A Product Market Fit Show | Startup Podcast for Founders
00:41:16 · Pablo Srugo, Ali Khokhar
[00:41:16] S1: Got you. [00:41:17] S0: And so I was like, okay. So I had the first conversation, and then they came to the event and they saw me speak as on one of the panels. And then they saw a couple of my LinkedIn posts that popped up and like brought me back top of mind for them. And then finally a month later, after like three months end to end of multiple touch points, we met them at two conferences, had two virtual conversations, they saw two of my LinkedIn posts that resonated with them, did they actually purchase? So it's not like, hey, I'm just gonna cold DM, have a conversation, and we're done. It's more like you still have to do the relationship building, but the initial entry point that came in was, hey, I'm in this community, you're in this community. We would say it explicitly. I found you through this paid community that we are part of. It's not like a random cold DM. I saw what you're building, I think it's interesting, I'm building something interesting, would love to pick your brain. That specific was the campaign that we ran from this one community in a very non sales y way that led us to eventually close a million dollars of revenue, and the total cost was literally $20 a month.
00:42:15 · Pablo Srugo
[00:42:15] S1: This is what all the like, whether it's the community or the events, any of these things are just a way to help them filter out. Right? Like, you run a cold email outbound campaign of which you can do, and I just had, like, a founder on here, that's how he got his first million. But it was half a million emails for 1% response. I mean, that's what you and so if you have unlimited like, you're a horizontal product, and in this case, it was like customer success. Right? It's like, okay. You can run that. You can do that. But if you have any sort of verticalization, you just can't afford to have only a 1% conversion because you'll run out. So how do you get it to 10%? And the way you get it to 10% is if you think about it on the on the receiving side is you have to make yourself jump out somehow. You've gotta just be like, oh, it's not just another cold thing. There's some sort of filtering. So just being able to say I'm part of this community that you know, from the universe of of whatever infinite number of people, you've gone down to the thousand members in that community. Right? Like, you've you've filtered a lot. You show up at an event at a conference, same thing. Like, that conference is gonna have hundreds, maybe thousands of attendees, but not tens of thousands or hundreds of thousands. So you've just you're just helping them. You're just trying to find ways of how do you filter out for your customers so you're not competing with everyone. You're just competing with a subset, and then your conversion rate will dramatically improve assuming that, of course, you validate it and and you're solving a problem that's actually, you know, that they want solved.
00:43:37 · Ali Khokhar
[00:43:37] S0: Exactly. Like when we did the to give you an idea of scale and numbers, right, this community has like 2,000 people in it. When we filter down to the folks we actually want to speak to, it was like 200. That's it. It was tiny. It was a tiny group of people. And so like our conversion rate could not be like 1%. Right? Like it needed to be much higher. But it was able to be much higher because it was so targeted, so focused, and things like that. And nowadays everyone's like, you know, like AI SDR ing basically. Right? And like you can't really do that at scale in enterprise and land where relationship building is so important. Especially you can't do it when you have no brand, no credibility, like, you know, you're just finding your first set of customers to make a bet on you. It just needs to be done in a very thoughtful, intentional way, and it has to be done by founder and CEO. Like I've told also all everybody I've spoken with, you should sell the first mill. In my case, I sold the first 2,000,000 myself, personally. If you can't sell the first 2,000,000 yourself, like, first of all, are you gonna attract the world's best AEs to come work for you? Right? The world's best sales team is not gonna respect a founder who can't do it themselves. If you're build on an AE and say, your, you know, year one quota or target is a million, a million and a half. If you yourself haven't done that in six months, you don't have a right to say this is possible, you have the ability to do this. It's very different when founder and CEO does it, and it's very important that founder and CEO does the first x million themselves before then building out a team, because also you lose all the learnings, what resonates, what doesn't resonate, those first batch of conversations that result in the first million of revenue is the foundation on which you set your vision, your story, your product roadmap, the way your narrative, your entire GTM engine, the people you hire to sell, everything comes off of that. So it just becomes so so so critical beyond just like, yo, look I've had about a million dollars in revenue. It's like, no no no, I've built the foundation to get to 10, which will then get me to a 100, which will then get me to billion. It's all systems building. Right?
00:45:26 · Pablo Srugo, Ali Khokhar
[00:45:26] S1: Plus it's it's a place in in like, you know, the head of sales is the first one to go, and and it's the most turned over position. Like, it's the one place you need to be able to say, I know this person's not doing it right because I've done it, versus always being guessing, and then it's just you wasting months and quarters. And you don't know. Is it the product? Is it the marketing? Is it the sales? You just have no idea because you haven't sold that million yourselves. [00:45:46] S0: Precisely. [00:45:47] S1: One thing that we didn't touch on is we talked about at the beginning, you were kind of horizontal play. By product market fit, you were focused on, you know, the health care, and you mentioned pivots. Right? What tell me a little bit because I know that there was a big kind of pivot moment. Tell me about maybe the before, during, and after of that story. [00:46:04] S0: Yeah. So it was a couple of things that caused us to to do this. And, like and this is the other thing is, like, is this even a pivot or is it a narrowing of focus? But slightly different. Right? Like, pivot, could say, like, the Slack story of like, oh, we were trying to build a video game and then we're like, hey, [00:46:17] S1: what do need? That's the big big Pivot. This is like a small within Pivot.
00:46:17 · Pablo Srugo, Ali Khokhar
[00:46:17] S1: what do need? That's the big big Pivot. This is like a small within Pivot. [00:46:20] S0: Yeah. This is like the core thesis of hey, we can build AI systems that capture really good expertise, that can go and deliver service service heavy workflows in the form of software in a with a high degree of quality. That thesis foundationally stayed. Initially, we were serving both solopreneurs, SMB, and enterprise, right, so we're like serving a very different set of customers, and then we were layering on a second layer of complexity which was really being leadership exec coaching, we were doing consultants, marketers, we were doing a little bit of health stuff, it's so just like all over the place. And so we then said, okay, couple things happened. One was I saw the path actually to 10,000,000 of ARR in that old world. I stopped seeing the path to a billion run rate. And so it was like, I felt like we were climbing the hill, and the top of that hill wasn't the end state we wanted to land in. And we were like still a baby of a company, so like we could have kept going. It was work it's not like it just stopped working. [00:47:15] S1: You were doing how much in revenue more or less?
00:47:17 · Ali Khokhar
[00:47:17] S0: We were doing just under $3.02, 300 k of revenue. K. But like solopreneur, like, know, ACVs are five ten k. Right? And so we were just like servicing that archetype of customer generally speaking. And we're like at a few 100 k, we had raised our seed round. And we're like, okay, cool. You know, let's go get to two, three, and raise an a, and then we'll try to get to 10 and so on and so forth. But again, going back to like, if my cofounder and I lose the conviction that this is a $10.50, $100,000,000,000 outcome, we need to instantly change direction. Even if there's still a lot of room to go. Right? Even if like we're at the beginning of a hill, it's still a hill. As soon as you see that end state being 10 to 15,000,000 of revenue, not 500,000,000 or a billion of run rate, then now it's opportunity cost. Now we're wasting everybody's time. We're wasting our time. We're selling a story to the world. We're sharing a story to the world that we no longer believe in. Right? And so that obviously was like a very big moment. The other thing we started realizing also was we had just built a more enterprise grade platform that a lot of our earlier customers were only taking advantage of 10 to 20% of the actual machinery we had built. It almost felt like at some point we started selling a tank to somebody who wanted a bicycle. And we're like, why don't we just point our machine to people who wanna buy a tank? Like essentially exactly what we have actually built. And so that's sort of where we were sitting was we looked at our customer base, we're like, this tiny sliver actually is the future of the company, and we can build a large business here that is like interesting, that we care a lot about, that we personally have a lot of deep conviction in, that a lot of our team members have a lot of deep conviction in, that we have personally seen the pain points consistently around, but the core thesis is also consistent. It's not like we're full one aiding. The core thesis of service is heavy, supply constraint, high quality is important, high risk of failure, like let's go build AI systems or agents, none of that.