A Product Market Fit Show | Startup Podcast for Founders
00:11:49 · Pablo Srugo, Scott Stevenson
[00:11:49] S1: It's again this notion that reality doesn't meet the idea? People expect, oh my God, it's going to drive all this traffic, but then the work it takes and all the nuances around it don't let them realize that value? [00:12:01] S0: Exactly, and that passed the CAC payback test. I think our CAC payback was probably six months on that whole motion or less, but it didn't pass the retention and the usage test. We looked at usage retention cohorts a lot. [00:12:15] S1: How much time? That one's tougher because don't you need months of data to see if it flatlines or do you get to see it faster somehow?
00:12:15 · Pablo Srugo, Scott Stevenson
[00:12:15] S1: How much time? That one's tougher because don't you need months of data to see if it flatlines or do you get to see it faster somehow? [00:12:22] S0: In this case actually – I'm probably over-explaining it because in this case, I think you could see what we call the wiggles of death, which is the customer size of the product. You see those first like, oh they logged in, oh they did something and you see a couple wiggles and then nothing. At our company we say actually most things you launch, that's the pattern you see with the wiggles of death. The user is like, "Oh, there's a new feature, I'll play with it." You see a couple little spikes of people using it and then nothing. In my mind that is the default for most companies when they launch anything. I was talking to another company the other day. They built this amazing customer portal and they were amazed that after months of hyping up this portal selling it to customers, they looked at the logs and no customer had ever logged into this portal almost anytime. It had all been their own internal users using it and they thought people were using it. I was like this is normal. This is actually what I see. This is the dirty secret of SaaS is actually getting anyone to use anything. Especially in 2024 when you're so distracted, there's so many other more exciting things to look at, getting anyone to even log into a web app is excruciatingly – [00:13:29] S1: Reminds me of my my usage of threads.
00:13:29 · Pablo Srugo, Scott Stevenson
[00:13:29] S1: Reminds me of my my usage of threads. [00:13:34] S0: Yeah, exactly. Yeah, I logged in once or twice. The wiggles of death, that was my exact usage pattern. I logged in, I went there twice. [00:13:41] S1: That was one experiment. What were some of the others? [00:13:44] S0: It's quite a lot. I think client questionnaires was something we focused on a lot. We had this idea of taking info from a client and feeding it into a template, but actually the questionnaire in its own was useful as a product because when you're onboarding a new legal client, you need to figure out do they conflict with any of your other clients? There's a whole bunch of KYC information you need. We also had this client questionnaire angle of like, watch your lawyers, watch your client questionnaires. That was one that did pretty well. It didn't have that amazing physiological reaction from the customer on it. Some of the others, more advanced types of templating, we even went in terms of – client portal is also something we launched like, hey, lawyers, now not only do you have all these templates on this stuff, you also have a portal that your clients can log into.
00:13:44 · Scott Stevenson, Pablo Srugo
[00:13:44] S0: It's quite a lot. I think client questionnaires was something we focused on a lot. We had this idea of taking info from a client and feeding it into a template, but actually the questionnaire in its own was useful as a product because when you're onboarding a new legal client, you need to figure out do they conflict with any of your other clients? There's a whole bunch of KYC information you need. We also had this client questionnaire angle of like, watch your lawyers, watch your client questionnaires. That was one that did pretty well. It didn't have that amazing physiological reaction from the customer on it. Some of the others, more advanced types of templating, we even went in terms of – client portal is also something we launched like, hey, lawyers, now not only do you have all these templates on this stuff, you also have a portal that your clients can log into. [00:15:08] S1: Maybe one question that comes to me is, everybody talks about you just run a lot of experiments, that's how you're going to have higher odds of finding something that has true product market fit. The other current is that even there's outside pressure, but even most founders I speak with, they just want something that works. They just want something that scales. You have this like, yeah, you would want to just run experiments endlessly until something just takes off but also you just want to find something that works and scale it. How did you manage staying disciplined and what just was that process like while you're running all these experiments?
00:15:49 · Scott Stevenson
[00:15:49] S0: It was excruciatingly hard. We had very high conviction that product market fit should feel having an almost physiological response from your customers where when they see the product their pupils are dilating, there's a neurochemical reaction happening. I remember reading a quote. I can't remember exactly where it was from. I can't remember. You might know. It was a quote that basically said, if you have product market fit, it should feel like basically the product is being pulled out of your hands faster than you can provide it. Your servers are on fire; your salespeople are burnt out. That's what it should feel like. I can't remember where I had read that but it really stuck in our heads, true product market fit. This obviously doesn't always happen, especially in enterprise sales, sometimes it's just to grind the whole time. We decided we're not scaling the company, we're not upping our burn and we're just staying incredibly lean and agile until we have a product that people are pulling out of our hands faster than we can provide it and we're having enormous growing pains and everything's on fire. I would say that to our board. Our board's awesome. They've been very supportive but they are very skeptical about this. Everyone so wants to believe that the thing that they're doing is the right thing. Everyone so wants to move on to the next stage and to start scaling, moving on to the next thing, hiring people after you raise money. There's just a lot of pressure to put that capital to work as quickly as possible and scale the thing and everyone wants to believe that you already know what the thing is.
00:16:29 · Pablo Srugo, Scott Stevenson
[00:16:29] S1: What are some of the arguments because this is where it gets really interesting? I think the rubber meets the road here. On the one hand, you're coming here and you're saying, look, the capital here is not like this, usage and retention, why would I scale it? It seems obvious, but I'm sure there's another argument on the other side that's what is that argument that tells you, no, you're overthinking it, you just got to scale this thing and things will take care of themselves? [00:16:50] S0: I do think there was a period of time where capital was in such excess and there was just this social thing happening where everyone was just watching each other and doing what everyone else was doing. This social mimicry, which I think is – key to business and investing is not mimicking what everyone else is doing, but it's actually in practice very, very hard. The book Blitzscaling was very popular at the time and everyone's like, well, if you don't scale fast enough, a competitor is going to come in or if you don't start scaling up, you're not going to learn fast enough. If you don't scale up, how is your team going to do anything if you don't hire 10 more people? I think there was largely a lack of belief at how how much a small number of people could do for a little while. I think a small number of people can do a lot, sometimes more than a larger number of people. If you're doing a new experiment every two weeks, very hard to get a 50 person team aligned on that. People get burnt out pretty quick, but small team can do that.