The slow no đŠ„
An ever-alluring time sink, why speed of development alone doesnât mean much for new AI entrants, and lean vs cheap startups.
Welcome to the 81st 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 đ at Chargebee for Startups) and the interwebz. So, stay tuned! And thanks for reading!
In this edition, youâll find the following instructive and inspiring pickings:
#1: Pilotâs co-founder and CEO, Waseem Daher, alerts founders against the light-at-first, deceptively-promising footsteps that almost always lead to âsomething much worseâ than a straightforward rejection: the slow no.
#2: Intercomâs co-founder and CSO, Des Traynor, illustrates how AI-first startups that target (or hope to disrupt) existing categories need to build a lot more than just âpinging text over to OpenAIâ and completely invalidate core incumbent assumptions.Â
#3: Crossbeamâs co-founder and CEO, Bob Moore, reflects on how the calculated improvisations of being lean as an engineer-led business meant that the âtouchy-feely, intangibleâ work of crafting a brand took a backseat; and notes how he came to realize the latterâs superpowers. Â Â
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#1: The slow no đŠ„
(From: Pilotâs Waseem Daher) (Source: Startup Real Talk)
In sales
A ânoâ in sales isnât a bad thing. If anything, itâs a great learning opportunity, as long as you didnât sink tons of time into the sale.
The problem is: itâs easy to sink tons of time into a sale that feels like itâs moving at a glacial paceâand then after months and months of effort, you finally get the no.
When this happens, itâs either because (a) this wasnât a high-enough priority for the buyer, or more commonly (b) because you havenât actually done the work to come to a mutual understanding with the buyer about what steps need to happen to get the sale, or who needs to be involved.
Hereâs an example from a conversation I recently had with a founder: they were excited that a large company was potentially interested in using their product. The buyer wanted to run a month-long proof of concept before buying, and the founder was apprehensive about committing the resources needed to do it, but was leaning in favor.
My question to the founder was: if this proof of concept is a success, are you sure that they will buy? If you can get the deal to a point of âIf this POC works, weâll buy for $x,â then yes, you absolutely should do it.
But you have to do the work up front with the prospect to make sure thatâs the caseâbecause otherwise whatâs going to happen is that youâre going to complete the POC, it will have been successful, and youâll find out that they donât have the budget, that someone youâve never heard of needs to approve it, or a million other things that might sabotage the deal.
How to avoid the slow no in sales
You have to do the discovery/qualification work up-front. Is this going to be a good customer for us? (Can we serve them well?) Do they actually have real pain here? Is this a top-three priority for them? Do they have the budget to buy this?
Who actually needs to be involved in the decision-making process, and have you met with (and made the case to) all these people? If the answer to any of these questions is âno,â you risk losing the sale after months and months of unnecessary work.
In fundraising or acquisitions
The slow no here stems from a lack of interest or a lack of urgency. And the reason itâs not a fast no is that itâs not in the investor/acquirerâs interest to tell you no right awayâwhy not keep things warm, just in case it turns out to be interesting later? The VC associate or junior corporate development personâs job is the same: to keep tabs on all startups that *even might potentially some day be possibly interesting*, even if there are no near-term plans to do anything at all.
How to avoid the slow no in fundraising or acquisitions
Two things are needed: first is actual conviction from the right person at the acquirer/investor.
At a company, this means an executive of the company needs to be sponsoring the transaction.
âŠ
At a venture capital firm, this means a VC partner, and preferably one who is more senior and has sufficient pull with the other partners. Associates and analysts donât write checks.
But that isnât sufficient to make things go fast. To truly prevent the slow no, you also need a compelling alternative. Meaning: you have to either have another credible buyer or investor thatâs also poised to move quickly, or you need to actually be willing to walk away.
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(This is, incidentally, also just good life advice.)
#2: AI â  good software đ§±
(From: Intercomâs Des Traynor) (Source: Invest Like the Best)
âŠlet's say, I'm trying to build a competitor to⊠Mailchimp or something like that, an e-mail newsletter tool. Everyone understands the gist to it. The question I would have is: Does the way in which you build the competitor, is it substantially different to how Mailchimp is architected?
Are there some fundamental assumptions made in the codebase of Mailchimp that are now entirely invalidated? Do they just make no sense anymore? And if that is the case, then I think yes, the opportunity is with the new startup.
Because what Mailchimp has to do if they want to compete is actually build a whole new thing. But I think, in most cases, and if we just keep pulling the email/Mailchimp example, if you and I say, âHey, Patrick, let's go build a Mailchimp competitor and we're going to use AI, and it's going to do AI to write your newsletters and AI to generate your designs.â Brilliant.
So we still have to build a massive deliverability platform. We still have to build link attribution. We still have to build e-mail rendering and testing e-mail rendering across a dozen different clients. We still probably have to build up a brand credibility and all of that stuff.
And all that Mailchimp has to do is shell out to OpenAI for augmenting the text already. So in that world, I think you might be in some 80-20, 80% of the existing tech still stands and 20% is going to be new stuff coming from OpenAI or coming from Anthropic or whoever we lean on. So I don't really see an advantage.
And the calculus I'd actually do when I talk to the companies about prospective investments or want to assess Intercom threats is basically how fast can they move.
Let's assume that you and me and our super-hot new startup can move 10x the speed of Mailchimp. Let's say we conclude [that] it takes us three months to build all the AI stuff and it might take Mailchimp 30 months. The question is, [are] 27 months enough for me and you to go and build every other feature in Mailchimp to the same standard?
And if it's not, then we're goosed. We don't really have a play to make there.
To give you just one counter example, let's say me and you said, âHey, we're going to build a tool that's one of these advertisement management optimization tools.â You log in every day and you see what ads are working and you change your spends and you cancel some ads and tweak some ads.
You could imagine how a LLM-powered tool could basically optimize itself, consistently create new versions of ads, run those instead, run A/B test amongst itself and literally entirely manage your entire ad inventory directly without anyone ever having to log in.
And in that world, I think a lot of the assumptions of the incumbent are totally invalid. They might have dashboards and reports of lovely funnels for configuring occupants, but it's all unnecessary.
The AI is going to do it all for you. So in that world, if we're going to go after a space where, hey, we would actually build this thing substantially different were we building it today, I think all the advantage is within the entrant.
That's when it gets exciting.
âŠ
The biggest question I always try to zoom in on is, âI know AI is really important and it is core to this new workflow that you're going to automate or whatever. Talk to me about the rest of the products that you're building around it.â
And this sounds like it's maybe perhaps not the sexiest answer to give you.
âŠI think having a cool idea for an AI feature can genuinely can be unique and maybe you spotted the capability that others haven't.
But in most cases, you still have to go and build an incredible piece of software around it. So you might have a unique twist on how project management should be done and it involves a bit of AI, and that's awesome.
But you still need to have a PM tool that's as good as Linear. And that's still going to be a huge amount of work. So what I try to do is shift the conversation to there, just to make sure that there's actually something behind this. Because my fear in so many of these AI cases is that we're all just pinging text over to OpenAI.
And these prompts and these bits of text, they might be proprietary. You might have a bit of an edge there. You might do some clever s*** client side before it goes over there, but it can't be that you're the only person who's worked out the right prompt.
If you're investing in something that is built on AI, the thing that you're doing still has to be pretty brilliant, which might mean really good integrations, really good platform, beautiful UI, et cetera.
Related Relay reads:
Thematicâs co-founder, Alyona Medelyan, on the mechanics of commercializing and scaling an AI-first, B2B product (âThe tricky part for technologists is to find people who will pay money for the solution. There are a tonne of âinterestingâ AI applications that people are willing to talk about but not pay for.â)
Question Baseâs co-founder, Yana Vlatchkova, on sequencing AI just right in the MVP process (âWhether youâre building an AI startup or another solution, itâs important to understand the depth of the problem youâre trying to solve and the psychology of the users. This is the only way to make a solid bet on a market.â)
#3: The costs of not defining a startup's identity đ§Ź
(From: Crossbeamâs Bob Moore) (Source: The Debrief)
Rewinding the clock to those early days, I think, we were always very big subscribers to the philosophy of the lean startup. Almost to a fault. We went so far into being lean that we got into the territory of being cheap.
And itâs a really important distinction there, because, when youâre lean you make these efficient, agile decisions to build, measure, and learn. Build, measure and learn. This awesome loop.
When youâre cheap, you build the thing that costs the least, measure the thing that you wanted to measure in the first place, and learn to confirm your biases, and go into this ultimate spiral.
What we did during those early years was to great effectâŠWe had a great idea at that company and we were able to pretty efficiently, very inexpensively, in a totally bootstrapped way, iterate our way through that slightly flawed build-measure-learn cycle to a version of product market fit.
Which did allow us to get to seven figures of revenues, dozens of employees, and hundreds of customers. All profitably. The whole way through. We never had a quarter where we didnât turn a profit.
From like a hustle culture, âletâs do this without venture moneyâ, entrepreneurâs-dream point of view, that stuff worked. And it scaled really well as long as, Jake, my co-founder and I, between the two of us, we could kind have our thumb on every single scale of the entire operation.
That personal touch, that founder-led touch that existed inside every facet of the company, when we got to a point where we didnât just have managers, we had managers of mangers, and the sort of telephone game of âwhatâs the why behind doing this?â
Not just any given project or any given win that we might be trying to do. But this in the biggest sense of the word. Why is this company here? Why did we start it? What do we stand for? Where are we going?
In the early days, that mission, vision, values stuff I was such an opponent of that.
âŠ
Values at their core felt to like the antithesis of the lean startup. Some really expensive people spend time in a room, weeks and weeks and weeks, to come up with these words that you could have thrown a dart in a thesaurus for good, right?
Because of that, I rejected them in their entirety. We just didnât do it. We didnât have a mission and vision or values at RJMetrics as a company until later on. It was when we got to that larger scale when we started realising that thereâs actually a place for the mission and the vision and the values.
The idea is not for them to be these feel good words that remain on the wall. We really put our stake in the idea that a value system is meant to be an argument ender.
Your ability to invoke a value in a conversation ought to be something that stops a three-hour conversation from happening because if something flies in the face of one of these north stars, itâs something weâre fundamentally not something we do at the company.
The brand, turns out to be, almost existententially entangled in the mission and the vision and the values that exist inside of company. When youâre underinvesting in that mission, vision and values, youâre definitionally underinvesting in the brandâŠ
The net net of it was that itâs not just that we didnât stand out. Itâs not just that we werenât a memorable brand to our customers. Itâs that our own team didnât identify with the identity of the business.
Itâs important to note that when we solved the brand identity issue that process could not have ever happened had we not solved for the company identity issue.
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Looker was a company that we competed with that basically heavily disrupted our space. They were founded after we wereâŠ
They ended up getting acquired by Google for many, many, many billions of dollars [a 100 times the amount we settled on]. Effectively they had a very comparable value proposition to their core, to what we had.
I think the way branding plays into that isâŠSure companies with great brands fetch a valuation premium when getting acquired. Itâs usually not a billions of dollars premium, but itâs a little sprinkles on the cupcake there for sureâŠ
What Iâd say though is that our lack of investment in brand was emblematic of just the lack of investment in identity and that stretched all the way to:
product identity,
which stretched all the way to what we mean to our customers,
which stretched into what theyâll pay for the platform,
how loyal they are to it,
and how much those accounts grow over time.
These are where you start getting into some of the unit economics what makes an absolutely outstanding business. And Looker was an absolutely outstanding businessâŠ.They made a very specific thing for a very specific persona. They really spoke to that persona.
They knew who they were.
Related Relay read:
Bob Mooreâs Relay AMA on niches, why persona reasons arenât product reasons, a truth of ownership all founders must embrace, a four-pronged framework for what business to build next, and more (âI think it took me a long time to develop a true sense of intellectual honesty and to be risk-seeking rather than risk-averse while operating an early-stage company. Both are core requirements in a startup entrepreneur, as you have to chase down the high-risk, high-upside chess moves and then be honest with yourself quickly when you screw them up and need to pivot. This was a mental journey more than anything.â)
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