Ask Me Anything About Customer Success with SaaStr CEO Jason Lemkin and ChurnZero CEO You Mon Tsang

Cool.

Hey, Jason.

Ivan, thanks for having me here. It's so exciting.

Yeah, it's a lot of fun. So we're doing an AMA, right? So I will have some questions to start, but those of you in the audience, just go ahead and put questions in, you know, uh, big, small, controversial, non-controversial, uh, just put them into the question box and then we'll filter them and get them to Jason. But Jason, hey, you mind if I start with just a high-level look back?

For sure.

Okay. All right. So I'm going to quote you 3 things that you said.

Yes.

In 2015, you said customer success is a single-digit hire, right? So that means that, you know, when should I hire the first CS person? That's either employee 1 or 9. Is that what that means?

Yep. That was the idea, right? To challenge folks to not think back then, right, we're talking about 2 generations ago in SaaS, to not think of customer success as a cost center, to not think of it as something you do when you have a few million in revenue, to invest early in your future, right, in decade-long relationships. So that was the idea. You're only going to come out ahead if that's a single-digit hire.

2018, you wrote, growth is good, but retention builds empires. Yeah, that was a good one. Yeah, that's a good one. That was a good one.

I want to refresh that one.

Yeah, it's in many, many of my slides. And then in 2020, you also said you are not doing enough customer marketing.

Yes.

So this is today, 6 years, over 6 years, right? 2015. Maybe, maybe I'll ask you an overarching question. You know, there's a lot of CS people on the audience here.

Yes.

You know, how has your thinking about CS and SaaS grown? Evolved over the, you know, since 2015?

Well, look, at some level I was fortunate, right? Is I was in, you know, the second generation of SaaS companies. I started Adobe Sign when Aaron Levy started Box and all these other ones. And when we sold a little bit too early to Adobe in 2011, you know, there was challenges meshing the sales cultures and there were challenges doing other things that we sold at a million a month back then, which seemed like a lot in 2011. $12 million a year, a million a month doubling. And we didn't quite understand how recurring revenue worked back then. We didn't quite understand how important NRR was. But it was clear that even if Adobe would struggle initially to understand our sales processes or motions, that our customers were growing so quickly, it was enough just to keep our customers, right? That was the insight. And if you fast forward today, even though Adobe Sign has lost market share to DocuSign, a lot of it, which hurts me as a founder, it's still almost a $300 million ARR business, right, a decade later. So mainly by focusing on retention, that $10, $12 million business has grown to $300 million over a decade. And that's the power of customer success. And I just realized, and I was literally just talking about this with a couple of great founders this week, if you don't exactly know what to do in sales, right? And sometimes we don't, right? If you're not sure, we're planning for next year, right? Hopefully we're all planning 2022, planning it. And if you're not quite sure how to do that extra thing, where to go, put the money into customer success because it always works. Right? And that was the genesis of the single-digit hire. It's always going to work to keep those core customers. But little did we know in 2015 that we could all keep our customers for decades, right? All of us are keeping our customers for multiple decades now. And that's kind of that thread from, hey, don't forget about customer success. And when I started to talk about it early, almost a decade ago, you know, a lot of customer success professionals felt very much like second or third-tier citizens, right? I would, I would go speak and and I would be like, I would talk about giving folks incentives, right, in variable comp, and that's still an open topic today in the industry, right? But when I started talking about it, 2013, 2014, 2015, people thought it was crazy. There's that guy that gets us, right? And I started writing, give everyone at least 20% boost if you hit an NRR goal, because do the math, right? If your NRR goal goes from 110 to 130 and you pay a few extra bucks to your CS team, it's the best investment you could make in your company, right? So I think that's changed. And then what's happened is we all figured out the playbook maybe around 2018, 2017, 2018, right? That was this next post, retention builds empires. And I remember at the first SaaSGR annual in 2015, the kickoff speaker was Aaron Levy from Box, and Box had IPO'd the last week. It was so kind of him. He was exhausted. He came in 2015 and I said, You know, does Wall Street understand recurring revenue? He's like, well, a few people. Fast forward to today, that's 2015. Fast forward today, open up a prospectus of anyone IPOing, the Braze, the Datadog, everyone, you know what, the NRR is page one metric, right? And everyone that has 120+% NRR is touting that, and even more, GRR is becoming more important than NRR, but they're touting that as one of their most important metrics, right? And so, That is the age, the age of retention building empires, but where we're still behind is customer marketing. I still give us a C- or a D+ in understanding customer marketing, even though maybe at customer success we're getting to kind of the B+, A- level today, but customer marketing is where customer success was almost a decade ago.

So I'll play it back to you. So for you, the last few years, it's just become more and more obvious the impact of retention, which means the impact of customer success and customer marketing. It's just gotten more obvious. It's no no longer sort of a debatable conversation. Now it's just getting better at doing that job. Yeah.

What's the single largest SaaS company?

Salesforce, right? No, Microsoft.

Well, okay, I'm not going to count the really old. Let's count Salesforce. What percent of Salesforce's new bookings come from its base? Do you know?

I'm going to guess 75%.

70%. Oh, 70%. That's the whole story. Think about that. Salesforce is a $300 billion company today. If it didn't have that extra 30%, maybe it'd only be a $50 billion company, but that's still pretty good.

So think about that. They're getting, they're getting an ARR of over 100% on that 70%?

Yeah, well over. Yeah. But 70 at Salesforce's scale at $20 billion in revenue. Think about this for a minute. At $20 billion north of $20 billion, 70%, even at $20 billion, 70% of their new bookings are coming from the installed base. Now they need multiple products, which is something we didn't understand a few years ago, the role of multiple products in expansion, right, in our expansion, which is a cutting-edge topic too. But if Salesforce at $20 billion in ARR and a $300 billion market cap can get 70% of revenue from its base, that means any founder CEO that is listening to this is underinvesting in customer success, almost by definition, almost 100% are underinvesting in customer success.

So let me, let me drill down on NRR. We talked about that earlier in an earlier session. NRR, I'm actually saying is it's gone from an impact metric. Well, it went from an, oh, by the way metric, I'll talk about that, you know, at some point to an impact metric, makes it to the board slide. I'm actually calling it a qualifying metric now, right? Where it almost doesn't matter, like if your NRR is not good, nothing else matters. You know, it doesn't matter if your team is good, your technology is good, your product is good. Is it that important a metric? You know, give me credit. Well, hold on, let's step back.

I hear your point. And I think if you worked at Sequoia Capital, I would agree with you. You're right. And but, but I am constantly surprised, maybe not surprised, impressed with the ability of great founders to drive up their NRR, NPS, and CSAT. I am constantly impressed. So look, If you go meet with a VC and let's say, and let's say you're enterprise, okay, and your NRR is only 100% in the enterprise, not good enough. It's got to be north of 120% in the enterprise, right? Let's say you're SMB and you're below 95%, not good enough for SMB, right? You're not going to get, you're not going to get, you're not going to get that check. You're not going to get that Series A or B check because you're not top quartile in NRR. Okay. You've got to be top quartile to get funded. Let's be clear. Today it's known if you're not top quartile, you're not going to get funded. I'm not even sure that was true 3 years ago. It is true today. Like, do not pass go. But so that's depressing if you need to raise venture capital, right? But that's just a little piece of it. The ability, if you look at companies, you know, HubSpot is an iconic company for larger SMBs, right? Iconic, right? But it took them quite a while to get to 100% NRR. Okay. It took them quite a while. And you'll see this again and again if you squint at companies going public, where often in the early days their metrics were not as good. But they made stickier products, more valuable products, better human beings, and they grew it up. So yes, it is necessary. But if you are not top quartile, have the confidence that it's possible. Like, don't, don't get depressed. And this, we've talked about this on SaaS so many times over the years. Just improve it each quarter. This is again, probably the top 1 or 2 most impactful things you do at your company is improve these metrics each quarter. Don't kill yourself. To go from 80% to 140% NRR in a quarter, like, don't cry in your soup. Just go from 80% to 90% to 100% to 110%. It's enough, right? That's enough.

Right. So I think you're right. It's if you want to go public, you want to raise money, then it's a qualifying metric. Otherwise, it makes your life easier if you improve it every single day. Your company becomes better, better, stronger, healthier. You just always have to keep moving that up. All right, I'm going to take a question from the audience and I have a few questions.

Let me just throw one thing that's slightly adjacent in though, just to relate. Customer marketing is super important. The other one that I think is almost a qualif— that people don't talk enough about is activation rates and time to deployment, right? And that is one of your best cheats here to improve things is to get your customers to deploy as instantly as possible. And I'm glad that when I meet with more and more startups, they know this number, right? How quickly do you deploy, right? And what percent of your companies, what percent of your customers go into production within an hour, a week, a month, right? And that's a big cheat that I think is one of the best ways to make rapid improvement if you're mediocre, right? And a lot of folks with mediocre NRR, GRR metrics, I dig in, What percent of your customers have deployed? 78%. Well, of course, 22% are gonna— not all of them, but they're gonna leave if they don't deploy, right? And I'll ask them, how long does it take your average customer to go live? And even with SMBs, I'll often hear 20 days on average. I'm like, it should be tomorrow. If you can't self-deploy, if you're an app that can't self-deploy, the answer should be tomorrow. Like, why can't it be tomorrow? We don't have enough people. Not my problem, right? Build better software, hire more people.

Yeah, retention rates, you know, they're the outcome, they're downstream. You got to go upstream to solve it. So I agree with you.

Yeah, if they don't deploy, they're tough to renew.

Right, right. You don't implement, you don't deploy, whatever it is.

Yeah, like now.

Okay, interesting question. Uh, well, what mistake did you make early on that you glad you made, right, in hindsight, because you learned from it? Top mistake. I think I know what it is, but go ahead.

Hmm, top mistake I made early on that I'm glad—

Early on as a SaaS professional. Or in customer?

Boy, maybe because it's the morning, I can't— top mistake that I made that relates to customers and customer retention?

Whatever, in SaaS in general.

The top mistake I made that I'm not, that I'm not glad I made, and going into this sort of world we're in today, like at the tail end of COVID the top mistake I made was not visiting enough customers in person by far. And I've written about this. I wrote this post years ago. I lost a lot of customers after I sold my company, but I never lost a customer I met. Still, 10 years on, when I watch some of the logos at Adobe, a lot of those are ones I visited, right? And the ones I never visited, we lost. Now, of course, we're all doing more Zooms now. We're not going back to that, right? That's a better thing, right? And you should be doing, as I think as a CEO, you've got to be doing 10 Zooms a week. And as a CS professional, you should be doing 3 to 4 a day, right? If you can. But a mistake I made, I remember in the early days, we're talking about me as a founder, I lost a TopLogo customer, right? I lost a TopLogo, and I'm like, what happened? Like, the numbers are great, the usage is huge, everything. We polled your team, we have an 80% NPS. He's like, yeah, but DocuSign came. Oh, they're here. They were here last week. Like, well, I got, I got, I got 12 people. I can't be everywhere. And that moment when he said, well, they were here, and I'm like, okay, I can't be everywhere, but I got to be, I got to be more places, right? Okay. It was actually not long after that I hired my VP of customer success and my VP of customer success, my VP of product, and my VP of sales all got help helped us all get on the road more often. But, and, but I, and I think it's important. And now when I meet with CEOs, and now that we're in this weird phase, right, this COVID phase, look, if you're not comfortable meeting in person, don't meet in person. I'm not telling you to do anything you're not comfortable with, but it's time, right? It is time. And those bonds— we don't play golf with customers anymore, right? Those days, I think, are mostly gone. But boy, that is, that's, that's the number one mistake I made was not getting in front of— and I, and I continue to make it in many ways to this day.

Sure. Sure, all right, so this is another question from the perspective of someone who sees the whole SaaS organization. Yes. So how do you, and I'll ask it a different way, how do you convince sales to help with NRR, right? And this of course is about the good fit deals, not selling to the wrong folks. I mean, it's really hard to have that conversation with the VP of sales, much less, you know, and as well as the CEO, any strategies to sort of have the whole organization get behind NRR? And of course that means not selling bad deals as well.

Well, look, in the scaling phase, right, there are a few things that are more frustrating to see as professionals than churn and burn deals, right? There's not, a deal is closed, a sales rep lied, a sales rep claimed a feature worked, and they, and it just doesn't work or barely works or they exaggerated the functionality. And not only did they kind of lie to the customer, but you know, you're going to lose the customer. Like, they're so frustrating. I'll give the strategic answer, which maybe is a little, challenges your question a little bit. I don't think once you get to the next phase, whether it's $20 million or $30 million or the next, that whatever your next phase is, I don't see the great VPs of sales wanting churn and burn deals. I think you work through this. I think there may always be incentives for reps to do them, okay, which we could chat about next. But as you scale and the VP of sales in a, in a, in a higher NRR space sees how much is tied to retention, I don't see them getting as excited about churn and burn deals. It's not that it totally solves it, but I do see like a lot of issues like stress around pilots goes away. As your brand gets established. It doesn't disappear, but the stresses around compliance, pilots, churn and burn, as you scale, everyone starts to get more aligned because it's a no— everyone starts to have an ARR number and no one really wants the crap that doesn't help them achieve their goal, right? So that's just to have faith that alignment happens, right? Until then, The only thing that I just don't see enough folks do is do weekly deal reviews for both prospects and existing customers. And you've got to force the CEO and the VP of Sales and the VP of CS to both be at the deal review. Like, CS should be, should be involved in reviewing the top deals in the pipeline so they know what is going to be forced down their throat. Right. And VP of Sales and CEO should talk about the top customer issues each week. Right. And you should see it. And when, and if a churn and burn deal is important enough that it creates stress among that Triumph for it, you're going to see gradual improvement, you're gonna get more resources. But you gotta have these, you gotta have these meetings, and you gotta once, at least once a month, talk about lost deals too, and have all three. You need CEOs, sales, and customer success all to come to all these meetings, right? And if they won't, then the CEO has to drive it.

Okay, how about, you know, because waiting for a company to naturally get better at that can be, you know, can be frustrating. How about things like, and I've heard this a few times, I've never done it, which is to change the commission where maybe you don't get paid, you get paid a smaller amount upfront. No, so don't miss out. You've seen it, doesn't help.

I think that, um, it doesn't help. The, the, um, I've tried all these things myself. I've watched them in action. Um, great sales professionals have, have a, have a particular version of ADD. They, they need to close and move on. You do not want to hire You want to hire the great sales professionals, especially as you get more enterprise, are solution experts, they're product experts, they guide you, they're your ally. If you haven't done enterprise sales before, you don't realize how much an enterprise buyer relies on a sales professional to help them make decisions. They're their agent, because that person— I don't have that person at my own company. I don't have that person at Qualcomm or Google or someone working for me. So the sales rep does my work for you. They're almost your minion in many ways, right? And, um, but you can't expect— you want your closers closing. You want your closers closing. What we've learned in sales and CS is we want to specialize. We want deployment specialists doing deployments. We want sales engineers supporting sales, right? We want solution architects architecting. And we want ideally the classic CS person managing longitudinal relationships but not doing engineering and product tweaking up front. Like, we want to specialize both functions. So you got to have your sellers sell. I really don't know the answer to that other than that I think deal reviews with the VP of Sales and if you have enough trust, okay, this is what I have seen work much better. Having customer, if you have enough trust with your head of customer success, have them have to accept the customer. This is the only hack I've seen. Not that the commission is delayed until deployment or renewal. but CS has to accept it. And if you can, it's, if you can talk to the sales team, you can say, look, we got two choices. Either we're gonna have to hold back some of your commission until we're in production or until risk, or we're just asking for a CS accepted customer, right? It's a post, it's, it's after closed one. And folks that have implemented that, um, and in fact, even on our little team today at Saastr, we implemented that in the last year, and it was Magical on our little team. Magical.

Okay, so, so implementing basically the same as every SaaS company, but we—

I literally tried this experiment myself, right?

Right.

And anything, anything non-standard that a salesperson on my team closed with the sponsor, there was no commission until it was accepted by the post-sales team. No commission. And I can tell you, it radically changed our sales team's behavior. It radically changed it. Like, there was bitching and whining, but we didn't— we tried the experiment of breaking up the comp. It didn't really work. Like, people were okay, but they grumbled. But we immediately just said, look, you are not getting paid on any, anything remotely non-standard until it's accepted. And the sales behavior improved. It was night and day how much our sales team's attitude and improvement changed. Night and day. Radically.

Okay, you're making friends on, on, on this, uh, uh, you know, the seminar here, webinar here. But, uh, quick question. What happened? Did fewer deals, more higher quality deals come through? Or was there sort of a period where you rejected a bunch of deals and then it took some time for sales to learn?

Did it happen immediately? Yeah, it took about 2 cycles to work through it. And it helped. And again, we're just— it's more help for me maybe to talk about companies I've invested in, but you've gotten to know Brian, our head of sales. It's important. It's interesting case study, though. It's interesting to have our head, our head of sales, when Brian joined, he was a partner in this exercise. So before, there was no, like, we had a great team, but there was no partner here. No one, no one had interest. And we came in, I said, Brian, Brian joined, and I said, I got to tell you the top 3 stressors we have on our team, right? You know, and this one of these rogue deals, right, which are our version of churn and burn, are destroying our team. They're just destroying our team, right? And, and we almost don't even want to do sales for these deals. Like, it's how CS chills. Like, and I'm little, I'm like, I'm the fucking CEO of this little team. I don't even want to do these sponsors anymore, right? I don't want to do them. And it did create a little bit of, of it. At the same time, for us, for what it's worth, for Medicine, we switched sales commissions to payment upon signature instead of receipt, which is a natural thing you do as you grow as a company because there's no point in waiting when cash doesn't matter. But that was a little bit of a tweak, right? And at the same time, we actually increased sales commissions. But it created some gripes. But if you— the lesson learned, which is true of any company, if your VP isn't bought in on it, your VP of sales, it ain't going to work, is it?

Right.

Absolutely not going to work. Right.

Absolutely. CEO's got to buy into, of course.

But here's the fascinating thing. It's— so it probably took 2 months, maybe it took more. It might have taken— it probably took 2 months to fully implement and then a bunch of mistakes after that. Right. And there were a couple deals we did not pay any commissions on at all.

Oh, okay.

And that, that You almost need to have a couple to feel it, right? But what ended up happening after that, this is interesting, is when you got that real alignment between post-sales and sales on these deals, we sold more, right?

Right.

Because then everyone knows the box because it doesn't matter. Like, don't sell a churn and burn deal. Instead, if you understand the parameters of it, you'll just get better at selling what you can deliver successfully and you'll sell the same or more revenue.

That's great. That's great. That's a great story.

You won't lose any revenue. You won't lose any revenue.

Right. All right. I got a true AMA question here for you.

Yes.

You're an investor. You're stranded on an island. You have 3 businesses to evaluate and you're blind. You know, they're generic businesses. You get to invest in only one and you know nothing else except for 3 metrics. What 3 metrics are you asking for?

Well, look, I mean, obviously revenue growth, NRR, and burn rate. Any B2B company can be reduced to top-line growth, NRR, and burn. If I know the three of those, I know the physics of your business. If I had a fourth, I'll tell you what the more interesting answer, if I had a fourth, right? Which is, what's your next product? What's your next offering? I think the most—

Even early on, even for your seed and A-round folks, you can ask that?

What we've— No, but maybe, because if you look at what's happened, the most visceral example is the addition of fintech. So Shopify as a SaaS company has okay growth. When you add in merchant services, it's insane. Bill.com, which is what, worth $30 billion today? One of my favorite CEOs and products ever. We run SaaS from Build.com. I love Renée. Really good company when it IPO'd at a couple billion, but when it added fintech and payments as its second product line, now it's got a third. Now it's a $30 billion company. Datadog has 20 products today, right? Twilio has 10. So, um, it's not that when a company at a million or 2 million in ARR, you want to see 40 products. That's probably a recipe for failure.

That's right, that's right.

But I would love If I was blind, right, because things are so big today in SaaS and cloud, right, I would love to know what's the hint, what's the hint of your second product, right? And I'll flip it around. I met with a great founding team this week. I love them. Okay, great, great early traction coming up on a million in revenue. Cool product, really slick, really beautiful. Their initial product's TAM's a little bit too small. Okay, but it's okay because they're crushing it in that growth. But The next thing they want to do to build the TAM, they haven't started, and it doesn't quite make sense. Like, it almost makes sense, but it doesn't quite make sense, right? And, you know, and so that's a step too far. But if there was a little progress made on that next area, just a little progress, then I would be like, super, I'd be like, I'm so excited, right? So it's connecting these smaller TAMs So you can see how you can build something huge. And that's where we're seeing the explosion. If you look at— I know it sounds like a lot, but if you look at every SaaS company at a billion in ARR today, two interesting things. One, they're growing fast at a billion. You know, we used to think that was almost impossible that you could grow 70% at a billion in ARR, but it's almost becoming commonplace, which is insane, right? But the related point is they've all got these suites of products, right? They may be very, very tightly related, they may be only 2 or 3, like Aviva if it's enterprise. But we've all realized you need this, this multi-product approach. So hints of it, I think, can fuel you to infinity, right? They can fuel you to infinity.

So the 3 metrics: growth, overall growth, NRR, and margin.

You know, that's just— I don't even need no margin, just burn rate.

Just burn rate. Burn rate. Okay. Whether or not you're healthy—

Margin can be games. Margin can change, right? Margin, liquidity, finance. Just the burn rate tells me.

Okay, got it.

Right.

That's interesting. And then, and then, and then that—

and for what it's worth, when I see a high burn rate but the other two are good, something's like off often.

Okay.

Right. The margins, I mean, software margins essentially are 100% in the early days, aren't they?

Yeah, they are. That's true. That's true.

Gross margins at least, right? Gross margins are 100%.

All right, uh, let's see about hiring. Okay, you know, so there's a lot of new SaaS companies being born, and so finding someone— this is really about a senior person, so you're bringing someone senior into your organization— how critical is previous SaaS experience compared to just sort of overall just tech software experience? Like, you know, how much, how much are you placing on experience and previous experience SaaS for a SaaS executive today?

For customer success or for any role?

I think this seems to be anyone.

Well, I'm going to answer for customer success because I think, I think it's different.

Okay.

For sales, marketing, product, and engineering, I would not take— I would not, if I'm scaling, hire someone that does not have a pure SaaS background. There's too many folks that do.

Okay.

There's no point in hiring a salesperson that hasn't sold SaaS. I ain't gonna take that risk. If you're below $4 or $5 million in revenue, so customer success is still hands-on. It's not all systems and process and tools, right? It's not all instrumentation. I can take more risk in CS. I can take someone that's smart. I could take someone that has done account management, that has done client services, that has worked in a hardware industry, that has worked in different industry. If they're smart and maybe somewhat techie or technical, I see that work all the time. And or even in B2C, right, or in e-commerce come into B2B. I can see that work in CS. So I would take more risk in CS if you're early-ish than I would in other functional areas, because a brain, a little bit of technical expertise, and empathy for the customer can take you really, really far, right?

Right, right. Oh, that's interesting. Okay, I like that answer. Okay, so here's one. This is someone who's earlier in their development, so maybe focus on getting the product-market fit.

Yeah.

And you've talked about, you know, doing things that don't scale, but in terms of onboarding their sort of earlier customers, should they overinvest, really bum rush, you know, the customer to make sure they have a great first experience? You know, is that the right thing to do early on? It just—

Well, I'll be more specific. As founders, as founders, we all know the answer is yes.

Yes, absolutely.

In fact, as founders, The biggest frustration sometimes can be working with folks on your team. Sometimes it's true in engineering that they really don't want to interface with customers. They don't, they don't get this bombardment of attention, right? I think that the one mistake they make— we started this— was not having customer success be a single-digit hire. Do you have someone great in customer success and do you have someone in support? Like, it's not the same role, right? Beyond that, I think the other mistake I constantly see made is when you close your first enterprise customer, And maybe that's $50K to start. Maybe it's $100K later. It's $1 million or $10 million or $100 million if you're Salesforce. That first $50K to make, maybe it's $20K if your product's $200 a year and you close at $200K, like, you know, it's a lot with it. That person should have their own person. This is the mistake I see founders. They should have their own person. You've been struggling for a year or two and you finally close a $100,000 a year customer. It's your first logo. Okay, at turn zero, wherever it is. That person should have their own person. Hire that person. Now, if that person needs to be quirky, if that person happens to be your sister-in-law, if that person is whatever, I don't care. This is someone that has a brain, okay, and will pick up the chat, the email, the phone, right, all the time. And they don't have to know everything. If they're stupid, it's not going to work, okay? But it's fine to say, I'm going to find out the answer to your question and I'm going to get back to you now. Your biggest customers deserve that person. Okay. And I remember a fun story. I think I wrote about it, but years ago, one of our biggest customers was Groupon when Groupon was huge, right? When it was adding 1,000 sales reps a month, right? And at the time, it was Salesforce's biggest tech customer. This is, this is a deck over a decade ago, right? And two learnings from that, that first, maybe the second trip to Groupon. The first one was Marc Benioff had personally been there the day before, so that says a lot, right? There was also a— Salesforce put a prop phone there, okay? And it was a real phone. And when you picked up that phone, someone from Salesforce always answered, okay? And back then it was a big deal for Salesforce. Maybe it was $20 or $30 or $40 million a year, which today actually is not a huge deal for them, but whatever. It was double-digit millions. And that phone, I think it was red or green or something, but Salesforce put it in. With great Salesforce branding and you picked up the phone 24 hours and someone solved your problem.

That's amazing, right? Amazing.

All right. So as a startup, because you don't have 1,000, you could have that person. Think about the power of— no, think about that magical experience when you, when you sign up and you're the biggest. And remember, customers are not stupid. They know if they're your biggest customer and they're expecting— it's a social contract. If you're a biggest customer, you're expecting— you're not expecting the software does everything. You're not expecting that it's perfect or that it's feature-rich. You're expecting that relationship and innovation. And so when that, you're expecting that experience. So that's where you should have that person, like make sure. And again and again, I'm like, oh, we just closed a million-dollar deal. Hooray! Who's their dedicated rep? Well, we don't have it, but ugh, it was so hard to close that deal.

I think scalability is, you know, if you think about scalability too early, you just don't get the thing done, right? I mean, then You kind of back into it, you make it to process, or you just send that person on it, bum rush the problem, and then at some point, if you actually fix the problem, let's go ahead and think about scaling.

Yes.

Okay, so since you think about SaaS all day, there's still folks who, there's plenty of industries that are not subscription-based, not SaaS-based. If you're moving from, say, on-prem to trying to be SaaS, top few things you got to think about in order to make that jump successfully?

I mean, it's a, it's a, it's a, for the vendor, from the perspective of the vendor, or the, right?

Yeah. So like I sell maybe an on-prem solution and, you know, or I sell a hosted solution, but that is one-offs, you know, and I want to go to SaaS and sell subscription-based. What are the few, I mean, Adobe did it recently, right? They kind of like flipped.

Yeah, I was there when it started. Um, yeah, I just think First of all, I think there are elements of software is software, and great software is great software. In fact, on-prem software is better than cloud software. Do you know why?

Tell me why.

Because it's really hard to patch. If we do a release tonight for Turn Zero and there's a bug, it sucks, but we could roll out a patch before most of our customers have ever noticed. Do you know how hard— have you ever patched? I mean, I don't know your whole career, but patching on-prem software, can be from hard to, in some cases, depending on how secure the environment is, it can be close to impossible.

Oh, rushing out a floppy disk. I was there.

Impossible. So cloud software is worse than on-prem software. It is worse in terms of quality, right? I don't literally— but the trade-off is you're making a commitment for continuous innovation, right? And people forget this. People pay— there is an element of subscription software that's a ripoff. Right, that, hey, look, as a vendor, I'm going to go, I'm going to make more money at month, at year 2.64 versus a perpetual license, right? That's, that's the CFO's version of SaaS, right? And but, but the customer actually is expecting something different. They're expecting substantial innovation. And that is sometimes the biggest thing to get your arms around of when you go like, we're expecting, you really do need to do, I mean, we could talk about doing, you know, hourly releases and all that junk, but really people want quarterly innovation in their vendor and they're expecting it. For that check. And you have the idea that you have to re-earn your customer, right, which is part of retention. Sometimes it's a little alien to on-prem folks, the idea of re-earning your customer. And, you know, it doesn't mean that they're going to churn in an hour if you don't keep innovating and adding more functionality, but they will leave you.

Right. I think, you know, it's really about the model of customer service and success. Maybe they're asking about the finances and, you know, dealing with the jump to a monthly or annual recurring revenue model. Those things are always hard. But people have solved that before. You just have to be ready for it.

That's more simple. That usually has a 2-year transition phase, and then you come out ahead on the other side like Adobe and Intuit. That part is pretty well understood today. It's a little stressful, but frankly, investors and Wall Street don't care. They're happy for it. Everyone that's gone— Hotspot just finished it, and they raised $6 billion. So all the analytics players relate to it too, right? I mean, when Salesforce bought Tableau, it wasn't really even a SaaS company.

That's right. That's true. That's true.

Right? I mean, GitLab just IPO'd at $16 billion. It's not really a SaaS company.

Right. The good news is that we don't have any— no one's first. You're not going to be first anymore. There's a playbook ahead of you. All right. Yeah. Hey, there's been a lot of talk about product-led growth business models. Where does customer success fit into that model? That's one of the questions I have right here.

Well, I think that, I don't know. I think that the key is, and fortunately there's so many vendors today now, but you know, you can't have product-led growth isn't actionable unless you have instrumentation around it. Right. What is actionable? Right. What is the difference between product-led growth And classic freemium, self-service, viral, word of mouth, which we've been doing for as long as we had collaboration software, internet software, right? What is the difference between that, right? What is the difference between Dropbox giving you more storage if you invite 10 of your friends, right? What is the difference between Salesforce launch with the free trial in 1999, right? Is that product-led growth, right? But our ability to in real time understand the journey of a customer, right? How they use the product and how they collaborate with third parties, right? And other folks. If you don't have that instrumentation, if you don't have actionable data, I don't think it really matters much, right? So step one is to truly instrument it. And we're getting there, we're getting there. But I think that's where, you know, is product-led growth. If, because if you don't have instrumentation, the product-led growth are just are just little things on your product roadmap that sort of product team's going to work on and you hope that they work out.

Yeah, I agree. And there's, by the way, there's no reason not to do it now. There's plenty of technology. It's actually easy. Plug it right in and get going because the CS team, if you're going to have one, needs— they need the signals, right, to figure out what to do next.

But the net thing is like, what are signals in the old days? Usage, right? That's all we had like a generation ago, right? So for CS, if you have the right instrumentation, You have to decide what are the couple other signals that we can act on that will accelerate deployment both internally, right, for, for now you're defining product, and, and if you can, if you're a collaborative product, externally where the magic is, right?

All right, so we have 5 minutes left. I'm gonna ask you a couple of, uh, different kinds of questions. So someone says, hey, you do great interviews. What's the— and I'm just going to keep the word— the coolest interview you've ever had?

That I've, I've done as an interviewer?

Have you ever done?

Yeah, yeah.

Greatest, coolest, funnest?

Boy, funnest is, I think my favorite, there's so many, there's so many great ones. I mean, certainly doing Stewart Butterfield at Slack in 2015 when Slack was just exploding, telling me we'd never have salespeople. That was fun at the first Aster Annual. I think the ones though that stay with me, probably the one that stays with me the most was Therese Tucker from Blackline after she just moved on to Chairman. And ultimately, founders that can put, you know, this as almost a single parent, a solo founder, a woman when it was harder, an engineer that had to throw away the product that she built for the first 2 years and start from scratch with no investors and no money. Here, folks that like Therese putting that in context and for other, that was maybe my number one. Favorite of all that I can think of. Not goofiest. Stewart might have been the funniest one. I didn't know him. But, but, but I think the best communicators, right, can put things in context for you, right, and help you see something different. And I would say, I think in her own way, Therese was my favorite for that. That's your job, right? And that's why as an executive, for as an executive, don't— I know you might think, oh my God, I got to tell the story 100 times. I got to tell the Churn Zero story 100 times. But You get good at it.

Oh yeah. It's okay.

That's part of being a leader. It's, that's part of being a leader and getting better and better at telling that story and the pieces of it. And that's an art, and not making it trite, right? That's the art.

So I'm gonna ask you one last question. It's around COVID, and the reason I'm asking you this is because, you know, your Disaster Annual was the first major tech conference that got impacted by COVID. I remember I was, I was checking my phone right, right before I got on the plane to see if I was going to go to San Francisco for SAS Annual 2021, and then I went to SAS Annual 2022. So you've been thinking about this, you're on the front line of this. So maybe I'll generalize it a little bit. What major sort of systemic changes, you know, maybe some non-obvious ones— sorry to put you on the spot— around COVID and the impact on the way we do business, something that we ought to invest in, right? Or take advantage of now that we're in this brave new world.

I think that— well, look, what was clear is when COVID hit, yeah, we lost 10 million. We had to cancel SaaS Annual. That was all terrible, right? We could chat about that if you wanted to for cathartic reasons. But then there was a first wave. Everyone needed Zoom, right? I mean, Zoom— Zoom— completely changed, right? It went from a niche app to an operating system, didn't it? Right? Zoom, Slack, Notion, this became our— or versions of those became our stacks, right? Almost overnight as we all moved in a distributed world. So we all saw that. I think what it took me a while to realize until I met with more enterprise CEOs is that's just starting in the enterprise. Because there's two waves. Wave one was We can't function as a company without these tools, right? And it wasn't just Zoom. Companies like Talkdesk and Five9 and all others that did call centers, they all had to move to the cloud. And those were all on-prem systems, right? The legacy systems, right? That was another— so there are whole areas of work. God, we just can't work as a company distributed without these tools. But now, now CIOs and CXOs and others, now they're planning for the next 5 years, right? And there's a whole wave of buying decisions and you can see it in the Gartner numbers, like the Gartner numbers keep going up, right? Gartner has to keep revising every quarter up the amount going into SaaS because the changes that the organizations wanted to make post-COVID but didn't, weren't forced to make in a week, those are now being played out in 2022, in late 2021 and into 2023. So if you're in the engine of enterprise change and you're the right vendor, strap it on because next year is going to be even better. Than this year, right? Zoom may have— we love Zoom. Zoom may have peaked in the sense that Zoom adoption already happened, right? I mean, it's still growing, but growing 40% is not the same as 400%. But in the enterprise, the best ones, it's the next 2 years that are going to be crazy.

That's amazing. All right, so we'll end on an optimistic note, which is, you know, we actually talked about this earlier where, you know, it's prompting extreme digital transformation, right? Extreme. Extreme. And so We'll end there. Well, hey, Jason, thank you for sharing, you know, years, years, years of experience. And, and thanks for being early on the customer success train and really leading all of us. And I hope everyone follows Jason at Jason M. Lemkin at Twitter. I know I do. And then make sure you go to SaaS Annual.

So, all right.

Thanks, everyone. And thanks.

Thanks, everyone, for joining.