SaaS Interviews with CEOs, Startups, Founders
This Founder Built 3 SaaS Companies, hit $40m ARR 3 times. Here's how
29 Apr 2022
Chapter 1: What is the main topic discussed in this episode?
Founders, what's going on? You guys know I love in-person events and they are back. The recording you're about to hear is from our most recent event where we had hundreds of founders come together, share intimate details, templates, KPIs, OKRs about their business, and it was something special. Something special. We'd love to meet you in person.
If you want to see the next live events we have coming up via our schedule, the link will be down below in the description. If you're listening on iTunes, check this out on YouTube. You'll see the links in the description or you can just Google founder path or Latka next event. We'd love to see you in person. In the meantime, though, enjoy this recording. It's a good one.
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. Please help me welcome Godard Abel with G2 to the stage.
Take it away.
Have fun. You bet. And I do wish... Is this mic working? It is? Okay, yeah. As I was saying, I wish I had big biceps like Dave. I asked him how he does that, and he said 3,600 calories in, 3,200 out. I'm more of a runner, so in my old age, I'm trying to stay skinny. But I wish I had those glasses. But what I'm here to talk to you about is, yes, building SaaS companies.
And maybe just to get us going, it is Friday morning. I was at a lovely dinner. Thank you, Nathan. Great event. And love being with all of you. I think I consider you all my brethren, my brothers and sisters in building businesses. I do often like to say I think building a SaaS company is like being a parent. I also have three kids.
And I do think now I've built three companies, so three SaaS babies. And I'm also now, I like to say, uncle, where I'm chairman, helping so much with a real family. So I also have nieces and nephews, SaaS businesses. But I do love building SaaS businesses. But just to get us going, please stand up if you have started at least one SaaS company. That's probably why you're here.
Most of you, I assume. Whoa. Don't fall over backwards. I didn't have that much wine last night. Yes, so all of you, yes. And hold on, stay standing if you've started two SaaS businesses. Ooh, quite a few of you, yes, I love it. Keep going back for more. And now sit down if you've started two, and keep standing if you've done three or more. All right, we still got three, I love it.
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Chapter 2: How does the guest describe his journey in building SaaS companies?
And I was out in California going to business school there and everyone was starting companies. I remember the time like Jerry Yang came to speak to us. He was still a big deal. I don't even know if anyone knows who Jerry is anymore. But he started Yahoo, which was actually really big before Google. And so it's just been a really exciting career in SaaS.
And I have learned a lot, and I'm still learning. I think that's why I'm still doing it. I do also see entrepreneurship as a great way to keep learning, keep growing. And I think you can make a lot of money doing it, which is wonderful. I've enjoyed that. It's a great way to make a living. But I also think, and frankly, Henry talked about that yesterday with Nathan. Just an incredible story.
of creating a $20 billion business. I think he still owns 12% of it. It's pretty good. How much do you still own of G2? More than that. What's ARR right now? 80. Just over 80. There you go. Okay. I like Nathan's quick questions. Just like, I think same thing Henry said, I always respect that about you. You just go right to the point.
You're a storyteller, so I want to get the hard numbers out at the same time, you know?
Yeah. No, and I don't want to talk about the numbers and making money, because Henry's better at that than I am. But what I want to talk about is also everything else you can learn. And I think equally to me, it's how do you find meaning? How do you grow spiritually?
And it's probably what's been really surprising, interesting about entrepreneurship is it has been also a spiritual journey of personal growth, learning. And I do think entrepreneurship is a unique platform to do both. You can do really well, make a lot of money. And I think you can really grow as a human.
And I think if you build a really good company, it can be a platform for others to grow as well. And I'm sure you see that. But I love that our entrepreneurial family now, we've hired well over 1,000 people over the many years, but seeing so many of them grow with us. And now we're also really excited helping them start their own companies.
And so it's also a wonderful platform we can create to make the world better. But my first job was as a McKinsey consultant. And there you get paid by the slide. So I do have quite a few slides. But mainly just pictures to hopefully help me tell stories. And so let's get going. Nine key lessons learned. And first, yes, I have five SaaS babies.
There's actually a sixth one in the works that I haven't announced yet. But my day job is G2. And I love building G2. And especially, I also built G2 for SaaS founders like us, because my real inspiration was hating Gartner. Anyone here love Gartner? If you love Gartner, please leave the room.
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Chapter 3: What challenges did the founder face during the dot-com era?
But all that stuff was super hard and super expensive. So you also had to raise, you literally needed millions just to get the thing live. And then we did get it live with a ton of hype. Hired like 70 people. And I was 27. I'm like, wow, we're going to go public in a year. I remember one of my first investors was John Scully. You have to be old to remember him. But he's sort of infamous.
If you've watched like the movies about Apple, he's the guy that fired Steve Jobs. So that's not a great track record. but he was very famous at the time still. And, you know, so he was my first investor. And then once I had him invest, everyone, and his advice to me was just like, just think about how to go public in one year. I was like, that sounds awesome.
So we hired 70 people, didn't know what we're doing. And frankly, in hindsight, it was a really bad way to build a SaaS business because I think in hindsight, starting to realize in one year, you never build a good product. or a good company. But then, and our journey got much harder, so a year into it, all of a sudden, like at the end of 2000, I'm like, oh great, we'll raise our next round.
But all the VCs then were like, no, you're a young, dumb, clueless kid. And the internet was a fad. And it went into like .bomb, that's what everyone was saying. And then I'd call on customers, like, hi, we're from bigmachines.com. Eventually we dropped to .com. They're like, oh, when are you going bankrupt?
And then 9-11 happened, and all these manufacturers were like, well, I'm not investing in anything. And the internet was a fad. So goodbye. So I think for a couple years, we were only selling like two or three customers a year. I think my business plan to my investors was like, we're going to sign up 50, then 100. And really, it just wasn't selling at all.
So it was a very painful time, and then we had to cut way back. I did several layoffs, went all the way down to 20 people. And it was also very depressing. I remember I just felt all this failure. Because my father, actually, I convinced him to become my first customer and investor. So I'm like, oh, I'm going to lose all my dad's money. I had recruited my friends from MIT, my best friends.
I'm like, I'm going to ruin their careers. And we're going to go bankrupt. That's kind of what it felt like. So very hard time. But then I think in 2003, we kind of had our come to Jesus moment because my co-founder and I, Chris, we sat down. We're like, we have a million dollars left. We burned through 19. We only had a million dollars in revenue.
And we're like, clearly, we're not going to raise any more money. And so it's either do we give the last million back and quit or do we keep going? And ultimately, we did have about a dozen early manufacturing customers. They were having success. They were actually accelerating their sales quoting, selling online through their distributors with big machines.
And we're like, eventually, the market will come. So we decided to persevere, cut the company down to 20 people. And we're like, OK, we've got to cut it to a point where in a year, we can actually get profitable and cash flow positive, because we'll never raise more money. And then we did pull that off. We just started selling one deal at a time. We actually got cash flow positive.
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Chapter 4: What lessons did he learn from his first SaaS company experience?
It was like a really shitty office in the Chicago suburbs. A suburb called Highland Park. But I think we actually had two rooms. One room had like eight people. That was G2. And then we opened the back room. And I remember the heating system in the building didn't even work. But then, and at the time, Max's original product had about a million ARR. And then in two years, we scaled it.
Actually, we beat that plan. That was a plan. But we scaled it to 60 million in two years and got acquired by Salesforce. And we did like the double-double. VCs love that. We double every six months. And the first company, I never hit my sales plan, I think, for seven years. Steelbrick, we never missed.
While I was running it, I think it was 17 quarters in a row, first as a startup and then inside the sales force. So that was just incredible. And I think the big difference was, well, one, product market fit was much better, clearly.
I mean, by then the cloud was a thing and people needed CPQ apps, but also we just knew what we were doing and we were able to take the whole team and everything we learned the first time and just do it so much faster. And now G2, that is my focus, my day job. And G2, we'd started, like I said, in parallel.
Or before Steelbrick even, but it was going so slow that Matt and I decided we wanted to go build another company. Because for a couple of years we couldn't make any money at G2. And we had this great vision, let's build Yelp for software, but then we realized nobody wants to write reviews. And I think Yelp, their founder, did some great blogs.
He's like, yeah, 99% of people only read reviews, they never write them. And frankly, I thought about it myself. I'm like, wow, I never wrote a review until I started a review company, but I'd read them. I'm like, this is great, right? TripAdvisor, Yelp, it was all like a free resource to me, but I was too busy to write them. And that's when we realized with G2, we're like, F, this is hard.
Nobody wants to write reviews. And I think our first, we launched it at Dreamforce. We just put out a booth, because we decided to start with Salesforce and partner apps. And then we were just handing out $5 Starbucks cards, like, hey, please write a review. And we did that. I think at Dreamforce, we got like 1,000 reviews.
We went back to our office, I remember it was October, and we looked at Google Analytics, and we had one person on the site, literally. You know that Google real-time analytics? And you see one. And then we got really excited, because the second one popped up in Europe. We're like, wow, two. And then I'm like, oh shit, it's my dad.
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Chapter 5: How did partnerships influence the growth of his companies?
That's actually the original business plan. I made it with my father at our country club in Pittsburgh. And that was like a front and back event table reservation card. That was my original business plan. And we kind of said, we're going to do everything. We're going to build a machinery marketplace. We're going to help manufacturers sell. We're going to help people buy.
And in hindsight, it was like 50 products. We're going to build them all at once. We'll build them all in a year. And obviously, that was way too broad. And so I learned the hard way. We had to shut down our e-buy, shut down our e-marketplace until we just said, hey, let's just focus on what we call e-sales, which then became CPQ. And I think that's probably one problem.
I think my least favorite pitch from entrepreneurs are like, how are you going to win? I'm like, When you say like, oh, I'm gonna have a lot more features than all the incumbents. And I think now the more companies we build, they try to make them as narrow as possible. Like just start with one thing and do that better than anyone else. And I kinda learned that the hard way.
And I think then once we started growing, I think what Matt and I learned, how do we make this thing scalable? And I think learned a lot there from Salesforce. There's Dave Rudnitsky. He kind of was famous. He published their original sales playbook. But I think having a playbook Because once it went beyond Matt and I, we started hiring tens, hundreds of reps.
We're like, hey, we have to have a playbook. And so that's still something we do today. And it kind of was something probably I also wish I'd always done earlier, like start investing in enablement, start investing in process. So as you start to get to tens, hundreds of reps, you have a playbook. But I think don't get too rote.
Because I think the best selling is still an art form, and I love selling. But I think being able to audible. You want a process, you want a plan, but then you got to feel the vibe and go with it. The other thing we learned, especially from Mark Benioff, is acquisitions are a good way to accelerate. Henry's been doing this incredibly well at Zoom Info.
But I also think the best way to make acquisitions happen is to partner first. And certainly that's what Salesforce does. You get to know each other. You actually make sure your products work together. Do customers love them together? And then it can lead to very natural acquisitions. So we did one at Steelbrick where we went from CPQ to Quota Cash. We bought a billing company.
That was a great partner of ours. And that really expanded the vision. Now it's Salesforce Revenue Cloud. It's CPQ plus billing. And then also G2, we've done a couple siftery that brought us G2 Track, G2 Stack. So it's an exciting way to expand your footprint more quickly once you have momentum, once you have money.
But I think what I've done poorly so far, and I would do better like Henry, is I think we haven't been thoughtful enough about integration. And so I think that's something we want to do better going forward. In terms of talent, I think when you're starting, and you've all had this, Henry talked about yesterday, at the beginning, frankly, you can't afford experienced people. You don't want them.
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Chapter 6: What strategies were implemented to scale the second SaaS company?
They didn't refresh the team. And I think just like a sports team, every season, you look at your roster again, and you do make sure you have the right talent and the right jobs. And sometimes that's hard, but I think it's critical, especially in a growth company. Your needs change every year. And make sure you have the right keepers in every job. So don't delay. Thank you.
Guys, give it up for Godard.