What Early SaaS Founders Get Right: 5 Winning Strategies

Robert Khoury is a successful entrepreneur and an author of the bestselling book, Feed a Starving Crowd, and The Subscription Playbook. As a co-founder of one of the fastest growing proptech SaaS companies, Archistar.ai, which has been on the AFR 100 3 years in a row, he has raised $40 million in venture capital And been also featured on the top 100 young entrepreneurs in Australia. So his insights today are priceless, and they're earned in the battlefront. Now, today, you are going to learn about how to grow a SaaS company, how to build a moat, turn it into a fortress, and keep expanding it into the company you've always dreamed of. Thanks for joining the call, Rob. So good to have you here.

Yeah, thanks, Priyank. I'm very excited to be here and you're a very good friend of mine and always happy to jump on any adventure that you decide to go on.

Fantastic. So tell me about your journey in entrepreneurship and what led you to write this book.

So basically, it all kind of started with my university degree. So my first one was a Bachelor of Computer Science. Very quickly went to corporate in various sales and marketing roles. Always did very well, always overachieving sales targets and kind of smashing marketing campaigns and doing quite well. After about 10, 12 years in corporate, I decided to write my first book called Feed a Starving Crowd, which was really good. It did bestseller and I think there's about 50,000 copies now in the market. Wow. Yeah, so it's been very successful. And after I wrote that book, I started my own marketing agency. And the reason why I started that agency was because After writing the book, a lot of people were saying, hey Rob, can you help with our marketing, et cetera? So I thought, okay, I'll start the agency. Let's help people out. And because I did my MBA then, I learned all about differentiation and how do you stand out in the market and you can't be the same as everyone else. So I decided to have a results-based marketing agency. And so by results-based, what I would do was I would do like event marketing. So I would fill up events and get paid like a cost per seat that I filled up. Or I'd do product launches or lead generation, all kinds of things where there was a tangible outcome and I could get paid on that outcome, whether it was a lead, a sale, an event attendee, things like that.

Right.

And so because of that offer, it was very popular. So even internationally, people were saying, hey, Rob, can you do this? Can you do that? And so like if I did an event and I filled up the event and I got paid to fill the event up, Yeah, the client will say, Rob, thanks so much. That was a great event. And I'd say, cool, when's the next event? And they go, don't know, might be later this year, maybe next year. You know, we'll come back to you when we're going to have the next event. And then I kind of said, well, to myself, I'm like, crap, I've got all this staff, all this office expense, all this overhead, and all of that is recurring expenses. But my income is really lumpy. Like, it might be great when I do the event, but then It might be another 6 or 12 months before that event comes around again. And I've got to try and find someone next month to do an event because I've got to pay the team next month. And so what ended up happening was I'd have all these kind of gaps in our schedule of marketing campaigns. And every time we had a gap, I would just pay the team out of my own personal savings.

Hey.

And so after a while, it got to about, it's about $200K that I'd put in out of my personal savings, just kind of topping the team up. In between projects. And my wife is like, Rob, what are you doing here? Like, this is, you know, a business meant to give us money. We're not meant to be putting, like, you know, we don't have to keep, we're not a charity here. We have to keep paying people. It's not like the business should be paying the people, not you personally. Yeah. And I was like, you know what? Can't, can't argue with the point. It's a good point. And so that was a real kind of wake-up call to me to say, Rob, you've really got to do something different here. Like, whatever you're doing isn't working. And so basically then I was very fortunate. I found a buyer of the agency and I was able to exit the agency. It wasn't a huge financial result, but I was able to still to kind of exit and get a result there. And then while I was working out what to do next, my brother Ben had started up the Archistar business. And I'm sure we'll talk more about it in the coming questions, but it's been a great success. And it was a real breath of fresh air. Like it was a software play. So, you know, we didn't have like a kind of a fulfillment cost every time someone subscribed. It was recurring revenue, which was a breath of, you know, I could sleep easy at night knowing that people were paying each month. It was AI technology and there was a really good moat around the business as well. So yeah, I think with all those things in mind, it's just been such a good business. And, you know, for the last 3 years we've been in the AFR Fast 100 Growing Businesses. So it's, it's been a real success story.

And you know what, for everyone listening, I've known Rob from his corporate days. And just like he said, he's always been a high performer. But not only that, you know, Rob is probably the most unique thinker because he has, you know, from starting his own agency after being in corporate through to being a co-founder with, you know, and being a key part of the story in architecting what happened at Archistar and now writing this book around subscription. You know, he just is, I'm always inspired and full of ideas when I talk to Rob. So tell me a little bit more about your journey with Archistar.

Yeah, so look, Archistar has been a great success. When it started up, essentially, we started up as an e-learning academy. So we were teaching architects and digital designers the latest software tools. And it was all done digitally through the internet, great online courses. Most of the clients were the universities. And then what we started to find was that people were saying, Rob, like, you know, we don't really want to learn C# programming, you know, to draw architecture buildings. Could you guys just do it for us? And so I asked Ben, was it possible? He said, it's going to take about 18 months, but we can get there in stages, but it's going to be a decent project to get there. So we raised a bit of seed capital. We started doing it manually for the first few months. And then over time, we were able to start doing these designs automatically using generative design and AI technology. So, and we're very early to market with this. Like our first version of the SaaS came out in 2018. So over 5 years ago now. And yeah, ever since then, it's been very successful. Like we've got a great client base in Australia. North America is doing very well for us and even the Middle East. So. It's been a really good journey. It's a great software platform and yeah, had great support from investors all the way through.

Fantastic. I mean, I have, we shared an office on the same floor, a tiny office, you know, that we had and you had a larger office down. And then I've seen your premises in the city, which is, you know, it's this huge from where you've come. And I think it's just, It's a true startup success story. And then the success you've had with, you know, just AFR Fast 100, the recognition year after year. So I think that there is so much credibility behind what you have to say about growing businesses that I'm just so keen to jump into it. Now, before I do that, tell me a little bit more about that infrared sauna that I think is right behind you.

Yeah, that's a funny one. So basically the, um, I got it during COVID and I did a bit of research online and it turns out that it's a bit geeky, but there's, there's something called EMF, which is kind of like radiation that comes out from the saunas. And I found one that had no EMF. So it's very safe to be in and it literally plugs into the wall, the power point. So doesn't need any fancy, like, 3-phase power and like that, just a normal power point. You don't need to tip the water in and maintain it and things like that. And it's, it fits one person, about the size of a phone booth.

So it's a lot of fun. Fantastic.

Like I use it 3 or 4 times a week, just for 10, 15 minutes, nothing major. I just read a chapter or 2 of a book while I'm in there. And, um, I find it really refreshing. You can come out, have a cold shower after that. And yeah, I'm buzzing. I'm ready for work after that.

Well, probably that's the true secret behind all the ideas that you've got loaded into this book that you've written. So—

You never know. You never know. We can give the sauna all the credit.

So look, we are, you know, very much living in a subscription economy. It is not a new idea. It is probably a very well-proven, robust business model from the Netflixes of the world to the Dollar Shave Clubs, to cars now being, you know, in fact, some— I remember watching a keynote from the CEO of Zuora around, you know, really painting a picture about a world where everything was on subscription. You didn't have to own anything. You could literally access whatever you wanted on a subscription. So I love that idea. Given that you have built your own subscription company, which is on the AFR 100, You know, we have from founders to business owners to sales leaders and salespeople who watch this show. Can you tell us more about, you know, what are some of the key strategies that you'd recommend for anyone who has a seed or a fledgling SaaS business, some growth strategies that you see have worked for you and other companies at that early stage?

Yeah, so my kind of view at the early stage is you've almost got to do whatever it takes to get your first It was quite half a million to a million dollars in revenue. And generally speaking, it's like founder or co-founder led sales motion. So a mistake I see people making is maybe hiring that VP or head of sales too early before you got the product market fit. And that can be painful on all fronts. So like what me and Ben did, like our first million dollars was basically me and Ben just going out there and pitching it ourselves. And it was actually really fun because what we would do is we'd go pitch and then the client might say, hey, could you do this feature? And then we just go back and build it the same day and go back and say, yeah, we've already done that. You know, do you want to sign up now? I think though the challenge is once you get to a certain scale, that's after you have a proper development team and a bit of a roadmap and a backlog, like you can't really do that anymore. So, but for your first half million to million dollars, that was, you can, you know, You can prioritize what features you build and what order that you build them in. And you can have that speed. That's the real advantage at that early stage where whatever people want, you can build it very quickly and give it to them and then really build up that first half million to million dollars of revenue. So, you know, I don't think there's any real, like none of the stuff that I do is super crazy. Like I don't have to run like, you know, a Facebook retargeting pixel with a 15-step process or, you know, just kind of crazy, um, automated sequences and things like that. Like, I think for that first half million to a million dollars, it's literally just getting in front of the right people. And whether that's, you know, depends on what type of business you are and if you're targeting consumers or businesses. It might just be LinkedIn reachouts, it might be people that you know already through— like, I, I do so much stuff that's just very, very, very boring and very simple, just like LinkedIn reachouts, email reachouts, phone calls, like the real basics, um, which again, it's not, it's not that impressive and it's not that exciting, but it gets results. Even for my book launch, probably 85% of the people came from me just reaching out on LinkedIn to people I knew saying, hey, got the event coming up next month, you want to come along? Really simple. I tried 10 other things as well because you never know what works, what doesn't work, but the majority of the heavy lifting came through LinkedIn outreach and, and that made LinkedIn ads, Facebook ads, emails, all that kind of thing. So even with all this experience and running so many campaigns across so much time, like, I even, I don't know what's going to work before you get started. So I normally try anywhere from 5 to 10 different strategies whenever I'm kind of launching a new campaign to see what lands and where you get the best bang for buck.

Yeah, that's really good advice. And I think that, you know, just what you said there is at the end of the day, it's in the early days, it's whatever it takes and whatever works because you do not necessarily have the scale or the ability to run programs which are systematically delivering an outcome, right? So obviously very scrappy but effective to get you from, you know, zero to your first million.

Yeah. And in saying that, like I was at an event last night and one of the attendees said, hey Rob, I've got this business. I'm still pre-seed and, you know, like I'm still before getting funding. Um, I've got like an MVP. I've got 3 customers on trial and I might be able to get 10 more on trial, but I just haven't got the time to go out and, you know, go out and make those things happen. I'm like, well, you've got to find the time. You know what I'm saying? Like that's, Like the first 3 that you've got on the trial, that's a really good start, but now you've got to move them to being paid. And then the 10, the other 10 that are prospects, you've got to move them to being a trial and get them paid too. You've got to find the time. Like it's, maybe you have to work nights or weekends to make it happen. And that's a bit of a, you know, it's not great. No one enjoys that, but sometimes you've got to do what you've got to do. And then, you know, once you do then get those clients signed up and they're paying and they're happy with it. Then you might better get some funding, then you can hire a team and then you can start to, you know, maybe work some reasonable hours, hopefully, or maybe you still have to work long hours, but you can't expect people to back you if you haven't got the time to go and see customers.

Yeah. So what is that point where you go from founder-led sales to your first hire? What are some of the things that should be in place?

Yeah. So I, my kind of view is like that half million to million dollar level to migrate to that first hire. And the most important thing that I find is making sure that person is like a player coach. So someone that can, like has led a team in the past and is happy to lead a team as well going forward, but is really happy to be your first salesperson and kind of build that up for the first 6 to 12 months. So that's really important that you find like not just a pure play manager because then they're going to have to hire a team. And then they're going to need at least a few people underneath that. And at half a million to a million dollars of revenue, you really can't afford to be spending that kind of money on a 3-person team. So you really need that first person to be a real, a person that loves selling, but loves building teams as well. And it's a unique kind of role. Like it's not every person out there that wants to do that. They can or wants to do both, but it's a critically important role. And then the other mistake I find is that they're too too fast to push off that onto the new head of sales. So like, I do think for at least the first 1 to 3 months, you know, one of the founders still has to tag along to the sales meetings so that the new head of sales can really see what to do. And like, you know, what are the key messages? What are the key points? And then after that, then that's great. They can pick it up and run with it and drive it and build their own team from there. So that's what I've seen work. a number of times and yeah, seems to be a good kind of formula.

And one more question. I mean, since you've lived through it yourself, hands-on, you know, building these teams, what are some of the things that you look for for someone who's going to succeed in that pre-seed, pre-Series A, that early stage startup environment? What do you look for?

Yeah, I think 95% of it is The attitude from what I've seen. Yeah. Because I feel like anyone that you're kind of interviewing is going to have some sort of qualification, is going to be somewhat able to do the job. So really at that early stage, it's about 90% attitude and hard work. Like my kind of view is if you literally see, if you're that hungry and you've got a very high activity level and you're seeing enough people and there's a bit of product market fit there, there's nothing that should stop you from growing to that next stage and getting yourself to that Series A from that seed stage. And the only thing that's going to stop you is just not putting in the hours and the effort and doing the calls and the meetings.

Yeah.

Because if you think about it, let's say you've done half a million to a million dollars, like you've only scratched the surface of a very, very small fraction of the total addressable market. So you might have 3 or 5 or 10 clients, but there's going to be thousands or tens of thousands or hundreds of thousands. So It's literally just getting in front of people and then making those meetings happen. And the product should be selling, should start selling itself after a while because there's so much market opportunity ahead of you. And it was just a matter about getting out there and making it happen. So yeah, the main thing for me is just that hunger and willingness to go do a lot of meetings and then have the willingness to go to build a team once you've made that first initial dent into the market.

That's great. So tell me, moving on from that now, you know, how do you protect your business and develop a moat around it?

Yeah. So in the book, The Subscription Playbook, there's about 9 different factors on how to, how to build a moat around the business. And it kind of varies from business to business, how you can do that. Some things I really am a big fan of, uh, you know, looking at how you can start to build some network effects in the business. And it's not for every business. Like I know it's, It's not easy to do and it's very hard, but from what I've seen, it's one of the most powerful of the moat elements, like having some network effects. And what I mean by that is that the more that people use the platform, the better it grows for everyone. And also, like, you're starting to get some multiplayer facets in there. So if it's a product that just one person uses by themselves, then it's a bit slower to grow that because you've got to keep finding the next person. But if it's a product where there's a team using it and all they're using external people as well in the same product, then you can start to get some of those network effects happen where you sign up one user, but then they invite all their friends to start using it, all their colleagues start using it. And then maybe their contractors or third-party suppliers. And then you start to get 1 equals 5 or 7 or 10 or 500, you know, potentially, who knows? But that's, that could be a really good moat around the business because if 1 equals 10, Then you're going to go at an exponential pace with the user growth.

Yeah, well, I think of, for example, Slack or Zoom or Teams. I mean, some of these things, they're so fundamentally woven into your digital workflow, you just can't rip off and replace with something else because everybody else is using it, right?

That's exactly it. So that's, yeah, and you've described one of the other mode adapters, which is called embedding. You know, and then high switching costs. So basically, like, if you build a software product and it's embedded into a lot of other systems and it's a critical part of someone's workflow, that's a moat factor because for someone to pick up, like, you look at Xero, you know, for someone to pick up and move accounting systems is a dog's breakfast. That's no fun. Same with Salesforce. You know, you've, if you've got some, if you've really customized Salesforce for your business, Have fun picking that up and moving that to another CRM. That's no fun at all. Same with Slack, all the history, all the workflow, all the apps and the add-ons inside there. So a lot of these very successful companies have built, you know, what we call like customer lock-in or high switching costs or embedding where they become a very important part of the customer's workflow. So that's one of the other factors. And yeah, we could talk all day about moats. I love this topic. Yeah, there's so many different ways that you can build defensibility into the business. And another way is really about just doing things that are hard to start with that people don't want to do. So yeah, because if you do a lot of heavy lifting and other people aren't prepared to do a lot of heavy lifting, you can get a real big head start. And once you've got that head start, it's hard to catch up. It's almost like Google with search algorithms and a search engine. So there's, that's still what, you know, Well into the 90% of market share 20 years in.

Absolutely.

Because of just the amount of crawling they've done. They've got the biggest database.

So, you know, you've walked this journey yourself. You talk about doing hard things. You know, what are some of the hardest things that you find as a founding team, you know, that you have been a part of as you go through that phase of, You know, having that idea, I love the pivot that you mentioned around from teaching people, listening to that feedback to actually building the product yourself, getting some funding and, you know, it's just gold. But what are some of the very hard things that you've had to endure and come out on the other side that you would tell anyone who's got the dream to build a SaaS or a subscription company?

Yeah, all good questions. Like the main thing for me, like the most challenging thing and the most important thing in the business is Capital allocation. So basically it's determining, okay, with the amount of cash and resources and projects, opportunities that you have, where do you place your bets? Because, you know, in any business you could have dozens, you know, quite literally dozens, even more than that, of different opportunities and different ways you could take the business. Now you could build this feature or build that feature or target this market or target this geography or target this vertical industry or acquire this business or acquire that business. So there's almost an unlimited number of ways you can take the business and what direction you can go in. So the hardest part is saying no about like, okay, because no to good stuff. Everyone always says, oh, just say no to more things. But it's very like, sometimes you look at something, it's like, okay, that could be a $10 million business. That could be a $100 million business. That's a good opportunity. But the challenge is, you know, with limited resources, like even though we've raised some, a great amount of money, like $40 million, even still we've got to, it doesn't, you can't do everything. You can't do everything. So you can't serve every market. You can't serve every vertical. You can't have every feature. And so really kind of thinking through that and saying, okay, what's our strategy? Where are we going to place our bets? Where are we not going to place our bets? It is always a really tough one because There's a lot of things that look really good that you have to say no to and just really be crystal clear where you're going to focus and place your bets and where you're going to win.

That's great. I really liked one of the statements, you know, in your book, which, you know, or rather a chapter which says, how do you protect your business? You know, how do you turn your small company into a fortress? Tell me more about that.

Yeah. So for me, that's really about determining like what's going to keep your business competitive and stay ahead of the competition over the long term. And so we spoke about like Google before. So what they've done is their data basically is what keeps them ahead of everything else, having such a big dataset. You can even look at with like the traffic providers or the mapping providers like Waze. So Waze just has up-to-date, up-to-the-minute traffic information from millions and millions and millions of cars around the world. Like that's a very, very hard moat. To overcome. Like that's, you know, it's very hard to put a dent into that because, you know, you've got to find millions of cars, download your app, accept your terms and conditions and privacy policies, use it all the time and turn off the other one that they're using already. It's a pretty big defensibility moat. So I love seeing examples like that where, you know, businesses really thought through where they can have a strategic advantage and a sustainable competitive advantage over the long term.

Yeah. I can just see some are, you know, you can slice the world into nice-to-have and need-to-have apps. And you definitely want to be in the need-to-have for your target audience so that you've got all of those things that you've talked about earlier, right? Embedding the network effects, you know, the defensibility. So that's fascinating.

Yeah, totally agree. And I feel also, You know, like sometimes some people, I get people read the book and they're like, oh, there's, you know, 9 different moat elements, you know, and I, I can only do 3 of them. And I'm like, that's fine. Don't feel bad about it. Like most businesses don't even have one of these in place. If you've got 3, that's still a good start. And no business is ever going to have all 9 or like more than that because it's just, it's just the nature of the beast. Like you're never going to have every single thing perfect in any business. So it's more about just You know, kind of creating awareness about what kind of things you can do to make the business more defensible and kind of protect from the competition and just doing as many as you can, but not necessarily doing every single thing.

Absolutely. And I think that really comes back to, you know, founders who are highly aware about their user experience and then looking at how they can, you know, take that, learn from it, just like I know I've repeated it before, but going from your e-learning to actually building a solution, which is what they wanted even more, right? In terms, because you knew what your users were looking for.

Yeah. And I think in our particular business at Archistyle, we're very lucky that our founder, my brother, Dr. Ben Khoury, has a background in architecture and in digital architecture and generative design. So he was intimately aware of the challenges that the industry was facing and also had the technical chops to work out what the technical solution was. So yeah, I think the skill level of the founder and the founder really understanding the customer's problem. Again, all this stuff is so, you've heard it a million times, but it's true. Like it's really true.

So lastly, in terms of land and expand strategies, what do you recommend that founders do to be able to effectively grow So land and expand is a very, very important strategy in software businesses and subscription businesses.

And the reason is, is that people don't like to be tied in. They don't like to be locked into anything, essentially. So to get people to agree to starting a new subscription, land and expand means that you lower the barrier to entry as much as possible. And so if you look at some of the very successful tech companies like Atlassian, Slack, Zoom, things like that. A lot of the time they've got like a free plan or a very low cost plan or a free trial, just a very low barrier to entry to allow people to start to use a product and test it out without having to make a formal financial commitment at the start. And the reason why that works so well is you start to get groundswell from the bottom up. So the people that use it start to use it, start to love it, start to really be happy with it. And then they'll ask more of their teammates to use it. And then from there, they'll try to get management approval to pay for it, et cetera. Whereas in the olden days, you'd go top down. So you'd go to the CTO, the CIO and say, we've got the best enterprise messaging platform. We want you all to come on board. You know, it's $500,000, et cetera, et cetera. And it'd be a really big kind of enterprise sales cycle versus Starting small, getting people testing it out, trialing it, starting to use it, and then growing that way through expanding. And yeah, you know, the companies like Atlassian and Zoom and Slack, et cetera, have been real champions of that approach. And you can just see how well they've done to see the testament to that success.

And, you know, in terms of the, you know, we had started earlier talking about the first hires and then basically, you know, when you go from a founder-led sales effort to a, you got your first head of sales, how do you maximize the return without just hiring for the sake of hiring? You know, how do you start moving that revenue engine forward?

Yeah, so the way that I kind of see it is that Basically, by the time you make that first hire, you should have some benchmarks by now of like the founders-led selling of where they get you to. So like, for example, like if the founders can close 50% of deals, so then does that, like, how close can your next salesperson get to where the founder stats are? And it probably won't ever be as good as the founders because, you know, the founders are going to be the best salespeople for any particular product and are able to pivot very quickly and understand what's possible. So I think once you can start seeing that first salesperson cycling anywhere remotely close to what the founder stats are, then I feel like you've started to get a good return on investment and you're probably ready to grow that team.

That sounds really good. Well, Rob, I have learned so much and this has been so much fun because we, all of us, we are surrounded by apps and subscriptions that we are embedded into. You know, from the nice-to-haves to the need-to-haves. And your book, The Subscription Playbook, I absolutely love it. It is so useful. I think that every founder that is on a journey, as well as their senior leadership team, it's, you know, essential reading. Absolutely. So I wish you great success. And, you know, please check out The Subscription Playbook on any good book Bookstore, Amazon, where else can they find it, Rob?

Yeah, Amazon's great. There's a website for the book, subscriptionplaybook.com. And Pri, I believe you're going to have a stack of copies as well, so they can hit you up and see if there's any left in stock as well.

Fantastic. All right. I appreciate that. And Rob, I appreciate you so much for coming and sharing this with us today. Thank you.

Thanks, Pri. It was great being on the call and Always a big fan of anything you do. So it was my pleasure to be on the call and share some of these strategies with your listeners.

Amazing. Thank you.