SaaS Interviews with CEOs, Startups, Founders
Founder stuck at $8m revenue, burning $400k/month shares Profit and Loss, How he turned things around with Proposify CEO Kyle Racki
29 Oct 2024
Chapter 1: What challenges did Proposify face in its growth journey?
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It's been so inspiring to hear all these great stories from founders who grew from zero to 100 million in, you know, two years, five years, ten years. I'm going to share a story that's a little bit different than maybe some other ones that we heard because I'm going to be very raw and vulnerable and share a lot of my fuck-ups. And hopefully...
If you're pre $8 million in revenue, you can avoid some of these pitfalls. And I think some of these can still happen even when you're a little bit further along. So to kind of set it off, I want to start with a story about two years ago. It was the fall of 2022. I was in a state now for a couple of years where I was really checked out of my business. I was really bored. I was frustrated.
Things weren't going terribly well. Our rate of growth had been declining year after year. And when the SaaS market changed around 2022 is when we We actually started to decline for the first time, really, since we found Product Market Fit.
And I had been going through this M&A process where we hired an M&A banker and had strategics and PE firms lined up to sell the company, because I was just trying to offload it. I was trying to hit the escape hatch and get out while the getting was good. But everything kind of happened around the same time. The SaaS market kind of crashed in 2022.
Investors and acquirers started getting nervous and suddenly I had this, you know, what was this big list of potential acquirers all pull out, not get a single LOI from anyone. And it was at that moment where I really didn't know what to do. And I was in front of my board when they asked me, like, Kyle, do you have the stomach to keep going?
I shed a tear for the first time in front of them and said, I think so. I don't know. But how did I get here? And that's really what I want to share with people today is some mistakes you can recover from pretty quickly. And other ones, you may not even feel the effects of them for a long time. How did we get here?
So when Proposify got off the ground, it was around 2014, we started finding product market fit, we started to scale, things were really fun. It was a kind of a new and emerging space, proposal software, online proposals, interactive quotes, e-signatures, that kind of thing.
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Chapter 2: How did Kyle Racki handle the company's financial struggles?
We didn't even really know what they wanted. And I'm going to share what started to work there. One of the biggest issues that we had was the speed at which we moved in the early days to build features and ship started to slow down.
We started to kind of buckle under the weight of technical debt and legacy that I didn't have an experienced engineering leader who really knew how to scale us past that. But I'll get back there in a second. What I want to share here is what started to work for us as we moved up market. Because we had the problem that a lot of companies have.
I think we heard Adam Robinson earlier today talking about the 10% churn. We didn't have churn that was that bad. But as with all self-serve small businesses, free trial motion, churn starts to eat away at your growth overall. Even if you're at a 2% or 3%, you really want to get that down low. But it's tough when they're small businesses and it's a low price point.
So when we started to experiment with building a sales team and going after larger businesses, I made also the mistake of basically just hire a team and a VP of sales to figure it out instead of trying to learn that myself and try to sell deals myself. But after a few false starts, what started to work for us is we realized that the product had to change significantly.
So larger businesses were mostly interested in how does it integrate with Salesforce and do you have SSO and what's your security policy? We had to check a lot of boxes in order to win deals and it took us a while to get there. The other big thing was our positioning. You know, we heard Eric talk about that in terms of Pendo, like how they'd position against competitors.
And what we realized was that, you know, the customers who bought Proposify to send beautiful proposals and get faster sign-off, that messaging didn't really resonate with the mid-market because they're like, we have cool PowerPoint decks. Like, we know how to send proposals. What they really wanted was control. Right?
Sales reps using the wrong materials, sending out proposals with mistakes, the management team not really having any visibility into what's going out the door and getting in prospects' hands. That's what they were buying. And so once we shifted our positioning to that, sales became a lot easier. And then the third really big thing was pricing.
So we did, again, the classic startup mistake of like, put everything on the enterprise plan. Give it all away. And so we were just capping our ability to sell larger deals. Once we moved to a per seat price, that also became easier.
And we went from being able to sell at most a $3,000 a year ACV contract up to now where we have a couple in the six figure range, but average would be more 10, 20, 30K deals. So that started to help us. And when you look at this graph, what you notice is this is the black lines, the total ARR growth of the company.
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Chapter 3: What mistakes did Proposify make during its expansion phase?
And I feel like we've got the right team and the right leader to be able to do so. So I know I've only got a couple minutes left. I just want to share a couple takeaways, because I know my story wasn't like, how we grew to 100 million in five years. It was much more of that long slog of building a SaaS company and being bootstrapped and funded.
But really, one of my biggest unlocks was solving for your biggest constraint. How often do you know what really is holding you back from growth? And it just feels like it's too difficult or it's too hard to fix. So we tend to go to other things.
And we go to things that feel easier and feel productive instead of staring into the abyss directly and attacking the biggest problem that's holding us back. And if we're in SaaS, you hear people say, oh, product is so easy to build product now. AI can write your product. It's all about sales and marketing. I don't believe that for a second.
I believe that if you're in the SaaS business, you're in the product business. You can't outmarket or outsell a weak or a mediocre product, especially when you're in a competitive market where other competitors are innovating at a fast rate. And leaders are your leverage, right? If your department isn't functioning,
Oftentimes we hold on to people too long or we hold on to leaders and think, well, maybe in another quarter they'll have figured it out. And I've just learned this lesson, I have the scars to show it time and again, is that you know when it's the right leader because within 90 days something will change. They will pick broken glass off the floor.
Some changes are more systemic and take longer to action, but a great leader is gonna do something within the first 90 days that show you that they're the right leader for where you're at in the business. And then finally, as we know, SaaS is a marathon and not a sprint.
And when we look at these founders who grew to 100 million ARR, a lot of times there was five years of zero revenue or sub five million in revenue. And so that's what I'm embracing now is I'm not trying to fast exit. I'm not trying to get to a certain revenue mark and flip the company. I'm really building for the longer term.
And if you as the CEO aren't the biggest cheerleader in the business, if you're not the most passionate, your team will feel that too. And I realized that when I wasn't passionate, I was letting the whole company down. And I was expecting somebody else to figure out instead of taking the reins myself. And I think you have to do whatever it takes to get your head back in the game like I did.
So I want to thank you guys. I hope you got something valuable from that. And I'd love to chat with you. Thank you.
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