SaaS Interviews with CEOs, Startups, Founders
How to shoot through the scale gap (hardest part of scaling rev is between $1M ARR - $6M ARR)
06 Nov 2022
Chapter 1: What are the challenges of scaling revenue from $1M to $6M ARR?
Hey folks, hope your Q3 and Q4 is off to a good start. We just wrapped up Founder 500 in Austin, Texas. Hundreds of bootstrap founders showed up. It was an amazing time. I loved meeting so many of you.
This interview today is a recording from that session, which you're gonna love because now we have visuals, we have the founder teaching, and I made every single speaker include their revenue graphs and real artifacts in their presentations. Without further ado, let's jump in.
You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all these podcast interviews. Check it out right now at getlatka.com. Please welcome Adam Baker to the stage.
My father once told me that if you fail to prepare, you're preparing to fail. So this should be an interesting 20 minutes. Buckle in. I'm Adam. I'm the founder of actually four SaaS companies. One failed, so I talk about that more than I do the successes I've had. I'm based in London. I'm currently the founder and CEO of Dealpad. Oh, that's not me. Oh, God. There you go. I told you. I don't lie.
I'll get you. All right. Okay. So I'm gonna talk to you a little bit about my journey, specifically what I've learned across building four companies, bootstrapping every single company. I've raised 2.5 million across those four companies. And my last company, my previous company, Blotter, we got to about 17 million ARR on that two and a half million. Other than that, I've bootstrapped.
So if we can skip another slide. What do I press here then? Don't hit the big off button. That's what it is. There you go. I can run companies, but I can't operate tech. There you go. So my first company was called Blotter. And it was a real journey for us. It was a passion of mine. I wanted to change the world and how the world consumed news.
I was convinced, still am, that so much is being undiscovered. So many news events happen that we don't know about because of bias or because journalists can't get there. And I wanted to be the catalyst to changing that. And so I set about building out some machine learning that authenticated news footage from anonymous sources around the world. And we built a global network of a million people.
We had a team of 27 people. And 18 months later, we had zero revenue. And it was a really... kind of, I guess, pivotal time in our company, where I had, similar to Gil earlier, I had to tell 27 people that I couldn't make their payroll, and I didn't know when I was gonna be able to make it.
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Chapter 2: How did the guest bootstrap four SaaS companies successfully?
It's one of the biggest challenges we've got from one data center to the other for lots of different reasons. And so we really had to go back to the drawing board and figure out who our customer was. Who did we want to service? At one point we had DHL calling us and telling us they wanted to work with us. We could never support DHL.
But we had that conversation, and we wasted months talking to the HL. And we really had to home in. So we decided we would focus on B2B software companies that had a platform. And the reason for that is because, and I'll talk a bit about this in a minute, when you think about churn, a really big... denominator of why users churn is how they use your platform. We're not just in a single feature.
It's things that the human eye wouldn't find. It's a combination of features that will contribute to that particular user not using the platform enough or not growing enough. And I can talk about that in a bit. So what we did, we really looked at, okay, who's our customer? Who's our ideal customer? And then inside that customer, who's our ideal buying persona? And let's live their life.
Let's really understand what they care about. So if you look here, we're talking about what keeps you from being more efficient at work? What limits you from doing your job the right way? What parts of your skill set do you need to work on? What are you being asked to do more of? by your business and your company? What's going to make you successful?
We really wanted to understand things that probably weren't that relevant to what we were going to deliver to them. But we wanted to understand who that buying persona was. And then we looked at the problem we were solving. So is it a critical problem? Is their life going to stop if we turn this off at some point? What are we solving for that company?
And knowing the customer that we really wanted to target, knowing the user that we were going to hopefully be providing the software for, and then really understanding how our solution could fit that was a really significant help. And so we built out this framework that enabled us to go through this. It took us months, but it was absolutely the...
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Chapter 3: What lessons were learned from the failure of the first company?
Probably the biggest reason why we were able to then scale. So at Churnley, our average contract value is about 150K. So we've got customers that pay us a lot more than that and we've got customers that pay us a lot less. But typically it's about 150K. Our sales cycle is anywhere from about four months to...
year and whatever right it's long it's complex so we are talking to multiple stakeholders across multiple teams from finance to customer success to sales to anybody that's involved in in customer retention and revenue growth. And so we really had to make sure that we had ourselves the right tools and the right framework.
So we went back to the drawing board and we started to look at what we needed to build, what solutions we needed to build to serve our ideal customer and our ideal buying persona. And then from there, we built out a roadmap. And what was really clear was that we needed to integrate into more of our customers' workflows. And we didn't do that very well initially.
And again, that was a real tipping point for us because the moment we could go and sit inside a customer and we could say, yep, we do integrate into SAP or Oracle, which are the two main integrations we have, It was a game changer. And we wouldn't have known that if we had not gone through the research.
And so I just want to talk to you a bit about how we then win, because we still win, good, high-value deals in a very, very complex sales process. So we've built out something called value validation. And what that is for us, it means that we absolutely wanna get the executive sponsor of this project to the table. And if we don't, we don't continue the conversation.
That's the first thing we ask for when we go into a sales process. Who owns this at the top of your company? Is there a budget approved for this already? Can we get access to them? And it's not just a hello, we want them at the table. And we have our own process.
Now, one of the things with sellers, and I'll go back to, I'll come on to my latest company, DealPad, because this is fundamentally sits across it. But one of the biggest challenges that I've seen with sellers is that they're scared to ask questions. They're scared to take their buyers through a journey.
And so what happens is they just fall into the buyer's sales process and they're out of control of that process themselves. Nothing worse trying to run and build a sales organization when your sellers are out of control. And so what this value validation framework does is it helps us stay in control. So we ask our customers to commit to five workshops before we even give them a proposal.
If they can't do that, we're out. We don't talk to them. So the first thing we want is that executive alignment. The second thing we want is to ask that executive, who's the kind of the management layer here that's gonna be responsible for doing this? Both in terms of deciding and evaluating us, but also in terms of delivering it, integrating it and using it.
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Chapter 4: How did Churnley achieve rapid revenue growth during COVID-19?
What they're not looking at is if you sell by, how many of you sell per seat here? Quite a few of you. So if you're selling by seat, contraction is the biggest killer for your business because you'll bring a customer on, you might sell 100 seats and you've still got that customer in 12 months time, but you've probably churned 60% of your seats. So you're contracting revenue.
And so what we look at is how you stop contraction. And what we've found is that there are a number of common triggers that really determine whether a customer is gonna churn or not. And so credit card expires. If you enable your customers to pay via your web app and they pay on the credit card, their card expires. They're not coming back to your platform and updating their card.
And so you'll keep on sending them reminders and they probably won't do anything about it. That customer will at some point churn or they'll contract, particularly if it's a single seat business. If you're selling single seats, It's very, very unlikely. The other thing is with single seats, if you sell single seats, I guarantee you're not gonna be able to grow that company as well as you could.
Because when you sell single seats, the organization that that person works for doesn't know anything about your software. We sold by seat initially, and then what we did is turn that off, and we just go and sell into the company now, and we sell directly into the organization.
It takes longer, but you'll get a much higher ARR, and you'll retain that customer much better than you would if you sold single seats. If you don't see growth through an account, the likelihood is they're going to churn, or they're going to contract. You need to develop growth strategies for your customers every single day.
And I see CSMs, customer success managers, customer success teams, just focus on engagement. They're focused on how do we make that customer successful. That's great, but how are you going to grow that customer? How are you going to surface opportunities for that customer to do more with you and become more dependent on you?
Because if they keep on buying more things from you, even if it's just small incremental things, they're going to stay. And so growth in a customer success team, I think is the number one. part of a customer success team's job. Because you think about it, you're never gonna grow a customer if they're not engaged. So they have to be engaged to grow.
So think about growth and how you're gonna surface growth opportunities. We see that a lot. And then finally, I've touched on it, but this is very arbitrary and it's very, very difficult to understand from the human eye. But when you look at a platform, you might have, we put a little bit of JavaScript into each product feature in our customer's platform.
And when you actually look at the usage and how people are interacting, you can start to get patterns. But it's very different from every company, which is why we custom build our software. But you'll start to see that if you use this feature with this feature and this feature, you're more likely to better grow that customer.
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Chapter 5: What strategies can prevent customer churn in SaaS businesses?
What's their tech stack? What's their sales stack? What's their CS stack? And bake into that. Don't have them in your platform. You don't need them in your platform. Get into the workflows that they're already working in. It becomes way, way less likely that they'll leave you. Single seats again, as I said, and a growth strategy.
They're the biggest reasons I think that customers will stay with you. So moving quickly on, I've got 30 seconds on this clock, but it's gonna take me a couple of minutes. My latest company is called Dealpad, and Dealpad helps companies get deals closed.
And so this is a combination of all the work that I've been doing over the last 15 years, building my four, or previously three, software companies, and I've used this framework all the way through those organizations, and particularly with Churnley to get these deals closed. So Dealpad is a digital sales room.
And it's a space where you bring all of your buyers together in one place and you share all the content, all the information they need to evaluate you. And then you build out mutual action plans to align on a closed date. So everything that needs to be ticked off in order to get a deal closed, You align with your buyer and your entire buying team.
You attribute who the owners are and what the close dates are. So every single task is a close date. So you're actually working to a main close date through very small little incremental close dates. And it's very, very unlikely that a deal slips. And I don't know how many of you suffer from slip deals and your salesperson saying to you, oh, this is gonna close on the 25th of August.
And then that comes and goes and the deal doesn't close because the buyer isn't aligned. The buyer doesn't know that's a milestone for your business. And so what DealPad does is looks at that. And just to give you an indication of how it works, this was one of our customers. This was their closed one in Q3 last year. Then they started to build out mutual action plans via DealPad.
And in the next quarter, that's their closed one. And the following quarter, That's their close one. So mutual action plans and bringing your buyers together works brilliantly. We see it repeatedly.
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Chapter 6: How important is understanding your ideal customer profile (ICP)?
So I've already spoken to you about that. And then finally, I'll just jump through these things. I just want to talk to you a bit about some traps that I fell into. I'm sure there are some experienced people out here. You've got more experience than me, but three things that I learned really quickly was you need balance. And as a founder, it's very, very difficult to get balance.
You need to be a quitter. So I learned to quit. And you need to really think really carefully about exiting if you're fortunate enough to get acquired. And so the whole idea inception piece for a founder is that you're always going through this cycle. I do it every day. And I've said, I've built four companies. I'm stupid. I'm making bad decisions. Why am I doing this? I don't believe in myself.
And you have to kind of check yourself all the time to ensure that you're on the right track. But believe in yourself. You're going to get so much negativity. You do. I'm sure you do. I get it every day. People say no. People tell you that you're stupid. Believe in yourself because nobody else will believe in you if you don't. And then from here, it's doing the right thing.
But understanding when you do the wrong things, quit quickly. And it's almost that fail fast kind of mentality. Don't be afraid to quit. And I've seen so many founders. I invest in about 20 odd software companies. And it's crazy how many founders just can't quit. They keep doing the same thing all the time. And if it's not working, just park it and move on and do something else.
And not business-wise, find another strategy because you'll find something that works, but you've got to keep quitting. And then finally, balance. If you look on this chart, this was me before when I used to work 90% of my time and now I work about 60% of my time and I'm way more efficient. I'm working across two companies as CEO.
The main thing here is I've really focused on my meetings and so I've cut my meetings back and I'll focus way more on products and sales. For me, that's all I care about. If I can support my company and my team In one way, it's going to be on sales. That moves the needle on everything. It makes everything easier. If you don't have sales, you're not going to grow.
You're not going to raise money, or at least at the valuation that you want. As a founder, going back to my previous point, you are the best salesperson in your organization. Leverage that. And I guess this is where I'm at now. So I'm spending a lot more time on personal things. I love holidays. I probably drove Nathan mad because I was on an island for a few weeks and he couldn't get hold of me.
And I put my slide in for this about three days ago. But that's my life. I want that. That's how I balance my life now. And if other people have to kind of work around it, then so be it. That's what works for me. And I think as a founder, you've got to find what works for you.
And then finally, just, oh no, so I won't go into this too much, but I'm doing a brain day at one o'clock, I think, downstairs. So we can talk about this, but if you're interested in kind of what happens during an exit, I've got some horror stories that I can share with you. Well, just one very briefly was that when I sold my first company, I've been a sole founder.
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