Monetizing SaaS: Episode 11 with Matt Bradley, former CEO of CloudSnap (acquired by Paylocity)

Matt, it is so good to be here with you. I've had a great time getting to know you over the last year or so through our personal connection, Pat. Um, you've had such a cool career. You've started in banking, you moved into corporate development, you did a huge amount of work for almost a decade at Rackspace where you ended up leading strategy. From there, you were the CEO of CloudSnap, which was acquired by Paylocity. You spend a lot of your time now helping CEOs and founders think about building their businesses and also about pricing and packaging. So in your words, can you take us through your career journey and how we got to now?

Sure. So I mean, the way that I would describe it is I had no idea what I wanted to do out of college. I thought, you know, investment banking would be a good learning ground. And that turned out to be right. You know, I found it to be a place where I learned what hard work was and working very long hours, but probably more importantly, I got to see a set of companies and an industry that was growing really fast, which ultimately introduced me to Rackspace. And so Rackspace was a company that This was like 2008, which is like when the cloud was still like a nebulous concept. But we tried to take Rackspace public. We actually lost the IPO to Goldman Sachs. And I was the junior analyst at the time, but my boss got hired to be one of the more senior guys in finance. And he called me and I knew I wanted to work at a real company that had real customers that created a product that was physical in some ways and not just, you know, no disrespect to finance. Like, I think it's a great industry, a great profession, but I wanted— I didn't want to go into private equity and I didn't want to go to a hedge fund. I wanted to go and see how true businesses are built. And so I decided, one of my former bosses called me, he said, "Hey, you should come check out this company called Rackspace. It's in San Antonio. This cloud thing's taken off." And I said, "Sounds good." And it was fortuitous. Did I really understand the cloud? Did I really understand how big it would be? Totally not. At all. But, you know, I then went to Rackspace. I spent 10 years there. I think what was really unique about my experience at Rackspace is, you know, I got to see like massive growth and hypergrowth. I saw stagnation and then I saw like reinvention of the company all over a 10-year period. Which was just like a tremendous learning experience for me, for the people we called our employees Rackers, for all the Rackers that were there at the time. I mean, it was just like a Harvard Business School case study on how to operate when you're growing, how to reinvent yourself, how to drive a culture. How to be metrics-driven. Like there was just a lot of really great stuff. I think the leaders of the company were really great that I learned under. And so, you know, Rackspace was a, it was just a, it was an incredible experience. I decided it was time to leave after having been there for a while. And, you know, one of my mentors basically said, hey, go figure out if you can cut your teeth on something small. And so I thought about a bunch of options and what I wanted to do, but ultimately that's what I decided to do. And so I went to a company called CloudSnap in 2019-ish. And we, you know, we had a sub-million-dollar business with an unknown brand at the time. And I worked very closely with— I did not found the company, but I worked very closely with the sole founder of the company. And, you know, we basically grew it 300% in 400% in 2.5 years and really got things operationally sound and we could have built a business for a really long time. For me, it was a great experience to lead a broader team, see what it was like to be a CEO, work across departments. And it was just a phenomenal experience for everybody involved. We were not trying to sell the company at all. It just happened to make sense that Paylocity was interested and I think they had the right values. I think most importantly, our employees were highly valued by them. And so it was a great outcome for all our employees. And then equally, of course, shareholders have to win. And so it was a good outcome for really all parties involved. And if I think about, I was actually thinking about this before this podcast, how many of our full-time employees at CloudSnap are still at Paylocity? And it's the vast majority, which is great. That tells you, I'm not allowed to recruit them, but it just tells you that that ended up hypothesis ended up being true because when employees— employees have the option. You can leave whenever you want and they're not. And that tells you that Paylocity values them and that the work they're doing every day is something they enjoy waking up and committing a third of their life to. That's my working at or running companies experience. Now what I've done is I've started to do a bunch of advisory work and board work. And it's not like you're sort of like, hey, I'm your board member. I show up once a quarter and give you a bunch of feedback and tell you you should grow revenue faster and have a great day. I like to get I like to get operationally involved. And so I will work and I really only— one of the questions I ask CEOs that I work with is, is do you really want the help? And a fair number say no, which I think is a reasonable answer. But those that do understand that when I say, do you really want the help? I'm going to set up meetings with you and your reports and like, we're going to get deep in data. We're going to understand why customers that have this profile are behaving this way. We're going to understand how our sales motion is set up, what our target verticals are, why those are our target verticals. Should we make changes? What changes should we make and why? And it's like regular and recurring. And it's, you know, for the most part, like weekly engagements. Not quarterly engagements. And so that's what I'm doing now. I think it's a ton of fun. There's a few companies that I spend a bunch of time with. One is ProsperOps, which is a cloud cost optimization provider on AWS, and we recently moved into Google. I spend a fair amount of time with a company called SuperDispatch, which has a ERP, like what's called a transportation management system for shippers and carriers. So, you know, we think about, um, rental car companies as an example, as somebody that you just rent a car from, but on the back end, like, they go to auctions, they buy cars, um, and they then have to move those cars across the United States, either because they buy them at auction or You have 12 cars in Washington, D.C. and you need them to be in Atlanta. And so somebody's got to ship those cars and you need a management system to do stuff like make sure the carrier has valid insurance, make sure that the carrier takes photos before the trip and at the end of the trip. So there's a lot of really cool vertical software stuff that they can do. And then there's a few other companies too, but those are two that I think are very well positioned, growing quickly, have dynamic teams. So I'm doing that type of stuff.

And you're also a dad.

Yes, I'm a dad. I have two children. One is 4 and a half and the other is 2. The 4-and-a-half-year-old is currently at— summer's out, school's out because it's summer. So my mom agreed to, for the next 2 days, run something called Camp Nana. And so I'm getting updates from my mom about how they're going to art class and trying to make sure it's not just like a 2-day Netflix binge-a-thon where my son comes home wanting nothing but TV.

So thanks for sharing your story. I want to actually go back to CloudSnap. So when you got there, sub-million dollars, what did you do literally? Like, where did you focus to grow the business 400% in those 2 years? And second question there is like, did the business have product market fit at the time or was it like a semblance of product market fit and you really had to go forge product market fit with something slightly different or adjacent?

It's a good question. So how I got involved with CloudSnap originally was, you know, the main investor is a friend of mine who I still do a bunch of work with. And he said, hey, I have this company that's growing super fast, but they're growing so fast that they're burning cash way faster than I was expecting. And it doesn't really make sense. So can you help me figure out what's really going on? And can you join a few board meetings and just like listen to the team give updates and see where that goes? And so, you know, ultimately what happened is we had to change a lot of stuff. And so I, you know, to answer your question, I think the company had product market fit. We, we ultimately had we had a direct sales motion, but we also had a partner-led sales motion. And so we got a tremendous amount of demand from SAP Concur. And so for us, when you think about you're just like this little tiny startup with like sub-50 employees and you are being shepherded by a multibillion-dollar conglomerates, Salesforce, as the go-to solution for a very specific thing that customers want. That's actually a dangerous— it's an enviable position to be in, but it can also be a dangerous position because then what starts to happen, and this is what happened to us, is we started saying yes to everything and we shouldn't have done that. And so we had to go back and reset expectations with our partner around the types of things we could do and the types of things we couldn't do. Just from like a, hey, here's what, you know, I think at a high level for the audience's perspective, like CloudSnap was in what's called an IPaaS, which basically, you know, it was a software solution that moved data between enterprise applications. And so, um, you know, Concur would come to us and say, hey, you know, we have Concur Expense, you know, this customer would love to move their expense data from, uh, Concur to name your random app. And we would say, yeah, sure. But the reality is, is that the way integration works is there's a long tail. And so what we ultimately had to decide is how long that tail was and then where on it we were going to support customers. And so, you know, the ERP that is very big in industrials in, you know, Europe, but has no presence in the United States where we get most of our demand, probably isn't one that we should support. And so we had to go through this whole process of reducing our product catalog in some ways to improve the customer experience. I think there was a whole host of other stuff we had to do. We had to be sure that executives were aligned to every part of the company. I think we had to, and this relates to certainly your business, but we had to be sure we were priced right. And so I There were a whole bunch of learnings around how we priced, how we should price, how customers would perceive that, that we changed over time. Those are just some things. I mean, we did a lot of stuff. It was a lot of fun. It was a lot of work. A lot of fun. Yeah, that's great.

And I'm almost tempted to say like the title for this podcast could be something like Knowing When to Say No. I mean, it can really crater the business if you say yes to too much. Correct. Zoom out a little bit for me. So you're working with a number of different companies in different spaces. What are the big inflections in terms of B2B software that attract a lot of your curiosity, a lot of your excitement, a lot of your energy?

I think the cloud is still in pretty early days. I think it's becoming increasingly complex. I think like, you know, ProsperOps is an example of a company I'm very involved in. Like, there's just tremendous opportunity for that company over time. And right now we're focused on cost optimization. We'll be focused on cost optimization for a long time, but there's a lot of stuff outside of cost optimization that customers need help with. And so I think the cloud is like still very much in its early innings and, you know, in many ways, like the increasing complexity and AI and all that stuff, like it helps. It's going to help the software provider. I still like vertical SaaS. Like I think vertical SaaS is— I don't think I'm going to have any like super revolutionary thoughts here. I think, you know, another theme, another theme that I think is emerging and, you know, of course, like with the rise in rates, like people are returning to profitability. I personally have always been a guy that's like focused on ensuring we have the right business fundamentals before we get too big. You know, like, let's not scale our sales force from 2 people to 16 people because we just did a big Series A. Like, let's take it from 2 to 6. And if that works, there are exceptions, of course, like when it's just so obvious that we're, you know, underpenetrated or whatever. But I think, I think for most companies, that's not the answer. And so I think like the return to gradual growth is a good thing. I think, you know, the— there's just going to be a lot of opportunity with like, call it like the sub-$25 million ARR software company that operates in a space that has like 50 to 75 competitors that are adjacent but not direct competitors and like Should some of them belong together to have like a stronger bundle? And this is something like I learned, you know, when CloudSnap got acquired by Paylocity, I spent some time with the product org inside of Paylocity. And like, I really was not like a full believer in bundling. And I'm much more of a believer in, and when I say bundling, I mean like separate products that solve different things, often for the same consumer. And so like if you take Paylocity as an example, like, or Rippling, which is probably like, you know, the, the golden child for, for bundling.

Yeah.

Uh, in this category, you know, you can sell time and labor as a module. You can sell payroll as a module. You can do IT management as a module, all under sort of the guise of like human capital needs. And there was this— anyway, so I think that there'll be an opportunity for all the niche software providers to come together. So those are just, I don't know, a few things that I think about.

Really cool. You talked a little bit about monetization and pricing and packaging already, and you alluded to the customer experience when you talked about it. I want to go there. Like, when you think about monetization and B2B SaaS, well, it's complex and it's increasingly complex as companies try to support multiple go-to-market motions, as you were doing at CloudSnap, um, multiple products as people move into maybe more bundling or they're scaling, and certainly kind of hybrid billing models where they're having to move beyond seat-based and into usage-based or some hybrid. Um, can you talk about You've seen pricing and packaging done well, and I'm sure you've seen it done poorly too. Can you talk about some of the most common mistakes that you've run into with either your own companies or portfolio companies that you're helping?

Yeah, I think, yeah, I think, um, listen, I have a really good one at CloudSnap. So when I first took over CEO, our pricing model was, um, based on per application. So if you, you know, if you use Concur and use NetSuite and you wanted data to flow from those two systems, you paid us— I'm making these numbers up— but you paid us $250 a month for Concur and you paid us $250 a month for NetSuite. But, you know, one of my— I have a lot of pricing principles, uh, that I, that I think are very important.

Let's, let's hear them. Uh, tell, tell the, tell the story and then tell us the principles. Okay.

I think the, the, the principle for this very particular issue is that the price that you charge customers has to be, um, aligned to the value a customer receives, and also can't be out of whack with your cost structure. And, you know, so what happened is we had customers that had Concur and, um, NetSuite in that example and did like one thing. They just moved expense reports. Um, and I think what's important for context is we would support custom workflows, which meant that our support team had to sometimes support custom code. And that's very hard to do. And it's much harder to do when customers are, instead of moving just expense reports to the ERP, they are moving expense reports to the ERP. They manage their vendors in NetSuite. They want their vendors to sync with Concur Invoice. They want to do 3-way match of the invoice system into the ERP with a bunch of checks and balances along the way. They want to treat, you know, certain divisions differently than other divisions. They want to treat employees from certain geographies different than others. Like, there's a lot of stuff you could do. And so for us, what made sense was to move from app-based pricing to workflow-based pricing. And what that meant is that, um, customer— it put the onus on the customer to either value the automation of that workflow we were building or not, and, uh, allowed us to appropriately charge and monetize for that automation. And so it radically changed what customers were paying us. It also radically changed how certain customers thought about our product and whether they should use it because they thought we would do 25 things for $500 a month when in reality, like the only way to really get the 25 things was to pay much more than $500 a month.

Is it true that it also radically changed the gross margin?

Yeah. Yeah, yeah, yeah, yes.

Yes. That's a great story. Go into the other principles or the 2 or 3 that come to mind.

I think you have to be extremely deliberate in your pricing philosophy. So I think ultimately if you zoom out, and I do this with every company I look at, I believe the most important page on any company's website is their pricing page. Um, it's the only page that tells you exactly what you get for, you know, different options if there are different options. It's the only page that tells you how you can actually buy it. It's the only page that tells you what is or is not included. It's the culmination of how you go to market, and it's ultimately how you derive all of your revenue. And so if you don't have a super clean, ideally pricing page that's public, but certainly pricing philosophy to the extent you don't have public-facing pricing, that to me is the most critical thing. And I think it matters at early stage and I think it matters at late stage.

How does a company arrive at pricing? Pricing philosophy?

I think early stage, you just work with customers and test a bunch of different ideas and iterations. But I think most companies and most customers rally around a unit, and that unit can be whatever it is, you know, it can be a unit of value, it can be, you know, Zoom meeting minutes, it can be whatever it is. But ultimately, I think The vast majority of businesses have a single unit that closely resembles what customers value and what it costs to deliver.

So is there a principle, is there a close second principle that comes close to that one in terms of importance?

Um, you know, I feel pretty strongly this is related, but It's not the same thing because you don't have to have a pricing page to have a strong pricing philosophy. I think, you know, for the vast majority of companies, having a pricing page is what I would say is second. Like, I think there's this common fallacy that like enterprises or companies that sell enterprise-level products, you know, whatever, $100K $1 million-plus ARR contracts or $1 million-plus ARR contracts that enterprises don't want to see pricing. And I just don't think that's true. I think AWS has disproved that. I think AWS, you know, got to like $10 billion in revenue and completely upended how hosting and cloud was thought about. By just showing public pricing and showing their rate tiers and making it easy to buy online.

You were competing against AWS at one point, weren't you?

Yes. Yeah, it was very hard. They're really amazing.

They're amazing.

You know, I don't know. I could give you more. Like, I think, you know, product sales and marketing need to always be aligned. On what pricing is.

Okay, how do they do that? Because that's like easier said than done. So how do they do that?

Well, you gotta work together. You gotta do like, uh, product sales and marketing should be meeting every week.

This is just like pricing committee or something?

It's not just— that committee doesn't need to be just pricing, but like, you know, if you have a PLG motion, somebody's got to be in charge of revenue. Sometimes that's a product manager, sometimes it's not.

Let's talk about product managers for a second. Product managers in some companies, like, they're the best thinkers on monetization in the business. Some businesses that's not true. Maybe I'd love for you to reflect on that. Like, to what extent is monetization need to be managed and controlled and owned by a single stakeholder in product?

I don't think it has to be owned by a single stakeholder in product. I think it has to be owned by a single stakeholder in the company. Um, that could be a sales leader, that could be the CEO. I think it depends.

Like, I view it so cross-functional, like it's so cross-functional, it's really hard to put it in one department.

Yeah, I agree. I viewed myself at CloudSnap, I viewed myself as being in charge of pricing, um, because I think it is very cross-functional. I think it's— I think there needs to be somebody, you know, it's half the— it's half the revenue equation. So price times quantity, and, and both are, both are equally important. And in some situations, price can be more important. Can be the lever that you actually have more control over.

Is there a company that you've worked with recently where they've done a really great job on both pricing and packaging?

I think ProsperOps does an excellent job.

What do they do? Like, how can people learn from their discipline, their practice?

So they have a pricing model that perfectly aligns to the customer, like perfectly aligns to the customer. So they help customers save money on AWS. They take a percentage of savings. So both the customer and the company are perfectly aligned in saving a maximum amount of money to get to the best outcome. I think that's the first thing. I think the second thing is they have, you know, it's an enterprise, um, It's an enterprise sales motion. Um, I think one of the things that can be hard with enterprise software is, um, how do you really experience it before you experience it? They have done a tremendous job at, um, offering something they call the savings analysis where customers essentially have to give ProsperOps a limited amount of access to their AWS environment. And then we can tell the customer, if you use us, here is what is going to happen on day 1, on month 12, on month 36, and into perpetuity. And that's a very powerful thing to be able to say. We only save money when you save money. We only make money when you save money. And here's what it's going to look like. And so I think they've, they've done a tremendous job at pricing in a way that's perfectly aligned to the customer. And they've done a good job at packaging up something that is very complex where customers can easily understand, okay, if I use you, here's what's going to happen.

Yeah. And maybe to add on to that, like there's some real transparency that's transpiring there between the vendor and the prospect.

Yep.

I have a very clear understanding of both the value and the price I will pay for the value at various increments over time.

Correct. Correct.

How did they— I mean, did they just get lucky, right? Like they've got a naturally aligned price metric or have they done something internally from both an operational and systems perspective to help them be very good at this?

I think the founding team had tremendous experience in the space. And so they had seen how it worked with other customers. In a slightly different category, but they had a lot of experience with large enterprise customers that used, quote, the cloud. And so I think they came in with a strong set of assumptions. I think their assumptions were mostly right. They early on played around with several different models., but ultimately their assumption of how to price ended up being right.

So imagine the audience listening to this conversation are product engineering, product and engineering leaders, founders and CEOs. Are there misconceptions that you think are prevalent in the world of monetization, pricing and packaging that you still see play out regularly?

I think so. I mean, I think, I think just like principally, I think pricing is very complex, but I don't think, I don't think there's like, there are definitely like things you should absolutely do, but for most companies, there's, there's no right answer. There just are wrong answers. So like the freemium model as an example might make a ton of sense for an open source infrastructure company. Uh, it only makes sense though, where you can show like a super clear upgrade path and one that has future demonstrable value. But if you don't have that, like a freemium model may not be the right model. And so like, you know, that would be just, that would be a common misconception. I think another common misconception would be like, you know, the product owns monetization. You know, sometimes they do. But sometimes it's the CEO. Sometimes, you know, in a sales-led organization, it could be the CRO. And so, you know, I think every company is different. And I think every company just needs to recognize like who's actually the decision maker here. Because what can go really wrong is when it's a sales-led culture and a sales-led organization and that in that organization, really needs to be decided. The decisions need to be decided by the sales leader because he is, he or she is closest to the customer. But like, guess what? Product just implemented a bunch of things that like changed the go-to-market motion on accident. Like I've seen that. That's not good. Um, so I think those are, those are a few, um, things that just, I feel like just, just to drill into that for a second.

I mean, that's where it feels like. All the organizational challenge around trust building must reside when it comes to something as complex as pricing and packaging.

Yeah.

I mean, for an organization to end up in a place where product has released functionality that totally changed the go-to-market under a CRO's leadership, something's gone really off the rails, right?

Yeah. Yeah.

Yes. And so what, what, what could that company theoretically have done to prevent that? Is it they're just better at holding incremental meetings around a pricing and packaging committee? Or is it— maybe this question sort of is like a dead end because it's just like, it's how people work together or don't work together well. But because this is such a cross-functional problem, it can often get constrained by these flaws and the way we collaborate.

Yeah, I think so. I think it's about how individuals and organizations or functions more broadly work together. So it starts at the top with how the leadership team and how the CEO runs the company. Um, you know, are you a command-and-control CEO or are you a collaborative CEO? Like, there's, you know, different people operate in different ways. Um, and then how do you make decisions? What is the organizational framework for making decisions? And, you know, has somebody thought about, if I do XYZ, Do I have enough context? If I'm in product and I do XYZ in my product, do I even have enough context to understand that what I'm doing might actually have massive downstream ramifications? Maybe, maybe not. You know, maybe that would have been covered at the CEO all-hands, or, you know, maybe you do a monthly closed, uh, close one, close lost readout where you ask product to show up to understand what types of customers we're winning and what types of customers we're losing. I mean, there's a lot of ways you want to just be sure that organizations are informed about what other parts of the organization are doing.

We've already gone past time, so I'm grateful that you've gone past time. I have a couple more questions, but are there any questions that I haven't asked you that you think we should be talking about, you know, kind of around this general surface area?

I don't think so. As long as you're good with how it's going. This is for you, man.

Uh, you've maybe already talked about it, but I'm curious if there's a different answer here. What's been the most influential, um, moment in your career? Like, like a moment, like a conversation with someone, like you had to take an action, something that happened.

The most influential moment in my career? Um, I think it was probably agreeing to be the CEO of CloudSnap. I think there are a lot of things that led up to that, like, you know, working hard in high school and having a good GPA and being able to go to a good college and all that type of— like, I don't think it's— I don't think— I think I was afforded the opportunity to make that decision because of a lot of prior decisions. But I think choosing to be CEO of a small startup and listen, take a huge risk. Like I was, you know, a big company executive. And with being a big company executive comes a ton of perks. You know, I didn't have to worry about like, would I have 12 customers next week? We had, you know, we had 10,000 large customers. That paid us sizable amounts of money. And so it just became a very different— it became a different world. It became a different risk profile.

Is that the reason it was so formative for you? It was like the biggest risk that you felt you'd taken at that point?

Yes. And I learned a lot. I learned how to lead cross-functional teams. I got to see the impact that a CEO can have on an organization and how to lead, I think, the right way.

And were you command and control?

I think, you know, I— you should ask the team that worked with me. But I think there are moments when a CEO has to be command and control. Um, but I think for the most part, you want to create a collaborative environment where, uh, you are allowing the members of your team to make what they believe to be the right decisions at that point in time. Um, and so that is how I tried to to operate. There were, you know, points in time where I had very firm call, very firm views, and I had to make the call. You know, like, for example, as we talked about earlier, like, changing from app-based pricing to workflow-based pricing was actually a, like, financial thing that had to happen for us to secure our future. We had to change customers' perspectives on that. And if we didn't, like, listen, I don't know that CloudSnap would have worked. But you got to own it. Like you as the CEO of the company, there's nothing more important than ensuring you have a bright future. And so at points in time, you have to make decisions, but where teams can make decisions, it's always better.

It's really good. Where can founders who would like to connect with you? Reach out and connect.

Where can they reach? They can find me on LinkedIn. They can.

You don't have a profile picture on LinkedIn.

What's that?

You don't have a profile picture on LinkedIn. What do you mean? Do you not? Do you?

I think I do.

Oh, okay.

I'm fairly certain I do. You tell me if I don't.

I feel like I tried to look you up and I couldn't find it, but yeah. I don't think you do. Really?

Yeah, I do on my side. Are you sure it's just not a different Matt Bradley? There is a problem there. A lot of Matt Bradleys.

Actually, actually, we've been— I've— it looks like I've got a pending request into you for about 6 or 7 months, so maybe that's why I can't see it.

Hold on, let's, let's change that. No, I do have a pending request from today.

No, no way.

Okay.

But I still can't see it, but maybe after this conversation I can.

Okay. But yeah, LinkedIn.

LinkedIn.

I'm on LinkedIn a fair amount. I mean, or you can—

Oh, I got your picture now. It just showed up.

I got a picture.

There you go. Hey, thank you so much for doing this. It's been a blast.

Cool, man. Happy to help.