A Product Market Fit Show | Startup Podcast for Founders
00:13:58 · Andrew Antos
[00:13:58] S1: But I think both my co founder and I, we're extremely ambitious and so we were just like, this is clearly not what we want to do. And so they were like, we need to change who we're selling into, right? And so we looked around and we're like, OK, we have some tech that works well in terms of understanding documents. Which was a scarce resource, looking at 2019, 2020. So we have that, we have expertise in NLP, which also was a scarce resource and so we were like, who else has problems that are related to documents? And we sliced it by industries, and then we sliced it by functions. So we developed these hypotheses, we put all these sticky notes up and basically what came out of it is like we want to be function specific rather than industry specific. Because we don't have any unfair advantage in a specific industry. It's not like one of us has been in banking for twenty years and have a great network and we can just easily sell to banks. And so we said like, OK, we don't have that kind of an unfair advantage nor we're in a place that has that. So we looked at, OK, what are the functions? And so within functions, we basically realized, OK, the people that have the biggest problems with documents other than lawyers are finance teams, right? Because they're looking at the same documents, contracts, orders, POs, invoices, expense receipts. Everything is just some kind of documentation of a transaction that happened and all these finance teams needed to account for those transactions properly. And so we were like, OK, let's focus on finance teams. Let's do a research, and initial research was like, yes, you have teams that are reviewing contracts for revenue treatment. You have teams that are doing order management to book and build deals. You have teams that are doing the expensing, the expense receipts. You have AP teams that are doing invoicing. So there's a lot and those teams are pretty big. And so we were like, OK, there's a logic here. And so what we've done, we were like, OK, let's build a product. Let's spend three months on this. Let's build something on top of the technology that we already have, launch it and then we said in six months, we need to be $250k ARR. So this is 2020, so very different numbers than what you see in the market today.
00:16:11 · Pablo Srugo, Andrew Antos
[00:16:11] S0: Thats right. [00:16:12] S1: We need to be a $250k ARR from minimum eight customers, right? Then we put that guardrail as in we're finding product market fit now. The fact that we can deliver services. So we set that guardrail and then we just managed to that, right? So we went out, we tried to sell it to everybody who would be willing to speak to us and we ended up hitting eight customers. But like $350, almost. Like $340k ARR in six months and so that told us that, hey, where people are willing to pay for this. It's a bigger problem. So they're willing to pay more, even though they were super early and it also kind of scales pretty easily, right? If you can go from zero to eight enterprise customers in six months, that's a good start. So that's kind of like the first guardrail, and then the business continued to grow.
00:16:58 · Pablo Srugo
[00:16:58] S0: And I'm curious, before we move forward. The analysis of all the different industries and the functions, and then deciding that you're better off going after a function, picking finance. Because they have potential problems with documents. That all makes sense. That's the theory side. Then you go out and you said, you started talking to these customers. Do you have a sense? I'm curious what that was like, how deep, how many customers, what kind of conversations, what kind of things did you ask? Coming up with a story of something that sounds like it's going to work is so easy and it's so easy to delude yourself, right? And so I'm curious what you did ahead of it to increase the odds of the story you told yourself actually work and ultimately, you know, got you to the $350k or whatever.
00:17:40 · Andrew Antos
[00:17:40] S1: I think it was just crisp articulation. So there's, I think, maybe two components to this. So once we wrote up a document, right? Like the actual pitch. What would this actually be? If you put it in writing, and I think putting things in writing really matters. Because once you see it, you start iterating through that. But we basically wrote it down and we said, hey, your problem statement is you have teams of people who are reading documents, again and again. If we can cut that down by whatever it was, seventy percent. Then you get this much time back and what is the value, right? You don't have to hire as many people as you're scaling. You have better employee experience because people don't enjoy doing this thing anyway. You have better compliance because you have fewer errors. So we wrote all of that down and then I think I fundamentally believe there's two really magical numbers that you really need to care about and that's, thirty and one hundred. Because what we found is, again and again, you want to talk to roughly thirty people to validate an idea or invalidate an idea. Ten is not enough because you can always find Ten friendlies or ten unfriendlies. Fifty or a hundred is to difficult, too many, right? But you can easily have thirty conversations in a couple of weeks and thirty seems to be a really good number to get that initial validation. So we talked to about thirty people to revalidate it and then I think one thing that we found multiple times now is, you truly find the core of the product market fit once you sell a hundred customers. It doesn't mean that it's like everybody's super happy and everybody's at a huge deal size. But again, like around a hundred, you actually have a hundred goes at it and then the motion kind of reveals itself.
00:19:23 · Pablo Srugo, Andrew Antos
[00:19:23] S0: Is this a hundred sales that you made or a hundred attempts? [00:20:06] S1: A hundred sales. [00:19:27] S0: Gotcha. [00:19:28] S1: And so, that's kind of like what we saw. So to pursue this business, we get it to about a hundred customers. [00:19:33] S0: And what exactly did it do for these finance teams and these documents?
00:19:33 · Pablo Srugo, Andrew Antos
[00:19:33] S0: And what exactly did it do for these finance teams and these documents? [00:19:36] S1: It would read all these documents automatically so people don't have to, and it would kind of fill in a checklist. Because all of these finance teams have some kind of a view. Like, you're looking at a revenue contract to understand if you need to account for this contract in a different way. Or the management teams are literally looking at order forms and it's like, does the data that we have in Salesforce or ERP agree to what we have in paper, right? So we don't have some kind of a misstatement. So it's all of that stuff and so we would be able to usually punch out sixty percent on the low end and ninety to ninety three percent on the high end of all these documents that didn't have to be read by people that would drive efficiency and compliance. Yeah, and so we pursued that business. It was doing decently well. It was like 2-xing, 2 and a hal-xing year over year, depending on the year. But what we found out is kind of, I think, two things. So the first one was this moment where we launched this other thing that just took off immediately, right? And if you're looking at it, the numbers are actually very similar. We ended up doing like twelve or fourteen customers in the first five and a half weeks compared to doing eight customers and getting $350k in six months. [00:20:51] S0: And before that was probably $350k in a year or whatever it was, like for product one.