Auren Hoffman (LiveRamp): A Billion in Exits: 5 Things I'm Doing 5 Times Better This Time

So next up, we've got Oren Hoffman, who is the co founder and former CEO of LiveRamp, the largest middleware provider for market automation companies. And kind of keeping along with the theme that Leo had on lessons and such, Oren's going to talk a lot about five different lessons. He learned that he's doing much better this time. And so I'm really excited to sort of keep this theme of lessons that that founders have. And with Oram, we've really got a repeat founder of businesses who successfully then exited, so has had time to put down some great thoughts on what to do better next time. So with that, I'd like to welcome Oram.

Thanks.

All right, welcome.

All right. Okay, so we're gonna have a good conversation here today. I'm gonna try to do these slides very quickly and leave as much time as possible for questions. So your assignment is to think of a good question. If you're really an entrepreneur, you'll have a good one, and then we can have a little bit of a discussion going forward as we move forward together. So just quickly we're gonna talk about is basically five core lessons that I learned from Liveramp and then what we're doing from those lessons and the new company I'm involved with with Siftery. Just a quick overview. Liveramp is the largest middleware company in marketing technology. If you're in the marketing technology space, you probably have heard of Liveramp. If you're not, you almost certainly have not heard of Liveramp. And Siftery is a new company. Siftery helps companies find products, tools that they should be using different software products. So if you're selling a software product, your software products almost certainly listed already on SIFT 3, et cetera. So just to give you a quick overview of those two things. So before I go forward, just a quick, quick poll. How many people here when they started your. When you started a company is trying to enter a market bigger than a billion dollars. Okay, so we're going to talk about that. And then in this kind of debate of hiring, there's always this debate between going for experience over going for potential. So how many people here go for experience? Raise your hand if you're experienced people. Okay, we have two people. Really? Okay. Three, four. Okay. How many are potential? Okay. And how many of you are just really tired right now? Okay, awesome. Great. Okay, so we're going to talk about basically five core lessons. The first lesson is all around athletes beat position players, at least in the early days. Second lesson is put yourself in a Box to define optionality. The third lesson is focus on a small market that you can actually win. The fourth lesson is about salespeople, about the product oriented salespeople versus relationship oriented salespeople. And the fifth lesson is basically about the future of enterprise software, which we'll have a discussion about as well. That makes sense. Okay, so that's our quick journey. Basically five lessons, five slides. So the first lesson is basically again, you have these all around athletes, which are basically people with potential versus the position players, which are the people with experience. And so if you know what you're going to do and you're very sure where the world is going, almost always position players beat all around athletes. If you know you're going to be playing football in the super bowl, you need a kicker who can kick field goals and you need to have one of the best kickers in the world, otherwise you ain't going the Super Bowl. But if you don't know what sport you're going to play, you might be playing the decathlon, maybe the person who can only kick field goals might not be the person you should be getting on your team. So in the early days, essentially who kind of our core thesis is all around athletes are better than position players, people with potential are better than experience. And that was kind of our core learning at Liveramp. Almost every single person at Liveramp was hired with less than five years of experience. Almost every single person we ever hired out of like the 200 people hired at LiveRamp was hired with less than five years of experience. And as we grew, we promoted those people to manage the person who took my job over and is now running the company we hired out of college. And so he's now running the 200 person company. Today. When you scale and you know what you're doing, then you know, bringing in those position players can be sometimes really helpful. Now this is pretty controversial, so hopefully we can have some questions about this as we go forward. Okay. Second thing is, is to put yourself in a box. Again, this is pretty controversial. Most people don't agree with me here, but my core thing is to be as focused as possible to put yourself in a box. And the box basically says what you're not going to do. And I think you should publicly state to everyone who will listen, that includes your customers, your partners, your employees, your investors. Anytime you talk publicly about your company, this is what we don't do. We're not going to do all these things. We're just going to do this tiny little thing. We're only going to do this thing. Here's where we're going to go. When we're putting ourselves in a very defined box, almost every smart person in the world will disagree with me. They'll say, no, you need to leave your options open. You need to be able to do all these things. You don't know where the world is going to take you. But I think you can be smart enough to know where the world is going and put yourself in a box and really, really own that particular box. At Liveramp, people would always say, are you going to do media? We say, well, we're never going to do media. Are you going to build applications? No, we're never going to build applications. We're just a middleware company. We're just going to move data between one application to another. Today, that's still all Liveramp does all these years later. It doesn't do anything else. It just basically moves data between applications. Do you actually do anything with the data? No, we just move data between applications. We'll only do that. We'll never do anything else. That's the only thing we're going to do. If you do that, if you eschew optionality and you stay focused, then it's really easy for all your employees to make decisions. If the strategy is clear, what you'll never do, you can push all of decisions down to the lowest rung of your employees. If the strategy isn't clear, you need to micromanage your employees a lot more. You need to be involved with a lot more of decision making. Almost every strategic deal that has to be done by one of like the three strategic people in your company because not everyone will know enough to know what's going on. So the clearer you can make the strategy of what you will and will not do, the easier it is to push that down. At Siftery, we're doing the same thing. Siftery. The first thing people ask us if you go to the siftery.com site is, oh, great, I'm a vendor, I want to pay you well. We're never going to take money from vendors. Sorry. We're going to try to build tools for buyers and not for vendors. And yes, people constantly are asking us, oh, great, you can build all these products, you can get all this money. But being publicly out there of not doing something allows a lot more clarity from the entire organization to go forward. I hope that makes sense. Okay, that's two, three. Again, this is also pretty controversial. If you're starting a company or you're starting A new product in your company. My advice is to find the smallest market that you could go after. Find the tiniest, tiniest market and go after that market and own that market. Now, the best market has three basic core things that you want to look for. One is that it's really, really small and we'll talk about why in a second. The second is that you can own it so that you will be the dominant player. Hopefully you'll own over 50% market share. And the third is that the market is going to grow really, really, really fast. Right? That's the three most best things to go after. The reason why you want to go after a small market is because no one else is going to care about it and therefore you can own it. If you're going after a large market, everyone else is going to care about that market. So you want to go after the smallest market as possible. When LiveRamp started our first year in business, 2011, first year with our product, our market, total market for what we were doing was $3 million. $3 million was the total market. And we had two competitors out there. We did a million first year revenue and we had two other competitors that were out there. But those competitors both were part of companies that had over 100 million in revenue and, and they didn't really care about this market. They weren't going to fight hard to make that market win. Second year live ramp revenue. We did 9 million in revenue, 9 million in SaaS revenue. So we did more in revenue second year than the entire market was the first year because we picked a market that was growing. We picked a market we could find that was growing. Third year revenue live ramp. We did 21 million in revenue and we were profitable. And that's super fast growth for a profitable company. You almost never see a SaaS company grow that fast when it's profitable. And the reason is, well, we own the market and it was much easier to be profitable. We were owning the market. Our sales expenses were really, really tiny. We did 21 million in revenue with five salespeople. Because we own the market. It's like, well, if you want, it's pretty easy to sell. Either we could sell it to you or not. Either you needed it or not. We were the market leader. We had the best product in the market. Nobody else really cared enough about that market to really focus on that market. Now the numbers since that was 2013, numbers since are somewhat public because now we're part of a public company, but it's still one of the fastest growing SaaS companies of its size that's around and really because it owns the market. And siftery's goal is to really is to be similar, is to really try to own that market as well. Fourth thing, and this is also going to be controversial, there's basically two types of salespeople that are out there. There's product oriented salespeople and there's relationship oriented salespeople. And you need to figure out what type of company you are and you need to figure that out fast because it's really going to change the type of salespeople you need. Relationship oriented salespeople are the typical salesperson that you find. They're gregarious people, they're outgoing, they're extroverted, they're your friend, they're buying drinks for everyone. They're going to talk to you when they're on the airplane. They're going to trade information. They're the life of the party. They're going to tell jokes. That's the relationship oriented salesperson. If you're selling a product which has a lot of competition and is not as differentiated and you need to be honest with yourself, if you are, that relationship salesperson is going to be really helpful because they're going to build really good relationships with the customer and they're going to actually get that sale going. The product oriented salesperson is introverted. They look at their shoes. They're not the life of the party. When the cocktail hour comes, they actually go to their hotel room and shoot off like 50 emails. Now, they're just as competitive as the relationship oriented salesperson, but they're much more into the weeds of the product. Product oriented salespeople usually don't have a sales engineer. They're actually the sales engineer themselves. They're much more technical, they're much more involved. If you have a product that is really differentiated, if you have a product that is really different, and again, you gotta be honest with yourself, then you want the product. Orange salesperson. Product oriented salesperson is never taking someone to the baseball game. Never. They're just going out there and they're explaining the product. They're patient with the customer, they're working with the customer to help that customer understand what they do and understand the capabilities. And then they're really making the decision up to the customer of whether or not they should buy this product because it's differentiated. And so they're really what their main goal is. They're trying to get the customer to understand the true capabilities of the product, not the razzle Dazzle. Here's just what we do. And then you as a customer and you have to be very smart and technical because you have to answer a lot of questions and be patient as the customer gets up the learning curve. At Liveramp, every one of our salespeople, all of our top salespeople are product oriented salespeople. They're all introverted. Our top salesperson who runs the sales team, his first job out of college was a chip designer at amd. He's an electrical engineer. And so it's incredibly successful building out with these more introverted salespeople. My number one mistake as a founder was hiring extroverted salespeople to sell a product oriented product. And the last thing that we'll talk about today, we'll see if this thing works. Ah, there we go. Perfect. Last thing we talk about today is the future of enterprise software. Why are you all here at Saster? You're all here at Saster because there's just this massive abundance of enterprise software. Almost all of you are at an enterprise software company or you're probably somebody who invests in enterprise software companies, right? That would probably represent 98% of this room. And you're like, wow, there are a lot. You look around the room, you're like, there are a lot of enterprise software companies in this world. And there are. The number of enterprise software companies has gone up 20x in the last 10 years. The number of software companies that the average company buys, let's say a company like Best Buy, the average company like Best Buy Buys has gone up 10x in the last 10 years. A company like Best Buy had about maybe 45 vendors or so 10 years ago. Today they have about 450 vendors. The number of buyers within an enterprise software company has gone up 12x. So there used to be a small number of people that buy software. Now there's a huge number of people within the company that are buying software or influencing the buying of that software. And the budgets have gone up dramatically as well. Over the last 10 years, the budget for software within most of these big companies has gone up like this. The budget for people, for employees has been flat last 10 years of large companies. So they're making a conscious choice to replace people with APIs, people with software, people with essentially they're using your companies for people, right? And this is happening everywhere. And so you have to think about, how do I play into this market of abundance, this abundance that's coming out there? Which side am I on? Am I on the side where I'm going to have just massive competition. I think that's okay as long as you've got something very differentiated because people will buy. It used to be that if somebody bought SAP and SAP had a feature that they were essentially getting for free because they already bought SAP, which was worse than your company product, they'll still stay with SAP. They won't use their product today. If your product is better than the free one they're getting from SAP, they're buying your product. They're used to doing that. And it's so much easier to sell into companies today. So it's okay, but you will have more competition. Or are you playing on the other side of it, like the middleware companies. Liveramp, Snaplogix, Mulesoft, Klever segment, et cetera. You know, all these middleware companies that are essentially. Saster. Saster essentially is a middleware company. Right. It's just basically a conference. It's bringing all these vendors together. They're allowing to talk to each other. It's like a human middleware company is what Saster is right here. So Saster plays into this global trend and that's what we're trying to do with Siftery as well. Siftery is really helping companies learn about all this different software that's out there and it's trying to play into this trend. So in some ways you're going to be affected by this trend. It's becoming much easier to buy software so many of you maybe can make. Your sales are going to be much easier than it was before. It's much easier to start these companies. There's lots more competition in every given space. So we're all going to play into this trend. So with that, now we're going to use your homework that we gave to you. You can tweet at me or you can quora me or whatever else it might be, but hopefully we'll get your questions as well.

Yeah, let's open it up. Actually, I've got one.

Oh, great. Awesome.

On your point about starting with a small market at lighter capital, we fund a ton of SaaS companies and a ton of companies focus on relatively niche markets. And we see more and more and more and we've got maps of what different niche markets are coming up. But one thing I'd love to learn is how is it that you identify such a small market that's growing quickly? Because it's not like you can get a Gartner report, because by the time Gartner's come out and made a report, About a fast growing market. It's $4 billion. Right. So how is it you've identified that kind of stuff? Because I think there are a lot of people that are thinking about founding companies and want to find a place to go. But how do you identify? That would be a great lesson, I think.

Yeah, I mean that's the $25 billion corporate question. Right. And it's a really, really good question. It's a really, really hard thing to do. So, yeah, if Gartner's writing a report on it. First of all, Gartner has never in the history wrote a report where it didn't have multiple companies in this. In this. In the, in the. Right. So it's already writing report about something that's fairly competitive, that's out there. So usually it means you have to have some sort of proprietary knowledge. You have to understand this space better than others. And this is why if you're like, I don't know, you're right. But if you're old like me, this is where old guys like me have an advantage. And so if you're old like me and I'm on the old side of the tech world, this is where you want to be. You want to be in a place where you can have an advantage. You can use your experience. If you're young, you should probably be doing like a B2C type of thing. Right? That's where you have kind of the edge. So use your experience to your advantage. Maybe it doesn't have that many advantages when you're old, but if you have a little bit of gray hair, use your experience to your advantage and find kind of like some weird niche that maybe people don't totally understand. Maybe it takes a lot of proprietary knowledge to get. There's some weird thing in the insurance world about how the claims get moved around and there's all this government regulation, but you know it because you were in it for a while and your brother in law's got a company or you know, whatever it might be and then do it. But if I knew exactly how to find it, I would be starting these companies every day.

Yeah, no, I totally agree. We see that a lot because we fund a lot of smaller niche sort of SaaS, companies like that. And I'm always impressed when they've really focused on something small. I think that one of the challenges that's come up that would also be interesting from that is going on to raise equity when you're focused on something small. Because a lot of VCs really want to and at lighter capital. We're not a traditional vc, so we're not focused on this. But. But they really want to see that you have a big market. Like you started your speech with. Who here is addressing a billion dollar market? Because if you're not addressing a billion dollar market, it might be hard to raise equity money, but if you start small and focused, I totally agree that it's, you've got a better business in the long run, but it can be sometimes hard to sell that to investors.

You're absolutely right. Raising money in a small market is really hard because by definition, if you're going after a small market that you think is going to grow fast, most people won't believe you that it's going to grow fast, otherwise other people would already be in the market. And so you have to convince these people that it will grow fast. And, you know, and VCs aren't any smarter than anyone else here. And so it's going to be very difficult to convince them that this is going to be a, you know, a lot of them will think the market's going to tap out or et cetera. My retort is, look, if someone says, well, the market's only going to be, I know you're going to get to 25 million in revenue and that's going to be great, but I really want to only invest in a company that can get to a billion in revenue. My retort to them is, look at our team. If you think we're smart enough to, once we get to 25 million, to find an adjacent market where we can continue to grow at 100% year over year, then invest in us. If you don't think we're a good enough team, then you shouldn't be investing in us. And so put the pressure on them to say, look, if you don't think we're a good enough team, that's fine. Then you probably shouldn't invest in us anyway. But if you do, we're probably smart enough to move to an adjacent market. Yep.

It's the old idea of, I guess this shows my age. Crossing the chasm.

Right.

Of the old. Crossing the chasm. For those that haven't read yet, we.

Got two oldies out there.

Yeah, yeah, exactly. With that, I've hogged enough question time. Let's have some questions from the audience. We got some around.

Sure.

You want to stand up? I can just. Oh, we got one for you.

Thank you. So my question is relating. You've got three. We've got three converting buyer Personas. Completely different niche markets. What you said, I believe in slide 2, we want to find one that we want to double down on and own that buyer Personas market. Definitely. Does it make sense for us to put down our cards and neglect the other two converting buyer Personas and just own the one that we see the most potential in? How do you typically approach that situation when you know you can make money on other segments without knowing anything about your business and probably likely to be wrong. But my, my bias would be to. To immediately focus on the one thing that you think has the most potential or for whatever reason you're gonna do them, you're gonna do the best at your product is the best fit for and not worry about the other. And publicly tell every all your employees, we're not, we're not gonna work. We're not gonna worry about these other guys. We're not gonna go after them. We're just gonna go after this Persona. We're gonna own this Persona. We're gonna build tools for this Persona. I want you to sleep when you're dream. I want you to dream about this Persona at night. And we're gonna to build things for this Persona.

Got one back here. Back over here. Following up on that question. I mean, would you, if you got customers in other segments that actually came to you and said, hey, we want your product, would you refuse the business?

Potentially so. I mean, one of the other things, one of the other things in SaaS companies is the most important thing in SaaS companies is churn. In the end, it's like basically is customer satisfaction. Do customers love your product and are they going to stick with your product? And the live ramp numbers for last year aren't public, but basically almost every year. Liveramp turn. Our number of customers that left US was under 5% of our customers left in a year. You know, we had negative churn every year from, from a revenue standpoint. And, and so you want to sell to people you know are going to benefit from it. And when someone wants to buy it and you don't believe we're going to benefit from it as much as they should, you might be wrong. So you might want to investigate, okay, why do you want to buy it? What's going on, what's how. But, but if you, if you believe they're not going to benefit from it, you as much as they should, I think having an unhappy customer in the long run is generally not a good strategy.

So I may represent the engineers who started companies.

Awesome.

I'm the CEO who's An engineer. That means I'm product sales oriented.

Correct.

And I've hired a VP of sales, my only salesperson who's really relationship oriented. So does that make me the sales engineer or am I driving it? Am I going to really build a sales organization around product or can there be a balance?

Well, my personal feeling is it really depends on the product that you're building and who you're selling it to. So for instance, I come from the marketing technology world and in there it's pretty easy to make the distinction. In the marketing technology world if you sell products to agencies, you're a relationship. Almost, almost 100% of companies that sell products to agencies, you need relationship salespeople, need to be taking these agency people out to dinners and drinks, need to be building long term relationships with these agencies. When you're selling it actually to the marketers, like if you're selling it directly to Coca Cola and not to the agency, then usually again this is just a simple heuristic. But usually you need more of the product oriented sales team because it's got something that's fairly differentiated and fairly different. So you want to understand your company and you understand the type of company you have. And either you have the right head of sales or you don't, depending on the type of product that you have.

Got one behind. Oh, sorry, one second.

Great talk. What's your tips for finding the high potential candidates when you're hiring them? Can you give us like A2 highlights? How do you pick the people you're going to hire? That's a really good question. So first of all, like hiring people is incredibly humbling. There's probably nobody here that probably has had a really great hit rate. And I think there's one of the things that is even more humbling is let's say you hire 30 people. Yeah. Okay, you may have like five that don't work out or 10, whatever it is that don't work out. But you'll also have like these five superstars, let's say, right. That end up becoming superstars. And those people are the really people that really drive your organization. In my personal experience, I have never, I priori been able to pick out the superstars before they were superstars. So you know, I may have hired 40 people and maybe they all turned out to be at least pretty good, like you know, very, very good employees. And they may all be a players but there were like four of them were just these absolute superstars. I wasn't able to, I wasn't smart enough to know before I hired them that they would be this just incredible people and those are the people that really drive you. Now of course, once you work with them, it's easy, right? Once you've worked with them before, it's really easy to know in the future. So this is basically a long winded way of saying I have no freaking clue how to do it. And if anyone here comes up with the way, please tweet me or email me. I would love to know how to hire better.

They walk in the office green or something.

Yeah, exactly.

Great talk.

My question is kind of when you're getting started with picking out who you.

Actually want to connect on either side of middleware, how does that play into how that play into your initial deal making process to figure out which products you actually supported and built your platform around the beginning?

Sorry, what do you mean by which products?

So if you're like connecting marketing tech products, right?

Yeah. So I mean if you're middleware then and you're just connecting products to one another, then you just really have to understand what your customers use. So let's say you're going after like for instance, a lot of you guys probably use Google Apps, right? So hey, like if you're middleware for sales, you know, sales organization, probably pulling data out of Google Apps is probably good. Probably a lot of you guys use Salesforce, right? So hey, well that's probably a good place in the marketing tech where we use. The number one marketing technology company in the world is Google and so that's probably a good place to start. We should probably integrate with Google and it's the best place to go. And it's the most, you know, the most of the spend is going through Google. So that was to us was the number one most important place. And then you know, there's lots of these, you know, core ad networks, core other platforms that are out there. There's obviously things like Facebook and Twitter and some of these other places that you want to move data in between as well.

Okay, maybe one more question.

All right, you good? Sure.

G' day mate. Just with your sales team, you talked about five people, $21 million. Can you just explain maybe the roles of those people and how you, I mean been able to achieve that or understand that it was a niche market, you own the market. But it's still fascinating to hear five people, how did they handle the deal flow, that kind of stellar growth?

Well, first of all, remember we went from 19 21, so we had nine in the bank from the year before. Right. And then we were able to upgrade some of that nine. So we're not talking about 21 in like new bookings for the year with those five salespeople.

10 million a year is pretty good.

Yeah, but the. I mean, I think if you have like, basically the huge problem with most salespeople is you don't have leads, you don't have good people to talk to. It's not like, you know, sales conversations with a customer are, you know, for one customer is going to take up like a thousand hours a year of your time. And you only have so many emails you could do for follow up, so many things you can send them so many meetings. And we're talking about probably like 20, 30, 40 hours for a big customer. Right. That is going to take that much of your time to go do. So you don't need a lot of salespeople to do so. Usually the reason you need a lot of salespeople is either the relationships. If you're actually taking people out to dinner, you actually need. It takes a long time to build these relationships, and you can only maintain so many relationships at once. Or another reason you might need a lot of salespeople is that they're unearthing the leads themselves and they're trying to get these leads themselves. In our case, because we're a middleware company, most of our leads came from our partners. And so we had our partners sending us all these leads and they're like, hey, you know, to use our product better, you should go over here. And so that made it really, really easy and much better. But if you have. That could be the same thing. If you have a great marketing organization, it could be something similar where you need fewer salespeople because you have a great marketing organization.

All right, that's our time. Thanks so much.

That was great.

Absolutely.