Surviving the end-goal ICP 🌤
A PMF litmus test, tracing the (external and internal) arcs of the startup rollercoaster, and a tactic to better control your pitch's narrative in a VC meet.
Welcome to the 75th edition of The SaaS Baton. A fortnightly newsletter that brings you hand-curated pieces of advice drawn from the thoughtful founder-to-founder exchanges and interviews taking place on Relay (curated with 💛 at Chargebee for Startups) and the interwebz. So, stay tuned!
In this edition, you’ll find the following instructive and inspiring pickings:
#1: Basis’ founder and CEO, Bebe Kim, dissects the enduring B2B appeal of startups selling to other startups and reveals how that often creates a mere semblance (however promising) of product-market fit.
#2: Tandem’s co-founder, Rajiv Ayyangar, recounts the hopeful, frenetic, ambitious, agonizing, and instructive 5-year ride of going from false starts to unprecedented “white-hot” traction to flattened growth.
#3: Chameleon’s co-founder and CEO, Pulkit Agrawal, outlines a handy one-pager for addressing the standard — “kind of annoying” yet necessary — VC request for “a deck.”
Finding these hard-won founder takes valuable? Consider forwarding this edition to an ever-curious teammate or a much-cherished SaaS friend? 🙂 New readers can sign up here.
🗞 Recently on Relay:
AMAs (Tomorrow!) — I’m A Smart Bear (Jason Cohen), founder of 2 unicorns, both bootstrapped & funded; bought, sold, and invested in startups. AMA! Drop your questions here. Or request a Relay invite?
Heuristics and Hunches (June 16th) — How the Founder Persona Likely isn’t Your ICP, Why Biz Fundamentals Trump All Silicon Valley “Must-Haves”, and Other Recognitions with Basis’ Founder, Bebe Kim
— Why $75m, vision, expertise, and serial founders, couldn’t guarantee success
— How founders are almost never the end-goal ICP
— The related origins of Basis and Atrium
— Making the personal transition from legal to finance
— Finding the line between efficiency and growth at all costs
Heuristics and Hunches (June 9th) — Interviewing 200 Prospects (and as Many End Users), Building a Quality/Quantity Waitlist, and Invaluable Lessons from Hotjar with trumpet’s Co-Founder, Rory Sadler
— Beginning with a personal itch
— Really committing to early-stage research
— A quality/quantity waitlist
— Prioritizing the waitlist along ICP lines
— Gathering attention in a crowded space
— trumpet’s always-on customer delight stack
— What Rory took away from his time at Hotjar
#1: Surviving the end-goal ICP
(From: Basis’ Bebe Kim) (Source: Relay)
With B2B SaaS companies, there’s this standard playbook:
Join YC [or a similar setting] and sell to the other founders. Which is fine for the very, very early stages. But I don’t feel comfortable investing in a business until it’s gotten past the founder persona.
Because that persona, in most cases, is not the eventual ICP.
I’ve had companies tell me in excitement, ‘oh my god, we solve the founder’s back office, they love us and are paying a lot of money.’
To which I respond with, ‘well, they’re just paying for somebody to do it for them.’
That’s easily one of the biggest lessons we learned at Atrium as well.
When we joined YC, our KPI was, “get the third of the YC batch to use Atrium.” And we did. But the problem was that they were really using and paying for a service, not technology. We believed that technology will somehow come out of offering services.
It made sense.
But founders, we learned, weren’t our end-goal ICP as far as the software goes.
So is the case with a lot of B2B SaaS companies.
What should one do then?
Can still start with founders, yes.
Leverage their early adopter traits.
Get them to generate some buzz and testimonials.
And then quickly move on to the head of marketing/HR/Finance or whoever you’re actually developing software for.
Having that awareness from the beginning helps. I’m not saying founders are nobody’s ICP. They are. Pulley (love Yin Wu) tries to get in front of founders before Carta does for cap table needs.
Again, what most people should be asking instead is:
Will the software survive the next ICP?
If you are starting with founders, will your tool survive the transition to the actual personas?
In Pulley’s case, it does survive. You get in. There’s always this external legal person that manages things with founders for a long time. When legal finally moves in-house, the cap table has established its footing for a long time.
If instead the tool quickly moves off to a different team?
With Basis, for instance, that’s finance.
We could sell to founders.
But they’re not necessarily interested in our tool.
What they’re looking for is finance strategy and reporting know-how. And they don’t even know yet that the end deliverables they are looking for are the output of a team of finance people with different competencies. The end software ICP is the finance team, which is in the midst of moving to outsourced.
Related Relay read: Pulley’s founder, Yin Wu, on attending YC for the third time
#2: “Why didn’t we keep fighting?”
(From: Tandem’s Rajiv Ayyangar) (Source: rajivayyangar.com)
The Pandemic - promise-market fit
Before our first engineering hire even started, the pandemic hit.
Michael Seibel has said that product-market fit ‘feels like getting punched in the face repeatedly.’ The first month of the pandemic felt like that. Every metric went exponential. Thousands of companies - seemingly every unicorn and Fortune-500 - installed Tandem.
There was a single day when we doubled in active users. Despite Tim’s herculean efforts, we had frequent outages, and lots of video call failures. We were absolutely drowning in user complaints.
…
We felt like the world needed Tandem. But churn was high. We weren’t delivering on the core promise of unlocking spontaneous calls. After the initial spike, churn took over and we started declining.
…
Tandem was working as we imagined for more and more teams, and it was beautiful to see. It unlocked spontaneous calls - 50% of calls were under 15 minutes. We logged over 3M call hrs. 3-month retention increased 2.5x. We started growing again.
But a few months later, we flattened. The top-of-funnel had dried up. Over the next year, we tried everything - growth features, paid acquisition, direct sales, product marketing. We could influence most stages of the funnel, but it didn’t translate to getting full teams onboard.
It felt like people just didn’t want Tandem anymore.
On the surface, there were several reasons for this market shift:
Slack Huddles fulfilled part of our use case
Video fatigue (globally, video calls fell by 2/3 after the initial pandemic spike - video burnout was real).
Many Tandem teams returned to the office.
But I think there’s a core insight here, around how I want the world to work vs. how it actually works…
For some companies, Tandem resonates, and it’s beautiful to see it working. But that market is small (~250 companies as of now).
…
Why didn’t we keep fighting?
The simple answer is - we were out of runway, in part because we opted for an ambitious pivot instead of cockroach mode. A deeper answer is that we’d reached a natural end as a founding trio.
…
We all grew in myriad ways over the 5-year journey. I learned to recognize the emotional armor I sometimes carried - the defensive need to be right, instead of finding the right answer collaboratively.
I learned ways of letting go of this armor and getting to a place of curiosity. I learned the value of separating the story in my head from reality, and from the other person’s story - the space between our narratives is breathing room for connection.
Feelings of failure
While I’m satisfied with how we wound down, the months preceding were some of the darker times in the startup journey for me. I struggled with feelings of failure on multiple fronts.
A strategic acquisition was never guaranteed, but when we weren’t able to find even a viable acquihire option, I felt I had let the team down.
When Bernat left, I felt like I’d failed him as a co-founder. Since we started 5 years ago, I’d held a vision of the three of us ringing the IPO bell together. I didn’t just want to win, I wanted us to win together.
With some distance and reflection, and trading notes with other founders, I can see these as part of the normal startup rollercoaster. The failure of Tandem to find a larger audience, on the other hand, still feels a bit personal.
If you know me, you know one of my core values is co-creation - thinking together with others, and the other is unlocking potential in myself and others. In hindsight, Tandem was an expression of these values, and using it made my life so much better.
When the world didn’t want Tandem, it felt like the world didn’t want me.
What I’d do differently
When the pandemic hit and we felt like we had product-market fit, I wish we’d continued to work on top-of-funnel growth, and testing adjacent markets and distribution strategies (like direct sales).
When the market shifted, it took us a long time to feel it, because we’d been out of touch with how we were growing. In the future I’ll be more paranoid, even when I think I’ve found PMF.
On the team front, I wish we’d worked in-person as much as possible, especially in the early days of the company. While Tandem makes remote work dramatically better, it’s still far from the high-bandwidth collaboration you can have in-person. In fact, I’ve come to believe in-person work is like a team superpower.
On the life-balance front, I wish I hadn’t stopped rock climbing during the stress of the pandemic. It was important to me before, and I lost a part of myself when I stopped.
#3: Send a separate pre-read instead
(From: Chameleon’s Pulkit Agrawal) (Source: LinkedIn)
This was one of the best tactics I used when raising Chameleon's $13M Series A last year and I'm sharing it for the first time. 👀
Every VC asks for ‘a deck’ before deciding to take a meeting. 😬
... it's kind of annoying as a founder, but it makes sense: they're looking to gather basic context so they don't waste their and your time. 🤷♂️
But it can be really hard to control the narrative if you send your deck. 👎
After all half of your pitch is your deck, but the other half is your story and voiceover. 🎙
And if you design your deck to be consumed without your narrative then likely it'll be wordy and hard to present in your actual pitch meeting. 📚
✅ Solution: CREATE A SEPARATE PRE-READ!
A simple one-pager that you can send pre-meeting that conveys the arc of your story with enough data points to get someone interested. ✨
It doesn't need to have all your numbers or full details of your vision -- you can hold some cards and use those in the meeting. 😎
You should also assume that this will get passed around, so don't include anything too sensitive (e.g. customers that haven't given you permission to use their logos/names; or key roadmap plans). 🤫
But this helped me get meetings with almost every VC I got an intro with 🔥 (~30 meetings) and helped me ensure we were starting from the same page in each meeting.
As a bonus: I was able to disqualify the 1-2 VCs that didn't manage to read (this pretty short) doc before our meeting... if they weren't able to spend a few minutes in preparation then it wasn't a good fit for us. 🚫
I used Notion for this (it looks good; it's feels fresh; everyone is familiar with it / it's easy to use) and below is a short gif of this doc. 💝
My outline was:
1️⃣ Intro: what Chameleon does, including a short demo video
2️⃣ Traction: some key growth metrics (and what we did to achieve this)
3️⃣ Market: our competitors and how we differentiate
4️⃣ Future: why our category will be big + how we expect to use funds
5️⃣ Funding: our fundraising history so far
I also added a couple of callouts of ‘Insights’ 💡 that we had picked up, including some things that had changed recently that were driving a shift in the market and enabled us to capture more opportunity.
Hopefully this helps your future fundraising 💚
🤝 Founder social:
Until next time,
Team Relay (Chargebee for Startups)