A Product Market Fit Show | Startup Podcast for Founders
00:00:00 · Scott Stevenson, Pablo Srugo
[00:00:00] S0: One of the intuitions to stay lean until you find PMF was right because we did question that a lot. It was very hard to maintain that conviction with some really difficult conversations with stakeholders on why we weren't scaling out or growing faster. I would tell myself, no, that was right. I probably could have saved myself some sleep if someone had told me that, that – more people had told me that, that was right. [00:00:22] S1: Welcome to the Product Market Fit Show brought to you by Mistral, a seed-stage firm based in Canada. I'm Pablo. I'm a founder turned VC. My goal is to help early stage founders like you find product market fit. Scott, welcome to the show. It's awesome to have you here. [00:00:40] S0: Thanks for having me Pablo. Great to be here.
00:00:40 · Scott Stevenson, Pablo Srugo
[00:00:40] S0: Thanks for having me Pablo. Great to be here. [00:00:41] S1: Now you run a company that's called Spellbook. Originally that same company was called Rally Legal. I remember maybe a few years ago you spoke with me about that opportunity and I was not smart enough to see the future but maybe more so to understand your own perspective into everything you need to do to find product market fit, which at the end of the day is the key characteristic I think in the early stages. How fast can you move; how many experiments can you make, because if you just keep doing that, at some point you'll get it. That's exactly what happened here. Spellbook now is like the ChatGPT for lawyers. It could be I think a cleaner positioning, but it took a long time to get there. Maybe to start, we can start in the early days just to set context like what was Rally legal and maybe more so how did you come up with that idea?
00:01:31 · Scott Stevenson
[00:01:31] S0: Yeah, we started Rally. There's myself and two co-founders Matt and Daniel. Daniel was a lawyer. Matt was a mechanical engineer who had started a toy company. I come from an engineering and product background and I had started my first small naive startup straight out of the university. Even before this, we launched this musical instrument and I got my first little angel check of 20K. Before I knew it, half of that angel check was gone on legal fees and I was like, what just happened? It was crushing for me. I thought that was a lot of money at the time for a company to have and I was really frustrated with that. I went down to become a director of engineering at another company for a while, but this problem really stuck in my head of like, wow, it's really hard to start a company when it costs so much just to get basic legal work done. This must be a problem for a lot of people. That became my mission and I was plugged into the smart contract and Ethereum space for a while. I was like, oh, for a while I thought smart contracts are going to take over and everything's going to become a computer-based contract and it's all going to be cheap. I went to Ethereum hackathons and things like that, but we knew we needed to build something that people would actually use and that lawyers would use and lawyers didn't seem too receptive to using Ethereum and smart contracts at the time. They knew there was this pain. This set me personally on a mission to figure out how do we make legal services more accessible so we can have more entrepreneurs, so we can have faster sales cycles, better employment contracts? Everything in the world runs on contracts. It's friction that is in every single transaction. As an entrepreneur, I would always been looking for what's an impactful mission that I could dedicate my life to? When I thought about the experience I had and when I thought about the scale of this around the globe; if you go to the strike website, you see that globe with all the financial transactions happening around the world and their whole thing is increasing the GDP of the internet. I'm like, well, if we could decrease the friction of legal transactions by 90%, what does that do to the GDP of the earth? How many more people can start companies?
00:03:39 · Pablo Srugo, Scott Stevenson
[00:03:39] S1: That's the high level to decrease friction, which I really like. What was the first pain point and value prop that you went after and how did you land on that specifically? [00:03:53] S0: I'll preface this with us plus really our director of growth as well. We launched over a hundred landing pages, so we've had a lot of different value props. I could tell you about a lot of experiments that we ran. [00:04:06] S1: We'll definitely go through that. [00:04:08] S0: The very first thing we launched and it happened almost in a couple weeks was really a template library for founders. Actually the very first thing we did was like, screw lawyers, we're just going to bring templates to founders and whatever they need we'll have. We launched that very quick. It wasn't pretty successful. [00:04:25] S1: Like an employment contract, a safe doc, whatever, a bunch of NDAs?
00:04:25 · Pablo Srugo, Scott Stevenson
[00:04:25] S1: Like an employment contract, a safe doc, whatever, a bunch of NDAs? [00:04:30] S0: Yeah, exactly. We had a bunch of people immediately sign up and pay us five bucks a month and we're like, oh geez, this still isn't – it's going to take a long while to become raw and profitable on this. It was a hard sale because what we realized is even if you could automate the creation of these documents for people, they still had no idea what they say. They still need someone to trust. They still need someone to explain it to them. We really quickly pivoted away from that. At the same time, a law firm guy named Todd Bissett in Waterloo at Miller Thomson came to us and he was like, "Oh, our law firm is actually looking for a templating technology and a way to streamline startup paperwork for our own clients. We saw what you have and it looks actually really compelling." We actually worked with him and his team for a number of weeks to actually hone the product for law firms and to interface with clients so they could then use our product to capture a bunch of information from clients. They could send a questionnaire to clients and then suck that into templates, build a whole bunch of docs, and then do their bespoke thing. Then that became – I would say the core of the real Rally product was this Rally for law firms. [00:05:37] S1: When you had this lawyer come to you and tell you about this problem set, did you just start designing with them or did you also go and run discovery and all these classic PMF motions?
00:05:37 · Pablo Srugo, Scott Stevenson
[00:05:37] S1: When you had this lawyer come to you and tell you about this problem set, did you just start designing with them or did you also go and run discovery and all these classic PMF motions? [00:05:48] S0: We definitely went into hyper focus on their problem. We actually worked out of the office for a little while. We were alongside lawyers who were doing real legal work. We hyper-focused probably too much on my customer to be honest. Probably over-fit our product a lot. [00:06:06] S1: That was your first product? This is like 2019, you've got this product for law firms to help them streamline their process of making simple documents. Is that maybe in broad stroke what it was? [00:06:16] S0: Yeah, exactly. Then we ended up raising a pre-seed round from some east coast investors early on after we had some initial revenue. We got a handful of other customers on law firms on board who were great early supporters. This is still 2019. Then we did a lot of iteration there to get to something where we felt there was really deep PMF. This is where the long – those first customers were super exciting but then it was at the valley of despair. I'm sure you've seen the graph from YC of the typical startup trajectory. Really exciting getting these first customers; then getting to true PMF was this valley of years really.