SaaS Interviews with CEOs, Startups, Founders
Profitable Growth is sexy again. How we hit $1.7M profitably with only 6 FTEs and plans to scale profitably by 5x YoY.
22 May 2023
Chapter 1: What insights can we gain from the SaaS conference?
I'm very excited to share this recording with you guys, which happened at our conference, sasopen.com, with over 100 speakers, all founders of B2B SaaS companies. We have a very high bar for what speakers share on stage. So you're going to enjoy this episode where we dive deep into revenue graphs, real tactics, and real growth metrics.
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 of these podcast interviews. Check it out right now at getlatka.com.
So quick background on me. I was pre-med. So when you look at my LinkedIn and you see Bachelor of Science, it's not Bachelor of Science of Computer Science. It was actually Life Sciences. So I was intending on being a doctor. I worked in a teaching hospital at UCLA for about three years and then pivoted and found myself in software. Part of that journey is I'm always learning.
And I always look forward to this event. Luke, you know, I learned from you. And Rajesh, I learned from you. And I'll continue. And if you look at... You know, Anand yesterday, he probably would have said, I don't swear like Anand did. I don't know who watched Anand yesterday, but very inspiring CEO of Insight. And the profit of growth is hard, but it is possible.
And hopefully I can share some nuggets with you of our story and how we got there. Scaffolding is critical. And I'm going to share with you, I think from the onset, you have to have this mindset of building from day one of thinking profitable. A shocking statistic, 28% of the publicly traded companies were not profitable in 2021. How is that possible? Crazy statistic.
It's my own money and it's my co-founder's money. And for like many of you, you put your own hard work money in here, spend it wisely. There's a lot of things you can spend money on, but you've got to say no a lot. And if you do A and B, and I thank Nathan because I have control of the company. He's been a big help to make sure that I stay in control, that we have ownership of the company.
So that's one, is the foundation we're gonna talk about. Number two is, particularly in a down economy, figure out ways to remove buyer friction. We're a sales-led growth company. Many of you here might be product-led growth, but we actually have to do some hard work to convince customers of value. Part of that, we do everything for the buyer. And I'll share with you what I mean by that.
And as a new vendor, as a company that's never spent a dollar on marketing, that has no brand recognition, you have to de-risk it for the customer to adopt you as a new vendor. And then what I call escape from velocity. I believe we're on the front end of escape from velocity, and I'll tell you how we got there and what we plan to do that.
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Chapter 2: How did the speaker transition from medicine to software?
So what we do is we sit inside Salesforce, we monitor leads and records that are going to go into a cadence or sequence, sales loft, outreach, I'm sure you've heard of them. And then that's when we act. So we inspect every record, make sure it's accurate. If it's not, we quarantine it. or we fix it and it makes reps extremely productive. So that's my little spot in the Salesforce ecosystem.
So we have a tab and that is functionally where we place our information and gets mapped to the dialers, it gets mapped to the sales engagement tool And we look and feel just like Salesforce. And what it gives me is the ability to reach what I feel is about 70% of the B2B market, which gives us a little bit of leverage. I don't know how many of you can relate to this, I can sell without a CRM.
I can sell without intent data. I can sell without conversational intelligence. These are wonderful technologies. I can sell without a sales engagement tool. I just need a spreadsheet, and I have to have the contact information for my buyer. Otherwise, it's a non-starter for anything else.
So where we find ourselves when we thought about where we would place Modigi in the ecosystem, there's lots of wonderful sales tech out there, is we're the last mile. We're cleaning everything up. Otherwise, all those tools to record conversations and train against conversations, the intent signals, who's my high-fit buyer? They're ready to buy. If you can't reach them, it's a waste of money.
And so that's part of our sales motion. so um as people that know me know i love live music and i just moved to nashville from the bay area it's a wonderful town anybody been to nashville live in that yeah there's music everywhere and so when i think about this um the way that we started our company it's like a three-man band uh rush great band bc boys since we're in new york great band
The police, that didn't go so well, right? They broke up. But right now, we founded this company based on the ability to produce wonderful music with just three people initially. And there's a lot of crossover between what I do and what my co-founder CRO does and what our COO does. Look at, so I call it the Swiss Army Knife. But we all come together. We're all around innovation.
All three of us get together on innovation. Two of us focus on lead gen and sales. And then we have a COO who really is incredibly talented that runs not only operations, he runs product, he runs technology, he runs customer success, which I do as well. And so that would cost a lot of money if you had specific people to fill those roles.
Expert advisors, this came out of Anand's, I'm keeping score on what Anand said yesterday. Don't believe you have to raise VC, did not raise VC. Don't be afraid to hire expert advisors. So we have advisors, I have a president of a telecom company because we're dealing with mobile phone information. I thought it was important to have that.
We have Google on our advisory board, the lead technologist at Google. We have the cost of legal, oh my God, $850 an hour. So one of my advisors is an attorney, but he also worked at SAP on the deal desk. He worked at DocuSign. He built their go-to-market strategy. And privacy compliance.
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Chapter 3: What strategies can help achieve profitable growth in a down economy?
Don't believe your own hype. We haven't hyped anything. We've spent $0 on marketing. We've aggregated our customers through just hard work and grit. And now we might go out to market and tell the world what we're doing. Don't sell only to startups. That was another thing Anand said yesterday. We actually started out upstream.
So the majority of our revenue as a new company comes from companies that are worth over a billion dollars. I'm going to share an example of a company that's worth $25 billion that we're working with. Don't hire salespeople before you can sell. And I'm going to come back. to this. That 1.7 that we did last year, it's a small number.
I've been dealing with hundreds of millions of dollars of numbers when I've worked in sales leadership. That's just two people selling. That's me and my co-founder. So now that we know, I'm trying to go back. Is there no back button? Anyway, so the idea is that just two of us selling accomplished that. And what I feel good about is we have the feedback loop from every client engagement.
So I was determined to be on every install of our software, which takes two hours to install and set up in Salesforce, so I can get the feedback loop to improve our technology. So yeah, we just hired our first salesperson because now we've mastered what the sales cycle looks like.
In 2022, we were at a, you know, to hire that individual and to hire my first customer success manager, came to Nathan to get a tranche of money to help us scale and grow for growth. And here are the numbers. I'm not afraid to show it. And at the end, I'll show you my pro forma for the next 24 months or next two years. But we made profit last year, and we made profit this year.
Or in 2021, we made profit. In 2022, we made profit. We were a services company in 2020, and we didn't launch our product till Q1 of 2021. So this is, hopefully I shared some nuggets with you about, so in a down economy, you gotta do a lot of extra, go through a lot of extra hoops for buyers. I have a couple of fun stories. But one, I'm gonna show you what a value report looks like.
So I heard, Luke, you talked about data-driven. Almost everything is data-driven, particularly the type of deal sizes that we're working on. And you have to prove that you can solve a problem. So come up with a use case or two, prove it out empirically through data, And then it has to be around increasing revenue, increasing productivity. A lot of companies are doing more with less, obviously.
I mentioned earlier, de-risk it as a new vendor. So because we have a Salesforce managed package, we took change off the table. One of the things that we run into in B2B sales is I don't have enough people. Not me, but the buyer. They're too busy. You look redundant, right? Change management. I can't take my sales guy. I have fewer cycles to spend learning a new tool.
And because you don't have to learn a new tool, I took that off the table. Get creative when it comes to deal, making deals. We're a SaaS that has a 12-month subscription. That's our typical contract. But if our buyer says, listen, I need assurances that if you shit the bed, that we can get out. So on occasion, we'll do a three-month contract.
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Chapter 4: How does the speaker differentiate their company in the market?
Get the insertion. So I mentioned, we've already showed like a proof of value, right? But those price points, there's a lot of consolidation in budgets, so I'm willing to take smaller deals that are maybe 25% of the size, $25,000 deals, $50,000 deals, just to get the insertion. Get a small order and then earn the customers, through customer success, a time to value, right?
And I would urge you all to do the same. So this is where it starts for us. I mentioned that I was pre-med. So when I think about my upcoming doctor's appointment, new to Nashville, so I have to go to my new primary care physician. When you're my age, you do the PSA test. There's a lot of things. You want to know what's going on. You do that through a blood test.
This is my version of a blood test. So what we do is we take the last 15 or 30 days of contact data that companies paid their reps to use to prospect and effectuate engagement. Here's an example of a $25 billion cloud services company. They thought that mobile phone coverage is what our big bet is, right? That's what we're specialized on. But they had 28% mobile phone coverage.
They didn't understand. They thought it was higher. 68% of those phone numbers were wrong. They also had 9.8% of the prospects had changed jobs. That's another thing we do. We look at, are people still at the target company? Are prospects still at the target company? Have they changed? Is John Smith still at eBay? Is he at Amazon?
So they've effectively have, in access of 91% of the market, they had no idea. They've never had visibility before this diagnostic. In over 147 reps last year, 500 meetings, upside down. Less than 1% call to connect rate. It's all because of that, bad data. So this one, what we've decided to do is take the state of diagnostic and we've built a network of ambassadors, okay?
And that's how, you know, I mentioned earlier, like getting the Circle Trust, you have so much bombardment that there's only so much mind share to get. And so what we've built is a program called Ambassador Program. So we have started, and actually this is old already, Mandy, Mandy updated that this, We have 12 of the top 300 influencers on LinkedIn recommending and promoting Modigi.
Not Modigi the company, but Modigi the data diagnostic. It's a free diagnostic to see the impact of inaccurate information and our ability to fix it. So as I mentioned, if I execute, there's no reason I doubt that I can. I'm sharing with you my pro forma. As a founder,
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Chapter 5: How does Modigi enhance sales rep productivity?
I'm not giving up equity to VCs. That's 3 million. I can spit off 3 to 4 million of EBITDA over the next two years. And I feel really good about that. So what I shared with you is if you're lucky enough to get a band together of people who compliment each other, who have different skill sets, that's a great start. Spend your money wisely, outsource everything you can.
I like to say, be a need to have versus a nice to have.
Chapter 6: What are the challenges of inaccurate contact data in sales?
Lower the barrier to entry. Do everything for your customer. Make it easy for them to buy and partner with you. And then the escape velocity. Find your version of offering something that didn't exist, that everybody needs. And that's it. Thank you. Thank you. If the data diagnostic resonates with you, that's a website specific for this event. We'll prioritize you and your business.
But you'd have to act pretty fast on that because we're getting really busy. Thank you.