SaaStr Podcast #172: Jon Lee, Founder & CEO @ ProsperWorks on Why It Is Easier To Start In SMB and Work Your Way Up
Welcome to Episode 172! Jon Lee is the Founder & CEO @ ProsperWorks, the #1 recommended CRM for G Suite. To date, ProsperWorks have raised over $85m in VC funding from the likes of True Ventures, Norwest, GV, Bloomberg Beta, and more incredible names. Prior to ProsperWorks, Jon started in investment banking at Merrill Lynch before moving to run a large operations team at Yahoo. Jon then founded Bazaar Advertising Solutions, a business self funded from a Palo Alto apartment that Jon scaled into a highly profitable $47m business in less than 2 years. Jon then sold Bazaar to Epic Media in 2006. Following the acquisition, Jon founded DNA Games, the number one casino simulation game on Facebook with more than 20 million players, ultimately acquired by Zynga in May 2011.
In Today’s Episode You Will Learn:
* How Jon made his way into the world of CRM, having successfully founded and sold 2 prior business in the lead gen and gaming space? Why does Jon believe building a SaaS business is very much like building a gaming business?
* How does Jon think about the scaling of company culture with the scaling of headcount? Where does Jon see the inflection points where this culture starts to break down? What does Jon mean when he suggests “the importance of a culture of innovation?”
* Why does Jon believe it is so important to insert a culture of risk into the organization? How does this risk mindset differ and look across different segments of the business? How does Jon aim to create a culture of risk and ambition without a fear of failure and not hitting targets?
* Why does Jon think it is always better to start in SMB and move to enterprise? How does this decision change how one thinks about product roadmap? How does this change how one approaches traction building ahead of fundraising? What should one look to learn from rapid iteration and testing before moving to the enterprise market?
60 Second SaaStr?
* What does Jon know now that he wishes he had known at the beginning?
* What keeps Jon up at night?
* What is Jon’s favorite SaaS reading material?
SaaStr 172: Why It Is Easier To Start In SMB and Work Your Way Up, How To Encourage A Risk Mindset Into Your Culture & How To Separate Ego From Decision-Making with Jon Lee, Founder & CEO @ ProsperWorks
Jon Lee is the Founder & CEO @ ProsperWorks, the #1 recommended CRM for G Suite. To date, ProsperWorks have raised over $85m in VC funding from the likes of True Ventures, Norwest, GV, Bloomberg Beta and more incredible names.
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To the guest today, I’m thrilled to welcome Jon Lee, founder and CEO at ProsperWorks, the number one recommended CRM for G Suite. To date, ProsperWorks have raised over $85 million in VC funding from the likes of True Ventures, Norwest, GUV, Bloomberg Beta, and more incredible names.
As for Jon, prior to running ProsperWorks he started in investment banking at Merrill Lynch, before moving to run a large operations team at Yahoo!. Jon then founded Bazaar Advertising Solutions, a business self‑funded from a Palo Alto apartment that Jon scaled into a highly profitable $47 million business in less than two years.
Jon then sold Bazaar to Epic Media in 2006. Following the acquisition, Jon founded DNA Games, the number one casino simulation game on Facebook with more than 20 million players, ultimately acquired by Zynga in May, 2011.
That’s quite enough from me. I’m now very excited to hand over to Jon Lee, founder and CEO at ProsperWorks.
Jon Lee: Good. That’s perfect. I think we’re warmed up.
Harry: Jon, it’s absolutely fantastic to have you on the show today, having heard so many great things from the team at True. Thank you so much for joining me today, Jon.
Jon: Thanks, Harry. I appreciate it.
Harry: Not at all, but I’d love to kick off with a little bit about you and how you came to make your way into SaaS and came to found ProsperWorks.
Jon: I’ve been a career entrepreneur since 2005. I started my first company, which was Bazaar Advertising. We were a marketing automation company. It was organically funded by myself through $47 million in revenue. We sold it to a private equity firm.
Then, I started a video game company called DNA Games, which did AD testing for Facebook games. We sold that to Zynga.
Then, I basically took a little break, had an existential crisis and realized my life’s purpose is to serve. I figured the best way to do that was to help other people, like myself, entrepreneurs, change the world to make it a better place.
In terms of SaaS, we wanted to serve entrepreneurs and help make them successful. If you take a look at what drives value the most for entrepreneurs, it’s sales. We focus on the CRM vertical. As we did a lot of research, we didn’t meet a lot of people that liked the existing solutions that were out there. They were cumbersome, required a lot of data entry, wasn’t convenient to use.
As a result, they weren’t getting a value out of CRM they were looking for. An organization, be able to establish a repeatable process of visibility and ultimately be able to automate their sales process.
We started ProsperWorks as focused CRM that’s integrated with G Suite, one of the fastest growing office productivity suites which also happened to be the most adopted among the crowd that we were targeting, which is fast growing companies, and also fast‑growing teams within larger companies.
Harry: Can I jump on one element there, just being the element of DNA Games. I’d love to hear the alignment or lack of alignment to entering the SaaS world.
I had Neil Young at N3TWORK on the show recently. He said the gaming business today, in the world of customer acquisition for games, is very similar to building SaaS businesses. Would you agree with that, in the alignment of building games businesses to SaaS?
Jon: That’s exactly right. In gaming, it’s all about engagement. What is engagement in gaming? It’s about fun. It’s about the like. What is it about in enterprise software? It’s about delivering real value.
A lot of the tactics in gaming around how you introduce people to what your unique value proposition is, or the analog in games being fun, is very similar. In the first‑time user experience, for us it’s all about demonstrating the “fun” or the value in drips as the user enters the product and gets to understand the product.
We’re constantly measuring what are the moments of delight, and how often are we actually delivering real value to the customer, and making sure that we drive, from a UI perspective and from other perspectives, to be able to get people to ultimately realize value within the product itself.
We measure our engagement. We’re constantly measuring the number of times that we achieve our goal emotions, driving the users to delight, which is ultimately delivering more value for the business, closing more deals, organizing their leads better, using their time more efficiently, and so forth.
Harry: I do want to break it up into a couple of different segments, so to say. I want to start on the theme of culture and scaling that culture with the growth that you’ve had, then move to upsell and business expansion, and finish on the market that you serve itself. How does that sound?
Jon: That sounds great.
Harry: Culture and scaling, I spoke to many of your investors before the interview. They said that you’ve mastered the scaling of culture and creating this culture of innovation.
Talk to me. What does this culture of innovation mean to you?
Jon: I think it means, first, being very clear with the team exactly what goal that you’re trying to solve and why it’s important. People need to understand and align with what the vision of a company is.
Our vision of our company is to be the engine of prosperity. We believe that there’s so much unlocked productivity out there in the market. The fact that CRM drives three trillion dollars in sales a year, that there’s a tremendous amount of opportunity for us to be able to increase that productivity.
It’s really important to align the team around that common goal, and then be very clear what it means to accomplish that goal. That’s your mission.
From a mission standpoint, our mission is to make business relationships easy. We pick apart that mission. We decide, “What are we going to do different in the market?” because CRM’s been around for some time now, to be able to do that.
We’ve focused in on ease of use, on automation of data entry, around this notion of augmented productivity where CRM is everywhere where you talk to your customer. Once you get alignment on that, it’s about setting…What are the goals for every single individual on the team that ultimately align to deliver that vision and ultimately that mission?
I fundamentally believe that people that join startups, of course they want to bet big and make a lot of money, but they also want to make a big change. More importantly, they want to understand what their impact is to that change.
All of our employees have a very clear metric that they’re driving towards. They can measure whether or not their…I like to call it awesome. Everyone wants to be awesome. If there’s a very clear measurement of whether what they did or how they contributed toward making the company or themselves demonstrate that they were awesome, that’s fantastic.
The way that you execute a culture like that is, again, being very clear what the objectives are and then how you measure them. Making it clear their contributions, how it moves that measurement. Then, giving them the freedom to do it.
It’s about transparency. It’s about providing all the data that they need in order to best make the decisions on a day to day basis.
Harry: Can I jump in? You mentioned that kind of goals, accomplishing those goals. How do you create a culture of accountability and responsibility, but also not a feeling of continuous fear of not accomplishing goals and that potential failure?
Jon: One of our values is to win as a team and to be comfortable with taking risks. I think it’s orienting people around the notion that in order for us to stand out in the market, we can’t make iterative improvements. We need to make order of magnitude improvements.
In order to do that, we have to encourage risk taking. Risk taking is absolutely encouraged at the company. We won’t always hit our goals, but what’s important is that we are putting our best foot forward and putting our best efforts towards doing that.
That’s actually a really hard line to straddle, as you mentioned. There is a good balance of fear of not contributing to the team, but then there’s also this amazing opportunity to be able to deliver outsized returns on the metrics and the goals that people are running after.
Harry: Absolutely, a kind of call to any culture. I’m intrigued, because you’ve scaled ProsperWorks immensely over the last 24 months, now over 100 people. I’m interested. Where have you seen the breakdowns in the scaling of culture? Where are those inflection points?
Jon: We’re now at 162 people. We’re going to be at 220 people. I think that culture starts from the top. It starts with defining, again, what that vision and mission, what your values are. It’s about rewarding employees and making clear that those values are very important to the organization.
Those values are the basis from which people get promoted, from which they get recognized, from which they are awesome. That’s where it starts.
It percolates downwards through your executive team. The way in which you engage with your executive team needs to be consistent with those values. You’ll be surprised how much behavior, as the CEO founder, that you convey on your executive team, which then influences their line of managers, and influences the second line of managers, and ultimately influences the individual contributors, as well.
Harry: If you go back to those early days and go back to the scaling journey itself, where have there been bumps in the road with scaling this culture?
Jon: It’s fairly easy as a thoughtful CEO, as a good leader, to be able to permeate that culture. I think once you get past 150, and it’s actually very interesting that it’s exactly with Dunbar’s number, it becomes a lot more difficult because people in different departments start not knowing other people in other departments.
You start adding a bunch of new faces. There’s the new groups, the older groups. Cliques start forming. That’s when it’s really important to emphasize the values, and to celebrate those values, and to make sure that every manager embodies those values so that every single employee ultimately does the same.
Myself, a number of my friends, have all noted, “Yeah, there’s something magical that happens at 150, where you no longer, as a CEO founder, can rely on yourself to perpetuate that culture. You need to rely on your team to be able to do that for you.”
Harry: You spoke about the exec team a little bit there. I’ve had multiple guests on the show who talk about exec team churn throughout stage. I’m intrigued, do you agree with the common notion that you go through three or four exec teams on your way to IPO or eventual M&A?
Jon: Yeah, I think every founder gets to IPO or building a substantially large business by achieving various goals at different stages of the company. For Series A companies, it’s product market fit. For Series B, it’s the ability to demonstrate scalability of revenues. For Series C, it’s the ability to do so profitably in a repeatable fashion.
In order for you to be successful, you need to embody a true embrace of all of your executives, and deeply care about them and their development. I think the simple reality is that, as the company grows and the objectives change, there are different skills that are required.
You do your best that you can to coach your executives to be able to do that, but there comes a point in time where the company needs to bring in outside experts. I think most entrepreneurs recruit people like themselves early days who are hustlers, who are smart, who are ready to learn. They can learn very quickly.
You learn through making mistakes. You learn through talking to other people. The best way to learn is actually being around people that have actually done it before.
Even at ProsperWorks we’ve brought in three new executives. Jon Aniano from Salesforce who was the SVP of product of service cloud. He ran product for a $3‑billion organization. We recognized that as we move upmarket we need that product expertise and the ability to scale a product organization past over 100 people.
We brought in Morgan Norman, who was the CMO of Dialpad and SVP at Zuora and NetSuite who was very successful in bringing in mid‑market customers into his prior companies and scaling that organization.
We brought in Niraj Shah, who was Senior Director of Growth over at Zendesk who’s now our VP of Growth, to be able to velocify a portion of our customer segment.
I think every CEO needs to look deeply, as much as they want to believe and support and grow the existing executive team, what does the company need at this point in time?
Be able to position and bring in people that can accelerate that. It’s not to say that that CEO is not loyal or not supportive of the existing executive folks, but you’re actually doing them a favor. You’re actually helping to increase the size of the overall pie and the value of the company.
These new individuals give an opportunity for existing executives to learn from these other executives that have been there and done that in the past. You’re doing them two favors, both for their career, both for their pocketbook, but most importantly, mostly, to help us achieve the vision that we all signed up for.
Harry: Tell us, how do you bring in such talent and such experience into an existing team without disincentivizing those who maybe hoped it would be them next?
Jon: That’s a really tough question. I think that every fast‑growing company and successful company is successful and fast growing because of the executive team that supported it. I think that the way that you do it is just being very clear. What’s the vision? What’s the mission? What are the values? What are the metrics and goals that we need to drive?
We have to always be intellectually honest and ask ourselves, “What can we do today to help us achieve our goals faster?”
I think having that open conversation around what we know and what we don’t know and where we have a lack of experience. I think if you have a culture on your executive team that is intellectually honest and self‑reflective it makes it easy to make that transition.
Harry: You spoke about the multiple different segments of the market that you now serve, from SMB, to mid‑market and enterprise. Probably the most common question that early SaaS founders ask me is, “Harry, should I start with SMB, refine the product, and work my way our or start with enterprise and work my way down?”
Imagine that you were advising me. What advice and recommendations would you give me?
Jon: I would say start from SMB and work your way up. That certainly has been our approach. A lot of this comes from my DNA experience, as well, which is the ability to iterate very quickly.
You ultimately need to do two things in enterprise software. You’re either providing a product that is new and that you need to convince a market that there’s a need for it or you’re solving and building a better product that they’re already using.
Here in the second camp, like ProsperWorks is, then it’s important that you nail two things. Number one, you have the features that your customers expect you to have today. Those are the table stakes.
Number two, you have a handful, maybe two to three, features that distinguish you from the market. In order for you to figure out, number one, there’s a lot you can do around customer interviews and so forth but nothing beats actually having to convince a customer to give you money for your product to test whether or not it’s good enough for them and then ultimately track the retention of that product.
Number two, from a differentiation standpoint, you’re making a bet. The faster and earlier that you can test those bets of what makes my product different will allow you to stand out from the market. What usually happens is if you graph…You’ve got market adoption on the Y axis and feature depth on the X axis.
You see these inflection points where you have step functions going up where, once you complete a series of features you’re able to reach a much larger market. It goes up, and so forth, until you go from very small business, small business, to medium sized business, to ultimately enterprises.
To me, the best way to do that is in an iterative fashion. That allows you to be able to rapidly test what do our customers engage with most. What do they write most about in positive reviews as to what makes ProsperWorks different?
Being able to get your product out earlier is very important. However, you need to be very careful and define what your target market is. If your target market is mid‑sized businesses, you have to be careful that you don’t become biased toward your current customer base and what they need versus what your mid‑market customer base needs.
It’s very important to find your target market very early on so that you make sure you filter for that.
Another advantage of going small business to enterprise is that, naturally, small businesses need less features than enterprises do. What it allows you to do is to be able to start getting traction. You raise a $3‑million series C or a two million series C. You only have so much time and resources to build so many products.
As a matter of practicability, on an existential basis, being able to continue to fund and grow your business you need to be able to demonstrate progress. Progress equals revenue and growth. In order to do that, you need to have a market to be able to sell into.
That’s largely been our approach, which was we needed to find product market fit. We needed to scale revenues and demonstrate strong growth. And then, we needed to be able to repeat that growth in a profitable fashion, which is how we raised $87 million over the history of the company.
Harry: Can I ask, what was the biggest challenge for you in taking that SMB start and then moving upmarket, now, to the multiple segments that you serve? What were the core challenges?
Jon: I think the core challenge was speaking to what I spoke about before, which is that when we first launched our product it was free. We got a lot of customers to come on board. They requested a lot of different features.
Our natural bias was to build the features that our customers wanted. The reality is that the features that that segment wanted versus the segment we’re really going after, which is larger small businesses and medium sized businesses, are actually quite different than the needs of what a free customer may want, who is a one or two individual company.
Again, being very clear of what your end target market is is very important. Making sure that you filter feedback from the right customer segment so that you ultimately are pointed in the right direction from a product development, marketing, and sales standpoint.
Harry: Final question before we move into the quick fire, how did the internal structure of the team change with the upscaling into [inaudible 19:27] ?
Jon: What we’ve discovered is that from a product engineering standpoint, for the most part every customer segment requires a different team. From a sales and marketing perspective, you need to bring in individuals who can sell into the mid‑market.
We have a dedicated mid‑market sales team. I think it’s not impossible but it is harder for an SMB or a small business sales team that’s inbound focused to transition into a mid‑market team that is outbound focused. We’ve tried it in the past. Credit to the folks who put their best foot forward, incredibly intelligent, incredibly ambitious folks.
We weren’t as successful with that. Where we found success is where we bring in the leaders and the folks who have experience with that to be able to focus on the individual markets that we serve. That’s velocity, zero to five employees, core, 5 to 100 employees, and ultimately mid‑market, which is 100 to 1,000 employees.
That speaks true on the product side, as well. There’s a very different type of customer. As a result, you need a different type of product manager, a different type of designer who understands the use case of each particular segment.
It’s very important that you bring in the experts that understand these different markets so that you can be most successful with them.
Harry: I do want to dive into Jon’s 60 second [inaudible 20:45] . Jon, just for you. I say a short statement and then you give me your immediate thoughts. How does that sound?
Jon: That’s perfect.
Harry: How to optimize a sales call for customer rapport?
Jon: Caring deeply about their business, and really understanding what are the pain points, and coming across as a credible consultant to those pain points.
Harry: What keeps you up at night, Jon? What’s a common recurring thing that keeps you up at night?
Jon: Are we moving fast enough?
Harry: Tell me a moment in your life that served as an inflection point and changed the way you think.
Jon: I read a book about the ego and how much decisions and the way you act is reflected by ego. The moment that you can separate your ego from business decisions, the better decisions that you’re going to make.
Harry: Tell us, how do you do that?
Jon: You have to analyze your emotions and your reactions and realize that when you have intense emotions and reactions take a deep breath, stand back, ask yourself why you’re feeling this way. Is it an extension of the way you were brought up or just who you are?
Be able to decouple and say, “This is my mind talking. This is not who I am.” Be able to recenter yourself to make that objective decision.
Harry: What’s your favorite SaaS reading material,
Jon: What are the favorites on a rainy day?
Jon: I love SaaStr.
Harry: Great answer. Let’s finish on what do you know now that you wish you had known at the beginning of your time with ProsperWorks?
Jon: The importance of culture and the importance of surrounding yourself with an executive team that is aligned with your vision and your values.
Harry: Jon, it’s been such a pleasure to have you on the show today. As I said, I heard so many great things from the team at True. Thank you so much for joining me today.
Jon: Thank you.
Harry: I want to say a huge thanks to Jon for giving up his time today to appear on the show. If you’d like to see more from Jon, you can follow him on Twitter @jonleepw.
Likewise, we’d love to see you behind the sceens here at SaaStr. You can find me on Instagram @hstebbings1996. Do not forget to check out SaaStr Pro, that’s at saastrpro.com/podcast. That will change how you cultivate and harness your team.
As always, we appreciate your support. I cannot wait to bring you next week’s episode.