What It Takes to Forge Your Own Category with Braze Co-Founder and CEO Bill Magnuson

So I wanted to really start the story where we began with Braze. Braze was founded in mid-2011, and you can see in this photo a shot of the early days of me and my CTO, John Hyman, and co-founder. This is actually, if you look a little bit closely, you'll notice the bare concrete floors. We were in what I think was the third ever WeWork, and we were on the top floor of it. And they ran out of money while they were finishing the interior space. On about the 4th floor. And so us and the other people on the top floors got to live with bare concrete floors, which I think is probably an ingredient for category creation. Now we fast forward 11 years later, a little bit less humble position. We actually went public last year on the NASDAQ. Today we are spread out around the world. I used to say that our offices were in the current and former British Empire, but we actually during COVID started to expand beyond those borders as well. We're a little bit over 1,200 employees today, a little a little bit over 1,500 customers. We are managing the relationships of over 4 billion monthly active users on behalf of our customers. And we do that in large part through the sending of messages. We send email, push notifications, we deliver messages inside mobile applications, on websites, through loyalty programs and set-top boxes, et cetera. What we're trying to do is really understand the entirety of a customer lifecycle and communicate with them throughout that in order to build strong relationships. We sell to job titles that actually didn't exist when we started the company. We work with teams and with interdisciplinary skill sets that work together in ways that were not happening in 2011 when we started Braze. And so what I want to talk about today is really that journey of going through category creation, some of the patience that it requires, the convictions, how you navigate a competitive landscape in those scenarios. And I think it's a lot of our learnings are actually particularly notable in an environment like today where it has become, you know, harder to raise money, where there's definitely volatile market dynamics out out there, but where competition is just as strong as ever. So let's talk about a couple of the key ingredients that it takes for category creation. One of the first ones is, you know, in technology, a little bit easier to find, but obviously we're always going to look for massive magnitude and change. And when we see a pace of change accelerating, whether that is the adoption of new consumer technology, maybe it's new backend infrastructure and architectures that are going to enable software to do more interesting things, maybe there are changes in the broader governance landscape, things like data privacy, um, you know, the advent of GDPR, the move towards first-party data have been particularly relevant in our space. Uh, anytime we start to see change accelerating, it creates the opportunity for a new category to potentially emerge. Now for Braze, obviously mobile was a really big part of that. And if I go back to 2011, we had a dual conviction that was informed by our co-founders' experience using smartphones. I had actually worked at Google right at the launch of Android. I remember the big fiberglass cupcake getting rolled out onto the lawn, you know, and really kind of moving on from my BlackBerry and starting to understand what the freedom of a smartphone was gonna mean for the human experience. But we took that a step further and said, what's gonna happen in the business world? So there were two things. You know, one was that huge businesses would be born and built to be mobile first. And the second one was that the wide-scale adoption of mobile technology by consumers would lead legacy enterprise businesses to transform themselves and change the way that they did business. Now along with that, we started to think about what does the consumer experience look like and how is that gonna change the way that brands can understand and communicate with their customers. If people were gonna have these mobile devices that they carried with them where you had an intimate connection with that technology, you brought it with you everywhere you went, you gave it permission to interrupt your day, you gave it permission to understand more about you and the context around you, We knew that that meant that there was gonna be a change in the way that we kind of thought about communication, the way that we thought about our relationship with brands, and it was gonna be something that would need to be a lot more sophisticated than before. If you were gonna be given the kind of permission as a brand to interrupt someone's life, it meant that there needed to be a reciprocal relationship there. You had to deliver value and relevance in the moment, and from our perspective, that meant that a lot of the prior ways of thinking about things like individual messaging, digital messaging, communicating with customers, were just, they were too basic. They weren't focused enough on providing relevance to people. They weren't thinking about timing in a sophisticated enough manner. So what we saw was that, you know, a new, there was opportunity for a new category to emerge. There was opportunity for new skill sets to enter into the field, and there would also be interdisciplinary collaboration that would become necessary for brands to be competitive in this space. So that leads into, I think, the second big one. And one of the things that I've always really loved about Braze and our customer customer base is that we sell to job titles that didn't exist when we started the company. When you look at, you know, the concept of CRM, it wasn't happening at B2C scale in 2011, much less 2015. You know, part of that had to do with backend architectures and, and the kind of just the scale of data processing that was available. Another big part of it is, is the, what I referenced earlier, which is that when we develop this more intimate and personal connection with our mobile devices, we also gave it permission to understand who we were as a person and the context around that. So there was more data available, there was better opportunity from a kind of cloud data processing architecture standpoint to understand all that data in the moment. But then of course there were teams that were gonna have to harness that power and bring their own creativity to life in order to ultimately deliver what we needed, which were better customer experiences that we're gonna build stronger relationships. And so, you know, I think that as technologists and as business builders, especially with early startups, you know, we often will go more toward what we are familiar with. But in many cases, the opportunity that's coming about because of change is, is actually building into brand new skill sets, brand new ways of collaborating, brand new ways of working. And so a really big takeaway on this is that as you're building new categories, you obviously see that opportunity for change coming about because of the technical change, but you also can't lose sight of the human change. What's going to happen with the practitioners of the category that you're building into? How are their skill sets going to evolve over the next year, 3 years, 5 years? How are their budgets going to get determined? What are the leadership, you know, that sits above them, how are they going to think about team structures? How do we look at collaboration? You know, when we first started, it was rare rare for marketing teams to take a very fine-grained look at the data that was, that was determining the entire life cycle of the customer. Because in many cases, marketing, if you think about, you know, putting up a billboard or a TV ad or running a lot of brand advertising, there just wasn't— it wasn't a data-rich environment. And so there wasn't a lot that, you know, a data analyst, much less a data engineer, which again largely didn't exist when we started the company, was going to be able to do. Fast forward to today and we see this concept of a modern growth team where we bring together marketing, product and engineering, and data and analytics. And that comes together in this amazing feedback loop where we can have imaginative ideas come to life that are going to help our— help brands engage their customers better. That comes out of traditional practice, the traditional practice of marketing. We pair that with product and engineering resources to help those ideas come to life more quickly, and then they evolve faster and toward higher and higher levels of ROI by bringing in data science and data engineering. That was a concept and a kind of collaborative effort that wasn't happening when we started. But what we had to do was really think about how are, you know, how are consumer patterns gonna change? What is that gonna mean for the opportunities for brands that understand that? And then how will those skill sets and teams evolve over time? For us, we also had, we, there's also the, the kind of third major ingredient here is to stick to your strong convictions. For Braze, it, it was this basic human idea that better engagement with your customers will lead to better business outcomes. Now in mobile, we had a little bit of an issue in the early days, which is that from 2011 to call it 2014, that first stage of our early conviction, which was that huge businesses would be born and built to be mobile first, hadn't yet arrived. The biggest apps in the App Store were like the Compass app and the Flashlight app or the Arnold Schwarzenegger soundboard, right? These things are like fun and gimmicks, but they're not real businesses. Similarly, we saw consumer behaviors were taking a while to change. People weren't trusting their phones enough to put a credit card into it. The cell networks weren't fast enough. I remember having conversations with app developers in 2012 or 2013 where they actually told us that they didn't want their customers to engage with their products. 'cause they had already sold it to them for $1.99 in the App Store, and the sooner they stopped using it, the sooner they could stop paying the server bills, right? These were like ideas in the early days of mobile that were just quite frankly immature, but we had strong conviction in our hypothesis that huge businesses would be built in mobile, and that through that process, if we could provide better engagement with their customers, it would lead to better business. Business outcomes. And so that brings me into kind of this third thing, which is that as you're building a category, you need to stick to your convictions because it might take some time. And I'll put some data on this, you know, for our own experience in a second. And then the second, which we are all well aware of right now, is that markets are wildly dynamic and can be through this period. There's going to be speed bumps along the way, and you need to keep your, your sights mindset in a very focused way on where you're going and where you're gonna get to in the future. So I promised a little bit of data, and I know that at Saastr, you know, a lot of the content here is focused on this critical scaling path from 2 million to 20 million in ARR. And you know, this is the, the curve that we followed in order to do that. You know, we 8x'd our ARR in that 2-year period. But what I want you to zoom in on here is actually when this graph begins. Because that x-axis actually doesn't start until 2015. But remember, we founded the company in 2011, so it took 4 years for us to get to the point where we started to really see this acceleration in revenue because the market wasn't there yet. We, you know, I talked about all those job titles that we sell to today that didn't exist. Guess what? They didn't exist in 2014 either. You know, we knew and saw that these opportunities were coming, but they took a took a while to really come to fruition. It's even more interesting when you look at the market that we were selling into because you can see global— you know, this is a global smartphone sales graph, and it was rapidly accelerating from that 2011 to 2015 period. Interestingly enough, it wasn't until that actually started to level off a little bit that we started to see our revenue opportunity take off. And so when you're working to create a new category, you know, when you're looking at everything around you, see that rapid change, you can see that opportunity ahead of you. But, you know, what I want everyone to, you know, to really kind of find confidence in is that in a lot of cases, that opportunity for businesses to be built and for you to really start to rapidly accelerate your revenue, you know, is not necessarily going to show up right from the beginning. There's a lot of energy, there's a lot of excitement, and you need to keep yourself attached to those foundational convictions But there, there needs to be patience in the picture as well. We can take a look at this from another landscape, and you can see the number of apps and games in the App Store. You know, this number gets all the way up to 3 million, 3 million apps in the App Store before we got to 2 million in ARR. And then we were able to grow from there. We started to see, you know, it wasn't about quantity, it was about quality. It wasn't about how many different soundboards could be sold as separate apps in the App Store. But rather who's building sustainable businesses. And that allowed for us to, to really continue to lean into scaling our go-to-market motion and moving, moving beyond those early days. Now, there's also a supercycle going on, and this is where I think it's really important to think about this as we're now, you know, 10 years after mobile and everyone out here is thinking about, well, what's the technological change that I'm going to be able to find opportunity in? And, you know, what, how do I think about the pacing and what does the evolving, you know, whether it's skill sets or it's consumer preferences or it's the evolving technology landscape, you know, how, how is this moving? How do I know that I'm in the, I'm in the right part of a curve? Well, this is a really interesting kind of longitudinal look. And what you're looking at is a chart from The Economist that we have augmented with the smartphone data point in here. And this is the number of years that it took before these different technologies were used by 1/4 of the American population. You know, we start out in the 1800s. It took literally almost 50 years before that was true for electricity. As we go through television, radio, you know, telephone, it takes a few different— a few decades. We get to PCs and early mobile phones, and we're getting down to about a decade. It only took 7 years for this to be true for the web. And then smartphones showed up, and it happened twice as fast. It only took 3 years for people, for 25% of Americans to adopt smartphones, and then it continued to accelerate from there. And, and today obviously actually has more reach than any technology that's come before it, including things like clean water and electricity. And when we look at the reach of smartphones and the opportunity that that created, a lot of that came through the rapid pace of adoption. That, however, had a lot of uncertainty. There was a lot of dynamism in those early markets. There was a lot of early change. And, you know, we know this today as well when we look at the market environment, when it's more challenging to raise financing, you know, it can lead to really tough choices around what do I prioritize and how fast do I grow. I mentioned at the beginning, you know, this is my first SaaSer, came from New York. Braze actually in the early days had a difficult time raising financing. If we go all the way to 2016 into our Series C, Every single fundraising round that we raised, we only had one term sheet. It wasn't like you saw, you know, in Silicon Valley with people chasing us around different hotel lobbies and coffee shops with half a dozen term sheets competing with each other. In each round, we got one person to believe in us, and that was 5 years of development in the business through this period. And so for us, we were forced to learn how to grow at the right speed. We had a lot of competitors that raised a lot more money than us, And, you know, we were kind of forced to learn these lessons, and I want to share them with everyone today because I think that the environment that we're in is one where, you know, being able to take those lessons and apply them to your business, no matter what, you know, level of funding you might be at, can be really helpful because it teaches you as a business to kind of keep your eyes on that long-term prize of category creation and the massive addressable market that waits for you on the other side of that, but still do it in a way that allows you to maintain your efficiency and build build a really value-oriented culture along the way. So bringing that all together, you know, what this means is to grow at the right speed. And I want to walk you through a couple models about how I think about that, uh, that I hope you can apply to your business. So first, a quick little anecdote. Now I mentioned that I worked at Google before we started the company, and that early exposure to Android was important for my conviction in starting Braze. Another place that I worked at briefly was a hedge fund. And during my new employee onboarding, we had a talk from one of the co-chief investment officers of the business, and he drew 3 curves that look like this up on the whiteboard. And he asked the room, you know, of these 3 investments, which one would you prefer? You've got, you know, letter C, where you, you know, grow really fast in early days, you, you know, you hit the skids, you come down a little bit, and then you emerge from the ashes and you end up at the high end. In letter B, you know, you're, you're kind of slow and steady, and then eventually you hit your stride and you go up. Or letter A, where, you know, you're just kind of— you're growing methodically the entire time. And this seems like a question about risk tolerance, right? Like, how much volatility are you willing to take on in order to maximize your eventual return? Or it could be a question about patience. How long are you willing to wait before things really take off? But of course, Of course, you know, in the hedge fund world, it's a bit of a trick question, because in letter C, all of your clients pulled out all of their money when you crashed down right there, and you never actually got the opportunity to rise from the ashes. In letter B, you never got the fundraising that you needed to really start to take off, and your competition outpaced you from the very beginning. Letter A actually ends up being the only one that exists in reality, right? So this isn't a question about risk tolerance, it's actually a question about, How do we navigate market dynamics over time, taking into account things like the fundraising environment? You know, there's also like when we bring this into the startup landscape, it also has implications for the talent that you bring on board, how you engage your employee base, how, you know, you can invest in your early customers and continue to build on their experience over time. And so this, this idea that, you know, we can kind of choose between these, I think, is it's actually a false choice. And what we need to be able to focus on as a business is how do you end up being that letter A so that you're actually the only one still surviving at the end, you know, especially when you're in a world where you're trying to create a category and it might take some time. So from there, um, I wanna introduce them this model for thinking about this, which is the idea of using a supply and demand curve to think about your addressable market. So when you're building a new category, your eventual addressable market should be massive. But it might be the case in your early years that your ability to access that market incrementally could be very expensive. And so what you're looking at with the supply curve on the, on the left here, this blue curve, this is indicative of what the market looked like for us in, call it, 2013 or 2014. We could spend money to access a little bit of it. You know, we could, we could sell to— there were a few mobile apps out there that were operating as businesses. You know, some of them were trying to take a more sophisticated approach to their customer engagement. They were excited to try us out, and so we were able to efficiently sell to them. But if we wanted to accelerate in 2013 and get up that curve, we were going to pay a lot of, you know, whether it was money or energy, we were going to have to expend a lot in order to climb up that curve and sell more. And a lot of startups get forced to do this as well. If you raise too much money, you know, you try to grow too fast in the early days before before the market is really there, you find yourself trying to claw up this curve, but it's pretty inelastic. You know, if you are trying to sell to job titles that don't exist, sometimes you need to wait for those job titles to exist. If you are selling into a market where consumer attitudes and behaviors are taking time to evolve, you can help influence that, but in many ways, you know, the kind of massive momentum that's gonna build through that change can take time. Similarly, if you're building on the back of, of new artificial intelligence technology, or maybe, um, you know, you're using new architectures and building them out, uh, there's, there's other kind of external factors that have a lot of mass around them that will take time to build. And so when you look at this, if you wanna grow over time, there's an interesting balance between how much do I want to climb up this curve? How much do I want to pay to grow today? Versus where do I invest to swing this curve out over time? And how do I think about how that curve is gonna swing out over time? So the most efficient path through this is that, you know, you look at 20, you know, for us, maybe 2013, 2014 was that blue line. By the time we got to 2015, 2016, you know, we get to the lighter blue dotted line. Over time, that curve continues to swing out. And then when you really hit your stride and the market is coming into its own, That's where that curve flattens out, and then you can start to pour more investment into scaling the go-to-market. But think about this, especially when, you know, you're working through an environment that is gonna demand patience, one where your financing might be, you know, limited for a variety of reasons, whether that's because, you know, the venture markets have frozen up or because, you know, you're not able to maybe show that early momentum yet cuz the market's not there yet. And, and, You know, just keep that conviction because if you truly are in a category that's emerging and you're making those long-term investments, these supply curves will swing out. And if you can, if you can go to, you know, being that slow and steady curve that goes up, you know, eventually you're the last one standing and that can be super, super powerful. Now, another important part of this is of course keeping your focus on where product market fit is. I'll provide another anecdote. You know, I mentioned that, We had a hard time raising money in the early days. It was hard for us to get the attention of the venture community. That wasn't true for all of our competitors, but actually that market reality in that curve was the same for them. So they found themselves trying to claw their way up that curve and they couldn't do it. And so they unfocused themselves. They had these higher growth expectations. And so they went from just doing, you know, messaging and customer engagement. They added analytics. They went into the install attribution ecosystem and went over into the ad side of the house. They started to add customer Support and service. You know, these are, these were companies that had 50, 100, 150 employees, and all of a sudden they were trying to sell 5 products because in order for them to actually kind of hit the growth targets that they had signed up for, they needed to access not just one curve, they had to try to do it on multiple. And so instead of focusing on swinging that curve out, they wasted all their energy trying to claw up a bunch of these really hard to move up curves as the category was still emerging. The better strategy would've been to ruthlessly focus on where you knew the market was gonna go, to maintain that conviction and continue to build for that future so that when the market does arrive, you are a focused company that is years ahead of your competition. You understand your customer better, you've been developing those relationships and really building that deep understanding in your product organization and your go-to-market organization, and you're ready to really go in a focused way and compete for that emerging category. The next one is to really think about your value chain, which is, you know, as this category emerges, where do we think the value is gonna collect? How are people gonna think about what they want to pay for in this market? How is technology gonna kind of change around it and enable you to then leverage a partner ecosystem so that you can stay focused where your product market fit is? And allow for all the businesses around you to, you know, stay in their lanes as well, and you work together to emerge into this category. When we look at this for Braze, you know, we mapped out the problem of customer engagement through this stack, and we said, hey, if you want to have a great conversation with someone, there you need to be able to listen to them so that you can understand them better, and then through that understanding, you can have a more engaging and valuable conversation. We took that very human concept and we mapped it into technology. We said we need to be able to ingest data and be a good listener. One of the most important things we did was that we vertically integrated the data flow, and we went right into our customers' products when the data was being generated, and we made sure that it would get to our stack as fast as possible. That was one of the most important things that we really held strongly to. That was where our product market fit was going to be in the future. Because we knew that we would differentiate through having access and control over that real-time data flow. The next aspect of it is really understanding people. So we wanted to build through this classification, orchestration, and personalization layer an ability for these emerging job titles, these emerging skill sets, people that were gonna do consumer-scale CRM, people that were gonna do growth marketing, people that were gonna take data and, and a greater understanding of their customer customers in real time in order to deliver great experiences to them. And so we started investing really heavily in classification, orchestration, and personalization, knowing that that was a place we weren't gonna partner, we weren't gonna modularize. That's where the differentiation and the part of the value chain that we really wanna build our moat around was gonna be. And that continues to be the case today. But then we, we needed to be able to modularize, you know, in, at other parts of this. When you vertically integrate, the edges of that vertical integration should have modularity. And so we knew that we were going to partner to get data into the system no matter where it was being generated, and that lived on the top. And we also knew that we wanted to be able to communicate with people in the, in the way that made the most sense. And so that's why we also had modularity at the bottom of the stack, but focused product development in the middle. Now, the last thing that I want to talk through as well is, is another look at this technology adoption curve, which I'm sure everyone in this audience has seen some version of in the past. And in case you haven't, a quick tour is that, you know, basically as you're building into a new market, in the early days you sell to these early innovators. They're willing to deal with issues. They, they don't usually have as much willingness to pay, but they'll pay with their time and their energy and their collaboration with you. You move from them into the early adopters. And then as the company really hits its stride, you know, you move into both the early majority and the late majority, and you're selling to the bulk of the market. Now that kind of $2 to $20 million period is a really interesting one because you get to $2 million by selling to those innovators and early adopters. You get to $20 million as you're kind of crossing over that chasm. But then when you hit your stride and you want to scale to $100 million and a billion in ARR, when you wanna get to the scale where you're going public, you know, you're gonna live in that middle of the curve in the mainstream market for quite a while. And so a big takeaway here is that the area under the curve really matters. You can't lose sight of tomorrow's customers and, you know, accidentally over-index on the needs or the lack of needs of those early innovators. You know, one example that we had from the early days of Braze, And looking at that came from our email editors. All of our early customers had developer resources. And so it meant that none of our early, uh, you know, early adopters were asking us for a WYSIWYG editor for email, right? Because they were comfortable actually editing it. And so we, we didn't see that in the early demand signal, but actually when we finally went and built it, we unlocked a, you know, a much larger part of the market that maybe just didn't have those resources in the early days. Now, I, I mentioned that last November we went public, and so I just wanted to share, you know, a little bit of this anecdote that, uh, is the equivalent of the WYSIWYG editor for companies that are really scaling. Over the last year, we had to go and upgrade a bunch of HR and finance systems, and we went from great systems built by, you know, emerging startups with really intuitive UI, UX, and, and actually really attractive price points, and we had to upgrade to clunky enterprise software with abysmal user experience, unintuitive interfaces. And by the way, it also costs more. Why? Because it's integrated with things that we can audit. It has the right, you know, it has the right enterprise security controls. It has the right, you know, it has all these things that that's integrated into NetSuite, or whatever these other things are that we need to use in order to close the books. So we got trapped in this interesting situation where I had to pay more for worse software because of these enterprise needs that I had, which means that the businesses that we churned off of are by definition losing some of their best customers right at a stage of growth when, you know, they're ready to pay them a lot more. The reason for that is because they're not prioritizing what the needs of the later majority are going to be while they're growing in their early stages. And so, you know, that, that lesson of really trying to think about what are the needs going to be from that middle of the curve where I'm really going to live for a while as I get to $20 million, go to $100 million and beyond. It's, it's all too easy to kind of end up with that myopic vision of, of focusing on the feedback or the lack of feedback. None of your smaller customers are going to ask you for something like that, that you might be seeing in the market. So when you look at category creation, you know, an emerg— a kind of a recurring theme through this talk has been, think about where you are today for sure, build for that. But you always need to have your eye on this multi-year time horizon. How are consumer preferences going to change? How is technology going to change? How are, you know, my customer skill sets and their teams going to change? What is that market curve going to look like in the future, and how do I swing it out so that I can grow more efficiently over time? And what are tomorrow's customers going to really ask me for so that I can hit my stride in the middle of the curve where there's a lot more willingness to pay and there's a lot more customers? All right, so that does it for my time. And, you know, we'll be able to make these slides available. I hope you found this informative. Informative, and I hope you've been able to learn from the journey that we went through starting out in 2011, the early advent of mobile, and growing into where we are today. I'm Bill Magnuson. If you want to follow me on Twitter, that's my handle. And we're also hiring at Braze, so check it out if you want a job.