Jason Citron - Building the Third Place - [Founder’s Field Guide, EP.4]

Podcast Summary

• Microsoft for Startups: A Valuable Resource for B2B Companies: Microsoft for Startups provides B2B startups with access to technology, a streamlined sales path, and a proven track record of driving business value.

  Microsoft for Startups is a valuable resource for B2B startups looking to scale their companies. The program offers access to technology like Azure Cloud and GitHub, as well as a streamlined path to selling alongside Microsoft and their global partner ecosystem. Notable investor, Jeff Ma, now leads the program, and it has a proven track record of driving long-term business value for participating companies. Founders of B2B enterprises should consider checking out Microsoft for Startups at startups.microsoft.com. Additionally, Vanta provides a simpler and more cost-effective solution for startups seeking SOC 2 compliance, allowing them to focus on building their businesses instead of dealing with the complexities of audits. During this episode of Founders Field Guide, Jason Citron, the founder and CEO of Discord, shared insights into his journey from video game player to creator. Starting as a game developer, Citron became fascinated with computer programming and making games after a friend showed him how to draw circles on a computer screen using Qbasic. This experience sparked a lifelong obsession with learning how to code and create digital experiences. Later, he founded OpenFein in 2008, which provided location-based social networking services for mobile applications. These early experiences shaped Citron's entrepreneurial mindset and prepared him for the creation and growth of Discord, one of the largest and fastest-growing social networks in the world.

• Capitalizing on new platforms for success: Identifying new platforms early and building something people want can lead to significant growth in entrepreneurship

  Recognizing and capitalizing on new platforms can lead to significant success in entrepreneurship. The speaker's experience in the video game industry and later in tech startups illustrates this idea. In the video game industry, being a launch title on a new console generation provided an opportunity for success due to limited competition. Similarly, when the App Store launched, the speaker saw it as a new frontier and managed to release a game on the first day, leading to thousands of installs and growth for his business. However, this approach comes with risks, as it requires identifying new platforms and trends early on. The speaker's experience also highlights the importance of building something people want and effectively distributing it to reach potential customers.

• From game success to business pivot: Entrepreneurial success requires adaptability and uncertainty management. Validating hypotheses, sequencing, and timing are crucial. Pivoting when necessary can lead to new opportunities.

  Uncertainty and adaptability are key components of entrepreneurial success. The founder of OpenFeint started with a successful game launch but soon realized that building a sustainable business was not as simple as getting distribution. He tried various business models but none of them worked out. Facing the possibility of having to return home due to lack of funds, he pivoted and turned the social features of his game into a toolkit for other developers. This led to the creation of Xbox Live for iPhone, which became OpenFeint and was a huge success. The experience taught him the importance of validating hypotheses, sequencing and timing, and going from engineering to CEO roles. The sale of OpenFeint did not mark the end of his entrepreneurial journey, but rather the beginning of the idea for Discord. The transition was not a straight line, but a series of lessons and experiences that shaped his next venture.

• Entrepreneurship requires passion and perseverance: Former entrepreneur's journey from selling his company to co-founding Discord demonstrates the importance of staying true to your passions and persevering through setbacks in entrepreneurship.

  Passion and perseverance are key in entrepreneurship, even when things don't go as planned. The speaker, a former entrepreneur, shared his experience of selling his company and trying to build a new one focused on cooperative multiplayer games on tablets. Despite initial setbacks and emotional challenges, he continued to pursue his vision, using his understanding of the industry and consumer needs. He applied a hypothesis-testing mindset, treating product development like a scientific process. This approach, combined with his passion, led him to co-found Discord, a communication platform for gamers that has since become a major player in the gaming industry. The experience taught him that even when things don't go as planned, it's important to keep trying and stay true to your passions.

• Getting real signals early for informed decisions: Early testing and public feedback can help entrepreneurs make informed decisions and derisk their product, but not every product will be a hit.

  In the process of building a company or developing a product, it's crucial to get real and meaningful signal back as early as possible to make informed decisions. The entrepreneur shared examples from his experience, including the importance of derisking by testing art styles and gameplay mechanics through public feedback. While making mistakes is inevitable, interpreting the right signals can help improve the product and increase its chances of success. However, it's important to note that even with the right approach, not every product will be a hit. The entrepreneur's approach has led to modest successes, but he acknowledges that building something massive at scale required more than just getting the right signals early on.

• Understanding user behavior and passion in early stages: Early intense usage by passionate users can indicate objective utility and lead to long-term success for products.

  For building products at scale, it's crucial to have high frequency and longevity of usage during the early days. Passionate users in the initial stages are more likely to be intensely engaged and can indicate the objective utility of what you're creating. For instance, Discord's success can be attributed to its early intense usage, as users were rapidly obsessed with it due to its promise of improving outdated communication tools for gaming communities. The original idea behind Discord was to build a better version of existing communication apps for PC users, who were already heavily invested in multiplayer games. Discord seamlessly integrated communication into the gaming experience, allowing users to text and voice chat within an invite-only server. The app's success can be attributed to its early adoption by passionate gamers and its ability to fit snugly into the gaming activity, creating an always-on conference call experience. This case study highlights the importance of understanding user behavior and passion during the early stages of product development to achieve long-term success.

• Making voice communication for gaming simple and accessible: Discord's founders leveraged ease of use and accessibility to create a popular voice communication app for gamers, expanding through targeted online communities.

  Discord's founders recognized the popularity of voice communication among gamers and aimed to make it more accessible. They built on existing technologies like WebRTC to create an easy-to-use app that could be joined through a simple link, rather than requiring downloads and complicated IP addresses. This ease of use was crucial in gaining initial traction through word-of-mouth among friends and gaming communities. To expand beyond this, they targeted online spaces where gamers gathered, spreading the word and growing the user base. Essentially, they focused on making voice communication for gaming simple, accessible, and convenient, which proved to be a winning strategy.

• Engaging with gaming community on Reddit: Responding directly to users in a community platform led to Discord's initial growth and widespread adoption by creating a low-commitment, playful communication service.

  Discord's initial growth was driven by a strategic approach to engage with the gaming community on Reddit. The team asked for feedback on their new communication app, Discord, and responded directly to users in a Discord server. This approach generated word-of-mouth and resulted in hundreds of new users. The team intended to create a communication service that felt like a "third place" where friends could interact with low friction and commitment. It wasn't until years later that they realized they had inadvertently built a digital version of Ray Oldenburg's concept of a third place. The team's focus on creating a playful and low-commitment communication service resonated with users beyond gaming, leading to its widespread adoption. Understanding their audience early on was crucial to Discord's success.

• Discovering a broader purpose for Discord: Discord's founders recognized 30% of users weren't gaming, leading them to expand mission to 'give people power to create belonging'.

  Discord, initially created for gaming communities, has evolved to serve a much broader purpose. The founders discovered that around 30% of users were not primarily using Discord for gaming. Through introspection and deep conversations, they realized that the core of their mission was to help people find belonging and connection. This realization expanded their mission to "giving people the power to create belonging in their life." Discord, with its communication services, enables people to connect with friends and communities, regardless of physical distance. This journey illustrates the importance of recognizing and adapting to the evolving needs of users, and the profound impact technology can have on fostering human connection.

• Discord shifts focus from selling video games to communication services: Discord abandoned ads and instead invested in enhancing its communication service and premium subscription model, leading to its growth as a significant business.

  Discord pivoted from selling video games to focusing on communication services due to market competition and user preferences. The company initially offered a subscription service, Discord Nitro, but debated whether to add ads or double down on the service. The team ultimately decided against selling ads and instead invested in enhancing Discord Nitro, making it more valuable to users and leading to its growth into a significant business. The alignment of incentives between Discord's team and users was a priority, and the company aimed to create a positive end-user experience. This strategic decision to focus on enhancing the communication service and offering a premium subscription model has proven successful for Discord.

• Discord offers premium features to enhance communication: Discord keeps basic functions free while offering premium features to enhance communication and user experience, ensuring user engagement and willingness to pay

  Discord, a communication platform, differentiates itself from competitors by offering premium features that enhance communication, while keeping basic functions free. This approach keeps users engaged and willing to pay for additional benefits. Examples include custom animated emojis, high-quality video game streaming, and server boosting. Discord's founders, having learned from the history of businesses that aggregate large user bases, aimed to create a company with clear intentions and a focus on user experience. They prioritize offering features that are delightful and optional, rather than necessary, to ensure the platform remains fun and inclusive for all users.

• Creating a Positive Work Environment: By hiring slowly and carefully, focusing on mission fit, and fostering intrinsic motivation, founders can build a company with a strong work culture and high productivity.

  Building a successful company requires intentionality and a strong culture. Jason Citron, the founder of Discord, shared his experience of facing challenges when managing a larger team at his previous company, OpenFaint. He emphasized the importance of creating a positive work environment from the start, as opposed to letting it develop by accident. By hiring slowly and carefully, focusing on mission fit, and fostering intrinsic motivation, Citron and his team were able to build a company with a high employee-to-user base ratio and a strong sense of purpose. The key takeaway is that as a company grows, communication and coordination become more complex, but by being intentional and deliberate, founders can create a positive work environment that fosters motivation and productivity.

• Investing in people and processes for long-term success: Focus on employee development, customer needs, and small, mighty teams for long-term business growth. Discord's unique features create a competitive advantage.

  Building a successful and enduring company involves taking a long-term view and focusing on the development of people and processes. The speaker emphasizes the importance of investing in management training and employee development, even if it doesn't yield immediate returns. He also stresses the importance of staying focused on the needs of customers and the fundamentals of the business, rather than fixating on competition. The speaker's philosophy for building a workplace is centered around small, mighty teams and making existing people more productive or smarter. He believes that Discord's network effect provides a strong competitive advantage, but that intentional thinking about competitive advantage is necessary for businesses looking to scale. The unique combination of features in Discord, including text, video, and voice communication, creates a holistic experience that sets it apart from other communications platforms.

• Discord's Community Experience and Hiring Practices: Discord fosters a vibrant community through invite-only access, rule control, and live features. Humility and compassion are valued in hiring, with interviews focusing on candidates' interactions with service workers.

  Discord's combination of an invite-only space with the ability to control rules and norms, along with live features like text, voice, and video, creates a vibrant, engaging community experience akin to a bustling restaurant. Humility and compassion are valued traits in hiring, and Discord's unique interview process includes observing how candidates treat service workers. The use of text, voice, and video communication tools caters to different levels of focus and attention. Discord's emphasis on belonging and kindness is reflected in their hiring practices. A kind act that has had a significant impact on someone is a question often asked during interviews.

• The power of relationships and small kindnesses: Consider the long-term implications of relationships and small acts of kindness for personal and business success. Start with the end in mind, understand your role, focus on big risks, and don't shy away from the enterprise market.

  The power of relationships and consistent small kindnesses can have a significant impact on our lives and businesses. Evan Reiser, CEO of Abnormal Security, emphasized this during his conversation with Jason on the Microsoft for Startups podcast. He shared how the little things, like making coffee for a spouse or a coworker, can create a magical bond in relationships. Similarly, when it comes to choosing a cloud provider or vendor for a business, entrepreneurs should consider the long-term implications. Microsoft for Startups offers a great ecosystem for enterprise startups, making it easier for both startups and customers to succeed. For those starting new b2b companies, Evan advised starting with the end in mind, understanding the founder's role, focusing on big existential risks, and not shying away from the enterprise market. By focusing on the little things and considering the long-term implications, we can make meaningful connections and build successful businesses.

• Achieving success with new cloud native platforms: Adopting modern technologies helped X Company secure a Fortune 500 client within a year, highlighting the importance of speed and agility in today's business world

  Using new cloud native platforms helped a startup called "X Company" achieve success and secure its first Fortune 500 client within a year of its founding in April 2018. These platforms allowed the company to deliver value quickly and efficiently to its customers. By enabling fast access to solutions, the startup was able to make a significant impact in a short amount of time. This success story underscores the importance of adopting modern technologies in today's business landscape, where speed and agility are key factors for growth. For more insights and episodes, visit investorfieldguide.com.