Dan Martell - From Freemium to Premium with Matthew @ Yesware.com - Escape Velocity Show #28

00:00:00.000 You know, one out of every 10 workers is a salesperson.

00:00:04.780 They are the pointy end of the spear

00:00:06.780 for every organization in the world.

00:00:09.000 Their success determines the top line

00:00:11.500 of every organization in the world.

00:00:13.760 And yet, they use generic tools, generic phone,

00:00:16.620 generic software.

00:00:18.020 Even CRM is like basically a generic database,

00:00:21.920 slightly customized for the sales manager.

00:00:24.920 If you make software for the end user salesperson,

00:00:27.900 they will be more successful.

00:00:30.860 If they are more successful, they will make more money.

00:00:34.440 If they have more money, they'll pay for the software.

00:00:37.540 Ignition sequence start.

00:00:39.580 Three, two, one.

00:00:50.780 Boom.

00:00:51.480 Matthew, thank you so much for coming on.

00:00:53.120 Happy to do it, man.

00:00:54.020 I'm so excited to chat.

00:00:55.220 But you founded Yesware.

00:00:57.880 We'll talk about that.

00:00:58.880 But I'm excited.

00:00:59.880 You get to do this again after nine years-ish to start up.

00:01:03.920 But bodes well.

00:01:05.280 And when did that?

00:01:06.100 Is the product available?

00:01:07.600 I know.

00:01:08.220 No, it's not available.

00:01:09.600 So this is my third Greenfield startup.

00:01:11.780 And it feels so good, actually, to start fresh and build

00:01:17.360 from the ground up again, given I learned so much from Yesware

00:01:20.960 and my first startup as well.

00:01:22.700 And so it's so fun to just hit it hard.

00:01:25.640 I mean, at a high level, when you start looking

00:01:28.880 at the new idea, what are some of the core

00:01:32.840 tenets that you want to bring into this new startup?

00:01:36.340 So my opportunity analysis filter

00:01:39.780 is maybe a little different than the business school

00:01:42.820 opportunity analysis filter.

00:01:44.160 But it generally boils down to what

00:01:46.520 am I personally inspired to do?

00:01:48.820 And what personal problems do I face

00:01:51.320 that other people face also.

00:01:53.700 So have I empathetically struggled with this issue before?

00:01:56.840 So with Yesware, I was the VP of sales

00:01:59.480 up in front of board members, giving them my pipeline

00:02:02.460 and realizing I had no idea what my pipeline was actually

00:02:05.360 doing.

00:02:06.220 And so where's the data for that?

00:02:08.340 Well, it's an email.

00:02:09.680 If you can get into email, you get all the data.

00:02:12.100 And that was the inspiration for Yesware.

00:02:13.840 Solve your own problem.

00:02:15.240 With Bodeswell, it's me and lots and lots of people

00:02:18.960 like me that I know, like everyone who works at Yesware,

00:02:21.460 everyone who works at all these technology companies,

00:02:23.460 everyone who falls into this category called mass affluent,

00:02:28.580 wakes up in the middle of the night and thinks,

00:02:30.700 can I live the life I want to live?

00:02:33.360 Can I send my kids to college?

00:02:34.680 Can I pay for mom's long-term care?

00:02:36.300 Can I buy the house in the lake?

00:02:37.520 Can I take a year off and travel?

00:02:38.820 Can I retire at 50, not 60, not 70?

00:02:42.780 How is this going to work out?

00:02:44.420 Is this life going to work out?

00:02:45.960 Yeah, am I making the right decisions?

00:02:47.160 Am I making the right decisions?

00:02:48.420 And then how do I get there?

00:02:49.980 And so Bodeswell is basically like a telescope

00:02:52.140 that you can use to look into the future

00:02:54.420 and plan your life to say, oh, no, I got to take that route.

00:02:57.400 And oh, I got to do this instead.

00:02:58.880 And help me chart the course to see if it's all

00:03:01.320 going to work out or not.

00:03:02.520 Now, is that model going to be primarily consumer?

00:03:06.480 I don't know yet.

00:03:07.420 OK, so it's that early.

00:03:08.520 At this moment, yeah, we're building.

00:03:10.380 We've built like a first closed beta version of the product,

00:03:14.100 put it out in front of a bunch of people,

00:03:15.480 did a bunch of user interviews.

00:03:17.560 And now we're iterating on all that feedback.

00:03:21.020 And then we're going to try to figure out B2C, B2B, B2B2C,

00:03:25.500 B2C2B.

00:03:26.640 Like, how did it?

00:03:27.900 I mean, early days on the business model.

00:03:30.060 On the Yesware side, I think then the total funding

00:03:32.960 was around $40 million, is that?

00:03:34.320 50.

00:03:34.660 Yeah, 50.

00:03:36.380 Over years, what did you learn about like,

00:03:42.000 because I feel like in the early days of this,

00:03:44.220 The email automation.

00:03:45.300 Today is pretty ubiquitous.

00:03:46.800 Everybody knows about the tools out there.

00:03:49.700 But you guys were really early, right?

00:03:52.740 So you wanted to solve that problem,

00:03:54.240 but did you have to educate the market that this is something

00:03:57.380 they should be doing?

00:03:58.100 Because lead gen used to be a marketing thing,

00:04:01.000 not so much a sales thing.

00:04:02.760 And then it seems like sales started

00:04:04.200 creating their own opportunities.

00:04:06.880 And well, sales always created their own opportunities,

00:04:09.900 like the classic salesperson.

00:04:11.000 But for Yesware, and basically for all three of my projects,

00:04:19.000 what I'm looking for in the very early stages of user testing

00:04:23.200 is the glint in the eye.

00:04:24.900 When you put the product in front of some person and say,

00:04:27.640 try it to do this, do you get the glint in the eye

00:04:30.760 within 10 or 15 seconds?

00:04:33.400 And if you can deliver that kind of magic moment

00:04:36.300 to a user who's never seen this thing before,

00:04:39.040 then like you've got it and with yes where we had one feature we built the templates feature first

00:04:46.300 okay and i tested a bunch of people this incubator and there was no glint in the eye like like it's

00:04:52.020 a useful thing yeah there's no it's not sexy sex appeal yeah with the email tracking thing like as

00:04:58.000 soon as this person saw the alert you know matthew opened your email it's like bing you know and i

00:05:05.500 could see the wheels turning on people's eyes. So that, to me, was like that feature that sort

00:05:11.040 of opened the door. And then everything kind of followed on from there, which is to say,

00:05:17.180 well, sales is not just email tracking, right? Sales is building a relationship. Sales is

00:05:21.500 communicating genuinely. Sales is saving all my stuff into my CRM so I don't have to do it.

00:05:25.780 Then being a manager, running a team, like lots of other things. But you need that initial hook,

00:05:33.660 that magic moment and once people get that then you can build around it then you then you earn

00:05:38.940 their trust and their credibility and they're like oh i want to learn more but if you don't

00:05:43.720 have that immediate hook then like software is kind of boring and like oh my boss is telling

00:05:48.000 me to do this use this tool it doesn't it's not it's not interesting yeah frankly and one of the

00:05:54.120 things that you guys are really well known for is the freemium version of the product and i know you

00:05:59.260 guys monetized later.

00:06:00.820 I remember talking to you last time I was here.

00:06:03.820 So how did, and was early distribution always free?

00:06:08.720 It started out free altogether, and then maybe.

00:06:14.060 Because was it a Chrome extension or something?

00:06:15.640 Yep, Chrome extension, exactly.

00:06:17.440 I mean, I'm dating myself.

00:06:18.260 Was there Chrome extensions back then?

00:06:21.740 I mean, it's so weird.

00:06:22.740 It was early.

00:06:23.640 Yeah.

00:06:24.140 It was early in the world of Chrome extensions.

00:06:25.460 I don't know if there was a Chrome extension app store.

00:06:27.840 There was an app store.

00:06:29.460 OK.

00:06:29.880 We totally lucked into that thing.

00:06:31.340 OK.

00:06:31.520 I mean, and honestly, finding the Chrome store

00:06:35.840 and the extension distribution channel altogether

00:06:38.860 was a major factor.

00:06:40.280 Because suddenly, you know, we put the thing on an app

00:06:44.720 and a Chrome extension.

00:06:45.900 We suddenly started getting, like, 10 users a day,

00:06:49.140 then 50 users a day, then 100 users a day,

00:06:51.440 then 1,000 users a day.

00:06:52.940 Now we get, like, 10,000 free users a month

00:06:56.360 from the Chrome store.

00:06:57.380 Whoa.

00:06:58.180 And for free.

00:07:00.880 And as you can imagine, as you know, as a startup,

00:07:03.700 like that's what you need to get the water moving

00:07:07.720 under the bow so you can figure out what's working and what's

00:07:09.840 not.

00:07:10.920 So thank you to Google.

00:07:12.420 Every time I see people from Google,

00:07:13.760 I say thank you for the Chrome store.

00:07:15.320 I appreciate that.

00:07:18.800 And then, yeah, and then we did free

00:07:21.320 because I didn't know if anyone would buy it.

00:07:24.340 Yeah.

00:07:25.740 And we didn't start charging for it until someone,

00:07:28.360 Ben Sardella, formerly of Kissmetrics, sent me an email

00:07:33.880 and said, I want to be your first customer.

00:07:36.120 Send me your first invoice, because I want

00:07:39.040 an invoice number one from the SR.

00:07:40.040 And how long was that from product availability?

00:07:41.620 That was about six months, maybe five months.

00:07:46.260 So I cut him an invoice for $5.

00:07:49.500 Maybe it was like $60 for the year.

00:07:51.060 I can't remember exactly.

00:07:53.120 And that was the first sale.

00:07:54.560 And then, literally, people would stop me in the street

00:07:57.220 and say, you've got to charge me more.

00:07:59.400 And that's all the people who say you can't raise prices

00:08:02.780 after you launch something are wrong.

00:08:04.100 Like, if you have a good product.

00:08:05.660 You're saying raise prices on the whole user base?

00:08:07.660 Yeah.

00:08:08.080 Like, we started at free.

00:08:09.840 Then we had a paid version at $5, and then we raised it to $10.

00:08:13.280 Now it's $15, and we have many plans that are above $15.

00:08:15.920 What did you separate that made, what

00:08:17.760 was the free line in regards to the trial?

00:08:21.600 Yes, where originally it was like number of tracked emails.

00:08:25.400 OK.

00:08:25.960 So it was like good value metric.

00:08:27.460 Yeah.

00:08:27.760 Yeah.

00:08:28.200 And then so they paid the $5 and then eventually the $10 to get that.

00:08:32.080 And then was there a clear kind of how does this play out into being a big?

00:08:38.120 Because, I mean, you guys raise venture capital.

00:08:40.000 Yep.

00:08:40.620 Like, what was the vision back in the early days around what this was going to be, where it was going to sit inside the enterprise?

00:08:47.220 Like, how is this going to be a $100 million company?

00:08:49.320 Yeah.

00:08:49.460 Yeah, the pitch was basically one out of every 10 workers

00:08:58.140 is a salesperson.

00:09:00.660 They are the pointy end of the spear

00:09:02.380 for every organization in the world.

00:09:04.920 Their success determines the top line of every organization

00:09:08.080 in the world, and yet they use generic tools, generic phone,

00:09:12.060 generic software.

00:09:13.540 Even CRM is basically a generic database,

00:09:17.520 slightly customized for the sales manager.

00:09:20.600 If you make software for the end user salesperson,

00:09:23.480 they will be more successful.

00:09:26.580 If they are more successful, they will make more money.

00:09:30.120 If they have more money, they'll pay for the software.

00:09:34.280 That's, in essence, the business plan.

00:09:35.980 So the customer was a salesperson.

00:09:37.540 So that's an interesting distinction, not a sales manager.

00:09:39.840 No.

00:09:40.380 Right?

00:09:40.960 You wanted to make sure the salesperson got value

00:09:43.320 and was more productive.

00:09:44.820 And did that help guide features and roadmap?

00:09:49.300 Yeah, in fact, having that clarity of who the end user

00:09:52.920 customer was without any distraction

00:09:57.060 was super helpful.

00:09:58.380 It got harder when we got sales managers calling us

00:10:02.480 and saying, hey, I got 10 people on my team

00:10:05.700 using your product.

00:10:06.820 How can I use it too?

00:10:08.060 How could it help me?

00:10:09.040 And then we had two customers.

00:10:10.300 We had the end user salesperson and the sales manager.

00:10:13.260 And then we got the calls from the VPs of sales saying,

00:10:16.480 I got five managers, 10 people each.

00:10:19.700 How do I see, what view do I use?

00:10:23.820 But that's just part of growing up as a company.

00:10:25.520 So you actually were cool if it was just

00:10:27.360 an individual salesperson, and I'm

00:10:28.740 assuming that's what it was.

00:10:29.540 They would just use it for themselves.

00:10:31.160 They didn't care if the company, they just

00:10:33.660 thought it was that powerful and useful.

00:10:35.940 They made more money using Yesware,

00:10:37.640 so they'd pay the $10 or $15 a month to do it.

00:10:40.300 Where'd the name come from?

00:10:42.920 Well, I figured we were going to make software for salespeople.

00:10:46.400 And it wasn't hardware.

00:10:47.780 It wasn't just going to be hardware.

00:10:49.160 It wasn't just going to be software.

00:10:50.280 It was going to be anything that helps a salesperson

00:10:52.280 close a deal.

00:10:53.100 OK.

00:10:53.560 So it's Yesware.

00:10:54.800 So in the early days, there was a vision

00:10:56.460 to maybe build a sales-specific phone,

00:10:58.560 a sales-specific, even on the hardware side.

00:11:00.360 Look, it still could happen, man.

00:11:01.680 I mean, this thing's just getting going.

00:11:03.480 It's like we're not even 10 years old.

00:11:05.400 So I could see all kinds of stuff.

00:11:09.100 That's really cool.

00:11:10.200 And so the freemium, when did you make the choice to go free trial

00:11:14.520 and move away from freemium?

00:11:17.240 That was, roughly speaking, 2000.

00:11:23.560 Must have been 14 or 15.

00:11:27.120 OK, so about four years ago.

00:11:28.580 Yeah, four or five years.

00:11:29.160 And what was the pushback when you did that?

00:11:31.960 Or was there a fear, like, making that decision?

00:11:34.000 Yeah, the fear was that.

00:11:36.020 Because you have this distribution that works on word of mouth.

00:11:39.140 Yeah, it's working.

00:11:40.200 Yeah.

00:11:40.700 And we're essentially going to test them. 0.55

00:11:42.660 And we're going to potentially cut off our knees.

00:11:45.340 Yeah.

00:11:47.160 And obviously, we thought about this a lot.

00:11:49.060 For sure.

00:11:49.640 And we did a lot of user studies.

00:11:50.700 And we did a lot of soul searching.

00:11:52.500 It took a year to drum up the courage to do it.

00:11:56.940 But we had over 100,000 free users on the software.

00:12:03.020 And they weren't converting.

00:12:05.600 They weren't buying it.

00:12:06.820 They were just using it for free.

00:12:08.460 And maybe that's OK, but for an enterprise-focused software

00:12:12.260 product that needs to narrow our target market

00:12:15.500 so we can deliver a great product for our core customer,

00:12:19.320 the free folks were somewhat of a distraction.

00:12:23.080 Because you really have two products at that point.

00:12:25.140 Yeah, exactly.

00:12:26.080 Well, now we have the free product for the end users who

00:12:29.020 are never going to pay.

00:12:30.220 We have the trial.

00:12:31.340 We have the salesperson product.

00:12:32.960 We have the sales manager product and the sales VP

00:12:35.200 product.

00:12:35.620 And then we have to take care of the sales operations folks,

00:12:37.800 So you got six different, for a small team of like 100 people,

00:12:42.800 it was a distraction.

00:12:43.800 And so after much discussion and this was a board level

00:12:48.800 decision, basically, we presented to the board

00:12:50.800 that we would think we should do this.

00:12:52.800 And then we did all the underlying work,

00:12:56.800 and then we built this blog post, an interactive thing,

00:12:59.800 to tell people why we were doing it

00:13:01.800 and what we were going to use the money for

00:13:03.800 and why it was important to pay for the software.

00:13:06.800 software, and then we did it, and we promptly

00:13:10.760 had the best revenue month ever.

00:13:13.440 It's crazy.

00:13:13.980 Because so many people converted from free to paid.

00:13:17.260 And there were literally two or three people who

00:13:20.340 tweeted about FYesware.

00:13:23.300 But we put other free alternatives in the communication.

00:13:27.700 So there were other companies that

00:13:29.080 came around at that point.

00:13:30.300 Yeah, at that point, people were like, hey, go use this.

00:13:33.280 Yeah, so we don't want to leave you hanging.

00:13:34.540 It's just we can't.

00:13:35.680 We're trying to build a sustainable business.

00:13:38.260 This doesn't work for us.

00:13:43.360 So is freemium going to be part?

00:13:45.280 Because that's always a debate.

00:13:47.300 I guess I'm just more of a pay me if I create value kind of guy.

00:13:50.520 But I also understand the distribution challenges,

00:13:52.840 just because it's a more honest feedback loop.

00:13:54.760 But do you feel like having experienced a really

00:13:57.720 successful freemium solution, that that might be in your

00:14:01.060 playbook always going forward in software?

00:14:04.900 Where do you stand on this now?

00:14:10.560 For Bodeswell, so when I advise companies,

00:14:16.820 I'm not like one way or no way.

00:14:20.660 You have to figure it out for your particular audience,

00:14:24.240 your particular channel, your particular price point, et cetera.

00:14:28.520 I think freemium is still very relevant for professional

00:14:32.760 software, for sure.

00:14:34.140 So prosumer.

00:14:35.540 Yeah, exactly.

00:14:36.860 And you kind of need it for a consumer.

00:14:39.240 Yeah.

00:14:41.000 So I'm not biased against it, but it's got to serve a very clear purpose.

00:14:47.540 And it's got to be like you got to put some bounds around it that say like within these bounds it makes sense.

00:14:53.620 And outside these bounds, like it's breaking our business.

00:14:58.200 So for Bodeswell, we will definitely have a free trial.

00:15:04.140 But I don't know if we'll have a freemium version, but we might.

00:15:09.640 Yeah.

00:15:09.880 I just don't know yet.

00:15:11.140 TBD.

00:15:11.820 Yeah.

00:15:12.360 That's interesting.

00:15:14.020 Yeah, no, it's – people say that freemium is a marketing decision, distribution decision, not a kind of business model decision of like –

00:15:21.780 It's a product decision too.

00:15:23.320 Yeah.

00:15:25.840 It's a sales decision.

00:15:27.600 It's a company decision because like salespeople are competing with a free product.

00:15:32.420 You know, and we did get pushback from potential customers who said, well, your free product's pretty good.

00:15:38.460 Like, I'm not sure I need to buy your thing.

00:15:40.980 And we would just sort of say, like, well, OK, you can use it, you know.

00:15:45.180 And that's to a salesperson who's trying to make a number like that's not a great answer.

00:15:49.920 Yeah.

00:15:50.420 So it really is a company decision.

00:15:53.700 And it is possible to change, obviously, but it's hard.

00:15:57.980 I, you know, it's really hard in the midst of the battle

00:16:03.980 to figure out where you're going.

00:16:06.980 You know what I mean?

00:16:07.980 And so the startup battle.

00:16:10.980 And so I just feel that I kind of rushed headlong into the battle

00:16:18.980 a little too much sometimes at Yesware in motivation

00:16:22.980 to get things done, you know?

00:16:24.980 And Brad Feld actually had a great line for me occasionally.

00:16:31.460 He would say, Matthew, slow down to speed up.

00:16:36.240 Take a minute, pause, think about it, assess the situation, talk to some people.

00:16:40.880 Let me introduce you to some people.

00:16:42.860 And then once you know what you want to do, then go forward.

00:16:47.460 So I try to remind myself of that.

00:16:52.500 You've got to move fast.

00:16:53.900 You can't slack.

00:16:54.980 whatever.

00:16:55.980 On the other hand, like.

00:16:57.860 Get some other viewpoints.

00:17:00.380 Because once you make a decision like that,

00:17:02.320 it's hard to unroll it, so.

00:17:04.740 And I mean, what other kind of lessons

00:17:07.440 do you feel you've learned at Yesware

00:17:08.860 that you're going to be taking?

00:17:10.280 I know.

00:17:10.900 I know we don't.

00:17:11.520 Yeah, you could do a whole master class a couple days

00:17:14.020 on this.

00:17:15.180 But what are the big ones that are not so obvious

00:17:18.500 or a bit unique that you think you're going to take forward?

00:17:24.980 So I went into Yesware, and I thought software for salespeople.

00:17:30.180 And that was the full extent of our positioning and our targeting.

00:17:32.980 Yeah.

00:17:33.760 And because we had this sort of very horizontal product, it worked.

00:17:38.500 Yeah.

00:17:39.100 But then we struggled with narrowing as we went.

00:17:43.800 And now, for Bodeswell, I have one specific person who I know who is the center of the target market.

00:17:51.880 Yeah.

00:17:52.360 At core.

00:17:52.840 It's that drilled in.

00:17:55.180 And maybe that's too narrow, but at least I can go talk to Dave

00:17:59.080 and I can say, here's what we've got, what do you think?

00:18:01.220 You know what I mean?

00:18:01.960 And there are more people like Dave out there in the world.

00:18:05.240 So that's one.

00:18:06.840 God, I learned so much from that experience.

00:18:09.920 And the reason why you decided to do that specific thing,

00:18:12.600 understanding your ICP or your core customer,

00:18:14.660 was because in building Yesware, you

00:18:17.480 felt like it was tough to make decisions

00:18:19.780 because it was a moving target on who you were going to serve?

00:18:22.240 Yeah, I didn't want to a priori decide who the target was,

00:18:25.940 because I didn't know who would use this new thing.

00:18:28.780 And then when people start using your thing,

00:18:35.320 and loving it, and tweeting about it, and talking about it,

00:18:37.540 and coming up to you asking them to charge them money for it,

00:18:40.080 it's hard to turn them away.

00:18:41.240 Yeah, it feels good.

00:18:42.000 You never know where you're going

00:18:43.420 to get another $10 a month.

00:18:44.600 So you take the money, and it's like,

00:18:47.380 I think that was right to do.

00:18:49.300 But then you get to a certain scale, like a million, two

00:18:51.600 million, 3 million ARR, and suddenly you see the opportunity

00:18:55.860 in front, and it's hard to narrow from there.

00:18:57.840 Because it means saying no to some other people.

00:18:59.280 You've got to say no.

00:18:59.940 And right now at Yesware, actually,

00:19:01.780 I would say over the last year, so I

00:19:07.200 asked Joel Stevenson to step in as CEO about a year ago.

00:19:12.260 And a lot of the work that he's done with the new executive

00:19:15.280 team is basically figure out the core customer for Yesware

00:19:18.380 going forward.

00:19:19.640 And now they're really starting to serve that core customer.

00:19:23.000 And you see it in the numbers.

00:19:24.180 You see it in the reviews.

00:19:25.620 It's getting this real adoption amongst this core high-value group.

00:19:32.740 But it means de facto that we're disappointing some other people.

00:19:36.300 And that's just the price of growing.

00:19:38.280 Especially as a founder that built something,

00:19:40.280 and you just want anybody to want to pay attention, use it.

00:19:45.220 And I'm the kind of guy that likes to be liked.

00:19:47.600 I want everyone to like me.

00:19:49.220 I don't want to piss people off, you know, and so it's kind of, I mean, so now I'm turning

00:19:57.440 that dial a little bit with the next one and be like, you know, this is not for everybody.

00:20:04.340 Is this for, like people say, like Gen X, financial planning must be Gen X. I'm like,

00:20:08.360 well, oh, so they say millennials. Everyone's building software for millennials. And I'm like,

00:20:13.460 Well, millennials could use it, but really, it's Gen X.

00:20:16.640 Gen X mass affluent.

00:20:19.400 No, sorry, I want to give it away to everyone

00:20:22.400 in high school and college.

00:20:23.400 If you have a .edu, you can use Bodeswell for free at some

00:20:26.000 point.

00:20:26.860 But right now, it's like we need to focus on our core customer.

00:20:30.440 What have you learned about capitalizing the business?

00:20:33.800 OK, so my take on this now is, so we had venture capital

00:20:40.400 investment from the beginning at Yesware.

00:20:42.680 Yeah, because of your previous success.

00:20:44.740 No, no, at Yesware.

00:20:46.420 OK.

00:20:46.840 I mean, it wasn't because of my previous success.

00:20:49.180 It was because Rich Miner at Google Ventures was into the idea.

00:20:56.440 Yeah.

00:20:56.940 And then I got to know Brad Feld at Foundry through Raj Bhagavat.

00:21:04.020 And they liked software for salespeople.

00:21:07.280 Big market.

00:21:07.860 Could be $100 million business.

00:21:09.120 Yes, we're in.

00:21:09.840 Like, that's how it kind of came together.

00:21:11.380 Wow.

00:21:11.680 Wow.

00:21:12.180 What was the first check?

00:21:13.340 How big was it?

00:21:14.200 1.2 million.

00:21:15.760 That's crazy.

00:21:16.360 And there was a prototype.

00:21:20.500 The template prototype?

00:21:21.740 It was a very rough, mostly functional prototype

00:21:26.620 that Cashman built.

00:21:27.520 And God bless Cashman.

00:21:29.320 Yeah.

00:21:30.520 I never could have built that, what he built,

00:21:32.560 in such a short period of time.

00:21:34.980 So we had something that showed we could do it.

00:21:37.160 And in the first board meeting, Brad and Rich said,

00:21:40.340 do you really want to bring this thing to market?

00:21:43.120 Or do you want to just start fresh?

00:21:45.020 And I was kind of like, can we do that?

00:21:47.520 And he was like, yeah, start fresh if you want.

00:21:49.280 Throw it away.

00:21:51.860 But anyway, the point is that I think

00:21:54.460 the ideal capital structure for a startup

00:21:58.440 is for the common shareholders of a startup, which

00:22:01.520 is the founding team and the employees,

00:22:04.960 is bootstrap it as much as you can to about 10 million ARR.

00:22:09.780 And once you get to $10 million or $15 million ARR, then there's a world of financial-

00:22:14.240 Debt financing, revenue-based finance, all non-dilutive capital.

00:22:17.040 All those things come to play.

00:22:18.720 And the growth guys will come in, and they'll put $20 million on the balance sheet and give

00:22:23.960 $10 million in the secondary, and you're good.

00:22:27.240 Yeah.

00:22:28.380 So that's-

00:22:30.340 That's your guidance today.

00:22:31.200 That's what I'm thinking about.

00:22:32.380 Yeah.

00:22:32.900 And that's where you see some companies- I mean, that's what's interesting about the

00:22:38.660 data.

00:22:38.880 I mean, 10 years ago, there was not

00:22:40.680 the amount of information around equity structure,

00:22:44.540 compensation, like public.

00:22:46.620 I mean, even today, I think there's

00:22:48.060 only 55 publicly traded SaaS companies.

00:22:50.500 It's not a lot.

00:22:51.360 Is that right?

00:22:51.820 Yeah, it's not a lot.

00:22:52.940 You think there's hundreds.

00:22:55.220 I believe Gail from Constant Contact was the first.

00:22:58.500 A lot of people don't realize that.

00:23:00.280 Yeah, she was certainly one of the first.

00:23:01.880 First to go IPO SaaS.

00:23:03.840 What a SaaS model is Gail. 1.00

00:23:05.540 There's a company in Manchester, New Hampshire,

00:23:08.720 also, that was a training company that was kind of SaaS

00:23:11.560 before.

00:23:12.360 We used to call it ASP.

00:23:13.720 Oh, I remember.

00:23:14.400 Remember ASP?

00:23:14.860 Yeah, application service provider, yeah, yeah.

00:23:19.220 But Gail is a pioneer.

00:23:20.600 Like, whether or not she was the first,

00:23:22.300 she was an absolute pioneer for Boston,

00:23:25.100 for being a CEO in SaaS, for doing what she did.

00:23:27.900 Talk about stick-to-itiveness and power.

00:23:30.680 It's crazy.

00:23:31.680 Gail Goodman.

00:23:32.540 Yeah, she, when we were building Flowtown,

00:23:34.620 she actually went out of her way to meet us at our office 1.00

00:23:36.900 in San Francisco to just connect.

00:23:40.140 And she was super curious about what

00:23:42.780 we were doing around social and email.

00:23:44.480 And she actually shared with us her early days of building.

00:23:50.000 People understand VSB, very small business.

00:23:52.500 There's SMB, but then there's the solopreneur hair shop

00:23:57.020 stylist.

00:23:57.720 One to five.

00:23:58.380 Yeah, it's so, I mean, your churn rate

00:24:01.720 is a byproduct of just business failure rate.

00:24:03.860 Yeah, that's right.

00:24:05.060 And I thought hearing that story really

00:24:07.360 gave me a lot of respect for what she created.

00:24:10.520 That's another thing.

00:24:11.380 Two more things Constant Contact did.

00:24:13.220 One is be super data-driven.

00:24:15.180 With that kind of VSB, SMB target,

00:24:18.060 you have to be super data-driven.

00:24:19.700 And they really pioneered that in the Boston area.

00:24:22.180 And Wayfarer and many other companies

00:24:24.860 have learned from that.

00:24:26.640 And two, the high-touch customer service model.

00:24:30.740 Every single person who signs up for Constant Contact

00:24:32.900 gets a phone call.

00:24:34.760 And that doesn't scale, whatever,

00:24:39.220 but they have run the numbers on that, and it works.

00:24:41.780 Yeah, that if you talk to a live person,

00:24:43.360 your retention goes up.

00:24:45.200 It's interesting how tech founders

00:24:48.700 want to do things that are automated and scalable.

00:24:52.280 I mean, arguably, yes, we're allowed

00:24:53.660 people to do things that were more automated for a sales

00:24:58.180 person, but really to help them personalize it.

00:25:01.140 One thing I've always been curious is,

00:25:02.580 And I think you guys worked with Infer

00:25:04.520 around account-based marketing.

00:25:05.960 And how did you guys think about providing the salesperson

00:25:13.340 insights into their activity?

00:25:15.580 Like if you could paint the picture of where,

00:25:18.000 if Yesware was built out to where you think it was the potential,

00:25:22.380 what would it look like as an experience for a salesperson?

00:25:25.500 What was that vision?

00:25:26.680 Yeah, so two aspects of that, and we have made inroads and progress on both aspects, but it's not nearly done.

00:25:39.460 So the first aspect is the real time, like the pulse.

00:25:42.920 What's happening out there in the world?

00:25:44.480 In the world of my accounts, my contacts, my relationships, like what's going on?

00:25:50.960 So I want to know, like, is the person interested or are they not interested?

00:25:54.640 Are they reading my thing?

00:25:56.240 or are they not reading my thing?

00:25:57.200 Are they forwarding it around

00:25:58.160 or are they not forwarding it around?

00:25:59.960 Are they thinking about me or not?

00:26:01.580 Are they traveling or are they at the home office?

00:26:03.960 Are they coming to visit me or are they not?

00:26:06.620 The real-time data is so important

00:26:09.280 and that's why from the very beginning

00:26:10.520 we pushed to make this thing as real-time as we could.

00:26:14.040 And we wanted to make it like a 100 millisecond lag

00:26:16.640 at the most.

00:26:18.740 It doesn't always work that way

00:26:19.980 because email is complicated and at scale,

00:26:22.440 but that's the goal.

00:26:23.920 And then the second part is the analytics.

00:26:26.240 so as I'm doing my thing, help me get better.

00:26:30.260 So I'm not waiting for someone to do something.

00:26:32.580 I'm producing some content.

00:26:34.140 I'm writing an email.

00:26:35.240 I'm writing a reply.

00:26:36.540 Help me get better at doing that.

00:26:37.980 Help me get faster, more efficient,

00:26:39.400 but also more personal and more real and more genuine.

00:26:44.340 And that's, I feel like that's the thing

00:26:47.380 that separates the great salespeople

00:26:50.120 from the good salespeople.

00:26:52.300 Whereas if you, and that's why writing.

00:26:55.340 And that's where technology makes a lot of sense to support that.

00:26:58.680 It can help you because it can know more about the people you're writing to.

00:27:03.160 At scale, yeah.

00:27:03.700 At scale.

00:27:04.440 And it can encourage you to be a better writer.

00:27:07.560 I would love to put like Strunk and White into Yesware.

00:27:10.260 And so as you're typing it, it's like, that's a passive construction of a sentence.

00:27:14.620 But in E.B. White's like hilarious little dry Mainer kind of Easter eggs in there. 0.96

00:27:19.500 Yeah. And so where it's going, I think you'll see us continue on both of those paths, but for a wider range of communication.

00:27:31.200 So not just calendars and meetings and emails and phone calls, but all the ways that salespeople communicate with prospects.

00:27:39.740 And then a deeper and richer sense of the person that you're writing to and where are they at?

00:27:46.880 Where are they at in the buying cycle?

00:27:48.220 Where are they at in their career?

00:27:49.380 What do they need?

00:27:50.920 Because if we can be more responsive to the prospect,

00:27:55.040 then we don't need to bother the people that are not prospects.

00:28:00.020 And frankly, B2B spam is a huge problem.

00:28:03.200 Big problem.

00:28:03.900 And it's going to burn the entire opportunity

00:28:06.440 for all the sales software providers out there.

00:28:09.280 Because we saw it with the internet and banner ads and emails

00:28:13.040 and all this stuff.

00:28:14.260 Yeah, marketers ruin everything. 0.52

00:28:15.480 If you overuse a channel, it gets burned out.

00:28:18.480 And so it's much better now to be like, no, no, actually, we're not about blasting out.

00:28:23.640 In fact, we say to prospects, like, if you're just about 300 emails a day from each rep, like, we don't want to work with you.

00:28:30.100 There are other companies out there that will take your business, but that's not for us.

00:28:33.420 We really want to work with companies that want to help their salespeople build genuine relationships with customers and prospects.

00:28:40.680 Go slow to go fast.

00:28:41.820 Yeah, exactly.

00:28:42.840 Yeah, personalize it.

00:28:43.960 Make it more interesting.

00:28:45.480 Um, I, I remember reading the Swear blog, you know, you guys wrote some epic content.

00:28:50.900 How did you guys think about that, you know, value as an organization to produce content

00:28:57.860 for your market?

00:28:59.020 You know, some people do it well, some people don't.

00:29:02.020 Well, our cashman and my first business was actually a content business.

00:29:05.900 So it was a media company in 2000, early 2000s.

00:29:09.900 And so we knew about writing and we knew the power of writing good content and

00:29:14.920 inspiring a community to participate and then contribute.

00:29:19.420 So it was based on that.

00:29:21.220 And then it was based on the fact that no one was writing for salespeople, and salespeople

00:29:25.660 want to get better at their job.

00:29:27.680 And so we figured we could do that with a data-driven approach, that would work.

00:29:31.180 And then we found this woman named Bernie Reader, who was at an early customer of ours,

00:29:38.180 Forrester Research.

00:29:40.320 And she took that ball and ran with it.

00:29:42.980 And she basically galvanized our blog. 1.00

00:29:45.780 Did you hire her?

00:29:46.620 Yeah, we hired her. 0.99

00:29:47.700 Wow.

00:29:48.200 And she was like, let's go.

00:29:51.580 And it was amazing.

00:29:53.500 She found some amazing freelancers.

00:29:55.540 She found some amazing contributors.

00:29:56.960 And she hired a small team. 0.86

00:29:59.420 And she took that blog from my posts, which were 20,000 readers a month kind of thing, to 400,000 or 500,000 readers a month.

00:30:09.020 Wow.

00:30:09.200 It's like one of the biggest B2B blogs on the web. 1.00

00:30:12.740 Yeah, it's a great example of content inbound really

00:30:18.080 educating the market.

00:30:19.280 I think a lot of products, there's the tool,

00:30:21.280 and then there's the best practices around it.

00:30:25.240 And what's cool is that if you do it right,

00:30:26.820 your marketing will serve more people than your product ever

00:30:29.040 will if you do it right.

00:30:30.580 Exactly.

00:30:31.080 And that was part of the idea.

00:30:32.360 It's like, we want to make software for salespeople,

00:30:34.120 but not everywhere can use our stuff,

00:30:36.080 because they're on different platforms or whatever.

00:30:38.700 They can all use the article about how

00:30:40.280 to construct a good subject line.

00:30:42.580 Yeah.

00:30:43.080 How do you, Matthew, kind of continue to learn?

00:30:48.000 What's your style of overcoming challenges or hard situations?

00:30:54.040 What's your go-to?

00:30:54.920 Are you a reader?

00:30:56.520 You have advisors?

00:31:00.740 Do you attack it head on?

00:31:02.860 I am a, that's a really good question.

00:31:07.300 I got to think about that for a second.

00:31:10.260 I'm like a feel-the-gut-punch kind of guy.

00:31:16.260 Like, it's kind of got to hurt physically.

00:31:20.320 And if it hurts, then it's like motivation to deal with it.

00:31:24.760 So I spend some time every day trying

00:31:28.320 to connect with my body and connect with my actual feelings.

00:31:32.020 Is that the meditation side?

00:31:33.420 Meditation, or exercise, or just basic mindfulness

00:31:37.260 practice of walking down the street

00:31:39.180 and not checking my phone all the time or listening to music,

00:31:41.560 but just looking around.

00:31:43.640 I love sitting in airport lobbies

00:31:45.240 and waiting for the plane and just not doing anything

00:31:48.420 and just being bored.

00:31:50.040 And be OK with being bored.

00:31:51.720 And it's fine.

00:31:52.980 People don't look. 0.50

00:31:54.080 It's funny.

00:31:54.620 We don't look up anymore when we walk.

00:31:56.500 Just to look at.

00:31:57.880 And if you do, people are like, what's he looking at?

00:31:59.580 Is there something up there?

00:32:00.400 Actually, they're not.

00:32:01.660 Nobody notices.

00:32:02.860 What I've come to realize by being bored in airport lobbies

00:32:05.100 is no one even cares because they don't care.

00:32:07.420 They've got their own thing.

00:32:09.040 So it's absolutely, like, I felt self-conscious about it for a while,

00:32:14.680 but I realized, like, they actually don't even notice.

00:32:16.740 So when you say oneness, is it, like, just being in tune with your body?

00:32:21.580 Yeah.

00:32:22.020 Yeah, and just, like, for you, it's, like, a gut thing.

00:32:24.840 Like, if there's some discomfort there, that's when you're, like, okay, I've got to address this.

00:32:28.360 Yeah, that's, like, a signal.

00:32:29.820 Yeah, and is that, like, a certain spiritual practice, or, like, how did you come to that realization?

00:32:35.640 I mean, I came to it through sitting meditation practice.

00:32:41.640 But I think it's universal.

00:32:43.640 I don't think it's, I mean, that's just one route.

00:32:47.640 But I think people that, anybody that does any kind of discipline.

00:32:51.640 Yeah, like yoga.

00:32:52.640 Yoga, training for sports.

00:32:55.640 You become aware.

00:32:56.640 Flower arranging, painting, videography.

00:33:00.640 I mean, I think in a lot of ways, growing up is about becoming more and more in tune with your world, becoming more and more aware of what's happening and becoming more connected to other people and realizing that this other person has a whole life and this is our moment together.

00:33:28.380 and so let's not miss that

00:33:31.120 you know what I mean

00:33:31.760 so when that doesn't

00:33:35.180 feel good like when there's pain

00:33:37.040 there or discomfort or trouble

00:33:38.820 or frustration like that's a sign

00:33:40.940 of like oh well let's go into that

00:33:42.620 let's check that out

00:33:44.540 and you know

00:33:46.680 with me with lots of people

00:33:48.700 there's a lot of that

00:33:50.020 as a founder I mean that's just

00:33:52.640 a lot of it

00:33:53.420 and then when you say you're pro meditation

00:33:55.460 is there a specific practice that you

00:33:57.860 Like TM or?

00:33:59.080 So I mostly, well, for 25 years, I basically practiced in the sort of American Buddhist world of sitting meditation.

00:34:08.800 Yeah.

00:34:09.380 Which me particularly connected more with the folks who came from Tibet and started teaching Tibetan, American versions of Tibetan meditation practices.

00:34:22.460 And now I still do that, but I'm much more onto the American side of things.

00:34:27.380 Like I think there are some incredible American meditation teachers that have practiced for 15 or 20 or 30 years and actually have embodied the teachings for this culture in a way that it's really powerful.

00:34:41.860 Yeah, it's practical.

00:34:42.520 And is that like if somebody, a family member or a good friend of yours comes to you and says, hey, man, I'm dealing with this turmoil, is that one of the first things you would expose them to or suggest to them?

00:34:53.720 No.

00:34:54.480 Okay.

00:34:54.940 It's not a cure-all for you.

00:34:56.540 It's definitely not a cure-all, and it's definitely not something that's like a quick fix.

00:35:01.320 Yeah.

00:35:01.500 But for people who say, like, actually a guy came up to me yesterday after a panel I did, and he said, how should I deal with startup stress?

00:35:15.840 And can you give me a book to read?

00:35:18.880 You know, it wasn't like a specific thing that was happening right now.

00:35:23.540 It was more like, I need to get better at this.

00:35:25.500 Dealing with.

00:35:26.040 I want to get better at dealing with the stress.

00:35:27.680 and so for that

00:35:29.360 starting a meditation practice is great

00:35:31.760 because you can

00:35:33.480 slowly incrementally build up

00:35:35.060 but it's just like going to the gym

00:35:36.400 you don't go to the gym and try to bench press 250

00:35:38.880 you go to the gym and you bench press 20

00:35:41.300 and then you do

00:35:42.980 that for a week and then you do 25

00:35:45.340 so sitting meditation

00:35:47.340 same thing, you don't go and try to sit for an hour

00:35:49.560 like it would be just

00:35:50.980 what's the longest you've ever meditated for?

00:35:55.700 three months

00:35:57.260 You meditate for three months?

00:35:58.320 Well, I mean, I was at a retreat for three months.

00:36:01.220 And how many hours a day would you meditate?

00:36:03.980 Like 12. 0.99

00:36:06.860 Holy crap. 0.97

00:36:08.440 I thought you were going to say like two hours, 0.99

00:36:10.360 and I would have been impressed.

00:36:11.600 My head just exploded. 0.99

00:36:13.920 Holy crap. 0.91

00:36:15.320 I mean, a lot of people do it. 0.98

00:36:17.340 It's funny.

00:36:17.760 As soon as you said that to me, my brain said,

00:36:19.720 you don't want to go there, Dan.

00:36:21.280 That's exactly what my mind's like.

00:36:23.120 You don't want to know what's in there.

00:36:24.840 Oh, that's interesting.

00:36:25.520 Isn't that interesting?

00:36:26.500 I mean, I'm assuming you're exploring the deep bowel

00:36:32.500 of your psyche at that level.

00:36:34.500 I mean, it's.

00:36:36.500 I mean, yeah, at some points.

00:36:40.500 But it's like nothing really changes.

00:36:44.500 OK.

00:36:45.500 Do you have psychedelic experience-esque?

00:36:48.500 Do you ever get into these moments of outside of your body

00:36:52.500 when you're meditating that much?

00:36:54.500 in sitting meditation well it's interesting like it does happen and the basic instruction is like

00:37:01.220 that's just thinking that is not a big deal that's not what you're going for you're not going for

00:37:07.220 some altered state you're not going for some woo woo kind of spiritual thing yeah that's just your

00:37:12.680 thoughts so just bring your awareness back when you realize that's happening just bring your

00:37:18.220 awareness back to your body no different feel your breath it's the same it really is it's your

00:37:22.620 thoughts.

00:37:23.520 Wow.

00:37:24.420 So that's not the point.

00:37:27.300 The point is to be present in the moment.

00:37:30.660 What are your thoughts around visualization

00:37:33.300 and the word manifestation, but essentially just

00:37:35.860 being intentional about images that you want to achieve,

00:37:40.260 goals, outcomes?

00:37:41.240 Yeah, that's a very tried and true technique

00:37:44.040 across many different spiritual and athletic disciplines.

00:37:51.120 I mean, I remember in, I think it was the 1976 Winter Olympics, I remember being at home and watching Phil and Steve Mayer, two of the premier early American ski racers, and their twin, their younger and older brother, and they were sitting next to each other in their ski suit, and they were doing this before the race.

00:38:09.960 Like, they were visualizing each turn of a slalom course.

00:38:13.920 And so this is, again, not a Buddhist thing.

00:38:17.080 This is something that everybody does to get better in practice and get ready for a big thing.

00:38:21.120 As a skateboarder growing up, like, I saw the board.

00:38:25.180 Like, it was, you would never just say, I'm going to do a kickflip and think, I'm going to magically do a kickflip.

00:38:30.160 You literally have to picture in your mind and think about where your feet and the flick and how you're going to catch the board and land on it over those trucks.

00:38:37.020 Like, it's so funny when you bring this to people that are like, oh, that's too woo.

00:38:40.760 You know, your visualization, manifestation, it's like, no, it's just like, it's what athletes do.

00:38:47.320 It's what high performance, it's kind of like what founders do.

00:38:49.440 We visualize the future.

00:38:51.780 We're essentially, it's like in our minds, it already exists.

00:38:54.960 We're just having to get everybody else to catch up

00:38:57.680 to what we're creating here.

00:39:00.040 Someone told me that entrepreneurs

00:39:02.800 are basically people that tell lies until they become true.

00:39:06.000 That's interesting.

00:39:09.180 It's interesting.

00:39:09.880 As soon as you say that, then I think Theranos.

00:39:11.580 And I'm like, well, sometimes they don't.

00:39:12.880 Sometimes they don't.

00:39:13.880 They don't catch up.

00:39:14.820 They don't become true quick enough.

00:39:17.040 Yeah.

00:39:18.040 And also, sometimes people are lying.

00:39:20.180 Yeah.

00:39:20.680 And they're not following through on what they say they're

00:39:22.680 doing, and they're spinning a tale that they're not being

00:39:25.840 honest with themselves.

00:39:26.720 And that's a disappointment.

00:39:29.020 Yeah.

00:39:29.620 Matthew, as you've gone through this journey, three companies

00:39:32.380 now, who have you had to become to be the CEO from a habits

00:39:39.220 and mindset and beliefs point of view?

00:39:42.100 I mean, I had to grow up a lot.

00:39:43.900 And what were some of those areas that you had to work on?

00:39:48.040 Um, I had to, um, well, a couple of things come to mind immediately.

00:39:53.740 One is I had to just, uh, be a lot less, um, self-centered and a lot more concerned about

00:40:02.240 other people concerned about the customer and their world, their needs concerned about

00:40:08.860 the team and their needs, what they were going through as opposed to what was, like prioritize

00:40:14.820 the needs of your executives or in your and your team your company your startup founder your front

00:40:19.780 you know your co-workers um same with investors same with and then that helped me actually be a

00:40:26.020 better husband to be a better father because like then i started to realize wait a minute these are

00:40:31.060 like i'm turning outwards from being as more self-centered and trying to be more human

00:40:36.500 center other centered and that really helped me grow up um the other thing that came to mind when

00:40:42.580 when he asked that is like, how to say this?

00:40:47.820 Like, I didn't, I wasn't sure I wanted to be a CEO.

00:40:55.440 And I sort of thought like I could slide into it

00:40:58.200 without actually owning the responsibility and the seat

00:41:02.400 and the position.

00:41:03.700 So I thought at the beginning, we'll all just

00:41:06.040 be one big group.

00:41:07.180 We'll all be a team, flat, and we're all colleagues,

00:41:10.800 and we're all working hard.

00:41:12.020 Smart, do your thing.

00:41:12.920 Yeah, exactly.

00:41:13.800 And that just doesn't work.

00:41:15.500 Like, as much as I tried to ignore that, other people were treating me, looked at me and said, that's the CEO.

00:41:22.720 And so I, at some point, like, two, three, maybe even four years into Yesware, I had to basically sit down and own that and be like, guess what?

00:41:29.960 I'm the leader of this.

00:41:31.760 And I got to start acting like it.

00:41:33.960 And that was, you know, that took some time.

00:41:36.680 But, like, I kind of feel like the transition out of that role sort of sealed that part of the process for me.

00:41:44.600 When you became chairman?

00:41:45.680 Yeah, when I promoted Joel and became chairman, that was, like, the culmination of that.

00:41:51.260 I said, like, no, I owned it.

00:41:53.060 I did it.

00:41:53.720 I did it.

00:41:54.400 I found someone who I thought could do it better for the next stage.

00:41:58.200 And so now I feel like those are two developmental shifts that really helped.

00:42:04.000 That's really cool.

00:42:04.760 Matthew, I really appreciate you coming on.

00:42:06.680 Thanks so much, man.

00:42:08.040 Bodeswell, everybody check it out.

00:42:10.040 And where do people find you online?

00:42:11.580 Bodeswell.io and at Mbellows at Twitter and LinkedIn and Matthew at Bodeswell.io.

00:42:19.680 Check it out.

00:42:20.300 Thanks, man.

00:42:20.740 Appreciate it.

00:42:22.200 Thanks for watching this episode of Escape Velocity.

00:42:25.580 Be sure to like and subscribe and leave a comment with your biggest insight from our conversation.

00:42:31.020 Be sure to check out the next episode.

00:42:36.680 Thank you.

Dan Martell - May 21, 2020

From Freemium to Premium with Matthew @ Yesware.com - Escape Velocity Show #28

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