9 Do's and Dont's of Scaling a SaaS Business to $50m+ in ARR

founders what's going on you guys know i love in-person events and they are back the recording you're about to hear is from our most recent event where we had hundreds of founders come together share intimate details templates kpis okrs about their business and it was something special something special we'd love to meet you in person if you want to see the next live events we have coming up via our schedule the link will be down below in the description if you're listening on itunes check this out on youtube you'll see the links in the description or you can just google

founder path or latka next event we'd love to see you in person in the meantime though enjoy this recording it's a good one please help me welcome codard abel with g2 to the stage take it away have fun you bet you know do you wish is this mic working yeah it is okay yeah as i say i wish i had big biceps i asked him how he does that and he said

3 600 calories in 30 kilograms and i have some weight lifting i'm more of a runner so in my old age i'm trying to stay skinny but i wish i had those questions but what i'm here to talk to you about is yes building sas companies and maybe just to get us going it is friday morning i was at a lovely dinner thank you nathan great event and love being with all of you i think i consider you all my brethren my brothers and sisters in building businesses

i do often like to say i think building a sas company is like being a parent i also have three kids and and i do think now i've built three companies so three three sas babies and i'm also now i'd like to say uncle where i'm chairman couple helping some entrepreneurial family so i also have nieces and nephew sas businesses and uh but i do love building sas business but just to get us going like please stand up if you're have started at least one sas company

that's probably why you're here most of you i assume whoa don't fall over backwards i didn't have that much wine last night um yes so all of you yes and then hold on stay standing if you've started two sas businesses oh quite a few of you yes i love it keep going back for more and now sit down if you start at two and keep standing if you've done three or more

all right we still got three i love it and now how about sit down unless you've done four anyone all right yeah and that's why i'm here so and i've only started three as founder ceo but now i'm also started help start two as kind of executive chairman and a couple more into work so i love building sas businesses and i've been doing it now since 1998.

it's a long time i turned 50 last year so i'm getting old but honestly i also like being the old guy it's actually i find it much more relaxing because i remember my first company i started when i was 27 and i was just full of adrenaline i had bigger biceps and uh but i really didn't know what i was doing it was all adrenaline energy i just want to build something you know i was in california at the time the silicon valley actually started my first company in 2000 and that was still i don't know how many of you are old enough to remember

2000 yes quite a few of you yeah but that was a dot-com era and super exciting time and i was out in california going to business school there and everyone was starting companies i remember the time like jerry yang came to speak to us he was still a big deal i don't even know if anyone knows who jerry is anymore but he started yahoo which was actually really big before google and so just been a really exciting career in sas and i have learned a lot and i'm still learning i think that's why i'm still doing it i do also see entrepreneurship as a great way to keep learning keep growing

and i think you can make a lot of money doing it which is wonderful i've enjoyed that it's a great way to make a living but i also think and frankly henry talked about that yesterday with nathan just an incredible story uh of you know creating a 20 billion dollar business i think he still owns 12 percent of it that's pretty good how much do you still own of g2 more than that what's right now 80 just over 80. there you go okay i like nathan's quick questions just like i

think same thing henry said i always respect that about you you just go right to the point you're a storyteller so i want to get the hard numbers out at the same time you know yeah no and i don't want to talk about the numbers and making money because like henry's better at that than i am but what i want to talk about is also everything else you can learn and i think equally to me it's how do you find meaning how do you grow spiritually and that's probably what's been really surprising interesting about entrepreneurship is it has been also a spiritual journey of personal growth learning

and i do think entrepreneurship is a unique platform to do both you can do really well make a lot of money and i think you can really grow as a human and i think if you build a really good company it can be a platform for others to grow as well and i'm sure you see that but i love that our entrepreneurial family now we've hired you know well over a thousand people over the many years and but seeing so many of them grow with us and now i'm also really excited helping them start their own companies and so it's also a wonderful platform we can create to make the world better uh but my first job was as a mckinsey

consultant and there you get paid by the slide so i do have quite a few slides but mainly just pictures hopefully help me tell stories and uh so let's get going nine key lessons learned and first yes i have five sass baby there's actually a sixth one in the work that i haven't announced yet but my day job is g2 and i love building g2 and especially i also built sas build g2 for sas founders like us because my real inspiration was hayden

gardner anyone here love gardner if you love gartner please leave the room gutter they just signed a sponsor contract man help me okay all right i love them too um but they're just slow because i remember my first company big machines it took me nine years to get in the gartner report and 12 years to become the leader now how many of you want to wait 12 years to become a leader i paid them a lot too i probably wasn't good enough at kissing

my endless ass that was the part i also hated and frank what i love doing i love talking to customers and that was really the idea for g2 like let's not have some analysts that can't eat the food you know it says like a restaurant critic that literally can't eat the food right the analysts can't use the software and they just stand outside the restaurant asking other people how was your meal and i'd rather ask to people eating the meal right and that's why we said it's kind of a yelp for business software when we started and let's give the power to the customer and the user so that was our inspiration it was really exciting

to see g2 coming to life we did become a unicorn last year so that was one of my unfulfilled dreams as an entrepreneur but my next unfulfilled dream i do want to be like henry and so eventually i hope we can ring the bell but we still have a ways to go and my first company big machines as i mentioned i started this in 2000.com era i was a 27 year old cocky kid at the time investors like that because it was.com and frankly we were

completely clueless but i recruited for like smart kids from mit stanford and we started out we were able to raise 20 million the first year just based on hype and the internet and back then vcs were not so critical like there were no metrics there was nothing you just kind of had hype and a vision but the vision was really inspired also by my father my father was an entrepreneur but in a very different industry he made pumps industrial pumps i was born in germany and there's a good kind of small they call

mr stunt a small german pump manufacturing company and he was making these pumps you can see a picture of a blue little able pump there but they're pissed membrane pumps pumps for complex applications and what really inspired my first company i went home to pittsburgh pennsylvania he moved us from the pittsburgh of germany essen which is if any of your soccer fans is right next to dortmund obviously dortmund but the kind of northwest industrial part of germany we moved to pittsburgh because he wanted to start a u.s subsidiary and but i was talking to my

father about the internet i went back home for thanksgiving 99 i was in the silicon valley which at the time was called the reality distortion zone might still be that but i think at the time also jeff bezos was already famous and everyone was afraid of getting amazon which is still true 22 years later but but as i talked to my dad i'm like hey how's the pump industry going to be disrupted by the internet i think he's like well it's disruption and he just said it's not yeah because i sell these complex pumps

and every pump we have to configure a different pump with you know based on the flow rate pressure viscosity chemical composition of the fluid we have to configure different pump motors couplings housings and there's no way i could sell it online like a book but then i had the idea i saw what dell was doing and dell was one of the also most successful entrepreneurs in 90s but michael dell had started selling pcs online and pcs were also very configurable you can choose your memory your hard drive your screen size and behind the scenes they had a configuration engine

that allowed you to price it in real time make sure all the components fit together and even order it online and so the basic idea for big machines was let's help my father do the same thing but my dad only had two it people they didn't know anything about the internet they didn't have a website and they also were really just focused on their erp system and so really decided to build it what today you'd call the cloud i think back then we called it on-demand software and uh because we said hey let's just

because you know let's just take the hosting all that stuff out of them but back then it was still really hard we had to raise 21 bucks because we had to buy like sun servers you know spark servers oracle database licenses build our own at first it was like in our office we had like a big server room and then eventually went to colo but all that stuff was super hard and super expensive so you also had to raise you literally needed millions just to get this thing live and then we did get a live with a ton of hype hired like 70 people and i was 27 i'm like wow we're gonna go public in a year i remember one of my first

investors was john scully you have to be able to remember him but he's sort of infamous if you watch like the movies about apple he's the guy that fired steve jobs so that's not a great track record uh but he was very famous at the time still and uh you know so he he was my first investor and once i had him invest everyone and his advice to me was just like just think about how you go public in one year i was like that sounds awesome so we hired 70 people didn't know we're

doing and frankly in hindsight it was a really bad way to build a sas business because i think in hindsight i certainly realize in one year you never build a good product or a good company but then and our journey got much harder so a year into it all of a sudden like at the end of 2000 i'm like oh great we'll raise our next round but all the vcs then we're like no you're a young dumb clueless kid and the internet was a fad and it went into like dot bom that's what everyone was saying and then i'd call on customers like hi we're from bigmachines.com eventually drop the dot

com they're like oh when are you going bankrupt and then 911 happened and all these manufacturers were like well i'm not investing in anything and uh the internet was a fad so goodbye so i think for a couple years we were only selling like two or three customers a year i think my business plan my investors was like we're gonna sign up 50 then 100 and really it just wasn't selling at all so it's a very painful time and then we had to cut way back you know did like several layoffs went all the way down to

20 people and it was also very depressing i remember i just felt all this failure because my father actually i convinced her to become my first customer and investor so i'm like oh i'm going to lose all my dad's money i'd recruited my friends from mit my best friends i'm like i'm going to ruin their careers and we're going to go bankrupt that's kind of what it felt like um it's a very hard time but then i think in 2003 we kind of had our come to jesus moment because my co-founder and i chris we sat down we're like we have a million

dollars left we burned through 19. we only had a million dollars in revenue and we're like clearly we're not going to raise any more money and so it's either do we give the last million back and quit or do we keep going and uh and ultimately we did have about a dozen early manufacturing customers they were having success they were actually accelerating their sales quoting selling online through their distributors with big machines and we're like eventually the market will come so we decided to persevere cut the company down to 20 people we're like okay we got to cut it to a point where

in a year we can actually get profitable and cash flow positive because we'll never raise more money and then we did pull that off we just started selling one deal at a time we actually got cash flow positive and and then i think the other really smart thing we did um well one we figured out how to sell the product i'll talk more about that but i hired matt gorniak who's become kind of my best friend he was a young sales guy at the time but he and i really figured out how to sell together and he became our cro and the other smart thing i did at time i went to talk to mark benioff

and he was just salesforce was still private but i remember i met him in a salesforce event in chicago and i'm like hey mark i think we could partner because we were using his crm and at the time was really only for smbs maybe mid-market companies but i said hey some of your customers are going to need a sales quoting tools sales configuration tools siebel has one and he said great let's partner so this was before the app exchange i think they had like apex apis who partnered with them and then for a couple years it also didn't work i think first year we partnered we had like one or two joint customers

but then all of a sudden by you know then it turned a corner because salesforce started moving up market and i remember our first big deal with them was with ricoh the big copier multifunction printer company but they were looking at salesforce and siebel and they said to salesforce like hey unless you have a configurator we're not buying your product and then they called us and so they started bringing us a lot of deals and business really started growing and so eventually it actually turned a big success and we did scale it

we never raised more money and we actually scaled cash flow positive and ultimately had a great exit to oracle and uh but that was i think really our formative years was just learning how to sell and i do think you learn the most by pain just like your kids you put the hand on your hand on the stove and it really hurts but then you don't do it again and the second company yeah we learned a lot

because after we sold big machines to oracle actually after we started g2 we decided to do another one because right after oracle bought big machines we're like wow there's gonna be big vacuum the salesforce ecosystem and there's still a big need for sales configuration quoting tools so we decided to build another one we partnered with max rudman he was already building an app called code quickly and we started at beginning of 2014 that's max and is our ribbon cutting it was like a really shitty office in the chicago suburbs somewhere called highland park but i think we actually had two rooms one room had like eight people that was g2 and

then we opened the back room and i remember the heating system in the building didn't even work um but then and at that time max's original product had about a million arr and then in two years we scaled it actually we beat that plan that was a plan but we scaled it to 16 million in two years and got acquired by salesforce and we did like the double double vcs love that we double every six months and the first company i never hit my sales plan i think for seven years steel brick we never missed it was um well i was running it i think like 17

quarters in a row first as a startup and then inside the sales force so that was just incredible and i think the big difference was well one product market fit was much better clearly i mean by then the cloud was a thing and people needed cpq apps but also we just knew what we're doing and we were able to take the whole team and everything we learned the first time and just do it so much faster and now g2 that is my focus my day job and g2 we'd started like i said in parallel to or before steel brick even but it was going so slow

that matt and i decided we wanted to go build another company because for a couple years we couldn't make any money at g2 and we had this great vision let's build yelp for software but then we realized nobody wants to write reviews and i think yelp their founder did some great blogs he's like yeah 99 of people only read reviews and never write them and forget i thought about myself i'm like wow i never wrote a review until i started review company but i'd read them i'm like this is great right tripadvisor yelp there's all like a free resource to me but i was too busy to write them and that's what we realized with gt we're like

f this is hard nobody wants to write reviews and i think our first we launched it at dreamforce we just put out a booth we decided to start with salesforce and partner apps but and then we were just handing out five dollar startups starbucks cars like hey please write a review and we did that i gotta get dreamforce we got like a thousand reviews i went back to our office i remember like october and like we looked at google analytics and we had like one person on the site literally you know that google real-time analytics and you see one

and then like then we got really excited because the second one popped up in europe we're like wow two and then i'm like oh it's my dad so it was a hard business to build because we had this massive cold start and uh so actually that's why i went to go build a steel work with matt because we're like we like driving revenue but then my co-founder tim did a great job while i was building steel brick scaling the company and eventually we got past this cold start and obviously really excited because how many of you are our g2 customers

quite a few thank you you all can be uh but you know we do work with 3 000 software vendors now including henry and zoom info but you know to help them and obviously g2 and somebody says like yep you can be our for free you can be number one very committed to that if you have the best reviews and most reviews like slack has been number one on g2 for many years they've never paid us a penny to my frustration but then we try to upsell slack and others premium marketing tools that you know hopefully to help you drive more growth but so it's really exciting to see g2

coming to life and hope to work with all of you to validate your apps and help you become the leader in you know 12 months not in 12 years and what have we learned um so number one you know what have we learned about growth then i want to talk a little bit about what we've learned about talent and finally what are some of the great lessons i've learned from mark benioff and others and so number one ride big waves and i think we're really lucky we're all

riding this wave software's in the world marc andreessen said this in 2012 right when we're starting g2 and i think it's been so true and the beauty of it is i think it's going to continue so i've been really lucky my whole career 20 plus years has been in the software industry it's just been growing it's like the ultimate tailwind and forgetting the only mistake i ever made was selling any of our companies because they've all just gotten more valuable because this market keeps growing and the good news for us i think it's going to continue another 30 years and this is i think some battery ventures data but it's you know the market's going to 10x

again so frankly i like to think of it if you do nothing your business will be 10 times bigger and and i think this is really cool the software industry yes we have over 100 000 apps now on g2 and it just keeps growing so i think we all have this amazing tailwind because there is now purpose-built software for every industry and you all are creating it like i was just we're just talking like for tax advisors and it's amazing entrepreneurs just keep building better and better apps for more and more business and functions um and i think a part of our strategy is

also we like to partner with giants like i said our success i'm very thankful to mark benioff because really thanks to him big machines and his ecosystem same thing with steel brick now they're also an investor in g2 but i think partnering also with giants we partner with aws marketplace we partner with microsoft azure we partner with ibm red hat so three of the four largest cloud marketplaces in the world are now powered by g2 reviews and because not everyone comes to g2.com yet and so we said hey let's put it

where the buyers are going and so now your reviews are on g2.com will also go to these marketplaces and i i like to look at this as a trillion dollar arms race and between microsoft google amazon they're all literally i think betting on trillions and if we can be in the middle of that arms race and you can be in the middle of the arms race we'll all grow and i think the hard lesson though i learned at big machines was initially my vision was way too broad that's actually the original business plan

i made it with my father at our country club in pittsburgh and just that was like a front and back of a table reservation card that was my original business plan and kind of said we're gonna do everything we're like we're gonna build a machinery marketplace we're gonna help manufacturers sell we're gonna help people buy and like in hindsight there's like 50 products i'm gonna build them all at once we'll build them all in a year and obviously it's way too broad and so i learned the hard way we had to shut down our ebuy shut down our e-marketplace until we just said hey let's just focus on what we call e-sales

which then became cpq and uh and i think that's probably not one problem like i think the my least favorite pitch from entrepreneurs are like how are you gonna win i'm like when you say like oh i'm gonna have a lot more features and all the incumbents and i think now the more companies we build they try to make them as narrow as possible like just start with one thing and do that better than anyone else and uh kind of learned that the hard way and i think then once we started growing i think what matt and i learned how do we make this thing scalable and i think learned a lot there from

salesforce there's dave rudnicki he kind of was famous he published their original sales playbook but i think having a playbook because once it went beyond mat nine we started hiring tens hundreds of reps we're like hey we have to have a playbook and so that's still something we do today and i kind of was something probably i also wish i'd always done earlier like start investing enablement start investing in process so as you start to get to tens hundreds of reps you have a playbook and but i think don't get too wrote because i think the best selling is still an art form and i love selling but

i think being able to audible you know you want a process you want to plan but then you got to feel the vibe and go with it the other thing we learned especially from mark benioff is acquisitions are a good way to accelerate or henry's been doing this incredibly well at zoom info but i also think the best way to make acquisitions happen is to partner first and certainly that's what salesforce does you get to know each other you actually make sure your products work together do customers love them together and then it can lead to very natural acquisitions so we did one at steel brick where we

went from cpq to quote to cash we bought a billing company that was a great partner of ours and that really expanded the division now it's salesforce revenue cloud it's cpq plus billing and then also g2 we've done a couple siftery that brought us g2 track g2 stack so it's an exciting way to expand your footprint more quickly once you have momentum once you have money and i think what i think what i've done poorly so far and i would do better like henry is you know i think we haven't been thoughtful enough about integration and so i think that's something we want to do better going forward

in terms of talent i think when you're starting and you've all had this henry talked about yesterday at the beginning frankly you can't afford experienced people you don't want them right you just want young smart hungry people that'll do anything at the beginning you need that right you need all-rounders they'll just do anything go through walls and figure it out and then i think the best town strategy for me has been across companies we've built what we call an entrepreneurial family but you know we hire them like young smart fresh out of school clueless then they learn with us and then we keep

building together you know one company two companies three companies and this was our team at steel brick and i think it was cool about steel brick i think of the 200 people we had when salesforce acquired us over 100 were with us at big machines and they were totally dialed in we loved working together and i think there's nothing like you know breeding your own talent and then keeping the family together and yes don't use recruiters although i have a good friend nick who runs hunt club i do use recruiters now on occasion i think when you really need

specialized executives specialized hires but in general i think and also henry talked about this all his best sales people are higher is sdrs and i asked him in the breakout like what's your criteria he's like we don't have any well he didn't quite say that but you just hire young smart people and then see who grows with you and that's a much better way than using recruiters and we do have now a very global team of g2 650 people it's also going global and uh and i am quite we do have a

team in kiev and i am feeling quite sad right now and i'm sure makita will talk about that more but it is a horrible time but it's wonderful to have talent everywhere around the world and growing and i think once you have your team we learned also to really be conscious about culture when i started my first company i wasn't conscious about culture at all it's like hey let's just start going but then the second company we realized from the beginning let's be really clear about our culture and so we defined a peak culture

which has been common at g2 as well as at steelbrick in high level we just said we're the good guys and we had a competitor without any username anymore app does they were the bad guys but we genuinely believe like hey we're going to take better care of our customers our customers are going to love us and it's all about heart and really caring about your customers caring about your team and so our goal is always to have evangelical customers have inspired employees and also have investors not just get a good return but

have them proud to be associated with us and that has had a great impact on our enps and i think the other important thing is we have authenticity as one of our core values but i think also being you know very authentic with your team and and you want to have bigger you want to have process but i think you still want people to feel the human connection and i think the other thing i've learned the hard way is leadership does need to

evolve you know i think you've all been at the startup days where everyone knows everyone it's actually super fun you know everything you can solve every problem but then you quickly realize once you get over 50 employees and this is all fossil from reid hoffman linkedin founder it's part of blitzscaling great book but you know but you get bigger all of a sudden you can't solve all the problems yourself you don't know everyone anymore you can't coach everyone and then i think we're not going to the next phase we're becoming more of a city where really i feel like i can't solve i don't even know what most of the

problems are anymore and you really have to build a team that will solve the problems and your job becomes much more alignment and this is something i've gone through it's also kind of painful because i think you a lot of you might have this where you find your co-founders while they're amazing they don't scale at some point as leaders and so i have made a lot of changes i brought in a whole new leadership team the last year new chief product officer sarah new chief revenue officer mike nude cmo

amanda new chief people officer and i'm looking for cfo so i've kind of found wow once we hit five six hundred people it just needed more mature leaders and i'm starting to build an office ceo very inspired by mark benioff because i was like mark how do you do this and he's got a whole office of the chairman like 30 people chief of staff that just helped him drive his initiatives and his impact make sure he's prepared follows up for every meeting runs his v2 mom his alignment and so i'm starting to build that myself

and and i think in hindsight and i'm probably like most of you founders like i love my co-founders i love my team and then i'm oftentimes in hindsight i like wait too long to make changes even when i see people struggling and not being comfortable as a job gets bigger and so i think don't be afraid to make the changes and even don't be afraid to have people leave because sometimes you're like oh wow this person's indispensable like i'm gonna even if they're not in the right job anymore and i've always found you know everyone is replaceable ultimately and in terms of stealing from the best

yes mark benioff he's still my idol as an entrepreneur impact on the world but i think one thing he's always used as a v2 mom that's his first v2 mom he's got a great blog but it's his alignment tool and but just writing down every year every quarter what are your key priorities in some ways like the okr but it's better and we define one every year you know we actually spent a lot of time we started a leadership team in november we spent three months and there's also like a 10 page narrative now where we define our vision our values our key methods our

key initiatives we set measures for everyone and then we report on them every month and i think that's the other big thing i think especially as your company gets bigger like don't assume your team understands what you want and what your vision is and so i think also just communicating constantly what's your vision what's your values what are your key initiatives has been really important and now we have a whole cadence i learned from mark benioff you know but how do we do monthly operating reviews with each team each part of the v2 mom obviously quarterly

board meetings all hands meetings but i think now we've really formalized how we communicate because and i think people say this and sounds pedantic you can't communicate enough but it's true and conscious leadership i think this was during my first company there i am in 2009 with my baby daughter maddie uh my wife stacy and that's our big machines team early days we had really ugly branding didn't have a good cmo didn't have a cmo but those look at construction jackets

the what yeah lederhosen yes uh does uh yeah halloween going back to our german roots although i'm actually from northern germany it's funny i came to america everyone's like where's your lederhosen i'm like we don't wear those but i i played the part but the reality was while my life was in a lot of ways great like i had this talked about it but i had this constant fear of failure and anxiety which is very hard to deal with for a few years and then luckily i met jim dethmer he's curated this whole

conscious leadership movement conscious.is and ever since then a 2008 through yp i met a coach conscious leadership coach jim i've been working with coaches ever since and it has helped me i think much better lead much better connect with people and and i was i think in hindsight i was kind of abusing myself my first company i was beating myself up all the time i'm gonna fail and i'm not doing enough and and frankly then i would eat and drink too much

to kind of try to stuff my anxiety and so i think what i've been working on ever since is being more conscious meditating breathing for me it's working out every morning but doing something to take care of myself every day you know kind of no matter how busy you are even like ignore emails take some time for yourself every day that's been crucial to me and last but not least uh we're also now applying the netflix no rules rules uh i've gotten to know peter reilly and he

runs leadership development for netflix but also and i think this is what i mentioned don't be afraid to make changes but now we do this formally at least once a year we just did it with all our leaders hey are they still a keeper and really keeper test night growth company is only true for a year are the right person in the job right now this year and if not you either rely on another job or move them out and i think we're just getting more disciplined about that and we just did it and actually the last inspiration is yes we are i do like to say entrepreneurial

family but also what netflix says is you know not truly a family i like to say hey the drunk uncle at thanksgiving gets thrown out because we do want to be a high performing team and i'm from germany and this is a 2014 world cup winners amazing but they had a really high performing team right the reality is in 2018 germany like got knocked out early at the world cup right because they didn't they didn't refresh the team and i think just like a sports team every season you look at your roster again and

you know you do make sure you have the right talent in the right jobs and sometimes that's hard but i think it's critical especially in a growth company your needs change every year and make sure you have the right keepers in every job so don't delay thank you guys give it up for godard