A Product Market Fit Show | Startup Podcast for Founders
00:04:34 · Keith Peiris
[00:04:34] S0: Yeah, yeah. We were actually on sort of similar trajectories and more power to them. They did great work and executed, but we just didn't like where it was going. And I think deep down at a human level, you're like, we want to make pro tools used by sophisticated users and we want them to like rely on it every day. And we just couldn't see a path for Tome to turn into that. What was funny about the pivot to Lightfield was that we went on this journey with Tome being like, all right, how do we turn this into a serious work tool? And we just followed the journey of who makes a lot of decks, who's in the product the most. It turned out it was sales and marketing folks. So we sort of followed them in. We asked them, hey, could we do a pilot? Can we do some discovery with you? And we found our way into probably 10 companies where they were like, okay, you know, you guys are good at making product. You know, Tome is cool. Let's do a pilot. Maybe you can build decks for us. And when we got there, it was so funny. With all 10 of them, within a few weeks, everyone lost interest in us making decks. They were like, this isn't that big of a problem. We all use templates. We just fill them out. We don't know if we care. Maybe you can do some other things. So we sort of got pulled in, you know, doing things like account research, building proposals, responding to RFPs, writing emails. We just got pulled out of the slide space instantly. And that was the first sign of, wait a minute, maybe we can't sell this presentation product into companies. And then when we were there, we started to ask like, okay, to do all of these things well, like proposals and account research, whatever, what do we need? And at that time, I was like, oh, I assume I just connect to Salesforce and we'll have everything we need and we'll be able to do this work. And it turns out that what you need is not in the traditional CRM to do great generative AI work. It's sort of spread everywhere. It's in your call recorder. It's in your email. It's in your Slack. It's in your data warehouse. We found that it was such a struggle to combine these different types of data because it's super inconsistent, right? Like what the sales rep wrote in Salesforce doesn't match what's in the meeting or what's in the email or what's in the data warehouse. And they're all using different entities.
00:06:56 · Keith Peiris, Pablo Srugo
They're all using different paths. We're like, wait a minute, this actually seems like a more important problem, you know, creating like a single source of truth on a customer, you know, inside of a company. And we're like, this seems really important because you're going to have agents all over the place. And if they're a little misaligned, they're going to create bad work. And also companies are getting a little smaller and a little flatter. So it makes sense to build a system where everyone can be aligned and connected to truth. So I think those feelings made us believe, hey, maybe this is a bigger opportunity. [00:07:34] S1: Pivots happen all the time, but you'd raise the series B with the old product, which makes me assume that it was like at a certain level in terms of, you know, number of customers, revenue, etc. Like, what can you tell me about just how far was that business when this was happening? [00:07:49] S0: Yeah, I mean, it was like, it was around 20 million users. It was single digit millions of ARR. And the CAC was super low because there was so much organic demand or like any AI productivity tool was because it was all over the place. The cost of goods sold was through the roof because inference was really high. And the repeat usage was low. And the revenue retention was very low. [00:08:14] S1: Were you still growing top line or was top line also because of those things starting to plateau? [00:08:19] S0: So top line was still growing because you're like, not really paying for growth. It's all like organic. So it's still growing.
00:08:19 · Keith Peiris, Pablo Srugo
[00:08:19] S0: So top line was still growing because you're like, not really paying for growth. It's all like organic. So it's still growing. [00:08:27] S1: Like doubling, like that, like solid growth or kind of like starting to tail? [00:08:30] S0: I feel like the user growth was still growing. The revenue was like starting to soften because the net retention was so low. And there are companies like this. You know, I won't mention all of them, but you know, it's like a consumer productivity company. It's like 20% NDR, but the whole company works because you don't pay for acquisition. Right. And we thought about it. We're like, look, there's so much demand. The way to build this is you build out all your SEO, your AEO. You keep burn low and it turns into something. But honestly, like deep down, like none of us were just excited about that company. Like none of us wanted to build a presentation product that people use like once a quarter that we could not sell B2B, that, you know, no one who's amazing at making decks would ever use. It was just like wrestling with us, you know, morally every day coming to work of like, ah, did we really like quit our jobs to build this thing?
00:09:27 · Pablo Srugo
[00:09:27] S1: So here's something that I, that I see all the time, like on just on the VC side, working with founders. It's similar to what you experienced, a little different in terms of the numbers and the type of business, but it's very common to have a product, a business that starts to work. You get to a million, 2 million, 5 million, 10 million, even 20 million, right? Maybe 15, maybe at some point, but you get to a good amount of error. And you start to see that kind of, that's why I was asking about growth, right? You got to, you went like one to two or one to three, but then, you know, three to five and then five to seven. And then you're like, okay, this year we're going to do seven to 10. It's a struggle, right? Because I'm talking to these founders and I'm like, I don't have the answer. Like I don't have, hey, if you do this, you're going to double. I don't have the answer of, hey, you should throw it all away and pivot. It's always, okay, here's what we're going to do different this year on the sales. Here's what we're going to do different on the marketing. The net effect is always plus minus 5%, 10%. Like it's not going to change the whole thing. And I'm being more and more prescriptive with them or at least clear. Like if you do this, like just so you know, if you get to 10 million and you're going 20%, you're worth like 30 million. What's the point almost? But I guess the question to you is because you went through it and you had something real, 20 million users, tens of millions of dollars raised many millions in ARR. What would you say to a founder like that that comes to you and says, Keith, like I got a business, it's working, but I don't see how I can get it back to like inflection. You know, like what, what do I do? Just keep going, keep hustling, whatever. Do I do something abrupt? Like what, what are my choices? What do I do? How do I even think about it?
00:11:02 · Keith Peiris, Pablo Srugo
[00:11:02] S0: Yeah. I mean, it's, it's very personal, which is to say that, you know, if you're in that state, if you've got distribution, you could think about the next product. Right. And I know many founders that are like, our first product didn't really work, but we got some distribution. So we made the second and the third and then start, things started to work. [00:11:20] S1: Because you have a relationship with customers. Like that's when you think distribution is what you're saying.
00:11:20 · Pablo Srugo, Keith Peiris
[00:11:20] S1: Because you have a relationship with customers. Like that's when you think distribution is what you're saying. [00:11:24] S0: Yeah, exactly. Exactly. It could be that you've got the right platform, you know, with the data, you know, with the infrastructure and you can build something else. Or maybe you just got a great team, right? And that's your asset and you can figure out what to build next. But I think it really depends on like what you want out of it. Because at that time, you know, when we were adding a million users a month or two million users a month, there probably was a way to get a soft landing for the team, you know, where investors make a little bit of money, the team does okay. We all go work at some big corporation for a couple years and then come out and do the next thing. And that was like top of mind for me. But the thing that actually really pushed me, it was one of my board members, Dan, who's on the board of Lightfield now, because of this advice, he was like, these technology super cycles, they don't happen every day, right? You know, this is the sort of thing that happens like once a decade or once every two decades. And he's like, you're so early. You know, at the time, we were like two years in and he was like, you have a lot of capital, you've got an incredible team. You know, if you go and take the like, the soft landing, you're going to be stuck there for two to four years. You're going to come out and this thing will be over. [00:12:38] S1: It's over. Yeah.