Welcome to Episode 174! Timo Rein is the Founder & CEO of Pipedrive, the startup that helps sales people focus on actions that close deals. To date, Timo has raised over $30m from the likes of Atomico, Bessemer Venture Partners, TransferWise Founder Taavet Hinrikus, and Andy MCloughlin, and has scaled the team to over 330 people across multiple continents. Prior to founding Pipedrive, Timo was a Partner at Vain & Partners acting in a consultancy role on how to get the best ROI from your sales process and before that was himself a door-to-door salesman with SouthWestern Company selling high-ACV products.
In Today’s Episode You Will Learn:
* How Timo made his way into the world of SMB CRM with the founding of Pipedrive from the days of being a door-to-door salesman of high-ACV products?
* Why did Timo choose to go global with Pipedrive from day 1? What are the benefits of founders having this global mindset from the start? What are Timo’s biggest learnings in terms of acquiring customers globally early on? What worked? What did not work? How did Timo think about pricing on an individual country perspective? What are the challenges with this?
* Having raised from both US and UK VCs, how does fundraising differ when comparing Europe to the US? If Timo had to say the West Coast, East Coast and European VCs each had one area they focus, what would that area be? What are the challenges with these inherent focus points? What advice would Timo have for foreign founders looking to make it big in the US?
* How does Timo look to manage a team so spread across the globe? What are the core challenges of this? What works? What does not work? What functions can be split up by geography? What must remain in one location? Now at 300 people, how does Pipedrive ensure for the same values fit when hiring at scale?
* Many VCs say with such low ACV and such high churn, the SMB market is too difficult. How does Timo respond to this? How does Timo think about ensuring the continuous refilling of top of funnel? How does Timo think about acquiring such small customers in a cost efficient manner?
60 Second SaaStr?
* What does Pipedrive look like at $100m ARR?
* What keeps Timo up at night?
* Who is Timo’s favorite angel investor?
* What does Timo know now that he wishes he had known at the beginning?
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Harry Stebbings: Hello, and welcome back to another week in the world of SaaStr. With me, Harry Stebbings. I would love to see you on Instagram where you can add me @hstebbings1996. You can submit questions for future guests there.
To the guest today. I’m thrilled to welcome the incredible founder in the form of Timo Rein, founder and CEO at Pipedrive, the startup that helps salespeole focus on actions that close deals. To date, Timo’s raised over $30 million from the likes of Atomico, Bessemer Venture Partners, TransferWise’s founder Taavet Hinrikus, and Andy Mcloughlin at Uncork and has scaled the team to over 330 people across multiple continents.
Prior to founding Pipedrive, Timo was a partner at Vain and Partners acting in a consultancy role on how to get the best ROI from your sales process and before that was, himself, a door to door salesman with Southwest and Company selling high ACB products.
I do also have to say a huge thank you to Teddie Wardi and Andy Mcloughlin for suggesting such brilliant questions today. I really do so appreciate that.
You’ve heard quite enough from me now so, without further ado, I’m very, very excited to welcome Timo Rein, founder and CEO at Pipedrive.
Timo Rein: Good. That’s perfect. I think we’re warmed up.
Harry: Timo, absolutely fantastic to have you on the show today. I’ve heard so many great things, both from Jason Lamkin and Teddie Wardi. Thank you so much for joining me today.
Timo: Great. Thank you for having me.
Harry: Not at all, but I want to kick off today with a little about you and how you came to make your way into the world of SaaS and came to found Pipedrive. What’s that story?
Timo: I was born, actually, in the Soviet Union, which was the Soviet Republic of Estonia at that time and regained independence in 1991. That’s where I grow up. I’m a husband and a father of three. Also, a psychology major. Worked in a professional recruitment firm for four years and then built a physical sales training and consultancy business with two partners.
I also sold door to door, but B to B and enterprise for most of my career. In 2010 I founded Pipedrive with four other co‑founders. What we do is a sales action and sales pipeline management tool so that people in sales, anywhere in the world, could be very consistent in their daily and weekly effort and enjoy good results all the time.
We’re doing quite well. We’re serving SMBs literally on every continent.
Harry: I have to ask, and I can’t not ask, given the enterprise and B to B enterprise focus there that you mentioned in your past, why a SMB focus to Pipedrive?
Timo: I’m still trying to find the best answer to that question, actually.
Harry: [laughs] Sorry. I was too intrigued.
I do want to break the interview today up into a couple of different segments. I want to start on a theme of internationalism, what that means for acquiring customers and pricing, building teams and cultures. Finishing on with that SMB market that we just touched on. How does that sound?
Timo: It sounds promising.
Harry: Starting on the theme of internationalism, you went international and global very early. A question from Jason Lamkin, why did you choose to go international so early? What were the core benefits?
Timo: The biggest part of it was necessity. There was no other way. When you think of a whole market which is 1.3 million people as a population, and then you get to numbers which are actually there for you as potential customers you’re in a situation where you have to. As far as SaaS SMB goes, we had to look for customers everywhere. That’s outside of our home market.
That’s our story. In terms of benefits we had to, because of that situation, think in global terms of what is the main problem to solve for everybody? It also forced us to think, what makes different regions approachable in a global manner and where localization is almost a must from day one?
I also think that building that organization up that we built, which is able to serve a global customer base, is one of the benefits. We had to do it from the beginning. Last, but not least, you have to test marketing methods which would work globally. There’s no way around it.
Even today, I think it gave us a head start and gave us the momentum which we’re using to this day.
Harry: I couldn’t agree more on the benefits of that immediate global mindset. I am intrigued by one element you said, which was the localization element. How did you think about that? How has that evolved today as a must?
Timo: I think that it has taken us to different situations, and tactics, and strategy depending on the market. I’ll give you, for example, Latin America. It was one of the earliest localizations for us that we started with. Over the years, we’ve discovered more and more elements where we could serve that market better if we had a slightly deeper localization.
There are certain markets and regions where we haven’t gotten to this question because it’s been performing. You can take the Netherlands. You can take some other countries where people are quite fine with English.
Brazil, for example, wasn’t that one. Brazilian Portuguese, to get that language into the application but also into the knowledge base, ultimately to the marketing side, into all the chats that take place between customer support people and customers. That was something that we have to do. I’m quite proud we did.
Harry: We spoke about localization of product there. I’m intrigued. In terms of the different geographies and acquiring different customers in those different geographies, how did you manage to acquire such a global customer base? Did the acquisition strategies vary? What were the key lessons for you in doing that different acquisition strategy per geo?
Timo: When I look back, I think that there’s an element of toughness there to crackle, to get into certain early adopter circles first is one of the answers.
For example, US. It has an amazingly strong program for accelerators so we went into one. It was AngelPad in San Francisco in 2011. Angel investors and micro VCs, they’re really well connected to SMBs, to influencers. Just getting the product into their hands as we worked through that network, it was very important.
What I already told about, for example, Latin America. I think it’s understanding where we have to put in dedicated work to increase that level of localization. Not only that, but also getting the global pricing strategy to, more or less, right and then get the customers, which helps you to trade that allocate base as they pick up the product. That also has been proven to be very beneficial.
Harry: You mentioned the pricing perspective there. I’m intrigued. What were the challenges in pricing the product for such a global audience in so many countries?
Timo: Some people say that the price is never right, meaning that you can always think that you could change that, or you should change that. I think it’s probably true.
It has to be set somewhere. We’ve to gauge the price which would work globally. It obviously means that we are overpriced in areas and we are underpriced in some others. There are challenges that come from this.
You look at the market. You think maybe regional pricing should be implemented yesterday. We’ve mostly stayed away from this, so far.
More than pricing challenges, actually, I would say that payment methods and habits which differ a lot from Brazil, to the US, to Germany. This is where we also want to make a difference. Working to get things as close to market as possible, which I have to say is a long and winding road of figuring that out, but also then putting that technology in place.
Harry: I’m intrigued. We’ve spoken about the global mindset. It’s even moving global from a fundraising perspective. You’ve raised from both the US and Europe.
How does fundraising differ for you, from your experiences, when comparing the two?
Timo: I’ve heard, I’ve also personally felt, that there’s some truth in saying that US West Coast looks at customer and user first and that East Coast looks at P&L and budgets. Europe, you understand that the question becomes about time to profitability.
I think there are differences there by these cultures or what they’re called, but for me the main difference is the US has more VCs and angels in it. More companies, I would say, as well. The concentration makes the situation like a good learning base. People are more experienced.
They’re quite often also more aggressive about growth, which I don’t think is necessarily a function of experience but just a mindset. What I mean by this is short term growth quite frequently puts founders and also companies and some investors to look for amazing results in 18 months rather than three for four years.
I would say somewhat more short term, also, especially early on.
Europe, actually, I’m still learning about because I spent about four years in US. I came back last summer. It’s been very exciting to see some strong ex‑entrepreneurs, now VCs, making their mark. I’m continuing to understand what this network of investors and how their fundraising differs. There are some differences but I think the ones that I mentioned are the biggest ones for me.
Harry: With those four years of experience scaling in the US, question from Jason Lamkin who asked, what advice would you have for founders looking to go big in their entrance into the US market, having done it so well with Pipedrive?
Timo: I think go to live in the US is definitely good advice that I could give. Expect it to be expensive personally and for the business. At the same time, there’s a price you pay. You could also look at it from an investment point of view.
Entrepreneurs and investors that I mentioned, learn from them firsthand. There’s so many things that experience gives, which is the amount of mistakes that people have made that you can learn from. I think that’s a major benefit.
I remember one example from my own life where I went to door to door sales. The only thing I asked from my friend who had done it before was, “What would be the one thing that you would not do or one thing that you would definitely do if you were to do it again?”
The thing he said was one of the things I kept in my head as a mentor. There’s so many things where people feel that they made mistakes. I think, then, just testing your product for that market fit. Not only from the perspective of a product, and what it does, and what problem it solves. It also is able to get through to the market.
I think US, overall, has this very simple mentality of getting to a customer because there’s so much noise around there. In some areas, other than US, you might think you need a sophisticated approach in your messaging. In US, you have to be the simplest, easiest to understand, easiest to differentiate. That’s a valuable lesson.
Harry: Pipedrive’s in an inherently competitive space. I’m intrigued. It’s always a big question for me. How do you think about competition? Is it a row your own race case for you? Is it very much a benchmark and analyze the competition and very much peg yourself against them?
Timo: I’ve always liked the fact that we have to do our work really well and then take a look at what’s out there as alternatives that we could learn from, that we have to be aware of. I don’t want to take an approach of reacting first and then thinking what we should be doing when it comes to our own thinking.
You would always find me in that sort of position that we need to understand what our vision is, and what we need to do, and compare ourselves and our pace against completing that. Then the competition, which can also be quite interesting.
I’ve found that SMBs, they have different sorts of experiences. Some, especially when it comes to an industry like ours, have an experience of different vendors in a CRM space or a sales management tools…A large number of them have an experience of using notebooks and analog tools of the world. Just an email client and things like that.
We have to be really careful in understanding who and what we’re competing against and not just look at the immediately comparable vendors and look at the checkmarks into the features that we are serving our customers with, as well. Or maybe not.
For me, the main key is figuring out what we need to do and having that path, and then comparing out road and pace against that.
Harry: Absolutely. I completely agree on that kind of consumer education and what they need.
I do want to discuss another element that you mentioned earlier, which is the team itself. Very challenging in terms of being so global so early with the team. The question, again from Jason Lamkin, how are you going to manage a team that’s distributed so far across the world? Have there been some kind of core takeaways from you from scaling this team?
Timo: I think this is just hard. I’ve worked in a setting where you have one location. You always go there. You can find the people there. You know that everything that is going on going around is here. You can feel it all the time.
The first thing when you have locations which are really in different areas, different continents, you need to manage that separation somehow. I think second, you need to manage the communication that happens between these locations.
The questions that we’ve asked, can these parts of the organization actually be separated? What will stop these different locations from falling apart? How do we set up internal comms?
I think that maybe we’ve done something right, but I’m mostly seeing that we’ve done so many things wrong, too, because that’s where we learn and then understand that we need to address things.
Harry: Can I ask, what have you done most wrong, do you think?
Timo: I think we’ve underestimated the importance of keeping people in the loop in terms of their communication and also keeping people on the ground that make them feel part of that global business.
What I believe in is that you need to have a person on the ground that matters to local people first. You can already go wrong there. I think we have done more or less right there. You need to find a person who’s not just your buddy who you know and it’s just a matter of relocation. You need to find somebody who is in that culture and makes people feel that this is us here.
At the same time, as a paradox, you need to have a feeling that someone from global leadership either resides or visits the place enough and people feel that they matter. This is where I think we haven’t always found the right combination because it’s difficult when you have four or five locations around the world.
Some functions and teams, I also feel, can be split between locations. You can think of support, engineering, but some are much suffered to split as we’ve learned, which is the core marketing team.
When it comes to leadership, as the last point, I would say that leadership in a global company, they can forget about not traveling. Their office is probably better described by time zones they are frequently in rather than a location.
Harry: I would love to stay on this theme, though. We mentioned the scaling of the team there. Teddie Wardi tells me now over 300 people. How do you ensure then, and this is his question? I have to give him credit. With over 300 people, how do you ensure that new recruits have a values fit?
You mentioned your unique perspective on values fit. How do you ensure that now, with the scale of Pipedrive, everyone has that similar values fit that you wanted from day one?
Timo: When you think of people, I think it was Shrek who said that Shrek is like an onion. People are like onions. We’re very tough to peel to get to the core.
What we do when we hire people is that we use some tactics which just help us. They’re not as sophisticated, I would think. What we do is keep the process longer. We want to get more people involved in hiring, not just one or two people but some people from a team.
We do have some formal events like boot camps where people who join, so that you get a feeling of what it means to get into this company with some other people, not just you, in some location. We have a founder interview which we’ve kept. We also attempt to gauge the character fit, besides professional fit.
When we talk about values and things like that, I don’t actually like values as a word because it makes me feel as something we aspire, not necessarily something who we are. I like, when we describe character components instead, something that makes you who you are and so that you can be that person.
When it comes to what we look for in everybody, I think that is something that helps us in that scale. We look for people who are driven, with a very high standard and no excuse as an individual. Then, we look people who, being that, actually want to join teams and work with an open and humble mind.
At the end of the day, they care about not ruling other people’s days as a habit because when you put pressure on an organization somebody is not going to feel that great. The question is, does that become a habit or people actually figure out how to work together?
Harry: You mentioned the slightly elongated process that you pursue there. I’m intrigued. I often hear the term, “Hire fast, fire fast.” Does that mean you would disagree with the hire fast sentiment?
Timo: Part of me definitely says, “Yes.” We want to understand people, especially in the critical roles. We take more time there. At the same time, sometimes the experience tells you that maybe you should have just hired somebody quickly into the organization. Maybe you should have just learned very quickly and if it works it works. If it doesn’t, it doesn’t and you [inaudible 17:52] it to this learning experience.
I think there are different ways of doing this. Our way has been much more about getting a strong understanding whether that person delivers on a professional and a character side. At the same time, we make mistakes still, obviously. That’s where I mostly think that maybe we should have hired faster and not taken that long time.
That is where I give it to people who do it different ways. Our way was what we described.
Harry: You mentioned your way, especially with the character component. I’m interested, because Pipedrive turns salespeople into sales warriors. I have to ask, how does one create this sales culture of warriorship, and the accountability, and the goal setting but without the fear of maybe missing your numbers?
How do you think about that, both from Pipedrive’s perspective and then, maybe broader, from a macro perspective?
Timo: I like that question because it makes me want to ask a question back. Where do you get that question? It’s a very good one so I’m not going to ask. That’s my curiosity.
Harry: It’s Mike Bigger’s question of how do you set incredibly ambitious, driven goals without creating this demotivated team when maybe they don’t get hits sometimes.
Timo: It’s a good one.
First of all, I don’t believe, actually, that fear ever goes away when you’re in sales. I believe that fear can also be looked at as almost like a prerequisite to confidence. The reason being I think you can be confident when you know what to fear.
For example, you should fear not making your foundation strong. You should fear not doing the basics over and over. You should also fear that you’re not sticking to your schedule enough.
I think that process that is known and calculated to get victories in sales has to take over the role of being the main driver, not the fear. Driving that process and having the culture around it, this is what I’ve seen helps people and also organizations to help send that fear into the background where it belongs and is useful.
I don’t believe that it can be fully put aside and eliminated from the system, which I do think that it actually serves a purpose.
Harry: I have one super nerdy passion of mine. This really is a nerdy one, is ramp up time for sales people. Given the enterprise background that you mentioned before your Pipedrive days, and now with the extent of experience of Pipedrive, how have you seen the ramp up times differ when comparing SMB sales to enterprise sales for those reps themselves?
Timo: You would somewhat think that enterprise has more to dig in, in a way, to understand different companies. The processes tend to be longer as the volumes tend to be bigger. Sorry, not the volume but the size of deals.
I would still say that, depending on the role, obviously whether we are talking about people who spend most of their time qualifying more than their time closing the actual accounts, I would still say that it’s really important if you want to have a differentiated product and a person out there that you can trust. You have to get to know the customer business. You have to get to know all the actual product.
I would like this ramp up time to be long enough so that people get to know what it is that they are doing and who they are doing it for.
I actually haven’t thought about it. I’m not going to go and speculate here, to be honest.
Harry: I thought it was a nerdy question.
I do want to finish saying, before we move into the quick fire round, on the SMB market itself Pipedrive’s attacked it so well. I speak to so many VCs. They say, “Oh, Harry. Such low ACVs, SMB’s just so hard.”
I’m intrigued. What do you make of this kind of statement and sentiment? How do you think of optimizing the funnel to ensure that the continuous flow of converting leads?
Timo: I think some things have to be done really well. Product has to be very good, otherwise you don’t have a chance. I think we’ve been on a good path, a lot of work to do. That has created a very strong flow of leads coming in.
Now, you go toward converting. I think service has to be very good. The same way. It’s a software as a service, right?
We do work well with our customers before they join and during the lifetime, which has to be done really well in any business that wants to convert these Bs. I actually think, looking back, when we didn’t have a proper sales function at all in a company then the conversion after we implemented a proper customer support function actually took a serious increase. I realized that that is a hard factor, not a soft factor.
Then, obviously, it becomes a matter of figuring out how the marketing engine maintains efficiency under increased load, under‑exploration.
We keep learning. Again, it’s not easy. You have to have different product offerings so that people can choose between plans and the separate products so that you could also manage your revenue better and everybody can get what they need.
Harry: You mentioned the element of customer support there. Is it possible to implement this kind of strong and sustainable customer support team with such low ACVs? It’s often common with customer success teams in enterprise. Is it possible doing that with the SMB and lower ACV market?
Timo: I think it is, even though it has to be done in a way of looking into the whole P&L and understanding the cost structure you can sustain. I would imagine that that becomes a tough decision point.
I think this is where our distributed organization gives us an edge. We can look at the parts of the world where we can get really talented people and really hungry people to work, and yet we’re not looking at the cost levels or living standards of a Silicon Valley on the West Coast of the US, for example.
I get it. It’s a difficult one to get right. I believe that it has to be there. It’s again, by definition, software as a service. We can’t do one and not the other.
Harry: Absolutely. I do agree with the centrality of it.
I do want to move to my favorite element of any interview, being the quick fire round. This one’s very different than the other ones, Timo. It’s all because of your suggestion of doing the whole lot in 60 seconds. Thank you for that innovation. This might be more challenging for you. You might have shot yourself in the foot there.
Are you ready to roll?
Timo: Hold on. Hold on. I’m going to put on my…
Harry: Seat belt.
Timo: Yeah, seat belt’s on now. OK.
Harry: Next stop is $100 million in ARR. What does Pipedrive look like at $100 million in ARR?
Timo: I think it’s an exciting company delivering a strong product and solid service.
Harry: What keeps you up at night?
Timo: I would say becoming too tense about small things or big things.
Harry: Question from Andy Mcloughlin. Who’s your favorite angel investor?
Timo: The only possible answer, Andy.
Harry: That check’s worth it now for him.
Tell me a moment in your life that served as an inflection point and changed the way you think?
Timo: Business life, it would have to be a kick in the butt by a fellow door to door salesman who thought me being a consultant was a cop out. Personal, life is really very fragile. It’s bigger than we can cope with and less meaningful unless we find that meaning.
Harry: Favorite SaaS reading material, what is it for you?
Timo: I would say listening material and maybe this podcast.
Harry: I love it. What do you know now that you wish you’d learned at the beginning?
Timo: That drive of a person actually matters more than I thought and I didn’t think it didn’t.
Harry: As I said, I heard so many great things. It’s been such a pleasure. I can’t wait to see Pipedrive at $100 million and to the celebration with a mojito in person. Thanks so much for joining me today.
Timo: Thank you, Harry. It’s been a pleasure.
Harry: I do want to say a huge thank you, again, to Timo for giving up his time today to appear on the show. If you’d like to see more from Timo you can find him on Twitter @timorein. Likewise, we’d love to see you behind the scenes here at SaaStr.
You can find us on Instagram @hstebbings1996. It’d be great to see you there.
I do want to say, again, I so appreciate all your support. It means the world to me. I cannot wait to bring you next week’s episode.