Dan Martell - Integrate Core Values Into a SaaS Business with David @ Grasshopper.com - Escape Velocity Show #5

00:00:00.000 with fast growth there's lots of problems but more importantly lots of problems are hidden

00:00:04.320 right so as soon as you hit a plateau all the problems just appear right there's cultural

00:00:09.600 problems there's issues with processes there's marketing issues there's all sorts of stuff and

00:00:14.400 when you're growing at doubling rates yeah it's just all ignored right it's like ah and what were

00:00:18.560 your growth rates in the early days oh we more than doubled in the every year yeah

00:00:30.000 What's up, David?

00:00:37.400 How's it going, man?

00:00:37.980 Good.

00:00:38.220 How are you?

00:00:38.740 Cool.

00:00:39.040 I'm doing amazing.

00:00:40.060 I'm here with David, serial entrepreneur, investor, good dude.

00:00:47.360 We've known each other for over a decade.

00:00:49.180 I actually have the video.

00:00:51.920 I think I shot it on a flip cam.

00:00:53.440 Is this possible?

00:00:54.140 I think it was like a little desktop one, I think,

00:00:56.380 like on a tripod thing or something.

00:00:58.000 Yeah, yeah, yeah.

00:00:58.120 No, I definitely had a holster.

00:00:59.460 or this is, I want to say, 2007, 2008.

00:01:02.640 You were kind enough, I think, maybe a cold email.

00:01:04.920 I don't know.

00:01:05.420 Do you remember who introduced us, or was it cold?

00:01:07.180 I think it was a cold email.

00:01:08.100 I remember we sat in the front conference room at Grasshopper.

00:01:10.680 And we talked, yeah.

00:01:11.880 So cold email.

00:01:13.860 Founder, co-founder of Grasshopper,

00:01:16.820 Chargify, several other SaaS companies' ideas.

00:01:21.600 I just asked you about incorporated businesses.

00:01:23.680 You mentioned six or seven?

00:01:25.620 I think it's six in total that we put real time into, right?

00:01:28.360 How many domains, though?

00:01:29.980 So that's the question.

00:01:31.000 When you ask, it's like, OK, how many business have you

00:01:33.320 started?

00:01:33.820 How many domains have you bought for ideas?

00:01:36.460 Oh, way too many.

00:01:37.480 Far too much money and, I mean, like, hundreds of domains.

00:01:40.120 Hundreds of domains.

00:01:40.860 Hundreds.

00:01:41.680 Including ones that we bought, like premium domains.

00:01:43.800 Like, stuff that is more than $10,000 domains.

00:01:46.900 Like single word, double word, really good stuff.

00:01:49.340 I asked him the other day, David's

00:01:51.000 now kicking off a new company called superfat.com,

00:01:54.260 I'm assuming.

00:01:54.760 Yep.

00:01:55.880 And so I was like, dude, how many domains

00:01:58.060 you have.

00:01:59.080 But today, we're going to talk about scaling SaaS companies.

00:02:01.820 And you just got off stage speaking at LTVConf

00:02:05.540 here in New York City.

00:02:08.140 As you, like, let's go back.

00:02:09.940 The origin story, you know, people

00:02:11.420 can Google online, listen to a bunch of other interviews.

00:02:13.580 I want to talk about, like, the marketing, the distribution

00:02:16.540 channels, the growth.

00:02:17.680 I mean, you know, there was a lot of people don't know this.

00:02:20.160 I was a customer, got Vmail back in the day.

00:02:22.520 And then there was the big rebrand with the chocolate,

00:02:27.040 The chocolate-covered grasshoppers.

00:02:28.540 Chocolate-covered grasshoppers to the grasshopper.com rebrand.

00:02:33.120 But even before that, you guys did a lot of stuff marketing-wise.

00:02:37.660 What were those?

00:02:38.840 When I look at growth charts, they typically

00:02:41.320 have step functions of growth, right?

00:02:42.920 They're not linear.

00:02:45.620 What were some of those for you guys got vmail early days?

00:02:49.040 Yeah, so we were always just 100% marketing-focused.

00:02:53.540 The first software was really garbage.

00:02:55.660 I mean, like, legitimately not good software, right? 0.67

00:02:58.720 It's just bad product.

00:02:59.560 Yeah.

00:03:00.460 And all we did was market, right?

00:03:02.380 And just brought customers in.

00:03:03.980 Really?

00:03:04.480 Yeah.

00:03:04.740 That's all we did.

00:03:05.620 And when you have a product that you're embarrassed of,

00:03:08.160 how do you continue to resolve?

00:03:11.680 I mean, because that's the thing, right?

00:03:13.180 You know that it's not great, but is it just

00:03:15.460 like the vision was going to be there?

00:03:17.340 I think, first of all, most customers don't care, right?

00:03:20.080 Like, the way that you look at the software

00:03:22.700 is far more critical than customers.

00:03:24.500 Like, it did the function it was supposed to.

00:03:26.480 It didn't do it perfectly, it didn't look great,

00:03:28.700 the design was horrible, right?

00:03:30.240 So we had a great branded, like, beautiful website

00:03:32.680 on the front end, and then the back end

00:03:34.240 was like, just horrible, right?

00:03:35.580 But, so for us, that was a hard, that was like,

00:03:37.760 oh my god, can't believe this.

00:03:39.360 Customers did not care, and we knew that

00:03:41.760 because they continued to pay, right?

00:03:43.500 So like, that's all that mattered.

00:03:44.800 And what year is this, to give context?

00:03:47.300 So this is now 14 years ago, so 2004.

00:03:51.060 2004, and what were some of the marketing

00:03:54.240 channels that you guys deployed so i mean the early days this was

00:03:57.820 omniture before adwords adwords yeah a lot of people

00:04:01.020 watching don't know this stuff i know i feel so when i say

00:04:03.780 um and i mean clicks were like cents right so there was a benefit in

00:04:10.700 starting then like we drove traffic for a relatively low price

00:04:13.880 um and there was no competition people didn't understand what to do with this

00:04:18.000 they had no idea right um that's why today i tell people always

00:04:21.460 look for these new channels that get ignored,

00:04:23.680 or they're brand new.

00:04:24.780 What would be an example of something

00:04:26.460 that people might look into today?

00:04:27.840 So I mean, I think Reddit's really interesting, right?

00:04:30.120 Depending on how you're targeting,

00:04:31.880 there's interesting traffic you can generate from Reddit.

00:04:35.080 I think for us, we looked at radio.

00:04:37.020 This was a number of years ago.

00:04:38.100 Today, I think that started to-

00:04:39.400 You guys were sixth advertiser on Howard Stern.

00:04:42.200 Super.

00:04:42.620 Now, ZipRecruiter's just lighting that channel up. 0.94

00:04:44.920 Yeah.

00:04:45.260 But I mean, they're paying different CPMs than you guys.

00:04:48.160 And so radio is definitely not conventional for a tech startup.

00:04:52.460 Now it's becoming more at scale.

00:04:54.340 Now.

00:04:54.680 Now.

00:04:55.220 But five years ago, the only company who did it was Constant Contact.

00:04:59.320 There was no one else who had done national terrestrial radio.

00:05:02.780 Were they an inspiration for you guys being that they were in Boston as well?

00:05:06.540 It wasn't even Boston.

00:05:07.460 We just looked at them as like they have the same target customer, right?

00:05:10.140 These super micro businesses.

00:05:12.320 And maybe they're on to something if they're willing to spend this much money on radio.

00:05:16.280 We have to look at it, right?

00:05:17.840 Why is no one else doing it? 1.00

00:05:19.100 Well, either they're stupid or they found something really interesting. 1.00

00:05:22.440 And they found something really interesting. 1.00

00:05:23.800 Yeah, I remember sitting down with Gail in San Francisco.

00:05:26.880 She was visiting.

00:05:27.680 Her corp dev guy reached out.

00:05:30.080 I almost ignored him.

00:05:31.160 She's like, oh, our CEO's in town.

00:05:32.560 Would you like to meet with her?

00:05:33.440 I was like, yes, please.

00:05:34.360 I mean, most people don't know this, but I mean, I believe they were the first publicly traded SaaS company.

00:05:40.620 I think so.

00:05:42.500 I mean, they were, I'm trying to think if anyone was before them.

00:05:45.380 But no, like they built.

00:05:46.860 they pioneered they built this road for a lot of people yeah them i would say her and salesforce

00:05:51.300 obviously um salesforce more on the enterprise side right like 100 constant contact to me was

00:05:56.700 really the only one who had stepped down market from the enterprise and said how do we really do

00:06:01.420 this for small businesses right i know salesforce had that marketing message but it's still like

00:06:05.720 that wasn't the buyer right that wasn't the person who really paid them yeah so so it's funny because

00:06:10.200 she you know i'm asking her obviously i'm asking similar questions like how did you start what did

00:06:14.420 you do?

00:06:14.920 How do you manage your leadership team?

00:06:16.520 And she explains to me the difference between an SMB

00:06:19.880 and a VSB, right?

00:06:21.140 And I've never heard.

00:06:22.040 She was the first to ever use that term VSB.

00:06:24.200 So when you say micro-businesses, I get what you're saying.

00:06:27.440 Because she was like, no, this is

00:06:29.420 the independent hair salon that rents a booth

00:06:32.780 at somebody else's spot.

00:06:35.040 Our average customer had like two and a half employees,

00:06:37.260 right?

00:06:37.760 Including himself, right?

00:06:40.040 So they were part of the two and a half.

00:06:41.880 Yeah.

00:06:42.260 So when people talk about churn, I mean,

00:06:44.660 we're talking just business failure rate as a churn driver

00:06:48.020 that you can't do anything against.

00:06:50.540 It was about 50% of churn was from business failure.

00:06:53.840 When you go after the VSBs or the micro businesses,

00:06:56.420 that's what you got to deal with.

00:06:59.760 But obviously, the product evolved,

00:07:01.680 and you guys got acquired for reported $165 million.

00:07:06.440 Some guy recently asked you, what's

00:07:07.600 it like being worth hundreds of millions of dollars?

00:07:10.160 You laughed.

00:07:10.860 I get it.

00:07:12.100 But clearly, it was an incredible outcome.

00:07:14.200 But along that journey, were there

00:07:17.200 moments where you finally figured out

00:07:19.900 a next stage of growth where it started to feel inevitable?

00:07:24.600 Or was there always this fear that somebody else

00:07:29.380 might figure this out?

00:07:30.280 Or how did that, thinking back to the mental state

00:07:32.780 of that journey, were there things that kept you up at night?

00:07:37.640 Or was it mostly just trying to improve things?

00:07:40.100 So I'd say there's two things that kept us up at night.

00:07:42.400 One, with fast growth, there's lots of problems.

00:07:45.820 But more importantly, lots of problems are hidden, right?

00:07:48.240 So as soon as you hit a plateau, all the problems just appear, right?

00:07:52.320 There's cultural problems.

00:07:53.760 There's issues with processes.

00:07:55.760 There's marketing issues.

00:07:56.920 There's all sorts of stuff.

00:07:57.960 And when you're growing at doubling rates, it's just all ignored, right?

00:08:01.060 It's like, ah, it's happening.

00:08:02.080 And what were your growth rates in the early days?

00:08:04.120 We more than doubled in the first years.

00:08:06.080 Yeah, somebody said recently, if you grow by 50%,

00:08:10.080 every year, pretty much every six months,

00:08:12.060 you're breaking most of your systems.

00:08:13.740 Things just start falling apart.

00:08:15.240 On stage, you brought up having a coach.

00:08:17.940 And I believe you had two coaches through that journey.

00:08:21.960 I mean, it's now become more part of the conversation.

00:08:24.840 But dude, 2005, 2006 was not a normal thing.

00:08:29.680 What did you see in your business,

00:08:31.880 or what did you feel personally that

00:08:33.200 made you decide that you needed a coach to support the growth?

00:08:37.080 Yeah, so I went to a lot of conferences.

00:08:39.640 like this, like probably less SaaS stuff

00:08:41.960 because it wasn't as focused at the time.

00:08:43.860 Yeah, were there SaaS focused?

00:08:45.320 I mean, that's not really even a word that existed back then.

00:08:48.340 So I mean, it was like business conferences, right?

00:08:51.380 And maybe kind of like personal development

00:08:53.500 or entrepreneur development conferences.

00:08:56.260 And I kept thinking to myself, OK, I come back

00:08:58.060 with all of these ideas.

00:08:58.920 And I have a list.

00:08:59.840 Everyone goes to a conference, right?

00:09:01.220 A list of 52 things.

00:09:02.520 I'm going to do all of these, right?

00:09:04.020 And then you do none of them, right?

00:09:05.540 And I felt very frustrated doing that again and again.

00:09:07.900 So I finally said, I'm going to pick one kind of system

00:09:10.900 or process and get a coach to help me actually implement it.

00:09:14.620 So the driving force was actually implementing

00:09:17.140 something from one of these things.

00:09:18.660 One system or process.

00:09:19.720 Yes.

00:09:20.660 And how did you go about making that decision,

00:09:23.320 or what was that process like?

00:09:24.920 Well, the problem is I'm pretty impulsive.

00:09:27.020 The process was I was sitting in the thing.

00:09:29.560 I'm like, I'm doing this tomorrow.

00:09:31.840 I emailed Vern, who was at the conference,

00:09:33.820 and said, who's your best coach?

00:09:34.720 Author of Scaling Up.

00:09:35.660 Yeah.

00:09:36.160 I said, give me your best coach.

00:09:37.780 He's at the conference.

00:09:38.760 Oh, you're at the conference where he's talking about, OK.

00:09:41.720 And I'm like, I want your best coach.

00:09:43.460 I wanted him.

00:09:44.020 And he said no, but I love it.

00:09:45.640 You went to him.

00:09:46.940 Have you ever read What Got You Here, Won't Get You There?

00:09:49.180 Yeah, so same thing.

00:09:50.420 Email Marshall Goldsmith.

00:09:51.840 Little did I know, I remember he was kind of,

00:09:54.280 he actually got on a call, crazy enough.

00:09:56.040 I wouldn't even do that.

00:09:57.060 But he was kind of getting on a call.

00:09:58.700 And he goes, I asked, you know, I'm

00:10:00.500 trying to act all like, this is after I sold Spheric

00:10:02.500 and I wanted to really level up, didn't even have a company.

00:10:05.460 And he goes, well, normally I work with Fortune 50

00:10:07.440 companies, and the fee structure is we work together.

00:10:11.620 I get them results, and they look at that impact

00:10:14.680 and write me a check.

00:10:16.120 And it's usually significant.

00:10:19.360 And I was like, OK, we're working in two

00:10:21.160 different hemispheres here, so I'm just going to thank you.

00:10:23.880 He invited me.

00:10:24.380 It was funny.

00:10:24.880 He invited me to a conference.

00:10:26.500 He's like, sounds like you're a motivated, eager guy.

00:10:29.340 Let's hang out.

00:10:30.880 So I get the impulsiveness.

00:10:32.400 Vern says no, and then, you know.

00:10:35.520 I said, just give me your top coach and top trainer.

00:10:38.600 Because the things I wanted to implement

00:10:40.140 is I wanted to put core values in place.

00:10:42.280 I wanted to put in daily meetings.

00:10:44.280 And the beginnings of the rhythm.

00:10:46.140 What year of business was this?

00:10:49.860 2004, 2008.

00:10:52.800 Wow, so four years.

00:10:54.120 Yeah, four years into the business.

00:10:55.120 Company must have been what, 25?

00:10:57.080 We're doing probably four years in, 8 million bucks.

00:11:01.400 Yeah, 25 people-ish.

00:11:03.220 Yeah.

00:11:03.720 Yeah.

00:11:04.220 Yeah.

00:11:04.920 That's usually when it starts to hurt.

00:11:06.120 And there was big problems.

00:11:09.120 And so we got less, came in as a coach.

00:11:12.640 And part of the process, I wanted

00:11:13.900 to start these quarterly planning sessions.

00:11:16.560 To me, that was the start.

00:11:17.980 Pretty core stuff today.

00:11:19.620 But I mean, in hindsight, would you have done it sooner?

00:11:23.020 Yes.

00:11:24.840 So new companies now, we do this immediately.

00:11:26.940 There's three people on the team.

00:11:28.440 We met in Boston, did our first quarterly planning session.

00:11:30.740 We're doing the next one.

00:11:31.920 It's just part of the infrastructure of doing that.

00:11:34.800 And then worked with less, felt like you got what you needed from him, found another coach.

00:11:39.720 But this time, I think because you shared the story, was somebody that you wanted,

00:11:44.040 that built companies, that had been there, and really less about SaaS, more about...

00:11:49.800 Internal process, like how do we create a culture of success?

00:11:52.880 How do we create a systematic process where we can hit goals again and again?

00:11:57.460 Like how do I create a machine, right?

00:11:59.500 And that's absent of SaaS.

00:12:01.280 Like we had the experts and built the expertise internally.

00:12:03.860 like we could do survival curves and predictions and all this stuff right yeah i wanted someone

00:12:08.820 that came in and said like here's how you run a company and here's how you do it at scale this is

00:12:14.020 i mean something elon musk talks about often is is he gets excited about the machine that

00:12:18.500 builds the machine right and i think about that all the time when i'm like okay like how does

00:12:23.220 this process play out independent of people and more about like just does this get better over

00:12:28.340 time?

00:12:28.880 Does this get smarter?

00:12:31.820 What's fun for you is you've now been

00:12:33.320 able to iterate across a few other companies,

00:12:36.000 Chargify and many other companies.

00:12:39.620 What do you think are those critical tools or strategies

00:12:45.420 that should, and it's always like accounting software,

00:12:47.760 like what should I use?

00:12:49.040 Well, if you're at 100 million, SAP.

00:12:50.580 If you're at zero, a spreadsheet.

00:12:52.720 What do you think is, because most of the people watching

00:12:55.680 are kind of the 2 million ARR.

00:12:58.100 What are things that you feel are like, OK, at this point, these are things you need in your business?

00:13:01.940 So I think the most valuable ones for us were meeting rhythms, one.

00:13:05.020 So daily, weekly, monthly meetings.

00:13:07.480 It gets rid of a lot of the junk, gets people focused and communicating.

00:13:11.940 And when you say junk, what do you mean?

00:13:13.360 What would they be seeing in their business? 0.73

00:13:14.180 All the noise, right?

00:13:15.400 Like, let's sit in a meeting and talk about the BS metric for no reason.

00:13:18.940 Like, you know, like when you're meeting every week and all the metrics are on the wall, red, yellow, green, in front of everyone's face, there's no reason to have a meeting about it.

00:13:27.600 Like, you've talked about it in that hour meeting.

00:13:29.760 You've covered it.

00:13:30.660 And in the monthly meeting, you talk about, like, digging deep into it.

00:13:33.040 How do we change churn?

00:13:34.060 How do we do this, right? 0.99

00:13:36.260 And the daily meetings, as soon as you hit 10 people, communication goes to shit, right? 0.88

00:13:42.580 And putting the daily meetings in allowed us to scale up to 50 people with no issues.

00:13:48.680 We didn't have, like, company wikis.

00:13:50.240 There was no Slack.

00:13:51.000 I personally hate Slack, right?

00:13:52.840 But that wasn't even an option then.

00:13:54.540 So we couldn't even get in trouble with it.

00:13:56.000 so our option was literally the daily meeting which is five minutes what am i doing today

00:14:01.580 where am i stuck that's it right that's awesome and every single person in the company was in at

00:14:08.140 least one daily meeting so you got meeting rhythms you mentioned values are those kind of things that

00:14:12.580 are important for you yeah the two million plus yeah at this stage value values for sure even

00:14:17.020 earlier than two million like in essence before you hire the first employee yeah values and how

00:14:21.700 do you implement or integrate values into a company?

00:14:26.020 Because I mean, it's one thing to have them 0.99

00:14:27.540 on a poster on a wall, which we all know is bullshit. 0.97

00:14:30.120 But for you, how do you integrate that? 0.97

00:14:33.680 Where does it show up?

00:14:34.820 Yeah, everywhere.

00:14:35.580 I mean, so the first is recruiting and hiring.

00:14:37.580 So every possible employee coming in knows the values,

00:14:41.500 has to demonstrate in their life how

00:14:43.200 they represent these values.

00:14:45.260 How they did this in their past job.

00:14:47.320 Even if our values differed from that company, show me.

00:14:50.080 What were examples of your values just?

00:14:51.780 Oh, yeah.

00:14:52.280 So Grasshopper was go above and beyond.

00:14:54.280 Always entrepreneurial, radically passionate in your team.

00:14:58.360 And those came from the founders, obviously, right?

00:15:01.240 Yeah.

00:15:01.740 And you mentioned that people getting hired only fill those.

00:15:06.580 They don't talk to a manager until they've filled those out

00:15:09.740 in an application to explain how, demonstrate how these show up

00:15:14.700 in your life.

00:15:15.200 Yeah, I want to see a story like, in my home life,

00:15:18.320 My kid, this happened, and I went above and beyond because my kid's friend, this happened.

00:15:23.240 I want a story of how you demonstrated this value, right?

00:15:26.800 And something that shows you at your core, right?

00:15:30.840 Asking questions like that, you can't fake, right?

00:15:34.500 So recruiting-

00:15:35.240 Unless they're a horrible person.

00:15:36.400 They're making up stories.

00:15:37.660 That would just be weird.

00:15:38.720 It's like, you have kids?

00:15:39.780 Not really.

00:15:41.120 I thought it sounded good.

00:15:42.080 Yeah, it sounded really good as a story.

00:15:43.740 Maybe not so much.

00:15:44.940 Yeah.

00:15:45.120 Yeah.

00:15:45.620 So recruiting, firing.

00:15:48.180 So it's so much easier to say to someone, you know what?

00:15:51.820 There's clearly not a fit here.

00:15:53.940 And it's just like apparent.

00:15:54.900 You don't even have to say it.

00:15:55.780 It's uncomfortable, because the values are there.

00:15:58.440 They're in everything you do.

00:15:59.940 And you're like, yeah, this just doesn't fit.

00:16:03.140 And they're like, I know.

00:16:05.220 And you just move on.

00:16:06.120 That's the best.

00:16:07.500 Like, you don't, yeah.

00:16:08.640 When they come to the same outcome you come to,

00:16:11.300 and it's amicable, and it's just like, yeah, yeah,

00:16:14.000 we're probably not going to make it.

00:16:15.100 put the values in place, and certain people quit.

00:16:17.920 And it was the people we wanted to get rid of anyway.

00:16:20.280 But they're like, yeah.

00:16:21.520 They're looking at the paper.

00:16:22.780 30%, they implemented this.

00:16:25.000 And 30%, they realized after going through the exercise

00:16:29.340 that 30% of their team didn't embody those values.

00:16:33.520 And I think half quit, and then half,

00:16:35.680 there was a transition plan within six months.

00:16:37.340 But it's that, I think I heard somebody

00:16:41.520 say their values are about hiring and firing against them.

00:16:44.940 Like, that's what they exist for,

00:16:46.740 is almost like the people filter.

00:16:50.220 You know, and also in regards to making decisions

00:16:52.760 in your absence.

00:16:53.700 Because that's, like, again, the machine

00:16:54.900 that builds a machine.

00:16:55.700 It's just, for me, it's so fun to think.

00:16:57.440 Like, I'm a software guy.

00:16:58.320 So I'm thinking, I'm so nerdy.

00:16:59.680 I think about object models and polymorphism 1.00

00:17:02.000 and, like, stupid shit. 1.00

00:17:03.180 They're like, how does this apply to business? 1.00

00:17:04.500 But if you design the interface of how people should

00:17:10.740 be making decisions in your absence,

00:17:12.960 that's where scale comes into play.

00:17:14.520 Because as a founder, I'm assuming that's at 25 people.

00:17:17.380 That's where you feel frustrated, is that decisions are being made that you can't possibly

00:17:21.640 know, that are just not aligned with how you would make them, right?

00:17:25.560 Yeah.

00:17:25.760 So I look all the way to the edge, right?

00:17:27.220 So customer service, right?

00:17:28.620 They're usually the furthest from the executive team, right?

00:17:32.280 And the ones that touch the customer the most.

00:17:34.880 Ooh, that's good.

00:17:36.040 Right?

00:17:36.240 Which is really scary.

00:17:37.420 Yeah.

00:17:37.620 So I wanted my customer service team to be able to make decisions in real time on the

00:17:42.100 phone and solve problems.

00:17:43.260 and if they're doing that they're doing things like refunds and credit and like you know someone

00:17:47.920 says you i printed business cards and you messed up like what do i want them to do right so in all

00:17:53.360 of those instances when they selected a refund they had to put which core value or core promise

00:17:59.440 it related to right and one of them was being like you know uh entrepreneurially generous was one of

00:18:06.340 the core promises right to our customers so like in cases we refunded more than they've ever paid

00:18:12.360 us right and I'm okay with that when the rep puts in why they did it and they put in a thing like

00:18:17.980 you know we just really messed up the customer's struggling they just started we had to refund their

00:18:22.000 whole printing cost for their business cards and your whole thing was I even it's just being

00:18:27.040 thoughtful like it's it's cool that you prompt it because it's you know at least they stopped

00:18:31.680 they thought about it they gave you gave you an answer um how how many employees did you have at

00:18:37.560 when Citrix acquired you guys right about 42 but that didn't count our customer service team

00:18:42.340 revenue per?

00:18:43.180 Which was outside of our core office.

00:18:45.040 OK.

00:18:45.460 So when you factor that in, we had probably

00:18:48.020 about 60 people or so.

00:18:49.600 That's still a small team for the kind of revenues

00:18:51.700 you guys are at.

00:18:53.380 What did you, who did you, this is one of my favorite questions.

00:18:57.620 Who did you have to become to run that company?

00:19:00.100 That's a good question, right?

00:19:01.000 Yeah.

00:19:01.380 Because I think that's entrepreneurship,

00:19:02.580 is who do I need to become?

00:19:03.840 Yeah, I changed over those years so many times.

00:19:06.160 Some of it was a real struggle, right?

00:19:07.840 Like at one point I had probably about 15 plus people

00:19:12.020 reporting to me I am not a good manager like I'm not a good people manager my

00:19:16.400 disk profile is high D low I right and under pressure it's like negative I 0.57

00:19:21.980 right so I'm gonna run you over and be a dick about it right so that's not a good

00:19:25.940 people manager and I had 15 people reporting to me so that was challenging 0.95

00:19:30.020 right over time I had to learn how to give up control to an executive team

00:19:34.900 that is far smarter than I am right which is what you want but emotionally

00:19:39.140 that's a struggle and that's hard to do and oh and that's how I drove down my

00:19:44.000 hours worked like 10 hours a week because the executive team was an amazing

00:19:48.380 executive team running the company right and it's a sale I left Citrix is like

00:19:54.740 we're gonna pay you extra because we don't want to give you a title and a

00:19:58.660 high salary to sit here and do nothing like the company's gonna run right so I

00:20:03.700 think there's a lot of variation over time and if you go all the way back to

00:20:06.560 beginning i did customer service i'm clearly not good at it right um for the reasons previously

00:20:11.440 mentioned but like i did that um and i'm glad i did i learned inside and out what customers care

00:20:17.920 about what you know what are the challenges why they don't like the software why they do like you

00:20:21.840 know why they love this piece of it i learned all that and and you know on this that's you know on

00:20:26.880 the skill side and just knowing knowing thyself what about like on the emotional fortitude or

00:20:32.960 or being able to deal with the swings

00:20:36.340 as comes with things, right?

00:20:38.340 Yeah, like the entrepreneurial roller coaster, right?

00:20:39.940 Totally, I mean, you guys created the video on it.

00:20:42.100 Yeah.

00:20:42.940 Yeah.

00:20:44.400 It's, I think it's challenging.

00:20:48.940 The good thing for me is like,

00:20:50.340 I've never experienced like the depression piece of it,

00:20:53.380 right?

00:20:54.640 I don't know why, like, I can't explain that, right?

00:20:57.420 I understand how challenging that is,

00:20:59.020 and it's a real thing,

00:21:00.180 so I don't appreciate when people discount it,

00:21:01.980 But for me, that has not been an issue, right?

00:21:05.160 But I understand those low points

00:21:07.180 to the point where you're like,

00:21:08.420 should I be doing this business, right?

00:21:10.660 And I think when you start to question that,

00:21:12.240 those are the times when you have to have a core purpose

00:21:15.600 that you really believe in.

00:21:17.160 And you say, you know what, right now,

00:21:20.280 we had a big outage, right?

00:21:21.940 Every customer's upset.

00:21:23.220 There's people calling and screaming, 0.68

00:21:24.460 I hate you, you ruined my business.

00:21:26.900 Like, I want all my money back, I've ever paid you. 0.99

00:21:29.100 Like, this is really bad.

00:21:30.940 phone numbers is quarter business yeah it's like internet connectivity and

00:21:34.480 people are like not happy right and at that point you're like oh my god like

00:21:39.280 this is not good right I could go out of business not good right but you step

00:21:45.160 back and you say like our core purpose and power entrepreneurs exceed I'm like

00:21:48.340 look we need to get this back online because this is what we do right this is

00:21:51.940 the people we help are these people that are complaining the reason they're

00:21:55.360 complaining is because it's their business it's there it's their life

00:21:58.000 Right?

00:21:59.340 And the reason they care that much

00:22:01.220 is why we should care that much.

00:22:03.620 And so there's two things I'd love to double click on.

00:22:06.740 The first is the core purpose.

00:22:10.880 Because I do feel like for a lot of entrepreneurs,

00:22:13.500 they start this journey, and it's

00:22:15.660 about solving a problem.

00:22:17.720 But then eventually, the problem's kind of been solved.

00:22:21.200 And that's where a lot of people decide

00:22:22.760 to start something new or bounce.

00:22:24.660 But when you stick with something,

00:22:26.200 And you were there right till the end, right?

00:22:29.740 What did that shift to?

00:22:32.040 Like, for David, what did that purpose shift to?

00:22:34.560 Is it less about solving phone systems?

00:22:37.280 I mean, you know what I mean?

00:22:37.960 And it sounds like it was more entrepreneurial,

00:22:39.620 but were there phases of how you had to reset that purpose

00:22:43.340 for yourself and the business?

00:22:44.520 Or how did that?

00:22:45.440 No, I mean, so when we started the business,

00:22:46.740 we wanted to build an environment that we loved being in

00:22:48.800 and we just loved going to every day and working, right?

00:22:51.000 So that was our internal purpose.

00:22:53.820 Pretty early on, we figured out that we

00:22:55.440 loved working with it, the time we deemed small businesses.

00:22:58.380 We then moved that term to entrepreneurs,

00:23:00.200 because I think it filters out the mom and pop dry cleaner.

00:23:04.000 Not that that's not a business.

00:23:05.540 It's a different mindset, right?

00:23:08.200 So we filtered it out to entrepreneurs,

00:23:09.680 and what we realized we loved doing was helping those people.

00:23:12.700 So the wording changed over time,

00:23:15.060 but internally and externally,

00:23:17.120 we were doing the same thing the entire time.

00:23:19.680 So I don't think purpose changes that much.

00:23:22.200 The wording, I think, changes because you refine it over time

00:23:24.900 and you figure out the right way to say it,

00:23:26.660 and the right terms to use, and things like that.

00:23:29.020 Now, you guys didn't raise any money, I believe, right?

00:23:32.640 And I think the report was that you own 90% of the business,

00:23:36.000 or you and your co-founder own 90% of the business on exit.

00:23:38.700 Again, $165 million.

00:23:40.100 So pretty awesome.

00:23:41.860 You've built some other companies.

00:23:43.960 I don't charge if I raise money?

00:23:46.340 We raised just half a million dollars from Mark Cuban,

00:23:48.340 just because we needed the stamp of approval of like.

00:23:51.520 I took his money.

00:23:52.400 He's a good dude.

00:23:52.940 I remember I almost kicked, I didn't kick him out the round.

00:23:55.340 We were oversubscribed.

00:23:56.300 And one of my lead investors, Steve at Baseline,

00:23:58.640 amazing investor.

00:23:59.720 Steve is literally like a gift to entrepreneurs in the Valley.

00:24:03.040 And I was like, hey, we're oversubscribed.

00:24:04.880 We're restructuring the cap table.

00:24:06.340 And I think I might bounce Mark.

00:24:09.240 He goes, see these four other people?

00:24:11.940 Bounce them first. 0.98

00:24:12.980 I was like, yeah, you're right.

00:24:13.940 There's some, yeah.

00:24:14.940 So he took some money.

00:24:15.740 Mark's a great guy.

00:24:16.540 Like, I would.

00:24:17.240 He replied to every email.

00:24:18.880 Amazing.

00:24:19.340 Nobody else did.

00:24:20.180 Amazing.

00:24:20.720 Every investor email update, he always

00:24:22.720 replied with thoughtful questions.

00:24:24.520 And even like, I found even if he didn't have like a deep

00:24:27.220 thought, he replied and like, it was him.

00:24:31.160 It's not like an assistant of assistant, right?

00:24:33.260 And he gets far more emails than I do.

00:24:35.220 And our investment was so tiny.

00:24:36.980 Like, this is like, means nothing, right?

00:24:39.640 And he replies.

00:24:41.860 And most of the time useful, right?

00:24:43.580 That's better than 98% of people.

00:24:46.180 Oh, he is a very unique individual for that factor

00:24:50.300 Yeah, it's his, I just, I feel like when I think of Mark,

00:24:53.000 he's just cranking, I think like he used to have a flip thing

00:24:55.880 phone, and he just, the keyboard, and he's just

00:24:57.800 like cranking at his shortcuts and all that stuff.

00:25:01.920 So now that you've started other companies,

00:25:04.280 what is your thoughts to funding?

00:25:06.480 Because I know that's something I've reached out

00:25:08.120 to you recently as I look at making more investments

00:25:10.740 and kind of thinking differently about markets.

00:25:13.760 What are your thoughts on capitalizing

00:25:15.320 companies to get escape velocity, especially if marketing

00:25:19.100 channels, pennies, clicks, not anymore.

00:25:23.140 What are your thoughts on capital funding?

00:25:25.320 Yeah, it's a hard place, because as an investor,

00:25:27.500 I have one set of thoughts.

00:25:28.700 And as a founder, I have a different set.

00:25:30.500 I think in some places they converge,

00:25:32.000 but in some places they diverge.

00:25:34.760 I think that if I'm looking at SaaS companies today,

00:25:38.860 there is no reason to take funding

00:25:40.900 before you have a million dollars of AR.

00:25:43.460 Getting to that point today, to me, is the minimum bar.

00:25:47.180 That's product market fit.

00:25:48.660 Like, forget the MVP stuff and all the other things.

00:25:50.960 Like, a million dollars of ARR says people are willing to pay at some scale for your product, right?

00:25:58.220 And getting to there without funding gives you lots of optionality, right?

00:26:02.000 The longer you go without funding, optionality increases, right?

00:26:05.640 So when you get to $10 million, now debt financing and revenue-based financing is far cheaper.

00:26:11.260 I mean, these are things that most people don't even understand.

00:26:13.560 I think a lot of the market doesn't even realize exists.

00:26:16.120 Like, you know, the lighter capitals and many others out there.

00:26:21.180 You know, I think they start at, what, a millionaire are?

00:26:23.740 They'll fund you on that.

00:26:27.040 And do you think those are viable options?

00:26:28.940 Or you mentioned $10 million.

00:26:29.960 Should they wait?

00:26:31.300 It's expensive.

00:26:32.400 I would wait as long as I can.

00:26:34.260 I really don't love revenue financing.

00:26:36.700 Like, it's sucking the lifeblood out of the company in real time

00:26:40.080 compared to debt financing,

00:26:41.500 where at least you get maybe the first year of no payments

00:26:44.260 or just interest only,

00:26:45.320 and now you can kind of push that out over time.

00:26:48.600 And the larger you are, the more power you have to do that, right?

00:26:52.760 The revenue financing is a reasonable option.

00:26:55.740 It is very expensive when you run the numbers

00:26:57.880 compared to equity financing, right?

00:27:00.400 So you gain some power and you give it up in returns.

00:27:05.300 So how should founders,

00:27:07.540 because I work with a lot of one, two millionaire companies

00:27:10.920 and they're at that stage where they're like,

00:27:12.580 hey, that half a million bucks looks really appealing

00:27:15.600 from an equity financing point of view,

00:27:18.680 but there's also this debt stuff.

00:27:20.020 How do you run the equation in your mind to evaluate those?

00:27:23.800 Yeah, to me, it should never be used for anything

00:27:26.100 except marketing, right?

00:27:27.580 So because if I put it into marketing,

00:27:29.360 I can run the equation and say, every dollar in

00:27:31.720 equals this much out, my cost of capital is x,

00:27:34.300 and I know my return is greater than zero, right?

00:27:37.100 If I put it into staff and employees,

00:27:39.360 there's no way to run any calculation, right?

00:27:42.160 So I don't want to be taking bets with that money.

00:27:44.860 I don't want to be taking product bets,

00:27:46.880 like I'm going to change something, a new market.

00:27:49.180 We're going to pivot.

00:27:49.440 We're going to move up market, all that stuff.

00:27:51.120 You're like, no, this is a channel investment.

00:27:53.460 And you can run the numbers on the ROI.

00:27:56.540 That's interesting.

00:27:58.360 How do you know when you're ready to sell?

00:28:02.240 I don't think you're ever ready to sell, honestly.

00:28:05.060 And the best time to sell is when you don't want to, right?

00:28:07.500 Everyone says that.

00:28:08.340 But I mean, it's true, right?

00:28:09.460 It is true.

00:28:11.140 And for us, it was much more about the numbers

00:28:16.340 were astronomically bigger than what we thought

00:28:19.040 the current value of the business today was.

00:28:21.380 So it was a de-risking question, right?

00:28:23.820 Taking 100% of our net worth in a highly e-liquid asset

00:28:28.420 and converting it into a highly liquid asset, right?

00:28:31.040 That's just a life de-risking question, right?

00:28:33.800 And there's some balance in there where you're like,

00:28:35.580 look, I believe the value's here,

00:28:37.660 and if someone's paying me near the value,

00:28:39.320 I probably don't do it.

00:28:40.380 If they're paying me way over the value,

00:28:42.260 now I've just de-risked my life, right?

00:28:45.860 And so that became more attractive to us.

00:28:48.320 And then when you factor in the cultural fit,

00:28:51.080 which I think is critically important in a sale,

00:28:54.020 they wanted to keep the brand,

00:28:55.860 they wanted to keep the team, the core values,

00:28:58.040 the things that we built and cared about,

00:29:00.000 they wanted to keep and keep it part of Grasshopper, right?

00:29:04.160 So when you factor those two things in together,

00:29:05.740 we kind of had to sell at that point.

00:29:07.760 And you had to sell because you felt

00:29:11.120 like, A, the risk profile made sense,

00:29:14.420 and then also they were going to do right by your team.

00:29:18.380 Was there, I mean, that is, it's like, OK, well,

00:29:22.460 there's exposure if we're in the market for another.

00:29:24.500 Let's say, because a friend of mine, Marco, from Thumbtack,

00:29:27.000 had a really great way of thinking about it,

00:29:28.340 where he said, I look at how many years of perfect execution

00:29:32.860 are they buying, right?

00:29:33.920 It was just like, oh, that really kind of like that equation.

00:29:37.760 And if the number is big enough, then it makes sense.

00:29:40.160 Because maybe not a perfect, but 80%.

00:29:43.280 I know what it's going to be worth then.

00:29:44.860 So are they buying at that point?

00:29:48.360 But you'd built this business for so long.

00:29:51.340 Was there a part of you, especially I think your first

00:29:54.340 company for the most part, that felt like it was your baby?

00:29:57.080 Like, was there any loss?

00:29:59.780 Like, I went through it with Sphere.

00:30:01.280 Like, literally had to see a therapist,

00:30:03.140 walk around, anxiety attacks.

00:30:05.100 And he's like, yeah, you're having loss, whatever.

00:30:09.680 Did that come up post-exit or on your way to it?

00:30:13.500 Yeah, I mean, there's so many questions there.

00:30:16.620 At post-exit, for sure, there was this emotional,

00:30:18.960 we left sale day one, day two were gone, just immediate.

00:30:23.820 Email address changes, little things

00:30:26.380 that were very emotional.

00:30:27.940 An email address you've had for 10 years,

00:30:30.720 you're like, oh crap, I've got to switch this

00:30:32.320 in all these places.

00:30:32.980 Then you think about the emotional act.

00:30:34.740 starts to add up right so I think yeah there was definitely an emotional aspect

00:30:39.540 of it like losing your identity more importantly like I was the grasshopper

00:30:43.440 guy like that's just who I was known as right it family friends you know

00:30:48.900 conferences everything right and then you're just not that so I think that's

00:30:53.700 hard but so the way I look at I think differs from the caught like I look at 0.84

00:30:58.700 from an acquisition standpoint I have near perfect information right because

00:31:03.860 I have all the internals.

00:31:05.100 I have all the past history.

00:31:06.320 The acquirer has bits and pieces.

00:31:09.100 Would I pay what they're paying?

00:31:11.460 And if the answer is no, they're overpaying.

00:31:14.420 And if the answer is way overpaying, then I

00:31:17.500 know that this is a really great deal.

00:31:20.840 I know what I would pay today.

00:31:22.100 You wouldn't pay.

00:31:23.240 And if it's more than that, you know it's a great deal.

00:31:26.880 That's a really good way to look at it.

00:31:28.380 Because you're right.

00:31:29.380 You have near-perfect information.

00:31:31.340 They're looking at data points.

00:31:34.220 But back on that exit, because I believe people start SaaS

00:31:37.840 business.

00:31:38.300 Yes, it's sexy.

00:31:39.100 But the truth is, it's an incredible model.

00:31:41.340 It's an incredible, predictable revenue model.

00:31:43.860 And that's why the valuations are some of the highest

00:31:46.740 and across different asset classes.

00:31:50.760 So one of the things I teach is how

00:31:52.740 to design some level of perfect exit.

00:31:55.440 Did you guys understand what the value drivers were

00:31:58.700 as you built for a potential acquirer?

00:32:00.680 or did it just happen?

00:32:03.580 Was there strategy at some point around it,

00:32:05.720 or you just kept the core question you were solving

00:32:08.480 is how to create the best place to work at?

00:32:10.660 I think the core question that drove those factors

00:32:13.160 is how do we create a profitable business?

00:32:16.320 Those things, and a highly efficient business.

00:32:19.340 So profitable and highly efficient.

00:32:20.560 That's why when you tell me about employees to revenue,

00:32:22.760 I mean, it was a high ratio.

00:32:24.240 Yeah.

00:32:24.800 Yeah.

00:32:25.580 So I think all of the things we did to drive to those two goals

00:32:28.860 is what Acquire likes.

00:32:30.500 just happens to be we never thought about it in that perspective like an

00:32:33.200 acquirers perspective you just you just that's essentially it wasn't for the

00:32:37.740 acquisition it was just like we want to build a great business these are the

00:32:40.340 value drivers that we want to improve on turns out that they're the same that an

00:32:44.020 acquirer wants to now during the acquisition acquisition process of

00:32:47.300 course now you start to think about like you know okay like what is cross-sell

00:32:51.440 and upsell look like how do I how do I massage this number what are the

00:32:54.740 numbers that are gonna help us with the valuation and we've got some time to

00:32:57.820 to kick them up a few notches.

00:33:00.040 Did you guys work with an outside broker to do the deal?

00:33:03.060 Yeah, fair question.

00:33:04.700 So Citrix came to us, which is kind of odd.

00:33:08.380 We did not run a process, right?

00:33:09.940 So we did use a firm to represent us,

00:33:15.540 more from a logistics standpoint, like,

00:33:17.940 how do you set up a deal room?

00:33:19.180 And let's manage the process and kind of remove

00:33:22.220 the founders one level so you don't screw something up

00:33:24.600 and all that stuff.

00:33:25.540 Yeah, you're going to go there after.

00:33:26.800 you kind of give yourself a buffer.

00:33:28.960 I ran all my processes because I actually absolutely

00:33:31.200 love that part of the business, but definitely

00:33:33.620 had my advisors in the corner.

00:33:37.300 Now that you see a lot of SaaS companies,

00:33:39.640 what do you see changing from their, you know,

00:33:43.920 just the landscape of SaaS in regards to, I mean,

00:33:48.600 it's still a new market.

00:33:49.800 It's not like e-commerce or like, I mean,

00:33:51.560 I look at my brother's home building.

00:33:52.880 It's as old as people are. 1.00

00:33:54.820 People lived in houses.

00:33:56.260 SAS, numbers, there's still debates

00:33:58.700 around even how to measure certain metrics.

00:34:01.120 What do you see as things that are evolving

00:34:04.960 that you think are smart, that people are doing sooner,

00:34:08.520 either bootstrapped or funded, that are not so obvious,

00:34:11.780 but that are coming into the future?

00:34:14.320 I think the most interesting things

00:34:15.500 are the more enterprise things and bringing enterprise

00:34:18.640 back down into SAS, right?

00:34:20.340 Where the fear I have with SAS right now

00:34:22.640 is this overload of things for small businesses,

00:34:26.400 things for tech companies, and things for remote companies.

00:34:30.000 And the reason that happens is the people building them

00:34:32.220 run those type of companies,

00:34:33.320 so they're solving their own problems.

00:34:34.640 I get the issue.

00:34:36.040 But that is just overloaded.

00:34:38.720 The next time I see a project management software pitch,

00:34:41.400 I'm like, really?

00:34:43.880 A, none of them work, so it doesn't really matter.

00:34:46.440 And there's literally a billion.

00:34:49.200 It's just not interesting.

00:34:50.800 But look at super old industries, like dental.

00:34:55.180 Who has ever thought about a SaaS product?

00:34:57.260 There's none, right?

00:34:58.980 There are so many industries like that

00:35:00.580 that spend a lot of money.

00:35:03.040 And creating software is far easier,

00:35:05.120 because they have no context.

00:35:07.160 They're using AOL or Hotmail, right?

00:35:09.560 They don't care what it looks like or how it works.

00:35:11.980 Yeah, so you're saying, and I've always

00:35:14.380 said these non-sexy would never be written about on TechCrunch

00:35:17.860 industries.

00:35:18.760 And I personally like the ones that you can charge enough

00:35:21.520 per month to get to some meaningful level of revenue

00:35:23.800 quickly.

00:35:24.820 It's tough to make them work on $9 a month,

00:35:27.740 some of these SaaS companies.

00:35:30.220 That is super cool.

00:35:32.140 And especially if you want to run a sales channel,

00:35:34.300 like people calling sales, you've

00:35:36.400 got to be in the $300, $400, $500, $600 a month range.

00:35:40.360 Now it's probably going up as salaries have increased.

00:35:42.460 But I mean, at $100, we tried it at $100.

00:35:47.480 It's not possible.

00:35:48.100 No, not possible.

00:35:49.300 I want to give you a chance to talk about SuperFat.

00:35:51.340 Totally non-sassy, but e-commerce,

00:35:53.260 and you guys are doing some smart things

00:35:54.620 with the reoccurring models on it.

00:35:56.980 What is it?

00:35:57.640 Where did it come from?

00:35:59.560 Why did you start it?

00:36:01.300 Well, I go from sass to a business with a bunch of inventory.

00:36:03.760 Yeah, man, SuperFat, look at this.

00:36:05.140 So you told me you've got a box sent to my house,

00:36:07.260 so I'm excited to get back to Canada and taste this stuff.

00:36:10.060 I'm going to definitely eat this one.

00:36:11.960 Yeah, so I think what's been most interesting for us

00:36:13.880 is like- And what is it first?

00:36:14.940 Yeah, it's a nut butter product, right?

00:36:17.140 So like healthy fats.

00:36:18.180 Yeah, healthy fats, right?

00:36:19.480 Vegan, keto, paleo, all of the certifications, right?

00:36:23.700 I built it with Mike and C-Mac because-

00:36:27.340 Oh, C-Mac's involved as well, your co-founder from Grasshopper.

00:36:29.280 Yeah, and Mike, who was at Grasshopper too.

00:36:31.420 Oh, awesome.

00:36:33.340 Because I wanted a product like this to consume, right?

00:36:35.680 I changed my diet, I changed my life,

00:36:38.140 I stopped eating sugar, I got rid of all that.

00:36:40.100 But I mean, this is from a escape velocity point of view,

00:36:43.660 founders not treating themselves like a premium racehorse.

00:36:48.380 Like you just wouldn't, if you are literally 0.98

00:36:50.200 the driver of the business, looking at this stuff.

00:36:53.260 I know you did yoga, or still do quite a bit,

00:36:55.680 and just taking care of yourself.

00:36:57.680 How do you think that impact would impact founders

00:37:01.140 if they take care of their?

00:37:02.580 I mean, I've found my productivity has increased.

00:37:05.800 Just changing my sleep has had massive impacts

00:37:08.500 on attitude, empathy, like interacting

00:37:11.340 with other human beings, right?

00:37:12.920 which you do all day as a founder.

00:37:14.860 I just got this thing, the Oura Ring.

00:37:16.640 The Oura Ring?

00:37:17.240 Oura Ring, yeah, Oura.

00:37:19.520 And at first, I resisted it.

00:37:20.680 I had it for three months, because I didn't want it

00:37:22.880 to tell me I was sleeping bad, because I was like,

00:37:24.940 every morning I wake up and I'm like,

00:37:26.600 I just had the best sleep ever, regardless

00:37:29.000 if I tossed and turned.

00:37:30.280 And I've been busting out some good sleep, so I'm happy.

00:37:33.600 But I like that feedback.

00:37:36.040 So you're saying healthy fats, nut butter based product,

00:37:40.600 five flavors available online.

00:37:44.140 So what's been most interesting to learn about, though,

00:37:46.640 is we've started to apply what we've learned in SaaS

00:37:49.120 to e-commerce.

00:37:50.260 And people are like, why are you doing it that way?

00:37:52.180 We're like, well, because we can make a lot of money

00:37:54.020 doing it that way.

00:37:55.120 So the way we run our marketing channels,

00:37:57.920 we run it like a SaaS marketing channel, right?

00:38:00.000 Where e-commerce, yeah, average order value.

00:38:03.280 Oh, we look at all that stuff, reorders.

00:38:05.560 We look at all the things where, from an e-commerce

00:38:07.300 perspective, the models are different.

00:38:10.560 And then so we're also willing to scale aggressively where other people are like, ah, you know, we're looking at payback, right?

00:38:16.180 Like, if I know my reorder rate, I can-

00:38:18.380 You're willing to go a few months where they're trying to do a 30-day.

00:38:20.820 Yeah.

00:38:21.040 Like, they want to essentially make their cack on the first order, potentially, and you're willing to say, we're cool going long on this.

00:38:26.620 Yeah.

00:38:27.060 Dude, that, I mean, that to me is the, I think, where as channels get more expensive, the ones that understand lifetime value and also how to monetize that audience.

00:38:38.020 So right now, you guys have how many SKUs?

00:38:41.260 Five.

00:38:41.900 Five.

00:38:42.440 There's a six, which is a variety box, but there's five core flavors.

00:38:45.220 Yeah.

00:38:45.560 And what do you guys do for upsells?

00:38:49.380 Anything?

00:38:50.100 Do you guys, is that something coming?

00:38:52.100 Yeah, the biggest, so there's two.

00:38:53.800 One is three boxes, you get free shipping, right?

00:38:56.520 So that's a pushed average order value up.

00:38:58.500 Yeah.

00:38:58.700 The biggest kind of post-upsell is our flow for buy one variety box, which is most new customers, right?

00:39:05.720 Yeah.

00:39:05.840 They buy the single variety box on the website, and then how do we nurture them over time?

00:39:10.860 And we're only a few months in, so we're starting this process.

00:39:13.740 How do we nurture them over time to buy their favorite flavor?

00:39:17.040 Yeah, once you know that they have their favorite flavor.

00:39:18.680 Once every month, whatever, right?

00:39:20.660 Yeah, whatever the frequency is.

00:39:22.400 And when you say nurture, that's the email campaign, the messaging.

00:39:26.660 It's amazing e-commerce how much is email.

00:39:29.620 It was surprising to me.

00:39:30.860 Yeah.

00:39:31.100 At Grasshopper, we used email, but we were also in SaaS kind of scared to hit the customer

00:39:38.560 and say, maybe I don't need to pay for this.

00:39:40.960 There's stuff that happens.

00:39:41.700 Are you doing things that's very personal?

00:39:44.580 Is there a personality behind the brand?

00:39:46.400 Yeah.

00:39:46.760 Yeah, okay.

00:39:47.080 It's very fat forward.

00:39:48.720 I mean, the name, our core purpose is empowering change with fat.

00:39:53.180 So we're very much on that side of the education where fat is good, right?

00:39:57.940 and staying away from the specific diet.

00:40:01.140 I eat a certain way.

00:40:02.340 It doesn't really matter, right?

00:40:03.640 I ate vegan for six months, right?

00:40:05.480 I did all sorts of things.

00:40:07.560 You tested it out.

00:40:08.460 Yeah.

00:40:08.920 But at the end of the day,

00:40:10.560 I think there's a clear direction

00:40:12.960 where consumer packaged goods is starting to move,

00:40:16.620 which is, in general, increasing fat

00:40:19.300 and lowering refined carbohydrates.

00:40:22.040 We can argue about other carbohydrates,

00:40:24.660 but refined carbohydrates,

00:40:26.060 those are starting to trend out,

00:40:27.580 which I think is good.

00:40:28.640 Yeah, the debate has been settled there.

00:40:30.520 Awesome.

00:40:30.980 David Hauser, appreciate you, man.

00:40:31.960 I appreciate that.

00:40:32.760 Thanks so much.

00:40:33.340 Thanks.

00:40:34.080 Oh, now we're done.

00:40:35.740 Thanks for watching this episode of Escape Velocity.

00:40:38.960 Be sure to like and subscribe

00:40:40.500 and leave a comment with your biggest insight

00:40:42.940 from our conversation.

00:40:44.440 Be sure to check out the next episode.

Dan Martell - July 04, 2019

Integrate Core Values Into a SaaS Business with David @ Grasshopper.com - Escape Velocity Show #5

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