Off to a Great Start

Build a strong foundation by avoiding these mistakes in activation

Written by Simon Chamorro (Alliance DAO) and Qin En Looi (Saison Capital)

As the Head of Growth for Alliance DAO, the leading community and accelerator of web3 founders, Simon has helped shape dozens of web3 startups in their early growth journeys. Recently, he noticed a gap observed across multiple founders - the lack of consideration and thought behind activation. In distilling lessons learned and building out a keynote for Alliance DAO founders, Simon found himself making a list of the mistakes that he was keen to help founders avoid - one that he thought might be helpful to share with Safary’s Substack readers as well.

“Web3 has nurtured a bad habit of short attention cycles. Most growth strategies are short-term, competing for the same attention from a small group of users that lasts at most a few days on Twitter or Discord. As a result, retention is poor and most users move on from one product to the next for airdrop farming. But these growth challenges are really hard for crypto founders, building great products, with great distribution, on top of onboarding users to a nascent decentralized Web is no small feat” says Simon.

In this interview, Simon outlines the most common early mistakes he sees in activation, sharing the tactics and frameworks he uses to guide founders to get better at activation. Whether it is the trap of obsessing about retention but neglecting about activation, or the tendency to blindly measure metrics like monthly active users (MAU), Simon details the four activation moments every product offers, offering up a guide that is tactical and relevant to web3 founders. 

Mistake #1: Misalignment between marketing/sales and product at the sign-up moment

One of the simplest yet most common mistakes web3 products make at the first activation moment - the sign-up moment - is the mismatch between marketing messaging and product promise. Before users interact with a product, they first come into contact with the marketing or sales message. From there, there are 4 “fit” questions that resonate in their minds as they sign up for the product:

1. Is this for me? (product fit)

2. Does this do what I want? (promise fit)

3. Is this easy? (intent fit)

4. Do I know how to get it? (knowledge fit)

Often the expectations users have about these 4 “fits” are preconceived from marketing messages. These expectations continue throughout the user journey until a habit is formed - when usage becomes second nature and subconscious. This is where product and marketing teams need to be aligned - starting with a common north star metric. This mitigates the situation where marketing makes exaggerated claims that are unsubstantiated from the products in the quest for chasing “vanity metrics” that the product team is not optimizing for.

Take for example a decentralized automated market maker. While it is tempting to tease “the best rates” or “the lowest fees” to evoke value-hunting desires, one would almost certainly expect users to price compare against existing alternatives such as UniSwap. To not deliver would contravene the promise fit, and lead to a missed activation opportunity.

Mistake #2: Forgetting about the setup moment

After the sign-up moment, founders are often eager to leap into the “aha!” moment for users. Yet, many miss the critical in-between: the setup moment. The setup moment refers to the information and actions required from the user, before they can experience the “aha!” moment. The classic example of a setup moment is Facebook’s “10 friends in 7 days” principle. In the early days of the social media platform, the insight emerged that if a user added 10 Facebook friends within the first 7 days of registration, they were much more likely to be retained on the platform.

Yet the addition of friends was not the “aha!” moment - the process of searching for friends and befriending them was not what gave users joy. The “aha!” moment lay in scrolling through the infinite newsfeed, where users could stay in touch with what their family and friends were up to. Preceding this magical moment was the setup process of adding friends.

A parallel in web3 would look something like this: before a user can borrow crypto from a protocol, they need to complete two actions - connect their wallet, then provide collateral. These 2 actions are part of the setup moment, and metrics can be measured to deliver insights such as “users who fund their collateral pools with more than 1 ETH in 30 minutes are twice as likely to retain than users who do not”. Clarity around this setup moment can lead the protocol to optimize their onboarding and user interface to focus around the collateral funding actions. 

Thus, founders should not neglect the bridge between the sign up moment and the “aha!” moment. Instead of letting the user figure out how to get there, it is worth considering what needs to happen to make the “aha!” moments happen.

Mistake #3: Pre-maturely concluding activation at the ‘aha!’ moment

Imagine you are getting behind a the wheel of a race car for the first time, ready to experience the thrill and adrenaline of hurtling down a race track at 200 miles an hour. You have completed the setup moment - the engineers have delivered their safety briefing, and you have rehearsed on a simulator. As you sit on the track, an instructor climbs in the front passenger seat, and off you go. You feel the exhilaration - the “aha!” moment. After the first lap, however, the instructor gets out of the car and says “You’re off on your own.” All of a sudden, you are afraid of crashing the car. You slow down, and decide once is enough - and never drive again.

The above analogy underscores the common mistake companies make after delivering the “aha!” moment to users. Right after, they pre-maturely conclude that the user has been activated. Yet the goal is not the realization of a single “aha!” moment, but a series of repeated “aha!” moments that eventually lead to habit forming. Just as how you would like the instructor to accompany you for a few more laps around the race track, users often want to be hand held for the same action several times until they develop comfort. 

Drawing from Nir Eyal’s Hook Model, the key to building habits from the “aha!” moment is to offer a variable reward, followed by requesting for a user to invest in the experience. After experiencing the “aha!” moment, the user receives a reward. This could be an extrinsic incentive, or a “feel good” emotion that is invoked like a sense of accomplishment. Importantly, the reward differs each time, creating anticipation and engagement.

Beyond the reward, habit-forming products also expect user investment - where the user puts something into the product, such as time, money, or data. Examples include content curation - everytime we listen to a song, like it, or skip it, we teach the algorithm to offer better song recommendations. This fosters a sense of ownership and increases the likelihood of habit formation.

Mistake #4: Insufficient context around the habit moment

When users start to form habits around products, the most common metric to track is active users - daily, weekly or monthly. Yet founders should consider what is the natural pattern of usage for their products, and adjust the metrics accordingly. Take for example a liquid staking product - the majority of users adopt a “set and forget” approach, and are likely to return to check on yields and rewards only occasionally. Hence, following the typical measurements of daily or weekly active users might not be the most productive. 

Furthermore, metrics measurement should be contextualized around different user segments. Most products have 3 user categories: casual users, core users and power users. While casual users interact with the product once in a while, core users engage at the expected natural frequency. Power users are the select few who engage way higher than normal. Understanding the nuances across these 3 segments and aligning the right metrics to track frequency of usage can lead to more targeted actionable insights.

Mistake #5: Not doing the qualitative work first.

It is common for founders to skip the startup 101 work, defining the problem in the customer words, looking at the alternative ways people solve the problem (not competitors), spending months researching why others before them failed, understanding why would a prospective customer would use the product they are building, and trying to narrow down the natural frequency in which people experience the problem. This requires simple but meticulous work with customer research calls, high fidelity prototypes, shadowing, secret shoper, and more. Skipping this work is likely a core reason startups fail, and end up having to re-work a ton after launching the product, costing time and money.

The founders who do this qualitative work not only set themselves up for success but achieve the following: they are able to define their retention and activation metrics qualitatively, and then work backwards from there to build a great activation funnel. Its like mapping the terrain before building something . It serves as a great point of reference for launching the produt with measurable objectives. This qualitatively defined metrics also serve as a proxy to product market fit. And once users start to flow through the product and provide enough data for statistical significance, then its easier to do correlation analysis, and define the metrics quantitatively.

The first impression is the last impression

Well thought out activation can seem like an overkill, especially to early stage web3 founders, yet it is important to remember that the first impression is the last impression. Often, a churned user is the most expensive to re-acquire or resurrect. Yet investing in activation will reap manifold rewards, including subsequent improvements retention to the retention curve.

For founders who want to get serious around activation, Simon concludes with the following advice:

• “Leverage both web2 and web3 growth tools” - The most effective brands in web3 will be those that effectively leverage a combination of web2 and web3 growth tools. web3 is particularly challenging because the infrastructure for onboarding users remains clunky, slow and expensive, and good UX is hard to achieve. This means that by default, web3 founders have to build 2 or more segmented and/or personalized activation flows - one of a crypto native audience, and the other for no-coiners. Suggestions include combining token airdrops with traditional content or performance marketing, as well as offering logins either via wallet or email. 

• “Good artists copy, great artists steal” - identify existing companies, both in web2 and web3 that have great retention, and distill what makes the activation work. Often the principles of activation are common regardless of use case, and effective activation can positively impact retention. Hence, a “reverse engineering” approach of improving retention by enhancing activation is not uncommon. 

• “Don’t leave users alone. Hand hold them” - a common misconception is for products to optimize for fewer clicks and steps. Yet good activation sometimes involves creating more steps to educate users about the experience. Onboarding flows are a great opportunity to bring users up to speed in knowledge and skills.

• “Time bound your measurements” - set a target timeline for users to go from the sign up moment to the aha moment, then from the aha moment to the habit moment. For a wallet security company Simon is working with, he sets clear guideposts - 1x7, 4x28. 1x7 refers to the “aha!” moment of protecting a user for the first time within the first 7 days, and he defines the “habit” moment of protecting the user 4 times within the first 28 days.