A Product Market Fit Show | Startup Podcast for Founders
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.
00:22:04 · Pablo Srugo
[00:22:04] S2: We have tens of thousands of people who have followed the show. Are you one of those people? You want to be a part of the group. You want to be a part of those tens of thousands of followers. So hit the follow button. The concern, right? Always with this stuff and again, now, maybe it's less of a concern just because everybody's doing it, but it hasn't fundamentally changed the equation. Which is how much can you really do for one customer before? You mentioned you didn't really care about scalability, but that's still on a lot of investors and I think a lot of founders minds, right? hey don't want to get stuck being this consultancy like thing. Obviously, in your case, you were able to scale it. Maybe just tell me more about, is there a middle ground? Is there a balance? Is it just a matter of, at first it takes a long time but later on you have a playbook and it's faster, or is it still really custom? How do you manage that trade off between wanting to give your customer the best possible experience, which means hand holding, means going in, embedding, et cetera. But also wanting to be able to add a lot of customers, add a lot of ARR fast, which means, you know, holding those resources back to work on kind of core product.
00:23:02 · Ben Rudolph
[00:23:02] S0: So I actually remember this moment where I told Nick, my co founder, all our engineers are integrating data right now. We can't build any product, we need some other strategy and, you know, I think in those moments, scarcity breeds innovation. And we started building this other platform that allowed people who weren't engineers to integrate data. And that was our first shift to, oh, OK, if engineers don't need to integrate data, that saves a ton of time. And so, we started building out this other function within Peregrine. Deployment strategy is what we called it and they were, think of, maybe studied computer science. Went to McKinsey for a couple years, wanted to work in technology and then they could integrate a bunch of data. Work with the customer. Partner with them to do that last mile configuration and I think we've always thought about that investment as a growth driver, not as something that needs to be optimized away. And of course, as you grow fast, you need to invent and you need to innovate in order to save time, and free up resources. That's something we're continuing to do and we always do. But I think our frame of mind on it is just maybe a little bit different.
00:24:15 · Pablo Srugo, Ben Rudolph
[00:24:15] S2: Well, because the impact is on speed and margins, right? That's usually where you would see it. Was that a problem, let's say, at least on the fundraising side back then? Again, today, I don't know that it is but back then. Was that a thing that people were like, oh, your margins aren't eighty five, they're sixty percent and whatever? Or maybe the other question is, what was the size of the ACVs? And maybe that justified it as well. [00:24:36] S0: To answer your second question first, our average ACV right now is around $250k. [00:24:43] S2: Which means, to be clear, back then it was probably smaller, right? It was probably $50k, $100k? [00:24:44] S0: Yeah, yeah, definitely back then it was a little bit smaller. [00:24:46] S2: So they're not, like we're not talking, you know, multi-million dollar deployments for the most part. Where it's like, yeah, obviously you're going to throw ten people at it. You're really playing this, you know, somebody's giving you $100k and you're putting three engineers on it for a couple of months. Like it's tight, is that true? [00:25:00] S0: I think that's true in the short term. In the long term, I'd say you probably have better, you have better margin. Because you have invested in that customer to the point where the technology is successful and if that technology is like deeply embedded in the way that organization works. [00:25:17] S2: Right, retention must be amazing, I would assume. [00:25:19] S0: Yeah, retention is very good at Peregrine.