Dan Martell - From Paid to Freemium with Michael Litt, Co-Founder & CEO @ Vidyard.com

00:00:00.000 Back to this transition of being a founder to CEO, all of a sudden you're responsible for so much more than you had ever imagined.

00:00:06.360 Admission sequence start.

00:00:08.360 Three, two, one.

00:00:19.520 Michael Litt, what's up, dude?

00:00:21.360 I am very happy to be here, Dan.

00:00:23.220 Dude, I appreciate you, man. You're one of my good buds.

00:00:25.560 Thank you.

00:00:26.000 We do a ski trip every year.

00:00:27.700 Or it's, I mean, is this five years for you?

00:00:31.080 I've been doing it for seven.

00:00:32.080 I think this will be five.

00:00:33.420 Yeah.

00:00:33.820 Yeah, if not.

00:00:34.760 The first year we got canceled.

00:00:36.320 Yeah, I still consider it because there was still stuff.

00:00:38.800 Like you hung out with Craig and you guys went and did.

00:00:40.940 Yeah, yeah, we actually turned around on the flights.

00:00:42.820 And we ended up buying one of the companies of the guys that

00:00:45.480 was there.

00:00:45.980 Oh, that was crazy.

00:00:46.480 I mean, that's what people are like.

00:00:47.700 So like, is this a business thing?

00:00:49.480 Or I said, first and foremost, it's my vacation,

00:00:51.280 so don't F with it.

00:00:53.480 Fuck, why am I saying F with it?

00:00:55.160 It's my podcast.

00:00:57.220 It's my vacation, so don't fuck with it.

00:00:59.260 And then B, a lot of stuff happens

00:01:00.820 just through conversations.

00:01:01.900 Like, you ended up acquiring a company.

00:01:04.780 You're the founder of Vidyard, an incredible company.

00:01:07.760 I'm a customer.

00:01:08.780 My dad's a customer, Victor, which is awesome.

00:01:11.280 One of the originals.

00:01:12.280 Doesn't pay you a lot, so sorry for the low ACV on that one.

00:01:14.620 It's OK.

00:01:16.040 And you've built the, what's the garage ventures?

00:01:19.220 Garage Capital.

00:01:20.020 Garage Capital.

00:01:21.120 So you've invested in how many companies through that?

00:01:23.800 Just over 80.

00:01:24.880 80 companies.

00:01:25.720 40 million AUM.

00:01:26.980 And how long have you been deploying capital through that?

00:01:29.760 Six years.

00:01:30.520 OK, but you're an entrepreneur, man.

00:01:31.720 You're a creator.

00:01:32.500 We met when you were at YC, geez, almost probably

00:01:35.420 a decade ago now.

00:01:36.580 Is it 2009?

00:01:37.360 2011.

00:01:37.860 OK, 11.

00:01:38.480 OK, cool.

00:01:39.640 So not a decade yet.

00:01:41.560 But always enjoyed our conversation.

00:01:44.620 You're funny, yet you can go deep on the business side

00:01:47.680 of things, which I find awesome.

00:01:50.980 What are, like, so one of the things

00:01:53.440 I want to talk to you about is the freemium play you guys

00:01:55.100 just pulled off at Vidyard or going through.

00:01:58.480 Most companies move up market.

00:02:00.340 And in some ways, you come down.

00:02:02.600 How did you think about it?

00:02:04.320 What's the rationale?

00:02:06.380 What's been the impact so far?

00:02:08.000 Yeah, for sure.

00:02:08.660 So there's a number of factors that come into play

00:02:11.600 with this decision.

00:02:12.300 One is, and I think the easiest one

00:02:14.380 to describe with respect to data,

00:02:16.820 is the sheer number of companies in the MarTech landscape

00:02:19.740 today.

00:02:20.540 The barrier to entry to developing technology is low.

00:02:23.220 Is it like 50,000 MarTech companies?

00:02:25.480 7,000.

00:02:26.260 There's 7,000.

00:02:27.060 But when we started, it was 150.

00:02:29.500 Wow.

00:02:30.420 Right?

00:02:30.700 So when we started the company, you'd call into a CMO or a VP of sales, say, hey, I've

00:02:35.880 got a solution to this problem you don't know you have.

00:02:38.020 Are you interested?

00:02:38.880 And that's how we grew.

00:02:39.880 Yep.

00:02:40.440 I did.

00:02:41.940 And just to talk about the early, early days, because I think it'll be useful to your audience,

00:02:46.160 we built a crawler called...

00:02:47.860 DMOS.

00:02:48.660 Nostradamus.

00:02:49.140 Yeah.

00:02:49.420 Crawled the DMOS.

00:02:50.920 I've already talked about this with you, potentially.

00:02:52.460 Dude, we talk, I mean, I think we did a co-presentation last year.

00:02:55.320 Oh, yeah, yeah, yeah.

00:02:56.060 You know the story, right?

00:02:57.220 It's awesome.

00:02:57.960 And came up with a lead list.

00:03:00.260 And you were like calling, you were doing it.

00:03:01.300 Yeah.

00:03:01.640 Yeah, hand-to-hand combat.

00:03:02.860 100 contacts a day that would be developed while I slept.

00:03:06.420 I'd wake up, look at these 100 contacts, go do calls, take the customer feedback, give

00:03:10.920 that to the engineers.

00:03:11.800 They'd wake up, build the code through the night.

00:03:13.700 We'd sync up in the morning.

00:03:15.260 They'd tell me what they built, and I'd go out and call those people back and try to

00:03:18.080 sell to them.

00:03:18.500 And that was kind of the Victor era.

00:03:20.240 Yeah.

00:03:20.440 Another one of our first customers

00:03:22.140 was Donna, who I ended up marrying.

00:03:23.540 Yeah, yeah.

00:03:24.040 We take customer success very seriously.

00:03:25.600 Very seriously, yeah.

00:03:27.340 And so that's the way we did things, right?

00:03:29.980 Now, 7,000 companies doing the same thing

00:03:32.340 doesn't necessarily work anymore, right?

00:03:34.960 And when you have-

00:03:35.860 Did you see that?

00:03:36.440 Is that like, was, I mean, I don't know

00:03:39.120 what you're comfortable sharing on numbers,

00:03:40.580 but did you see kind of like this growth ceiling coming?

00:03:44.400 Yeah, like-

00:03:45.760 We just knew that.

00:03:46.500 Things are getting more expensive,

00:03:47.740 CAC's getting more expensive, or-

00:03:49.380 Yeah, CAC increases for sure.

00:03:52.140 Response rates are lowering.

00:03:53.760 Yeah, response rates, the cold outbound are lowering.

00:03:56.280 There's certain headwinds that you just kind of organically

00:03:59.460 start to feel, right?

00:04:00.900 Yeah, and it wasn't limiting growth of the company,

00:04:02.940 because you can always, in our case, venture back,

00:04:04.880 spend more money to acquire those customers,

00:04:06.660 be in more places.

00:04:07.560 And in a lot of ways, we got a head start.

00:04:09.840 And so we already had brand recognition.

00:04:11.100 How much did you guys raise so far?

00:04:12.420 Is it $40 million?

00:04:13.060 $65.

00:04:13.620 $65, OK.

00:04:14.820 Yeah, US.

00:04:16.480 So anyways, so this is happening, right?

00:04:19.320 And I think when you have a landscape that's commoditized,

00:04:22.660 a.k.a. there's a lot of options, the biggest execution risk

00:04:27.240 for an employee in a company is time.

00:04:29.580 And so how do you help them preserve that time

00:04:32.760 in a commoditized landscape?

00:04:34.340 The only option, in my opinion, is to have a free product.

00:04:37.560 It just makes a ton of sense.

00:04:38.640 That way they don't have to schedule demos.

00:04:40.560 Yeah.

00:04:40.960 So I'm a marketer, and I need to put a video on a landing page,

00:04:43.980 or send a video in an email.

00:04:45.260 Or I'm a sales rep, and I want to send a video to a prospect.

00:04:49.300 I'm not going to go through a week and a half long discovery process and talk to someone in sales and then go back to my company and ask for a budget and run a 60, 90 days cycle of research and effort to go and solve this problem I have.

00:05:02.520 I'm going to go find the best available option for free.

00:05:05.040 And the reality is in our market, specifically for hosting video, putting in a landing page, et cetera, the status quo vendor is YouTube, which is free.

00:05:12.720 Mm-hmm.

00:05:13.740 And so it just became very, very obvious to us,

00:05:16.980 based on all these dynamics that we were seeing,

00:05:19.080 that a free option was the best way

00:05:21.180 to break into an organization.

00:05:22.080 But did you learn that?

00:05:24.120 It's funny.

00:05:24.560 It's not long ago, but most people knew viewed it, right?

00:05:27.280 So I feel like an OG, because I knew viewed it.

00:05:29.000 And then you're like, no, we renamed it to GoVideo.

00:05:31.360 And then yesterday, I heard you say, no, it's just Vidyard.

00:05:33.960 Yeah.

00:05:34.460 It's like, so was that because that was kind of a freemium,

00:05:38.140 kind of, I call it an expensive lead gen tool?

00:05:41.620 But yeah, so we kind of had appetizers

00:05:44.980 to this main course of full freemium.

00:05:46.600 And that, yes, the Chrome extension was free.

00:05:49.480 That was the view to go video, flash video, now.

00:05:54.520 650,000 users on it that we were able to mine for upsell

00:05:59.980 and enterprise accounts on a seed basis.

00:06:01.380 Essentially build pipeline, yeah.

00:06:02.740 And then HubSpot came along and said, hey,

00:06:04.240 we want to offer a video product.

00:06:06.820 And we gave them access to our APIs.

00:06:08.860 They built HubSpot video on top of us.

00:06:11.180 It's not white labeled.

00:06:12.080 It's HubSpot Video powered by Vidyard.

00:06:13.660 It's in Sales Hub, Marketing Hub, Service Hub.

00:06:16.180 A year later, we've got 25,000 shared organizations

00:06:19.320 using HubSpot Video.

00:06:21.000 It's a multi-million dollar.

00:06:21.800 And if they buy, it's your deal.

00:06:23.520 It's a multi-million dollar business line for us.

00:06:25.140 Inside their, wow, inside their platform.

00:06:27.400 Inside their platform.

00:06:28.580 Super rare, right?

00:06:29.320 They run frontline support.

00:06:30.360 Super, super rare.

00:06:31.180 I can't think of many.

00:06:32.040 Our board was like, we've never seen a deal like this before.

00:06:34.260 This is pretty interesting.

00:06:35.720 But for HubSpot, it took away the execution risk

00:06:38.520 of building the product.

00:06:39.720 They validated that our product was best in market

00:06:42.280 based on the customers we have.

00:06:43.700 That's cool.

00:06:44.300 And we were willing to support it with a free model

00:06:46.220 where we collected all the upside.

00:06:48.840 There's going to be a phase two and a phase three

00:06:50.420 of that relationship, which I'm really excited about.

00:06:53.340 But it was kind of this real appetizer to free.

00:06:56.260 Brian Halligan, amazing entrepreneur, CEO.

00:06:59.040 Hopefully, you get him on the podcast one day

00:07:00.680 if you haven't already.

00:07:01.400 I'd love to, yeah.

00:07:02.340 Yeah, we should ask him.

00:07:04.320 He did this really interesting thing at Inbound,

00:07:07.160 which I loved where he talked about the buying cycle for executives and there

00:07:12.220 was 30 people in the room and he said raise your hand if you've made a

00:07:15.340 software purchasing decision in the last year and these are CMOs, CROs, CEOs,

00:07:21.120 not one person. Shut up. Not one person. Oh shit because it's come from the bottom

00:07:26.040 up. Yeah. Oh. Right. Execution risk. Dude I would have put money on that. I would have lost all my

00:07:31.040 money. Yeah but previous five years everybody was involved. Yeah. Right. So this thing has

00:07:35.480 change it. Think about Slack, right? Slack gives you 95%.

00:07:38.540 Dude, I heard Slack salespeople for a certain segment SMB don't even have quota.

00:07:42.060 Yeah.

00:07:42.940 Like things are shifting.

00:07:44.640 Things are shifting massively, right?

00:07:46.400 The consumer has all the purchasing power and it's not the CMO, it's the user. And that

00:07:52.540 purchasing power is their time. And time is the most expensive economy.

00:07:56.680 That's a good argument, man.

00:07:57.800 In today's world. Yeah.

00:07:58.660 I don't know if I would have, I wasn't a freemium fan.

00:08:02.180 Neither was I.

00:08:03.140 I mean, I'm like, pay me.

00:08:04.600 Yes, but here's the thing, right?

00:08:07.000 My life has been full of companies.

00:08:09.040 I mean, I got my career start at BlackBerry

00:08:11.920 that just didn't read the tea leaves.

00:08:14.980 And so here I am reading the tea leaves,

00:08:16.660 saying we want to be a 5, 10, 15, 20-year-old business.

00:08:22.100 How are we going to ensure that we keep up with the times,

00:08:25.060 maintain our competitive advantage,

00:08:26.520 and continuously innovate, getting as many people as

00:08:29.080 possible to use our product?

00:08:30.340 I don't disagree that it is a powerful engine and moat,

00:08:34.460 Because, I mean, you look at MailChimp and, like, many others.

00:08:37.780 Yep.

00:08:38.220 It's just a very courageous decision at your scale, I think,

00:08:43.480 to make as a venture-backed company.

00:08:45.820 Like, did your board push back on you?

00:08:48.740 Did your internal team?

00:08:51.280 Like, I mean, this is some serious buy-in.

00:08:53.700 The internal dynamic shift is an interesting one.

00:08:57.040 The board one is actually easier.

00:08:58.860 So the board, you know, we've been very fortunate.

00:09:00.960 And we've got a very eclectic board, Byron Dieter, 11, 12,

00:09:05.960 I don't know, maybe 15 cloud IPOs at this point.

00:09:08.200 Shannon Brayton, CMO of LinkedIn,

00:09:10.260 premiums their motion.

00:09:12.160 Michael Brown from Battery Ventures.

00:09:15.060 He's seen it all before.

00:09:16.460 Is that who we hung out with, Michael Brown, in Dublin?

00:09:20.020 Last year.

00:09:20.640 Yeah.

00:09:21.140 Yeah, yeah, yeah.

00:09:21.960 I like that guy.

00:09:22.780 Downtown Michael Brown, he's a great human.

00:09:26.240 Dennis Kavlman was at BlockBerry.

00:09:28.920 And I think the secret to board management

00:09:31.120 is honestly being honest, open, transparent,

00:09:34.900 and letting them know why you're doing what you're doing,

00:09:37.380 and justifying it with data and experience.

00:09:39.760 They just want to know that you're

00:09:41.300 looking at things to make those decisions.

00:09:43.080 Yeah, they trust us to do the right things, right?

00:09:45.340 And so the bigger issue, though, is the team.

00:09:48.660 Because I use the same arguments that I just communicated

00:09:51.440 with you to tell the team that, hey, this

00:09:53.000 is what we need to do.

00:09:54.520 And they're all like, yeah, that makes sense, it's great.

00:09:56.800 And then they go back to their job doing the exact same thing.

00:09:58.800 that I built, that I, yeah.

00:10:00.400 Yeah, right, you've got to protect the base

00:10:02.360 while you completely change the way

00:10:04.440 you're going to add to that base.

00:10:05.740 Yeah, everything changes.

00:10:07.460 Everything changes.

00:10:08.320 I mean, you're messing with people,

00:10:09.640 like if sales guys, it's like, how's comps going to,

00:10:12.140 how's, you know, everything.

00:10:14.420 So believe it or not, the one thing

00:10:17.480 that hasn't really changed, and it will over time,

00:10:20.160 is sales.

00:10:21.100 The biggest changes happen in product and marketing,

00:10:23.920 in that now, all of a sudden, they have to work together.

00:10:27.040 And in an enterprise business, product and marketing

00:10:30.220 don't really collaborate ever.

00:10:31.660 Just give me an SLA.

00:10:32.660 I'll meet it.

00:10:33.160 Don't talk to me.

00:10:33.900 Exactly.

00:10:34.680 And now, product is held just as accountable for user growth

00:10:39.720 and user adoption as marketing is.

00:10:42.640 That's a big shift.

00:10:43.680 Big shift.

00:10:44.420 Big shift.

00:10:45.320 And no longer is the engineering team just focused

00:10:47.540 on code base and code quality and the microservices.

00:10:51.460 They're now aligned to the customer funnel.

00:10:53.780 So we have a product manager and a designer

00:10:55.960 and an engineering manager aligned to free,

00:10:58.640 aligned to pro, aligned to the business.

00:11:00.460 Because free has to be managed like a product.

00:11:02.880 It has to be good.

00:11:03.780 It has to, for it to do the thing it's supposed to do,

00:11:06.840 it has to, like the free product has to be a product.

00:11:09.880 Like it can't be a watered down version.

00:11:12.440 Like it's got to add value.

00:11:14.460 Quickly.

00:11:15.080 The risk I would see, and I've talked to founders,

00:11:18.080 is like giving away too much.

00:11:20.620 Like did you guys do a histogram analysis?

00:11:22.420 How did you guys figure out where the free line was going to be?

00:11:25.380 Yeah, so we have a lot of data to identify what people

00:11:28.620 are willing to pay for at the enterprise level

00:11:32.160 and at kind of the pro level.

00:11:34.020 And again, a lot of people, I think,

00:11:37.200 think that freemium is a motion that works for SMBs.

00:11:41.340 There's a lot of data to show that freemium is actually

00:11:43.320 a motion that drives a ton of penetration

00:11:45.060 in the enterprise as well.

00:11:46.500 But just so happens to be a motion that lets you sell.

00:11:48.420 Is that a new thing?

00:11:49.260 Is that like a new Slack Dropbox thing?

00:11:50.900 Or is that?

00:11:52.220 Yeah.

00:11:52.720 But I mean, Atlassian, no, they didn't

00:11:54.260 They didn't have free Atlassian, did they?

00:11:55.640 Oh, yeah.

00:11:56.260 Did they?

00:11:57.140 OK, I just knew that you could buy everything

00:11:58.760 as like three grand credit card.

00:12:01.280 Yeah, I mean, the free trial was the original kind

00:12:03.700 of freemium motion, right, in enterprise.

00:12:07.440 And so what this does is allow us

00:12:09.460 to sell to small companies who just

00:12:11.240 want to buy on a credit card and not to talk to someone

00:12:13.160 in sales.

00:12:14.420 Not talk to someone in sales.

00:12:15.760 How about this?

00:12:16.260 Is this good now?

00:12:16.880 That works good.

00:12:17.420 Yeah, the mic's good.

00:12:19.340 Who else did this?

00:12:20.280 Audio.

00:12:20.820 OK, I don't want to get any weird germs from this.

00:12:24.240 No, you're fine.

00:12:25.080 OK.

00:12:25.580 No, we'll just send you a bunch of photos of people

00:12:29.000 close talking.

00:12:30.220 Yeah, we wipe these down every year.

00:12:31.780 Basically made out with all these people on Dan Martell.

00:12:34.200 I'll send you faces.

00:12:36.060 OK, that's going to haunt me.

00:12:39.340 But yeah, so it's not just about small business success, right?

00:12:43.480 It's also about enterprise and penetrating that enterprise

00:12:46.940 in multiple ways, right?

00:12:48.280 So the ideal motion now is that someone

00:12:51.040 needs to put a video on a landing page.

00:12:52.940 So they Google that, they upload the video to Vidyard,

00:12:55.180 they embed it in their landing page, that's great.

00:12:57.140 Someone in the sales team starts using our Chrome extension,

00:12:59.860 or someone in the BDR team uses the video creation tool,

00:13:05.280 screen recording, webcam recording tool in Sales Loft,

00:13:08.060 or Outreach, or HubSpot.

00:13:09.580 And all of a sudden, we have this diverse subset of users

00:13:12.660 in a company, and the concern that an enterprise has

00:13:15.660 about that diverse subset of users is,

00:13:18.140 A, what content are they sharing?

00:13:19.940 B, if they're using the free product,

00:13:21.400 it's on a Vidyard branded sharing page.

00:13:23.660 It's not on our branded sharing page,

00:13:25.180 which is our header and our footer

00:13:26.440 and draws more navigation.

00:13:29.000 There's no shared content library.

00:13:30.980 There's no security.

00:13:32.060 There's no workflow.

00:13:32.660 There's no data.

00:13:33.560 Data.

00:13:33.980 Right?

00:13:34.320 Who's watching these videos for how long on the contact record?

00:13:36.700 So this is the land and expand model

00:13:38.940 of just getting people to adopt.

00:13:42.260 And then you guys look at that and say,

00:13:44.720 like, this pattern is showing up at this enterprise company.

00:13:47.500 Let's assign different.

00:13:49.740 And then, so you guys launched, you have some data now.

00:13:54.980 Is it promising?

00:13:55.940 Yes, hugely promising.

00:13:57.460 More promising than I would have predicted.

00:13:59.320 Anticipated?

00:13:59.620 Are you serious?

00:14:00.320 Yeah, way better than anticipated.

00:14:01.740 There was like pent up demand for this

00:14:04.640 that we did not even perceive.

00:14:06.560 So prior, did you guys have a free trial?

00:14:10.000 No.

00:14:10.500 Really just a demo request, and then you go.

00:14:13.800 Yeah, Inter-Enterprise Motion.

00:14:14.860 The only way you could buy Vidyard,

00:14:17.540 prior to the whole Chrome extension world,

00:14:20.420 was to raise your hand on the website,

00:14:22.460 or we call you and you say, hey, that's interesting.

00:14:24.860 SQL, self-qualified lead, or MQL.

00:14:27.380 Now we have the PQL, which is.

00:14:29.900 Talk about the PQL.

00:14:30.920 The PQL is the.

00:14:32.060 You were early on this PQL stuff.

00:14:33.600 PQL is the holy grail of the QLs.

00:14:36.360 Yeah, and this is essentially identifying

00:14:39.140 where the opportunities are based on usage,

00:14:41.600 like people actually using the product.

00:14:43.000 Yeah.

00:14:43.340 Product qualified lead.

00:14:44.280 And if I'm a salesperson, I would much

00:14:46.520 rather talk to someone that's using the product and getting value out of it than someone who's

00:14:51.520 just willing to take a call for research purposes. Yeah. Right. And is running an investigation

00:14:56.560 in a competitive process. Yeah. Right. A PQL kind of removes the competitive process. They've

00:15:00.760 already made the decision that we're going to use Vidyard for something. Just how much.

00:15:03.940 Yeah, exactly. They're going to pay. Yep. How much are you going to pay? Exactly. So

00:15:07.820 amazingly, on our very first day of launch, 2,500 PQLs. What? Yep.

00:15:13.960 blew my mind i wrote an email to the board and i was like hey this is the first day it's really

00:15:22.300 promising and actually what correlated to that although that number has persisted since because

00:15:27.320 it's grown was we got featured in the chrome store and i don't know if that's google's algorithm

00:15:31.660 now did you change the chrome extension in any way we did it we did update you did add the copy

00:15:37.200 on it um yeah a couple new features new description the go video brand went away we just called the

00:15:42.120 The reason we call it Vidyard is because I come to conferences

00:15:44.500 and people are like, I love sending Vidyards.

00:15:46.300 And they're like, this is like Kleenex.

00:15:48.640 I'm not going to say, no, no, it's tissue paper.

00:15:51.000 It's Kleenex.

00:15:51.820 Let's just call it Kleenex.

00:15:53.440 And then in regards to how you, because my thoughts would be like,

00:16:00.740 now you have to set some parameters around when you reach out to these

00:16:04.000 organizations.

00:16:05.020 Like you can't, do you like jump on them right away?

00:16:07.060 They're a PQL or just like, what's the definition for you guys?

00:16:11.360 Yeah, so our North Star as a company now

00:16:14.120 is the monthly active user.

00:16:15.640 Yeah.

00:16:16.420 And the reason we do that is because it's a great way

00:16:18.600 to align product and marketing.

00:16:20.500 Back to that previous point.

00:16:21.300 Yeah, yeah.

00:16:22.620 And for you guys, it's one a week video and viewed.

00:16:26.200 Yes, yes.

00:16:27.200 So we have a very strict kind of rule set

00:16:29.960 around what is an MAU.

00:16:31.240 Yeah.

00:16:31.680 A lot of companies are like, hey, they signed up.

00:16:33.480 They signed up.

00:16:33.920 They're an MAU.

00:16:34.360 Yeah.

00:16:34.740 And then you call them, they're like, no thanks.

00:16:36.340 I forgot I signed up.

00:16:37.560 Yeah, yeah.

00:16:38.380 Right?

00:16:38.560 We want them to be active, getting value out of it

00:16:41.160 before we have that conversation.

00:16:42.420 So what that does is it drives marketing

00:16:43.780 to boost the volume of people that could PQL

00:16:47.680 and could sign up for the product.

00:16:49.800 And then it forces product to think about providing enough values

00:16:52.900 that these people actually activate and use it and get value,

00:16:55.700 which then allows us to have that conversation with them.

00:16:58.680 Now, our sales team is split into two groups,

00:17:01.940 emerging and commercial.

00:17:03.340 Emerging is 200 employees and less.

00:17:05.680 Commercial is 200 employees and more.

00:17:07.740 The workflow at which those PQLs go through that team

00:17:11.120 is a work in progress.

00:17:13.100 Yeah.

00:17:13.500 But basically, our BDR team, which is aligned

00:17:16.200 to the commercial team, will call into the base of active users

00:17:20.160 and say, hey, this is what you're missing out on.

00:17:22.300 Are you interested?

00:17:23.400 And then hand that over to a commercial rep.

00:17:25.080 Individually, to the individual usage within an organization.

00:17:27.800 Yeah.

00:17:28.180 OK.

00:17:28.620 Similar message regardless of the department

00:17:31.160 those people are part of?

00:17:32.520 It really depends on the size of the organization, right?

00:17:35.180 And again, BDRs are aligned to 200 employees.

00:17:36.920 There's always like, it's like sales enablement

00:17:38.980 or is it also marketing?

00:17:40.960 Because I mean, you guys, yeah.

00:17:42.680 So who are your buyers?

00:17:43.880 Yeah.

00:17:44.180 So number one, there's the video producer

00:17:46.840 inside of an organization, right?

00:17:48.860 That's the person that's like, I need, yeah,

00:17:50.880 I need a place to store video.

00:17:52.520 I need the ability to embed it.

00:17:54.740 I want some basic analytics on the performance of my assets.

00:17:58.080 That person has a lot of different names

00:18:00.200 from director of video strategy to video production.

00:18:03.460 It's an intern.

00:18:04.040 Blah, blah, blah, blah, blah.

00:18:04.740 Yeah, there's lots of that.

00:18:05.440 That person normally rolls up to a VP of content, VP digital, sometimes CMO, demand generation director is another person involved in that.

00:18:14.020 So in marketing, it's really the whole team, right?

00:18:16.420 Because video is becoming such a core part of the strategy.

00:18:19.300 So someone starts using it, and then we have to build consensus with that whole team.

00:18:23.480 So demand gen, for instance, is a checkbox.

00:18:25.640 Does it integrate with Marketo or HubSpot?

00:18:28.240 And can I use it to generate more leads by embedding personalized video and email campaigns?

00:18:33.200 or can I run nurture campaigns based off of how much video someone's watching?

00:18:35.740 Which is a must today if you're doing outbound.

00:18:37.880 Like you've got to personalize a video.

00:18:39.420 I mean, you guys were known for that.

00:18:40.780 You show people how to do that.

00:18:42.040 And still people don't do it, which is crazy.

00:18:44.740 It's amazing how I think, don't take this as any offense.

00:18:49.320 Marketers are listening to this podcast,

00:18:50.520 but there's a lot of lazy marketers.

00:18:53.340 Marketing automation is kind of a victim of its own success, right?

00:18:55.620 It made it easier to send emails to massive lists and email open rates.

00:18:59.800 It's, you know, Gary Vaynerchuk talks about his email and the-

00:19:03.020 Marketers will ruin all things.

00:19:04.480 90% open rates.

00:19:04.900 Yeah, 90% open rates back in the 90s, yeah, late 90s, early 2000s.

00:19:09.000 Now we beat 2% and everybody's doing the hula dance, right?

00:19:12.760 I would be pumped, pumped, yeah.

00:19:13.620 I read your emails.

00:19:14.080 Oh, for open rates.

00:19:15.380 Yeah, we're rocking about 20% and then it's 2% on the click-throughs.

00:19:19.240 1.8 and 2% on click-throughs.

00:19:21.480 I appreciate that, man.

00:19:23.000 Yeah, so that's on the marketing side.

00:19:24.720 Yeah.

00:19:25.120 On the sales side, it's sales reps, it's directors of sales, sales managers,

00:19:29.800 that want to break into new territories,

00:19:31.640 try new things to gather attention.

00:19:34.120 BDR teams doing outbound prospecting and outbound sales.

00:19:37.480 Sales enablement leads that are trying

00:19:39.640 to describe a new workflow or a new pricing to their team

00:19:43.280 and want feedback if the team is watching it.

00:19:46.040 Product managers who are doing design crits

00:19:49.140 or walking through product roadmaps with their teams.

00:19:51.040 So pretty much if there's a video aspect to an organization,

00:19:54.040 you guys play a part there.

00:19:55.820 And here's the thing.

00:19:57.280 There needs to be a video aspect to an organization.

00:19:59.600 And that's the scale of our opportunity.

00:20:01.420 And that's what gets me out of bed every day.

00:20:03.000 Our mission is to help businesses succeed with video.

00:20:05.540 So we build products to help businesses succeed with video.

00:20:11.040 And in regards to the other headwinds that have come up over the years,

00:20:15.040 what are some other big challenges you've had to overcome over the years?

00:20:21.780 Remember you had a big, didn't you hire, maybe, again,

00:20:25.200 I don't know what I can talk about, but the VP of sales culture fit problem.

00:20:28.600 Yeah.

00:20:29.100 Like, what can you, because I mean, that to me

00:20:30.880 is really, a lot of founders are like, OK, I'm

00:20:33.160 going to hire this guy.

00:20:33.980 He's going to come, he's going to solve all my problems.

00:20:35.680 And it's not necessarily, can they bring a playbook to execute?

00:20:38.440 It's, can they fit the culture?

00:20:40.040 And I know you guys, like people, what do you call them?

00:20:42.500 Vidyardians?

00:20:43.280 Yeah.

00:20:43.780 They come in, do you still do the hand in the paint?

00:20:46.940 Yeah, I mean, green paint, door, hand on the wall,

00:20:52.360 look in the eye.

00:20:53.320 Yeah.

00:20:53.960 This is what you're committing to,

00:20:55.940 And don't you ever, you know, forget.

00:20:58.800 I mean, you take culture very seriously.

00:21:01.080 Yes.

00:21:01.540 So I don't know what examples you want to use, you know.

00:21:04.000 But how should founders think about that

00:21:06.540 and how that's going to help you or hurt you?

00:21:10.020 So something that we introduced recently

00:21:11.720 that I wish we'd done from the very beginning of time

00:21:14.180 is what we call the nine box.

00:21:17.300 The nine box is, so I'm an engineer,

00:21:19.720 so I try to use as much data as possible

00:21:22.080 to find these things.

00:21:23.420 But you have an AXE, which on one, the vertical AXE is values, and on the horizontal AXE is performance.

00:21:30.620 And then you plot your entire team.

00:21:33.320 So you ask your managers to plot their contributors.

00:21:36.240 You ask the contributors to plot each other.

00:21:38.420 The SLT, senior leadership team, does the managers and each other.

00:21:42.180 The ELT does themselves and each other.

00:21:45.160 And what you end up with is this chart that has the whole team ranked based on their alignment to performance and values.

00:21:52.480 and you divide it up into these nine boxes.

00:21:55.420 So is it like a two by two?

00:21:56.500 Well, I guess it's a three by three.

00:21:57.880 Three by three.

00:21:58.880 So top right is golden handcuffs, right?

00:22:02.840 We want to keep you in the organization.

00:22:05.580 The number one thing that keeps high performers

00:22:07.560 in an organization is keeping other high performers

00:22:10.540 in the organization.

00:22:12.040 They want to work with great people.

00:22:13.260 Bingo.

00:22:13.800 If an A feels like it's carrying a bunch of Bs and Cs,

00:22:17.060 they will leave.

00:22:18.120 The reason why we built this is because an A came to me

00:22:21.780 and said, I'm going to leave because I'm carrying my team.

00:22:24.200 And I said, tell me more, please, what is going on?

00:22:27.240 And I learned that in the process of going from 50 to 200 employees,

00:22:31.720 we took really great individual contributors and made them managers

00:22:34.940 and never taught them how to fire.

00:22:37.280 Oh, fire.

00:22:38.740 Manage their team, manage people out.

00:22:41.700 Everybody just wants to coach.

00:22:43.400 And new managers actually hide weaknesses from senior leadership

00:22:46.680 because they feel like it's their responsibility to bring that person up.

00:22:49.380 they don't realize I can get rid of that person

00:22:51.840 and put someone in here that I need.

00:22:53.720 So I don't have to carry them.

00:22:54.840 So this tool set, this line box.

00:22:56.400 Dude, that's huge, man.

00:22:57.480 Huge.

00:22:58.020 Yeah, huge.

00:22:58.660 You didn't teach them how to fire.

00:23:00.460 Yes.

00:23:01.280 That is the most important thing to scaling an organization, right?

00:23:05.900 Hiring is relatively easy.

00:23:07.520 If you have a great culture, you attract really awesome people.

00:23:10.400 Talent pipeline.

00:23:11.100 But not everybody is going to be a great fit.

00:23:13.880 Yeah.

00:23:14.240 So on this box, right?

00:23:15.500 Top right corner, performance values alignment, golden handcuffs.

00:23:18.540 let's keep that person let's make sure we build a's around them bottom they gotta go they gotta

00:23:23.980 go immediately right dude this is what i heard vista does private equity vista yeah they uh

00:23:29.500 you know one of their playbooks is essentially talent scoring and pros file and they pretty

00:23:34.300 much say the a's we give them equity we like we make them part of the win and everybody else it's

00:23:40.120 i think it's like a's we we give them comp b's we coach them up or out yeah bottom out yeah like

00:23:47.780 That's like in the first 90 days.

00:23:49.860 Yep.

00:23:50.420 They do this.

00:23:51.060 Yeah.

00:23:51.280 It's crazy.

00:23:51.960 And it's absolutely one of the best things I think

00:23:54.260 an organization can do.

00:23:56.100 And if you build that into your culture from day one, right,

00:23:59.060 you won't run into this issue where all of a sudden-

00:24:00.900 And when you say build into it, is it something you teach?

00:24:04.240 Like, does a new employee know that this

00:24:06.280 is going to be done to them?

00:24:07.180 Yeah.

00:24:07.600 They do now.

00:24:08.580 OK.

00:24:08.860 And a manager, once a quarter, needs

00:24:11.860 to sit down with that employee and have that discussion

00:24:13.780 on where they are on that chart.

00:24:15.560 Relative to that team.

00:24:16.340 Right.

00:24:16.580 And that's feedback from their point of view

00:24:18.480 and the team's point of view.

00:24:19.680 So they're getting 360.

00:24:21.220 Yeah.

00:24:22.560 It's very, very, very valuable.

00:24:23.840 I perform as a type A guy.

00:24:25.000 Like, I don't want to be in the bottom lap.

00:24:26.420 I want to be in the top, wherever.

00:24:27.920 Yeah.

00:24:28.300 And so some of the best people say, hey,

00:24:30.980 this is where I want to be.

00:24:31.900 What do I need to do to get there?

00:24:33.300 Yeah.

00:24:33.460 When I was an intern, interns at the University of Waterloo

00:24:36.860 were rated from below expectations

00:24:40.240 through the satisfactory phase to excellent.

00:24:43.580 And then if you're really good, you got an outstanding.

00:24:46.120 And outstanding required an extra bit of work by the employer

00:24:49.860 to fill in why you were outstanding and why you went above and beyond.

00:24:53.200 And so I'd go into my work term and say, I'm not a good student,

00:24:56.980 so I need outstandings if I'm going to have any shot at a decent career.

00:25:00.360 Tell me what's above and beyond, yeah.

00:25:01.880 What do I need to do to become an outstanding?

00:25:04.440 Give me the list.

00:25:05.560 Tell me what it is.

00:25:06.660 I'm going to do every single one of those things.

00:25:08.320 Point me in the direction.

00:25:09.100 And I always got an outstanding, right?

00:25:11.100 So now we have a vehicle to do that in the company, which didn't exist before.

00:25:14.840 It's talked about.

00:25:16.220 A couple gotchas.

00:25:17.700 Two, if someone is very high values and low performance,

00:25:22.860 that's a coaching opportunity, in my opinion, right?

00:25:25.380 What's going wrong on the performance side?

00:25:27.260 Do they just not have the tools or the skills?

00:25:29.680 Can we invest in that person?

00:25:30.960 Because they bleed the culture.

00:25:32.920 They know what we do.

00:25:34.500 They love the customer.

00:25:36.400 And if you had to rank performance over culture,

00:25:39.400 culture has to come first.

00:25:40.560 Yes.

00:25:40.940 Yeah.

00:25:41.500 You can't have a star player or a high performer

00:25:44.380 that's disruptive and against values and all that stuff.

00:25:48.300 And this is the second gotcha.

00:25:49.840 Back to the original question, right?

00:25:51.720 We had a really, really, really high-performing individual

00:25:54.660 that was not a good values fit.

00:25:57.400 And the way I discovered this values fit

00:25:59.480 is people were coming around them saying,

00:26:01.400 I am questioning everything that is my existence

00:26:05.340 working for this person,

00:26:06.640 and here's the type of stuff that's going on.

00:26:09.440 Peers were saying that stuff as well.

00:26:11.200 and I realized that if I did not move that person on

00:26:14.420 from the business, I was gonna have a mass exodus

00:26:16.940 because people just did not want to work with them

00:26:19.120 and so a high performer with low values

00:26:21.600 is literally what we call cultural cancer

00:26:24.200 and it will rot away at your team

00:26:26.960 and as a leader, as your company gets bigger and bigger

00:26:29.840 it's harder and harder for you to see that

00:26:31.800 unless you build trust and people come to you

00:26:35.020 and you do something about it

00:26:36.740 and so this is a vehicle for me to get perspective

00:26:39.100 of if that exists and how to eradicate it in the process.

00:26:42.460 It's perspective, because they're going to show up right there.

00:26:45.500 And then you've got to figure out, is this, can we work with them on the value side?

00:26:50.260 Yeah, and I would say performance is coachable, because you can tell somebody how to do something

00:26:54.800 and work them through that process.

00:26:55.840 But values are kind of integrated into who you are.

00:26:57.840 They're locked and loaded.

00:26:58.040 Once you're like 25, I feel like I heard this somewhere.

00:27:00.680 Or I heard once by the age of 30, your music preference is pretty much locked and loaded.

00:27:05.840 Most people don't change.

00:27:06.860 most people i know we're very open-minded entrepreneurs we're we'll discover them cool

00:27:11.160 with different things but like for most human beings at 30 you're locked and loaded i think

00:27:16.460 it's like pretty much like 25 like i've heard seven really well no in the kids side my wife

00:27:22.680 renee said that to us she's like you know we don't have to be really really good for seven years

00:27:28.520 because that's gonna you know so i was like thank goodness because i can't keep this up

00:27:32.500 I'm just kidding.

00:27:34.200 Oh my gosh.

00:27:34.800 I like that.

00:27:35.300 Yeah, no, so that's fair.

00:27:36.700 So if people are, you know, but so prior to that,

00:27:40.380 you guys must have done some kind of like career path

00:27:42.700 development, but it just didn't incorporate this?

00:27:44.760 Yes, we don't always ask people what they want to do

00:27:47.020 and where they want to go and try to align them

00:27:49.240 to that path, right?

00:27:50.300 Yeah.

00:27:51.600 And that's a great thing.

00:27:52.660 That needs to be a part of this as well.

00:27:54.400 But the problem with that is career development and path

00:27:57.500 development doesn't necessarily align always

00:28:00.760 to the corporate objectives of the company.

00:28:03.400 If somebody wants to be a CEO, while I'm sitting in this role,

00:28:08.800 there's not really a clear path of that.

00:28:10.760 But I can give them access to the stuff CEOs would do

00:28:13.960 that I am learning and the stuff I'm doing.

00:28:16.280 The biggest learning for me on being a CEO

00:28:18.100 is that as a founder, you're the person who's really

00:28:19.960 good at starting shit.

00:28:21.700 CEO is the person who's really good at scaling it.

00:28:24.520 That's the biggest difference.

00:28:25.520 And applying these types of things like the nine box

00:28:27.640 to ensure the company is performing and amplifying

00:28:30.760 their efforts through all the people

00:28:32.240 that they've brought into the organization.

00:28:33.700 So through that, we've had a number

00:28:35.680 of entrepreneurs that have now spun off

00:28:37.780 their own companies that we've worked with and helped

00:28:40.200 do that, that we funded through Garage Capital.

00:28:42.860 So the Vidyard Mafia starts to get developed

00:28:45.620 through this process of helping people get better and plan.

00:28:49.240 Because you know their values.

00:28:50.620 You've seen them operate over time.

00:28:52.240 So that's whole performance over time thing.

00:28:54.140 Yeah.

00:28:54.680 Like, I love the people I work with.

00:28:56.500 I honestly can say that.

00:28:57.700 And I love seeing them progress and develop

00:29:00.220 and do the things they want.

00:29:01.180 So just because they leave doesn't mean you

00:29:02.440 want to stop working with them.

00:29:03.400 Bingo.

00:29:03.700 If you can save it, yeah.

00:29:04.880 But while they're in the business,

00:29:06.340 I'm very clear that this is what we need to do.

00:29:08.560 And if you can succeed at this, then these

00:29:10.360 are the options that will open up for you.

00:29:12.880 And having that clear expectation setting conversation,

00:29:16.480 at first it's hard, but it's really

00:29:18.900 the easiest conversation to have, and it's

00:29:20.320 the most important one to have.

00:29:21.400 What are you doing?

00:29:21.900 I mean, internationally, I think we were just

00:29:23.140 talking about deploying a new office in Dublin or Europe,

00:29:27.860 or what have you learned about kind of growing past North

00:29:32.820 America and kind of scaling that up?

00:29:35.940 So we've actually had a few shots.

00:29:37.320 Is it a customer poll?

00:29:38.080 A few shots at it.

00:29:39.160 OK.

00:29:39.660 So one is there's a rule of thumb out there

00:29:43.960 that Bessemer wrote in the original 10 laws of cloud,

00:29:47.660 which was removed from the updated version.

00:29:49.780 It's funny because it was called cloud.

00:29:51.200 Now it's kind of, I guess, SAS.

00:29:52.720 10 rules of SaaS.

00:29:53.600 Byron's store first, who does cloud, which is what it is.

00:29:55.420 I like it as cloud, it's more encompassing.

00:29:57.920 Yes, it's more than just because cloud doesn't necessarily

00:30:00.840 mean your subscription revenue and all that stuff.

00:30:02.940 Yeah, cloud is a technology model.

00:30:05.780 SaaS is a business model, right?

00:30:07.060 Yeah.

00:30:09.060 There's a couple of things we've learned.

00:30:10.200 One, their rule of thumb was wait till you're

00:30:13.840 about $1 million in MRR. Before that,

00:30:17.300 you probably don't know your motion well enough

00:30:19.460 to truly have it be successful or apply the local.

00:30:22.500 When you use the word motion, for those that have never heard it,

00:30:24.540 it's really kind of the go-to-market.

00:30:25.880 Yeah, go-to-market strategy and the sales motion,

00:30:28.780 the motion that you use to develop pipeline.

00:30:31.040 It's like a playbook, right?

00:30:32.180 Yeah, it's how do you create throughput and velocity.

00:30:34.920 Exactly.

00:30:35.440 And so we tried to force ourselves into EMEA

00:30:38.960 through a number of different strategies.

00:30:41.300 One, sales rep wanted to move to London.

00:30:44.320 So we moved her there and said, go for it and see what you can do.

00:30:48.100 um that didn't necessarily work the greatest right i think there is a multitude of reasons but this

00:30:55.360 is a very different culture to sell into and europe is very bifurcated from a country to

00:31:01.820 country perspective versus north america is this gigantic market that's very homogenous right if

00:31:07.100 you're canadian you can't understand how to do transactional sales sales into the u.s europe

00:31:12.720 tends to be very relationship based still so very different sales process so that didn't work

00:31:18.000 Prior to that, you know, we had a person on the team who was an Irish dual citizen and wanted to move back to Ireland.

00:31:25.140 And so we said, hey, go to Ireland and set up shop and introduced them to the Canadian consulate and the IDA and basically got things rolling.

00:31:33.860 The day he went from just a straight salary to a comp model, which reduced his base and had a quota, he quit.

00:31:43.040 And that same day, he also posted a picture of himself climbing Machu Picchu in Peru.

00:31:46.960 So that didn't work either.

00:31:49.360 The lesson there is if you want to do a new region,

00:31:53.380 you've got to go all in.

00:31:55.260 And by going all in, it means hiring someone local

00:31:58.240 that understands the market, that has experience

00:32:00.260 in your landscape, and has sales experience.

00:32:04.740 Somebody who is senior, I think, but is also willing

00:32:07.680 to roll up their sleeves and go out there

00:32:09.740 and close some business and prove the model works

00:32:12.360 in a different economy.

00:32:14.120 And then it starts scaling around.

00:32:15.280 Because it is different, the buying process.

00:32:16.960 the deck, the communication, the relate.

00:32:19.040 I mean, it's not as easy like, oh, we're winning over here.

00:32:21.820 Let's just.

00:32:22.420 Bingo.

00:32:23.040 Yeah.

00:32:23.360 And then what about like you or a founder?

00:32:25.700 How do you know when you're ready?

00:32:26.400 No.

00:32:26.840 Do you think you should be present in that?

00:32:29.020 Like, are you going to spend more time here?

00:32:30.560 Yeah.

00:32:30.880 Oh, yeah.

00:32:31.540 Yeah.

00:32:31.840 Because like somebody else argued recently,

00:32:33.880 they were like the founder needs to.

00:32:35.440 Essentially, the founder's really good at starting.

00:32:37.500 So they go in.

00:32:38.720 They're there, though.

00:32:39.760 They bring that person.

00:32:40.840 They work with them.

00:32:41.680 They build the thing.

00:32:42.520 They backfill.

00:32:44.140 I think it depends what you're trying to do.

00:32:45.820 If you're trying to build a true secondary office

00:32:49.180 that has development resources, et cetera,

00:32:52.120 I think that's the case.

00:32:54.140 But from a sales perspective,

00:32:56.380 if we're doing it here,

00:32:57.460 it's because we're running an inside sales team.

00:32:59.440 And for me to be present means me being on calls.

00:33:02.260 It also means my sales leader being on calls.

00:33:03.580 You can do that from wherever.

00:33:04.740 And what we're finding is we have a momentum in market.

00:33:07.560 We're already closing about 10% to 15%

00:33:10.120 of new ARR per quarter in EMEA.

00:33:13.240 And we're not doing anything to market here.

00:33:15.060 And what was the rule, I guess, for when you should do it?

00:33:19.240 A million dollars in MRR, which we are well, well, well beyond.

00:33:24.660 So we're kind of doing it late.

00:33:25.620 But this pull and this momentum is there.

00:33:28.560 And so now we're saying, OK, we have an amazing partnership

00:33:32.100 with Marketo Adobe in that they're a reseller.

00:33:35.160 So they'll sell us on their paper.

00:33:36.600 Talk about this one, because this one's interesting.

00:33:38.680 This one's really exciting.

00:33:40.020 So what can you share about those details?

00:33:41.640 I don't want to get you in trouble.

00:33:42.860 So no, no, no.

00:33:44.400 like the splits and stuff, because I find it fascinating.

00:33:46.100 Oh, the revenue splits.

00:33:46.820 Yeah, yeah, yeah.

00:33:47.780 So basically, we were the number one Marketo launch point

00:33:51.840 partner in terms of shared installs.

00:33:54.360 And what we found early on was that the people using Marketo

00:33:58.200 wanted to use video, and they wanted

00:34:00.060 to use a video platform that integrated into Marketo,

00:34:03.160 as in into the data set, so they could do nurture programs

00:34:05.860 based on video views and easily integrate video and email

00:34:08.780 campaigns.

00:34:09.280 Yeah, like if somebody watched two-thirds of a video,

00:34:11.020 go do this campaign.

00:34:12.000 If they only watched 10 seconds, go do this.

00:34:13.960 So we had hundreds of shared customers.

00:34:17.080 Adobe comes along, buys Marketo to start winning

00:34:19.780 mid-market marketing strategy.

00:34:21.460 And Marketo says, hey, Vidyard's a great company.

00:34:25.060 We want to start selling them on our paper

00:34:27.040 to deepen the relationship with customers,

00:34:28.960 make them more sticky, and build a strong technology

00:34:31.840 ecosystem around what they call the system of record marketing.

00:34:34.760 And for some companies, Adobe's got 800 salespeople?

00:34:39.440 Marketo has 600.

00:34:41.520 Adobe would have thousands.

00:34:43.060 But I mean, essentially, you go to Marketo,

00:34:44.960 they have 600 salespeople.

00:34:46.020 You guys have 80 or whatever.

00:34:47.920 And all of a sudden now, you can increase.

00:34:50.120 You don't have to add to your CAC.

00:34:52.360 You can essentially start saying, hey, let's work at a reseller.

00:34:56.440 And we'll talk about the economics for them.

00:34:59.160 And they're doing it because they may not

00:35:01.220 have the pipeline of innovation.

00:35:03.160 And I'm not saying that's true for them.

00:35:04.420 But that's the way people need to think about it,

00:35:06.360 is if we can add innovation to create a real solution,

00:35:11.640 which shared install base is probably a really good place

00:35:13.800 to look.

00:35:14.300 I know Microsoft did this for years.

00:35:16.880 And then that way, they can essentially increase ARPU

00:35:20.520 and all that stuff and just get better win rates.

00:35:23.340 It can increase all that stuff.

00:35:25.040 How do you do that successfully?

00:35:26.860 Because how do you get the mind share of these reps?

00:35:30.660 How many people on your team do you

00:35:32.080 have just managing partner training?

00:35:35.920 Yeah, six right now.

00:35:39.840 And are they just for the Marketo or any, all the partners?

00:35:43.100 That includes HubSpot, Marketo, and then we're adding to it for Salesforce.

00:35:48.800 And how do they get time with those salespeople?

00:35:51.860 Is it part of the agreement?

00:35:53.560 Is it big barn stealing?

00:35:55.920 So there's one piece of it that's part of the agreement.

00:35:58.960 So an agreement to allow us to come in and run certain enablement sessions, get meetings,

00:36:06.540 get press releases, all that stuff.

00:36:08.320 That gets negotiated up front.

00:36:09.840 And it's important.

00:36:11.360 Some co-marketing, juice, some dollars, la, la, la, la.

00:36:15.380 And then it's just pure hustle.

00:36:17.960 So we've got an individual on this particular partnership

00:36:21.040 that travels around the world, gets in front of sales managers,

00:36:24.520 gets in front of offices.

00:36:26.040 Yep.

00:36:26.380 OK, so they essentially, their quota is aligned with those people are selling.

00:36:29.280 Their quota is what ideally Marketo Adobe is ultimately going to sell.

00:36:33.160 Now, this is the first quarter for it that we're currently in.

00:36:36.900 However, for all intrinsic purposes,

00:36:40.480 there are over 100 active opportunities now

00:36:45.240 through this relationship that we've

00:36:47.380 generated in the past seven weeks.

00:36:49.140 Wow.

00:36:49.560 So it looks like, assuming these come through and close,

00:36:52.220 it's going to be a very productive relationship for us.

00:36:54.280 Yeah.

00:36:54.740 And then ratio, I think it was 60-40.

00:36:58.980 Oh, in terms of the revenue split?

00:37:00.400 Yeah.

00:37:02.400 And you can just not tell us.

00:37:03.460 Yeah, it's dynamic.

00:37:04.660 You came up with a number there, which isn't entirely inaccurate.

00:37:08.340 What you want to make sure, though, is that over time.

00:37:10.280 I didn't say which way it was either.

00:37:11.200 Yeah, who knows?

00:37:11.840 Yeah, who knows?

00:37:12.340 What you want to make sure is that over time,

00:37:15.340 you retain as much of the value of the customer as possible.

00:37:19.180 So year one can look a certain way, but year two, three, and four

00:37:21.740 can be totally different.

00:37:22.800 Yeah.

00:37:23.300 I know lead pages, I think they were used to do like 40% in year

00:37:28.720 one, and then they would go down to 10% year two.

00:37:30.600 I've seen some people do 40% year one and nothing year two.

00:37:34.540 So it can really depend.

00:37:36.020 Because I mean, there's so many different aspects,

00:37:37.520 even like the investment of co-market.

00:37:39.260 When I did Flowtown, we did 13 partner integrations.

00:37:42.760 And the first one was, pay us to do the integration.

00:37:45.600 So that was cool.

00:37:46.220 They paid us engineering.

00:37:47.640 But then I got smarter.

00:37:48.560 And it was like, OK, pay us to do the integration.

00:37:51.380 And agreed to a $50,000 marketing budget.

00:37:54.300 And a blog post.

00:37:55.320 And a case study.

00:37:56.000 And like, yeah, so you can have a lot of fun with it.

00:37:57.840 But the big idea that you saw, and that I'm assuming

00:38:01.200 if this trends in the productivity levels you want,

00:38:04.340 is to then go find other companies

00:38:06.020 where you can deploy this, because then you

00:38:08.000 don't have to over-invest in your sales team

00:38:11.100 and still build pipe.

00:38:12.160 Yeah, and there's some model that you develop internally

00:38:14.920 that you look at your cost of sale,

00:38:16.660 or your cost of goods sold, you think about your margin,

00:38:20.780 you think about your LTV to CAC ratio, all this stuff,

00:38:23.240 and you can build what that ratio of revenue split should be.

00:38:28.820 And then understanding what the motivation is of Adobe

00:38:31.480 in this particular case, right?

00:38:32.700 They're a very large organization

00:38:34.820 doing billions of dollars in revenue.

00:38:37.620 New ARR is important to them, but more importantly

00:38:40.420 is that they retain the customers that they have.

00:38:43.020 Oh, so they could actually look at their data set

00:38:45.100 and say customers with a Vidyard integration

00:38:48.680 retain at a higher rate.

00:38:50.480 It's in our interest to get this deployed.

00:38:52.480 We have strong retention rates, right?

00:38:53.760 Now, would you show them that if you had it?

00:38:55.420 Like, did you have that data in regards

00:38:57.060 to their customer retention?

00:38:59.340 So when we do these things and we assign mutual NDAs,

00:39:02.680 what gets asked of us, we like to ask of the partner in return.

00:39:06.560 Oh, that's a good way to look at it.

00:39:08.600 Because it helps us understand motivations,

00:39:11.380 and it makes negotiating easier, and it makes understanding.

00:39:13.540 That's a good way.

00:39:14.080 When you ask of me, I feel like I might ask of you.

00:39:17.140 And I think that's a good strategy for M&A as well,

00:39:19.480 right?

00:39:19.780 If you're being acquired by anything

00:39:21.240 that could potentially be competitive at some point

00:39:23.260 in the future, you know, a lot of these companies just

00:39:25.460 go out on fishing expeditions and pump you for information.

00:39:28.680 You know, I want some information.

00:39:30.640 Yeah, what are you worrying about the market?

00:39:31.600 or mutual NDA, which, you know, is what it is.

00:39:35.360 But yeah, I think it's really important to get that as well.

00:39:38.140 Who are the founders that you look at in the market today

00:39:42.040 or companies?

00:39:42.840 I mean, obviously, Salesforce, Benioff, blah, blah, blah.

00:39:44.980 But like upcoming, I mean, yeah.

00:39:46.720 He's in that blah, blah, blah category now.

00:39:48.420 Yeah, the $120 billion market cap or whatever it is.

00:39:52.360 But maybe up and coming that you think

00:39:54.760 are doing really smart things from a distribution point

00:39:56.780 of view or product point of view, maybe lesser known.

00:40:00.840 Yeah, yeah, yeah.

00:40:01.600 Yeah, I mean, so really well-known.

00:40:04.900 I love Brian Halligan and Dharmesh.

00:40:07.780 I think they culturally are very aligned

00:40:11.560 to the way we think about building business.

00:40:14.140 Do you see the new push for distributed teams or remote teams?

00:40:17.860 Dharmesh just did a talk, and he said, for years,

00:40:20.100 I argued against it because I just felt like everybody's

00:40:24.040 going to be in one spot.

00:40:25.060 And then as Dharmesh is a technical guy,

00:40:27.840 he just asked himself, what's the probability?

00:40:31.300 the A players are going to be within a 100-mile radius

00:40:33.460 of our headquarters.

00:40:35.280 Low.

00:40:36.120 All right.

00:40:36.500 So if we want to hire the best people,

00:40:38.840 and so they flipped the whole thing now

00:40:40.460 where they've got virtual pods and distributed teams.

00:40:43.300 The only thing I'd say with that is it's also a scale thing, right?

00:40:46.320 Because the volume of A is within a 50-kilometer

00:40:49.980 or 50-mile radius that you need when you're a 10-person company.

00:40:54.300 It's probably plenty, right?

00:40:55.360 But when you have, I don't know, 700, 800 engineers or thousands,

00:40:59.680 I don't know,

00:41:00.220 So then all of a sudden, yeah, you want more A's.

00:41:02.420 That's a real problem.

00:41:03.200 You're going to have to reach elsewhere.

00:41:03.720 So it may not be something you do at the beginning.

00:41:05.180 It's something you can do at scale.

00:41:06.600 Yeah, for sure.

00:41:07.180 You guys are mostly in one office?

00:41:08.960 Yes, especially engineering.

00:41:11.380 Waterloo, I think, is one of the best, if not the best place in the world to hire and retain talented skilled engineers.

00:41:17.000 I mean, Amazon, Facebook all figured it out.

00:41:18.980 Microsoft, yeah.

00:41:19.900 Lots of people are there.

00:41:20.940 They all recruit from there for that particular reason.

00:41:23.320 So that's why we're there.

00:41:24.360 Yeah.

00:41:24.760 So hopefully that advantage retains for a long time.

00:41:28.120 I mean, our population catchment area, if you include the GTA,

00:41:31.360 is like 8 million people.

00:41:32.900 So it's a lot larger than I think a lot of people assume.

00:41:35.780 And we've got people commuting from all over the place

00:41:37.620 into the office now, right?

00:41:38.640 Commuting from Toronto to Waterloo is a lot better

00:41:40.620 than commuting from Waterloo to Toronto.

00:41:42.080 Yeah, you're going against traffic, yeah.

00:41:44.540 Yeah, yeah.

00:41:45.260 So culture, HubSpot.

00:41:47.220 Yeah, so culture, long-term thinking, customer advocacy,

00:41:51.840 obsession, HubSpot.

00:41:53.820 Lesser-known founders doing really cool things.

00:41:56.700 There's a gentleman named Martin Bissari, who is a co-founder with two of his brothers,

00:42:05.020 a really interesting company based in Waterloo called Applyboard.

00:42:09.080 And what Applyboard is doing is helping international students apply to North American schools.

00:42:16.220 Sounds trivial. You sound like you just go through a process.

00:42:18.960 But what they do is streamline the application process so that it comes through their technology and goes out to a bunch of different schools.

00:42:25.860 Like pre-vetted or packaged in a way that the school is like.

00:42:28.640 Yeah.

00:42:29.200 And it's getting to the point where they have such a volume

00:42:32.220 of international students coming in,

00:42:34.160 which is where post-academic institutions

00:42:36.540 make the vast majority of their profit

00:42:38.640 because the fees are much higher, tuitions are much higher,

00:42:42.120 are coming to them and saying,

00:42:43.580 what should we teach to attract more students

00:42:47.160 to our academic institution?

00:42:49.200 And their act one, in my opinion, is helping this happen.

00:42:52.940 And the universities pay them a very strong position

00:42:55.080 on tuition to do this.

00:42:57.120 Act two is these international students need bank accounts.

00:43:00.300 They need lines of credit.

00:43:01.480 So they created some valuable tools for the students looking.

00:43:05.560 And for the universities.

00:43:06.560 And they're taking a big on the, I mean.

00:43:09.200 It's a marketplace for international students.

00:43:11.040 And that's a big dollar amount.

00:43:12.380 I mean, tuition's a big number.

00:43:13.920 Yeah.

00:43:14.180 You can't take a piece of that.

00:43:15.080 And now, you know, banks can't really figure out

00:43:17.260 how to underwrite.

00:43:18.100 Let's say a student comes from Pakistan.

00:43:19.880 Yeah.

00:43:20.060 You know, how do you underwrite a loan against family wealth

00:43:23.340 or assets or whatever, right?

00:43:24.480 And so they now have an opportunity to broker that transaction as well.

00:43:27.720 And their second act is that is going to be.

00:43:29.620 I mean, once you get into that, the vertical.

00:43:31.540 Yeah, I mean, and the third largest export in North America is education.

00:43:36.980 So not only is it, you know, this amazing tool, it's a huge market, right?

00:43:42.900 And very few other people are doing that one.

00:43:44.740 So that one's cool.

00:43:45.720 On the market, just disrupting a kind of pretty generic, archaic.

00:43:49.660 Yeah.

00:43:50.220 Yeah.

00:43:50.720 And then another one, you know, I have to make a plug for her

00:43:53.700 because I love her to pieces is my wife, who you've met.

00:43:56.440 Donna.

00:43:56.780 Who's just an operational monster.

00:44:00.880 It's impressive.

00:44:01.640 In a good way.

00:44:02.480 And is such a strong advisor to me

00:44:04.560 and a lot of the stuff I'm going through

00:44:06.200 and experience as an operator.

00:44:08.040 I mean, she's been through an acquisition.

00:44:09.660 She was at NetSuite.

00:44:10.560 She led product for the human capital management group,

00:44:14.220 which was a product that ended up being called Sweet People,

00:44:17.280 which I think is a cool name for it.

00:44:18.620 And then they got acquired by Oracle.

00:44:20.080 She left and has now started a company called Kite.

00:44:23.580 I mean, the list goes on and on.

00:44:24.860 I could keep raving about awesome people.

00:44:27.400 Waterloo is full of them.

00:44:28.680 You got to, we got to get you there.

00:44:31.020 And again, last time I was there, man, you guys packed my, remember that day?

00:44:34.000 It's you and Michael.

00:44:35.500 Macaulay.

00:44:36.080 Yeah, it's just like packed, like go do a talk here, round table there.

00:44:40.620 That bar, I was doing a talk at a bar that night.

00:44:42.600 I mean, I pretty much showed up from 7 a.m. till 9 p.m.

00:44:46.420 And then it was like some black car back to Toronto.

00:44:48.500 Have you met Michelle from ClearBank?

00:44:52.580 No.

00:44:53.480 We've emailed, what's his name, Andrew?

00:44:55.640 Andrew D'Souza.

00:44:56.180 Andrew and I know each other.

00:44:57.260 Haven't met with Michelle.

00:44:58.400 Emailed them not too long ago.

00:45:00.440 And we couldn't meet up.

00:45:01.840 That's an amazing.

00:45:02.660 So that's just the last one.

00:45:03.500 Are they in Waterloo or Toronto?

00:45:04.820 They're Toronto.

00:45:05.900 Yeah.

00:45:07.160 Andrew's a Waterloo guy, Waterloo grad from Systems.

00:45:10.040 Same program as me.

00:45:11.740 They're a couple.

00:45:12.720 Yeah.

00:45:13.280 Building an awesome company that's completely disrupting

00:45:16.100 startup finance.

00:45:16.960 Yeah.

00:45:17.300 So RBF for e-commerce for the most part,

00:45:19.680 revenue-based financing.

00:45:21.240 Yeah.

00:45:21.740 It's cool.

00:45:22.340 It's really cool.

00:45:23.300 Dude, this whole like, I was talking to Nathan Latka,

00:45:26.600 because he's in the financing space.

00:45:29.160 And it's just neat how there's just more options,

00:45:32.620 non-dilutive capital.

00:45:35.360 Venture doesn't have a fit for every company.

00:45:37.760 No.

00:45:38.540 It's like somebody, I like the analogy

00:45:40.280 of pouring rocket fuel in a Jetta.

00:45:42.280 If you're a Jetta, man, it's dangerous.

00:45:44.820 And you know what?

00:45:45.320 That Jetta, Volkswagen.

00:45:47.540 Yeah, whatever.

00:45:48.740 I mean, I had a Jetta.

00:45:50.540 Dude, my first car.

00:45:51.540 Yeah, an 87 diesel.

00:45:52.880 It took me all the way to California and back, right?

00:45:55.080 Yeah.

00:45:55.700 And the reality is, is you can cover a lot of distance in a Jetta.

00:45:59.360 Yeah.

00:46:00.620 And I think over time, you can create a lot of value as well,

00:46:05.300 right, because you're not paying for that.

00:46:07.040 Repairs are cheaper than it is in the Ferrari.

00:46:09.380 Yeah, just getting a mechanic to work on it is way different.

00:46:12.320 It's emotional anxiety.

00:46:13.700 Yep.

00:46:15.300 I mean, looking back over the last decade of building

00:46:18.220 companies, and you've been pretty much an entrepreneur.

00:46:21.420 Like, even before, yeah, did you have a video production

00:46:23.900 company before Vidyard?

00:46:24.960 Redwoods Media Video Production Company.

00:46:26.340 Then I ran a semiconductor blog, which I sold.

00:46:30.180 Yeah, and your brother's an entrepreneur.

00:46:31.860 I mean, this is just what you do.

00:46:33.000 You create.

00:46:33.840 Looking back over your time at Vidyard

00:46:36.060 and really over the years, who have you

00:46:39.440 had to become to be the person sitting here leading this

00:46:42.720 company?

00:46:45.300 Wow, that's deep. Who have I had to become?

00:46:49.740 Not that we're finished in any means, like on a journey point of view,

00:46:53.020 but like just what are some of those perspectives,

00:46:56.440 beliefs that had to shift for you to continue?

00:46:59.600 Yeah, I think I have had to change a lot in the process.

00:47:06.820 And in some ways, I have reflected that I've lost a little bit of who I was

00:47:17.700 and that person I liked.

00:47:20.880 I never was someone with like an edge or like someone who could be irritable

00:47:29.540 or someone who looked at a person as a resource other than a human being.

00:47:38.080 And I think one of the aspects of becoming a CEO and not just being a founder

00:47:43.060 is that you have to make really hard decisions that force you into those positions.

00:47:47.900 And those hard decisions you wear, like you brought up the example of the individual

00:47:52.120 I had to terminate for being a bad values fit.

00:47:54.580 i had to think about that person as a resource that was potentially going to fuck up my company

00:48:00.280 and my dream and in the process do so for a bunch of people that i loved and respected that were

00:48:07.640 around the table as well and when you have to make those decisions and you battle with them

00:48:13.720 and it challenges your personal sense of values that's when i think you really and truly grow

00:48:20.640 but it's important to be able to retain who you were before that

00:48:25.500 because that's the person that people love being with

00:48:28.440 and love spending time with.

00:48:29.780 And so that's how I think I can be jovial and very light about things

00:48:33.400 but also when it comes down to it, I am very serious and structured in my approach.

00:48:38.480 And again, it's that transition from being a founder to a CEO

00:48:42.220 and you've got to surround yourself with people that can help you do that

00:48:45.200 which is why I do the bald-faced trip, right?

00:48:47.620 It's a vacation, but it's also getting exposed to a bunch of people in similar situations

00:48:53.240 that are empathetic to the challenges you have and help normalize some of those challenges

00:48:58.680 and some of the reactions and things you need to do in response to those challenges.

00:49:02.720 So the process of changing is ever-present.

00:49:07.500 I think for me, it's ensuring that I'm able to always come back to who I am.

00:49:12.920 And Donna is also very, very good at anchoring me and leveling me.

00:49:18.140 We ended up just in April, we bought a property on Lake Huron,

00:49:23.780 about an hour and a half from where we live.

00:49:25.860 And I go out there and I cut down trees and, you know,

00:49:29.360 I ride this ATV through the bush and do some surfing and skimboarding

00:49:35.220 and stuff that I love.

00:49:37.140 And it has nothing to do with the context of work, but it recharges me.

00:49:40.940 And when I'm going through those uncomfortable moments, I have this thing that I think about and reflect on and I know is this representation of who I truly am.

00:49:50.980 But these are the things I need to do with my responsibility as it adheres to our stakeholders, right, which is our customers, our team, our community, and our shareholders.

00:50:01.360 And I think, again, back to this transition of being a founder to CEO, all of a sudden you're responsible for so much more than you had ever imagined.

00:50:07.900 and you need to be representative of those stakeholders

00:50:11.280 in everything you do professionally,

00:50:13.360 but again, not lose who you are at home.

00:50:17.080 Dude, appreciate you, man.

00:50:19.040 Grateful for our friendship.

00:50:20.060 Thank you, Dan.

00:50:20.680 Cheers, man.

00:50:21.560 Cheers.

00:50:21.980 Thanks for watching this episode of Escape Velocity.

00:50:25.220 Be sure to like and subscribe

00:50:26.760 and leave a comment with your biggest insight

00:50:29.200 from our conversation.

00:50:30.700 Be sure to check out the next episode.

Dan Martell - October 08, 2020

From Paid to Freemium with Michael Litt, Co-Founder & CEO @ Vidyard.com - Escape Velocity Show #38

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