Sequoia is one of the most sought-after VC firms in the world, and predictably, it sees plenty of startups competing for its attention.
In a recent episode of TechCrunch Live (formerly Extra Crunch Live), Sequoia partner Stephanie Zhan and Nick Fajt, founder and CEO of social gaming platform Rec Room, explained what the venture capital firm looks for in consumer-facing startups. We even took a look at Rec Room’s earliest pitch deck, the seed that ultimately grew into a business that has raised nearly $150 million.
This episode also featured the ECL Pitch-Off, where founders in the audience pitched their products and services to our expert guests to get their live feedback. You can check out the whole episode as well as the Rec Room pitch deck below.
Love is the answer
Sequoia, alongside almost every other VC firm, prizes one factor when deciding to investing in a consumer-facing company: User love.
There are a handful of ways to measure user love, from NPS scores to retention and engagement metrics to reviews of the product.
Just a few weeks after it launched, Rec Room was seeing users average 26 minutes per session and around 90 minutes per user every day, which meant that many users were coming back for multiple sessions.
Bear in mind that we aren’t talking about tens of thousands of users. But in small numbers, the product was resonating, so it stood to reason that it would also resonate with more people. Sequoia was very drawn to this, and Zhan noted that in consumer companies, user love is the most important thing she looks for.
“This wasn’t just people coming in, saying hi and popping out,” said Zhan. “There was real engagement here, even in relatively small numbers. That’s what stood out most. That was the real magic.”
Alongside time per session, Sequoia used Rec Room’s “high-five” metrics to evaluate user love.
High-fives don’t actually have any value in Rec Room games themselves. You don’t win or earn anything by giving a high-five. But the metrics around high-fives continued to go up as more people played.
Nick had been thinking a lot about what forms of communication and interaction matter. One of the things that I had forgotten about, but I remembered rereading some of our internal communication at Sequoia from while we were evaluating Rec Room at the time, was that we kept talking about this notion of high-fives. It’s interesting. I literally had a count of the number of high-fives that the current user base had at the time. And I wondered why do high-fives matter?