We are building SigNoz - a tool which helps engineering teams to respond to issues before their customers find it , and thus help businesses get more efficient. Rather than getting calls from customers about issues in your software and getting engineering teams to respond to it - we generate alerts by monitoring the systems continuously and help communicate issues and responses across product, business and customer support team. We are early stage with few trials going on with customers in India (we are based out of Bangalore, India). I have the following questions for you:
How do I reach out to customers in US & Europe? What channels are effective for reaching out to VP Engineering/ Product Manager persona? Ours is a global product and I want to gauge the response on our product from US/EU market fast - and not just be stuck in the local minima based on feedback from local market
How does one think about funding the business? When is a good time to start looking for external funding for a product like ours? (For context, We are completely product focused currently - and have not raised any external money. But this slows down our speed - as we are just founders and few interns in the team currently. We have so many ideas to try in the product and for distribution)
OK - I’m off! HI Rajaraman - we’ve both been there, right? It’s somehow better, but not easier.
In my experience, there wasn’t one thing, it was often a case of keeping lots of plates spinning. Clearly one of the big challenges early on is making sure you have enough money to get to the next stage. It always takes longer and costs more than you think. Running out of money (and we did that, twice) is hard and hugely distracting.
But money aside, our main mission was simply to find product market fit as soon as possible and then prove that by having paying customers. Prior to that, all your conversations with investors and even staff, are a little bit hypothetical, but once you have some real customers willing to give you money (Jason Lemkin says at least 10), then you start having some data that backs up your hypothesis.
So, I would say, certainly in the early days, if you can manage your cash and focus on proving product market fit then you’re in a much stronger position.
I can relate to your detailed blog post on transitioning from an agency to a product company — I have been trying to do the same and been fairly successful in cutting down on taking up new work. However, I’m yet to make the complete transition. In this context, I have two questions:
If you had not sold the agency business, do you see yourself running it on the side perpetually by finding someone to lead it full-time?
How did you manage to say goodbye to your agency customers? In particular, the customers who had stayed with you for a long time (2+ years).
Great question! Yes, me, Mark and Luke started our first business together in 2004 and since then we’ve launched and sold (and lost) several side projects/businesses. So we’ve been through the highs and the lows and what we’ve discovered is that we’re quite different in some ways: we have different appetites towards risk, we have different strengths and weaknesses and we often have differences of opinion, too. But we do all share two things: values and aspirations.
That means that we don’t spend a lot of time debating whether something is right or wrong, but more whether it gets us to where we want to be as efficiently as possible. It also means that if we disagree with each other, we know it’s not personal… we all want the same thing after all.
So my tips would be:
try and establish that you have shared values early on. If you aren’t aligned here: if one person thinks creating a great working culture is important and another thinks that it’s a waste of time and money, then you are going to spend too much time debating that every time it comes up
find consensus, even if that’s a compromise, then execute that plan. Don’t look back: decide on something as a group then just do it, even if you weren’t 100% in agreement.
talk all the time. If you are frustrated or worried, talk to your co-founders. Don’t let it linger and fester.
don’t make it all about work and understand that people have lives outside of work. We’re all human beings trying to do our best and we all have flaws.
then finally, play to your strengths and accept your weaknesses. In our business, I love metrics but I’m not as technical as I’d like to be. Mark hates numbers but is good at understanding the technical complexities. Luke is CTO so obviously gets the technology but traditionally hasn’t had much to do with sales and customers. We can’t all be good at everything.
I’d say the main things you need to be watching are: MRR Growth, Customer Acquisition Costs and Churn.
MRR Growth, because at that stage, you need to be showing growth at speed if you want to raise more money. Remember that the ideal growth trajectory post $1m is T2:D3 (ie Triple, Triple, Double, Double, Double for each year after $1m). So you need to be coming into that first year post $1m quite hard. For us, it took us about 22 months to get to $1m, and then 6 months more to get to $2m. Sometimes it’s hard, but anything you can do to improve growth is good - well almost anything:
CAC - customer acquisition cost. One of our side projects (we were a minority shareholder) was dead before it even got going really. In spite getting to $3m+ in revenues, it was on the back of acquisition costs that were higher even than its Lifetime Value. So, no matter how fast your growth, if it costs more to acquire a customer than you will ever get back from them then ultimately that’s unsustainable. The rule of thumb is a CAC equal to or less than the Annual Contract Value, but in the early days you should expect a much lower CAC than that. Costs get higher as you get bigger and move upstream, but early on you should be able to win customers with much less spend, relying on early adopters, word of mouth and hustle!
Then Churn - the silent killer. Again, probably less of an issue very early on, but keep an eye on it as you get bigger. The Quick SaaS Ratio ($ new + expansion) - (contraction + churn) won’t be as important early on, but will start to be something to watch as you get bigger. It needs to be at least 4. This shows that you are efficient at growing your business. If you see your churn starting to grow, hop on it and try and work out what the issue is. Sadly, churn is a bit of a lagging indicator, but you can start to see if there is a link between churn and other behaviour that may flag warning signs in the future.
Organic inbound - same. We invested very heavily in content from Day 1. It was long-tail (ie about the problems we were solving) rather than about us and we committed to producing 4 bits of content every week. It took time to see the results, but today we still get a lot of leads from the content that we have been building over the last 4 years.
Churn. We were quite lucky - we have always had net negative revenue churn, ie people expand by more than they churn. This is partly because your early customers are more forgiving and partly because you are adding way more than your existing customer base is churning. I think one thing we did that has stood the test of time, was being very responsive to customers big and small. It’s one of the reasons why people say they chose us over others. And when you’re small you can afford to do that - you can even have personal outreach by one of the founders to demonstrate how much you care. Today we still have net negative revenue churn, but the % is smaller and churn is an ongoing concern for us. It never disappears. The only thing I would say is that when you get bigger customers, your churn reduces significantly.
This is such a question close to my heart and i could talk about it for hours, but I’ll just tell you what happened with us.
I think in total, the time from saying we were going to move full-time onto ScreenCloud and then finally concluding it was a couple of years. We’d spoken about that transition for a while, but actually making the commitment to get rid of the agency came a bit later (because we thought we could do both). For us we sold the agency and raised our seed round in the same month and I think if we hadn’t done it like that, it would have been tricky. At the same time, raising a seed round whilst also running another business wasn’t easy either. Investors were wary. So it’s a fine balancing act.
Because you can’t predict exactly how things will pan out, my advice would be to come up with a plan with your co-founder(s) and then execute that plan bit by bit. So long as you are making progress towards it, you will get there eventually. We’d decided that if we hadn’t sold the agency by the time we raised our seed round, we would just close it down. We had to have that deadline where we could all be 100% focused on our real future. As it turned out we were lucky enough to find a home for it in time.
On the staff question: most of the staff in the UK went with the agency to the new owner. They were, after all, agency people and a lot of them didn’t want to work on a single product. Our dev team, who were mainly based in Thailand (where Luke is based) were very happy not to have demanding clients any more and so they all moved over. We had enough time to hire people in London to plug any gaps left by Thailand.
In terms of incentives and salaries - everyone (apart from the founders) stayed on the same salary and we had stock options that we were able to give them. Not sure how easy it would have been to try and cut salaries for staff.
The main mindset change is that you are no longer building for individual clients, you are building what’s best for your business aspirations. When you are a consultancy you do everything your customers ask you to do (more or less). But, your main priority now shifts to the product and that product has to be solving problems for the majority of your customers (or in line with your roadmap) rather than what an individual wants. It’s quite hard when someone says “can you make it do this?” not to respond by doing what they ask. But, actually your product roadmap priorities are much more important. The danger is that you get sidetracked, or spend all of your time and money building something that only one customer cares about.
By learning to say ‘no’. By explaining that you can’t do consultancy and that you are thankful for their ideas and it will be discussed at the next product planning meeting and when you have more news about whether or when it will be incorporated, you will let them know. You could also split out a separate Pro Services team, but you have to separate out recurring revenue from non-recurring project based revenue. Don’t fudge the two and focus primarily on building the recurring element!
Not sure! I guess exactly as you say: if you want to scale it is impossible to ‘paper over the gaps’ with manual services. The company has a choice: do they want to stay where they are or do they want to scale. If they want to scale, you need to build a scaleable product and go to market process.
In the early days I would say it’s about creating good, believable content. When we started, we didn’t write a piece about ScreenCloud and how great we were, we filmed a video explaining how to get your Tweets onto a screen using a Google Chromecast. And then we did the same thing but using an Amazon Fire TV stick. So really try and be where your customers are and write about the real problems you are solving. We also used Adwords and are on review sites such as G2 and Capterra. Unfortunately, it’s a question of plugging away and being consistent. Down the line you can start doing outbound, but that is expensive and you need to have a mature product and a very clear idea of who you are targeting.
You need to decide if you think funding will make the difference between getting you to where you need to be or not. For us, we knew we wanted to move fast, we knew what we had to do and we didn’t want to boot-strap it and take longer to get things going. We also wanted to know quickly if it wasn’t going to work so we could move on. So for us investment was the right thing, but it doesn’t have to be for everyone. There are plenty of companies who never took any investment and succeeded. If you do want to go down that route, I would start as soon as you are confident that you have something that could be successful but feel you are being held back too much because of funds. Make sure you don’t give away too much in equity and ideally look for enough money to take you to your next milestone.
I do have children, but I have been careful not to make sacrifices that I think have negatively impacted my personal life. At times I’ve earnt less money, sure and I have worked hard and been really stressed, but not to the point where my kids never see their Dad or we can’t eat! So I think there has to be a balance. Mark, my co-founder, has spoken openly about some of the mental health challenges he has faced running a business and how teaching exercise classes saved him. I honestly believe that unless you take care of your health (mental and physical) and make sure you are there for the people you love, then no amount of commercial success is worth it.
One advantage of being your own boss is that you get to decide how you spend your time and I would say you should fiercely protect that. Do the things that keep you sane and happy, and don’t feel guilty that, for example, going to the gym in the afternoon is what you need to do to get the best out of your day. In fact, once you embrace that, it makes being an entrepreneur much less of a ‘sacrifice’ than, say, putting up with a horrible boss!
Honestly? No. You may not be running it, but if it’s yours, you will still get dragged into it. You have to rip the bandaid off and just commit to your new life. If we hadn’t sold it, we would have closed it down - but that would have been much harder. For a long time we could do both, but I can see now how wrong we were to imagine that would ever work. Mark, my co-founder said to me once when we were trying to do everything in tandem “imagine if all we had to think about was ScreenCloud, how much damage we could do”. At the time that really resonated with me - and he was right. Once we made the jump we never looked back (other than to say - we’re so glad we’re not doing that anymore).
We did two things: for the smaller customers who only really wanted us for bits of maintenance, we found a good, small agency who were willing to take them on. We didn’t ask for any payment: we just wanted to make sure that nobody was left in the lurch. For the larger ones, we explained what was happening and I had a lot of meetings where I was present just for reassurance rather than actually doing any work. So, for about 1-2 months, for the bigger clients, I would go along to the occasional meeting until I wasn’t needed any more. It was important to us that loyal clients weren’t suddenly dumped. I think we did a good job on that - well as good a job as we could.
Congratulations to getting to revenue and being bootstrapped - I take my hat off to you!
Sadly, my experience is that partnership channels don’t work at your size. What often happens is someone comes along and says “we’re going to sell you and we have thousands of customers” and you think “brilliant! I can get someone else to make me rich without doing any of my own sales and marketing”.
We thought exactly that. One reseller in particular promised to completely transform our fortunes overnight. So we spent time and money on this, we even hired a partnerships manager. But we were too early. The sad truth is that resellers are there to make themselves successful and if they have a huge arsenal of products then they have a better chance of having something they can sell to a customer. But they aren’t going to go out of their way to sell your product. Once customers start asking for your product then it may be worth their while, but they aren’t going to take a gamble on you or invest their own money for you. Why should they?
So my advice would be, if someone has a customer already and they can resell you then great. Work out a reseller price and tell them what it is. But don’t bank on them being a key driver for your business and definitely don’t agree to any exclusivity.
For us, it was quite easy to fall into the types of role we did: I do more commercial/marketing/legal stuff, Mark does more team/understanding customers/product, and Luke does technical and product. That’s what we did at the agency and that’s kind of what we ended up doing here.
We’ve always acted as an equal partnership: we own the same amount of shares, we get paid the same and we all have an equal say in what decisions we make.
For ScreenCloud we had to pick roles and for me and Mark it was a bit odd. At the agency we were just ‘directors’, but investors wanted us to have defined job titles. For Luke it was obvious as he was the technical one. For me and Mark it was less so. In the end I was managing the winding up of the agency and Mark had moved full-time onto ScreenCloud so he assumed the CEO title, which left me with COO. But in reality, we just work the way we always have together and that seems to allow us to get things done!