Our recent SaaStr Summit: Bridging the Gap was the first time I’ve had a chance to be a participant at a SaaStr event in a long, long time. Usually I personally have to do too much planning, moderating, etc. I learned a lot! 😉 So I thought I’d share my learnings from the sessions as we put them up on YouTube.
My next set of 10 Learnings is from Jeff Lawson, CEO of Twilio, and his investor and board member, Byron Deeter of Bessemer Venture Partners. Both are long-time top-rated SaaStr speakers. Take a watch before or after you read the learnings:
Jeff founded his last 2 companies before Twilio during the last 2 downturns, so he’s thought through a lot of things we’ve all 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.
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 right now? 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 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.”
And a great bonus quote: “2020 is the Year of The Digital Necessity. Customers that need it, need it tomorrow. Not over the next 5 years.” Jeff thinks this isn’t a 1-time thing, but will persist.
Finally, the session we did with Jeff at the 2017 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: