A Product Market Fit Show | Startup Podcast for Founders
00:01:04 · Pablo Srugo, Nick Fleisher, S2
[00:01:04] S1: What are your ACVs? [00:01:06] S0: It depends on the client, right? For the biggest Fortune 500s, it could be 500k to a million. For the 10 to 30 person legal team, it could be anywhere from call it 50 to 100k. [00:01:14] S2: That's product market fit. Product market fit. Product market fit. I called it the product market fit question. Product market fit. Product market fit. Product market fit. Product market fit. I mean, the name of the show is product market fit. [00:01:29] S1: Do you think the product market fit show has product market fit? Because if you do, then there's something you just have to do. You have to take out your phone. You have to leave the show five stars. It lets us reach more founders, and it lets us get better guests. Thank you. Nick, welcome to the show, dude. [00:01:46] S0: Thanks for having me. Excited to be here. [00:01:48] S1: So your founder of Sandstone just raised a $30 million Series A. It's this legal play that sounds a little bit, we're going to touch on this, but, you know, probably in the area of a spell book, of a wordsmith, which are companies that have been on the show before. Kind of this inbox plus AI for legal. So we're going to go deep into what the product is and what the company does. But before we do that, let's start where we always start, which is the product market fit moment. When did you feel like you found true product market fit?
00:02:14 · Nick Fleisher
[00:02:14] S0: The first moment for us was really one of our early big clients. And it's rare for startups, at that stage we were pre-seed, to be able to work with Fortune 500s. And we had deployed with them for a couple weeks. This is kind of before we had like product telemetry and like understood usage at a reasonable amount. And we actually went on site and spent time with the GC and the legal team. And we're watching them open Sandstone. And you may be familiar with like a JIRA or Linear. Sandstone has a very similar interface for managing all your legal work. And we saw they had not just the one team we had initially set up for them, but a dozen. And a couple hundred tickets or items on each one. And so it was clear that they were using it a lot. And I think that was the first spark. But where it got a little bit more, you know, what I would say like, hey, this is real PMF is when we left that meeting in Boston, the GC or the person running the team had fired off six, maybe seven or eight intros to other GCs in Boston, suggesting that we get time with them and saying, this is a product that you need to be using. And to me, that's like, you know, when you're not even going to them asking for the intros, it's just happening. Right. That's like real PMF to some extent. And it's how you drive much higher growth. And today, like a significant portion of our business is just people using it and suggesting it to their friends. And in legal, you know, you've had other folks in legal tech on the show. It's all about word of mouth and community. Right. Like it's just a very close knit group. And so like that's our biggest lever for us. And so I think that for us was the first one where it was like, OK, this thing makes sense. Like people really want this. They see the value. If they're willing to like put their reputation on the line and email someone and say, hey, you need to be using this.
00:03:55 · Pablo Srugo
[00:03:55] S1: Referrals, I think, are one of the best signals of true product market fit. And everybody gets like some referrals. But if you're getting a lot of referrals and that becomes like a big channel for you and in the early days you see sparks of it, you just think about yourself. Like which kind of products do you organically tell other people about? Like it's a lot of social risk to tell someone, hey, you need to try this product. So you really only do it with the products you genuinely love. And you feel like this is such like whether it's a productivity so useful or it's just like an amazing experience type of product. But it's got to be in one of those categories. And so I think that's one of the clearest signs, early signs, I should say, of product market fit.
00:04:32 · Nick Fleisher, Pablo Srugo
[00:04:32] S0: Yeah. It has to be like a completely net new category and product of something that like you've really never experienced. Right. Like the first moment you had Claude or ChatGPT and you told your like your family and friends about it. Or it has to be like something that takes an existing market. Like we play kind of in this contract lifecycle management market and like throws everything that you know about it out the window. And it's like, here's what good could actually look like. Plus really good service and support. Right. Like to us, one of the most important parts of building in the AI era, and I'm sure others have talked about this in the show. Like if you want to roll out a successful AI implementation or tool at a Fortune 500, a huge component of it is like, are we helping you understand the tool and roll it out properly? Otherwise, there's no value in vertical enterprise SaaS or AI. And that's a rabbit hole we could go down for sure. [00:05:21] S1: One of the questions that I get a lot of founders like asking or at least thinking about is, how do you drive more referrals? How do you drive more word of mouth? Is there anything you can meaningfully do on that sense? Because you mentioned a lot of your business comes through there. Or is it just about, well, you got to have a great product that people love and you just organically get that?
00:05:36 · Nick Fleisher
[00:05:36] S0: I think great product that people love is like the lowest bar. But like then there's things that you kind of have to do on top of that. One is like, do you service your customers so well that like they build close relationships with your team? Like I was traveling this week in, you know, in the middle of the country. Five people on our team went and they all like had separate dinners and drinks and like social events with the client that they've just like built relationships with over time. Like not even about work and what we're doing. And so to me, that's like one way. And then the second is like we've hired and brought on people to our team really early who were stewards of the community. Like one of our first tactics when we launched was like we want to be like a place that the legal community feels comfortable going and like talking and spending time even if they're not users of Sandstone. Right. I think this is like one of the most critical ways to get word of mouth and referral is like you can't just be comfortable with the product and the service that it provides. But also like is this a community that's like actually net positive for legal or legal tech? And you can do that same thing in any vertical. So we've hired people who like have spent 20, 30 years building in this community and know the different areas of legal tech and GCs and legal ops. And I think that's like been a huge source for referrals and just building our network on the sales side.
00:06:50 · Pablo Srugo, Nick Fleisher
[00:06:50] S1: Well, we're going to talk at the end about kind of two tactical deep dives. And one of them is related to this because you're hosting like two to three dinners every single week with people that could be your customers. And you've got a whole kind of playbook for that. So we're going to talk about that. We're also going to talk about why you're hiring an AE so early. Most people do it well after a millionaire. You did much earlier. So we'll talk about that as well. But let's go through now the story. Right. So what was the first idea for Sandstone? When did that happen? [00:07:15] S0: Yeah. So I was at originally engineer, built mobile apps, ended up at McKinsey. At McKinsey, all of my work happened to be legal tech. It was just very random. My first client was the biggest legal tech and research company. [00:07:29] S1: When was this, by the way? What year?