Ep. 235: Andrew Filev is the Founder & CEO @ Wrike, the cloud based collaboration and project management software that scales across teams in any business. In Dec 2008, Vista Equity Partners acquired a majority stake in Wrike for a deal reportedly valuing the company at $800m. Before this transaction, Andrew had raised over $45m in funding from the likes of Rory @ Scale and Bain Capital Ventures just to name a few. As for Andrew, he started his first software development company at the age of 18 and has been running Wrike for the last 13 years alongside advisory roles with both Ditto and Appulate.
In This Episode We Discuss:
* How Andrew made his way into the world of SaaS from his starting his first software business at the age of just 18 and how that led to his founding of Wrike?
* How does Andrew advise founders on the question of whether to start in enterprise or SMB? What are the benefits of starting in SMB? How does the founder know when is the right time to start moving to enterprise? What are those leading indicators? How does the product and what you invest in proactively need to change as you move into enterprise?
* Andrew has been the CEO for the last 13 years, how has the role of CEO changed over those years? What has been the most challenging phase? If the CEO is the guardian of the culture, what does a great guardian look like? What 3 elements does Andrew focus almost exclusively on today within his role as CEO?
* What does Andrew think are the major breaking points in the scaling of companies? Where does culture begin to breakdown? What can be done to mitigate this? How does Andrew think about using employee satisfaction surveys internally? How can one accurately determine the strength of your manager set?
Episode 236:Join Logikcull’s CEO and Co-Founder Andy Wilson as he takes you through the mistakes made going from $0 to $10M in 19 months.
SaaStr’s Founder’s Favorites Series features one of SaaStr Annual’s best of the best sessions that you might have missed.
This podcast is an excerpt of Andy’s session at SaaStr Annual 2019.
Missed the session? Here’s what Andy talks about:
*Selling the way your customers want to buy.
*What you need to know about hiring, firing, advisors, and culture
*Why SaaS is your business model, not your mission.
If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:
Below, we’ve shared the full transcript of Harry’s interview with Andrew Filev.
Harry Stebbings: We are back for another week in the world of SaaStr with me, Harry Stebbings @HStebbings1996 with two b’s on Instagram and I respond to all messages there, and I would love to hear your thoughts and feedback on how we can really make this show as best for you as possible.
Harry Stebbings: But to the show today, and I am so excited to welcome Andrew Filev to the hot seat today. Now Andrew is the founder and CEO at Wrike, the cloud based collaboration and project management software that scales across teams in any business. In December 2008, Vista Equity Partners acquired a majority stake in Wrike for a deal reportedly valuing the company at eight hundred million dollars. Before this transaction, Andrew had raised over 45 million dollars in funding from the likes of Rory at Scale and Bain Capital Ventures, just to name a few. As for Andrew, prior to starting Wrike, he started his first software development company at the ripe old age of eighteen and has been running Wrike for the last thirteen years, alongside advisory roles with both Ditto and Appulate.
Harry Stebbings: I do also want to say a huge thank you to both Jason Lempkin and Rory O’Driscoll for the fantastic question suggestions today. I really do so appreciate that.
Harry Stebbings: However, that’s quite enough of me, and so now I’m very excited to hand over to Andrew Filev, founder and CEO at Wrike.
Harry Stebbings: Andrew, it’s absolutely fantastic to have you on the show today. I heard so many great things from Rory at Scale, but thank you so much for joining me today, Andrew.
Andrew Filev: It’s a pleasure to be here, thank you.
Harry Stebbings: I would though love to kick off today with a little about you, so tell me. How did you make your way into the world of SaaS and really come to found Wrike? What was that ‘ah-ha’ moment?
Andrew Filev: I founded my first company when I was seventeen years old, and it was a professional services business so, at that time I already knew how to code and basically started the business that flourished [inaudible 00:04:00]. It was growing pretty fast, we were successful and became, to some degree, victims of that success. We had a pretty big team. I was personally responsible for my action, to any concurrent projects on the delivery side, I was responsible for managing digital marketing, recruiting. So, coordinating all those efforts was not an easy affair, and I found myself spending less and less time with technology and more and more time with just, pure administrative coordination work and at some point, I was ready to say enough is enough, and I have lots of fond memories and good things from them back then.
Andrew Filev: One of my favorite ones is with digital work, you assume that it happens at the speed of light and that information travels at the speed of light and quite often it travels at the speed of Monday morning meetings. So, I desperately wanted to correct it for myself and my organization but I also felt that this was a great opportunity for the market, and it was literally as a professional services firm we actually were pretty early in developing some [inaudible 00:05:06]. It was before they even were called SaaS. The term that was thrown most popular back then, there were two terms. One was [inaudible 00:05:14] and another one was Ajax, believe it or not.
Andrew Filev: And so, we were experts in the technology and then I saw great need and I’m like hey, let’s go. Let’s build something that’s very collaborative, that helps managers like me all over the world get visibility to what’s happening in their business. So you could sleep sound and run the business well and that was a well routed inspiration.
Harry Stebbings: I love it. I do and I expected to go off schedule but probably not go off schedule as early as this but I’m too interested. As you know I speak to a ton of investors, and whenever I say professional services, Andrew, they seem to run for the hills. Is it fair of them to run for the hills or should there be maybe nuance to how they think about professional services today?
Andrew Filev: That particular business was great but definitely not a venture of fact material, and their investors are correct to say that most of the professional services businesses are kind of linear, right? And heavily depend on human labor, if you will, right? Do you want to scale the business? You just need to hire more people. So from that perspective you are absolutely correct. It’s not a typical tech venture. But that said, there’s some very interesting businesses, especially when they start overlapping with new technologies. For example, I’ve forgot the company name but there was a pretty big founding over AI, enterprise AI orientive company. There are usually, whenever you’ve got this server transformational technologies, true in transformational that that’s big markets. Often times there is one or two top gear consultant firms centered around that technology that might be venture founded.
Andrew Filev: Either through core growth potential and professional services, or quite often they core develop some IP, and in general if there’s this big relief coming and if it will overtake the whole enterprise world in 3, 4 or 5 years. That’s an amazing revenue opportunity. How I do think though, once in a while, their interest in professional services may venture into fund-able businesses.
Harry Stebbings: I do want to start there Andrew, and I know a lot of SaaS founders talk to me about this SMB, enterprise, where should I start and where should I move to and from? I had Jason VandeBoom of ActiveCampaign on the show, and he said SMB first works. Can I ask, would you agree with the SMB first works model, and how do you think about your experience in that really coming into play here?
Andrew Filev: So, I generally believe that there is no silver bullet, right? So it’s kind of what works for you and what works for the market. In our case is what we started with was I would say teams, and there’s a slight difference. So there are products that are pure SMB and then there are products that start as a small team but horizontally can span across companies that are large and small. For example, of the latter would be Box for example, or Wrike for let’s say or Zendesk or even [inaudible] where you start with smaller organizations but you can easily grow into larger ones. And from that perspective, I do think that there is in view, sort of a proven formal and [inaudible 00:08:17] expand where you figure out your product market fit. You go over and test it at scale with small businesses. And so, it’s all incremental investments, incremental risk, so it can get your product very far.
Andrew Filev: And what it also does is when you start [inaudible 00:08:33] them up with a cross for that option you very much focused on UX and making sure your product is easy to use, easy to adopt. Which ultimately helps when you come to the enterprise because in today’s day and age a lot of it is sourced through the departments rather than going down. And, customers now and start to understand the value of usability because no one wants a shelfware. People want their problems solved.
Andrew Filev: So I do believe that moving up market step by step is definitely kind of a working model for a lot of SaaS businesses.
Harry Stebbings: I like that step by step approach. I do have to ask then, in terms of timing, when do you think founders should open their mindset in terms of being willing to make that first step, the second step? There’re stages when kind of they should start focusing on the upmarket motion?
Andrew Filev: So, in our case we are pretty scientific, we like to do two tasks. So, I’ll give you an example: before we had our first sales rep we already had 3000 customers, and when we decided to build the sales functions instead of saying, “Hey let’s raise venture funds and hire an enterprise sales reps,” we promoted two of our customer success reps to start doing sales in a fairly transactional way. And we actually measured the output and we did the full economics model. It was a quick task that only took us two, three months. But we had a bulletproof model that economics work and so we were confident we could invest in it. That was our kind of first step towards building the engine.
Andrew Filev: And then gradually through the years we continued to push ourselves and invest into [inaudible 00:10:07] tracking us higher and higher in that hierarchy. And so, we tried to be a little bit ahead, where you need to build that sales muscle and also you need to build that marketing muscle. But we also tried to go with the times, for example if our deal sizes are kind of six figures, right? You want to hire a sales rep that can potentially sell seven figures but you shouldn’t rely on that as a main selling motion.
Andrew Filev: So, apply this similar thinking all the way from very small deals, but gradually build that capacity but don’t overextend yourself was our motto.
Harry Stebbings: I am super interested. You said that about making the economics work with regards to the start of that upmarket motion. What are the economics in this case in your mindset? Was it the simple CAC to LTV and then thinking about sales rep payback period? What was the economics that is important for founders to think about when determining how feasible it is?
Andrew Filev: You’re absolutely right that the payback period was crucial. Our first six years of our growth we were purely bootstrapped. So we spent a lot of time on that and we’re watching it very carefully because we didn’t want to run out of money. There was no investor to bank us in case that happened, and that built very strong DNA through all this years up until today when our venture fund had pretty big rounds. We still run it very very efficiently. They know that payback is important, their [inaudible 00:11:29] activity is also important, gives you longer term of view. But in our specific case, we were actually looking even deeper, so we already had e-commerce engine working. And for us, it wasn’t just a hey sales should be profitable, it was sales should be more profitable than e-commerce. So, if we add the sales cost and if we add the sales out-lift to the topline, the difference should be net positive.
Andrew Filev: So that was the first calculation that we did when we added the sales function. And later in the journey we did philosophically similar calculations when we added different tiers of sales organizations. So we started with very transactional sales team and then we gradually added the market and enterprise and so every time we do that we try to understand what that this team is economically reasonable and efficient by itself. But also, we like to compare their efficiency across different channels of different teams to make sure that if you peel down the onion, the machinery is working well across the board, not just any small island.
Harry Stebbings: No, I totally get you. So we spoke about the economics there in terms of the theory. And I love the element that you said there a couple of times about the testing before really standing big. If we dig a little deeper on the testing, when approaching kind of up market motions, how do you think one can test in maybe a leaner way the feasibility of moving up market with enterprise, sales, and marketing before investing so heavily? Are there ways to test the feasibility tangibly?
Andrew Filev: So for us, the model we picked was land and expand so we always had our expansion, we were always ahead of our new sales and that provides you the confidence that you can absolutely [inaudible 00:13:09] in the market. You have the best product, you have the best service. Some of our customers grew with us and that gives us the confidence that we can serve that market and we can aggressively go after the new business of a similar type. So when we started hunting for the businesses like that we already had a pretty strong customer base, a very loyal customer base that made us confident that we can do it.
Andrew Filev: So I say too, there are a couple of things that are important. One, you want to absolutely make sure there is a product market fit, right? And as a founder you’re always bias so you want to make sure that the customers see. Not just that you believe it’s there. Money is good way to prove that. If they’re ready to pay it, they’re ready to deploy, they’re getting that value. If you’re able to retain and expand them, that’s a good sign. The other piece of good is services right? That is very different–SMB and enterprise have very different expectations on the level of service that you will provide to make them successful. People make some career make or break decisions by betting on you and you want to absolutely make sure you support them and provide them incredible level of service and make them successful. So that commitment to service was very important for us. And one that completes their circle in known areas of the product that you need to practically invest.
Andrew Filev: This is not reactive, this has to be practical, you have to be on top of security, you have to be on top of manageability and skill in their comp. Because again, the last thing you want to do is let a customer down so when it comes to technological problems we were ahead. We were always saying okay, what’s the next frontier? We want to be ready. And then, in terms of services we always wanted to be [inaudible 00:14:53], here’s where we are, we want to provide the best service to the customers. And then in terms of attacking new business, I’d say we were a little bit behind in the sense that first we kind of organically grew into markets, and then we doubled down on that, because that’s through our sales and marketing dollars.
Harry Stebbings: Can I ask, do you wish that you had raised venture funding earlier, and attacked the market maybe sooner than you did?
Andrew Filev: I don’t think so. For some people it looks like a long journey. I’d been doing this for the decade. I’m absolutely happy with every year of the journey. Of course I mean I’m not saying it’s always up and to the right, there’s sometimes hiccups on the way but I think the timing worked well. There’s sort of dynamics in the market that you can only control so far in your small business, alright. It’s very hard to boil the ocean so I feel if some companies, they’re a little bit ahead of the market and they try to force the market to work. Our market is huge, like we could be adopted by millions of businesses, so you can’t just take it over with stars. There’s kind of a natural progression and maturity curve in the market, so I feel generally it worked well for us. I also built the right DNA in the company because we bootstrapped for six years of our life, we always put the customers first. We are like the same channel, in that our customers are our best investors. So that meticulous focus on customers helped the product market fit follows the same track.
Andrew Filev: We couldn’t mask the performance of our product or our marketing by dollars and say hey, you know what, I’ve got the runway, a couple more quarters to get there. Every quarter was do or die, and you had to deliver the value to the customers and you had to do it in a sort of economically responsible way.
Andrew Filev: So I feel that built a lot of good culture, built comradery that now is very helpful. And once you have that goal then investment becomes just an incremental fuel into the fire. And you can control it, if you want it to go faster, you put more and if you say hey, I’m happy and that’s kind of a natural pace at which we are growing you can pull that back a little bit. So that allowed us to be, if you will, in control of our destiny.
Harry Stebbings: No, I totally get it. And using venture as kind of this leaver, not a crutch is very rare for me so see. I do want to ask though, because we spoke about those three things that you need to really feel comfortable moving up market. When you do and you really want to hire those first reps, you said about the 3000 existing customers you had when you hired your first reps. Can I ask, what kind of experience for you personally do you like to see in the first enterprise reps? What do you advise founders that they should look for?
Andrew Filev: I now add a little heavier substance. So our first reps were not enterprise reps, we looked at it as layer cake. We had e-commerce, and then we had transactional, and then we had mid market, and then we had enterprise. So if you’re speaking about enterprise specifically, it’s a little bit different than transactional. So your first reps, you need a combination of great sales execution and tenacity which generally makes strong sales reps, but at the same time, if it’s your first enterprise rep, you want them still to be fairly creative. And, you absolutely want to make sure that they can do discovery well. When I first interview a new sales rep I often role play with them and one of the key things that I was watching is, can they do discovery?
Andrew Filev: I feel it’s very important in enterprise in general and I think it’s very important in sales and it is especially important in horizontal product like ours that could be applied to so many different use cases and customer use, so I feel that the ability to do discovery is an art in itself and then of course you need their strong sales, execution and sales performance to kind of follow through, build their clientele closet.
Harry Stebbings: No I totally get you and it’s a fascinating thing in terms of discovery being primary. I do want to speak a little bit about you though and your role, Andrew. Because as you said, you’ve kind of been doing this for over a decade. I’m really interested. How does the role of CEO change over time?
Andrew Filev: It’s a different job for me if I was to go on business, it’s a different job every two to four years, which is great. It keeps me always kind of on my toes. I’d say at this scale I have a renowned focus on a couple of things. One is goal setting. The bigger the organization, the more valuable I found to spend time upfront. To very, very clearly define the goals in a very specific way and align everyone on why those goals are important. And the second component, which goes hand in hand with goal setting is that alignment. So spending progressively more time on making sure that when we decided to go after something there’s a full accountability of costs, everybody who is involved and who is critical to that success, it’s usually basically everybody. So aligning the executives, making sure that this alignment goes down through the organization. We use a calling platform to make sure that our strategic initiatives are well planned, and making sure that that accountability doesn’t stop at executives and go downstream to the managers and the individual contributors. That goal setting and that alignment becomes very important.
Andrew Filev: Then what’s always important is just setting the North star and being their advocate and their leader for the whole team, so everybody understands what that is and everybody is excited to get there and understands why it’s so important. Not just for their economics, but for them. For their careers and for their world. I think in setting that North star, and then making sure that the team has a clear path to that and holding people accountable that becomes more and more part of their jump versus tactical components which were more important when were a[inaudible 00:20:25]… very deep into analytics, and marketing, and product and technology. When you’ve just started the business you have to go very deep, but as you grow the business that goal setting and alignment becomes a bigger component.
Harry Stebbings: Can I ask, in terms of as you grow the business, I’m interested especially as you grow the head count. Are there inflection points that you saw, especially with Wrike, where there were kind of break points maybe in company and team scaling, and ones that you’d advise founders to kind of watch out for as they scale their teams.
Andrew Filev: Thank you for reminding me, I almost forgot. As a founder/CEO, I think you have a special role in being a guardian of the culture. I feel that this is very important, especially in hypergrowth. This is one of the fallacies that some companies get into. They grow too fast, they start losing their core DNA. And so, we were deliberate in that, we built a self-prevailing culture. Part of our culture code is picking learning and feedback routes to critique, to improve ourselves. That was super helpful, that helped us avoid some of the typical breaking points.
Andrew Filev: I’ll give you examples of what I mean by that. We do a periodic employee satisfaction surveys, and we go very deep trying to understand if it’s some teams or either geographically or functionally, there’s some areas of improvement. If the employees are not happy, like what was going on? And the survey is anonymous, but then if we see there is a red spot, we try to follow up and understand what happened. All our managers, we run upward feedback survey on all of them, and come away with 360s from their direct reports to understand if they’re good managers, are they helping their teams do their career defining work. That their teams believe that they provide adequate support and that they kind of foster the type of team.
Andrew Filev: So we have a lot of feedback loops built into organization that help us not just keep the culture, but continue to improve as we scale, and that help us to avoid major fall backs. And that said, there were a couple of times which were tough. There’s ones where due to bad timing on a case, a couple of good people left the company. And all for good reasons, it’s somebody made a career advancing move. It was all for good reasons, but because it coincided it created this vacuum [inaudible 00:22:52] in people’s hearts. And for me, personally, it was very rough because I’m very team oriented so I took it to heart. It wasn’t easy for me, but again once you build the right team and once you build the right culture we’re a company of many, if you will. Some people stepped up that provided actually excellent opportunity to promote some folks and push some of our teammates to shine and show what they could do, so I was happy to see that again. The team carried us forwards, and actually we became a stronger org, a better org and we were able to promote some folks. So that turned out to work well for everybody.
Harry Stebbings: Well it’s a sign of a special team and I love that emotional leadership. It’s absolutely I think what we need to see more of. I do though want to move into my favorite segment of the show, Andrew. So it’s a quick fire round. I say a short statement and essentially you give me your immediate thoughts in about 60 seconds or less per one. Are you ready?
Andrew Filev: Well, let’s go!
Harry Stebbings: Okay, so no man’s land in SaaS pricing, does it really exist or not?
Andrew Filev: I have no idea.
Harry Stebbings: What about sales rep productivity, what is good to you?
Andrew Filev: The company needs to have a well defined playbook so that there’s no question on productivity. That playbook should also expand into on-boarding as well, where there are early signs of success. It should be measured, it should be obvious to the sales rep if she’s performing or not, and it should be obvious to her manager how well that the team is doing. There should be no guesses or art in that.
Harry Stebbings: Can I ask, how does payback period vary when considering SMB versus enterprise sales reps?
Andrew Filev: In the enterprise, the sales component is usually heavier. In the SMB, marketing component is heavier. The average payback is at the company’s discretion and depends on retention. If your retention is very healthy, you can go longer. All the way up to two years. In the SMB, retention is usually lower, so it’s not a good sign if you go beyond a year. [inaudible 00:24:50] companies that keep it at a year. A year is the magical mark, especially if you have a lot of annual contracts which basically allows you to recover the cash and reinvest it.
Harry Stebbings: Multi year deals, are they always fantastic or anything to watch out for?
Andrew Filev: They depend on your product market fit. There are a couple of enterprise companies which have saw that collapse because they must [inaudible 00:25:14] under multi year deals. And they grew fast, and then when the renewals came they weren’t able to sustain that growth. As long as you’re delivering the value, correctly incentivizing your customer success team to make sure that the customers are growing with you, within those contracts, then multi year deals could be good for the customer and good for the company.
Harry Stebbings: How do you feel about channel or partner seller programs, Andrew?
Andrew Filev: I feel that for a lot of SaaS in the early days it’s easy to get over excited about those and, again this is not a rule for everybody, but in my experience in the early days they don’t deliver on the promises. But then as a company grows and matures and builds its own product market fit and understands its customers, how to sell, then channel can become an important multiplier.
Harry Stebbings: Absolutely. Final one, and probably my favorite I have to admit, what do you know now that you wish you’d known at the beginning of your time with Wrike?
Andrew Filev: Finally I don’t think there is knowledge in abstract. A lot of it comes through the experience. A lot of their management best practices are common sense, but you have to live through them to fully internalize and live, embrace them. So I do not think there is sacred knowledge, there probably is but I just struggle to define it on the spot.
Harry Stebbings: Totally. Listen, Andrew, I heard many great things from Rory before the episode and it’s such a pleasure to have you on so thank you so much for joining me today.
Andrew Filev: Thank you, I hope their listeners enjoyed it.
Harry Stebbings: Such a fantastic guest, and if you’d like to see more from Andrew you can find him on Twitter at @Andrewsthoughts. Likewise you must check out Wrike, it’s at wrike.com. It would also be great to see you behind the scenes here at SaaStr. You can do that on Instagram at @HStebbings1996 with two b’s.
Harry Stebbings: As always, I so appreciate all of your support and I can’t wait to bring you a fantastic episode with Parker Conrad at Ripling next week.