A Product Market Fit Show | Startup Podcast for Founders
00:15:35 · Pablo Srugo, Andrew Butt
[00:15:35] S1: Let's go there. I want to go back after but let's just – let's go there because we're already on it. How far along did you get on the product in order to have the conviction to shut everything else down? [00:15:45] S0: We got to 20-something customers and 2.5 million of ARR or something on the product. That took us probably three or four years to do that. By, say, the end of 2019, beginning of 2020, that's where we'd got to. Then the real catalyst was the Series A because we would've just immediately gone out of business if we had shut down the thing that was generating cash when we had no capital, obviously, but we said, look, as soon as we close the Series A, then we'll start winding up the services and we'll literally write to our customers one by one and say, "Unfortunately, we're shutting this down but we're going to do it over a year and we'll help you to make sure you can go somewhere else." [00:16:25] S1: That's actually – that's a long time to be doing two things, 2016 to 2019 and you got pretty far along. I mean, 2.5 million ARR is pretty serious. Just looking back, would you have done it any faster or do you think that was the right way to do it?
00:16:25 · Pablo Srugo, Andrew Butt
[00:16:25] S1: That's actually – that's a long time to be doing two things, 2016 to 2019 and you got pretty far along. I mean, 2.5 million ARR is pretty serious. Just looking back, would you have done it any faster or do you think that was the right way to do it? [00:16:40] S0: I think I would've done it faster. I think, again, I didn't know what I didn't know, of course, and I think now that I've been in the Bay Area for four years and done the A, B, C, D and met lots of other CEOs and now – if I'd had any of that knowledge, I probably would've done it a couple of years earlier. Probably not more than that because we're, again, targeting quite traditional companies, manufacturers, distributors, retailers and they're only just really ready and embracing this type of product in the cloud. If we'd been too early, I think we would've not been able to get product market fit which I'm sure we'll be talking about. [00:17:18] S1: Yeah. Let me ask about that because I think when it – on the road to true product market fit, I think one of the earliest things is delivering value and just knowing whether there's even real demand. In your case it's so different because people were already paying you for that product just bespoke and all you were really doing was building it so that it would be a box that you could give to everyone the same box, let's say, in simple terms. How much work did you have to do to just understand if there was real demand or was that a given for you at that point?
00:17:47 · Andrew Butt, Pablo Srugo
[00:17:47] S0: You're right. I think we could see there was demand. I think we didn't know in the early days how much demand there was and so, for example, how many industries actually had these rebates and was it only distributors or would it also be other types of companies in the supply chain and was it just the UK or would it be other countries? We knew there was demand but we didn't really know how big the market was in those early days. Then I think also trying to come up with a standardized approach wasn't that straightforward because with bespoke you just build whatever anyone wants and you do what the customer tells you to do whereas with the products, you are really saying, "This is how the product works; this is best practice; and no, it can't do that but, don't worry, because this is how you should do it." Then, of course, you get pushback and customers say, "No, we are unique and that will work for us." That was still quite challenging to standardize on an approach that we could put into our product. [00:18:38] S1: It seems to me that might be one of the hardest parts. I'm curious if you remember any stories around building V1 and just making the choices between, here's five or 10 different custom iterations that we've done for these different customers. This is what we need; this is what we need and then the debates around why or whatever.
00:18:56 · Andrew Butt
[00:18:56] S0: One of them, which was really interesting, was customers wanted to be able to get their trading partners – so that means if you're a distributor, it would be your suppliers and if you're a manufacturer, it would be your distributors and your retailers – to log in to a portal and then access certain information on the rebates and maybe approve and sign off an agreement and various things. They all wanted a custom portal that was branded for their company and where they could control the users and set the permissions and that's what everyone wanted. It was actually my cofounder so I can't take the credit for this one, David, he said, "No, what we'll do is we'll have a standard portal which will just be enable.com and every trading partner has to register on Enable." "Our customers won't have a unique portal that they control. It would just be the standard platform that everyone – and then we will effectively own the trading partners because they'll register with us and then we'll make it many to many so that each trading partner can then see other trading partners." That was something where I thought that will never work because customers just will refuse to do that. When you went back to the bespoke customers, they didn't want that but what we found was with new customers, we just explained that was how it worked, that just is how it performed and they were like, "Sure, that sounds fine." That was just one story and that's been good because we've now got literally tens and tens of thousands of trading partners of our customers all registered directly with Enable and it's a many-to-many marketplace. That was a really, really good design decision that we made in the product.
00:20:29 · Pablo Srugo, Andrew Butt
[00:20:29] S1: That's a great story and just what moves to mind is, did you do any classic customer discovery as you were designing V1 or did you just stay – you had some exposure because of what you built and then you just put your heads down and built it? [00:20:44] S0: It definitely was iterative and those early customers on the product – we did have a product but it was very narrow. Again, one of our skills back then, and hopefully – I think we do still have it but it was a particular standout aspect back then, was actually user interface design. Again, my cofounder, David, that was his real skill. Our software looked really good and in those early days we didn't have that much surface area but what we did have was very – had a lot of boardroom appeal and it was easier to sell. What that meant, to answer your question, is we would get the first few customers to sign up and then we were building the products with them because we had this small surface area and we had to actually build it out as we were implementing it. [00:21:30] S1: What was that MVP and how did you decide what the smallest – you mentioned surface area. What was the smallest thing you could build that someone might pay for? [00:21:38] S0: It was really a repository of agreements and nice tools to be able to create the agreements in a structured way and search them and view them and so on. [00:21:50] S1: Like contracts, literally the contracts?
00:21:50 · Pablo Srugo, Andrew Butt
[00:21:50] S1: Like contracts, literally the contracts? [00:21:52] S0: Yes, exactly, so the rebate contracts where we'd say, "This is between Pablo and Andrew and there's three different line items and first one is that I pay you 5% of all purchases" and so on, so building that contract and having that in a nice repository that you could search and report on. [00:22:09] S1: Before that, that would be, what, like a Microsoft Word document? [00:22:13] S0: Yeah, exactly. That's a good point because very early you could create or the system would dynamically generate a PDF version of the contract from the data you'd put in whereas before customers would have an Excel spreadsheet that they had to manually maintain and then a Word document, to your point, of what the actual contract was and then the two would often be different. Then I think, also, the calculation engine was really important so calculating those rebates by pulling in the transactions and reconciling them with the agreements. That probably was it. That's what we built first. Then people said, "We need to do forecasting and we need to do cash collection and we need to do approval workflow." These were all things we didn't have and we had to – we won the customer and then basically build that out while we were implementing it. [00:22:56] S1: What would you say was the main ROI of especially that early version of the product? Why did people buy it? Was it time saving or –