Moving Crunchbase From a Freemium to Subscription-Based Model

Jager McConnell, Chief Executive Officer @ Crunchbase; Jordan French, Executive Editor & Co-Founder @ Grit Daily

Ascent Conference 2019

Jordan French [00:00:04] For the uninitiated, Jager, now they’ve heard your name a few times. There are few, though, who don’t fully know Crunchbase in its present form. What’s in most of our minds is what it used to be, which is just a database, but it’s a lot more than that.

Jager McConnell [00:00:19] Yeah, that’s right. Actually, I was just curious. Just show of hands. How many of you don’t know what Crunchbase is, just so I know. Awesome. Well, thank you for coming. Listen, I’ve got a few. I like that so much. Crunchbase is we try to be the best private company database in the world and we are building applications on top of that. So we think of ourselves actually as an application company and not as a data company as we’re trying to figure out how do prospector’s like maybe you’re a entrepreneur trying to find your next investor, maybe you’re a salesperson trying to find your next prospect or investor try to buy your investment. All of those are prospective use cases. So we’re trying to build prospective applications on top of what we would argue is the world’s best data platform to build applications on top of.

Jordan French [00:01:04] And especially for some of the crew who are uninitiated, don’t don’t really even know the name. Let’s let’s if we could just establish size and even some of the volume, like how many people are visiting.

Jager McConnell [00:01:17] So we’ve got about 60 million people using Crunchbase today. About 55 percent of them are international. About half of our companies in space are international. So it’s a it’s a global thing. And then if you look at, like, the percentages of used cases, you’ll see about a quarter sales people and BD people about a quarter are entrepreneurs, about a quarter of our market researchers, and they’re sort of everyone else. And then there are like investors, job seekers, because, of course, you’d want to find companies to work at. So there’s like a job seeker use case. It’s very it gets the slices get smaller and smaller within that remaining 25 percent.

Jordan French [00:01:54] And we’ll definitely talk about those slices Jager and set them aside for a bit because they specially relate to your move from free to premium to to the to the freemium model. I want I want to go back in history in time a little bit because a lot of people recognize the crunch part of the name, and no one ever gets to ask this question. But if you could sort of dispel or explain some of the history in the relationship The Crunchbase that might help the audience, too.

Jager McConnell [00:02:23] Yeah. So it’s it’s I’m Crunchbase CEO. I joined in September 2015. But Crunchbase has been around since 2007. So how is that possible? What was part of TechCrunch? And so TechCrunch is a journal sort of news source and they are using crunchbase as a sourcing tool to help find companies to write about. So as 100 or so countries was 100 percent user generated content, people would go and say, oh, I want to be written about every public company in the country, sorry, TechCrunch. And that was how it was for years and years. And then eventually TechCrunch got bought by AOL, which got by Vermont, by Verizon, and then they had this thing called Crunch Base. So they valued at zero dollars and they said, we don’t know what to do with this thing. Should we shut it down? Or maybe there’s value here. Maybe we should spin it out. So they started talking about spinning out. I heard about it. Just heard about it, which is what the VC did it and we spun out as a company. So ever since then, we transitioned from an ad based model, which is what we were when we spun out trying to make money from ads. And now I’m an application guy. I used to work at Salesforce, like, let’s make it an application company and build subscription businesses on top of it. That seems to be working a lot better.

Jordan French [00:03:38] Yeah, definitely. So interpret that back to you. Is it was either shut it down, throw it away or let’s just let’s just give it to Jager.

Jager McConnell [00:03:45] Well our give is a strong word. Its its emergence invested capital. They bought a large part of the company Verizon stepped back to, had a much smaller percentage of the company. Then they were able to connect with me and convinced me to be the CEO.

Jordan French [00:04:03] Certainly. And I promise we’ll still get to the premium funnel. But there’s one interesting, almost ironic tacit and that is also that crunch base also does news and is in some way in competition with its former culpably, its former sort of a sister company.

Jager McConnell [00:04:22] Yeah, I mean, it’s something more of a partnership like we with crosspost content. We we are definitely friends. Not even in front of me is like we’re definitely friends. We share they give links back to us. We give links right to them. We’re still on TechCrunch as navigation. So it’s a very it’s a very mutually beneficial relationship, not at all competitive like which is why we do podcasts with them together in harmony, sweet harmony, you know.

Jordan French [00:04:52] A rarity among among perhaps companies these days in a way. But in its evolution, I think it’s obviously quite fascinating for a lot of the audience. Is part of that evolution, though, is a shift also in your. Business model, and it in our minds, countries used to be free. It hasn’t always been that case. But before we even unpack that, why even why move away from the ad stack that you had in the first place? If if that seemed to be working as a revenue model.

Jager McConnell [00:05:20] It wasn’t working. That’s that was the problem. If it was working, they would have wouldn’t have spread it out. So I shouldn’t disclose this, but circle of trust in the Internet and so on. So we were burning about a half million dollars a month when I when we spun out just paying the salaries of the people and making the service go. And we are making a million dollars a year so that math doesn’t really work out really well. So companies go out of business really fast with that sort of model. So so we it was kind of scary, obviously will be spun out. We had about a year and a quarter of runway, so I was like in a year and a quarter, can you build a tool, does application and keep talking about this prospect to launch it, sell enough of it to to raise a Series B before you run out of money and you’ve got to like you’ve got a year and a quarter to do that. And I wanted or it was a little sketchy touch and go because it wasn’t clear we were going to be able to do. And as we building it, of course, naturally, you discover a lot of the things that you didn’t expect that you have to also fix before you launch that it was it was a good time.

Jordan French [00:06:29] And we’re we’re all already sweating. I’m thinking about four hundred and maybe twenty days, maybe a year and a quarter. We we can empathize. It doesn’t seem like necessarily a natural fit for a user base that an audience that was just accessing adding data, making it more valuable to then sort of throw up what seemed like a paywall went into that thought process.

Jager McConnell [00:06:54] Sure. So the the way we think about it is, yes, everything about Crunchbase was free. And you could just you could use it, crawl it, take advantage of it. You could try to do a denial service. There’s a lot of things you could do before we spun out. We had to protect the service. We had to protect the data. So we have now a Ridgewell and a paywall. The the paywall came up first and the paywall was if you want any of the new things that we have built and that’s really these Prostratin towards the monitoring tools, the things that help you find the companies that you need to do your job. That’s a new thing that didn’t exist before we spun out. So we’re going to charge you for that. And that seems like a fair deal. And then with the Ridgewell, which is actually more of a recent thing, honestly, it’s if you are clicking around and browsing, a bunch of the service were to ask you to tell us who you are. And there’s reasons to do that, both from a marketing and selling standpoint for sure, but also user experience. And probably most importantly is it helps us protect our service, because as we get bigger, people call us like crazy, like 300 gigabytes a day of people trying to pull down our data by putting up walls. It helps us identify those abusive users and stop them.

Jordan French [00:08:09] Certainly. And it’s, you know, indisputable. There’s a lot of valuable data in there, especially that, you know, the traffic itself, our user base, you know, speaks to that, you know, look at the scoreboard. But but certainly when you consider when you consider the the the user base Jager and. Apologies, apologies, I was rather.

Jager McConnell [00:08:44] Sort of so good, just just slow you down. I love that.

Jordan French [00:08:48] Yeah, I had a I had a train. I thought, well, let’s let’s let’s turn back to the funnel really quickly. So just to establish the trenches, because in the audience’s mind, when you say Reigel, what you mean is registrational. Yeah. And that’s not necessarily something that people have to pay for, is that right?

Jager McConnell [00:09:05] This is something that so we we track sort of user sentiment and a lot of ways some of that is just through engagement and bounce rate. So how many people come to the site? Are they clicking? Do they leave the site right away? Another thing that we look at as scores US net promoter score for those folks who don’t know. And that’s just a methodology to essentially survey our users and say, is this something that you enjoy? Is would you recommend it to someone else? So we track those things. And as we put up walls and paywalls, we see how people’s sentiment changes. And certainly as the CEO, a lot of people come up to me and say, oh, you put a paywall up. So now I can’t see profiles past the second or third profile. And then I have to explain to them. And this means that we have to we have to do a better job with the product. Hey, that’s actually a free login thing. We’re just asking you to go and register. And we’re like, if you don’t want the marketing email that you’re definitely going to get after that click unsubscribe. Right. You still have a log in and now you’re able to go and use the site almost like it was when we spun out. And that that’s like we need to do that and we just we have to do a better job, communicate. But from our perspective, it’s still 70, which is like ridiculously high salesforce. It was much, much, much lower than that. So we feel pretty good about that. And our engagement is actually going up. So we have many, many when a user comes to country, stood there for a long time, which is great.

Jordan French [00:10:32] Certainly. And I’ll pull on one little thread there, Jäger and that is you mention you could do a better job on something specific. It sounds like that was articulating to the audience when they go to space that that. Right. Well it’s really just an email, a login that’s free. Is that specifically what you’re referring to?

Jager McConnell [00:10:49] This is a I’ve seen screenshots on Twitter, like ohh Crunchbase , has a paywall now. And it’s like, no, not really. It’s actually what you took a screenshot of. If you read it, it says it’s free. Just we need an email address. And again, without it, it’s very hard for us to do a lot of things that make the user experience better. But also it helps us make people not like pulled out our entire site.

Jordan French [00:11:13] Certainly. And and for those in the audience also who you know, media, for example, grittily, we consider a paywall. I think there’s others with various models are starting businesses that are considering paywalls to how do you sort of decide where that that perimeter is jagga on, you know, how much you want to give away and then what should be paid for after.

Jager McConnell [00:11:33] Yeah. So and this is like if you are yourself evaluating if you should do for freemium or paywalls, a critical part of that is experimentation. And we use we have an AB testing framework. It’s actually a service because it’s called split. I oh check it out. It’s pretty cool and allows you to go and do a B testing across your entire application in our case, our site. So another problem that I have with the complaints is it really depends on what cohort you’re in. So there’s different cohorts based on let’s say it’s 20 percent of our traffic is seeing a like it’s the second profile view where you have a Ridgewell for another 12 percent. They don’t have a register at all because that’s how our control group there’s another twenty percent that has it at five, you know, so so by doing that, we can go and try different things and see how the user engagement, a user experience changes based on science since he like what’s what’s going on in each of those different scenarios. We do that on the Ridgewell. We’re doing that with the paywall. We do that with changes of features. We will move things around. All of that are those are all experiments that we’re doing and we’re using the same testing framework so that we can scientifically say this is actually decreasing engagement. Users are unhappy with this in a material way. Roll it back and to roll back. It’s just a switch. So some of the stuff like there’s there’s the most aggressive cohort like where we’re like, will they do this? You know, like that’s like maybe at five percent of our traffic and we have enough traffic where we can have that, but still be a meaningful amount where you might have the price go up really dramatically because we want to go and see if the if there’s a for certain types of users, if they’re willing to pay more and what happens. And there’s another cohort where it’s even less where we can go and see would we be better served having even a lower price. So there’s all sorts of different AB testing splits that we’re doing right now.

Jordan French [00:13:29] Certainly I think we don’t impact that all day. It’s always fascinating, especially the data wonks in the audience. You mentioned pricing.

Jager McConnell [00:13:35] Datawonk’s.

Jordan French [00:13:36] Data wonk’s. This is a real.

Jager McConnell [00:13:38] I’ve never heard of that. Okay.

Jordan French [00:13:39] We can.

Jager McConnell [00:13:40] How many people have heard the term data wonk?

Jordan French [00:13:42] Well, how many are you? That’s a good number. How many are data ones? How many of you are data wonks know?

Jager McConnell [00:13:49] And I saw one coffee cup go up.

Jordan French [00:13:52] So there’s the rare breed like ENTJ personality to learn something new. Awesome. So that’s especially useful advice for those who have the traffic had this go up. You mentioned a cost structure, though, earlier in the conversation when you spun out. There’s people doing things we in our minds can imagine relates to quality of data. But it seems like you’re at an interesting intersection all the time where you have to figure out what the data is worth and the quality of that goes up with the more that you spend. So since you mentioned pricing, how do you figure out what you should charge at a given time for a certain subset for what they’re after?

Jager McConnell [00:14:31] Sure. I mean, it’s there’s a lot of ways of doing that. One is we did we did a lot of focus group testing to sort of see what is of our of our power users in particular, what is the sort of how how OK, are they spending a large amount? And what’s interesting is, you know, there’s users that will pay nothing, you know, in the focus group. And there are some users that were willing to pay a thousand dollars a month because that’s really what if you look at a lot of our competitors, that’s what they’re charging. It’s like, oh, cool. You’re like this other person. I would pay the same as what I pay them if you had these extra features or you have this data. So we had to sort of pick something in between. We actually went on the lower end. It’s three hundred forty dollars a year compared to like ten thousand dollars a year for some of our competitors because again, we were trying to democratize the access. Right. We want to be able to make it available to the people that like maybe can’t afford the ten thousand dollars a year one. So. So you have to sort of balance that. And so that was a big part of it. And then, of course, there was actual experimentation where we go and see how people react to different prices. And then there’s also just the math of the business. Right. It took like people to know this. We spent something like eighteen will spend something like seventeen million dollars to make crunch base be the data set that it is for our users. That’s a lot of money. We need to have a business model that can support that. So if it was a dollar, a user a month, we couldn’t do what we’re doing. So the data quality would decrease. In the end, when I’m looking to 2020, we’re looking to double that investment. And that’s a lot of money. And most of it a lot of it is to go and push into the data and go and make the data even better and do better insights and deeper insights. And we were talking about 30 million dollars plus in costs. Hopefully we can do a good job.

Jordan French [00:16:18] And you mentioned a really specific number of those. Three hundred forty eight dollars. Why not? Why not 347, Jager, 349?

Jager McConnell [00:16:26] Its worthy of an experiment because for some reason we’ve always done this this math this way. And it’s twenty nine dollars for 12 months. So twelve times twenty nine is three hundred forty eight. There’s probably something to be said like should we try four ninety nine or three ninety nine and to ninety nine. I don’t even know when the last time the study was done on the night is better than the zero. I feels like something in the 1920s but that’s what we, that’s why it’s that number.

Jordan French [00:16:53] Yeah. It certainly works as long as it doesn’t. And I want to challenge maybe the point, the underlying assumption of all the cost base also, at least in some of the audiences minds, is our other sort of maybe in more encyclopedic databases like Wikipedia, they have all volunteers. Why why have all this 17 million cost structure at all? Why not have a volunteer user base jagga that moderates that that vets’ that verifies each of the edits so that the integrity of the data remains or stays high.

Jager McConnell [00:17:27] And Wikipedia’s case, I think they have something like 300 or 400 million users. If I’m ever going to have 60 million in a world where we had that that number, maybe it would work. But the reality is that most people who come to crunchbase simply want to consume. They don’t want to contribute. They don’t necessarily even have anything to contribute. Nine times out of ten. You need more data wonks. I need the world’s more data wonks. Really? So so that’s part of it is is we have a consumption based model rather than a sort of contribution model. Again, it used to be one hundred percent user generated content back five years ago, but that seventy million dollars, of course, I was talking about that’s doing things like we have 4000 partnerships. Right. Who’s managing those partnerships? How are you finding more partnerships? That’s with governments. That’s with events, that’s with investors, that’s with accelerators. And that’s going on giving us direct primary source data that no one else has. So that’s an example of costs. We’ve got the five minute warning in the back there. We also have things like data science and engineering going on, doing, crawling and finding the data and absorbing and all of the news that’s in crunch basis. Automatically, Poplin gets all the companies. It makes like that’s hard stuff and that stuff that keeps the date alive, that’s what keeps our users happy. That’s why when they’re prospecting, they know that our data is pretty close up to date. No date is perfect, but ours is pretty damn good compared to some of the competitors. Then, of course, I’ve got our own data team. So that’s, you know, all in 60, 70 people who manually are going and updating that data where the machines can’t do it automatically. All those things add up to cost. And that’s why the price.

Jordan French [00:19:06] Yeah, certainly we could pick that apart probably for a few hours. One more question and I’ll go definitely go Q and A and I’ll drop down and and come to commandeer the mic, get it to some people to ask you questions directly. Jagat I know the ad questions before we started. I want to finish on this though, and that is 60 60 million uniques in that audience every month. You mentioned international these twice earlier in the conversation. Is there a cohort that might even be here in part that’s missing from countries that you’d like to to to be part of that you haven’t quite been able to touch enough yet?

Jager McConnell [00:19:41] No, not from a use case standpoint. So so when you like, we obviously there’s competitors all over the world and we don’t look at all of them. And usually they’ll say that our data is better than ours when we go and actually evaluate our data, they like crushes them. There’s a competitor over in Europe, for instance, that says we have more funding around than anyone else, like we’ve got actually twice as many as they do in Europe.

Jordan French [00:20:02] Or crunches them, Jager.

Jager McConnell [00:20:03] Thank you. So so not really all the use case. Pye’s, if you like, look at a specific country. The use case of of who’s using us now is actually pretty similar globally. However, where we want to improve is the breadth of companies. So in China, for instance, there’s millions of companies that we don’t have in countries that probably should be in countries. The challenge is not just how do you get them, though, but it’s also how do you not completely destroy the user experience for everyone else if there is a lot of Chinese companies. And there so you search you just got all these like Chinese characters and things that just don’t make sense, or the Chinese and then the English blending together, all that stuff is our thing, things that we’re working on that next year.

Jordan French [00:20:46] So it is certainly a blend, but it sounds like you’re more than well, open and welcome to that to that data. I’m going to talk to Mike down. If you could just raise your hand. We can definitely get at least one, perhaps two questions into Jager real quick and just say your name.

Audience 1 [00:21:03] I’m Ivan from generic photos. The question is, how do you divide your time and energy into your team’s resources between actually creating the product, generating the data in developing the website and your efforts to monetize it?

Jager McConnell [00:21:20] Yeah, it’s a really, really good question and it’s a hard one to answer just a few minutes. But fundamentally, it’s if you if you think about our total company, it’s about a third on go to market. So that’s salespeople, marketing people trying to figure out how to talk about it. And it includes like onboarding, experience, retention, all that kind of falls into that some of that bucket. Then there’s a third is the data. So that’s where we’re going and spending a lot of time on just making the data better place to be. So that’s our data platform. APIs are involved there that day to clean up all of that hides and then that other third and then the final third is the application. So that’s why we’re building that’s where you find certainly the monetization piece for us. The blend between the monetization piece and the free stuff is actually it’s the same teams working on it that will change over time. But that’s how it is today.

Jordan French [00:22:13] Certainly. And we’ve time for one more question. I’ll Walkertown, just raise your hand and you can pop one to Jager. There we go. Thanks. And just say your name.

Audinece 2 [00:22:24] Julia McAllister from Def Method. I’m curious about we talked a lot about the monetization of the platform. I’m looking forward to the future. Do you see there being more revenue potential from just providing the raw data and having the data be accurate and correct? Or do you see there being more value in analyzing that data for the end user, kind of the model of don’t make me think and then providing them the insights that they’re looking for is that they don’t have to do the number crunching themselves.

Jager McConnell [00:22:52] Yeah, it’s definitely the former or sorry, the insights of the latter. I think you just said that’s where the the applications are. That’s where our users are. That’s what our users are looking for. When you think about the prospecting use case of I can tell you, hey, entrepeneur, these are the investors you should talk to next, because they’re the ones that should invest in your company or hey, salesperson. These are the companies that you probably care about because they look like to you typically sell to and they just raise money. That’s why we play very, very well. There is still the raw data play is about 40 percent of our revenue today, and that’s the TAM there. The total addressable market is a little too small for us to sort of bet the whole business on how many. Yes, we have about 500 applications using Country Day today in their own applications. I mentioned some like Yahoo! Finance, LinkedIn market. Watch Business Insider, there’s a number of those folks if but there’s only so many of those out there in the world and I wouldn’t want to bet the business model on that. So let’s focus on on adding value to the 60 million people coming Crunchbase.

Jordan French [00:23:52] That’s a great question. Do that’s all the time we have. If you could just join me. Big round of applause for Jager McConnell. Busy man.

Speakers

How to Accelerate Growth By Applying Agile Market Research Throughout the Product Lifecycle

Morgan Molnar, Head of Product Marketing and Insights @ SurveyMonkey
Ascent Conference 2019

[00:00:05] Hi, everyone, so great to be here from sunny California. The energy at this conference is really invigorating. So thank you for having me today. I’m going to be talking about How to Accelerate Growth by Applying Agile Market Research throughout the Product Lifecycle. And there’s a lot to unpack in this pretty lengthy title. So first, what do I mean by agile market research? I’m sure most of you have pretty grasp familiarity with agile software development and that framework. And, you know, it’s the idea of taking large, complex, long term projects and breaking it down into smaller, more manageable chunks or sprints. The same really applies in market research. If you’re taking a long term project that’s going to take maybe upwards of eight months, maybe it’s a product development initiative and you plan it all from the start and you don’t adapt along the way, you might risk launching a product that’s irrelevant or doesn’t meet a market need. And so what agile market research does is pretty much the same thing as agile software development. And it takes the market research and the insights you need throughout that product development process. And it breaks it down into smaller, more manageable iterative chunks or sprints where you might be exploring a market, testing ideas, validating those ideas, and then track optimizing and tracking along the way. And so what I’m going to talk to you today about is how to apply agile market research to the entire product development lifecycle. And so here’s the textbook diagram of the product lifecycle. You’ve got development prelaunch. It’s when you’re first coming up with those big ideas, you know, are going to be a winner and then you get into where the revenue growth curve actually starts. So introducing your product to market growing, then peaking at maturity and then ultimately declining. And there are research methodologies and projects that make sense. And you should be doing along each of these stages of the product development lifecycle. And we’re going to go into a couple of these, along with some real life stories from survey monkey customers who are excelling at this. And so let’s focus first on development. So there’s a lot of things you can be doing. Again, this is where you’re really coming up with those amazing ideas that you’re going to be taking to market. First, you want to be sizing that market and segmenting the prospective buyers. What is that total addressable market? What do they want? What do they care about competitive intelligence? So who are the other players in this space? What are their differentiators? And how is your idea going to provide unique value to the market? Uses an attitude which is kind of research lingo for a collective consumer behavior study. So it could be anything from understanding buyers, behaviors, attitudes, opinions, the shopper experience, buyer journey, how people make decisions when purchasing and then concept testing. So once you have some prototypes, once you have some early stage ideas, how are you testing? How are you getting that in front of people getting feedback from an unbiased representative group of your target market? And so while all of this is going on in that development stage of the product lifecycle, founders and entrepreneurs are also carrying about another big thing, and that’s fundraising and that’s winning over investors. And all of this research that you’re doing to help inform the early stage of your business is also going to help you win over those investors. I got to sit down with Zoe Schlag, managing director of TechStars. It’s an accelerator program that’s internationally known. And she said in her own words, When I’m backing an entrepreneur, one of the things I’m looking for is unique market knowledge that no one else has. It’s coming to and in an investor with a unique perspective on a market problem that no one else has tackled from the same perspective. And so to win over an investor, you need that data to pack up your idea, your unique perspective, and sometimes you can’t get that anywhere else. You’ve got to do that. Research yourself. Here’s an example from an early stage startup still in the development stage. It’s called Bridge Care. They are they are trying to make health sorry, child care more easily affordable and findable through employer benefits. And what they did is use market research to understand the roots of parents struggles with child care costs. Early on with this company, they were looking into how do we help parents finance child care? We’ve got student loans, we’ve got mortgages. We don’t have anything helping people for a child care.

[00:05:01] And so this was something that they were researching early on. And Jamie, the founder, knew that she needed a unique statistic that would really just prove out this need this problem, this issue that she was trying to solve and help prove out what kind of business model would work best.

[00:05:22] And so, in her words, a lot of people reuse the same statistics to stand out to investors, though, you need the right data to prove out your own unique business model. What Jimmy found was a lot of people who are entering this child care space. We’re quoting the same statistics over and over. There’s a really famous one from Lean In that says 43 percent of women are leaving the workforce due to child care or other caregiving responsibilities. And that was getting cited again and again and again and events. Investors would hear that in her pitch and they’d nod like, yes, we know, what are you going to do about it? And so Jimmy knew that she had to find that money stat that was going to tie this. You know, the problem of women leaving the workforce to the child care costs to this idea of financing. And so she did her own market research. And Jamie’s money stat was one in three parents are taking on credit card debt as a direct result of the high cost of child care. So for the first time, investors were hearing not just women leaving the workforce, but that parents were taking on other types of financing because of this high cost of child care. And so for the first time, investors would listen to her pitch and their ears would perk up in their upward. Did you get that? And she said, I did my own homework. I did my own research. I surveyed over a thousand parents of children of a certain age. And I this is what’s happening. This is what’s going on. And so she was able to win over investors.

[00:06:54] She got into the TechStars program and she’s still growing and acquiring customers and adapting her business model again to the needs of parents. But again, what really helped her get that initial round of funding get into a really great accelerator program was having this unique stat.

[00:07:12] To win over investors, OK, next stage introduction, at this point, you’re really doing it, your product is out there, it is in the market is not stealth mode anymore. You are are in the real world. And so while that’s all well and good, that research does not stop there. So in the introduction stage, the main things you want to be focused on are product item optimization. So after you’ve launched that MVP, how do you continue to refine the product features? How do you refine the pricing you’re targeting, etc. and then shopper insights. So continuing to understand what’s going on at the shelf, the entire buyer journey. And then you want to be testing and refining your messaging, whether that’s on your website, it’s on your physical packaging, it’s on your product itself, it’s how you talk about it, how your salespeople talk about it, et cetera.

[00:08:04] And so we’re going to talk about some product testing, product testing example. This is a company, Helix Sleep there, a mattress and sleep accessories company based here in New York City. They make customizable mattresses tailored just to your sleep preferences and comfort levels. And they used market research to develop their most recent product, the Helix Pillow. And they had a hunch, they had a hunch that people were buying pillows along with their mattresses and did some research on that and found a guy. Actually, not only were they buying them, but two to three per mattress purchase. And so they’re like, OK, there’s something here, there’s a market here, let’s figure out how we can solve it. And they did some more research. So they they really did iterative research throughout the entire product development process of coming up with this idea and launching this idea of a new Pelo. And one thing that they found was that pillow comforter and pillow preferences were just as personalized and specific to the individual as mattresses were. Some like it hot or cold, soft or firm, high profile, low profile. And not only this, but they found a unique stat that this was also not just different person to person, but even the same person’s preferences would change based on the season, the temperature outside. And so what they developed was a new pillow that had removable inserts, a cooling cover. So it was customizable not only person to person, but even for your same needs throughout the year. And it was wildly successful. They sold out this pillow in the first month of their launch. And according to the founder, Jerry, using DIY market research and iterative market research, they’ve been able to cut the product development cycle in half. That’s basically doubling their speed to market. So huge success there just by doing a few market research studies as they’re coming up with these ideas and refining these ideas, they launched a successful new product.

[00:10:08] All right. So now growth, this is where you really, you know, step on the gas pedal. And once you already know, your product is awesome, this is where you can start to track and continue to keep a pulse on the market and continue to refine even further. One of the big things that almost every brand is doing is tracking key critical brand metrics periodically throughout the year. Ad testing is big. So now that you’ve you’ve developed product market fit, you’re in that acceleration in growth stage. You’re probably developing a cadence of marketing campaigns and ads that are going to, you know, evolve and improve your brand perception in the market. And then you obviously always want to keep in touch with market trends overall, not just about your brand or your competitors, but generally what’s going on in the market. And so this is a story about Albats, who knows about the Albats brand, who’s heard about them a lot of OK, a lot of hands in the room. OK, we’ll get a little bit of participation here, OK? What do you think of the Albats brand? What comes to mind? Just shout.

[00:11:12] Shout out. Recycled or recyclable?

[00:11:16] I heard. Inexpensive.

[00:11:22] Comfortable, yes. All right, well, those are great, so Albert’s mission in the post this on their website, in their search snippets, if any of you for the talk a couple of weeks ago was the most comfortable shoes using environmentally sustainable materials. And even though Albats has only been around for five years, they were founded five years ago and they have already grown to be an internationally recognizable and beloved brand. And what they do is they regularly track key brand metrics that are critical to their success. So awareness, yes, but general perception and brand associations. So all those words you threw out are the things that you thought of when you saw this brand. Those are the things that they’re trying to keep a pulse on perception and consideration across all of the markets that they’re in, all of the geographies. And what this does for Albats, I mean, if you think about how they’ve been able to grow so fast and build this brand is they’re using these brand metrics as almost a validation or a calibration exercise so that all of the ads, the messages, the content that they’re putting out there is building in amassing all of this brand knowledge and awareness and perception in this in the exact trajectory that they want to go into. So comfort, low cost sustainability, recyclable materials, all of those things that you shout it out exactly what they wanted you to think of. And so this brand tracking is keeping them on the pulse of that. They’re head of analytics. Dinesh says it is important for us to keep a close eye on brand strength because that is how we’re going to grow. Brand superimportant and the research behind it just as important.

[00:13:12] OK, so now you get to maturity, brand tracking pretty much goes on once you’re big enough to have general brand awareness and a broader market, you start brand tracking. You keep that going as long as your business is alive. The next thing I want to talk about, though, is thought leadership research. And what I mean by thought leadership research is the research that you do not necessarily to internally inform your strategy, but the research that you’re doing to build your brand’s credibility, your authority, your expertize, the research that you’re publishing publicly. So if you hear of a state of blank research reports that businesses put out all the time on their major categories, that’s thought leadership research. If you’ve, you know, listen to any of the keynotes today and you’ve seen statistics quoted or cited in their in their presentations that’s thought leadership research. And so it’s not just about, you know, getting the stats that a reporter wants or building the report to drive your own business need. This is also what readers are seeking out. So we actually did our own research with people consuming content, and they said that content that contains data or content that contains research is more trustworthy, it’s more persuasive, it’s more fun to read than content without data.

[00:14:34] And here’s a really fun example from a project management company there are based in the Bay Area. They’re called Rike, and they regularly conduct market research on workplace topics to fuel their awareness and demand joint efforts. So they work with reporters to see what kind of stories that they’re going to be writing about. And they do research to help provide stats and quotes for for those pieces. They also fuel their demands and efforts by creating really beautiful PDF research reports and then getting those on their website to collect leads. And there’s a really fun example of one study that they did a couple of years ago that has just exploded from a press mention and awareness perspective for four. Right. So their strategy is they they find peripheral topics or topics that are tangentially related to what they do. There are project management software company, which if all you write about is product project management, you might get a little boring. But what they do is they find fun topics that have mass appeal but can be tied back to workplace and project management. They did a study on swearing in the workplace and it was a really fun study they published a few years ago. And this thing has exploded. It’s gotten over hundreds of back links to their site to this day. It continues to get cited. They found some really interesting things in their study. One, apparently, women admit to swearing more than men at work. To that, I say, hell yeah. And they also found that, especially among millennials, that they wouldn’t even consider applying for a job if swearing was strictly banned at the company. So some really fun facts here. And and you see even just some of the some of the wide publications over here on the right of where they were getting these mentions and back links, you know, even a segment on The Today show. So some really interesting stuff coming from here. And again, it was a fun research report, ties back to the workplace, but yet it still continues to get mentions to the stay.

[00:16:45] All right, so then you get to the decline stage and you pack up and you get a new job. No, just kidding. Now this is where everything starts all over again. Everything we talked about comes back full circle. You are evolving your product. You’re getting acquired. You’re finding new growth curves.

[00:17:06] And so this, you know, product life cycle starts to stack up on top of itself. And you can see how this can become very cyclical from a, you know, just an operational standpoint and conducting research and continuing to develop and enhance products that you offer. And so, you know, as you evolve and as you kind of continue to go through that cycle, then that that agile market researcher, that looping that iterative idea of doing small, punchy, relevant market research to aid your strategy really comes into play. And so with that, you then need the tools to do so, so Survey Monkey has a product called to remind the audience it’s a fully integrated research panel in over 100 countries. All you do is select your targeting criteria. How many people you want to survey, you check out online and you get responses in minutes. When people think about market research, they think of these long, arduous, time consuming, expensive, full service engagements. But it’s almost 20, 20 folks. We’ve got tech for that. This is a this is a tech startup conference. You’re thinking about your your tool stack. This should definitely be one of them. And all of those use cases and research topics that I talked about earlier. So every monkey has templates for all of those to get you started. And then we’ve also published an ultimate guide to doing market research. It’s fully packed with everything you would need to do a research project from start to finish. And then if that’s not enough, we also have a team of research experts that can help you get your DIY market research program off the ground. So with that, that’s my time. Thank you all so much for listening. I will hang out maybe in the in the lobby or reception area if you have any questions. Thank you.

Speakers

Driving Growth – Something New to Think About

Marcus Wagner, CEO & Founder @ AcctTwo

Ascent Conference 2019

[00:00:03] My name is Marcus Wagner and I’m the CEO and founder of a company called ActTwo, and you’ll learn a little bit about what we do through the course of my presentation. But if you’d like to learn more, we’re one of the exhibitors. If you go into the exhibiter hall, we’re just on the right hand side as you walk in. And since we started late, I might truncate the presentation. We might not have time for questions. So let’s start with a show of hands or volunteers. I’ve got a question to ask you. Just raise your hand or shout out the answers. What do you think some of the greatest enablers for growth of your business are?

[00:00:36] Just shout them out. Alcohol. Wow. All right. That helps when you prepare the board presentation, right. What are some enablers? What are things that propel your business forward? What do you say, partners? Capital. Referrals. How about this side of the room, you guys are quiet. The press, OK, great, thanks for those answers. What about some of the greatest impediments to growth, maybe speaking from firsthand experience? Any impediments that you see?

[00:01:14] Talent churn, it’s good one. Compliance. Sales cycle churn.

[00:01:24] You don’t want money going out the back door as it’s coming in the front door, right? So so those answers probably didn’t surprise you and they didn’t surprise me either. So today, I want to spend some time getting you to start thinking about something that you may not have thought about before as you think about growth and those things that might be able to drive growth through your organization or potentially impeded, depending on what decisions you make. So this comes from experience of me and my company working with over a thousand high growth companies, many of them in tech, ready? So first of all, this session could just as easily have been called survive to thrive, because in order for companies to thrive and grow, startups need to be able to survive. And we all know that most startups don’t survive. So what is the key to survival? It turns out that overcoming financial challenges is one of the keys to survival. Thirty eight percent of startups that failed, according to a study by Hacker Noon, failed because of financial challenges, and less than 46 percent of seed tech companies actually make it through there, around. So my goal today is to help you go back one more slide for me.

[00:02:47] One more, that one, thank you.

[00:02:50] My goal today is to give you a playbook so that you’re in a better position to tackle your financial challenges with minimal, minimal effort, managing your cash, securing funding and scaling your operations to support rapid growth. And I’m probably going to skip a couple of slides here in order to to move forward. Quickly, let’s skip those. There you go. So what I’m going to do today is talk to you about three keys to survival and growth, and I’m going to give you three warnings about what will happen if you don’t put these into place. And the first key to survival is having a playbook.

[00:03:30] So you all know that great coaches have a great playbook. How many of you would say that you have a playbook for your business? Raise your hand if you have a playbook. Not too many hands are going up, so those of you who who raise your hands, is it written down? It is good, good, is it is it understood by the whole organization?

[00:03:58] So a little bit of shrugging, but hopefully it’s understood, is it practiced right? Are you actually practicing the playbook that you put in place now? In football, a playbook is generally broken down into offense, defense and special teams in business. The playbook contains all the pieces and parts of your go to strategy for getting things done. Accenture defines a playbook as a process, a process workflows standard operating procedures and cultural values that shape a consistent response or the play.

[00:04:37] Next slide. So what does your playbook include?

[00:04:44] Let’s just build this slide and take a look at what some of these things are, and for those of you who don’t have a playbook, the more honest ones of you in the room.

[00:04:53] What needs to be included?

[00:04:57] Does this list look good to you? Does this have everything on it that should be included in your playbook?

[00:05:03] See anything missing?

[00:05:09] OK, so if you do have a playbook, it’s likely informal. And for me, this is evident from having worked with hundreds of tech CEOs and founders, but more importantly, as a founder myself. When I started my business eight years ago, which is now about a 25 million dollar revenue company, the first thing I did was I hired the type of people that I thought had the talent to help me build a company. And in the early days, we had a pretty good idea. We thought we had a good idea of what we were going to do and how we were going to do it. But what we found was it wasn’t documented very well. And again, going back to Accenture, the playbook is process workflows, standard operating procedures and a set of cultural values that shape a consistent response or play at Act two. Today, we’re documenting things in this way. And I have to tell you that the lack of this playbook has ended up constraining our growth recently. But we also neglected to include something that is incredibly important to have in your playbook. And that is accounting. Believe it or not, we didn’t have an accounting playbook. Now, let me clarify, I’m just the CEO of a company that delivers the future of finance and accounting to high growth companies. So you’d think we would have had a playbook in place. We implement accounting systems. We deliver managed accounting services to high growth companies. So this is not a shameless plug. Maybe it’s more of a therapy session for me. But more importantly, I’m here to help you avoid making the same mistakes that I made. OK, next slide, so here’s my first warning, if you don’t have a playbook in place, you will lose control.

[00:06:57] Now, it’s not a matter of if you lose control, it’s just a question of when you’ll lose control.

[00:07:06] So my second key to survival and growth is having the right finance and accounting infrastructure in place early. OK, what most companies do is they start out in Excel or they start out in quick books because it’s cheap and it works when you’re small. But when you outgrow it, it becomes painful and then it becomes very expensive.

[00:07:30] So.

[00:07:32] If it done right and and put in place early, there are platforms that you can put in place that will scale down to where your needs are as a start up, but will allow you to grow to 100 million, 200 million, three hundred million dollar organization. So how many of you would want to be in this position? I love this photo. I don’t know where it came from. While I haven’t met many of you in the room, I’ve met some of you. My gut tells me that many of you are headed towards this outcome for your finance and accounting. What do I mean by that? So your foundation in accounting infrastructure is critical to scaling to go from a startup to a scale up to an enterprise requires more than just having a great product with great marketing, a great sales and great customer support. You can see that you need the infrastructure to handle more volume, more complexity, more reporting and analysis and more controls and oversight as you scale up. Let me give you an analogy. When you’re building an apartment or a hospital or a hotel designed to house hundreds of people, would you as the owner build the foundation after all the people are in the building? Of course you would. You put the foundation in place first. So scaling without the proper infrastructure can result in several things. Number one, it can result in more and more manual effort that’s needed to enter customers in the system. Get your invoices out the door, extract data across numerous subscription contracts to pull out your key staff metrics. Seema Chern customer lifetime value deferred revenue. The second thing that happens when you scale without the proper infrastructure is that you’re constantly looking in the rearview mirror instead of the front windshield because you’re always playing catch up. When you have systems that aren’t integrated, you’re constantly inputting data numerous times. The third thing that you’ll find happens when you don’t have the appropriate infrastructure as you’re scaling is it becomes more and more difficult to report to investors, lenders, et cetera. And that results in a lack of confidence in the integrity of the numbers. Especially when everything’s being calculated in spreadsheets. If you don’t believe it, just ask your auditors and speaking of auditors scaling without the proper infrastructure results in your audit costs and ultimately your due diligence costs going way out of control, because the amount of checking that has to happen, scaling without the appropriate infrastructure can also result in surprise. Hits to your cash can result in unexpected restatements of revenue because it wasn’t booked correctly or it wasn’t invoiced correctly. And last but not least, scaling without the appropriate infrastructure can result in damage to your enterprise value and spending. I’m estimating probably 10 times more trying to fix that tire on the motorcycle while it’s driving instead of putting it in place ahead of time. So my second warning to you is not having the proper infrastructure in place early means you’ll have to start over later. You’ll spend a ton of money. Give you an example. We’ve had clients because the new revenue recognition rules that are in the SAS space spend over 500000 dollars with us to rip and replace and implement a new system. I don’t want that to be you and you’ll end up leaking enterprise value. So growth requires you’re thinking about accounting to change. So here are a few things I want you to think about, accounting is no longer simply an expense. It’s an investment in the future of your organization. Accounting is no longer about history. But it’s about the future being able to predict the future. Accounting is no longer where the buck stops, but where the growth starts. And it’s all about the data and the analytics that you’re going to be able to get from your accounting system. Don’t relegate your CFO and your and your accounting department to the back office. You need a strong CFO to help propel you forward by not slowing you down, first of all. And number two, by arming you with all the information that you need in order to grow. So if you’re skeptical about this, you remember the top 10 rolls of cloud computing that Bessemer made famous back in 2012, well, three of those top 10 are metrics based. Number five, play Moneyball in the cloud and check the scoreboard with the five C’s of cloud finance Sayama Cash Flow CCAC, CLTV and Chern, I’m assuming everybody has seen that topline top 10 list. Number six is build the engine, the revenue engine and only agrest aggressively invest in revenue if you have a short cash payback period. Well that all needs to be calculated by someone. And number 10 and best sellers list is cash is still the king cloud, a nomics requires that you focus on cash flow above operating profits. Which leads me to my third and final key to survival and growth, which is having a real time dashboard digital board book that serves up those key metrics to you that you can pull up on your phone or your iPad or at home anywhere you are. Just think about it. Most of us, when we prepare for board meetings, it’s a mad scramble to pull all that data out of Salesforce or out of books or out of Excel and pull it all together. And then you run out of time and you hope and pray that it’s right when it gets to the board. Right. So this allows you to focus on what matters, which is customers, products and sales. And again, my third warning is without that real time visibility, you’ll lose control of the business. What’s the impact of extended DSO, inaccurate cash forecasting, busted bank covenants? An unexpected cash squeeze or worst case scenario, a botched capital raise, especially when you really need the money, that’s the loss of control. So back to Bill Walsh, the words that I want you to think about as you read this quote again, how can I be sure I’m making decisions based on the best information, i.e., thorough across the organization. In other words, extensive. And that is actually current or immediate. So, again, my first advice to you is to create an accounting playbook, and we had act to believe your accounting playbook should consist of these five key areas, active planning, which means not only having a plan or budget in place, but constantly monitoring that against actuals. Considering your best and worst case scenarios and actually making the appropriate adjustments and making changes on the fly, sound transaction management means not having to worry about processing orders, invoices, payables, journal entries and banker checks, but also, even more importantly, being able to scale those volumes if you’re as successful as you want to be. Right. We want a whole lot of revenue. We want a whole lot of transactions by responsible cash management. I mean, really understanding your cash position on a daily basis. I actually look, when I’m not watching the Astros game, I look at my phone and check my cash position. Am I working capital every day, but also having accurate projections of what your cash will be and making sure that you don’t get out over your skis by timely and reporting and analytics. I mean, having the information you need when you need it from anywhere, any time, and not just a static report, but being able to drill down into that data and get questions answered quickly or perform what if analysis. And then finally by funding an exit readiness, I mean, having your books in order with all the detail that’s required for the due diligence that’s going to be done on you by either a potential lender, a potential investor, or maybe even a potential buyer. The second rule for growth is having that supporting infrastructure in place and doing that early. Don’t be afraid to invest early. It will pay dividends in the future and allow you to scale without ever having to think about it again. And by the way, this type of infrastructure that I’m talking about doesn’t have to be built. It can be bought. So it doesn’t really matter how you get there. Just get there. Just get it in place early. And then third, keep a constant pulse on the health of your business through the form of a of a digital dashboard. So hopefully I’ve given you some new things to think about that go beyond just having a great product and great sales team, a great go to market strategy, and that you’ll think about your accounting and finance playbook so that No. One, accounting and finance is not an impediment to growth. And number two, it’s actually an enabler of growth. I think we’re out of time for questions. So if you have any questions, come visit me or one of my colleagues at the act to Booth in the Exhibiter Hall. Thanks for listening.

Speakers

Developing and Articulating a Clear and Compelling Growth Strategy to the Board

Katie Bullard, President & Chief Growth Officer @ DiscoverOrg; Nate Grossman, Co-Founder @ Growth Street Partners

Ascent 2019

Nate Grossman [00:00:05] I’m Nate Grossman, as it says up there, co-founder of Growth Street Partners, where growth equity firm based out in San Francisco, where typically partnering with founder, owned and led companies when they’re around 15 to 40 employees and helping them scale to 100, 150 plus whatever their goals are together. And so this topic is near and dear to our hearts at Growth Street, and there’s no better person to be talking about it than with Katie Bullard. And I’ll let her give her intro.

Katie Bullard [00:00:35] Hi, guys. I’m the president and chief growth officer at Discover or now also Zoominfo. We just went through a recent merger. How many of you guys are using zoominfo or any system like that yet for your sales and marketing? Great. So we have a new combined platform coming. If you haven’t already taken a look at it, definitely do. So this is my third VCP back to business that I’ve been at and all three of those we’ve been fortunate enough to go through an exit. And so here to share some of my lessons learned around building a good growth strategy, both with the board that I have at the time, but then also positioning us for the next next round of funding.

Nate Grossman [00:01:19] Awesome. So, yeah, yeah, we have 20 minutes, so it will be quick, but we’re going to talk a little bit about when, uh, is the right time to be thinking about this and developing a growth strategy, how and who the board’s role in the process. And then a few quick examples. But we’ll start with with when. And so maybe, you know what moment. Yeah. Throughout the different experiences you’ve had, uh, led you to realize you needed a growth strategy.

Katie Bullard [00:01:47] Also, what I would say is, first of all, if you guys are in, you know, really early start, I’m the number one thing you need to focus on is product market fit. So do you have a market that’s willing to not only is not only seeing value in the product that you’re building, but is willing to pay for the products that you’re building. So that’s number one. Once you feel like you have a really strong, good product market fit, what any investor, whether it’s an existing board or somebody that you want to get investing from, wants to know is how will you keep that growth going. So that’s great. This product that you have now, take it to market. What are your next vectors of growth for? For us? We were a little bit past the startup stage at each of the businesses I’ve I’ve been at, but we were at that point where our core product, we had done a good job of capturing a strong market. And that was the question which was great. What are the next growth factors for that business? And I always thank you. You don’t want to wait to figure that out until you’re ready to go pitch to a new investor. You want to actually have figured that out as an executive team, you know, really early on and used that to kind of guide everything that you’re doing, whether it’s your go to market strategy or product strategy or your M&A strategy.

Nate Grossman [00:03:09] And what does that look like internally at the company, the the process of developing the strategy and who’s involved in that process? Do you have frameworks for it?

Katie Bullard [00:03:18] Yeah. So let me talk high level. When I talk about a growth strategy, what I tend to think about is three years from now, you know, who are we going to be as an organization? What is it what are the products we’re building to go capture that market? What are the financial plans look like three years from now? How will we. What is the North Star that we’re aiming for as a as a company and so for any company, there are a lot of different ways to grow. There’s all kinds of different levers that you can pull. And so when this first came to to kind of our realization that we were, you know, we were getting ready to go in front of a bunch of investors and quite frankly, like we didn’t have a really clear growth strategy. We sat down as a team and put together a framework to to really help us evaluate what all of our different growth opportunities were. So we put together a really brief little animation that I thought would be helpful, and then we can use that to kind of go through the rest of the discussion. So let’s see if this will work. There’s no sound. OK, there you go. And I’m going to let it go through and then it’ll all come back to it all. So essentially, what we did as an organization was we built out this this vector model and we took the core business today first and we said, you know, is there a way to accelerate growth just from new pricing and packaging? Is there a way to accelerate accelerate growth just from putting additional investment, for instance, into our sales and marketing strategy? And we put together kind of on I’m going to call this a very many business case for each one of those things. So pricing and packaging, customer whitespace, you know, go to market optimization. And then we built out each of these other vectors and we said, what are the next adjacent products that are same buyer. Right. But something new that they could buy from us. And we mapped out white, just white, boarded out what all those different opportunities were. Then we did the same thing for new channels where the new channels could we build out a different partnership program? Could we, you know, use a channel to go you to go internationally, which gets to new geographies where what are the geographies that we’re strong in today, where the geographies that we aren’t and what are those opportunities for us? And then new buyers there actually could. And I’ll use the Discover, for example, as an example, we were selling really well to sales and marketing teams, but we knew that account management teams could actually use our data to help identify like churn risks. Right. So when it leaves, most of you guys know when a point of contact leaves an organization that’s actually a really high churn risk. Not only is it a great indicator for a sales guy to come in and sell, but the flip side is true to so account managers might be a new buyer for us. So we literally just mapped each of these out, sort of mapped out the vectors, and we did a one page market overview of each of those opportunities. So what would it take for us to go after that, that new growth opportunity? What was the competitive landscape look like? Were there any headwinds or tailwinds that existed in each of those? And we went into a strategy session as a leadership team with a one pager on each of those. I think we ended up with something like 10 or 15 different growth opportunities based on this framework right here, and had a discussion as an executive team. We did some, you know, market opportunity, fit rankings, gave everybody the opportunity to kind of come in and say, where do we think the biggest opportunity is? And the key thing is we left that that session with three things. And this happens every time I’ve done this. You leave those sessions with three to five things you want to double down on. And you also leave that session with ten things that you say I’m not going to focus on now. But you you leave the session with a with with enough understanding of the growth opportunity that it feels credible. Right. And so when you go to the board at the next board meeting and you say, hey, here’s where we’re going to focus, here’s where you want investment, we want to go international, we want to go down market. Here’s what we’re not going to do. It really it is very credible to the board.

Nate Grossman [00:08:04] Yeah, absolutely. And moving to that now, when do you feel like is the right time to get your board involved and make sure that there is alignment there? Because ultimately that is really what it’s about.

Katie Bullard [00:08:17] I think it totally depends on each of, you know, your boards or if you if you know you know them really well. So I’ll give you two examples. We had one example. So I was working for a small company that was part of the Vista Equity Partners portfolio, but we were like their small company portfolio and we wanted to come in. This is Vista is great, but like you got to be buttoned up. So when you come into the Vista board. So we wanted to do this ourselves, feel really, really good about everything that all the analysis that we had done. And so we did it ourselves. And then we brought it to the board at Discover. Org. We were actually really kind of struggling with two or three different avenues to go down like we came out of that session. I’m not entirely sure what we were going to do from a buyable perspective. And so we actually wanted to get the board involved as we were thinking through that strategy. So we actually did a session with the board and we made them actually go through this with us so that we all left. That all in alignment, by the way, ended up driving. The acquisition is some info, but we wanted to all get on the same page and feel totally aligned on that. And so for that board and for that situation, we actually did this together with the board.

Nate Grossman [00:09:40] And then I see you in those different scenarios, engage the board in different ways. Coming out of the engagement with the board. How do you feel like? How do you know it went well or didn’t go well?

Katie Bullard [00:09:53] Yeah. So I think the thing that was most compelling for us and I’ll use an example when I was that I was at a legal tax software company that was part of the Vista portfolio at the time. We had gotten some interest from other investors up until that, but nothing that had really stuck. And part of it was I think we had not clearly articulated this ourselves internally, which then meant we couldn’t articulate it to the next group. So when we went through this process and actually sat down, mapped this all out, put it together, this actually was like, you know what, I think it’s time to start potentially a process and bring bring in some additional investors, which to us was a signal of their confidence in us. And what they told us, though, was what you need to do for the next investors. You need to show some early traction in one or two of these so you can go out and say, these are the five ways we want to grow in the next three years. One’s a new product. One’s a new buyer, one’s a new geography. But you need to be able to show at least one of those already on your your PNL that you’re starting to see that momentum. So let’s pick one. Let’s go after it. For us, it was actually international. We wanted to we decided to show a little bit of growth in international and then that will give the next investor confidence that that these are these are real. And so actually, the fact that they. Got to that point, is what signal to us that they were confident in the strategy?

Nate Grossman [00:11:30] Yeah, yeah, definitely. And what what things do you need to show the board? What do you say to, um, uh, give them the confidence or help them help you like. Yeah. As an example, um, with our companies, we really want to make sure they’re being data driven. And so we want to make sure that a lot of that has happened before. We’re having the conversation with them.

Katie Bullard [00:11:55] Yes. Yeah, great point. So I think doing those little mini business cases and coming in with some hypothesis of how big this market opportunity is, how fast it’s growing, where we would need investment instead of just coming and saying, hey, we want to grow internationally or we want to go down market, or we think this next product is the next thing, I think coming in with with some data that we had already done ourselves without honestly, without going and spending a bunch of money on market research, we used our a couple of product managers to go gather some of this data and put it together, I think is really, really important. And I think especially, you know, when you’re in a startup phase like you don’t you don’t have the money to go, do, you know, hire Bain to do a deep dove on all of these different opportunities. But having a little bit of data behind it is important.

Nate Grossman [00:12:51] Yeah, for sure. Um, maybe moving on to examples. So examples of when this has worked really well and examples of when it didn’t work.

Katie Bullard [00:13:01] Well, yeah. So, you know, we all we are all in really dynamic markets. I feel like we think we know what the market’s going to be two to three years from now. And it never actually is that they change so, so fast. And so I I think my biggest cautionary tale is I was at one company and we put out, you know, we developed our three year growth strategy. We felt like we put a lot of research into it. We knew the products we were going to put onto the roadmap. We knew, you know, which companies we wanted to go buy versus build. We knew which channels we wanted to go after. And we were we were also really we wanted to stay focused. Right. We didn’t want to be focused. We don’t want to change priorities all the time. That was really important to us. It’s important to any business to grow, but you can take that to an extreme. And so I think we didn’t check back in on that growth strategy enough and. What that that meant we missed some opportunities or we we ended up going down a path that if we had taken a step back, you know, every quarter and relooked at that strategy, we probably would have pivoted more quickly. And so that was one advices use that north that guiding North Star like, you know, use that growth strategy as you’re guiding North Star. But check in on it every one to two quarters and make sure that the dynamics of the market haven’t changed to a point that you need to shift your priorities and be OK, saying it’s we need to shift the priority. And if you again, if you have this clearly outline and you’ve communicated it to to a board, then when you come back and say, here’s why we’re going to shift priorities, then it’s it’s easier for them to to buy into as well. So that was that was a cautionary tale. I think, you know, where it has worked really well. I there’s been a lot of places where it’s worked really well. But I think the example that I gave earlier where, you know, we said, hey, these are the three growth factors. We want to we have a good core product. We have good retention on this product. We want to take it internationally. We want to scale down markets. And we have this like adjacent interesting space. We’re not really sure what we want to do in there, but we we know that’s where we want to go, that we we went after each of those in very small chunks and we said we’re going to first focus on international. We’re going to prove it out. We’re, you know, and we’re going to show some traction there. And then once we feel good about that, we’re going to do the next one that actually worked really, really well. And in the case of that particular company we had had in an investor that had been interested in us previously, had come to us, was not really sure about the legal tech space. They didn’t they weren’t they weren’t entirely sold on the growth story of the business. And because we put this in place and because we built out this, you know, this international and honestly, we had more momentum internationally than we ever thought we were we were going to have. They then came back to us nine months later and paid double what they would have paid when they came prior to that, because we we had this story and we had, you know, shown some movement on it. Yeah.

Nate Grossman [00:16:31] Yeah, absolutely. Yeah. Um, and bringing it full circle, I guess this goes back to your cautionary tale a little bit. Yeah. Um, but what what’s the right cadence for this process of developing and reevaluating your growth strategy, both internally and communicating it back to the board?

Katie Bullard [00:16:51] So we go through the whole process once a year. We actually usually do it in the summer time. And the reason is that we use the growth strategy to then drive the product roadmap, to drive the investments we want to put in the next year’s plan. And so then that way we’re not like having to double back on things. So we go through the full process once a year relooking and re really validating the three year strategy. And then every quarter at our leadership offsite, we we check in on it. Are they still the right priorities? And so that we’re actually really well for us, I think that the biggest thing was lining up developing this three year growth strategy and then using that to feed the roadmap, the financial plan for the next year, the budget requests that we wanted to put in, that was what was most important.

Nate Grossman [00:17:38] Yeah, awesome.

Katie Bullard [00:17:41] I think we’re getting the one minute signal back there, too, to.

Nate Grossman [00:17:44] Oh, perfect. OK, um, I think that, uh, uh, we can finish there. Um, but again, I really appreciate you taking time to do this.

Katie Bullard [00:17:56] Yeah. Hopefully that was helpful. I’ll be here around in the back for a couple of minutes afterwards if you guys have any questions. I think this framework works, whether you’re just starting out, you know, whether you’re a ten million dollar company or whether you’re approaching the hundred million dollars states to hopefully you guys all get to that point soon.

Nate Grossman [00:18:15] Awesome. Thank you, everyone.

Speakers

Pricing as a Growth Lever

Joshua Bloom, Managing Partner @ Simon-Kucher & Partners

Ascent Conference 2019

[00:00:07] I actually have a pretty ambitious agenda, I want to talk to you all about pricing and kind of the strategic side of why it’s a growth lever. But I also in the next 15 minutes, want to give you a few tactical takeaways that you can go back and take your own companies. So maybe just as a start, a show of hands, who has had to grapple with pricing at their companies? OK, that’s great. About 80 percent and my question, hopefully the other 20 percent who didn’t raise their hands after this, they will be inspired to go tackle pricing.

[00:00:37] All right. So I’m coming in with a kind of fact base that I’ll I’ll share a little bit of context.

[00:00:44] And I work for a company, Simon-Kucher and Partners, that has been around for thirty five years. And I’ve been with the firm for the last 16 years. I lead our software, Internet and media practice here in the US and we focus on top line growth activities, marketing, pricing, sales and kind of underneath there. We’re best known for our work in pricing. It’s about 60 percent of the work we do. We have thirteen hundred people worldwide and at 35 year history we’re doing over a thousand projects a year at this point. So a really solid kind of benchmark fact base to start from. And as I said, I focus on the tech vertical and that covers all different types of software companies that you can imagine, as well as kind of consumer Internet companies, two-sided markets and media companies.

[00:01:31] So let’s start talking about pricing. So why is this important?

[00:01:36] One of you don’t have to necessarily take my word for it. We do a lot of outreach to companies, to investors. One of our recent surveys, we surveyed 70 private equity and venture capital firms and looked at where they spent their time and effort and money during their holding period and what the actual return was. And in good news for us, pricing was the highest ROIC activity, kind of outpacing sales investments, marketing investments, cost or Operation Focus, which are traditionally the areas of the highest, highest investment, but actually somewhat under invested. So this is an area for continued continued improvement, but definitely something with higher ROIC. Just taking one more macro step back, why are so many companies tackling pricing, monetization and revenue model challenges? You could say part of it is a a result of a long term trend, which is that that kind of transactional business of goods is largely being replaced by services and ultimately subscription revenue models. So I’ll have a lot of material in this section. Pricing covers a lot of different topics, but I’m going to focus on this subscription topic and what it really means, why pricing is an important lever inside there and what are what are some of the tactics you can apply. So obviously there’s a lot of buzz words when you when you dove into the topic of subscription businesses, things like land and expand, expand and renew, et cetera.

[00:03:08] I wanted to give us a little bit of a data driven fact based to start this discussion and why land and expand really matters. And especially that expand component is pretty much captured in this chart that if you think about the customer acquisition cost for a dollar of annual contract value for a new logo customer, you’re paying on average more than a dollar. So your payback period is maybe 13, 14 months. On the other hand, if you’re able to land that customer and focus on cross-sell up sell opportunities, metering usage, getting increases at renewal, those are all cheaper activities to drive. And you’re looking at thirteen to twenty seven cents on the dollar on average to drive that type of ACV. So it’s a fundamental lifeblood of the of the subscription business model. And it’s where I’m going to focus so I can look at those three levers to kind of drive a land and expand strategy. I’ll focus on upswell, which could be tier upgrades, it could be cross-sell to another product. Look at usage, how to think about metering and licensing. We’ll think about retention. What is the best way to take advantage of that kind of particular point in the customer lifetime journey? And maybe to inspire you all with a little bit of a benchmark here. The top 20 percent of SAS companies are able to get one hundred and twenty percent improvement on their ACV year over year. So if they have a dollar that’s up for renewal next year, they’re getting a dollar, 20 cents.

[00:04:40] OK, so now I’m going to dove into some of the tactics, so the first land and expand topic is, is that land peace and how to upscale if this website pricing page looks familiar to you or looks like your own companies?

[00:04:57] I apologize, but this is often referred to as the before picture or something we call feature shock that it’s incredibly tedious list of features with no clear value statements.

[00:05:11] After.

[00:05:13] Going through an exercise of looking at what are the true value messages that you’re trying to convey, focusing on communicating those, there really is not just beauty and simplicity in that clear value messaging, but but increase conversion. So in an online channel, this is kind of a before and after test, zero additional features, only changing the skin of the pricing page to focus on what customers are getting as they step up in each package. This resulted in a 60 percent higher conversion contract value.

[00:05:50] So that’s the land. Let’s talk a little bit about how to expand, so one of the biggest questions you’ll tackle and what we say is how you charge is more important than how much you charge that fundamentally pricing is an exercise in dollars and cents.

[00:06:06] It’s an exercise in understanding the right business model. I’ll take an example of a public company. We work with Blackbaud CRM software that had historically been priced on a per user basis and in general per user pricing was the dominant mode in the 90s, early 2000s. But obviously with cloud deployment models, we have a lot better telemetry to measure kind of value and use. So we help them look at both alternative metrics and how to migrate people to their new service offering a number of years ago. And one of the things we found was as opposed to users which remain flat records, kind of donor records as a CRM system focused on fundraising, grew 14 percent a year in their customer base. So if you did a cohort analysis and said we land a customer in year one, what does that customer look like in your for they’ve got forty two percent more records than where they started changing that metric and getting ninety five percent of the installed base also migrated to that metric and as they made this conversion, helped their stock price grow forex in the last few years. All right, another example, a kind of cross-sell, everyone’s favorite hardware company to look at is kind of industry leaders, even in the hardware space, more, maybe more traditional industry. Apple has been known for being the pricing leader. That’s how they’re often referred to in the cell phone market, smartphone market. And they have been consistently increasing prices with the launch of their flagship product each fall, essentially over the last few years. But something changed. If people have been watching the news, they made headlines with the iPhone 11 Macs launching net pricing announcement a couple of weeks ago by keeping prices flat. Any idea why they did that? Any ideas from the group? Well, it’s no longer just about hardware, they’re trying to cross-sell other services, the main point of that, that announcement was all the news services are launching a TV platform for five dollars a month, publications platform for ten dollars a month, credit cards, no fees, interest only. Essentially, they’re starting to look at the phone as a beachhead for other cross sale opportunities. And at that point, the economics of the model of just maximizing profit on the hardware itself start to lose appeal and you start to see that it’s more the land entry point. OK, you have a customer, you’ve expanded the customer, how do you keep that customer, retain that customer? But also don’t you shoot for attention, shoot for increase to offset churn. A lot of companies will look at targeted price increases at renewal. So they’ll say, well, especially in an enterprise sales environment or mid-market sales environment, we might have had people coming in at different prices, different discount levels. And at renewal is an opportunity to revisit some of that pricing and say are they actually where their peer group is? Can we say with a straight face that a customer walking in right now with a similar characteristic would see a similar price? That’s more of a lift of kind of the underperforming price points from the past. There’s an opportunity to say, have we added value? That’s part of the exchange. And have we fundamentally invested in the product since they first purchased kind of shift the whole pricing curve? And are there other things we know about their customer behavior that would allow us to differentiate pricing even on the customer specific level? So this is an example from an EdTech client where we looked at some of those differentiating factors and we’re able to see there were differences in churn based on things like customer tenure. And it wasn’t necessarily even linear that there might have been a honeymoon period in the first year, but actually it’s a year or two. That is really the critical moment when people decide are they going to stick with this software or are they going to find something else? But once you make it to kind of a long tenured customer history, then then there’s there’s real value in use. So we looked at these different type factors, applied this type of program of differentiating price increases and was able to we’re able to realize double digit price increases this past year with basically all of that flowing to EBITA without significant churn. The last piece retain this is maybe going a little farther afield from pricing, but fundamentally another project we worked on that that maybe you were all familiar with is Hubers loyalty program. So the writer loyalty program that was rolled out this year, again, if you if you focus on what’s been happening with Uber and Lyft, a lot of the financial coverage is about not just their rates, but the degree to which they are retaining customers and driving loyalty. So using loyalty programs to create different price levels for your most loyal customers and keep them engaged is part of that exercise as well.

[00:11:01] OK, so hopefully I’ve given you all a couple of different ways to think about the pricing problem, but maybe closing thoughts, I’ll let others close for me.

[00:11:13] Warren Buffett says if you have to have a prayer session before raising prices 10 percent, you’ve got a terrible business that that is the determination of whether you have a good business. And obviously, I think that’s that’s a relatively strong signal from the investor community. Let’s try from an operator, Steve Ballmer. This thing called Price is really, really, really important. And Steve Ballmer fashioned deep in thinking through revenue, price and business model is the difference between a successful company and a failure. So a couple of closing thoughts are on the importance. I hope you taken away a few things. And thanks for having me. Happy to connect with all the folks in this room here. LinkedIn. Thank you.

Speakers

Scaling from Seed to C: What Founders Should and Should Not Prioritize Through Growth

Elisa Garcia Anzano @ M12 and Tamara Steffens @ M12, Microsoft’s venture fund

Startup Grad School Stage
Ascent Conference 2020

Elisa Garcia Anzano [00:00:00] OK, let’s get started. Hi, everyone, and welcome to our fireside chat scheme from C2C. What fun. The soothing signal not through growth and the listener can turn on the head of market development for them. 12 Microsoft venture fun. And today I’m thrilled to be in competition with my friend in my district and of our fun Tamara Steffen’s. So a little bit of a Tamara Tomalis investing for himself in North America and India. She’s an experienced operator and entrepreneur with over 20 years of experience in Silicon Valley. At both the startups and left, companies have less startup was accomplis, a mobile productivity app. Microsoft acquired accomplis, now Outlook Mobile in 2014. Afterwards, Tamara went on to lead business development for the Office of 65 organization, and that’s where I met. Before that, Tamrat helped lead several startups to that IPO or acquisition, including software will come bunghole for one in pop. Tamara, thanks for being here today.

Tamara Steffens [00:01:07] Hey Elisa, it’s great to see you. Wish we could be in person and be nicer to be working out of our San Francisco office, but this will have to do.

Elisa Garcia Anzano [00:01:15] Yes, good to see you, too. Yeah, so a little bit more about myself, like I lead the market development team from 12 and my team minutes. As you said, Marketplace composed four of us open for your company, has been to cabinet promising Fortune 500 company corporations. I’ve been on Microsoft for 14 years and these last have been Adamsville has been fantastic. OK, so let’s get this safety versus a philosophical question to scale, not to scale. Tamara, you’ve had several experiences, growing data centers to exceed. Can you share some of the moments when you knew that it was time to scale? Well, one of the indicators that data startups was onto something big.

Tamara Steffens [00:02:03] Yeah, that’s a question I get often. It’s it’s interesting because I think sometimes you get into early stage tech and you’re there so early that nobody even understands the technology. One of my first startups are actually my first what I would call startup or software dot com. And although people think we sold software on the Internet, it was actually an email company that figured out how to do millions of users in a single domain so that consumers could use email. And I remember friends of mine saying who needs their own personal email? In fact, it really took off. Right? So we knew we could scale when companies like AOL at the time. If people don’t know what that acronym is, American Online or America Online started out with a lot of texting or chat and then moved into letting people have their own email addresses. And as soon as it caught on, it just really took off some other startups that really had early tech and people didn’t necessarily understand it to start. But the example is at Fusion one, they did cloud backup of all things that many years ago and it was on your phone. So when you got your mobile phone and you dropped it in, you ran over it with your car or the most common thing was to drop it in the toilet. Apparently your phone would be ruined because they weren’t waterproof back then. And you could walk into a Verizon store. They were one of the first operators to buy the technology and they would hand you your phone back. They would have all of your stuff on it, all your contacts, all your texts, everything. And you are like, so grateful that you didn’t just lose everything when you dropped your phone because again, this was pretty far back up. So I think once people see an example, whether it’s using personal email or getting your phone back with everything on it, the technology starts to take off. And, you know, once people understand it, then they can buy it. Right. Meaning you’ll start to be able to generate revenue. Another example is when I was at Path, it was a private social network. Right. Really competed with the likes of Facebook. Facebook’s really public path was really private. You could only see your friends and family. So it wasn’t you didn’t have this ability to search for people and look at their what they were doing. But we found that if you didn’t have seven friends, you wouldn’t use the product. So when people would download the product and they would start to use it would really encourage them to go get seven friends. And we even gave them some friends. Some of our our social media director was decided to be friends with people who didn’t have seven friends so that she could teach them. And it was really fun. But it was a way that we knew as soon as people who have no friends on a social network, they would start to use it and share things with their friends and family. And I think, like I said, if a company figures out how to get their product understood, then usually you can move on to scale.

Elisa Garcia Anzano [00:05:16] That’s a desperate device. So what about how how do you start seeing them when you know it is time to start thinking about partnerships like what are the levers that you pull for the skill? Do you have an example to set up operations that you’ve done that helped your startups go?

Tamara Steffens [00:05:37] Yeah, as I mentioned, fusion one in the cloud technology that was really early stage backup, right. In the days where, you know, there wasn’t really such a thing as you put your stuff out in the cloud. So we had to have an operator and our first big customer was Verizon. Right. So they actually pushed it. It was called backup and recovery. And you paid a dollar a month on your phone. You really don’t notice that dollar, but for one dollar to back up your phone every night. Now, as you know with with Android or Apple, it automatically backs your stuff up. So if you do lose your phone or your cell phones now, it’s a very simple thing to do. But back then it wasn’t. So that was a big partnership that we did that worked out really, really well because they were able to distribute the technology on every phone they sold. And we’ve we’ve come on, as you and I both know, we both worked a lot in our previous life prior to and 12 with a lot of the mobile OEM like Samsung and Sony and the various handset manufacturers. And, you know, we knew if we could get our technology installed on the handsets, people would see it. Right. They’d recognize that. They’d see it. They’d start to use it. So I think those old partnerships that I started way back when have carried all the way through to today.

Elisa Garcia Anzano [00:07:04] You actually have a similar example around partnerships and also on the other side. It wasn’t a large corporation. I was working for Microsoft, but back in the day when I was a tiny startup, we need a partnership with them where we help them distribute through all of our stores and we that partnership with that telco as well. So basically what they were tiny, but we had a set of producer. We were able to lend to us Safi’s and New Windows Phone back in the day when we have windows, phones and a new experience for Xbox. So we had them. They they were very aligned technologically with what they were trying to do. So they build really amazing apps and we chose to install them in our devices and go to operators. And I I mean, they weren’t even in our Super Bowl ad that year. So that was pretty cute. So I would never leave the part of the progressive hopefully get to the place where they’re at right now. And they’ve been for a while. The whatever the company like is that like any partner seemed like you went from like Siedel to like two hundred with a company. Was that through partnerships as well?

Tamara Steffens [00:08:15] What we started to do some partnerships actually. We were pretty aligned with Microsoft. You know, we decided early on that if we were going to sell to the Enterprise and you know this better than I do because you’ve done so many enterprise partnerships in your career. But we knew if we were going to sell to the Enterprise, we had to start on Microsoft. Right. And while we certainly integrated with Google as well, the partnership with Microsoft allowed us to do Outlook Right. Exchange and really start to work with large corporations. So I think that was probably one of our more strategic alignments on the security side, although never, never spoken. It can. We can now. It’s five years later. But we worked quite, quite closely with like the NSA and the CIA and started to work with them on getting mail on devices for the US government at the time. And it was really beneficial to us because we learned a lot about security and trying to make sure our product was very secure. So I think between, like kind of a technology partnership and then Microsoft on the enterprise side, those were early stage partnerships that we really we really leaned on. But we went direct with most of our sales prior to getting in through the App Store. So, of course, our relationship with Google and our relationship with Apple and getting the apps in the App Store and getting it featured and using traditional growth methods as well.

Elisa Garcia Anzano [00:09:42] That’s very interesting. So now let’s B2B to customers. I mean, at the end of the day, the key for every business is to make money, right? And we all know that the first, the customer is critical for an instant. So what can you say about what tactics could you use to convince a large customer to a living doing your startup? Like, how how do you do that?

Tamara Steffens [00:10:05] Yeah, so that’s hard. And I think you’ve got to not spread yourself too thin as the cliche is, is known. And what I mean by that is, you know, in the example of like Boingo is another example where we we we got Wi-Fi going. Right. So we connected a bunch of Wi-Fi networks around airports and coffee shops. So that part of the partnership was volume more networks tied together, building a better product. But the end product then we had to go and partner with the likes of AT&T and other operators. And I do remember thinking, let’s get one and let’s do it great so that this is an amazing reference and make sure that when we’re partnering with them, they’re part of the partnership in the success. Right. Because you’re going to hit bumps in the road. And if you don’t find partners that allow you to make a couple mistakes, it can really derail your efforts in your growth. Right. So don’t pick too many states to stay the course and pick a partner that will allow you to hit a couple of bumps so that your growth you can maintain that growth.

Elisa Garcia Anzano [00:11:21] Yeah, that’s interesting. So a couple comments, so knowing my my job right now, I’m helping startups like they have customers like introducing them to customers and so customer. But in previous role, I was sort of I was the customer. I was on the buy side. Right. And one of the things that I’ve seen way too many startups doing is trying to bend over backwards to gain the first customer when that when we are not the line, when there’s no distress on the other side. And I’ve seen startups sort of get lost trying to sell to a big company like Microsoft when the priorities are not there. So one of the big pieces of feedback that I’d like to give is, is that just like make sure that your priorities are aligned, the interest is there. I would say this is like a relationship, you know, with the other person is not going to be like to just leave it like is not so, especially when it’s one of your first customers. They can really define who you are as a company. So I highly advise not to just bend over backwards, toughest customer and change the whole strategy of your company just because of one customer goes one big name straight out. Like if several customers are like not like saying yes to you, then you sort of start thinking about like, what is your strategic direction the first, then just do it for one customer. Yeah. I don’t know if you agree with that.

Tamara Steffens [00:12:49] I actually completely agree with that, at least I think exactly what what you just said is the right strategy, right. Pick pick the partner that actually can help you grow. And it’s got to be a partner that actually fits your solution. That’s not to say you’re not going to make slight pivots and changes because you do have to find that product market fit. And you know, you know better than anyone in working with all kinds of partners and Microsoft and getting them aligned with Microsoft as the customer. Like you said, you do have to make some changes, but hopefully not, you know, huge. And picking the wrong partner, like you said, could put you out of business. Right. So be careful, pick wisely and don’t pick too many to start because that success is really important.

Elisa Garcia Anzano [00:13:35] Yeah, yeah. Completely. I knew that. And then I think the other thing that I will serve is understand what your customer wants. And I understand the signals that they’re sending you. And even before reaching out, like do your homework, we just as Microsoft, we get too many pitches and take sending Roberts Microsoft as a customer like you need to do a little bit of diligence on the customer and what they’re interested in, what the dual function is. If you know anybody in the network that you can talk to is this you need to be meeting a need that the customer has. If you don’t truly understand what the need says before approaching the customer, then the conversations are not going to be very effective.

Tamara Steffens [00:14:19] I agree 100 percent.

Elisa Garcia Anzano [00:14:23] So I think this is. This is sort of related so so then and I haven’t been on the startup side, but like if you have limited resources and you really need to focus on it, what is your first partner? Your first customer? How you grow like a Step-By-Step. How do you stabilize these priorities, especially as you grow? How do you make sure that you stay focused on your priorities as you grow?

Tamara Steffens [00:14:49] Yeah, I think, you know, revenue is king, right, and in making money event, you’ve got to make money eventually. I know there were years in the in the startup industry where it was growth at all costs. Right. You didn’t even worry about if you were making money on those customers because you just had to get to 50 million, one hundred million, 30 million, a million customers. Like that was the thing. Let’s just go, go, go. Until we get customers. I don’t know that that was super effective. Right. There was a lot of a lot of unfortunate failures, even with millions of users in some of those companies along the way. So I think now it’s a it’s a it’s a kind of a happy medium where you do need growth. Right? You need users, you need scale. But when you’re getting those customers and picking those partners, make sure they’re customers that will pay. Right. It’s fine to have a freemium model. It’s fine to you know, we acquired myelitis is a great example. Then one of the better growth tactics as far as enterprise type products, small business products, where you could use the product for 30 days for free. And at the end of the 30 days, they would show you exactly how many miles you drove, how much you could put on your taxes so that the IRS would reimburse you or your company could reimburse you the fifty five cents per mile. And so it would pay for itself. And they would give you a perfect example of exactly what you did that month and how it was going to pay for itself. So they understood that they gave away the first thirty days, but they told you the value at the end of the thirty days and then they have a miraculous like sixty percent take rate. If they could get somebody to use the product for a month and they could show the value of the person in their driving, they could get somebody they could convert that small businesses or enterprise user into their product. So I think that’s key, right? Find customers that are willing to pay you and don’t just go for growth at all costs, because if nobody’s going to pay you and your five million customers in, you probably aren’t going to last long.

Elisa Garcia Anzano [00:16:59] That’s from a business perspective. What about Heidi? What about people like how do you how do you think about growth and what type of people you need to hire so that you can keep growing? And how do you hire in a period of growth?

Tamara Steffens [00:17:15] Yeah, well, there’s a couple of different different ways. If it’s a consumer based product, you’re probably going to look for somebody that’s a growth expert. Right, that really understands those growth techniques, data science, if you will, on how to use the App Store and ads and a combination of attribution to get your users to try your product. Right. So you would focus on that if it’s an enterprise play and you’re selling directly into the enterprise, your first couple of salespeople are pretty key, right? Long track records really understand the enterprise can go back to existing customers that they sold to in the past with this new solution and get those referenced customers going. So I would say depending Enterprise, your first couple of key hires and growth are going to be your enterprise sales guys. If it’s a consumer price based product, it’s going to be data, data science, growth, technology, people that really understand how to apply that.

Elisa Garcia Anzano [00:18:14] And how do you maintain the culture of the company as you scale and grow?

Tamara Steffens [00:18:19] Yeah, well, I mean, you you know, I know there’s a lot of talk about diversity in today’s world, and it’s incredibly important. I know Satya and Microsoft as a whole believes that a diverse company and a diverse culture make a better product. That’s a known fact. Diverse companies make more money and are more profitable. As you know, women run, companies are more profitable. But I think you have to start from the beginning, right? Because I think as you’re building the company, when you have the opportunity to choose a diverse, diverse talent and diverse workforce and you bring that together, you will have a stronger company. And I’m on the board of a couple of companies who have just done an amazing job at that. Were a company in Seattle zip up has done just wonders around starting from the beginning and hiring a really diverse workforce and their product and their successes has shown it. So start from the beginning. Don’t try to do it later.

Elisa Garcia Anzano [00:19:21] That’s great device. So changing gears a little bit 20/20. It’s been a year, a very different year has changed everything we do and we don’t know when that’s going to change back again or if it will ever change back again. Right. We don’t have handshake’s we know having some meetings to close deals. There is no interviewing in person either. So how does that change how companies grow and make how companies are formed since you’re on the board of so many companies in this field?

Tamara Steffens [00:19:56] Yeah, I mean, I feel like we’re still early in this crazy journey called Twenty Twenty It and Twelve has done a really good job of of looking at new companies and talking to founders and getting to know them. And I think more now than ever. And you’re you’re you’re a rock star. This is just keep your network right. Constantly reach out to your network and be talking to them even over teams. And Zoom, that’s really important because your network is probably going to give you the best connections to one hiring and or in our case, investments. So you’ve you’ve got to you’ve got to treat your network the way you would treat it in person. Unfortunately, virtually the same way. And least I hope we do get back to some sort of normal next year, because I think we’re all going to be tired of video by the dark here.

Elisa Garcia Anzano [00:20:52] Oh sure. And it does require more effort to keep your network, to keep your connections, to retire, to be strategic about who you retire because it doesn’t happen. It you just don’t go to an event and you meet people and you’re like, oh, that’s a great event. Things happen spontaneously. You have to be more thoughtful about how you it. I like to set an example of something that my team has been driving, as you know, when because we used to cost a lot of events for our portfolio companies and that’s where most of the interactions between customers in our caucus happened. So we had to get creative as well. And we are located as a defense marketing funds just to see what our companies would like to do in this strange Spiga and 11 companies came back to us with really, really creative solutions. There’s one that I like, especially as Senator said, this is my team and a great company. They they basically have a solution that takes simple failures in real time for vehicles. So they sell. I mean. Their customer base is basically automotive execs in the Great Lakes. So is that really hard audience to read to if they’re not like their car shows and like vans for like the car industry? Right. So they came with this idea where they hosted wine and cheese tastings online to discuss the future of the industry. And they would be sending wine and cheese packages to executives at home. And they landed several opportunities through these activities. And I’m hoping we can do more of these with some of our portfolio companies.

Tamara Steffens [00:22:31] Yeah, yeah. That was a great idea. Your team really executed well on that. And I, I do think it’s perfect. Right. And now they deliver great stuff like that right to your door so.

Elisa Garcia Anzano [00:22:41] Yeah, so we can just be sending wine and cheese gifts for like when we have a lot of stuff like yeah, hopefully more creative ideas will come, but definitely some time for creativity because is things that happening spontaneously. So you have to be much more strategic and then you have to have more imagination to get stuff right.

Tamara Steffens [00:23:00] Yeah, I totally agree. And on that note, I think we’re coming to the end of our our chat. We should have had some wine and cheese at the end and we could have demonstrated demonstrated the actual the the idea that your team came up with, because I do think it was brilliant and it was very successful. It’s been amazing talking to you again and looking forward to doing this in in San Francisco, where we can both get back into our office and have a normal day. And I believe that day will come.

Elisa Garcia Anzano [00:23:31] For sure hopefully very soon. Thanks for saying your experiences the day, Tamara, and thanks to the Ascent conference for having us today. I hope you enjoy the rest of the conference. Thank you.

Tamara Steffens [00:23:43] Thanks elisa.

Elisa Garcia Anzano [00:23:44] Bye bye

Speakers

Scaling a start-up: Expanding and Launching in Asia Market

Michael Zhu, Founder & Managing Partner @ Accathon Capital

Startup Grad School Stage
Ascent Conference 2020

[00:00:00] OK, cool. Hey, guys, thank you very much for joining me with my session. And today I’m going to take about twenty five minutes to go over something that a lot of founders in my in my portfolio or some other people in my network that are looking to expand our business, that we’re launching their business in Asian market. So I’m going to talk a little bit more in detail, but because of a time limitation. So some of the things that I may skip or I’ll stay very high level, I’m very happy to connect you guys over LinkedIn or some other way so that we can talk more in details. All right. So another thing that hopefully you guys enjoy the last night debate, which is a very interesting and I know some of souvenirs coming out of the debate, which is very interesting as well.

[00:01:00] But anyway, let me let me share my screen now and then.

[00:01:07] OK. So today the topic is us going as target startup and expanding the launching Asia market, honestly speaking, Asian market as large as huge.

[00:01:20] So today I’m not going to focus on every single market in Asia, but particularly in China. So I’m going to dove into it. So who I am and who we are. We call it ourself entrepreneur behind, entrepreneur into then twenty eight. Twenty eighteen. We establish excellent capital, which is the office style direct investment firm, as coming from my family business and directing all the investments globally. And we invest into venture capital funds, other assets, alternatives and other fixed assets. But the same time will also back emerging game changers in the tech industry. So this is something that we are proud of and we’re Fashanu and just being around for two years. But we have accomplished a lot, hopefully, that I can share with you guys in a few seconds. So it’s just a high level of of us. We pretty much focus on cross-border market and we take approach of venture investing and venture building in terms of a track record of our investments. We have deploy capital in three first quartile venture capital funds both in New York City as well as the Shanghai with the five billion plus combined again. And this is just a couple of top table type of investment we did. And the Venture Capital Fund and some of the venture capital funds portfolio. These are pretty much diverse in investing to Sasfin, Tagore, some others. And the one that we invested into Shanghai was purely focused on consumer space. So that’s one and a second. Things we invest directly or indirectly through either as PV or some other ways into the early stage of startups. So when I say early stage, we pretty much cover CE rounds all the way to C or C or D, and so we have deployed capital in forty five plus direct investments into the startups in the US market. Only out of this forty five we have about a unicorn’s which we’re so proud of and three axes. So one of Z was dot com which acquired by Walmart three point three billion dollars deal. The other several potential accesses as coming on the on the way and there are already followed IPO and sort of waiting for the final IPO and our focus on investments pretty much in the SAS FinTech health care of consumer entertainment in mediatheque our family business, particularly in media and entertainment tech. We invest a lot of OTT platform or some of a consumer space that directly related to consumers and their entertainment media. Some of the VR are in a hologram programs and that’s all our focus. And so this is a type of industry sectors where we focus on in terms of other things that we do besides investments, because we believe that making the investments into the start of a world where ecosystem is just not enough. So because of where the firm focus on cross-border market and a lot of companies that if we want to go cross-border capital is just not enough. So you have to know understand what the market looks like and what the market needs you to do and what the what are your products and services can serve the market better. So so that’s exactly why and the reason that we’re we’re here today. So that’s another reason that we have a venture building component in our firm and into the twenty eighteen, we launch a signature program called a cross-border. You know, it related to cross-border accelerator programs, which are called Innovation Journey China. So up to now, we have successfully launched three course. And with seventeen B2B startups from early stage to the growth stage, there are relatively ambitious to looking for another market growth, particularly in China, because that’s one of the best or our largest consumption market in the world. And I think their business or their products or services will be better to position early in the market. So they join our program and we have about seven verticals. They’re all B2B. So we focus on a machine learning some block chain. And, you know, big data and lots of things like that, and we have about 17 companies coming from all over the world and Verver with a very diverse background and indico where we’re not focused on one particular or two particular sectors or industries. We have sector where region agnostic group or people are join us. Typically we design about forty five days hyper programs for them to get in touch with, you know, the potential buyers, potential market in China, potential investors in China.

[00:06:46] And and we at the end of the day, we design a 15 days to 12 or 15 days actually demo tour for them to really physically immerse themselves into the region. And then we arrange one on one meetings according to what they’re looking for, as well as the large conference that they can pitch in front of thousands of people with a combination of investors and academics and and government officials. So through the initiatives, we have accomplished a lot for our cohorts. And I’d just give you some examples from the last programs that we had. One of the mobility tech companies be able to secure a sort of exclusive agreement with one of the largest automotive company called Geely, you know, providing a ride, sharing services for the clients travel overseas, although now covid-19 has a lot of, you know, ban on the travel. But that’s a this is something that we achieved for the nerds, a tech company from our second cohort, the being able to lock in a deal with Alibaba and India, working with Alibaba Swingle School, which is a middle school on launching the curriculum designs and everything there. And then this tech company from from New York City, even just seeing corporate and launching a soft landing in China. So which is amazing. So this is just a very high level of what we do at act on capital. And so just want to give you a high level of of our track record and what we do. All right. So for next two minutes, you know, without further ado, I think we do Telcel So I’d love to share a two minute video that actually tell you as we condense all of the things that we did in the programs that brought them to China. And so hopefully that give you a sense of what it looks like when they when they are having a demo toy in China, enhancing all the collaborations and building connections and understand American and get in touch with their clients and sort of consumers and be in touch with their investors. So that’s all we did for them while they are traveling with us in China. So enjoy the two minutes and I’ll pick up later.

[00:11:15] All right, so hopefully that’ll give you a rough idea what it looks like, and so without further ado, I think expanding and launching in different markets, you have to understand what it looks like. And so I’m going to take about five to 10 minutes to give you a rough idea of what it looks like. And some of you guys may heard of the China market is huge or gigantic. And so what does it mean? So what it really means to talk to you in terms of a large market besides the larger market, what do you know? So I just want to give you a comparison between the US and the China Internet. I mean, the market. So as you may know that China has a one point four billion people and versus us as of three three hundred thirty one million and Internet users in China is about nine hundred million users. So it’s about sixty three percent of China’s population. That number is huge. And compared to the US market, we have two hundred, almost three hundred million users in the Internet and out of that nine hundred four million users in China and then there are eight hundred ninety seven million users are Internet mobile users.

[00:12:35] So they use mobile every single day. So that’s that’s quite a lot of mobile Internet users. And they’re also using mobile to do the payments and live streaming, all the things that I’m going to cover that later. So it’s quite, quite a lot. But keep in mind, if you compare the the Internet user, the remainder of the people that have not been on the Internet, so China still have about five million, five hundred million users not on the Internet, which is underserved and underrepresented if. And so that’s really a huge number that actually creates a tremendous of opportunities for people to to consider to tackle in the market later on in, you know, compared to the US. And it’s just a 10 percent of a population that are not on the Internet. So the growth there was not strong. So this is just to give you a life, the idea of what it looks like for the China and the US into a landscape, for the top Chinese, a community and a cities. And as you can tell from here that Beijing, Honjo, Shanghai changes as most of probably cities that you’re familiar with. Beijing is the most active hybrid, sort of a city in China with very live and active eco system and in the community with the majority of venture capital aligned with in Beijing. In a way, we’re actually they have about six to one unicorn’s in Beijing. And so this is definitely one of the largest market in China. And a number of Shenzhen is definitely a, I would say, hometown for a manufacturer and OEM ODM, when you’re looking for parts or you are in the hardware or manufacturing business, you know, Shinji’s definitely the one that you don’t want to miss. So you basically can’t find anything there. So, you know, besides talking about the large market and I will say a couple of different things that actually you can really create opportunity, Tranz opportunities for you. If you’re really thinking about going to Asia market and particularly in China, you don’t have to go to China. But there are tons of different opportunities that either after Korea or post-Soviet that we see a tremendous offer, a chance for international players to be taking in part of a market. So I’m going to talk about just three points that I want to highlight in the market right now. So, first of all, it’s not a CEO, it’s not a CFO, it’s not a CTO, actually drive your internal digital transformation of your large corporations, but actually covid-19 data. So covid-19 accelerate that the digital transformation across various sectors. So in India, before I personally involved with a lot of a corporate innovation programs, designing the program for corporates to be more innovative by tagging and interacting with Starbucks globally. So Services has a lot of different innovative ideas and technology that can help companies to be more innovative and stay competitive. And where a lot of traditional business there still over left behind and sort of think about, oh, whether this digital transformation can help us or some. Some. Can help us to grow or stay competitive, but should be covid-19 accelerate the whole process and talk about that later in a second. Second thing is a mass adoption for 5G, as we know that 5G coming approaching. And so there are tons of initiatives and infrastructure being built in Asia, particularly in China, for mass adoption, for 5G. And it’s not just about the speed. So it’s not just about one hundred times more speedy than 4G, but actually create a infrastructure for a lot of industries like the fully autonomous vehicles, where remote surgeries, where those kind of things not be able to adopt it in a market. And a third thing, which is a very unique and really top down and which is live streaming business in China, where we see live streaming continue to evolve and expand, not just about gaming and not just about some of the traditional ways that people think about live streaming. But but now they’re bringing tremendous values and fortune to a lot of people, ranging from traditional business, all the way to startups or foreign companies that actually are selling products and services in China that are utilizing live streaming to to do that. So we’re going to give you a sort of an example for that. OK, so there’s a little bit of detail of the first steam and the covid-19. So as you can see, the nineteen eighteen you know, the the the actually the number spiked from five hours per day that people spend on the Internet to seven point two hours per day in this march and during the event, which means a lot because you only have twenty hours per day and most of the companies are competing for people to spend more time on the phone on on the Internet to utilize their or their apps so that the more time they spend on on on the phone Internet, that means a lot. Now, however, a word that jump or spike goes. So part of that goes to work productivities. And so they’re using zoom or tensen, the video cost to do activities and to complete the works and some of them to do video, short videos and a video editing and a Web browser and education, if you can if you take a look at the education and then there are seventy nine million people that actually increased from the past to to jump on the line to to accept the education, which is absolutely greater than the combined students in the United States. So that’s a huge and this is just the one second thing as covid-19 absolutely accelerated the digital infrastructure plan. So in the past, China probably don’t have that ambitious plan to to to really accelerate the whole infrastructure building.

[00:19:31] But now they’re rolling out a lot of a stronger infrastructure network, including 5G, where even they’re now exploring the 60 and applied to digital tagging to all sectors and all the traditional manufacturing business or health care business or education, because applying new technology to become more digitalize and enhancing the data security, strength and technology innovation and a lot of embracing innovation then and put a little bit more fund into R&D to build to enhance their innovation from that technology wise and also optimize the broader industry development. That’s all the things the disastrous rollout after the covid-19 inspired by that. So just a little bit, you know, the industry is not being transformed from the covid-19 typically education. We see the same similar things to here in the states that our students are staying at home and accept that online education. There is just one platform classing in China used to host about two hundred thousand students daily before the pandemic. But now this year average over two million students a day on their platform. They’re accepting their education, which could be seen. And other industries like health care and manufacturing improvement there all see a a transformation from offline and to digital online and adapting or or utilizing a lot of technology to become more smarter. So second thing is mass adoption for 5G, if you look at this chart, it just by end of this year, China will be aiming for having about one hundred sixty million users or subscriber for the 5G. And the tremendous market size for 5G in China is huge. And that means that a lot of a fundamental infrastructure for for Internet companies and not only in China, but also other countries to go to business in there, have a very strong, secure infrastructure. And based on, according to a survey, that China Chinese consumer has highest intention to upgrade to 5G compared to South Korea and the US and the UK and China has about 70 percent of it. People are intention having intention to upgrade to 5G. And also the same time, seven to eight percent of people are willing to pay more to up to 5G. So you probably hear hear that a lot of phone makers and including Xiaomi, including Huawei or or Vevo or some others and roll out a lot of affordable 5G phones are in the market already. So that’s that’s going to be having mass adoption for 5G in Internet users. Of course, that I said before, it’s not just about the speed, the transform entirely for other other industries. So if you’re working in a smart city, if we working autonomous vehicle, we’re doing some sensors were were lighter or some others. Or if you were working on some of a smart manufacturing to help manufacturers to transform into newly innovative way for them to be able to save costs and be more productive. Or if you working in a health care to improve the the speed of a surgery or so help other people to cure their their cancer or some other diseases from the rural space, then adoption of 5G can absolutely add a value to to what you are doing. So the one I’m saying is if you are the founder and trainer in those different industries, do definitely think about those areas. You can add value or you can bring your unique products or services to Asia market to that into the helping consumers. All right. Number three, so as I mentioned, that live streaming continues to evolve and expand. So live streaming business and industry in China gone through three phases. So from the phase one starting from 2012, all the way to now is already evolved from just a gaming sports within culture. And a people share some sort of what they were playing, the games where where some of the sports, where some of the culture they actually doing online all the way to. Now, that becomes a platform for people to do the e-commerce or to do the e-commerce for selling stuff or selling the fast moving consumer goods or even the last last sort of here is one of the famous Keywell kind of viva, which is selling the rocket in China. So so which is tremendous of amazing. And unbelievably, the people are selling something and achieving something goes. So what’s the scale of the e-commerce the live streaming can bring into the game where I have three examples here, one from celebrities, one from tech entrepreneur, one from a chairman of a large corporations in China. They all represent all different kind of industries where identities from a different market, from different perspective, they all embrace the life streaming e commerce. So for the small celebrity, the he she felt she she sold us thirty five million B, which is roughly around five million USD during her first live streaming show. Just selling some of, let’s say, coffee or, you know, a fast moving consumer goods or something other the things that they sell this much.

Speakers