"The “Dos & Don’ts” of Building Winning SaaS Companies with G2 Crowd

Great to be here with you. And I've been building SaaS company now for 20 years. So that's a long time. And I also met my wife 20 years ago. And what I'm looking forward to doing with you is sharing some of what we've learned about what to do and what not to do. And it says dos and don'ts. But for me, it was more— I first learned the don'ts, and then I learned the dos. And I was born in Germany, 1971. My father was an entrepreneur, but he was building pump companies, very different businesses. But when I was 9 years old, he moved us to Pittsburgh, and I had been living in the Pittsburgh of Germany, which was Essen. But I did become a Steelers fan. And aspired to be an entrepreneur like my father. And my education, I went to MIT to study mechanical engineering, and I think I thought I was going to go into the pump business like my father. But after a stint as a consultant, I came out to Stanford back in the late '90s in the dot-com era. This was in 1997. And I spent 2 years. I remember when I was in business school, The internet was brand new, and back then the hero was Jerry Yang. And I remember him coming to one of our classes talking about how he was building Yahoo. And at that same time, I met two Stanford computer science students. And unfortunately, it wasn't Larry and Sergey who were starting Google at the same time, but it was two other students doing something much more mundane. They were building time and expense software. But they were doing it early in Java, and trying to do it in a way where you could deploy it on the internet, which is something we would call SaaS today. But then after joining them, and we sold that startup to another startup, Niku, I went home to Pittsburgh in 1999, which led to the inspiration for starting our first business. And my father was in the pump business, and I remember going to visit him back in Pittsburgh. And talking about the internet and how it was going to affect his business. And back then, what was interesting to me, I said, Dad, how's the internet going to change your life? And he said, it's not. Which, coming out of the Valley, and even back then, everyone was worried about getting Amazoned, which we still are 20 years later, and many of us are still getting Amazoned. But he said, my pump business is not going to get Amazoned. I sell highly engineered complex pumps. And I can't sell them like a book online. But being out here in California at the time, I saw what Cisco was doing, what Dell was doing. Dell was selling configurable PCs online, and that really gave us the inspiration. I wanted to help my father sell his pumps like you could sell Dell PCs, all on the internet. And so we started building a cloud solution, but it was a long, arduous journey. I thought we're gonna be successful in one year, go public, be like Jerry Yang. But I think a year into it, we hadn't made much progress. 3 years into it, we were almost bankrupt. And it actually wound up taking 13 years till we got to a great exit. Our next company, SteelBrick, was inspired by the first. And SteelBrick was really a next-generation CPQ. And one of our audience members, Lars Nielsen, is right here. He's actually part of the reason I decided to partner with the founder of SteelBrick, Max Rudman. And Max had built a great CPQ app. But not a lot of the world had heard of it, except for Lars. Lars was one of the early customers of Cloudera, and I met him at Dreamforce in 2013. And unbeknownst to me and my business partner Matt Gorniak, he came up to us. He was a Big Machines customer, and he was actually heckling us. Lars said, hey, I found a much better CPQ. And we're like, Lars, it's OK. Oracle just bought the company. But what is it? And he said, it's called Qlikly. And we still didn't know what it was. And then he said, SteelBrick. And we're like, oh, funny. We're talking to Max. And that gave us the courage to partner with Max. And then in less than 2 years, we took that business from Max plus a couple of guys to, you know, really a global leader that was acquired by Salesforce. So the second time we knew what not to do and what to do. And that's what I'm going to share today is how you can in 7 quarters go from $3 million to $400 million valuation guaranteed. You have to have Lars as your customer. And in between Big Machines and SteelBrick, we actually started another company called G2. And G2 was inspired by my experience as a SaaS entrepreneur. And frankly, part of it was, I remember it took us 9 years to get in a Gartner report. 9 years, that seemed a little bit too slow to me. And I didn't love talking to analysts. I love talking to customers. And so our goal with G2 was, let's give people like Lars, let's let our customers vouch for us. And let's let the customer have all the power. And that's what we're building with G2 now. And it took us many years. And in parallel, we went off and built SteelBrick. I came back to G2 as a CEO about 3 quarters ago after a little bit of time at SteelBrick. But my co-founder has done an amazing job creating a scale platform that now has 600,000 reviews and 3 million SaaS software buyers coming every month looking for products like yours. And as a hobby, we have just launched another SaaS company called 3Kit. We met another entrepreneur, Ben Houston, amazing entrepreneur, reminded us of Max Rudman, and he's building amazing 3D AR technology. He used to make movies doing computer special effects, computer graphics. He actually saved Harry Potter's life. But his technology is so shiny and beautiful that we decided we had to partner with him. And now I'm the executive chairman of this company, but 20 of our former SteelBrick team members have joined Ben. And they're going to be bringing this, this product to market. And the amazing thing is we took that from $100,000 to $1 million ARR in just one quarter. And so the goal is every company, we get a little bit better. And what have we learned? There's really 4 keys we see to building great SaaS businesses. Number 1, commit to the summit. Figure out what are you really passionate about? What summit are you trying to climb? Number 2, so I learned the hard way. I was more of an engineer, MBA. I didn't know how to sell anything, which led me to near bankruptcy. And, but ultimately really learned how to sell with passion. Once you're selling and starting to scale, now you need a team. And so I think we've really learned how to build a winning team. And as you'll see, a lot of our team now goes with us from company to company, but we keep growing it. And finally, take care of yourself. And I think what's very hard as a founder, it's a very emotional journey. And I do remember, especially my first company, I had a lot of depression, a lot of anxiety. And so now I've learned how to take care of myself so that I can have fun while we're winning. Well, the first lesson learned, commit to the summit. And I do think building a company is an arduous journey. You will go through highs, but you also have many lows. So I think it's really important to be climbing a mountain you really want to get to the top of. And for me, as I mentioned, big machines is a very personal problem. I was trying to help my father. He was my first customer, my first investor. And so although it took 13 years, many struggles, near bankruptcy, we really wanted to solve this problem. And ultimately we did. And G2 Crowd, as I mentioned, we want to eliminate the magic. What is the magic in the magic quadrant? I don't know. But with G2, you do know. It's very transparent. It's your customers' voice. You can see who they are. They're real people on LinkedIn. And so we think we have a much better way to validate your products and rate your products. And the big thing building any business, you need a partner. It's a long journey. And I remember with Big Machines, my first partner was Chris Schutz. He and I went to MIT together. He was a much better engineer than I ever was. And so once I had the idea, I convinced my father to invest and become a customer. I called Chris and said, hey, how do we build this product? And actually, Chris, today, 17 years later, he's actually still running that business at Oracle. But a lot of our other families— so Joachim Klein, he joined us at Big Machines in 2000 to run our European business. He's still with us today, now running 3Kit. Tim Handorf, you can see there, joined me at Big Machines in 2000. He was the CEO of G2 while I was building SteelBrick, and now he's our president. But the amazing thing, a lot of us now have been together almost 20 years building companies. And having this kind of a tight-knit team, I think, is what you really need to succeed. And perseverance. And I mentioned this. My first lesson was what you don't do. But what I did do at Big Machines at the very beginning, which was quite exciting, was the dot-com era. I created a PowerPoint business plan. I went to see a man named John Sculley, who you have to be older to remember. But if you watch the movie about Apple, he's the guy that fired Steve Jobs. So, which was maybe a bad move. This, uh, but he was, uh, John Sculley was actually quite a famous businessman, and he became my first investor in Big Machines. He was investing in internet companies. So I was able to very quickly raise almost $20 million, scale the business. But frankly, we didn't have a product yet. We didn't have customers. And so, you know, by the end of that first year, started to realize, oh wow, we're We were starting to have problems, starting to have to lay people off. Had to do that 3 times. And by 2003, we were almost out of business. We'd burned through $23 million in venture capital and only had $1 million in revenue to show for it. And so we faced a very hard decision, my co-founder Chris and I. Do we just give back the last million to our investors and chalk it up to lesson learned, get another job? Or do we continue? And I think we did decide to persevere. And it was because we really believed in the plan. And some of our— we had very few early customers. We didn't know how to sell our product. I think in 2002 we only signed up 2 customers. And this was after the dot-com bubble burst, 9/11 happened. We were going to manufacturers saying, "Hey, we're going to sell you pumps on the internet." And they all said to us, "Well, the internet's a fad. You're a dot-com. You're going out of business. Go away." So it was a very hard time for us. And also my personal life, my wife and I, we— well, luckily I found out we were pregnant. But we were having twins, and I remember they were born in 2004. Our business was kind of at the bottom, but they also wound up being born 9 weeks premature. And I remember one of the hardest days of my life, what it felt like. I was going to the hospital. Actually, our biggest customer for big machines had just, you know, we thought we're gonna get a big add-on order. We'd gone to visit the president in Delavan, Wisconsin. We didn't show up for the meeting. And so I just remember feeling, oh wow, my business is going under, my boys are in the NICU in the hospital, and my life can't get any worse. And but remarkably, from there, my only life only got better. Luckily, my boys today, they're 14 years old, amazing boys doing really well, and the business turned the corner. And I thank a lot of that to actually Matt Gorniak, who I hired at that time. He was at GE. In a program. He before built another startup that he sold to Oracle. And frankly, he was getting bored at GE, but he decided to join me. Why, I don't know. And then together we really learned how to sell the product and ultimately had a great company. And the other thing I learned at that time was you really need to ride a bigger wave. And really, in hindsight, Big Machines, we were too early. But the other thing that made it successful, in 2004 I went to One of the first Dreamforces met Marc Benioff, and, you know, said to Marc, "Hey, we love your Salesforce app. It's in the cloud. We've built a CPQ in the cloud. Can we partner?" And it took a couple years to really get going, but ultimately that's what made Big Machines a success. We became the number one partner for Salesforce in the cloud. And as they grew, we grew. And so I think— and really we're all riding a much bigger wave of SaaS. And I was talking to Jason M. Lemkin on the way in, And I remember he started SaaStr. The first event was 4 years ago. This is the 5th SaaStr. And I remember thinking back then, wow, everyone already knows about SaaS. It's kind of baked, right? It's not really gonna get any bigger. And frankly, I was really wrong 4 years ago. It's still getting much bigger. And now I believe it's gonna get much bigger over the next 10 years. So we are riding this much bigger wave. But I think within your own category, find something that's really gonna grow inevitably, with you or without you, and riding that bigger wave is really what can make your startup successful. And the wave we're riding at G2, the wave we're all riding here at Saastr, is this fourth industrial revolution, which really means everything in business is being automated. And companies, rather than hiring people, they're now automating everything. There's companies, there's people talking about robotic process automation, companies like UiPath, Automation Anywhere, with software, we're automating every single business process. With SaaS, all of your applications. You're automating more and more processes in more and more industries and making it easier and easier for companies to scale and get more efficient. But I think this is still just the beginning, and I think almost everyone believes this now. More and more business processes are going to be automated. They're going to be automated by software, by robots. And it's also scary. Businesses are still afraid of getting Amazoned. John Chambers from Cisco said that everyone's going to try to transform digitally, but 40% of companies will fail. And they'll even go out of business. And so there's a massive opportunity, but also a massive threat for every business out there. And really, that's our goal with G2, is to be that platform where businesses can go and find the right technology, find the best SaaS app, the ones that you're making, to make them succeed rather than fail in this industrial revolution. And the other thing I learned at Big Machines is don't set your vision too broad too early. And what we did way back in 2000, we said not only are we gonna build this cloud app, but we're gonna build a marketplace. We're gonna sell all pumps, all machinery. And that was my first business plan right there. It was my father's golf course in Pittsburgh, but it was the back of a napkin business plan. And I think we said, yeah, we're gonna take the whole machinery industry online in, I don't know, 2 years. And from there we had to narrow the vision, narrow the team. And so I kind of learned the hard way, hey, focus on one problem. And that's where SteelBrick was very different. Max was much smarter than I was. He picked one problem. He said, "I'm just gonna do CPQ on Salesforce for software companies like Cloudera." And that was a great initial market. And from that focus, we were able to broaden very quickly, very successfully. And the other big thing I learned, especially at Salesforce and watching Marc Benioff over the years, is you really have to create a winning story. 'Cause most software is kind of boring. Business software, it's not super sexy. And I think one amazing thing Marc Benioff did— Salesforce automation is not exciting, but he created a bigger story. And this is a great book from Marc's book, Beyond the Cloud, great quote where he said, you know, no matter where we're selling, no matter which customer we're selling to, we never sold the features of CRM. And frankly, Salesforce probably never had the best features, but he created this amazing story about the company, the 1-1-1 model. The customer success. And he's made it really exciting. And you go to Dreamforce even now, you know, 200,000 people come to San Francisco excited about Salesforce, about CRM. And really being able to tell that bigger story is how you can differentiate yourself. And selling with passion. And I started as an engineer. And as an MBA. And frankly, in business school back then, they didn't even have a class on sales. I think professors thought it was a dirty word. They taught us strategy, finance, and they taught us how to raise money, but they did not teach us how to sell. The first 3 years of my business, I didn't really know how to sell, and frankly, we almost went bankrupt. It wasn't until we got to that point where we had no more money, and then really Matt and I together, we learned, "Hey, let's just go one deal at a time. Let's figure out what the customer wants. Let's articulate a compelling story and vision, and let's sell them that deal." And then let's deliver. And it's obvious in a way, but for me also as a founder entrepreneur, I realize everything I do today is sales. I sell my customers, my employees, my investors. And, and so I think that's the most important skill no matter what business you want to build. And what we've been teaching our team is how do they all sell with that same passion? How do they make the story personal to them? Because I think if you can, whatever business you're building, if it's personal to you, you can explain to your customer why it matters to you, how it can help them, you can win. And no boring demos. And one thing we also do at our sales kickoffs, oftentimes we ask vendors to come in and pitch just to get salespeople to see how boring most demos are. And I think the key to a good demo, it's actually the story you tell around it. And I do remember With SteelBrick, I had the chance to go visit Marc Benioff at his house. And I had a huge pitch prepared. I don't know, like 15 slides on why we were the best CPQ partner for Salesforce. But I only got 2 slides into it, and then Marc looked at me. He's like, "Hey, can you show me the demo?" I'm like, "Right now? I'm like, I have 10 more great slides to show you." He's like, "No, I just wanna see the demo." And then I showed him, actually I did a demo of, hey Marc, this is you buying time and expense software using, SteelBrick using CPQ, using billing, and took them quote to cash on Salesforce. And, but it was all about Mark buying time and expense software for his company. I think it was a good story, but I do remember then, you know, after demoing to him for 21 minutes, he turned to John Smordja and said, "I think we should buy the company." And which was a big surprise. We were very happy to be his great partner. But I do think, and now this is something we try to teach all our salespeople, You got to make it personal. You got to tell a story. You got to make it relevant. And I think in any SaaS business, this is something you have to get really good at. And selling as a team. And I think most of your teams, you know, you need sales engineers, you need founders, but especially if you're trying to sell bigger deals, don't go in alone. Build many relationships on many levels. And I, I think this is something certainly Matt and I— and the other thing is that once you've been selling together 15 years, you really don't have to prepare. Everyone knows what they're going to do. Everyone knows their part in the team. And you can really win. And what we're doing now with G2 to make it easier to amplify customer voice. And I remember we first learned this at Big Machines, where the best way to sell was to have our customers speak to our prospects. But back then, the only way we could do it is we'd have our user conference. We'd have events. But that could only happen once a year. But we always found that once our prospects heard from our customers— and first we were scared, CPQ projects are hard, some of our customers weren't happy— but our prospects loved the fact even when there were challenges, when they had problems, they heard that we would take care of them. And our whole goal with G2 is to make that much easier, because you will also tend to tax your references. And I mentioned Lars earlier, but I think after a while for SteelBrick, he was doing like 10 reference calls a month. And he said, look, I have a job to build, we're taking our company public. So we said, oh great, Lars, just write a review on G2. And so rather than having to set up reference calls, we started sending our SteelBrick prospects, and now it's Salesforce CPQ, you can see there, you know, there's hundreds of reviews. And we found that's what really gave prospects the confidence to buy without having to do reference calls. And the other thing we do is we show them their LinkedIn connections so you can find somebody you already know. And so we find this is now a great way, once you have a great SaaS app, you delight your customers, It's one of the best ways to accelerate that. Another great company, Qualtrics. And you might have heard from Ryan, he just sold his company to SAP for $8 billion. But Qualtrics also went all in on G2. You can see they have over 1,000 customer reviews. And they're really using that to validate their customer success and let other people discover the product. And so it is a great way. And we designed it for entrepreneurs like yourself. It's free. You don't have to talk to us. You don't have to pitch us. Just have your customers speak for you. For you, and this will really accelerate your growth. And finally, once you do all that hard work to get a deal, I think we also learned is don't give it away. And I think the keys in the SaaS business, I think we got really good at— no, it's going to be a 3-year deal, it's going to be annual upfront payments. And, and I think we also did SteelBrick, we said, hey, we're not— we had a competitor that we didn't think was very trustworthy. We just said our first deals were all at list price. And because we really believe in the value, we believe we had a better application. And I think we also learned that that's really critical to building your business. And building a winning team— this is really what makes us successful today and allows us to build more and more companies. And one great example of this, one of the stories I did hear from John Sculley was about Steve Jobs and why he was such an amazing recruiter. And you might have heard He actually recruited John Sculley with one of the most famous lines, recruiting lines ever. He said, hey, do you— he was actually the CEO of Pepsi and one of the most successful young executives to America, but he wanted him to come help him run Apple. And he said, hey, do you want to run— do you want to sell colored sugar water the rest of your life, or do you want to change the world, dent the universe? And I think he said Steve was such a good recruiter because he just believed so much in what Apple was doing that he just couldn't understand why anyone wouldn't want to be a part of his mission. And I think really bringing that belief in your business is the key to bringing great people to your team. And don't use recruiters. What's much better is bring the best people with you. And even if you haven't started a company, I remember my CTO for my first company, Big Machines, was Vic Alston. He'd worked with me at our prior startup, Niku, and I just told him, "Hey, I'm starting a company." He's like, "Hey, I want to come with you." He didn't know what we were building. And I think now we've done this across 4 companies, but by building a really unique culture where people can see, hey, people succeed, they grow with you, then they'll stay with you. And this really becomes by far your biggest asset. And building your playbooks. And this is something now across companies. So once Matt and I learned how to sell, we started writing it down, and we now have about a 100-page sales playbook we take to every company, and we keep tuning it. But to teach new salespeople how to do those great demos, how to sell with passion, how to sell as a team. And there's also a great playbook out there from Salesforce. If you just Google, I believe, Salesforce sales playbook, but he has kind of the 11 laws of how Salesforce became so successful. And but really, you have to write your own playbook and to be able to scale. And but once you have your playbook, I think the beauty of it, just like my meeting with Marc Benioff, you have to audible. And you know, you might have the perfect pitch prepared, but the customer wants to hear something else, wants to see the demo now. Be ready to do that. And I think also why Peyton Manning was such a great football player— Tony Dungy, his first coach with the Colts, he could audible so well because he was so well prepared. He knew the playbook so well. He practiced every route 200 times. So when the game changed, he could change on the fly. And this is what we also try to drill into our teams is, hey, you have to know the standard plays, so you can audible. And building great partnerships. I think not only big partners like Salesforce, but some of our best partners were smaller. Ryan Westwood at Simplice, I remember meeting him. He only had 10 employees in 2014. We were just starting SteelBrick. And I just visited him last week at Silicon Slopes in Utah. But now all of a sudden he has 400 global employees, all built implementing SteelBrick, now Salesforce CPQ. So I think also betting on small partners. That will bet their career, their company on you is a great way to have amazing partners. And we've been starting to also acquire other entrepreneurs to accelerate our business. We just acquired a company called Siftree, amazing entrepreneurs, Ramshi and Ayan. But I think the key to making that successful is now they believe G2 is their company. They're bringing their entrepreneurial spirit, their energy, their product, their talents to us. And we found this a great way to grow faster. But while you're doing all of that, and now G2, we're getting up to almost 300 employees. One of the things that amazed me at Salesforce, Marc Benioff being able to align 40,000 people, and Elon Musk talks about this, that's his whole purpose in life, because any company is a group of people. But if they're not all running in the same direction, you don't get the energy, you don't get the talents. And so once you have that team, once you start doing acquisitions, you really have to keep everyone aligned. And a great method we do use is the V2 Mom. To make sure that the whole company, the whole team, is running in the same direction. And this culture that we've built is really why people want to keep working together. But it does all start— I only learned this when I was leaving my first company, Big Machines. We'd sold 51% to an investor, and so I left a little bit before we sold the company to Oracle. But we had a nice goodbye party in Chicago. I remember we were on the rooftop in the summer. And it was a great party. We were drinking a lot of beer. And people were coming up to me saying, "Thank you. It was so great to work with you." And I was just asking everyone, "Well, what— why did you like working with me?" And what shocked me, it wasn't a lot of things. It was just one thing. They're like, "You really care. You really care about the customers, the company. You really care about me." And— but what shocked me, that was it. It wasn't any magical formula. And so I think having people really feel it, your customers, your employees, your partners, your investors, That heart is what can really help you build such strong cultures. And taking care of yourself. And as I mentioned, Big Machines was a big struggle. Took many years. And for many years I had this cloud of anxiety in my forehead, which was my company. I figured I couldn't stop thinking about it even when I was with my kids. And frankly, it didn't feel great. But then I met this conscious leadership guru, Jim Dethmer. Through some YPO friends, and he started just having me work on my own awareness. And what I really learned was I really have to take care of myself first. And frankly, when I was building big machines, I was about 30 pounds heavier. I wasn't great at taking care of myself. I was drinking too much, eating too much to stuff my anxiety. And, but ultimately, I've just learned, and luckily now I'm 47, but I think I'm in better shape than when I was 37. And I do start every day. I run every day. That's how I start my day. I work out. I spend an hour at the beginning of the day running, stretching, breathing. And I do it every day even if I have to sleep one hour less. It's my number one priority. And it's also great when you travel. So this is me in Boulder on top of Mount Sanitas. But running can also take you to beautiful places. And being authentic. And this is my daughter, Maddie. She's just amazingly authentic and amazing. I love— I'm happy every time I see her. She's now 11 years old, but she's just so amazingly authentic. And I think this is something I bring to my work every day. And it just makes my life much more enjoyable, but also allows my team to trust me that much more. And the simplest thing I've learned is just to breathe. Enjoy the silence in the universe so you can ultimately find your divine path. And that's what I now try to do every day, every meeting, is find the easier, the more natural path, and trust your intuition and see where it takes you. So thank you.