddit crisis with members. This weekend I’m sharing another on when to fire someone. Join the community with a 14-day free trial to get access to my library of 35+ deep dives, and a new one in your inbox every Saturday.

Heads up! I’m hosting an IRL founder meetup in NYC. RSVP here! More cities coming soon. I also have room for one sponsor — reply and LMK if you’d like to be part of it.

Today at a glance:

  • Opportunity → Subscription Web Development

  • Framework → Hierarchy of Engagement

  • Tool → Organize User Feedback

  • Trend → AI Ethics

  • Quote → Learning from Other’s Mistakes

I also added a new section this week where I curate the most interesting content I saw about startups over the past week. Check it out at the end.

🤝 A Message from Finmark

Forget spending hours creating clunky financial spreadsheets. Instead, have more time to spend actually building your startup.

Finmark, from BILL, helps founders:

  • Get a 360˚ view of your finances. Track key metrics like runway, burn rate, revenue, expenses, and payroll in real time—all from a single dashboard.

  • Gain investor confidence. Give investors confidence in your business by providing a clear financial plan and showcasing the KPIs that matter most.

  • Forecast accurately. No need to second-guess your math. Finmark handles the calculations for you so you can focus on analysis and growth.

  • Reduce busy work. Finmark integrates with the tools you already use, so inputting and updating your data is as simple as a couple of clicks.

Try Finmark for free and start planning your startup’s financial future.

Want to get in front of 36,000+ founders? Go here. Want to stop seeing ads? Upgrade now.

💡 Opportunity: Subscription Web Development

You may have heard of Designjoy on Twitter — a “productized” (read: subscription) one-person design agency. They’re doing over $1 million per year by offering “unlimited requests” but only one at a time. Pretty cool.

(This is similar to the limited amount of monthly advising I offer.)

Well, the founder of Designjoy thinks someone should use the same model for web development. This isn’t a venture-scale opportunity, but I agree (and it’s an easy opportunity to spin up).

These types of subscription services will become more popular throughout the rest of the year.

🧠 Framework: Hierarchy of Engagement

Sarah Tavel, General Partner at Benchmark, developed a way to understand user engagement called the Hierarchy of Engagement.

Level 1: Develop a “core action” you want users to take. Most often the core action is the action most correlated with retention. Facebook’s was growing your friend list.

Level 2: Enable network effects. Make sure that more people = more value on the network. Using our FB example, the more friends you have on FB the harder it is to leave.

Level 3: Flywheels and more flywheels. Once you have engaged users, make sure the time they’re engaged creates more engagement from other users — create an infinite engagement glitch in the matrix. For FB, having more friends on the platform meant you would invite more friends to join the platform.

🛠 Tool: Attio

Startups usually end up hating their CRM or never setting one up because they're slow, rigid, or require too much maintenance. Instead, they run on spreadsheets for way too long.

Attio is a new type of CRM that's fast and flexible while being powered by an advanced data model with the ease of a no-code builder. It's also free to use — check it out here.*

📈 Trend: AI Ethics

Is AI going to end humanity? Regardless of what you think about that question, there are increasing calls from industry and regulators to create standard guidelines to deter bad actors.

This has the potential not only to be an interesting problem space to explore for founders (look for B2B opportunities to help organizations set their own ethical guidelines for the use of AI), but also a notable issue in political movements around the world over the next few years.

💬 Quote: Learning from Others’ Mistakes

It’s unlikely your startup idea is completely new. Chances are people have tried some iteration of it in the past. Learning from their mistakes is an easy thing founders can do to give themselves an advantage when launching their startup.

Instacart learned from WebVan, Chewy learned from Pets[.]com, the list goes on…

🔗 Links of the Week

  • How to read a balance sheet (Link)

  • 6 automations to power your startup to 7 figures (Link)

  • A hiring process mistake and how to avoid it (Link)

  • Cheat codes to building a software company from someone who sold one for $100M. (Link)

  • 8 ways to nail your pitch from the co-founder of Netflix (Link)

  • 10 common mistakes founders make that result in slow growth. (Link)

  • Graph of what should be derisked at each funding stage. (Link)

💡 How Can I Help?

Here are 3 ways for me to help you close your fundraise, find PMF, or accelerate growth:

“*” indicates sponsored content. Want to stop seeing ads? Upgrade now.