A Product Market Fit Show | Startup Podcast for Founders
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.
00:06:16 · Scott Stevenson, Pablo Srugo
[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. [00:07:00] S1: What happened? Walk me through that because I find this is so important to understand and hard to understand from the outside is if you find one customer, five customers that really love it, you just assume there's got to be a thousand and how can it be harder? It is got to get easier, not harder. What's your thinking on that? Why does that happen?
00:07:18 · Scott Stevenson
[00:07:18] S0: I think the biggest thing for us is I don't think the initial customers – they love the idea of it, they love to buy it, they love the concept of it, but actually getting real usage, real engagement, real habit change, that was the hard thing. Even with these customers, getting them to truly set up templates in our system, time to value we realized was really important. It took us a long time to figure that out, but they had to do a lot of setup and configuration to get this to work. Then once they got it set up to work – so they had to basically set up these fancy legal templates in our system. Then often the legal teams would be like, "Oh, this is great, all the other lawyers are going to love this. My work's a little bit too bespoke but all the other lawyers are going to love it." We would hear that over and over and over again where they so want to improve their process, they so want to embrace technology, but when the rubber meets the road and they have a live deal they're like, oh, this is too bespoke for this templating engine and they wouldn't use it. From a usage perspective it wasn't hitting the way we wanted. I think especially if you're working with a large customers, large law firms, the danger there is the implementation cycle can be a year, can be two years to technically get something rolled out past all the committees and to start getting feedback and do all the changes. When all that time goes by, you don't know if you have product market fit or not. That's really, really difficult. I think we ended up switching to focusing on small nimble firms who just adopting is really quickly. Then our iteration cycle sped up a lot. We could easily see like, okay, we still don't really have deep PMF. The other way we measured PMF was CAC payback period. We were just of a little bit religious about what's our CAC payback period? You doing this motion. If the CAC payback period wasn't clearly well under 12 months we were like, okay, we don't have PMF.
00:09:06 · Pablo Srugo, Scott Stevenson
[00:09:06] S1: You're going after smaller clients. You mentioned running many different experiments. You mentioned hundreds of landing pages. Can you dive in on that? What were some of the things you were testing? Then you mentioned CAC payback period. What were some of the outputs that you looked at to see if those tests worked? [00:09:25] S0: Splits; our director of growth was also a huge part of this also. His name is Kurt Dunphy. We rolled over a hundred landing pages with different value props. Often there was a new feature, a little feature we built to angle the product in a certain way. We monitored these experiments at a variety of levels. Our goal was to run an experiment every two weeks. We would look at a lot of different things. We wouldn't just launch landing pages, we would also launch ads with those landing pages. [00:09:51] S1: What's an example of that? Just take us through one of those experiments that you remember.
00:09:51 · Pablo Srugo, Scott Stevenson
[00:09:51] S1: What's an example of that? Just take us through one of those experiments that you remember. [00:09:55] S0: Yeah, so one of the experiments which actually resonated a lot from a sales standpoint was what we called our menu of services pitch. We actually turned our templating system into a menu of services or a Shopify for law firms that they could put on their website. Now not only did they have templates, they could actually advertise like, "Oh, you need a will or you need an employment agreement, come into my website, click on need an employment agreement, put in all the info." That gets submitted to the lawyer. The lawyer goes into the lawyer's template. The lawyer does their massage on it, and the product goes back to the customer. That was one of our actually hit experiments on the sales side was allowing the lawyer to almost set up a little Shopify shop. [00:10:36] S1: Why do you think that resonated?