A Product Market Fit Show | Startup Podcast for Founders
00:13:20 · Pablo Srugo, Keith Peiris
[00:13:20] S1: I think that's true of most metrics, by the way. I don't know if I want to go extreme and say that's always true of all metrics but like, like if your demo to close, making it up, right, is 25% could you optimize to 30? Yes. Could you optimize to 50? Probably not unless maybe you materially change the ACV or something like that and you go after a completely different set of customer but like, you're probably not that bad, you know, at showing a demo and it goes with the same like, if you only get so many demos booked in a week at a certain, like, I'm sure you've tried the low-hanging fruit for almost all the metrics that matter as a smart founder that's been in market for two years, let's say I'm making it up. You've tried all the obvious stuff so the odds that somebody's going to come in and make such a big change on a metric that it's going to take, you know, re-inflect your business, it can happen but it's, a lot of it is kind of false hope, right? I'm with you on that. [00:14:10] S0: Yeah. That was one of the realizations I had. I agree for a lot of metrics. I have so many friends who are founders and they're like, my CAC has not changed in eight years. It's like maybe gone up or down 20, 10, 20% but it's not changed. I can make ACVs go up, you know, I can build more product, I can make my sales process a little more optimized but it's sort of like what you have in year one is probably roughly what you'll have in year five, you know, and you have to decide is this the game you want to play?
00:14:10 · Keith Peiris, Pablo Srugo
[00:14:10] S0: Yeah. That was one of the realizations I had. I agree for a lot of metrics. I have so many friends who are founders and they're like, my CAC has not changed in eight years. It's like maybe gone up or down 20, 10, 20% but it's not changed. I can make ACVs go up, you know, I can build more product, I can make my sales process a little more optimized but it's sort of like what you have in year one is probably roughly what you'll have in year five, you know, and you have to decide is this the game you want to play? [00:14:41] S1: It's the nature of the beast. Like it's the nature of the business that you're in, the metrics are a fallout of that for the most part. [00:14:46] S0: Yeah, exactly.
00:14:47 · Pablo Srugo
[00:14:47] S1: Now one thing that you said that I want to dive into and I'm going on this point because the pivot ultimately leads to the problem for you said you have distribution which is I think taken for granted like if you think about it you're starting from zero, you're starting from scratch in a new industry unless you're a domain expert or whatever, even if you are but especially if you're not, you've got to go and get people's attention. Like you've got to go and get people to know that you exist, be willing to give you a shot, give you a chance which is spending on ads, going to conferences, doing all this stuff and it takes a long time. If you've got a business that's doing two, three, five, 10 million in revenue, you've got hundreds of customers that you actually have like a real relationship with and you have whatever team and cash that you have, right? But that's a big edge like trying to leverage that to find, like in your case, you found a completely different problem to solve if I understand correctly for the customers that you had. So I'd love to go deeper on how you did that because I feel like that's a playbook or a path whatever you want to call it that's open to anybody. I mean anybody in this situation could say, okay, you know what? It's true. I have these relationships with these customers rather than thinking from the product what more feature could I add? What else could I do? or limit myself to saying we're a company that does X so we can only do X. You did something different. Like let's go deep on what you did there.
00:15:56 · Keith Peiris
[00:15:56] S0: Yeah. And I think, you know, hindsight's 20-20. To be honest, we had way more consumers than businesses and I think it actually would have been a more direct path to build a second consumer product. You know, we could have built like a, you know, what are these code generating tools or something and I think that would have been a shorter path. I think deep down, you know, Henry and I wanted to build a B2B product. We wanted to build something that like people used every day and cared about and that's probably what steered us. I'd argue it actually steered us initially in a much darker place because it steered us towards sales and marketing. As you know, like GTM tech is so crowded. It's brutal, right? It's super crowded because I would say most sales teams are willing to try something new, see if it helps them be more successful. But the sort of pilot conversion rate is super low. You know, most of these companies don't have proprietary data, right? So it's just a race to the bottom, right? If you have got like 30 tools in every company and they're all trying to offer roughly the same thing because they don't have the data, they don't have the model, right? And it just turns into a commodity game. And that was kind of the, I think the dark thing that we were trying to navigate in the, call it like mid pivot, where we're like, all right, we're here. You know, we've got these customers where we're building these tools. This also isn't going to lead to a very good business, you know, because we're just this layer that sits on top of Salesforce and Snowflake and we're not an LLM company, you know, so we're also just paying Anthropic or OpenAI. We've found some problems to solve, but like this, you know, at the time we were like, this is probably a worse setup than Tome. I think that that took some distance from the problem. You know, we started to sit back and be like, did any of us really wake up to build like this point solution, GTM piece of tech that's like hard to sell, hard to convert? I think we actually just needed some space from the problem to think about like, well, how's the world going to change? What's going to be different? And what do we actually want to do?
00:17:55 · Pablo Srugo, Keith Peiris
[00:17:55] S1: How do you do this as somebody who's running an existing business? This is the problem I have with, like I'm thinking of a founder that I'm having this discussion with and I'm like, you need to find a way to just, we're talking about next quarter and like, are we going to be plus minus 10? And I'm like, man, next quarter, like even if you hit your low, like if you hit your high, it's not that good. And if you hit your low, it's not that bad. Like it just, we're not talking about things that because you're in this situation of plateauing and I'm trying to get them like, just you need time to pull away almost. Let somebody else worry about that. How do you do that? How do you give yourself time to think the way that you're thinking? Like it's easy to do when you have no business. When you have a business happening, it's hard enough to worry about the fires. [00:18:29] S0: The honest truth is that we needed to, I don't want to say this in a cold way. We took it very seriously. We needed to cut burn really aggressively. You know, we spoke to our board and we're like, we're going to turn off the old product. We are going to dramatically cut burn. [00:18:44] S1: You did this before knowing what you were going to build? Yeah. Oh, wow. Okay. That's true. Burn the boats. I mean, that's like, holy shit. Like I got 20 million users. I'm putting that to zero. That's a big move. [00:18:54] S0: Yeah. Yeah. Yeah. We're like, we're going to go down to like seven people. [00:18:57] S1: From how many? [00:18:57] S0: I mean, Tome had 70 people.
00:18:57 · Keith Peiris, Pablo Srugo
[00:18:57] S0: I mean, Tome had 70 people. [00:18:59] S1: You went from 70 to seven? Yeah. Wow. [00:19:02] S0: And our board was great. They were supportive. They were like, look, if this is what you guys want to do, I think everyone was like, don't be half in. Like they're like, you're not going to find product market fit again by this being a side project with Tome. Like you have to burn the boats. You have to cut burn. You have to go down to like pre-seed company again. Again, so you can figure it out. [00:19:25] S1: How much did you have in the bank when you did that? After you did that? [00:19:28] S0: I don't remember exactly, but I would say we had like a solid series A worth of capital in the bank. [00:19:34] S1: Sure. Yeah. So you're like, money was not an issue. Like with seven people, you've got infinite runway. You can just like, like that's not going to be the thing that kills you. At this point, it's going to be, do you find something worth going after or not? [00:19:43] S0: Yeah, exactly. And that was kind of uncomfortable, right? You like throw away something that was sort of working. [00:19:49] S1: Dude, it's crazy. I've heard of many people pivoting and even pivoting late, but almost always when they have something else, it's like taking off. Like I almost never heard it like this. So aggressive.