The Golden Rule to $100M in ARR

I’m so glad to be here. It’s been a while, and I think we’ve got a ton more stuff to talk about.

One is I’m an old man now. I started in the early two thousand at Apple. And if there’s one thing you wanna know about Apple, especially, you know, I was based in Europe, is that it’s a very centralized company, and so you need to ask authorization for everything and you never get it in marketing. You just never get it. And so my boss, was the head of marketing for Apple France, he was not running campaigns because he was not getting authorized. He was running experiments because for experiments, did not need to ask.

We’re talking about 2005 here, 2004. Didn’t need to ask for anyone. And then when he got caught, he said, oh no, we’re just running an experiment to see if the audience of the market reacts well to that. Like, that’s smart. Right? And the second founding story, couple of years later, I was in IT security consulting firm leading marketing over there. That’s when I I realized that leveraging engineers to build quasi products, to build demand gen, drive people to the product that is different. So have people build something which is a quasi product works really well especially for technical audiences.

Both of those things merged in 2014, 2015 when I joined Mention and I started using Segment. I’m like, hey, I’m fairly technical now, and I know how to run experiments, and I know how to do technical marketing, and at that time, it just started to be called growth. And I just landed in the right place at the right time.

It’s hard to come out with a really good product that you’re not monetizing directly. First, because many people, if there is interest for your product, people have built a better version of it and have monetized it. So like a lot of those niche have disappeared. And the second is that the quality has gone down and people have become desensitized, when they say oh, there’s like a free cost calculator, return on investment calculator, like one of those typical things, right, or website grader. Most of those are terrible now and so people will think like oh, I’m not gonna like sign up or put my info, my PI there because I’m not gonna get my values worth.

Alright? But if you have something truly amazing, does it still work? Absolutely.

Segment is a it’s a technical product targeting a engineering audience. I know I often get founders who have a similar audience, who wanna sell to engineers, and and they’re telling me, gee, like, you know, outbound emails doesn’t work. Engineers don’t want to be sold to. And by and large, that’s true. Though, if you’re lucky enough to have a really good product, let’s put aside those that have like a bad product, we have a truly good product that is useful, you have the incentive to have a free plan, a startup plan, because engineers will stay engineers as they change jobs and they no longer are in startups and they join a real legit company, and they will bring your product along with them.

That’s what we found at Segment. We did a crazy attribution logic where we found engineers across jobs by keying not on the link not on the email because you the email changes, domain changes, not on the name, that’s not relevant, on the LinkedIn URL. Because unless you’re a psychopath, you don’t change your LinkedIn URL between jobs. It’s the same slug. And so we just took from collaborate all the LinkedIn URLs of other people and we say, hey, has that person came three months ago, four, five months ago?

And if yes, did they come through a startup plan? And then we did reverse attribution that way. And we found that a lot of people coming for like mid market enterprise deals had used the product quarters ago at a small startup that had died and that attribution was worthwhile. So if you can do that, go for it.

Who does it well, Harry? Name me companies that at the early stage are really good at PLG or enterprise. It’s very rare that they have one of the two motions like pinned down. And so most of the time they try a bit of PLG, they try a bit of enterprise, they land most of the time in between. Segment? Both PLG and enterprise sells that. Drift? Ditto. Gorgias? Ditto. All of the companies I worked for, I worked with, and we’re gonna talk about CAC, I’m sure, but like mostly for CAC reasons, they optimize for efficient acquisition and selling, and they land with both motions.

No, it happens. It’s rare. It’s extremely rare that you have like super strong virality, a real PLG. We have been Most people who like say, I wanna do PLG, they don’t do PLG. Right? They have a free plan. They have a self serve plan. It does not mean there’s virality. It does not mean that people invite each other. Even the people I love and care about, you think of like something like a Ramp, amazing company. Like, do you think there’s PRG? Do you think CFOs randomly invite other CFOs to use Ramp?

Hell no. It doesn’t happen like that. It doesn’t work like that. Maybe there are some network effects we can talk about, but there’s no PRG.

You’re right, but there’s worse. You’re absolutely right. If you don’t create the packaging, the pricing plans to support the high cost of the enterprise motion, then you’re killing yourself. But there’s worse, it’s companies that are enterprise first with the entire like cost structure and product structure of an enterprise software and then want to open a PLG, angles is, hey, let’s let people like sign up on their own, and like nothing works. Like the acquisition does not work, the product is not self serve. You can’t build like a self serve like feature into like something that was meant for your CSMs to build the the instance, and that happens.

I see those people come to me and it’s like this is just not going to work. It’s impossible. You can’t pivot that way.

Focus. Success in startups is being able to focus your efforts to grow faster than your competitors. If you lose focus, your competitors grow faster than you, you lose.

Let’s first talk, like, why do you land in that situation? Generally, it’s because you find one of the two motions. Generally, to be honest, like, most people start with the SME market because you you don’t have what it takes to close, like, enterprise wide market companies. You don’t have SOC two compliance and whatnot. Alright? And eventually, one exec at a larger company is more risk prone than others and likes is an early adopter and will come to you and will offer like a three, four, five times your current ACV and you’re gonna take it.

Of course, you’re gonna take it. And then you’re gonna wonder, are there more like that? It happens like kind of naturally. It just happens. You just start closing a few of those and then you need to start layering the cost structure. You need to like to support them, you don’t wanna lose them because the churn would look bad. Put You the logo on your page because you want, like that’s an exciting logo, you put in your board deck, so you need to support that, prevent the churn.

Most of the time it happens insidiously. It’s very rare that I have people tell me I do not want to do enterprise features, I don’t want enterprise customers. I have one example, Zapier did that for very, very long. I talked with Zapier founders when I was at Segment and I wanted enterprise features and he said gee, we love you, but I’m sorry, we’re not gonna build those features. I’m like why? I pay for that. He’s like yes, But we are loose focus of the huge market of SMBs and we want to close as many of those.

Other people will take care of the enterprise markets. We don’t want you to to go there. I remember it because it’s extremely rare.

I think often what you see is companies find one early adopters market, one audience where in the words of brand Valveld, there’s like there’s a a message to audiences or product to audience fit. And you start just maxing that out. You have a competitive advantage, your message resonates well, and eventually you’re gonna plateau because you have convinced most of the early adopters, the people that are early, into your product. Audiators have made the conscious decision, they don’t want your product. Alright? The friction increases and you’re gonna start looking for new audiences.

You can think, hey, this small audience is too small for us, I can’t raise my price, I can’t convert more of those, I can’t sustain my growth there. Alright? I can’t do my two x my three three two two two. And so you’re looking for new audiences. And those new audiences will be either in different industries, in different segments generally, more rarely in different geos. So you tend to generally go like same company size different industries, then you go different segments, company sizes, and then you go into different geos.

That’s the way that you that I see most companies grow.

to be in the top decile of startups in terms of performance, thus in terms of valuation and funding and outcomes, you would have to grow past the first million, 3x the first year, 3x the second year, and then 2x for every year for the next three years. So three, three, two, two, two, alright? And if you do that, you end up at a 100,000,000 plus in revenue in five years.

question. So at first, like, why do boards want that now? Well, it’s because we’re in we’re in this kind of recession or tough times, I wanna say, in a way where capital is scarce. And when capital becomes scarce, there’s two ways to win. You either grow fast out of it, well, that’s tough, or you reduce cost. And founders try to do a bit of both, right, to de risk. When you think of all of the people asking about PLG for PLG, that’s another way of saying they’re looking for low CAC tactics.

They’re looking for customers that bring themselves, that bring other customers for free that you don’t have to pay for. If you go beyond that, if you can’t do the PRG, which most can’t as we discussed, I’d say low CAC. If you look at the top quartile of startups in terms of performance post 5,000,000 revenue, you’re gonna see that roughly it’s about a dollar of Sorry. A dollar of cost revenue, for a dollar of revenue. So you spend a dollar to get a dollar. That’s the top quartile, and that’s fully loaded CAC.

What that means that takes into account, the marketing spend, the marketing headcount, the sales team, bonuses, and whatnot, everything but building the product. Marketing generally represents about 30% of that. So about 30¢ on the dollar. And so if you take no on on a payback time of twelve months adjusted, like one for one, that’s about four months of payback time. Four months of payback time is really good. That’s really good. You pay back you think about it. Just like if you’re doing a loan. You actually loan four months to a third party, to your customer.

After four months, you start being in the money. That’s how you should think about it. Every time a customer churns before four months is a loan that has not been repaid. It’s a default on your debt.

Anything below 12 is good. Now when you think of that, generally, like, that’s a very simple framework. If you wanna be a bit smaller, you’re going to, CAC TV. Again, going back into, I mean, fintech these days with Ramp, when people onboard a financial, you know, platform, global platform like like Ramp, they tend to stay to stay for very, very long, multiple years. And so you can afford let’s say something much higher in terms of payback time because the LTV is huge. People stick for $34.05, at the mid market €8.

So when they stick around for €8, you can start being very aggressive. You can start spending like more than one year, maybe €2.

I understand where you’re coming from. On financial products, you can see the rate at which companies have switched their payment platforms and their, like, expensing platform. It tends to be, especially at the mid market, very slow. And it’s unlikely that changes because the cost of switching is super high. And that’s the you know, if you look at why, know, Ramp, but also Brex and others have raised so much money, it’s because the VCs have made the same calculations and have decided, concluded that it is very likely that people stick for that long.

That’s the only reason why those companies are worth that much. It’s because the churn is almost like sledge.

Because most people don’t have an eight year retention time frame.

one is really good.

I don’t think that you can calculate or you can attribute how or why customers have come to you at the early stage. I don’t think it’s worth it. You don’t have the scale, you don’t have the diversity and even if you have found one channel that works, it’s unlikely that you can scale it that way. And so to speak in simple terms, you can’t take this Google Sheet cell and like drag it to the right. It’s unlikely to to be real. And so don’t try.

In most successful startups, the CAC will rise faster than the brand can compensate for that rise. As you said, like every new audience is slightly harder to acquire and convert because if not, you would have converted that audience sooner, earlier that would mean the first audiences. The people who have, as I said earlier, seen your ad, talked to you, took a demo and said no, can you really reach back to them, you know, after three months and say, hey, Harry, you told us no three months ago, have you reconsidered your position?

Nah, you’re not gonna do that, that just doesn’t work. Eventually, I’ll give you an example, Gorgias, coming that I love, focusing on the ecommerce merchants. If you look at their total addressable market, we’re talking of a couple 100,000 merchants in The US and Europe. That’s the market. By now, they touch each of those merchants at least once a quarter, at least every single merchant at least once a quarter. So once you do that, how do you grow?

Well you go by, you know, you’ve maxed out your typical demand gen efforts, you’re touching the people, you go by increasing price, by adding new products to convince people on products you didn’t have before, and by doing brand, by convincing them that their decision that they made prior is wrong. That is entirely new orientation, new business, it’s a completely different. This is no longer growth. That’s no longer growth. Once you touch everyone every quarter, what takes you to the next stage is traditional marketing, traditional product.

You’re now an established business. So how do you define growth then? Answer two questions. Like, one is growth right and what is growth? Let’s start with what is growth. Growth is a risk adjusted way of creating value. What that means is that I have limited information when I’m an angel investor I have a limited due diligence. When I do growth I have limited knowledge on that experiment, on that hypothesis. I’m going to do some simple heuristics and say: Hey, is this a worthy bet? If I make not one but 20 of those bets, can one of those pay back all the failures?

That is typically a Visa mindset. And that is the growth marketing mindset. I don’t know what’s going to work. You got to be very humble. You just need to move fast, have high velocity and to have just the right level of quality to be able to figure out will this stick. So it is a multidisciplinary way of creating competitive moats, whether that’s in pre sign up acquisition or post sign up in the product, it doesn’t matter. And when it’s not, it’s I oppose it to core product, core marketing, the traditional way of, I’d say, releasing features or campaigns.

That’s a great question. So first, the biggest mistake that I see happen in growth teams is they undertake an experiment without assessing the cost, the effort, or the audience size. And often they ask, can we reach statistical significance here? Is the audience big enough for us to be able to learn the outcome? And often when I dig, the answer is no. There’s just not enough people. And that happens very often in b to b SaaS products, just like my stuff, post product. It’s very hard to get statsig post sign up in a b to b SaaS because you’re gonna need like a thousand users to be engaging with a product in a short time frame.

Who has that? It’s really truly it’s rare. Just think about that. So you gotta be able to like be ruthless and exclude those experiments where you won’t be able to come out with a learning. What I care about is not so much the wins because I can’t predict those. What I care about how many experiments can I have running at the same time where I learn whether this is a failure or a success, and I store that information?

A good learning is a statistically significant deviation from your status quo. It’s hard. I’ll give you one example. Okay? People often change their onboarding email, their welcome email, post sign up to get people to use the product. And they test and it’s hard to get a lift there. You know what I tell them? Have you tested against a holdout, a a control audience? And they tell me yes. And they tell me, oh, the control is is the standard email. Said, no. You’re wrong. The control is no email.

Have you tried not sending a welcome email, not sending, you know, the the first three, four, five emails to get people to use the product? And of course they haven’t. And I tell them try it. Take twenty, thirty, whatever it takes to be statistically significant and don’t send emails. And let’s see what the true deviation in activation and retention is. And you know what happens Harry? Most of the time, it’s not statistically significant. The people who are all going to activate will activate regardless of getting an email or not.

And so the email has no value at all.

Yeah. That’s the value of experience. And I think it’s Luke Leveque who’s the chief growth officer at Shopify who said that. I think growth is one of those disciplines where the knowledge of something that has worked somewhere else and that is replicable is extremely valuable and rare. That doesn’t really happen in product, like you’ve done a product really well somewhere else, you can’t really replicate that in another company, it just doesn’t work that way. It’s also not true in marketing or in engineering. But in growth, if you have something where you’re able to like tickle a human psychology just the right way, it’s likely to work again in the next company because they’re still the same humans.

I gave you an example I heard recently. One company sent verification emails, but the product does not need verification emails. You don’t need to click to verify your email, but they just tried, hey. What if we ask people to verify the email? Does that bring the people back into the product? What if we do it regardless of other than the product? And what if we send it twice, regardless if they verified the first time? It works. It works great. It’s interesting to find that that is an example of something that is very replicable in almost any SaaS business.

It’s very easy to implement, and it will drive your user retention up.

Generally, they take a working growth tactic like that one and they tone it down a bit. I’ll give you an example. You often see emails where they have this like almost tone in cheek personal from like the CS person or like a sales engineer, making it look like the text is personal, but it’s wrapped in an HTML layer, which makes it very clear it’s not personal. And I tell them like, you gotta pick folks, Either this is a corporate email and it’s corporate looking, or this is a text based email that’s being sent through through Gmail.

Which behavior are you trying to like get your users to do? Alright? What do you want them to believe? Is this coming from a human or is it not coming from a human? They haven’t put themselves in the shoes of the recipient. They don’t think what feeling am I trying to create? So the biggest mistake is they don’t think of the humans on the other side. They don’t think of the psychology enough.

You know what’s fantastic? It’s we live in 2023, and now you have AI products, you name it, all the ones you care, they love, and you can build personalized content with a scale that you never dreamed of before, which is at a quality that was unachievable before. What people care, especially in horizontal products, is that you talk about them, their problems, their challenges. Actually, I might go back when I said just earlier, you asked me what was the biggest mistake. Actually, it’s probably that companies, marketers talk of them and their product first.

They don’t talk about you, the audience and your problems. They say, hey, here’s my product, here’s what we do, here’s our customers, here’s why we are great. And you know what? As a recipient, I don’t care. I really don’t care. I’ve got other things to care about in my day than like a random company I never heard about. But if you reach out to Harry and you have context in his business, what he does, what he loves and care, what challenges, you have a really good assumption that he’s facing right now, it’s much more likely that you can pique his interest.

So these days with large language models and injected data about hey, is this a dentist? What’s the size of the dentistry? Where are they based? Are they in the mission and SF? You can start being extremely specific and relevant. And relevance creates reciprocity. Reciprocity gets you responses.

There are two things that work when you try to reach out to someone that you don’t know or a prospect, whether it’s by by email, by whatever, whatever the communication channel. True value, your communication, let’s call it an email, contains something that’s really helpful. I can give you an example. And the second is reciprocity for humanness. They truly believe it comes from a human, and thus they will feel compelled to respond because somebody else has spent some time. Let’s unpack those two here. Okay? True value.

Give you an example. Gorgias again, a support platform for merchants. Merchants sell, you know, these days a lot, of course, on TikTok but also on Instagram. Instagram is a major platform for merchants. What we found out is that sometimes some customers, potential customers of the merchant or the brand, posted negative comments on a brand’s post, and nobody took care of that. We said, hey, that’s a miss from the brand, but great, can we scrape that? Can we automate that? We found out that we could. And so we started scraping and automating the detection of negative comments on brand posts on Instagram, sending it to the brand owner, to the company owner, to the marketing leader.

This is hey Harry, love your products, but just letting you know there’s like a couple of negative comments here on your posts and it’s been forty eight hours, you haven’t responded and really you should. That’s it. Don’t talk about Gorgias, don’t talk about the product. This works super well. Why? When it’s public. I’m not doing anything like, you know, sneezy, like, it’s it’s just on Instagram, like, everyone can see it. True? It’s true. You can see, you can verify, you can click on the post, you will find the negative comment, you know it’s not me.

And second, like, it’s helpful. Absolutely. You should take care about it. You should respond if you haven’t. Right? You see those three things? The only response you can have is thanks. Thanks for catching it. Thanks. That’s it. Of course, I’ll follow-up to that email with an ask for demo, and of course, you’ll be compelled to give me your time because you would really be a douchebag not give me some of your time given that I found some mistakes that you made in your brand. Alright? So super high response rates there.

That’s value. I have million examples of that. If you can drive value about mistakes, problems of the business, you have discovered that your audience does not know, you will get engagement guaranteed.

Absolutely. The challenge is finding those opportunities, those pockets of opportunity and scaling those. That’s a challenge.

That’s why I love growth. There is an upfront cost to finding that, testing it. Of course, we don’t we don’t automate anything before we test it manually. We had, like, some Jira people, like, send a couple 100 manually to see if it works. And once we knew the response rates were huge, we then, like, invested in doing it with our engineers. But once you’ve built it and you’ve amortized the upfront cost, the marginal cost of that email is zero. You’re just running a few scripts. The acquisition cost of doing that is zero.

If your competitors are not doing it, you have like this like green ocean in front of you with like this no competition, $0 CAC. That’s competitive moat. What was the response rate? It’s like just so I is it like 50%? No. It’s more like 12%. 12%, which is about five x the standard response rate of a good cold email. Reciprocity. You wanna go to reciprocity? Yeah. Yeah. What’s the other thing that creates responses? Now here’s the thought experiment I want you and the audience to have.

At home, you have a mailbox, physical mailbox. In that mailbox, you receive junk mail. Right? Most of it is junk mail. You take that junk mail, you throw it away. Don’t even think about it. You don’t care. You have no personal feelings. You have no emotions to that junk mail. You feel maybe even lighter about throwing it away. Now let’s say you go through the junk mail as you throw it away. There’s this one letter, that’s sealed letter, that’s obviously written by a human, obviously by an old person.

And there’s your name Harry on it, Harry Stebbings written on it, and there’s the return address behind it. They even maybe like lick the stamp and put it on the envelope. You’re very convinced as a human. How likely are you Harry to take that envelope and throw it in the trash without opening it? No way. Right? You would be a psychopath if you did that. I tested that thought experiment. At SaaStr, in front of hundreds of people, not one person raised their hand. Not one. Which makes sense.

Why? We have reciprocity.

Give you an example. Ramp, targeting financial platform, targeting CFOs. Notoriously difficult audience to engage with. Almost nothing we can scrape about a company or a CFO is useful. They’re not posting about their financial issues on Twitter. It doesn’t happen. What we did

post it? So what we did is that we scraped very typical their LinkedIn profile, black colleges. And here’s the trick. The trick is we found about what’s the commonality between CFOs. They’re all well educated. They all went to college. Like, a 100%, right, went to college. Okay? In The US, very specific about The US, people who went to US college tend to be very passionate about that college sports team. Very passionate. Right? So what we did is that we matched to the visits, the college where each CFO went and the upcoming games of that college against the opponent team.

We then built a very simplified betting algorithm to see is the CFO’s team likely to win or lose, and we send that in an email and say, hey, Harry. Your team, there are sharks or whatever, is going against, like, the Bisons or whatever next week, and I’m ready to bet $50 that your team’s is about to lose. If you win up on top, I’ll give you $50. No question to ask? If you lose, I’ll just ask for a twenty minute call. Now that is a typical $50 for a call email, but and here’s the but.

The sophistication of the email with this upcoming game that you know about, the ability to be able to bet for free, what looks for free on sports which people love, makes it feel so human. Nobody believes this is automated, but it is. Nobody believes it’s automated. People are like, hey, somebody actually researched, somebody knows the upcoming games, somebody cares about something that I care about too. This is fun. The response rate here is 12 to 15%, about the same in the voice of No One is Cursor and Gorgias.

Again, for a very, very small cost and something that no one in their right mind would think of doing manually. That is reciprocity. You see that, you immediately believe, hey, there’s a human that cares, like, at least I have to respond. At the minimum, I have to respond.

It will. I have a conviction that there are two possibilities, and I think two things will happen in that will be true at the same time. Some part of the population will start rejecting communication coming from anonymous people because they won’t know if it’s a human or not and thus they will by default think that it’s a robot and thus that there is no reciprocity that should be expensed. And some other part of the population, maybe the more tech savvy people, will not care and say hey, is this information valuable?

The problem is that because the marginal cost is so low, high quality text, high quality communication about you will become huge. It’s gonna be all the time everywhere and you just won’t have the time for it. It’s very likely that we’ll start ignoring messages from real humans at a much higher rate because the quality of AI will be better than the quality of humans. Does that mean cold outbounds dying? It’s not cold outbounds, it’s communications dying. Personal communications dying. It’s not just cold outbounds. You that the same is true on phone calls.

Phone calls, text calls, like blog posts, anything that is a human written content is soon likely to be better if done by an AI.

I love the worry on your face about the future, Harry. You don’t like that. I think there’s a few things. One is if you are on the cutting edge of tools and platforms, you will win regardless of what happens. Alright? You will because the others, like anyone who’s not doing the things that I said is already losing right now. Second, this negative pessimistic view of communication is a few years in the future. It’s not a right now issue. So you have a couple years to like handle it.

Third, you if ask like a wild bet, I think it will be more about social proof, community, and relationships. I’ve seen a a product which instead of a chat bot on your SaaS homepage or pricing page, connects to your LinkedIn, your email connections, relationships, and says, hey, Jake, Harry is using this software. Do wanna ask him about it? And I thought that’s really smart. Right? Instead of like doing random social proof about other companies or the people I don’t know, it’s like, hey, this connection of yours, this person you know and trust, use this software right now daily, just ask him about it.

And because I have I trust Harry, I know Harry, I’m like, yeah, Harry’s a good guy, I know him, just give him a call, Harry says, yeah, this is this is legit. I’m like, okay, cool. Done. That you can see, has the immediate opportunity of solving the problem we just created.

I’m I’m a big fan of HubSpot and what they’ve been able to build in the past couple years. Almost everyone is HubSpot. And they have one of the biggest addressable markets in the world. So almost any business needs a CRM, that’s one. Second, their market is almost an oligopoly. There’s Salesforce, there’s HubSpot, maybe there’s like Freshdesk, Zoho, that’s about it. There’s like less than five companies that are like decent when you look at the entire suite. Okay? Which is extremely rare given the size of the market that is of so few players in that market.

And you need to have one. It’s not like you can say no, I’m good, like I don’t need a CRM, I don’t need a marketing option, like you need to. So you will buy one of those, which is why it’s a great company and it’s they’re doing it so well. Almost no one has the combination of those market attributes. And I have never seen companies I’ve worked with, neither at Segment or at Drift, Gorgias or Ramp, and not in one of the companies I engage with, we were able to get to 50,000,000 on one channel, not one.

I’m in between. I’m in business. I don’t like to be surprised. And what that means is if I’m gonna raise a series a or b, whatever your stage is, I wanna know like can I actually spend that money? Do I have like more than like hypothesis that I know how to spend that money? And so I recommend increasingly as you go through the stages to test the CAC and the depth of those channels. I’ll give you one example. Let’s let’s take like paid on Facebook. Do you really know what’s the depth of that channel?

No. How do you do it? I recommend companies to two x the budget every week until it’s that lines. Just do it for like four weeks, six weeks. It’s not gonna like burn your budget, your entire like capital, but just two x on a week two, two x on a week three, two x on week four. Very quickly, you’re gonna find out where the cap is. Alright? You’re gonna find you’re not getting more, like, engagement, more clicks, more revenue, and then you can scale back and can tell your board, hey, board.

We’ve pressure tested the depth of that channel, and we know how much money we can spend on that channel. And you then go and do the same on every other channel. I did the same for Revit on emails. What’s the number maximum number of emails somebody can receive before there’s like negative outcomes? Is it like once a year, once a quarter, once a month? Let’s just take a small sample and let’s go down. Obviously, like, there’s like diminishing effects, like, you should test it.

Test the same way in every channel, and they go back to you once and say, hey, we know the depth of email, we know the depth of, like, paid, we know that of every other channel, this is why we need to raise money, this is how we can spend it.

To exit again and you’ll find it. Eventually, you won’t be able to spend more money. There’s a point where you can’t spend more money or you’re spending more and not getting more engagement. If you’re not sure, to exit again.

Take a randomized symbol of the audience. If you can’t do that, it means your target market is too small and you should be doing ABM. If you have like let’s take Gorgias again, like if you have like 200,000 companies, can’t you take 5,000 companies, 2,000 companies, the smallest audience Facebook will let you have like 2,000 and like really increase the budget there? If you burn those 2,000 out of 200,000, burn 1% and you’ve learned the outcome of the channel, Is it not worth it?

Reject any KPI that is vanity. You don’t care about traffic, you don’t care about any of those KPIs. The only thing you care about is weight adjusted pipeline dollars. So although those KPIs, engagement KPIs, your growth team, your marketing team needs to convert them based on lead score, based on company size and stage, your usual close rate. Every single logo that engages with your brand at any stage needs to be converted into a dollar figure. We then sum those and you have a pipeline by stage that is not just for your sales team, that is also for your marketing team.

Your marketing team has a funnel TAM to MQLs going drilling down to SQLs, then over to your sales team. They should have a pipeline figure per stage, and based on your conversion rate, you should give them goals at every stage of that pipeline. The key learning is what has worked for sales also works for marketers. If a marketing candidate that you’re looking to hire does not own a pipeline figure, that is the wrong candidate, my friend.

Then you don’t have a good lead score. Then your lead score is bad. If your lead score is good and your pipeline is adjusted with the lead score, that should not happen.

If you let’s say your ACV is 10 k and your lead score predicts a likelihood to close of 30%. So the value of that company you pipe is $3,000. It’s not 10, it’s three. If the lead score is shit, maybe it’s one. You don’t count the 10, you count the three. And if you can’t make that prediction, then you should be working on a lead score.

All the ones who are winning. It’s fairly easy to build a lead score. You know, you could like outsource it to a company like MadKudu, you could build it on a modern AI platform like Akio, like there’s like even HubSpot has like simplified models for If you haven’t think of like the lead score, it means you haven’t thought of your ICP. If you haven’t thought of who’s a good customer for you, you just stop everything and just go define who are the good customers and what are their attributes.

Well, the

to them, growth.

I love for that to be true. I have learned that I’m wrong, and that is rarely the case. The LeuklaVecs of the world are the exception, truly. It generally rolls into like either product or or marketing. I would love for that to be a standalone function. The lead score itself generally is within like ops.

After a couple million revenue, once you’ve handled the early adopters, you’ve scaled at least one channel that works well and you’re starting to think of optimization, testing aggressively, building a growth team, then you should have enough data for that. But let’s flip the question the other way. If you don’t have enough data, then your growth team can’t learn. If the growth team can’t learn, you should not hire a growth team.

Yeah. I don’t think I don’t think that’s a good case for a growth team because kind of like you said earlier, you can drive terrible pipeline to a funnel. I can drive terrible leads to your product. If you hire a growth team too early, will they get you user engagement? Absolutely. Is that gonna be the right users? Your bet is as good as mine. People respond to incentives. If the incentive of the team is to drive sign ups and engagement, the problem is they will optimize for that, not for the long term viability of the business.

That’s a huge risk. I’m French, I know how to cheat 10 times out of 10. You give me anything as a goal that is not revenue and you incentivize me strongly for that, you’re gonna get that KPI, but you’re not gonna get the revenue.

no.

that. So

A former founder. You know what the good thing about startups? Most don’t make it out. Out. Like, out of 10 die. That doesn’t mean it’s a bad founder. There’s a million reasons for the startup not to have, like, survived, and most of the founders are amazing individuals. They know how to bounce back. They know how to pivot. They are focused on long term outcomes on revenue. All of those things that are said are exactly the key attributes you want for somebody who’ll be leading your growth team.

If you don’t have a former founder, go for somebody from like a consulting background, one of the big five, somebody who’s really focused on like data, on precision, on the running hypothesis, and on running a process. Growth is about running a process, not about like being super smart. It’s running a process.

You want for a growth team to work out. First, it exists after your product team, obviously, otherwise you don’t have a product. Generally, after your first few marketers, right, who are doing the traditional campaigns, core campaigns, and you’re gonna create this startup in the startup, this this team within the team, and they’re gonna take risks as we talk as like a VC. What do they need to be able to do that? They need to be able to build and to ship. That means you have this former founder who’s like the head of growth slash PM running the process.

You’re gonna have at least one engineer, maybe data analyst if the founder can do it, but you you’re the the head of growth is the analyst in the early days. So you have like head of growth, engineer, and then one marketer slash copywriter.

You want to ensure that they can look at your data, which means you need to give them a take home that has some of your data. I would recommend hiding a few Easter eggs in there, some outliers, to see how they look at the data, have they found the Easter eggs, and do they question the dataset and those lines. That’s the first thing.

Yes, absolutely. I will put a couple of people, a couple of like logos that have like very weird, you know, retention, revenue, acquisition, stuff like that, right? Behavior, things like that. Do they see that? Alright. If they don’t see it, like, can they really eyeball a data set? That’s the first thing. And then what’s their approach to risk, to making bets in coming out on top? How do they win? When they face interesting challenge, what’s their approach? One of the key questions I always ask that is really out there, people don’t expect it.

I ask them like, have you played video games? I used to be a gamer before I had kids. Maybe like, yeah, Most people have played games at one point in their life. Right? I’m like, cool. Tell me about it. Like, what’s the platform? What’s the game? What’s your strategy? How do you win? Teach me. Indulge me. Tell me about the rules. What makes a really good player in that game? Do they understand the rules and can they think outside the box? Because that is growth, is understanding the rules, thinking outside the box and making interesting valuable bets, risk adjusted bets.

Again, as we said, the risk adjusted works for your pipeline, works for the growth experiments, works as a VC. It’s the same logic. I’m looking to find, are they reasonable risk takers?

Have you played a board game like Starcraft?

Okay. Good. So how do you do that? Like, what’s your approach to surviving? How do you ensure you can survive?

Yes. You you can start drilling down to understand what is one person’s approach. Obviously, it’s easier when it’s like a board game, like a StarCraft or, you know, a walk or something like that. And and it’s also because it’s games that I I know better, but even in more modern game other games, like, I try to understand that, like and maybe you’re not a mistake or Harry. I mean, you, Harry, are not the right candidate for that. That’s my point.

You mean somebody that I have hired and eventually comes out as a bad hire?

Exactly. It’s fairly obvious, pretty fast. They won’t try aggressive things. It’s all about being very aggressive. Let’s go back to the things I talked to you about today. I saw your face and like you’re thinking like, well, that’s crazy. That’s out there. That’s out of the box. Like, where’s the box? That is just aggressively thinking of like what can I do that stands out? That is really different. People will question this has to be human, this is really valuable, this is not like can that person, can that, can they do that?

Or gonna are say hey, we’re gonna run some ads and we’re gonna talk about product? Maybe that’s a great marketer, that’s a dimension person. It’s a combo of being very thoughtful about the odds and the bets and running the experiment in a scientific way and being aggressively creative.

My budget is my headcount and it’s the time allocation of my headcount. My constraint is how many experiments can my small team ship and if you at your team like React these days with like ten, fifteen people on the growth team, they ship about 200 experiments per quarter. Now you go back to the individual, it’s not crazy, 10 experiments per person per quarter, so like you know roughly a bit less than one per week. So it’s not crazy. At the rate of 200 a quarter, some stuff has to work or you’re very unlucky, but some stuff has to work and you’re getting like a good, you know, ten, fifteen solid wins.

So my constraint is headcount and velocity. That’s why I optimize for those things. It’s rarely budget because I’m not competing on budget.

Hiring to senior, being like having stars in the eyes because somebody has had a huge track record and is very senior and believing what they tell me. And they tell me yes, I’m excited by going back early stage and getting my hands dirty. That has never came out to be true. Not once have I hired a senior person in a position where there’s no one else to empower them and they told me they would get their hands dirty. Have they gotten their hands dirty? Not once.

They lost it. It’s almost like just going back to your soccer FIFA game, there’s an age and once you’re past the age of playing soccer, you become a coach. Do you ever become a player again? Absolutely not, it just never happens. You can’t do that. Same thing here. There’s one thing we can talk about here. So why does it happen in marketing and not in engineering? It’s very unique. As an engineer, you can be an l eight engineer, individual IC, right, very experienced. You’re the best engineer at this code base.

You know it in and out and you will be respected and nobody will question it. As a marketer, do you know anyone who has done like five, six, seven years of the same role without becoming a manager? And you’d say, yeah, that person’s awesome at what they do, they’re the best. Hell no. Everybody in marketing is forced to become a manager pretty fast. Why? Right. Because there is no respect for deep knowledge of one channel. I know exceptions, like, for example, Rex at HubSpot on paid ads is is but even him, he’s a manager now.

Actually, I don’t think I can name one person who’s still an IC, does not manage people, is getting their hands dirty on a daily basis, and has like plus five years of experience. I don’t think I know anyone. So you got to hire early because and don’t hire a senior. They won’t get the shit done. Do you think marketing gets the respect it deserves? Sometimes. Absolutely. When there’s like very great and with these good campaigns, it depends where. Like if you’re talking of like engineering companies and doing like companies and doing products like Segment, I get is it harder?

Absolutely. For sure it’s harder. But there are places like obviously I started making it to Apple. Apple is a marketing company. Do people respect Apple’s brand and marketing? Absolutely. But that’s more like the exception than the rule.

You You should always hire full time when you can. Like, I always tell people, like, if you can hire the person you want that’s the right fit for you, go for it. I’m I’m not a good replacement for that. The hole that I plug, the problem that I fix, is generally you can’t make that hire. The experienced growth person or that founder that you care about that is amazing, do they wanna take the risk with you at their series a? No. They wanna go build their own company.

And so who are you gonna hire? You’re gonna hire a more younger, high on the execution skill, but they don’t have the expertise. They don’t have the experience. I’m the fix for that. But if you can hire the guy that has experience, the skills, the knowledge, and can like ship, hire that person absolutely 10 times out of 10.

It’s a tight overlap, which is why I have a business. I have a business because the people like me, like, I know all people that like my level of experience in The US. There’s less than 200. There’s like a 120 people.

Which one of those can you hire a series a company? None. Hey. Yeah. You’re laughing. None. Okay. Zero of those people are available on the market. Not one. Of the one twenty, a third is like semi retired and VC and other things. A third is in like great walls like Luke, and you’re not gonna poach Luke from like Shopify. And there’s a third like me who’s like doing like consultancy and like advisory and like other things. You can’t hire those people. Not at the series a at least.

I mean, sure, if you’re like Shopify, like everything’s possible, But, like, you’re a series a, series b, you’re not getting those people. I I wanna be honest, like, that’s just not happening.

Coffee, hot coffee cappuccino on Segment’s homepage. Talk to me about that. What happened here? It worked. When you came to the website, instead of asking on the chat, how can we help you, which is lame and not unique, we said, like, how do you like your coffee? And because it was, like, a reverse IP running pre COVID, we knew what the HQ was, the company, Duane, I knew the city, and we would just ship coffee to you. We’d just ask for your first name. We knew you were Harry.

Boom. Ship a cappuccino to you. While you were waiting for the cappuccino that was run by Postmates, we would say, hey, do you have twenty minutes for a demo? Of course, you’d say yes.

Of course, $20. $20 for a demo? Good CAC. It worked well? Yeah. It worked well.

Email. People have called the death of email every year, and it’s still going strong.

One’s back. I don’t know which one has died to death, but the phoenix of tactics is cold call. Cold call was dead from like 2012, 2013 to 2022. And with LLMs now and tools like Orum, cold call is back big time.

Have strong connections to learn what others are succeeding. The key to success in growth is testing and learning. And so if you can outsource the cost of learning to other teams, either through advisory like I did in the early days or through like good relationships, you are saving a ton of effort and capital, and you can then deploy those learnings to your business and look like a fucking genius.

Generally, building bundles. Like bundles are a terrible idea. When you start bundling different features, different products together into one, the size of the audience that cares about the entire bundle is smaller and smaller as the bundle increases.

The fact that it’s not independent. Growth is not an independent function. It has to wall up to marketing or product or whatnot, and that that creates conflicts which eventually leads into death of growth teams at late stage. There’s almost no company at a late stage of a growth team, same for like Facebook, Shopify, and a couple of those.

The one thing I’ve never had the opportunity to do myself and I always like admire is the typical of virality. I think of the Dropbox of the world and like you know prosumer, think of Zapier. I know those companies, I know the leaders, I know how they pull it off and the combination of a huge market, a very viral product, very sticky viral product, good product creates opportunities unlike no other. The ability to have people, customers bring other customers to no cost to you. I just wanna like sit back and relax and see the customers sign up.

Man, I wanna be in that in the in my beach chair and see that. And for me, it’s always been like hard work and I always imagine like the writers, you know, at at Dropbox and other places thinking like, a million people just invited themselves last month. How cool is that?

Harry, it’s been great for me too. Let’s talk again sooner than six shows next time.