A Product Market Fit Show | Startup Podcast for Founders
00:15:45 · Ben Rudolph, Pablo Srugo
[00:15:45] S0: I think about that question a lot. I'm not sure I have a satisfying answer for you as to exactly why this person said yes. But I do think the way we crafted our message, the way we wanted to be, we had a service orientation approach, and I think that resonated with this person who was very technologically forward. And we told them, we were your scientists and we wanted to learn the space, and build, and deliver great technology for him. [00:16:11] S2: They probably believed already that with tech they could do a lot more. There's just so many gaps and then just like, I don't have a budget, I don't have the time. And all of a sudden you two walk in, and they're like, yeah, okay, I could see this makes sense. Something like that, which is kind of why I have to go through so many. Because you need one that actually is already almost all the way there. Is that ring true? [00:16:29] S0: A hundred percent and I also think there is like an aspect to, great, I got two free crime analysts. Who know how to write software and work with Excel really well, that's great. [00:16:39] S2: Right, so you're working with these people. They're starting, they're handy cases and you're learning on the job. What happens next?
00:16:45 · Ben Rudolph
[00:16:45] S0: We had that case that led to that kind of expert witness experience and we raised our first initial seed capital after that. And we got our first two or three person office. And we grew really slowly for the first, I'd say, probably three or four years. Word of mouth, our very next customer was the city next door and it was because the chief talked to that chief. And was like, hey, these guys are actually doing a lot of good work for us. And that word of mouth growth is, how we built the product and deeply empathize with the problem space. And had the opportunity to go that extra mile. I mean, we learned so much during that time. One of our first customers was Albuquerque, and I remember I was on site one time. And I was doing a case with one of the detectives, and there is this technology called ShotSpotter that detects gunshots. And I was pulling up these gunshots at time of the crime, and I was like, oh, my God, there's so many guns firing. Was there a mini war? What is happening? And the guy's like, no, no, this is. So there was a homicide, gun goes off, but there is this tradition or something that happens in Albuquerque where at the end of night, at the end of a party. Someone takes out their gun and shoots it in the air. Everyone else takes out their gun, shoots it in the air. So this homicide happened, gunshot goes off, people think it's related to a party happening next door. Everyone shoots, and so you look at the map, you're like, everyone's shooting their gun. What's going on? And so you learn these little bits of context on how they do their job, and that coupled with us constantly iterating the product to make sure that we could meet their needs.
00:18:26 · Pablo Srugo, Ben Rudolph
[00:18:26] S2: How big was the seed round that you raised back then? [00:18:26] S0: Yeah, back then we raised, it was either $1 or $2 million. [00:18:26] S2: Okay, so $1 or $2 million and this was? What's the timeline? When do you guys start and then when does the seed round happen? [00:18:26] S0: The seed round was nine or ten months after we started the company. [00:18:26] S2: Yeah, it's funny, comparing it to the stuff you see today. This is, and then you end up where you end up. Which is obviously hugely successful, but it's good to remember what I would always call that reality, right? I don't know that this can stay forever, but nine months to raise a million dollars today is like, oh my god. You should be raising, you know, ten, and you should be growing crazy. But this is how you ultimately end up with the real business. It's worth billions of dollars. Most of the businesses that end up even at this stage, which is still way less than one percent. Have a starting story that looks more like this than the highlights they see on TechCrunch today.
00:18:26 · Pablo Srugo, Ben Rudolph
[00:18:26] S2: Yeah, it's funny, comparing it to the stuff you see today. This is, and then you end up where you end up. Which is obviously hugely successful, but it's good to remember what I would always call that reality, right? I don't know that this can stay forever, but nine months to raise a million dollars today is like, oh my god. You should be raising, you know, ten, and you should be growing crazy. But this is how you ultimately end up with the real business. It's worth billions of dollars. Most of the businesses that end up even at this stage, which is still way less than one percent. Have a starting story that looks more like this than the highlights they see on TechCrunch today. [00:19:16] S0: You know, I really believe that to build big businesses. You got to stack bricks, and there are very few shortcuts in life. And I think the things that we've done that have taken a long time. Those are our moats, and those are durable. And so, you know, I don't know these businesses well. But if you can get $500 million in revenue in six months, you'll probably lose $500 million in revenue in six months. It's just, it's unclear to me what the moat is when you go super, super quickly. I think there's a lot of durability in being able to build your business methodically.
00:19:16 · Ben Rudolph, Pablo Srugo
[00:19:16] S0: You know, I really believe that to build big businesses. You got to stack bricks, and there are very few shortcuts in life. And I think the things that we've done that have taken a long time. Those are our moats, and those are durable. And so, you know, I don't know these businesses well. But if you can get $500 million in revenue in six months, you'll probably lose $500 million in revenue in six months. It's just, it's unclear to me what the moat is when you go super, super quickly. I think there's a lot of durability in being able to build your business methodically. [00:19:49] S2: We were going to talk about a couple of tactical areas, that we can kind of go deep on. I want to talk about one of those now, because I think it's related and it's going to be kind of the story to get to PMF. You were big on for deployed engineers a long time ago. I mean, now it's like the cool thing to do. Everybody does it, right? Back then it used to be called services and it was like, you should not do that. You want product, you want high margins, all these sort of things. But I mean, you were to the point that, if I remember correctly, when you were small. Ten, fifteen people, maybe half your team might get deployed for a month on a single customer. Let's walk through that. Tell me, how you did it, why you did it and how big was the services element? How do you still, obviously you ended up scaling? So I'm trying to understand all that, but let's start at the beginning. Just what was the idea around for deployed engineers? How did you set it up?
00:20:33 · Ben Rudolph
[00:20:33] S0: I think the overarching principle for us in the early days and still today really is over investing for success. And Peregrine started with, deep roots in product development and implementation, and that's what we really wanted to be good at. And we weren't so good at marketing, and we weren't so good at these other functions. But those are two things where we're going to put all our points into this. And we really believe, in those early days that over investing in ensuring the customer is successful would pay massive dividends. And I think that was also, especially the case in government where it's such a high trust network. I mentioned that we got our second customer because the chief just told the other chief that these guys were good and trustworthy. That dynamic is very, very real and so, you know, we weren't really thinking too deeply about how do we build an infinitely scalable business. We were thinking about how do we make our customer really successful and so even in those early days, I remember one of our first engineering hires. We sent him to our second customer in Pittsburgh where he basically worked out of that office for about three weeks integrating their data. They had this like luau and he cooked a key lime pie, and he just completely got embedded with that department. Understood their lingo and was able to deliver a much better integration product for them. Because he understood the difference between different values in their database and could actually map all the disparate data, to how they actually talk and spoke within their department.