A Product Market Fit Show | Startup Podcast for Founders
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?
00:10:36 · Pablo Srugo, Scott Stevenson
[00:10:36] S1: Why do you think that resonated? [00:11:15] S0: It resonated because lawyers want to make money. They want clients and they want customers. That's one of their biggest pains is where's my next dollar coming from? Where's my next customer coming from? The idea of having a digital storefront was really compelling. How we knew this worked? First we ran ads and people were clicking those ads and we were looking at the cost per click and the cost per conversion into our demo meeting. What's the cost to get a lawyer into a demo meeting? It was way lower than anything else we had run before. We knew that within two weeks of running these ads. We had so much data. We threw up an ad, threw up a landing page. What is the cost to get someone into a demo? We were like, "Wow, this is 90% lower than anything we've run before. They love this." Then we took that and then we were able to go and say, okay, let's take this experiment to the next step. Let's actually roll this feature out to all these customers, implement it and see how it goes. This is where the problems started with that value prop. Again, the time to value issue, getting connected into their website. Lawyers could get this thing up and running, but they had no idea how to drive traffic to it. They're chasing this mirage of – and I'm sure Shopify has this issue too. They probably have tons of people setting up stores and no traffic going to those stores. That was actually a killer problem for that direction for us.
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?