Life After Freemium: How we killed our business model

me and giving drew a warm Round of Applause up on the stage um bam my name is Drew I'm from a company called Crystal knows started it in 2015. and just to get an idea so this is going to be all about business model transformation um how many people have the majority of their revenue coming from either what you call it plg or self-service or basically most people pay you with a credit card individually all right and then how many people most of their

revenue come from a more B2B motion where it's annual or like subscriptions got it so we're about like 40 to 60. how many people are changing from one to the other or moving from one all right so is it is it a moving up Market both all right so who I think it's who's moving up market right now okay who's moving down Market cool all right so I got a good mix so just to give you the high level we are about

seven years old and we've been in the Pro the long process of figuring out that the world of like self-service and SMB it was great to get us started but it did not it was not going to get us to where we want to be so when people ask me how long I've been doing Crystal I say it well it's like a seven and a half year old company but it's like a two-year-old business so that's kind of what this is about so my biggest lesson for the last seven years of doing this was just that most SAS cannot scale by plg alone and plg

means a lot of things to a lot of people if you want to just substitute like self-service for us so self-service pricing or payments um so I just want to walk through the next 20 minutes the three I guess there's really two stages one is I call our plg model so I want to start basically where we were for the most you know the majority of our of our company's life where it's just everybody is a self-service single subscription

paying us with a credit card don't really talk to most people to do that I'm going to go over how we built that organic funnel how we it really helped us to achieve profitability and grow in a lean way um but then also the problems why I couldn't scale so now I'm going to go over the pivot how we validated the new model um and how we de-risked that whole process so it wasn't just you know cutting off things right away and changing and then the challenges to come along with it and then if I uh don't speak too long I ramble on I'm going to talk about

the new model and how that has played out so far over the last two years at the high level we've about 4X star LTV which is the main kind of metric that I've been using as success to make these decisions and build the team and everything so three stages so I'll start with just basic overview of the product um does anybody here familiar with Crystal Eric okay a few people so it's a um we call an Adaptive selling tool we serve mostly B2B sales teams and they

use it our Chrome extension on LinkedIn it can be to help them communicate better with people and we also have these tools for Gmail Outlook help people write better emails based on the personality of who you're speaking to um like I said we've been around for just over seven years been profitable for the last three we did raise money so we raised venture capital from Mostly strategics so Salesforce and HubSpot Ventures are our main primary two investors and we've got a couple more I move about 30 employees right now

scattered all over the US and Canada and our product it mostly is an integrated we call it a coach for every conversation so it's not the type of thing where you plug it in and says Mission critical tool that someone's spending their Day on um it's more of an integration focused thing so we just want to follow you around if you're a B2B sales rep or a B2B sales manager wherever you do your work so that's kind of an example of what the product does living in Gmail Works in a similar way to like spell

check or grammarly but correct your emails as you write so it's a it's a it's a whole kind of multi-dimensional thing starts with personality assessments then goes to how you put this stuff into practice so this is just like a picture of when we from when we started to now and it's been a it's been a journey it's kind of crazy for me to look at the uh just the the change in it so if you notice there's two lines that pink line is our self-service business and that was all of our revenue

for the first five-ish years of growing Crystal and that's what a lot of people learned about the product because we were just trying to build this inbound funnel and thus we give away a lot for free so we've got a big freemium platform and that created a growth mechanism however as you can see it was just very difficult to scale that we couldn't really it was just very hard to move it and get it a little bit into the details the paint the purple line is the B2B sales motion that we started about

two years ago towards the end of 2020. and that is a combination of like mid-market and Enterprise sales and that's what's really elevated our business not I mean this is a very much a work in progress so hopefully I can talk to you in a couple years and that Line's gonna this one's gonna look very different but um it's really given us a scalable sales model that now we're kind of pressing into so you're seeing like a work in progress type presentation right now this is this is not a complete retrospective

under her this is the key stat that I am laser focused on with our team it's improving improving our LTV so all throughout this self-service journey of our company I could not for the life of me figure out how to increase ACV significantly I could not figure out how to get the churn down so that resulted in a long long slog of struggling with Lowell TV we had a very exciting product on the surface but just the nature of you know this credit card

churn and a product that was not coming down from the top and then people struggling to implement it it was just a very difficult it was very difficult to upsell to expand all kinds you know everything that all the people on the stage have said you should be doing this we actually couldn't put her into motion because we didn't actually have real relationships with our customers um but last two years since I'm lending all this stuff we'll be able to increase that about 4X and it's kind of on its way up as we continue to do it

so the the first model just so we know what we're talking about here um you might find it something similar we were charging anywhere between like 29 and 49 a month for our product and it was mostly mostly monthly sorry monthly uh monthly deals we had no sales team no customer success team at the time I bragged about that it's like yeah great our product kind of just sells itself people just pay us it's wonderful um I was able to just

do things like you know have a tiny tiny scene that was mostly just me and a bunch of other developers and honestly it wasn't all bad like the the good parts about this was that it forced us to build really strong organic funnels so Crystal does over a hundred or sorry over a thousand signups per day and of those there are a lot who are very well qualified for an account so building that funnel was really helpful build a lot of brand awareness some really great logos of companies where we got a lot of saturation and then also

just product wise when you have that kind of motion this is this is a reason I would say here definitely go into freemium or plg if you haven't yet it gives you a very very fast feedback loop you can put something in you can put something out there and whereas if you're in a pure B2B motion it's going to take you a while you know maybe months to figure out did this work in a high volume transactional business you can get data like within a day or depending on what you're doing maybe it's a couple of weeks so being able to make decisions really quickly that was a

really big part of the plg part um and then also was just super efficient so insanely low CAC at the time most of the time we did this we just had less than 10 people didn't it was just not a very people-intensive business and most of those were on the product engineering side and we were able to build um steady cash flow so as a tiny company we were able to even after raising Venture Capital add like over a million to the balance sheet and just kind of keep going smooth and steady but anyway I was going to just describe a couple of those

um how we did that this was a part of the organic funnel and how it was generating those thousand signups a day so first one was just multiplayer features I could skip over these details here but the second was SEO so that was a major part of growing that funnel most of our SEO is just these personality tests and all these types of opportunities that we found online so bottom line here is that growing that

self-service or plg motion was really a forcing function for us to build these types of channels so that's a that is a great reason to do it and also it really plays into our strategy now but it really struggled so just put some numbers to it I mean our churn rates were probably two to three percent in just credit card churn like involuntary credit card sharing a loan and you can recover some of that if there's tools do it but it that even that to overcome is really tough and then you put it on top

on top of it it's a product that you you know we we would find that people when they started as even if they're at a huge company it feels like a secret weapon to them so they don't really spread it to others this is mostly dealing with sales reps so they're they're competing with their peers so rather than say hey I found this great new tool a lot of sales reps in these large companies had a more adversarial relationship where we would talk to them and say Hey you know you like using the products like yeah I love

Crystal and then we asked them like oh is anybody else in the team using it's like no way I'm not telling them about this like this is giving me an advantage that was a really interesting learning from like one of the one of the darker sides of uh of like a single single license type product so that happened so it was very hard to increase the ACV or get opportunities and spread it that was like one of the main things I found out and then when I Dig Dug in further and this has continued up till this year was I

learned that there were a lot of huge companies that were kind of because they I don't want to say it's like a hole in our business model but we just we didn't really expect them to use the product in the way that we thought and because this is just a bunch of people giving us their credit card it wasn't a full motion where they're paying us thousands of dollars to pay us a few hundred dollars a month never even had the opportunity to to understand that now we talked to a lot of them because we had relation you know I had one-on-one relationships with people and you know but we're dealing

with like 5 000 customers at one point a 10 person team you just you just don't have the insights you do when you're dealing in a in a larger motion so these were some some of the issues that were really holding us back then around the mid to late 2020 had these insights which caused us to to change over to now I call this plg plus B2B sales motion um we had a couple of Team subscriptions and this is I think one of the

unexpected things where it's if you're one of those companies that's going from self-service towards Enterprise or B2B this is one of the things that just surprised me I was expecting roughly similar usage and retention patterns but what we saw was a jump from like 55 retention rate to about 120. and that was pretty much the same product except when it was an individual use case just you lose half of them over a year versus

the same exact product in a B2B use case where you know we've got a customer success team people actually responsible for maintaining the revenue expansion opportunities we're seeing a consistent about 120 percent retention right and that's before we you know change the product to accommodate for those people better so that was like the kind of thing that would be obvious to a more experienced person who knew what they were doing but that's not me so it took me five years to realize that I was like

all right well this product X what I thought was a product problem over and over again if we just released the right feature then people will stop canceling accounts if we just figure out how to you know tweak the onboarding so you know that we get the right self-service customer them a lot better numbers it turns out it was just our product this is not the same for everybody but our product in particular just works better when it's part of a whole organizational initiative or a whole team initiative so that was the biggest intro then there were some other

things here like um for example this I kind of mentioned before when large companies were organically converting so we'd see a big customer of ours Accenture and we'd see all these Accenture accounts coming in going out upgrading downgrading like signing up a whole bunch of people and then never responding to the emails that we sent out um it was just like all this Churn it you know and you're looking at these logos like wow we've got accentuous

customers oracles customers ey Salesforce like these just massive companies but no real Enterprise traction and it's because they never actually had the pressure to to enter into the sales process even when we had a sales team we were trying for it because we had the self-service account it was like this very low friction way to just kind of take care of with your company card and not worry about it um and then overall just personally and

this maybe you can resonate with the constant steady grind of doing a B2B company but with b2c like churn was just exhausting because I'll be b2c companies that have subscriptions they all deal with high high churn rates relative to what a B2B company looks like but um I think a lot of prosumer type you know models it can work with a super super sticky product that's not really what we have it's not

just not like that so constantly has seen customers churn and build these relationships and then seeing um just it's just physically like exhausting to do because you feel like you're constantly on this hamster wheel and maybe you're taking like two-step sword or maybe you're taking like five steps forward and then like four steps back that's what I feel like so back in 2022 this is

at the point when we had probably I'd say two to three percent of our Revenue coming from these team deals but we got those insights that I mentioned well like wow these customers have just been here forever they were just things that I closed personally didn't have a sales team doing it I realized these people are actually using this product and it's they are showing a lot of success with it and they seem to really like it a lot more than the individuals who keep coming in and out decided to just kind of go for it because like I said we had raised money

and we had the cash in the balance sheet we just didn't really know how to use it so at this point even though we were profitable or because we were profitable I was able to just say like let's just take the risk and try something new so in 2020 we hired finally a VP of sales we've done this before can I can't speak enough to that just the amount of La the amount of experience I lacked so both on the VP of sales and VP of customer success people who had done this before and just like

allowed to cover up my blind spots as like a developer technical founder and then we started placing new limits on our self-service accounts and just kind of went for it and so this is what our our model after a lot of tinkering and a bunch of different kind of flows has now today looks like so we get about 20 000 signups from all kinds of word of mouth so direct referral all that per month and we got about 10 000 sinus

via SEO so that funnel I mentioned and a little bit for marketing everybody converts to free accounts so this is a I said we kill the freemium model we didn't really kill the freemium model that's still going strong we killed the freemium to self-service model and now everybody ends up getting put in one of these buckets they're uh well there's really four buckets there's a lot of people are just consumers who are kind of disregarded but of the leads you got mqls these are people who would previously sign up for a self-service

account and these are the ones who either are a tiny entity at a large company who we want to nurture or they're someone who had a genuinely small business there's a mid Market which is for us like 3 to 24K ACV and these are generally companies that have teams of people call it from 10 to 100 and that's we have a sales team around that and then we have this Enterprise bucket where the companies that are usually

greater than 5 000 people a lot of them have scattered free users little paid accounts across the board and it's primarily a sales use case for us so this model flows both into those buckets and then those buckets flow upward because we're kind of constantly nurturing those smaller scale leads into the larger ones the trade-offs are definitely real too and I definitely want to I'm not gonna go too into detail this because I want to show you the results of all this but

the main ones are around sales cycle and complexity so if you've ever tried that up Market motion if you're going the opposite direction it's it's kind of a nice it's a nice reprieve from those things but going out Market we definitely had to build out our just the overall apparatus in the uh to the infrastructure around compliance and legal in all of this so that's been a big big trade-off and also much greater seasonality this was one that I didn't expect whereas our Revenue used to be very very steady now we see those huge drop-offs in the summer come back

and you know towards the end of quarters and then you get that big drop off in the winter something that was just not on my radar as uh just mainly plg founder and I was like oh well it actually matters when people are in the office so there's all these little things and then one I didn't expect too is a little bit of an emotional roller coaster difference because you know just I think last week we closed one of our biggest deals ever and it was in flux for a while and um felt really good and the week prior we had lost one of our biggest steals ever that didn't close so that was something I never ever dealt

with before thank you and these are the two main drivers for it though so those risks so far look like they're paying off so our overall Revenue per user is up about three times and like I said the gross the Churn number on those B2B accounts is much more healthy so that's kind of continuing on this downward trajectory and the number's not on here but the net is about it's about 120 for the B2B account so we're kind of we finally got over a hundred percent across the

customer base it's about 101 and we're kind of continuing that upward motion so today this is what it looks like um we've got that yellow line which is the self-service business the pink line is our mid-market business and that earlier developing line is our Enterprise business which is where we're really hoping most of the growth comes from in the future um and one thing you notice is just that yellow line it's going down and that's one of the key takeaways for me is that I'm gonna actually go to my

next slide here these are the three key takeaways but that last one was I realized for years as a Founder that has been used to one business model I actually had this built-in fear of watching a number go down a number going down that I could have relied on steadily growing up going up even if it was really hard to make it increase faster the only thing that helped me personally unlock a new business model with those much healthier unit economics and something that I can actually scale now because I have a model that can plug

sales people into and a customer success team into and if they hit their numbers it works the only thing was getting over the fear of watching a number go down that I had trusted in going up for a long time so that's that's the key thing it's anything take away from this presentation it's the thing that got you to say one million may not be the thing that gets you to 10 million and if you have any kind of mental blocks like that usually because you've been you know resting on one number going up for a long time then getting over that can be really helpful so anyways

yeah that's that's uh I think we're about 20 minutes now so that's the end of my presentation um if anybody wants to go in deep I love like nerding out on business model type stuff because I'm tinkering with this for years at this point um especially when we're talking about moving one way or the other it's just there's so many of these built-in assumptions that you have that are completely the opposite or completely false that you don't really figure out until you until you move that direction until you really meet and go deep with someone in that so yeah I'd love to love

to talk about that with anybody who's kind of going through that motion or the opposite motion so thank you [Applause] [Music]