How to Win When There are 1000 Players in Your Market with Salesforce Digital CEO Adam Blitzer

David Cummings, my co-founder. And you may be wondering at this point, what the heck is a Pardot, right? About 50% of people pronounce it Pardot, 49% of people pronounce it Pardot, and then there's always that one person from Boston who pronounces it Pahdot. But Pardot is the kind of name you get for a company when you have $8 to spend on a domain name. We wanted a name that meant something to someone somewhere. That's a low bar, but for $8, you almost can accomplish it. We looked up marketing on dictionary.com, and the 27th entry was the only one that was available, and it was Latvian for to market or to sell. So we took it, we were $8 in, and we were off to the races. Now, we built Pardot organically, and in 2012, we had the opportunity to sell it to a much larger digital marketing company and a newly public marketing company called ExactTarget. And I know what you're thinking at this point. Did that terrible Pardot logo get even worse? Yes, yes, it did. But it was a really successful outcome, a good outcome for the city of Atlanta where we were founded, and we were now part of a larger digital marketing organization. But almost, you know, a few months after we got to ExactTarget, we started positioning ExactTarget to be acquired by Salesforce. So all in all, 10 months close to close, we sold the business, you know, both businesses combined to Salesforce and really became the foundation for Salesforce's digital marketing efforts, what became the Marketing Cloud, uh, and what became the demand generation engine of Salesforce. I ran Pardot at Salesforce for a couple of years and then ultimately took over the Sales Cloud Uh, it was really interesting being at Salesforce and having the franchise sales business being run by essentially a digital marketer. And it just speaks to our philosophy that marketing and sales should be two sides of the same coin. About a year ago, I came back to my roots of digital and I took over our digital business. Uh, so it's fun for me to get back in the trenches of all things digital. Um, but that's sort of been, been the root, uh, of where Pardot came from. Where it sits within Salesforce. We'll go much deeper on what made it successful in a really, really crowded marketplace. But to understand that, I also wanna give you a little bit of a background on me. You know, you see me sitting here, I have this bald head, I'm probably slouched with bad posture, and I'm wearing a shirt that's probably one size too big for me. And you're all thinking the same thing. This guy has lived hard, right? But it wasn't always like that. I wasn't always that guy in the top right corner over there. I actually used to be that guy in the top right corner. So that was me when I used to do a sport called judo really competitively, which I did for about 20 years. That's actually what I looked like roughly the day I met my wife. So my wife married that guy. Unfortunately, my wife is married to this guy. Some people age like wine, some people age like milk. But what I loved about judo, and I lived in Japan for about 4 years competing really extensively, what I loved about judo is it's a physical sport. It's like wrestling. You know, you win by throwing someone, but it's also a really mental sport. And it's also really about this idea of asymmetry and asymmetric forces. In judo, the idea is if someone's pushing really hard at you, You don't necessarily wanna push back. If someone's pushing you, you wanna pull. If someone's pulling you, you wanna push. You're trying to take advantage of someone's weakness in their balance so that you can throw them. If you're ever kind of meeting force with force, you're not doing things really efficiently. And so the best way to win is to be maximally efficient. And the way to do that is to think about asymmetry. And so we'll get into this idea of asymmetry how it applies to startups, also how it applies to large companies. I also wanted to prove to you that I didn't always look like this. So if you followed martech at all over the last, call it, decade, you're familiar with images like this. This is a great graphic from Scott Brinker from Chief Martech, who every year puts out essentially a landscape of the MarTech ecosystem. And this is called the MarTech 5000, which is actually a bit of a misnomer at this point because there are actually 8,000 logos on this slide. So MarTech is made up of a ton of different cottage industries. It's made up of a lot of industries that are not winner-take-all. Many are not even winner-take-most. Many wind up being multi-horse races in a way that we don't see, uh, in many other types of markets. Now this graphic is crazy. Someone once asked me, a friend of mine asked me if this was the map of Westeros, like you have to cross the Narrow Sea to get to content management or something like this. What's interesting is if we look back, we see just how crazy this has become. And, you know, this goes back to 2011 here. I think when David and I co-founded Pardot in 2007, there were about 100 logos on this slide. So there were about 100 serious martech vendors on this slide, and then it sort of exploded from there. So in this environment, uh, you know, where the only thing you can bet on is that there's going to be a proliferation of martech, a proliferation of competition, how can you possibly hope to compete? We competed in the space that is now called marketing automation, or even more aptly, B2B marketing automation. But back when we started, it didn't even really have a name. Sometimes it was called lead management, sometimes it was called demand generation, sometimes it was revenue performance optimization or management or something like that. But you can tell when there isn't even a name for the space, you know, there's going to be people kind of coming in and coming out of it, uh, and it's going to be changing really rapidly. These were just some of the players in the space. There were dozens and dozens and dozens of players. Some of these companies were founded before us, some of these companies were founded after us, but it was incredibly crowded. And as we started to compete, we founded the company in '07. By the end of 2007, there was a nuclear winter for funding. It was basically the bottom for the economy at that point. Not quite as bad as what we're in right now during the pandemic, but still quite a bad time to be a startup. Funding had dried up, companies were not spending, and many of the early vendors sort of started to lose power, sort of started to bow out. And it was really, you know, in the case of these 4 vendors, 3 of us were founded right around the same time in '06 and '07. Eloqua had a big enough war chest to basically survive, you know, all the way through. But it really, marketing automation became a 4-horse race fairly quickly. But I'd say, even in many software markets, 4 strong players still feels relatively crowded. And we had a lot working against us. One, we founded the company in Atlanta. Our main competitors were in much, much bigger startup ecosystems. We weren't in Silicon Valley, we weren't in Boston, we were very, very far from the institutional money. We bootstrapped. We We had no funding. Especially in the beginning, we were sort of getting off the ground from nothing. We were new co-founders. We had very little experience. We essentially— being that we had no funding, we were largely hiring people who were even less experienced than us. And so we just had very, very little experience. I mean, you look off to the right, that's a photo of me from sort of the early days of Pardot. What was I doing? I didn't even know I was bald at that point. Look at all that hair on the side of my head. So there was clearly a lot going up against us. And then lastly was market maturity. This was an evangelical market. We were all figuring it out. The market didn't have a name for it. Companies didn't exactly know they needed it. And so lots of things up against us. But we thought, we can't control all of those things. We can't control how much funding our competitors have raised. We are where we are. We're in Atlanta. We loved it, right? But we are where we are. We can't force the market to mature faster. So what are the things we can control? So when the world zigs, zag. This was a great tagline. It was a really famous ad campaign from Levi's. It was related to black jeans. Now, I don't necessarily endorse black jeans. Maybe you You want to look like a caterer or waiter or something like that, or valet attendant. But it was a really famous campaign. And those words actually really tie back to the idea of asymmetry. When everyone is doing one thing, think about doing the opposite. And in a lot of cases, this can be a really powerful force in business. So we'll walk through a few different ways that we thought about asymmetry. The first was geography. I mentioned we were in Atlanta. We weren't in the hotbed of startups. Atlanta has a thriving startup ecosystem today, but it certainly didn't back in 2007. So we thought, you know, how do we use Atlanta to our advantage? One of the questions we used to always get from other founders, you know, who were like intrigued by us starting a B2B marketing company in Atlanta, they'd always say like, "How do you hire anybody in Atlanta?" And we would kind of scratch our heads and say, you know, I know this may come as a surprise to you, but we have books in Atlanta, and some of us can read them, and they're not even actually all colored in yet, which was actually a joke from our former head of sales, used to say that all the time. It is an amazing, amazing hotbed of talent. You have Georgia Tech in the city, you have Emory in the city, you have Duke and UNC nearby. It's essentially the capital of the South, and a great collection of talent assembles there. Every year as colleges graduate. So if you can become one of the top employers, you're going to get your pick of people, you're going to get extremely, extremely talented people, and they're going to be incredibly loyal. It was also insanely cheap from a commercial real estate standpoint. Because we were hiring, because we were expanding during a recession, we could basically be anywhere we wanted. So that was our office. Right, almost right from the beginning. It was kind of insane. It was the 34th floor of a 34-story office building in Atlanta, which today is actually Salesforce Tower Atlanta. We got that space on the top floor initially for $4 a square foot. So not $4 a square foot a month, $4 a square foot. And we grew into it over time. Um, but because we were scrappy, because we were able to take someone's sublease that was sort of imploding at the time, we were able to get it essentially for nothing. We also took the company that was in there, they had about 150 employees, we had 20, we took all their furniture for a dollar. So it was like 120 Herman Miller Aeron chairs, it was like 120 Steelcase desks, it was hundreds of thousands of dollars worth of furniture, but expensive to get rid of. So if you can zig and zag and be comfortable with subleases, you could really get this amazing space that looked out over the whole city and became a real weapon for recruiting. Our timing, uh, also coincided with the rise of web conferencing. This was when GoToMeeting, Webex, etc. were sort of coming into their own, and it became much more common to do inside sales— the rise of the BDR and inside sales rep. So it meant we could have junior sales reps in Atlanta selling as effectively as an outside sales rep used to do. Atlanta started also to become a hotbed of B2B at this time. So we had a good local base to sell into because we were targeting B2B companies. And Atlanta also had a very mature email marketing landscape between Mailchimp and Silverpop and many others. Uh, so there was good talent to draw upon. We also had very asymmetric funding. So Marketo, one of our competitors, wound up raising over $100 million. Eloqua, at least $40 million. HubSpot, $100 million. We spent the $8 we had on our domain name. And then another $150 on that horrendous logo. But we were very asymmetric in terms of funding. And this will play out in terms of how all the exits worked in a bit. But it just meant that we had constraints around the company. We had to run things very differently. And this is a little bit similar to almost how Toyota, for example, thought about the Prius when they were making the first mass-market hybrid. They came up with the price point first. We want to deliver a hybrid for X amount of dollars and then work backwards. How do we fit into that? So we built a business where we said, you know, hey, we have certain constraints on the business. We want to sell marketing automation for, you know, $1,000 per month. How do we engineer the business to be able to do that knowing that we have no funding to fall back on? How do we get paid up front? How do we incent reps to sell the right kind of deal? How do we support it? In a very frictionless way. But we looked at our funding as a constraint. We let our competitors spend most of their funding to build that market that was still very evangelical. We also thought about product incredibly asymmetrically. This ties back to funding a little bit. When you have less funding, you're certainly going to have less firepower for engineering. You're going to be able to not go nearly as far in the infinite backlog of things that you could possibly want to build. And so you you can be really opinionated about product and actually say, you know what, I'm going to think about having less firepower, not necessarily, you know, as a disadvantage, but I'm going to actually put a stake in the ground and say, hey, that's actually how we're going to build the product. We're going to let our competitors go all the way on the flexibility side of the spectrum. So if you think of the spectrum of ease of use and flexibility, you can really only be one or the other. You can be somewhere you know, on this spectrum, you can't be in multiple places at once. If you are ultimately flexible, you can't be super easy to use. If you're super easy to use, you can't cover every possible use case. It just tends to be how products work. So by the time we'd started, Eloqua was already very focused on the enterprise. They were sort of, you know, hunting elephants, right? Marketo was a little bit more to the left, but kind of still trying to chase the enterprise. And so we thought, hey, we're never going to be able to meet the needs of that enterprise. We're kind of unfunded. We're doing things remotely. Enterprises have very different expectations. Let's go as far to the left as we can. And so let's put a stake in the ground and say, hey, we're going to be fast time to value. We're going to be easy to use. We're going to have a simple user interface. We're going to have less functionality by design. But that's going to be a feature for us rather than a bug. And so it meant, you know, our R&D could really be focused on the UI. It could be focused on, you know, getting people up to speed quickly, wizards, out-of-the-box templates. We could spend a lot more on support and services to get people up and running, and we can really build the whole company around this idea of easy. Now, later, sort of after our market played out a little bit, another player, HubSpot, would emerge. I purposely don't have them on this slide because In the time it sort of took us to get to exit, we weren't really competing with them. That sort of happened later. But HubSpot would actually come even farther to the left of us. And so, you know, there continued to be sort of these asymmetric moves, but we were all at different places on this spectrum. And it wound up actually carving out different parts of the market along this exact spectrum. We also thought about corporate culture very asymmetrically. Because we didn't raise money, we controlled the company. We could do literally whatever we wanted. We could run the company exactly how we saw fit. If we wanted to slow down, we could slow down. If we wanted to speed up, we could speed up. That's the beauty of things when you get to some scale and you are still bootstrapped, you're still owned by the employees. And so we had competitors that were just hard charging, were known for being very, very strong sales cultures. And could be a bit of a grind as they were on their IPO paths. And so we swung completely in the other direction. We said, hey, let's run the company with a simple rudder. Let's run the company by being the best place to work and the best place to be a customer. And those are purposely in that order. We thought, if you're not the best place to work, nothing else is going to matter, right? If your employees aren't excited every single day, if they're not mission-driven, Nothing else is going to matter. So that's the first rudder. Every time we make a decision, is this the best place to work? Then is this the best place to be a customer? We're not talking about growth, profits, anything else. If you get those two things right, the business is going to work. We also thought about our core values, and this is how we hired. Are people positive? Are they supportive? Are they self-starting? You're going to have a ton of ups and downs. You want people in the trenches with you that are positive. Are they supportive? Is everyone willing to pitch in to do whatever they need? No one's ever going to say I'd love to help, but that's not really my job. And are they self-starting, right? The space basically didn't exist yet. We were all figuring it out. We were hiring people that had essentially no experience or very little experience because almost no one had experience in marketing automation. We needed people who could dig in and figure it out, and it paid off for us. We had essentially zero employee attrition throughout our journey. Very, very, very little attrition. And, you know, what we're most proud of is we were able to become the best place to work in Atlanta for our category the year we were acquired. We were able to be the best place to work in Atlanta the year after we were acquired, speaking to the continuity of culture. And then the Atlanta office of Salesforce, which really had that kind of Pardot DNA, a couple of years after that was the best place to work in Atlanta for its category in terms of large companies. Colin Powell has this great quote, perpetual optimism is a force multiplier. And that totally played out for us. You know, anyone we had would work 5 times as hard as normal because they were just having so much fun. They believed they would bend over backwards for the customer. My co-founder David would often say corporate culture is the only sustainable competitive advantage that's fully in the control of the entrepreneur. You can't control anything else, you can completely control your corporate culture. Now, I mentioned asymmetric funding. This played out in very asymmetric exits. We went out to raise funding because we thought you were supposed to do that. So I think we were at, I don't know, maybe $5 million in ARR, we had good product-market fit, we did it the hard way, we hadn't raised any money. And we went to Sand Hill Road, we talked to tons of VCs about raising money, When we met with Benchmark, we got to meet with Bill Gurley, who is a legendary investor. We were really surprised what he told us. He said, "You guys would be crazy to raise money. I wouldn't raise money if I were you." We thought, "What? What are you talking about?" He said, "Do the founder math." He said, "You guys, your employees, you own the whole company today. Let's say someone buys you for $30 million today, would you be happy?" And we're like, "Yeah, do you have your checkbook?" He said, "Okay, let's say you go for another year and you sell the company for $50 million. You guys still own the whole thing. Would you be happy?" We're like, "Yeah." He said, "Okay, so you're sort of playing with house money right now. You have 3 competitors that have raised a ton of money. They're playing a very different game than you are. There's something to be said for all this optionality. There are a lot of companies who could do a $30 million acquisition, a $50 million acquisition, a $100 million acquisition." Then it starts to get really hairy, and the number of possible acquirers starts to get really small. And he said, now play this out. Watch when some of your competitors IPO, and maybe IPO at close to $1 billion in terms of their valuation, but maybe they own 10% of the company. You guys play this out, you sell the company for $100 million, but you and the employees own the whole company. It's exactly the same outcome, and you're probably going to have a lot more fun along the way. It was pretty amazing that just a couple of years after that, the market played out almost exactly as he called it. Now, you have to put yourself back in time a little bit. Today's valuations are incredibly frothy, but back in 2012, we were still kind of coming out of this Great Recession. Valuations were really depressed. So Eloqua IPO'd, and their valuation was less than $400 million. When they IPO'd. And you can see the remaining co-founders' ownership stake of it. We sold the company right, basically the month after that, we sold it for close to $100 million and our employees owned the whole company. Marketo would IPO the next year and still under a billion-dollar valuation. And you can see the CEO's stake in it. And then HubSpot would IPO the year after that, still under a billion-dollar valuation. Now, of course, after these companies IPO'd, different things happened. Eloqua would ultimately go on to be acquired by Oracle. Marketo would be a public company for a little bit, be acquired by Vista Equity. HubSpot would do phenomenally well as a public company and continue to execute. So things all change from here. We're just sort of talking about that kind of initial liquidity, often that founders think about at the time of exit, whether it's an IPO or an acquisition. So 4 companies wound up doing well. They wound up doing well very, very, very differently from one another in this space. And it was very asymmetric. So everyone sort of ran their own game. We ran the most different game from these other 3, and it wound up playing out really, really nicely for all of our employees. We made tons of mistakes along the way. I have this quote at the bottom to show most mistakes are totally fine as long as they're not the last one, right? As long as they're not the fatal one. Saviely Tartakover was a great, great chess player in the early 1900s. And he says, the winner of the game is the one— is the player who makes the next-to-last mistake. Now, the good thing about bootstrapping is you almost can't make a mistake that's big enough to kill you. You don't have enough money to throw at a really, really bad mistake. But some of the mistakes we made, early on, we had no contracts. We had the SaaS model. Monthly billing, monthly contracts, month to month, which is just in retrospect, pretty crazy, right? You do not give yourself a lot of time for an enterprise, even though we were simple enterprise software, to get someone up and running, to make them successful, to get them bought in, to see the ROI. You have a month to do that before they can turn it off. So in retrospect, contracts would've just given both us and the customer a little bit more time to ease into things. And obviously, you know, you have much better results in terms of reducing attrition. We had no coherent upsell strategy, so we had poor pricing and packaging. You know, basically our, our middle edition was sort of too good, and there was no reason to move to higher editions. We didn't have a lot of science around our pricing and packaging. A really powerful force for SaaS startups or enterprise startups is when you can get to net negative churn. When your net revenue retention is so high that the business is just growing as a result of it without even thinking about new bookings. We had to do everything with new bookings because we weren't moving customers through additions. We could have been much smarter at that. We were also much too efficient in sales. Like, we loved our efficiency numbers, and the reality is we should have been much less efficient in sales because this was an evangelical market where you could go out and grab it people were sort of throwing money at this space for quite a while. And we were leaving money on the table by being overly efficient in terms of sales, in terms of number of reps making quota, quota too low, et cetera. And part of that relates to the next one where we, and frankly, I think everyone around us, probably our competitors as well, everybody, we underestimated the size of the market. I mean, this market is still growing fast. 13 years later, right, those 4 players that are in it, uh, those 4 players that I mentioned, they're all doing well, right? I think collectively we all underestimated the size of the market. This often happens in enterprise software. So some takeaways, you know, embrace your constraints. Your business is going to have plenty of constraints. You know, we did, whether it was our geography, our experience, our funding, our R&D budget. Embrace it. Think about how you can flip that around. Don't meet force with force. If someone's pushing, pull. If someone's pulling, push. Think about how do you flip one of your disadvantages into saying, hey, this is where I'm going to put a stake in the ground and my competitor can't go there with me. It's just too different from what they're doing. Control what you can control. There are going to be a ton of things you can't control. You can't control the economy. You can't control your timing. It's very rare that— most founders have stories about how they started companies. Because they had some deep pain that they felt, and now is the perfect time to solve it. And those stories are mostly BS, right? They're mostly for an interview. The reality, for the most part, is like, you want to start a company and you sort of figure out exactly what it becomes along the way. You can't control your market timing, you can't control the economy, you can't control what your competitors do. You can control what happens within your four walls. And certainly corporate culture is the biggest thing that you can have an influence on. In fact, that's probably your main job. As a CEO or as a co-founder. And then optionality can be a beautiful thing. If you keep your options open, there are a lot of different things you can do. Eventually, probably once you've raised a certain amount of money or a certain number of times, you lock yourself into a certain path. Obviously, you can still be incredibly successful. You just have one possible outcome, as opposed to keeping more options on the table. So there are things that matter. You know, this graphic, you've seen lots of different versions of it. There are things that matter, there are things that you can control. Ultimately, you want to focus on the things, you know, where there's— where that Venn diagram sort of meets in the middle. So that's what I wanted to share. We have about half of our time left, so I wanted to open things up to questions. I'm going to go ahead and stop sharing my screen, and it looks like we have a bunch of things. Coming in through the chat. So the first one is from Joe Lin, and that's how best to position your company to become a Salesforce partner. So this is more related to my current day job. This is very different than it was back when we and our competitors were all in the Salesforce orbit. So we were all kind of around Salesforce, selling into Salesforce customers. And the AppExchange was a good ecosystem to do that. So that's Salesforce's independent software vendor sort of ecosystem. Today, there is a much, much, much more robust way to partner with Salesforce, to have our ISV sales reps position your products, things like that. So if you want to reach out to me, my email address is ablitzer, B-L-I-T-Z-E-R, @salesforce.com. I can put you in touch with the partner team and they can get you set up in the right way. From Taylor, what are some of the biggest strategies you took to create that positive culture in Atlanta? When we started the company, Atlanta did not have a lot of startups, right? Atlanta startups were largely in logistics or they were in security. What was interesting is like probably the most legendary startup in Atlanta, Mailchimp, was also— they were becoming— they were kind of like really taking off just as we were starting. They were about to hire their 10th employee right as we started. And I remember they were nervous, like, what is this going to do to our culture? We're becoming a big company with 10 people. Now they're at many, many, many hundreds of millions of revenue, an incredible company. But no one thought of Mailchimp as a startup because they had bootstrapped it as well. We bootstrapped our company. So no one thought of us as a startup, but it's because they didn't have people around them who were at startups. People just thought of us as a small company. But because we didn't know any better, we just built the kind of company we wanted to work at. So we did things that we thought were right. We paid 100% of the health insurance premium for our employees. We overspent on office space. Now, obviously, it was $4 a square foot, as I mentioned, but we got way too much office space. We had space for 120 people when we only had 20 people because we just thought it was totally worth it, right? Hire a couple less engineers, have an incredible office. That's a force multiplier for all of our employees. We did all the goofy things like we paid for car cleaning and house cleaning and kind of the Silicon Valley sort of style benefits, which weren't common at that point. But I think the biggest thing was we hired for core values. So my co-founder and I interviewed every single candidate up to about 150 employees. We were the last round. And by the time someone got to us in the process, we knew they could do the job. We knew they'd be successful at the actual job. The only thing we evaluated is, are they positive? Are they self-starting? Are they supportive? That was it. We conducted a normal interview, but we were only listening for those 3 cues. Uh, and if they met those, we knew they were going to work out. So hiring for core values, as opposed to hiring for skillset and hiring for experience, I think was by far the biggest thing we did. and again, did it up to— basically up until the time we sold the company— that had the biggest impact on creating a positive culture. And my co-founder has done a lot of writing about this. If you go to davidcummins.org, he's done a lot of writing about how we thought about culture. So next one is anonymous. Maybe this is from one of our former competitors. But throughout your journey, did you have your competitors speaking misinformation about your company your products to create fear, doubt, uncertainty within the market? And how did you handle that? So fear, uncertainty, and doubt, commonly referred to as FUD, is very common. Marketing automation became unfortunately a fairly nasty space. I think it's because it sort of coincided with the rise of social media and Twitter, but it became kind of this mudslinging space. As much as possible, we tried to stay above it. We just tried to be the nice people in the space. You know, it met with our vibe, right? We were in Atlanta, we're unfunded, we're sort of the aw shucks crowd. And as much as possible, we also tried to expose our customers to as many people from our team as possible during the sales cycle. So we would actually have them meet with people from support, meet with people from, you know, that were going to be doing their implementations. We didn't try to hide any of that. We actually made that part of our sales process because we thought our culture was so strong. And, you know, people really got a sense of, we're going to be in the trenches with them, these are good people. And that was super helpful. The other thing you find with FUD is your customers will be skeptical about it, or your prospects will be skeptical about it, and they'll actually send you the FUD. They're like, hey, your competitor said this. And so you can really easily refute most of that. And it just like totally cuts your competitor down. Now, what you shouldn't do is let your competitor know that you can easily refute it, 'cause you actually want them to keep doing it if it's easy to refute, because then they just lose credibility in the deal. If you let them know that you know about it, or you show them your counterpoints, they'll just adjust and go somewhere else. So unfortunately, this is common. Now, I wouldn't say any of this was like directed top-down from competitors. It just happens in the trenches, right? It's like normal part of going to battle, but unfortunately it happens all the time. From Phil, how did you figure out pricing and packaging? We didn't until— I think until actually we were probably part of Salesforce did we get much smarter about it. One thing about pricing and packaging, when we first started the company, we said, hey, let's sell marketing automation for $50 $50 per customer per month. And we thought, oh, we'll just have like 10,000 customers, no big deal. Then we got our first customer and we thought, whoa, that was hard to sell. We're not going to get 10,000 customers. But we just sort of had no idea. And so we kept raising the price. And then we raised the price to $150 per customer per month, then $325 per customer per month, then $500. Every time we raised the price, our head of sales would get super nervous and think we're going to slow down, we're not going to be able to get as many customers. And every time we raised it, we sped up. And it's because our prospects would take us more seriously. We stopped being a widget and we started being a real piece of software. And we kept raising it, kept raising it, kept raising it. And our sweet spot really wound up being $1,000 per customer per month. And the reason for that is We thought it was kind of the maximum amount a head of marketing could put on their credit card without getting a CFO's approval. And so, you know, sort of what is the right amount? Okay, $1,000 a month felt like something someone didn't need to get budget approval for in kind of this mid-market place we were playing. And so we wound up, you know, building the business around how could you go to market for $1,000 per customer per month. So we changed the pricing a lot to get there. We never raised the price on an existing customer. We grandfathered them in. You know, if you were that lucky customer that paid us $50 per month, I think we only had one of those. We had probably a dozen that paid us $150 per month, kept them the whole way through. You know, they trusted us early, uh, and so you need to reward them for that. Um, next one, also anonymous: How do you look at what your competitors are doing and how do you decide what to let go of so it doesn't distract you. This is really hard. Uh, it is natural to look at what your competitors are doing way too often, uh, and to get really, really attached to what your competitors are doing. You have to listen to your customers. Um, they are infinitely more important than your competitors. Your customers are actually using your product. They are in it every day and they will guide you. Now, With that, we were lucky in that, you know, we didn't focus on elephants, you know, the huge enterprise customers. We didn't focus on rabbits. We focused on deer. There's a good blog post from Mark Schuster, who is a VC in LA, who posted about, you know, what's the sweet spot for your company and what does it mean for you? And so we were focused on kind of that mid-market of deer, and it meant no customer for us was more than, you know, X% of our revenue or 1% of our revenue. And so we couldn't go down a bad path doing feature requests for one, one customer. We would look at what does a broad swath of customers need? What is— what do 80% of our customers need? But listen to your customers a lot more. Most other things are noise. You have your own intuition for the market. You have your customers, your competitors. You know, that's an input, but you have to kind of put that away. Why did you sell Pardot? Why didn't you grow it further? From Ritus. That is a great question. And actually, my co-founder did not want to sell it. This led to one of the big conflicts of our co-founder life because I did want to sell it and he didn't want to sell it. We didn't think that much about selling it until we were approached by ExactTarget. And we also didn't really know how to sell a company. We didn't have a board. We were first-time entrepreneurs, essentially. My co-founder had another company he was operating, but it wasn't wasn't kind of the same sort of venture-ish acquisition target kind of company. So we'd never gone through this before. We didn't know you're supposed to get a banker. We didn't know you should shop your offer, that kind of thing. So we sort of did that manually. We went out and we started talking to private equity. We started talking to VC, really to get a sense of valuation from those types of funds to counterbalance the offer we were getting. The way I thought about it is it was inevitable that a company like Salesforce would get into the space. Marketing automation was so adjacent to Salesforce automation, it was absolutely natural. We thought about that actually before we wrote a line of code for Pardot, and that's why we tried to integrate with multiple CRMs, which wound up being a pain in the butt. Um, but you know, it was optionality in case Salesforce got into the space with someone else. So that was always looming. Does our value get cut in half when Salesforce acquires one of our competitors or builds this themselves? The other thing is the privacy landscape was getting a little bit crazy. There was this Do Not Track movement that was starting to gain some momentum. It wound up fizzling out, but that was always at the back of my mind as well. Are things going to get difficult for marketing automation, for analytics? And then the last part which is probably the most important part, is if we were going to sell the company, we wanted to land it somewhere great, somewhere that would take care of it, that would take care of our team, our employees, where it could flourish. And ExactTarget was a kindred spirit in terms of corporate culture. When we read ExactTarget's S-1, it listed corporate culture as a competitive differentiator, competitive advantage. And we'd never seen that in any S-1 we'd ever read. Certainly at that time, typically it was like, hey, we have these patents and this and that. And that really spoke to us. And if you'd ever met Scott Dorsey, the CEO and founder of ExactTarget, I mean, you just know within 10 minutes of meeting him, like, this is the place we want to be. And they lived up to it. Every single thing they said they would do, they lived up to. I mean, it was a short time period of being part of ExactTarget, but just a phenomenal acquirer. And I remember having the conversation with my founder about it. And those are kind of the 3 things that did it. The valuation got to the right place and we agreed to sell the company. Which one— so from Simon, which one do you think is a good exercise for correct pricing? Once you get to a big company, you can be pretty scientific about it. You just have enough customers. You can do your research. You can do your surveys. When you're small, You know, it's tough. And I think founders almost always underprice their products because as founders, like, we build these products. Like, how good could they be? How could someone actually be paying us this much money for our products, particularly in enterprise? So I would say, think about what type of customer do you want? You know, to use, you know, Mark Souster's, you know, rabbit, deer, elephant analogy. Like, what type of customer do you want when you pick kind of one of those archetypes? And then within that, keep raising your price until your prospects just push back and say, this is, you know, we're not going to pay this, right? But keep raising it until your velocity slows down. Now, when I say that, keep raising it, don't raise it on your existing customers, right? Your existing customers, if they locked in at a certain rate, that's fine. Keep them at that rate, right? That's goodwill. They trusted you. But with your new customer, you know, just keep raising your price and you'll know when your sales velocity slows down. You've kind of hit equilibrium, you're in the right spot. So that's the unscientific way of doing it. A lot of startups also worry, like, is it going to send a bad message to the market when I raise my price or change my price? The reality is it's not going to send any message because no one knows what the heck you're pricing. No one knows who you are, right? You know, unless you're like a household name or you're a public company, it's okay. Just do right by your existing customers. From Clinton, did sales volume decline after implementing contracts? What positive or negative effects happened from it. What improvements in 30-day churn did you see from adding this condition to the signup? So we actually did two things, uh, and we didn't do these until very late in our life cycle. I think it was like as we were getting acquired by ExactTarget, or a little bit before that. Um, we switched to, um, uh, annual contracts. Um, and then also annual prepayments, we would give a significant discount for. Remember, we were bootstrapped, so the cash flow advantage of getting paid in advance was awesome. It was really immense. With contracts, I would say things did not measurably slow down. I think by that time, the market had matured. So we started in '07. In '07, people were scared by the end of '07, because we were in the midst of a recession. And people were willing to try things, but having no contract was appealing to people. By 2011, 2012, things had really stabilized and, you know, started to recover, and marketing automation was a thing, right? Contracts were normal. Our competition was doing contracts. And so I think because we, you know, we didn't do it until the market had matured and until we were also on solid footing with a real track record, we were able to do it without slowing down. And then annual payments, we didn't require, but because we incentivized it, we were really able to get a lot of those. And that was super helpful. Now, we didn't go to multi-year contracts until after we were a part of Salesforce. Obviously, we still don't require those, but that's an option. Those are really, really powerful for running a business. Once you go to annual contracts, your attrition is just night and day. I mean, it is totally different. If you read Behind the Cloud, which was Marc Benioff's first book about the early days of Salesforce. He also talks about the power of going from month to month to annual contracts and just what it does for the business. It seems obvious, right? But again, as kind of first-time SaaS founders, these are the things you don't know. From another anonymous, how did that special Pardot corporate culture need to change post-acquisition? How did you manage that transition? This is really hard for startups, but you need mostly the founder, right? Or founders. You need to understand that once you sell your company, you've sold your company, right? It's not your company anymore. Lots of people forget that. Lots of people forget that. And they try to run it as their startup within the big company. And that just does not work. You know, it works for a little bit. You have this halo effect of being acquired. Everyone's excited, it's good, but then you hit a wall at a certain point because, you know, you have all the red tape of being at a big company without the lift, without the leverage. Instead, you need to think about it as my journey is different now, especially if you're like me, right, and you stayed on. My journey is different right now. We sold the company, the journey was awesome. We're at a different part of the journey now, um, and the name of the game is leverage, right? How do we get leverage from the big company? And from a culture standpoint, you need to say, like, people who work on Pardot at Salesforce, they still call themselves Pardashians. It's hard to keep up with the Pardashians. And they think of those fun things about their culture. But I would say they think of themselves as like, my heritage is Pardot, my citizenship is Salesforce. Just like, I can be of Eastern European descent or Jewish, but I'm American. And that's how you kind of mend those or meld those two together. The other thing is there's a big concern, like cultures have to be the same for it to work. Cultures are never the same. No two companies are the same. They're always different. And that's okay. They just have to be compatible. You have to be able to see where the other person is coming from. You have to have this rudder that you translate things through. I mentioned in Pardot's case, be the best place to work and be the best place to be a customer, intentionally in that order. Salesforce would flip the order. Salesforce would say customer success, right? And then employee success would probably be after that. And that's like a subtle difference. But, you know, when you're making a decision, you have to be able to sort of translate where someone is coming from. And I think startups that can embrace being part of the big company and say, hey, maybe we're not going to go as fast as we used to, but we're not going to go as fast as we used to because the stakes are much higher right now. We have thousands of customers instead of dozens or hundreds of customers. We have to slow down. Or now we have much more enterprise customers instead of all SMB customers. We have to slow down. But holy smokes, we have salespeople in every theater in the world. We have legal teams, right? I was the lawyer for Pardot. I used to play the Law Order theme song in the background while I was looking at contracts. It's terrifying, right? So think about leverage. Think about translating cultures, being compatible. And I think that's what's helped us be success— be successful. "What do you believe raising funds would've helped you be better at?" from Mauricio. I think it would've helped us capture the market much more than we did. I mentioned we were too efficient on sales. We also probably just couldn't hire salespeople ahead of our revenue fast enough. Now, we didn't raise funds, but we did get a very big line of credit from Silicon Valley Bank. Silicon Valley Bank at that time was one of the only banks that really could value SaaS companies appropriately for a line of credit. Most banks would say, what assets do you have? They want things to seize. Oh, do you have printing presses we can seize if you default? And obviously, as a SaaS startup, you have nothing. We had scooters in the office. But Silicon Valley Bank, they would look at your ARR, your annual recurring revenue, as your creditworthiness. And they would give you some multiple of your ARR as a line of credit. We had no warrants, we weren't giving anything up, interest rates were essentially zero, so it was almost free non-dilutive capital for us. And that's what we used to fuel the business. Now, you have to get to a certain size in ARR to be able to get anything meaningful in terms of line of credit, but once you do, it's an awesome non-dilutive source of capital. Again, things were super cheap. In 2007, a really good engineer in Atlanta was probably making $60,000 a year. I mean, today you're like double that. So it was very, very different. And having like a $5 million line of credit or $7 million line of credit could go really far for us, especially as revenues were ramping up really quickly. Another anonymous question. What is your AV setup right now? This looks and sounds great. Thanks. I assume you mean like the picture looks great and I don't, right? Because I get that a lot too. Or like, hey Adam, can you blur your face and make the background crystal clear? The trick for like a really crystal clear image is to use an actual mirrorless camera, so not a webcam, so like a camera that you take, take photos with. So I'm using a Fujifilm X-T3. Then you get like a kind of special adapter called a Cam Link to hook it up. It is a fairly expensive setup, but if you think we're gonna be in this situation for a year, or you're just gonna use it going forward, it's probably well worth it for events like this. You get a good lens, it blurs your background. I have no lights on in my room, but it picks up like every possible bit of light. And then I have like an anchor puck mic for the sound. What were some of your disappointments from the early days? What turned out to be good for the company in the end? I mentioned, and this is from Devin, I mentioned some of the mistakes we made, particularly around being too efficient on sales, being bad at pricing, not having annual contracts. We certainly could have been much bigger at the time of acquisition than we were. So I think those probably hurt us. It also probably took us too long to define our culture. We got to 20 employees before we defined positive, self-starting, supportive. And to get to those 20 employees, we made, made some misses. And each miss is painful, right? People you hire, they're good people. You like them. And they don't work out for whatever— typically they don't work out for those values reasons. You know, I would have loved if we had defined it earlier. We got to 20 and we said, wow, we have 20 amazing people. How do we keep this up when we're at 150? And that's when we sort of said, what do these 20 people have in common? They're all totally different from one another. But if we kind of drill it down, they have those 3 things in common. So I wish we had done that probably earlier. Let's see, I think we have time for 2 more questions. Yep. So from Conrad, if there were not many people with experience in this industry because basically it didn't exist, What kind of habits did you focus on for the sales and marketing team? I would say we hired the smartest people we could, Type A, from good schools, that had just a track record of excelling at something. Obviously not this. And for most people we hired, this was their first job in tech. Um, you know, some of our best people, they were transitioning out of like being an accountant or like an auditor at Ernst Young or something, like totally different kind of things, but they all excelled at something. Uh, you know, whether it was something in their undergraduate career, whether it was something in their first job, they were all super smart and they were hungry. And we said, we'll teach you everything about marketing automation. Now bear in mind, we were only like 8 minutes ahead of them, right? Because this was such a new space, but we hired for the person We hired for their values. And then we just said, experience, like, it doesn't matter that much. No one knows how to do any of this. We're going to figure it out. And so we had a much more inexperienced workforce than our competition. But in the end, I don't think it really mattered that much. Last question, I think. This is from Aki. "My guess is that bootstrap companies can only handle less ambitious engineering projects due to the cost required. Did you see that at Pardot or no?" I'll give you a couple of examples of bootstrapped companies that are now gajillion-dollar companies. One is Mailchimp. Again, I mentioned many, many hundreds of millions of dollars, and the employees own the whole company. It's insane to think about that. One of the greatest success stories ever, I think, in tech. And it's still kind of under the radar. Like, most people would not have expected it to be bootstrapped, but many hundreds of millions of dollars in revenue. Like, could have been public at any moment, but like, why would you? You and the whole company as the employees. So that company is absolutely incredible. The automation that they've had to build in, to have a freemium model for email, that you can detect bad actors and spam, to handle the scale that they handle, absolutely incredible. Another one that comes to mind is Atlassian, which was essentially bootstrapped. Their first round of funding was very late in their lifecycle, which was basically a secondary round, but they built the company organically in Australia, one of the greatest bootstrap success stories. I mean, now it's tens of billions of dollars in market cap. Qualtrics, I think, was largely bootstrapped until very late, until it was already at major, major scale. So it's not impossible. It's just rare. Now, actually, all three of those companies I mentioned were not in Silicon Valley. Qualtrics was in Utah. Mailchimp was in Atlanta. And Atlassian is in Australia. Actually, not cheap at all, but in Australia. But just maybe that had something to do with it. I do think, let's say you're in New York City, let's say you're in San Francisco, probably tougher to bootstrap because things are just so expensive, whether it's your real estate, whether it's your labor market, whether it's anything else. Just everything is more expensive, and bootstrapping could be more difficult. So I think that's all we have time for. We got loads and loads of good questions. I will try to answer as many of these as I can on Twitter over the next few days. I want to thank everybody for taking the time today. Really, really good discussion, really good questions. Everybody be safe. It is, it is a crazy, crazy time out there. Take care of yourselves, take care of your families, take care of those around you, and thanks again. I'll talk to you soon.