Secret Stash ep 2: Justin Kan shares the secret to entrepreneurship in games
It was 2007 and Robin was running the mobile data business at Verizon while Justin was rolling out JustinTV’s first prototype - a camera strapped to his head (literally). It was the perfect meetcute: Justin needed inexpensive mobile data to livestream his day-to-day and Robin had access to tons of it (In fact, Robin was the first one to put YouTube on a cell phone!). Turns out the deal didn’t go as planned though, and the two went their separate ways.
Then nearly fifteen years later, in 2021, they reconnected, teamed up as co-founders, and created their investment fund Goat Capital. Since then, they’ve founded and invested in dozens of companies - including Stash (that’s us, the new direct-to-consumer platform for game developers).
In this episode of Secret Stash, co-host Archie Stonehill and Stash co-founders - Justin Kan, Robin Chan, and Dan Borstelmann - share stories on each stage of gaming entrepreneurship:
- how the founding team got together and why it’s stuck
- creating hypotheses and knowing when to change gears
- doubling down on macro market trends
- establishing a defensible product strategy
- executing on product excellence
Tune into our latest episode below or wherever you listen to your podcasts. Or, keep reading for the highlights.
Like a marriage: Differing skill sets but similar values
If you’ve met all three Stash co-founders, you’ll know they’re each … very different. In Justin’s words, “I think I'm really good at the creative part of entrepreneurship and the storytelling. I think Robin is really amazing at generating new ideas and figuring out new ways we might take the company. Then Dan is the one who actually is competent at executing things - Robin and I will be the first to admit we're not.”
Dan agrees that Justin and Robin are “a great foil to me because like we're almost complete opposites in the way we work. They force me to get out of the day-to-day and have a more strategic conversation.”
That complementary skill set is critical - where one’s weaker, the other can make up for it. But while personalities and skill sets can (and largely should) vary across the founding team, values need to be aligned.
“Think of a co-founder almost like a marriage. You're gonna spend many many years together. Do you trust this person? Is this person in it for the right reasons? Do they want to build the right things? It's such a high bar. It's a much higher bar than anything else in working together.”
“Think of a co-founder almost like a marriage. You're gonna spend many many years together. Do you trust this person?"
To put into context, Robin shared some thoughts from his first startup, about a time when they were really struggling: “there’s a part of you that’s like ‘oh, this guy's terrible. I'm going to quit on them or I want them to leave.’ But then you look at each other and you're just like, ‘look, we can't quit. We have to make this work.’ And when you realize that you really can't quit because this is your company, the company will literally die if you leave. That’s the bar of the person you have to be next to as a co-founder.”
Treating entrepreneurship as the great experiment
Once you find your partner, what’s next? Getting to work. Justin thinks of entrepreneurship like an experiment - with your startup being the test. “You have this hypothesis, you assemble the team and capital to make it happen, you build it and then you see what happens. You can get data along the way that might tell you ‘oh, maybe you're barking up the right tree or the wrong tree’ but you can't really know until you do it.”
Like any experiment, sometimes your hypothesis will be right and sometimes it’ll be wrong. The only way to keep going is to form a new hypothesis and carry out the experiment again. In fact, most times your initial hypothesis won’t be right. Archie, who was previously an investor, often says, “the only thing I know about your game or your company is that it will not be what you're pitching to me right now.”
“If you’re sailing, you need a direction to sail in, even if you have to modify the route you're taking.”
So how do you know when to change hypotheses, pivot, or even kill your idea? First, be honest with yourself. Second, “be diligent about talking to your customers and collecting data.” The times he didn’t pivot, or didn’t pivot well, Justin admits he was “lying” to himself, thinking he knew better than his customers.
Investors want to see macro trends, not micro
To help make a good initial hypothesis, the Stash co-founders, and even Archie from his investment days, recommend focusing on macro themes.
There’s generally two schools of thought in investing - macro vs micro. The macro is - why now, what’s the technology shift or market shift that enables this business to capture outsized return on capital? Then the micro is - who are the people that are going to do this, what is the product design innovation, what are the tactics?
As investors and founders, the crew agree that macro is often the most important - they want to know: why is this going to be super big?
In Justin’s experience, founders aren’t often strategizing in terms of the market or looking for an opportunity with an active search process - instead they love something, they have an idea, and they do it. In fact, for Justin at JustinTV and then Twitch, he and his co-founder Emmett Shear just wanted to “do something cool … Emmett was really interested in gaming streams because that's what he'd watched. So we kind of just went with that.” They never expected it to get as big as it did.
But while entrepreneurs might not be aware of their macro thesis, a lot of investors look out for it. Justin and Emmett were web-native and had insight into their audience and their product category, which they didn’t know they had in a macro sense.
Robin agrees, sharing that the macro approach has governed a lot of his investments - “where there's a tailwind on any idea, with a cycle behind pushing that idea to validation. It’s no different from Stash. There's obviously a lot of macro dynamics going on in the industry right now. Today, the Department of Justice has a lawsuit with Apple, and there's a lot of structural de-regulatory changes."
Taking down the competition with a strong philosophy and excellent product execution
Now, you’ve found your partner, made your macro-themed hypothesis, and put it to the test. The next step is putting a plan together to stand up against the competition.
“You always have to think about ‘how are you different from your competition, philosophically?’ Then it trickles down to your products.”
To do that at Twitch, Justin and Emmett carefully identified out of all the possible constituents - advertisers, viewers, and streamers - streamers were their “true customers”. To them, it didn’t really matter how pixel perfect the viewer's experience was, because the viewers would go where the content and streamers were, and the advertisers would go where the viewers were.
“You always have to think about ‘how are you different from your competition, philosophically?’"
“That was a hugely important insight, even though it seems very simple, because what that meant was we oriented our entire company around serving streamers. We built the best streamer tools. We tried to pay them the most. We would take them out to eat.”
That’s in contrast to YouTube and Google for example, whose customer was principally the advertiser. The crew noted that Google’s search experience largely degraded over time, and a good chunk is made up of ads now. That left a gap for OpenAI and ChatGPT to create a new, more user friendly experience for their “true customer” - the users. That was their philosophical difference.
Incumbents like Google often lag disruptors in adopting new features - especially those that didn’t directly tie back to their historical customers, in Google’s case the advertisers. Twitch launched donations as a major monetization mechanic years before Youtube enabled direct viewer-to-creator payments, and Patreon took advantage of the same dynamic by enabling direct-to-consumer monetization models for creators that took some power away from the specific content platforms.
Where does defensibility come from?
Most great startups have a “thesis” - a key insight that drives design and product choices. Rarely is any technology or approach inherently defensible and specific features can be replicated and strategies, too. So where does defensibility normally come from?
The crew agreed that one thing that creators defensibility, is executing on product extremely well. And how do you execute well? As the designated executor, Dan shares, “you have to be relentlessly focused on making the experience as good as possible while serving what the customer wants.”
Echoing that, Robin expressed, “there's a lot of examples in other industries where you can elevate the experience with nice infrastructure.” For example, when Square got started and transformed “ugly NCR machines” into an “elegant terminal”, or what Shopify’s done for merchants.
Balancing industry against non-industry knowhow (in games)
Of course, the product lead is a big part of that best-in-class execution strategy. Justin notes that there’s two types of product roles in Silicon Valley - the zero-to-one and the one-to-many. For startups, it’s the former that matters most.
In Silicon Valley, most product managers are in that one-to-many role - “which is mostly rearranging pixels. It's not unimportant. It's very important actually, but it's more about optimization and improvement of an existing insight … refining it, making the user experience better, making the login screen cleaner, maybe they're figuring out how to grow it, but they're not really fundamentally identifying any new way to deliver value to customers.”
Meanwhile, “the invention of a new product really requires a different set of skills. The most fundamental thing you need to do is understand your customer, what do the customers want, where can you deliver customer value … Most big companies have very few people who can think of new insights.”
That’s a big part of what Justin and Robin saw in hiring Archie, who in addition to co-hosting Secret Stash, is Stash’s Head of Product: “That's one of the things that was really attractive from my perspective on how you would be able to identify what the customer needs were and then, in conjunction with the team, form those products ... You have this really deep understanding of the gaming companies and gaming company incentives and what they want.”
That industry knowhow - and specifically gaming industry knowhow - was critical to Archie’s hire. Not just because it helps Archie go from zero-to-one, but also because gaming has unique nuances other industries don’t.
In comparison to other consumer products, the complexity of building a game - and building tools for game developers - is immense. This makes it especially hard for outside industries and service providers to understand and serve game developers. Dan explained, “other people come into this space, they've never worked in gaming before, and they tell all these game companies that if you do it this way, you're gonna do it better. And all the game companies don't enjoy that because they're being talked down to by people that don't know as much as they do about their industry.”
Robin agreed, learning from his friend Mitch Lasky that, “the gaming industry is very tribal. If you understand and appreciate the craft of games, and you build solutions for games, you’re welcome. But if you're just providing a solution that doesn't really appreciate the nuances of what the industry is about, it's a harder integration.”
But while having direct industry experience, especially in the gaming world, is a huge factor in product success, it’s important to balance that with outside industry expertise too. Talking to Archie, Dan shared, “so folks like yourself who've been working in gaming, and maybe folks like me who weren't previously working in gaming, can learn from both sides.”
This idea was crucial to Stash’s product strategy and mission: “there's all these industries out there that have completely revolutionized direct-to-consumer businesses, mostly on the internet over the last 10 to 15 years. The tooling for that is really, really good, but it's not in gaming. And a lot of that is because the platforms have owned distribution for so long, and there's been no competition there, so there's been no innovation.”
That’s why taking expertise from outside gaming and combining it with the team’s existing gaming knowledge is a winning formula for product excellence.
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