Why Mailchimp never raised 📖
Ben Chestnut's reflections, framing the enteprise AI hammer, and B2B reels.
Welcome to the 97th 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: Pendo’s co-founder and CEO, Todd Olson, on setting up a vision, a business case, and a bottom-up, team-wide resolve to deploy AI for the right (customer-first) reasons.
#2: tl;dv’s co-founder and CEO, Raphael Allstadt, describes the inward probing that led them towards an unlikely B2B growth medium/channel.
#3: Mailchimp’s co-founder, Ben Chestnut, recalls the unique deliberations behind why they never took the venture capital route, why they never hired a CS team, and why “the thing you’re good at, that’s probably going to be the thing that your company sucks at.”
#1: Driving an organic AI bet 🌱
(From: Pendo’s Todd Olson) (Source: The Product Experience Podcast)
Make sure that they tie back what they want to do with AI to real business outcomes, to real customer outcomes….They’re doing something instead of doing something else. It’s a prioritisation exercise. Everything is a prioritization exercise.
‘We thought this last thing was the most important thing and now you’re telling me you want to build this AI stuff. Is it because you think it’s cool? Is it really more important than that last thing? If you make a case that it’s really more important than that other thing, let’s rearrange…but there’s gotta be a strong why behind it.
One of the most interesting whys that even my board challenged me on when they thought we were going a little too slow and this is right around the time we did the hackathon.
Tech, in general, last year (maybe the last year and a half), the demand environment has gotten tighter. With the end of who zero interest rate period. In general, budgets are tightened. CIOs are saying they’re spending less. Growth is a little bit less across the board.
You know what’s not less? AI. AI is more.
One of the business outcomes for really investing in AI is that it’s one of the few areas where demand is at an all-time high.
If you want to meet customers where they are, you want to adjust to macro conditions, one of the things you can do is to see what’s hot and make sure you’re taking an advantage of it and giving it to customers.
If customers want AI? Build AI.
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This is a creative conversation, customers are still not ready for it. But the thing that’s interesting is they want to be partnering with companies that are going to be the leaders and not the laggards. Last thing you want to do is decide, ‘well, next year is really our year for AI.’
Because guess what? Whether it’s adding a lot of value to customers or not, that’s kind of irrelevant. We’re learning! And I’m not saying that the AI that Pendo is shipping today is AI that’s perfect.
Or that’s ultimately what our customers want. But boy we’re getting smarter and smarter. And we’re getting it into people’s hands. They’re touching it.
That’s how you build great products. You iterate. And if you’re not shipping you’re not iterating. Us getting something out there fast and knowing that we’re constantly iterating, constantly improving as the technology is shifting, we’re just setting ourselves to be a leader and not a laggard in this technology by not waiting.
Not waiting until it’s a mandate or requirement that people have to have it.
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It’s a journey.
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One of the things I realized was that if we don’t sort of organise it and create a strategy and a vision around how AI can help improve our product experience, we’re going to get technology for technology’s sake. Just like lots of other trends we’ve seen in the past.
AI is no different from any amazing technology transformation that we had. Remember the early days of mobile? The number of things that did not belong as a mobile app that we had to all download and then a bunch of them went away…
To this day, Pendo doesn’t have a mobile app. To be honest, most people are using us on a computer. We had one for a very short period of time because it was cool, we could build it.
AI is really no different. I think step one was getting our leadership team. We did an offsite for four and half hours, where we were like, ‘what are all the possibilities, and what do our customers really want from us?’ From Pendo. You got to think that other vendors will do other things and we can let them do those things….
We kind of went back to some of the basics.
Focused on things like jobs to be done. What job are we actually automating? If the whole concept of generative AI is automation, what are we trying to automate? What are the really painful things that we think that this technology can automate? How painful are those things? Is it valuable to the user?
That’s kind of where we started. We started with that vision.
The second major thing that we did was…’now that we had a vision, we wanted to unlock creativity for our engineering team.
The reality is if it’s really me, our head of product, and three other executives come up with an AI strategy…it’s just not going to be as good if you don’t enlist all the support of all the really smart people here at Pendo.
So we did a hackathon. Hackathons are primarily product and engineering events at Pendo. But it does often bleed into other organisations. We let anyone who wants to join it, join it….We decided that we didn’t want to force people to do AI projects. That didn’t align with our culture and what the hackathon was about.
However, we do give out cash prizes for the winners. And we said ‘we’re going to give out cash prizes only for AI projects.’ I will say that someone did a non-AI project which was amazingly cool, we still gave out cash prize for that…
After that we had 38 examples of how our products can use AI… Maybe not all aligned with our vision. But a bunch [of them] were. We then started to find the ones that aligned really well and we started productizing them.
#2: B2B TikTok 🎭
(From: tl;dv’s Raphael Allstadt) (Source: Relay)
When we started out, we had this intuition to not just look at the same growth channels that our competitors were focusing on. We wanted to look inward first and understand what we were drawn to, what we were good at, and what we would enjoy.
That early probing made us realize that we were definitely excited about the idea of humor in communication. We also found that this was something clearly missing in the software industry. More, importantly, we felt we were good at it.
Not necessarily being funny, but at least knowing what’s funny.
So we partnered with a cool creator. And gathered great confidence from our Product Hunt launch video, which won the demo of the year award. We saw that that attempt really resonated with people and asked ourselves, ‘what’s the channel for videos?’
Those were two. Instagram and TikTok. So picking them was a sort of natural evolution for us. We hit it off quite fast, especially with Instagram. We were essentially doing work humor that was funny for everyone and no one.
Our videos started amassing a lot of engagement and reach. Ex: we were featured on 9GAG etc. But we also learned that nobody tied those viral videos with what we did. They didn’t connect us with anything beyond being funny.
So another round of introspection followed. Who did we really want to target? The product org. Not just product/engineering but sales and customer success as well, given that they all sit at the core collaboration that informs products.
We started making jokes about these folks.
With that we were able to align our impressions, our views, our follower growth, and our engagement with those who’d actually care about tl;dv. That’s when we started to see impact. Essentially, a correlation between a clip going viral and the product getting attention from a specific persona.
That being said, one important thing to mention for any social channel is that you always begin with top-of-the-funnel metrics. You just need to have the faith that if it’s the right audience, in the end, they’ll have enough brand love to check out the product.
So, it’s definitely a long-term practice, but it works!
How did we act on the learning that we had to be more focused? We started throwing in one or two product jokes in 10 generic ones.
Whenever you’re shifting positioning on a social channel, you must do it slowly and gradually. You need to be patient around such changes because your audience has a certain set of established expectations.
Within four months or so (yes, it took a while) of making this transition, we saw that we were going even more viral because we were niche. A niche, we discovered, is always bigger than one thinks.
We went deep enough that some people in the audience asked us, ‘are you secretly in our meetings?’ or “how did you get so good at understanding my day-to-day struggles?”
Of course, the best and the worst of companies, we all struggle with the same core issues; there’s just a difference of magnitudes. Say: a clash between growth incentives and inner alignment. Or a lack of empathy for a different team.
Plus, the viewers told us things such as, ‘this is happening to me, but with a variation.’ We listened and addressed that with another skit. Getting to a real symbiosis with our followers.
#3: Notes from Mailchimp’s 20-year journey 📖
(From: Mailchimp’s Ben Chestnut) (Source: MicroConf)
When we started, it was during the dot-com burst. Nobody was getting money. All the VCs had gone bust. So many years passed before the economy came back again and VCs started knocking. But, by then, it was too late.
We were already making 10s of millions of dollars. We were on the verge of making 100s of millions. And I could see over the horizon, hitting a billion.
When they [VCs] came knocking, it was nice. It was good for my ego. But I couldn’t figure out what I would spend the money on. We were already making enough of it. That was really the most matter-of-fact reason.
The other one was that what I noticed every time they came knocking, they would really just give me someone else’s playbook. They would say ‘take our money and you can do what Constant Contact did.’
They really wanted me to get the next best IPO. And it’s understandable, that’s their job, to get exits for the LPs….
As entrepreneur, I’m sure, you all can relate I wanted to build my own thing my way. This is my baby, I was going to do it, Bruce Lee style. This is the way. My way. So that was one of the reasons. I couldn’t articulate it back then.
It was sort of the lack of respect that they had for the thing that I was creating. I didn’t want to be a copy cat. And I didn’t want to take orders from some nerdy MBA VC to become a copy cat. That’s the worst.
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What we learned the hard way was we were serving small businesses…I used to tell all new employees, I used to draw this diagram, it was two mountains. And I was like, ‘in our business, you have [the] small business mountain or [the] enterprise mountain, you pick one of those two.’
And in the middle I picked death valley.
Mid-market is Death Valley.
You have clients who have the ambitions of a large business and the budget of a small business. And a lot of those managers who’re running marketing in those mid-sized companies, they’re not exactly your cream of the crop with a lot of experience in marketing.
They don’t know how important marketing is as an investment. They’re very picky, choosy customers. They’re high maintenance. So we focused really on the bare-bones, just the smallest of the smallest customers.
You just lose your shirt if you have customer success managers trying to help them give them any kind of service. It was all kind of self-serve for us…These are people who would sign up for an account, run it for 10 months, shut their business down, go get a job. Two years later figure out, ‘oh that’s how you run a business.’
Start up a new business. Revitalize that old Mailchimp account and then pay us money. That’s like a three/four year sales pipeline, you don’t make money with customer success from that kind of clientele.
We served enterprise for sure. But we chose to serve them through the API. If you’re an enterprise, if you have an engineer, read our API docs, build it yourself, and we’ll give you volume discount. That was the way we chose to do it.
We experimented with customer success. It’s also a cultural thing. We could not quite get that culture into our business. If you look at HubSpot, they’ve got that nailed, but it’s a very different business vs ours.
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What I learned later on is that the thing you’re good at, that’s probably going to be the thing that your company sucks at. You can’t scale it because you’ve still got your hands into it.
I was really good at design, creativity, and branding. And that team, I noticed after 10 years, wasn’t scaling like the rest. Like support, customer service, operations, I sucked at them so I always hired the best people I could find for that.
That side of my business scaled and was very, very efficient. I think because I didn’t have experience, it kept my mind open to always hire operational people. I always called them that. ‘Those *operational* people over there.’
My passion was not just creativity but fostering a creative culture. That’s the thing that I focused on the most. So, we got to 12,00 people, In think because I wasn’t the one managing them all. I always had great COOs.
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Thanks for reading! 🌻
Team Relay (Chargebee for Startups)