SaaStr Podcast #200: Brad Birnbaum, Founder & CEO @ Kustomer Discusses The Right Way To Think About SaaS Pricing Today

Welcome to Episode 200! Brad Birnbaum is the Founder & CEO @ Kustomer, the first intelligent platform for customer experience that enables you to know everything about every customer. To date, Brad has raised over $38m in funding for Kustomer from some of the very best in the SaaS business, including Tomasz Tunguz @ Redpoint, Ed Sim @ Boldstart, Canaan Partners, Box Group and Social Leverage, just to name a few. Previously, he was the Co-founder of Assistly, which was acquired by Salesforce and became Desk.com. Prior to that, he was CTO for Talisma and Co‑founder & CTO of eShare Technologies. In addition, Brad was also the CTO @ Sean Parker’s Airtime and VP of Engineering with Salesforce.

In Today’s Episode We Discuss:

  • How Brad made his way into the world of customer experience and SaaS over 20 years ago.
  • This is Brad’s 4th time at the roadshow, what does Brad believe are the core benefits of repeat entrepreneurship? How did his prior experience change his operating mentality with Kustomer? What has he done differently this time? What worked and he has kept the same?
  • Brad has made the transition from CTO to CEO, how did he find this transition? What were some of the most challenging elements? What have been some of the biggest surprises? What advice would Brad have for other CTOs who have made or are thinking about making the transition?
  • Brad initially served SMBs with Kustomer but now primarily focuses on mid-level, what would Brad’s biggest advice be when it comes to finding the right go-to-market strategy for you? How did their transition alter their approach to pricing, product, messaging and distribution? Where does Brad see many people go wrong on go-to-market?

Brad’s 60 Second SaaStr:

  1. What does Brad know now that he wishes he had known at the beginning?
  2. When is the right time to pour fuel on the company fire?
  3. What would Brad most like to change in the world of SaaS?

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Jason Lemkin
Harry Stebbings
SaaStr
Brad Birnbaum

Transcript

Harry Stebbings: You are listening to the official SaaStr podcast with me, Harry Stebbings at HStebbings1996 on Instagram with two bs and I would love to see you there, where you can both suggest questions and guests for future episodes. And speaking of episodes, I mean, my word, what an expert we have in store for you today, and I’m thrilled to welcome Brad Birnbaum, founder and CEO of Kustomer to the hot seat today. Kustomer is the first intelligent platform for customer experience that enables you to know everything about every customer and to date Brad has raised over 30 million dollars in funding for Kustomer from some of the very best in the SaaS business, including the wonderful Tomasz Tunguz at Redpoint, Ed Sim at Boldstart, Canaan Partners, BoxGroup, and Social Leverage, just to name a few. Previously he was also the co-founder of Assistly, which was acquired by Salesforce.com and became Desk.com. Prior to that he was CTO of Talisma and co-founder and CTO of eShare Technologies. In addition, Brad was also the CTO at Sean Parker’s Airtime and V.P. of Engineering with Salesforce and I do also want to say a huge thank you to the very wonderful Mr. Ed Sim at Boldstart for the intro to Brad today. I really do so appreciate that, Ed.

Harry Stebbings: Well, Brad, it is absolutely fantastic to have you on the show, having heard so many great things, both from Ed at Boldstart and Gary at Social Leverage. Thank you so much for joining me today, Brad.

Brad Birnbaum: It’s my pleasure. I’ve been looking forward to being on the show for quite awhile.

Harry Stebbings: Well that’s very kind of you but I’d love to kick off today with a little bit about you. So Kustomer is your fourth time building a customer service company. I’d love to hear how did you make your way originally into the world of SaaS, and then what was that founding story with Kustomer in a very succinct two to three minutes.

Brad Birnbaum: I’ve been building customer service software since the mid 90s, had a bunch of very companies along the way. In 2008, I found myself selling my last company and looking for something new so I ended up working at AOL and running chat in 2008, and it was an interesting time to be there. While they were going through a lot of transformation there and after being there a little while I quickly realized that it wasn’t for me as I really like to build product and we weren’t able to do as much of that there as we could, so I was there with a of couple other folks that I’ve spent most of my career working with: Alex Bard, Gary Bennit, and Jeremy Suriel. We all decided to leave AOL at about the same time to do what we know and love, which was build customer service software. However, we said we’ve been building enterprise on-prem software for our whole career. Why don’t we try our hand at SaaS, because the world is quickly going to SaaS, and we saw the benefits of SaaS of not having to worry about databases and all the fun stuff around there, right? You know, you’re on this version of Oracle so we said we’re going to focus on SaaS and at the time I was doing a lot of traveling as an enterprise CTO for many years and I just had my first daughter and I said to the guys, I said I really don’t want to travel as much as I used to. Maybe we can try our hand SMB because the sale cycles are very different.

Brad Birnbaum: And that sounded like a great idea. So we ultimately formed Assistly in 2009 to do SaaS-based SMB customer support and it was a quick journey. It was 18 months from incorporation to acquisition term sheet from Salesforce. That product is now at Salesforce as Desk.com, and it was a great ride. I spent three years at Salesforce, had a really good time. After my 3 year journey at Salesforce was over, I went and worked at a different company called Airtime for a year which was something out of my core domain which was all about the next great social network…it was Sean Parker’s company–or still is Sean Parker’s company–the next great social network around group video co-consuming media together and it was super lot of fun. I really had a great time, met a lot of great people there, but realized I needed to get back to my passion and my passion was building customer service software. So Jeremy Suriel and I–he was with me at Airtime–we left and ultimately founded Kustomer. And the reason we did that is we just saw this really large opportunity in the market to do it right this time. We saw a lot of old school legacy players there. We saw a lot of point solutions and we saw an opportunity to build an amazing platform to enable next generation customer service.

Harry Stebbings: Absolutely. I couldn’t agree more with you in terms of the opportunity there. I do have to ask before we dive in. You mentioned your time at Salesforce there. I’d love to hear, were there any big takeaways from the three years at Salesforce that you’ve maybe really taken with you to the operational mentality with customers today.

Brad Birnbaum: Sure. There were a lot of takeaways. Salesforce is an amazing company. It’s a great big company. One of the things that we definitely learned there is a lot of the secret sauce at Salesforce–admittedly it’s not that secret–is in fact its platform. They started right in the very beginning, building a platform. They didn’t go to market with the platform. They went to market with their initial apps on top of platform. But having that platform has enabled so much of the Salesforce success and ecosystem to grow. And that was certainly one of the core takeaways, and the second one was a lot of its processes. So the V2MOM process at Salesforce, which was a management alignment process. When I first got there I immediately thought it was a little corny, but by the time I left I truly saw the value of it. And frankly it’s something we’ve implemented here at Kustomer. We call them KUSTYS, which is Key Units Strategies To Yield Success, but it’s an alignment process we use from the top down so that everybody is aligned at the executive level all the way down to the individual contributor level. So yeah, great time at Salesforce.

Harry Stebbings: I love those takeaways. It’s always a fascinating thing. I do want ask though, and still stay on the theme that we touched on there as we said Kustomer being your fourth company. We had Fouad from Sapho on the show–and please forgive me for this–he said that being old in SaaS is a huge benefit. Obviously you’re very young. But when we chatted before, you said about the benefits of repeat entrepreneurship. So starting on that, in your mind what are the core benefits of having done this rodeo before and it being such a trodden path, so to speak.

Brad Birnbaum: Thanks for the “so young” comment, but there is a lot of value in experienced entrepreneurs. I think a lot of venture capitalists see tremendous value in repeat entrepreneurs. So where are some of the benefits? There’s obviously the obvious, which is, you know, learning from past experiences, right? I’ve done this several times, begot some good successes and a great journey along the way so there’s really a lot of value in their deep knowledge and the contact center space for maybe two years of my career I’ve spent over 20 years in the contact center space back all the way into the mid 90s and obviously continuing now and I’ve seen how it’s evolved. I’ve seen the technology evolve. I’ve seen the ways customers want to communicate have truly evolved. That deep knowledge has really helped us build a great product. Also one of the core benefits I learned is there are no shortcuts in building a product. Every time in the past when we would try and just hack something together, it would last a little while and then come crashing down. So learn that you’ve got to do it right. You’ve got to do it right. And it’s easier to do it right nowadays than it used to be 20 years ago. But you got to do it right. Also, it’s easier to fundraise, admittedly. As I said earlier, VCs do appreciate repeat entrepreneurs. When you’ve got a great product in a space with a really large TAM, I do think it is easier to fundraise. And, lastly, but certainly important, is I’ve got a great network to pull talent from. I’ve met a lot of people over the years across many interesting companies and it’s been super helpful here to build Kustomer.

Harry Stebbings: Can I ask, what do you think you’ve done differently, given that the three prior past experiences, that have really changed kind of how you approach today with Kustomer change how you really think about building a company today.

Brad Birnbaum: Sure. The first thing I’ll tell you about Kustomer is when that when Jeremy and I set out to build Kustomer, we knew we had to go big. We wanted to build a massive company. That was a core part of our fundamental thinking. Every decision we make around here. We want a company to last the ages. We’re not looking for a quick hit. It’s important that we build something that will have longevity and maybe even be a long-time legacy. So in doing that, there’s a lot of things about, right? We knew that we had to build a proper platform as opposed to a polling solution or a quick and dirty app. And building a platform is a pretty time consuming task, right? It takes a lot of people. It takes a lot of capital, takes a lot of time. So we knew that we wanted to go big. And we set ourselves up across the board to go big in every way.

Brad Birnbaum: Secondly, we thought it was important to consumerize our product. You know the contact center, call center software definitely fills an amazing void, but it sometimes is accused of being, you know, boring and lifeless, and having spent that year at Airtime working with Sean Parker and Daniel Klaus and some really amazing people, my core takeaway was I can take the best of building business software but also take the best of what I learned building consumer software and smash them together and there’s no reason that customer service software has to be ugly and boring, right? There’s no reason we can’t take modern experiences and bring those onto the desktop. And, lastly, I think one of our biggest takeaways that Jeremy had is we just have to build the product to scale from the beginning. Invest the time. Do it right the first time. It will pay mass dividends.

Harry Stebbings: What advice would you have for founders, maybe younger founders given your experience and knowledge growing multiple companies? When founders come to me and say, “Hey, my investors want to see progress they want to see product roadmaps being hit.” And sometimes you have to do the quick and dirty to get back. What would you advise them, say it was an angel investment of yours. When they feel the external pressure to maybe do the quicker and dirtier product iteration instead of the do it right, do it long term.

Brad Birnbaum: There’s always a balance, right? And we have that balance here, too, right? We have to be nimble. There’s certain fundamental things you always have to do right. You always have to do it properly. You can’t cut the corners. But at the same time we’re very nimble, right? Our roadmap is fluid. It’s based on what we’re seeing in the market, where we’re seeing our customer trajectory going, the capabilities that we see them needing. So I think it’s a hybrid. I think it’s a hybrid of knowing the things that are critically important and you cannot sacrifice with bringing agility in the form of being nimble at the same time.

Harry Stebbings: Can I ask, what are the things you can’t sacrifice?

Brad Birnbaum: Well for us, we can’t sacrifice trust. So trust is a term we actually picked up at our time at Salesforce and trust is an embodying principle of everything from security to system uptime, to do you trust the data, right? Is the data accurate if it’s a recorder. And trust is one of our mantras around here at Kustomer. It’s something that we have a trust team actually have a dedicated trust team right now and it’s something that you probably will hear, say 50 times a day around here. And the reason is if your customers don’t trust you, if they don’t trust your data if they don’t think your data is safe, if they don’t think it’s secure, they won’t want to do business with you or they will not continue. So trust is just one of those core mantras we took away and it’s something that we just don’t cut corners on.

Harry Stebbings: No, I love that and I’ve never heard of a dedicated trust team. I think that’s absolutely awesome. I do have to ask, though, I chatted to Ed and Gary before the episode, and they mentioned your being CTO for much of your career. How have you found the transition from CTO to CEO and have there been some pretty challenging elements?

Brad Birnbaum: So first off I would say I’m really enjoying taking on my expanded role as CEO. It is the first time. And, you know, like anything new, I had a little apprehension. but I have a great support system. I’ve got great investors, advisors, a great board, and you know, I knew I would be up to the task. I’d say my role as CEO has evolved. In the first 18 months, we were very very heads down building product. It took us a little while to really get our product out there and there’s a lot of focus on there so first 18 months very heads down on helping the product team. I am an engineer by trade so I was  even writing some code, but since then I’ve really started to shift a lot of my focus and emphasis on scaling and operationalizing the business, right? That includes everything from helping the go to market team to helping be the brand and face of the company to even fundraise. So a lot of that has been the evolution of my CEO role.

Harry Stebbings: Can I ask, what has been the most challenging elements.

Brad Birnbaum: So I just had a really good discussion with my life coach about this yesterday but it’s prioritizing my time. I find that my calendar is now always to full and there’s too many things to do, too many meetings to take. And it’s hard. It’s hard to say no to things. So prioritizing my time has definitely been a challenge I have observed over maybe the last 30 days and what I’ve been trying to figure out is is an anomaly going on or is that the new normal. And I think unfortunately for me, I’ve realized that it’s become the new normal and I’m trying to think through how I can optimize my time better.

Harry Stebbings: Yeah. No, I think that’s a very difficult decision making process so I feel sympathy for you there. But I do have to ask, when you assess the landscape and having been a CTO and having a very fleshed-out CTO network, where do you see many CTOs turned CEOs maybe going potentially wrong. And is there any advice you give them, having gone through that process now with Kustomer.

Brad Birnbaum: Yeah, so we talked to a lot of companies and in ancillary spaces sometimes companies want to partner with or or even sometimes companies were exploring some type of M&A-type activity. I noticed a pattern. I actually do definitely see the pattern that most of these companies have CTOs turned CEOs that maybe aren’t doing as well as they had hoped. When I peel back the onion and talk to them, they’ll have a team of seven or ten and they’re all product people and I’d say well how are you selling this? What’s your go to market strategy? Who’s focusing on go to market? And it always is just the CTO turned CEO that says, “Yeah, that’s my responsibility.” I say, But A, you’ve probably never done it before and B, going to markets, that’s a hard thing. It’s an important thing and you need a really clear focus on it. It’s no wonder why maybe you haven’t been as successful as you like and I strongly encourage you to think about hiring some strong go to market leadership to help you out. So it’s definitely one of the things that I’ve noticed, one of the things I think we’ve done pretty well here.

Brad Birnbaum: I also sort of encourage them to kind of elevate themselves from the tech and focus on what they can do to help the company sell more product. We’ve seen that happen here, right? We’ve seen examples where you have to take yourself out of the day to day, of the product side and really focus on what I can be doing to enable the company to be more successful. And that’s been something I’ve had to transform myself on, too, and as a product person, as an engineer I’m always deferring to, we could solve this through product. And that’s not always the answer, right? I mean you want to build the best products and I think we have. But sometimes there are other answers and it’s not always only solved the product, right? You know there are things you need to do in sales and marketing and customer experience, etc. to build that company and keep your customers happy.

Harry Stebbings: I’m so pleased you said about the go to market element there because obviously we’re going to touch on it. But I do have to, in terms of kind of the people behind it, I had a guest on the show the other day that said the founding team must always be the ones to really evolve and think about the go to market in the early days. If they didn’t have the experience, is this something that you disagree with in terms of bringing in that external expertise?

Brad Birnbaum: No, I think it’s important. I think it’s something that we did here at Kustomer and I think it was super helpful. I think you should never be too proud to, if something is not your core strength, to find something, somebody, or a team to complement you on there. So, no, I think that’s critically important. One of the things that, frankly, I wish we had done even sooner. I was really, really focused heavily on go to market, even long before we got our product built.

Harry Stebbings: No, I love that. But as I said, I know from my chat with Ed, I know you initially focused on an SMB market with the self-serve approach, but now much more serving midmarket, which leads me to the question that all SaaS founders ask me, which is, should I start with SMBs, prove product/market fit, and then move to enterprise or vice versa. I guess my initial question is how would you respond to this question. Maybe imagine I’m an angel investment if yours. What advice would you give me?

Brad Birnbaum: Yeah, well, first off you have to be nimble and adjust, right? I’m not a fan of the word pivot. I don’t care for that term, right? You have to learn your lessons as you’re building your company, as you’re building a product, as your scaling, and figure out what works for you. In the case of us here at Kustomer, we thought we were going to do a lot of what we did at Assistly, where we were going to build a great product. It was going to be focusing on SMBs. You would be able to self provision on the website, going through trial mode, you put your credit card in and you’re good to go. What we noticed after we started selling the product for about a quarter or two is that while we had a lot of SMB customers that are very happy with the product, we were also getting a very large pipeline of mid-market just below enterprise customers, and the unit economics are a little stronger for those types of customers, right? They tend to go to your higher pricing tier. They’ll tend to take annual or, in our case, multiyear contracts, frankly, and they’re far less afraid for paying larger services implementations.

Brad Birnbaum: And I’ll never forget, we were at a board meeting and the board looked at us and said, “Brad, you know you guys are doing well on on the SMB side but you’re also really showing promise on these mid-market to small enterprise customers in your pipeline and you unit economics are much stronger for you. And you know you may want to think about focusing a little more heavily on that,” and we thought about that for a little while after that board meeting and kind of realized that we should really start to focus on that. That’s where most companies aspire to get to, but it usually takes them a while to get there. To your point, they start SMB and go up. We kind of realized that the product we built was so strong, it was so robust the platform enabled so much stuff to happen in your business that it was an even better fit for the mid-market to small enterprise customers, and we ultimately went down that path and started to make that transformational shift.

Harry Stebbings: Can I ask, in terms of that realization and going down that path, how did that affect your thinking around the entire go to market approach and really kind of what needed to be changed as a result?

Brad Birnbaum: Right. So one of things we realized is we wanted to hire senior go to market leadership to solve that, right? So we know we needed leaders–to your point earlier–I needed leaders who could help elevate me, who were very strong at that market segment with domain expertise and we hired leaders and sales and marketing to help us focus on that. We quickly turned off self-provisioning, which meant we weren’t really enabling or allowing people to self-provision and set up the product as were focusing towards a richer sales experience, a deeper sales experience. We turned off self-provisioning. We had an immediate focus on improving and upgrading and enhancing our CS and implementation teams as these larger customers required deeper implementations, deeper integrations. We started enhancing our sales team. We hired much more senior account executives, solutions consultants, sales enablement, changed our marketing strategy and how we were finding and acquiring customers, and really just changed the way we actually started doing business.

Brad Birnbaum: So in the past it was all simply automated payments or credit cards, but we quickly had to adjust to the way our customers wanted to do business with us, even though, yes it would be easier to just have them put the credit card in and move on. We had to change the way we did business and focus on things like contracts and even compliance that came with contracts and changing things net payment terms. Some of our customers are on net 30, etc. Or some customers only want to pay through wires, not credit cards, or tiered pricing when customers hit a certain threshold in the number of seats that tiered pricing or seasonal pricing. We do a lot of business with retailers. They appreciate seasonal pricing. They don’t need all those seats for the whole duration of the year. They only need them during the holiday season. So we had make a lot of changes to how we did business.

Harry Stebbings: Can I jump in and ask, in terms of pricing, I often have founders ask me, “I don’t want to create a pricing model that disincentivizes users to actually use my product.” So a usage-based pricing model. How do you think about pricing today, and what would your kind of advice around that be, having gone through it?

Brad Birnbaum: So pricing’s a really difficult thing, right? It’s something that we wrestled with in the earliest days of Kustomer. We wanted to be innovative. We thought innovator pricing would be very important to us. We quickly learned as we started talking to customers that they didn’t want innovative pricing. They wanted repeatable, consistent pricing that mapped to the budget they already had in place. Now as we are going mid-market and above, we’re mostly replacing existing solutions, whether it be Zendesk or Salesforce. So they already had a budget in place, so they just said, “Hey, we have X amount allocated for a solution. Our solution is better, it’s robust, it does more, but this is the budget that we have.” So they wanted a pricing model that, frankly, mapped  to the way they’re accustomed to doing business It was highly predictable. So while we wanted to think about doing a consumption model here at Kustomer, because we thought that was innovative, we realized our customers didn’t want a consumption model.

Brad Birnbaum: And, frankly, what we have today is a pretty standard model. We have several pricing tiers of different depths of functionality and then people pay monthly on an annualized basis so it’s a pretty standard model that users are familiar with or our customers are familiar with. And, frankly, it’s worked for us. Pricing has not been a challenge for us. If anything, we’re getting better at driving our ASP up quarter over quarter. The last three quarters it’s gone up significantly each and every quarter. We’re doing that by adding more and more capabilities into our highest level tiers, in this case for us it’s Ultimate. And, frankly, we’ve started to roll out additional capabilities. We’ve rolled out our telephony solution that our customers have had an incredibly high take rate on that last quarter and about 50% of our Q3 customers have adopted it already.

Brad Birnbaum: So we’re seeing customers are appreciating the more value we’re able to provide, and, frankly, are willing to pay for it.

Harry Stebbings: Can I ask, in terms of the mid-market segment that you kind of really honed in on and do so well at, how do you think about the often-cited terminology of no man’s land in SaaS pricing and is that something you strongly disagree with, having lived through this and having scaled through this today.

Brad Birnbaum: Yeah, so look. Regarding no man’s land, I actually think that 10k in ACV is where we see our growth business. We have two parts. We have our enterprise business and our growth business and the growth business is for deals that are closer to 10k in ACV, right? I mean, we want it to. And we’re seeing lots of inbound interest from customers who don’t need hundreds and hundreds of agents who really appreciate what our solution offers them. And they see the value in it and we don’t want to turn them away. And we also see that many of them start on the 5 to 10 to 15 seat size but have quickly expanded and grown. We’ve had really amazing success on that so we don’t want to turn away. So actually we’ve seen a lot of success in the 10K in ACV range around our growth deals and the expansion that’s followed that up. So for us it’s not no man’s land. It’s been a great place to play. Our ACV is definitely higher than that. It’s been a great place for us to play, acquire newer customers, and watch them expand with us.

Harry Stebbings: And then the subsequent question I had is, you mentioned the multi-year deal element earlier on. How do you think about multi-year deals? Often, if they’re not kind of not paid upfront, it’s just shifting the follow up, I always think, from kind of customer success to finance departments. How do you think about that and the importance of them for early stage companies.

Brad Birnbaum: Well, I mean they’re certainly helpful in that it’s contracted, guaranteed revenue, right? So you know the TCV is, of course, a great thing to have, right? But for us it’s been beneficial and in several ways. One, it certainly helps our economics of strong. We know x amount of revenue will continue on that through those durations of the contract and, frankly, helped us–we have virtually no churn here Kustomer. Which I’m really proud of, Really like no churn, which is just amazing for our maturity level at this point and time, and certainly multiyear contracts help. I do think the reason we have virtually no churn is because we’ve got an amazing product and an amazing team supporting that product, right? Yes. I mean if you do have a multi-year contracts it’s kind of hard to churn on that.

Harry Stebbings: No, I get you.

Harry Stebbings: I do want to kind of extrapolate one level higher there and discuss the landscape and the competition. You mentioned some of the players that you’re replacing there: Salesforce, Zendesk. I’m intrigued. Taking it from the very top, being in the space you are, how do you think about how a startup can take on such industry leaders as you said there, both in terms of the public companies that you take on.

Brad Birnbaum: Sure. So my belief is that once a decade all products need to be reinvented. It’s just the world changes so much. If you could see me, I’d be holding up my iPhone and tell you this is 10 years old–it’s actually 11 years old now–but it’s 10 years old and the iPhone was created before Zendesk existed, as an example, right. The world communicated in a very different way a decade ago. We weren’t texting. There was no Facebook Messenger, etc., etc. So changing landscape dictates that you need products to be nimble and agile around it. And frankly sometimes it’s really hard to change an existing product to adapt to the new landscape.

Secondly, technology improves. Technology improves on an incredibly rapid rate and tooling that exists today is radically different than a decade ago. Whether it be all of the great stuff in cloud computing and AWS or whether it be things that are available from an intelligence perspective. A decade ago you needed an army of data scientists. Now there’s lots of great services that you can use for ML and AI and that natural language sentiment–natural language processing and sentiment, also. So we were able to leverage all that. We’re also able to leverage things that improve performance. So the cost for running our services–when we ran Assistly, we were Ruby on Rails, and it was very expensive to operate because Ruby on Rails, while it was a great language for building code rapidly, it wasn’t very efficient at processing those requests. Well now we’re on Node.js, and that’s far, far more efficient. You know, orders of magnitude more efficient. So improving tech has really helped a lot.

Brad Birnbaum: I would also tell you that building a better product can take your customers critically important. Here at Kustomer, we have one of our core values, we call it customer first: always go above and beyond. And it’s something that we focus on, that we instill in our team, we instill in our company, and we instill it in how we build and support customers and it’s very much helped a lot.

Harry Stebbings: I do want to dive in on one element. You mentioned there the element of data. We had Phil Libin, formerly of Evernote, now of Turtles.ai, on the show recently, and he said the theory that you need a lot of data to take on incumbents is basically based on lazy assumptions, therefore negating the incumbency advantage. Would you agree with him from this perspective on the data element?

Brad Birnbaum: You have to have data. You can’t run a business without it. As we’re maturing, I’m constantly looking at new data that I never saw before. Trying to figure out how I should be starting the business, where we should be improving, where we should be investing, where we need to correct things, so much to the point that I’m spinning up team tell me that, right, as we head into 2019 and are really focusing on operationalizing our business and growing rapidly, data is key for me, right? You need quantitative and you need qualitative, and so talking to customers is also a different form of data. It’s not as numbers driven, but talking to customers is a really important piece of data for us. Understanding what they need, right? Some of these stories just can’t be quantified.

Brad Birnbaum: Managing to metrics… So we mentioned the Salesforce V2MOM process earlier, and our version of it, which is our KUSTYS. Well, that’s even a part of data, right? That’s our alignment and process around the data, right? The goal we’ve set for ourselves, whether they be revenue goals to customer success metrics, all of that is a component part of the data. Everybody aligning around the data and measuring and checking ourself against that data. So, yeah, critically important.

Harry Stebbings: I do have to ask, you mentioned there about how the data affects how you think about kind of operationally scaling in 2019. How do you think about when is the right time to really pour fuel on the fire, so to speak, when scaling a company. What are these leading indicators which give you the confidence that now is that time?

Brad Birnbaum: I think in order to decide when you want to pour fuel on the fire, you need to know that your machine is running, right? You need to know that you have a product that customers love, a product that your sales and marketing team is able to sell in a repeatable fashion a product that you don’t have churn against. Here at Kustomer, 2018 was all about proving the business. Do we have a product that people love, can we sell it? Does it scale? Does it work? Is it repeatable? The answer was yes, so we’re now actually entering 2019 in the mode where we’re very much pouring a lot of that proverbial fuel on the fire, to the point that we’ll pretty much double our teammates here at Kustomer–we call it the Krew– we’ll double our teammates in the next two quarters, so yeah, we’re very much pouring fuel on the fire.

Brad Birnbaum: We’re seeing a lot of aspects of the business really starting to work and take off, and now is the time to kind of get into hyper growth mode, and we’re just beginning that journey.

Harry Stebbings: I’m too intrigued not to ask before we move into the quick-fire.

Harry Stebbings: You said about kind of almost doubling the team there. Are you concerned/thinking heavily about how to retain a really kind of nimble startup culture with the team doubling in such a short space of time?

Brad Birnbaum: Culture is key. Culture something that’s very important, something we think about. We have quarterly exec off-sites.  It’s always one of the most interesting topics that we spend so much time figuring out. We’re always thinking of different ways to enhance, instill, and improve our culture and generate the best that we can, and our teammates are everything to us. If we do not have teammates that enjoy coming to work every day, enjoy spending time with one another, are subscribed to the vision and the beliefs that we have here. You know, we won’t build that great company that we aspire to do. Culture’s something that’s very, very heavily focused on. There’s probably not a day that goes by that we’re not thinking about how we can optimize our culture or how we can instill the startup core values but yet at the same time be that large company that we aspire to be and support these large customer accounts that we’re getting.

Harry Stebbings: Absolutely. I do want to move into my favorite, being the quick-fire. So I say a short statement and then you give me your immediate thoughts in 60 seconds or less per one. How does that sound?

Brad Birnbaum: Sure. Love to.

Harry Stebbings: When I spoke to Ed Sim, he told me he so enjoyed watching you grow as a CEO. Where do you think you’ve grown the most and why?

Brad Birnbaum: I would say certainly on the leadership side it’s challenged me to become a better leader, a different leader. Leading an engineering team, which is what I’ve generally done in the past is very different than leading a company. So definitely challenging. I’ve grown as a person. I’ve grown as a leader.

Brad Birnbaum: Secondly, where I’d say is fundraising. It’s one of those things that I was uncertain how I would do it. I never led fundraising rounds in the past and had some concern, will I be able to do that effectively. I think I’ve grown tremendously from a fundraising and working with the VC community. I spent a tremendous amount of time spending cycles with VCs, educating them, getting to understand what we’re all about. Partially, it’s to get them excited for future investments. But equally important is getting into their ecosystems and getting introductions into their companies and their portfolio companies and that’s been a great source of leads for us, frankly.

Harry Stebbings: No, for sure, I think VCs are the untapped customer acquisition channel of the future.

Harry Stebbings: I would like to hear, from Gary Bennit: Tell me about your first interaction with Mark Cuban.

Brad Birnbaum: That’s an interesting one. My first company, which is called eShare back in the mid 90s, we made large scale chat rooms and message boards, and back in the mid 90s–we’re calling maybe 96 at this point, 1996. We had a lot of the largest sites on the Internet using us: Lycos, GeoCities, Star Media, Iwon, these were some of the biggest brands of the day and we had, our business was about making large scale chat room software. Well, one of our earliest customers was a company called AudioNet, and it was a small company in the beginning. And what AudioNet was, was a Web site for rebroadcasting college sports–football, basketball, etc.–college sports to people out there in Internet land and they used RealAudio, RealNetworks to do that. And they coupled that–they embedded that inside of my chat software, Chatware. We were a small company, it was a three-person company at the time and AudioNet was equally small and the founder of AudioNet is Mark Cuban. So Mark used to just call up for tech support and we were helping him out. And anyway, fast forward, AudioNet became Broadcast.com. He rebranded it, and Broadcast.com, of course, was sold to Yahoo. And that’s, I think what’s helped some of Mark’s recent financial success.

Harry Stebbings: I love that story. Tell me, what would you most like to change in the world of SaaS today.

Brad Birnbaum: So I actually think today’s day and age is becoming in some ways easier and in some ways harder for SaaS companies to get started, and I like to figure out how to make it easier for SaaS companies to get started, right? We’re seeing a lot of challenges, to build a company now, in some ways is harder, right? So take compliance as an example. Nowadays, your customers are focused on GDPR, HIPAA, SOC 2, etc., lots of compliances and it takes a lot of time and money and effort, legal bills and consultants, and I often ask myself how would a new company without funding–without substantial funding–ever get there, be able to focus and truly achieve that. And that’s just one example, but I’d love to see it easier for people with great ideas with maybe slightly more limited funding or resourcing to be able to spin up in this world and I do think it’s getting harder. So I’d love to see how we can make that easier for people, and there’s probably a bunch of companies out there that could help a lot.

Harry Stebbings: I couldn’t agree with you more there. I do want to finish today on what you know now that you wish you’d known in the beginning and it can be the beginning of your time with Kustomer, it can be the beginning of your time with your first company, as you said there, serving Mark Cuban.

Brad Birnbaum: So lets take it from a Kustomer perspective. From the beginning of Kustomer, I think I mentioned this a little earlier, but the thing that I would’ve done is I would have spun up key go to market hires sooner, actually probably almost right in the beginning. What I didn’t realize is, yeah, it takes a long time to build a great platform and then a product on top of that platform, but it takes a long time to build a proper go to market machine, too, right? You’ve got to find the right hires, those hires have to build the right team, you’ve got to build the right processes. You’ve got to implement sales enablement, and I think if we had begun that journey a little bit sooner, we would probably be even bigger right now right. So we would have been more efficient and gone to market faster and probably even been a bigger company. So that’s probably what I would have done sooner is focused more heavily on building that go to market machine and the team around it long before we had the product not as the product was getting ready, if that makes sense.

Harry Stebbings: It does absolutely, but Brad, you know what a fan I am of the product. Thank you so much for joining me. I had so many great things and I can’t wait to see the exciting times ahead.

Brad Birnbaum: Thanks so much. This was super fun. I really enjoyed it.

Harry Stebbings: What a huge pleasure it was to have Brad on the show there and if you’d like to see more from him you can follow him on Twitter @BradBirnbaum, and I do want to say again a huge thank you to Gary Benitt, and to Ed Sim of Boldstart for the fantastic questions they provided that really did help me so much. Likewise, we’d love to see you behind the scenes here SaaStr. You can see that on Instagram at HStebbings1996 with two bs. As always, I appreciate all your support and I cannot wait to bring you a fantastic episode next week.

Published on November 16, 2018

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