How Clubhouse Drove Sign-ups & Engagement VIA Exclusivity ($1B in 8 Months) #scottsthoughts

Welcome to Success Story, the most useful podcasts in the world. I'm your host, Scott D. Clarey, and today we're going to break down how Clubhouse grew from just another startup to a billion dollar valuation in just over eight months. And if I'm not mistaken, now they're at a $4 billion plus valuation with 10 million weekly active users. This is a business growth case study. All right, today we're going to talk about Clubhouse. We're going to break down how they went from a no name company to a billion dollar company in eight months. During a pandemic, we're going to talk about founders, we're going to talk about their strategy. We're going to talk about exclusivity and fomo and talk about everything that you can learn from Clubhouse after we break down their story. So let's get right into it. So pandemic hits, most companies are not doing so great. Many corporations are just focusing on what they're already doing, on what they know works, many people are getting furloughed. Life's not really that great for a lot of businesses that are trying to understand how to navigate this new normal. But there are some companies who took advantage of the pandemic and took advantage of it in a big way. And the companies that we may think of would be the ones that we're selling personal protection equipment or the ones that we're selling tools that allowed us to work virtually. But there are other companies that also took advantage of the pandemic and not in that malicious way, but in a way that allowed them to transform themselves and tap into a need that probably wouldn't have been as prevalent in a pre-pandemic era. And that's what happened with Clubhouse. The transformation of Clubhouse turned it from a startup, it was a startup that had smart people behind it, but it turned it from a startup into a billion dollar business in eight months. And that's not normal. It was one of the most remarkable, fascinating, and brilliantly executed growth stories and strategies in startup history. So let's go back to 2020. So the two founders of Clubhouse, so Rohan, Seth, and Paul Davidson, they launched Clubhouse in April 2020 as an audio only social media platform. That's how we still know it. The company's growth was largely driven by three separate aspects, influencer marketing, strong ties to Silicon Valley tech, and the beauty and simplicity of the product. That's what eventually led to the growth of Clubhouse. Now today, many people use Clubhouse to expand their professional and personal networks still as an audio only platform. But let's, again, go back to that April of 2020, let's go back to that date when Clubhouse launched and walk through why it was such a massive hit, almost from day one. So this is the first aspect, we spoke about three aspects, right? We spoke about influencer marketing, strong ties, and beautifully crafted products. The first aspect would be the strong ties, that's what I want to dive into. And I want to also say this. The fact that the behaviors and the habits of the average user, the average Clubhouse user, who was sitting at home, who was Zoom fatigued, who basically was on video all day, but had some extra time because they didn't have community more, that's the persona of the Clubhouse user. That's the person who was sitting at home who eventually started using the platform. So all the things that the two founders did and had access to, all of that was amplified and compounded by the persona of the audience. And this is something that we have to, we have to give credit, we're credit to do. And the landscape of the, you know, the rather the environment of the user, the reality of the user who jumps on Clubhouse would have been much different if it had launched two years ago, three years ago, right? So first point, using the reputation as an advantage. So the founders Rohan Seth and Paul Davidson leveraged their reputation and network to reach influential figures. Clubhouse accessed the market via the promotion of mega influencers, like Drake and Elon Monskin Oprah Winfrey. Without a doubt, the endorsement from a large influencer network draws a lot of attention to your product. And it's very impressive. The Clubhouse managed to attract such high caliber individuals so early on. And these influencers really brought a product and an act that was still in its infancy to the attention of everyone in Silicon Valley and really the rest of the world. Now you may be wondering how did you get access to these influencers? Because of course, if you have access to them, then it sounds really, really easy. It makes a lot of sense, but you don't just have access to these people. So all of this was made popular by the two founders by Seth and Davidson's network. They were established members of the Silicon Valley Tech community and venture capital community. They had a strong network of high network individuals. And they had already worked on four technology startups before Clubhouse was even a thought. So you have to understand that they had built their network between their career success and their business successes in the past to get it to a point where they had the access. They had the connections. They had their reputation already that allowed them to tap into this audience. For example, just to show you how successful they were before you even heard of them or their product clubhouse, they had sold one of their first apps called Highlight to Pinterest. That's not a small acquisition in and of itself. So they had a network. They had past wins. They had a reputation and with their ties to the tech and the venture capital scene, they managed to raise $12 million from and recent Horowitz, a private American venture capital from a very notable and well-known American venture capital firm. And this was an impressive first win for Clubhouse and obviously attracted some attention because Andrews and Horowitz doesn't just invest in anybody. Like, for example, they've been in Coinbase, they've been in Lyft, they've been in Ripple, Databricks, Oculus VR, some really, really notable companies. Now, to understand why this investment was such a big deal and why it had such an impact on the success of Clubhouse, we have to look at Silicon Valley in a broader context. Silicon Valley, many startups fail. This is not uncommon for people to fail. In fact, you know, 90, 95, 99% of startups, they fail. And why is that? Black funding, investors pulling out, hiring the wrong people, personalities, ambitions, goals of the founders don't align. And as a consequence, the companies become fragmented, they become divided. Venture capital investors and firms like Andrews and Horowitz and others, they're very risk-adversed. They deny companies funding when they most need it, meaning the ID doesn't even get off the ground. So by having the reputation, by building out small things and by doing those things successfully, and by putting in the time and the years to build the network, this is what allowed them to raise money easily when they needed it. So the funding in and of itself helps your company progress forward, but also just getting the funding attracts good attention. It shows it a notable venture capital firm is interested in you. So this provided that first successful route to market awareness, which again, allowed more notable influencers to feel comfortable getting behind the platform, lending their name to the platform, hopping on. And of course, because how it works in Silicon Valley is when one investor goes in on a project, this makes a lot of other investors feel very comfortable. So when Andreessen Horowitz gives a company $12 million, many other investment firms now feel as though, well, now it makes sense for me to go in. And usually what happens is in Silicon Valley, when you have one main investment from the leads around that puts in money, then everybody wants to jump in and then around or funding round or the amount of money you can get, you get potentially too many offers and you could be what could be considered oversubscribed or over invested in. So it's usually hard to get that first person, but when that first investor is a notable name or even if the first investor is not a notable name, it definitely opens the floodgates for other investors and exposure and press and PR and in this case, influencers. So now they have the funding, they have some eyeballs on them. We have to remember, COVID is still happening and marketing, market conditions are right for this kind of tech and this kind of platform. So funding, influencers, environment, all lines up. But what's next? Well, your product has to be damn good because even if you market a shitty product, people are just going to find a shitty product quicker and never use it. So what made people want to use clubhouse? Well, it was intuitive. It was familiar. So social media communities always struggle to gain the approval of a larger audience. If the first time you use it, it is an intuitive, it is an simple, it doesn't make sense. It's not flawless and that's what clubhouse made sure they were, they were intuitive, they were user friendly, the onboarding was simple. It got the attention and it followed it up with high quality design and it allowed users to feel comfortable using it which allowed them to stay on the platform and made them want to stay on the platform. Even if you think about how you can use it in your day to day, if you're on clubhouse, you don't have to be staring at your phone at your screen to use it. You can be using it while you're at the gym while you're walking while you're studying while you're relaxing. It's just audio, it's just listening and they've made it so that it's a very, very user-friendly tool once you're in it to join the jump between rooms to engage in conversations to just listen to conversations and potentially not get involved. The user experience as well as even the design, the layout, the font, the pages, the flow, all of it was very well put together and that makes for a comfortable product, a product that feels familiar from day one and when you have that type of product that just resonates with the user the first time they interact with it, that's a sticky product, that's something that they'll keep using again and again and again because the experience is enjoyable. If you want to speak about some data points that validate everything I'm saying, clubhouse generated similar levels of engagement and app retention as Spotify due to the fact that you didn't have to leave your phone on to actually use it and high levels of screen time lead to higher rankings in the app store which meant more downloads, which meant more attention from investors, which meant more attention from influencers so you can see how all these things really need to align. The last piece that clubhouse did really, really well was a bit of FOMO with an invite-only layer. So the nice thing about clubhouse is that once you're in, you're in. It has an open networking structure, in essence it means that once you're in there you have no restrictions, you can join any club, any room, nothing's really private, you can move in and out of clubhouse rooms, observing conversations, getting involved, contributing to the discussion, you can join clubhouse rooms with celebrities, with the most famous people in the world, you don't need a ticket, you just join. But also there's an element of FOMO because everything's live in clubhouse, it's best to stop people from recording conversations so if you miss a live show you're out of luck, there's no archive. So imagine if the most famous person in the world who is your idol is speaking live on a topic that you're interested in and you know that it's only going to be at that particular time you're going to join and you know that you're going to miss it, if you know that if you miss it you're never going to be able to hear that segment again. So it increases FOMO or fear of missing out so that people want to join and want to get involved. But then also there's the invite-only piece mixed in with the live FOMO component. So the invite-only piece, it was structured like this. So when clubhouse was first launched, it was launched on an invite-only basis and it was actually only originally launched on iOS and it wasn't even available for Android users. So you needed an invite from somebody to join. By December of 2020 it had 600,000 members as well as celebrities who had joined. Now a few months later it has over 12, sorry not 12, it has 10 million weekly active users. So it shows you that even if it's invite-only if you have all the other elements aligned people are going to want to join, they're going to want to participate. And the platform does have a very exclusive feel. When you're trying to join, you don't have an invite yet. It has an era of mysteriousness and unexplainability. You just know that there's celebrities there, you know that there's people there, your peers there. You see it all over the news when it was first launched that got some great PR, but you can't get in so you're looking for invites, invites excuse me. And it got to the point where there's actually a reseller market, meaning that people who had invites were actually selling their invites for money. So if you had so many invites you would try and sell those invites and people would pay to get onto the platform so that you didn't have to wait for a free invite or access to the platform in three or four or five or six months. So all of these elements really combine to create this excitement and this anticipation and all of this just ended up being a huge flywheel for users getting into the platform using it. And then that combined with the fact that people were probably tired of video on all the time, but they're also just sitting at home really, really allowed clubhouse to be successful in its first few months. And that's really when you're taking a product to market and you have investment and you want to have some momentum, which is one of the most important things that a startup can have. It allowed them to really hit the ground running in a major way, which has led their platform to gain the success that it has had to date. And of course, we can always attribute it to the network of Seth and Davidson and the fact that they had past successes, but realistically you can read into it a little bit deeper and you can see that of course the network helped, but there was a perfectly executed take-to-market strategy and playbook, which really ended up and resulted in the success of clubhouse of C. Is the end result? Well, today as of July 2021, clubhouse is worth and valued over $4 billion. Now here are 11 lessons that I've drawn out from the clubhouse story that I think are great lessons just to recap and lessons that if you are building a startup or you're building your thing, or even if even for people that aren't building their own thing, these are very smart and hopefully insightful lessons. So number one, reputation and network can expedite anything you're working on or you're taking on, job hunt, startup, etc. The founders use their network to leverage startup capital as well as influencers for their take-to-market strategy, but you can use your network to get a new job, to raise money, to find new opportunities. So I know this is an overused quote, but your network is your net worth and it is 100% applicable on point and something you should always remember. Second lesson influencer marketing works, when done right. So a lot of people don't quite understand influencer marketing. Now this was a slightly different play than what most companies would be able to do, meaning that they just got incredibly large influencers that made tabloids and headlines and got them PR and press. But still, if you find influencers that are niche to your product or your service, influencer marketing does work when done right, but you have to know who is going to have the most loyal fan base, the most loyal audience that will get people to care about what they're saying. Third lesson, and overnight success takes years. This was the fourth successful, if I'm not mistaken, it could have been the fifth because I did four previous, so be the fifth successful tech venture by the two co-founders. So always you see the end result, but you don't see all the work in the hours and the success and the failures because I can guarantee you, if there was four successful tech ventures, there was a hell of a lot of failures as well. You don't see all of that, right? So you just see these two guys, they build Clubhouse, oh my God, what an incredible company in business, but you got to take a look back and see all the things that they've done to get to the point that allowed them to create Clubhouse. If Clubhouse was the first thing, these two people made, there's a really good chance it would have not turned out the way it did today. Lesson number four, FOMO and exclusivity will always drive people to want to be in. Make something that people value and make it exclusive. Number five, product-led growth and product-led marketing is important. Part of the appeal of an app or a product or even a service is just creating something that's exceptional. People just don't seem to focus as much as they should on just creating incredible stuff. So part of the appeal of the app was the intuitiveness, the user friendliness, the UI, the UX. Just take this as a lesson as they build incredible shit and people will find it. Just don't put a garbage into the world. Number six, have a strong take-to-market strategy. So yes, they have their network, they have their connections, but you can see all the different steps they took to get the product to market. That was executed flawlessly, so they didn't launch the product and just hope people signed up. Have a strategy. Even if it's not perfect, have some sort of strategy. Don't just put something out into the world and have no strategy for marketing it or selling it. You have to have some idea of how you're going to find your users. It doesn't mean you should wait till it's a perfect plan, but have some sort of plan so you can action against it. Number seven, creating a community is hard, but when done right, it's a billion dollar business idea. So all successful apps, Facebook, Twitter, Instagram, LinkedIn, they're all social media communities, but even non-social media companies that really have their consumers as evangelists, they've created a community. So creating a community, even if it's not your core product, which it is for Clubhouse and for other social media apps, creating a community will always help you build a business. Video is powerful and intimate, sorry, lesson number eight, audio powerful and intimate even at scale. You don't always have to have your camera on. I think this was sort of a lesson that is a little bit more specific to Clubhouse, but it's something that allowed them to scale and to build and to amass this enormous audience and community because I think people were so sick of video chat and during COVID. Number nine, build a product that focuses on inclusion and acceptance. The nature of Clubhouse prompted moderators to make people feel welcome, a stark contrast from other social media platforms. So the lesson here is that when you're building something, try and make it so that people feel comfortable and happy using it because a lot of social media unfortunately has gotten very negative. So one thing that Clubhouse does focus on is allowing you to go wherever you'd like to go, speaking to anybody who you'd like to speak to, and also the moderators for these channels are trying to bring you in, are trying to get you to engage, and that's something that allows people to feel good about interacting with these different rooms that they jump in and out of. It makes them feel like they can be included and be part of the conversation with incredible smart people, sometimes celebrity status people, whereas a lot of other social media apps, they're very negative in toxic environments unfortunately. And lesson number 10, build community into every part of the app, build community to every part of the thing you're building. Even after joining, you're instantly notified when other members of your social network join the app to increase your chance of staying with and using the app. So the lesson here is that if you're building something, of course, you want to increase the stickiness of the product. When people join or sign up for the thing, they want to feel like there's a community that they've now entered into, and what Clubhouse did well is after you joined, it's now showing you in your phone, in your contacts, who else is using the app? Who else out of your friends is also in this community? So you feel like you're part of something, you feel like you're in this with your friends. And I think that that's something that you should also take to heart if you're building something, because too many companies just build on delivering the product or service and don't have a community aspect. It reduces the stickiness of the product. And by sticking it to the product, I mean, it reduces the chance of the person staying with the product, because they don't really care about it. They just use it for what it's meant to be used for, and that's it. And when you're first building something, you don't even think, of course, I want to build and deliver a great product, but at the end of the day, you also want people to feel good when they're using it. And of course, it depends on whether or not you're building a business product or a consumer product. But still try and include some aspect of community, even the ability for members to ask other members questions. You see that a lot with help boards and whatnot. And there's communities built around business to business or non-social media products. So always try and build community into every part of your product or your service or your app. And there's a variety of ways you can do it. So be creative with it. And last lesson, first impressions matter for anything you're selling to anybody, any product you're building, any company you're starting. First impressions always matter. So with Clubhouse, the UI, the UX, when you first download the app, beyond boarding process, it's simple. It's intuitive. It's non-invasive. It's not asking you for all of your secret questions, secret answer, date of birth. It's not requiring a lot for you to get in and get started. Which makes it feel easy, simple, non-invasive. This is what people want. Don't make your product hard to use. Don't make your product hard to purchase. And if you can eliminate some steps so that people can start using right away and they feel like the onboarding is non-invasive, simple, easy, and they're guided through the actions they have to take to understand and to use the product or the service completely. So there's no question mark. That's a great product. That's a great experience. That's a great first impression that will again increase the chances of that person using your product long term. Anyways, that's the story of Clubhouse. Those are some lessons brought out of Clubhouse. I hope you enjoyed. If you want more business, growth, case studies, actionable insight, or interviews with incredible people, go to successstorypodcast.com.