SaaStr Podcasts for the Week with Byron Deeter, Elliott Robinson, Henry Schuck, and Jason Lemkin


This post is by Amelia Ibarra from SaaStr

Ep. 373: Bessemer’s 5th Annual State of the Cloud Report returns for a definitive look at the cloud industry today. Byron Deeter and Elliott Robinson, partners at Bessemer Venture Partners, offer macro trends in the public and private cloud markets, strategic advice to cloud founders, and insights into why entrepreneurs should feel auspicious about the future.

 

This episode is sponsored by Linode.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from a session at SaaStr Annual @ Home. You can read the podcast transcript below.

 

Ep. 374: ZoomInfo founder and CEO Henry Schuck shares how he built a business from scratch and grew it into one of the most successful IPOs of the 21st century—and what it was really like…the good, the bad, and most of all, the ugly. He reflects on where he went wrong, what he would do differently, and how to avoid making the same mistakes he did.

 

This episode is sponsored by Outgrow.

 

This episode is an excerpt from Jason and Henry’s session at SaaStr Annual @ Home. You can read the podcast transcript below.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Byron Deeter
Elliott Robinson
Henry Schuck

We’ve shared the transcript of episode 373 below. You can also jump down to the transcript of episode 374.

Transcript of Episode 373:

Byron Deeter:

I’m going to dive in here with a little bit of an overview. To say that 2020 has been unusual, and unprecedented, and momentous would all be understatements. But let’s just begin by taking a little look back at how we’ve gotten here. We want to take you through the cloud journey over the last several years. We’re going to start with some dates that predated COVID and really go to prior SaaStrs. If you look back on February 5th, 2019, which was the SaaStr Annual, hopefully many of you were there in person, we gave the state of the cloud presentation and talked about the power of the industry, and the power that’s been building in terms of market capitalization of just the public cloud companies and what they show. That was February 5th, 2019.

Coincidentally, SaaStr Annual was slated to be February 5th, 2020 this year, where we were going to reveal that the cloud had passed the one trillion market cap mark, which was exactly one year after the SaaStr Annual 2019. It was a meaningful milestone for many reasons, and yet, just a few days later, the world change pretty dramatically. If you look at the March volatility, the major indices fell 30% pretty much across the board as the health crisis started to take hold, and the economic crisis was starting to be previewed.

Now, the cloud index fell along with it. The blue line here is the Bessemer Nasdaq Emerging Cloud Index, which is an index that we’ve tracked for many years, which is the basket of the pure play public cloud stocks. You’ll see here from this blue line, the 30% fall that rapidly rolled through our entire industry. Now, as April came, we started to see those climb back. You fast-forward to May, you started to see not only the indices roll back, but specifically this blue line of the cloud industry. As we rolled to June and July, and then all the way through to August, we saw essentially a separation that is reflected over the longer time arc here as well.

If you go back to before 2014, what you see is the power of the cloud. You see that both organizations embracing this cloud movement, but specifically in COVID, more and more companies turning to the cloud as their solution for business continuity or for business growth in these times when shelter in place is making on-prem solutions difficult and in many cases, impossible to use. It’s also been a powerful moment for technology to be a force for good. We’ve seen many of the cloud community companies help usher in this transformative, somewhat defensive posture, but also allowing companies to reinvent themselves and to grow.

To give a few examples, when the entire restaurant and hospitality industry was forced to reinvent themselves, most restaurants shutting down entirely due to shelter-in-place mandates, Toast, which is a leading point of sale solution and vertical SaaS application and mobile application for the restaurant industry, and an all-in-one restaurant platform, rapidly switched and helped offer new solutions for online ordering, contactless delivery, and allowed restaurants that had never before provided takeout, and were literally facing bankruptcy shutdown situations to suddenly create an entire new line of business.

Another collection of their customers actually turned their kitchens into service offerings. This here is an example from a Burmese restaurant called Thamee, in DC, which has partnered with World Central Kitchen, and they’re donating thousands and thousands of meals to people in need, healthcare staff, and frontline workers, Black Lives Matter protesters in the community. You see that these teams and these small businesses across America rallying with the help of technology solutions provided by many of you on this call and cloud providers more broadly, the same needs existed with the physical world that we saw with the virtual world in many ways, and physical store owners had this crisis moment where they were shutting down. They had to reinvent themselves.

This million business milestone was passed in March by Shopify, one of the leading storefront providers, and a cloud vertical solution for eCommerce, where they grew 400,000 storefronts between mid March and mid April, because of small businesses, again, that had been only physical before, and found that to survive and hopefully ultimately thrive, the cloud solutions were their way forward. We celebrate businesses like that, and of course, the platform we’re on today with Zoom, that has really become a communications platform that’s defining this COVID era. They’re giving us the connectivity to communicate with our colleagues, friends and family. They’re facilitating virtual schooling, they’re helping governments organize. They’ve helped with life’s most important and sacred moments, whether that’s birthday celebrations, weddings, and unfortunately, even in some cases, the last goodbyes. But it is really incredible and inspiring to see how these companies and these cloud leaders have ushered in this new phase of innovation and growth, even in the hardest moments of society.

What we see is this unlocking of cloud power, and we see this acceleration of the trends that we’ve known are building through the years. It reinforces the growth of the industry. If we look at that and step back, you can think of this, again, from the leading perspective of the public’s first, which is this evolution over time. Just 12 years ago, the entire market capitalization of the top five cloud companies was less than $14 billion. When you roll that forward just seven years, that was up 8X, you roll that for just 12 years, is that a staggering 61X. Just in the top five names, the growth has been spectacular.

If you think about the broader hybrid vendors, so the Amazons, Googles and Microsofts that have cloud businesses that are growing and building within, the same trends exist there. If you look at the IAS vendors, they passed $130 billion revenue milestone this year. We’ve all seen AWS and what they’ve done with their platform. It is staggering. Even at spectacular scale, they’re still growing at 30%. Azure has been gaining on them rapidly and is growing a double that rate. Still has some market share to go, but is providing a fantastic offering that many of you benefit from. Google Cloud, AliCloud International, et cetera, the industry has just been going through this massive transformation, and has been responsive to the market demands of COVID in ways that wouldn’t be possible in a non-public cloud, non-scalable way that’s allowing the continuity and the power in a modern format that wasn’t before possible.

But if you think of all these stats out there, there’s one number that for me is most impressive. It’s 94%. What this number means is across all industries, 94% of businesses today use at least one cloud solution. We are truly living in a cloud first world today, where businesses not only understand, but they now embrace and are looking to lead with technology solutions from folks on this Zoom, who are cloud first and providing that next generation of solutions. If you think of this in the context of software, it’s particularly powerful because for years, we’ve been seeing the visionaries out there promoting this transition. But it takes a long time to build.

The dark blue bar here is cloud as a percentage of worldwide software spend. For years, it barely registered as it was building. What we’ve seen over the last several years is that compounding starting to develop, and if you roll forward and see what happens, if you go to 2032, out just a dozen years from now, how massively that transformation takes hold. The 50% mark is going to cross within the next three years, and the vast majority of all software quickly will become cloud. If you think of this over this arc, and in fact, if you reinvent it in a circle chart or a pie chart, you can see visually how cloud is eating software.

You’ve got this dynamic within the next couple of years where cloud becomes a majority, but it just rolls forward. You get this almost eating effect, I think of it as Pac-Man in motion, where truly, cloud is taking over the core of technology and all of software. If you think of this from a market size standpoint, there’s often this debate, is that good or bad? What happens when cloud has consumed software? What happens to growth? What is the potential? This fantastic, staggering growth that we’ve seen over the prior years, is that sustainable? Can it continue? There’s all sorts of implications. For you out there founding new businesses, is it too late for investors, public and private? Have I missed my window, or what is fair value?

This is the chart that we think helps answer that, which is to zoom out, and think of not only cloud and its current market size, or not even just software in its current market size, which mind you, is a multiple of that. We have through that 2032 range, we show how the growth rates are certainly sustainable, and in fact, in some industries will accelerate as you get this compounding building, and you get this sea change effect as the industry realizes and embraces cloud.

But you actually should zoom out another level. You should think of this as the technology industry as a whole is really the addressable market by all of you. Because more and more hardware is becoming soft. It’s the software within hardware that’s powering innovation, and powering efficiency, and powering growth. Really, cloud absorbs hardware, software and services. As you see more opportunities for automation, and as you see more of the technology of the cloud and software percentage of technology reveal itself, it’s really that 3.7 trillion dollar market that’s addressable.

As you think even more, both broadly, in sector, and in geography, the global GDP is increasingly becoming tech-based. As you think about cloud as hands down the most powerful force in all software, and really now in all of technology, and we all know that technology is increasingly driving other industries and innovation across industries. We absolutely believe that a large percentage of global GDP will be cloud-driven and cloud-based in the years ahead. When asked specifically, “How does this end, or how does this play out?” We absolutely believe we’re still in the early days. What has become obvious to those of us in the cloud community, and what’s starting to become more and more obvious to the world, has a long and powerful future ahead.

That’s going to be the basis of the rest of this conversation. We’re going to talk you through a little bit of the learnings from these leaders and our experiences working with many of the innovators. Then we’re going to end with some predictions. With that, I’m going to let my partner, Ell, take it from here and guide you through some of the lessons learned and some of the 10 laws takeaways over the last many years of working with these leading companies.

Elliott Robinson:

Thanks, Byron.  As Byron walked everyone through, there’s been a lot of change and evolution that’s taken place in the cloud software market. Today, there’s more than 140 private and public cloud companies that are worth more than a billion dollars, including a lot of companies that are speaking at SaaStr. Here at Bessemer, we’ve been really lucky to work with some of the best, as you can tell from my partner Byron’s Zoom background. But what we really like to do is try to share best practices amongst the many years of experience we’ve had working with cloud companies.

What we’re going to do today is highlight three of them. We’re all living through a really unique time with COVID. Companies are working more remote first, everyone’s trying to traverse the new landscape, and I think that these three have really stood the test of time since we published the first 10 Laws of Cloud report more than a decade ago. Let’s dive in.

Law number one, in the cloud economy, scale wins. A bit of a personal note for me, before coming to Bessemer, I was with a great fund in Toronto, Canada called Georgian Partners. I’m a big fan of Canadian entrepreneurs, so shout out to any of you on the Zoom today. One of the early co-investments with my prior firm in Bessemer was in Shopify. One of the favorite quotes that I always had from Tobi, and really, his philosophy was that reaching scale, it’s not just about the revenue, it really is about finding a product that sets the pace of innovation, and having this mentality that while you might be really excited about the product that you’re offering to the market today, you actually want to render it obsolete so that your competitors can’t just copy what you’re doing.

We’ve had a lot of discussion about Zoom over the last few months, as Byron alluded to, with everyone working at home. But if you just take a step back for any kind of market that we’ve had success with, with cloud software companies, the majority of the market, say 50, 60, sometimes 70% goes to the scaled leader. Then unified communications and video conferencing space, Zoom has definitely taken a new position as the market leader. This number might have increased just in the past week, but it certainly sits somewhere around 64, 65%, where you’re seeing companies like Skype, BlueJeans, and WebEx coming up just behind them.

Another thing that we’ve seen over the last decade is cloud companies have this unique ability to scale way more rapidly than they have in the past than many of their other tech market peers. If you look at companies like Cornerstone OnDemand, which we invested in a long time ago, it took them some time to get to 100 million of ARR. But if you look at new companies like a Shopify, a Twilio, a HashiCorp, they’re able to get there even faster, somewhere around four or five, six years, and that’s something that we’re seeing with all the cloud giants that are entering the market today.

Leveraging on some of Tobi’s philosophy, it’s something here that we call at Bessemer, Finding Your Second Act. Everyone knows Shopify for what it is today, but in the earlier days, it really was the best SaaS platform for SMB eCommerce providers. Then they found somewhere in like year 2014 and ’15 that they could layer in something like payments as an additional way to monetize their customer base. We call that a second act. What that does is not only did it accelerate the top line revenue for Shopify, but it dramatically opened up their total addressable market on a revenue basis. 

If you’re a cloud founder sitting at home today, and you’ve got a great value prop for your customer base and your market, you do want to think about maybe 12 months, 18 months from now, “What’s that next thing that I could layer into the market?” Not just for expansion in your base, but upsell as well, and more of a new platform, value prop you could take to the market. Byron gave a great example with Toast, one of my favorite portfolio companies. They started in the point of sale market, and then as the company scaled, they rolled out new value props and modules for payroll, or Toast capital, or ways to manage your employee base.

With Twilio, for example, they expanded into email. You can also find your second act inorganically via acquisition as Twilio did with SendGrid. Then in HashiCorp’s case, one of the most exciting cloud infrastructure software companies that we found, they’ve expanded their second act with Terraform in the provisioning space, and then Consul in the networking space. 

Law number three, this is huge, particularly in COVID, so we’re going to talk about this a little bit differently. Everyone is trying to figure out the go-to-market learning curve. Now, what we haven’t really seen over a lot of time, and we kind of predicted, was everyone in Salesforce is basically working from home. If you’re a founder today and you’re trying to scale your go-to-market org, in the early days, you’re in what we call the initiation phase. This is really founder-led sales. You’re wearing multiple hats, you’re probably the head of sales, head of content marketing, also head of inside sales.

But what you really want to do is as you’re finding your first sales leaders to bring into the org, we typically call them Renaissance Salespeople. They have this unique ability to evangelize your product in the market, learn from your early customers what they like, what they don’t like, bring that feedback loop into product, into marketing, and really start to make that flywheel work. You really don’t want to think about bringing in new salespeople until you’re seeing that first round of product market fit, and then you’re ready to go into the transition phase. This is when you’re actually building out your org. You might be thinking about BDR, some ISR, some field sales reps, and you as a founder can take off one of your hats and maybe move into more strategic sales with your biggest and most valued customers.

Here, what you really want to think about is testing out two or three reps, seeing how they work, see if their quotas are about right. Are they hitting their numbers? Are customers happy with what they’re seeing? You don’t really want to scale beyond that first batch of reps. A general rule of thumb is about two to three times their fully loaded cost before you start rolling them in. Again, this is supposed to be our COVID considerations version of this report, and everyone is an inside sales rep today. The one thing that we like to talk about is CAC payback. That’s really analyzing a period back, how much does it cost to acquire a customer? That’s your CAC. If you divide that by the gross margin, how many customers you get into Period Four, you can start to figure out against your churn, how many months, gross margin effected, does it take for you to turn that newly acquired customer into a profitable customer?

Why does that matter even more in COVID? Well, there’s just more uncertainty. We don’t really know how long it’s going to be before people are back in the field, flying on planes regularly where you can touch and feel your customers. Your churn might be a little more volatile in this period, so actually tracking your CAC, calculating it, gross margin affecting it, and figuring out what your CAC payback is on a monthly basis is even more important.

After you figure out how your go-to-market org is going to scale, potentially, you see success, you’re adding field sales reps, you might be going more geo-focused, more industry vertical-focused. Now, you’re in the execution phase. This for us means typically, you’re finding some sales folks that may or may not be a little more coin-operated, so less of that renaissance rep that’s really evangelizing. They’re are always going to be great shepherds and voice and face of your company, but these folks, you want to give them a territory, a good list of customers, maybe they even have their own book of business, and you let them go. Then the one thing that you always want to think about is nail it before you scale it. Make sure in the initiation phase you feel comfortable with the results before you move into the transition phase, and that’s the same thing with the execution phase.

Then my favorite personal law, number nine, tone starts at the top. What’s really interesting about this, we talked about it, and we updated the report before COVID, and oftentimes, people say things like culture, and values, and how we track that stuff internally. How important is it? Well, I’ll tell you one thing, portfolio companies of ours and founder friends of mine, who now have their entire employee base working remotely or from home, now, this really matters. You as a founder have to set the tone, and you can’t do it in a weekly stand up, or an all hands meeting in person. You got to do it remote. 

We have this framework that we typically talk to our portfolio company founders about. It starts with defining your culture and values early, really understanding and letting your early employees understand, “Why do we work here? What are we really trying to accomplish?” It also allows your early employees to find that values fit with you, your philosophy and where your company is going.

Number two, we really want companies to report and track these metrics early. If you can’t measure it, you can’t really change it. You’re just putting your finger in the air and doing a gut check. Then number three, 360 feedbacks. Our advice is you can’t really do these too early. It’s how we all get better, and as a investor and board member, one of my favorite things is doing 360 feedback for the founder or CEO, talking to the board members, talking to their direct reports, and giving a unique set of feedback to that founder.

Beyond that, there’s some great software, cloud software options you can use. Both Glint and Culture Amp are great solutions that many of our companies use. Then just a personal note, we’re living through a really interesting time here in our country and in tech. Statistically, I don’t look like your average venture capitalist, but I really do care about diversity and inclusion. It’s not just something good to do. It’s actually a great business strategy and competitive advantage. This is just a little bit of a shout out to one of my favorite companies. It just so happens they’re a Bessemer company, but that doesn’t matter. Edith at LaunchDarkly, they put their culture and values very publicly on their website, very prominently. They’ve got some incredible initiatives, particularly in the engineering and coding org about how to make diversity and inclusion a strategic advantage for them.

Byron Deeter:

Very well said, and we look forward to hopefully seeing you all in person at the next SaaStr Annual next year. Until then, stay well, stay sane, and stay cloudy. 

 

*****

Transcript of Episode 374:

Henry Schuck:

Every company big and small is realizing that high quality data is a necessity to go to market. My name’s Henry Schuck, I’m the CEO of ZoomInfo and DiscoverOrg. There’s no platform out there that’s brought together the breadth, the depth, and the accuracy of business information the way that we have. Business information is constantly changing. What we’ve built is this core AI machine learning engine that takes literally millions and millions of unique sources so that we can deliver 95% accuracy to our clients. We have data scientists who are embedded into our go to market motion. We’re looking at every single metric and figuring out, how to convert that a little bit better, a little bit better, a little bit better?

Henry Schuck:

I really want to build a business that in every single department, whether it’s sales, or marketing, or product development, I want every single piece of that business to be literally best in class. I think the culture of continuous improvement at our company is a big part of our success. We’re just going to grind this thing out. We’re going to work harder. We’re going to care more. You have to be paranoid when it’s good because I want to make sure that it’s repeatable. I want to make sure that if there’s something that we did last week that made it the best week ever, that we keep on doing it. Whose idea was it to IPO in the middle of a pandemic, anyways? It’s not a celebration. It’s really just a launching point for the next thing.

Jason Lemkin:

All right. Sometimes on these digital things, the crowd can be a little quiet. But let’s all give it up for Henry Schuck from ZoomInfo. It’s great to have him here. And Henry, thank you so much for making the time and joining us.

Henry Schuck:

Absolutely. We can just sit here and watch that movie on loop if you’d like.

Jason Lemkin:

It was pretty good. I did notice you’re a little fitter now than you were for a brief moment in that journey. I hadn’t noticed that before. Is that fair to say?

Henry Schuck:

I’m more fit now, or during the journey?

Jason Lemkin:

Now, now.

Henry Schuck:

Maybe. It might just be the camera angle.

Jason Lemkin:

Might just be the camera angle, yeah. It’s funny, I’ve learned over the years, it’s subtle, but if you see a CEO, a founder that you know and you see them get fitter, it’s a good sign. Invest, do whatever you can when they go because it’s a tell when they start looking good.

Henry Schuck:

I had somebody tell me once, “Sometimes I feel guilty if I take time away from work to work out.” And I had somebody tell me, they said, “Henry, you’ve told me that when you work out, you’re more productive at work. You’re a better version of yourself at work. And so why are you not just thinking about that as an investment into your productivity at work?” He was like, “Yeah, I could get behind that.”

Jason Lemkin:

It’s true. So this is a special session. First of all, we will try to do some Q and A, so click on Q and A at the bottom if you’re watching this on Zoom rather than on social media. Click in there, we’ll try to get to some of these questions. And this will be a fun session for two reasons. First, I think as a case study, ZoomInfo’s a super interesting company. We’ve obviously all used the product. And I think, but when it IPOed I was shocked at the scale of the company. Right? I didn’t know. There’s a lot of vendors. I knew it had broken out, so we were shocked. And Henry will share some stories as we wend through this of how folks maybe underestimated him on the journey, and what it took for him to build a decacorn. And it’s so interesting to see one of these products that we know and are like, “Oh, my God. The scale of the product,” and why. Why did ZoomInfo break out? And it is a competitive space. And how does this really work? So I think it’s super fun.

Jason Lemkin:

And Henry pointed out the company did not raise 11 $100 million rounds from Sequoia and Andreessen, and had its own sort of path through private equity and other things. And in some ways as a company, not a product, might’ve floated under the radar a little bit until it kind of exploded this year. So a lot of interesting things. Henry asked what he could talk about at SaaStr, and he did us a gift, which we’re going to go through, is he laid out his top 10 mistakes getting to the first $400 million or so in revenue. So I’m going to ask him about these 10 mistakes. And what’s great is so many of these are themes that we’ve all talked about in our community in SaaStr for years. And I think it’s special to get his time to sit down quietly and write them.

Jason Lemkin:

And it’s so interesting when a CEO or founder does this because you can hear their brain and their heart. The number one mistake probably was the number one piece of scar tissue you have. And then you can just peer into their brain. So with that, let me kick this one off because this could mean so many things. But mistake number one, being risk averse in investment outside of sales. A lot of founders might have the opposite experience. But what does this mean? Where did you hold back too much?

Henry Schuck:

Yeah. And I think you could probably replace sales with your area of expertise if you’re a founder or a CEO. And so I felt really tied into sales. I understood how it worked. I did all of the sales for the first … Not all the sales, but I was on the frontline doing the sales for the first five years of the company’s existence. I had regular quota carrying sales rep on top of everything else. And so every time it came to spend the next dollar, I was much more likely to spend it in sales than really anywhere else in the business.

Henry Schuck:

And when I was thinking about this mistake, I was thinking about: Why was it that I wanted to put all the dollars into sales, and I was much less likely to put it in marketing, or HR, or customer success? And really, I think sales was easy for us because you could see a direct line to rep. You put a dollar in sales, you saw it turn into money. And everywhere else in the business, that line was less clear, so you could put it in marketing. And do you trust the reports you’re getting about attribution and where the leads are coming in? You could put it in HR, but do you really believe that they’re going to strategically grow your talent?

Henry Schuck:

And when you think about not making the investments in all of those other areas, what you’re really telling yourself is either you don’t trust the people in the department, and so you’re going, “I’m not going to give that money to marketing because I just don’t really trust that they’re going to be able to execute with those dollars.” So go fix that, don’t not make the investment in marketing because you don’t trust the execution of the team or the leader. If you’re not going to make the investment in product, you have to ask yourself, “Why would I not be making that investment in product?” And it’s probably because either you’re chasing the wrong things, you don’t trust the product leader, or you don’t think your customers are going to engage with that side of the product.

Henry Schuck:

And so I think on this one, we always wanted immediate payoff, and so we never looked to, for the early portion of the business didn’t really look to making investments that had long-term payoff. And a lot of that is because we didn’t trust, or I didn’t, trust the leaders in those organizations to deliver me the results that I trust the leaders in sales to deliver. And so the learning here is if you don’t trust a team, and you’re not making an investment in that team because you don’t trust them, you have to fix the underlying issue there because these investments go a long way.

Jason Lemkin:

Well, that’s an interesting point. You took it a slightly different place than I was expecting. I thought you were going to say, “I trusted sales, so I just put, with limited capital, I put it where I knew.” But you’re really saying, “I didn’t know these other areas, and I’m not sure about the leaders I hired.” Did you hire the wrong first generation management team because you hadn’t done those functional areas before? Or why were you not able to trust them? Did you just make the classic mis-hires?

Henry Schuck:

I think I made the classic mis-hires. And then after I made the classic mis-hires, if I took marketing for example, after I made a classic mis-hire there, what I convinced myself of was what I was getting from them was better than what I would do myself in the limited time that I would’ve focused on marketing across all of the other things I was focusing on, instead of: Am I getting in just a vacuum what I would expect from a fantastic marketing organization? And I wasn’t ever getting that in the early days. What I was getting instead was something better than what I was able to do on my own. And it was just the wrong lens to look at it through.

Jason Lemkin:

And what was the first VP you hired outside of sales that was your ah-ha moment that changed the game, that moved the needle? How were you able to change this? What was that game changing VP?

Henry Schuck:

Yeah. I hired a great sales leader, revenue ops, and now he’s our chief revenue officer. And what you saw when he came in, now you’ve written about this too, Jason, is the minute he came in, we thought we were really good. And he was immediately making impact all over like, “Why aren’t we doing this? Let’s do this,” and not just like, a lot of leaders can come in and just poo poo on everything. I can’t believe you guys are doing it this way. And oh, it’s an embarrassment that we’re doing it this way. The great leaders go, “Hey, we’re missing this opportunity.” Then they execute against that opportunity and give you results against it. And they’re able to do that over and over and over at scale.

Henry Schuck:

And so when we hired this revenue operations leader, all of a sudden, you could see everything he put his hands on turned to gold. And you were like, “Okay. Leadership can really turn around really any area of the company.”

Jason Lemkin:

Yeah. One other one on this. I want to get mistake number two first. But when you focused on sales because of this, looking back, obviously it’s ended up being an amazing journey. But did you end up with certain types of product feature gaps and technical debt because it wasn’t an area you were focused on? Did you miss some investments in the product in those first couple years because of this?

Henry Schuck:

Yeah, totally. We missed investments in the product along the way. We missed investments in building a great engineering team early on. And then I think maybe more so than anything, we missed investments on the account management and customer success side. We were so focused on the sales side that we didn’t invest the same sort of vigor around talent and training and onboarding, and just getting the right people and continuously giving them feedback in the account management side. And so in the early years of the company, we really struggled from a net retention and logo churn perspective.

Henry Schuck:

And that was another area where when we hired somebody good and you saw their numbers turn, yeah, it’s just magic. And you actually kind of convince yourself at some point, my business is different. My business is different. I have SMBs. My business is different, data and software together are just more complicated and less sticky than other things. You just convince yourself of all of these. You have this very special thing, so it can’t be best in class. And that’s just not true. You just don’t have the right leadership or structure to get there often.

Jason Lemkin:

That’s really good insight. You hear that a lot from data focused companies that high churn is okay. Right? You hear from a lot of HR focused companies that NPS is going to be low because employees hate using those tools. Right? They hate doing self assessment. They hate it. And that is true, probably true historically if you went into G2 and looked. But you shouldn’t settle for that, should you? [crosstalk 00:12:32] settle for that.

Henry Schuck:

And if you use Webex users and Citrix users how they felt about their conferencing solution, early on, they might tell you, “Oh, I hate conferencing.” And I think what you saw Zoom Communications do was make that an enjoyable experience, and that was a big differentiator. You didn’t have to settle for low NPS scores in video conferencing. You could be a lot better.

Jason Lemkin:

Yeah. It’s a super good insight. And I want to hit the next, number two, but especially in data, so many folks make so many excuses. Right? It’s ephemeral. It’s a marketing tool. Of course, it’s going to churn. If the asset doesn’t perform, if the data’s not great, I’ll just leave and try another one. This isn’t like Salesforce. It’s not sticky. But your lesson here I think is a profound challenge to founders, which is, don’t settle, it’s not okay. You can have 30, 40, 50, 60 NPS in any field. Right?

Henry Schuck:

Absolutely.

Jason Lemkin:

Not just … Okay. This one is niche, but it’s interesting, not doing mergers and acquisitions sooner. I don’t know that every founder would put this as a mistake number two. But it’s interesting because you put it second here.

Henry Schuck:

Yeah. So maybe I’ll give a little bit of a lineage. I bootstrapped the company with my co-founder in 2007. We put $25,000 on our credit cards and went to market. We built a really profitable business that had high margins. And we didn’t bring in our first outside capital until for seven years later, the business was already at a $25 million ARR run rate. And we’re doing that profitably. And when you have a profitable business, you have the opportunity to do M&A, and actually do that M&A with … We did M&A with debt. And so if you’ve built this growing, profitable business, and you’re able to loan against your balance sheet to go out and acquire competitors in your space, or other technology tuck ins in your space along the way, that is absolutely, in my opinion, a play you should run.

Henry Schuck:

And we were always kind of late to this. For every, our big acquisitions that we did along the way were a company called BrainKing in 2007, 2017, and ZoomInfo, which I founded the business as a company called DiscoverOrg. You changed the name to ZoomInfo after that acquisition. We made that ZoomInfo acquisition in 2019. And both of them, we had looks at those businesses a year or a year and a half before. And if we had done the acquisitions earlier, we would’ve saved I think $700 million in acquisition M&A costs. Now it’s hard to go, “Oh, what a mistake that was.” It’s a mistake in that the cost in capital was higher. Things ended up working great.

Henry Schuck:

But part of the reason why we didn’t do that is, and I think probably a lot of founders feel this way, is when you’re looking at your business that you’ve grown up inside of, you start to feel like you’re just like a kid pretending in an adult world. People who do M&A don’t feel like 30 year olds who started their companies, and we just didn’t have the confidence that we could pull something like that off. And we’re were always a year behind getting the confidence to be able to actually do M&A successfully. And it just costs us money along the way.

Jason Lemkin:

Yeah. The first point’s interesting because we’re all kind of … There’s been a bunch of talks already at this event. We’re all a little bit woke to the power of debt in SaaS if you do it right. Right?

Henry Schuck:

Yep.

Jason Lemkin:

It has to be for leverage. It can’t be in lieu of equity on its own because then you’ll spend it and you’ll get into trouble on the service. But if you’re at $25 million in ARR, and it’s predictable. And how much did you borrow to do the first acquisition?

Henry Schuck:

$200 million.

Jason Lemkin:

Okay. Well, you did take advantage of the growth in multiples that we’ve had over the last few years. Right?

Henry Schuck:

Yes, I did take advantage of the growth in multiples. And we protected equity.

Jason Lemkin:

You protected equity. But you were able to somewhat confidently say, “Hey, I can service that debt.” Right? Given the repeatable cash flows, right?

Henry Schuck:

Yeah.

Jason Lemkin:

And that’s something that whether it’s just to take a little bit of debt to hire that extra VP of product that you wish you’d hired back in the day, or whether it’s to do something. We should all, if we have strong metrics, strong revenue retention, we should be confident to do this. It’s sort of what you’re saying. Be confident. Be confident and do it a year early because you were going to get there. Right? You saw it already in the numbers at $25 million ARR. You were going to get to 100. The odds of going from 25 to 100 approached 100% at that point. Right? It’s just the resolution was unclear. Right?

Henry Schuck:

Yeah. And if you were confident about from an M&A perspective, if you’re confident that you could put two businesses together, get synergies out of it, grow them faster, and make them more efficient in the process, you have even a bigger pot of sort of cashflow to service the debt.

Jason Lemkin:

And did you … It’s niche because I want to hit the next one, but it is interesting. Did you feel like you had to get a discount, like they had to have a lower multiple than you as you build up your confidence for M&A? Is it hard to pay up versus having to pay down?

Henry Schuck:

I did feel that way. I don’t mind having some room to make mistakes on execution along the way. And so you do look for … Today, you get some companies who will tell me, “Well, Henry, you’re trading at this multiple, so why shouldn’t we get that multiple?” It’s like, well-

Jason Lemkin:

We should get higher. We should get higher. We’re growing even faster.

Henry Schuck:

[crosstalk 00:18:11] get a higher multiple because we’re more strategic. And the truth is there’s a lot of execution risk when you do M&A. And you have to be organized and focused. And so leaving you some room to slip somewhere is a useful thing to have.

Jason Lemkin:

Yeah. It’s a good lesson for founders because I mean, from the other side, it’s confusing. Right? ZoomInfo’s great, but whatever you’re trading at, you’re growing, I don’t know what you’re growing that you’re public. But let’s say you’re growing 50%, 40%, doesn’t matter, 60%.

Henry Schuck:

We’re growing 40, yes. Almost 40% [inaudible 00:18:45].

Jason Lemkin:

But Henry, I’m growing 80%. And so I deserve 40 X ARR because I know, I know, I know, but it’s not fair, Henry. Just draw a line, and founders are in this, you just need to be aware of it. Right? You just need to be aware of it. And every situation … I remember back in the day when Salesforce wanted to buy us in the beginning, the biggest acquisition they’d done was $16 million at the time.

Henry Schuck:

Wow.

Jason Lemkin:

And they’d met with us, and they were like, “We really want to buy you, but 16 would be too much.” Now you look at Tableau and MuleSoft. Right? And then you look at Jeff Lawson at Twillo. He’s like, “I’m not messing around. I’m not buying an itty bitty mail company. I’m buying the best thing, SendGrid, and I don’t care.” Even though the multiple was a little off, he’s going. And it’s a spectrum in companies of all the different rates. You were kind of in the middle, I think. Right?

Henry Schuck:

Yeah.

Jason Lemkin:

You didn’t want to mess around.

Henry Schuck:

I didn’t. I think the way, if I’m thinking in Jeff’s shoes, one of the things that I’m thinking is when I bring this asset in, what am I able to do with it when I put it in the product, when I give it access to my go to market team? How much faster can I grow it? Where are the synergies from that perspective? That was always really important. Actually, that takes us to mistake number three, which is not appreciating go to market as a strategic advantage.

Jason Lemkin:

What does this mean?

Henry Schuck:

So this means when we were doing, first, when we were doing M&A, when we were growing the business, I never thought of how valuable it was to have an incredibly efficient go to market engine. And we have a go to market engine that drives at 10 XLTV to cap. It does a 30 day, there’s a 30 day average sales cycle. It’s super efficient in generating leads and driving them through the pipeline with automation. And what I didn’t appreciate was when you look at a business, and you’re like, “What are the key assets in that business?” If you’re a founder, or you’re a senior executive at a company, and you’re thinking about your business and going, “What are the strategic advantages to our business? Or are there strategic levers here?” If go to market is just something you don’t even think about as part of that, that’s a major mistake because go to market, how you generate leads and find new customers and upsell and grow your customer base, that is a major, can be a major strategic advantage for your business.

Henry Schuck:

And it’s so often that I see companies where you have two companies, their features and product are in parity. And one is just running circles around the other one. And when you see that happening, it’s because one figured out go to market in a more precise, more efficient way. And that gives them an incredible advantage along the way.

Jason Lemkin:

Okay. I get that. That’s what I’ve observed. But what do you mean by leveraging that? You’ve got two companies. Right? Both have the same product. Maybe even the slower growing one is better. Sometimes that happens because they’re inwardly focused. But one’s figured out their go to market motion. Right? If that’s you, and that’s what you were, what do you mean? How do you take that to the next level? Why was it a mistake? That’s the piece I’m missing. What’s the investment or the action you didn’t take here when you had that advantage?

Henry Schuck:

So along the way when we were looking at acquisitions, especially when we were looking at acquisitions.

Jason Lemkin:

Bolted in.

Henry Schuck:

When you would look at an acquisition, you would go, “Oh, I have an opportunity to take what is a company that didn’t focus on go to market as in such a focused way as we did, and if I can take this team of 20 sellers, who are doing $10 million a year in ARR, what if I can take that team and make them do $20 million by just bringing in our go to market motion into that?”

Jason Lemkin:

Oh, on top, not get rid of them, but actually just add your expertise to their team. Take the same talent without training and tools and people, and just leverage up their revenue per lead, just increase their revenue per lead. Right?

Henry Schuck:

Increase their revenue per lead from an M&A perspective. Internally, the way I think about it too is if you can make go to market incredibly efficient, incredibly effective, then that gives you a strategic advantage to be able to take dollars that you would be spending there and spend them in product, and spend them in account management, and spend them in customer success and marketing. The more efficient you make your go to market motion, the more dollars you have to spend across the company. And I never really … I actually, when people would say, “Hey, ZoomInfo is a sales first company.” And I’d be like, “No. No. We’re a product first company. We’re a customer first company.” I hated hearing that. And it took a while to-

Jason Lemkin:

I’m with you.

 

Henry Schuck:

To just realizing that’s okay. That’s a strategic advantage of the business. We shouldn’t be embarrassed of it.

Jason Lemkin:

There’s something really interesting you said, which I think goes against some typical Twitter advice, which is that if you have an efficient go to market engine, the classic advice from VCs and others is pour gasoline on the fire. If you have an efficient … If you have 50 great reps, hire 500. Right? Go raise $200 million. And you’re saying an insight which is what I believe philosophically, although I don’t know if it works in the real world, which is if you have efficient engine, that means you can free up resources in other areas. It’s a weapon. Right?

Henry Schuck:

It’s a weapon.

Jason Lemkin:

Because if you’re inefficient, you end up having to spend every nickel in sales and marketing, every, it consumes all your oxygen. So you’re saying if your sales focused, [inaudible 00:24:23] good, put the money elsewhere. Don’t give into the fuel in the fire mentality, necessarily.

Henry Schuck:

Yeah. And then, by the way, if you’re putting money elsewhere and you’re making those investments in a smart way, that just should drive your ability to continue to invest in a disciplined way inside of your sales organization. So if I take the dollars from that strategic asset and I put it in other places, and then that should drive reinvestment back into the sales team.

Jason Lemkin:

That makes sense. So this one, we might’ve hit, and I like the fuel to fire at the end. It’s a good tie to the last thread. We might’ve hit this a little bit in the beginning. But what does this mean, hesitation stopped you going even faster?

Henry Schuck:

Yes. So I think that we did kind of hit this the beginning. But I think the way that I think about this was we’ve always been a pretty high margin business. But one of the things that we didn’t do was really think through prescriptively, where should the margin and the business be? And how should we trade? How should we think about growth versus profitability? And what did the market actually prefer here?

Jason Lemkin:

Got it.

Henry Schuck:

Instead of doing … And the reason why we didn’t do that, I think, is we had hesitation around trusting where that investment would go to change the profile of the business. And so if today, we’re 40% growth and 47% margins, then saying, “Hey, in the future, what does 60% growth and 30% margin look like?” It was tough to have that conversation along the way because we didn’t trust that the dollars invested downstream would turn into that result.

Jason Lemkin:

I got it.

Henry Schuck:

And so being convicted about making those investments and how it changes the face of the business, and trusting your ability to put the next dollar in marketing, or put the next dollar in sales, to have it grow, I think we got comfortable with who we were and how we were operating the business, and then didn’t take risks on that type of growth.

Jason Lemkin:

So whatever your own version of the rule of 40 is, it took you a while to believe it at a gut level that, that would work, that you could retain that. Right?

Henry Schuck:

[crosstalk 00:26:30] of the rule of 40 is like a rule of 80 today. But yeah, it was hard to-

Jason Lemkin:

But it’s true. Whether it’s 80, it’s hard. I didn’t believe that was true. I thought that was a silly-ism, the rule of 40 or 80. But if you have a well oiled machine, it is true for a while at least. Isn’t it?

Henry Schuck:

Yeah, absolutely. If you have a well oiled machine, you should be able to continue to invest and continue to grow in those areas. And I think we were just not convicted that the additional dollar would net the same return.

Jason Lemkin:

And there’s particularly this moment where on the sales team, you go from, you start, you have to believe that it really is bodies in, bodies out, assuming quality. Right? It’s a tough transition because in the beginning, you’re like, “Linda, Bob and Henry are so good. I just need more of them.” And then your sales leader’s like, “No, I need 40 reps,” and you don’t believe it. You don’t believe that it’s capacity. But you’re doing capacity planning for 2021 right now. Right? You know you need this number of reps.

Henry Schuck:

[crosstalk 00:27:32] in 2021. I think one of the interesting things here is I think a lot of people say, you hear a lot of people when you ask, “Why is your company successful?” They say, “Well, it’s because of the people.” And early in the early days of ZoomInfo, I got really frustrated with that answer. So I’d be on a webinar like this, and the CEO would say, “Hey, we’re really successful because of the people.” And I’d be like, “Come on. You’re really successful because of the product.” It’s got to be the-

Jason Lemkin:

It sounds like a platitude. Right? You didn’t believe it.

Henry Schuck:

Sounds like a platitude, totally. But then I found myself often, to that point, saying, “Man, if I had 10 of this guy, or 20 of that guy, or 30 of this woman, how much faster could I grow the business?” And that’s really just saying growth of your business comes down to the people. If you can look in your business, and I know everybody on this call can, and say, “If I had 10 more of him or 10 more of her, this business would grow exponentially faster,” then you really do believe that talent drives your business growth. And that’s an easy way to get to the core of what drives it, is to go, “If I clone this person 10 times, would the business grow faster?” And if the answer to that question is yes, for any number of folks in your organization, then you really do believe talent is the driver to success.

Jason Lemkin:

That’s a good insight. If there’s someone I’d say, “If I had 10 of her, I’m 100% confident,” then you’ve got to find a VP to go find that person for you. Right?

Henry Schuck:

Yep.

Jason Lemkin:

Can’t be you, going to your first point, because you can’t recruit 10 yourself. But go find the VP to do it. 

 

Jason Lemkin:

Henry, this was amazing. This was one of my favorite sessions of all time. These are the same mistakes we all make and keep making. But I think you’ve given us an incredible set of challenges to just make fewer of these mistakes. That’s the trick. Isn’t it?

Henry Schuck:

Yes.

Jason Lemkin:

Just make a couple fewer, and then watch how much faster you grow.

Henry Schuck:

That’s right.

Jason Lemkin:

All right. So this was a 10. I’m sure everyone is quietly applauding in cyberspace during this global pandemic. But I’m deeply appreciative for the time, as we all are, so thank you so much.

Henry Schuck:

Thank you, Jason. Thank you, everybody.

 

The post SaaStr Podcasts for the Week with Byron Deeter, Elliott Robinson, Henry Schuck, and Jason Lemkin appeared first on SaaStr.

SaaStr Podcasts for the Week with Matt Garratt, Trisha Price, David Schmaier, Rob Bernshteyn, and Jason Lemkin


This post is by Amelia Ibarra from SaaStr

Ep. 359: The Secrets to Vertical Growth, What it Really Takes to Build a $1B SaaS Company with Matt Garratt, SVP, Managing Partner @ Salesforce Ventures, Trisha Price, Chief Product Officer @ nCino and David Schmaier, CEO & Founder @ Vlocity. From strategies in recruitment and team building to sales tactics, these leaders from Salesforce, nCino, and Vlocity, will discuss the top tips for moving beyond horizontal SaaS and building a billion-dollar SaaS company.

 

This episode is sponsored by Linode.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from a session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.

 

Ep. 360: Digital transformation marks a radical rethinking of how companies use tech, people, and operations to fundamentally change their business performance. Coupa CEO, Rob Bernshteyn, and SaaStr CEO, Jason Lemkin, will discuss how the Cloud has changed in 2020.

This episode is sponsored by Guideline.

 

This episode is an excerpt from Jason and Rob’s session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Matt Garratt
Trisha Price
David Schmaier
Rob Bernshteyn

We’ve shared the transcript of episode 359 below. You can also jump down to the transcript of episode 360.

Transcript of Episode 359:

Matt Garratt:

Thank you. I’m really excited to be here today. I am Matt Garratt, Managing Partner of Salesforce Ventures, and we will be talking about the secrets to building a $1 billion vertical SaaS company, and we’re very fortunate to have two executives from leading enterprise software companies who have done this.

So first, Trisha Price, who is the Chief Product Officer of nCino, who recently had an amazing IPO, and also David Schmaier, who’s the founding CEO of Vlocity, and CEO now of Salesforce Industries, as they were recently acquired by Salesforce for over a $1 billion, as well. So, very excited to have both of you with us today, and thank you so much for making the time.

Before we go into our stories [inaudible] a bit more, provide a bit of context. I’ve had the fortune of working with both of you over the last few years and seeing, really, the change in the vertical SaaS industry change over a number of years. We’ve invested in over 300 companies at Salesforce Ventures and have partnered with both of you closely and it’s been amazing to see this story up close and personal over the years.

Matt Garratt:

I remember a few years ago when companies were out fundraising, vertical SaaS was not as popular as it was today, and part of that is, the adage would go that, “Well, these are smaller TAMs and these are going to be lower gross margin businesses, and if you look at the chart we’re showing, the gross margin in the early days can be as low as 30% and maybe getting above 50%. There’s a lot of services. Are these really product companies? There’s heavy services, at least 30 to 45% versus best-in-class that want to be less than 10%.”

Matt Garratt:

But then when you start to grow and you start to get these customers, you see some really nice benefits. These companies can scale really efficiently. They need fewer sales as a percentage of overall employees. When you look at sales efficiency as measured by magic number, it’s quite good. Retention is much better than most businesses and then the upsell opportunities are quite good, so it’s not surprising that while maybe not so popular a few years ago, you’ve seen quite a few successful exits in this space. A few of the leading companies in the Cloud 100 list, as put together by Forbes, of leading enterprise software companies are in industry verticals and just on the Salesforce platform, the three most valuable companies built on the platform were industry-vertical companies, including nCino, Vlocity, and Veeva.

Matt Garratt:

If you just look at Vlocity and nCino, amazing businesses. Grew to over a hundred million dollars in revenue in five years. As I mentioned, acquired by Salesforce for over a billion dollars and nCino, amazing business. Had a fantastic IPO recently valued depending on stock price around $6 billion, so we wanted to hear firsthand: How did you do this? We have, again, David Schmaier of Salesforce Industries. David, maybe would you give us a quick background about you and what gave you the idea to start this company?

David Schmaier:

Yeah. Thank you, Matt, and it’s great to be here. Thanks for inviting me and welcome to all the folks from SaaStry. I’ve been working in the front office space for 34 years, so I’ve been doing this a long time and when I started, the worldwide market for what we now call CRM software was $50 million globally and so I worked back out of graduate school at a small company called Oracle in the ’80s and I met a guy named Tom Siebel there and I went off and founded a company called Siebel Systems with him and I met another guy named Marc Benioff who went off to found Salesforce, so I was either smart or lucky, and either answer’s okay by me, but maybe a little bit of both.

David Schmaier:

But I had built CRM and then I had built industry-specific verticals, actually over 20 in my prior life, and a few of my colleagues worked with Salesforce right when the app exchange started to found a company called Veeva Systems and Veeva became, I think, it’s still the biggest company ever built on the Salesforce platform and as the worldwide leader in life sciences CRM, and so I saw how successful Veeva was and I went to my first Dreamforce in 2013 to find the next Veeva and what I found was incredible. I was amazed by how big Salesforce was in the ecosystem. I was amazed by the app exchange. I think back then there was 2,800 companies. Now, there’s 5,000 and 2,799 of them were horizontal software companies and one was Veeva. Actually, two. I think nCino had been already started, but I didn’t see nCino there, I didn’t know of them then, so maybe there’s a couple of vertical SaaS companies, but Veeva was a big one and it became clear to me that this was a huge opportunity.

David Schmaier:

I’d built verticals before, so I called up my old friends from Oracle and Siebel who founded Veeva and I got together the next morning with the three Veeva founders, and of course it wouldn’t be a great software company without a cocktail napkin, so on a cocktail napkin, we drew out the strategy for what became Vlocity, so that’s how we got started.

Matt Garratt:

Fantastic. Trisha, I’d love to get a bit more of your background for everyone and then talk about the founding story of nCino, which is certainly a little bit different than Vlocity.

Trisha Price:

Sure, Matt, and David, the reason you didn’t know about the other industry vertical is because that stage, we probably had like two customers or something like that, so we were just too small to be on your radar back then, but I appreciate the chance to talk to everybody today, Matt.

Trisha Price:

nCino is a little bit different in its background. We were actually built out of a bank called Live Oak Bank and Live Oak Bank was founded in 2009 and they had a need for a completely digital bank. Well, to most of you, that may not seem crazy today. You may even engage with a bank that is completely digital today, but at that time, it was pretty much unheard of to have branchless institutions, and so they started looking around for the right software to help digitize their processes and Cloud was important to them for scalability and they couldn’t find anything, so they started working on this concept of digital banking in the Cloud, and from there, very early on, we spun out and created nCino, which is Spanish for Live Oak, and we created nCino.

Trisha Price:

Our roots from the very beginning were built by bankers for bankers and from the very beginning, we made the choice to build the application on the Salesforce platform and since then, we’ve scaled quite a bit. We have over 1100 customers across the globe. We have offices in Tokyo, Sydney, Melbourne, Toronto, Salt Lake City, and then our headquarters here at the beach in Wilmington, North Carolina, and we have over 900 employees.

Matt Garratt:

Super. We went to the idea, so let’s talk about the different phases of building a $1 billion vertical SaaS company. David was kind enough to share this framework that he uses. David, you talked a bit about the team and the founders. Can you talk about maybe a little bit broader than the initial founding team and when you were first hiring people, how did you think about hiring people who had SaaS and software experience versus people that had industry-specific experience?

David Schmaier:

Sure. I think the team is probably the most fundamental step, maybe even more important than the idea, so I’m a big believer in Jim Collins’s book, Good to Great, where “You want to get the right people on the bus and then figure out where you want to drive the bus to,” and luckily from my prior experience, I was able to call a few of my old colleagues who were like-minded, and I think that’s the key is if you’re starting a company, it sounds glamorous, but it’s 24 by seven and it’s a lot of work, it’s exciting, it’s thrilling. There’s amazing highs, but there’s low lows, too, and you have to do everything. You have to plug in the computers, you have to set up the network, you have to figure out how to pay people, you have to find office space, all that stuff.

David Schmaier:

But we found a team of people who are really passionate about building software and building a company and so I went through my Rolodex of top people that I knew from my prior networks of companies and there was a founding six and ultimately 10 of us that banded together in a little low-cost office to figure out how to build a bunch of industry Cloud verticals, and then the key part, which I think we’ll get to later, is we figured out that we had to do it with a partner and so there was no other choice in our mind, we were all aligned at doing it with Salesforce. That was maybe the other most fundamental decision besides the team is the partnership with Salesforce.

Matt Garratt:

Thank you. Trisha, similar question: When you were starting to hire and scale out the team in Wilmington, were you focused on people who had experience in financial services or software experience or a little bit of both and how did you balance that?

Trisha Price:

Yeah, I mean, I couldn’t agree more with David. At nCino, it all comes down to the people and execution, right? Ideas are a dime a dozen, lots of people have lots of them, but to make a company successful, it takes grit, it takes determination, it takes a certain attitude, it takes relentless focus on customers, and that is just a level of execution that you need to get to the kind of success that David’s company and we at nCino have had, and so we’ve always been one to hire for attitude and aptitude more than a specific skill set.

Trisha Price:

Now, in an industry vertical like financial services, you absolutely have to have a deep banking experience and the built by bankers for bankers has been a part of our core DNA, so we absolutely have hired lots of folks with a banking background, but the problem you get if you only focus on folks with a banking background is the faster horse’s problem and what I mean by faster horses is they know how to automate the processes that already exist at a bank, but that’s not really going to disrupt an industry, that’s not really going to get people to get off of their current systems and processes, and so it’s not about faster horses, it was about inventing a car, right?

Trisha Price:

So, how do you get people who are innovative, who can think outside the box? It does require, certainly, people with technical background. For us that didn’t necessarily mean Salesforce. We’ve tended to hire just the best attitude and aptitude full-stack developers we can find and Salesforce has such a plethora of trailheads and training that that’s not really an issue, and so it has been a combo, I would say, of three types of people: the best technical talent we could find with the best attitude, certainly people with deep domain experience, which is needed in vertical SaaS, and then those out-of-the-box thinkers, those inventors, those creative folks who can really cause you to think about things in a different way.

Matt Garratt:

Well, I can attest to the commitment to hire for aptitude versus specific skills. I don’t know if you recall, but we were at dinner one time and there was a waiter that she just blew us away. We were really impressed with her and she ended up becoming one of your… I kept saying, “You need to hire her,” and she became one of your customer success managers, if I recall.

Trisha Price:

Yes.

Matt Garratt:

A full testament to you never know where great talent is going to come from.

Trisha Price:

That’s right.

Matt Garratt:

Let’s move on to the initial product. David, can you talk about the initial product that you took to market? Maybe to provide some framework, I generally think of industry-vertical solutions of having to be sort of full-stack and a bit broader than a horizontal app, and so there’s generally a higher build upfront. Can you talk about the first product and how did you know it was done or at least ready to take to market in the first place?

David Schmaier:

Sure. Yeah, I’m a product person by training and so we had had a lot of experience building SaaS and vertical products. The key for us was we were building not one industry Cloud, but four, and then at Vlocity, we later added two more and expanded to six, so the secret of building one vertical SaaS product is going deep. The secret to building more than one is reusing components so that you don’t have six engines that do the same thing, that you reuse that engine and you get to use what we call metadata to reimagine it for each one of these industries.

David Schmaier:

Luckily, we had had experience doing that, so I couldn’t agree more with what Trisha said: If you do industries, you got to have domain experts, so I had originally four domain experts, now six, leading each one of our industry teams. Then we also hired full-stack developers, so like you said, Trisha, not Salesforce experts, but just great developers and they all learned Salesforce. We immediately standardized on Salesforce and did the full training course, I think this was pre-trailhead, but did whatever the training was back then, can’t even remember what it’s called now.

David Schmaier:

We were amazed how fast we were able to build on top of the platform. So my prior life, I had built the platform and the core apps and the industry apps, but to build the platform can actually be several years of work and cost hundreds of millions of dollars depending on how you do it, and so we got incredible leverage, incredible. It’s hard to overstate this from the Salesforce platform and so we actually created our company in March of 2014 and at Dreamforce, we showed the four vertical apps, which is about six months later, and they were beta releases and then we shipped them soon after Dreamforce, so maybe in seven or eight months, we were able to ship for industry Clouds, and then we were off to the races. But the key again in industry-specific SaaS is understanding the business processes, understanding the critical problems and the issues, and really going deep in each one of these industries.

Matt Garratt:

Now, I want to pick up on that in a second with you, Trisha, but David, I guess when you were building this out and you had such a big vision, can you talk about the fundraising? Did you need to raise more money to build such a big product platform and were there specific VCs that you sought out or that were going to be more attracted to this solution? How did you manage that?

David Schmaier:

Sure. Yeah, I think on the fundraising, maybe our experience was a little unique, which was we knew a lot of people in the industry, so because we wanted to partner with Salesforce, our first call was with Salesforce and John Somorjai and Marc Benioff wanted to immediately invest in our company, which was great. If you’re going to build a company with Salesforce, who better to invest than Salesforce? I think if that’s the question, the answer to that should be yes.

David Schmaier:

Salesforce became our lead investor and then in our second round, there was room for a second investor, and so we went with Sutter Hill Ventures was a VC partner of ours and I had known a bunch of the partners there. It’s a great tier one firm on Sand Hill Road, but I think what they’re looking at when they’re trying to fund you is this wheel of: Is there a great idea? Is there a strong team that’s done it before? What is the product, or what will the product be, or where is the product? Do you have customers? And then, how repeatable is the model? And so, because we had done this before, we were able to very quickly do the fundraising, so we literally had like two meetings with each one of the investors and were able to close on the financing, so I don’t think that’s normal. I wouldn’t expect that to be the typical process, but it was pretty straightforward for us

Matt Garratt:

And Trisha, maybe back to the product and building the platform: How do you compare this building a more vertical industry solution versus a horizontal application and how challenging is that initial build?

Trisha Price:

Yeah, I mean, certainly when you’re in a vertical build, the depth you have to go to for customer success is deep, right? There has to be value that you’re delivering beyond a surface level set of features. It’s got to solve end-to-end problems at a financial institution or whatever your vertical may be. It may be that they’re on spreadsheets or word documents or things of that nature and so maybe your barrier to entry in those type of processes can be a little bit lighter, but if you’re doing a rip-and-replace of a legacy solution, that requires an end-to-end set of features that really solve that end-to-end business problem, and that typically means deep integrations, right?

Trisha Price:

Most of these vertical industries that we’re talking about, you’re not the only shop in town, right? It’s an ecosystem of applications and so having a very strong approach to integrations, whether it’s one like Salesforce took with having your own app exchange type concept and ecosystem or whether you’re building direct productized integrations or a combination of both, that takes quite a bit of time, not just to solve your end-to-end set of workflows and feature sets, but to get those integrations right for customer success.

Trisha Price:

I do think that takes time, but I completely agree with David: Building on top of Salesforce dramatically decreased our time to market. From my background, I’ve been building banking software for my entire 20-plus year career. It’s really the only thing I’ve ever done, pretty much, and so for me, this was the first time I’ve worked for a product company built on top of Salesforce. It was a tremendous difference for me to come in, certainly a learning curve of different ways of doing things that takes some getting used to, but the benefit that we received from it from a company perspective was tremendous.

Trisha Price:

It wasn’t just in the early days to get that product out quicker. Think about the scalability as you go global. I talked about our offices in all these different countries across the world, data centers. I mean, have you thought about data centers in Japan? Have you thought about data centers in Australia? These are not simple things to solve. And then you layer on top of that platform features like multicurrency, multi language, you layer on top of that things like entitlements in security and investment in security and so that certainly did impact our ability to get to market, even with the kind of complexity and depth that our product and our vertical requires.

Matt Garratt:

You hit on something pretty interesting there, Trisha. When you said you’re talking about ripping out incumbent players. Even if it’s a bad solution, as long as people aren’t miserable, they’re not going to rip those out if it’s part of your banking platform. What was the core value proposition or the thing that you focused on most that was the most convincing thing or that really was compelling for banks, particularly the larger banks, to move off of their incumbent solution to you?

Trisha Price:

Yeah, I mean, for us, it has changed over the years and it has changed as we’ve launched new solutions, right? When we first started, we primarily focused in the commercial lending space and since then, we’ve launched retail banking solutions as well, and retail banking solutions tend to be more fully banked than the commercial lending space was when we first started, which was a lot of spreadsheets and Word documents in the early days. Changed a little bit now, but primarily, that’s still true.

Trisha Price:

But from the beginning, we’ve had core value that we’ve been able to deliver to our customers, right, faster. As a customer, what do you care about when you’re applying for a loan? Am I approved? When do I get my money, right? Whether you’re a business or you’re a consumer. And so, how do you help banks do that quicker? How do you help them do that at scalability and how do you as a software company do that for the smallest community and regional institution in the US to the largest, most sophisticated global institutions in the world on one code base, right? Cloud, definite differentiator, right? Because if you look at these financial institutions, they have growth aspirations, right? They get acquired, they acquire other institutions, so having immediate scalability of the Cloud, definite differentiator, and then having a set of features and solutions that drive value of regulatory compliance, supporting their growth strategies, doing it in a cost-efficient way are really our core values in how we think about building software and why I think so many customers have jumped on the nCino product.

Matt Garratt:

Maybe a follow onto that: When you’re building an industry-vertical solution, how do you avoid a lot of the customization work? Is that a challenge from company to company? You have presumably a somewhat smaller TAM and if a large bank is coming knocking and they want something, how do you balance that in making something that’s reusable without too much customization and services?

Trisha Price:

Relentless focus, relentless focus. It is very easy in vertical and these kind of depth of applications, and I know David’s been faced with this, I’m sure, many times, to get off course from the industry product that you’re building and say yes to a customer. But if you have those creative people that I talked about earlier, you can figure out how to solve a customer problem, but do it in an industry way. I think, yes, that requires the customer to be able to apply configurations on top of your base product to meet their needs and it requires some ingenuity in how you code and create a product, but it certainly can be done, and I think coming back to the Salesforce platform, Salesforce has done this phenomenally as a platform, and so you can learn from what they’ve done and take advantage of a lot of their configurations to handle that in a similar way that they have.

Matt Garratt:

Well, we are at the bottom of the hour, so, David, Trisha, thank you so much for taking the time, walking us through your experiences at Vlocity and nCino. It’s been a pleasure working with you, and a pleasure talking here, so thank you both so much.

Trisha Price:

Thank you, Matt.

David Schmaier: 

Matt, thanks so much.

*****


Transcript of Episode 360:

Jason Lemkin:

Good morning everybody. I’m super excited for the next session at SaaStr Enterprise with one of my favorite CEOs in one of, I think, one of the most interesting cloud companies, Coupa, and I’m glad to have Rob back at SaaStr in general. He was kind enough to come a couple of years ago when Coupa was still on fire, maybe had recently IPOed, I don’t know the timing. But I’m super glad to have Rob back now because Coupa, to me, in the crazy world we’re in, is at a very interesting intersection. And there are what we’ve talked about as COVID beneficiaries. Folks that have benefited from these crazy times and Coupa is one of them. Coupa’s growing quickly and its stock price has done fine and it has benefited.

Jason Lemkin:

But at the same time Coupa is the market leader in spend management, and managing procurement, and managing supply chains and those are areas that are deeply impacted by the economy, deeply impacted. It’s hard not to walk downtown through [inaudible 00:01:05] it to see what’s happening in healthcare all over the place, in financial services. And so Coupa is super interesting because it’s benefiting as a software player but yet it has this insight into the economy of software and the economy of the real world that I can’t think of another vendor that has. I’m super excited to talk with Rob and down at the bottom on the Zoom, hit Q&A, we will save time for questions. We had a few already come in but click there and I’ll remind you at the end so we can chat and I can let Rob talk a little bit about Coupa and then we can chat about it but managing almost 2 trillion of spend across basically all segments of our economy. Which we’ll chat about.

Jason Lemkin:

Coming up on 500 million in revenue, whatever the exact number is, no forward looking statements in this presentation but what’s super interesting that I’ll make sure we talk about even here is that Coupa has redefined the category and now has more revenue in this category than ever existed. What does that mean for the cloud? How do you change a category? And again, we’ve been talking about digital transformation for 20 years, probably, Rob, since you and I started in software but so much has changed. I want to dig into a bunch of things on the slide but what are you seeing? What’s changed the most since March 15th? What’s unexpected? What’s expected? What are the number one things that have shocked you, or have been pulled forward years that you weren’t expecting?

Rob Bernshyten:

Well, I think as everyone is saying, Jason, and again thank you for having me on, there has been a greater energy and focus in what was already happening, which is the move to digital. I think in our case it’s even more interesting because when you’re in times of hyper growth folks tend to focus a little bit more on revenue than they do on profitability. And they do on operational efficiency frankly and our value proposition at Coupa has always been to help companies become more operationally efficient. To help them unlock all of their potential so they can pursue all of their missions and visions.

Rob Bernshyten:

Obviously we’re doing that now for hundreds and hundreds of companies around the world. It’s an opportunity to engage in the same dialogue we’ve been having now for well over a decade but the ears are perking up even more because they know that they need to move to a digital method of driving their operational efficiency, understanding how they’re managing their spending as it pertains to everything they need for their business, how they’re thinking about supplier risk, how they’re thinking about their inventory levels, their sourcing activities, and so much more. It’s really, really exciting for us to have a greater emphasis into an area that we know is so important anyhow.

Jason Lemkin:

It’s interesting because it’s different for different vendors. Since March 15th, was there a trigger point where maybe I had a project that I was talking to Coupa, it might be a 2021, 2022, 2023 long term deployment because you have many enterprise customers. Was there a particular drama issue, shelter issue, a wedge issue that got projects pulled forward years?

Rob Bernshyten:

Well, interestingly enough it was actually a bit of the opposite in the first month or so, and I mentioned that on the last earnings call. There was almost a deer in headlights moment amongst all the vast majority I would say of our prospects around the world whereas we don’t know what’s going to happen so we actually need your help. We need to get PPE equipment. We need to get things to sort it out so then I’m back in two, three weeks. You can do that. It was really rewarding for us here at Coupa. We have this robust community of existing customers and they came together on our platform to source personal protective equipment for their organization. We were less oriented to how do we close more business during that first month, to more oriented towards how do we help this community make sure that they are going concern which was very real in some industries for sure.

Jason Lemkin:

Yeah, we’ve all been through four phases since March. I hadn’t fully… I did hear that when you said it before but didn’t think through it. There were vendors where the end of March into April were crazy even Zoom the next day exploded. But even Slack it took a while for folks to figure out we needed to Slack more. Then Slack took off. You had the chief procurement officers, CIOs and others needed to survive for that first month. Then what was… Has there been four waves? What are the next couple of waves that you’ve seen across your partners and customers?

Rob Bernshyten:

Well, the most interesting thing for us is that we’ve taken dozens of customers live since this hit. Because it’s one thing to sell new prospects, and of course we’re focused on that, and we’re doing just fine there but when you think about the existing inflight projects when suddenly these people are operating from home and they’ve never operated in a virtual environment, and to take large global deployments live and have see them start running massive amounts of spend through our system.

Rob Bernshyten:

Ceding them control spend. We have a whole bunch of customers who didn’t have control over their spend. They couldn’t stop the company from spending money in certain places. We’re able to help them do that on their mobile phone through our integrated email capabilities offered via Coupa. That was very, very rewarding and powerful. And then of course we reemerged and we started looking at how we can drive our global reach and expansion, obviously we’re well into that now months after the crisis started.

Jason Lemkin:

For a big Coupa customer, pick one if you want or don’t or an example, but before March 15th what was a typical deployment to be fully into production? Not an agile kind but maybe an old school type. Would it be a year? Would it take a year from really signing and fully going live? If it was or whatever it was, how do you compress that into weeks? How do you manage the team? How do you do the internal change management and the external because we’re not necessarily wired that way until March, were we?

Rob Bernshyten:

That’s right. Well the average is roughly six to nine months for our enterprise customers. Our mid-market customers, four, maybe five, weeks, so it’s not bad. But you know what happened is that we gained a lot of efficiency ourselves in working while our customers remotely, you don’t have the time. “Well we’ll meet you on Thursday we’re going to fly in. Were all going to get into a room.” “Well, it’s Monday let’s just do it right now.”

Rob Bernshyten:

You’d get the systems integrator on the Zoom session, you have the existing customer on the Zoom session, you have my Coupa colleague on the Zoom session. We’re sharing as you’re sharing this slide the configuration set up and literally walking through it. In many ways we stand to gain an advantage in the efficiency with which we can work together as long as we can overcome the change management required for some folks, as you say, to be a little bit more tech savvy and be willing to work in this way. We’re seeing that happening without a doubt.

Jason Lemkin:

Where do you think… It’s hard… There’s so much change it’s hard to even predict but in some ways it’s great that you can now deploy customers over Zoom, right? It’s so much more efficient. You don’t have to get on an airplane. You don’t have to book the hotel and all this but some things are lost and some things are different. Has enterprise buying changed? Do you think it will swing back into the middle? Can we live this dream where we never have to get on jets again? Where do you think we’ll be on the other side of COVID?

Rob Bernshyten:

You know it’s hard to predict that, Jason, of course, and probably it’s somewhere in the middle. I don’t think it’d be an extreme one way, or the other if I had to predict. But what I will tell you that will be consistent is that enterprise software is really about driving change management. Driving the change. One of our core values at Coupa is focused on results. In other words, identify exactly what it is that you’re attempting to achieve after you’re live, a year after you’re live and then focus everything in and around that. Limitations like the inability to travel, or advantages like the ability to get on a virtual session like this are the methods of getting to have that result. As long as we keep people oriented toward that outcome I think we’re in fine shape, and that’s how we think about this approach.

Jason Lemkin:

That’s good. I want to talk about this because you have some great data in this. I worry about supply chains. I try not to worry in the world but there’s a lot going on. You want to remain positive, but I look back at some of the first SaaStr blog posts in 2012. I wrote one in 2012 as I was walking Downtown University in Palo Alto when the last retail store reopened, but it was four years. Downtown Palo Alto, it’s a fairly gentrified community.

Jason Lemkin:

There’s a lot of money in Palo Alto–tech money, but it took four years for the last retail, what’s now West Elm to reopen for four years. I’m worried about this. What are you seeing? And this one is interesting, 43% of companies were worried about the ability to fulfill orders. At the beginning of COVID you still can’t get a webcam. You couldn’t get a monitor. We were worried there were some groceries you couldn’t get at the beginning of this. Tell us what you’ve learned being at the center of this.

Rob Bernshyten:

Well, first of all brick and mortar retail absolutely is in trouble, and frankly brick and mortar retail to some extent has been in trouble well before this pandemic. We were looking at our business spend index, if your viewers go to spendindex.com they can see the data on that. We’ve been looking at retail for three, four quarters and it’s been trending down. When we’ve seen a lot of very interesting data I could share with you around the downward trend. But when you think about global supply chains and this massive globalization dynamic we’ve had in the world for the last six, seven, eight years. We’re getting into, let’s call it globalization 2.0, which begins to balance global with local. As this slide says is there some fragility in our supply chain? Yes. But I would argue that fragility is really in the area of information technology, information access rather than in physical access because the goods and services exist.

Rob Bernshyten:

And as soon as there’s demand, supply gets there. You look at PPE there was a massive demand and within three, four weeks, there was massive supply. The challenge wasn’t there. The challenge was having the information at your fingertips to hot swap suppliers, get access to things you needed at the right time, make commitments contractually to people to know that you will fulfill your obligations. That’s the world in which we play in at Coupa. That was what makes it so interesting. We’ve got customers literally hot swapping suppliers, moving them into certain areas where they never even thought they’d be buying from, creating contingency plans for categories of spend. You need information technology for that and that’s what’s exciting about many of the things we’re doing and seeing in our customer community.

Jason Lemkin:

Well, that’s interesting. I was following after right when we got into this wonderful pandemic, how Coupa was at the center of getting PPE and identifying this but I didn’t fully understand why. Other than it’s a great thing to do but I guess it took a while for me but the supply got there within a relatively short period of time relatively speaking but it needed help, it needed liquidity, it needed connection. And I guess Amazon works again, right? We can still get Amazon products to our home. I guess we don’t need to worry as much that–the market will solve this, no matter what global turmoil there is in the short term as long as technology can connect us, I guess is the learning.

Rob Bernshyten:

Yeah. Absolutely information technology. Access to the right data at the right time to make the right decisions and collaborate amongst the supply chain. It’s very exciting to see some of the largest companies in the world really reorienting themselves to fully modernizing their supply chain, their business spend management approach. It couldn’t be more exciting for us obviously.

Jason Lemkin:

I want to get some of the data next but on this last point in the slide. This is something I think about a lot. Did we know that the cloud would be this strong after March, that there would be this boost? It’s crazy, right? Coupa is on fire but you talk about retail, look at Shopify. Shopify is a $120 billion company today. It’s crazy and the growth factor is insane. It’s the maximum output of this trend that we’ve seen but can’t… If we’re in shelter, if we’re in this world through the end of next year, can we have this divergence? Can we have a cloud on… Can cloud remain on fire when one out of three people are essentially unemployed in the country? How long can we remain divergent? Do you have any insights here?

Rob Bernshyten:

Well, it’s a tough question. It’s interestingly Shopify and Amazon, and these are our customers. Amazon runs in tens of billions they manage through Coupa so we’re close to these customers but the same value proposition that existed before this crisis exists now, it’s just seen as a higher priority. The ability to get greater speed, the ability to have information at your fingertips, the ability to embed, Jason, best practices into your deployments. Just about every CIO I talk to tells me, “Hey we’re going to go with Coupa, but hey promise me you’re going to deploy this in a way that’s going to be quote unquote, vanilla or best practice so that my team doesn’t start doing a whole bunch of end rounds that are going to make us on upgradable and slow us down.”

Rob Bernshyten:

They want agility. They want access to community information, hopefully we’ll talk about. I think there are a lot of dynamics that are really tailwinds for us in pushing cloud faster into the world at large and obviously these are big, big markets we’re all playing in and I’m sure many of your viewers are playing in. The opportunity is now, really, to accelerate our efforts, no doubt.

Jason Lemkin:

It’s usually the CIOs wanting these best practices, right? They don’t want custom made. They have this sort of on-prem scars of some hack. Some bit of corner code written that–or weird workflow. I should have known Amazon was a customer. I didn’t know it, but my mistake. But boy you must learn a lot from Amazon. Amazon must be the like the Walmart of today, where they’re an amazing customer, but they school you a bit. What is like for an Amazon? What do all your other customers benefit from? What are some… That vanillaism? What are some things you’ve learned from really those mega customers like Amazon that–and how does that benefit the others? How have they leveled you up?

Rob Bernshyten:

The beauty of enterprise software, as I think every one of you viewers knows is, is can you have minimal code that supports the massive amount of use cases, as many use cases as possible?

Jason Lemkin:

That’s the dream.

Rob Bernshyten:

That’s the dream. What we learn from our largest customers, Amazon being one and others, is how to support massive complexity in the simplest way possible. And what we learned from some of our smaller customers is how to keep things very intuitive and user centric but at the same time abstract them from some of the complexity that they may never need to use and make everything configurable. We’re constantly learning about scale and stretching our platform from the larger enterprise and we’re consistently staying very, very true to usability and user centricity that we’re picking up from the smaller growing companies. And that’s a beautiful marriage to have on one platform.

Jason Lemkin:

Yeah. Relate to this. This is something I wanted to learn from you in the enterprise is brands. You and I chatted right before we went live, I asked you about competition. I had some fun talking about Ariba which we’re in 2020, Coupa isn’t really an Ariba 2.0 but maybe in the early days there was some truth to that. I had a lot of experience there and you said I don’t spend some… Now that we’re big enough, now that we’re actually larger than this category used to be, I don’t spend as much time thinking about competition. I think one reason is you have this trusted brand. You’ve become… Every deal is hard. You have to prove yourself to Amazon and Shopify but you are this brand. There’s suites and there’s best-of-breed which we thought about. But do folks want even more from trusted brands now in 2020, and even more after March 15th? And what does that mean, versus going more horizontal? And where do we want to invest more in trusted brands?

Rob Bernshyten:

Well, it’s interesting. I’m looking at this slide and saying do enterprises want more from vendors? In some sense I would push back on the term vendors because I don’t consider our company, any one of my colleagues working here, anything that we offer, we’re not a vendor. When I think of vendors I think of a hotdogs at a baseball park-

Jason Lemkin:

I would have hated it myself as the CEO. You’re right. But-

Rob Bernshyten:

Well so, but-

Jason Lemkin:

But CIOs might still use the term.

Rob Bernshyten:

It plays into your question. It’s a term that’s grounded in business they used to be a products business, it smells of commoditization. The reality is what customers really want is they want trusted advisors, they want partners, they want people to bring best in class technology, embedded best practices, and they want folks that are focused on value creation with them and measurable success. That’s what they want more than ever and that’s what they deserve. They’ve always deserved. They just didn’t have the chance to get that on the first run of this thing, and enterprise software in the 90s and maybe a well into the new millennium.

Rob Bernshyten:

When you develop trust, and I believe trust is built on transparency. You have to actually see measurably that we’re delivering value for you. If a third party came in and said, “Okay, there’s a relationship between Coupa and one of their customers and here’s what’s happening.” They will be able to point to measurable value X amount saved, or X user adoption, or X spend categories and a management, or X improvement in operational efficiency, whatever that may be.

Rob Bernshyten:

Once that’s established, of course those customers are inclined to want to tap into subscribing to more what we call value as a service from those partners of theirs, and we consider ourselves to be that type of partner for them. We’ve benefited from that and I hope we’ll continue to benefit from that because we take every one of our customers very seriously. We want to keep them forever. We want to continue to drive more and more value for them.

Jason Lemkin:

Yeah, it’s interesting. I think at Salesforce, depending on how you look at it, CRM is either their fourth or third largest category now. It’s pretty crazy, isn’t it?

Rob Bernshyten:

Sure is, sure is. Well look, understanding every component of your customer, how you market to them, how you sell to them, how you service them, how you interact along on the web it’s super important. But I argue it’s just as important to understand your entire supply base and how you buy from them, how much you spend with them, how you can collaborate with them, whether or not you can mitigate risk when they have risks. We’re really operating on the exact opposite side of the equation. We’re helping people, companies who spend money do it in the most operationally efficient and thoughtful way.

Jason Lemkin:

And related to this and at the bottom point, when I listened to the last earnings call, you said inbound demand is up from your base. Your customers want more and more from you, from a trusted vendor. A related question because it seems like–so you’re coming up on 500 million in revenue, whenever it exactly, I don’t know exactly what ARR, it doesn’t really matter for this, but how far can you see? Can you see… You obviously can see to a billion. You can see it right behind you going across the bridge but can you see 10 X? Can you see to 5 billion now as crazy as that might have sounded a couple of years ago? How far can you see in… What do you see? What do customers want? How should the product and things like… What do you see? What’s the furthest you can see, and what do you see?

Rob Bernshyten:

Well, I appreciate that question, Jason. What I see is a $50 billion plus total adjustable market, and what I typically ask are two very, very simple questions of any prospect I interact with, frankly anyone I interact with whether it’s over Zoom, or before in the physical world. Do you think, number one, your company is doing a great job in managing the spending that it’s involved in for all the things and services that you need, or you think it’s done really, really well? I’ve rarely, rarely gotten an answer that says, “Oh yeah we’re great. We know everything about how we spend money. We have control over it. It’s complex.” Okay.

Rob Bernshyten:

Then I ask the second question, “Do you think you’re employing information technology in a way that’s comprehensive, and fully integrated, and user centric, and deployed quickly that addresses some of the challenges described?” And the answer is always no. Just about every company in the world can really stand to improve the way that they do their business spending and the way they manage their business spending. I see a huge, huge opportunity and I think this is in many ways early innings for this category. We’re proud to do our part in trying to lead a focus into this area and then fulfill that leadership with a real brand promise and real measurable outcomes for every one of our customers. I think that is why we’ve seen more inbound interest and more capabilities, and additional features and functions of modules that we can deliver for our customer base of course.

Jason Lemkin:

A couple things, this is more a tactical point and I want to make sure we get a couple of things on the data you have but this is a bit of a mystery to me. I should know the answer to this, but I don’t. Why are payments so hot now? I understand the innovation of Stripe of two lines of code back in the day, but why–you’re seeing this? Why is this all coming together now, and why couldn’t payments be as hot five years ago? I put hot in quotes. What’s so much more valuable today than it was, or what’s changed in technology because I’m missing a bit of, why now.

Rob Bernshyten:

Well first of all, it’s saying that the value proposition has been there for a long time. It’s been there for a long time. The question is, has the value proposition been fulfilled? I’m not sure [crosstalk 00:22:45]-

Jason Lemkin:

Why now?

Rob Bernshyten:

Well look at what’s happening in the consumer world. The value proposition has been there a long time too, but it’s only now starting to be fulfilled with Square, and Apple Pay, and Google Pay. Now if you look at B2B payments, my gosh. First of all it’s much bigger. There’s a lot more money flowing there but secondarily the technology, the capabilities there are really archaic. Old school technology, a lot of manual–a lot of paper. In the United States, nearly half is paper-based checks. What are we kidding ourselves? These systems are rigid, you have monthly batch jobs running out of incumbent solutions. There’s no ability to collaborate with your supply base around payment rails, around dynamic discounting, around virtual credit card payments and transfers, yet cross border is still super old school and complex.

Jason Lemkin:

Super old school.

Rob Bernshyten:

There’s is so much we can do here. You got third parties enter to do supply chain finance. We’re in the very early innings of a huge market and it requires leadership, and it requires incredible tech. Some of the approaches that been taken in the past year have largely been driven by banks. The approach we’re taking is partnering with banks where we’re bringing what we’re really good at to the equation. A highly scalable, robust, transactional platform. What we know about usability and how important user centricity is to that problem, and we’re starting to really get somewhere. We have, as I mentioned in the last earnings call, nearly 100 customers leveraging components of Coupa Pay and that’s growing. It’s really exciting for us.

Jason Lemkin:

If you look at what’s happened with Shopify, how big payments have gone there. If you look the very low end adjacent to like bill.com that used to have any payments revenue and then it became one of their key drivers of growth. What do you see a few years out here in the enterprise? How core is this? It’s obviously core to Coupa but how big… Is this flip around and become one of the most essential parts of what we’re doing in terms of managing this business commerce? Or are we… In five years will this be massive?

Rob Bernshyten:

It’s hard to make a detailed prediction. The way we like to do our business is do it very organically. Our customers are asking for these capabilities of us. We didn’t wake up and say we’re going to do payments. Our customers said we’re doing procure to okay to pay through your platform. How about we do procure to pay? [crosstalk 00:25:03]

Jason Lemkin:

Got to do the last mile, right?

Rob Bernshyten:

Yeah, let’s do the last mile and pick off a bunch of use cases that we’re struggling with. We see a big opportunity here. We’re going to co-develop with our customer community. We want to take the same approach we’ve taken with every other set of modules we’ve deployed and we’ll see where it goes. But the likelihood of us being able to capture a real meaningful portion of this market, based on what everyone is saying, I think, that’s objectively looking at this appears to be quite high.

Jason Lemkin:

Yep. Now this next slide is something I picked out of your investor report because it’s interesting to me as a founder, how do you… Fiscal discipline is super interesting. You turn around you probably can’t believe all the unicorns you read about on tech crunch each day that are raising 400 million and you don’t even want to know what the bottom line looks like because it doesn’t matter. Coupa is a generation… We’re generations ago in terms of thinking about this, and then you look at weird things like Zoom. You know what Zoom’s burn rate was the year before it’s IPO? You know what it was?

Rob Bernshyten:

I don’t, I don’t remember.

Jason Lemkin:

Zero. It wasn’t minus $1 or like Eric literally said to the marketing team, “You can spend every dollar we have, but it’s the funniest thing, it’s like 414 million in revenue and like 414 million of losses.” And it’s literally a zero. It’s the fun you can get it. You can imagine that conversation. Here’s your allowance. But what is this? What’s 50 is the new 40 and when should software be profitable? It’s supposed to… Shouldn’t it be really profitable? You need X number of engineers and everyone can buy it but what does this all mean? What are you saying about this 50 is the new 40?

Rob Bernshyten:

Well, first off let me say I love how Eric thinks and I think similarly in the sense that there need to be guardrails on your business. The idea of spending at all costs, and by the way we’ve had some pressure as a public company certain quarters where people say, “Well why don’t you just press further in sales and marketing and grow-“

Jason Lemkin:

Press on the gas.

Rob Bernshyten:

And then you’d have the other side as soon as there’s a little bit of backwards says “Hey, why don’t you accelerate the pace to profitability?” Look, we all know in software as a service what really matters is cash flow. Cash flow is what matters. That’s what fuels the business. We have put guardrails on the business now for 45 quarters. We’ve had guardrails on the business. Very, very careful and thoughtful growth not overextending ourselves, but at the same time, careful management of sales and marketing efficiency, and then getting scale into a model on the bottom line.

Rob Bernshyten:

Those are the guardrails we’ve had every quarter for 45 quarters, and just as Eric does it, here’s what it’s going to be for the next quarter. We’ve got 12 weeks, go, and we see what exactly what happens. We distill that, we look at all the metrics by business unit, by geography, by product line, and then we unlock the investment we’re going to have for the next quarter, go and do it over and over again. When you do that for as many quarters that we’ve done you get into this situation where you can have this rule 50 dynamic that my colleague and CFO came up with, I think when he became 50 years old. But we are operating at this level now and it’s exciting.

Jason Lemkin:

There’s a benefit at 50? Is 50 too much? Obviously you’re a proponent of it because you put it out, but where we’re at… How do you set that guardrail? What is too efficient versus too inefficient when you’re able to be efficient? I can think about it [crosstalk 00:28:26].

Rob Bernshyten:

I think you have to combine backwards looking metrics. When you complete a quarter, you look at all your backwards looking metrics and then you combine them with all your leading indicators as an executive which is what does the pipeline look like? What does our talent look like? Where are we in terms of stage of pipeline? Where would we want to make investments geographically? When are we launching the next product release, and then use your gut to fine tune exactly how you’re going to run out at the following quarter. You have the guardrails but you also don’t hamstrung yourself as an executive. Otherwise you could automate the job of the CEO in that area and that’s probably not the best way to do it.

Jason Lemkin:

Good. Let me skip… Oh, oops we had this slide. Maybe we lost one on the different segments. I want to talk about some of these points, but we might’ve taken some of this out, but tell me what you’re seeing across different industries because you do have some data on this. One of the most interesting things from some Coupa data I’ve seen is I read The Wall Street Journal, I read the New York Times. It seems like many banks are doing very well in this crazy environment. But like Coupa shows financial services under a lot of pressure, healthcare. It’s hard to get a handle on what’s happening in healthcare. Some hospitals are all at the edge of bankruptcy. On the other hand, other segments of healthcare are on fire. They’re literally on fire. Walk me through some of the data you see of different segments and maybe some things that are counterintuitive that you’re seeing in different parts of the economy.

Rob Bernshyten:

Well, I think one of the biggest things that I think most people now understand is that given the amount of liquidity in the market it’s very hard to gauge the extent to which financial services firms are doing well and healthcare et cetera. You have to have that context in mind. It’s very difficult to answer that question in two sound bites, I really do urge your audience to go to spendindex.com. Here’s what we’ve done there Jason-

Jason Lemkin:

We have a slide on it here. I think I just lost it but yes it was a great one.

Rob Bernshyten:

Let me tell you what we’ve done there because we have created an index that is a real leading indicator. Let me tell you why. We’re looking at things like what are the approval cycle times in the current quarter. In other words it didn’t take longer for people to prove something before they even bought it, before they even ordered it, before anything happened. We have a leading indicator in terms of how long, by industry, folks are thinking through purchases. That’s never been seen before, in an aggregate level with nearly $2 trillion worth of data. We’re looking at rejection levels. What percent of things are getting rejected? You never see that in the GDP. Now if there’s an increase in rejection levels, of course there’s a likelihood that that industry has concerns.

Rob Bernshyten:

We’re looking at average spend per employee and companies and we’ve put that into an index to give leading indicators that we launched this every quarter and when we backwards tested this to 2016 against the GDP, we saw a very real and meaningful correlation. We think this could be a real enabler for people to get a sense for things. But if you look at the last one, what we shared at the last earnings call of course significant retail slow down, slow down across the board frankly but what’s more so on pronouncing retail. When you look at a financial services slow down there as well whether that’s seen or not in stock prices. I’d urge people to go to spendindex.com. We’re sharing this openly. We want to be a good corporate citizen. We’re not gaining anything from sharing this other than maybe a little bit more awareness about Coupa. I’d urge your folks to check it out.

Jason Lemkin:

Yeah. Everyone go to that because it’s pretty awesome, spendindex.com and I’m on it on my iPad. I had a screenshot in here but I think maybe we took it out because it was backwards looking but let me ask you one or two questions because it is great. Everyone should check this out. It is great to see this data and granted there’s a little bit of a lot. It’s not up to the minute, right? It takes you… You’ve got to get that data so it’s through Q1. But one that that surprise to me is high tech was down. How you define high tech, right? That was down in Q1. When the cloud’s on fire but in spend index high tech’s down, what are we seeing there? What should I see something? Is there a story behind the story there?

Rob Bernshyten:

Well, you see what you see which is [crosstalk 00:32:27] Q1 when you look at the index purchases for hardware and software in the first quarter of the year, when you look at time to approve, when you look at number of rejections, we look at average spend per employee was down and that’s a reality of what happened there. Now whether or not that’s measured it in the stock prices of many of these companies, probably not. But again you could argue that the current liquidity environment and the longer term opportunity in the digitization area is very, very real. Look investors are looking for places where they going to get yield. They’re not going to get it U.S treasuries. They’ll look at placing a yield. They’re looking for longer term bets and there’s no question. Many things… My colleagues and I like Eric and others are doing have the opportunity to really stand the test of time and develop into very, very meaningful longterm businesses. That’s what we’re doing here.

Jason Lemkin:

I want to chat about your book next but on the spend index, the Q1 just remind me. Q1 is calendar Q1, right?

Rob Bernshyten:

That’s right.

Jason Lemkin:

So Q1 is through March. This retail one plummets dramatic even through Q1. That trend you can see it in Q4. Retail was already off deeply in Q4 then Q1 is down. Boy it’s just epic. It’s almost a step function. It’s almost a step function here, right?

Rob Bernshyten:

Absolutely step function. And look, if we have to make predictions I think they’re pretty obvious We’re going to see real backward seasoned retail, we’re going to see a lot of consolidation, we’re going to see brands get rolled up. It’s going to happen. It’s already beginning to happen because look, folks aren’t going to the mall and not buying in those stores. The retailers that are quick enough and nimble enough to get to consumers directly to figure out different innovative ways to manage their supply chain will stand the test of time but it’s a real struggle in retail. No question about it.

Jason Lemkin:

Yeah. I would literally encourage everyone listening now, or the thousands that will watch this later go to spendindex.com. It’s fascinating. Coupa has a massive… It has almost 2 trillion of spend thrown through the platform. If nothing else, this is a fascinating data point that you can segment across financial services, healthcare, high tech, manufacturing, retail, and it’s a slice but you may see right now a story that is worrisome of our economy. There is some optimism in this.

Jason Lemkin:

Actually health and life sciences out-performs more than I would expect from the press because our hospital’s not taking ordinary patients and our dentists at a lay level. I felt like that’s under more pressure than the spend index suggests. But outside of that, it’s a worrisome. It’s a bunch of more worrisome trends and maybe we’re all ballooned by the massive liquidity injections, the trillions of dollars in the economy, the planes fly nowhere and the extra unemployment checks but the real signals underneath our economy are very worrisome on these charts.

Rob Bernshyten:

Yes perhaps. I’m looking forward to the next quarters release. We’re actually going to start slicing by category of spend. What are the categories folks are spending on? Were they increasing, decreasing as part of the blocking enterprises? We’ll have more robust data. Greater fidelity of data as we go, and hopefully it’ll help folks understand what’s going on in the world frankly.

Jason Lemkin:

Yeah. All right. I’m going to post this on SaaStr after the next one’s out because it’s super fascinating. Okay so book. You got a book. Is it out? I should know I’m going to buy 100 copies, 50 copies are… Tell us about the book.

Rob Bernshyten:

Well, this is really a book that is the next step from values of service. A book that I did about three years ago. And this is really about breaking the silos of traditional enterprise software which was always deployed one customer time with one set of data and never being able to see anything across. Never able to take anonymized, sanitized, aggregated data. We’re beginning to take that data, distill insights from it, and push that back into individual customer environments so that we could be smarter together as a customer community.

Rob Bernshyten:

I look at this book as really… I don’t have a PhD, Jason, I ended at my MBA. This is kind of my hypothesis, or thesis, or dissertation if you’d like, and it’s really a position paper on where we see enterprise software going, which is the breakdown of those silos so that we could be smarter together as enterprises and customers for the use of information technology. We’re on the very bleeding edge of that with what we’re doing here at Coupa and every day we discover more and more interesting use cases that we can employ for our customers to take advantage of, and I’m happy to share anything you’d like about that.

Jason Lemkin:

It’s interesting in these communities. SaaStr is a community. I never knew much about community before this. I’m still learning. There’s a lot of talk about communities and how that customer, vendors, technology solution. People will be communities, communities are out there. What do you mean by communities? What are you seeing? What have you learned at Coupa in general? What does this mean?

Rob Bernshyten:

There’s so much but I would give you the metaphor that I love which is waves. I was very proud that Noma endorsed this book after having thought through our concept committee intelligence here-

Jason Lemkin:

Yeah, that’s a space you didn’t imagine community would exist on maps but it sure does.

Rob Bernshyten:

Exactly. And with waves we’re truly smarter together as we traveled from destination, from A to B because we’re leveraging immediate access to data and that data requires almost no friction, in some cases zero friction to collect, aggregate and distill insights that could be pushed back to the individual driver they could find their way through. The exact same concept applies to everything happening in business processes. Best practices for how many people you should have in your workflow Jason. There’s companies out there 60 people in their workflow to approve something that’s $200. If they knew how far outlier they are in real time they could fine tune that.

Rob Bernshyten:

They’re overpaying for categories of spend all over the place. They’re exposing themselves to risky suppliers and not leveraging community insights to figure out which suppliers they should be considering working with. The list goes on and on of all of these use cases where we can truly be smarter together, and proudly as a platform we’re enabling that for our customers. With every release of our product we’re turning on more and more of these community intelligence capabilities that allow them to be smarter together.

Jason Lemkin:

The book in large part, is it share a lot of learnings about how to build this community among your customer and partner base?

Rob Bernshyten:

Well, first of all it frames what it actually means to have a community intelligence environment. What are the components of that? It explains why the time is now to strike. Particularly if you have early stage companies that are watching us, right now is the time to really build up a platform that can have the stand the test of time in leveraging cross company committee insights, and then it shows a whole host of use cases and case studies of what we’ve experienced so far, and asks the reader as I did with values of service to comment on what they’re seeing, pushback on some of the hypotheses in the book so that we can learn together as a community of readers, frankly, of the book as well.

Jason Lemkin:

Okay. That’s great. Well let’s… Everyone let’s… I’m going to do a deep dive. I think community for business software is super powerful. It’s so important and it’s something we’re learning today. Just like payments, maybe. Everything in enterprise sometimes it’s four to five years later than consumer. Maybe payments is there, and maybe community is there too. Waze to hit this five years ago but we need to learn this as leaders. Let’s all read this and, Rob, if you want, maybe whenever you want we could do a deep dive on community on the podcast to 130,000 people because I think this is a great topic on its own.

Jason Lemkin:

How to building this community thing because… Otherwise this is a great book. Let’s all read it and I will share some learnings on it on SaaStr in a bit. There’s more I want to talk about, let’s make sure we have a few minutes of questions before we end. Actually hold on. How are we doing that? Let me make sure I grab… Apologies for one second. There was one very specific I wanted to hit and then we’ll go into the Zoom. These are specific to procurement but I think these are good ones to hit for Rob. What are the three pain points for chief procurement officers, excluding generating savings and reducing supply chain. What are the top pain points in 2020 for CPOs?

Rob Bernshyten:

One of the biggest pain points is ensuring that the CFO, the CEO, and the CIO become their truly connected colleagues in solving many of the challenges that they’ve been thinking about for a number of decades. If you go to a CPO conference of any kind, the conversation is typically, how do we get a seat at the table? How is it that the whole organization doesn’t understand all the value that we can offer? Now is the time to strike to showcase that value, and that value is in every possible way of course from savings, which is very obvious, but it extends to supplier risk mitigation, which is obvious, and all the way through managing the entire integrated way with which a business manages its spend through information technology. Now’s the time to strike.

Rob Bernshyten:

Look if we have a phenomenal CPO and we use our own platform but if my CPO ping me on Zoom, email or walked into my office and said, “Look, hey I need a budget of X because I’m going to make sure that we’re going to mitigate our supplier risk. I’m going to save us this much money. I’m going to give us a platform that’s going to help us be modern and scale into the future.” Why in the world would I not support them if they were a trusted advisor? That’s the opportunity.

Jason Lemkin:

Yup. The next one it’s a bit of a lay up, or even a commercial but I always love to hear what a CEO has to say which is, which new Coupa product or feature are you most excited about?

Rob Bernshyten:

Well, the most exciting one for me is community intelligence, which is a set of capabilities that we discuss in the book, but in the entire fabric of the product set. They appear for example in expense management, which we don’t talk about as often but we have hundreds of customers using Coupa’s expense management. We are mitigating fraud in spend management. We’re using the data set of our aggregated customer base and serving up individuals that are highest likely to be doing fraudulent activities so you can investigate rather than rigid policies, or a free for all. We found a way to use technology to be prescriptive, which is the P in Coupa. Prescriptive to individual controllers and people responsible for spending in a company leveraging community intelligence. And that’s just one example of many capabilities leveraging community intelligence within Coupa.

Jason Lemkin:

This one from Nikko. You probably don’t know the answer although it’d be wonderful if you did. I know Coupa works with many hospitality companies and how many quarters do you think bars and restaurants, hotels, airports will rebound? If you knew that you could probably be on CNBC any night, everywhere any night anyway but do you have any insights, or do you have a model? Do have an operating model, when will these hyper impacted hospitality businesses recover?

Rob Bernshyten:

Well, I love the second part of the question because of course I’m not a fortune teller. In fact, the big unknown is when some of these things will happen but we have a very clear scenario based model for V, U, and L, and then we execute accordingly based on where things work out.

Jason Lemkin:

So V, E. V I get. Are we past V, or is there still a chance for V?

Rob Bernshyten:

Well, it depends on how far you step back and looking at your V-

Jason Lemkin:

How wide it is.

Rob Bernshyten:

But I think in many ways you’re right. We are pretty much past it. I think that’s a fair assessment of the market.

Jason Lemkin:

This one will take you back but let’s at least do one and have some fun because we did chat about this before we started. What were the biggest challenges early on when Coupa was a startup procurement folks hadn’t quite heard of. You didn’t have the brand and were replacing their competing with solutions like Ariba.

Rob Bernshyten:

Well I can give you a very long list of challenges but I think the biggest is to get folks to give us a chance. If you look at some articles that came out in 2009 when I was raising money, and our first raise that I was involved in it was 15 million and a half post. There was I think $7 million raise, 15 and a half post. It was getting folks to try. We did things like we said, “Look, give us a year annual subscription. If we don’t deliver this quantifiable value to you within 12 months, you could cancel and we’ll give you your money back.”

Rob Bernshyten:

That was a big, big risk to take in 2009 and 2010. But we delivered for these customers and they became fans, and they became highly referenceable and they gave us a chance to go to the next customer, next customer and grow our ACV, and grow our renewal rate. It was very, very hard to really early days of course but that built a foundation and the right culture I think in this company because we don’t take anything for granted.

Jason Lemkin:

Did any material number of customers really ask for their money back?

Rob Bernshyten:

No, not even inmaterial. None asked for their money back.

Jason Lemkin:

I personally love the money back guarantee hack. It’s always one that asks for their money back, and it doesn’t matter because if you don’t keep the customer for life, it doesn’t matter if you give one year of revenue back, even though it’s stressful, it doesn’t matter.

Rob Bernshyten:

Well, you know, Jason, the beauty of it is, even if let’s say they were to ask at the end of the year if you’re objectively looking at data that said on a mid-market customer you paid a $100,000 a year. Well we’ve saved you $700,000 this year. Isn’t a little egregious for you to ask for your money back and isn’t it obvious we delivered value for you? Are we not a valued service partner for you? So frankly, we didn’t have that but that doesn’t mean it wasn’t easy to get those deployments, to configure the product, to build new features, to do what it took to get it done, no question. It’s very hard.

Jason Lemkin:

Let me ask you one related early question, and then we can wrap up with a few more current questions. But one of the reasons in the early days that I got very… From afar, I was interested in Coupa as back at Adobe Sign, EchoSign I would meet with a lot of folks and mostly on the contract side we would deal with sales side of course in the early days, but there’d be a lot of buy-side conversations, a lot of them. And we would go in and we built an Ariba connector early. It was very hard to do because it wasn’t an open platform but, and I mean this is no disrespect to anyone at SVB, but I never heard so many complaints.

Jason Lemkin:

People would complain about Ariba and people complain, obviously you’re biased, but it lit up the hair on the back of my neck because I hadn’t heard this. When you’re selling those early days and you don’t have the brand, can you… Looking back on it without bias, how do you leverage those complaints? How do you turn those into an asset? Do you bash the competitor? Do you not? Does that create a bigger wedge then if they’re happy, and maybe you didn’t see it but I heard this again and again at so many global 2000 companies Ariba would be their least favorite vendor.

Rob Bernshyten:

Well, to be frank, we did some bashing early on. We didn’t know whether it was right or wrong but that bashing wasn’t grounded in logic. It was grounded in facts. When you’re talking to a customer that’s getting 4% of their spend running through an incumbent system, the bar is not that high to get them to eight, nine, 10, 50.

Jason Lemkin:

It’s not that high.

Rob Bernshyten:

It’s not that high but it’s a matter of bringing that to the forefront. Bringing facts to the forefront that everybody could look at so they can make the right choices. Those were early day things you have to do but obviously now thankfully we’re well beyond that.

Jason Lemkin:

All right. Maybe the last one, or the penultimate one. Maybe this will be the last one. In this… But this is probably more from a founder perspective if you thinking about. In these uncertain times some deals go more quickly but some go most slowly. Any tips you’ve learned to accelerate closing of deals in these shelter area?

Rob Bernshyten:

Yeah I think it’s in the shelter area but I think it’s more broadly. What I notice now we work with so many different… I’ve had the chance to work with so many hundreds of sales professionals in my career, certainly hundreds of Coupa as well over this time. What you find is folks tend to pivot a little bit more towards being a bit aggressive. In other words, look where great, where the best, nine out of 10 people use us. I don’t love that. Then you have the other extreme which is they’re a little bit overly passive. In other words they chase balls. Yeah, let me give you 50 references. 50 references. Let me show you a customer exactly like you. What else can I do for you? Our mindset at Coupa is we don’t want to be too aggressive, and you don’t want to be too passive. You want to be assertive.

Rob Bernshyten:

Focus on the facts, become a trusted advisor, get vision lock on what is you’re attempting to achieve in working with us, and if we agree to that vision lock, perhaps I’m the right player to help you achieve it. If I’m not, you can go find the other player to help you achieve it. We try to be very, very assertive in our dealings and always, Jason, always grounded in integrity. That’s very, very important to me. I never wanted an environment where the sales person would sell something and then they’d be afraid to interact with that prospect. That’s horrible. We want a lifetime relationship with this customer. They should be proud of what they’ve done and they should know they have now thousands of people behind them, they’re going to deliver for that customer. This is value of service. It’s a different way of thinking about the traditional product space business into the business that is today. I mean, SaaStr right? This is what it’s about.

Jason Lemkin:

Yeah. No turn and burn deals.

Rob Bernshyten:

No.

Jason Lemkin:

They’re the worst. Rob this was incredible, thanks for giving us the full 50 minutes. I love spendindex.com go to it. We’ll talk about more about it on SaaStr spending next [inaudible 00:50:01] you will. There’ll be another quarter of data coming out shortly I assume.

Rob Bernshyten:

That true, it will.

Jason Lemkin:

But you will see things that are fascinating that are data-driven, which I love. Check that out and also Smarter Together. This community in B2B, I think, is super powerful for the next five years. So hopefully we can continue the conversation there but grab your copy. Rob again, this was wonderful. Thanks for taking the time out.

Rob Bernshyten:

Don’t mention it, cheers.

 

The post SaaStr Podcasts for the Week with Matt Garratt, Trisha Price, David Schmaier, Rob Bernshteyn, and Jason Lemkin appeared first on SaaStr.

SaaStr Podcast #357 with BlackLine CEO & Founder Therese Tucker: “Busting the Myths About Startup Success”


This post is by Amelia Ibarra from SaaStr

Ep. 357: Therese Tucker breaks through the dogma behind what it takes to build a successful tech company. With stories based on the founding of BlackLine — to the company’s successful IPO – you’ll learn the most common myths behind success and why they may be holding you back.

 

This episode is sponsored by Lightmatter.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from Therese’s session at SaaStr Annual 2018. You can see the full video here, and read the podcast transcript below.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
BlackLine

The transcript for this episode is below:

Therese Tucker: I’ve spent my whole career in B2B software. It’s an area that doesn’t get enough focus. Today, I’m going to start by telling you a little bit about me and a little bit about BlackLine and then some of the things that I’ve learned along the way.

I am the youngest of four girls. I was raised on a farm in rural Illinois. Neither of my parents went to college. Their big dream for me was that I could be a secretary. They made me take typing in high school, which worked out really well when I majored in computer science.

Therese Tucker: I’ve also always had trouble conforming, fitting into a certain mold, which might explain the pink hair, which you may be wondering about. We’ll dispense with that right away. It happened three years ago.

My marketing team wanted me to do the world’s most boring video. Older woman, “A blah, blah, blah, blah, blah.” I kept saying, “No, I don’t wanna…” I finally said, “Fine, I’ll do it, but I’m gonna dye my hair pink.” They laughed and they said, “No, you won’t.” [laughs] They didn’t realize it. I really try to never lose a game of chicken.

Therese Tucker: Turned out I liked it. Turned out it became who I am. I’m also a serial entrepreneur. I retired from SunGard Treasury Systems as their CTO. I got bored and started BlackLine. Not the best reason for starting a company.

Bootstrapped, because nobody in their right mind would have actually invested in us back then and took it up until 2014 as a bootstrapped company. Now, later in this talk, I’m going to give you a couple of my horror stories about fundraising along the way. I want to put a caveat on that.

In 2014, I sold a majority to Silver Lake Sumeru and ICONIQ. When you find the right partner, the right investor, what they can do in terms of helping you grow and scale a company is just invaluable. When I tell you horror stories later, just keep that in mind.

Bootstrapped it and then in October of 2016, we actually did an IPO, which was interesting and fun and cool, but it’s a lot of work, too. What is it that we do, you ask? Let me ask you, how much do you know about accounting? All of a sudden, you’re sorry that you asked.

Therese Tucker: Because accounting is probably the least sexy field out there. Yet, there’s a point to that because sometimes the best businesses are the areas that other people have overlooked because they’re not terribly interesting.

What we’ve been able to do is we’ve been able to build this very cool business, we’ve got an army of happy customers, and we’ve gotten just enough publicity that I get to be up here and speak to you today.

In the 16‑plus years that I’ve actually been working at BlackLine, the culture has shifted dramatically. We have gone through this myth‑making process where we deified founders as these brilliant geniuses. Yet, that really sharply diverges from my own set of experiences and the things that I’ve learned along the way.

Today, I want to tell you about some of the myths that I see out there and how I view some of the different experiences that I’ve had.

Therese Tucker: Myth number one, there’s a playbook. I’ve heard that word a few times around here already. There’s an old adage out there. If it was easy, everybody would do it. This applies here. If there was a playbook that worked for everybody, then everybody would go out and make a gazillion dollars and we’d all be happy.

It’s not like that. Companies are like people. They have a unique DNA. They have a unique culture. What might work beautifully for one can absolutely sink another. Those that are most likely to succeed, sometimes they fail. Sometimes, those that everybody else overlooks are the ones that succeed and quietly.

When you start a company, you’re betting on an idea or vision that nobody else has had. When you start a company, do you ever ask yourself, why didn’t IBM or Google or Oracle do this? There’s two answers for that. Either they really did overlook it or they actually looked at it and valued it differently than you did.

When you’re starting a company, it’s really just a bet that everybody else is wrong and they made a mistake. If somebody tells you there’s one way of doing it, they’re guessing. They are. I have a bit of a playbook now, but it’s my playbook. It worked for BlackLine.

The truth is, and when you start a company, to take it to a successful place, it’s a weird mix of hard work, perseverance, luck. Sometimes, it’s just having a friend who encourages you when you are ready to quit. It can be something that small as having the right person say the right thing into your life at the right time.

My caveat for today is I’m going to share some of my experiences with you, but they may or may not work. They may or may not be helpful to what you’re doing.

Myth number…Number two? [laughs] In Los Angeles where I live, there’s this guy. Oh my gosh, you can run into him all the time. If you ask him what he does, he’ll tell you that he’s in the business. For those of you that don’t know Southern California, that’s the movie business, Hollywood.

If you press him further, he’ll tell you that he’s working on his screenplay. Then, he’ll keep telling you. He won’t stop talking. He’ll tell you that Brad Pitt’s going to star in this pilot and he’s got so‑and‑so to produce it and Hans Zimmer to do the music.

You just know that this guy is full of it and you’re trying to be polite, you’re trying to get away. We see that guy all the time down in LA. Don’t be that guy with your startup. Don’t be that guy.

The reality is to even get to the point where you quit your day job and you’re going to go start a company, you have to have a stupid amount of confidence. You do. You just have to go, “I don’t care what everybody else says. I know I can do this.”

It’s almost an arrogant choice to say that I’m right and everybody else in the world is wrong because they didn’t see it. That’s how good I am. There has to be a certain amount of confidence that actually gets you to that point where you jump off that cliff.

The biggest mistakes happen when people start to believe their own hype, when they start to think…We have a saying in‑house at BlackLine. Somebody always says, “All that and a bag of chips.” You have people that think that they’re all that. When that happens, they lose focus on the business itself.

The reality is different. If you are the CEO of a small company, you have to be committed to doing whatever it takes to make that company successful. That could be buying bagels, that could be coding. I’ve cleaned toilets. Not fun, but in one of our offices, we didn’t have a cleaning service so, yeah, it got gross.

I did it because I wanted my company to succeed no matter what. You have to do all of that while you are selling all the time, while you are cheerleading, and while you are dealing with the stress of whether or not it’s going to work. The glamour might come later. Might come much, much, much later, so don’t be that guy. [laughs] Don’t be that guy.

Instead, if you pivot from arrogance to humility, there are so many benefits here. It allows you to be confident in your idea but still seek out the wisdom of people who have been there before.

I will always be indebted to one of my early board members and friends, Tom Unterman. I would bring all of my documents to lunch and lay out everything to give a snapshot of the business. He would, time after time, point to an area that I had completely missed. I’d go, “Oh my God, how did I miss that?”

He’d say, “You need to focus on that before it becomes a huge problem.” Cannot put a price on that. The ability to seek wisdom from others. The other thing about humility, it gives you clarity. It gives you clarity to look at your business honestly and assess what’s working and what’s not.

BlackLine started out by building wealth management software. I knew how to do that. I was great at it. After three years, we had one paying customer. Out of money, terribly broke, freaked out.

This customer came to us and it went something like this. We have a business problem, we don’t have any engineers, we have money, and said, “You have engineers. You obviously don’t have any money. What if we trade?”

Therese Tucker: Think about this. My big idea. Optimizing accounting operations was not my big idea. How embarrassing is that? It was created by an accountant at a bank in Nebraska. I’m not kidding. Humility allows you to do the pivots, allows you to capitalize on a great idea no matter whose idea it is.

If you’re married to your own idea and it’s not the right one, it’s not going to work. It’s interesting, in that humility can be an attribute, while not really prized in the tech industry, can really allow you to be successful.

Remember our aspiring screenwriter. One of the reasons that he is so annoying is because he’s got it in his mind that his future is all about riches and yachts and very exclusive Hollywood parties. He’s not necessarily interested in putting in the work that’s necessary or getting the coaching or the feedback that he needs.

We’ve all seen it. The reality is most startups fail. Most do. Even BlackLine. It wasn’t my first attempt. There were any number of times when I was really convinced that it was a dead, dead, dead proposition. We failed almost many times.

Even after we did our pivot to the accounting automation and optimization, we still had desperate moments. One of the things that was so interesting to me was doing business with large companies. They move at a glacial pace. We would have sometimes three‑ to five‑year sales cycles. I’m not kidding.

Then, they would call up and go, “Guess what? You’re selected. We’re going to introduce you and two competitors to our procurement department.”

Therese Tucker: Absolutely. Then, even if you get the software in and they love it, sometimes they take three or four months to pay. That would keep me up at night trying to figure out how I was going to make my payroll. Even when you’re successful, it’s a long road.

Think about BlackLine. 15 years from inception to IPO. When I think about building this company, I think about…I hate bugs and I hate jungles. I think about trying to make a road through the jungle. There’s no road, there’s no path, there’s no map. There’s no straight line. You don’t quite know where you’re going. You’re zigzagging back and forth.

It’s a long, slow haul. You have to learn things like how do I scale my sales force? How do we sell to accountants? How do we market? How do we handle the security around financial information? The things that we had to learn were not something that I could go Google on the Internet.

It was particularly tough because when you’re bootstrapped, every single dollar matters. When you make a mistake, that’s a dollar that you don’t have any more.

In fact, one of our decisions, in 2007, we had to decide, are we going to sell SaaS or are we going to be an on‑prem software company? Terrifying, because back in those days, big companies didn’t even know what SaaS was, much less they weren’t going to put their financial information out in the cloud.

We decided, at that point, to bite the bullet and say everything we’re going to do, whether it’s how we architect the software, how we go to market, how we actually contract everything, is SaaS from here on out. That was a terrifying decision.

Yet, it turned out to be a very, very good one. Could have gone the other way. You hit points like that in your journey where it’s like wow, fork in the road. Flip a coin. I hope we’re doing the right thing. You can’t really call those out ahead of time. They just spring up and hit you at times.

If you get to be successful, it will probably take longer than you really, really wanted it to. When I started BlackLine, I thought it would take about three years. That was really my expectation. You will hit things that you don’t anticipate, but this is your story. This is really about what you craft for your own journey.

Let me be really clear here. I’m not advocating not raising capital. They’d probably kick me out of the stage right now.

Therese Tucker: VC money definitely is what makes tech companies happen, but bootstrapping is brutally hard. It is so many sleepless nights. There are no shortcuts. It’s a day‑to‑day fight for survival.

We did look at funding on multiple occasions. We had some lowball offers from names that you would recognize that we turned down. I believe that the habits that we learned from bootstrapping BlackLine, in terms of just being wise about how you spend money, really were very instrumental in our success later.

I would say avoid building your business with the intent of raising money. We see people sometimes, they’re all about their business plan, they’re about how many meetings they can get, they’re about who they’re talking to.

Oh my gosh, sometimes you walk around the streets of San Francisco and people are on their phones bellowing out that their plans are getting funded. It’s just like, “Oh, no.” That’s not…You’re losing the focus on the business when you do that.

You’re falling in love with the idea and it’s easy to do because the money is what sustains your business. But the person on the other side doesn’t know your market and doesn’t know your business. Focusing on impressing them over building your business or getting customers, that’s dangerous.

Frankly, we got some bad advice from VCs in the early days. I had one firm who gave me the proverbial pat on the head and said, “You’ve done a nice job, we’ll take it from here.” They said, “We’ve got a rock‑star CEO.” I thought, “Well, maybe this is good for the company. I’ll meet him.”

Met this gentleman, he spent two hours talking about himself, how great he was, his much younger very beautiful second wife, and his home renovation project. He was almost a caricature of himself.

Therese Tucker:  Had I taken that advice and money, I doubt that BlackLine would be here today. Venture capitalists are playing a numbers game. If they can take 10 companies of a similar profile, there’s a pretty good chance that one of those is going to be really successful and make back the investment, which is great if you’re the one. If you’re not, you may not be aligned.

Rather than focus so much on the raising of capital and sometimes, I won’t say anything political, but, well, we have people that can’t stop campaigning.

Therese Tucker: It’s a similar issue. You don’t want to be the guy who’s always just not building the business but trying to raise money. One of the most important predictors of success of a company is if people want to pay for what you are doing. It sounds so simple and so obvious, and yet sometimes people don’t really focus on that.

My recommendation is to take the smallest amount of capital possible and maintain the most control. If you build a successful business that has paying customers, a clean ledger, a thrifty attitude, you will be able to raise as much money as you need when you need it.

Now, something else to be careful of is when you raise money, people sometimes have a tendency to spend like they’re rich. I always think about lottery winners. Do you know most lottery winners are broke within three years of winning because they just start throwing money around?

It’s possible, I suppose, to plunge large amounts of the money efficiently into your startup, but it’s not that common. Usually, people end up wasting it. It is much more painful to have to fire people and contract as a company than it is to grow. It’s much more fun to grow. It’s much more fun to have a little bit of a stretch and a bit of a reach.

Build a real business with paying customers. Run it lean and you will be amazed at the amount of money that will be there when it’s the right time to scale.

The post SaaStr Podcast #357 with BlackLine CEO & Founder Therese Tucker: “Busting the Myths About Startup Success” appeared first on SaaStr.

SaaStr Podcast #355 with Homebrew Partner Satya Patel: “The PPP You Really Need for Raising Capital During a Pandemic”


This post is by Amelia Ibarra from SaaStr

Ep. 355: Despite the global pandemic, seed investing remains hyperactive amongst VCs. Satya Patel of Homebrew shares his expert advice on how to raise seed capital in 2020.

This episode is sponsored by Lightmatter.

 

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from Satya’s session at SaaStr Summit: The New New in Venture. You can see the full video here, and read the podcast transcript below.


 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Satya Patel

The transcript for this episode is below:

Satya Patel:

I’m here to talk to you today about raising capital in today’s environment, particularly at the seed stage, so we’ll touch on the Series A stage as well.

Satya Patel:

I wanted to start by just talking a little bit about something that all of you have been hearing about, which is PPP loans, the SBA program for getting capital to companies in need. The reality is is that if you’re a startup just getting off the ground, PPP isn’t a legitimate option for you. So, I’m here to tell you exactly what you need, what PPP really means for you, and the difference between raising money in today’s environment versus not being able to do it. So, with that, let’s jump right in.

Satya Patel:

The world has certainly changed, there’s no question about that. Sheltering-in-place is just the most obvious impact; how people interact with each other, when and if customers buy, whether the rebound is a V-shape or a W-shape or a loop-de-loop, there’s definitely a lot of change in today’s world, and that’s the only thing that we know for certain.

Satya Patel:

The other thing that we know is that there’s a ton of confusion about what’s going on and how long this is going to persist. We don’t know very much about the virus, we don’t know the right way to approach fighting it, and we certainly don’t know how the economy is going to perform over the coming months. So, don’t count on anyone, I mean anyone, to give you the answers.

Satya Patel:

And you certainly shouldn’t expect answers from The Midas List or VCs that you know and respect. We’re just living in unprecedented times. Anyone who pretends to know how this is going to play out is doing just that, they’re pretending. As much as VCs spend time evaluating the markets, evaluating businesses, trying to predict the future, we don’t know any more than any of you in relation to what’s going to happen here over the next 12, 18, 24 months.

Satya Patel:

So, for you, as founders and entrepreneurs, the key is to focus on the things you can control, and one of the things you can control is how you tell your story to VCs. But, to do that effectively, you need to get in their heads, no matter how scary a place that might be. So, what are VCs busy doing right now? That’s a good place to start, to understand the actual landscape in which you are trying to raise capital.

Satya Patel:

First, they’re focused on their current portfolios.  Which companies are in a world of hurt? Which companies are benefiting from accelerating trends and new dynamics? Which just need to bide their time? Any VC worth his or her salt is focused on helping the founders and CEOs that they work with take care of the physical and mental wellbeing of their teams, stabilizing their businesses, and planning for the uncertainty over the next 18-24 months. So, getting their attention right now for anything new is really tough and that’s something that you should just accept and know, going into any potential fundraising process.

Satya Patel:

The other thing that VCs are doing is one very important part of their jobs, and that’s meeting companies and studying markets to figure out where they might want to invest eventually. You’ve all probably gotten a cold email from a VC associate or partner asking about your business or wanting to understand your market. Expect more of those because VCs trade on data and they all have the time available to them right now to spend hours talking to folks like you about what’s going on in the world and collecting that data. But that’s only the beginning for them, collecting data is the thing that they can do right now. Unfortunately, the reality is most of them are just waiting and sitting on their hands.

Satya Patel:

The thing that most people don’t realize about venture capital is that VCs are always thinking about capacity, and most venture partners at Series A and later firms only make one to two investments per year, and so the opportunity cost of making an investment now, versus thinking about an investment later, is a real cost to them because it’s a cost of their time, not to mention what might be happening from a broader market perspective.

Satya Patel:

And, from that standpoint, there’s a huge disconnect between the public markets, unemployment rates, and what startups are experiencing on the ground right now with customers. Until there’s more stability in those areas, you can expect that most VCs will be waiting for a time where they have more comfort with valuations, with customer behavior, and with knowing that there’s going to be another set of VCs down the road who are going to be willing to write a check to support their companies on an ongoing basis. So, most investors, no matter what they say, are taking a wait-and-see approach. If an investor is telling you that they’re active or open for business, they probably are, in the sense that they’re busy collecting data, but that doesn’t necessarily mean they’re in a position to write checks.

Satya Patel:

The good news for all of you is that seed is very different. I don’t want to be a complete downer, so this is hopefully a bright spot. There is a ton of capital committed to the seed asset class, and because we’re investing at the earliest stages of the market, there’s only so much price compression that investors can expect. As a result, what’s happening in the public markets isn’t necessarily impacting the very early stage of the private markets.

Satya Patel:

The other thing that’s important is that there are many types of investors at the seed stage. There are angel investors, super angels, pre-seed funds, microfunds, institutional microfunds. The reality of their businesses, our business, is that we can’t afford to miss the next great company. We only get one bite at the apple, we are seed-stage investors. Unlike firms that are later, Series A and later, oftentimes those funds will invest at Series A and Series B, or Series B and Series C, so they have the opportunity to revisit companies that they may have missed. Not the case to the seed stage.

Satya Patel:

And, as a result, seed-stage investors are active in the market at this very moment. The other thing is that most seed investors tend to do more volume of investing than investors at the later stage, so the opportunity cost of investing in something right now isn’t the same as it might be for a later-stage investor. And so, for all of those reasons, seed right now is a very different beast than Series A and later-stage investing.

Satya Patel:

It’s definitely an active market at the seed stage. Homebrew is only one data point, but we’ve made five investments since shelter-in-place started, and every one of those investments was a competitive situation, so there are many firms that are trying to write checks into some of the best companies, hopefully. We’ve spoken to many of our peer funds and most of them have made at least one, and mostly more than one, investment during shelter-in-place. And probably the even better news for all of you, is that, given competition, valuations at the seed stage haven’t declined dramatically, maybe 10-20% at the seed stage, and maybe up to 20 or 30% at the pre-seed stage, but given the world we live in, there are some realities about seed-stage investing and the amount of capital that’s being committed to the asset class. That means that the amount of activity and the opportunity for you to go tell your story and raise capital is as strong as ever.

Satya Patel:

That said, there are some differences about the world we’re living in now. Obviously, as we’re seeing now, the most important one and probably the biggest difference is you’re going to be pitching over Zoom. And no matter what a VC says, they prefer to meet people in-person. So, it remains true that lots of VCs still haven’t figured out if they can get comfortable making investments without having met someone in person. For you, the thing to do is ask the question: are they willing to and have they made an investment over Zoom? And then determine whether you want to continue the conversation.

Satya Patel:

It’s going to be tough to be the first investment that a partner at any VC firm makes without having met you in person. There’s so much subtle communication that gets lost over video, you need to make it up with energy. You might feel like you’re exaggerating your expression or tone, but it’s going to be more effective. You really need to put your best foot forward and exude that passion and energy that maybe you take a step back from when you’re in the room, but over a video, there’s nothing more important than convincing people and demonstrating to them that you have the energy and the commitment to whatever idea that you’re pursuing.

Satya Patel:

A very tactical piece of advice: invest in good lighting. Do it now, before you pitch. Both subconsciously and consciously, it has an effect on whoever’s going to watch you. Ideally, another piece of advice is that you’re setting the camera on the video at eye level. No one’s going to get a sense for who you are by looking at your chin or the top of your head, certainly if you’re going to have a glare off the top of your head, like I do, in many cases. So, invest in good lighting, set up your camera well, and exude energy if you’re going to be pitching over Zoom, which is the reality of how the next 12-18 months is likely to look like for founders and entrepreneurs who are trying to meet with VCs.

Satya Patel:

Another major difference is that you can expect that investors are going to want to do many more references than they might have in the past, both customer references and professional references. Have those ready. Prep anyone you’ve asked to be a reference with the things that you want them to highlight, and make sure that they have the two or three questions in mind that they’re likely to be asked by any potential investors. Definitely have at least one person that you’ve worked with, recently, on the list. Nothing’s more frustrating for a potential investor than getting a set of references where the most recent reference is from two jobs ago.

Satya Patel:

And if you don’t have any mutual contacts with the investor, where they can do backchannel referencing on you, you’re going to need to go the extra mile in terms of that communication style that we talked about over video, and also the proof of your commitment to what you’re building, and maybe even evidence of product market fit. But, backchannel referencing and on-sheet referencing are critical at this moment, and being prepared to handle those requests well is going to be the difference between success and failure in your fundraising process.

Satya Patel:

Expect that investors are going to want more time with you. Because you’re not getting those soft cues that you get from meeting people in person, investors are going to want to have more time over Zoom with you and your team, and you should want that, too; after all, you’re choosing an investor and making a commitment for the life of your company, and so take the time to get to know those investors over Zoom cocktails or virtual working sessions or whatever is going to give you a better sense of what it might be like to work with them and give them a better sense of what it might be to work with you. Deal processes may take more time overall, but if you make yourself available, and you probably have some time, you’ll help speed things along. But know that there’s going to be a greater time commitment, more meetings, more conversations, to get over the bar and over the hump for closing your seed financing, or any financing in this environment.

Satya Patel:

So, despite some of these changes, which are subtle in some ways, fundraising is mostly the same at the seed stage. Seed investors are betting on a market that’s two to four years from now, and sometimes even longer, so they can’t afford to take a wait-and-see approach and wait until the economy straightens itself out or the government gives better advice around how we’re going to deal with all of this, they have to be investing now for the future. And given the number of investors and the amount of capital that’s in the market, remember that it only takes one yes, that’s all you’re trying to get to, and that one yes will automatically create scarcity for you and get others to say yes, so put your best foot forward and try to get to that one yes.

Satya Patel:

So, how do you do that? My point of view would be there’s still only one way to get to yes at the seed stage. You’ve got to make them believe. Investing at the seed stage is an irrational act. There’s no amount of data that is available about your company and about you, at the seed stage, that’s going to convince somebody based on cold, hard facts. Think about it: all there is is a few people and an idea, and that idea has all the odds in the world stacked against it, yet investors have to decide to give you hundreds of thousands or millions of dollars, despite all of that. And that’s why your goal is not to win the argument with data, it’s to generate emotional resonance so that the investor irrationally believes in what it is that you’re pursuing and in you. And that’s where we get to what we believe PPP really means in today’s environment and in any environment when you’re raising capital at the seed stage.

Satya Patel:

This PPP doesn’t come from the SBA or any government entity, this PPP comes from the story that you weave when you deliver your pitch. It starts with you and the other people on your team. VCs want to surround themselves with people who they can learn from and who they want to enjoy spending time with and working with. They want to support founders who deeply believe in something that should exist in the world, in founders who they feel deserve tremendous success, and who they want to see succeed.

Satya Patel:

Belief might spring from any number of things related to your team, any number of characteristics, including the founding story, the chemistry of your team, the unique insights that you have into the problem that you’re solving, but it’s important that you get across something special about your team. Because this is an emotional decision more than a rational one, it’s very true when VCs say that they invest in people first. It’s the emotional connection to those people that leads to the investment because no rational thinking leads to saying yes at the seed stage when it’s an idea and a team and not much more. So, focus on the people and communicating what’s special about you and your team.

Satya Patel:

The second way of building an emotional connection is about the potential of your business. The potential of your business might be captured by the mission or the market or the product, but somehow you need to leave the VC feeling that he or she absolutely wants the problem that you have identified to be solved, and the thing that you’re building to exist in the world, and that what you’re building is going to be enormous in scale and scope. This is why VCs have a hard time investing in things that aren’t targeted towards them; if something’s not relatable, it’s hard to see the potential of it, but your job is to communicate the potential of it, whether it’s through the market opportunity or the product or the mission of the business. It’s the promise of the early-stage startup that can make VCs take that emotional leap and ignore the difficult reality of what it means to start a company that’s most likely to fail.

Satya Patel:

And the final P in the PPP that really matters is proof. Unfortunately, accept that you don’t have it at the seed stage. Most companies don’t end up where they start and, if that’s the case, then the early signs of what you see as product market fit aren’t real, for the most part, because the use case you’re addressing probably isn’t consistent across all the customers you have, the customers who are adopting don’t share enough common characteristics for you to have identified a singular customer type, long-term engagement isn’t proven, early customer acquisition costs are misleading, so there’s a bunch of reasons that the proof you think you have is probably not proof in the investor’s mind. So, the thing to remember about that last P, proof, is that you can’t count on it at the seed stage. Nothing kills a good story like data. For most VCs, it’s easier to bet on the promise then the reality, especially at the seed stage, so you’re better off playing on emotion, and, again, people and potential are the emotional keys that you want to cue off of and drive your story around.

Satya Patel:

So, now that you know the keys to raising seed capital with PPP, it’s time to think about the A, and while the seed is all about emotion, the A is completely different, it’s about risk, and so we’re going to talk a little bit about how to think about risk in the context of your seed-stage company that’s in pursuit of a Series A.

Satya Patel:

The dirty little secret of investing, of a business which is predicated on people who take risks, is that VCs actually don’t like risk very much, they’re afraid of it, and that’s why the bar for Series A rounds and later keeps rising, and investors are generally willing to overpay for clear momentum as opposed to take early risk when they could be getting a better price because, at the end of the day, most VCs don’t want to take dramatic risk. And they’re only willing to take risk when they know that the risk that they’re taking is less than what the prior investors took and, hence, the higher price. And so that’s the thing to keep in mind is you’re always being evaluated from a risk perspective, and VCs are trying to evaluate very specific areas of risk when it comes to your business.

Satya Patel:

We categorize the types of risks that investors are looking at into five buckets. The first is product, and that includes everything from technical risk, timing risk, those kinds of things related to establishing product market fit. The second major risk is team risk. Are you missing some key skillsets that are going to be critical to execute the plan that you have or to deliver against the mission that you’re pursuing? Sometimes, that could be somebody from a sales perspective, somebody from a design perspective. Many founding teams have people who can build products, but they’re missing some other key areas that could be critical to reducing the perceived risk or executing against the potential of the company.

Satya Patel:

The third risk is market risk, which includes everything from size of the market, regulatory risk, geopolitical risk, all those kinds of risk that fall under the category of market. The fourth major risk that investors are evaluating is go-to-market risk. Is there a clear definition of an ideal customer? Is there a repeatable, scalable sales model? Is there somebody beyond the founder who’s been able to sell on a repeatable basis? Those are the types of questions that are asking in the category of go-to-market risk. And then, finally, fifth is financial risk. Can the capital be managed until the next financing? Can the company manage cash until the key milestones have been achieved or the risks have been addressed? And will the business be attractive to future financers and future investors based on what it’s able to accomplish? So, those are the five risks that you need to think about because these are the risks that are in the heads of any investors that you’re going to be talking to.

Satya Patel:

Your job with seed capital is to reduce or eliminate those risks, but it’s unrealistic to tackle of five of them. Pick the three that are the most significant and focus on those, and then tell the Series A investor why you chose those, what have you done to mitigate those risks, and why should they bet on you being able to eliminate the other risks in the business? Oftentimes, at the seed stage, the most common risk to focus on are product risk, market risk, and go-to-market risk, but it’s going to really depend on the investor that you’re talking to and, more importantly, on your specific business. So, with your seed investors, get on the same page in terms of what are the most critical risks to address, and then pick the three that you’re going to try to tackle during that seed phase of your company.

Satya Patel:

Finally, in addition to addressing the risks, you need to achieve some level of scale. The Series A investor is trying to bet on less risk, but also there’s clear scale to demonstrate that this can be a large and viable company. Whether it’s customers or revenue or some reasonable trajectory of growth, or some absolute level of customer attraction or revenue traction, you’re going to have a hard time demonstrating that you’ve eliminated or reduced risks if you haven’t achieved some level of scale. And so combine reducing three risks with scale and you can unlock your Series A.

Satya Patel:

So, if you’re going to remember three things from today, start with the very first, which is don’t fear the world that we’re living in. Things have certainly changed, but more is the same than is different in the world of venture financing, especially at the seed stage. Second, the only PPP you need to keep in mind are the ones that will help you make them believe: people, potential, and proof. Importantly, people and potential are the ones that you can control, proof is unlikely to amount to much, but it’s important for you to know that as you’re going into your seed fundraise process. And then, finally, after your seed, pick the three risks to tackle and you’ll be set up for a successful Series A.

The post SaaStr Podcast #355 with Homebrew Partner Satya Patel: “The PPP You Really Need for Raising Capital During a Pandemic” appeared first on SaaStr.

SaaStr Podcasts for the Week with Keith Rabois and Jason Lemkin


This post is by Amelia Ibarra from SaaStr

Ep. 353: Keith Rabois (Paypal, Linkedin, Square) and SaaStr Founder Jason Lemkin talk about the landscape of SaaS & Cloud fundraising and valuation in 2020.

This episode is sponsored by Lightmatter.

 

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from Keith and Jason’s session at SaaStr Summit: The New New in Venture. You can see the full video here, and read the podcast transcript below.

 

Ep. 354: Whether you’ve just raised your first round or are in hypergrowth mode, here are the 10 things SaaStr CEO and Founder, Jason Lemkin, wishes his board and investors had told him.

Jason also provides the list here.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Keith Rabois

Below we’ve shared the transcript of Episode 353:

Jason Lemkin: Let’s step back because I know this is something that everyone’s thinking about all of the world, everyone on Twitter, tell me what you’re thinking about–how do I get my arms around this slide, right? On the left, we go into February and this is the best of times, isn’t it? 10, 11 years… I mean, it’s better than we ever thought. Right?

Jason Lemkin: There was this joke on Twitter the other day, someone who was pointing out how on your LinkedIn you said PayPal, it exited at a billion and now it’s worth 40 billion or 50 billion. So we figured out a long run, but even before you update your LinkedIn and then bam. Look at this, the BVP Cloud Index, we plummeted in March and then as we were talking about before, if you just put all your money just into Square on March 20th, you would have doubled your money, right? Let alone the Datadogs and the Shopifys and the Zooms. And yet, as you’ve talked about all, look at what’s happening in California. I mean, it’s devastating. As an investor and as someone looking forward, how do we weigh the two sides of this, the best and the worst of times?

Keith Rabois: There’s a couple of potential theoretical answers that would reconcile these two worlds. One is maybe stock markets are long term investors and all the critiques that public market investors are short term thinkers are just false and you can make a strong empirical argument right now that all of the major indices in the world are basically taking a long term perspective on the value of these companies, looking at the effectively discount cash flow projections and saying, “Hey, there’s this virus blip that’ll be between one and four quarters long, but nothing about a 20 year horizon has gotten worse and if anything, maybe things are better over 20 years.” So all the people who were whining, jumping up and down about the evils of short-termism and public markets, which I never really believed in anyway, maybe you’re just factually wrong. That’s one thesis.

Keith Rabois: Second way to go is typically, when you do your discounted cashflow for those of you who went to business school or something, you’re basic applying it, the key variables, actually your discount rate and with the effective interest rates being so low, your discount rate is basically negligible. Yeah, I know what discount rate you apply. In some ways, if you just held everything cost in and change your discount rate and reduce it by a meaningful amount, you’re going to get exactly the chart on your left. That actually would work just empirically also. I don’t think it’s that hard to reconcile these things. What’s a little harder to reconcile is what’s going on in Venture. We’ll talk about that separately, which is, I actually do think that most private market investors are somewhere between spooked and reorienting their approach and valuations. And that’s a little bit disconnected from the public markets at the moment. At some point, those things need to be in harmony, at least in partial harmony.

Jason Lemkin: So let’s come back to that in a second, but just to understand these two. Just to unpack a little bit what you’re saying. At least many SMBs are incredibly impacted, right?

Keith Rabois: Yeah.

Jason Lemkin: I mean, the levels of small businesses shut down. Many of which the Shopifys and the Squares would attempt to power. Some of them are doing better, don’t get me wrong. But the level of businesses in the Tenderloin, the level of businesses is a nap on. I mean, it’s going to be devastating. It’ll be years but many will never reopen. Does it not matter for the chart on the left? Does the unemployment… I mean, just getting away from the human impact, does it not impact at the end? Does it not all bubble up to even the best cloud stocks?

Keith Rabois: It’s unclear which stocks it bubbles up to. I mean, many companies are not really serving the target market of the SMBs that are most affected, think like traditional retail, traditional coffee shops, comfort food, gyms, fitness, et cetera. There are some companies that are technology companies that have to do work with them and do target them but that’s not the meat and potatoes of most companies. The Squares absolutely, Yelp to some extent absolutely. But that’s more the exception than the rull of the go to market for many companies. So you could still reconcile those if you had to. Then typically, in a recession and depression, whether we’re in a depression or not, open question, but the consumer demand falls apart pretty quickly. And because the driver or the impetus for this economic turmoil wasn’t really lack of consumer confidence or lack of consumer resources, it’s not clear that consumers don’t have the money to spend.

Keith Rabois: In so far as you’re talking about consumer or pseudo consumer stocks, people have a lot of disposable income at the moment, partially because they’re not spending it on things they normally would. Typically, a normal American goes out to eat a certain number of times a week. That’s expensive. They may take a certain number of Ubers, that’s expensive. They may go see a movie or two or show or play. They’re not doing any of those things. They’re actually effectively saving money. They have the ability to spend it in other places, whether they spend it now or save it and then spend it once the economy opens again. I think that that will help certainly prop up consumer based stocks. Then on the other hand or on top of that, the government’s obviously subsidizing a lot of people who are suffering and so they don’t feel-

Jason Lemkin: That’s for sure.

Keith Rabois: … The short, acute pain. They’re not changing their consumption patterns as dramatically as if they were… I was watching a movie the other night about The Great Depression, that was a true 25, 30% unemployment or 20, 25% unemployment, where there was no consumer spending. And so obviously the people that need consumers to spend money for their revenue and then their contribution margin just had no shot of selling things. Look at Model T sales or something. Right now if you look on the other side, an area I know a fair amount about, look at US real estate. Somehow this defies logic, but is true. Last month, housing sales in the US are actually ahead of last year, like literally ahead. That makes no sense in many ways. It’s like 16 depths ahead of last year.

Keith Rabois: There is in another tale two cities is most of the people that were most affected by the March and April shutdowns were not the people that buy and sell houses. They’re people who typically are 1099 workers with lower FICO scores or lower income. And so it didn’t affect the US real estate market, except for like two to three weeks where everything was shut down and just couldn’t transact. But right now, I mean, Redfin has published several studies publicly about how they’re ahead of last year. Zillow, I saw this morning is trading at probably at 52-week high. People are buying and selling houses. That suggests that there is this weird combination of something’s thriving and something’s failing. I think the music industry, for example, at the extreme other end is catastrophically affected. The idea that people are going to go see live shows in dense environments with poor sanitation or they’re going to… I just think that that whole industry doesn’t know what to do in itself at the moment and it’s going to take years to sort that out.

Jason Lemkin: Since you’re maybe spending more time looking at some of the consumer data than many of us are, it sounds like there is some hints of optimism in what you’re saying and that maybe you think… And we won’t hold you to this if in July you change your mind. We’re all learning. But it sounds like you feel like there’ll be a decent V. The $10 trillion being deployed to prop up the economy and pent up consumer demand may create a weird V, but it may create a V that’s reflective of the chart on the left for consumers.

Keith Rabois: No, I think it’s going to be more inconsistent. I think by segment. There’ll be some Vs and then there’ll be some complete flat-lining. I think it’s more overall more like 2000 to 2003 in Silicon Valley, but there’ll be some industries and some verticals that either aren’t affected as much or snap back very quickly. And then there’s going to be others that take years. There’s a stat I saw after 9/11. Just before 9/11 occurred, we’d hit a USP domestic travel record and it took three years until May 2004 to get back to the level. I think many industries will be like that, where it takes two or three years to get back to the same level. I think some businesses never get back to the same level.

Keith Rabois: I think international travel is almost permanently affected. Permanently, meaning measured in three to 10 year doses, aware of the idea that you can just travel almost anywhere in the globe on a whim is not going to happen. Countries are going to take their borders very seriously. There’s going to be different rules, and different processes, and different tasks and different paperwork you need to travel. Every time you add friction of getting paperwork, tasks, et cetera, less people are going to travel. The idea of a weekend trip from New York, people live in New York, a weekend trip to London probably that’s not going to happen for a very long time. Those industries and the associated industries, hospitality, et cetera, I think are in for a very long non V-shaped recovery. Whereas some industries I can see snapping back, maybe long tail retail, definitely. I already see this.

Keith Rabois: I’m a multiple time investor in a company called Faire that basically provides data and services to SMBs all across the US and gives them the tools to compete with Amazon. The company was doing phenomenally well and our customers were doing phenomenally well before March hit. We clearly saw the impact the first three weeks. It’s dramatic. Nobody can go shop in Main Street America. But in the last three to four weeks, there’s been a sustained week to week improvement. I suspect-

Jason Lemkin: In store. [crosstalk 00:11:49]

Keith Rabois: … Well, there’s some substitution. That’s a fair caveat. Some of these businesses, maybe even many of these businesses, have started investing more and more in selling online to their preexisting in store customers. They’ve been actually quite clever and scrappy and figured out how to offset the decline of revenue. But then now the fact is now in May, likely to be more like a 10 to 20% net. Well, actually that’s even wrong. The company will grow more than 2X year to year in that despite all the lockdowns. There is definitely a sustained improvement across the country. Inconsistent, they serve the virtue of having 70,000 retailers or something like that is you actually literally have retailers everywhere. And so yes, in San Francisco, they’re probably not selling that much and in LA, probably not selling that much, but somewhere in Nebraska, they’re probably back to normal.

Jason Lemkin: Yeah. The pieces that recover at which pace is interesting. I wrote–I looked a little while ago and I wrote an early SaaStr post in 2013. After I sold EchoSign Adobe, I went back and got out. I rented a small office in downtown Palo Alto, and it was middle of 2013 when the last boards came down on a retail store. The West Elm store, I don’t know if you know where it is. It’s near Wahlburgers.

Keith Rabois: Yes, of course.

Jason Lemkin: It was boarded up until 2013. That sounds crazy thinking about it, doesn’t it?

Keith Rabois: Yeah.

Jason Lemkin: 2013 had been boarded up.

Keith Rabois: The lag is very real. Then also, there’s industries where it’s just hard to fathom them how they deal, from an economic standpoint, with either consumer or government mandated density caps. Like, think restaurants, hard to imagine how the economics of those businesses work with half the tables.

Jason Lemkin: Let me just ask you on this one. I want to hit the next slide. Pick your date in February, whatever ,it doesn’t really matter, where were we overall in Venture one to 10? Say on February 15th or February 1st, where were we on one to 10?

Keith Rabois: I think we were already down to a six or seven.

Jason Lemkin: Oh, really?

Keith Rabois: Yeah, I think some of the corrections in valuation, enthusiasm, tolerance for high burn rates and things of that sort, had already been adjusting or were adjusted for the last six to nine months. Somewhat, I would tie it back if you had to put a kind of hidden timeline right around that we worked the debacle is when I think there’s a very clear retrenchment, repricing, re-analysis of what’s the right criteria for a growth round. For example Founders Fund, I don’t think we changed our criteria at all, but I felt like maybe we were on the 20th percentile in terms of conservatism on some of these metrics. I felt like everybody moved to agree with our metrics and goals and objectives very quickly, where maybe there’d be a 10% of people who had still fund stuff that we thought it was a miserable business from an empirical standpoint. It really did move from 80% fund stuff that we didn’t like to only 10% of people would fund stuff we didn’t like. [crosstalk 00:15:11].

Jason Lemkin: We may look back at the WeWork IPO as the moment when things changed. Right? And when that was whenever one, we didn’t see it all, but that might’ve been a moment.

Keith Rabois: I think that was when it was clear to people. It started to change before that, truthfully, at least in my view from my vantage point. But I think that was when everybody had the proverbial partner meeting discussions about what are we funding, why are we funding, what price are we funding. It was a crystallizing moment, even if some of that stuff already had some momentum behind it.

Jason Lemkin: If we were a six and a seven there, and that’s good, from a very narrow SaaS perspective, I would have rated it at 11 but I don’t disagree with you [inaudible 00:15:54].

Keith Rabois: Sure.

Jason Lemkin: Where are we today from your perspective if different from Founders Fund, if that was a six or seven, not March, not April, but wherever the heck we are today, May 27th?

Keith Rabois: Maybe like a three.

Jason Lemkin: You think it’s a three?

Keith Rabois: Yeah. I think there’s deals being announced. I mean, including IAA and now four investments over the last month, let’s say. But almost all of those have significant momentum, at least maybe a handshake, possibly a term sheet, maybe even signed documents before March 16th. Then it takes a while to get through the process of negotiation, real documents, wiring money, [crosstalk 00:16:38]. Yeah. All that stuff at large. I think that the reality is very few new deals are getting done, with very few exceptions. I think there are some growth rounds that are getting done because you can look at the spreadsheets and these are pretty impressive businesses. There’s a handful of businesses that just look amazing on paper. They look amazing on Excel or paper or whatever, Excel spreadsheets or something.

Keith Rabois: Those deals are possible to do, especially with public market comparables being both high and no longer quite as volatile. I mean, there’s still some volatility. You could just even look at today, there’s some volatility in the market. But it’s pretty easy to hit the outlier high growth companies with moderate bird, batch payback on a cap basis. Everybody wants to invest in it or most funds are looking into those. And so those deals can still get done. The earliest stage stop, I would probably guesstimate is getting done at 10 to 15% normal in terms of velocity and probably-

Jason Lemkin: That’s a lot different than you’d think looking at the press, right? 10 to 15%?

Keith Rabois: … Oh yeah, absolutely.

Jason Lemkin: A lot different.

Keith Rabois: I mean, 10 to 15% and add, probably call it 50% of the valuation of last year.

Jason Lemkin: If you’re growing faster than March 15th, how does that impact that calculation?

Keith Rabois: If you’re going faster in a way where also the unit economics/payback is improving and that’s actually true for some companies, like think DoorDash or some telemedicine companies as extreme examples, those are pretty fundable for two reasons or home fitness in some ways, maybe. I’m not sure whether the payback on the home fitness thing has changed that dramatically, the cut payback, but certainly the growth is there. Those companies are very fundable right now because basically, it’s like a version of the old why now question. So every good investor deck has why now slide. The post March 16th is just amplifying that question. Why is your company better post COVID? If you have a great answer to that, people will definitely be interested in funding you. It’s species of the old canonical Why now question. But if you don’t have a great why now question, then I think you’re getting lost in a quicksand in VCs that are polite but not really investing.

Jason Lemkin: Yeah. Let me just dig into that a little bit. I think this was the point you were trying to make with Faire, that it’s still doing incredibly well, just not quite as well as it would have done absent COVID-19, right? 2X instead of 3X.

Keith Rabois: Yeah, good. Literally, our plan for the year was to grow or plan for 2020 would be to grow more than 3X, which is great. I mean, for a company that had pretty good scale. But we’ll still put up 2X even with COVID, which by most metrics that’s a pretty good year. Maybe not be good enough for the company’s ambitions, but we’ll get back to 3X. But 2X year to year is actually not that bad in the grand scheme of life.

Jason Lemkin: Not that bad. Let me ask the question then for new deals and as you said, you’ve announced a ton of deals personally in the Founders Fund, but most of them were in flight before all this happened. One way or another in flight.

Keith Rabois: Yeah.

Jason Lemkin: For a new deal, that is like a Faire. Maybe not literally Faire, but let’s say in February you were at 2 million ARR tripling and you love the founder. Okay? It was in a good space, it’s growing 3X, unit economics are plenty good. Whatever your bar is, your bar is high but tripling, quadrupling going 2.5X and instead of 3X, now it’s 2X or instead of 3X, now it’s 1.8 X and it’s not [inaudible 00:20:29]. So, it’s not restaurants. Do you just do the deal? Do you just connect the dots and say, “I’m going long. I don’t really care if it’s eight to 20 months until this recovers.” Or what’s the honest answer for you and Founders Fund? Is it still tough to make that mental leap that it’s just a gap?

Keith Rabois: I think it depends on how much is this a temporary blip? Meaning can you articulate–Look, everybody’s going to have a weird set of metrics in late March, early April. Typically, when we’re funding a later stage company, they have this super smooth growth curve and everything looks amazing. Very few people are going to be presenting for the next year or two, slides that are perfect. Everybody’s going to have some volatility, at least in March and April. And so you can show that the volatility segment of time or time is pretty temporal and that you’re back on a predictable growth rate, et cetera, even if it’s a month to three months of that. I think there’ll be some serious interest in investing in companies like that.

Keith Rabois: I think you get basically a pass. In most companies you’re going to get a pass between March and maybe May in some of their metrics, but the metrics before that pass zone better be pretty damn good and at some point after that pass zone, they better start looking good again. If you can do that, I think people would just close their eyes to this middle zone, where typically in a growth round, and even a series of C can’t really get away with that. A missed quarter looks terrible typically. Everybody’s going to have a missed quarter or so.

Jason Lemkin: Got it. But for what I call them, the COVID beneficiaries, the COVID impacted and the COVID we don’t need you anymore. For the impact that I think you’re saying, look, it is hard. It’s a fact that it’s hard. Even if intellectually you know that these industries are coming back, you have to resume growth in two, three it sounds like, to get funded. You have to resume your normal growth.

Keith Rabois: Yeah. I think you do need to show that if you want more money, that the company has either figured out or at least the macro world has adjusted and so you’re back on whatever trajectory you’re on. Or the company has figured out how to tune what it does, whether in small tuning or large pivoting to the new world and that there’s evidence that whatever adjustments you made are working. If not that, then I think there’s not a lot of appetite to fund companies, especially if they’ve already raised a sizeable chunk of capital. It’s much easier and let’s say to raise sizable chunks, let’s call it 10 million or more. If you’re not able to show that the world has been fixed from whatever perspective and vantage point you’re in business or you fixed your company to take advantage of the new world, it’s much easier to pass at somebody who’s already raised a dose of capital. Just say, I’d rather take a shot at something new that’s built from the ground up in this new world.

Jason Lemkin: Yeah. Let me ask you a question that I’ve thought a lot about but you may have much better data and thinking, which is my gut–and I don’t have the data to support this but I have my anecdotal data. I’ve made 25 investments and I talked to a lot of founders. I think 15 to 20% of SaaS companies that we work with are COVID beneficiaries. 15 to 20% are in collaboration, sharing E-Learning, even just e-commerce. I invested in a company called Gorgias, which is a contact center for SMBs on Shopify. March was rough. April, it grew 70%. That was an unexpected one. If 15 to 20% are COVID beneficiaries, can that absorb all the venture capital? Does venture capital even need to bother? Venture capital, no matter how it looks, it’s not a huge asset class. Is it? Is there even any point for new investments in doing anything but a COVID beneficiary?

Keith Rabois: You could really argue that because if you believe that there’s a fundamental shift in the world in any way towards e-commerce verticals, towards ad foam, fitness training, et cetera, absolutely, it would make sense to take your money and only invest in COVID beneficiaries. There’s a big argument. We debate internally all the time. You can debate publicly. How much does human behavior snap back into traditional norms or is there a “new normal”?

Jason Lemkin: Now what’s the answer?

Keith Rabois: Well, I actually think it varies by vertical. I actually think that there are some things that have had a permanent change and people are not going to go back. For example, let’s talk about telemedicine just because it’s easy to grok. Telemedicine had been growing nicely for the last five to seven years. I mean, there’s a couple public companies, several private companies, but it’s had step function. What I mean step function, I’ll give you some real numbers. Stanford Hospital went from roughly 1700 telemedicine consults a day to 74,000 a day. Cleveland Clinic has roughly the same scale there. So massive step function.

Keith Rabois: What’s happened is people realize, actually, you know what, telemedicine is actually better. I don’t want to go to a doctor’s office where everybody else there has germs or something. I have to sit in this waiting room and the doctor’s never on time, whereas mostly 50 to 70% of things that go wrong with me, the doctor can easily diagnose or triage by a telephone call from my home when I haven’t even had a commute, let alone to get exposed to other people’s germs. And by the way, they’re probably on time for the telemedicine call. That I don’t think flips back at all.

Keith Rabois: Also, the companies, at least the private companies, get better marginal economics. I run a telemedicine wave. The regulators also stepped in and made things easier, relaxed some cross state border restrictions on practicing medicine. Unfortunately, I suspect they’ll go back to normal and insist the California doctors could only treat people that are in California, which makes no sense, but they had suspended that, which also allowed for this growth. But maybe even the regulators will cave now. I’m sure there’s no, maybe not no, but almost trivial negligible examples of California doctors either really screwing up the practice of medicine for Virginia residents. All of that is just a permanent change. Then you can even see, well, maybe if that’s true, maybe there’s applications that crossed to other versions or species of medical care where telemedicine or quasi-telemedicine takes off as well.

Keith Rabois: There’s some things that I don’t think are complete substitutes and really are unfortunate inferior substitutes. You can argue some of the… Even if you go into home fitness, break this down, I think Peloton is a pretty good substitute for SoulCycle for many people. Maybe superior, cost-effective, more convenient, more adaptable to their schedule, et cetera. I’m not sure the at home equivalent of weight training is for going to a gym. Most people are not going to have the same equipment, the space, et cetera. We funded a company that provides a really good at home experience called Tempo for strength training. But to some extent, there’s limits on what you can do in a normal person’s house in America, or apartment. I think that is a function of what’s the healthcare situation in estates, what’s the risk tolerance of people for getting exposed to germs? But are people going to permanently stay away from gyms if the healthcare crisis alleviates? I doubt it.

Jason Lemkin: Georgia doesn’t suggest it.

Keith Rabois: No, that’s true. Truthfully, the facts in Georgia don’t suggest that it’s as big a problem as people thought. But yeah, I personally wouldn’t want to be in a gym right now with a lot of other people. It’s just hard to keep everything perfectly sanitized all day long, even if you put density caps on. But I would imagine, you’ll see gyms, even the Equinoxes of the world, where you have to schedule your workout.

Jason Lemkin: Yeah. It’s complicated. Keith, this was incredible. I wish we could dig it even more but we’ve gone our full length of time. So thanks for anything. Anything else last minute you want to share? I think we’ve hit some amazing stuff.

Keith Rabois: That’s great. It’s a pleasure to be with you.

Jason Lemkin: All right. Stay safe and we’ll talk soon. Thanks everybody for joining.

Keith Rabois: Great. All right.

 

The post SaaStr Podcasts for the Week with Keith Rabois and Jason Lemkin appeared first on SaaStr.

SaaStr Podcast #349 with Craft Ventures General Partner David Sacks: “How to Turn Your SaaS Startup into an Army”


This post is by Amelia Ibarra from SaaStr

 

Ep. 349: Startups can get messy. Especially in growth. David Sacks (Yammer, PayPal) shares how to navigate from 50-500 employees.

This episode is sponsored by Lightmatter.

 

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from David’s session at SaaStr Summit: The New New in Venture. You can see the full video here, and read the podcast transcript below.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
David Sacks

The transcript for this episode is below:

David Sacks: So, probably the topic that I get asked about the most over the past 20 years, based on my operating experience, is just how do we get more organized? How do we solve this? And, wouldn’t it be nice if somehow we could turn this shit show into an army where instead of having this startup chaos, we could get the team working in lock step. Rather than having this feeling of disconnected functional areas, everyone in the company knows what to work on. Rather than having this erratic schedule around hitting sales targets, or hitting releases, that there’s a feeling that just quarter after quarter the company keeps shipping and selling. To me, that’s what the cadence says.

I learnt this operating myself. First, I was the founding era CEO of PayPal during the PayPal Mafia period, and I was a self taught product person, I learned how to do product management operations there. Then, my next company, I founded Yammer. I was the CEO. We adapted this operating philosophy for a SaaS company. We had to learn how to do sales and sales marketing and compete in heads up battles against other companies selling similar products. We refined the cadence then, and it worked extremely well.

We went from zero to 56 million in sales in under four years, and that resulted in a unicorn, we ended up selling the company to Microsoft in 2012 for 1.2 billion dollars. I think, to this day, it’s actually the fastest unicorn SaaS exit.

Now, during that time, we were competing against Salesforce, they had a competing product called Chatter. So, we studied what they were doing very closely, I read, Marc Benioff has a great book called Behind the Cloud, which I recommend to everybody. And, so we learned and adapted key elements of their system and incorporated it into this cadence. Salesforce is the most successful cloud software company, and so it’s worth, I think, learning from the things that they’ve done.

So, what is the cadence? Basically, it’s based on a few very simple insights, but very few startups are actually doing these things. So, the first insight is that there’s two key systems in a startup. The first system is what I call the sales finance system. And, the second system is what I call the product marketing system.

Both of these systems, in my view, run better on a quarterly cycle, and they should be planned on a quarterly cycle. Then the final, the third insight is that, well if you’ve got these two systems that are running on a quarterly cycle, if you just snap them together with a site off set, and we’ll talk about that, you can then create a single operating cadence for the company.

It’s very simple, I mean this is something that every start up can do. And, when a start up deteriorates into the thing I call the shit show, it’s always because one of these groups, or one of these systems is, either it’s not being run the way it needs to, or it’s not being snapped into alignment with the other systems. All right, so let’s talk about each of these systems and functional areas, and then I’ll explain how they all snap together.

So, the first system is a sales finance system, so let’s start with sales. So, sales, in my view, is best run on a quarterly plan. You can get there by process of elimination. But, two other ways to run a sales team is you can run them on annual quotas, or you can run them on monthly quotas, and in my experience, annual quotas are just too slow to judge performance, it doesn’t let you make modifications and adjustments mid course, you have to wait until the whole year is over.

By the same token, monthly plans are too volatile. Some startups can do monthly quotas if they have an extremely quick sales cycle. But, otherwise, for the vast majority of startups, you want to be on a quarterly quota plan. Then, the other thing you want to take into consideration is that if you adjust quotas and territories more than once a quarter, you’ll really start to affect the morale of the sales team, they’ll start feeling undermined.

So, the first part of the sales finance system is to recognize that sales must be on a quarterly plan, and then that allows you to create a series of milestones within each quarter. So, every quarter is going to start off the same, you’re going to start off with the sales kick off. At that kick off, the sales team is going to receive their plans, their territories, if there is any company objectives, or spiffs, things that the company wants to incentivize, those things will be covered then. And, you’re going to do some significant retraining, you’re going to retrain the sales team on the product, you’re going to train the sales team on any best practices. If some reps have been particularly effective, you’re going to want to share those learnings, that wisdom across the group.

The second month, mid quarter, you’re doing a lot of pipeline inspections, the sales leader is making sure their team is going to hit their goal, they’re making adjustments, giving advice in terms of how to actually close those deals. Then, and we’ll talk about this in a minute, but marketing and product will be generating news in the second month of the quarter, and sales can use that news to warm up prospects, email them news collateral, awards recognition that the company is getting and use that to help put deals over the top. Then, in the third month, you really want to avoid distractions, the team should just be head down on closing and making their number.

So, that’s the sales calendar. The sales calendar is part of one system with the finance calendar. I mean, this is pretty, I think obvious and intuitive, as well. But, the starting point for the finance calendar is to understand that there is a fiscal year, a financial or accounting based fiscal year for the company.

The question really is, well there’s only two choices for that, you can have a fiscal year that ends on December 31st, or you can put the calendar year, or you can have one that ends on January 31st, and my recommendation for most SaaS companies is that you want to have a January 31st fiscal year for the simple reason that you don’t want to be closing deals and have the entire year’s number, because a lot of deals will come down to the wire. You don’t want to be scrambling during that Christmas to New Year’s week when everyone is on vacation. It’s more humane for your sales reps to not make them work during that week, or to have their quarters depend on that. But also, it’s very hard to get hold of prospects during that time, and so I recommend generally a January 31st.

You also avoid being, smart prospects will know at the end of the year to demand discounts, because they know that if the vendor is scrambling to close deals to hit some number, they can get a better discount. You’ll be in a better position of leverage if you’re not having to give year end discounts, so I generally recommend January 31st.

Then, that means that your sales quarters that we talked about, will be based on that fiscal year end. So now, you can basically say okay, well look, if I’ve got that Q4 is going to end now on January 31st, so that means that my Q1, my quarter end is going to be now February, March, April, and then so April is the next quarter. Then, May, June, July, so July is the next quarter end. And then, August, September, October, October is the next quarter end.

So, we can now essentially snap the sales quarters to the fiscal year. You want to do this for reporting reasons, right? I mean, so if the finance team have closed the books on each fiscal quarter, report that to the board, you don’t want to be reporting incomplete, mid quarter sales numbers. You’ll have a much better idea of what’s happening in the business if your sales quarters are snapped to the fiscal year.

Then, the final thing I like to do as part of the finance calendar is make snap board meetings, because you want the board to review the information while it’s still fresh. So, I like to see board meetings, but typically quarterly board meetings occur two to three weeks after the close of these quarters, so we talked about when the results are fresh, that’s when we want to talk about it. And, now the team can get strategic insights from the board right at the beginning of the next quarter, and there’s still time to implement them for that quarter. So, that’s the finance calendar, and the combination of sales and finance working together is what I call the sales finance system.

So, let’s shift gears to the second system, it’s the product and marketing system, and the product calendar. So, the product calendar, I want to tell you about my philosophy on product management, and this is something I learned at PayPal and then refined it at Yammer is, a lot of people, a lot of founders I should say, resist the idea of having planned quarters around product management. I’ve really learned this is a good thing to do. Again, when you’re in that seed stage, when the founder can just run around and tell engineers what to build, that’s fine. But again, we’re talking about the time in a company’s life when they’re expanding from 50 to 500. And, just having the CEO running around every day or every week, telling people what to do just doesn’t scale, and so you need product managers, and those product managers, I’ve learnt, work best on a quarterly calendar.

So, the analogy you can use is, let’s say that you want to fill a jar with rocks, pebbles and sand, we have this graphic here down on the bottom right, and so how do you do it? You see the jar on the left here, they weren’t able to fit the rocks in the jar, because they filled up the sand first, then they put in the pebbles, and then they did the rocks. The right way to do this is to put the big stuff in first, the rocks, then you put in the pebbles then you put in the sand.

Product management is a lot like that, where what you’re trying to do is maximize, it’s about resource planning, right? So, you’re trying to maximize the amount of stuff that you can get pushed through the system with a fixed amount of resources, it’s about maximizing that.

What I found is that companies that don’t think in terms of a quarterly product management calendar, one of two things happens. Number one; they just ship sand, right? They don’t think in terms of shipping tent pole features, new products, major releases. Or, when they do, they end up going wildly, wildly over schedule. So, they’ll put together, and ship a new product, but because they never really planned it, they didn’t scope it correctly, and so you’ll be talking about a product that should’ve taken, or was supposed to take one quarter and you’ll still be doing it two, three, four quarters later. I’ve seen V2s that were supposed to take a couple of quarters end up being literally years late, and it paralyzed the development road map of the company.

So, product management is useful to make sure that you actually do big stuff, you don’t just get the sand done, you actually get some big rocks in there. But, it also helps you make sure you’re scoping correctly. The rule we had at Yammer is that every project we would assign somewhere between two and 10 engineers for two to 10 weeks. So, the absolute biggest project that we could ever do, would be 10 engineers for 10 weeks, and that would be for the absolute most strategic priority. We would just say the max is 10 engineers for 10 weeks, and if we couldn’t do that, the product needs to be re-scoped, it needs to be shrunk down into something that 10 engineers could ship in 10 weeks, that we could put in front of users, get feedback about whether they liked the product before we then went on to the next round.

This is a system that we’ve used, and again what having a product management calendar does is allow you to think in terms of what are the rocks? What are the pebbles? What are the sand? Let’s fill up that jar with rocks first, then pebbles, then sand. You will actually get more done like the jar on the right as opposed to the jar on the left, you will actually fit more through your road map.

Moving on to the marketing calendar. The marketing calendar, I guess a couple of key points here; one is that marketing and product, those calendars are one system for the obvious reason that start ups are product driven, and most news that the company puts out will feed off of new products, new product releases, and so marketing is really going to piggyback off of the product management calendar, it’s going to be marketing those product features. Those product features should be the centerpiece of marketing events.

I also believe that for marketing purposes, having four big releases is better than having 52 small ones. It’s not to say you can’t ship code weekly, or even daily, but in terms of for marketing purposes, and for planning, for product management purposes, you really want to think in terms of a big seasonal release. That’s what Salesforce has done very effectively for 20 years, is that they have a winter, spring, summer, fall release, and the compounding effect of that has been huge.

The other thing you want to think of for marketing purposes is you really want to have an event based marketing calendar, and I don’t know why more start ups and more founders don’t do this. Some of the most successful founder CEOs that we’ve ever had in our industry, have used this technique of event based marketing.

Steve Jobs, I mean the big iPhone release that we think about the big product releases that Apple’s done, they were always based around events. Marc Benioff of Dreamforce, now the largest tech conference, and obviously Elon, whenever he puts out a new product, it’s based on a live product demo.

So, having an event based marketing calendar, I think it does a number of really important things. Number one; it combines, there is so much clutter in the world right now, just putting out a press release doesn’t get it done. When you can combine the press release, that news, with an event, you bring together customers, and fans, and influencers, and you combine it with a live demo, you don’t just put out a press release and create what’s called a lightning strike, it’s much more compelling.

The next thing, though, is that there is an internal benefit, a huge internal benefit to the company in terms of setting dates, setting deadlines in advance. The deadline, the date for these events gets set well in advance. So, if the folks at Tesla know that Elon is going to be going on stage to present the Model 3, they’ve got to hit that deadline. Same thing with Marc Benioff at Dreamforce, knowing that you’re sending your CEO on stage with that product is tremendously motivating for the team inside the company, they know they have to hit those deadlines.

Then finally, it forces the leader of the company, not just the team but the leader of the company to think about prioritization, and what’s really important in a different way. Because, you the leader are going to have to go on stage, and present and explain this big product announcement. You’re going to have to effectively justify why it matters. So, it forces the leader of the startup to think months in advance about what is going to be important to customers.

What I find is that if you think about the product marketing calendar this way, it makes it a little bit more like the sales finance calendar where sales is about selling to customers, sales doesn’t work unless a customer buys what you’re selling. I think that’s a good dynamic, you get market feedback, and I think having to think about the customer and their reaction while you’re doing the product and marketing planning, is a very good thought exercise for the company.

So, that’s how the product and marketing system works. Now, let’s talk about how you snap these two systems together. The most important concept here is very simple, is that you want to have an offset, say a half quarter. You don’t want the product marketing system for their major event, for their launch event, to be coming due at the exact same time that the sales quarter is coming due. You don’t want to light  everyone’s hair on fire at the same time, it creates too much chaos inside the organization.

Also, it’s not good change management. You don’t want the product and the product demos changing right when sales is trying to close deals, you want some stability in the product. By the same token, when you have these big lightning strike events in the middle of the quarter, that usually comes with a bunch of positive press coverage, and sales can take those articles, they can email them to prospects, they can use it to warm up prospects who’ve gone cold, or they can use it to help further deals, to help put deals over the top, so it’s just a much more useful time. So, if you think about these two systems, you just want to off set them by about half a quarter, okay?

So, now let’s think about, well how are we snapping this together? Number one, you’re going to decide your fiscal year, it’s going be December 31st, or January 31st, and then you’re going to snap the fiscal quarters to that, that will snap the sales quarters to it, and then you’re going to snap your event schedule, so that events occur in the middle of the quarter, then you’re going to plan your R&D cycle to hit those event deadlines. It’s very, very simple. But, this will give you a super structure for everything happening inside of the company.

Now, one objection that I get to this, I know a lot of you think that when you hear about events that you think no one is going to come to your event. That’s what I thought at Yammer, is that we decide we’re going to do this thing called Yam Jam, and we made it our annual user conference, and we were very worried that no one would care and no one would show up. But, you would be surprised, even our second year as a start up, that a large number of people showed up. If you have product market fit, sufficient to raise a series A and a series B, and you’re scaling from 50 to 500 employees, you have a fan base out there, you have a community and you can engage them.

You may start small, it may only be a few dozen people at this event, but it will grow. Just look at Dreamforce, the products that Elon and Tesla have rolled out, what Steve Jobs did at Apple, obviously those are very sexy products. But, what Marc Benioff has done at Salesforce, that’s CRM, it’s not inherently the most exciting product, it’s business software. And yet, they’ve been able to, starting from very modest beginnings, they’ve been able to turn that into the largest tech conference.

So, you will get people to turn up at your event, and what I recommend here is one user conference a year, and then three smaller webinars, or city events, doesn’t have to be a huge event for the other quarters. But again, it forces that discipline around making sure that what you’re working on matters.

So, let’s translate this. So, now you’ve snapped these two systems together, let’s just quickly review what’s going to be happening in a quarter. The amazing thing about the cadence is I can tell you what’s going to be happening inside your startup, inside a SaaS startup, without even knowing what software problem your business is addressing. But, if you’re using the cadence, you’ll be marching to this beat, and you’ll be well organized.

So, month one is going to be dominated by the idea of planning, and so you’re going to start off with the sales kick off, there’s going to be prep for the sales kick off. And, at the sales kick off, you’re going to get new sales plans, territories and quarters are going to be finalized.

Meanwhile, the finance team is closing out the quarter, and by the way, the PMs are presenting at the sales kick off, they’re basically re-training or training up the sales reps on the latest changes in the product and what’s coming out next, because selling your project road map is a very important part of the sales process as well. So, you’re going to have this cross functional opportunity at all these events for those kinds of interactions.

Next, you’re going to have board meeting prep, and you’re going to have the board meeting. Then, immediately on the heels of that board meeting, you’re going to want to feed those strategic insights that you’ve talked about back into the company, and typically you’re going to do a product road map prioritization for the next quarter’s launch event. Not for the one that’s just about to happen, but for the next quarter.

Meanwhile, code freeze and QA are beginning for the launch event that you’re about to do in month two. So, month two is going to be dominated by, say in week seven, you’re going to do this event. It’s either going to be your user conference, or it’s going to be a city event, or in the days of COVID, it could just be a webinar, that’s fine. But, you’re going to basically have this launch event, and the first couple of weeks of month two are going to be dominated by people getting ready for that, the marketing collateral is going to get finalized, the event prep, event details are going to get finalized. You’re certainly going to be doing QA and testing on the release, you might be in closed beta with some customers.

Then, the other thing that’s happening, though, is that the product managers should be racing ahead to be getting ready for what’s happening next quarter, and they’ll be working on specs and design reviews for what’s happening for the next quarter.

At the end of the month, at the end of month two, you’re going to want to debrief. You’ve just done this big launch event, how did it go? What are the learnings? You may have convened your customer advisory board, what did they say? You’re going to want to debrief and internalize those lessons. You’re going to want to do recognition inside the company, you’re going to want to recognize the people who made it all happen, there should be some celebration. Normally, there are good things to celebrate, you just did a big launch event, and so recognizing and celebrating that accomplishment is a good thing to do.

Like I mentioned, sales reps can now use the marketing news that you just generated at this event to warm up leads, and the engineering team is going to be really busy if you’ve just done a big launch event. If you’ve just done a big launch, there’s going to be bug fixes, and so for a week or so after launch, they’re going to be busy doing that. Meanwhile, the PMs are finalizing the next quarter’s launch, the next quarter’s release.

Then finally, you’ve got the third month of the quarter, which is really a heads down period inside the company. So, what’s happening in month three is that the sales reps are really focused on just closing deals, you want minimal distractions for the sales reps. Then, coding is going to begin, if it hasn’t already, for the next quarter,s release. Remember that in month two, the PMs and designers really finalized their part of the release, the planning, and now coding begins in earnest. So, month three is really this heads down period where people are just cranking out code and closing deals. And, that’s basically the quarter and then you start again with right back at it, now you’re at the beginning of the next quarter, and you’re right back at sales kick off, you’ve got the quarter end close, you’ve got your next board meeting and so on.

So, this really creates an operating cadence within the company. One of the big benefits of the cadence is, I think it has important cultural benefits. So, there’s this old debate about culture inside of start ups which is well, should a start be run like a sprint, or a marathon? You’ll hear founders defend both approaches. My view on this is actually, which one is better? I would say neither. I think the best approach is ladders.

So, for people that are into fitness, ladders are when you sprint for a while and you do a sprint and then you rest, you let your heart beat return to its resting rate, and then you repeat, and then you do it again. If you try to run, the fact of the matter is that start ups do take a long time, they’re an infinite game, and if you try to just run it as a sprint without rest, you will burn people out. Conversely, if you have this attitude that it’s just a marathon, I do think that is a recipe for going slow.

So, to me, ladders are the right balance culturally. Sprint, hit this big launch, let the sales team sprint to hitting their quarter end, but then you have a recovery period. You have the sales kick off, you have that week after the big launch event where you’re letting people celebrate the accomplishments, reflect on what has happened, and then you do it again.

So, let me just summarize. So, what is the cadence? I think the cadence is four key calendars in the company, which consolidate into two synchronized systems, and then one operating cadence when you have those two systems working in tandem with each other with this half quarter offset.

I think human beings are wired to think in terms of seasons and quarters, and I think this is a very natural way for all of us to work, is in terms of these quarterly planning cycles. The first system, the sales finance system, really orients around the quarterly close as its central event, what it’s building up to. And then system two, the product marketing schedule or system is oriented around this big launch event.

You want to use these two systems in tandem with each other. Whenever you have an event, it’s an opportunity to synchronize people inside of the company around cross functional collaborations. So, like I mentioned, the product managers are going to speak at the SKO. And, I also believe in the sales reps attending, say virtually, through streaming any of these product launches. I think it’s very important to involve the whole company in these big events. Then, what you’re going to want to do is, if you think about your all hands meetings, you’re going to want to work backwards from these events.

So, knowing that these are the big milestones inside the quarter, you almost know exactly what each all hands is going to be about. So, after the quarter closed, you’re going to do an all hands meeting to review the results, what just happened. The all hands meeting before the big launch event, you’re going to want to preview what’s coming out. The all hands meeting after the launch event, you’re going to want to debrief on what you learnt. The all hands meeting after the board meeting, I think it’s a good idea to review what you just talked about with the board.

You should also be thinking about, what are these key events, because each one creates cross functional collaboration, but each of these important events also creates the opportunity for an all hands meeting inside the company, so you can keep everybody up to date and synchronized.

Then, I would just tell you, the compounding effect of shipping just four great quarters a year. I know if you’re shipping daily or weekly, and you say well, wait four? Again, I’m not saying you shouldn’t just push code live, I think it makes sense just for version control, you want to push code. But, again in terms of the planning cycle, I know it seems like you’re getting less done to have four lightning strikes, or four mega launch events compared to 52, but again, think about the rocks versus sand, and the compounding effect of implementing the cadence quarter after quarter for years is enormous, because I can tell you most companies in this few hundred employee range, or big companies, they’re lucky if they have one great launch every year. So, if you can do this quarter after quarter after quarter, the way that Salesforce has, the compounding effect of that will be very big.

Then finally, like I mentioned, start ups are not a marathon or a sprint, think in terms of ladders, I think you’ll be pleasantly surprised culturally what that does for you.

The post SaaStr Podcast #349 with Craft Ventures General Partner David Sacks: “How to Turn Your SaaS Startup into an Army” appeared first on SaaStr.

SaaStr Podcast #344 with SaaStr Founder Jason Lemkin: “16 Tips To Increase The Odds You Get Funded”


This post is by Amelia Ibarra from SaaStr

Ep. 344: Given that so many VC pitches are over Zoom now, we thought it would be worth sharing the things it’s easy to get wrong when pitching investors. Pitching VCs is like anything.  You’ll get better at it over time.  Later, you’ll even get great at it.  Once you know how it works, it’s not even that hard to knock it out of the park. But until then, so many founders make unforced errors.   Rookie errors.  Here are 16 that you can easily avoid / fix right now today.

 

If you would like to find out more about the show, you can follow us on Twitter here:

Jason Lemkin
SaaStr

Below, we’ve shared the transcript of the episode.

Announcer: This is SaaStr founder’s favorite series. In this episode, SaaStr CEO, Jason Lemkin shared 16 rookie errors founders make pitching VCs.

Jason Lemkin: I have been looking at a lot of pitches from founders over the last week or two. And some of them truly are amazing. Some of them just leap off the page and you just want to meet with that founder right then and there. But typically you see a bell shape distribution, a handful of pitches really leap off the page. A bunch are terrible, are simply terrible, and most are in the middle. Most have something interesting. There’s some hint. There’s something in the email, in the subject line, in the deck that’s interesting. But it’s not as interesting as it could be.

Jason Lemkin: And I want to talk about that because there’s no reason, if you’re pitching investors, that your pitch should be in the middle of the bell curve. It should be as good as it possibly can be. And I wanted to review 16 rookie errors that I see founders make again and again, when pitching investors, where there’s no need to make these mistakes. And if you fix these mistakes, if you don’t make them, you’re going to go up that distribution. You’re going to be in that top 10% of pitches where folks really want to meet with you.

Jason Lemkin: The first one, it’s really a combination of two points, which is that cold emails work, but they have to be awesome. And we recently did the New New Venture at SaaStr. We had some top VCs, Aileen Lee from Cowboy, Keith Rabois, David Sacks, Christoph Janz, Forbes Midas list, three of the top VCs in the world. They all came and shared their learnings and you can see them on YouTube, on newnewventure.com.

Jason Lemkin: And what was interesting is the ones that I interviewed, the top VCs that I talked to, said they all read almost all of their inbound emails. And this is contrary to many of the advice you get on the internet where you need a warm intro, you need to know the right people, you need to have gone to Stanford or been in the right accelerator. And those things, there’s no question that helps. Fair or not, discriminatory or not, having social proof, having proof that you might be great, helps. Going to Stanford and Harvard helps, graduating out of Y Combinator helps.

Jason Lemkin: But the best VCs read their cold emails. So you’re armed with that. You know that actually you can inbound to a top VC, at least seed VCs, at least early stage VCs, and they will probably read it. So make it awesome, folks. It’s a sales pitch. Folks don’t want to hear a one line email about how you’re better than Zoom. No, explain it. Make that subject line pop, make every part of your pitch amazing. Have the email subject line be so awesome folks would want to invest just off the subject line. Make the body of the email incredible, incredible. Share your best metrics, why you’re going to win, why the team is great, why your vision is perfect. Distill it so that someone might invest just based on that email.

Jason Lemkin: And then attach a deck, and make that deck as awesome as it can be. Don’t have a teaser deck. Don’t throw off some random statistics about the market. Explain why someone should buy stock from you. Fundraising is selling stock. It is a specialized version of sales, but it is sales, no doubt. So make the world’s best email possible.

Jason Lemkin: And if you look below, I will share a link to two emails that I read, cold emails, and those companies are now worth literally, literally billions of dollars. These were pure cold emails to me that I funded for millions for companies that are now worth billions. It does happen. Does it happen every day? No, but nothing happens every day. But every year, unicorns, multiple unicorns in SaaS are founded. And every year there’s at least one decacorn, and investors are looking for them. And seed stage investors can’t meet everyone. They can’t do everything from warm referrals, and they will read the best email possible, so make it awesome. Otherwise, you’re doing yourself a disservice.

Jason Lemkin: Point number two, be super straight with answers. Remember, especially early stage investors, especially seed stage investors and angels and the like, they know you don’t know everything. They know you don’t have 10 million in revenue and 10,000 customers. So just answer the question. How much money are you raising? How many customers do you have? What’s your churn rate? What’s your NPS? What’s working well, what isn’t? Why do you win deals? That’s the most important thing, founders just answer. Why do you win deals? Why are you 10x better? That should also be in your pitch. Why are you 10x better? Don’t be cagey.

Jason Lemkin: The best founders, I can tell you, are not cagey. And I know it’s hard. I know many of us haven’t done it before. I know it can be intimidating and you can be insecure, but this is your job, you’re the CEO, be honest. And if you don’t know the answer, just say that. “I don’t know the answer.” And if you should know the answer and don’t know the answer, it’s okay to say that too. Listen, you should say, “I should know that answer. I’ve been in this space for decade, but I doubt I’ll get back to you on it. But it’s a great question. I should know the answer.” Look, if you say that to every single question, it’s a fail, but you can say it once or twice. It’s okay to know eight out of 10 of the answers, even in your industry, seven out of 10, be honest. But if you’re cagey, no one will believe that you’re going to build a unicorn.

Jason Lemkin: Mistake number three. And this happens more often later in the process and more often in in-person meetings in Zooms these days. But it still happens all the time. Don’t bring the wrong people with you and don’t put them in your slide deck either. Advisors are great, mentors are great, angels are great, but they’re not your team. Do not drag your advisor or someone you’re paying shares for to help you raise money to the investor pitch. A few folks will challenge this, but the reality is investors want to meet the founders, and particularly the CEO, but the founders. That’s who they’re betting in. It’s usually at least 50% of the bet, always, and especially early stage.

Jason Lemkin: So don’t bring people who aren’t part of the long term team. Don’t bring people who aren’t writing code, who aren’t making decisions, who aren’t talking to customers. They’re just a flag for someone that is insecure. And again, we’re all insecure in this process, but you don’t need flags that say you’re not going the distance. So don’t bring folks with you that aren’t founders to meetings.

Jason Lemkin: Next point. And I know this sounds simple. I actually know you’ll hear contrary advice from incubators and accelerators. But you’ll see most of the best investors that are live on Twitter agree with me, which is, send the deck. Send the deck ahead of time, send it quickly, and send all of it. Remember, you’re in sales, or at least in fundraising, someone’s on sales.

Jason Lemkin: Now, later when you build the hottest unicorn, when you build the next Zoom and Slack and Twilio and Datadog, when it’s later stage, you’ll build a data room and you will put all your documents in there and your financial statements, which may even be audited then, and all your cohort data and everything. And you will allow 20 or 30 investors a week, two weeks to log into a carefully constructed data room that’s password protected, review the data and make an offer, make a bid. You may be collecting term sheets, two, five, 10, or more when you’re the hottest late stage company. But that is rarely, it is rarely the way it works early.

Jason Lemkin: In late stage, often the investors are in sales. But if you’re in sales, if you’re the founder, if you’re the CEO in sales, make it easy on them. This is true of any sales. So send the deck. Don’t send a teaser deck, don’t send a DocSend or a password protected deck. Look, it’s nice to have the DocSend. It’s nice to have all the data and see who’s looking at what. Of course, it’s fascinating, but don’t do it. Don’t do it. If you want to embed a Mixmax link, that’s a much better way to do it because it can silently track who’s doing what.

Jason Lemkin: But don’t create gates. Many investors will not read a DocSend. And more importantly, if you don’t send the deck, just send the deck, they may not follow up. They may not ask for it. They may move on. Many of the top investors have hundreds of pitches in their inbox and they’re looking for the ones that stand out. But if you don’t send your best assets, you’re just decreasing the odds you get funded.

Jason Lemkin: Next point. This is a rookie error and I see it all the time and it shouldn’t happen. But I see it all the time from super smart people. You have to diligence your investors. You have to research them. Yes, deep down, you can basically send the same email and the same deck to everybody. But think about reaching out to a top customer. Treat an investor like a hundred K or a million dollar deal. If you want a million dollars from them, treat them like a million dollar customer. They deserve ABM. They deserve a handcrafted email, not a cadence, not an email that doesn’t even recognize them. At least go on the website, spend 15 minutes and look at the deal she or he did, look at some of their other portfolio. See if there are some sort of ties to what you’re doing.

Jason Lemkin: They don’t need to be the same, but does this VC do SaaS? Do they do B2B? Do they do marketplaces? Do they do B2D? What type of deals do they do? How is your company at least vaguely similar to an investment they have to done? It doesn’t have to be the same, and VCs don’t want to make competitive investments. But is the deal size similar? Is the type of vertical similar? Is the type of buyer, is that is the type of not obviousness similar? Just make a personal connection.

Jason Lemkin: And the best way to do it with VC is with a portfolio company they love because portfolio companies are like VC’s kids, sort of. They love to talk about especially a successful one. I mean, if a VC has a decacorn in her portfolio, she’ll never stop, she or he will never stop talking about it. So compare how your startup was like that Datadog or Twilio or Workday or Zoom, or whatever it was in the early days. Show that connection, and there’s a 10 times higher chance you’ll make a connection. And worse, when you don’t do it, when it’s clear that email is just going to 40 people, the best VCs have too many, and they don’t follow up. So you have to personalize and you have to do your diligence and ABM it and get to know those VCs.

Jason Lemkin: Next one. You do need to educate most investors on your space. Most of them will not really understand what you’re doing and why you’re doing it and how it works. But not too much. Don’t waste time, don’t waste slides in your deck. Don’t waste space in your email, educating VCs too much in industry. Think about two slides and two lines and two sentences is enough. If a VC has never done an investment even remotely similar, they probably won’t again, but summarize the industry in two sentences. Why is the content marketing industry changing? Why is travel changing? Why is application performance management changing? Why are whatever changing? Just summarize it in two sentences. Summarize it ideally in one slide, but two max. We do not need to hear the history of your industry since the 17th century, since the days of mainframes. It’s too much, and it is accidentally condescending. VCs, at least like to think they understand industries, even when they don’t. So forget the decades of history, forget the workplace of the future. Just summarize quickly what’s changed and why you matter.

Jason Lemkin: Okay. The next two are a bit of a Goldilocks. But you need to be careful about going in too strong with VCs, but also going in too weak. So let me explain. If you go in super strong, and people get this advice, and act as if you have 10 offers, that you’re the hottest startup out there … If it’s true, and that’s your thing, and you like to go on a little heavy, do it. By all means, go in strong. If you have two term sheets on terms you like, you can be a little aggressive on the third. You can say, “I need an offer by Friday, by tomorrow, by this afternoon.”

Jason Lemkin: But I see too many founders sort of fake it. And maybe they’re nervous and maybe they haven’t done it before. Maybe they got bad advice on YouTube or on the internet. But don’t go in too strong. Be confident of what you have. Be confident about your future. Be confident about your financial model. Be confident about your pitch. But don’t put investors under excessive pressure to write a check, or they may just walk for that reason.

Jason Lemkin: By the same token, this is tricky. This is tricky. Don’t go in too weak. And what do I mean by too weak? Too weak doesn’t mean that if I don’t get money from you tomorrow, you’re out. What too weak means is too weak about your startup. And I’ll tell you the number one thing that I hear, that to me is always a huge flag, which is, I just need money to blank. I need money to hire a sales team. I need money to grow. The worst one is to grow faster. Like I’m not growing so great today, but if I had money, I’d hire a magical salesperson off the internet and I would grow faster. No. That makes you sound too weak. Winners always find a way to win. And the truth is, investors really want to put money into startups that don’t need it.

Jason Lemkin: Now, that rarely becomes true until the very late stage. But think about that idea. Think about presenting truthfully a message where you don’t need this money. You just want it to win even bigger. That should be your mantra. Not, I can only win if I have your money. Even if it’s true, it’s too wishy washy and too weak.

Jason Lemkin: Next point. And we alluded above, don’t ask for coffee to share notes. There’s some debate on the internet, and maybe it was even more a valid debate before COVID-19. But should you ask for advice when you want money, or ask for money when you want advice? I sort of understand that. I don’t know the exact answer, but I think the best thing is being direct. If you want money, tell an investor you want to raise money, you’re raising money, so they know. Folks, time is limited. Just let them know. Don’t ask for a coffee to share notes. Don’t ask in a one line email to catch up. Make that email amazing. Say I’m raising 100,00, 200,000, a million, 2 million, 10 million, a hundred million. And here’s exactly why. Here’s exactly why you should fund me. Don’t ask for coffee.

Jason Lemkin: People that are–that have winners in their portfolio, folks that are already managing 10, 15, 20 investments, they do not have time for coffee. And the folks that have time for coffee probably don’t have time to fund you. Not literally true. There are exceptions and there may be folks that want to help you in particular, but generally no one has time for coffee that has a checkbook.

Jason Lemkin: Next one is like too much information about founder relationships. It is great to hear that founders have a history together. It is great to hear that you worked at Airbnb together, or Salesforce together, or wherever together. But hearing that you went to elementary school together, how does that tell me you’re going to build a unicorn? It doesn’t.

Jason Lemkin: My point is making sure when you describe the connections to the founders, that you do it honestly, you’re truthful about it. But you do it in such a way that is compelling, that adds value to the investment. The fact that you two were the best engineers that knew each other at your last startup, or even in grad school, or heck, even in high school, I guess. That’s compelling. But don’t go too far back in time. I don’t really care that you guys played soccer together when you were kids. And it undermines some of the maturity in the investment.

Jason Lemkin: Next one, answer the questions. Answer the questions. I know a lot of folks like to say I’ll get there later in their presentation, or maybe even tell an investor they don’t quite understand the industry. Don’t do that. Don’t do that. VCs, investors are thoughtful why they ask the questions. You may think the question is stupid. It may even be stupid, but there’s a reason they ask it. Sometimes it is to hear themselves talk, but sometimes it’s that they just met with a startup that was kind of different. Maybe not competitive, not in the same space, but roughly different. And something stuck in their head from that meeting, and they want to hear what you think about it.

Jason Lemkin: My advice, and some will disagree, don’t say you’ll get to that later. Don’t say. Answer the VC’s question. Even if they want to jump around the deck, jump around the conversation, even if the conversation is not linear in the way you like, even if your pitch is interrupted, do it. If a VC wants to see a demo upfront, do the demo upfront. Don’t make her or him wait. People learn different ways. I’ve learned this from SaaStr. I’ve learned it from investing for SaaStr. Some folks learn from podcasts. Some folks learn from events. Some folks learn from blog posts. Some folks went from Quora answers or Twitter or tweets or LinkedIn posts. We have so many different types of media at SaaStr. And different people learn different ways. It’s true. Investors too. So when they interrupt, I know it can be annoying, but answer their questions because it’s probably the way they learn.

Jason Lemkin: Related to this, speak with data if it’s there. Know your data, know your metrics, know your churn rate, know your revenue growth rate. Know the average of your growth rate the last few months. Even if you’re pre-revenue, know your plan. Linda, Bob, Jay, Jane, what’s your revenue going to be at the end of this year? How many customers will you have? You have to know these numbers. You have to know your model, cold. It does not have to be perfect or perfectly accurate, but you need to speak with data when you can.

Jason Lemkin: Related to that, make sure you know the stories underneath the data. Okay, great, you have 14 customers. How did you find those 14 customers? How did you close that big customer? I don’t know. If you can’t those answers, it’s close to the kiss of death. So speak with data and know the stories behind that data, so you are the master of wherever your company is, one customer, 10 customers, a thousand. You should be the master of how you got there and what the underlying, both quantitative and qualitative, factors are.

Jason Lemkin: Next one, claiming things that aren’t quite true. And what I mean in particular, there’s a lot of things. Be scrupulously true. Speak positively. But most importantly, don’t claim things like pilots, don’t claim things like unpaid users, don’t claim things like free users are customers or revenue that aren’t. Claim they are what they are. If half your revenue is from pilots, then just say that. Say, “I have four customers that are paying, four that are paying, but pilots. They’re short pilots. And four unpaid pilots.” Okay, I get it. Four paying, four paid pilots, four unpaid pilots. But don’t say you have 12 customers.

Jason Lemkin: I got to tell you, most founders do this. And it does them a disservice. It instantly undermines your credibility. Because imagine the narrative. “Oh, you have 12 customers. Jay, that’s great. Okay, 12 customers. But how does that roll up into your revenue?” “Well, actually only eight are paying.” “Only eight of your … So are they customers?” “Only eight customers are paying. But four of them are pilots that don’t start till next month.” It doesn’t add up.

Jason Lemkin: Don’t exaggerate your revenue. It’s early. Just speak the truth, speak the truth about everything, but especially about your customer data. Be clear what a user is, what a pilot is, what an unpaid pilot is, a customer. A customer is someone that gives you real money right now for your product. And just be true about the rest of it. Again, you can stack it. I have this many customers, this many pilots, this many unpaid free users. That’s fine. They’re all good. They have different values. Customers count more than pilots and pilots count more than free trials, but they all have value. So just share it.

Jason Lemkin: And related to that, don’t hide anything. It’s the flip side. Don’t hide anything, whatever the bad news is in the fundraising. Maybe you can get away with hiding some of it, but most of it will come back to bite you. Most of it truly would. So whatever the bad news is, at least bring it up by the second meeting.

Jason Lemkin: Okay, last two of these 16 mistakes I hear. And this penultimate one, I hear it again and again. And I know it’s a sign of nervousness sometimes, and that’s okay. But oftentimes it’s a sign of not a great founder, which is not understanding the competitive landscape. You have to understand the competitive landscape. The best founders are thinking all the time about their market. The big competitors. If you compete with Zoom, then they know everything about Zoom. They know every single thing about Zoom. They also know everything about the new Zoom competitor that just launched on Product Hunt, that’s even smaller than them.

Jason Lemkin: They know their landscape cold. It’s not necessarily because they obsess about competition. Some of us obsess more, some of us obsess less. But they know that you learn from the competition. It’s one of the best ways we learn. Almost no software categories are new. We’re iterating on old categories. Zoom is not the first web conferencing. Salesforce is not the first CRM. Again, and again, and again, very few categories are new. So we have to learn from the competition. And the best founders know their competition cold.

Jason Lemkin: And related to that, they don’t belittle the competition. You should know what they’re good at. Be flattering for what they’re good at. And do it truthfully. Don’t make it a throw away line. Say, “You know what? Everything about Zoom is awesome. This is one of the most iconic cloud companies of our lifetimes. Having said that, Zoom’s focus is not on healthcare.” Okay, I don’t even know if that’s true. But if you just said that to me, that’s a great way to position yourself in the landscape. Zoom is great at everything, but they don’t focus on healthcare. Zoom is great on everything, but they don’t focus on thousand plus seat deals. Whatever it is, that makes sense. And that shows you know your landscape cold.

Jason Lemkin: And it also shows you’re respectful. I didn’t denigrate Zoom. I didn’t say their technology is terrible, the audio is awful. I didn’t mock them, and great founders never do it. Great founders respect the ones that came before them, even if they’re going to kill them in the marketplace. They know it’s not going to happen overnight. And they know that even if the technology is terrible, which it rarely is, customers may not care.

Jason Lemkin: Salesforce is over 20 years old. Salesforce launched in the late nineties. I mean, this is a 20 something year old piece of software. I meet with a lot of founders that poke at Salesforce as a piece of software. They don’t get it. Customers love Salesforce. Salesforce just closed its largest nine figure deal ever. That’s because customers love it. So the best founders are very respectful of the competition and they know it cold.

Jason Lemkin: And here’s my last tip. And it goes back to the first one about making that email perfect, about making the subject line perfect, about making the email body perfect, about making the deck perfect, about making it the best sales pitch possible. Assuming you’ve gotten anybody’s attention, here’s my final exercise. And it always works.

Jason Lemkin: When you put together a deck, an investor deck for potential investors, make sure the first slide sells the deal. Now, you could have a title slide. But I mean the second slide, the first substantive slide. Whether you need five bullet points or four, or maybe it’s too texty and you need 10, which of course we all hate, but assume that the whole deal, the whole value proposition can be subsumed into one slide. Of course it can. You are just an investment property at the end of the day. Summarize it. “Hi, our name is Goom, Doom, Vloom, whatever it is, the next Zoom. We have 21 customers. Our ACV is $1,100. We’re going to 18% a month. We have four co-founders. We’ve raised half a million dollars to date and we want to grow 400% this year. We spent $0 on marketing.”

Jason Lemkin: That’s pretty cool right there. Okay. That slide almost literally sells the company. Try it. You’re going to say you can’t do it, but if you spend an hour and then you put it aside and you come back the next day and you come back later, you’re going to find you can distill the entire reason to invest your company in that first slide. And then slides two through 20, two through 40, hopefully it’s not too long, they’re really just backup to explain those bullet points and why folks should involve. But sell it all in one slide. Force yourself to do it, not go for coffees. And you’re going to push yourself. Instead of being in the middle of that bell curve with a great startup, you’re going to be a great startup with a great pitch. That’s going to dramatically increase the odds that you get funded, even if it’s off a cold email.

 

The post SaaStr Podcast #344 with SaaStr Founder Jason Lemkin: “16 Tips To Increase The Odds You Get Funded” appeared first on SaaStr.

SaaStr Podcast #343 with Point Nine Capital Managing Partner Christoph Janz


This post is by Amelia Ibarra from SaaStr

Ep. 343: On today’s episode, Christoph shares his five tips for fundraising during a pandemic.  Christoph has invested in more than 20 SaaS startups and lives and breathes SaaS, everything from “A as in AI-enhanced B2B software” to “Z as in Zendesk”. Christoph co-founded Point Nine Capital in 2011. Before that, he co-founded two Internet startups (DealPilot.com in 1997 and Pageflakes in 2005). In 2008 he became an angel investor and discovered Zendesk, Clio, FreeAgent – and his love for SaaS.

 

This podcast is sponsored by Guru.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Christoph Janz

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This podcast is an excerpt from Christoph’s session at SaaStr Summit: The New New in Venture. You can see the full video here.

Below, we’ve shared the transcript of the episode.

Announcer: This is SaaStr’s Founder’s Favorite Series, where you can hear some of the best of the best from SaaStr speakers. This is where the cloud meets. Guru is the knowledge management solution that delivers the information you need when and where you need it. Guru lets your team capture information instantly, wherever it surfaces, Slack, Gmail, Salesforce, Microsoft Outlook and Teams, and more, without ever leaving their workflow. Visit getguru.com/SaaStr to get guru for free. Up today, Christoph Janz, managing partner at Point Nine Capital.

Christoph Janz: I’m Christoph Janz. I’m a partner at Point Nine Capital. I’ll talk about the topic of fundraising during a pandemic. And if you don’t know about Point Nine yet, just a short introduction. We’re an early stage venture capital firm focused primarily on B2B SaaS and B2B marketplaces. We’re based in Europe, but we invest, well, first of all, all over Europe and also in the U.S. and Canada and occasionally in other places. And we’ve been lucky enough to have been an early stage investor, amongst the first investors in company like Algolia, Contentful, Typeform, Loom, Zendesk and many others. You can see some of them here on the screen.

Christoph Janz: So what does it take to raise capital in SaaS? That’s a question that we’ve looked at in the past many times, actually you might have come across one of our SaaS funding napkins. There was a blog post that I wrote a couple of years ago where I try to answer that question, what it takes to raise capital in SaaS on the literal back of a napkin, and it kind of developed a life of its own. And so we produced some real, physical napkins, and we did that again in the next year and in the year thereafter. However, we have not yet created the pandemic version of that napkin. So like SaaS funding in a global pandemic is truly unprecedented, so we don’t have that napkin yet. But let’s try to approach that question.

Christoph Janz: But now let’s come to the actual topic that we wanted to focus on, which is fundraising. It’s not a great time to be fundraising. Let’s make no mistake about that. If you are not in this category of COVID-19 beneficiary, like video conferencing, telehealth, tele-education. For them, it’s easy to raise because they see such strong growth. But if you’re not in one of these categories, then it’s most likely going to be harder. And if you can increase your runway, decrease your burn, maybe do an internal round, that is certainly something to consider.

Christoph Janz: But on the other hand, nobody really knows how long this crisis will take, how long the recession will take, if it’s going to get worse before it gets better. And I think there are a lot of companies that have no choice but have to raise sometime within the next weeks or months or six to 12 months. And it’s primarily for them, where it’s primarily those companies that I had in mind when I tried to put a couple of tips together.

Christoph Janz: My first tip is that you should have a very clear COVID-19 assessment. And I think it’s something that you should address proactively as part of your pitch. There are a lot of questions that you need to answer. Have you seen, or did you expect an increase churn, both with respect to a logo churn and ARR churn? Are there changes to your conversion rates, is your lead generation impacted? What about pipeline development, sales cycles, pricing, payment terms, other changes in customer behavior or user behavior? So lots and lots of questions there, burn rates, your targets in 2020, how is your team doing? Has the work from home situation changed where you’re going to hire in the future and how you’re going to hire?

Christoph Janz: So there are a lot of questions. And now that we’re about two or three months into the crisis, people expect you to have some answers. Obviously there are still a lot of questions and it’s okay to admit that uncertainty, it’s okay to have multiple scenarios. I think nobody expects you to have all the answers and really nobody knows how the next 12 or 24 months are going to look like. But you should have done your homework by now. And you should be able to talk about the impact of the crisis on your company and what you’ve done to mitigate the negative impact, as well as to seize opportunities, if there are opportunities that have come out of this.

Christoph Janz: If COVID-19 has accelerated your growth, which it has in a couple of companies, And I mentioned some of the relevant categories here already, then that’s awesome. But not every SaaS company is in a position to benefit from this. Not everybody can, or must, be one of the companies that benefits from corona. So don’t try to make this up, just provide an honest and transparent assessment of how you are affected and what your actions are to address that.

Christoph Janz: My tip number two is that when you go out fundraising, you should start with an extra long long list, longer than usual. And there are primarily two reasons for that. Number one, or reason A, is you might have to. Many investors are cautious and busy with their portfolio, as I’m sure you’ve heard or read, or maybe found out in discussions. So the bar is just higher than it has been in normal times. And it’s also possible that firms will drop out of the process because they struggle to build conviction without meeting you in person, and that’s something I’ll try to address in some more detail in a minute. But you just have to expect that you will get more nos or more people that go silent or are just not excited for various reasons. And that is a good reason to start with a longer list and from the get go.

Christoph Janz: The good news is that you can. There is no thing, no coffee meetings, no dinners. The process is a lot more efficient which means you can start with a much bigger long list and run a process while you talk to a much larger number of investors in parallel. And I have a nice this quote here from Nimrod Priell, the founder and CEO of a company called Radical, which has very recently raised a round of financing, and Nimrod wrote a blog post in which he said, “The one advantage you have right now is that there are no face to face meetings, so there is no commute, wait at the lobby, order coffee overhead. I fit seven to eight pitches a day whilst spending seven hours with our two-year-old,” and so on. I thought this was really nice.

Christoph Janz: And we’ve also seen this in our own portfolio. Here’s a quote from a company, from a founder and of a company in our portfolio that has just closed a series A. It’s in German here, but I can give you the takeaway in English. And what he said was that the long list should be larger than normal as many investors drop out. Just because of the special circumstances currently, it took us two weeks less than planned to get to a term sheet. And without traveling, it’s much easier to talk to many investors in parallel. So he actually kind of enjoyed the process more than the normal process with a lot of meetings, travels, coffees, dinners. So there is a positive side to that as well.

Christoph Janz: Now, if you have a long, very long long list, then it’s very important that you disqualify ruthlessly. And that’s my point number three here. It’s usually either love at first sight or never love when you meet investors. Obviously there can be exceptions, but I think in most cases, either people get excited pretty quickly and then they do their work to confirm their assumptions, or they will just never get excited. I think if the initial excitement isn’t there, then you can probably spend your time on other leads. So make sure that you focus your really scarce time on the best leads.

Christoph Janz: And in that sense, it’s not that different from an enterprise sales process where you also want to create a large top of the funnel because that gives you then the opportunity to cherry pick the best leads rather than spending time with wrong leads that are unlikely to convert. And you’ll probably also, you probably don’t want to be the one who teaches an investor to do his or her first remote investment, just like you probably don’t want to be the SaaS company that teaches somebody in another company to buy software for the first time or to buy SaaS for the first time. So you’ll probably want to focus your resources on, in this case, investors where you think they, they won’t struggle with the process just because they cannot meet you in person.

Christoph Janz: And I have another very nice quote on that topic from another awesome Point Nine family founder, who a couple of weeks ago sent me a narrowed down list of what he said the prospects that he thought were still realistic to write a term sheet. And then he said, “My criteria for realistic is that they followed up with the right buyer questions a few days after sending data room and then scheduled a follow up call.” And I think this was really awesome. It’s very rare that I’ve seen kind of qualification of investors with that clarity.

Christoph Janz: I think the more natural and also understandable behavior for founders is to be optimistic, maybe overly optimistic, and to assume that everything went great because that’s also the signals that investors tend to send because they want to keep the options open. But I think it’s really smart to try to really read the interest from investors realistically, and then just not waste time with the wrong ones and focus on the right ones, or maybe even change your plans if you come to the conclusion that this round is just not happening right now.

Christoph Janz: Tip number four is that you should have a killer deck and killer due diligence materials. And this is actually something I’ve been talking about for a long time. But I think now that a larger part of the process is asynchronous, it’s even more important that all of the materials that you share are in perfect shape. So you should have a data room with all the important KPIs, and that should be ready before you have the first pitch because once you do, there won’t be time to put all of this together. And everything should be either obvious or self-explanatory, or there should be notes to minimize the backend false clarifications.

Christoph Janz: It’s also a good idea to create an FAQ or a similar document to preempt some of the due diligence questions which you will probably get from investors. And what we’ve also seen founders do, which I think is a great idea, is to provide a narrated version, like a Loom of your deck, in addition to sending over your deck. So just think about the fact that a much larger part of the process is now asynchronous, which means there are fewer opportunities for you to convince people in a meeting, to just wing it. The materials that you provide, kind of like the product, is even more important than it previously was.

Christoph Janz: And the last point I want to talk about is that you need to build trust and maybe learn to build trust remotely. It’s not a no brainer for investors to invest over the distance, they still have to adjust to that, and transparency builds trust. So consider inviting VCs that you’re in a process with to your chart module, to internal dashboards, share KPIs with them early on, be super responsive. That’s probably a no brainer. What we like a lot at Point Nine, and I’m assuming it might work with other investors as well, is to do working sessions. And that can be a remote white boarding session, but it can also be that you collaborate asynchronously over a couple of days, or maybe a week, in a document or in a presentation to figure out something like a go to market strategy or a hiring plan. And I think that actually gives both parties, both sides, a chance to get to know each other better and to kind of do a bit of a mutual try before you buy.

Christoph Janz: Then I’ve heard walk and talk meetings with this six feet apart or beers over Zoom to kind of socialize. I don’t know yet, I don’t know if that’s going to be a thing, but maybe if the lockdown continues, then maybe those are some of the things that people will do.

Christoph Janz: To conclude here, I have pasted a post from Martin Mignot, a partner at Index Ventures, which I thought was interesting. So what he asked here was, “How can you get a sense for a company’s culture without visiting their office and hanging out at the coffee machine?” And then he suggests to do a couple of things, like check their interview process, ask for their internal newsletter, ask for their employee engagement survey, join one of their team meetings as an observer. I think what this goes to show is that there is such a strong need from on the investors side to really get to know you, get to know some of your colleagues and build trust before you make this big decision to invest millions, or maybe tens of millions of dollars or euros into a company, and dedicate, commit a large, significant part of your time to it for many years. So try to put yourself also into the investor’s shoes and think about everything you can do to build trust.

Christoph Janz: If you’re currently not raising, but you’re planning to raise capital sometime within the next six to 12 months, it might be a good idea to start building some relationships now, or to warm up some existing relationships and maybe invite investors to follow you, to subscribe to your internal investor newsletter. I’m usually not a big fan of this. I think in normal times, it’s usually a waste of time to spend too much time with investors when you’re not fundraising because in normal times you can just focus on your business, and by the time you want to fundraise, you set up all the meetings and you do your pitch and you compress everything in a tight process. And I think that’s usually the best. That’s usually the advice that I like to give. But I think in the current times, this might be a bit different because the trust, developing trust, is so important and it’s different and more difficult right now. So now might be the time to invest some more of your time into building these relationships ahead of when you need them.

Christoph Janz: So just to wrap things up, again, there are five pieces of advice that I’d like to leave you with. Number one, have a clear COVID-19 assessment. Start with an extra long long list, disqualify it ruthlessly, have a killer deck and killer due diligence materials and build trust remotely.

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The post SaaStr Podcast #343 with Point Nine Capital Managing Partner Christoph Janz appeared first on SaaStr.

SaaStr Podcast #342 with Zapier CEO Wade Foster


This post is by Amelia Ibarra from SaaStr

Ep. 342: On this episode of the SaaStr podcast, our CEO, Jason Lemkin, chats with Zapier CEO, Wade Foster, on Distributed Teams and Building a Cloud Product. Zapier is a global remote company that allows end-users to integrate the web applications they use. Although Zapier is based in Sunnyvale, California, it employs a workforce of 250 employees located around the United States and in 23 other countries.

This interview was recorded in February 2020.

 

This podcast is sponsored by Guru.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Wade Foster

Below, we’ve shared the transcript of Jason’s interview with Wade.

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Announcer: Up today, Zapier CEO, Wade Foster.

Jason Lemkin: All right. You want to hit a few of the things that we wanted to chat about on this list?

Wade Foster: Sure, let’s do it.

Jason Lemkin: First of all, just because it’s fun… Well, actually, before we get there, does everyone get Zapier pronounced right? What are the odds that folks get it pronounced right?

Wade Foster: I think it probably is like 40/60 right to wrong.

Jason Lemkin: [inaudible 00:00:01:04]. Do you roll either way?

Wade Foster: I roll either way because… So here’s what I like to tell myself. This is how I sleep at night. It’s like a gif/jif thing. So there’s an internet controversy, people like a controversy and it creates word of mouth. That’s what I tell myself to sleep at night.

Jason Lemkin: Because I think the zap is a hard consonant and it’s hard to say it.

Wade Foster: Yeah.

Jason Lemkin: It’s hard to say, isn’t it?

Wade Foster: Yeah. But you want to zap stuff. That’s what you’re trying to do. You’re trying to zap things. I don’t know, so is Zapier. But when you can’t afford domain names in 2011 because they’re all taken, you get the one with one P because that’s what’s available.

Jason Lemkin: [inaudible]

Wade Foster: And it has API in the name so it’s kind of clever.

Jason Lemkin: I didn’t actually know that until the last time we met, that it had API in the name.

Wade Foster: Yeah. It turns out cleverness is not a great marketing strategy.

Jason Lemkin: Like the arrow in the FedEx logo that you don’t know until someone… And then you’re like, “Oh my God, there’s an arrow in there.”

Wade Foster: You can’t unsee it. Or the A to Z in Amazon, right?

Jason Lemkin: I guess if it was a little Z, big API, it wouldn’t have been hip, but you-

Wade Foster: So we did do that. The original logo has API in gray.

Jason Lemkin: I see.

Wade Foster: It’s not super hip, but whatever.

Jason Lemkin: All right. So for folks that don’t know the company, I don’t want to go back and talk about the early days when you went through Y Combinator, that’s all fun. I want to talk about forward looking stuff. But give us a rough sense, where are you at today? How big are you? You’ve talked a little bit about revenues, how many employees? What do you want to accomplish maybe by the end of the year?

Wade Foster: Sure. Zapier, 300 employees, global, fully distributed team. Well over 100,000 customers, last revenue number we talked about was early last year, 50 million ARR.

Jason Lemkin: So more than that today.

Wade Foster: Yeah, more than that today. What do we want to accomplish this year? I think a big part of this, we’ve got the company’s product, we want to do a better job of servicing these mid market users, make sure that we’re there for them. We want to do a much better job of making automation easier. I think there’s an opportunity for us to really make setting this stuff up super simple.

Wade Foster: It used to be engineers did all this work. It used to be that you had IT staff that did all this. Now with Zapier, anyone can do it. But it’s still a little nerdy, it’s still a little technical. And so I think there’s more we can do to abstract away parts of that so you’re run of the mill sales rep or your run of the mill recruiter or whoever can just sort of step in and be like, “Automation is part of my tool set. It’s how I do my job. It’s how I’m more effective at my work.” So there’s a whole bunch of design and simplification and product extensions that we have in mind to really make that first run experience really good.

Jason Lemkin: Essentially, when I think about folks that I work with that use Zapier, I would say, for example, tech focused marketers, folks that are next generation. They love the app, right?

Wade Foster: Yeah. They’re all in.

Jason Lemkin: They’re like, “I can’t connect my dated marketing automation app to my janky CRM to my website,” because we are all using hundreds of apps, right?

Wade Foster: Yeah.

Jason Lemkin: So forget about even a lay engineer, I think a technical marketer can use the product and love it, right?

Wade Foster: Yeah.

Jason Lemkin: But what’s the next frontier beyond that? I don’t know what the term is, but it’s like web savvy. You got to be web savvy, right?

Wade Foster: Yeah.

Jason Lemkin: Do you think someone that isn’t web savvy will be able to use the product as effectively as someone that is by the end of the year?

Wade Foster: I mean, I hope so. That’s the goal.

Jason Lemkin: What do you need to do that? We’re running out of time to talk about no code maybe and all this stuff, but that’s an element of getting beyond the web savvy, right?

Wade Foster: Yeah.

Jason Lemkin: Just getting to a level with web aware people. How can a web aware people use your application, right?

Wade Foster: Yeah. I think a big part of it is we get simpler, we get easier, so we find better entry points into the product that as you’re going about just using these tools, you’re prompted to set up zaps and there’s very little configuration to go on.

Wade Foster: I still remember my experience using Squarespace in the early days. When you had to configure the DNS settings and stuff like that, Squarespace has always been easy, but it used to be like you have the tutorial open on one side and then you were going through their setup flow in the other and you’re copying and pasting links into it. It was easy in the fact that it was straight forward, but there was just a lot you had to do.

Wade Foster: Now, when you go in to set up a Squarespace site, you buy the domain and then they have a little spinner and they’re like, “Ta-da. Your site’s ready for you.”

Jason Lemkin: That’s what you want. It integrates with Google domains, right?

Wade Foster: Totally.

Jason Lemkin: And we want that, right? Even I get a headache. I screw it up, I can’t remember what my C name is or my whatever it is and I want to just jump off the roof.

Wade Foster: Yeah. And it’s not that it’s hard, it’s just that there’s a lot of steps and you’re copying and pasting a bunch. That’s our job is to get rid of all that stuff where you don’t care about that. You just want it to work for you and the worst thing is [crosstalk 00:05:57].

Jason Lemkin: And what’s the single hardest part of that that you want to conquer this year? Do you have a sense of what [crosstalk 00:06:03]?

Wade Foster: Yeah, a big part of it is you’re mapping data from different services, one service to another and so how do you extract that stuff away? How do you just say-

Jason Lemkin: It’s always been wrong. It’s always, always the corner in the edge cases break, right?

Wade Foster: Yeah.

Jason Lemkin: Fields don’t match, there’s more than 256 characters in the wrong field, the data doesn’t flow the right way. How do you-

Wade Foster: Then you get an error message that a user looks at and they’re like, “What the heck is that?”

Jason Lemkin: You do this at scale.

Wade Foster: Yeah. So I mean, the big part of it is you just get a lot of data and you start to know and you can match on other users use cases and say, “Hey, you’re trying to do this stuff. We’re going to take those configurations and we’re going to make those default configurations for other folks,” so that out of the box it sort of works.

Jason Lemkin: Yep. And last one because I want to tie this into a question, but do you think… I used to hate this term persona, but I’ve evolved. I do think it summarizes a lot of things as organization… I used to hate alignment as a term, now I like it. But as you look to that future, is there different persona that will use the product?

Wade Foster: I definitely think so. Right now-

Jason Lemkin: Do you have a name for this person?

Wade Foster: We don’t have a name yet.

Jason Lemkin: [crosstalk 00:07:07].

Wade Foster: We’re going through all of our segmentation. Yeah. We’re doing all the segmentation work and things like that right now. But I think you hit it on the head where web savvy, tech forward, technology oriented companies love Zapier today. Now it’s about how do you get it in companies that maybe there’s a web savvy person in the company, but maybe the company isn’t tech forward. So how do you enable them to implement it inside their organizations?

Wade Foster: And then how do you go the next step further where it’s like, “I’m just an organization and technology is sort of being foisted upon me and I just got to catch up.” The Cloud is everywhere. Well, how do you make sure you get that sort of last wave of folks on board with it?

Wade Foster: As companies age and grow, you’re trying to get as far through that thing as you possibly can. That’s how you get as much market penetration as you want.

Jason Lemkin: This next question I have, it’s early in the year and you’re at a very interesting point because you’re trying to connect whatever we call them, we can call them… How many apps do you connect? A thousand apps? Five thousand? Five million?

Wade Foster: Yeah, We’re 1,600 right now.

Jason Lemkin: Okay. But there’s a lot of Clouds in those apps that you’re connecting. And you’re trying to do it in a much more effortless way than enterprise products. You’re forced to think about the future of the Cloud in a way different than the Davos sound bites. What do you see down the pipe that other folks don’t see because you’re in this intersection? What do you see happening, not this year, but in three to four years that maybe even could disrupt Zapier, right? That even could change the ecosystem. What are you worried about or excited about that maybe other people don’t see [inaudible 00:08:44]?

Wade Foster: I think there’s just an explosion in the number of tools that people use. We all use the big stuff, right? We all use Slack, we all use Zoom, we all use G Suite. We all use that stuff, but every org has a slice of tools that… You could probably tell me right now a half a dozen tools where I’d be like, “What is that? How does it work? I’m not sure how it is.”

Jason Lemkin: And I rely on them.

Wade Foster: Yeah, and you rely on it. And it’s probably a 10 million ARR business and it’s a really solid business. So I think there is going to be just a… It wouldn’t surprise me if the new sort of family business is a software shop, a SaaS business that does like 10 million in ARR, or a million in ARR, somewhere in between there and it’s pretty successful. Yeah, it’s not a venture scale business and no one ever talks about these types of businesses, but they’re everywhere right now.

Jason Lemkin: They are.

Wade Foster: If you group them all together, there’s pretty significant adoption across all those tools and they need them to work with all this other stuff that they have. I think we like to think of tech as, hey, the Faang companies and these big Saas companies and whatnot, but there’s a lot of tech that’s not that.

Jason Lemkin: Yeah. And what do you think at the other end of the spectrum of things like UiPath and Automation Anywhere that are… Or even Plaid from the other day? I know they sound like a bunch of apps, but they’re taking another approach. They’re bypassing APIs, they’re using next generation scraping, flat files and whatever it takes to make anything work. In some ways it’s opposite end of what you’re doing-

Wade Foster: It really is.

Jason Lemkin: In some ways you’re trying to solve similar problems though, aren’t you?

Wade Foster: Those are important problems to solve. I think they’re transitionary problems is how I would talk about them where they’re big business-

Jason Lemkin: In like 2040?

Wade Foster: I mean, perhaps, yeah. Enterprise moves slow, right? But I think we all know that APIs are a better way to consume data. This is the ideal state. Let’s use files as an example. Drive was into the market before Dropbox was. But Drive said, “It’s all about the Cloud, it’s all about docs and sheets and stuff like that.” They didn’t think about file formats and whatnot. Dropbox was like, “We’re just going to start by syncing your file formats. We’re going to deal with all this crufty, old school, desktop related stuff and do it really well.”

Wade Foster: And in some ways, that’s sort of transitionary. We are all now on the Cloud. Outside of photos and maybe videos, we don’t actually interact with files all that much anymore. So in some respects, Dropbox was focused on a transitionary thing, but they use that to build a billion dollar business out of it. Now they’ve got to figure out how do they exist in a world where most everything is Cloud? I suspect they’ll figure it out.

Wade Foster: But it’s the same thing, I think, with when you look at UiPath and Automation Anywhere, is they’re tackling this thing that is a massive problem, but all those things are somewhat fragile. Businesses don’t want it to operate like that for forever. So 2040, what’s the better way to do this stuff?

Jason Lemkin: Yeah. I want to throw out one thought that you kind of tease at and then I want to hit the next one on our list. But we launched this product called SaaStr University just a couple of days ago to take all of our 6,000 articles and blog posts and organize it for the next generation, and we already have almost 4,000 founders on it. It’s pretty cool.

Jason Lemkin: I didn’t have time. Over the holidays I had extra time and I picked a platform called Mighty Networks. It’s very limited and it’s very slick because it’s like a social network with learning attached and it only has three integrations in it. It has Google Analytics, it has something I forget, and it has Zapier to solve all the things that it doesn’t integrate with. Now that’s profound if you think about it. There’s a bunch of things to think about. That’s a brand that you have, it’s a product. And you know that I’ve gotten passionate about that. Once you have a brand and you’re past that point, how are you thinking about leaning in so that everyone will build… There’s only three products and you probably never even heard of it until I brought it up. You’re the only one of the three and they’re not going to probably put the effort in… Whoever your number two competitor is, I don’t know who it is. They’re not going to do the effort.

Wade Foster: Not for Mighty Networks.

Jason Lemkin: They’re not going to do it, right?

Wade Foster: Mm-hmm (affirmative).

Jason Lemkin: Because they got too much stuff else to do, right?

Wade Foster: Yeah.

Jason Lemkin: We already used it to hook up to Marketo and some other things. Are you leaning in on that as you’re kind of thinking about [inaudible 00:13:16] beyond revenue, what are you doing to build on that and not break that relationship and build on your brand?

Wade Foster: Yeah. I mean, at the end of the day, for us, we’re about connecting the tools you use. And so the tools you use are so critical for us where we are going to make sure that we have every app on the platform, period. Everything is going to be supported by Zapier and the stuff that everyone uses is going to be supported super well. We’re going to make sure that the G Suites, the Slacks, the stuff everyone uses is going to be really good. Really, really good.

Jason Lemkin: You’ll do that no matter what it takes.

Wade Foster: We’ll do that no matter what it takes.

Jason Lemkin: You got to have a Slack team internally, don’t you? To make sure that that-

Wade Foster: Yeah. I mean, we have people dedicated to the top in apps on the platform.

Jason Lemkin: Do you get early access to their platform changes and know ahead of time?

Wade Foster: Oh, yeah. We work with them to… And in fact, oftentimes we try and build stuff together for that stuff. So we’re the guinea pigs on new, weird things.

Jason Lemkin: With those ones you’ve got deep relationships, right?

Wade Foster: Yeah.

Jason Lemkin: You’re given access to their staging servers and preview releases and all that sort of stuff.

Wade Foster: Yeah. And then for the long tail of folks, you’re trying to provide tooling, you’re trying to export the things you’re learning with your top in apps and make it really easy for them to self serve, to build similar type experiences to what you’re trying to do on this more experimental big side of things.

Jason Lemkin: But Mighty Networks, you’re not making any money off them directly, right? Maybe you are, maybe, but it’s small, right? What are you doing to empower that long tail in 2020?

Wade Foster: Yeah, you just give them tools. You give them the things so they can solve the problems themselves. These orgs, they need it. Their customers are begging for integrations. And so Zapier is the easiest thing they can do to be able to say-

Jason Lemkin: That’s why it’s one of the three. It’s the easiest thing they can do, right?

Wade Foster: Yeah, it literally is the easiest, fastest thing they can do. And so our job is, if it’s not the easiest, fastest thing that we can do, we’re in trouble. So we need to continue to be the easiest, fastest thing they can do to say yes to all these customer feature requests.

Jason Lemkin: There’s just one thing I want to go back in time on because when we were at the Inbound Conference we chatted about it, which was the early days when you had to build the integrations yourself versus crossed over, right? It never fully changes because you’re working with your top customers team. So you’re still building these [crosstalk 00:15:30].

Wade Foster: Yeah, we still build stuff ourselves.

Jason Lemkin: Maybe power dynamics is the wrong term, but when did the relationships change? How should you be aware of it? I see a lot of folks that… Especially folks that have good but not great engineering teams, they want the partners to do all the work.

Wade Foster: Yeah.

Jason Lemkin: It’s hard enough just to build an API. If you have no experience, it’s not easy. It’s not easy to build an API and you have four engineers and some pretty good but not great engineer needs six months to build your API. And then Slack comes in and Slack’s not going to build it.

Wade Foster: No.

Jason Lemkin: So what did you learn and when is it appropriate to ask the partner to do the work instead of you if you want to have a positive ecosystem?

Wade Foster: I think there’s sort of two things. You have to have something that people want at the end of the day. You’re not going to be a platform if people don’t want it. Typically, that means you got a lot of users because that’s what most of us are trying to do. We’re trying to tap into a user base that we feel like [crosstalk 00:16:27]-

Jason Lemkin: You want to pick a top three platforms and build on them, right?

Wade Foster: Yeah. We’re going to build on Slack because everyone uses Slack and so we’ll get all their users. That’s the dream. It doesn’t really play out like that, but that’s the dream.

Wade Foster: There has to be some other reasons. It’s not for access to your customers. What is it that you’re providing them that they’re willing to say, “You know what? We’re going to do a thing that isn’t going to impact our entire customer base.” I remember the moment–we were having this debate very early on, I remember the moment it flipped a switch in our head was when Aaron from Box, he sends us an email at like 2:00 AM on a Saturday and was like, “Why isn’t Box on Zapier?” And the answer was, “Well, we’re three people just going as fast as we can. Of course Box should be on Zapier, we’re just not there yet.”

Wade Foster: But that got us thinking. He sent us an email in the middle of the night, maybe he would put an engineer on it. If he cares enough to do that, maybe he would do that. And so we just emailed him and said, “Hey, would you put an engineer on this if we had a way for you to do it?” And he was like, “Sure.” And so we were like, “Okay.” That’s enough of a signal for us that if we make the tooling good enough, maybe they would go do it.

Wade Foster: I think a lot of us have this dream that’s like everyone’s going to build on us, but basically no evidence that someone would do such a thing. So for me, it’s like you got to have some evidence that someone’s willing to go do that before you go stake the future of your company on this platform vision.

Jason Lemkin: Yep. And Aaron Levie’s story is a good one. And sometimes what happens, too, is you think everyone’s going to build on your API and no one does. But often what happens in the early days is there’s one or two high affinity partners. Sometimes they’re another little company in YC, sometimes they’re a big company. They may not even be huge. They may be one of your 10 million mom and mom companies, but you solve a big arse problem for them so they bring you into every deal overnight. I’ve had a few. Did you have any experience like that where someone needed you?

Wade Foster: We’ve definitely seen it over the years, where Zapier is basically if you don’t use Zapier alongside the tool, the tool itself kind of doesn’t do enough.

Jason Lemkin: Do they literally package you up with their product and pull you into deals?

Wade Foster: They start, yeah, basically. They’re like, “You should just use Zapier.” A company like Clearbit, take that for example. It’s a dev tool. However, a lot of their companies aren’t devs.

Jason Lemkin: Clearbit’s super interesting. It’s a dev tool and a lot of marketers and others want to use it.

Wade Foster: Yeah. And it’s like, okay, if you want to use it but you’re not a dev, how do you do that?

Jason Lemkin: Yes.

Wade Foster: Zapier.

Jason Lemkin: That’s how our marketing team uses it. Exactly. Even though you’re both dev tools in a sense, are you aligned from a go to market perspective? Is it totally incidental? Do you guys know each other? Do you work together?

Wade Foster: We know each other. It’s mostly incidental. We’re not aligned, we don’t have co-selling agreements or anything like that.

Jason Lemkin: Do you have a BD team or a partner team that helps facilitate this stuff?

Wade Foster: Yeah, we do. [crosstalk 00:19:24].

Jason Lemkin: What’s their KPI? Or do they have a goal for 2020 or a job?

Wade Foster: Yeah, there’s different teams. So we have teams focused on our biggest apps and so that’s a different goal versus teams that are focused on the programs that you put in place of help for the thousand apps and whatnot like that.

Jason Lemkin: Cool. All right. For a couple minutes, before we run out of time, I want to talk about distributed teams, which is your super passion. But I want to dig in on a few topics that maybe you talk about it a little bit less that we’ve chatted about. The first one is just advice. I mean, first of all, I need your advice. I’m struggling to learn how to do this and you could give me personal advice, which I will be grateful for. But the meta point is, I know your point which is great, which is good counsel, which is go all in early, right?

Wade Foster: Yeah.

Jason Lemkin: The Zapier story is you have the co-founders, your co-founder goes through YCS to go back to the Midwest and you decided you better learn how to do it because you have no choice. It’s a great story. But a lot of us don’t start that way. I invested in another YC company that I love that’s a rocket ship and they’re 10 dudes, all guys, which is bad in 2020, all working in one room that have coded together for years. And then they just broke it all up and said, “We’re going 100% distributed.”

Jason Lemkin: That’s such a big culture change from [inaudible 00:20:43] to… What’s your advice if you don’t start there? What’s your advice to folks you’ve met that are at [crosstalk 00:20:50] a hundred and it’s not that I want to have a remote, an extra office, because that’s not the same.

Wade Foster: No, it’s not.

Jason Lemkin: It’s not even remotely the same, is it?

Wade Foster: So I’ve given this advice to a few folks and a few folks have followed up on it and it seems to work. If you follow it through, it seems to work. Now, like anything, you have to commit to it, which is, take, let’s call it two weeks. I think two weeks is long enough, but you might need to do longer. It’s enough time where you basically have to deal with it where you can’t say, “I’m going to go back to the office,” For two weeks no one can come to the office. Doors are locked, you can’t show up. It has to be long enough where your default response is not like, “Well, when we’re in the office again, let’s make sure to discuss this.” Or, “When we’re in the office again, let’s make sure to figure this out.” So it has to be long enough.

Wade Foster: It doesn’t have to be the whole company, but just take a team first. So if you have a small team, that team, lock the doors on them, everyone’s from home, even the boss. You have to just do it and figure out, we have a core problem to deal with and we just don’t have any of the tooling, any of the documentation, any of the infrastructure set up to deal with it. And so you’ll just start realizing, okay, we got to start putting in a little bit of a process for this, a little bit of a discipline around this type of thing.

Wade Foster: Then even if you decide, “Hey, we’re not going to be fully remote. We’re actually going to go back into the office,” just the exercise of having done that will make you a better run company. You still decide to run out of an office, you’ll get to bring some good habits from that exercise.

Jason Lemkin: I love that idea. I’m going to think about that. Based on those learnings and your own, what about folks who they really enjoy being in the office if you have an office? It’s their time away, it’s their third place and they don’t want to work, I mean, I’m looking at you on Zoom in your home office, which I’ve seen on a few videos. But not everyone has a home office. Maybe there’s four of us in an apartment in San Francisco and we don’t even want to go to WeWork, right?

Wade Foster: Yeah.

Jason Lemkin: Maybe that’s the answer. But what do you do for folks that it’s not just collaborating, they literally want a third place.

Wade Foster: Yeah.

Jason Lemkin: Because you’ve got 500 employees, right?

Wade Foster: Yeah.

Jason Lemkin: So you have to have thought about this.

Wade Foster: Yeah. We’ve got 300. So we are at a point now where… So first thing, there’s a certain amount of this where if your social life comes from the office, if that’s how you get your connection to your community, a fully distributed team, it might just be tough for you. It just could be a thing of like, “Hey, you should opt out of that.” That said, some of these companies are getting big enough that we’re starting to solve some of these problems too.

Wade Foster: At Zapier, certain cities have a pretty high number of employees. I think Portland has like 25 people for us. And there’s a whole social scene around work for folks in Portland, where we don’t have an office for them, but a person on that team schedules coffee shop meet ups and happy hours and come over to our family’s house for dinner on a Friday night events for the team. Where you start to build camaraderie and a real sense of community around the people you work with.

Wade Foster: And so I think you try and just find little nuggets like that, where you can provide some of that. It’s never going to be the same thing as showing up in an office 40 hours a week. But I don’t know that you need that. I don’t know that everyone wants the full thing, they just want a little bit. They don’t want to feel like they’re on an island by themselves.

Jason Lemkin: Yeah. All right, man. Well, this was great. Thanks for being part of the SaaStr community. I think you were at SaaStr like 2016 or 2017 or something.

Wade Foster: Yeah. It was a long time. If I remember it was like sub-1000 people was the first one I was at or something like that.

Jason Lemkin: Yeah. You’re coming back this year which is great. You’ve done the podcast before. So thanks for everything and thanks for teaching us. I mean, I know doing this kind of stuff is good, but I think really we are learning about distributed teams and no code from you in a big way and I’m personally learning. So thanks for everything that you do.

Wade Foster: Yeah. I appreciate it and thanks to you, as well. I think we’re all learning from the SaaStr community together.

Jason Lemkin: The Cloud keeps evolving, we’re all learning, right?

Wade Foster: Yep. That is the truth.

Jason Lemkin: All right, man. I’ll see you in San Jose and we’ll chat in a little bit.

Wade Foster: Awesome. Thanks, Jason.

Announcer: Say goodbye to slip ups. Old news is a thing of the past. With Guru’s verification tool, you’ll always be confident that your team’s knowledge is up to date and accurate because it’s verified by your in house experts. SaaStr listeners can get Guru for free today by visiting GetGuru.com/SaaStr.

 

The post SaaStr Podcast #342 with Zapier CEO Wade Foster appeared first on SaaStr.

SaaStr Podcasts for the Week with CMX Media and Salesforce — May 22, 2020


This post is by Deborah Findling from SaaStr

 

 

 

 

 

 

Ep. 335: David Spinks is the Founder @ CMX, the premier network for community professionals. In 2019, CMX was acquired by Bevy, where David now serves as the VP of Community. Bevy is a customer-to-customer community management platform, building products that brands use to build, grow and manage their community event programs, both virtual and IRL for companies like Slack, Twitch, Salesforce, Atlassian, and Duolingo. Prior to CMX, David founded 2 prior startups centred around different forms of community building and before that was Community Manager in the early days of LeWeb the largest tech/startup conference in Europe.

Pssst 🗣 Loving our podcast content? Listen to the start of the episode for a promo code to our upcoming events!

In Today’s Episode We Discuss:

* How David made his way into the world of SaaS and came to found CMX. Why David believes that community is so central for all SaaS companies today?
* How does David advise teams on expectation setting around virtual events? How ambitious should they be? What big mistakes does David often see in the early days of the planning? How does this differ if you have an existing cohort of users vs are starting new with no audience?
* How dependent is the success of the community on the platform it is hosted on? What is the ideal size for Slack, Telegram and Whatsapp communities? Should the host seed the discussion or allow it to be natural? How important is it to establish a handbook of expected actions and behaviors? Should you cull members who are inactive?
* What does David believe separates good from great when it comes to discussion groups? What innovative strategies has David seen work when it comes to bringing a virtual event to life? What is the right amount of people in that discussion group? What is the core role of the moderator for the group?

 

Ep. 336: Leveraging survey data from 66+ enterprise SaaS companies, Matt Garratt, Managing Partner of Salesforce Ventures, shares the landscape of how businesses are shifting their sales & GTM strategies to react to today’s uncertain times. Adnan Chaudhry, SVP of Sales at Salesforce, then provides actionable takeaways on how to refocus your sales teams, engage with customers, adjust your sales comp and how you can properly forecast in today’s new landscape.

 

This podcast is sponsored by Guru.

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This podcast is an excerpt from Matt and Adnan’s session at SaaStr Summit. You can see the full video here.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
David Spinks
Matt Garratt
Adnan Chaudhry

Below, we’ve shared the transcript of Harry’s interview with David.

Harry Stebbings: Welcome back to the official SaaStr podcast with me, Harry Stebbings, and you can suggest both questions and guests for future shows on Instagram @Hstebbings1996, with two Bs. And I always love to see you there. But to our episode today. And there’s one question every SaaS company is asking themselves right now, “How the hell do I do virtual events, and what makes the best so good?” Well, diving into this today, I’m thrilled to welcome David Spinks, founder of CMX Media, the premier network for community professionals. In 2019, CMX was acquired by Bevy, where David now serves as the VP of Community. Bevy is the leading provider of in-person community software, powering community programs and incredible companies like Slack, Twitch, Salesforce, Atlassian, and more. And prior to CMX, David founded two other startups centered around different forms of community building, and before that was community manager in the early days of LeWeb, the largest tech startup conference in Europe.

Harry Stebbings: But enough from me, so now I’m very excited to dive into this extravaganza on what makes the best virtual events, with David Spinks, founder of CMX Media.

Harry Stebbings: David, it is so great to have you on the show today. And what you probably don’t know is I’ve been an admirer of yours from afar, mostly on Twitter, for a while. So thank you so much for joining me today, David.

David Spinks: Honored to be here.

Harry Stebbings: I would love to start, though, with some context. So tell me, how did you make your way into the wonderful world of startups, SaaS, and how did you come to found CMX?

David Spinks: Yeah, it’s a long story, but to make it as brief as possible, I’ve been building communities online since I was a kid. Started in middle school, around video games, Tony Hawk’s Pro Skater 4 was my game of choice, built a big online forum around that, and just became pretty fascinated by how technology could connect people and create community. And so I did that, I was just active on every online community platform I could. Eventually that became my career and I became community manager, joined a startup in Philly called Scribnia, at the time. And we were in an accelerator program for three months, and halfway through that accelerator program, we pivoted and started SeatGeek, which, everyone will know SeatGeek, and no-one will know Scribnia. And we kicked that off and that was my first entry into tech. And I ended up running that first company, Scribnia. I was the managing director and ran that company. And that just got me in the door and that led to more and more opportunities to work with different tech companies.

David Spinks: I ran community at a company called Zaarly for about a year, I ran community for LeWeb, which you may know was one of the biggest tech conferences in Europe for many years.

Harry Stebbings: Sure. Absolutely. Loic.

David Spinks: With Loic Le Meur. Yep. And helped Udemy kick off their first community program, and also started companies. So I started a company called Feast, which was delivering ingredients to your home, and you get this home cooking experience with videos that teach you how to cook.

David Spinks: And ultimately kicked off CMX six years ago, because throughout my career, starting companies and building community for companies, ironically, there was no community for community professionals. And so I would do everything I can to find other people who are doing this work and just get to meet up with them, ask them questions. I co-founded thecommunitymanager.com with a couple of friends, about eight or nine years ago as a place to just start writing about this stuff.

David Spinks: And eventually led to starting CMX Summit six years ago, which is our conference, as just a place to bring everyone together who’s doing this work, building community for companies. And so that grew, we bootstrapped it for five years. Last year, at the start of last year, we were acquired by a company called Bevy, which powers event programs, event communities for companies. And that’s how I’m here.

Harry Stebbings: And the rest is history. Speaking of communities today, every company in the world is thinking, “Shit, how do I move from physical to virtual events?” I want to dive into that because I think many are foundering and a lot of scratching their heads, doing it for the first time. So you’ve had a starting point, and expectations set slightly when thinking about the transition to virtual events. So when you think about maybe expectation setting for these companies, how do you advise companies to approach just how ambitious they should be when it comes to that first virtual event?

David Spinks: Yeah. It’s funny because I’ve been banging this drum of community for more than 10 years now, and all it took was a global pandemic, and all of a sudden everyone’s like, “Wait, this is important.” I’m like, “Yeah, I know.” And so there’s companies that have been doing this for a while, but even the ones who have been doing it for a while were probably still reliant on in-person events, and they’re trying to pivot. And then you have companies who weren’t really doing much in terms of community, or weren’t doing anything online and they’re kicking it off for the first time. If this is your first time doing that, I think just getting started’s really important.

David Spinks: It’s easy to overwhelm yourself and try to do too much, and launch a massive forum, and throw a huge virtual conference. But you can start in very simple ways with just simple discussion calls, kick off a Zoom call with your 10 top customers. People are craving community right now, they can’t connect with each other in person. And so they’re looking for any opportunity to connect with each other, and they’re all dealing with this epidemic. It’s affecting everyone, and so everyone has a lot of shared challenges and lot of things they want to ask each other right now. And so just start creating those spaces for them to come together, and a lot will start to happen organically.

Harry Stebbings: Can I ask, when you create these spaces for them to come together, and sorry, this is off schedule, but I’m intrigued, do you seed the discussion threads themselves, or do you let the discussions flourish naturally within the participants?

David Spinks: Ideally, it’s all happening organically, and you’re just sitting back and nudging the direction or facilitating. More realistically, you’re going to launch an online space and you’re going to have this vision of everyone showing up, and participating, and engaging. And then it’s just going to be crickets. There’s so many spaces for people to engage today, that to create a new space, you really have to put in the work and facilitate. And so in those early days, I think you really want to be creating a lot of the content yourself, be putting out discussions, be putting out conversations that you think would be interesting, and then don’t even wait for people to respond. As soon as you post it, message five people that you know, and already have a relationship with and say, “Hey, I just posted this question. I’d love to get a conversation going. Do you have a minute today to jump in and post a response?”

David Spinks: And so you’re manufacturing the example that you want others to see. So when someone new joins a group, now they see activity, they see people engaging, they see thoughtful responses in there. And now, that sets an example for them to be thoughtful in their responses and start posting. And it just puts out the message that this is an exciting place to be. It’s the same reason that a bar might only let some people in at a time, in order to create a long line, so it looks like it’s in high demand. Same kind of thing for communities, if people show up and it just looks empty and it looks dead, that’s not going to feel like an exciting place to participate, but if you start to create that experience of engagement and excitement in the community, then when people join, they’ll feel drawn into that group.

Harry Stebbings: So, as I said there, we write these schedules and then we just go completely off script, but I much prefer it that way. In terms of the platforms, I’m really intrigued. How dependent is the success on the platform choice that you make? Because you could do anything from a WhatsApp group to a Telegram group, to a Slack channel, to any of the collaboration tools that we have today. How dependent is success upon the platform choice?

David Spinks: Yeah, it’s a big question. If you already have an engaged audience, and a lot of people who are trusting the brand, aware of the brand, engaged with you, it’s going to be easier to launch your own owned platform. Maybe you kick off a Discourse forum, or you use one of the enterprise platforms, and you bring people to your site and your community, because they’re already engaged, because you already have an audience, that’s going to be easier.

David Spinks: If you’re starting from scratch and people still don’t know who you are, and they’re not fully engaged with your brand, and your team, and your product yet, maybe you don’t have a lot of users yet, it’s going to be really hard to get people to participate in a new space as well. You’re just creating a new habit, and people are so used to going to big social to interact now, that it’s hard to get people’s attention. And so in that case, it might be better to go to where they are already, which might be a Facebook group, Slack is really popular because people are already in there, Discord is really big for gaming, and use that to build the community. And then, once you have that engagement, once you have an engaged community, the community is the people, it’s not the product. And so once you have the people engaged, then it becomes easier to move them to different spaces that maybe they otherwise wouldn’t have.

Harry Stebbings: Totally get you. Can I ask, in terms of those groups and communities that you build in those initial days, how do you think about optimal size? Because you want enough where there’s enough discussion and enough content going around, to where it feels like the velocity of thought is high, but you also don’t want too much where there’s apathy and too much noise. How do you think about the optimal size in those early days?

David Spinks: Smaller is often better, right? A good quality group of 10 people is going to be much more valuable to someone than a hundred people that weren’t as curated, and in an experience that isn’t as intimate. And everyone knows that, like you go to a dinner with 10 really awesome people, this is the best experience, right? Everyone loves that kind of experience.

Harry Stebbings: Totally.

David Spinks: But then you go to the meetup with a hundred people just casually drinking, and it was open to anyone, that’s not nearly as valuable. It’s not as facilitated. You don’t get to talk to people as deeply. It doesn’t feel as curated. And so in general, I think smaller is better to start, and then you want to grow it incrementally. So if you’re looking at an online group, maybe ten’s a little small, unless you’re in a WhatsApp group, or a chat space that works with a small group, but let’s say you did a Slack or a Facebook group. You’re going to want more people than that, I would say maybe 50 or a hundred’s a good starting point.

David Spinks: And then you want to grow it gradually. So you don’t want to overwhelm it, right. Going back, I keep using bar examples, I don’t know why. It’s on my mind, I guess, I haven’t been to a bar in months, but you ever go to a bar, and you’re with friends, and it’s not that crowded and you’re having a great time, and you can hear each other and you have space to move, and you can get a drink quickly, and then rush hour hits. And all of a sudden it’s packed with like 500 people, and you can’t get to the bar and you can’t hear each other, and you don’t have space, and it no longer feels like it’s there for you? That’s what it feels like when someone kicks off an online community and they have a hundred people in it, and then they invite 500 people into the group. It just completely overwhelms the community dynamic that you had in there.

David Spinks: And so maybe a good rule of thumb is to keep it to like 50% growth each week, or each month, or even 25%. So if you have a hundred, then add 25 more each week, and then you can welcome those people properly. Everyone who’s in the group can contribute to welcoming them properly. And you create more of what feels like an organic growth, rather than a manufactured growth.

Harry Stebbings: Can I ask a tough one? Do you cull people who don’t engage or who don’t consistently show themselves to be a meaningful part of the community?

David Spinks: Usually, no. It depends on the format. Let’s say you did bring together 10 people in a discussion group, and it’s noticeable that someone is not participating, that they’re not showing up, that they’re not engaging. Then I might call that. And I might say to that person, “Hey, it seems like maybe this isn’t the best fit for you, so totally cool. But we want to make sure that we keep this group really focused. And so we’re going to keep rotating members out based on engagement.” You might be able to do that in that small group, just to keep it really high quality. In a larger group, it doesn’t matter. You actually want to have people, even if they’re passively engaging in these large groups, because that becomes an audience for those people who are creating, that makes them want to create.

David Spinks: So there’s the 90-9-1 rule is this old study on large online communities, and it basically said that 90% of people will passively consume in a community, 9% will be responding and engaging, and 1% will be creating. And so realistically, every community is going to have a very small percentage of people who are actively creating and contributing, and then a much larger percentage who are passively consuming. And then there are people who just go completely inactive. And at the end of the day, unless you’re paying per user, or some meaningful metric to you, you can just let those people do what they do. And you can also run campaigns to try to reengage them. So everyone plays a role in the community at all different levels of activity.

Harry Stebbings: Can I ask, we mentioned the different levels of activity and we mentioned some different behaviors there, in terms of very active, responsive, and then creating. In terms of guide books, or guidelines, when initiating people into the group, how important is it to have almost a guide book, a set of rules? “This is how the community operates.” How important is that, versus letting it be much more free flowing?

David Spinks: It’s absolutely critical. There are communities out there that prefer to just be completely free flowing. I think we’ve seen that historically devolves into some pretty bad behavior. And I think it’s really important that you have a lot of intention in any community space that you create. And so there’s a concept called setting the container. And I think that applies to anything from a small discussion group, where you’re trying to essentially explain, “Here’s how to participate in a quality way, and here are the rules that will make sure everyone feels safe and comfortable participating here,” right? So it’s not just rules, it’s not just what not to do. It’s also being explicit about, “Here’s how to contribute in a great way. Here’s the kind of behavior we encourage in this group.” That’s going to guide people to know how to participate in a quality way, that they may not have realized, or may not have been comfortable doing that before.

David Spinks: And so it’s really important to have that. That said, you should always be open to evolving and changing and learning from your community members. And so maybe someone one day recommends a different kind of guideline, or they do something within the boundaries that you’ve set, and you realize, wow, that was a great way of approaching this problem. Let’s turn that into an official guideline or rule. So you can constantly adapt and evolve your guidelines, but you always want to be intentional about how you want people to participate, and how you don’t want them to participate in the community.

Harry Stebbings: We’ve spoken quite a lot about discussion groups there, and I think a lot of companies in particular, are scratching their heads in terms of how to really encourage engagement within the community. I’d love to hear your thoughts, having seen so many different kinds of viral and vibrant communities, in terms of really, what cool methods of engagement have you seen really work well in virtual events?

David Spinks: Yeah, so the world of virtual events is evolving rapidly right now. And I honestly think everyone was sleeping on the value of virtual events before, and now that they don’t have a choice, everyone’s getting a crash course in it. The default has been the Zoom call. The Zoom webinar, the traditional webinar. Have a speaker, everyone watches that speaker. There’s a chat feed where they can respond, or ask questions, or talk to each other. And maybe there’s a Q and A at the end. It’s pretty one way, right? It’s one person broadcasting to a lot of people.

David Spinks: That’s not really going to be a virtual event in the same way that a physical event, you have the opportunity to meet people, to turn to your neighbor and talk, to network. And so the really great virtual events are incorporating more opportunities for those attendees to engage, to participate, to network with each other. And so, events that do this really well have a combination of different formats. They do have speakers that are presenting and educating, and then they have speed networking, so icebreaker.video is a really great tool for this, or if you use Hopin. A lot of these tools have speed networking built into it, where each attendee gets randomly matched up with another attendee. Icebreaker does a good job of giving discussion prompts for them as well. And you can choose the time that it rotates out. So you can do three minute talks, or five minutes talks, or seven minutes, and then it fades out then at seven minutes, and you get matched up with someone else. So our community loves that, that’s been really effective.

David Spinks: And then just a small discussion group. When you have a speaker broadcasting to everyone, no-one else is getting to meet each other or discuss the content. And so using breakout rooms, using smaller group discussions, is a really awesome way to make it feel more like a real event where they’re getting to meet people. They get to participate in the discussion, they get to bring their questions and hear from others. And so that’s a really valuable way of making your virtual event more engaging.

David Spinks: And you can combine these things, right? So we do, CMX Connect is our global event program that’s run by members of our community. We have over 60 chapters around the world. And for all of the events that we do, we combine all these different elements into one event. And so we might have 30 minutes of speed networking to start, and then we’ll have a speaker talk on a topic, like measuring your community, or running virtual events. And then we’ll break out into discussion groups, so that people can discuss that topic amongst themselves, and share their own challenges and their own lessons. And we might mix up that order, and mix and match different formats, but you can think it as modular like that, you have these different event modules, and you can combine them to make a more holistic experience for your community members.

Harry Stebbings: I’m really pleased you mentioned Hopin there, it’s one of our favorite platforms. So, really pleased to hear that. And you also mentioned discussion groups, and I’ve heard you say before that one of the key rules is, it’s under 10 and over 30. Explain this ratio and rationale to me here, David.

David Spinks: So it’s just a way of remembering how to make a discussion group really valuable. And it’s not a hard and fast rule, but more of a guideline. So under 10 means less than 10 people. We’ve all been in discussion groups with 15 people or 20 people, and there’s just no way that everyone gets an opportunity to have their voice heard, not everyone’s going to get to participate in the discussion. If you try to involve everyone, you just don’t get to go very deep. And so I think ideally discussion groups are generally six to eight people. I think 10 is about the most you want to have, so shoot to have less than 10 people per group.

David Spinks: And then over 30. So this depends, but generally, especially if the entire event is a discussion group, 30 minutes is just not going to be enough time. You want to have enough time for people to introduce themselves, for you to kick off the conversation, and then really give people opportunity to bring their challenges, bring their voice, be able to respond to each other, be able to get into conversation. And just so many discussion groups, especially virtual ones, which just take a little bit more time to really facilitate and engage, they get cut off at 30 minutes, and that’s when the conversation usually starts getting good. And so, just making sure that you have ample time for people to have that discussion, and you keep the group small enough that it can be a meaningful discussion.

Harry Stebbings: Totally with you there in terms of giving it ample time. You mentioned the facilitation, there. I’m interested, because it’s a tough role, being a facilitator. What’s the most important role for a facilitator to enforce, in your mind?

David Spinks: I think it’s about equity of voice. I think their job is to identify who hasn’t had a chance to speak, and making sure they create the space for those people to speak, and their job’s to see when somebody is taking up too much airspace, and moderate and facilitate and say, like, “Thank you so much for sharing. It’s been really great to hear from you. I’d love to hear from other members of the group. Harry, what do you think about this topic? Anything that you’d like to share?”

David Spinks: And so without that moderation, every single discussion group I’ve ever participated in has devolved into one person talking a whole lot, and everyone else is having to sit there and listen. And when people participate in a discussion group, they don’t feel like they’re in a position of power or authority to moderate themselves. And if they did, it might feel very, they’re bringing conflict to the group. And so first of all, every discussion group should have a moderator, a facilitator. You should never have an unmoderated or unfacilitated group. You always want to have someone who’s responsible for facilitating the discussion, and it’s that person’s job to make sure that everyone has an equal opportunity to share their voice

Harry Stebbings: Totally with you in terms of the voice equity. There’s one element, which is always challenging, which is that terrible, awkward silence, especially when you throw an open question out and everyone’s waiting for everyone else to answer. I’m interested, in terms of the awkward silence, what’s the right way for the facilitator to act and engage in those awkward silence moments?

David Spinks: You just got to sit with it, honestly. It’s always tempting to try to fill in empty space. You always want to take out the discomfort for everyone, but I think a good facilitator is comfortable just sitting with that silence and letting others fill it in with their voice. And sometimes it’s just people wanting to be polite, and they don’t want to be the first one to speak, and they want to give other people a chance to speak. I remember in elementary school or middle school, not wanting to be the first one to raise your hand. People just are hesitant to be the first one to volunteer, but then once one person gets going, then it opens it up, and others want to share.

David Spinks: And so just being comfortable with those uncomfortable silences, letting it sit and letting people fill it in themselves. I’ll just sit there on the Zoom call and smile, and see them start to smile as they realize that no-one’s saying anything. And then inevitably someone, within 30 seconds, which might feel like a lifetime, but it’s usually only 30 seconds, someone will be like, “All right, I’ll go.”

Harry Stebbings: That’s funny. 30 seconds, as a facilitative before, 30 seconds does feel like a lifetime, I tell you, David. I do have to ask, though, when we do Q and As, as well, the awful moment is when you say, “Does anyone have a question from the audience?” And you get the really awkward, no questions. What do you do in those situations? Do you seed people in the audience? Do you have backup questions ready? What’s the right way to approach that really awkward element?

David Spinks: Yeah. I think that you really do want to seed it ahead of time, if possible. And you want to continue to remind people to post those questions. One really fun thing you can do is ask people to send in questions ahead of time. And if you’re doing it like a webinar or Zoom call, you can actually have them send in videos of themselves asking the question, and then you can pull in the video and play it live, so it actually looks like someone came on and asks a question and then you bring it back to the speaker to answer the question. So that’s a fun way to make it work on virtual events that you couldn’t even do elsewhere and offline, but seeding things upfront is really good throughout the event.

David Spinks: Reminding people, like, “Hey, just as a reminder, we’re going to be moving to Q and A in 10 minutes. So please put in your questions now, so we can get rolling right away.” Right? So that’s the kind of thing, because sometimes you open up to Q and A and you forgot to remind anyone that it’s coming up, and then they’re not ready to ask a question. And so you want to try to seed it as much as possible. And then when you get to that Q and A point, if you realize that there are no questions in there, don’t stop and say, like, “All right, any questions?” Just keep rolling through it and say like, “All right, well, I have a few more questions that we seeded from the community ahead of time. Please keep posting your questions here in the chat, but let’s dive into the first one.” And so you don’t have that dead air time. And so that’s different, right?

David Spinks: If you’re facilitating a discussion group, uncomfortable silences are really good. If you are putting on content, you’re performing, you’re creating, it’s like doing a podcast or doing a radio show. You don’t want dead silence on a TV or on a radio. It’s the same thing in your webinar, you don’t want to be sitting there live with 200, or a thousand, people watching you and just saying like, “All right, any questions?” That’s just awkward and that just looks like people aren’t engaged, which isn’t a good look. And so I’ll just keep rolling through it, and just go right into those pre-seeded questions that you’ve already pulled in, or prepared. Or just make it up, say like, “Oh, we collected these questions ahead of time. Let’s dive into that.” Even if you literally made up those questions right before the call.

Harry Stebbings: Trust me, David, with my over-excited British way, there is never an awkward silence in my podcast, but I totally agree with you there. I do want to ask this, so we have this event, and we want to know if it’s successful, and we need to measure it. In terms of measurement, I’ve heard you say before that there were two lenses with which to really measure the success of your event. What are those two lenses and how do you break them down?

David Spinks: Yeah. So in working with any community team, we map it out that you have two, what do we call them, dual objectives. So you have a business outcome that you’re hoping to achieve, and then a community outcome that you’re hoping to achieve. And you should be able, in theory, to achieve both with any sort of experience or program that you run. So if it’s a forum, you have your engagement in the forum, your monthly active users, your daily active users, your sense of community, you can actually survey people, you can get NPS, and all these ways of measuring the health of community. And you might be looking at something like reducing support costs, or collecting feedback on your product, or retaining customers. And so you have both the community and the business objectives.

David Spinks: And it’s the same thing for events. You’ll have aspects of the event that you want to tie back to, are we building a healthy community? And in the same way as an online group or forum, you can send out surveys. “Do you feel like you belong in this community? Do you feel safe in this community?” Net Promoter Score. You can look at number of attendees. How many RSVPs did you have, and what percentage of them showed up? How many of those people were repeat attendees? So these are all kinds of things that show you, is your community happy, healthy, and engaged?

David Spinks: And then you’re going to have the business objectives. We use a really simple framework for identifying the business value of community programs. It’s called the SPACES model. So that breaks down into support, product, acquisition, contribution, engagement, and success. And so those are the six areas and you could probably figure it out from the name, but support is people supporting each other, answering questions, giving each other support with their technical problems. That tends to be more in an online forum space, but it can work in events as well.

David Spinks: Product is, you’re collecting feedback and insights on how to improve your product from your community members. So, did you collect that feedback at a booth at your event? Or did you have people fill out a survey at the event to help you improve your product?

David Spinks: Acquisition is growth. So this is actually a really key one for events, and everyone should be doing this, and every event platform should hopefully be able to help you do this. And so you should be able to say, who came to our events, how many people came, how many of them were new leads? How many of them were new prospects? How many of them were opportunities? How many of them ultimately closed to sale? How many of them were customers? And so that gives you a good idea of how your events are actually impacting pipeline.

David Spinks: Contribution is, if you have a platform, let’s say, Airbnb, you have hosts who are contributing to the platform. They run lots of events for their hosts, and they want to see that those events are helping their hosts become more successful at contributing to the platform.

David Spinks: Engagement is essentially customer attention. And so, are our customers more likely to be loyal, to stick around, customer lifetime value as a result of attending our events.

David Spinks: And then success is, customer success. It’s helping people be more successful at using your product, and growing in their career through education programs.

David Spinks: And so all of those can be powered by your events and your online communities, and you can tie any of those events back to one of those business outcomes.

David Spinks: And the last thing I’ll say there is just, we tend to think of these events as one-offs, right? We think of it as like, “This is an event and this event needs to drive this business value, this community value.” And that’s it. We look at it in that bubble, but what you should look at your events as, is touch points with your community over time. And so your goal is to build an ongoing, engaged community over years. And that event is just one single touch point amongst many touch points, that can include your forum, it can include your email, it can include events, in-person events, when those come back. It’s one touch point in an ongoing community member journey that people are having with you.

David Spinks: And so, think about holistically for your event program. Maybe you’re doing a big conference twice a year, and you’re doing regular meetups every month, and you’re doing office hours every week. Those are different kinds of events that you can create, and each one of those is going to have a different community goal, and it might even have a little bit of a business goal. Or maybe some of the events don’t have a business goal, it’s just about engaging the community, knowing that later it’s going to drive business value. And so when you think about it, now you start thinking about your entire community program holistically, and all the different events and touch points that might feed into that customer journey.

Harry Stebbings: I absolutely love that holistic perspective. And I really liked the breakdown there between the two different lenses. So I think that’s an awesome clarity to what is quite a murky, “How do I measure success?” I do, though, David, want to move into my favorite, which is the quickfire round. So, I say a short statement, and then you hit me with your immediate thoughts and I’m going to throw in a couple that aren’t in the schedule that you just mentioned because I’m too intrigued. So just roll with that. Okay. So you mentioned that RSVP to confirm in attendance, what’s a good measurement and a good success rate in terms of that RSVP to attendance of virtual events?

David Spinks: That range is going to be huge, because it depends on the size of the event, right? If you have a 10 person event, you probably want all 10, or at least nine out of 10 people to show up, because you personally invited them. If you have a big conference, it’s going to be lower and we’re seeing the range all across the board. Some people are seeing higher attendance rates than their offline programs were, some people are seeing lower rates, and so offline, historically we’d see for a free meet-up, or a free event, you’d see about 40% people show up. We just hosted CMX Global. We had 3000 people RSVP for that event and we had 2200 show up. It was about 70% showed up, which awesome. It was really cool to see that high of a turnout rate.

David Spinks: It’s hard to have a benchmark, just compare against your own events. So if you did a conference, how do you compare against the last one? If you do a meet-up, how do you compare against your previous meet-ups? And see what you can do to continue to improve that conversion rate by improving your emails, your communication flows, things like that, that might help people be reminded that the event’s coming up, and make sure they have it on their calendar, and that they’re ready to join when it kicks off.

Harry Stebbings: What a terrible question from me, I apologize for that. Benchmark- [crosstalk 00:30:08].

David Spinks: Well, it’s a terrible, “It depends,” answer, which everyone hates.

Harry Stebbings: Tell me, what’s the biggest misconception around virtual events?

David Spinks: There’s a belief that you just can’t build real community through virtual events, there’s just no way you can replace in-person experiences with virtual experiences. And that is true, that you can’t replace it, and there’s a hundred percent, many elements of in-person gatherings that we are just never going to be able to replicate virtually. Even if you got the VR experience perfect, and you have your haptic suit, and you could feel everything. And even then, it’s still not going to be the same as just being able to run into someone in the hallway of an event. It’s the serendipity that you miss out on.

David Spinks: That said, there are a lot of things that you can do to create really meaningful experiences that help people actually connect with each other, and form relationships and form legitimate bonds. And so you have to get creative, and you have to figure out ways of creating serendipity and connecting people with each other in ways that aren’t just a webinar.

David Spinks: You can replicate a good amount of things that you have in an in-person event. Will it do it a hundred percent? No, but there’s a lot of value that you couldn’t even do in an in-person event, because virtual events are just more accessible, for one. So people who may have not been able to travel, or afford a ticket, they can all come together in a virtual event in a way they couldn’t in person. So look for the unique values, or the unique opportunities that virtual events provide, rather than just trying to copy what an in-person event is.

Harry Stebbings: Totally agreed in terms of not being a copy of the in-person. Final one, but a really interesting one for me to hear is, obviously you have CMX, but of all the other virtual events you’ve been to, what has been your favorite virtual event, and what made it so good?

David Spinks: it would be the virtual Passover Seder that we hosted with our friends and family.

Harry Stebbings: Got you. And what made it so good was the bond between friends and family?

David Spinks: Yeah, it was awesome. It was a virtual Seder and, so Seder means order. And so it’s basically, you go through the order of Passover, and you read the stories and you sing the songs. And we had, everyone pulled up a virtual Seder, and they each read from it. So we rotate around. So everyone felt involved, everyone felt included, you drink a lot of wine during it. So it was fun. And so we used to host Seders at our house all the time, every year.

David Spinks: Obviously we couldn’t do that this year. So we did it virtually, but my family is in New York. I grew up in New York, I live in San Francisco now. And so they’ve never been able to be there for the Seder that we host. And this year they were able to join from New York. And we even had two other friends, from Australia, join us. It was morning for them, so they maybe had a little less wine than us, but it was really cool to be able to have our really close friends in San Francisco and our family involved. And just seeing that melding of different groups, that I think otherwise would have been really hard, because everyone would have just done it with their friends, or with their family, to be able to bring those groups together was really special.

Harry Stebbings: David, as I said, I’ve been an admirer from afar for a long time. So I can’t thank you enough for joining me today, and this has been fantastic.

David Spinks: Awesome. Well, thank you so much for having me.

Harry Stebbings: Absolutely loved that deep dive with David. And if you’d like to see more from David, you can find him on Twitter @DavidSpinks. Likewise, it’d be great to welcome you behind the scenes here. You can do so on Instagram @HStebbings1996, with two Bs.

Harry Stebbings: As always, I so appreciate all your support. And I can’t wait to bring you another fantastic episode next week.

 

The post SaaStr Podcasts for the Week with CMX Media and Salesforce — May 22, 2020 appeared first on SaaStr.

SaaStr Podcasts for the Week with


This post is by Deborah Findling from SaaStr

 

 

 

 

 

 

Ep. 333: Bridget Gleason is the Head of Sales and Customer Success @ Tidelift, the company providing managed open source, backed by maintainers. Tidelift has raised over $40M from some of the best in the business including Foundry Group and General Catalyst. As for Bridget, she has the most incredible track record. Before Tidelift, Bridget was VP of Sales @ Logz.io and before that was VP of Corporate Sales @ Sumo Logic where she drove ARR up by a record 237%. Prior to SumoLogic, Bridget was VP of Sales @ YesWare where she increased MRR per rep by 450%. Finally, before YesWare, she was VP of Sales @ Engine Yard, where she tripled monthly recurring revenue, over the course of her 3+ year tenure, in 3 key leadership roles.

Pssst 🗣 Loving our podcast content? Listen to the start of the episode for a promo code to our upcoming events!

In Today’s Episode We Discuss:

* How Bridget made her way into the world of SaaS and Sales and came to be Head of both Sales and Customer Success at Tidelift.
* Why does Bridget believe the best starting point for customer success is “company culture and value”? How does company culture impact the quality of customer success? In practice, what can one do to improve it? Who has done this well? How does value drive customer success forward?
* How does Bridget think Maslow’s Hierarchy of Needs drives the roadmap for customer success? What core elements does it change? Where do most teams go wrong in implementing the role out of their CS strategy? When should one hire their first CS rep? What should that hire look like from an experience perspective?
* How does Bridget advise her CS reps the best ways for them to build trust with their clients? What works? What does not work? Does Bridget believe CS teams should be involved in the upsell process? Does that endanger the element of trust?

 

Ep. 334: Hear from Michelle Zatlyn, co-founder and COO of Cloudflare. Michelle started the company during an economic downturn in 2009. In this talk, Michelle will share how she made her business idea come to life and some lessons learned that can help other entrepreneurs—from solving a real, meaningful problem, to communicating in a crisis, prioritizing when there’s a true lack of resources, and more.

This podcast is sponsored by Guru.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This podcast is an excerpt from Michelle’s session at SaaStr Summit. You can see the full video here.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Bridget Gleason
Michelle Zatlyn

Below, we’ve shared the transcript of Harry’s interview with Bridget or you can jump to the transcript of Michelle’s podcast.

Transcript of Harry’s interview with Bridget:

Harry Stebbings: Hello, and welcome back to the official SaaStr podcast with me, Harry Stebbings. I always love to see behind the scenes, you can do that on Instagram at @HStebbhings1996, with two Bs. 

But, time for the show today. We’ve spent a lot of time in the world of marketing lately, and so I wanted to switch it up today, and move to the sales and customer success side. So, with that, I’m delighted to welcome back to the show Bridget Gleason, Head of Sales and Customer Success at Tidelift, the company providing managed open source, backed by maintainers. Tidelift has raised over $40 million from some of the best in the business, including Foundry Group and General Catalyst.

As for Bridget, she has the most incredible track record. Before Tidelift, Bridget was VP of Sales at Logz.io, and before that was VP of Corporate Sales at Sumo Logic, where she drove ARR up by a record 237%. Before Sumo Logic, Bridget was VP of sales at Yesware, where she increased MRR per rep by 450%. And finally, before Yesware, she was VP of sales at Engine Yard, where she tripled monthly recurring revenue over the course of her three year tenure, in three key leadership roles. 

But, that’s quite enough from me, so now without further ado, I’m so excited to hand over to Bridget Gleason, Head of Sales and Customer Success at Tidelift.

Harry Stebbings: Bridget, I have to say, it is such a joy to have you back on the show. Thrilled to see about your recent move to Tidelift, and such exciting times ahead there. But, thank you so much for joining me today, Bridget. 

Bridget Gleason: Well, Harry, it was great. You know, the last time we did this, it was, I think, February 2019, so just a little over a year ago. Really great to connect, and get caught up. 

Harry Stebbings: Absolutely it is. Listen, I loved that episode so much, when we did the first one. But, hit me, for those that maybe missed our first episode, which was so great, tell me, how did you make your way into the world of SaaS, and how did you come to be the rockstar head of sales and CS at Tidelift today? 

Bridget Gleason: I love it, I love the rockstar name that you give me, whether it’s true or not. But, Harry, I like to tell people that I took the jungle gym route here, meaning that it wasn’t this straight line from rep, to manager, to VP, mine was nothing like that. I was an English business major in school, but I taught in the engineering, I was a [inaudible 00:04:08] in the engineering school. 

I went into product marketing for the commercial arm of Xerox Park, which is a big computer research company here. Then, I went into sales school, Xerox sales school. Then, I started a company, which I sold in early 2000. Did a lot of consulting for high tech startups, I really love the startup space. Ended up taking VP of sales role with one of my customers, and then, gosh Harry, I did all sorts of things. I opened an office in Ireland for one of the companies, I was the first US employee for an Israeli company. 

And now at Tidelift, which interestingly, the CEO reached out to me after he heard the podcast that you and I did more than a year ago. 

Harry Stebbings: That is amazing to hear. I did not know that, but I’m absolutely to thrilled to hear that. He clearly has great tastes in podcasts. 

Bridget Gleason: Well, he does have great taste in podcasts. And, I don’t know that I would have found Tidelift, and it’s just been a career defining role and move for me, and really, really inspiring. So, thank you, thank you Harry, for doing what you’re doing. 

Harry Stebbings: I absolutely love doing it. But, I do want to start on a really interesting aspect, because when we spoke last time, you were head of sales. And now, with the new role with Tidelift, CS, customer success, has been incorporated into your purview. 

With that, we have to have a starting point for the strategy and the plan, and when we spoke before you said the best starting point for customer success is company culture, and value. What did you mean by this? Maybe, is it better to take it turn by turn, and how does company culture play into the level and quality of customer success? 

Bridget Gleason: There’s always been this discussion. Does customer success start after you close a sale? Should the handoff start before the customer becomes a customer? Should customer success start when reps are reaching out? 

My belief, Harry, is that customer success starts with the culture of the company. I read a book, God, it was years ago, about Marriott. JW Marriott was notorious for this, and he said, “If we treat our employees right, they’ll treat the customers right.” I think Marriott started in 1927, and in the early ’30s, they were one of the earliest companies to give healthcare benefits to their employees. They really had an employee first, and by extension, a customer first orientation. I believe that 100%, that if we’re not treating each other well, and we don’t have a culture that is engaging, and respectful of the individual, it’s going to be very hard for us to extend that to the people who we’re dealing with.

When you look at, just in statistic, Harry, of it, companies that have employees who are highly engaged are 22% more profitable. So, how did we do that? You’ve got to have a culture where employees not only survive, but they have to thrive. 

Harry Stebbings: Can I ask, if we take that to a practical level, because I totally agree in terms of that career development, and the thriving. We’ve seen the chastising of the foosball tables, and La Croix provisions that are deemed culture, often. What can one do, on a practical level, that you’ve seen work in terms of building that culture and company value so inherently into how we think about, also, customer orientation? 

Bridget Gleason: Well, I think there’s a lot of different pieces of it. 

I know, just at a manager level, one of the things that I try to do with my direct reports is, first of all, how are they doing? Just, how are they doing as humans? Especially now, around COVID-19, how we’re doing, we’re all under a lot of stress, so checking in with how people are doing. As well as their professional desires and aspirations, those are always top of mind. One thing we did as a company was … It was last Monday, our executive team said, “You know what? We need a Maintain Ourselves Monday.” Everybody just got a day off. It’s an allowing of people to bring their whole selves. 

This leads to the next part, Harry, when you asked about value. I believe that values lead to value. So, values lead to more, also, value creation. Tidelift is unique in my experience, in terms of values. There is not a person in the company who couldn’t rattle off the four values, we talk about them every day, and have them integrated into their work. We don’t need to have them posted, we don’t need to have them, really, reviewed, they are so woven into our brand. So, that’s how we deal with one another internally, as well as externally. 

I’ll tell you what they are really quickly, because I think they’re interesting. There’s four of them. So, optimistic, we see an amazing future. We deal in open source, we provide managed open source for large companies. We believe that open source is really awesome, and we want to be part of it. So, we’re optimistic, and as it relates to customer success, we believe that for our customers. We’re practical is value number two. We know that the words in these lofty ideals aren’t enough, so we try to be very pragmatic, and very honest, and have a really honest assessment of ourselves and our product. The third is additive. We have a growth mindset, that we’re capable of learning and doing more. Then finally, is around inclusivity and diversity, and we believe the world is a better place with diverse voices. 

Those are the things that we practice internally, but also bring those to the table when we’re dealing with customers. 

Harry Stebbings: I love the four values. I am really interested by one especially there, and it’s the element of open source. Now, you’ve been involved in both sales and customer success is closed source also. How does it differ, in terms of traditional enterprise software, versus open source? Specifically, when it comes to customer success, is there a core differentiator? 

Bridget Gleason: Well, I’ll tell you, for us what’s a core differentiator is open source is an amazing phenomenon, of all of these people contributing with no expectation to get anything back. When we talk about additive, as it relates to open source, there’s been a history of companies harvesting the value from open source, but not, then, added back to it. So, when we think about customer success, we don’t want to just harvest the best things of open source, and not contribute back. But, we also want to be ones that are adding to the value, that’s a core, underlying mission. 

So, our products and services are around how can we help companies utilize open source more effectively, more securely, more responsibly, as well as contribute. And then, it’s a two-sided marketplace, so we’ve got subscriber companies that we provide support for the open source that they use. And on the other side, we have the maintainers themselves, that we pay to keep their open source that they are responsible for secure, et cetera. We’re trying to add back in both ways, and make both parties successful. 

When you have a commercial product, you don’t have this two-sided marketplace, where you’re trying to balance both. Making sure that we’re not just harvesting, but that we’re really contributing in a meaningful way back to the community, and we engage in that also with our customers, which I think is really, really powerful. 

Harry Stebbings: Speaking of engaging with your customers in that way, I am really interested if we take the hat of head of sales that you have worn before, now incorporated the head of CS also. A lot of questions that I get asked from early stage founders is, “Okay, I’m always told that I need to develop a sales playbook before I can hire my first sales rep, and then I pass it onto them. With customer success, is it the same? Is there a customer success playbook that I have to develop? And, when should I hire my first rep?” 

I guess, there’s three separate questions there, that are kind of integrated. How do you think about that requirement for CS playbook, and when to hire your first? 

Bridget Gleason: So, I see sales and customer success as a continuum. I don’t see them as distinct, perhaps, as some might see them. When the sales team is engaging early on, what we’re trying to identify is what is the success criteria of this particular prospect, what are they trying to achieve? How might we be able to help them do that? By extension, then, that after the commercial are completed, we’re just extending what that looks like. 

I think a highly functional, evolved team is one that starts the criteria really early on, and is just rolling it out, and playing it out. If you don’t do a good job on the sales side early on, and setting those expectations, it will be very difficult for you to do a good job on the customer success. So, the playbook needs to be written as you’re working this out with prospects.

In fact, Harry, I’m working right now on some big proposals. Some of the sales reps and I are working on some big proposals, and customer success is highly involved because in these proposals is the success plan. What we do is we send out, in a Google doc, a proposal. We ask that the prospect to review it with us, and tell us where we have it wrong before we submit something formal. It’s not just pricing, it goes all through the rollout, Harry, of what it’s going to look like as we rollout. Not just rollout and onboarding, but then, what does success look like? We start really, really early. 

Then, to your question about when to hire, because it’s a continuum … Again, we’re an early stage company, so what we did, as you’ve probably seen before, is founder’s really involved, everybody’s involved. Founder’s really involved, then you have the sales team that’s managing it as it extends. And then, we got to a point, also … Again, we sell to very large, primarily regulated industries. Because we’re selling high, six figure deals, we just need to make sure that we’ve got enough resources on the ground to deliver a really incredible experience to them. 

Harry Stebbings: How do you think about professional services, and the challenges that naturally occur in terms of delivering that in a COVID world? 

Bridget Gleason: We’re all learning. We’ve had to adjust a lot of our delivery mechanisms, and these are things that we’re doing in conjunction with our customers.

It’s interesting, Harry. Because we sell a technical product to technical people, they’ve actually been distributed for quite some time because in order to get great talent, you’ve got to be distributed. You don’t have to be, but it helps if you can be, in terms of getting talent. I don’t know that we’re facing as much of a challenge, because the teams that we work with are often highly distributed anyway.

But, it’s going to continue to evolve, it’s continuing to evolve. It’s something, I think, we’re all really grappling with. 

Harry Stebbings: Pulling on that thread, I’m really interested to dive in here. A lot of founders say “Hey, our professional services is growing, and it’s becoming 30, 35 percent of revenues.” At what point do you think professional services becomes too heavy weighted on the revenue front? And, how should founders think about that balance and tipping point? 

Bridget Gleason: Well, I guess it’s what function is professional services performing, in terms of the sale, the implementation, and then the ongoing maintenance. And, how big a part of your business do you want that to be, do you want to be a services organization?

If delivering services is fundamental to your product, if it’s a core competency, keep it. Keep it, keep, keep, keep it. If it’s not, if it’s something that you’re delivering but it’s not really part of your core competency or differentiator, there would be an argument to bring in partners. Because there’s some benefits that you can’t achieve you’re also using partners, and letting them take on some of the professional services revenue.

I look at it, just how core is it to what you’re delivering, the value that you deliver? 

Harry Stebbings: Yeah, absolutely. I love the integration there, of partnerships. 

I do want to stay on CS though, so apologies for that drifting off. But, we discussed the first stating point. If we then think about enacting that, and putting a roadmap of success together, you’ve previously stated the importance of Maslow’s Hierarchy of Needs as a roadmap for customer success. A bit of a cliffhanger for me, with that one. So, talk to me about this one, Bridget. How is the Hierarchy of Needs a roadmap for customer success in your mind? 

Bridget Gleason: It’s an interesting one, and our CEO Donald Fisher is the one who first started talking about this, with prospects and customers. If you think, Harry, at the very base level of the hierarchy, the basic needs, which are physiological and safety, what that translates to customer success as I look at it is implementation, onboarding, you answer my questions quickly, you handle my basic needs. And Harry, I think for too long, we’ve looked at these basic needs as, “I’m doing great customer success! They’re implemented, they’re onboarding, I answer their questions,” and we measure things by that. 

If you go up a level, though, the next two levels in Maslow’s Hierarchy are belonging and esteem. Those, in the customer success world, they map to adoption and insights. Is there more that I can get? Because on the esteem side, and the belonging, and what are other people doing, that fits in there. Is there more, are a lot of people using it, do I feel good because I’ve gotten great adoption in the company? That’s better, customer success when it moves up to that, and you’re helping companies extend the adoption as well as get more insights, that’s good. I think most companies, if they get to that, they’re going to give themselves an A.

At Tidelift, we’re not stopping with those. The very tip is the self actualization, and what that looks like is a thought partner. For Tidelift specifically, how are we, together, making open source better, this community? We have an amazing community. Again, specific to Tidelift, there’s a movement, when you get to this level, of open source consumption. So, how are we, as a company, consuming open source in a way that is efficient, and secure, and responsible to an external contribution? 

Harry, what is so amazing, and what’s so thrilling about being part of Tidelift is the companies who we are engaging with, they have a strong desire to move beyond the harvesting of open source, and getting whatever they can out of it because they know it’s amazing, so they want to keep using it. But, they also want to be contributors, and to give back to this community. That’s where you get this self actualization. 

I think, in other companies, it’s similar, it’s not going to map in the same way that Tidelift will map. But, where do you find, at the tip of the pyramid, that you can engage with your customer to do something greater, and to be really a thought partner in whatever it is that they’re doing because they’re the star of the show. 

Harry Stebbings: I totally love that positioning as the thought partner. Can I ask, in terms of check-ins, I think a lot of CS teams get this wrong. What does the right check-in structure look like to you? And, how do you think about really structuring that conversation ahead of time, without being too formulaic, and objective, and maintaining that human element of the relationship? 

Bridget Gleason: I’m not a fan, Harry, of, “Hey, just calling to check in,” where there’s no structure to it.

If we go back to what we were talking about earlier, this success plan that we put in place before they become a customer, it does give you a roadmap. They often have a roadmap of what they’re trying to achieve, so we do two things. One, with good tooling, we try to understand as much as we can about what’s happening in their environment without having to ask them. Again, not being creepy, they need to know, “Hey, we’re looking at your dashboards,” or whatever it is, whatever kind of tooling makes sense. We learn as much as we can through tooling, because in SaaS you have a great opportunity for that.

Then, number two is, we really stick to and look at what they’re trying to achieve in the success roadmap, and use that as a template when we have these conversations. Has that shifted, have things changed? COVID-19 changes a lot of things for how things are going to be rolled out, how we implement things, and it’s a continual conversation. 

We also let our customers guide, in terms of the frequency of check-ins, and the mode. Sometimes it’s phone, sometimes it’s Zoom, sometimes it’s Slack, sometimes it’s text, sometimes it’s email, sometimes it’s a report, sometimes it’s an in-app message. But, we work with them to develop the communication cadence and style that works for them. 

Harry Stebbings: Sorry, you said there about the impact of COVID. I do just have to ask, with both hats on I’m sure you have such amazing purview, but I have so many SaaS founders who say, “Hey, Harry, so far, my sales pipe hasn’t been impacted.” I guess, how would you respond and advise that founder? How have you seen your sales pipe be impacted? And, how do you think a head of sales should be thinking now in enterprise, when looking at that pipe? 

Bridget Gleason: When you’ve got founders who say the sales pipe hasn’t been impacted, that, to me, means if you think about an axis of companies that are least affected to most affected, and the financial strength, they’re selling into a quadrant that is financially strong, and not as affected. Which aren’t very many companies, by the way, not very many companies that haven’t had a supply chain disruption in some way. So, I think that’s great. I mean, that surprises me a little bit, but I think that’s great. 

Harry Stebbings: But in enterprise, the contracts are long, the clients are slow moving, generally speaking. 

Bridget Gleason: Right. 

Harry Stebbings: So with heavy enterprise, my concern is … I go, the big point here is, so far. Actually, we haven’t had the first round of renewals, and we haven’t had the first discussions on this accounting. This is going to be more painful than you think, don’t go into this thinking so far, we’ve been fine, so we can expect the same moving forward. Batten down the hatches is my advice. 

Bridget Gleason: Yes. 

Harry Stebbings: Would you agree with that?

Bridget Gleason: Yes! Yes, 100% because the plans are still evolving, the plans are still evolving. What one hears from a prospect or a customer may have been said to them with 100% integrity. “This is going to happen, in this timeframe,” 100% integrity. But, things can change because we’re not through it yet to know, nobody knows. 

I agree with you, that we need to move through with a measure of caution, and realism. Again, one of our core values … Okay, I can’t get through the day without talking about one of our core values, but being practical. And just flexible, build that into the plan, that things are not going to go exactly as planned. They’re not going to. 

Harry Stebbings: If we have that in mind then, a willingness to accept uncertainty, say, when we think about rollouts, the other big thing that I’m seeing is slippage, especially at the enterprise level. From the customer success perspective, what kind of core things are you seeing in terms of slippage, in terms of delayed rollouts, that you think COVID has really impacted? 

Bridget Gleason: Well, COVID affects people, and people are part of these rollouts. People are getting sick, they’ve got family members who are sick, they are working in environments that they’re not used to working in. So, I think we see slippage, and time frames extended because of the very human element of what’s happening, and a lot of uncertainty. 

Harry, people are more stressed, there’s more anxiety, they can handle less. Zoom fatigue is a real thing. You factor in the human element of all of it, and things are going to take a little longer. We’ve got to accommodate for the human part of the businesses that we’re selling into, that we’re not selling to robots. Again, just keeping that in mind, and having some buffer built in as we think about it. It’s a great muscle right now, that we can learn to flex as an organization, of being flexible, and resilient, and learning how to have some buffer but still keeping things going down as predictable a path as we can. 

Harry Stebbings: You said there, flexible and resilient. The question that I get a lot from different founders is, “How much should we be willing to give when it comes to discounting?” When you think about discounting, and that flexibility and resilience in mind, you’ve got to meet your business objectives, but you also need to be flexible. How do you think about the right level of discounting to accept? 

Bridget Gleason: God, it’s so funny, Harry, I haven’t thought about discounting at all. 

Harry Stebbings: Really?

Bridget Gleason: Well, I haven’t. I haven’t thought about it because we’re delivering against value. We’re really trying to look at what the value creation. I do understand how some companies would think about some discount, based on the new reality. It’s not my go-to place, it’s not my go-to place. We try to price things fairly from the outset, so we don’t get into that. 

I don’t know, it’s a good question. I get it, but that’s not my go-to place. 

Harry Stebbings: I mean, speaking of that pricing fairly though, it does take me something that you said to me before. Which is, the centrality of trust, for a CS team to be successful. So, I guess the biggest for me is, absolutely that makes sense, me the customer, you with Tidelift, how do we build trust in this relationship? And, what really work in building that relationship of trust? 

Bridget Gleason: Well, I don’t think it’s a surprise to anyone that trust is a key factor in driving customer engagement and loyalty, it’s a key factor. Threading this pricing issue and trust, a great way to erode trust is to offer a customer a price, then when they ask for a discount, you give them one without asking for anything in return. Because what that says to them subconsciously is, “Oh, I thought you were giving me the best price, but then you give me this other one.” That sows a seed of distrust. 

A way around that is a give to get. “All right, I can give you a discount, if you can close it this month because this is important for us.” Or, volume discounts are normal. Or, in exchange for a testimonial, there are things that you can do to give to get. What’s hard, also, about this give to get in this environment is if I were to tell a customer, “I’ll give you a discount if you can do it this month,” that doesn’t seem like it’s really taking into account their realities, also. I may be better off giving them extended terms, just to do it that way. Okay, that’s threading the two together. 

Ways to establish this trust. I tell the team, “You have to be trustworthy in order to get trust.” Like, you have to be trustworthy, you have to tell the truth, first and foremost. Second, it’s okay, and in fact I often encourage it, Harry, to tell a prospect or a customer things that you can do and things that you can’t do, because it lets them know that you’re not just trying to sell them swampland in Florida. Also, another way to develop trust is to say, for example, “I will deliver this proposal to you by Friday at four PM,” and you put in a date and a time, and you deliver on it. That starts to say, “Oh okay, they do what they say they’re going to do.” Conversely, if you make commitments that you can’t keep, you’ll erode trust in that way. 

Harry Stebbings: Totally aligned, in terms of … It sounds, I don’t mean it badly, but so people would do as you said, what they said they would do. “I’ll email you tonight,” and it comes through tomorrow. It’s like, you said tonight, build that trust in that really important way. 

I guess, the biggest way that trust is often deemed to be eroded within the realm of customer success, or often a lot of people think it is, is when customer success is heavily involved in upsell processes. I’m interested to hear your thoughts here. Does being involved in an upsell process erode that element of trust? And, should customer success be involved?

Bridget Gleason: I don’t think it should erode trust at all, if a customer success person is involved in an upsell, because we shouldn’t be talking about an upsell if we don’t think that there is some value, based on that upsell. There needs to be a lot of integrity in the process. If there’s integrity in the process, I don’t see that there’s any issue with a customer success person also being involved in an upsell. 

I think, sometimes where I see a separation as being helpful, is sometimes customer success people, if they’re more technical than not, they just don’t feel as comfortable, or as fluent around that process in the commercials. I don’t see that as a problem, I would rather them be clunky, and just be honest, because customers see that, and they respond well to it. But, sometimes I can see just a separation of roles, that you want one person that you just know, if it’s a highly technical product, that they just handle the technical side, and they like to have that handoff, a division of work. Because getting involved in the commercials, you’re involved in a lot of other pieces of the business. 

So, I see it not as an issue of trust, as much as just a division of labor. 

Harry Stebbings: Totally agreed, in terms of the division of labor. I’m glad we’re aligned on that. 

I do want to dive into my favorite though, Bridget, which is a quick fire round. So, I say a short statement, and then you give me your immediate thoughts, in about 60 seconds or less. Are you ready to rock and roll? 

Bridget Gleason: Yes. 

Harry Stebbings: Okay. I love this one, actually. What motto or quote do you most frequently revert back to, and why? 

Bridget Gleason: Okay. Well, I’ll tell you my most recent, and these change. So, the one that I’ve been quoting most recently is, “If you want to go fast, go alone. If you want to go far, go together.” I just finished this great book called Boys in the Boat, about this rowing team that won the 1936 Olympics in Berlin. I so believe, Harry, that we can do so much more if we do it together, I’m a big believer in teamwork. Again, at Tidelift we’ve got this opportunity to work together as a team, to work together teams within the company, to work together as teams within this larger open source community, and I just really believe that we’ve got this great opportunity if we work together. COVID-19’s another great example, let’s figure out how to do this together. 

Harry Stebbings: What do you know now that you wish you’d known when you entered SaaS? 

Bridget Gleason: I’m probably not giving a good answer here, but I love surprises. I love the unknowing. For me, I’m so curious, so to learn something new, so I’m glad I didn’t know any more than I knew so that I would have the privilege of discovery. Which, I think, is just a fantastic journey. 

Harry Stebbings: Oh my word, it sounds wonderful. But no, I don’t enjoy the privilege of discovery, I’d much rather get to the endpoint much quicker. 

Bridget Gleason: That’s funny. 

Harry Stebbings: I do want to ask, biggest surprise about the move to Tidelift? 

Bridget Gleason: I didn’t know that a company could be so rooted in values, and what that does to how we work together as a team and how we show up in the world, it is one of the greatest privileges of my professional career. This founding team are inspiring, they move me to tears what they’re trying to do in the world. I just feel really committed to what they’re doing, and who they are, and really wanting to bring about more diversity. Here are four individuals who don’t have to care who do, and are using their background to do it. So, just that I could be so inspired by a company. 

Harry Stebbings: Building a team outside of the Bay, what’s the biggest pro, and the biggest con? 

Bridget Gleason: Well, we’re 100% remote, so we’re all over the place. We’ve got a core of people in Boston, where I sit now. I think one of the pros is when you’re building all over the place, you’ve got a larger talent pool so we get great talent. Also, at this time, COVID-19, we’re all used to working remote. 

The biggest con is, oh gosh, Harry, there’s nothing that can replace the in-person. We do get together as a company, several times a year. But, the camaraderie in an office, and that in-person, is probably the biggest con. 

Harry Stebbings: If you could change one thing about the world of SaaS today, what would it be and why? 

Bridget Gleason: It’s probably the one thing, and the one thing I hate. So, I think sometimes with SaaS, there’s the ability to leave something quickly, that you can be in and out because it’s easy to rip and replace. I think sometimes companies may not stick with a product or service long enough, and it puts a lot of pressure on quicker wins. I think we lose something if you’re not able to establish a longer term relationship, and moving to that point, like I said, of self actualization, really developing something great together. 

Harry Stebbings: Do you think time to value can actually be quite an erosive, problematic principle? Essentially, you could try and gamify it to create short term value creation, to reduce the time to value pendulum. But actually, there might be more value, or an optimal situation created with just a little bit more time, and slower to value, but more value. 

Bridget Gleason: Yes, plus one to that, I agree. 

Harry Stebbings: Yeah, it’s something that always annoys me when people go, “Oh, it’s all about time to value.” Totally aligned there. 

Final one. Who in SaaS customer success today do you think is killing it? And, why do you get inspired by them, in terms of their approach? 

Bridget Gleason: A couple of companies come to mind, one is Outreach. The CEO, Manny Medina, I knew early on. What inspires me about them is they really are working with customers to try to get to that tip of Maslow’s Hierarchy, and partner to try to figure out what are sales teams trying to do. Okay, so that’s one. 

Zapier, I think, is another one. I know the team there, and the woman that’s running customer success. Again, what inspires me about them is this close collaboration with their partners, and really pushing the envelope in terms of trying to help them do more, and the customers really being the star of the show. 

Then finally, there’s a company, Catalyst, which is a startup. These two brothers, Edward and Kevin Chiu, that are creating a new customer success platform. I’m just really anxious to see what they’re going to come out with, but I love that they’re trying to change things up a bit. 

Harry Stebbings: Totally with you, I think Catalyst are great. But Bridget, listen, as I said, I’ve wanted to do this episode for a while, since I saw about the move. Thank you so much for joining me today, and this has been so much fun. 

Bridget Gleason: Likewise, Harry. 

Harry Stebbings: I always so love my discussions with Bridget, and I want to say a huge thank you for her for giving up the time today to be on the show. If you’d like to see more from us, behind the scenes, then you can on Instagram at @HStebbings1996, with two Bs, it’s always so great to see you there.

As always, I so appreciate all your support, and I can’t wait to bring you a phenomenal set of episodes next week. 

 

Transcript of Michelle’s podcast:

Announcer: This is SaaStr’s Founders Favorite series, where you can hear some of the best of the best from SaaStr speakers. This is where the cloud meets.

You know the deal. Your project is due EOD, but the stakeholder with the answers you need is MIA. Well, there’s a better way. Guru is the knowledge management solution that delivers the information you need when and where you need it. Guru lets your team capture information instantly, wherever it surfaces. Slack, Gmail, Salesforce, Microsoft Outlook coming soon, and more.

Up today, CloudFlare COO Michelle Zatlyn.

Ben Dahl: Hi everybody. We are very lucky to have Michelle Zatlyn, co-founder of CloudFlare here today, to talk about starting a business in the midst of some economic headwinds. Clearly we have a little bit of a headwind at this point, and I think Michelle’s perspective as a founder during that sort of time period will be really useful. I think it would be really helpful for Michelle to just give a little bit of an overview about CloudFlare and about herself.

Michelle Zatlyn: Sure. Thanks, Ben. Thanks so much for being here everyone. I’m Michelle Zatlyn. I’m one of the founders and CEO of a company called CloudFlare. And we started CloudFlare during the economic downturn right after the financial crisis in 2008. And so we started to work on this in 2009. And while it’s different, it’s definitely a different thing going on in the world today. I do want to say that there are a lot of companies that actually started with us, that class of companies, and many of them have turned into big great companies today. So if you’re one of those entrepreneurs who are working on your ideas and thinking, “Man, is now the time to start?” it’s definitely possible. So we started CloudFlare in 2009 and today we have about 1400 people around the world. Our customers are internet properties, so websites, apps, APIs, and those customers come to CloudFlare to be fast, safer, reliable online.

So we built a service that does cybersecurity, global performance and reliability for any intranet property. And in these last 10 years, we have 26 million internet properties that use our service on any given day. So a huge scale. We stop about 50 billion cyber attacks daily on behalf of those 26 million internet properties. And we make the internet faster, safer and more reliable for a lot of people, so we’re really proud of that and our whole team is really proud of that. And so that’s some of the things we’ve done in the last 10 years.

And one thing that’s been really cool, starting the company 10 years ago in an economic downturn to today, about six months ago, Matthew and I and our team took the company public on the New York Stock Exchange. So we went from an idea that started during the economic downturn to a company that went public about six months ago. And today we’re about a 6, $7 billion market cap company.

Ben Dahl: So Michelle, as you think about starting CloudFlare in the midst of an economic downturn and you fast forward to today, do you have a sense or major tips for entrepreneurs as they’re thinking about either starting a new business, or extending their current business?

Michelle Zatlyn: Yeah. Sometimes I think it’s easier if you’re starting than extending. So I’m going to answer your question with that frame of mind. Because I think back to 2009 and it was really hard to get a job. I was doing my MBA at grad school, and so many of my classmates couldn’t get jobs. I had done my summer internship at Google. And I remember getting the call from Google, my manager at Google saying, “Hey, we’ve decided not to extend any of our summer internships a full time offer.” Because again, it was 2008. There was this huge financial crisis and people just were not hiring. And in many ways, when it’s hard to find a job, it’s actually, out of necessity it’s actually a really good time to start a company, the right company anyhow. Because I wasn’t competing with a lot of other offers. It wasn’t like you had a choice of a hundred things to go and do and you had to say no to a hundred things to go pursue this one thing.

So if I think back to our year at business school, a lot of amazing companies came out of that. And I think part of it is because the job prospects were kind of gloomy. And so for entrepreneurs who are starting to think about starting, again, I think for the right idea that you’re really passionate about and if you really think you’re solving a big meaningful problem of a big market with tailwinds to your back, it can be a really good time. That doesn’t mean it’s easy. It’s still really hard and there’s lots of things that was hard about it. You got to be really frugal and you got to innovate your way out of problems.

But I do think the mindset of, it’s almost like your option B or your other options, it’s almost easier to walk away from it because there aren’t that many other good things going on, so let me go create this thing that I just can’t stop thinking about. And so that’s for the people who are currently… And then the second thing I will say, I remember we raised, our first round of money from Ben who was one of the partners who helped us raise our series A, and then Venrock. And we raised $2 million, which, today people laugh. That’s like nothing for a series A. But back then, that was kind of the size of rounds.

And I just remember Matthew and Lee and I, and our team of the original eight people who really worked on this idea, we spent every dollar so wisely because it was a scarce resource. And when you only have a little bit of money, you really innovate your way out of problems or engineer your way out of problems. And we had this great engineering team and we really innovated our way out a lot of problems and tried to figure out ways to do things cheaper, better than we would instead of throwing at the problem. We used to have a saying, “Don’t throw money at the problem. Let’s innovate our way out of the problem.” And again, in a downturn like today, where money is still going to be hard to come by, that’s actually I think a really good, it can take you very far when you’re building your company.

Ben Dahl: I recall in the beginning that your rule used to be that the answer when someone wanted to spend additional dollars to solve a problem, was the first answer was always no. And that in the future, to the extent that you couldn’t solve it through creative programming or what have you, that potentially you’d loosen the purse strings. But the reality is, is that smart engineering was an important part of how you approached building the business.

Michelle Zatlyn: That’s exactly right.

Ben Dahl: In terms of when you were ideating on CloudFlare, how did you get to a conviction on the scale of what you were solving and the size of the market? Because largely at that point, particularly on both the content delivery, but also the web security side, this was not a problem that people were really focused on.

Michelle Zatlyn: I’m going to answer this question, but I want to make one caveat to my answer. When Matthew and Lee and I started CloudFlare, we really wanted to build a big company. That was our desire. And so a lot of my perspective is always behind building big companies. Again, a multibillion dollar public company. That’s what we wanted to do. And so I’m going to answer your question, because that was the frame of mind of what I was looking for. I was looking for a big, meaningful, hairy problem to solve that was going to turn into a big company. But there’s lots of different ways to build businesses, and there’s lots of amazing companies that never become a multibillion dollar company that are equally great and profitable, they’re just different.

So the advice that I’m going to share is really related to this swing for the fence model, and that works for some people and less for others. And so when we think back to what was happening when we started back in 2010 when we were working on this idea in 2009, we just saw there’s this huge shift going on, where we were going from a world from hardware and software that you owned, to services in the cloud that you rented. And I remember AWS was growing really quickly. And at the time there was a big debate of, will big companies ever really use AWS? Well fast forward 10 years later, that seems like such a naive thing to say today. I mean, them and Azure, they’ve just had tremendous success. But 10 years ago that wasn’t a given.

And so this huge shift was going on. There was all these software companies and then the advent of all these SAS application companies like Salesforce and Workday that were breakout successes. And we saw the same thing happening at the network layer where, yeah businesses have always wanted to be fast, safe, and reliable and I used to buy a lot of hardware boxes. And we said, can we turn that into a global service in the cloud that customers rent from us? And we knew that was a big idea. And there was just this huge shift going on. So again, kind of this idea there was a big market and there was a tailwind and there was this macroeconomic shift, which creates opportunities for new entrants. So that was the first kind of aha.

And the second thing that I was really proud of, and I think that if you’re a founder that can find both, it’s like, wow, there’s a big business here. Because the first thing you have to ask yourself, is there a business here because businesses are what sustain.

The second aha that we had was our go to market where we wanted to start with all of the startups and small businesses and nonprofits and developers out there, who today were using nothing. Because they didn’t have the budget or technical resources to buy these enterprise-grade services that existed for big companies. And so we had this big aha, like wow, we’re going to start with small businesses and small websites, and developers and startups and nonprofits who need to be fast, safe, and reliable around the world, and today they’re using nothing. So when we launched, our competitor was nothing. We were trying to get people to go from using nothing to something. And so we had to make it ridiculously easy to sign up and attractive. And if we did, it would kind of become a flywheel, knowing that our end goal is not only do we want to help startups and entrepreneurs and small businesses and developers and nonprofits, but over time, we also wanted to go help medium-sized businesses and large organizations and big enterprises and government organizations. And again, fast forward to today, we do all of that.

But early on we really started with a different go to market, and that allowed us to build our product and our technology and get momentum, so that we can then go compete more heavily with current competitors among large enterprises. And so it was those two things, it was like, “Wow, there’s a big macroeconomic shift. If we can help make the internet better for all these people around the world who currently have nothing, I’d be really proud to work on that.” And so it’s this idea of, I thought there was a big business opportunity and something that I think Matthew and Lee and I were really proud to show up every day and work really hard on.

Ben Dahl: One thing that I think it’s worth spending a brief moment on is just the distinction between good technology and a good business. And I think one thing that you and Matthew have always been focused on, is building both, really solid technology and a good business. But I think for people that are thinking about building a business in this environment, it’s not just solving a hard technological problem, but it’s also creating a real business out of it. And I think it’s worth you talking about that for a few minutes.

Michelle Zatlyn: Yeah. So again, when you start a company and then now we’ve scaled it to, in 2019 we did about we did 287 million in revenue last year. So just to give you a sense of going from 0 to 287 million in revenue last year. And some time along the way you realize as a founder, it’s all about mission and your vision, and do I have a problem here and how can I get people to come work for me? And how do I make sure that people love where they’re working? But at some point I remember having this big realization of “Wow, we’re founders and a business owner.” And it’s really hard for a company, you cannot, tech is amazing. I mean, we’re an engineering-driven company and that’s where we love and we celebrate it. But it is so hard to compare technology between one company and another. It’s way easier to compare business metrics.

And so at some point we had to keep all the great things about our technology. It is about the tech. We love that. It’s differentiation. We live that on a daily basis. But at the end of the day we also had to put our business owner hats on, and the questions we ask ourselves as business owners are different. They’re like, how fast can we acquire a customer? Do they renew our service? Do they want to adopt more of our services? How happy are they? How much does it cost us to deliver this service to them? And it turns out you really need to do both. And I think some founders forget about caring about the business metrics and I actually think that’s a real mistake. Because at the end of the day, if you have a really great business around awesome technology, that’s when magic happens.

And so I did not realize this on day one. And I wish someone had kind of come up to me in the face and told me really directly, “Michelle, at some point you got to think about the business metrics.” And for us it was around 50, 60, 70, 80 million in revenue that I really had an aha of like, “Oh wow, we are going to get compared on these KPIs and these metrics.” A, I got to know what they mean. And B, which ones are we good at today and which ones are we bad at? And the ones that we are bad at, how are we going to get better at them? And then over time we slowly moved them in a direction that we’re proud of. And even today there’s some that are better than others and we continue to work at it. But I think the faster that founders can realize that they’re also running a business, I hope that that means you’ll get to 80, 100 million in revenue faster than we did.

Ben Dahl: So as you think about that evolution as a company, how did you instill a culture that was about leveling up and continuing to evolve, and surrounding yourself with the people that you needed to build that business?

Michelle Zatlyn: Well, there’s kind of two points to that. There’s both the people you bring in to hire, to be part… Again, it doesn’t matter how great the founders are, you need a team to go really far. And I think trying to get that first team to come join you and then scaling the team. And who you need to be your first 20 teammates, who you need to be 20 to 100, who you need to go from 300 to 2000. Actually, people look different in those stages. And some things are the same, people matter. They make a huge difference. And there’s a huge difference between a great hire and a good hire at all those stages. But the types of person that we used to hire when we had 50 people in the company looked different than what we look for today.

Today it’s all about people who understand process and repetitive motion and automating things so we can do those things really efficiently so we can free up time and resources to do other things that help give us leverage in our business, versus when you’re employee number 20 or 30 or 40, you just need a lot of doers to roll up and do the actual work because you’re in build mode, build, build, build. And I think that the types of people you look for along the way are different. Once you have great people on your team, you want to make sure that they stay.

I was talking to one founder a couple of weeks ago, and they were really proud that they had 30% attrition of their team last year. And I said, “30%? That’s really high.”

And they said, “No, no, no. In a startup it’s normal for people to leave that often.”

I was like, “Well it’s true. People leave more frequently than a larger company, but 30% annual attrition, there’s something wrong. Either you’re not hiring the right people in, or you’re not a very good place to work.” I think most high-growth tech companies have annual attrition of 10 to 20%, and maybe 15 to 20% is considered average. So you want to be less than 25 and you want to be less than 20. And maybe in a nano point of time, it spikes because you’re going through some really important transition. But again, most of your peers are at 15 to 20% annually and you’re up at 25 to 30, something is wrong. Either you’re not spending enough time on the hiring side, or once they’re at your company, they feel like they can’t contribute or it’s not a good place to work, or the culture is bad or something is broken. And I really encouraged that founder to go back rethink what they thought was good there.

And at the end of the day that’s a leadership decision from founders of saying, “What kind of place do we want this to be for people to work?” And I think there’s lots of great stories. And then recently in the news, the last few years, there’s been some terrible stories. And I actually think it’s upon all of us as leaders in the tech industry to show there’s lots of ways to create a work environment, and some can be really healthy and be a place where people choose to work and want to be and have huge success stories. So that’s for the team and getting people in.

I would say one thing that we’ve done that worked really well for us that isn’t always well-appreciated or agreed upon, it just worked for us, is that hiring managers. We have a belief that people come work for their manager, and they stay if they like their manager. And so our hiring managers are heavily involved with hiring. And early on we didn’t have any managers so that meant the founders did most of the hiring. And then we hired managers and they did it. And when we were at less than 100 people, 50% of my time was hiring. So you just feel like you’re always looking for people to join. And I also had all my other things I had to do so it just meant I was working all the time.

And today of course, we have a recruiting team. We have a great recruiting team and they partner with the hiring managers. But even to this day, hiring managers are responsible for building their teams. And again, we have a much bigger organization today, and the recruiters partner with them to build great people in. And even to this day our hiring managers spends about 20% of their time hiring every week. And that might not sound like a lot, that’s like one day a week, or two hours every single day. And I just don’t believe you can outsource it. Good people, and we think there’s a big difference and a great hire and a good hire, and great people want to work for great people, and they need to know their manager.

So that’s a little bit about getting great people to come into your company. I think if you’re thinking about a founder scaling and how do you scale yourself through all these different phases, it’s slightly different. Because it’s rare to start a company and then still be running the company as a public company. And I’m really proud of that, and I know Matthew’s really proud of that. And I hope that, we have role models above us, whether it’s Marc Benioff and Parker Harris. Or whether it’s the Shopify founders or Atlassian or Jeff Lawson at Twilio. They are definitely people that we can look up to and I hope there’s a whole other class of companies coming up behind saying, “Wow, they did it. We want to do it too,” because I definitely think it’s possible.

And I guess there’s a couple of things I’d say about scaling yourself as a founder is, I remember someone said this to me once and they were totally right. They’re like, “Either you’re running your business, or your business is running you, and you got to decide which one it is.” And I mean, I’m a competitive person. Obviously I want to run the business. I don’t want the business to run me. And this is kind of going from a founder hat to a business owner hat. And so you got to do things to scale with the business because what matters at 20 million in revenue is different than a 100 million. It’s different at 300 million. And I think that if you can be a sponge, that is like, if I can only give you one piece of like advice, it’d be, be a sponge, this growth mindset, constantly learning. Read.

At SaaStr, Jason Lemkin and his team do an amazing job getting people here to help you. And if you just show up and listen for free, you will avoid making so many mistakes and grow as a leader. That’s what I did. I went to a lot of things like this and I learned from people ahead of me and we got to where we were faster. So there’s so many resources today that help you learn as a founder, way more than 10 years ago. It’s pretty phenomenal. You can read books and whatnot. I think as you hire your leadership team, sometimes people don’t want to hire people as good as them because they’re worried that they’re going to look bad. That’s rookie mistake 101. You need to hire a leadership team that’s better at you than everything you do. Because, as long as you’re confident that you’re the vision, you’re the founder, you’re going to care about this more than anyone ever does. And if you can partner with these amazing leaders who are so good, the best head of product, the best head of engineering, the best CMO and the best chief revenue officer, and you all get everyone rowing in the same direction, that’s how you build an amazing business, as a team together. And so you’ve got to really hire a leadership team better than you.

Ben Dahl: Well, Michelle, thank you for answering my questions.

Michelle Zatlyn: Yeah, likewise. And thanks to everyone who listened in and hopefully it was helpful. And I can’t wait to see everything you build and I hope you all build big companies quicker because you learned something today.

Announcer: Say goodbye to slip-ups. Old news is a thing of the past. With Guru’s verification tool, you’ll always be confident that your team’s knowledge is up to date and accurate, because it’s verified by your in-house experts. SaaStr listeners can get Guru for free today by visiting getguru.com/saastr.

 

The post SaaStr Podcasts for the Week with appeared first on SaaStr.

SaaStr Podcasts for the Week with Work-Bench and Initialized Capital — May 8, 2020


This post is by Deborah Findling from SaaStr

 

 

 

 

 

 

Ep. 331: Jessica Lin is a Co-Founder and General Partner @ Work-Bench, one of New York’s leading early-stage enterprise funds with a portfolio including the likes of Cockroach Labs, X.ai, Dialpad, VTS and Catalyst to name a few. Prior to Work-Bench, Jessica was a Learning and Development Manager at Cisco Systems, where she worked with the Engineering organization on Agile transformation, innovation and culture. Jessica is actively involved with the education and workforce development community in New York City and as chair of the Industry Advisory Board at Opportunities for a Better Tomorrow.

Pssst 🗣 Loving our podcast content? Listen to the start of the episode for a promo code to our upcoming events!

In Today’s Episode We Discuss:

* How Jessica made her way from learning Swahili into the world of enterprise and into the world of venture with the founding of Work-Bench?
* How should founders expect to see their new business pipe be impacted by COVID? What does Jessica believe is the right way to do proper pipe reviews? What specific elements does Jessica really double click on in reviews? Where does Jessica find managers and founders do pipe reviews wrong?
* What does Jessica believe is the right way for sales reps to engage with new customers during this time? What is the right tone to adopt that achieves both empathy and a business objective? How should sales teams and CS respond to requests for discounts? What should be the compromise with discounts?
* What specific and deliberate things can startups do not just to prevent churn but also to increase usage and upsell? Does Jessica agree with the rule of thumb that in enterprise, on an annual basis, 95% of your customers should retain? What other strategies has Jessica seen work really well for retention?

 

Ep. 332: Prepare for the worst, hope for the best. Hear from Garry Tan, co-founder and managing partner at Initialized Capital, about how to protect your business during a crisis. He’ll cover remote work, team management, sales, marketing, product development, and more.

 

This podcast is sponsored by Guru.

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This podcast is an excerpt from Garry’s session at SaaStr Summit.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Jessica Lin
Garry Tan

Below, we’ve shared the transcript of Harry’s interview with Jessica.

Harry Stebbings: Welcome back to the official SaaStr podcast with me, Harry Stebbings. And if you’d like to suggest future guests or questions for the show, you can on Instagram, @hstebbings1996 with two Bs. But to our episode today, and I’ve been such a fan of the model this team have built. They’ve also been incredible community builders and players in the New York tech ecosystem over the last few years, and I’m so very excited to welcome Jessica Lin, co-founder and general partner at Work-Bench, won new York’s leading early stage enterprise funds, with a portfolio including the likes of Cockroach Labs, X.ai, Dialpad, VTS and Catalyst, to name a few.

Harry Stebbings: Prior to Work-Bench, Jessica was a learning and development manager at Cisco Systems where she worked with the engineering organization on agile transformation, innovation and culture. Jessica is also actively involved with the education and workforce development community in New York city, and serves as chair of the Industry Advisory Board at Opportunities for a Better Tomorrow.

Harry Stebbings: But enough from me. So, now I’m very excited to hand over to Jessica Lin, co-founder and General Partner at Work-Bench. Jessica, it is such a pleasure to have you on the show today. I’ve heard so many great things from the one and only Jonathan Lehr. So, thank you so much for joining me today, Jessica.

Jessica Lin: Thank you so much, Harry, for having me.

Harry Stebbings: Not at all. I’ve actually really wanted to see this one for a long time. I love the Work-Bench model. But I do want to start today with a bit about you. So, how did you make your way into the world of SaaS, and how did you come to co-found Work-Bench? What was that aha moment?

Jessica Lin: Well, again, as you said, you may know us at Work-Bench as IT to VC with my co-founder Jonathan Lehr, who joined your podcast in 2017, John coming from Morgan Stanley corporate IT, my colleague Kelly coming from Forrester Research. But I’m actually not only IT to VC, I’m also Swahili to VC. So, I studied International Development in Swahili in undergrad, thought I was going to end up in a career in global health, but then serendipitously ended up taking an engineering class in my senior year of college that led me down a path of working with student startups.

Jessica Lin: Then, serendipitously again, took on a role at Cisco Systems, working with really great internal engineering teams. So, my story is the ultimate story of pivots, of having really lived and breathed our motto at Work-Bench as an enterprise tech VC fund, which is that great things happen at the intersection of suits and hoodies.

Harry Stebbings: Absolutely it does. I have one very pressing question. Have you ever used your Swahili in work?

Jessica Lin: I need to find more use cases for that for sure.

Harry Stebbings: It’s a burgeoning enterprise ecosystem, I’m sure.

Jessica Lin: Absolutely.

Harry Stebbings: I do want to dive in straight though because it’s such a pressing and interesting environment right now, and I want to start on the lifeblood of any business, which is the sales. Everyone is anticipating COVID will kill the majority of pipe and new business discussions. If we get a sense of the lay of the land, when you sit down with your company’s pipe reviews, how should founders expect to see their new business pipe be impacted?

Jessica Lin: Absolutely. And how we review pipe now is actually the same as how we review any other time with our portfolio companies. I think a lot of SaaS VCs tend to look only at booked business or MRR, but where we like to spend time is actually a layer deeper, because we know just how nuanced enterprise sales can be, and most of all that they take a very long time and can be very complex. So, that means in every pipeline review, understanding, one, deal velocity. How are your meetings progressing, who are they progressing with, are the right stakeholders in the room, what’s the next action step, how fast is the next followup meeting getting scheduled, how are pilots going, and what else can we be doing to get our clients onboarded as soon as possible?

Jessica Lin: Then, most of all, really the quality of the pipeline. How can we continue experimenting to grow the top of the funnel, whether it’s content, now virtual events and more. We’re of course taking into account COVID, that there are delays, that stakeholders may be distracted, but we’re also still hearing demand from our corporate network.

Harry Stebbings: Can I ask, and this is totally off schedule, but why not? In terms of the stakeholders themselves, I always have the perception in my mind that if you’re not a top one, two, or three enterprise buy for the CIO, it’s going to be fundamentally challenging. And honestly, I don’t find it so interesting. Is that shortsighted of me given the huge amount of software that CIOs and the stakeholders have to engage with today, or do you think it is right to have that very rigid prioritization in mind?

Jessica Lin: One of the things that we talk a lot about with our companies and with our Work-Bench community is that the misconception is to go straight to the CIO. The CIO is the top dog, they have all the budget dollars to spend. But in our experience at Work-Bench, what we’re seeing is that the actual stakeholders who are evaluating and assessing your tech as a vendor is really N minus one, N minus two, N minus three. So, the titles may be MD, VP, director, and we actually advise our companies to go deeper within the org, and that’s where you’re going to find technologists who really appreciate and have the bandwidth and capacity to understand what you’re doing.

Harry Stebbings: Can I ask, how do you deepen that relationship when the CIO or the stakeholder is maybe more in the top echelons of the enterprise? How do you deepen that relationship and look to build those maybe more product champions when your key primary contact is in the higher echelons?

Jessica Lin: Yeah, and this is so much of what even we do at Work-Bench as we build up the corporate network, it really is about how do you provide value to those executives? And a lot of them really love tech. That’s the key part is that they really love learning about new tech, about what’s out there, about how these technologies will transform what they’re doing in their business. So, we really advise our companies to be able to build those relationships really authentically.

Jessica Lin: A sale may not happen within three months or even six months, but the more you can provide value to them, whether it’s connecting them with other peers, whether it’s inviting them to events, whether it’s sharing, those are the types of relationships and investment where you can see the enterprise relationship pay off, maybe sometimes even one to two years down the line, but can be very worth it.

Harry Stebbings: Totally, in terms of that sales cycle. You also mentioned pilots there, and it can be a nice onboarding into a much longer and more formal relationship. How have you seen the best engage with offering pilots, and what’s the structure of the pilots that you tend to advise when selling to enterprise?

Jessica Lin: Yeah, I think that’s the number one thing for especially the enterprise. And a big part of it is that time kills all deals, and this is more true than ever. So, how do you get people using and loving your product asap? So, you really need to speed up onboarding, especially for an enterprise customer. So, our company, Arthur, an explainable AI company, realized that the regulated industries they sell into also want their solution on prem, even during a pilot phase. So, they set up an install that now only takes 15 minutes per deployment, and also rolled out sample data sets and models so that customers can download and get models pumping into their platform in minutes.

Jessica Lin: Our company Fire Hydrant and Incident Response platform has set up what are effectively sandbox simulations where their prospective customers can actually use Fire Hydrant in the case of a simulated outage. So, it pulls the now-remote now-distributed reliability teams together and lets them collaborate on solving the problem where they can feel the power of the platform firsthand. So, I always advise our companies, it’s really accelerating the time to value.

Jessica Lin: How can you make sure your customer gets fully onboarded as soon as possible, which again, sometimes can take up to three months in the enterprise with implementation and deployment, and then make sure that there’s really high usage and active engagement within the first three months so that customers can see your ROI in value in that time, and that the next six months then can be focused on upselling and cross selling in the renewal.

Harry Stebbings: In terms of optimizing the onboarding, often for enterprise it can be a launch part, coaching, professional services, very much in-person, high touch, where the team really comes in and spends time on site. How do you think that high touch professional services onboarding changes in a COVID world?

Jessica Lin: Yeah, I think so much of that is being creatively done now, and we’re finding that there’s new ways, and a lot of it is blending. I think so much of new sales and customer success are blending together, and that’s actually for the best, but the love you show for your existing customers, you can now extend to new prospects as well. And I love that joke around VCs, “Let me know how I can help.” Well, this is true for enterprise start-ups too, instead of saying in generic, “How can I help?” go to your customers and prospects with three specific needs where you can help out the most based on other customers you’re working with.

Jessica Lin: So, for example, our company, RippleMatch, they started hosting community chats for university recruiters across their enterprise customers and prospects. These were really curated sessions where small groups of campus recruiters could have a safe space and come together and share what they’re doing around recruiting this year. Our company, Catalyst, a customer success platform, has been offering trainings, not only to customer success managers, but to so many other functions like support and product, since customer success and retention is so critical in this time cross-functionally.

Jessica Lin: So, I think it just looks and takes on a slightly different form, but being able to offer something that will truly help improve your customers and prospects lives is really what’s going to make you stand out during this time.

Harry Stebbings: You mentioned some of the companies that, in terms of Catalyst, RippleMatch, they’ve really done it well. When you look across the landscape and suite of companies, where do you think many potentially go wrong in terms of really engaging that enterprise sale, also maybe in the midst of COVID?

Jessica Lin: For many people, it’s tempting to throw out all messaging out the door and try to sell to COVID, and that may be relevant in a few industries like healthcare, but for most other enterprise software companies the principles still hold true. What is the technology, what is a unique opportunity, and what is the ROI that I can bring to my customer? We had Kelly Breslin, previously the EVP of Sales at Tableau, who led the company to over $1 billion in revenue, on one of our webinars yesterday at Work-Bench. And she said that, with Tableau in 2008 during the financial crisis, they actually didn’t change their messaging. If anything, actually reinforced their current mission, which became more important than ever.

Jessica Lin: So, if anything, it’s not just selling features, it’s not just selling functions, it’s about telling your story. So, for your customers, sharing with them user stories, how are other customers using your product. It may help illustrate new use cases that your prospects may not have known about before. Now, on the flip side, there is a chance that your messaging does have to change during this time in this new environment, and Bob Tinker, the founder and former CEO of MobileIron, shared with us that in 2008, for their smartphone security and management product, the downturn actually forced them to change their messaging.

Jessica Lin: They had previously gone out with a productivity pitch, but they realized that what was way more compelling to customers was cost savings, which honestly ended up being a huge inflection point for them, even better for them in the long run. And the hardest thing, Bob said, is for founders to let go of their founding idea. It can feel really uncomfortable. But you may need to go out and test new ideas, potentially refine or go-to-market urgency fit by validating customer’s new top pain points during this time.

Harry Stebbings: Yeah, no, absolutely. I totally agree, especially in terms of that more human narrative behind it. I guess, thinking about that human narrative, how do you advise founders and reps on the right tone to engage with potential customers in this time. It’s such a tough time, because you need to be empathetic, kind and caring, but you also have to achieve business objectives. So, what’s the right blend in terms of the tone that you adopt these discussions?

Jessica Lin: Bob said it best. During tough times like these for founders, you have to have both empathy, but also ruthlessness. And that gets talked about less. And I love that duality. And I see it in our founders. All of our enterprise companies still have sales targets. They may be adjusted, but the targets are still there, and they may just have to be more creative than ever to hit them. And I do think there is a way to strike that balance. And the best way really to do that is simple. It’s to truly care about your customers. And if you truly care about your customers in an authentic, genuine way, then you can be ruthless [inaudible 00:13:42] about solving problems for their business.

Harry Stebbings: Can I ask you, you mentioned target sales, and it’s such an interesting talking point for me, in particular. I’m really passionate about this one. And it’s, when you think about target assessing with your companies, and you were really part of that active discussion, how do you set targets that are ambitious and really stretch targets, but also you don’t want to create ones which are unachievable and will create disincentives within the team and then lack of morale if they’re not hit? How do you strike that fine balance, and what does that decision making process look like for you with the founders?

Jessica Lin: I think about that a lot, especially for sales teams who may be harder for them right now to close new sales during this time. And I think the key takeaway and lesson here is really just to over communicate. And what I mean by that is saying, “Hey look, we may have to adjust targets. This is how we may be able to make it up to you, whether it’s through spiffs, through other accelerants,” but to constantly be clear with your sales teams. Something I’ve heard from a lot of account execs right now, it’s less about the fact that they may not hit their original targets, but it’s the fact that they don’t have a clear roadmap in mind. What should I be doing with my time?

Jessica Lin: And again, sales teams tend to be very competitive. They like to have goals, they like to have metrics. So, I think as long as it’s very clear to the sales teams, “Hey look, we may have you focus less on closing new sales, but can we have you work at the top of the pipeline? Can we help you help out more with customer success?”, then I think that can be something that’s really important for sales teams and founders to be seen right now.

Harry Stebbings: Can I ask, I had Ben [inaudible 00:15:10], CR of [inaudible 00:15:11] on the show, and he denigrated the specialization of sales and said, really, you lose that natural human relationship when he was simply passed off from SDR to RAP to AE. How do you think about the specialization of sales, if that’s right, and do you lose that human relationship with the mechanical policy?

Jessica Lin: I do think, like I said earlier, that customer success and sales are blending now, and so much of what you were doing, again, for existing customers you should be doing for new prospects. So, I do think perhaps in the future that those lines will be a bit more blurred. I do think it’s still helpful to have some organizational structure, especially as teams grow bigger and bigger, but that customer success mindset coming to the center or for the organization. I actually think it’s a change for the better.

Harry Stebbings: I do agree. I think it’s better for the customer, fundamentally. I do want to ask, you mentioned customer success, that being more and more important than ever. If we dive in a bit, what specific and deliberate things can start-ups do, not just to avoid churn, but also on the upside, to expand the usage and upsell?

Jessica Lin: Yeah. So much of what I shared a bit with RippleMatch and Catalysts I think is so critical. And the key is how do you get customers using the product during this time. And there are of course products perhaps within dev ops, security, automation, that will be seen as more essential during this time, but it’s really proving that time to value that I mentioned earlier that is going to be so critical so that when renewal does come up, you can prove very clearly to them, “Hey, this is how much you’ve been able to use our product and for this ROI.”

Jessica Lin: And a great example, like I mentioned, is our company, Catalyst, the customer success platform, and what they’re seeing with their platform is more and more usage, again, not with just customer success managers, but across product, across sales, across marketing, coming in and using their platform to understand customer health, and again, what their customers need. So, it’s a bit meta, but it truly is showing that customer success is now the center of our organization.

Harry Stebbings: We love a good meta point, don’t we, on that one. But you mentioned that the renewals, and one thing I think we will see obviously a lot of, and I’m by no means that wise person for this, but I think we’ll see a huge obviously amount of discounts coming back. How would you advise, and how do you advise your founders to approach discounts, and how to think that through?

Jessica Lin: Yeah, I do believe at least at the early stage that we’re investing in, at the C2, that offering a discount to an enterprise or a larger logo can be worth it in this environment, but then you do have to write in your contract around price increases for your two, or just make it a one year deal, and then you readjust when the macro environment improves. And I do still think big contracts can still get done at the enterprise. We’re seeing this with our start-ups selling into large Fortune 500s. We just had a company close a multi-year, multi hundred thousand dollar deal with a large pharma company.

Jessica Lin: And the key is, of course, which sector and function. But if it’s a true pain point at the enterprise, it shouldn’t be a budget issue, from what we’re seeing. It tends to be a bit more black and white for large enterprises. Either there’s a budget freeze, or there’s cash to spend, and it might just get pushed back a quarter or two.

Harry Stebbings: Totally. And I always find a give and take, we give the discount, but then we’d also love for an extensive case study to be available from you guys, as a bit of a compromise. I think there’s a lot that you can negotiate with. I do want to ask, because there’s a lot of rules of thumb in enterprise around churn specifically, and that when we’re talking about customer success, often people will say logo should retain 95% on an annual basis. This is one of the core rules of thumb. Would you agree with this, and how do you think about the rules of thumb around churn, and maybe the ones you agree with versus disagree with?

Jessica Lin: Yes, I do think that’s a general good rule of thumb. What I will say is different than perhaps SMB is that, in the Fortune 500 with enterprise customers, your contracts are either churning, renewing at flat, or expanding. And it tends to be a bit more tied to the hip is what we see. And that’s why enterprise deals are of course so much more painful to close, but when you do get them they’re stickier. It’s that 12 to 18 month sales cycle versus the two to three month SMB contract. So, we do see that a bit more closely tied together, logo versus all our retention.

Harry Stebbings: Yeah, no totally, especially in the tie. I’m interested, because a lot of VCs always shirk when they hear the elements of professional services. I personally quite like it. Obviously not as good for the margin, but fundamentally, I think great for the retention and usage. How do you feel on the professional services basis, and what do you think is a healthy ratio of product to professional services rev?

Jessica Lin: At the early stage, what we’re seeing, we really advise our companies to just invest as much as possible in customer success and professional services. And especially in the early days where product is still getting built out, that’s where actually so much understanding from your customers of what needs to be built into products so it can be automated more in the future, is so important. So, the more that you can invest there in customer success, it feeds so much better into product, and that’s where staying close to your customer, customer feedback, can be such a critical part of your product roadmap and development.

Harry Stebbings: Yeah, no, I’m totally with you in terms of that, super tight communications channel. Can I ask, I want to delve into Work-Bench a bit more as an organization now, especially in terms of the current times, because Work-Bench has a specific strategy around events and community, and it’s absolutely killed in the last years. As I said, I love your model, and so many people talk to me about your events. It’s incredible. But I wanted to talk about how it’s been impacted in the recent environment. So, how have you adapted your approach and strategy in the face of COVID and the rise of virtual events?

Jessica Lin: Absolutely. Community has been such a core part of our DNA at Work-Bench since day one. We’ve, in the past, hosted up to 200 enterprise events a year in New York, and we’ve moved everything online. And in a way that surprised me. I’ve actually enjoyed it a lot more than I thought we would. It’s easier than ever to spin up events. There’s more access, more people across the country, the world can join. So, we’ve been doing at least one or two webinars and events a week with Fortune 500s, founders, sales leaders, our corporate round tables, sales leader chats. And the number one thing I always say is that, content still needs to be number one. And I think most conferences assume that speakers got it. And I actually think the opposite. I think most speakers need practice, they need feedback, they need run-throughs. So, don’t assume that can be masked on a Zoom.

Harry Stebbings: I totally agree. Can I ask, what do you find about the best speakers that makes them so good? I certainly have a lot of thoughts on this given the podcast, but what do you find makes the best so good?

Jessica Lin: I think it’s a lot of practice to be honest. We hosted a massive women in enterprise tech summit two years ago called Navigate, and the amount of time I saw our speakers put into their individual presentations, I think, has a direct correlation. The more time you put in, the more feedback you get, the more comfortable you’ll be, the more fun you’ll have. And I think that really comes through and resonates with the audience.

Harry Stebbings: Yeah, no, I’m totally with you in terms of the preparation. I guess, for you as the organizer of the event, have there been any big learnings in terms of what it takes to run a really successful online event, and I guess, why do you think many are maybe going wrong today as they make that transition?

Jessica Lin: I think even if mistakes are being made right now, they’re being made in the spirit of creativity, and we’re seeing so much creativity and personality and full throwers. I love what our company Fire Hydrant did. They actually created a video for a sponsored happy hour at a virtual developer conference on how to make an old fashioned drink. It was so well done, it had a great sense of humor, and I think it just really resonated. And we always do it. I worked [inaudible 00:22:40] at our events, it’s a tradition. And we had a presenter last week actually show a photo of herself via Zoom screen share of her sitting on an ostrich. These are things that were hard to do in person before. So, I think it’s having fun and recognizing that we’re all learning along with each other. That is so important during this time.

Harry Stebbings: Well, I mean I’ve never quite had anyone share a photo of them on an ostrich, and I’ve done over 3000 entities. So, clearly I’m missing something. I do want to move into my favorite element now, Jessica, which is the quick fire round. So, I’ll say a short statement, and then you hit me with your immediate thoughts, about 60 seconds or less. Are you ready to dive in?

Jessica Lin: Ready to go.

Harry Stebbings: Okay. So, the New York tech ecosystem, the pros and the cons.

Jessica Lin: The pros, I love our pizza, our hustle, our [inaudible 00:23:22], our geography, getting uptown and downtown in minutes, our diversity of industries, the number of suits and customers in New York, unmatched anywhere else in the country. And we’re all missing New York City so much right now, and praying for it to fight and come back during this time. What’s hard for New York, and I think specific to enterprise, is that certain enterprise roles are, of course, so harder to hire for. And it’s really just a function of not having had that long time enterprise ecosystem here. So, talent like enterprise marketing, product managers with a lot of experience, that’s still quite competitive to hire them.

Harry Stebbings: Can I ask, with the cost inefficiency of the Valley, with, I think everyone would agree, probably worsening living conditions in the Valley, are you seeing a migration of top tech talent from the Valley to New York?

Jessica Lin: We absolutely are. And we’re seeing a lot of folks say, “Hey, I’ve always wanted to live in New York,” come out. We’ve seen founders, serial founders who may have started their first company out in the Bay but have decided to start their second or third company in New York city. So, we’re so excited for that and we welcome them with big arms.

Harry Stebbings: Tell me the hardest element of your role with Work-Bench today.

Jessica Lin: I think it’s the hardest, but it’s also the best, which is just constant context switching and so much learning. So, constantly learning, constantly having to teach myself new things, new technologies, companies, peoples, deals, events, content, customer insights, our own fundraising, hustling alongside our start-ups. And it’s the best part of the job, but also by Friday my head actually hurts from just so much stuff in it. And we always joke at Work-Bench that on Fridays, “Did that happen this week?” because whatever happened on a Monday usually feels like two weeks ago by then.

Harry Stebbings: I totally agree, and I think in some ways magical thing about founding your own firm, knowing that I … It’s such a start-up, and I don’t think people quite realize how much of an operator founder fund managers are.

Jessica Lin: Absolutely.

Harry Stebbings: Tell me, what would you most like to change in the world of SaaS and enterprise SaaS today?

Jessica Lin: I would say this about enterprise, which is, at Work-Bench, honestly, we’ve tried to just make enterprise more fun and more accessible. It’s historically been a white man’s game, and I think that’s why enterprise tech faces more diversity challenges than perhaps consumer tech or other verticals. But we’re making inroads, and that’s why we do so much to grow the New York tech community. Tons of events, think a lot about how to make it welcoming, and do a lot in supporting women enterprise across our women and enterprise founders database, our workshops, our lunches or conferences, and more.

Harry Stebbings: Jessica, hit me. Final one. What’s the most recent publicly announced investment, and why did you say yes and get so excited?

Jessica Lin: This is great timing because again, our company, Catalyst, a customer success platform, just announced their $25 million series B led by Spark Capital yesterday, and we actually met the founders back in 2016 through our New York city community when the founders were at Digital Ocean, and Ed, the CEO, led customer success there. And given our community with the VP customer success dinners, and [inaudible 00:26:21] we hosted, we saw this tremendous demand for truly unified customer success platform, and how Ed and Kevin [inaudible 00:26:28] really stood out.

Jessica Lin: So, they started Catalyst in 2017. We’ve led their C2 back in 2018, and we’ve been honored to be a part of their ride in New York City ever since. And as we’ve talked about so much, customer success is now being moved to the center of the org. And for us to have met them as a part of our Work-Bench community so many years ago, it just feels very full circle.

Harry Stebbings: Jessica, as I said, been a huge fan of the model for a long time. I loved having Jonathan on. I’ve wanted to make this happen for quite a while, so, thank you so much for joining me today, and it’s been a lot of fun.

Jessica Lin: Thanks, Harry, it’s been such a blast.

Harry Stebbings: As I said at the beginning, huge fan of that model and such exciting times ahead with Work-Bench. And if you’d like to see more from us behind the scenes, you can do so on Instagram at hstebbings1996 with two Bs. I always love to see that.

The post SaaStr Podcasts for the Week with Work-Bench and Initialized Capital — May 8, 2020 appeared first on SaaStr.

SaaStr Podcasts for the Week with Domo and Gorgias — April 24, 2020


This post is by Deborah Findling from SaaStr

 

 

 

 

Ep. 327: John Mellor is Chief Strategy Officer @ Domo, the company that allows you to leverage BI at scale to empower your team with data. Prior to their IPO, Domo raised funding from the likes of Benchmark, Founders Fund, a16, Greylock and IVP to name a few. As for John, prior to Domo he served as vice president for strategy and business operations for Adobe’s Digital Experience business, driving more than $3 billion in annual revenue. John joined Adobe through the company’s acquisition of Omniture in 2009, where he served as executive vice president of marketing, driving all marketing efforts to strategically advance the industry’s largest standalone web analytics business.

Pssst 🗣 Loving our podcast content? Listen to the start of the episode for a promo code to our upcoming events!

In Today’s Episode We Discuss:

* How did John make his way into the world of SaaS over 2 decades ago and how did that lead to his running a $3Bn ARR business line at Adobe and lead to his joining Domo? What were John’s biggest takeaways from his decade at Adobe?
* Why does John believe that COVID will be a bigger accelerant than any other C-level led initiative? For vendors going through that digital transformation with their customers, what is the right tone to adopt that is both empathetic and achieves business objectives? Is digital transformation a technology challenge or a behavioral challenge?
* How will a 100% virtual event environment impact physical events when and if they do come back? What were John’s biggest takeaways from running Domo’s annual event virtually? What worked? What did not work? On a conversion basis, how did it compare to in-person events? How should we structure content for these virtual events?
* How does John think about the role of leadership in a crisis such as this? What is the right tone for the leader to adopt? Where does John believe many leadership teams go wrong in times such as this? How can leadership teams ensure that a crisis is not self-fulfilling and how can one prevent that mindset?

 

Ep. 328: Romain Lapeyre is CEO of Gorgias. Gorgias is the leading help center on the Shopify platform, and that gives them a pulse into a large segment of SMBs in particular. They have almost 2,500 customers in segments both struggling (fashion, luxury), and growing (electronics, etc.). They are coming up on $10m ARR but aren’t there quite yet, so a lot like a lot of you, or where you’ll be soon enough.

This episode is sponsored by TaxJar.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This podcast is an excerpt from Jason’s discussion with Romain. You can watch the full video here.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
John Mellor
Romain Lapeyre

Below, we’ve shared the transcript of Harry’s interview with John.

Harry Stebbings: We are back in the world of SaaS. This is SaaStr with me, Harry Stebbings, and we’re diving straight into the show today with a first for the podcast, the first ever chief strategy officer we’ve had on the show. And they do not come more respected and experienced than our guest today, John Mellor. John Mellor is the Chief Strategy Officer at Domo, the company that allows you to leverage business intelligence at scale to empower your team with data. And prior to their IPO, Domo raised funding from some of the best in the business including Benchmark, Founders Fund, Andreessen Horowitz, Greylock, and IVP, to name a few.

Harry Stebbings: As for John, prior to Domo, he served as Vice President for Strategy and Business Operations for Adobe’s digital experience business, driving more than $3 billion in annual revenue. John joined Adobe through the company’s acquisition of Omniture in 2009, where he served as the executive vice president of marketing, driving all marketing efforts.

Harry Stebbings: However, that’s quite enough from me. So now, I’m very excited to hand over to Domo’s chief strategy officer, John Mellor.

Harry Stebbings: John, it is such a pleasure to have you on the show today. I’ve heard so many great things from many prior guests, so thank you so much for joining me today, John.

John Mellor: Oh, it’s a pleasure. Thanks for the opportunity.

Harry Stebbings: Not at all, but I would love to kick off today with it a little bit of background on you. So tell me, John, how did you make your way into what I call the wonderful world of SaaS, and how did you come to be Chief Strategy Officer at Domo today?

John Mellor: I got into SaaS before I knew I was getting into SaaS. It started back in 2003, when I joined Omniture, which was an analytics company founded here in Utah. And they were trying to do the very best that they could for customers in helping them understand what was the traffic like on their website, who was coming, how often did they come back, what did they look like, et cetera. And the most natural way to deliver that information to customers was through an online interface, where we would capture all the traffic, all the information, synthesize it, and just deliver it to those customers via a web UI. And little did we know, we were part of the SaaS movement. It was back when you used different words for it, things like managed software or application service provider. And that was kind of my entree into SaaS.

John Mellor: And that year, when I joined in 2003, Omniture did $8 million in revenue. And we later took our first round of VC money. Then, we took the company public and did a secondary, and eventually, sold it in 2009, to Adobe for $1.8 billion. And at that point, the company was doing a little over $300 million in revenue. And then, I stuck around Adobe for nine years. Adobe was a fantastic experience, and we did about $10 billion in acquisitions and grew that business to $3.5 billion in annual revenue. And that kind of gets us to today.

Harry Stebbings: I have to ask, close to 10 years at Adobe at the forefront of really such a transformational time for the company, John. What were your biggest takeaways from the time at Adobe, and how do you think that time impacted your operating mentality today with Domo?

John Mellor: Adobe was a great experience. That company is just phenomenal. The leadership team there is amazing, and we saw them go through a couple of pretty big transformations. Number one is they didn’t really have an enterprise software selling group when they bought Omniture, so that route to market was something they were very interested in creating. So, we saw them and worked with them to develop that enterprise route to market.

John Mellor: But then probably the biggest transition was watching Adobe transition into the subscription business model with its Creative Cloud product as it’s known today. And going through the process of selling boxed software in stores to selling online delivery of the application, it’s crazy. I think it was 2011 when they did the annual analyst meeting, and they dropped their revenue forecast by $100 million. And the stock popped. We thought, “What in the world just happened?” Clearly, Wall Street and the Adobe team knew the benefit of a subscription business model and the transition into SaaS. So, it was great.

John Mellor: I think in terms of the takeaway that I got from Adobe personally was I’ve always been a strategy person. I’m very interested in the big picture, what’s the context in which we’re operating, how is that driven by macro trends, et cetera. And I would build these nice strategic presentations and go in to the CEO and the leadership team and present these. And the CEO would kind of lean back and say, “Well, John, that looks great. That makes a lot of sense. So, what are you going to do about it?”

John Mellor: And that was a takeaway for me because it taught me that strategy that’s not connected to operations is just not as useful, nearly as useful, as it should be to an organization. So, I think my takeaway was strategy is incredibly important, but until you connect it to what the business is actually doing and the operations, then you haven’t created real change in an organization.

Harry Stebbings: Can I dive in and ask, in terms of kind of the connection of that strategy, how do you create that connection cross-functionally across the company? So effectively, what works, I guess, in terms of your experience in connecting with the individual heads of function to imbue the strategic thoughts that you have to them?

John Mellor: There are two ends of it that I found. One is bringing people along when you’re building the strategy. So, you do your best to win the hearts and minds of the folks that are really going to be involved in executing the strategy once it’s baked. And I’m a firm believer that no single person owns strategy. If they do, then it’s probably going to start and stop with them. So, it’s a little bit of a herding cats kind of situation, where you have to bring people along with strategy, and bring the best ideas from various groups, and do your best to synthesize those concepts into a strategy that people buy into. So, that’s on the front end.

John Mellor: On the back end, the way that we structured the team was that I also ran the business operations team. So effectively, my team controlled the weekly agendas for executive staff meetings. We controlled a lot of how the pieces came together and what were the operational metrics that we built to report up to the CEO. And that drove this cadence of alignment on a weekly, quarterly basis that helped us operationalize what we had bought off on on strategy. And we did that on a rolling annual basis. So each quarter, we would reevaluate strategy and hopefully not change it too significantly and keep it for at least a year. But that process seemed to work pretty well for us.

Harry Stebbings: Can I ask another question related to the connection of strategy to the operations? How do you think about and how do you advise founders on when’s the right time to hire a chief strategy officer and how they know that it’s right for their company?

John Mellor: I look at the evolution of how I got the strategy role at Omniture. I certainly didn’t start that way. I started out running marketing, and then I was running the partner ecosystem. And what happened was you started to see all of the value add that partners were delivering or certain technologies were delivering to our platform at Omniture. And that started to inform our roadmap, things that we would work with partners to build, and things that we wanted to go buy.

John Mellor: So, it evolved into the acquisition roadmap. So, we would go buy companies that had been partners for a couple of years, and we had seen proven value. And it became this connection with the CEO where he and I just had a rapport. We were kind of finishing each other’s sentences, but not in a too much of drinking each other’s Kool-Aid way because that tension has got to exist or you don’t move forward. So, I think the strategic role for a founder has got to be an organic evolution.

John Mellor: And a founder just can’t turn over strategies. Founders are where they are because they’re good at strategy and they have great vision. The strategic role has to be an amplification or a way to put structure around the strategy and tie it down to operations.

Harry Stebbings: Yeah, no, no, I definitely agree with you in terms of being an extension and kind of aligned with the CEO. I do want to dive into kind of the macro environment today though, and the Twittersphere is alight with the sectors that will be most impacted by COVID. Largely pronounced by VCs, I have to admit, but when we chatted before,, you said to me that when it comes to COVID, it will do more for digital transformation than any other C-level led initiative. First, why do you think COVID is such an accelerant?

John Mellor: Well, I saw a meme on the internet a few weeks ago that said, “What will drive your digital transformation strategy the most? Is it the CDO? Is it the CIO, or is it COVID?” And that kind of puts a fine point on it, but digital transformation, in my mind, has been inevitable. And it’s a journey that organizations have been on for decades. And the technology simply just catches up and then some kind of forcing function happens to accelerate adoption of that technology. And I think that’s one of the situations we’re in now.

John Mellor: I mean, it’s not dissimilar to a Y2K moment. You think back in the late ’90s, ERP was a bold, if not a risky, proposition for companies. But then as you got closer to Y2K, the imminence of that event and the potential impact of that event drove a massive acceleration in ERP companies. That market grew four, five fold in five years from ’95 to 2000 because you got people out of the intellectualizing of what technology could do to them or for them into the sheer business environment need to compete or to survive.

John Mellor: And that’s where we are now. We’re in a different world. It’s a couple of decades later. But digital transformation is inevitable, and there’s either a carrot or a stick. And you’ve seen a lot of early adopters and companies that are leaders in their markets go through the digital transformation process and get closer to customers through digital interactions, become more personal, do this sort of mass personalization with individuals, or make data more available inside their companies. And that has happened with leaders in their industries because they’ve been ahead of the curve.

John Mellor: Well now, you have this crashing wave of change that it is incredibly clear that if companies don’t change and drive more agility into their business, understand things very, very rapidly, and make changes very rapidly, that survival is a real question, not just thriving, but survival.

Harry Stebbings: So, what core ways do you think we’ll see them drive agility into that business operations into the differing functions within that business? I’m super intrigued by that.

John Mellor: So, I think the first is just the speed with which you have to make decisions, right? And as a CEO or any kind of line of business leader, decision making is a function of information. You have to understand, how is your business working, what are the drivers of your business, what is the operational health of your business? And that is primarily driven a data exercise. And if you think of the simple questions you need to answer as a line of business person, those questions have to be informed by different parts of the organization, different operational systems.

John Mellor: Let me give you an example. So, Pep Boys is a customer that we deal with a lot at Domo. And they are a retail company, have big retail spaces, and they try and drive promotions through the retail. But if you don’t understand inventory and the inventory turns and availability at the store level and then have those store managers be able to report at a regional level, if you can’t then see that at a CEO level, then you’re just blind. You can’t really understand performance of a store in the context in which you need to understand it. And so, I think that the access to information and putting it in the hands of people who can make decisions quickly is one of the key transformations that’s underway right now. And COVID is absolutely driving that.

Harry Stebbings: Yeah. No, listen, I totally agree with you in terms of it being the catalyst for change. I guess with that in mind though and with COVID being the core accelerant, the question being there is, is digital transformation and change management a technology challenge, or is it actually a cultural challenge given the realization that we have with COVID?

John Mellor: It’s probably equal parts. I would say it is 50/50 because the technology is so key to just making the systems work. But it’s a lead to horse to water kind of situation where the technology can make the system available or make the actions available, the information, the decision, support available. But what it can’t do is get the end user to actually adopt it.

John Mellor: So, you see things in companies. We’ve got a large retailer that uses our system to actually gamify the process of unloading trucks at the loading dock. So, you wouldn’t think about that as a business intelligence process or even a data-driven process because the individuals on the loading dock don’t feel like they’re logging into a BI tool. They’re using an app that’s helping them log boxes offloaded off of the truck and comparing their performance against the team that’s coming right after them or before them. And that is a great example of using technology in the right way to drive a behavioral change and a usability change amongst the frontline people who need access to data.

John Mellor: I mean, executives in the boardroom have been pushing transformation for a decade or so. What they haven’t successfully yet done is help the people on the front lines, the employees that are behind the counters or at the loading docks, or driving the trucks around, or restock shelves at convenience stores. They haven’t put the information in their hands in a way that they can actually make a decision that makes their life better.

Harry Stebbings: I mean, I’ve got so many things to unpack from that. I guess my question is, in terms of really getting into the hands of the core consumers, how do you think about the mistakes that people often make when selling to CIOs and then that crucial adoption intersection between the CIO and the end consumer? Where do you think the mistakes that the core vendors make when trying to make that bridge and transition?

John Mellor: I think it’s easy to stay in the boardroom or in the corner office when you think about digital transformation. And the hurdle that people need to get over is that while that is where key decisions and direction need to be set, it’s not really how the business grows. The business grows when employees can make decisions, the big decisions or the small decisions, with data at their fingertips and in a form that doesn’t just look like, “Okay, I’ve logged into a spreadsheet. I can see that margin of product X is better than margin of product Y,” but it’s… Let me give you an example.

John Mellor: So, we have a customer that is responsible for restocking shelves in convenience stores, and the people who do that restocking drive the trucks around with all the chips and soda and thing on the truck. And they have to make the decision of whether to put product A ahead of product B. And the real impact of that decision for that individual is how much commission are they going to make? And the top level office, the corner office, can set commission structures.

John Mellor: But what you really want to do is change behavior and give the tools so that the behavior change is obvious and easy for the individual needing to make the behavior change. So, it’s not just about information, it’s about the apps that you can put on the device, the phone, the tablet, whatever device that individual is using at the moment of time when they’re making a decision. And that’s where you start to infuse the digital transformation as fertilizer, deep, deep into the organizational roots.

Harry Stebbings: Can I ask you, how do you think by the effectiveness of professional services and training days when vendors come in and really spend time with the teams on the ground? How do you think about the effectiveness of those in driving that core kind of bottoms-up adoption, and then I guess, subsequently, should that be charged for, or should that be part of the core offering?

John Mellor: This, I think, gets to a key point about what customers want to buy. Customers want to buy outcomes. In a very real sense, they kind of don’t care how much the software costs versus the services. They just need the outcomes and the technology change and the behavioral change that comes along with it.

John Mellor: The challenge from a vendor standpoint, and just being realistic, is that every customer is a snowflake. And you end up with a situation where professional services may be a very heavy part of one implementation and configuration, and it may be very light in other cases. So, I don’t know that there’s a easy answer from a vendor side other than to say, recognize that customers want to buy outcomes. And don’t make it too difficult to buy the outcomes when you’re trying to price or configure these systems.

Harry Stebbings: Speaking of kind of the customers that want those outcomes, we have to acquire those customers first. In B2B and often in enterprise they’re mostly acquired often by events, and events have been so effective over the last few years. But with COVID, that’s obviously now a real challenge. So I guess from the more macro perspective is, how will a 100% virtual event environment impact physical events when and maybe if they return?

John Mellor: Yeah, I think we’ve learned a lot with digital events. And Domo specifically, gosh, our Domopalooza event, our annual user conference, was March 18th, so we were right in the eye of the storm. We decided to make Domopalooza a 100% online event on February 28th. So, we had 12 business days to make that transition, which was very painful, so I understand the pain of people having to make that transition.

John Mellor: But you learn a lot, and there’s great things that come out of a 100% online event. For example, reach can be extraordinary. You can reach people with these marquee events, multiples of the people that would be able to buy a ticket and take three or four days off of work and fly to the location you’re going. So, that’s one big benefit.

John Mellor: The flip side, the con of it, is you really sacrifice a lot of intimacy, and events give you an opportunity to hang out with people, to go to the bar and have a drink, to have breakfast, to enjoy the entertainment, a concert, or whatever. And in enterprise software, relationships are such a key part of the selling environment that we need a way to maintain those.

John Mellor: And I think we’ve probably got a six to nine month window where things will be a 100% online, and you’ll see the enterprise software companies that have built, have invested, in really great relationships with customers because I think they’ll have the staying power to keep those relationships alive over that six to nine month period without face-to-face contact. But I think after that, we will hopefully be able to return to a physical in-person event environment.

John Mellor: But I think we’ll be able to manage a blend because it won’t be a light switch where you turn it on, and all of a sudden, your attendance goes back to 100% of what it was in the previous year at these events. We will have to have a mix, and I think that mix will be an art that we’ve got to navigate where you try and blend the intimacy with the reach, and you don’t make the distinction of it’s an either/or.

Harry Stebbings: Can I ask, in terms of performance wise, what were your takeaways from the palooza in terms of how virtual events compare to physical events in terms of performance and conversion wise?

John Mellor: We made this decision with 12 business days to go, and so we were faced with a lot of key decisions about how to execute this. And those decisions ranged from, how long do we make the event? Domopalooza had been a three-day event, and we certainly knew we couldn’t have three days of online material. So, you have to make decisions about how long it’s going to be at the basic end of the spectrum.

John Mellor: But then you have decisions around, what personas do I really need to satisfy? And I think most every physical event has a broad range of these personas. You’ve got executive people who want thought leadership. They want vision. They want to see roadmap. And you have the practitioners or the users who want to dive deep into the product. And so, we made a lot of decisions trying to balance those two audiences.

John Mellor: And we felt like, from a performance standpoint, we felt really good about it. We typically have 2,500 to 3,000 people physically show up to Domopalooza, and we had over 12,000 people watch our event. And they didn’t watch all of it. But to have a 4X reach is pretty amazing the day of the event.

John Mellor: And another aspect of these physical events is they tend to be forcing functions from the vendor standpoint. They drive strategic decisions. They drive product to get things done and shipped. They drive big messaging decisions and partner ecosystem decisions and events and things like that.

John Mellor: So, you still want to use them to drive that forcing function and then kind of ring the value out of all that effort in an amplified way where you might have 3,000 people at an event if it’s live. You’re going to have 12,000 if it’s virtual, and you can reach so many more people. And your downstream nurture of that audience can really be tailored based on, what were they interested in when they came to the event, what breakout sessions did they attend, what parts of the keynote did they watch? So, it gives you a chance for a lot of downstream intimacy. The jury’s still out on close rates and ACV creation, those sorts of things. The enterprise sales cycle will take a while, but we’re pretty happy with it.

Harry Stebbings: Can I ask, speaking of that move from physical to virtual, how are you thinking about… I spoke to PagerDuty last week, and they mentioned their shift in marketing spend from physical to virtual. And I guess my question too is, how are you thinking of shifting spend and the strategy around it in light of the pandemic?

John Mellor: It’s a decision that has a little bit of strategy involved, but it’s become kind of a forced strategy. I don’t really have a strategic decision to make about how much I spend on events in the next four months because that decision has been made for me. There just aren’t any physical events to attend. So, you’ve got this balance of the strategy comes into play with, how do you redeploy those funds? So, how do you create the online equivalent of that reach and that intimacy in a completely digital environment?

John Mellor: So, we have shifted significant amounts of the event spend to digital programs. Some of those are webinars, where you’re trying to replicate that in-person, that live experience. But some of it is just in increased ad spend, where you’re doing more search and more display, more syndicated content, et cetera, more email. And so, we’re absolutely doing everything we can to keep lead volume up, to keep the pipeline acceleration where we need it to be because we don’t want to make decisions that would make this crisis sort of a foregone conclusion or predestined.

Harry Stebbings: Yeah, I mean, it’s interesting you said there about predestined. How do you think about avoiding making the crisis self-fulfilling?

John Mellor: It’s such an interesting topic because I lived through the recession. I was working at Omniture when we went through the recession. Our CEO, of course, was there. Our CFO went through the recession at his company. And so, you’ve got this tendency to evaluate scenarios in your head, and some of those scenarios are pretty awful. And the challenge is to not let those scenarios dictate action prematurely.

John Mellor: So, you want to really let the data talk. And so, you start to look at early indicators. You start to dial in your magnifying glass on anything that would be a very early indicator, early, early indicator on your business. What’s your web traffic? What is your lead rate, your rate of generated leads from that traffic? How are those leads turning into opportunities? How are those opportunities progressing through the pipeline? And you don’t have a nine month full sales cycle to watch these. You just do not have that much time. And so, you’ve got to make decisions on early, early indication very quickly.

Harry Stebbings: Totally agree in terms of the speed there. I guess, my question to you is, I speak to a lot of SaaS companies, and they’re going, “Hey, we’re actually not affected by this. Our revenues are looking the same. Our customers are happy.” And I kind of think you will find out most how your business is impacted when it comes to renewals, when it comes to churn and discounting that comes with those renewals. How would you advise founders who aren’t seeing changes as of yet and are kind of unsure because they’re expecting to see negative changes, but the data doesn’t show it yet? How would you advise them?

John Mellor: When I sit with my marketing team several times a week, they read out a lot of data. And one of the questions I ask them at the end is, “Okay, so if you were living under a rock, if you had no access to news, how would you say the business was doing?” And that’s one of the factors that we use in determining whether or not we’re going to increase or decrease spend.

John Mellor: These sorts of situations are so historic because they have no playbook. And the danger, I think, is to apply an old playbook to a new situation that is 100% unique. You can apply some judgment, but to think you can just cookie-cutter a situation from the past and apply it to this situation, I believe, is incorrect.

John Mellor: So, the advice that we’re following is plan for the worst. Get those preparations in place in detail and know what steps you’re going to take when you see the indications that you should take those steps. But don’t take the steps too soon because I think you can predestine your situation in a very self-fulfilling way.

Harry Stebbings: Yeah, no, listen, I totally agree with you in terms of predestiny, and yeah, I think it’s a very negative, cyclical mindset to get into. I do want to dive there into my favorite element of any episode, John. So, I say a short statement, and you give me your immediate thoughts. It’s called the quick fire round. Are you ready to rock and roll?

John Mellor: Exciting.

Harry Stebbings: Okay, so what do you know now that you wish you’d known at the beginning of your time at Domo?

John Mellor: I wish I had known better the complexity of the offering.

Harry Stebbings: Can I ask, what makes Josh the special leader that he is?

John Mellor: I’ve worked with a few founders in my career, and I think founders are just different humans. They’re wired different. Their ability to have a vision to be doggedly attached to that vision is what makes them unique. And that is certainly the characteristic that I would say Josh has got, is he can see things as they should be, have a complete irreverence for reality about why that’s hard, and just keep persistently going after that.

Harry Stebbings: What’s the hardest element of your role with Domo today, John?

John Mellor: The hardest element is simplifying the offering into consumable chunks. There was so much resource put into building the Domo platform, and it’s so broad and so deep that the challenge is it can do so many things. And that’s not what a buyer wants to hear. A buyer wants to hear, how does it solve my pain today, make me revenue, give me business impact? So, distilling that broad, deep functionality into consumable chunks for personas is the process that we are really focused on because that’s where the transformation is.

Harry Stebbings: Can I ask, what’s the optimal relationship between chief strategy officer and CEO?

John Mellor: I think the right CEO-chief strategic officer relationship has a lot of constructive tension in it. At least speaking from my experience, you have to realize that the founder is in their position because they are extremely talented and unique in the ways that create businesses and create ideas and vision. The role of strategy is to try and distill that vision into an operational framework that the business can act on and grow over the long term and do it efficiently. And that tension is a powerful accelerant, so there’s a lot of chemistry that’s got to exist, for sure.

Harry Stebbings: I love that constructive tension. I do want to finish it on my favorite, which is, if you could change one thing about the world of SaaS today, what would it be?

John Mellor: I think from an enterprise software SaaS standpoint, we just got to make it more usable for the end users. It’s got to be simple, simple, simple.

Harry Stebbings: Totally agree with you in terms of the simplicity. But John, as I said, I have heard so many great things, both about you and Josh from many different people on the show. So, thank you so much for joining me today, and this has been so much fun.

John Mellor: Thank you, Harry. It’s been a pleasure.

Harry Stebbings: Such a pleasure to have John on the show there and absolutely loved that discussion on the accelerant of change management. If you’d like to see more from John, you can find him on Twitter, @MellorTime. Likewise, it’d be great to welcome you behind the scenes here. You can do so on Instagram @hstebbings1996 with two Bs. It would be great to see you there.

Harry Stebbings: As always, I so appreciate all your support, and I can’t wait to bring you a fantastic episode next week.

 

The post SaaStr Podcasts for the Week with Domo and Gorgias — April 24, 2020 appeared first on SaaStr.

SaaStr Podcasts for the Week with PagerDuty and Gusto — April 17, 2020


This post is by Deborah Findling from SaaStr

 

 

 

 

Ep. 325: Carolyn Guss is VP of Corporate Marketing @ PagerDuty, the company keeping your digital operations running perfectly with their real-time operations platform. Prior to their IPO in April 2019, PagerDuty had raised funding from some of the best in the business including a16, Bessemer, Meritech, Harrison Metal and Elad Gil to name a few. As for Carolyn, prior to joining PagerDuty she spent 5 years as the GM of Method Communications San Francisco Office and before that spent time on the other side of the pond with a close to 7-year stint at Orange as Head of Corporate PR and Head of US Communications.

Pssst 🗣 Loving our podcast content? Listen to the start of the episode for a promo code to our upcoming events!

In Today’s Episode We Discuss:

* How Carolyn made her way across the pond from Head of US Communications at Orange to GM of Method in SF to then playing a key role in the marketing team at PagerDuty?
* How does Carolyn think startups and larger companies can replace the leads that are lost from having no events in a COVID-19 world? How are PagerDuty shifting their strategy? How does PagerDuty think about brand marketing? Does it have to be tied to a number directly tied to revenue? What are the challenges with brand marketing?
* What does Carolyn believe is the right tone to approach customers within this time? How can one be supportive but also drive towards business objectives? In terms of tone, what is the right tone to approach the broader team with? How does PagerDuty gain a sense of company morale at scale? What tools do they use?
* How does Carolyn think about the benefits of transparency both with employees and with customers? Is there an extent to the benefits of transparency? Can one ever been too transparent? How does one think about this in a very corporate perspective with PagerDuty now being a public company?

 

Ep. 326: Gusto’s Lexi Reese walks you through scaling high performance teams. Is trust earned or given? How do you communicate for impact?

This episode is sponsored by TaxJar.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This podcast is an excerpt from Lexi’s session at SaaStr Scale.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Carolyn Guss
Lexi Reese

Below, we’ve shared the transcript of Harry’s interview with Carolyn.

Harry Stebbings: Welcome back to the official SaaStr Podcast with me, Harry Stebbings. And if you’d like to leave feedback or suggestions for future episodes, I always love to hear your thoughts. And you can do so on Instagram at HStebbings1996 with two Bs. But time for the show today and I’m thrilled to welcome Carolyn Guss to the hot seat today.

Harry Stebbings: Now, Carolyn is VP of Corporate Marketing at PagerDuty, the company keeping your digital operations running perfectly with their realtime operations platform. Prior to their IPO in April 2019, PagerDuty had raised funding from some of the best in the business, including: Andreessen Horowitz, Bessemer, Meritech, Harrison Metal, and Elad Gil to name a few.

Harry Stebbings: As for Carolyn, prior to joining PagerDuty, she spent five years as the GM of Method Communications in the San Francisco office, and before that, spent time on the other side of the pond with close to a seven-year stint at Orange as Head of Corporate PR and Head of U.S. Communications.

Harry Stebbings: But now I’m delighted to hand over to Carolyn Guss, VP of Corporate Marketing at PagerDuty.

Harry Stebbings: Carolyn, it is such a pleasure to have you on the show today. I’ve heard so many great things from the one and only Jen, and so thank you so much for joining me today.

Carolyn Guss: Thanks, Harry, for having me here. It’s a pleasure to talk to you. We’ve obviously worked with SaaStr for a long time. Really enjoyed the relationship. Jennifer Tejada, our CEO, has always enjoyed speaking at SaaStr, so it’s great to be chatting to you in an unusual time for all of us.

Harry Stebbings: It is indeed an unusual time, but we so appreciate that. But I would love to start with a little bit on you, Carolyn. So tell me, how did you make your way into what I call the wonderful world of SaaS and come to be VP of Corporate Marketing of PagerDuty today?

Carolyn Guss: So like you, and as you can probably tell from my accent, I started out my career in London. I was running corporate comms for Orange, the large French mobile operator. We had 200,000 employees and were part owned by the government. So it was about as far away from SaaS startup land as you can possibly get. But it was a great experience, grounding me in tech. We launched a lot of products in emerging markets. Mobile was really booming at that time. We were getting into digital TV. But as time went on, I could really see the level of innovation that was coming out of Silicon Valley, in particular, but SaaS companies more broadly, so managed to find my way to the West Coast of the U.S. in about 2008. But my startup experience was actually a PR firm called Method Communications, where I worked with some of the most exciting companies. So Domo, Nutanix, Qualtrics, PagerDuty, of course, Robinhood. So many of the really exciting tech companies were really broken out by Method. And I ran the San Francisco office for the agency.

Carolyn Guss: So during that time I met Jennifer Tejada and the team at PagerDuty, worked with them through their IPO. What I really learned in that time was that PagerDuty was a pretty unique experience for me. It’s a complex technology, but it touches all of us every day. PagerDuty is used by the likes of Netflix, Zoom, Nordstrom, Gap. And many of us don’t realize that the digital experiences that we’re having and the apps and the websites that we’re visiting are working great because PagerDuty is there, used by the teams behind them. So I got excited about the mission of the company and the opportunity to really up level the marketing story because it is a complex technology. And so started talking to the team about the opportunities to work together and about six months ago came over from being an agency partner to PagerDuty to running the corporate marketing team.

Harry Stebbings: Can I ask, because it’s a very interesting transition. Because obviously at Method you work across a very broad landscape of clients and customers, and then obviously with PagerDuty, much more of a focus purview. How was the transition for you and how did you find that going from quite broad to quite focused?

Carolyn Guss: Absolutely. There was a real transition. I’d been working with PagerDuty for 18 months and I felt I really understood the business, but actually I didn’t. I was one step removed. So coming away from knowing lots and lots of companies a little bit to knowing one company really deeply, I think it’s helped me deepen my impact. What’s broad for me now is my remit. So I’m looking after internal comms, so really helping with the culture of PagerDuty. I’m looking after marketing, so events, brand marketing. And I’m looking after PR and communications as well. So how are we showing up in social media? Opportunities like this, talking to you, getting our voice out there in the media and making sure we’re well differentiated. So the breadth of my activities has grown and I think that’s kept me really engaged and excited to learn.

Harry Stebbings: Totally. And I think the breadth is what’s so fascinating. I do want to dive into a couple of those specific elements you mentioned there, and particularly placed in the context that we’re in, obviously the rise of COVID has meant a lot of marketing plans are quite simply out of the window in many cases. So I’d love to discuss how you think about changing strategies and pivots in the face of COVID. And you mentioned events there. Always a huge source of leads for B2B companies. How do you think about a lead replacement with such a large marketing activity now really gone?

Carolyn Guss: Absolutely. Events were a huge part of generating marketing qualified leads for PagerDuty and we had two different types of events. One is large scale customer events and the other is community events. It’s more focused on developers that use the platform. Obviously none of those events can take place at the moment. So what we did first was we mapped all the different events that we host and we mapped the value of leads that we expect to get from those events. And then we looked at how we can replace these with different digital channels. It was really a cross-functional effort with sales and marketing and product and a growth team that’s responsible for all our digital and web presence. And we’ve broken it out into a few areas.

Carolyn Guss: So most immediately we’ve pivoted to replace events themselves with virtual events. So we had an event in London, customer event, and we took that virtual. Required a lot of communication and fast action. And then the other thing that we’ve done is to create a series of webinars. So one of the things about PagerDuty where we really excel with events is that we provide a lot of community resources and information and best practice sharing. So it’s really easy to just take that and deliver it over a webinar. These webinars aren’t particularly about product push, they’re about the things that you can do to improve your own incident response and make sure that your own digital operations run well. So we had a ton of these resources already available in written form, so it’s just about having some of our execs or our experts take them out as webinars and promoting those to our customers.

Carolyn Guss: And then the next thing we’re doing is really doubling down on our digital media spending. We haven’t been really focused on above the line ever. We’ve done one or two brand campaigns, but it hasn’t been something that’s at the heart of PagerDuty marketing. We’ve been almost quite scrappy in our marketing, I’d say. So we’re taking some of that budget that was used for events and we’re moving over to things like sponsored content, web page takeovers, radio advertising. And the reason that we feel like that’s a good pivot for us right now versus the direct nature of events is because fundamentally PagerDuty keeps the Internet up and running and the whole world has just gone offline and online with shelter in place. So more than ever, companies need our services. So we are looking to cast a much wider net right now and get that message out there. So we definitely have brand awareness goals as well as marketing qualified lead goals with this shift that we’re making.

Harry Stebbings: You’re teeing me up so nicely because there’s so many things I just want to unpack from that. My first is if you take it in order, you mentioned the shift to virtual events there. A big one for me is how does it compare from a results basis in terms of MQLs, and what have been your initial takeaways from the first few that you’ve done now?

Carolyn Guss: It’s early to answer that. We have a certain number of MQLs that we expect to get from an event based on how that event performed in the past. We’ve been running our major user event, for example, PagerDuty Summit, for four years. So we’re preparing dashboards to figure out what we can expect to get from webinars and what we can expect to get. But I wouldn’t say that we have the answer just yet, Harry. I think that it’s possible we’re going to see that, but then equally PagerDuty’s really built on land and expand. That’s been the best sales motion, or the biggest sales motion that we’ve experienced as a company.

Carolyn Guss: So right now what we’re seeing is a ton of extra usage on our platform from existing customers. So what we want to do there is make sure that we’re offering resources and being really, really supportive to those customers. So I don’t actually think that we’re going to be able to say if we’ve got this number of leads from an event, the virtual equivalent of that event will get the exact same number of leads. I think it’s about taking a different approach and really leading with supporting our existing customers for that land and expand motion and then getting the broader awareness out there with bigger digital media spend so that we can be adding new logos.

Harry Stebbings: Totally agreed with you there, especially on the awareness. The awareness is an interesting one because brand marketing, there’s different views on brand marketing and awareness. And I guess my question to you is how do you think about and assess brand marketing and how do you respond to often people’s thoughts that it’s untraceable, it’s untrackable, and it’s therefore challenging as a core strategy in itself?

Carolyn Guss: So brand marketing, we ran our first brand campaign in the fall of last year. We rebranded and we ran campaigns for the first time ever. And I would agree that for a company with our culture, it’s not as obviously trackable. With our land and expand model, what we’ve always done is just really look to drive people to trial through our website. And that’s obviously extremely tangible. We know exactly how many people are coming through to trial and then how many people are becoming customers. So the brand marketing campaign, we looked at it differently. We weren’t expecting a brand campaign to generate leads in the same way that we see from our website. We were really looking at it as a way of building value in the PagerDuty brand and helping us to differentiate from other companies that are in our market or in adjacent markets that sometimes people will confuse with us.

Carolyn Guss: So we’re not necessarily expecting brand marketing to drive to very hard metrics. That said, we will be tracking those metrics and we will be running the exact same dashboards on marketing qualified leads to understand how it’s performing because there’s always the opportunity to improve and iterate. So right now, what we’ve done is created a plan for April for digital marketing spend. We’ll be benchmarking that and then we’ll iterate on our plan for May.

Harry Stebbings: Totally get you. Can I ask, you said that about using the same framework and I like that. It makes me think of something that CMO at Pendo, Joe Chernov, once said on the show. He said that all marketing activities have to be tied and held accountable to a number directly tied to revenue. Would you agree with him in terms of having to be tied directly to revenue, or is there a broader purview and a nuance to that?

Carolyn Guss: At the high level I do agree. And we use Pendo ourselves to understand exactly how we’re driving to revenue. There’s nuance within it, though. So if I think about my team, I have customer marketing in my team right now and we absolutely tie to revenue of customer marketing. We create a number of assets, we push them out through webinars, through other types of digital campaigns, and we track MQLs. If I take public relations, we don’t track to MQLs of public relations. That’s really for building brand.

Carolyn Guss: So ultimately, as a VP of Corporate Marketing, I am tied to a number, but I take my nuance within that as to which vehicles I’m using to reach that number. So my spend may be greater in one area than another depending on how I’m tracking against that number. So I think it’s about being able to pull different levers and I do think there’s some nuance in there.

Harry Stebbings: Absolutely. You mentioned the customer marketing team and it makes me think to the time that we’re in today because it’s a time where tone is something that you have to think a lot about. So I’m intrigued, given the time and actually moving to the conversations themselves with the customer, how do you think about adopting a tone of support and care, which is obviously very necessary in an uncertain time right now, but also a need to impact revenue and business objectives with the tone as well?

Carolyn Guss: This has been a really big conversation for us. So back in February, we started to see on our platform that our customers were labeling the types of incidents that they use PagerDuty for with pandemic or coronavirus or COVID-19. So we could understand then that our customers were experiencing some kind of business impact as a result of the situation. And so we began to think through, how do we support them in that situation? We were seeing some customers having really surging demand for their product. And you can imagine it’s companies in online learning, video conferencing, collaboration tools.

Carolyn Guss: And what that means is their teams are working around the clock and are working really hard to keep things running. And so it is not helpful for us to say buy more PagerDuty licenses. It’s really about showing them supports that if they’re spinning up an incident response team fast or they’re really scaling their ability to fix incidents on their networks, then it’s about us showing them with webinars, with videos, with white papers, how do you do that fast. So we have something called Incident Commander Training, which is how you train people to run major incidents. And as you can imagine with growing demand on networks, there’s going to be more people required to step into that job and help the core team keep the systems running perfectly.

Carolyn Guss: We have something called Virtual NOC Training because everyone’s just gone home. Companies were used to having a NOC in their office and they could all have a sense of the health of their systems and suddenly everyone’s gone home. So we’ve provided training on how to create a virtual NOC. So we’re already leading with a message of here’s best practices and support that we can provide to you. And we believe that that will lead to growth for us down the line. But it doesn’t feel right at the moment to be pushing product and license messages.

Harry Stebbings: I totally agree with you in terms of not feeling right there. I guess my question is it’s almost customer success, but it’s also definitely marketing. And I think more and more today we’re seeing marketing being pushed further and further down the funnel with the creation of that content being used to support and make their clients as successful as possible. Do you agree with this almost merging of the roles of marketing, especially around content, with customer success?

Carolyn Guss: Absolutely. We’re very much hand in hand with customer success now and I think account based marketing is something that’s growing within PagerDuty. Because we began with the land and expand motion, but we really, as we move up into larger companies, need to help with that expansion and that’s where customer success and marketing are hand in hand. We’re generating a lot of materials and then customer success are really personalizing them and having those conversations. But then we’re looking to amplify that, I guess, by having the same messaging show up in different kinds of channels where these customers are going to turn up. So yeah, very much cross-functional effort for us. It already was and it is so now more than ever.

Harry Stebbings: You mentioned the cross-functionality there between the different teams. It’s an incredibly hard thing to achieve. I guess my question to you, subsequently, is what do you think you do to allow yourself to do that, A, efficiently, but also with speed being cross-functional, and also being remote now too?

Carolyn Guss: We had actually just had, before all of the coronavirus changes began, we had gone off site with all of our leadership team to talk about how do we improve cross-functional working in PagerDuty and eliminate silos. And there was areas where it was working really well, but we needed to challenge ourselves to be better and more agile cross-functionally. And then of course this situation arose and it forced it to happen immediately and it forced it to happen in the most challenging way, which is with everybody going remote. So the way that we kicked it off was that we created a framework, crisis management framework, and it has four functional teams and those teams are all made up of people from different functions. One of them is about really protecting and promoting the welfare of our employees. One of them is about supporting and engaging our customers. Another one is about the resiliency of our platform. Because we like to say we are always on. When you’re down, we’re up and we’re helping you. And that promise is so important right now. And then the last one is about financial preparedness in our business.

Carolyn Guss: And so those work streams are not run individually by product or individually by finance or individually by sales and marketing. They have cross-functional team members across all of them. So that’s a new way of working for us. So it’s really accelerated a way of working that we were trying to accomplish. And I think that’s something I bet other companies are experiencing too, is that in times of crisis, it allows you to focus on what matters the most and you can work cross-functionally because people talk straight to each other and they just go and figure out who the person is and find them immediately. They don’t wait or put it on their to do list or hold back better opinion. So I think we’re going to see a huge improvement in cross-functional behavior and we’re kind of excited about it. It’s one of the real benefits of this situation that we keep talking about inside PagerDuty.

Harry Stebbings: I totally agree with you there, especially in terms of the massive transition overnight and forcing things that maybe would have taken slightly longer. I guess my question is, diving slightly more deeper into the granulars of navigating team morale, team culture in the shift, got to have this tone of empathy and support. So how do you think about the comms strategy around showing that empathy and support to the team in these very challenging and uncertain times?

Carolyn Guss: We’ve always had an internal comm strategy of ultra transparency. And when I joined PagerDuty it made me a little nervous because I was thinking, well, if we’re being this transparent to the employees, what if this gets outside of the business? But it’s really what we believe in in our culture. So that’s interesting now because we’re having AMAs every week, sometimes twice a week, with our executives. And anybody can submit a question that’s publicly seen by all of the employees. And people really want to understand what does this mean for me? So we’re being really honest. As a business we’re in a really strong cash position, but as I told you earlier, we’re still trying to figure out what this is going to mean for our pipeline. So we’re being really honest and transparent, but we’re really striking a balance there with a lot of support and empathy and also with celebrating the wins that we have.

Carolyn Guss: We are landing great deals still. There’s wins across the business with product teams, with sales teams, with marketing. So we’re really celebrating that more than we ever would. But in going back to the AMAs, what we believe is just a really, really strong cadence of communication right now. So Jennifer, our CEO, gets on video frequently. Other members of our executive leadership team do and they post that to the company. The AMA is run twice a week. We have updates to policies and FAQs that run twice a week. So it’s been sort of hyper communication.

Carolyn Guss: But we’ve also been polling the employees. So we use the survey tool called Culture Amp. We’re polling the employees weekly because the situation is so fluid, to understand are we’re getting it right, are we striking the right tone with you? Do you feel connected? Do you feel like you can carry on working in this way? Do you feel like you can carry on in this remote situation? So we’ve really been able to get a good pulse from the employees on how they’re feeling. And I think for many people their job is a highlight for them right now. We’re busy, we’re leaning into this, but it’s stressful. You’re at home, you feel heightened levels of anxiety. So we’re also trying to think ahead about what the needs will be. If we’re all going to be working from home for a long period of time, which is a possibility, what are people’s needs that we need to be able to predict? What about mental health issues, what about burnout issues and how can we support our employees there?

Harry Stebbings: Listen, I totally agree with you and I’d just highly recommend espresso martinis continuously throughout the day, on that note. And I do want to ask you, transparency is fantastic as a core ethos. My question to you is does one ever have to be careful about being too transparent? And if you were advising other comms strategists and professionals thinking about us within that companies, are there any limits to transparency?

Carolyn Guss: Yes, absolutely. Responsible transparency, I think, is the key. We need to make sure that anything that we want to talk about quite transparently today, we can see that through. We’ll lose trust of our employees if we end up having to go back on a commitment that we made. So we want to be transparent, we want to answer all questions and we do have that as a core part of our culture, but we don’t make big promises or make big commitments about the future. And I think part of that is being a new publicly traded company, as well. It’s part of the muscle that we’ve developed.

Harry Stebbings: No, I totally agree. I think that’s a real muscle that’s developed when you go public. And transparency is also tied to being real and being very authentic. In terms of authenticity and real, how do you think about being both transparent and real? And I guess on the real side, how do you think about that? If it potentially disincentivizes the team, say… A lot of founders that I work with say, hey, we lost a key client. I don’t know whether to communicate that back to the team. It’s yes, it’s not transparent, but I’m thinking about morale and I’m thinking about culture in a difficult time. What should I do? How would you advise them in those cases? You want it to be real and transparent, but you also have to think about wider morale and morale maintenance. How do you think about that?

Carolyn Guss: We think about it through the lens of vulnerability as a leader. So when we have a miss as a business, we talk about it with our senior leadership team and we talk about the learnings. We have a big culture of postmortems inside PagerDuty. It comes from the DevOps methodology that we were really built on. So anytime we feel that we’ve failed, lost, or could have done better, we host a postmortem and we really talk honestly and vulnerably with each other. So people are quite used to that. So then when is this a bigger deal that has more impact we’ll talk about it with our senior leadership team and we’ll be vulnerable there. And then we’ll ask them if it’s appropriate for you when you’re leading your teams, if you’re having a quarterly business review or just a stand up, bring vulnerability because it helps other people feel, it helps your employees feel that if they’re experiencing a challenge right now and they don’t know what to do about the challenge, they know that they’re safe with you, that you can relate to that.

Carolyn Guss: Because I think as much as we want to celebrate the positives now more than ever, if all we do is talk about the positives, it’s going to feel kind of disingenuous and we’re going to make employees, I think, disengage. So we look at it through the lens of vulnerability. It’s not that we’re specifically trying to share bad news so that everybody can level set. We’re looking to use it in a very intentional way.

Harry Stebbings: No, I totally agree. And I think absolutely vulnerability, actually, in many ways inspires a lot of strength in the team. But I do want to dive into my favorite element of any episode, being the 60 Second SaaStr, Carolyn. So I say a short statement and then you hit me with your immediate thoughts. Are you ready to dive in?

Carolyn Guss: I’m ready.

Harry Stebbings: So it’s been an incredible career in the marketing world for you, but what do you know now that you wish you’d known at the beginning of your time in marketing?

Carolyn Guss: Truncate. I used to be rather long winded, still am a bit, and not really be able to influence and land my points and couldn’t understand why I’d have to repeat something three times and it still felt like people didn’t get it. So I do a lot of media training with executives, preparing them for short soundbites. That’s actually a crucial skill in all parts of marketing because you need to influence and you need to sell a message. So thinking about the three points that you want to land and truncating the way that you land them.

Harry Stebbings: I think I could clearly do with some of your media training. I have that wonderful British bumblingness. But I do want to ask, what’s the hardest element of your role with PagerDuty today?

Carolyn Guss: Devising for good versus perfect. PagerDuty sets a really high bar, and yet we have to be very agile and move fast. So there’s the balance of being okay to ship something that’s not yet perfect, but it’s good enough when we always want better and we always hold ourselves to a higher bar and strive for more.

Harry Stebbings: ABM, is it a buzzword that’s just used too much these days, or is it a new, innovative and fundamental shift in the way we market?

Carolyn Guss: I think it’s a pretty fundamental shift in the way that we market. We were talking earlier about the relationship between marketing and customer success. One of the things that we’ve experienced in PagerDuty is we have many, many customer contacts. It is not a top down model in PagerDuty, it’s a bottom up model. Developers come in, they buy the product. It really expands through the business as a viral growth. Many teams and executives start using PagerDuty. We have to have an account based marketing approach. We have to have an account based marketing approach where we touch all of those different contacts with the right type of messaging for their need. So we feel that marketing is getting more personal than ever and that is a fundamental shift.

Harry Stebbings: If you could change one thing in the world of SaaS today, what would it be and why?

Carolyn Guss: Oh, we’re so inside in Silicon Valley we forget about the world at large. We forget about the fact that they don’t know what SaaS means, that they don’t use our tools, although they may be impacted by our tools. SaaS companies are used by traditional businesses across the world, but we tend to forget that and live in our Silicon Valley bubble. So I would love for all of us to get a broader mindset and just challenge ourselves every day on the assumptions that we make.

Harry Stebbings: Final one, but who in SaaS marketing do you think is killing it today and why do you think so?

Carolyn Guss: Zoom is killing it today. And this may be an obvious answer or a timely answer, but I feel Zoom’s always been killing it because they really put their ethos and their belief first. The narrative is that they want to make people happier. I mean, who doesn’t buy into that? And this is a B2B company, predominantly. And then I think they also really live through that values. They’ve given the product away for K through 12 educators and that’s a hard thing to do. That’s causing massive scaling for their business. But it’s living by their values that they should do good in the world. So I think they’re absolutely killing it in SaaS marketing right now.

Harry Stebbings: That’s awesome to hear and I couldn’t agree with you more there. But Carolyn, this has been so fun. I’ve absolutely loved doing it. So thank you so much for joining me today.

Carolyn Guss: Thank you, Harry. It’s been a real pleasure to talk to you.

Harry Stebbings: Absolutely loved having Carolyn on the show there. And such exciting times ahead for PagerDuty. And if you’d like to see more from us behind the scenes, you can do so on Instagram at HStebbings1996 with two Bs. I always love to see you there.

Harry Stebbings: As always, I so appreciate all your support and I can’t wait to bring you another fantastic episode next week.

 

The post SaaStr Podcasts for the Week with PagerDuty and Gusto — April 17, 2020 appeared first on SaaStr.

SaaStr Podcasts for the Week with Moveworks and Bessemer Venture Partners — April 10, 2020


This post is by Deborah Findling from SaaStr

 

 

 

 

Ep. 323: Bhavin Shah is the Founder & CEO @ Moveworks, the cloud-based AI platform, purpose-built for large enterprises, that resolves employees’ IT support issues⁠—instantly and automatically. To date Bhavin has raised over $108M with Moveworks from the likes of Mamoon Hamid @ Kleiner Perkins, Arij Janmohamed @ Lightspeed, Bain Capital, Sapphire Ventures and ICONIQ. Prior to Moveworks, Bhavin was the Founder and CEO @ Refresh which was later acquired by LinkedIn and then before that founded Gazillion Entertainment, a company he scaled to over 200 employees.

Pssst 🗣 Loving our podcast content? Listen to the start of the episode for a promo code to our upcoming events!

In Today’s Episode We Discuss:

* How Bhavin made his way into the wonderful world of SaaS and came to found Moveworks.
* What are the core challenges IT teams are facing as a result of the move to remote work? Where do many make mistakes here? What can one do from a structural perspective to set them up for success when moving to remote?
* What does great change management look like in Bhavin’s mind today? Where do so many go wrong here? How does this change in the world of remote? Who should be involved in executing on the change management plan?
* How does Bhavin think about the role of customer success today? Why does Bhavin believe that customer success and product should be in one org? How does Bhavin think about the interplay of marketing and customer success? Is marketing moving closer and closer to customer success with their content?

 

Ep. 324: Join SaaStr CEO Jason Lemkin and Bessemer Venture Partners Partner Byron Deeter for a deep dive on what’s going on in Venture Capital and Cloud.

This episode is sponsored by TaxJar.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This podcast is an excerpt from Jason and Byron’s webinar “Bridging the Gap: The Current State of Venture Capital and Cloud.” You can find the full webinar here.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Bhavin Shah
Byron Deeter

Below, we’ve shared the transcript of Harry’s interview with Bhavin.

Harry Stebbings: Welcome back to the official SaaStr podcast with me, Harry Stebbings. I’d love to see you behind the scenes here at the show on Instagram @HStebbings1996 with two Bs. I always love to see you there. But to our episode today, and we welcome an incredible three time entrepreneur now rocking the world of enterprise SaaS, and so with that I’m thrilled to welcome Bhavin Shah, founder and CEO of Moveworks, the cloud-based AI platform, purpose built for large enterprises that resolves employees’ IT support issues instantly and automatically. Today, Bhavin has raised over $108 million with Moveworks from the likes of Mamoon Hamid at Kleiner Perkins, Arif Janmohamed at Lightspeed, Bain Capital, Sapphire Ventures, and ICONIQ, to name a few.

Harry Stebbings: Prior to Moveworks, Bhavin was the founder and CEO at Refresh, which was later acquired by LinkedIn, and then before that, founded Gazillion Entertainment, a company he scaled to over 300 employees. 

Harry Stebbings: Now I’m very excited to hand it over to Bhavin Shah, founder and CEO at Moveworks.

Harry Stebbings: Bhavin, it is so awesome to have you on the show today. As I said, I’ve heard so many good things from pretty much every board member of yours and investor, but especially Mamoon at Kleiner and Arif at Lightspeed. So thank you so much for joining me today.

Bhavin Shah: Thanks, Harry. First time caller, long time listener. Excited to be on the show today.

Harry Stebbings: I mean, my word, that is so good for my ego. But I do want to start today with some context. So tell me, Bhavin, how did you make your way into what I definitely think is the wonderful world of SaaS, but also what was that founding ah-ha moment for you with Moveworks?

Bhavin Shah: So I grew up in Silicon Valley here in the Bay Area, and my parents immigrated in the late ’60s, was exposed to technology from a very early age. This endeavor with Moveworks is my third company. My last company was in the mobile productivity space called Refresh.io. We were acquired by LinkedIn about five years ago. Moveworks came about through a very deliberate process, a process by the four of us founders to understand where we could use machine learning in a very useful and impactful way in the enterprise. And the journey took us to a conversation with over 30 CIOs and IT leaders and analyzing a bunch of their IT tickets before taking our first bit of capital.

Bhavin Shah: The discovery was that there’s now about a billion knowledge workers worldwide, and each of those knowledge workers submits about one ticket a month. But those tickets still take three days to get resolved, and so we saw billions of dollars being spent on better ticketing systems, better automation tools, which the world definitely needed. But these tickets were still relatively slow, and when we dug into the details, what we realized is that they’re still written in natural language, and so no one had taken the approach of trying to solve the tickets directly by understanding and building machine learning frameworks to read these tickets and then solve them completely autonomously. And so that’s been our journey. How do we go from three days to three seconds?

Harry Stebbings: Absolutely, and it’s been an incredible journey to see those since then. I do, sorry, I’m too intrigued not to ask, you mentioned the two prior companies there. How did that experience with those two prior companies impact your operating mindset today with Moveworks?

Bhavin Shah: My career has involved a variety of different industries. I started off in the toy business. I went into the gaming world and it went into mobile productivity, and then now into enterprise SaaS, and if I could do it all over again, I would have done enterprise SaaS from the get-go. It’s a domain that I really enjoy, and I think I thrive in. But along the way of company building, I think you learn a lot about yourself. You learn a lot about what matters, how you build culture, how you build teams, how you listen to customers, how you don’t listen to customers. A lot of different factors went into this. But when it came down to Moveworks, there was a variety of different viewpoints that each of us founders were bringing to the table. I had spent a bunch of years thinking about how to make people productive on mobile, how to leverage that platform.

Bhavin Shah: Varun, my co-founder, was at Facebook building machine learning tools with specifically chat bot tools that were being used to optimize and improve the interview process for hiring managers. They could talk to a bot about who they were interviewing, etc. Jiang, my other co-founder, was at Google and was one of the founding engineers of the question-answer system that shows those paragraphs at the top of the Google search results, basically doing NLP on the fly and then figuring out what to show you, which is very important to our product today, and then Vaibhav, who had also been a serial entrepreneur like myself, building large enterprise scale systems.

Bhavin Shah: So I think a lot of these perspectives came together in a way that allowed us to all build from there and build this company.

Harry Stebbings: I mean, it’s such a unique blend of both backgrounds and skills associated, and so just [inaudible 00:06:23] teams. I do want to ask, though, because if we start on the most important topic that’s actually the front of every single portfolio a founder of ours has mind is the obvious move to remote work and the rise of work from home. You were on the front lines of this movement, and as you said there about speaking CIOs, you speak CIOs across all verticals really, making the switch to work from home. So I guess the first question is what are the core challenges IT teams face as a result of having to move to fully remote pretty much overnight?

Bhavin Shah: There’s so many challenges, and I think as the weeks go by, some of these challenges are getting solved, but initially connectivity, VPN issues, bandwidth, access, policies, procedures, related to all this is support, and that’s our world here at Moveworks. Now what’s interesting if you read the news, which everyone is doing right now, you hear a lot about bars closing, schools closing, gyms closing, but one thing that you don’t hear about is the fact that every walk up bar in the enterprise is now shuttered. It’s closed. We’re not able to go into the office anymore and walk up to someone in IT and say, “Hey, can you fix this for me?” And so overnight, IT teams have had to shift their strategies and deploy things like messaging platforms, remote conf and webinar tools, digital channels for IT support, a lot of other systems to ensure that workers working from home are staying productive.

Bhavin Shah: And the data, as part of the challenges that we’re seeing them face, we’re seeing a 500% gain in requests that employees are making for video conferencing apps like Zoom. We’re seeing the demand for IT support services double. We’re seeing two to three X the number of troubleshooting tickets come into the help desk. And so the good news is there’s lots of good solutions, there’s a lot of companies that want to help here, but the real test that’s going on right now is whether IT teams can put these systems in place in a matter of days and weeks, not months or years.

Harry Stebbings: You’ve seen a variety of different rollout, so to speak, from the IT teams themselves. When you think about perfecting the infrastructure stack and process of these rollouts, where do you see many maybe make mistakes and go wrong in really transitioning to work from home effectively?

Bhavin Shah: Yeah, I think what we’re seeing is it’s mostly about speed. I think a lot of IT teams were thinking that they would make these changes over the course of several years, and manage change management accordingly. I think the ones that are moving quickly now to pick up best of breed best practices and roll it out are finding that employees are quite receptive. Employees are able to make switches very quickly. I think we’re all seeing this. I’ve got kids, and overnight they’re all switched to now doing classes over Zoom. Even my kid’s TaeKwonDo and gymnastics classes are doing them over Zoom.

Bhavin Shah: So I think that where people believe that people can’t change, I think ends up getting them stuck in deliberation and where they know that if they make the change, people will adjust, those groups are winning. One thing I’ll say though is you are seeing kind of a shift in terms of the economy. While many businesses are shuttering and slowing down or weakening, there is a new type of economy, a new type of business that is starting to see more traction and/or thrive in this environment, and that is for businesses that are helping employees and individuals get work done anywhere and anytime. And I think that’s something that we’re seeing play into our business, and in general, the world of SaaS.

Harry Stebbings: One thing I’m really intrigued by is is this a flash in the pan momentary realization from traditional large incumbents and enterprise that obviously fundamentally by law, they have to be work from home? And then more of back to their traditional standards of practice and work? Or do you think this is actually fundamentally a shift in how society operates with regards to its relationship to work?

Bhavin Shah: Yeah, I think it’s the latter, and here’s our experience. So when we started the company, about 20% of CIOs that we talked to had an enterprise-wide collaboration/chat strategy. They’d be going with Slack or Microsoft Teams or Glip or GChat, etc. Last year, that percentage was about 50/50. 50 had adopted something, 50 were still figuring out when to deploy a new tool and how to go about doing that. That debate is over. Basically the next two months, every company in America is going to have decided and implemented one of these tools, and if you’ve used these tools in enterprise, once you start using them, it’s very, very hard to go back. And I think for us, we made an early bet in this world of enterprise chat being a big deal and being something that would overtake traditional means of communication like email.

Bhavin Shah: And so we see that happening in our personal lives with WhatsApp and SMS and everything else. Why not in the enterprise? And so this is actually causing that shift to occur very rapidly, and people will start to see the utility of this. I think through chat, the UI is very intuitive for everyone. It’s not one that we have to learn. We’re all familiar with writing, we’re all familiar with communicating. And so it allows us to have more interactivity, it allows us to simplify work streams, and basically work at real-time. So I think this is a permanent shift, even when we do go back to the office building.

Harry Stebbings: You mentioned an early bet that you placed in terms of the market itself and its transition. I have to ask, because now it seems inherently obvious, but it wasn’t at the time, and it was early. Why did you gain such conviction as opposed to other channels of support, like email and voice? And what led that decision making conviction?

Bhavin Shah: Yeah, it’s a good question. We are a conversational AI company, and there’s a variety of ways that you can obviously engage in conversation. I think that enterprise messaging for us provided a lot of affordances that just made sense if we wanted to provide support to employees. So just going back to the behavior, employees submit on average about one IT ticket a month, and it takes about three days for them to get a result. Now there are portals, there are self-service catalogs and things that people can use, but when you only have an issue every few weeks to a month, you don’t really know how to navigate those. Those UIs are wrought with friction, and email obviously had its inherent delays as well and it’s not real-time.

Bhavin Shah: And so what we wanted to do was find a way that employees could just do what’s intuitive, which is shoot off a quick note and send it off to IT through a chat and have that picked up and have that resolved, but more importantly, by doing it in the enterprise collab tool, we could get their attention, because they’re already checking that tool 100 times a day, collaborating with team members on projects, checking updates, etc. So we wanted to find an interface that allowed for that high volume, high frequency, and we just didn’t necessarily see that with voice, and of course, email has been clogged for years, and you can very effectively find people on their mobile devices, on their tablets, on their laptops, with these new messaging platforms, which really does a lot to help improve our engagement and overall resolve more tickets for those employees.

Harry Stebbings: You said that about engagement, and you also said that about the three day ticket resolution being the standard. I’m really interested, because I always think the definition of what success looks like is crucial, and metrics are often fundamentally quite uniform across industries and verticals. What metrics do you use to define success today? And I guess why do you focus on those specific metrics over others?

Bhavin Shah: Yeah, so until recently, I think SaaS has been mostly focused on the delivery model of the software, to go from your data center to a cloud, which that itself led to some new metrics that have been used for the greater part of a decade, which is to measure active users. And it’s pretty logical, but the problem with active users is it doesn’t really tell you how much value you’re getting. And so I think for us, we’ve been charging forward in a new way of energizing SaaS insomuch as we’re taking ownership of the actual end to end results. We’re doing the implementation and configuring overall, so looking at how many tickets did we resolve for each customer? And so that is the metric that we picked. It’s got perfect alignment between us and the customer. How many tickets did Moveworks resolve yesterday at Broadcom? How many tickets did Moveworks resolve yesterday at Nutanix?

Bhavin Shah: And we measure that, our customers measure that, and it allows us to focus on whatever might be the case to make those metrics better. Sometimes that’s engagement, sometimes that’s an additional integration that we need to do, sometimes that is triggering some other automation that the customer might already have. But the goal ultimately is to provide more workload relief for the IT teams by having a system like this resolve more and more tickets. So for us, the alignment is at a higher order around what was our output, what was the results of our system each day, each hour?

Harry Stebbings: Can I ask you, I’m on the board of many companies that face the challenge of change management. In a normal world where services, revenue, and in-person visits, meetings, seminars are possible, change management is still fundamentally a challenge. In a remote world, how does change management change, and does it get inherently more difficult given the lack of physical services that one can provide in terms of coaching, training seminars to really allow for a smooth transition?

Bhavin Shah: Well, I think that’s absolutely right. What I see a lot of, especially in our own experience of using other SaaS tools, there’s a heavy burden placed on the customer to learn the tool, to implement the tool, to train the employees on how to use the tool, and only then do you actually see the full value of what was created. With our product, and something that we strive for, is how do we take more and more of that work off the plates of our customers and how do we give them more value right out of the box? And so sometimes, it’s not just us delivering a set of tools. I always think of this analogy like Home Depot. A lot of enterprise SaaS mindset is, “Hey, let’s just give someone a tool and have them go figure this out or extract value from it.”

Bhavin Shah: At Home Depot, you go buy your tools to go do whatever home improvement project you want. Maybe you’re building a birdhouse. Maybe you’re building an extension to your living room. It doesn’t matter to them as long as you bought their tools. For us, we actually want to provide you with the end result of what you’re looking for. If you want that living room extension, let’s go build that and give you the keys when it’s ready so you can walk in and enjoy it. And so from our standpoint, the customer success motion, the engagement that we have with customers, is not just about improving our machine learning to understand yet another type of ticket utterance or language pattern, but it’s sometimes us adding a new integration into a back end system.

Bhavin Shah: Sometimes it’s us showing those customers how to clean up an old process or to change a system or record. All of that is so that we can track and show that progress with each customer, and that metric gives us the ability to know where we stand, and that’s something that’s very intrinsic with what we do. Really it’s about customer success being company success as we build this out.

Harry Stebbings: Can I ask, in terms of both customer success, I guess also marketing, but in terms of horizontal application, this is not a vertically specific tool and it’s so horizontal across so many different industries. How do you think about effective marketing in customer success, given the inherently different use cases, applications, and some challenges the different verticals will face with it.

Bhavin Shah: So one of the premises that we had when we founded the company, and this was insight that we derived by looking at IT ticket data, was that IT was homogenizing globally. What does that mean? That means that, and largely due to SaaS products, people had the same tickets that they were solving every morning about Zoom, GoToMeeting, WebEx, or BlueJeans about MacBook, Dells, Lenovos, or HPs. And so as a result, we found ourselves really excited about the opportunity to solve this problem because everyone was experiencing the same problems. So we could build machine learning models at scale that could resolve it out of the box up front for our customers.

Bhavin Shah: And so while we have customers in pharma and semi-conductor and other high tech and retail and services, we have the same types of tickets. And so as a result, our customer success team works broadly across all customers, but we’re solving the same issues. Organizationally, we put customer success and product into one org, because it’s not just important to build a feature and then deliver it to the customer. It’s about building that feature, delivering it, and then seeing how much value it delivers and figuring out what needs to happen on our side, on the customer side, to maximize that value.

Bhavin Shah: So there’s a variety of metrics that we track from a customer success standpoint, but in this sense, it goes back to this core drumbeat heartbeat that we have at the company, which is everyone in the company gets a daily report. And every morning, we all look at it and it tells us how many tickets we resolved yesterday at Broadcom, how many tickets yesterday did we resolve at AppDynamics, at Nutanix, at Freedom Financial. And for me, I get that report every morning, but others in the company are looking at that every hour, every few minutes, to understand really what is the impact that we’re having and what can change and evolve as a result of knowing that?

Harry Stebbings: Can I ask, you said there about CS, like sitting actually with product? Do you engage with a product postmortem, and what do you do to weave that very tight fabric between product and CS strategically other than sitting together?

Bhavin Shah: The journey of building a product or a feature inside of our company is perhaps different than others. So instead of it being a top down motion of the market saying, “Build this use case,” and then the product marketers figuring out the details of that going down to a product manager, going down to an engineer. It’s actually quite the opposite. The engineers are looking at ticket data every day, and they’re saying, “Hey, there’s these tickets, these 300 tickets we skipped at this customer today. What could we build? What kind of machine learning models? What kind of integrations can we build to solve that?” And that leads to further research, further discovery, customer conversations, and ultimately ties into well, what’s the impact going to be? Are we going to increase overall customer resolution by 5%, by 2%? Great. Let’s go do that. Let’s put that in the next quarter’s product plan.”

Bhavin Shah: So today, we’re resolving between 30 and 40% of all tickets on average across customers, and it didn’t just happen overnight. We were two years ago bragging about three to 5%, and over time, the analysis of ticket data, the understanding of how customers perceive that value but ultimately building these features, it’s not a black box. It’s not one of these things where we build them, then we market them, and then we sell them, and then we all pray that people will buy it. It’s something that’s a lot more fluid and a lot more certain before we even start writing the first line of code.

Harry Stebbings: Gosh, the joy of doing the show is I can take the conversation in any way I want. You said there about the improving efficiency of the resolutions there. It made me think we chatted before the show about information network effects with regards to podcasting. When you think about network effects with Moveworks, is there not data network effects where every subsequent ticket actually improves the efficiency of the subsequent thousand tickets, building higher efficiency and resolution speeds.

Bhavin Shah: 100%, and I think that’s something that we haven’t seen a ton of in the enterprise world. In traditional settings, if I buy a database and you buy a database, the same database, the database doesn’t get smarter because we’re both using it. For us, we are absolutely benefiting from that, and our customers are, too. Think of different forms of AI. You hear about in the academic circles, weak forms of AI, which are basically making a prediction or a suggestion or better ranking things. Then you have strong forms of AI that are trying to take entire problems and solve them end to end. A level five self-driving car is a strong form of AI.

Bhavin Shah: We’re sort of like that in the IT world. You want a self-driving car that’s been driven a million miles before you get into it, or a billion miles. With us, similarly, our product is seeing now over 70 million tickets and we keep processing them. We keep getting better, we keep understanding, okay, what actions need to be taken for this kind of language pattern? What actually needs to be taken for this other? And so we are getting better. What that means is a variety of things. One is customers who become new customers of ours, and which today we’re doing almost one customer launch every day, a large enterprise, they’re seeing immediate time to value, like the first day we might resolve 20% of their tickets. The first week we might resolve 30% of their tickets. So they don’t have to wait around for six months, a year.

Bhavin Shah: And that’s where I think we’re breaking from the traditional SaaS model where you have a toolkit, have a lot of professional services, they get attached to it, and then you configure it, that’s custom, and then you see the results. You can’t get to the same results that we have with machine learning because we’re able to aggregate, but also we’re able to learn very quickly and to your point, have this true network effect, which ties into the homogeneity and ties into a lot of the other factors, which really gets down into how did we and why did we start this company? This is exactly why. We thought of all these things, these things were somewhat still hard to figure out how we were going to achieve, but the concepts were there, and that got us very excited.

Harry Stebbings: Can I ask, thinking large enterprise and some of their challenging requests, do you ever get pushback on the data sharing between companies in terms of allowing you to provide better efficiency across the client base because of the knowledge sharing and data sharing that allows you to do so?

Bhavin Shah: Yeah, so security’s super important to us from the get-go, very early on we made investments to ensure that we could keep customer data separate and not commingle data, but at the same time, build machine learning understanding across ticket data so that when we learned something in one environment, we can leverage it in the next. So we do a lot of abstraction tokenization, things that keep what’s proprietary proprietary, but also allow us to more generically learn from that. Our customers review that with us. We go through extensive discussions around how we handle that, and for the most part, I think people are starting to come around to the fact that they want an AI system that has been trained, that has learned, that delivers value out of the box, because if you’ve been tracking a lot of this AI space, there’s a lot of AI initiatives that crash and burn six months later, a year later.

Bhavin Shah: And it’s because these things are very hard to stand up on your own. They’re very hard to maintain. They’re very hard to make smarter and evolve. And so the real benefits of going SaaS with AI is that you get all that benefit right up front and you get that continuous improvement over time. So that’s how we’re seeing it and our customers are excited about getting those results without the kind of effort that they would normally have to put into it.

Harry Stebbings: We may be diving a little bit into the ML world here, but I am just interested, have you noticed this kind of asymptotic moment of data ingestion really where there’s decreasing efficiency with every additional dataset? Because once you hit 70 million, there must be some moment of asymptote. Does that make sense? And how do you think about that?

Bhavin Shah: Yeah, so instead of thinking about it as one machine learning model and a monolithic concept of 70 million tickets going to one model, think of it as thousands of models. Think about it as hundreds of techniques. Think about it as different capabilities, and so today, we’ve seen so many tickets, but we’re not solving 100% of tickets. In fact, we think the asymptote of tickets that can be resolved rises up to about 85 to 90%. There’s still some tickets that will always have to use people to better understand… Sometimes people are very vague in their tickets. It’s like, “Hey, I just got back from Hawaii, and everything’s broke. Can you help?”

Bhavin Shah: Well, in that case they really just want a hug from IT or they want someone to give them support, so it’s not intended for a machine to solve. But if you think about it from how we’ve gone about this is we’ve stitched together a framework of looking at all the intents in IT, all of the entities that we see in IT, and we’re building machine learning models to understand every intent entity pairing that’s out there. But as a result, it isn’t just a singular effort. We have to constantly review these things. We have to have human annotators that look at thousands of tickets a day and see are our models drifting? Are our models getting over fit? Do we have to inject noise into the training data? There’s a lot of other factors that go into this that we work on to ensure that this stuff works.

Bhavin Shah: But to your point, absolutely, models, techniques, are evolving very rapidly, and we see models peak in performance all the time, and so this idea that there’s one model and you just train it once and it’s modeling as a service, then you bring it back and you use it, forget about it. We’re changing stuff so often that sometimes we’ll remove entire sets of models and retrain them, some get retrained on a continuous basis, some on a weekly basis, some on a monthly basis, some don’t get retrained until we have a committee meeting, but it’s all towards the goal of what I’ve been saying this whole time, which is one metric. How many tickets did we resolve across all customers? How many tickets did we resolve across these customers? And that drives our behavior.

Harry Stebbings: Well, I can clearly chat to you all day about data asymptotes and the machine learning model. So I think it’s best we move onto the 60 second quick fire round, Bhavin. I say a short statement and you hit me with your immediate thoughts. Does that work well for you?

Bhavin Shah: Sure.

Harry Stebbings: So it’s a war for talent, as we always hear. What’s the hardest role to hire for today and why?

Bhavin Shah: That’s easy. Machine learning infrastructure. I think with machine learning systems, they’re both computationally and memory intensive, and so the challenges are just intense, and finding people with that experience is really hard.

Harry Stebbings: What’s the biggest challenge about your role today with the company and with Moveworks?

Bhavin Shah: We’re going through fast growth and I think nailing forecasting is still an art, still figuring that out. Sometimes we overshoot, sometimes we under call, and I think that’s something that we’re all focused on now, especially as we’re seeing everyone work from home and how to right size our investments accordingly.

Harry Stebbings: Sorry, this is kind of off schedule, but how do you think about transparency within the org, especially with regards to goals? Because you want people to drive towards something. You want to set ambitious goals. But you also don’t want to set too ambitious goals so people will be discouraged by it if they don’t hit them. How do you think that balance of ambitious but not discouraging if not hit?

Bhavin Shah: One of the folks that I had a chance to recently meet is Rob, the CEO of Coupa, and he has hit his target as a company I think for something like 44 quarters. It’s some larger than 40 quarters in a row. That is a hero. That is someone who has really figured out the right balance of making sure that you set a goal and that you hit it, even through good times and bad times. And I think that is super important. I don’t have a specific answer other than you do want to strike that balance, and the transparency is key, and so the good news is for us, a lot of our stuff is inherently transparent just given our product, and even today, later today I’m going to be reviewing the operating plan for the year with the team based on what we’re seeing now change in the market. And I think it’s just keeping everyone updated and keeping everyone tuned into the same channel.

Harry Stebbings: What’s the biggest area where investors have actively helped you and really moved the needle for the company?

Bhavin Shah: CIO introductions. Investors seem to know every CIO out there and their help with prospecting is huge.

Harry Stebbings: If you could change one thing about the world of SaaS today, what would it be?

Bhavin Shah: I think increase expectations from SaaS products. It’s like, let’s hold ourselves more accountable for the outcomes and deliver real results. Instead of just being a tools provider and making customers do the heavy lifting, let’s give them solutions. I think that’s something that I’d love to see the world of SaaS talk more about.

Harry Stebbings: Hit me. What’s the next five years for you and for Moveworks? Can you paint that vision for us?

Bhavin Shah: Yeah, so we’re doing IT today, but our goal is to go into many other domains and departments. I think ultimately, if knowledge workers need help, we want to be the company that solves it for them, and I think we’re on that journey and we’re super excited by the reception so far. So we’ll keep plowing ahead.

Harry Stebbings: Bhavin, as I said, I heard so many good things, as I said, from Mamoon, from Arif, so thank you so much for joining me today, and I’ve so enjoyed chatting.

Bhavin Shah: My pleasure, Harry, and these are obviously challenging times, but it’s been fascinating to see how SaaS apps and other products like that or like Moveworks are allowing folks to stay connected from afar.

Harry Stebbings: I have to say, I really could not be more excited for the time I had with Moveworks, and if you’d like to see more from Bhavin, you can find him on Twitter @Bhavinator. I do love that username. Likewise, it’d be great to see you behind the scenes here. You can do that on Instagram @HStebbings1996 with two Bs. 

Harry Stebbings: As always, I so appreciate all your support and I can’t wait to bring you another fantastic episode next week.

 

The post SaaStr Podcasts for the Week with Moveworks and Bessemer Venture Partners — April 10, 2020 appeared first on SaaStr.

SaaStr Podcasts for the Week with Front and ICONIQ Capital — April 3, 2020


This post is by Deborah Findling from SaaStr

 

 

 

 

Ep. 321: Anthony Kennada is the CMO @ Front, the startup that provides your team with better email so they can treat every customer like your only customer. To date, Front have raised over $138M from some leading names including Sequoia, Eric Yuan @ Zoom, Ryan and Jared Smith @ Qualtrics, Michael Cannon-Brookes and Jay Simmons @ Atlassian and Frederic Kerrest @ Okta to name a few. As for Anthony, prior to Front Anthony was the founding CMO at Gainsight where he and his team are credited with creating the Customer Success category. At Gainsight Anthony and the team developed a new playbook for B2B marketing that fueled the company’s growth from $0 to over $100M of ARR. If that was not enough, Anthony is also the author of Category Creation: How to Build a Brand that Customers, Employees, and Investors Will Love. The book debuted as a number one new release on Amazon.

Pssst 🗣 Loving our podcast content? Listen to the start of the episode for a promo code to our upcoming events!

In Today’s Episode We Discuss:

* How Anthony made his way into the world of SaaS starting in the sales team at Box and how that led to his entering the world of marketing and creating the customer success category.
* How does Anthony’s marketing playbook change when making the move from Gainsight with higher ACVs and longer sales cycles to Front with lowers ACVs and much higher volume? How does Anthony think about ABM today with Front given the lower ACVs? At what ticket size does ABM make sense?
* How does Anthony feel about brand marketing? Why did Anthony and Front decide now was the right time to engage with billboards? How does Anthony think about data and tracking for brand marketing? Does Anthony believe that all marketing has to be tied to a number directly related to revenue?
* How does Anthony see a changing relationship between customer success and marketing? How is marketing being pushed further into the realms of CS? What is the optimal relationship between CS and marketing? How does this compare to the relationship of sales and marketing more traditionally?

 

Ep. 322: Many people make the false assumption that the path for a highly successful SaaS company is straight “up and to the right”. Of course, for those involved, the reality of the journey is characterized by a series of obstacles that must be navigated. Fmr. Shasta Ventures Doug Pepper will share the key challenges that were overcome to allow Marketo to become a $5B SaaS Category Leader in Marketing Automation.

This episode is sponsored by TaxJar.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This podcast is an excerpt from Doug’s session at SaaStr Europa session.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Anthony Kennada
Doug Pepper

Below, we’ve shared the transcript of Harry’s interview with Anthony.

Harry Stebbings: Welcome back to the official SaaStr podcast with me, Harry Stebbings, @hstebbings1996 with two Bs on Instagram. But to the show today, and I’ve been very excited for this one. He’s a friend, a marketing leader and in a way creating much of what we know as customer success today. So without further ado, I’m thrilled to welcome back Anthony Kennada, back to the hot seat today.

Harry Stebbings: Anthony is the CMO at Front, the startup that provides your team with better email so they can treat every customer like your only customer. To date, Front have raised over $138 million from some leading names, including Sequoia, Eric Yuan at Zoom, Ryan and Jared Smith at Qualtrics, Michael Cannon-Brookes and Jay Simmons at Atlassian, and Frederic Kerrest at Okta, to name a few.

Harry Stebbings: As for Anthony, prior to Front, Anthony was the founding CMO at Gainsight, where he and his team are credited with creating the customer success category. At Gainsight, Anthony and the team developed a new playbook for B2B marketing that fueled the company’s growth from nought to over a hundred million dollars of ARR.

Harry Stebbings: And if that was not enough, Anthony is also the author of Category Creation, How to Build a Brand That Customers, Employees and Investors Will Love. The book debuted as the number one new release on Amazon and is a must read in my eyes. 

Harry Stebbings: But you’ve heard quite enough from me. So now I’m very excited to hand over to Anthony Kennada, CMO at Front.

Harry Stebbings: Anthony, I have to say it’s such a joy to have you back on the show. Thrilled to see about your recent move to Front and such exciting times ahead there. So thank you so much for rejoining my very dulcet British tones, Anthony.

Anthony Kennada: Thanks for having me back, Harry.

Harry Stebbings: Not at all, but I do want to start with some context and maybe for those that missed our first episode, tell me, how did you make your way into the world of SaaS and come to be the rockstar of marketing that you are today at Front?

Anthony Kennada: Oh gosh, you’re too kind. Well, growing up, I had no idea that I would find myself in marketing, but looking back now, I think there were actually some signals that might have been hiding in plain sight. My job in college was to produce concerts on campus, which got me really interested in events.

Anthony Kennada: I was actually part of a fraternity in which I was the one coming up with the witty t-shirt ideas and working on our website. But my first real job out of college was as a technical recruiter. Basically I was recruiting engineers for Bay area based startups and the problem with it was that the year was 2008, and it was a really tough time for hiring, but an even worse time for recruiters.

Anthony Kennada: So the company ultimately met its fate, but I was successful in placing one engineer with a small file sharing company in Palo Alto, called Box. So I reached out to the hiring manager, I asked them for a shot on their sales floor and eventually they offered me a role as an SDR and I became the 37th employee at Box. And so that’s what really started, I think my journey overall in SaaS at Box.

Anthony Kennada: That’s where I fell in love with startup life in general and for the next few years to bounce around from sales roles to business development roles, to product roles, effectively everything but marketing until I landed at Gainsight.

Anthony Kennada: And I was the first marketing hire at Gainsight, I think the 19th employee. It’s there that really cut my teeth in marketing and mostly because I had to. We were about to create this new category, this movement in customer success. And there really wasn’t a ton of best practices on how to do that. And so my team and I spent six and a half years really writing our own playbook.

Anthony Kennada: Then we took the company from about a 100K or so of ARR to just about a hundred million of ARR before I moved on in June of this past year. So now I’m at Front, super excited to partner with Mathilde and the team and really take on a problem of really massive scale.

Harry Stebbings: I mean you guys did such amazing work in terms of creating that playbook at Gainsight, so totally credit to you for that. But I do want to discuss because you mentioned there, moving from Gainsight obviously to Front. And at Gainsight, you fundamentally created the market of customer success in many ways since day one.

Harry Stebbings: It’s different in the way that it’s much more of a case of kind of capturing a much larger existing market, being email in the future of work, big shift. So how does your marketing playbook and tactics really change when making this transition?

Anthony Kennada: Yeah, well you know what’s interesting is that the companies do represent two completely different go to markets. At Gainsight, we were hyper-focused from a TAM perspective on customer success and product leaders. And we spent years working hard to really try to expand that TAM, which now, it actually continually will show up in LinkedIn’s emerging jobs report as one of the fastest growing professions in the world.

Anthony Kennada: So we know some of that effort is starting to pay off. We took a lot of pride in really championing the role and in doing so, we ended up fueling our growth by selling it to that community that we were fostering.

Anthony Kennada: Front, on the other hand, represents an existing massive TAM, literally over a billion knowledge workers in the world use email at work. I think it’s hard to identify a bigger TAM in enterprise software. So our challenge on the marketing side is effectively, how do you take an otherwise horizontal TAM and deploy the right messaging, the right campaigns, to intentionally capture segments of that market at a time?

Anthony Kennada: And a big learning for me now, I’m only four months into the job, is honestly how incredible the Front product is and the value that customers are already getting from it. And so my sense is our challenge is effectively building that awareness engine. So I don’t think we’re product constrained. I don’t think we’re market constrained surely. And thankfully, I think we were able to do that really well at Gainsight. So I’m bullish on the future of the business.

Harry Stebbings: So do you think, sorry, off schedule, but I’m intrigued. Given the horizontal play that you have with Front, being available to so many different types of knowledge workers, do you think about segmentation within the marketing team and going vertical by vertical? How do you approach that,, because you can’t literally market to everyone from financial services to shipping brokers. So how do you think about marketing vertically and what the right play is there?

Anthony Kennada: Totally. So I view that as a function of our product marketing effort. And so we have a person on our team, we’re still small growing, but one person who’s dedicated basically industries and segments, marketing. And so his focus is actually, I think we’ll cover some of this stuff, is what are the verticals that have a high fit today that are dealing with the complexity of customer communications and for them, the difference between actually getting back to the customer quickly with the right context is the difference between success and failure.

Anthony Kennada: And so that person is effectively responsible for owning the business plan for each of the verticals and then aligning with the different go to market partners, be it the SDR organization, the sales organization, the web team, whatever it is to ensure that we’re building digital and experiential kind of components that are able to drive demand within those independent verticals.

Anthony Kennada: So for sure, I think that’s an incremental strategy for us to grow. You need some more of the flywheel type stuff to get it going at scale, but I think you need both when you’re attacking a market just this wide.

Harry Stebbings: And you said about the flywheel stuff there and Front is a very different play to Gainsight in many other ways, so much larger ACVs, generally speaking at Gainsight, also means you had a lot more freedom when it comes to re-budgeting around things like account based marketing, specifically. I’m interested, how do you think about an approach ABM today with Front, given the higher velocity but smaller ACV model?

Anthony Kennada: So we do have at Front, a self-serve business that to your point, drives a high volume of lower ACV deals. But actually we do have several deals that are in the mid to high six figure ACV range. So it’s definitely something that we’re thinking about, ABM and overall, how do we keep this machine producing but also go out and find some of those bigger deals.

Anthony Kennada: And so this actually is what we were just talking about, at the very top of the funnel, what we’ve done is adapt ABM where we’re not looking at specific accounts but rather industries or verticals that we can deploy some of those tactics into. Some of these are non-obvious verticals, but we’ve seen a cluster of customers who are incredibly successful with us and they’re used to the product, logistics industry, for example, financial services, and we’ll do then what honestly tens of thousands of other SaaS businesses have done before.

Anthony Kennada: We’ll build a target account list of accounts within that industry, or create a set of messaging that’s appropriate for that audience. We’ll deploy those personalized paid media programs and outbound cadences, we’ll show up at the random trade shows, the whole thing. It’s just important that we choose what the right industries, the right use cases are, or we’ve already seen success.

Anthony Kennada: But this, it doesn’t come at the expense of that product led kind of growth motion. We’re still doing a number of things to keep that self-serve business productive, but we have to do both in order to really control more of our destiny on the pipeline creation at scale. So to answer your question, I think every company needs to think about ABM regardless of where they are in their maturity or if they sell big deals or small deals. The question just becomes, are you doing it at the account level or at the industry level?

Harry Stebbings: It’s interesting, actually. I saw the other day, Mathilde posted a picture of Front’s first billboard ever, which was great to see. But my question there was like, it’s a very different form of marketing. Why did you decide now was the right time for that and how do you think about people who say, “Oh, I would never do that because you never have an anchor around conversion and there’s no trackability of it?”

Anthony Kennada: I love billboard questions because it’s definitely one of the most controversial things and maybe it’s this Bay area bias that we have about billboards. But we did it for a couple of reasons. We were coming off of the deals of our series C announcement and so for us, that announcement campaign drove a ton of new trials of the product and so we wanted to sustain that momentum in the weeks and months coming out of that campaign.

Anthony Kennada: And so we had never done a billboard as a business. I think the company from maybe a recruiting perspective or culture perspective had an appetite for one and what we thought is, can we see an increase in San Francisco Metro traffic to the site and ultimately lead signups if we’re able to do this out of home experience with the billboard.

Anthony Kennada: So we did it and it’s still early days on data. I think we’re seeing that there is momentum still, which is really exciting. Your point is valid, very hard to directly attribute that to the billboard, but there is something, I think from the brand side, from the employee sentiment side and I think a little bit in the data that we’re seeing in terms of increased visibility in the region in which we’re putting the billboard up.

Harry Stebbings: Yeah, no, and as I said, I love seeing it, but I was interested by that. Going back to the different velocity sales models, I am really interested in it, especially in terms of the relationship between sales and marketing. How does that change when you compare the time at Gainsight and the time at Front now and what kind of that relationship and interplay looks like between sales and marketing?

Anthony Kennada: Yeah, I think it’s just as important at Front as it is at Gainsight or any other company, frankly. At Front, our sellers today, they spend a lot of time engaging with trial leads that are from high potential, high intent accounts, right? And marketing, we have a role to play to enable our sales team with the right messaging, the right collateral, whatever it takes to help get those deals across the finish line.

Anthony Kennada: So it’s similar to what a lower volume sales model would look like. We signed up for a pipeline coverage number at Front to basically show that we’re in this with the sales team. Our success is dependent on their success. So this idea of very tight interlock between these two organizations is just as important as more of the higher ACV, lower volume type environments. But for trials that have this no human touch whatsoever, completely self-serve, we’re on the hook to partner with the product and the growth teams to build an onboarding experience that can lead to value delivery and ultimately activation.

Anthony Kennada: So it’s not just this relationship with sales that we have to work on now, but also with products, also with customer success and that’s where I think the best way it’s going to debug these kind of relationships between marketing and other orgs is to have marketing sign up for some type of number, to align incentives, to align accountability, and it has this way of shining a light on where in the process are there gaps today that need to be discussed and need to be improved on.

Harry Stebbings: I’m so pleased you said that about the horizontal layer of marketing across the company and all the different functions there from sales to product to customer success and picking up on the customer success one, I’m very much a believer. I think marketing really is being pushed down the funnel with so much of marketing as content now being used as a form of customer success and product engagement.

Harry Stebbings: Would you agree with me that it’s always kind of seeing the integration of marketing and customer success and how do you see that relationship playing out, optimally?

Anthony Kennada: Yeah. No, it’s 1000% true. The model I mentioned in the last question is one example. If your business doesn’t have a concept of sales and emotion just goes from awareness to product to success, in that world, marketing has an incredible relationship dependency with the customer success team. We need to create kind of the scale of education content and the programs to drive adoption, drive expansion motions.

Anthony Kennada: I think some people are developing this new role called either life cycle marketing or customer success programs or I’ve heard tech touch, regardless of whether that lives within marketing or within customer success, this is a point of intersection between these two groups that’s really important.

Anthony Kennada: It’s important to have them collaborate on visualizing what the customer journey looks like and create all of the one to many content and programs they’re going to move customers across their journey. But it’s not just if you don’t have a sales team. So an example of how marketing can support customer success in more of the traditional model is facilitating community, whether that’s user groups or admin communities, developing programmatic ways like advisory boards or user groups, anything that can really enable the customer success teams to have meaningful conversations with their customers.

Harry Stebbings: Would you not say events are almost a core customer success strategy as well in terms of engagement?

Anthony Kennada: Yeah, absolutely. Nothing can replace this in-person experience that we get when we get in front of a customer. So totally. I think they ought to be tied at the hip just as much as marketing and sales. And I think we’ve just been so obsessed with the new business as a community for so long that we’re only now starting to take notice of this.

Harry Stebbings: Yeah, no, listen, I totally agree with you. I do want to touch on, because we mentioned the billboards there and we mentioned a couple of the different channels, one being ABM, but when we look at the brand you’re trying to build today, it’s very much in the theme of upending the traditional large incumbents, your Microsofts and Googles of the world. And so with a marketing hat on, how do you think brand plays a role in upending these huge incumbents and what do the challenger brands look like at their best, so to speak?

Anthony Kennada: I have a lot of respect for companies like Microsoft and Google. Clearly they’ve obviously done a lot of things right to get to where they are today. But these are two examples of companies that are born in a completely different era. They didn’t need to compete by leading with purpose or by winning the hearts and the minds of the market. Instead they developed near monopolies, basically, in their respective categories and they ran away with the market.

Anthony Kennada: And now they’re totally locked into this go to market strategy of yesteryear. They lead with their what. Their what being their products or their how, their massive sales organizations, their entrenched channel partners. They don’t lead with the why and if they did, they would come across potentially more like a campaign than it would this kind of authentic expression of who they are as a brand.

Anthony Kennada: So I think that the best challenger brands being developed today fundamentally understand that in order to have a shot at beating the incumbents, you have to lead with why. These are brands that are purpose-driven, they’re community led and they’re investing in the success of their customers and the stakeholders that surround them.

Anthony Kennada: Since we know that customers ultimately buy products emotionally, even in B2B, building this emotive, authentic brand in enterprise SaaS, can really help accelerate growth. Frankly, unlike any other vector that I’m aware of in the marketing stack.

Harry Stebbings: Can I ask, in terms of building that why for the community that you serve, as we said, going back to the horizontal element of just how many different functions that Front can be applied to. For financial services, it could be the why is around secure and efficient compliance. For other industries, it could be a ton of other things in terms of collaboration and transparency. How do you think about converting the why across so many different verticals?

Anthony Kennada: We’re working on this now, actually, this idea, that higher level why, that higher level emotive positioning has to eventually connect to the product level messaging, otherwise it just comes across as marketing speak. I’ve concluded that it’s effectively the difference between brand and a product marketing exercise. The messaging has to be developed obviously collaboratively between these two groups, but in a hierarchy where everything cascades down from the highest level, that has to work for everyone.

Anthony Kennada: The highest level has to work for everyone regardless of what industry or vertical you’re in. But once you go down a layer or two, you can assign specific sets of messaging to relevant industries and relevant use cases that’s informed by that higher level story, but it’s contextually relevant for that intended audience. So I’ll give you an example. In our case at Front, we’re exploring, at the highest level, the human experience with work.

Anthony Kennada: And that’s a topic that’s loaded for all of us, regardless of what role we’re in or what industry. And it’s a very culturally relevant conversation today, this notion of hustle culture and working extremely long hours that inevitably will lead to burn out and decrease productivity and all these sorts of things. At our core, what we really seek is unlocking meaning in our work, whatever that means to you. And that meaning can come from number one, being in control of your workload versus having your work overwhelming you.

Anthony Kennada: And second is your ability to make an impact on your business, on your teammates, and honestly the world around us. And so that’s the sort of inspirational why. But if you zoom down to the product brand and the product messaging, we believe that our inboxes are the window into our work. And if we’ve ever felt like email overload has contributed to our stress, then that’s exactly what we’re talking about.

Anthony Kennada: But for some professions, getting back to a customer quickly, I mentioned this, with the right context, is really the difference between hitting the number and not hitting the number or having several tabs open to keep in check all of these various productivity apps and the notifications that are just popping up at us and also managing our inbox is extremely overwhelming.

Anthony Kennada: So our challenge of how we’re thinking about this is to come up with product level positioning that can appeal to those various use cases and it’s not easy, but I think if a brand can unlock it, it’s a very powerful story that can pull really the masses into this movement behind what you’re trying to create.

Harry Stebbings: Can I ask you a potentially controversial one? When you say a lot of what you do there, it does resonate in terms of what I hear from Superhuman. How do you feel about Superhuman? Is that a competitor, or is that a personal email versus a professional email? How do you think about the interplay?

Anthony Kennada: I think about it as the latter. I think we’re trying to solve a problem that’s less around the organization of your email and the visual layer that sits on top of email. We’re really building some complex workflows on how businesses work that sit beneath the front end, if you will. So I think Superhuman’s great from a personal productivity perspective, but when it comes to really the complexity of work, that’s really where we’re pouring in a lot of our innovation.

Harry Stebbings: Yeah, no, that totally makes sense. And I’m sorry for such a controversial question.

Anthony Kennada: No, not at all.

Harry Stebbings: I do want to ask though, because when you look at the people you’ve worked with, in terms of the CEOs you’ve worked with, you’ve worked with Nick Mehta, you’ve worked with Aaron Levie, you work with now Mathilde, some incredible CEOs and the CFO, CEO relationship’s an interesting one. How do their styles differ, first?

Anthony Kennada: I’m the luckiest CMO and SaaS I think for this reason. Each of them are super, super different. Aaron’s this high energy product centric type leader. Nick is an incredible people and culture centric CEO. Mathilde is really thoughtful and cares deeply about culture and mission, and she also gets a ton of energy from working on the product.

Anthony Kennada: I believe something that actually Jason Lemkin shared in a tweet a few years ago, that the CEO is actually the real CMO. Our job as marketers is to go and bring that vision to life. And I think that’s true. I think that’s true regardless of the market or the product or the style. What matters most is us unlocking what’s authentic to that individual CEO. So in the case of Nick, for example, we were able to come up with a number of campaigns and executive comms plays that showcased his childlike joy or his appreciation for music and pop culture.

Anthony Kennada: And we brought those elements into his personal brand that we showed the world. With Mathilde, she’s got this incredible following on Medium and social media around her leadership and startup culture knowledge. And she cares really deeply about the happiness of her employees and the professionals around her.

Anthony Kennada: That’s a story that we can help tell and as marketers, because at the end of the day, the only currency that a CEO has is time. So marketing, we have a role to play to really scale this authentic connection that they can make with customers out to the world and if we can do this right, it becomes a superpower and I think Aaron and Nick and Mathilde all appreciate that and have figured that out.

Harry Stebbings: Can I ask, when you look at the relationships that you’ve had with them, what in your mind makes the ideal CEO, CMO relationship if one is thinking optimally with the idealistic hat on?

Anthony Kennada: I think the heart of it is trust. It has to be this foundation from which everything else can develop and as trust is developed, I think an open line of communication for feedback, bi-directional feedback, is really critical for maintaining it over time. CMOs want to work for a company that has a big market opportunity, has a great product, has an inspiring team.

Anthony Kennada: They want to know that they’re going to be given some resources to effectively tackle the opportunity ahead of the company or maybe if not altogether resources, certainly the tailwind to go out and tell a big story. CEOs, they want to find CMOs that can be stewards of the brand and can help shepherd the company into this next chapter of growth.

Anthony Kennada: Not to mention someone who could be equal parts, creative storyteller, quantitative demand gen expert, cultural leader. So finding the right person really isn’t easy, but once you do, I think investing in that, the relationship with trust and feedback and getting obviously the success stories on the board are really a key.

Harry Stebbings: Can I ask, you’re in the epicenter and you have an incredible community of CMOs around you. Where do you think many find it tough in terms of the CMO to CEO relationship?

Anthony Kennada: First of all, there’s the risk of mis-hire and it’s this idea that a CMO will usually feel more comfortable either in demand gen or the storytelling components of the job. I like to say with their own free time, they’ll either think more in Excel or PowerPoint. And so it’s important to understand which qualities are going to matter most at the leadership level and then what qualities can be hired in a lieutenant down the line.

Anthony Kennada: And sometimes getting that wrong, I think, can lead to a lot of challenges. And I think the second one is when do you bring someone on. My belief, maybe I’m biased as a marketing leader, but I think you can save a lot of time by making a marketing leader, whether it’s a CMO or otherwise, a single digit hire.

Anthony Kennada: Because a lot of the positioning work, a lot of the operational work to start generating demand, Marketo or HubSpot, these types of things can really benefit from being built right the first time rather than being appended and being revisited later on in the journey. So I think it’s a matter of clarity on the role and the profile, and then timing of when you bring that person in.

Harry Stebbings: See I totally agree with you in terms of the timing there being single digit. And final question before the quick fire, what do you think they should look for? Because it’s such an interesting kind of Jack of all trades marketing position when you are a single digit first marketing hire, but also I guess the CMO in many respects too. Do you just want the pure analytical customer acquisition channel optimizer, or do you want the vision storyteller to set it?

Harry Stebbings: How do you think about the optimal blend of art and science in that first hire?

Anthony Kennada: I think answering that question depends on what the makeup of the executive team looks like. If you’re a CEO that’s more of the product driven type person, maybe more of a bent towards the quantitative, maybe you need a creative storyteller to be on stage helping tell the story, helping tend to find it, in which case that might be the right profile.

Anthony Kennada: But typically earlier days and obviously, Harry, you know this really well, even better than I do. It’s about hitting the right kind of success metrics to build the business and build a foundation of a growth engine. And so I think what you’ll typically see are more folks looking to bring in maybe a head of marketing that has more of the demand gen expertise.

Anthony Kennada: Maybe it’s like a stretch VP type of role and someone that’s about to step into owning it for the first time. That typically is more of what I see. But I think it does depend on who else is in the room.

Harry Stebbings: No listen, I totally agree with you and incredibly tough question to answer, so I’m sorry for such a shit question.

Anthony Kennada: Not at all.

Harry Stebbings: But the best interviewer is going to admit when they ask a shit question. I wanted to dive into my favorite, being the quick fire, Anthony. So I say a short a statement. You know how this goes, 60 second to fire an answer. Ready?

Anthony Kennada: Yep. Let’s go.

Harry Stebbings: So what do you know now about the process which you wish you’d known at the beginning of your time in marketing?

Anthony Kennada: I wish I knew that the work that we do in marketing has to translate to sales or to some type of revenue outcome. Otherwise it doesn’t actually really matter. And I know that sounds super, super dark, maybe controversial, but there’s actually, I think quite a lot of freedom in that constraint.

Anthony Kennada: And deeply understanding that has helped my teams take this servant leadership posture when working with sales that things pay dividends for us both on the relationship but also the business outcomes.

Harry Stebbings: What about brand marketing, what about employee incentivization, employee confidence, like, say billboards or like, say a lot of that fucks me off. A lot of people think podcast advertising is brand marketing. And you can get real data, but do you know what I mean?

Harry Stebbings: What about the softer ones, which isn’t directly traceable but it’s an ecosystem play as well?

Anthony Kennada: I think it’s super important, but I do think you can tie affinity type things back to some type of outcome. Be it the sales team’s engaged, we’re starting to hit the number, the product teams building the right things. In general, our ENPS tends to be a leading indicator for our NPS overall as a business, so I think there’s somewhere in a spreadsheet, somewhere down the line, all of those efforts do show up in some type of business outcome.

Harry Stebbings: Hit me. What’s the biggest surprise about the move to Front?

Anthony Kennada: This is the first time that I’ve worked at a business that it’s this high velocity. We send out this thing called a daily weather report on business metrics that go out to our leadership team and our board every single day, it automatically triggers and seeing a no touch 50K ARR expansion come through on a Sunday, is something I’ve never seen before in B2B.

Harry Stebbings: Wow. I dream of that as a VC. Tell me, you’re building a team outside of the Bay. Biggest pro and biggest con.

Anthony Kennada: It’s the only way to stay competitive in 2020, so Front is actually the second company now that I’ve brought to Phoenix, Arizona. Biggest pro, the energy, the excitement of our teammates outside the Bay area. I think it translates to higher talent retention, higher engagement. Biggest con, honestly, it takes time to really figure out how to recruit well in these new markets.

Harry Stebbings: If you could change one thing about the world of SaaS today, what would it be?

Anthony Kennada: Honestly, that companies would choose to invest in helping their employees find real meaning in their work. I think that there’s not enough being written about the emotional wellbeing of teammates and how that translates to productivity. Hopefully that’s something that we can help play a part of, but my hope is that together as an industry we can start being proactive about this conversation.

Harry Stebbings: Tell me, who in SaaS marketing do you think is killing it today and why do you think so?

Anthony Kennada: Yeah. I’m a huge fan of Joe Chernov, newly minted CMO at Pendo, by the way, and I know you sat down with Joe, but if folks get a chance to know him, you’ll appreciate just how wise and thoughtful he is. I think David Gerhardt at Privy, he continues to be this high energy young CMO that’s really pushing the boundaries of B2B marketing.

Anthony Kennada: And the third one, I’ve been working closely with the team at 21st Century Brand. They’re a brand strategy agency that was born out of Airbnb and this is a group of marketers that care really deeply about expressing purpose and community leadership in SaaS marketing. And that’s a spirit that I think we need more of overall in our industry.

Harry Stebbings: I did indeed see that about Joe and that made me very happy, but listen, Anthony, as I said that, it’s been a while since we did our last one. I was so thrilled to see the move to Front, such exciting times ahead. Thank you so much for joining me today.

Anthony Kennada: Yeah, thanks so much, Harry. It was really fun.

Harry Stebbings: As always, I just love chatting to Anthony in such exciting times ahead for Anthony. If you’d like to see more from him, you can find him on Twitter @AKennada. Likewise, it’d be great to welcome you behind the scenes here. You can do so on Instagram @Hstebbings1996 with two Bs. 

Harry Stebbings: As always, I so appreciate all your support and I can’t wait to bring you a fantastic episode next week.

 

The post SaaStr Podcasts for the Week with Front and ICONIQ Capital — April 3, 2020 appeared first on SaaStr.

SaaStr Podcasts for the Week with Qordoba and Gainsight — March 27, 2020


This post is by Deborah Findling from SaaStr

 

 

 

 

Ep. 319: May Habib is the Founder & CEO @ Qordoba, the platform that helps everyone at your company write with the same style, terminology and voice. To date, May has raised over $21M in funding with Qordoba from the likes of Upfront Ventures, Aspect Ventures, Bonfire Ventures and Michael Stoppelman to name a few. Before entering the world of SaaS, May was a vice president at one of the world’s largest sovereign wealth funds, where she was the first employee on the technology investment team, building a portfolio now worth over $20B. Before that, May started her career in the New York Office of Lehman Brothers raising capital for software companies.

Pssst 🗣 Loving our podcast content? Listen to the start of the episode for a promo code to our upcoming events!

In Today’s Episode We Discuss:

* How May made her way into the world of startups and SaaS from being a VP at one of the world’s largest sovereign wealth funds in the Middle East?
* How does May think about and assess operational survival in times of such uncertainty? Why does this downturn feel so different to prior downturns? Operationally, what needs to fundamentally change about your processes?
* How does May think about when is the right time to engage with preemptive burn cuts? Where does one look first in the organization when making these cuts? How does one structure those discussions? What is the right way to do it? What is the right way to communicate the cuts to the team, customers, and investors?
* How does one keep the existing team’s spirits high when they have just seen many of their friends be released? What is the right way to manage those discussions? What can founders do to build unity in their team now everyone is WFH? What has worked well for the Qordoba team? Where do many go wrong here?

 

Ep. 320: We’re obviously in a very unique situation today. The pace at which Corona is impacting us all right now is so fast, it’s hard to keep up.

Today is different from other times but in SaaS. It will probably be like ’08-’09 downturn — just faster.

Join Jason Lemkin, CEO and Founder of SaaStr, and Nick Mehta, CEO of Gainsight, as they take a look back at what happened to them as a SaaS vendor in ’08-’09, and what learnings you can leverage.

 

This episode is sponsored by TaxJar.

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This podcast is an excerpt from Jason and Nick’s webinar “What We’re Doing Now. And How We Got Through ’08-’09.” You can find the full replay here.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
May Habib
Nick Mehta

Below, we’ve shared the transcript of Harry’s interview with May.

Harry Stebbings: We are back on the official SaaS to podcast with me, Harry Stebbings. And, now I’m in self isolation,. I’m getting up some weird and wonderful stuff on Instagram, so do check it out at HStebbings1996 with two Bs. It’d be great to see you there.

Harry Stebbings: But, to the show today and I’m thrilled to welcome back an old friend and incredible founder to the hot seat today in the form of May Habib. May is the founder and CEO of Qordoba, the platform that helps everyone at your company, write with the same style, terminology, and voice. And, to date, May has raised over $21 million in funding with Qordoba from the likes of Upfront Ventures, Aspect Ventures, Bonfire Ventures, and Michael Stoppelman, to name a few. Before entering the world of SaaS, May was a vice president at one of the world’s largest sovereign wealth funds, where she was the first employee on the technology investment team, building a portfolio now worth over $20 billion. Before that, May started her career in the New York office of Lehman Brothers, raising capital for software companies.

Harry Stebbings: However, you’ve heard quite enough of me. So, now I’m very excited to hand over to a dear friend, May Habib, founder and CEO at Qordoba.

Harry Stebbings: May, it is such a pleasure to have you on the show today for a very special round two. Now for those that missed our first episode, I do want to kick off today with a little on you, so tell me, how did you make your way into the wonderful world of SaaS, and how did you come to found Qordoba?

May Habib: Well, I started my career in banking and then I moved over to the investing side. I worked for a super large sovereign wealth fund in the middle East and it was a great adventure. I loved that, but I always knew I wanted to start my own company and once I had the seeds of an idea, I tried to kick myself out of corporate life before it got too comfortable. I moved to San Francisco in 2015, and I started Qordoba. Today we are a team of 28 based here in San Francisco and our product is an AI writing assistant for businesses.

May Habib: If you are a company of a reasonable size now, you’ve got people in marketing, customer success, of course sales, all talking to your market, all talking to your prospect, and making sure they all say the same things is a really tough job. So, Qordoba provides an editorial style guide. We are a single source of truth for those writing and messaging guidelines. We’ve got a browser extension that sits in the browser and it helps correct and align writing to that style guide. And, our customers are folks like Twitter, Intuit, Braintree. We use Qordoba to help the writers write well, write on brand, adjust things like terminology, messaging, writing style, getting the voice and tone right. And, I was a college journalist, a high school journalist, and so there is a lot of founder market fit right now and helping people write well.

Harry Stebbings: I do want to ask though, because you mentioned there, the time in banking and you also mentioned about the time that the sovereign wealth fund, when we look at the landscape today, it’s a challenging landscape, that has to be very clear. I have to ask, when you think back to that time in 08 at Lehman’s and then 09 in the middle East, how does today compare and how do you think about that as a comparison standpoint, in terms of landscapes?

May Habib: Well, it was an incredibly scary time. I have been here before in terms of this being a very scary time too. I was at Lehman during the financial crisis and I was one of those people, Harry, you saw on TV, walking out of the building in Times Square with my life in a box, and then your countryman, Larry Diamond, saved us the following week. So, I went back into that building with the same box. But, it was certainly months of anxiety leading up to and after the bankruptcy. And what’s crazy about this time is those months of anxiety have actually been compressed into days. And, so it’s an incredibly high amount of stress in a very short period of time for everybody.

May Habib: Then when I was in the UAE, a couple of years later, I was working for the government when Abu Dhabi bailed out Dubai and I was in the heart of the region a couple of years later, when oil prices fell from a hundred bucks a barrel, which is what they were when I moved, to $50 a barrel when I left to move to San Francisco. So, even though this is my first recession in tech, I am no stranger to scary times and it is absolutely scary. I think the suddenness really differentiates this particular economic crisis from previous ones that I’ve had a front seat to, and it’s going to be about survival.

Harry Stebbings: I mean I totally agree with you. When we chatted about it a little bit beforehand in terms of VCs speaking to their portfolio founders, I mentioned to you about mastering it in terms of speaking to portfolio founders about, as we said, their survival, operational survival, so I’d love to ask, how do you think about operational survival in times of such uncertainty?

May Habib: It’s about a few things. Number one is do you have the cash to make it out to the other side? We’ve all just blown our Q1. If you have a listener who’s made their Q1, I would love to hear it because it is a frigging impossibility right now and super impressive if they made their numbers. So, not only have most of us come in under on Q1, we have no idea what Q2 and Q3 hold. I’ve had customers who are incredible fast growing tech companies to prospects who are enterprise and mid market companies, household names, who have said, “I can’t buy software this month. I don’t know what next month will be. Let’s stay close.” And, these are deals that you know we had gotten really close to the finish line. It feels like this may be over by end of Q2 from a health crisis perspective, but it certainly does not mean back to normal.

May Habib: There is going to be a ramp up and that means a ramp up in your prospects going back to normal and your industry going back to normal, so operational survival is going to be about making your revenue projections zero for Q1, making them zero for Q2, having them in Q3 and Q4. And, on that basis, figuring out what it’s going to take for you to survive long enough to be able to see the other side. I just don’t see outside capital being a realistic possibility for most companies. So, that’s one. Do you have the cash to survive?

May Habib: I think number two is what’s happening in the minds of your team. Who is anxious? Who is worried? Who do you really need to talk to, to make sure they’re not freaking out? Now, you know that managing our own psychology as a founders part time job that during society-wide crises, having been through them before, you really need to make sure you know what your team is thinking.

May Habib: If you’re a team of 30-ish like us, then you as a founder, those are one-on-ones with everyone on your team to figure out where their minds are at. If it’s a larger team, focus on your leadership, but focus on your core folks, how are they doing at home? How is it like having their kids at home? Do they still believe in what you’re trying to do? Those are just going to be really important things to make sure the team survives to the other side, because you could have the cash stockpile you need, but if you’ve got people really not able to hit the ground running once you’re out on the other side, then you are going to have to have the team reset as well.

May Habib: And, then I think survival is also going to be about staying really close to your buyer and staying close to the market in a very empathetic way. Not in a way where you’re trying to sell them things, but really understand how their position has changed, how their jobs are changing. Most of us, most of your prospects are going to have VPs of finance and CFOs putting a pause on budgets until they can figure out what the markets are doing. Do you have a good handle of how your prospects lives have changed? It could be a permanent change. So, talking to them without trying to sell them anything, I think it’s going to be important for this period that we’re going into.

Harry Stebbings: I mean I have so many things to unpack from those. I mean if we take it kind of one by one, you mentioned there about kind of what to expect in Q1 being totally blown in terms of the first instance. Do you think there’s anything you can do to mitigate that in terms of discounts? In terms of much, much cheaper pricing for the first year and then second year where it ramps up so you preserve their cashflow and then it gets to normal pricing the next year. Is that anything you can structure a deal as to eek them out, quite frankly?

May Habib: The kinds of discounts that you provide are going to be dependent on the stage of the company, so we are absolutely doing things like that because adoption is just very important for us. The initial land is really important. There are still going to be lots of folks who say, “I just can’t roll anything out right now, whether it’s free or not.” And, so I think it’s going to be hard for people to commit to things that work when they’re trying to stock toilet paper in their bathrooms. It’s just the psychology of it and they could be there, but then the decision maker may not be, the budget holder may not be. So, just so much has to line up for somebody to make a decision right now. My advice would be try to be as high IQ as possible when talking to prospects and really back off if folks can’t do anything because it could be damaging to the long term relationship if you press, even if you’re giving things away.

Harry Stebbings: No, absolutely. I do agree. You said also about kind of being really close to the hoop and being really close to the buyer in that non-transactional way. If you think about the questions to ask to really gather as much information as possible, what questions should we be asking?

May Habib: I think working from home when companies are not used to that can really fundamentally change what organizations are able to get done. We’re lucky, I think in tech and startups in particular, that we really have a years long headstart on the rest of the global economy. We have built entire software stacks that make this possible. There are an incredible number of companies who are just being introduced to Zoom right now.

May Habib: So, I think having empathy for that and really just trying to dig in on how people are staying in touch. How are they talking to their boss? What’s happening to their direct reports? What about all those contractors they used to have? We are a cross functional product, so those questions are pretty natural for us to be curious about. But, I think that gives you a really good sense of how anxious somebody may be even if they’re not necessarily letting it on.

Harry Stebbings: You mentioned their team there in terms of the customer’s team, in terms of your team, when the customer does provide that feedback that ,”Hey, we just can’t roll it out, free or not,” or the pipe goes to zero or whatever kind of negative unexpected consequence comes from this. My question to you is what do you do kind of deliberately to keep morale high and to ensure that the team members are as empowered and as happy as possible in this time?

May Habib: We have really tried to ramp up the amount of good news sharing. So, customer success has got their cadence of calls, and if anything, people want human contact. And, so customer success has had just a busy calendar as ever. So, really being able to share those nuggets to the rest of the team is important. We had our first virtual happy hour last Friday and very lightheartedly someone came up with the idea of a toilet paper finding service and while on the call over beers, the team launched, findmytoiletpaper.com. It’s live, you could actually go to that site.

May Habib: So, trying to focus on the people versus the business because taking care of that people will take care of the business is what we’ve tried to do and checking in on each other. We’ve got a couple survivalists on our team who would be okay in their homes if all of electricity and water were to be shut off. And, so we’re making fun of them. They may have 15 people show up at their house at any given time. So, really getting to know each other as people, making a real effort to turn on our videos when we’re talking to them, turning any social activities to virtual ones. That’s what we’ve been trying to do these past couple of weeks

Harry Stebbings: And, I think findmytoiletpaper.com will soon be a viral sensation, by the way, I love that in terms of an output. I do have to ask though, because in these extended periods also, a lot of people are considering cuts in certain ways, especially if it’s potentially more prolonged than one expects. These are actions that often preemptive burn cuts. How do you think about when’s the right time to think about and then to do preemptive burn cuts?

May Habib: Well, we did one when we looked at our operating plan for 2020 at the start of this crisis a few weeks ago. We saw that it would be pretty difficult for us to make the numbers work if Coronavirus was going to be more than just a blip. And, we took the extraordinary decision to reduce the size of our team by a third. And, we did that very quickly. So, it was days from making the decision to announcing it to the people impacted. And, we did that the first week of March and literally two days later we went to work from home.

May Habib: I mean I can’t underscore the speed at which this entire crisis has come on. If we really think about where all of our heads were at 10 days ago, and that day was the hardest day of my professional life. The day that we did that, a third of the company is 17 people and it was 17 people who had become close friends to me, close friends to each other, who we had recruited painstakingly. So, that was a really tough day and I am grateful that we got to the other side of that because it makes the likelihood that we will survive what comes all that much higher and that is a win for the team that remains. That’s a win for our product existing in the world. It’s a win for our customers.

Harry Stebbings: I mean, there’s a couple of questions that I have to ask your advice on. One is that I hate conflict, honestly, and as you said, they’re friends, you have relationships with them. I never know the right way to do it and the right way to approach it. Advise me, what is the right way to do it and how do you think about structuring that conversation?

May Habib: Yeah, structuring the entire day was my number one job from when we made the decision to when we did it. I literally didn’t do anything else but prepare for that day and I talked to other CEOs who have done it. Lynn Perkins from Urbansitter was an incredible resource. I talked to former CEOs who have done it. Tony Levitan from Leaders in Tech was an incredible resource there too, talking to me through this. And, we ended up planning for the day that we did it and literally 15 minute increments starting from 6:00 AM to 5:00 PM exactly who we were going to talk to, in what order, what we were going to say, who was going to be doing what in kind of the core people that knew about it. Then who was going to be told in what order in terms of the folks who needed to know because there was people on their teams who are impacted.

May Habib: So, we decided on a Sunday, we did it on a Thursday and my life from that Sunday to the Thursday was only this. And, we had to speak very candidly to those departing. I had to take full responsibility. I let the company grow a little too fast and we were coming into a really incredible economic period that none of us had seen before. I mean, the vast majority of folks that were on our team were people who had never been through any economic crisis in their career. At mid thirties, I am one of the oldest people on the team and so that was really tough. And, I did see a range of outcomes. Folks for whom this was their first job out of college were impacted to a degree. Folks who went through the previous downturn were not. And, so just speaking really candidly about what happened to those folks, taking responsibility for it, rallying the team that remains is just as important.

May Habib: Now, rallying is difficult when two days later you move to work from home. And, so I really feel for the companies that are going to have to do these kinds of workforce adjustments in the next few months because they’re not going to have kind of the benefit that we had benefit in air quotes because it was a really shit day, but we were all together at the office. And, I do think there’s nothing like being able to put that whole office in a room after something like this happens to have those frank conversations about the health of the company, the health of the balance sheet, and the fact that we’re all together to run as fast as we ever have towards these goals.

May Habib: So, yeah, there’s a lot there, but I guess that’d be my advice in a nutshell.

Harry Stebbings: When you think about keeping the morale high there, for you, what do you think works in those situations? And, if you were to advise people that you now have to do it in a remote situation, what would you advise them given your experience having done it in person and kind of now being worked from home, how would you advise?

May Habib: I think being as high EQ as possible. People are going to want to grieve and so moving to a “rah rah, we’re going to get shit done” mode too quickly is not the right thing to do. In your mind, you’re already on the other side because you’re the one who had been planning for days for this and the folks that will be doing it over the next few months, I can’t tell you how many startup founders have told me that they’re going to have to do something like this soon. Not trying to be too positive, honestly, about where shit is going. And, what I have tried to do for myself is really hold lightly to the outcome.

May Habib: The best I can do is lead with my mind, with my heart, create a place where we love and enjoy the journey and that we all feel like we’re playing a fun, challenging game with people that we like and if we win, that’s frigging awesome. And, sharing that and really giving people the room they need to grieve. People that they loved who aren’t working with the company anymore and kind of go through their own cycle of emotions versus being kind of so focused on getting them to a good place really quickly. If you are able to be authentic and open, they will get to a good place on their own and they’ll meet you there. But, you have to meet them where they are emotionally right now.

Harry Stebbings: In terms of being authentic and open, it’s, as you said, it was the hardest day of your career. It’s a horrible and shit situation. And, so in terms of the psychology, I am really intrigued, how do you fundamentally manage the psychology of being CEO and how do you handle these really pretty shit situations?

May Habib: My friend Nick Flanders is a CEO also, and he told me a phrase a few weeks ago that just really encapsulates how I get through the tough times. And, it’s one that I just said, “holding lightly to the outcome.” You can be really obsessed with the process, really focused on the process. If you can hold lightly to what that process gets you to, you are able to be so much more present or able to connect much more deeply and show up more authentically and openly. And, I think it leads to better outcomes for your own psychology and the psychology of others around you.

May Habib: You are leading from a place of joy and love versus fear and anxiety and I think that makes all of the difference in leading. And, our own psychology’s important so that we can show up every day and get out of bed every day, but it’s also important because if we’re not managing our own psychology, there’s a transference that happens whether we like it or not, whether if we feel it’s happening or not. And, people know when you’re leading from a place of security and love versus fear and anxiety and especially in this period that we’re going through right now and I think it’s going to last a couple of quarters. Leading from a place of true peace, it’s going to be more important than ever.

Harry Stebbings: Can I ask you a really weird, quite deep question and I hope it’s okay for me to ask. Where do you find true peace and security in what you do today, in terms of now being also work from home? What is it that gives you that kind of mental secure place?

May Habib: I feel mentally secure knowing that no matter what happens, me and the team will have left it all out on the field. We don’t leave a stone unturned and knowing that you’re giving it your best and they’re going to be all sorts of things that are outside of your control, I think gives me a lot of peace and truly trying to do good things for people. Whether that is your customer, whether that is a person on your team, whether that is contractor who you’re working or no longer working with. I mean trying to do it peacefully is what gives me security that I’m not wronging anybody.

May Habib: Nobody on my team is wronging anybody and we are all just trying to do our best. If we take care of the people, I really believe this, it will take care of the business, and I believe we are going to win and make it through the other side, but these are challenging times. These are unchartered waters, for sure. There is no playbook for this.

Harry Stebbings: Can I ask, how do you communicate the team changes to kind of two very important and specific segments being one, your customer base and two your investor base. Do you need to really convey the changes to the customer base one, and the investor base, two?

May Habib: Definitely to both, for sure, and there are different communications strategies on the customer and the prospect side and we went customer by customer, prospect by prospect. They don’t need to know the ins and outs of everything that happened. They do need to know that somebody that they worked closely with is no longer with the company. Depending on how big that relationship was, it involved me also getting on the phone to just let them know that the company’s in really, really strong position, stronger than ever. And, we wanted to make sure that we were in a position to weather what may, and have our own future in our own hands. And, those conversations went very well. Certainly with investors, they’re part of your initial decision and so the investors have got, for the most part, a head in advance view on what’s coming. In our case it was pretty specific.

May Habib: What’s nice about investors is they’ve got a portfolio. And, so they’ve seen, especially if they’ve got decades of experience and we’re very lucky with our very experienced investors. They’ve seen this dozens and dozens of times. And, so who is impacted and how you do it, they are so well positioned to give you advice on that. So, we brought them in very early and then they’re also there to help you get folks back on their feet and so we created a list of folks who were impacted that was shared with the portfolio companies who are hiring and hire mode of our investors and so investors are very empathetic. They’re very supportive. If anything, they’re asking you to cut even more than you think you need to, because they’ve seen this story before and they’re really incredible and also trying to help us get people back on their feet.

Harry Stebbings: Every investor is calling every portfolio founder they have right now and telling them to cut everything they can in terms of burn and really just maximize runway as long as possible. Are founders a little bit annoyed by this when they have every investor they have calling them for the very same call? And, then how do you think about that? Because, it’s something that I’ve been concerned about it as I’ve been making these calls.

May Habib: So, much advice is really hard to internalize and action until it’s lived experience. Every time I’m annoyed by a question or frustrated by somebody asking me something, that’s a moment for self reflection, and we don’t want to do the hard things. It’s just human nature and no matter how annoyed they are at you, Harry, still make the call, still give the advice. I also resisted making our cuts as big as they ended up being and I am now grateful that I took that hard advice and a lot of it is just the founder coming to terms with what they need to do and I think they will thank you for it.

Harry Stebbings: No, I agree. Are you worried about the psychology of your team in this time? A lot of founders I speak to are very worried, especially if they don’t have a remote first team initially. Are you and have you been worried about the psychology of individual team members, loneliness, isolation, fatigue? Is that a concern for you or do you feel that given the infrastructure set up already, it’s a storm that can be weathered quite easily?

May Habib: It’s my number one concern is making sure the team is okay at home, isn’t feeling anxiety. I mean we have had our fundamental needs challenged when people go to the supermarket and the shelves are empty. When people are afraid for the lives of their parents. I think that the psychological impact of this goes deeper than we even think right now and you have to be empathetic to that as the leader of a company. It’s going to impact productivity. It’s going to impact the way folks show up and the only thing you can do, I think, is make yourself available and have these kinds of candid conversations with people very early, very frequently. We try to stay in touch as much as possible on a daily and weekly basis through Zoom and I think it’s going to get a little worse before it starts to get better. But, yeah, I have so much empathy for everybody who hasn’t had a remote first team until now.

Harry Stebbings: Can I ask you, the other thing that we’re seeing is obviously school closures. It also just causes a huge, not burden, but time responsibility, on working professionals who had previously had their days unencumbered when children were at school. How do you think about being a leader when many employees or employees suddenly have children that they need to homeschool and look after all day?

May Habib: Oh, so much empathy for that. I have an 11 month old at home who is being pushed around in a trolley outside right now because I am doing this call. So, I think we’ve had really, from the beginning, a culture where there’s not a really a stark line that divides home and family. I had my newborn at the office at 10 days old and then at three weeks old and that’s same for other folks in the company. I have done calls with candidates with my baby in my lap or you can hear him in the background and it’s just part of life at Qordoba. We’ve got a lot of parents on the team and I think we are all going to have to be okay with kids coming in and out of the frame.

May Habib: Everybody knows this CNN clip from a couple of years ago. I think that’s just normal. I was literally just on a call with a great contractor that we work with and his wife walked into the frame and said hello, the baby ran in and she joined him on his lap for a little while and it was just really lovely and there is a lot of silver lining,, I think in this phase that all of our economies are going through and if it is a bit of the blurring of the line between home life and work life, I think that’s going to be a very positive thing.

Harry Stebbings: Can I ask you a weird one and a slightly messy question, but I’m too intrigued and I’ve been thinking about it a lot over the last few days and it’s, do you think it we’ll be fundamentally so much more appreciative of human connection and human relationships after this period of isolation? Or do you think that the health concerns and the virality of the virus itself will just actually lead people to be more skeptical, more germaphobic than ever. And, that might be the wrong word, but do you know what I mean? More isolatory than ever. Which way do you think it will go?

May Habib: Oh, I think we’re going to become so much more connected. I leaned my head out the window today and told my neighbor that the Walgreens had restocked toilet paper and his dog barked up to my baby and it was just moments like this happening now throughout our day that just didn’t happen before. I think one of the benefits of working from home is going to be feeling much more present in our communities and especially in San Francisco. We’ve got such a transitory population and being able to just breathe in to the physical place where you’re at because, I mean right now San Francisco is on lockdown and we are not supposed to leave our house for non-essential anything for the next three weeks till April 7th, and that is a forced step back. It’s a forced reckoning in a way and that I think is going to have really positive impacts in the kinds of bonds we all make and just the physical communities where we live.

Harry Stebbings: That makes me super happy to hear. No, I’m very pleased to hear that. And, I do hope for the same. I do want to move though into my favorite element of any episode though, May, being the 60 Seconds SaaStr. So, I say a short statement and then you hit me with your amazing immediate thoughts. Are you ready to dive in?

May Habib: Okay, great. Let’s do it.

Harry Stebbings: Okay, so let’s hit with what do you know now about the process which you wish you’d known at the beginning of your time with Qordoba?

May Habib: That advice would be useless. And, what I mean by that is once you’ve learned the lesson yourself with your own lived experience, you can kind of look back and say, “Ah yes, that’s what that advice was about.” But, nothing I would say would be as helpful as if you want to start a SaaS company, please just get started and get all your mistakes over with.

May Habib: It’s like when you start a company, there should be a syllabus of all the mistakes you’re going to make, some of the multiple times in different flavors. And, just pick yourself up, check it off the list, take the lesson with you and move on. I wish I had known that that’s what it was going to be like.

Harry Stebbings: If you could change one thing about the world of SaaS today, May, what would it be and why?

May Habib: I think they would do an industry founded nonprofit whose purpose was an education effort for the mid market enterprise on just what SaaS can do. It’s not just about CRM and ERP and accounting software. There’s a whole software stack that makes us startups super efficient and innovative and if non startups could really understand that flow, I think it would change the speed at which they bought and adopted software.

Harry Stebbings: What’s the hardest element of your role with Qordoba today, May?

May Habib: I think on the work front, I would say the hardest part is going back to build that inbound and organic engine. We just got so good at outbound that we never did that and now we have to because the buying journey is changing and it’s a fun and it’s an interesting skill set for sure, but it’s just a different one than the one we had been developing and I would say that it’s been challenging, fun but challenging.

May Habib: And, then I think from a leadership perspective, the hardest part today is really just trying to keep the team together, keep us positive and get us to the other side.

Harry Stebbings: Tell me, when you’re stuck, who do you turn to for advice and what’s been your big takeaways from that relationship?

May Habib: I turn to books, and I have lots of great conversations with people in the industry and investors, but I kind of have this like three-part Bible that really helps me when I’m stuck, stuck now, because I feel like when I’m stuck I just have to go into my own mind for a minute and in the rereading of this canon and with the new lived experience, it’s where I think my insights happen for me and my three go-tos are the 15 Commandments of Conscious Leadership by Diana Chapman. That really changed my life. It was recommended to me by Karen Norman.

May Habib: And, then you had him on your show last week, Matt Mocharyi, The Great CEO Within. Loved the episode and I’ve been rereading chapters of that book for months now. And, then Disciplined Entrepreneurship by Bill Aulet for those of us who are gut driven, it’s just, it’s a great balanced, very data-driven approach to building product. Those are sort of my Old Testament and New Testament and Koran, I love those three books.

Harry Stebbings: Listen, I loved doing the episode with Matt and it’s been such a pleasure to have you on the show today so thank you so much for joining me today and I really do so appreciate it, May.

May Habib: Thanks so much, Harry.

Harry Stebbings: My word, I absolutely love May and such exciting times ahead for Qordoba. And if you’d like to see more from me you can find her on Twitter at May_Habib. Likewise, it’d be great to welcome you behind the scenes here. As I said, self isolation and so doing some very weird and wonderful shit. You can find that on Instagram at HStebbings1996 with two Bs. I would love to see you there.

Harry Stebbings: As always, I so appreciate all your support and I can’t wait to bring you a fantastic episode next Monday with Anthony at Front.

 

The post SaaStr Podcasts for the Week with Qordoba and Gainsight — March 27, 2020 appeared first on SaaStr.

SaaStr Podcasts for the Week with Pilot and Doctolib — March 20, 2020


This post is by Deborah Findling from SaaStr

 

 

 

 

Ep. 317: Rachel Hepworth is VP of Marketing @ Pilot, the startup that offers the best bookkeeping, tax and CFO services for growing businesses. To date they have raised over $58M from some of the best in the business including Index Ventures, John Collison, Paul English, Drew Houston, Frederic Kerrest, Diane Greene and more incredible names. As for Rachel, prior to joining Pilot, she saw the hyper-growth of Slack firsthand enjoying a couple of different roles including Head of Growth Marketing and then also Head of Self Service and Platform Marketing. Before Slack, Rachel spent 4 years at LinkedIn where she led the product marketing team for content experiences. Finally, before LinkedIn, Rachel spent close to 3 years at Climate Corporation, prior to their $1Bn exit to Monsanto.

Pssst 🗣 Loving our podcast content? Listen to the start of the episode for a promo code to our upcoming events!

In Today’s Episode We Discuss:

* How Rachel made her way from marketing manager at Climate Corporation to VP of marketing at Pilot today? What were Rachel’s biggest takeaways from her time seeing the hyper-growth at Slack?
* How does Rachel think about organic growth and inciting word of mouth today? How does Rachel think they can be more accurately tracked and measured? How does Rachel think about the optimal ratio of paid to organic in growth? Would Rachel agree in paid, your payback period doubles every $5M you spend?
* With the rise of product-led growth, are we seeing a fundamental shift in the structure of sales and marketing? How does Rachel see marketing move ever close to the function of customer success today? What is the optimal way for customer success and marketing to work together?
* How does Rachel think about the importance of getting in front of your customers? Why does Rachel believe that data tells you the what and customer conversations tell you the why? What is the right way to structure your customer conversations? Where do so many people go wrong here?

 

Ep. 318: The first step in success with SMB clients is to recognize that it’s not a one size fits all scenario. Companies need a specialized approach for SMB accounts, different than the tactics used for Enterprise. Accel Partner Andrei Brasoveanu will sit down for a conversation with Agnes Bazin Doctolib on how to create a targeted and effective sales process tailor-made for SMB.

This episode is sponsored by TaxJar.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This podcast is an excerpt from Agnes’s session at SaaStr Europa 2019.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Rachel Hepworth
Agnes Bazin

Below, we’ve shared the transcript of Harry’s interview with Rachel.

Harry Stebbings: This is the official SaaStr podcast with me, Harry Stebbings at HStebbings1996 with two Bs on Instagram. And there you can both suggest guests and questions for future episodes and I really do love to see you there. But in the show today, and it’s been a while since we really delved into the world of SaaS marketing and I’m thrilled to say that all changes today and I’m very excited to welcome Rachel Hepworth, VP of Marketing at Pilot, the startup that offers the best bookkeeping, tax, and CFO services for growing businesses. To date, they’ve raised over $58 million from some of the very best in the business including Index Ventures, John Collison at Stripe, Paul English at Lola and Kayak, Drew Houston at Dropbox, Frederic Kerrest at Okta, Diane Greene, and many more incredible names.

Harry Stebbings: As for Rachel, prior to joining Pilot, she saw the hypergrowth of Slack firsthand, enjoying a couple of different roles including Head of Growth Marketing and then also Head of Self Service and Platform Marketing. Before Slack, Rachel spent four years at LinkedIn, where she led the product marketing team for content experiences. And finally, before LinkedIn, Rachel spent close to three years at Climate Corp, prior to their $1 billion exit to Monsanto. I do also want to say huge thank you to Waseem of Pilot and to Mark at Index for some fantastic question suggestions today. I really do so appreciate that.

Harry Stebbings: That’s quite enough for me though. I’m very excited to hand over to Rachel Hepworth, VP of Marketing at Pilot.

Harry Stebbings: Rachel, it is such a pleasure to have you on the show today. As I said, I heard so many great things from your wonderful founder Waseem and then also from Mark at Index. Thank you so much for joining me today.

Rachel Hepworth: Thanks, Harry. Happy to be here.

Harry Stebbings: I would love to kick off though with a little bit about you, Rachel. Tell me, how did you make your way into what I call the wonderful world of SaaS, but come to me the killer head of marketing at Pilot today?

Rachel Hepworth: Well, the beginnings of it are somewhat of a long and winding story and I’ll spare you most of it. But basically about 15 years ago, I was out of school. I’d had a variety of truly random but slightly interesting jobs, including selling cheese. And I decided that I wanted to join a startup because I was young, I had no responsibilities, risk meant nothing. And I joined this company called Weatherbill, which was basically a market for weather derivatives, which hadn’t existed before. And this was a slightly strange but really large opportunity because it turns out that almost every business has economic impact from the weather. The idea is you want to be able to mitigate that risk like you would any other type of insurance risk. But if I’m really honest, what drew me to the company was their logo. They had this cute little umbrella and I just thought that was really friendly at the time.

Rachel Hepworth: And so the company took a chance on me, I took a chance on them. And then I spent the next year sort of learning about tech marketing, making every mistake in the book. And basically not really helping the company at all. And this was right around the time of 2006 to seven. After a year, decided that the definition of insanity was continuing to do what you’d always done hoping for different results. And so went back and started to actually focus much more on customer development and product marketing rather than demand gen. And I didn’t even have words for these functions at the time. It’s just the type of work I was doing. And I realized that Weatherbill actually didn’t have product market fit when I joined, and it’s never good to be a marketer at a company without product market fit. And so I spent quite a while figuring out who actually was our target audience. Turns out it’s not every business in the world.

Rachel Hepworth: What do they like? What was missing from the product that prevented them from buying? How did we need to change how we went to market? And eventually Weatherbill rebranded to become The Climate Corp and it sold to Monsanto for about a billion dollars. So we did figure it out, but in the middle was the financial crisis, looked like the company was going to go out of business. We weren’t selling anything and it was a pretty incredible learning experience, but probably not one that I’d really want to repeat anytime soon. Through great stress comes great lessons, but I feel like I’ve had those lessons and I don’t need to kind of repeat that experience.

Rachel Hepworth: But then after Climate Corp, I joined LinkedIn, which was a totally different experience because LinkedIn had just gone public at the time. This was 2012, and that was really where I learned how to market and operate at scale and use data and test really rigorously and learn about a lot of the fundamental best in class practices of marketing. Because at a startup, you figure out how to be scrappy and get things done. You don’t necessarily figure out the optimal way to get things done. At LinkedIn I started out on the prosumer subscription side of the business and then eventually I switched over to the consumer side, which is more about the LinkedIn feed and video and SlideShare and kind of managed PMMs that were driving all of these features that contributed to the daily engagement metrics of LinkedIn.

Rachel Hepworth: And that was a really great experience,, but after four years, I had this urge to go back to something smaller. LinkedIn grew from 2,000 to 12,000 employees while I was at the company. And that growth was really exciting, but 12,000 there’s a lot of people, communication gets harder and I just wanted to be able to build something. And so that’s when I went to Slack to start their growth marketing team. And Slack had about 500 employees at the time. It was a really nice size of company. They clearly had product market fit, they were growing like crazy, but they were still small. People forget how small Slack was back in that time. And they still had a lot of things to work out.

Rachel Hepworth: On the growth marketing team, we worked really closely with the growth product team, the analytics team, engineering team, and it was really, how do you optimize that really strong Slack funnel? We had so many people who had heard about Slack, they wanted to try Slack, but they really didn’t know what it was, nor did we know how to describe it. And so it made it more difficult for people to get value out of it quickly because they’d land in Slack and they’d say, “Okay, I send a message to somebody, but where’s the bigger so what?”

Rachel Hepworth: And so that was really a lot of what we focused on is how do you deliver value to all of those users who are trying your product? But because there’s so little friction, it’s so easy to start. That means the intent is not quite as high. There is no lock in effect. And you can see a lot of churn in those first couple of days. Really focusing on not just acquiring customers, but acquiring healthy, active customers was where I spent most of my time. And then after a couple years I ended up managing most of the Slack product marketing team as well. Really figuring out how to take new features to market. And then as Slack transitioned up market, how do you sell a product that had been so focused on bottoms up user growth and sell it into the enterprise? Because it really is a very different muscle.

Rachel Hepworth: And then I got excited by Pilot because of a couple different things. One is that Pilot is a company that automates bookkeeping and eventually the larger financial back office for SMBs. And it’s a really, really large market. The things I learned from Climate Corp and LinkedIn and Slack is, market size is really important. If you have an amazing product with a $10 million total market size, you can kill it. But it’s only ever going to be a nice little business. And so the size of the opportunity is so important. And for bookkeeping, which is this service that is almost mandated and certainly needed by just about every small business out there, you’re talking about a $60 billion TAM in the US alone. Really legitimately huge market. Everyone needs it. No one likes it. It’s a pretty ripe industry for disruption because there’s no big player who’s really killing it in this space.

Harry Stebbings: And also no one bloody loves bookkeeping.

Rachel Hepworth: Yes, that is another challenge that we can talk about, but exactly. Yeah. No one likes it. At best, everybody says it’s okay. I pay for books, I get some books, I guess. The government forces me to, ho hum. And then the second challenge is that when you’re dealing with an SMB business, it’s really about acquiring customers at scale. And that is fundamentally a marketing challenge. And so this is not a freemium product. There are costs to delivering books to customers. We can’t just give it away. And we’re not targeting $100,000 deals or million dollar deals where you can have a sales team who goes out and hunts for the appropriate customer. You really need to find a way to drive the growth in a format that’s scalable and repeatable and profitable for this very, very large audience. And that fundamentally will come down to a marketing challenge, which was really interesting and exciting for me.

Harry Stebbings: Let’s dig in on that marketing challenge because kind of speaking of that growth as you said there, it’s different ACVs and it’s different kind of styles. And so if we talk about kind organic growth and word of mouth, a lot of people say today, it’s untrackable, it’s immeasurable, and almost kind of denigrated to a certain extent. I guess my first question is, would you agree with the statement on word of mouth and organic being this untrackable, immeasurable avenue?

Rachel Hepworth: It’s certainly harder to track than a Facebook ad. What’s not? But that doesn’t mean that it’s impossible. And it’s something I’ve thought a lot about because at Slack in particular, organic growth and word of mouth, were such powerful levers. And if you feel like you have no control over them, you don’t feel really good about your fate because you’re basically just at the whim of whatever happens in the marketplace. It’s not a total black box. I look at the growth of our organic acquisitions. I look at the growth of our acquisitions coming through referrals, just natural referrals where a customer calls up and says, “So-and-so told me about this product,” which is actually a pretty high percentage. And in that way you can track it pretty specifically. But another more indirect way I think about it is I track it through NPS because you’re not going to get referrals without a high NPS. And then thinking through how to create a environment where you’re going to grow word of mouth and organic more strongly. And it’s not just sitting back and saying, “I hope it’s happens.”

Harry Stebbings: Is that focusing on hyper-local geocentric areas where you know that there’s a community of small businesses and actually if you target one and penetrate it, there’s a higher likelihood of virality through word of mouth if you’re within that tight community, is that the sort of kind of strategic thing that you do to in the site word of mouth?

Rachel Hepworth: That’s part of it and that’s certainly at Pilot one of the things we’ve done is we’ve initially focused on startups because they are such a tight knit community who are constantly asking for recommendations. And so one founder will ask another founder for advice about how to set up their company. And so that creates a very natural environment for word of mouth to flourish. But first more fundamentally, is you have to have a product or service that’s worth talking about. Because even if you’re in that tight community, if nobody likes what you’re selling or they think it’s mediocre, the recommendations aren’t going to happen. And so I actually explicitly think about measuring your word of mouth potential as it’s really what happens when the experience of a product or service sort of vastly exceeds the expectations of the person buying it. And I think about that in terms of Pilot in that you buy bookkeeping from us, let’s say, and every month we deliver you accurate books and that’s great. You bought something, we gave it to you, we did what you paid us to do.

Rachel Hepworth: But not many people are going to run out to their friend and say, “Guess what? I found this bookkeeper and I paid them for our P and L statement and then they gave it to me and it was awesome and you should go try it.” That’s just not going to happen. But if we delivered books to you and we said, “Hey, here are your statements and we noticed that you’re paying twice as much for your Salesforce subscription as startup industry standard, you can negotiate that and save $30,000 a year.” That’s something that people aren’t expecting. That’s an extra piece of value. And that’s something where they will go out and say, “Hey, this company I use just told me about this thing. You should go try them because they’re going to give you other valuable information that can help your company be more successful or grow.”

Rachel Hepworth: It’s about really over delivering upon what the expectations were, whatever you set them to be. And that’s setting up, how do you measure that? And how do you understand if you are doing that? And that just providing people what they pay for is really not enough, I think, is key to finding levers to really boost word of mouth and organic growth to a much higher degree.

Harry Stebbings: No absolutely. It actually reminds me of Gusto, the employee payroll company, who realized that actually no notifications are sent when traditional payroll companies pay people and so they send a fun email saying, “Hey, you just got paid, go celebrate,” essentially. It’s not actually really additional value but it is an additional incremental thing that incites word of mouth, which I liked.

Rachel Hepworth: It’s a moment of delight for people and so that’s what gets them talking.

Harry Stebbings: Totally. Absolutely. I guess I think, though, when we look at kind of the marketing split and often founders ask, “Okay, so I obviously desperately want word of mouth and organic,” but the right ratio between organic and paid and how that relationship looks is a tough one. How do you think about the optimal ratio for you of paid to organic?

Rachel Hepworth: I think it’s always going to depend on the company and the particular market and model you’re in. And so one thing I’m always hesitant about is I don’t think there are any hard and fast rules. Except for that for me, I’ve never seen a particularly successful B2B company thrive with paid as its dominant channel. And so I have a strong perspective that if organic in some way or shape or form isn’t driving the majority of your purchases and it doesn’t have to be 90%, but still the majority, particularly in the early days when you’re attracting those early adopters who tend to be the biggest advocates, if you haven’t achieved that, I think you have a problem with product market fit and you need to step away from the paid ad spend and sort of forcing people through the funnel and think about how you create a better experience or you’re solving a more important problem for your customers.

Rachel Hepworth: Because for most SaaS companies, you’re not selling toothpaste and so thinking that you’re going to get all your growth through Facebook or Instagram or LinkedIn through an ad, of we offer this thing, go buy it, is not very realistic. I think of paid as useful for targeting very specific high value audiences, for promoting certain events that can nurture people down a path. It’s an ingredient in the mix, but it can’t be your base.

Harry Stebbings: I do agree with you there. Thinking of just accountability within the org, I am interested, kind of going back to the organic growth element, where do you think organic growth and kind of accountability with it lies? Is it marketing? Or is it actually customer success who really should be the ones encouraging product engagement, creating that community? Where do you think that accountability lies actually? With marketing or customer success?

Rachel Hepworth: I actually, in most of the companies I’ve been, would question whether it lied between product or marketing versus marketing and customer success. I think customer success is really important. Retention for upsell, for expansion, and certainly the more up market you go, the larger the role customer success plays because they tend to be a little bit more bespoke in their interactions with customers, a little bit more one-on-one. They’re really, really crucial for those big deals. But in the beginning, particularly the freemium model or an SMB model, if you want to get a lot of people and you need to get a lot of people in the door and you need to have them see some initial signs of value before they deeply engaged, you have to have them prepped and educated and understand what they are supposed to be getting out of the product before they even start engaging with the product. And then the product has to actually deliver on those experiences.

Rachel Hepworth: I think of it as a partnership between those two functions and after they’ve kind of gotten that very initial traction is where customer success tends to come in to say, “Hey, you’ve gotten some value here. We can help you get even more.” But if you don’t get that initial value, customer success never gets that chance to engage.

Harry Stebbings: No, it’s super interesting to hear the emphasis on product there. It takes me to kind of probably one of the buzziest words in SaaS at the moment, which is kind of product growth and a strategy that’s star struck in the minds of so many people in our ecosystem. I am interested with this fundamentally new way to approach both kind of the distribution and engagement with the products that we create, do you think we’re seeing the fundamental shift in the role of sales and marketing?

Rachel Hepworth: I think for product led growth companies we are, because the volume you’re dealing with for product led growth, which typically is a freemium model, by its nature of being freemium, it has to be a very, very large volume of users coming in at the top of the funnel because they’re lower intent, there’s less friction. You haven’t, in my mind necessarily acquired them just because they sign up to your product. There’s still a lot left to go in terms of actually capturing them and capturing that value. And so marketing shifts from trying to initially attract these users, to trying to help them understand the value, and at Slack, we called it activated users, but actually engage in the product in a way that implies that they’ll have success, they’ll have health, and they have some potential of paying you down the line. Versus just we signed up tons of users and then they all churned one day later, so the value was really zero.

Rachel Hepworth: Those initial signups almost become what marketing typically has thought of as the leads. And so marketing turns much more to, it’s about education. It’s about understanding how the features relate to value versus kind of the more brand building or extremely top of funnel activities that it would focus on in other types of companies.

Harry Stebbings: You mentioned brand building there and it’s one that I often hear a little bit of reductionism towards, which is kind of brand marketing and the lack of kind of attribution that it delivers. How do you think about brand marketing today given the challenge of attribution with it, but actually in many positive externalities it can have in terms of ecosystem building, employee incentivization, how do you think brand marketing?

Rachel Hepworth: It depends on the stage of company you’re at. I think brand marketing when done correctly can be immensely powerful, but even when it’s done correctly and is powerful, it’s extremely difficult to track. Again, not everything that you can track has value and vice versa. You can track Facebook ads very easily, but they often end up being not particularly interesting drivers of growth. Just because you track it doesn’t mean that you should spend all your time on it. If you’re a startup or an earlier stage company, it’s you don’t really have a brand to market. It feels too early for me. But once you become a little bit more established, there’s a lot of power in brand marketing. But if you want to be able to attribute every dollar you spend to the dollar impact, you’re going to be unhappy and fail. My first rule of thumb at companies is if your executive team wants to see the ROI in very strict terms from brand marketing, I’ve never seen that successfully happen.

Rachel Hepworth: And so you’re just going to fail and be really dissatisfied. But that doesn’t mean that there wasn’t an enormous amount of value delivered. You just have to understand that a lot of it is indirect. A lot of it you are not going to be able to put a tracking pixel on and you have to have a certain amount of faith. And that’s really unsatisfying to people in tech marketing. But I also strongly believe that it’s the truth. And so I wouldn’t engage in brand marketing until my company had some amount of brand to market. If people have never heard of you before, there are quicker and simpler things to do. But Slack certainly engaged in quite a bit of brand marketing. And at this point it’s about extending and defending the brand more than it is about generating tons of new users. But Slack is a very valuable brand to extend and defend so that’s extremely important.

Harry Stebbings: Oh it does indeed. I guess my question though, is you mentioned kind of the challenge of attribution there and kind of communicating that to maybe the other members of the team. Can I ask, in terms of kind of creating a pipeline goal for you as the head of marketing, how do you think about creating a goal that’s a stretch goal for you and the team and it’s an ambitious target to hit, but also not a stretch too far, which will kind of create a dampening of the team if it’s not hit. How do you think about the right goal to set in terms of pipeline?

Rachel Hepworth: It’s a big challenge and the one thing I’ll say is that at most of the companies I’ve been at, we have not actually been able to particularly accurately set or hit goals both too low and too high, almost any quarter, which just tells you, and these are very successful companies, so this tells you how hard it is. Part of what I start with is just looking at the current funnel and what’s happening with it and what you think you can realistically change with it. And this could be as high up as we’re going after the wrong audience so we’re fundamentally going to shift that very top of funnel of even who is our addressable audience down to, is sales picking up the qualified leads quickly enough? Or is our messaging correct? Are we converting people at a rate that we think is healthy?

Rachel Hepworth: Every different business and industry has different kind of standard ratios and metrics for each of these. And so I’d also caution against looking at the company to your left or right and saying our funnel should look like theirs because unless they’re in the same business you are, that’s almost certainly not true. But for me it’s about having an actual plan for how you’re going to move the numbers and not just saying, “Next quarter we’re going to double it and we have no idea how, but we want to be aggressive, so we’ll double it.” If you don’t have a plan, you’re never going to make it.

Rachel Hepworth: And so this goes back in some ways to very classic growth teams. You form a hypothesis and then you do an experiment and then you learn from it. If you don’t have a hypothesis of how you’re going to achieve the goals you’re setting, then you’ll never figure out why you either blew them out of the water or failed to come close to them. And so that’s my rule of thumb with setting goals is I need to be able to see how we’re going to get there. And if I can’t, then we need to have a conversation about if the goal is realistic or not.

Harry Stebbings: Totally. And I guess in terms of that conversation that then ensues, what’s the ideal relationship, do you think, between the head of marketing and the CEO? And what does that interplay look like with the C-suite itself?

Rachel Hepworth: I think as much honesty and real talk as possible is important because you’re not helping the business by not providing all the information. And that’s actually one of the reasons that I was really drawn to Pilot is I felt that the executive team were people who I could have that sort of conversation with. Where if you had bad news or a point of view that wasn’t exactly the same as their point of view, you could have a vibrant discussion about that and it wasn’t going to be a problem. And so one of the first things I did when I came in at Pilot is I did some 2020 planning and kind of looked at our funnel and what’s our growth numbers? And the conversation I had here was we’ve been focusing exclusively on startups. That’s a relatively small TAM in terms of all SMBs in the US, shouldn’t we expand that and go after some other industries?

Rachel Hepworth: And this doesn’t just have impact on marketing, it has impact on how the sales team will pitch and message. It has impact on if the product team has built all the features that will fit some other industries that may have different requirements. It has impact literally on our bookkeepers and how they do the books. There’s a lot of spillover effect of expanding who your focus is. Obviously Pilot is a horizontal product. Eventually we want to go after all SMBs, but you can’t do it all at once. How do you stage it? What’s that timing? And so we had a very rigorous discussion literally in the first one to two weeks that I joined about whether this made sense, should we do it now? What’s the sense of urgency? And they ended up agreeing. And so we’ve been expanding into eCommerce and professional services over this first quarter as a way to increase that top of funnel and provide a larger audience for Pilot.

Rachel Hepworth: But that was, the company was a 100% focused on startups before this and really hadn’t considered doing a really strong push at this point into other ancillary industries. And so we had to have some real talk about how large the actual startup market was and if that made sense. And so I think being able to have that conversation and then back it up with some numbers, not just, I feel startups are a small industry, we should go after a different industry is really, really, really important. But if you don’t, you’re just going to be working at cross purposes and ultimately we all, startups are hard, everybody has to work together for any company to have any chance of succeeding. And so if you’re not all on the same page, you’re just totally doomed to failure.

Harry Stebbings: I totally agree and I think that transparency is key. You mentioned the secondary expansion there though for the business and I do want to touch on the customer base before we move into the quick fire. I know you are a strong believer in the power of really getting in front of your customers. I guess why is this necessary today with the incredible data profiling tools we have on our customers and the data that we have without being in front of them. Why is it important?

Rachel Hepworth: I think there’s so many subtleties that you miss that prevent you from really killing it on your marketing and sales if you just use data because data will tell you the what, but it never tells you the why. Again, a lot of that data, if you are a freemium product that can watch how people interact, you do have more robust data than maybe a more typical product where you have to engage with sales and actually purchase it before using it. But either way, you don’t really know why things are happening.

Rachel Hepworth: And so I’ll give you an example way back from the Climate Corp days where we didn’t fully have product market fit and we thought we understood what was going on, but we really didn’t. One of the ways that we priced our product was, and again this is a weather insurance product, so you buy a million dollars worth of coverage and we’ll charge you $500. It seemed really straightforward. This is how insurance works. Who wouldn’t get it? Well, it turns out that if you focus on agriculture, which is what we ended up doing because who has more weather risk than farmers? Farmers don’t budget like that. They budget by acre. And so if you tell them something costs $500 they have no idea if that fits into their working model. But if you tell them that it costs $7 per acre of corn, they instantly know if they can afford that and they know that you are a service or business that sort of understands their industries because you’re speaking their language.

Rachel Hepworth: But we never would have known that from the data. All we would see is that nobody completed the purchase funnel. And so kind of getting out there and talking to people and understanding their world and how they speak and the language they use in how they run their business was really crucial to being able to take that company from essentially zero sales to being acquired for a billion dollars. And that happens, every company I’ve been at, there are stories like that where you don’t know what you don’t know until you go out there and get close to people and kind of have those conversations. And you’ll miss out on all of that just by looking at data. I love data, but it can’t be used in isolation.

Harry Stebbings: No, I agree. And I think it’s fascinating, especially in terms of kind of the granularities around how they think about pricing there by acre, as you said. I guess my question to you is, that’s fantastic. Especially when we look at the startup market, but customers change. They get smaller, they get bigger often in many cases, and they just become very different. I guess first is, how do you watch for this and stay ahead of the change in customer base?

Rachel Hepworth: Yeah, we had this at Slack for sure where it started out so strongly in the engine dev community. And then in order to really grow, you need to be useful to all functions within a company. And so one thing is that you can just look at the typical customer segmentation information, either demographic, firmographic or the actions they’re taking within the product and see how it’s shifting over time and how that seems to change their engagement with your company or product and the value they’re getting. And so that tells you that your customers are shifting. And so at Slack we segmented our customers. When I first came in, that was one of my first projects and what we saw is that, this kind of startupy engineering centric company was less than 5% of our TAM but 30% of our users. And so you can see who you’re killing it with, who’s getting all your value and you can also predict that as you expand and more and more people use your product, that’s going to shift because it can’t stay at that same ratio.

Rachel Hepworth: And so you need to understand how to provide value to different types of people. And that has been true at every company I’ve been at. You start out with this group of early adopters who are just attitudinally, they’re very different from who your larger audience is and over time you have to figure out how to make your product more approachable and usable by people who are less interested in spending enormous amounts of time understanding a new tool or being kind of the first to market. The requirements for the customer experience actually get higher I think as you become more mature because you have less and less engaged, eager users who are willing to bend over backwards to make your product or service work for them. And so you have to refine it more and more and be more and more self serve and simple to use and obvious in the value that it’s delivering.

Rachel Hepworth: At Slack we had to figure out, well if we want people in sales to use it, what is the value for people in sales? We don’t have Jira integrations for sales folks. People in sales speak a lot to folks outside of their company. Having this only internal communication is not a particularly big value prop. And that was a really big focus of the marketing and product teams and customer success, all the teams over time of how do we speak to each individual function and understand the value they’re going to get out of Slack? And then oftentimes build new features to actually deliver enough value because the features didn’t innately exist in the original product.

Harry Stebbings: Can I ask, is it super hard when you have a product like Slack or like Pilot though, it works across many different industries, is it not challenging in terms of speaking horizontally to so many industries with one message? How do you think about resonating with so many when you are so horizontal?

Rachel Hepworth: I think the first challenge is one, figure out the axis that you’re going to segment on. How are you going to cluster your different customers? At Pilot, our theory is is that we’re going to segment on industry because different industries have different financial integrations that are important to them and they have different ways that they use their books. An example is eCommerce lives and dies by inventory and cashflow. You talk about how bookkeeping helps you grow your business by managing that inventory and cashflow. Startups, bookkeeping is important because investors require that you keep good books, they want to see where their money’s going. And really high quality books can actually help you raise money faster. That’s very compelling for startups, but generally doesn’t speak to eCommerce at all. And so figuring out not just everybody needs bookkeeping, but what is that deeper value that they would get out of it is really important.

Rachel Hepworth: At Slack we segmented by function, it wasn’t so much by industry except for a couple of regulated industries. That was about understanding that Slack spread function to function. An engineer would bring it in and it would spread to the engineering team. And then how did it spread to other teams? Well who works with engineering? Product. And so if product wanted to work well with engineering, they needed to be on Slack. What’s the value to product beyond just you can speak to your engineers? And then who works with product? Well marketing and product marketing. And so understanding how people adopt the tool and then understanding how to message it to that specific group of people becomes really important. But I think the key that differs for different companies that are horizontal is they might all segment on a slightly different axis. Understanding what that is is really key.

Harry Stebbings: Yeah, no, no, I totally agree with you. And fascinating in terms of that kind of internal expansion within the org there for the Slack products. I do want to move into my favorite element, Rachel, being the quick fire round. I say a short statement and you hit me with your immediate thoughts. Are you ready to roll? About 60 seconds per one.

Rachel Hepworth: I’m ready.

Harry Stebbings: Okay. What do you know now about the process that you wish you’d known at the beginning of your time in marketing?

Rachel Hepworth: It’s really that you never know enough about your customer and that a lot of people, particularly in Silicon Valley, have really brilliant ideas that sounds so amazing and are just totally irrelevant for the market they are trying to go after. You cannot believe other people’s hype or your own hype. You got to get out there and talk to people and it will cut short a lot of pain and banging your head against the wall when things are not working out.

Harry Stebbings: What’s the hardest element of your role with Pilot today?

Rachel Hepworth: It’s what we talked about before. How do we smartly approach this really big TAM? Because SMBs are not homogenous. And so how do we segment them? How do we find them? And how do we communicate the value of what Pilot does in a way that’s relevant? Because everybody needs bookkeeping, but bookkeeping is not sexy or exciting. So how do you capture their attention and create that sense of urgency of I need to switch or I need to buy this service today?

Harry Stebbings: If you could change one thing about the world of SaaS today, what would you change?

Rachel Hepworth: I think it’s actually that a lot of SaaS companies have become very addicted to getting people onto their subscriptions and then hoping that they don’t notice how much they are spending. This is true on the B2B and the consumer side and so you see this actually marketing strategy, people can refer to it as don’t poke the bear ,where you don’t want to remind people that they’re paying for your service because then it will cause them to cancel because they realize they’re not getting enough value on it. And that’s always really bothered me and I wish there was less of a tendency to use that as a churn reduction strategy than actually figuring out how to help people get more out of the product.

Harry Stebbings: Yeah, no, I totally agree with you there. Buffer actually have a brilliant email. It says, “Thank you for making Buffer possible.” And it’s got pictures of the team and it’s just, it’s integrating a moment of delight into something that’s traditionally painful, being your invoice. Yeah, it’s our final one. Who in SaaS marketing today do you think is killing it? And why?

Rachel Hepworth: This might be because of the function I’m in, but I spend a lot of time thinking about SaaS companies that are targeted at marketers and who does a really great job. And the companies that come to mind are, HubSpot is obviously killing it with content marketing and understanding their customer. And I think what’s been interesting about them in the last year or two is they really expanded their share of wallet. They’re not a young company, but they’re accelerating their growth. And because that’s because they know how to combine a bunch of different products and deliver more and more value over time to this SMB base that they’re serving. And then I think Drift has done a pretty amazing job, specifically in marketing. They are trying to name and own a category that has existed for a while and they did not by any means create but still seek to sort of dominate it through their marketing. And I think they really understand their target audience and what people care about and they’ve done a great job there.

Harry Stebbings: Rachel, as I said at the beginning, I’ve been looking forward to this one since I interviewed Waseem. He said, “You’ve got to have Rachel on.” And then obviously Mark from Index said many great things, so thank you so much for joining me today and I’ve absolutely loved doing this.

Rachel Hepworth: Thank you so much, Harry.

Harry Stebbings: So much fun having Rachel on the show there, and as I said, could not be more excited for the future with Pilot. And if you’d like to see more from us then you can find us on Instagram at HStebbings1996 with two Bs. I really do love to see you there.

Harry Stebbings: As always, I so appreciate all your support and I can’t wait to bring you a fantastic episode next week with Anthony Kennada at Front.

 

The post SaaStr Podcasts for the Week with Pilot and Doctolib — March 20, 2020 appeared first on SaaStr.

SaaStr Podcasts for the Week with Pipe and MessageBird — March 13, 2020


This post is by Deborah Findling from SaaStr

 

 

 

 

Ep. 315: Harry Hurst is the Co-Founder & Co-CEO @ Pipe, the startup that gives you control of your cash flow by giving you access to the full annual value of your monthly subscriptions, upfront. This month they announced their $6M seed round led by David Saks @ Craft and joined by Fika, Weekend Fund, Naval Ravikant and WorkLife Ventures to name a few. Prior to Pipe, Harry co-founded Skurt raising over $11M in the process before being acquired by Fair.com. Harry has also angel invested in the likes of BreathePod and Try.com.

Pssst 🗣 Loving our podcast content? Listen to the start of the episode for a promo code to our upcoming events!

In Today’s Episode We Discuss:

* How Harry made his way from the UK to founding one of Silicon Valley’s hottest SaaS startups with the founding of Pipe.
* How does Harry think about when is the right time for a startup to raise VC funding? How does Harry stress test the alignment between the founder and the VC? Alternatively, when is the right time for a founder to take non-dilutive capital from Pipe instead?
* Pipe’s lending model is so centered around churn prediction, what does their churn analysis look like at Pipe? How does Harry think about the right way to structure churn postmortems? Why does Harry believe investing in customer success is far more important than customer acquisition?
* How does Harry think about the importance of brand for enterprise startups today? Do you have to invest in it from Day 1? What mistakes does Harry see many founders make when it comes to investing in their early brand?

 

Ep. 316: The startup journey moves in waves—whether you’re ready or not. After finding funding and product/market fit, your next steps as a founder in the hypergrowth phase can determine the future of your company. Harry Stebbings of Stride.VC and Robert Vis of MessageBird will walk through lessons learned to survive hypergrowth and what will make a difference when it comes to scaling. Hear how to navigate fast growth and how to look ahead as you travel forward.

This episode is sponsored by TaxJar.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This podcast is an excerpt from Robert’s session at SaaStr Europa 2019.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Harry Hurst
Robert Vis

Below, we’ve shared the transcript of Harry’s interview with Harry Hurst.

Continue reading “SaaStr Podcasts for the Week with Pipe and MessageBird — March 13, 2020”