A ways back during lockdown, we had some of the best founders in SaaS join us for SaaStr Summit: Bridging the Gap to buck people up. It was great, and incredible 20,000+ attended digitally. But it was a short downturn! SaaS stocks actually rapidly recovered, even as lockdown and shutdowns lasted far longer than any of us thought it ever would at the time.
Among others, one of my favorite CEOs and founders, Jeff Lawson came back and shared his top learnings from tougher times. And now that I look back, the learnings actually are even more useful now than before, because this “downturn” we’re in for some has lasted far longer.
There was one point Jeff Lawson CEO of Twilio made that really resonated with me then, but faster forward to today, resonates even more: if you don’t commmit 100%, you never really make any money. You never really get anywhere.
The last few years, it seems now everyone has a side hustle. Even VPs and even CEOs have then. Everyone has a Plan B and everyone … sort of commits less. They don’t really go 100% all-in, or at least not as much as before. Not everyone, but so many more folks than before. Maybe that’s logical. But I just never see anyone truly go big who doesn’t commit 100%.
Jeff Lawson made that mistake himself. He was CTO at StubHub, that sold for $400,000,000+. But he made almost no money from that one.
Why not? Jeff was very direct. He never committed 100%. And everyone knew it. They kept him. He had his salary. But he never made a fraction of what he’d made if he hadn’t hedged his bets, and just … gone all-in.
10 Learnings From Jeff Lawson (CEO Twilio) + Byron Deeter (Bessemer Ventures): “Adapt, Plan, Deliver”
Jeff founded his last 2 companies before Twilio during the last 2 downturns, so he’s thought through a lot of things many of you have been going through.
1. Twilio was Jeff’s 4th start-up. His first sold course notes, founded out of their dorm.
Their competitor bought them out in April 2000, couldn’t IPO, and was bankrupt by August. He went from $125,000,000 in value — all stock — for his start-up to … $0 in 18 months. He learned paper millions can go to zero. 🙂
2. He joined StubHub as CTO, but didn’t get nearly as much equity as the other CTO — because he “wasn’t committed enough”.
A good reminder to us all, and the point we dug into above.
3. Started Twilio in January 2008, just as the last downturn happened. For months, they couldn’t raise any money at all.
They talked to a lot of customers, who were at first confused … but then came up with ideas to use “that telephone thing”. They had that conversation enough times to just build the first Twilio API. But at that time, fundraising was really tough. VCs didn’t think developers would buy anything. They w.anted to invest in apps, not APIs. But a few investors got it. They went to pitch one VC partner pitch, but then Lehman Brothers collapsed. And they had to go months with no money at all.
But they didn’t quit, because their customers loved the API. They raised $10,000 from each of their parents — and that was it to start. But the customers started coming. And it didn’t take long. They had revenue their first month after launch. After several months, they knew they had something. Jeff sold his wedding gifts to extend their runway.
His learning: follow your customers. Times will change. Markets will change. But the customers are your best source of financing and knowledge.
4. Customers will pay you to build a product you haven’t launched yet — if they believe you can deliver it.
We know this, but it was great to hear it from Jeff as well.
5. How do you balance being conservative to survive, versus needing to be aggressive to win? Founder optimism vs. pragmatism.
“The more you commit yourself, the higher the probability is you will be rewarded for that.” At Stubhub, he never gave the signals he was all in. And he got 1/5th the equity as his colleague. “Commit yourself as much as you are able.” He did have a full-time job when they were exploring Twilio, but as soon as he saw customer interest, he went full-time and “all in”.
6. If you have to cut — where do you cut?
“If you are in survival mode, you need to think through every investment you make now, weighted toward survival first, but the best outcome after the crisis is over second.”
7. Jeff says he’s realized startups are either “product constrained or distribution constrained“.
Make your investments accordingly. If your customers love your product now, hire reps. If you have a lot of reps, but they complain they can’t sell your product, invest in the best product tweaks you can to unlock more distribution. You can’t build a whole new product, but you can tweak what you have.
8. Twilio has a fairly tight limit on its free trial, due to hard costs of telephony and hard costs of fraud detection.
So he’s a strong advocate of charging early and quickly. He recommends setting the expectation customers will pay for value received, even if they get a small use case for free at first. The Slack story is incredible, but most of us need to focus on getting to revenue very early.
9. How do you evolve your focus toward segments doing better in tougher times?
Jeff first advocates for “revenue diversification”. They’ve worked that down at Twilio so their Top 10 Customers now represent a small fraction of their revenue. Jeff also suggests simply giving “massive discounts” to customers in segments that can’t pay right now. To make sure your customers are healthy — to shift to “a mindset of service” to your customers.
10. “Your job as an entrepreneur is to find hard problems to solve.”
Times of crisis are actually great times to find hard problems to solve. We need so many customer problems solved now. Both in unimpacted industries, but also in the heavily impacted industries. “Maybe even go solve a problem for the airline industry today. Maybe don’t bet your whole company on that industry. But they have problems they are desperate to solve.”
This session in many ways is even more relevant today. Times have been. challenging not for a month or two, but now for 18+ months. And more and more folks … just aren’t committing 100%. Keeping their options open.
By all means, keep them open. But don’t be upset when that really great outcome passes you by.
Finally, the session we did with Jeff at SaaStr Annual right after Twilio’s IPO was incredible. A deep dive on how to sell, how to sell to developers, how to expand products and markets, and much more. Take a look:
See everyone at 2023 SaaStr Annual Sep 6-8 in SF Bay Area!!