How To Create A Shock-proof Path For Hypergrowth with ActiveCampaign CEO + Dir of Customer Success

Before we get started and dive into the presentation, Jason, do you wanna introduce yourself a bit?

Sure, thank you. Yeah, so I started ActiveCampaign back in 2003. So I've been at it for a little while now. Spent a decade focused on developing on-premise software products that would help small businesses grow, help them save time. So we focused on tools that had everything to do with the customer lifecycle, contact management, help desk, live chat, and, and really start realizing like there was something, uh, larger that we could go after in the way of automating across the entire customer experience, not just the sales marketing pieces. Uh, so we'd start transitioning the company, uh, 10, 13 years in over to a customer experience automation platform, uh, and have since been fortunate to grow from, uh, just about $5 million ARR with maybe 20 employees in 2016 to over 600 people and well over $100 million ARR today.

Yeah. Awesome. Thank you. I think one of the things that is constant at ActiveCampaign is change. And in any hypergrowth business, I think that that's always a big constant. And whether it's our customer experience, whether it's our internal tools, whether it's our communication strategy, I think we're always innovating to make things better. So I guess my question for you is, is it really possible to shockproof your business when you're in this hypergrowth state? Stage, or you're on your way to this hypergrowth stage, or is it more about managing the risk along the way?

Yeah, no, it's a good question. I, I think the whole title of the talk track, uh, Fortunate or Unfortunate, is, uh, is kind of a fallacy, uh, because there is no such thing. Uh, when I look back at the last 17 years and all kind of the highs and lows though, there are definitely some areas where some of those lows, uh, really helped create, like, how do we ensure we're as shockproof as possible? And I think there's a couple of easy things, like if I were to start a company all over again, I'd be thinking about one of the things that we always had early on is we never wanted to have large customers. We never wanted to have customers that would make up a significant portion of revenue. That in and of itself is not a unique idea. A lot of people think that way. And then you quickly start growing, finding customers, wanting to get revenue, and that allure of a larger addition, maintaining your growth rate. Starts to bring you there. So what we did earlier on is we just made it very well known within the company that we're just gonna have a rule: no customer more than half a percent of our revenue. We're gonna, we're gonna embed that in the culture and get everyone to be excited about that fact, so that when we do have people pushing that— and we ultimately did have that— that we have that built up within the organization to be able to say, say no, and we're gonna, we're gonna take a little bit extra time we're going to focus on doing something a little bit more long-term. I think another thing, a way to really de-risk over time a little bit is focusing on international sooner than later. I think a lot of people think about international as something that you do later on when you need to find more revenue, when you're all set to go after a singular market, when in fact, from the get-go, we just started translating the platform. We even crowdsourced and used our own customers to help do that. And that actually helped us become over 50% international just organically. Then we're able to go in and layer in more things into different markets as we kind of see fit and whatnot. And that, that just allows you to find your way into growth internationally in a way that's both scalable and you don't have to overthink it. Another tactic we did with international was really focusing on advocacy, which I also think is oddly a really good way of, of ensuring stability for your business. So early on when we were like 20 people, I always had like a Kanban board of potential advocates, and then we spread that throughout a bunch of people within the company as well of just like, here are some people we think could be advocates, maybe they're just a heavy user Maybe they have a little bit of influence within their area. Just spend time with them, get to know them. They're able to help message you through potentially tough times. They're able to help gain support. When I look at some of the international growth, there's like a couple advocates in particular that are probably responsible for a good majority of that. So I think there's that piece as well. And I'll stop after the last one, but there's the other piece I would say is really like, there's this idea of focus on one thing, do it well. And I think there's a lot of good with that. At the same time, if you have something that you can go a little bit more broad with, I would suggest go for that. So in our case, you could look at ActiveCampaign and say, we should focus on automation for healthcare in the West Coast or something. We could do that phenomenal. We could really focus on that. And that alone, but that would kind of limit what we're able to actually do over time. That would put a heavy concentration into a singular vertical when in fact, I think, as a platform and being product-led and whatnot, you can personalize the experience within a platform according to your user. So it's, it's easier to start out with this idea of going broad and then bringing it in versus starting with this verticalized focus. But basically all of that just speaks to like having that, having optionality in the way of having different levers you can pull over time and different things you can lean on over time.

Yeah, I think it's been interesting to see how our international business has really played into how we've grown as a business and also how we've adapted to working with those different markets. And as we put people in those markets, how our relationships have gotten stronger and we've really leverage those advocates to grow the business in this space. And then something you just brought up was this optionality. I think we talk about optionality all the time. It comes up as a theme constantly in, you know, decision-making and conversation. So I'm curious if you can talk a little bit more about why you think that is so important, and then how does it factor into how we make decisions as a business, whether in the day-to-day or even just bigger strategic decisions we make?

Yeah, and I think it's something, you know, definitely it's kind of ingrained with a lot of ideation. And so when you think about scaling a business or think about like you want to be like a competitor, you want to be like a peer in the space, you're instinctively going to just follow what someone else is doing. And that really makes you go into a singular path. And oftentimes that leads you into this like go big or go bust, probably starts with high speed, probably funding upfront and whatnot. And I think that's just a misfortunate thing to occur. And like on the timing aspect by itself, I'm just not sure that all companies, all challenges people are trying to solve have the timing aspect to the degree that we try to put an emphasis on it. Meaning, take a look at ActiveCampaign. If we're going after marketing automation, CRM category, things like that, One could say there's some pretty large players in those markets, timing matters a ton, gonna need a lot of money, all this stuff. Instead, we took this approach of let's avoid funding at all costs, because I knew like once we start going down that road, optionality in the way of maybe I want to focus on small businesses, maybe I want to focus on something that's going to take longer time, I want to try to think of a different way of building a business, versus some common playbook that's out there. And there's a lot of ways you can do that. Like, you know, early on we incentivize different things like annual to just try to get more cash flow and whatnot. We utilize like SBA loans. We did like ARR lines and we did like an American Express cash advance on like our recurring revenue. And like nobody wrote about us. We didn't get like the congrats. From anyone. If anything, people would probably, um, have spoke ill about some of those things. But like, those are all things that you don't even have to be at a crazy significant scale, uh, to be able to tap into. And by doing that, you can control your optionality in the way of like creating something you believe in, a vision you hold to, um, the ability to say no to some of those larger contracts because you know it's going to steer you off course. And so like all of that, I think like that example in particular, it sounds nice in the way of like if you're not already in a situation, but I think you can still create optionality when you find yourself in a spot where it feels like you don't have any.

Yeah, I think that's a good point. I remember when we first met and had our first conversation, one of the questions I asked you was like, how is this business running with so little funding? And just kind of amazed to hear your story about bootstrapping the business. And I think that that is something that is different than a lot of the players in the space and how they've grown.

Yeah. And so there's a question here as well of like, why did we raise $100 million then, right? Like, so, and that, I think there's this idea of like, you have to have a bootstrap mentality or you're all in on the funding. And I think there's this blend of where you can take a lot of the, the traits, the, the ideas, and the way of running the business with that bootstrap methodology and mentality, and then weave in at the right time when you know it's the right decision as a business, and more of an opportunistic way ideally to continue growing.

Yeah, well, um, one of the things that I appreciate as the leader of our customer success org is just how customer obsessed you are as the leader of our company. I know that We talk a lot about doing things at ActiveCampaign that don't scale and how we're okay with that. We're okay with doing things that don't scale. And I think the level of detail in the weeds that you get with our customers is really impressive for the size of customer base we have with over 100,000 customers. I know you start your morning every day reading customer NPS feedback. And I know that's not a lie because sometimes it ends up in my inbox with next steps on how to maybe help a situation that didn't go the way that we would want it to for our customers. So when you think about doing something like that, that, that we know most people would say, well, that doesn't scale. How could you possibly have the time for that? What advice would you give? How do you stay customer obsessed while you're scaling a company this fast?

Yeah, I think to truly understand your customer, your company, you have to understand your customer. Every time I've tried to add gates between some of that feedback, like the cancellation reasons, if I just tried to get a report of that like once a month, It's easier for me over time. I start to think about the gap I have in terms of understanding the true pain points and opportunities though. There's a lot of value in that qualitative, into that tone, how people respond to those that you have to bring in. Now it doesn't scale with myself just reading all of it. I do it because I actually enjoy it. But we also then built out a team to help sort of go through all of this and bring some of those examples throughout the organization. Meaning if I go to a product team and I show them a report of like, this feature is going up, this area is going down in terms of satisfaction, it's useful, but it doesn't really get buy-in, doesn't really bring that like, who is that person? What is that story? And give actual, like, meaning behind some of that work. So how can you bring some of that throughout the organization? And then you can take things like, when we do an all-hands or something like that, we oftentimes bring it out and surface a customer. We spend a good piece of time of actually just talking about, like, that customer, how they started their business, or how they started their career to get into this business. And then we walk through the entire customer lifecycle. So we'll go everything from like, how— what marketing did they interact with? And then maybe they talked to an SDR or an account executive, and that goes on to success. And it's really amazing as you start to go through each story, like how many areas, how many people are involved in a singular customer story, as well as like, what does it mean for that customer? And to surface those continually, and you can blend it in and be really intentional about bringing international stories into the mix and whatnot. But that really gives that, like, what is the experience of a customer and what matters there? I think also choosing what you celebrate as a company. We've been trying to be very intentional about celebrating customers, celebrating that overfunding, celebrating over ARR targets. So we didn't even really do that much as a business when we hit certain ARR things. But, you know, when we passed 100,000 customers, that was an amazing big deal. We're just getting started. But bringing that through everything you do and thinking about it in a way of how do you bring the actual real stories throughout is quite helpful.

Yeah, yeah. I think it's— I think something that's important too is that we never think a customer is too small to have a conversation with and understand their business and their, and their challenges and how they're using ActiveCampaign to run their business and how we can help and support them growing. I think that that's been really important to me as we, you know, as we think about how do we service our customers in a scalable way.

Yeah, and I think that's an interesting thing as well. I think some people think about different segments of the customers a little bit differently, like maybe provide less support here or do something else there. I would go as far down as you can while ensuring like as far as down as you can go, even if it's premium or whatnot, just making sure that that experience is amazing, right? Because otherwise that's going to work against you. It's going to work against your advocacy, organic growth. But by trying to get everyone to think about it as a customer, and we actually did things over time where we would attribute like different Zendesk tickets or Jira issues and whatnot with ARR on them. And we actually had to roll a lot of that back because we found ourselves internally starting to make decisions purely based on the value of, of a customer when we should be thinking about it as the value of kind of the overall issue, which could be impacting a lot of different people.

Yeah, definitely. So with growth comes hiring, and we've hired, I think, over 500 people since 2016, if I've got that number correct. Um, just been growing like crazy. We have over 100 open roles today. Um, I know my calendar is full of interviews. I'm sure many of our teams feel that way as well. So when we think about adding so many people to the team at such a huge, fast clip, how do we remain focused on those values and communication as we scale as a team? Like, culture is bound to evolve and change as we grow and change as a business. So how do we make sure that we're focused on creating a culture that we're proud of and that we know people want to be a part of?

Yeah, so there's, there's a couple things there. One, especially at times of change like right now, adapting to full work from home, like a lot of things going on, communication, like I've never communicated as much as I do now. And obviously doing different types of things, whether it be video, text, doing it in different formats for different people to be able to consume that. But while doing that, I think the important piece is like, be okay with it not being perfect. Meaning like authenticity when you're communicating, what's going on change, when you're communicating where we're going as a business, matters far more. I would take that same idea, apply that to marketing as a whole. The most successful marketing campaigns we ever see are ones that are actually slightly imperfect, blend in sort of that human personal touch, and, and are not overly polished or perfectionize, right? So like, I think really focusing on that helps a lot. Also, just being honest and upfront with like, we don't have it all figured out. Like, I know I don't have it all figured out. I know the company doesn't quite yet. Growth creates so much chaos, and I think you have options you can try to address that with. You could try to remove all the chaos, and that would be I've tried to do that. That's difficult in and of itself. You could just try to move through it and maybe slow it down or something like that. But it's really just being upfront about the fact of we're learning. Create the ability for people to surface what their ideas— so like whenever I start any new hire class, we spend time on like what are some of your observations already? Like, that's the most valuable time in my mind, is when they're just getting into our company. They're not necessarily already kind of associated with all of our way of thinking or whatever it may be. Creating that culture of pushing on different things. Because to your point, like, the culture and what we're doing and everything is just constantly transforming over time.

Yeah, definitely. So I think maybe we have some time for— to answer some of the Q&A questions.

Sure. Yeah, so one question on the hiring and whatnot was, uh, what roles are the team members mostly in? We focused on investing primarily in product and engineering first. I've kind of used that as a bit of a throttle almost for how we think about the business as a whole. So if we're looking to grow sales and marketing a certain amount, I need that organization to grow as well to be able to support what we're doing, which is very much a product-led motion. Another question would be, the current climate seems that freemium is a thing of the past. Any more innovative alternatives to the freemium model for scaling? I, I think there's some people continuing to see success with freemium. We have tried that in the past to an extent as well and really landed with the 14-day trial as being what was actually the most useful for us. Obviously, results may vary for all things, but I think you can find a way to really make a trial period have some benefits of being able to fully try out the platform, whether that's with a little bit of a human assist or more just a self-serve and allowing continual sort of updates to it as long as people complete steps, which I think is the important piece to it for extending them. Trial and whatnot. And there's a question about going back to the customers that are too large, or like, how do you stop a customer from becoming more than half a percent of revenue? And what happens if they organically grow to that point? And that's a, that's a really good question. My thing is, I've been all the time, like, if we want to serve larger customers, we just have to bring more customers on. We haven't necessarily faced that quite yet. But that's a, that's an interesting one that I think maybe that's an exception to the rule in that case, because if they're still finding value, but I think then you start to relook at your different customer segments and you either have to start addressing for that customer size with a little bit more intention, which will cause a shift in your business. It will cause changes in your sales, your marketing, and everything else. So if you continue to serve that customer, you have to know that you're going into that area, or you're going to be providing a subpar experience there. And the other thing in terms of just like optionality and just sort of current environment and whatnot, I think, is operating in the state of kind of— how I like to describe it is just kind of paranoia at all times. Meaning creating a culture of we're not making decisions, we're not looking at things just purely based on data. We've set up a number of mechanisms and different types of processes in the way of let's surface hunches and let's do more based off of hunches. If we're starting to react, if we're starting to do things as a business just purely based on data, we're always behind. And this goes back to like, how do you enable that throughout the company? How do you get people to surface those things? From throughout the entire organization. But finding routine ways where you can systematically look and have a way where people, people are almost like encouraged, if not they have to supply various hunches at different points. Because otherwise you'll quickly lose that as a culture and you'll start doing more and more conservative sort of safe moves purely based on data. And I think that can really hold you back as an organization.

Yeah, definitely. Did we get through all the questions, the Q&A questions?

I believe so. One other question came in on how do you think about churn or something like net dollar retention? I think net dollar retention is the, the guiding sort of thing you should be going after entirely. With that being said, I wouldn't design a business around trying to meet someone's expectations in terms of what makes sense. Uh, I think in the small business, uh, market in particular, you could look at certain segments to customers and they may be bringing down your net dollar retention or may, may be, uh, impacting your churn rates. Um, instead of just trying to correct that, look at the value being created there. And in our case, there are certain customers that on paper perhaps are not necessarily profitable even at times. But going back to if they're having like a good experience, you're possibly creating advocates, you're creating this, this, this funnel, if you will, because all businesses start small and grow. And that's something that if you give that up too early, then you're going to go right into this paid marketing sort of machine that's going to be much more expensive to grow and harder to continue on with. So I think net dollar retention all the way, but keeping that in mind. So finding out what makes sense for you as a business. For us, we think about it in sliced different ways and then tracking accordingly and just having that be open and known throughout the company so people aren't making decisions based on it.

Awesome. Well, I think we're coming up on time. Thanks, Jason M. Lemkin, for having this conversation, and thank you, SASter, for having us. Thanks, everyone who attended.

Really appreciate it.

Thank you, guys. Thanks for joining. Talk to you soon.