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
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