Dan Martell - What You Need To Build a Two-Sided SaaS

00:00:00.000 and you know you got them when they lean in and they start giving you advice

00:00:04.440 leon good chatting with you man i am really excited about this i've been watching uh the

00:00:21.880 youtube uh channel i've listened to the pods it's kind of surreal being here i have to say

00:00:27.000 dude we're gonna have some fun i appreciate uh the opportunity i'm excited to dive in

00:00:31.720 um let's start off what what's the business who do you serve and how do you serve them

00:00:36.280 uh the business is software that helps connect smb technology companies with enterprise uh

00:00:42.600 organizations um we serve mainly telco sector and what's it called handshaker handshaker cool

00:00:51.960 we are in kind of a niche b2b space with a high arpu so all that sort of comes with a significant

00:01:04.520 challenge in that sales cycle is a little bit longer and we also have this kind of marketplace

00:01:11.960 dynamic which is we have two customers we have a buyer and a seller buyer being large enterprise

00:01:17.400 looking at innovation seller being a tech company trying to get the eyes and ears of the big tech

00:01:25.000 company so got it so the model is um correct me if i'm wrong uh new startup technology wanting to

00:01:32.360 get in front of more established fortune 2000 clients you know uh both for distribution for

00:01:40.520 them to get innovation so the motivation for the big company is innovation access to early kind of

00:01:46.600 differentiator unique value the startup obviously getting reference accounts revenue that kind of

00:01:54.040 thing some case studies potentially um do i got that right yeah yeah absolutely um and what are

00:02:00.840 the big challenges that you have that you want to discuss today yeah so there's three um the first

00:02:07.400 is marketplace dynamics in that um we have this complex by buyer and seller two-sided um software

00:02:15.240 as a service and you need inventory on one or the other to actually make the thing fly uh in other

00:02:22.200 words inventory meaning customers one has to be bigger than the other the second is um forecasting

00:02:29.400 uh for purposes of fundraising um you know i've been doing um sales forecasting for a number of

00:02:35.880 years but there's an element of blue sky that's involved and i don't want it to be beyond

00:02:41.720 credibility um and then the last piece is the pricing element so um figuring out what our

00:02:50.580 pricing structure would be i've got an idea but it's it's again it's it's gut feel uh more than

00:02:58.580 it is researched and what stage are you guys at today so we're just under 3k mrr um we're on track

00:03:07.300 to get to around about 5k in the next couple of months are targets to get to 10k by the end of

00:03:13.140 this uh this year and uh what is the use case today that people are paying for walk me through

00:03:20.180 kind of a traditional use case so the key thing is is eyes and ears on a new product or a new

00:03:26.420 technology um the right eyes and ears in the big enterprise for the enterprise it's an optic on

00:03:33.300 innovation it's it's actually getting visibility of all the really cool tech out there without

00:03:37.940 having to go to these big conferences and um and then actually putting that in front of functional

00:03:43.220 leaders not just an innovation function in a large company so what's the offering like use

00:03:48.100 case in regards to give me examples of people that are currently paying you for the the to be in the

00:03:55.780 marketplace and what do the companies pay to get access to those companies so we have um quite a

00:04:03.060 wide-ranging set of sellers that have got technology that helps fix specific problems

00:04:08.660 in the telco operators so they have a piece of technology that'll help understand customer

00:04:14.420 experience they've got something quite unique that measures both subjective and objective

00:04:20.420 customer experience type metrics and they're trying to get that into a big operator that

00:04:25.220 probably has you know lots of people shouting at them to be seen and heard and maybe they can't get

00:04:30.420 the right person to hear them out um so i understand the seller wanting to get in front of

00:04:35.780 the telco what do you do to enable that transaction what do they pay today what does the telco pay

00:04:41.940 yes so so for example um they'll uh pay to to be listed and they do a short elevator pitch

00:04:52.820 and that elevator pitch is then visualized in a a wall of innovation essentially video wall

00:04:57.860 and that video wall is categorized by functional area for the buyer so the

00:05:02.760 buyer gets a onto crowdsourced view of all this innovation and the functional

00:05:07.480 leadership in a big buyer will have visibility of an area that they're

00:05:11.360 particularly interested in they'll use tags etc keywords and that'll pop up

00:05:16.780 that'll tell them a little bit about the company the seller that's trying to get

00:05:21.860 their attention they'll have a little video that says hey we are X technology

00:05:25.700 company we can help you get visibility of both the subjective and objective data for your clients

00:05:30.600 in real time we've got track record of doing this in these places or we're a startup etc

00:05:35.280 and so that that that human touch that pitch is then attached um uh with a little bit of um i

00:05:44.020 guess background information about the company um maybe just a one pager and that's what the

00:05:49.320 buyer the big company sees but it goes directly to the right person in the business that's sort

00:05:55.160 identified an area that they're really keen to look at um so i understand the seller pays to be

00:06:01.880 listed you help do you help them with the video and help them creative okay absolutely and then

00:06:07.160 the buyers what do they pay right now so they are probably the higher end of the scale in terms of

00:06:16.600 pricing structure um and just a subscription to the existing community um they'll pay for

00:06:24.360 two things one is that visibility of the innovation and the second thing is being able to

00:06:29.320 send a requirement confidentially in a swim lane to our community to say hey guys

00:06:34.040 we've got this problem we can't nail it down um what have you got to offer and so we'll then

00:06:39.640 provide that sort of uh what do they pay a month right now for that so right now they're on on um

00:06:46.520 a 25k a year um sort of startup uh amount i i think that should be higher um but that's kind

00:06:54.920 of the level we're at so the buyers paid 25k to get access to this innovation the sellers right

00:07:01.080 now do they pay anything yeah so there's a there's a scale from uh depending on size so if you have

00:07:05.880 proper startup before you've had funding or anything that's um early on uh it's anything

00:07:11.480 from 3k to 13k a year depending on which sort of level you're at there's four levels essentially

00:07:17.000 got it how did you come up with this idea where the inspiration come from 20 years of bte um i've

00:07:24.200 spent that time um generally sort of small company trying to sell into bigger companies large telcos

00:07:31.480 generally it's a technology play uh within the networks or it functions and it's and it's it's

00:07:37.480 hard right it's i mean you you know enterprise sales it's it's a grind um my last business

00:07:43.480 i was with for 10 years leading global sales i just spent all my time on a plane and i got to

00:07:48.520 20 end of 2019 i was just i was on a red eye back from the us and i just spent four or five

00:07:53.880 weeks on the road and i was like right there's gotta be a better way of doing this there's way

00:07:58.600 too much noise out there um and the main people that you want to get in touch with in in the

00:08:05.880 enterprise you know it's it's a long process of getting their attention it's a long and

00:08:10.440 an expensive process right so um you know i i basically lived and breathed it for 20 years i

00:08:16.120 just got to the point where i was like right let's do something about this has got to be a better way

00:08:20.280 of doing this um and frankly a lot of the conversations i've had with the buy side the

00:08:25.720 telco operators the big guys um they struggle to harness innovation properly right so a lot of them

00:08:35.240 will have an innovation function a lot of them will have you know specific people that will try

00:08:40.520 and bring in startups um into their business but actually getting that into functional leadership

00:08:45.880 and actually you know making that innovation come to life in their organization is also a huge

00:08:50.520 struggle so um i wanted to do something about it and i had enough proof from my previous business

00:08:57.720 to say okay this is definitely an itch that needs scratching um and if you can do something tech

00:09:02.760 wise to make that whole process a lot easier um then hopefully you know it'll it'll be a decent

00:09:09.160 market fit so i just thought like do it let's go for it um so i mean this is and and that was the

00:09:14.360 inspiration for handshaker the way i look at it is you have two separate customers so marketplaces

00:09:20.600 are unique because it's like having twins right you have literally two separate customers you've

00:09:26.120 got to serve you have the enterprise customer that's looking for innovation and then you have

00:09:30.120 the startup that's looking for adoption, right? So I always ask myself, which one is the most

00:09:36.120 important to build demand around? And in your case, my gut tells me it's the enterprise, right?

00:09:42.360 If you have, you know, 100, 200, 500 enterprises, and, you know, maybe a dozen in each category,

00:09:49.320 you know, telco, or, you know, communications, or whatever, you know, you know, water and gas,

00:09:55.800 or like different things that are similar like cousins that if you build that critical mass

00:10:01.720 then the startups will happily pay right and and i'm always looking for repeatable patterns to

00:10:07.720 match in the market so when i look at what you're doing you know maybe you're aware of this but

00:10:12.200 there's a lot of these events companies that will pitch you to sponsor or attend their event they

00:10:18.760 get you at a table and then they essentially wine and dine the executives at this these fortune 2000

00:10:24.920 companies to come to the event, to sit down, to hear the pitch, right? And they kind of pitch it

00:10:30.600 as like business networking. And I mean, it's typically, you know, five to 10, 15 grand per

00:10:36.760 company that pays to go, right? So you know that model, right? So you're trying to disrupt this,

00:10:43.660 and I would argue in a better, more eloquent way. So the good news is, is your value proposition,

00:10:52.080 the price point is high enough to support a sales process. Okay. So the way I think about it is if

00:10:59.580 that's my customer, these big companies, then I can ask myself, what's true about this customer?

00:11:05.660 What makes them a perfect fit? In my world, I call it a perfect fit customer. A perfect fit means

00:11:10.260 ready to buy. They have the characteristics, they have the values. Like what makes it that if I

00:11:16.260 approach this company, what's true about that company that would tell me that they would be

00:11:21.300 ready to buy my kind of solution. So if I ask you that question, Leon, how do you answer that?

00:11:26.680 What's true about your potential enterprise company that tells you they would easily spend

00:11:32.840 15 grand a year to get access to your platform? I would say they've got an innovation team

00:11:40.400 that's scouting. So they proactively look. Write that down. Innovations team.

00:11:44.800 I would say they have, it's a technology business and so they're going to have a truckload of problems to solve.

00:11:58.800 Cool. Technology business, innovation center. I always think about like three core areas.

00:12:04.800 What are the tools they might already have spent money on that might give you indication?

00:12:09.800 you indication what are the expert they may have hired or know of that tells you that they're

00:12:15.720 innovators or what are the events or groups or places they go and spend time that would tell

00:12:21.800 you that they would be potentially a good fit is there if you look at those three buckets right

00:12:26.120 what i i call it the three f's fund follow and frequent where would that fit in there okay okay

00:12:32.680 perfect and frankly most of them are spending a lot of time at the big telco events mobile congress

00:12:40.920 has been it's probably the big one um perfect so so check this out because i'm always like

00:12:46.840 growth hacking you hear this term growth hacking often which is like you know people kind of look

00:12:51.720 at as like marketing or you know metrics based marketing is kind of what we used to call it

00:12:56.200 it before the growth term uh came about but i always look for um distribution or like um you

00:13:05.240 know taking a wide net and really getting more spears focus um actually great book if you haven't

00:13:11.500 read it predictable revenue by aaron ross he talks about spears nets uh in there but when i hear what

00:13:18.600 you're sharing i'm hearing they go to this event which you just mentioned right what was the event

00:13:23.660 again mobile congress right so they go to mobile mobile congress mobile world congress sorry okay

00:13:31.420 so they go to mobile world congress of those people so that's the original hit list in there

00:13:37.580 you say okay of those companies which ones have innovation departments so everybody that doesn't

00:13:42.300 you take them out and then maybe within there i'm looking for something else right maybe i'm looking

00:13:47.740 for that they have adopted this technology right in the consumer space or in the b2b space you say

00:13:52.940 they have a snapchat account right if you're a business and you have a snapchat account you're

00:13:56.460 an early adopter right because what we're trying to find is the early adopters in your market

00:14:02.140 because if you do a really good job at aggregating hundreds of businesses that look like this but

00:14:09.020 they're not early adopters then the technology companies won't have liquidity they won't sell

00:14:13.980 through they won't get adopted you won't build case studies to be able to share to other people

00:14:18.940 in the market that your platform works right so that's what we're looking for what what what would

00:14:25.100 tell you if they're an early adopter versus a lagger you know and micro more's kind of innovation

00:14:31.420 adoption curve yeah and you know it's funny telco should be an early adopter of a lot of things but

00:14:38.460 but um they kind of buck the trend um i would suggest if they are uh running their own cloud

00:14:47.100 or vocally supporting a particular cloud technology or provider, then it gives you

00:14:53.660 a really good idea.

00:14:54.620 That's the one. And then cloud. So here's what's cool. And I meant Jeffrey Moore,

00:15:00.300 not Michael Moore. I think Michael Moore is the movie director. Jeffrey Moore is the innovator

00:15:08.460 and genius. So for example, I was working with one of my portfolio companies that I invested in,

00:15:15.980 and they were building a payroll software in Manila and they were having a hard time getting

00:15:21.340 in front of their early adopters. So same exercise went through one of the three Fs, fund, follow,

00:15:27.820 frequent. And one of the things they came to was, well, most of these SMBs use Google Apps for

00:15:34.620 Domain. This is before it was called Google Suite, but Google Apps for Domain. Now, Leon,

00:15:39.260 if you're technical enough to know that, and I ask you, okay, if I got a list of 100 companies,

00:15:45.020 how would I know if they use Google Apps for domain? If you know, you would say, oh, well,

00:15:50.540 you could check the DNS records to see if their mail record is set to Google mail server. Does

00:15:56.900 that make sense? Yeah, it makes a lot of sense. And there's this great site called Built With

00:16:02.540 that can potentially provide you with that information. So Built With, I think will tell

00:16:07.880 you the cloud provider they're using, the technology stack, the MarTech stack, the email

00:16:12.380 tools so you can almost use built with to give them a grading score of early adopters so if you

00:16:17.500 take people that attend the mobile world you know expo people that have a cloud and an innovation

00:16:25.580 team all of a sudden now you're you're you're making sales to you're using a sphere to go after

00:16:32.620 those accounts to get them which is going to queue you up to build the demand side of your marketplace

00:16:37.340 so that there's liquidity on the startup side does that make sense makes perfect sense yeah um

00:16:43.820 so that would be the first thing um you had a few other questions about pricing

00:16:47.900 and what was the other one so maybe the the forecasting for fundraising so i don't know um

00:16:55.580 maybe the forecasting comes next but yeah so the first thing is enterprise uh pricing so figuring

00:17:01.340 out um a pricing structure without it being um uh you know maybe i guess uh well it's a kind of a

00:17:14.380 rule of thumb type approach rather than it being yeah i mean here's here's the truth in in most

00:17:20.940 startups pricing is not something you should optimize for i think you need to capture value

00:17:26.220 You need to be able to support your growth. You need to be able to cover your costs. But in the

00:17:31.820 early days, your first 10 accounts might get your service at cost. Or even you might be even more

00:17:38.140 generous with your time and say, look, we're not trying to make 85% gross margin. We're just trying

00:17:43.740 to learn and experiment and we're just going to price it aggressively in the market to get those

00:17:49.180 first customers. If we're successful, we're going to get the case study. We're going to get the

00:17:53.100 testimonial. We're going to get some, you know, we really need them to bootstrap the marketplace

00:17:57.820 anyway. So don't worry too much about pricing. I think what you should look at is, is there

00:18:04.220 similar type products that companies that size pay for, right? It could be consulting retainers,

00:18:09.740 it could be innovation retainers, it could be whatever, right? And if they have them,

00:18:14.140 then you could easily use that as a kind of a benchmark, right? And say, look,

00:18:19.980 companies are already used to spending X amount of money on innovation, consulting, etc. Maybe

00:18:25.420 they pay for an account for Deloitte, not Deloitte, but maybe they pay for an account for

00:18:32.780 Gartner because they're giving them innovation and research and all that stuff.

00:18:38.700 And you can look at that price point and say, if they're paying for that, then they would pay for

00:18:42.300 this because we actually are more a tangible implementation version of that. And then using

00:18:47.500 that to kind of build out your forecast and your sales process but at the end of the day

00:18:51.660 you need to build demand generation maybe it's through these events buying those lists

00:18:56.620 filtering them through your qualifiers that make them a perfect fit customer and then

00:19:01.660 building some kind of knowledge around you know is this a 60 90 day 160 day sales cycle right

00:19:08.860 big companies typically are longer the reason why is because teams need to go through budget

00:19:13.980 approval right when you're a big company you can't just decide to spend 25 grand like it's very few

00:19:18.460 people in the org that's allowed to do that so then there's some pricing strategies there like

00:19:23.180 trying to keep it below a certain amount per month right and that gets into the discretionary budgets

00:19:27.500 for a team potentially right but i would say if you pattern match against something they're already

00:19:31.580 used to paying for then then people will be like okay yeah you're right they do pay you know 15

00:19:37.340 grand a year for this or 25 grand we're only pricing at 15 our products differentiated because

00:19:42.300 of these things. This is the size of the market. Here's our go-to-market strategy.

00:19:48.460 Be specific. This is the way we're going to do it. And as we build that up, we're going to partner

00:19:54.220 with these accelerators to build the supply side, which is the technology companies.

00:20:02.780 If you can get people to buy what the supply has to offer, then there'll be more supply than you

00:20:08.860 can deal with right at the end of the day if i'm a taxi and you have you got fares for me

00:20:15.500 even if i'm not a taxi i'll become a taxi if there's business to be made does that make sense

00:20:19.740 yes the yes you need to build some level of supply to have liquidity so that people looking for that

00:20:24.140 demand don't come up and have a blank slate experience but you do that slowly using the

00:20:28.300 bowling pin strategy meaning that you start with one industry like you've done you make sure you

00:20:32.620 get a certain amount of coverage and then you ask yourself what's the close cousin i call it the

00:20:37.340 close cousin jeffrey moore probably has a better term for it but it's the second and the third

00:20:41.260 bowling pin right what looks the same right so if i'm going from selling to telco maybe water and

00:20:48.700 gas is similar but you also said that they have an innovation stack so maybe not right so you'll

00:20:53.180 have to understand what looks the same because those are the markets you want to go after second

00:20:57.900 and third to build the the supply or the demand side or supply side to match that right because

00:21:04.380 you always want to make sure that there's a liquidity yeah totally get it and um i think

00:21:09.900 you know you mentioned the pattern matching um phrase which i think is probably a better way of

00:21:15.340 saying the rule of thumb type approach than that i mentioned um and essentially i've done i've

00:21:20.780 looked at the type of subscriptions these guys are paying for the type of um events they're going to

00:21:26.940 and i've gone okay if they're paying 25 30 40k for those types of events then they should be able

00:21:33.580 to pay for this type of product um i i was and that methodology if i stand in front of a

00:21:41.260 potential investor and then give them that sort of pattern matching approach they're not going to say

00:21:45.500 well you know no it's it's literally what i call napkin math right where you you've mapped out a

00:21:51.020 very logical informed argument for why your pricing is in the realm of possibility right

00:21:59.820 and you've already kind of proved it out a little bit it's not optimized you're not trying to

00:22:03.660 optimize right now you're trying to build liquidity and build scale but over time you know that you

00:22:08.380 can kind of increase the prices to be able to improve your go-to-market and your monetization

00:22:13.340 that's a really good way to present it in regards to like what's aggressive versus not i mean if

00:22:18.860 you're raising venture capital and you want to build a venture-backed business you need to show

00:22:23.260 some kind of way that you're going to get to 100 million in revenue in the next seven years that's

00:22:27.260 the rule of thumb right because investors are making a dozen bets on somebody being a winner

00:22:34.860 and if that's you they want to hear how are you going to stack that growth and build out that team

00:22:40.780 and leverage their capital to to build the the marketplace right and what does that liquidity

00:22:45.980 look like at scale does that help does really help um so leon as we wrap up what are the big

00:22:52.780 takeaways for you what what what resonated the most with you from our conversation for me it's

00:22:58.620 it's uh pattern matching um you know i think that's a really great way to describe how to

00:23:05.020 show that you've got a methodology essentially a rough guy um how to hone in on your right um

00:23:13.500 your right buyer um you know the three key areas we talked about um and finally you know uh i think

00:23:22.140 I think the biggest thing is the close cousins, I think, as well.

00:23:26.140 It's also a really good thing that I took from the from the session.

00:23:30.140 If you could show you you've got some form of methodology to focus on one market and you've got close relatives.

00:23:36.140 You can go after them. It shows you've got a growth potential.

00:23:40.140 Yeah. And you just want to show the ten pins. These are the first three.

00:23:44.140 These are the ones we've already planned out. Each one is worth X amount of market share or size of revenue or potential.

00:23:49.140 and that's how we get to a hundred million.

00:23:51.640 And it just feels thoughtful and logical

00:23:54.080 and that's what investors want.

00:23:55.560 And then, you know, you got them when they lean in

00:23:59.200 and they start giving you advice.

00:24:00.860 Just so you know, the moment you stop talking

00:24:03.280 and they go, but you could also do this.

00:24:05.300 That's when you know you've got an investor on the hook.

00:24:08.420 Awesome.

00:24:09.360 Awesome, Leon, it's been a pleasure, man.

00:24:11.700 Great to meet you, great to meet you, thank you.

00:24:13.420 Have an amazing rest of the day, we'll talk soon.

00:24:14.700 Thank you, and you.

00:24:19.140 We'll be right back.

Dan Martell - April 26, 2021

What You Need To Build a Two-Sided SaaS

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