Presentation to the Lean Startup Circle Meetup, San Francisco, July 21, 2010 at Kick Labs. Overview of how IMVU has grown using Lean Startup principles and the challenges faced as the company scaled.

1. An online community where members use 3D avatars
to meet new people, chat, create
and have fun with their friends

2. Lean Startup Pitfalls Uncovered
Brett G. Durrett (@bdurrett)
VP, Engineering & Operations, IMVU, Inc.
Lean Startup Meetup, San Francisco, July 21, 2010 1

3. Presentation PIVOT!
a word so popular right now that I had to drop it on the second slide
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4. The Transition of a Lean Startup
IMVU’s journey to becoming a Large Company
Brett G. Durrett (@bdurrett)
VP, Engineering & Operations
IMVU, Inc.
Lean Startup Meetup, San Francisco, July 21, 2010
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5. WTF?
Hey Brett… don’t Large Companies suck?
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6. I heard this talk…
From Steve Blank’s “Why Accountants Don’t Run Startups” presentation, used with permission. 5

7. Startups Don’t Last Forever
Scalable Large
Transition
Startup Company
- Business Model found - Cash-flow breakeven
- Product/Market fit - Profitable
- Repeatable sales model - Rapid scale
- Managers hired - New Senior Mgmt
~ 150 people
You fail if you remain a startup!
From Steve Blank’s “Why Accountants Don’t Run Startups” presentation, used with permission.

8. Startups Don’t Last Forever
Scalable Large
Transition
Startup Company
- Business Model found - Cash-flow breakeven
- Product/Market fit - Profitable
- Repeatable sales model - Rapid scale
- Managers hired - New Senior Mgmt
~ 150 people
You fail if you remain a startup!
From Steve Blank’s “Why Accountants Don’t Run Startups” presentation, used with permission.

9. Startups Don’t Last Forever
Scalable
Large Large
Transition
Startup
Company Company
- Business Model found - Cash-flow breakeven
FTW!
- Product/Market fit
- Repeatable sales model
- Managers hired
- Profitable
- Rapid scale
- New Senior Mgmt
~ 150 people
You fail if you remain a startup!
From Steve Blank’s “Why Accountants Don’t Run Startups” presentation, used with permission.

10. The Large Company is the result of a
successful Scalable Startup
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11. The Large Company is the result of a
successful Scalable Startup
If you can survive the transition
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12. The Large Company is the result of a
successful Scalable Startup
If you can survive the transition
(which has pitfalls)
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13. Not Really Startup Metrics
• ~100 full-time employees
– Technical staff ~50 people
• > $40 million run-rate
• > 10 million monthly unique visitors
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14. Introduction
• Assumption audience is quite familiar with
Eric Ries’ Lessons Learned blog
• IMVU sometimes referred to as the
original Lean Startup
• Talking about IMVU transitioning from
Scalable Startup to Large Company
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15. Quick Background
• Customer Development & Lean principles
lead company to tremendous growth
• Fast development – everybody focused on
getting new things into customers hands
• No “golden gut” - customer metrics beat
grand product vision
• Inspirational environment – everybody
empowered to make product decisions
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16. Hey – We’re a Scalable Startup!
IMVU Revenue by Quarter (in millions)
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07
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17. Initial Transition
• Product Owners for R&D, productizing,
monetizing and keeping things running
– Smaller, independent versions of company
• Same successful philosophy and practices
– Ship fast (but 2 month cycles feel slow)
– Anybody can make product decisions
– Customer-facing over infrastructure
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18. Not So Much
IMVU Revenue by Quarter (in millions)
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07
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19. Not So Much
• Revenue dropped even though we were
the using exact same philosophy and
practices that delivered success
• Product becoming “bucket of bolts”
– Features abandoned because development
teams disbanded / moved to new projects
• Emphasis on customer-facing changes
leads to increased technical debt 18

20. Transition: Plan B
• 7 “customer experience” product groups
– acquisition, discovery, connection, etc.
• Persistent feature ownership
• Each group has key business metric
– Conversion, retention, # chats, etc.
– Combined metrics ultimately drive revenue
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21. Again, Not So Much
IMVU Revenue by Quarter (in millions)
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08
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22. Again, Not So Much
• Revenue flat
• Product still a “bucket of bolts”
• Technical debt continues to pile up
– Build infrastructure hindering development
– Can’t iterate on IM client
• Lack of progress leading to morale issues
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23. Key Failures
• Didn’t align everybody for success
– Competing metrics = adversarial owners
– Authority disconnected from responsibility
• 7 product teams = too small to be effective
– No desire to apply limited team to tech debt
• Focus on immediate customer feedback
prevented “big bet” improvements
– Bias favors features over infrastructure 22

24. Transition: Plan C
• Align organization for success
• Strengthen product ownership
– Support it with effective project management
• Allow “big bets”, not just optimizations
• Don’t lose the things that make us great!
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25. Getting Aligned
• Officers determine business strategy
– Shared (repeatedly) with all employees
• All employees have same incentive plan
– 2009 targets for profitability and revenue
• Authority consistent with responsibility
– Drive accountability
– Required difficult changes to culture
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26. Stronger Product Ownership
• VP Product clear mandate
– Determines long-term product strategy
– Aligns product owners to company strategy
• Product teams: product, monetization,
keeping things running, but this changes
• Product Owners determine all product
changes
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27. Project Management
• Needed visibility into:
– Where we spend development resources
– Better ROI assessment when planning (the “I”)
– What others are doing (transparency)
• Resource Allocation
– Product decides % of resources to each area
– Engineering determines actual people
• Variation of scrum, 2-3 week sprints
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28. Seeing the Big Picture
• Passion for customer validation great
• Obsession for immediate validation can
distract you
• Easy to lose sight of:
– Product opportunities requiring a big bet
– Increasing technical debt
– Infrastructure needs
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29. Customer vs. Infrastructure
• Customer facing features prioritized over
infrastructure critical to early success
• When it compromises ability to rapidly
iterate a key strength is lost
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30. How Do You Know?
“We are hiring smart people that can’t make
changes to our code”
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31. Payback of Technical Debt
• Dedicated technical investment projects
• Some systems get a technical debt “tax”
applied only when product changes
• Tech Leads can add project requirement
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32. Continuous Deployment Overhead
• Effective development systems require
ongoing investment to scale
– Impacts speed and morale
• IMVU spends >20% of engineering on
maintenance of the tests and process
– Even with premium we find it has high ROI
• Pain follows a square wave pattern as we
scale the organization 31

33. CD: Expect Some Hurdles
• Production outages
• New overhead
– Tests
– Build systems
• Production outages
• Frustration
• Production outages
(but well worth it)

34. Cultural
• No longer possible for everybody to
participate in every aspect of the company
• Leadership changes at all levels
• Process: too much, too little.
• Not everyone makes the transition… some
people just love startups
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35. Key Cultural Values We Kept
• Entrepreneurial spirit
• Customer metrics validate our decisions
• Value everybody’s ability to contribute to
product direction
• Accepting failures in order to learn and
improve
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36. Example: New IM Client
• Not previously possible
– 1-year design and development
– Substantial non-customer-facing infrastructure
• Big win for customers and technical debt
– Solved key issue confusing customers
– Rate of development greatly accelerated
• Iterated with customer validation!
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37. Example: Hack Week
• Originally few requirements
– Anybody can develop anything
– Have to demo it at end of week (live)
• New requirements – anything, but ship it or kill it
– Each person allowed 1 project at a time
– Product adopts it, keep building it or kill it
– Limit customer exposure until adoption
– Engineers need business data to make decisions!
• Results
– Much higher rate of projects getting to customers
– Many engineers choose to work on existing product plan!
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38. How’s the Transition Going?
IMVU Revenue by Quarter (in millions)
$8
$7
$6
$5
$4
$3
$2
$1
$0
Qtr Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09
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39. Thank You
Brett G. Durrett
Twitter: @bdurrett
bdurrett@imvu.com
and… many thanks to Steve Blank for use of his slides
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40. Oh Yeah…
Interested in getting more experience?
We’re hiring!
http://www.imvu.com/jobs/
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