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Sarah Tavel\xa0is a General Partner at Benchmark and sits on the boards of Chainalysis, Hipcamp, Rekki, Cambly, and Medely. She is a founding member of All Raise, the nonprofit organization working to accelerate the success of women in the venture-capital and VC-backed startup ecosystem. Before Benchmark, Sarah was a partner at Greylock Partners. She joined Pinterest in 2012 as their first PM and launched their first search and recommendations features. She also led three acquisitions as she helped the company scale through a period of hypergrowth. In this episode, we discuss:

Sarah\u2019s Hierarchy of Engagement framework for growing a consumer startup

\u2022 The three levels of the Hierarchy of Engagement: core action, retention, and self-perpetuation

\u2022 The importance of measuring cohorts and maintaining focus on the core action

\u2022 Examples of core user actions from Pinterest and YouTube

Sarah\u2019s Hierarchy of Marketplaces framework for building a marketplace startup

\u2022 The three vectors of growth for dominating a marketplace

\u2022 Advice on \u201ctipping the marketplace\u201d and ultimately dominating the market

\u2022 The value of focusing on a constrained market

\u2022 How to avoid disruption

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This entire episode is brought to you by Gelt\u2014Redefine your approach to taxes.

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Find the full transcript at: https://www.lennysnewsletter.com/p/the-hierarchy-of-engagement-sarah

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Where to find Sarah Tavel:

\u2022 X: https://twitter.com/sarahtavel

\u2022 LinkedIn: https://www.linkedin.com/in/sarahtavel/

\u2022 Substack: https://www.sarahtavel.com/

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Where to find Lenny:

\u2022 Newsletter: https://www.lennysnewsletter.com

\u2022 X: https://twitter.com/lennysan

\u2022 LinkedIn: https://www.linkedin.com/in/lennyrachitsky/

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In this episode, we cover:

(00:00) Sarah\u2019s background

(03:33) Framework 1: The Hierarchy of Engagement

(06:03) Level 1: Core action

(10:33) Level 2: Retention

(14:00) Level 3: Self-perpetuation

(19:32) The importance of focus

(23:54) The challenge of anonymity

(26:04) Advice for founders who want to increase retention

(29:34) What founders often get wrong

(31:43) Examples of core actions

(37:37) Finding your North Star Metric

(38:12) Who should use the Hierarchy of Engagement framework

(38:54) The Hierarchy of Marketplaces framework

(46:09) Level 1: Focus on a constrained opportunity

(50:19) Sarah\u2019s \u201chappy GMV\u201d and \u201cminimum viable happiness\u201d concepts

(54:47) Thumbtack: a counterexample to this approach

(56:36) Signs you\u2019re ready to move to level 2

(58:06) Level 2: Tipping the marketplace

(01:04:15) Tipping loops

(01:10:53) Not all markets are susceptible to tipping

(01:15:55) The challenge of homogeneity in B2B marketplaces

(01:20:29) Signs you\u2019re tipping successfully

(01:21:43) Level 3: Dominating the market

(01:28:29) The opportunity in underestimated markets

(01:30:11) The challenges of chasing GMV and losing focus

(01:36:36) Recognizing currents and momentum in the market

(01:39:20) You can never rest on your laurels

(01:41:03) How to apply these frameworks outside of marketplaces

(01:42:57) Three ways to find marketplace opportunity

(01:45:10 ) Lightning round

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Referenced:

\u2022 Hierarchy of Engagement, Expanded: https://sarahtavel.medium.com/the-hierarchy-of-engagement-expanded-648329d60804

\u2022 Pinterest: https://www.pinterest.com/

\u2022 Evernote: https://evernote.com/

\u2022 Notion: https://www.notion.so/

\u2022 Houseparty app: https://en.wikipedia.org/wiki/Houseparty_(app)

\u2022 Clubhouse: https://www.clubhouse.com/

\u2022 How to price your product | Naomi Ionita (Menlo Ventures): https://www.lennyspodcast.com/how-to-price-your-product-naomi-ionita-menlo-ventures/

\u2022 TikTok: https://www.tiktok.com/

\u2022 Lessons on building a viral consumer app: The story of Saturn: https://www.lennysnewsletter.com/p/lessons-on-building-a-viral-consumer

\u2022 Saturn: https://www.joinsaturn.com/

\u2022 What happened to Secret?: https://www.failory.com/cemetery/secret

\u2022 How to determine your activation metric: https://www.lennysnewsletter.com/p/how-to-determine-your-activation

\u2022 Shishir Mehrotra on LinkedIn: https://www.linkedin.com/in/shishirmehrotra/

\u2022 The rituals of great teams | Shishir Mehrotra of Coda, YouTube, Microsoft: https://www.lennyspodcast.com/the-rituals-of-great-teams-shishir-mehrotra-coda-youtube-microsoft/

\u2022 Engagement Hierarchy: Core Actions: https://sarahtavel.medium.com/engagement-hierarchy-core-actions-dd4f72042100

\u2022 Choosing Your North Star Metric: https://www.lennysnewsletter.com/p/choosing-your-north-star-metric

\u2022 Hierarchy of Marketplaces: https://sarahtavel.medium.com/the-hierarchy-of-marketplaces-introduction-and-level-1-983995aa218e

\u2022 Mike Williams on LinkedIn: https://www.linkedin.com/in/yoroomie/

\u2022 Everything Marketplaces: https://www.everythingmarketplaces.com/

\u2022 Fabrice Grinda on LinkedIn: https://www.linkedin.com/in/fabricegrinda/

\u2022 OLX: https://www.olx.com/

\u2022 DoorDash Loves the \u2019Burbs as Much as You Do: https://www.wsj.com/articles/doordash-loves-the-burbs-as-much-as-you-do-11605618001

\u2022 Thumbtack: https://www.thumbtack.com/

\u2022 NPS: https://en.wikipedia.org/wiki/Net_promoter_score

\u2022 Sean Ellis on LinkedIn: https://www.linkedin.com/in/seanellis/

\u2022 Rekki: https://rekki.com/

\u2022 Ronen Givon on LinkedIn: https://www.linkedin.com/in/ronen-givon-535b2514

\u2022 Hipcamp: https://www.hipcamp.com/

\u2022 Demand driving supply: The little-understood growth loop behind a surprising number of iconic billion-dollar companies: https://www.lennysnewsletter.com/p/demand-driving-supply-marketplaces

\u2022 Inside the Revolution at Etsy: https://www.nytimes.com/2017/11/25/business/etsy-josh-silverman.html

\u2022 Faire: https://www.faire.com/

\u2022 Bill Gurley on LinkedIn: https://www.linkedin.com/in/billgurley/

\u2022 Mechanical Turk: https://www.mturk.com/

\u2022 Parker Conrad on LinkedIn: https://www.linkedin.com/in/parkerconrad/

\u2022 Rippling: https://www.rippling.com/

\u2022 \u201cWhite Space\u201d for Building a Marketplace: How to Find Your Competition\u2019s Vulnerabilities\u2014and Capitalize: https://sarahtavel.medium.com/white-space-for-building-a-marketplace-how-to-find-your-competitions-vulnerabilities-and-79674aa4d399

\u2022 Pachinko: https://www.amazon.com/Pachinko-National-Book-Award-Finalist/dp/1455563935

\u2022 The Five Temptations of a CEO: https://www.amazon.com/Five-Temptations-CEO-Anniversary-Leadership/dp/0470267585

\u2022 The Five Dysfunctions of a Team: A Leadership Fable: https://www.amazon.com/Five-Dysfunctions-Team-Leadership-Fable/dp/0787960756

\u2022 Tesla: https://www.tesla.com/

\u2022 Reid Hoffman on LinkedIn: https://www.linkedin.com/in/reidhoffman/

\u2022 What Is A Good Activation Rate: https://www.lennysnewsletter.com/p/what-is-a-good-activation-rate

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Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email podcast@lennyrachitsky.com.

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Lenny may be an investor in the companies discussed.