Live from SaaStr Europa 2022: Stage B with Snyk, Vanta, Hook, Crane, Boast.ai and Atomico

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Please welcome founder and CEO at Hook, Firas Rashid, investor and venture partner at Crane Ventures, Rav Dholival, VP of customer success at Sneak.io, Lindsay Serafin, and director of customer success at Vanta, Caitlin Sullivan.

Oh, wasn't expecting that to lean back. Hi everyone, and welcome to this session on scaling customer success in 2022. We're gonna cover a few topics today. So we're going to talk about what is customer success, who is it you should be hiring, what metrics should you be looking at, and also what do you need to do to start to scale digital customer success as well. Before we start, I'd love to kind of know who's in the audience. So can you raise your hand if you're a founder? And can you raise your hand if you work in customer success? If you work in a business that has customer success? And if you don't care about customer success? That's a good sign. Cool, so let's get started. I'd love to— firstly start with introducing this panel. Uh, is that on screen? Awesome. Um, so, uh, Rav, I'll hand over to, uh, to you to introduce yourself.

Well, thanks for us. Thanks everyone coming. My name is Rav Dhaliwal. I'm a venture capital investor and recovering CS executive.

So, hi, I'm Lindsay Zarefin. I lead customer success at Sneak.io.

Hi, my name is Caitlin Sullivan. I lead customer at Vanta.

And I'm Faraz. I'm the founder and CEO at Hook, and we're a machine learning platform that helps customer success teams predict their revenue accurately. My background before starting Hook was I used to lead customer success at AppDynamics. We were a $4 billion acquisition by Cisco, and we grew to about $550 million ARR. And so in that journey, I kind of experienced a whole range of the challenges at customer success. So before we get started, I want to start with this slide, which will talk to you about why does customer success matter at all. And the graph that I'm showing you is the valuation of a company— sorry, the revenue of a company. And in this case, the company has not done any sales at all except for year 1 when they had $10 million in ARR. And what's happening here is the green line shows you what happens if they had 180% net retention. The middle line is 140% net retention, and the bottom line is 105% net retention. So as a company, if you have no new sales, starting with $10 million, after 5 years you have $100 million in ARR, which makes you hugely attractive to investors. And this is why the backdrop of this conference has all been about how net retention has become the most important metric that SaaS companies should be concerned about. This has been accelerated by the, uh, changes in the market that we're all seeing, which is valuations are changing, companies are starting to churn more, and that in itself puts customer success right in the center middle of SaaS. Um, in the last 3 years alone, I think we've seen customer success job rates grow by about 700%, which really shows you how, how this landscape's changing. So with that, I'll start to direct towards the panelists. And Lindsay, I'll start with you first. What is customer success and how's it evolved?

Sure.

So I think 10 years ago, if you asked what customer success was, you know, you usually described it in relation to another function. Well, it's sort of like support or it's sort of like account management or it's sort of like professional services. Whereas now, you know, as a testament to the folks in this room, customer success is now an established function at many, even early stage software companies. But I like to think of it as, as really customer success is whatever your business needs at that time to connect the edges of your product or your offering to the actual needs and value that your customer receives at the end.

Rav, maybe you wanna add to that?

Yeah, absolutely. I think that's a really great distillation. I would probably layer onto that by saying it's really any function or any group that is creating the conditions for future revenue. And that's essentially going back to your graph there, Faraz. We are all trying to learn sales, go-to-market, close, and annual contract value, ACV, that builds our company, but it's actually net revenue retention that sustains it. Every successful software subscription company from Zendesk to Salesforce, et cetera, by year 5, 6, 7, most of their new revenue is coming from the people they've already sold to. And that's why you need a function that helps drive fast value and creates the conditions for net revenue.

Anything to add to that, Caitlin?

No, I think, you know, when I started in customer success, it was always described as proactive customer support. Now it really is just a vital part of the revenue engine, especially at startups.

Awesome. I think a lot of the people here will be wondering when they get started out with customer success or as they start to scale it, what should they be looking at in terms of hiring? I talked about the idea that there's been such a growth in customer success hiring and talent is difficult to find. I know Caitlin, you've got quite a strong opinion on it. Yeah. So we'd love to hear what, what is it that people should be looking for in their first customer success hires?

Yeah, I think you, you definitely want somebody who's done the job before, ideally at a startup, because I think as a lot of us know, there's sort of a lot to, to weed through there. What's most important to me, especially in those for the first couple of hires are, are you empathetic, which I think every CS professional has in common. Are you scrappy? Can you sort of weed through the muck of not having the resources at your fingertips? And are you accountable to your customers and your colleagues?

Cool.

Lindsey?

Yeah, I think I get this question a lot. I think a lot of it depends on kind of what, again, that business needs at the time. But I think some good strategies for earlier stage, I think if you've got someone who's from your industry who knows the, the space and the practices and can help kind of connect your product to the customer's environment and their business, I think that can be really helpful. And then I think you really need to decide for your very first hire, do you need someone that's leaning more towards the technical side to get really into the weeds and the product, or do you need someone that's more geared towards the relationship management side, um, and focused on the business value? And I think that first hire depends a little bit on where your business is at the time that you make that hire.

I'll just add, I think Caitlin, your point about people who are consultative, empathetic, super important. And again, Lindsay, to your point around some of those traits that you need, I would just add to that, I think as founders or, or, or people running this function, there's 5 questions I think to ask yourself because it does vary a little bit by stage, you know, whether you're pre-product market fit, go-to-market fit, you know, how do we sell? Are we a freemium bottom-up model? Are we a top-down, Enterprise sale. How do we deploy? Is it highly technical? Do you need very specific product program management skills, or is it pretty straightforward? What's the change impact of our software? Does it change the way thousands of people work at our customer, or is it like maybe 10 people in DevOps, right? How, um, how much industry or domain knowledge is required? Sometimes CSM doesn't need any, they can learn it on the job. It'd be very hard to put a non-data scientist person in front of a bunch of data scientists and show value. So think about that. And then how do you expand? What's the expansion motion? Is it more consumption, more license, complementary products? Because that will speak to how much commercial nous somebody would need.

Awesome. I found when I was doing the, the hires back in my days at AppDynamics, and we rebuilt our customer success motion in the course of 12 months where we were at about $200 million ARR. To become more proactive. And what I found was that actually the experience in understanding your customer's problem in their business outweighed the need for them to have previous customer success experience. And I think it's easy as, as SaaS founders, as, as, um, as SaaS employees to forget that. But the reality is, is that what your software is doing is solving a business problem, and the technology is actually just a facilitator for doing that.

So I would just add on that point actually, Fraz, it's a really important point. If you're still searching for product market fit, it's not a bad idea to have your, a product person wear a customer success hat because that's the name of the game, right? If you've got product market fit at least in one or two segments and you are now scaling, you know, go-to-market organization, you may want someone who's more client-facing, a bit more commercially oriented, but also really understands the product. So again, that stage you're at, really will depend on, you know, that kind of profile.

Yeah. And this morning we were talking about how the roles change. And I know Lindsay, we started to talk around how you have renewals teams and support teams. I think many founders in here will be at the very first stage where the earliest hire is, you know, someone that does everything. Certainly that is the case for us for Hook. Do you want to touch upon maybe some of the experience you've had in how that evolves from earlier stages? To later stages?

Sure, absolutely. I mean, someone once told me a rule of 3, which I think is kind of good, which is once you have like 3 people doing the same thing, they should be like a separate team. Um, but in the beginning, you really have those unicorns wearing lots of hats, right? So they're kind of jumping around and doing lots of different jobs. Um, and then obviously once you get to 5 to 10 people, that starts to not scale, right? Because it's really hard to keep finding the unicorns that can do and do everything. So then you wanna start to specialize. I think it makes sense to specialize along your customer journey, right? So someone focused more on the onboarding phase, someone maybe focused more on adoption, and then that renewal bit, which is a little bit more of a commercial focus, renewal expansion, again, depending on your commercial arrangement.

Awesome. And Caitlin, your team started to kind of split up into specialties now.

Yeah.

Do you wanna talk a bit about some of that structure and what you've started to find?

Yeah, we sort of kind of hit the same cliff where we were wearing all the hats and at almost 3,000 or more than 3,000 customers, that's really hard to do. And so, you know, it's really sort of defining like what the most important pieces of your journey are and then you can kind of specialize and segment from there. So for us, we knew that onboarding and adoption was really important and so that's where we started.

Awesome. Sounds good. I think that's, it's really insightful to think about the rule of 3 as well because I think it's easy to, get stuck in getting external advice and not knowing whether it's relevant to your stage. And certainly I've seen the evolution at the earlier stages where you have that one person that does everything. You begin to build a renewals team, you start to realize you've got services people that you need to bring in, and knowing when to scale those out is important.

I would just add, I think thinking about what your sales team is going through is a really good indicator for you all as sort of founders. So If you're realizing, well actually my AEs now need support from SDRs or BDRs, they need solutions engineers, that's normally a sign you should start unbundling lots of other things from individuals to specialization. So that can be a useful way to kind of gut check, is it time to move to specialization?

One other rule of thumb that's helpful is your, when does your first cohort of customers come up for renewal? So if you're doing annual plans, right? And you're kind of looking ahead and you're seeing, Okay, when is that first cohort of customers renewing? You wanna make sure someone's thinking about that renewal and it's not a reactive, like, oops, we forgot those customers are renewing.

Or it's gonna happen by magic.

Yeah. Or it's gonna happen by magic without someone engaging.

Yeah. It's a, it's a really interesting point. If you've got product market fit in a segment and then suddenly you start to sell into different segments, maybe even large enterprise segments, those kind of customers, you know, they don't stick to the script. They'll find ways to use your product that you hadn't thought of. Thought about. And that often exposes a lot of gaps in your organization structure. That's also a good indicator you might need specialist technical teams, specialist renewals teams, et cetera. But also the thing to avoid there is to not unbundle and have what I like to call an everything department. So everything that doesn't fit, we'll just give that to the customer team. That is a rocky road to ruin for, for any business.

I think I, I, I wanna cover, a topic that we talked about at breakfast this morning on, on hiring as well.

Um, you guys should have come to breakfast. It was a great day.

It was a great breakfast. On the, um, uh, on the, on the topic of hiring, uh, what are your thoughts about who they should report into? I know that's, uh, that's a, an interesting debate, but, um, should it be the CRO, um, the COO, sometimes the CMO?

Well, again, I think it's very much about stage. You know, if you're in that pre-product market fit stage, you know, haven't probably reported to product because you're not going to become a company unless you can nail the product market fit. I think when you are scaling, you've got product market fit, you're building a go-to-market organization either in or very closely aligned to sales. Wherever sales is reporting up into probably makes sense because if you think about it, CS is really part of an ongoing sales motion. You've landed the customer, but you want to sell more to them. So having them, you know, both report up to CEO or CRO. It's also very useful for you as founders if your head of sales and head of CS report to you, or to report to the same person, because as you know, sales never lose a deal because of sales. They lose it because the product doesn't do something. And CS never lose a customer because of CS. They lose it because the product didn't have X feature or whatever. And you need those independent data points to make up your own mind about where the actual problems lie. And then when you're a large complex business or multi-product business, you need a whole customer organization, roll it up to a Chief Customer Officer, I think.

So we've defined what customer success is. We've hired our first people. We've started to get them to report into someone. What is it that we should be looking at in terms of metrics and how to measure them, Rav?

Oh, well, look, I mean, I think first of all, it's important that the team is measured on something that's materially important to the company. At the time. So, you know, in an early stage you may be all about brand. We just got to build brand awareness, build brand, align them to that. Is it MPS or is it something like that? But fundamentally I think it boils down to two measures. One's leading, one's lagging, right? The lagging one is NRR. If we're investing in a team to help customers, we want to get that returned and we want to see some uplift. So 110, 120% NRR, that's lagging. So I think it's always, always really good for a CS asked him to have a quarterly measure. I like to call that a time to value measure. Is there some metric either in terms of product usage or product usage characteristics or adoption we need to get every customer to? Or is it just a case we just gotta get every customer deployed within the quarter? Because if we don't deploy them, they don't see any value. So some NRR metric, north star, time to value, I think the more leading metric.

Caitlin, metrics.

Yeah, I mean, I think net retention will always be top of mind, but it's important to really sort of define those milestones that lead up to the renewal and, and not to take your eyes off of really the health of your customers. And, and that'll look different at every company. And it's important to reassess as your business grows and matures, your customer segments start to change to, to sort of come back to that and redefine it.

Yeah, I totally agree with what everyone else said on those are the key metrics. I also think something they can think about is what do you measure versus what do you comp on. So I think some people rush to put a very complicated comp plan in place without actually proving the ability to measure consistently some of these metrics. So my advice would be, before you set anyone up with a comp plan, make sure you've actually measured that metric as a KPI for at least one quarter and that you have some confirmation that it's actually directionally indicative of performance before you tie comp to it, or you'll spend all your time managing a comp plan instead of actually moving the business forward.

You clearly lived through that pain.

Probably 10 times.

Yeah. And actually a really interesting point that often gets overlooked is a really good way to align people in the go-to-market organization is to give them some overlapping comp. So, you know, if your CSM team is predominantly comped on NRR, make 5% of the salesperson's comp NRR. Make 5% of the CS person's comp helping them close the deal. This is where a lot of scaling problems occur, because people are just compensated to not think about the person who's coming next. So I think this sort of— some of the more customer-focused metrics can be really important to have everybody have a portion of across the organization.

I found that the— one of the most effective things we did at AppDynamics was to give the CS team a number that nobody else owned. And what we'd found was that, um, there was a direct correlation between adoption and whether or not someone would renew. So we found that, uh, a renewing customer would be at, say, 57%, and churned customer would be at 29% adoption. And interestingly, when we gave the customer success team the adoption metric, they gained so much respect within the company because they now owned a metric that, that wasn't stolen by sales and, uh, and it wasn't, it was only influenced by them. I'd be interested to hear your thoughts around, you know, that kind of approach.

I've paid on adoption before as well. I think the challenge is just the accuracy of your ability to measure it and the systems you have in place for controls, right? 'Cause there's weird gotchas where, well, if a customer churns, all of a sudden the adoption goes up because they fell out of the denominator or, this customer's using the product in a different way, so they're actually getting a ton of value, but their utilization isn't showing it. So that's why I would say if you can measure it for a quarter first and you like it, then pay on it.

[Speaker:JASON M. LEMKIN] And there's seasonality to that. In Scandinavia, everyone goes on holiday for 3 months because it's the only good weather. And if you're measuring the team on adoption, you're not making any money that quarter, right? So I think adoption, I feel it's a proxy for some characteristic of product usage.

Right.

So it might not be physical number of users, it might be data throughput through the system, or they're using 6 out of the top 10 key features or something like that, right? Something that correlates to what you believe is business value.

Yeah. Yeah. I have a strong opinion on how we should measure sentiment versus engagement and behavior.

Probably think about running a company.

Yeah. How should people use sentiment? Like what is it around sentiment metrics that people should take in?

Yeah, I've become less and less of a fan of sentiment measures over the years because there are so many nuances, right? If you think about how someone views your company or your brand, it's not just the person they talk to the most, it's the sum of every experience they have with the brand from buying it to deploying it, to going to your website, to raising a ticket. Why put one person on the hook for the rest of the brand, right? So that's why I'm not necessarily, I think sentiment may have a part because you want to track qualitative and quantitative metrics. Sometimes people don't use your product very well, but they love you. That still is a renewal risk. And conversely, they do not talk to you, they do not engage with you. Their NPS is low, but they've got strong product usage. So I kind of think of it, it's like a blood pressure reading. You need both values, but I wouldn't comp people on the sentiment values. There's just too many other variables I mean, if your patch was, you know, dach, you're never gonna hit your NPS number. Culturally, they give nobody a 10, right? So it's not fair.

Yeah. Any other thoughts around sentiment, NPS?

Yeah, I think it's, it's definitely a blended metric that should go into sort of some sort of overall way to measure health. We've all gone into a renewal call where you're looking at their usage and like, yes, like they use it all the time and they're super upset, right? And so you can't just rely on usage. Something that we do is just when a CSM gets off the call with the customer, we just have them update their sentiment sort of regularly, and then we use that as a factor that goes into the overall health score. But it can be really hard to nail. I think a lot of folks have gotten burned with just looking at sentiment.

I'll give you a funny story. When I was at Slack, someone gave us a 0 on NPS, and I had to call them and find out why we got the 0.

And he went, "Oh no, no, we love you guys, right?

We're just 'cause we were running at NPS and we wanted to see what your process was if we gave you a zero, right? It was like, thank you, stats completely screwed up, right? So this is why it's not really particularly useful.

Are you sure they just weren't expecting to get—

Somebody once did it on the mobile app and they thought it was a 10 and they didn't render properly and they gave us a zero, right?

People want the popup to go away.

Yeah, exactly. They want the— exactly. Yeah, they want the popup to go away.

Cool, so we've built customer success, we've hired some people, We've started to measure them and give them some metrics. There's an amazing buzzword in customer success today around digital customer success scale. I think it's becoming increasingly important. Lindsay, I know your team's been doing some awesome work in it. Would love you to talk about what is digital CS? When does it matter?

Yeah, definitely. I think it's important. So, you know, we built a digital success function. You know, it started with the small customers. Customers, right, as a way to serve them, and then we actually realized that all customers want to be served digitally. In this day and age, you probably experience it yourself, you don't want to have to get on the phone with someone unless you have to. If you can get an answer and watch a quick video or read an article that's going to tell you exactly what you need to do in the product, then you can save your in-person time with your, your CSM talking about the value, talking about your strategies and your best practices. So I think that's one of the my biggest lessons learned with digital success is it's not just for the small customers. It really helps you scale everything you do.

Caitlin, would love to hear your thoughts on it as well. I know we were talking about community.

Yeah.

And I think that's a hot topic as part of that as well.

Definitely. Yeah. I mean, I think at the end of the day, it's about sort of, to your point, meeting your customers where they are. And, you know, at Vanta, we just had this incredible growth. We couldn't hire fast enough. And then we hired a CFO, so we got budgets in place. But, you know, our customers don't wanna be bottlenecked at that level. And I think that, you know, really defining what should be human-led or a tech touch and then building kind of communities around that can really help. And community can be a really great way to get product feedback to sort of lessen the burden on CS and support teams as well. And so that's been really helpful too.

I think about digital CS in the same way as customer marketing. I think really, you know, if you want to get messaging across about product or value to hundreds of thousands of potential customers or existing customers, you're gonna have to use the customer marketing style tools and techniques. And so I don't think it's any surprise that there's more and more startups out there building this kind of tooling to support people who have got, you know, thousands, hundreds, thousands of customers.

Are there interesting approaches Lindsey, that maybe your team's been using on the digital CS side to help scale that? I know we've talked before about pooled CS models, for example, to drive that.

Yeah, so I, I, what, what Raj said, I think ours is, our digital CS is really a, it's a joint venture between customer success and marketing. So trying to leverage the marketing stack in terms of email, email outreach, webinars, right? Group sessions, which have been fairly effective. And then we have like a Slack channel, kind of like a one-to-many community Slack channel that allows you to answer questions in a way that serves all customers instead of wasting time on those one-to-ones. So which is kind of taking that one-to-many approach first and foremost, and then choosing who to engage with. So we have just a couple of digital CSMs or community CSMs, and they're not assigned to any accounts. Specifically, but they have— they're leveraging data and they're choosing who to engage with. So if a customer, you know, is not moving forward through your journey according to how you want them to, so if they've hit 60, 90 days and they haven't logged in, then we're intervening, but we're letting the tech go first. And so you're choosing to engage as opposed to like the traditional model where some of those small customers are the noisiest customers. It can end up taking up all of your time. Um, and you're not in control of of where you engage.

And statistically, they churn at higher rates too, right? So yeah, because you can't get to them.

Makes sense. So let's focus on the most important topic for today, which is what is the actionable thing that people can do when they walk out of here? Caitlin, let's start with you. What's the tangible takeaway that people should start with?

I mean, I think it's always important to remember that the success of your customers and not just live in a, in a CSM's backyard. You know, at Vanta, something that really helped us was having sort of top-line company goals around the customer outcomes that we were looking to achieve to hold everybody accountable and then really to benefit our customers. A tactical advice I would say would be get your product team in front of customers early and often and hire your first CSM probably a little bit earlier than maybe you think. Give them time to really dig into the product and get to know your customers.

It's funny, the CSM thing. I've, uh, when I first started out in CS, Series C, Series D would, when you start, would start to build out your CS team.

Yeah.

And, uh, and these days the, um, I mean, you can't raise a Series A without having a CS team.

Yeah.

A CS plan in place.

And I'm guessing at that stage it was all about revenue protection, right? Stop churn, stop churn. Mm-hmm. As opposed to grow, grow, grow, right?

Yeah, exactly. And almost, You also, at that stage, had to start to separate out how do you control the costs of like how you keep your customers protected? So you labeled it customer success. It might have been done by sales or other people before. And actually today, I speak to a lot of founders who hire their customer success person before even their first revenue-paying customer. I know at least for us, that was the case.

Makes some sense.

Lindsay, what's your actionable takeaway?

Yeah, I think everyone in the company, has a role to play with customers. So really similar to what Caitlin said, as a CS team, like your job is to put the customer in front of other parts of your business. And if you have a product leader or a CEO or anyone who says, well, I don't need to talk to the customer to do my job, well, that's wrong, right? Because if you're not talking to your customers, you're not gonna get the right feedback on what's working and what isn't working with your product. I think the other action advice I would say, depending on where you are, if you haven't, formally mapped your customer journey, um, you know, it's, it's really important to do that early. And the customer journey, not from your outside perspective, not from the sales perspective or the buying journey, but the actual customer journey. Like Faraz, you were talking about earlier, what is the customer's business problem and how are they trying to solve it? And whenever I do customer journey mapping with earlier stage companies, I tell them, you're not allowed to talk about your product at all. This, this is the customer's journey and what business problem are they solving. And I think if you you go through that exercise, it'll be very enlightening into how you need to incorporate your product into their process.

So I would say if you're building a team or you have a team, I think number one is make sure they are measured on something that's materially important to you as a company that you're targeting on that. And then have a very crisp one-two sentence max definition of the value they add to customers and the value they add to your bottom line. And I think for those of of you are founders in the room, I would say the actionable thing is go away and memorize the phrase, there's no such thing as post-sales.

My takeaway is, um, I think people overcomplicate the data problem. And, uh, when I first started to figure out how to become data-driven in CS, we actually just got a spreadsheet of all of our, uh, renewals and churns. We made, uh, two columns. One column had adoption, the other column had another usage metric. And all we did was we just graphed that in Excel. So we didn't spend, you know, hundreds of thousands of dollars on data scientists at that point. We didn't have to go and wait for our product team. And it really started to give us like immediate insights into what is the data point that was there, which showed us that adoption had this very high correlation. And that allowed us to start to set things with the team. So, you know, if you could do one thing on the data side, I would just do that.

Awesome.

So that's all from us. We're going to go down to the Hook stand after this. So for about 30 minutes, if you've got any questions for any of the panelists, you need to look for this color. There's a bunch of people on my team that will be walking down. By the way, I'm really sorry for anyone who attended the conference wearing a color of this t-shirt. I got confused with the Hook team. And on that note, I'd like to say thank you to Rav, to Lindsay, to Caitlin. Amazing panelists with, uh, with an awesome set of experience. Thank you very much.

Thank you.

We gonna get married! We gon' move on! Move on! We gon' get married! Gonna take it down! I hear you now! Hold them up! We gon' get married! Gon' take it down! We gon' move on! Move on! We gonna get married, gonna take it down.

Please welcome Boast.ai co-founder Lloyd Lobo.

Everyone having a good time at Zaster? No excitement, let's hear it. Amazing, amazing. How many people here, show of hands, are bootstrappers or trying to bootstrap a company? Wow, I love it, I love it. Awesome. I hope you guys can see the slide somewhere. All right, so I'm going to talk about bootstrapping and 10 lessons we learned from bootstrapping to $10 million. And all the failures and fuck-ups along the way. Before that, a quick background on myself. I've been a part of 4 venture-backed companies so far, 4 failures. And I say failures because raising money isn't success, right? What success is when the founders and the employees make money. And if the founders and employees don't make money, it doesn't matter if you sold your company and the VC pulled out. So I'm an engineer. After engineering, I worked in product. The first company I was in product at, small company, the head of product quit. So I ended up running product, but then also doing sales, doing marketing, digital marketing, everything. And things went to shit when we raised money at $8 million in ARR, we raised a funding round and then everything went to shit. More people and companies die of indigestion than starvation. And then did a couple other companies. My other key realization was customers want an outcome, they don't want software, so you gotta deliver that outcome. So Boast, and prior to Boast then I was part of Speakeasy, which was incubated by Byron Dieter at Bessemer. We spent 2 years out of Bessemer's office, we launched, with 10,000 users and then the company failed after 6 million. We had the best of the best team. And I realized that is more companies die of indigestion than, sorry, I lost the train of thought. More companies die of indigestion than starvation. And so both we bootstrapped, we bootstrapped to 8 figures in revenue and then we raised a round and everyone made money before the funding. So the first thing I say my key learning from bootstrapping, and this starts on day zero, is start with your values. And when you're bootstrapping and when you're poor, it's very difficult to think about values. You just need to eat. But values are super important and it helps you make very difficult decisions. So I'll give you an example. Let's say one of the founders cares about money or control, right? And one of the founders care about impact. In the beginning, in the early days, it's fine, you make it work. But eventually you get to a time where you're like, you know what, I want to impact, meaning I want to give more stuff away for free. And money means no, you got to charge for everything. That never works. There's this friction that always creeps in. And then how you hire your executive team, your employees, it's very, very important to start with values. It's not bullshit. A lot of people see this as bullshit, but these are actual— culture is the leading indicator of growth and these are things that'll help you survive when the company is dying, especially as a bootstrap company. And this is a great framework by Map&Fire. And it's like purpose. Your purpose is your forever. Like why do you exist? So my company boasts we automate government funding. Boring thing. For entrepreneurs, but that's not our purpose. Our purpose is to help innovators change the world because every dollar spent in innovation returns 20 to the economy. Vaccines, robots, clean drinking water. What is the vision? What will the world look like because of us? There will be more companies that are driving innovation, accelerated innovation. How do we do it? We integrate with your technical financial systems to help you get money and give you the insights to accelerate innovation. And your values, I think this is the most important thing. Your purpose is forever. Your vision is what will the world look like. Your mission is how do you do it. And your values is really important. It's like, how do you behave? How do you show up? And this is important because let's say one of the founders or employees cares about transparency. But then somebody else cares about, you know what, I think we need to tell employees things on a need-to-know basis. It never works. Eventually, Maybe in the beginning you're poor and you make it work, but then like at $1 million, $3 million, $5 million, there's always problems. So it's very important to align on values. When you hire people, assess them and hold them accountable to values. Like you can't say, oh, you know what, you got to always do what's right. But then the first time like an executive screws up, you can't hide that, right? You got to hold people accountable to values. The second lesson I learned as an engineering founder is the number one skill you need to have as a bootstrap founder is learn to sell, right? Sales fixes everything. That extra dollar in the company, it keeps the lights on. And so it's very important to learn how to sell. How many of you here are founders? How many of you love selling? Jeez, half the hands went down. Right? Selling is everything. And this is what I learned is customers, yes, employees, investors, media, you're always selling. Jeez, I feel like in the first several years of a bootstrap company, I was selling my wife why I should do this company. I was selling my parents. My wife's like, my parents are like, your wife's a doctor. What are you doing this startup nonsense? Go get a job and support the family. And I'm like selling my parents, I'm selling my wife on why I should do it. And my wife's like, you know what, you've been a part of 3 companies that failed. I'm like, they were funded, this is bootstrapped. She's like, if this fails, you're going and getting a job at Salesforce. In Silicon Valley, going and getting a job at Salesforce is like death, right? So you're getting a job, but it's selling. Selling is everything. So how do you get better at something? I'd hop on the phone, make 10 calls a day, cold call. I still remember when we started the company, when you're bootstrapped, when we started Boast, we had no software, no customers. We'd call people and would cold call them, build lists using Mechanical Turk, Amazon's Mechanical Turk, 'cause we couldn't even afford like ZoomInfo and anything. So Mechanical Turk is a tool where you upload contacts and then workers from all over, gig workers for $2, $3, 5, 10 cents, they build the list. And then we cold call people and we'd say, hey, you know what? I'm gonna be in your neighborhood. Can I hop by? I have a meeting right there. And then people feel bad and take the meeting. But we hop on 10 calls and evangelize everyone, right? What founders typically do is they prepare a pitch and they go and like, you know, sort of give a very delivered, sort of contrived pitch to VCs or anyone. I say if you want to perfect your pitch and make it Flow, just pitch everybody. Like you're on the bus, ask somebody, what do you do? Oh, here's what I do. And start with the problem and the market and how you're solving it very naturally. And over time, 1% better every time, it just gets better and better and better. The same thing in front of your employees. Don't talk about your product and what the product does. Talk about the vision. The more you talk about it, you start believing it. You start drinking your own Kool-Aid and it's very important. It's very important as a bootstrap founder to drink your own Kool-Aid because if you don't drink it, nobody else is going to, right? So 10 calls a day, email everyone, evangelize everyone. You may have sales reps in your organization, shadow them, hop on calls with them or people you know, friends, and then read a little bit. I hate reading. I personally don't read any books. I do just-in-time reading where like if I need some information, I'll Google it. And I interview, I talk to a lot of people. We run a podcast. Twice a week, I've interviewed over 300 people over the years. I just call people and be like, hey, you want to hop on my show and interview them and get free advice. But if you love reading or you can read, the 3 books I read that shaped my life. Imagine somebody who hates reading recommends 3 books. These are the best books. SPIN Selling was very, very helpful. Made to Stick is a great book. And Pitch Anything. SPIN Selling from a sales perspective because When you are selling, when you don't have a product, you really need to understand the customer and that is more of a consultative approach. The second thing is don't boil the ocean. Like people are like, oh, I need to do a startup, but then I need to be on Instagram or TikTok and I need HubSpot and I need like 10 other things. And that's when you fail, when you do too many things. The theme here constantly on every slide is more die of indigestion than starvation. Don't boil the ocean. Build your startup in phases. So what is phase 1? You have an idea. You need to validate the market. Get 5, 10 people to pay you to try it out. That's it. Simple. Pick up the phone, email people, build a list, send tens of emails a day. I'm an entrepreneur. I was following you. I'm not looking to sell you anything. You're an expert in the space. Can you spare 20 minutes for some advice? Hop on the call, get 10 people to pay you to try it out if you're in B2B SaaS. Next phase is product market fit. Let's say you're a $20,000 ACV company, expand that cohort to 50, get a million in revenue, right? That million in revenue is one of the indicators of product market fit, like half a million to a million. But really what is the indicator is you have high retention, people don't leave you, right? So validation is saying your message resonated, there's a problem. I'm gonna try you out. Product market fit is saying, well, every time I have that problem, I'm keep coming back. But in B2B SaaS, especially you're selling annual contracts maybe, how do you measure product market fit? Well, you measure by looking at engagement, right? Engagement is the leading indicator of product market fit. If your product needs somebody to go in every week or every month, just measure that. Because if somebody is not engaged, then they're gonna check out. Like if you don't talk to your wife for 6 months, obviously like it's over, right? So the fourth thing is it's very important to know when to grow. But actually, you know what, let me go through the other 2 phases. So you got product-market fit, then you got product-channel fit, right? Figure out one scalable, repeatable channel to grow. There's hundreds of channels you could invest in, figure out one. And that takes you to maybe $3 to $5 million in revenue. You can raise your Series B if you want to fund, take outside funding, and then you are at a point of scale. 75% you invest in what you've nailed and 25% you try new things. Now that at scale where founders fail is they're like, oh, you know what? I crushed it in Canada or I crushed it in the US. Now I can go and sell this in the UK. So I'm going to go and build a team and start selling it. They jump to scale without going through that framework. You got to go back again. You know what? When you were validating it, you had 2, 3 people, hacker, hustler, hipster, whatever. And you made some calls and you did some wireframes and then you sold and you got the product-market fit. But when you're at scale and you want to go to a new market, you can't just go and start selling to thousands of people. You got to go through that same framework, validate the market, validate, get to product-market fit, figure out a repeatable channel, and then scale. And where people fail is they do too many things in each phase. You're validating, but then you're trying to perfect your website. You're trying to get to product-market fit, optimize for engagement, but then you are like sending marketing campaigns and email campaigns. You're at product-channel fit and you're looking at scaling all over the place. There's great power in doing one thing really well over time. You can get to $10 million in revenue And Jason M. Lemkin's been a great mentor for me personally. When we launched Bose, he gave us a free booth at SaaStr in 2017. And he always says one thing, well over time compound interest, even at $10 million, you grow 40% year over year in 6, 7 years, you'll hit $100 million in revenue. So focus is key and time box each phase. The fourth thing is very important to know when to invest in growth. I get asked this question a lot. Every founder asks me like, hey, what is the next growth hack? Like, is there like, what channel you're investing in? And is there some API? Is there some marketplace? Everyone is looking for a growth hack. And what happens is growth people talk and every channel gets saturated. It costs twice as much to squeeze the same ROI from Facebook ads. You try something, next thing you know everyone else is doing. So you gotta figure out new ways to fish and swim in the same pond, or fish in the same pond, right? And Elon Musk is famous, so I have to throw a quote from him, and he says, start with first principles. Boil things down to the simplest form and reason up from there. Don't do something what somebody else is doing. And as bootstrap founders, one of my biggest mistakes were, hey, what have you tried? What have you tried? Oh, I have a growth hack, and you try to try that, and those are not sustainable, right? And this is simple, engagement and revenue and growing that is the most important thing. If you keep growing that cycle, you will be successful. If you don't have engaged users who keep coming back and pay you, you're going to fail. Like that's the simplest thing. And so what I tell people is, You're not ready to grow if one, you don't have an ideal customer, one kind of customer coming to you for a specific job to get done. And the second thing is you have poor retention. They keep leaving. They don't keep coming back. And that's what happened with SpeakEasy. You get 10,000 users, but I couldn't tell who the ideal user was and they kept leaving. It was a calling app for salespeople. Salesforce funded it, Bessemer funded it. We spent all this time building this app, we launched it, we got 10,000 people sign up. Great, that was the year of Slack-like growth. Everyone was like, oh, this thing is going viral. I looked at the data and I'm like, this is a calling app for salespeople, but there's butchers, bakers, and candlestick makers downloading this app. Taxi guys are using it for dispatch. You got Bernie Sanders using it for election campaigning. I'm like, that's when I realized this this company is going to fail. People were using it for all kinds of use cases, and which was predominantly free calling. And I kept arguing with the team to say, shut down the free calling, make it paid, only your relevant audience will stick around. After much fighting, we shut down the free because people were churning. They would use it for calling, then stop, then go jump around. Only salespeople, 300 people, salespeople stuck around and we built the product perfect for them. But by the time we made that decision, we ran out of money. We couldn't raise the next round of funding. Had I bootstrapped it and focused on a small subset of users, it would be big. Like Dooley, I don't know, a bunch of you have heard of Dooley here. They've raised lots of money. They're doing the same thing. The founder is a friend of mine. And so that key learning is small subset of customers, no ideal customer, and poor retention will cause you to fail. So this comes back to this one ICP. When you're focused, your messaging gets a lot of clarity, right? And so how do you figure out your ideal customer profile? And that's very important. Where do they eat, breathe, drink, sleep? Who are their— what are their titles? What are the key jobs they're trying to get done? What are they forced to jangle together because you don't exist? How can you remove the unnecessary steps? And how do you deliver them a delighted state? And so an example, a company I built, Automatically, which also failed. It was an app, it was like Intercom in 2013. It would sit on top of your customer service tools and automatically respond like a real human, right? And so I'll share the learning from there. We wanted to nail the ICP. So we said, okay, let's pick two. One is customer service reps at large enterprises, and two is customer service reps or leaders at enterprise CPG companies, right?

Two.

One is enterprise tech, one is enterprise CPG. And I love this framework. It's a product framework. Basically, you look at the size, how many people it's gonna reach, what is the ease of access, what is the effort involved? So here with nailing your ICP, How do you figure out what's the first ICP you're gonna go after? You leverage data. What is the market size? How many of those people exist? What is the propensity to pay and what is the ease of access? It's just a hypothesis. You just put numbers there. Then you go and mine thousands of contacts in each and you start reaching out. And so that's what I did. Enterprise tech, enterprise CPG started reaching out. Now of course the market size for enterprise CPG back then was much larger than enterprise tech. And they could pay more, but it was impossible to get ahold of them. And enterprise tech, like the CS leaders all hopped on the call and I would write an email something like, hey, I'm a founder, I'm looking to make customer service more efficient. You're a leader in the space. Can you spend 20 minutes of your time with me? I'm not looking to sell you anything. I'd send like 200-300 emails a day. They'd hop on the call, we'd understand a day in their life. Like, hey, have you ever been in a situation where your customer service reps can't respond to people? Very simple question. That is a SPIN, by the way, the SPIN selling. SPIN, S is situation, I is P is problem. So situation question, problem question, implication question, and need payoff question. So have you ever been in a situation where you experienced XYZ problem? Okay, XYZ. And how do you deal with that? Oh, you know what? Our agents don't respond on time. And then the problem is like customers don't get good service and they're complaining. What is the implication of that? They start hammering us on Twitter and social media. They go and complain, they go and start swearing at our CEO. Then the CEO complains to my boss and they shit all over me. So that's the implication. And so the neat payoff is, if you in a perfect world, if you had a magic wand, how would you solve this problem? And they're like, in the perfect world, If a query comes in, we'll respond like a real human. That would be magic one. So we call the company automatically, look at inbound data, and respond like a real human. Now here's why it failed. We had all this customer development. Now when you do this customer development, you follow up with them, like treat it like a sales process. Hey, thanks for your time on the call, maybe send them a gift card. Here's what we discussed, would love to have you in the beta, yada yada, right? They tell you what they'll pay for it. Then when we went to do the integration, Salesforce is like, dude, you gotta go through this security review. It's gonna take 8 months. Oh my God. So then we ran to Zendesk, phenomenal company. They had an open API. They're like, yeah, you can drop it in the marketplace tomorrow. And the Zendesk folks, if they're here, go check them out. They recently are doing a fund as well, investing in companies. So we dropped the app in their marketplace in a week. Lots of people hopped on. In the first day we got 300, 400 signups. And then I started getting complaints, guys, make it stop. And we're like, what happened? They're like, it's spitting out gibberish to our customers. And so the realization there was we did all the customer development on large enterprises that have huge historical volume of data. And when we moved to Zendesk, they had all these small businesses that didn't have data. And so the AI, was spitting out gibberish. This is 2013. And so we got dejected and that was another learning there is customers want an outcome, they don't want software. And so if I knew then what I knew today, I would've just asked all those customers what are the most common questions? And that's not AI, but like what are the answers and do like a rules engine and map and answer that. But we shuttered that and moved on to Boast. So if you nail your ICP, Not only it helps you figure out a framework like this, figure out who to reach out to. And if you are going to switch or pivot, make sure you do that again. You got to test the market. But it helps you do this, figure out the circle of influence. So I'll give you an example. At Bose, our ideal customer is the founder CEO of a technology company in US, Canada. That's the ICP. Who do they fund? Who do they frequent? Who do they follow? You can build lists. So they fund tools like MongoDB and Salesforce and HubSpot and Stripe. Who do they follow? Like Jason M. Lemkin and Mark Andreessen and all these unicorns. And who do they frequent? They read TechCrunch and Betakit and VentureBeat and they go to all these events. So when we built that framework, we said the best way to target these customers for our product is start doing events. And we started hosting a lot of events and now it's like twice a week. Or 4 times a week, 2 podcasts, 2 webinars, we do a big conference in Vancouver called Traction. And we started doing this frequently as pizza nights, and we would invite a speaker who would be somebody they'd follow, and we'd invite the press, and we'd invite the people who they buy tools from. So when they gravitate towards it, they're like, oh, it feels like my home, my people, right? And so that made it very easy for us to build content and sell to that audience. And effectively bootstrap. There was clarity in our messaging selling to that audience because they're focused on one, and we build relationships with all the influencers around them. Now let's say you focus on 10 different markets as a bootstrap company, it's very hard to do that. So nailed and scaled, we talked a lot about this. One customer, one channel, one offering can get you to $10 million in revenue, right? Don't get distracted. And Peter Thiel has this great quote on distribution channels. If you try many and you do mediocre, you're doomed. But if you kill one, you'll build a big company. So this is what— how many of you have heard of Hiten Shah here? Kissmetrics founder. A few people, not as popular, but 7 years ago, very, very popular. He was an advisor at Speakeasy, comes to the office. He's like, Lloyd, show me the marketing plan. How are you going to get all these customers? And I show him something like this, like everything in there. And he sinks in his chair and he goes red in his face. And he's like, burn these fucking slides down. This is the marketing shit list. He's like, you are going to fail. And I'm so embarrassed in front of the whole team. I'm like, oh my God, what did I do? And I'm like, why do you say this? He's like, what is the one channel that's working? I said outbound, but it's not enough. You know, it's not generating that much leads. So I'm trying like ads and I'm trying affiliate and this and he's like, you are going to fail, burn these slides down. This is the marketing shit list. So I said, what do I do? He's like, how much, how many emails are you sending a day outbound? How much outbound? I'm like, maybe 50. He's like, send 500, send 5,000, jam more data, get to a critical mass if it's generating results. And that's when I knew the value of one. And at Boast we built, community and we did BD in the community and that one took us to 10, right? And similar framework to nail your channel. Very calm, right? How many people is this activity gonna reach? And this is a very common product framework called RICE, reach, impact, confidence, and effort. How many people is it gonna reach? What is the TAM? What is the impact on your bottom line? How confident are you? What is the effort involved? If something takes you like 10 years to do, and it's gonna make you a billion-dollar company, is it worth it? Like SEO takes a long time, community takes a long time. Picking up the phone is instant gratification. As a bootstrap company, you gotta eat. So you gotta pick up the phone sometimes. You gotta hound events, right? So leverage data at each step. It makes the conversation with your co-founders very calm. And then like people won't say like, oh, you need to be on TikTok and you need to do like, you need to write these, what is it, broetry, these bro kind of posts on LinkedIn, you know, one sentence each, people get a lot of engagement. They're not gonna tell you nonsense like that. Just very calm conversation. What is the channel? What is the reach? What is the impact? What is the confidence? What is the effort? Test a little bit in each and double down where it works. This one is really important. You have a product, how do you get people to keep coming back? So we talked about engagement is really important. We talked about retention is really important. And then the third step is virtuous loops, what gets people to keep coming back. This I learned from Sarah Tewell. She was a speaker at a Traction conference that we hosted. And she said, if you look at the most successful products out there, they have two things for retention. One is mounting loss and one is accruing benefits, one or the other. And mounting loss is something like Instagram. You build all this social following, you don't want to leave. It's the more you use the product, the better it gets, and you don't want to leave. And so that's accruing benefits. And then Then the other one is mounting loss, which is the more you use the product, the more you were to lose if you would leave. Like if you had all your notes, now sometimes crappy products also by virtue of long-term existence will be sticky, maybe like Salesforce. But if you have all your data in Evernote, for example, you don't wanna leave, right? If you have this huge following on Instagram, you're not going to leave. So the product needs to get better. And needs to build that sort of trust with you where you don't want to leave because it's just a pain to switch. The switching cost is too much. Show up consistently. I think this founders ignore a little too much, but consistency is the leading indicator of building trust. And in bootstrap companies, you need it. Oftentimes I'll see founders like a road, They're updating all the time, right? I angel invest quite a bit and they update you and then 2 months they've not updated you or 3 months and you know something has happened. There's a downturn, they've not updated you. Then they don't update their team. What happens is if let's say your partner doesn't talk to you for a few weeks, you start getting paranoid. There's something up. You're a little different. Humans are like that. People do business with people. If you don't go, if you are doing like weekly town halls, And then you stop updating your team, what's going to happen? They're going to get paranoid. They're going to think something's wrong. They're going to assume the worst, right? And so what is the job of a founder here? Is one, to set the vision, but to also communicate. Clearly articulating and communicating your vision to excite, inspire, and motivate people is not a one-and-done activity. You got to do it day in, day out. Because people who are inspired, excited, and motivated can move mountains. But if you just do it once in a while or send in, like do it in a way to inform people, you want to excite people, you want to evangelize them, you want to get them pumped up and motivated. But if you're doing it just to inform, then you may as well send an email and people are going to be checked out. So it's vision, it's culture, it's holding people accountable. Culture is the leading indicator of growth. I've seen this company over company. Culture slides. They don't hold people accountable to values. More people think it's normalized. People leave. And then all the people that are left are toxic people. So don't do that. Communication, like I talked about, recruiting, investor relations, and focus on solving all the drama in the company. And showing up, that consistency is key. You know, we run this, as I said, we run this community called Traction. And the pre-pandemic we had, I think like 30,000 subscribers. Now it's 110. We started doing webinars twice a week. And usually people say, oh, we'll try a webinar, we'll stop. But we, rain or shine, I had COVID and I was in the hospital, still found speakers and got twice a week. Now we're 110. Every week we'll add hundreds and hundreds. Consistency is key. If you show up, good, Success is one thing, one or two things done well consistently over time. And when your employees see you being consistent and consistently showing up, they respect you, they trust you, they don't want to leave. Your values, your vision can't be lip service. You can't say like, oh, you know what, I want to always do what's right. But then the first time there's a complaint against an executive, you're hiding it and you're shoving it. No, show up, hold people accountable, and make, Hey, tell them we're doing this because of XYZ. These are the values, right? This was a big lesson for me. You're a bootstrap company. You're used to hanging out with poor people with no experience, right? That is the life. You gotta strike two stones and make fire. Everyone learns on the job. Your first salesperson and your first marketer and your first product person, they never had any experience because you can't afford it. Afford to pay them. So everyone learns together. Now you start making money. You actually start making money and you can afford to hire a few people. Maybe you go and raise a small round of funding. And what happens is you start hiring big company execs. That is the natural gravitation. Oh, I can afford to hire all these big execs. Don't do that. Your Swiss Army knife can stretch a lot farther than you think. So the number one bullshit lie that founders tell each other is this, I'm the CEO, I'm the CPO, I'm the whatever. That's bullshit. You're an individual contributor. You are not the CEO of your company. You are an individual contributor. You're writing code or you're picking up the phone and calling, you're sending emails. You are an individual contributor. Your job then is to make that journey as you go from validation to product market fit to product channel fit and scale. You gotta grow as an individual contributor to a manager, to a VP, and then an executive. What we do is we're like, ah, let's, we're CEO, so I'm gonna hire all these people. And then you abstract too soon from the day-to-day of your company and growth slows, culture goes to shit. So make sure you're abstracting one layer at a time. You're an individual contributor, you picked up the, so let's say you are a sales founder, right? You're calling people, you've figured out how to get 10 customers. You know the messaging that works. Hire 1 or 2 salespeople and become a manager. Don't become a VP, don't become a C-suite and hire a VP who has not sold it, right? Don't hire big company execs. And I say this very passionately 'cause I've suffered through this. Hire people who can roll up their sleeves and do the job because you as a CEO or founder who was an individual contributor knows what good looks like. Doing this, but a person who's not gone from 0 to 1 or 1 to 5 or 5 to 10 and has gone from like 100 to 500, they don't know what good looks like from 0 to 10. So you need people who can roll up their sleeves. More doers, less talkers, right? Like when you hire big execs, there's a lot of strategy and there's a lot of PowerPoint. Burn, like Hiten Shah said, burn the PowerPoints. I want to see what gets shipped every week, what's making progress. Holding people accountable to values. And the last thing is have zero tolerance for toxicity, right? Hire slow and fire fast. It's okay. Yes, you may have hired very seasoned leaders, but if they're toxic or they're not showing results, fire them. It's okay. A bad executive. So another, Another founder I spent a lot of time with, or investor, is Gokul Rajaram. He's on the board of Coinbase, Pinterest. We've invested in a couple companies together. He tells me all the time, a bad company, a bad leader exec can not only cost your company in years, but they could even destroy your company completely, right? Because think about it, individual contributors are steering at the bottom. At the top, they're steering the ship. They can steer you in the complete wrong direction. They're not just rowing, they're like just moving the whole, ship. So make sure you hire slow and fire fast. I say this often and maybe it's here. If you keep hiring and promoting people on tenure versus trajectory, you'll become the thing that you set out to disrupt. You'll become the government and you don't want to become the government. You want to hire people on trajectory. So what is trajectory? People who are high trajectory people, and I truly believe this because I never had experience. I work at startup after startup after startup. Is they want to try new things. They ask a lot of questions and they move really fast. Your biggest asset more than money is time. Move fast, ask a lot of questions and can roll up their sleeves and execute. I need to prepare some landing pages. I need to prepare a pitch deck tomorrow. I need to test out this new channel. Those skills are really important. Those are high trajectory people. The problem with high trajectory people is they're pain in the ass. I'm a pain in the ass. I drive people around me crazy. I want to move really fast, ask a lot of questions, question everything. And when you bring on sort of high experience people, they want calm, right? They used to process in a big company. If you're moving really fast, it becomes very difficult for them. They want calm. And calm and speed traditionally don't go well together, right? And in the early days, going from 0 to 10 and beyond, you want speed, you don't want calm. If you want calm, then go work for a big company, get some equity, rest and vest on the roof and sip cocktails in the Bahamas. The other thing is culture. I talked a lot about culture. I've learned this over the years of culture at Boast and culture of a great community at Traction and also talking to lots and lots of founders is what do people gravitate for? Towards. How many of you have heard of the Peloton here? The bike, you know, that you hop on and— you know, culture in a company should be like riding a Peloton bike. You hop on the bike, you're connected to the people next to you. You have autonomy because nobody's micromanaging you and you get better and better as mastery. And there's a great sense of purpose, better health. There's energy because there's somebody who's pumping you day in, day out, right in front of you. Go, ride, move. Move faster. And the last thing is recognition. There's badges and rewards. When one of those things are missing, I call it CAMPER. And I stole three from there from Daniel Pink, where there's AMP, autonomy, mastery, and purpose, he says. But I feel like post-pandemic especially, people need connection and they need energy and they need recognition, not just autonomy, mastery, and purpose. I call it a CAMPER. And if you have that CAMPER framework in your company, your employees will be happy. Company campers, it's cheesy, but that's what I found. If you're not connected with a company, chances are you'll get paid somewhere and you'll go. Or if you're not constantly recognized, you just feel like, hey, what am I, am I a robot? Like nobody's saying thank you. So those things are really, really important, like energy, recognition, connection. And a lot of this you deliver through communication. And that's why I say learning to sell, learning to communicate are very important skills as a founder. And the last one, Lesson is watch the leading indicators. Oftentimes we look at NPS and CSAT and EPS, NPS. By the time you look at that every quarter, it's already too late. So figure out what are the leading indicators of NPS and customer retention. It's engagement. If a customer keeps coming back, if what is the leading indicator of engagement, then great onboarding. If you have a great onboarding, for your employees, for your product, people will come back again. It's like going to a party. Let's say I invite you to a party. You come to my house, you got to jump over garbage, nobody greets you, you see a bunch of unknown strangers, you're going to be like, screw this, I'm leaving. But let's say I invite you to my house, I open the door for you, I pour a glass of drink, introduce you to 3 other founders, you're like, I'm going to stay a little longer. So that is your onboarding. Your onboarding needs to be special so people experience that wow moment. Engagement, and it makes them say, I'm gonna come back over and over again, right? So what is the leading indicator of engagement? It's onboarding. What is the leading indicator of retention? It's engagement. What is the leading indicator of growth? It is retention. So watch the leading indicators. What is the leading indicator of employee happiness? Like you shouldn't wait for an ENPS survey. When you send surveys, most employees think, oh, you know what? Maybe they're watching this, so I'm just gonna give whatever bullshit score. How many people have found that? Then the employee gives a great ENPS and then leaves. What's important is you're invested in the growth. Are employees engaged? Are they showing up? Have you created opportunities for them? So as a founder, it's very important to watch the leading indicators, especially in a bootstrap company, because you may not be around to watch the leading, lagging indicators if you're bootstrapped. If you're funded, it's great, whatever, you have money. But if you're bootstrapped, you may not be around to get the results of the leading indicator. And so this I copied from 500 Startups, but like it's, I've known 500 Startups for all my life and I simplified it based on your business. It's like, how do you find customers? How do you get them to try it? How do you get them to stay? How do you get them to keep coming back? How do you get them to pay? And do they bring their friends? Those are 5 things that matter in growing your business. And key takeaways, just to summarize, great companies have great alignment. Get really good at selling, talking to customers, practice that. You're meeting people on a bus and the best thing is pitching strangers and you're not pitching, you're having a conversation. What do you do? What do I do? Talk to strangers, it'll make you better. Build in phases, validation, product market fit, product channel fit. And then scale. If you don't have a single ICP and you don't have retention, don't invest in growth. That's the empty calories of growth. It'll feel good that you're getting, like at Speakeasy, thousands of users signing up and then like thousands leaving. It's like throwing money in the fire. Use data to determine your ICP and your channels. I think that's very important, the RICE framework. How many people it's going to reach? What is the impact? Confidence and ease. Make your product sticky by creating mounting loss or accruing benefits. It gets better the more I use it or the more I would lose if I were to leave. And do show up, be consistent, hire for trajectory and Swiss Army knives, and obsess over leading indicators. So ultimately, especially in a bootstrap company, but any company, if your employees are engaged, your customers are happy, and you You don't earn money, so simple, right? You'll build a great business. If you chase impact, you'll build something big. I say this all the time, and this is very important from a values perspective. People who chase power destroy relationships. People who chase control destroy relationships. People who chase money make short-term decisions. You're looking for the next quarter. If you chase impact, you will change the world and build a big company. Company. Thank you, everyone. I have like 5 minutes for questions if you want to ask me something. Happy to. Yes.

How do you select your first sales rep?

How do I select my first sales rep? So I'll give you an example of how we selected our first sales rep. We couldn't afford, right? We could not afford I was selling, cold calling, cold emailing and selling. So what happens when you sell as a founder is you figure out— I like two things. One is calling and one is emailing. And if you have a little bit of money, try Google Ads or LinkedIn Ads because it tells you what message is resonating, right? And so then you start to develop this playbook of what leads to a sale, how many demos, how many qualifying calls, how many proposals that lead to a sale, right? Then when we wanted to find our first sales rep, you can't afford it. So we threw ads everywhere, evangelized everyone, and we found this person who was a competitor in the Olympics and he needed a job. And we were like, okay, you know what, the one trait is they never give up and they are good at doing one thing really, really well. And so we evangelized that person to join, Gave him the playbook, scaled it. He's our Chief Business Officer today. But I say evangelize people. You may know people you went to school with. You don't have the luxury as a bootstrap person to pay anyone to hire you. Your first employees likely will be people who've never done that job before. That's why it's very important to be an individual contributor, learn to do it, and find people who have the grit and determination and desire to move fast. Find those trajectory people. This person wants to move fast, This person can deal with ambiguity because things are changing all the time and can adapt. And then go evangelize people in your school or people you went to, you grew up with, people you know, get them excited. And honestly, when you find people who are poor also like you, they empathize with you a little bit and they need a job. Like for a seasoned salesperson, getting $10-15 an hour is It's not gonna happen. But for somebody who's out of school, they may help you. And the thing is, as you go through those phases, I would say at product market fit, it is— at validation, it's founder-led. At product market fit, it's founder plus 1 or 2 people. At product channel fit, when you're trying to figure out a repeatable scalable, then you can find maybe senior leaderships, but your first salesperson is pure evangelism. Sometimes it's a little bit of begging too, if you're not good at evangelism. Evangelizing, your friends, please help me. You train, you, so you need to get very good at coaching them on the playbook that you use to get your first 10. You can come here, my friend, and use this.

[FOREIGN LANGUAGE] How do you keep going? Because when you talk about things that did not work, how do you keep going?

Because a lot of times people don't focus on founder psychology. You know, I'm giving a talk on mental health in France on Thursday. And I wish I could show this picture. Life is rough. Being a founder is extremely rough. There's ups and downs of founder life. Your personal health goes to shit. Shit, your family life goes to shit, and you gotta keep motivated. And through this exercise, it's like so up and down. I was expecting twins, I lost a child in between of all of that. Then we bootstrapped the company and then finally it was like this growth equity firm comes to us who we knew through the community. They said, we want to fund you. As founders, you can take money and secondary, we're like, great, it's a win. See, this is a benefit of bootstrapping. When you bootstrap to $10 million, you can write your own ticket. If you raise money, you can take off the table. When you raise money from like your seed round, right? You can't, especially in this market, high margin and so on. We raised the money and I told my family, we'll go and celebrate. We'll go to Tahiti. Great, we're rich, we made some money. Next thing you know, when the deal closed a week after the press release, I got COVID, I was hospitalized. Hospitalized, almost died, right? So these things happen and you keep thinking to yourself, everything bad happens to me. Why does it happen to me, right? You're thinking I have it worse. But trust me, somebody else out there always has it worse than you. Somebody else, you know, somebody else is— somebody else has less money than you. Somebody else may have one leg. Somebody else may not come from privilege. You got to think about like somebody else always has it worse.

Right?

And so that is one. The other thing that I found which is really, really helpful is one, surround yourself by people that you can talk to all the time. Like either a mastermind group, go see a shrink. Misery loves company. Find a bunch of miserable people like you and sit and vent, right? Seriously, misery loves company. It's amazing. Like Ray, my co-founder in Traction, we share the same room here and like I'm just, complaining to him like half the time, right? He's like, he's gone gray faster just listening to my complaint. But misery loves company, seriously. So get a shrink, bring people who are going through the same problem and talk to them. I think that is very, very important. The third thing is, and maybe this is the first thing, is work out. Like trust me, when you exercise first thing in the morning or whenever, It releases endorphins in your brains that reduces the feeling of depression. I was, I'm being honest here, I was suicidal when I was during COVID I felt like I gave away the company and like now I'm going to die. I never spent any time with my family. Like my biggest regret was if I died, I didn't see my 8-year-old and 4-year-old grow up. I didn't spend any time with family. So none of nothing else mattered. Nothing mattered. So exercise releases endorphins in your brain that calm the feeling of depression. And remember one thing, pain is the precondition for growth. With everything in life, if there is no pain, you conq— you won't conquer anything and you won't reach a bigger height. So if you have extreme pain, you conquer it, you know how to deal with it, and tomorrow if you have another situation, you you pass through it with ease, right? I think there's a saying that says, tough people create weak times, weak people create tough times, and tough times create tough people. So go through tough times. Pain is the precondition for growth. Cool, awesome. Thanks for listening to my nonsense. Have a good one. I'll make you a toy.

I'll make you turn over into my little boy. You see, I'm going somewhere. Don't know what I am gonna do when I get there. You know, the moon is a thing. Your only inspiration and your only meaning. You might Oh, twisted truth. If you ain't rich, then you won't go to the bar. Having mercy, licking up blood. I'm moving through your ocean like I've never had enough. You see, you ain't all I want. You're everything and more that I ever hope for. You must think that all that I do is spend my time making Pretty pictures of you. You can't fall when I'm climbing, but I'll be falling over just by having you in my mind. Oh, listen to them picking up a ball inside of Jericho Wall. Oh, twist it through them. Kicking up ball outside of number 10 wall! All twisted through there— I'm rich you ain't so won't go to the mall? No, yo' wont go to the mall... You wont go to the mall... Yo want go, yo wan't go, yo wanna go to the mall?! Oh no, ya'll don't got y'all money for that!? You won't go to the mall. You won't go. You won't go. You won't go to the mall. If you ain't got nothing, you ain't got nothing. Nothing. You'll never go there when you ain't got nothing. Hey, you'll never go there. You never go there.

Maybe because he had it off, that's why he didn't let—

Check, check.

Please welcome Atomico partner Irina Avas and Atomico principal Hilary Ball.

Hello everyone and thank you for joining us. We are the only thing between you and the happy hour, so it's always a tricky time, but we'll try and make it engaging and interesting. My name is Irina. I'm a partner at Atomico. I focus primarily on our early-stage investing.

And I'm Hillary. I'm a principal in the investment team at Atomico, and I focus on our growth-stage investing, so from Series B and onwards.

Atomico, as you may know, is a multi-stage fund, which means we are lucky to invest across stages from early to growth, and we get to see a lot of scaling journeys in the process. Today, what we want to to do is bring you a little bit of insight into how we look at investments, at potential investments, and how that evolves from the early stage all the way through to growth. We want to bring you a little bit of this investor mindset to the table so that you can take this into account when you plan your milestones or when you pitch to various types of investors as well.

And so, Irina, and I know there have been a lot of great sessions over the past 2 days deep diving into some of these areas in particular, like product market fit or go-to-market or metrics. And so what we wanted to use this session for today is to zoom out a bit and look at the overall picture of some of these different components that investors will be thinking about when they're analyzing an investment in your company. And so what you see here is a bit of a simplified framework of 7 of these core areas that that we think about as investors when we're looking at a potential investment opportunity. And what you see in each of the columns is the different levels, a rough idea of the different levels of proof point or validation that investors might expect to see in each of these areas as you progress from the early stages, which we'll be calling venture throughout the course of this session, so seed and Series A, all the way towards growth, so Series B and onwards. So what you'll see, of course, and as you'd expect, is that at the early stages, the level of proof points or validation that is needed in each of these areas is, of course, much lower. There, there's more risk being taken on the investor side, but this burden of proof will increase in each of these areas as you go towards the growth stages. But what you also might notice is there is one row on this table where that need for validation is there even from the early earliest stages from the seed, which is this, this idea around the narrative. And this becomes really important because, because of this dynamic at the early stages where a lot of these areas won't be proven yet and there won't be full validation yet, how you craft that narrative and tell that story to investors is really key in terms of telling them about the vision. Um, but even at the growth stage, a lot of these areas won't be perfectly in place yet, whether it's the exact go-to-market or the competitive advantage being fully proven out yet. So that narrative remains really important throughout the entire course of this scaling journey. And so what Irina and I do— we'll do now is we'll chat through each of these 7 areas in a bit more detail. And given our respective focus areas as investors, Irina will focus on chatting about the venture early-stage investor mindset in each of these areas, and I'll share my perspective around how this evolves bit as you reach the growth in the Series B and onwards stages.

So to start with the scale of the opportunity, I'm sure you guys know that investors will look at market size as a potential— as a key proxy for the potential outcome size. And the way we think about market size is several kind of like dimensions from your addressable total theoretical addressable market all the way to the actually realistic market share you can gain. You can calculate market size in different ways. You can calculate it as bottom-up, applying your pricing to a wide set of customers. You can calculate it as a top-down, where you cut the segment of the market to reflect the realistic share that you're gonna— a segment of customers that you're going to go after. And in terms of like how we look at it, What is important for us at the vent— at the early stages is that you have a clear definition of what your true market is. A lot of founders go and say, oh, we're playing these like huge market of $10 billion of X and Y, but actually it is not necessarily this sort of sum, the serviceable addressable market of that product. So it's really important to understand what your true market is and what is your realistic share that you can achieve from that market. There isn't a minimum market size. We often get asked like, you know, what, what do you wanna see? And the reality is different funds will expect different market sizes based on their own fund size, their own strategies. But I, one exercise that's always good to do is think about how do I get to $100 million ARR? What does that market look like that gets me there?

And from the growth stage perspective, what we'll look at is not only have you started to prove out these validation points around capturing this core market that Irina just articulated, but what we'll also start to look for is some initial proof points that are demonstrating the market expansion potential of your business. And so this can come in a variety of different forms. It can come from potentially product expansion where you might be adding on new features or product adjacencies. Adjacencies. It can come from business model expansion where perhaps you're monetizing pieces of your product that you weren't previously, or even geographical expansion where perhaps your product is one that needs a bit of a different product formulation in different markets, in different geographies, or a different sales or go-to-market motion in different geographies. And so seeing those initial proof points around that ability to expand your market is something that gets us very excited at the growth stage in terms of seeing this ability to continue to capture even further market size opportunities. Um, one thing to note is, is I think what we see, it's often very tempting to start to try to capture these market expansion opportunities as soon as you start to identify them. But one thing to keep in mind is to really make sure you nail that core market offering that Irina just spoke about before starting to prove out these market expansion abilities 'cause it will start to take resources and potentially dilute your focus. And so making sure you've proven the core before starting to do some of this expansion is, is a key thing that we would keep in mind as well.

So moving on, on the product side, um, at the earlier stages, you often don't have a fully fledged product, um, or a fully executed product. So we don't necessarily expect to see that. What we do expect expect to see is a clear product vision and a clear product roadmap. And ideally, especially as you go towards Series A, some version of an MVP. The one— the other thing we look for that may not be obvious is we're always gonna ask ourselves, what is the secret sauce here? Like, what is the secret sauce of your product? What is— what are like unique assets and insights that you have that will differentiate the product in the, in the, in the long term? And will create this sort of engagement and value over a longer period of time as the market also grows and gets more crowded. And these sort of secret sauce can be things like insights from your users or early insights from your customers. It can be, they can come from design partners. They can come from your experience as a founder. But bringing those together is important and communicating that as well.

And at the growth stage, what we'll, we'll start to look for is that this secret sauce that Irina just mentioned, we're now starting to see proof points that that is validated in the market. And how we look to see that is that it's translating into this usage and engagement of your product. And what that starts to prove out to us at the growth stage is that not only is the pain point that you identified a real one, but that this secret sauce or the edge that your product is tackling with that pain point within the market really is resonating. And we see that in the usage and engagement of your product.

So on the, on the product market fit, um, we will start by thinking about the metrics that determine product market fit for the specific business you're building, because product market fit metrics will differ depending on, on the product. In some cases, the most relevant metrics would be number of customers or revenue-based metrics. In other cases, it's users or community-based traction. Um, and so we'll always tailor our view, but what we really want to see is that you have thought about it, that you have a view on what are the core KPIs and that you monitor and track them and use them to inform, um, your, your product. We also want to see that you understand somewhat the bar or the bar you're setting to when do you achieve product market fit. How do you know you'll have product market fit? And lastly, I would encourage you to also go beyond the obvious metrics. There's obviously the standard things that investors look at, but then there will be other metrics that are important for your product, which can be qualitative insights, customer reviews. Retention numbers. It can be certain segmentation of your customers and just using— use those as well. Don't only kind of stick to, well, this is what I'm expected to, but actually stick to what you think is helpful for you and for proving product-market fit to yourself as well, not just to investors.

From a growth perspective on product-market fit, it's relatively straightforward versus the venture early-stage landscape. —on it, which is simply that the bar becomes higher. We'll be looking for these metrics to be at a greater scale than they were at the earlier stage, and how that in particular is translating into value. So the one sort of piece of product market fit that I'd call out here from a growth stage perspective is we will definitely be paying attention to these items like usage and community traction. But what we'll particularly start to need to see validated at the growth stage is also this element around value and that this usage and engagement is really translating into revenue and there's a willingness to pay for the product that you're providing.

So after product-market fit, you wanna think about go-to-market fit. Um, and obviously at the very early stages, you won't have this sort of like repeatable sales playbooks in place, and we don't expect you to have that. However, what we would expect is a view on a go-to-market plan and the strategy and a solid rationale and thinking behind why that is the go-to-market plan. So we will look into the choices you have made, um, for that about how you, who are your key customers, which segments, how, what size, who are your users, who are the budget holders, and how did you derive those conclusions based based on behaviors and incentives of these key stakeholders. As an example, you can have, for instance, if you're building a, a DevTool company, your go-to-market is likely going to be different than if you're building an enterprise automation company, which means you're likely to have to think about how to create those user attraction and community love before you even think about the top-down enterprise motion. And that needs to be reflected reflected in your thinking early on and in, in how you're planning. What we see more commonly these days is that a lot of the products have to play a little bit with both, with the bottom-up and top-down. And as a founder, you may not have a full go-to-market team in place, a senior layer to kind of help you do that. So you, at the beginning, it's very important that you also test the various routes and decide how you're going to sequence them, what you're going to do if, if you do have to combine them.

And from the growth stage perspective, what we'll look to see is that these early iterations on the go-to-market side are now really starting to crystallize into identified sales channels and repeatable sales playbooks. So taking, for example, um, what Irina mentioned of perhaps you're taking a top-down go-to-market approach, or sorry, a bottom-up go-to-market approach in order to really fill the top of the funnel and start to get this community adoption. What we might pay attention to in growth, if this is applicable to your product, is have you identified these trigger points at which you perhaps upsell to a team account? And maybe even have you identified that there's a tipping point at, at which you need to complement your bottom-up go-to-market approach with a bit of a top-down enterprise motion in order to land some of these bigger customers? So really starting to see that you've started to crystallize crystallize that thinking and have some initial proof points and validation around that go-to-market maturing and being repeatable is something that we'll pay a lot of attention to at the growth stage. Um, another element or lens of our thinking on the go-to-market side at growth is also overall looking for increasing efficiency in your go-to-market. And so the accumulation of insights and data that you've gathered from these early iterations that you've been doing, we'll want to start to see that this has led to you being able to more precisely target your customers, figure out how to find them and how to convert them. And so we'll wanna start to see that be reflected in metrics around your go-to-market, like your payback periods or your sales cycles becoming more efficient, or at least identified levers that are gonna provide a path to them becoming more efficient in the future.

On the competitive advantage, what we'll spend time on is trying to understand kind of a little bit like the secret sauce for the product is trying to understand what is the competitive advantage of the company that will compound over time to represent this long-term moat. And this depends again on the business you're building. Sometimes it's a tech and IP because you're building something more technical. It can be proprietary data you, you have access to or you've built. It can be category creation or a certain brand. And sometimes it's as simple as first mover advantage or strong execution because there are still a lot of businesses where, you know, land grab is, is important at the beginning. The other thing we'll do is we'll zoom out and look at the overall landscape. This means looking at competitive offerings, but also at companies that are in adjacent areas that could expand or that you could expand into. And we'll take a view on what's the best entry point and who— what do we think wins over the long term.

And from a growth stage perspective, what we'll start to really want to see is that this competitive advantage that you articulated at the early stage is really now getting validated and that we can see proof points that show to us that this competitive advantage really is real and is resonating in the market. And so often by the growth stage in Series B and onwards, your product will be in the hands of your customers who have been using it. If you have potentially direct or indirect competitors, their products will be in the hands of other customers as well. And so we then at the growth stage spend a lot of time validating and understanding the competitive advantage from the customer point of view. And so we'll speak to customers, understand what their key decision criteria were, how they evaluated perhaps your solution against different solutions, and really get some of that anecdotal and qualitative understanding that this competitive advantage really is real and is resonating. Many growth investors will also have a, a quantitative approach as well to validating this competitive advantage, which will be running wide market surveys of these customer groups to also understand how your your product ranks relative to potentially competing solutions in the market as well. And so generally what they'll be looking for with all of this insights and data is really trying to validate by the growth stage that they can see that you are the emerging category leader in the space that you're playing in.

Moving on to founders, perhaps the most important thing. Um, the, the first question we ask ourselves is around this kind of founder market or founder problem. Wouldn't fit. Why are you the best position to build this product? What is it about the insights that you have, about the experience that you have, that gives you an edge, that gives you a unique advantage? And what is your story? Why do you want to build what you're building? The other thing we look at is what we call talent magnet. So what are the early signs that you can retain excellent talent, top performers that have chosen to join you versus joining another startup or another large company or starting their own. Then lastly, a very important element is the culture. We take a view that you need to start thinking about this very early on, that culture needs to be a very deliberate strategy and a consistent effort over time, and that you cannot course correct it or that it's much much harder to course correct later on. In particular, key elements of culture such as diversity and inclusion, they become much harder to course correct when you're 10 people— when you're 100 people and you've not solved it, versus when you're 10 people at the beginning. So I think there are those— it's kind of easy to ignore because it may not be the most pressing thing to solve, but they become bottlenecks going forward, also for, for talent retention and for the kind of the, the team you wanna build.

And from the growth stage perspective, a lot of what Irina just mentioned carries over from venture over to growth in terms of how we think about founders and team. Um, one thing where the, the burden of proof potentially becomes quite a bit higher is taking this founder market fit that Irina spoke about at the early stage, and we'll wanna see how this is now bridging into to a validated execution ability that you have. And so how this founder market fit has translated into you identifying the right milestones, starting to hit them, and perform to a plan. Um, we definitely still spend a lot of time thinking about this concept that Irina mentioned of being a talent magnet. At the growth stage, what we'll also be looking for is that your very strong early performers and people that you wanted to keep in the team are carrying over you're able to retain them and they're staying on for this next phase of, of the journey. In addition to seeing talent join from other companies into some of the key roles as well. Um, and then finally, from an organizational perspective at the growth stage, given a lot of the elements that I mentioned today around where we'll start to look for potentially market expansion or these repeatable playbooks around the sales team, um, we'll wanna see kind of the thoughtfulness and talk through with you around how you're thinking about creating an organizational structure that supports that continuous market expansion that you'll be going after.

And lastly, the power of the narrative. Um, as, as you saw, there's differences in, in terms of like venture and growth stages, but one kind of like combined element that unifies them all, um, is the narrative and nailing that. Is important at all stages. Why? Because the narrative brings together all the elements of what you're building in a compelling story that's not just for your investors, but it's a, it's a story that you, you kind of tell to your employees, to your customers, to everyone that you interface with. And you need that to be consistent and well thought through so that you align everyone behind the same mission and the same, the same goals. So one thing to— we'd encourage you always is to invest early in building that narrative that is clear, crisp, and unique to you, and practice it so much that it becomes second nature. And finally, always have an elevator pitch at hand because you never know who you run into. I think that wraps it up. Thank you very much, and I We have a few minutes left. I'm sure we haven't covered really everything. So who has any questions?

And if you have a question, just raise your hand.

I have a mic and can run over.

Thank you, great presentation. I was wondering about the market sizing, whether decks should say bottoms up, top down, give some kind of additional information besides just the circles.

I think the first, the most important thing is that you show the definition of What is the market and what is the TAM and what is the SAM and then show the numbers. And I don't necessarily think that the decks should show the calculations. You can always talk about those. But what first thing we ask ourselves is, is this the right way to define the true market for this product? That's probably where I would start and focus on. And then on the bottom up, top down, you can also do both because it sometimes helps to triangulate. If they're really far apart, then you probably want to ask yourself why.

Thank you. What is the expected ARR in each stage?

Sure. Um, each investor will think about it a bit differently. For us, um, we don't have a set expected ARR at each of these stages, and I think we see that it varies. Sometimes we see Series A or Series B companies that might be still pre-launch, um, and so that's why we'll look at some of these other ways to validate things like product-market fit. It might not yet be provable in terms of ARR, and so digging into some of these other metrics around it are something we spend a lot of time on. I think in terms of setting out a set number of ARR at each of those stages, I think we're seeing that it fluctuates quite a bit. So it would be, it would be difficult to give a specific number.

Um, yeah. And maybe just to give you an example, I mean, it differs a lot in the, again, going back to the business you're building and what are the metrics that matter. Um, I've certainly invested in companies where at Series A, there was no revenue and there was no plan to have a revenue for the next year to 18 months because the focus was on community and usage. So what I looked at there is how does that scale of usage trends, how in terms of like not just reach but also engagement, monthly, weekly, daily active users. What do those users say on, on Twitter, on Facebook or whatever and The, the revenue was not relevant at that stage. It becomes relevant later. Of course, it always, you always have to get to revenue, but, um, and it's the same. And in the example I mentioned on, on some of the dev or data toolings, the initial, if, if the initial like effort on go-to-market is on bottom-up community building, it's just harder to generate revenue from that. And that's also not where your end endgame for revenue is because you, your endgame is to get these few users, but then get to the head of the team or one level up to, to sell it for the whole company. So that's, even if there is revenue at that stage, it's probably less indicative of the future revenue. So I think it's about, a lot of founders ask like, what's the minimum ARR? And it's just so, the reason it's so hard to answer that question is because it is very dependent on the business and you can have good ARR, but if it comes from just 2 customers and it's just pilots and you cannot renew a renewable contract of 1 year, that's very different than repeatable ARR. So I think there's 1 question here and there was 1 more there. I don't know where she is.

Thank you, Irina, Hillary. I'm Jordi, founder at Factorial. Question for both of you: what are the most common reasons for you to pass on investment opportunities in both the early and the growth stages?

Good question. I think— I mean, to be honest, it can be all of these things that we've mentioned. It can be size of the opportunity. A lot of the time is size of the outcome. We are a pretty large fund, and So we will look for really outsized outcomes, multi-billion dollar type of outcomes. And sometimes we can see, probably that's the most common one. Like for me, sometimes I see this is gonna be a great business, but I think it's going to get to, in the best case scenario, $700-800 million. And I find it hard to see a path to $10 billion or even a couple of billion. That I think is common. The founder question is also sometimes, I mean, it's one of the things that people never like to tell you because it's like, it can be taken very personal, but there are situations where it's not clear why that founder is really differentiated in building that business or the founders that spike very much on one thing but haven't complemented themselves with someone to help them on all the other things that they may not you know, have, because that's what happens when you spike on one thing. And so I think that's another quite common, common reason if I had to pick up two, but it can be any of those or a combination of them most often.

Yes, the answer wouldn't be that different for us at the growth stage. I agree. I think one of the ones that often comes to mind is, is that market size. And size of the opportunity question, which again comes back to why crafting that narrative around what is the scale of the opportunity that you're going after is, is so important. Um, one other one for us that's, that's really important to us as a fund as well is this idea around alignment of vision. And so that's why we spend a lot of time also understanding how you think about this market evolving, what is the roadmap that you've set out to achieve it, and making sure that we're aligned. We definitely see that for founders are the ones who have the best insights into how to go after this opportunity. But that alignment in terms of how you're planning to tackle it is, is another thing that we spend a lot of time on and want to make sure that we get right together as well.

Hi, Patrick with Unlisted. Thanks for the presentation. Question around the ownership: is there any particular things you look at at a cap table? And what's your views and expectations around distributed ownership between the team?

You mean if the founder basically has less ownership because it's—

Yeah, and in general, particular things you look for, like dilution, how much does the owner own, or the founder own, versus the team, co-founders, investors, and such?

I mean, in the early stages, we expect the founders to still— I think in general, we want the founders to own enough have to be incentivized to, to keep going with the business. At the early stages, um, we expect the founders to still own the majority, at least when we come in. What we have had challenges with in the past is, for instance, university spinouts where you have like a 30% owned by a university because you have taken the IP from there. I think those are very cap tables for us to get into. But otherwise, I think if the founder is, you know, very— like, an ownership of 10-20% on the founders is way too low for the beginning because it's going to keep getting diluted. I don't know if that's helpful, but we don't have like a certain number. What we want to see is the founders own still a big chunk of the business. There is obviously an option pool for future employees. And then generally there's like maybe a seed investor, and then there's like— we come in at the A, for instance. That would be an example. But I think we would worry if the founder had 10%.

Hi, Espen from Kindly. So obviously you, you have an investment committee and you make a business case, and how, how do you align that next exit with the founders, like in the case of Spacemaker that you did. Then just after a couple, a couple of years, there was this exit already to Autodesk with a really good return on your investment as well. So do you, do you look on potential industrial exits together with the, with the founders when you enter investments? —like that?

I mean, it really depends. Ideally, we want to see the company grow for many years and become a multi-billion-dollar company and exit through an IPO or a large M&A. But there are some companies that have opportunities to exit earlier where the exit is interesting to the founders, and we generally align with them and we generally go where the founders, I think as a fund, we're more founder-friendly, so to say. So we will have a discussion. If we disagree, we will be open about it. But we've not had necessarily massive, massive conflicts around those things. But the objective is to build really large companies, but obviously not all companies get to be very large companies. So we, We adjust on the way. I don't know if you have anything to add. There was a question here, but she left. I think we're on time. All right. I think we're on time, so we'll wrap up here unless there's more questions. But thank you very much, and enjoy the happy hour. Thank you so much.

Oh yeah!