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Treating each customer as âbig ticket,â the advantages of chasing hard, all-in-one products, and arriving at the fundraising decision by reviewing competitionâs fate.
Welcome to the fiftieth (yay!) edition of The Baton. A fortnightly newsletter that brings you three, hand-curated pieces of advice drawn from the thoughtful founder-to-founder exchanges and interviews taking place on Relay and the interwebz. So, stay tuned!Â
Thanks a bunch for supporting us last week for Relayâs #2 finish on Product Hunt! đđœAnd hello, hello to all the new readers whoâve joined us this week! đ»
In this edition, youâll find instructive and inspiring pickings from the brains of Bentoâs Jesse Hanley, Ripplingâs Parker Conrad, and Typesenseâ Jason Bosco.
Recently on Relay:
Heuristics and Hunches â (Calmly) Competing Against HubSpot and Mailchimp as a One-Person Team with Bentoâs Founder, Jesse Hanley
#1: âI treat a $30/m customer and a $3,000/m exactly the same" â Bentoâs founder, Jesse Hanley, on how he approaches support and sales like a customerâs favourite, local restaurant and how that, among other practices, enables him to take on industry giants. (Source: Relay)
I see Bento as your little, local restaurant.
A place where you really like the chef who does some lovingly quirky things with the food.
Vs. something like the Hotto Motto in Japan, one of the main fast food chains here. Reliable. Cheap. But which just doesnât evoke the same feelings or emotions.
I believe the crowded marketing software space is a bit like that. People tend to pick tools where they have an affinity for the founder. Where they feel theyâre going to get thoughtful, understanding support.
The whole of last night and this morning I was talking to a customer while they were in the midst of setting up their segments. They messaged me on our public Discord and I got on a call to help unblock whatever they were stuck with.
You donât have similar avenues of support in our massive, large competitors. With HubSpot, to get any help youâve got to pay for their premium support. In the case of Mailchimp or Klaviyo, you need to bring in expensive consultants. If you raise a support ticket, a response arrives 24hrs later, and it usually sucks.
So itâs not that hard to compete on service. If you can also approach the product somewhat uniquely on top of that, you can carve out a happy, little profitable market for your product.
Recently I was reminded of another aspect I dislike about how service is approached in SaaS.
A VC-backed founder (who Iâm friendly with) insisted that most sign-ups need to go through the self-serve route and theyâd only ever worry about helping âbig ticket,â enterprise customers.
I think thatâs the worst kind of attitude.
At Bento, from a support standpoint, I treat a $30 customer and a $3,000 customer exactly the same. I always will. Because I feel it doesnât really matter if youâre running a small business or a large one, youâd still need help!
For customers to stick around longer, stay loyal, and drive the whole word of mouth component, I canât be worried about the efficiency of the support/sales pipeline. I have to help every single customer, no matter their size.
Iâve had customers that pay $30/month refer to customers that bring in $3,000/month and vice versa.
When startup founders, at least in the early stages, concern themselves way too much with being efficient, they just kill their businesses in a way. Unless, of course, theyâre well funded and can push for more and more sign-ups.
If youâre a bootstrapped business, you have to treat every customer basically the same.
Because you canât know who is going to drive more of their business through the product or refer similar customers. So you canât quite quantify and thus optimize and make things more efficient in this regard.Keeping the above as a given, there are places where I seek out efficiencies, albeit in a more community-centric way:
- I direct most support queries to a public channel on our Discord server instead of addressing them over emails. One response from me can help many folks at a time. And people tend to be nicer, more polite in that medium.
- Then I conduct weekly office hours across different time zones (just did one for our EU customers) where people can discuss their chief concerns.
- Plus I (enjoy) filming a lot of help videos that tackle common doubts and make the in-product experience better.
On the sales side, too, I work with a consultant who helps me manage our Close.com inbox. Essentially everyone who signs up gets contacted by him.
He sifts all the opportunities and works out whoâs going to be a good lead, but I usually talk to a large percentage of people myself. Iâve got demos and walkthrough sessions queued up and I love that.
Again, we try to get in touch with everybody and treat them all the same. Sometimes you get people who look like normie consumers but turn out to be running massive businesses.
A story comes to mind.
Growing up, my dad would take me to these really fancy car dealerships in two different cars (a nice one and a terribly old one). He wanted to show me how we were treated differently based on our outfits and the cars we had driven.
The lesson that I learned from that is that you never know who the buyer is and what their in-the-moment intentions/goals are. Itâs hard to judge a book by the cover, so itâs better to build a sales process that engages everyone.
#2: The problem with building point solutions â Ripplingâs co-founder and CEO, Parker Conrad, argues for upending the oft-recommended notion of starting with a hyper-focussed, narrow use case. (Source: Startup Grind)
One of the most common tropes of startups and how to do them well is that itâs really important to focus. You should narrow the scope of what youâre doing as much as possible. You should start really small. You kind of grow and expand from thereâŠ
I think itâs advice thatâs largely wrong. And has held back the industry; has held back a lot of important companies that could have been created but have not been.
So whatâs wrong with this approach?
I think one problem is that it narrows the types of problems you work on. When you think about the problems that your clients have, they often span a lot of different business systems or point solutions.
In fact, some of the biggest problems and the hairiest problems, therefore problems that could potentially give rise to the most valuable companies tend to be things that span a lot of different point-solution products within a business. Therefore, only building one point solution product canât really address them.
The second thing is that this idea of focus was maybe a decent advice a decade ago. Because a decade ago in B2B SaaS companies, you could really build any business tool and build it as a SaaS subscription product on the web. And you were pretty much guaranteed to hit what would become a pretty successful company if you did it well.
But the problem is, now itâs 2021, and there are a lot of different companies, operating in these narrow, point solution verticals. And so I think, thereâs a lot more opportunity if you can go bigger and combine a lot of these point solutions into one product.
The third thing is that a lot of people would say, âlook, you start with one thing and then you expand to others.â I think that tends not to happen. Companies that focus early on tend to continue to focus. Often a companyâs ambition is circumscribed on day 1, when itâs founded.
And itâs really hard to move beyond that, whatever you decide to do initially, the problems that you have to address are always so deep, you keep going deeper and deeper and deeper.
Companies that start out and think, âweâre going to do A first and then B,â really tend to never get to B. They tend to stick with A for a very long time.
So, whatâs the alternative to this?
I think the alternative is something that I call the Compound Startup. Which is a startup that instead of doing one, very narrow thing, âŠtries to build a whole set of different point solution systems in one coherent product and tackle several different related point solutions at once to solve a much larger problem for businesses.
So why would you do this?
Because there are a lot of reasons why itâs hard.
The first thing is that these compound startup opportunities are relatively unexplored. Because everyone has been focussing for so long. I think what it leads to is that there are
Doing one thing [means] thereâs tonnes of competition there, but if you taken a series of closely related products and do them all at once, there are these islands of undiscovered product-market fit, that are just beyond the horizon line.
And that no one has sailed out to because of all of this advice that you should narrow your ambition and narrow your focus to just one very specific thing which often isnât enough to get you from point A to point B.
The second thing is that there are a whole set of product advantages that come from having a multi-product company. First is integrations. The types and the depths of integration you can have when youâre building a set of related products together in-house, is so much more powerful than what you can do through a set of APIs with other vendorsâŠ.
You can identify certain bits of functionality or certain parts of the product that end up being reused across a number of different products that you are building. And you can build those ones and have some advantages like R&D efficiency, but, more importantly, you can afford to go much deeper.
For your clients, itâs so much easier with common UX patterns. They learn how to use the product and theyâve already learned how to use four different products.You donât have to do things in four different ways across four completely separate products.
And the last one is this incredible contracting and pricing advantage. A lot of times, a bundled contract or a bundled system, you can optimise your price for the value of the bundle rather than the value of any specific point solutions.
#3: Deciding not to raise by assessing the unfortunate foibles of competitors â Typesenseâ co-founder, Jason Bosco, untangles and learns from the ânot-so-ideal precedentâ their VC-backed competitors have set. (Source: Typesense)
Our mission with Typesense is to make great instant-search technology accessible to teams of all sizes and expertise, and not let budget or seniority be an obstacle.
This is one reason we made 100% of Typesense free and open source. We do need to monetize to be a sustainable product, so weâve chosen to monetize with our Cloud offering, Support and Sponsorships.
But, weâve priced all our offerings in a reasonable way, with the hope of reaching the Fortune 10 Million, rather than just the Fortune 100.
It seems like the typical playbook for VC-backed software companies these days is to initially price their product free or really cheap, spend raised capital on marketing and user acquisition, dominate the market, and then slowly start raising their prices and go up market towards the Fortune 500.
It almost feels like selling that $1M deal is the holy grail every VC-backed software company is aspiring to crack, while using the small and medium business market as a means to an end.
Iâve been on the other side of this a couple of times now unfortunately and been burnt by it. I start relying on a product that works great and is seemingly affordable. Years pass and I suddenly find myself in an old grandfathered plan, that would cost me 5x more to upgrade to the latest plans.
âYou get much more valueâ, âWeâve added all these awesome featuresâ they tell me. But in reality, a 5x cost increase is something majority of companies canât just absorb. So theyâre either stuck in a stale plan, or have to start looking for the next equivalent product with reasonable prices, and hope the same thing doesnât happen again.
With Typesense, we want to build a company that doesnât look at the SMB market as a means to an end.
We want to explicitly serve this market well. We do not want to unreasonably raise prices and chase that $1M deal. If the $1M deal happens, we welcome it, but that is not our holy grail.
This is not an easy thing to do, in fact it is quite painful to watch - customers switching over from one of our competitors to Typesense routinely save 95% in costs, to get an identical end-user experience and weâve been told that weâre leaving money on the table by charging so low and that we should raise prices.
Sure, we could be at 10x revenue of what we are if we had a different pricing model, but then thatâs exactly the cycle we want to break for SMBs. We want them to build on top of us with the confidence that we wonât end up pricing them out as we grow.
âŠ
One of our competitors prides themselves in being able to solve for every single search use case there is, and then offers additional layers of search-related products on top of it.
Looking at their landing pages these days, itâs hard to figure out exactly which one of their offerings you really need to solve this particular problem you have. Sure they have hundreds of pages of documentation, but that also makes it harder to find a needle in a haystack.
My theory on why this particular company ended up adding so many complex offerings on top of their core search use case, is the pressure to find new revenue opportunities as a company and show progress by adding new features and supporting more and more use cases.
Unfortunately, this now has the ramification of their product being so complex to the point of being unapproachable to engineers who are just starting out with search.
Weâd hate to be in that position with Typesense. Our explicit stated goal is to be an easier-to-use alternative.
The last thing we want to end up doing is add more layers on top of Typesense in an effort to find bigger revenue streams and end up going the way of the very folks weâre trying to build a simpler alternative to.
We want our product to be powerful in its continued ease of use, simplicity and performance.
Until next time,